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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Baillie Gifford Shin Nippon Plc | LSE:BGS | London | Ordinary Share | GB00BFXYH242 | ORD 2P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 111.60 | 111.00 | 111.80 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Unit Inv Tr, Closed-end Mgmt | -80.4M | -81.91M | -0.2621 | -4.26 | 348.78M |
TIDMBGS
RNS Number : 9493S
Baillie Gifford Shin Nippon PLC
15 March 2019
RNS Announcement: Preliminary Results ------------------------------------- Baillie Gifford Shin Nippon PLC =============================== Legal Entity Identifier: X5XCIPCJQCSUF8H1FU83 Results for the year to 31 January 2019 ---------------------------------------------
Over the year the Company's net asset value per share (after deducting borrowings at book value) fell by 6.1% compared to a 7.8% fall in the comparative index*. The share price fell by 7.2%.
In sterling terms over three years, the Company's comparative index is up 45.4%, whilst the net asset value (with borrowings at fair value) and share price are up by 83.8% and 91.0% respectively.
3/4 Weak Chinese demand over the past year had a negative impact on some Japanese small caps. 3/4 However, many of the rapid growth, online businesses that the Company owns performed well.
3/4 Bengo4.com, which operates a website that connects lawyers with individuals and businesses seeking legal advice, was the largest positive contributor to performance.
3/4 New investments included Raksul, which has developed an online, cloud-based system that connects service providers with clients in real-time; Akatsuki, a mobile gaming company; and Uzabase, a financial software company.
3/4 The Company is seeking shareholder approval to permit investment in unlisted companies at a level of up to 10% of the portfolio (measured at time of investment).
(*) The Company's comparative index for the year to 31 January 2019 was the MSCI Japan Small Cap Index (total return in sterling terms).
Alternative Performance Measure - see Glossary of Terms and Altnernative Performance Measures at the end of this document.
Source: Refinitiv/Baillie Gifford and relevant underlying index providers.
Shin Nippon aims to achieve long term capital growth through investment principally in small Japanese companies which are believed to have above average prospects for growth. At 31 January 2019 the Company had total assets of GBP486.1m (before deduction of bank loans of GBP52.0m).
The Company is managed by Baillie Gifford & Co, an Edinburgh based fund management group with around GBP187 billion under management and advice as at 14 March 2019.
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. 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. You can find up to date performance information about Shin Nippon at www.shinnippon.co.uk.
See disclaimer at the end of this document.
14 March 2019
For further information please contact:
Alex Blake, Baillie Gifford & Co
Tel: 0131 275 2859
Roland Cross, Director, Four Broadgate
Tel: 0207 776 0512 or 07831 401309
Chairman's Statement ====================
The year to 31 January 2019 was challenging for investors and the Company's net asset value per share* (NAV) and share price fell by 6.0% and 7.2% respectively, slightly ahead of the return of the comparative index (MSCI Japan Small Cap Index, total return in Sterling terms), which fell by 7.8%.
Your Board continues to review performance over a rolling three-year period. Over this period, the Company's NAV rose by 83.8% and its share price by 91.0% versus the comparative index return of 45.4%.
At 31 January 2019 the premium of the share price over the net asset value was 8.0%, slightly lower than the 9.3% of the previous year. The Board continues to monitor this premium carefully and will continue to manage this imbalance between buyers and sellers by issuing shares appropriately as noted below.
Share Split and Share Issuance
The Interim Management Report in July acknowledged the subdivision of the ordinary shares of the Company. This five for one split of five new ordinary shares of 2 pence replacing each ordinary share of 10 pence was approved at last year's AGM.
Also, during the year, the Company issued 36,025,000 shares (15.2% of share capital at 31 January 2018) at a premium to NAV raising net proceeds of GBP68.7m. The Board believes that both the share split and the continuing issuance of new shares will improve the liquidity of the stock and its appeal to a wider range of shareholders.
Borrowings
The Board continues to support the strategy of using gearing to enhance portfolio performance. Gearing at both the start and end of the year remained fairly constant at 10.5% and 10.6% respectively. Total borrowings throughout the year remained unchanged at Yen7.45bn. During the year the Yen strengthened against Sterling by 8.4%. Last year it weakened by almost the same amount. The Company continues with its policy of not engaging in currency hedging.
Revenue
During the year the Board announced a reduction in the annual management fee payable to Baillie Gifford & Co Limited, the Company's Managers and Secretaries. With effect from 1 January 2019 the Company's annual management fee will be calculated at 0.75% on the first GBP50m of net assets, 0.65% on the next GBP200m of net assets and 0.55% on the remainder (previously the first GBP50m tier was calculated at 0.95%).
The revenue return per share increased from a deficit of 0.11p to a surplus of 0.04p. Gross portfolio income rose by 45.7% but the management fee rose 34.7% due to the increase in average NAV over the year. Certain other expenses increased by 17.8%. That said, I am delighted that our ongoing charges fell from 0.89% to 0.77%.
AGM
At this year's AGM we are again seeking authority to issue new shares on a non pre-emptive basis of up to 10% of the issued share capital of the Company. Any shares issued would be for cash and only at a premium to net asset value thus enhancing the net asset value to the existing shareholders.
As with issuing shares at a premium, the Board will again be seeking your approval to buy back shares should they start trading at a substantial discount either in absolute terms or in relation to its peers. Similarly, if required this activity would enhance the net asset value attributable to existing shareholders.
This year, your Board proposes an additional resolution to amend the investment policy to permit investment in unlisted companies at a level of up 10% of the portfolio (at the time of purchase) and to increase the maximum number of holdings from 75 to 80. Although we currently have made only one investment in an unlisted company, the Managers are seeing more unlisted opportunities and the Board is of the view that this is an appropriate moment to provide clarity for shareholders on the maximum level such investments might reach.
Governance
Francis Charig and Iain McLaren both retire from the Board at May's AGM. Both have served the Company with great distinction and have seen the Company grow hugely to its present level. Francis brought great knowledge and wisdom from his experience and Japanese contacts and Iain's control of Audit Committee matters has been exemplary. Both individuals will be sadly missed.
I am delighted to report that Professor Sethu Vijayakumar and Jamie Skinner CA have been appointed to the Board. Sethu is Professor of Robotics at Edinburgh University as well as a visiting professor at both Kyoto and Tokyo Universities. Sethu not only speaks Japanese but also writes it!
Jamie will assume the role of Audit Committee Chairman. Jamie spent most of his recent working career with Martin Currie in Edinburgh and I regard him as an investment trust professional.
I welcome both Sethu and Jamie to the Board and look forward to working with them in the years ahead.
Outlook
As a UK listed company, the Board and Managers have considered the implications of Brexit. Around half of the Company's investments are domestically focussed within Japan and the remaining holdings have minimal exposure to the UK. The Board is therefore not concerned about the impact of Brexit on the portfolio. Although the Y/GBP exchange rate may react according to the market's view on the Brexit outcome reached, which would affect the value of the Company's shares, its borrowings are denominated in Yen so any exchange movements impacting the loans would be more than offset by opposite exchange movements affecting the portfolio. Additionally, there is the possibility of turbulence on the London Stock Exchange. Spikes in supply or demand for the Company's shares can however, be managed by share issuance or buybacks as appropriate.
More broadly, there seems to be greater uncertainty in the world regarding global growth than at any time over the last 10 years. However, the Company's strategy of seeking to identify smaller Japanese companies with strong growth potential means that the performance is more dependent on the ability of those companies to take advantage of their opportunities than on the global economy.
Similar themes to last year are still prevalent. There is still an ongoing labour shortage and access to experienced labour is arguably one of the biggest issues for companies in Japan. Retaining staff and introducing mechanisms and technologies to assess employee satisfaction and reward performance are massive challenges.
There is some cyclical slowdown in certain sectors but corporate Japan's mood is generally positive but cautious. Inbound tourism remains strong and there is strong growth in infrastructure projects supporting the Rugby World Cup in 2019 and the Olympic and Paralympic Games in 2020. Companies are also gradually seeing the need to invest capital expenditure for the future and are taking a less short-term view.
We remain positive. The start up environment for companies on our radar is changing. Government policies are more supportive. There is generally better access to capital and more importantly there is a new attitude to creating wealth and starting exciting, disruptive technology businesses. The Board and the Managers remain encouraged by the outlook.
More detailed information about the Company's portfolio is contained within the Managers Report below.
M Neil Donaldson
Chairman
14 March 2019
* After deducting borrowings at fair value.
For a definition of terms see Glossary of Terms and Alternative Performance Measures at the end of this announcement.
Past performance is not a guide to future performance.
See disclaimer at the end of this document.
Managers' Report ================
In last year's half yearly update, we highlighted concerns related to trade protectionism and a cyclical slowdown in key global sectors. Both these headwinds gathered steam through the year and dampened investor sentiment, resulting in a weak stock market. High growth small cap stocks in Japan fell sharply as investors regarded them as being particularly vulnerable to external shocks.
Weak Chinese demand over the past year had a negative impact on some Japanese small caps. In 2017, Japanese suppliers of factory automation equipment saw strong orders from Chinese customers. However, demand weakness last year led to fewer orders being placed as inventory levels rose. Harmonic Drive, a leading global manufacturer of speed reduction gears used in smaller robots, saw a near 50% decline in orders. Although it remains a strong global player with high market shares and best-in-class products, the severe fall in orders led to significant share price weakness. Conditions in the important Chinese and US automobile sectors also remained tough. After nearly three decades of growth, car sales in China fell last year. In the US, sales declined for most major Japanese car companies. As a result, smaller auto parts suppliers like Nippon Ceramic, a leading global manufacturer of ultrasonic sensors for cars, and IRISO Electronics, a manufacturer of connectors for car electronics, suffered operationally. Despite challenging conditions, both companies remain resilient. They have strong balance sheets and are investing in new product development to secure future growth.
In comparison, the domestic environment for small caps remained favourable. Labour shortage, a recurring theme in recent Managers' reports, is becoming extreme. The jobs-to-applicants ratio remains at an all-time high and the economy now has near full employment. The employment rate of women aged 15 to 64 in Japan is now higher than in the US. Despite the government's attempts at bringing in overseas workers, the labour market remains incredibly tight. Industries such as IT are seeing very high levels of demand for experienced engineers. This is proving to be a boon for TechnoPro, one of Japan's largest IT staffing specialists. Inbound tourism remained strong and Japan welcomed just over 30 million visitors last year. The government has set an official goal to attract 40 million inbound visitors by 2020 and 60 million by 2030. Companies such as infrastructure repair and maintenance specialist Sho-Bond are seeing strong orders from both private and public-sector clients as Japan prepares to host international events like the Rugby World Cup and the Summer Olympic and Paralympic Games.
Many of our rapid growth, online businesses performed well last year. GMO Payment Gateway, a leading online payments provider, continues to generate strong growth as it expands into new areas within financial services. Labour market tightness is resulting in increased job mobility as more people embrace flexible working. Crowdworks, a leading online platform for crowdsourced services, is seeing fast growth both in user numbers and the amount of work being delivered through its platform. Orders at Japan's largest online food delivery company, Yume No Machi, accelerated sharply last year. This nascent industry is growing quickly as Japanese consumers become more comfortable with the concept of ordering food online using smartphone apps. Management are making heavy investments to build scale at the cost of short-term profits.
Performance
For the year ending 31 January 2019, the MSCI Japan Small Cap index (total return in sterling terms) fell by 7.8% while Shin Nippon's net asset value per share (after deducting borrowings at fair value) fell by 6.0%. Given our long-term investment horizon, a fairer way of looking at performance is to focus on the long-term. Over three and five years, the comparative index is up by 45.4% and 82.7% while the Company's net asset value per share is up by 83.8% and 157.4% respectively.
Many of our favourite online disruptors were among the top performers over the past year. Bengo4.com was the largest positive contributor to performance. It operates a website that connects lawyers with individuals and businesses seeking legal advice. Lawyers register as members and pay Bengo4.com a fee to market themselves on its website. This service has grown quite popular and approximately a third of Japan's lawyers are now registered members. Bengo4.com also has a rapidly growing business providing online, cloud-based contracts that can be securely signed. This alternative to traditional paper-based contracts is seeing rapid adoption by companies of all sizes and has become a major growth driver for the company. Longstanding holding MonotaRO maintained its incredible record of delivering very high growth rates over the years despite numerous challenges. It recently started operations at a new, automated warehouse that nearly doubles its sales capacity, thereby giving it significant room for future growth.
Software company Brainpad has developed an artificial intelligence-based software product that helps companies design targeted marketing campaigns by predicting changes in consumer behaviour with a high level of accuracy. Brainpad is seeing rapid adoption of its software by both large and medium-sized companies, resulting in rapid sales and profit growth. Specialist medical device manufacturer Asahi Intecc is expanding beyond its traditional cardiovascular related areas, thereby increasing its addressable market. Following the end of a joint venture with its US partner Abbott Labs, Asahi Intecc has now taken full control of marketing and distribution in the US and is already seeing its market share rise.
Among the poorer performers were companies suffering from a slowdown in cyclical sectors. Both Optex, a manufacturer of industrial security and fault detection systems, and Nabtesco, a motion control technologies specialist, saw a significant fall in orders. While both companies remain globally competitive in their respective areas, this short-term weakness was taken negatively by the market. Outsourcing was another weak performer as the market took a dim view of management's decision to issue new shares to strengthen the balance sheet after a series of debt-funded acquisitions. Sales at Seria, one of Japan's leading Yen100 store operators, suffered as the company struggled with upgrading its inventory management system. The shares were sold off aggressively as investors questioned management's capability in getting the company back to growing fast again.
Portfolio
We focus on a company's individual attractions and pay little attention to the benchmark. Consequently, Shin Nippon's active share continues to be high at 94%, implying just a 6% overlap with the comparative index. Annualised turnover within the portfolio was 18.7%. We identified many attractive high growth ideas and sold some existing holdings where we no longer had conviction. We participated in the IPO of Raksul, a fast-growing business run by its young and entrepreneurial founder. It has developed an online, cloud-based system that connects service providers with clients in real-time. It is currently focussing on disrupting the domestic printing and logistics sectors, both of which are very inefficient, traditional and quite large.
We took a holding in Akatsuki, a mobile gaming company that is developing a potentially exciting new business in E-sports, an industry that is seeing explosive growth globally. KH Neochem is a specialist chemicals manufacturer that enjoys an oligopoly in its key products. It makes environmentally friendly chemicals used in cosmetics, refrigerants for air conditioners and building materials. Uzabase is a young, financial software company that is trying to disrupt a market dominated by Bloomberg and Thomson Reuters through its own low-cost offering. It has one of the largest databases of private companies in Asia and has already gained meaningful market share in Japan. It also has a fast-growing business in the US where it provides a subscription based financial news service. It is differentiating itself by offering a large selection of original content prepared by a panel of well-known industry experts.
We sold our holding in high-end rice cooker manufacturer Zojirushi as it is failing to cope with intensifying competition and pricing pressure. Shares in condominium builder Takara Leben were also sold as sales and profits continue to shrink due to weak demand and rising land and labour costs. It also has a weak balance sheet that leaves the company with little room for error. We have been disappointed by management's capital allocation at online recipe website Cookpad and web-based rental property aggregator Lifull. Both companies are expanding overseas despite significant growth opportunities in Japan and we have therefore sold our holdings in both companies. Auto parts maker Unipres is struggling to grow its business, mirroring the fortunes of its main customer Honda. Management's efforts at diversifying their client base have yielded very little and we struggled to retain any enthusiasm for owning the shares.
Outlook
Ongoing reforms in Japan are resulting in new business opportunities for smaller companies. Despite the current slowdown, we believe major global trends like automation and electrification of cars remain intact. There is ample scope for growth in these areas for Japanese small caps. Shin Nippon continues to focus on investing in dynamic and innovative smaller businesses and we are encouraged by the numerous investment opportunities emerging in various sectors.
Baillie Gifford & Co
14 March 2019
For a definition of terms see Glossary of Terms and Alternative Performance Measures at the end of this announcement.
Past performance is not a guide to future performance.
See disclaimer at the end of this document.
Income statement (unaudited) ============================
The following is the unaudited preliminary statement for the year to 31 January 2019 which was approved by the Board on 14 March 2019. No dividend is payable.
Hot Features
Premium
For the year ended For the year ended
31 January 2019 31 January 2018
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================================================== ======== ======== ======== ======== ======== ========
(Losses)/gains on investments* - (32,225) (32,225) - 108,387 108,387
Currency (losses)/gains (note 2) - (3,875) (3,875) - 3,591 3,591
Income 5,092 - 5,092 3,496 - 3,496
Investment management fee (note 3) (2,871) - (2,871) (2,131) - (2,131)
Other administrative expenses (601) - (601) (510) - (510)
Net return before finance costs and taxation 1,620 (36,100) (34,480) 855 111,978 112,833
================================================== ======== ======== ======== ======== ======== ========
Finance costs of borrowings (note 4) (1,005) - (1,005) (732) - (732)
================================================== ======== ======== ======== ======== ======== ========
Net return on ordinary activities before taxation 615 (36,100) (35,485) 123 111,978 112,101
================================================== ======== ======== ======== ======== ======== ========
Tax on ordinary activities (509) - (509) (350) - (350)
================================================== ======== ======== ======== ======== ======== ========
Net return on ordinary activities after taxation 106 (36,100) (35,994) (227) 111,978 111,751
================================================== ======== ======== ======== ======== ======== ========
Net return per ordinary share(#) (note 6) 0.04p (13.98p) (13.94p) (0.11p) 52.31p 52.20p
================================================== ======== ======== ======== ======== ======== ========
* Gains on investments include gains and losses on disposals and holding gains and losses on the investment portfolio resulting from: i) changes in the local currency fair value of the investments and, ii) movements in the yen/sterling exchange rate.
Currency gains include: i) currency exchange gains and losses on yen bank loans, ii) exchange differences on the settlement of investment transactions and, iii) other exchange differences arising from the retranslation of cash balances.
(#) Prior year figures restated for the five for one share split on 21 May 2018.
The total column of this statement is the profit and loss account of the Company. The supplementary revenue and capital return columns are prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in this statement derive from continuing operations.
A Statement of Comprehensive Income is not required as all gains and losses of the Company have been reflected in the above statement.
Balance sheet (unaudited)
=========================
At 31 January 2019 At 31 January 2018
GBP'000 GBP'000 GBP'000 GBP'000
======================================= ============== ===================== ============== ======================
Fixed assets
Investments held at fair value through
profit or loss 479,874 443,917
Current assets
Debtors 2,706 2,833
Cash and cash equivalents 5,750 5,668
======================================= ============== ===================== ============== ======================
8,456 8,501
======================================= ============== ===================== ============== ======================
Creditors
Amounts falling due within one year (2,229) (3,129)
Net current assets 6,227 5,372
======================================= ============== ===================== ============== ======================
Total assets less current liabilities 486,101 449,289
======================================= ============== ===================== ============== ======================
Creditors
Amounts falling due after more than one
year (note 7) (51,946) (47,877)
======================================= ============== ===================== ============== ======================
Net assets 434,155 401,412
======================================= ============== ===================== ============== ======================
Capital and reserves
Share capital 5,469 4,749
Share premium account 163,191 95,174
Capital redemption reserve 21,521 21,521
Capital reserve 249,351 285,451
Revenue reserve (5,377) (5,483)
Shareholders' funds 434,155 401,412
======================================= ============== ===================== ============== ======================
Net asset value per ordinary share*
(after deducting borrowings at book
value) 158.8p 169.1p
--------------------------------------- -------------- --------------------- -------------- ----------------------
Ordinary shares in issue* (note 8) 273,452,485 237,427,485
======================================= ============== ===================== ============== ======================
* Prior year figures restated for the five for one share split on 21 May 2018.
Statement of changes in equity (unaudited) ==========================================
For the year ended 31 January 2019
Share premium Capital
Share account redemption Capital reserve* Revenue reserve Shareholders'
capital GBP'000 reserve GBP'000 GBP'000 funds
GBP'000 GBP'000 GBP'000
================== ========= ============= ================= ================= ================= ===============
Shareholders'
funds at 1
February 2018 4,749 95,174 21,521 285,451 (5,483) 401,412
Ordinary shares
issued (note 8) 720 68,017 - - - 68,737
Net return on
ordinary
activities after
taxation - - - (36,100) 106 (35,994)
Shareholders'
funds at 31
January 2019 5,469 163,191 21,521 249,351 (5,377) 434,155
================== ========= ============= ================= ================= ================= ===============
For the year ended 31 January 2018
Share premium Capital
Share account redemption Capital reserve* Revenue reserve Shareholders'
capital GBP'000 reserve GBP'000 GBP'000 funds
GBP'000 GBP'000 GBP'000
================== ========= ============= ================= ================= ================= ===============
Shareholders'
funds at 1
February 2017 4,040 40,094 21,521 173,473 (5,256) 233,872
Ordinary shares
issued (note 8) 709 55,080 - - - 55,789
Net return on
ordinary
activities after
taxation - - - 111,978 (227) 111,751
Shareholders'
funds at 31
January 2018 4,749 95,174 21,521 285,451 (5,483) 401,412
================== ========= ============= ================= ================= ================= ===============
* The capital reserve balance at 31 January 2019 includes investment holding gains of GBP150,046,000 (31 January 2018 - gains of GBP222,272,000).
Cash flow statement (unaudited)
===============================
For the year ended For the year ended
31 January 2019 31 January 2018
GBP'000 GBP'000 GBP'000 GBP'000
========================================================= ========== ======== ========== ========
Cash flows from operating activities
Net return on ordinary activities before taxation (35,485) 112,101
Net losses/(gains) on investments 32,225 (108,387)
Currency losses/(gains) 3,875 (3,591)
Finance costs of borrowings 1,005 732
Overseas withholding tax (453) (328)
Increase in debtors, accrued income and prepaid expenses (631) (227)
Increase in creditors and prepaid income 52 253
Cash inflow from operations 588 553
Interest paid (963) (736)
========================================================= ========== ======== ========== ========
Net cash outflow from operating activities (375) (183)
========================================================= ========== ======== ========== ========
Cash flows from investing activities
Acquisitions of investments (155,313) (107,413)
Disposals of investments 85,032 25,850
========================================================= ========== ======== ========== ========
Net cash outflow from investing activities (70,281) (81,563)
--------------------------------------------------------- ---------- -------- ---------- --------
Shares issued 70,576 53,950
Bank loans drawn down - 28,429
========================================================= ========== ======== ========== ========
Net cash inflow from financing activities 70,576 82,379
========================================================= ========== ======== ========== ========
(Decrease)/increase in cash and cash equivalents (80) 633
Exchange movements 162 (485)
Cash and cash equivalents at 1 February 5,668 5,520
========================================================= ========== ======== ========== ========
Cash and cash equivalents at 31 January* 5,750 5,668
========================================================= ========== ======== ========== ========
* Cash and cash equivalents represent cash at bank and deposits repayable on demand.
List of Investments at 31 January 2019
======================================
2019 2019 Absolute(#) 2018
Value % of Performance Value
Name Business GBP'000 total assets % GBP'000
========================== =================================== ========= ============== ============= ===========
Asahi Intecc Specialist medical equipment 16,047 3.3 21.5 11,983
Bengo4.com Online legal consultation 15,347 3.2 143.9 5,230
Outsourcing Employment placement services 13,261 2.7 (33.6) 12,801
Nihon M&A Center M&A advisory services 12,877 2.6 (9.0) 11,876
Istyle Beauty product review website 12,691 2.6 (18.8) 12,515
MonotaRO Online business supplies 12,500 2.6 46.5 10,919
Drug discovery and development
Peptidream platform 11,630 2.4 11.7 10,121
Megachips Electronic components 11,626 2.4 (25.8) 10,799
GMO Payment Gateway Online payment processing 11,471 2.4 27.7 10,101
Manufactures machine tool
OSG equipment 11,155 2.3 (11.3) 3,559
Manufacturer of measuring
Horiba instruments 11,098 2.3 (16.0) 8,603
Raksul Internet based services 10,683 2.2 107.2 -
Internet platform for restaurant
Infomart supplies 10,548 2.2 63.3 6,553
Discount travel agency and theme
H.I.S. parks 10,391 2.1 13.7 7,100
Katitas Real estate services 10,154 2.1 7.3 7,311
Sho-Bond Infrastructure reconstruction 9,432 1.9 (3.1) 7,736
Healios K.K. Regenerative medicine 9,323 1.9 (13.7) 7,955
Toshiba Plant Systems and
Services Plant engingeering company 9,068 1.9 4.8 5,226
Holding company with interests in
biotech
Noritsu Koki and agricultural products 8,631 1.8 (30.8) 9,475
Yume No Machi Online meal delivery service 8,562 1.8 (14.0) 9,917
========================== =================================== ========= ============== ============= =========
Top 20 226,495 46.7
========================== =================================== ========= ============== ============= =========
Kitz Corp Industrial valve manufacturer 8,535 1.8 (4.3) -
Nippon Ceramic Electric component manufacturer 8,497 1.7 (9.6) 7,870
Nifco Value-added plastic car parts 8,267 1.7 (23.7) 10,010
Brainpad Business data analysis 8,062 1.7 185.5 1,958
Cosmos Pharmaceuticals Drugstore chain 7,810 1.6 17.2 2,196
Technopro Holdings IT staffing 7,784 1.6 5.3 6,700
Hamakyorex Third party logistics 7,519 1.6 13.2 4,760
Shoei Manufactures motor cycle helmets 7,368 1.5 (17.0) 7,924
Harmonic Drive Robotic components 6,883 1.4 (45.1) 9,105
Manufacturer of scientific
Jeol equipment 6,779 1.4 64.5 4,306
Online platform for buying car
Broadleaf parts 6,684 1.4 10.2 6,830
Sato Holdings Barcode and RFID technology 6,495 1.3 (19.2) 6,601
Crowdworks Crowdsourcing services 6,446 1.3 82.1 2,636
Cocokara Fine Drugstore chain 6,396 1.3 (15.4) 5,543
Locondo E-commerce services provider 6,384 1.3 31.9 3,216
eGuarantee Guarantees trade receivables 6,305 1.3 19.1 3,864
Pigeon Baby care products 6,145 1.3 9.4 6,661
M3 Online medical services 6,040 1.3 (14.7) 7,989
ZOZO Internet fashion retailer 5,996 1.2 (25.1) 10,165
Nakanishi Dental equipment 5,802 1.2 3.9 4,584
IRISO Electronics Specialist auto connectors 5,772 1.2 (29.7) 8,473
WDB Holdings Human resource services 5,758 1.2 (28.2) 6,774
Optex Infrared detection devices 5,626 1.2 (39.8) 11,402
Seria Discount retailer 5,471 1.1 (43.6) 7,500
KH Neochem Chemical manufacturer 5,319 1.1 (15.9) -
Manufactures compressors and
painting
Anest Iwata machines 5,232 1.1 (11.7) -
Torex Semiconductor Semiconductor company 4,900 1.0 (18.4) 1,337
Sanbio Stem cell based stroke treatment 4,868 1.0 (33.7) 9,506
Daikyonishikawa Automobile part manufacturer 4,861 1.0 (30.1) 5,646
Game testing and internet
Poletowin Pitcrew monitoring 4,610 0.9 (17.0) 3,890
Nabtesco Robotic components 4,121 0.8 (38.2) 6,828
List of Investments at 31 January 2019 (Ctd)
=============================================================
2019 2019 Absolute(#) 2018
Value % of Performance Value
Name Business GBP'000 total assets % GBP'000
======================== ======================================= ========= ============== ============= =========
Digital Garage Internet business investor 4,073 0.8 (21.0) 9,864
JP Holdings Operates child-care facilities 4,038 0.8 (3.6) 1,744
Calbee Branded snack foods 4,022 0.8 (0.2) 5,074
Aeon Delight Shopping mall maintenance 3,960 0.8 11.3 3,117
Moneytree K.K. Class B
Preferred u Al based fintech platform 3,253 0.7 133.9 1,391
SIIX Outsources overseas production 3,227 0.7 (32.1) 4,589
Yonex Sporting goods 3,127 0.7 3.8 1,840
Japanese internet advertising and
CyberAgent content 3,049 0.6 (19.4) 10,048
Akatsuki Mobile games developer 3,008 0.6 14.4 -
Nikkiso Industrial pumps and medical equipment 2,976 0.6 (14.1) 4,089
Asics Sports shoes and clothing 2,758 0.6 (3.9) 2,910
Gumi Mobile games developer 2,733 0.6 (37.3) 2,428
Findex Healthcare software developer 2,608 0.5 (20.5) 3,081
Nanocarrier Biotech company 2,040 0.4 (65.4) 5,480
Dream Incubator Early stage business support 1,818 0.4 (36.2) 1,819
Hoshizaki Electric Commercial kitchen equipoment 1,629 0.3 (19.1) 5,978
Tenpos Holdings Refurbished kitchen equipment retailer 1,628 0.3 (15.4) 1,677
Freakout Holdings Digital marketing technology 1,614 0.3 (24.2) 1,639
Weathernews Weather information services 1,538 0.3 (4.8) 1,660
Takemoto Yohki Plastic containers for cosmetics 1,246 0.3 2.8 -
Morpho Image processing technologies 1,186 0.2 (53.1) 2,528
Uzabase Financial data services 811 0.2 (13.2) -
Online platform for small local
DesignOne Japan businesses 166 <0.1 (72.2) 2,947
Mugen Estate Real estate services 136 <0.1 (43.4) 5,516
======================== ======================================= ========= ============== ============= =========
Total Investments 479,874 98.7
Net liquid assets* 6,227 1.3
========= ==============
Total assets 486,101 100.0
Bank loans (51,946) (10.7)
========= ==============
Shareholders' funds 434,155 89.3
========= ==============
# Absolute performance (in sterling terms) has been calculated on a total return basis* over the period 1 February 2018 to 31 January 2019.
u Unlisted holding.
* See Glossary of Terms and Alternative Performance Measures at the end of this announcement.
Source: Baillie Gifford/Statpro and underlying data providers. See disclaimer at end of this document.
Notes to the condensed financial statements
===========================================
1. The Financial Statements for the year to 31 January 2019 have been prepared in accordance
with FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'
on the basis of the accounting policies set out in the Annual Report and Financial Statements
which are unchanged from the prior year and have been applied consistently.
2. Currency (losses)/gains 31 January 2019 31 January 2018
GBP'000 GBP'000
============================================================= ================== =================
Exchange differences on bank loans (4,037) 4,076
Other exchange differences 162 (485)
(3,875) 3,591
================================================================== ================== =================
3. Investment management fee - all charged to revenue 31 January 2019 31 January 2018
GBP'000 GBP'000
Investment management fee 2,871 2,131
On 1 January 2019 the annual management fee was reduced to 0.75% on the first GBP50m of net
assets, 0.65% on the next GBP200m of net assets and 0.55% on the remainder. Prior to 1 January
2019 the annual management fee was 0.95% on the first GBP50m of net assets, 0.65% on the next
GBP200m of net assets and 0.55% on the remainder.
4. The Company paid interest on bank loans of GBP992,000 (2018 - GBP717,000) and GBP13,000 (2018
- GBP15,000) in respect of Yen deposits held by the Custodian Bank.
5. No dividend will be declared.
6. Net return per ordinary share 31 January 2019 31 January 2018
GBP'000 GBP'000
============================================================== ================== ===================
Revenue return 106 (227)
Capital return (36,100) 111,978
============================================================== ================== ===================
Total return (35,994) 111,751
============================================================== ================== ===================
The returns per ordinary share set out below are based on the above returns and on 258,154,060
ordinary shares (2018 - 214,092,280), being the weighted average number of ordinary shares
in issue during the year. There are no dilutive or potentially dilutive shares in issue.
=======================================================================================================
Revenue return 0.04p (0.11p)
Capital return (13.98p) 52.31p
============================================================== ================== ===================
Total return (13.94p) 52.20p
============================================================== ================== ===================
Notes to the condensed financial statements (ctd)
=================================================
7. The Company has arranged secured fixed rate borrowings, drawn down as follows:
At 31 January 2019
ING Bank N.V. - 7 year Yen3,350 million loan at 2.217% maturing 27 November 2020.
ING Bank N.V. - 3 year 8 month Yen2,000 million loan at 1.301% maturing 27 November 2020.
ING Bank N.V. - 7 year Yen2,100 million loan at 1.693% maturing 18 December 2024.
At 31 January 2018
ING Bank N.V. - 7 year Yen3,350 million loan at 2.217% maturing 27 November 2020.
ING Bank N.V. - 3 year 8 month Yen2,000 million loan at 1.301% maturing 27 November 2020.
ING Bank N.V. - 7 year Yen2,100 million loan at 1.693% maturing 18 December 2024.
The bank loans are stated after deducting the arrangement fees of GBP201,000 which are amortised
over the terms of the loans. Amortisation of the arrangement fees during the year was GBP32,000
(2018 - GBP25,000). The fair value of the bank loans at 31 January 2019 was GBP52,810,000
(31 January 2018 - GBP48,646,000). See Glossary of Terms and Alternative Performance Measures
at the end of this announcement.
8. At 31 January 2019 the Company had authority to buy back 36,471,042 shares. No shares were
bought back during the year (2018 - nil). Share buy-backs are funded from the capital reserve.
During the year the Company issued 36,025,000 shares on a non pre-emptive basis at a premium
to net asset value for net proceeds of GBP68,737,000 (2018 - 7,090,000 shares for net proceeds
of GBP55,789,000).
9. The Annual Report and Financial Statements will be available on the Company's website www.shinnippon.co.uk
on or around 10 April 2019.
10. The financial information set out above does not constitute the Company's statutory accounts
for the years ended 31 January 2019 or 2018. The financial information for 2018 is derived
from the statutory accounts for 2018 which have been delivered to the Registrar of Companies.
The auditor has reported on the 2018 accounts; their report was (i) unqualified, (ii) did
not include a reference to any matters to which the auditor drew attention by way of emphasis
without qualifying their report and (iii) did not contain a statement under section 498 (2)
or (3) of the Companies Act 2006. The statutory accounts for 2019 will be finalised on the
basis of the financial information presented by the Directors in this preliminary announcement
and will be delivered to the Registrar of Companies following the Company's Annual General
Meeting which will be held on 17 May 2019.
None of the views expressed in this document should be construed as advice to buy or sell
a particular investment.
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.
Glossary of Terms and Alternative Performance Measures (APM)
An alternative performance measure is a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework.
Total Assets
Total assets less current liabilities, before deduction of all borrowings.
Net Asset Value
Also described as shareholders' funds, Net Asset Value (NAV) is the value of total assets less liabilities (including borrowings). The NAV per share is calculated by dividing this amount by the number of ordinary shares in issue.
Net Asset Value (Borrowings at Book Value)
Borrowings are valued at adjusted net issue proceeds. The Company's yen denominated loans are valued at their sterling equivalent and adjusted for their arrangement fees. The value of the borrowings on this basis is set out above.
Net Asset Value (Borrowings at Fair Value) (APM)
Borrowings are valued at an estimate of their market worth. The Company's yen denominated loans are fair valued with reference to Japanese government bonds of comparable yield and maturity. The value of the borrowings on this basis is set out above. A reconciliation from Net Asset Value (with borrowings at book value) to Net Asset Value per ordinary share (with
borrowings at fair value) is provided below.
31 January 31 January
2019 2018
--------------------------------- ---------------- ----------------
Net Asset Value per ordinary
share (borrowings at book
value) 158.8p 169.1p
Shareholders' funds (borrowings GBP434,155,000 GBP401,412,000
at book value)
Add: book value of borrowings GBP51,946,000 GBP47,877,000
Less: fair value of borrowings (GBP52,810,000) (GBP48,646,000)
Shareholders' funds (borrowings GBP433,291,000 GBP400,643,000
at fair value)
Shares in issue at year end 273,452,485 237,427,485
Net Asset Value per ordinary
share (borrowings at fair
value) 158.5p 168.7p
Net Asset Value (Borrowings at Par Value) (APM)
Borrowings are valued at their nominal par value. The Company's yen denominated loans are valued at their sterling equivalent. The value of the borrowings on this basis is set out above.
31 January 31 January
2019 2018
---------------------------------- ---------------- ----------------
Net Asset Value per ordinary
share (borrowings at book
value) 158.8p 169.1p
Shareholders' funds (borrowings GBP434,155,000 GBP401,412,000
at book value)
Add: book value of borrowings GBP51,946,000 GBP47,877,000
Less: par value of borrowings (GBP52,040,000) (GBP47,995,000)
Shareholders funds' (borrowings GBP434,061,000 GBP401,294,000
at par value)
Shares in issue at year end 273,452,485 237,427,485
Net Asset Value per ordinary
share (borrowings at par value) 158.7p 169.0p
Discount/Premium (APM)
As stockmarkets and share prices vary, an investment trust's share price is rarely the same as its NAV. When the share price is lower than the NAV per share it is said to be trading at a discount. The size of the discount is calculated by subtracting the share price from the NAV per share and is usually expressed as a percentage of the NAV per share. If the share price is higher than the NAV per share, this situation is called a premium.
Ongoing Charges (APM)
The total expenses (excluding borrowing costs) incurred by the Company as a percentage of the average net asset value (with debt at fair value). The ongoing charges have been calculated on the basis prescribed by the Association of Investment
Companies.
Performance Attribution (APM)
Portfolio Performance Attribution illustrates how the portfolio has performed in absolute terms and relative to the comparative index. Performance is calculated on this basis for the portfolio holdings according to their relevant industrial sector classifications. Contributions to relative performance against the index are attributed to either stock selection (relative performance derived from the selection of stocks within an industrial sector) or asset allocation (relative performance derived from overall allocation to each industrial sector).
Total Return (APM)
The total return is the return to shareholders after reinvesting the net dividend on the date that the share price goes ex-dividend. The Company does not pay a dividend.
Gearing (APM)
At its simplest, gearing is borrowing. Just like any other public company, an investment trust can borrow money to invest in additional investments for its portfolio. The effect of the borrowing on the shareholders' assets is called 'gearing'. If the Company's assets grow, the shareholders' assets grow proportionately more because the debt remains the same. But if the value of the Company's assets falls, the situation is reversed. Gearing can therefore enhance performance in rising markets but can adversely impact performance in falling markets.
Gearing represents borrowings at book less cash and cash equivalents expressed as a percentage of shareholders' funds.
Potential gearing is the Company's borrowings expressed as a percentage of shareholders' funds.
Equity gearing is the Company's borrowings adjusted for cash, bonds and property expressed as a percentage of shareholders' funds.
Net Liquid Assets
Net liquid assets comprise current assets less current liabilities, excluding borrowings.
Share Split
A share split (or stock split) is the process by which a company divides its existing shares into multiple shares. Although the number of shares outstanding increases, the total value of the shares remains the same with respect to the pre-split value.
Third party data provider disclaimers
No third party data provider ('Provider') makes any warranty, express or implied, as to the accuracy, completeness or timeliness of the data contained herewith nor as to the results to be obtained by recipients of the data. No Provider shall in any way be liable to any recipient of the data for any inaccuracies, errors or omissions in the index data included in this document, regardless of cause, or for any damages (whether direct or indirect) resulting therefrom.
No Provider has any obligation to update, modify or amend the data or to otherwise notify a recipient thereof in the event that any matter stated herein changes or subsequently becomes inaccurate.
Without limiting the foregoing, no Provider shall have any liability whatsoever to you, whether in contract (including under an indemnity), in tort (including negligence), under a warranty, under statute or otherwise, in respect of any loss or damage suffered by you as a result of or in connection with any opinions, recommendations, forecasts, judgments, or any other conclusions, or any course of action determined, by you or any third party, whether or not based on the content, information or materials contained herein.
MSCI Index data
MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indexes or any securities or financial products. This document is not approved, endorsed, reviewed or produced by MSCI. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.
Regulated Information Classification: Additional regulated information required to be disclosed under the laws of a Member State
- ends -
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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March 15, 2019 03:00 ET (07:00 GMT)
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