Japan: Groundhog day?
COMMONLY HELD VIEWS
“I’ve only ever lost clients money in Japan.”
“I don’t need to have anything in Japan. I’d rather own Asia.”
“Why should I buy the Japanese market when Japanese investors don’t?”
FINDING AN OPPORTUNITY
110
1900
105
1700
100
1500
95
90
1300
85
1100
80
Leading Indicators (LHS)
70
1993
900
TOPIX (RHS)
75
700
1994
1995
1996
Source: KBC Securities Japan
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
FINDING AN OPPORTUNITY
1000
1800
800
1600
600
400
1400
200
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No
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Ap
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-0
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-200
1200
Au
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Ja
n02
0
1000
-400
-600
800
-800
-1000
Copyright 2007 Bloomberg LP
600
INVESTING IN THE LONGER TERM
Standard
Deviation from PSR Current
10-Year Mean
10-Year
Mean
Standard
Deviation from
10-Year Mean
0.5x
0.9x
(1.7)
(2.2)
0.5x
0.9x
(1.9)
2.6x
(2.9)
0.9x
1.4x
(1.8)
1.2x
2.4x
(2.0)
1.3x
2.2x
(2.1)
Nippon Electric
1.6x
2.1x
(1.1)
2.4x
2.4x
0.0
Shionogi
0.9x
2.0x
(1.2)
1.0x
1.4x
(0.5)
PBR
current
10-Year
Mean
Toyota Motor
0.9x
1.8x
(2.0)
Denso
0.8x
1.5x
Canon
1.1x
Shin-Etsu Chemical
Source:Macquarie as at 23 February 2009
SO WHY BOTHER WITH JAPAN?
 Global-leading, well-managed companies
 Strength of the “Japanese business model” drives home competitive advantage
 Key beneficiaries of long-term Asian growth
 Country of domicile is an advantage – “Japan discount” weighs heavy on
valuations
 Listed corporate earnings are very different from Japanese GDP
CASE STUDY
Toyota
150.00
QUALITY - Balance sheet strength driving market
share gains
140.00
VALUE - Trading at significant discounts to long-term
valuations
130.00
120.00
110.00
100.00
GROWTH - Continued investment has created the platform
for sustainable future growth
90.00
CHANGE - Inventory adjustment nearing completion. Cost
reduction is important theme
80.00
09
nJa 08
vNo 08
pSe 8
l-0
Ju 08
ay
M 08
ar
M 8
0
nJa 07
vNo 07
pSe 7
l-0
Ju 07
ay
M 07
ar
M 7
0
nJa 06
vNo 06
pSe 6
l-0
Ju 06
ay
M 06
ar
M 6
0
nJa 05
vNo 05
pSe 5
l-0
Ju 05
ay
M 05
ar
M 5
0
nJa 04
vNo 04
pSe 4
l-0
Ju 04
ay
M 04
ar
M 4
0
n-
Ja
Past performance is not a guide to future returns. Source: Thomson Datastream. As at 19 February 2009.
This information does not constitute investment advice, nor is it an offer or invitation to subscribe for shares in the stock.
CASE STUDY
Denso
170.00
160.00
QUALITY - Balance sheet strength offers defensive
appeal in the face of net losses
VALUE - Trading at a large discount to book value
150.00
140.00
130.00
120.00
110.00
GROWTH - Rising value of sales per vehicle and
business won from overseas car-makers
100.00
90.00
CHANGE - Aggressive cost reduction measures
80.00
n-
09
nJa 08
vNo 08
pSe 8
l-0
Ju 08
ay
M 08
ar
M 8
0
nJa 07
vNo 07
pSe 7
l-0
Ju 07
ay
M 07
ar
M 07
nJa 06
vNo 06
pSe 6
l-0
Ju 06
ay
M 06
ar
M 06
nJa 05
vNo 05
pSe 5
l-0
Ju 05
ay
M 05
ar
M 05
nJa 04
vNo 04
pSe 4
l-0
Ju 04
ay
M 04
ar
M 4
0
Ja
Past performance is not a guide to future returns. Source: Thomson Datastream. As at 19 February 2009.
This information does not constitute investment advice, nor is it an offer or invitation to subscribe for shares in the stock.
CASE STUDY
Canon
140
QUALITY - Leading market shares in copiers, laser
beam printers (LBP), digital still cameras. Large net
cash position
130
VALUE - Cyclical downturn has pushed down
valuations
120
110
100
GROWTH - Growing sales of LBPs in emerging markets
90
CHANGE - Analyst revision stabilising would be the first
sign of recovery. Weak yen benefits. Scope to cut costs
80
09
nJa 08
vNo 08
pSe
8
l-0
Ju 08
ay
M 08
ar
M 8
0
nJa 07
vNo 07
pSe
7
l-0
Ju 07
ay
M 07
ar
M 7
0
nJa 6
0
vNo 06
pSe 6
l-0
Ju 6
-0
ay
M
6
-0
ar
M 6
0
nJa 05
vNo 05
pSe
5
l-0
Ju 05
ay
M 05
ar
M 5
0
nJa 04
vNo 04
pSe
4
l-0
Ju 04
ay
M 04
ar
M 4
0
n-
Ja
Past performance is not a guide to future returns. Source: Thomson Datastream. As at 19 February 2009.
This information does not constitute investment advice, nor is it an offer or invitation to subscribe for shares in the stock.
CASE STUDY
Shin-Etsu Chemical
140
QUALITY - Global leader in silicon wafers and PVC. Excellent
long-term record in value creation, consistent growth
130
VALUE - Cheap against long-term history. PER 11x
120
110
100
90
80
GROWTH - Strong record in new product innovation
CHANGE - Aggressive attitude in cutting depreciation
70
60
n-
09
nJa 8
0
vNo 8
0
pSe
8
l-0
Ju 8
-0
ay
M
8
-0
ar
M 8
0
nJa 7
0
vNo 7
0
pSe
7
l-0
Ju 7
-0
ay
M
7
-0
ar
M 7
0
nJa 6
0
vNo 6
0
pSe
6
l-0
Ju 6
-0
ay
M
6
-0
ar
M 6
0
nJa 5
0
vNo 5
0
pSe
5
l-0
Ju 5
-0
ay
M
5
-0
ar
M 5
0
nJa 4
0
vNo 4
0
pSe
4
l-0
Ju 4
-0
ay
M
4
-0
ar
M 4
0
Ja
Past performance is not a guide to future returns. Source: Thomson Datastream. As at 19 February 2009.
This information does not constitute investment advice, nor is it an offer or invitation to subscribe for shares in the stock.
CASE STUDY
Nippon Electric Glass
240
QUALITY - Historic margins and cash generation high
220
VALUE - Hit hard by production adjustment at customers. Valuations
sent to large discount to book, despite balance sheet strength
200
180
160
140
GROWTH - Expect volume growth to continue.
Pricing power still good
120
100
CHANGE - Share price will respond aggressively to
improving levels of capacity utilisation
80
09
nJa 8
0
vNo 8
0
pSe
8
l-0
Ju 8
-0
ay
M
8
-0
ar
M 8
0
nJa 7
0
vNo 7
0
pSe
7
l-0
Ju 7
-0
ay
M
7
-0
ar
M 7
0
nJa 6
0
vNo 6
0
pSe
6
l-0
Ju 6
-0
ay
M
6
-0
ar
M 6
0
nJa 5
0
vNo 5
0
pSe
5
l-0
Ju 5
-0
ay
M
5
-0
ar
M 5
0
nJa 4
0
vNo 4
0
pSe
4
l-0
Ju 4
-0
ay
M
4
-0
ar
M 4
0
n-
Ja
Past performance is not a guide to future returns. Source: Thomson Datastream. As at 19 February 2009.
This information does not constitute investment advice, nor is it an offer or invitation to subscribe for shares in the stock.
CASE STUDY
Shionogi
160
140
QUALITY - The “right size” – big enough to spend on R&D,
small enough to enjoy the benefits
VALUE - Attractive PER valuation (13x 3/10). Scope to expand
shareholder returns given strong cash-flows
120
GROWTH - Anti-cholesterol treatment Crestor is the main
top-line driver
100
CHANGE - Stock sold-off on shift out of defensives.
This created a good buying opportunity
80
60
40
n-
09
nJa 08
vNo 08
pSe
8
l-0
Ju 08
ay
M 08
ar
M 8
0
nJa 7
0
vNo 07
pSe
7
l-0
Ju 07
ay
M 07
ar
M 7
0
nJa 06
vNo 06
pSe
6
l-0
Ju 06
ay
M 06
ar
M 6
0
nJa 05
vNo 05
pSe
5
l-0
Ju 5
-0
ay
M
5
-0
ar
M 5
0
nJa 04
vNo 4
0
pSe 4
l-0
Ju 4
-0
ay
M 04
ar
M 4
0
Ja
Past performance is not a guide to future returns. Source: Thomson Datastream. As at 19 February 2009.
This information does not constitute investment advice, nor is it an offer or invitation to subscribe for shares in the stock.
WHAT YOU NEED FROM A JAPANESE EQUITIES MANAGER
 Long-term focus
 Identifying companies with sustainable business models and the ability to
generate value for shareholders
 Timing
 Understanding the profit cycle
 Buy and sell decisions
And one who will tell you when to take money off the table
MARTIN CURRIE’S JAPAN CREDENTIALS
 50% of our £9.9 billion of assets are invested in Asia

Stable and deeply resourced team
 Differing perspectives, complementary skill-sets
 Strength and continuity of relationships
 19 year record in Japan – outperformance of 3.7% p.a.
vs. Topix over this period*
 Clear investment philosophy and disciplined process
**
Investment
experience
81 years
Experience of
investing in Japan
69 years
Past performance is not a guide to future returns. Source: Lipper Hindsight. Fund: Martin Currie Japan Fund. Bid-bid basis with gross
income reinvested. *From 14 September 1989 to 31 January 2009. **3 years to 31 December 2008
REGULATORY INFORMATION
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performance information calculated by Martin Currie complies with the GIPS standards.
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