Annual Financial Report

RNS Number : 3855R

Edinburgh Worldwide Inv Trust PLC

09 December 2016

 

RNS Announcement: Preliminary Results

Edinburgh Worldwide Investment Trust plc

The following is the unaudited preliminary statement for the year to 31 October 2016 which was approved by the Board on 8 December 2016.

¾  Over the year to 31 October 2016, the Company's net asset value per share, cum income with debt at fair value, increased by 18.0% and the share price by 10.3%. The comparative index, the S&P Global Small Cap Index, increased by 29.0% in sterling terms.

¾  Revenue losses per share were 0.12p (2015: deficit of 0.18p) so no final dividend is being paid. The Company's objective remains that of generating capital growth. Should the level of underlying income increase in future years, the Board will seek to distribute the minimum permissible to maintain investment trust status.

¾  The portfolio's exposure to healthcare companies, UK listed companies and younger less proven businesses hindered performance. Alnylam Pharmaceuticals, a gene silencing company, was the notable detractor to performance while MarketAxess, an electronic bond trading platform, was the notable positive contributor to performance.

¾  As at the year end, the Company held four unlisted equity investments accounting for 2.8% of total assets (2015: 1.7%); Souq Group, Oxford Nanopore Technologies, Skyscanner Holdings and Unity Biotechnology.

¾  Although the near direction of markets is influenced by both macro and geopolitical concerns, the Managers have long believed that the success, or failure, of smaller companies is most heavily influenced by their own actions.

Summary

Edinburgh Worldwide aims to achieve long term capital growth by investing in listed companies throughout the world. The Trust has total assets of £306 million (before deduction of loans of £37 million) as at 31 October 2016.

Edinburgh Worldwide is managed by Baillie Gifford & Co Limited, the Edinburgh based fund management group with around £145 billion under management and advice as at 8 December 2016.

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 stockmarkets in which the Company invests and by the supply and demand for the Company's shares. Investment in investment trusts should be regarded as medium to long-term. You can find up to date performance information about Edinburgh Worldwide on the Edinburgh Worldwide page of the Managers' website at http://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.

9 December 2016

For further information please contact:

Anzelm Cydzik, Baillie Gifford & Co

Tel: [phone]

Roland Cross, Director, Four Broadgate

Tel: [phone] 

 

Chairman's Statement

Performance

In the year to 31 October 2016 the Company's net asset value per share, when calculated by deducting borrowings at fair value, increased by 18.0% and the share price by 10.3%. The comparative index, the S&P Global Small Cap Index, increased by 29.0% in sterling terms during this period. Over the course of the year the discount to net assets with borrowings deducted at fair value averaged 9.2% and stood at 11.6% as at 31 October 2016. Although the Company's absolute returns over the year are encouraging the relative return has been hindered by the overweight exposure to Healthcare and Biotechnology stocks. The performance of Alnylam Pharmaceuticals and IP Group in particular has hurt.

The Board and Managers believe in the merits of investing in less mature entrepreneurial businesses and holding them whilst they develop over the long term, despite the inevitable 'bumps' that might be encountered over the period. Operationally the majority of holdings in the portfolio continue to perform and develop as hoped. Greater detail on the performance of the underlying holdings in the portfolio can be found within the Managers' Review.

Over the thirteen years that Baillie Gifford has been managing the Company's assets, net asset value per share has increased by 273%, the share price by 315% and the comparative index* by 233% in total return terms.

Borrowings

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 2.81%.

As the Managers invest in companies that are believed to have long term attractions, the Company will typically maintain gearing to maximise potential returns. Invested equity gearing ranged between 6.0% and 12.5% over the course of the year and stood at 8.8% at the financial year end (2015 - 9.8%).

Unlisted Investments

The Company is permitted to invest up to 5% of total assets in unlisted equity investments, in aggregate, at time of acquisition. Two holdings were purchased over the course of the past financial year, Skyscanner Holdings and Unity Biotechnology, taking the portfolio weighting in unlisted equity investments to 2.8% of total assets (2015 - 1.7% of total assets), invested in four holdings as at the Company's year end. Since then it has been announced that Ctrip.com, a Chinese online travel company, is close to acquiring Skyscanner, with the transaction expected to be completed by the end of 2016. 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 Board and Managers are excited by the business models of the remaining investments and their potential as long term investments within the portfolio.

Earnings and Dividend

The Company's objective is that of generating capital growth. Consequently, the Managers do not invest in companies based on the level of income they may pay out as dividends.

This year the net revenue return per share was a deficit of 0.12p (2015 - deficit of 0.18p), 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.

Management Fee

The Board maintains close scrutiny of costs and is keen to ensure that shareholder value is not unfairly eroded through charges. Earlier this year the Company announced a change in the calculation of its management fee, with the introduction of a further reduced stepped tier of 0.55% at £250m of net assets with effect from 1 September 2016. This follows on from the changes and simplification in fee structure announced in 2013 and results in further cost savings to the benefit of shareholders.

The annual management fee payable to the Company's Investment Managers and Secretaries, Baillie Gifford & Co Limited, is now as follows: 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. There is no separate secretarial fee. The fees are calculated on a quarterly basis and further information is contained in note 3 in the Annual Report and Financial Statements.

The Board

I am standing down as Chairman and retiring from the Board at the conclusion of the Company's Annual General Meeting taking place on Tuesday 24 January 2017. I am pleased to confirm that Mr Henry Strutt will replace me as Chairman, relinquishing his responsibility as Chair of the Company's Audit and Management Engagement Committee. This position will be filled by Mr Donald Cameron.

Mr Mungo Wilson has joined the Board; his biography is set out on page 19 of the Annual Report and Financial Statements. His appointment is subject to ratification by shareholders at the forthcoming Annual General Meeting.

I firmly believe that your Company has a dynamic, experienced and engaged Board that provides excellent oversight of, and challenge to, the Managers, as well as other service providers, on your behalf. The Board and Baillie Gifford have a healthy relationship and understanding and I leave in the knowledge that your Company is in capable hands.

Investment Outlook

The macro economic backdrop continues to provoke bouts of notable market volatility from which very few companies are sheltered. For example, uncertainty surrounds the terms of the UK's exit from the European Union and the direction of Mr Trump's economic policies. Immature, innovative, fast-growing businesses are not immune from exhibiting price volatility. However, periods of volatility provide opportunities for long term discerning investors to invest in growth companies at attractive valuations. Your Board and Managers believe that business fundamentals ultimately prevail over the investment cycle. Successful smaller companies create and exploit their own long term opportunities despite the economic conditions at any given time. Being a patient investor often brings rewards. As mentioned last year, being able to identify the companies that value innovation, which have both a cultural acceptance of it and a means to develop commercial opportunities around it, is key to unearthing the market leaders of the future and is a key focus for the Managers.

An overview of the portfolio is provided by the Managers in the Managers' Review.

Annual General Meeting

The Annual General Meeting of the Company will be held at Baillie Gifford's offices in Edinburgh at 12 noon on Tuesday, 24 January 2017. The Company will once again be seeking to renew its share buyback, issuance and treasury share powers. Further information on these resolutions can be found on pages 21 and 22 of the Annual Report and Financial Statements.

Douglas Brodie and John MacDougall, the portfolio's Manager and Deputy Manager, will give a presentation and answer any 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.

David HL Reid

Chairman

8 December 2016

* MSCI All Countries World Index (in sterling terms) until 31 January 2014, thereafter 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.

Past performance is not a guide to future performance.
 

Managers' Review

The combination of a divisive US Presidential election, the UK voting for 'Brexit' and a collapse in the value of sterling yielded a turbulent and atypical environment during the Company's financial year. Given this backdrop, and as suggested in the Interim Report, we are not overly surprised that economic and geo-political factors are preoccupying the market's attention of late. Whilst global stock markets have proved to be comparatively robust in dollar terms over the past year (and strong in sterling terms) the prevailing backdrop of uncertainty has seemingly tilted markets towards risk aversion and an environment where short term sentiment and thematic influences have held sway. Such periods tend to be transient but are rarely sympathetic to our long term fundamental approach of identifying attractive growth companies early in their lifecycle and retaining ownership of successful companies as they grow and thrive. Ours is a patient approach that strives to understand fully the problem a company is looking to solve and implicitly recognises that the success (or failure) of smaller companies is most often determined by the individual company's actions.

The enduring nature of innovation and business development implies to us that our approach never really goes out of fashion. However, we recognise that at times the stock market can work to a very different agenda and the uncertain economic and political outlook has resulted in a market that currently craves stability and visibility. These are attributes that many of our more immature companies cannot yet offer. We have long thought of the economic and political environment as being the canvas upon which businesses paint a picture. Recent developments have undeniably left the canvas somewhat frayed around the edges but we believe this is unlikely to detract from the picture that will ultimately emerge over the coming years and decades. Moreover, we sense that as innovation accelerates and technology broadens out the available palette of colours has increased significantly; short term worrying about the canvas potentially misses the emergence of a masterpiece.

With regard to the Company's underperformance, versus the comparative index, over the year to 31 October 2016 we observed two prominent contributing themes. First, the significant exposure within the portfolio to healthcare companies, particularly early-stage biotechnology businesses, which in aggregate performed poorly. Second, the high exposure to UK-listed companies; post the Brexit vote the UK market has been one of the weaker developed-world equity markets and the Company's positioning towards younger, less proven businesses penalised us further. The overall shape of the portfolio, be it exposure to industries or geographies, is determined by the stock ideas that we uncover. We don't embark on our task with a preconceived notion as to what or where is interesting. Furthermore we have a strong preference for companies that are innovating to serve global end markets thereby not overly restricting a holding's success to the prospects of a particular region or currency. Our exposure to healthcare companies is built upon us unearthing many attractive investment opportunities which we think, in aggregate, can ultimately yield therapies and technologies that could profoundly change what we can expect from healthcare over the coming decades. Based on our observations we believe that healthcare can transition from a highly centralised system to a much more personalised, data-led and patient-empowered one. We would highlight the holdings in businesses such as Dexcom (continuous blood glucose monitoring for diabetics) and Oxford Nanopore Technologies (cost effective DNA sequencing) as being representative of this trend. Whilst our long term optimism on healthcare remains undiminished we recognise that investor sentiment towards the sector deteriorated markedly over the past year. Early in the financial year heightened investor risk aversion impacted negatively on the share prices of many of our biotechnology holdings and latterly this was exacerbated by fears that drug pricing in the US might come under increased scrutiny. In several cases we opportunistically added to our existing healthcare holdings and used share price weakness to start a new position in a number of exciting, albeit early stage, companies

The holding in the electronic bond trading platform MarketAxess again made a notable positive contribution to performance. We have long admired the combined attractions of liquidity and transparency that MarketAxess has pioneered in bond trading markets and are pleased that its offering is broadening out beyond US investment grade bonds. Despite the shares having performed well, we continue to see a substantial opportunity ahead for the company as scale and network effects work to its advantage, resulting in ever greater trading volumes flowing through the platform. On a less positive note, the holding in Alnylam Pharmaceuticals, the gene silencing company, performed poorly due in part to disappointing clinical trial data for one of its drugs in development. The safety-related termination of a drug, being developed for a rare heart disorder, is a disappointing development and an unexpected result. The company has not yet been able to explain fully the observed safety profile but, in our opinion, it is unlikely to be representative of a fundamental issue with the company's technology and gene silencing approach. We await further insights on this trial, and the many other clinical trials Alnylam is currently conducting, with interest as we continue to believe that gene silencing offers significant potential in a broad range of therapeutic settings.

We acquired a number of new holdings in the period. The purchases of Skyscanner, LendingTree and Pacira Pharmaceuticals were commented on in the Interim Report. New holdings in the second half of the year included Adaptimmune Therapeutics, Trupanion and Unity Biotechnology. Adaptimmune is a biotechnology company trying to harness the power of a patient's immune system to treat a wide range of cancers. The company has developed a highly efficient way of engineering proprietary 'T' cell receptor molecules that are specific for targets known to be expressed by cancer cells. There are several companies developing T cell therapies to treat cancer, with most using approaches dependent upon antibody based recognition of the cancer (versus the T cell receptor based approach developed by Adaptimmune). The advantages of Adaptimmune's approach are two-fold: first the range of targets is much greater as its approach enables it to look into the cancer cell whereas antibody approaches are limited to targets on the outside of a cancer cell; and second, its approach more closely resembles the body's own cancer fighting mechanisms thereby avoiding some of the extreme side effects associated with other treatments. Trupanion provides medical insurance for pets in the under-served North American market. The company's strong focus on creating value for both pet owners and vets through more comprehensive coverage, robust data-led pricing and simpler claims processing is addressing the key reasons why product penetration has remained so low (1-2%), relative to other countries (e.g. 25% in the UK). When combined with the efforts of its direct salesforce, building relationships with thousands of vet practices around the country, we believe Trupanion has a significant growth opportunity ahead of it. Unity Biotechnology is an early stage unlisted biotech company working on senescent cells (dormant cells which have ceased to divide). Biological mechanisms such as senescence naturally act to limit tumour risk, but if left unchecked these cells can promote age-related pathologies, including a decline in regenerative capacity. By pursuing therapies that selectively clear senescent cells in particular tissues, the ambition is to limit, or even reverse, age related conditions such as glaucoma and osteoarthritis.

The holdings in Wirecard, Oisix, Barco and Senomyx were sold due to concerns over their future growth potential and the holding in LinkedIn was sold following a takeover offer from Microsoft. Post the year end it was also announced that Skyscanner, the unlisted travel search website held in the portfolio, was to be acquired by Ctrip.com, China's largest online travel company.

 

Income statement

	For the year ended 31 October 2016 (unaudited)			For the year ended 31 October 2015 (audited)
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains on investments	-	46,083	46,083	-	23,245	23,245
Currency (losses)/gains	-	(2,740)	(2,740)	-	479	479
Income (note 2)	1,178	-	1,178	1,106	-	1,106
Investment management fee	(436)	(1,307)	(1,743)	(415)	(1,245)	(1,660)
Other administrative expenses	(483)	-	(483)	(498)	-	(498)
Net return before finance costs and taxation	259	42,036	42,295	193	22,479	22,672
Finance costs of borrowings	(239)	(719)	(958)	(220)	(660)	(880)
Net return on ordinary activities before taxation	20	41,317	41,337	(27)	21,819	21,792
Tax on ordinary activities	(81)	-	(81)	(63)	-	(63)
Net return on ordinary activities after taxation	(61)	41,317	41,256	(90)	21,819	21,729
Net return per ordinary share (note 4)	(0.12p)	84.31p	84.19p	(0.18p)	44.52p	44.34p

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 2016 (unaudited) £'000	At 31 October 2015 (audited) £'000
Fixed assets
Investments held at fair value through profit or loss	292,799	250,178
Current assets
Debtors	127	5,801
Cash and cash equivalents	13,244	2,734
	13,371	8,535
Creditors
Amounts falling due within one year	(650)	(558)
Net current assets	12,721	7,977
Total assets less current liabilities	305,520	258,155
Creditors
Amounts falling due after more than one year (note 6)	(36,908)	(30,799)
Net assets	268,612	227,356
Capital and reserves
Called up share capital	2,450	2,450
Share premium	82,180	82,180
Special reserve	35,220	35,220
Capital reserve	147,942	106,625
Revenue reserve	820	881
Shareholders' funds	268,612	227,356
Net asset value per ordinary share (after deducting borrowings at fair value) (note 6)	546.13p	462.74p
Net asset value per ordinary share (after deducting borrowings at par)	548.14p	463.95p
Ordinary shares in issue	49,004,319	49,004,319

 

Statement of changes in equity

For the year ended 31 October 2016 (unaudited)

	Called up share capital £'000	Share premium £'000	Special reserve £'000	Capital* reserve £'000	Revenue reserve £'000	Shareholders' funds £'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
Dividends paid during the year (note 5)	-	-	-	-	-	-
Shareholders' funds at 31 October 2016	2,450	82,180	35,220	147,942	820	268,612

For the year ended 31 October 2015 (audited)

	Called up share capital £'000	Share premium £'000	Special reserve £'000	Capital* reserve £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 November 2014	2,450	82,180	35,220	84,806	1,706	206,362
Net return on ordinary activities after   taxation	-	-	-	21,819	(90)	21,729
Dividends paid during the year (note 5)	-	-	-	-	(735)	(735)
Shareholders' funds at 31 October 2015	2,450	82,180	35,220	106,625	881	227,356

*  The capital reserve as at 31 October 2016 includes investment holdings gains of £50,479,000 (2015 - gains of £18,934,000).

 

Cash flow statement

	For the year ended 31 October 2016 (unaudited)		For the year ended 31 October 2015 (audited)
	£'000	£'000	£'000	£'000
Cash flows from operating activities
Net return on ordinary activities before taxation*		41,337		21,792
Net gains on investments		(46,083)		(23,245)
Currency losses/(gains)		2,740		(479)
Finance costs of borrowings		958		880
Overseas tax incurred		(81)		(66)
Changes in debtors and creditors		50		78
Cash from operations		(1,079)		(1,040)
Interest paid		(944)		(879)
Net cash outflow from operating activities		(2,023)		(1,919)
Cash flows from investing activities
Acquisitions of investments	(38,768)		(38,913)
Disposal of investments	47,932		33,290
Net cash inflow/(outflow) from investing activities		9,164		(5,623)
Cash flows from financing activities
Equity dividends paid (note 5)		-		(735)
Net cash outflow from financing activities		-		(735)
Increase/(decrease) in cash and cash equivalents		7,141		(8,277)
Exchange movements		3,369		416
Cash and cash equivalents at 1 November		2,734		10,595
Cash and cash equivalents at 31 October		13,244		2,734

*  Dividends received in the year amounted to £1,173,000 (2015 - £1,119,000)

 

Portfolio and equity performance at 31 October 2016 (unaudited)

Name	Business	Fair value 2016 £'000	% of total assets	Performance†		Fair value 2015 £'000
				Absolute %	Relative %
MarketAxess	Electronic bond trading platform	20,394	6.7	89.5	44.0	10,905
IP Group	Intellectual property commercialisation	8,238	2.7	(37.2)	(52.3)	11,698
4D Pharma	Bacteria derived novel therapeutics	7,930	2.6	(2.0)	(25.6)	8,039
IPG Photonics	High-power fibre lasers	7,770	2.5	48.5	12.8	5,231
iRobot	Domestic and military robots	7,585	2.5	114.5	62.9	2,344
Tesla Motors	Electric cars	7,271	2.4	20.9	(8.2)	6,017
Alnylam Pharmaceuticals	Therapeutic gene silencing	6,552	2.1	(48.1)	(60.6)	9,723
Ocado	Online food retailer	5,431	1.8	(27.0)	(44.6)	6,764
Zillow Class C	US online real estate portal	4,961	1.6	52.4	15.7	3,258
Temenos	Banking software	4,834	1.6	75.5	33.3	3,990
Dexcom	Real time blood glucose monitoring	4,674	1.5	18.8	(9.8)	3,932
Wayfair	Online furniture and homeware retailer	4,652	1.5	0.4	(23.8)	2,335
LendingTree	Online loan marketplace	4,582	1.5	69.6*	23.7*	-
GrubHub	Online and mobile platform for restaurant   pick-up and delivery orders	4,371	1.4	105.7	56.2	931
Financial Engines	Investment advisory firm	4,295	1.4	9.7	(16.7)	3,956
Start Today	Internet fashion retailer	4,286	1.4	99.1	51.2	3,048
Genus	Animal breeding services	4,133	1.4	30.8	(0.7)	3,206
Next	Provides online property information	4,113	1.3	43.4	8.9	3,361
Cosmo Pharmaceuticals	Therapies for gastrointestinal diseases	3,977	1.3	20.4	(8.6)	3,325
Galapagos	Clinical stage biotechnology company	3,855	1.3	58.7	20.5	2,430
TripAdvisor	Online travel review platform	3,829	1.3	(3.1)	(26.4)	5,994
Splunk	Data diagnostics	3,819	1.3	35.6	3.0	2,817
Infomart Corp	Internet platform for restaurant supplies	3,777	1.2	61.2	22.5	1,652
Novadaq Technologies	Medical systems for intra-surgical imaging	3,715	1.2	7.7	(18.2)	3,449
SEEK	Online recruitment portal	3,647	1.2	58.2	20.1	2,369
Renishaw	Measurement and calibration equipment	3,629	1.2	39.5	6.0	2,654
Seattle Genetics	Antibody conjugates based biotechnology	3,620	1.2	57.9	19.9	3,047
Puretech Health	IP commercialisation focused on health   care	3,608	1.2	(10.1)	(31.7)	2,543
ASOS	Online fashion retailer	3,570	1.2	61.3	22.5	2,772
M3	Online medical database	3,492	1.1	97.0	49.6	3,541
Xeros Technology Group	Commercial laundry manufacturer	3,479	1.1	(16.6)	(36.7)	3,580
MonotaRO	Online business supplies	3,475	1.1	19.3	(9.4)	4,945
Aerovironment	Small unmanned aircraft systems	3,456	1.1	31.7	0.0	2,566
Imagination Technologies	Graphics semiconductor designer	3,435	1.1	2.0	(22.5)	3,363
Dialog Semiconductor	Analogue chips for mobile phones	3,432	1.1	33.4	1.3	2,572
Stamps.com	Website for postage services	3,379	1.1	62.4	23.4	5,251
Xing	Professional networking	3,325	1.1	31.2	(0.3)	2,554
Oxford Nanopore    Technologies‡	Novel DNA sequencing technology	3,306	1.1	2.0	(22.5)	3,000
Genmab	Therapeutic antibody company	3,241	1.1	110.5	59.9	2,695
Faro Technologies	Designs and develops measurement   devices	2,951	1.0	25.7	(4.5)	2,028
EPAM Systems	Outsourced software and services	2,883	1.0	5.0	(20.2)	5,740
Teradyne	Semiconductor testing equipment   manufacturer	2,860	0.9	52.5	15.8	1,895
Digital Garage	Internet business incubator	2,788	0.9	53.9	16.9	1,833
Abcam	Scientific reagent supplier	2,777	0.9	46.9	11.6	2,336
Peptidream	Drug discovery platform	2,661	0.9	173.9	108.1	1,353
Pacira Pharmaceuticals	Development, commercialisation and   manufacturing of proprietary   pharmaceutical products	2,605	0.9	(38.4)*	(49.3)*	-
Ellie Mae	Provides technology solutions to automate   mortgage origination process	2,602	0.9	44.2*	12.1*	-
Rightmove	UK online property portal	2,577	0.8	(1.6)	(25.3)	2,647

Portfolio and equity performance at 31 October 2016 (unaudited) (Ctd)

Name	Business	Fair value 2016 £'000	% of total assets	Performance†		Fair value 2015 £'000
				Absolute %	Relative %
Kingdee International   Software	Enterprise management software	2,541	0.8	24.1	(5.8)	2,041
National Instruments Corp	Instrumentation equipment used in   research and testing	2,516	0.8	19.4	(9.3)	2,157
Exa	Simulation software and services	2,503	0.8	84.3	40.0	1,351
Zillow Class A	US online real estate portal	2,458	0.8	35.6	3.0	1,809
Trupanion	Pet health insurance provider	2,452	0.8	22.5*	17.1*	-
Xero	Cloud-based accounting software	2,439	0.8	48.6	12.8	1,659
Xaar	Ink jet printing technology	2,410	0.8	(16.2)	(36.3)	2,915
Morphosys	Therapeutic antibodies	2,315	0.8	(10.0)	(31.7)	2,566
Victrex	High-performance thermo-plastics	2,227	0.7	(2.3)	(25.8)	2,351
AAC Technologies	Miniature acoustic components	2,212	0.7	91.9	45.8	2,296
Power Integrations	Analogue integrated circuits	2,208	0.7	62.5	23.4	1,372
Yoox Net-A-Porter	Online luxury fashion retailer	2,192	0.7	6.6	(19.0)	2,056
Cellectis	Biotech focused on genetic engineering	2,177	0.7	(15.7)	(36.0)	2,231
Digimarc	Digital watermarking technology	2,109	0.7	78.9	35.9	675
SDL	Language translation services	2,093	0.7	12.7	(14.4)	1,858
Codexis	Manufacturer of custom industrial enzymes	2,067	0.7	97.3	49.9	627
Basware	Software solutions for financial transactions	2,045	0.7	11.6	(15.3)	1,800
Skyscanner‡	Flight metasearch platform	2,000	0.7	0.0*	(21.0)*	-
Foundation Medicine	Develops cancer diagnostic technology	1,859	0.6	28.1	(2.7)	1,449
Stratasys	3D printer manufacturer	1,794	0.6	(5.2)	(28.0)	1,892
Tissue Regenix	Regenerative medical devices	1,770	0.6	2.8	(21.9)	1,672
Souq Group Class A Pref.‡	Middle East e-commerce website	1,638	0.5	26.5	(3.9)	1,295
Unity Biotechnology Inc   Series B Pref.‡	Biotechnology company seeking to develop   anti ageing therapies	1,638	0.5	(0.1)*	0.9*	-
Oxford Instruments	Produces advanced instrumentation   equipment	1,509	0.5	32.7	0.8	1,159
Ceres Power Holding	Developer of fuel cells	1,506	0.5	39.1	5.7	821
Zumtobel	Commercial lighting	1,499	0.5	(2.0)	(25.5)	1,546
Avacta Group	Analytical reagents and instrumentation	1,465	0.5	(33.5)	(49.5)	2,173
Nanoco	Quantum dot manufacturer	1,365	0.4	0.0	(24.1)	1,372
China Financial Services	Small and medium-sized enterprises   lending in China	1,334	0.4	55.2	17.9	907
Adaptimmune Therapeutics   ADR	Clinical stage biopharmaceutical company	1,321	0.4	(33.6)*	(36.5)*	-
Horizon Discovery	Customised cell lines to aid drug discovery	1,303	0.4	(1.1)	(24.9)	1,313
On Deck Capital	Provider of capital finance to businesses	1,302	0.4	(15.1)*	(34.7)*	-
hVIVO (formerly Retroscreen   Virology)	Outsourced pre-clinical analytical services	1,284	0.4	(35.1)	(50.7)	1,717
Ricardo	Automotive engineer	1,264	0.4	4.3	(20.8)	1,242
Suss Microtec	Fabrication and inspection equipment	1,146	0.4	16.0	(11.9)	984
Aduro Biotechnology	Immunotherapy services provider	1,145	0.4	(44.0)*	(58.0)*	-
Acacia Research	Patent licenser	1,065	0.4	12.9	(14.2)	958
Bioamber	Bioengineering company	1,055	0.3	(21.1)	(40.1)	1,339
Ilika	Discovery and development of materials for   mass market applications	1,007	0.3	(29.3)	(46.3)	1,155
Thin Film Electronics	Develops printed, rewritable memory media	960	0.3	34.9	2.5	711
Nanocarrier	Drug delivery technology	923	0.3	33.9	1.7	969
C4X Discovery Holdings	Rational drug design and optimisation	891	0.3	64.5	24.9	465
Sarine Technologies	Systems for diamond grading and cutting	820	0.3	36.2	3.5	613
Summit Therapeutics	Drug discovery and development	799	0.3	52.7	16.0	521
Foamix Pharmaceuticals	Drug reformulation technology	724	0.2	41.0	7.1	513
Fusionex	Software for data analytics	585	0.2	(48.7)	(61.1)	1,123
Applied Graphene Materials	Manufactures graphene nanoplatelets	516	0.2	(23.1)	(41.6)	208
Evola Holdings	Yeast-based industrial biotechnology	258	0.1	(56.4)	(66.9)	1,324
Velocys	Gas to liquid technology	162	0.1	(38.4)	(53.3)	267

Portfolio and equity performance at 31 October 2016 (unaudited) (Ctd)

Name	Business	Fair value 2016 £'000	% of total assets	Performance†		Fair value 2015 £'000
				Absolute %	Relative %
Intelligent Energy Holdings	Developer of modular fuel cells	68	0.0	(87.7)	(90.7)	589
GI Dynamics	Develops and markets medical devices	18	0.0	(8.6)	(30.6)	19
China Lumena New Materials	Mines, processes and manufactures   natural thenardite products	0	0.0	0.0	(31.7)	0.0
Ensogo	South East Asian e-commerce	0	0.0	(100.0)	(131.7)	647
Total equities		292,799	95.8
Net current assets		12,721	4.2
Total assets at fair value#		305,520	100.0

†      Absolute and relative performance has been calculated on a total return basis over the period 1 November 2015 to 31 October 2016 (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 deduction of loan.

‡    Denotes unlisted security.

Source: Baillie Gifford/StatPro.

Past performance is not a guide to future performance.

 

Distribution of total assets* by industry (unaudited)

		Industry Analysis 31 October 2016 % of total assets*		Portfolio Weightings (relative to comparative index†) at 31 October 2016 % points overweight/(underweight)
Equities:	Biotechnology	13.4		11.2
	Capital Markets	10.8		7.5
	Software	8.4		5.3
	Internet Software and Services	8.1		6.2
	Electronic Equipment, Instruments and Components	6.7		3.9
	Internet and Direct Marketing Retail	6.7		6.1
	Pharmaceuticals	5.0		3.4
	Semiconductors and Semiconductor Equipment	4.7		2.7
	Health Care Equipment and Supplies	3.2		0.8
	Life Sciences Tools and Services	3.1		2.2
	Household Durables	2.5		0.8
	Automobiles	2.4		2.3
	Professional Services	2.3		1.0
	Chemicals	2.0		(1.3)
	IT Services	1.9		(0.6)
	Internet and Catalogue Retail	1.8		1.8
	Technology Hardware, Storage and Peripherals	1.7		1.1
	Thrifts and Mortgage Finance	1.5		0.8
	Health Care Technology	1.4		1.1
	Machinery	1.4		(2.6)
	Media	1.4		(0.9)
	Trading Companies and Distributors	1.1		(0.4)
	Aerospace and Defence	1.1		(0.2)
	Electrical Equipment	1.0		(0.1)
	Insurance	0.8		(2.4)
	Speciality Retail	0.5		(1.8)
	Consumer Finance	0.4		(0.2)
	Diversified Financial Services	0.4		(0.1)
	Energy Equipment and Services	0.1		(1.3)
	Net Current Assets	4.2
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.

Distribution of total assets (unaudited)

Geographical Analysis

		31 October 2016 %	31 October 2015 %
North America		45.5	39.3
	USA	45.5	39.3
Europe		37.2	43.3
	United Kingdom	25.4	29.2
	Eurozone	8.5	10.4
	Developed Europe (non euro)	3.3	3.7
Africa and Middle East		0.5	0.5
	UAE	0.5	0.5
Asia		10.6	12.0
	Japan	8.3	8.3
	China	1.3	2.3
	Hong Kong	0.7	0.9
	India	-	0.3
	Singapore	0.3	0.2
Australasia		2.0	1.8
	Australia	1.2	1.2
	New Zealand	0.8	0.6
Total equities		95.8	96.9
Net current assets		4.2	3.1
Total assets*		100.0	100.0

Sectoral Analysis

		31 October 2016 %		31 October 2015 %
Consumer Discretionary		15.2		15.8
Energy		0.1		0.1
Financials		13.9		11.2
Health Care		26.1		27.0
Industrials		7.0		7.9
Information Technology		31.5		32.2
Materials		2.0		2.7
Net Current Assets		4.2		3.1
Total assets*		100.0		100.0

 * Total assets before deduction of loans

Notes (unaudited)

1.	The Financial Statements for the year to 31 October 2016 have been prepared in accordance with The Financial Reporting Standard applicable in the UK and Republic of Ireland ('FRS 102') which the Company must adopt for its financial year ending 31 October 2016. Following the application of the new reporting standard and the AIC's issued Statement of Recommended Practice, there has been no impact on the Company's Income Statement, Balance Sheet or Statement of Changes in Equity (previously called the Reconciliation of Movements in Shareholders' Funds) from the period previously reported. The Cash Flow Statement reflects the presentational requirements of FRS 102, which are different to FRS 1. In addition, the Cash Flow Statement reconciles to cash and cash equivalents whereas under previous UK GAAP the Cash Flow Statement reconciled to net funds/debt. The Company has early adopted the amendments to Section 34 of FRS 102 regarding fair value hierarchy disclosures. 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. The Company's principal risks are market related and include market risk, liquidity risk and credit risk. An explanation of these risks and how they are managed is contained in note 18 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 in the Annual Report and Financial Statements, 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. 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	2016 £'000	2015 £'000
	Income from investments	1,178	1,105
	Deposit interest	-	1
		1,178	1,106
3.	Baillie Gifford & Co Limited are appointed as Managers and Secretaries. 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.
4.	Net return per ordinary share Revenue 2016  Capital Total Revenue 2015 Capital Total Net return on ordinary activities after     taxation (0.12p) 84.31p 84.19p (0.18p) 44.52p 44.34p
	Revenue return per ordinary share is based on the net revenue loss on ordinary activities after taxation of £61,000 (2015 - net revenue loss of £90,000) 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 £41,317,000 (2015 - net capital gain of £21,819,000) 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.

 

Notes (unaudited) (Ctd)

5.	Ordinary dividends		2016	2015	2016 £'000	2015 £'000
	Amounts recognised as distributions in the year:
	Previous year's final (paid 5 February 2015)		Nil	1.50p	Nil	735
	Also set out below are the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of section 1158 of the Corporation Tax Act 2010 are considered. There is no revenue available for distribution by way of dividend for the year (2016 - revenue loss of £61,000; 2015 - reserve loss £90,000).
			2016	2015	2016 £'000		2015 £'000
		Dividends paid and payable in respect of the year:
		Proposed final dividend per ordinary share	Nil	Nil	Nil		Nil
6.	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 2016 and 31 October 2015 National Australia Bank Limited: €9,400,000 at an interest rate of 1.59% per annum. US$25,600,000 at an interest rate of 3.14% per annum. £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. The fair value of borrowings at 31 October 2016 was £37,895,000 (2015 - £31,394,000). Net asset value per share (after deducting borrowings at fair value) was 546.13p (2015 - 462.74p).
7.	The Company incurred transaction costs on purchases of £26,000 (2015 - £29,000) and on sales of £17,000 (2015 - £22,000).
8.	At the Annual General Meeting on 28 January 2016 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 2016 or 2015. At 31 October 2016 the Company had authority to buy back 7,345,747 ordinary shares.
10.	The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 October 2016. The financial information for 2015 is derived from the statutory accounts for 2015 which have been delivered to the Registrar of Companies. The Auditors have reported on the 2015 accounts, their report was unqualified and did not contain a statement under section 495 to 497 of the Companies Act 2006. The statutory accounts for 2016 are unaudited and will be finalised on the basis of the financial information presented in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
11.	The Report and Accounts will be available on the Edinburgh Worldwide page of the Managers' website http://www.edinburghworldwide.co.uk † on or around 19 December 2016.

† Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the

Company's website (or any other website) is incorporated into, or forms part of, this announcement.

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

 

END

 

 

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