Results for the six months to 28 February 2015
|
RNS Announcement |
|
The Baillie Gifford Japan Trust PLC |
|
Results for the six months to 28 February 2015 |
In the six months to 28 February 2015, The Baillie Gifford Japan Trust's net asset value per share (after deducting borrowings at fair value) increased by 20.5% compared to a 12.3% increase in the TOPIX total return (in sterling terms). The Company's share price increased by 20.6%.
¾ Outperformance versus the benchmark was due to strong stock selection and the positive effect of gearing over the period.
¾ Active Share at the period end was 87%, which shows that the overlap with the index is very small and that an investment approach which emphasises the individual merits of companies is being taken.
¾ Economic policy in Japan remains supportive of the corporate sector with continued quantitative easing from the Bank of Japan as it tries to reach an inflation target of 2%.
¾ There have been further positive developments in corporate governance in Japan. Company behaviour is clearly changing, with more emphasis on increasing returns to shareholders.
The Baillie Gifford Japan Trust aims to achieve long term capital growth principally through investment in medium and smaller sized Japanese companies which are believed to have above average prospects for growth, although it invests in larger companies when considered appropriate. At 28 February 2015, the Company had total assets of £347.0m (before deduction of bank loans of £47.1m).
The Company is managed by Baillie Gifford, an Edinburgh based fund management group with around £127bn under management and advice as at 25 March 2015.
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. 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.
25 March 2015
For further information please contact:
Alex Blake, Baillie Gifford & Co
Tel: 0131 275 2859
Roland Cross, Director
Broadgate Mainland
Tel: 0207 726 6111
The following is the unaudited Half-Yearly Financial Report for the six months to 28 February 2015.
|
Responsibility statement |
We confirm that to the best of our knowledge:
a) the condensed set of financial statements has been prepared in accordance with the Accounting Standards Board's statement 'Half-Yearly Financial Reports';
b) the Half-Yearly Management Report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.7R (indication of important events during the first six months, their impact on the financial statements and a description of principal risks and uncertainties for the remaining six months of the year); and
c) the Half-Yearly Financial Report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.8R (disclosure of related party transactions and changes therein).
By order of the Board
Nick AC Bannerman
Chairman
25 March 2015
|
Half-yearly management report |
During the six months to the end of February 2015 the net asset value per share, with borrowings deducted at fair value, rose by 20.5% to 425.9p as the Japanese stock market reached new post-2008 Crisis highs. This compares with a 12.3% increase in the comparative index in sterling terms after the 7% depreciation of the yen against sterling. The significant outperformance was due to both good stock selection and the positive impact of gearing. There were six stocks each contributing more than 0.5% in relative gains and only two detracting similarly.
For the first time the Half-Yearly Report includes a figure on the Active Share of the portfolio. There has been a significant amount of discussion recently in the financial press about the need for true active management of portfolios rather than any mimicking of indices. Japan Trust's figure of an 87% Active Share, which was the same at the previous year end, shows that the overlap with the index is very small and that an investment approach which emphasises the individual merits of companies is being taken. This figure will continue to be shown in future reports.
The Japanese economy is recovering gradually from the effects of the consumption tax increase in April 2014 but the overall level of growth in the last quarter of 2014 was disappointing with GDP only rising 0.4%. However this figure masks other encouraging trends in the economy with the labour market tightening further, female participation in the workforce increasing, wage growth beginning to accelerate, an ongoing property recovery both in city land prices and the office market, exports growing and a surge in inbound tourism particularly from China and other countries in East Asia. As a result of this, profits have continued to increase and there are good prospects for further growth in both the economy overall and corporate profitability.
The yen, which had already weakened significantly, was again depreciating against sterling in the first half of the period under review. However since the end of November there has been a shift and the yen has now risen marginally against sterling. Whilst direct influences on currency levels are difficult to analyse there seem to be a number of factors involved. The adoption of quantitative easing by the ECB, the weakening of the oil price, the resumption of export growth may all have had an influence. If Japan does restart some nuclear power stations, as seems increasingly likely, energy imports will fall significantly and this should also help support the yen. At current levels Japan is a competitive place to manufacture and there are many news stories of production being returned to Japan and further investments being made in upgrading production capacity.
We have commented in previous reports on the encouraging improvements in corporate governance in Japan and there have been further positive developments since then. A Corporate Governance code has been announced recently in addition to last year's Stewardship Code. Company behaviour is clearly changing, with more emphasis on increasing returns to shareholders via higher targets for return on equity, more share buy-backs and increased cash dividends. Baillie Gifford welcomes the opportunity for more constructive engagement with company managements and we feel that our long term outlook is well aligned to the time scales that corporate Japan considers. Recent shifts in domestic asset allocation and the need for Japan to increase returns to support an ageing population means that pressure for action is increasing and the scope for improvement in balance sheet management is very large as cash balances have built up through the years of deflation.
Economic policy in Japan remains supportive of the corporate sector with continued quantitative easing from the Bank of Japan as it tries to reach an inflation target of 2%. The government was returned to power with an improved majority after a snap election in December and is aiming to enact a significant structural reform programme. Cuts to corporate taxes have been announced and further reductions seem likely as the tax system is reformed. Tax revenues overall are rising strongly as the tax base is extremely cyclical, although there is still a budget deficit. Whilst hopes for Mr Abe's Third Arrow have perhaps faded the positive impacts of various policies are beginning to be felt.
Past performance is not a guide to future performance.
|
Income statement (unaudited) |
|
|
For the six months ended 28 February 2015 |
For the six months ended 28 February 2014 |
For the year ended 31 August 2014 |
||||||
|
|
Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
Gains on sales of investments |
- |
2,728 |
2,728 |
- |
1,883 |
1,883 |
- |
7,538 |
7,538 |
|
Changes in investment holding gains |
- |
44,826 |
44,826 |
- |
2,495 |
2,495 |
- |
11,263 |
11,263 |
|
Currency gains (note 4) |
- |
2,633 |
2,633 |
- |
3,630 |
3,630 |
- |
3,927 |
3,927 |
|
Income from investments and interest receivable |
2,087 |
- |
2,087 |
1,690 |
- |
1,690 |
3,746 |
- |
3,746 |
|
Investment management fee |
(993) |
- |
(993) |
(835) |
- |
(835) |
(1,693) |
- |
(1,693) |
|
Other administrative expenses |
(273) |
- |
(273) |
(185) |
- |
(185) |
(386) |
- |
(386) |
|
Net return before finance costs and taxation |
821 |
50,187 |
51,008 |
670 |
8,008 |
8,678 |
1,667 |
22,728 |
24,395 |
|
Finance costs of borrowings |
(507) |
- |
(507) |
(470) |
- |
(470) |
(1,004) |
- |
(1,004) |
|
Net return on ordinary activities before taxation |
314 |
50,187 |
50,501 |
200 |
8,008 |
8,208 |
663 |
22,728 |
23,391 |
|
Tax on ordinary activities |
(209) |
- |
(209) |
(135) |
- |
(135) |
(341) |
- |
(341) |
|
Net return on ordinary activities after taxation |
105 |
50,187 |
50,292 |
65 |
8,008 |
8,073 |
322 |
22,728 |
23,050 |
|
Net return per ordinary share (note 6) |
0.15p |
72.23p |
72.38p |
0.10p |
11.92p |
12.02p |
0.47p |
33.45p |
33.92p |
All revenue and capital items in this statement derive from continuing operations.
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.
|
Balance sheet (unaudited) |
|
|
At 28 February 2015 £'000 |
At 28 February 2014 £'000 |
At 31 August 2014 £'000 |
|
Fixed assets |
|
|
|
|
Investments |
339,797 |
261,228 |
286,275 |
|
|
|
|
|
|
Current assets |
|
|
|
|
Debtors |
757 |
754 |
369 |
|
Cash and short term deposits |
7,429 |
10,270 |
5,231 |
|
|
8,186 |
11,024 |
5,600 |
|
|
|
|
|
|
Creditors |
|
|
|
|
Amounts falling due within one year: |
|
|
|
|
Bank loans (note 7) |
(8,119) |
(16,370) |
- |
|
Other creditors |
(956) |
(823) |
(1,428) |
|
|
(9,075) |
(17,193) |
(1,428) |
|
Net current liabilities |
(889) |
(6,169) |
4,172 |
|
Total assets less current liabilities |
338,908 |
255,059 |
290,447 |
|
|
|
|
|
|
Creditors |
|
|
|
|
Amounts falling due after more than one year: |
|
|
|
|
Bank loans (note 7) |
(38,973) |
(25,724) |
(41,733) |
|
Net assets |
299,935 |
229,335 |
248,714 |
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
Called up share capital |
3,479 |
3,403 |
3,467 |
|
Share premium |
48,009 |
42,754 |
47,092 |
|
Capital redemption reserve |
203 |
203 |
203 |
|
Capital reserve |
254,155 |
189,248 |
203,968 |
|
Revenue reserve |
(5,911) |
(6,273) |
(6,016) |
|
Shareholders' funds |
299,935 |
229,335 |
248,714 |
|
Net asset value per ordinary share (after deducting borrowings at fair value) |
425.9p |
335.4p |
353.3p |
|
Net asset value per ordinary share (after deducting borrowings at par) |
431.1p |
337.0p |
358.7p |
|
Ordinary shares in issue (note 8) |
69,581,750 |
68,056,750 |
69,331,750 |
|
Reconciliation of movements in shareholders' funds (unaudited) |
For the six months ended 28 February 2015
|
|
Share £'000 |
Share premium £'000 |
Capital redemption reserve £'000 |
Capital reserve* £'000 |
Revenue reserve £'000 |
Shareholders' £'000 |
|
Shareholders' funds at 1 September 2014 |
3,467 |
47,092 |
203 |
203,968 |
(6,016) |
248,714 |
|
Shares issued |
12 |
917 |
- |
- |
- |
929 |
|
Net return on ordinary activities after taxation |
- |
- |
- |
50,187 |
105 |
50,292 |
|
Shareholders' funds at 28 February 2015 |
3,479 |
48,009 |
203 |
254,155 |
(5,911) |
299,935 |
For the six months ended 28 February 2014
|
|
Share £'000 |
Share premium £'000 |
Capital redemption reserve £'000 |
Capital reserve* £'000 |
Revenue reserve £'000 |
Shareholders' £'000 |
|
Shareholders' funds at 1 September 2013 |
3,251 |
32,019 |
203 |
181,240 |
(6,338) |
210,375 |
|
Shares issued |
152 |
10,735 |
- |
- |
- |
10,887 |
|
Net return on ordinary activities after taxation |
- |
- |
- |
8,008 |
65 |
8,073 |
|
Shareholders' funds at 28 February 2014 |
3,403 |
42,754 |
203 |
189,248 |
(6,273) |
229,335 |
For the year ended 31 August 2014
|
|
Share £'000 |
Share premium £'000 |
Capital redemption reserve £'000 |
Capital reserve* £'000 |
Revenue reserve £'000 |
Shareholders' £'000 |
|
Shareholders' funds at 1 September 2013 |
3,251 |
32,019 |
203 |
181,240 |
(6,338) |
210,375 |
|
Shares issued |
216 |
15,073 |
- |
- |
- |
15,289 |
|
Net return on ordinary activities after taxation |
- |
- |
- |
22,728 |
322 |
23,050 |
|
Shareholders' funds at 31 August 2014 |
3,467 |
47,092 |
203 |
203,968 |
(6,016) |
248,714 |
* The Capital Reserve balance as at 28 February 2015 includes investment holding gains on fixed asset investments of £148,458,000 (28 February 2014 - gains of £94,864,000; 31 August 2014 - gains of £103,632,000).
|
Condensed cash flow statement (unaudited) |
|
|
Six months to 28 February 2015 £'000 |
Six months to 28 February 2014 £'000 |
Year to 31 August 2014 £'000 |
|
Net cash inflow from operating activities |
653 |
455 |
1,652 |
|
Net cash outflow from servicing of finance |
(502) |
(425) |
(884) |
|
Total tax paid |
(181) |
(109) |
(330) |
|
Net cash outflow from financial investment |
(6,689) |
(12,659) |
(22,491) |
|
Net cash outflow before financing |
(6,719) |
(12,738) |
(22,053) |
|
Financing |
|
|
|
|
Shares issued |
929 |
10,887 |
15,289 |
|
Bank loans drawn down |
8,070 |
11,023 |
27,410 |
|
Bank loans repaid |
- |
- |
(16,387) |
|
Net cash inflow from financing |
8,999 |
21,910 |
26,312 |
|
Increase in cash |
2,280 |
9,172 |
4,259 |
|
Reconciliation of net cash flow to movement in net debt |
|
|
|
|
Increase in cash in the period |
2,280 |
9,172 |
4,259 |
|
Net cash inflow from bank loans |
(8,070) |
(11,023) |
(11,023) |
|
Exchange differences on bank loans |
2,711 |
4,508 |
4,869 |
|
Exchange differences on cash |
(83) |
(762) |
(888) |
|
Movement in net debt in the period |
(3,162) |
1,895 |
(2,783) |
|
Net debt at start of the period |
(36,502) |
(33,719) |
(33,719) |
|
Net debt at end of the period |
(39,664) |
(31,824) |
(36,502) |
|
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities |
|
|
|
|
Net return before finance costs and taxation |
51,008 |
8,678 |
24,395 |
|
Gains on investments |
(47,554) |
(4,378) |
(18,801) |
|
Currency gains |
(2,633) |
(3,630) |
(3,927) |
|
Changes in debtors and creditors |
(168) |
(215) |
(15) |
|
Net cash inflow from operating activities |
653 |
455 |
1,652 |
|
Twenty largest holdings at 28 February 2015 (unaudited) |
|
Name |
Business |
Value £'000 |
% of total |
|
Toyo Tyre & Rubber |
Tyre manufacturer |
10,873 |
3.1 |
|
Don Quijote |
Discount store operator |
10,746 |
3.1 |
|
Fuji Heavy Industries |
Subaru cars |
9,934 |
2.9 |
|
Sysmex |
Medical equipment |
9,841 |
2.8 |
|
Cyberagent |
Internet advertising and content |
9,669 |
2.8 |
|
Rakuten |
Internet retail and financial services |
9,210 |
2.7 |
|
Misumi Group |
Precision machinery parts distributor |
8,866 |
2.5 |
|
Iriso Electronics |
Specialist auto connectors |
8,697 |
2.5 |
|
SoftBank |
Telecom operator and internet investor |
8,601 |
2.5 |
|
Japan Exchange Group |
Stock Exchange operator |
8,391 |
2.4 |
|
M3 |
Online medical database |
8,287 |
2.4 |
|
Kubota |
Agricultural machinery |
8,252 |
2.4 |
|
H.I.S. |
Travel agency and theme parks |
8,060 |
2.3 |
|
Itochu |
Trading conglomerate |
7,596 |
2.2 |
|
Temp Holdings |
Employment and outsourcing services |
7,211 |
2.1 |
|
Sony |
Consumer electronics, films and finance |
7,079 |
2.0 |
|
Yaskawa Electric |
Robots and factory automation |
6,807 |
2.0 |
|
Isuzu Motors |
Trucks and pick-ups |
6,659 |
1.9 |
|
Asics |
Sports shoes and clothing |
6,438 |
1.8 |
|
Otsuka Corp |
IT solutions for SMEs |
6,181 |
1.8 |
|
|
|
167,398 |
48.2 |
* Before deduction of bank loans
|
Notes to the condensed financial statements (unaudited) |
|
1.
|
The condensed financial statements for the six months to 28 February 2015 comprise the statements set out on pages 6 to 10 together with the related notes on pages 11 and 12. They have been prepared on the basis of the same accounting policies as set out in the Company's Annual Report and Financial Statements at 31 August 2014 and in accordance with the ASB's Statement 'Half-Yearly Financial Reports' and have not been audited or reviewed by the Auditors pursuant to the Auditing Practices Board Guidance on 'Review of Interim Financial Information'. The Company's assets, the majority of which are investments in quoted securities which are readily realisable, exceed its liabilities significantly. All borrowings require the prior approval of the Board. Gearing levels and compliance with borrowing covenants are reviewed by the Board on a regular basis. In accordance with the Company's Articles of Association, shareholders have the right to vote annually at the Annual General Meeting on whether to continue the Company. The next continuation vote will be in November 2015. The Directors have no reason to believe that the continuation resolution will not be passed at the Annual General Meeting. Accordingly, the Half-Yearly Financial Report has been prepared on the going concern basis as it is the Directors' opinion that the Company will continue in operational existence for the foreseeable future. |
|||
|
2. |
The financial information contained within this Half-Yearly Financial Report does not constitute statutory accounts as defined in sections 434 to 436 of the Companies Act 2006. The financial information for the year ended 31 August 2014 has been extracted from the statutory accounts which have been filed with the Registrar of Companies. The Auditor's Report on those accounts was not qualified and did not contain statements under sections 498(2) or (3) of the Companies Act 2006. |
|||
|
3. |
The management agreement with Baillie Gifford & Co Limited is terminable on not less than 6 months' notice, or on shorter notice in certain circumstances. With effect from 1 April 2013 the annual management fee was changed to 0.95% on the first £50 million of net assets and 0.65% on the remaining net assets, calculated and payable quarterly. The annual fee previously was 1.0% of net assets, calculated and payable quarterly. |
|||
|
4. |
Currency gains/(losses) |
Six months to 28 February 2015 £'000 |
Six months to 28 February 2014 £'000 |
Year to 31 August 2014 £'000 |
|
|
Exchange differences on: |
|
|
|
|
|
Cash balances |
(83) |
(762) |
(888) |
|
|
Bank loans |
2,711 |
4,508 |
4,869 |
|
|
Other items |
5 |
(116) |
(54) |
|
|
|
2,633 |
3,630 |
3,927 |
|
|
|
|
|
|
|
5. |
No interim dividend will be declared. |
|
|
|
|
|
|
|
|
|
|
Notes to the condensed financial statements (unaudited) (continued) |
|
6. |
Net return per ordinary share |
Six months to 28 February 2015 £'000 |
Six months to 28 February 2014 £'000 |
Year to 31 August 2014 £'000 |
|
|
Revenue return on ordinary activities after taxation |
105 |
65 |
322 |
|
Capital return on ordinary activities after taxation |
50,187 |
8,008 |
22,728 |
|
|
|
Net return per ordinary share is based on the above totals of revenue and capital and on 69,482,579 ordinary shares (28 February 2014 - 67,184,926; 31 August 2014 - 67,942,092), being the weighted average number of ordinary shares in issue during each period. There are no dilutive or potentially dilutive shares in issue. |
|||
|
7. |
Bank loans of £47.1 million (¥8.7 billion) have been drawn down under yen loan facilities which are repayable between November 2017 and August 2020 (28 February 2014 - £42.1 million (¥7.2 billion); 31 August 2014 - £41.7 million (¥7.2 billion)). The November 2017 loan is shown under short term creditors as this is a revolving facility which can be drawn for 1, 2, 3 or 6 months and repaid at the end of each drawdown period without incurring breakage costs. |
|||
|
8. |
The Company has the authority to issue shares/sell treasury shares at a premium to net asset value as well as to buy back shares at a discount to net asset value. During the period, 250,000 shares (28 February 2014 - 3,025,000; 31 August 2014 - 4,300,000) were issued at a premium to net asset value raising proceeds of £929,000 (28 February 2014 - £10,887,000; 31 August 2014 - £15,289,000). |
|||
|
9. |
Transaction costs incurred on the purchase and sale of the investments are added to the purchase cost or deducted from the sales proceeds, as appropriate. During the period, transaction costs on purchases amounted to £10,000 (28 February 2014 - £18,000; 31 August 2014 - £32,000) and transaction costs on sales amounted to £6,000 (28 February 2014 - £11,000; 31 August 2014 - £19,000). |
|||
|
10. |
Principal Risks and Uncertainties The principal risks facing the Company relate to the Company's investment activities. These risks are market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. An explanation of these risks and how they are managed is contained in note 19 of the Company's Annual Report and Financial Statements for the year to 31 August 2014. The principal risks and uncertainties have not changed since the publication of the Annual Report and Financial Statements which can be obtained free of charge from Baillie Gifford & Co and is available on the Japan Trust page of the Managers' website www.japantrustplc.co.uk†. Other risks facing the Company include the following: regulatory risk (that the loss of investment trust status or a breach of applicable legal and regulatory requirements could have adverse financial consequences and cause reputational damage); operational/financial risk (failure of service providers' accounting systems could lead to inaccurate reporting or financial loss); the risk that the premium/discount at which the Company's shares trade can change; and gearing risk (the use of borrowing can magnify the impact of falling markets). Further information can be found on pages 6 and 7 of the Annual Report and Financial Statements. |
|||
|
11. |
The Half-Yearly Financial Report is available at www.japantrustplc.co.uk† and will be posted to shareholders on or around 16 April 2015. |
|||
|
None of the views expressed in this document should be construed as advice to buy or sell a particular investment. |
||||
† Neither the contents of the Managers' website nor the contents of any website accessible from hyperlinks on the Managers' website (or any other website) is incorporated into, or forms part of, this announcement.
- Ends -
This information is provided by RNS
Latest directors dealings
- 3 minutes ago Hamak Gold Limited NPV (DI)
- 56 minutes ago Prudential
- 1 hour ago Vanquis Banking Group 20
- 3 hours ago Frasers Group
- 3 hours ago Cavendish Financial