Preliminary Results
RNS Announcement: Preliminary Results
Baillie Gifford US Growth Trust plc
Legal Entity Identifier: 213800UMIOUWXZPKE539
Regulated Information Classification: Additional regulated information required to be disclosed under applicable laws and regulations.
Results for the year ended 31 May 2021
During the financial year to 31 May 2021, the Company's share price and net asset value (calculated deducting borrowings at fair value) returned 63.0% and 62.8% respectively. This compares with a total return of 22.4% for the S&P 500 Index * (in sterling terms).
¾ The pandemic has caused an avalanche of structural change.
¾ Breakthrough healthcare technologies such as Moderna's mRNA therapy platform and Teladoc's telemedicine services have been thrust into the mainstream.
¾ Consumers have altered their behaviour and have been making more purchases online from the likes of Wayfair and utilising apps such as DoorDash for meal and snack delivery.
¾ Streaming services like Netflix and Roku have seen significant upticks in subscriber growth.
¾ Employers have been forced to embrace remote working, enabled at least partly thanks to the interconnectivity provided by companies such as Zoom.
¾ We are beginning to see the digital transformation take hold in new areas and have taken new public company holdings in Carvana and Vroom in the second-hand car market, Lemonade in insurance, and Coursera in education.
¾ We made seven additional private company investments over the last twelve months whilst four of our existing private company holdings went public in the period.
¾ At the end of May, we held positions in twenty private companies which collectively comprised 16.5% of total assets.
Baillie Gifford US Growth Trust plc seeks to invest predominantly in listed and unlisted US companies which the Company believes have the potential to grow substantially faster than the average company, and to hold onto them for long periods of time, in order to produce long term capital growth.
You can find up to date performance information about Baillie Gifford US Growth on the US Growth Trust page of the Managers' website at www.bgusgrowthtrust.com ‡
Baillie Gifford US Growth Trust is managed by Baillie Gifford, the Edinburgh based fund management group with around £350 billion under management and advice in active equity and bond portfolios for clients in the UK and throughout the world (as at 9 August 2021).
Investment Trusts are UK public limited companies and are not authorised or regulated by the Financial Conduct Authority.
* Source: Refinitiv and relevant underlying index providers. See disclaimer on page at the 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.
Past performance is not a guide to future performance. The value of an investment and any income from it is not guaranteed and may go down as well as up and investors may not get back the amount invested. This is because the share price is determined by the changing conditions in the relevant stock markets in which the Company invests and by the supply and demand for the Company's shares.
11 August 2021
The following is the Preliminary Results Announcement for the year to 31 May 2021 which was approved by the Board on 10 August 2021.
Chairman's Statement
It is with pleasure that I present the Annual Report for Baillie Gifford US Growth Trust plc ('the Company') for the year to 31 May 2021. During the period, we have all lived through the twists and turns of the global Covid-19 pandemic, with equity markets experiencing some of the most significant instability in living memory.
The Board is pleased to be able to report that our Managers have continued to largely work from home seamlessly and that both portfolio management and all regulatory and administrative tasks have been uninterrupted. The Managers continue to stick to their long-term investment approach and are focused on identifying the exceptional growth companies in America.
During the financial year to 31 May 2021, the Company's share price and net asset value, calculated by deducting borrowings at fair value, returned 63.0% and 62.8% respectively. This compares with a total return of 22.4% for the S&P 500 Index* (in sterling terms). Over the period from 23 March 2018 (launch date and first trade date), the Company's share price and net asset value, calculated by deducting borrowings at fair value, returned 206.5% and 202.3% respectively compared to a total return of 72.0% for the S&P 500 Index* (in sterling terms).
The Board is encouraged by the net asset value total return that the Managers have been able to deliver over the period since launch. However, we would ask shareholders to judge performance over periods of five years or more. Further information about the Company's portfolio performance is covered by our portfolio managers, Gary Robinson and Kirsty Gibson, in their Managers' Review.
Kirsty Gibson was appointed as co-manager alongside Gary Robinson with effect from 1 March 2021. Kirsty is an investment manager in Baillie Gifford's US Equities Team and a co-manager of the Baillie Gifford American Fund. Kirsty replaced Helen Xiong who joined Baillie Gifford's Global Alpha Team last year.
Share Issuance and Buy-backs
The Company's shares have continued to consistently trade at a premium to their net asset value and the Company has issued a further 45,070,000 shares in the year to 31 May 2021 at an average premium to net asset value of approximately 6.4%, raising further net proceeds of £132.9 million.
The Company published a prospectus in April 2021 and as at 31 May 2021 had authority, which was granted at the initial launch, to issue a further 693.2 million shares. This authority expires in March 2023.
The Company also has authority to buy-back shares. The buy-back facility was sought to allow the Company to buy-back its own shares when the discount is substantial in absolute terms and relative to its peers. The Company will be seeking to renew the buy-back authority at the forthcoming Annual General Meeting.
Gearing
On 23 October 2020, the Company entered into a new US$25 million three year fixed rate facility with ING Bank N.V., London Branch which expires on 23 October 2023. This facility is in addition to the existing US$25 million five year revolving credit facility with ING Bank N.V., London Branch which expires on 1 August 2023. The facilities are available to be used to fund purchases of securities as and when suitable opportunities arise. As at 31 May 2021, US$25 million had been drawn down under the fixed rate facility and US$12.5 million under the revolving credit facility (31 May 2020 - US$18 million under the revolving credit facility).
Earnings and Dividend
The Company's priority is to generate capital growth over the long term. The Company therefore has no dividend target and will not seek to provide shareholders with a level of dividend. The net revenue return per share for the year to 31 May 2021 was a negative 1.78p (year to 31 May 2020, a negative 1.05p). As the revenue account is again running at a deficit, the Board is recommending that no final dividend be paid. Should the level of underlying income increase in future years, the Board will seek to distribute the minimum permissible to maintain investment trust status by way of a final dividend.
Private Company (Unlisted) Investments
As at the Company's year end, the portfolio weighting in private company (unlisted) investments stood at 16.5% of total assets, invested in twenty companies (2020 - 12.2% invested in seventeen companies). There were seven new purchases in the year and four stocks, Affirm, Airbnb, Butterfly Network and Snowflake, listed. There is commentary on the new holdings in the Managers' Review and Review of Investments below. Since the year end further investment has been made in Away (JRSK Inc), Lyra Health and Thumbtack, and a new holding acquired, Faire Wholesale. Your portfolio managers remain alert to further special and high potential opportunities not widely accessible through public markets.
Board Composition
We were delighted to welcome Mr Chris van der Kuyl and Ms Rachael Palmer as non-executive Directors of the Company with effect from 1 June 2021 following a detailed search undertaken with the support of an external recruitment consultant. Chris is one of Scotland's leading entrepreneurs working across the technology, media, gaming and entertainment sectors and Rachael is an experienced strategy, marketing and business development professional with extensive experience working within the technology sector. All Directors are subject to annual re-election at the AGM in September and the two new Directors will be subject to election by the shareholders this year. The Directors' biographies can be found on pages 24 and 25 of the Annual Report and Financial Statements. Board members have a broad range of appropriate skills between them.
Annual General Meeting
The Annual General Meeting ('AGM') of the Company has been scheduled to be held at Baillie Gifford's offices in Edinburgh at 9.30am on Friday, 17 September 2021. In light of continuing Covid-19 restrictions, shareholders will not be able to attend the AGM as the meeting will be held with the minimum number to ensure it is quorate. I encourage shareholders to submit their votes by proxy before the applicable deadline ahead of the meeting and to submit any questions for the Board or Managers in advance by email to trustenquiries@bailliegifford.com or by calling 0800 917 2112 (Baillie Gifford may record your call). Developments with regard to Covid-19 restrictions will be closely monitored and any changes will be announced to the London Stock Exchange regulatory news service and made available at bgusgrowthtrust.com. This year, due to current circumstances, the portfolio managers will record a webcast which will be available to view on the Company's website following the AGM.
Changes to Articles
We have asked our lawyers to undertake a review of the Articles of Association. The principal proposed change is set out below. Further details of the full changes proposed can be found on page 64 of the Annual Report and Financial Statements. Hybrid General Meetings - One consequence of the Covid-19 pandemic has been the impact on the ability of shareholders to attend physical General Meetings. The Company is therefore proposing to make amendments to the Company's Articles to allow shareholders to attend by electronic means as well as in person. These changes will be too late for the 2021 AGM but will allow for more flexibility in future. It is the Board's intention to continue to have a physical element to our General Meetings wherever possible.
Outlook
We continue to live in unusually uncertain times. Whilst we cannot yet predict the long-term impact of the world's response to the pandemic or the ramifications of trade and political tensions in the United States and elsewhere, my Board colleagues and I believe we can be confident that seismic changes will continue in the 'real world' as new business models flourish and innovation impacts countless industries, many as yet not fully disrupted by recent innovations. Significant changes in healthcare, transportation, ecommerce, finance, enterprise software and energy amongst other markets all present an opportunity to identify and support the exceptional growth companies of the future. It is pleasing to note that this growth has been well evidenced over the past year in the results of many of the companies in which we invest. All that being the case, the Board and the Managers remain confident in our outlook.
Tom Burnet
Chairman
10 August 2021
* Source: Refinitiv and relevant underlying index providers. See disclaimer at the end of this announcement.
For a definition of terms see Glossary of Terms and Alternative Performance Measures at the end of this announcement.
Past performance is not a guide to future performance.
Managers' Review
As the world begins to take some significant steps out of the tumult of the past year, it is hard not to look around blinking somewhat as if to say, 'what just happened?'. Whilst we have always believed that technology-led change was inevitable, its pace and spread during the past year have served to humble us. Lest we forget - inevitability does not equate to predictability.
The stock market is far too complex a system to think in certainties. We prefer to think in probabilities. We combine this probabilistic thinking with one of the most underrated temperaments of investing: patience. These traits afford us the luxury of investing with a long-term mindset and enable us to ride out the inevitable volatility and humbling periods of underperformance. They allow us to focus on what a company could achieve if things go right. We understand that whilst some of the innovators that we own will succeed, others will not, and some we will miss completely but the passage of time allows us to make and own our mistakes, hone our understanding, learn from others, and deepen and develop our thought processes.
In times of rapid change the temptation is to grasp the familiar, 'the certainties'; take comfort from the recognisable and double down until 'normality' returns. But with change comes opportunity. Probabilities enable us to stretch our thinking and imagine these opportunities. There is no 'normality'. 'Normal' is not a static concept. Companies do not operate in a vacuum; they are part of an ecosystem. They evolve, adapt and impact each other.
In nature, many complex systems, like ecosystems, have a tendency to self-organise into a 'critical state', a sort of teetering calm, where minor changes or disturbances can lead to avalanche effects of all difference sizes. One way to conceptualise this is by thinking of a sandpile. Consider a flat table covered in a thin layer of sand. The addition of a single grain will have little impact on the other grains; there is stability. However, as more grains are added, the sandpile grows, from a layer, to several layers, to a heap. Eventually, the sandpile reaches a critical point, where the addition of another grain can cause local disturbances or even system wide avalanches.
There are parallels between these sandpiles, natural ecosystems, and the global economy. The Covid pandemic could be thought of as just another grain added to the already complex system that is the world economy. But it set in motion a huge avalanche. In biology the term used to describe this is punctuated equilibrium. Under this definition evolution occurs in spurts instead of following the slow and steady path outlined by classical Darwinism. Long periods of relative inactivity, the building of a sandpile, are interrupted by rapid disruptions, large avalanches. And just like in nature where species evolve or mutate rapidly during periods of punctuated equilibrium, the same can be said of companies during the pandemic. Many businesses had to evolve their business practices and go-to market strategies, and adapt to massive surges in demand and challenges with supply. And just as happens in nature, some thrived, others evolved to survive, and some will no doubt go extinct.
As companies, big and small, evolved and adapted to their new environment, they impacted each other and the environment around them. The biological term for this idea is 'fitness'. The higher the fitness of a species, the better suited it is to survive and reproduce in its specific environment. And just as the survival of a cheetah depends not just on its own genetic code but also that of the zebra it hunts - if the zebra sprouts wings it doesn't really matter how fast the cheetah is - a company's fitness during periods of radical change will depend on how well placed it is to respond to changes in demand and how it is positioned relative to its competitors. Holdings such as Shopify, the ecommerce platform, and Stripe, the payments platform, were there to help offline businesses transition online and generally support small and mid-size businesses to adapt and keep their businesses operating during the complexity of the pandemic. Holdings such as HEICO, the parts manufacturer for the aerospace industry, and Away, the luxury travel brand, struggled during the past year as the travel industry ground to a halt. Replacement parts for airlines were not required whilst planes were grounded and upgrading suitcases was not a top priority for many whilst they were stuck inside their homes. No matter how well run these businesses are, their fitness was significantly impacted by the challenges of the industry into which they sell - travel. We expect these challenges in the travel industry to be relatively short-lived. However, a deeper and more permanent evolution is happening in the way we consume content; and it is not just the content providers themselves that have benefited from this change. Over the past year streaming services like Netflix, Roku and Disney+ have seen significant upticks in subscriber growth. Linear TV has lost out, but there have also been avalanches in other parts of the sandpile. As viewers have shifted to streaming services, the advertising industry has had to evolve its mindset and adapt to follow this customer base. Procter & Gamble has announced that it expects to move away from the traditional upfront model of TV ad buying, a hangover from the 1950s when advertising inventory was sold in advance to fit in with new car releases. Instead of buying up front, advertisers are now turning to demand side platforms, such as The Trade Desk, to buy adverts programmatically in real time. The Trade Desk sorts through twelve million ads per second and matches ad inventory with advertisers based on data about who is watching. Thus, The Trade Desk and the rise of connected TV or streaming has resulted in more efficient, data-driven ways for advertisers to reach their customer base.
Companies need to evolve in periods of rapid change simply to survive. They operate in complex ecosystems where the other agents, their customers and competitors, are constantly evolving and changing. In nature this is known as the Red Queen Effect, taken from Alice in Wonderland. The basic premise being that species, just like Alice and the Red Queen, must run fast just to stand still. Survival is a never-ending race, either you evolve and adapt, or you die. In the long run there is no static equilibrium. Thus structural change is powerful because it does not happen in isolation. It comes in avalanches that impact all companies and industries, changing the landscape for everyone, and driving everybody forward.
The pandemic has caused an avalanche of structural change. The ecosystem has evolved, and the initial grains of sand have triggered many downstream effects. Breakthrough healthcare technologies such as Moderna's mRNA therapy platform and Teladoc's telemedicine services have been thrust into the mainstream, out of necessity. Consumers have altered their behaviour and have been making more homeware purchases online from Wayfair; viewing and purchasing homes online from Zillow and Redfin; and utilising apps such as DoorDash for meal and snack delivery. Employers have been forced to embrace remote working, enabled at least partly thanks to the interconnectivity provided by companies such as Zoom. The pandemic has highlighted the importance of employee mental health, and companies have turned to new private company holding Lyra's mental health platform which connects employees to help and treatment. The last eighteen months have also seen a new wave of entrepreneurs emerge, ready to take advantage of the services offered by the likes of Shopify, Stripe and Brex which are enabling them to start and scale businesses more efficiently than ever before. And more specifically, companies like Pinterest have used the pandemic to enable insight led selling. Harnessing its data, Pinterest was able to see how trends around Halloween and Thanksgiving were different this year, helping Chief Marketing Officers to get in front of those trends and deliver high returning ad campaigns. The perfect illustration of the power of intent on the platform and a significant unlock in bringing advertising dollars to Pinterest.
The changes above run deep. This is beyond a few deviations at the top of a sandpile which are easy to go back on. Covid has moved many grains of sand, touched many industries and the structure of the pile is now fundamentally different. This means it is close to impossible to go back to how things were. New 'equilibriums' have been established across industries at levels higher than those prior to the onset of Covid.
Portfolio Changes
This year saw slightly higher turnover than previous years. This reflects the speed and breadth of change we are witnessing and high levels of competition for capital in the portfolio. New opportunities are being thrown up by the rapid shifts of the sandpile. With so many exciting businesses emerging across a broad base of industries, this affords us the opportunity to keep raising the bar for inclusion in the portfolio and ensures we only own those we believe have the potential to be truly exceptional.
There have been some changes to the top ten holdings over the last year, with Moderna, Roku, Zoom, Stripe, and Twilio all moving into its ranks. Some of these names - Moderna, Roku, and Zoom - have become big holdings on account of strong share price performance but our conviction in their long run growth opportunities has cemented their position in the top ten. For others we have been actively adding to our position. For example Twilio has expanded its communications offering to integrate consumer data, which has increased our confidence in its edge. Twilio's addressable market is greater than US$1 trillion, it is in the early stages of exploitation, and the company's dominance is growing. We believe it deserves to be a large holding for the trust.
A large reduction in Tesla and the complete sales of Mastercard and Alphabet have also impacted the constituents of the top ten. 2020 was a phenomenal year for Tesla but having revisited the upside case twice within a six-month period we decided to reduce the trust's holding. Whilst the fundamentals have been strong our conviction in the assumptions required to meet our return threshold over the next five years is lower given the strong performance of the shares. Far more emphasis needed to be placed on the energy generation/storage side of the business and, whilst this represents a massive opportunity, it is still very early. Tesla remains a top ten holding, but it is no longer our largest. We continue to believe that Alphabet and Mastercard have built incredible businesses in their differing domains, however the upside case from here for both companies is increasingly challenged. For Alphabet we have waning conviction in the potential of the moon-shot bets, such as Waymo, its autonomous driving unit. Because of this the outlier case has become increasingly difficult to make. For Mastercard, whilst its global footprint is impressive, competition has intensified challenging their traditional credit card model. We have seen, and own, several companies entering the payments market with novel technology leading us to believe the competitive moat surrounding Mastercard is not what it was.
In terms of the listed holdings our new purchases are across industries. We are beginning to see the digital transformation take hold in new areas and have taken holdings in Carvana and Vroom in the second-hand car market, Lemonade in insurance, and Coursera in education. Digitisation is spreading into more complex and regulated industries, which we believe to be full of inefficiency and ripe for improvement. Additionally, the deflationary forces driven by technology may finally be starting to impact the health care industry. Our new holdings, Recursion Pharmaceuticals, a drug discovery platform, and 10x Genomics, a single cell sequencing business, could mark the beginning of a whole new era in the healthcare industry; one of more predictable and efficient drug discovery methods, leading to lower costs and more options for patients. Finally, we initiated holdings in Pinterest for its potential to become the location for discovery and inspiration, and Snap given its lead in augmented reality advertising and its potential to become the first 'super-app' of the west. We have a hypothesis that advertisers are looking for platforms beyond Facebook and Alphabet, and Pinterest and Snap have the potential to be the major beneficiaries of this shift.
These purchases were funded by various complete sales. There was no notable pattern to them. The sales of New Relic, Activision and Interactive Brokers were driven by investment cases that did not play out as expected. The purchase of Slack Technologies by Salesforce.com forced our hand on its sale. Our sale of Facebook reflected our concerns relating to people, relevance and regulation.
We made seven additional private company investments over the last twelve months: Brex, Capsule, Epic Games, Honor Technology, Lyra Healthcare, Nuro, and PsiQuantum. We have included descriptions of each of these below. Four of our existing private company holdings, Affirm, Snowflake, Airbnb, and Butterfly Network, went public in the period. The net results was that, at the end of May, we held positions in twenty private company securities which collectively comprised 16.5% of total assets. Taking into account companies which were previously private company investments, but which are now public, this figure rises to 22.5%.
Sharpening Our Inputs
The past year has been one of great learning and growth for not just the companies we invest in but also for us as a team.
We view research as our input and our thought processes and mental models as our algorithms. The portfolio and performance are our outputs. We look to continually differentiate our inputs and sharpen our algorithms in order to drive our outputs. Whilst the performance of the trust over the past year has been phenomenal, we recognise that complacency and ego are our greatest foes.
In his last shareholder letter as CEO of Amazon, Jeff Bezos spoke of the challenge of maintaining distinctiveness in a world that is trying to pull you back to equilibrium. In the world of investment management where best practice adoption and mimicry are commonplace, it is a tough fight to remain differentiated. But we are fighting hard.
It has been more challenging to keep our inputs broad with travel restrictions and the fact that content access has been easier through webinars and virtual conferences. We have set up a book club to discuss interesting topics and learn from each other, invited external speakers to develop our thinking and ran a reading week focused on new mental models. We have also been leveraging our relationships with companies, in both the public and the private space, to share insights and learn about emerging fields. For example, we have been developing our thoughts on topics such as sustainability, biotechnology platforms, culture and scale-as-a-service. We look forward to travelling again, visiting our holdings and developing deeper connections with experts and academia to keep up the fight against equilibrium.
The past year has confirmed the importance of a strong philosophy and process; the solid foundation of beliefs our stock selections are built upon. In times of turbulence, both positive and negative, returning to our solid foundation helps steady the ship. For us that meant avoiding knee jerk reactions both when stocks rose significantly and during the more recent volatility. Whilst philosophy retains a sense of constancy, process is open to refinement and progress and we are constantly striving to improve.
Investment Principles
As we have done for the last two years, we have included below, our investment principles again, unaltered. We continue to hope that by publishing our investment framework in this and future communications that we will provide shareholders with a useful reminder of our philosophy and a yardstick with which to measure us.
The fifth of the principles concerns the role of capital markets 'The role of capital markets has changed, and we have evolved with it. As companies are remaining private for longer, so too have we broadened our search for exceptional growth companies into private companies. We are largely indifferent to a company's private or public status. We will conduct diligent analysis and allocate capital to where the highest returns are likely to be'.
We believe the role of capital markets has also evolved to encompass a more explicit role in driving sustainability. We have included a section on the following page to expand upon our thinking around sustainability and the positive role we can play as long-term owners of assets.
Outlook
We remain resolutely focused on identifying the exceptional growth companies of the future and holding them in size and for significant periods of time. Given the disruption we are seeing across all sectors this ought to be a fruitful environment for us as growth investors. However, the bar for inclusion in the portfolio remains high, and we view the sort of competition for capital we continue to see as a great position to be in.
We remain tremendously excited about the opportunity in front of us. We believe that innovation is speeding up and spreading out and we are closer to the beginning than the end. More and more traditionally 'safe' industries look ripe for disruption. And as companies continue to shift the current sandpile there will, of course, be volatility in share prices - this is the norm, not the exception. Riding out this volatility is necessary to deliver long-term outperformance. However, we do believe the pandemic has triggered an avalanche of change. And this makes being a Baillie Gifford US Growth Trust investor right now particularly exciting.
Sustainability
"If the long view becomes the averaged short-term actions to appease the loudest person at the moment, it is a path to nowhere".
Ben Silberman, Founder CEO, Pinterest
Let's start a new conversation on sustainability. A conversation to make explicit, what we trust is already implicit, in our process. To bring a broader, and we believe, valuable narrative on sustainability to the table, helping to improve us as investors and pushing companies themselves to get better.
We believe that sustainability is inextricably linked to being a long-term investor. To think about a company on a five+ year horizon, we must consider the sustainability of its business in the broadest possible sense; why will any company continue to grow? Why will customers continue to like them - from both a product and reputation perspective? How will management allocate capital or handle challenges? This is sustainability beyond a company's impact on the environment or the remuneration of its executives. That is not to say these issues are unimportant. They are just part of a far larger picture.
What Does Long Term Mean To Us?
Long term is investing on a five+ year time horizon. A time-period where the empowerment of employees benefits productivity, where the considered consumption of natural resources ensures continued access, where a sustainable supply chain protects inventory, and where balancing customer experience with profit taking ensures long-term sales growth. Long term is a time-period where the needs of the entire ecosystem line up.
Long term is ambition. It is thinking about what a company could do, might be, not what it is today. Long term for us is not imagining base cases, but blue-sky cases.
Long term is support. It is about being there for companies and founders, encouraging and supporting them to achieve their ambitions. Enabling them, with steady and often sizable ownership stakes, or direct capital deployments, to think big.
Finally, long term is sustainable. We define sustainable as the ability to balance value creation with value capture. You cannot capture more value than you create for any length of time; companies that do this will not survive. Those that thrive in the long run will deliver more value than they capture.
Deploying Capital Sustainably
As long-term investors we have an exceptional opportunity to deploy our clients' capital in a way to help maximise the value creation our holdings deliver. And we have thought long and hard about how to articulate the societal value creation our clients enable by owning our portfolio. Tesla is a salient example. Have Baillie Gifford's clients contributed more to the future of society from owning Tesla from 2013 to the present versus now and for the next eight years? We concluded that without our clients' long-term and stable capital in the early years Tesla may not have achieved what it has today.
Consequently, we consider the 'capital impact' of our clients' investment in a given company. We use the term to open up the conversation as to the different ways our clients' capital can enable companies to achieve their ambitions and deliver a positive contribution to society.
We believe our clients' capital impact can be considered under three broad headings: Beneficiary Impact, Support Capital Impact, and Direct Capital Impact. Beneficial Impact comes from owning companies we believe to be making a positive societal contribution over the long run. Companies which only fit within this category are making a positive contribution to society, and they will do so whether or not our clients own the shares; our clients' capital is not playing an instrumental role. Support Capital Impact is about how long-term and sizable ownership stakes can enable companies to be ambitious and take calculated risks, to achieve their long term potential and really deliver on their potential for society, knowing they have solid, long term shareholders on the register. The final category is Direct Capital Impact. This is where our clients' capital directly enables a company to fulfil its potential - whether that be supporting an IPO, participating in a capital raise or by investing in these businesses in private markets.
One type of capital impact is not better than another; although we believe that some are more influential. We look to open up a discussion and to enable investors to better understand how directly they are empowering a business to achieve its potential.
We create a societal contribution hypothesis for every company we own. Our approach is highly subjective, and we look at what each company might deliver to society if it grows as we think it could; an approach we believe to be highly aligned with our investment style. There is no perfect company. All companies will make mistakes on the road to fulfilling their potential and some will not succeed. We are cognisant of positive and negative implications of success, and we consider those we believe to be most important for the long run sustainability of each company. We use these to feed into further work or engagement with a company, helping us to become better stewards of our clients' capital whilst pushing the companies we own on behalf of our clients to improve.
We do not score our portfolios' net societal contribution. We prefer to think of companies as participants in complex and interconnected networks. Their influence will depend on many factors and we certainly won't predict all of them. Instead we seek to understand how their positive societal contributions could enhance their durability, and how the negative implications of their growth might diminish that. That is not to say that we believe that all societal impact is equal, in fact we feel it is fairly easy to identify those companies which we believe have the potential to change society. Not necessarily just through what they do or sell, but indirectly through the industries that they change with them. We call these companies the Gamechangers.
Sustainability in its broadest possible sense is very important to us as long term, growth investors. And after careful consideration we have decided to talk more openly about how we integrate it into our process. This is a challenging and complex topic and we are far from having all the answers. But we will keep asking questions of ourselves and of the companies we invest in.
We look forward to new conversations, evolution and becoming better investors.
The US Equity Team
Investment Principles
To our shareholders
Our core task is to invest in the exceptional growth businesses in America. Over the full course of time, these companies will develop deep competitive moats and generate abnormal profits and unusually high shareholder returns. We endeavour to generate returns for our clients by helping in the creation and improvement of such useful enterprise. To the extent that we are successful in identifying these companies, we believe that we can multiply the wealth of our clients over the long term.
Managing shareholders' money is a huge privilege, and not one we take lightly. It is a relationship, not a transaction. Relationships can only be built on a foundation of trust and understanding. It is with this that we seek to lay out the fundamental principles by which we will manage your money and the framework for how we make decisions so that you, our shareholders, can decide whether it aligns with your investment philosophy.
- We believe the fundamental measure of our success will be the value we create for our shareholders over the long term. It is only over periods of five years or more that the characteristics we look for in businesses become apparent. Our turnover has been in the teens, consistent with our time horizon. We ask that our shareholders measure our performance over similar periods.
- Short term volatility is an inevitable feature of the market, and we will not manage the portfolio to reduce volatility at the expense of long term gain. Many managers are risk-averse and fear loss more than they value gain. Therefore, they accept smaller, more predictable risks rather than the larger and less predictable ones. We believe that this is harmful to long term returns, and we will not shy away from making investments that are perceived to be risky if we believe that the potential payoffs are worthwhile. This means that our performance may be lumpy over the short term.
- We believe, and academic work has shown, that long-term equity returns are dominated by a small handful of exceptional growth companies that deliver outsized returns. Most stocks do not matter for long-term equity returns, and investors will be poorly served by owning them. In our search for exceptional growth companies, we will make mistakes. But the asymmetry inherent in equity markets, where we can make far more in a company if we are right than lose if we are wrong, tells us that the costliest of mistakes is excessive risk aversion.
- We do not believe that the index is the right starting point for portfolio construction. The index allocates capital based on size. We believe that capital should be allocated based on marginal return and the ability to grow at those rates of return. Big companies are not immune to disruption. We do not manage the portfolio to an active share target, but we expect the active share of this fund to be high.
- The role of capital markets has changed, and we have evolved with it. As companies are remaining private for longer, so too have we broadened our search for exceptional growth companies into private companies. We are largely indifferent to a company's private or public status. We will conduct diligent analysis and allocate capital to where the highest returns are likely to be.
- We may discuss long term trends and themes present in the portfolio, but we do not plan on discussing short term performance. We believe our duty is to maximise the long term wealth of our shareholders, and that creating narratives around short term performance serves our shareholders poorly.
- We will endeavour to operate in the most efficient, honest, and economical way possible. That means keeping our management fees and ongoing costs low. We recognise that even modest amounts, when allowed to compound over long periods of time, add up to staggering sums, and we do not wish to dilute the compounding of returns with the compounding of costs.
With this foundation, we hope to build Baillie Gifford US Growth into a world class savings vehicle. We are grateful that you have joined us on this journey, and we look forward to a long and hopefully prosperous relationship with you.
Baillie Gifford Statement on Stewardship
Reclaiming Activism for Long-Term Investors
Baillie Gifford's over-arching ethos is that we are 'actual' investors. We have a responsibility to behave as supportive and constructively engaged long-term investors. We invest in companies at different stages in their evolution, across vastly different industries and geographies and we celebrate their uniqueness. Consequently, we are wary of prescriptive policies and rules, believing that these often run counter to thoughtful and beneficial corporate stewardship. Our approach favours a small number of simple principles which help shape our interactions with companies.
Our Stewardship Principles
Prioritisation of long-term value creation
We encourage company management and their boards to be ambitious and focus their investments on long-term value creation. We understand that it is easy for businesses to be influenced by short-sighted demands for profit maximisation but believe these often lead to sub-optimal long-term outcomes. We regard it as our responsibility to steer businesses away from destructive financial engineering towards activities that create genuine economic value over the long run. We are happy that our value will often be in supporting management when others do not.
A constructive and purposeful board
We believe that boards play a key role in supporting corporate success and representing the interests of minority shareholders. There is no fixed formula, but it is our expectation that boards have the resources, cognitive diversity and information they need to fulfil these responsibilities. We believe that a board works best when there is strong independent representation able to assist, advise and constructively test the thinking of management.
Long-term focused remuneration with stretching targets
We look for remuneration policies that are simple, transparent and reward superior strategic and operational endeavour. We believe incentive schemes can be important in driving behaviour, and we encourage policies which create alignment with genuine longterm shareholders. We are accepting of significant pay-outs to executives if these are commensurate with outstanding long-run value creation, but plans should not reward mediocre outcomes. We think that performance hurdles should be skewed towards long-term results and that remuneration plans should be subject to shareholder approval.
Fair treatment of stakeholders
We believe it is in the long-term interests of companies to maintain strong relationships with all stakeholders, treating employees, customers, suppliers, governments and regulators in a fair and transparent manner. We do not believe in one-size-fits-all governance and we recognise that different shareholder structures are appropriate for different businesses. However, regardless of structure, companies must always respect the rights of all equity owners.
Sustainable business practices
We look for companies to act as responsible corporate citizens, working within the spirit and not just the letter of the laws and regulations that govern them. We believe that corporate success will only be sustained if a business's long-run impact on society and the environment is taken into account. Management and boards should therefore understand and regularly review this aspect of their activities, disclosing such information publicly alongside plans for ongoing improvement.
Review of Investments
A review of the Company's ten largest investments and additions to the private company securities as at 31 May 2021 is given below.
Top Ten Holdings
Shopify
6.4% of total assets
Shopify provides software tools which allow merchants to easily set-up and manage their businesses across an increasingly complex and fragmented retail landscape. Shopify's software helps to make merchants more efficient by automating large swathes of their operations (e.g. marketing, inventory management, payments, order processing, shipping) thus allowing them to focus on product market fit. The company maintains a rapid pace of innovation and is run by an impressive founder who has built a distinctive merchant-focused culture.
Amazon
5.0% of total assets
Amazon addresses huge market opportunities in the form of global retail and global IT spending. In retail, it competes on price, selection and convenience and is improving all three as it gets bigger. Amazon's AWS (Amazon Web Services) division is less mature than its retail business, but it is no less exciting. Here, Amazon is in a clear position of leadership in what could turn out to be one of the largest and most important market shifts of our time. Both opportunities are outputs of what is perhaps most distinctive of all about Amazon - its culture. Amazon optimises for customer delight. The company is run with a uniquely long term perspective. It is willing to be bold and scale its experiments (and failures) as it grows. These cultural distinctions allow Amazon to possess the rare and attractive combination of scale and immaturity.
Wayfair
4.4% of total assets
Wayfair is an online furniture retailer but thinks of itself as a software company with an edge in logistics for large pieces of furniture. Furniture has historically been a difficult category for e-commerce due to the challenges of providing a good experience. Consumers want to visualise the product in their homes; they want to know exactly when the product will be delivered so they can be at home to receive it; and they want to know that they can easily return the product should it not meet their expectations. Suppliers are incredibly fragmented and do not have the scale to deliver these experiences to the consumer. Wayfair has managed to bring all the suppliers together under its brand and is applying its tech expertise to create a superior customer experience. On the front end, it has built a visual browsing platform, allowing customers to search by image, or to visualise a piece of furniture in their homes to scale. On the back end, it has built a sophisticated logistics and distribution network that ensures speedy and reliable delivery to consumers. The business is capital light and has a negative working capital, meaning that growth is largely self-funded. Online penetration o
f homeware is still in the low teens and we believe there is
substantial opportunity for the company ahead.
Tesla
3.6% of total assets
Tesla makes electric cars, battery storage and solar power systems. The company has proven that cars can be environmentally friendly without compromising on style, safety, or performance. We are in the early stages of a major shift in the transportation industry towards EVs, and Tesla is the best positioned globally to capitalise on this. It is an innovative and mission-driven company whose success is aligned with the interests of the planet.
Moderna
3.3% of total assets
Moderna is a leader in the field of mRNA therapeutics, a new class of medicines that leverage the body's natural protein-production apparatus to treat diseases. It is known for its Covid-19 vaccine, but its long-term growth opportunity is far broader. mRNA is a foundational technology that theoretically has the potential to induce the production of just about any protein - human or non-human - inside our cells. This versatility opens up a wide range of therapeutic opportunities for mRNA. Furthermore, mRNA, like DNA, is, in a sense, digital, and is therefore programmable. In moving from one drug to the next, the delivery mechanism and building blocks remain the same. The only thing that changes is the code. Because of this, Moderna's mRNA platform ought to be more scalable than past drug development approaches. Indeed, Moderna may have more in common with a software company than a traditional biotech.
Twilio
3.2% of total assets
Twilio provides a cloud-based software platform which enables developers to integrate communications functionality, for example voice calls or text messages, directly into applications via simple connection points called APIs. Uber, for example, uses Twilio to communicate with its customers via text message. Before Twilio came along it was expensive and cumbersome to integrate communications into applications. It required relationships with telecoms carriers, proprietary hardware, and a team of specialists to run the systems. It could take years to implement, with costs running in to millions of dollars. Twilio has solved this problem by building a software platform which sits above the communications industry and abstracts away the complexity on behalf of customers. All developers need to do is plug in to Twilio's APIs and they can be up and running in minutes at minimal cost. Global spending on communications is enormous at over US$1trillion per year and is an area which is likely to see significant disruption over the coming years. Given the scalability, flexibility, and ease of use of Twilio's products, the company has the potential to build on its early lead in this area and to sustain high rates of growth for many years.
Roku
3.1% of total assets
Roku operates the number one TV streaming platform in the US. Its product aggregates 'Internet TV' content and provides a way for both content providers and advertisers to reach consumers who have turned their back on traditional TV. Roku is well placed to benefit from the powerful secular shift towards streaming video and the strong appetite from advertisers to use this medium. As streaming video matures, viewership of free ad-based content is growing, which plays to Roku's strengths. The company is well positioned within the ecosystem given its strong consumer brand, scale, and ability to use data to drive returns for advertisers.
The Trade Desk
3.1% of total assets
The advertising industry is undergoing a wholesale shift in the way that advertising is bought and sold. Whereas in the past advertising was bought and sold in bundles, in the digital world, advertising can be transacted on a one to one basis, targeting only the audiences that are relevant. The Trade Desk provides the technology that enables this targeted buying of advertising through real-time auctions. Its platform connects media buyers to a wide range of digital inventory and provides a set of tools to help buyers determine what price to pay for those ad opportunities. This is known as programmatic advertising - the buying of advertising using data. Programmatic advertising is still in its infancy and is growing rapidly, supported by higher efficacy and a tangible demonstration of return on investment. As the programmatic industry becomes mainstream, it will consolidate around a handful of buying platforms, and we believe that The Trade Desk will emerge as the leading buying platform for the independent internet.
Zoom Video Communications
2.8% of total assets
Zoom is a video-conferencing app. It has become so popular that the word 'zoom' is now being used as a verb. Its success is a function of its highly stable and scalable platform which 'just works'. Prior to the pandemic, Zoom was handling 10 million peak daily meeting participants. A few months later, this figure had exploded to 300 million. Zoom went from a niche enterprise tool to a consumer scale product almost overnight, and managed to scale to meet demand almost without a hitch, which is a testament to the strengths of its technology platform. Zoom's product spreads virally, so marketing costs are low. In terms of the market opportunity, not only does Zoom have scope to take share within the existing video-conferencing market, it has the potential to grow the overall market if it can change perceptions around quality and ease of use.
Stripe
2.7% of total assets
Stripe is a payments technology company. Founded in 2010 by Irish brothers Patrick and John Collison, the company is in the process of developing a platform for sending money seamlessly and compliantly between any two internet-connected nodes in the world. The company processes massive volumes of payments from a broad customer base, ranging from US start-ups to global giants. Stripe's long-term ambition is to make entrepreneurship
easier and thus significantly increase the amount of business conducted online.
Stripe is a private company investment.
Private Company Securities purchased in the year to 31 May 2021
Brex
1.2% of total assets
Brex is building an all-in-one platform for businesses to manage their finances. It started by offering a corporate card for venture-backed business. It has expanded into SMBs and larger businesses and is now offering a broader suite of products including business accounts, expense management, and bill pay software. Existing options are expensive and don't work well with one another. Brex is aiming to build a fully integrated suite which will act as the financial operating system for growing businesses. Its business model and approach have demonstrated strong alignment with its customers, a rarity in this sector. This customer focus, coupled with the strength of the founding team and breadth of their ambition, leave Brex well placed to exploit this large opportunity.
Capsule
0.6% of total assets
Capsule is an online pharmacy. It started in New York and is now expanding across the US. The company offers free same-day delivery of prescriptions and access to a team of pharmacists. The US pharmacy market is huge and is in the very early stages of shifting online. The offline experience is sub-optimal. Customers must wait in line, there is a lack of price transparency, and medicines are often out of stock. Capsule's online pharmacy helps resolve these frictions, leading to increased drug adherence and higher levels of customer satisfaction. The pharmacy is the most frequent touchpoint for customers within the US healthcare system, with the average consumer visiting over once per month. This makes it an important point of leverage in the healthcare system. Capsule's aim is to use technology to build a pharmacy that works better for all stakeholders.
Epic Games
1.0% of total assets
Epic Games is a video games company. Under founder Tim Sweeney's leadership, Epic has adapted to - and in many cases has driven - important industry shifts that have occurred since the business was founded in the 1990s. This speaks to a distinctive culture and management team. As the company behind Fortnite, it has a large and engaged user base, with dynamics akin to those one might find with social networks. As the developer of the Unreal Engine, the industry's largest third-party games engine, it offers a toolset that enables high quality games to be made. Finally, with the Epic Store, it is changing how consumers buy games and is offering better incentives to developers. Each of these businesses is interesting in its own right, but together they have the makings of a powerful platform.
Honor Technology
0.3% of total assets
Honor is building a software platform to make the US home care market more efficient. The home care industry is large and fragmented. It is about US$30billion in size with 1.5 million care pros working across 21 thousand agencies. Agencies that partner with Honor gain access to a technology platform that handles back-office operations such as recruitment, training, scheduling, payroll, and performance monitoring of caregiver staff. Home care has historically been a very difficult business to scale. By bringing technology to the industry, Honor is helping to make agencies more efficient, leaving them better placed to service the rapid growth in demand associated with an ageing society.
Lyra Healthcare
0.6% of total assets
Lyra provides mental health care benefits to employers in the US. Plan beneficiaries can use Lyra's digital platform to gain access to therapists and coaches. The platform matches members with the therapist best suited to their own personal circumstances. A significant proportion of care is delivered through Lyra's 'Blended Care' or telemedicine offering, which pairs video therapy sessions with personalised digital lessons and exercises. Importantly, Lyra chooses its therapists based on their adherence to evidence-based treatments. The combination of Lyra's technology platform and evidence-based approach leads to greater uptake of mental health services in employers who use the platform and better outcomes.
Nuro
0.4% of total assets
Nuro is developing a last-mile delivery service using its bespoke autonomous vehicles. The company hopes to revolutionise delivery with a sustainably cheaper and better customer experience. Nuro's vehicles are custom designed for driverless goods delivery, which should lead to a faster path to commercialisation than with autonomous passenger taxis. Indeed, Nuro is the first company to have received permission from the US regulator to commercially deploy autonomous vehicles on the road. While the company is still in testing, demand for its service appears strong. It has signed partnerships with retailers such as Walmart, Kroger, Domino's, and CVS. Nuro's founders were part of the initial team at Google that designed Waymo. We have known them for some time and consider them to have an attractive combination of deep technical expertise and business acumen.
PsiQuantum
0.4% of total assets
PsiQuantum is aiming to commercialise quantum computing. Most companies in the field are attempting to use new materials, which are hard to manufacture, and electrons, which are error prone, to achieve basic functionality. PsiQuantum is taking a radically different approach. Its components are made from silicon, which allows the company to use well established semiconductor manufacturing techniques, and its calculations are based on photons, which are more stable than electrons. The approach is showing signs of being scalable and could realise the field's promise of solving some of the most complex, pressing, and lucrative problems in the world today. It is still early days, but we have been impressed by the quality of the people, partnerships, and processes they have assembled to meet this challenge in the years ahead.
Income statement
For the year ended 31 May
|
|
2021 Revenue £'000 |
2021 Capital £'000 |
2021 Total £'000 |
2020 Revenue £'000 |
2020 Capital £'000 |
2020 Total £'000 |
|
Gains on investments |
- |
304,245 |
304,245 |
- |
140,652 |
140,652 |
|
Currency gains |
- |
639 |
639 |
- |
88 |
88 |
|
Income (note 2) |
648 |
- |
648 |
595 |
- |
595 |
|
Investment management fee (note 3) |
(4,701) |
- |
(4,701) |
(2,206) |
- |
(2,206) |
|
Other administrative expenses |
(537) |
- |
(537) |
(380) |
- |
(380) |
|
Net return before finance costs and taxation |
(4,590) |
304,884 |
300,294 |
(1,991) |
140,740 |
138,749 |
|
Finance costs of borrowings |
(401) |
- |
(401) |
(485) |
- |
(485) |
|
Net return before taxation |
(4,991) |
304,884 |
299,893 |
(2,476) |
140,740 |
138,264 |
|
Tax |
(75) |
- |
(75) |
(79) |
- |
(79) |
|
Net return after taxation |
(5,066) |
304,884 |
299,818 |
(2,555) |
140,740 |
138,185 |
|
Net return per ordinary share (note 4) |
(1.78p) |
106.89p |
105.11p |
(1.05p) |
57.85p |
56.80p |
The total column of this statement represents the profit and loss account of the Company. The supplementary revenue and capital columns are prepared under guidance 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 the Company does not have any other comprehensive income and the net return after taxation is both the profit and comprehensive income for the year.
Balance sheet
As at 31 May
| 2021 £'000 | 2020 £'000 |
Fixed assets |
|
|
Investments held at fair value through profit or loss (note 6) | 916,255 | 474,136 |
Current assets |
|
|
Debtors | 3,253 | 1,627 |
Cash and cash equivalents | 18,484 | 16,089 |
| 21,737 | 17,716 |
Creditors |
|
|
Amounts falling due within one year (note 8) | (11,564) | (15,650) |
Net current assets | 10,173 | 2,066 |
Total assets less current liabilities | 926,428 | 476,202 |
|
|
|
Creditors |
|
|
Amounts falling due after more than one year (note 8) | (17,545) | - |
Net assets | 908,883 | 476,202 |
Capital and reserves |
|
|
Share capital | 3,068 | 2,618 |
Share premium account | 249,020 | 116,607 |
Special distributable reserve | 168,942 | 168,942 |
Capital reserve | 497,528 | 192,644 |
Revenue reserve | (9,675) | (4,609) |
Shareholders' funds | 908,883 | 476,202 |
Net asset value per ordinary share (after deducting borrowings at book value) | 296.21p | 181.92p |
Ordinary shares in issue (note 10) | 306,835,000 | 261,765,000 |
Statement of changes in equity
For the year to 31 May 2021
| Share £'000 | Share premium account £'000 | Special distributable reserve £'000 | Capital Reserve £'000 | Revenue reserve £'000 | Shareholders' £'000 |
Shareholders' funds at 1 June 2020 | 2,618 | 116,607 | 168,942 | 192,644 | (4,609) | 476,202 |
Ordinary shares issued (note 10) | 450 | 132,413 | - | - | - | 132,863 |
Net return after taxation | - | - | - | 304,884 | (5,066) | 299,818 |
Shareholders' funds at 31 May 2021 | 3,068 | 249,020 | 168,942 | 497,528 | (9,675) | 908,883 |
For the year to 31 May 2020
| Share £'000 | Share premium account £'000 | Special distributable reserve £'000 | Capital Reserve £'000 | Revenue reserve £'000 | Shareholders' £'000 |
Shareholders' funds at 1 June 2019 | 2,298 | 68,839 | 168,942 | 51,904 | (2,054) | 289,929 |
Ordinary shares issued (note 10) | 320 | 47,768 | - | - | - | 48,088 |
Net return after taxation | - | - | - | 140,740 | (2,555) | 138,185 |
Shareholders' funds at 31 May 2020 | 2,618 | 116,607 | 168,942 | 192,644 | (4,609) | 476,202 |
The Capital Reserve balance at 31 May 2021 includes investment holding gains of £376,767,000 (2020 - £186,483,000).
Cash flow statement
For the year ended 31 May
| 2021 | 2021 | 2020 | 2020 |
| £'000 | £'000 | £'000 | £'000 |
Cash flows from operating activities |
|
|
|
|
Net return before taxation |
| 299,893 |
| 138,264 |
Net gains on investments |
| (304,245) |
| (140,652) |
Currency gains |
| (639) |
| (88) |
Finance costs of borrowings |
| 401 |
| 485 |
Overseas withholding tax incurred |
| (76) |
| (80) |
Changes in debtors and creditors |
| 405 |
| 220 |
Cash from operations* |
| (4,261) |
| (1,851) |
Finance costs paid |
| (438) |
| (521) |
Net cash outflow from operating activities |
| (4,699) |
| (2,372) |
Cash flows from investing activities |
|
|
|
|
Acquisitions of investments | (309,160) |
| (87,106) |
|
Disposals of investments | 170,973 |
| 48,780 |
|
Net cash outflow from investing activities |
| (138,187) |
| (38,326) |
Cash flows from financing activities |
|
|
|
|
Ordinary shares issued | 132,863 |
| 48,088 |
|
Bank loans drawn down | 76,793 |
| 53,878 |
|
Bank loans repaid | (62,632) |
| (51,543) |
|
Net cash inflow from financing activities |
| 147,024 |
| 50,423 |
Increase in cash and cash equivalents |
| 4,138 |
| 9,725 |
Exchange movements |
| (1,743) |
| 412 |
Cash and cash equivalents at start of the period |
| 16,089 |
| 5,952 |
Cash and cash equivalents at 31 May |
| 18,484 |
| 16,089 |
* Cash from operations includes dividends received in the period of £508,000 (2020 - £533,000) and interest received of £99,000 (2020 - 64,000).
List of Investments as at 31 May 2021 |
Name | Business | 2021 Value £'000 | % of total assets* | 2020 Value £'000 |
Shopify Class A | Cloud-based commerce platform provider | 60,231 | 6.4 | 37,851 |
Amazon | Online retailer and cloud computing provider | 46,704 | 5.0 | 37,620 |
Wayfair | Online furniture and homeware retailer | 41,149 | 4.4 | 23,141 |
Tesla | Electric cars, autonomous driving and solar energy | 33,288 | 3.6 | 34,733 |
Moderna | Therapeutic messenger RNA | 30,816 | 3.3 | 6,114 |
Twilio | Cloud-based communications platform | 30,107 | 3.2 | 4,293 |
Roku | Online media player | 28,801 | 3.1 | 7,916 |
The Trade Desk | Advertising technology company | 28,627 | 3.1 | 15,609 |
Zoom Video Communications | Remote conferencing service provider | 26,304 | 2.8 | 9,054 |
Stripe Class B CommonU | Online payment platform | 3,977 | 0.4 | - |
Stripe Series G Preferred U | Online payment platform | 19,367 | 2.1 | 10,961 |
Stripe Series H Preferred U | Online payment platform | 1,660 | 0.2 | - |
|
| 25,004 | 2.7 | 10,961 |
Netflix | Subscription service for TV shows and movies | 23,186 | 2.5 | 19,611 |
Illumina | Gene sequencing equipment and consumables | 23,156 | 2.5 | 14,757 |
First Republic Bank | Private banking | 21,245 | 2.3 | 9,646 |
Novocure | Electric field based cancer therapies | 20,153 | 2.2 | 6,870 |
Space Exploration Technologies Series J Preferred U | Rocket and spacecraft company | 9,531 | 1.0 | 5,740 |
Space Exploration Technologies Series K Preferred U | Rocket and spacecraft company | 2,172 | 0.2 | 1,308 |
Space Exploration Technologies Series N Preferred U | Rocket and spacecraft company | 5,471 | 0.6 | - |
Space Exploration Technologies Class A Common U | Rocket and spacecraft company | 1,129 | 0.1 | - |
Space Exploration Technologies Class C Common U | Rocket and spacecraft company | 348 | <0.1 | - |
|
| 18,651 | 1.9 | 7,048 |
Name | Business | 2021 Value £'000 | % of total assets* | 2020 Value £'000 |
Chegg | Online education company | 18,645 | 2.0 | 10,877 |
Affirm P | Consumer finance | 2,864 | 0.3 | 2,750 |
Affirm Class A P | Consumer finance | 6,764 | 0.7 | - |
Affirm Class B P | Consumer finance | 8,455 | 0.9 | - |
|
| 18,083 | 1.9 | 2,750 |
Peloton P | Connected fitness equipment | 16,121 | 1.7 | 7,090 |
Peloton Interactive | Connected fitness equipment | 845 | 0.1 | - |
|
| 16,966 | 1.8 | 7,090 |
CoStar Group | Commercial property information provider | 16,733 | 1.8 | 8,221 |
Carvana | Online platform for buying used cars | 14,467 | 1.5 | - |
Workday | Enterprise information technology | 14,068 | 1.5 | 9,938 |
Chewy | Online pet supplies retailer | 13,647 | 1.5 | 6,785 |
Ginkgo Bioworks Series E Preferred U | Bioengineering company developing micro organisms that produce various proteins | 13,314 | 1.4 | 3,424 |
Cloudflare | Cloud-based provider of network services | 13,242 | 1.4 | 1,477 |
Redfin | Technology-based real estate brokerage firm | 12,161 | 1.3 | 6,490 |
Lemonade | Insurance company | 11,833 | 1.3 | - |
Denali Therapeutics | Clinical stage neurodegeneration company | 11,372 | 1.2 | 3,963 |
Vroom | Online platform for buying used cars | 11,300 | 1.2 | - |
Image sharing and social media company | 11,156 | 1.2 | - | |
Appian | Enterprise software developer | 10,918 | 1.2 | 3,811 |
Snowflake P | Developer of a SaaS-based cloud data warehousing platform | 10,812 | 1.2 | 862 |
Watsco | Air conditioning, heating and refrigeration equipment distributor | 10,807 | 1.2 | 6,722 |
Name | Business | 2021 Value £'000 | % of total assets* | 2020 Value £'000 | ||
Brex Series D Preferred U | Corporate credit cards for Start-ups | 6,331 | 0.7 | - | ||
Brex Class B Common U | Corporate credit cards for Start-ups | 4,221 | 0.5 | - | ||
|
| 10,552 | 1.2 | - | ||
ABIOMED | Manufacturer of heart pumps | 10,359 | 1.1 | 8,303 | ||
Zipline International Series C Preferred U | Drone-based medical delivery | 6,582 | 0.7 | 2,986 | ||
Zipline International Series E Preferred U | Drone-based medical delivery | 3,730 | 0.4 | - | ||
|
| 10,312 | 1.1 | 2,986 | ||
NVIDIA | Graphics chips | 10,277 | 1.1 | 5,728 | ||
Epic Games U | Video game platform and software developer | 8,905 | 1.0 | - | ||
MarketAxess Holdings | Electronic bond trading platform | 8,584 | 0.9 | 16,888 | ||
Workrise Technologies Series D Preferred (RigUp) U | Jobs marketplace for the energy sector | 4,112 | 0.3 | 3,640 | ||
Workrise Technologies (RigUp) Series D-1 Preferred U | Jobs marketplace for the energy sector | 914 | 0.1 | 809 | ||
Workrise Technologies (RigUp) Series E Preferred U | Jobs marketplace for the energy sector | 3,517 | 0.4 | - | ||
|
| 8,543 | 0.8 | 4,449 | ||
Snap 'A' | Camera and social media company | 8,531 | 0.9 | - | ||
Teladoc | Telemedicine services provider | 8,239 | 0.9 | 6,768 |
| |
Alnylam Pharmaceuticals | Therapeutic gene silencing | 8,172 | 0.9 | 6,548 |
| |
Tanium Class B Common U | Online security management | 8,136 | 0.9 | 3,413 |
| |
Zillow Group Class A | US online real estate services | 7,904 | 0.8 | 4,075 |
| |
Penumbra | Medical tools to treat vascular diseases | 7,762 | 0.8 | 5,508 |
| |
Stitch Fix | Online clothing retailer | 7,718 | 0.8 | 3,827 |
| |
Butterfly Network P | Portable ultrasound and diagnostics | 7,162 | 0.8 | 4,829 |
| |
Datadog | IT monitoring and analytics platform | 6,909 | 0.7 | - |
| |
Glaukos | Ophthalmic medical technology company | 6,842 | 0.7 | 3,691 |
| |
10X Genomics | Single cell sequencing company | 6,826 | 0.7 | - |
| |
Name | Business | 2021 Value £'000 | % of total assets* | 2020 Value £'000 |
| |
Warby Parker (JAND Inc) Series A Preferred U | Online and physical glasses retailer | 3,379 | 0.4 | 2,446 |
| |
Warby Parker (JAND Inc) Series C Preferred U | Online and physical glasses retailer | 2,856 | 0.3 | 2,068 |
| |
|
| 6,235 | 0.7 | 4,514 |
| |
Lyra Health Series E Preferred U | Digital mental health platform for enterprises | 6,033 | 0.6 | - |
| |
Capsule Series D Preferred U | Digital pharmacy | 5,628 | 0.6 | - |
| |
Convoy Series D Preferred U | Marketplace for truckers and shippers | 5,126 | 0.6 | 3,814 |
| |
HEICO Class A | Aerospace parts | 5,072 | 0.5 | 3,377 |
| |
DoorDash | Online local delivery | 5,048 | 0.5 | - |
| |
Thumbtack Class A Common U | Online directory service for local businesses | 4,817 | 0.5 | 1,149 |
| |
Aurora Innovation Series B Preferred U | Self-driving technology | 4,490 | 0.5 | 2,027 |
| |
PsiQuantum Series D Preferred U | Silicon photonic quantum computing | 3,517 | 0.4 | - | ||
Nuro Series C Preferred U | Self-driving vehicles for local delivery | 3,517 | 0.4 | - | ||
Coursera | Online educational services provider | 3,453 | 0.4 | - | ||
Lyft P | Ridesharing | 3,066 | 0.3 | 1,599 | ||
Airbnb Class B Common P | Online market place for travel accommodation | 3,036 | 0.3 | 1,033 | ||
Away (JRSK Inc) Series D Preferred U | Travel and lifestyle brand | 1,243 | 0.1 | 1,291 | ||
Away (JRSK Inc) Convertible Promissory Note U | Travel and lifestyle brand | 1,122 | 0.1 | - | ||
Away (JRSK Inc) Series Seed Preferred U | Travel and lifestyle brand | 649 | 0.1 | 531 | ||
|
| 3,014 | 0.3 | 1,822 | ||
Sana Biotechnology | Gene editing technology | 2,976 | 0.3 | - | ||
Indigo Agriculture Series E Preferred U | Agricultural technology company | 1,668 | 0.2 | 1,959 | ||
Indigo Agriculture Series F Preferred U | Agricultural technology company | 481 | <0.1 | - | ||
Indigo Agriculture Series G Preferred U | Agricultural technology company | 704 | 0.1 | 278 | ||
Indigo Agriculture Common U | Agricultural technology company | 108 | <0.1 | 58 | ||
|
| 2,961 | 0.3 | 2,295 | ||
Name | Business | 2021 Value £'000 | % of total assets* | 2020 Value £'000 | ||
Honor Technology Series D Preferred U | Home care provider | 2,814 | 0.3 | - | ||
Recursion Pharmaceuticals | Drug discovery platform | 2,703 | 0.3 | - | ||
Niantic Series C PreferredU | Augmented reality games | 2,570 | 0.3 | 2,274 | ||
Yext | Digital knowledge management | 1,500 | 0.2 | 3,008 | ||
Total Investments |
| 916,255 | 98.0 |
| ||
Net Liquid Assets |
| 18,967 | 2.0 |
| ||
Total Assets |
| 935,222 | 100.0 |
| ||
* Total assets less current liabilities, before deduction of borrowings.
P Denotes listed (private company) security previously held in the portfolio as an unlisted (private company) security.
U Denotes unlisted (private company) security
| Listed equities % | Unlisted securities† % | Net liquid assets % | Total assets % |
31 May 2021 | 81.5 | 16.5 | 2.0 | 100.0 |
31 May 2020 | 84.4 | 12.2 | 3.4 | 100.0 |
Figures represent percentage of total assets.
† Includes holdings in ordinary shares, preference shares and convertible promissory notes.
Distribution of total assets *
|
|
At 31 May 2021 % |
At 31 May 2020 % |
|
Communication Services |
8.5 |
12.2 |
|
Consumer Discretionary |
24.5 |
27.2 |
|
Consumer Staples |
0.4 |
0.5 |
|
Financials |
5.7 |
8.9 |
|
Healthcare |
17.2 |
13.7 |
|
Industrials |
8.5 |
7.8 |
|
Information Technology |
30.5 |
24.3 |
|
Materials |
1.4 |
0.7 |
|
Real Estate |
1.3 |
1.3 |
|
Net Liquid Assets |
2.0 |
3.4 |
|
|
100.0 |
100.0 |
* Total assets less current liabilities before deduction of all borrowings.
|
Notes to the financial statements |
|
1. |
Principal accounting policies The Financial Statements for the year to 31 May 2021 have been prepared in accordance with Financial Reporting Standard 102, 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' on the basis of the accounting policies set out in the Annual Report and Financial Statements which are unchanged from the prior year and have been applied consistently. |
||||||||
|
2. |
Income |
2021 £'000 |
2020 £'000 |
||||||
|
|
Income from financial assets designated at fair value through profit or loss |
|
|
||||||
|
|
Overseas dividends |
500 |
528 |
||||||
|
|
Overseas interest |
146 |
21 |
||||||
|
|
|
646 |
549 |
||||||
|
|
Other income |
|
|
||||||
|
|
Deposit interest |
2 |
46 |
||||||
|
|
Total Income |
648 |
595 |
||||||
|
3. |
Investment management fee Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford & Co, has been appointed as the Company's Alternative Investment Fund Manager ('AIFM') and Company Secretaries. Baillie Gifford & Co Limited has delegated portfolio management services to Baillie Gifford & Co. Dealing activity and transaction reporting has been further sub-delegated to Baillie Gifford Overseas Limited and Baillie Gifford Asia (Hong Kong) Limited. The Investment Management Agreement is terminable on not less than six months' notice. The annual management fee is 0.70% on the first £100 million of net assets and 0.55% on the remaining net assets. Management fees are calculated and payable quarterly. |
||||||||
|
4. |
Net return per ordinary share |
2021 Revenue |
2021 Capital |
2021 Total |
2020 Revenue |
2020 Capital |
2020 Total |
||
| Revenue return after taxation |
(1.78p) |
106.89p |
105.11p |
(1.05p) |
57.85p |
56.80p |
|||
|
|
Revenue return per ordinary share is based on the net revenue loss after taxation of £5,066,000 (2020 - net revenue loss after taxation of £2,555,000) and on 285,237,493 (2020 - 243,286,434) ordinary shares, being the weighted average number of ordinary shares in issue during each period. Capital return per ordinary share is based on the net capital gain for the financial period of £304,884,000 (2020 - net capital gain of £140,740,000) and on 285,237,493 (2020 - 243,286,434) ordinary shares, being the weighted average number of ordinary shares in issue during each period. Total return per ordinary share is based on the total gain for the financial period of £299,818,000 (2020 - £138,185,000) and on 285,237,493 (2020 - 243,286,434) ordinary shares, being the weighted average number of ordinary shares in issue during each period. There are no dilutive or potentially dilutive shares in issue. |
||||||||
|
5. |
Ordinary dividends There are no dividends paid or proposed in respect of the financial year. There is no investment income available for distribution by way of dividend for the year to 31 May 2021 due to the revenue loss of £5,066,000 in the year (2020 - revenue loss of £2,555,000). |
||||||||
Notes to the financial statements (Ctd)
|
6. |
Fair Value Hierarchy The fair value hierarchy used to analyse the fair values of financial assets is described below. The levels are determined by the lowest (that is the least reliable or least independently observable) level of input that is significant to the fair value measurement for the individual investment in its entirety as follows: Level 1 - using unadjusted quoted prices for identical instruments in an active market; Level 2 - using inputs, other than quoted prices included within Level 1, that are directly or indirectly observable (based on market data); and Level 3 - using inputs that are unobservable (for which market data is unavailable).
An analysis of the Company's financial asset investments based on the fair value hierarchy described above is shown below. Investments held at fair value through profit or loss |
||||
|
|
As at 31 May 2021 |
Level 1 £'000 |
Level 2 £'000 |
Level 3 £'000 |
Total £'000 |
|
|
Listed securities |
762,116 |
- |
- |
762,116 |
|
|
Unlisted ordinary shares |
- |
- |
31,641 |
31,641 |
|
|
Unlisted preference shares * |
- |
- |
121,376 |
121,376 |
|
|
Unlisted convertible promissory notes |
- |
- |
1,122 |
1,122 |
|
|
Total financial asset investments |
762,116 |
- |
154,139 |
916,255 |
|
|
|
||||
|
|
As at 31 May 2020 |
Level 1 £'000 |
Level 2 £'000 |
Level 3 £'000 |
Total £'000 |
|
|
Listed securities |
414,486 |
- |
- |
414,486 |
|
|
Unlisted ordinary shares |
- |
- |
6,407 |
6,407 |
|
|
Unlisted preference shares * |
- |
- |
50,134 |
50,134 |
|
|
Unlisted convertible promissory notes |
- |
- |
3,109 |
3,109 |
|
|
Total financial asset investments |
414,486 |
- |
59,650 |
474,136 |
|
|
* The investments in preference shares are not classified as equity holdings as they include liquidation preference rights that determine the repayment (or multiple thereof) of the original investment in the event of a liquidation event such as a take-over. During the year to 31 May 2021 investments with a book cost of £13,966,000 (31 May 2020 - £4,666,000) were transferred from Level 3 to Level 1 on becoming listed.
|
||||
|
|
|
||||
|
Notes to the financial statements (Ctd) |
|
||
|
6. |
Fair Value Hierarchy (Ctd) |
|
|
|
|
The valuation techniques used by the Company as explained in the accounting policies Listed Investments The fair value of listed security investments is the last traded price on recognised overseas exchanges.
Unlisted Investments 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 valuation policy applies techniques consistent with the International Private Equity and Venture Capital Valuation ('IPEV') Guidelines 2018.
The techniques applied are predominantly market-based approaches. The market-based approaches available under IPEV are set out below and are followed by an explanation of how they are applied to the Company's unlisted portfolio:
- Multiples; - Industry Valuation Benchmarks; and - Available Market Prices.
The nature of the unlisted portfolio currently will influence the valuation technique applied. The valuation approach recognises that, as stated in the IPEV Guidelines, the price of a recent investment, if resulting from an orderly transaction, generally represents fair value as at the transaction date and may be an appropriate starting point for estimating fair value at subsequent measurement dates. However, consideration is given to the facts and circumstances as at the subsequent measurement date, including changes in the market or performance of the investee company. Milestone analysis is used where appropriate to incorporate the operational progress of the investee company into the valuation. Additionally, the background to the transaction must be considered. As a result, various Multiples based techniques are employed to assess the valuations particularly in those companies with established revenues. Discounted cashflows are used where appropriate. An absence of relevant industry peers may preclude the application of the Industry Valuation Benchmarks technique and an absence of observable prices may preclude the Available Market Prices approach. All valuations are cross-checked for reasonableness by employing relevant alternative techniques.
The unlisted investments are valued according to a three monthly cycle of measurement dates. The fair value of the unlisted investments will be reviewed before the next scheduled three monthly measurement date on the following occasions: - at the year end and half year end of the Company; and - where there is an indication of a change in fair value as defined in the IPEV Guidelines (commonly referred to as 'trigger' events). |
|
|
|
7. |
Transaction costs The purchases and sales proceeds figures above include transaction costs of £80,000 (2020 - £20,000) and £46,000 (2020 - £18,000) respectively, being £126,000 (2020 - £38,000) in total. |
||
|
8. |
Borrowing facilities The Company entered into a US$25,000,000 three year fixed rate facility with five ING Bank N.V., London Branch which expires on 23 October 2023 which is in addition to the existing US$25,000,000 five year revolving credit facility with ING Bank N.V., London Branch which expires on 1 August 2023. At 31 May 2021 creditors falling due within one year include borrowings of US$12,500,000 (sterling value £8,794,000) drawn down under the five year revolving credit facility (31 May 2020 - creditors falling due within one year included US$18,000,000 (sterling value £14,560,000) drawn under the five year revolving credit facility). At 31 May 2021 creditors falling due after more than one year include borrowings of US$25,000,000 (sterling value £17,545,000) drawn down under the three year fixed rate facility. The fair value of borrowings as at 31 May 2021 was £26,616,000 (31 May 2020 - £14,560,000).
The main covenants relating to the loan are that borrowings should not exceed 30% of the Company's adjusted net asset value and the Company's minimum adjusted net asset value shall be £140 million (year to 31 May 2020 - £70 million). The adjusted net asset value calculation includes the deduction of 100% of any unlisted securities. There were no breaches in the loan covenants during the year to 31 May 2021 (31 May 2020 - none). |
||
|
Notes to the financial statements (Ctd) |
|||||||||||||||
|
9. |
Analysis of change in net debt |
|
|
|
|
|
|||||||||
|
|
|
At 31 May 2020 £'000 |
Cash flows £'000 |
Exchange movement £'000 |
At 31 May 2021 £'000 |
|
|||||||||
|
|
Cash and cash equivalents |
16,089 |
4,138 |
(1,743) |
18,484 |
|
|||||||||
|
|
Loans due within one year |
(14,560) |
4,990 |
776 |
(8,794) |
|
|||||||||
|
|
Loans due within two to three years |
- |
(19,151) |
1,606 |
(17,545) |
|
|||||||||
|
|
Total |
1,529 |
(10,023) |
639 |
(7,855) |
|
|||||||||
|
|
|
|
|
|
|
||||||||||
|
10. |
Share capital |
2021 Number |
2021 £'000 |
2020 Number |
2020 £'000 |
||||||||||
| Allotted, called up and fully paid |
|
|
|
|
|||||||||||
| ordinary shares of 1p each |
306,835,000 |
3,068 |
261,765,000 |
2,618 |
|||||||||||
|
|
The Company has authority to allot shares under section 551 of the Companies Act 2006 which was granted at the General Meeting held on 5 March 2018 and which lasts until the end of the period of five years from the date of the passing of the resolution. The Board has authorised use of this authority to issue new shares at a premium to net asset value in order to enhance the net asset value per share for existing shareholders and improve the liquidity of the Company's shares. In the year to 31 May 2021, the Company issued a total of 45,070,000 shares (nominal value £450,000, representing 17.2% of the issued share capital at 31 May 2020) on a non pre-emptive basis at a premium to net asset value (on the basis of debt valued at par value), raising net proceeds of £132,863,000 (in the year to 31 May 2020, the Company issued a total of 31,965,000 shares nominal value £320,000, representing 13.9% of the issued share capital at 31 May 2019, raising net proceeds of £48,088,000), which has been invested in accordance with the Company's investment policy.
Over the period from 31 May 2021 to 9 August 2021 the Company has issued a further 525,000 shares at a premium to net asset value, raising net proceeds of £1,823,000.
The Company's authority to buy back shares up to a maximum of 14.99% of the Company's issued share capital was renewed at the Annual General Meeting held on 9 October 2020. No shares were bought back in the year to 31 May 2021. At 31 May 2021 the Company had authority to buy back a further 40,332,843 ordinary shares. |
||||||||||||||
|
11. |
The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 May 2021 or the year ended 31 May 2020 but is derived from those accounts. Statutory accounts for the period to 31 May 2020 have been delivered to the Registrar of Companies, and those for the year to 31 May 2021 will be delivered in due course. The auditor has reported on those accounts; the reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. |
||||||||||||||
|
12. |
The Annual Report and Financial Statements will be available on the Managers' websitebgusgrowthtrust.com‡ on or around 16 August 2021. |
||||||||||||||
Notes to the financial statements (Ctd)
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
The total value of all assets held less all liabilities (other than liabilities in the form of borrowings).
Shareholders' Funds and Net Asset Value
Shareholders' funds is the value of all assets held less all liabilities, with borrowings deducted at book cost. Net Asset Value (NAV) is the value of all assets held less all liabilities, with borrowings deducted at either fair value or par value as described below. Per share amounts are calculated by dividing the relevant figure by the number of ordinary shares in issue.
Borrowings at Par Value
Borrowings are valued at nominal par value.
Borrowings at Fair Value (APM)
Borrowings are valued at an estimate of their market worth.
Net Asset Value (Reconciliation of NAV at Book Value to Nav at Fair Value)
|
|
31 May 2021 |
31 May 2020 |
|
Net Asset Value per ordinary share (borrowings at book value) |
296.21p |
181.92p |
|
Shareholders' funds (borrowings at book value) |
£908,883,000 |
£476,202,000 |
|
Add: book value of borrowings |
£26,339,000 |
£14,560,000 |
|
Less: fair value of borrowings |
(£26,616,000) |
(£14,560,000) |
|
Shareholders' funds (borrowings at fair value) |
£908,606,000 |
£476,202,000 |
|
Number of shares in issue |
306,835,000 |
261,765,000 |
|
Net Asset Value per ordinary share (borrowings at fair value) |
296.12p |
181.92p |
Net Liquid Assets
Net liquid assets comprise current assets less current liabilities (excluding borrowings).
(Discount)/Premium (APM)
As stock markets and share prices vary, an investment trust's share price is rarely the same as its NAV. When the share price is lower than the NAV 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 NAV per share and is usually expressed as a percentage of the NAV per share. If the share price is higher than the NAV per share, this situation is called a premium.
|
|
|
31 May 2021 |
31 May 2020 |
|
Net asset value per ordinary share (after deducting borrowings at fair value) |
(a) |
296.12p |
181.92p |
|
Share price |
(b) |
308.00p |
189.00p |
|
Premium (borrowings at fair value) |
((b)-(a)) ÷ (a) |
4.0% |
3.9% |
Notes to the financial statements (Ctd)
Glossary of Terms and Alternative Performance Measures ('APM') (continued)
(Discount)/Premium (APM) (Ctd)
|
|
|
31 May 2021 |
31 May 2020 |
|
Net asset value per ordinary share (after deducting borrowings at book value) |
(a) |
296.21p |
181.92p |
|
Share price |
(b) |
308.00p |
189.00p |
|
Premium (borrowings at book value) |
((b)-(a)) ÷ (a) |
4.0% |
3.9% |
Total Return (APM)
The total return is the return to shareholders after reinvesting any dividend on the date that the share price goes ex-dividend. The Company does not pay a dividend, therefore, the one year and since inception total returns for the share price and NAV per share at book value are the same as the percentage movements in the share price and NAV per share at fair value as detailed on pages 1 and 23 of the Annual Report and Financial Statements.
Ongoing Charges (APM)
The total recurring expenses (excluding the Company's cost of dealing in investments and borrowing costs) incurred by the Company as a percentage of the average net asset value (with debt at fair value).
Ongoing Charges Calculation
|
|
|
31 May 2021 £'000 |
31 May 2020 £'000 |
|
Investment management fee |
|
4,701 |
2,206 |
|
Other administrative expenses |
|
537 |
380 |
|
Total expenses |
(a) |
5,238 |
2,586 |
|
Average daily cum-income net asset value |
(b) |
772,873 |
344,838 |
|
Ongoing charges |
((a) ÷ (b)) |
0.68% |
0.75% |
Gearing (APM)
At its simplest, gearing is borrowing. Just like any other public company, an investment trust can borrow money to invest in additional investments for its portfolio. The effect of the borrowing on the shareholders' assets is called 'gearing'. If the Company's assets grow, the shareholders' assets grow proportionately more because the debt remains the same. But if the value of the Company's assets falls, the situation is reversed. Gearing can therefore enhance performance in rising markets but can adversely impact performance in falling markets.
Gearing is the Company's borrowings at book value less cash and cash equivalents (including any outstanding trade settlements) expressed as a percentage of shareholders' funds.
|
|
31 May 2021 |
31 May 2020 |
|
Borrowings (at book cost) |
£26,339,000 |
£14,560,000 |
|
Less: cash and cash equivalents |
(£18,484,000) |
(£16,089,000) |
|
Less: sales for subsequent settlement |
(£2,909,000) |
(£1,517,000) |
|
Add: purchases for subsequent settlement |
£1,320,000 |
£241,000 |
|
Adjusted borrowings (a) |
£6,266,000 |
(£2,805,000) |
|
Shareholders' funds (b) |
£908,883,000 |
£476,202,000 |
|
Gearing: (a) as a percentage of (b) |
1% |
(1%) |
Notes to the financial statements (Ctd)
Glossary of Terms and Alternative Performance Measures ('APM') (continued)
Potential gearing is the Company's borrowings at par expressed as a percentage of shareholders' funds.
|
|
31 May 2021 |
31 May 2020 |
|
Borrowings (at book cost) (a) |
£26,339,000 |
£14,560,000 |
|
Shareholders' funds (b) |
£908,883,000 |
£476,202,000 |
|
Potential gearing: (a) as a percentage of (b) |
3% |
3% |
Leverage (APM)
For the purposes of the Alternative Investment Fund Managers Directive, 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.
None of the views expressed in this document should be construed as advice to buy or sell a particular investment.
‡ 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.
11 August 2021
For further information please contact:
Alex Blake, Baillie Gifford & Co
Tel: 0131 275 2859 or 07773 246035
James Budden, Baillie Gifford & Co
Tel: 0131 275 2816 or 07507 201208
Mark Knight, Four Communications
Tel: 0203 697 4200 or 07803 758810
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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.
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