Final Results

RNS Number : 7474E

Baillie Gifford Japan Trust PLC

01 October 2008

 



THE BAILLIE GIFFORD JAPAN TRUST PLC

Results for the year to 31 August 2008

Over the year to 31 August 2008, The Baillie Gifford Japan Trust's net asset value per share declined by 18.2% and the share price declined by 23.0%. The TOPIX (in sterling terms) declined by 7.8% over the same period. The majority of the underperformance occurred in the first half of the Company's year.

	Underperformance was due mainly to stock selection in the Manufacturing & Machinery and Real Estate & Construction sectors along with the employment of gearing.
	As at 31 August 2008 net gearing stood at 15% having been 18% a year earlier.  Although the Board and Managers believe that borrowing to invest in Japanese equities remains a sensible long term strategy, the Company's level of gearing is being reduced due to current global economic uncertainties.
	The domestic Japanese economy has slowed, nevertheless corporate and personal balance sheets remain sound, which should help to ameliorate any economic weakness.
	Focus on improving shareholder returns continues, with significant buybacks and dividend increases by many companies.
	Following several years of share price declines, it is notable that many Japanese companies are trading at below book value.
	Given the current undemanding valuation of the Japanese market, the Board is of the view that Japanese equities are an attractive area for investment for long term investors.

* The Company's Benchmark index is the TOPIX Index in sterling terms.

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. If the Company's investments fall in value, gearing will increase the amount of this loss. The more highly geared the Company, the greater this effect will be. Investment in investment trusts should be regarded as medium to long term. 

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, although it invests in larger companies when considered appropriate. 

Baillie Gifford & Co, the Edinburgh based fund management group with around £ billion under management and advice as at 30 September 2008, is appointed as investment managers and secretaries to The Baillie Gifford Japan Trust PLC. 

1 October 2008

- 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

Important Information and Risk Warnings

Past performance is no guarantee of future performance.

The value of your investment

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 stockmarkets 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.

Overseas investment

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.

Gearing

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. If the Company's investments fall in value, gearing will increase the amount of this loss. The more highly geared the Company, the greater this effect will be.

Investment in Smaller Companies

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.

Directors' and Baillie Gifford staff interests

The staff of Baillie Gifford & Co and the Company's Directors may hold shares in the Company and may buy or sell such shares.

You can find up-to-date performance information about The Baillie Gifford Japan Trust PLC at www.japantrustplc.co.uk

THE BAILLIE GIFFORD JAPAN TRUST PLC

The following is the unaudited preliminary statement for the year to  August 2008 which was approved by the Board on 30 September 2008.  No dividend is payable.

INCOME STATEMENT

(unaudited)

	For the year ended 31 August 2008				For the year ended 31 August 2007
	Revenue £'000	Capital £'000	Total £'000		Revenue £'000	Capital £'000	Total £'000
Losses on investments	-	(22,157)	(22,157)		-	(12,386)	(12,386)
Currency (losses) /gains (note 2)	-	(2,866)	(2,866)		-	1,203	1,203
Income (note 3)	2,195	-	2,195		1,844	-	1,844
Investment management fee (note 4)	(1,057)	-	(1,057)		(1,432)	-	(1,432)
Other administrative expenses	(247)	-	(247)		(239)	-	(239)
Net return before finance costs and taxation	891	(25,023)	(24,132)		173	(11,183)	(11,010)
Finance costs of borrowings	(513)	-	(513)		(385)	-	(385)
Net return on ordinary activities before taxation	378	(25,023)	(24,645)		(212)	(11,183)	(11,395)
Tax on ordinary activities	(132)	-	(132)		(114)	-	(114)
Net return on ordinary activities after taxation	246	(25,023)	(24,777)		(326)	(11,183)	(11,509)
Net return per ordinary share (note 6)	0.40p	(40.40p)	(40.00p)		(0.52p)	(18.06p)	(18.58p)

 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 2008

(unaudited)

	At 31 August 2008		At 31 August 2007
	£'000	£'000	£'000	£'000
FIXED ASSETS Investments		127,749		160,997
CURRENT ASSETS
Debtors	332		164
Cash and deposits	10,511		2,439
	10,843		2,603
CREDITORS:  Amounts falling due within one year	(2,950)		(4,762)
NET CURRENT ASSETS/(LIABILITIES)		7,893		(2,159)
TOTAL ASSETS LESS CURRENT LIABILITIES		135,642		158,838
CREDITORS:  Amounts falling due after more than one year		(24,249)		(22,668)
TOTAL NET ASSETS		111,393		136,170
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		98,710		93,068
Capital reserve - unrealised		(4,254)		26,411
Revenue reserve		(8,473)		(8,719)
EQUITY SHAREHOLDERS' FUNDS		111,393		136,170

NET ASSET VALUE PER ORDINARY SHARE	179.9p	219.9p
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 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

For the year ended 31 August 2007

	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 2006	3,097	22,110	203	87,572	43,090	(8,393)	147,679
Net return on ordinary activities after taxation	-	-	-	5,496	(16,679)	(326)	(11,509)
Shareholders' funds at 31 August 2007	3,097	22,110	203	93,068	26,411	(8,719)	136,170

THE BAILLIE GIFFORD JAPAN TRUST PLC

CASH FLOW STATEMENT (unaudited)
	For the year ended 31 August 2008						For the year ended 31 August 2007
	£'000		£'000					£'000				£'000
NET CASH INFLOW FROM OPERATING ACTIVITIES			696									35
NET CASH OUTFLOW FROM SERVICING OF FINANCE			(502)									(385)
FINANCIAL INVESTMENT
Acquisitions of investments	(19,146)							(33,004)
Disposals of investments	30,164							30,272
Realised loss on forward currency contract	(95)							-
Exchange differences on settlement of investment transactions	(102)							6
NET CASH INFLOW/(OUTFLOW) FROM FINANCIAL INVESTMENT			10,821									(2,726)
NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING			11,015									(3,076)
FINANCING
Bank loans drawn down	-							4,100
Bank loans repaid	(4,923)							(3,280)
NET CASH (OUTFLOW)/INFLOW FROM FINANCING			(4,923)									820
INCREASE/(DECREASE) IN CASH			6,092									(2,256)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Increase/(decrease) in cash in the year			6,092									(2,256)
Net cash flow from bank loans			4,923									(820)
Exchange (losses)/gains on bank loans			(4,753)									1,218
Exchange movement on cash			1,980									(21)
MOVEMENT IN NET DEBT IN THE YEAR			8,242									(1,879)
NET DEBT AT 1 SEPTEMBER			(24,506)									(22,627)
NET DEBT AT 31 AUGUST			(16,264)									(24,506)
RECONCILIATION OF NET RETURN BEFORE FINANCE COSTS AND TAXATION TO NET CASH INFLOW FROM OPERATING ACTIVITIES
Net return before finance costs and taxation			(24,132)									(11,010)
Losses on investments			22,157									12,386
Realised currency gains			(2,272)									(1,037)
Unrealised currency (losses)/gains on bank loans			5,242									(166)
Amortisation of fixed interest book cost			(11)									-
Increase in accrued income			(37)									(7)
(Increase)/decrease in other debtors			(49)									11
Decrease in creditors			(72)									(29)
Overseas tax suffered			(130)									(113)
NET CASH INFLOW FROM OPERATING ACTIVITIES			696									35

THE BAILLIE GIFFORD JAPAN TRUST PLC

TWENTY LARGEST EQUITY HOLDINGS at 31 August 2008 (unaudited)
Name	Business	2008  Value £'000	2008 % of total assets	2007 Value £'000
Inpex	Oil and gas producer	4,100	3.0	3,804
Canon	Printers and copiers	4,044	2.9	4,578
East Japan Railway	Tokyo based railway	3,921	2.8	3,521
Modec	Designs and leases offshore oil platforms	3,870	2.8	3,697
Accordia Golf	Golf course owner and operator	3,806	2.8	3,453
Misumi Group	Precision machinery parts distributor	3,764	2.7	3,648
Itochu	Trading conglomerate	3,467	2.5	4,459
Shimadzu	Environmental testing equipment	3,438	2.5	3,379
Rakuten	Internet retailer	3,337	2.4	1,987
KDDI	Mobile telecommunications	3,220	2.3	3,813
Kamigumi	Port operator	3,167	2.3	3,149
USS Company	Second-hand car auctioneer	3,141	2.3	4,065
SMC	Pneumatic control equipment	3,131	2.3	3,607
Mitsubishi UFJ Lease & Finance	Leasing company	3,130	2.3	3,145
Sysmex	Medical equipment	3,086	2.2	2,865
Asahi Glass	LCD, auto and construction glass	3,083	2.2	3,835
Tsumura	Herbal medicines	3,005	2.2	2,058
Sumitomo Mitsui Financial Group	Major bank	2,941	2.1	1,961
Mitsubishi Electric	Industrial electric conglomerate	2,897	2.1	4,180
Aeon Mall	Shopping mall developer	2,810	2.1	2,627
		67,358	48.8	67,831

THE BAILLIE GIFFORD JAPAN TRUST PLC

NOTES

(unaudited)

	The financial statements for the year to 31 August 2008 have been prepared on the basis of the same accounting policies set out in the Company's Annual Financial Statements at 31 August 2007.
					31 August 2008 £'000		31 August 2007 £'000
2.	Currency (losses)/gains
	Exchange differences on bank loans				(4,753)		1,218
	Other exchange differences				1,887		(15)
					(2,866)		1,203
3.	Income
	Income from investments and interest receivable				2,083		1,630
	Other income				112		214
					2,195		1,844
4.	Investment management fees for the year ended 31 August 2008 are net of a VAT refund of £157,000 (2007 - nil) relating to VAT suffered on management fees for the periods 1990 to 1996 and 2000 to 2007 following a ruling from the European Court of Justice that investment trust management fees should be exempt from VAT.
5.	No final dividend will be declared.
6.	Net return per ordinary share
		2008				2007
		Revenue	Capital	Total		Revenue	Capital	Total
	Net return on ordinary activities after taxation	0.40p	(40.40p)	(40.00p)		(0.52p)	(18.06p)	(18.58p)
	Revenue return per ordinary share is based on the net revenue gain on ordinary activities after taxation of £246,000 (2007 - net revenue loss of £326,000), 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 in the net capital loss for the financial year of £25,023,000 (2007 - £11,183,000), 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 £26.8 million (¥5.3 billion) have been drawn down under yen loan facilities which are repayable between November 2008 and August 2014 (31 August 2007 - £26.9 million (¥6.3 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 £28,00031 August 2007 - £52,000) and transaction costs on sales amounted to £40,000 (31 August 2007 - £38,000).
9.	At 31 August 2008 the Company had authority to buy back 9,284,056 shares at a discount to net asset value as well as the authority to issue/sell from treasury 6,193,500 shares at a premium to net asset value. No shares were bought back or issued/sold 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  31 August 2008. The financial information for 2007 is derived from the statutory accounts for 2007 which have been delivered to the Registrar of Companies. The Auditors have reported on the 2007 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.bailliegifford.com on or around 29 October 2008.
	None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

 

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