Final Results

Baillie Gifford Shin Nippon PLC 27 February 2004 BAILLIE GIFFORD SHIN NIPPON PLC Results for the year to 31 January 2004 Shin Nippon's share price rose 59.5% over the year to 31 January 2004. The Company ranks second in its AITC peer group in terms of one year net asset value performance, and first over three and five years. • 2003 was a much better year for global equity markets and small Japanese companies fully participated in the recovery. • During this year the Company's share price rose by 59.5% and net asset value per share rose by 57.5%, while the comparative index* gained 53.3%. • In the six months to 31 January 2004 net asset value per share rose 25.0%, compared to a 17.6% rise in the comparative index. • Good stock selection along with the selective use of gearing aided out-performance. • There has been a strong rebound in the Japanese Economy. Export growth has been accompanied by a sharp pick-up in domestic capital expenditure, and the recovery in industrial production has stimulated the labour market. • The Managers view positively the outlook for Japanese equities. The rebound in Japanese equities is firmly rooted in fundamental factors, namely the improving structural profitability of corporate Japan coupled with the strong cyclical economic recovery underway. Shin Nippon continues to find attractively valued small companies and remains geared into the market. * The Company's comparative index for the year ending 31/01/04, is a composite comprising a market-capitalisation weighted index of the Tokyo Second Section Index, the TOPIX Small Index and the JASDAQ OTC Index in sterling terms. Baillie Gifford Shin Nippon PLC aims to achieve long-term capital growth principally through investment in small Japanese companies which are believed to have above average prospects for capital growth. At 31 January 2004 the Company had total assets of £51.4 million (before deduction of bank loans of £7.3 million). The Company is managed by Baillie Gifford & Co., an Edinburgh based fund management group. 27 February 2004 For further information please contact: Alistair Way, Manager, Baillie Gifford & Co. 0131 275 2000 Mike Lord, Director, Broadgate Marketing 020 7726 6111 CHAIRMAN'S STATEMENT This was a much better year for the Company's performance. The Japanese market outperformed its global counterparts, rallying from low levels in the spring, and smaller companies were strong. In the year to 31 January 2004, Shin Nippon's share price rose by 59.5%, as the net asset value increased by 57.5%. The Company's composite index rose by 53.3% over the same twelve month period. Despite the continued improvement in economic statistics, markets were weak at the start of the year. The war in Iraq and its potential impact on the global recovery weighed on investor sentiment. The end of the war and the avoidance of a major financial crisis led to a strong rebound in the Japanese market. Significant foreign share buying was in evidence for the remainder of the year, as investors were attracted back by good earnings growth and low valuations. Borrowing Total borrowing remained constant at Y1.4bn throughout the year, and by 31 January 2004 this equated to potential gearing of 16.5% of net assets if fully utilised, a lower ratio than a year ago owing to the rise in net assets. Borrowing contributed positively to performance, with the Company benefiting from being geared into a rising market. At the start of the year we had net gearing equivalent to 14.6% of shareholders' funds. The figure at the end of the year had fallen slightly to 11.8%. This position reflects the Managers' belief that the long term outlook for Japanese smaller companies remains positive and that valuations are attractive. The cost of borrowing in Japanese yen remains low. Hedging Shin Nippon undertook no currency hedging during the year. The exchange rate as at 31 January 2004 was £/Y 192.67 which represented a 2.3% appreciation of the yen from the £/Y 197.15 rate at the start of the year. The weakness of the dollar was again the main force at play within world currency markets on continuing concerns about the US budget and trade deficits. We will continue to monitor currency moves and will consider hedging if we feel that the yen has diverged sharply from fair value. Revenue Shin Nippon's policy of pursuing capital growth rather than income has remained the same since its listing in 1985. The loss per share for the year was 0.78p, an improvement from last year partly thanks to revenues from stock lending. Dividend yields on Japanese stocks have continued to rise and Shin Nippon saw income from dividends rise by 11.6% to £441,000. Dividend yields remain low by international standards and with the Company still having a deficit on the revenue account, no dividend can be recommended. Share Buy Backs & AGM At the Annual General Meeting in May 2003, shareholders approved the Company's authority to buy back up to 14.99% of its issued share capital. The purpose of using such authority is to enhance the net asset value of Shin Nippon for existing shareholders when the discount of the share price to net asset value becomes substantial. The Company has to balance the benefits of buying back shares with considerations on liquidity of the shares in the market. The Company bought back 0.95% of shares outstanding during the year. Shareholders will be asked to renew this power to repurchase 14.99% of the Company's shares at the Annual General Meeting on 29 April 2004. My fellow Directors and I intend to support this proposal and urge shareholders to do likewise. In addition, the Company will be seeking to renew the Directors' authority to issue shares up to an aggregate nominal amount of £267,661, and to issue a limited number of shares for cash on a non-pre-emptive basis. It is the Board's intention only to issue shares under this authority when the share price is at a premium to net assets value, thereby enhancing net asset value per share. There will also be a resolution to increase the aggregate annual limit of Directors' fees to £100,000 from the current limit of £50,000 which has been in place since the launch of the Company in 1985. Total directors fees currently amount to £40,000 which does not leave scope for attracting additional Board members of sufficient calibre, especially given the additional regulatory and corporate governance requirements on directors. Outlook The Japanese economy has continued to recover strongly over the past year. GDP estimates were continually revised up during the year and now suggest that Japan grew by a healthy 2.7% in calendar year 2003. Growth was again supported by exports with continued strength in Chinese demand. The yen has strengthened during the year against the dollar despite the government intervening in the currency markets to an unprecedented extent. However, this is a less important factor now that Asia has overtaken the US as the largest export market. More encouragingly, the recovery has broadened out into the domestic economy. Companies have had to spend to improve or increase production capacity to meet increased demand. The improvement in machinery order figures highlights the better capital expenditure environment, while deflationary pressures appear to have eased gradually. Further, there also now appears to be a higher chance of rises in asset prices, with land price rises in certain parts of Tokyo. Disappointingly there has been a lack of real progress by the government on the reform front. Koizumi was re-elected leader of the LDP but he has been largely been focusing on international matters. The Industrial Revitalisation Corporation of Japan has not so far received many large troubled corporate candidates for restructuring, although it has just announced a potentially significant deal with Kanebo. Perhaps the most significant change over the year has been the dramatic improvement in sentiment towards the banking sector. The Bank of Japan and the FSA have started to coordinate their efforts to tackle the industry's problems. Fears of a significant financial crisis were alleviated, following the injection of public funds last May into Resona Holdings, probably the weakest of the big banks. Since then the banks themselves have shown some progress in the disposal of their bad loans, and the rise in markets has strengthened their balance sheets. The recent recovery in markets encouragingly seems to be much more founded on reality than past rebounds. Capacity in many industries is now much more in tune with demand and the pricing environment looks a lot more positive. The improving domestic economy gives many companies an excellent opportunity to improve profitability. Shin Nippon continues to find attractively valued small companies who are growing their sales, cash flows and earnings. The Board continues to believe that Shin Nippon's policy of investing in small Japanese companies for capital growth will bring good long term shareholder returns. BAILLIE GIFFORD SHIN NIPPON PLC The following is the unaudited preliminary statement for the year to 31 January 2004 which was approved by the Board on 26 February 2004. The Board of Baillie Gifford Shin Nippon PLC are recommending to the Annual General Meeting of the Company to be held on 29 April 2004 that no dividend be paid for the year ended 31 January 2004. STATEMENT OF TOTAL RETURN (unaudited and incorporating the revenue account*) For the year ended For the year ended 31 January 2004 31 January 2003 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Realised losses on investments - (2,542) (2,542) - (6,077) (6,077) Unrealised gains/(losses) on investments - 18,777 18,777 - (3,741) (3,741) Currency gains (note 1) - 42 42 - 335 335 Income 524 - 524 398 - 398 Investment management fee (389) - (389) (358) - (358) Other administrative expenses (160) - (160) (157) - (157) Net return before finance costs and taxation (25) 16,277 16,252 (117) (9,483) (9,600) Finance costs of borrowings (170) - (170) (231) - (231) Return on ordinary activities before taxation (195) 16,277 16,082 (348) (9,483) (9,831) Tax on ordinary activities (43) - (43) (59) - (59) Return on ordinary activities after taxation (238) 16,277 16,039 (407) (9,483) (9,890) Transfer (from)/to reserves (238) 16,277 16,039 (407) (9,483) (9,890) Return per ordinary share (0.78p) 53.14p 52.36p (1.32p) (30.69p) (32.01p) (note 3) There was no dilution of the above returns in either year. * 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. BAILLIE GIFFORD SHIN NIPPON PLC SUMMARISED BALANCE SHEET at 31 January 2004 (unaudited) 31 January 2004 31 January 2003 £'000 £'000 NET ASSETS Listed overseas equities 38,320 24,893 Unlisted - traded on the OTC market 10,791 6,573 - other unlisted 809 614 Total equities 49,920 32,080 Net liquid assets 1,451 3,307 Total assets (before deduction of bank loans) 51,371 35,387 Bank loans (note 4) (7,266) (7,101) Net assets 44,105 28,286 CAPITAL AND RESERVES Called-up share capital 3,060 3,090 Capital reserves 45,183 29,096 Revenue reserve (4,138) (3,900) Equity shareholders' funds 44,105 28,286 Net asset value per ordinary share (note 5) 144.1p 91.5p Ordinary shares in issue (note 6) 30,600,492 30,900,492 There was no dilution of net asset value at either date. BAILLIE GIFFORD SHIN NIPPON PLC SUMMARISED CASH FLOW STATEMENT (unaudited) Year to Year to 31 January 2004 31 January 2003 £'000 £'000 £'000 £'000 NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES 118 (120) NET CASH OUTFLOW FROM SERVICING OF FINANCE (168) (255) TOTAL TAX PAID (44) (59) FINANCIAL INVESTMENT Acquisitions of investments (19,423) (18,719) Disposals of investments 18,588 20,456 Realised currency gain/(loss) 207 (51) NET CASH (OUTFLOW)/ INFLOW FROM FINANCIAL INVESTMENT (628) 1,686 NET CASH (OUTFLOW)/ INFLOW BEFORE FINANCING (722) 1,252 FINANCING Shares repurchased (220) - Bank loans repaid - (2,563) NET CASH OUTFLOW FROM FINANCING (220) (2,563) DECREASE IN CASH (942) (1,311) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Decrease in cash in the year (942) (1,311) Net outflow from bank loans - 2,563 Exchange movement on bank loans (165) 386 MOVEMENT IN NET DEBT IN THE YEAR (1,107) 1,638 NET DEBT AT 1 FEBRUARY (4,115) (5,753) NET DEBT AT 31 JANUARY (5,222) (4,115) BAILLIE GIFFORD SHIN NIPPON PLC TWENTY LARGEST EQUITY HOLDINGS at 31 January 2004 (unaudited) Name Business Market % of value total £'000 assets Fuji Seal Packaging and shrink-wrap materials 1,732 3.4 * Goodwill Group Part-time labour and nursing care 1,709 3.3 Arisawa Manufacturing Specialist industrial materials 1,588 3.1 Sumisho Lease Specialist leasing operator 1,541 3.0 Bandai Maker of toys, cartoons and character goods 1,339 2.6 USS Company Second-hand car auctioneer 1,301 2.5 * SES Wafer polishing equipment 1,266 2.5 Seiko Corporation Watches and lenses 1,216 2.4 * LeoPalace21 Condominium developer and lessor 1,192 2.3 Sanyo Shinpan Finance Consumer loans and credit cards 1,134 2.2 MEW Information Systems Business software developer 1,035 2.0 * Aark Design consulting 1,027 2.0 * Tamron Camera lenses 1,026 2.0 Koei Games software developer 1,015 2.0 Tsumura Herbal medicines 938 1.8 Kose Cosmetics 934 1.8 Eneserve Alternative power generation 916 1.8 Chiyoda Integre Component outsourcing 912 1.8 Taito Arcade operator 891 1.7 Nissin Consumer loans and credit cards 885 1.7 23,597 45.9 * Denotes unlisted holdings, including those traded on the Japanese OTC market BAILLIE GIFFORD SHIN NIPPON PLC NOTES (unaudited) 31 January 2004 31 January 2003 £'000 £'000 1. Currency gains Realised exchange differences 207 77 Unrealised exchange differences (165) 258 42 335 2. No dividend will be declared. 3. Return per ordinary share Revenue return (238) (407) Capital return 16,277 (9,483) Return per ordinary share is based on the above returns and on 30,631,725 (2003 - 30,900,492) ordinary shares, being the weighted average number of ordinary shares in issue during the year. 4. Bank loans of £7.3 million (Y1.4 billion) have been drawn down under yen loan facilities which are repayable between August 2004 and May 2005 (31 January 2003 - £7.1 million (Y1.4 billion)). 5. Net asset value per ordinary share is based on net assets of £44,105,000 (2003 - £28,286,000) and 30,600,492 (2003 - 30,900,492) ordinary shares, being the number of ordinary shares in issue at the year end. 6. At 31 January 2004 the Company had authority to buy back 4,587,013 shares in accordance with the authority granted at the AGM in May 2003. The Company bought back 300,000 shares with a nominal value of £30,000 at a total cost of £220,000 during the year under review. 7. The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 January 2004. The financial information for 2003 is derived from the statutory accounts for 2003, which have been delivered to the Registrar of Companies. The Auditors have reported on the 2003 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 2004 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. This information is provided by RNS The company news service from the London Stock Exchange SEMFAMSLSESE

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