Interim Results

Baillie Gifford Japan Trust PLC 05 April 2007 THE BAILLIE GIFFORD JAPAN TRUST PLC Results for the six months to 28 February 2007 In the six months to 28 February 2007, The Baillie Gifford Japan Trust's net asset value per share rose by 0.3%. The TOPIX rose by 3.0% in sterling terms over the same period. The Company's share price rose 2.4%+ and stood at a premium to net asset value at the end of the period. • The Company predominantly holds medium and smaller sized companies. These in general have underperformed the index which has risen principally on the back of strong gains by very large companies. • The Japanese economy has continued to expand, although the pace of growth has slowed. Although the main area of weakness is consumption with minimal overall wage growth, property and labour market indicators remain encouraging and capital expenditure remains robust. • Merger and acquisition activity has picked up, spurring reorganisation and improved productivity in the sectors affected. • Growth companies no longer trade at a valuation premium to the market and the Managers have added to a variety of long term growth stocks on modest valuations. + 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. 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. You can find up to date performance information about The Baillie Gifford Japan Trust PLC on the Baillie Gifford website at www.bailliegifford.com. The Baillie Gifford Japan Trust PLC aims to pursue long-term capital growth principally through investment in medium to smaller sized Japanese companies. Baillie Gifford & Co, the Edinburgh based fund management group with around £50 billion under management and advice as at 4 April 2007, is appointed as investment managers and secretaries to The Baillie Gifford Japan Trust PLC. 4 April 2007 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 During the six months to 28 February 2007 the net asset value per share rose by 0.3% to 239.0p, underperforming the 3% rise in the TOPIX in sterling terms during the period. The stock market was quite strong during these months, rising 7.2% in yen terms, but the continuing weakness of the yen muted the rise when adjusted into sterling. The main contributors to the index gain were very large companies whilst smaller and medium sized companies generally did less well. The Japanese economy has continued to expand, although the pace of growth has slowed. Indicators for the property and labour markets remain encouraging and exports have continued to grow. Capital expenditure by companies is also robust and we expect this strength to continue as the capital stock of Japan ages and companies have the funds to invest to renew equipment as well as to make facilities more labour efficient. The Bank of Japan raised interest rates again in February, furthering the move to normalisation. The main area of weakness is consumption where, despite tight labour markets and some wage rises for temporary workers, overall wage growth has been minimal. This may be a side effect of many older workers reaching 60 and moving from highly paid full time work to part time lower paid employment or may signal difficulty for the unquoted sector. Developments in this area will be monitored closely over the next few months. Profits for the first three quarters of the fiscal year were strong, rising 13.5% but profit forecasts remain cautious. There are moves to tighten audit standards and internal controls at many companies, partly as a result of legislation, which is similar to that in the US, and partly owing to various accounting scandals where auditors have been found not to be sufficiently independent. These developments should promote sensible change in the longer term as corporate governance, in the broadest sense, improves. Merger and acquisition activity has also picked up significantly and we should see further developments. The competition authorities will now pay more attention to global market shares, and we believe that many industries will see significant reordering in the next couple of years. The pattern so far, as shown by the noodle and fishing industries, is that one announcement in a mature domestic sector has led to a flurry of activity and a significant reorganisation. Overall these changes should help improve productivity in Japan and help boost growth. Portfolio During the period we sold most of the holding in Sumitomo Realty and the weighting in the Real Estate and construction sector fell from 9.1% to 5.0%. This has been a very successful investment since it was purchased in 2003 and whilst the fundamentals for the property sector remain strong, we felt that this was fully reflected in the share price. We bought holdings in Accordia Golf, a company which buys and improves the operating performance of golf courses that have gone bankrupt, Shimadzu a world leader in scientific instruments and Privee investments, which is a company taking an activist approach to investing in Japan's private railways. We sold holdings in Panahome, a house builder with disappointing operational performance as well as Promise and OMC Card, both consumer lenders where regulatory change has been extremely adverse and we see no immediate prospect of improvement. Outlook Whilst the economic expansion in Japan is now fairly mature, the changes in the corporate landscape are only just beginning. Along with the increase in merger activity there is also an increased emphasis on shareholder activism. Japanese companies will in aggregate use 52% of net earnings for the year ending March 2007 for dividends and share buy-backs, signalling that more profits will go to shareholders. A leading domestic investor has also emphasised that they may vote against the management of companies not meeting certain levels of return on equity. There have also been a number of explicit requests by foreign investors for further improvements in dividend payments and whilst these have not been particularly successful so far, the pressure is clearly building. Another feature of the current market is that valuation differences have been compressed so that growth companies no longer trade at a premium to the market. This has resulted in the share price underperformance of some of our holdings, where operational performance has been as expected and this we believe brings opportunities. As a result we have been adding to a variety of long term growth stocks on modest valuations. By order of the Board Baillie Gifford & Co 4 April 2007 The following is the interim statement for the six months ended 28 February 2007 which has been neither reviewed nor audited by the auditors. This statement is being printed and will be sent to all shareholders on 20 April 2007. 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 INCOME STATEMENT (unaudited) For the six months ended For the six months ended For the year ended 28 February 2007 28 February 2006 31 August 2006 Revenue Capital Total Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Realised gains on investments - 6,939 6,939 - 9,010 9,010 - 19,822 19,822 Unrealised (losses)/gains on investments - (7,376) (7,376) - 39,055 39,055 - 2,741 2,741 Currency gains (note 2) - 1,028 1,028 - 294 294 - 2,611 2,611 Income (note 3) 817 - 817 633 - 633 1,728 - 1,728 Investment management fee (722) - (722) (808) - (808) (1,573) - (1,573) Other administrative expenses (121) - (121) (124) - (124) (232) - (232) Net return before finance costs and taxation (26) 591 565 (299) 48,359 48,060 (77) 25,174 25,097 Finance costs of borrowings (192) - (192) (207) - (207) (412) - (412) Return on ordinary activities before taxation (218) 591 373 (506) 48,359 47,853 (489) 25,174 24,685 Tax on ordinary activities (49) - (49) (36) - (36) (104) - (104) Return on ordinary activities after taxation (267) 591 324 (542) 48,359 47,817 (593) 25,174 24,581 Return per ordinary share (note 5) (0.43p) 0.95p 0.52p (0.87p) 78.08p 77.21p (0.96p) 40.65p 39.69p 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. 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. THE BAILLIE GIFFORD JAPAN TRUST PLC SUMMARISED BALANCE SHEET at 28 February 2007 (unaudited) 28 February 28 February 31 August 2007 2006 2006 £'000 £'000 £'000 NET ASSETS Listed equities 166,330 190,481 169,160 Unlisted equities 437 2,729 1,491 166,767 193,210 170,651 Net liquid assets 7,506 7,778 4,371 Total assets (before deduction of bank loans) 174,273 200,988 175,022 Bank loans (note 6) (26,270) (30,073) (27,343) 148,003 170,915 147,679 CAPITAL AND RESERVES Called-up share capital 3,097 3,097 3,097 Capital reserves 153,566 176,160 152,975 Revenue reserve (8,660) (8,342) (8,393) SHAREHOLDERS' FUNDS 148,003 170,915 147,679 NET ASSET VALUE PER ORDINARY SHARE 239.0p 276.0p 238.4p Ordinary shares in issue (note 7) 61,935,000 61,935,000 61,935,000 THE BAILLIE GIFFORD JAPAN TRUST PLC RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (unaudited) For the six months ended 28 February 2007 Share Share Capital Capital Capital Revenue Total capital premium redemption reserve - reserve - reserve shareholders' reserve realised unrealised funds £'000 £'000 £'000 £'000 £'000 £'000 £'000 Shareholders' funds at 1 September 2006 3,097 22,110 203 87,572 43,090 (8,393) 147,679 Return on ordinary activities after taxation - - - 6,895 (6,304) (267) 324 Shareholders' funds at 28 February 2007 3,097 22,110 203 94,467 36,786 (8,660) 148,003 For the six months ended 28 February 2006 Share Share Capital Capital Capital Revenue Total capital premium redemption reserve - reserve - reserve shareholders' reserve realised unrealised funds £'000 £'000 £'000 £'000 £'000 £'000 £'000 Shareholders' funds at 1 September 2005 3,097 22,110 203 68,317 37,171 (7,800) 123,098 Return on ordinary activities after taxation - - - 8,856 39,503 (542) 47,817 Shareholders' funds at 28 February 2006 3,097 22,110 203 77,173 76,674 (8,342) 170,915 For the year ended 31 August 2006 Share Share Capital Capital Capital Revenue Total capital premium redemption reserve - reserve - reserve shareholders' reserve realised unrealised funds £'000 £'000 £'000 £'000 £'000 £'000 £'000 Shareholders' funds at 1 September 2005 3,097 22,110 203 68,317 37,171 (7,800) 123,098 Return on ordinary activities after taxation - - - 19,255 5,919 (593) 24,581 Shareholders' funds at 31 August 2006 3,097 22,110 203 87,572 43,090 (8,393) 147,679 THE BAILLIE GIFFORD JAPAN TRUST PLC SUMMARISED CASH FLOW STATEMENT (unaudited) Six months to Six months to Year to 28 February 2007 28 February 2006 31 August 2006 £'000 £'000 £'000 Net cash outflow from operating activities (93) (270) (65) Net cash outflow from servicing of finance (200) (183) (392) Total tax paid (47) (32) (101) Net cash inflow/(outflow) from financial investment 4,304 (874) 3,691 NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING 3,964 3,206 (1,432) Net cash inflow from bank loans - 5,006 5,006 INCREASE IN CASH 3,964 8,212 3,574 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Increase in cash in the period 3,964 8,212 3,574 Net cash inflow from bank loans - (5,006) (5,006) Exchange movement on bank loans 1,072 448 3,178 MOVEMENT IN NET DEBT IN THE PERIOD 5,036 3,654 1,746 Net debt at start of the period (22,627) (24,373) (24,373) NET DEBT AT END OF THE PERIOD (17,591) (20,719) (22,627) RECONCILIATION OF NET RETURN BEFORE FINANCE COSTS AND TAXATION TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES Net return on ordinary activities before finance costs and taxation 513 48,060 25,097 Gains on investments 489 (48,065) (22,563) Currency gains (1,028) (294) (2,611) Changes in debtors and creditors (67) 29 12 NET CASH OUTFLOW FROM OPERATING ACTIVITIES (93) (270) (65) THE BAILLIE GIFFORD JAPAN TRUST PLC TWENTY LARGEST HOLDINGS at 28 February 2007 Market value % of total £'000 Name Business assets Canon Printers and copiers 4,506 2.6 Japan Tobacco Tobacco manufacturer 4,306 2.5 Asahi Glass Specialist glass manufacturer 4,210 2.4 Sumitomo Heavy Heavy electric machinery 4,193 2.4 Mitsui OSK Lines Shipping company 4,126 2.4 Itochu Trading conglomerate 4,078 2.3 Diamond Lease Leasing services 4,047 2.3 Mitsubishi UFJ Financial Major bank 4,043 2.3 KDDI Mobile telecommunications 3,976 2.3 USS Company Second-hand car auctioneer 3,914 2.2 Misumi Group Precision machinery parts distributor 3,828 2.2 Yamada Denki Consumer electronics retailer 3,824 2.2 SMC Pneumatic control equipment 3,736 2.1 AIOI Insurance General insurance 3,618 2.1 Inpex Petroleum and natural gas producer 3,584 2.1 East Japan Railway Rail transportation service 3,488 2.0 Modec Offshore oil platform production 3,485 2.0 Toray Industries Materials company 3,472 2.0 Kamigumi Port operator 3,365 1.9 H.I.S. Discount travel agency 3,312 1.9 77,111 44.2 THE BAILLIE GIFFORD JAPAN TRUST PLC NOTES 1. The financial statements for the six months to 28 February 2007 have been prepared on the basis of the accounting policies set out in the Company's Annual Financial Statements at 31 August 2006. Six months to Six months to Year to 28 February 2007 28 February 2006 31 August 2006 £'000 £'000 £'000 2. Currency gains Realised exchange differences (44) (154) (567) Movement in unrealised exchange differences 1,072 448 3,178 1,028 294 2,611 3. Income includes stock lending fee income of £109,000 (28 February 2006 - £121,000; 31 August 2006 - £243,000). 4. No interim dividend will be declared. 5. Return per ordinary share Revenue return (267) (542) (593) Capital return 591 48,359 25,174 Return per ordinary share is based on the above totals of revenue and capital and on 61,935,000 (28 February 2006 and 31 August 2006 - 61,935,000) ordinary shares, being the weighted average number of ordinary shares in issue during the period. 6. Bank loans of £26.3 million (Y6.1 billion) have been drawn down under yen loan facilities which are repayable between August 2007 and May 2011 (28 February 2006 - £30.1 million (Y6.1 billion); 31 August 2006 - £27.3 million (Y6.1 billion)). 7. 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. No shares were issued or bought back during the period under review. 8. Transaction costs incurred on the purchase and sale of the investments are added to the purchase cost or deducted from the sale proceeds, as appropriate. During the period, transaction costs on purchases amounted to £27,000 (28 February 2006 - £32,000; 31 August 2006 - £78,000) and transaction costs on sales amounted to £21,000 (28 February 2006 - £37,000; 31 August 2006 - £64,000). 9. The financial information contained within this interim report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The financial information for the year ended 31 August 2006 has been extracted from the statutory accounts which have been filed with the Registrar of Companies and which contain an unqualified Auditor's Report and do not contain a statement under section 237 (2) or (3) of the Companies Act 1985. 10. The Interim Report was approved by the Board on 4 April 2007 and will be available on the Managers' website www.bailliegifford.com on or around 20 April 2007. None of the views expressed in this document should be construed as advice to buy or sell a particular investment. This information is provided by RNS The company news service from the London Stock Exchange

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