Final Results
Baillie Gifford Japan Trust PLC
29 September 2005
THE BAILLIE GIFFORD JAPAN TRUST PLC
Results for the year to 31 August 2005
The Baillie Gifford Japan Trust PLC outperformed its benchmark index* over the
year to 31 August 2005 by 7.4 percentage points. Net asset value per share rose
18.6%, while the benchmark index gained 11.2% and the share price 28.3%.
Performance in the second half of the Company's year was underpinned by the
re-acceleration of Japan's economy in 2005. In this period, the Company's net
asset value rose by 12.4% compared to a 8.5% rise in the benchmark index.
• Performance over the year resulted from good stock selection in the
Pharmaceutical and food, Electricals and electronics, Manufacturing and
machinery, and Retail sectors. This was enhanced through the use of
gearing.
• Over the Company's year, gearing has steadily increased from 9% of net
assets to 20% of net assets as at 31 August 2005. We recently borrowed
JPY1bn for five years at 1.28%. Given increasing evidence of reflation in
Japan, we view long term interest rates as unsustainably low and the
opportunity to borrow at these rates as attractive.
• The twin domestic drivers of consumption and private capital expenditure
have boosted the Japanese economy in 2005.
• Prime Minister Koizumi's recent victory in the Lower House elections means
that Post Office privatisation should now be approved by the Upper House.
This should spur further reform initiatives in areas such as healthcare,
employment and pensions.
• Our enthusiasm for Japanese equities is based on the pace of private sector
reform. With corporate Japan expected to maintain its focus on controlling
costs and inventories, profit growth looks set to exceed expectations again
this year.
• Since the financial year end, the Company has spent several days trading at
a premium to net asset value. The Board is monitoring the situation
carefully with a view to possibly issuing additional shares.
• Richard Burns and Graham McCallum will not be standing for re-election to
the Board at the Annual General Meeting. They have been directors for 4
and 24 years respectively. The Board would like to thank them for their
contribution.
Past performance is no guarantee of 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.
Investment in investment trusts should be regarded as medium to long-term. You
can find up to date performance information about Baillie Gifford Japan on the
Baillie Gifford website at www.bailliegifford.com.
As the Company invests in overseas securities, changes in the rates of exchange
may also cause the value of an investment (and any income it may pay), to go
down or up.
The Company has borrowed money to make further investments. This is commonly
referred to as gearing. If the Company's investments fall in value, gearing
will increase the amount of this fall. This means that when this money is repaid
by the Company the value of these investments and the income from them may not
be enough to cover the borrowing and interest costs, and the Company makes a
loss. The more highly geared the Company, the greater these effects will be.
Investment in smaller companies is generally considered higher risk as their
shares are usually more volatile and less liquid than those of larger companies;
as a result, share price fluctuations may be greater than those of larger
companies. Smaller companies may do less well in periods of adverse economic
conditions.
The staff of Baillie Gifford & Co, and the Company's Directors, may hold shares
in the Company and may buy or sell such shares.
* The Company's Benchmark index for the year to 31/8/05 is the TOPIX Index in
sterling terms.
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.
28 September 2005
- ends -
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
The following is the unaudited preliminary statement for the year to 31 August
2005 which was approved by the Board on 28 September 2005. No dividend is
payable.
STATEMENT OF TOTAL RETURN
(unaudited and incorporating the revenue account*)
for the year ended for the year ended
31 August 2005 31 August 2004
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Realised gains on investments - 2,195 2,195 - 2,648 2,648
Unrealised gains on investments - 17,034 17,034 - 13,537 13,537
Currency gains (note 1) - 402 402 - 1,635 1,635
Income 1,398 - 1,398 945 - 945
Investment management fee (1,114) - (1,114) (975) - (975)
Other administrative expenses (236) - (236) (221) - (221)
Net return before finance costs
and taxation 48 19,631 19,679 (251) 17,820 17,569
Finance costs of borrowings (315) - (315) (255) - (255)
Return on ordinary activities
before taxation (267) 19,631 19,364 (506) 17,820 17,314
Tax on ordinary activities (89) - (89) (73) - (73)
Return on ordinary activities
after taxation (356) 19,631 19,275 (579) 17,820 17,241
Transfer (from)/to reserves (356) 19,631 19,275 (579) 17,820 17,241
Return per ordinary share (note 3) (0.58p) 31.70p 31.12p (0.93p) 28.77p 27.84p
* 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 31 August 2005
(unaudited)
31 August 2005 31 August
2004
£'000 £'000
NET ASSETS
Listed overseas equities 145,442 108,849
Unlisted equities - traded on the Japanese Over-The-Counter market - 3,263
- other unlisted 2,339 1,759
Total fixed asset investments 147,781 113,871
Net liquid assets 832 10,719
Total assets (before deduction of bank loans) 148,613 124,590
Bank loans (note 4) (25,515) (20,767)
123,098 103,823
CAPITAL AND RESERVES
Called-up share capital 3,097 3,097
Capital reserves 127,801 108,170
Revenue reserve (7,800) (7,444)
EQUITY SHAREHOLDERS' FUNDS 123,098 103,823
NET ASSET VALUE PER ORDINARY SHARE 198.8p 167.6p
Ordinary shares in issue (note 5) 61,935,000 61,935,000
THE BAILLIE GIFFORD JAPAN TRUST PLC
SUMMARISED CASH FLOW STATEMENT
(unaudited)
for the year ended for the year ended
31 August 2005 31 August 2004
£'000 £'000 £'000 £'000
NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES 76 (245)
NET CASH OUTFLOW FROM SERVICING OF FINANCE (311) (203)
TOTAL TAX PAID (89) (76)
FINANCIAL INVESTMENT
Acquisitions of investments (34,628) (31,553)
Disposals of investments 19,947 39,685
Realised currency gain 143 288
NET CASH (OUTFLOW)/INFLOW FROM FINANCIAL INVESTMENT (14,538) 8,420
NET CASH (OUTFLOW)/INFLOW BEFORE FINANCING (14,862) 7,896
FINANCING
Bank loans drawn down 5,007 11,610
Bank loans repaid - (9,002)
NET CASH INFLOW FROM FINANCING 5,007 2,608
(DECREASE)/INCREASE IN CASH (9,855) 10,504
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
(Decrease)/increase in cash in the year (9,855) 10,504
Net cash flow from bank loans (5,007) (2,608)
Exchange movement on bank loans 259 1,347
MOVEMENT IN NET DEBT IN THE YEAR (14,603) 9,243
NET DEBT AT 1 SEPTEMBER (9,770) (19,013)
NET DEBT AT 31 AUGUST (24,373) (9,770)
THE BAILLIE GIFFORD JAPAN TRUST PLC
PERFORMANCE ATTRIBUTION (in sterling terms)
For the year to 31 August 2005
Computed relative to the benchmark (TOPIX in sterling terms) with net income
reinvested.
+-----------------+-----------------+-----------------+------------------+------------+--------------------+
| | Benchmark | Baillie Gifford | | | Contribution |
| |asset allocation | Japan | Performance * |Contribution| attributable to: |
| | |asset allocation | | | |
+-----------------+--------+--------+--------+--------+--------+---------+------------+---------+----------+
|Portfolio | | | | | | |to relative | Stock | Asset |
|breakdown |01.09.04|31.08.05|01.09.04|31.08.05|BG Japan|Benchmark| return |selection|allocation|
| | % | % | % | % | % | % | % | % | % |
+-----------------+--------+--------+--------+--------+--------+---------+------------+---------+----------+
|Electricals and | 13.7| 13.0| 9.1| 10.1| 20.6| 5.2| 1.6 | 1.4 | 0.2 |
|electronics | | | | | | | | | |
+-----------------+--------+--------+--------+--------+--------+---------+------------+---------+----------+
|Manufacturing and| 18.9| 18.6| 20.3| 20.6| 21.0| 10.8| 1.4 | 1.4 | - |
|machinery | | | | | | | | | |
+-----------------+--------+--------+--------+--------+--------+---------+------------+---------+----------+
|Retail | 4.7| 3.7| 8.8| 10.1| 25.7| 10.4| 1.2 | 1.2 | - |
+-----------------+--------+--------+--------+--------+--------+---------+------------+---------+----------+
|Commerce and | 11.5| 10.3| 20.8| 22.1| 10.7| 10.3| (0.2)| - | (0.2)|
|services | | | | | | | | | |
+-----------------+--------+--------+--------+--------+--------+---------+------------+---------+----------+
|Pharmaceuticals | 6.9| 7.0| 6.0| 7.7| 46.1| 16.2| 1.7 | 1.7 | - |
|and food | | | | | | | | | |
+-----------------+--------+--------+--------+--------+--------+---------+------------+---------+----------+
|Real estate and | 3.7| 4.3| 6.7| 7.6| 10.2| 19.4| (0.4)| (0.6)| 0.2 |
|construction | | | | | | | | | |
+-----------------+--------+--------+--------+--------+--------+---------+------------+---------+----------+
|Financials | 16.9| 18.4| 17.5| 18.6| 23.4| 19.5| 0.7 | 0.6 | 0.1 |
+-----------------+--------+--------+--------+--------+--------+---------+------------+---------+----------+
|Information, | 11.8| 11.8| 7.9| 7.0| -| 2.2| 0.3 | (0.1)| 0.4 |
|communication and| | | | | | | | | |
|utilities | | | | | | | | | |
+-----------------+--------+--------+--------+--------+--------+---------+------------+---------+----------+
|Chemicals and | 11.9| 12.9| 12.3| 16.1| 8.6| 22.4| (1.7)| (1.9)| 0.2 |
|other materials | | | | | | | | | |
+-----------------+--------+--------+--------+--------+--------+---------+------------+---------+----------+
|Cash and brokers'| -| -| 10.6| 0.9| 0.5| -| (0.4)| - | (0.4)|
|balances | | | | | | | | | |
+-----------------+--------+--------+--------+--------+--------+---------+------------+---------+----------+
|Gearing | -| -| (20.0)| (20.7)| 0.4| -| 2.0 | - | 2.0|
+-----------------+--------+--------+--------+--------+--------+---------+------------+---------+----------+
|Total | 100.0| 100.0| 100.0| 100.0| 19.9| 12.5| 6.6 | 3.8 | 2.7|
+-----------------+--------+--------+--------+--------+--------+---------+------------+---------+----------+
Past performance is no guarantee of future performance.
Source: The WM Company/Baillie Gifford & Co
Contributions cannot be added together, as they are geometric; for example, to
calculate how a return of 19.9% against a benchmark return of 12.5% translates
into a relative return of 6.6%, divide the portfolio return of 119.9 by the
benchmark return of 112.5 and subtract one. In addition, the total contribution
figures include a residual element that relates to changes in weightings
mid-month and which cannot be attributed to individual sectors. Consequently,
the contributions for the individual sectors do not sum to the total
contribution figures.
* The above returns are total returns (net income reinvested), calculated on a
monthly chain-linked method.
THE BAILLIE GIFFORD JAPAN TRUST PLC
TWENTY LARGEST EQUITY HOLDINGS
at 31 August 2005
Market
value
% of total
£'000
Name Business assets
Yamada Denki Consumer electronics retailer 5,749 3.9
Sumitomo Heavy Heavy electric machinery 4,808 3.2
Japan Tobacco Tobacco manufacturer 4,619 3.1
Sumitomo Realty & Development Property development and leasing 4,244 2.9
Itochu Trading conglomerate 4,233 2.8
Aiful Consumer finance 4,200 2.8
Inpex Petroleum and natural gas provider 3,643 2.5
UFJ Holdings Major bank 3,583 2.4
Asahi Glass Specialist glass manufacturer 3,506 2.4
JFE Holdings Major steel company 3,413 2.3
SMC Pneumatic control equipment 3,308 2.2
Diamond Lease Leasing services 3,282 2.2
AIOI Insurance General insurance 3,274 2.2
Don Quijote Discount store operator 3,187 2.1
Yaskawa Electric Specialist factory automation 3,153 2.1
Alps Electric Electronic components 3,075 2.1
Tokyu Railway based conglomerate 3,066 2.1
Canon Printers and copiers 3,004 2.0
KDDI Mobile telecommunications 2,905 1.9
Mitsui OSK Lines Marine transportation, warehousing and
cargo handling services 2,894 1.9
73,146 49.1
THE BAILLIE GIFFORD JAPAN TRUST PLC
NOTES
31 August 2005 31 August 2004
£'000 £'000
1. Currency gains/(losses)
Realised exchange differences 143 1,569
Movement in unrealised exchange differences 259 66
402 1,635
2. No final dividend will be declared.
3. Return per ordinary share
Revenue return (356) (579)
Capital return 19,631 17,820
Return per ordinary share is based on the above returns of revenue and capital and on 61,935,000 (31
August 2004 - 61,935,000) ordinary shares, being the weighted average number of ordinary shares in
issue during the year. There are no dilutive or potentially dilutive shares in issue.
4. Bank loans of £25.5 million (Y5.1 billion) have been drawn down under yen loan facilities which are
repayable between August 2007 and May 2011 (31 August 2004 - £20.8 million (Y4.1 billion)).
5. At the AGM in November 2004, 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 year and at 31
August 2005 the Company's authority to buy back its own shares, therefore, remain unchanged at
9,284,056 ordinary shares.
6. The financial information set out above does not constitute the Company's statutory accounts for the
year ended 31 August 2005. The financial information for 2004 is derived from the statutory accounts
for 2004 which have been delivered to the Registrar of Companies. The Auditors have reported on the
2004 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 2005 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.
None of the views expressed in this document should be construed as advice to buy or sell a particular
investment.
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