Scot.American Inv. - Scottish American Investment Co Half-year Results
30/07/2024 07:00
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RNS Number : 2758Y Scottish American Investment Co PLC 30 July 2024
RNS Announcement
The Scottish American Investment Company P.L.C. (SAINTS)
Legal Entity Identifier: 549300NF03XVC5IFB447
Regulated Information Classification: Interim Financial Report.
The following is the unaudited Interim Financial Report for the six months to
30 June 2024 which was approved by the Board on 29 July 2024.
Results for the six months to 30 June 2024
Results
¾ SAINTS' assets have delivered a positive return over the first six
months of 2024, although returns have not kept up with the broader equity
market over the period. SAINTS' net asset value total return (borrowings at
fair value) was 5.5% over the first six months of 2024, whilst global
equities* returned 12.2% over the same period.†
¾ Earnings growth across the equity portfolio remains strong, and in
line with the Managers' expectations.
¾ In recent months, however, relative performance has been affected by
market sentiment, and by not owning certain non-yielding or deeply cyclical
companies which have benefitted from the current environment. In addition,
SAINTS' diversifying investments in property and other areas have
underperformed equities over the period.
¾ The Company has declared a second interim dividend of 3.55p. This is
a 2.9% increase on the equivalent dividend last year, which compares to
inflation of 2.0% (being the CPI increase for the year to 30 June 2024).
¾ SAINTS' revenues per share over the period were 7.83p compared to
7.64p for the equivalent period last year. The modest increase in revenues
reflects both continued dividend growth from the Company's equity investments
and changes to the weightings of the Company's other investments. In addition,
there have been a number of changes to the property portfolio, designed to
increase its quality, resilience and lease length.
¾ The Board and the Managers remain optimistic about SAINTS' long term
prospects for inflation beating income growth and attractive returns.
* FTSE All-World Index (in sterling terms).
† Source: LSEG/Baillie Gifford and relevant underlying service providers.
See disclaimer at end of this announcement.
Interim Management Report
In Aesop's well-known fable about the hare and the tortoise, the hare bounds
ahead after the gun fires, until, over-confident of victory in a long race, he
decides to take a nap. The tortoise meanwhile perseveres at a steady pace,
ever-onwards, eventually over-taking the hare and crossing the finish line in
first place. Your managers have been reminded of this tale more than once
during the past six months, a period when they have looked a little more
tortoise than hare. SAINTS' portfolio has undoubtedly made good progress since
the start of 2024, with the companies growing their earnings and dividends at
a steady pace, and the Company's NAV per share (with borrowings at fair value)
rising to a new record during the period. The NAV per share (with borrowings
at fair value) was 561.7p as at 30 June 2024, up 4.1% year to date. But the
wider stock market has bounded ahead, up nearly 11% over the same period. Your
managers have thoroughly scrutinised the holdings in the portfolio, and we
firmly believe that all is well: perseverance remains the name of the game.
But we owe shareholders an explanation of why the portfolio's performance has
recently looked a little more pedestrian than the market.
Equity markets
This has been a remarkable six months for equity markets, with the benchmark
FTSE All-World Index rising almost 11%, taking its cumulative rise over the
past year to about 18%. This is heady stuff when one considers that over long
periods of time the stock market has delivered an annual nominal price return
of somewhere around 6-7%. (For those keeping score, the UK market as measured
by the FTSE All-Share Index has risen by about 6% per annum since its
inception in 1962; the US market as measured by the S&P 500 has risen a
little over 7% p.a. during the same period).
Why have equity markets been so strong? If we cast our minds back to this
time a year ago, many were fretting deeply about the possibility of a global
recession, after a period of swift increases in interest rates to tame
inflation. The narrative through the back half of 2023 was that rate hikes
would torpedo growth, and equities were not the place to be, particularly with
gilts at 5%. Fast-forward to today, however, and that storyline is old news.
Economists (and others who make a living forecasting disaster or euphoria) are
now optimistic about a 'soft landing' for most economies, and excited about
the potential pro-growth benefits of reduced interest rates.
The way this has played out in the stock market is that many cyclical and
economically-sensitive companies have seen a dramatic reassessment of their
fortunes. A good example is the US banking giant JP Morgan, whose share price
has almost doubled in the past twelve months. Or ExxonMobil, which saw its
shares rise almost 20% in the first quarter of this year. As these names
constitute a sizable part of the stock market, these moves have driven the
index higher. This effect accounts for perhaps 1/3 of the underperformance of
SAINTS' global equity portfolio against the market over the period.
Alongside 'soft landing euphoria', the other big theme in the stock market of
late has been Artificial Intelligence ('AI'). This is best encapsulated by the
extraordinary rise in the share price of Nvidia, the semiconductor designer
whose chips are, without a doubt, the gold standard for the intense computing
power that is required to make AI work. Over the past 12 months Nvidia's
revenues have soared as companies fall over themselves to place orders for its
chips, excited by the potential of AI to generate profits: or at least,
fearful of missing out if they don't. Its share price has soared too, making
it one of the world's largest companies by market capitalisation. SAINTS does
not own shares in Nvidia, and so its meteoric rise accounts, on its own, for
another third of the gap between SAINTS' equity portfolio and the index.
Nvidia, it must be said, is a fascinating conundrum. Without doubt it's a
special company, with a visionary leader, and a probably-enduring lead in
designing AI chips. But the challenge with investing in Nvidia is that in some
ways it is reminiscent of Cisco, or Nortel Networks, in the heady days of the
early internet. We are currently in the middle of a capital expenditure phase
for AI, where companies are rapidly trying to build capabilities, much as they
splurged on Cisco's internet routers and switches to connect to the internet
in the mid-1990s, or all those fibre optic cables from Nortel which telecoms
companies laid down in an effort to become the pre-eminent carriers of the
internet's rapidly-growing data. When customers are in "build it or miss out"
mode, revenues at companies like Nvidia can soar upwards.
But history also teaches us, whether we look back at the dotcom capex boom of
the 1990s, or indeed the railway-building boom that marked the first
investments for SAINTS in 1873, that this will not last forever and that, when
there is euphoria, there is a good chance that supply overshoots demand, at
least for a while. This can be very painful for companies which sell cables,
or locomotives. So there are two reasons that SAINTS does not own Nvidia. The
obvious one is that it pays a minimal dividend - it yields 0.02% - but the
subtler one is that the investment outcome from here is a long way from the
predictable dependability and resilience which, along with growth, is the
bedrock of SAINTS' approach.
Long-time shareholders will know that SAINTS is focused on the steady
long-term compounding of earnings and dividends. We self-identify as
tortoises. We invest in companies which we expect to grow their earnings on
average around 10% per annum, faster than the long-term market average of
around 5%; indeed actually quite fast for a tortoise! From experience we have
found that the most cyclical stocks, like JP Morgan or ExxonMobil, are not
usually a good fit with the steady long-term compounding and resilient
dividends we seek. Our approach has proved rewarding to shareholders,
providing capital and income growth well-ahead of inflation over the long
term, with a steady dividend that shareholders can rely on through thick and
thin (the last cut was in 1938). But our differentiated approach does mean
that SAINTS' portfolio can lag behind in times when cyclical names, or large
index constituents which we don't own, are rocketing upwards.
SAINTS' portfolio
While a third of SAINTS' performance gap comes from cyclicals, and another
third from not owning Nvidia, the remaining third comes from a residual of ups
and downs during the past six months. Let's take a closer look at some of the
individual holdings in SAINTS' portfolio.
During the first half of the year, three investments fared particularly well:
Schneider Electric, Atlas Copco and Novo Nordisk. All continued to report
strong earnings growth. Schneider is benefiting from structural trends towards
electrification, as a leader in the provision of low- and medium-voltage
electrical equipment, such as boards to manage electrics in buildings. A
particularly strong area of growth has been datacenters: these complex
buildings require good power management to be efficient. Schneider is seeing
good volume and price growth in this business, which is driving earnings and
dividend growth.
Atlas Copco also reported continued solid growth, in its businesses ranging
from compressors to vacuum pumps, and it has additionally been a beneficiary
of the improvement in sentiment towards cyclical names mentioned earlier.
Atlas is what we would describe as a light cyclical, rather than a deep
cyclical, and therefore fits our philosophy of steady compounding and
resilient dividends.
Novo Nordisk continues to see strong demand for its appetite suppressants,
which help patients combat weight gain, and during the first half of the year
it received news that its 'Wegovy' product has been approved in China, a
potentially massive market. We view demand for Novo's pharmaceuticals as more
"opex" than "capex" for customers, and with only 1 million patients currently
taking Wegovy, out of an estimated 800 million globally who potentially could
benefit from it, we see a long runway for further growth.
On the negative side, Sonic Healthcare, the Australia-based operator of a
global network of pathologists' labs, saw its earnings and share price fall as
the temporary boost to its profits from COVID-related testing, which was still
ongoing a year ago, finally dissipated in the recent half year. We have
prodded its outlook and continue to believe that rising testing volumes
worldwide, positive price/mix from ever-more sophisticated tests ordered by
doctors, and ongoing cost control efforts by the company, will drive steady
compounding of earnings in the years ahead.
B3, the operator of equity and derivative exchanges in Brazil, also saw a
cyclical downturn in trading volumes; we believe this is temporary and its
long-term growth potential remains strong. Finally Edenred, the France-based
provider of meal and other employee-related vouchers, saw its share price fall
after the Italian government said it was re-opening an old investigation into
whether the company was complying with the rules of a particular tender some
years ago. We continue to investigate this, to make sure nothing untoward has
happened, but so far we're comfortable with what we've seen and continue to
foresee growth in the years ahead.
Earnings review
We mentioned earlier that we have thoroughly scrutinised the portfolio to
check all is in order with SAINTS' investments. This is a reference to an
important exercise that we conduct annually: a detailed examination of the
financial results of every company in the portfolio. The goal is to check
whether the earnings growth of each investment is meeting our expectations. We
take each company's latest reported annual results and clean up the numbers to
get a clear understanding of the profit growth each has delivered. This is
more complicated than it sounds, because many factors distort the headline
results of a company: currency moves, acquisitions and disposals, or the
treatment of certain accounting items.
Once we have cleaned up the numbers, and have a good read on each company's
underlying earnings growth for the past year, we then stack these numbers
against their cleaned-up results from previous years. This done, the key
metric we look at is five-year compound growth in clean earnings per share. By
looking at five-year growth rates we isolate some of the noise from economic
cycles or years like 2020. We get a good read on long-term profit progression.
As mentioned above, our philosophy is to invest in steady growth and in
practice we look for companies which we expect to compound their EPS by around
10% per annum for a decade or more. This forms the bedrock of delivering
above-inflation dividend and capital growth to SAINTS' shareholders. Aiming
for 10% should ensure that even if we get some investments wrong, as we
inevitably will, and even allowing for lower returns from SAINTS' small
non-equity portfolio, the portfolio's capital and dividend growth should have
a good likelihood of beating inflation and the broader stock market.
So what did we find, after conducting our review this year? We found that over
the last five years, on a capital-weighted basis, the portfolio's companies
have successfully delivered slightly above our 10% EPS growth hurdle. (We
should note for full transparency this number reflects the current portfolio,
which will have changed a bit over the past five years, but as our turnover is
low, particularly in relation to complete sales and new purchases, this impact
should be modest.)
As one would expect there is a range of outcomes at the stock level. The vast
majority of holdings have broadly met or exceeded our growth target, some
spectacularly so. The top five include such diverse names as gaming company
Netease, stock exchange B3, and sportswear company Anta Sports, all of which
have compounded their EPS by more than 15% per annum. It also features two
technology-related holdings: TSMC and Microsoft. Apart from Netease, bought at
the end of 2020, the other four companies have been held for more than decade.
At the other end of the scale, a few holdings have disappointed. This is
almost inevitable in an actively managed portfolio, and is one of the reasons
why it is important that SAINTS' portfolio is well diversified. But any
holdings that fall short of our growth hurdle are subsequently placed under
the microscope. We need to prod them further and have a good think about
whether they deserve to continue as holdings … or should be upgraded.
Two examples. When we conducted this exercise last year we identified Want
Want, the Chinese food company, as a holding that had fallen short of our
hurdle over the past five years. After conducting further research on the
ground in China, investigating whether this had been cyclical or structural,
we decided its prospects had deteriorated, and so we sold the shares.
Contrast this with Amadeus, the airline IT company, where EPS growth has been
negative over the past five years. Further review has confirmed the major
problem it has faced has simply been the slow recovery of air travel since
COVID. We are convinced that having bottomed in 2021, its future still looks
bright: indeed most of Amadeus' competitors have been hugely weakened during
the past few years, and it is now taking market share from them. We believe
the next several years are likely to see strong growth of at least 10% p.a
(global air travel has indeed just passed its pre-COVID peak) and have
concluded that we should continue to hold the shares.
In summary, SAINTS' equity portfolio is meeting our stretching 10% per annum
growth target. Excellent growth from the likes of Atlas Copco, TSMC, Microsoft
and many more like them is driving good underlying earnings growth. A minority
of names has fallen short, but we have them under close inspection and will
continue divesting and re-investing where appropriate to ensure that SAINTS
remains well-placed for growth in the years ahead. We are confident in the
continued strength and prospects for long-term compound growth of the
underlying companies.
ESG
We continue to monitor and engage with holdings where we see potential ESG
concerns. Recently we have focused on many of the portfolio's Consumer
Packaged Goods companies, as these names potentially face challenges to growth
from changing expectations around packaging recyclability, nutritional
content, supply chain auditing, and similar matters. An example is the
emerging debate about so-called "ultra-processed foods" (UPF). This area is
characterised by nascent science but growing consumer concern.
As part of our review we drew on multiple sources, including speaking to the
companies themselves. For example we engaged with Nestlé, speaking with its
Deputy Head of Corporate Regulatory and Scientific Affairs and Assistant VP
& Global Head of Food and Industry Affairs, to understand their approach
to UPF within their portfolio. We had similar conversations at other food and
beverage companies.
These conversations have given us confidence that all of our holdings are on
the right track. For example when it comes to recyclability, Nestlé has
upgraded its packaging to the point that more than 86% is now either
recyclable, reusable or compostable. This is quite some way ahead of the
average food company, and positions Nestlé well for the future as more and
more consumers take care of their environmental footprint.
It is important that companies stay front-of-foot with evolving consumer
needs. We believe this is essential to continued growth in the long-term. We
are happy to see that SAINTS' holdings are taking this seriously and appear
well-positioned for the future.
Other asset classes
An advantage of the investment trust structure is the ability to borrow at
attractive rates and long maturities, and invest this for higher returns than
the cost of borrowing. SAINTS has modest debt of £95m, implying gearing of
less than 10%, with a blended fixed interest rate just below 3%. It invests
this in a mix of properties, bonds and infrastructure names.
Performance in these other asset classes is typically mixed over any
short-term period, with some doing better and some worse, and this was the
case once again in the first half of the year. The infrastructure names and
the fixed income portfolio showed negative returns whilst the property
portfolio made a positive if modest contribution to returns.
The infrastructure holdings continue to be buffeted by volatile expectations
of interest rates. In the UK, we have an investment in renewables through
Greencoat UK Wind, and an investment in assets in North America and Europe
through BBGI Infrastructure. Both companies have been impacted by widening
discounts to NAV during this period of higher interest rates, though we
continue to have confidence in the quality of these assets and the cash flows
that fund their attractive dividends.
In SAINTS' fixed income portfolio, there was broad weakness in Emerging
Markets bonds due to interest rates staying higher for longer than expected.
Our investments are mostly in Central and Latin American countries, where
interest rates remain much higher than prevailing inflation rates. For
example, Mexico's inflation rate has fallen to 4% while its interest rates
remain elevated at 11%. This provides investors with a significant return
opportunity, particularly given that these Emerging Markets' Central banks are
likely to cut interest rates once the US Federal Reserve starts doing so,
providing a tailwind to Emerging Markets bonds going forward.
The positive contribution from the property portfolio came from the income
generated over the period, with the capital return of the portfolio marginally
negative over the period. Property markets have been challenging for the past
couple of years, and investors have rightly had questions about the ongoing
valuations of properties on the balance sheets of investment trusts. But the
manager of SAINTS' properties has steered clear of the most-affected sectors.
With property valuations holding up, at least for SAINTS, we hope this
provides re-assurance to shareholders. During the past six months, the
property managers have continued to look for opportunities to improve the
portfolio, both through extending and improving leases and through sales and
purchases. The allocation to property has risen over the reporting period,
largely due to proceeds from sales towards the end of 2023 being reinvested in
two new properties.
Transactions
Our philosophy of finding and holding great companies for the long-term
naturally results in fairly low turnover within the portfolio, as long as we
are doing our job well. During the first half of 2024, we made a new
investment in Swedish drilling equipment company Epiroc, and we divested
shares in GSK, Dolby Labs and Kering. More details on the rationale for these
transactions follows below.
Epiroc is a Swedish company selling high-value, mission-critical drilling
equipment to mining and construction companies. Its expertise in hard-rock
drilling and strong track-record of innovation have made Epiroc a global
leader in a consolidated industry. There are many structural drivers
supporting growing demand for their products and a large and growing installed
base of equipment supports steadily-rising demand for new attachments, spare
parts and maintenance, which are provided by a strong network of
highly-specialised technicians. Representing close to 70% of revenues, this
part of the business helps reduce the inherent cyclicality of its end-markets
and provides steady cashflows, allowing Epiroc to reinvest for growth whilst
paying an attractive and resilient dividend.
GSK is a British pharmaceutical company which we have held for more than 5
years in the portfolio. Our investment case had two main assumptions: that the
company would sharpen its commercial focus under new management, and that the
appointment of well-respected chief scientific officer, Hal Barron, would lead
to a rejuvenation of the company's drug pipeline. Since then, the commercial
turnaround has happened, but the second part of our investment case has failed
to materialise and indeed Hal Barron left the company.
Dolby, of the ubiquitous logo, makes software for audio and vision
applications, such as the sound encoded in broadcast TV. Held since 2012, the
shares have delivered a cumulative return of more than 200% (in GBP), or about
10% per annum and slightly ahead of global equities over the period. Although
these returns have been solid, we have been underwhelmed by the pace of
revenue and profit growth at the company. Our analysis is that structurally,
the company faces an ongoing headwind from pricing, whilst its highly
technical engineers' pay keeps rising. Dolby is struggling to grow its profits
at an attractive rate. We do not see this fundamentally changing and so we
have divested from the holding.
Luxury group Kering, owner of brands such as Yves Saint Laurent, has been a
successful investment since our first purchase in 2016. At the time, we
anticipated a successful turnaround in the fortunes of its flagship brand,
Gucci, under a new creative director. This led to several years of strong
growth in profits, and ultimately resulted in a cumulative return on our
initial investment of ~180%, compared with ~130% for the wider stock market
over the same period. However, in the past 18 months, the company appears to
have gone off track. The creative director has left, we are not convinced by
the new strategy for Gucci, and there has been a great deal of churn in the
management team. The company is now quite leveraged, both operationally and
financially, and we are concerned that it will see a prolonged period of weak
sales and potentially even financial difficulties going forward. With its
prospects looking unattractive, we divested from the holding.
As well as funding the purchase of Epiroc the proceeds from these disposals
were reinvested in existing holdings. Outside the equity portfolio, notable
transactions were two new investments in the property portfolio
(inflation-linked rentals from a service station near Gatwick and an
industrial warehouse in the south of England) which were funded by disposals
from sovereign bonds.
Conclusion and Outlook
SAINTS' NAV per share reached a record level in the first half of the year.
The underlying growth of the portfolio remains strong, if a little more
'tortoise' than the market's 'hare'. We remain staunch believers that focusing
on companies which steadily compound their earnings and dividends ever-higher
will stand SAINTS' shareholders in good stead in the long-term.
Ultimately, we expect this approach to drive not only real capital growth in
the portfolio, but also inflation-beating income growth. This is core to
SAINTS' objectives: a resilient dividend which grows ahead of UK inflation.
All of the equity holdings pay dividends, and over time we expect these
dividends to follow earnings growth, underpinning SAINTS' ability to pay a
growing dividend to shareholders backed by natural income.
At this half-way point, it is always a little unclear exactly how SAINTS'
income growth will play out in the remainder of the year. On the one hand
portfolio earnings and dividend growth has been robust. But on the other
exchange rates remain an unknown, and recently we have seen Sterling
strengthening. As most of SAINTS' investments are outside the UK, this
introduces uncertainty to the growth rate in income.
However, the Company is able to draw on reserves if necessary: an advantage of
the investment trust structure. With UK inflation trending down towards 2%, we
are optimistic that income growth from SAINTS' investments should once again
allow the Board to increase the dividend at a rate above inflation. In the
meantime your managers will continue to steer the portfolio in pursuit of
steady growth, and we will report back again at the full year results.
Baillie Gifford & Co
29 July 2024
See disclaimer at the end of this announcement.
Past performance is not a guide to future performance.
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 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
Lord Macpherson of Earl's Court
Chairman
29 July 2024
Performance Attribution for the Six Months to 30 June 2024 (unaudited)
For the six months to 30 June 2024
Average allocation Average allocation benchmark* Total return† Total return* † benchmark
SAINTS % SAINTS %
Portfolio breakdown % %
Global equities 95.1 99.9 5.9
Infrastructure equities‡ 3.1 0.1 (4.4)
Bonds 2.1 (4.4)
Direct property 9.1 3.1
Deposits 0.5 -
Borrowings at book value (9.9) 1.5
Portfolio total return (borrowings at book value) 5.5
Other items(#) (0.2)
Fund total return (borrowings at book value) 5.3
Adjustment for change in fair value of borrowings 0.2
Fund total return (borrowings at fair value) 5.5 12.2
* The Company's benchmark is the FTSE All-World Index (in sterling terms).
† Alternative performance measure - see glossary of terms and alternative
performance measures at the end of this announcement.
# Includes Baillie Gifford and OLIM Property Limited management fees.
‡ The allocation reflects the six infrastructure equity holdings set out the
list of investments below.
Source: Baillie Gifford/LSEG and relevant underlying index providers. See
disclaimer at the end of this announcement.
Past performance is not a guide to future performance.
List of Investments as at 30 June 2024 (unaudited)
Name Business 30 June 2024 30 June 2024
Value % of total assets
£'000
Global equities
Novo Nordisk Pharmaceutical company 44,843 4.2
Microsoft Computer software 42,861 4.0
Watsco Distributes air conditioning, heating and refrigeration equipment 40,817 3.8
Taiwan Semiconductor Manufacturing Semiconductor manufacturer 40,775 3.8
Fastenal Distribution and sales of industrial supplies 30,994 2.9
Procter & Gamble Household product manufacturer 30,142 2.8
Atlas Copco Engineering 29,482 2.8
Apple Consumer technology 27,134 2.5
Partners Group Asset management 26,511 2.5
Schneider Electric Electrical power products 26,501 2.5
Analog Devices Integrated circuits 25,112 2.4
Deutsche Boerse Securities exchange owner/operator 23,331 2.2
Carsales.com Online marketplace for classified car advertisements 22,989 2.2
Coca Cola Beverage company 22,626 2.1
Pepsico Snack and beverage company 22,613 2.1
Wolters Kluwer Information services and solutions provider 21,418 2.0
Experian Credit scoring and marketing services 19,733 1.9
Admiral Car insurance 18,593 1.7
United Parcel Service Courier services 18,379 1.7
Intuit Software 17,381 1.6
Roche Pharmaceuticals and diagnostics 17,097 1.6
Sonic Healthcare Laboratory testing 16,612 1.6
Nestlé Food producer 16,465 1.5
Arthur J Gallagher Insurance broker 16,176 1.5
United Overseas Bank Commercial banking 13,545 1.3
Anta Sports Sportswear manufacturer and retailer 13,386 1.3
L'Oréal Cosmetics 13,234 1.2
Midea Group Appliance manufacturer 12,258 1.2
McDonald's Fast food restaurants 12,240 1.2
SAP Business software developer 12,007 1.1
Edenred Voucher programme outsourcer 11,439 1.1
Texas Instruments Semiconductor supplier 11,156 1.0
T. Rowe Price Fund manager 11,129 1.0
Kuehne + Nagel Worldwide freight forwarder 11,026 1.0
Cisco Systems Data networking equipment 11,000 1.0
NetEase Online gaming company 10,832 1.0
Valmet Manufacturer of pulp and paper machinery 10,789 1.0
Home Depot Home improvement retailer 10,559 1.0
Coloplast Manufacturer of medical products 10,558 1.0
B3 S.A. Securities exchange owner/operator 10,292 1.0
Epiroc Mining and infrastructure equipment provider 9,837 0.9
AVI Staple foods manufacturer 8,598 0.8
Starbucks Coffee retailer 8,575 0.8
Amadeus IT Group Technology provider for the travel industry 8,360 0.8
USS Second-hand car auctioneer 8,241 0.8
Hong Kong Exchanges and Clearing Securities exchange owner/operator 8,029 0.8
Man Wah Sofa designer and manufacturer 7,806 0.7
Cognex Industrial automation 7,805 0.7
Diageo International drinks company 7,452 0.7
Hargreaves Lansdown UK retail savings and investment platform 7,131 0.7
Albemarle Producer of speciality and fine chemicals 6,423 0.6
Fevertree Drinks Producer of premium mixer drinks 5,951 0.6
TCI Producer of health-food products 5,530 0.5
Medtronic Medical devices company 5,314 0.5
Pernod Ricard Global spirits manufacturer 5,313 0.5
Eurofins Laboratory testing provider 5,220 0.5
Albemarle 7.25% 2027 Pref. Producer of speciality and fine chemicals 4,335 0.4
Total global equities 923,955 86.6
Infrastructure equities
Greencoat UK Wind UK wind farms 10,362 1.0
Terna Electricity grid operator 6,093 0.6
BBGI Global Infrastructure PFI/PPP fund 5,640 0.5
Jiangsu Expressway Tollroad operator 3,850 0.3
Assura Primary healthcare property group 3,265 0.3
Exelon Grid and utility operator 844 0.1
Total infrastructure equities 30,054 2.8
Direct property See table below 93,550 8.8
Bonds
Euro denominated Ivory Coast 6.625% 2048 1,361 0.1
US dollar denominated Dominican Republic 5.875% 30/01/2060 1,821 0.2
Mexico 5.75% 12/10/2110 1,479 0.1
3,300 0.3
Brazilian real denominated Brazil CPI Linked 15/05/2045 2,554 0.2
Dominican peso denominated Dominican Republic 9.75% 05/06/2026 734 0.1
Indonesian rupiah denominated Indonesia 9% 15/03/2029 2,930 0.3
Indonesia 7.375% 15/05/2048 1,892 0.2
4,822 0.5
Total bonds 12,771 1.2
Total investments 1,060,330 99.4
Net liquid assets 6,278 0.6
Total assets (before deduction of borrowings) 1,066,608 100.0
Property portfolio
Location Type Tenant 30 June 2024 30 June 2024 % of total assets 31 December 2023 Value
Value £'000
£'000
Biggleswade* Warehouse Sherwin-Williams UK Limited - - 5,700
Crawley(†) Motorway Services Moto Hospitality Limited 18,750 1.8 -
Denbigh Supermarket Aldi Stores Limited 4,800 0.5 4,800
Earley Public House Spirit Pub Company (Managed) Limited (Greene King plc) 2,500 0.2 2,600
Gosport Supermarket Aldi Stores Limited 5,550 0.5 5,550
Holyhead Hotel Premier Inn Hotels Limited 6,500 0.6 6,550
New Romney Holiday Village Park Resorts Limited 19,250 1.8 19,250
Otford Public House Spirit Pub Company (Managed) Limited (Greene King plc) 1,700 0.2 1,700
Ringwood Hotel Premier Inn Hotels Limited 8,350 0.8 8,650
Southend-on-Sea Warehouse Booker Limited 7,900 0.7 7,900
Taunton Bowling Alley Mitchells & Butlers Retail (No.2) Limited (sublet to Hollywood Bowl Group 3,650 0.3 3,650
plc)
Witney(†) Industrial James Donaldson Group Limited 14,600 1.4 -
93,550 8.8 66,350
* Sold during the period.
(†) Purchased during the period.
Income Statement (unaudited)
For the six months ended For the six months ended For the year ended
30 June 2024 30 June 2023 31 December 2023 (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains on sales of investments - securities - 23,474 23,474 - 17,939 17,939 - 26,346 26,346
Gains on sales of investments - property - 1,848 1,848 - - - - 492 492
Changes in fair value of investments - securities - 14,349 14,349 - 38,544 38,544 - 65,005 65,005
Changes in fair value of investments - property - (1,859) (1,859) - (2,167) (2,167) - (6,546) (6,546)
Currency gains/(losses) - 81 81 - (39) (39) - 32 32
Income - dividends and interest 14,670 - 14,670 14,493 - 14,493 25,446 - 25,446
Income - rent and other 2,734 - 2,734 2,348 - 2,348 4,632 - 4,632
Management fees (note 3) (547) (1,640) (2,187) (514) (1,542) (2,056) (1,031) (3,094) (4,125)
Other administrative expenses (685) - (685) (634) - (634) (1,268) - (1,268)
Net return before finance costs and taxation 16,172 36,253 52,425 15,693 52,735 68,428 27,779 82,235 110,014
Finance costs of borrowings (354) (1,061) (1,415) (354) (1,061) (1,415) (711) (2,134) (2,845)
Net return on ordinary activities before taxation 15,818 35,192 51,010 15,339 51,674 67,013 27,068 80,101 107,169
Tax on ordinary activities (1,861) 468 (1,393) (1,811) 506 (1,305) (3,108) 977 (2,131)
Net return on ordinary activities after taxation 13,957 35,660 49,617 13,528 52,180 65,708 23,960 81,078 105,038
Net return per ordinary share (note 4) 7.83p 20.00p 27.83p 7.64p 29.46p 37.10p 13.48p 45.63p 59.11p
Note: 7.00p 6.75p 14.10p
Dividends paid and payable per share
(note 5)
The accompanying notes below are an integral part of the Financial Statements.
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 statements 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 30 June At 31 December
2024
£'000 2023
£'000
Non-current assets
Investments - securities 966,780 955,460
Investments - property 93,550 66,350
1,060,330 1,021,810
Current assets
Debtors 4,076 3,549
Cash and deposits 4,271 7,340
8,347 10,889
Creditors
Amounts falling due within one year:
Other creditors and accruals (2,069) (2,787)
Net current assets 6,278 8,102
Total assets less current liabilities 1,066,608 1,029,912
Creditors
Amounts falling due after more than one year:
Loan notes (note 7) (94,735) (94,728)
Net assets 971,873 935,184
Capital and reserves
Share capital 44,579 44,579
Share premium account 186,100 186,100
Capital redemption reserve 22,781 22,781
Capital reserve 700,552 664,892
Revenue reserve 17,861 16,832
Shareholders' funds 971,873 935,184
Net asset value per ordinary share* 545.0p 524.5p
Ordinary shares in issue (note 8) 178,315,943 178,315,943
*See Glossary of Terms and Alternative Performance Measures at the end of this
announcement.
The accompanying notes below are an integral part of the Financial Statements.
Statement of Changes in Equity (unaudited)
For the six months ended 30 June 2024
Share Share Capital Capital Revenue Shareholders'
reserve *
capital premium redemption £'000 reserve funds
£'000 account reserve £'000 £'000
£'000 £'000
Shareholders' funds at 1 January 2024 44,579 186,100 22,781 664,892 16,832 935,184
Net return on ordinary activities after taxation - - - 35,660 13,957 49,617
Dividends paid in the year (note 5) - - - - (12,928) (12,928)
Shareholders' funds at 30 June 2024 44,579 186,100 22,781 700,552 17,861 971,873
For the six months ended 30 June 2023
Share premium account Capital redemption reserve
Share £'000 £'000 Capital reserve* Revenue reserve Shareholders'
capital £'000 £'000 funds
£'000 £'000
Shareholders' funds at 1 January 2023 44,188 178,189 22,781 583,814 17,702 846,674
Shares issued 363 7,370 - - - 7,733
Net return on ordinary activities after taxation - - - 52,180 13,528 65,708
Dividends paid (note 5) - - - - (12,348) (12,348)
Shareholders' funds at 30 June 2023 44,551 185,559 22,781 635,994 18,882 907,767
* The Capital Reserve balance at 30 June 2024 includes investment holding
gains of £37,812,000 (30 June 2023 - gains of £317,109,000).
The accompanying notes below are an integral part of the Financial Statements.
Condensed cash flow statement (unaudited)
Six months to Six months to
30 June 30 June
2024 2023
£'000 £'000
Cash flows from operating activities
Net return on ordinary activities before taxation 51,010 67,013
Net gains on investments - securities (37,823) (56,483)
Net losses on investments - property 11 2,167
Currency (gains)/losses (81) 39
Finance costs of borrowings 1,415 1,415
Overseas withholding tax (1,383) (1,291)
Changes in debtors (537) (687)
Changes in creditors (704) 73
Other non-cash changes 29 80
Cash from operations 11,937 12,326
Interest paid (1,415) (1,422)
Net cash inflow from operating activities 10,522 10,904
Cash flows from investing activities
Acquisitions of investments - securities (48,888) (68,321)
Acquisitions of investments - property (32,865) (14,967)
Disposals of investments - securities 75,355 75,535
Disposals of investments - property 5,654 -
Net cash outflow from investing activities (744) (7,753)
Cash flows from financing activities
Equity dividends paid (12,928) (12,348)
Shares issued - 7,734
Net cash outflow from financing activities (12,928) (4,614)
Decrease in cash and cash equivalents (3,150) (1,463)
Exchange movements 81 (39)
Cash and cash equivalents at start of period* 7,340 4,184
Cash and cash equivalents at end of period* 4,271 2,682
* Cash and cash equivalents represent cash at bank.
The accompanying notes below are an integral part of the Financial Statements.
Notes to the condensed Financial Statements (unaudited)
1. Basis of Accounting
The condensed Financial Statements for the six months to 30 June 2024 comprise
the statements set out on above 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 July 2022 with consequential amendments. They have not been audited
or reviewed by the Auditor pursuant to the Auditing Practices Board Guidance
on 'Review of Interim Financial Information'. The Financial Statements for the
six months to 30 June 2024 have been prepared on the basis of the same
accounting policies as set out in the Company's Annual Report and Financial
Statements at 31 December 2023.
Going concern
The Directors have considered the nature of the Company's principal risks and
uncertainties, as set out on below, together with its current position. The
Board has, in particular, considered heightened geopolitical tensions and
conflicts and macroeconomic concerns, including increased inflation and
interest rates, but does not believe the Company's going concern status is
affected. In addition, the Company's investment objective and policy, its
assets and liabilities and projected income and expenditure, together with the
Company's 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, the
majority of which are investments in quoted securities which are readily
realisable, exceed its liabilities significantly. All borrowings require the
prior approval of the Board. Gearing levels and compliance with borrowing
covenants are reviewed by the Board on a regular basis. The Company has no
short term borrowings. The redemption dates for the Company's loan notes are
June 2036, April 2045 and April 2049. Accordingly, the Directors consider it
appropriate to adopt the going concern basis of accounting in preparing these
Financial Statements and confirm that they are not aware of any material
uncertainties which may affect the Company's ability to continue to do so over
a period of at least twelve months from the date of approval of these
Financial Statements.
2. Financial Information
The financial information contained within this Interim Financial Report does
not constitute statutory accounts as defined in sections 434 to 436 of the
Companies Act 2006. The financial information for the year ended 31 December
2023 has been extracted from the statutory accounts which have been filed with
the Registrar of Companies. The Auditor's Report on those accounts was not
qualified, and did not contain statements under sections 498(2) or (3) of the
Companies Act 2006.
3. Investment Manager
Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford
& Co, has been appointed by the Company as its Alternative Investment Fund
Manager (AIFM) and Company Secretary. The investment management function has
been delegated to Baillie Gifford & Co. The management agreement can be
terminated on 6 months' notice. The annual management fee, calculated
quarterly, is 0.45% on the first £500m of total assets and 0.35% on the
remaining total assets, where 'total assets' is defined as the total value of
the assets held, excluding the value of the property portfolio, less all
liabilities (other than any liability in the form of debt intended for
investment purposes).
As AIFM, Baillie Gifford & Co Limited has delegated the management of the
property portfolio to OLIM Property Limited. OLIM receives an annual fee from
SAINTS of 0.5% of the value of the property portfolio, subject to a minimum
quarterly fee of £6,250. The agreement can be terminated on three months'
notice.
4. Net return per ordinary share
Six months to Six months to
30 June 2024 30 June 2023
£'000 £'000
Revenue return on ordinary activities after taxation 13,957 13,528
Capital return on ordinary activities after taxation 35,660 52,180
Total net return 49,617 65,708
Weighted average number of ordinary shares in issue 178,315,943 177,095,723
5. Dividends
Six months to Six months to
30 June 2024 30 June 2023
£'000 £'000
Amounts recognised as distributions in the period:
Previous year's final of 3.80p (2023 - 3.67p), paid 11 April 2024 6,776 6,487
First interim of 3.45p (2023 - 3.30p), paid 20 June 2024 6,152 5,861
12,928 12,348
Amounts paid and payable in respect of the period:
First interim of 3.45p (2023 - 3.30p), paid 20 June 2024 6,152 5,861
Second interim of 3.55p (2023 - 3.45p) 6,330 6,152
12,482 12,013
The second interim dividend was declared after the period end date and
therefore has not been included as a liability in the Balance Sheet. It is
payable on 19 September 2024 to shareholders on the register at the close of
business on 9 August 2024. The ex-dividend date is 8 August 2024. The
Company's Registrar offers a Dividend Reinvestment Plan and the final date for
elections for this dividend is 29 August 2024.
6. Fair Value Hierarchy
The fair value hierarchy used to analyse the basis on which the fair values of
financial instruments held at fair value through the profit or loss account
are measured is described below. Fair value measurements are categorised on
the basis of the lowest level input that is significant to the fair value
measurement.
Level 1 - using unadjusted quoted prices for identical instruments in an
active market;
Level 2 - using inputs, other than quoted prices included within Level 1, that
are directly or indirectly observable (based on market data); and
Level 3 - using inputs that are unobservable (for which market data is
unavailable).
An analysis of the Company's financial asset investments based on the fair
value hierarchy described above is shown below.
Level 1 Level 2 Level 3 Total
As at 30 June 2024 £'000 £'000 £'000 £'000
Securities
Listed equities* 954,009 - - 954,009
Bonds - 12,771 - 12,771
Property
Freehold - - 93,550 93,550
Total financial asset investments 954,009 12,771 93,550 1,060,330
Level 1 Level 2 Level 3 Total
As at 31 December 2023 £'000 £'000 £'000 £'000
Securities
Listed equities 917,594 - - 917,594
Bonds - 37,866 - 37,866
Property
Freehold - - 66,350 66,350
Total financial asset investments 917,594 37,866 66,350 1,021,810
* This includes £4,335,000 of Albemarle 7.25% 2027 preference shares
There have been no transfers between levels of the fair value hierarchy during
the period. The fair value of listed investments is bid value or, in the case
of holdings on certain recognised overseas exchanges, last traded price. They
are categorised as Level 1 if they are valued using unadjusted quoted prices
for identical instruments in an active market and Level 2 if they do not meet
all these criteria but are, nonetheless, valued using market data. The fair
value of unlisted investments is determined using valuation techniques,
determined by the Directors, based upon observable and/or non-observable data
such as latest dealing prices, stockbroker valuations, net asset values and
other information, as appropriate. The Company's holdings in unlisted
investments are categorised as Level 3 as the valuation techniques applied
include the use of non-observable data.
7. Bank loans
At 30 June 2024, the book value of the borrowings was £94,735,000 (31
December 2023 - £94,728,000) and the fair value was £64,978,000 (31 December
2023 - £68,155,000). The debt comprises long-term private placement loan
notes: £15 million with a coupon of 2.23% issued in 2021 which mature in
2036, £40 million with a coupon of 3.12% issued in 2022 which mature in 2045
and £40 million with a coupon of 3.12% issued in 2022 which mature in 2049.
8. Share Capital
At 30 June 2024, the Company had the authority to buy back 26,729,559 ordinary
shares and to issue 17,831,594 ordinary shares without application of
pre-emption rights in accordance with the authorities granted at the AGM in
April 2024. During the six months to 30 June 2024, no shares were issued. (31
December 2023 - 1,565,000 shares were issued at a premium to net asset value
raising proceeds of £8,302,000). During the six months to 30 June 2024, no
shares were bought back (31 December 2023 - nil).
9. 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.
10.
The Interim Financial Report will be available on the SAINTS page of the
Managers' website: saints-it.com (http://www.saints-it.com/) ‡ on or around
15 August 2024.
Principal Risks and Uncertainties
The principal risks facing the Company are financial risk, investment strategy
risk, discount risk, climate and governance risk, regulatory risk, custody and
depositary risk, operational risk, leverage risk, political risk, cyber
security risk and emerging risks. An explanation of these risks and how they
are managed is set out on pages 41 to 45 of the Company's Annual Report and
Financial Statements for the year to 31 December 2023 which is available on
the Company's website: saints-it.com.
The principal risks and uncertainties have not changed since the date of that
report.
Glossary of Terms and Alternative Performance Measures (APM)
An alternative performance measure is a financial measure of historical or
future financial performance, financial position, or cash flows, other than a
financial measure defined or specified in the applicable financial reporting
framework.
Total assets
This is the Company's definition of Adjusted Total Assets, being the total
value of all assets held less all liabilities (other than liabilities in the
form of borrowings).
Net Asset Value ('NAV')
Also described as shareholders' funds, net asset value is the value of total
assets less liabilities (including borrowings). Net asset value can be
calculated on the basis of borrowings stated at book value and fair value. An
explanation of each basis is provided below. The net asset value per share is
calculated by dividing this amount by the number of ordinary shares in issue
excluding any shares held in treasury.
Net Asset Value (borrowings at book value)
Borrowings are valued at adjusted net issue proceeds. Book value approximates
amortised cost.
Net Asset Value (borrowings at fair value) (APM)
Borrowings are valued at an estimate of their market worth. This indicates the
cost to the Company of repaying its borrowings under current market
conditions. It is a widely reported measure across the investment trust
industry.
Net Asset Value
30 June 2024 31 December 2023
Shareholders' funds (borrowings at book value) £971,873,000 £935,184,000
Add: book value of borrowings £94,735,000 £94,728,000
Less: fair value of borrowings (£64,978,000) (£68,155,000)
Shareholders' funds (borrowings at fair value) £1,001,630,000 £961,757,000
Shares in issue 178,315,943 178,315,943
Net Asset Value per ordinary share (borrowings at fair value) 561.7p 539.4p
Ongoing Charges (APM)
The total expenses (excluding borrowing costs) incurred by the Company as a
percentage of the average net asset value (with borrowings at fair value). The
ongoing charges have been calculated on the basis prescribed by the
Association of Investment Companies.
Performance Attribution (APM)
Analysis of how the Company achieved its performance relative to its
benchmark.
Premium/(discount) (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, this situation is called a premium.
30 June 2024 30 June 2024 31 December 2023 31 December 2023
NAV (book) NAV (fair) NAV (book) NAV (fair)
Closing NAV per share 545.0p 561.7p 524.5p 539.4p
Closing share price 513.0p 513.0p 535.0p 535.0p
Premium/(discount) (5.9%) (8.7%) 2.0% (0.8%)
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.
30 June 30 June 30 June 31 December 31 December 31 December
2024 2024 2024 2023 2023 2023
NAV (book) NAV (fair) share price NAV (book) NAV (fair) share price
Opening NAV per share/share (a) 524.5p 539.4p 535.0p 479.0p 495.5p 508.0p
price
Closing NAV per share/share (b) 545.0p 561.7p 513.0p 524.5p 539.4p 535.0p
price
Dividend adjustment factor* (c) 1.01339 1.01317 1.01481 1.02768 1.026683 1.027273
Adjusted closing NAV per share/share price (d =(b) x (c) 552.3p 569.1p 520.6p 539.0p 553.8p 549.6p
Total (d) ÷ (a)-1 5.3% 5.5% (2.7%) 12.5% 11.8% 8.2%
return
* The dividend adjustment factor is calculated on the assumption that the
dividends paid out by the Company are reinvested into the shares of the
Company at the cum income NAV/share price, as appropriate, at the ex-dividend
date.
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. Equity gearing is the Company's borrowings
adjusted for cash, bonds and property expressed as a percentage of
shareholders' funds.
Leverage (APM)
For the purposes of the Alternative Investment Fund Managers (AIFM)
Regulations, 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 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.
‡ Neither the contents of the Managers' website nor the contents of any
website accessible from hyperlinks on the Managers' website (or any other
website) is incorporated into, or forms part of, this announcement.
None of the views expressed in this document should be construed as advice to
buy or sell a particular investment.
SAINTS' objective is to deliver real dividend growth by increasing capital and
growing income. Its policy is to invest mainly in equity markets, but other
investments may be held from time to time including bonds, property and other
asset classes.
Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford
& Co, is appointed as investment managers and secretaries to SAINTS.
Baillie Gifford & Co, the Edinburgh based fund management group has around
£215 billion under management and advice as at 29 July 2024.
Past performance is not a guide to future performance. SAINTS is a listed UK
company. As a result, the value of its shares and any income from those shares
is not guaranteed and could go down as well as up. You may not get back the
amount you invested. As SAINTS invests in overseas securities, changes in the
rates of exchange may also cause the value of your investment (and any income
it may pay) to go down or up. You can find up to date performance information
about SAINTS on the SAINTS page of the Managers' website saints-it.com
(http://www.saints-it.com/) . Neither the contents of the Company's website
nor the contents of any website accessible from hyperlinks on the Company's
website (or any other website) is incorporated into, or forms part of, this
announcement.
For further information please contact:
James Budden, Baillie Gifford & Co
Tel: 0131 275 2000
Jonathan Atkins, Four Communications
Tel: 0203 920 0555 or 07872 495396
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Sustainable Finance Disclosure Regulation ('SFDR')
The EU Sustainable Finance Disclosure Regulation ('SFDR') does not have a
direct impact in the UK due to Brexit, however, it applies to third-country
products marketed in the EU. As SAINTS is marketed in the EU by the AIFM,
Baillie Gifford & Co Limited, via the National Private Placement Regime
('NPPR') the following disclosures have been provided to comply with the
high-level requirements of SFDR.
The AIFM has adopted Baillie Gifford & Co's ESG Principles and Guidelines
as its policy on integration of sustainability risks in investment decisions.
Baillie Gifford & Co believes that a company cannot be financially
sustainable in the long run if its approach to business is fundamentally out
of line with changing societal expectations. It defines 'sustainability' as a
deliberately broad concept which encapsulates a company's purpose, values,
business model, culture, and operating practices.
Baillie Gifford & Co's approach to investment is based on identifying and
holding high quality growth businesses that enjoy sustainable competitive
advantages in their marketplace. To do this it looks beyond current financial
performance, undertaking proprietary research to build up an in-depth
knowledge of an individual company and a view on its long-term prospects. This
includes the consideration of sustainability factors (environmental, social
and/or governance matters) which it believes will positively or negatively
influence the financial returns of an investment. The likely impact on the
return of the portfolio from a potential or actual material decline in the
value of investment due to the occurrence of an environmental, social or
governance event or condition will vary and will depend on several factors
including but not limited to the type, extent, complexity and duration of an
event or condition, prevailing market conditions and existence of any
mitigating factors.
Whilst consideration is given to sustainability matters, there are no
restrictions on the investment universe of the Company, unless otherwise
stated within in its Investment Objective & Policy. Baillie Gifford &
Co can invest in any companies it believes could create beneficial long-term
returns for investors. However, this might result in investments being made in
companies that ultimately cause a negative outcome for the environment or
society.
More detail on the Investment Managers' approach to sustainability can be
found in the ESG Principles and Guidelines document, available publicly on the
Baillie Gifford website bailliegifford.com.
The underlying investments do not take into account the EU criteria for
environmentally sustainable economic activities established under the EU
Taxonomy Regulation.
- ends -
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