Annual Financial Report
The following amendment has been made to the 'Annual Financial Report' announcement released on 18 December 2017 at 15:39 under RNS No 6914Z.
The original announcement contained an incorrect hyperlink for the Company's website.
All other details remain unchanged.
The full announcement is shown below.
Edinburgh Worldwide Investment Trust plc
Legal Entity Identifier: 213800JUA8RKIDLH380
Regulated Information Classification: Annual Financial and Audit Reports
Annual Financial Report
This is the Annual Financial Report of Edinburgh Worldwide Investment Trust plc as required to be published under DTR 4 of the UKLA Listing Rules.
The financial information set out in this Annual Financial Report does not constitute the Company's statutory accounts for the years ended 31 October 2016 or 31 October 2017 but is derived from those accounts. The Company's Auditors have reported on the Annual Report and Financial Statements for 2016 and 2017; their reports were unqualified, did not draw attention to any matters by way of emphasis, and did not contain statements under sections 498(2), (3) or (4) of the Companies Act 2006. Statutory accounts for the year ended 31 October 2016 have been filed with the Registrar of Companies and the statutory accounts for the year ended 31 October 2017 will be delivered to the Registrar in due course.
The Annual Report and Financial Statements for the year ended 31 October 2017, including the Notice of Annual General Meeting, has been submitted electronically to the National Storage Mechanism and will shortly be available for inspection http://www.morningstar.co.uk/uk/NSM and is also available on Edinburgh Worldwide's page of the Baillie Gifford website at: www.edinburghworldwide.co.uk
Neither the contents of the Managers' website nor the contents of any website accessible from hyperlinks on the Managers' website (or any other website) is incorporated into, or forms part of, this announcement.
Baillie Gifford & Co Limited
Company Secretaries
18 December 2017
Chairman's Statement
Performance
In the year to 31 October 2017 the Company's net asset value ('NAV') per share, when calculated by deducting borrowings at fair value, increased by 31.6% and the share price by 43.0%. The comparative index, the S&P Global Small Cap Index, increased by 13.4% in sterling terms during this period. Over the course of the year the discount to net assets with borrowings deducted at fair value averaged 7.9% and stood at 3.9% as at 31 October 2017. Portfolio turnover was 13.2% compared to 15.6% in 2016 and the ongoing charges have reduced from 0.92% to 0.87%, partly as a consequence of the tiered management fee.
The good relative and absolute performance was driven by a number of holdings, most notably Alnylam Pharmaceuticals, a gene silencing company, LendingTree, an online loan marketplace, and IPG Photonics, a manufacturer of fibre-lasers used in metal processing. All three companies are headquartered in the United States. On balance, the fundamental performance of the holdings in the portfolio continues to be progressing as hoped. Greater detail on this can be found within the Managers' Review below.
For interest, since the broadening of the Company's investment policy, at the end of January 2014, to target less mature entrepreneurial businesses at the time of initial investment, the Company's NAV per share, when calculated by deducting borrowings at fair value, has increased by 65%, the share price by 71% and the comparative index by 59% in sterling terms. Over the fourteen years that Baillie Gifford has been managing the Company's assets, NAV per share has increased by 389%, the share price by 494% and the comparative index* by 284%, all in total return terms.
Unlisted Investments
The Company is permitted to invest up to 5% of total assets in unlisted equity investments, in aggregate, at time of acquisition. As at the Company's year end, the portfolio weighting in unlisted equity investments stood at 2.1% of total assets, invested in three holdings (2016 - 2.8% of total assets in four holdings). There was one new unlisted purchase during the year, Spire Global, which designs, manufactures and operates a constellation of 'nano satellites'. Further information can be found within the Managers' Review.
We were forced sellers of two of our unlisted holdings, Skyscanner and Souq, which were acquired by Ctrip.com and Amazon respectively. Although these were sold at a profit, this was a disappointing outcome for us as we had hoped that these would be long term holdings with the potential for more significant upside returns. The ability to invest in unlisted equities through a closed ended vehicle is one of the notable benefits of the investment trust structure and a differentiating factor versus open ended peers. The loss of a holding, listed or unlisted, due to a merger or takeover, is usually one of the notable headwinds faced by the Managers in achieving significant returns over the long term.
Borrowings
The extent and range of equity gearing is discussed by the Board and Managers at each Board meeting. Together we agree that the Company should typically be geared to equities to maximise potential returns, with the current parameters set at +5% to +15%. Over the year, the invested equity gearing ranged between 5.5% and 9.0%, and stood at 8.6% at the financial year end (2016 - 8.8%).
The Company has a five year fixed rate multi-currency loan from National Australia Bank Limited, expiring in September 2019. At present, drawings are €9.4 million, US$25.6 million and £7.5 million, with a weighted average interest rate of 2.80%.
Earnings and Dividend
As stated in my predecessor's reports, the Company's objective is that of generating capital growth and investors should not expect any income from this investment. This year the net revenue return per share was a positive 0.30p, due largely to a one-off refund of French withholding tax and associated interest (2016 - deficit of 0.12p). However, the revenue account for 2017 is running at a deficit after the deduction of operating expenses, so 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.
Investment Approach
The ability to identify the companies that value innovation, and have the capability to develop commercial opportunities around it, is key to unearthing the market leaders of the future and is a key focus for the Managers. Such companies can be expected to thrive regardless of the underlying economic conditions. Nonetheless, the actions of investors often exhibit indiscriminate tendencies and immature growth companies can undergo notable price volatility. The structure of investment trusts permits their managers and discerning long term investors to take positions for the long term when the tide of money or sentiment depresses valuations. Rather than focus on macro economic developments, the Managers will therefore continue to focus their efforts on picking growth companies that create and exploit opportunities and which exhibit excellent long term growth prospects and the potential for positive long term returns.
An overview of the portfolio is provided by the Managers below.
Changes in the portfolio's management
Due to increased responsibilities on Baillie Gifford's Long Term Global Growth Desk, John MacDougall decided to stand down as the Company's Deputy portfolio manager. The Board was supportive of this decision and would like to thank him for his contributions to the success of the Company.
Svetlana Viteva and Luke Ward were appointed Deputy portfolio managers, effective 7 December. Both Svetlana and Luke joined Baillie Gifford in 2012 and work closely with Douglas Brodie as part of Baillie Gifford's Global Discovery investment desk, from which Edinburgh Worldwide is managed. The Board is enthused by their appointment and looks forward to working more closely with them.
Annual General Meeting
The Annual General Meeting of the Company will be held at Baillie Gifford's offices in Edinburgh at 12 noon on Wednesday 24 January 2018. The Company will once again be seeking to renew its share buyback, issuance and treasury share powers. The buy back facility is sought to allow the Company to buy back its own shares when the discount is substantial in absolute terms and relative to its peers. Issuance, either from treasury or of new shares, will only be undertaken at a premium to the prevailing cum income NAV, with debt calculated at par, in order to satisfy natural market demand. This would enhance the NAV per share for existing shareholders as well as dilute ongoing costs and help with trading liquidity of the shares of the Company. Further information on these resolutions can be found on page 21 and pages 52 and 53 of the Annual Report and Financial Statements.
Douglas Brodie, Svetlana Viteva and Luke Ward, the portfolio's Manager and Deputy Managers, will give a presentation and take questions. The Board will also be available to respond to any questions that you may have. I hope that you will be able to attend.
Henry CT Strutt
Chairman
7 December 2017
* MSCI All Countries World Index (in sterling terms) until 31 January 2014, thereafter the S&P Global Small Cap Index (in sterling terms). The index data has been chain linked to form one comparative index figure. Figures are total return with net asset value at par.
For a definition of terms see Glossary of Terms, note 8.
Past performance is not a guide to future performance.
Managers' Review
As we postulated in the Interim Report, the current year has seen global stock markets return to a more fundamental approach, displacing the geopolitical shocks and macroeconomic uncertainty that beset much of 2016. The move away from a sentiment-led market backdrop has benefited the absolute and relative performance of the Company's portfolio. We are not particularly surprised by this. Stock market analysis has consistently shown that, in the longer term, company specific fundamentals ultimately prevail, hence our focus on stock selection and structural growth opportunities. Our remit is to unearth what we believe to be the most innovative, forward-thinking young businesses; those companies that are typically below the radar of many investors but which have the ambition to be much larger and the capability to reshape their respective industries. It's a challenge we relish but one that requires patience combined with the ability to craft an investment case over many years, potentially decades. The strong net asset value performance over the past year reflects the substantial progress made by many of our underlying holdings, not just over the past 12 months but arguably over much longer periods of time. Whilst it's pleasing to see many of the holdings grow and garner greater investor attention, we believe that many of the best performing holdings still offer the prospect of very significant future returns. This reflects on many of these businesses being still comparatively small and immature relative to the size of the opportunity that they are looking to address.
When observing the stocks that contribute most to performance over an annual period it's common to identify certain themes. In contrast, performance over the current period is notable for the diverse spread of holdings that contributed positively; encompassing biotechnology companies, online aggregators, e-commerce retailers and companies involved in digital manufacturing and software. The commonalities across these businesses are far from obvious but we believe they do exist. They include being businesses that we have typically owned for several years and which have grown to be amongst our largest positions in the portfolio. They typically have entrepreneurial founder managers still involved with the business and, perhaps most importantly, they share a belief that what they offer, be it drugs, lasers or software code, is substantially superior to what was available before. This innovative disruptive streak is what distinguishes many of our holdings and we believe it is testament to the current environment being rife with new tools and technologies which can be harnessed by nimble, entrepreneurial companies. The other important attribute that these holdings share is growing evidence that what they offer is inherently scalable. The topic of scalability captures many attributes but at its core is the ability of a business to become stronger and more defensible as it grows. Scalability is what helps bridge an interesting idea into a tangible, successful and differentiated business. Consequently, understanding how a business could scale and evolve forms a key component of how we think about business growth. Getting these aspects of our analysis right often means the difference between identifying a good business versus a truly transformational one.
The longstanding holding in Alnylam Pharmaceuticals made a notable contribution to performance as it revealed a highly positive outcome for its most clinically advanced drug candidate; a significant achievement that paves the way for this drug to be approved in the coming months. This is the first example from its extensive drug pipeline to successfully navigate the clinical trials process and it significantly validates the core gene-silencing technology platform that underpins the business. The initial success has been in an inherited disorder called TTR Amyloidosis, a serious disease that manifests through chronic and often fatal damage to nerve and cardiac tissue. With limited treatment options hitherto available, the evidence that Alnylam's drug reversed the disease offers a profound benefit to this critical patient group. We have written before on the changing landscape of drug development. What has long been a process dominated by serendipity is becoming increasingly rational. The synchronised efforts of science to unlock the molecular basis of disease alongside novel highly targeted intervention will bring profound changes in healthcare. Alnylam embodies much of this change; a technology that explicitly links the growing appreciation of genetics in driving disease with the ability to intervene directly at the genetic level. Novel, high potential therapeutic platforms are comparatively rare, perhaps the drug discovery industry might see a handful of these every decade or so, even rarer still is for one company to have robust proprietary ownership of the technology. The combination of these two observations makes us excited about the ongoing potential of Alnylam, both therapeutically and commercially.
Other notable contributors to performance include LendingTree, the online marketplace for US consumers to efficiently access financial products, and IPG Photonics, manufacturer of fibre-lasers used in various metal processing applications. LendingTree's very robust growth hints at the emerging network effects and scale advantages that are common traits amongst dominant online marketplaces. With an offering that benefits borrowers through choice and transparency, combined with a broad base of lenders that increasingly recognise the power of targeting borrowers through digital channels, we see significant scope for the business to grow and further strengthen its emerging advantage. IPG Photonics has seen a marked acceleration in growth rates recently as adoption of fibre-lasers, a product category they pioneered, broadens out. This is being driven by the company's success in producing lasers that operate at increasing power levels, a development that has seen the technology move away from comparatively simple applications, such as metal etching, towards mainstream industrial processes such as welding. With a growing range of applications, we see a role for fibre-lasers in helping to drive the automation of production lines around the world, a development that could underpin many years of growth for the business.
Portfolio Update
We acquired several new holdings in the period. The holdings in Teladoc, Mindbody, CEVA, Ambarella and STAAR Surgical were commented on in the Interim Report. New holdings in the second half of the year included Spire Global, Mulesoft, Penumbra, Exact Sciences, Novocure and NuCana. Spire Global is an unlisted company that designs, manufactures and operates a constellation of nano-satellites. These are a fraction of the size, weight, and complexity of traditional satellite hardware, yet offer improved performance and significantly lower costs when used in combination. With its rapidly growing network of orbiting nano-satellites, Spire is attempting to solve large problems in diverse areas such as weather forecasting, aircraft tracking and maritime monitoring. Mulesoft sells software to corporates that helps them to connect their IT assets through the use of Application Programming Interfaces (APIs). Historically, patching together disparate pieces of software within a business had required costly specialist system integration and cumbersome point-to-point code. In contrast, APIs have the potential to revolutionise how IT departments operate by enabling faster and cheaper IT integration without compromising integrity and security of the network. The opportunity is large and expanding, driven by the proliferation of software and computing devices, and we believe Mulesoft's technological lead is significant. Penumbra designs and manufactures advanced medical tools for minimally invasive clot removal. Through removing blood clots quickly, the outcomes for stroke victims can be significantly improved compared to conventional drug based treatments. This has the effect of significantly lowering lifetime care costs with the additional benefit of enabling the procedure to be performed in an outpatient setting.
The new holdings in Exact Sciences, Novocure and NuCana are all examples of innovative approaches to combat cancer. Exact offers a low cost molecular diagnostic cancer test based on its understanding of epigenetic changes that occur very early as a cancer forms. The initial test, marketed as Cologuard, is focused on colon cancer, the second most prevalent cancer in the US. The test has been selling extremely well which we believe is testament to the significant value this test confers to the patient and the healthcare system. We expect the very strong growth for Cologuard to continue and we are intrigued by early moves to apply the company's genetic insights to potentially other cancers such as lung, ovarian or prostate. Novocure has pioneered a novel therapeutic modality, known as Tumour Treating Fields. It uses low intensity intermediate frequency alternating electric fields to stop the division of cancer cells. The first application of this new therapeutic approach is for treating patients with glioblastoma, an aggressive form of brain cancer. We are encouraged by the clinical evidence and the early commercial traction which Novocure has seen to date and we believe the mechanism of action could have broad application in treating other solid tumours. NuCana is an Edinburgh based healthcare company that has developed a proprietary chemistry that improves the potency and duration of action of traditional chemotherapy agents. These chemical modifications should prevent mechanisms of drug resistance often seen in chemotherapy treatment and should avoid many of the toxicity issues that drastically impact on patients. With several clinical trials due to report over the coming years we see great potential for the business to transform the chemotherapy field.
The holdings in AAC Technologies and Abcam were sold following a period of strong share price performance that, in our opinion, resulted in the shares being fairly valued. Exa, Novadaq exited the portfolio on the back of the companies being acquired. Since the Company's financial year end, Imagination Technologies has also been acquired.
For a definition of terms see Glossary of Terms, note 8.
Investment Philosophy
Most small businesses are destined to stay small given their limited scope for both structural growth and meaningful differentiation. Such businesses constitute the bulk of the smaller companies' universe yet are of no appeal to us. However, what is intriguing about the smaller companies' universe is that it contains a subset of immature but potentially high growth companies. By identifying attractive growth companies earlier we seek to benefit from growth at an earlier stage in a company's lifecycle and retain ownership of successful companies as they grow and thrive; we see our role as investing in what are potentially the larger companies of the future as opposed to the smaller companies of today.
We are looking to concentrate on the part of the market where we believe our analytical effort and the pursuit of genuinely transformational growth can be better exploited. The focus at time of initial investment is on younger, more immature companies that are global and exhibiting strong growth.
It is important to remember that big successful ideas typically start out as small, tentative and unproven. Early iterations are easy to dismiss as unworkable but experimentation with, and evolution of, an initially raw concept can, over time, yield huge commercial relevance. Our philosophy involves weighing up what is proven and tangible alongside what has promise and long term potential. Integral to this approach is recognising the role of innovation in business development; it provides the fuel for business creation, growth and long term competitive differentiation. Consequently, identifying companies that value innovation, having both a cultural acceptance of it and a means to develop commercial opportunities around it, is fundamental to our investment approach.
Growth companies, especially those which are young and hard to model, are difficult businesses to value. The wide range of potential outcomes and profitability that is heavily skewed to future years is a combination of uncertainties that many investors struggle with. We do not have all the answers but by approaching the challenge with a genuine long term perspective, accepting a degree of uncertainty, backing robust innovation and entrepreneurial management, we believe we are well positioned to identify the smaller businesses most likely to shape the world in which we live. As technological advancements encroach into an increasing pool of opportunity, the rate and extent of growth that a small business can achieve, in a relatively short period of time, is almost unrecognisable to that of a few years ago. Innovative smaller businesses that are unburdened by the legacy of historic business practices, or those willing to adapt to change, are best positioned to harness this opportunity.
Portfolio and Equity Performance as at 31 October 2017
|
Name |
Business |
Country |
Fair value 2017 £'000 |
% of total assets |
Performance† |
Fair value 2016 £'000 |
|
|
Absolute % |
Relative % |
||||||
|
Alnylam |
Therapeutic gene silencing |
|
|
|
|
|
|
|
Pharmaceuticals |
|
USA |
22,449 |
5.8 |
214.4 |
172.1 |
6,552 |
|
MarketAxess |
Electronic bond trading platform |
USA |
21,640 |
5.6 |
6.7 |
(7.6) |
20,394 |
|
LendingTree |
Online loan marketplace |
USA |
17,178 |
4.4 |
207.8 |
166.4 |
4,582 |
|
IPG Photonics |
High-power fibre lasers |
USA |
14,208 |
3.7 |
101.7 |
74.6 |
7,770 |
|
Tesla Inc |
Electric cars, autonomous driving and solar energy |
USA |
11,209 |
2.9 |
54.2 |
33.4 |
7,271 |
|
iRobot |
Domestic and military robots |
USA |
9,244 |
2.4 |
21.8 |
5.4 |
7,585 |
|
Wayfair |
Online furniture and homeware retailer |
USA |
8,964 |
2.3 |
92.8 |
66.9 |
4,652 |
|
IP Group |
Intellectual property commercialisation |
UK |
8,079 |
2.1 |
(1.7) |
(14.9) |
8,238 |
|
Temenos Group |
Banking software |
Switzerland |
7,955 |
2.1 |
65.6 |
43.3 |
4,834 |
|
Renishaw |
Measurement and calibration equipment |
UK |
6,963 |
1.8 |
94.2 |
68.1 |
3,629 |
|
AeroVironment |
Small unmanned aircraft systems |
USA |
6,774 |
1.7 |
96.1 |
69.7 |
3,456 |
|
Yoox Net-A-Porter |
Online luxury fashion retailer |
Italy |
6,564 |
1.7 |
20.7 |
4.5 |
2,192 |
|
GrubHub |
Online and mobile platform for restaurant pick-up and delivery orders |
USA |
6,432 |
1.7 |
47.2 |
27.4 |
4,371 |
|
Ocado |
Online food retailer |
UK |
5,676 |
1.5 |
4.6 |
(9.5) |
5,431 |
|
Zillow Class C |
US online real estate portal |
USA |
5,646 |
1.5 |
13.8 |
(1.6) |
4,961 |
|
Galapagos |
Clinical stage biotechnology company |
Belgium |
5,640 |
1.5 |
46.3 |
26.6 |
3,855 |
|
Genus |
Animal breeding services |
UK |
5,180 |
1.3 |
26.8 |
9.7 |
4,133 |
|
Financial Engines |
Investment advisory firm |
USA |
5,165 |
1.3 |
20.8 |
4.5 |
4,295 |
|
Start Today |
Internet fashion retailer |
Japan |
5,083 |
1.3 |
43.8 |
24.4 |
4,286 |
|
Cellectis |
Biotech focused on genetic engineering |
France |
4,942 |
1.3 |
79.2 |
55.1 |
2,177 |
|
Baozun SPN ADR |
Chinese e-commerce solution provider |
USA |
4,569 |
1.2 |
98.6* |
88.1* |
- |
|
Exact Sciences |
Provides of non-invasive molecular test for early cancer detection |
USA |
4,552 |
1.2 |
31.2* |
27.4* |
- |
|
InfoMart Corp |
Internet platform for restaurant supplies |
Japan |
4,388 |
1.1 |
17.0 |
1.3 |
3,777 |
|
Xero |
Cloud-based accounting software |
New Zealand |
4,255 |
1.1 |
70.5 |
47.6 |
2,439 |
|
Faro Technologies |
Designs and develops measurement devices |
USA |
4,204 |
1.1 |
42.0 |
22.8 |
2,951 |
|
Mulesoft 'A' |
Enterprise software developer |
USA |
4,192 |
1.1 |
9.7* |
6.5* |
- |
|
Morphosys |
Therapeutic antibodies |
Germany |
4,180 |
1.1 |
80.6 |
56.3 |
2,315 |
|
Oxford Nanopore Technologies‡ |
Novel DNA sequencing technology |
UK |
4,176 |
1.1 |
16.2 |
0.6 |
3,306 |
|
Puretech Health |
IP commercialisation focused on health care |
UK |
4,154 |
1.1 |
(8.3) |
(20.6) |
3,608 |
|
Novocure |
Manufacturer of medical devices for cancer treatment |
USA |
4,136 |
1.1 |
22.3* |
22.3* |
- |
|
Dialog Semiconductor |
Analogue chips for mobile phones |
Germany |
3,992 |
1.0 |
16.6 |
0.9 |
3,432 |
|
Seattle Genetics |
Antibody conjugates based biotechnology |
USA |
3,947 |
1.0 |
9.0 |
(5.7) |
3,620 |
|
Trupanion |
Pet health insurance provider |
USA |
3,923 |
1.0 |
59.9 |
38.4 |
2,452 |
|
Name |
Business |
Country |
Fair value 2017 £'000 |
% of total assets |
Performance† |
Fair value 2016 £'000 |
|
|
Absolute % |
Relative % |
||||||
|
Chegg |
Online educational company |
USA |
3,899 |
1.0 |
3.0* |
2.9* |
- |
|
Stamps.com |
Website for postage services |
USA |
3,884 |
1.0 |
111.3 |
82.8 |
3,379 |
|
ASOS |
Online fashion retailer |
UK |
3,874 |
1.0 |
8.4 |
(6.2) |
3,570 |
|
4D Pharma |
Bacteria derived novel therapeutics |
UK |
3,748 |
1.0 |
(51.3) |
(57.9) |
7,930 |
|
Xeros Technology Group |
Commercial laundry manufacturer |
UK |
3,733 |
1.0 |
8.3 |
(6.3) |
3,479 |
|
National Instruments Corp |
Instrumentation equipment used in research and testing |
USA |
3,706 |
1.0 |
50.4 |
30.2 |
2,516 |
|
Cosmos Pharmaceuticals |
Therapies for gastrointestinal diseases |
Italy |
3,643 |
0.9 |
(7.5) |
(19.9) |
3,977 |
|
Genmab |
Therapeutic antibody company |
Denmark |
3,636 |
0.9 |
12.7 |
(2.5) |
3,241 |
|
MonotaRO |
Online business supplies |
Japan |
3,586 |
0.9 |
3.9 |
(10.1) |
3,475 |
|
SEEK |
Online recruitment portal |
Australia |
3,461 |
0.9 |
19.0 |
2.9 |
3,647 |
|
Lifull (formerly Next) |
Provides online property information |
Japan |
3,438 |
0.9 |
(15.9) |
(27.2) |
4,113 |
|
Foundation Medicine |
Develops cancer diagnostic technology |
USA |
3,389 |
0.9 |
82.3 |
57.7 |
1,859 |
|
STAAR Surgical |
Develops and manufactures high margin visual implants |
USA |
3,142 |
0.8 |
47.8* |
23.4* |
- |
|
M3 |
Online medical database |
Japan |
3,131 |
0.8 |
(10.0) |
(22.2) |
3,492 |
|
Ambarella |
Video compression and image processing semiconductors |
USA |
3,124 |
0.8 |
(3.4)* |
(8.5)* |
- |
|
Kingdee International Software |
Enterprise management software |
China |
3,081 |
0.8 |
21.3 |
4.9 |
2,541 |
|
Victrex |
High-performance thermo- plastics |
UK |
3,048 |
0.8 |
40.4 |
21.5 |
2,227 |
|
CEVA |
Licenses DSP-based platforms applications to the semiconductor industry |
USA |
2,998 |
0.8 |
29.0* |
22.3* |
- |
|
Peptidream |
Drug discovery platform |
Japan |
2,998 |
0.8 |
12.6 |
(2.5) |
2,661 |
|
Splunk |
Data diagnostics |
USA |
2,913 |
0.8 |
2.8 |
(11.0) |
3,819 |
|
Teladoc |
Telemedicine services provider |
USA |
2,912 |
0.7 |
46.8* |
36.8* |
- |
|
Digital Garage |
Internet business incubator |
Japan |
2,902 |
0.7 |
4.9 |
(9.2) |
2,788 |
|
Suss Microtec |
Fabrication and inspection equipment |
Germany |
2,875 |
0.7 |
152.5 |
118.5 |
1,146 |
|
Rightmove |
UK online property portal |
UK |
2,865 |
0.7 |
12.7 |
(2.5) |
2,577 |
|
Zillow Class A |
US online real estate portal |
USA |
2,825 |
0.7 |
15.0 |
(0.5) |
2,458 |
|
Xaar |
Ink jet printing technology |
UK |
2,794 |
0.7 |
19.6 |
3.5 |
2,410 |
|
Imagination Technologies |
Graphics semiconductor designer |
UK |
2,743 |
0.7 |
(20.1) |
(30.9) |
3,435 |
|
Horizon Discovery |
Customised cell lines to aid drug discovery |
UK |
2,596 |
0.7 |
98.4 |
71.7 |
1,303 |
|
SDL |
Language translation services |
UK |
2,591 |
0.7 |
25.3 |
8.5 |
2,093 |
|
Basware |
Software solutions for financial transactions |
Finland |
2,477 |
0.6 |
23.4 |
6.8 |
2,405 |
|
Dexcom |
Real time blood glucose monitoring |
USA |
2,470 |
0.6 |
(47.2) |
(54.3) |
4,676 |
|
Stratasys |
3D Printer manufacturer |
USA |
2,451 |
0.6 |
8.5 |
(6.1) |
1,794 |
|
Pacira Pharmaceuticals |
Development, commercialisation and manufacturing of proprietary pharmaceutical products |
USA |
2,414 |
0.6 |
(7.3) |
(19.8) |
2,605 |
|
Mindbody CL |
Business management software for the wellness sector |
USA |
2,308 |
0.6 |
9.0* |
(0.1)* |
- |
|
Codexis |
Manufacturer of custom industrial enzymes |
USA |
2,295 |
0.6 |
12.0 |
(3.1) |
2,067 |
|
Name |
Business |
Country |
Fair value 2017 £'000 |
% of total assets |
Performance† |
Fair value 2016 £'000 |
|
|
Absolute % |
Relative % |
||||||
|
Spire Global‡ |
Manufacturer of small, low cost satellites |
USA |
2,259 |
0.6 |
(3.6)* |
(6.6)* |
- |
|
Digimarc |
Digital watermarking technology |
USA |
2,188 |
0.6 |
3.9 |
(10.1) |
2,109 |
|
Adaptimmune Therapeutics ADR |
Clinical stage biopharmaceutical company |
UK |
2,186 |
0.6 |
65.9 |
43.6 |
1,321 |
|
NuCana SPN ADR |
An oncology-focused biotechnology company |
UK |
2,156 |
0.6 |
(23.7)* |
(26.0)* |
- |
|
Penumbra |
Manufacturer of a novel blood clot extraction technology |
USA |
2,130 |
0.5 |
9.5* |
6.3* |
- |
|
Oxford Instruments |
Produces advanced Instrumentation equipment |
UK |
2,121 |
0.5 |
42.6 |
23.4 |
1,509 |
|
Ellie Mae |
Provides technology solutions to automate mortgage origination process |
USA |
2,032 |
0.5 |
(21.9) |
(32.4) |
2,602 |
|
Ceres Power Holding |
Developer of fuel cells |
UK |
1,995 |
0.5 |
29.8 |
12.3 |
1,506 |
|
Catapult Group International |
Sports analytics focused on optimising athlete performance |
Australia |
1,961 |
0.5 |
8.1* |
4.5* |
- |
|
Benefitfocus |
Cloud-based benefits software provider |
USA |
1,947 |
0.5 |
(23.6)* |
(26.8)* |
- |
|
Unity Biotechnology Inc Series B Pref. ‡ |
Biotechnology company seeking to develop anti ageing therapies |
USA |
1,506 |
0.4 |
(8.1) |
(20.4) |
1,638 |
|
Tissue Regenix |
Regenerative medical devices |
UK |
1,430 |
0.4 |
(48.0) |
(55.0) |
1,770 |
|
Zumtobel |
Commercial lighting |
Austria |
1,350 |
0.3 |
(9.3) |
(21.5) |
1,499 |
|
Aduro Biotechnology |
Immunotherapy services provider |
USA |
1,302 |
0.3 |
(32.2) |
(41.3) |
1,145 |
|
China Financial Services |
Small and medium-sized enterprises lending in China |
China |
1,276 |
0.3 |
(1.1) |
(14.4) |
1,334 |
|
Ricardo |
Automotive engineer |
UK |
1,123 |
0.3 |
(9.6) |
(21.8) |
1,261 |
|
Avacta Group |
Analytical reagents and instrumentation |
UK |
1,087 |
0.3 |
(25.7) |
(35.7) |
1,465 |
|
Summit Therapeutics |
Drug discovery and development |
UK |
1,065 |
0.3 |
(22.5) |
(32.9) |
799 |
|
C4X Discovery Holdings |
Rational drug design and optimisation |
UK |
851 |
0.2 |
(31.1) |
(40.4) |
891 |
|
Acacia Research |
Patent licenser |
USA |
745 |
0.2 |
(29.3) |
(38.8) |
1,065 |
|
Nanoco |
Quantum dot manufacturer |
UK |
732 |
0.2 |
(45.6) |
(52.9) |
1,365 |
|
Thin Film Electronics |
Develops printed, rewritable memory media |
Norway |
519 |
0.1 |
(45.8) |
(53.1) |
960 |
|
Foamix Pharmaceuticals |
Drug reformulation technology |
Israel |
510 |
0.1 |
(29.3) |
(38.9) |
724 |
|
Ilika |
Discovery and development of materials for mass market applications |
UK |
466 |
0.1 |
(53.6) |
(59.9) |
1,007 |
|
Sarine Technologies |
Systems for diamond grading and cutting |
Singapore |
462 |
0.1 |
(42.1) |
(49.9) |
820 |
|
hVIVO (formerly Retroscreen Virology) |
Outsourced pre-clinical analytical services |
UK |
400 |
0.1 |
(67.7) |
(72.1) |
1,284 |
|
Applied Graphene Materials |
Manufactures graphene nanoplatelets |
UK |
242 |
0.1 |
(76.4) |
(79.6) |
516 |
|
Velocys |
Gas to liquid technology |
UK |
162 |
0.0 |
2.2 |
(11.6) |
162 |
|
GI Dynamics |
Develops and markets medical devices |
Australia |
34 |
0.0 |
94.1 |
68.0 |
18 |
|
Name |
Business |
Country |
Fair value 2017 £'000 |
% of total assets |
Performance† |
Fair value 2016 £'000 |
|
|
Absolute % |
Relative % |
||||||
|
China Lumena New Material |
Mines, processes and manufactures natural thenardite products |
China |
0 |
0.0 |
0.0 |
(15.6) |
0 |
|
Ensogo |
South East Asian e-commerce |
Australia |
0 |
0.0 |
0.0 |
(15.6) |
0 |
|
Total equities |
|
|
383,846 |
99.0 |
|
|
|
|
Net liquid assets |
|
|
4,017 |
1.0 |
|
|
|
|
Total assets at fair value# |
|
387,863 |
100.0 |
|
|
|
|
† Absolute and relative performance has been calculated on a total return basis over the period 1 November 2016 to 31 October 2017 (performance figures for investments bought during the period are part-period returns - see note below). Absolute performance is in sterling terms; relative performance is against S&P Global Small Cap Index (in sterling terms).
* Figures relate to part-period returns where equity has been purchased during the period.
# Before deductions of loan
‡ Denotes unlisted security.
Source: Baillie Gifford/StatPro and relevant underlying index providers. See disclaimer at the end of this announcement.
Past performance is not a guide to future performance.
Distribution of total assets* by industry
|
|
|
Industry Analysis 31 October 2017 % of total assets* |
|
Portfolio Weightings (relative to comparative index†) at 31 October 2017 % points overweight/(underweight) |
|
Equities: |
Biotechnology |
18.4 |
|
15.4 |
|
|
Internet Software and Services |
10.1 |
|
7.9 |
|
|
Capital Markets |
9.0 |
|
6.4 |
|
|
Electronic Equipment, Instruments and Components |
8.6 |
|
5.2 |
|
|
Software |
7.8 |
|
4.8 |
|
|
Internet and Direct Marketing Retail |
7.8 |
|
7.3 |
|
|
Thrifts and Mortgage Finance |
4.4 |
|
3.6 |
|
|
Semiconductors and Semiconductor Equipment |
4.2 |
|
1.7 |
|
|
Health Care Equipment and Supplies |
3.3 |
|
1.1 |
|
|
Life Sciences Tools and Services |
3.0 |
|
2.1 |
|
|
Automobiles |
2.9 |
|
2.8 |
|
|
Pharmaceuticals |
2.6 |
|
1.0 |
|
|
Household Durables |
2.4 |
|
0.6 |
|
|
Aerospace and Defence |
1.7 |
|
0.3 |
|
|
Chemicals |
1.5 |
|
(2.0) |
|
|
Technology Hardware, Storage and Peripherals |
1.4 |
|
1.0 |
|
|
Professional Services |
1.4 |
|
0.0 |
|
|
Machinery |
1.1 |
|
(3.6) |
|
|
Health Care Technology |
1.0 |
|
0.6 |
|
|
Diversified Consumer Services |
1.0 |
|
0.3 |
|
|
Insurance |
1.0 |
|
(1.9) |
|
|
Trading Companies and Distributors |
0.9 |
|
(0.6) |
|
|
Media |
0.9 |
|
(1.1) |
|
|
Electrical Equipment |
0.9 |
|
0.0 |
|
|
Health Care Providers and Services |
0.7 |
|
(0.8) |
|
|
IT Services |
0.7 |
|
(1.8) |
|
|
Consumer Finance |
0.3 |
|
(0.4) |
|
|
Energy Equipment and Services |
0.0 |
|
(1.2) |
|
|
Net Liquid Assets |
1.0 |
|
|
|
Total assets* |
100.0 |
|
|
|
|
* Total assets before deduction of bank loan. |
|
|
|
|
† S&P Global Small Cap Index (in sterling terms). Weightings exclude industries where the Company has no exposure. See disclaimer at the end of this announcement.
|
Distribution of total assets |
Geographical Analysis
|
|
31 October 2017 % |
31 October 2016 % |
|
|
North America |
|
56.1 |
45.5 |
|
|
USA |
56.1 |
45.5 |
|
Europe |
|
32.6 |
37.2 |
|
|
United Kingdom |
20.3 |
25.4 |
|
|
Eurozone |
9.1 |
8.5 |
|
|
Developed Europe (non euro) |
3.2 |
3.3 |
|
Africa and Middle East |
|
0.0 |
0.5 |
|
|
UAE |
0.0 |
0.5 |
|
Asia |
|
7.8 |
10.6 |
|
|
Japan |
6.6 |
8.3 |
|
|
China |
1.1 |
1.3 |
|
|
Hong Kong |
0.0 |
0.7 |
|
|
Singapore |
0.1 |
0.0 |
|
Australasia |
|
2.5 |
2.0 |
|
|
Australia |
1.4 |
1.2 |
|
|
New Zealand |
1.1 |
0.8 |
|
Total equities |
99.0 |
95.8 |
|
|
Net liquid assets |
1.0 |
4.2 |
|
|
Total assets* |
100.0 |
100.0 |
|
Sectoral Analysis
|
|
31 October 2017 % |
|
31 October 2016 % |
|
|
Consumer Discretionary |
|
15.0 |
|
15.2 |
|
Energy |
|
0.0 |
|
0.1 |
|
Financials |
|
14.7 |
|
13.9 |
|
Health Care |
|
29.0 |
|
26.1 |
|
Industrials |
|
6.0 |
|
7.0 |
|
Information Technology |
|
32.8 |
|
31.5 |
|
Materials |
|
1.5 |
|
2.0 |
|
Net Liquid Assets |
|
1.0 |
|
4.2 |
|
Total assets* |
|
100.0 |
|
100.0 |
* Total assets before deduction of loans
|
Investment Changes |
|
|
Valuation at 31 October 2016 £'000 |
Net acquisition/ (disposals) £'000 |
Appreciation/ (depreciation) £'000 |
Valuation at 31 October 2017 £'000 |
|
Equities: |
|
|
|
|
|
North America |
|
|
|
|
|
USA |
138,997 |
12,280 |
65,994 |
217,271 |
|
Europe |
|
|
|
|
|
United Kingdom |
77,658 |
(682) |
1,260 |
78,236 |
|
Eurozone |
25,963 |
163 |
9,537 |
35,663 |
|
Developed Europe (non euro) |
10,017 |
(250) |
2,853 |
12,620 |
|
Africa and the Middle East |
|
|
|
|
|
UAE |
1,638 |
(1,515) |
(123) |
- |
|
Asia |
|
|
|
|
|
Japan |
25,515 |
(1,559) |
1,570 |
25,526 |
|
China |
3,875 |
- |
482 |
4,357 |
|
Hong Kong |
2,212 |
(4,008) |
1,796 |
- |
|
Singapore |
820 |
- |
(358) |
462 |
|
Australasia |
|
|
|
|
|
Australia |
3,665 |
1,037 |
754 |
5,456 |
|
New Zealand |
2,439 |
- |
1,816 |
4,255 |
|
Total equities |
292,799 |
5,466 |
85,581 |
383,846 |
|
Net liquid assets |
12,721 |
(7,644) |
(1,060) |
4,017 |
|
Total assets |
305,520 |
(2,178) |
84,521 |
387,863 |
Key Performance Indicators
The key performance indicators (KPIs) used to measure the progress and performance of the Company over time are established industry measures and are as follows:
¾ the movement in net asset value per ordinary share compared to the comparative index;
¾ the movement in the share price;
¾ the premium/(discount) of the share price to the net asset value per share; and
¾ the ongoing charges.
An explanation of these measures can be found in the Glossary of Terms, see note 9.
The one, five and ten year records for the KPIs can be found on pages 4, 5 and 6 of the Annual Report and Financial Statements respectively.
Future Developments of the Company
The outlook for the Company for the next 12 months is set out in the Chairman's Statement and the Managers' Review.
Capital Structure
At the year end the Company's share capital consisted of 49,004,319 fully paid ordinary shares of 5p each. The Company currently has powers to buy back shares at a discount to net asset value per share (NAV) for cancellation or retention as treasury shares as well as to issue shares/sell treasury shares at a premium to NAV.
Related Party Transactions
Details of the management contract are set out in the Directors' Report on page 20. The management fee payable to the Managers by the Company for the year, as disclosed in note 3 in the Annual Report and Financial Statements, was £2,141,000 (2016 - £1,743,000) of which £585,000 (2016 - £471,000) was outstanding at the year end, as disclosed in note 11 in the Annual Report and Financial Statements.
The Directors' fees for the year are detailed in the Directors' Remuneration Report on page 28 of the Annual Report and Financial Statements.
No Director has a contract of service with the Company. During the year no Director was interested in any contract or other matter requiring disclosure under section 412 of the Companies Act 2006.
Management Fee Arrangements
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.
The Investment Management Agreement sets out the matters over which the Managers have authority in accordance with the policies and directions of, and subject to restrictions imposed by, the Board. The Management Agreement is terminable on not less than three months' notice. Compensation fees would only be payable in respect of the notice period if termination by the Company were to occur sooner.
With effect from 1 September 2016 the annual management fee is 0.95% on the first £50m of net assets, 0.65% on the next £200m of net assets and 0.55% on the remaining net assets. Prior to 1 September 2016 the fee was 0.95% on the first £50m of net assets and 0.65% on the remaining net assets. Management fees are calculated and payable quarterly. The Board is of the view that calculating the fee with reference to performance would be unlikely to exert a positive influence on performance.
The details of the management fee are as follows:
|
|
2017 £'000 |
|
2016 £'000 |
|
|
|
|
|
|
Investment management fee |
2,141 |
|
1,743 |
|
|
2,141 |
|
1,743 |
Principal Risks
As explained on pages 24 and 25 of the Annual Report and Financial Statements there is a process for identifying, evaluating and managing the risks faced by the Company on a regular basis. The Directors have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. A description of these risks and how they are being managed or mitigated is set out below.
Financial Risk - the Company's assets consist mainly of listed securities and its principal financial risks are therefore market related and include market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. An explanation of those risks and how they are managed is contained in note 17 to the Financial Statements on pages 47 to 51. As oversight of this risk, the Board considers at each meeting the composition and diversification of the portfolio by geographies, sectors and capitalisation are considered along with sales and purchases of investments. Individual investments are discussed with the Managers as well as the Managers' general views on the various investment markets and sectors. A strategy meeting is held annually.
Investment Strategy Risk - pursuing an investment strategy to fulfil the Company's objective which the market perceives to be unattractive or inappropriate, or the ineffective implementation of an attractive or appropriate strategy, may lead to reduced returns for shareholders and, as a result, a decreased demand for the Company's shares. This may lead to the Company's shares trading at a widening discount to their Net Asset Value. To mitigate this risk, the Board regularly reviews and monitors the Company's objective and investment policy and strategy, the investment portfolio and its performance, the level of discount/premium to Net Asset Value at which the shares trade and movements in the share register.
Discount Risk - the discount/premium at which the Company's shares trade relative to its Net Asset Value can change. The risk of a widening discount is that it may undermine investor confidence in the Company. The Board monitors the level of discount/premium at which the shares trade and the Company has authority to buy back its existing shares or issue shares (including authority to sell shares held in treasury), when deemed by the Board to be in the best interests of the Company and its shareholders.
Regulatory Risk - failure to comply with applicable legal and regulatory requirements such as the tax rules for investment trust companies, the UKLA Listing Rules and the Companies Act could lead to suspension of the Company's Stock Exchange listing, financial penalties, a qualified audit report or the Company being subject to tax on capital gains. To mitigate this risk, Baillie Gifford's Business Risk, Internal Audit and Compliance Departments provide regular reports to the Audit and Management Engagement Committee on Baillie Gifford's monitoring programmes. Major regulatory change could impose disproportionate compliance burdens on the Company. In such circumstances representation is made to ensure that the special circumstances of investment trusts are recognised. Shareholder documents and announcements, including the Company's published Interim and Annual Report and Financial Statements, are subject to stringent review processes, and procedures are in place to ensure adherence to the Transparency Directive and the Market Abuse Directive with reference to inside information.
Custody and Depositary Risk - safe custody of the Company's assets may be compromised through control failures by the Depositary, including breaches of cyber security. To monitor potential risk, the Audit and Management Engagement Committee receives six monthly reports from the Depositary confirming safe custody of the Company's assets held by the Custodian. Cash and portfolio holdings are independently reconciled to the Custodian's records by the Managers. In addition, the existence of assets is subject to annual external audit and the Custodian's audited internal controls reports are reviewed by Baillie Gifford's Business Risk Department and a summary of the key points is reported to the Audit and Management Engagement Committee and any concerns investigated.
Small Company Risk - the Company has investments in smaller, immature companies which are generally considered higher risk as changes in their share prices may be greater and the shares may be harder to sell. Smaller, immature companies may do less well in periods of unfavourable economic conditions. To mitigate this risk, the Board reviews the investment portfolio at each meeting and discusses the merits and characteristics of individual investments with the Managers. A spread of risk is achieved by holding stocks classified across at least fifteen industries and six countries.
Unlisted Investments - the Company's risk could be increased by its investment in unlisted investments. These assets may be more difficult to buy or sell, so changes in their prices may be greater. To mitigate this risk, the Board considers the unlisted investments in the context of the overall investment strategy and provides guidance to the Managers on the maximum exposure to unlisted investments.
Operational Risk - failure of Baillie Gifford's systems or those of other third party service providers could lead to an inability to provide accurate reporting and monitoring or a misappropriation of assets. To mitigate this risk, Baillie Gifford has a comprehensive business continuity plan which facilitates continued operation of the business in the event of a service disruption or major disaster. The Audit and Management Engagement Committee reviews Baillie Gifford's Report on Internal Controls and the reports by other key third party providers are reviewed by Baillie Gifford on behalf of the Board.
Leverage Risk - the Company may borrow money for investment purposes. If the investments fall in value, any borrowings will magnify the impact of this loss. If borrowing facilities are not renewed, the Company may have to sell investments to repay borrowings. To mitigate this risk, all borrowings require the prior approval of the Board and leverage levels are discussed by the Board and Managers at every meeting. Covenant levels are monitored regularly. The majority of the Company's investments are in quoted securities that are readily realisable. Further information on leverage can be found in note 18 on page 51 of the Annual Report and Financial Statements and the Glossary of Terms at the end of this announcement.
Political and Associated Economic Risk - the Board is of the view that political change in areas in which the Company invests or may invest may have practical consequences for the Company. Political developments are closely monitored and considered by the Board. The Board has noted the results of the UK referendum on continuing membership of the European Union. Whilst there is considerable uncertainty at present, the Board will continue to monitor developments as they occur and assess the potential consequences for the Company's future activities.
Viability Statement
In accordance with provision C.2.2 of the UK Corporate Governance Code the Directors have assessed the prospects of the Company over a minimum period of five years. The Directors continue to believe this period to be appropriate as it is reflective of the longer term investment strategy of the Company, and over which, in the absence of any adverse change to the regulatory environment and the favourable tax treatment afforded to UK investment trusts, they do not expect there to be any significant change to the current principal risks facing the Company nor to the adequacy of the mitigating controls in place. Also the Directors do not envisage any change in strategy or objectives or any events that would prevent the Company from continuing to operate over that period.
In considering the viability of the Company, the Directors have conducted a robust assessment of each of the Company's principal risks and uncertainties detailed below and in particular the impact of a significant fall in the global equity markets on the value of the Company's investment portfolio. All of the key operations required by the Company are outsourced to third party providers and alternative providers could be engaged at relatively short notice if necessary. The Directors have also considered the Company's leverage and liquidity in the context of the fixed rate loan which is due to expire in September 2019, the income and expenditure projections and the fact that the Company's investments comprise mainly readily realisable quoted equity securities which can be sold to meet funding requirements if necessary.
Based on the Company's processes for monitoring operating costs, share price discount/premium, the Managers' compliance with the investment objective, asset allocation, the portfolio risk profile, leverage, counterparty exposure, liquidity risk and financial controls, the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five years as a minimum.
Going Concern
In accordance with the Financial Reporting Council's guidance on going concern and liquidity risk, the Directors have undertaken a rigorous review of the Company's ability to continue as a going concern. An explanation of the Company's principal risks and how they are managed is set out above, and contained in note 17 to the Financial Statements.
The Company's assets, the majority of which are investments in quoted securities which are readily realisable, exceed its liabilities significantly. All borrowings require the prior approval of the Board. Gearing levels and compliance with borrowing covenants are reviewed by the Board on a regular basis.
Accordingly, the Financial Statements have been prepared on the going concern basis as it is the Directors' opinion, having assessed the principal risks and other matters set out in the Viability Statement above, that the Company will continue in operational existence for a period of at least twelve months from the date of approval of these Financial Statements.
Financial Instruments
As an Investment Trust, the Company invests in equities and makes other investments so as to meet its investment objective of achieving long term capital growth. In pursuing its investment objective, the Company is exposed to various types of risk that are associated with the financial instruments and markets in which it invests.
These risks are categorised here as market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk.
The Board monitors closely the Company's exposures to these risks but does so in order to reduce the likelihood of a permanent loss of capital rather than to minimise the short term volatility. The risk management policies and procedures outlined in this note have not changed substantially from the previous accounting period.
Market Risk
The fair value or future cash flows of a financial instrument or other investment held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - currency risk, interest rate risk and other price risk. The Board of Directors reviews and agrees policies for managing these risks and the Company's Investment Managers both assess the exposure to market risk when making individual investment decisions and monitor the overall level of market risk across the investment portfolio on an ongoing basis.
(i) Currency Risk
Certain of the Company's assets, liabilities and income are denominated in currencies other than sterling (the Company's functional currency and that in which it reports its results). Consequently, movements in exchange rates may affect the sterling value of those items.
The Managers monitor the Company's exposure to foreign currencies and report to the Board on a regular basis. The Managers assess the risk to the Company of the foreign currency exposure by considering the effect on the Company's net asset value and income of a movement in the rates of exchange to which the Company's assets, liabilities, income and expenses are exposed. However, the country in which a company is listed is not necessarily where it earns its profits. The movement in exchange rates on overseas earnings may have a more significant impact upon a company's valuation than a simple translation of the currency in which the company is quoted.
Foreign currency borrowings can limit the Company's exposure to anticipated future changes in exchange rates which might otherwise adversely affect the value of the portfolio of investments.
Exposure to currency risk through asset allocation, which is calculated by reference to the currency in which the asset or liability is quoted, is shown below.
|
At 31 October 2017 |
Investments £'000 |
|
Cash and deposits £'000 |
|
Bank Loan £'000 |
|
Other debtors and creditors* £'000 |
|
Net exposure £'000 |
|
US dollar |
222,123 |
|
4,667 |
|
(19,278) |
|
(54) |
|
207,458 |
|
Yen |
25,526 |
|
- |
|
- |
|
17 |
|
25,543 |
|
Euro |
32,020 |
|
- |
|
(8,246) |
|
19 |
|
23,793 |
|
Swiss franc |
11,598 |
|
- |
|
- |
|
- |
|
11,598 |
|
Australian dollar |
5,456 |
|
|
|
- |
|
- |
|
5,456 |
|
Hong Kong dollar |
4,357 |
|
- |
|
- |
|
- |
|
4,357 |
|
New Zealand dollar |
4,255 |
|
- |
|
- |
|
- |
|
4,255 |
|
Danish krone |
3,636 |
|
|
|
- |
|
- |
|
3,636 |
|
Norwegian krone |
519 |
|
- |
|
- |
|
- |
|
519 |
|
Singapore dollar |
462 |
|
- |
|
- |
|
- |
|
462 |
|
Total exposure to currency risk |
309,952 |
|
4,667 |
|
(27,524) |
|
(18) |
|
287,077 |
|
Sterling |
73,894 |
|
19 |
|
(7,500) |
|
(651) |
|
65,762 |
|
|
383,846 |
|
4,686 |
|
(35,024) |
|
669 |
|
352,839 |
* Includes net non-monetary assets of £16,000.
|
At 31 October 2016 |
Investments £'000 |
|
Cash and deposits £'000 |
|
Bank Loan £'000 |
|
Other debtors and creditors* £'000 |
|
Net exposure £'000 |
|
US dollar |
142,680 |
|
13,160 |
|
(20,968) |
|
(57) |
|
134,815 |
|
Yen |
25,515 |
|
- |
|
- |
|
14 |
|
25,529 |
|
Euro |
21,986 |
|
- |
|
(8,440) |
|
33 |
|
13,579 |
|
Swiss franc |
9,069 |
|
- |
|
- |
|
- |
|
9,069 |
|
Australian dollar |
3,665 |
|
- |
|
- |
|
- |
|
3,665 |
|
Hong Kong dollar |
6,087 |
|
- |
|
- |
|
- |
|
6,087 |
|
New Zealand dollar |
2,439 |
|
- |
|
- |
|
- |
|
2,439 |
|
Danish krone |
3,241 |
|
- |
|
- |
|
- |
|
3,241 |
|
Norwegian krone |
960 |
|
- |
|
- |
|
- |
|
960 |
|
Singapore dollar |
820 |
|
- |
|
- |
|
- |
|
820 |
|
Total exposure to currency risk |
216,462 |
|
13,160 |
|
(29,408) |
|
(10) |
|
200,204 |
|
Sterling |
76,337 |
|
84 |
|
(7,500) |
|
(513) |
|
68,408 |
|
|
292,799 |
|
13,244 |
|
(36,908) |
|
(523) |
|
268,612 |
* Includes net non-monetary assets of £36,000.
Currency Risk Sensitivity
At 31 October 2017, if sterling had strengthened by 5% in relation to all currencies, with all other variables held constant, total net assets and total return on ordinary activities would have decreased by the amounts shown below. A 5% weakening of sterling against all currencies, with all other variables held constant, would have had an equal but opposite effect on the Financial Statement amounts. The analysis is performed on the same basis for 2016.
|
|
2017 £'000 |
|
2016 £'000 |
|
US dollar |
10,373 |
|
6,741 |
|
Yen |
1,277 |
|
1,277 |
|
Euro |
1,189 |
|
679 |
|
Swiss franc |
580 |
|
453 |
|
Australian dollar |
273 |
|
183 |
|
Hong Kong dollar |
218 |
|
304 |
|
New Zealand dollar |
213 |
|
122 |
|
Danish krone |
182 |
|
162 |
|
Norwegian Krone |
26 |
|
48 |
|
Singapore dollar |
23 |
|
41 |
|
|
14,354 |
|
10,010 |
(ii) Interest Rate Risk
Interest rate movements may affect directly:
¾ the fair value of investments in fixed interest rate securities;
¾ the level of income receivable on cash deposits;
¾ the fair value of fixed-rate borrowings; and
¾ the interest payable on any variable rate borrowings.
Interest rate movements may also impact upon the market value of the Company's investments outwith fixed income securities. The effect of interest rate movements upon the earnings of a company may have a significant impact upon the valuation of that company's equity.
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment decisions and when entering borrowing agreements.
The Board reviews on a regular basis the amount of investments in cash and fixed income securities and the income receivable on cash deposits, floating rate notes and other similar investments.
The Company finances part of its activities through borrowings at approved levels. The amount of such borrowings and the approved levels are monitored and reviewed regularly by the Board.
The interest rate risk profile of the Company's financial assets and liabilities at 31 October is shown below:
Financial Assets
The Company's interest rate risk exposure on its financial assets at 31 October 2017 amounted to £4,686,000 (2016 - £13,244,000), comprising of its cash and short term deposits.
The cash deposits generally comprise overnight call or short term money market deposits of less than one month which are repayable on demand. The benchmark rate which determines the interest payments received on cash balances is the bank base rate.
Financial Liabilities
The interest risk profile of the Company's financial liabilities and the maturity profile of the undiscounted future cash flows in respect of the Company's contractual financial liabilities at 31October are shown below.
Interest Rate Risk Profile
|
|
2017 £'000 |
2016 £'000 |
|
The interest rate risk profile of the Company's financial liabilities at 31 October was: |
||
|
Fixed rate - Sterling denominated |
7,500 |
7,500 |
|
- US$ denominated |
19,278 |
20,968 |
|
- Euro denominated |
8,246 |
8,440 |
|
|
35,024 |
36,908 |
Maturity Profile
|
The maturity profile of the Company's financial liabilities at 31 October was: |
||
|
|
2017 £'000 |
2016 £'000 |
|
In less than one year |
|
|
|
- accumulated interest |
981 |
1,038 |
|
In more than one year, but not more than five years |
|
|
|
- repayment of loan |
35,024 |
36,908 |
|
- accumulated interest |
897 |
1,987 |
|
|
36,902 |
39,933 |
Interest Rate Risk Sensitivity
An interest rate risk sensitivity analysis has not been performed as the Company does not hold bonds and has borrowed funds at a fixed rate of interest.
(iii) Other Price Risk
Changes in market prices other than those arising from interest rate risk or currency risk may also affect the value of the Company's net assets. The Company's exposure to changes in market prices relates to the fixed asset investments as disclosed in note 9 of the Annual Report and Financial Statements.
The Board manages the market price risks inherent in the investment portfolio by ensuring full and timely access to relevant information from the Managers. The Board meets regularly and at each meeting reviews investment performance, the investment portfolio and the rationale for the current investment positioning to ensure consistency with the Company's objectives and investment policies. The portfolio does not seek to reproduce the comparative index: investments are selected based upon the merit of individual companies and therefore performance may well diverge from the short term fluctuations of the comparative index.
Other Price Risk Sensitivity
Fixed asset investments are valued at bid prices which equate to their fair value. A full list of the Company's investments is given on pages 13 to 15 of the Annual Report and Financial Statements. In addition, a geographical analysis of the portfolio and an analysis of the investment portfolio by broad industrial or commercial sector is given on pages 16 and 17 of the Annual Report and Financial Statements.
106.5% (2016 - 105.8%) of the Company's net assets are invested in quoted equities. A 10% increase in quoted equity valuations at 31 October 2017 would have increased total assets and total return on ordinary activities by £37,590,000 (2016 - £28,422,000). A decrease of 10% would have had an equal but opposite effect.
Liquidity Risk
This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
Liquidity risk is not significant as the majority of the Company's assets are investments in quoted securities that are readily realisable. The Board monitors the exposure to any one holding.
The Company has the power to take out borrowings, which gives it access to additional funding when required. The Company's borrowing facilities are detailed in note 12 in the Annual Report and Financial Statements and the maturity profile of its borrowings are set out on page 49 of the Annual Report and Financial Statements.
Borrowings falling due after more than year:
|
|
2017 £'000 |
2016 £'000 |
|
National Australia Bank Limited multi-currency loan |
35,024 |
36,908 |
Borrowing facilities
The five year fixed rate facility with National Australia Bank Limited of €9.4m, US$25.6m and £7.5m, expires on 30 September 2019. The drawings were as follows:
At 31 October 2017 and 31 October 2016
National Australia Bank Limited:
¾ €9,400,000 at an interest rate of 1.59% per annum.
¾ US$25,600,000 at an interest rate of 3.14% per annum.
¾ £7,500,000 at an interest rate of 3.12% per annum.
The main covenants relating to the loan facility with National Australia Bank Limited are: total borrowings shall not exceed 35% of the Company's adjusted gross assets and the minimum adjusted gross assets shall be £110m.
Credit Risk
This is the risk that a failure of a counterparty to a transaction to discharge its obligations under that transaction could result in the Company suffering a loss.
This risk is managed as follows:
¾ where the Managers make an investment in a bond or other security with credit risk, that credit risk is assessed and then compared to the prospective investment return of the security in question;
- the Depositary is liable for the loss of financial instruments held in custody. The Depositary will ensure that any delegate segregates the assets of the Company. The Depositary has delegated the custody function to Bank of New York Mellon SA/NV London Branch. Bankruptcy or insolvency of the Custodian may cause the Company's rights with respect to securities held by the Custodian to be delayed. The Managers monitor the Company's risk by reviewing the Custodian's internal control reports and reporting its findings to the Board;
- investment transactions are carried out with a large number of brokers whose creditworthiness is reviewed by the Managers. Transactions are ordinarily undertaken on a delivery versus payment basis whereby the Company's Custodian bank ensures that the counterparty to any transaction entered into by the Company has delivered on its obligations before any transfer of cash or securities away from the Company is completed;
- transactions involving derivatives, and other arrangements wherein the creditworthiness of the entity acting as broker or counterparty to the transaction is likely to be of sustained interest, are subject to rigorous assessment by the Managers of the creditworthiness of that counterparty; and
- cash is only held at banks that are regularly reviewed by the Managers.
Credit Risk Exposure
The maximum exposure to credit risk at 31 October was:
|
|
2017 £'000 |
2016 £'000 |
|
Cash and short term deposits |
4,686 |
13,244 |
|
Debtors and prepayments |
102 |
127 |
|
|
4,788 |
13,371 |
None of the Company's financial assets are past due or impaired (2016 - none).
Fair value of financial assets and financial liabilities
The Directors are of the opinion that the financial assets and liabilities of the Company are stated at fair value in the Balance Sheet with the exception of long term borrowings. The fair values of the Company's borrowings are shown below.
|
|
2017 |
2017 |
|
2016 |
2016 |
|
|
Book £'000 |
Fair* £'000 |
|
Book £'000 |
Fair* £'000 |
|
Fixed rate loan |
35,024 |
35,574 |
|
36,908 |
37,895 |
|
Total long term borrowings |
35,024 |
35,574 |
|
36,908 |
37,895 |
* The fair value of the bank loan is calculated with reference to government bonds of comparable yield and maturity.
Capital Management
The capital of the Company is its share capital and reserves as set out in note 14 in the Annual Report and Financial Statements together with its borrowings (see note 12 of the Annual Report and Financial Statements). The objective of the Company is the achievement of long term capital growth by investing primarily in listed companies throughout the world. The Company's investment policy is set out on page 7 of the Annual Report and Financial Statements. In pursuit of the Company's objective, the Board has a responsibility for ensuring the Company's ability to continue as a going concern and details of the related risks and how they are managed are set out on page 25, pages 7 and 8 and pages 24 and 25, respectively of the Annual Report and Financial Statements. The Company has the ability to buy back its shares (see page 21 of the Annual Report and Financial Statements) and changes to the share capital during the year are set out in note 13 of the Annual Reports and Financial Statements. The Company does not have any externally imposed capital requirements other than the covenants on its loan which are detailed in note 12 of the Annual Report and Financial Statements.
Fixed Asset Investments
|
As at 31 October 2017 |
Level 1 £'000 |
Level 2 £'000 |
Level 3 £'000 |
Total £'000 |
|
Listed equities |
375,905 |
- |
- |
375,905 |
|
Unlisted equities |
- |
- |
7,941 |
7,941 |
|
Total financial asset investments |
375,905 |
- |
7,941 |
383,846 |
|
As at 31 October 2016 |
Level 1 £'000 |
Level 2 £'000 |
Level 3 £'000 |
Total £'000 |
|
Listed equities |
284,217 |
- |
- |
284,217 |
|
Unlisted equities |
- |
- |
8,582 |
8,582 |
|
Total financial asset investments |
284,217 |
- |
8,582 |
292,799 |
Investments in securities are financial assets designated at fair value through profit or loss. In accordance with Financial Reporting Standard 102, the tables above provide an analysis of these investments based on the fair value hierarchy described below, which reflects the reliability and significance of the information used to measure their fair value.
Fair Value Hierarchy
The fair value hierarchy used to analyse the fair values of financial assets is described below. The levels are determined by the lowest (that is the least reliable or least independently observable) level of input that is significant to the fair value measurement for the individual investment in its entirety as follows:
Level 1 - using unadjusted quoted prices for identical instruments in an active market;
Level 2 - using inputs, other than quoted prices included within Level 1, that are directly or indirectly observable (based on market data); and
Level 3 - using inputs that are unobservable (for which market data is unavailable).
The valuation techniques used by the Company are explained in the accounting policies on page 40 of the Annual Report and Financial Statements.
Alternative Investment Fund Managers (AIFM) Directive
In accordance with the Alternative Investment Fund Managers Directive, information in relation to the Company's leverage and the remuneration of the Company's AIFM, Baillie Gifford & Co Limited, is required to be made available to investors. In accordance with the Directive, the AIFM's remuneration policy is available at www.bailliegifford.com or on request (see contact details on the back cover of the Annual Report and Financial Statements) and the numerical remuneration disclosures in respect of the AIFM's relevant reporting period (year ended 31 March 2017) are also available at www.bailliegifford.com. The Company's maximum and actual leverage levels (see Glossary of Terms at the end of this announcement) at 31 October 2017 are shown below:
Leverage
|
|
Gross Method |
Commitment Method |
|
Maximum limit |
2.50:1 |
2.00:1 |
|
Actual |
1.10:1 |
1.10:1 |
Statement of Directors' Responsibilities in respect of the Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year. Under that law they have elected to prepare the Financial Statements in accordance with applicable law and UK Accounting Standards (United Kingdom Generally Accepted Accounting Practice) including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'.
Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these Financial Statements, the Directors are required to:
¾ select suitable accounting policies and then apply them consistently;
¾ make judgements and accounting estimates that are reasonable and prudent;
¾ state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Financial Statements; and
¾ prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable laws and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, a Directors' Remuneration Report and a Corporate Governance Statement that complies with that law and those regulations.
The Directors have delegated responsibility to the Managers for the maintenance and integrity of the Company's page of the Managers' website. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.
The work carried out by the Auditor does not involve any consideration of these matters and, accordingly, the Auditor accepts no responsibility for any changes that may have occurred to the Financial Statements since they were initially presented on the website.
Each of the Directors, whose names and functions are listed within the Directors and Management section, confirm that, to the best of their knowledge:
¾ the Financial Statements, which have been prepared in accordance with applicable law and UK Accounting Standards (United Kingdom Generally Accepted Accounting Practice) including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', give a true and fair view of the assets, liabilities, financial position and net return of the Company;
¾ the Annual Report and Financial Statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy; and
¾ the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.
On behalf of the Board
Henry CT Strutt
Chairman
7 December 2017
Income Statement
|
|
For the year ended 31 October 2017 |
For the year ended 31 October 2016 |
||||
|
|
Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
Gains on investments |
- |
85,581 |
85,581 |
- |
46,083 |
46,083 |
|
Currency gains/(losses) |
- |
824 |
824 |
- |
(2,740) |
(2,740) |
|
Income (note 2) |
1,268 |
- |
1,268 |
1,178 |
- |
1,178 |
|
Investment management fee |
(535) |
(1,606) |
(2,141) |
(436) |
(1,307) |
(1,743) |
|
Other administrative expenses |
(513) |
- |
(513) |
(483) |
- |
(483) |
|
Net return before finance costs and taxation |
220 |
84,799 |
85,019 |
259 |
42,036 |
42,295 |
|
Finance costs of borrowings |
(250) |
(749) |
(999) |
(239) |
(719) |
(958) |
|
Net return on ordinary activities before taxation |
(30) |
84,050 |
84,020 |
20 |
41,317 |
41,337 |
|
Tax on ordinary activities |
179 |
28 |
207 |
(81) |
- |
(81) |
|
Net return on ordinary activities after taxation |
149 |
84,078 |
84,227 |
(61) |
41,317 |
41,256 |
|
Net return per ordinary share (note 3) |
0.30p |
171.58p |
171.88p |
(0.12p) |
84.31p |
84.19p |
The total column of this statement is the profit and loss account of the Company. The supplementary revenue and capital columns are prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in this statement derive from continuing operations.
A Statement of Comprehensive Income is not required as there is no other comprehensive income.
Balance Sheet
|
|
At 31 October 2017 £'000 |
At 31 October 2016 £'000 |
|
Fixed assets |
|
|
|
Investments held at fair value through profit or loss |
383,846 |
292,799 |
|
|
|
|
|
Current assets |
|
|
|
Debtors |
102 |
127 |
|
Cash and cash equivalents |
4,686 |
13,244 |
|
|
4,788 |
13,371 |
|
Creditors |
|
|
|
Amounts falling due within one year |
(771) |
(650) |
|
Net current assets |
4,017 |
12,721 |
|
Total assets less current liabilities |
387,863 |
305,520 |
|
|
|
|
|
Creditors |
|
|
|
Amounts falling due after more than one year |
(35,024) |
(36,908) |
|
Net assets |
352,839 |
268,612 |
|
|
|
|
|
Capital and reserves |
|
|
|
Share capital |
2,450 |
2,450 |
|
Share premium account |
82,180 |
82,180 |
|
Special reserve |
35,220 |
35,220 |
|
Capital reserve |
232,020 |
147,942 |
|
Revenue reserve |
969 |
820 |
|
Shareholders' funds |
352,839 |
268,612 |
|
Net asset value per ordinary share (after deducting borrowings at fair value) (note 6) |
718.89p |
546.13p |
|
Net asset value per ordinary share (after deducting borrowings at par) |
720.02p |
548.14p |
|
Ordinary shares in issue |
49,004,319 |
49,004,319 |
Statement of Changes in Equity
For the year ended 31 October 2017
|
|
Share capital £'000 |
Share premium account £'000 |
Special Reserve £'000 |
Capital* reserve £'000 |
Revenue reserve £'000 |
Shareholders' £'000 |
|
Shareholders' funds at 1 November 2016 |
2,450 |
82,180 |
35,220 |
147,942 |
820 |
268,612 |
|
Net return on ordinary activities after taxation |
- |
- |
- |
84,078 |
149 |
84,227 |
|
Shareholders' funds at 31 October 2017 |
2,450 |
82,180 |
35,220 |
232,020 |
969 |
352,839 |
For the year ended 31 October 2016
|
|
Share capital £'000 |
Share premium account £'000 |
Special Reserve £'000 |
Capital* reserve £'000 |
Revenue reserve £'000 |
Shareholders' £'000 |
|
|
Share capital £'000 |
Share premium £'000 |
Special Reserve £'000 |
Capital* reserve £'000 |
Revenue reserve £'000 |
Shareholders' £'000 |
|
Shareholders' funds at 1 November 2015 |
2,450 |
82,180 |
35,220 |
106,625 |
881 |
227,356 |
|
Net return on ordinary activities after taxation |
- |
- |
- |
41,317 |
(61) |
41,256 |
|
Shareholders' funds at 31 October 2016 |
2,450 |
82,180 |
35,220 |
147,942 |
820 |
268,612 |
* The capital reserve as at 31 October 2017 includes investment holdings gains of £71,923,000 (2016 - gains of £50,479,000).
Cash Flow Statement
|
|
For the year ended 31 October 2017 |
For the year ended 31 October 2016 |
||
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Cash flows from operating activities |
|
|
|
|
|
Net return on ordinary activities before taxation* |
|
84,020 |
|
41,337 |
|
Net gains on investments |
|
(85,581) |
|
(46,083) |
|
Currency (gains)/losses |
|
(824) |
|
2,740 |
|
Finance costs of borrowings |
|
999 |
|
958 |
|
Overseas tax repaid/(incurred) |
|
207 |
|
(81) |
|
Changes in debtors and creditors |
|
148 |
|
50 |
|
Cash from operations |
|
(1,031) |
|
(1,079) |
|
Interest paid |
|
(1,001) |
|
(944) |
|
Net cash outflow from operating activities |
|
(2,032) |
|
(2,023) |
|
Cash flows from investing activities |
|
|
|
|
|
Acquisitions of investments |
(50,072) |
|
(38,768) |
|
|
Disposal of investments |
44,606 |
|
47,932 |
|
|
Net cash (outflow)/inflow from investing activities |
|
(5,466) |
|
9,164 |
|
(Decrease)/increase in cash and cash equivalents |
|
(7,498) |
|
7,141 |
|
Exchange movements |
|
(1,060) |
|
3,369 |
|
Cash and cash equivalents at 1 November |
|
13,244 |
|
2,734 |
|
Cash and cash equivalents at 31 October |
|
4,686 |
|
13,244 |
|
|
|
|
|
|
* Dividends received in the year amounted to £1,159,000 (2016 - £1,173,000)
Notes
|
1. |
The unaudited Financial Statements for the year to 31 October 2017 have been prepared in accordance with FRS102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' The accounting policies adopted are consistent with those of the previous financial year. The Directors consider the Company's functional currency to be sterling as the Company's shareholders are predominantly based in the UK and the Company and its investment manager, who are subject to the UK's regulatory environment, are also UK based. |
|||||||||||||||||
|
2. |
Income |
2017 £'000 |
2016 £'000 |
|||||||||||||||
|
Income from investments |
1,166 |
1,178 |
||||||||||||||||
|
Deposit interest |
102 |
- |
||||||||||||||||
|
|
1,268 |
1,178 |
||||||||||||||||
|
3. |
|
|||||||||||||||||
|
|
Revenue return per ordinary share is based on the net revenue return on ordinary activities after taxation of £149,000 (2016 - net revenue loss of £61,000) and on 49,004,319 ordinary shares, being the weighted average number of ordinary shares in issue during each year. Capital return per ordinary share is based on the net capital gain for the financial year of £84,078,000 (2016 - net capital gain of £41,317,000) and on 49,004,319 ordinary shares, being the weighted average number of ordinary shares in issue during each year. There are no dilutive or potentially dilutive shares in issue. |
|||||||||||||||||
|
4. |
There are no dividends paid and proposed in respect of the financial year. The revenue available for distribution by way of dividend for the year is £149,000 (2016 - revenue loss £61,000) which is the basis on which the requirements of section 1158 of the Corporation Tax Act 2010 are considered. |
|||||||||||||||||
|
5. |
The fair value of borrowings at 31 October 2017 was £35,574,000 (2016 - £37,895,000). |
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6. |
The Company incurred transaction costs on purchases of £23,000 |
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7. |
At the Annual General Meeting on 24 January 2017 the Company renewed its authority to purchase shares in the market, in respect of 7,345,747 ordinary shares (equivalent to approximately 14.99% of its issued share capital at that date). No shares were bought back during the years to 31 October 2017 or 2016. At 31 October 2017 the Company had authority to buy back 7,345,747 ordinary shares. |
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8. |
Glossary of Terms |
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Total Assets
Total assets less current liabilities, before deduction of all borrowings.
Net Asset Value
Also described as shareholders' funds, Net Asset Value (NAV) is the value of total assets less liabilities (including borrowings). The NAV per share is calculated by dividing this amount by the number of ordinary shares in issue.
Net Asset Value (Borrowings at Fair Value)
Borrowings are valued at an estimate of their market worth.
Net Asset Value (Borrowings at Par Value)
Borrowings are valued at their nominal par value.
Net Liquid Assets
Net liquid assets comprise current assets less current liabilities, excluding borrowings.
Notes (Ctd)
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8. |
Glossary of Terms (Ctd) |
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Discount/Premium 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. Total Return The total return is the return to shareholders after reinvesting the net dividend on the date that the share price goes ex-dividend. Ongoing Charges The total expenses (excluding borrowing costs) incurred by the Company as a percentage of the average net asset value (with debt at fair value). Gearing 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 par less cash and cash equivalents expressed as a percentage of shareholders' funds. Potential gearing is the Company's borrowings expressed as a percentage of shareholders' funds. Leverage 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 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 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. |
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