TIDMUSA
RNS Number : 6459J
Baillie Gifford US Growth Trust PLC
17 August 2023
Baillie Gifford US Growth Trust plc (USA)
Legal Entity Identifier: 213800UM1OUWXZPKE539
Regulated Information Classification: Annual Financial
Report
Annual Report and Financial Statements
Further to the statement of audited annual results announced to
the Stock Exchange on 10 August 2023, Baillie Gifford US Growth
Trust plc ("the Company") announces that the Company's Annual
Report and Financial Statements for the year ended 31 May 2023,
including the Notice of Annual General Meeting, has today been
posted to shareholders and submitted electronically to the National
Storage Mechanism where it will shortly be available for inspection
at data.fca.org.uk/#/nsm/nationalstoragemechanism .
It is also available on the Company page of the Baillie Gifford
website at: bgusgrowthtrust.com (as is the statement of audited
annual results announced by the Company on 10 August 2023).
Responsibility Statement of the Directors in respect of the
Annual Financial Report
Each of the Directors who were in office during the year ending
31 May 2023 and remain in office at the date of approval of the
Financial Statements confirm that, to the best of their
knowledge:
3/4 the Financial Statements, which have been prepared in
accordance with applicable law and United Kingdom Accounting
Standards (United Kingdom Generally Accepted Accounting Practice)
including FRS 102 'The Financial Reporting Standard applicable in
the UK and Republic of Ireland', give a true and fair view of the
assets, liabilities, financial position and net return of the
Company;
3/4 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 performance,
business model and strategy; and
3/4 the Strategic Report and Directors' Report include 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 that it faces (as also set out
below).
Principal and Emerging Risks relating to the Company
As explained on page 36 of the Annual Report and Financial
Statements, there is an ongoing process for identifying, evaluating
and managing the risks faced by the Company on a regular basis. The
Directors have carried out a robust assessment of the principal and
emerging risks facing the Company, including those that would
threaten its business model, future performance, regulatory
compliance, 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:
The Board considers the macroeconomic and geopolitical concerns
to be factors which exacerbate existing risks, rather than discrete
risks, within the context of an investment trust. Their impact is
considered within the relevant risks.
Financial Risk - the Company's assets consist mainly of listed
securities 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 19 to the Financial Statements on
pages 62 to 68 of the Annual Report and Financial Statements. The
Board has, in particular, considered the impact of heightened
market volatility over recent months due to macroeconomic factors
such as higher inflation and interest rates and geopolitical
concerns, including the Russia-Ukraine conflict. As oversight of
this risk, the Board considers at each meeting various metrics
including industrial sector weightings, top and bottom stock
contributors to performance and sales and purchases of investments.
Individual investments are discussed with the portfolio managers
together with general views on the investment market and sectors. A
strategy meeting is held annually.
Private Company (Unlisted) Investments - the Company's risk
could be increased by its investment in private company securities.
These assets may be more difficult to buy or sell, so changes in
their prices may be greater than for listed investments. To
mitigate this risk, the Board considers the private company
securities in the context of the overall investment strategy and
provides guidance to the Managers on the maximum exposure to
private company securities. The investment policy limits the amount
which may be invested in private company securities to 50% of the
total assets of the Company, measured at the time of
investment.
Investment Strategy Risk - pursuing an investment strategy to
fulfil the Company's objective which the market perceives to be
unattractive or inappropriate, or the ineffective implementation of
an attractive or appropriate strategy, may lead to reduced returns
for shareholders and, as a result, a decreased demand for the
Company's shares. This may lead to the Company's shares trading at
a widening discount to their net asset value. To mitigate this
risk, the Board regularly reviews and monitors the Company's
objective and investment policy and strategy, the investment
portfolio and its performance, the level of discount/premium to net
asset value at which the shares trade and movements in the share
register, and raises any matters of concern with the Managers.
Environmental, Social and Governance Risk - as investors place
increased emphasis on environmental, social and
governance ('ESG') issues, perceived problems on ESG matters in
an investee company could lead to that company's shares being less
attractive to investors, adversely affecting its share price, in
addition to potential valuation issues arising from any direct
impact of the failure to address any ESG weakness on the operations
or management of the investee company (for example a failure to
identify a pathway to Net Zero or poor employment practices).
Repeated failure by the Manager to identify ESG weaknesses in
investee companies could lead to the Company's own shares being
less attractive to investors, adversely affecting its own share
price. This is mitigated by the Manager's strong ESG stewardship
and engagement policies which are available to view on the
Managers' website: bailliegifford.com and have been reviewed and
endorsed by the Board, and which are fully integrated into the
investment process as well as the extensive up-front and ongoing
due diligence which the Manager undertakes on each investee
company. This due diligence includes assessment of the risks
inherent in climate change as well as ongoing positive engagement
on ESG related issues (see page 17 of the Annual Report and
Financial Statements).
Discount 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. 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. The Liquidity Policy
is set out on page 5 of the Annual Report and Financial
Statements.
Regulatory 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. 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 Report 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.
Custody and Depositary Risk - safe custody of the Company's
assets may be compromised through control failures by the
Depositary, including breaches of cyber security. To monitor
potential risk, the Audit Committee receives half yearly 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. The Custodian's assured 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.
Operational 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. 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. The other key third party
service providers have not experienced significant operational
difficulties affecting their respective services to the
Company.
Cyber Security 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. To
mitigate this risk, 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.
Leverage Risk - the Company may borrow money for investment
purposes (sometimes known as 'gearing' or 'leverage'). If the
investments fall in value, any borrowings will magnify the extent
of this loss. If borrowing facilities are not renewed, the Company
may have to sell investments to repay borrowings. The Company can
also make use of derivative contracts. All borrowings require the
prior approval of the Board and leverage levels are discussed by
the Board and Managers at every meeting. Covenant levels are
monitored regularly. The majority of the Company's investments are
in quoted securities that are readily realisable. Further
information on leverage can be found on page 75 of the Annual
Report and Financial Statements and the Glossary of Terms and
Alternative Performance Measures on pages 76 and 77 of the Annual
Report and Financial Statements. Capital constraints and other
macroeconomic factors could result in banks being unwilling to
lend, preventing the Company from making use of leverage to enhance
long-term returns for shareholders.
Political and Associated Economic Risk - the Board is of the
view that political change in areas in which the Company invests or
may invest may have practical consequences for the Company.
Political developments are closely monitored and considered by the
Board. The Board continues to assess the potential consequences for
the Company's future activities including those that may arise from
geopolitical tensions. The Board remains watchful of broader global
political tensions and the associated potential for armed
conflict.
Emerging Risks - as explained on pages 6 and 7 of the Annual
Report and Financial Statements 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 the global economy (including factors such as
supply chain constraints, economic sanctions and lending associated
capital constraints) and the related exposure of the investment
portfolio to external and emerging threats such as the societal and
financial implications of an escalation of geopolitical tensions,
cyber risk, artificial intelligence, new infectious diseases or
similar public health threats. This is mitigated by the Manager's
close links to the investee companies and their ability to ask
questions on contingency plans. The Manager believes the impact of
such events may be to slow growth rather than to invalidate the
investment rationale over the long term.
Baillie Gifford & Co Limited
Company Secretaries
17 August 2023
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END
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August 17, 2023 05:27 ET (09:27 GMT)
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