TIDMBGEU
RNS Number : 7676T
Baillie Gifford European Growth Tst
17 November 2023
RNS Announcement
Baillie Gifford European Growth Trust plc
Legal Entity Identifier: 213800QNN9EHZ4SC1R12
Results for the year to 30 September 2023
Over the year to 30 September 2023, the Company's net asset
value per share (NAV) total return was 8.3% compared to a total
return of 20.5% for the comparative index. The share price total
return for the same period was 8.6%.
-- Positive contributors in the period included: Ryanair, which
continued to take market share from weaker airlines and invest in
new capacity; and online classified companies Adevinta and its
major shareholder Schibsted which showed that they can offset
temporarily weaker volumes with price increases.
-- Negative contributors in the period included: battery startup
Northvolt which was written down to reflect moves in public
benchmarks, though operational progress remains good; and payments
processing company Adyen which fell after announcing some market
share losses in the US.
-- Annual turnover was 9% and gearing stood at 15.6% of
shareholders' funds as at the year end.
-- The portfolio now contains five unlisted companies accounting
for 10.9% of total assets as at 30 September 2023 (2022: 11.0% in
four companies).
-- The net revenue for the year was 2.68p per share (2022:
0.79p). A special interim dividend of 2.20p was paid on 15
September 2023. A final dividend of 0.40p per share is being
recommended (2022: 0.70p).
-- Over the year a total of 538,471 shares were 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 GBP217 billion under
management and advice as at 15 November 2023.
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 8.3% compared to a total return of
20.5% for the FTSE Europe ex UK Index, in sterling terms. The share
price total return over the year was 8.6%; as at 30 September 2023
the discount to NAV of the Company's shares was 13.6%.
The dramatic shift in macroeconomics and interest rates of all
durations has continued to make it a challenging time for growth
investors. Discount rates have risen; price earnings ratios are
conversely lower. Despite strong operational performance from most
of our holdings (further detail provided in the Managers' report on
below) the share prices of the types of companies we own have not
recovered from the significant falls we saw in the previous year,
and in some cases have fallen further.
Since Baillie Gifford began managing the portfolio in November
2019, the NAV total return has been 9.3% compared to a total return
of 25.1% for the FTSE Europe ex UK Index, in sterling terms. The
share price total return has been 2.6%, with the discount widening
from 7.5% to 13.6%.
After an initially strong run of performance, the Company has
suffered two years of poor investment results. This has damaged the
longer run outcome for now. The Board is painfully aware of the
volatility and disappointment this has entailed for shareholders
but is confident that Baillie Gifford's currently out-of-favour
growth style will be vindicated in the longer term. The reason
equity investment yields the best long run returns is that it
involves volatility and requires patience and, on occasion, a
degree of endurance. The Board therefore considers it premature to
make a proper assessment of long-term performance.
Earnings and dividend
During the year the Company received a repayment of tax (and
interest) from HMRC, totalling GBP7.9 million (2.20p per share)
following receipt of a settlement agreement in relation to the
Franked Investment Group ('FII GLO') computational-based claims.
The Board distributed this to shareholders as a special interim
dividend of 2.20p per ordinary share on 15 September 2023.
Revenue return per share for the year was 2.68p (2022 - 0.79p)
and the Board is recommending a final dividend of 0.40 p per
ordinary share (2022 - 0.70p). Subject to shareholder approval at
the Annual General Meeting ('AGM'), the dividend will be paid on 2
February 2024 to shareholders on the register on 5 January 2024.
The ex-dividend date will be 4 January 2024.
Borrowings
The Company has two EUR30 million long-term debt facilities: the
first has a remaining duration of 17 years and is priced at a fixed
rate of 1.57% and the other has over 12 years outstanding 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 gearing of 15.6% of shareholders'
funds.
Share buybacks, issuance and discount
Over the course of the Company's financial year, the share price
moved from a 13.5% discount to NAV to a 13.6% discount to NAV.
During this period, the Company bought back 538,471 shares at a
total cost of approximately GBP501,000. 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 year and so, at the AGM, is
seeking to renew the annual authority to repurchase up to 14.99% of
the shares in the Company 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 AGM. As with the
buy back authority, this authority would expire at the conclusion
of the AGM to be held in 2025.
The Board
As noted in the 2022 Annual Report, Dr. Woodward will stand down
from the Board at the AGM. The Board therefore undertook a
recruitment process seeking to appoint an additional independent
non-executive Director and was pleased to announce the appointment
of David Barron with effect from 1 October 2023. David has spent 25
years working in the investment management sector and was until
November 2019 Chief Executive Officer of Miton Group PLC following
six years with the firm. Prior to this he was Head of Investment
Trusts at JP Morgan Asset Management for more than ten years having
joined Robert Fleming in 1995. David will stand for election at the
upcoming AGM. On Dr Woodward's departure from the Board, Andrew
Watkins will become Chair of the Audit Committee and Emma Davies
Senior Independent Director. It is my intention to stand down at
the 2025 AGM, at which time David will replace me as Chair. The
Board intends to undertake a recruitment process next year and
anticipates appointing a further Director by 30 September 2024.
The Board wishes to thank Dr Woodward for his many years of
commitment, service, energy and insight and, in particular, for his
assiduity and experience in the role of Chairman of the Audit
Committee.
Annual General Meeting
The AGM will be held at 11 a.m. on 18 January 2024 at the
Institute of Directors, 116 Pall Mall, London, SW1Y 5ED. The
Managers will make a presentation and I look forward to meeting
shareholders who are able to attend. To accurately reflect the
views of shareholders of the Company, the Board intends to hold the
AGM voting on a poll, rather than by a show of hands as has been
customary. This will ensure an exact and definitive result. The
Board encourages all shareholders to exercise their votes on the
AGM resolutions by completing and submitting the form of proxy
enclosed with the Annual Report to ensure that your votes are
represented at the meeting (whether or not you intend to attend in
person).
If you hold shares through a share platform or other nominee,
the Board encourages you to contact these organisations directly as
soon as possible to arrange for you to submit votes in advance of
the AGM. Alternatively, the Association of Investment Companies'
('AIC') website theaic.co.uk/how-to-vote-your-shares has
information on how to vote your shares if you hold them via one of
the major platforms. The following link will also take you through
to the AIC website where there is information on how your platform
can help you attend the AGM in person
theaic.co.uk/aic/ready-to-invest/shareholder-voting/attending-an-agm
.
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 110 and 111
of the Annual Report. 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 their
favour.
Outlook
Fund managers are nearly always prone to regard the current
environment as difficult. It is no exaggeration, however, to
describe the present geopolitical turmoil and deterioration in the
fabric and harmony of both democratic and autocratic societies as
troubling and unusual. 25 years of unprecedented and arguably
reckless money printing has come home to roost. Adding value in
anticipating big picture change either good or bad is difficult,
even accepting an element of reflexivity: one thing leads to
another. Inflation leads to falling living standards and,
historically, wars. The good news, as ever, is in the degree of
innovation, disruption and commercial success that can flow from
human ingenuity. Stock-picking in the form of focussing on what
might go right is the best way to explore and mine this seam.
Growing, high quality companies delivering goods and services that
enhance their customers' lives are worthy of attention and
investment. Our Managers are adept at this activity. They have been
sticking to their guns. In this we support them.
Michael MacPhee
Chairman
16 November 2023
Managers' Report
We took over management of the Company four years ago with the
aim of investing in Europe's most dynamic growth companies. Since
then, the share price has experienced a spectacular rise and
equally spectacular fall. Adjusted for the share split, we started
at just over 80p, peaked at around 170p, and ended the current
period almost where we started. While we continually ask ourselves
what we could have done differently, Baillie Gifford has been
managing European portfolios since 1985 and has experienced poor
performance before. Many of our most successful companies have been
through similarly difficult bouts. Just as those companies did, we
emerged from each one in a stronger position. We do not wish to
downplay the recent period of poor performance. We think about it
every
day. Disappointing as this is, however, it is more important to
consider where the share price will be five years from now.
Over short periods there are many variables that help dictate
what a company is worth. These include interest rates, risk
appetite, social media, and many of the behavioural shortcomings
from which we humans regularly suffer. Companies make mistakes too
- operational hiccups happen. These are businesses run by real
people trying to navigate complex issues and unpredictable events.
Over longer periods of time, however, these variables play a far
less significant part. What is more important for value creation is
a strong, durable corporate culture, and the ability to grow
profitably over time. We will make mistakes, but if we build and
maintain a portfolio of high-quality growing businesses run by
people we trust, we believe that we can deliver for our
shareholders.
Performance
Over the last financial year, the Company's NAV delivered a
total return of 8.3% while the FTSE Europe ex UK index returned
20.5% in sterling terms. The Company's share price total return was
8.6%, ending the period at 83.6p, representing a discount of 13.6%
to the NAV. This compares to a discount of 13.5% at the beginning
of the period.
Despite these relative returns, we are increasingly optimistic
about the future. Operational progress has been at least in line
with our expectations, and we are seeing many affirming signals
that our companies are taking advantage of this environment,
investing while peers retrench, carrying out acquisitions, and
buying back shares. We are not the only ones who think the selloff
is overdone.
Positive contributors in the period include Ryanair, which
continued to take market share from weaker airlines and invest in
new capacity. Online classified companies Adevinta and its major
shareholder Schibsted showed that they can offset temporarily
weaker volumes with price increases. Both companies' share prices
have also been boosted by news that a private equity consortium is
looking to acquire Adevinta. Freight forwarder DSV and building
materials manufacturer Kingspan continue to execute well, and both
have been linked with potential large-scale acquisitions made
feasible by their strong balance sheets. Spotify continues to grow
healthily and now boasts over 550m monthly active users. After much
investment, its recent focus has shifted to profitability using
cost reductions and price increases as levers. This shift is
underway at many technology companies, although Spotify is the
first to be rewarded by the market.
Some companies performed less well. Battery startup Northvolt
was written down to reflect moves in public benchmarks, though
operational progress remains good. Elsewhere, payments processing
company Adyen fell almost 50% in the week after announcing some
market share losses in the US. This looks temporary to us, though
we continue to monitor progress and debate the attractiveness of
the new, lower valuation. Sartorius Stedim Biotech, which
manufactures bioprocessing equipment for the biologics industry,
also reported negative news, noting a slowdown in demand and higher
inventories. Again, these issues feel temporary, and
we have made a modest addition. Swedish gaming company Embracer
has been more disappointing. The investment case centred on the
founder's strategy of acquiring media content and gaming studios
and letting their founders flourish in a decentralised
organisation. Unfortunately, this was a case of overpromising and
underdelivering, and management is now being forced to sell assets
to pay down debt. We have some sympathy for the idea that the
company is now undervalued, but we have lost faith in the
management team and the board. Trust in management and alignment
are non-negotiable for us so we have sold our entire position.
Improving performance
We genuinely believe that the future looks brighter than the
past. Cynics may argue that this is what all underperforming fund
managers say, so the onus is on us to explain the underpinnings of
our optimism. So, what are the catalysts to drive improving
performance?
Cognitive psychologist Gary Klein, in his book 'Seeing What
Others Don't', suggests that performance is improved by 'reducing
errors and increasing insights'. As we have written before, our
main error has been misjudging the impact of rapidly shifting
monetary policy on the valuations of growth companies. Because the
companies in the portfolio tend to be smaller and grow much faster
than average, most of their lifetime cashflows are in the future,
and these are now being discounted at a much higher rate than they
were. We have therefore felt the impact of rising rates much more
acutely. When panic sweeps the market,
it is the more nascent, higher growth companies that get hit
hardest.
In order to minimise future valuation risk, we monitor interest
rate and duration risk in the portfolio and construct a reverse
discounted cashflow model for every company we look at. These
process tweaks will help us test our assumptions on valuation, but
also to take advantage of opportunities in a volatile market. This
is crucial - the potential upside is much greater than the
potential downside, so while minimising errors is important, it is
less important than identifying insights to help us invest today in
tomorrow's winners.
Insights
"Insights shift us toward a new story, a new set of beliefs that
are more accurate, more comprehensive, and more useful. Our
insights transform us in several ways. They change how we
understand, act, see, feel, and desire."
- Gary Klein
We strive to identify insights. We look for new ways of seeing
companies, truths that others are perhaps less able to see,
potential that the market is not currently discounting. This is how
one outperforms the market over the long term. Klein suggests that
insights are often generated through pattern recognition and making
connections as a by-product of coincidence or curiosity. Insights
can also come from contradictions and inconsistencies. When we come
across things that don't make sense, we need to build new mental
models to understand what is going on. For us this is happening
more and more when thinking about company valuations.
We have underperformed over the past two years - this simple
observation is irrefutable. Interest rates have risen, and
valuation multiples have fallen. However, here's the contradiction:
over the past two years, the forward price-to-earnings multiple of
our portfolio has fallen by 50%, from 34x to 17x*, which is a 40%
premium to the index we are trying to outperform. If you believe
sell-side analysts, earnings per share (EPS) of our portfolio are
expected to grow 12% per annum over the next three years which
compares favourably to 4% per annum for the index. At those rates,
the valuation multiple of our portfolio would be below that of the
index within five years, although we would be disappointed if it
wasn't sooner. This doesn't make any sense to us. The companies we
invest in typically grow faster than the index and we would expect
this to continue for far longer than five years. We think they are
higher quality, have unique corporate cultures, have less debt, and
are run by some of the best capital allocators in Europe. Things
can always get cheaper but even the idea that our portfolio would
trade at a discount to the index in a few years highlights just how
inefficient the market is at valuing growth.
So, what's going on? Part of the explanation could be related to
hyperbolic discounting. This is a complicated sounding way of
saying that future profits are being excessively discounted. We are
reminded of the 1972 Stanford marshmallow experiment, led by
psychologist Walter Mischel, which set out to measure a child's
willingness to defer gratification. Children would often choose to
devour one marshmallow immediately rather than wait fifteen minutes
to receive two. This desire to experience immediate rewards at the
expense of bigger rewards in the future plagues markets as much as
children.
As long-term investors, we believe that the market tends to
underestimate the attractiveness of special companies over long
periods. This inefficiency becomes much more acute during times of
stress, when time horizons shrink, risk appetite diminishes, and a
premium is placed on certainty. It's no great surprise, then, that
market breadth has narrowed sharply since 2021. Many have sought
refuge in the perceived safety of the largest companies in the
index regardless of their fundamentals or valuations. We've long
believed that the midcap space in Europe contains a high proportion
of future outliers, but this view is increasingly at odds with what
the market is pricing in. This won't last forever, so we believe
that this is the time to be adding to those stocks where we see
asymmetric payoffs.
Portfolio
Portfolio turnover for the year was 9%, implying an average
holding period of just over 10 years. During the second half of our
financial year, we made six new investments in public companies:
EQT, one of the world's largest and most reputable private equity
firms; LVMH and Moncler, two luxury goods companies that are
getting better as they get bigger; Soitec, an innovative French
semiconductor company exposed to rapidly growing markets; Royal
Unibrew, a multi-beverage company with serial acquirer
characteristics; and Eurofins, a global lab testing business we've
been waiting patiently to buy for many years. We also made a new
investment in an unlisted Italian software company called Bending
Spoons, which has a unique approach to monetising consumer mobile
apps. This is a diverse, high-quality, highly profitable collection
of companies growing much faster than the market, with meaningful
inside ownership and attractive valuations.
During the same period, to make way for these new holdings, we
completely sold five investments. We have already mentioned
Embracer, but food delivery firm Just Eat Takeaway.com and green
holding company Aker Horizons didn't work out either. Just Eat
Takeaway.com suffered from an ill-timed acquisition in the highly
competitive US market. Legislators also introduced fee caps which
effectively turned a profitable business into a loss making one.
With Aker Horizons we underestimated how difficult it would be for
its portfolio of clean tech businesses to generate profits. MedTech
distributor Addlife, and heat pump manufacturer NIBE, have been
more successful. During the Covid pandemic, Addlife benefitted from
increased demand for diagnostics and hospital equipment, while
demand for NIBE's energy efficient heat pumps far exceeded supply
during the energy crisis. In both cases we determined that
valuations had risen too much, and that the capital would be best
redirected into better ideas.
Private companies
While the Company can invest up to 20% of total assets in
private companies, we currently have five investments accounting
for around 11%: Northvolt (4.9%), McMakler (1.8%), sennder (1.8%),
Flix (1.5%) and Bending Spoons (0.9%). Overall operational progress
has been good and both Northvolt and Flix are rumoured to be
considering an initial public offering ('IPO') in 2024.
We think giving investors low-cost access to private companies
that would otherwise be unavailable is an attractive proposition.
Companies are staying private for longer, as many of them are
relatively asset light and therefore require little capital to
grow. As a result, many are in the fortunate position to be able to
choose their investors. We think our reputation as long-term growth
investors and our ability to invest in both private and public
markets mean we are advantaged when it comes to deal flow. We
absolutely believe that investing in Europe's increasingly dynamic
private companies can generate significant value and provide
insights into a level of disruption not normally seen in public
markets.
Northvolt
Our very first private investment is becoming increasingly
important to us and the broader European economy. Northvolt was
founded in 2016 by two former Tesla executives backed by two
Swedish entrepreneurs who wanted to accelerate decarbonisation.
Their mission was to produce the world's greenest batteries with
the lowest carbon footprint. In just seven years, the company has
taken on over 4,000 employees, secured more than $8bn in funding,
and received more than $55bn in orders from customers like BMW, VW,
Scania, Siemens and ABB. This is truly remarkable.
At 4.9% it is the largest position in the portfolio, so its
success will help underpin any rebound in performance. The rumoured
IPO in 2024 is just a milestone for us if it happens as we can
continue holding the shares if there remains sufficient upside.
Either way it should be very high profile particularly given its
strategic importance to Europe's automotive industry, politicians,
and financial institutions who all want to see it succeed. Europe
cannot afford to rely on Asian battery manufacturers. It needs to
build its own supply chain and Northvolt is the best chance we
have.
Northvolt's opportunity is large and growing. In Europe alone,
battery demand is expected to increase from around 150GWh in 2022
to 1,370GWh in 2030. This is likely to be revised upwards as new
markets and applications emerge. We suspect this will be a
commoditised market, but Northvolt's strategy seems well-suited.
Important aspects of this strategy include:
-- An ambition to lower the carbon footprint of a battery to
10kg of carbon dioxide equivalent per kilowatt hour, a 90%
reduction from the current industry benchmark. This will be driven
by access to very cheap renewable hydroelectric power, using
responsibly sourced raw materials, and using at least 50% recycled
material.
-- Its unique vertical integration. Everything from cathode
production to cell assembly to recycling will be done in-house.
This not only lowers carbon emissions but also helps capture more
recycled materials and improves quality.
-- A European supply chain. A local champion needs local supply,
and Northvolt's aim is to source 90% of components from within
Europe. This creates a lot of alignment with those customers and
politicians responsible for orders and subsidies.
-- A focus on talent. Northvolt has assembled one of the best
R&D teams in the world. Battery chemistries and technological
roadmaps will evolve so it is important that the company can adapt
and compete with its Asian competitors.
During an investment trip to Sweden with the Board, we recently
visited Northvolt's first factory, Northvolt Ett, in the small town
of Skellefteå. The 200-hectare site near the Arctic Circle is
equivalent to around 300 football pitches, so is a highly ambitious
project. The current plan is to produce 150GWh of batteries by
2030, but there is upside potential to this figure. To put this
into context, if the average electric car has a 70kWh battery, this
would be enough to power more than 2 million of the 11 million cars
sold in Europe in 2022. Using public estimates for battery prices
in 2030, this could result in $10-15bn in sales. Engineering and
manufacturing at this scale poses tremendous challenges, and there
will no doubt be delays and setbacks. If Northvolt succeeds,
however, the payoff for investors could be huge.
Outlook
Our investment style is very much out of favour, and we have
undoubtedly made mistakes, but we have the right people and
corporate culture at Baillie Gifford to persevere through this
difficult time. There are plenty of geopolitical tensions and
economic headwinds to worry about, but we must not let such factors
overshadow the adaptability, innovation, and capital allocation of
the companies we invest in. We are riding on the coat-tails of
founders, families and management teams who are doing all the hard
work. That this work is being so discounted by the market gives us
confidence in a brighter outlook for returns from here.
Stephen Paice
Chris Davies
Baillie Gifford
16 November 2023
* Representative portfolio and index figures are calculated
excluding negative earnings.
List of investments
As at 30 September 2023
2023 2023
Value % of total
Name Geography Business GBP'000 assets
----------------------- ------------ ----------------------------------------------------- --------- -----------
Northvolt (U) Sweden Battery developer and manufacturer 18,752 4.9
Prosus Netherlands Portfolio of online consumer companies 18,710 4.9
Ryanair Ireland Low-cost airline 16,791 4.4
Topicus.com Netherlands Acquirer of vertical market software companies 16,053 4.2
Schibsted Norway Media and classifieds advertising platforms 14,381 3.8
Atlas Copco Sweden Industrial group 13,070 3.5
DSV Denmark Freight forwarder 12,473 3.3
ASML Netherlands Semiconductor equipment manufacturer 12,247 3.2
Allegro.eu Poland E-commerce platform 12,058 3.2
Kingspan Ireland Building materials provider 11,356 3.0
EXOR Netherlands Investment company specialising in industrials 10,774 2.8
Kering France Owner of luxury fashion brands 10,570 2.8
IMCD Netherlands Speciality chemicals distributor 9,697 2.6
Adevinta Norway Online classifieds marketplaces 9,606 2.5
Avanza Bank Sweden Online investment platform 9,396 2.5
Richemont Switzerland Owner of luxury goods companies 8,907 2.3
Spotify Sweden Online audio streaming service 8,528 2.2
Manufacturer of precision instruments for
Mettler-Toledo Switzerland laboratories 8,302 2.2
Dassault Systèmes France Develops software for 3D computer-aided design 8,137 2.1
Adyen Netherlands Online payments platform 8,024 2.1
Nexans France Cable manufacturing company 8,003 2.1
Reply Italy IT consulting and systems integration provider 7,089 1.9
sennder (U) # Germany Freight forwarder focused on road logistics 6,938 1.8
McMakler (U) Germany Digital real estate broker 6,668 1.8
Sartorius Stedim
Biotech France Pharmaceutical and laboratory equipment provider 6,531 1.7
Zalando Germany Online fashion retail platform 5,848 1.5
Flix (U) Germany Long-distance bus and train provider 5,841 1.5
Hypoport* Germany FinTech platform 5,633 1.5
Hexpol Sweden Manufacturer of rubber and polymer compounds 5,591 1.5
Investment company specialising in digital
Kinnevik Sweden consumer businesses 5,508 1.5
Delivery Hero Germany Online food delivery platform 4,968 1.3
Epiroc Sweden Mining and infrastructure equipment provider 4,910 1.3
Evotec Germany Contract research and drug discovery company 4,793 1.3
HelloFresh Germany Meal kit delivery company 4,775 1.3
LVMH* France Luxury goods 4,626 1.2
Wizz Air Hungary Low-cost airline 4,583 1.2
Manufactures engineered substrates for semiconductor
Soitec* France wafers 4,508 1.2
Hemnet Sweden Online real estate platform 4,400 1.2
adidas Germany Sports shoes and clothing manufacturer 4,170 1.1
Beijer Sweden Wholesaler of cooling technology 3,827 1.0
AUTO1 Germany Online platform for used car selling in Europe 3,785 1.0
Moncler* Italy Manufactures luxury apparel products 3,693 1.0
Bending Spoons (U)
* Italy Mobile application software developer 3,243 0.9
AutoStore* Norway Warehouse automation and cubic storage systems 3,121 0.8
Tonies Germany Musical storybox toys for children 3,099 0.8
Royal Unibrew* Denmark Alcoholic and non-alcoholic beverages 2,892 0.8
Eurofins* France Analytical testing services 2,862 0.8
Developer of treatments based on gene editing
Crispr Therapeutics Switzerland technology 2,701 0.7
Investment firm, investing in equity, ventures,
EQT* Sweden infrastructure and real estate 2,688 0.7
Investment company specialising in early-stage
VNV Global Sweden technologies 2,253 0.6
Cellectis France Biotech focused on genetic engineering 433 0.1
----------------------- ------------ ----------------------------------------------------- --------- -----------
Total Investments 377,812 99.6
-------------------------------------------------------------------------------------------- --------- -----------
Net Liquid Assets* 1,536 0.4
-------------------------------------------------------------------------------------------- --------- -----------
Total Assets 379,348 100.0
-------------------------------------------------------------------------------------------- --------- -----------
Borrowings (51,960) (13.7)
-------------------------------------------------------------------------------------------- --------- -----------
Shareholders' funds 327,388 86.3
-------------------------------------------------------------------------------------------- --------- -----------
(U) Denotes private company investment.
* New holding bought during the year (Addlife, Aker Horizons,
Embracer, NIBE Industrier, Takeaway.com, Ubisoft Entertainment were
sold during the year)
Includes American Depositary Receipt.
# Includes convertible loan note.
Income Statement
2023 2023 2023 2022 2022 2022
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ----- --------- -------- -------- --------- --------- ---------
Gains/(losses) on investments - 19,795 19,795 - (241,839) (241,839)
Currency (losses)/gains (40) 533 493 104 (1,145) (1,041)
Income 2 3,912 - 3,912 4,313 - 4,313
Investment management fee 3 (354) (1,416) (1,770) (412) (1,647) (2,059)
Other administrative expenses (564) - (564) (572) - (572)
-------------------------------- ----- --------- -------- -------- --------- --------- ---------
Net return before finance costs
and taxation 2,954 18,912 21,866 3,433 (244,631) (241,198)
-------------------------------- ----- --------- -------- -------- --------- --------- ---------
Finance costs of borrowings (164) (653) (817) (214) (652) (866)
-------------------------------- ----- --------- -------- -------- --------- --------- ---------
Net return before taxation 2,790 18,259 21,049 3,219 (245,283) (242,064)
-------------------------------- ----- --------- -------- -------- --------- --------- ---------
Tax on ordinary activities 6,835 - 6,835 (358) - (358)
-------------------------------- ----- --------- -------- -------- --------- --------- ---------
Net return after taxation 9,625 18,259 27,884 2,861 (245,283) (242,422)
-------------------------------- ----- --------- -------- -------- --------- --------- ---------
Net return per ordinary share 4 2.68p 5.09p 7.77p 0.79p (67.98p) (67.19p)
-------------------------------- ----- --------- -------- -------- --------- --------- ---------
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.
The accompanying notes below are an integral part of the
Financial Statements.
Balance Sheet
2023 2023 2022 2022
Notes GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------- ----- -------- -------- -------- --------
Fixed assets
Investments held at fair value through
profit or loss 6 377,812 358,105
Current assets
Debtors 2,406 2,797
Cash and cash equivalents 907 3,571
------------------------------------------------- ----- -------- -------- -------- --------
3,313 6,368
------------------------------------------------- ----- -------- -------- -------- --------
Creditors
Amounts falling due within one year: (1,775) (1,516)
------------------------------------------------- ----- -------- -------- -------- --------
Net current assets 1,538 4,852
------------------------------------------------- ----- -------- -------- -------- --------
Total assets less current liabilities 379,350 362,957
------------------------------------------------- ----- -------- -------- -------- --------
Creditors
Amounts falling due after more than one
year: 7 (51,960) (52,560)
------------------------------------------------- ----- -------- -------- -------- --------
Net assets 327,390 310,397
------------------------------------------------- ----- -------- -------- -------- --------
Capital and reserves
Share capital 8 10,061 10,061
Share premium account 125,050 125,050
Capital redemption reserve 8,750 8,750
Capital reserve 176,215 158,457
Revenue reserve 7,314 8,079
------------------------------------------------- ----- -------- -------- -------- --------
Shareholders' funds 327,390 310,397
------------------------------------------------- ----- -------- -------- -------- --------
Net asset value per ordinary share * (borrowings
at book value) 91.4p 86.5p
------------------------------------------------- ----- -------- -------- -------- --------
Net asset value per ordinary share * (borrowings
at fair value) 96.7p 91.9p
------------------------------------------------- ----- -------- -------- -------- --------
The accompanying notes below are an integral part of the
Financial Statements.
* See Glossary of terms and alternative performance measures at
the end of this announcement.
Statement of Changes in Equity
For the year ended 30 September 2023
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
2022 10,061 125,050 8,750 158,457 8,079 310,397
Dividends paid during the year 5 - - - - (10,390) (10,390)
Shares bought back into treasury - - - (501) - (501)
Net return on ordinary activities
after taxation - - - 18,259 9,625 27,884
------------------------------------ ----- -------- -------- ----------- -------- -------- -------------
Shareholders' funds at 30 September
2023 10,061 125,050 8,750 176,215 7,314 327,390
------------------------------------ ----- -------- -------- ----------- -------- -------- -------------
For the year ended 30 September 2022
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 - - - (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
------------------------------------ ----- -------- -------- ----------- ---------- -------- -------------
The accompanying notes below are an integral part of the
Financial Statements.
Cash Flow Statement
2023 2023 2022 2022
Notes GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ ----- -------- -------- --------- --------
Cash flows f rom operating activities
Net return on ordinary activities
before taxation 21,049 (242,064)
Net (gains)/losses on investments (19,795) 241,839
Currency (gains)/losses (533) 1,041
Finance costs of borrowings 817 866
Tax repayment received 7,034 -
Overseas withholding tax suffered (199) (284)
Overseas withholding tax received 451 459
Changes in debtors* (170) (214)
Changes in creditors* 29 (316)
------------------------------------------ ----- -------- -------- --------- --------
Cash from operations 8,683 1,327
Interest paid (813) (852)
------------------------------------------ ----- -------- -------- --------- --------
Net cash inflow from operating activities 7,870 475
------------------------------------------ ----- -------- -------- --------- --------
Cash flows from investing activities
Acquisitions of investments(#) (46,765) (147,499)
Disposals of investments(#) 47,203 147,012
------------------------------------------ ----- -------- -------- --------- --------
Net cash inflow/(outlow) from investing
activities 438 (487)
------------------------------------------ ----- -------- -------- --------- --------
Cash flows from financing activities
Shares bought back into treasury (509) (7,436)
Equity dividends paid 5 (10,390) (1,276)
------------------------------------------ ----- -------- -------- --------- --------
Net cash outflow from financing
activities (10,899) (8,712)
------------------------------------------ ----- -------- -------- --------- --------
Decrease in cash and cash equivalents (2,591) (8,724)
Exchange movements (73) 43
Cash and cash equivalents at start
of year 3,571 12,252
------------------------------------------ ----- -------- -------- --------- --------
Cash and cash equivalents at end
of year 907 3,571
Comprising:
Cash at bank 907 3,571
------------------------------------------ ----- -------- -------- --------- --------
907 3,571
------------------------------------------ ----- -------- -------- --------- --------
* Change in debtors is made up of changes in accrued income,
prepaid expenses and taxation recoverable (excluding overseas
withholding tax received in the year). Change in creditors is made
up of changes in other creditors and accruals.
Cash from operations includes dividends received of GBP2,839,000
(2022 - GBP4,284,000) and interest received of GBP919,000 (2022 -
GBP2,000).
# Acquisitions of investments is made up of the current year
purchases at cost, plus opening purchases for subsequent
settlement, less
closing purchases for subsequent settlement (see note 11).
Disposals of investments is made up of the current year sales
proceeds plus
opening investment sales awaiting settlement, less closing
investment sales awaiting settlement.
The accompanying notes below are an integral part of the
Financial Statements.
Notes to the Condensed Financial Statements
1. The Financial Statements for the year to 30 September 2023
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 below which are consistent with those applied for the
year ended 30 September 2022.
2. Income
2023 2022
GBP'000 GBP'000
------------------------ -------- --------
Income from investments
Overseas dividends 2,890 4,311
Overseas interest 103 -
------------------------ -------- --------
Other income
Interest 919 2
------------------------ -------- --------
Total income 3,912 4,313
------------------------ -------- --------
Interest for 2023 includes GBP869,000 interest received from
HMRC with the tax repayment (see note 6 on page 96 of the Annual
Report and Financial Statements).
3. Investment Management Fee
2023 2023 2023 2022 2022 2022
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------- -------- -------- -------- -------- --------
Investment management
fee 354 1,416 1,770 412 1,647 2,059
---------------------- -------- -------- -------- -------- -------- --------
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. The 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
2023 2023 2023 2022 2022 2022
Revenue Capital Total Revenue Capital Total
------------------------ -------- -------- ------ -------- -------- --------
Net return per ordinary
share 2.68p 5.09p 7.77p 0.79p (67.98p) (67.19p)
------------------------ -------- -------- ------ -------- -------- --------
Revenue return per ordinary share is based on the net revenue
return on ordinary activities after taxation of GBP9,625,000 (2022
- GBP2,861,000), and on 358,552,904 (2022 - 360,823,119) 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
gain for the financial year of GBP18,259,000 (2022 - net capital
loss of GBP245,283,000), and on 358,552,904 (2022 - 360,823,119)
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
2023 2022
2023 2022 GBP'000 GBP'000
---------------------------------------- ----- ----- -------- --------
Amounts recognised as distributions
in the period:
Previous year's final (paid 10 February
2023) 0.70p 0.35p 2,511 1,276
Special Interim Dividend (paid 15
September 2023) 2.20p - 7,879 -
---------------------------------------- ----- ----- -------- --------
2.90p 0.35p 10,390 1,276
---------------------------------------- ----- ----- -------- --------
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 GBP9,625,000 (2022 - GBP2,861,000).
2023 2022
2023 2022 GBP'000 GBP'000
------------------------------------- ----- ----- -------- --------
Dividends paid and proposed in the
period:
Special Interim Dividend (paid 15
September 2023) 2.20p - 7,879 -
Proposed final dividend per ordinary
share
(payable 10 February 2024) 0.40p 0.70p 1,433 2,511
------------------------------------- ----- ----- -------- --------
2.60p 0.70p 9,312 1,276
------------------------------------- ----- ----- -------- --------
6. Investments
Level Level Level
1 2 3 Total
As at 30 September 2023 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- -------- -------- --------
Securities
Listed equities 336,369 - - 336,369
Unlisted equities - - 41,443 41,443
---------------------------------- -------- -------- -------- --------
Total financial asset investments 336,369 - 41,443 377,812
---------------------------------- -------- -------- -------- --------
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 equities - - 39,599 39,599
---------------------------------- -------- -------- -------- --------
Total financial asset investments 318,506 - 39,599 358,105
---------------------------------- -------- -------- -------- --------
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 pages 92 and 93 of the Annual Report and
Financial Statements. A sensitivity analysis by valuation technique
of the unlisted securities is on pages 104 and 105 of the Annual
Report and Financial Statements.
7. Creditors - amounts falling due after more than one year
2023 2022
GBP'000 GBP'000
----------------------------- -------- --------
Unsecured loan notes:
EUR30m 1.55% 24 June 2036 25,998 26,299
EUR30m 1.57% 8 December 2040 25,962 26,261
----------------------------- -------- --------
51,960 52,560
----------------------------- -------- --------
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.
The Company currently has 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 2023, nil had been drawn down (2022 - 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. Share Capital
2023 2023 2022 2022
Number GBP'000 Number GBP'000
----------------------------------- ----------- -------- ------------ --------
Allotted, called up and fully paid
ordinary shares of 2.5p each 358,149,200 8,954 358,687,671 8,967
Treasury shares of 2.5p each 44,294,490 1,107 43,756,019 1,094
----------------------------------- ----------- -------- ------------ --------
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 2023
the Company had authority to buy back 53,228,811 ordinary shares.
During the year to 30 September 2023, no ordinary shares (2022 -
nil) were bought back for cancellation and 538,471 ordinary shares
were bought back into treasury at a cost of GBP500,000 (2022 -
GBP7,444,000). 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 2023 no shares were issued (in the
year to 30 September 2022 - no shares were issued).
9. Analysis on change in net debt
1 October Other non-cash Exchange 30 September
2022 Cash flows changes movement 2023
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------- ---------- -------------- --------- ------------
Cash and cash equivalents 3,571 (2,591) - (73) 907
Loans due in more than one
year (52,560) - (6) 606 (51,960)
--------------------------- --------- ---------- -------------- --------- ------------
(48,989) (2,591) (6) 533 (51,053)
--------------------------- --------- ---------- -------------- --------- ------------
10. The financial information for 2022 is derived from the
statutory accounts for 2022 which have been delivered to the
Registrar of Companies. Statutory accounts for 2023 will be
delivered to the Registrar of Companies in due course. The Auditors
have reported on the 2022 and 2023 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.
11. 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 76 of the Annual Report and Financial
Statements. The Directors' Fees are included in note 4 on page 95
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 95 of the Annual Report and Financial
Statements and the amount accrued at 30 September 2023 is set out
in note 11 on page of the Annual Report and Financial Statements.
Details of the Investment Management Agreement are set out on page
58 of the Annual Report and Financial Statements.
The Company is part of a marketing programme which includes all
the investment trusts managed by the Manager. The Company's
marketing contribution, recharged by the Manager, was GBP88,000
(GBP100,000) as disclosed in note 4 on page 95 of the Annual Report
and Financial Statements.
12. The Annual Report and Financial Statements will be available
on the Company's page of the Managers' website at
bgeuropeangrowth.com on or around 1 December 2023.
None of the views expressed in this document should be construed
as advice to buy or sell a particular investment.
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.
Third Party data provider disclaimers
No third party data provider ('Provider') makes any warranty,
express or implied, as to the accuracy, completeness or timeliness
of the data contained herewith nor as to the results to be obtained
by recipients of the data.
No Provider shall in any way be liable to any recipient of the
data for any inaccuracies, errors or omissions in the index data
included in this document, regardless of cause, or for any damages
(whether direct or indirect) resulting therefrom. No Provider has
any obligation to update, modify or amend the data or to otherwise
notify a recipient thereof in the event that any matter stated
herein changes or subsequently becomes inaccurate.
Without limiting the foregoing, no Provider shall have any
liability whatsoever to you, whether in contract (including under
an indemnity), in tort (including negligence), under a warranty,
under statute or otherwise, in respect of any loss or damage
suffered by you as a result of or in connection with any opinions,
recommendations, forecasts, judgements, or any other conclusions,
or any course of action determined, by you or any third party,
whether or not based on the content, information or materials
contained herein.
FTSE Index Data
Source: London Stock Exchange Group plc and its group
undertakings (collectively, the 'LSE Group'). (c)LSE Group 2023.
FTSE Russell is a trading name of certain of the LSE Group
companies. 'FTSE(R)' 'Russell(R)', 'FTSE Russell(R), are trade
marks of the relevant LSE Group companies and are used by any other
LSE Group company under license.
All rights in the FTSE Russell indices or data vest in the
relevant LSE Group company which owns the index or the data.
Neither LSE Group nor its licensors accept any liability for any
errors or omissions in the indices or data and no party may rely on
any indices or data contained in this communication. No further
distribution of data from the LSE Group is permitted without the
relevant LSE Group company's express written consent. The LSE Group
does not promote, sponsor or endorse the content of this
communication.
Sustainable Finance Disclosure Regulation ('SFDR')
The EU SFDR does not have a direct impact in the UK due to
Brexit, however, it applies to third-country products marketed in
the EU. As Baillie Gifford European Growth Trust is marketed in the
EU by the AIFM, Baillie Gifford & Co Limited, via the National
Private Placement Regime, the following disclosures have been
provided to comply with the high-level requirements of SFDR. The
AIFM has adopted Baillie Gifford & Co's Governance and
Sustainable Principles and Guidelines as its policy on integration
of sustainability risks in investment decisions.
Baillie Gifford & Co's approach to investment is based on
identifying and holding high quality growth businesses that enjoy
sustainable competitive advantages in their marketplace. To do this
it looks beyond current financial performance, undertaking
proprietary research to build an in-depth knowledge of an
individual company and a view on its long- term prospects. This
includes the consideration of sustainability factors
(environmental, social and/or governance matters) which it believes
will positively or negatively influence the financial returns of an
investment. More detail on the Managers' approach to sustainability
can be found in the Governance and Sustainability Principles and
Guidelines document, available publicly on the Baillie Gifford
website bailliegifford.com.
Taxonomy Regulation
The Taxonomy Regulation establishes an EU-wide framework of
criteria for environmentally sustainable economic activities in
respect of six environmental objectives. It builds on the
disclosure requirements under SFDR by introducing additional
disclosure obligations in respect of alternative investment funds
that invest in an economic activity that contributes to an
environmental objective. The Company does not commit to make
sustainable investments as defined under SFDR. As such, the
underlying investments do not take into account the EU criteria for
environmentally sustainable economic activities.
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 107
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.
2023 2023 2022 2022
GBP'000 per share GBP'000 per share
-------------------------------- -------- ---------- -------- ----------
Shareholders' funds (borrowings
at book value) 327,390 91.4p 310,397 86.5p
Add: book value of borrowings 51,960 14.5p 52,560 14.7p
Less: fair value of borrowings (32,869) (9.2p) (33,425) (9.3p)
--------------------------------- -------- ---------- -------- ----------
Net asset value (borrowings at
fair value) 346,481 96.7p 329,532 91.9p
--------------------------------- -------- ---------- -------- ----------
The per share figures above are based on 358,149,200 (2022 -
358,687,671) 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.
2023 2023 2022 2022
NAV (book) NAV (fair) NAV (book) NAV (fair)
-------------------- ----------- ----------- ----------- -----------
Closing NAV 91.4p 96.7p 86.5p 91.9p
Closing share price 83.6p 83.6p 79.5p 79.5p
--------------------- ----------- ----------- ----------- -----------
Discount 8.5% 13.6% 8.1% 13.5%
--------------------- ----------- ----------- ----------- -----------
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.
2023 2022
2023 Share 2022 Share
NAV price NAV price
--------------------------------- ----------- ------ ------ ------- -------
Closing NAV/share price (a) 96.7p 83.6p 91.9p 79.5p
Dividend adjustment factor* (b) 1.0286 1.0328 1.0024 1.0025
--------------------------------- ----------- ------ ------ ------- -------
(c) = (a)
Adjusted closing NAV/share price x (b) 99.5p 86.3p 92.1p 79.7p
--------------------------------- ----------- ------ ------ ------- -------
Opening NAV/share price (d) 91.9p 79.5p 154.5p 152.4p
--------------------------------- ----------- ------ ------ ------- -------
(c) ÷
Total return (d) -1 8.3% 8.6% (40.4%) (47.7%)
--------------------------------- ----------- ------ ------ ------- -------
* The dividend adjustment factor is calculated on the assumption
that the dividends of 0.7p and 2.20p (2022 - final dividend 0.35p)
paid by the Company during the year were reinvested into shares of
the Company at the cum income NAV/share price, as appropriate, at
the ex-dividend date.
The NAV (fair) total return for the period since Baillie Gifford
began managing the portfolio in November 2019 can be calculated
using the methodology shown in the table above and an opening NAV
of 93.7p, a dividend adjustment factor of 1.0585 and a closing NAV
of 96.7p.
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 is provided below.
2023 2022
------------------------------------------ ---- -------------- --------------
Investment management fee GBP1,770,000 GBP2,059,000
Other administrative expenses GBP564,000 GBP572,000
------------------------------------------ ---- -------------- --------------
Total expenses (a) GBP2,334,000 GBP2,631,000
------------------------------------------ ---- -------------- --------------
Average net asset value (with borrowings (b) GBP379,519,000 GBP439,950,000
deducted at fair value)
------------------------------------------ ---- -------------- --------------
Ongoing charges ((a) ÷ (b) expressed
as a percentage) 0.62% 0.60%
------------------------------------------------ -------------- --------------
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.
Gearing is the Company's borrowings adjusted for cash and cash
equivalents expressed as a percentage of shareholders' funds.
Gross 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.
-end-
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END
FR BRBMTMTIBMPJ
(END) Dow Jones Newswires
November 17, 2023 02:00 ET (07:00 GMT)
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