Baillie Gifford UK Growth Trust half yearly report

Baillie Gifford UK Growth Trust PLC

29 November 2024

 

RNS Announcement

Baillie Gifford UK Growth Trust plc (BGUK)

Legal Entity Identifier: 549300XX386SYWX8XW22

Results for the six months to 31 October 2024

The following is the unaudited Interim Financial Report for the six months to 31 October 2024 which was approved by the Board on 28 November 2024.

Over the six month period to 31 October 2024, the Company's net asset value per share total return was +8.1% compared to +1.8% for the FTSE All-Share Index total return. The share price total return for the same period was +11.7%.

− As Chairman, I am in the fortunate position of writing my first statement for the Company at a time when performance has improved. We have in Baillie Gifford UK Growth Trust a portfolio of growth companies on unusually attractive valuations.

− Good operational performance was rewarded with notable share price rises in several holdings.

− We sold our positions in Victrex, Hargreaves Lansdown and IG Group, and took a new holding in Applied Nutrition.

− The net revenue return per share was 2.45p compared to 2.78p in the corresponding period last year. As highlighted previously, no interim dividend will be declared as all dividends are paid as a single final dividend.

− Over the period a total of 4,957,992 shares were bought back for treasury. Following the purchase of a further 1,748,609 shares since the period end, as at 27 November 2024 the Company has 20,945,278 shares held in treasury accounting for 15.0% of the Company's current shares in issue.*

− The UK is full of exciting growth opportunities and the Company is well placed to maximise on that growth potential.

*This percentage calculation excludes treasury shares from the denominator.

Total return information is sourced from Baillie Gifford/LSEG. 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.

Baillie Gifford UK Growth Trust plc invests to achieve capital growth predominantly from investment in UK equities with the aim of providing a total return in excess of the FTSE All-Share Index total return.

The Company is managed by Baillie Gifford & Co, an Edinburgh based fund management group with around £224.6 billion under management and advice as at 28 November 2024.

Baillie Gifford UK 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 UK Growth Trust plc at bgukgrowthtrust.com^‡.

Past performance is not a guide to future performance. See disclaimer at end of this announcement.

^‡ 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.

28 November 2024

For further information please contact:

Anzelm Cydzik, Baillie Gifford & Co

Tel: [phone]

Jonathan Atkins, Four Communications

Tel: [phone] or 07872 495396

Principal risks and uncertainties

The principal risks facing the Company are financial risk, investment strategy risk, discount risk, climate and governance risk, regulatory risk, custody and depositary risk, operational risk, leverage risk, political risk, cyber security risk and emerging risks. An explanation of these risks and how they are managed is set out on pages 34 to 37 of the Company's Annual Report and Financial Statements for the year to 30 April 2024 which is available on the Company's website: bgukgrowthtrust.com. The principal risks and uncertainties have not changed since the date of that report.

Responsibility statement

We confirm that to the best of our knowledge:

a.          the condensed set of Financial Statements has been prepared in accordance with FRS 104 'Interim Financial Reporting';

b.          the Interim Management Report includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.7R (indication of important events during the first six months, their impact on the Financial Statements and a description of the principal risks and uncertainties for the remaining six months of the year); and

c.          the Interim Financial Report includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein).

On behalf of the Board

Neil Rogan

Chairman

28 November 2024

Chairman's interim update

I am in the fortunate position of writing my first Chairman's statement for the Company at a time when performance has improved.

Over the six months to 31 October 2024 your NAV per share total return was +8.1% and your share price total return was +11.7%, both outperforming the FTSE All-Share Index total return of +1.8%. As you can see in the table below the one-year performance numbers are also significantly ahead of the benchmark index, but the three-year and five-year performance numbers still lag considerably behind. Iain and Milena analyse performance in more detail in their report.

Total return performance^*

	6 month	1 Year	3 Year	5 Year
FTSE All-Share Index†	1.8%	16.3%	19.7%	31.9%
NAV	8.1%	23.6%	(10.2%)	15.3%
Share price	11.7%	27.1%	(16.3%)	13.4%

There is still much work to be done by the Managers and by the Board to turn around this Company. Obviously, the main determinant of our future success will be building on this performance improvement over the next three to five years. Your Board believes that the ingredients are in place for Baillie Gifford to deliver this improvement, with their clear investment philosophy, a robust investment process and a strong team led by Iain and Milena managing the portfolio. They have learnt the pitfalls of their style of investing, such as paying too high an entry price for a good company or holding on too long when something starts to go wrong. Their response has been an intensive programme of company meetings to review and upkeep the validity of the investment case for all your holdings.

What can the Board do? We have introduced a 100% performance conditional tender, which means that shareholders will be given in 2029 the opportunity to tender as much of their holding as they wish at a 2% discount to NAV if performance fails to beat the comparative index over the five-year period to 30 April 2029. We have also committed to an extra continuation vote in 2027. And we have stepped up our buyback program this year to the extent that we have bought back 4,957,992 shares in the six months to 31 October 2024, representing 3.4% of the number of shares in issue at the start of the year.

We can also set expectations. Baillie Gifford's investment style means that this Company is likely to perform best when markets are rising, when growth stocks are outperforming value stocks and when mid- and small-cap stocks are outperforming large-caps. Because the active share of the portfolio is large (87%; meaning that 87% of the portfolio is different from the FTSE All-Share Index) performance outcomes are likely to remain significantly different to the index.

The Board's dividend policy remains unchanged, which is to pay out at least 85% of earned income in one payment per year, putting any excess into revenue reserves. The Board is responsible for the level of ongoing charges which was a competitive 0.70% per annum at 30 April 2024. The major component of this is the 0.50% management fee paid to Baillie Gifford.

Turning to Board composition, I would like to record the Board's thanks to Carolan Dobson who stood down as Chairman in August having served on the board for nearly ten years. We are in the final stages of recruiting a new director whom we expect to join in January 2025.

Outlook

Looking at the numbers reveals we have in Baillie Gifford UK Growth Trust a portfolio of growth companies on unusually attractive valuations. The blended historic price to earnings ratio for the portfolio is around 20 times, with 10% earnings growth predicted for the next three years and companies that should produce superior growth beyond that horizon. This is a much better starting position for a growth portfolio than has been the case for many years. Many of the companies held will be able to grow even if the UK economy remains lacklustre. But the real excitement would come if the UK was able to unleash its growth potential. The new Government's policy is geared towards increasing growth in the economy but achieving this will be challenging.

The best-case scenario would see a return to the growth style tailwind that helps Baillie Gifford perform at the same time as the UK moving back up towards its normal valuation levels versus world markets and investment trust discounts reverting to mean. Any one of these would be good news for shareholders.

Neil Rogan

Chairman

28 November 2024

^*    Alternative Performance Measure, see Glossary of terms and Alternative Performance Measures below.

^†    Source: LSEG/Baillie Gifford and relevant underlying data providers. See disclaimers below.

Past performance is not a guide to future performance.

Interim management report

Even as bottom up investors, it was hard to ignore the chatter surrounding the UK General Election, interest rate cuts, the political drama across in the US and efforts by the Chinese to stimulate their economy. However the relatively small bounce in the FTSE All-Share over the period did highlight that these factors are often more short term and transitory than many people think. What was undoubtedly important from a psychological viewpoint was the cut in interest rates by the Bank of England in August. There has been no doubt that for growth investors the rapid rise in interest rates since the outbreak of inflation post the Covid lockdown has been a significant headwind. The fact that inflation rates have fallen significantly and that interest rates appear to have peaked should allow the stock market to focus more on fundamentals of companies bodes well for our highly differentiated portfolio with the growth potential it contains.

This trend played out to some extent in the period, although it is a very short period to draw firm conclusions. Nevertheless, good operational performance was rewarded with notable share price rises in holdings such as Autotrader, Experian, Games Workshop, Volution, Just Group and AJ Bell. The welcome absence of no further bad news from the wealth manager St James's Place also led a large jump in the share price albeit from a fairly low level at the start of the period. On the less positive side, the market was still unforgiving of trading disappointments as we saw in holdings such as Diageo & Burberry (poor trading from both), Page Group (a tough current climate for recruitment firms) and Kainos (Government IT contract delays). Elsewhere some of our engineers such as Renishaw and Bodycote fell as markets worried about the impact of some tough end markets on their near term prospects.

Transactions

There were a few notable transactions in the period. We exited our position in Victrex, the speciality chemicals business as we grew increasingly downbeat that the new product areas they are trying to commercialise are taking longer than hoped and may not be material enough to make a difference to the more mature core business.

We decided to sell our position in Hargreaves Lansdown following its agreed takeover by private equity. We have been disappointed by the performance of this leading savings platform business in recent years, as a number of management missteps have ultimately led to disappointing inflows into their platform in comparison to the other platform businesses owned in the portfolio such as Integrafin and notably AJ Bell. Whilst we had been impressed by the new CEO at Hargreaves Lansdown and his plans for getting a grip on the business, we also felt that it would take time and money to fix, so it was not a total surprise that an opportunistic bid at a difficult time for the business was accepted by the board given the uplift to the prevailing share price.

We also sold our longstanding position in the financial spread betting business IG Group after a decent bounce in the share price. A new CEO has been installed and has been brutally honest that while the business is very profitable, it has lost market share and missed out on growth opportunities by not being nimble enough. While we found that candour refreshing, we decided that there were risks in his reset strategy which might involve acquisitions where this business has had decidedly mixed results in the past.

Finally, we bought a new holding in Applied Nutrition at its floatation on the market. The business is founder led, has built a strong and profitable position in certain sports related markets and we think it has the opportunity to grow significantly both in the UK and more importantly internationally. Encouraging evidence of the latter is signing up well known supermarkets to stock some of their products and they believe that these relationships can be materially expanded in the future. We think Applied Nutrition's edge is having a nimble and innovative culture where the business can test and launch new flavours or products in relatively short order in comparison to competitors.

Outlook

Our style as managers is to stick to our processes, keep a vigilant eye on our holdings and try to avoid being unduly despondent or euphoric. While it is pleasing to see a decent period of performance for the Company, we are not getting carried away. What we are more concerned with is owning a portfolio of exciting growth names and trying to ensure that the management teams are executing on that long term potential. In turbulent times this remains a challenge, but at the same time the rewards for owners of such businesses that can execute on their plans is as attractive and as relevant as ever.

Iain McCombie and Milena Mileva

Baillie Gifford & Co

28 November 2024

The principal risks and uncertainties facing the Company are set out above. Related party transaction disclosures are set out in note 9 below.

The managers' core investment principles

Investment philosophy

The following are the three core principles underpinning our investment philosophy. We have a consistent, differentiated long-term investment approach to managing UK equities that should stand investors in the Company in good stead:

Growth

We search for the few companies which have the potential to grow substantially and profitably over many years. Whilst we have no insight into the short-term direction of a company's share price, we believe that, over the longer term, those companies which deliver above average growth in cash flows will be rewarded with above average share price performance and that the power of compounding is often under-appreciated by investors. Successful investments will benefit from a rising share price and also from income accumulated over long periods of time.

Patience

Great growth companies are not built in a day. We firmly believe that investors need to be patient to fully benefit from the scale of the potential. Our investment time horizon, therefore, spans decades rather than quarters. This patient, long-term approach affords a greater chance for the superior growth and competitive traits of companies to emerge as the dominant influence on their share prices and allows compounding to work in the investors' favour.

Active investment management

It is our observation that many investors pay too much attention to the composition of market indices and active managers should make meaningful investments in their best ideas regardless of the weightings of the index. For example, we would never invest in a company just because it is large or to reduce risk. As a result, shareholders should expect the composition of the portfolio to be significantly different from the benchmark. This differentiation is a necessary condition for delivering superior returns over time and shareholders should be comfortable tolerating the inevitable ups and downs in short-term relative performance that will follow from that. Portfolio construction flows from the investment beliefs stated above.

List of investments as at 31 October 2024 (unaudited)

Name	Business	Value £'000	% of total assets *
Basic materials
Rio Tinto	Metals and mining company	5,662	1.8
		5,662	1.8
Consumer discretionary
Games Workshop	Toy manufacturer and retailer	17,802	5.7
Howden Joinery	Manufacturer and distributor of kitchens to trade customers	12,111	3.9
4imprint	Direct marketer of promotional merchandise	9,679	3.1
RELX	Professional publications and information provider	6,327	2.0
Moonpig	Online greetings card and gifting platform	5,731	1.8
Burberry	Luxury goods retailer	3,128	1.0
		54,778	17.5
Consumer staples
Diageo	International drinks company	6,824	2.2
Applied Nutrition	Premium nutrition supplement retailer	1,333	0.4
		8,157	2.6
Financials
AJ Bell	UK wealth manager	13,125	4.2
Just Group	Provider of retirement income products and services	10,494	3.4
St. James's Place	UK wealth manager	8,717	2.8
Legal & General	Insurance and investment management company	8,465	2.7
Lancashire Holdings	General insurance	7,653	2.5
IntegraFin	Provides platform services to financial clients	7,216	2.3
Prudential	International life insurer	5,943	1.9
Hiscox	Property and casualty insurance	5,232	1.7
Molten Ventures	Technology focused venture capital firm	4,428	1.4
		71,273	22.9
Healthcare
Genus	World leading animal genetics company	8,336	2.7
Creo Medical	Designer and manufacturer of medical equipment	835	0.3
Exscientia	Biotech company	496	0.1
Oxford Nanopore	Novel DNA sequencing technology	415	0.1
		10,082	3.2
Industrials
Volution Group	Supplier of ventilation products	18,498	5.9
Experian	Global provider of credit data and analytics	17,225	5.5
Ashtead	Construction equipment rental company	13,929	4.5
Wise	Online platform to send and receive money	9,616	3.1
Bunzl	Distributor of consumable products	8,794	2.8
Renishaw	Metrology company	8,026	2.6
Halma	Specialist engineer	7,935	2.5
Inchcape	Car wholesaler and retailer	7,015	2.2
Bodycote	Heat treatment and materials testing	5,152	1.7
PageGroup	Recruitment consultancy	3,902	1.2
FDM Group	Provider of professional services focusing on information technology	2,771	0.9
		102,863	32.9
Real estate
Rightmove	Online property portal	6,262	2.0
Helical	Property developer	3,618	1.2
		9,880	3.2
Technology
Auto Trader Group	Advertising portal for second hand cars in the UK	18,103	5.8
Softcat	IT reseller and infrastructure solutions provider	10,501	3.4
Kainos Group	IT services and implementer	6,825	2.2
First Derivatives	IT consultant and software developer	4,452	1.4
Wayve Technologies Ltd Series B Pref.§	Developer of fully autonomous driving systems	3,338	1.1
		43,219	13.9
Total equities		305,914	98.0
Net liquid assets		6,272	2.0
Total assets *		312,186	100.0

^§    Denotes private company investment.

^*    Total assets less current liabilities, before deduction of borrowings. See Glossary of terms and Alternative Performance Measures below.

Stocks highlighted in bold are the 20 largest holdings.

Income statement (unaudited)

		For the six months ended 31 October 2024			For the six months to 31 October 2023			For the year ended 30 April 2024 (audited)
Notes		Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains/(losses) on investments		-	19,037	19,037	-	(38,005)	(38,005)	-	(6,288)	(6,288)
Currency (losses)/gains		-	(20)	(20)	-	54	54	-	(93)	(93)
Income		4,281	-	4,281	4,812	-	4,812	9,787	-	9,787
Investment management fee	3	(223)	(520)	(743)	(208)	(484)	(692)	(421)	(982)	(1,403)
Other administrative expenses		(306)	-	(306)	(267)	-	(267)	(568)	-	(568)
Net return before finance costs and taxation		3,752	18,497	22,249	4,337	(38,435)	(34,098)	8,798	(7,363)	1,435
Finance cost of borrowings		(208)	(485)	(693)	(155)	(361)	(516)	(314)	(732)	(1,046)
Net return before taxation		3,544	18,012	21,556	4,182	(38,796)	(34,614)	8,484	(8,095)	389
Tax		-	-	-	-	-	-	-	-	-
Net return after taxation		3,544	18,012	21,556	4,182	(38,796)	(34,614)	8,484	(8,095)	389
Net return per ordinary share	4	2.45p	12.44p	14.89p	2.78p	(25.81p)	(23.03p)	5.68p	(5.42p)	0.26p
Note: Dividends paid and payable per share	5	-			-			5.60p

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

All revenue and capital items in the above statements 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 (unaudited)

	Notes	At 31 October 2024 £'000	At 30 April 2024 £'000
Fixed assets
Investments held at fair value through profit or loss	6	305,914	296,590
Current assets
Debtors		563	2,242
Cash and cash equivalents		6,812	1,917
		7,375	4,159
Creditors
Amounts falling due within one year:
Bank loan	7	(24,350)	(16,350)
Other creditors		(1,102)	(1,246)
		(25,452)	(17,596)
Net current liabilities		(18,077)	(13,437)
Net assets		287,837	283,153
Capital and reserves
Share capital		40,229	40,229
Share premium account		11,664	11,664
Capital redemption reserve		19,759	19,759
Warrant exercise reserve		417	417
Share purchase reserve		40,619	49,380
Capital reserve		161,520	143,508
Revenue reserve		13,629	18,196
Shareholders' funds		287,837	283,153
Net asset value per ordinary share*		203.1p	193.0p
Ordinary shares in issue	8	141,720,515	146,678,507

^*            See Glossary of terms and Alternative Performance Measures below.

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

Statement of changes in equity (unaudited)

Six months to 31 October 2024

	Notes	Share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Warrant exercise reserve £'000	Share purchase reserve £'000	Capital reserve * £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 May 2024		40,229	11,664	19,759	417	49,380	143,508	18,196	283,153
Net return after taxation		-	-	-	-	-	18,012	3,544	21,556
Ordinary shares bought back into treasury	8	-	-	-	-	(8,761)	-	-	(8,761)
Dividends paid	5	-	-	-	-	-	-	(8,111)	(8,111)
Shareholders' funds at 31 October 2024		40,229	11,664	19,759	417	40,619	161,520	13,629	287,837

Six months to 31 October 2023

	Notes	Share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Warrant exercise reserve £'000	Share purchase reserve £'000	Capital reserve * £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 May 2023		40,229	11,664	19,759	417	55,628	151,603	15,122	294,422
Net return after taxation		-	-	-	-	-	(38,796)	4,182	(34,614)
Ordinary shares bought back into treasury	8	-	-	-	-	(865)	-	-	(865)
Dividends paid	5	-	-	-	-	-	-	(5,410)	(5,410)
Shareholders' funds at 31 October 2023		40,229	11,664	19,759	417	54,763	112,807	13,894	253,533

^*    The Capital Reserve balance at 31 October 2024 includes investment holding gains of £21,746,000 (31 October 2023 - losses of £41,156,000).

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

Cash flow statement (unaudited)

	Six months to 31 October 2024 £'000	Six months to 31 October 2023 £'000
Cash flows from operating activities
Net return before taxation	21,556	(34,614)
Adjustments to reconcile company profit before tax to net cash flow from operating activities
Net (gains)/losses on investments	(19,037)	38,005
Currency losses/(gains)	20	(54)
Finance costs of borrowings	693	516
Other capital movements
Changes in debtors	1,087	1,264
Changes in creditors	(6)	(84)
Cash from operations*	4,313	5,033
Interest paid	(545)	(361)
Net cash inflow from operating activities	3,768	4,672
Cash flows from investing activities
Acquisitions of investments	(1,851)	(16,732)
Disposals of investments	12,156	16,117
Net cash inflow/(outflow) from investing activities	10,305	(615)
Cash flows from financing activities
Bank loan drawn down	8,000	1,900
Equity dividends paid	(8,111)	(5,410)
Ordinary shares bought back into treasury and stamp duty thereon	(9,047)	(865)
Net cash outflow from financing activities	(9,158)	(4,375)
Increase/(decrease) in cash and cash equivalents	4,915	(318)
Exchange movements	(20)	54
Cash and cash equivalents at start of period	1,917	5,512
Cash and cash equivalents at end of period†	6,812	5,248

^*    Cash from operations includes dividends received of £5,305,000 (2023 - £5,994,000) and £48,000 deposit interest (2023 - £65,000).

^†    Cash and cash equivalents represent cash at bank.

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

Notes to the Financial Statements (unaudited)

01      Basis of accounting

The condensed Financial Statements for the six months to 31 October 2024 comprise the statements set out above together with the related notes below. They have been prepared in accordance with FRS 104 'Interim Financial Reporting' and the AIC's Statement of Recommended Practice issued in November 2014 and updated in July 2022 with consequential amendments and have not been audited or reviewed by the Auditor pursuant to the Auditing Practices Board Guidance 'Review of Interim Financial Information'. The Financial Statements for the six months to 31 October 2024 have been prepared on the basis of the same accounting policies as set out in the Company's Annual Report and Financial Statements at 30 April 2024.

Going concern

Having considered the nature of the Company's principal risks and uncertainties, as set out on the inside front cover, together with its current position, investment objective and policy, its assets and liabilities and projected income and expenditure, together with the Company's dividend policy, it is the Directors' opinion that the Company has adequate resources to continue in operational existence for the foreseeable future. The Board has, in particular, considered heightened geopolitical tensions, conflicts and macroeconomic concerns. It has reviewed the results of specific leverage and liquidity stress testing, but does not believe the Company's going concern status is affected. The Company's assets, the majority of which are investments in quoted securities which are readily realisable, exceed its liabilities significantly and could be sold to repay borrowings if required. All borrowing facilities require the prior approval of the Board. Gearing levels and compliance with borrowing covenants are reviewed by the Board on a regular basis. In accordance with the Company's Articles of Association, shareholders have a right to vote on the continuation of the Company every five years. This resolution was last passed at the 2024 Annual General Meeting. The Board made a commitment during 2024 to put forward a resolution at the Annual General Meeting to be held in 2027 for the continuation of the Company. This is in addition to the five-yearly continuation votes and, as such, a continuation vote is expected to be held in 2029 as well. The Directors have considered the continuation vote to be held at the 2027 Annual General Meeting, along with the other factors set out above, and are satisfied that it is appropriate to adopt the going concern basis of accounting in preparing these Financial Statements and confirm that they are not aware of any material uncertainties which may affect the Company's ability to continue to do so over a period of at least twelve months from the date of approval of these Financial Statements.

02      Financial information

The financial information contained within this Interim Financial Report does not constitute statutory accounts as defined in sections 434 to 436 of the Companies Act 2006. The financial information for the year ended 30 April 2024 has been extracted from the statutory accounts which have been filed with the Registrar of Companies. The Auditor's Report on those accounts was not qualified, did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report, and did not contain a statement under sections 498(2) or (3) of the Companies Act 2006.

03      Investment manager

Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford & Co, has been appointed by the Company as its Alternative Investment Fund Manager ('AIFM') and Company Secretary. The investment management function has been delegated to Baillie Gifford & Co. The management agreement can be terminated on six months' notice. The annual fee is 0.5% of net asset value, calculated and payable quarterly.

04      Net return per ordinary share

	Six months to 31 October 2024 £'000	Six months to 31 October 2023 £'000
Revenue return after taxation	3,544	4,182
Capital return after taxation	18,012	(38,796)
Total net return	21,556	(34,614)
Weighted average number of ordinary shares in issue	144,731,603	150,285,181

Net return per ordinary share is based on the above totals of revenue and capital and the weighted average number of ordinary shares in issue during each period.

There are no dilutive or potentially dilutive shares in issue.

05      Dividends

	Six months to 31 October 2024 £'000	Six months to 31 October 2023 £'000
Amounts recognised as distributions in the period: Previous year's final dividend of 5.60p (2023 - 3.60p), paid 13 September 2024	8,111	5,410

06      Fixed assets - investments

Fair value hierarchy

The fair value hierarchy used to analyse the basis on which the fair values of financial instruments held at fair value through the profit or loss account are measured is described below. Fair value measurements are categorised on the basis of the lowest level input that is significant to the fair value measurement.

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).

As at 31 October 2024	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Listed equities	302,576	-	-	302,576
Unlisted preference shares*	-	-	3,338	3,338
Total financial asset investments	302,576	-	3,338	305,914

As at 30 April 2024	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Listed equities	293,252	-	-	293,252
Unlisted preference shares*	-	-	3,338	3,338
Total financial asset investments	293,252	-	3,338	296,590

^* The unlisted preference shares investment represents a holding in Wayve Technologies Ltd.

The fair value of listed investments is quoted bid price. Listed investments are categorised as Level 1 if they are valued using unadjusted quoted prices for identical instruments in an active market and as Level 2 if they do not meet all these criteria but are, nonetheless, valued using market data. Unlisted investments are valued at fair value by the Directors following a detailed review and appropriate challenge of the valuations proposed by the Managers. The Managers' unlisted investment policy applies methodologies consistent with the International Private Equity and Venture Capital Valuation Guidelines 2022 ('IPEV'). These methodologies can be categorised as follows: (a) market approach (multiples, industry valuation benchmarks and available market prices); (b) income approach (discounted cash flows); and (c) replacement cost approach (net assets). The Company's holding in an unlisted investment is categorised as Level 3 as unobservable data is a significant input to its fair value measurement.

07      Bank loans

At 31 October 2024 the Company had borrowings of £24,350,000 (30 April 2024 - £16,350,000).

This was drawn down under the one year £30 million unsecured revolving credit loan facility with The Royal Bank of Scotland International Limited which expires in July 2025.

08      Share capital

At 31 October 2024, the Company had the authority to buy back 19,277,878 ordinary shares and to allot or sell from treasury 14,604,350 ordinary shares without application of pre-emption rights in accordance with the authorities granted at the AGM in September 2024. During the six months to 31 October 2024, no shares were sold from treasury (year to 30 April 2024 - no shares were sold from treasury). During the six months to 31 October 2024, 4,957,992 ordinary shares with a nominal value of £1,239,000 were bought back at a total cost of £8,761,000 and held in treasury (year to 30 April 2024 - 3,841,977 ordinary shares with a nominal value of £960,000 were bought back at a total cost of £6,248,000 and held in treasury).

09      Related party transactions

There have been no transactions with related parties during the first six months of the current financial year that have materially affected the financial position or the performance of the Company during that period and there have been no changes in the related party transactions described in the last Annual Report and Financial Statements that could have had such an effect on the Company during that period.

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

Glossary of terms and Alternative Performance Measures ('APM')

An alternative performance measure 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

Also described as shareholders' funds. Net asset value (NAV) is the value of total assets less liabilities (including borrowings). The NAV per share is calculated by dividing this amount by the number of ordinary shares in issue (excluding treasury shares).

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 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.

	31 October 2024	30 April 2024
Closing NAV per share	203.1p	193.0p
Closing share price	177.0p	163.5p
Discount	(12.9%)	(15.3%)

Ongoing charges (APM)

The total expenses (excluding borrowing costs) incurred by the Company as a percentage of the average Net Asset Value. The ongoing charges are calculated on the basis prescribed by the Association of Investment Companies.

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.

		31 October 2024 NAV	31 October 2024 Share price	30 April 2024 NAV	30 April  2024 Share price
Closing NAV per share/share price	(a)	203.1p	177.0p	193.0p	163.5p
Dividend adjustment factor*	(b)	1.0276	1.0319	1.0197	1.0226
Adjusted closing NAV per share/share price	(c = a x b)	208.7p	182.6p	196.8p	167.2p
Opening NAV per share/share price	(d)	193.0p	163.5p	195.6p	168.0p
Total return	(c ÷ d) -1	8.1%	11.7%	0.6%	(0.5%)

^*    The dividend adjustment factor is calculated on the assumption that the dividend of 5.60p (2023 - 3.60p) paid by the Company during the year were reinvested into shares of the Company at the cum income NAV per share/share price, as appropriate, at the ex-dividend date.

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.

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

	31 October 2024	30 April  2024
Borrowings	£24,350,000	£16,350,000
Less: cash and cash equivalents	(£6,812,000)	(£1,917,000)
Adjusted borrowings	£17,538,000	£14,433,000
Shareholders' funds	£287,837,000	£283,153,000
Invested gearing	6%	5%

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

	31 October 2024	30 April  2024
Borrowings	£24,350,000	£16,350,000
Shareholders' funds	£287,837,000	£283,153,000
Drawn gearing	8%	6%

Private (unlisted) company

A private (unlisted) company means a company whose shares are not available to the general public for trading and not listed on a stock exchange.

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.

Leverage (APM)

For the purposes of the UK 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.

Treasury shares

The Company has the authority to make market purchases of its ordinary shares for retention as treasury shares for future reissue, resale, transfer, or for cancellation. Treasury shares do not receive distributions and the Company is not entitled to exercise the voting rights attaching to them.

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