TIDMBGUK
RNS Number : 0079S
Baillie Gifford UK Growth Fund PLC
03 July 2020
Baillie Gifford UK Growth Fund plc
Legal Entity Identifier: 549300XX386SYWX8XW22
Regulated Information Classification: Annual Financial and Audit
Reports
Annual Financial Report
This is the Annual Financial Report of Baillie Gifford UK Growth
Fund 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 30 April 2019 or 30 April 2020 but is derived from
those accounts. The Company's Auditors have reported on the Annual
Report and Financial Statements for 2019 and 2020; their reports
were unqualified, did not draw attention to any matters by way of
emphasis, and did not contain statements under 498(2) or 498(3) of
the Companies Act 2006. Statutory accounts for the year ended 30
April 2019 have been filed with the Registrar of Companies and the
statutory accounts for the year ended 30 April 2020 will be
delivered to the Registrar in due course.
The Annual Report and Financial Statements for the year ended 30
April 2020, including the Notice of Annual General Meeting, has
been submitted electronically to the National Storage Mechanism and
will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism and is also
available on the Baillie Gifford UK Growth Fund plc page of the
Baillie Gifford website at: www.bgukgrowthfund.com
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 Secretary
30 June 2020
Covid-19 coronavirus - Important note regarding arrangements for
the Annual General Meeting (AGM)
The Board of Baillie Gifford UK Growth Fund plc (UK Growth)
recognises the public health risk associated with the Covid-19
outbreak arising from public gatherings and notes the Government's
measures restricting such gatherings, travel and attendance at
workplaces.
At the same time, the Board is conscious of the legal
requirement for UK Growth to hold its AGM before the end of
October. Given the current uncertainty around when public health
concerns will have abated, the Board has for the time being decided
to aim to follow the Company's customary corporate timetable and,
accordingly, the Company's AGM is being convened to take place as
scheduled at 12 noon on Wednesday 5 August 2020 at the offices of
Baillie Gifford & Co, Calton Square, 1 Greenside Row, Edinburgh
EH1 3AN without access for shareholders. The Board will, however,
continue to monitor developments and any changes will be advised to
shareholders by post and details will be updated on the Company's
website. In the meantime, the Board encourages all shareholders to
submit proxy voting forms as soon as possible and, in any event, by
no later than 12 noon on 3 August 2020.
We would encourage shareholders to monitor the Company's website
at www.bgukgrowthfund.com . Should shareholders have questions for
the Board or the Managers or any queries as to how to vote, they
are welcome as always to submit them by email to
trustenquiries@bailliegifford.com or call 0800 917 2112. Baillie
Gifford may record your call.
Chairman's Statement
Covid-19
In these uncertain times, my fellow Directors and I would like
to take this opportunity to extend our thoughts to all affected by
recent events, and our gratitude to those working tirelessly for
the benefit of all.
Your Board has been monitoring how the Managers and other
service providers have been responding to developments and has
sought assurances that, operationally, they are acting responsibly
towards their employees whilst maintaining appropriate standards of
service to the Company. The portfolio managers in turn have
continued to seek similar assurances from the companies held in the
portfolio.
Annual General Meeting ('AGM')
It is intended that the Company's AGM will be held on Wednesday
5 August 2020 at 12.00 noon at the offices of Baillie Gifford, 1
Greenside Row, Edinburgh, EH1 3AN. Whilst normally inviting
shareholders to attend, this doesn't seem possible at the current
time, so shareholders are encouraged to submit their votes by proxy
rather than attempt to do so in person. The meeting itself will
involve the minimum number of people necessary for it to be quorate
so anyone not authorised to attend will be declined entry for
health reasons. Should the situation change, further information
will be made available through the Company's website at
www.bgukgrowthfund.com and the London Stock Exchange regulatory
news service.
Performance
For the year to 30 April 2020, the Company's net asset value
('NAV') total return (capital and income) was negative 12.5%
compared to a negative 16.7% for the FTSE All-Share Index total
return.
The Company's share price total return over the same period was
negative 14.6%. Whilst disappointing to see a fall in value, it is
good to see our quality portfolio outperforming the broader market
in these difficult times.
The longer-term prospects for our companies look exciting. The
Managers' review below highlights some of the interesting
developments in the portfolio as well as some of the issues
faced.
Stewardship
As long-term 'actual' investors, the portfolio managers' focus
is on promoting the best long-term performance outcomes for the
businesses in which they invest, actively engaging with companies
on those issues which could impact their long-term potential and
supporting actions which they believe will maximise returns in
future years. As part of the investment research process,
consideration is given to relevant environmental, social and
governance issues and the impact these may have on future
returns.
The portfolio managers invest in companies at different stages
in their evolution and across different industries and are wary of
prescriptive policies and rules, believing that these can run
counter to thoughtful and beneficial corporate stewardship. The
approach adopted therefore favours a small number of simple
stewardship principles which help shape interactions with
companies. These principles, along with their core investment
principles, are set out on page 9 of the Annual Report and
Financial Statements .
Share Buy-backs and Issuance from Treasury
No shares were bought back during the year to 30 April 2020. At
the forthcoming AGM, the Board will ask shareholders to renew the
mandate to repurchase up to 14.99% of the outstanding shares. The
share buy-back policy seeks to operate in the best interests of
shareholders by taking into account the relative level of the
Company's share price discount to NAV when compared with peer group
trusts, the absolute level of discount, volatility in the level of
discount and the impact from share buy-back activity on the
long-term liquidity of the Company's issued shares.
The Board also believes that the Company benefits from the
flexibility of being able to re-issue any shares that might be held
in treasury and is therefore looking to renew the annual issuance
authority. At present there are 10,396,700 shares, 6.9% of the
Company's issued share capital as at 30 April 2020, held in
treasury. To avoid any dilution to existing investors, these would
only be re- issued at a premium to NAV and after associated
costs.
Gearing
During the year, the Company replaced its Scotiabank GBP35
million revolving one year credit facility with a GBP20 million
revolving credit loan facility with National Australia Bank. This
new facility contains the option to increase the amount borrowed to
GBP35 million. No borrowings were drawn in the period and this
continues to be the position.
The Board sets internal guidelines for the portfolio managers'
use of gearing which are altered from time to time but are subject
to net effective gearing not representing more than 20% of
shareholders' funds.
Earnings and Dividends
The net revenue return per share for the year was 3.75p, versus
5.12p in 2019. A final dividend of 3.10p per share, payable on 12
August 2020 to shareholders on the register as at 10 July 2020, is
being recommended. Shareholders should not rely on receiving a
regular or growing level of income from the Company as its priority
is capital growth. Any dividend paid will be by way of a single
final payment and the Board expects that such dividends would
represent approximately the minimum permissible to maintain
investment trust status.
Diversity Policy
The Board believes that maintaining a diversity of thought and
experience on the Board, and at an operational level within Baillie
Gifford, represents the best way of discharging its
responsibilities to shareholders. In furtherance of this belief,
the Board will look for the best ways to increase the diversity of
gender, ideas, professional experiences and cultural backgrounds to
which the Company is exposed.
The Board will continue to monitor diversity on an ongoing
basis, having regard to developments in Corporate Governance Code
and wider market practice, and seek to ensure that the Company
retains the benefits of a diversity of thought and experience going
forward. As circumstances allow, the Company will continue to look
for opportunities to broaden the diversity to which the Company is
exposed, in furtherance of this commitment.
Financial Conduct Authority ('FCA') Value Assessment
Shareholders might be aware that new FCA rules require
Alternative Investment Fund Managers to assess the overall value
that their authorised unit trusts and open-ended funds deliver to
investors. Although these rules do not apply to investment trusts,
it should be noted that, over the course of the Company's financial
year, the Company's Committees and Board assessed various costs
levied by third party service providers as well as the Managers and
Secretaries, and the quality of service received. I can therefore
report that at present it is the Board's view that charges levied
by third parties and the Managers and Secretaries are
reasonable.
Outlook
The long-term ramifications of Covid-19 on the UK and global
economies are unknown, but it is likely that in the short-term the
trading environment for many companies will be exceptionally
challenging. On top of this, whilst the UK has left the European
Union, the risks of a disorderly Brexit remain high.
The Board and Managers have attempted to consider the
implications of such matters sensibly and dispassionately and
remain convinced that exceptional UK growth companies are still
able to exploit their competitive strengths over the long-term and
take advantage of the opportunities that follow severe economic
dislocation. Patient investors should, therefore, be rewarded in
due course.
Carolan Dobson
Chairman
19 June 2020
For a definition of terms, see Glossary of Terms and Alternative
Performance Measures at the end of this announcement.
Past performance is not a guide to future performance.
Managers' Report
================
The impact of the Covid-19 pandemic will likely be felt for some
years to come. It has had tragic consequences for many families
to-date whilst also shining a light on a number of professions that
historically have always worked tirelessly for the good of society
without the deserved recognition. We extend our sympathies to those
that have suffered bereavement and our thanks to those vital
workers that have carried out their duties in exceptionally
difficult times. Considering the current tragic backdrop, it seems
rather trivial to remind people that investment for the long-term
remains our core professional focus, assimilating events and
considering the implications for the portfolio, but professionally
this is what we must do.
Although one can never say never, when writing future reports,
we think it will be hard to match the events of the 12 months to 30
April 2020 for escalating drama. In the interim report we referred
to the first half of the financial year as "tumultuous" with Brexit
negotiations and global trade war concerns dominating headlines. So
how on earth can one describe the events of the second half?
Firstly, a snap UK election resulting in a surprisingly large
Conservative majority that initially cheered markets and directly
led to 'Brexit' actually happening, with the UK leaving the
European Union at the end of January. But even those historic
events were in turn superseded by the coronavirus (Covid-19)
pandemic that led to most countries in the world forcing their
citizens into lockdown and a collapse in economic activity. The UK
stock market, in particular, suffered in this latter phase and, as
the Chairman noted in her report, we ended in negative territory
for the year.
Rather than speculate and blether on (a Scottish phrase) at
length about the consequences of current events where the most
intellectually honest, if slightly unsatisfactory, response to
fellow shareholders is "we simply don't know", we think a more
useful analysis is to answer 'what have you done, what are you
doing and where are you going?' Particularly in regard to the
latter point, whilst we have said in the past that we have no
crystal ball, it is reasonable to ask how our investment framework
helps us think about the current extraordinarily difficult and
uncertain environment for companies.
What have we done?
The main thing to say about the last twelve months is that we
have stayed true to our investment principles which, as always, are
separately shown on page 9 of the Annual Report and Financial
Statements . In our minds, there is a strong temptation to start
reacting to near term events unless one has the discipline of a
consistent investment process. Despite the distractions of the last
twelve months we are, and remain, bottom up stock pickers with a
long-term investment horizon, meaning that portfolio turnover has
remained low. We have said previously that performance over
short-term periods will be random. Consequently, we should not draw
out significant conclusions of the portfolio outperforming over
this twelve-month period, particularly as we downplayed the
significance of the portfolio underperforming over the first half
in the interim report. Such ups and downs are to be expected with a
portfolio that looks very different from the index. What we can say
is that despite some significant share price falls we remain
unenthused about large parts of the UK markets, such as energy and
banking, as we continue to believe the long-term prospects in those
areas are unexciting for growth investors.
Nevertheless, we remained alert to new opportunities and prior
to the crisis bought new holdings in Farfetch (discussed in the
interim report), Games Workshop and a small holding in Creo
Medical. Games Workshop is a well-established retailer of its own
fantasy games (such as Warhammer) and model figures that
enthusiastic gamers buy and paint themselves. Over thirty years the
business has built a fantastic amount of intellectual property and
nurtured a loyal and passionate customer base. While this is always
going to be a niche hobby, the growing interest in the fantasy area
has, we think, stimulated additional demand for its products. Over
the last few years, the current management team has made some well
thought out tweaks to the business model that have been very
successful, such as letting the company's independent wholesalers
also sell the product online, simplifying the rules book to make
the game more accessible to new customers, increased new product
introductions and also engaged digitally with the gaming community.
This latter change has generated significant goodwill and
strengthened the relationship Games Workshop has with its community
of gamers. We are excited about the remaining growth potential for
the hobby, particularly internationally, as well as the scope to
build a large and profitable IP licensing business. The latter will
take time and patience, but we think the returns to long-term
shareholders are potentially significant.
Creo Medical is one of the most exciting smaller companies we
have come across in the recent past. It designs and manufactures
new and highly innovative endoscopes which enable physicians to
take this technology outside of the purely investigative/diagnostic
realm into the operating theatre and use it effectively in
therapeutic applications. Although Creo is still at an early stage
of its development, and therefore with associated risks, there is
growing evidence that its products are transformative to patient
care in a range of cancers (starting with gastrointestinal
indications), allowing for significantly quicker recovery, reduced
hospital stays and lower recurrence rates. A recent liquidity event
- the company raised some funding to accelerate the
distribution/commercialisation of its product suite - allowed us to
buy a small holding.
What are we doing?
Since the coronavirus outbreak, the focus of our discussions
(now over Zoom calls rather than in person) has continued to be on
finding and owning the most promising UK growth businesses over a
five-year plus horizon. This means that we are simultaneously
looking for new opportunities while also carefully appraising the
resilience of our existing investments in the face of current
events and asking ourselves if the long-term case has in any way
been impaired. One painful decision we took in the early stages of
the crisis was to sell the holding in the cruise ship operator
Carnival, despite the shares having already fallen significantly.
In this particular case, we had concerns that growing the cruise
market may prove challenging when a semblance of normality returns
while, in the short-term, the balance sheet of the business was
uncomfortably laden with debt, not a promising position when
revenues are rapidly drying up. Interestingly, subsequent to our
sale, Carnival has attempted to shore up its balance sheet with a
mixture of expensive debt and equity which will undoubtedly dilute
the upside for shareholders in the business should a cheerful
scenario of recovery for cruising come to pass. On the flipside, we
bought a new holding in 4imprint, a company which we have liked for
some time but where valuation has been a stumbling block. 4imprint
distributes promotional products used by businesses (primarily in
the United States) as a form of advertising or as gifts to
customers and employees. It operates in a large and extremely
fragmented market and, through investments in marketing and its
sales force, it has been gaining market share over many years from
its smaller and less efficient competitors. The current lockdown
measures have resulted in an extremely challenging operating
environment. However, the business has a very robust financial
position and should withstand the storm. If the 2009 downturn is an
example, the company will emerge stronger and continue to
significantly outgrow its underlying market.
Where are we going?
Perhaps the most important question of the three we asked
ourselves is this final one. Neither of your portfolio managers are
fans of trying to draw lessons from the last crisis, as some
commentators have done. This smacks to us of generals trying to
fight the last war. In reality, all crises are unique and
complicated in their origins and we have been considering whether
some of the broad themes that many of our holdings play into still
ring true. What we would venture is that much of our thinking here
is tentative and may change as more information comes to light. The
most important theme by far is the growing digitisation of the
economy and our belief that many growth businesses are trying to
capitalise on this. Our view is that the current crisis is akin to
a shock that will likely accelerate this trend. From our own
business to others that we own or observe, necessity is forcing
organisations to adopt digital ways of working. This can be painful
but in the long-term can unlock significant productivity gains and
opportunities for smart management teams. Our holdings in FDM Group
and First Derivatives are, we believe, well-placed to benefit from
enterprises in many different industries increasing investments in
their technology infrastructure. The current crisis will also
likely further entrench the "digital" habits of consumers and boost
demand for our consumer technology platforms and retailers such as
Just Eat Takeaway.com, Farfetch and Boohoo.com. We also remain
enthusiastic about the strong network effects underpinning the
dominant positions of Rightmove and Autotrader. In this severe and
sudden downturn in activity in their end markets, however, both
businesses have rightly realised that their competitive positions
are best served by being financially supportive of their own
customers, estate agent and second-hand car dealers respectively.
Our mindset in both these cases is to back this policy of
short-term financial pain in order to safeguard long-term
opportunities.
We cannot wish away the fact that it is likely that the most
dramatic recession in UK history is pending and will cause damage
whose effects are not clear. That explains why, despite the Board
being supportive of us utilising the additional firepower of our
borrowing facilities, we have so far been cautious in gearing the
portfolio. One final point is worth noting. As growth investors,
dividends do not hold centre stage in our approach and in our view
should only flow from the profits and cash flow generated after
appropriate investment back into the business. The current dividend
crisis in the UK, with an unprecedented decline in pay-outs to
shareholders, is therefore of less interest to us. Indeed, in
several cases, we have been supportive of decisions by companies to
suspend dividends given the economic difficulties and the necessity
to protect the business and position themselves for the
opportunities that may arise.
While we remain optimistic about the overall quality and
superior growth potential of the companies in the portfolio, we
must acknowledge the greater than usual element of uncertainty.
What gives us some confidence, if one is prepared to look beyond
the immediate crisis, is that we have a high degree of confidence
in the management teams of our business. In communication with many
of them over recent weeks, our message has been simple: please try
to do the right thing for the long-term interests of your business
and try to do right by your other stakeholders such as staff,
suppliers and customers. This is not easy, but rather like our
investment style, we think by attempting to focus on the
fundamentals of long-term success, the odds of a positive outcome
are tilted in your favour. And to our fellow shareholders, we would
like to thank you for your continued patience and support and look
forward to updating you on our future progress.
Iain McCombie and Milena Mileva
Baillie Gifford & Co
19 June 2020
For a definition of terms, see Glossary of Terms and Alternative
Performance Measures at the end of this announcement.
Past performance is not a guide to future performance.
List of Investments as at 30 April 2020
=================================================================
Name Business Fair % of
Value total
GBP'000 assets
==================================== ============================================= ========= ========
Basic Materials
Rio Tinto Metals and mining company 6,764 2.6
Speciality high-performance chemicals
Victrex manufacturer 4,633 1.7
========= ========
11,397 4.3
========= ========
Consumer Goods
Diageo International drinks company 7,823 3.0
Games Workshop Group Toy manufacturer and retailer 6,484 2.4
Burberry Luxury goods retailer 5,554 2.1
19,861 7.5
========= ========
Consumer Services
Operator of online and mobile market
place for takeaway
Just Eat Takeaway.com food 11,178 4.2
Advertising portal for second hand
Auto Trader Group cars in the UK 9,895 3.7
Boohoo.com Online fashion retailer 9,705 3.7
HomeServe Domestic Insurance 9,004 3.4
Professional publications and information
RELX provider 8,574 3.2
Rightmove UK's leading online property portal 8,088 3.1
Manufacturer and distributer of
kitchens to trade
Howden Joinery customers 7,554 2.9
Inchcape Car wholesaler and retailer 4,903 1.9
Euromoney Institutional
Investor Specialist publisher 2,611 1.0
Mitchells & Butlers Pub and restaurant operator 2,106 0.8
Technology platform for the global
Farfetch fashion industry 2,041 0.8
4imprint Direct marketer of promotional merchandise 1,984 0.8
========= ========
77,643 29.5
========= ========
Financials
St. James's Place UK wealth manager 9,129 3.5
Hargreaves Lansdown UK retail investment platform 8,967 3.4
Prudential International life insurer 8,596 3.3
Insurance and investment management
Legal & General company 6,639 2.5
Helical Property developer 6,533 2.5
Provides platform services to financial
IntegraFin clients 6,309 2.4
Provider of retirement income products
Just Group and services 4,370 1.6
Technology focused venture capital
Draper Esprit firm 3,451 1.3
IG Group Spread betting website 3,245 1.2
Hiscox Property and casualty insurance 2,834 1.1
AJ Bell Investment platform 2,792 1.0
========= ========
62,865 23.8
========= ========
Name Business Fair Value % of
GBP'000 total
assets
=================== ======================================= =========== ========
Healthcare
Genus World leading animal genetics company 10,899 4.1
Online platform selling antibodies
to life science
Abcam researchers 10,829 4.1
Designer and manufacturer of medical
Creo Medical equipment 593 0.3
=========== ========
22,321 8.5
=========== ========
Industrials
Renishaw World leading metrology company 9,121 3.4
Ultra Electronics Aerospace and defence company 7,569 2.9
Halma Specialist engineer 6,704 2.5
Bunzl Distributor of consumable products 6,266 2.4
Ashtead Construction equipment rental company 5,884 2.2
Volution Group Supplier of ventilation products 5,210 2.0
PageGroup Recruitment consultancy 4,098 1.6
Bodycote Heat treatment and materials testing 4,019 1.5
Specialist service provider to
James Fisher & the global marine and energy
Sons industries 2,270 0.9
Rolls-Royce Power systems manufacturer 2,157 0.8
53,298 20.2
=========== ========
Technology
First Derivatives IT consultant and software developer 6,560 2.5
Provider of professional services
focusing on information
FDM Group technology 5,848 2.2
=========== ========
12,408 4.7
=========== ========
Total Equities 259,793 98.5
Net Liquid Assets 3,866 1.5
Total Assets 263,659 100.0
============================================================ =========== ========
Stocks in bold are the 20 largest holdings.
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:
- the movement in net asset value total return per ordinary
share relative to the benchmark total return over the longer
term;
- the movement in the share price total return relative to the
benchmark total return over the longer term;
- the absolute level of movement in the net asset value total
return over the longer term;
- the absolute level of movement in the share price total return
over the longer term;
- the premium/discount of the share price to the net asset value
per share;
- management fee; and
- ongoing charges.
An explanation of these measures can be found in the Glossary of
Terms and Alternative Performance Measures at the end of this
announcement.
The one, five and ten year records for the KPIs can be found on
pages 4,5 and 14 of the Annual Report and Financial Statements.
In addition to the above, the Board considers peer group
comparative performance.
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' Report above.
Related Party Transactions
The Directors' fees for the year and interests in the Company's
shares at the end of the year are detailed in the Directors'
Remuneration Report on page 27 of the Annual Report and Financial
Statements. No Director has a contract of service with the Company.
During the years reported, 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 Secretary.
Baillie Gifford & Co Limited has delegated portfolio management
services to Baillie Gifford & Co. Dealing activity and
transaction reporting has been further sub-delegated to Baillie
Gifford Overseas Limited and Baillie Gifford Asia (Hong Kong)
Limited.
The Investment Management Agreement between the AIFM and the
Company 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 Investment Management
Agreement is terminable on not less than six months' notice or on
shorter notice in certain circumstances. Compensation would only be
payable if termination occurred prior to the expiry of the notice
period. The annual management fee is 0.5% of net assets, calculated
and payable quarterly. For the financial year ended 30 April 2019,
in order to offset the costs of repositioning the portfolio
following its appointment as AIFM, Baillie Gifford agreed to waive
its management fee for the year to the extent of GBP732,000
(approximately equal to six months' management fee payable to
Baillie Gifford based on the Company's net asset value on 29 June
2018).
2020 2020 2020 2019 2019 2019
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
======================= ========= ========= ========= ========= ========= =========
Investment management
fee 438 1,021 1,459 239 556 795
======================= ========= ========= ========= ========= ========= =========
Principal Risks
As explained on pages 21 and 22 of the Annual Report and
Financial Statements there is an ongoing 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 and emerging 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 of listed
securities and its principal and emerging 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 below. The Board has, in particular, considered the
impact of heightened market volatility since the Coronavirus
outbreak. To mitigate this risk the Board considers at each meeting
various portfolio metrics including individual stock performance,
the composition and diversification of the portfolio by sector,
purchases and sales of investments and the top and bottom
contributors to performance. The Managers provide rationale for
stock selection decisions. 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. To manage this risk, the Board monitors the level
of discount/premium at which the shares trade and the Company has
authority to buy back its existing shares 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 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 cyber security incidents. To mitigate this
risk, the Audit 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. 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 Committee and any concerns
investigated. In addition, the existence of assets is subject to
annual external audit.
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
(including any disruption resulting from the Coronavirus outbreak)
or major disaster. Since the introduction of the Covid-19
restrictions, almost all Baillie Gifford staff have been working
from home and operations have continued largely as normal. The
Board 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. The other key third party service
providers have not experienced significant operational difficulties
affecting their respective services to the Company.
Leverage Risk - the Company may borrow money for investment
purposes (sometimes known as 'gearing' or 'leverage'). 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 borrowing facilities 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
Company's investments are in listed securities that are readily
realisable. Further information on leverage can be found below and
in the Glossary of Terms and Alternative Performance Measures at
the end of this announcement.
Political Risk - political developments are monitored and
considered by the Board as they occur, such as the departure of the
UK from the European Union on 31 January 2020, and to assess the
political consequences for the Company's future activities.
Viability Statement
Notwithstanding that the continuation of the Company is subject
to approval by shareholders every five years, with the next vote at
the Annual General Meeting in 2024, the Directors have, in
accordance with provision 31 of the UK Corporate Governance Code,
assessed the prospects of the Company over a five year period. The
Directors continue to believe this period to be appropriate as it
reflects the Company's longer term investment strategy and to be a
period during which, in the absence of any adverse change to the
regulatory environment and to the 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
effectiveness of the controls employed to mitigate those risks.
Furthermore, the Directors do not reasonably envisage any change in
strategy or any events which would prevent the Company from
operating over a period of five years.
In considering the viability of the Company, the Directors have
conducted a robust assessment of each of the principal risks and
uncertainties detailed above and in particular the impact of market
risk where a significant fall in UK equity markets would adversely
impact the value of the investment portfolio. The Company's
investments are listed and readily realisable and can be sold to
meet its liabilities as they fall due. The Directors have also
considered the Company's leverage and liquidity in the context of
the unsecured revolving credit loan facility of GBP20 million
expiring in July 2020, which was undrawn at 30 April 2020 and
remains undrawn as at 18 June 2020. Specific leverage and liquidity
stress testing was conducted during the year, including
consideration of the risk of further market deterioration resulting
from the coronavirus outbreak. The stress testing did not indicate
any matters of concern. In addition, all of the key operations
required by the Company are outsourced to third party service
providers and it is reasonably considered that alternative
providers could be engaged at relatively short notice where
necessary. The Board has specifically considered the UK's departure
from the European Union on 31 January 2020 and can see no scenario
that it believes would affect the going concern status or viability
of the Company.
Based on the Company's processes for monitoring revenue
projections and operating costs, share price discount/premium, the
Managers' compliance with the investment objective, asset
allocation, the portfolio risk profile, leverage, counterparty
exposure, liquidity risk, financial controls and the Managers'
operational resilience, 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.
Going Concern
In accordance with The Financial Reporting Council's guidance on
going concern and liquidity risk, including its Covid-19 guidance,
the Directors have undertaken a rigorous review of the Company's
ability to continue as a going concern and specifically in the
context of the coronavirus pandemic.
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 below. The Board
has, in particular, considered the impact of heightened market
volatility since the coronavirus outbreak but does not believe the
Company's going concern status is affected. The Company's assets,
the majority of which are investments in quoted securities which
are readily realisable, exceed its liabilities significantly. All
borrowing facilities require the prior approval of the Board.
Gearing levels and compliance with borrowing covenants are reviewed
by the Board on a regular basis. The Company has continued to
comply with the investment trust status requirements of section
1158 of the Corporation Tax Act 2010 and the Investment Trust
(Approved Company) Regulations 2011.
In accordance with the Company's Articles of Association,
shareholders have the right to vote on the continuation of the
Company every five years, the next vote being at the Annual General
Meeting to be held in 2024. 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
The Company invests in equities for the long-term so as to
achieve its investment objective of long-term capital growth with
the aim of providing a total return in excess of the FTSE All-Share
Index. The Company borrows money when the Board and Managers have
sufficient conviction that the assets funded by borrowed monies
will generate a return in excess of the cost of borrowing. 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 and could result in
either a reduction in the Company's net assets or a reduction in
the profits available for dividend.
These risks are categorised here as market risk (comprising
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
year.
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 two elements -
interest rate risk and market price risk. The Board of Directors
reviews and agrees policies for managing these risks and the
Company's Investment Manager assesses the exposure to market risk
when making individual investment decisions as well as monitoring
the overall level of market risk across the investment portfolio on
an ongoing basis. Details of the Company's investment portfolio are
shown above.
(i) Interest Rate Risk
Interest rate movements may affect the level of income
receivable on cash deposits and interest payable on variable rate
borrowings. They may also impact upon the market value of the
Company's investments as 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 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 the income receivable on cash deposits.
The Company has the ability to finance 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 interest bearing
financial assets and liabilities at 30 April 2020 was nil.
Financial Assets
Cash deposits generally comprise overnight call or short-term
money market deposits and earn interest at floating rates based on
prevailing bank base rates.
Financial Liabilities
The Company did not make any draw down under the one year GBP20
million unsecured revolving credit loan facility with National
Australia Bank during the year to 30 April 2020.
(ii) Market 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 Investment Manager. 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.
Currency Risk
Certain of the Company's assets, liabilities and income could be
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.
Other Price Risk Sensitivity
A full list of the Company's investments is shown above. There
is a concentration of exposure to the UK, though it should be noted
that the Company's investment may not be entirely exposed to
economic conditions in the UK, as many UK listed companies do much
of their business overseas.
100% (2019 - 100%) of the Company's net assets are invested in
quoted equities. A 10% increase in quoted equity valuations at 30
April 2020 would have increased total net assets and net return on
ordinary activities after taxation by GBP25,979,000 (2019 -
GBP30,021,000). 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 in investments that are readily realisable.
The Company has the power to take out borrowings, which give it
access to additional funding when required. The Company's borrowing
facilities are detailed in note 11 of the Annual Report and
Financial Statements.
The maturity profile of the Company's financial liabilities due
in less than one year at 30 April was:
2020 2019
GBP'000 GBP'000
============================== ========= =========
Other creditors and accruals 392 447
============================== ========= =========
392 447
============================== ========= =========
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:
- where the Investment Manager makes 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 The Bank of New York Mellon (International)
Limited. Bankruptcy or insolvency of the custodian may cause the
Company's rights with respect to securities held by the custodian
to be delayed. The Investment Manager monitors 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 Investment
Manager. 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;
- the creditworthiness of the counterparty to transactions
involving derivatives, structured notes 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 Investment
Manager; and
- cash is only held at banks that are regularly reviewed by the
Investment Manager.
Credit Risk Exposure
The exposure to credit risk at 30 April was:
2020 2019
GBP'000 GBP'000
=========================== ========= =========
Cash and cash equivalents 3,512 4,488
Debtors 746 1,487
=========================== ========= =========
4,258 5,975
=========================== ========= =========
None of the Company's financial assets are past due or
impaired.
Fair Value of Financial Assets and Financial Liabilities
The Company's investments are stated at fair value and the
Directors are of the opinion that the reported values of the
Company's other financial assets and liabilities approximate to
fair value.
Capital Management
The objectives of the Company are to ensure that it will
continue as a going concern and to maximise the capital return to
its equity shareholders through an appropriate level of gearing.
Its borrowings are set out on note 11 on page 43 of the Annual
Report and Financial Statements. The Company does not have any
externally imposed capital requirements. The capital of the Company
is the ordinary share capital as detailed in note 12 of the Annual
Report and Financial Statements. It is managed in accordance with
its investment policy in pursuit of its investment objective, both
of which are detailed on page 6 of the Annual Report and Financial
Statements, and shares may be repurchased or issued as explained on
pages 18 and 19 of the Annual Report and Financial Statements.
Fair Value of Financial Instruments
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).
The valuation techniques used by the Company are explained in
the accounting policies on page 39 of the Annual Report and
Financial Statements.
The financial assets designated as valued at fair value through
profit or loss are all categorised as Level 1 in the above
hierarchy. None of the financial liabilities are designated at fair
value through profit or loss in the Financial Statements.
Alternative Investment Fund Managers (AIFM) Directive
In accordance with the AIFM 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.
AIFM Remuneration
In accordance with the Directive, the AIFM 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). The numerical remuneration disclosures in respect of
the AIFM's reporting period are available at
www.bailliegifford.com.
Leverage
The Company's maximum and actual leverage levels (see Glossary
of Terms and Alternative Performance Measures at the end of this
announcement) at 30 April 2020 are as follows:
Gross method Commitment method
Maximum Limit 2.00:1 2.00:1
Actual 0.98:1 1.00:1
------------- ------------------
Statement of Directors' Responsibilities in Respect
of the Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report
and 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 United Kingdom Accounting Standards, comprising
Financial Reporting Standard 102 the Financial Reporting Standard
Applicable in the UK and Republic of Ireland (FRS 102). 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 its profit or loss for
that year. In preparing these Financial Statements, the Directors
are required to:
3/4 select suitable accounting policies and then apply them consistently;
3/4 state whether applicable United Kingdom Accounting
Standards, comprising FRS 102, have been followed, subject to any
material departures disclosed and explained in the Financial
Statements;
3/4 make judgements and accounting estimates that are reasonable and prudent; and
3/4 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 and the Directors' Remuneration Report
comply with the Companies Act 2006. They are responsible for such
internal control as they determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error, and have general
authority for taking such steps as are reasonably open to them to
safeguard the assets of the Company and to prevent and detect fraud
and other irregularities.
Under applicable laws and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors' Report,
Directors' Remuneration Report and 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.
Responsibility Statement of the Directors in Respect of the
Annual Financial Report
We confirm that, to the best of our knowledge:
3/4 the Financial Statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and net return of
the Company;
3/4 the Strategic Report includes a fair review of the
development and performance of the business and the position of the
issuer, together with a description of the principal risks and
uncertainties they face; and
3/4 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 position and
performance, business model and strategy.
On behalf of the Board
Carolan Dobson
19 June 2020
Income Statement
For the year ended 30 April 2020 For the year ended 30 April 2019
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
========================================== =========== =========== ========== =========== =========== ==========
Net losses on investments - (42,210) (42,210) - (6,850) (6,850)
Currency losses - (9) (9) - - -
Income 6,562 - 6,562 8,658 - 8,658
Investment management fee (438) (1,021) (1,459) (239) (556) (795)
Other administrative expenses (463) - (463) (689) - (689)
========================================== =========== =========== ========== =========== =========== ==========
Net return before finance costs and
taxation 5,661 (43,240) (37,579) 7,730 (7,406) 324
Finance costs of borrowings (17) (40) (57) (20) (47) (67)
========================================== =========== =========== ========== =========== =========== ==========
Net return on ordinary activities before
taxation 5,644 (43,280) (37,636) 7,710 (7,453) 257
Tax on ordinary activities - - - - - -
========================================== =========== =========== ========== =========== =========== ==========
Net return on ordinary activities after
taxation 5,644 (43,280) (37,636) 7,710 (7,453) 257
========================================== =========== =========== ========== =========== =========== ==========
Net return per ordinary share (note 4) 3.75p (28.75p) (25.00p) 5.12p (4.95p) 0.17p
========================================== =========== =========== ========== =========== =========== ==========
Dividends declared in respect of the financial year ended 30
April 2020 amount to 3.10p (2019 - 4.45p). Further information on
dividend distributions can be found in note 8 on page 42 of the
Annual Report and Financial Statements.
The total column of this statement is the profit and loss
account of the Company. The supplementary revenue and capital
return 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 all gains
and losses of the Company have been reflected in the above
statement.
Balance Sheet
At 30 April 2020 At 30 April 2019
GBP'000 GBP'000
Fixed assets
Investments held at fair value through profit or loss 259,793 300,207
====================================================== ================ ================
Current assets
Debtors 746 1,487
Cash and cash equivalents 3,512 4,488
====================================================== ================ ================
4,258 5,975
====================================================== ================ ================
Creditors
Amounts falling due within one year (392) (447)
====================================================== ================ ================
Net current assets 3,866 5,528
====================================================== ================ ================
Net assets 263,659 305,735
====================================================== ================ ================
Capital and reserves
Share capital 40,229 40,229
Share premium account 9,875 9,875
Capital redemption reserve 19,759 19,759
Warrant exercise reserve 417 417
Share purchase reserve 60,433 60,433
Capital reserve 120,725 164,005
Revenue reserve 12,221 11,017
====================================================== ================ ================
Shareholders' funds 263,659 305,735
====================================================== ================ ================
Net asset value per ordinary share* 175.2p 203.1p
====================================================== ================ ================
Ordinary shares in issue (note 8) 150,520,484 150,520,484
====================================================== ================ ================
* See Glossary of Terms and Alternative Performance Measures at the end of this announcement.
Statement of Changes in Equity
For the year ended 30 April 2020
Share Capital Warrant Share
Share premium redemption exercise purchase Capital Revenue Shareholders'
capital account reserve reserve reserve reserve reserve funds
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============== ======== =========== =========== =========== =========== =========== ============ =============
Shareholders'
funds at 1
May 2019 40,229 9,875 19,759 417 60,433 164,005 11,017 305,735
Dividends paid
during the
year (note 5) - - - - - - (4,440) (4,440)
Net return on
ordinary
activities
after
taxation - - - - - (43,280) 5,644 (37,636)
Shareholders'
funds at 30
April 2020 40,229 9,875 19,759 417 60,433 120,725 12,221 263,659
============== ======== =========== =========== =========== =========== =========== ============ =============
For the year ended 30 April 2019
Share Capital Warrant Share
Share premium redemption exercise purchase Capital Revenue Shareholders'
capital account reserve reserve reserve reserve reserve funds
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============== ======== =========== =========== =========== =========== =========== ============ =============
Shareholders'
funds at 1
May 2018 40,229 9,875 19,759 417 60,433 171,458 10,081 312,252
Dividends paid
during the
year (note 5) - - - - - (6,774) (6,774)
Net return on
ordinary
activities
after
taxation - - - - - (7,453) 7,710 257
Shareholders'
funds at 30
April 2019 40,229 9,875 19,759 417 60,433 164,005 11,017 305,735
============== ======== =========== =========== =========== =========== =========== ============ =============
Cash Flow Statement
===================
For the year ended 30 April
2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
==================================================== ======== ======= ========= ========
Cash flows from operating activities
Net return on ordinary activities before taxation (37,636) 257
Net losses on investments 42,210 6,850
Currency losses 9 -
Finance cost of borrowings 57 67
Changes in debtors and creditors 686 258
Cash from operations 5,326 7,432
Interest paid (57) (72)
==================================================== ======== ======= ========= ========
Net cash inflow from operating activities 5,269 7,360
==================================================== ======== ======= ========= ========
Cash flows from investing activities
Acquisitions of investments (16,917) (313,132)
Disposals of investments 15,121 325,392
Net cash (outflow)/inflow from investing activities (1,796) 12,260
==================================================== ======== ======= ========= ========
Cash flows from financing activities
Bank loan repaid - (12,000)
Equity dividends paid (4,440) (6,774)
==================================================== ======== ======= ========= ========
Net cash outflow from financing activities (4,440) (18,774)
==================================================== ======== ======= ========= ========
(Decrease)/increase in cash and cash equivalents (967) 846
Exchange of movements (9) -
Cash and cash equivalents at start of year 4,488 3,642
==================================================== ======== ======= ========= ========
Cash and cash equivalents at end of year* 3,512 4,488
==================================================== ======== ======= ========= ========
* Cash and cash equivalents represent cash at bank and
short-term money market deposits repayable on demand.
Notes to the Financial Statements
=================================
1.
1. The Financial Statements for the year to 30 April 2020 have been prepared in accordance with
FRS 102 '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.
========================================================================================================
2. Income 2020 2019
GBP'000 GBP'000
================================================ ======================== ============================
Income from investments 6,544 8,648
UK dividends 18 10
Other income
Deposit interest
===================================================== ======================== ============================
Total income 6,562 8,658
===================================================== ======================== ============================
Investment Management Fee
================================================ ======================== ============================
3. 2020 2020 2020 2019 2019 2019
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================ ============== ============== ========= ============= ========= =================
Investment
management fee 438 1,021 1,459 239 556 795
---------------- -------------- -------------- --------- ------------- --------- -----------------
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 Secretary.
Baillie Gifford & Co Limited has delegated portfolio management services to Baillie Gifford
& Co. Dealing activity and transaction reporting has been further sub-delegated to Baillie
Gifford Overseas Limited and Baillie Gifford Asia (Hong Kong) Limited.
The Investment Management Agreement between the AIFM and the Company 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 Investment Management Agreement is
terminable on not less than six months' notice or on shorter notice in certain circumstances.
Compensation would only be payable if termination occurred prior to the expiry of the notice
period. The annual management fee is 0.5% of net assets, calculated and payable quarterly.
For the financial year ended 30 April 2019, in order to offset the costs of repositioning
the portfolio following its appointment as AIFM, Baillie Gifford agreed to waive its management
fee for the year to the extent of GBP732,000 (approximately equal to six months' management
fee payable to Baillie Gifford based on the Company's net asset value on 29 June 2018).
========================================================================================================
4. Net Return per 2020 2020 2019 2019 2019
Ordinary Share 2020 Revenue Capital Total Revenue Capital Total
================ ============== ============== ========= ============= ========= =================
Net return on
ordinary
activities 3.75p (28.75p) (25.00p) 5.12p (4.95p) 0.17p
================ ============== ============== ========= ============= ========= =================
Revenue return per ordinary share is based on the net revenue return on ordinary activities
after taxation of GBP5,644,000 (2019 - GBP7,710,000), and on 150,520,484 (2019 - 150,520,484)
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 loss for the financial year
of GBP43,280,000 (2019 - net capital loss of GBP7,453,000), and on 150,520,484 (2019 - 150,520,484)
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.
========================================================================================================
5. Ordinary Dividends 2020 2019 2020 2019
GBP'000 GBP'000
================================================ ========= ============= ========= =================
Amounts recognised as distributions in the year:
Previous year's final dividend (paid 6 August 2019) 2.95p 3.00p 4,440 4,516
Interim dividend - 1.50p - 2,258
===================================================== ========= ============= ========= =================
2.95p 4.50p 4,440 6,774
===================================================== ========= ============= ========= =================
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. The revenue available for distribution by way of dividend for the year is
GBP5,644,000 (2019 - GBP7,710,000).
. 2020 2019 2020 2019
GBP'000 GBP'000
Dividends paid and payable in respect of the
year:
Interim dividend - 1.50p - 2,258
Proposed final dividend (payable 12 August
2020) 3.10p 2.95p 4,666 4,440
=============================================== ========= ============= ========= =================
3.10p 4.45p 4,666 6,698
=============================================== ========= ============= ========= =================
If approved, the final dividend of 3.10p will be paid on 12 August 2020 to all shareholders
on the register at the close of business on 10 July 2020. The ex-dividend date is 9 July 2020.
6. At 30 April 2020, the Company had a 1 year GBP20 million unsecured revolving credit loan facility
with National Australia Bank which expires on 8 July 2020. There were no drawings under this
facility at 30 April 2020.
7. During the year, transaction costs on purchases amounted to GBP51,000 (2019 - GBP1,476,000)
and transaction costs on sales amounted to GBP8,000 (2019 - GBP90,000).
8. The Company's shareholder authority permits it to hold shares bought back 'in treasury'. Under
such authority, treasury shares may be subsequently either sold for cash (at a premium to
net asset value per ordinary share) or cancelled. At 30 April 2020 the Company had authority
to buy back 22,563,020 ordinary shares. During the year to 30 April 2020, no ordinary shares
were bought back (2019 - no ordinary shares were bought back). Under the provisions of the
Company's Articles of Association share buy-backs are funded from the capital reserve.
9. 1 May 2019 GBP'000 Cash flows GBP'000 Exchange movement 30 April
GBP'000 2020
GBP'000
Cash and cash
equivalents 4,488 (967) (9) 3,512
Total 4,488 (967) (9) 3,512
================== ================== ================== ================== ========
10. The financial information set out above does not constitute the Company's statutory accounts
for the year ended 30 April 2020 or 2019 but is derived from those accounts. Statutory accounts
for 2019 have been delivered to the Registrar of Companies, and those for 2020 will be delivered
in due course. The Auditors have reported on those accounts, their report was (i) unqualified;
(ii) did not include a reference to any matters to which the Auditors drew attention by way
of emphasis without qualifying their report; and (iii) did not contain a statement under sections
498(2) or (3) of the Companies Act 2006.
11. The Annual Report and Financial Statements will be available on the Company's website
www.bgukgrowthfund.com
on or around 3 July 2020.
None of the views expressed in this document should be construed
as advice to buy or sell a particular investment.
Glossary of Terms and Alternative Performance Measures (APM)
Total Assets
Total assets less current liabilities, before deduction of all borrowings.
Net Asset Value
Net Asset Value (NAV) is the value of total assets less liabilities (including borrowings).
The NAV per share is calculated by dividing this amount by the number of ordinary shares in
issue (excluding treasury shares).
Net Liquid Assets
Net liquid assets comprise current assets less current liabilities, excluding borrowings.
Discount/Premium (APM)
As stockmarkets and share prices vary, an investment trust's share price is rarely the same
as its 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, it is said to be trading at a premium.
=============================================================================================================
2020 2019
============================================================== ======================= ====================
Closing NAV per share 175.2p 203.1p
Closing share price 161.5p 192.0p
============================================================== ======================= ====================
Discount (7.8%) (5.5%)
============================================================== ======================= ====================
Total Return (APM)
The total return is the return to shareholders after reinvesting the net dividend on the date
that the share price goes ex-dividend.
2020 2020 2019 2019
NAV Share NAV Share
Price Price
============================== ============================== ======= ============== ====== ==========
Closing NAV per share/share
price (a) 175.2p 161.5p 203.1p 192.0p
Dividend adjustment factor* (b) 1.0143 1.0155 1.0236 1.0255
Adjusted closing NAV per
share/share price (c = a x b) 177.7p 164.0p 207.9p 196.9p
Opening NAV per share/share
price (d) 203.1p 192.0p 207.5p 187.5p
============================== ============================== ======= ============== ====== ==========
Total return (c ÷ d) - 1 (12.5%) (14.6% ) 0.2% 5.0%
============================== ============================== ======= ============== ====== ==========
* The dividend adjustment factor is calculated on the assumption that the dividends of 2.95p
(2019 - 4.50p) paid by the Company during the year were reinvested into shares of the Company
at the cum income NAV per share/share price, as appropriate, at the ex-dividend date.
===========================================================================================================
Ongoing Charges (APM)
The total expenses (excluding borrowing costs) incurred by the Company as a percentage of
the average net asset value. The ongoing charges have been calculated on the basis prescribed
by the Association of Investment Companies.
A reconciliation from the expenses detailed in the Income Statement above is provided below.
===========================================================================================================
2020 2019
============================================================== ======= ============== ==================
Investment management fee GBP1,459,000 GBP795,000
Other administrative expenses GBP463,000 GBP689,000
-------------------------------------------------------------- ------- -------------- ------------------
Total expenses (a) GBP1,922,000 GBP1,484,000
Average net asset value (b) GBP292,419,000 GBP293,237,000
Ongoing Charges ((a) ÷ (b) expressed as a percentage) 0.66% 0.51%
============================================================== ======= ============== ==================
Baillie Gifford & Co Limited was appointed on 29 June 2018 and agreed to waive its management
fee for the year ended 30 April 2019 to the extent of GBP732,000 (approximately equal to six
months' management fee payable to Baillie Gifford based on the Company's net asset value on
29 June 2018). The calculation for 2019 above is therefore not representative of future management
fees. The reconciliation below shows the ongoing charges figure if the waived management fee
is included in the ongoing charges calculation.
===========================================================================================================
2019
============================================================== ======================= ==================
Investment management fee GBP795,000
Investment management fee waived during the year GBP732,000
Other administrative expenses GBP689,000
============================================================== ======================= ==================
Total Expenses (a) GBP2,216,000
Average net asset value (b) GBP293,237,000
============================================================== ======================= ==================
Ongoing Charges ((a) ÷ (b) expressed as a percentage) 0.76%
============================================================== ======================= ==================
Gearing (APM)
At its simplest, gearing is borrowing. Just like any other public company, an investment trust
can borrow money to invest in additional investments for its portfolio. The effect of the
borrowing on the shareholders' assets is called 'gearing'. If the Company's assets grow, the
shareholders' assets grow proportionately more because the debt remains the same. But if the
value of the Company's assets falls, the situation is reversed. Gearing can therefore enhance
performance in rising markets but can adversely impact performance in falling markets.
Equity gearing is the Company's borrowings adjusted for 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.
The Company currently has no borrowings drawn down.
Leverage (APM)
For the purposes of the Alternative Investment Fund Managers (AIFM) Directive, leverage is
any method which increases the Company's exposure, including the borrowing of cash and the
use of derivatives. It is expressed as a ratio between the Company's exposure and its net
asset value and can be calculated on a gross and a commitment method. Under the gross method,
exposure represents the sum of the Company's positions after the deduction of sterling cash
balances, without taking into account any hedging and netting arrangements. Under the commitment
method, exposure is calculated without the deduction of sterling cash balances and after certain
hedging and netting positions are offset against each other.
Active Share (APM)
Active share, a measure of how actively a portfolio is managed, is the percentage of the portfolio
that differs from its comparative index. It is calculated by deducting from 100 the percentage
of the portfolio that overlaps with the comparative index. An active share of 100 indicates
no overlap with the index and an active share of zero indicates a portfolio that tracks the
index.
===========================================================================================================
Automatic Exchange of Information
In order to fulfil its obligations under UK Tax Legislation relating to the automatic exchange
of information, the Company is required to collect and report certain information about certain
shareholders.
The legislation will require investment trust companies to provide personal information to
HMRC on certain investors who purchase shares in investment trusts. As an affected company,
Baillie Gifford UK Growth Fund plc will have to provide information annually to the local
tax authority on the tax residencies of a number of non-UK based certificated shareholders
and corporate entities.
Shareholders, excluding those whose shares are held in CREST, who come on to the share register
will be sent a certification form for the purposes of collecting this information.
For further information, please see HMRC's Quick Guide: Automatic Exchange of Information
- information for account holders
https://www.gov.uk/government/publications/exchange-of-information-account-holders
.
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===========================================================================================================
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END
FR KKNBBKBKDOOK
(END) Dow Jones Newswires
July 03, 2020 06:42 ET (10:42 GMT)
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