Annual Report and
Financial Statements
Baillie Gifford
China Growth
Trust plc
31 January 2024
Investor Disclosure Document
The UK Alternative Investment Fund Managers Regulations require
certain information to be made available to investors prior to their
investment in the Company. The Company’s Investor Disclosure
Document is available for viewing at bailliegiffordchinagrowthtrust.com.
Notes
None of the views expressed in this document should be construed
as advice to buy or sell a particular investment.
Investment trusts are UK public listed companies and as such
comply with the requirements of the Financial Conduct Authority
(‘FCA’). They are not authorised or regulated by the FCA.
Baillie Gifford China Growth Trust plc currently conducts its affairs,
and intends to continue to conduct its affairs, so that the Company’s
ordinary shares can qualify to be considered as a mainstream
investment product and can be recommended by Independent
Financial Advisers to ordinary retail investors in accordance with the
rules of the FCA in relation to non-mainstream investment products.
This document is important and requires your immediate attention.
If you reside in the United Kingdom and you are in any doubt as to
the action you should take, you should consult your stockbroker,
bank manager, solicitor, accountant or other independent financial
adviser authorised under the Financial Services and Markets Act 2000
immediately. If you reside outwith the United Kingdom, you should
consult an appropriately authorised financial adviser.
If you have sold or otherwise transferred all of your holding in
Baillie Gifford China Growth Trust plc, please forward this document,
together with accompanying documents, but not your personalised
form of proxy, as soon as possible to the purchaser or transferee, or to
the stockbroker, bank or other agent through whom the sale or transfer
was or is being effected for delivery to the purchaser or transferee.
01
Baillie Gifford China Growth Trust plc
Introduction
Financial highlights 02
Baillie Gifford – philosophy and process 04
Strategic report
Chair’s statement 07
Managers’ report 10
Review of investments 18
One year summary 22
Five year summary 24
Ten year record 26
Business review 28
Managers’ report on environmental, social and governance engagement 42
Baillie Gifford – proxy voting 49
Baillie Gifford – statement on stewardship 50
Baillie Gifford – valuing private companies 52
List of investments 54
Distribution of total assets 57
Governance report
Directors and management 59
Directors’ report 62
Corporate governance report 68
Audit Committee report 75
Directors’ remuneration report 78
Statement of Directors’ responsibilities 82
Financial report
Independent Auditor’s report 85
Income statement 94
Balance sheet 95
Statement of changes in equity 96
Cash flow statement 97
Notes to the Financial Statements 98
Shareholder information
Notice of Annual General Meeting 114
Further shareholder information 120
Communicating with shareholders 122
Insights 123
Third party data provider disclaimer 124
Sustainable Finance Disclosure Regulation 125
Glossary of terms and alternative performance measures 126
Company information 129
Contents
Introduction
Annual Report and Financial Statements 2024
02
Financial highlights
Year to 31 January 2024
Share price
*
(40.8%)
NAV
*
†
(40.9%)
Comparative
index
*
#
(30.5%)
* Source: LSEG/Baillie Gifford and relevant underlying index providers. See disclaimer on page 124. All figures are stated on a total return basis.
Total return and discount are alternative performance measures – see Glossary of terms and alternative performance measures on pages 126 to 128.
†
Net asset value per share (‘NAV’).
#
The benchmark is the MSCI China All Shares Index (in sterling terms).
Past performance is not a guide to future performance.
The principal investment objective of the
Company is to produce long-term capital
growth by investing predominantly in shares
of, or depositary receipts representing the
shares of, Chinese companies.
NAV, share price and benchmark total return
*
(figures rebased to 100 at 31 January 2023)
Discount to net asset value
*
(figures plotted on a weekly basis)
J
2024
J
2023
F MAMJJAS N
OD
● Share price*
●
NAV*
†
●
Benchmark*
#
50
60
100
90
80
70
20242023
JJFMAMJJAS N
OD
● Discount*
●
Average discount*
(20%)
(5%)
(15%)
(10%)
Baillie Gifford China Growth Trust plc
03
Introduction
Annual Report and Financial Statements 2024
04
Baillie Gifford –
philosophy and process
Our philosophy and competitive edges
Our goal is to use our global perspectives and local
knowledge to identify the next generation of exciting
growth companies and build a portfolio of 40–80 of
the best ideas. We seek to identify mispricing
relative to fundamentals and accept that it can take
time for this to be reflected properly in company
valuations.
We believe that long-term returns are derived from
investing in disruptive and secular trends which play
out over years not months or quarters. We are looking
for businesses that enjoy sustainable competitive
advantages and have the potential to grow their
earnings significantly ahead of the market average
over the long term. As growth investors, we are
focused on the identifying the innovative companies
with competitive advantages that position them to
benefit from, and contribute to, China’s economic,
societal and cultural development over the long-
term.
We believe fundamental research focused on the
five-year prospects for companies makes for a
differentiated approach to managing Chinese
equities, in an asset class where impatience and
short-termism abound. We think our approach
delivers an active edge in three key areas:
Time horizons, perspectives and insights.
Time horizon
Companies grow over time. The true value of a
business is rarely determined by what will happen
in the next few quarters, but by what will happen
in the many years ahead. It is over years that
deep changes in industries and behaviours occur,
and that competitive advantage and management
excellence are recognised. Being able to think
and act independently of the structures and
short-term incentives of traditional finance
is an important advantage.
A long-term focus also embeds the consideration of
ESG factors at its heart. We believe this is vital in a
country like China, given the role of the state, lower
levels of disclosure, and the need for engagement
with companies. It allows us to mitigate the risks of
getting Chinese companies wrong, but importantly,
it helps us discover where the best opportunities lie.
Fighting the instinct to involve ourselves in conventional
market short termism requires important behavioural
and cultural traits. Our partnership structure allow
us to think differently and independently, and that
provides our opportunity.
Baillie Gifford China Growth Trust plc
05
Perspective
We believe that balancing on-the-ground insights
with a global perspective gives us an important
edge. An open and collaborative culture allows
us to understand Chinese companies not just in
their own market, but in a global context too.
Having investment managers and analysts on-the-
ground in Shanghai enables us to deepen our
long-standing relationships with existing holdings,
identify the next generation of exceptional companies
at an earlier stage, better understand societal and
cultural developments, and forge partnerships with
academics and industry specialists in the region.
When added to the global perspectives derived
across Baillie Gifford, we can gain far deeper
insights into companies and sectors of interest.
The benefit from our global perspectives is multi-
fold: Baillie Gifford’s long history of researching
growth companies globally, well-established trust
with global companies as long-term, patient
investors, as well as our strong academic
connections, not only deepens our understanding
of the industry trends and the competitive
environment that Chinese companies operate in,
but also provides checks and balances when
assessing Chinese companies in a global context,
including an assessment of the geopolitical
environment and ESG standards.
Relationships and insight
Given our investment time horizons, we prioritise
meeting with academics, industry specialists and
owners of businesses who think about their strategy,
not financial analysts who think about the next
quarter’s earnings.
With three decades of experience investing in
China, we have built relationships as a patient and
supportive shareholder and developed strong
access to some of the largest and most influential
companies. Relationships take time to build but they
have been critical in helping us understand China’s
ongoing development and the future direction of
Chinese businesses.
These relationships, often built on trust and
reputation over many years, provide access to a
range of interesting companies, ensure management
teams are aware of our approach and philosophy,
and in doing so, help position us and our thinking in
a different light to much of the market. This has
provided an advantage in our understanding of
companies early in their growth stages, and insight
into the future challenges and opportunities for
companies we hold.
The Strategic report,
which includes pages 07 to 57
and incorporates the Chair’s
statement, has been prepared in
accordance with the Companies
Act 2006.
Strategic
report
07
Baillie Gifford China Growth Trust plc
Chair’s
statement
For a definition of terms, see Glossary of terms and alternative performance measures on pages 126 to 128. See disclaimer on page 124.
Past performance is not a guide to future performance.
Performance
The 12 months under review have formed an
extraordinary third consecutive year of market falls
that has tested the patience of many investors. A
year ago, the stock market looked set to embrace
China’s reopening: covid was becoming a thing
of the past, consumer spending was expected
to bounce back, regulation of large technology
companies was abating, measures were being rolled
out to restore confidence in the property sector
and there were hopes that geopolitical tensions
were easing and there may be some level of
co-operation. Some but not all of this has occurred
but frustratingly we have not seen the results benefit
the Company’s performance in this financial year.
Generally, the negative returns over the period have
been driven by macroeconomics and geopolitics
rather than the performance of the underlying
companies in the portfolio. The listed holdings within
the Company’s portfolio continue to perform well
operationally, delivering 17.7% earnings growth in
the financial year.
During the financial year to 31 January 2024,
the Company’s net asset value total return,
calculated by deducting borrowings at fair value,
was negative 40.9% and the share price total return
was negative 40.8%. This compares with a total
return of negative 30.5% for the MSCI China All
Shares Index (in sterling terms).
Over the period from 16 September 2020 (the
date of the adoption of the China strategy), the
Company’s net asset value and share price returned
negative 49.3% and negative 50.5% respectively
compared to a total return of negative 39.4% for the
MSCI China All Shares Index (in sterling terms).
The underperformance in 2023 can largely be
attributed to the Company’s lack of exposure to the
energy sector (the only sector which saw a positive
Susan Platts-Martin
Chair
Appointed to
the Board in 2014
and as Chair in 2017
Strategic report
Annual Report and Financial Statements 2024
08
Dividend
Since the adoption of the China strategy and the
appointment of Baillie Gifford as Managers in
September 2020, the Company’s returns are now
predominantly generated from capital growth as
opposed to income. During the financial year, the
revenue return per share increased by 13.1% from
2.14p to 2.42p.
The dividend policy of the Company, which became
effective last year, is that any dividend paid will be
by way of a final dividend and be not less than the
minimum required for the Company to maintain its
investment trust status.
The Board is proposing a final dividend of 2.0p, an
increase of 17.6%, which, subject to shareholder
approval, will be paid on 24 July 2024 to
shareholders on the register at close of business on
21 June 2024, with the shares trading ex-dividend
on 20 June 2024.
Ongoing costs
The ongoing changes figure for the year is 0.97%.
Last year, the ongoing charges were 0.94%.
Gearing
In April 2022, the Company entered into a
$40m revolving credit facility with RBSI. As at
31 January 2024, a relatively modest $7.5m has
been drawn down under the facility, and gearing
stood at 4.2%. The Board consider that a prudent
level of gearing is advantageous given the long term
returns forecast in China equities by the Managers
and is seeking to renew the loan facility in April 2024
Unlisted investments
The Company holds one unlisted investment,
ByteDance, which represented 8.4% of the total
assets as at 31 January 2024. The valuation process
is undertaken by Baillie Gifford and supplemented by
an independent assessment by S&P Global, and is
set out on page 52.
ESG
The consideration of ESG factors is an integral part
of the Managers’ long-term investment approach.
The Board reviews the Managers’ engagement
with portfolio companies at each Board meeting. In
addition, the Board has also reviewed the Managers’
approach to assessing geopolitical risks in 2023.
Further details can be found on pages 42 to 49.
return) and financials (the third best performing
sector and which returned a negative 15%) and
overweight position in consumer discretionary which
returned a negative 37%. Foreign investors stayed
away from China and domestic investors moved
into defensive sectors and state-owned enterprises
(‘SOE’). The FTSE China SOE index outperformed
the non-SOE index in calendar year 2023,
continuing a trend which began in 2021. Given that
the Company invests for growth and as such is not
weighted towards SOE companies, it has resulted
in weaker performance relative to the benchmark.
As part of the Board’s oversight of the Managers’
investment approach, I attended a Baillie Gifford trip
to China to meet the investment team in Shanghai
and portfolio companies. In addition, the Board met
with the members of Shanghai team virtually at its
annual strategy day. The Board remains satisfied
that the Managers are investing in accordance with
its long term growth approach.
There will be periods of underperformance during
the investment cycle as the Managers do not
invest in trends, and as I have previously noted,
the Managers have a long-term investment
approach, and we would ask shareholders to judge
performance over periods of five years or more.
Further information about the Company’s portfolio
performance is covered by our portfolio managers in
their Managers’ Report.
Discount/premium and share issuance
The Company’s share price discount to net asset
value at the last financial year end was 6.3%, and
the shares continued to trade at a discount for the
duration of the financial year. The discount was
volatile during the financial period, 15.5% at its
widest and 2.6% at its narrowest. The Company’s
share price ended the year at a discount to net asset
value of 6.2%.
No shares have been issued by the Company during
the period as the shares have traded at a discount
to net asset value. The Company bought back
160,700 shares into treasury over the period. The
buy backs benefit shareholders in the Company by
modestly enhancing the NAV per share. The Board
continues to keep its liquidity policy under close
review and recognises the need to address any
sustained and significant imbalance of buyers and
sellers. Details of the full liquidity policy can
be found on page 29. Between 31 January and
1 April 2024, no shares were issued and
389,189 shares were bought back into treasury.
09
Baillie Gifford China Growth Trust plc
The Board
As noted in my statement last year, I plan to step
down from the Board on 30 April 2024 having
completed my nine year tenure. I am pleased to
confirm that Nicholas Pink, who joined the Board
in September 2023 following a search undertaken
with the support of an external recruitment
consultant, will succeed me as Chair with effect
from 1 May 2024. Nicholas has extensive senior
management experience in financial services with
previous roles at UBS Investment Bank including
Global Head of Research and Head of Asia
Research. Nicholas currently sits on the board
of two other investment trusts.
I am also pleased to confirm that following a second
search conducted by an external recruitment
consultant this year, Sarah MacAulay will be joining
the Board on 1 May 2024. Sarah is an experienced
investment trust director and former portfolio
manager with knowledge of the Asian region. I am
delighted with both appointments and confident that
the Company will be led by a competent board with
wide ranging skills.
All Directors are subject to annual re-election at the
AGM in June. Biographies of each of the Directors
can be found on pages 59 and 60.
The Managers
Since the change of mandate in September 2020,
Roderick Snell and Sophie Earnshaw have been
co-portfolio managers of the Company. Following
a decision by the Managers to separate their China
and Global Emerging Markets teams, the Board
is pleased to announce that Linda Lin, partner at
Baillie Gifford, will be joining Sophie as co-portfolio
manager with effect from 1 February 2024 to
replace Roderick who is stepping away to focus
on his Emerging Market and Asia responsibilities.
The Board would like to thank Roderick for his
contribution to the Company over the last three
and a half years.
Annual General Meeting
The AGM will be held at 4pm on Wednesday,
19 June 2024 at The Cavendish Hotel, 81 Jermyn
Street, London SW1Y 6JF. The meeting will include a
presentation from the Managers and all shareholders
are invited to attend.
To accurately reflect the views of shareholders of
the Company, the Board intends to hold the AGM
voting on a poll, rather than by a show of hands
as has been customary. This will ensure an exact
and definitive result. The Board encourages all
shareholders to exercise their votes on the AGM
resolutions by completing and submitting the form
of proxy enclosed with the Annual Report to ensure
that your votes are represented at the meeting
(whether or not you intend to attend in person).
If you hold shares through a share platform or other
nominee, the Board encourages you to contact
these organisations directly as soon as possible
to arrange for you to submit votes in advance of
the AGM. Alternatively, the Association of
Investment Companies’ (‘AIC’) website theaic.co.uk/
how-to-vote-your-shares has information on how
to vote your shares if you hold them via one of
the major platforms. The following link will also
take you through to the AIC website where there
is information on how your platform can help you
attend the AGM in person theaic.co.uk/aic/ready-to-
invest/shareholder-voting/attending-an-agm.
Should shareholders have questions for the Board
or the Managers, or any queries as to how to vote,
they are welcome, as always, to submit them by
email to trustenquiries@bailliegifford.com or calling
0800 917 2112 (Baillie Gifford may record your call).
Outlook
Investor sentiment and related share trading have
significantly influenced share price performance
over the last three years, and share prices
have diverged from their fundamentals. It is the
fundamentals that our Managers remain focused
on, as it is a company’s operational progress over
the long term that will deliver outperformance.
The combination of an ambitious entrepreneurial
culture and bold top-down policies with the sheer
scale of China’s markets continues to provide a
unique opportunity given lower valuations. A
long-term investment horizon underpins our
Managers’ efforts as they seek to find the companies
in China with the best sustainable growth outlook,
regardless of their size, sector or position in an
index. As I concluded in my Chair’s statement last
year, China is a market where there is likely to be
ongoing short term volatility however the prospects
for significant long term growth remain.
Susan Platts-Martin
Chair
2 April 2024
Strategic report
Annual Report and Financial Statements 2024
10
Managers’
report
1 The period of performance referred to for both the FTSE China SOE index and the FTSE China non-SOE index is the year 2023 versus the Company
reporting period which is 31 January 2023 to 31 January 2024.
For a definition of terms see Glossary of terms and alternative performance measures on pages 126 and 128.
Past performance is not a guide to future performance.
The year under review was disappointing and painful
for Chinese equities, with our index falling by
30.5%. Indeed, it marks an extraordinary third
consecutive year of drawdowns in our asset class.
In the main, returns over the period have been
driven by macroeconomics and geopolitics rather
than company fundamentals. The holdings within
the Company’s portfolio continue to perform well
operationally. Our listed holdings delivered
17.7% earnings growth in the financial year versus
index-level earnings growth of only 2.1%. Despite
this, the portfolio derated from a price-earnings
multiple of 19x to 12x.
China’s economy continues to transition away from
its old model of property led growth to a new model
of innovation led growth. The economy has been
weak but is not in crisis. The country’s GDP grew
by 5.2% in 2023 and met the official growth target
for the year. The International Monetary Fund does
expect growth to slow in 2024, but only to
4.6%. The property market’s drag on nominal
growth continues, with nationwide sales numbers at
40% of the 2021 peak, while there has only been a
tentative stabilisation in sales of the top 100 largest
developers. Despite the mortgage rate falling by
around 150 basis points since 2021 and the pricing
of property posting only single-digit declines over
two years (though this industry-level data masks
double-digit declines in some tier-one cities), the
government is struggling to stimulate demand.
Thankfully, other segments of the Chinese economy,
namely household consumption and exports, were
strong enough to offset this weakness. The
post-covid rebound in consumer spending and the
fall in the savings rate in the first quarter led to a
welcome uptick in services growth. At the same time,
strength in the US economy and China’s continued
global competitiveness saw robust export demand.
Retail sales were up circa 15%, and real per capita
household income was up circa 20% in 2023
versus 2019.
Unfortunately, the rally in consumer spending
softened materially towards the end of the year, and
the job market further deteriorated. In addition, the
government’s support for the economy was thought
by many to be underwhelming. As such, market
sentiment deteriorated as the year progressed.
Geopolitics was also a negative driver, with
technological controls and economic barriers
increasing even as relations between the US and
China formally stabilised. December marked the
worst net outflows of China/Hong Kong equities
in 2023 and the third-largest monthly outflows in
history. Foreign investors appear to be increasingly
shunning China. Indeed, third-quarter data indicated
that inbound foreign direct investment (‘FDI’) fell
close to negative territory for the first time since
1998. FDI was only US$15bn for the first nine
months of the year – a 92% drop from 2022. On the
current trend, China may attract less FDI in 2023
than Poland.
This deterioration in sentiment was reflected
in negative returns for our benchmark after a
brief rally in the first quarter. The only sector in
positive territory was energy, which posted circa
17% return over the year. The next best sector was
utilities, which fell circa 9%, followed by financials
at negative 15%. Domestic investors, faced with
mixed economic data and disappointing levels of
policy support, moved into defensive sectors and
state-owned enterprises (‘SOEs’). The FTSE China
SOE index outperformed the non-SOE index by
12% in 2023
1
, continuing a trend which began in
2021. In line with our investment philosophy, the
portfolio’s overwhelming exposure to growth sectors
and non-SOE companies resulted in weaker relative
performance than the benchmark.
11
Baillie Gifford China Growth Trust plc
* Chinese consumers pay significant amounts upfront before construction of the property is finished.
Where does this leave us? In both absolute and
relative terms, the valuation of Chinese equities
is low. Our benchmark, MSCI China All Shares,
is trading on circa 9x 2024 price earnings. This
multiple is almost one standard deviation below
its 5 and 10 year average, less than half that of
US equities (MSCI USA is trading on 20x) and below
that of both MSCI ACWI (16.6x) and Emerging
Markets (MSCI EM 11.7x). As noted above, the
Company’s listed portfolio of holdings has derated
to 12x over the year, despite delivering double-digit
earnings growth.
Towards the end of the reporting period, we saw
further signs of a significant government effort to
address pockets of weakness in the economy and the
rout in the stock market. In July, Beijing announced
a 17-point plan to increase confidence in the private
sector. This followed a concerted effort by Premier
Li and a flurry of announcements at the highest
levels designed to reassure the private sector of the
government’s continued support. Most importantly,
the regulatory backdrop was largely stable for
some of China’s largest private sector companies,
except for a quickly corrected misstep in gaming.
In February 2024, in response to the stock market
rout, we saw Beijing begin to intervene in the equity
market via the purchase of stock index funds and
SOE buybacks while the former head of the China
Securities Regulatory Commission was replaced.
Concerning property, context is important. The
government’s long-term aim is to reduce the
country’s reliance on this sector as an engine of
growth. Most Western economists would agree
that this adjustment is necessary for the country’s
long-term economic health. With this in mind, the
government’s refusal to stimulate aggressively and
provide a ‘quick fix’ becomes understandable. The
initial focus of policymakers was on demand-side
stabilisation measures. We saw mortgage rates
fall to their lowest level on record and restrictions
on purchasing removed. As noted above, these
measures had limited success.
In the second half of 2023, we saw the government
announce an increase in public-sector construction
spending via the ‘three major projects’:
• The expansion of social housing;
• The renovation of urban villages; and
• The construction of civil infrastructure to increase
resilience to natural disasters.
Then, finally, in January 2024, we saw the
government begin to extend support to
private-sector developers, the most distressed
subsegment of the industry. Measures include:
• The People’s Bank of China (‘PBOC’) announced
RMB 350bn (circa US$50bn) in priority sector
lending for real estate developers to execute the
‘three major projects’;
• The promise of additional credit support via
banks; and
• Local governments in eight cities are beginning
a pilot project to buy up vacant apartments from
developers to reduce inventory and help stabilise
cash flows.
Given China’s pre-sale
*
housing model, improving
the public’s confidence in private sector developers’
creditworthiness and ability to complete projects is
crucial to stabilising the industry.
With developer finances still deteriorating and the
economy slipping in and out of deflation, there is
undoubtedly more work still to do. However, actions
taken to date suggest a course correction is well
underway at a time when pessimism about China
is at an all-time high.
Strategic report
Annual Report and Financial Statements 2024
12
More importantly for us as active managers, China
still offers a unique opportunity for growth. For
example, of all companies in MSCI ACWI forecast
to grow revenues at 20% per annum for the next
three years, 40% come from China. While headline
GDP continues to slow, there are ample structural
opportunities in a variety of industries that continue
to excite us. For example, in terms of automation
and advanced manufacturing, China is already the
largest industrial robotics market in the world. Yet
robot density is only one-third of that of countries
like Korea.
Another example would be the rise of domestic
brands. In a whole host of industries, foreign brands
still dominate. But this is changing. A good example
would be cosmetics, where domestic leaders such
as Proya continue to take share from mass-market
foreign brands. A further example would be ‘little
giants’: companies with advanced expertise in
strategically important industries such as solar,
batteries or semiconductors.
Indeed, because of our ability to avoid vast swathes
of the index, our portfolio holdings delivered
double-digit earnings growth in 2023 despite
China’s economic woes. For example, ByteDance,
our largest holding at 8.4% and only unlisted
investment, reported over 35% revenue growth in
the nine months to September, driven by continued
monetisation of its vast userbase. Kweichow Moutai,
a 5.9% holding and our second largest overweight,
delivered circa 17% revenue and earnings growth
over the same period, driven by the phenomenal
strength of its domestic baijiu brand. Tencent,
another large holding within the Company’s portfolio,
delivered 10% revenue growth in the most recent
quarter and treble-digit earnings per share growth as
capital allocation continued to improve. Or CATL, a
1.8% holding in the portfolio and the world’s leading
battery manufacturer, pre-announced that it would
deliver 38-48% year-over-year revenue growth in
2023. CATL has grown its revenue and earnings by
over 10x in the last four years and trades on less
than 15x 2024 earnings. What comforts us during
these challenging times is our holdings’ continued
strong operational performance and the knowledge
that, over meaningful periods, share prices are likely
to follow fundamentals.
However, we are anything but complacent and
continue to interrogate the investment decisions
we made since Baillie Gifford won the Company’s
mandate in 2020. For example, we have added
two independent research providers to our list
of resources to bolster our ability to ascertain a
company’s alignment with the Chinese state and the
risks and opportunities of the broader geopolitical
environment. Both specialise in analysing Chinese
and US policy. We have commissioned work
from our Risk Team on our trading decisions and
have interrogated the research process, quality
and investment decisions that led to our largest
individual stock mistakes. We also continue to
challenge our historic preference for privately run
companies instead of SOEs.
At the firm level, we’d also like to highlight Baillie
Gifford’s continued support for our Chinese equities
business. While some of our competitors are closing
their Chinese operations, Baillie Gifford continues to
invest. Our Shanghai office, which opened in 2019,
has added resources yearly, with two new graduates
joining in the last two years alongside a dedicated
ESG analyst. We now have seven investment staff
working out of Shanghai. We recently established a
dedicated China team that will be responsible for our
Chinese equity funds. As such, Sophie is excited to
welcome Linda Lin, a partner at Baillie Gifford and
an investment specialist on China, as co-manager
for the Baillie Gifford China Growth Trust. Linda
will replace Roderick Snell who will re-focus his
attention on Asia Pacific. Establishing the dedicated
China Team, of which Sophie is a part, and adding
Linda as a formal decision maker to our China equity
strategies, is a significant increase of resources.
Portfolio positioning and recent activity
Balancing global perspectives with local insights
and ensuring a long-term focus in our analytical
framework is critical to finding China’s best and most
innovative public and private growth companies. We
undertook two joint trips around China, one in May
2023 and one in January 2024. Linda Lin led our
most recent trip, and she was joined by managers
from our Long Term Global Growth team and our
Emerging Markets team.
Our philosophy and investment horizons afford
excellent access to company leaders. Linda was
fortunate to meet with founders and ‘C-level’
management from PDD Holdings, one of the new
purchases for the Company, along with existing
holdings Meituan, LONGi and KE Holdings. We
also met NIO, one of China’s leading electric
vehicle brands and a competitor to BYD; Kuaishou,
a competitor to ByteDance; and Luckin Coffee,
China’s version of Starbucks. More broadly, while the
atmosphere was somewhat gloomy, with negative
local sentiment and weak consumer confidence,
we found the trip uplifting at the most basic level
of what companies are doing regarding growth.
The entrepreneurial spirit that allows new companies
13
Baillie Gifford China Growth Trust plc
to challenge entrenched incumbents and the
huge spoils available to domestic victors have not
changed. This type of growth is currently on offer
at prices not seen in many years.
Our portfolio positioning remains relatively
consistent compared to last year. We retain exposure
to the sectors and companies that we believe offer
the best long-term growth potential and upside.
We have large overweight positions in consumer
discretionary and industrials, and large underweights
in lower growth sectors such as financials and
utilities. We believe the portfolio is geared toward
the themes likely to drive China’s next decade of
growth including:
• The energy transition, advanced manufacturing
and robotics;
• ‘Little giants’;
• Leading domestic brands; and
• Long-duration growth companies in both
traditional and online industries.
Portfolio turnover during the year was 7.9%,
reflecting our confidence in our holdings despite
the negative returns we experienced in 2023. New
purchases during the period included PDD Holdings,
Silergy, Anker Innovations and BYD. PDDhas done
a terrific job servicing the sizeable cost-conscious
consumer market, taking share in areas increasingly
vacated by Alibaba. Over the last few years, they
have carved out a formidable niche targeting
low-income users in lower-tier cities with a
deeply-discounted ‘treasure hunt’ experience.
Recently, the platform has gained traction with
higher-income users in China and several overseas
markets. The company has become increasingly
cash-generative as it has moved away from massive
marketing promotions without losing user traction.
As one of the few Chinese ecommerce platforms
that retains the potential for massive operational
upside, we felt PDD was worthy of a place within
the Company’s portfolio. Silergy is an analogue
semiconductor designer and benefits from tailwinds
similar to SG Micro, including import substitution.
We took advantage of the weakness in the shares
on the back of a cyclical slowdown to buy this
high-quality, high-growth business.
Anker Innovations is a Chinese consumer electronics
company. Its record of making quality products at
fair prices has earned it a valuable brand reputation
among its Western customers. Indeed, the company
leverages China’s supply chain advantages in
electronics to make high-quality products at
reasonable prices. Our Shanghai office has worked
over the past year to understand the company’s
strategy and the founder’s motivations, giving us
greater confidence in their ability to grow profitably
and broaden their product offerings. Given its
predominantly overseas revenue base, the stock is
also a diversifier within the Company’s portfolio.
We also bought an initial holding in BYD. BYDwas
founded in 1995 as a manufacturer of lithium-ion
batteries for consumer applications like smartphones
and notebooks. It grew rapidly to become one of the
global battery leaders by the early2000s when it
also moved into electronics manufacturing services
and autos. In retrospect, there was a much greater
coherence to this strategy than the company were
credited with at the time – in each new market that
they entered, BYD has distinguished itself with a
highly flexible, highly integrated manufacturing
process characterised by significant levels of
research and development (‘R&D’), a focus
on self-developed components and very rapid
innovation cycles. They were early movers into the
electric vehicle (‘EV’) market in 2006, where they
leveraged their proprietary battery technology and
manufacturing experience to become the leading
EV manufacturer in China by 2018; in 2022, they
overtook Tesla to become the world’s largest EV
maker by volume. The recent surge in market share
partly reflects the advantages of having control over
its supply chain when the rest of the industry has
been struggling. Still, we also suspect it reflects a
more enduring advantage as the company enters
a virtuous circle of scale leveraging high R&D
spend, which in absolute terms now dwarfs most
of their competitors. If the company can remain
one of the leading players in the fast-growing
ChineseEVmarket, then we think the shares look
attractive; if they can build on their more recent
signs of progress in third-party battery sales or
autos outside China, then the rewards may be
even greater.
Sales of Burning Rock Biotech, Dada Nexus, Geely
Automotive, and Hangzhou Tigermed funded these
purchases. The US battle around Chinese American
Depositary Receipts and the Holding Foreign
Companies Accountable Act provided a technical
challenge to our investment case for Burning Rock
Biotech. We remain convinced that the market for
next-generation sequencing in oncology is huge and
that the data supporting Burning Rock’s position
was credible. However, we underestimated how
much financing was necessary for a loss-making
company, particularly via the equity market. This was
Strategic report
Annual Report and Financial Statements 2024
14
a mistake. The company’s inability to issue equity in
the US, their only listing location, and their inability
to obtain a secondary listing in Hong Kong due to
their smaller size led to a vicious spiral in which
investors sold down on concerns around delisting
risk, the market capitalisation shrank, and the
company’s ability to fund its operations diminished.
We sold our holdings in Geely and Tigermed. Geely’s
vehicles have historically been popular with Chinese
consumers who value its strong engine technology
(partly bought in via the acquisition of Volvo) and
mid-range prices. We believe the company’s core
advantage in engine technology has diminished
with the shift to EVs. Given substantial investments
outside the listed entity, the founder’s alignment also
appears to have shifted. We believe BYD’s vertically
integrated model and core expertise in battery
technology make it much more likely to benefit from
the shift to electric vehicles. Tigermedis a leading
clinical research organisation. We have decided to
sell the holding largely due to the increased risk of
trade barriers overseas. We believe these barriers
could substantially impact the company’s ability to
grow in the future.
Performance
The portfolio’s performance was very
disappointing in both absolute and relative terms.
It underperformed against a falling benchmark.
The benchmark for the period returned negative
30.5%, NAV negative 40.9% and the share price
negative 40.8%. The portfolio’s overwhelming
exposure to non-SOE companies, particularly in the
financials space, plus its underweight positions in
energy and utilities (the two best-performing sectors
within our universe), contributed to our relative
underperformance. While this was undoubtedly
painful, our portfolio exposure is in keeping with our
growth philosophy, which has served us well over
longer periods.
The main stock detractors to performance were
varied. Li-Ning, a leading domestic sportswear brand,
faced increased competition from multinational
players such as Adidas and a weakening consumer
backdrop. Discounting in the channel and an
inventory correction in the second half spooked the
market, resulting in a marked derating in the shares.
This is a stock that we have significantly reduced
at much higher price points. After the correction
and the additional research we conducted, we are
minded to continue holding the shares. We believe
the brand remains relatively strong and that this is
not reflected in the 10x price-earnings multiple we
are now being asked to pay.
Glodon, a software provider to the construction
industry, and SG Micro, an analogue chip designer,
are examples of where cyclical issues have
overwhelmed the structural case in the short term.
SG Micro operates in the analogue semiconductor
industry, which remains dominated by foreign
players. China’s desire to reduce its import bill
and establish a globally competitive, homegrown
semiconductor industry is a significant long-term
tailwind for the company. In the short term, however,
we saw the company suffer as the industry entered
a cyclical downturn. We are confident that the
company’s competitive advantage remains strong
and that its position as a domestic leader will see
it benefit once the cycle turns. We added to this
company in the first half of the reporting period
after the first correction in the shares. Glodon is a
dominant cost estimation software provider to the
construction industry. Its software helps its clients
reduce costs and increase the efficiency of their
operations. Software penetration in this industry
is low and rising, and we believe Glodon is likely to
benefit from this tailwind in the long run. In the near
term, however, cyclical weakness in property and
construction resulted in revenue and profit growth,
disappointing the market.
Meituan was also a detractor. The shares fell
markedly despite the company delivering circa
25% revenue growth in the first nine months of
the year and turning profitable. Indeed, in the third
quarter of 2023, its earnings grew by almost 200%.
We met Wang Xing, the founder of the company, in
January of this year and continue to hold him in high
regard. Meituan retains a dominant position in food
delivery and is utilising its delivery network to expand
into adjacent categories. In top-tier cities, Meituan
delivers products in under half an hour. In addition,
Meituan has a dominant position in restaurant
bookings and travel. Competition from ByteDance
in this part of the business has seen margins fall.
However, growth has accelerated markedly due
to ByteDance’s entrance and the subsequent rise
in online penetration. The fall in margins is yet
to impact absolute profit growth materially. The
company also has loss-making initiatives such as
ride-hailing and community group buy. These are
gradually turning profitable or being scaled back,
leading to exceptional profit growth for the company.
Despite this, Meituan is only trading on 15x price
earnings. We are inclined to add to our holding.
15
Baillie Gifford China Growth Trust plc
Other detractors to performance included gearing
which sits at around 3-4% and stocks such as
Centre Testing International, Ping An Insurance
and Estun. Whilst gearing has been a detractor to
performance over the near term, we continue to
believe that it should be value accretive over the
long term given our expectations for attractive
returns in the asset class relative to the cost of debt.
We decided to add to our position in Centre Testing
International in January 2024, after the shares fell.
Centre Testing International is the leading private
sector company in China’s testing and inspection
market. The company derated substantially as part
of a general sell-off in growth stocks and in response
to cyclical weakness in some of its end markets. We
believe the company is a high-quality operator with
a sizeable, long-term growth opportunity ahead of
it, and, as such, we decided to take advantage
of share price weakness to build a more sizeable
position in the Company’s portfolio.Ping An
Insurance and Estun were reduced in the first half
of the reporting period due to concerns about
changes in the regulatory backdrop and increased
competition, respectively.
Contributors to performance included all four
state-owned enterprises held in the Company’s
portfolio: Weichai Power, Brilliance China
Automotive, Kweichow Moutai and Zijin Mining. Of
these, only Weichai and Brilliance China Automotive
delivered a positive return. Zijin, a leading gold and
copper miner, delivered 10% revenue growth in the
first three quarters of 2023, yet the shares fell 11%
during the period. On 12x earnings, we believe the
company has significant upside ahead of it driven
by the energy transition. As noted above, Kweichow
Moutai delivered 17% revenue and earnings growth
in the first nine months of 2023, yet its share price
fell 19%. Moutai is arguably the strongest and most
durable brand in China. It has 800 years of heritage
and can price its baijiu at a significant premium. The
financial returns of this business are also exceptional.
Brilliance China Automotive is something of a
special situation. It is an automaker and BMW’s
partner in China. The company was relisted in
Q4 2022 after a period of suspension. The share
price was at a very depressed level at the point of
relisting. In January and July 2023, Brilliance China
Automotive declared two special dividend payouts
to shareholders totalling 1.92 Hong Kong dollars per
share, while the shares were trading around four
Hong Kong dollars on average. While a 40% yearly
return is encouraging, the future case for Brilliance
China Automotive does rely on decisions around
next year’s special dividend payment and its new
management team’s operational execution.
ByteDance was our largest contributor over the
year. Despite delivering circa 35% revenue growth
in the first nine months of the year, our independent
valuation team wrote the shares down by 11%,
less than the benchmark decline. This was due to
a fall in the peer group valuation and supported by
valuations observed in the secondary market. We
believe that ByteDance offers outstanding growth
potential even if one excludes the US business.
ByteDance continues to monetise its vast user
base in China and to take a substantial share within
ecommerce. We are confident that its exceptional
operational performance will be rewarded by
substantial share price returns over meaningful
periods.
Silergy and Midea were also contributors to
performance. Silergy is an analogue semiconductor
designer and benefits from similar tailwinds to SG
Micro (discussed above). Due to its exposure to
different end markets, the cycle turned down earlier
for Silergy relative to SG Micro. It experienced a
marked correction in its share price as demand
weakened. The cycle for Silergy has now turned,
and, as such, its shares have begun to recover. We
bought Silergy during its cyclical correction and are
pleased to see it rebound after purchase. Midea is a
leading white goods manufacturer and a high-quality
compounder. It delivered 7% revenue growth and
10% earnings growth in the first nine months of
the year, and the shares were flat during the period.
It trades on circa 11x price-earnings and will likely
continue growing at high single-digit and low double-
digit rates for a long time.
Strategic report
Annual Report and Financial Statements 2024
16
Outlook
As discussed above, China’s economy continues to
transition away from its old model of property led
growth to a new model of innovation led growth.
There is clearly a risk that the government fails to
manage this transition successfully. However, we
remain cautiously optimistic. In terms of the old
growth model, policy is increasingly focused on
stabilising the most distressed segments of the
property industry. Any stabilisation here could be
very meaningful for consumer confidence, which
could in turn be very meaningful for domestic
demand. In terms of the new growth model, China
has made significant progress in areas such as
renewable energy, electric vehicles and, increasingly,
semiconductors. The days of recycling export
earnings into infrastructure led growth are over
and China is now exporting capital around
South-east Asia and into other developing regions.
This gives enormous growth opportunities to
Chinese companies whose business strategies are
aligned to China’s national objectives.
These growth opportunities are reflected in the
operational performance of the companies we own
within the Company. As noted above, our listed
holdings delivered 17.7% underlying earnings
growth. Despite this, the portfolio’s value fell by
c.40%. This extraordinary divergence between
earnings and value is a reflection of sentiment,
rather than operational performance. Sentiment is
driven both by the economic transition alluded to
above and by geopolitics between the US and China.
As China’s success in transitioning to its new growth
model becomes clearer, it is likely that sentiment will
improve and that other pools of capital, in addition
to the US, will become materially invested in the
attractive returns on offer in China.
Despite a difficult couple of years of performance,
Baillie Gifford continues to believe that China
remains an exciting hunting ground for growth
investors. As such, we continue to invest in our
capabilities here and have added significant
resource. With valuations low in both an absolute
and relative sense, we believe that the opportunity
in China has becoming even more compelling. As
such, we remain optimistic about future returns.
Roderick Snell
Sophie Earnshaw
Baillie Gifford & Co
2 April 2024
17
Baillie Gifford China Growth Trust plc
Strategic report
Annual Report and Financial Statements 2024
18
Review of
investments
A review of the Company’s
ten largest investments as
at 31 January 2024.
ByteDance
ByteDance is a social media and short
form video company and it represents
the Company’s first private investment.
It was founded in 2012 by Yiming Zhang
and the company has grown to rank
amongst the world’s largest companies
of its kind. Its short form video app,
Douyin, is a market leader in China, and
TikTok, its global equivalent, is dominating
the format globally. ByteDance benefits
from a technological edge in machine
learning which it uses to bring out new
applications tailored to different media
forms and different demographics.
The company’s ability to innovate in this
space is exceptional and we believe one of
the key drivers of its likely future success.
We believe ByteDance has the potential to
be a generation defining media company.
Tencent
Tencent is a leading social media and
entertainment platform. It has a dominant
position in online gaming and an
ecosystem in WeChat that we believe is
one of the strongest in China. Monetisation
of WeChat’s over one billion monthly
active users represents one growth
driver for the company. Further growth
opportunities are provided by Tencent’s
strong positions in cloud infrastructure and
consumer and SME lending, along with
its portfolio of investee companies which
span online music streaming, ecommerce,
and short form video. Pony Ma, the
founder and Chairman of the company,
is indelibly focused on the long term and
has executed exceptionally well in one of
China’s fastest moving industries.
Valuation at
31 January 2024
£10,551,000
% of total investments
at 31 January 2024
8.4
Valuation at
31 January 2023
£11,953,000
% of total investments
at 31 January 2023
5.7
Net purchases/(sales) in
year to 31 January 2024
Nil
Valuation at
31 January 2024
£9,330,000
% of total investments
at 31 January 2024
7. 4
Valuation at
31 January 2023
£12,694,000
% of total investments
at 31 January 2023
6.0
Net purchases/(sales) in
year to 31 January 2024
£695,000
© AFP/Getty Images © Alamy Stock Photo
19
Baillie Gifford China Growth Trust plc
Alibaba
Alibaba is a leading online retailer. Its
ecommerce business is returning to growth
after a period of intensified competition
and share loss. Steadily increasing online
penetration in segments such as grocery
and Fast Moving Consumer Goods remains
a long term driver for the business, whilst
the company’s efforts to integrate live
streaming and social media into the
platform aim to revitalise the platform
following stiff competition for customers
and merchants attention from competitors.
In addition, Alibaba retains a strong
position in infrastructure as a service, or
the cloud, where it has a similar business to
Amazon Web Services. The company has
taken the decision to focus on profitable
growth as opposed to growth at any cost.
Alibaba’s partnership structure and its
capable and experienced management
team are well-aligned with shareholders.
Kweichow Moutai
Kweichow Moutai is one of the most
important and iconic Chinese brands.
It manufactures premium baijiu (white
alcohol) which has a heritage and respect
embedded within Chinese culture. Its
unique brewing conditions and process
provide a core competitive advantage.
When combined with supply scarcity and
limited competition in the very high-
end market, Moutai is able to price at a
premium and maintain a loyal customer
base. It is an extremely profitable business.
We believe in the strength and heritage
of the brand, the sustainability of revenue
growth, and the longevity of its core
competitive advantage.
China Merchants Bank
China Merchants Bank is a leading
consumer bank in China with a lengthy
track record and solid market share.
It has outcompeted its state-owned rivals
via a relentless focus on the consumer.
As such, it has built up an enviable
position in consumer lending and in wealth
management, both segments with strong
growth potential. In terms of lending
quality, this has been strong through the
cycle and we believe this is a bank that
will continue to offer attractive returns
to shareholders.
Valuation at
31 January 2024
£9,249,000
% of total investments
at 31 January 2024
7. 4
Valuation at
31 January 2023
£13,819,000
% of total investments
at 31 January 2023
6.6
Net purchases/(sales) in
year to 31 January 2024
£643,000
Valuation at
31 January 2024
£7,447,000
% of total investments
at 31 January 2024
5.9
Valuation at
31 January 2023
£9,436,000
% of total investments
at 31 January 2023
4.5
Net purchases/(sales) in
year to 31 January 2024
(£20,000)
Valuation at
31 January 2024
£4,133,000
% of total investments
at 31 January 2024
3.3
Valuation at
31 January 2023
£7,631,000
% of total investments
at 31 January 2023
3.6
Net purchases/(sales) in
year to 31 January 2024
(£26,000)
© China News Service/Getty Images © VCG/Getty Images
Strategic report
Annual Report and Financial Statements 2024
20
Valuation at
31 January 2024
£3,969,000
% of total investments
at 31 January 2024
3.2
Valuation at
31 January 2023
£4,580,000
% of total investments
at 31 January 2023
2.2
Net purchases/(sales) in
year to 31 January 2024
(£14,000)
Valuation at
31 January 2024
£3,741,000
% of total investments
at 31 January 2024
3.0
Valuation at
31 January 2023
£9,559,000
% of total investments
at 31 January 2023
4.6
Net purchases/(sales) in
year to 31 January 2024
(£3,062,000)
Valuation at
31 January 2024
£3,220,000
% of total investments
at 31 January 2024
2.6
Valuation at
31 January 2023
£3,082,000
% of total investments
at 31 January 2023
1.4
Net purchases/(sales) in
year to 31 January 2024
(£18,000)
Zijin Mining
Zijin Mining is a Chinese gold and copper
company with ambitious volume growth
plans through organic expansion and M&A,
particularly in its copper business. Copper
is an economically sensitive commodity
that should benefit from economic activity
globally but should be further boosted
meaningfully by green investment (be it
renewable generation or electric vehicles).
Indeed, copper is an essential enabler of the
green revolution. We do not think the upside
to the commodity price, nor Zijin’s growth
potential, is being adequately factored in by
the market.
Ping An Insurance
Ping An Insurance is one of China’s
leading financial services groups. It is
China’s second largest life insurer, a
market with growth potential driven by
China’s emerging middle class and rising
disposable income. It also has a leading
position in property and casualty insurance
where it has consistently delivered strong
returns. In addition, it has consistently
invested in artificial intelligence and
machine learning in order to increase the
efficiency and long-term viability of its
core business. Again, this is a company
with a long-term, growth mind-set that
we believe will deliver substantial returns
to shareholders.
NetEase
NetEase is one of the most successful
gaming companies in China, second only
to Tencent, with a proven track record of
developing popular, high-quality titles on
both mobile and PC. It has successfully
monetized its titles whilst protecting the
gamer experience and its brand name and
the company culture continues to attract
and retain the best game developers in
China. Its financials are attractive and
it is a well-managed company.
The gaming industry in China continues
to grow, particularly on mobile, and
NetEase appears well placed to benefit
from this for many years.
21
Baillie Gifford China Growth Trust plc
Valuation at
31 January 2024
£3,202,000
% of total investments
at 31 January 2024
2.6
Valuation at
31 January 2023
£4,946,000
% of total investments
at 31 January 2023
2.4
Net purchases/(sales) in
year to 31 January 2024
(£557,000)
Valuation at
31 January 2024
£3,077,000
% of total investments
at 31 January 2024
2.5
Valuation at
31 January 2023
£3,223,000
% of total investments
at 31 January 2023
1.5
Net purchases/(sales) in
year to 31 January 2024
(£20,000)
Zhejiang Sanhua
Intelligent Controls
Zhejiang Sanhua is one of the world’s
largest manufacturers of controls and
components for heating, ventilation
and air conditioning (‘HVAC’) systems,
electric vehicles and home appliances.
Sanhua has a global customer base of
top tier manufacturers, with half of their
revenues generated from China and half
from overseas. The company has over
50% market share in its key products.
Sanhua’s ability to produce quality at scale
is a key competitive advantage. This is a
founder-owned company whose global
position has been underappreciated
in a China context. We expect Sanhua
to benefit from consumption growth in
general, as well as growth in the electric
vehicle market, and an industry shift
in home appliances towards stricter
environmental standards.
Midea
Midea is the world’s largest home appliance
business, listed in Shenzhen. It is a great
quality business, investing for growth and
appears very cheap. Home appliance
businesses are dull yet make great returns
(28-29% return on equity), require little
capital, have brand equity and throw off a
healthy level of cash, some of which is
returned to Midea shareholders via a 4%
dividend yield. This company stands out
given its category leadership and desire to
grow the business in a meaningful way. It is
investing in technology, is at the forefront of
innovation (22,000 patents and counting), is
expanding its product range and geographic
reach and also buying in additional brands at
good prices. The move into robotics though
the acquisition of Kuka, a world leader, could
be particularly interesting, not least due to
efficiency gains likely in its own business.
Strategic report
Annual Report and Financial Statements 2024
22
One year
summary
The following information
illustrates how Baillie Gifford
China Growth Trust has
performed over the year to
31 January 2024
* For a definition of terms see Glossary of terms and alternative performance measures on pages 126 and 128.
†
Key Performance Indicator.
#
The benchmark is the MSCI China All Shares Index (in sterling terms).
¶
Alternative performance measure – see Glossary of terms and alternative performance measures on pages 126 to 128.
Source: LSEG/Baillie Gifford and relevant underlying index providers. See disclaimer on page 124.
Past performance is not a guide to future performance.
31 January
2024
31 January
2023 % change
Total assets
(before deduction of bank loans)*
£125.3m £210.0m
Bank loans £5.9m £6.1m
Shareholders’ funds* £119.4m £203.9m
Net asset value per ordinary share* 193.06p 328.87p (41.3%)
Share price 181.00p 308.00p (41.2%)
MSCI China All Shares Index
(in sterling terms)
#
(32.2%)
Revenue earnings per ordinary share 2.42p 2.14p
Dividends paid and payable in respect
of the year
2.00p 1.70p
Ongoing charges
†¶
0.97% 0.94%
Discount
†¶
(6.2%) (6.3%)
Active share
¶
72% 72%
Year to 31 January 2024 2023
Total return
¶
Net asset value per ordinary share
(40.9%) (5.7%)
Share price (40.8%) (7.9%)
Benchmark
#
(30.5%) (2.2%)
23
Baillie Gifford China Growth Trust plc
* For a definition of terms see Glossary of terms and alternative performance measures on pages 126 and 128.
†
Key Performance Indicator.
#
The benchmark is the MSCI China All Shares Index (in sterling terms).
¶
Alternative performance measure – see Glossary of terms and alternative performance measures on pages 126 to 128.
Source: LSEG/Baillie Gifford and relevant underlying index providers. See disclaimer on page 124.
Past performance is not a guide to future performance.
Year to 31 January 2024 2024 2023 2023
Year’s high and low High Low High Low
Net asset value per
ordinary share
334.82p 193.29p 359.06p 238.91p
Share price 325.00p 176.00p 355.00p 208.50p
(Discount)/
premium
†¶
(2.6%) (15.5%) 2.9% (15.5%)
Year to 31 January 2024 2023
Net return per ordinary share
Revenue 2.42p 2.14p
Capital (136.61p) (22.37p)
Total (134.19p) (20.23p)
Strategic report
Annual Report and Financial Statements 2024
24
(Discount)/premium* to NAV
(figures plotted on a monthly basis)
20242019 2020 2021 2022 2023
Years to 31 January
●
(Discount)/premium
*
Source:
LSEG/Baillie Gifford.
(15%)
(10%)
20%
10%
15%
5%
(5%)
0%
* Alternative performance measure – see Glossary of terms and alternative performance measures on pages 126 and 128.
†
The benchmark is the MSCI China All Shares Index (in sterling terms), prior to 16 September 2020 the benchmark
was MSCI AC Asia ex Pacific Index. Data is chain-linked from 16 September 2020 to form a single comparative index.
#
See disclaimer on page 124.
Past performance is not a guide to future performance.
Five year total return* performance
(figures rebased to 100 at 31 January 2019)
20242019 2020 2021 2022 2023
Cumulative to 31 January
● NAV total return
*
●
Share price total return
*
● Benchmark
†#
Source:
LSEG/Baillie Gifford and relevant underlying index providers
#.
50
250
200
150
100
Five year
summary
The following charts indicate
how an investment in
Baillie Gifford China Growth
Trust has performed relative
to its benchmark
†
and its
underlying NAV over the
five year period
to 31 January 2024.
25
Baillie Gifford China Growth Trust plc
20242020 2021 2022 2023
Years to 31 January
Source: LSEG/Baillie Gifford and relevant underlying index providers
#
.
●
NAV total return
*
● Share price total return
*
(40%)
(20%)
60%
40%
20%
0%
Annual NAV and share price total returns*
(relative to the benchmark
#
total returns)
*
Alternative performance measure – see Glossary of terms and alternative performance measures on pages 126 and 128.
†
The benchmark is the MSCI China All Shares Index (in sterling terms), prior to 16 September 2020 the benchmark
was MSCI AC Asia ex Pacific Index. Data is chain-linked from 16 September 2020 to form a single comparative index.
#
See disclaimer on page 124.
Past performance is not a guide to future performance.
Annual NAV and share price total returns*
2024
2020
2021 2022 2023
Years to 31 January
●
NAV total return
*
● Share price total return
*
Source: LSEG/Baillie Gifford.
(60%)
(40%)
80%
60%
40%
20%
(20%)
0%
Strategic report
Annual Report and Financial Statements 2024
26
Capital
At
31 January
Total
assets
£’000
Borrowings
£’000
Shareholders’
funds *
£’000
NAV *
p
Share
price
p
(Discount)/
premium *
%
2014
168,246 8,500 159,746 241.9 213.5 (11.7)
2015 184,280 – 184,280 279.5 244.0 (12.7)
2016 170,388 – 170,388 259.3 231.0 (10.9)
2017 217,035 – 217,035 333.9 286.0 (14.3)
2018 244,455 – 244,455 386.6 344.0 (11.0)
2019 219,929 – 219,929 352.5 303.0 (14.1)
2020 222,208 – 222,208 363.5 333.0 (8.4)
2021 271,424 – 271,424 492.7 548.0 11.2
2022 224,931 5,590 219,341 353.7 339.3 (4.1)
2023 210,032 6,092 203,940 328.9 308.0 (6.3)
2024 125,301 5,890 119,411 193.1 181.0 (6.2)
Ten year
record
* For a definition of terms see Glossary of terms and alternative performance measures on pages 126 and 128.
†
Total operating costs (excluding performance fees) divided by average net asset value. Baillie Gifford was appointed on 16 September 2020 and agreed
to waive its management fee for six months from the date of appointment. Without the management fee waiver the ongoing charges for the year to
31 January 2021 would have been 1.0% and the year to 31 January 2022 would have been 0.8%.
Past performance is not a guide to future performance.
Revenue Gearing ratios
Year to
31 January
Gross
revenue
£’000
Available
for ordinary
shareholders
£’000
Revenue
earnings per
ordinary
share
p
Ordinary
dividends paid
and proposed
per share
p
Ongoing
charges
ratio
†
%
Gearing *
%
Gross
gearing *
%
2014
4,978 2,910 4.4 4.5 0.9 3 5
2015 4,464 2,628 4.0 4.6 1.1 – –
2016 4,782 2,836 4.3 4.7 1.1 – –
2017 5,004 2,880 4.4 4.8 1.0 – –
2018 5,740 4,141 6.5 5.5 1.0 – –
2019 6,577 4,954 7.9 7.0 1.0 – –
2020 6,073 4,412 7.2 7.2 1.1 – –
2021 3,600 2,329 4.5 7.2 0.7 – –
2022 1,599 592 1.0 7.2 0.7 1 3
2023 2,047 1,325 2.1 1.7 0.9 3 3
2024 2,599 1,498 2.4 2.0 1.0 4 5
27
Baillie Gifford China Growth Trust plc
Source: LSEG and underlying index providers. See disclaimer on page 124.
* For a definition of terms see Glossary of terms and alternative performance measures on pages 126 and 128.
†
The benchmark is the MSCI China All Shares Index (in sterling terms), prior to 16 September 2020 the benchmark was MSCI AC Asia ex Pacific Index.
Data is chain-linked from 16 September 2020 to form a single comparative index.
Past performance is not a guide to future performance.
Cumulative performance (taking 2014 as 100)
At
31 January
Net asset
value per
share
Net asset
value total
return *
Share
price
Share price
total return * Benchmark
†
Benchmark
total return *
†
2014 100 100 100 100 100 100
2015 116 118 114 117 114 117
2016 107 111 108 113 104 110
2017 138 145 134 142 137 149
2018 160 170 161 173 158 176
2019 146 158 142 155 145 166
2020 150 166 156 175 153 181
2021 204 229 257 293 183 220
2022 146 167 159 184 144 175
2023 136 158 144 170 138 171
2024 80 93 85 101 93 119
Compound annual returns (%)
5 year (11%) (10%) (10%) (8%) (8%) (6%)
10 year (2%) (1%) (2%) 0% (1%) 2%
Strategic report
Annual Report and Financial Statements 2024
28
Business model
Business and status
Baillie Gifford China Growth Trust plc (the
‘Company’) is a public company limited by shares
and is incorporated in England. The Company is an
investment company within the meaning of section
833 of the Companies Act 2006 and carries on
business as an investment trust. Investment trusts
are UK public listed companies and their shares are
traded on the London Stock Exchange. They invest
in a portfolio of assets in order to spread risk.
The Company has a fixed share capital, although,
subject to shareholder approval sought annually,
it may purchase its own shares or issue shares.
The price of the Company’s shares is determined,
like other listed shares, by supply and demand.
The Company has been approved as an investment
trust by HM Revenue & Customs subject to
the Company continuing to meet the eligibility
conditions. The Directors are of the opinion that the
Company has continued to conduct its affairs so as
to enable it to comply with the ongoing requirements
of section 1158 of the Corporation Tax Act 2010 and
the Investment Trust (Approved Company) (Tax)
Regulations 2011.
The Company is an Alternative Investment Fund
(‘AIF’) for the purposes of the UK Alternative
Investment Fund Managers Regulations.
Investment objective
To produce long-term capital growth by investing
predominantly in shares of, or depositary receipts
representing the shares of, Chinese companies.
Investment policy
The Company invests predominantly in shares
of, or depositary receipts representing the shares
of, Chinese companies. Chinese companies are
companies that have their headquarters in China
or that the Investment Manager deems to have a
significant part of their operations in China. They
may be listed, quoted, or traded on any market,
or unlisted. The Company will be actively managed
and may invest in companies of any size and in any
sector. In furtherance of the Investment policy the
portfolio will normally consist principally of quoted
equity securities although unlisted companies, fixed
interest holdings or other non equity investments
may be held.
The portfolio will comprise between 40 and 80 listed
and unlisted securities. No individual investment
will represent a greater weight in the portfolio than,
(i) 20%, or (ii) its weight in the MSCI China
All Shares Index (in sterling terms) plus 7.5%,
whichever is lower as measured at the time of
investment.
The maximum amount which may be invested in
unlisted securities shall not exceed 20% of the
gross asset value of the Company, measured at
the time of investment.
The Company will at all times be invested in several
sectors. While there are no specific limits placed on
exposure to any one sector, the Company will at all
times invest and manage the portfolio in a manner
consistent with spreading investment risk.
The Company intends to employ gearing in the
normal course of events. The Company may in
aggregate borrow amounts equalling up to 25%
of gross asset value, although the Board expects
that borrowings will typically not exceed 20% of
gross asset value, in both cases calculated at the
time of drawdown.
With prior approval of the Board, the Company
may use derivatives for the purposes of efficient
portfolio management in order to reduce, transfer or
eliminate investment risk in the Company’s portfolio.
Derivative instruments in which the Company may
Business
review
29
Baillie Gifford China Growth Trust plc
invest may include foreign exchange forwards,
exchange-listed and over-the-counter options,
futures, options on futures, swaps and similar
instruments. The Company does not intend to enter
into derivative or hedging transactions to mitigate
against general currency or interest rate risk.
While it is intended that the Company will be fully
invested in normal market conditions, the Company
may hold cash on deposit or invest on a temporary
basis in a range of cash equivalent instruments.
There is no restriction on the amount of cash or cash
equivalent instruments that the Company may hold.
The Company may invest no more than 10%,
in aggregate, of gross asset value at the time of
acquisition in other listed closed-ended investment
funds, but this restriction will not apply to
investments in such funds which themselves have
stated investment policies to invest no more than
15% of their gross asset value in other closed-ended
investment funds. In this case, the limit is 15%.
No material change will be made to the Company’s
Investment Policy without the prior approval by
ordinary resolution of the shareholders.
Culture
As an externally managed investment company
with no employees, Baillie Gifford China Growth
Trust’s culture is expressed through its Board and
its third party service providers, in particular its
Managers, in their interactions with shareholders
and other stakeholders. The Board’s assessment
of its own interactions is described in its Section
172 Statement on page 38, and the
Baillie Gifford statement on stewardship, which
describes the Managers’ culture of constructive
engagement, is set out on page 50.
Dividend policy
The Company’s priority is to produce capital growth
over the long term. The Company’s dividend policy
is that any dividend paid will be by way of a final
dividend and be not less than the minimum required
for the Company to maintain its investment trust
status.
Liquidity policy
The Board recognises the need to address any
sustained and significant imbalance of buyers and
sellers which might otherwise lead to shares trading
at an anomalous discount or premium to net asset
value per share. While it has not adopted any formal
discount or premium targets which would dictate
the point at which the Company would seek to
purchase shares or issue further shares, the Board
is committed to utilising its share purchase and
share issuance authorities where appropriate in
such a way as to mitigate the effects of any such
imbalance. In considering whether buy-back or
issuance might be appropriate in any particular set
of circumstances, the Board will take into account,
inter alia: the prevailing market conditions; whether
the discount is substantial relative to the Company’s
peers; the degree of net asset value accretion that
will result from the buy-back or issuance; the cash
resources readily available to the Company; the
immediate pipeline of investment opportunities open
to the Company; and the level of the Company’s
existing borrowings.
Strategic report
Annual Report and Financial Statements 2024
30
-30
-25
-20
-15
-10
-5
0
● NAV total return relative
to benchmark
● Share price total return
relative to benchmark
1 year 5 years 10 years
%
Key performance indicators
The Board uses key performance
indicators (‘KPIs’) to measure
the progress and performance
of the Company over time when
discharging its duties as set
out on page 68. These KPIs are
established industry measures.
The one, five and ten year records
of the KPIs can be found on pages
22 to 27. Further discussion is
included in the Chair’s statement
on pages 07 to 09.
In addition to the above, the Board
considers peer group comparative
performance.
Across these measures, the Board
looks for relative outperformance
over the long term, while
remaining mindful that the nature
of the Investment Policy and the
growth characteristics of the
portfolio investments may entail
periods of underperformance
over the short and medium
term. The Board is disappointed
with the performance of the
Company during the year but
is satisfied with the Manager’s
explanation of the reasons for the
underperformance. The Board is
satisfied that the ongoing charges
ratio is competitive.
Net asset value total return
relative to the benchmark
*
The total return is the return to
shareholders after reinvesting
the net dividend on the date that
the share price goes ex-dividend.
Share price total return
relative to the benchmark
*
The total return is the return to
shareholders after reinvesting
the net dividend on the date that
the share price goes ex-dividend.
Share price
(discount)/premium
*
As stock markets 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
it is said to be trading at a discount.
If the share price is higher than the
NAV, this situation is called
a premium.
-15
-10
-5
0
● Average (discount)/premium
of share price to NAV
1 year 5 years 10 years
%
Ongoing charges ratio
*
The ongoing charges ratio is the total
recurring expenses (excluding the
Company’s cost of dealing in investments
and borrowing costs) incurred by the
Company as a percentage of the daily
average NAV. Without the management fee
waiver (see page 26) the ongoing charges
ratio for 2021 would have been 1.0% and
in 2022 0.8%. The Board has an ongoing
charges target of 1.0% or less.
0.0
0.5
1.0
1.5
● Ongoing charges ratio
%
2014 20
24
Performance
At each Board meeting, the Directors consider a number of performance measures to assess the Company’s
success in achieving its objectives.
* Alternative performance measure – see Glossary of terms and alternative performance measures on pages 126 to 128.
Past performance is not a guide to future performance.
31
Baillie Gifford China Growth Trust plc
Borrowings
The Company employs gearing, as set out in the
Investment Policy. The Company has in place a
two year revolving credit facility for US$40 million
with Royal Bank of Scotland (International) Limited
which expires on 13 April 2024. The Board are in
discussions with lenders regarding renewal.
Viability statement
Having regard to provision 31 of the UK Corporate
Governance Code, the Directors have assessed the
prospects of the Company over a five year period.
The Directors continue to believe this period to be
appropriate as it reflects the Company’s longer term
investment strategy and to be a period during which,
in the absence of any material adverse change to
the regulatory environment in the UK and/or China
and to the tax treatment afforded to UK investment
trusts, they do not expect there to be any significant
change to the current principal and emerging
risks facing the Company nor to the effectiveness
of the controls employed to mitigate those risks.
Furthermore, the Directors do not reasonably
envisage any change in strategy or any events which
would prevent the Company from operating over a
period of five years.
In considering the viability of the Company, the
Directors have conducted a robust assessment
of each of the principal and emerging risks and
uncertainties (including climate change) detailed on
pages 32 to 38, in particular the impact of market
risk where a significant fall in Chinese equity markets
would adversely impact the value of the investment
portfolio. The Directors have also considered the
Company’s leverage and liquidity in the context of
the revolving credit facility which expires in April
2024 (which they are seeking to renew) with specific
leverage and liquidity stress testing conducted
during the year, including consideration of the risk
of further market volatility resulting from increasing
geopolitical tensions.
In addition, the Board and the Managers monitor
the covenant levels included in the revolving credit
facility regularly. Although the Directors do not
envisage difficulty refinancing this facility, the
majority of the Company’s investments are listed
at present and readily realisable and can be sold
to meet its liabilities as they fall due. Borrowings
may not exceed 25% of gross asset value, and are
not expected to exceed 20% of gross asset value.
In addition, all of the key operations required by
the Company are outsourced to third party service
providers and it is reasonably considered that
alternative providers could be engaged at relatively
short notice where necessary.
Based on the Company’s processes for monitoring
revenue projections and operating costs, share
price discount/premium, the Managers’ compliance
with the investment objective, asset allocation,
the portfolio risk profile, leverage, counterparty
exposure, liquidity risk, financial controls and the
Managers’ operational resilience, the Directors have
concluded that there is a reasonable expectation
that the Company will be able to continue in
operation and meet its liabilities as they fall due
over the next five years.
Strategic report
Annual Report and Financial Statements 2024
32
Principal and emerging risks
As explained on pages 72 and 73 there is an ongoing process for identifying, evaluating and managing the
risks faced by the Company on a regular basis. The Directors have undertaken a robust assessment of the
principal and emerging risks facing the Company, including those that would threaten the business model,
future performance, solvency or liquidity. There have been no significant changes to the principal risks
during the year. A description of these risks and how they are being managed or mitigated is set out below:
Financial
risk
What is the risk?
The Company’s assets consist
mainly of listed securities
(91.5% of the investment
portfolio) and its principal and
emerging financial risks are
therefore market related and
include market risk (comprising
currency risk, interest rate
risk and other price risk),
liquidity risk and credit risk.
An explanation of those risks
and how they are managed
is contained in note 18 to the
Financial Statements on
pages 107 to 112.
How is it managed?
The Board has, in particular,
considered the impact of
increasing market volatility due
to macroeconomic factors such
as higher inflation and interest
rates and geopolitical concerns.
In order to oversee this risk,
the Board considers at each
meeting various metrics including
industrial sector weightings, top
and bottom stock contributors
to performance along with sales
and purchases of investments.
Individual investments are
discussed with the portfolio
manager together with general
views on the investment markets
and sectors. A strategy session is
held annually.
Current assessment of risk
This risk is increasing due to
increased market volatility
as a result of increasing
macroeconomic and
geopolitical concerns.
Investment
strategy risk
What is the risk?
Inappropriate business strategy
and/or changes in the financial
services market leads to lack
of demand for the Company’s
shares and its shares trading
at a persistent and anomalous
discount to the NAV.
Poor investment performance,
including through inappropriate
asset allocation, leads to
value loss for shareholders in
comparison to the benchmark
or the peer group.
How is it managed?
The Board reviews its strategy
at an annual strategy meeting.
It considers investor feedback,
consults with its broker and
reviews its marketing strategy.
It regularly reviews its liquidity
policy. The strategy is considered
in the context of developments
in the wider financial services
industry.
The performance of the Managers
is reviewed at each Board meeting
and compared against the
benchmark and peer group.
Exposures are reviewed against
benchmark exposures to identify
the highest risk exposures.
The Board regularly reviews
and monitors the Company’s
objective and investment policy
and strategy.
Current assessment of risk
This risk is increasing as the
market’s appetite for growth
stocks, typically held by the
Company, has decreased
during the recent period of
increasing macroeconomic
and geopolitical concern.
Decreasing RiskIncreasing Risk No Change
33
Baillie Gifford China Growth Trust plc
Discount
risk
What is the risk?
The discount/premium at
which the Company’s shares
trade relative to its net asset
value can change. The risk of a
widening discount is that it may
undermine investor confidence
in the Company.
How is it managed?
To manage this risk, the
Board monitors the level of
discount/premium at which the
shares trade and the Company
has authority to buy back its
existing shares, when deemed
by the Board to be in the best
interests of the Company and
its shareholders.
Current assessment of risk
The Company’s discount
widened during the year
(see chart on page 2).
The Company has been
buying back shares during
the year to 31 January 2024.
Regulatory
risk
What is the risk?
Failure to comply with
applicable legal and regulatory
requirements such as the
tax rules for investment trust
companies, the FCA Listing
Rules and the Companies Act
could lead to suspension of the
Company’s Stock Exchange
listing, financial penalties,
a qualified audit report or the
Company being subject to tax
on capital gains. Changes to the
regulatory environment could
negatively impact the Company.
How is it managed?
To mitigate this risk,
Baillie Gifford’s Business Risk,
Internal Audit and Compliance
Departments provide regular
reports to the Audit Committee
on Baillie Gifford’s monitoring
programmes. Major regulatory
change could impose
disproportionate compliance
burdens on the Company.
In such circumstances
representation is made to ensure
that the special circumstances of
investment trusts are recognised.
Shareholder documents and
announcements, including the
Company’s published Interim
and Annual Report and Financial
Statements, are subject to
stringent review processes and
procedures are in place to ensure
adherence to the Transparency
Directive and the Market Abuse
Directive with reference to
inside information.
Current assessment of risk
All control processes are
working effectively.
There have been no material
regulatory changes that
have impacted the Company
during the year.
Decreasing RiskIncreasing Risk No Change
Strategic report
Annual Report and Financial Statements 2024
34
Decreasing RiskIncreasing Risk No Change
Custody and
Depositary
risk
What is the risk?
Safe custody of the Company’s
assets may be compromised
through control failures by the
Depositary, including breaches
of cyber security.
How is it managed?
To mitigate this risk, the Audit
Committee receives six-monthly
reports from the Depositary
confirming safe custody of the
Company’s assets held by the
Custodian. Cash and portfolio
holdings are independently
reconciled to the Custodian’s
records by the Managers who
also agree uncertificated private
portfolio holdings to confirmations
from investee companies.
The Custodian’s audited internal
controls reports are reviewed
by Baillie Gifford’s Business Risk
Department and a summary
of the key points is reported
to the Audit Committee and
any concerns investigated.
In addition, the existence of
assets is subject to annual
external audit.
Current assessment of risk
All control procedures are
working effectively.
Operational
risk
What is the risk?
Failure of Baillie Gifford’s
systems or those of other
third party service providers
could lead to an inability to
provide accurate reporting
and monitoring or a
misappropriation of assets.
How is it managed?
To mitigate this risk, Baillie Gifford
has a comprehensive business
continuity plan which facilitates
continued operation of the
business in the event of a service
disruption or major disaster.
The Audit Committee reviews
Baillie Gifford’s Report on
Internal Controls and the reports
by other key third party providers
are reviewed by Baillie Gifford
on behalf of the Board and a
summary of the key points is
reported to the Audit Committee
and any concerns investigated.
In the year under review, the other
key third party service providers
have not experienced significant
operational difficulties affecting
their respective services to
the Company.
Current assessment of risk
All control procedures are
working effectively.
35
Baillie Gifford China Growth Trust plc
Decreasing RiskIncreasing Risk No Change
Leverage risk
What is the risk?
The Company may utilise
borrowings in order to increase
its investment exposure.
While such leverage presents
opportunities for increasing
total returns, it can also have
the opposite effect of increasing
losses. If income and capital
appreciation on investments
acquired with borrowed funds
are less than the costs of the
leverage, the Company’s net
asset value will decrease. The
use of leverage also increases
the investment exposure, which
means that if the market moves
adversely, the resulting loss to
capital would be greater than
if leverage were not used.
How is it managed?
Under the Investment Policy,
the maximum gearing is 25%
of gross assets, though the
Company does not expect
borrowing to be in excess of 20%
of gross assets. All borrowing
facilities are approved by the
Board and gearing levels are
discussed by the Board and the
Managers at every meeting.
Covenant levels are monitored
regularly by the Board and the
Managers.
Current assessment of risk
No significant change in risk
level. The Company continues
to deploy gearing and has
a revolving credit facility
in place which expires in
April 2024. The board are
seeking to renew the loan
facility.
Climate and
governance
risk
What is the risk?
As investors place increased
emphasis on climate change
and other Environmental, Social
and Governance (‘ESG’) issues,
perceived problems with these
matters in an investee company
could lead to that company’s
shares being less attractive to
investors, adversely affecting
its share price. In addition,
potential valuation issues could
arise from any direct impact of
the failure to address the ESG
weakness on the operations or
management of the investee
company (for example in
the event of an industrial
accident or spillage). Repeated
failure by the Investment
Manager to identify climate/
ESG weaknesses in investee
companies could lead to the
Company’s own shares being
less attractive to investors,
adversely affecting its own
share price.
How is it managed?
As described on page 74, the
consideration of ESG (including
climate change) is a core
component of Baillie Gifford’s
investment process, with the
Board overseeing and challenging
Baillie Gifford on ESG matters.
The Board meet with the
Investment Manager and discuss
the investment portfolio, including
the application of Baillie Gifford’s
ESG framework. Baillie Gifford’s
Governance and Sustainability
team undertake specific ESG
reviews on investment portfolios.
Current assessment of risk
The Investment Manager
continues to employ strong
ESG stewardship and
engagement policies.
Strategic report
Annual Report and Financial Statements 2024
36
Cyber
security risk
What is the risk?
A cyber-attack on Baillie
Gifford’s network or that of
a third party service provider
could impact the confidentiality,
integrity or availability of data
and systems.
How is it managed?
The Audit Committee reviews
Reports on Internal Controls
published by Baillie Gifford and
other third party service providers.
Baillie Gifford’s Business Risk
Department report to the Audit
Committee on the effectiveness
of information security controls
in place at Baillie Gifford and its
business continuity framework.
Cyber security due diligence
is performed by Baillie Gifford
on third party service providers
which includes a review of crisis
management and business
continuity frameworks.
Current assessment of risk
This risk is seen as increasing
due to recent indications
that the continuation of
geopolitical tensions could
lead to cyber attacks.
Emerging technologies,
including AI, could potentially
increase information security
risks. In addition, service
providers operate a hybrid
approach of remote and
office working, thereby
increasing the potential of a
cyber security threat.
Single
country
risk
What is the risk?
The Company invests
predominantly in equities
of companies which are
incorporated or domiciled,
or which conduct a significant
portion of their business,
in China. Investing in a single
country is generally considered
a higher risk investment
strategy than investing more
widely, as it exposes the
investor to the fluctuations of
a single geographical market,
in this case the Chinese market.
How is it managed?
The Company’s exposure to
a single country, China, is an
integral part of its investment
strategy. Risk is mitigated to a
degree by appropriate portfolio
diversification and careful
analysis of investment
opportunities.
Current assessment of risk
This risk is seen as increasing
due to concerns over
geopolitical risks.
Decreasing RiskIncreasing Risk No Change
37
Baillie Gifford China Growth Trust plc
Emerging
market risk
What is the risk?
Investing in an emerging market
such as China subjects the
Company to a higher level of
market risk than investment in a
more developed market. This is
due, among other things, to the
existence of greater market
volatility, lower trading volumes,
the risk of political and
economic instability, legal and
regulatory risks, risks relating to
accounting practices, disclosure
and settlement, a greater risk of
market shut down, standards of
corporate governance and more
governmental limitations on
foreign investment than are
typically found in developed
markets. Geopolitical tensions
between the US and China,
in particular relating to Taiwan,
remain heightened with the
potential for further sanctions
to be imposed. Investing in
China is often through
contractual structures, such
as Variable Interest Entities
(‘VIEs’, see Glossary of terms
and alternative performance
measures on page 128) that
are complex and could be
open to challenge.
How is it managed?
The Managers are cognisant of
the risks associated with investing
in emerging markets such as
China, and they shape their
investment strategy and due
diligence accordingly. The Board
is kept informed of political and
regulatory issues impacting
China and the portfolio.
The Board monitors the risks
associated with any complex
investment structures, including
the proportion of investments
held in VIEs (estimated to be
28% as at 31 January 2024).
Current assessment of risk
Rising concerns over
geopolitical risk.
Unlisted
securities
What is the risk?
The Company may invest in
unlisted securities, which are
not readily realisable and are
more difficult to value given the
absence of a quoted price.
There may be less available
information and there will be
less regulation in respect of
disclosures and corporate
governance
How is it managed?
Baillie Gifford conducts
appropriate due diligence in
respect of all unlisted
investments, and has an
established valuation approach
(as described on page 52),
which is carefully reviewed
by the Board.
Current assessment of risk
No change in assessment
of risk.
Decreasing RiskIncreasing Risk No Change
Strategic report
Annual Report and Financial Statements 2024
38
Promoting the success of the Company
(section 172 statement)
Under section 172 of the Companies Act 2006,
the directors of a company must act in the way
they consider, in good faith, would be most likely
to promote the success of the company for the
benefit of its members as a whole, and in doing
so have regard (amongst other matters and to the
extent applicable) to: a) the likely consequences
of any decision in the long term; b) the interests
of the company’s employees; c) the need to
foster the company’s business relationships with
suppliers, customers and others; d) the impact of
the company’s operations on the community and
the environment; e) the desirability of the company
maintaining a reputation for high standards of
business conduct; and f) the need to act fairly as
between members of the company.
In this context and having regard to the Company
being an externally-managed investment company
with no employees, the Board considers that the
Company’s key stakeholders to be: its existing and
potential new shareholders; its externally-appointed
Managers and Secretaries (Baillie Gifford); other
professional service providers (corporate broker,
registrar, auditors and depositary); lenders; wider
society and the environment.
The Board considers that the interests of the
Company’s key stakeholders are aligned, in terms
of wishing to see the Company deliver sustainable
long-term growth, in line with the Company’s
stated objective and strategy, and meet the highest
standards of legal, regulatory, and commercial
conduct, with the differences between stakeholders
being merely a matter of emphasis on those
elements.
Emerging
risk
As explained on pages 72 to 74, the Board has regular discussions on principal risks and uncertainties,
including any risks which are not an immediate threat but could arise in the longer term. The Board considers
that the key emerging risks arise from the interconnectedness of global economies and the related exposure
of the investment portfolio to external and emerging threats such as escalating geopolitical tensions, cyber
security risks including developing AI and quantum computing capabilities, and new coronavirus variants
or similar public health threats.
This is mitigated by the Board discussing at each Board meeting the impact of such threats on both markets
globally and also more specifically on the Chinese market. This is mitigated by the Managers’ close links to
the investee companies and their ability to ask questions on contingency plans. The Managers believe the
impact of such events may be to slow growth rather than to invalidate the investment rationale over the long
term. The Company also monitors its service providers to ensure there is adequate business continuity.
39
Baillie Gifford China Growth Trust plc
Stakeholder Why we engage How we engage and what we do
Shareholder Shareholders are, collectively, the Company’s
owners: providing them with a return for their
investment in accordance with the Company’s
investment policy and objective is the reason
for its existence.
The Board places great importance on communication
with shareholders. The Annual General Meeting provides
an opportunity for the Board and Managers to present to
shareholders on the Company’s performance, future plans
and prospects. It also allows shareholders the opportunity to
meet with the Board and Managers and raise questions and
concerns. The Chair and Senior Independent Director (‘SID’)
are available to meet with shareholders independently of the
Managers as appropriate. The Managers meet regularly with
shareholders and their respective representatives, reporting
their views back to the Board. Directors also attend certain
shareholder presentations, in order to gauge shareholder
sentiment first hand. Shareholders may also communicate
with members of the Board at any time by writing to them at
the Company’s registered office or to the Company’s broker
(see contact details on page 129). These communication
opportunities help inform the Board when considering how
best to promote the success of the Company for the benefit
of all shareholders over the long term.
Baillie Gifford –
Managers and
Secretaries
The Company’s Board has delegated the
management of the Company’s portfolio,
and the administration of the Company’s
operations including fulfilment of regulatory
and taxation reporting requirements, to Baillie
Gifford. Baillie Gifford is therefore responsible
for the substantial activities of the Company
and has the most immediate influence on
its conduct towards the other stakeholders,
subject to the oversight and strategic direction
provided by the Board.
The Board seeks to engage with its Managers and
Secretaries, and other service providers, in a collaborative
and collegiate manner, encouraging open and constructive
discussion and debate, while also ensuring that appropriate
and regular challenge is brought and evaluation conducted.
This approach aims to enhance service levels and strengthen
relationships with the Company’s providers, with a view
to ensuring the interests of the Company’s shareholders
are best served by keeping cost levels proportionate and
competitive, and by maintaining the highest standards of
business conduct.
Portfolio companies As all of the Company’s operations are
conducted by third party professional
providers, it is the companies held in its
investment portfolio which have the primary
real-world impact in terms of social and
environmental change, both positively and
negatively, as well as generating, through their
commercial success, the investment growth
sought by the Company’s shareholders.
The investee companies have an interest in
understanding their shareholders’ investment
rationale in order to assure themselves
that long-term business strategies will be
supported.
The Board is cognisant of the need to consider the impact
of the Company’s investment strategy and policy on wider
society and the environment. The Board considers that its
oversight of environmental, social and governance (‘ESG’)
matters is an important part of its responsibility to all
stakeholders. The Board’s review of the Managers includes
an assessment of their ESG approach and its application in
making investment decisions. The Board regularly reviews
Governance Engagement reports, which document the
Managers’ interactions with investee companies on ESG
matters (see pages 42 to 48).
Brokers The Company’s brokers provide an interface
between the Company’s Board and its
institutional shareholders.
The Company’s brokers regularly attend Board meetings,
and provide reports to those meetings, in order to keep the
Board apprised of shareholder and wider market sentiment
regarding the Company. They also arrange forums for
shareholders to meet the Chair, or other Directors,
outwith the normal general meeting cycle.
The Board’s methods for assessing the Company’s progress in the context of its stakeholders’ interests are
set out below.
Strategic report
Annual Report and Financial Statements 2024
40
Stakeholder Why we engage How we engage and what we do
Registrars The Company’s registrars provide an
interface with those shareholders who
hold the Company’s shares directly.
The Company Secretaries liaise with the registrars to
ensure the frequency and accuracy of communications
to shareholders is appropriate, and monitor shareholder
correspondence to ensure that the level of service provided
by the registrars is acceptable. The Managers’ risk function
reviews the registrars’ internal controls report and reports on
the outcome of this review to the Audit Committee.
Auditor The Company’s Auditor has a responsibility to
provide an opinion on whether the Company’s
Financial Statements as a whole are free from
material misstatement, as set out in more
detail in the Auditor’s report to the members
on page 85.
The Company’s Auditor meets with the Audit Committee, in
the absence of the Managers where deemed necessary, and
the Managers undertake to provide all information requested
by the Auditor in connection with the Company’s annual audit
promptly and to ensure that it is complete and accurate in all
respects.
Depositary
and Custodian
The Depositary is responsible for the
safekeeping of the Company’s financial
instruments, as set out in more detail on
page 63.
The Depositary provides the Audit Committee with a report
on its monitoring activities. The Board and Managers seek to
engage with the Depositary and Custodian in a collaborative
and collegiate manner, encouraging open and constructive
discussion and debate, while also ensuring that appropriate
and regular challenge is brought and evaluation conducted.
This approach aims to enhance service levels and strengthen
relationships with the Company’s providers, with a view to
ensuring the interests of the Company’s shareholders are
best served by keeping cost levels proportionate and
competitive, and by maintaining the highest standards of
business conduct.
Lenders Lenders such as holders of debt instruments
(debentures, bonds and private placement
loan notes) and banks providing fixed or
revolving credit facilities or overdrafts provide
the Company’s gearing and have an interest
in the Company’s ongoing financial health
and viability.
The Company’s legal advisers review all legal agreements
in connection with the Company’s debt arrangements
and advise the Board on the appropriateness of the terms
and covenants therein. The Managers and Secretaries
ensure that the frequency and accuracy of reporting on,
for example, covenant certification, is appropriate and
that correspondence from the lenders receives a prompt
response.
AIC/industry peers The Association of Investment Companies
(‘AIC’) and the Company’s investment
trust industry peers have an interest in the
Company’s conduct and performance,
as adverse market sentiment towards
one investment trust can affect attitudes
towards the wider industry.
The Company is a member of the AIC, and the Directors
and/or the Managers and Secretaries (as appropriate)
participate in technical reviews, requests for feedback on
proposed legislation or regulatory developments, corporate
governance discussions and/or training.
Investment platforms Investment platforms provide an interface
with shareholders who invest in the
Company indirectly.
The Managers liaise with the various investment platforms
on strategies for improving communications with the
Company’s shareholders who hold their shares via these
platforms. An annual timetable of key dates is published on
the Company’s website, for the ease of reference of such
shareholders.
Wider society and
the environment
No entity, corporate or otherwise, can exist
without having an influence on the society
in which it operates or utilising the planet’s
resources. Through its third-party relationships,
as noted above, the Company seeks to be a
positive influence and, in circumstances
where that is not possible, to mitigate its
negative impacts insofar as is possible.
The Board and Managers’ interactions with the various
stakeholders as noted above form the principal forms of
direct engagement with wider society and in respect of the
environment (commercial, financial, and in terms of planetary
health and resources).
41
Baillie Gifford China Growth Trust plc
The Board recognises the importance of maintaining
the interests of the Company and its stakeholders,
in aggregate, firmly front of mind in its key decision
making and Baillie Gifford & Co Limited, the
Company Secretaries, are at all times available to
the Board to ensure that suitable consideration is
given to the range of factors to which the Directors
should have regard. In addition to ensuring that the
Company’s stated investment objective was being
pursued, key decisions and actions during the year
which have required the Directors to have regard to
applicable section 172 factors include:
• as part of ongoing Board succession and
refreshment, the appointment and induction
of Nicholas Pink to the Board, with effect from
1 September 2023. The Board believes his
considerable knowledge and experience will be
a great benefit to the Company. Details of his
relevant skills and experience are provided on
page 60;
• the purchase of 160,700 of the Company’s own
shares into treasury at a discount to net asset
value, for subsequent reissue, in order to ensure
the Company’s shareholders found liquidity for
their shares when natural market demand was
insufficient, and on terms that enhance net asset
value for remaining shareholders; and
• the Board’s decision to declare a final dividend
of 2.00p.
Employees, human rights
and community issues
The Board recognises the requirement to provide
information about employees, human rights
and community issues. As the Company has no
employees, all its Directors are non-executive
and all its functions are outsourced, there are no
disclosures to be made in respect of employees,
human rights and community issues. Further
information on the Company’s approach to
Environmental, Social and Governance matters are
provided below.
Gender representation
At 31 January 2024, and at the date of this report,
the Board comprised five Directors, three male and
two female. The Company has no employees. The
Board’s policy on diversity is set out on pages
71 and 72.
Environmental, social and governance policy
Details of the Company’s policy on socially
responsible investment can be found under Corporate
Governance and Stewardship on page 74.
The Company considers that it does not fall within
the scope of the Modern Slavery Act 2015 and it is
not, therefore, obliged to make a slavery and human
trafficking statement. In any event, the Company
considers its supply chains to be of low risk as its
suppliers are typically professional advisers.
A statement by the Managers under the Act has
been published on the Managers’ website at
bailliegifford.com.
Future developments of the Company
The outlook for the Company for the next 12 months
is set out in the Chair’s statement on pages 7 and 9
and the Managers’ report on pages 10 to 16.
The Strategic report, which includes pages 7 to 57
was approved by the Board of Directors and signed
on its behalf on 2 April 2024.
Susan Platts-Martin
Chair
Strategic report
Annual Report and Financial Statements 2024
42
China’s economy has high state ownership and a
large industrial base. Coupled with decades of high
growth under an evolving legal and regulatory system,
this results in an index in which many companies score
poorly on ESG data metrics. This can be compounded
by a lack of disclosure and the difficulties of language
and reporting. Herein lies the opportunity.
We believe that ESG has a material impact on
companies’ growth opportunities, competitive
advantages and, ultimately, long term share price
performance. As such, key ESG matters are routinely
considered as part of the investment case and are
built into the research framework that we use for
the Company. Indeed, the first question that we ask
of all potential investments is, ‘does this company
contribute to or benefit from China’s economic,
societal or environmental development, and what is
the global context?’ This question encourages us to
think broadly about various stakeholders, including
the government, that materially impact companies’
long-term success. This is supplemented by our due
diligence checklist which includes a consideration
of corporate governance, executive remuneration
and board structure, sustainability of business
practices, and environmental and social impact
(extract in Box 1).
In the reporting period, we started to use the
updated checklist with one additional question
on Good Governance standards to reflect our
explicit monitoring process regarding the change of
Sustainable Finance Disclosure Regulation (‘SFDR’)
rules. The carbon-specific question also expands
to wider climate approaches and environmental
protective measures to broadly capture the
environmental efforts of the current and potential
investee companies (extract in Box 1).
Where companies are found lacking, engagement
is our preferred approach. Indeed, we believe that
investors, companies and society stand to benefit
if we can play a role in pushing businesses towards
improved standards of governance, behaviour and
performance. As such, we seek to engage with
Managers’ report on
environmental, social and
governance engagement
the companies in which we invest in order to help
them towards industry best practice. We seek a
commitment from these companies to constantly
improve their standards and we hold them to account.
Data
Given the meteoric rise of ESG-influenced investing,
you’d be forgiven for thinking there was already
enough relevant data to guide decisions. But this
is far from the truth, particularly in China. Despite
decades of research into corporate responsibility,
growing interest in sustainable finance, and an entire
industry devoted to churning out ESG data, there are
still significant gaps in our knowledge.
To start to overcome this, our investment approach
draws on a broad range of sources of insight, from
company visionaries to academic experts to data
providers. They help us to meaningfully inform,
support or challenge our contentions about the
long-term prospects of companies, including their
governance and sustainability. We are mindful of the
adage ‘not everything that can be counted counts,
and not everything that counts can be counted’.
Investors are increasingly faced with a barrage of
ESG data and ratings which are often inconsistent,
incomplete, and incomparable. We view data not as
a checklist of boxes to be mechanically ticked off,
but instead as the starting points for meaningful
conversations with companies and stakeholders.
Recognising the intangible nature of corporate
character, our approach must be more nuanced
and qualitative.
The following selected data points illustrate the
importance of such nuance and the questions that
we seek to explore through our broader analysis and
company engagement. Data points are shown in
relation to the index (MSCI China All Share) for the
period from 1 February 2023 to 31 January 2024.
It should be noted that there are some gaps in data
and particularly for the private companies included
in the Company’s portfolio.
43
Baillie Gifford China Growth Trust plc
Box 1
Environmental and social due diligence checklist for Baillie Gifford China Growth Trust
Does this company contribute to or benefit from China’s cultural, economic or societal development, and
what is the global context?
• What are the material ESG topics the company identifies for themselves?
• Does the company have a robust approach to climate change and wider environmental issues (incl. carbon
disclosure, climate targets, net zero path)?
• Is the company compliant with the United Nations Global Compact? If not, why?
• How is the company rated by external research providers? Do we agree with these ratings? If not, why not?
• Are there any red flags and/or areas for company engagement?
• Does the company uphold Good Governance Standards (incl. UNGC Principles 3 and 10, accounting, tax)?
Board membership
What it is – We look to company boards to provide
effective oversight. Typical data points on board
composition are shown below in relation to the index
(MSCI China All Share).
What does the data tell us – Board independence is
particularly nuanced given the bias of this portfolio
to founder firms (such as Kingsoft, LONGi, Alibaba)
along with the presence of some state-owned
enterprises (including Kweichou Moutai). There was
no significant change during the reporting period.
A lack of independence with no extenuating context
is a cause for engagement and further investigation.
In 2023, the number of female directors on boards
for our portfolio remained approximately the same
as in 2022, while the index saw a slight increase.
Meanwhile, we have been encouraging holdings
with all-male boards to seek female candidates to
increase gender diversity. For example, we have
engaged with Meituan on this indicator since
2021 and recommended potential candidates to
the company upon request. Meituan successfully
appointed a female independent non-executive
board director in mid-2023. We expect to see
an even lower number of holdings with all-male
boards in 2024, as companies like Proya and China
Merchants Bank are actively seeking female board
members for board re-election this year. Apart from
gender diversity, background and the role of board
members, long-term board tenure, and over boarding
are also indicators that we actively engage in.
●
Company
● Index
0102030405060
Average board tenure (in years)
Percentage of female directors
Board independence percentage
55.1
57.9
9.4
7. 8
20.4
17.8
Strategic report
Annual Report and Financial Statements 2024
44
Ownership
What it is – The table below highlights the range and
concentrations of different ownership structures
held within the public companies in the portfolio.
An explanation of the definitions is included below
the table. Data for 13 companies is missing so the
totals showing for the Company only add up to
80.2%.
What does the data tell us – Whereas the index is
heavily invested in state-owned enterprises, nearly
two-thirds of our portfolio is invested in companies
that are founder or family owned. This can be
important for many reasons, including allowing
companies to take decisions against the grain of
short term demands of many market participants. It
often takes influential and visionary leadership,
backed by aligned and patient shareholders, for a
company to spearhead disruptive change while
remaining focused on its long-term mission.
However, the data doesn’t tell us about the founder’s
other business activities, the depth of the management
team, or attitudes towards shareholder rights and
other stakeholders. Our focus is therefore on the
fundamental research and ongoing engagement to
determine what works in practice for each company.
Compared with last year, one noticeable difference
is a relative increase in the percentage of controlled
companies. This is due to a higher availability of
company data.
Owner Type
Index
%
Company
%
Controlled 24.3 9.1
Principal 10.8 5.5
Founder firm 46.6 58.1
Family firm 2.6 5.8
Widely held 1.3 1.7
Controlled
A Controlled company is one where the largest
shareholder or shareholder group holds 30% or
more of the voting rights.
Principal shareholder
A company with a Principal shareholder is one where
the largest shareholder or shareholder group holds
between 10% and 30% of the voting rights.
Founder firm
Founder serves as Chairman or CEO or retains
significant influence at the company.
Family firm
Family holds 10% or more of the voting rights and
maintains at least one board seat.
Widely held
A widely held company has no identified shareholder
or shareholder group holding greater than 10% of
the voting rights.
UN Global Compact Alignment
What it is – This indicator uses company alignment
with the ten UN Global Compact (‘UNGC’) Principles
as a proxy for social performance and exposure
to corporate controversies, which can be found at
unglobalcompact.org/what-is-gc/mission/principles.
The chart shows the percentage of the portfolio
assessed by a third party data provider as ‘compliant’.
What does the data tell us – The data suggests that
the majority of holdings are compliant and conduct
themselves responsibly in regard to society and the
planet. One is assessed as non-compliant by a third
party and one is on the watchlist. There is no data
for two of our holdings (10.5% of the portfolio).
Zijin Mining remains on the data providers’
watchlist and it is also on another third party’s
non-compliance list. We have laid out a 3-year
engagement plan. During the reporting period,
we engaged with the company on its approach to
human rights, community relations building, and
environmental topics. Our ESG analysts have paid
in-person visits to its operations in Xinjiang and to
its Shanghang headquarters and spoke with the
director who oversees ESG.
Li-Ning successfully left the watchlist and was
reassessed as compliant following strengthened
disclosure and enhanced conversation with the
third party as we suggested. It was a reminder of
the limitations of data providers and the importance
of filling the information gap which both companies
and investors should make efforts to do.
Tencent remains non-compliant on a third party
list with Principle 2 of the UN Global Compact for
allegations of complicity in human rights abuses. Our
research and engagement lead us to conclude that
the company is taking action to the greatest extent
possible to comply with domestic legislation while
also attempting to comply with international norms.
We keep an annual ESG dialogue with Tencent
and will continue to keep this on our watchlist for
enhanced due diligence.
45
Baillie Gifford China Growth Trust plc
Our expectation for all companies we hold is that
they will respect internationally accepted human
rights and labour rights throughout their business
operations and value chain. This includes the
management of exposure to labour and human rights
risks and encouraging positive relationships with
local communities.
Passed UN Global Compact Compliance
78.9
86.3
●
Company ● Index
0%
20%
100%
80%
60%
40%
Carbon performance
Addressing climate change is one of the most
significant challenges of our time. From shifting
weather patterns that threaten food production
and disrupt supply chains, to rising sea levels that
increase the risk of catastrophic flooding, the
impacts of climate change are global in scope and
unprecedented in scale. Growing societal pressure
and regulatory action are combining with the
physical impacts of climate change to create new
risks and opportunities for companies. As long-
term investors, we must take cognisance of these
to understand the implications for long-term value
creation.
What it is – Carbon footprint analysis identifies
the largest direct emitters and helps to prioritise
research and engagement activities. The relative
carbon footprint compares the total
carbon emissions of the portfolio with the index
per US$1 million invested. Weighted Average
Carbon Intensity is the sum product of the
portfolio constituent weights and intensities of
Carbon Intensity (the total carbon emissions per
US$1 million of revenue generated and shows the
efficiency of the portfolio in terms of emissions per
unit of financial output). These intensity measures
allow comparison of emissions across companies
of different sizes and in different industries. We
recognise that carbon footprinting and emissions
intensity analysis is imperfect. Beyond simple
concerns about data accuracy and availability, this
analysis can only tell us where a company is – not
where it is going. This is why we see it as a starting
point and not the end.
Scope 1 emissions are those deriving directly from
company activities (i.e. stack emissions and fuel
use); Scope 2 emissions arise indirectly as a result
of electricity use. Emissions within these scopes are
reasonably under the control of the company and
can be expected to be calculated by all companies.
We are continuing to engage with companies and
research providers on the availability, comparability
and robustness of Scope 3 emissions – those
that result from activities of assets not owned or
controlled by the reporting organisation, but that the
organisation indirectly impacts in its value chain.
What does the data tell us – The data demonstrates
lower carbon intensity and relative carbon than the
index (MSCI China All Share). The Weighted Average
Carbon Intensity tCO2e/US$ million revenue for
Scope 1, 2 and those material Scope 3 emissions are
also below the benchmark. In terms of top emission
contributors of the portfolio, we have seen a big
change in top emitters. This is mainly due to the
expanding coverage of Scope 3 emissions in our
reporting.
Scope 1, 2 & Material Scope 3
(PCAF)
Scope 1&2
0
200
800
600
400
21.5
170.8
262.3
636.3
Scope 1, 2 & Material Scope 3
(PCAF)
Scope 1&2
●
Company ● Index
0
200
1,000
800
600
400
60.1
280.1
482.5
842.3
Carbon footprint (tCO2e/US$ million invested)
Weighted average carbon intensity
(tCO2e/US$ million revenue)
Strategic report
Annual Report and Financial Statements 2024
46
We added an additional category of ‘material’
Scope 3 emissions to our reporting in line with the
recommendations of the Partnership for Carbon
Accounting Financials (‘PCAF’). Material Scope 3
emissions are the Scope 3 emissions from entities
operating in certain sectors where such emissions
are particularly significant. In the prior year’s
report this covered the oil and gas and mining
sectors, however for this report it also includes the
transportation, construction, buildings, materials
and industrial activities sectors, per PCAF guidance.
Material Scope 3 emissions are therefore very likely
to be higher for current year compared to the prior
year.
ESG: It’s case-by-case
We believe that governance really matters with
respect to long-term investment performance. Good
governance is linked to good environmental and
social performance. Our ongoing assessment of
corporate governance issues may change our view
on buying, selling or resizing our clients’ holdings. It
also determines how we choose to vote at company
meetings and how we engage with management, the
two principal levers we have for influencing change.
Just as there is no universally ‘right’ way to invest
in the stock market, or to manage a pension fund,
there is no ‘one-size-fits-all’ step-by-step approach
to corporate governance. We are open minded about
what is the most appropriate way to govern and
manage a company, and we are pragmatic about the
significant differences in what is expected and the
options available to companies across the world.
The following three examples highlight our approach
to engagement.
Box 2
Supporting the battery manufacturing champion – Contemporary Amperex Technology Co, Ltd (‘CATL’)
CATL is a champion in power battery systems, energy storage batteries, and battery materials. It is now
the world’s largest battery maker with about 38% of the global market share and it has a broad range of
business relationships globally including major automotive OEMs.
Our engagement with CATL strengthened in 2023. As one of the two long-term investors being invited, we
went on a site visit to CATL’s zero carbon factory located in Yibin, Sichuan with a group of suppliers to learn
more about the company’s decarbonization strategy and progress towards its carbon neutrality goal of 2025
on core operations and of 2035 across value chains. CATL also recently formed a team under the Board
Director Office to liaise with institutional investment managers. Through this connection, we are able to
explain our investment philosophy and the way we integrate ESG into investment, ask questions, and share
our expectations on CATL’s ESG plan and disclosure in more detail. We value the important role CATL plays
in leading the battery manufacturing industry in terms of decarbonisation and supply chain due diligence.
Its potential impact on formulating the global rules on the battery passport sitting on the board of the Global
Battery Alliance would be significant. We are proud to support the company alongside the sustainable
journey and contribute to the energy transition.
Topics to further monitor and improve include its near-term renewable energy expansion in its power supply
to meet the approaching timeline of carbon neutrality, higher transparency of the CREDIT
* programme
launched in 2022 aiming at supplier auditing, and the measures to secure board stability. We will continue to
discuss these topics with the company.
* CREDIT stands for carbon footprint, recycling, energy, due diligence, innovation and transparency
47
Baillie Gifford China Growth Trust plc
Box 3
Continuing to engage on social and environmental performance – Zijin Mining
Zijin Mining is a large state-owned metals and mining company. The historic focus has been on gold,
but the recent two areas Zijin emphasised as crucial for their growth and societal contribution are copper
and lithium, key to energy transition and storage.
Following email exchanges and online meetings in 2022, we conducted field trips to two of Zijin’s domestic
operation sites and further strengthened our dialogue with the company in 2023. During the visit to
Zijin Ashele copper mine in Xinjiang, we got the chance to speak with the employees and residents in
surrounding communities to gain a first-hand impression of the company’s employment and community
relations building in practice. The company confirmed its employment base in Xinjiang and reassured the
investors with their strong commitments to no forced labour and open recruitment. The staff are composed
of Han, Kazaks, and Hui people. Safety measures in Ashele have been recommended by the China
Occupational Safety and Health Association to other mining organisations in the country.
We met the management in Shanghang, Fujian province, where Zijin was established and is headquartered.
We had a visit to the open pit of the Zijinshan gold and copper mine which now serves as a model and
demonstration site well known for its green practices like the recovery and rehabilitation of land while
developing. We had an in-depth conversation with the group director who oversees ESG and discussed
topics on environmental protection and social practices. He emphasised that Zijin complies with the stricter
regulations and standards of the PRC and countries of operation. On the group level, Zijin is reviewing
subsidiary companies, engaging with a wider range of stakeholders, building internal capacity on human
rights due diligence specifically, and auditing to international standards.
The onsite visits and face-to-face exchanges further build up our convictions that the company keeps
improving and that the direction of travel is positive. We decided to close some of our engagement
objectives as having been achieved but will continue to follow-up. The engagement focus will incline
to Zijin’s domestic decarbonisation pathway and human rights issues in overseas operations.
Strategic report
Annual Report and Financial Statements 2024
48
Box 4
Establishing an internal watchlist based on our own in-house research and engagement – Tencent
Tencent was deemed to be UNGC non-compliant by a data provider with UN Global Compact Principle 2 in Q4
2022. An increase in media reports accusing the company of engaging in censorship and surveillance of its
users on behalf of the Chinese government drove the change. We engaged with the company shortly after the
assessment and continued to follow up on the company’s approaches to data access and privacy in our annual
ESG meetings. Meanwhile, we expanded our own research by commissioning a study by leading human rights
theorist Professor Jack Donnelly at the University of Denver, to assist us in assessing complex human rights
cases such as Tencent. To enhance our analysis further, we invited another distinguished academic with deep
expertise in the UN process, as well as a leading university research institute, to provide us with additional
independent challenge and insight.
The company states that they respond to valid legal requests across all jurisdictions where they offer products
and services. The veracity of third party requests is reviewed internally. The legal department reviews all court
orders to ensure compliance with local laws and regulations. In addition to public disclosure, we inquired if
the company had ever turned down government requests for the protection of user data. The answer was
yes, but no percent or examples could be disclosed. We highly suggest more transparency on this front, but
we also think it is fair to argue that Tencent has displayed the necessary policies and internal procedures to
demonstrate compliance regarding data governance and privacy to meet UN Global Compact Standards.
Since China released two data protection laws, Tencent has updated its product interfaces, data policies and
mechanisms, and evolved technologies. A new data security management task force has been established to
execute and coordinate across the groups. Recognising the company is taking action to the greatest extent
possible to comply with domestic legislation while also attempting to align with international norms, we
proposed to place it on our internal UNGC watchlist and would continue to monitor any data-related measures
and disclosure.
We also make sure that Tencent’s positive contributions to SME development, innovative technologies
improving the power usage effectiveness and ethnic designs in gaming are not overshadowed by the UNGC
compliance challenge. Embracing the bright sides are equally important as managing the downside risks.
49
Baillie Gifford China Growth Trust plc
Baillie Gifford –
proxy voting
How are we voting?
Thoughtful voting of our clients’ holdings is an integral
part of our commitment to stewardship. We believe
that voting should be investment led, because how we
vote is an important part of the long-term investment
process, which is why our strong preference is to be
given this responsibility by our clients. The ability to vote
our clients’ share also strengthens our position when
engaging with investee companies.
We look for high quality management teams and
governance structures supportive of long-term
investment opportunities. The graph on the right shows
our voting for the Baillie Gifford China Growth Trust in
the reporting period. It is no surprise that as long-term
owners, seeking to invest in a relatively small number
of exceptional companies, we are generally supportive
of management. Where we disagree or where our
engagement has been unsuccessful, there are cases
where we will vote against management. For example,
during the reporting period, we opposed the nomination
of an independent director who was involved in past
controversies and criticized by the Shanghai Stock
Exchange recently. We find it concerning that he would
be joining the board as an Audit Committee Chair, the
most important role at the core committees.
Our central voting team is also in the process of
updating our General Principles and market-based
guides for voting, which will serve as a living reference
document to all things related to proxy voting. The
jurisdiction sheets will capture market-specific context
and reflect the latest regulations of each market.
The data
All data is pulled from MSCI, Sustainalytics, ISS
and BoardEx, via the Factset platform along with some
internal sources. It is fact checked by our ESG analysts
and is considered correct at the time of writing. The
data covers the calendar year 2023.
For more detail, please see bailliegifford.com/en/uk/
about-us/ literature-library/miscellaneous/investment-
stewardshipactivities-report/
Baillie Gifford China Growth Trust
proxy voting record 2023
% Votes
Votes for 95 1,148
Votes against 3 36
Abstain 2 24
No Vote 0 0
Total 100 1,208
Source: MSCI. MSCI makes no express or implied
warranties or representations and shall have no
liability whatsoever with respect to any MSCI
data contained herein. The MSCI data may not be
further redistributed or used as a basis for other
indexes or any securities or financial products.
This report is not approved, endorsed, reviewed
or produced by MSCI. None of the MSCI data
is intended to constitute investment advice
or a recommendation to make (or refrain from
making) any kind of investment decision and may
not be relied on as such.
Strategic report
Annual Report and Financial Statements 2024
50
Baillie Gifford –
statement on stewardship
Baillie Gifford’s overarching ethos is that we are
‘Actual’ investors. That means we seek to invest
for the long term. Our role as an engaged owner
is core to our mission to be effective stewards
for our clients. As an active manager, we invest in
companies at different stages of their evolution
across many industries and geographies, and focus
on their unique circumstances and opportunities.
Our approach favours a small number of simple
principles rather than overly prescriptive policies.
This helps shape our interactions with holdings
and ensures our investment teams have the
freedom and retain the responsibility to act in
clients’ best interests.
Long-term value creation
We believe that companies that are run for the
long term are more likely to be better investments
over our clients’ time horizons. We encourage our
holdings to be ambitious, focusing on long-term
value creation and capital deployment for growth.
We know events will not always run according to
plan. In these instances we expect management
to act deliberately and to provide appropriate
transparency. We think helping management to
resist short-term demands from shareholders often
protects returns. We regard it as our responsibility to
encourage holdings away from destructive financial
engineering towards activities that create genuine
value over the long run. Our value will often be in
supporting management when others don’t.
Alignment in vision and practice
Alignment is at the heart of our stewardship
approach. We seek the fair and equitable treatment
of all shareholders alongside the interests of
management. While assessing alignment with
management often comes down to intangible factors
and an understanding built over time, we look for
clear evidence of alignment in everything from
capital allocation decisions in moments of stress
to the details of executive remuneration plans and
committed share ownership. We expect companies
to deepen alignment with us, rather than weaken it,
where the opportunity presents itself.
51
Baillie Gifford China Growth Trust plc
Governance fit for purpose
Corporate governance is a combination of structures
and behaviours; a careful balance between systems,
processes and people. Good governance is the
essential foundation for long-term company
success. We firmly believe that there is no single
governance model that delivers the best long-term
outcomes. We therefore strive to push back against
one-dimensional global governance principles in
favour of a deep understanding of each company
we invest in. We look, very simply, for structures,
people and processes which we think can maximise
the likelihood of long-term success. We expect to
trust the boards and management teams of the
companies we select, but demand accountability
if that trust is broken.
Sustainable business practices
A company’s ability to grow and generate value for
our clients relies on a network of interdependencies
between the company and the economy, society and
environment in which it operates. We expect holdings
to consider how their actions impact and rely on these
relationships. We believe long-term success depends
on maintaining a social licence to operate and look
for holdings to work within the spirit and not just the
letter of the laws and regulations that govern them.
Material factors should be addressed at the board
level as appropriate.
Strategic report
Annual Report and Financial Statements 2024
52
We aim to hold our private company investments
at ‘fair value’ i.e. the price that would be paid in an
open-market transaction. Valuations are adjusted
both during regular valuation cycles and on an
ad hoc basis in response to ‘trigger events’.
Our valuation process ensures that private companies
are valued in both a fair and timely manner.
The valuation process is overseen by a valuations
committee at Baillie Gifford which takes advice
from an independent third party (S&P Global).
The portfolio managers feed into the process,
but the valuations committee owns the process and
the portfolio managers only receive final valuation
notifications once they have been applied.
We revalue the private holdings on a three-month
rolling cycle, with one-third of the holdings
reassessed each month. For investment trusts,
the prices are also reviewed twice per year by the
respective investment trust boards and are subject
to the scrutiny of external auditors in the annual
audit process.
Continued market volatility has meant that recent
pricing has moved much more frequently than would
have been the case with the quarterly valuations
cycle. Beyond the regular cycle, the valuations team
also monitors the portfolio for certain ‘trigger events’.
These may include: changes in fundamentals; a
takeover approach; an intention to carry out an initial
public offering; or changes to the valuation of
comparable public companies. The valuations team
also monitors relevant market indices on a weekly
basis and updates valuations in a manner consistent
with our external valuer’s (S&P Global) most recent
valuation report where appropriate. When market
volatility is particularly pronounced the team do
these checks daily. Any ad hoc change to the fair
valuation of any holding is implemented swiftly and
reflected in the next published net asset value. There
is no delay.
More information specific to the valuation
of ByteDance, the unlisted holding held by
Baillie Gifford China Growth Trust can be
found in note 9, on page 104.
The Independent Auditor’s report on page 89
explains the procedures carried out by the external
Auditor on the private companies (unquoted
investments) as part of their audit.
Baillie Gifford – valuing
private companies
53
Baillie Gifford China Growth Trust plc
Strategic report
Annual Report and Financial Statements 2024
54
Name Business
Value
£’000
% of total
assets
ByteDance
Social media and entertainment company 10,551 8.4
Tencent Social media and entertainment company 9,330 7. 4
Alibaba Group Online retailer, payments and cloud business 9,249 7. 4
Kweichow Moutai Luxury baijiu maker 7,447 5.9
China Merchants Bank Consumer lending and wealth management 4,133 3.3
Zijin Mining Group Renewable energy enabler 3,969 3.2
Ping An Insurance Life and health insurance 3,741 3.0
NetEase Gaming and entertainment business 3,220 2.6
Zhejiang Sanhua Intelligent Controls Heating and cooling component manufacturer 3,202 2.6
Midea Group White goods and robotics manufacturer 3,077 2.5
BeiGene Immunotherapy biotechnology company 2,811 2.2
Meituan Online food delivery company 2,759 2.2
Weichai Power Construction machinery and heavy duty trucks 2,756 2.2
Fuyao Glass Industry Group Automotive glass manufacturer 2,550 2.0
PROYA Cosmetics and personal care company 2,527 2.0
PDD Holdings Broadline retail 2,354 1.9
Shenzhou International Garment manufacturer 2,290 1.8
CATL Electric vehicle battery maker 2,263 1.8
ENN Energy Gas distributor and provider 2,138 1.7
Silergy Semiconductors and semiconductor equipment 2,118 1.7
Shandong Sinocera Functional Material Advanced materials manufacturer 2,044 1.6
Centre Testing International Electrical components and equipment 1,953 1.6
Guangzhou Kingmed Diagnostics Diagnostics company 1,933 1.5
Shenzhen Inovance Technology Factory automation company 1,850 1.5
Brilliance China Automotive Automotive makers and BMW partner 1,784 1.4
Shenzhen Megmeet Electrical Power electronics manufacturer 1,764 1.4
KE Holdings* Online real estate 1,726 1.4
List of
investments
at 31 January 2024
55
Baillie Gifford China Growth Trust plc
Name Business
Value
£’000
% of total
assets
Anker Innovations Technology hardware, storage and peripherals 1,721 1.4
Ping An Bank SME and consumer lender 1,714 1.4
Li-Ning Domestic sportswear manufacturer 1,594 1.3
HUAYU Automotive Systems Automotive parts manufacturer 1,556 1.2
Estun Automation Robotics and factory automation company 1,438 1.1
BYD Automobiles 1,312 1.0
SG Micro Corp Semiconductor designer 1,208 1.0
Yifeng Pharmacy Chain Drug retailer 1,162 0.9
Yonyou Network Technology Software for SMEs and corporates 1,141 0.9
Sinocare Diagnostics and diabetes company 1,124 0.9
Asymchem Laboratories (Tianjin) Life sciences contract research organisation 1,074 0.9
Kingdee International Software Software for SMEs and corporates 1,058 0.8
Robam Appliances White goods manufacturer 1,037 0.8
Sungrow Power Supply Component supplier to renewables industry 944 0.8
WuXi AppTec Life sciences contract research organisation 922 0.7
Sunny Optical Technology Electronic components for smartphones and autos 909 0.7
LONGi Solar energy provider 830 0.7
Kingsoft Software for SMEs and corporates 815 0.7
Pop Mart Toy and collectibles maker 811 0.6
Minth Automotive parts manufacturer 800 0.6
JD.com Online retailer 797 0.6
Glodon Software provider to the construction industry 654 0.5
Jiangsu Azure Air freight and logistics 629 0.5
Beijing United Information Tec Industrial ecommerce platform 627 0.5
Topchoice Medical Dental services provider 588 0.5
Medlive Technology Medical dictionary and marketing organisation 574 0.5
Hua Medicine (Shanghai) Diabetes drug manufacturer 546 0.4
Strategic report
Annual Report and Financial Statements 2024
56
Name Business
Value
£’000
% of total
assets
New Horizon Health Early cancer detection 449 0.4
Dongguan Yiheda Automation Co Industrial machinery 443 0.4
Kinlong Building products 396 0.3
Yunnan Energy New Material Component supplier to renewables industry 339 0.3
Total investments 124,751 99.5
Net liquid assets
†
550 0.5
Total assets 125,301 100.0
Borrowings (5,890) (4.9)
Shareholders’ funds 119,411 95.1
Denotes unlisted holding (private company).
* Includes investments in American Depositary Receipts (‘ADRs’).
†
For a definition of terms used, see Glossary of terms and alternative performance measures on pages 126 to 128.
Listed
equities
%
Unlisted
securities
%
Net liquid
assets
%
Total
assets
%
31 January 2024 91.1 8.4 0.5 100.0
31 January 2023 94.0 5.7 0.3 100.0
Figures represent percentage of total assets.
57
Baillie Gifford China Growth Trust plc
Distribution
of total assets
*
Sector at 31 January 2024
* Total assets represents total net assets before deduction of borrowings.
3
4
5
8
10
7
2
6
1
Sector 2024
%
2023
%
1 Consumer discretionary 25 26
2 Communication
services
18 13
3 Consumer staples 9 7
4 Financials 8 10
5 Healthcare 8 11
6 Industrials 15 16
7 Information technology 8 9
8 Materials 5 5
9 Real estate 1 1
10 Utilities 2 2
11 Net liquid assets 1 Nil
Governance
report
This governance report, which includes
pages 59 to 83 outlines the Board’s
approach to the governance of your
Company. We believe that good governance
builds better outcomes and we are
committed to high standards of corporate
governance and transparency.
59
Baillie Gifford China Growth Trust plc
Directors and
management
Susan Platts-Martin
Chair
Appointed 2014
Tim Clissold
Director
Appointed 2021
Susan Platts-Martin brings to the Board considerable
knowledge of investment companies and investment
management generally. Susan spent 26 years in
a broad range of roles at Fidelity International,
including several years as the head of investment
trusts. She is a qualified chartered accountant and
currently sits on the board of BlackRock Smaller
Companies Trust plc.
Tim Clissold qualified as a Chartered Accountant and
has worked in Australia, Hong Kong and extensively
in China, where he was co-founder of one of the
first private equity groups in the country. He later
ran Goldman Sachs China’s distressed investment
business in Beijing. He co-founded another business
to originate UN carbon offsets from GHG emission
reduction projects in China. Tim is chief resolution
officer at Peony Advisors Limited, a company which
helps foreign investors recover value after being
disenfranchised by Chinese companies and is a
non-executive director of Henderson Far East
Income Limited. He was a member of the Strategic
Advisory Board of Braemar Energy Ventures, a
New York venture capital fund focused on energy
efficiency technologies. He is the author of Mr China
and Chinese Rules and speaks, reads and writes
Mandarin Chinese.
Directors
Governance report
Annual Report and Financial Statements 2024
60
Nicholas Pink
Director
Appointed 2023
Nicholas Pink has extensive senior management
experience in financial services with previous roles
at UBS Investment Bank including Global Head of
Research and Head of Asia Research. Nicholas is
currently the Senior Independent Director of Ruffer
Investment Company Limited and non-executive
director of JP Morgan Emerging Europe, Middle
East and Africa Securities plc. He was previously an
independent director of Redburn (Europe) Limited.
Jonathan Silver is a qualified accountant and
member of the Institute of Chartered Accountants of
Scotland. Jonathan has held various senior financial
positions throughout his career, including 21 years
as Chief Financial Officer on the main Board of Laird
plc from 1994 until 2015. Jonathan was the
chairman of the audit committee at Invesco Income
and Growth Trust plc from 2007 until 2021.
Jonathan is a non-executive director and chairman
of the audit and risk committee of Henderson High
Income Trust plc, a position he has held since 2019
and is also a non-executive director and chairman of
the audit committee of Spirent Communications plc,
a position he has held since 2015. Since 2017
Jonathan has been a non-executive director of
East and North Hertfordshire NHS Trust.
Jonathan Silver
Audit Committee
Chair
Appointed 2022
All of the Directors are members of the Audit Committee.
Magdalene Miller
Director
Appointed 2020
Magdalene Miller is a former investment director with
Aberdeen Standard Investments’ global emerging
market team. Based in London and Edinburgh, she
spent 32 years managing listed equity portfolios,
investing in Japanese, Asian Pacific and UK markets.
In the 10 years before her retirement in 2018, she
ran the Standard Life China Sicav, one of the top
performing funds in its sector. A native of Hong Kong,
Magdalene is fluent in Cantonese and Mandarin
and has travelled extensively in China and Asia over
the course of her career. She is a non-executive
director of Templeton Emerging Markets Investment
Trust plc. She also currently serves as a trustee for
an educational endowment fund and participates in
volunteering work.
61
Baillie Gifford China Growth Trust plc
Managers and secretaries
The Company has appointed Baillie Gifford & Co
Limited, a wholly owned subsidiary of Baillie Gifford
& Co, as its Alternative Investment Fund Managers
(‘AIFM’) and Company Secretary. Baillie Gifford
& Co Limited has delegated investment management
services to Baillie Gifford & Co. Baillie Gifford & Co
is an investment management firm formed in 1927
out of the legal firm Baillie Gifford, WS, which had
been involved in investment management since 1908.
Baillie Gifford is one of the largest investment trust
managers in the UK and currently manages twelve
investment trusts. Baillie Gifford also manages
unit trusts and open ended investment companies,
together with investment portfolios on behalf of
pension funds, charities and other institutional
clients, both in the UK and overseas. Funds under
the management or advice of Baillie Gifford totalled
around £230 billion as at 1 April 2024. Based in
Edinburgh, it is one of the leading privately owned
investment management firms in the UK,
with 57 partners and a staff of around 1,760.
During the year ended 31 January 2024, the
Managers of Baillie Gifford China Growth Trust were
Roderick Snell and Sophie Earnshaw. With effect
from 1 February 2024 Linda Lin replaced Roderick
Snell as portfolio manager.
Roderick joined Baillie Gifford in 2006 and became
a partner of the firm in 2023 and is an investment
manager in the Emerging Markets Equity Team. He
has managed the Baillie Gifford Pacific Fund since
2010 and has been Manager of Pacific Horizon
Investment Trust since 2021 (he was deputy from
2013). Since March 2020, he has also been a
manager on the China strategy. He spent time
in the UK and European Equity teams prior to
joining the Emerging Markets Equity Team in 2008.
Roderick graduated BSc (Hons) in Medical Biology
from the University of Edinburgh in 2006.
Sophie joined Baillie Gifford in 2010 and is an
investment manager in the Emerging Markets
and China A-share Teams. She has also been
co-manager of the China Fund and a member
of the International Focus Portfolio Construction
Group since 2014.
Sophie is a CFA Charter holder. She graduated
MA in English Literature from the University of
Edinburgh in 2008 and MPhil in Eighteenth Century
and Romantic Literature from the University of
Cambridge in 2009.
Linda is an investment manager in the China Equities
team and a decision maker on Baillie Gifford’s All
China and China A share strategies. She is also
a member of the Long Term Global Growth team.
Linda joined Baillie Gifford in September 2014 and
worked in Edinburgh until relocating to Shanghai
in 2019 as Head of the Investment Team. She
became a partner of the firm in May 2022 and is
now based in Edinburgh. Prior to joining Baillie
Gifford, Linda spent four years as a global equity
analyst with Aubrey Capital and two years in real
estate investment in China. She graduated BComm
in Accounting and Finance from the University of
Auckland, New Zealand in 2007 and MSc in Finance
and Investment from the University of Edinburgh in
2011. Linda is a native Mandarin speaker.
Baillie Gifford & Co and Baillie Gifford & Co Limited
are both authorised and regulated by the Financial
Conduct Authority.
Roderick Snell
Investment Manager
Sophie Earnshaw
Investment Manager
Linda Lin
Investment Manager
Governance report
Annual Report and Financial Statements 2024
62
The Directors present their
Report together with the audited
Financial Statements of the
Company for the year to
31 January 2024.
Directors’
report
Corporate governance
The Corporate governance report is set out on pages
68 to 74 and forms part of this Report.
Managers and company secretaries
Baillie Gifford & Co Limited, a wholly owned
subsidiary of Baillie Gifford & Co, was appointed
as the Company’s Alternative Investment Fund
Managers (‘AIFM’) and Company Secretaries on
16 September 2020. Baillie Gifford & Co Limited
has delegated portfolio management services to
Baillie Gifford & Co. Dealing activity and transaction
reporting has been further sub-delegated to Baillie
Gifford Overseas Limited and Baillie Gifford Asia
(Hong Kong) Limited.
The Investment Management Agreement between
the AIFM and the Company sets out the matters over
which the Managers have authority in accordance
with the policies and directions of, and subject to
restrictions imposed by, the Board. The Investment
Management Agreement is terminable on not less
than three months’ notice or on shorter notice in
certain circumstances. Compensation would only
be payable if termination occurred prior to the expiry
of the notice period. The annual management fee
is (i) 0.75% of the first £50 million of net asset
value; plus (ii) 0.65% of net asset value between
£50 million and £250 million; plus (iii) 0.55% of net
asset value in excess of £250 million, calculated and
payable quarterly.
63
Baillie Gifford China Growth Trust plc
The Board considers the Company’s investment
management and secretarial arrangements on an
ongoing basis and a formal review is conducted
annually. The Board considered, amongst others,
the following topics in its review: the quality of the
personnel assigned to handle the Company’s affairs;
the investment process and the results achieved to
date; investment performance; the administrative
services provided by the Secretaries and the quality
of information provided; the marketing efforts
undertaken by the Managers; the relationship with
the Managers; and comparative peer group charges
and fees.
Following the most recent review, the Board
concluded that the continuing appointment of Baillie
Gifford & Co Limited as AIFM and the delegation of
investment management services to Baillie Gifford
& Co, on the terms agreed, is in the interests of
shareholders as a whole.
Depositary
In accordance with the UK Alternative Investment
Fund Managers Regulations, The Bank of New York
Mellon (International) Limited has been appointed
as Depositary to the Company. The Depositary’s
responsibilities include cash monitoring, safe
keeping of the Company’s financial instruments,
verifying ownership and maintaining a record
of other assets and monitoring the Company’s
compliance with investment limits and leverage
requirements. Custody services are provided by
The Bank of New York Mellon (International) Limited
(as a delegate of the Depositary) (the ‘Custodian’).
Directors
Information about the Directors, including their
relevant experience, can be found on pages 59
and 60.
Nicholas Pink was appointed to the Board on
1 September 2023 and is required to seek election by
shareholders at the Annual General Meeting. Details
of his relevant skills and experience are provided on
page 60. Sarah MacAulay will be joining the Board on
1 May 2024 and is also required to seek election by
shareholders at the Annual General Meeting. Details
on her relevant skills and experience are provided on
page 70. All other Directors will retire at the Annual
General Meeting and offer themselves for re-election
with the exception of Susan Platts-Martin who will
stand down from the Board on 30 April 2024. As
noted in the Chair’s statement on page 9 Nicholas
Pink will become Chair on Susan Platts-Martin’s
retiral. Following a formal performance evaluation,
the Chair confirms that the Board considers that
each Director’s performance continues to be
effective and that each Director remains committed
to the Company and capable of devoting sufficient
time to their roles. The Board recommends their
re-election to shareholders.
Director indemnification and insurance
To the extent permitted by law and by the Company’s
Articles, the Company has entered into deeds of
indemnity for the benefit of each Director of the
Company in respect of liabilities which may attach to
them in their capacity as Directors of the Company.
These provisions, which are qualifying third party
indemnity provisions as defined by section 234 of
the Companies Act 2006, were in place throughout
the year and as at the date of approval of the
Financial Statements.
The Company maintains Directors’ and Officers’
Liability Insurance.
Governance report
Annual Report and Financial Statements 2024
64
Conflicts of interest
Each Director submits a list of potential conflicts of
interest to the Board for consideration and approval
at each meeting. The Board considers these
carefully, taking into account the circumstances
surrounding them prior to authorisation. Having
considered the lists of potential conflicts there were
no situations which gave rise to a direct or indirect
interest of a Director which conflicted with the
interests of the Company.
Dividends
The Board recommends a final dividend of 2.00p
per ordinary share (2023 – 1.70p). No interim
dividend was declared (2023 – nil). Dividends will
be by way of a final dividend and be not less than
the minimum required for the Company to maintain
its investment trust status.
If approved by shareholders at the Annual General
Meeting, the recommended final dividend per ordinary
share will be paid on 24 July 2024 to shareholders
on the register at the close of business on 21 June
2024. The ex-dividend date is 20 June 2024.
Share capital
Capital structure
The Company’s capital structure at 31 January
2024 consists of 68,348,151 ordinary shares of
25p each (2023 – 68,348,151) of which 61,852,282
(2023 – 62,012,982) are allotted and fully paid and
6,495,869 (2023 – 6,335,169) are held in treasury.
There are no restrictions concerning the holding or
transfer of the Company’s ordinary shares and there
are no special rights attached to any of the shares.
Dividends
The ordinary shares carry a right to receive
dividends. Interim dividends are determined by the
Directors, whereas the proposed final dividend is
subject to shareholder approval.
Capital entitlement
On a winding up, after meeting the liabilities of the
Company, the surplus assets will be paid to ordinary
shareholders in proportion to their shareholdings.
Voting
Each ordinary shareholder present in person or by
proxy is entitled to one vote on a show of hands and,
on a poll, to one vote for every share held.
Information on the deadlines for proxy appointments
can be found on pages 117 to 119.
Major interests disclosed in the Company’s shares
The Company has received notifications in
accordance with the Financial Conduct Authority’s
Disclosure and Transparency Rule 5.1.2R of the
following interests in 3% or more of the voting rights
attached to the Company’s issued share capital.
Name
Number of
ordinary 25p
shares held at
31 January 2024
% of
issue *
City of London Investment
Management
9,356,724 15.1
Rathbone Nominees 3,076,669 5.0
*
Ordinary shares in issue excluding treasury shares.
In the period from 31 January 2024 to 1 April 2024,
the Company was notified that City of London
Investment Management held 10,461,380 shares
(17.0% of the shares in issues as at 1 April 2024).
There have been no other changes to the major
interests in the Company’s shares intimated up to
1 April 2024.
Analysis of shareholders at 31 January
2024
Number of
shares held
2024
%
2023
Number of
shares held
2023
%
Institutions 14,871,063 24.0 9,577,929 15.5
Intermediaries/
Retail savings
platforms
42,555,981 68.8 47,207,778 76.1
Individuals 4,254,717 6.9 5,046,445 8.1
Marketmakers 170,521 0.3 180,830 0.3
61,852,282 100.0 62,012,982 100.0
65
Baillie Gifford China Growth Trust plc
Annual General Meeting
The details of this year’s AGM, including the
proposed resolutions and information on the
deadlines for proxy appointments, can be found on
pages 114 to 119. Shareholders who hold shares in
their own name on the main register will be provided
with a form of proxy. If you hold shares through a
share platform or other nominee, the Board would
encourage you to contact these organisations
directly as soon as possible to arrange for you to
vote at the AGM. The resolutions relating to the
renewal of the Directors’ authorities to issue and
buy back shares are explained in more detail below.
Share issuance authority
Resolution 11 in the Notice of Annual General
Meeting seeks to renew the Directors’ general
authority to issue shares up to an aggregate nominal
amount of £5,121,924. This amount represents one
third of the Company’s total ordinary share capital
currently in issue and meets institutional guidelines.
No issue of ordinary shares will be made pursuant
to the authorisation of Resolution 11 which would
effectively alter the control of the Company
without the prior approval of shareholders in
General Meeting.
Resolution 12, which is being proposed as a special
resolution, seeks to renew the Directors’ authority
to issue shares or sell shares held in treasury on a
non pre-emptive basis for cash up to an aggregate
nominal amount of £1,536,577 (representing 10%
of the issued ordinary share capital of the Company
as at 1 April 2024). This authority will continue until
the conclusion of the Annual General Meeting to be
held in 2025 or on the expiry of 15 months from the
passing of the resolution, if earlier. The authority
proposed to be granted by Resolution 12 will only be
used to issue shares or sell shares from treasury at,
or at a premium to, net asset value and only when
the Directors believe that it would be in the best
interests of the Company to do so.
During the year to 31 January 2024, the Company
did not issue any shares.
Market purchases of own shares
At the last Annual General Meeting the Company
was granted authority to purchase up to 9,295,746
ordinary shares (equivalent to 14.99% of its issued
share capital), such authority to expire at the 2024
Annual General Meeting. The Directors are seeking
shareholders’ approval at the Annual General
Meeting to renew the authority to make market
purchases up to 14.99% of the Company’s ordinary
shares in issue (excluding treasury shares) at the
date of passing of the resolution, such authority
to expire at the Annual General Meeting of the
Company to be held in 2025. Such purchases will
only be made at a discount to the prevailing net
asset value.
During the year to 31 January 2024, 160,700 shares
(2023 – no shares) were bought back under the
buy-back authority.
The Company may hold bought-back shares in
treasury and then:
i. sell such shares (or any of them) for cash (or its
equivalent under the Companies Act 2006); or
ii. cancel the shares (or any of them).
Shares will only be resold from treasury at a
premium to the net asset value per ordinary share.
Treasury shares do not receive distributions and the
Company will not be entitled to exercise the voting
rights attaching to them.
In accordance with the Listing Rules of the FCA,
the maximum price (excluding expenses) that may
be paid on the exercise of the authority must not
exceed the higher of:
i. 5% above the average closing price on the
London Stock Exchange of an ordinary share
over the five business days immediately
preceding the date of purchase; and
ii. an amount equal to the higher of the price of
the last independent trade of an ordinary share
and the highest current independent bid for an
ordinary share on the trading venue where the
purchase is carried out.
Governance report
Annual Report and Financial Statements 2024
66
The minimum price (exclusive of expenses) that
may be paid will be the nominal value of an ordinary
share. Purchases of ordinary shares will be made
within guidelines established, from time to time,
by the Board. Your attention is drawn to Resolution
13 in the Notice of Annual General Meeting.
This authority, if conferred, will only be exercised
if to do so would result in an increase in net
asset value per ordinary share for the remaining
shareholders and if it is considered in the best
interests of shareholders generally.
Articles of Association
The Company’s Articles of Association may only be
amended by special resolution at a general meeting
of shareholders.
Financial instruments
The Company’s financial instruments comprise its
investment portfolio, cash balances, borrowings
and debtors and creditors that arise directly from
its operations such as sales and purchases awaiting
settlement and accrued income. The financial risk
management objectives and policies arising from
its financial instruments and the exposure of the
Company to risk are disclosed in note 18 to the
Financial Statements.
Disclosure of information to Auditor
The Directors confirm that, so far as each of
the Directors is aware, there is no relevant audit
information of which the Company’s Auditor is
unaware and the Directors have taken all the steps
that they might reasonably be expected to have
taken as Directors in order to make themselves
aware of any relevant audit information and to
establish that the Company’s Auditor is aware
of that information.
Independent Auditor
The Auditor, Ernst & Young LLP, is willing to
continue in office, and in accordance with section
489 and section 491(1) of the Companies Act 2006,
resolutions concerning Ernst & Young LLP’s
re-appointment and remuneration will be submitted
to the Annual General Meeting.
Post Balance sheet events
The Directors confirm that there have been no
significant post Balance sheet events which require
adjustment to, or disclosure in, the Financial
Statements or notes up to 2 April 2024.
Stakeholder engagement
Although the Company has no employees, trade
suppliers or customers, the Directors give regular
consideration to the need to foster the Company’s
business relationships with its stakeholders, in
particular with shareholders, its externally appointed
Managers, other professional service providers
and lenders. The effect of this consideration upon
the key decisions taken by the Company during
the financial year is set out in further detail in the
Strategic report on pages 39 to 41.
Greenhouse gas emissions and Streamlined
Energy & Carbon Reporting (‘SECR’)
All of the Company’s activities are outsourced
to third parties. The Company therefore has no
greenhouse gas emissions to report from its
operations, nor does it have responsibility for
any other emissions producing sources under
the Companies Act 2006 (Strategic Report and
Directors’ Reports) Regulations 2013. For the reason
set out above, the Company considers itself to be
a low energy user and has no energy and carbon
information to disclose under the SECR regulations.
Bribery Act
The Company has a zero tolerance policy towards
bribery and is committed to carrying out business
fairly, honestly and openly. The Managers also adopt
a zero tolerance approach and have policies and
procedures in place to prevent bribery.
Criminal Finances Act 2017
The Company has a commitment to zero tolerance
towards the criminal facilitation of tax evasion.
Recommendation
The Directors unanimously recommend you vote
in favour of the resolutions to be proposed at the
Annual General Meeting as it is their view that the
resolutions are in the best interests of shareholders
as a whole.
On behalf of the Board
Susan Platts-Martin
Chair
2 April 2024
67
Baillie Gifford China Growth Trust plc
Governance report
Annual Report and Financial Statements 2024
68
Compliance
The Board confirms that the Company has complied
throughout the year under review with the relevant
provisions of the UK Code and the recommendations
of the AIC Code. The Code includes provisions
relating to the role of the chief executive, executive
directors’ remuneration and the need for an internal
audit function.
Given that the Company is an externally-managed
investment trust, the Board considers these
provisions are not relevant to the Company (the need
for an internal audit function specific to the Company
has been addressed on page 77). Details of the
Board’s view on Directors who have served on the
Board for more than nine years can be found within
the Independence of Directors section of this report.
The FRC has confirmed that AIC member companies
who report against the AIC Code will be meeting
their obligations in relation to the UK Code (the AIC
Code can be found at theaic.co.uk).
The Board
The Board has overall responsibility for the
Company’s affairs. It has a number of matters
formally reserved for its approval including strategy,
investment policy, gearing, liquidity policy, treasury
matters, dividend and corporate governance policy.
The Board seeks to contribute to the delivery of the
Company’s strategy by engaging with the Managers
in a collaborative and collegiate manner with
open and respectful discussion and debate being
encouraged, whilst also ensuring that appropriate
and regular challenge is brought and evaluation is
conducted. The Board also reviews the Financial
Statements, investment transactions, revenue
budgets and performance of the Company. Full and
timely information is provided to the Board to enable
it to function effectively and to allow Directors to
discharge their responsibilities.
Corporate
governance report
The Board is committed to
achieving and demonstrating
high standards of Corporate
Governance. This statement
outlines how the principles of the
2018 UK Corporate Governance
Code (the ‘UK Code’) which
can be found at frc.org.uk and
the relevant principles of the
Association of Investment
Companies (‘AIC’) Code of
Corporate Governance (the ‘AIC
Code’) published in 2019 were
applied throughout the financial
year. The AIC Code provides a
framework of best practice
for investment companies
and can be found at theaic.co.uk.
69
Baillie Gifford China Growth Trust plc
Board of Directors
Comprises independent
non-executive directors
Chair: Susan Platts-Martin*
Senior Independent Director:
Magdalene Miller
Audit Committee
Chair: Jonathan Silver
Purpose: The primary purpose of the
Company’s Audit Committee is to provide
oversight of the financial reporting
process, the audit process, the Company’s
system of internal controls, compliance
with laws and regulations.
Nomination
Committee
Chair: Susan Platts-Martin*
Purpose: The main purpose of the
Nomination Committee is to oversee Board
recruitment and succession planning as
well as Board appraisals including
identifying training needs.
Third party service providers appointed
by the Board
Alternative Investment Fund Manager and Company Secretary:
Baillie Gifford & Co Limited
(wholly owned subsidiary of Baillie Gifford & Co)
Dealing activity and transaction reporting:
Baillie Gifford Overseas Limited and
Baillie Gifford Asia (Hong Kong) Limited
The Company does not have a
Management Engagement Committee,
the function of a Management
Engagement Committee is performed
by the Board. That function is to ensure
that the Managers remain suitable to
manage the portfolio, that the
management contract is competitive
and reasonable for the shareholders,
and that the Company maintains
appropriate administrative and company
secretarial support.
Ernst & Young LLP
Auditor
The Bank of
New York Mellon
(International) Limited
Depositary
Computershare
Investor Services
PLC
Registrar
JP Morgan
Cazenove
Company broker
*
Susan Platts-Martin will stand down from the Board on 30 April 2024 and Nicholas Pink will become Chair.
Governance report
Annual Report and Financial Statements 2024
70
The Board comprises five Directors, all of whom
are non-executive. The Chair is responsible for
organising the business of the Board, ensuring its
effectiveness and setting its agenda. The executive
responsibility for investment management has been
delegated to the Company’s Alternative Investment
Fund Manager (‘AIFM’), Baillie Gifford & Co Limited,
and, in the context of a Board comprising only
non-executive Directors, there is no chief executive
officer. The Senior Independent Director
is Magdalene Miller.
The Directors believe that the Board has a balance
of skills and experience that enables it to provide
effective strategic leadership and proper governance
of the Company. Information about the Directors,
including their relevant experience, can be found on
pages 59 to 60.
There is an agreed procedure for Directors to seek
independent professional advice, if necessary, at the
Company’s expense.
Appointments to the Board
As noted in the Chair’s Statement on page 9
during the year the Board undertook two separate
recruitment processes to appoint non-executive
Directors to the Board. Cornforth Consulting was
engaged on both occasions to help identify a
potential new Director. Cornforth Consulting has
no other connection with the Company or any of
the Directors. The Board identified the skills and
experience that would be required, having due
regard for the benefits of diversity on the Board, and
candidates were interviewed from a shortlist provided
by Cornforth Consulting.
Nicholas Pink was identified as the preferred
candidate in the first search and was appointed to
the Board on 1 September 2023 and his relevant
skills and experience are provided on page 60.
As explained in the Chair’s statement on page 9,
Susan Platts-Martin will retire from the Board on
30 April 2024 and Nicholas Pink will become Chair.
Sarah MacAulay was identified as the preferred
candidate during the second search and will
be joining the Board on 1 May 2024. Sarah is
an experienced investment trust director and
former portfolio manager with knowledge of the
Asian region.
The terms and conditions of Directors’ appointments
are set out in formal letters of appointment which are
available for inspection on request.
Under the provisions of the Company’s Articles
of Association, Directors are subject to election
by shareholders at the first AGM after their
appointment. Thereafter, all Directors will retire at
each AGM and, if appropriate, offer themselves for
re-election.
Independence of Directors
All the Directors are considered by the Board to
be independent of the Managers and free of any
business or other relationship which could interfere
with the exercise of their independent judgement.
The Directors recognise the importance of succession
planning for company boards and review the Board
composition annually. The Board is of the view that
length of service will not necessarily compromise
the independence or contribution of Directors of
an investment trust company, where continuity
and experience can be a benefit to the Board.
Meetings
There is an annual cycle of Board meetings which
is designed to address, in a systematic way, overall
strategy, review of Investment Policy, investment
performance, marketing, revenue budgets, dividend
policy and communication with shareholders. The
Board considers that it meets sufficiently regularly
to discharge its duties effectively. The table below
shows the attendance record for the Board and
Committee meetings held during the year. The
Annual General Meeting was attended by all
Directors serving at that date.
Directors’ attendance at meetings
Board
Nominations
Committee Strategy
Audit
Committee
Number of meetings 4 3 1 2
Susan Platts-Martin 4 3 1 2
Tim Clissold 4 3 1 2
Magdalene Miller 4 3 1 2
Nicholas Pink* 2 1 1 1
Andrew Robson
†
2 2 0 1
Jonathan Silver 4 3 1 2
* Appointed 1 September 2023.
† Retired 15 June 2023.
71
Baillie Gifford China Growth Trust plc
Policy on Board and Chair’s tenure
The Board’s policy is that all Directors, including
the Chair, shall normally have tenure limited to
nine years from their first appointment to the
Board. Exceptions may be made in exceptional
circumstances, particularly in respect of the Chair
for example to facilitate effective succession
planning or if the Company were in the middle
of a corporate action, when an extension may be
appropriate. However, the Board believes that long
serving Directors should not be prevented from
forming part of an independent majority and that the
length of a Director’s tenure does not necessarily
reduce his or her ability to act independently.
Performance evaluation
An appraisal of the Chair, each Director and a
performance evaluation and review of the Board
as a whole and the Audit Committee was carried
out during the year. Each Director and the Chair
responded to an evaluation questionnaire.
The Chair’s appraisal was led by Magdalene Miller,
the Senior Independent Director. The appraisals
and evaluations considered, amongst other criteria,
the balance of skills of the Board, training and
development requirements, the contribution of
individual Directors and the overall effectiveness
of the Board and the Audit Committee. Following
this process it was concluded that there was a
diverse range of skills within the Board, and the
performance of each Director, the Chair, the Board
and the Audit Committee continues to be effective
and that each Director and the Chair remain
committed to the Company.
A review of the Chair’s and the other Directors’
commitments was carried out and the Board is
satisfied that they are capable of devoting sufficient
time to the Company. There were no significant
changes to the Chair’s other commitments during
the year.
Diversity
Appointments to the Board are made on merit
and based on objective criteria, including the
promotion of diversity of gender, social and ethnic
backgrounds, and cognitive and personal strengths.
The priority in succession planning and appointing
new Directors is to identify candidates with the best
range of skills and experience to complement those
of the existing Directors, with a view to ensuring that
the Board remains well placed to help the Company
achieve its investment and governance objectives.
Board composition
In order to fulfil its obligations, the Board recognises
the importance of having a range of skilled and
experienced Directors, balancing the benefits of
length of service and knowledge of the Company
with the desirability of ensuring regular refreshment
of the Board. The Board reviews its composition
annually.
The following disclosures are provided in respect
of the FCA Listing Rules targets that: i) 40% of a
board should be women; ii) at least one senior role
should be held by a woman; and iii) at least one
board member should be from a non-white ethnic
background, as defined by the Office of National
Statistics criteria. As an externally managed
investment company with no chief executive officer
or chief financial officer, the roles which qualify as
senior under FCA guidance are Chair and Senior
Independent Director (‘SID’). The Board also
considers Audit Committee Chair to represent a
senior role within this context.
The Board has resolved that the Company’s year
end date be the most appropriate date for disclosure
purposes. There have been no changes since
31 January 2024.
Gender Number %
Senior
roles
*
Men 3 60% 1
Women 2 40% 2
Ethnic background Number %
Senior
roles
*
White British or Other White
(including minority white groups)
4 80%
2
Asian/Asian British 1 20% 1
* As an externally managed investment company with no chief executive
officer or chief financial officer, the roles which qualify as senior under
FCA guidance are Chair and Senior Independent Director (‘SID’). The
Chair is a woman and the SID a woman. The Board also considers the
role of Audit Committee Chair to represent a senior role within this
context and this role is performed by a man.
The Board meets the FCA Listing Rules diversity
targets that at least 40% of the individuals on
the Board are women, at least one of the senior
positions on the Board is held by a woman and that
there is at least one Director of an ethnic minority
background.
Governance report
Annual Report and Financial Statements 2024
72
All recruitment for new Board members will be
external, through the use of an external recruitment
agency. The recruitment agency will be engaged
to undertake the selection of a list of suitable
candidates for consideration and approval by the
Nominations Committee. The external recruitment
agency will be asked to put forward candidates
with the desired skillset and also with a diverse
range of backgrounds, cultures and identities.
The Nominations Committee will take the FCA
Listing Rule diversity targets and any other best
practice matters into account when determining
the appropriateness of a candidate and final
appointment.
Induction and training
New Directors are provided with an induction
programme which is tailored to the particular
circumstances of the appointee. Regular briefings
were provided during the year on industry and
regulatory matters. Directors receive other relevant
training as necessary.
Remuneration
As all the Directors are non-executive, there is
no requirement for a separate Remuneration
Committee. Directors’ fees are considered by the
Board as a whole within the limits approved by
shareholders with the Chair’s fees considered by the
Board in the absence of the Chair. The Company’s
policy on remuneration is set out in the Directors’
remuneration report on pages 78 to 81.
Management Engagement Committee
The Directors have considered that a separate
Management Engagement Committee is not required
given the small size of the Board.
Audit Committee
The report of the Audit Committee is set out on
pages 75 to 77.
Nomination Committee
The Nomination Committee consists of the whole
Board due to the small size of the Board. Ms Platts-
Martin is Chair of the Nomination Committee. The
Committee meets at least annually and at such
other times as may be required. The Committee has
written terms of reference that include reviewing
the Board, identifying and nominating new
candidates for appointment to the Board, Board
appraisal, succession planning and training. The
Committee also considers whether Directors should
be recommended for re-election by shareholders.
The Committee is also responsible for considering
Directors’ potential conflicts of interest and for
making recommendations to the Board on whether
or not the potential conflicts should be authorised.
The Committee’s terms of reference are available on
request from the Company and on the Company’s
website: bailliegiffordchinagrowthtrust.com
Internal controls and risk management
The Directors acknowledge their responsibility
for the Company’s risk management and
internal control systems and for reviewing their
effectiveness, including with regard to preparation
of the Company’s Annual Report and Financial
Statements. The systems are designed to manage
rather than eliminate the risk of failure to achieve
business objectives and can only provide reasonable
but not absolute assurance against material
misstatement or loss.
The Board confirms that there is an ongoing
process for identifying, evaluating and managing
the significant risks faced by the Company in
accordance with the FRC guidance ‘Guidance on
Risk Management, Internal Control and Related
Financial and Business Reporting’.
The practical measures in relation to the design,
implementation and maintenance of control policies
and procedures to safeguard the Company’s
assets and to manage its affairs properly, including
the maintenance of effective operational and
compliance controls have been delegated to the
Managers and Secretaries.
The Board oversees the functions delegated to the
Managers and Secretaries and the controls managed
by the AIFM in accordance with the UK Alternative
Investment Fund Managers Regulations (as detailed
below). Baillie Gifford & Co’s Internal Audit and
Compliance Departments and the AIFM’s permanent
risk function provide the Audit Committee with
regular reports on their monitoring programmes.
The reporting procedures for these departments
are defined and formalised within a service level
agreement. Baillie Gifford & Co conducts an annual
review of its system of internal controls which is
documented within an internal controls report which
complies with ISAE 3402 and Technical Release
AAF 01/06 – Assurance Reports on Internal Controls
of Service Organisations made available to Third
Parties. This report is independently reviewed
by Baillie Gifford & Co’s Auditor and a copy is
submitted to the Audit Committee.
73
Baillie Gifford China Growth Trust plc
A report identifying the material risks faced by the
Company and the key controls employed to manage
these risks is reviewed by the Audit Committee.
These procedures ensure that consideration is given
regularly to the nature and extent of risks facing the
Company and that they are being actively monitored.
Where changes in risk have been identified during
the year they also provide a mechanism to assess
whether further action is required to manage
these risks.
The Directors confirm that they have reviewed the
effectiveness of the Company’s risk management
and internal controls systems, which accord with
the FRC ‘Guidance on Risk Management, Internal
Control and Related Financial and Business
Reporting’ and they have procedures in place to
review their effectiveness on a regular basis. No
significant weaknesses were identified in the year
under review and up to the date of this report.
The Board confirms that these procedures have
been in place throughout the Company’s financial
year and continue to be in place up to the date of
approval of this report.
To comply with the UK Alternative Investment
Fund Managers Regulations, The Bank of New York
Mellon (International) Limited acts as the Company’s
Depositary and Baillie Gifford & Co Limited as its AIFM.
The Depositary’s responsibilities include cash
monitoring, safe keeping of the Company’s financial
instruments, verifying ownership and maintaining
a record of other assets and monitoring the
Company’s compliance with investment limits and
leverage requirements. The Depositary is liable for
the loss of financial instruments held in custody.
The Company’s Custodian is The Bank of New
York Mellon (International) Limited. The Custodian
prepares reports on its key controls and safeguards
which are independently reviewed by KPMG
LLP. The reports are reviewed by Baillie Gifford’s
Business Risk Department and a summary of the key
points is reported to the Audit Committee and any
concerns are investigated.
The Depositary provides the Audit Committee with
a report on its monitoring activities.
The AIFM has established a permanent risk
management function to ensure that effective risk
management policies and procedures are in place
and to monitor compliance with risk limits. The AIFM
has a risk management policy which covers the risks
associated with the management of the portfolio,
and the adequacy and effectiveness of this policy
is reviewed and approved at least annually. This
review includes the risk management processes and
systems and limits for each risk area.
The risk limits, which are set by the AIFM and
approved by the Board, take into account the
objectives, strategy and risk profile of the portfolio.
These limits, including leverage (see 35), are
monitored and the sensitivity of the portfolio to
key risks is undertaken periodically as appropriate
to ascertain the impact of changes in key variables
in the portfolio. Exceptions from limits monitoring
and stress testing undertaken by Baillie Gifford’s
Business Risk Department are escalated to the AIFM
and reported to the Board along with any remedial
measures being taken.
Going concern
In accordance with the Financial Reporting Council’s
guidance on going concern and liquidity risk, the
Directors have undertaken a rigorous review of the
Company’s ability to continue as a going concern.
An explanation of the Company’s principal and
emerging risks and how they are managed is on
pages 32 to 38 and contained in note 1 to the
Financial Statements. The Board has, in particular,
considered the impact of increasing geopolitical
tensions and conflicts, including increased
macroeconomic concerns alongside specific
leverage and liquidity stress testing but does not
believe the Company’s going concern status is
affected. The Company’s assets, the majority of
which are investments in quoted securities which are
readily realisable, exceed its liabilities significantly.
All borrowings require the prior approval of the
Board. The Board are seeking to renew the current
revolving credit facility which expires in April 2024.
Gearing levels and compliance with borrowing
covenants are reviewed by the Board on a regular
basis. The Company has continued to comply
with the investment trust status requirements of
section 1158 of the Corporation Tax Act 2010 and
the Investment Trust (Approved Company) (Tax)
Regulations 2011.
The Company’s primary third party suppliers,
including its Managers and Secretaries, Custodian,
Depositary, Registrar, Auditor and Corporate
Broker, are not experiencing significant operational
difficulties affecting their respective services to
the Company.
Accordingly, the Financial Statements have been
prepared on the going concern basis as it is the
Directors’ opinion, having assessed the principal
risks and other matters as set out in the Viability
Statement on page 31, that the Company will
continue in operational existence until 30 April 2025,
which is for a period of at least 12 months from the
date of approval of these Financial Statements.
Governance report
Annual Report and Financial Statements 2024
74
Relations with shareholders
The Board places great importance on
communication with shareholders. The Company’s
Managers communicate regularly with shareholders
and their representatives. The Chair also meets
shareholders independently of the Managers, from
time to time, and reports shareholders’ views to the
Board. Shareholders wishing to communicate with
any members of the Board may do so by writing to
them at the Company’s registered office or through
the Company’s broker, J.P. Morgan Cazenove (see
contact details on page 129). All correspondence
addressed to the Chair is dealt with directly by
the Chair.
The Company’s Annual General Meeting provides
a further forum for communication with all
shareholders. The level of proxies lodged for
each resolution is announced at the meeting and
is published at bailliegiffordchinagrowthtrust.com
subsequent to the meeting. The notice period
for the Annual General Meeting is at least
21 clear days. Shareholders and potential
investors may obtain up-to-date information
on the Company from the Managers’ website
at bailliegiffordchinagrowthtrust.com.
Corporate governance and stewardship
The Company has given discretionary voting powers
to Baillie Gifford & Co. The Managers vote against
resolutions they consider may damage shareholders’
rights or economic interests and their actions are
reported at Board meetings.
The Company believes that it is in the shareholders’
interests to consider environmental, social and
governance (‘ESG’) factors when selecting and
retaining investments and has asked the Managers
to take these issues into account. The Managers
do not exclude companies from their investment
universe purely on the grounds of ESG factors but
adopt a positive engagement approach whereby
matters are discussed with management with
the aim of improving the relevant policies and
management systems and enabling the Managers
to consider how ESG factors could impact long-term
investment returns. The Managers’ report on ESG
on pages 42 to 48 provides more detail. The
statement of compliance with the UK Stewardship
Code can be found on the Managers’ website
at bailliegifford.com. Baillie Gifford & Co, the
Managers, has considered the Sustainable Finance
Disclosure Regulation (‘SFDR’) and further details
can be found on page 125.
The Managers are signatories to the United Nations
Principles for Responsible Investment and are also
members of the of the Asian Corporate Governance
Association and the International Corporate
Governance Network.
Climate change
The Board recognises that climate change poses a
serious threat to our environment, our society and
to economies and companies around the globe.
Addressing the underlying causes is likely to result
in companies that are high emitters of carbon facing
greater societal and regulatory scrutiny and higher
costs to account for the true environmental impact
of their activities.
The Managers have engaged an external provider
to map the carbon footprint of the equity portfolio
using the information to prioritise engagement and
understand what higher emitting companies are
doing to manage climate risk better. The carbon
intensity of the Company is provided in the
Managers’ report on ESG on pages 45 and 46.
Baillie Gifford’s Task Force on Climate-Related
Financial Disclosures (‘TCFD’) Climate
Report is available on the Managers’ website
at bailliegifford.com. A Company specific
TCFD climate report is also available on the
Company’s page of the Company’s website at
bailliegiffordchinagrowthtrust.com. The Managers,
Baillie Gifford & Co, are signatories to the Carbon
Disclosure Project.
On behalf of the Board
Susan Platts-Martin
Chair
2 April 2024
75
Baillie Gifford China Growth Trust plc
The Audit Committee consists
of all Directors. The members
of the Committee consider that
they have the requisite financial
skills and experience to fulfil the
responsibilities of the Committee.
Jonathan Silver is the Chair
of the Committee.
Audit
Committee report
The Committee’s authority and duties are clearly
defined within its written terms of reference which
are available on request from the Company and
on the Company’s page of the Managers’ website:
bailliegiffordchinagrowthtrust.com. The terms of
reference are reviewed annually.
The Committee’s effectiveness is reviewed on an
annual basis as part of the Board’s performance
evaluation process (see page 71).
At least once a year the Committee meets with the
external Auditor without any representatives of the
Managers being present.
Main activities of the Committee
The Committee met twice during the year to
31 January 2024. Ernst & Young LLP, the external
Auditor, and Baillie Gifford attended both meetings.
Baillie Gifford & Co’s Internal Audit and Compliance
Departments and the AIFM’s permanent risk function
provided reports on their monitoring programmes.
The following significant issues have been
considered in relation to the Annual Report and
Accounts for the year ended 31 January 2024:
Valuation and existence
The prices of all the listed investments at
31 January 2024 were agreed to external price
sources. The Committee reviewed the Managers’
valuation policy for investments in unlisted
companies (as described on page 52) and approved
the valuation of the unlisted investment following a
detailed review of the valuation of the investment
and relevant challenge where appropriate. The listed
portfolio holdings were agreed to confirmations from
the Company’s Custodian. The unlisted holding in
ByteDance was agreed to external confirmations.
Governance report
Annual Report and Financial Statements 2024
76
Recognition of income
Income received is accounted for in line with
the Company’s accounting policy. There were
no significant matters during the year to report.
The Audit Committee reviews the treatment of any
special dividends received during the year, and also
reviews total income against both prior year income
and forecast income.
Risk review and emerging risks
The Committee regularly reviews the Company’s risk
matrix and keeps the key strategic risks facing the
Company under particular scrutiny. Please see the
discussion of principal risks on pages 32 to 38.
In addition, the Audit Committee considered its
processes for identifying and monitoring emerging
risks. It was agreed that at each Audit Committee
meeting there should be a discussion on emerging
risks, and any identified emerging risks should be
recorded in the risk matrix.
Going concern and viability statement
The Committee considered the factors, including
increasing geopolitical tensions, that might affect
the Company’s viability over a period of five years
and its ability to continue as a going concern for at
least twelve months from the date of signing of the
Financial Statements. It has also reviewed the reports
from the Managers on the cash position and income
projections of the Company, the liquidity of the
investment portfolio, compliance with debt covenants
and the Company’s ability to meet its obligations
as they fall due. The Committee also reviewed the
Viability statement on page 31 and the statement
on going concern on page 73 including the impact
of increasing geopolitical tensions. Following this
assessment, the Committee recommended to the
Board the appropriateness of the Going Concern
basis in preparing the Financial Statements and
confirmed the accuracy of the Viability Statement
and statement on Going Concern.
Other Matters Considered During the Year
During the year, the Audit Committee also
considered the following:
• Independent Auditor: Ernst & Young (‘EY’) were
re-appointed as Independent Auditor for the year
ended 31 January 2024. Details are provided on
page 77 in the section External Auditor.
• Compliance with section 1158 of the Corporation
Tax Act 2010: The Directors regularly receive
updates from the Managers on the Company’s
compliance with the requirements of investment
trust status. There were no significant matters
during the year to report.
• Cyber security: The threat of a cyber attack
is a concern for all organisations. The Audit
Committee considered the principal risks, and
reviewed information from relevant service
providers on their cyber security arrangements.
• Service providers: The Audit Committee reviewed
the performance and internal controls of its major
operational service providers. The Committee
also reviewed the arrangements in place within
Baillie Gifford & Co whereby their staff may,
in confidence, raise concerns about possible
improprieties in matters of financial reporting
or other matters.
• Allocation of costs: The Audit Committee
reviewed the Company’s policy on the allocation
of certain costs (principally management fees and
interest costs) between capital and revenue and
recommended to the Board that there should be
no change in the following proportion: capital
75%; revenue 25%. This split reflected the
Board’s view of the expected long-term split
of returns, in compliance with the SORP. The
recommendation was accepted by the Board.
• Fair, balanced and understandable: The Audit
Committee reviewed the integrity of financial
statements and ensured that, taken as a whole,
they presented fair, balanced and understandable
assessment of the Company’s position and
prospects.
77
Baillie Gifford China Growth Trust plc
FRC Review
The Financial Reporting Council (`FRC’) reviewed
the Company’s Annual Report and Financial
Statements for the year to 31 January 2023. There
were no areas identified for improvement based
on the review. The FRC notes that its review does
not provide assurance that the Annual Report and
Financial Statements are correct in all material
respects and that its role is not to verify the
information provided but to consider compliance
with reporting requirements.
Internal audit
The Committee continues to believe that the
compliance and internal control systems and the
internal audit function in place within the Managers
provide sufficient assurance that a sound system
of internal control, which safeguards shareholders’
investment and the Company’s assets, is maintained.
An internal audit function, specific to the Company,
is therefore considered unnecessary.
Internal controls and risk management
The Committee reviewed the effectiveness of the
Company’s risk management and internal controls
systems as described on pages 72 and 73. No
significant weaknesses were identified in the year
under review.
External Auditor
To fulfil its responsibility regarding the independence
and objectivity of the external Auditor, the
Committee reviewed:
• the audit plan for the year to 31 January 2024;
• a report from the Auditor describing its
arrangements to manage auditor independence
and received confirmation of its independence;
and
• the extent of non-audit services provided by the
external Auditor. There were no non-audit fees for
the year to 31 January 2024.
To assess the effectiveness of the external Auditor,
the Committee reviewed and considered:
• the Auditor’s fulfilment of the agreed audit plan;
• feedback from the Secretaries on the performance
of the audit team;
• the Audit Quality Inspection Report from the FRC;
and
• detailed discussion with audit personnel to
challenge audit processes and deliverables.
To fulfil its responsibility for oversight of the external
audit process the Committee considered and
reviewed:
• the Auditor’s engagement letter;
• the Auditor’s proposed audit strategy;
• the audit fee; and
• a report from the Auditor on the conclusion
of the audit.
Ernst & Young LLP has been engaged as the
Company’s Auditor since 2020. The audit partners
responsible for the audit are rotated at least
every five years in accordance with professional
and regulatory standards in order to protect
independence and objectivity and to provide fresh
challenge to the business. Caroline Mercer is the
lead audit partner, has held the role since 2020 and
will continue as audit partner until the conclusion of
the 2024 audit.
Ernst & Young LLP has confirmed that it believes it
is independent within the meaning of regulatory and
professional requirements and that the objectivity
of the audit partner and staff is not impaired.
Having carried out the review process described
above, the Committee is satisfied that the Auditor
has remained independent and effective.
There are no contractual obligations restricting the
Committee’s choice of external Auditor.
Accountability and audit
The respective responsibilities of the Directors
and the Auditor in connection with the Financial
Statements are set out on pages 82 to 83.
On behalf of the Board
Jonathan Silver
Audit Committee Chair
2 April 2024
Governance report
Annual Report and Financial Statements 2024
78
Directors’
remuneration report
Statement by the Chair
The Directors’ Remuneration Policy is subject to
shareholder approval every three years or sooner
if an alteration to the policy is proposed. The
Remuneration Policy which is set out below was last
approved at the Annual General Meeting in June
2023 and no changes are proposed to the policy
at the Annual General Meeting to be held on
19 June 2024.
The Board reviewed the level of fees during the year
and considered peer group comparatives, and it was
agreed that with effect from 1 February 2024, the
Chair’s fee should increase by £1,000 to £44,000
and the non-executive Director fee should increase
by £1,000 to £27,000, there were no changes to
the additional fee for the Chairman of the Audit
Committee or the Senior Independent Director.
Directors’ Remuneration Policy
The Company’s policy is that the remuneration
of non-executive Directors should reflect the
experience of the Board as a whole and be
determined with reference to the Company’s peer
group and the investment trust industry generally.
Directors are not eligible for bonuses, pension
benefits, share options, long-term incentive schemes
or other performance-related benefits as the
Board does not believe that this is appropriate
for non-executive Directors.
The Board has set four levels of fees: one for the
Chair, one for the other non-executive Directors, an
additional fee that is paid to the Director who chairs
the Audit Committee and an additional fee paid to
the Senior Independent Director. Fees are reviewed
annually in accordance with the policy. The fee for
any new Director appointed will be determined on
the same basis. Any changes to Directors’ fees are
considered by the Board as a whole.
This report has been prepared in
accordance with the requirements
of the Companies Act 2006.
79
Baillie Gifford China Growth Trust plc
Expected
fees for
year ending
31 January 2025
£
Fees paid
for the year to
31 January 2024
£
Chair’s fee 44,000 43,000
Non-executive Director’s fee 27,000 26,000
Additional fee for the Chairman of the Audit Committee 5,000 5,000
Additional fee for Senior Independent Director 1,000 1,000
Total aggregate annual fees that can be paid to the Directors in any year under the
Directors’ Remuneration Policy, as set out in the Company’s Articles of Association
200,000 200,000
Any views expressed by shareholders on the
fees being paid to Directors will be taken into
consideration by the Board when reviewing the
Directors’ Remuneration Policy and in the annual
review of Directors’ fees.
Under the Articles of Association, Directors are
entitled to be paid all reasonable travel, hotel
and incidental expenses incurred in or about the
performance of their duties as Directors, including
expenses incurred in attending Board or shareholder
meetings.
If any Director is called upon to perform extra or
special services of any kind, under the Articles of
Association, they shall be entitled to receive such
extra remuneration as the Board may decide in
addition to any remuneration they may be entitled
to receive.
The Company does not enter into service contracts
with its Directors. Instead, the Company has a policy
of entering into a letter of appointment with each
of its Directors, copies of which are available on
request from the Company Secretary. Under the
Directors’ letters of appointment, there is a notice
period of one month and no compensation is payable
to a Director on leaving office. No compensation is
payable in the event of a takeover bid.
The terms of their appointment requires all Directors
to retire and be subject to election at the first Annual
General Meeting after their appointment. Thereafter
all Directors will seek annual re-election at the
Company’s AGMs.
Limits on Directors’ remuneration
The fees paid to the non-executive Directors are
determined within the limit set out in the Company’s
Articles of Association which is currently £200,000
per annum in aggregate. Any change to this limit
requires shareholder approval.
The fees for the non-executive Directors are payable
monthly in arrears and the fees paid in respect of
the year ended 31 January 2024 together with the
expected fees payable in respect of the year ending
31 January 2025 are set out in the table below. The
fees payable to the Directors in the subsequent
financial years will be determined following an
annual review of the Directors’ fees.
Governance report
Annual Report and Financial Statements 2024
80
Annual report on remuneration
An ordinary resolution for the approval of this report will be put to the members at the forthcoming Annual
General Meeting.
The law requires the Company’s Auditor to audit certain of the disclosures provided in this report.
Where disclosures have been audited, they are indicated as such. The Auditor’s opinion is included
in the Independent Auditor’s report on pages 85 to 92.
Directors’ remuneration for the year (audited)
The Directors who served during the year received the following remuneration in the form of fees and
taxable benefits. This represents the entire remuneration paid to the Directors.
Name
2024
Fees
£
2024
Taxable
benefits *
£
2024
Total
£
2023
Fees
£
2023
Taxable
benefits *
£
2023
Total
£
Susan Platts-Martin 43,000 4,953 47,953 41,500 1,688 43,188
Tim Clissold
†
26,000 2,484 28,484 25,000 986 25,986
Magdalene Miller
#
26,626 2,592 29,218 25,000 1,326 26,326
Nicholas Pink
‡
10,833 1,843 12,676 – – –
Chris Ralph
¶
– – – 9,487 1,266 10,753
Andrew Robson
§
12,021 687 12,708 31,000 982 31,982
Jonathan Silver
^
29,128 2,076 31,204 10,417 128 10,545
147,608 14,635 162,243 142,404 6,376 148,780
Annual percentage change in remuneration
This represents the annual percentage change in the entire remuneration paid to the Directors.
Name
% from
2023 to
2024
% from
2022 to
2023
% from
2021 to
2022
% from
2020 to
2021
Susan Platts-Martin
**
11 2 (17) 24
Tim Clissold
†
10 206 – –
Dermot McMeekin
††
– – (61) –
Magdalene Miller
#
11 2 492 –
Nicholas Pink
‡
– – – –
Chris Ralph
¶
– (59) 7 –
Andrew Robson
§
(60) 2 12 –
Jonathan Silver
^
296 – – –
* Comprises expenses incurred by Directors in the course of travel to attend Board and Committee meetings.
†
Mr Clissold was appointed as a Director on 1 October 2021.
#
Ms Miller was appointed as a Director on 26 November 2020 and was appointed Senior Independent Director on 15 June 2023
‡
Mr Pink was appointed as a Director on 1 September 2023.
¶
Mr Ralph retired as a Director on 16 June 2022.
§
Mr Robson retired as a Director on 15 June 2023.
^
Mr Silver was appointed as a Director on 1 September 2022 and appointed as Audit Chair on 15 June 2023.
**
The Chair was paid an additional £10,000 for the year to 31 January 2021 to reflect the exceptional work done in relation to
the selection of the new Managers.
††
Mr McMeekin retired as a Director on 16 June 2021.
81
Baillie Gifford China Growth Trust plc
Statement of voting at Annual General Meeting
At the last Annual General Meeting, of the
proxy votes received in respect of the Directors’
remuneration report, 99.4% were in favour, 0.5%
were against and votes withheld were 0.1%. At the
last Annual General Meeting at which the Directors’
Remuneration Policy was considered (June 2023),
99.4% of the proxy votes received were in favour,
0.5% were against and 0.1% votes were withheld.
Relative importance of spend on pay
The table below shows the actual expenditure
(fees and taxable benefits) during the year in
relation to Directors’ remuneration and
distributions to shareholders.
2024
£’000
2023
£’000
Change
%
Directors’ remuneration 162 149 8.7
Share buy backs 299 – –
Dividends 1,054 2,853 (63.0)
Company performance
The following graph compares the share price
total return (assuming all dividends are reinvested)
to ordinary shareholders compared with the total
shareholder return on a notional investment made up
of shares in the component parts of the benchmark.
The benchmark is the MSCI China All Shares Index
(in sterling terms), prior to 16 September 2020 the
benchmark was MSCI AC Asia ex Pacific Index.
The benchmark was chosen for comparison
purposes as it is the index against which the
Company measures its performance.
Directors’ interests (audited)
The Directors at the end of the year under review, and their interests in the Company, are shown in
the following table. There is no requirement under the Company’s Articles of Association for Directors
to hold shares in the Company. There have been no changes intimated in the Directors’ interests up to
1 April 2024.
Name
Nature
of interest
Ordinary 25p
shares held at
31 January
2024
Ordinary 25p
shares held at
31 January
2023
Susan Platts-Martin Beneficial 14,694 14,694
Tim Clissold Beneficial 50,000 50,000
Magdalene Miller Beneficial 2,300 2,300
Nicholas Pink* Beneficial 25,992 –
Jonathan Silver Beneficial 25,000 25,000
* Nicholas Pink was appointed to the Board on 1 September 2023.
Cumulative to 31 January
20242014 2016 2018 2020 2022
Source: LSEG and relevant underlying index providers. See disclaimer
on page 124.
All figures are total returns (assuming net dividends are reinvested).
See Glossary of terms and alternative performance measures on pages
126 to 128.
* MSCI China All Shares Index (in sterling terms). Prior to 16 September
2020 the benchmark was MSCI AC Asia ex Pacific Index.
0
300
150
100
50
250
200
● Benchmark* ● Baillie Gifford China Growth Trust’s
share price
Performance graph
(figures rebased to 100 at 31 January 2014)
Past performance is not a guide to future
performance.
Approval
The Directors’ remuneration report on pages 78 to 81
was approved by the Board of Directors and signed
on its behalf on 2 April 2024.
Susan Platts-Martin
Chair
Governance report
Annual Report and Financial Statements 2024
82
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose
with reasonable accuracy at any time the financial
position of the Company and enable them to ensure
that the Financial Statements and the Directors’
remuneration report comply with the Companies
Act 2006. They are responsible for such internal
control as they determine is necessary to enable the
preparation of Financial Statements that are free
from material misstatement, whether due to fraud or
error, and are also responsible for safeguarding the
assets of the Company and to prevent and detect
fraud and other irregularities.
Under applicable laws and regulations, the Directors
are also responsible for preparing a Strategic report,
Directors’ report, Directors’ remuneration report and
Corporate governance statement that complies with
those laws and regulations.
The Directors are responsible for ensuring that
the Annual Report and Financial Statements
are made available on a website. Financial
Statements are published on the Company’s
website in accordance with legislation in the
United Kingdom governing the preparation
and dissemination of Financial Statements,
which may vary from legislation in other jurisdictions.
The maintenance and integrity of the Company’s
page of the Managers’ website is the responsibility
of the Directors. The Directors’ responsibility also
extends to the ongoing integrity of the Financial
Statements contained therein. The Directors have
delegated responsibility to the Managers for the
maintenance and integrity of the Company’s
page of the Managers’ website.
The Directors are responsible for preparing
the Annual Report and Financial Statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare
Financial Statements for each financial year.
Under that law they have elected to prepare the
Financial Statements in accordance with applicable
law and United Kingdom Accounting Standards,
comprising Financial Reporting Standard 102
‘The Financial Reporting Standard applicable
in the UK and Republic of Ireland’ (FRS 102).
Under company law the Directors must not
approve the Financial Statements unless they
are satisfied that they give a true and fair view
of the state of affairs of the Company and of its
profit or loss for that year. In preparing these
Financial Statements, the Directors are required to:
• select suitable accounting policies and then
apply them consistently;
• state whether applicable United Kingdom
Accounting Standards, comprising FRS 102,
have been followed, subject to any material
departures disclosed and explained in the
Financial Statements;
• make judgements and accounting estimates
that are reasonable and prudent; and
• prepare the Financial Statements on the going
concern basis unless it is inappropriate to presume
that the Company will continue in business.
Statement of Directors’
responsibilities
in respect of the Annual Report and the Financial Statements
83
Baillie Gifford China Growth Trust plc
Responsibility statement of the Directors
in respect of the annual financial report
We confirm that, to the best of our knowledge:
• the Financial Statements, prepared in accordance
with the applicable set of accounting standards,
give a true and fair view of the assets, liabilities,
financial position and net return of the Company;
• the Strategic report includes a fair review of
the development and performance of the
business and the position of the Company,
together with a description of the principal risks
and uncertainties it faces; and
• the Annual Report and Financial Statements,
taken as a whole, is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the
Company’s position and performance,
business model and strategy.
On behalf of the Board
Susan Platts-Martin
Chair
2 April 2024
Financial
report
The Financial Statements for the
year to 31 January 2024 are set
out on pages 94 to 112 and have
been prepared in accordance with
FRS 102 ‘The Financial Reporting
Standard applicable in the UK and
Republic of Ireland’.
85
Baillie Gifford China Growth Trust plc
Independent
auditor’s report
to the members of Baillie Gifford China Growth Trust plc
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities
under those standards are further described in the
Auditor’s responsibilities for the audit of the financial
statements section of our report. We believe that the
audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We are independent of the Company in accordance
with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including
the FRC’s Ethical Standard as applied to public
interest entities, and we have fulfilled our other
ethical responsibilities in accordance with these
requirements.
The non-audit services prohibited by the FRC’s
Ethical Standard were not provided to the Company
and we remain independent of Company in
conducting the audit.
Opinion
We have audited the financial statements of Baillie
Gifford China Growth Trust plc (“the Company”) for
the year ended 31 January 2024 which comprise
the Income Statement, Balance Sheet, Statement
of Changes in Equity, Cash Flow Statement, and
the related notes 1 to 18, including a summary
of significant accounting policies. The financial
reporting framework that has been applied in their
preparation is applicable law and United Kingdom
Accounting Standards including FRS 102 “The
Financial Reporting Standard applicable in the UK
and Republic of Ireland” (United Kingdom Generally
Accepted Accounting Practice).
In our opinion, the financial statements:
• give a true and fair view of the Company’s affairs
as at 31 January 2024 and of its loss for the year
then ended;
• have been properly prepared in accordance with
United Kingdom Generally Accepted Accounting
Practice; and
• have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements of
Baillie Gifford China Growth Trust plc (the ‘Company’)
for the year ended 31 January 2024 which comprise
the Income Statement, Balance Sheet, Statement
of Changes in Equity, Cash Flow Statement, and
the related notes 01 to 18, including a summary
of significant accounting policies. The financial
reporting framework that has been applied in their
preparation is applicable law and United Kingdom
Accounting Standards including FRS 102 ‘The
Financial Reporting Standard applicable in the UK
and Republic of Ireland’ (United Kingdom Generally
Accepted Accounting Practice).
Financial report
Annual Report and Financial Statements 2024
86
• Inspection of the Directors’ assessment of the risk
of breaching the debt covenants as a result of a
reduction in the value of the Company’s portfolio.
We recalculated the Company’s compliance with
debt covenants in the scenarios assessed by the
Directors and reviewed the Directors’ reverse
stress testing in order to identify what factors
would lead to the Company breaching the
financial covenants and in turn impacting the
going concern.
• Review of the Company’s going concern
disclosures included in the annual report in order
to assess that the disclosures were appropriate
and in conformity with the reporting standards.
Based on the work we have performed, we have
not identified any material uncertainties relating to
events or conditions that, individually or collectively,
may cast significant doubt on the Company’s ability
to continue as a going concern for a period assessed
by the Directors, being the period to 30 April 2025,
which is at least 12 months from the date these
financial statements were authorised for issue.
In relation to the Company’s reporting on how they
have applied the UK Corporate Governance Code,
we have nothing material to add or draw attention to
in relation to the Directors’ statement in the financial
statements about whether the Directors considered
it appropriate to adopt the going concern basis of
accounting.
Our responsibilities and the responsibilities of the
Directors with respect to going concern are described
in the relevant sections of this report. However,
because not all future events or conditions can be
predicted, this statement is not a guarantee as to the
Company’s ability to continue as a going concern.
Conclusions relating to going concern
In auditing the financial statements, we have
concluded that the Directors’ use of the going
concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of
the Directors’ assessment of the Company’s ability
to continue to adopt the going concern basis of
accounting included:
• Confirmation of our understanding of the
Company’s going concern assessment process
by engaging with the Directors and the Company
Secretary to determine if all key factors were
considered in their assessment.
• Inspecting the Directors’ assessment of going
concern, including the revenue forecast, for
the period to 30 April 2025 which is at least 12
months from the date these financial statements
were authorised for issue.
• Reviewing the factors and assumptions, including
the impact of the current economic environment
and other significant events that could give rise to
market volatility, as applied to the revenue forecast
and the liquidity assessment of the investments
and determined, through testing of the
methodology and calculations, that the methods,
inputs and assumptions utilised are appropriate to
be able to make an assessment for the Company.
• Consideration of the mitigating factors included in
the revenue forecasts that are within the control
of the Company. We reviewed the Company’s
assessment of the liquidity of investments held
and evaluated the Company’s ability to sell those
investments in order to cover working capital
requirements should revenue decline significantly.
87
Baillie Gifford China Growth Trust plc
Overview of our audit approach
Key audit
matters
(‘KAM’)
Risk of incomplete or inaccurate revenue
recognition, including the classification of special
dividends as revenue or capital items in the Income
Statement.
Risk of incorrect valuation or ownership of the
investment portfolio.
Materiality Overall materiality of £1.19m which represents
1% of shareholders’ funds.
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of
materiality and our allocation of performance
materiality determine our audit scope for the
Company. This enables us to form an opinion on
the financial statements. We take into account
size, risk profile, the organisation of the Company
and effectiveness of controls, the potential impact
of climate change and changes in the business
environment when assessing the level of work to be
performed. All audit work was performed directly by
the audit engagement team and relevant specialist.
Climate change
There has been increasing interest from
stakeholders as to how climate change will impact
companies. The Company has determined that the
impact of climate change may impact the Company’s
investments and their valuations. This is explained
in the principal and emerging risks section, which
form part of the “Other information”, rather than
the audited Financial Statements. Our procedures
on these disclosures therefore consisted solely of
considering whether they are materially consistent
with the financial statements or our knowledge
obtained in the course of the audit or otherwise
appear to be materially misstated.
Our audit effort in considering climate change
was focused on the adequacy of the Company’s
disclosures in the financial statements as set out
in note 1(a) and conclusion there was no further
impact of climate change to be taken into account
other than the unlisted investment as the listed
investments are fair valued based on market pricing
as required by FRS102. Unlisted investments are
fair valued using IPEV Guidelines which require
fair value to be assessed for implications related to
climate change. We also challenged the Directors’
considerations of climate change in their assessment
of viability and associated disclosures.
Key audit matters
Key audit matters are those matters that, in our
professional judgment, were of most significance in
our audit of the financial statements of the current
period and include the most significant assessed
risks of material misstatement (whether or not due
to fraud) that we identified. These matters included
those which had the greatest effect on: the overall
audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement
team. These matters were addressed in the context
of our audit of the financial statements as a whole,
and in our opinion thereon, and we do not provide a
separate opinion on these matters.
Financial report
Annual Report and Financial Statements 2024
88
Risk Our response to the risk Key observations communicated
to the Audit Committee
Incomplete or inaccurate revenue recognition,
including the classification of special dividends
as revenue or capital items in the Income
Statement (as described on page 76 in the Audit
Committee’s Report and as per the accounting
policy set out on pages 99 and 100).
The total revenue for the year to 31 January
2024 was £2.60m (2023: £2.41m), consisting of
dividend income from listed investments.
The Company received 5 special dividends
amounting to £0.97m (3 special dividends
amounting to £0.13m classified as revenue,
and 2 special dividends amounting to £0.84m
classified as capital).
There is a risk of incomplete or inaccurate
recognition of revenue through the failure to
recognise proper income entitlements or to
apply an appropriate accounting treatment.
In addition to the above, the Directors may be
required to exercise judgment in determining
whether income receivable in the form of special
dividends should be classified as ‘revenue’ or
‘capital’ in the Income Statement.
We performed the following procedures:
We obtained an understanding of the processes
and controls surrounding revenue recognition
and classification of special dividends by
performing walkthrough procedures.
For all dividends received, we recalculated the
dividend income by multiplying the investment
holdings at the ex-dividend date, traced from
the accounting records, by the dividend per
share, which was agreed to an independent data
vendor. We also agreed all exchange rates to
an external source. For dividends received, we
agreed the amounts to bank statements.
To test completeness of recorded income, we
tested that dividends had been recorded for all
investments with reference to announcements
obtained from an independent data vendor.
For all listed investments held during the year,
we reviewed the type of dividends paid with
reference to an external data source to identify
those which were ‘special’.
For the five special dividends received by the
Company, we checked the appropriateness of
classification as revenue or capital by reviewing
the underlying circumstances of the special
dividends received.
The results of our procedures
identified no material
misstatements in relation
to the risk of incomplete or
inaccurate revenue recognition,
including classification of special
dividends as revenue or capital
items in the Income Statement.
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Baillie Gifford China Growth Trust plc
Risk Our response to the risk Key observations communicated
to the Audit Committee
Incorrect valuation or ownership of the
investment portfolio (as described on page 76
in the Audit Committee’s Report and as per the
accounting policy set out on pages 99 and 100).
The valuation of the investment portfolio at 31
January 2024 was £124.75m (2023: £209.50m)
consisting of listed equities with an aggregate
value of £114.20m (2023: £197.55m) and
an unlisted equity investment amounting to
£10.55m (2023: £11.95m).
The valuation of the assets held in the
investment portfolio is the key driver of the
Company’s net asset value and total return.
Incorrect investment pricing, or failure to
maintain proper legal title of the investments
held by the Company could have a significant
impact on the portfolio valuation and the return
generated for shareholders.
The fair value of listed investments is determined
using quoted market bid prices at close of
business on the reporting date.
The unlisted investment is valued at fair value
by the Directors following a detailed review
and appropriate challenge of the valuations
proposed by the Investment Manager. The
unlisted investment policy applies methodologies
consistent with the International Private Equity
and Venture Capital Valuation guidelines
(“IPEV”).
The valuation of the unlisted investment, and
the resultant impact on the unrealised gains/
(losses), is the area requiring the most significant
judgement and estimation in the preparation of
the financial statements.
We performed the following procedures:
We obtained an understanding of the
Managers’ processes and controls surrounding
investment valuation and legal title, including
an understanding of the operation of the
Investment Manager’s Unlisted Valuation
Securities Group and the Directors’ process for
review of the unlisted investment valuations, by
performing walkthrough procedures.
For all listed investments in the portfolio, we
compared the market prices and exchange rates
applied to an independent pricing vendor and
recalculated the investment valuations as at the
year end.
We inspected the stale price reports produced
by the Administrator to identify prices that have
not changed and verified whether the listed price
is a valid fair value. We did not identify any listed
investments with stale prices.
For the unlisted investment held as at the year-
end we utilised our specialist Valuations team
to review and challenge the valuation. This
included:
• Reviewing the valuation papers prepared by
the Managers as at the year end;
• Assessing whether the valuation has been
performed in line with the accounting policy
and the IPEV guidelines;
• Assessing the appropriateness of the data
inputs and challenging the assumptions used
to support the valuations;
• Assessing other facts and circumstances,
such as market movement and comparative
company information, that have an impact
on the fair market value of the unlisted
investment; and
• Determining a fair value range for
the valuation and assessing whether
Management’s valuation is within this range.
We recalculated the unrealised gains/losses on
investments as at the year-end using the book-
cost reconciliation.
We compared the Company’s investment
holdings as at 31 January 2024 to an
independent confirmation received directly from
the Company’s Custodian.
The results of our procedures
identified no material
misstatements in relation to
the risk of incorrect valuation
or ownership of the investment
portfolio.
Financial report
Annual Report and Financial Statements 2024
90
Our application of materiality
We apply the concept of materiality in planning and
performing the audit, in evaluating the effect of
identified misstatements on the audit and in forming
our audit opinion.
Materiality
The magnitude of an omission or misstatement that,
individually or in the aggregate, could reasonably
be expected to influence the economic decisions
of the users of the financial statements. Materiality
provides a basis for determining the nature and
extent of our audit procedures.
We determined materiality for the Company to be
£1.19 million (2023: £2.04 million), which is 1%
(2023: 1%) of shareholders’ funds. We believe that
shareholders’ funds provides us with materiality
aligned to the key measurement of the Company’s
performance.
Performance materiality
The application of materiality at the individual
account or balance level. It is set at an amount to
reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected
misstatements exceeds materiality.
On the basis of our risk assessments, together with
our assessment of the Company’s overall control
environment, our judgement was that performance
materiality was 75% (2023: 75%) of our planning
materiality, namely £0.89m (2023: £1.53m). We have
set performance materiality at this percentage due to
past experience of the audit that indicates a lower risk
of misstatements, both corrected and uncorrected.
Given the importance of the distinction between
revenue and capital for investment trusts, we also
applied a separate testing threshold for the revenue
column of the Income Statement of £0.08m (2023:
£0.10m), being 5% of net return on ordinary
activities before taxation.
Reporting threshold
An amount below which identified misstatements are
considered as being clearly trivial.
We agreed with the Audit Committee that we would
report to them all uncorrected audit differences in
excess of £0.06m (2023: £0.11m), which is set at
5% of planning materiality, as well as differences
below that threshold that, in our view, warranted
reporting on qualitative grounds.
We evaluate any uncorrected misstatements against
both the quantitative measures of materiality
discussed above and in light of other relevant
qualitative considerations in forming our opinion.
Other information
The other information comprises the information
included in the annual report, other than the
financial statements and our auditor’s report
thereon. The Directors are responsible for the other
information contained within the annual report.
Our opinion on the financial statements does not
cover the other information and, except to the extent
otherwise explicitly stated in this report, we do not
express any form of assurance conclusion thereon.
Our responsibility is to read the other information
and, in doing so, consider whether the other
information is materially inconsistent with the
financial statements or our knowledge obtained in
the course of the audit or otherwise appears to be
materially misstated. If we identify such material
inconsistencies or apparent material misstatements,
we are required to determine whether this gives
rise to a material misstatement in the financial
statements themselves. If, based on the work we
have performed, we conclude that there is a material
misstatement of the other information, we are
required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies
Act 2006
In our opinion the part of the Directors’ remuneration
report to be audited has been properly prepared in
accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the
course of the audit:
• the information given in the strategic report and
the Directors’ report for the financial year for
which the financial statements are prepared is
consistent with the financial statements; and
• the strategic report and Directors’ reports have
been prepared in accordance with applicable legal
requirements;
Matters on which we are required to report by exception
In the light of the knowledge and understanding
of the Company and its environment obtained in
the course of the audit, we have not identified
material misstatements in the strategic report or
Directors’ report.
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
• adequate accounting records have not been kept,
or returns adequate for our audit have not been
received from branches not visited by us; or
91
Baillie Gifford China Growth Trust plc
• the financial statements and the part of the
Directors’ Remuneration Report to be audited are
not in agreement with the accounting records and
returns; or
• certain disclosures of Directors’ remuneration
specified by law are not made; or
• we have not received all the information and
explanations we require for our audit
Corporate governance statement
We have reviewed the Directors’ statement in
relation to going concern, longer-term viability and
that part of the Corporate Governance Statement
relating to the Company’s compliance with the
provisions of the UK Corporate Governance Code
specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit,
we have concluded that each of the following
elements of the Corporate Governance Statement is
materially consistent with the financial statements or
our knowledge obtained during the audit:
• Directors’ statement with regards to the
appropriateness of adopting the going concern
basis of accounting and any material uncertainties
identified set out on page 73;
• Directors’ explanation as to its assessment of the
Company’s prospects, the period this assessment
covers and why the period is appropriate set out
on page 31;
• Director’s statement on whether it has a
reasonable expectation that the group will be able
to continue in operation and meets its liabilities set
out on page 76;
• Directors’ statement on fair, balanced and
understandable set out on page 83;
• Board’s confirmation that it has carried out a
robust assessment of the emerging and principal
risks set out on page 32;
• The section of the annual report that describes the
review of effectiveness of risk management and
internal control systems set out on page 72; and
• The section describing the work of the audit
committee set out on pages 75 to 77.
Responsibilities of Directors
As explained more fully in the Directors’
responsibilities statement set out on pages 82 and
83, the Directors are responsible for the preparation
of the financial statements and for being satisfied
that they give a true and fair view, and for such
internal control as the directors determine is
necessary to enable the preparation of financial
statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the Directors
are responsible for assessing the Company’s
ability to continue as a going concern, disclosing,
as applicable, matters related to going concern
and using the going concern basis of accounting
unless the Directors either intend to liquidate the
Company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit
of the financial statements
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole
are free from material misstatement, whether due to
fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK)
will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the
aggregate, they could reasonably be expected to
influence the economic decisions of users taken on
the basis of these financial statements.
Extent to which the audit was capable
of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined
above, to detect irregularities, including fraud. The
risk of not detecting a material misstatement due
to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate
concealment by, for example, forgery or intentional
misrepresentations, or through collusion. The extent
to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
Financial report
Annual Report and Financial Statements 2024
92
However, the primary responsibility for the
prevention and detection of fraud rests with both
those charged with governance of the Company and
management.
• We obtained an understanding of the legal and
regulatory frameworks that are applicable to the
Company and determined that the most significant
are FRS 102, the Companies Act 2006, the Listing
Rules, the UK Corporate Governance Code, The
Companies (Miscellaneous Reporting) Regulations
2018, the Association of Investment Companies’
Code and Statement of Recommended Practice
and Section 1158 of the Corporation Tax Act 2010.
• We understood how the Company is complying
with those frameworks through discussions with
the Audit Committee and Company Secretary,
and review of Board minutes and the Company’s
documented policies and procedures related to
controls over the financial reporting process.
• We assessed the susceptibility of the Company’s
financial statements to material misstatement,
including how fraud might occur by considering
the key risks impacting the financial statements.
We identified a fraud risk with respect to
incomplete or inaccurate revenue recognition
through incorrect classification of special
dividends as revenue or capital items in the
Income Statement and incorrect valuation of
the unlisted investment and the resultant impact
on unrealised losses. Further discussion of our
approach is set out in the key audit matters above.
• Based on this understanding we designed our
audit procedures to identify non-compliance
with such laws and regulations. Our procedures
involved review of the reporting to the Directors
with respect to the application of the documented
policies and procedures related to controls over
the financial reporting process, and review of the
financial statements to ensure compliance with
the reporting requirements of the Company.
A further description of our responsibilities for the
audit of the financial statements is located on the
Financial Reporting Council’s website at
www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Other matters we are required to address
• Following the recommendation from the audit
committee, we were appointed by the Company on
12 June 2019 to audit the financial statements for
the year ending 31 January 2020 and subsequent
financial periods.
• The period of total uninterrupted engagement
including previous renewals and reappointments
is five years, covering the years ending 31 January
2020 to 31 January 2024.
• The audit opinion is consistent with the additional
report to the audit committee.
Use of Our Report
This report is made solely to the Company’s
members, as a body, in accordance with Chapter
3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state
to the Company’s members those matters we are
required to state to them in an auditor’s report and
for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to
anyone other than the company and the Company’s
members as a body, for our audit work, for this
report, or for the opinions we have formed.
Caroline Mercer (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory
Auditor
Edinburgh
2 April 2024
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Baillie Gifford China Growth Trust plc
Financial report
Annual Report and Financial Statements 2024
94
For the year ended 31 January
Notes
2024
Revenue
£’000
2024
Capital
£’000
2024
Total
£’000
2023
Revenue
£’000
2023
Capital
£’000
2023
Total
£’000
Losses on investments 9 – (83,606) (83,606) – (12,378) (12,378)
Currency gains/(losses) 13 – 105 105 – (216) (216)
Income 2 2,599 – 2,599 2,407 – 2,407
Investment management fee 3 (255) (765) (1,020) (311) (932) (1,243)
Other administrative expenses 4 (523) – (523) (550) – (550)
Net return before finance costs
and taxation
1,821 (84,266) (82,445) 1,546 (13,526) (11,980)
Finance costs of borrowings 5 (136) (408) (544) (116) (347) (463)
Net return before taxation 1,685 (84,674) (82,989) 1,430 (13,873) (12,443)
Tax
6
(187) – (187) (105) – (105)
Net return after taxation 1,498 (84,674) (83,176) 1,325 (13,873) (12,548)
Net return per ordinary share 7 2.42p (136.61p) (134.19p) 2.14p (22.37p) (20.23p)
The total column of this statement is the profit and loss account of the Company. The supplementary revenue and capital return columns are prepared
under guidance published by the Association of Investment Companies.
All revenue and capital items in this statement derive from continuing operations.
A Statement of Comprehensive Income is not required as all gains and losses of the Company have been reflected in the above statement.
The accompanying notes on pages 98 to 112 are an integral part of the Financial Statements.
Income
statement
95
Baillie Gifford China Growth Trust plc
As at 31 January
Notes
2024
£’000
2024
£’000
2023
£’000
2023
£’000
Fixed assets
Investments held at fair value through profit or loss 9 124,751 209,499
Current assets
Debtors 10 23 26
Cash and cash equivalents 15 926 1,000
949 1,026
Creditors
Amounts falling due within one year 11 (6,289) (6,585)
Net current liabilities (5,340) (5,559)
Total assets less current liabilities 119,411 203,940
Capital and reserves
Share capital 12 17,087 17,087
Share premium account 13 31,780 31,780
Capital redemption reserve 13 41,085 41,085
Capital reserve 13 22,775 107,748
Revenue reserve 13 6,684 6,240
Shareholders’ funds 119,411 203,940
Net asset value per ordinary share* 14 193.06p
328.87p
The Financial Statements of Baillie Gifford China Growth Trust plc (Company registration number 91798)
were approved and authorised for issue by the Board and were signed on 2 April 2024.
Susan Platts-Martin
Chair
The accompanying notes on pages 98 and 112 are an integral part of the Financial Statements.
* See Glossary of terms and alternative performance measures on pages 126 and 128.
Balance
sheet
Financial report
Annual Report and Financial Statements 2024
96
For the year ended 31 January 2024
Notes
Share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Shareholders’
funds
£’000
Shareholders’ funds at 1 February 2023 17,087 31,780 41,085 107,748 6,240 203,940
Dividends paid during the year 8 – – – – (1,054) (1,054)
Net return after taxation 7 – – – (84,674) 1,498 (83,176)
Ordinary shares bought back into treasury – – – (299) – (299)
Shareholders’ funds at 31 January 2024 17,087 31,780 41,085 22,775 6,684 119,411
For the year ended 31 January 2023
Notes
Share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Shareholders’
funds
£’000
Shareholders’ funds at 1 February 2022 17,087 31,780 41,085 121,621 7,768 219,341
Dividends paid during the year 8 – – – – (2,853) (2,853)
Net return after taxation 7 – – – (13,873) 1,325 (12,548)
Shareholders’ funds at 31 January 2023 17,087 31,780 41,085 107,748 6,240 203,940
The accompanying notes on pages 98 to 112 are an integral part of the Financial Statements.
Statement of
changes in equity
97
Baillie Gifford China Growth Trust plc
* Cash from operations includes dividends received of £2,576,000 (2023 – £2,402,000) and interest received of £23,000 (2023 – £5,000).
The accompanying notes on pages 98 to 112 are an integral part of the Financial Statements.
Cash flow
statement
For the year ended 31 January
Notes
2024
£’000
2024
£’000
2023
£’000
2023
£’000
Net return before taxation (82,989) (12,443)
Adjustments to reconcile company profit before tax to net cash flow from operating activities
Net losses on investments 83,606 12,378
Currency (gains)/losses (105) 216
Finance costs of borrowings 544 463
Other capital movements
Changes in debtors 3 74
Change in creditors (97) (25)
Taxation
Overseas withholding tax suffered (198) (181)
Overseas withholding tax reclaims received 11 76
Cash from operations* 775 558
Interest paid (541) (451)
Net cash inflow from operating activities 234 107
Cash flows from investing activities
Acquisitions of investments (14,521) (27,760)
Disposals of investments 15,663 25,723
Net cash inflow/(outflow) from investing activities 1,142 (2,037)
Cash flows from financing activities
Equity dividends (1,054) (2,853)
Shares bought back (299) –
Net cash outflow from financing activities (1,353) (2,853)
Increase/(decrease) in cash and cash equivalents 23 (4,783)
Exchange movements (97) 287
Cash and cash equivalents at start of year 16 1,000 5,496
Cash and cash equivalents at end of year 16 926 1,000
Financial report
Annual Report and Financial Statements 2024
98
01 Principal accounting policies
The Financial Statements for the year to 31 January 2024
have been prepared in accordance with FRS 102 ‘The
Financial Reporting Standard applicable in the UK and
Republic of Ireland’ on the basis of the accounting policies
set out below which are consistent with those applied for
the year ended 31 January 2023.
a. Basis of accounting
All of the Company’s operations are of a continuing
nature and the Financial Statements are prepared on a
going concern basis under the historical cost convention,
modified to include the revaluation of fixed asset
investments and on the assumption that approval as an
investment trust under section 1158 of the Corporation
Tax Act 2010 and the Investment Trust (Approved
Company) (Tax) Regulations 2011 will be retained.
The Board has, in particular, considered the impact of
increasing market volatility due to macroeconomic and
geopolitical concerns, but does not believe the Company’s
going concern status is affected. The Company’s assets,
which at present are mainly 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 continued to comply with the
investment trust status requirements of section 1158 of
the Corporation Tax Act 2010 and the Investment Trust
(Approved Company) (Tax) Regulations 2011.
The Company’s primary third party suppliers, including
its Managers and Secretaries, Custodian, Depositary,
Registrar, Auditor and Corporate Broker, are not
experiencing significant operational difficulties affecting
their respective services to the Company. Accordingly,
the Financial Statements have been prepared on the
going concern basis as it is the Directors’ opinion, having
assessed the principal and emerging risks and other
matters, as set out in the Viability Statement on page 31,
that the Company will continue in operational existence
until 30 April 2025, which is for a period of at least 12
months from the date of approval of these Financial
Statements.
In preparing these Financial Statements the Directors
have considered the impact of climate change risk as a
principal risk as set out on page 35, and have concluded
that it does not have a material impact on the Company’s
investments. They have considered the impact of climate
change on the value of both the listed and unlisted
investments included in the Financial Statements.
The listed investments should already include the impact
in their prices as quoted on the relevant exchange and
consistent with that view, we do not believe the impact
on the unlisted investments would be material.
The Financial Statements have been prepared in
accordance with the Companies Act 2006, applicable
UK Accounting Standards and with the AIC’s Statement
of Recommended Practice ‘Financial Statements of
Investment Trust Companies and Venture Capital Trusts’
issued in November 2014 and updated in July 2022 with
consequential amendments. In order to reflect better
the activities of the Company and in accordance with
guidance issued by the AIC, supplementary information
which analyses the Income Statement between items of
a revenue and capital nature has been presented.
Financial assets and financial liabilities are recognised
in the Company’s Balance sheet when it becomes a party
to the contractual provisions of the instrument.
The Directors consider the Company’s functional currency
to be sterling as the entity is listed on a sterling stock
exchange in the UK, the Company’s share capital and
dividends paid are denominated in sterling, Company’s
shareholders are predominantly based in the UK and the
Company and its Investment Manager, who are subject
to the UK’s regulatory environment, are also UK based.
b. Significant accounting estimates and judgements
The preparation of the Financial Statements requires
the use of estimates, assumptions and judgements.
These estimates, assumptions and judgements affect
the reported amounts of assets and liabilities, at the
reporting date. While estimates are based on best
judgement using information and financial data available,
the actual outcome may differ from these estimates.
The key sources of estimation and uncertainty relate
to the assumptions used in the determination of the fair
value of the unlisted investment, which are detailed in
note 9 on pages 103 and 104.
Notes to the
Financial Statements
99
Baillie Gifford China Growth Trust plc
Judgements
The Directors consider that the preparation of the
Financial Statements involves the following key
judgements:
i. the determination of the functional currency of the
Company as sterling (see rationale in 1(a) above); and
ii. the fair valuation of the unlisted investment.
The key judgements in the fair valuation process are:
i. the Managers’ determination of the appropriate
application of the International Private Equity and
Venture Capital Guidelines 2022 (‘IPEV Guidelines’)
to each unlisted investment; and
ii. the Directors’ consideration of whether each fair
value is appropriate following detailed review and
challenge. The judgement applied in the selection of
the methodology used for determining the fair value of
each unlisted investment can have a significant impact
upon the valuation.
Estimates
The key estimate in the Financial Statements is the
determination of the fair value of the unlisted investment
by the Managers for consideration by the Directors.
This estimate is key as it significantly impacts the
valuation of the unlisted investment at the Balance sheet
date. The fair valuation process involves estimation using
subjective inputs that are unobservable (for which market
data is unavailable). The main estimates involved in the
selection of the valuation process inputs are:
i. the selection of appropriate comparable companies
in order to derive revenue multiples and meaningful
relationships between enterprise value, revenue and
earnings growth. Comparable companies are chosen
on the basis of their business characteristics and
growth patterns;
ii. the selection of a revenue metric (either historic
or forecast);
iii. the application of an appropriate discount factor to
reflect the reduced liquidity of unlisted companies
versus their listed peers;
iv. the estimation of the probability assigned to an exit
being through an initial public offering (‘IPO’) or a
company sale;
v. the selection of an appropriate industry benchmark
index to assist with the valuation validation or the
application of valuation adjustments, particularly in the
absence of established earnings or closely comparable
peers; and
vi. the calculation of valuation adjustments derived
from milestone analysis (i.e. incorporating operational
success against the plan/forecasts of the business into
the valuation).
c. Investments
The Company’s investments are classified as held at fair
value through profit and loss in accordance with sections
11 and 12 of FRS 102. Purchases and sales of investments
are recognised on a trade date basis. Expenses incidental
to the purchase and sale of investments are recognised in
the Income Statement as capital items.
Investments are classified as held at fair value through
profit or loss on initial recognition and are measured at
subsequent reporting dates at fair value. The fair value
of listed security investments is bid price or last traded
price. Unlisted investments are valued at fair value by
the Directors following a detailed review and appropriate
challenge of the valuations proposed by the Managers.
The Managers’ unlisted investment policy applies
methodologies consistent with IPEV Guidelines. These
methodologies can be categorised as follows (a) market
approach (multiples, industry valuation benchmarks and
available market prices); (b) income approach (discounted
cash flows); and (c) replacement cost approach (net
assets). The valuation process recognises also, as
stated in the IPEV Guidelines, that the price of a recent
investment may be an appropriate starting point for
estimating fair value, however it should be evaluated using
the techniques described above.
d. Cash and cash equivalents
Cash and cash equivalents include cash in hand and
deposits repayable on demand. Deposits are repayable
on demand if they can be withdrawn at any time without
notice and without penalty or if they have a maturity or
period of notice of not more than one working day.
e. Income
i. Income from equity investments is brought into
account on the date on which the investments are
quoted ex-dividend or, where no ex-dividend date is
quoted, when the Company’s right to receive payment
is established.
Financial report
Annual Report and Financial Statements 2024
100
ii. Special dividends are treated as repayments of capital
or income depending on the facts of each particular
case.
iii. Interest receivable/payable on bank deposits
is recognised on an accruals basis.
iv. Overseas dividends include the taxes deducted
at source.
v. If scrip is taken in lieu of dividends in cash, the net
amount of the cash dividend declared is credited to the
revenue account. Any excess in the value of the shares
received over the amount of the cash dividend foregone
is recognised as capital.
vi. Interest from fixed interest securities is recognised on
an effective yield basis.
f. Expenses
All expenses are accounted for on an accruals basis.
Expenses are charged through the revenue account
except:
i. where they relate directly to the acquisition or disposal
of an investment, (transaction costs), in which case
they are recognised as capital within losses/gains
on investments; and these expenses are commonly
referred to as transaction costs and comprise brokerage
commission and stamp duty.
ii. they relate directly to the buy-back/issuance of shares,
in which case they are added to the buy-back cost or
deducted from the share issuance proceeds.
The management fee is allocated 25% to revenue
and 75% to capital in line with the Board’s expected
long-term split of revenue and capital return from the
Company’s investment portfolio. The Board reviews the
expense allocation policy on a yearly basis and considers
whether it remains appropriate.
g. Long term borrowings, overdrafts and finance costs
Bank loans and overdrafts are classified as loans and are
measured at amortised cost. They are initially recorded at
the proceeds received net of direct costs. Finance costs
are accounted for on an accruals basis and are allocated
25% to revenue and 75% to capital in line with the
Board’s expected long-term split of revenue and capital
return from the Company’s investment portfolio. The
Board reviews the expense allocation policy on a yearly
basis and considers whether it remains appropriate.
h. Taxation
The taxation charge represents the sum of current tax and
the movement in the provision for deferred taxation during
the year. Current taxation represents non-recoverable
overseas taxes which is charged to the revenue accounts
where it relates to income received and to capital where
it relates to items of a capital nature. Deferred taxation is
provided on all timing differences which have originated
but not reversed by the Balance sheet date, calculated
on a non-discounted basis at the tax rates expected to
apply when the timing differences reverse, based on what
has been enacted or substantively enacted, relevant to
the benefit or liability. Deferred tax assets are recognised
only to the extent that it is more likely than not that
there will be taxable profits from which underlying timing
differences can be deducted.
i. Dividend distributions
Interim dividends are recognised in the year in which they
are paid and final dividends are recognised in the year
in which the dividends are approved by the Company’s
shareholders in a General Meeting.
j. Foreign currencies
Transactions involving foreign currencies are converted
at the rate ruling at the time of the transaction. Monetary
assets and liabilities and fixed asset investment in foreign
currencies are translated at the closing rates of exchange
at the Balance Sheet date. Any gain or loss arising from
a change in exchange rate subsequent to the date of the
transaction is included as an exchange gain or loss in the
Income Statement as capital or revenue as appropriate.
k. Capital reserve
Gains and losses on disposal of investments, changes in
the fair value of investments held, exchange differences
of a capital nature and the amount by which other assets
and liabilities valued at fair value differ from their book
cost are dealt with in the capital reserve. Purchases
of the Company’s own shares are also funded from
this reserve and the weighted average purchase price
paid to purchase the shares is credited to this reserve
if the shares are subsequently sold from treasury. The
nominal value of such shares is transferred from share
capital to the capital redemption reserve if the shares are
subsequently cancelled.
l. Share premium
The share premium reserve represents:
• the proceeds of sales of shares held in treasury in
excess of the weighted average purchase price paid by
the Company to repurchase the shares; and
• the excess of the proceeds of issuance of new shares
over the nominal value.
m. Capital redemption reserve
The nominal value of ordinary share capital purchased
and cancelled is transferred out of called-up share capital
and into the capital redemption reserve on the relevant
trade date.
n. Revenue reserve
The revenue profit or loss for the year is taken to or from
this reserve. The revenue reserve may be distributed by
way of a dividend.
o. Single segment reporting
The Company is engaged in a single segment of business,
being investment business, consequently no business
segmental analysis is provided.
101
Baillie Gifford China Growth Trust plc
02 Income
2024
£’000
2023
£’000
Income from investments
Overseas dividends 2,576 2,402
Other income
Interest 23 5
Total income 2,599 2,407
03 Investment management fee
2024
Revenue
£’000
2024
Capital
£’000
2024
Total
£’000
2023
Revenue
£’000
2023
Capital
£’000
2023
Total
£’000
Investment management fee 255 765 1,020 311 932 1,243
Details of the Investment Management Agreement are disclosed on pages 62 and 63. Baillie Gifford & Co Limited’s annual
management fee is (i) 0.75% of the first £50 million of net asset value; plus (ii) 0.65% of net asset value between £50 million and
£250 million; plus (iii) 0.55% of net asset value in excess of £250 million, calculated and payable quarterly.
04 Other administrative expenses
2024
£’000
2023
£’000
General administrative expenses 183 162
Directors’ fees (see Directors’ remuneration report on page 80) 148 142
Custody fees
29 71
Registrar fees
28 25
Depositary fees
15 31
Marketing
* 71 75
Auditor’s remuneration – statutory audit of Company’s Annual Financial Statements 49 44
523 550
* The Company is part of a marketing programme which includes all the Investment Trusts managed by the Managers. The marketing strategy has
an ongoing objective to stimulate demand for the Company’s shares. The cost of this marketing strategy is borne in partnership by the Company
and the Managers. The Managers matches the Company’s marketing contribution and provides the resource to manage and run the programme.
05 Finance costs of borrowing
2024
Revenue
£’000
2024
Capital
£’000
2024
Total
£’000
2023
Revenue
£’000
2023
Capital
£’000
2023
Total
£’000
Interest on bank loans 136 408 544 116 347 463
Financial report
Annual Report and Financial Statements 2024
102
06 Tax on ordinary activities
2024
Revenue
£’000
2024
Capital
£’000
2024
Total
£’000
2023
£’000
2023
£’000
2023
£’000
Analysis of charge in year
Corporation tax repayment from HMRC (11) – (11) – – –
Overseas withholding taxation 198 – 198 105 – 105
Factors affecting tax charge for year
The tax charge for the year is lower than the
standard rate of corporation tax in the UK
of 24% (2023 – 19%)*. The differences are
explained below:
Net return before taxation 1,685 (84,674) (82,989) (1,430) (13,873) (12,443)
Net return on ordinary activities multiplied by
the standard rate of corporation tax in the UK
of 24% (2023 – 19%)
405 (20,322) (19,917) 272 (2,636) (2,364)
Effects of:
Capital returns not taxable – 20,040 20,040 – 2,393 2,393
Income not taxable (619) – (619) (457) – (457)
Overseas withholding tax incurred 198 – 198 105 – 105
Taxable losses in year not utilised 214 282 496 185 243 428
Tax repayment received (11) – (11) – – –
Revenue tax charge for the year 187 – 187 105 – 105
* A tax rate of 24% reflects the increase in the UK corporation tax rate from 19% to 25% from 1 April 2023.
As an investment trust, the Company’s capital gains are not taxable.
Factors that may affect future tax charges
At 31 January 2024 the Company had a potential deferred tax asset of £6,518,000 (2023 – £6,000,000) on taxable losses which
is available to be carried forward and offset against future taxable profits, a deferred tax asset has not been recognised on these
losses as it is considered unlikely that the Company will make taxable revenue profits in the future and it is not liable to tax on its
capital gains. The potential deferred tax asset has been calculated using a corporation tax rate of 25% (2023 – 25%).
Due to the Company’s status as an investment trust, and the intention to continue meeting the conditions required to obtain
approval in the foreseeable future, the Company has not provided for deferred tax on any capital gains and losses arising on the
revaluation or disposal of investments.
The Company has filed protective claims with HMRC in order to seek recovery of potentially overpaid taxes from HMRC in relation
to the UK’s pre-2009 dividend tax rules. The claims cover accounting periods ending 2005–2007 and accounting periods ending
2008 and 2009 in which the Company paid UK tax under Schedule D Case V. In such periods, the Company is seeking recovery of
the tax paid together with interest.
The decision of the First Tier Tribunal (FTT) in the Post Prudential case was issued in December 2021 and was largely in favour
of the claimants. However, many of the decisions of the FTT were appealed by HMRC. Subsequently in January 2024 the Upper
Tribunal (UT) issued a further judgement overturning some but not all the FTT’s decisions. It is expected that both HMRC and
the claimants will further appeal the UT’s decisions and therefore the value, timing and probability of the claim’s success for the
accounting periods ending 2005 – 2007 remain uncertain.
Contingent asset
HMRC have indicated they will repay overpaid taxes for the accounting periods ending 2008 and 2009 of £1.1 million plus interest.
As the repayment is probable, but not virtually certain, the Company is disclosing £1.1 million as a contingent asset.
103
Baillie Gifford China Growth Trust plc
07 Net return per ordinary share
2024
Revenue
2024
Capital
2024
Total
2023
Revenue
2023
Capital
2023
Total
Net return per ordinary share 2.42p (136.61p) (134.19p) 2.14p (22.37p) (20.23p)
Revenue return per ordinary share is based on the net revenue return on ordinary activities after taxation of £1,498,000 (2023 –
£1,325,000), and on 61,981,380 (2023 – 62,012,982) ordinary shares, being the weighted average number of ordinary shares in
issue during each year.
Capital return per ordinary share is based on the net capital loss for the financial year of £84,674,000 (2023 – loss of £13,873,000)
and on 61,981,380 (2023 – 62,012,982) ordinary shares, being the weighted average number of ordinary shares in issue during
each year.
There are no dilutive or potentially dilutive shares in issue.
08 Ordinary dividends
2024 2023 2024
£’000
2023
£’000
Amounts recognised as distributions in the period:
Previous year’s final dividend (paid 26 July 2023) 1.70p 4.60p 1,054 2,853
Also set out below are the total dividends paid and proposed in respect of the financial year, which is the basis on which the
requirements of section 1158 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way
of dividends for the year is £1,498,000 (2023 – £1,325,000).
2024 2023 2024
£’000
2023
£’000
Dividends paid and proposed in the period:
Proposed final dividend per ordinary share
(payable 24 July 2024)
2.00p 1.70p 1,229 1,054
09 Investments
As at 31 January 2024
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Securities
Listed equities 114,200 – – 114,200
Unlisted equities – – 10,551 10,551
Total financial asset investments 114,200 – 10,551 124,751
As at 31 January 2023
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Securities
Listed equities 197,546 – – 197,546
Unlisted equities – – 11,953 11,953
Total financial asset investments 197,546 – 11,953 209,499
Investments in securities are financial assets held at fair value through profit or loss on initial recognition. In accordance with FRS
102 the tables above provide an analysis of these investments based on the fair value hierarchy described below which reflects
the reliability and significance of the information used to measure their fair value.
Financial report
Annual Report and Financial Statements 2024
104
09 Investments (continued)
Fair value hierarchy
The levels are determined by the lowest (that is the least reliable or least independently observable) level of input that is significant
to the fair value measurement for the individual investment in its entirety as follows:
Level 1 – using unadjusted quoted prices for identical instruments in an active market;
Level 2 – using inputs, other than quoted prices included within Level 1, that are directly or indirectly observable (based on market
data); and
Level 3 – using inputs that are unobservable (for which market data is unavailable).
The valuation techniques used by the Company are explained in the accounting policies on page 99. The Company’s unlisted
ordinary share investment at 31 January 2024 was valued using the market approach using comparable traded multiples.
A sensitivity analysis of the unlisted security is on page 110.
Significant Holdings Disclosure Requirements – AIC SORP
Details are disclosed below in accordance with the requirements of paragraph 82 of the AIC Statement of Recommended Practice
‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’ (updated in July 2022) in relation to unlisted
investments included in the ten largest holdings disclosed on page 54. As required, this disclosure includes turnover, pre-tax profits
and net assets attributable to investors, as reported within the most recently audited financial statements of the investee companies
where possible.
As at
31 January 2024
Latest
Financial
Statements
Book
cost
£’000
Market
value
£’000
Income
recognised
from holding
in the period
£’000
Turnover
(£‘000)
Pre-tax
profit/
(loss)
(£‘000)
Net assets
attributable to
shareholders
(£‘000)Name Business
ByteDance Social Media n/a 8,212 10,551 Nil Information not publicly available*
As at
31 January 2023
Book
cost
£’000
Market
value
£’000
Income
recognised
from holding
in the period
£’000
Turnover
(£‘000)
Pre-tax
profit/
(loss)
(£‘000)
Net assets
attributable to
shareholders
(£‘000)Name Business
Latest
Financial
Statements
ByteDance Social Media n/a 8,212 11,953 Nil Information not publicly available*
* Confidentiality agreements prevent the disclosure of this information.
Listed
equities
£’000
Unlisted
equities *
£’000
Total
£’000
Cost of investments held at 1 February 2023 227,778 8,212 235,990
Unrealised holding gains/(losses) at 1 February 2023 (30,232) 3,741 (26,491)
Value of investments held at 1 February 2023 197,546 11,953 209,499
Analysis of transactions during the year:
Purchases at cost 14,521 – 14,521
Sales proceeds received (15,663) – (15,663)
Realised losses on sales (13,745) – (13,745)
Losses on investments (68,459) (1,402) (69,861)
Value of investments held at 31 January 2024 114,200 10,551 124,751
Cost of investments held at 31 January 2024 212,891 8,212 221,103
Investment holding (losses)/gains at 31 January 2024 (98,691) 2,339 (96,352)
Value of investments at 31 January 2024 114,200 10,551 124,751
* The unlisted security investment represents a holding in ByteDance.
105
Baillie Gifford China Growth Trust plc
09 Investments (continued)
The company received £15,663,000 (2023 – £25,723,000) from investments sold in the year. The book cost of these investments
when they were purchased was £29,408,000 (2023 – £42,773,000). These investments have been revalued over time and until
they were sold any unrealised gains/losses were included in the fair value of the investments. The purchases and sales proceeds
figures above include transaction costs of £13,000 (2023 – £21,000) and £22,000 (2023 – £37,000) respectively.
2024
£’000
2023
£’000
Net losses on investments
Losses on sales (13,745) (17,050)
Changes in investment holding (losses)/gains (69,861) 4,672
(83,606) (12,378)
10 Debtors
2024
£’000
2023
£’000
Due within one year:
Accrued income and prepaid expenses 23 26
23 26
None of the above debtors are investments classified as held at fair value through profit or loss. The carrying amount of debtors
is a reasonable approximation of fair value.
11 Creditors – amounts falling due within one year
2024
£’000
2023
£’000
The Royal Bank of Scotland (International) Limited loan 5,890 6,092
Investment management fee
207 344
Other creditors and accruals 192 149
6,289 6,585
None of the above creditors are financial liabilities held at fair value through profit or loss. At 31 January 2024 borrowings of
£5.9m (US$7.5 million) (2023 – £6.1 million (US$7.5 million)) were drawn down under a two year US$40 million revolving credit
facility with The Royal Bank of Scotland (International) Limited which expires on 13 April 2024 at a margin of 1.3% over the US
Dollar Relevant Reference Rate with a maturity date of 13 April 2024. The main covenants relating to the current facility are:
i. The consolidated gross borrowings shall not exceed 30% of the Company’s adjusted portfolio value;
ii. The Company’s adjusted portfolio value is not less than £75,000,000; and
iii. Eligible investments held shall not be less than 40.
12 Share capital
2024
Number
2024
£’000
2023
Number
2023
£000
Allotted, called up and fully paid ordinary shares of 25p each 61,852,282 15,463 62,012,982 15,503
Treasury shares of 25p each 6,495,869 1,624 6,335,169 1,584
Total 68,348,151 17,087 68,348,151 17,087
In the year to 31 January 2024 no shares were issued from treasury (2023 – no shares were issued from treasury). The
Company’s shareholder authority permits it to hold shares bought back in treasury. Under such authority, treasury shares may
be subsequently either sold for cash (at a premium to net asset value per ordinary share) or cancelled. At 31 January 2024 the
Company had authority to buy back 9,135,046 ordinary shares. During the year to 31 January 2024, no ordinary shares (2023
– nil) were bought back for cancellation and 160,700 ordinary shares (2023 – nil) were bought back into treasury. Under the
provisions of the Company’s Articles of Association share buy-backs are funded from the capital reserve.
Financial report
Annual Report and Financial Statements 2024
106
13 Capital and reserves
Share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Capital
reserve
realised
£’000
Capital
reserve
unrealised
£’000
Revenue
reserve
£’000
Shareholders’
funds
£’000
At 1 February 2023 17,087 31,780 41,085 134,186 (26,438) 6,240 203,940
Net losses on sales
of investments
– – – (13,745) – – (13,745)
Changes in investment
holding gains
– – – – (69,861) – (69,861)
Exchange differences – – – (97) – – (97)
Exchange differences
on bank loans
– – – 217 (15) – 202
Ordinary shares
bought back
– – (299) – – (299)
Investment management
fee charged to capital
– – – (765) – – (765)
Finance costs of borrowings
charged to capital
– – – (408) – – (408)
Dividends paid in year – – – – – (1,054) (1,054)
Revenue return after
taxation
– – – – – 1,498 1,498
At 31 January 2024 17,087 31,780 41,085 119,089 (96,314) 6,684 119,411
Share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Capital
reserve
realised
£’000
Capital
reserve
unrealised
£’000
Revenue
reserve
£’000
Shareholders’
funds
£’000
At 1 February 2022 17,087 31,780 41,085 152,947 (31,326) 7,768 219,341
Net losses on sales
of investments
– – – (17,050) – – (17,050)
Changes in investment
holding gains
– – – – 4,672 – 4,672
Exchange differences – – – 287 – – 287
Exchange differences
on bank loans
– – – (719) 216 – (503)
Investment management
fee charged to capital
– – – (932) – – (932)
Finance costs of borrowings
charged to capital
– – – (347) – – (347)
Dividends paid in year – – – – – (2,853) (2,853)
Revenue return after
taxation
– – – – – 1,325 1,325
At 31 January 2023 17,087 31,780 41,085 134,186 (26,438) 6,240 203,940
The capital reserve as at 31 January 2024 is £22,775,000 and is shown in the above table as capital reserve realised
£119,089,000 and capital reserve unrealised (£96,314,000). The capital reserve unrealised includes investment holding losses
of £96,532,000 (2023 – losses of £26,491,000) as disclosed in note 9.
Under the terms of the Company’s Articles of Association, sums standing to the credit of the capital reserve are available for
distribution only by way of redemption, purchase of any of the Company’s own shares or by way of dividend.
The revenue reserve and the capital reserve realised in the table above, are distributable.
107
Baillie Gifford China Growth Trust plc
14 Shareholders’ funds per ordinary share
2024 2023 2024
£’000
2023
£’000
Shareholders’ funds 193.06p 328.87p 119,411 203,940
Net asset value per ordinary share is based on the net assets as shown above and 61,852,282 (2023 – 62,012,982) ordinary
shares, being the number of ordinary shares in issue at the year end, excluding shares held in treasury. At 31 January 2024 all
borrowings were in the form of short term floating rate borrowings and their fair value is considered equal to their book value,
hence there is no difference in the net asset value per share between including debt at book, or fair value, in the calculation.
15 Analysis of change in net debt
1 February
2023
£’000
Cash flows
£’000
Exchange
movement
£’000
31 January
2024
£’000
Cash and cash equivalents 1,000 23 (97) 926
Loans due within one year (6,092) – 202 (5,890)
(5,092) 23 105 (4,964)
1 February
2022
£’000
Cash flows
£’000
Exchange
movement
£’000
31 January
2023
£’000
Cash and cash equivalents 5,496 (4,783) 287 1,000
Loans due within one year (5,590) – (502) (6,092)
(94) (4,783) (215) (5,092)
16 Contingent liabilities, guarantees and financial commitments
There were no contingent liabilities, guarantees or financial commitments at the year end (2023 – none).
17 Transactions with related parties and the managers and secretaries
The Directors’ fees for the year and interests in the Company’s shares at the end of the year are detailed in the Directors’
remuneration report on pages 80 and 81. No Director has a contract of service with the Company. During the years reported, no
Director was interested in any contract or other matter requiring disclosure under section 412 of the Companies Act 2006.
The Management fee due to Baillie Gifford & Co Limited is set out in note 3 on page 101 and the amount accrued is set out in
note 11 on page 105. Details of the Investment Management Agreement are set out on pages 62 to 63.
18 Financial instruments
The Company invests in equities for the long term so as to achieve its investment objective of long-term capital growth with the
aim of providing a total return in excess of the MSCI China All Share Index. The Company borrows money when the Managers
have sufficient conviction that the assets funded by borrowed monies will generate a return in excess of the cost of borrowing.
In pursuing its investment objective, the Company is exposed to various types of risk that are associated with the financial
instruments and markets in which it invests and could result in a reduction in the Company’s net assets and/or a reduction in the
profits available for dividend.
These risks are categorised here as market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and
credit risk. The Board monitors closely the Company’s exposures to these risks but does so in order to reduce the likelihood of a
permanent loss of capital rather than to minimise short-term volatility.
The risk management policies and procedures outlined in this note have not changed substantially from the previous accounting
year.
Market risk
The fair value or future cash flows of a financial instrument or other investment held by the Company may fluctuate because of
changes in market prices. This market risk comprises three elements – currency, interest rate risk and market price risk. The Board
reviews and agrees policies for managing these risks and the Company’s Investment Manager assesses the exposure to market
risk when making individual investment decisions as well as monitoring the overall level of market risk across the investment
portfolio on an ongoing basis. Details of the Company’s investment portfolio are shown on pages 54 and 56.
Financial report
Annual Report and Financial Statements 2024
108
18 Financial instruments (continued)
Currency risk
The Company’s assets, liabilities and income are denominated in currencies other than sterling (the Company’s functional
currency and that in which it reports its results). Consequently, movements in exchange rates may affect the sterling value of
those items.
The Investment Manager monitors the Company’s exposure to foreign currencies and reports to the Board on a regular basis.
The Investment Manager assesses the risk to the Company of the foreign currency exposure by considering the effect on the
Company’s net asset value and income of a movement in the rates of exchange to which the Company’s assets, liabilities, income
and expenses are exposed. However, the country in which a company is listed is not necessarily where it earns its profits. The
movement in exchange rates on overseas earnings may have a more significant impact upon a company’s valuation than a simple
translation of the currency in which the company is quoted.
Exposure to currency risk through asset allocation, which is calculated by reference to the currency in which the asset or liability
is quoted, or, for unlisted investments, denominated, is shown below.
At 31 January 2024
Investments
£’000
Cash and
deposits
£’000
Bank loans
£’000
Debtors
and creditors
£’000
Net
exposure
£’000
US dollar 13,353 737 (5,890) (21) 8,179
Hong Kong dollar 62,593 – – – 62,593
Chinese renminbi 46,687 155 – – 46,842
Taiwanese dollar 2,118 – – – 2,118
Total exposure to currency risk 124,751 892 (5,890) (21) 119,732
Sterling – 34 – (355) (321)
124,751 926 (5,890) (376) 119,411
At 31 January 2023
Investments
£’000
Cash and
deposits
£’000
Bank loans
£’000
Debtors
and creditors
£’000
Net
exposure
£’000
US dollar 13,676 254 (6,092) (18) 7,820
Hong Kong dollar 109,313 – – – 109,313
Chinese renminbi 86,510 726 – – 87,236
Total exposure to currency risk 209,499 980 (6,092) (18) 204,369
Sterling – 20 – (449) (429)
209,499 1,000 (6,092) (467) 203,940
Currency Risk Sensitivity
At 31 January 2024, if sterling had strengthened by 10% in relation to all currencies, with all other variables held constant, total
net assets and total return on ordinary activities would have decreased by the amounts shown below. A 10% weakening of sterling
against all currencies, with all variables held constant, would have had an equal but opposite effect on the Financial Statement
amounts. The analysis is performed on the same basis for 2023.
2024
£’000
2023
£’000
US dollar 818 782
Hong Kong dollar 6,259 10,931
Chinese renminbi 4,684 8,724
Taiwanese dollar 212 –
11,973 20,437
109
Baillie Gifford China Growth Trust plc
18 Financial instruments (continued)
Interest rate risk
Interest rate movements may affect the level of income receivable and payable on cash deposits and interest payable on variable
rate borrowings. They may also impact upon the market value of the Company’s investments as the effect of interest rate
movements upon the earnings of a company may have a significant impact upon the valuation of that company’s equity.
The possible effects on cash flows that could arise as a result of changes in interest rates are taken into account when making
investment decisions and when entering borrowing agreements.
The Board reviews on a regular basis the amount of investments in cash and the income receivable on cash deposits.
The Company has the ability to finance part of its activities through borrowings at approved levels. The amount of such
borrowings and the approved levels are monitored and reviewed regularly by the Board.
During the year to 31 January 2024, the majority of the Company’s assets were non-interest bearing, and there was exposure to
interest bearing liabilities through the loan agreement.
Financial assets
Cash deposits generally comprise overnight call or short-term money market deposits and earn interest at floating rates based on
prevailing bank base rates.
Financial liabilities
The interest risk profile of the Company’s financial liabilities and the maturity profile of the undiscounted future cash flows in
respect of the Company’s contractual financial liabilities at 31 January are shown below:
Interest rate risk profile
The interest rate risk profile of the Company’s financial liabilities at 31 January was:
2024
£’000
2023
£’000
Floating rate – US$ denominated 5,890 6,092
5,890 6,092
Maturity profile
The maturity profile of the Company’s financial liabilities at 31 January was:
2024
£’000
2023
£’000
In less than three months
Repayment of loans 5,890 6,092
Interest on loan 21 18
5,911 6,110
Interest rate risk sensitivity
An increase of 1% in interest rates, with all other variables being held constant, would have decreased the Company’s net assets
for the year to 31 January 2024 by £53,000 (year to 31 January 2023 – £55,000). A decrease of 1% would have had an equal but
opposite effect.
Other price risk
Changes in market prices other than those arising from interest rate risk or currency risk may also affect the value of the Company’s
net assets. The Company’s exposure to changes in market prices relates to the fixed asset investments as disclosed in note 9.
The Board manages the market price risks inherent in the investment portfolio by ensuring full and timely access to relevant
information from the Investment Manager. The Board meets regularly and at each meeting reviews investment performance, the
investment portfolio and the rationale for the current investment positioning to ensure consistency with the Company’s objectives
and investment policies. The portfolio does not seek to reproduce the index, investments are selected based upon the merit of
individual companies and therefore performance may well diverge from the comparative index.
Financial report
Annual Report and Financial Statements 2024
110
18 Financial instruments (continued)
Other price risk sensitivity
A full list of the Company’s investments is shown on pages 54 to 56.
95.6% (2023 – 96.9%) of the Company’s net assets are invested in Level 1 quoted equities. A 10% increase in quoted equity
valuations at 31 January 2024 would have increased total net assets and net return on ordinary activities after taxation by
£11,420,000 (2023 – £19,755,000). A decrease of 10% would have had an equal but opposite effect.
8.8% (2023 – 5.9%) of the Company’s net assets are invested in an unlisted security. The fair valuation of the unlisted
investment is influenced by the estimates, assumptions and judgements made in the fair valuation process (see 1(b) on pages 98
and 99). A sensitivity analysis is provided below which recognises that the valuation methodologies employed involve subjectivity
in their significant unobservable inputs and illustrates the sensitivity of the valuations to these inputs. The inputs have been flexed
by +/-10% with the exception of the recent transaction price valuation approach as it does not involve significant subjectivity.
The table also provides the range of values for the key unobservable inputs.
As at
31 January 2024 Significant unobservable inputs*
Valuation
technique
Fair value of
investments
£’000
Key
unobservable
inputs
Other
unobservable
inputs Range
Sensitivity
%
Sensitivity to changes in
significant unobservable inputs
Market approach
using comparable
traded multiples
10,551 Enterprise
value /
Last twelve
months ( EV/
LTM) revenue
multiple
a,b,c,d 1.23x –
7.22x
10% If EV/LTM multiples changed
by +/- 10%, the fair value
would change by £918,101 and
(£918,497)
Discount for
lack of liquidity
e 10% 10% If the illiquidity discount is
changed by +/- 10%, the fair
value would change by £117,040
and (£117,436)
As at
31 January 2023 Significant unobservable inputs*
Valuation
technique
Fair value of
investments
£’000
Key
unobservable
inputs
Other
unobservable
inputs Range
Sensitivity
%
Sensitivity to changes in
significant unobservable inputs
Market approach
using comparable
traded multiples
11,953 EV/LTM
revenue
multiple
a,b,c,d 2.2x – 7.3x 10% If EV/LTM multiples changed
by +/-10%, the fair value
would change by £1,136,313
and (£1,136,313)
Discount for
lack of liquidity
a,b,c,d,e -10% 10% If the illiquidity discount is
changed by +/-10%, the fair
value would change by
£132,816 and (£132,816)
* Significant unobservable inputs
The variable inputs applicable to each broad category of valuation basis will vary dependent on the particular circumstances of
each private company valuation. An explanation of each of the key variable inputs is provided below. The assumptions made in
the production of the inputs are described in note 1(c) on page 99.
a. Application of valuation basis
Each investment is assessed independently, and the valuation basis applied will vary depending on the circumstances of each
investment. When an investment is pre-revenue, the focus of the valuation will be on assessing the recent transaction and the
achievement of key milestones since investment. Adjustments may also be made depending on the performance of comparable
benchmarks and companies. For those investments where a trading multiples approach can be taken, the methodology will
factor in revenue, earnings or net assets as appropriate for the investment, and where a suitable correlation can be identified
with the comparable companies then a regression analysis will be performed. Discounted cash flows will also be considered
where appropriate forecasts are available.
111
Baillie Gifford China Growth Trust plc
18 Financial instruments (continued)
Significant unobservable inputs (continued)
b. Probability estimation of liquidation events
The probability of a liquidation event such as a company sale, or alternatively an initial public offering (‘IPO’), is a key variable
input in the transaction-based and multiples-based valuation techniques. The probability of an IPO versus a company sale is
typically estimated from the outset to be 50:50 if there has been no indication by the company of pursuing either of these
routes. If the company has indicated an intention to IPO, the probability is increased accordingly to 75% and if an IPO has
become a certainty the probability is increased to 100%. Likewise, in a scenario where a company is pursuing a trade sale
the weightings will be adjusted accordingly in favour of a sale scenario, or in a situation where a company is underperforming
expectations significantly and therefore deemed very unlikely to pursue an IPO.
c. Selection of comparable companies
The selection of comparable companies is assessed individually for each investment at the point of investment, and the relevance
of the comparable companies is continually evaluated at each valuation. The key criteria used in selecting appropriate comparable
companies are the industry sector in which they operate, the geography of the company’s operations, the respective revenue and
earnings growth rates and the operating margins. Typically, between 4 and 10 comparable companies will be selected for each
investment, depending on how many relevant comparable companies are identified. The resultant revenue or earnings multiples
or share price movements derived will vary depending on the companies selected and the industries they operate in.
d. Estimated sustainable earnings
The selection of sustainable revenue or earnings will depend on whether the company is sustainably profitable or not, and
where it is not then revenues will be used in the valuation. The valuation approach will typically assess companies based on
the last twelve months of revenue or earnings, as they are the most recent available and therefore viewed as the most reliable.
Where a company has reliably forecasted earnings previously or there is a change in circumstance at the business which will
impact earnings going forward, then forward estimated revenue or earnings may be used instead.
e. Application of illiquidity discount
The application of an illiquidity discount will be applied either through the calibration of a valuation against the most recent
transaction, or by application of a specific discount. The discount applied where a calibration is not appropriate is typically
10%, reflecting that the majority of the investments held are substantial companies with some secondary market activity.
Liquidity risk
This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities as they
fall due. Liquidity risk is not significant as the majority of the Company’s assets are in investments that are readily realisable.
The Company’s holding in an unlisted investment, which is not considered to be readily realisable, amounts to 8.8% of net assets
at 31 January 2024.
The Company has the power to take out borrowings, which give it access to additional funding when required. The maturity profile
of the Company’s financial liabilities is on page 109.
Credit risk
This is the risk that a failure of a counterparty to a transaction to discharge its obligations under that transaction could result in
the Company suffering a loss. This risk is managed as follows:
• where the Investment Manager makes an investment in a bond or other security with credit risk, that credit risk is assessed and
then compared to the prospective investment return of the security in question;
• the Depositary is liable for the loss of financial instruments held in custody. The Depositary will ensure that any delegate
segregates the assets of the Company. The Depositary has delegated the custody function to The Bank of New York Mellon
(International) Limited. Bankruptcy or insolvency of the custodian may cause the Company’s rights with respect to securities
held by the custodian to be delayed. The Investment Manager monitors the Company’s risk by reviewing the custodian’s internal
control reports and reporting its findings to the Board;
• investment transactions are carried out with a large number of brokers whose creditworthiness is reviewed by the Investment
Manager. Transactions are ordinarily undertaken on a delivery versus payment basis whereby the Company’s custodian ensures
that the counterparty to any transaction entered into by the Company has delivered on its obligations before any transfer of
cash or securities away from the Company is completed;
• the creditworthiness of the counterparty to transactions involving derivatives, structured notes and other arrangements,
wherein the creditworthiness of the entity acting as broker or counterparty to the transaction is likely to be of sustained
interest, is subject to rigorous assessment by the Investment Manager; and
• cash is only held at banks that are regularly reviewed by the Investment Manager.
Financial report
Annual Report and Financial Statements 2024
112
18 Financial instruments (continued)
Credit risk exposure
The exposure to credit risk at 31 January was:
2024
£’000
2023
£’000
Debtors 23 26
Cash and cash equivalents 926 1,000
949 1,026
None of the Company’s financial assets are past due or impaired.
Fair value of financial assets and financial liabilities
The Company’s investments are stated at fair value and the Directors are of the opinion that the reported values of the Company’s
other financial assets and liabilities approximate to fair value.
Capital management
The objective of the Company is to maximise the total return to its equity shareholders through an appropriate capital structure.
Its borrowings are set out in note 11 on page 105. The Company does not have any externally imposed capital requirements other
than the covenants on its loan which are detailed in note 11. The capital of the Company is the ordinary share capital as detailed in
note 12. It is managed in accordance with its Investment Policy in pursuit of its investment objective, both of which are detailed on
pages 28 and 29, and shares may be repurchased or issued as explained on page 105.
Shareholder
information
Shareholder information
Annual Report and Financial Statements 2024
114
Notice of Annual
General Meeting
The Annual General Meeting of Baillie Gifford
China Growth Trust plc will be held at The Cavendish
Hotel, 81 Jermyn Street, St James’s, London,
SW1Y 6JF on Wednesday 19 June 2024, at 4pm.
You will find directions to the venue by scanning
the QR code above.
To accurately reflect the views of shareholders of
the Company, the Board intends to hold the AGM
voting on a poll, rather than by a show of hands
as has been customary.
The Board encourages all shareholders to
submit proxy voting forms as soon as possible
and, in any event, by no later than 4pm on
Monday 17 June 2024.
Should shareholders have questions for the Board
or the Managers or any queries as to how to vote
or how to attend the meeting they are welcome
as always to submit them by email to
trustenquiries@bailliegifford.com or call
0800 917 2112. Baillie Gifford may record your call.
For details of how to vote your shares if held via a
platform please refer to theaic.co.uk/how-to-vote-
your-shares.
Piccadilly
Pall Mall
Haymarket
Regent Street
St James’s Street
Piccadilly
Circus
The Mall
King St
Jermyn Street
St James’s Sq
The Cavendish Hotel
81 Jermyn Street
St James’s
London
SW1Y 6JF
115
Baillie Gifford China Growth Trust plc
Notice is hereby given that an Annual General
Meeting of Baillie Gifford China Growth Trust plc will
be held at The Cavendish Hotel, 81 Jermyn Street,
St James’s, London SW1Y 6JF on Wednesday
19 June 2024, at 4pm for the following purposes.
To consider and, if thought fit, to pass the following
Resolutions as Ordinary Resolutions.
01. To receive and adopt the Financial Statements
of the Company for the year to 31 January 2024
with the Reports of the Directors and of the
Independent Auditor thereon.
02. To receive and approve the Directors’ Annual
Report on Remuneration for the year to
31 January 2024.
03. To declare a final dividend of 2.00p per ordinary
share.
04. To re-elect Magdalene Miller as a Director of the
Company.
05. To re-elect Tim Clissold as a Director of the
Company.
06. To re-elect Jonathan Silver as a Director of the
Company.
07. To elect Nicholas Pink as a Director of the
Company.
08. To elect Sarah MacAulay as a Director of the
Company.
09. To re-appoint Ernst & Young LLP as Independent
Auditor of the Company to hold office from the
conclusion of this meeting until the conclusion
of the next Annual General Meeting at which
the Financial Statements are laid before the
Company.
10. To authorise the Directors to determine the
remuneration of the Independent Auditor of the
Company.
11. That, in substitution for any existing authority,
but without prejudice to the exercise of any such
authority prior to the date hereof, the Directors
of the Company be and they are hereby
generally and unconditionally authorised in
accordance with section 551 of the Companies
Act 2006 (the ‘Act’) to exercise all the powers of
the Company to allot shares in the Company and
to grant rights to subscribe for or to convert any
security into shares in the Company (‘Securities’)
provided that such authority shall be limited to
the allotment of shares and the grant of rights
in respect of shares with an aggregate nominal
value of up to £5,121,924, such authority to
expire at the conclusion of the next Annual
General Meeting of the Company after the
passing of this Resolution or on the expiry of
15 months from the passing of this Resolution,
whichever is the earlier, unless previously
revoked, varied or extended by the Company in
a General Meeting, save that the Company may
at any time prior to the expiry of this authority
make an offer or enter into an agreement which
would or might require Securities to be allotted
or granted after the expiry of such authority
and the Directors shall be entitled to allot or
grant Securities in pursuance of such an offer or
agreement as if such authority had not expired.
To consider and, if thought fit, to pass Resolutions
12 and 13 as Special Resolutions.
12. That, subject to the passing of Resolution 11
above, and in substitution for any existing power
but without prejudice to the exercise of any such
power prior to the date hereof, the Directors of
the Company be and they are hereby generally
empowered, pursuant to sections 570 and 573
of the Companies Act 2006 (the ‘Act’), to allot
equity securities (within the meaning of section
560(1) of the Act), for cash pursuant to the
authority given by Resolution 11 above, and to
sell treasury shares for cash, as if section 561(1)
of the Act did not apply to any such allotment or
sale, provided that this power:
Shareholder information
Annual Report and Financial Statements 2024
116
a. expires at the conclusion of the next Annual
General Meeting of the Company after
the passing of this Resolution or on the
expiry of 15 months from the passing of this
Resolution, whichever is the earlier, save that
the Company may, before such expiry, make
an offer or agreement which would or might
require equity securities to be allotted or
treasury shares to be sold after such expiry
and the Directors may allot equity securities or
sell treasury shares in pursuance of any such
offer or agreement as if the power conferred
hereby had not expired; and
b. shall be limited to the allotment of equity
securities or the sale of treasury shares up
to an aggregate nominal value of £1,536,577,
being approximately 10% of the nominal value
of the issued share capital of the Company, as
at 1 April 2024.
13. That, in substitution for any existing authority
but without prejudice to the exercise of any such
authority prior to the date hereof, the Company
be and is hereby generally and unconditionally
authorised, pursuant to and in accordance
with section 701 of the Companies Act 2006
(the ‘Act’) to make market purchases (within
the meaning of section 693(4) of the Act) of
fully paid ordinary shares of 25 pence each in
the capital of the Company (‘ordinary shares’)
(either for retention as treasury shares for
future reissue, resale, transfer or cancellation),
provided that:
a. the maximum aggregate number of ordinary
shares hereby authorised to be purchased is
9,213,317, or, if less, the number representing
approximately 14.99% of the issued ordinary
share capital of the Company as at the date of
the passing of this Resolution;
b. the minimum price (excluding expenses) which
may be paid for each ordinary share shall be
the nominal value of that share;
c. the maximum price (excluding expenses)
which may be paid for each ordinary share
shall not be more than the higher of:
i. 5% above the average closing price
on the London Stock Exchange of an
ordinary share over the five business
days immediately preceding the date of
purchase; and
ii. an amount equal to the higher of the price
of the last independent trade of an ordinary
share and the highest current independent
bid for an ordinary share on the trading
venue where the purchase is carried out;
and
d. unless previously varied, revoked or renewed
by the Company in a General Meeting, the
authority hereby conferred shall expire at the
conclusion of the Annual General Meeting
of the Company to be held in respect of the
year ending 31 January 202 5, save that the
Company may, prior to such expiry, enter
into a contract to purchase ordinary shares
under such authority which will or might be
completed or executed wholly or partly after
the expiration of such authority and may make
a purchase of ordinary shares pursuant to any
such contract.
By order of the Board
Baillie Gifford & Co Limited
Managers and Secretaries
2 April 2024
117
Baillie Gifford China Growth Trust plc
Notes
01. As a member you are entitled to appoint a proxy
or proxies to exercise all or any of your rights
to attend, speak and vote at the AGM. A proxy
need not be a member of the Company but
must attend the AGM to represent you. You may
appoint more than one proxy provided each
proxy is appointed to exercise rights attached to
different shares. You can only appoint a proxy
using the procedure set out in these notes and
the notes to the proxy form. You may not use
any electronic address provided either in this
notice or any related documents (including the
proxy form) to communicate with the Company
for any purpose other than those expressly
stated.
02. To be valid any proxy form or other instrument
appointing a proxy, together with any power
of attorney or other authority under which it
is signed or a certified copy thereof, must be
received by post or (during normal business
hours only) by hand at the Registrars of the
Company at Computershare Investor Services
PLC, The Pavilions, Bridgwater Road, Bristol,
BS99 6ZY or eproxyappointment.com no later
than 2 days (excluding non-working days)
before the time of the meeting or any adjourned
meeting.
03. CREST members who wish to appoint a proxy
or proxies through the CREST electronic proxy
appointment service may do so by using the
procedures described in the CREST Manual
and/or by logging on to the website
euroclear.com/CREST. CREST personal
members or other CREST sponsored members,
and those CREST members who have appointed
a voting service provider(s), should refer to their
CREST sponsor or voting service provider(s),
who will be able to take the appropriate action
on their behalf.
04. In order for a proxy appointment or instruction
made using the CREST service to be valid, the
appropriate CREST message (a ‘CREST Proxy
Instruction’) must be properly authenticated in
accordance with Euroclear UK & International
Limited’s specifications, and must contain the
information required for such instruction, as
described in the CREST Manual. The message,
regardless of whether it constitutes the
appointment of a proxy or is an amendment to
the instruction given to a previously appointed
proxy must, in order to be valid, be transmitted
so as to be received by the Company’s registrar
(ID 3RA50) no later than 2 days (excluding
non-working days) before the time of the
meeting or any adjournment. For this purpose,
the time of receipt will be taken to be the time
(as determined by the timestamp applied to
the message by the CREST Application Host)
from which the Company’s registrar is able to
retrieve the message by enquiry to CREST in
the manner prescribed by CREST. After this time
any change of instructions to proxies appointed
through CREST should be communicated to the
appointee through other means.
05. CREST members and, where applicable,
their CREST sponsors, or voting service
providers should note that Euroclear UK &
International Limited does not make available
special procedures in CREST for any particular
message. Normal system timings and
limitations will, therefore, apply in relation to
the input of CREST Proxy Instructions. It is the
responsibility of the CREST member concerned
to take (or, if the CREST member is a CREST
personal member, or sponsored member, or
has appointed a voting service provider(s), to
procure that his/her CREST sponsor or voting
service provider(s) take(s)) such action as
shall be necessary to ensure that a message
is transmitted by means of the CREST system
by any particular time. In this connection,
CREST members and, where applicable, their
CREST sponsors or voting system providers are
referred, in particular, to those sections of the
CREST Manual concerning practical limitations
of the CREST system and timings.
Shareholder information
Annual Report and Financial Statements 2024
118
06. The Company may treat as invalid a CREST
Proxy Instruction in the circumstances set out
in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
07. The return of a completed proxy form or
other instrument of proxy will not prevent
you attending the AGM and voting in person
if you wish.
08. Pursuant to Regulation 41 of the Uncertificated
Securities Regulations 2001 and section 311 of
the Companies Act 2006 the Company specifies
that to be entitled to attend and vote at the
Annual General Meeting (and for the purpose of
the determination by the Company of the votes
they may cast), shareholders must be registered
in the Register of Members of the Company no
later than 2 days (excluding non-working days)
prior to the commencement of the AGM or any
adjourned meeting. Changes to the Register
of Members after the relevant deadline shall
be disregarded in determining the rights of any
person to attend and vote at the meeting.
09. Any person to whom this notice is sent who is
a person nominated under section 146 of the
Companies Act 2006 to enjoy information rights
(a ‘Nominated Person’) may, under an agreement
between him/her and the shareholder by whom
he/she was nominated, have a right to be
appointed (or to have someone else appointed)
as a proxy for the Annual General Meeting.
If a Nominated Person has no such proxy
appointment right or does not wish to exercise it,
he/she may, under any such agreement, have a
right to give instructions to the shareholder as to
the exercise of voting rights.
10. The statement of the rights of shareholders in
relation to the appointment of proxies in Notes
1 and 2 above does not apply to Nominated
Persons. The rights described in those Notes
can only be exercised by shareholders of the
Company.
11. Under section 338 of the Companies Act 2006,
members meeting the qualification criteria set
out in note 14 below may, subject to certain
conditions, require the Company to circulate
to members notice of a resolution which may
properly be moved and is intended to be moved
at that meeting. The conditions are that:
a. the resolution must not, if passed,
be ineffective (whether by reason of
inconsistency with any enactment or the
Company’s constitution or otherwise);
b. the resolution must not be defamatory of any
person, frivolous or vexatious; and
c. the request:
i. may be in hard copy form or in electronic
form;
ii. must identify the resolution of which notice
is to be given by either setting out the
resolution in full or,
if supporting a resolution sent by another
member, clearly identifying the resolution
which is being supported;
iii. must be authenticated by the person or
persons making it; and (iv) must be received
by the Company not later than 8 May 2024.
12. Under section 338A of the Companies Act 2006,
members meeting the qualification criteria set
out at note 14 below may require the Company
to include in the business to be dealt with at the
Annual General Meeting a matter (other than
a proposed resolution) which may properly be
included in the business (a matter of business).
The request must have been received by
the Company not later than Wednesday
8 May 2024. The conditions are that the matter
of business must not be defamatory of any
person, frivolous or vexatious. The request must
identify the matter of business by either setting
it out in full or, if supporting a statement sent by
another member, clearly identify the matter of
business which is being supported. The request
must be accompanied by a statement setting out
the grounds for the request. Members seeking
to do this should write to the Company providing
their full name and address.
119
Baillie Gifford China Growth Trust plc
13. Under section 527 of the Companies Act 2006,
members meeting the qualification criteria set
out in note 14 below may require the Company
to publish, on its website, (without payment) a
statement (which is also passed to the Auditor)
setting out any matter relating to the audit of the
Company’s Financial Statements, including the
Auditor’s report and the conduct of the audit.
Such requests must be made in writing and must
state your full name and address.
14. In order to be able to exercise the members’
rights in notes 11 to 13, the relevant request
must be made by:
a. members representing at least 5% of the
total voting rights of all the members who have
a right to vote on the resolution to which the
requests relate; or
b. at least 100 members who have a right to vote
on the resolution to which the requests relate
and hold shares in the Company on which
there has been paid up an average sum, per
member, of at least £100.
Such requests should be sent to the Company
at Calton Square, 1 Greenside Row, Edinburgh,
EH1 3AN. Electronic requests permitted under
section 338 (see note 11) should be sent to
trustenquiries@bailliegifford.com.
15. Information regarding the Annual General
Meeting, including information required
by section 311A of the Companies Act
2006, is available from the Company’s
page of the Managers’ website at
bailliegiffordchinagrowthtrust.com.
16. All shareholders are strongly encouraged to
exercise your votes in respect of the AGM
in advance, and to appoint the Chair of the
Meeting as your proxy, to ensure that your
votes are counted. Furthermore, the Board
always welcomes questions from the Company’s
shareholders at the AGM and shareholders are
invited to submit their questions to the Board
in advance. The answers to these questions
will be posted on the Company’s page of the
Managers’ website after the AGM. Shareholders
should submit any questions they may have to
trustenquiries@bailliegifford.com before
12 June 2024.
17. As at 1 April 2024 (being the last practicable
day prior to the publication of this notice) the
Company’s issued share capital consisted of
61,463,093 ordinary shares, carrying one vote
each. Therefore, the total voting rights in the
Company as at 1 April 2024 were 61,463,093
votes. Voting on the resolutions will be
conducted by way of a poll. This will ensure an
exact and definitive result.
18. Any person holding 3% or more of the total
voting rights of the Company who appoints
a person other than the Chair of the meeting
as his/her proxy will need to ensure that both
he/she and his/her proxy complies with their
respective disclosure obligations under the
UK Disclosure and Transparency Rules.
19. No Director has a contract of service with the
Company.
Shareholder information
Annual Report and Financial Statements 2024
120
Baillie Gifford China Growth Trust is an
investment trust. Investment trusts offer
investors the following:
• participation in a diversified portfolio of shares;
• constant supervision by experienced professional
managers; and
• the Company is free from capital gains tax on
capital profits realised within its portfolio, although
investors are still liable for capital gains tax on
profits when selling their investment.
How to invest
The Company’s shares are traded on the London
Stock Exchange. They can be bought by placing an
order with a stockbroker, or by asking a professional
adviser to do so. If you are interested in investing
directly in Baillie Gifford China Growth Trust,
you can do so online. There are a number of
companies offering real time online dealing
services. Find out more by visiting the investment
trust pages at bailliegifford.com.
Sources of further information on the
Company
The price of shares is quoted daily in the
Financial Times and can also be found on the
Company’s page of the Managers’ website at
bailliegiffordchinagrowthtrust.com, Trustnet at
trustnet.com and on other financial websites.
Company factsheets are also available on the Baillie
Gifford website and are updated monthly. These are
available from Baillie Gifford on request.
Baillie Gifford China Growth Trust identifiers
ISIN GB0003656021
Sedol 0365602
Ticker BGCG
Legal Entity Identifier 213800KOK5G3XYI7ZX18
The ordinary shares of the Company are listed on
the London Stock Exchange.
Key dates
Ordinary shareholders normally receive a final
dividend in respect of each financial year, paid in
July. The Annual Report and Financial Statements
are normally issued in April and the AGM is normally
held in June.
Share register enquiries
Computershare Investor Services PLC maintains
the share register on behalf of the Company.
In the event of queries regarding shares registered
in your own name, please contact the registrars
on 0370 707 1410. This helpline also offers an
automated self-service functionality (available
24 hours a day, 7 days a week) which allows you to:
• hear the latest share price;
• confirm your current share holding balance;
• confirm your payment history; and
• order change of address, dividend bank mandate
and stock transfer forms.
You can also check your holding on the Registrars’
website at investorcentre.co.uk. They also offer a
free, secure share management website service
which allows you to:
• view your share portfolio and see the latest market
price of your shares;
• calculate the total market price of each
shareholding;
• view price histories and trading graphs;
• register to receive communications from the
Company, including the Annual Report and
Financial Statements, in electronic format;
• update bank mandates and change address
details; and
• use online dealing services.
Further shareholder
information
121
Baillie Gifford China Growth Trust plc
To take advantage of this service, please log in at
investorcentre.co.uk and enter your Shareholder
Reference Number and Company Code (this
information can be found on the last dividend
voucher or your share certificate).
Electronic proxy voting
If you hold stock in your own name you can choose
to vote by returning proxies electronically at
eproxyappointment.com.
If you have any questions about this service please
contact Computershare on 0370 707 1410.
CREST proxy voting
If you are a user of the CREST system (including
a CREST Personal Member), you may appoint one
or more proxies or give an instruction to a proxy
by having an appropriate CREST message
transmitted. For further information please refer
to the CREST Manual.
UK Alternative Investment Fund Managers
(‘AIFM’) Regulations
In accordance with the AIFM Regulations,
information in relation to the Company’s leverage
and the remuneration of the Company’s AIFM,
Baillie Gifford & Co Limited, is required to be
made available to investors. In accordance with
the Regulations, the AIFM remuneration policy
is available at bailliegifford.com or on request
(see contact details on page 129). The numerical
remuneration disclosures in respect of the AIFM’s
reporting period are available at bailliegifford.com.
Leverage
The Company’s maximum and actual leverage
(see Glossary of terms and alternative
performance measures on pages 126 to 128)
levels at 31 January 2024 are shown below:
Gross method
Commitment
method
Maximum limit 2.50:1 2.00:1
Actual 1.05:1 1.05:1
Automatic exchange of information
In order to fulfil its obligations under UK tax
legislation relating to the automatic exchange of
information, the Company is required to collect
and report certain information about certain
shareholders.
The legislation requires investment trust companies
to provide personal information to HMRC on certain
investors who purchase shares in investment
trusts. As an affected company, Baillie Gifford
China 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.
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
gov.uk/government/publications/exchange-of-
information-account-holders.
Data protection
The Company is committed to ensuring the
confidentiality and security of any personal data
provided to it. Further details on how personal data is
held and processed on behalf of the Company can be
found in the privacy policy available on the Company’s
website bailliegiffordchinagrowthtrust.com.
Shareholder information
Annual Report and Financial Statements 2024
122
Communicating
with shareholders
Trust magazine Baillie Gifford China Growth Trust web page at
bailliegiffordchinagrowthtrust.com
Trust magazine
Trust is the Baillie Gifford investment trust magazine
which is published twice a year. It provides an insight
to our investment approach by including interviews
with our fund managers, as well as containing
investment trust news, investment features and
articles about the trusts managed by Baillie Gifford,
including Baillie Gifford China Growth Trust.
Trust plays an important role in helping to explain
our products so that readers can really understand
them. For a copy of Trust, please contact the
Baillie Gifford Client Relations Team (see contact
details on page 129).
You can subscribe to Trust magazine or view a
digital copy at bailliegifford.com/trust
Suggestions and questions
Any suggestions on how communications with
shareholders can be improved are welcomed, so
please contact the Baillie Gifford Client Relations
Team and give them your suggestions. They will also
be very happy to answer questions that you may
have about Baillie Gifford China Growth Trust.
Baillie Gifford China Growth Trust on the web
Up-to-date information about Baillie Gifford
China Growth Trust is available on the
Company’s page of the Managers’ website at
bailliegiffordchinagrowthtrust.com. You will find full
details of the Company, including recent portfolio
information and performance figures.
Client relations team contact details
You can contact the Baillie Gifford Client Relations
Team by telephone, email or post:
Telephone: 0800 917 2112
Your call may be recorded for training or monitoring
purposes.
Email: trustenquiries@bailliegifford.com
Website: bailliegifford.com
Address:
Baillie Gifford Client Relations Team
Calton Square
1 Greenside Row
Edinburgh EH1 3AN
Please note that Baillie Gifford is not permitted
to give financial advice. If you would like advice,
please ask an authorised intermediary.
123
Baillie Gifford China Growth Trust plc
China: Fear or FOMO?
by Ben Buckler
Ben Buckler on how investors should
steer between the twin poles of risk
in China.
China Growth Trust:
Citywire webinar
by Sophie Earnshaw
Co-manager Sophie Earnshaw
discusses the opportunities and
challenges affecting the portfolio.
Finding China’s A-share jewels
by Qian Zhang
The country’s domestic markets are
rich in companies with the know-how
to become global leaders.
Insights
Shareholder information
Annual Report and Financial Statements 2024
124
Third party data
provider disclaimer
No third party data provider (‘Provider’) makes any
warranty, express or implied, as to the accuracy,
completeness or timeliness of the data contained
herewith nor as to the results to be obtained by
recipients of the data.
No Provider shall in any way be liable to any
recipient of the data for any inaccuracies, errors
or omissions in the index data included in this
document, regardless of cause, or for any damages
(whether direct or indirect) resulting therefrom.
No Provider has any obligation to update, modify
or amend the data or to otherwise notify a recipient
thereof in the event that any matter stated herein
changes or subsequently becomes inaccurate.
Without limiting the foregoing, no Provider shall have
any liability whatsoever to you, whether in contract
(including under an indemnity), in tort (including
negligence), under a warranty, under statute or
otherwise, in respect of any loss or damage suffered
by you as a result of or in connection with any
opinions, recommendations, forecasts, judgements,
or any other conclusions, or any course of action
determined, by you or any third party, whether or
not based on the content, information or materials
contained herein.
MSCI index data
The MSCI information may only be used for
your internal use, may not be reproduced or
redisseminated in any form and may not be used
as a basis for or a component of any financial
instruments or products or indices. None of the MSCI
information is intended to constitute investment
advice or a recommendation to make (or refrain from
making) any kind of investment decision and may
not be relied on as such. Historical data and analysis
should not be taken as an indication or guarantee
of any future performance analysis, forecast or
prediction. The MSCI information is provided on an
‘as is’ basis and the user of this information assumes
the entire risk of any use made of this information.
MSCI, each of its affiliates and each other person
involved in or related to compiling, computing or
creating any MSCI information (collectively, the
‘MSCI Parties’) expressly disclaims all warranties
(including, without limitation, any warranties of
originality, accuracy, completeness, timeliness,
non-infringement, merchantability and fitness for a
particular purpose) with respect to this information.
Without limiting any of the foregoing, in no event
shall any MSCI Party have any liability for any direct,
indirect, special, incidental, punitive, consequential
(including, without limitation, lost profits) or any
other damages (msci.com).
125
Baillie Gifford China Growth Trust plc
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 Baillie Gifford China
Growth Trust 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
stewardship 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
Sustainable Finance Disclosure
Regulation (‘SFDR’)
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 and by
scanning the QR code below.
The underlying investments do not take into account
the EU criteria for environmentally sustainable
economic activities established under the EU
Taxonomy Regulation.
Shareholder information
Annual Report and Financial Statements 2024
126
Glossary of terms and alternative
performance measures (‘APM’)
An alternative performance measure (‘APM’) 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. The APMs noted below are commonly used measures
within the investment trust industry and serve to improve comparability between investment trusts.
Total assets
This is the Company’s definition of adjusted total assets, being the total value of all assets less current
liabilities, before deduction of all borrowings.
Net asset value
Net asset value is the value of total assets less liabilities (including borrowings). The net asset value per
share (‘NAV’) is calculated by dividing this amount by the number of ordinary shares in issue (excluding
treasury shares).
Net liquid assets
Net liquid assets comprise current assets less current liabilities, excluding borrowings.
Discount/premium (APM)
As stockmarkets and share prices vary, an investment trust’s share price is rarely the same as its NAV.
When the share price is lower than the NAV it is said to be trading at a discount. The size of the discount is
calculated by subtracting the NAV per share from the share price and is usually expressed as a percentage
of the NAV.If the share price is higher than the NAV, it is said to be trading at a premium.
2024 2023
Closing NAV (a) 193.06p 328.87p
Closing share price (b) 181.00p 308.00p
Discount
((b) – (a)) ÷ (a)
(6.2%) (6.3%)
127
Baillie Gifford China Growth Trust plc
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.
2024
NAV
2024
Share price
2023
NAV
2023
Share price
Closing NAV per share/share price (a) 193.06p 181.00p
328.87p
308.00p
Dividend adjustment factor* (b) 1.006801 1.007763 1.014030 1.014557
Adjusted closing NAV per share/share price (c) = (a) x (b) 194.37p 182.41p 333.48p 312.48p
Opening NAV per share/share price (d) 328.87p 308.00p 353.70p 339.25p
Total return (c) ÷ (d) -1 (40.9%) (40.8%) (5.7%) (7.9%)
*
The dividend adjustment factor is calculated on the assumption that the dividend of 1.70p (2023 – 4.60p) paid by the Company during the year was
reinvested into shares of the Company at the cum income NAV/share price, as appropriate, at the ex-dividend date.
Ongoing charges (APM)
The total expenses (excluding borrowing costs) incurred by the Company as a percentage of the average
net asset value. The ongoing charges have been calculated on the basis prescribed by the Association of
Investment Companies.
A reconciliation from the expenses detailed in the Income statement on page 94 is provided below.
2024 2023
Investment management fee £1,020,000 £1,243,000
Other administrative expenses £523,000 £550,000
Total expenses (a) £1,543,000 £1,793,000
Average daily cum-income net asset value (b) £158,468,461 £190,419,970
Ongoing charges
((a) ÷ (b) expressed as a percentage)
0.97% 0.94%
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 shareholders’ funds
is called ‘gearing’. If the Company’s assets grow, shareholders’ funds 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 is the Company’s borrowings adjusted for cash and cash equivalents expressed as a percentage of
shareholders’ funds.
Gross gearing is the Company’s borrowings expressed as a percentage of shareholders’ funds.
2024 2023
Gearing *
£’000
Gross
Gearing
†
£’000
Gearing *
£’000
Gross
Gearing
†
£’000
Borrowings (a) 5,890 5,890
6,092 6,092
Cash and cash equivalents (b) 926 – 1,000 –
Shareholders’ funds (c) 119,411 119,411 203,940 203,940
4.2% 4.9% 2.5% 3.0%
*
Gearing: ((a)–(b)) divided by (c), expressed as a percentage.
† Gross gearing: (a) divided by (c), expressed as a percentage.
Shareholder information
Annual Report and Financial Statements 2024
128
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 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.
Unlisted (Private) Company
An unlisted (private) company means a company whose shares are not available to the general public for
trading and not listed on a stock exchange.
Variable Interest Entity (‘VIE’)
VIE structures are used by some Chinese companies to facilitate access to foreign investors in sectors
of the Chinese domestic economy which prohibit foreign ownership. The purpose of the VIE structure is
to give the economic benefits and operational control of ownership without direct equity ownership itself.
The structures are bound together by contracts and foreign investors are not directly invested in the
underlying company.
Treasury shares
The Company has the authority to make market purchases of its ordinary shares for retention as treasury
shares for future reissue, resale, transfer or for cancellation. Treasury shares do not receive distributions
and the Company is not entitled to exercise the voting rights attaching to them.
129
Baillie Gifford China Growth Trust plc
Directors
Chair: Susan Platts-Martin
Tim Clissold
Magdalene Miller
Nicholas Pink
Jonathan Silver
Alternative Investment Fund
Managers, Secretaries and
Registered office
Baillie Gifford & Co Limited
Grimaldi House
28 St James’s Square
London SW1Y 4JH
T: +44 (0)131 275 2000
bailliegifford.com
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
T: +44 (0)370 707 1410
Depositary
Bank of New York Mellon
(International) Limited
160 Queen Victoria Street
London EC4V 4LA
Company Broker
JP Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Independent Auditor
Ernst & Young LLP
Chartered Accountants
and Statutory Auditors
Atria One
144 Morrison Street
Edinburgh EH3 8EX
Further information
Client Relations Team
Baillie Gifford & Co
Calton Square
1 Greenside Row
Edinburgh EH1 3AN
T: +44 (0)800 917 2112
trustenquiries@bailliegifford.com
Company details
bailliegiffordchinagrowthtrust.com
Company Registration No. 91798
ISIN: GB0003656021
Sedol: 0365602
Ticker: BGCG
Legal Entity Identifier:
213800KOK5G3XYI7ZX18
Company
information
Calton Square, 1 Greenside Row, Edinburgh EH1 3AN
Telephone +44 (0)131 275 2000
bailliegiffordchinagrowthtrust.com
FSC