Legal Entity Identifier: 54930037AGTKN765Y741

The Baillie Gifford Japan Trust PLC outperformed its benchmark index* over the year to 31 August 2017 by 8.8 percentage points.  Net asset value per share, after deducting borrowings at fair value, rose 27.6%, while the benchmark index gained 18.8%.  In this period the Company's share price increased by 37.5%.

¾  Performance is primarily driven by individual company share prices. Over the year the best performing stock (Yaskawa Electric) delivered double the performance than the worst (M3) subtracted.

¾  One emerging area of opportunity is healthcare, where we took three new holdings over the year. We also continue to find opportunities in automation related businesses.

¾  Sarah Whitley will retire from Baillie Gifford, the Company's Investment Manager, on 30 April 2018.

¾  Following Sarah's retirement, Matthew Brett will take over as the portfolio manager, supported by Praveen Kumar as deputy portfolio manager.

*    The benchmark index is the TOPIX total return (in sterling terms)

Source: Thomson Reuters Datastream/Baillie Gifford. See disclosure at the end of this announcement.

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. At 31 August 2017, the Company had total assets of £657.7m (before deduction of bank loans of £82.5m).

The Company is managed by Baillie Gifford, an Edinburgh based fund management group with around £170bn under management and advice as at 29 September 2017.

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. This is because the share price is determined by the changing conditions in the relevant stock markets in which the Company invests and by the supply and demand for the Company's shares. The Trust has borrowed money to make further investments (sometimes known as 'gearing' or 'leverage'). The risk is that when this money is repaid by the Trust, the value of the investments may not be enough to cover the borrowing and interest costs, and the Company will make a loss. If the Trust's investments fall in value, any invested borrowings will increase the amount of this loss. You should view your investment as long term. You can find up to date performance information about The Baillie Gifford Japan Trust PLC on the Company website at www.japantrustplc.co.uk.

29 September 2017

For further information please contact:

Alex Blake - Client Liaison

The Baillie Gifford Japan Trust PLC

Tel: 0131 275 2859

Roland Cross, Director,

Four Broadgate

Tel: 020 3761 4440

I am very pleased to report on another strong year for your Company with the net asset value (after deducting borrowings at fair value) rising 27.6%, compared to a 18.8% rise in the benchmark TOPIX index total return (in sterling terms). The share price increased by 37.5%, breaking through 700p for the first time, and the Company's shares are currently trading at a premium to NAV (after deducting borrowings at fair value) of 4.3%. The majority of investment trusts in the Japanese sector have been trading at discounts for some considerable time now while Japan Trust has traded at or near a premium for most of the last two years. This overall strong performance continues to build on impressive five and ten year records for the Japan Trust.

As with most recent years, stock selection (+3.0%) and gearing (+3.5%) both contributed strongly to the returns; further performance details are to be found in the Managers' Report.

Investment income increased by 20% to £8.48m for the year, due in the main to increased dividends. Expenses increased by 22% due mainly to higher management fees (up £0.61m to £3.18m) in line with the substantial increase in net asset value. It is worth noting that the reduction in management fee secured by the Board last year (now 0.55% for net assets in excess of £250m) has served shareholders well, saving £0.25m in fees for the full year.

Overall revenue gain per share was 2.80p (2016 - 2.35p) while ongoing charges for the year dropped to 0.8% (2016 - 0.9%), though as in prior years no dividend will be paid while the revenue reserve remains in deficit.

Sarah Whitley, who has managed the Company's portfolio since 1991, will be retiring from Baillie Gifford, the Company's Investment Manager, on 30 April 2018. Baillie Gifford, with the full support of the Board and Sarah Whitley, will appoint Matthew Brett as the Company's portfolio manager and Praveen Kumar as the Company's deputy portfolio manager with effect from that date. Sarah will work closely with Matthew and Praveen to ensure a smooth transition in portfolio management responsibilities.

As background for shareholders, Matthew Brett joined Baillie Gifford in 2003 and is an Investment Manager in the Japanese Equities team. He co-manages the £1.8bn Baillie Gifford Japanese Fund with Sarah and has been attending all Japan Trust Board meetings since 2008, providing excellent insight on our investments. Praveen Kumar joined Baillie Gifford in 2008, is also an Investment Manager in the Japanese Equities team and is the portfolio manager of Baillie Gifford Shin Nippon PLC.

On behalf of the Board I would like to thank Sarah for her truly significant contribution to the Company. Her dedicated professionalism, quite exceptional knowledge of Japan and its markets and discriminating judgement have been accompanied throughout the four decades of her career by an unswerving enthusiasm for all things Japanese. That Sarah was often in the minority of investors to firmly believe in the ongoing investment opportunities in Japanese companies has brought great benefit to the Japan Trust. Sarah has managed the Company since 1991 and, in the period from 30 September 1991 to 31 August 2017, the Company's NAV increased by 545% compared to the return on the TOPIX index (in sterling terms) of 156% and she has mentored those on the Baillie Gifford Japan Desk with great success. In Matthew Brett we have a fine successor to Sarah having worked with the Board for almost ten years, and I look forward to the continued success of the Trust under his stewardship.

Gearing amounted to 17% of shareholders' funds at the start of the year and ended the year at 13%. Gross borrowings increased to Y11.7bn (2016 - Y10.2bn) while the sterling value of these loans in the balance sheet rose to £82.5m at the year end (2016 - £75.3m). Given the very low cost of yen loans and the positive contribution of gearing to performance during the year, we continue to believe that borrowing to invest in Japanese equities is a sensible strategy.

The Company did not exercise its share buy back powers during the year; however, your Board believes it is important that the Company retains this power and so, at the Annual General Meeting, is seeking to renew this facility. The Company also has authority to issue new shares and to reissue any shares held in treasury for cash on a non-pre-emptive basis. Shares are only issued/reissued at a premium to net asset value, thereby enhancing net asset value per share for existing shareholders.

During the year to 31 August 2017, 5.1m shares were issued at a premium to net asset value raising proceeds of £34m, continuing the trend of recent years. The Directors are, once again, seeking 10% share issuance authority at the Annual General Meeting and we will continue to issue shares only when at a premium to net asset value. This authority will expire at the conclusion of the Annual General Meeting in 2018.

Our shareholders have the right to vote annually on whether the Company should continue in business, and will again have the opportunity to do so at the Annual General Meeting to be held on 30 November 2017.

Last year the Company again received support for its continuation. Your Directors are still of the opinion that there remain attractive opportunities in selected, well-run Japanese companies and given the long-term favourable outlook for the Japan Trust. To that end my fellow Directors and I intend, where possible, to vote our own shareholdings in favour of the resolution and hope that all shareholders will feel disposed to do likewise.

Your Board is committed to high standards of corporate governance. In particular it recognises the need to have a balance of skills, experience and length of service which forms part of our succession planning discussions at our Nomination Committee meetings. Given the above it also believes that membership of the Board should be refreshed over time and would like to note that Paul Dimond intends to retire from the Board at the conclusion of the Company's 2018 Annual General Meeting. The process for identifying a new board member is in hand and the Board intends that a new Director will have been identified and appointed by this time next year. The appointment would then fall to be ratified by shareholders at the Company's 2018 Annual General Meeting.

The year to 2017 saw ongoing strength in Japanese equities. Our Managers continued to find extremely interesting companies in which to invest, with their expertly researched 'bottom up' approach to stock selection adding significant value to the portfolio.

Business sentiment in Japan has been improving in recent years, with many positive aspects to the economic and consumer confidence indices following through into company results and consumer activity. However, with political tension in the region rising following North Korea's missile testing and President Trump's written and verbal reactions adding to that tension, we remain vigilant in assessing the impact such uncertainties can bring to the stocks we invest in. There are many things to remain positive about within Japan as a whole. Corporate governance changes are continuing, for example, it is now a requirement for shareholders to disclose how they vote on resolutions, and distributions to shareholders have continued to rise. These developments are all adding to the underlying strength of the economy and confidence in the management teams running the companies we invest in.

During the year your Manager and her team have again outperformed the market through their stock selection methodology, with Baillie Gifford Japan remaining a popular choice for investors. The Board visited Japan in May with the Managers, meeting CEOs and senior management of many current and potential investments. We returned home with an even more positive outlook for your Trust given the impressive entrepreneurial spirit we found that many fail to give Japan credit for, a real commitment to the social fabric of the country through profitable progress and investment, allied to new technologies that will blossom in this evolving technological age. The Managers firmly believe this will contribute to further strong results for shareholders.

As mentioned above Sarah Whitley is retiring from Baillie Gifford next April after a remarkable career spanning four decades, proving pivotal to the successful growth of the Japan Trust while maintaining an evident passion for her work. The Trust has prospered greatly under Sarah's stewardship and we will be sorry to see her retire but in Matthew Brett we have a more than able successor. He takes over the reigns with her full confidence and blessing along with that of your Board, is well thought of within Baillie Gifford and already known to many of our major shareholders. We look forward to him continuing to build on the successful performance of Baillie Gifford Japan Trust long into the future.

In summary, we believe there continue to be significant opportunities for investment growth among the companies in our portfolio, in addition to other investments currently under consideration, and that the Managers' approach of investing for medium to long term growth will indeed capitalise on these opportunities going forward.

Nick AC Bannerman

Chairman

29 September 2017

For a definition of terms see Glossary of Terms, Note 12.

Past performance is not a guide to future performance.

Performance

Over the past year the NAV per share with borrowings deducted at fair value has increased by 27.6% to 682.4p which compares very favourably to a rise in the Company's benchmark of 18.8%.  Baillie Gifford believes that performance should be measured over longer periods and over five years the NAV has outperformed the benchmark by 9.2% p.a. and over ten years by 5.1% p.a. demonstrating the benefit to shareholders of an active long-term growth orientated stock picking approach. 

The Company's total assets increased to just over £650m, a rise of over £150m during the year, due to the combination of outperformance, a strong TOPIX and share issuance.  A larger trust will be of benefit to shareholders as fixed costs are spread over a broader base and also helps to reduce transaction costs by helping the liquidity of the shares. 

The main driver of the strong absolute return was the increase in the value of the TOPIX which rose 24.3% in Yen on a total return basis, slightly exceeding the high of 2015 on a total return basis.  The Company also borrows in Yen to invest in stocks and this decision was helpful to performance given the strong absolute return in Yen.  The Yen weakened 4.4% against Sterling to ¥141.8 per £1, slightly reducing the return in Sterling.  Last year's concerns surrounding the potential for a significant Chinese slowdown failed to materialise, global stock markets generally progressed upwards and Japan is increasingly seen as a haven of relative stability.

As in last year's report the portfolio is grouped into four different styles of growth to reflect our decision-making process.  Each of these styles offer different risks and opportunities.  Secular growth, the largest part of the portfolio, includes companies that we feel have an opportunity to grow rapidly but where there are a number of potential outcomes.  Growth stalwarts however are companies where growth is less rapid but more predictable, whilst those categorised as special situations are companies whose recent performance has not been good but we see a reason to believe that improvements are underway.  The cyclical growth stocks are those whose earnings do not rise every year but where we expect the earnings to be higher from one cycle to the next.  The mix of the four different styles of growth will change somewhat over the years but it seems inevitable that our positive approach to investing will result in a high weighting towards secular growth. 

Performance is primarily driven by individual company share prices rather than positions taken on industrial sectors so we think it is most meaningful to list the top ten and bottom ten contributors to performance over one and five years rather than showing performance by sector.  There are several general points worth noting.  First, we pay no attention to the index when deciding which investments to hold, preferring to maximise returns by only investing in companies in which we have genuine conviction.  These are often medium or smaller-sized companies where it is easier to see rapid growth.  Second, due to the asymmetric nature of stock returns a good idea can do much more to help returns than a bad idea can hinder them.  Over one year the best performing stock (Yaskawa Electric) delivered double the performance than the worst (M3) subtracted.  Over five years the difference rises to over three times.  It is important therefore for us to focus on the upside potential of individual stocks and to stay the course when we have found a good idea.  Mistakes are inevitable but over the long-haul we believe that this approach of holding on to winning stocks is the one that will benefit shareholders the most.  Finally, the returns have come from a diverse range of companies - including manufacturers, internet businesses, financials and service companies.  This is natural because we are looking for individual growth businesses rather than investing on a sector basis and good companies can be found in many different industries.

In total we bought nine new holdings during the year and sold eight existing holdings.  Turnover was 6% in the last year, low even by our standards.  We are firm believers that if a growth business is performing well it is difficult to replace.  Furthermore, the issuance of shares allowed an element of re-shaping the portfolio without needing to sell anything. 

One emerging area of opportunity is healthcare, where we took three new holdings during the year.  The first, Cyberdyne, has commercialised an exoskeleton designed to help patients rehabilitate following brain injury such as stroke.  The second, Peptidream, has developed a library of synthetic peptides which can be used as direct therapies or to target drugs very specifically.  The third, Healios, is using stem cells to treat age-related macular degeneration which is a serious eye condition that is very difficult to treat.  In each case the company is harnessing new technologies to create innovative solutions that have very large addressable opportunities. 

We continue to find opportunities in automation related businesses taking new holdings in Keyence, a factory automation consultancy, and Monotaro, which sells a wide variety of maintenance, repair and operation products to small businesses.  These join the new purchases made last year in the same area of Nidec, the precision motor manufacturer, and Topcon, the global position system.  Again the scale of the potential opportunity for such businesses remains very large and investing in Japan we are fortunate to have many good quality businesses to choose from.  

Investment Environment

Japan has made major corporate governance improvements over the past several years, driven by the launch of the Stewardship Code in 2014 and the Corporate Governance code in 2015.  In general companies have been paying more attention to shareholder returns with dividends continuing to grow and share buybacks remaining at similar levels.  The Company has seen the benefits of this change, with investment income growing 19.6% from the previous year to reach £8.5m.  We continue to believe that many of the companies that we invest in have the ability to grow dividends faster than earnings over the long-term. 

Japan's domestic economy continues to perform well, enjoying 6 consecutive quarters of positive growth, the longest such streak in over a decade. Both domestic consumption and corporate spending on capex have been key contributors to domestic growth. The labour market remains very tight with the unemployment rate below 3% and the jobs-to-applicants ratio has now exceeded levels seen during Japan's economic bubble era. This is also beginning to put considerable upward pressure on wages which is likely to have positive implications for domestic consumption.  Recently, Mr Abe has decided to call an early election with a view to extending his mandate.  Meanwhile the strength of overseas demand has continued, being felt especially keenly in areas such as robotics which seem to be in a period of secular growth. 

Where might the challenges come from?  A global slowdown would reduce demand for Japanese exports, as would any trade dispute between the US and China that reduced total demand given that they are Japan's two most significant export markets.  There continues to be the potential for geopolitical difficulties around Japan, with North Korea of particular concern.  Moreover, it is a simple fact that the stock market has made considerable progress since the dark days around the global financial crisis. 

Outlook

We believe that there are significant opportunities available to long-term stock pickers in Japan.  In areas such as the internet, automation and healthcare, rapid development is taking place and this gives the opportunity for dynamic businesses to prosper.  We will continue to strive to identify businesses with exciting growth opportunities and to purchase shares in them for your Company. 

Baillie Gifford

September 2017

For a definition of terms see Glossary of Terms, Note 12.

Past performance is not a guide to future performance.

Equity Portfolio by Growth Category

As at 31 August 2017

* A definition of the growth categories can be found in the Managers' Report.

Stock Level Attribution

Source: StatPro. Baillie Gifford Japan Trust relative to TOPIX total return, in sterling terms. See disclaimer at the end of this announcement.