Last checked at 24 Sep 2020 07:00
RNS Announcement |
Baillie Gifford Shin Nippon PLC |
Legal Entity Identifier: X5XCIPCJQCSUF8H1FU83 Regulated Information Classification: Half Yearly Financial Report
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Results for the six months to 31 July 2020 |
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The Company's net asset value per share† rose by 5.4% compared to an 8.8% fall in the MSCI Japan Small Cap Index*. The share price increased by 7.7%.
¾ Online legal portal Bengo4.com was the top contributor to performance, with its cloud-based digital contracts business, Cloudsign, seeing rapid growth.
¾ Other strong performers included Japan's leading online drug marketing platform, M3, and Japan's leading online food delivery company, Demae-Can.
¾ Physical retail, travel and manufacturing related stocks were among the weakest performers due to the varying levels of disruption caused by Covid-19.
¾ Among the new purchases during the period was GA Technologies, a provider of cloud-based software products for the real estate industry.
¾ Although disruptive, the current climate has created numerous growth opportunities for small businesses in Japan seeking to revolutionise outdated business practices and solve structural issues currently facing traditional Japanese companies.
† After deducting borrowings at fair value.
* The Company's comparative index is the MSCI Japan Small Cap Index (total return and in sterling terms). See disclaimer at the end of this announcement.
Source: Refinitiv/Baillie Gifford and relevant underlying index providers. See disclaimer at end of this announcement.
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 July 2020 the Company had total assets of £563.5 million (before deduction of bank loans of £53.6 million).
The Company is managed by Baillie Gifford, an Edinburgh based fund management group with approximately £282 billion under management and advice as at 23 September 2020.
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 long term. You can find up to date performance information about Shin Nippon at www.shinnippon.co.uk.
23 September 2020
For further information please contact:
Alex Blake, Baillie Gifford & Co
Tel: 0131 275 2859
Mark Knight, Four Communications
Tel: 0203 697 4200 or 07803 758810
The following is the unaudited Interim Financial Report for the six months to 31 July 2020.
Responsibility Statement |
We confirm that to the best of our knowledge:
a) the condensed set of Financial Statements has been prepared in accordance with FRS 104 'Interim Financial Reporting';
b) the Interim Management Report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.7R (indication of important events during the first six months, their impact on the Financial Statements and a description of the principal risks and uncertainties for the remaining six months of the year); and
c) the Interim Financial Report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein).
On behalf of the Board
MN Donaldson
Chairman
23 September 2020
Interim Management Report |
The Covid-19 pandemic has caused significant disruption to businesses globally. Its impact continues to reverberate across global stock markets and Japan is no exception. Whilst markets have recovered sharply from their lows in March, investor sentiment remains fragile. The outlook for a return to normality is uncertain, given the continuing global spread of the virus.
In these challenging circumstances, for the six months to 31 July 2020, the MSCI Japan Small Cap index fell by 8.8% compared to a 5.4% increase in Shin Nippon's net asset value per share (after deducting borrowings at fair value). Over three and five years, which we believe is a fairer way of judging long-term investment performance, the comparative index has risen by 0.2% and 51.9% respectively, while the Company's net asset value per share has increased by 36.1% and 126.6%.
In an attempt to limit the spread of Covid-19, Japan has had its share of lockdowns and restrictions on a range of activities like travel, offline retail and manufacturing. Unsurprisingly, companies operating in these sectors were among the hardest hit. However, adversity also brings opportunities. The pandemic has laid bare the frailties of traditional Japanese companies that remain ill-equipped to respond to a crisis like this. In a developed economy like Japan, it is staggering to note that a large number of companies do not have the required IT infrastructure to enable their employees to work from home. This is because Japanese companies, in general, have under-invested in IT over the years as they see this as a cost of doing business rather than a potential source of competitive advantage. The current crisis is forcing such companies to embrace new technologies and services in order to resume their operations. This digital transformation of corporate Japan is proving to be a fantastic growth opportunity for numerous young, dynamic and fast-growing smaller companies, especially those operating in the online services and software areas.
Online legal portal Bengo4.com was the top contributor to performance during the first half of the year. Its core business of matching lawyers with people seeking legal advice continues to grow at a steady pace. Its cloud-based digital contracts business, Cloudsign, is seeing rapid growth thanks to companies that are migrating away from paper-based contracts. As remote working takes hold in Japan, it is becoming untenable for businesses to continue using contracts in their traditional form. This includes the use of hanko, the personal stamp used by employees to make documents official. Cloudsign offers the ability to prepare and sign documents digitally. It also allows users to maintain a historic digital trail of documents and simplifies the task of document storage and retrieval. The Japanese government is using the current pandemic as an opportunity to encourage companies to adopt digital contracts and is in the process of legalising their use in a range of sectors. As a first-mover and a leading player, Bengo4.com is well placed to capitalise on this growth opportunity.
Longstanding holding and Japan's leading online drug marketing platform M3 is another beneficiary of the pandemic. Due to worries about contracting the virus through face-to-face meetings, the traditional model of pharmaceutical sales staff visiting doctors to market drugs is no longer feasible. As a result, M3 is seeing a sharp rise in the number of pharma companies subscribing to its online platform to market multiple drugs. Telemedicine is another area that provides considerable growth opportunities for M3. The Japanese government is keen to expand the use of telemedicine to deliver medical advice to vulnerable people, especially in the current situation. Through its healthcare joint venture with LINE, Japan's largest mobile messaging service, M3 will begin offering remote health medical consultation and telemedicine services to users across Japan.
Japan's leading online food delivery company Demae-Can was another strong performer. It has rapidly expanded its geographical footprint and now has nationwide delivery coverage. This stands in stark contrast to its competitors like Uber Eats that operate mostly in the metros. Numerous restaurants and food chains across Japan are struggling as Covid-19 has resulted in a collapse in customer footfall. Demae-Can is proving to be a blessing for such businesses. It is seeing explosive growth in the number of delivery orders, thanks to a sharp rise in the number of people ordering food online and restaurants signing up for its delivery services. Japan's largest trade receivables insurance provider eGuarantee is also benefitting in the prevailing climate. Covid-19 has understandably caused a lot of stress at numerous businesses, with their very survival now being called into question. This is resulting in a flood of enquiries for eGuarantee's insurance services as businesses seek to protect themselves against potential defaults by their customers.
As highlighted earlier, physical retail, travel and manufacturing related stocks were among the weakest performers due to the varying levels of disruption caused by Covid-19. Cosmetics retailer iStyle was among the largest negative contributors to performance. The company has had to weather a series of setbacks. A meaningful part of its revenues come from its small network of physical stores across Japan where it stocks products rated as being the most popular by its online community of around 15 million users. Due to Covid-19, it has had to shut down all of its stores, thereby resulting in a significant hit to revenues. The company also generates a meaningful proportion of its revenues through its Asian e-commerce platform, selling mainly to Chinese customers. A change in regulation imposed by the Chinese authorities meant that iStyle's online operations in the Chinese market were severely hampered.
Japan's leading travel operator H.I.S. was another weak performer, thanks to a collapse in both inbound and outbound travel. Conditions for travel related companies in general remain tough and there is little visibility on when travel might return to normal levels. Online food ordering platform Infomart also performed poorly. With falling customer footfall amidst shutdowns, restaurants across Japan are reining in their spending on food supplies. This has had a knock-on effect on Infomart's business as commissions from restaurants using its online food ordering service have fallen sharply.
Given its sizeable exposure to manufacturing related clients, staffing company Outsourcing is seeing a sharp drop in demand for its services. Many of its key clients are running their factories well below capacity and have also frozen their hiring plans. Whilst Outsourcing's domestic business has borne the brunt of this, its overseas staffing businesses are performing relatively well. A lot of these are focussed on IT recruitment where end-demand remains strong. Specialist plastic car parts manufacturer Daikyonishikawa also performed poorly, largely mirroring the fortunes of its main customer Mazda. Near-term challenges notwithstanding, we continue to believe that Daikyonishikawa remains well positioned to benefit from the structural trend of using more plastic parts in cars in order to reduce weight and improve efficiency. The company is also financially sound as it has a strong balance sheet with a large net cash position.
Over the six months, we purchased five new holdings and sold one. Among the new purchases was GA Technologies, a provider of cloud-based software products for the real estate industry. The real estate industry in Japan remains traditional, with little by way of automation or digitalisation. Through its software products, GA Technologies facilitates a number of services like remote viewing, automated preparation of building plans, online mortgage application and approval, and smartphone-based property management services, to name a few. It aims to provide a seamless and transparent experience for property buyers and sellers. It is run by its young and dynamic founder who owns a large stake in the business. We also participated in the IPO of Modalis Therapeutics, an early-stage biotech that has developed a new and promising gene editing technique that stimulates the human body to self-correct genetic abnormalities.
Gojo was another new addition to the portfolio and is our second unlisted investment. It is a holding company with majority stakes in a number of exciting and fast-growing businesses based in India, Sri Lanka, Cambodia and Myanmar. These subsidiaries are engaged in businesses related to financial inclusion, with a focus on microfinance, lending for affordable housing and SME financing. The growth opportunity for these businesses is sizeable as the vast majority of the population in these markets remains without access to formal channels of banking and finance. We sold our entire holding in Takemoto Yohki, a manufacturer of PET bottles for cosmetics, as the company is struggling in the face of a severe deterioration in its end markets due to Covid-19. Some of its customers have been moving production of PET bottles in-house, having previously outsourced this to the likes of Takemoto Yohki. This reversal seems structural to us and hence, a long-term negative for Takemoto Yohki.
It is easy to be gloomy in the current climate. However, we think these are exciting times for the kinds of high growth and dynamic companies that Shin Nippon invests in. Although the pandemic has caused wide-spread disruption to businesses and societies globally, it is also serving to accelerate much needed and long overdue changes in the way businesses operate. This is true perhaps more so in Japan than anywhere else given its corporate culture that is steeped in outdated business practices. Japanese companies are waking up to the fact that they will have to reform or perish as their existing business models are unlikely to be fit for purpose in the long-run. This is creating numerous growth opportunities for smaller businesses in Japan that are seeking to solve precisely the kind of structural issues facing traditional Japanese companies. We remain excited by the prospect of investing in these 'problem solvers'!
The principal risks and uncertainties facing the Company are set out following note 13 of this report.
Baillie Gifford & Co
Past performance is not a guide to future performance
Income statement (unaudited) |
| For the six months ended 31 July 2020 | For the six months ended 31 July 2019 | ||||
| Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 |
Net gains on investments (note 3) | - | 27,068 | 27,068 | - | 70,278 | 70,278 |
Currency losses | - | (1,008) | (1,008) | - | (3,736) | (3,736) |
Income from investments | 2,655 | - | 2,655 | 2,762 | - | 2,762 |
Investment management fee (note 4) | (1,490) | - | (1,490) | (1,511) | - | (1,511) |
Other administrative expenses | (261) | - | (261) | (286) | - | (286) |
Net return before finance costs and taxation | 904 | 26,060 | 26,964 | 965 | 66,542 | 67,507 |
Finance costs of borrowings | (572) | - | (572) | (530) | - | (530) |
Net return on ordinary activities before taxation | 332 | 26,060 | 26,392 | 435 | 66,542 | 66,977 |
Tax on ordinary activities (note 5) | (266) | - | (266) | (276) | - | (276) |
Net return on ordinary activities after taxation | 66 | 26,060 | 26,126 | 159 | 66,542 | 66,701 |
Net return per ordinary share (note 7) | 0.02p | 9.32p | 9.34p | 0.06p | 24.18p | 24.24p |
The total column of this statement is the profit and loss account of the Company. The supplementary revenue and capital 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) |
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At 31 July 2020 | At 31 January 2020 (audited) |
| £'000 | £'000 |
Fixed asset investments |
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Investments held at fair value through profit or loss (note 8) | 550,426 | 530,633 |
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Current assets |
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Debtors | 869 | 3,141 |
Cash and cash equivalents | 14,057 | 5,736 |
| 14,926 | 8,877 |
Creditors |
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Amounts falling due within one year (note 9) | (40,389) | (41,112) |
Net current liabilities | (25,463) | (32,235) |
Total assets less current liabilities | 524,963 | 498,398 |
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Creditors |
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Amounts falling due after more than one year (note 9) | (15,121) | (14,682) |
Total net assets | 509,842 | 483,716 |
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Capital and reserves |
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Share capital | 5,591 | 5,591 |
Share premium account | 174,208 | 174,208 |
Capital redemption reserve | 21,521 | 21,521 |
Capital reserve | 313,043 | 286,983 |
Revenue reserve | (4,521) | (4,587) |
Shareholders' funds | 509,842 | 483,716 |
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Net asset value per ordinary share (after deducting borrowings at book value) |
182.4p |
173.0p |
Ordinary shares in issue (note 11) | 279,577,485 | 279,577,485 |
Statement of changes in equity (unaudited) |
For the six months ended 31 July 2020
| Sharecapital £'000 | Sharepremium account £'000 | Capital redemption reserve £'000 | Capital reserve* £'000 | Revenue reserve £'000 | Shareholders' funds £'000 |
Shareholders' funds at 1 February 2020 | 5,591 | 174,208 | 21,521 | 286,983 | (4,587) | 483,716 |
Net return on ordinary activities after taxation | - | - | - | 26,060 | 66 | 26,126 |
Shareholders' funds at 31 July 2020 | 5,591 | 174,208 | 21,521 | 313,043 | (4,521) | 509,842 |
For the six months ended 31 July 2019
| Sharecapital £'000 | Sharepremium account £'000 | Capital redemption reserve £'000 | Capital reserve* £'000 | Revenue reserve £'000 | Shareholders' funds £'000 |
Shareholders' funds at 1 February 2019 | 5,469 | 163,191 | 21,521 | 249,351 | (5,377) | 434,155 |
Ordinary shares issued (note 11) | 61 | 5,420 | - | - | - | 5,481 |
Net return on ordinary activities after taxation | - | - | - | 66,542 | 159 | 66,701 |
Shareholders' funds at 31 July 2019 | 5,530 | 168,611 | 21,521 | 315,893 | (5,218) | 506,337 |
* The Capital reserve includes investment holding gains of £155,794,000 (31 July 2019 - gains of £204,029,000).
Condensed Cash Flow Statement (unaudited) |
| Six months to 31 July 2020 | Six months to 31 July 2019 |
| £'000 | £'000 |
Cash flows from operating activities |
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Net return on ordinary activities before taxation | 26,392 | 66,977 |
Net gains on investments | (27,068) | (70,278) |
Currency losses | 1,008 | 3,736 |
Finance costs of borrowings | 572 | 530 |
Overseas withholding tax | (344) | (335) |
Changes in debtors and creditors | 820 | 676 |
Cash from operations | 1,380 | 1,306 |
Interest paid | (553) | (502) |
Net cash inflow from operating activities | 827 | 804 |
Net cash inflow/(outflow) from investing activities | 6,961 | (7,320) |
Ordinary shares issued | - | 5,481 |
Net cash inflow from financing activities | - | 5,481 |
Increase/(decrease) in cash and cash equivalents | 7,788 | (1,035) |
Exchange movements | 533 | 257 |
Cash and cash equivalents at start of period | 5,736 | 5,750 |
Cash and cash equivalents at end of period * | 14,057 | 4,972 |
* Cash and cash equivalents represent cash at bank and short term money market deposits repayable on demand.
Twenty largest equity holdings at 31 July 2020 |
Name |
Business | Value £'000 | % of total assets | Absolute performance * % |
Bengo4.com | Online legal consultation | 27,387 | 4.9 | 106.8 |
Demae-Can | Online meal delivery service | 17,911 | 3.2 | 60.5 |
GMO Payment Gateway | Online payment processing | 17,114 | 3.0 | 59.4 |
Cosmos Pharmaceuticals | Drugstore chain | 16,994 | 3.0 | 65.9 |
MonotaRO | Online business supplies | 16,595 | 2.9 | 73.6 |
Nihon M&A Center | M&A advisory services | 15,990 | 2.8 | 65.8 |
Raksul | Internet based services | 15,701 | 2.8 | (13.4) |
M3 | Online medical services | 15,449 | 2.7 | 71.2 |
eGuarantee | Guarantees trade receivables | 14,369 | 2.5 | 84.7 |
Shoei | Manufactures motor cycle helmets | 12,121 | 2.1 | 14.6 |
Kitanotatsujin | Online retailer | 11,566 | 2.1 | (22.9) |
Infomart | Internet platform for restaurant supplies | 11,029 | 2.0 | (22.9) |
Locondo | E-commerce services provider | 10,318 | 1.8 | 170.8 |
Katitas | Real estate services | 10,159 | 1.8 | 11.7 |
Sho-Bond | Infrastructure reconstruction | 10,012 | 1.8 | 4.2 |
JEOL | Manufacturer of scientific equipment | 9,896 | 1.8 | (16.0) |
Asahi Intecc | Specialist medical equipment | 8,714 | 1.5 | (0.4) |
Cybozu | Develops and markets internet and intranet application software for businesses |
8,708 |
1.5 |
66.8 |
Outsourcing | Employment placement services | 8,612 | 1.5 | (40.4) |
Seria | Discount retailer | 8,514 | 1.5 | 45.4 |
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| 267,159 | 47.2 |
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* Absolute performance is in sterling terms and has been calculated on a total return basis over the period 1 February 2020 to 31 July 2020.
Source: Baillie Gifford/StatPro and relevant underlying data providers.
Notes to the condensed financial statements (unaudited) |
1. | The condensed Financial Statements for the six months to 31 July 2020 comprise the statements set out on the previous pages together with the related notes below. They have been prepared in accordance with FRS 104 'Interim Financial Reporting' and the principles of the AIC's Statement of Recommended Practice issued in November 2014 and updated in October 2019 with consequential amendments and have not been audited or reviewed by the Auditor pursuant to the Auditing Practices Board Guidance on 'Review of Interim Financial Information'. The Financial Statements for the six months to 31 July 2020 have been prepared on the basis of the same accounting policies as set out in the Company's Annual Report and Financial Statements at 31 January 2020. Going Concern The Directors have considered the nature of the Company's principal risks and uncertainties below, together with its current position, investment objective and policy, its assets and liabilities and projected income and expenditure. The Board has, in particular, considered the impact of heightened market volatility since the Covid-19 outbreak but does not believe the Company's going concern status is affected. Although net current liabilities are reported on the Balance Sheet, the Company's assets, which are primarily investments in quoted securities which are readily realisable (Level 1), exceed its liabilities significantly and could be sold to repay borrowings if required. All borrowings require the prior approval of the Board. Gearing levels and compliance with loan covenants are reviewed by the Board on a regular basis. The Company has continued to comply with the investment trust status requirements of section 1158 of the Corporation Tax Act 2010 and the Investment Trust (Approved Company) Regulations 2011. Accordingly, the Directors considered it appropriate to adopt the going concern basis of accounting in preparing these Financial Statements and confirm that they are not aware of any material uncertainties which may affect the Company's ability to continue in operational existence for a period of at least twelve months from the date of approval of these Financial Statements | |||
2. | The financial information contained within this Interim Financial Report does not constitute statutory accounts as defined in sections 434 to 436 of the Companies Act 2006. The financial information for the year ended 31 January 2020 has been extracted from the statutory accounts which have been filed with the Registrar of Companies. The Auditor's Report on these accounts was not qualified, did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report, and did not contain a statement under sections 498 (2) or (3) of the Companies Act 2006. | |||
3. |
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| Six months to 31 July 2020 | Six months to 31 July 2019 |
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| £'000 | £'000 |
| Net gains on investments |
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| Gains on sales of investments |
| 22,148 | 16,296 |
| Movement in investment holdings gains |
| 4,920 | 53,982 |
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| 27,068 | 70,278 |
4. | Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford & Co, has been appointed by the Company as its Alternative Investment Fund Manager (AIFM) and Company Secretary. The investment management function has been delegated to Baillie Gifford & Co. The management agreement can be terminated on six months' notice. The annual management fee is 0.75% on the first £50m of net assets, 0.65% on the next £200m of net assets and 0.55% on the remainder, calculated and payable quarterly. | |||
5. | The Company suffers overseas withholding tax on its equity income, currently at the rate of 10%. | |||
6. | No interim dividend will be declared. | |||
Notes to the condensed financial statements (unaudited) (ctd) |
7. |
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| Six months to 31 July 2020 | Six months to 31 July 2019 | ||||
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| £'000 | £'000 | ||||
| Net return per ordinary share |
|
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| ||||
| Revenue return |
| 66 | 159 | ||||
| Capital return |
| 26,060 | 66,542 | ||||
| Total return |
| 26,126 | 66,701 | ||||
| Net return per ordinary share is based on the above totals of revenue and capital and on 279,577,485 (31 July 2019 - 275,146,822) ordinary shares, being the weighted average number of ordinary shares in issue during the period. There are no dilutive or potentially dilutive shares in issue. | |||||||
8. | Fair Value The fair value hierarchy used to analyse the basis on which the fair values of financial instruments held at fair value through the profit or loss account are measured is described below. Fair value measurements are categorised on the basis of the lowest level input that is significant to the fair value measurement. Level 1 - using unadjusted quoted prices for identical instruments in an active market; Level 2 - using inputs, other than quoted prices included within Level 1, that are directly or indirectly observable (based on market data); and Level 3 - using inputs that are unobservable (for which market data is unavailable). The Company's investments are financial assets held at fair value through profit or loss. An analysis of the Company's financial asset investments based on the fair value hierarchy described above is shown below: | |||||||
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| As at 31 July 2020 | Level 1 £'000 | Level 2 £'000 | Level 3 £'000 | Total £'000 | |||
| Listed equities | 539,496 | - | - | 539,496 | |||
| Unlisted securities | - | - | 10,930 | 10,930 | |||
| Total financial asset investments | 539,496 | - | 10,930 | 550,426 | |||
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| As at 31 January 2020 | Level 1 £'000 | Level 2 £'000 | Level 3 £'000 | Total £'000 | |||
| Listed equities | 527,373 | - | - | 527,373 | |||
| Unlisted securities | - | - | 3,260 | 3,260 | |||
| Total financial asset investments | 527,373 | - | 3,260 | 530,633 | |||
Notes to the condensed financial statements (unaudited) (ctd) |
8. (ctd) | There have been no transfers between levels of the fair value hierarchy during the period. The fair value of listed investments is last traded price which is equivalent to the bid price on Japanese markets. Listed investments are categorised as Level 1 if they are valued using unadjusted quoted prices for identical instruments in an active market and as Level 2 if they do not meet all these criteria but are, nonetheless, valued using market data. Unlisted investments are valued at fair value by the Directors following a detailed review and appropriate challenge of the valuations proposed by the Managers. The Managers' unlisted investment valuation policy applies methodologies consistent with the International Private Equity and Venture Capital Valuation guidelines ('IPEV'). These methodologies can be categorised as follows: (a) market approach (multiples, industry valuation benchmarks and available market prices); (b) income approach (discounted cash flows); and (c) replacement cost approach (net assets). The Company's holdings in unlisted investments are categorised as Level 3 as unobservable data is a significant input to their fair value measurements. |
9. | The amounts falling due within one year include bank loans of £38,522,000 (¥5.35 billion) outstanding under yen loan facilities repayable on 27 November 2020 (31 January 2020 - £34,403,000 (¥5.35 billion)).The amounts falling due after more than one year include bank loans of £15,121,000 (¥2.10 billion) outstanding under a yen loan facility repayable on 18 December 2024 (31 January 2020 - £14,682,000 (¥2.10 billion)). |
10. | The fair value of the bank loans at 31 July 2020 was £54,008,000 (31 January 2020 - £52,626,000). |
11. | The Company has the authority to issue shares/sell treasury shares at a premium to net asset value as well as to buy back shares at a discount to net asset value. During the period under review, no shares were issued (31 July 2019 - 3,050,000 shares raising net proceeds of £5,481,000). No shares were bought back during the period under review (31 July 2019 - nil). |
12. | Transaction costs incurred on the purchase and sale of the investments are added to the purchase cost or deducted from the sale proceeds, as appropriate. During the period, transaction costs on purchases amounted to £26,000 (31 July 2019 - £26,000) and transaction costs on sales amounted to £34,000 (31 July 2019 - £23,000). |
13. | Related party transactions There have been no transactions with related parties during the first six months of the current financial year that have materially affected the financial position or the performance of the Company during that period and there have been no changes in the related party transactions described in the last Annual Report and Financial Statements that could have had such an effect on the Company during that period. |
None of the views expressed in this document should be construed as advice to buy or sell a particular investment. | |
Principal Risks and Uncertainties The principal risks facing the Company are financial risk, investment strategy risk, discount risk, regulatory risk, custody and depositary risk, small company risk, operational risk, leverage risk and political risk. An explanation of these risks and how they are managed is set out on page 8 of the Company's Annual Report and Financial Statements for the year to 31 January 2020 which is available on the Company's website: www.shinnippon.co.uk. The principal risks and uncertainties have not changed since the date of that report with the exception of the ongoing situation regarding Covid-19. The Board and Managers continue to review the portfolio for the potential impact of the pandemic. The business continuity arrangements of the Managers and other third party service providers have proven robust with operations continuing largely as normal. | |
The Interim Financial Report will be available on www.shinnippon.co.uk‡ and will be posted to shareholders on or around 5 October 2020.
‡ Neither the contents of the Managers' website nor the contents of any website accessible from hyperlinks on the Managers' website (or any other website) is incorporated into, or forms part of, this announcement.
Glossary of Terms and Alternative Performance Measures (APM)
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 in note 9 above.
Net Asset Value (Borrowings at Fair Value) (APM)
This is a widely reported measure across the investment trust industry. Borrowings are valued at an estimate of their market worth. The Company's yen denominated loans are fair valued with reference to a Japanese government bonds of comparable yield and maturity. The value of the borrowings on this basis is set out in note 10 above.
| 31 July 2020 | 31 January 2020 |
Net Asset Value per ordinary share (borrowings at book value) | 182.4p | 173.0p |
Shareholders' funds (borrowings at book value) | £509,842,000 | £483,716,000 |
Add: book value of borrowings | £53,643,000 | £52,085,000 |
Less: fair value of borrowings | (£54,008,000) | (£52,626,000) |
Shareholders' funds (borrowings at fair value) | £509,477,000 | £483,175,000 |
Shares in issue at period end | 279,577,485 | 279,577,485 |
Net Asset Value per ordinary share (borrowings at fair value) | 182.2p | 172.8p |
Net Liquid Assets
Net liquid assets comprise current assets less current liabilities, excluding borrowings.
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.
| 31 July 2020 NAV (book) | 31 July 2020 NAV (fair) | 31 January 2020 NAV (book) | 31 January 2020 NAV (fair) |
Closing NAV per share | 182.4p | 182.2p | 173.0p | 172.8p |
Closing Share Price | 183.6p | 183.6p | 170.4p | 170.4p |
Premium/(discount) | 0.7% | 0.8% | (1.5%) | (1.4%) |
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.
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.
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 its cash borrowings at par 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.
Leverage (APM)
For the purposes of the Alternative Investment Fund Managers (AIFM) Directive, leverage is any method which increases the Company's exposure, including the borrowing of cash and the use of derivatives. It is expressed as a ratio between the Company's exposure and its net asset value and can be calculated on a gross and a commitment method. Under the gross method, exposure represents the sum of the Company's positions after the deduction of sterling cash balances, without taking into account any hedging and netting arrangements. Under the commitment method, exposure is calculated without the deduction of sterling cash balances and after certain hedging and netting positions are offset against each other.
Active Share (APM)
Active share, a measure of how actively a portfolio is managed, is the percentage of the portfolio that differs from its comparative index. It is calculated by deducting from 100 the percentage of the portfolio that overlaps with the comparative index. An active share of 100 indicates no overlap with the index and an active share of zero indicates a portfolio that tracks the index.
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