Annual Financial Report

RNS Number : 0501I

Baillie Gifford Shin Nippon PLC

04 March 2010

 



BAILLIE GIFFORD SHIN NIPPON PLC

Results for the year to 31 January 2010

 The Company's net asset value per share (after deducting borrowings at fair value) rose by 14.1% and the share price rose by 20.4%, outperforming the Company's comparative index* which declined by 1.5% in sterling terms.

·	Good relative and absolute performance was achieved through stock selection, notably in the Retail and Electricals & electronics sectors.  Gearing aided performance; however, sterling returns were reduced by yen weakness over the period.  As at the Company's year end, equity gearing stood at 16.8% compared to 18.0% a year earlier.
·	The Japanese economy is benefiting from the recovery in global trade.  Investment in technology manufacturing equipment has been strong and capital expenditure in the machinery sector is picking up.  Consumer confidence is recovering as demand for labour improves.  Most Japanese companies have enacted dramatic cost cutting and some have managed to regain previous peak levels of profitability.
·	Company valuations remain low and attractive when compared to long term averages.  The Board and Managers are of the view that the universe of investable Japanese smaller stocks provides numerous opportunities to invest in companies with the potential to grow earnings over the long term.
·	Since 2001, the Company's comparative index has been a market weighted, capital return only composite of the Tokyo Section Section, Topix Small, and the JASDAQ indices.  As of 1 February 2010, it will be changed to the MSCI Japan Small Cap Index, total return, in sterling terms.  The change is being made as the MSCI index is a better reflection of the companies in which Baillie Gifford Shin Nippon invests, and recognises that Japanese companies are now paying a meaningful level of dividends.

* The Company's comparative index for the year to 31 January 2010 was a composite index of the Tokyo Second Section Index, the TOPIX Small Index and the JASDAQ Index, weighted by market capitalisation, in sterling terms.

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 2010 the Company had total assets of £51.5m (before deduction of bank loan of £7.9m).

The Company is managed by Baillie Gifford & Co, an Edinburgh based fund management group with around £59 billion under management and advice as at 3 March 2010.

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 medium to long term. You can find up to date performance information about Shin Nippon at www.shinnippon.co.uk.

3 March 2010

-     ends -

For further information please contact:

Anzelm Cydzik

Baillie Gifford & Co                                                                              0131 275 2000

Roland Cross, Director,

Broadgate Mainland                                                                             020 7776 0512

                                                                                                            or 07831 401309

BAILLIE GIFFORD SHIN NIPPON PLC 

Chairman's Statement

Performance

Over the last year, after a two year period of pronounced weakness, Japanese markets in aggregate posted positive returns in local currency terms. However, for sterling investors the weakness in the Yen meant that these returns were reduced. Over the year to 31 January 2010 the Company's comparative index declined by 1.5% in sterling terms.  Shin Nippon's performance exceeded this with an improvement in net asset value (after deducting borrowings at fair value) of 14.1%, while the share price appreciated by 20.4%. The discount of the share price to net asset value narrowed during the period from 21.7% to 17.4% and ranged between 27.9% and 6.6% during the year. The Company's performance was sound against its peer group,  ranking it 3/5 for NAV total return performance over one year, 2/5 over three years and 1/5 over five years.

Stock selection was the source of the Company's good relative and absolute performance and this, along with the stock market and the economy, is discussed more fully in the Managers' report.

Borrowing

In March 2009 ¥250m of debt was repaid early and the Company ended the period with debt of ¥1.15bn. This has an interest cost of 2.025% and is due for repayment in August 2011. The resultant gearing at the end of the year was 18.2% gross and 16.8% net and was beneficial to performance during the course of the year.

Hedging

The Company undertook no hedging during the period, during which the Yen weakened by 10.9% against Sterling, moving from ¥/£129.48 to ¥/£145.27.  Movements in currency markets are monitored closely and hedging would be considered if the Yen diverged significantly from the Managers' estimate of fair value.

Revenue

Shin Nippon's remit is to pursue capital growth rather than income generation. The Company's revenue per share for the year fell from 1.54p in the previous period to 0.08p. The main reason for the decline was the 30.1% drop in investment income to £868,000 with companies cutting their dividends as profits fell sharply. During the previous year the Company also benefited from the recovery of £44,000 of VAT and related interest from HM Revenue & Customs. Shin Nippon's revenue reserve remains in deficit so a dividend is not possible.  

AGM

At this year's AGM the Board is seeking to renew the facility to issue new shares, and to re-issue any shares held in treasury (of which there are none at present), up to 5% of the Company's issued share capital for cash, on a non pre-emptive basis, but only at a premium to net asset value. No shares were issued during the financial year. Such authority would be used to feed natural market demand and would enhance the net asset value per share for existing shareholders.

Approval is also sought to renew the authority to buy back shares. The purpose of this facility is to enable the Board to buy back shares when the discount is substantial in absolute terms and in relation to its peers. Its impact would be to enhance the net asset value per share for existing shareholders.

Authority is also sought to adopt new Articles of Association so that the remaining parts of the Companies Act 2006 can be incorporated. 

Strategy

At this year's annual review of strategy with the Managers, the Board reaffirmed its view of the long term attractions of investing in smaller companies in Japan. Notable features discussed were: Japan as a major beneficiary of its proximity to China and strong regional growth; the existence of a substantial pool of smaller, innovative Japanese companies with strong competitive advantages in the region and the world;  many small companies in Japan are under-researched providing good potential for outperformance as a consequence of your Managers'  investment process; companies generally have strong balance sheets; many company valuations are very low on a historic basis at present; and, Shin Nippon benefits from low cost historic borrowings. There are, however, some negatives. Doubt remains over the political system. The new government of Prime Minister Hatoyama has had a rocky start on some financial issues but there are grounds for hoping that structural change is happening below the surface, albeit slowly. Also, corporate governance in Japan is still poor but, again, there are continuing signs of improvement.

I should mention also one area where your Company is materially different from its competitors. Shin Nippon's objective is to invest for the long term, and it does just that. The average holding term of its largest ten holdings is four years and four months and the portfolio turnover rate has averaged 27.5% annually over the past five financial years. This is in sharp contrast to many investment vehicles that have very high turnover rates but still claim to invest for the long term.

BAILLIE GIFFORD SHIN NIPPON PLC

Chairman's Statement (Ctd)

Comparative Index and Performance Objectives

Setting an appropriate comparative index for Shin Nippon has always been a challenge. This was last reviewed formally in 2001 when the Board adopted a weighted composite index (in sterling terms) of the Tokyo Second Section, Topix Small and the JASDAQ indices. This is not ideal as the indices suffer from various structural problems such as having some constituents that are really quite large companies or a long tail of companies that are completely illiquid, but it was felt to be the best and fairest solution at the time. Since then the MSCI Japan Small Cap Index has become an established quality index covering smaller companies in Japan. Compared to the other available indices, it has a better match with the size of stocks that Shin Nippon invests in both at the top and bottom of its range, and the median capitalisation of its components is well matched to the Company's portfolio too. Also, the MSCI index is available on a total return basis.

In the last five years there has been a dramatic increase in dividend payouts in Japan, albeit from a very low base. The Board has decided therefore that all future performance comparisons will be compiled on a total return basis i.e. including income, and has adopted the MSCI Japan Small Cap Index, total return in sterling terms, as your Company's comparative index from 1 February 2010. The yield on the portfolio and the index is very similar at approximately two percent at present. For reference, the MSCI index increased by 2.1% over the year to 31 January 2010.

In addition, the Board has reviewed your Company's performance targets. As the objective is to achieve long term capital growth, the Board has decided that the key target for the Managers should be to outperform the comparative index and the Company's peer group over running periods of three years. In evaluating the Managers, the Board will take account of performance over one and five year periods as well. The Board and Managers are also very aware of the desire to generate absolute returns for shareholders.

Board

I was honoured to be appointed Chairman on 29 April 2009 on the retirement of Mike Hathorn. I should like to pay tribute to Mike's skills and patience in chairing us through many years, and which contributed to our positive long term performance. Over the last few years the Board has had an active programme of Board refreshment. Last year it was announced that Sarah Whitley would stand down in due course. It is planned that this will happen when a suitable replacement has been identified and an announcement will be made to this effect in due course. As a result all the Company's Directors will be independent of the Managers. As head of the Japanese department of Baillie Gifford, Sarah's advice will continue to be available to the Board.

Outlook

The Japanese economy is benefiting from the recovery in global trade. Exports from Japan to the rest of Asia have been especially buoyant in recent months. Investment in technology manufacturing equipment has been strong and there are now signs that capital expenditure in the machinery sector is picking up.  The wildcard remains domestic consumption, and the widely held consensus is that consumer spending will remain unexciting. However, there are some grounds to expect a more favourable outcome. Consumer confidence is recovering as demand for labourimproves, and families with children are in line for a significant increase in their monthly income when child allowance payments are introduced by the new government later this year.  

Corporate Japan has endured a very tough year. However, most Japanese companies deserve credit for their swift response to the dramatic collapse in global demand and the overall level of cost cutting has been very impressive. Some companies have even managed to regain previous peak levels of profitability already, despite sales being significantly lower than before the downturn.  In recent quarters aggregate profits for the market have taken many by surprise and consensus forecasts for the full year imply a major slowdown in the next few months which seems highly unlikely. The Board and Managers believe that the market tends to underestimate the impact on corporate profits of a cyclical recovery combined with aggressive cost reductions.

Despite the rosier background compared to twelve months ago, Japanese share prices have tended to lag the recovery in global share prices. Valuations remain low and attractive when compared to longer term averages. We remain encouraged by the underlying performance of the companies held and the Managers have been buying new holdings where the market appears to be ignoring the sustainability of the recent improvement in fundamentals.

BAILLIE GIFFORD SHIN NIPPON PLC 

Managers' Report

Performance and Portfolio

Shin Nippon's net asset value per share (after deducting borrowings at fair value) increased by 14.1% over the year compared to a fall of 1.5% in the comparative index which comprised a market capitalisation weighted composite of the Tokyo Second Section Index, the TOPIX Small Index, and the JASDAQ. The sterling return was negatively impacted by the 10.9% fall in the value of the Yen over the twelve months.

At the beginning of this twelve month period the global economy appeared to be in freefall and there were lingering doubts about the stability of the financial system. The Japanese market endured a turbulent year reaching its low point in March before rallying over the summer, as signs started to emerge that the world's economy was responding to stimulus packages and that a global depression had been avoided. Towards the second half of the year Japanese indices generally weakened. Investors appear to have been worried about both the impact of short term yen strength on Japanese exporters and the threat of dilutive equity issuances after some of the larger, generally weaker Japanese companies announced large new financing issues. Some investors were no doubt also disappointed that the new government had dominated the headlines for mostly the wrong reasons during their first couple of months in office. These concerns probably help explain Japan's relative underperformance compared to other parts of the world.

Within Japan the economy has rebounded quickly, as it has tended to do in the past when global demand has reaccelerated. This naturally favoured the industries with most exposure to external demand such as Electricals & electronics and Manufacturing & machinery. Stocks in these sectors had been amongst the weakest performers in the previous year as global demand deteriorated.

The impressive speed of the turnaround in aggregate profits for the Japanese market has taken many by surprise. While demand has only just started to improve gradually over the past couple of quarters, profitability in some cases has already returned to near record high levels. This highlights how aggressive companies had been in their cost cutting at the start of the year to allow them to cope with the dramatic slowdown in orders.

The subdued reaction in share prices to the improving news regarding economic and profit growth in Japan has allowed Shin Nippon to purchase several new holdings in stocks with exciting long term growth prospects, at depressed valuation levels. Nifco manufactures specialist plastic parts for automobiles, while Chugoku Marine Paints is also benefiting from the recovery in the global economy. More domestic focused new purchases include Point, a fashion retailer that is gaining market share, and Nihon M&A Center, which offers advisory services to small businesses and their owners.

Attribution

The table following this report contains information regarding the contribution to overall portfolio performance last year from our stock selection and asset allocation in each sector. As has been previously intimated, this breakdown is slightly artificial as we select stock purely on the basis of their individual merits but it does provide some details on the key factors contributing to performance.

The Company's good performance relative to its comparative index is broadly attributable to stock selection combined with the positive effect of maintaining our low cost yen gearing.

Electricals and electronics was by some margin the best performing sector in the market as the semiconductor cycle picked up, in response to the healthier demand for consumer electronics. Iriso Electronics, the manufacturer of electronic connectors, and Foster Electric, a company that makes earphones for portable music players and mobile phones at its production bases around Asia, were especially strong performers.

Another strongly performing area was the broad Manufacturing and machinery sector where share prices started to rise in anticipation of an increase in capital spending on equipment from very low levels. Industrial hydraulic joint maker Nabtesco is a good example of a machinery related holding that performed well as orders from the rest of Asia rebounded for construction equipment and high speed railway networks.

Retailwas one of the worst performing sectors, given the fairly lacklustre consumption background, but several of our niche retail stocks performed very strongly. Start Today is an online fashion retailer that is benefiting as Japanese consumers become more accustomed to buying clothing over the internet, while Daikokutenbussan and Don Quijote have both done well due to the increasing popularity of their discount formats.

In general, areas of the market that were less linked to the economic business cycle were amongst the poorer performers. The Pharmaceuticals and food sector, for example, declined overall and our holding in EPS, the coordinator of outsourced drug trials, was one of our worst performing holdings. While the company may not be benefiting particularly from the pickup in the economy, the longer term growth outlook for this business still looks very attractive.

BAILLIE GIFFORD SHIN NIPPON PLC

Managers' Report (Ctd)

Portfolio turnover remained low over the twelve month period at 21%, which is in line with our investment horizon of three to five years.

Economy

As has been mentioned already, the Japanese economy has been recovering since early last year, spurred initially by increases in export demand. Forecasts for economic growth in Japan this year are being revised up as evidence of a more sustained improvement in conditions emerges. Industrial production and capacity utilisation have both been rising as orders from the rest of Asia have rebounded quickly. Japanese companies were quick to stop production when demand collapsed so there was no major inventory problem, and even now inventories are still below normal levels despite the recovery in production. This improvement in fundamentals has been reflected in the various business sentiment surveys including the one specific to smaller companies. Access to credit has also improved as the year has progressed.

While overall consumption remains fairly subdued, consumer confidence is recovering as the labour market improves. Overtime payments are starting to rise again and households with children further stand to benefit from the introduction of child allowance benefits later this year. Deflation, the persistent drag on the domestic economy, persists and it remains to be seen whether the Bank of Japan will take a more active stance in fighting this problem.

The main political story of the year was the election of the Democratic Party of Japan in September's general election. This ended a period of virtually unbroken rule for the Liberal Democrat Party since the Second World War. The new party swept into office after a campaign promising new and innovative policies designed to boost domestic consumption and reduce the power of the bureaucracy. A combination of political inexperience and personal scandal has resulted in many people writing off the DPJ's chances of success already. It is far too early to tell whether their efforts to boost consumer spending will succeed but the initial signs regarding the reform of the civil service are more encouraging. The long era of meddling bureaucrats dictating policy to serve various vested interests, rather than the greater economic good, may be coming to an end.

Outlook

Japanese companies have returned to profitability in recent quarters thanks to the recovery in global trade and a dramatically reduced cost base. Forecasts for the full year to March 2010 are too low and consensus estimates will inevitably be revised upwards. We have been taking advantage of the apparent disconnect between the improving fundamentals and the relatively disappointing performance of the smaller Japanese markets to build up exciting new holdings in some attractively valued domestic niche growth companies, along with several globally competitive exporters with high exposure to growth in the rest of Asia. Over the next year the market's focus should turn to stocks that have the ability to generate sustainable earnings growth and this should favour the long term "winners" that Shin Nippon aims to hold.

Portfolio Performance Attribution for the Year to 31 January 2010 (unaudited)

Computed relative to the comparative index†

	Index		Shin Nippon		Performance*		Contribution	Contribution attributable to:
	asset allocation		asset allocation		Shin		to relative	Stock	Asset
	31.01.09	31.01.10	31.01.09	31.01.10	Nippon	Index	return	selection	allocation
Portfolio Breakdown	%	%	%	%	%	%	%	%	%
Electricals and electronics	6.4	8.5	6.9	11.3	98.7	26.9	4.1	4.0	0.1
Manufacturing and machinery	14.3	16.4	33.3	31.7	14.0	11.5	2.7	0.6	2.1
Retail	12.1	11.0	26.1	22.8	3.7	(12.9)	2.3	4.0	(1.7)
Commerce and services	19.6	18.4	27.9	21.7	5.2	(6.1)	2.4	2.7	(0.3)
Pharmaceuticals and food	6.7	5.5	7.2	4.4	(18.5)	(6.6)	(0.9)	(0.7)	(0.2)
Real estate and construction	7.8	8.3	3.1	7.3	87.1	(4.3)	2.8	2.8	-
Financials	8.3	7.2	3.2	4.8	6.5	(22.3)	1.9	1.2	0.7
Information, communication and utilities	12.3	12.0	9.3	8.2	(10.5)	2.3	(1.4)	(1.2)	(0.2)
Chemicals and other materials	12.5	12.7	0.9	4.3	62.6	1.7	1.1	1.5	(0.4)
Cash and brokers' balances	-	-	10.3	1.6	(11.8)	-	(0.5)	-	(0.5)
Gearing	-	-	(28.2)	(18.1)	(8.5)	-	1.5	-	1.5
Total	100.0	100.0	100.0	100.0	15.5	(1.5)	17.2	15.8	1.3

Past performance is not a guide to future performance.

Source: HSBC/Nomura International plc.

Contributions cannot be added together, as they are geometric; for example to calculate how a return of 15.5% against an index return of (1.5%) translates into a relative return of 17.2%, divide the portfolio return of 115.5 by the index return of 98.5 and subtract one.

†The comparative index for the year to 31 January 2010 comprised a composite of the Tokyo Second Section Index, the TOPIX Small Index and the JASDAQ Index, weighted by market capitalisation, in sterling terms.

*The returns for Shin Nippon are total return (net income reinvested) whereas, due to the unavailability of total return data, the index returns are capital only returns (income not reinvested).  It is estimated that the index return would be higher by approximately 2 per cent per annum if net income was reinvested.

^†

BAILLIE GIFFORD SHIN NIPPON PLC

 

The following is the unaudited preliminary statement for the year to 31 January 2010 which was approved by the Board on 3 March 2010. No dividend is payable.

INCOME STATEMENT

(unaudited)

	For the year ended 31 January 2010				For the year ended 31 January 2009
	Revenue £'000	Capital £'000	Total  £'000		Revenue £'000	Capital £'000	Total  £'000
Gains/(losses) on investments†	-	4,771	4,771		-	(3,922)	(3,922)
Currency gains/(losses) (note 2)‡	-	551	551		-	(3,383)	(3,383)
Income (note 3)	868	-	868		1,358	-	1,358
Investment management fee (note 4)	(397)	-	(397)		(345)	-	(345)
Other administrative expenses	(236)	-	(236)		(223)	-	(223)
Net return before finance costs and taxation	235	5,322	5,557		790	(7,305)	(6,515)
Finance costs of borrowings (note 6)	(152)	(37)	(189)		(222)	(80)	(302)
Net return on ordinary activities before taxation	83	5,285	5,368		568	(7,385)	(6,817)
Tax on ordinary activities	(59)	-	(59)		(87)	-	(87)
Net return on ordinary activities after taxation	24	5,285	5,309		481	(7,385)	(6,904)
Net return per ordinary share	0.08p	16.99p	17.07p		1.54p	(23.74p)	(22.20p)
(note 8)

   † Gains/(losses) on investments include gains and losses on disposals and holding gains and losses on the investment portfolio resulting from: i) changes in the local currency fair value of the investments and, ii) movements in the yen/sterling exchange rate.

‡   Currency losses include: i) currency exchange gains and losses on yen bank loans, ii) exchange differences on the settlement of investment transactions and iii) other exchange differences arising from the retranslation of cash balances.

   The total 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. No operations were acquired or discontinued during the year.

   A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Company have been   reflected in the above statement. 

BAILLIE GIFFORD SHIN NIPPON PLC

BALANCE SHEET

at 31 January 2010

(unaudited)

	At 31 January 2010		At 31 January 2009
	£'000	£'000	£'000	£'000
Fixed Assets
Investments		50,864		45,262
Current Assets
Debtors	249		147
Cash and short term deposits	619		3,932
	868		4,079
Creditors
Amounts falling due within one year	(246)		(268)
Net Current Assets		622		3,811
Total Assets less Current Liabilities		51,486		49,073
Creditors
Amounts falling due after more than one year (note 9)		(7,917)		(10,813)
Total net assets		43,569		38,260
Capital and Reserves
Called-up share capital		3,110		3,110
Share premium		7,674		7,674
Capital redemption reserve		21,521		21,521
Capital reserve		15,908		10,623
Revenue reserve		(4,644)		(4,668)
Shareholders' funds		43,569		38,260
Net Asset Value Per Ordinary Share:
(after deducting borrowings at fair value)		139.6p		122.3p
Net Asset Value Per Ordinary Share:
(after deducting borrowings at par value)		140.1p		123.0p

BAILLIE GIFFORD SHIN NIPPON PLC

 

 

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

(unaudited)

For the year ended 31 January 2010

	Called-up share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total shareholders' funds £'000
Shareholders' funds at 1 February 2009	3,110	7,674	21,521	10,623	(4,668)	38,260
Net return on ordinary activities after taxation	-	-	-	5,285	24	5,309
Shareholders' funds at 31 January 2010	3,110	7,674	21,521	15,908	(4,644)	43,569

For the year ended 31 January 2009

	Called-up share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total shareholders' funds £'000
Shareholders' funds at 1 February 2008	3,110	7,674	21,521	18,008	(5,149)	45,164
Net return on ordinary activities after taxation	-	-	-	(7,385)	481	(6,904)
Shareholders' funds at 31 January 2009	3,110	7,674	21,521	10,623	(4,668)	38,260

BAILLIE GIFFORD SHIN NIPPON PLC

CASH FLOW STATEMENT (unaudited)
	For the year ended 31 January 2010			For the year ended 31 January 2009
	£'000	£'000		£'000	£'000
NET CASH INFLOW FROM OPERATING ACTIVITIES (note 11)		207			743
SERVICING OF FINANCE
Interest and breakage costs paid	(217)			(295)
NET CASH OUTFLOW FROM SERVICING OF FINANCE		(217)			(295)
TAXATION
Overseas tax paid	(56)			(83)
TOTAL TAX PAID		(56)			(83)
FINANCIAL INVESTMENT
Acquisitions of investments	(10,938)			(6,436)
Disposals of investments	10,036			10,326
Exchange differences on settlement of investment transactions	(70)			80
NET CASH (OUTFLOW)/INFLOW FROM FINANCIAL INVESTMENT		(972)			3,970
NET CASH (OUTFLOW)/INFLOW BEFORE FINANCING		(1,038)			4,335
FINANCING
Bank loans repaid	(1,793)			(5,384)
NET CASH OUTFLOW FROM FINANCING		(1,793)			(5,384)
DECREASE IN CASH		(2,831)			(1,049)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Decrease in cash		(2,831)			(1,049)
Net cash outflow from bank loans		1,793			5,384
Exchange movement on bank loans		1,103			(4,843)
Exchange differences on cash		(482)			1,380
MOVEMENT IN NET DEBT IN THE YEAR		(417)			872
OPENING NET DEBT		(6,881)			(7,753)
CLOSING NET DEBT		(7,298)			(6,881)

 

BAILLIE GIFFORD SHIN NIPPON PLC

TWENTY LARGEST EQUITY HOLDINGS at 31 January 2010 (unaudited)

		2010		2009
Name	Business	Value £'000	% of total assets	Value £'000
Message	Provides nursing services for the elderly	1,991	3.9	1,336
Nabtesco	Hydraulic equipment	1,967	3.8	1,151
Daikokutenbussan	Discount store for food and sundry goods	1,746	3.4	1,415
Don Quijote	Discount store chain	1,492	2.9	1,184
EPS	Provides clinical testing services	1,419	2.8	1,828
Hamakyorex	Trucking and warehousing	1,409	2.7	1,639
Nakanishi	Dental equipment	1,375	2.7	1,060
Pronexus	Financial printing services	1,308	2.5	1,764
Osaka Securities	Stock exchange operator	1,279	2.5	660
Shinko Plantech	Plant maintenance services	1,233	2.4	1,003
Shoei	Manufactures motor cycle helmets	1,213	2.4	1,138
H.I.S.	Discount travel agency	1,197	2.3	1,349
Cocokara Fine	Drugstore chain	1,148	2.2	953
First Juken	Builds and sells residential buildings	1,070	2.1	312
Accordia Golf	Golf course operator	1,063	2.1	726
Micronics Japan	Electronic measuring devices	1,050	2.0	-
Start Today	Internet fashion retailer	987	1.9	-
Horiba	Manufacturer of measuring instruments and analysers	970	1.9	777
Foster Electric	Headphone manufacturer	940	1.8	223
Askul	Office equipment supplier	908	1.8	1,173
		25,765	50.1	19,691

 

 

 

 

 

 

BAILLIE GIFFORD SHIN NIPPON PLC

NOTES

(unaudited)

1.	The financial statements for the year to 31 January 2010 have been prepared on the basis of the same accounting policies used for the year to 31 January 2009. The Directors consider the Company's functional currency to be sterling as the Company's shareholders are predominantly based in the UK and the Company is subject to the UK's regulatory environment.
		31 January 2010		31 January 2009
		£'000		£'000
2.	Currency gains/(losses)
	Exchange differences on bank loans	1,103		(4,843)
	Other exchange differences	(552)		1,460
		551		(3,383)
3.	Income includes stocklending fee income of nil (2009 - £69,000). The stock lending arrangements were terminated during the year to 31 January 2009. The maximum aggregate value of securities on loan during the year to 31 January 2009 amounted to £19.1m.
		31 January 2010		31 January 2009
		£'000		£'000
4.	Investment management fee - all charged to revenue
	Investment management fee	397		389
	VAT recovered (see note 5)	-		(44)
		397		345
	Baillie Gifford & Co are employed by the Company as Managers and Secretaries under a management agreement which is terminable on not less then twelve months' notice or on shorter notice in certain circumstances. The fee in respect of each quarter is 0.25% of the total net assets of the Company attributable to its shareholders on the last day of that quarter. Miss SJM Whitley, a Director of the Company, is a partner of Baillie Gifford & Co.
5.	VAT Recovered In 2007 the European Court of Justice ruled that investment trust management fees should be exempt from VAT. HMRC has accepted the Managers' repayment claims for the periods from 1990 to 1996 and from 2000 to 2007. £44,000 of VAT together with £45,000 of interest was received by the Managers on behalf of the Company and was recognised in the year to 31 January 2009.
6.	The Company paid interest on bank loans of £152,000 (2009 - £222,000). During the year the company incurred costs of £37,000 (2009 - £80,000) relating to the early repayment of bank loans which have been charged to capital.
7.	No dividend will be declared.

BAILLIE GIFFORD SHIN NIPPON PLC NOTES (Ctd) (unaudited)
		31 January 2010		31 January 2009
		£'000		£'000
8.	Net return per ordinary share
	Revenue return	24		481
	Capital return	5,285		(7,385)
	Total return	5,309		(6,904)
	The returns per ordinary share set out below are based on the above returns and on 31,100,497 ordinary shares (2009 - 31,100,497), being the weighted average number of ordinary shares in issue during the year.  There are no potentially dilutive shares in issue.
	Revenue return	0.08p		1.54p
	Capital return	16.99p		(23.74p)
	Total return	17.07p		(22.20p)
9.	A bank loan of £7.9 million (¥1.15 billion) has been drawn down under a yen loan facility which is repayable on 10 August 2011 (2009 - bank loans of £10.8 million (¥1.4 billion) repayable on 10 August 2011).
10.	At 31 January 2010 the Company had authority to buy back 4,661,964 shares. No shares were bought back during the year. Share buy-backs are funded from the capital reserve.
		31 January 2010		31 January 2009
		£'000		£'000
11.	Reconciliation of Net Return before Finance Costs and Taxation to Net Cash Inflow from Operating Activities
	Net return before finance costs and taxation	5,557		(6,515)
	(Gains)/losses on investments	(4,771)		3,922
	Currency (gains)/losses	(551)		3,383
	Increase in accrued income	(35)		(40)
	Decrease  in other debtors	1		4
	Increase/(decrease) in creditors	6		(11)
	Net cash inflow from operating activities	207		743
12.	The Report and Accounts will be available on the Company's website www.shinnippon.co.uk on or around 25 March 2010.
13.	The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 January 2010.  The financial information for 2009 is derived from the statutory accounts for 2009, which have been delivered to the Registrar of Companies.  The Auditors have reported on the 2009 accounts, their report was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985.  The statutory accounts for 2010 will be finalised on the basis of the financial information presented in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting which will be held on  30 April 2010. None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

 

END

 

 

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