Company Announcements

RNS Announcement: Preliminary Results

Baillie Gifford US Growth Trust plc

Legal Entity Identifier: 213800UMIOUWXZPKE539

Regulated Information Classification: Additional regulated information required to be disclosed under applicable laws and regulations.

Results for the year ended 31 May 2021

During the financial year to 31 May 2021, the Company's share price and net asset value (calculated deducting borrowings at fair value) returned 63.0% and 62.8% respectively. This compares with a total return of 22.4% for the S&P 500 Index* (in sterling terms).

¾  The pandemic has caused an avalanche of structural change.

¾  Breakthrough healthcare technologies such as Moderna's mRNA therapy platform and Teladoc's telemedicine services have been thrust into the mainstream.

¾  Consumers have altered their behaviour and have been making more purchases online from the likes of Wayfair and utilising apps such as DoorDash for meal and snack delivery.

¾  Streaming services like Netflix and Roku have seen significant upticks in subscriber growth.

¾  Employers have been forced to embrace remote working, enabled at least partly thanks to the interconnectivity provided by companies such as Zoom.

¾  We are beginning to see the digital transformation take hold in new areas and have taken new public company holdings in Carvana and Vroom in the second-hand car market, Lemonade in insurance, and Coursera in education.

¾  We made seven additional private company investments over the last twelve months whilst four of our existing private company holdings went public in the period.

¾  At the end of May, we held positions in twenty private companies which collectively comprised 16.5% of total assets.

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.

You can find up to date performance information about Baillie Gifford US Growth on the US Growth Trust page of the Managers' website at www.bgusgrowthtrust.com‡

Baillie Gifford US Growth Trust is managed by Baillie Gifford, the Edinburgh based fund management group with around £350 billion under management and advice in active equity and bond portfolios for clients in the UK and throughout the world (as at 9 August 2021).

Investment Trusts are UK public limited companies and are not authorised or regulated by the Financial Conduct Authority.

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

‡    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.

Past performance is not a guide to future performance.  The value of an investment and any income from it is not guaranteed and may go down as well as up and investors may not get back the amount invested.  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.

11 August 2021

The following is the Preliminary Results Announcement for the year to 31 May 2021 which was approved by the Board on 10 August 2021.

Chairman's Statement

 It is with pleasure that I present the Annual Report for Baillie Gifford US Growth Trust plc ('the Company') for the year to 31 May 2021. During the period, we have all lived through the twists and turns of the global Covid-19 pandemic, with equity markets experiencing some of the most significant instability in living memory.

The Board is pleased to be able to report that our Managers have continued to largely work from home seamlessly and that both portfolio management and all regulatory and administrative tasks have been uninterrupted. The Managers continue to stick to their long-term investment approach and are focused on identifying the exceptional growth companies in America.

During the financial year to 31 May 2021, the Company's share price and net asset value, calculated by deducting borrowings at fair value, returned 63.0% and 62.8% respectively. This compares with a total return of 22.4% for the S&P 500 Index* (in sterling terms). Over the period from 23 March 2018 (launch date and first trade date), the Company's share price and net asset value, calculated by deducting borrowings at fair value, returned 206.5% and 202.3% respectively compared to a total return of 72.0% for the S&P 500 Index* (in sterling terms).

The Board is encouraged by the net asset value total return that the Managers have been able to deliver over the period since launch. However, 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, Gary Robinson and Kirsty Gibson, in their Managers' Review.

Kirsty Gibson was appointed as co-manager alongside Gary Robinson with effect from 1 March 2021. Kirsty is an investment manager in Baillie Gifford's US Equities Team and a co-manager of the Baillie Gifford American Fund. Kirsty replaced Helen Xiong who joined Baillie Gifford's Global Alpha Team last year.

Share Issuance and Buy-backs

The Company's shares have continued to consistently trade at a premium to their net asset value and the Company has issued a further 45,070,000 shares in the year to 31 May 2021 at an average premium to net asset value of approximately 6.4%, raising further net proceeds of £132.9 million.

The Company published a prospectus in April 2021 and as at 31 May 2021 had authority, which was granted at the initial launch, to issue a further 693.2 million shares. This authority expires in March 2023.

The Company also has authority to buy-back shares. The buy-back facility was sought to allow the Company to buy-back its own shares when the discount is substantial in absolute terms and relative to its peers. The Company will be seeking to renew the buy-back authority at the forthcoming Annual General Meeting.

Gearing

On 23 October 2020, the Company entered into a new US$25 million three year fixed rate facility with ING Bank N.V., London Branch which expires on 23 October 2023. This facility is in addition to the existing US$25 million five year revolving credit facility with ING Bank N.V., London Branch which expires on 1 August 2023. The facilities are available to be used to fund purchases of securities as and when suitable opportunities arise. As at 31 May 2021, US$25 million had been drawn down under the fixed rate facility and US$12.5 million under the revolving credit facility (31 May 2020 - US$18 million under the revolving credit facility).

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 2021 was a negative 1.78p (year to 31 May 2020, a negative 1.05p). 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 16.5% of total assets, invested in twenty companies (2020 - 12.2% invested in seventeen companies). There were seven new purchases in the year and four stocks, Affirm, Airbnb, Butterfly Network and Snowflake, listed. There is commentary on the new holdings in the Managers' Review and Review of Investments below. Since the year end further investment has been made in Away (JRSK Inc), Lyra Health and Thumbtack, and a new holding acquired, Faire Wholesale. Your portfolio managers remain alert to further special and high potential opportunities not widely accessible through public markets.

Board Composition

We were delighted to welcome Mr Chris van der Kuyl and Ms Rachael Palmer as non-executive Directors of the Company with effect from 1 June 2021 following a detailed search undertaken with the support of an external recruitment consultant. Chris is one of Scotland's leading entrepreneurs working across the technology, media, gaming and entertainment sectors and Rachael is an experienced strategy, marketing and business development professional with extensive experience working within the technology sector. All Directors are subject to annual re-election at the AGM in September and the two new Directors will be subject to election by the shareholders this year. The Directors' biographies can be found on pages 24 and 25 of the Annual Report and Financial Statements. Board members have a broad range of appropriate skills between them.

Annual General Meeting

The Annual General Meeting ('AGM') of the Company has been scheduled to be held at Baillie Gifford's offices in Edinburgh at 9.30am on Friday, 17 September 2021. In light of continuing Covid-19 restrictions, shareholders will not be able to attend the AGM as the meeting will be held with the minimum number to ensure it is quorate. 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). Developments with regard to Covid-19 restrictions will be closely monitored and any changes will be announced to the London Stock Exchange regulatory news service and made available at bgusgrowthtrust.com. This year, due to current circumstances, the portfolio managers will record a webcast which will be available to view on the Company's website following the AGM.

Changes to Articles

We have asked our lawyers to undertake a review of the Articles of Association. The principal proposed change is set out below. Further details of the full changes proposed can be found on page 64 of the Annual Report and Financial Statements. Hybrid General Meetings - One consequence of the Covid-19 pandemic has been the impact on the ability of shareholders to attend physical General Meetings. The Company is therefore proposing to make amendments to the Company's Articles to allow shareholders to attend by electronic means as well as in person. These changes will be too late for the 2021 AGM but will allow for more flexibility in future. It is the Board's intention to continue to have a physical element to our General Meetings wherever possible.

Outlook

We continue to live in unusually uncertain times. Whilst we cannot yet predict the long-term impact of the world's response to the pandemic or the ramifications of trade and political tensions in the United States and elsewhere, my Board colleagues and I believe we can be confident that seismic changes will continue in the 'real world' as new business models flourish and innovation impacts countless industries, many as yet not fully disrupted by recent innovations. Significant changes in healthcare, transportation, ecommerce, finance, enterprise software and energy amongst other markets all present an opportunity to identify and support the exceptional growth companies of the future. It is pleasing to note that this growth has been well evidenced over the past year in the results of many of the companies in which we invest. All that being the case, the Board and the Managers remain confident in our outlook.

Tom Burnet

Chairman

10 August 2021

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

For a definition of terms see Glossary of Terms and Alternative Performance Measures at the end of this announcement.

Past performance is not a guide to future performance.

Managers' Review

As the world begins to take some significant steps out of the tumult of the past year, it is hard not to look around blinking somewhat as if to say, 'what just happened?'. Whilst we have always believed that technology-led change was inevitable, its pace and spread during the past year have served to humble us. Lest we forget - inevitability does not equate to predictability.

The stock market is far too complex a system to think in certainties. We prefer to think in probabilities. We combine this probabilistic thinking with one of the most underrated temperaments of investing: patience. These traits afford us the luxury of investing with a long-term mindset and enable us to ride out the inevitable volatility and humbling periods of underperformance. They allow us to focus on what a company could achieve if things go right. We understand that whilst some of the innovators that we own will succeed, others will not, and some we will miss completely but the passage of time allows us to make and own our mistakes, hone our understanding, learn from others, and deepen and develop our thought processes.

In times of rapid change the temptation is to grasp the familiar, 'the certainties'; take comfort from the recognisable and double down until 'normality' returns. But with change comes opportunity. Probabilities enable us to stretch our thinking and imagine these opportunities. There is no 'normality'. 'Normal' is not a static concept. Companies do not operate in a vacuum; they are part of an ecosystem. They evolve, adapt and impact each other.

In nature, many complex systems, like ecosystems, have a tendency to self-organise into a 'critical state', a sort of teetering calm, where minor changes or disturbances can lead to avalanche effects of all difference sizes. One way to conceptualise this is by thinking of a sandpile. Consider a flat table covered in a thin layer of sand. The addition of a single grain will have little impact on the other grains; there is stability. However, as more grains are added, the sandpile grows, from a layer, to several layers, to a heap. Eventually, the sandpile reaches a critical point, where the addition of another grain can cause local disturbances or even system wide avalanches.

There are parallels between these sandpiles, natural ecosystems, and the global economy. The Covid pandemic could be thought of as just another grain added to the already complex system that is the world economy. But it set in motion a huge avalanche. In biology the term used to describe this is punctuated equilibrium. Under this definition evolution occurs in spurts instead of following the slow and steady path outlined by classical Darwinism. Long periods of relative inactivity, the building of a sandpile, are interrupted by rapid disruptions, large avalanches. And just like in nature where species evolve or mutate rapidly during periods of punctuated equilibrium, the same can be said of companies during the pandemic. Many businesses had to evolve their business practices and go-to market strategies, and adapt to massive surges in demand and challenges with supply. And just as happens in nature, some thrived, others evolved to survive, and some will no doubt go extinct.

As companies, big and small, evolved and adapted to their new environment, they impacted each other and the environment around them. The biological term for this idea is 'fitness'. The higher the fitness of a species, the better suited it is to survive and reproduce in its specific environment. And just as the survival of a cheetah depends not just on its own genetic code but also that of the zebra it hunts - if the zebra sprouts wings it doesn't really matter how fast the cheetah is - a company's fitness during periods of radical change will depend on how well placed it is to respond to changes in demand and how it is positioned relative to its competitors. Holdings such as Shopify, the ecommerce platform, and Stripe, the payments platform, were there to help offline businesses transition online and generally support small and mid-size businesses to adapt and keep their businesses operating during the complexity of the pandemic. Holdings such as HEICO, the parts manufacturer for the aerospace industry, and Away, the luxury travel brand, struggled during the past year as the travel industry ground to a halt. Replacement parts for airlines were not required whilst planes were grounded and upgrading suitcases was not a top priority for many whilst they were stuck inside their homes. No matter how well run these businesses are, their fitness was significantly impacted by the challenges of the industry into which they sell - travel. We expect these challenges in the travel industry to be relatively short-lived. However, a deeper and more permanent evolution is happening in the way we consume content; and it is not just the content providers themselves that have benefited from this change. Over the past year streaming services like Netflix, Roku and Disney+ have seen significant upticks in subscriber growth. Linear TV has lost out, but there have also been avalanches in other parts of the sandpile. As viewers have shifted to streaming services, the advertising industry has had to evolve its mindset and adapt to follow this customer base. Procter & Gamble has announced that it expects to move away from the traditional upfront model of TV ad buying, a hangover from the 1950s when advertising inventory was sold in advance to fit in with new car releases. Instead of buying up front, advertisers are now turning to demand side platforms, such as The Trade Desk, to buy adverts programmatically in real time. The Trade Desk sorts through twelve million ads per second and matches ad inventory with advertisers based on data about who is watching. Thus, The Trade Desk and the rise of connected TV or streaming has resulted in more efficient, data-driven ways for advertisers to reach their customer base.

Companies need to evolve in periods of rapid change simply to survive. They operate in complex ecosystems where the other agents, their customers and competitors, are constantly evolving and changing. In nature this is known as the Red Queen Effect, taken from Alice in Wonderland. The basic premise being that species, just like Alice and the Red Queen, must run fast just to stand still. Survival is a never-ending race, either you evolve and adapt, or you die. In the long run there is no static equilibrium. Thus structural change is powerful because it does not happen in isolation. It comes in avalanches that impact all companies and industries, changing the landscape for everyone, and driving everybody forward.

The pandemic has caused an avalanche of structural change. The ecosystem has evolved, and the initial grains of sand have triggered many downstream effects. Breakthrough healthcare technologies such as Moderna's mRNA therapy platform and Teladoc's telemedicine services have been thrust into the mainstream, out of necessity. Consumers have altered their behaviour and have been making more homeware purchases online from Wayfair; viewing and purchasing homes online from Zillow and Redfin; and utilising apps such as DoorDash for meal and snack delivery. Employers have been forced to embrace remote working, enabled at least partly thanks to the interconnectivity provided by companies such as Zoom. The pandemic has highlighted the importance of employee mental health, and companies have turned to new private company holding Lyra's mental health platform which connects employees to help and treatment. The last eighteen months have also seen a new wave of entrepreneurs emerge, ready to take advantage of the services offered by the likes of Shopify, Stripe and Brex which are enabling them to start and scale businesses more efficiently than ever before. And more specifically, companies like Pinterest have used the pandemic to enable insight led selling. Harnessing its data, Pinterest was able to see how trends around Halloween and Thanksgiving were different this year, helping Chief Marketing Officers to get in front of those trends and deliver high returning ad campaigns. The perfect illustration of the power of intent on the platform and a significant unlock in bringing advertising dollars to Pinterest.

The changes above run deep. This is beyond a few deviations at the top of a sandpile which are easy to go back on. Covid has moved many grains of sand, touched many industries and the structure of the pile is now fundamentally different. This means it is close to impossible to go back to how things were. New 'equilibriums' have been established across industries at levels higher than those prior to the onset of Covid.

Portfolio Changes

This year saw slightly higher turnover than previous years. This reflects the speed and breadth of change we are witnessing and high levels of competition for capital in the portfolio. New opportunities are being thrown up by the rapid shifts of the sandpile. With so many exciting businesses emerging across a broad base of industries, this affords us the opportunity to keep raising the bar for inclusion in the portfolio and ensures we only own those we believe have the potential to be truly exceptional.

There have been some changes to the top ten holdings over the last year, with Moderna, Roku, Zoom, Stripe, and Twilio all moving into its ranks. Some of these names - Moderna, Roku, and Zoom - have become big holdings on account of strong share price performance but our conviction in their long run growth opportunities has cemented their position in the top ten. For others we have been actively adding to our position. For example Twilio has expanded its communications offering to integrate consumer data, which has increased our confidence in its edge. Twilio's addressable market is greater than US$1 trillion, it is in the early stages of exploitation, and the company's dominance is growing. We believe it deserves to be a large holding for the trust.

A large reduction in Tesla and the complete sales of Mastercard and Alphabet have also impacted the constituents of the top ten. 2020 was a phenomenal year for Tesla but having revisited the upside case twice within a six-month period we decided to reduce the trust's holding. Whilst the fundamentals have been strong our conviction in the assumptions required to meet our return threshold over the next five years is lower given the strong performance of the shares. Far more emphasis needed to be placed on the energy generation/storage side of the business and, whilst this represents a massive opportunity, it is still very early. Tesla remains a top ten holding, but it is no longer our largest. We continue to believe that Alphabet and Mastercard have built incredible businesses in their differing domains, however the upside case from here for both companies is increasingly challenged. For Alphabet we have waning conviction in the potential of the moon-shot bets, such as Waymo, its autonomous driving unit. Because of this the outlier case has become increasingly difficult to make. For Mastercard, whilst its global footprint is impressive, competition has intensified challenging their traditional credit card model. We have seen, and own, several companies entering the payments market with novel technology leading us to believe the competitive moat surrounding Mastercard is not what it was.

In terms of the listed holdings our new purchases are across industries. We are beginning to see the digital transformation take hold in new areas and have taken holdings in Carvana and Vroom in the second-hand car market, Lemonade in insurance, and Coursera in education. Digitisation is spreading into more complex and regulated industries, which we believe to be full of inefficiency and ripe for improvement. Additionally, the deflationary forces driven by technology may finally be starting to impact the health care industry. Our new holdings, Recursion Pharmaceuticals, a drug discovery platform, and 10x Genomics, a single cell sequencing business, could mark the beginning of a whole new era in the healthcare industry; one of more predictable and efficient drug discovery methods, leading to lower costs and more options for patients. Finally, we initiated holdings in Pinterest for its potential to become the location for discovery and inspiration, and Snap given its lead in augmented reality advertising and its potential to become the first 'super-app' of the west. We have a hypothesis that advertisers are looking for platforms beyond Facebook and Alphabet, and Pinterest and Snap have the potential to be the major beneficiaries of this shift.

These purchases were funded by various complete sales. There was no notable pattern to them. The sales of New Relic, Activision and Interactive Brokers were driven by investment cases that did not play out as expected. The purchase of Slack Technologies by Salesforce.com forced our hand on its sale. Our sale of Facebook reflected our concerns relating to people, relevance and regulation.

We made seven additional private company investments over the last twelve months: Brex, Capsule, Epic Games, Honor Technology, Lyra Healthcare, Nuro, and PsiQuantum. We have included descriptions of each of these below. Four of our existing private company holdings, Affirm, Snowflake, Airbnb, and Butterfly Network, went public in the period. The net results was that, at the end of May, we held positions in twenty private company securities which collectively comprised 16.5% of total assets. Taking into account companies which were previously private company investments, but which are now public, this figure rises to 22.5%.

Sharpening Our Inputs

The past year has been one of great learning and growth for not just the companies we invest in but also for us as a team.

We view research as our input and our thought processes and mental models as our algorithms. The portfolio and performance are our outputs. We look to continually differentiate our inputs and sharpen our algorithms in order to drive our outputs. Whilst the performance of the trust over the past year has been phenomenal, we recognise that complacency and ego are our greatest foes.

In his last shareholder letter as CEO of Amazon, Jeff Bezos spoke of the challenge of maintaining distinctiveness in a world that is trying to pull you back to equilibrium. In the world of investment management where best practice adoption and mimicry are commonplace, it is a tough fight to remain differentiated. But we are fighting hard.

It has been more challenging to keep our inputs broad with travel restrictions and the fact that content access has been easier through webinars and virtual conferences. We have set up a book club to discuss interesting topics and learn from each other, invited external speakers to develop our thinking and ran a reading week focused on new mental models. We have also been leveraging our relationships with companies, in both the public and the private space, to share insights and learn about emerging fields. For example, we have been developing our thoughts on topics such as sustainability, biotechnology platforms, culture and scale-as-a-service. We look forward to travelling again, visiting our holdings and developing deeper connections with experts and academia to keep up the fight against equilibrium.

The past year has confirmed the importance of a strong philosophy and process; the solid foundation of beliefs our stock selections are built upon. In times of turbulence, both positive and negative, returning to our solid foundation helps steady the ship. For us that meant avoiding knee jerk reactions both when stocks rose significantly and during the more recent volatility. Whilst philosophy retains a sense of constancy, process is open to refinement and progress and we are constantly striving to improve.

Investment Principles

As we have done for the last two years, we have included below, our investment principles again, unaltered. We continue to hope that by publishing our investment framework in this and future communications that we will provide shareholders with a useful reminder of our philosophy and a yardstick with which to measure us.

The fifth of the principles concerns the role of capital markets 'The role of capital markets has changed, and we have evolved with it. As companies are remaining private for longer, so too have we broadened our search for exceptional growth companies into private companies. We are largely indifferent to a company's private or public status. We will conduct diligent analysis and allocate capital to where the highest returns are likely to be'.

We believe the role of capital markets has also evolved to encompass a more explicit role in driving sustainability. We have included a section on the following page to expand upon our thinking around sustainability and the positive role we can play as long-term owners of assets.

Outlook

We remain resolutely focused on identifying the exceptional growth companies of the future and holding them in size and for significant periods of time. Given the disruption we are seeing across all sectors this ought to be a fruitful environment for us as growth investors. However, the bar for inclusion in the portfolio remains high, and we view the sort of competition for capital we continue to see as a great position to be in.

We remain tremendously excited about the opportunity in front of us. We believe that innovation is speeding up and spreading out and we are closer to the beginning than the end. More and more traditionally 'safe' industries look ripe for disruption. And as companies continue to shift the current sandpile there will, of course, be volatility in share prices - this is the norm, not the exception. Riding out this volatility is necessary to deliver long-term outperformance. However, we do believe the pandemic has triggered an avalanche of change. And this makes being a Baillie Gifford US Growth Trust investor right now particularly exciting.

Sustainability

"If the long view becomes the averaged short-term actions to appease the loudest person at the moment, it is a path to nowhere".

Ben Silberman, Founder CEO, Pinterest 

Let's start a new conversation on sustainability. A conversation to make explicit, what we trust is already implicit, in our process. To bring a broader, and we believe, valuable narrative on sustainability to the table, helping to improve us as investors and pushing companies themselves to get better.

We believe that sustainability is inextricably linked to being a long-term investor. To think about a company on a five+ year horizon, we must consider the sustainability of its business in the broadest possible sense; why will any company continue to grow? Why will customers continue to like them - from both a product and reputation perspective? How will management allocate capital or handle challenges? This is sustainability beyond a company's impact on the environment or the remuneration of its executives. That is not to say these issues are unimportant. They are just part of a far larger picture.

What Does Long Term Mean To Us?

Long term is investing on a five+ year time horizon. A time-period where the empowerment of employees benefits productivity, where the considered consumption of natural resources ensures continued access, where a sustainable supply chain protects inventory, and where balancing customer experience with profit taking ensures long-term sales growth. Long term is a time-period where the needs of the entire ecosystem line up.

Long term is ambition. It is thinking about what a company could do, might be, not what it is today. Long term for us is not imagining base cases, but blue-sky cases.

Long term is support. It is about being there for companies and founders, encouraging and supporting them to achieve their ambitions. Enabling them, with steady and often sizable ownership stakes, or direct capital deployments, to think big.

Finally, long term is sustainable. We define sustainable as the ability to balance value creation with value capture. You cannot capture more value than you create for any length of time; companies that do this will not survive. Those that thrive in the long run will deliver more value than they capture.

Deploying Capital Sustainably

As long-term investors we have an exceptional opportunity to deploy our clients' capital in a way to help maximise the value creation our holdings deliver. And we have thought long and hard about how to articulate the societal value creation our clients enable by owning our portfolio. Tesla is a salient example. Have Baillie Gifford's clients contributed more to the future of society from owning Tesla from 2013 to the present versus now and for the next eight years? We concluded that without our clients' long-term and stable capital in the early years Tesla may not have achieved what it has today.

Consequently, we consider the 'capital impact' of our clients' investment in a given company. We use the term to open up the conversation as to the different ways our clients' capital can enable companies to achieve their ambitions and deliver a positive contribution to society.

We believe our clients' capital impact can be considered under three broad headings: Beneficiary Impact, Support Capital Impact, and Direct Capital Impact. Beneficial Impact comes from owning companies we believe to be making a positive societal contribution over the long run. Companies which only fit within this category are making a positive contribution to society, and they will do so whether or not our clients own the shares; our clients' capital is not playing an instrumental role. Support Capital Impact is about how long-term and sizable ownership stakes can enable companies to be ambitious and take calculated risks, to achieve their long term potential and really deliver on their potential for society, knowing they have solid, long term shareholders on the register. The final category is Direct Capital Impact. This is where our clients' capital directly enables a company to fulfil its potential - whether that be supporting an IPO, participating in a capital raise or by investing in these businesses in private markets.

One type of capital impact is not better than another; although we believe that some are more influential. We look to open up a discussion and to enable investors to better understand how directly they are empowering a business to achieve its potential.

We create a societal contribution hypothesis for every company we own. Our approach is highly subjective, and we look at what each company might deliver to society if it grows as we think it could; an approach we believe to be highly aligned with our investment style. There is no perfect company. All companies will make mistakes on the road to fulfilling their potential and some will not succeed. We are cognisant of positive and negative implications of success, and we consider those we believe to be most important for the long run sustainability of each company. We use these to feed into further work or engagement with a company, helping us to become better stewards of our clients' capital whilst pushing the companies we own on behalf of our clients to improve.

We do not score our portfolios' net societal contribution. We prefer to think of companies as participants in complex and interconnected networks. Their influence will depend on many factors and we certainly won't predict all of them. Instead we seek to understand how their positive societal contributions could enhance their durability, and how the negative implications of their growth might diminish that. That is not to say that we believe that all societal impact is equal, in fact we feel it is fairly easy to identify those companies which we believe have the potential to change society. Not necessarily just through what they do or sell, but indirectly through the industries that they change with them. We call these companies the Gamechangers.

Sustainability in its broadest possible sense is very important to us as long term, growth investors. And after careful consideration we have decided to talk more openly about how we integrate it into our process. This is a challenging and complex topic and we are far from having all the answers. But we will keep asking questions of ourselves and of the companies we invest in.

We look forward to new conversations, evolution and becoming better investors.

The US Equity Team