TIDMBGS
RNS Number : 7769T
Baillie Gifford Shin Nippon PLC
22 March 2023
RNS Announcement
Baillie Gifford Shin Nippon PLC (BGS)
Legal Entity Identifier: X5XCIPCJQCSUF8H1FU83
Results for the year to 31 January 2023
Regulated Information Classification: Additional regulated
information required to be disclosed under the applicable laws and
regulations.
The following is the results announcement for the year to 31
January 2023 which was approved by the Board on 21 March 2023.
Over the year to 31 January 2023, the Company's net asset value
per share declined by 1.2% and its share price by 8.9%. The
comparative index * appreciated by 5.7%.
In sterling terms over three years, the net asset value was up
by 0.5% and the share price was down 6.8%, while the Company's
comparative index * was up 6.6%. Over the five years to 31 January
2023, the Company's net asset value per share appreciated by 2.9%
and its share price declined by 13.9%. Shin Nippon's comparative
index * return appreciated by 7.6% over this period.
3/4 The Managers' unwavering focus on high-growth smaller
companies is currently out of sync with investor sentiment, so the
recent performance in absolute and relative terms is not
unexpected. The Board recognises that the valuation downgrade of
growth companies does not always correlate with their operational
performance.
3/4 Macro headwinds and the lingering effects of Covid-19 have
led to poor share price performance at many of the portfolio's
internet companies such as Infomart, Japan's leading online food
ordering platform despite growing its sales over the past year and
generating a decent level of profits as well as investing heavily
for future growth, and online legal website Bengo4.com, despite
maintaining a high growth rate in sales and a very significant
increase in profitability.
3/4 Among the positive contributors to performance over the year
were insurance company Lifenet, the leading online life insurer in
Japan, drugstore chain MatsukiyoCocokara and Kamakura Shinsho, an
online platform for funerals and end-of-life related services.
3/4 Nine positions were sold and seven new positions were
initiated in the financial year, including one private company;
plastic recycling company JEPLAN which utilises a novel chemical
method to recycle PET and polyester. There are currently four
private companies in the portfolio accounting for 3.0% of total
assets.
3/4 Growth stocks are now priced at levels that assume barely
any future increase in revenues or profits, which is in stark
contrast to their underlying fundamentals. The Board and Managers
continue to believe that being patient and seeing through market
noise increases the chances of picking exceptional companies that
will deliver attractive long-term returns.
After deducting borrowings at fair value.
* The Company's comparative index is the MSCI Japan Small Cap
Index (total return and in sterling terms). See disclaimer at the
end of this announcement.
Source: Refinitiv/Baillie Gifford and relevant underlying index
providers. See disclaimer at the end of this announcement.
Shin Nippon aims to achieve long term capital growth through
investment principally in small Japanese companies which are
believed to have above average prospects for growth. At 31 January
2023 the Company had total assets of GBP633.5 million (before
deduction of bank loans of GBP88.0 million).
The Company is managed by Baillie Gifford, an Edinburgh based
fund management group with approximately GBP227 billion under
management and advice as at 17 March 2023.
Past performance is not a guide to future performance. The value
of an investment and any income from it is not guaranteed and may
go down as well as up and investors may not get back the amount
invested. The Company has borrowed money to make further
investments. This is commonly referred to as gearing. The risk is
that, when this money is repaid by the Company, the value of these
investments may not be enough to cover the borrowing and interest
costs, and the Company makes a loss. If the Company's investments
fall in value, gearing will increase the amount of this loss. The
more highly geared the Company, the greater this effect will
be.
Investment in investment trusts should be regarded as long term.
You can find up to date performance information about Shin Nippon
at shinnippon.co.uk .
See disclaimer at the end of this announcement.
21 March 2023
For further information please contact:
Anzelm Cydzik, Baillie Gifford & Co
Tel: 0131 275 2000
Jonathan Atkins, Director, Four Communications
Tel: 0203 920 0555 or 07872 495396
Chairman's Statement
Performance
Over the year to 31 January 2023, Shin Nippon's net asset value
('NAV') per share * declined by 1.2% and its share price by 8.9%.
The comparative index (MSCI Japan Small Cap Index, total return in
sterling terms) appreciated by 5.7%. As highlighted in my prior
reports, your Board has historically reviewed performance
principally over rolling three-year periods and it is disappointing
to report relative underperformance over this period. Over the
three years to 31 January 2023, the Company's net asset value per
share appreciated by 0.5% during this period and its share price
declined by 6.8%. Shin Nippon's comparative index return
appreciated by 6.6%.
Following a review and assessment of the Managers' time horizon
for investment, the Board has concluded that, going forward,
performance should be measured principally over rolling five-year
periods. Over the five years to 31 January 2023, the Company's net
asset value per share appreciated by 2.9% and its share price
declined by 13.9%. Shin Nippon's comparative index return
appreciated by 7.6% over this period. As you will note later in my
report, at this year's Annual General Meeting ('AGM') shareholders
are being asked to approve proposed changes to the Company's
Objective and Policy, one of which is to construct the portfolio
through the identification of individual companies which offer long
term growth potential typically over a five rather than
three-to-five year period. Reviewing performance principally over
five-year periods aligns with this. As illustrated on page 6 of the
Annual Report and Financial Statements the Company outperformed the
peer group over a five-year period.
In the Managers' Report below, you will find a more detailed
explanation of the recent performance and commentary on some of the
holdings, as well as performance numbers over five and ten years.
The Board maintains close oversight of the performance of the
Company. Although three year performance has been disappointing and
performance over the last two years has damaged longer-term
returns, we remain satisfied with the ten-year performance of the
Company. The Board recognises that the valuation downgrade of
growth companies does not always correlate with their operational
performance. We remain committed to the Managers' unwavering focus
on high-growth smaller companies and are confident that the Company
is well placed to benefit from the long term prospects of the
companies held in the portfolio.
Growth investing is currently out of sync with investor
sentiment and, as the Managers' fundamental bottom-up investment
approach does not consider the make-up of the comparative index
when constructing the portfolio, the recent performance in absolute
and relative terms is not unexpected and shareholders should expect
periods of underperformance. The Company also dropped back out of
the FTSE 250 index in March 2022, having been promoted in November
2020.
Outlook
The war in Ukraine is continuing to undermine sentiment in many
ways. High inflation is now a real threat to global growth and the
inevitable increases in interest rates will continue to provide
headwinds in many economies. Shin Nippon will not be immune to
these issues.
That said, your Board was very encouraged to meet twenty-four
different companies on its recent trip to Japan. We met companies
already owned in the portfolio as well as some potential new
holdings both in the listed and the unlisted space. It was apparent
that the negative effects of Covid-19 over the last couple of years
have largely dissipated, leading to a more positive outlook with no
visible evidence of any doom and gloom. However, there is no
getting away from the issue of the ageing population in Japan where
people are living longer and, where the economy is trying to grow,
this inevitably puts pressure on the ability to recruit suitable
skilled labour. I have mentioned this structural issue in previous
statements. The companies we met were all aware of these issues and
your Board was left confident that they were being addressed. The
number of foreign workers in Japan continues to grow and this trend
will inevitably continue in the years ahead. There is no doubt that
the companies we met were engaging and confident about their future
growth prospects. We met some highly skilled individuals who are
still trying to disrupt norms and we were left feeling that the
small cap sector in which the Company invests is in good shape.
The Managers have for many years adopted a stock picking
approach when shaping the portfolio. As the Directors discovered on
the trip, opportunities will continue to present themselves and we
are wholly supportive of the Managers in seeking those out and
continuing to strengthen the portfolio. The start-up environment
for companies is changing and Government policies are more
supportive. There is a positive attitude to creating wealth and
starting exciting, disruptive businesses. The Board and the
Managers remain encouraged by the outlook.
Borrowings
The Company's invested gearing increased over the course of the
year from 11% to 15% whilst potential gearing was unchanged at 16%.
Subsequent to the year end, a new secured Yen2,000 million
three-year revolving credit facility was drawn down from ING Bank
N.V. The Board agreed to increase gearing to allow the Managers to
invest in the strong pipeline of current opportunities, bolstering
the high growth nature of the portfolio at the right time and at
attractive valuations.
As at 31 January 2023, the Company had total borrowings of
Yen14.1 billion (GBP88.0 million) at an average interest rate of
1.4%. During the year the yen weakened against sterling by 3.4%.
The Company undertook no currency hedging during the year and has
no plans to do so.
Revenue Return and Ongoing Charges
Revenue return per share was 1.11p compared to 0.29p the prior
year. The revenue reserve remains in deficit therefore the Board is
recommending that no dividend be paid. The Company's ongoing
charges were 0.74% compared to 0.66% a year earlier. Although
expenses decreased during the year the average daily NAV fell from
GBP719.1 million in 2022 to GBP521.3 million in 2023 causing the
increase in the overall ongoing charge percentage. A reconciliation
of this can be found at the end of this announcement.
Share Issuance and Buybacks
Having ranged between a 1.5% premium and 11.6% discount,
averaging a 6.1% discount, the Company's shares ended the period at
an 8.6% discount to the NAV per share, having been at a 0.8%
discount a year earlier.
During the course of the year, 100,000 shares were bought back
at a cost of GBP154,000 and are currently held in treasury. As part
of this year's AGM business, approval is again being sought to
renew the authority to buy back shares. This would enable the
Company to buy back shares if the discount to NAV was substantial
in absolute terms or in relation to its peers, should that be
deemed desirable. Any such activity would enhance the NAV
attributable to existing shareholders.
Although no shares were issued during the year, there will also
be an AGM resolution to authorise the approval of share issuance,
on a non pre-emptive basis, of up to 10% of the Company's issued
share capital. As done in the past, any share issuance would be
undertaken at a premium to NAV per share and therefore be NAV
accretive for existing shareholders. The Board is of the view that
being able to increase the size of the Company, when conditions
permit, helps to improve liquidity, reduces costs per share and
potentially increases the appeal of the Company to a wider range of
shareholders.
Board Composition and Governance
I have thoroughly enjoyed my time as a Director and Chair of
Baillie Gifford Shin Nippon PLC but, as highlighted to the market
back in December, I will not be seeking re-election at the AGM in
May. It has been a pleasure for me to work with such an impressive
Board and also such a talented team at Baillie Gifford. I have
thoroughly enjoyed my time on the Board and am proud of our
achievements over the last nine years.
On my retirement, I am pleased to report that Mr Jamie Skinner
will take on the chairship of the Board and Mr Kevin Troup will
become Chair of the Audit Committee. Ms Abigail Rotheroe has been
appointed as the Chair of the Nomination Committee, effective from
1 February 2023.
The composition of the ongoing Board is appropriate for the
foreseeable future and will be compliant with the pending diversity
rules coming into effect for accounting periods beginning on or
after 1 April 2022.
Environmental, Social and Governance (ESG)
The consideration of ESG factors is part of the long term,
active, patient and growth focused approach to investment by our
Managers. Your Board is pleased with the focus the Managers place
on ESG and the resources applied to it. ESG in its widest sense is
a broad and complex subject and it features as part of every Board
meeting. Some examples of engagement with companies undertaken by
the Managers can be found below.
Annual General Meeting - Objective & Policy and Articles of
Association
In addition to the usual, and also aforementioned, AGM business,
a resolution is being put before shareholders to make a number of,
principally, stylistic changes to the Company's Objective and
Policy, which will also help to clarify some potential unintended
ambiguities in the current wording and to align investment horizons
with the Managers'. A comparison of the proposed and current
wording can be found on pages 7 and 8 of the Annual Report and
Financial Statements. The Board is taking a prudent approach to
these changes and is treating them, in aggregate, as a material
change. Therefore, in accordance with the Listing Rules, the
Company is required to seek shareholder approval for the proposed
amendments.
Furthermore, shareholders are being asked to approve changes to
the Company's Articles of Association, details of which can be
found on pages 33 and 34 of the Annual Report and Financial
Statements. One of the amendments would, if passed, permit the
Company to hold virtual AGMs in the future. This authority is being
sought not as a replacement to in-person AGMs, but as an
alternative in extremis should it be required due to prevailing
circumstances meaning that an in-person meeting was not possible,
as was the case at points during recent years because of
restrictions due to Covid-19.
This year's AGM will take place in person at Baillie Gifford's
offices in Edinburgh at 9:15am on Wednesday 17 May 2023. The
Managers will be presenting and the Board and I look forward to
seeing as many of you there as possible.
M Neil Donaldson
21 March 2023
Past performance is not a guide to future performance.
Source: Refinitiv/Baillie Gifford and relevant underlying index
providers. See disclaimer at the end of this announcement.
* After deducting borrowings at fair value
Alternative Performance Measure - see Glossary of Terms and
Alternative Performance Measures at the end of this
announcement.
For a definition of terms see Glossary of Terms and Alternative
Performance Measures at the end of this announcement
Managers' Report
2022 was another difficult year for growth investing. A number
of external events weighed on investor sentiment. Global supply
chains, especially autos and semiconductors, are recovering
gradually but continue to suffer from the after-effects of the
pandemic. The war in Ukraine had global repercussions as Europe
started weaning itself off Russian gas, driving up global energy
prices in the process. This has been a major cause of the high
rates of inflation being witnessed globally. Central banks across
the world have been raising interest rates in a bid to control
inflation. This has resulted in significant weakness in the share
price of high growth stocks as investors worry that higher interest
rates would lead to weak demand for their goods and services in the
future.
Against this challenging backdrop, there have been encouraging
signs. An uptick in inflation is leading to wage growth in real
terms. This is particularly noteworthy as wages have been generally
flat in Japan for the past thirty years due to deflation. Increases
in wages should lead to higher consumer confidence and thus a more
positive outlook for the domestic economy. Japan has now fully
reopened its borders to tourists, having eliminated all
Covid-related entry requirements. More recently, these green shoots
of a return to normality have been reflected in market sentiment.
We are returning to an environment where share prices are driven
more by fundamentals than pure macro developments. Despite
disappointing share price performance, we note that the vast
majority of our holdings have actually exhibited good operational
progress.
Performance
Shin Nippon's focus is, and remains, to invest in fast-growing
smaller companies in Japan which are often run by dynamic founders.
We continue to believe that they are driving much-needed change,
especially in light of an ageing and shrinking workforce. We remain
certain that investing in these companies will enable us to
generate attractive shareholder returns in the long run, despite
short-term turbulence. Companies in more traditional sectors of the
economy continue to face long-term challenges and we, therefore,
prefer to back companies that are disrupting the status quo.
For the year ending 31 January 2023, Shin Nippon's net asset
value ('NAV') decreased by 1.2% compared to an increase of 5.7% in
the MSCI Japan Small Cap Index (all figures total return and in
sterling terms, NAV with borrowings at fair value). Growth stocks
have remained out of favour, reflecting the market's preference for
short-term certainty over long-term opportunity. Encouragingly, the
outlook seems to be getting less myopic. Following continued share
price weakness in the first half of the year, we witnessed a more
encouraging level of performance in the second half. We remain
optimistic regarding the long-term growth prospects of the
high-growth businesses held in Shin Nippon but note that the
Company's weak performance over the past two years has impacted the
long-term numbers, which we consider a fairer way of looking at
performance. Over five years, Shin Nippon's NAV has increased by
2.9% versus an increase of 7.6% in the comparative index. Over ten
years, Shin Nippon's NAV has increased by 310.4% compared to an
increase of 150.1% in the MSCI Japan Small Cap Index.
Numerous macro headwinds and the lingering effects of Covid-19
have led to poor share price performance at many of our internet
companies. Infomart, Japan's leading online food ordering platform,
was one such poor performer. The significant decline in eating out
naturally hit a company that is connecting suppliers with
restaurants. Despite this extraordinarily tough environment,
Infomart has grown its sales over the past year and is returning to
higher profitability. Its recently started electronic invoicing
business is gaining traction as well. We remain attracted by the
opportunities in both segments and are hopeful that the market will
re-evaluate Infomart on the back of its improving fundamentals.
Online legal website Bengo4.com similarly remains out of fashion
despite maintaining a high growth rate in sales and a very
significant increase in profitability. Its electronic signature
segment 'CloudSign' has established itself as the industry standard
in Japan to the extent that management is now focusing on improving
margins rather than just growing sales.
Another detractor to performance was biotech company Healios.
Unfortunately, its main drug failed to show improved patient
outcomes in a clinical trial, so we decided to sell the
holding.
Among the positive contributors was insurance company Lifenet.
It is the leading online life insurer in Japan albeit with a still
very small share of the overall market. Lifenet's sales growth
recently accelerated, and the company is edging closer to
profitability. It continues to partner with major enterprises in
Japan, like mobile provider KDDI and credit card company Sumitomo
Mitsui Card. The opportunity remains significant, and we continue
to believe that Lifenet is much nimbler than incumbent insurance
companies and will therefore be able to take market share for a
long period of time. Drugstore chain MatsukiyoCocokara was another
strong performer. As referenced in the interim report, the company
recently acquired a smaller competitor and is benefitting from the
resultant synergies, leading to increased profitability for the
group as a whole. A large proportion of its sales come from
cosmetics which means that it should benefit from a recovery in
inbound tourism. Japanese cosmetics are highly appreciated,
especially by Chinese consumers, and MatsukiyoCocokara is well
placed to satisfy any future increases in demand.
Another beneficiary of Japan's reopening is Kamakura Shinsho, an
online platform for funerals and end-of-life related services.
In-person funerals have resumed in earnest in Japan following the
removal of all Covid-era restrictions. This has allowed the company
to re-accelerate its sales growth and boost its profitability which
took a significant hit during Covid-19. The funeral industry in
Japan remains deeply conservative and is characterised by very high
prices. Kamakura Shinsho continues to disrupt this unhappy
status-quo to give consumers better choices. Its growth runway
remains significant.
Portfolio
Reflecting our bottom-up stock-picking approach, Shin Nippon's
active share remains high at 94%. This implies only a 6% overlap
with the comparative index. The portfolio turnover for the
financial year was 13.8% which is in line with our long investment
horizon of five to ten years.
We purchased seven new holdings in the financial year, including
one private company. They represent an eclectic range of industries
which illustrates our non-dogmatic approach to investing. Among the
new holdings was Avex, one of Japan's leading music entertainment
businesses. Led by the founder, who remains in the role of chair,
management used the pandemic disruption to aggressively streamline
the business and bolster the balance sheet. With a return to
normality, Avex should benefit from a recovery in the live music
industry and its strong net cash position will allow it to
strengthen its competitive position.
Within cosmetics we discovered and invested in the Osaka-based
company I-ne. The company name stands for "Innovation never ends".
This relatively young business specialises in female haircare
products. Despite entering a competitive market, it has
consistently boasted mid-teen percentage revenue growth. New
products have grown even faster. True to its name, the company is
utilising new and innovative techniques like artificial
intelligence to analyse product-market fit and customer feedback.
This in turn is driving product development and the company has a
good track record of developing hit products. We are attracted by
the growth prospects and believe that margins can significantly
improve in the future. Furthermore, the founder retains a 70% stake
in the company which should provide good alignment.
We also invested in two niche manufacturing businesses: Nittoku
and Kohoku Kogyo. Both have significant global market share in
their respective business areas. Nittoku produces cutting-edge coil
winding machinery. Coils are found in virtually every electronic
product, but the real attraction is a continuous endeavour to
reduce their size and improve performance. The former is
particularly important for mobile handsets, where the number of
coils jumped from eight in a 4G handset to 40 in 5G. The latter is
of significance for electric vehicles as better coils lead to
increased performance. Kohoku Kogyo is similarly exposed to
electric vehicles. The company produces lead terminals for
aluminium electrolytic capacitors. Compared to an internal
combustion engine car, an electric vehicle requires two to four
times as many capacitors. Given the high-performance requirements
and high value-add, Kohoku's products are priced at a premium and
this should allow the company to improve its margins over time. It
also produces optical isolators for undersea internet data cables,
an area in which we have seen increased activity by both nation
states and private companies such as Alphabet and Meta.
In the private company space, we invested in plastic recycling
company JEPLAN. In contrast to conventional mechanical recycling
methods, JEPLAN utilises a novel chemical method to recycle PET and
polyester. JEPLAN's approach is environmentally friendly, scalable
and highly energy efficient. It is working with companies like
Coca-Cola Japan and Nestlé Japan in the food and drink sector as
well as apparel brands like Uniqlo and Snow Peak. Despite being
quite small and private, the company is already generating a decent
level of sales and is close to profitability.
Software company SpiderPlus was another addition to the
portfolio. It offers software as a service ('SaaS') solutions for
the management of construction sites. The construction industry in
Japan is very large and has barely been digitised. Even more
importantly, it is plagued by an ageing and shrinking workforce and
a large number of unfilled positions. Tools to make workers more
efficient are therefore very valuable and Spiderplus' product
enables significant time and cost savings. The company is led by a
dynamic founder with a background in construction subcontracting
and we admire the ambition he has for his company.
We exited nine holdings over the financial year. Among them was
CyberAgent, a media company offering online advertisement, mobile
games and online television. Having been held since 2013, the share
price has increased markedly, and its advertising and gaming end
markets are mature and becoming more competitive. As such, we
struggled to see the company growing its sales and profits
significantly from here. A somewhat idiosyncratic case was
specialist financial software company Uzabase. A private equity
company announced its intention to acquire Uzabase at a 72% premium
which we felt was attractive and therefore decided to tender our
shares. While still somewhat unusual in Japan, we have noted an
increase in private equity activity over the past few years.
We also sold Aeon Delight, a building security and maintenance
company. Contrary to our original investment hypothesis, the
company has been unable to diversify its client base meaningfully
beyond its parent company Aeon. We also had high hopes for the
company in the Chinese market which remains large and fragmented
but even here, management have not shown the drive and dynamism to
seize the opportunity, opting to adopt a more piecemeal approach
instead.
Outlook
Given the scale and speed of the downturn in high growth stocks
post-Covid, we remain very conscious that this has negatively
affected Shin Nippon's short and longer-term performance. However,
this has also meant that growth stocks are now priced at levels
that assume barely any future increase in revenues or profits,
which is in stark contrast to their underlying fundamentals.
Despite the discomfort from volatility, we believe it is important
to stay true to our stated investment philosophy and process which
has served shareholders well over longer periods of time. Being
patient and seeing through market noise increases our chances of
picking exceptional companies that will deliver attractive
long-term returns.
As Japan slowly moves out of Covid-19, the focus will return to
long-term challenges. A shrinking labour force calls for increased
digitalisation and more efficient ways of working. Global warming
and high energy prices provide motivation to decarbonise the
Japanese and global economy. The inexorable shift to electric
vehicles requires a recalibration of the auto industry. Geopolitics
is leading to a reshaping of the semiconductor industry. All these
challenges call for dynamic and nimble enterprises, run by bold
entrepreneurs willing to seize the myriad of opportunities that
these changes are creating. We believe Japanese smaller companies
are at the forefront of enabling many of these industry shifts,
thereby providing an exciting array of investment
opportunities.
Baillie Gifford & Co
21 March 2023
Source: Refinitiv/Baillie Gifford and relevant underlying index
providers. See disclaimer at the end of this announcement.
Past performance is not a guide to future performance.
For a definition of terms see Glossary of Terms and Alternative
Performance Measures at the end of this announcement.
Valuing Private Companies
We hold our private company investments at an estimation of
'fair value', i.e. the price that would be paid in an open-market
transaction. Valuations are adjusted both during regular valuation
cycles and on an ad hoc basis in response to 'trigger events'. Our
valuation process ensures that private companies are valued in both
a fair and timely manner.
The valuation process is overseen by a valuations committee at
Baillie Gifford, which takes advice from an independent third party
(S&P Global). The valuations committee is independent from the
portfolio managers, as well as Baillie Gifford's Private Companies
Specialist team, with all voting members being from different
operational areas of the firm, and the portfolio managers only
receive final valuation notifications once they have been
applied.
We revalue the private holdings on a three-month rolling cycle,
with one-third of the holdings reassessed each month. For Baillie
Gifford Shin Nippon, and our other investment trusts, the prices
are also reviewed twice per year by the respective boards and are
subject to the scrutiny of external auditors in the annual audit
process.
Recent market volatility has meant that recent pricing has moved
much more frequently than would have been the case with the
quarterly valuations cycle.
Beyond the regular cycle, the valuations committee also monitors
the portfolio for certain 'trigger events'. These may include
changes in fundamentals, a takeover approach, an intention to carry
out an Initial Public Offering ('IPO'), company news which is
identified by the valuation team or by the portfolio managers or
changes to the valuation of comparable public companies.
The valuations committee also monitors relevant market indices
on a weekly basis and update valuations in a manner consistent with
our external valuer's (S&P Global) most recent valuation report
where appropriate. When market volatility is particularly
pronounced the team does these checks daily. Any ad hoc change to
the fair valuation of any holding is implemented swiftly and
reflected in the next published net asset value. There is no
delay.
Review of Investments
A review of some of the Company's new acquisitions together with
a list of the ten largest investments is given below.
Top Ten
Litalico
2.7% of total assets
Litalico provides training and employment assistance for
disabled people and educational services for children with
developmental difficulties. It targets the roughly five million
adults and children in Japan who suffer from cognitive and mental
disabilities. The Japanese government has put in place policies to
improve access and employment opportunities for disabled people.
This should benefit the likes of Litalico that is one of the few
players with nationwide coverage. The company is also developing
new businesses to support its core operation of providing training
and employment. These include computer programming for kids,
financial planning for families with disabled members, and after
school and day-care services. We think the growth opportunity for
the company could be quite attractive given these tailwinds. It is
run by a young and dynamic President who owns a large stake in the
business.
Nakanishi
2.5% of total assets
Nakanishi manufactures dental equipment, specialising in rotary
cutting tools (handpieces), where it is one among the few leading
players globally. Whilst developed economies are fairly mature in
terms of trends in dental health care, there is significant growth
in emerging economies as standards of living rise and hygiene
regulations are tightened. Nakanishi looks particularly well placed
to exploit growth in the Chinese market where it has a leading
market share at the higher end of the market. The company is very
profitable and has had a good record of growth since listing in
2000. It is also run by the founding Nakanishi family who own a
significant stake in the business, thereby ensuring strong
alignment with minority shareholders.
Shoei
2.5% of total assets
Shoei is the leading manufacturer of premium motorcycle helmets
globally. The market is expanding thanks to growth in emerging
markets and barriers to entry are high given the strict safety
requirements. Shoei has been operating in this niche market for
over four decades and has established a strong and globally
recognised brand. It operates exclusively at the premium end of the
market and therefore, is able to make very high margins and
returns. The company is run by a dynamic and sensible management
team that have sought to maintain the high-end nature of its
products and continue to engage in innovative product
development.
Descente
2.5% of total assets
Descente is a sportswear manufacturer. It has a portfolio of
owned and licensed brands which include names like Descente, Le Coq
Sportif, Umbro and Srixon. Its portfolio of brands varies by price
and category. For example, Descente is predominantly a high-end
skiing and active-wear brand whereas Umbro is more of a mid-market
brand best known for football. It has a heritage in performance
sportswear, backed by research and development, which feeds into
its product range, particularly at the higher end. Roughly 50% of
its revenue comes from South Korea and 40% from Japan. China is a
big opportunity for Descente where it has a joint venture with Anta
Sports, China's largest sportswear brand by revenue. It appointed a
new President in June 2019 signalling less of a reliance on the
founding family. This followed on from trading house Itochu upping
its stake in Descente to around 40%. This rejig should give
Descente fresh impetus and it has set out plans to be more
aggressive in China and refocus on profitability in Japan. It also
seems confident that a downturn in its South Korea business is
temporary in nature. On top of this, Olympic sporting years are
ahead in both Japan and China. This along with health and
well-being increasingly becoming a policy lever should be helpful.
Overall, an improving demand backdrop along with a more focused
strategy should mean sales and profit can grow meaningfully from
here.
TechnoPro
2.5% of total assets
TechnoPro is a technology-focused staffing company. It supplies
engineers to the machinery, electrical, electronics, information
systems, software, biotechnology, construction and energy sectors.
It is well placed to benefit from structural growth drivers such as
the labour shortage in Japan. The IT industry is witnessing severe
shortages of labour and as the leading provider of engineers to
this sector, TechnoPro is well positioned to enjoy strong growth
for many years.
Snow Peak
2.4% of total assets
Snow Peak is Japan's leading brand of high-end camping items
with a line-up of roughly 800 products. It has a strong reputation
within Japan's camping community and has a dedicated and growing
user-base. Camping as a recreational activity is seeing strong
growth in Japan as an increasing number of 'second' baby boomers
(those born in the early 1970s) and young families embrace this
form of recreation. In the US, where the company is expanding
aggressively, roughly 1 in 3 households now undertake camping,
representing a large market for Snow Peak. The company is run by a
father (founder) and daughter duo who between them own nearly 30%
of the company, thereby ensuring strong alignment. The daughter is
the chief designer of Snow Peak's products and has a background in
fashion and design. We think the long-term growth prospects for the
company could be quite exciting given the favourable industry
background and its strong brand.
MatsukiyoCocokara
2.3% of total assets
MatsukiyoCocokara is a leading drugstore in Japan. It was formed
through the merger of Matsumotokiyoshi, a high end cosmetics
retailer, and Cocokara Fine, a drugstore. The combined entity now
holds among the largest market share by number of stores in Japan.
The integration of both businesses has been progressing well and
there are considerable synergies to be had from joint procurement
and operational rationalisation. The combined entity has been
realising these merger benefits, leading to rising margins. In
addition, the cosmetics business should be a big beneficiary of
inbound tourism whereas the drugstore part should have long-term
structural growth opportunities due to Japan's demographics.
Toyo Tanso
2.2% of total assets
Toyo Tanso makes speciality carbon products and has a leading
global share in isotropic graphite used in renewable energy
equipment and semiconductor manufacturing. It also has a leading
global share in silicon carbide coated graphite materials that are
used in the manufacture of compound semiconductors. Due to its
excellent heat resistance and durability, Toyo Tanso's isotropic
graphite is a key consumable part of the heaters and crucibles used
in the manufacturing process of monocrystal silicon which is the
raw material for solar-cell devices and semiconductors. Both
markets are expected to see strong growth in the coming years,
thanks to the proliferation of devices that are using an increasing
number of chips in them as well as the emphasis on increasing the
use of renewable energy. Toyo Tanso's isotropic graphite and
silicon carbide coated devices are high margin products and given
the favourable industry backdrop, we believe this has the potential
of transforming the company's margin and returns profile. This is a
family run business with nearly 30% of the company being held by
the family and related investment vehicles. We think this ensures
strong long-term alignment with minorities.
Lifenet Insurance
2.2% of total assets
Lifenet Insurance is a fast-growing online life insurance
business. It offers plain-vanilla life insurance products and sells
predominantly through its own online platform. Its
direct-to-consumer model allows it to price competitively,
potentially an enduring competitive advantage. Incumbent peers tend
to operate people-heavy distribution channels and are burdened with
an ill-fitting cost base. Lifenet's customer centricity is backed
by skills and expertise in systems development. It is a mix between
an insurer and an internet-services business. We think this
combination is attractive. Indeed, third-party businesses in Japan
are increasingly keen to team up with Lifenet. The regulatory
environment in Japan makes it difficult for new entrants to write
business on their own books, this is further help for Lifenet. We
think Lifenet is an ambitious and nimble business attacking a huge,
rather stale, industry.
Optex
2.1% of total assets
Optex is a global leader in infrared and laser sensors used in
areas such as surveillance systems, intrusion detection and factory
automation. More recently, the company has been successful in
expanding the areas of application for its sensors, a couple of
examples being in remote monitoring of customer facilities and
acceleration sensors that measure how safely people drive cars
(which is then used for calculating insurance premiums for
customers). The number of growing areas of applications for its
sensors means that Optex is well placed to enjoy high growth rates
for many years.
New Buys
GMO Financial Gate
1.6% of total assets
GMO Financial Gate ('GMOFG') is a leading offline digital
payments provider. Unlike online digital payments that happen
exclusively over the internet, offline digital payments take place
either at a physical store or at IoT enabled terminals like vending
machines, ticketing machines, self-checkout terminals and automated
parking meters. Offline transactions also typically involve the use
of a terminal (card reader, QR code scanner etc.) that supports a
wide range of payment methods like credit/debit cards, points cards
and QR codes. While most payments companies in Japan operate in the
online payments space and continue to focus all their energies in
this area, the offline market has basically been left uncontested.
GMOFG has filled this gap and is looking to automate what remains a
very large addressable market, many magnitudes larger than the
market for online payments. Along with offering automated offline
payments solutions like transaction processing and terminal sales,
GMOFG has also partnered with VISA and Sumitomo Mitsui Financial
Group (one of Japan's largest credit card issuers) to build an
alternate offline payments network that is low cost and much faster
compared to traditional networks operated by other card companies.
It has also developed a terminal called 'Stera' that operates
exclusively on this new network and supports an extensive range of
payment methods. Stera also comes with an 'App Store' style option
for merchants from where they can download and install seamlessly a
range of applications that help them with things like inventory
management and electronic invoicing. As part of the GMO group,
GMOFG has a very strong edge in terms of being part of the GMO
ecosystem and can offer end-to-end solutions to the considerable
client base of the GMO Group. The company has been growing rapidly
and given all the attractions mentioned above, growth here could be
sustained for many years to come.
Avex
1.4% of total assets
Avex is one of the largest music entertainment businesses in
Japan. The company has a proven record in discovering domestic
artists and managing and developing their careers. It has
successfully promoted several million-record selling artists in
Japan. Avex is now expanding in other related areas such as visual
software and targeting overseas markets. The pandemic has severely
disrupted the business as no live events or shows have been held
for at least a couple of years. Management have sold some assets to
strengthen their balance sheet and have also managed to sell some
of their treasury shares to longstanding shareholder and business
partner CyberAgent. This has resulted in a significant net cash
position on Avex's balance sheet. As the pandemic-era restrictions
are removed, we should see a strong snap back in sales and profit
growth for Avex, and along with its rock-solid balance sheet, we
feel the company could be in prime position to invest aggressively
to further strengthen its competitive position. The founder is
still involved in the business as the Chair owns about 7% of the
company, and the rest of the management team are longstanding Avex
employees, so overall there appears to be strong alignment.
Nittoku
1.0% of total assets
Nittoku is a leading global manufacturer of coil winding
systems. Its coil winding machines enjoy a high global market share
percentage and the overall industry is characterised by a rational
oligopoly. Coils are used in a number of attractive end markets,
the most prominent of which are the automotive industry and mobile
handsets. In automotive, there is a long standing trend of
motorising parts like windows and doors all of which require an
increasing number of coils. However, the most important development
is the move to electric vehicles. EVs rely on large, complex coils
in the car engine itself. Given Nittoku's expertise in high quality
coil winding the company should see increased demand from
automobile OEMs. In mobile handsets, we can observe a similar
trend: a 5G handset uses far more advanced coils than a 4G handset.
With consumers slowly switching over to better mobile phones we see
a very long growth runway for Nittoku.
JEPLAN
0.9% of total assets
JEPLAN is a private company that has developed a proprietary
chemical recycling technology for polyethylene terephthalate
('PET') plastics. This technology can also be extended to recycling
apparels. JEPLAN's technology is the only production-proven
chemical recycling method that has been certified by the USFDA.
Chemical recycling is superior to existing and conventional
mechanical recycling. It removes significant amounts of impurities
from recycled materials thereby generating high grade virgin PET
that is far superior to that generated by conventional mechanical
recycling. Chemical recycling is also more energy efficient,
environmentally friendly and scalable than existing mechanical
recycling methods. Following an independent external audit, JEPLAN
claim that their novel chemical recycling process contributes to as
much as a 45% reduction in greenhouse gases relative to mechanical
recycling. While the price of chemically recycled virgin PET is not
yet competitive versus mechanical recycled PET, JEPLAN aims to
achieve parity in 3-5 years through additional capacity additions
and further process improvements. JEPLAN already boasts of an
impressive client list that includes the likes of Coca-Cola Japan,
Uniqlo, Snow Peak, Nestlé Japan, Kirin, Suntory and Kao, to name a
few. The global market for recycled PET is sizeable and JEPLAN
currently only has a tiny share, so there should be many years of
growth ahead for the company. It is a founder run company and the
two co-founders own roughly a third of the shares between them.
SpiderPlus
0.8% of total assets
SpiderPlus is aiming to digitise Japan's construction industry.
The company provides architectural drawing and construction site
management software. Foremen on construction sites can use
SpiderPlus' SaaS offering to save significant time previously spent
on administrative duties. SpiderPlus is led by a founder with a
background in the construction industry and the company is
characterised by a closeness to their customers and a keen desire
to solve their problems. The overall construction market in Japan
is massive but IT spend is a tiny fraction of this, meaning that
SpiderPlus potentially has a very long growth runway. Given this
opportunity set, management are unsurprisingly pursuing sales
growth and are willing to incur temporary losses.
Kohoku Kogyo
0.7% of total assets
Kohoku Kogyo is a leading global manufacturer of lead terminals
for aluminium electrolytic capacitors and optical isolators for
undersea cables. The company enjoys a high market share in both
aluminium electrolytic capacitators and optical isolators. Lead
terminals are used in a variety of end products, from home
appliances to electric vehicles. The main growth driver is in
battery electric vehicles, which require 2-4x as many capacitors as
internal combustion engine vehicles. Given the higher requirements
and premium nature of the product, these lead terminals are 5-7x as
profitable as more commoditised terminals. The optical isolator
segment is buoyed by significant investment in undersea cables to
improve global internet connectivity. This is pursued by both
national governments as well as private players such as Alphabet
and Meta.
I-ne
0.5% of total assets
I-ne is a small Osaka-based cosmetics company founded by a young
entrepreneur who owns nearly 70% of the business. The company's
main area of focus is female hair care and for a young company, it
already boasts a very high market share and brand recognition.
Despite being introduced over five years ago and in a market that
is very competitive and saturated with similar products, I-ne's
hair care range has continued to grow at a high rate since launch.
Interestingly, some of the newer products they have launched are
growing at an even faster pace. The company makes extensive use of
AI-driven data analytics, all of which have been developed
in-house, to gather market intelligence and user feedback which
they then feed into their product development process. We believe
the company has good growth prospects given its unique product
development model and a proven track record of developing hit
products on a reasonably consistent basis.
Baillie Gifford Statement on Stewardship
Baillie Gifford's over-arching ethos is that we are 'actual'
investors. We have a responsibility to behave as supportive and
constructively engaged long-term investors. We invest in companies
at different stages in their evolution, across vastly different
industries and geographies and we celebrate their uniqueness.
Consequently, we are wary of prescriptive policies and rules,
believing that these often run counter to thoughtful and beneficial
corporate stewardship. Our approach favours a small number of
simple principles which help shape our interactions with
companies.
Our Stewardship Principles
Prioritisation of long-term value creation
We encourage our holdings to be ambitious and focus their
investments on long-term value creation. We understand that it is
easy to be influenced by short-sighted demands for profit
maximisation but believe these often lead to sub-optimal long- term
outcomes. We regard it as our responsibility to steer holdings away
from destructive financial engineering towards activities that
create genuine economic and stakeholder value over the long run. We
are happy that our value will often be in supporting management
when others don't.
A constructive and purposeful board
We believe that boards play a key role in supporting corporate
success and representing the interests of all capital providers.
There is no fixed formula, but it is our expectation that boards
have the resources, information, cognitive and experiential
diversity they need to fulfil these responsibilities. We believe
that good governance works best when there are diverse skillsets
and perspectives, paired with an inclusive culture and strong
independent representation able to assist, advise and
constructively challenge the thinking of management.
Long-term focused remuneration with stretching targets
We look for remuneration policies that are simple, transparent
and reward superior strategic and operational endeavour. We believe
incentive schemes can be important in driving behaviour, and we
encourage policies which create genuine long-term alignment with
external capital providers. We are accepting of significant payouts
to executives if these are commensurate with outstanding long-run
value creation, but plans should not reward mediocre outcomes. We
think that performance hurdles should be skewed towards long-term
results and that remuneration plans should be subject to
shareholder approval.
Fair treatment of stakeholders
We believe it is in the long-term interests of all enterprises
to maintain strong relationships with all stakeholders - employees,
customers, suppliers, regulators and the communities they exist
within. We do not believe in one-size-fits-all policies and
recognise that operating policies, governance and ownership
structures may need to vary according to circumstance. Nonetheless,
we believe the principles of fairness, transparency and respect
should be prioritised at all times.
Sustainable business practices
We believe an entity's long-term success is dependent on
maintaining its social licence to operate and look for holdings to
work within the spirit and not just the letter of the laws and
regulations that govern them. We expect all holdings to consider
how their actions impact society, both directly and indirectly and
encourage the development of thoughtful environmental practices.
Climate change, environmental impact, social inclusion, tax and
fair treatment of employees should be addressed at board level,
with appropriately stretching policies and targets focused on the
relevant material dimensions. Boards and senior management should
understand, regularly review and disclose information relevant to
such targets publicly, alongside plans for ongoing improvement.
Corporate Governance and Sustainability Engagement
By engaging with companies, we seek to build constructive
relationships with them, to better inform our investment activities
and, where necessary, effect change within our holdings, ultimately
with the goal of achieving better returns for our shareholders. The
two examples below demonstrate our stewardship approach through
constructive, ongoing engagement.
Outsourcing
Outsourcing is a staffing company focused on the manufacturing
and IT sectors. Outsourcing came under scrutiny in 2021 after
accounting irregularities were revealed at a major consolidated
subsidiary. We have had a number of engagements with the company
since that time to better understand the context for the internal
failures in controls and to encourage management and the board to
improve not just processes but also the cultural elements that
created the conditions for the fraudulent behaviour. We have been
encouraged by their progress, and this year was notable for two
reasons. The first is their decision to change their governance to
an internationally recognised board-with-three committees
structure. This places them within a select cohort of approximately
2.5% of quoted companies in Japan (as of 2022). The second is their
observation that as a result of an externally facilitated board
evaluation, they discovered that there were differences in the
information available to internal and external directors. This led
to a rethink about how they increase the external directors'
understanding of the business and facilitate their involvement in
important internal meetings. These are both helpful indications
that not only is the company pursuing proactive changes to address
the specifics of the 2021 controversy, the second and third-order
effects are improving governance overall, in line with a company
whose governance must mature as its business does.
Istyle
Istyle operates in a range of cosmetic beauty segments. They run
a beauty portal, a marketing business, e-commerce sites and a
staffing business for salons. Ahead of their 2022 AGM we engaged
with the company to discuss board independence, their deal with
Amazon and emissions reporting. Board independence has been a
recurring topic of conversation and we were encouraged that they
intended to appoint a new non-Japanese, female outside director in
2022. They were particularly interested in someone who can bring
expertise in diversity and support women's progression within the
company. This recruitment was delayed due to the Amazon deal, but
they expected it to proceed in 2023. On the recent convertible bond
deal with Amazon, board positions and independence were also
discussed, as granting Amazon a seat on the board would have
impacted the independence. Lastly, the discussion covered Istyle's
approach to emissions reporting. They are currently exploring the
ways in which they impact the environment and are undertaking
various sustainability initiatives. The meeting provides an
illustrative example of how our engagements build year on year and
evolve and develop in line with a company's development and market
context.
List of Investments as at 31 January 2023
Name Business 2023 % of Absolute 2022
Value total Performance Value
GBP'000 assets % GBP'000
Provides employment support
and learning
support services for people
Litalico with disabilities 17,296 2.7 (10.3) 17,425
Nakanishi Dental equipment 16,153 2.5 32.7 8,378
Shoei Manufactures motor cycle helmets 15,876 2.5 11.8 14,971
Descente Manufactures athletic clothing 15,573 2.5 (2.4) 17,512
TechnoPro IT staffing 15,571 2.5 36.7 14,269
Designs and manufactures outdoor
lifestyle
Snow Peak goods 14,943 2.4 (10.2) 17,097
MatsukiyoCocokara Retail company 14,731 2.3 61.5 11,067
Toyo Tanso Electronics company 14,181 2.2 38.6 5,301
Lifenet Insurance Online life insurance 13,364 2.2 98.5 4,690
Optex Infrared detection devices 13,314 2.1 37.3 5,606
Raksul Inc Internet based services 12,867 2.0 (27.2) 14,841
Torex Semiconductor Semiconductor company 12,857 2.0 (0.1) 14,020
eGuarantee Guarantees trade receivables 12,543 2.0 26.1 10,002
Katitas Real estate services 12,455 2.0 (10.7) 18,818
Sho-Bond Infrastructure reconstruction 12,445 2.0 8.7 16,518
Manufacturer of automated
Tsugami machine tools 12,250 1.9 8.0 14,359
GA Technologies Interactive media and services 11,594 1.8 29.1 6,282
Manufactures machine tool
OSG equipment 11,135 1.8 0.1 9,915
Nifco Value-added plastic car parts 10,574 1.7 (0.6) 10,837
Develops and markets internet
and intranet
application software for
Cybozu businesses 10,534 1.7 80.7 8,817
------------------------ --------------------------------- -------- ------- ------------ --------
Top 20 270,256 42.8
------------------------ --------------------------------- -------- ------- ------------ --------
Megachips Electronic components 10,209 1.6 (35.7) 16,415
Face-to-face payment terminals
and processing
GMO Financial Gate services 10,181 1.6 31.7 (#) -
Cosmos Pharmaceuticals Drugstore chain 9,900 1.6 (13.9) 8,942
Yonex Sporting goods 9,828 1.6 72.2 5,497
Harmonic Drive Robotic components 9,342 1.5 (5.8) 9,715
Tsubaki Nakashima Industrial machinery 9,069 1.4 (20.6) 11,275
Entertainment management and
Avex distribution 8,960 1.4 65.5 (#) -
Kamakura Shinso Information Processing Company 8,937 1.4 102.7 3,455
Holding company with interests
in biotech and
Noritsu Koki agricultural products 8,886 1.4 24.2 9,440
Asahi Intecc Specialist medical equipment 8,774 1.4 12.0 3,984
Iriso Electronics Specialist auto connectors 8,500 1.4 (8.5) 8,590
Specialised agrochemicals
Kumiai Chemical manufacturer 8,200 1.3 10.2 5,986
Nihon M&A Center M&A advisory services 7,907 1.2 (28.2) 9,201
Manufactures compressors and
painting
Anest Iwata machines 7,852 1.2 12.6 6,658
Drug discovery and development
Peptidream platform 7,829 1.2 (5.1) 6,844
Manufacturer of measuring
Horiba instruments 7,775 1.2 (3.0) 9,719
Internet platform for restaurant
Infomart supplies 7,751 1.2 (39.0) 12,525
Kitanotatsujin Online retailer 7,492 1.2 46.4 5,212
KH Neochem Chemical manufacturer 7,436 1.2 (6.6) 8,172
GMO Payment Gateway Online payment processing 7,351 1.2 18.0 12,520
Seria Discount retailer 7,120 1.1 (2.8) 5,533
Outsourcing Employment placement services 7,076 1.1 (24.9) 8,423
Wealthnavi Digital robo wealth-management 7,074 1.1 (16.0) 8,795
Weathernews Weather information services 6,935 1.1 (11.1) 7,705
Enechange IT service management company 6,922 1.1 (30.7) 7,581
Manufacturer of scientific
Jeol equipment 6,878 1.1 (40.1) 19,044
Inter Action Semiconductor equipment 6,813 1.1 (26.3) 6,193
SIIX Out-sources overseas production 6,579 1.0 6.2 5,448
MonotaRO Online business supplies 6,552 1.0 2.1 10,499
Bengo4.com Online legal consultation 6,488 1.0 (45.9) 8,883
Nabtesco Robotic components 6,449 1.0 4.8 8,622
Nittoku Coil winding machine manufacturer 6,403 1.0 34.6 (#) -
JEPLAN (u) Chemical PET recycling 5,653 0.9 (6.6) (#) -
Gojo & Company Inc Class
D Preferred (u) Diversified financial services 5,650 0.9 7.3 5,266
Crowdworks Crowd sourcing services 5,481 0.9 75.3 2,903
Shima Seiki Machine industry company 5,402 0.9 9.3 1,082
Kitz Industrial valve manufacturer 5,352 0.8 23.9 4,520
Construction project management (28.1)
SpiderPlus platform 5,347 0.8 (#) -
Spiber (u) Synthetic spider silk 5,131 0.8 (27.9) 7,116
Industrial pumps and medical
Nikkiso equipment 5,017 0.8 19.4 3,730
Game testing and internet
Poletowin Pitcrew monitoring 4,948 0.8 (8.9) 5,399
Nippon Ceramic Electronic component manufacturer 4,882 0.8 (0.9) 5,246
WDB Holdings Human resource services 4,465 0.7 (21.9) 5,953
Manufacturer of lead terminals
for aluminium
electrolytic capacitors and
optical isolators for
Kohoku Kogyo undersea cables 4,374 0.7 (6.5) (#) -
Pigeon Baby care products 4,171 0.7 (8.4) 3,742
Freakout Holdings Digital marketing technology 4,097 0.6 5.7 3,309
Demae-Can Online meal delivery service 3,947 0.6 (44.3) 1,942
M3 Online medical services 3,454 0.5 (22.0) 5,733
I-ne Hair care range 3,111 0.5 24.3 (#) -
Calbee Branded snack foods 3,062 0.5 9.8 2,891
Develops and provides enterprise
planning
oRo software 2,991 0.5 (21.5) 5,341
Daikyonishikawa Automobile part manufacturer 2,837 0.4 3.8 3,529
Akatsuki Mobile games developer 2,833 0.4 (14.0) 4,732
Brainpad Business data analysis 2,472 0.4 (36.5) 4,604
Locondo E-commerce services provider 2,401 0.4 (12.7) 3,722
Moneytree K.K. Class B
Preferred (u) AI based fintech platform 2,312 0.4 (45.4) 4,234
Istyle Beauty product review website 1,516 0.2 149.3 2,383
Online platform for buying
Broadleaf car parts 1,292 0.2 26.3 2,930
------------------------ --------------------------------- -------- ------- ------------ --------
Total investments 625,922 98.8
Net liquid assets * 7,544 1.2
Total assets 633,466 100.0
Bank loans (88,013) (13.9)
Shareholders' funds 545,453 86.1
------------------------ --------------------------------- -------- ------- ------------ --------
Absolute performance (in sterling terms) has been calculated on
a total return basis over the period 1 February 2022 to 31 January
2023.
Source: Baillie Gifford/Statpro and relevant underlying data
index providers. See disclaimer at end of this document.
# Figures relate to part period returns where the investment has
been purchased in the period.
u Unlisted holding (private company).
* See Glossary of Terms and Alternative Performance Measures at
the end of this announcement.
Past performance is not a guide to future performance.
Income Statement
For the year ended 31 January
2023 2023 2023 2022 2022 2022
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ----- -------- -------- -------- -------- --------- ---------
Losses on investments - (12,749) (12,749) - (182,288) (182,288)
Currency gains 2 - 2,214 2,214 - 4,612 4,612
Income 9,617 - 9,617 7,436 - 7,436
Investment management
fee 3 (3,154) - (3,154) (4,048) - (4,048)
Other administrative
expenses (679) - (679) (684) - (684)
---------------------------- ----- -------- -------- -------- -------- --------- ---------
Net return before finance
costs and taxation 5,784 (10,535) (4,751) 2,704 (177,676) (174,972)
---------------------------- ----- -------- -------- -------- -------- --------- ---------
Finance costs of borrowings 4 (1,332) - (1,332) (1,064) - (1,064)
---------------------------- ----- -------- -------- -------- -------- --------- ---------
Net return before taxation 4,452 (10,535) (6,083) 1,640 (177,676) (176,036)
---------------------------- ----- -------- -------- -------- -------- --------- ---------
Tax on ordinary activities (962) - (962) (744) - (744)
---------------------------- ----- -------- -------- -------- -------- --------- ---------
Net return after taxation 3,490 (10,535) (7,045) 896 (177,676) (176,780)
---------------------------- ----- -------- -------- -------- -------- --------- ---------
Net return per ordinary
share 6 1.11p (3.35p) (2.24p) 0.29p (56.95p) (56.66p)
---------------------------- ----- -------- -------- -------- -------- --------- ---------
The total column of this statement is the profit and loss
account of the Company. The supplementary revenue and capital
return columns are prepared under guidance published by the
Association of Investment Companies.
All revenue and capital items in this statement derive from
continuing operations.
A Statement of Comprehensive Income is not required as all gains
and losses of the Company have been reflected in the above
statement.
Balance Sheet
As at 31 January
2023 2023 2022 2022
Notes GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- ----- -------- ----------- -------- -----------
Fixed assets
Investments held at fair value through
profit or loss 7 625,922 610,857
Current assets
Debtors 3,047 2,604
Cash and cash equivalents 6,946 33,505
--------------------------------------- ----- -------- ----------- -------- -----------
9,993 36,109
--------------------------------------- ----- -------- ----------- -------- -----------
Creditors
Amounts falling due within one year 8 (46,154) (3,212)
--------------------------------------- ----- -------- ----------- -------- -----------
Net current (liabilities)/assets (36,161) 32,897
--------------------------------------- ----- -------- ----------- -------- -----------
Total assets less current liabilities 589,761 643,754
--------------------------------------- ----- -------- ----------- -------- -----------
Creditors
Amounts falling due after more than
one year 8 (44,308) (91,102)
--------------------------------------- ----- -------- ----------- -------- -----------
Net assets 545,453 552,652
--------------------------------------- ----- -------- ----------- -------- -----------
Capital and reserves
Share capital 6,285 6,285
Share premium account 260,270 260,270
Capital redemption reserve 21,521 21,521
Capital reserve 257,719 268,408
Revenue reserve (342) (3,832)
--------------------------------------- ----- -------- ----------- -------- -----------
Shareholders' funds 545,453 552,652
--------------------------------------- ----- -------- ----------- -------- -----------
Net asset value per ordinary share 173.6p 175.9p
--------------------------------------- ----- -------- ----------- -------- -----------
Ordinary shares in issue 9 314,152,345 314,252,485
--------------------------------------- ----- -------- ----------- -------- -----------
Statement of Changes in Equity
For the year ended 31 January 2023
Share Capital Capital
Share premium redemption reserve Revenue Shareholders'
capital account reserve * reserve funds
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ----- -------- -------- ----------- -------- -------- -------------
Shareholders' funds at
1 February 2022 6,285 260,270 21,521 268,408 (3,832) 552,652
Ordinary shares bought
back into treasury 9 - - - (154) - (154)
Net return on ordinary
activities after taxation - - - (10,535) 3,490 (7,045)
--------------------------- ----- -------- -------- ----------- -------- -------- -------------
Shareholders' funds at
31 January 2023 6,285 260,270 21,521 257,719 (342) 545,453
--------------------------- ----- -------- -------- ----------- -------- -------- -------------
For the year ended 31 January 2022
Share Capital Capital
Share premium redemption reserve Revenue Shareholders'
capital account reserve * reserve funds
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBPí000
--------------------------- ----- -------- -------- ----------- --------- -------- -------------
Shareholders' funds at
1 February 2021 6,026 229,149 21,521 446,084 (4,728) 698,052
Ordinary shares issued 9 259 31,121 - - - 31,380
Net return on ordinary
activities after taxation - - - (177,676) 896 (176,780)
--------------------------- ----- -------- -------- ----------- --------- -------- -------------
Shareholders' funds at
31 January 2022 6,285 260,270 21,521 268,408 (3,832) 552,652
--------------------------- ----- -------- -------- ----------- --------- -------- -------------
* The capital reserve balance as at 31 January 2023 includes
investment holding gains of GBP60,696,000 (2022 - gains of
GBP55,061,000).
Cash Flow Statement
For the year ended 31 January
2023 2023 2022 2022
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- --------- -------- --------- --------
Cash flows from operating activities
Net return on ordinary activities
before taxation (6,083) (176,036)
Net losses on investments 12,749 182,288
Currency gains (2,214) (4,612)
Finance costs of borrowings 1,332 1,064
Overseas withholding tax (892) (677)
Increase in debtors, accrued income
and prepaid expenses (681) (591)
Increase/(decrease) in creditors 27 (220)
-------------------------------------------- --------- -------- --------- --------
Cash inflow from operations 4,238 1,216
Interest paid (1,292) (982)
-------------------------------------------- --------- -------- --------- --------
Net cash inflow from operating activities 2,946 234
-------------------------------------------- --------- -------- --------- --------
Cash flows from investing activities
Acquisitions of investments (137,003) (132,308)
Disposals of investments 108,576 90,619
-------------------------------------------- --------- -------- --------- --------
Net cash outflow from investing activities (28,427) (41,689)
-------------------------------------------- --------- -------- --------- --------
Shares issued - 31,995
Ordinary shares bought back into treasury
and stamp duty thereon (154) -
Bank loans repaid - -
Bank loans drawn down - 32,667
-------------------------------------------- --------- -------- --------- --------
Net cash (outflow)/inflow from financing
activities (154) 64,662
-------------------------------------------- --------- -------- --------- --------
(Decrease)/increase in cash and cash
equivalents (25,635) 23,207
Exchange movements (924) (140)
Cash and cash equivalents at 1 February 33,505 10,438
-------------------------------------------- --------- -------- --------- --------
Cash and cash equivalents at 31 January* 6,946 33,505
-------------------------------------------- --------- -------- --------- --------
* Cash and cash equivalents represent cash at bank and deposits
repayable on demand.
Notes to the Financial Statements
1. The Financial Statements for the year to 31 January 2023 have
been prepared in accordance with FRS 102 'The Financial Reporting
Standard applicable in the UK and Republic of Ireland' on the basis
of the accounting policies set out in the Annual Report and
Financial Statements for the year ended 31 January 2023.
2. Currency gains
2023 2022
GBP'000 GBP'000
----------------------------------- -------- --------
Exchange differences on bank loans 3,138 4,752
Other exchange differences (924) (140)
----------------------------------- -------- --------
2,214 4,612
----------------------------------- -------- --------
3. Investment Management Fee
2023 2022
GBP'000 GBP'000
-------------------------- -------- --------
Investment management fee 3,154 4,048
-------------------------- -------- --------
Baillie Gifford & Co Limited, a wholly owned subsidiary of
Baillie Gifford & Co, has been appointed as the Company's
Alternative Investment Fund Manager ('AIFM') and Company
Secretaries. Baillie Gifford & Co Limited has delegated
portfolio management services to Baillie Gifford & Co. Dealing
activity and transaction reporting have been further sub-delegated
to Baillie Gifford Overseas Limited and Baillie Gifford Asia (Hong
Kong) Limited.
The Investment Management Agreement sets out the matters over
which the Managers have authority in accordance with the policies
and directions of, and subject to restrictions imposed by, the
Board. The Management Agreement is terminable on not less than six
months' notice. Compensation fees would only be payable in respect
of the notice period if termination were to occur sooner. The
annual management fee for the year to 31 January 2023 was 0.75% on
the first GBP50m of net assets, 0.65% on the next GBP200m of net
assets and 0.55% on the remainder. The fees are calculated and paid
on a quarterly basis.
4. The Company paid interest of GBP37,000 (2022 - GBP48,000) in
respect of yen deposits held by the custodian bank.
5. No dividend will be declared.
6. Net Return Per Ordinary Share
2023 2023 2023 2022 2022 2022
Revenue Capital Total Revenue Capital Total
-------------------------------- -------- -------- -------- -------- --------- ---------
Net loss on ordinary activities
after taxation 1.11p (3.35p) (2.24p) 0.29p (56.95p) (56.66p)
-------------------------------- -------- -------- -------- -------- --------- ---------
The returns per ordinary share set out above are based on the
net revenue gain of GBP3,490,000 (2022 - gain of GBP896,000) and
net capital loss of GBP10,535,000 (2022 - net capital loss of
GBP177,676,000) and on 314,222,074 ordinary shares (2022 -
311,992,773), being the weighted average number of ordinary shares
in issue during the year. There are no dilutive or potentially
dilutive shares in issue.
7. Fixed Assets - Investments
Investments in securities are financial assets designated at
fair value through profit or loss. In accordance with Financial
Reporting Standard 102, the tables provide an analysis of these
investments based on the fair value hierarchy described below,
which reflects the reliability and significance of the information
used to measure their fair value.
Fair Value Hierarchy
The fair value hierarchy used to analyse the basis on which the
fair values of financial instruments held at fair value through the
profit or loss account are measured is described below. Fair value
measurements are categorised on the basis of the lowest level input
that is significant to the fair value measurement.
Level 1 - using unadjusted quoted prices for identical
instruments in an active market;
Level 2 - using inputs, other than quoted prices included within
Level 1, that are directly or indirectly observable (based on
market data); and
Level 3 - using inputs that are unobservable (for which market
data is unavailable).
Level Level Level
1 2 3 Total
As at 31 January 2023 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ------------ ------------ ------------ ------------
Quoted equities 607,176 - - 607,176
Unlisted securities - - 18,746 18,746
-------------------------------------- ------------ ------------ ------------ ------------
Total financial asset investments 607,176 - 18,746 625,922
-------------------------------------- ------------ ------------ ------------ ------------
Level Level Level
1 2 3 Total
As at 31 January 2022 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ------------ ------------ ------------ ------------
Quoted equities 594,241 - - 594,241
Unlisted securities - - 16,616 16,616
-------------------------------------- ------------ ------------ ------------ ------------
Total financial asset investments 594,241 - 16,616 610,857
-------------------------------------- ------------ ------------ ------------ ------------
8. The bank loans are stated after deducting the arrangement
fees of GBP174,000 which are amortised over the terms of the loans.
Amortisation of the arrangement fees during the year was GBP49,000
(2022 - GBP36,000).
Borrowing facilities
At 31 January 2023
ING Bank N.V. - 3 year Yen7,000 million loan at 1.400% maturing
27 November 2023.
ING Bank N.V. - 3 year Yen5,000 million loan at 1.400% maturing
8 November 2024.
ING Bank N.V. - 7 year Yen2,100 million loan at 1.693% maturing
18 December 2024.
At 31 January 2022
ING Bank N.V. - 3 year Yen7,000 million loan at 1.400% maturing
27 November 2023.
ING Bank N.V. - 3 year Yen5,000 million loan at 1.400% maturing
8 November 2024.
ING Bank N.V. - 7 year Yen2,100 million loan at 1.693% maturing
18 December 2024.
Subsequent to the year end, on 3 March 2023, the Company drew
down a new secured Yen2,000 million 3 year revolving credit
facility from ING Bank N.V.
The fair value of the bank loans at 31 January 2023 was
GBP87,725,000 (31 January 2022 - GBP91,174,000). See Glossary of
Terms and Alternative Performance Measures at the end of this
announcement.
9. At 31 January 2023 the Company had authority to buy back
47,006,447 shares. 100,000 shares were bought back during the year
(2022 - nil). Share buy-backs are funded from the capital
reserve.
During the year the Company issued no shares on a non
pre-emptive basis (2022 - 12,960,000 shares for net proceeds of
GBP31,380,000).
Between 1 February and 17 March 2023 the Company did not buy
back or issue any shares.
10. Analysis of Change in Net Debt
Other
31 January Cash Exchange non-cash 31 January
2022 Flows Movement changes 2023
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ---------- -------- --------- --------- ----------
Cash and cash equivalents 33,505 (25,635) (924) - 6,946
Loans due within one year - - - (43,705) (43,705)
Loans due in more than one
year (91,102) - 3,138 43,656 (44,308)
--------------------------- ---------- -------- --------- --------- ----------
(57,597) (25,635) 2,214 (49) (81,067)
--------------------------- ---------- -------- --------- --------- ----------
11. The Annual Report and Financial Statements will be available
on the Company's website shinnippon.co.uk on or around 11 April
2023.
12. The financial information set out above does not constitute
the Company's statutory accounts for the years ended 31 January
2023 or 2022 but is derived from those accounts. Statutory accounts
for 2022 have been delivered to the Registrar of Companies, and
those for 2023 will be delivered in due course. The auditor has
reported on those accounts; their reports were (i) unqualified,
(ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their
report and (iii) did not contain a statement under section 498 (2)
or (3) of the Companies Act 2006.
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into, or forms part of, this
announcement.
Glossary of Terms and Alternative Performance Measures
('APM')
An alternative performance measure is a financial measure of
historical or future financial performance, financial position, or
cash flows, other than a financial measure defined or specified in
the applicable financial reporting framework. The APMs noted below
are commonly used measures within the investment trust industry and
serve to improve comparability between investment trusts.
Total Assets
This is the Company's definition of Adjusted Total Assets, being
the total value of all assets held less all liabilities (other than
liabilities in the form of borrowings).
Net Asset Value
Also described as shareholders' funds, Net Asset Value ('NAV')
is the value of total assets less liabilities (including
borrowings). The NAV per share is calculated by dividing this
amount by the number of ordinary shares in issue.
Net Asset Value (Borrowings at Book Value)
Borrowings are valued at adjusted net issue proceeds.
The Company's yen denominated loans are valued at their sterling
equivalent and adjusted for their arrangement fees. The value of
the borrowings on this basis is set out in notes 10 and 11 on page
59 of the Annual Report and Financial Statements.
Net Asset Value (Borrowings at Fair Value) (APM)
This is a widely reported measure across the investment trust
industry. Borrowings are valued at an estimate of their market
worth. The Company's yen denominated loans are fair valued using
methodologies consistent with International Private Equity and
Venture Capital Valuation ('IPEV') guidelines. The value of the
borrowings on this basis is set out above. A reconciliation from
Net Asset Value (with borrowings at book value) to Net Asset Value
per ordinary share (with borrowings at fair value) is provided
below.
31 January 31 January
2023 2022
------------------------------- --------------- ---------------
Net Asset Value per ordinary
share
(borrowings at book value) 173.6p 175.9p
Shareholders' funds
(borrowings at book value) GBP545,453,000 GBP552,652,000
Add: book value of borrowings GBP88,013,000 GBP91,102,000
Less: fair value of borrowings (GBP87,725,000) (GBP91,174,000)
Shareholders' funds
(borrowings at fair value) GBP545,741,000 GBP552,580,000
Shares in issue at year
end 314,152,485 314,252,485
Net Asset Value per ordinary
share
(borrowings at fair value) 173.7p 175.8p
------------------------------- --------------- ---------------
Premium/Discount (APM)
As stockmarkets and share prices vary, an investment trust's
share price is rarely the same as its NAV. When the share price is
lower than the NAV per share it is said to be trading at a
discount. The size of the discount is calculated by subtracting the
share price from the NAV per share and is usually expressed as a
percentage of the NAV per share. If the share price is higher than
the NAV per share, this situation is called a premium.
2023 2023 2022 2022
NAV NAV NAV NAV
(book) (fair) (book) (fair)
-------------- ------- ------- ------- -------
Closing NAV
per share 173.6p 173.7p 175.9p 175.8p
Closing share
price 158.8p 158.8p 174.4p 174.4p
--------------- ------- ------- ------- -------
Discount (8.5%) (8.6%) (0.9%) (0.8%)
--------------- ------- ------- ------- -------
The average discount/premium (APM) is calculated by taking an
average of the daily discount/premium percentage using NAV (fair)
for the year to 31 January 2023.
Ongoing Charges (APM)
The total expenses (excluding borrowing costs) incurred by the
Company as a percentage of the average net asset value (with debt
at fair value). The ongoing charges have been calculated on the
basis prescribed by the Association of Investment Companies.
A reconciliation from the expenses detailed in the Income
Statement above is provided below:
31 January 31 January
2023 2022
--------------------------- -------------- --------------
Investment management
fee GBP3,154,000 GBP4,048,000
Other administrative
expenses GBP679,000 GBP684,000
--------------------------- -------------- --------------
Total expenses (a) GBP3,833,000 GBP4,732,000
--------------------------- -------------- --------------
Average daily cum-income
net asset value (with
debt at fair value)
(b) GBP521,337,000 GBP719,124,000
--------------------------- -------------- --------------
Ongoing charges
(a) ÷ (b) (expressed
as a percentage) 0.74% 0.66%
--------------------------- -------------- --------------
Total Return (APM)
The total return is the return to shareholders after reinvesting
the net dividend on the date that the share price goes ex-dividend.
The Company does not pay a dividend, therefore, the one year total
returns for the share price and NAV per share at book and fair
value are the same as the percentage movements in the share price
and NAV per share at book and fair value as detailed above.
Gearing (APM)
At its simplest, gearing is borrowing. Just like any other
public company, an investment trust can borrow money to invest in
additional investments for its portfolio. The effect of the
borrowing on the shareholders' assets is called 'gearing'. If the
Company's assets grow, the shareholders' assets grow
proportionately more because the debt remains the same. But if the
value of the Company's assets falls, the situation is reversed.
Gearing can therefore enhance performance in rising markets but can
adversely impact performance in falling markets.
Gearing represents borrowings at book less cash and cash
equivalents expressed as a percentage of shareholders' funds.
Potential gearing is the Company's borrowings expressed as a
percentage of shareholders' funds.
Equity gearing is the Company's borrowings adjusted for cash,
expressed as a percentage of shareholders' funds.
2023 2022
Potential Potential
2023 Gearing 2022 Gearing
Gearing (#) Gearing (#)
GBP'000 GBP'000 GBP'000 GBP'000
--------------- -------- ---------- -------- ----------
Borrowings (a) 88,013 88,013 91,102 91,102
Cash and cash
equivalents
(b) 6,082 - 32,028 -
Shareholders'
funds (c) 545,453 545,453 552,652 552,652
--------------- -------- ---------- -------- ----------
15.0% 16.1% 10.7% 16.5%
--------------- -------- ---------- -------- ----------
Gearing: ((a) - (b)) ÷ (c), expressed as a percentage.
(#) Potential gearing: (a) ÷ (c), expressed as a percentage.
Leverage
For the purposes of the Alternative Investment Fund Managers
(AIFM) Regulations, leverage is any method which increases the
Company's exposure, including the borrowing of cash and the use of
derivatives. It is expressed as a ratio between the Company's
exposure and its net asset value and can be calculated on a gross
and a commitment method. Under the gross method, exposure
represents the sum of the Company's positions after the deduction
of sterling cash balances, without taking into account any hedging
and netting arrangements. Under the commitment method, exposure is
calculated without the deduction of sterling cash balances and
after certain hedging and netting positions are offset against each
other.
Active Share (APM)
Active share, a measure of how actively a portfolio is managed,
is the percentage of the quoted equity portfolio that differs from
its comparative index. It is calculated by deducting from 100 the
percentage of the portfolio that overlaps with the comparative
index. An active share of 100 indicates no overlap with the index
and an active share of zero indicates a portfolio that tracks the
index.
Net Liquid Assets
Net liquid assets comprise current assets less current
liabilities, excluding borrowings.
Share Split
A share split (or stock split) is the process by which a company
divides its existing shares into multiple shares. Although the
number of shares outstanding increases, the total value of the
shares remains the same with respect to the pre-split value.
Unlisted (Private) Company
An unlisted (private) company means a company whose shares are
not available to the general public for trading and not quoted on a
stock exchange.
Third Party Data Provider Disclaimer
No third party data provider ('Provider') makes any warranty,
express or implied, as to the accuracy, completeness or timeliness
of the data contained herewith nor as to the results to be obtained
by recipients of the data. No Provider shall in any way be liable
to any recipient of the data for any inaccuracies, errors or
omissions in the index data included in this document, regardless
of cause, or for any damages (whether direct or indirect) resulting
therefrom.
No Provider has any obligation to update, modify or amend the
data or to otherwise notify a recipient thereof in the event that
any matter stated herein changes or subsequently becomes
inaccurate.
Without limiting the foregoing, no Provider shall have any
liability whatsoever to you, whether in contract (including under
an indemnity), in tort (including negligence), under a warranty,
under statute or otherwise, in respect of any loss or damage
suffered by you as a result of or in connection with any opinions,
recommendations, forecasts, judgements, or any other conclusions,
or any course of action determined, by you or any third party,
whether or not based on the content, information or materials
contained herein.
MSCI Index data
Source: MSCI. The MSCI information may only be used for your
internal use, may not be reproduced or redisseminated in any form
and may not be used as a basis for or a component of any financial
instruments or products or indices. None of the MSCI information is
intended to constitute investment advice or a recommendation to
make (or refrain from making) any kind of investment decision and
may not be relied on as such. Historical data and analysis should
not be taken as an indication or guarantee of any future
performance analysis, forecast or prediction.
The MSCI information is provided on an 'as is' basis and the
user of this information assumes the entire risk of any use made of
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person involved in or related to compiling, computing or creating
any MSCI information (collectively, the 'MSCI Parties') expressly
disclaims all warranties (including, without limitation, any
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Sustainable Finance Disclosure Regulation ('SFDR')
The EU Sustainable Finance Disclosure Regulation ('SFDR') does
not have a direct impact in the UK due to Brexit, however, it
applies to third-country products marketed in the EU. As Baillie
Gifford Shin Nippon PLC is marketed in the EU by the AIFM, BG &
Co Limited, via the National Private Placement Regime ('NPPR') the
following disclosures have been provided to comply with the
high-level requirements of SFDR. The AIFM has adopted Baillie
Gifford & Co's Governance and Sustainable Principles and
Guidelines as its policy on integration of sustainability risks in
investment decisions. Baillie Gifford & Co's approach to
investment is based on identifying and holding high quality growth
businesses that enjoy sustainable competitive advantages in their
marketplace. To do this it looks beyond current financial
performance, undertaking proprietary research to build an in-depth
knowledge of an individual company and a view on its long-term
prospects. This includes the consideration of sustainability
factors (environmental, social and/or governance matters) which it
believes will positively or negatively influence the financial
returns of an investment. More detail on the Managers' approach to
sustainability can be found in the Governance and Sustainability
Principles and Guidelines document, available publicly on the
Baillie Gifford website bailliegifford.com.
Taxonomy Regulation
The Taxonomy Regulation establishes an EU-wide framework or
criteria for environmentally sustainable economic activities in
respect of six environmental objectives. It builds on the
disclosure requirements under SFDR by introducing additional
disclosure obligations in respect of alternative investment funds
that invest in an economic activity that contributes to an
environmental objective. The Company does not commit to make
sustainable investments as defined under SFDR. As such, the
underlying investments do not take into account the EU criteria for
environmentally sustainable economic activities.
Regulated Information Classification: Additional regulated
information required to be disclosed under the applicable laws
- ends -
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END
FR VFLFLXXLEBBV
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March 22, 2023 03:00 ET (07:00 GMT)
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