Baillie Gifford US Growth

RNS Announcement

Baillie Gifford US Growth Trust plc

Legal Entity Identifier: 213800UM1OUWXZPKE539

Regulated Information Classification: Half Yearly Financial Report

Results for six months to 30 November 2023

During the six months to 30 November 2023, the Company's share price and NAV (after deducting borrowings at fair value) returned 12.3% and 4.1% respectively. This compares with a total return of 7.9% for the S&P 500 Index* (in sterling terms). We have a long-term approach and would ask shareholders to judge performance over periods of five years or more.

-  During the period from 23 March 2018, launch date and first trade date, to 30 November 2023, the Company's share price and NAV (after deducting borrowings at fair value) returned 61.8% and 98.2% respectively. This compares with a total return of 117.8% for the S&P 500 Index* (in sterling terms).

-  At the end of November, we held positions in 24 private companies which comprised 31.7% of total assets.

-  We made three new purchases over the last six months, Meta Platforms, Samsara and Sprout Social. In addition, we made five complete sales during the period: Illumina, MarketAxess, Novocure, Redfin and Snap.

-  It has been a better year. The storm is easing. We know we cannot assume that the sun will always shine, but we take comfort from the fact that the companies held in your portfolio are executing, and executing well. When fundamentals will be better reflected in share prices is nigh on impossible to predict. Trying to predict the mood of the multitude of market participants is a fool's game for the long-term stock picker. Instead, we must double down on what differentiates us - long-term, active, growth, bottom-up stock pickers focused on fundamentals.

-  British physicist David Deutsch said, "We have a duty to be optimistic. Because the future is open, not predetermined and therefore cannot just be accepted: we are all responsible for what it holds". We take that responsibility seriously. US Growth holds companies which are determining that future. But it will take time. Navigating storms is part of the process. We believe the portfolio is well-positioned to navigate and realise its potential. That feels like a dream opportunity.

* Source: LSEG and relevant underlying index providers. See disclaimer at the end of this announcement.

Past performance is not a guide to future performance.

Baillie Gifford US Growth Trust plc seeks to invest predominantly in listed and unlisted US companies which the Company believes have the potential to grow substantially faster than the average company, and to hold onto them for long periods of time, in order to produce long term capital growth. The Company has total assets of £631.4 million (before deduction of loans of £39.5 million) as at 30 November 2023.

Baillie Gifford US Growth Trust plc is managed by Baillie Gifford & Co, the Edinburgh based fund management group with approximately £218.4 billion under management and advice in active equity and bond portfolios for clients in the UK and throughout the world (as at 22 January 2024).

The following is the unaudited Interim Financial Report for the six months to 30 November 2023 which was approved by the Board on 22 January 2024.

Responsibility statement

We confirm that to the best of our knowledge:

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

b.  the Interim Management Report includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.7R (being an indication of important events that have occurred during the first six months of the financial year, their impact on the condensed set of Financial Statements and a description of the principal risks and uncertainties for the remaining six months of the financial year); and

c.  the Interim Financial Report includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein).

On behalf of the Board

Tom Burnet

Chair

22 January 2024

Chair's interim update

Performance

During the first half of the financial year, the Company's share price and net asset value (after deducting borrowings at fair value) ('NAV') total return* were 12.3% and 4.1% respectively. This compares with a total return of 7.9% for the S&P 500 Index† (in sterling terms). The discount tightened during the period from 22.4% to 16.2%.

Further information about the Company's portfolio performance is covered by our portfolio managers, Gary Robinson and Kirsty Gibson, in their Interim management report.

Discount management

The Board acknowledges the discount is a challenge to many shareholders and the investment trust sector has been trading at discounts last seen during the financial crisis reaching an average sector low for the year of 16.9% at the end of October 2023. As at 1 June 2023 the Company was trading at a discount of 22.4%. This discount tightened to 16.2% as at 30 November 2023, being the end of the interim period.

The Board regularly reviews the Company's liquidity policy and it is a key discussion point at our Board meetings. We understand that repurchasing shares provides NAV accretion and can reduce share price volatility but we are also cognisant that buying back will result in the sale of public companies to fund the buy back and as such the portfolio will be skewed further towards the private company investments. Importantly if the exposure to private companies is a key driver behind the discount any such buy back could result in the discount widening rather than tightening. Following extensive Board discussions, a decision was reached during the period that the Company should undertake buy backs. The Company bought back 200,000 shares for a total consideration of £319,000. The Board will continue to monitor the discount and the application of the liquidity policy.

Gearing

During the period, the US$25 million five year revolving credit facility was refinanced with a US$25 million three year revolving credit facility from ING Bank N.V., London Branch, and the US$25 million three year fixed rate facility was refinanced with a US$25 million three ear revolving credit facility from The Royal Bank of Scotland International Limited.

Gearing* remained stable over the course of the period at 6% (6% as at 31 May 2023).

Outlook

Historically, periods of high inflation have led to underperformance in equity markets. As interest rates are used to control the inflation, growth equity valuations are often particularly hard hit and elements of your portfolio have borne the brunt of this over the last couple of years. As inflation drops and with interest rates potentially peaking, perhaps we can allow ourselves some optimism that valuations might begin to recover over the coming months. In any case, the Board remains supportive of the Managers' long-term approach to investing and we continue to encourage Gary and Kirsty to concentrate on identifying and buying into some of North America's most exciting companies. In that regard, the Board is pleased with your Company's progress and remains confident in the future.

Tom Burnet

Chair

22 January 2024

* Alternative performance measure, see Glossary of terms and Alternative Performance Measures at the end of this announcement.

Interim management report

During the period from 23 March 2018, launch date and first trade date, to 30 November 2023, the Company's share price and NAV (after deducting borrowings at fair value) returned 61.8% and 98.2% respectively. This compares with a total return of 117.8% for the S&P 500 Index* (in sterling terms).

This has not been a smooth journey. From launch until the end of Q3 2023, the top 15 listed holdings of the current portfolio experienced 59 drawdowns of greater than 20%. The largest single peak to trough hit was 82% for Shopify from November 2021 to October 2022. It has delivered a 347% share price rise since we first invested in it for the Company.  The average share price rise of the top 15 since our first investment is 305% with Tesla topping the list with a 1,351% return. This is asymmetry in action.

During the six months to 30 November 2023, the Company's share price and NAV (after deducting borrowings at fair value) returned 12.3% and 4.1% respectively. This compares with a total return of 7.9% for the S&P 500 Index* (in sterling terms). We have a long-term approach and would ask shareholders to judge performance over periods of five years or more.

Portfolio

"The big money is not in the buying and the selling, but in the waiting", Charlie Munger.

It feels only fitting to begin this Interim Report with a Mungerism. In part to mark the passing of a legendary investor but also to highlight its timeless relevance. The waiting, or a willingness to be patient, is an underappreciated skill set in investing. However, patience is different to inaction. In investing, patience is a willingness to ride out share price underperformance, given your conviction in the underlying strength of the company's business model and culture, even if the fundamentals are showing short-term weakness. To be effective it also requires a corresponding willingness to accept your mistakes and move on. Inaction, on the other hand, is about hope, not conviction. The hope that share prices recover, and a better exit opportunity presents itself.

We hypothesised that 2022 would be a year of reorientation, and 2023 would be a year of execution. Our portfolio companies experienced a valuation re-set following the pandemic. Faced with a higher interest rate environment and demand volatility, many spent much of 2022 reorientating their business models whilst endeavouring to execute on their long-term opportunities. As 2023 came to a close, the evidence for our hypothesis that it would be a year of execution has been building.

For some, the reorientation, and subsequent execution, has been easier given the greater levels of resilience in their business models. They were already profitable or generating free cash flow ('FCF')†. Examples would be CoStar, the US commercial and residential property data and marketplaces business, or Tesla, the electric vehicle manufacturer.

For others, it was a case of trimming some of the low interest rate environment excesses whilst maintaining the necessary investments for future growth. These companies removed teams or mothballed projects which no longer made economic sense, enabling them to transition to profitability. Examples include Shopify, the merchant-focused e-commerce platform, and Amazon, the online retailer.

Some remained less resilient from a cash flow or profitability perspective but had significant war chests of cash, providing them time to make the transition to self-sustainability whilst continuing to invest. An example would be Ginkgo Bioworks, the organism design company, whose current burn rate means it has two and a half years of cash remaining.

The final group of companies was lacking resilience. Some, like Wayfair, the online home furnishing business, and Affirm, the buy-now-pay-later company, made significant changes to shore up the resilience of their business models and are in far stronger positions than when the downturn began. For others, like Carvana, the online second-hand car marketplace, or Redfin, the real estate brokerage, we lost conviction in their ability to emerge from this environment stronger than when they went in. We consequently sold these holdings.

What we are seeing in the fundamentals at many of the businesses the Company holds only adds to our excitement about the future value of these companies. Wayfair has returned to revenue growth against a declining home market. CoStar is counter-cyclically investing its more than US$5 billion cash pile into future growth opportunities. Shopify launched ShopifyMagic, integrating artificial intelligence across its entire offering whilst delivering a 16% FCF margin, up from negative one year earlier. Duolingo, the gamified language learning app, is growing users at over 60% year-on-year despite spending just 16% of revenues on marketing. DoorDash, the food delivery app, has seen strong cohort dynamics and delivered close to US$900 million in FCF over the last twelve months.

It has not been plain sailing for all. Moderna continues to work through the uncertainty of Covid-19 vaccine demand, as the market moves from a pandemic to an endemic phase. Whilst we continue to believe in the opportunity for RNA as a treatment platform, and the data for future treatments is positive, the journey to steady state Covid revenues has been painful. Convoy, a marketplace for shippers and truckers and one of the Company's private investments, fell victim to the macro-economic environment. Despite the best efforts of its management team, Convoy had yet to reach the necessary scale to withstand the freight market's decline and could not cut its way to profitability. Convoy has gone out of business.

While share prices have shown strength over the past year, we continue to see opportunity in the dislocations between stock prices and the underlying valuations of companies. Future cash flows and earnings drive value, and a fundamental pillar of our investment philosophy is that price reflects value in the long run. However, price is driven by mood, momentum and broader sentiment in the short term, creating opportunity.

We bought a position in Meta (formerly named Facebook). Several years ago, we sold out of Meta on concerns around three Rs: regulation, relevance and recruitment. We have seen progress on all three fronts. The regulatory environment feels more benign. Reels is battling TikTok effectively, ramping toward a US$10 billion revenue run rate and helping Meta to remain relevant. We have a hypothesis as to why the best engineers want to come to Meta: artificial intelligence ('AI'). The greatest opportunity in AI comes from proprietary datasets, and Meta has a considerable advantage here. AI can be a significant revenue and returns driver for the company. These reasons, combined with a shift in attitude internally around allocating resources, led us to re-take a holding.

We took a new holding in Sprout Social, the social media management company. The proliferation of social media channels has made managing a brand online increasingly complex, while its importance has risen. Sprout's platform provides a single control centre that enables effective analysis and management across social media. The market has consolidated significantly over the past few years, and the resulting potential for substantial revenue growth with margin expansion is underappreciated.

We added to Pinterest, the visual discovery platform; Sweetgreen, the salad chain; and Amazon, the online retailer, as these companies have continued to execute against their long-term opportunity sets, yet their valuations have remained undemanding. Oddity, a cosmetics and skincare holding company, and one of our private investments, listed in the period.

During the period we sold our holdings in Novocure, Snap, Redfin, MarketAxess and Illumina. Redfin, the online brokerage, and Snap, the social media company, have made changes to their business models. We question whether they will emerge from this environment stronger than they went in. Novocure, the tumour-treating fields company, has faced challenges expanding its offering beyond the treatment of brain cancer. Both MarketAxess, the bond trading platform, and Illumina, the gene sequencing business, continue to dominate within their respective niches, however they have not delivered the levels of growth that we hoped for.

Outlook

It has been a better year. The storm is easing. We know we cannot assume that the sun will always shine, but we take comfort from the fact that the companies held in your portfolio are executing, and executing well. When fundamentals will be better reflected in share prices is nigh on impossible to predict. Trying to predict the mood of the multitude of market participants is a fool's game for the long-term stock picker. Instead, we must double down on what differentiates us - long-term, active, growth, bottom-up stock pickers focused on fundamentals.

British physicist David Deutsch said, "We have a duty to be optimistic. Because the future is open, not predetermined and therefore cannot just be accepted: we are all responsible for what it holds". We take that responsibility seriously. US Growth holds companies which are determining that future. But it will take time. Navigating storms is part of the process. We believe the portfolio is well-positioned to navigate and realise its potential. That feels like a dream opportunity.

The principal risks and uncertainties facing the Company are set out below.

Baillie Gifford & Co

Managers and Secretaries

22 January 2024

* S&P 500 Index total return (in sterling terms). Source: LSEG and relevant underlying index providers. See disclaimer at the end of this announcement.

† Free cash flow is the cash a company generates after taking into consideration cash outflows that support its operations and maintain its capital assets.

Valuing private companies

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 group at Baillie Gifford, which takes advice from an independent third party (S&P Global). The valuations group is independent from the investment team, as well as Baillie Gifford's Private Companies Specialist team, with all voting members being from different operational areas of the firm, and the investment team only receives 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. During stable market conditions, and assuming all else is equal, each investment would be valued two times in a six month period. For Baillie Gifford US Growth, and our other investment trusts, the prices are also reviewed twice per year by the respective boards and are subject to the scrutiny of external auditors in the annual audit process.

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 ('IPO'); company news which is identified by the valuation team or by the investment team; or meaningful changes to the valuation of comparable public companies. 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.

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. Continued market volatility has meant that recent pricing has moved much more frequently than would have been the case with the quarterly valuations cycle.

For the six months to 30 November 2023, most revaluations have been decreases, however we have seen some recovery within the portfolio. In the period, we have seen one portfolio company raise capital at an increased valuation reflecting the continued robust performance of the underlying investment and the changing market backdrop in specific sectors at the time of the raise. The average movement in both company valuation and share price for those that have decreased in value is shown below.

Share prices have increased compared to the decrease in headline valuations. This is a result of holding classes of stock with preferential liquidation rights and therefore providing down side protection.

The share price movement reflects a probability- weighted average of both the regular valuation, which would be realised in an IPO, and the downside protected valuation, which would normally be triggered in the event of a corporate sale or liquidation.

*Data reflecting period 1 June 2023 to 30 November 2023 to align with the Company's reporting period end. 

Baillie Gifford's stewardship principles

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.                                                                                       

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.

List of Investments

as at 30 November 2023 (unaudited)

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

^P  Denotes listed investment previously held in portfolio as a private company (unlisted) investment.  

^U  Denotes private company (unlisted) investment.

† Includes holdings in ordinary shares, preference shares and promissory notes.

# The Convoy holdings were valued at nil at 30 November 2023 subsequent to the company ceasing operations. More information can be found in the Interim management report above.

Figures represent percentage of total assets.

Distribution of total assets* (unaudited)

Sectoral Analysis as at 30 November 2023

Private company exposure as at 30 November 2023

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

Income statement (unaudited)

The accompanying notes below are an integral part of the Financial Statements.

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

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

A Statement of Comprehensive Income is not required as the Company does not have any other comprehensive income and the net return after taxation is both the profit and comprehensive income for the period.

Balance sheet (unaudited)

The accompanying notes below are an integral part of the Financial Statements.

Statement of changes in equity (unaudited)

For the six months to 30 November 2023

For the six months to 30 November 2022

* The capital reserve as at 30 November 2023 includes investment holding gains of £70,038,000 (30 November 2022 - gains of £14,173,000).

The accompanying notes on below are an integral part of the Financial Statements.

Cash flow statement (unaudited)

For the six months to 30 November

* Cash from operations includes dividends received in the period of £182,000 (30 November 2022 - £246,000) and interest paid of £24,000 (30 November 2022 - interest received of £13,000).

† Cash movements in bank loans are shown on a net basis. Prior year balances have been updated to reflect this.

The accompanying notes below are an integral part of the Financial Statements.

Notes to the Financial Statements (unaudited)

1.    Basis of accounting

The condensed Financial Statements for the six months to 30 November 2023 comprise the statements set out above together with the related notes below. They have been prepared in accordance with FRS 104 'Interim Financial Reporting' and the AIC's Statement of Recommended Practice issued in November 2014, updated in October 2019, April 2021 and July 2022 with consequential amendments, and have not been audited or reviewed by the Auditor pursuant to the Auditing Practices Board Guidance on 'Review of Interim Financial Information'. The Financial Statements for the six months to 30 November 2023 have been prepared on the basis of the same accounting policies as set out in the Company's Annual Report and Financial Statements for the year ended 31 May 2023.

Going concern

Having considered the nature of the Company's principal risks and uncertainties, as set out below, together with its current position, investment objective and policy, assets and liabilities, projected income and expenditure and the Company's dividend policy, it is the Directors' opinion that the Company has adequate resources to continue in operational existence for the foreseeable future. The Board has, in particular, considered the impact of heightened market volatility due to macroeconomic and geopolitical concerns, 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. Gearing levels and compliance with borrowing covenants are reviewed by the Board on a regular basis. As at 30 November 2023, the Company had a net current liability of £35 million primarily as a result of the US$25 million three year revolving credit facility with ING Bank N.V., London Branch, and the US$25 million three year revolving credit facility with The Royal Bank of Scotland International, which are due to mature on 26 July 2026 and 18 October 2026 respectively but which are rolled forward on a three monthly 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. Accordingly, the Directors consider it appropriate to adopt the going concern basis of accounting in preparing these Financial Statements and confirm that they are not aware of any material uncertainties which may affect the Company's ability to continue to do so over a period of at least twelve months from the date of approval of these Financial Statements.

2.   Financial information

The financial information contained within this Interim Financial Report does not constitute statutory accounts as defined in sections 434 to 436 of the Companies Act 2006. The financial information for the year to 31 May 2023 has been extracted from the statutory accounts which have been filed with the Registrar of Companies. The Auditor's Report on those accounts was not qualified, did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying the report and did not contain a statement under sections 498(2) or (3) of the Companies Act 2006.

3.    Investment manager

The Company has appointed Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford & Co, as its Alternative Investment Fund Manager and Company Secretaries. Baillie Gifford & Co Limited has delegated portfolio management services to Baillie Gifford & Co. Dealing activity and transaction reporting have been further sub-delegated to Baillie Gifford Overseas Limited and Baillie Gifford Asia (Hong Kong) Limited. The Management Agreement can be terminated on six months' notice.

The annual management fee is 0.70% on the first £100 million of net assets, 0.55% on the next £900 million of net assets and 0.50% on the remaining net assets.

4.    Net return per ordinary share

Net return per ordinary share is based on the above totals of revenue and capital and the weighted average number of ordinary shares in issue during each period. There are no dilutive or potentially dilutive shares in issue.

5.    Dividends

No interim dividend has been declared. The Company's objective is to produce capital growth and the policy is only to distribute, by way of a final dividend, the minimum required to maintain investment trust status. It is not currently envisaged that any dividend will be paid in the foreseeable future.

6.    Fixed assets - investments

The fair value hierarchy used to analyse the fair values of financial assets is described below. 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 Company's investments are financial assets held at fair value through profit or loss. In accordance with FRS 102, an analysis of the Company's financial asset investments based on the fair value hierarchy described above is shown below.

* The investments in preference shares are not classified as equity holdings as they include liquidation preference rights that determine the repayment (or multiple thereof) of the original investment in the event of a liquidation event such as a takeover.

The valuation techniques used by the Company are explained in the accounting policies on page 55 of the Annual Report and Financial Statements for the year ended 31 May 2023. Listed investments are categorised as Level 1 if they are valued using unadjusted quoted prices for identical instruments in an active market and as Level 2 if they do not meet all these criteria but are, nonetheless, valued using market data. The Company's holdings in private company investments are categorised as Level 3 as unobservable data is a significant input to their fair value measurements.

Private company 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' private company valuation policy applies methodologies consistent with the International Private Equity and Venture Capital Valuation guidelines 2022 ('IPEV'). 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 techniques applied are predominantly market-based approaches.

During the period investments with a book value of £5,725,000 (31 May 2023 - none) were transferred from Level 3 to Level 1 on becoming listed.

7.       Bank loans

The Company has a US$25,000,000 three year revolving credit facility with ING Bank N.V., London Branch, which expires on 26 July 2026 and a US$25,000,000 three year revolving credit facility with The Royal Bank of Scotland International Limited which expires on 18 October 2026. At 30 November 2023, creditors falling due within one year include US$50,000,000 (sterling value £39,496,000) drawn down under the two three year revolving credit facilities. At 30 November 2023, there were no creditors falling due after more than one year. At 31 May 2023, creditors falling due within one year included US$50,000,000 (sterling value £40,342,000) drawn under the five year revolving credit facility and the three year fixed rate facility.

The fair value of borrowings as at 30 November 2023 was £39,496,000 (31 May 2023 - £39,904,000).

8.    Share capital

The Company has authority to allot shares under section 551 of the Companies Act 2006. The Board has authorised use of this authority to issue new shares at a premium to net asset value in order to enhance the net asset value per share for existing shareholders and improve the liquidity of the Company's shares. In the six months to 30 November 2023, the Company issued no ordinary shares (in the year to 31 May 2023, the Company issued no shares).

Over the period from 30 November 2023 to 22 January 2024 the Company issued no shares.

The Company's authority to buy back shares up to a maximum of 14.99% of the Company's issued share capital was renewed at the Annual General Meeting held on 18 September 2023. 200,000 shares with a nominal value of £2,000 were bought back at a total cost of £319,000 and held in treasury in the six months to 30 November 2023 (year to 31 May 2023 - no shares were bought back). At 30 November 2023 the Company had authority to buy back 45,542,539 ordinary shares.

Over the period from 30 November 2023 to 22 January 2024 the Company bought back a further 100,000 shares.

9.    Related Party Transactions

There have been no transactions with related parties during the first six months of the current financial year that have materially affected the financial position or the performance of the Company during that period and there are no changes in the related party transactions described in the last Annual Report and Financial Statements that could have had such an effect on the Company during that period.

10.   Principal Risks and Uncertainties

The principal risks facing the Company are financial risk, private company investment risk, investment strategy risk, environmental, social and governance risk, discount risk, regulatory risk, custody and depositary risk, operational risk, cyber security risk, leverage risk, political and associated economic risk and emerging risks. An explanation of these risks and how they are managed is set out on pages 6 and 7 of the Company's Annual Report and Financial Statements for the year ended 31 May 2023 which is available on the Company's website: bgusgrowthtrust.com‡.

The principal risks and uncertainties have not changed since the date of that report.

11.   The Interim Financial Report will be available at bgusgrowthtrust.com‡ and will be posted to shareholders on or around 6 February 2024.

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

None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

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not based on the content, information or materials contained herein.

S&P Index data

The S&P 500 Index ('Index') is a product of S&P Dow Jones Indices LLC, a division of S&P Global, or its affiliates ('SPDJI'). Standard & Poor's® and S&P® are registered trademarks of Standard & Poor's Financial Services LLC, a division of S&P Global ('S&P'); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ('Dow Jones'). Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.

Sustainable Finance Disclosures Regulation ('SFDR')

The EU Sustainable Finance Disclosure Regulation ('SFDR') does not have a direct impact in the UK due to Brexit, however, it applies to third-country products marketed in the EU. As Baillie Gifford US Growth 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 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 and 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 Manager's approach to sustainability can be found in the stewardship principles and guidelines document, available publicly on the Baillie Gifford website bailliegifford.com.

The underlying investments do not take into account the EU criteria for environmentally sustainable economic activities established under the EU Taxonomy Regulation.

Glossary of terms and Alternative Performance Measures ('APM')

An Alternative Performance Measure is a financial measure of historical or future financial performance, financial position or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework. 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 held less all liabilities (other than liabilities in the form of borrowings).

Shareholders' funds and net asset value

Shareholders' funds is the value of all assets held less all liabilities, with borrowings deducted at book value. Net Asset Value ('NAV') is the value of all assets held less all liabilities, with borrowings deducted at either fair value or book value as described below. Per share amounts are calculated by dividing the relevant figure by the number of ordinary shares in issue.

Borrowings at book value

Borrowings are valued at nominal par value (book value). Borrowings are valued at adjusted net issue proceeds. The value of the borrowings at book is set out in note 7 above.

Borrowings at fair value (APM)

Borrowings are valued at an estimate of their market worth. The fair value of borrowings is set out in note 7 above and a reconciliation to net asset value with borrowings at book value is provided below.

Net asset value (borrowings at fair value) (APM)

Net liquid assets

Net liquid assets comprise current assets less current liabilities (excluding borrowings).

Discount/premium (APM)

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 per share it is said to be trading at a discount. The size of the discount is calculated by subtracting the share price from the NAV per share and is usually expressed as a percentage of the NAV per share. If the share price is higher than the NAV per share, this situation is called a premium.

Total return (APM)

The total return is the return to shareholders after reinvesting the dividend on the date that the share price goes ex-dividend. The Company does not pay a dividend, therefore, the six month and since inception total returns for the share price and NAV per share at book and fair value are the same as the percentage movements in the share price and NAV per share at book and fair value as detailed at the beginning of the announcement.

Ongoing charges (APM)

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 average net asset value (with borrowings at fair value).

Gearing (APM)

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

Gearing is the Company's borrowings at book value less cash and cash equivalents (including any outstanding trade settlements) expressed as a percentage of shareholders' funds.

Gross gearing is the Company's borrowings expressed as a percentage of shareholders' funds.

Leverage (APM)

For the purposes of the Alternative Investment Fund Managers 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, it 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.

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.

Private (unlisted) company

A private (unlisted) company means a company whose shares are not available to the general public for trading and not listed on the stock exchange.

Baillie Gifford US Growth Trust plc is a listed UK company. The value of its shares and any income from them can fall as well as rise and investors may not get back the amount invested. This is because the share price is determined by the changing conditions in the relevant stock markets in which the Company invests and by the supply and demand for the Company's shares. Investment in investment trusts should be regarded as medium to long-term. The Company's risk could be increased by its investment in unlisted investments. These assets may be more difficult to sell, so changes in their prices may be greater. The Company is listed on the London Stock Exchange and is not authorised or regulated by the Financial Conduct Authority. You can find up to date performance information about Baillie Gifford US Growth Trust plc on the US Growth page of the Managers' website at bgusgrowthtrust.com‡

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

Naomi Cherry, Baillie Gifford & Co  

Tel: 0131 275 2000

Jonathan Atkins, Four Communications

Tel: 0203 920 0555 or 07872 495396