Baillie Gifford US Growth Trust plc ('USA')
Results for the year ended 31 May 2022
During the financial year to 31 May 2022, the Company's share price and net asset value ('NAV' after deducting borrowings at fair value) returned -45.5% and -35.3% respectively. This compares with a total return of 12.2% for the S&P 500 Index * (in sterling terms). During the period from 23 March 2018, launch date, to 31 May 2022, the Company's share price and NAV (after deducting borrowings at fair value) returned 67.2% and 95.6% respectively. This compares with a total return of 93.0% for the S&P 500 Index * (in sterling terms).
- Turnover remains low, consistent with our five year plus time horizon.
- We added a few listed holdings, participating in the IPOs of Rivian Automotive, HashiCorp and Duolingo.
- We sold Zillow, Vroom, Glaukos and Lyft, which had veered off track from their forward-looking hypotheses.
- We made seven additional private company investments: BillionToOne, Blockstream, Databricks, Discord, Faire Wholesale, Snyk and Solugen.
- Three of our existing private company holdings, Aurora Innovation, Ginkgo Bioworks and Warby Parker, went public during the period.
- As at the end of May, we held twenty-four private company investments which collectively comprised 36.4% of total assets.
- We are currently seeing a significant dislocation between share prices and fundamentals but the prospects for the innovators that are driving change remain bright.
Chairman's Statement
Dear Shareholders
In last year's report, with all our lives still impacted significantly by the Covid-19 pandemic, I wrote about equity markets experiencing someofthemostsignificantinstabilityinlivingmemory.Ayearlater, it feels like the same phrase still rings true, with the valuations of growth stocks particularly hard hit in recent months.
During the financial year to 31 May 2022, the Company's share price and net asset value total returns, calculated by deducting borrowings at fair value, were -45.5% and -35.3% respectively. This compares with a total return of 12.2% for the S&P 500 Index * (in sterling terms). Over the period from 23 March 2018 (launch dateandfirsttradedate),theCompany'ssharepriceandnetasset value,calculatedbydeductingborrowingsatfairvalue,were67.2% and 95.6% respectively compared to a total return of 93.0% for the S&P 500 Index * (in sterling terms).
As we said last year when reporting very strong one year performance numbers, we would ask shareholders to judge performanceoverperiodsoffiveyearsormore.Furtherinformation about the Company's portfolio performance is covered by our portfolio managers, Gary Robinson and Kirsty Gibson, in their Managers' Review.
Share Issuance and Buy-backs
The Company's shares moved from a premium of 4.0% last year to a discount of 12.3% at 31 May 2022 as sentiment turned against the Company's growth investing style. The Company issued 525,000 shares in the first half of the financial year at a premium to net asset value, raising £1.8 million. During the second half of the financial year, the Company bought back 2,206,300 shares, to be held in treasury, at a total cost of £3.6 million.
The authority to issue shares obtained at launch is due to expire in March 2023. With this in mind the Directors are therefore seeking shareholders' approval at the Annual General Meeting to obtain new authorities for issuance and disapplication of pre-emption rights. These authorities will be in substitution to the authorities obtained on 5 March 2018.
The Company will be seeking to renew the buy-back authority at the forthcoming Annual General Meeting.
Gearing
The Company has two loan facilities in place with ING Bank N.V., London Branch. The first is a US$25 million five year revolving credit facility which expires on 1 August 2023 and the second is a US$25 million three year fixed rate facility which expires on 23 October 2023. As at 31 May 2022, the facilities had been drawn down in full (31 May 2021 – US$37.5 million). Net gearing increased from 1% to 6% over the course of the year.
Earnings and Dividend
The Company's priority is to generate capital growth over the long term. The Company therefore has no dividend target and will not seek to provide shareholders with a level of dividend. The net revenue return per share for the year to 31 May 2022 was a negative 1.88p (year to 31 May 2021, a negative 1.78p). As the revenue account is again running at a deficit, the Board is recommending that no final dividend be paid. Should the level of underlying income increase in future years, the Board will seek to distribute the minimum permissible to maintain investment trust status by way of a final dividend.
Private Company (Unlisted) Investments
As at the Company's year end, the portfolio weighting in private company (unlisted) investments stood at 36.4% of total assets, invested in twenty-four companies (2021 – 16.5% invested in twenty companies). There were seven new purchases in the year and three stocks, Aurora Innovation, Ginkgo Bioworks and Warby Parker, listed. There is commentary on the new holdings in the Managers' Review and Review of Investments below. Your portfolio managers remain alert to further special and high potential opportunities not widely accessible through public markets.
Environmental, Social and Governance ('ESG')
The Company's Managers believe that sustainability is inextricably linked to being a long-term investor. The Managers pursuit of long-term growth opportunities typically involves investment in entrepreneurial, disruptive and technology-driven businesses. Thesecompanies areoften capital-lightwith alow carbon footprint.
Annual General Meeting
The Annual General Meeting of the Company has been scheduled to be held at Baillie Gifford's offices in Edinburgh at 9.30am on Friday, 16 September 2022. Our current expectation is that a physical meeting will be possible. All shareholders are invited to attend, and the Board looks forward to welcoming you. The meeting will be followed by a presentation from the Managers. Should regulations relating to the Covid-19 pandemic change, the intention to hold a physical meeting will be reviewed and, if necessary, an announcement will be made on the Company's website at bgusgrowthtrust.com and the London Stock Exchange regulatory news service. I encourage shareholders to submit their votes by proxy before the applicable deadline ahead of the meeting and to submit any questions for the Board or Managers in advance by email to trustenquiries@bailliegifford.com or by calling 0800 917 2112 (Baillie Gifford may record your call).
Outlook
We continue to live in unusually uncertain times. Whilst your company has no direct exposure to Russia or Ukraine, the indirect consequences continue to unsettle markets and investors globally. Whilst we cannot yet predict the long-term impact of the war or the opening of economies as we come out of the Covid-19 crisis, we can continue to focus on our mission: to be long-term, supportive shareholders to some of the highest potential and most ambitious companies in the United States. We regularly review underlying performance and speak with management teams and our companies continue to perform strongly and are delivering their strategic ambitions. My Board colleagues and I remain confident that many market verticals are ripe for disruption and that the company is excellently placed to benefit from these changes over the long term. All that being the case, the Board and the Managers remain confident in our outlook.
Tom Burnet
Chairman
8 August 2022
‡ 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.
9 August 2022