Interim Results

Baillie Gifford Japan Trust PLC 03 April 2003 THE BAILLIE GIFFORD JAPAN TRUST PLC Results for the six months to 28 February 2003 Weakness in global stockmarkets has been reflected in the performance of The Baillie Gifford Japan Trust PLC over the six months to 28 February 2003. Despite global uncertainty and less than positive developments in Japanese public policy, recent economic and corporate news has been encouraging and the Managers believe that valuations on many companies are attractive. • Performance. Over the six months to 28 February 2003, the Company's net asset value per share fell 15.6% in comparison to its benchmark index (75% TOPIX and 25% Tokyo Stock Exchange Second Section in sterling terms) which fell 13.8%. The main factors behind this underperformance were the actual gearing invested in the market, poor stock selection among financials and machinery stocks and the strong relative performance of illiquid value companies in the Second Section index. • Japanese Economy. The Japanese economy has continued to recover, although the pace of recovery has begun to slow. Growth for the fiscal year to March 2003 is expected to be around 1.5%, however growth in 2003 is likely to be slower unless global conditions improve. • Corporate Activity. There has been an encouraging increase in corporate activity during the period, with many companies examining and rationalizing group structures. Two of our holdings, Konica and Minolta, announced a merger which should accelerate cost cutting. • Public policy. Banks have begun to restructure more aggressively following the appointment of Mr Takenaka as head of Japan's Financial Services Agency, however major changes to regulation seem unlikely at the moment. More cooperation between the Bank of Japan and the government is likely after the appointment of Mr Fukui as the new governor, although radical shifts in monetary policy are not expected. • Outlook. The Japanese stockmarket has been affected both by global economic uncertainty and by significant short term selling by Japanese pension funds. Corporate developments, however, have been encouraging and the taxes on dividend income reduced. Valuations on many companies are attractive. Whilst a more positive policy stance by the government is hoped for it is not anticipated, although there is further gearing to invest in the market if appropriate. The Baillie Gifford Japan Trust PLC aims to pursue long-term capital growth principally through investment in medium to smaller sized Japanese companies. The Company is managed by Baillie Gifford & Co., the leading independent Edinburgh based fund management group with around £20 billion under management and advice. 3 April 2003 For further information please contact: Sarah Whitley, Manager, The Baillie Gifford Japan Trust PLC 0131 222 4000 Mike Lord, Director, Broadgate Marketing 020 7726 6111 Baillie Gifford & Co. is regulated by the FSA. THE BAILLIE GIFFORD JAPAN TRUST PLC Interim Report The weakness in global stockmarkets has continued since the Company's year end and as a result the net asset value per share has fallen by 15.6% in the six months to 28 February 2003. The Company's benchmark index declined by 13.8% in sterling terms, with the very small illiquid companies that make up a significant proportion of the Tokyo Stock Exchange Second Section, and therefore the benchmark, performing much better than larger companies. The underperformance of the Company relative to the benchmark was also impacted by the gearing invested in the market and poor stock selection in financials and machinery stocks. Actual gearing was reduced through the period, but was still around 4.2% at the end of February. Surprisingly the recent economic news in Japan has been encouraging, with the recovery that started at the beginning of last year continuing in the past few months. Recent monthly data on production, consumption and capital spending has also been improving, although the pace of recovery has been slowing. Consumer prices continue to fall, but at a slower pace than before. As a result we now expect that growth for the fiscal year ending March 2003 will be around 1.5%. Growth in 2003 is likely to be slower, unless global conditions improve or government policy becomes more pro-active. In general the news from the corporate sector has also been encouraging. Profits are expected to grow strongly in the current year as companies exit unprofitable businesses and cut costs. Industrial capacity is being reduced in Japan and this coupled with a recovery in production means that capacity utilisation has risen sharply. Exports have been growing, particularly those to China, and demand in Japan has been stable. However, falling share prices have resulted in significant write-downs as most companies still hold equities on their balance sheets. Both the manufacturing and non-manufacturing sectors are generating significant amounts of cash flow to either invest or reduce debt. There has also been a noticeable increase in the amount of corporate activity during the period. Two of our holdings, Konica and Minolta, announced they were merging in January and would further accelerate their cost cutting programmes and focus resources on the most competitive areas of the joint entity. Companies with many subsidiaries continue to examine their holding structures and there are many mergers between subsidiaries and their ultimate controllers. Developments on the policy front have been less clear and less positive. Bank share prices fell sharply after the appointment of Mr Takenaka as the head of Japan's Financial Services Agency, when tougher policies towards the banks were indicated. In reaction to this there have been more aggressive restructuring, increased efforts to sell both equity holding and non-performing loans from the banks along with significant amounts of capital raising funded by the private sector and foreigners. Subsequent announcements show that the regulatory regime is not changing radically and although the actions by the banks are welcome they do not solve the sector's long term problems and further action will be needed to restore health. Mr Fukui has been appointed as the new governor of the Bank of Japan, a move which disappointed those hoping for radical monetary policy changes. There is likely to be more cooperation between various government agencies and policy may well be implemented more effectively under the new head. Positive effects from the implementation of previously announced plans, such as the Industrial Revitalisation Corporation, may be seen over the next few months as these new bodies start work in the new fiscal year. The Japanese stockmarket has been affected both by the global uncertainty of the last few months and by significant short term selling by Japanese pension funds, who are passing back some of their liabilities to the government. Corporate developments have been encouraging and tax changes since the period end will result in dividends being taxed less than before, which may mean that companies may increase dividends from their current low levels. Valuations on many companies are attractive and the gearing that we have invested in the market reflects this. Whilst we hope for a more positive policy stance by the government we are not anticipating it, but have further gearing to invest in the market if appropriate. By order of the Board Baillie Gifford & Co 2 April 2003 The following is the interim statement for the six months ended 28 February 2003 which has been neither reviewed nor audited by the auditors. This statement is being printed and will be sent to all shareholders on 15 April 2003. Copies will be available for inspection at the Registered Office of the Company or may be obtained on request from the Managers and Secretaries after that date. THE BAILLIE GIFFORD JAPAN TRUST PLC STATEMENT OF TOTAL RETURN (unaudited and incorporating the revenue account*) for the six months ended for the six months ended for the year ended 28 February 2003 28 February 2002 31 August 2002 Revenue Capital Total Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Realised losses on - (9,070) (9,070) - (5,502) (5,502) - (11,001) (11,001) investments Unrealised losses on - (3,381) (3,381) - (13,065) (13,065) - (5,284) (5,284) investments Currency gains (note 1) - 465 465 - 320 320 - 162 162 Income 302 - 302 314 - 314 808 - 808 Investment management (333) - (333) (417) - (417) (847) - (847) fee Other administrative (92) - (92) (109) - (109) (202) - (202) expenses Net return before (123) (11,986) (12,109) (212) (18,247) (18,459) (241) (16,123) (16,364) finance costs and taxation Finance costs of (78) - (78) (55) - (55) (116) - (116) borrowings Return on ordinary activities before (201) (11,986) (12,187) (267) (18,247) (18,514) (357) (16,123) (16,480) taxation Tax on ordinary (45) - (45) (46) - (46) (120) - (120) activities Return on ordinary activities after (246) (11,986) (12,232) (313) (18,247) (18,560) (477) (16,123) (16,600) taxation Transfer from reserves (246) (11,986) (12,232) (313) (18,247) (18,560) (477) (16,123) (16,600) Return per ordinary (0.39p) (19.04p) (19.43p) (0.49p) (28.68p) (29.17p) (0.75p) (25.40p) (26.15p) share (note 3) * The revenue column of this statement is the profit and loss account of the Company. All revenue and capital items in this statement derive from continuing operations. THE BAILLIE GIFFORD JAPAN TRUST PLC SUMMARISED BALANCE SHEET at 28 February 2003 (unaudited) 28 February 28 February 31 August 2003 2002 2002 £'000 £'000 £'000 NET ASSETS Listed overseas equities 60,468 74,705 79,180 Unlisted equities - traded on the OTC/Hercules Japan markets 7,755 4,754 6,957 - other unlisted 1,258 1,335 1,317 Total fixed asset investments 69,481 80,794 87,454 Net liquid assets 10,353 5,411 5,223 Total assets (before deduction of bank loans) 79,834 86,205 92,677 Bank loans (note 4) (13,962) (9,509) (14,176) 65,872 76,696 78,501 CAPITAL AND RESERVES Called-up share capital 3,147 3,174 3,167 Capital reserves 69,479 79,866 81,842 Revenue reserve (6,754) (6,344) (6,508) EQUITY SHAREHOLDERS' FUNDS 65,872 76,696 78,501 NET ASSET VALUE PER ORDINARY SHARE 104.7p 120.8p 124.0p Ordinary shares in issue (note 5) 62,935,000 63,475,000 63,335,000 THE BAILLIE GIFFORD JAPAN TRUST PLC SUMMARISED CASH FLOW STATEMENT (unaudited) Six months to Six months to Year to 28 February 28 February 2002 31 August 2002 2003 £'000 £'000 £'000 NET CASH OUTFLOW FROM OPERATING ACTIVITIES (132) (262) (284) NET CASH OUTFLOW FROM SERVICING OF FINANCE (79) (20) (119) TOTAL TAX PAID (47) (47) (119) FINANCIAL INVESTMENT Acquisitions of investments (18,502) (22,395) (50,387) Disposals of investments 26,701 20,766 43,198 Realised currency profit/(loss) 251 (610) (433) NET CASH INFLOW/(OUTFLOW) FROM FINANCIAL INVESTMENT 8,450 (2,239) (7,622) NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING 8,192 (2,568) (8,144) FINANCING Net (outflow)/inflow from bank loans - (568) 3,764 Shares purchased for cancellation (397) (291) (446) NET CASH (OUTFLOW)/INFLOW FROM FINANCING (397) (859) 3,318 INCREASE /(DECREASE) IN CASH 7,795 (3,427) (4,826) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Increase/(decrease) in cash in the period 7,795 (3,427) (4,826) Net outflow/(inflow) from bank loans - 568 (3,764) Exchange movement on bank loans 214 930 595 MOVEMENT IN NET DEBT IN THE PERIOD 8,009 (1,929) (7,995) NET DEBT AT START OF PERIOD (10,767) (2,772) (2,772) NET DEBT AT END OF PERIOD (2,758) (4,701) (10,767) THE BAILLIE GIFFORD JAPAN TRUST PLC TWENTY LARGEST EQUITY HOLDINGS at 28 February 2003 Market value % of total £'000 assets Name Business Konica Office equipment and imaging 2,905 3.7 USS Company Second-hand car auctioneer 2,351 2.9 Bandai Maker of toys, cartoons and character goods 2,284 2.9 Seino Transportation Trucking 2,217 2.8 JFE Holdings Major steel company 2,158 2.7 Yamada Denki Consumer electronics retailer 2,079 2.6 Okumura Construction and civil engineering 2,018 2.5 Tostem Inax Holdings Building materials 2,014 2.5 LeoPalace21 Condominium developer and lessor 1,979 2.5 Goodwill Group Part-time labour and nursing care 1,972 2.5 NTT Telecommunications 1,965 2.4 Fuji Heavy Industries Maker of Subaru brand automobiles 1,939 2.4 Kyocera Electronic components 1,911 2.4 NTT DoCoMo Mobile telecommunications 1,904 2.4 Itochu Trading company 1,817 2.3 Diamond Lease Leasing 1,757 2.2 Takeda Chemical Industries Pharmaceuticals 1,686 2.1 Ushio Specialist lighting products 1,604 2.0 Aiful Consumer finance 1,577 2.0 Toyo Suisan Noodle maker 1,555 1.9 39,692 49.7 THE BAILLIE GIFFORD JAPAN TRUST PLC NOTES 28 February 2003 28 February 31 August £'000 2002 2002 £'000 £'000 1. Currency gains Realised exchange differences 251 (906) (729) Movement in unrealised exchange differences 214 1,226 891 465 320 162 2. No interim dividend will be declared. 3. Return per ordinary share Revenue return (246) (313) (477) Capital return (11,986) (18,247) (16,123) Return per ordinary share is based on the above totals of revenue and capital and on 62,959,310 (28 February 2002 - 63,622,376; 31 August 2002 - 63,485,946) ordinary shares, being the weighted average number of ordinary shares in issue during the period. 4. Bank loans of £13.9 million (Y2.6 billion) have been drawn down under yen loan facilities which are repayable between 28 August 2006 and 9 August 2007 (28 February 2002 - £9.5 million (Y1.8 billion); 31 August 2002 - £14.2 million (Y2.6 billion)). 5. During the period the Company bought back 400,000 ordinary shares with a total nominal value of £20,000 for a consideration of £397,000 in accordance with the authority granted at the AGM in November 2001. The Company's authority to buy back its own ordinary shares was last renewed at the AGM in November 2002 in respect of 9,433,956 ordinary shares (equivalent to 14.99% of its share capital at that date). At 28 February 2003 the Company's authority to buy back its own shares remained unchanged at 9,433,956 shares. 6. The financial information for the year ended 31 August 2002 has been extracted from the full accounts, which have been filed with the Registrar of Companies and which contain an unqualified Auditor's Report. 7. The accounting policies applied in calculating the interim figures are consistent with those used in the Annual Financial Statements. The Interim Report was approved by the Board on 2 April 2003. This information is provided by RNS The company news service from the London Stock Exchange

Companies

Baillie Gifford Japan Trust (BGFD)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today