Half-year Report

RNS Number : 1192N

Baillie Gifford European Grw Ts PLC

18 May 2020

 

RNS Announcement

Baillie Gifford European Growth Trust plc

Legal Entity Identifier: 213800QNN9EHZ4SC1R12

Regulated Information Classification: Half Yearly Financial Report

Results for the six months to 31 March 2020

Over the six month period, the Company's net asset value (NAV) total return was (10.0)% compared to a total return of (17.0)% for the FTSE Europe ex UK index, in sterling terms. The share price total return for the same period was (0.9)%.

· Over the four months to end March, being the period under the management of Baillie Gifford, the Company's NAV total return was minus 10.7% compared to a total return of minus 17.0% for the FTSE Europe ex UK index, in sterling terms. The share price total return for the same period was minus 7.3%.

· Outwith the portfolio reorganisation associated with the transition from Edinburgh Partners, four holdings (Zooplus, BIM, Coca-Cola Icecek and Schindler) were sold and four new positions (Kuhne+Nagel, Rémy Cointreau, Pernod Ricard and Ubisoft) initiated during the period.

· Earnings per share were 1.17p compared to 7.90p in the corresponding period last year. As highlighted previously, no interim dividend will be paid, and any annual dividend will be paid only to the extent needed for the Company to maintain its investment trust status.

· Despite the recent volatility, the portfolio managers remain satisfied with the financial resilience of the underlying holdings in aggregate and are optimistic about the scale of the long-term opportunities ahead for those companies. The portfolio has invested gearing of around 4% at present.

· Other than the 10% tender, no shares were bought back during the period.

Past performance is not a guide to future performance

Total return information is sourced from Refinitiv, Baillie Gifford and relevant underlying index providers. See disclaimer at end of this announcement.

Baillie Gifford European Growth Trust aims to achieve capital growth over the long term from a diversified portfolio of European securities. At 31 March 2020 the Company had total assets of £310.3m.

Baillie Gifford European Growth Trust is managed by Baillie Gifford, an Edinburgh based fund management group with approximately £ 225.0 billion under management and advice as at 15 May 2020.

 

Baillie Gifford European Growth Trust 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.  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 Baillie Gifford European Growth Trust at www.bgeuropeangrowth.com. Past performance is not a guide to future performance.  See disclaimer at end of this announcement.

· Neither the contents of the Managers' website nor the contents of any website accessible from hyperlinks on the Managers' website (or any other website) is incorporated into, or forms part of, this announcement.

18 May 2020

For further information please contact:

Anzelm Cydzik, Baillie Gifford & Co 

Tel: [phone]

Mark Knight, Four Communications

Tel : [phone] or 07803 758810

 

The following is the unaudited Interim Financial Report for the six months to 31 March 2020which was approved by the Board on 15 May 2020.

Chairman's Statement

COVID-19

These are unsettling times. I would like to take this opportunity to wish everybody well and to pass on my and the Board's sincere best wishes to all those affected directly or indirectly as a consequence of COVID-19.

Performance

Over the six months to 31 March 2020, the Company's net asset value per share ('NAV') total return was -10.0% compared to a total return of -17.0% for the FTSE Europe ex UK Index, in sterling terms. Over the same period, the share price total return was -0.9% as the discount narrowed from 12.8% to 4.1%.

The following table divides the six-month period in two, showing the performance over the two months to the end of November 2019 when the portfolio was managed by Edinburgh Partners and the four-month period when the portfolio has been managed by Baillie Gifford & Co Limited ('Baillie Gifford').

Total Return	30 September to 31 March (%)	30 September to 30 November (%)	30 November to 31 March (%)
NAV	-10.0	0.8	-10.7
Share Price	-0.9	6.9	-7.3
FTSE Europe ex UK, in sterling	-17.0	-0.1	-17.0

Management Arrangements

As highlighted in my statement to shareholders in the Company's 2019 Annual Report, the Board served notice on Edinburgh Partners, terminating its appointment and replacing it with Baillie Gifford as the Company's alternative investment fund manager, company secretary and administrator; the move took effect at the end of November 2019. As part of the move, the Company's name was changed from The European Investment Trust plc, as were its London Stock Exchange ticker and web address (to BGEU and www.bgeuropeangrowth.com respectively). As part of the transition, Baillie Gifford agreed to waive its management fee for six months.

Portfolio Re-organisation

Following the move to Baillie Gifford, the portfolio was reorganised extensively in the first half of December, with only one holding, Ryanair, being retained and 40 new ones bought. This was necessary to reposition the portfolio to growth equities; Baillie Gifford having built its reputation as a growth investor. The cost of the portfolio restructuring was a little over 1% of the Company's net asset value.

Objective and Investment Policy

At the Annual General Meeting ('AGM') held on 23 January 2020, shareholders approved changes to the Company's objective and investment policy. As detailed in the 2019 Annual Report, the objective needed to be revised to reflect Baillie Gifford's investment style following the transition of the portfolio from Edinburgh Partners. The investment policy was also revised, principally to allow for up to 10% of the Company's total assets, as measured at the time of initial investment, to be invested in unlisted investments (there are none held at present). The changes to the objective and investment policy were approved by 99.3% of the votes lodged.

Dividend and Expense Allocation Policy

The final dividend of 21.5p was paid on 31 January 2020 to all shareholders on the register at the close of business on 3 January 2020. As flagged in the Annual Report, following the move to Baillie Gifford, the Company's dividend policy has been changed such that no interim dividend will be paid, and any annual dividend will be paid only to the extent needed for the Company to maintain its investment trust status.

In March, the Company announced a change to its expense allocation policy as the revised investment objective explicitly seeks to achieve capital growth. Effective 1 April 2020, the allocation policy has been amended to 80% to capital and 20% to revenue to replace the prior policy of two-thirds to capital and one-third to revenue. This change is in line with the Board's continued aim of matching expenses against the estimated division of the Company's long-term returns.

Tender, Discount and Share Buy Backs

Following approval by shareholders at the General Meeting that immediately followed the AGM, at the end of January the Company undertook a tender for 10% of its ordinary shares in issue at a 2% discount to the prevailing NAV; these shares are now held in treasury and may be re-issued at prices in excess of NAV.

When buying back shares, the Board does not have a formal discount target, but monitors the discount closely and is prepared to buy back shares opportunistically. Excluding the tender, no shares were bought back during the period.

The Board

As previously announced, to avoid a conflict Sue Inglis stood down from the Board at the end of November. In addition, Michael Moule has intimated his intention to retire from the Board at the conclusion of the AGM to be held in 2021. It is the Board's intention to appoint a new Director. We believe that four Directors is the right number again after the period of change and review that has been required.

Outlook

Europe is home to some of the world's most impressive, investor-friendly and well-aligned growth companies. Despite the uncertain backdrop, the portfolio managers remain focused on finding the companies that will progress through current events and emerge with an even more dominant position and strong prospects. In some ways, and for some businesses, this crisis could be described as accelerating our path towards a likely future. Stock market volatility is providing investment opportunities at attractive valuations and the portfolio now has invested gearing of around 4%. Comments on the longer-term prospects for the companies in the portfolio can be found in the Managers' Report.

Michael MacPhee

Chairman

15 May 2020

 

Interim Management Report

Investment Philosophy

We are long-term growth investors managing a concentrated portfolio of what we think are Europe's most exceptional companies. Their free cash flow and market returns mean that these companies generate a disproportionate amount of wealth within and for society. They endure and prosper due to having attractive growth opportunities and strong competitive positions. They create wealth over time by aligning the interests of customers, employees, managers and owners. In Europe, these exceptional businesses can be structurally mispriced for long periods of time. The following three principles underpinning our investment philosophy give us the best chance of exploiting this inefficiency.

Long Term

We believe that the market increasingly rewards a patient investment approach, because genuine long-term investing is difficult to implement consistently in practice. We focus on being long-term co-owners of businesses and typically invest for at least five years, so turnover of the portfolio is expected to be lower than 20% p.a. This is to ensure that we capture the benefits of those exceptional growth companies that tend to manifest over many years.

Active

Exploiting any inefficiency must start with a willingness to be different. For us, that means carrying out fundamental company analysis and looking for tomorrow's leading companies without any reference to the index. We then back our conviction by holding our ideas in a suitably concentrated portfolio. Our active share - how different the portfolio is to the index - is close to 90% and, when added to low turnover, increases our chances of outperforming.

Growth Focused

Owning companies whose sales and profits will grow sustainably over the long-term is shown to be a reliable path to strong investment returns. A significant market opportunity is only the starting point: growth must be valuable. We seek companies with a defensible and strengthening competitive advantage that are run by people whose interests are aligned with long-term value creation. Both these factors are often evident in a willingness to sacrifice short-term profit maximisation in return for long-term rewards.

Portfolio Positioning and Recent Activity

Our portfolio is built from the bottom-up so any biases in portfolio composition are purely the result of where we find exceptional investment ideas. What you will see in the portfolio is a bias towards Northern Europe, to Industrials, Consumer Discretionary and IT companies, to mid-sized companies and to those owned and managed by founders and families.

In our minds, the companies found here are among the most innovative and resilient in Europe and share similar characteristics in terms of large growth opportunities, entrenched competitive positions and well-aligned management teams. This also means that we are less likely to invest in some of the largest companies in Europe, particularly in industries like Banking, Consumer Staples and Pharmaceuticals. There are far fewer companies here that excite us and, if anything, these are the areas which will face most disruption over the coming years.

 

At the beginning of the year we sold online pet food retailer Zooplus, Turkish grocery retailer BIM and bottler Coca-Cola Icecek. Reasons included increasing competitive threats and slowing growth. We reinvested the proceeds in three new companies; the low-cost logistics platform Kuhne+Nagel, premium Cognac producer Rémy Cointreau and French computer games developer Ubisoft. These are companies we have followed for many years and we believe that they have a good chance of at least doubling in value over the next five years primarily though sales growth and increasing margins and returns on capital.

Notwithstanding the COVID-19 crisis, we have maintained a deliberate and long-term approach, as we see little need for panic. To begin with we offered our support to the management teams we invest in, encouraging them to remain focused on the long term and to look after employees and customers. At the same time, we reassessed the financial resilience of each company - the first order of the day in any crisis is survival - and as expected we did not find anything that worried us. This is because we have always preferred companies with strong balance sheets. We therefore think most of the companies in the portfolio will emerge from this crisis in a stronger position, helped by weaker competitors ceding market share or through opportunistic acquisitions, or both. Exposure to trends that seem to be accelerating in the current crisis, such as e-commerce, digitalisation and outsourcing, also give us confidence that longer term prospects are still very attractive.

Towards the end of March, we sold Schindler, the Swiss elevator business, and bought a new position in Pernod Ricard, the world's second largest wine and spirits producer. We feel that its ability to generate profitable growth from China and India has been underestimated. We also made small additions to companies where falling valuations had dislocated from future value creation. These included online classifieds business Adevinta, sportswear giant adidas and two technology focused holding companies, Kinnevik and Prosus. The latter has a large stake in Tencent, the Chinese social media and gaming company, which we think is one of the world's most attractive businesses.

Gearing

As believers in long term equity returns we expect to utilise gearing strategically, with 10% being a neutral position. We utilised some borrowings as part of the Company's 10% tender transaction at the end of January and invested gearing currently stands at around 4%. We have the ability to increase our gearing levels further to take advantage of any opportunities arising at an individual stock level.

Performance

Holdings in the portfolio that performed well over the period included online food delivery service company Delivery Hero, which made an attractive acquisition in South Korea; lab equipment provider Sartorius Stedim; and IT provider Bechtle. These companies have held up well during the crisis but, more importantly, benefit from structural growth that should endure long after the crisis has abated. Low-cost airline Ryanair, rubber compounder Hexpol, and oil and gas pipe manufacturer Tenaris were noticeably weak although this was unsurprising given the impact of COVID-19 on their respective industries and also the consequent oil price shock, particularly for Tenaris. Importantly though, each of these companies is well capitalised and stands to benefit from consolidation and market share gains from weaker competitors.

 

This is a very short period over which to judge our performance, however, we are pleased that stock picking continues to drive relative outperformance despite the fall in absolute terms. We do not know how or when the current crisis is going to end. What we do know is that, if we continue to find exceptional businesses run by people whom we trust, the impact from this most unfortunate crisis will be relatively insignificant in the context of longer-term returns.

The principal risks and uncertainties facing the Company are set out at the back of this announcement.

Baillie Gifford & Co

Past performance is not a guide to future performance.

For a definition of terms see Glossary of Terms and Alternative Performance Measures, see below.

Total return information is sourced from Refinitiv, Baillie Gifford and relevant underlying index providers. See disclaimer at the end of this announcement.

List of Investments as at 31 March 2020 (unaudited)
Name	Business		Country	Value £'000	% of Total Assets
Bechtle	IT systems integrator		Germany	17,063	5.5
IMCD	Speciality chemical distributor		Netherlands	13,518	4.4
Prosus	Media and e-commerce company		Netherlands	12,891	4.1
Atlas Copco	Industrial compressors manufacturer		Sweden	12,391	4.0
NIBE Industrier	International heating technology company		Sweden	12,032	3.9
adidas	Sports shoes and equipment manufacturer		Germany	11,741	3.8
L'Oreal	Personal care		France	11,207	3.6
Zalando	Online fashion retailer		Germany	10,710	3.4
ASML	Semiconductor equipment manufacturer		Netherlands	9,930	3.2
Delivery Hero	Online food delivery service		Germany	9,589	3.1
Spotify	Online music streaming service		Sweden	9,573	3.1
Kingspan	Provider of high performance insulation and building  envelope technologies		Ireland	9,498	3.1
Ryanair	Low cost European airline		Ireland	8,843	2.9
Addlife	Distributor of medical and laboratory equipment  in Northern and Central Europe		Sweden	8,336	2.7
DSV	Transport and logistics company		Denmark	8,123	2.6
Sartorius Stedim Biotech	International pharmaceutical and laboratory equipment    supplier		France	8,069	2.6
Kering	Luxury brand conglomerate		France	7,363	2.4
Adyen	Global payment company		Netherlands	7,303	2.4
Carl Zeiss Meditec	Medical technology for ophthalmology		Germany	7,230	2.3
Adevinta	Provider of internet based services		Norway	6,675	2.2
Legrand	Global specialist in electrical and digital building   infrastructures		France	6,495	2.1
Investor	Industrial holding company		Sweden	6,452	2.1
Takeaway.com	Online food ordering and home delivery		Netherlands	5,925	2.0
MorphoSys	Antibody based drug discovery platform		Germany	5,834	1.9
Hexpol	Manufacturer of rubber and plastic components		Sweden	5,748	1.8
Rémy Cointreau	Manufacturer and distributor of premium wines   and spirits worldwide		France	5,615	1.8
Mettler-Toledo	Manufacturer of precision weighing equipment		Switzerland	5,342	1.7
Ubisoft Entertainment	Video games publisher		France	5,341	1.7
Richemont	Luxury goods company		Switzerland	5,265	1.7
Novozymes	Enzyme manufacturer		Denmark	5,261	1.7
Beijer	Refrigeration and air conditioning		Sweden	4,628	1.5
Kuehne + Nagel	Worldwide freight forwarder		Switzerland	4,623	1.5
Inditex	International clothing retailer		Spain	4,577	1.5

List of Investments as at 31 March 2020 (unaudited) (Ctd) 

Name	Business	Country	Value £'000	% of Total Assets
Alfa Laval	Industrial conglomerate	Sweden	4,487	1.4
Edenred	Voucher scheme outsourcer	France	4,481	1.4
Svenska Handelsbanken	Retail bank	Sweden	4,168	1.3
Kinnevik	Invests in and builds digital consumer businesses	Sweden	3,806	1.2
Epiroc	Supplier to mining and construction industries	Sweden	3,786	1.2
Tenaris	Seamless steel pipe manufacturer	Luxemburg	3,268	1.0
Pernod Ricard	Global spirits manufacturer	France	2,934	0.9
U-Blox	Global Positioning Systems (GPS) developer for a   range of markets	Switzerland	2,168	0.7
Schindler	Elevator and escalator manufacturer	Switzerland	2,023	0.7
Cellectis	Genetic engineering for cell based therapies	France	1,316	0.4
Coca-Cola Icecek	Bottler and distributor of soft drinks	Turkey	404	0.1
Total Equity Investments			306,032	98.6
Net Liquid Assets			4,226	1.4
Total Assets			310,258	100.0
Borrowings			(14,100)	(4.8)
Net Assets			296,158	95.2

Income Statement (unaudited)

	For the six months ended 31 March 2020			For the six months ended 31 March 2019			For the year ended 30 September 2019
								(audited)
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Losses on investments	-	(30,699)	(30,699)	-	(36,129)	(36,129)	-	(32,508)	(32,508)
Currency (losses)/gains	(7)	(1,055)	(1,062)	(53)	180	127	24	80	104
Income from investments and interest receivable	984	-	984	4,023	-	4,023	14,523	-	14,523
Investment management fee (note 3)	(175)	(350)	(525)	(302)	(604)	(906)	(600)	(1,199)	(1,799)
Other administrative expenses	(246)	-	(246)	(251)	(6)	(257)	(484)	(6)	(490)
Net return before finance costs and taxation	556	(32,104)	(31,548)	3,417	(36,559)	(33,142)	13,463	(33,633)	(20,170)
Finance costs	(17)	(33)	(50)	(15)	(17)	(32)	(21)	(24)	(45)
Net return on ordinary activities before taxation	539	(32,137)	(31,598)	3,402	(36,576)	(33,174)	13,442	(33,657)	(20,215)
Tax on ordinary activities	(83)	-	(83)	(188)	-	(188)	(837)	-	(837)
Net return on ordinary activities after taxation	456	(32,137)	(31,681)	3,214	(36,576)	(33,362)	12,605	(33,657)	(21,052)
Net return per ordinary share (note 4)	1.17p	(82.42p)	(81.25p)	7.90p	(89.70p)	(81.80p)	31.00p	(82.80p)	(51.80p)
Note: Dividends paid and payable per share (note 5)	Nil			18.00p			31.00p

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

All revenue and capital items in the above 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 (unaudited)

	At 31 March 2020 £'000	At 30 September 2019 (audited) £'000
Fixed assets
Investments held at fair value through profit or loss (note 6)	306,032	369,064
Current assets
Debtors	4,044	2,729
Cash and deposits	1,198	2,301
	5,242	5,030
Creditors
Amounts falling due within one year:
Other creditors	(1,016)	(237)
Bank overdraft (note 7)	(14,100)	-
	(15,116)	(237)
Net current (liabilities)/assets	(9,874)	4,793
	296,158	373,857
Capital and reserves
Called-up share capital	10,061	10,061
Share premium account	123,749	123,749
Capital redemption reserve	8,750	8,750
Capital reserve	148,483	217,985
Revenue reserve	5,115	13,312
Shareholders' funds	296,158	373,857
Net asset value per ordinary share*	817.7p	929.0p
Ordinary shares in issue (note 8)	36,219,933	40,244,369

*See Glossary of Terms and Alternative Performance Measures at the end of this announcement.

 

Statement of Changes in Equity (unaudited)

For the six months ended 31 March 2020

	Share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Capital reserve £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 October 2019	10,061	123,749	8,750	217,985	13,312	373,857
Net return on ordinary activities after taxation	-	-	-	(32,137)	456	(31,681)
Dividends paid (note 5)	-	-	-	-	(8,653)	(8,653)
Shares bought back into treasury	-	-	-	(37,365)	-	(37,365)
Shareholders' funds at 31 March 2020	10,061	123,749	8,750	148,483	5,115	296,158

For the six months ended 31 March 2019

	Share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Capital reserve £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 October 2018	10,314	123,749	8,497	259,842	11,917	414,319
Net return on ordinary activities after taxation	-	-	-	(36,576)	3,214	(33,362)
Dividends paid (note 5)	-	-	-	-	(7,387)	(7,387)
Shares purchased for cancellation	(215)	-	215	(6,957)	-	(6,957)
Shareholders' funds at 31 March 2019	10,099	123,749	8,712	216,309	7,744	366,613

 

Notes to the condensed financial statements (unaudited)

1.	The condensed Financial Statements for the six months to 31 March 2020 comprise the statements set out on the previous pages together with the related notes below. They have been prepared in accordance with FRS 104 'Interim Financial Reporting' and the AIC's Statement of Recommended Practice issued in November 2014 and updated in October 2019 with consequential amendments and have not been audited or reviewed by the Auditor pursuant to the Auditing Practices Board Guidance 'Review of Interim Financial Information'. The Financial Statements for the six months to 31 March 2020 have been prepared on the basis of the same accounting policies as set out in the Company's Annual Report and Financial Statements at 30 September 2019. Going Concern The Directors have considered the nature of the Company's principal risks and uncertainties, as set out below, as well as the implications of the current COVID-19 pandemic.  In addition, the Company's investment objective and policy, assets and liabilities and projected income and expenditure, together with the dividend policy have been taken into consideration and it is the Directors' opinion that the Company has adequate resources to continue in operational existence for the foreseeable future. The Company's assets, all of which are investments in quoted securities which are readily realisable, exceed its liabilities significantly. All borrowings require the prior approval of the Board and gearing levels are reviewed by the Board on a regular basis. 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 the 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 30 September 2019 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, did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report, and did not contain a statement under sections 498(2) or (3) of the Companies Act 2006.
3.	As explained in the Annual Report for the year to 30 September 2019, the agreement with Edinburgh Partners AIFM Limited was terminated on 29 November 2019. Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford & Co, was appointed by the Company as its Alternative Investment Fund Manager (AIFM) and Company Secretary on 29 November 2019.The investment management function has been delegated to Baillie Gifford & Co.  The management agreement can be terminated on three months' notice. The annual management fee is 0.55% of the lower of (i) the Company's market capitalisation and (ii) the Company's net asset value (which shall include income), in either case up to £500 million, and 0.50% of the amount of the lower of the Company's market capitalisation or net asset value above £500 million. Baillie Gifford agreed to waive its management fee for six months from its appointment as AIFM.
4.	Net return per ordinary share	Six months to  31 March 2020 £'000	Six months to 31 March 2019 £'000	Year to 30 September 2019 (audited) £'000
	Revenue return on ordinary activities after taxation	456	3,214	12,605
	Capital return on ordinary activities after taxation	(32,137)	(36,576)	(33,657)
	Total net return	(31,681)	(33,362)	(21,052)
	Weighted average number of ordinary shares in issue	38,990,856	40,777,284	40,626,941
	The 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.

Notes to the condensed financial statements (unaudited) (ctd)

5.	Dividends		Six months to  31 March 2020 £'000	Six months to 31 March 2019 £'000
	Amounts recognised as distributions in the period:
	Final dividend of 21.5p (2019 - 18.0p), paid 31 January 2020		8,653	7,387
			8,653	7,387
	Dividends proposed in the period:		-
	Interim dividend - Nil (2019 - 9.5p)		-	3,823
			-	3,823
	Following the payment of the final dividend of 21.5p on 31 January 2020, the Company changed its dividend policy such that no interim dividend will be paid and any annual dividend will be paid only to the extent needed for the Company to maintain its investment trust status.
6.	Fair Value Hierarchy The Company's investments are financial assets held at fair value through profit or loss. 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). All of the Company's investments fall into Level 1 for the periods reported.
7.	The Company has a €30 million overdraft credit facility with The Northern Trust Company for the purpose of pursuing its investment objective. At 31 March 2020, €15.9 million (£14.1 million), (31 March 2019 - €20.2 million (£17.4 million)), (30 September 2019 - Nil) had been drawn down under the facility. Interest is charged at 1.25% above the European Central Bank Main Refinancing Rate.
8.	During the six months to 31 March 2020, the Company undertook a tender offer for 10% of its ordinary shares in issue at a 2% discount to the prevailing NAV and bought back 4,024,436 ordinary shares into treasury at a total cost of £37,365,000. During the six months to 31 March 2019, 861,000 ordinary shares were bought back and cancelled at a total cost of £6,957,000. During the year to 30 September 2019, 1,011,099 ordinary shares were bought back and cancelled at a total cost of £8,200,000. No shares were issued during the six months to 31 March 2020.
9.	During the period, transaction costs on equity purchases amounted to £435,000 and on equity sales £114,000.
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.  Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford & Co, was appointed by the Company as its Alternative Investment Fund Manager and Company Secretary on 29 November 2019.
None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

 

Principal Risks and Uncertainties

The principal risks facing the Company are investment and strategy risk, discount volatility risk, market risk (comprising interest rate risk, currency risk and price risk), liquidity risk, credit risk, gearing risk, regulatory risk, operational risk and other financial risk. An explanation of these risks and how they are managed is set out on pages 24 and 25 of the Company's Annual Report and Financial Statements for the year to 30 September 2019 which is available on the Company's website: www.bgeuropeangrowth.com‡. The principal risks and uncertainties have not changed since the date of the Annual Report with the exception of the current situation surrounding the COVID-19 pandemic. The Board and Investment Manager are working closely to monitor the situation as it develops and will continue to do so.

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 Guidance and Transparency Rule 4.2.7R (indication of important events during the first six months, their impact on the Financial Statements and a description of the 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 Guidance and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein).

By order of the Board

Michael MacPhee

Chairman

15 May 2020

 

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. 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 per share. 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. 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. 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. Potential gearing is the Company's borrowings expressed as a percentage of shareholders' funds. Gearing represents borrowings less cash and cash equivalents expressed as a percentage of shareholders' funds. Active Share (APM) Active share, a measure of how actively a portfolio is managed, is the percentage of the listed equity 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.

The Interim Financial Report will be available on the Company's page on the Managers' website www.bgeuropeangrowth.com‡on or around 26 May 2020.

 

Automatic Exchange of Information

In order to fulfil its obligations under UK tax legislation relating to the automatic exchange of information, Baillie Gifford European Growth Trust is required to collect and report certain information about certain shareholders.

The legislation requires investment trust companies to provide personal information to HMRC on certain investors who purchase shares in investment trusts. Accordingly, Baillie Gifford European Growth Trust 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.

New 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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FTSE Index Data

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