TIDMEWI
RNS Number : 0867A
Edinburgh Worldwide Inv Trust PLC
18 January 2024
RNS Announcement
Edinburgh Worldwide Investment Trust plc
Legal Entity Identifier: 213800JUA8RKIDDLH380
Results for the year to 31 October 2023
Commenting on the performance and outlook, Chair Henry Strutt,
said:
"Current market conditions, which have been characterised by
extreme volatility, short-termism and risk aversion have meant
these are seriously testing times for long-term, conviction-based
investors. However, while we should not dismiss the impact on our
shareholders of the recent setbacks in performance, we are
reassured by the fact that the underlying operational performance
of our portfolio has been strong. There are increasing signs that
we are at the top of the interest rate cycle and the reduction in
risk appetite we have seen recently is starting to unwind. While we
cannot be complacent or assume that recovery in valuations will be
a straightforward or immediate process, we see early signs of
improvement and genuine prospects for robust returns as conditions
normalise over time."
Overview
-- The Company exists to provide shareholders with an
opportunity to access the outsized returns that will accrue to
businesses able to exploit innovation across foundational
technologies such as biotechnology and gene sequencing, aeronautics
and space technology, automation and artificial intelligence to
semi-conductors, data processing and energy transformation and
storage, that are transforming our society and economy.
-- To access these strong returns requires a minimum five-year
investment horizon, and in many cases up to 10 years, and therefore
success or otherwise of the strategy cannot be appropriately
evaluated on a quarterly or annual basis.
-- The return to more normal inflationary and interest rate
conditions after the "cheap money" environment of the past decade
has adversely impacted valuations in the short-term but from a
longer-term perspective creates a highly attractive foundation for
thoughtful long-term growth investing which is EWIT's specialty,
with the prospect for robust returns as attractive as at any time
in recent memory.
Performance Summary
-- In difficult markets characterised by extreme volatility,
short-termism and risk aversion, the Company's net asset value
('NAV') per share, cum income with debt at fair value, decreased by
23.6% and the share price by 27.7% over the year to 31 October
2023.
-- The Company's comparative index, the S&P Global Small Cap
Index total return, which covers a wide spectrum of different
companies, decreased by 4.3% in sterling terms.
-- However, underlying operational performance within the
portfolio has been strong, and the Board has been reassured by the
fact that the majority of companies in the portfolio have robust
balance sheets and good cash positions and are expected to perform
strongly irrespective of macro-conditions.
-- Despite the fall in NAV, a number of investments delivered
positive performances over the period. Stand-outs included: Exact
Sciences, a provider of non-invasive molecular tests for early
cancer detection; Axon Enterprises, a law enforcement equipment and
software provider; and, Space Exploration Technologies (SpaceX),
which designs, manufactures and launches advanced rockets and
spacecraft.
-- Among those investments which contributed to the overall
decline in NAV were: Novocure, a manufacturer of medical devices
for cancer treatment; Alnylam Pharmaceuticals, a drug developer
focused on harnessing gene silencing technology; and, Staar
Surgical, which offers ophthalmic implants for vision
correction.
-- Given its growth company focus, the Company aims to generate
significant returns over the long term primarily through capital
appreciation rather than dividends. The net revenue return per
share was a negative 0.65p per share and therefore no final
dividend is being recommended. Should the level of underlying
income increase in future years, the Board will seek to distribute
the minimum permissible to maintain investment trust status.
-- Over the course of the financial year, the Company undertook
76 buybacks, buying back 5,190,382 shares for treasury. A further
1,710,933 shares have been bought back for treasury since the
period end.
-- As an Investment Trust, the Company is able to deploy
leverage where it sees opportunities to enhance returns, as was the
case in the course of the past financial year. As a result,
invested equity gearing stood at +14.1% of shareholders' funds at
the financial year end (2022 - +12.3%) and is currently +12.6%.
-- One of the unique features of EWIT's strategy, compared with
other growth investment vehicles, is its ability to spot and invest
in private companies many of which are, in the view of the Manager,
better equipped, culturally and structurally to exploit new
innovations at scale. As at the year end, the Company held fourteen
private companies accounting for 26.0% of total assets (2022 -
20.1% of total assets in fourteen companies). No new private
company investments were made during the year although follow-on
investments were made in SHINE Technologies and Astranis Space
Technologies, companies, which in the view of the Managers show
strong potential. There are currently still fourteen private
companies held accounting for 25.8% of total assets.
* Source: LSEG 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.
Past performance is not a guide to future performance.
Baillie Gifford & Co Limited
17 January 2024
The value of an investment and any income from it is not
guaranteed and may go down as well as up and investors may not get
back the amount invested. This is because the share price is
determined by the changing conditions in the relevant stock markets
in which the Company invests and by the supply and demand for the
Company's shares. Investment in investment trusts should be
regarded as medium to long-term. You can find up to date
performance information about Edinburgh Worldwide on the Edinburgh
Worldwide page of the Managers' website at
edinburghworldwide.co.uk(++)
(++) 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:
Anzelm Cydzik, Baillie Gifford & Co
Tel: 0131 275 2000
Jonathan Atkins, Director, Four Communications
Tel: 0203 920 0555 or 07872 495396
Andrew Garfield, Garfield Advisory Ltd
Tel: 07974982337
Jason Nisse, Garfield Advisory Ltd
Tel: 07769688618
Chair's statement
Our Mission
The Company's mission is to invest in innovative businesses that
are developing next generation products and services. We are living
through a period of unprecedented scientific innovation and
technological change. Edinburgh Worldwide ('EWIT') is designed to
provide investors, who are otherwise unable to access this dynamic
asset class, a way to participate in the exciting developments we
are seeing across a whole range of foundational technologies from
biotechnology and gene sequencing, through aeronautics and space
technology, automation and artificial intelligence to
semi-conductors, data processing and energy transformation and
storage. The flexibility of the investment trust structure allows
us to hold for the long-term and where necessary make follow-on
investment in these growing companies as they look for additional
finance to achieve their potential, without having to raise
additional funds from our investors.
We have always believed that in order to take full advantage of
these opportunities and access the potential for the outsized
returns these could generate, requires a five year investment
horizon, and in many cases up to 10 years. To judge performance on
anything less than that, risks undermining the long-term potential
that the Company has been established to access on behalf of its
shareholders.
This however has presented us with a significant challenge over
the last two years in a world where investors are under pressure to
focus on quarterly or even daily fluctuations in valuation.
Inevitably, even in the most favourable of market conditions,
short-term or even medium-term volatility will often be at variance
with the realisation of the long-term potential of the
portfolio.
Market conditions of late have been anything but favourable - to
put it mildly. The confluence of the pandemic and its overhang,
geopolitical tension, the resurgence of inflation after decades of
dormancy, and consequently aggressive central bank responses have
all conspired to drastically shorten investors' time horizons and
increase risk aversive behaviour. These have in turn hit valuations
of growth companies particularly hard, with a consequent knock-on
effect on performances across the piece, with portfolios such as
EWIT's being badly affected.
Performance Review . In the year to 31 October 2023, the
Company's net asset value ('NAV') per share, when calculated by
deducting borrowings at fair value, decreased by 23% and the share
price by 27.7%. The comparative index, the S&P Global Small Cap
Index* ([i]) total return, decreased by 4.3% in sterling terms
during this period. The Company's share price discount to NAV
ranged between 6% and 23.6%, averaging 17%, and ended the period at
a 17.4% discount.
While this is not significantly out of line with the investment
trust sector as a whole, where weighted average discounts of the
AIC Global and AIC Global Smaller Companies sectors ended the
period at 13.1% and 17.3% respectively, we recognise that is little
comfort to our investors, when one takes into account the fact that
the negative absolute returns of the past two financial years have
erased the positive relative and much of the absolute returns that
had been achieved since the broadening of the Company's investment
remit approved by shareholders at the 27 January 2014 Annual
General Meeting ('AGM'). Portfolio turnover over the year was 7.1%
compared to 10.8% for the Company's financial year to 31 October
2022. Management fees and other expenses were down 14.9% in
absolute terms compared with a year earlier, although as a
percentage of average shareholders' funds, the ongoing charges
represented 0.70% for the year versus 0.63% a year earlier,
reflecting the fall in NAV over the year.
http://www.rns-pdf.londonstockexchange.com/rns/0867A_1-2024-1-18.pdf
*9 months to 31 October 2014. The current broadened mandate was
approved by shareholders at the 27 January 2014 AGM, so the table
above shows the current portfolio managers' track record managing
Edinburgh Worldwide's portfolio.
The Board's Response
Faced with this exceedingly difficult situation, as an
independent Board, we have undertaken a thorough review challenging
the Manager on the approach, philosophy and processes. One option
would have been to recast the Company's objectives and portfolio in
order to bring performance closer to that of the Index. However, we
feel that would be doing a disservice to the long-term objectives
of our investors and risk replicating many other readily available
portfolios with greater short-term certainty but lacking the
outstanding long-term potential of the current portfolio. It would
eliminate that which is unique and irreplicable in the Company's
approach, and at a time when the current sources of market
dislocation have yet to fully wash through.
The portfolio is invested for the most part in companies with
solid finances and good economics as well as outstanding future
potential. The majority have been performing well operationally and
have strong cash positions which means that they are able to
self-fund without recourse to outside sources of additional
capital. We continue to encourage the portfolio managers to focus
on smaller entrepreneurial companies, as we believe these are
better able to deploy the best in human ingenuity and imagination
to embrace disruptive technologies and processes at scale than
larger companies who are inevitably hidebound by legacy practices
and business models and layers of bureaucracy and hierarchy.
Nevertheless, the portfolio managers, under close scrutiny of
the Board, have identified potential improvements to both processes
and tactics which should improve the balance of the portfolio.
These include being more rigorous in recognising stocks that have
had a good run and taking profits where appropriate, and being more
ruthless in addressing issues in the tail of the portfolio where
the portfolio managers may have tended in the past to err on the
side of patience.
Unlisted investments
Many promising businesses that we wish the portfolio managers to
invest in are at a relatively early stage in their development and,
while already able to access external funding, have not yet seen
the need to access public markets. As at the Company's year end,
the portfolio weighting in private companies stood at 26.2% of
total assets, invested in fourteen companies (2022 - 14.1% of total
assets in fourteen companies) including companies such as SpaceX
and PsiQuantum. This percentage is currently now at 25.8%. The
Company currently has shareholder authority to make investments
into unlisted investments of up to 25% of total assets, measured at
the time of investment. When above this figure, the investments
continue to be held, but new positions or additions cannot be made.
No new private company investments were made during the year
although follow-on investments were made in SHINE Technologies and
Astranis Space Technologies.
Understandably, following the extreme volatility in public
market valuations, the valuation of private companies has been
under particular scrutiny by the broader investor community and the
Board of EWIT. Whilst not surprising, it should be noted that
Baillie Gifford, supported by the Board, has always taken a
pro-active approach to private company valuations. Whilst there is
always going to be an unavoidable element of subjectivity, the
Board is firmly of the view that Baillie Gifford's approach to
valuing private companies is proactive and timely, ensuring that
the Company's daily published NAV is a genuine reflection of the
current value of the full portfolio - listed and unlisted. For
example, over the year to 31 October 2023, for the fourteen private
companies held in the portfolio, their ongoing monitoring led to
130 revaluations in the period and resulted in a 1.1% average
decrease in share price across the private companies held. As noted
in the Directors' biographies in the Annual Report, the Board and
Company also benefit from the expertise of the Directors when
scrutinising and valuing private company investments. Additional
scrutiny is also undertaken by Ernst & Young LLP, the Company's
auditors.
The Board and Managers remain of the view that private companies
continue to be a fundamental element in achieving the Company's
objective and, as highlighted in prior years, the Board will keep
the matter of the weighting to unlisted investments under review.
Details on the valuation process and quantum of valuations of the
portfolio's private company holdings undertaken, over the course of
the financial year, can be found immediately after the Managers'
Review; I encourage readers to note this.
Issuance, Share Buybacks and Treasury
Despite strong demand for EWIT shares in recent years, no shares
were issued in the last financial year. Given the discount to NAV
and the Board's continued conviction in its portfolio and approach,
the Company undertook 76 buybacks, buying back 5,190,382 shares to
be held in treasury at a cost of GBP8.17 million. This resulted in
the Company's issued share capital reducing by 1.3%. Buybacks were
undertaken over the course of the year but paused for a period
following the collapse of Silicon Valley Bank in the United States.
Since the Company's year-end, a further 1,710,933 shares have been
bought back for Treasury at a cost of GBP2.49 million.
The Company will once again be seeking to renew its share
issuance, buyback and treasury share authorities. Issuance, either
from treasury or of new shares, will only be undertaken at a
premium to the prevailing NAV, with debt calculated at either par
or fair (depending on which results in the higher hurdle), in order
to satisfy natural market demand. The buyback facility is sought to
allow the Company to buy back its own shares when the discount is
substantial in absolute terms and relative to its peers. The Board
is also mindful of the interests of longer-term ongoing
shareholders as well as market liquidity and sentiment. Whilst not
determining or prohibiting factors, the Board is also mindful of
and continuously monitors the level of private company exposure and
invested gearing.
Borrowings
At present, the Company has a five-year GBP100 million
multi-currency revolving credit facility which expires in June
2026. In addition, a five-year GBP36 million multi-currency
revolving credit facility which expires in September 2024. A GBP25
million multi-currency revolving credit facility expired during the
year and was not replaced.
The extent and range of equity gearing is discussed by the Board
and Managers at each Board meeting. Both parties agree that the
Company should typically be geared to equities to maximise
potential returns, with the current aspirational parameters set at
+5% to +15% of shareholders' funds. Over the year, the invested
equity gearing ranged between +9.7% and +16.1%,and stood at +14.1%
of shareholders' funds at the financial year end (2022 - +12.3%).
Invested equity gearing is currently 12.6% of shareholders'
funds.
Earnings and Dividend
The Company's objective is to achieve long term capital growth
and investors should not expect income from this investment. This
year the net revenue return per share was a negative 0.65p per
share (2022 - negative 0.49p per share) and therefore no final
dividend is being recommended by the Board. Should the level of
underlying income increase in future years, the Board will seek to
distribute to shareholders the minimum permissible to maintain
investment trust status by way of a final dividend.
Board Composition
Following a period of notable Board refreshment that has
resulted in the appointment of four new Directors with relevant
skills, since the start of 2020, I will be standing down from the
Board at the conclusion of this year's AGM taking place on 5 March
2024. Mr Jonathan Simpson-Dent, a seasoned private equity investor
with extensive experience of chairing company boards, and who has
been a member of the Board for 4 years, will assume the Chair at
this point. Ongoing Board refreshment is a healthy exercise and
will be one of the areas of focus under the direction of the new
Chair.
Ms Helen James will be standing down as the Company's Senior
Independent Director at the conclusion of the forthcoming Annual
General Meeting and will not be standing for re-election to the
Board in 2025. It is intended that Ms Jane McCracken, who has
enjoyed a successful career as an entrepreneur, advisor and
investor in venture capital backed high growth technology and
healthcare businesses in the UK and US, will replace her as Senior
Independent Director.
The timeline below shows the date of appointment of the current
Board.
http://www.rns-pdf.londonstockexchange.com/rns/0867A_2-2024-1-18.pdf
Annual General Meeting
The Company's next Annual General Meeting ('AGM') will be held
in person at Baillie Gifford's offices in Edinburgh at 12 noon on
Tuesday 5 March 2024. The portfolio managers will be presenting,
and I and the Board look forward to seeing as many of those of you
as possible who are able to attend either in person or by remote
video link. Details of how shareholders can watch this year's AGM
online can be found in the Notice of Annual General Meeting on page
118 of the Annual Report and Financial Statements.
Further information, including the proposed resolutions and
information on the deadlines for submitting votes by proxy should
you not be able to attend, can be found on pages 188 to 122 of the
Annual Report and Financial Statements. Shareholders who hold
shares in their own name on the main register will be provided with
a Form of Proxy. For shareholders who held shares through the
former abrdn Investment Trust Share Plans, Individual Savings
Account and Investment Plan for Children, and whose accounts have
moved to Interactive Investor, voting should now be undertaken in
line with the terms and conditions of your new account
provider.
If you hold shares through a share platform or other nominee,
the Board would encourage 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 www.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
www.theaic.co.uk/aic/ready-to-invest/shareholder-voting/attending-an-agm
.
Outlook
Our mission is to provide our investors with the opportunity to
participate in an extraordinary wave of scientific and
technological innovation and identify businesses that are not only
at the forefront of that wave but have the entrepreneurial skills
and scalability to translate innovation into outsized financial
returns. We recognise that this requires a patient conviction and a
readiness to accept short-term volatility in return for exceptional
reward in the long term.
The Board and Managers continue to believe that the EWIT
portfolio consists of companies with good economic foundations as
well as excellent future potential. Moreover, there are increasing
signs that we are at the top of the interest rate cycle and the
reduction in risk appetite that we have seen recently is starting
to unwind. While we cannot be complacent or assume that recovery in
valuations will be a straightforward or immediate process, we see
early signs of improvement.
While we cannot predict how long the current market conditions
will prevail, we remain convinced that focusing on the fundamental
strengths and potential of the portfolio will ultimately prevail,
and that a return to more normalised monetary conditions after
decades of cheap money will, with time, reward those who focus on
genuine value rather than chasing the latest short-term trends.
Henry CT Strutt
Chair
17 January 2024
Managers' review
When we conceived the investment philosophy that sits behind
Edinburgh Worldwide Investment Trust ('EWIT'), we knew that our
distinct growth style wouldn't succeed in all market conditions.
Nevertheless, the past three years have been especially
unpredictable and disappointing.
EWIT strives to understand how the world is evolving, and which
companies are best positioned to benefit. That demands we look
forward, remain obsessed with the drivers of change and seek ideas
that can convert the possible into tangible long-term commercial
success. Bruising though recent years have been, we believe that
the lowering of growth equity valuations for smaller capitalised
firms is a highly attractive foundation for thoughtful long-term
growth investing.
To us, the prospect of robust returns is more attractive than at
any time in recent memory.
The case for looking forward.
Stock markets rise and fall but the benefits of innovation
accrue all around us. The opportunity for innovation and tech-led
progress is stronger than ever. On many frontiers, entrepreneurs
and innovative companies are creating products and services that
will transform societal expectations. These frontiers stretch from
healthcare to communications to computing and automation.
Much of this change is unaffected by the negative influence of
equity markets and the tighter funding environment. It's driven
instead by structural shifts and new combinations of technologies
already underway. We expect many of these advances to appear within
5-10 years, but we're equally excited about possibilities beyond
this timeframe.
Many of the companies with the greatest potential to deliver
change are ones the market is shunning. They're seen as reckless
pre-profitable companies, early in their lifecycle with the
temerity to believe that things can be different from how they've
always been. With the market reflexively punishing such companies
and aggressively discounting their potential, those of us who
believe in progress, long-term relevance and human ingenuity have
become the contrarians.
Nevertheless, observing markets over many decades suggests that
such myopia risks missing out on where the long-term returns will
ultimately come from.
Be assured that the steady progress of human ingenuity is very
much alive and well. Stock markets might not reflect this, but
there are good reasons to be bullish about how underlying change
will coalesce with future equity returns. We have every confidence
that the portfolio can meaningfully outperform over the coming five
years. In recognition of this, we have been increasing our personal
holdings in the Trust.
Portfolio update
We remain confident about the portfolio's current positioning,
our long-term philosophy and our companies' ability to weather
challenging times. Nevertheless, tough periods such as the last few
years demand reflection: What could we have done better? What have
we missed? What parts of our process and decision-making could be
more robust?
Working with colleagues in Baillie Gifford's in-house Investment
Risk team we've analysed the long-run performance of the portfolio
and examined whether the relative sizes of groups of holdings have
impeded overall results. This process suggested two areas we could
improve:
-- Reassessment of the risk-reward balance in larger holdings
that have already made good returns
-- Better management of smaller positioned holdings that demands
we balance patience against the need for capital for ideas already
executing well
Making such tweaks won't perfect the portfolio but should
increase the robustness of our process and better protect against
future underperformance.
In the last EWIT Interim Report, we suggested that the era of
abundance and 'free money' was making way for an era that rewarded
better productivity and business efficiency, taking account of the
pressures on businesses and the potential of high-quality
automation enabled by AI and developments in software. Six months
on, we are even more convinced about the effect of these tools on
the portfolio in the coming years.
We're already seeing benefits in companies that have used the
recent downturn to get leaner and fitter while still staying true
to their long-term growth potential. We now have a better sense of
how AI might influence our holdings and open a new world of
efficiency. From generating new content to creating more engaging
and human-like customer interfaces, the technology will make many
tasks quicker and easier. As these tools are so widely available,
we increasingly think of them as essential to a business's
fundamental ability to compete.
In several portfolio companies, new AI capabilities are driving
opportunity. For example:
-- CyberArk: the increased ability for AI to impersonate humans
is driving up corporate spending on cybersecurity around user
identification
-- Axon: can now use AI to generate transcripts and police case reports based on bodycam data
-- Upwork: the freelance marketplace has become the go-to venue
for accessing AI talent and sees significant scope to package AI
tools for its base of freelancers across numerous areas
-- Chegg: the online tutoring company has pivoted to AI,
offering much higher personalisation and content efficiency
savings
Our most challenging investment over the year has been in
Novocure, and in aggregate the portfolio's exposure to healthcare
related names has impacted performance. We have long seen a role
for Novocure's novel tumour-treating technology to expand beyond
glioblastoma, a rare aggressive form of brain cancer. While its
attempts to prove this technology in the treatment of late-stage
ovarian cancer patients were unsuccessful, the clinical data in its
pivotal trial in lung cancer was very encouraging.
As detailed in the Interim Report, the data suggests that the
treatment works well when used with cancer-fighting antibodies that
have become the backbone therapy in many types of cancer. Further
evidence is needed to establish the significance of this
development, but we remain enthused about Novocure's long-term
opportunity. The recent derating of its shares was driven by the
setback in the path to commercialising its lung cancer therapy,
without the market appreciating the long-term importance of the
technology.
Despite the challenging market environment, several of our
smaller holdings performed well both commercially and in share
price performance. Demand for American Superconductor's resilient
power systems grew strongly throughout 2023 as its industrial and
utility customers continue to grapple with stabilising grid
connections at greater scale and an increasing mix of renewable
generation sources.
Another anti-cancer pioneer, Nanobiotix, the developer of
radio-enhancing products to boost radiotherapy, announced a
partnership and licensing deal with J&J for its main therapy,
for head and neck cancers, currently in late-stage clinical
development. We added to the Nanobiotix holding as it raised equity
to accelerate development.
With a streamlined product portfolio and a revamped go-to-market
approach, Digimarc has seen growing success in the adoption of its
product digitisation technology. There has been particularly strong
demand for its products in the retail sector as well as in
recycling, where it holds the promise of disrupting how sorting and
recycling of plastic waste is done.
We acquired a new position in MP Materials, an American miner of
the rare earths neodymium and praseodymium, which are used in
high-strength magnets for electric vehicles and wind turbines, as
well as a range of consumer, industrial and military applications.
These minerals could become much more valuable as green
technologies are rolled out at scale, and the concentration of
supply in China means that customers could pay a premium for those
from a more geopolitically secure part of the world. We're also
encouraged by MP's efforts to refine the minerals and make magnets
itself. This should allow it to capture substantially more value
than as raw material miners.
Most of the activity in the portfolio involved exiting companies
where the investment case was not progressing as hoped, and
'top-slicing' or partly selling off holdings in companies where we
felt the market was catching up on our view. We deployed the
resulting funds into other holdings where we felt the market was
not yet reflecting improvements in growth and profitability.
Companies we've sold include Everbridge, LendingTree, Splunk,
Ceva, Adicet, PhenomeX, Wayfair and Q2. We also sold Chinook
Therapeutics and Tabula Rasa as both received takeover approaches
(from Novartis and private equity respectively). Notable reductions
included Exact Sciences, Blackline, Axon, Shockwave and CyberArk.
Notable additions were made to our holdings in Oxford Nanopore,
Sprout Social, LiveRamp, Beam Therapeutics and Kingdee.
Some wider reflections on recent performance
We have previously referred to the Company's portfolio of
holdings as being in the eye of the storm regarding recent stock
market angst. Our bias towards smaller, earlier-stage
problem-solving companies is deliberate but has proven to be deeply
counter to the market sentiment that has persisted in the aftermath
of the COVID-19 pandemic. Where we believe our holdings offer
long-term relevance and transformational potential, the market has
demanded near-term predictability. Where we expect our holdings to
invest in and build their scale and edge, the market has craved
companies that are delivering cash returns now. Where we feel
optimistic about innovation and future technological change, the
market seems skittish and skewed to a cynical "believe it when I
see it" mentality.
At the centre of this storm is the topic of time horizons, the
key variable that all investors must factor in, but also the one
where the differences in approach are the widest. We view EWIT's
stock investing time horizon as being one that dovetails with its
investments. We seek to identify special innovative companies early
and retain them as they grow and thrive. It's a strategy that at
its core is about special companies being built with the implicit
belief that this should translate into special investment
opportunities given time. To us, a 5-10 year time frame is the
minimum over which we base our decisions, and in many cases, we
think the rewards of business building accrue over decades.
The dominant narrative in equity markets in the post-COVID era
has been the headwind of inflation and the efforts of Central Banks
to control it through higher interest rates. As company-focused
investors who observe long term change across many industries, we
are often perplexed by the broader financial market's obsession
with interest rates and their flow through into discount rates used
to value equity cashflows. While central bank rates impact the
discount rates used in valuation models, these moves have been
within historical norms and need some added context. Moreover,
history shows that small companies can still perform well in rising
interest rate environments.
http://www.rns-pdf.londonstockexchange.com/rns/0867A_3-2024-1-18.pdf
The key skill in high-growth, long-term investing is
understanding how a company's cash flow is likely to evolve over
time, rather than precisely estimating discount rates used in
valuation models. For earlier-stage companies, this means
considering a range of possible cash flow scenarios and the
probabilities of each.
The discount rate is just one input among many in the process of
valuation. Its importance tends to be dwarfed by assumptions about
long-term cash flow growth rates. For Alnylam, it's about assessing
the total market for gene silencing therapies. For SpaceX, it's
appreciating potential demand curves for lower cost space cargo and
global satellite internet through Starlink.
Put plainly, where our top performers are concerned, huge
commercial success over decades matters far more than academic
valuation debates at any single moment. Our lived experience with
our most successful investments shows most returns come from
business growth rather than from a re-rating of valuation
multiples. Even drastic compression of multiples is unlikely to
outweigh growth on the scale we envisage.
So EWIT remains focused on long-term opportunities, not
short-term market obsessions. We believe the problem-solvers we
invest in can transform industries over five-to-ten-year-plus time
horizons. Their immense commercial potential is far more important
than how we react to passing panics over interest rates.
The key question is whether higher interest rates fundamentally
change the long-term growth trajectories and cash flow potential
for our holdings. To answer that, we have thoroughly analysed the
portfolio's resilience considering both financial strength and
stage of business development.
Overall, we believe the portfolio is well-positioned across the
spectrum: from profitable companies generating cash flows today to
earlier-stage innovators with strong balance sheets that can fund a
path to profitability over the next two to three years. The market
is ignoring this financial sustainability factor, indiscriminately
punishing any company that's not profitable now, regardless of
capital resources or future prospects.
Our job at EWIT is to focus on secular technological shifts
where growth opportunities seem undiminished or even accelerating -
despite macro conditions. Conversely, we limit cyclical exposures
tied closely to commodity industries or big-ticket capital
spending. While interest rates directly impact some holdings like
Zillow or IPG Photonics, their structural advantages provide
resilience.
So if rates alone don't explain recent headwinds, what does? We
believe the extreme confluence of pandemic, war, inflation and
resulting policy responses has taken its toll on investor
psychology and time horizons. The ability to earn reasonable cash
yields with less risk has pulled focus to the near term.
This manifests in a bifurcated view of growth stocks. Linear,
predictable growth stories such as Axon and CyberArk are rewarded.
But longer-term opportunities dependent on strategic progress such
as Ocado, Novocure and Oxford Nanopore get little credit despite
their huge potential.
While we recognise it's highly subjective, we sense that the
tipping point between willing-to-extrapolation and
unwilling-to-postulate is around 18-24 months. We take comfort from
the observation that holdings that have made material progress and
boosted their near-term commercial traction have been rewarded. The
price appreciation of Digimarc, and Exact Sciences over the past
year are strong examples of this. Although an exaggerated focus on
the short-term currently blinkers the market, it's far from blind
to progress, as evidenced.
Healing from the barrage of exogenous shocks rather than rate
changes per se will likely restore longer-term thinking and risk
appetites. Encouragingly, some clouds over financial markets
already appear to be clearing.
Valuing private companies
We aim to hold our private company investments at 'fair value'
i.e. the price that would be paid in an open-market transaction.
Valuations are adjusted both during regular valuation cycles and on
an ad hoc basis in response to 'trigger events'. Our valuation
process ensures that private companies are valued in both a fair
and timely manner.
The valuation process is overseen by a valuations group at
Baillie Gifford, which takes advice from an independent third party
(S&P Global). The valuations group is independent from the
investment team with all voting members being from different
operational areas of the firm, and the investment managers only
receive final notifications once they have been applied.
We revalue the private holdings on a three-month rolling cycle,
with one third of the holdings reassessed each month. During stable
market conditions, and assuming all else is equal, each investment
would be valued four times in a twelve-month period. For investment
trusts, the prices are also reviewed twice per year by the
respective investment trust boards and are subject to the scrutiny
of external auditors in the annual audit process.
Beyond the regular cycle, the valuations team also monitors the
portfolio for certain 'trigger events'. These may include: changes
in fundamentals; a takeover approach; an intention to carry out an
Initial Public Offering ('IPO'); company news which is identified
by the valuation team or by the portfolio managers, or meaningful
changes to the valuation of comparable public companies. Any ad hoc
change to the fair valuation of any holding is implemented swiftly
and reflected in the next published net asset value. There is no
delay.
The valuations team also monitors relevant market indices on a
weekly basis and updates valuations in a manner consistent with our
external valuer's (S&P Global) most recent valuation report
where appropriate. Continued market volatility has meant
that recent pricing has moved much more frequently than would
have been the case with the quarterly valuations cycle.
Edinburgh Worldwide Investment Trust* %
--------------------------------------
Percentage of portfolio valued up
to 5 times 35
Percentage of portfolio valued up
to 6 times 73
Percentage of portfolio revalued
6+ times 27
--------------------------------------
*Data reflecting period 1 November 2022 to 31 October 2023 to
align with the Company's reporting period end.
In the year to 31 October 2023, the performance of the private
company portfolio has been relatively flat on average, with a
number of companies capitalising on their successes and issuing new
equity. The average movement in both company valuations and share
price movements have been shown below.
Valuation movement GBP'000
-------------------------------------- --------
Value of private company investments
as at 31 October 2022 176,669
Additions to existing holdings in the
period 4,095
Investment revaluation gains in the
period 16,286
Investment revaluation losses in the
period (16,993)
Value of private company investments
as at 31 October 2023 180,057
-------------------------------------- --------
Valuation movement %
------------------------------------- -----
Average movement in investee company
securities price (1.1)
------------------------------------- -----
Average movement in investee company
valuation (1.5)
------------------------------------- -----
Baillie Gifford Statement on stewardship
Baillie Gifford's overarching ethos is that we are 'Actual'
investors. That means we seek to invest for the long term. Our role
as an engaged owner is core to our mission to be effective stewards
for our clients. As an active manager, we invest in companies at
different stages of their evolution across many industries and
geographies, and focus on their unique circumstances and
opportunities. Our approach favours a small number of simple
principles rather than overly prescriptive policies. This helps
shape our interactions with holdings and ensures our investment
teams have the freedom and retain the responsibility to act in
clients' best interests.
Long-term value creation
We believe that companies that are run for the long term are
more likely to be better investments over our clients' time
horizons. We encourage our holdings to be ambitious, focusing on
long-term value creation and capital deployment for growth. We know
events will not always run according to plan. In these instances we
expect management to act deliberately and to provide appropriate
transparency. We think helping management to resist short-term
demands from shareholders often protects returns. We regard it as
our responsibility to encourage holdings away from destructive
financial engineering towards activities that create genuine value
over the long run. Our value will often be in supporting management
when others don't.
Governance fit for purpose
Corporate governance is a combination of structures and
behaviours; a careful balance between systems, processes and
people. Good governance is the essential foundation for long-term
company success. We firmly believe that there is no single
governance model that delivers the best long-term outcomes. We
therefore strive to push back against one-dimensional global
governance principles in favour of a deep understanding of each
company we invest in. We look, very simply, for structures, people
and processes which we think can maximise the likelihood of
long-term success. We expect to trust the boards and management
teams of the companies we select, but demand accountability if that
trust is broken.
Alignment in vision and practice
Alignment is at the heart of our stewardship approach. We seek
the fair and equitable treatment of all shareholders alongside the
interests of management. While assessing alignment with management
often comes down to intangible factors and an understanding built
over time, we look for clear evidence of alignment in everything
from capital allocation decisions in moments of stress to the
details of executive remuneration plans and committed share
ownership. We expect companies to deepen alignment with us, rather
than weaken it, where the opportunity presents itself.
Sustainable business practices
A company's ability to grow and generate value for our clients
relies on a network of interdependencies between the company and
the economy, society and environment in which it operates. We
expect holdings to consider how their actions impact and rely on
these relationships. We believe long-term success depends on
maintaining a social licence to operate and look for holdings to
work within the spirit and not just the letter of the laws and
regulations that govern them. Material factors should be addressed
at the board level as appropriate.
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 on investments - (174,925) (174,925) - (528,279) (528,279)
Currency gains/(losses) - 2,802 2,802 - (6,070) (6,070)
Income 2 1,077 - 1,077 986 - 986
Investment management
fee (1,060) (3,181) (4,241) (1,277) (3,830) (5,107)
Other administrative
expenses (915) - (915) (953) - (953)
--------------------------- ----- --------- --------- --------- --------- --------- ---------
Net return before
finance costs
and taxation (898) (175,304) (176,202) (1,244) (538,179) (539,423)
--------------------------- ----- --------- --------- --------- --------- --------- ---------
Finance costs of
borrowings (1,578) (4,735) (6,313) (675) (2,026) (2,701)
--------------------------- ----- --------- --------- --------- --------- --------- ---------
Net return before
taxation (2,476) (180,039) (182,515) (1,919) (540,205) (542,124)
--------------------------- ----- --------- --------- --------- --------- --------- ---------
Tax on ordinary activities (51) - (51) (57) - (57)
--------------------------- ----- --------- --------- --------- --------- --------- ---------
Net return after
taxation (2,527) (180,039) (182,566) (1,976) (540,205) (542,181)
--------------------------- ----- --------- --------- --------- --------- --------- ---------
Net return per ordinary
share (0.65p) (46.21p) (46.86p) (0.49p) (134.82p) (135.31p)
--------------------------- ----- --------- --------- --------- --------- --------- ---------
The total column of this Statement represents the profit and
loss account of the Company. The supplementary revenue and capital
columns are prepared under guidance issued 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 the
Company does not have any other comprehensive income and the net
return after taxation is both the (loss)/profit and total
comprehensive (expense)/income for the year.
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 6 671,300 872,804
--------------------------------------- ----- --------- -------- --------- --------
Current assets
Debtors 324 4,882
Cash and cash equivalents 19,146 11,131
--------------------------------------- ----- --------- -------- --------- --------
19,470 16,013
Creditors
Amounts falling due within one year 7 (106,033) (113,251)
Net current liabilities (86,563) (97,238)
--------------------------------------- ----- --------- -------- --------- --------
Net assets 584,737 775,566
--------------------------------------- ----- --------- -------- --------- --------
Capital and reserves
Share capital 4,058 4,058
Share premium account 499,723 499,723
Special reserve 35,220 35,220
Capital reserve 54,352 242,654
Revenue reserve (8,616) (6,089)
--------------------------------------- ----- --------- -------- --------- --------
Total shareholders' funds 584,737 775,566
--------------------------------------- ----- --------- -------- --------- --------
Net asset value per ordinary share 8 151.06p 197.70p
--------------------------------------- ----- --------- -------- --------- --------
Statement of changes in equity
For the year ended 31 October 2023
Share
Share premium Special 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 November
2022 4,058 499,723 35,220 242,654 (6,089) 775,566
Ordinary shares bought back
into treasury 8 - - - (8,263) - (8,263)
Net return after taxation - - - (180,039) (2,527) (182,566)
---------------------------------- ----- -------- -------- -------- --------- -------- -------------
Shareholders' funds at 31
October 2023 4,058 499,723 35,220 54,352 (8,616) 584,737
---------------------------------- ----- -------- -------- -------- --------- -------- -------------
For the year ended 31 October 2022
Share
Share premium Special 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 November
2021 4,052 497,999 35,220 808,197 (4,113) 1,341,355
Ordinary shares issued 8 6 1,724 - - - 1,730
Ordinary shares bought back
into treasury 8 - - - (25,338) - (25,338)
Net return after taxation - - - (540,205) (1,976) (542,181)
================================== ===== ======== ======== ======== ========= ======== =============
Shareholders' funds at 31
October 2022 4,058 499,723 35,220 242,654 (6,089) 775,566
================================== ===== ======== ======== ======== ========= ======== =============
* The capital reserve includes investment holding losses on
fixed asset investments of GBP149,279,000 (2022 - losses of
GBP3,223,000).
Cash flow statement
2023 2023 2022 2022
Notes GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ----- --------- --------- --------- ---------
Cash flows from operating activities
Net return before taxation (182,515) (542,124)
Net losses on investments 174,925 528,279
Currency (gains)/losses (2,802) 6,070
Finance costs of borrowings 6,313 2,701
Overseas withholding tax incurred (51) (57)
Changes in debtors and creditors (282) (754)
---------------------------------------- ----- --------- --------- --------- ---------
Cash from operations * (4,412) (5,885)
Interest paid (5,686) (1,942)
---------------------------------------- ----- --------- --------- --------- ---------
Net cash outflow from operating
activities (10,098) (7,827)
---------------------------------------- ----- --------- --------- --------- ---------
Cash flows from investing activities
Acquisitions of investments (73,803) (138,189)
Disposals of investments 98,261 115,592
---------------------------------------- ----- --------- --------- --------- ---------
Net cash inflow/(outflow) from
investing activities 24,458 (22,597)
---------------------------------------- ----- --------- --------- --------- ---------
Cash flows from financing activities
Ordinary shares issued 8 - 1,730
Ordinary shares bought back into
treasury
and stamp duty thereon 8 (8,567) (24,906)
Bank loans drawn down 402,717 335,346
Bank loans repaid (400,000) (306,862)
---------------------------------------- ----- --------- --------- --------- ---------
Net cash (outflow)/inflow from
financing activities (5,850) 5,308
---------------------------------------- ----- --------- --------- --------- ---------
Increase/(decrease) in cash and
cash equivalents 8,510 (25,116)
Exchange movements (495) 3,120
Cash and cash equivalents at 1 November 11,131 33,127
---------------------------------------- ----- --------- --------- --------- ---------
Cash and cash equivalents at 31
October 19,146 11,131
---------------------------------------- ----- --------- --------- --------- ---------
* Cash from operations includes dividends received of GBP718,000
(2022 - GBP956,000) and interest received of GBP288,000 (2022 -
GBP100,000).
Twenty largest holdings and twelve month performance at 31
October 2023
Name Business Country Fair value % of Absolute Relative
2023 total performance performance
GBP'000 assets* % %
------------------------- ------------------------------ -------- ---------- -------- ------------ ------------
Designs, manufactures
Space Exploration and launches advanced
Technologies# (U) rockets and spacecraft USA 69,018 10.0 9.8 14.7
Drug developer focussed
on harnessing
Alnylam Pharmaceuticals gene silencing technology USA 41,793 6.1 (30.5) (27.4)
Developer of commercial
PsiQuantum# (U) quantum computing USA 30,802 4.5 11.8 16.8
Online grocery retailer
Ocado and technology provider UK 20,598 3.0 (1.5) 2.9
Non-invasive molecular
tests for early
Exact Sciences cancer detection USA 19,935 2.9 68.2 75.7
Small unmanned aircraft
and tactical
AeroVironment missile systems USA 19,460 2.8 18.9 24.2
Oxford Nanopore Novel DNA sequencing
Technologies technology UK 18,801 2.7 (21.6) (18.2)
US online real estate
Zillow# portal USA 18,771 2.7 11.3 16.2
Ophthalmic implants
STAAR Surgical for vision correction USA 17,348 2.5 (44.0) (41.5)
Electronic bond trading
MarketAxess platform USA 17,239 2.5 (16.2) (12.5)
Law enforcement equipment
Axon Enterprise and software provider USA 17,223 2.5 33.5 39.4
Enterprise management
Kingdee International software
Software provider China 14,309 2.1 (23.4) (20.0)
Shine Technologies
(Illuminated Holdings)# Medical radioisotope
(U) production USA 14,029 2.0 (10.2) (6.2)
Enterprise software
Appian developer USA 14,004 2.0 (23.7) (20.3)
3D printing and aerospace
Relativity Space# launch
(U) company USA 12,858 1.9 56.0 62.9
Drug discovery and simulation
Schrödinger software USA 12,656 1.8 (14.4) (10.6)
Cloud based software
Sprout Social for social media management USA 11,692 1.7 (32.1) (29.1)
Online freelancing and
recruitment
Upwork services platform USA 11,241 1.7 (26.3) (23.0)
Astranis Space Communication satellite
Technologies# manufacturing
(U) and operation USA 10,713 1.5 2.7 7.2
Marketing technology
LiveRamp company USA 9,722 1.4 42.8 49.1
------------------------- ------------------------------ -------- ---------- -------- ------------ ------------
402,212 58.3
----------------------------------------------------------------- ---------- -------- ------------ ------------
* Total assets comprises all assets held less all liabilities
other than liabilities in the form of borrowings.
Absolute and relative performance has been calculated on a total
return basis over the period 1 November 2022 to 31 October 2023.
Absolute
performance is in sterling terms; relative performance is
against S&P Global Small Cap Index (in sterling terms).
# More than one line of stock held. Holding information
represents the aggregate of both lines of stock.
(U) Denotes private company investment.
Source: Baillie Gifford/StatPro and relevant underlying index
providers. See disclaimer at the end of this announcement
Past performance is not a guide to future performance
List of investments at 31 October 2023
Name Business Country Fair value % of Fair
2023 total value
GBP'000 assets 2022
GBP'000
-------------------------------- --------------------------------- ------------ ---------- ------- --------
Designs, manufactures
Space Exploration Technologies and launches advanced
Series N Preferred (U) rockets and spacecraft USA 39,556 5.7 36,028
Designs, manufactures
Space Exploration Technologies and launches advanced
Series J Preferred (U) rockets and spacecraft USA 17,944 2.6 16,343
Designs, manufactures
Space Exploration Technologies and launches advanced
Series K Preferred (U) rockets and spacecraft USA 8,180 1.2 7,450
Designs, manufactures
Space Exploration Technologies and launches advanced
Class A Common (U) rockets and spacecraft USA 2,551 0.4 2,323
Designs, manufactures
Space Exploration Technologies and launches advanced
Class C Common (U) rockets and spacecraft USA 787 0.1 717
-------------------------------- --------------------------------- ------------ ---------- ------- --------
69,018 10.0 62,861
------------------------------------------------------------------------------- ---------- ------- --------
Drug developer focussed
on harnessing gene
Alnylam Pharmaceuticals silencing technology USA 41,793 6.1 67,286
PsiQuantum Series C Preferred Developer of commercial
(U) quantum computing USA 17,618 2.6 14,860
PsiQuantum Series D Preferred Developer of commercial
(U) quantum computing USA 13,184 1.9 12,822
-------------------------------- --------------------------------- ------------ ---------- ------- --------
30,802 4.5 27,682
------------------------------------------------------------------------------- ---------- ------- --------
Online grocery retailer
Ocado and technology provider UK 20,598 3.0 20,917
Non-invasive molecular
tests for early cancer
Exact Sciences detection USA 19,935 2.9 15,663
Small unmanned aircraft
and tactical missile
AeroVironment systems USA 19,460 2.8 17,521
Novel DNA sequencing
Oxford Nanopore Technologies technology UK 18,801 2.7 17,295
US online real estate
Zillow Class C portal USA 17,429 2.5 15,632
US online real estate
Zillow Class A portal USA 1,342 0.2 2,438
-------------------------------- --------------------------------- ------------ ---------- ------- --------
18,771 2.7 18,070
------------------------------------------------------------------------------- ---------- ------- --------
Ophthalmic implants
STAAR Surgical for vision correction USA 17,348 2.5 30,984
Electronic bond trading
MarketAxess platform USA 17,239 2.5 23,688
Law enforcement equipment
Axon Enterprise and software provider USA 17,223 2.5 16,712
Enterprise management
Kingdee International Software software provider China 14,309 2.1 14,450
Shine Technologies (Illuminated
Holdings) Series Convertible Medical radioisotope
Loan Note (U) production USA 824 0.1 -
Shine Technologies (Illuminated
Holdings) Series Convertible Medical radioisotope
Promissory Note (U) production USA 3,295 0.5 -
Shine Technologies (Illuminated
Holdings) Series C-5 Preferred Medical radioisotope
(U) production USA 9,910 1.4 11,581
Shine Technologies (Illuminated
Holdings) Series D-1 Preferred Medical radioisotope
(U) production USA 0 0.0 869
-------------------------------- --------------------------------- ------------ ---------- ------- --------
14,030 2.0 12,450
------------------------------------------------------------------------------- ---------- ------- --------
Enterprise software
Appian developer USA 14,004 2.0 12,247
Relativity Space Series 3D printing and aerospace
D Preferred (U) launch company USA 8,753 1.3 5,193
Relativity Space Series 3D printing and aerospace
E Preferred (U) launch company USA 4,105 0.6 3,178
Drug discovery and
Schrödinger simulation software USA 12,656 1.8 8,793
Cloud based software
Sprout Social for social media management USA 11,692 1.7 12,883
Online freelancing
and recruitment services
Upwork platform USA 11,241 1.7 15,249
Communication satellite
Astranis Space Technologies manufacturing and
Series C Preferred (U) operation USA 9,889 1.4 9,638
Astranis Space Technologies Communication satellite
Series C Prime Preferred manufacturing and
(U) operation USA 824 0.1 -
10,713 1.5 9,638
Marketing technology
LiveRamp company USA 9,722 1.4 4,706
Antibody based drug
Genmab development Denmark 9,197 1.3 18,474
IP commercialisation
PureTech Health focused on healthcare UK 8,758 1.3 11,601
Fertility benefits
Progyny management company USA 7,914 1.2 8,418
Snyk Series F Preferred
(U) Security software UK 4,892 0.7 4,394
Snyk Ordinary Shares (U) Security software UK 2,919 0.5 1,989
-------------------------------- --------------------------------- ------------ ---------- ------- --------
7,811 1.2 6,383
------------------------------------------------------------------------------- ---------- ------- --------
Advanced heat exchange
Reaction Engines (U) company UK 7,737 1.1 7,000
Software development
JFrog tools and management Israel 7,664 1.2 9,128
Enterprise financial
BlackLine software provider USA 6,957 1.0 13,625
Cloud based accounting
software for small
Xero and medium-sized enterprises New Zealand 6,837 1.0 9,080
Opioid free analgesics
Pacira BioSciences developer USA 6,759 1.0 14,419
Manufacturer of medical
devices for cancer
Novocure treatment USA 6,575 1.0 26,862
Chinese bio-pharmaceutical
development and distribution
Zai Lab HK Line company China 6,448 0.9 6,131
IPG Photonics High-power fibre lasers USA 6,384 0.9 6,719
Affinity based diagnostic
Avacta Group reagents and therapeutics UK 6,290 0.9 7,100
Lightning software
that enables users
Lightning Labs Series B to send and receive
Preferred (U) money USA 5,803 0.8 5,972
Freelance services
Fiverr marketplace for businesses Israel 5,646 0.8 8,693
Online healthcare
resource and interactive
Doximity platform developer USA 5,624 0.8 5,534
ShockWave Medical Medical devices manufacturer USA 5,491 0.8 13,638
Video game platform
Epic Games (U) and software developer USA 5,456 0.8 10,427
Echodyne Corp. Series C-1 Metamaterial radar
Preferred (U) sensors and software USA 5,303 0.8 6,676
Cyber security solutions
CyberArk Software provider Israel 5,152 0.7 9,242
Online educational
Chegg company USA 5,151 0.7 15,587
Livestock breeding
Genus and technology services UK 4,960 0.7 5,931
Enterprise sales management
Zuora software USA 4,765 0.7 5,219
Measurement and calibration
Renishaw equipment UK 4,324 0.6 4,926
Solid-state batteries
QuantumScape for electric vehicles USA 4,310 0.6 6,608
BillionToOne Series C Preferred
(U) Pre-natal diagnostics USA 3,788 0.6 3,706
BillionToOne Promissory
Note (U) Pre-natal diagnostics USA 412 0.1 434,273
-------------------------------- --------------------------------- ------------ ---------- ------- --------
4,200 0.7 437,979
------------------------------------------------------------------------------- ---------- ------- --------
Nanomedicine company
focused on cancer
Nanobiotix ADR radiotherapy France 4,182 0.6 1,846
Telemedicine services
Teladoc provider USA 4,054 0.6 7,647
Cloud-computing infrastructure
HashiCorp provider USA 4,008 0.6 -
Designs and manufactures
power systems and
American Superconductor superconducting wire USA 3,962 0.6 3,002
Beam Therapeutics Biotechnology company USA 3,849 0.6 4,459
Ultra-sensitive protein
Quanterix analysers USA 3,751 0.5 2,014
Developer of fuel
Ceres Power Holding cells UK 3,740 0.5 6,192
Video compression
and image processing
Ambarella semiconductors USA 3,618 0.5 4,637
Twist Bioscience Biotechnology company USA 3,543 0.5 7,770
Digital watermarking
Digimarc technology provider USA 3,307 0.5 2,186
TransMedics Medical device company USA 3,293 0.5 2,438
Rare earth materials
MP Materials company USA 3,236 0.5 -
Pet health insurance
Trupanion provider USA 3,136 0.5 8,102
New Horizon Health Cancer screening company China 3,123 0.5 1,365
Antibody design and
AbCellera Biologics development company Canada 3,101 0.5 9,438
KSQ Therapeutics Series Biotechnology target
C Preferred (U) identification company USA 3,072 0.5 4,151
Online platform for
InfoMart restaurant supplies Japan 3,020 0.5 4,387
Cell therapies for
Adaptimmune Therapeutics cancer treatment UK 2,835 0.4 5,770
Manufacturer of gas
Sensirion Holding and flow sensors Switzerland 2,768 0.4 4,463
Digital advertising
Cardlytics platform USA 2,699 0.4 2,167
Intellectual property
IP Group commercialisation UK 2,395 0.3 3,229
Hydrogen energy solutions
ITM Power manufacturer UK 2,248 0.3 2,880
M3 Online medical database Japan 2,212 0.3 7,274
Manufacturer of insulin
pumps for diabetic
Tandem Diabetes Care patients USA 2,112 0.4 7,236
MonotaRO Online business supplies Japan 2,055 0.3 4,169
Peptide based drug
PeptiDream discovery platform Japan 2,052 0.4 1,829
UK online property
Rightmove portal UK 2,032 0.3 3,393
DNA Script Series C Preferred
(U) Synthetic DNA fabricator France 2,031 0.3 5,536
Cloud based accounting
software for small
freee K.K. and medium-sized enterprises Japan 1,778 0.3 2,231
Victrex High-performance thermo-plastics UK 1,751 0.3 2,101
Biotechnology company
focused on next generation
Sutro Biopharma protein therapeutics USA 1,701 0.2 4,779
Commerce platform
for small and medium-sized
EverQuote enterprises USA 1,632 0.2 1,221
Rational drug design
C4X Discovery Holdings and optimisation UK 1,607 0.2 2,273
Rational drug design
C4X Discovery Warrants and optimisation UK 0 0.0 -
-------------------------------- --------------------------------- ------------ ---------- ------- --------
1,607 0.2 2,273
------------------------------------------------------------------------------- ---------- ------- --------
A live game streaming
Huya ADR platform China 1,592 0.2 993
Industrial and pharmaceutical
Codexis enzyme developer USA 1,415 0.2 7,820
Discovery and development
of novel materials
Ilika for mass market applications UK 1,391 0.2 2,318
Specialised processor
Graphcore Series D2 Preferred chips for machine
(U) learning applications UK 930 0.1 3,945
Specialised processor
Graphcore Series E Preferred chips for machine
(U) learning applications UK 296 0.0 1,437
-------------------------------- --------------------------------- ------------ ---------- ------- --------
1,226 0.1 5,382
------------------------------------------------------------------------------- ---------- ------- --------
Stratasys 3D printer manufacturer USA 1,211 0.2 1,817
Therapies for gastrointestinal
Cosmo Pharmaceuticals diseases Italy 1,044 0.2 1,688
Akili Interactive Digital medicine company USA 1,012 0.1 6,561
Commerce platform
for small and medium-sized
BASE enterprises Japan 889 0.1 1,087
Analytics and data
collection technology
for sports teams and
Catapult Group International athletes Australia 848 0.1 823
Expense management
Expensify software USA 787 0.1 4,077
Voice and video platform
Agora ADR technology provider China 618 0.1 616
Messaging tools for
business and customer
LivePerson interactions USA 539 0.1 2,274
Next generation chemotherapy
NuCana SPN ADR developer UK 470 0.1 1,065
Satellite powered
data collection and
Spire Global analysis company USA 320 0.0 1,083
Genetic engineering
Cellectis for cell based therapies France 189 0.0 523
Genetic engineering
Cellectis ADR for cell based therapies France 68 <= 0.1 0
-------------------------------- --------------------------------- ------------ ---------- ------- --------
257 0.0 523
------------------------------------------------------------------------------- ---------- ------- --------
Angelalign Technology Medical devices manufacturer China 50 <= 0.1 67
Chinook Therapeutics (formerly
Aduro Biotechnology) CVR Immunotherapy drug
Line development USA 0 0.0 0
Microbiome biology
4D Pharma therapeutics UK 0 0.0 0
Microbiome biology
4D Pharma Warrants therapeutics UK 0 0.0 0
0 0.0 0
Mines, processes and
China Lumena New Materials manufactures natural
- Suspended thenardite products China 0 0.0 0
-------------------------------- --------------------------------- ------------ ---------- ------- --------
Total equities 671,300 97.6 872,804
--------------------------------------------------------------------------------- ---------- ------- --------
Net liquid assets 16,686 2.4 6,589
--------------------------------------------------------------------------------- ---------- ------- --------
Total assets * 687,986 100.0 879,393
--------------------------------------------------------------------------------- ---------- ------- --------
* Total assets comprises all assets held less all liabilities
other than liabilities in the form of borrowings.
(U) Denotes private company investment.
Listed equities Unlisted securities# Net liquid Total assets
% % assets %
%
---------------- --------------- -------------------- ---------- ------------
31 October 2023 71.4 26.2 2.4 100.0
---------------- --------------- -------------------- ---------- ------------
31 October 2022 79.2 20.1 0.7 100.0
---------------- --------------- -------------------- ---------- ------------
Figures represent percentage of total assets.
# includes holdings in preference shares, ordinary shares and
convertible promissory notes.
Distribution of total assets
Geographical Analysis
2023 2022
% %
-------------------------------------------------- ------ ------
North America 71.2 71.7
USA 70.7 70.6
Canada 0.5 1.1
Europe 19.7 21.5
United Kingdom 14.2 13.5
Eurozone 2.4 1.8
Developed Europe (non-euro) 3.1 6.2
Asia 5.6 5.0
China 3.8 2.3
Japan 1.8 2.7
Australasia 1.1 1.1
New Zealand 1.0 0.1
Australia 0.1 1.0
------------------------------------------------- ------ ------
Total equities 97.6 99.3
-------------------------------------------------- ------ ------
Net liquid assets 2.4 0.7
-------------------------------------------------- ------ ------
Total assets* 100.0 100.0
-------------------------------------------------- ------ ------
Sectoral Analysis
2023 2022
% %
------------------------- ------ ------
Healthcare 36.2 43.2
Industrials 24.7 17.7
Information technology 24.5 24.7
Consumer discretionary 4.3 6.3
Communication services 3.8 2.9
Financials 3.3 4.3
Materials 0.8 0.2
Net liquid assets 2.4 0.7
------------------------- ------ ------
Total assets* 100.0 100.0
------------------------- ------ ------
* Total assets comprises all assets held less all liabilities
other than liabilities in the form of borrowings.
Distribution of total assets* by industry
Industry Analysis Portfolio Weightings
31 October 2023 relative to comparative index )
% of total assets* at 31 October 2023
% %
------------------------------------------------- ------------------- --------------------------------
Aerospace and defence 18.4 16.9
Biotechnology 17.7 14.6
Software 16.3 16.6
Healthcare equipment and supplies 5.2 3.3
Technology hardware, storage and peripherals 4.8 (0.4)
Life sciences tools and services 4.1 3.3
Healthcare technology 3.6 3.4
Pharmaceuticals 3.6 0.7
Electrical equipment 3.1 1.4
Food and staples retailing 3.0 (2.3)
Professional services 2.9 0.6
Capital markets 2.8 (0.1)
Electronic equipment, instruments and components 2.8 0.1
Real estate management and development 2.7 1.0
Healthcare providers and services 2.4 0.3
Diversified consumer services 0.7 0.0
Auto components 0.6 (0.9)
Insurance 0.5 2.5
Interactive media and services 0.5 (0.2)
Metals and mining 0.5 (2.8)
Semiconductors and semiconductor equipment 0.5 (2.0)
Media 0.4 (1.0)
Chemicals 0.3 (3.0)
Trading companies and distributors 0.3 (1.2)
Entertainment 0.2 (0.5)
IT services 0.1 (1.4)
Net liquid assets 2.4
------------------------------------------------- ------------------- --------------------------------
Total assets* 100.0
------------------------------------------------- ------------------- --------------------------------
* Total assets comprises all assets held less all liabilities
other than liabilities in the form of borrowings.
S&P Global Small Cap Index (in sterling terms). Weightings
exclude industries where the Company has no exposure. See
disclaimer at the end of this announcement.
Notes to the condensed Financial Statements (unaudited)
1. Basis of accounting
The Financial Statements for the year to 31 October 2023 have
been prepared in accordance with FRS 102 'The Financial Reporting
Standard applicable in the UK and Republic of Ireland' and on the
basis of the accounting policies set out below which are consistent
with those applied for the year ended 31 October 2022.
2. Income
2023 2022
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Income from investments
UK dividends 379 410
Overseas dividends 340 472
Overseas interest 70 4
--------------------------------------------------- -------- --------
Other income 789 886
--------------------------------------------------- -------- --------
Deposit interest 288 100
--------------------------------------------------- -------- --------
Total income 1,077 986
--------------------------------------------------- -------- --------
Total income comprises:
Dividends from financial assets designated at fair
value through profit or loss 719 882
Interest from financial assets designated at fair
value through profit or loss 70 4
Interest from financial assets not at fair value
through profit or loss 288 100
--------------------------------------------------- -------- --------
1,077 986
--------------------------------------------------- -------- --------
3. Investment Manager
Baillie Gifford & Co Limited, a wholly owned subsidiary of
Baillie Gifford & Co, has been appointed as the Company's
Alternative Investment
Fund Manager ('AIFM') and Company Secretaries. Baillie Gifford
& Co Limited has delegated portfolio management services to
Baillie Gifford & Co. Dealing activity and transaction
reporting have been further sub-delegated to Baillie Gifford
Overseas Limited and Baillie Gifford Asia (Hong Kong) Limited. The
Management Agreement can be terminated on three moths' notice.
The annual management fee is 0.75% on the first GBP50 million of
net assets, 0.65% on the next GBP200 million of net assets and
0.55% on the remaining net assets. Management fees are 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 (0.65p) (46.21p) (48.86p) (0.49p) (134.82p) (135.31p)
------------------------ -------- -------- -------- -------- --------- ---------
Revenue return per ordinary share is based on the net revenue
loss after taxation of GBP2,527,000 (2022 - net revenue loss of
GBP1,976,000) and on 389,617,177 (2022 - 400,679,723) ordinary
shares, being the weighted average number of ordinary shares in
issue (excluding treasury shares) during the year.
Capital return per ordinary share is based on the net capital
loss for the financial year of GBP180,039,000 (2022 - net capital
loss of GBP540,205,000) and on 389,617,177 (2022 - 400,679,723)
ordinary shares, being the weighted average number of ordinary
shares in issue (excluding treasury shares) during the year.
There are no dilutive or potentially dilutive shares in
issue.
5. Dividends
This year the net revenue return per share was a negative 0.65p
per share (2022 - negative 0.49p per share) and therefore no final
dividend is being recommended by the Board. Should the level of
underlying income increase in future years, the Board will seek to
distribute to shareholders the minimum permissible to maintain
investment trust status by way of a final dividend.
6. Fair Value Hierarchy
Level Level Level
1 2 3 Total
As at 31 October 2023 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- -------- -------- -------- --------
Listed equities 491,243 - - 491,243
Unlisted ordinary shares - - 19,450 19,450
Unlisted preference shares* - - 156,900 156,900
Unlisted convertible promissory note - - 3,707 3,707
------------------------------------- -------- -------- -------- --------
Total financial asset investments 491,243 - 180,057 671,300
------------------------------------- -------- -------- -------- --------
Level Level Level
1 2 3 Total
As at 31 October 2022 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ------------ ------------ ------------ ------------
Listed equities 696,135 - - 696,135
Unlisted ordinary shares - - 22,456 22,456
Unlisted preference shares* - - 153,779 153,779
Unlisted convertible promissory note - - 434 434
------------------------------------- ------------ ------------ ------------ ------------
Total financial asset investments 696,135 - 176,669 872,804
------------------------------------- ------------ ------------ ------------ ------------
* The investments in preference shares are not classified as
equity holdings as they include liquidation preference rights that
determine the repayment (or multiple there) of the original
investment in the event of a liquidation event such as a
take-over.
Fair value hierarchy
The fair value hierarchy used to analyse the fair values of
financial assets is described below. 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 100 of the Annual Report and
Financial Statements. A sensitivity analysis by valuation technique
of the unlisted securities is given on pages 113 to 115 of the
Annual Report and Financial Statements.
7. Borrowings
The Company has a five-year GBP100 million multi-currency
revolving credit facility with The Royal Bank of Scotland with an
expiry date of 9 June 2026 and a five-year GBP36 million
multi-currency revolving credit facility with National Australia
Bank Limited with an expiry date of 30 September 2024. As at 31
October 2023, the Company had drawings of EUR10,600,000,
US$77,150,000 and GBP30,437,000 (2022 - EUR10,600,000,
US$77,150,000 and GBP27,720,000) under the GBP100 million multi-
currency revolving credit facility, with The Royal Bank of Scotland
International Limited. At 31 October 2023 and 2022 there were no
drawings under the GBP36 million multi-currency revolving credit
facility with National Australia Bank Limited.
All short term floating rate borrowings are stated at book cost
which is considered to be equal to their fair value given the
facilities are revolving credit facilities and as at 31 October
2023 amounted to GBP103,249,000 (2022 - GBP103,827,000).
8. Share capital
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 in
order to enhance the net asset value per share for existing
shareholders and improve the liquidity of the Company's shares. In
the year to 31 October 2023 the Company issued no shares (in the
year to 31 October 2022 - 550,000 shares with a nominal value of
GBP6,000, representing 0.1% of the issued share capital at 31
October 2021 raising net proceeds of GBP1,730,000).
Over the period from 31 October 2023 to 16 January 2024 the
Company has issued no further shares.
The Company also has authority to buy back shares. In the year
to 31 October 2023, 5,190,382 shares with a nominal value of
GBP52,000 were bought back at a total cost of GBP8,263,000 and held
in treasury (2022 - 13,468,672 shares with a nominal value of
GBP135,000 were bought back at a total cost of GBP25,338,000 and
held in treasury). At 31 October 2023 the Company had authority to
buy back a further 56,303,524 ordinary shares.
Over the period from 31 October 2023 to 16 January 2024 the
Company has bought back a further 1,710,933 shares at a total cost
of GBP2,489,000.
9. Analysis of change in debt
At 31 October Cash Exchange At 31 October
2022 flows movement 2023
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ----------------- ------------ ------------- -----------------
Cash and cash equivalents 11,131 8,510 (495) 19,146
Loans due within one year (103,827) (2,717) 3,295 (103,249)
-------------------------------------- ----------------- ------------ ------------- -----------------
(92,696) 5,793 2,800 (84,103)
-------------------------------------- ----------------- ------------ ------------- -----------------
10. Financial information
The financial information set out above does not constitute the
Company's statutory accounts for the year ended 31 October 2023 or
the year ended 31 October 2022 but is derived from those accounts.
Statutory accounts for the period to 31 October 2022 have been
delivered to the Registrar of Companies, and those for the year to
31 October 2023 will be delivered in due course. The auditor has
reported on those accounts; the reports were (i) unqualified, (ii)
did not include a reference to any matters to which the auditor
drew attention by way of emphasis without qualifying their report
and (iii) did not contain a statement under section 498 (2) or (3)
of the Companies Act 2006.
Glossary of Terms and Alternative Performance Measures
('APM')
An alternative performance measure is a financial measure of
historical or future financial performance, financial position, or
cash flows, other than a financial measure defined or specified in
the applicable financial reporting framework.
Total assets
This is the Company's definition of Adjusted Total Assets, being
the total value of all assets held less all liabilities (other than
liabilities in the form of borrowings).
Net Asset Value ('NAV')
Also described as shareholders' funds, net asset value is the
value of total assets less liabilities (including borrowings). Net
asset value can be calculated on the basis of borrowings stated at
book value and fair value. An explanation of each basis is provided
below. The net asset value per share is calculated by dividing this
amount by the number of ordinary shares in issue excluding any
shares held in treasury.
Net Asset Value (borrowings at book value)
Borrowings are valued at their nominal book value. The value of
the borrowings at book and fair value are set out on page 116 of
the Annual Report and Financial Statements.
Net Asset Value (borrowings at fair value) (APM)
Borrowings are valued at an estimate of their market worth. The
value of the borrowings at book and fair value are set out on page
116 of the Annual Report and Financial Statements
.
Net Asset Value (reconciliation of NAV at book value to NAV at
fair value)
2023 2022
GBP'000 GBP'000
----------------------------------- ---------------- ----------------
Net Asset Value per ordinary share
(borrowings at book value) 151.06p 197.70p
Shareholders' funds (borrowings at
book value) GBP584,737 GBP775,566
Add: book value of borrowings GBP103,249 GBP103,827
Less: fair value of borrowings (GBP103,249) (GBP103,827)
----------------------------------- ---------------- ----------------
Shareholders' funds (borrowings
at fair value) GBP584,737 GBP775,566
----------------------------------- ---------------- ----------------
Number of shares in issue 387,094,641 392,285,023
----------------------------------- ---------------- ----------------
Net Asset Value per ordinary share
(borrowings at fair value) 151.06p 197.70p
----------------------------------- ---------------- ----------------
At 31 October 2023 and 31 October 2022 all borrowings are in the
form of short term floating rate borrowings and their fair value is
considered equal to their book value, hence there is no difference
in the net asset value at book value and fair value.
Net liquid assets
Net liquid assets comprise current assets less current
liabilities, excluding borrowings.
Discount/premium (APM)
As stock markets and share prices vary, an investment trust's
share price is rarely the same as its net asset value. When the
share price is lower than the net asset value per share it is said
to be trading at a discount. The size of the discount is calculated
by subtracting the share price from the net asset value per share
and is usually expressed as a percentage of the net asset value per
share. If the share price is higher than the net asset value per
share, this situation is called a premium.
2023 2022
---------------------------------------------------- ----------- -----------
Net asset value per ordinary share (a) 151.06p 197.70p
Share price (b) 124.80p 172.60p
----------------------------------- ---------------- ----------- -----------
((b)-(a))
(Discount)/premium ÷ (a) (17.4%) (12.7%)
----------------------------------- ---------------- ----------- -----------
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.
Compound annual return (APM)
The compound annual return converts the return over a period of
longer than one year to a constant annual rate of return applied to
the compound value at the start of each year.
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. The leverage figures at 31 October 2023 are detailed on page
116 of the Annual Report and Financial Statements.
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.
Gearing (APM)
At its simplest, gearing is borrowing. Just like any other
public company, an investment trust can borrow money to invest in
additional investments for its portfolio. The effect of the
borrowing on the shareholders' assets is called 'gearing'. If the
Company's assets grow, the shareholders' assets grow
proportionately more because the debt remains the same. But if the
value of the Company's assets falls, the situation is reversed.
Gearing can therefore enhance performance in rising markets but can
adversely impact performance in falling markets.
Gearing is the Company's borrowings at book value less cash and
cash equivalents (including any outstanding trade settlements)
expressed as a percentage of shareholders' funds.
2023 2022
GBP'000 GBP'000
----------------------------------------- --------------- ---------------
Borrowings (at book value) GBP103,249 GBP103,827
Less: cash and cash equivalents (GBP19,146) (GBP11,131)
Less: sales for subsequent settlement - (GBP4,598)
Add: purchases for subsequent settlement - GBP6,719
Add: buy-backs awaiting settlement GBP128 GBP433
----------------------------------------- --------------- ---------------
Adjusted borrowings (a) GBP84,231 GBP95,250
----------------------------------------- --------------- ---------------
Shareholders' funds (b) GBP584,737 GBP775,566
----------------------------------------- --------------- ---------------
Gross gearing: (a) as a percentage of
(b) 14% 12%
----------------------------------------- --------------- ---------------
Potential gearing is the Company's borrowings expressed as a
percentage of shareholders' funds.
2023 2022
GBP'000 GBP'000
-------------------------------------- -------------- --------------
Borrowings (at book value) (a) GBP103,249 GBP103,827
Shareholders' funds (b) GBP584,737 GBP775,566
-------------------------------------- -------------- --------------
Potential gearing (a) as a percentage
of (b) 18% 13%
-------------------------------------- -------------- --------------
Ongoing charges (APM)
The total expenses (excluding dealing and borrowing costs)
incurred by the Company as a percentage of the daily average net
asset value (with borrowings at market value), as detailed
below.
2023 2022
GBP'000 GBP'000
----------------------------------------- -------------- --------------
Investment management fee GBP4,241 GBP5,107
Other administrative expenses GBP915 GBP953
----------------------------------------- -------------- --------------
Total expenses (a) GBP5,156 GBP6,060
----------------------------------------- -------------- --------------
Average daily cum-income net asset value
(with debt at fair value) (b) GBP731,407 GBP959,272
----------------------------------------- -------------- --------------
Ongoing charges (a) as a percentage
of (b) 0.70% 0.63%
----------------------------------------- -------------- --------------
Share split
A share split (or stock split) is the process by which a company
divides its existing shares into multiple shares. Although the
number of shares outstanding increases, the total value of the
shares remains the same with respect to the pre-split value.
Unlisted (private) company
An unlisted company means a company whose shares are not
available to the general public for trading and not listed on a
stock exchange.
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express or implied, as to the accuracy, completeness or timeliness
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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,
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suffered by you as a result of or in connection with any opinions,
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whether or not based on the content, information or materials
contained herein.
S&P index data
The S&P Global Small Cap Index ('Index') is a product of
S&P Dow Jones Indices LLC, a division of S&P Global, or its
affiliates ('SPDJI'). Standard & Poor's(R) and S&P(R) are
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data included therein.
Sustainable finance disclosure regulation ('SFDR')
The EU Sustainable Finance Disclosure Regulation ('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 Japan is marketed in the EU by the AIFM, Baillie Gifford
& Co Limited, via the National Private Placement Regime
('NPPR') the following disclosures have been provided to comply
with the high-level requirements of SFDR.
The AIFM has adopted Baillie Gifford & Co's ESG Principles
and Guidelines as its policy on integration of sustainability risks
in investment decisions.
Baillie Gifford & Co believes that a company cannot be
financially sustainable in the long run if its approach to business
is fundamentally out of line with changing societal expectations.
It defines 'sustainability' as a deliberately broad concept which
encapsulates a company's purpose, values, business model, culture,
and operating practices.
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 up 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. The likely impact on the return of the portfolio from a
potential or actual material decline in the value of investment due
to the occurrence of an environmental, social or governance event
or condition will vary and will depend on several factors including
but not limited to the type, extent, complexity and duration of an
event or condition, prevailing market conditions and existence of
any mitigating factors.
Whilst consideration is given to sustainability matters, there
are no restrictions on the investment universe of the Company,
unless otherwise stated within in its Investment Objective &
Policy. Baillie Gifford & Co can invest in any companies it
believes could create beneficial long-term returns for investors.
However, this might result in investments being made in companies
that ultimately cause a negative outcome for the environment or
society.
More detail on the Investment Manager's approach to
sustainability can be found in the ESG Principles and Guidelines
document, available publicly on the Baillie Gifford website
bailliegifford.com and by scanning the QR code below.
The underlying investments do not take into account the EU
criteria for environmentally sustainable economic activities
established under the EU Taxonomy Regulation.
Regulated Information Classification: Additional regulated
information required to be disclosed under applicable law.
- ends -
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