Annual Financial Report

RNS Number : 1307A

Baillie Gifford Japan Trust PLC

02 October 2009

 



THE BAILLIE GIFFORD JAPAN TRUST PLC

Results for the year to 31 August 2009

The Baillie Gifford Japan Trust PLC outperformed its benchmark index* over the year to 31 August 2009 by 2.4 percentage points.  Net asset value per share, after deducting borrowings at fair value, rose 3.2%, while the benchmark index gained 0.8%.  The share price declined 4.2%.  The fall in net asset value in the first six months of the year was reversed following a sharp recovery of 35.2% since the end of February.

	Returns benefited from the Yen strengthening 31% against Sterling.  Good stock selection in the Commerce and services and Retail sectors helped performance.  Stock selection in the Chemicals and other materials and Financials sectors hindered performance.
	Gearing was a net negative contributor to performance although it proved beneficial in the second half of the year.  Net gearing amounted to 15% at the start and end of the Company's year.  It was reduced to 1.5% by the end of January, before rising as the Managers found more companies on attractive valuations during the market turmoil.  During the year fourteen holdings were sold and nineteen new holdings purchased.
	The Japanese economy contracted sharply in Q4 2008 and Q1 2009.  However, the drastic and speedy action by companies to reduce costs and cut inventories, which exacerbated the decline, means that the cyclical low in economic activity appears to have been in February.
	The election success of the Democratic Party of Japan has significantly changed the political scene. Its aims of reform in the management of government, reduction in wasteful spending and support to families could bring economic benefits, although these are early days. Longer term, the establishment of a major two-party system should bring wider benefits.
	The significant size of the domestic Japanese market, which is still the second largest economy in the world, means that there are opportunities for well managed companies to grow and provides the Managers with diverse investment opportunities.
	Since inception, the Company's benchmark has been based on capital return indices only, with the TOPIX used since 2003.  As of 1 September 2009, it will be TOPIX (in sterling terms) total return.  The change is being made to better reflect the fact that Japanese companies are paying a more meaningful level of dividends.

* The Company's Benchmark index 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 which are believed to have above average prospects for growth. At 31 August 2009, the Company had total assets of £138.8m (before deduction of bank loans of £23.5m).

Baillie Gifford & Co, the Edinburgh based fund management group with around 
£53 billion under management and advice as at 1 October 2009, is appointed as investment managers and secretaries to The Baillie Gifford Japan Trust PLC. 

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

2 October 2009

- ends -

For further information please contact:

Sarah Whitley, Manager,

The Baillie Gifford Japan Trust PLC                0131 275 2000

Roland Cross, Director,

Broadgate Marketing                                      020 7726 6111

THE BAILLIE GIFFORD JAPAN TRUST PLC

The following is the unaudited preliminary statement for the year to  August 2009 which was approved by the Board on 1 October 2009.  No dividend is payable.

INCOME STATEMENT

(unaudited)

	For the year ended 31 August 2009				For the year ended 31 August 2008
	Revenue £'000	Capital £'000	Total £'000		Revenue £'000	Capital £'000	Total £'000
Gains/(losses) on investments	-	7,476	7,476		-	(22,157)	(22,157)
Currency losses (note 2)	-	(4,110)	(4,110)		-	(2,866)	(2,866)
Income (note 3)	2,422	-	2,422		2,195	-	2,195
Investment management fee (note 4)	(987)	-	(987)		(1,057)	-	(1,057)
Other administrative expenses	(247)	-	(247)		(247)	-	(247)
Net return before finance costs and taxation	1,188	3,366	4,554		891	(25,023)	(24,132)
Finance costs of borrowings	(503)	3	(500)		(513)	-	(513)
Net return on ordinary activities before taxation	685	3,369	4,054		378	(25,023)	(24,645)
Tax on ordinary activities	(153)	-	(153)		(132)	-	(132)
Net return on ordinary activities after taxation	532	3,369	3,901		246	(25,023)	(24,777)
Net return per ordinary share (note 6)	0.86p	5.44p	6.30p		0.40p	(40.40p)	(40.00p)

 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. 

THE BAILLIE GIFFORD JAPAN TRUST PLC

BALANCE SHEET

at 31 August 2009

(unaudited)

	At 31 August 2009		At 31 August 2008
	£'000	£'000	£'000	£'000
Fixed assets Investments		133,710		127,749
Current assets
Debtors	610		332
Cash and deposits	5,783		10,511
	6,393		10,843
Creditors:  Amounts falling due within one year	(6,289)		(2,950)
Net current assets		104		7,893
Total assets less current liabilities		133,814		135,642
Creditors:  Amounts falling due after more than one year		(18,520)		(24,249)
Total net assets		115,294		111,393
Capital and reserves
Called-up share capital		3,097		3,097
Share premium		22,110		22,110
Capital redemption reserve		203		203
Capital reserve - realised		87,586		98,710
Capital reserve - unrealised		10,239		(4,254)
Revenue reserve		(7,941)		(8,473)
Shareholders' funds		115,294		111,393

Net asset value per ordinary share	185.3p	179.5p
(after deducting borrowings at fair value)
Net asset value per ordinary share (after deducting borrowings at par value)	186.2p	179.9p
Ordinary shares in issue (note 9)	61,935,000	61,935,000

THE BAILLIE GIFFORD JAPAN TRUST PLC

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

(unaudited)

For the year ended 31 August 2009

	Share capital £'000	Share premium  £'000	Capital redemption reserve £'000	Capital reserve - realised £'000	Capital reserve - unrealised £'000	Revenue reserve £'000	Total shareholders' funds £'000
Shareholders' funds at  1 September 2008	3,097	22,110	203	98,710	(4,254)	(8,473)	111,393
Net return on ordinary activities after taxation	-	-	-	(11,124)	14,493	532	3,901
Shareholders' funds at  31 August 2009	3,097	22,110	203	87,586	10,239	(7,941)	115,294

For the year ended 31 August 2008

	Share capital £'000	Share premium  £'000	Capital redemption reserve £'000	Capital reserve - realised £'000	Capital reserve - unrealised £'000	Revenue reserve £'000	Total shareholders' funds £'000
Shareholders' funds at  1 September 2007	3,097	22,110	203	93,068	26,411	(8,719)	136,170
Net return on ordinary activities after taxation	-	-	-	5,642	(30,665)	246	(24,777)
Shareholders' funds at  31 August 2008	3,097	22,110	203	98,710	(4,254)	(8,473)	111,393

THE BAILLIE GIFFORD JAPAN TRUST PLC

CASH FLOW STATEMENT (unaudited)
	For the year ended 31 August 2009						For the year ended 31 August 2008
	£'000		£'000					£'000				£'000
Net cash inflow from operating activities			1,069									696
Net cash outflow from servicing of finance			(522)									(502)
Financial investment
Acquisitions of investments	(29,563)							(19,146)
Disposals of investments	31,576							30,164
Realised profit/(loss) on forward currency contract	471							(95)
Exchange differences on settlement of investment transactions	(289)							(102)
Net cash inflow from financial investment			2,195									10,821
Net cash inflow before financing			2,742									11,015
Financing
Bank loans repaid	(10,397)							(4,923)
Net cash outflow from financing			(10,397)									(4,923)
(Decrease)/increase in cash			(7,655)									6,092
Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in cash in the year			(7,655)									6,092
Net cash outflow from bank loans			10,397									4,923
Exchange differences on bank loans			(7,103)									(4,753)
Exchange differences on cash			2,927									1,980
Movement in net debt in the year			(1,434)									8,242
Net debt at 1 September			(16,264)									(24,506)
Net debt at 31 August			(17,698)									(16,264)
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs and taxation			4,554									(24,132)
(Gains)/losses on investments			(7,476)									22,157
Realised exchange differences			(1,656)									(2,272)
Unrealised exchange differences on bank loans			5,650									5,242
Amortisation of fixed interest book cost			8									(11)
Decrease/(increase) in accrued income			34									(37)
Decrease/(increase) in other debtors			97									(49)
Increase/(decrease) in creditors			13									(72)
Overseas tax suffered			(155)									(130)
Net cash inflow from operating activities			1,069									696

THE BAILLIE GIFFORD JAPAN TRUST PLC

TWENTY LARGEST EQUITY HOLDINGS at 31 August 2009 (unaudited)
Name	Business	2009  Value £'000	2009 % of total assets	2008 Value £'000
Accordia Golf	Golf course owner and operator	4,116	3.0	3,806
Don Quijote	Discount store operator	3,624	2.6	2,644
KDDI	Mobile telecommunications	3,485	2.5	3,220
Misumi Group	Precision machinery parts distributor	3,423	2.5	3,764
Itochu	Trading conglomerate	3,370	2.4	3,467
Keihin	Aluminium castings	3,268	2.4	1,866
Yamada Denki	Major consumer electronics retailer	3,245	2.3	2,392
Canon	Printers and copiers	3,150	2.3	4,044
Hitachi High-Technologies	Semiconductor production equipment	3,001	2.2	2,484
AIOI Insurance	Non-life insurance	2,973	2.1	2,685
Shimadzu	Environmental testing equipment	2,947	2.1	3,438
Osaka Securities Exchange	Stock and futures exchange	2,884	2.1	1,604
Mitsubishi Electric	Industrial electric conglomerate	2,810	2.0	2,897
Japan Tobacco	Tobacco manufacturer	2,808	2.0	2,580
Sysmex	Medical equipment	2,807	2.0	3,086
Asahi Glass	TV, car and construction glass	2,802	2.0	3,083
East Japan Railway	Tokyo based railway	2,719	2.0	3,921
H.I.S.	Travel agency	2,563	1.8	1,553
Shinko Plantech	Industrial plant maintenance	2,506	1.8	2,033
Sumitomo Heavy	Specialist machinery	2,498	1.8	2,176
		60,999	43.9%	56,743

THE BAILLIE GIFFORD JAPAN TRUST PLC

NOTES

(unaudited)

	The financial statements for the year to 31 August 2009 have been prepared on the basis of the same accounting policies set out in the Company's Annual Financial Statements at 31 August 2008.  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 August 2009 £'000		31 August 2008 £'000
2.	Currency Losses
	Exchange differences on bank loans				(7,103)		(4,753)
	Other exchange differences				2,993		1,887
					(4,110)		(2,866)
3.	Income
	Income from investments and interest receivable				2,351		2,083
	Other income				71		112
					2,422		2,195
4.	In 2007 the European Court of Justice ruled that investment trust management fees should be exempt from VAT. HMRC accepted the Managers' repayment claims for the periods from 1990 to 1996 and from 2000 to 2007. £157,000 of VAT together with £137,000 of interest was received by the Managers on behalf of the Company in respect of these periods, which was recognised in the year to 31 August 2008.
5.	No final dividend will be declared.
6.	Net Return per Ordinary Share
		2009				2008
		Revenue	Capital	Total		Revenue	Capital	Total
	Net return on ordinary activities after taxation	0.86p	5.44p	6.30p		0.40p	(40.40p)	(40.00p)
	Revenue return per ordinary share is based on the net revenue return on ordinary activities after taxation of £532,000 (2008 - net revenue return of £246,000), and on 61,935,000 ordinary shares, being the number of ordinary shares in issue throughout each year.   Capital return per ordinary share is based on the net capital return for the financial year of £3,369,000 (2008 - net capital loss of £25,023,000), and on 61,935,000 ordinary shares, being the number of ordinary shares in issue throughout each year. There are no dilutive or potentially dilutive shares in issue.
7.	Bank loans of £23.5 million (¥3.55 billion) have been drawn down under yen loan facilities which are repayable between August 2010 and August 2014 (31 August 2008- £26.8 million (¥5.3 billion)).

THE BAILLIE GIFFORD JAPAN TRUST PLC

NOTES (Ctd)

(unaudited)

8.	Transaction costs incurred on the purchase and sale of investments are added to the purchase costs or deducted from the sales proceeds, as appropriate. During the year, transaction costs on purchases amounted to £27,0008 - £28,000) and transaction costs on sales amounted to £27,000 (31 August 2008 - £40,000).
9.	At 31 August 2009 the Company had authority to buy back 9,284,056 shares. No shares were bought back during the year. Under the provisions of the Company's Articles of Association share buy backs are funded from the realised capital reserve.
10.	The financial information set out above does not constitute the Company's statutory accounts for the year ended 9. The financial information for 2008 is derived from the statutory accounts for 2008 which have been delivered to the Registrar of Companies. The Auditors have reported on the 2008 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 2008 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.
11.	The Report and Accounts will be available on the Managers' website www.japantrustplc.com on or around  October 2009.
	None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

 

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