Half-year Report

RNS Number : 2035S

Edinburgh Worldwide Inv Trust PLC

22 June 2018

 

RNS Announcement

Edinburgh Worldwide Investment Trust plc

Legal Entity Identifier: 213800JUA8RKIDDLH380

Results for the six months to 30 April 2018

Since 1 February 2014, the Company has been invested in a diversified portfolio of companies which individually offer significant long term growth potential and typically have a market capitalisation of less than US$5bn at the time of initial investment.

¾ Over the six month period the Company's net asset value per share† increased by 4.4% while the comparative index* increased by 0.5%. The share price rose by 13.5%.

¾ During the period the Company issued 3,255,000 new shares at a premium to its net asset value, increasing assets by £25.1m.

¾ The net revenue return per share was a negative 0.46p (six months to 30 April 2017: gain of 0.27p largely due to a one-off refund of French withholding tax and associated interest). No interim dividend is being recommended.

¾ A number of the Company's holdings contributed to the positive performance, notably: Ocado, the online grocery company; GrubHub, a US online food-ordering platform; and Nucana, an Edinburgh-based cancer drug company.

¾ Following the period end, Unity Biotechnology listed on Nasdaq and a new holding was taken in Akili Interactive Labs. As at 31 May 2018 the Company's unlisted exposure was 2.5% of total assets, comprised of four unlisted equity investments: Akili Interactive Labs, Oxford Nanopore Technologies, Reaction Engines and Spire Global.

¾ The Board and Managers remain enthused by the range and type of companies held and believe that patient investors will be rewarded over the long term.

†  Cum income with debt at fair value.

* S&P Global Small Cap Index total return (in sterling terms).  See disclaimer at the end of this announcement.

For a definition of terms see Glossary of Terms, note 12.

Past performance is not a guide to future performance.

Edinburgh Worldwide aims to achieve long term capital growth by investing primarily in listed companies throughout the world. The Company has total assets of £426.7 million (before deduction of loans of £34.3 million) as at 30 April 2018.

Edinburgh Worldwide is managed by Baillie Gifford, the Edinburgh based fund management group with around £195 billion under management and advice as at 21 June 2018.

Edinburgh Worldwide Investment Trust plc is a listed UK company. The value of its shares and any income from them can fall as well as rise and investors may not get back the amount invested. This is because the share price is determined by the changing conditions in the relevant stock markets in which the Company invests and by the supply and demand for the Company's shares. Investment in investment trusts should be regarded as medium to long-term. 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. The Company is listed on the London Stock Exchange and is not authorised or regulated by the Financial Conduct Authority. You can find up to date performance information about 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.

22 June 2018

For further information please contact:

Anzelm Cydzik, Baillie Gifford & Co:  Tel [phone]

Roland Cross, Director, Four Broadgate: Tel [phone] or 07831 401309

The following is the unaudited Interim Financial Report for the six months to 30 April 2018.

Responsibility statement

We confirm that to the best of our knowledge:

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

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

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

By order of the Board

Henry CT Strutt

Chairman

21 June 2018

 

Interim management report

Performance

Over the six months from 31 October 2017 to 30 April 2018, the Company's net asset value per share increased by 4.4%, which compares to a rise of 0.5% in the S&P Global Smaller Companies index*, total return in sterling terms, over the same period. The share price over the six months rose by 13.5% to 784.0p representing a premium of 4.5% to the net asset value at 30 April 2018. This compares to a discount of 3.9% at the beginning of the period. This has enabled the Company to issue new shares into natural market demand at a premium to net asset value, increasing assets by £25.1m and helping to dilute the ongoing costs for shareholders.

The broad market trends that supported the strong growth in NAV in the year to October 2017 have persisted during the current interim period. Our sense is that, on balance, stock markets would appear to be currently behaving broadly (and perhaps uncharacteristically) rationally with a focus on fundamentals and a reasonable ability to tolerate the inevitable 'noise' be it interest rates, Trump or geo-political concerns. We see this reflected in markets by greater investor willingness to differentiate between companies positioned to benefit from long term structural growth opportunities versus those businesses where the future is more challenged. We have suggested in the past that the broad range of new digital technologies and scientific advances was powering a range of exciting business opportunities. It's been pleasing to see the broader market begin to acknowledge these trends. Our sense is that these trends can be exceptionally long in duration and that the businesses they spawn are comparatively immature and undervalued compared to their ultimate potential.

Portfolio update

Perhaps the most striking feature to impact on the portfolio over the past six months was the heightened level of acquisitive corporate activity. Three of our holdings were bid for during the period: the online fashion retailer YOOX Net-a-Porter; software company Mulesoft; and the investment advisor Financial Engines. In the case of the YOOX Net-a-Porter and Mulesoft the acquirers were larger industry players (Richemont and Salesforce respectively) whereas Financial Engines was bid for by a private equity company. This heightened acquisition activity follows several quiet years with regard to takeovers; the last three portfolio holdings to be acquired occurred over a three year period. Whilst we recognise that some of the Company's up-and-coming holdings will inevitably carve-out a commercial proposition and uniqueness that makes them attractive to potential acquirers it's typically an outcome that we do not actively favour. Rather, we prefer our most innovative holdings to remain independent as we believe this often maximises the likelihood of a business really succeeding and ultimately increases the long term returns that can be achieved. Furthermore, we increasingly feel that the range of scalable technologies that young businesses now have access to helps relieve the growth strain that often pushed smaller businesses towards selling out to an acquirer. Time will tell but we hope the current spike in the acquisition of our holdings is a blip rather than a trend.

We remain broadly happy with the operational performance of the vast majority of the Company's holdings. Notable positive contributions were made from Ocado, GrubHub and recently listed Nucana. Ocado, the online grocery company, has made significant progress at licensing its leading automated warehouse and logistics platform to several large incumbents around the world. Our belief has been that Ocado's proposition represents the most compelling solution for selling online grocery at scale and that its hard earned experience in the UK stood it in good stead to export this to supermarket chains throughout the world. Following the period end, Ocado has also announced a sizable partnership agreement with Kroger, the second largest grocer in the US, which could see up to 20 Ocado-powered warehouses built in the US over the coming years. This is a transformational event for Ocado and a clear endorsement of how forward-thinking supermarkets are approaching changing consumer habits. GrubHub, the US online food-ordering platform, announced a strategically interesting US partnership with YUM brands, the owner of Pizza Hut, TacoBell and KFC. This partnership sees GrubHub become YUM's exclusive national delivery partner, a development which we think is highly significant as it validates GrubHub's reach and technical expertise. Nucana, the Edinburgh-based cancer drug company, released some highly encouraging, albeit early, clinical data. In a study investigating its second-generation chemotherapy compound in a rare form of gall bladder cancer, half the patients had a clear and clinically meaningful beneficial effect from its drug. This early data provides encouraging evidence that the company's technology provides markedly superior forms of anti-cancer drugs versus the original chemotherapy agents from which they are derived.

We acquired a number of new holdings in the period including BlackLine and Jianpu Technology. BlackLine produces software which helps companies adopt continuous accounting practices. This improves compliance and reporting procedures, whilst freeing up workers for higher value added tasks. Where we are particularly excited is its potential to introduce process automation, financial analysis and forecasting for clients as well. We have been impressed by management's strategy for growth, the company's strong customer focus and its partnerships with many leading distributers. Jianpu Technology is a leading online platform that offers discovery and recommendation services for consumer finance products in China. It's the largest of its kind, working with over 2,000 financial services providers and aggregating over 170,000 products across the credit spectrum. The demand for consumer credit in China is growing rapidly whilst the industry is relatively underdeveloped and fragmented. We think Jianpu is well positioned to help address distribution issues here, and we are excited by the prospect of them developing new services with banks which could facilitate a fully digital lending experience.

We also acquired a new holding in ResTORbio, a clinical-stage biopharmaceutical company focused on selective inhibition of a critical biological pathway implicated in many age-related diseases. The targeted pathway appears to be a highly significant biological mechanism that regulates viability and longevity of stem cells. As we age the pathway can become over-activated, a development that reduces stem cell function and impacts on the body's ability to repair and replenish. The company's initial focus is on the age related decline of the immune system which frequently manifests as a decline in the ability to combat infections, most notably infections of the respiratory tract.

By 30 April 2018 our unlisted exposure had increased to 2.5% following participation in a private funding round in Reaction Engines, a UK company that designs and manufactures very advanced heat exchangers. Thermal management is one of the most fundamental problems in engineering, underpinning the power, cost, weight and efficiency of almost every industrialised process in the world. Through pioneering advances in material science and highly intricate manufacturing, Reaction Engines has overcome many of our current limitations in this field. Its products and IP therefore have broad applicability across many existing markets and open the door for several new capabilities as well. Our other unlisted holdings at the period end were Oxford Nanopore Technologies, Spire Global and Unity Biotechnology. Following the period end, Unity Biotechnology listed on Nasdaq and a new holding was taken in Akili Interactive Labs, a company utilising technology for healthcare, the net effect has kept the unlisted exposure at 2.5% of total assets as at 31 May 2018.

The holdings in Mulesoft and YOOX Net-a-Porter were sold following the aforementioned bid approaches. We have also sold our holding in Stamps.com. The company has performed well over the several years we have held it, but we see more attractive growth opportunities elsewhere and have reallocated funds accordingly.

The principal risks and uncertainties facing the Company are set out in note 11.

*See disclaimer at the end of this announcement.

For a definition of terms see Glossary of Terms, note 12.

Past performance is not a guide to future performance.

 

Income statement (unaudited)

	For the six months ended 30 April 2018			For the six months ended 30 April 2017			For the year ended 31 October 2017 (audited)
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains on sales of investments	-	14,257	14,257	-	8,560	8,560	-	13,658	13,658
Movements in investment holding gains and (losses)	-	1,220	1,220	-	19,937	19,937	-	71,923	71,923
Currency gains	-	501	501	-	851	851	-	824	824
Income from investments and interest receivable	578	-	578	563	-	563	1,268	-	1,268
Investment management fee (note 3)	(315)	(945)	(1,260)	(250)	(750)	(1,000)	(535)	(1,606)	(2,141)
Other administrative expenses	(341)	-	(341)	(266)	-	(266)	(513)	-	(513)
Net return before finance costs and taxation	(78)	15,033	14,955	47	28,598	28,645	220	84,799	85,019
Finance costs of borrowings	(119)	(357)	(476)	(126)	(378)	(504)	(250)	(749)	(999)
Net return on ordinary activities before taxation	(197)	14,676	14,479	(79)	28,220	28,141	(30)	84,050	84,020
Tax on ordinary activities	(35)	-	(35)	212	28	240	179	28	207
Net return on ordinary activities after taxation	(232)	14,676	14,444	133	28,248	28,381	149	84,078	84,227
Net return per ordinary share (note 4)	(0.46p)	29.48p	29.02p	0.27p	57.64p	57.91p	0.30p	171.58p	171.88p

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

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

A Statement of Comprehensive Income is not required as the Company does not have any other comprehensive income and the net return on ordinary activities after taxation is both the profit and comprehensive income for the period.

 

Balance sheet (unaudited)

	At 30 April 2018 £'000	At 31 October 2017 (audited) £'000
Fixed assets
Investments held at fair value through profit or loss (note 6)	402,541	383,846
Current assets
Debtors	2,689	102
Cash and cash equivalents	27,222	4,686
	29,911	4,788
Creditors
Amounts falling due within one year	(5,714)	(771)
Net current assets	24,197	4,017
Total assets less current liabilities	426,738	387,863
Creditors
Amounts falling due after more than one year (note 7)	(34,332)	(35,024)
Net assets	392,406	352,839
Capital and reserves
Share capital	2,613	2,450
Share premium account	107,140	82,180
Special reserve	35,220	35,220
Capital reserve	246,696	232,020
Revenue reserve	737	969
Shareholders' funds	392,406	352,839
Net asset value per ordinary share (after deducting borrowings at fair value) (note 7)	750.59p	718.89p
Net asset value per ordinary share (after deducting borrowings at par)	750.88p	720.02p
Ordinary shares in issue (note 8)	52,259,319	49,004,319

 

Statement of changes in equity (unaudited)

For the six months ended 30 April 2018

	Share capital £'000	Share premium account £'000	Special reserve £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 November 2017	2,450	82,180	35,220	232,020	969	352,839
Ordinary shares issued (note 8)	163	24,960	-	-	-	25,123
Net return on ordinary activities after taxation	-	-	-	14,676	(232)	14,444
Shareholders' funds at 30 April 2018	2,613	107,140	35,220	246,696	737	392,406

For the six months ended 30 April 2017

	Share capital £'000	Share premium account £'000	Special reserve £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'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	-	-	-	28,248	133	28,381
Shareholders' funds at 30 April 2017	2,450	82,180	35,220	176,190	953	296,993

*    The Capital reserve as at 30 April 2018 includes investment holding gains of £123,623,000 (30 April 2017 - gains of £70,416,000).

 

Condensed cash flow statement (unaudited)

	Six months to 30 April 2018 £'000	Six months to  30 April 2017 £'000
Cash flows from operating activities
Net return on ordinary activities before taxation*	14,479	28,141
Net gains on investments	(15,477)	(28,497)
Currency gains	(501)	(851)
Finance costs of borrowings	476	504
Overseas tax (incurred)/repaid	(27)	248
Changes in debtors and creditors	5	(7)
Cash from operations	(1,045)	(462)
Interest paid	(476)	(510)
Net cash outflow from operating activities	(1,521)	(972)
Net cash (outflow)/inflow from investing activities	(293)	3,921
Ordinary shares issued	24,541	-
Net cash inflow from financing activities	24,541	-
Increase in cash and cash equivalents	22,727	2,949
Exchange movements	(191)	(858)
Cash and cash equivalents at start of period	4,686	13,244
Cash and cash equivalents at end of period†	27,222	15,335

^* Cash from operations includes dividends received in the period of £505,000 (30 April 2017 - £439,000) and interest

   received of £24,000 (30 April 2017 - £70,000).

^† Cash and cash equivalents represent cash at bank and short term money market deposits repayable on demand.

 

Performance of the Top 20 Holdings as at 30 April 2018 (unaudited)

Name	Business		Value £'000	% of total assets	Performance†
		Country			Absolute %	Relative %
MarketAxess	Electronic bond trading platform	USA	23,814	5.6	10.4	9.8
Alnylam Pharmaceuticals	Therapeutic gene silencing	USA	17,875	4.2	(25.2)	(25.6)
LendingTree	Online loan marketplace	USA	15,518	3.6	(14.4)	(14.9)
IPG Photonics	High-power fibre lasers	USA	11,390	2.7	(3.6)	(4.1)
Ocado	Online food retailer	UK	11,070	2.6	87.5	86.5
GrubHub	Online and mobile platform for   restaurant pick-up and delivery   orders	USA	10,280	2.4	59.8	58.9
Tesla, Inc	Electric cars, autonomous driving   and solar energy	USA	9,579	2.2	(14.5)	(15.0)
Wayfair	Online furniture and homeware   retailer	USA	8,689	2.0	(14.0)	(14.5)
Temenos Group	Banking software	Switzerland	8,407	2.0	5.6	5.0
AeroVironment	Small unmanned aircraft systems	USA	7,807	1.8	2.8	2.2
Pureteach Health	IP commercialisation focused on     health care	UK	7,350	1.7	16.1	15.5
IP Group	Intellectual property   commercialisation	UK	7,313	1.7	(9.6)	(10.1)
Chegg	Online educational company	USA	7,146	1.7	44.3	43.5
Renishaw	Measurement and calibration   equipment	UK	6,631	1.6	(4.5)	(5.1)
Baozun SPN ADR	Chinese e-commerce solution   provider	China	6,458	1.5	41.3	40.5
Zillow Class C	US online real estate portal	USA	6,393	1.5	13.3	12.6
Novocure	Manufacturer of medical devices for   cancer treatment	USA	6,250	1.5	22.1	21.4
Genmab	Therapeutic antibody company	Denmark	6,228	1.5	(3.3)	(3.9)
Financial Engines	Investment advisory firm	USA	6,152	1.4	19.7	19.1
Adaptimmune   Therapeutics ADR	Clinical stage biopharmaceutical   company	UK	5,617	1.3	56.1	55.2
			189,967	44.5

†       Absolute and relative performance has been calculated on a total return basis over the period 1 November 2017 to 30 April 2018. Absolute performance is in sterling terms; relative performance is against S&P Global Small Cap Index (in sterling terms). Source: Baillie Gifford/StatPro and relevant underlying providers. See disclaimer at the end of this announcement.

The Portfolio as at 30 April 2018 (unaudited)

Name	Business		Value £'000	% of total assets
		Country
MarketAxess	Electronic bond trading platform	USA	23,814	5.6
Alnylam Pharmaceuticals	Therapeutic gene silencing	USA	17,875	4.2
LendingTree	Online loan marketplace	USA	15,518	3.6
IPG Photonics	High-power fibre lasers	USA	11,390	2.7
Ocado	Online food retailer	UK	11,070	2.6
GrubHub	Online and mobile platform for restaurant   pick-up and delivery orders	USA	10,280	2.4
Tesla, Inc	Electric cars, autonomous driving and   solar energy	USA	9,579	2.2
Wayfair	Online furniture and homeware retailer	USA	8,689	2.0
Temenos Group	Banking software	Switzerland	8,407	2.0
AeroVironment	Small unmanned aircraft systems	USA	7,807	1.8
Pureteach Health	IP commercialisation focused on health care	UK	7,350	1.7
IP Group	Intellectual property commercialisation	UK	7,313	1.7
Chegg	Online educational company	USA	7,146	1.7
Renishaw	Measurement and calibration   equipment	UK	6,631	1.6
Baozun SPN ADR	Chinese e-commerce solution provider	China	6,458	1.5
Zillow Class C	US online real estate portal	USA	6,393	1.5
Novocure	Manufacturer of medical devices for   cancer treatment	USA	6,250	1.5
Genmab	Therapeutic antibody company	Denmark	6,228	1.5
Financial Engines	Investment advisory firm	USA	6,152	1.4
Adaptimmune Therapeutics ADR	Clinical stage biopharmaceutical company	UK	5,617	1.3
Genus	Animal breeding services	UK	5,570	1.3
Foundation Medicine	Develops cancer diagnostic technology	USA	5,543	1.3
Kingdee International Software	Enterprise management software	China	5,439	1.3
iRobot	Domestic and military robots	USA	5,437	1.3
InfoMart Corp	Internet platform for restaurant supplies	Japan	5,152	1.2
Galapagos	Clinical stage biotechnology company	Belgium	5,069	1.2
Xero	Cloud-based accounting software	New Zealand	4,999	1.2
Oxford Nanopore Technologies u	Novel DNA sequencing technology	UK	4,982	1.2
Codexis	Manufacturer of custom industrial enzymes	USA	4,876	1.1
Morphosys	Therapeutic antibodies	Germany	4,839	1.1
Peptidream	Drug discovery platform	Japan	4,811	1.1
Teladoc	Telemedicine services provider	USA	4,779	1.1
MonotaRO	Online business supplies	Japan	4,416	1.0
Digital Garage	Internet business incubator	Japan	4,353	1.0
Splunk	Data diagnostics	USA	4,284	1.0
NuCana SPN ADR	An oncology-focused biotechnology company	UK	4,208	1.0
Cellectis	Biotech focused on genetic engineering	France	4,185	1.0
BlackLine	Enterprise software developer	USA	4,183	1.0
Exact Sciences	Provides non-invasive molecular tests for early      cancer detection	USA	3,992	0.9
ASOS	Online fashion retailer	UK	3,975	0.9
Name	Business		Value £'000	% of total assets
		Country
Faro Technologies	Designs and develops measurement devices	USA	3,948	0.9
Dexcom	Real time blood glucose monitoring	USA	3,874	0.9
M3	Online medical database	Japan	3,850	0.9
STAAR Surgical	Develops and manufactures high margin   visual implants	USA	3,729	0.9
Penumbra	Manufacturer of novel blood clot   extraction technology	USA	3,638	0.9
Cosmo Pharmaceuticals	Therapies for gastrointestinal diseases	Italy	3,549	0.8
Lifull (formerly Next)	Provides online property information	Japan	3,533	0.8
Trupanion	Pet health insurance provider	USA	3,527	0.8
Start Today	Internet fashion retailer	Japan	3,527	0.8
SEEK	Online recruitment portal	Australia	3,474	0.8
Victrex	High-performance thermos-plastics	UK	3,332	0.8
Xeros Technology Group	Commercial laundry manufacturer	UK	3,316	0.8
National Instruments Corp	Instrumentation equipment used in research   and testing	USA	3,247	0.8
Zillow Class A	US online real estate portal	USA	3,190	0.7
Seattle Genetics	Antibody conjugates based biotechnology	USA	3,178	0.7
Rightmove	UK online property portal	UK	3,150	0.7
Mindbody	Business management software for the   wellness sector	USA	2,732	0.6
ResTORbio	Clinical stage biopharmaceutical company	USA	2,516	0.6
Ambarella	Video compression and image processing   semiconductors	USA	2,486	0.6
Basware	Software solutions for financial transactions	Finland	2,404	0.6
Pacira Pharmaceuticals	Development, commercialisation and   manufacturing of proprietary pharmaceutical   products	USA	2,403	0.6
Benefitfocus	Cloud-based benefits software provider	USA	2,400	0.6
Jianpu Technology ADR	Chinese consumer finance marketplace	China	2,398	0.6
Suess Microtec	Fabrication and inspection equipment	Germany	2,232	0.5
Ellie Mae	Provides technology solutions to automate   mortgage origination process	USA	2,110	0.5
Aduro Biotechnology	Immunotherapy services provider	USA	2,075	0.5
Xaar	Ink jet printing technology	UK	2,051	0.5
Unity Biotechnology Inc   Series B Pref u	Biotechnology company seeking to develop   anti ageing therapies	USA	2,036	0.5
Oxford Instruments	Produces advanced instrumentation   equipment	UK	2,022	0.5
Stratasys	3D printer manufacturer	USA	2,011	0.5
Ceres Power Holding	Developer of fuel cells	UK	1,958	0.5
CEVA	Licenses DSP-based platforms applications to     the semiconductor industry	USA	1,953	0.5
Spire Global u	Manufacturer of small, low cost satellites	USA	1,948	0.5
SDL	Language translation services	UK	1,906	0.4
Tissue Regenix	Regenerative medical devices	UK	1,820	0.4
Summit Therapeutics	Drug discovery and development	UK	1,798	0.4
Digimarc	Digital watermarking technology	USA	1,704	0.4
Dialog Semiconductor	Analogue chips for mobile phones	Germany	1,655	0.4
Name	Business		Value £'000	% of total assets
		Country
Reaction Engines Limited u	Advanced heat exchange company	UK	1,500	0.3
Horizon Discovery	Customised cell lines to aid drug discovery	UK	1,466	0.3
4D Pharma	Bacteria derived novel therapeutics	UK	1,391	0.3
Ricardo	Automotive engineer	UK	1,307	0.3
China Financial Services	Small and medium-sized enterprises lending   in China	China	1,260	0.3
Nanoco	Quantum dot manufacturer	UK	1,234	0.3
Catapult Group International	Sports analytics focused on optimising athlete   performance	Australia	1,198	0.3
C4X Discovery Holdings	Rational drug design and optimisation	UK	1,182	0.3
Zumtobel	Commercial lighting	Austria	680	0.2
Acacia Research	Patent licenser	USA	589	0.1
Sarine Technologies	Systems for diamond grading and cutting	Singapore	494	0.1
Avacta Group	Analytical reagents and instrumentation	UK	494	0.1
Thin Film Electronics	Develops printed, rewritable memory media	Norway	439	0.1
Foamix Pharmaceuticals	Drug reformulation technology	Israel	387	0.1
Ilika	Discovery and development of materials for   mass market applications	UK	373	0.1
Unity Biotechnology Inc Series C.   Pref u	Biotechnology company seeking to develop   anti ageing therapies	USA	298	0.1
Applied Graphene Materials	Manufactures graphene nanoplatelets	UK	287	0.1
hVIVO (formerly Retroscreen   virology)	Outsourced pre-clinical analytical services	UK	154	0.0
Velocys	Gas to liquid technology	UK	52	0.0
GI Dynamics	Develops and markets medical devices	Australia	17	0.0
Ensogo	South East Asian e-commerce	Australia	0	0.0
China Lumena New   Materials	Mines, processes and manufactures   natural thenardite products	China	0	0.0
Total equities			402,541	94.3
Net current assets			24,197	5.7
Total assets at fair value (before deduction of loans)			426,738	100.0

^u Denotes unlisted equity

Past performance is not a guide to future performance.

 

Distribution of total assets (unaudited)

Industry Analysis at 30 April 2018	% of total assets*		Portfolio Weightings (relative to comparative index†) at 30 April 2018 %
Biotechnology	18.6		15.6
Internet Software and Services	9.3		7.0
Software	8.8		5.6
Capital Markets	8.7		6.0
Electronic Equipment, Instruments and Components	6.7		3.6
Internet and Direct Marketing Retail	6.4		5.9
Life Sciences Tools and Services	4.4		3.6
Health Care Equipment and Supplies	4.2		1.7
Thrifts and Mortgage Finance	3.6		2.9
Pharmaceuticals	2.4		0.5
Health Care Technology	2.3		1.9
Automobiles	2.2		2.1
Semiconductors and Semiconductor Equipment	2.2		0.0
Aerospace and Defence	2.2		0.8
Diversified Consumer Services	1.7		0.9
Household Durables	1.3		(0.3)
Professional Services	1.3		(0.3)
Technology, Hardware, Storage and Peripherals	1.1		0.6
Trading Companies and Distributors	1.0		(0.4)
IT Services	1.0		(1.7)
Machinery	0.9		(3.7)
Consumer Finance	0.9		0.1
Chemicals	0.8		(2.5)
Insurance	0.8		(2.0)
Media	0.8		(1.1)
Electrical Equipment	0.7		(0.3)
Energy Equipment and Services	0.0		(1.3)
Net Current Assets	5.7		5.7
Total Assets	100.0
* Total assets before deduction of loans.

† S&P Global Small Cap Index. Weightings exclude industries where the Company has no exposure. See disclaimer at the end of this announcement.

 

Distribution of total assets^* (unaudited)

Geographical Analysis		30 April 2018 %		31 October 2017 %
North America		51.5		54.9
	USA	51.5	54.9
Europe		29.9	32.6
	United Kingdom	20.5	20.3
	Eurozone	5.8	9.1
	Developed Europe (non euro)	3.6	3.2
Asia		10.6	9.0
	Japan	6.9	6.6
	China	3.6	2.3
	Singapore	0.1	0.1
Australasia		2.3		2.5
	Australia	1.1	1.4
	New Zealand	1.2	1.1
Net Current Assets		5.7		1.0
Total Assets		100.0		100.0

Sectoral Analysis		30 April 2018 %		31 October 2017 %
	Consumer Discretionary	12.4		15.0
	Financials	14.0		14.7
	Health Care	31.9		29.6
	Industrials	6.1		6.0
	Information Technology	29.1		32.8
	Materials	0.8		0.9
	Net Current Assets	5.7		1.0
Total Assets		100.0		100.0

* Total assets before deduction of loans.

Notes to the condensed Financial Statements (unaudited)

1.	The condensed Financial Statements for the six months to 30 April 2018 have been prepared in accordance with FRS 104 'Interim Financial Reporting' and the AIC's Statement of Recommended Practice issued in November 2014 and have not been audited or reviewed by the Auditor pursuant to the Auditing Practices board Guidance on 'Review of Interim Financial Information'. The Financial Statements for the six months to 30 April 2018 have been prepared on the basis of the same accounting policies as set out in the Company's Annual Report and Financial Statements at 31 October 2017. Going Concern Having considered the nature of the Company's principal risks and uncertainties, as set out on in note 11 below, together with its current position, investment objective and policy, its assets and liabilities, and projected income and expenditure together with the Company's dividend policy, it is the Directors' opinion that the Company has adequate resources to continue in operational existence for the foreseeable future. The 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 Directors consider it appropriate to adopt the going concern basis of accounting in preparing these Financial Statements and confirm that they are not aware of any material uncertainties which may affect the Company's ability to continue to do so over a period of at least twelve months from the date of approval of these Financial Statements.
2.	The financial information contained within this Interim Financial Report does not constitute statutory accounts as defined in sections 434 to 436 of the Companies Act 2006. The financial information for the year ended 31 October 2017 has been extracted from the statutory accounts which have been filed with the Registrar of Companies. The Auditor's Report on those accounts was not qualified and did not contain a statement under sections 498(2) or (3) of the Companies Act 2006.
3.	Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford & Co, has been appointed by the Company as its Alternative Investment Fund Manager and Company Secretary. The investment management function has been delegated to Baillie Gifford & Co. The management agreement is terminable on not less than three months' notice. 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. Management fees are calculated and payable quarterly.
4.	Net return per ordinary share	Six months to 30 April 2018 £'000	Six months to 30 April 2017 £'000	Year to 31 October 2017 (audited) £'000
	Revenue return on ordinary activities after taxation	(232)	133	149
	Capital return on ordinary activities after taxation	14,676	28,248	84,078
	Total return	14,444	28,381	84,227
	Weighted average number of ordinary shares in issue	49,778,352	49,004,319	49,004,319
	Net return per ordinary share is based on the above totals of revenue and capital and the weighted average number of ordinary shares in issue during each period. There are no dilutive or potentially dilutive shares in issue.
5.	No interim dividend has been declared.

 

Notes to the condensed Financial Statements (unaudited) (ctd)

6.	Fair Value Hierarchy The fair value hierarchy used to analyse the basis on which the fair values of financial instruments held at fair value through the profit or loss account are measured is described below. Fair value measurements are categorised on the basis of the lowest level input that is significant to the fair value measurement. Level 1 - using unadjusted quoted prices for identical instruments in an active market; Level 2 - using inputs, other than quoted prices included within Level 1, that are directly or indirectly observable (based on                market data); and Level 3 - using inputs that are unobservable (for which market data is unavailable). An analysis of the Company's financial asset investments based on the fair value hierarchy described above is shown below. Investments held at fair value through profit or loss
		As at 30 April 2018	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
		Listed equities	391,777	-	-	391,777
		Unlisted equities	-	-	10,764	10,764
		Total financial asset investments	391,777	-	10,764	402,541
		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
	There have been no transfers between levels of the fair value hierarchy during the period. The fair value of listed investments is either bid price or, depending on the convention of the exchange on which the investment is listed, last traded price. Listed investments are categorised as Level 1 if they are valued using unadjusted quoted prices for identical instruments in an active market and as Level 2 if they do not meet all these criteria but are, nonetheless, valued using market data. Unlisted investments are valued at fair value by the Directors following a detailed review and appropriate challenge of the valuations proposed by the Managers. The Managers' unlisted investment policy applies methodologies consistent with the International Private Equity and Venture Capital Valuation guidelines ('IPEV'). These methodologies can be categorised as follows: (a) market approach (price of recent investment, multiples, industry valuation benchmarks and available market prices); (b) income approach (discounted cash flows); and (c) replacement cost approach (net assets). The Company's holdings in unlisted investments are categorised as Level 3 as unobservable data is a significant input to their fair value measurements.
7.	At 30 April 2018 creditors falling due after more than one year comprise borrowings of £34,332,000 (31 October 2017 - £35,024,000) drawn down under a five year fixed rate facility with National Australia Bank Limited which expires on 30 September 2019. The loans drawn down consisted €9.4m, US$25.6m and £7.5m at 30 April 2018 and 31 October 2017. The fair value of the bank loans at 30 April 2018 was £34,484,000 (31 October 2017 - £35,574,000).
8.	The Company has the authority to issue shares/sell treasury shares at a premium to net asset value as well as to buy back shares at a discount to net asset value. In the six months to 30 April 2018, 3,255,000 ordinary shares (year to 31 October 2017 - nil) were issued at a premium to net asset value raising net proceeds of £25,123,000 (year to 31 October 2017 - nil). In the six months to 30 April 2018 no ordinary shares were bought back therefore the Company's authority remains unchanged at 7,345,747 ordinary shares.

Notes to the condensed Financial Statements (unaudited) (ctd)

9.	During the period the Company incurred transaction costs on purchases of investments of £12,000 (30 April 2017 - £9,000; 31 October 2017 - £23,000) and transaction costs on sales of £13,000 (30 April 2017 - £7,000; 31 October 2017 - £23,000).
10.	Related Party Transactions There have been no transactions with related parties during the first six months of the current financial year that have materially affected the financial position or the performance of the Company during that period and there have been no changes in the related party transactions described in the last Annual Report and Financial Statements that could have had such an effect on the Company during that period.
11.	Principal Risks and Uncertainties The principal risks facing the Company are financial risk, investment strategy risk, discount risk, regulatory risk, custody and depositary risk, small company risk, unlisted investments, operational risk, leverage risk and political and associated economic risk. An explanation of these risks and how they are managed is set out on pages 7 and 8 of the Company's Annual Report and Financial Statements for the year to 31 October 2017 which is available on the Company's website: www.edinburghworldwide.co.uk. The principal risks and uncertainties have not changed since the date of that report.
12.	Glossary of Terms Total Assets Total value of all assets held less liabilities (other than liabilities in the form of borrowings). Shareholders' Funds and Net Asset Value Shareholders' Funds is the value of all assets held less all liabilities with borrowings deducted at book cost. Net Asset Value (NAV) is the value of all assets held less all liabilities, with borrowings deducted at either fair value or par value as described below. Per share amounts are calculated by dividing the relevant figure by the number of ordinary shares in issue. Borrowings at Fair Value Borrowings are valued at an estimate of their market worth. Borrowings at Par Value Borrowings are valued at nominal par value (book cost). Net Liquid Assets Net liquid assets comprise current assets less current liabilities (excluding borrowings). Discount/Premium As stockmarkets and share prices vary, an investment trust's share price is rarely the same as its NAV. When the share price is lower than the NAV 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 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).

Notes to the condensed Financial Statements (unaudited) (ctd)

12.	Glossary of Terms (Ctd) 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. 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. Potential gearing is the Company's borrowings expressed as a percentage of shareholders' funds. Invested gearing is the Company's borrowings at par less cash and brokers' balances 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 a ratio between the Company's exposure and its net asset value and can be calculated on a gross and a commitment method. Under the gross method, exposure represents the sum of the Company's positions after the deduction of sterling cash balances, without taking into account any hedging and netting arrangements. Under the commitment method, exposure is calculated without the deduction of sterling cash balances and after certain hedging and netting positions are offset against each other.
13.	The Interim Financial Report will be available at www.edinburghworldwide.co.uk‡ and will be posted to shareholders on or around 29 June 2018.
‡ 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.
None of the views expressed in this document should be construed as advice to buy or sell a particular investment.
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Regulated Information Classification: Half Yearly Financial Report. - Ends -

 

END

 

 

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