Baillie Gifford Europe Growth Tst plc Final Result

Baillie Gifford European Growth Tst

17 November 2023

 

RNS Announcement

Baillie Gifford European Growth Trust plc

Legal Entity Identifier: 213800QNN9EHZ4SC1R12

Results for the year to 30 September 2023

Over the year to 30 September 2023, the Company's net asset value per share (NAV) total return was 8.3% compared to a total return of 20.5% for the comparative index. The share price total return for the same period was 8.6%.

·       Positive contributors in the period included:  Ryanair, which continued to take market share from weaker airlines and invest in new capacity; and online classified companies Adevinta and its major shareholder Schibsted which showed that they can offset temporarily weaker volumes with price increases.

·       Negative contributors in the period included: battery startup Northvolt which was written down to reflect moves in public benchmarks, though operational progress remains good; and payments processing company Adyen which fell after announcing some market share losses in the US.

·       Annual turnover was 9% and gearing stood at 15.6% of shareholders' funds as at the year end.

·       The portfolio now contains five unlisted companies accounting for 10.9% of total assets as at 30 September 2023 (2022: 11.0% in four companies).

·       The net revenue for the year was 2.68p per share (2022: 0.79p). A special interim dividend of 2.20p was paid on 15 September 2023. A final dividend of 0.40p per share is being recommended (2022: 0.70p).

·       Over the year a total of 538,471 shares were bought back into treasury.

For a definition of terms see Glossary of terms and alternative performance measures at the end of this announcement. Total return information is sourced from Baillie Gifford/Refinitiv and relevant underlying index providers; see disclaimer at the end of this announcement.

Baillie Gifford European Growth Trust's principal investment objective is to achieve capital growth over the long-term from a diversified portfolio of European securities.

The Company is managed by Baillie Gifford & Co, an Edinburgh based fund management group with around £217 billion under management and advice as at 15 November 2023.

Past performance is not a guide to future performance. Baillie Gifford European Growth Trust plc is a listed UK company. The value of its shares and any income from them can fall as well as rise and investors may not get back the amount invested. The Company is listed on the London Stock Exchange and is not authorised or regulated by the Financial Conduct Authority. You can find up to date performance information about Baillie Gifford European Growth Trust plc on the Company's page of the Managers' website at bgeuropeangrowth.com‡

‡   Neither the contents of the Managers' website nor the contents of any website accessible from hyperlinks on the Managers' website (or any other website) is incorporated into, or forms part of, this announcement.

For further information please contact:

Naomi Cherry, Baillie Gifford & Co  

Tel: [phone]

Jonathan Atkins, Four Communications

Tel: [phone] or 07872 495396

Chairman's Statement

Performance

The net asset value per share ('NAV') total return over the Company's financial year was 8.3% compared to a total return of 20.5% for the FTSE Europe ex UK Index, in sterling terms. The share price total return over the year was 8.6%; as at 30 September 2023 the discount to NAV of the Company's shares was 13.6%.

The dramatic shift in macroeconomics and interest rates of all durations has continued to make it a challenging time for growth investors. Discount rates have risen; price earnings ratios are conversely lower. Despite strong operational performance from most of our holdings (further detail provided in the Managers' report on below) the share prices of the types of companies we own have not recovered from the significant falls we saw in the previous year, and in some cases have fallen further.

Since Baillie Gifford began managing the portfolio in November 2019, the NAV total return has been 9.3% compared to a total return of 25.1% for the FTSE Europe ex UK Index, in sterling terms. The share price total return has been 2.6%, with the discount widening from 7.5% to 13.6%.

After an initially strong run of performance, the Company has suffered two years of poor investment results. This has damaged the longer run outcome for now. The Board is painfully aware of the volatility and disappointment this has entailed for shareholders but is confident that Baillie Gifford's currently out-of-favour growth style will be vindicated in the longer term. The reason equity investment yields the best long run returns is that it involves volatility and requires patience and, on occasion, a degree of endurance. The Board therefore considers it premature to make a proper assessment of long-term performance.

Earnings and dividend

During the year the Company received a repayment of tax (and interest) from HMRC, totalling £7.9 million (2.20p per share) following receipt of a settlement agreement in relation to the Franked Investment Group ('FII GLO') computational-based claims. The Board distributed this to shareholders as a special interim dividend of 2.20p per ordinary share on 15 September 2023.

Revenue return per share for the year was 2.68p (2022 - 0.79p) and the Board is recommending a final dividend of 0.40 p per ordinary share (2022 - 0.70p). Subject to shareholder approval at the Annual General Meeting ('AGM'), the dividend will be paid on 2 February 2024 to shareholders on the register on 5 January 2024. The ex-dividend date will be 4 January 2024.

Borrowings

The Company has two €30 million long-term debt facilities: the first has a remaining duration of 17 years and is priced at a fixed rate of 1.57% and the other has over 12 years outstanding at a fixed rate of 1.55%. The Company also has an undrawn €30 million overdraft facility with The Northern Trust Company, which at present is capped at €15 million following Board agreement. At the year end, the Company had gearing of 15.6% of shareholders' funds.

Share buybacks, issuance and discount

Over the course of the Company's financial year, the share price moved from a 13.5% discount to NAV to a 13.6% discount to NAV. During this period, the Company bought back 538,471 shares at a total cost of approximately £501,000. The shares repurchased by the Company are held in treasury and are available to be reissued, at a premium, when market conditions allow.

The Board is of the view that the Company should retain the power to buy back shares during the year and so, at the AGM, is seeking to renew the annual authority to repurchase up to 14.99% of the shares in the Company in issue. When buying back shares, the Board does not have a formal discount target and is prepared to buy back shares opportunistically.

The Company also has authority to issue new shares and to reissue any shares held in treasury for cash on a non pre-emptive basis. Shares are issued/reissued only at a premium to NAV, thereby enhancing NAV for existing shareholders. The Directors are, once again, seeking 10% share issuance authority at the AGM. As with the buy back authority, this authority would expire at the conclusion of the AGM to be held in 2025.

The Board

As noted in the 2022 Annual Report, Dr. Woodward will stand down from the Board at the AGM. The Board therefore undertook a recruitment process seeking to appoint an additional independent non-executive Director and was pleased to announce the appointment of David Barron with effect from 1 October 2023. David has spent 25 years working in the investment management sector and was until November 2019 Chief Executive Officer of Miton Group PLC following six years with the firm. Prior to this he was Head of Investment Trusts at JP Morgan Asset Management for more than ten years having joined Robert Fleming in 1995. David will stand for election at the upcoming AGM. On Dr Woodward's departure from the Board, Andrew Watkins will become Chair of the Audit Committee and Emma Davies Senior Independent Director. It is my intention to stand down at the 2025 AGM, at which time David will replace me as Chair. The Board intends to undertake a recruitment process next year and anticipates appointing a further Director by 30 September 2024.

The Board wishes to thank Dr Woodward for his many years of commitment, service, energy and insight and, in particular, for his assiduity and experience in the role of Chairman of the Audit Committee.

Annual General Meeting

The AGM will be held at 11 a.m. on 18 January 2024 at the Institute of Directors, 116 Pall Mall, London, SW1Y 5ED. The Managers will make a presentation and I look forward to meeting shareholders who are able to attend. To accurately reflect the views of shareholders of the Company, the Board intends to hold the AGM voting on a poll, rather than by a show of hands as has been customary. This will ensure an exact and definitive result. The Board encourages all shareholders to exercise their votes on the AGM resolutions by completing and submitting the form of proxy enclosed with the Annual Report to ensure that your votes are represented at the meeting (whether or not you intend to attend in person).

If you hold shares through a share platform or other nominee, the Board encourages you to contact these organisations directly as soon as possible to arrange for you to submit votes in advance of the AGM. Alternatively, the Association of Investment Companies' ('AIC') website theaic.co.uk/how-to-vote-your-shares has information on how to vote your shares if you hold them via one of the major platforms. The following link will also take you through to the AIC website where there is information on how your platform can help you attend the AGM in person  theaic.co.uk/aic/ready-to-invest/shareholder-voting/attending-an-agm.

Should shareholders have questions for the Board or the Managers, or any queries as to how to vote, they are welcome, as always, to submit them by email to [e-mail] or call 0800 917 2112.

Information on the resolutions can be found on pages 110 and 111 of the Annual Report.  The Directors consider that all resolutions to be put to shareholders are in their and the Company's best interests as a whole and recommend that shareholders vote in their favour.

Outlook

Fund managers are nearly always prone to regard the current environment as difficult. It is no exaggeration, however, to describe the present geopolitical turmoil and deterioration in the fabric and harmony of both democratic and autocratic societies as troubling and unusual. 25 years of unprecedented and arguably reckless money printing has come home to roost. Adding value in anticipating big picture change either good or bad is difficult, even accepting an element of reflexivity: one thing leads to another. Inflation leads to falling living standards and, historically, wars. The good news, as ever, is in the degree of innovation, disruption and commercial success that can flow from human ingenuity. Stock-picking in the form of focussing on what might go right is the best way to explore and mine this seam. Growing, high quality companies delivering goods and services that enhance their customers' lives are worthy of attention and investment. Our Managers are adept at this activity. They have been sticking to their guns. In this we support them.

Michael MacPhee

 Chairman

16 November 2023

Managers' Report

We took over management of the Company four years ago with the aim of investing in Europe's most dynamic growth companies. Since then, the share price has experienced a spectacular rise and equally spectacular fall. Adjusted for the share split, we started at just over 80p, peaked at around 170p, and ended the current period almost where we started. While we continually ask ourselves what we could have done differently, Baillie Gifford has been managing European portfolios since 1985 and has experienced poor performance before. Many of our most successful companies have been through similarly difficult bouts. Just as those companies did, we emerged from each one in a stronger position. We do not wish to downplay the recent period of poor performance. We think about it every

day. Disappointing as this is, however, it is more important to consider where the share price will be five years from now.

Over short periods there are many variables that help dictate what a company is worth. These include interest rates, risk appetite, social media, and many of the behavioural shortcomings from which we humans regularly suffer. Companies make mistakes too - operational hiccups happen. These are businesses run by real people trying to navigate complex issues and unpredictable events. Over longer periods of time, however, these variables play a far less significant part. What is more important for value creation is a strong, durable corporate culture, and the ability to grow profitably over time. We will make mistakes, but if we build and maintain a portfolio of high-quality growing businesses run by people we trust, we believe that we can deliver for our shareholders.

Performance

Over the last financial year, the Company's NAV delivered a total return of 8.3% while the FTSE Europe ex UK index returned 20.5% in sterling terms. The Company's share price total return was 8.6%, ending the period at 83.6p, representing a discount of 13.6% to the NAV. This compares to a discount of 13.5% at the beginning of the period.

Despite these relative returns, we are increasingly optimistic about the future. Operational progress has been at least in line with our expectations, and we are seeing many affirming signals that our companies are taking advantage of this environment, investing while peers retrench, carrying out acquisitions, and buying back shares. We are not the only ones who think the selloff is overdone.

Positive contributors in the period include Ryanair, which continued to take market share from weaker airlines and invest in new capacity. Online classified companies Adevinta and its major shareholder Schibsted showed that they can offset temporarily weaker volumes with price increases. Both companies' share prices have also been boosted by news that a private equity consortium is looking to acquire Adevinta. Freight forwarder DSV and building materials manufacturer Kingspan continue to execute well, and both have been linked with potential large-scale acquisitions made feasible by their strong balance sheets. Spotify continues to grow healthily and now boasts over 550m monthly active users. After much investment, its recent focus has shifted to profitability using cost reductions and price increases as levers. This shift is underway at many technology companies, although Spotify is the first to be rewarded by the market.

Some companies performed less well. Battery startup Northvolt was written down to reflect moves in public benchmarks, though operational progress remains good. Elsewhere, payments processing company Adyen fell almost 50% in the week after announcing some market share losses in the US. This looks temporary to us, though we continue to monitor progress and debate the attractiveness of the new, lower valuation. Sartorius Stedim Biotech, which manufactures bioprocessing equipment for the biologics industry, also reported negative news, noting a slowdown in demand and higher inventories. Again, these issues feel temporary, and

we have made a modest addition. Swedish gaming company Embracer has been more disappointing. The investment case centred on the founder's strategy of acquiring media content and gaming studios and letting their founders flourish in a decentralised organisation. Unfortunately, this was a case of overpromising and underdelivering, and management is now being forced to sell assets to pay down debt. We have some sympathy for the idea that the company is now undervalued, but we have lost faith in the management team and the board. Trust in management and alignment are non-negotiable for us so we have sold our entire position.

Improving performance

We genuinely believe that the future looks brighter than the past. Cynics may argue that this is what all underperforming fund managers say, so the onus is on us to explain the underpinnings of our optimism. So, what are the catalysts to drive improving performance?

Cognitive psychologist Gary Klein, in his book 'Seeing What Others Don't', suggests that performance is improved by 'reducing errors and increasing insights'. As we have written before, our main error has been misjudging the impact of rapidly shifting monetary policy on the valuations of growth companies. Because the companies in the portfolio tend to be smaller and grow much faster than average, most of their lifetime cashflows are in the future, and these are now being discounted at a much higher rate than they were. We have therefore felt the impact of rising rates much more acutely. When panic sweeps the market,

it is the more nascent, higher growth companies that get hit hardest.

In order to minimise future valuation risk, we monitor interest rate and duration risk in the portfolio and construct a reverse discounted cashflow model for every company we look at. These process tweaks will help us test our assumptions on valuation, but also to take advantage of opportunities in a volatile market. This is crucial - the potential upside is much greater than the potential downside, so while minimising errors is important, it is less important than identifying insights to help us invest today in tomorrow's winners.

Insights

"Insights shift us toward a new story, a new set of beliefs that are more accurate, more comprehensive, and more useful. Our insights transform us in several ways. They change how we understand, act, see, feel, and desire."

- Gary Klein

We strive to identify insights. We look for new ways of seeing companies, truths that others are perhaps less able to see, potential that the market is not currently discounting. This is how one outperforms the market over the long term. Klein suggests that insights are often generated through pattern recognition and making connections as a by-product of coincidence or curiosity. Insights can also come from contradictions and inconsistencies. When we come across things that don't make sense, we need to build new mental models to understand what is going on. For us this is happening more and more when thinking about company valuations.

We have underperformed over the past two years - this simple observation is irrefutable. Interest rates have risen, and valuation multiples have fallen. However, here's the contradiction: over the past two years, the forward price-to-earnings multiple of our portfolio has fallen by 50%, from 34x to 17x*, which is a 40% premium to the index we are trying to outperform.  If you believe sell-side analysts, earnings per share (EPS) of our portfolio are expected to grow 12% per annum over the next three years which compares favourably to 4% per annum for the index. At those rates, the valuation multiple of our portfolio would be below that of the index within five years, although we would be disappointed if it wasn't sooner. This doesn't make any sense to us. The companies we invest in typically grow faster than the index and we would expect this to continue for far longer than five years. We think they are higher quality, have unique corporate cultures, have less debt, and are run by some of the best capital allocators in Europe. Things can always get cheaper but even the idea that our portfolio would trade at a discount to the index in a few years highlights just how inefficient the market is at valuing growth. 

So, what's going on? Part of the explanation could be related to hyperbolic discounting. This is a complicated sounding way of saying that future profits are being excessively discounted. We are reminded of the 1972 Stanford marshmallow experiment, led by psychologist Walter Mischel, which set out to measure a child's willingness to defer gratification. Children would often choose to devour one marshmallow immediately rather than wait fifteen minutes to receive two. This desire to experience immediate rewards at the expense of bigger rewards in the future plagues markets as much as children.

As long-term investors, we believe that the market tends to underestimate the attractiveness of special companies over long periods. This inefficiency becomes much more acute during times of stress, when time horizons shrink, risk appetite diminishes, and a premium is placed on certainty. It's no great surprise, then, that market breadth has narrowed sharply since 2021. Many have sought refuge in the perceived safety of the largest companies in the index regardless of their fundamentals or valuations. We've long believed that the midcap space in Europe contains a high proportion of future outliers, but this view is increasingly at odds with what the market is pricing in. This won't last forever, so we believe that this is the time to be adding to those stocks where we see asymmetric payoffs.

Portfolio

Portfolio turnover for the year was 9%, implying an average holding period of just over 10 years. During the second half of our financial year, we made six new investments in public companies: EQT, one of the world's largest and most reputable private equity firms; LVMH and Moncler, two luxury goods companies that are getting better as they get bigger; Soitec, an innovative French semiconductor company exposed to rapidly growing markets; Royal  Unibrew, a multi-beverage company with serial acquirer characteristics; and Eurofins, a global lab  testing business we've been waiting patiently to buy for many years. We also made a new investment in an unlisted Italian software company called Bending Spoons, which has a unique approach to monetising consumer mobile apps. This is a diverse, high-quality, highly profitable collection of companies growing much faster than the market, with meaningful inside ownership and attractive valuations.

During the same period, to make way for these new holdings, we completely sold five investments. We have already mentioned Embracer, but food delivery firm Just Eat Takeaway.com and green holding company Aker Horizons didn't work out either. Just Eat Takeaway.com suffered from an ill-timed acquisition in the highly competitive US market. Legislators also introduced fee caps which effectively turned a profitable business into a loss making one. With Aker Horizons we underestimated how difficult it would be for its portfolio of clean tech businesses to generate profits. MedTech distributor Addlife, and heat pump manufacturer NIBE, have been more successful. During the Covid pandemic, Addlife benefitted from increased demand for diagnostics and hospital equipment, while demand for NIBE's energy efficient heat pumps far exceeded supply during the energy crisis. In both cases we determined that valuations had risen too much, and that the capital would be best redirected into better ideas.

Private companies

While the Company can invest up to 20% of total assets in private companies, we currently have five investments accounting for around 11%: Northvolt (4.9%), McMakler (1.8%), sennder (1.8%), Flix (1.5%) and Bending Spoons (0.9%). Overall operational progress has been good and both Northvolt and Flix are rumoured to be considering an initial public offering ('IPO') in 2024.

We think giving investors low-cost access to private companies that would otherwise be unavailable is an attractive proposition. Companies are staying private for longer, as many of them are relatively asset light and therefore require little capital to grow. As a result, many are in the fortunate position to be able to choose their investors. We think our reputation as long-term growth investors and our ability to invest in both private and public markets mean we are advantaged when it comes to deal flow. We absolutely believe that investing in Europe's increasingly dynamic private companies can generate significant value and provide insights into a level of disruption not normally seen in public markets.

Northvolt

Our very first private investment is becoming increasingly important to us and the broader European economy. Northvolt was founded in 2016 by two former Tesla executives backed by two Swedish entrepreneurs who wanted to accelerate decarbonisation. Their mission was to produce the world's greenest batteries with the lowest carbon footprint. In just seven years, the company has taken on over 4,000 employees, secured more than $8bn in funding, and received more than $55bn in orders from customers like BMW, VW, Scania, Siemens and ABB. This is truly remarkable.

At 4.9% it is the largest position in the portfolio, so its success will help underpin any rebound in performance. The rumoured IPO in 2024 is just a milestone for us if it happens as we can continue holding the shares if there remains sufficient upside. Either way it should be very high profile particularly given its strategic importance to Europe's automotive industry, politicians, and financial institutions who all want to see it succeed. Europe cannot afford to rely on Asian battery manufacturers. It needs to build its own supply chain and Northvolt is the best chance we have.

Northvolt's opportunity is large and growing. In Europe alone, battery demand is expected to increase from around 150GWh in 2022 to 1,370GWh in 2030. This is likely to be revised upwards as new markets and applications emerge. We suspect this will be a commoditised market, but Northvolt's strategy seems well-suited. Important aspects of this strategy include:

• An ambition to lower the carbon footprint of a battery to 10kg of carbon dioxide equivalent per kilowatt hour, a 90% reduction from the current industry benchmark. This will be driven by access to very cheap renewable hydroelectric power, using responsibly sourced raw materials, and using at least 50% recycled material.

• Its unique vertical integration. Everything from cathode production to cell assembly to recycling will be done in-house. This not only lowers carbon emissions but also helps capture more recycled materials and improves quality.

• A European supply chain. A local champion needs local supply, and Northvolt's aim is to source 90% of components from within Europe. This creates a lot of alignment with those customers and politicians responsible for orders and subsidies.

• A focus on talent. Northvolt has assembled one of the best R&D teams in the world. Battery chemistries and technological roadmaps will evolve so it is important that the company can adapt and compete with its Asian competitors.

During an investment trip to Sweden with the Board, we recently visited Northvolt's first factory, Northvolt Ett, in the small town of Skellefteå. The 200-hectare site near the Arctic Circle is equivalent to around 300 football pitches, so is a highly ambitious project. The current plan is to produce 150GWh of batteries by 2030, but there is upside potential to this figure. To put this into context, if the average electric car has a 70kWh battery, this would be enough to power more than 2 million of the 11 million cars sold in Europe in 2022. Using public estimates for battery prices in 2030, this could result in $10-15bn in sales. Engineering and manufacturing at this scale poses tremendous challenges, and there will no doubt be delays and setbacks. If Northvolt succeeds, however, the payoff for investors could be huge.

Outlook

Our investment style is very much out of favour, and we have undoubtedly made mistakes, but we have the right people and corporate culture at Baillie Gifford to persevere through this difficult time. There are plenty of geopolitical tensions and economic headwinds to worry about, but we must not let such factors overshadow the adaptability, innovation, and capital allocation of the companies we invest in. We are riding on the coat-tails of founders, families and management teams who are doing all the hard work. That this work is being so discounted by the market gives us confidence in a brighter outlook for returns from here.

Stephen Paice

Chris Davies

Baillie Gifford

16 November 2023

* Representative portfolio and index figures are calculated excluding negative earnings.

List of investments

As at 30 September 2023

Name	Geography	Business	2023 Value £'000	2023 % of total assets
NorthvoltU	Sweden	Battery developer and manufacturer	18,752	4.9
Prosus	Netherlands	Portfolio of online consumer companies	18,710	4.9
Ryanair	Ireland	Low-cost airline	16,791	4.4
Topicus.com	Netherlands	Acquirer of vertical market software companies	16,053	4.2
Schibsted	Norway	Media and classifieds advertising platforms	14,381	3.8
Atlas Copco	Sweden	Industrial group	13,070	3.5
DSV	Denmark	Freight forwarder	12,473	3.3
ASML	Netherlands	Semiconductor equipment manufacturer	12,247	3.2
Allegro.eu	Poland	E-commerce platform	12,058	3.2
Kingspan	Ireland	Building materials provider	11,356	3.0
EXOR	Netherlands	Investment company specialising in industrials	10,774	2.8
Kering	France	Owner of luxury fashion brands	10,570	2.8
IMCD	Netherlands	Speciality chemicals distributor	9,697	2.6
Adevinta	Norway	Online classifieds marketplaces	9,606	2.5
Avanza Bank	Sweden	Online investment platform	9,396	2.5
Richemont	Switzerland	Owner of luxury goods companies	8,907	2.3
Spotify	Sweden	Online audio streaming service	8,528	2.2
Mettler-Toledo	Switzerland	Manufacturer of precision instruments for laboratories	8,302	2.2
Dassault Systèmes	France	Develops software for 3D computer-aided design	8,137	2.1
Adyen	Netherlands	Online payments platform	8,024	2.1
Nexans	France	Cable manufacturing company	8,003	2.1
Reply	Italy	IT consulting and systems integration provider	7,089	1.9
sennder U #	Germany	Freight forwarder focused on road logistics	6,938	1.8
McMakler U	Germany	Digital real estate broker	6,668	1.8
Sartorius Stedim Biotech	France	Pharmaceutical and laboratory equipment provider	6,531	1.7
Zalando	Germany	Online fashion retail platform	5,848	1.5
Flix U	Germany	Long-distance bus and train provider	5,841	1.5
Hypoport*	Germany	FinTech platform	5,633	1.5
Hexpol	Sweden	Manufacturer of rubber and polymer compounds	5,591	1.5
Kinnevik	Sweden	Investment company specialising in digital consumer businesses	5,508	1.5
Delivery Hero	Germany	Online food delivery platform	4,968	1.3
Epiroc	Sweden	Mining and infrastructure equipment provider	4,910	1.3
Evotec	Germany	Contract research and drug discovery company	4,793	1.3
HelloFresh	Germany	Meal kit delivery company	4,775	1.3
LVMH*	France	Luxury goods	4,626	1.2
Wizz Air	Hungary	Low-cost airline	4,583	1.2
Soitec*	France	Manufactures engineered substrates for semiconductor wafers	4,508	1.2
Hemnet	Sweden	Online real estate platform	4,400	1.2
adidas	Germany	Sports shoes and clothing manufacturer	4,170	1.1
Beijer	Sweden	Wholesaler of cooling technology	3,827	1.0
AUTO1	Germany	Online platform for used car selling in Europe	3,785	1.0
Moncler*	Italy	Manufactures luxury apparel products	3,693	1.0
Bending Spoons U *	Italy	Mobile application software developer	3,243	0.9
AutoStore*	Norway	Warehouse automation and cubic storage systems	3,121	0.8
Tonies	Germany	Musical storybox toys for children	3,099	0.8
Royal Unibrew*	Denmark	Alcoholic and non-alcoholic beverages	2,892	0.8
Eurofins*	France	Analytical testing services	2,862	0.8
Crispr Therapeutics	Switzerland	Developer of treatments based on gene editing technology	2,701	0.7
EQT*	Sweden	Investment firm, investing in equity, ventures, infrastructure and real estate	2,688	0.7
VNV Global	Sweden	Investment company specialising in early-stage technologies	2,253	0.6
Cellectis†	France	Biotech focused on genetic engineering	433	0.1
Total Investments			377,812	99.6
Net Liquid Assets*			1,536	0.4
Total Assets			379,348	100.0
Borrowings			(51,960)	(13.7)
Shareholders' funds			327,388	86.3

^U Denotes private company investment.

* New holding bought during the year (Addlife, Aker Horizons, Embracer, NIBE Industrier, Takeaway.com, Ubisoft Entertainment were sold during the year)

† Includes American Depositary Receipt.

# Includes convertible loan note.

Income Statement

	Notes	2023 Revenue £'000	2023 Capital £'000	2023 Total £'000	2022 Revenue £'000	2022 Capital £'000	2022 Total £'000
Gains/(losses) on investments		-	19,795	19,795	-	(241,839)	(241,839)
Currency (losses)/gains		(40)	533	493	104	(1,145)	(1,041)
Income	2	3,912	-	3,912	4,313	-	4,313
Investment management fee	3	(354)	(1,416)	(1,770)	(412)	(1,647)	(2,059)
Other administrative expenses		(564)	-	(564)	(572)	-	(572)
Net return before finance costs and taxation		2,954	18,912	21,866	3,433	(244,631)	(241,198)
Finance costs of borrowings		(164)	(653)	(817)	(214)	(652)	(866)
Net return before taxation		2,790	18,259	21,049	3,219	(245,283)	(242,064)
Tax on ordinary activities		6,835	-	6,835	(358)	-	(358)
Net return after taxation		9,625	18,259	27,884	2,861	(245,283)	(242,422)
Net return per ordinary share	4	2.68p	5.09p	7.77p	0.79p	(67.98p)	(67.19p)

The total column of this statement is the profit and loss account of the Company. The supplementary revenue and capital return columns are prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in this statement derive from continuing operations.

A Statement of Comprehensive Income is not required as all gains and losses of the Company have been reflected in the above statement.

The accompanying notes below are an integral part of the Financial Statements.

Balance Sheet

	Notes	2023 £'000	2023 £'000	2022 £'000	2022 £'000
Fixed assets
Investments held at fair value through profit or loss	6		377,812		358,105
Current assets
Debtors		2,406		2,797
Cash and cash equivalents		907		3,571
		3,313		6,368
Creditors
Amounts falling due within one year:		(1,775)		(1,516)
Net current assets			1,538		4,852
Total assets less current liabilities			379,350		362,957
Creditors
Amounts falling due after more than one year:	7		(51,960)		(52,560)
Net assets			327,390		310,397
Capital and reserves
Share capital	8		10,061		10,061
Share premium account			125,050		125,050
Capital redemption reserve			8,750		8,750
Capital reserve			176,215		158,457
Revenue reserve			7,314		8,079
Shareholders' funds			327,390		310,397
Net asset value per ordinary share* (borrowings at book value)			91.4p		86.5p
Net asset value per ordinary share* (borrowings at fair value)			96.7p		91.9p

The accompanying notes below are an integral part of the Financial Statements.

* See Glossary of terms and alternative performance measures at the end of this announcement.

Statement of Changes in Equity

For the year ended 30 September 2023

	Notes	Share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Capital reserve £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 October 2022		10,061	125,050	8,750	158,457	8,079	310,397
Dividends paid during the year	5	-	-	-	-	(10,390)	(10,390)
Shares bought back into treasury		-	-	-	(501)	-	(501)
Net return on ordinary activities  after taxation		-	-	-	18,259	9,625	27,884
Shareholders' funds at  30 September 2023		10,061	125,050	8,750	176,215	7,314	327,390

For the year ended 30 September 2022

	Notes	Share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Capital reserve £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 October 2021		10,061	125,050	8,750	411,184	6,494	561,539
Dividends paid during the year	5	-	-	-	-	(1,276)	(1,276)
Shares bought back into treasury		-	-	-	(7,444)	-	(7,444)
Net return on ordinary activities after taxation		-	-	-	(245,283)	2,861	(242,422)
Shareholders' funds at 30 September 2022		10,061	125,050	8,750	158,457	8,079	310,397

The accompanying notes below are an integral part of the Financial Statements.

Cash Flow Statement

	Notes	2023 £'000	2023 £'000	2022 £'000	2022 £'000
Cash flows from operating activities
Net return on ordinary activities before taxation		21,049		(242,064)
Net (gains)/losses on investments		(19,795)		241,839
Currency (gains)/losses		(533)		1,041
Finance costs of borrowings		817		866
Tax repayment received		7,034		-
Overseas withholding tax suffered		(199)		(284)
Overseas withholding tax received		451		459
Changes in debtors*		(170)		(214)
Changes in creditors*		29		(316)
Cash from operations†			8,683		1,327
Interest paid			(813)		(852)
Net cash inflow from operating activities			7,870		475
Cash flows from investing activities
Acquisitions of investments#		(46,765)		(147,499)
Disposals of investments#		47,203		147,012
Net cash inflow/(outlow) from investing activities			438		(487)
Cash flows from financing activities
Shares bought back into treasury		(509)		(7,436)
Equity dividends paid	5	(10,390)		(1,276)
Net cash outflow from financing activities			(10,899)		(8,712)
Decrease in cash and cash equivalents			(2,591)		(8,724)
Exchange movements			(73)		43
Cash and cash equivalents at start of year			3,571		12,252
Cash and cash equivalents at end of year			907		3,571
Comprising:
Cash at bank			907		3,571
			907		3,571

* Change in debtors is made up of changes in accrued income, prepaid expenses and taxation recoverable (excluding overseas withholding tax received in the year). Change in creditors is made up of changes in other creditors and accruals.

† Cash from operations includes dividends received of £2,839,000 (2022 - £4,284,000) and interest received of £919,000 (2022 - £2,000).

# Acquisitions of investments is made up of the current year purchases at cost, plus opening purchases for subsequent settlement, less

closing purchases for subsequent settlement (see note 11). Disposals of investments is made up of the current year sales proceeds plus

opening investment sales awaiting settlement, less closing investment sales awaiting settlement.

The accompanying notes below are an integral part of the Financial Statements.

Notes to the Condensed Financial Statements

1.  The Financial Statements for the year to 30 September 2023 have been prepared in accordance with FRS 102 'The

Financial Reporting Standard applicable in the UK and Republic of Ireland' on the basis of the accounting policies

set out below which are consistent with those applied for the year ended 30 September 2022.

2.  Income

	2023 £'000	2022 £'000
Income from investments
Overseas dividends	2,890	4,311
Overseas interest	103	-
Other income
Interest	919	2
Total income	3,912	4,313

Interest for 2023 includes £869,000 interest received from HMRC with the tax repayment (see note 6 on page 96 of the Annual Report and Financial Statements).

3.  Investment Management Fee

	2023 Revenue £'000	2023 Capital £'000	2023 Total £'000	2022 Revenue £'000	2022 Capital £'000	2022 Total £'000
Investment management fee	354	1,416	1,770	412	1,647	2,059

Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford & Co, was appointed as the Company's Alternative Investment Fund Manager ('AIFM') and Company Secretary on 29 November 2019. Baillie Gifford & Co Limited has delegated portfolio management services to Baillie Gifford & Co. Dealing activity and transaction reporting has been further sub-delegated to Baillie Gifford Overseas Limited and Baillie Gifford Asia (Hong Kong) Limited.

The Investment Management Agreement between the AIFM and the Company sets out the matters over which the Managers have authority in accordance with the policies and directions of, and subject to restrictions imposed by, the Board. The Investment Management Agreement is terminable on not less than three months' notice or on shorter notice in certain circumstances. Compensation would only be payable if termination occurred prior to the expiry of the notice period. The annual management fee is 0.55% of the lower of (i) the Company's market capitalisation and (ii) the Company's net asset value (which shall include income), in either case up to £500 million, and 0.50% of the amount of the lower of the Company's market capitalisation or net asset value above £500 million, calculated and payable quarterly.

4.  Net return per ordinary share

	2023 Revenue	2023 Capital	2023 Total	2022 Revenue	2022 Capital	2022 Total
Net return per ordinary share	2.68p	5.09p	7.77p	0.79p	(67.98p)	(67.19p)

Revenue return per ordinary share is based on the net revenue return on ordinary activities after taxation of £9,625,000 (2022 - £2,861,000), and on 358,552,904 (2022 - 360,823,119) ordinary shares, being the weighted average number of ordinary shares in issue during each year.

Capital return per ordinary share is based on the net capital gain for the financial year of £18,259,000 (2022 - net capital loss of £245,283,000), and on 358,552,904 (2022 - 360,823,119) ordinary shares, being the weighted average number of ordinary shares in issue during each year.

There are no dilutive or potentially dilutive shares in issue.

5.  Ordinary Dividends

	2023	2022	2023 £'000	2022 £'000
Amounts recognised as distributions in the period:
Previous year's final (paid 10 February 2023)	0.70p	0.35p	2,511	1,276
Special Interim Dividend (paid 15 September 2023)	2.20p	-	7,879	-
	2.90p	0.35p	10,390	1,276

Also set out below are the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of section 1158 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the year is £9,625,000 (2022 - £2,861,000).

	2023	2022	2023 £'000	2022 £'000
Dividends paid and proposed in the period:
Special Interim Dividend (paid 15 September 2023)	2.20p	-	7,879	-
Proposed final dividend per ordinary share (payable 10 February 2024)	0.40p	0.70p	1,433	2,511
	2.60p	0.70p	9,312	1,276

6.   Investments

As at 30 September 2023	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Securities
Listed equities	336,369	-	-	336,369
Unlisted equities	-	-	41,443	41,443
Total financial asset investments	336,369	-	41,443	377,812

As at 30 September 2022	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Securities
Listed equities	318,506	-	-	318,506
Unlisted equities	-	-	39,599	39,599
Total financial asset investments	318,506	-	39,599	358,105

Investments in securities are financial assets designated at fair value through profit or loss on initial recognition. In accordance with FRS 102 the tables above provide an analysis of these investments based on the fair value hierarchy described below which reflects the reliability and significance of the information used to measure their fair value.

Fair value hierarchy

The levels are determined by the lowest (that is the least reliable or least independently observable) level of input that is significant to the fair value measurement for the individual investment in its entirety as follows:

Level 1 - using unadjusted quoted prices for identical instruments in an active market;

Level 2 - using inputs, other than quoted prices included within Level 1, that are directly or indirectly observable (based on market data); and

Level 3 - using inputs that are unobservable (for which market data is unavailable).

The valuation techniques used by the Company are explained in the accounting policies on pages 92 and 93 of the Annual Report and Financial Statements. A sensitivity analysis by valuation technique of the unlisted securities is on pages 104 and 105 of the Annual Report and Financial Statements.

7.  Creditors - amounts falling due after more than one year

	2023 £'000	2022 £'000
Unsecured loan notes:
€30m 1.55% 24 June 2036	25,998	26,299
€30m 1.57% 8 December 2040	25,962	26,261
	51,960	52,560

The company has €30 million of long-term, fixed rate, senior, unsecured privately placed loan notes, with a fixed coupon of 1.57% to be repaid on 8 December 2040 and a further €30 million of long-term, fixed rate, senior, unsecured privately placed loan notes with a fixed coupon of 1.55% to be repaid on 24 June 2036.

The main covenants which are tested monthly are: (i) Net tangible assets shall not fall below £200,000,000. (ii) Total borrowings shall not exceed 30% of the Company's adjusted assets. (iii) The Company's number of holdings shall not fall below 30.

The Company currently has a €30,000,000 bank overdraft credit facility agreement with The Northern Trust Company (the 'Bank') for the purpose of pursuing its investment objective. As at 30 September 2023, nil had been drawn down (2022 - nil). The facility is uncommitted. Interest is charged at 1.25% above the European Central Bank Main Financing Rate. The Board has currently agreed to cap a drawdown under this facility at €15,000,000.

8.  Share Capital

	2023 Number	2023 £'000	2022 Number	2022 £'000
Allotted, called up and fully paid ordinary shares of 2.5p each	358,149,200	8,954	358,687,671	8,967
Treasury shares of 2.5p each	44,294,490	1,107	43,756,019	1,094
Total	402,443,690	10,061	402,443,690	10,061

The Company's shareholder authority permits it to hold shares bought back in treasury. Under such authority, treasury shares

may be subsequently either sold for cash (at a premium to net asset value per ordinary share) or cancelled. At 30 September 2023 the Company had authority to buy back 53,228,811 ordinary shares. During the year to 30 September 2023, no ordinary shares (2022 - nil) were bought back for cancellation and 538,471 ordinary shares were bought back into treasury at a cost of £500,000 (2022 - £7,444,000). Under the provisions of the Company's Articles of Association share buy-backs are funded from the capital reserve. The Company has authority to allot shares under section 551 of the Companies Act 2006. The Board has authorised use of this authority to issue new shares at a premium to net asset value per share in order to enhance the net asset value per share for existing shareholders and improve the liquidity of the Company's shares. During the year to 30 September 2023 no shares were issued (in the year to 30 September 2022 - no shares were issued).

9.   Analysis on change in net debt

	1 October 2022 £'000	Cash flows £'000	Other non-cash changes £'000	Exchange movement £'000	30 September 2023 £'000
Cash and cash equivalents	3,571	(2,591)	-	(73)	907
Loans due in more than one year	(52,560)	-	(6)	606	(51,960)
	(48,989)	(2,591)	(6)	533	(51,053)

10.  The financial information for 2022 is derived from the statutory accounts for 2022 which have been delivered to the Registrar of Companies. Statutory accounts for 2023 will be delivered to the Registrar of Companies in due course. The Auditors have reported on the 2022 and 2023 accounts, their report was (i) unqualified; (ii) did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report; and (iii) did not contain a statement under sections 498(2) or (3) to 497 of the Companies Act 2006.

11.  Transactions with related parties and the managers and secretaries

The Directors' fees for the year and interests in the Company's shares at the end of the year are detailed in the Directors' Remuneration Report on page 76 of the Annual Report and Financial Statements. The Directors' Fees are included in note 4 on page 95 of the Annual Report and Financial Statements. No Director has a contract of service with the Company. During the years reported, no Director was interested in any contract or other matter requiring disclosure under section 412 of the Companies Act 2006.

The Management fee due to Baillie Gifford & Co Limited is set out in note 3 on page 95 of the Annual Report and Financial Statements and the amount accrued at 30 September 2023 is set out in note 11 on page of the Annual Report and Financial Statements. Details of the Investment Management Agreement are set out on page 58 of the Annual Report and Financial Statements.

The Company is part of a marketing programme which includes all the investment trusts managed by the Manager. The Company's marketing contribution, recharged by the Manager, was £88,000 (£100,000) as disclosed in note 4 on page 95 of the Annual Report and Financial Statements.

12.  The Annual Report and Financial Statements will be available on the Company's page of the Managers' website at bgeuropeangrowth.com on or around 1 December 2023.

None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

Automatic Exchange of Information

In order to fulfil its obligations under UK tax legislation relating to the automatic exchange of information, the Company is required to collect and report certain information about certain shareholders.

The legislation requires investment trust companies to provide personal information to HMRC on certain investors who purchase shares in investment trusts. As an affected company, Baillie Gifford European Growth Trust will have to provide information annually to the local tax authority on the tax residencies of a number of non-UK based certificated shareholders and corporate entities.

Shareholders, excluding those whose shares are held in CREST, who come on to the share register will be sent a certification form for the purposes of collecting this information.

For further information, please see HMRC's Quick Guide: Automatic Exchange of Information - information for account holders gov.uk/government/publications/exchange-of-information-account-holders.

Third Party data provider disclaimers

No third party data provider ('Provider') makes any warranty, express or implied, as to the accuracy, completeness or timeliness of the data contained herewith nor as to the results to be obtained by recipients of the data.

No Provider shall in any way be liable to any recipient of the data for any inaccuracies, errors or omissions in the index data included in this document, regardless of cause, or for any damages (whether direct or indirect) resulting therefrom. No Provider has any obligation to update, modify or amend the data or to otherwise notify a recipient thereof in the event that any matter stated herein changes or subsequently becomes inaccurate.

Without limiting the foregoing, no Provider shall have any liability whatsoever to you, whether in contract (including under an indemnity), in tort (including negligence), under a warranty, under statute or otherwise, in respect of any loss or damage suffered by you as a result of or in connection with any opinions, recommendations, forecasts, judgements, or any other conclusions, or any course of action determined, by you or any third party, whether or not based on the content, information or materials contained herein.

FTSE Index Data

Source: London Stock Exchange Group plc and its group undertakings (collectively, the 'LSE Group'). ©LSE Group 2023. FTSE Russell is a trading name of certain of the LSE Group companies. 'FTSE®' 'Russell®', 'FTSE Russell®, are trade marks of the relevant LSE Group companies and are used by any other LSE Group company under license.

All rights in the FTSE Russell indices or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indices or data and no party may rely on any indices or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company's express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

Sustainable Finance Disclosure Regulation ('SFDR')

The EU SFDR does not have a direct impact in the UK due to Brexit, however, it applies to third-country products marketed in the EU. As Baillie Gifford European Growth Trust is marketed in the EU by the AIFM, Baillie Gifford & Co Limited, via the National Private Placement Regime, the following disclosures have been provided to comply with the high-level requirements of SFDR. The AIFM has adopted Baillie Gifford & Co's Governance and Sustainable Principles and Guidelines as its policy on integration of sustainability risks in investment decisions.

Baillie Gifford & Co's approach to investment is based on identifying and holding high quality growth businesses that enjoy sustainable competitive advantages in their marketplace. To do this it looks beyond current financial performance, undertaking proprietary research to build an in-depth knowledge of an individual company and a view on its long- term prospects. This includes the consideration of sustainability factors (environmental, social and/or governance matters) which it believes will positively or negatively influence the financial returns of an investment. More detail on the Managers' approach to sustainability can be found in the Governance and Sustainability Principles and Guidelines document, available publicly on the Baillie Gifford website bailliegifford.com.

Taxonomy Regulation

The Taxonomy Regulation establishes an EU-wide framework of criteria for environmentally sustainable economic activities in respect of six environmental objectives. It builds on the disclosure requirements under SFDR by introducing additional disclosure obligations in respect of alternative investment funds that invest in an economic activity that contributes to an environmental objective. The Company does not commit to make sustainable investments as defined under SFDR. As such, the underlying investments do not take into account the EU criteria for environmentally sustainable economic activities.

Glossary of Terms and Alternative Performance Measures (APM)

An Alternative Performance Measure ('APM') is a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework. The APMs noted below are commonly used measures within the investment trust industry and serve to improve comparability between investment trusts.

Total assets

This is the Company's definition of Adjusted Total Assets, being the total value of all assets less current liabilities, before deduction of all borrowings.

Shareholders' funds

Shareholders' Funds is the value of all assets held less all liabilities, with borrowings deducted at book value.

Net asset value

Net Asset Value is the value of total assets less liabilities with borrowings deducted at either book value or fair value as described below. The net asset value per share (NAV) is calculated by dividing this amount by the number of ordinary shares in issue (excluding treasury shares).

Net asset value (borrowings at fair value) (APM)

Borrowings are valued at an estimate of market worth. The fair value of the Company's loan notes is set out in note 19 on page 107 of the Annual Report and Financial Statements

.

A reconciliation from shareholders' funds (borrowings at book value) to net asset value after deducting borrowings at fair value is provided below.

		2023 £'000	2023 per share	2022 £'000	2022 per share
Shareholders' funds (borrowings at book value)		327,390	91.4p	310,397	86.5p
Add: book value of borrowings		51,960	14.5p	52,560	14.7p
Less: fair value of borrowings		(32,869)	(9.2p)	(33,425)	(9.3p)
Net asset value (borrowings at fair value)		346,481	96.7p	329,532	91.9p

The per share figures above are based on 358,149,200 (2022 - 358,687,671) ordinary shares of 2.5p, being the number of ordinary shares in issue at the year end.

Net liquid assets

Net liquid assets comprise current assets less current liabilities, excluding borrowings.

Discount/premium (APM)

As stockmarkets and share prices vary, an investment trust's share price is rarely the same as its NAV. When the share price is lower than the NAV it is said to be trading at a discount. The size of the discount is calculated by subtracting the share price from the NAV and is usually expressed as a percentage of the NAV. If the share price is higher than the NAV, it is said to be trading at a premium.

		2023 NAV (book)	2023 NAV (fair)	2022 NAV (book)	2022 NAV (fair)
Closing NAV		91.4p	96.7p	86.5p	91.9p
Closing share price		83.6p	83.6p	79.5p	79.5p
Discount		8.5%	13.6%	8.1%	13.5%

Total return (APM)

The total return is the return to shareholders after reinvesting the net dividend on the date that the share price goes ex-dividend.

		2023 NAV	2023 Share price	2022 NAV	2022 Share price
Closing NAV/share price	(a)	96.7p	83.6p	91.9p	79.5p
Dividend adjustment factor*	(b)	1.0286	1.0328	1.0024	1.0025
Adjusted closing NAV/share price	(c) = (a) x (b)	99.5p	86.3p	92.1p	79.7p
Opening NAV/share price	(d)	91.9p	79.5p	154.5p	152.4p
Total return	(c) ÷ (d) -1	8.3%	8.6%	(40.4%)	(47.7%)

* The dividend adjustment factor is calculated on the assumption that the dividends of 0.7p and 2.20p (2022 - final dividend 0.35p) paid by the Company during the year were reinvested into shares of the Company at the cum income NAV/share price, as appropriate, at the ex-dividend date.

The NAV (fair) total return for the period since Baillie Gifford began managing the portfolio in November 2019 can be calculated using the methodology shown in the table above and an opening NAV of 93.7p, a dividend adjustment factor of 1.0585 and a closing NAV of 96.7p.

Ongoing charges (APM)

The total expenses (excluding borrowing costs) incurred by the Company as a percentage of the average net asset value with borrowings at fair value. The ongoing charges have been calculated on the basis prescribed by the Association of Investment Companies.

A reconciliation from the expenses detailed in the Income Statement is provided below.

		2023	2022
Investment management fee		£1,770,000	£2,059,000
Other administrative expenses		£564,000	£572,000
Total expenses	(a)	£2,334,000	£2,631,000
Average net asset value (with borrowings deducted at fair value)	(b)	£379,519,000	£439,950,000
Ongoing charges ((a) ÷ (b) expressed as a percentage)		0.62%	0.60%

Gearing (APM)

At its simplest, gearing is borrowing. Just like any other public company, an investment trust can borrow money to invest in additional investments for its portfolio. The effect of the borrowing on shareholders' funds is called 'gearing'. If the Company's assets grow, shareholders' funds grow proportionately more because the debt remains the same. But if the value of the Company's assets falls, the situation is reversed. Gearing can therefore enhance performance in rising markets but can adversely impact performance in falling markets.

Gearing is the Company's borrowings adjusted for cash and cash equivalents expressed as a percentage of shareholders' funds.

Gross gearing is the Company's borrowings expressed as a percentage of shareholders' funds.

Leverage (APM)

For the purposes of the Alternative Investment Fund Managers (AIFM) Regulations, leverage is any method which increases the Company's exposure, including the borrowing of cash and the use of derivatives. It is expressed as a ratio between the Company's exposure and its net asset value and can be calculated on a gross and a commitment method. Under the gross method, exposure represents the sum of the Company's positions after the deduction of sterling cash balances, without taking into account any hedging and netting arrangements.

Under the commitment method, exposure is calculated without the deduction of sterling cash balances and after certain hedging and netting positions are offset against each other.

Active share (APM)

Active share, a measure of how actively a portfolio is managed, is the percentage of the portfolio that differs from its comparative index. It is calculated by deducting from 100 the percentage of the portfolio that overlaps with the comparative index. An active share of 100 indicates no overlap with the index and an active share of zero indicates a portfolio that tracks the index.

-end-

 

END