Interim Results
Baillie Gifford Japan Trust PLC
01 April 2004
THE BAILLIE GIFFORD JAPAN TRUST PLC
Results for the six months to 29 February 2004
• The Baillie Gifford Japan Trust PLC outperformed its Benchmark Index* by
8.1%.
• In the six months to 29 February 2004, net asset value per share rose 6.4%
compared to the Benchmark Index which declined 1.7% in sterling terms. In
the same period, the share price rose 11.3%+.
• The Company is ranked first in its AITC peer group in terms of 6 month and
1 year net asset value performance+.
• The use of gearing and stock selection aided the strong outperformance,
particularly stocks within the Commerce and Services and Financial sectors.
• The economic data continues to be strong and growing Chinese demand remains
a positive. Real and nominal GDP growth in 2003 has been followed by signs
that deflation is easing and the labour market is strengthening. We expect
that interest rates will remain low and that corporate profits will
continue to strengthen.
• The outlook is viewed positively. The Managers expect GDP growth of nearly
3% for the fiscal year ending March 2004 and continued expansion
thereafter, provided there are no exogenous shocks or domestic policy
errors. The Managers continue to invest nearly all the gearing in the
market. Many large holdings still look attractive.
* The Company's Benchmark index for the six months ending 29/02/04 is the TOPIX
Index in sterling terms.
+ Past performance is no guarantee of future performance.
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., an Edinburgh based fund
management group.
1 April 2004
For further information please contact:
Sarah Whitley, Manager,
The Baillie Gifford Japan Trust PLC 0131 275 2000
Mike Lord, Director,
Broadgate Marketing 020 7726 6111
THE BAILLIE GIFFORD JAPAN TRUST PLC
Interim Report
Over the six months to 29 February 2004 the net asset value per share rose by
6.4% to 148.8p. In the same period TOPIX in sterling terms fell by 1.7%, as the
yen depreciated by 9% against sterling. The strong outperformance of the
portfolio against the benchmark was mainly due to stock selection, particularly
within the Commerce and services and Financial sectors. The borrowings of £20m
were also beneficial to shareholders.
The economic news in Japan has continued to be positive and for 2003 there was
both real and nominal GDP growth. Activity has continued to be strong in 2004
so far and there are some indications that deflation may be easing, with
consumer prices stable and commodity prices rising. The labour market has shown
signs of strength and the recovery in profits that the corporate sector has been
experiencing is leading to increased bonus payments, which are typically several
months salary, thus supporting consumption. Interest rates remain low in Japan
and the monetary authorities have made it clear that they do not want to raise
them too early and choke off recovery.
Unlike some other developed countries growth in Japan is coming entirely from
the private sector, both domestic and overseas, as the government continues to
retrench its spending. Overall we expect GDP growth of nearly 3% for the fiscal
year which ends in March 2004 and further strong growth in the next year. The
risks remain of a change in the buoyancy of external conditions, particularly in
China, and the authorities making policy errors in Japan. At the moment neither
are a threat.
Corporate Japan continues to benefit from the strength of demand in China. Some
companies are exporting machinery to build the industrial base there whilst
others are seeing decreasing competition from imports and are therefore able to
raise prices for the first time in decades. As companies have scrapped 10% of
industrial capacity in Japan over the past six years their capacity utilisation
has risen sharply in the recovery, which may generate more general price rises.
This would be helpful in finally resolving the overhang of the 1980s boom.
Property prices in some parts of Tokyo are already rising and any increase in
asset values would be immensely helpful to the banks.
There has been no major change to the structure of the portfolio over the last
six months, with many large holdings performing well and still looking
attractive. We remain positive on the outlook, although alert to potential
problems, and continue to have nearly all the gearing invested in the market.
By order of the Board
Baillie Gifford & Co
31 March 2004
The following is the interim statement for the six months ended 29 February 2004
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 2004. 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 for the six months ended for the year ended
ended 28 February 2003 31 August 2003
29 February 2004
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
£'000 £'000
Realised - (9,070) (9,070) - (12,882) (12,882)
gains/(losses) on - 348 348
investments
Unrealised - (3,381) (3,381) - 22,567 22,567
gains/(losses) on - 3,880 3,880
investments
Currency - 1,786 1,786 - 465 465 - (64) (64)
gains/(losses) (note 1)
Income 282 - 282 302 - 302 797 - 797
Investment management (454) - (454) (333) - (333) (718) - (718)
fee
Other administrative (102) - (102) (92) - (92) (184) - (184)
expenses
Net return before (274) 6,014 5,740 (123) (11,986) (12,109) (105) 9,621 9,516
finance costs and
taxation
Finance costs of (120) - (120) (78) - (78) (159) - (159)
borrowings
Return on ordinary (394) 6,014 5,620 (201) (11,986) (12,187) (264) 9,621 9,357
activities before
taxation
Tax on ordinary (26) - (26) (45) - (45) (93) - (93)
activities
Return on ordinary (420) 6,014 5,594 (246) (11,986) (12,232) (357) 9,621 9,264
activities after
taxation
Transfer (from)/to (420) 6,014 5,594 (246) (11,986) (12,232) (357) 9,621 9,264
reserves
Return per ordinary (0.68p) 9.71p 9.03p (0.39p) (19.04p) (19.43p) (0.57p) 15.40p 14.83p
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 29 February 2004
(unaudited)
29 February 28 February 31 August
2004 2003 2003
£'000 £'000 £'000
NET ASSETS
Listed overseas equities 99,880 60,468 96,084
Unlisted equities - traded on the OTC/Hercules Japan markets 9,467 7,755 8,746
- other unlisted 1,507 1,258 1,484
Total fixed asset investments 110,854 69,481 106,314
Net liquid assets/(liabilities) 1,542 10,353 (226)
Total assets (before deduction of bank loans) 112,396 79,834 106,088
Bank loans (note 4) (20,220) (13,962) (19,506)
92,176 65,872 86,582
CAPITAL AND RESERVES
Called-up share capital 3,097 3,147 3,097
Capital reserves 96,364 69,479 90,350
Revenue reserve (7,285) (6,754) (6,865)
EQUITY SHAREHOLDERS' FUNDS 92,176 65,872 86,582
NET ASSET VALUE PER ORDINARY SHARE 148.8p 104.7p 139.8p
Ordinary shares in issue (note 5) 61,935,000 62,935,000 61,935,000
THE BAILLIE GIFFORD JAPAN TRUST PLC
SUMMARISED CASH FLOW STATEMENT
(unaudited)
Six months to Six months to Year to
29 February 28 February 2003 31 August
2004 2003
£'000 £'000 £'000
NET CASH OUTFLOW FROM OPERATING ACTIVITIES (335) (132) (27)
NET CASH OUTFLOW FROM SERVICING OF FINANCE (80) (79) (157)
TOTAL TAX PAID (26) (47) (98)
FINANCIAL INVESTMENT
Acquisitions of investments (10,528) (18,502) (51,026)
Disposals of investments 9,699 26,701 44,309
Realised currency (loss)/profit (186) 251 (147)
NET CASH (OUTFLOW)/INFLOW FROM FINANCIAL INVESTMENT (1,015) 8,450 (6,864)
NET CASH (OUTFLOW)/INFLOW BEFORE FINANCING (1,456) 8,192 (7,146)
FINANCING
Net inflow from bank loans 2,686 - 5,413
Shares purchased for cancellation - (397) (1,183)
NET CASH INFLOW/(OUTFLOW)FROM FINANCING 2,686 (397) 4,230
INCREASE/(DECREASE) IN CASH 1,230 7,795 (2,916)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Increase/(decrease) in cash in the period 1,230 7,795 (2,916)
Net inflow from bank loans (2,686) - (5,413)
Exchange movement on bank loans 1,972 214 83
MOVEMENT IN NET DEBT IN THE PERIOD 516 8,009 (8,246)
NET DEBT AT START OF PERIOD (19,013) (10,767) (10,767)
NET DEBT AT END OF PERIOD (18,497) (2,758) (19,013)
THE BAILLIE GIFFORD JAPAN TRUST PLC
TWENTY LARGEST EQUITY HOLDINGS
at 29 February 2004
Market
value % of total
£'000 assets
Name Business
Goodwill Group Part-time labour and nursing care 3,624 3.2
UFJ Holdings Major bank 3,451 3.1
LeoPalace21 Condominium developer and agency 3,365 3.0
Sumitomo Realty and Development Property development and lessor 3,146 2.8
Aiful Consumer finance 3,138 2.8
Tokyu Railway based conglomerate 2,950 2.6
Konica Minolta Holdings Office equipment and imaging 2,882 2.6
Yamada Denki Consumer electronics retailer 2,778 2.5
Uniden Cordless phone manufacturer 2,742 2.4
JFE Holdings Major steel company 2,654 2.4
Kyocera Electronic components 2,638 2.3
Asahi Glass Specialist glass 2,620 2.3
TDK Electronic components 2,604 2.3
KDDI Mobile telecommunications 2,517 2.2
Diamond Lease Leasing services 2,508 2.2
Canon Printers and copiers 2,471 2.2
Tostem Inax Holdings Building materials 2,453 2.2
NTT DoCoMo Mobile telecommunications 2,373 2.1
USS Company Second-hand car auctioneer 2,281 2.0
Itochu Trading conglomerate 2,207 2.0
55,402 49.2
THE BAILLIE GIFFORD JAPAN TRUST PLC
NOTES
29 February 2004 28 February 31 August
£'000 2003 2003
£'000 £'000
1. Currency gains/(losses)
Realised exchange differences (186) 251 (147)
Movement in unrealised exchange differences 1,972 214 83
1,786 465 (64)
2. No interim dividend will be declared.
3. Return per ordinary share
Revenue return (420) (246) (357)
Capital return 6,014 (11,986) 9,621
Return per ordinary share is based on the above totals of revenue and capital and on 61,935,000 (28
February 2003 - 62,959,310; 31 August 2003 - 62,473,082) ordinary shares, being the weighted average
number of ordinary shares in issue during the period.
4. Bank loans of £20.2 million (Y4.1 billion) have been drawn down under yen loan facilities which are
repayable between 28 August 2006 and 26 November 2008 (28 February 2003 - £13.9 million (Y2.6
billion); 31 August 2003 - £19.5 million (Y3.6 billion)).
5. At the AGM in November 2003, shareholders approved the renewal of the Company's authority to buy back
its own ordinary shares in respect of 9,284,056 ordinary shares of 5p each (equivalent to 14.99% of
its share capital at that date). No ordinary shares have been bought back during the period under
review and at 29 February 2004 the Company's authority to buy back its own shares, therefore, remained
unchanged at 9,284,056 ordinary shares.
6. The financial information for the year ended 31 August 2003 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 31 March 2004.
None of the views expressed in this document should be construed as advice to buy or sell a particular
investment.
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