TIDMBGEU
RNS Number : 1334H
Baillie Gifford European Growth Tst
22 November 2022
RNS Announcement
Baillie Gifford European Growth Trust plc
Legal Entity Identifier: 213800QNN9EHZ4SC1R12
Results for the year to 30 September 2022
The following is the results announcement for the year to 30
September 2022 which was approved by the Board on 21 November
2022.
Over the year to 30 September 2022, the Company's net asset
value per share (NAV) total return was -40.4% compared to a total
return of -15.3% for the comparative index. The share price total
return for the same period was -47.7%.
3/4 The largest detractors to relative performance were:
Zalando, an online fashion retailer; Takeaway.com, an online food
delivery service; and Wizz Air, a low cost airline.
3/4 Annual turnover was 25.9% and gearing stood at 15.7% of
shareholders' funds as at the year end.
3/4 The portfolio now contains four unlisted companies
accounting for 10.9% of total assets as at 30 September 2022 (2021:
4.5% in three companies).
3/4 The net revenue for the year was 0.79p per share (2021:
0.44p). A final dividend of 0.70p per share is being recommended
(2021: 0.35p).
3/4 Over the year a total of 5,911,659 shares have been bought back into treasury.
For a definition of terms see Glossary of Terms and Alternative
Performance Measures at the end of this announcement. Total return
information is sourced from Baillie Gifford/Refinitiv and relevant
underlying index providers; see disclaimer at the end of this
announcement.
Baillie Gifford European Growth Trust's principal investment
objective is to achieve capital growth over the long-term from a
diversified portfolio of European securities.
The Company is managed by Baillie Gifford & Co, an Edinburgh
based fund management group with around GBP230 billion under
management and advice as at 18 November 2022.
Past performance is not a guide to future performance. Baillie
Gifford European Growth Trust plc is a listed UK company. The value
of its shares and any income from them can fall as well as rise and
investors may not get back the amount invested. The Company is
listed on the London Stock Exchange and is not authorised or
regulated by the Financial Conduct Authority. You can find up to
date performance information about Baillie Gifford European Growth
Trust plc on the Company's page of the Managers' website at
bgeuropeangrowth.com ++
++ 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.
For further information please contact:
Naomi Cherry, Baillie Gifford & Co
Tel: 0131 275 2000
Jonathan Atkins, Four Communications
Tel: 0203 920 0555 or 07872 495396
Chairman's Statement
Performance
The net asset value per share ('NAV') total return over the
Company's financial year was -40.4% compared to a total return of
-15.3% for the FTSE Europe ex UK Index, in sterling terms. The
share price total return over the year was -47.7% as the discount
to NAV of the Company's shares widened from 1.3% to 13.5%. A
reversal of fortune and a very disappointing year in absolute and
relative terms.
Since Baillie Gifford began managing the portfolio in November
2019, the NAV total return has been 0.8% compared to a total return
of 3.9% for the FTSE Europe ex UK Index, in sterling terms. The
share price total return has been -5.6%, with the discount widening
from 7.5% to 13.5%.
It has certainly been a challenging year for all investors but
it has been particularly hard for growth investors. Reasons for
this are discussed at length in the Managers' report and a little
below.
Despite strong operational performance from our holdings
(further detail provided in the Managers' report below), the share
prices of the types of companies we own have fallen very
significantly, with those companies which have a technology angle
to them being punished severely.
Earnings and Dividend
As noted in the Company's 2019 Annual Report, any dividend paid
will be by way of a final dividend and be the minimum required for
the Company to maintain its investment trust status. Revenue per
share for the year was 0.79p (2021: 0.44p) and the Board is
recommending a final dividend of 0.70p per share (2021: 0.35p).
Subject to shareholder approval at the Annual General Meeting, the
dividend will be paid on 10 February 2023 to shareholders on the
register on 6 January 2023. The ex-dividend date will be 5 January
2023.
Borrowings
The Company has two EUR30 million long-term debt facilities: the
first has a duration of 20 years and is priced at a fixed rate of
1.57% and the other has a term of 15 years at a fixed rate of
1.55%. The Company also has an undrawn EUR30 million overdraft
facility with The Northern Trust Company, which at present is
capped at EUR15 million following Board agreement. At the year end,
the Company had invested borrowings of 15.7% with a further 1.1%
drawn and held in cash.
Share Buybacks, Issuance and Discount
Over the course of the Company's financial year, the share price
moved from a 1.3% discount to NAV to a 13.5% discount to NAV.
During this period, the Company bought back 5,911,659 shares at a
total cost of approximately GBP7,444,000 and an average discount of
7.9%. The shares repurchased by the Company are held in treasury
and are available to be reissued, at a premium, when market
conditions allow.
The Board is of the view that the Company should retain the
power to buy back shares during the current financial year and so,
at the Annual General Meeting, is seeking to renew the annual
authority to repurchase up to 14.99% of the shares in issue. When
buying back shares, the Board does not have a formal discount
target and is prepared to buy back shares opportunistically.
The Company also has authority to issue new shares and to
reissue any shares held in treasury for cash on a non pre-emptive
basis. Shares are issued/reissued only at a premium to NAV, thereby
enhancing NAV for existing shareholders. The Directors are, once
again, seeking 10% share issuance authority at the Annual General
Meeting. As with the buyback authority, this authority will expire
at the conclusion of the Annual General Meeting to be held in 2024,
unless renewed.
The Board and Portfolio Manager
The Company has been managed by Stephen Paice, Chris Davies and
Moritz Sitte as co-portfolio managers. In July 2022, Moritz took up
a new opportunity with a family office. The Board would like to
wish Moritz well in his new endeavours. The Company will continue
to be managed by the experienced team of Stephen and Chris as
co-portfolio managers.
There have been no changes to the composition of the Board
during the Company's financial year, though succession planning is
underway for the end of next year, as Dr Woodward will stand down
from the Board at the 2024 Annual General Meeting
Annual General Meeting ('AGM')
The AGM will be held at 11.00 a.m. on 2 February 2023 at The
Institute of Directors, 116 Pall Mall, London, SW1Y 5ED. Baillie
Gifford will make a presentation and I look forward to meeting
shareholders who are able to attend. The Board encourages all
shareholders to exercise their votes on the AGM resolutions by
completing and submitting a form of proxy.
Should the situation change and it not be possible to meet in
person, further information will be made available through the
Company's website at bgeuropeangrowth.com and the London Stock
Exchange regulatory news service. Should shareholders have
questions for the Board or the Managers or any queries as to how to
vote, they are welcome, as always, to submit them by email to
trustenquiries@bailliegifford.com or call 0800 917 2112.
Information on the resolutions can be found on pages 55 and 56 of
the Annual Report and Financial Statements. The Directors consider
that all resolutions to be put to shareholders are in their and the
Company's best interests as a whole and recommend that shareholders
vote in favour.
The First 50 Years
To commemorate its first 50 years, John Newlands has written a
short history of the Company. A copy of this is available on the
Company's page of the Managers' website at bgeuropeangrowth.com and
is enclosed with this Annual Report for those shareholders who have
asked to receive a printed copy.
Outlook
In retrospect, we will look back on the last 25 years of low and
falling interest rates as something of a mirage. Central bankers
have enjoyed fame far in excess of their historically important but
unglamorous role as financial plumbers. Their job, according to
Paul Volcker, who proved his worth as a practitioner, is to remove
the punchbowl before the party gets started. For decades there was
no sign of the punchbowl being removed and the world became
accustomed to unlimited punch. We must all consequently now get
used to the feeling of being punch drunk. An unparalleled period of
near-zero interest rates sits oddly with a 400-year average of over
4%. The present challenges set by a sharp deterioration in
geo-political harmony are shaking us out of that reverie. Something
was always bound to, but it was impossible to guess when. The music
has stopped, the party is well and truly over, the police have
arrived and reality has intervened. Interest rates are on their way
back to or above long term norms. In the stock market, present cash
flows are prized as rising inflation and interest rates currently,
though temporarily, outweigh all other factors. The market's
barometer is set to maximum fear and storm hatches have been
battened. The underlying prognosis for economic activity is being
impaired. Relative strength and growth will, in time, become rarer
and better appreciated.
If this all sounds and is dispiriting, the good news is that we
are living through a golden age of innovation and disruption in
business. Living standards are high, albeit inflated by an asset
bubble and cheap debt, and technological progress remains
extraordinary. Opportunities to grow and strengthen businesses and
to build enduring barriers to entry at pace have seldom been
greater. And positive change is being catalysed by today's
adversity. A $100 oil price, for example, can only hasten the end
of the carbon economy and accelerate its replacement. Equities, and
this portfolio specifically, remain a bet on human ingenuity. It is
challenging to endure this painful period of flux, but even in its
midst we might yet struggle to answer the question differently:
'what would I rather own for the long term?'
Michael MacPhee
Chairman
21 November 2022
Past performance is not a guide to future performance.
Total return information is sourced from Refinitiv/Baillie
Gifford and relevant underlying index providers; see disclaimer at
the end of this announcement.
For a definition of terms, see Glossary of Terms and Alternative
Performance Measures at the end of this announcement.
Managers' Report
In our last annual report, we noted 'a very good start' in
performance terms to our tenure as the Company's managers. Twelve
months on, with the share price down almost 50%, and at times
trading at prices in line with the beginning of our tenure, the
same could hardly now be said. With hindsight it is clear that we
underestimated inflationary forces and misjudged the speed and
magnitude of the subsequent correction in company valuations.
As ever in investing, there will be lessons for us to learn and
no doubt we will be debating these for the rest of our careers. The
more important priority for us at this point, however, is turning
today's prevailing pessimism to the advantage of our shareholders.
We find ourselves at a pivot point, with an extreme mismatch
between the potential of our companies and their valuations. If we
were at all over-optimistic on valuations last year, the balm must
surely be taking advantage when markets are depressed.
We recently read Richard Rumelt's Good Strategy Bad Strategy,
one of the most compelling books on the subject we've come across.
Perhaps his most powerful insight on strategy is that 'a great deal
of strategy work is trying to figure out what is going on. Not just
deciding what to do, but the more fundamental problem of
comprehending the situation'. This is as relevant to our own
strategy as to the strategy of any of our portfolio companies, so
before we explain our ongoing commitment to the process we've
built, it is important to attempt the task Rumelt wisely
encourages.
Simplistically, one could disaggregate the headwinds facing
European growth into those facing Europe, and those facing growth.
Geopolitics dominates the former. Russia's invasion of Ukraine has
exposed Europe's frailties, particularly the dependence on Russian
hydrocarbons, and unleashed a wave of inflation not seen in the
region for decades. Countless commodities have seen prices explode
as supply shocks hit markets. Perhaps most terrifying of all has
been Russia's reckless shelling around Ukrainian nuclear power
plants and its heightened rhetoric around the use of nuclear
weapons, recalling a much more dangerous era in Europe's past. The
proximity of developed Europe to the emerging crisis has caused a
great deal of fear, manifesting perhaps most strikingly in the
substantial outflows from European equities since the war
began.
As for growth, economies are clearly weakening. Several
consumer-facing portfolio companies, including HelloFresh, Zalando,
Allegro, Delivery Hero and Just Eat Takeaway, have already revised
guidance downwards for this year, but it feels increasingly likely
that more widespread downgrades are on the way. We do not aim to
distinguish ourselves as economic forecasters: John Galbraith's
observation that the role of economic forecasting is 'to make
astrology look respectable' springs to mind. Over time our
portfolio will live or die by the strength of its idiosyncratic
growth drivers and competitive advantages, not the short-term
oscillations of a naturally cyclical economy.
More relevant for assessing the dramatic sell-off in European
growth equities over the past year is the significant rise in
discount rates. With inflation running high - double digits in some
European economies - central banks are scrambling to bring it under
control by increasing interest rates. In the parlance of the
capital asset pricing model, the risk-free rate has risen, and the
equity risk premium too. The result is that future cashflows are
being valued much less highly than they were last year.
Share prices ultimately reflect the market's assessment of the
present value of a company's future cashflows. When discount rates
move up, growth stocks see their share prices hit
disproportionately. To illustrate the severity of this, one only
needs to look at some of our worst-performing stocks. We
arbitrarily selected fifteen holdings that have delivered a total
return of -50% or worse over the financial year. The average annual
revenue growth for these companies over the preceding three years
was 44% but, despite this strength, the three-year forward revenue
growth forecast remains a healthy 18.5%. It is notable, however,
that the average forward enterprise value to sales multiple for
this group of companies fell 61% over the year to 30 September
2022, despite their strong fundamentals. Multiple compression has
done a great deal of damage but, in many cases, it feels like there
has been a serious over-correction.
Despite all this turmoil, our strategy remains unchanged. We aim
to identify Europe's great growth companies by carrying out deep
research, unearthing insights and building conviction around a view
that differs from that of the market. We then own these special
companies over the long term. With the market seemingly pouring
scorn on this approach, the onus is on us to explain our ongoing
commitment to it.
Long-term fundamentals remain strong. Ben Graham's insight that
'in the short run, the market is a voting machine but in the long
run, it is a weighing machine' reveals an important truth about
markets: long-term returns are driven by fundamentals, not
multiples. Weight matters, and we think this portfolio has plenty.
A cursory glance across the markets being addressed by our
portfolio companies reveals strong secular underpinnings that will
drive high growth rates over the next decade. In freight
forwarding, digital disruptor sennder has the EUR300bn EU freight
truck market to grow into, with a mere EUR540m of managed revenue
today. Much bigger peer DSV operates across land, sea and air
markets, and tends to make large acquisitions every few years, yet
even it has a tiny 4% market share in third party logistics.
HelloFresh saw its revenue more than double in 2020, growing
another 60% in 2021, yet market penetration remains below 0.5%.
Wizz Air is growing its fleet at 15% per annum to the end of the
decade, taking advantage of the inefficiency of legacy carriers to
stimulate new demand and gain market share. Similar stories could
be told across the portfolio. In short, little has changed about
the long-term opportunities for our companies.
Crucially, we also see strengthening competitive advantages in
this difficult environment of scarce and expensive capital. Wizz
Air and Ryanair should both benefit from their low cost/low fare
model as demand softens and competitors retrench. Scandinavian
airline SAS recently filed for bankruptcy, Romania's Blue Air looks
set to follow suit, and there will be others. Food delivery
companies seem to be getting more rational, with signs of
retrenchment across the board. Deliveroo is exiting the
Netherlands, Just Eat Takeaway's home turf, while the latter has
exited Norway, Portugal and Brazil. We should see less discounting
and better profits. Serial acquirers with strong balance sheets and
strong cash flows should also find it easier to acquire targets in
tougher times. Europe's energy transition enablers also seem much
better placed given recent dislocations. NIBE's heat pumps,
Epiroc's electric mining vehicles and Kingspan's insulated panels
feel increasingly privileged. These companies are certainly not
wasting this crisis.
It's also worth pointing out that we have high conviction in the
portfolio's ability to weather the current storm. Long-term
prospects are irrelevant if companies do not survive to realise
them. We take comfort from the relatively low level of debt across
the portfolio. The net det to equity ratio, for example, remains
low at 0.2x compared to the benchmark at 0.6x. That is not to say
that it has been plain sailing - some stocks have required
additional attention. Delivery Hero successfully plugged potential
holes in its balance sheet earlier this year, and we've spent more
time than usual getting comfortable with Wizz Air's liquidity
position. We're also keeping a close eye on names like Cellectis
(where cash burn is high as its CAR-T cell treatments continue
through clinical trials) and Allegro (which is highly levered after
the acquisition of Mall Group); but, overall, the portfolio is in
good shape.
Another reason for optimism is that valuations are more
attractive than they have been in a long while. Outlier returns
aren't only the result of investing in high-growth, high-quality
companies; they are also the result of the market's expectations
being too low. We often use discounted cashflow (DCF) analysis as a
means of establishing where an expectations mismatch might arise.
We revisited our DCF analyses from last year and were struck by how
much less heavy lifting our companies need to do from here to hit
our return hurdle, a minimum of doubling over the next five years.
With long-term prospects still looking strong and competitive
advantages strengthening, we see attractive payoffs ahead for the
portfolio.
DCFs don't determine our investment decisions but can serve to
sense check our assumptions. They have helped highlight
discrepancies between our expectations and those of the market for
various stocks. In the case of our luxury holdings, Kering and
Richemont, it seemed at one point that the market was pricing in
competitive advantage periods of three years or less, which for
businesses that get stronger with age felt strangely pessimistic.
We found ourselves similarly surprised by the extremely gloomy
expectations for names at the higher growth end of the portfolio
like Zalando and HelloFresh, businesses that are disrupting
existing profit pools and creating new ones. These are businesses
with years of growth ahead if one looks beyond the fear and
uncertainty dominating markets today. These are exactly the sort of
mismatches we aim to exploit, and there are currently plenty to go
around.
In short, there is much to be optimistic about. Our portfolio is
well-positioned to weather the current storm and continue driving
transformational change across a range of industries. The mismatch
between these powerful long-term drivers and current share prices
is, however, starker than ever. For long-term growth investors such
dislocations are to be embraced, not feared. We may be natural
optimists, but hopefully of the rational sort.
Portfolio & Transactions
We believe strongly that Europe's big winners over the next
decade will be different from those of the past. With valuations
now depressed for many potential contenders, our attention has
naturally gravitated away from companies where likely growth rates
and/or valuations offer less upside potential. Rational, Kuehne
& Nagel and FinecoBank have exited the portfolio over the past
six months as more appealing opportunities for capital deployment
arose. As Ukraine is perhaps proving, the best form of defence is
often attack. Competition for capital has seldom felt this
intense.
Over the course of the past year, we've made opportunistic
additions to a significant number of our high-growth companies.
These include Aker Horizons, Wizz Air, Allegro, Prosus, Delivery
Hero, Just Eat Takeaway, AUTO1, Schibsted, VNV Global and Kinnevik.
Each of these companies continues to invest heavily for future
growth and competitive advantage, harnessing today's cashflows to
grow those of the future. These are the names where we observe the
greatest mismatches between long-term fundamentals and share
prices, but there have been several others. Luxury holdings
Richemont and Kering, Irish building materials supplier Kingspan
and freight forwarder DSV have all received additional capital on
this basis.
Market volatility has allowed us to be equally opportunistic in
the purchase of new holdings. In some cases, these are businesses
we've known and admired for some time. Two such cases are in
healthcare, where momentous change is afoot thanks to an
ever-enriching biological toolbox increasingly available to
innovative companies. CRISPR Therapeutics is riding this wave,
using a game-changing gene-editing tool discovered by Jennifer
Doudna and Emmanuelle Charpentier called CRISPR-Cas9. This is
essentially a pair of molecular scissors capable of cutting DNA in
specific places and making precise deletions of genetic material.
The discovery won the pair the Nobel Prize for chemistry in 2020.
CRISPR Therapeutics has been developing a curative treatment for
sickle cell disease, but this is potentially a platform technology
that could be applied to a broad range of other conditions.
We've also taken a new holding in Evotec, a contract research
organisation (CRO) and drug discovery business. This is another key
enabler of the biological revolution. Its most mature business is a
traditional CRO helping biotech and pharma companies with parts of
the R&D process they cannot do in-house. Evotec has a uniquely
end-to-end pre-clinical offering here, giving it an edge over
peers. More interesting for high-return outcomes, however, is
Evotec's recent move to jointly develop a pipeline of 120+ drugs
with its partners and share in the economics of their success. This
business model transition and the unique focus on research
excellence supporting it is ascribed little value by the market
We speak often of the breadth and diversity in the European
market. This could not be better demonstrated than by the other new
purchases we've made this year. Toy company Tonies, online digital
real estate agent McMakler (unlisted), acquisitive vertical market
software company Topicus and video games consolidator Embracer -
all mentioned in the interim report - demonstrate this clearly.
These are all relatively young companies, so it may be somewhat
surprising to see us purchase two companies that can trace their
origins back to the 19th century: Nexans and EXOR.
Both companies are modernising. Nexans, a French cables maker,
is reforging itself as a pure electrification business under the
leadership of CEO Christopher Guerin after years of
underperformance. He has staked his career on a radical reshaping
of the company, with one third of revenues earmarked for divestment
and an aspiration to use the freed-up capital to acquire
electrification businesses. The centrepiece for Nexans' pivot is
its subsea high-voltage business, where it supplies cables to the
offshore wind and interconnector markets and is one of two
companies in the world able to install subsea cables at extreme
depths. Nexans is thus a key enabler of the green energy transition
and, if Guerin is successful, its financial results will be
radically improved.
EXOR is the holding company of the Agnelli family. Its portfolio
today remains dominated by the businesses of the old Fiat empire.
The best of these is luxury carmaker Ferrari, which is perhaps
closer to a luxury goods company. Its siblings from the old Fiat
stable include Stellantis, formed by the merger of Fiat Chrysler
and Peugeot, and agricultural equipment maker CNH Industrial.
EXOR's discount to NAV recently widened to nearly 50%, but the more
appealing aspect of EXOR is the potential for portfolio
transformation. John Elkann - CEO and fifth generation Agnelli -
has a great deal of permanent capital to deploy at a time when it
is in short supply and valuations are attractive thanks to the
recent sale of reinsurance business PartnerRe. Elkann plans to
pivot the portfolio towards sectors where structural growth
prospects are stronger than the legacy car business, using the
Agnelli long-termism to open doors others can't. These include
luxury, healthcare and technology. We feel that this transformation
is underappreciated by the market.
Aside from our investment in McMakler earlier this year, we have
made no additional investments in unlisted companies. Private
markets have been somewhat quieter in 2022 with far fewer companies
raising capital compared to 2021. With public market valuations
having fallen, many unlisted companies perhaps fear that further
funding rounds may be transacted at lower levels than previous
ones, or so-called 'down rounds'. We remain enthused by the
long-term potential for Europe's unlisted companies, but we may
have to wait until brighter days before we can deploy fresh
capital. Despite fewer new opportunities, our current unlisted
investments continue to perform well. Swedish battery maker
Northvolt - our largest holding as at 30 September 2022 - was the
standout contributor to relative performance during the period,
though we would note that this performance has benefitted from
foreign exchange movements.
Outlook
One of the main characters in Hernan Diaz' recent novel Trust is
narcissistic financier Andrew Bevel, who makes a fortune investing
in markets in the 1920s largely on advice provided by his wife.
Drafting a revisionist memoir, Bevel seeks to cast himself as the
self-sufficient protagonist, depriving his late wife of much
deserved credit. Despite Bevel's obvious shortcomings, through him
Diaz offers a remarkably piercing insight with clear parallels to
stock markets:
'Every life is organised around a small number of events that
either propel us or bring us to a grinding halt. We spend the years
between these episodes benefitting or suffering from their
consequences until the arrival of the next forceful moment. A man's
worth is established by the number of these defining circumstances
he is able to create for himself. He need not always be successful,
for there can be great honour in defeat. But he ought to be the
main actor in the decisive scenes in his existence, whether they be
epic or tragic.'
Europe is living through several forceful moments at once. Not
simply the ongoing reverberations of Covid and the dislocations
caused by war, but also the immense wave of innovation in
technologies and business models which are surely the more relevant
protagonists of the story to be written in the years ahead. It is
precisely these 'main actors' we seek - companies that are in
control of their own destinies, able to create their own luck. This
is why we are uninterested in banks, traditional energy companies,
utilities and the cast of companies that rely on exogenous factors
to drive profits. We believe Europe's outliers are much more likely
to be those companies that can create their own 'defining
circumstances' over long periods.
Not all of our protagonists will go on to attain superstar
status as the great outliers of the next decade, but not all of
them need to. We believe the cast we have assembled provides an
excellent platform for those outliers to step forth, supported by
inexorable underlying growth trends, strengthening competitive
positions and excellent managers. The outlook for this portfolio
must therefore be based on an assessment of these factors. As you
can perhaps tell, we remain defiantly optimistic.
Stephen Paice
Chris Davies
Baillie Gifford & Co
21 November 2022
List of Investments as at 30 September 2022
%
of
Value total
Name Business Country GBP'000 assets
======================= ======================================== ============ ======== =======
Northvolt (U) Battery developer and manufacturer Sweden 24,301 6.7
Portfolio of online consumer
Prosus companies Netherlands 21,439 5.9
Adyen Online payments platform Netherlands 14,969 4.1
Acquirer of vertical market software
Topicus.com * companies Netherlands 13,025 3.6
Richemont Owner of luxury goods companies Switzerland 12,234 3.4
Ryanair Low-cost airline Ireland 11,990 3.3
Kering Owner of luxury fashion brands France 11,347 3.1
Atlas Copco Industrial group Sweden 10,958 3.0
IMCD Speciality chemicals distributor Netherlands 10,023 2.8
Nexans * Cable manufacturing company France 9,642 2.7
ASML Semiconductor equipment manufacturer Netherlands 9,609 2.6
Media and classifieds advertising
Schibsted platforms Norway 9,431 2.6
Avanza Bank Online investment platform Sweden 9,076 2.5
Manufacturer of precision instruments
Mettler-Toledo for laboratories Switzerland 8,888 2.4
Manufacturer of rubber and polymer
Hexpol compounds Sweden 8,848 2.4
DSV Freight forwarder Denmark 8,565 2.4
Develops software for 3D computer-aided
Dassault Systèmes design France 8,330 2.3
Investment company specialising
EXOR * in industrials Netherlands 8,304 2.3
IT consulting and systems integration
Reply provider Italy 8,020 2.2
Investment company specialising
Kinnevik in digital consumer businesses Sweden 7,953 2.2
Allegro.eu E-commerce platform Poland 7,786 2.1
Online food ordering and home
Takeaway.com delivery Netherlands 7,621 2.1
Sartorius Stedim Pharmaceutical and laboratory
Biotech equipment provider France 7,585 2.1
Kingspan Group Building materials provider Ireland 7,502 2.1
Spotify Online audio streaming service Sweden 7,263 2.0
Delivery Hero Online food delivery platform Germany 7,116 2.0
Adevinta Online classifieds marketplaces Norway 6,290 1.7
Zalando Online fashion retail platform Germany 6,241 1.7
Freight forwarder focused on
sennder (U) road logistics Germany 6,098 1.7
McMakler * (U) Digital real estate broker Germany 5,372 1.5
Wizz Air Holdings Low-cost airline Hungary 5,081 1.4
Online platform for used car
AUTO1 selling in Europe Germany 4,857 1.3
Acquirer of video, mobile and
Embracer * board games companies Sweden 4,828 1.3
NIBE Industrier Heat pump manufacturer Sweden 4,657 1.3
adidas Sports shoes and clothing manufacturer Germany 4,619 1.3
Contract research and drug discovery
Evotec * company Germany 4,604 1.3
Mining and infrastructure equipment
Epiroc provider Sweden 4,235 1.2
Flixmobility (U) Long-distance bus and train provider Germany 3,828 1.1
HelloFresh Meal kit delivery company Germany 3,731 1.0
Beijer Wholesaler of cooling technology Sweden 3,678 1.0
Hemnet Online real estate platform Sweden 3,442 1.0
Investment company specialising
Aker Horizons in green technology Norway 3,197 0.9
Addlife Acquirer of life sciences companies Sweden 3,058 0.8
Investment company specialising
VNV Global in early-stage technologies Sweden 2,862 0.8
Tonies * Musical storybox toys for children Germany 2,832 0.8
Crispr Therapeutics Developer of treatments based
* on gene editing technology Switzerland 1,967 0.5
Cellectis # Biotech focused on genetic engineering France 742 0.2
Ubisoft Entertainment Video games publisher France 61 -
======================= ======================================== ============ ======== =======
Total investments 358,105 98.7
=============================================================================== ======== =======
Net liquid assets 4,852 1.3
=============================================================================== ======== =======
Total assets 362,957 100.0
=============================================================================== ======== =======
Borrowings (52,560) (14.5)
=============================================================================== ======== =======
Shareholders'
funds 310,397 85.5
=============================================================================== ======== =======
(U) Denotes unlisted
* New holding bought during the year (Bechtle, FinecoBank,
Investor, Kuehne + Nagel, L'Oréal, MorphoSys, Pernod Ricard and
Rational were sold during the year).
# Includes American Depositary Receipt.
Income Statement
2022 2022 2022 2021 2021 2021
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=========================== ===== ======== ========= ========= ======== ======== ========
Net (losses)/gains
on investments - (241,839) (241,839) - 106,241 106,241
Currency gains/(losses) 104 (1,145) (1,041) (61) 1,981 1,920
Income 2 4,313 - 4,313 3,256 - 3,256
I nvestment management
fee 3 (412) (1,647) (2,059) (574) (2,298) (2,872)
Other administrative
expenses (572) - (572) (636) - (636)
Net return before
finance costs
and taxation 3,433 (244,631) (241,198) 1,985 105,924 107,909
Finance costs (214) (652) (866) (134) (427) (561)
Net return on ordinary
activities
before taxation 3,219 (245,283) (242,064) 1,851 105,497 107,348
Tax on ordinary activities (358) - (358) (318) (380) (698)
Net return on ordinary
activities
after taxation 2,861 (245,283) (242,422) 1,533 105,117 106,650
Net return per ordinary
share * 4 0.79p (67.98p) (67.19p) 0.42p 28.90p 29.32p
=========================== ===== ======== ========= ========= ======== ======== ========
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
2022 2022 2021 2021
Notes GBP'000 GBP'000 GBP'000 GBP'000
======================================= ===== ======== ======== ======== ========
Fixed assets
Investments held at fair value through
profit or loss 6 358,105 600,351
Current assets
Debtors 2,797 2,320
Cash and cash equivalents 3,571 12,252
6,368 14,572
Creditors
Amounts falling due within one year (1,516) (1,913)
Net current assets 4,852 12,659
Total assets less current liabilities 362,957 613,010
Creditors
Amounts falling due after more than
one year 7 (52,560) (51,471)
Net assets 310,397 561,539
Capital and reserves
Share capital 10,061 10,061
Share premium account 125,050 125,050
Capital redemption reserve 8,750 8,750
Capital reserve 158,457 411,184
Revenue reserve 8,079 6,494
======================================= ===== ======== ======== ======== ========
Shareholders' funds 310,397 561,539
======================================= ===== ======== ======== ======== ========
Net asset value per ordinary share
* (borrowings at book value) 86.5p 154.0p
======================================= ===== ======== ======== ======== ========
Net asset value per ordinary share
* (borrowings at fair value) 91.9p 154.5p
======================================= ===== ======== ======== ======== ========
Statement of Changes in Equity
Share Capital
Share premium redemption Capital Revenue Shareholders'
capital account reserve reserve reserve funds
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=========================== ===== ======== ======== =========== ========== ======== =============
Shareholders' funds at
1 October 2021 10,061 125,050 8,750 411,184 6,494 561,539
Dividends paid during the
year 5 - - - - (1,276) (1,276)
Shares bought back into
treasury 9 - - - (7,444) - (7,444)
Net return on ordinary
activities after taxation - - - (245,283) 2,861 (242,422)
=========================== ===== ======== ======== =========== ========== ======== =============
Shareholders' funds at
30 September 2022 10,061 125,050 8,750 158,457 8,079 310,397
=========================== ===== ======== ======== =========== ========== ======== =============
Share Capital
Share premium redemption Capital Revenue Shareholders'
capital account reserve reserve reserve funds
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================ ===== ======== ======== =========== ======== ======== =============
Shareholders' funds at
1 October 2020 10,061 123,749 8,750 303,860 6,228 452,648
Dividends paid during the
year 5 - - - - (1,267) (1,267)
Shares issued from treasury 9 - 1,301 - 2,207 - 3,508
Net return on ordinary
activities after taxation - - - 105,117 1,533 106,650
============================ ===== ======== ======== =========== ======== ======== =============
Shareholders' funds at
30 September 2021 10,061 125,050 8,750 411,184 6,494 561,539
============================ ===== ======== ======== =========== ======== ======== =============
Cash Flow Statement
2022 2022 2021 2021
Notes GBP'000 GBP'000 GBP'000 GBP'000
======================================= ===== ========= ======== ========= ========
Cash flows from operating activities
Net return on ordinary activities
before taxation (242,064) 107,348
Net losses/(gains) on investments 241,839 (106,241)
Currency losses/(gains) 1,041 (1,920)
Finance costs 866 561
Overseas withholding tax suffered (284) (698)
Overseas withholding tax received 459 576
Changes in debtors and creditors* (530) 63
Cash from operations ** 1,327 (311)
Interest paid (852) (339)
Net cash inflow/(outflow) from
operating activities 475 (650)
Cash flows from investing activities
Acquisitions of investments (147.499) (126,932)
Disposals of investments 147,012 101,088
Net cash outflow from investing
activities (487) (25,844)
Cash flows from financing activities
Shares issued from treasury - 3,508
Shares bought back into treasury (7,436) -
Equity dividends paid (1,276) (1,267)
Private placement loan notes issued - 52,994
Costs of issuance of private placement
loan notes - (103)
Net cash (outflow)/inflow from
financing activities (8,712) 55,132
(Decrease)/increase in cash and
cash equivalents (8,724) 28,638
Exchange movements 43 496
Cash and cash equivalents at start
of year 10 12,252 (16,882)
Cash and cash equivalents at end
of year 10 3,571 12,252
Comprising:
Cash at bank 3,571 12,252
======================================= ===== ========= ======== ========= ========
3,571 12,252
======================================= ===== ========= ======== ========= ========
*Change in debtors (GBP214,000) (2021 - (GBP119,000)), change in
creditors (GBP316,000) (2021 - GBP182,000).
** Cash from operations includes dividends received of
GBP4,284,000 (2021 - GBP3,224,000).
Notes to the Condensed Financial Statements
1. The Financial Statements for the year to 30 September 2022
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 pages 41 and 42 of the
Annual Report and Financial Statements which are consistent with
those applied for the year ended 30 September 2021.
2.
2022 2021
GBP'000 GBP'000
========================== ======== ========
Income from investments
Overseas dividends 4,311 3,255
Other income
Interest on deposits 2 1
========================== ======== ========
Total income 4,313 3,256
========================== ======== ========
3. Investment Management Fee
2022 2022 2022 2021 2021 2021
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
====================== ======== ======== ======== ======== ======== ========
Investment management
fee 412 1,647 2,059 574 2,298 2,872
====================== ======== ======== ======== ======== ======== ========
Baillie Gifford & Co Limited, a wholly owned subsidiary of
Baillie Gifford & Co, was appointed as the Company's
Alternative Investment Fund Manager ('AIFM') and Company Secretary
on 29 November 2019. Baillie Gifford & Co Limited has delegated
portfolio management services to Baillie Gifford & Co. Dealing
activity and transaction reporting has been further sub-delegated
to Baillie Gifford Overseas Limited and Baillie Gifford Asia (Hong
Kong) Limited. The Investment Management Agreement between the AIFM
and the Company sets out the matters over which the Managers have
authority in accordance with the policies and directions of, and
subject to restrictions imposed by, the Board. The Investment
Management Agreement is terminable on not less than three months'
notice or on shorter notice in certain circumstances. Compensation
would only be payable if termination occurred prior to the expiry
of the notice period.
Baillie Gifford & Co Limited's annual management fee is
0.55% of the lower of (i) the Company's market capitalisation and
(ii) the Company's net asset value (which shall include income), in
either case up to GBP500 million, and 0.50% of the amount of the
lower of the Company's market capitalisation or net asset value
above GBP500 million, calculated and payable quarterly.
4. Net Return per Ordinary Share
2022 2022 2022 2021 2021 2021
Revenue Capital Total Revenue Capital Total
======================== ======== ======== ======== =================== =================== ======
Net return per ordinary
share 0.79p (67.98p) (67.19p) 0.42p 28.90p 29.32p
======================== ======== ======== ======== =================== =================== ======
Revenue return per ordinary share is based on the net revenue
return on ordinary activities after taxation of GBP2,861,000 (2021
- GBP1,533,000), and on 360,823,119 (2021 - 363,715,768) ordinary
shares, being the weighted average number of ordinary shares in
issue during each year.
Capital return per ordinary share is based on the net capital
loss for the financial year of GBP245,283,000 (2021 - net capital
gain of GBP105,117,000), and on 360,823,119 (2021 - 363,715,768)
ordinary shares, being the weighted average number of ordinary
shares in issue during each year.
There are no dilutive or potentially dilutive shares in
issue.
5. Ordinary Dividends
2022 2021
2022 2021 GBP'000 GBP'000
============================================= ===== ===== ======== ========
Amounts recognised as distributions in the
year:
Previous year's final dividend (paid 11
February 2022) 0.35p 0.35p 1,276 1,267
============================================= ===== ===== ======== ========
Also set out below are the total dividends paid and proposed in
respect of the financial year, which is the basis on which the
requirements of section 1158 of the Corporation Tax Act 2010 are
considered. The revenue available for distribution by way of
dividend for the year is GBP2,861,000 (2021 - GBP1,533,000).
2022 2021
2022 2021 GBP'000 GBP'000
============================================= ===== ===== ======== ========
Dividends paid and payable in respect of
the year:
Proposed final dividend (payable 10 February
2023) 0.70p 0.35p 2,511 1,276
============================================= ===== ===== ======== ========
6. Investments
Level Level Level
1 2 3 Total
As at 30 September 2022 GBP'000 GBP'000 GBP'000 GBP'000
================================== ======== ======== ======== ========
Securities
Listed equities 318,506 - - 318,506
Unlisted securities - - 39,599 39,599
================================== ======== ======== ======== ========
Total financial asset investments 318,506 - 39,599 358,105
================================== ======== ======== ======== ========
Level Level Level
1 2 3 Total
As at 30 September 2021 GBP'000 GBP'000 GBP'000 GBP'000
================================== ======== ======== ======== ========
Securities
Listed equities 572,399 - - 572,399
Unlisted securities - - 27,952 27,952
================================== ======== ======== ======== ========
Total financial asset investments 572,399 - 27,952 600,351
================================== ======== ======== ======== ========
Investments in securities are financial assets designated at
fair value through profit or loss on initial recognition. In
accordance with FRS 102 the tables above provide an analysis of
these investments based on the fair value hierarchy described below
which reflects the reliability and significance of the information
used to measure their fair value .
Fair Value Hierarchy
The levels are determined by the lowest (that is the least
reliable or least independently observable) level of input that is
significant to the fair value measurement for the individual
investment in its entirety as follows:
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 valuation techniques used by the Company are explained in
the accounting policies on page 42 of the Annual Report and
Financial Statements. A sensitivity analysis by valuation technique
of the unlisted securities is on pages 52 and 53 of the Annual
Report and Financial Statements.
7. Creditors - amounts falling due after more than one year
2022 2021
GBP'000 GBP'000
============================= ======== ========
Unsecured loan notes:
EUR30m 1.55% 24 June 2036 26,299 25,755
EUR30m 1.57% 8 December 2040 26,261 25,716
============================= ======== ========
52,560 51,471
============================= ======== ========
The company has EUR30 million of long-term, fixed rate, senior,
unsecured privately placed loan notes, with a fixed coupon of 1.57%
to be repaid on 8 December 2040 and a further EUR30 million of
long-term, fixed rate, senior, unsecured privately placed loan
notes with a fixed coupon of 1.55% to be repaid on 24 June
2036.
The main covenants which are tested monthly are: (i) Net
tangible assets shall not fall below GBP200,000,000. (ii) Total
borrowings shall not exceed 30% of the Company's adjusted assets.
(iii) The Company's number of holdings shall not fall below 30.
At 30 September 2022 the Company currently had a EUR30,000,000
bank overdraft credit facility agreement with The Northern Trust
Company (the 'Bank') for the purpose of pursuing its investment
objective. As at 30 September 2022, nil had been drawn down (2021 -
nil). The facility is uncommitted. Interest is charged at 1.25%
above the European Central Bank Main Financing Rate. The Board has
currently agreed to cap a drawdown under this facility at
EUR15,000,000.
8. Transaction costs incurred on the purchase and sale of
investments are added to the purchase costs or deducted from the
sales proceeds, as appropriate. The purchases and sales proceeds
figures include transaction costs of GBP104,000 (2021 - GBP96,000)
and GBP59,000 (2021 - GBP45,000) respectively.
9. Share Capital
2022 2022 2021 2021
Number GBP'000 Number GBP'000
============================================ ============ ======== ============ ========
Allotted, called up and fully paid ordinary
shares of 2.5p each 358,687,671 8,967 364,599,330 9,115
Treasury shares of 2.5p each 43,756,019 1,094 37,844,360 946
============================================ ============ ======== ============ ========
Total 402,443,690 10,061 402,443,690 10,061
============================================ ============ ======== ============ ========
The Company's shareholder authority permits it to hold shares
bought back in treasury. Under such authority, treasury shares may
be subsequently either sold for cash (at a premium to net asset
value per ordinary share) or cancelled. At 30 September 2022 the
Company had authority to buy back 53,554,834 ordinary shares.
During the year to 30 September 2022, no ordinary shares (2021 -
nil) were bought back for cancellation and 5,911,659 ordinary
shares were bought back into treasury at a cost of GBP7,444,000
(2021 - nil). Under the provisions of the Company's Articles of
Association share buy-backs are funded from the capital reserve.
The Company has authority to allot shares under section 551 of the
Companies Act 2006. The Board has authorised use of this authority
to issue new shares at a premium to net asset value per share in
order to enhance the net asset value per share for existing
shareholders and improve the liquidity of the Company's shares.
During the year to 30 September 2022 no shares were issued (in the
year to 30 September 2021 - 2,400,000 shares on a non pre-emptive
basis (nominal value GBP60,000, representing 0.7% of the issued
share capital at 30 September 2020) at a premium to net asset value
(on the basis of debt valued at book value) raising net proceeds of
GBP3,508,000).
10. Analysis on change in net debt
1 October Other non-cash Exchange 30 September
2021 Cash flows changes movement 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
========================== ========= ========== ============== ========= ============
Cash and cash equivalents 12,252 (8,619) - (62) 3,571
Loans due in more
than one year (51,471) - (6) (1,083) (52,560)
========================== ========= ========== ============== ========= ============
(39,219) (8,619) (6) (1,145) (48,989)
========================== ========= ========== ============== ========= ============
11. The financial information for 2021 is derived from the
statutory accounts for 2021 which have been delivered to the
Registrar of Companies. Statutory accounts for 2022 will be
delivered to the Registrar of Companies in due course. The Auditors
have reported on the 2021 and 2022 accounts, their report was (i)
unqualified; (ii) did not include a reference to any matters to
which the Auditors drew attention by way of emphasis without
qualifying their report; and (iii) did not contain a statement
under sections 498(2) or (3) to 497 of the Companies Act 2006.
12. Transactions with Related Parties and the Managers and Secretaries
The Directors' fees for the year and interests in the Company's
shares at the end of the year are detailed in the Directors'
Remuneration Report on page 30 of the Annual Report and Financial
Statements. The Directors' Fees are included in note 4 on page 43
of the Annual Report and Financial Statements. No Director has a
contract of service with the Company. During the years reported, no
Director was interested in any contract or other matter requiring
disclosure under section 412 of the Companies Act 2006.
The Management fee due to Baillie Gifford & Co Limited is
set out in note 3 on page 43 of the Annual Report and Financial
Statements and the amount accrued at 30 September 2022 is set out
in note 11 on page 47 of the Annual Report and Financial
Statements. Details of the Investment Management Agreement are set
out on page 20 of the Annual Report and Financial Statements.
13. The Annual Report and Financial Statements will be available
on the Company's page of the Managers' website at
bgeuropeangrowth.com on or around 6 December 2022.
None of the views expressed in this document should be construed
as advice to buy or sell a particular investment.
Glossary of Terms and Alternative Performance Measures (APM)
An Alternative Performance Measure ('APM') 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. The APMs
noted below are commonly used measures within the investment trust
industry and serve to improve comparability between investment
trusts.
Total Assets
This is the Company's definition of Adjusted Total Assets, being
the total value of all assets less current liabilities, before
deduction of all borrowings.
Shareholders' Funds
Shareholders' Funds is the value of all assets held less all
liabilities, with borrowings deducted at book value.
Net Asset Value
Net Asset Value is the value of total assets less liabilities
with borrowings deducted at either book value or fair value as
described below. The net asset value per share (NAV) is calculated
by dividing this amount by the number of ordinary shares in issue
(excluding treasury shares).
Net Asset Value (Borrowings at Fair Value) (APM)
Borrowings are valued at an estimate of market worth. The fair
value of the Company's loan notes is set out in note 19 on page 54
of the Annual Report and Financial Statements.
A reconciliation from shareholders' funds (borrowings at book
value) to net asset value after deducting borrowings at fair value
is provided below.
2022
2022 per 2021 2021
GBP'000 share GBP'000 per share
=========================================== ======== ====== ======== =====================
Shareholders' funds (borrowings at book
value) 310,397 86.5p 561,539 154.0p
Add: book value of borrowings 52,560 14.7p 51,471 14.1p
Less: fair value of borrowings (33,425) (9.3p) (49,855) (13.6p)
=========================================== ======== ====== ======== =====================
Net asset value (borrowings at fair value) 329,532 91.9p 563,155 154.5p
=========================================== ======== ====== ======== =====================
The per share figures above are based on 358,687,671 (2021 -
364,599,330) ordinary shares of 2.5p, being the number of ordinary
shares in issue at the year end.
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 it is said to be trading at a discount. The size
of the discount is calculated by subtracting the share price from
the NAV and is usually expressed as a percentage of the NAV. If the
share price is higher than the NAV it is said to be trading at a
premium.
2022 2022 2021 2021
NAV (book) NAV (fair) NAV (book) NAV (fair)
==================== =========== =========== ================================ ================================
Closing NAV 86.5p 91.9p 154.0p 154.5p
Closing share price 79.5p 79.5p 152.4p 152.4p
Discount 8.1% 13.5% 1.0% 1.3%
==================== =========== =========== ================================ ================================
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.
2021 2021
2022 2022 NAV Share
NAV (fair) Share price (fair) price
====================== ========== =========== ============ =========================== ==========================
Closing NAV/share
price (a) 91.9p 79.5p 154.5p 152.4p
Dividend adjustment
factor (b) 1.0024 1.0025 1.0025 1.0024
Adjusted closing
NAV/share (c = a
price x b) 92.1p 79.7p 154.9p 152.8p
Opening NAV/share
price (d) 154.5p 152.4p 125.0p 122.0p
====================== ========== =========== ============ =========================== ==========================
Total return
(expressed (c ÷
as a %) d)-1 (40.4%) (47.7%) 24.0% 25.2%
====================== ========== =========== ============ =========================== ==========================
The dividend adjustment factor is calculated on the assumption
that the dividend of 0.35p (2021 - 0.35p) paid by the Company
during the year was reinvested into shares of the Company at the
cum income NAV/share price, as appropriate, at the ex-dividend
date.
Ongoing Charges (APM)
The total expenses (excluding borrowing costs) incurred by the
Company as a percentage of the average net asset value with
borrowings at fair value. The ongoing charges have been calculated
on the basis prescribed by the Association of Investment
Companies.
A reconciliation from the expenses detailed in the Income
Statement on page 37 of the Annual Report and Financial Statements
is provided below.
2022 2021
========================================= ==== ============== ==============
Investment management fee GBP2,059,000 GBP2,872,000
Other administrative expenses GBP572,000 GBP636,000
Total expenses (a) GBP2,631,000 GBP3,508,000
Average net asset value (with borrowings
deducted at fair value) (b) GBP439,950,000 GBP525,380,000
========================================= ==== ============== ==============
Ongoing charges ((a) - (b) expressed as
a percentage) 0.60% 0.67%
=============================================== ============== ==============
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 shareholders' funds is called 'gearing'. If the
Company's assets grow, shareholders' funds 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.
Equity gearing is the Company's borrowings adjusted for 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) Regulations, 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.
Automatic Exchange of Information
In order to fulfil its obligations under UK Tax Legislation
relating to the automatic exchange of information, the Company is
required to collect and report certain information about certain
shareholders.
The legislation requires investment trust companies to provide
personal information to HMRC on certain investors who purchase
shares in investment trusts. As an affected company, Baillie
Gifford European Growth Trust will have to provide information
annually to the local tax authority on the tax residencies of a
number of non-UK based certificated shareholders and corporate
entities.
Shareholders, excluding those whose shares are held in CREST,
who come on to the share register will be sent a certification form
for the purposes of collecting this information.
For further information, please see HMRC's Quick Guide:
Automatic Exchange of Information - information for account holders
gov.uk/government/publications/exchange-of-
information-account-holders.
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