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Regulatory News


Half-year Report

Thu, 11th Oct 2018 14:58


RNS Number : 7886D
Baillie Gifford Shin Nippon PLC
11 October 2018

This announcement replaces the announcement released on 28 September 2018 (RNS Number: 2375C). The Net Return on Ordinary Activities after Taxation of 48,237,000 stated on the Income Statement was shown erroneously as a negative number but is now shown correctly as a positive number.

Baillie Gifford Shin Nippon PLC

Legal Entity Identifier: X5XCIPCJQCSUF8H1FU83

Regulated Information Classification: Half Yearly Financial Report

Results for the six months to 31 July 2018

The Company's net asset value per share rose by 12.2% compared to a 2.1% rise in the MSCI Japan Small Cap Index*. The share price increased by 10.5%.

The Japanese market was weak during the first half of this year. Cyclical stocks exposed to overseas demand were particularly weak. However, domestically focussed companies saw strong share price performance.

Among the notable positive performers during the first half of the year were a selection of disruptive online businesses, including Brainpad, a data analytics company, Infomart, which operates an online food operating system, as well as longstanding holdings Start Today and MonotaRO.

Harmonic Drive, a leading global manufacturer of specialist precision parts for smaller robots, was among the weakest performers.

The IPO market remains robust and we participated in the IPO of Raksul, which has developed an online, cloud-based system that connects service providers with clients in real-time.

After deducting borrowings at fair value.

* The Company's comparative index is the MSCI Japan Small Cap Index (total return and in sterling terms). See disclaimer at the end of this announcement.

Source: Thomson Reuters/Baillie Gifford and relevant underlying index providers. See disclaimer at end of this announcement.

Shin Nippon aims to achieve long term capital growth through investment principally in small Japanese companies which are believed to have above average prospects for growth. At 31 July 2018 the Company had total assets of 542.1m (before deduction of bank loans of 50.6m).

The Company is managed by Baillie Gifford, an Edinburgh based fund management group with approximately 195 billion under management and advice as at 27 September 2018.

Past performance is not a guide to future performance. The value of an investment and any income from it is not guaranteed and may go down as well as up and investors may not get back the amount invested. The Company has borrowed money to make further investments. This is commonly referred to as gearing. The risk is that, when this money is repaid by the Company, the value of these investments may not be enough to cover the borrowing and interest costs, and the Company makes a loss. If the Company's investments fall in value, gearing will increase the amount of this loss. The more highly geared the Company, the greater this effect will be.

Investment in investment trusts should be regarded as long term. You can find up to date performance information about Shin Nippon at www.shinnippon.co.uk.

27 September 2018

For further information please contact:

Alex Blake, Baillie Gifford & Co

Tel: 0131 275 2859

Roland Cross, Director, Four Broadgate

Tel: 0203 697 4200 or 07831 401309

The following is the unaudited Interim Financial Report for the six months to 31 July 2018.

Responsibility Statement

We confirm that to the best of our knowledge:

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

b) the Interim Management Report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.7R (indication of important events during the first six months, their impact on the Financial Statements and a description of 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 and Transparency Rules 4.2.8R (disclosure of related party transactions and changes therein).

On behalf of the Board

MN Donaldson

Chairman

27 September 2018

Interim Management Report

The Japanese market was weak during the first half of this year due to external macro and political factors. Investor concerns centred around US relations with its key trading partners and slowing global demand in sectors such as semiconductors and automobiles. Under these circumstances there was general weakness among cyclical stocks exposed to overseas demand. However, this shift in sentiment benefitted domestically focussed companies which saw strong share price performance during this period.

In the six months to 31 July 2018, Shin Nippon's net asset value per share (after deducting borrowings at fair value) rose by 12.2% compared to a 2.1% rise in the MSCI Japan Small Cap index. However, we believe longer term periods are more appropriate bases on which to judge the success of the investment approach. Over the past three and five years, the comparative index is up by 68.5% and 104.1% respectively while the Company's net asset value per share is up by 135.3% and 229.3%.

Following shareholder approval at the 2018 Annual General Meeting, the Company undertook a sub-division of its ordinary shares on 21 May 2018 with each existing ordinary share of 10 pence being replaced by 5 new ordinary shares of 2 pence.

Despite rising trade tensions and worries about a cyclical slowdown in a few key sectors, the domestic economy in Japan remains in good health. Severe labour shortage across several sectors is driving strong wage growth and forcing some companies to invest more in labour saving technologies. Continuing the trend seen in recent quarters, growth in corporate capital expenditure remains robust and recently reached levels not seen since 2006. Inbound tourism also continues to be strong. More than 20 million foreigners have visited Japan so far this year and the government is on course to achieving its 2020 target of 40 million visitors.

Among the notable positive performers during the first half of the year were a selection of disruptive online businesses that continue to grow rapidly either by creating entirely new markets or by aggressively taking share from sleepy and slow-moving traditional incumbents. Data analytics company Brainpad was the top performer, with its share price more than doubling in the first half of the year. The company's proprietary data analytics software is seeing rapid adoption by numerous large clients. In addition, its new artificial intelligence tool which automates various repetitive tasks is being widely adopted by businesses seeking to improve staff productivity amidst a severe labour shortage.

Infomart was another strong performer during this period. Its online food ordering system for restaurants has now become the de facto industry standard in Japan. The company has gained tremendous scale in terms of both restaurants and food wholesalers who use its online system for business transactions. To consolidate its already strong competitive position, the company is continuing to add new features to its ordering platform. It recently launched an online invoicing system that is proving to be a major hit with clients from a range of sectors. The Japanese Ministry of Economy, Trade and Industry recently highlighted Infomart's system as an example of an innovative solution designed to improve productivity and reduce system costs. This endorsement has raised the company's profile and has helped generate a lot of interest in its product offering.

Other strong performers included some of our longstanding holdings such as Start Today, Japan's leading fashion e-commerce platform, and MonotaRO, a leading online retailer of maintenance and repair supplies. Start Today recently launched its private branded clothing range and despite the market's initial scepticism regarding management's execution abilities, the company continues to make good operational progress in this new venture. In a similar vein, having reacted negatively to MonotaRO's heavy upfront investments to secure long-term growth at the cost of short-term profits, the market has now begun to recognise the strength of its competitive advantage and growth opportunity. This has resulted in a strong upward move in the shares so far this year.

Against a challenging backdrop, companies in cyclical industries exposed to global demand have fared poorly so far this year. Harmonic Drive, a leading global manufacturer of specialist precision parts for smaller robots, was among the weakest names in the portfolio. It is suffering from a slowdown in demand from China and a worsening of the competitive environment. The company is facing stiff competition from new entrants who are not only competing on price but are also steadily catching up in terms of technology. Megachips, a fabless manufacturer of electronic components for gaming consoles and consumer electronics, saw considerable share price weakness following the cancellation of a large order by a major client. Japan's leading online real estate website operator, Lifull remained out of favour as management continue to expand overseas through acquisitions funded by equity issuance whilst the core online property rentals business continues to struggle.

Given our long-term investment horizon, portfolio turnover remained low at 11.3%. However, we purchased a few new holdings during the six months. Among these was Kitz, a manufacturer of valves used in a variety of end markets. It has the top share in several niche sectors in Japan and is among the top 10 players globally. It has a diversified customer base and has particularly strong competitive positions in residential, semiconductor and petrochemical related valves. Management's capital allocation has been excellent over the years. They've made small acquisitions to expand their global network and have also bought back a considerable number of shares over the past decade. We also took a new holding in KH Neochem, a chemicals manufacturer that has a strong competitive position in its key product categories. The company makes specialist chemical products used as raw materials in cosmetics, environmentally friendly refrigerants for air-conditioners and building materials. Each of the company's end markets is growing and as one of the few global suppliers of these base chemicals, it also has pricing power. We therefore think that the long-term growth prospects of KH Neochem look exciting.

We also sold some stocks during the six months. Online user-generated recipe website Cookpad continues to struggle as its product offering is becoming increasingly un-differentiated amidst intensifying competition from new entrants. Following a recent meeting with the CEO, we believe that the prospects of a turnaround are remote and hence decided to sell our entire holding. We also sold our holding in condominium builder Takara Leben where a combination of weak demand, and rising land and labour costs have pushed the company into a precarious position.

We have previously noted that the range of investment opportunities for Shin Nippon continues to broaden. The IPO market remains robust with around 50 companies listing so far this year. We participated in the IPO of Raksul, an exciting, high growth business run by its young and entrepreneurial founders. It has developed an online, cloud-based system that connects service providers with clients in real-time. It is currently focussing on disrupting the domestic printing and logistics sectors, both of which remain very inefficient, traditional and quite large.

Shin Nippon continues to focus on investing in the most dynamic and innovative smaller businesses that are emerging in Japan. We believe that the operating environment for such companies has improved immensely in recent years and are seeing a newfound confidence amongst young entrepreneurs. This augurs well for Shin Nippon in terms of the opportunity to identify and invest in such exciting, high growth businesses.

The principal risks and uncertainties facing the Company are set out at the end of this report.

Baillie Gifford & Co

Past performance is not a guide to future performance

Income statement (unaudited)

For the six months ended

31 July 2018

For the six months ended

31 July 2017

Revenue

'000

Capital

'000

Total

'000

Revenue

'000

Capital

'000

Total

'000

Net gains on investments (note 3)

-

51,417

51,417

-

36,186

36,186

Currency (losses)/gains

-

(2,829)

(2,829)

-

1,211

1,211

Income from investments

2,193

-

2,193

1,575

-

1,575

Investment management fee (note 4)

(1,465)

-

(1,465)

(935)

-

(935)

Other administrative expenses

(360)

-

(360)

(221)

-

(221)

Net return before finance costs and taxation

368

48,588

48,956

419

37,397

37,816

Finance costs of borrowings

(500)

-

(500)

(342)

-

(342)

Net return on ordinary activities before taxation

(132)

48,588

48,456

77

37,397

37,474

Tax on ordinary activities (note 5)

(219)

-

(219)

(157)

-

(157)

Net return on ordinary activities after taxation

(351)

48,588

48,237

(80)

37,397

37,317

Net return per ordinary share* (note 7)

(0.14p)

19.58p

19.44p

(0.04p)

18.12p

18.08p

* Prior period figures restated for the five for one share split on 21 May 2018.

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

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

A Statement of Comprehensive Income is not required as all gains and losses of the Company have been reflected in the above statement.

Balance sheet (unaudited)

At 31 July 2018

At 31 January 2018

(audited)

'000

'000

Fixed asset investments

Investments held at fair value through profit or loss (note 8)

538,223

443,917

Current assets

Debtors

3,475

2,833

Cash and cash equivalents

6,055

5,668

9,530

8,501

Creditors

Amounts falling due within one year

(5,604)

(3,129)

Net current assets

3,926

5,372

Total assets less current liabilities

542,149

449,289

Creditors

Amounts falling due after more than one year (note 9)

(50,628)

(47,877)

Total net assets

491,521

401,412

Capital and reserves

Share capital

5,186

4,749

Share premium account

136,610

95,174

Capital redemption reserve

21,521

21,521

Capital reserve

334,038

285,451

Revenue reserve

(5,834)

(5,483)

Shareholders' funds

491,521

401,412

Net asset value per ordinary share

*(after deducting borrowings at book value)

189.6p

169.1p

Ordinary shares in issue* (note 11)

259,302,485

237,427,485

* Prior period figures restated for the five for one share split on 21 May 2018.

Statement of changes in equity (unaudited)

For the six months ended 31 July 2018

Share
capital

'000

Share
premium

account

'000

Capital redemption

reserve

'000

Capital

reserve*

'000

Revenue reserve

'000

Shareholders' funds

'000

Shareholders' funds at 1 Feb 2018

4,749

95,174

21,521

285,451

(5,483)

401,412

Ordinary shares issued (note 11)

437

41,436

-

-

-

41,873

Net return on ordinary activities after taxation

-

-

-

48,587

(351)

48,236

Shareholders' funds at 31 July 2018

5,186

136,610

21,521

334,038

(5,834)

491,521

For the six months ended 31 July 2017

Share
capital

'000

Share
premium

account

'000

Capital redemption

reserve

'000

Capital

reserve*

'000

Revenue reserve

'000

Shareholders' funds

'000

Shareholders' funds at 1 Feb 2017

4,040

40,094

21,521

173,473

(5,256)

233,872

Ordinary shares issued (note 11)

195

12,846

-

-

-

13,041

Net return on ordinary activities after taxation

-

-

-

37,397

(80)

37,317

Shareholders' funds at 31 July 2017

4,235

52,940

21,521

210,870

(5,336)

284,230

* The Capital reserve includes investment holding gains of 261,503,000 (31 July 2017 - gains of 159,020,000).

Condensed Cash Flow Statement (unaudited)

Six months to

31 July

2018

Six months to

31 July

2017

'000

'000

Cash flows from operating activities

Net return on ordinary activities before taxation

48,456

37,474

Net gains on investments

(51,417)

(36,186)

Currency (gains)/losses)

2,829

(1,211)

Finance costs of borrowings

500

342

Overseas withholding tax

(245)

(181)

Changes in debtors and creditors

385

(203)

Cash from operations

508

35

Interest paid

(477)

(303)

Net cash inflow/(outflow) from operating activities

31

(268)

Net cash outflow from investing activities

(42,933)

(30,284)

Ordinary shares issued

43,255

13,041

Bank loans drawn down

-

14,403

Net cash inflow from financing activities

43,255

27,444

Increase/(decrease) in cash and cash equivalents

353

(3,108)

Exchange movements

34

(75)

Cash and cash equivalents at start of period

5,668

5,520

Cash and cash equivalents at end of period *

6,055

2,337

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

Twenty largest equity holdings at 31 July 2018 (unaudited)

Name

Business

Value

'000

% of

total assets

Absolute performance *

%

Outsourcing

Employment placement services

21,121

3.9

23.5

MonotaRO

Online business supplies

20,669

3.8

72.6

Istyle

Beauty product review website

19,980

3.7

37.5

GMO Payment Gateway

Online payment processing

16,038

3.0

38.5

Asahi Intecc

Specialist medical equipment

14,869

2.7

6.9

Yume No Machi

Online meal delivery service

14,598

2.7

47.2

Start Today

Internet fashion retailer

13,806

2.5

48.8

Optex

Infrared detection devices

11,904

2.2

0.3

Nihon M&A Center

M&A advisory services

11,080

2.0

(2.9)

Infomart Corp

Internet platform for restaurant supplies

11,021

2.0

91.9

Peptidream

Drug discovery and development platform

10,984

2.0

2.1

Horiba

Manufacturer of measuring instruments

10,731

2.0

16.7

Bengo4.com

Online legal consultation

10,375

1.9

78.8

Megachips

Electronic components

10,070

1.9

(34.5)

Nifco

Value-added plastic car parts

9,951

1.8

(6.1)

Katitas

Real estate services

9,789

1.8

38.2

Noritsu Koki

Holding company with interests in biotech and agricultural products

9,446

1.7

(17.2)

Raksul

Internet based services

9,329

1.7

105.7

Jeol

Manufacturer of scientific equipment

9,042

1.7

79.9

M3

Online medical services

8,985

1.7

12.7

253,788

46.7

* Absolute performance is in sterling terms and has been calculated on a total return basis over the period 1 February 2018 to 31 July 2018.

Figures relate to part period returns where the equity has been purchased during the period.

Source: Baillie Gifford/StatPro and relevant underlying data providers.

Notes to the condensed financial statements (unaudited)

1.

The condensed Financial Statements for the six months to 31 July 2018 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 principles of the AIC's Statement of Recommended Practice issued in November 2014 and updated in February 2018 with consequential amendments and have not been audited or reviewed by the Auditors pursuant to the Auditing Practices Board Guidance on 'Review of Interim Financial Information'. The Financial Statements for the six months to 31 July 2018 have been prepared on the basis of the same accounting policies as set out in the Company's Annual Report and Financial Statements at 31 January 2018.

Going Concern

The Directors have considered the nature of the Company's principal risks and uncertainties, as set out below, together with its current position, investment objective and policy, its assets and liabilities and projected income and expenditure. The Company's assets, which are primarily 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 loan covenants are reviewed by the Board on a regular basis. Accordingly, the Directors considered 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 in operational existence for a period of at least twelve months from the date of approval of these Financial Statements.

2.

The financial information contained within this Interim Financial Report does not constitute statutory accounts as defined in sections 434 to 436 of the Companies Act 2006. The financial information for the year ended 31 January 2018 has been extracted from the statutory accounts which have been filed with the Registrar of Companies. The Auditors' Report on these accounts was not qualified, did not include a reference to any matters to which the Auditors 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.

Six months to

31 July 2018

Six months to

31 July 2017

'000

'000

Net gains on investments

Gains on sales of investments

12,187

6,294

Movement in investment holdings gains

39,230

29,892

51,417

36,186

4.

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 six months' notice. The annual management fee is 0.95% on the first 50m of net assets, 0.65% on the next 200m of net assets and 0.55% on the remainder, calculated and payable quarterly.

5.

The Company suffers overseas withholding tax on its equity income, currently at the rate of 10%.

6.

No interim dividend will be declared.

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

7.

Six months to

31 July 2018

Six months to

31 July 2017

'000

'000

Net return per ordinary share

Revenue return

(351)

(80)

Capital return

48,588

37,397

Total return

48,237

37,317

Net return per ordinary share is based on the above totals of revenue and capital and on 248,142,402 (31 July 2017* - 206,366,990) ordinary shares, being the weighted average number of ordinary shares in issue during the period. There are no dilutive or potentially dilutive shares in issue.

* Prior period figures have been restated for the five for one share split on 21 May 2018.

8.

Fair Value

The fair value hierarchy used to analyse the basis on which the fair values of financial instruments held at fair value through the profit or loss account are measured is described below. Fair value measurements are categorised on the basis of the lowest level input that is significant to the fair value measurement.

Level 1 - using unadjusted quoted prices for identical instruments in an active market;

Level 2 - using inputs, other than quoted prices included within Level 1, that are directly or indirectly observable (based on market data); and

Level 3 - using inputs that are unobservable (for which market data is unavailable).

The Company's investments are financial assets held at fair value through profit or loss. An analysis of the Company's financial asset investments based on the fair value hierarchy described above is shown below:

Investments held at fair value through profit or loss

As at 31 July 2018

Level 1

'000

Level 2

'000

Level 3

'000

Total

'000

Listed equities

536,914

-

-

536,914

Unlisted equities

-

-

1,309

1,309

Total financial asset investments

536,914

-

1,309

538,223

As at 31 January 2018

Level 1

'000

Level 2

'000

Level 3

'000

Total

'000

Listed equities

442,526

-

-

442,526

Unlisted equities

-

-

1,391

1,391

Total financial asset investments

442,526

-

1,391

443,917

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

There have been no transfers between levels of the fair value hierarchy during the period. The fair value of listed investments is last traded price which is equivalent to the bid price on Japanese markets. Listed investments are categorised as Level 1 if they are valued using unadjusted quoted prices for identical instruments in an active market and as Level 2 if they do not meet all these criteria but are, nonetheless, valued using market data. Unlisted investments are valued at fair value by the Directors following a detailed review and appropriate challenge of the valuations proposed by the Managers. The Managers' unlisted investment valuation policy applies methodologies consistent with the International Private Equity and Venture Capital Valuation guidelines ('IPEV'). These methodologies can be categorised as follows: (a) market approach (price of recent investment, multiples, industry valuation benchmarks and available market prices); (b) income approach (discounted cash flows); and (c) replacement cost approach (net assets). The Company's holdings in unlisted investments are categorised as Level 3 as unobservable data is a significant input to their fair value measurements.

9.

The amounts falling due after more than one year include bank loans of 50,628,000 (7.45 billion) outstanding under yen loan facilities repayable on 27 November 2020 and 18 December 2024 (31 January 2018 - 47,877,000 (7.45 billion)).

10.

The fair value of the bank loans at 31 July 2018 was 51,505,000 (31 January 2018 - 48,646,000).

11.

The Company has the authority to issue shares/sell treasury shares at a premium to net asset value as well as to buy back shares at a discount to net asset value. During the period under review, 21,875,000 shares were issued at a premium to net asset value raising net proceeds of 41,873,000 (31 July 2017 - 1,950,000 shares raising net proceeds of 13,041,000). No shares were bought back during the period under review (31 July 2017 - nil). Prior period figures have been restated for the five for one share split on 21 May 2018.

12.

Transaction costs incurred on the purchase and sale of the investments are added to the purchase cost or deducted from the sale proceeds, as appropriate. During the period, transaction costs on purchases amounted to 36,000 (31 July 2017 - 19,000) and transaction costs on sales amounted to 15,000 (31 July 2017 - 7,000).

13.

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.

14.

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 financial risk, investment strategy risk, discount risk, regulatory risk, custody and depositary risk, small company risk, operational risk, leverage risk and political risk.

An explanation of these risks and how they are managed is set out on pages 8 and 9 the Company's Annual Report and Financial Statements for the year to 31 January 2018 which is available on the Company's website: www.shinnippon.co.uk The principal risks and uncertainties have not changed since the date of that report.

The Interim Financial Report will be available on www.shinnippon.co.uk and will be posted to shareholders on or around 8 October 2018.

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

Glossary of Terms

Total Assets

Total assets less current liabilities, before deduction of all borrowings.

Net Asset Value

Also described as shareholders' funds. 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 Asset Value (Borrowings at Fair Value)

Borrowings are valued at an estimate of their market worth. The Company's yen denominated loans are fair valued with reference to Japanese government bonds of comparable yield and maturity. The value of the borrowings on this basis is set out in note 10 above.

Net Asset Value (Borrowings at Book Value)

Borrowings are valued at adjusted net issue proceeds. The Company's yen denominated loans are valued at their sterling equivalent and adjusted for their arrangement fees. The value of the borrowings on this basis is set out in note 9 above.

Net Liquid Assets

Net liquid assets comprise current assets less current liabilities, excluding borrowings.

Discount/Premium

As stockmarkets and share prices vary, an investment trust's share price is rarely the same as its NAV. When the share price is lower than the NAV per share it is said to be trading at a discount. The size of the discount is calculated by subtracting the share price from the NAV per share and is usually expressed as a percentage of the NAV per share. If the share price is higher than the NAV per share, this situation is called a premium.

Total Return

The total return is the return to shareholders after reinvesting the net dividend on the date that the share price goes ex-dividend. The Company does not pay a dividend.

Ongoing Charges

The total expenses (excluding borrowing costs) incurred by the Company as a percentage of the average net asset value (with debt at fair value).

Gearing

At its simplest, gearing is borrowing. Just like any other public company, an investment trust can borrow money to invest in additional investments for its portfolio. The effect of the borrowing on the shareholders' assets is called 'gearing'. If the Company's assets grow, the shareholders' assets grow proportionately more because the debt remains the same. But if the value of the Company's assets falls, the situation is reversed. Gearing can therefore enhance performance in rising markets but can adversely impact performance in falling markets. Gearing represents its cash borrowings at par less cash and cash equivalents expressed as a percentage of shareholders' funds. Potential gearing is the Company's borrowings expressed as a percentage of shareholders' funds.

Leverage

For the purposes of the Alternative Investment Fund Managers (AIFM) Directive, leverage is any method which increases the

Company's exposure, including the borrowing of cash and the use of derivatives. It is expressed as a ratio between the

Company's exposure and its net asset value and can be calculated on a gross and a commitment method. Under the gross method, exposure represents the sum of the Company's positions after the deduction of sterling cash balances, without taking into account any hedging and netting arrangements. Under the commitment method, exposure is calculated without the deduction of sterling cash balances and after certain hedging and netting positions are offset against each other.

Active Share

Active share, a measure of how actively a portfolio is managed, is the percentage of the portfolio that differs from its comparative index. It is calculated by deducting from 100 the percentage of the portfolio that overlaps with the comparative index. An active share of 100 indicates no overlap with the index and an active share of zero indicates a portfolio that tracks the index.

Share Split

A share split (or stock split) is the process by which a company divides its existing shares into multiple shares. Although the number of shares outstanding increases, the total value of the shares remains the same with respect to the pre-split value. At the Annual General Meeting on 18 May 2018, shareholders approved a five for one share split which became effective on 21 May 2018.

Third party data providers disclaimer

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