RNS Announcement

Edinburgh Worldwide Investment Trust plc

Legal Entity Identifier: 213800JUA8RKIDDLH380

Regulated Information Classification: Half Yearly Financial Report.

Results for the six months to 30 April 2022

Since 1 February 2014, the Company has been invested in a diversified portfolio of companies which individually offer significant long term growth potential and typically have a market capitalisation of less than US$5bn at the time of initial investment.

¾  Over the six month period, the Company's net asset value per share decreased by 34.1% while the comparative index* decreased by 6.8%. The share price fell by 38.5%. Over the five year period, the Company's net asset value per share increased by 80.7% while the comparative index* increased by 40.7%.  The share price increased by 79.1%. 

¾  The past six months have been a been a challenging one for stock markets. This has been most acute for those listed companies where their commercial activities have yet to scale and consequently their profits skew to outer years. The stocks favoured by the Company have been in the eye of the storm.

¾  Of the stocks held in the portfolio, 19 generated positive absolute returns in sterling terms over the six months to end of April. Conversely, 35 stocks fell more than 50%.

¾  During the period, the Company issued 550,000 shares and bought back and held in treasury 3,525,695 shares. Since the period end to 31 May 2022, a further 3,192,854 shares have been bought back and held in treasury.

¾  The net revenue return per share was a negative 0.23p (six months to 30 April 2021: negative 0.31p). No interim dividend is being recommended.

¾  As at 30 April 2022 the Company's investment in unlisted companies was 19.3% of total assets (30 April 2021: 7.9%).

¾  The current aggressive sell off (including that since 30 April 2022) is more synonymous with growth being mistakenly viewed as an intrinsic fragility within a business. For companies where the growth potential largely sits outwith the influence of macro trends and geopolitics this seems both odd and short sighted, but ultimately a source of investment opportunity for the future.

* S&P Global Small Cap Index total return (in sterling terms).  Total return information sourced from Refinitiv/Baillie Gifford 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.

Edinburgh Worldwide aims to achieve long term capital growth by investing primarily in listed companies throughout the world. The Company has total assets of £947.2 million (before deduction of loans of £69.7 million) as at 30 April 2022.

Edinburgh Worldwide is managed by Baillie Gifford, the Edinburgh based fund management group with around £240 billion under management and advice as at 1 June 2022.

Edinburgh Worldwide Investment 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 buy or 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 Edinburgh Worldwide on the Edinburgh Worldwide page of the Managers' website at edinburghworldwide.co.uk‡

‡      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.

6 June 2022

For further information please contact:

Anzelm Cydzik, Baillie Gifford & Co

Tel 0131 275 2000

Jonathan Atkins, Four Communications

Tel: 020 3103 9553 or 07872 495 396

The following is the unaudited Interim Financial Report for the six months to 30 April 2022.

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 (indication of important events during the first six months, their impact on the Financial Statements and a description of the principal risks and uncertainties for the remaining six months of the 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

Henry CT Strutt

Chairman

1 June 2022

Interim management report

Performance and Backdrop

3Over the six months to 30 April 2022, the Company's net asset value per share decreased by 34.1%, which compares to a fall of 6.8% in the S&P Global Smaller Companies Index*, total return in sterling terms, over the same period. The share price over the six months fell by 38.5% to 196.60p representing a discount of 9.9% to the net asset value as at 30 April 2022 compared to a 3.5% discount at the beginning of the period.  Over the five years to 30 April 2022, the Company's net asset value per share increased by 80.7%, which compares to an increase of 47.0% in the S&P Global Smaller Companies Index*, total return in sterling terms, over the same period. The share price over the five years increased by 79.1%.

Over the six months to 30 April 2022, 550,000 shares were issued and 3,525,695 shares were bought back and held in treasury.  Since the period end to 31 May 2022, a further 3,192,854 shares have been bought back and held in treasury. The Company is prepared to buy back its own shares when the discount is substantial in absolute terms and relative to its peers. Having widened to double digit levels, and in the absence of notable demand, since mid-March the Company has regularly bought back stock at levels that are meaningfully accretive to the Company's net asset value. Rather than selling existing holdings to fund these buybacks, existing borrowing facilities have been utilised, thereby simultaneously incrementally increasing the Company's invested gearing, as we believe that the current portfolio is composed of attractively valued growth companies that have the potential to deliver on their respective business strategies. As at the end of April 2022, invested gearing stood at 7.2% of shareholders' funds, having been 2.5% six months earlier. As at the end of May 2022, invested gearing had increased to 8.7%.

The past six months have been a been a challenging one for stock markets. This has been most acute for those listed companies where their commercial activities have yet to scale and consequently their profits skew to outer years. The stocks favoured by the Company have been in the eye of the storm. The attributes that we like about them - they are building better and more efficient ways of solving large problems - have been markedly out of sync with the stability and defensiveness craved by the market currently. The reasons for this are complicated but we try and unpick them below.

There have been two prominent themes active in financial markets over the past decade and beyond. The first is that of technology empowered globalisation: the liberalisation of trade and information flow helping drive a more interconnected and efficient business landscape. The second is that of benign inflation and the expansionary monetary policy of many central banks (much of that stemming from the Financial Crisis over a decade ago but more recently from the response to the pandemic).

Both these themes have provided a supportive environment for equity investors. Globalisation acted to increase the addressable market for many businesses which synergised with digital technologies to make such endeavours scalable. Benign inflation and low interest rates offered stability for businesses and encouraged investment and the building of future cashflows (on the basis that such cashflows were less eroded by discounting them to their present value). The recent potent combination of escalating geopolitical tension, military conflict in Europe and the after-effects of the pandemic have pushed investors to reassess these two themes.

We have previously noted how pandemic-stretched supply chains were feeding into inflation of both goods and services. Our working assumption was that this would be transient and effectively self-correcting as the supply and demand normalised. There is mounting evidence to suggest that inflation is more pronounced, persistent and global in scope than the market expected. This is being exacerbated by the conflict in Ukraine driving up energy and food supply costs, but also by the ongoing disruption to Chinese manufacturing as the authorities take an aggressive approach to the spike in Covid-19 cases. While it could be argued that additional exacerbating forces might soon subside, our sense is that they could well remain as pressure points into the future, not least because their impacts have secondary consequences that will take time to fully play through.

As inflation in many developed markets approaches double-digit annual percentage rates the stock market has begun to fret about how this will impact on consumption, wage growth, business confidence and whether it will push central banks into a belated 'cull inflation at all costs' series of aggressive interest rate rises. We are not economic forecasters, but neither do we feel we need to be to recognise that the next few years might well be one characterised by stubbornly elevated inflation, tempered consumption and more expensive borrowing costs. It's not an environment that we would choose but neither is it one that we feel especially troubled by. The clear lessons of the past century have demonstrated that technologies and the companies that harness them play the greatest role in shaping society and driving progress. The cycles that influence such developments share very little, if any overlap with the cycles that drive the economy, inflation or interest rates.

Additionally, when economic growth is scarce and inflation elevated, we believe there are two attributes that will help some companies emerge from this situation in a stronger position. First, companies achieving real growth driven by increased need and adoption of a differentiated product offering. Second, companies that both develop and exploit intrinsically more efficient ways of solving huge problems. The combination of these characteristics yields both the opportunity to grow, the pricing power to protect margins and the scalable cost base to improve them over time. In summary, companies that deliver better, cheaper and more efficient solutions should ultimately find the tougher current environment one where their relative attractions hold more sway given sufficient time. While companies such as Ocado and the freelance network Upwork are currently caught in the 'growth is out of fashion' narrative active in today's stock market, we think they represent great examples of businesses where the inflation and tight labour force dynamics work to their long-term structural advantage.

Escalating geopolitical tension has been evident for several years, most notably between the US and China regarding technology and intellectual property. Recently, a more philosophical axis of difference has come to the fore; one that pitches societies that operate around democratic principles against those of authoritarian control. The conflict in Ukraine, and the resulting response from many countries, is a tragic embodiment of this. Exploring this topic in detail is beyond this commentary, but we think the challenge to globalisation is real. Thirty plus years of taking down barriers to trade and driving efficient globally connected supply chains is not easy to unpick. The patterns of business and trade are too interconnected to suddenly move to a different model, even if that was the favoured outcome. But when it comes to how businesses think about allocating incremental capital, greater emphasis will be placed on the continuity of supply through more diversified supply chains and a degree of onshoring. Such efforts, while ultimately being more robust, will be additive to the inflationary pressures outlined above and would likely stimulate investment in much more automated and robotics-based processes to insulate corporate margins. We think this latter point is important as it hints at how technology and innovative solutions will likely become an even more prominent driver of business opportunity in a post-globalisation age.

Changes in the market backdrop are always going to be hard to predict and difficult for both investors and companies to digest. A pivot by stock markets towards defensive companies is perhaps not too surprising at a time of such flux. However, we find the aggressive derating of growth focused businesses too reactionary and blunt in its application. A rising interest rate environment will naturally have a mechanical flow through to valuations but, in our minds, the current aggressive sell off (including that since 30 April 2022) is more synonymous with growth being mistakenly viewed as an intrinsic fragility within a business. For companies where the growth potential largely sits outwith the influence of macro trends and geopolitics we find this both odd and short sighted, but ultimately a source of investment opportunity for the future.

Growth doesn't come for free. Companies must invest in both human and physical assets to enable it. Such a dynamic necessitates that those companies investing for future growth will have financial characteristics that are immature regarding their ultimate potential. What's important to us isn't the snapshot of where a company currently sits along that journey. Rather, it's an assessment around a company having the capability and the means to progress along the spectrum of immaturity and realise its full potential. Despite the deterioration in the backdrop, we think this assessment holds very well for the vast majority of holdings in the portfolio. We sense that current valuations of many of the holdings imply an overly aggressive discounting of growth potential beyond that which could be considered near-term and highly visible. As stock pickers of companies where we are genuinely excited by what they might build over the coming decades, we think the current downward repricing of the long-term growth opportunity readily captures the near-term uncertainty and risk posed by the current environment.

Portfolio Update

The recent reporting periods have given insights on how our holdings have performed as the worst of the pandemic subsides and businesses seek a return to normality. Most have navigated this transition well, perhaps most notably Tesla, but for some the disruption has had a lingering effect. We generally view such second order effects of the pandemic as unhelpful developments as opposed to thesis changing events, but with the stock market in an unforgiving mode any such disappointments have typically resulted in aggressive selloffs.

Chegg, the online education company, warned of reduced uptake of its study-aid subscription packages at the start of the academic year on account of reduced student enrolments and unfavourable course dynamics. We think these challenges are transitory but are monitoring whether students' attitudes towards further education (and perhaps exams) might have changed given the abundance of workplace opportunities that currently exist.

At US real estate portal Zillow, we saw the company make an unexpected about-turn on its Zillow Offers product in which it acted as the buyer to willing sellers of property. Poor execution and a backdrop of aggressive price increases in US house prices had made the predictability of the Zillow offering one that was difficult to scale. Zillow Offers had been the company's all-guns-blazing attempt to monetise the selling agent side of the housing transaction to complement the buy-side lead generation that the core marketplace of Zillow had established. Whilst we view its demise as disappointing (largely as we feel we never really got a proper read out on the experiment) we think many of the processes and workflows that it had built for the Zillow Offers product can now be monetised in other less capital-intensive ways and so we decided to retain our exposure.

Teladoc, a virtual healthcare provider, gave a disappointing update regarding competitive activity slowing its consumer-focused behavioural health segment. The bigger opportunity as we see it relates to Teladoc building out comprehensive virtual medical services for its employer and health plan customers. This is a long-term opportunity that Teladoc has been building towards through organic and acquisitive activity and one for which we remain enthusiastic.

Out of the 116 companies held, 19 stocks in the portfolio generated positive absolute returns in sterling terms over the six months to the end of April. Conversely, 35 stocks fell more than 50%. Such an extreme distribution of returns illustrates how growth stocks across the board have suffered in the current environment. Bright spots would include Pacira BioSciences, a provider of novel anaesthetics and pain management products, where a recovery in surgical procedures is synergising with the growing demand for non-opioid pain management. In the unlisted portion of the portfolio Akili, a therapeutically focused digital games designer, announced its intention to transition to public markets through a SPAC structure. With a significant commercial launch looming for its FDA-approved game for ADHD, the cash injection from this process gives the business significant firepower to drive awareness of its highly novel offering. SpaceX's launch and internet businesses continue to scale. Demand for crew, cargo, tourism and satellite missions over the last six months alone has seen their reusable rockets launching at a rate of one every week. Thanks to this unique capability, the company has also been able to place over 2,600 Starlink satellites in orbit, providing high-speed internet access to a rapidly growing user base of over a quarter million subscribers around the globe.

We acquired six new holdings over the six months, comprising four listed companies and two private companies.

The new positions in Schrödinger and AbCellera reflect the increased use of software to optimise the drug development process, thereby driving efficiency in both time and dollars spent. Schrödinger's software function is a structure prediction/optimisation tool based on codifying the fundamental rules of physical chemistry. It is used by small molecule drug designers to optimise candidate drug molecules to favour particular attributes (e.g. affinity, solubility bioavailability, half-life etc.). The predictive abilities of its software have found favour within the Pharmaceutical and Biotech industry (it's already used in some capacity by the top 20 drug development companies), and we see scope for this to grow as customers increase the breadth and number of licenses they take. As this unfolds, we see a route by which Schrödinger might carve out a key position as the operating/collaboration layer across drug development which could deliver even greater efficiency savings (traditional drug development is a highly siloed process with a low level of process integration). While the bulk of the current commercial efforts to date have been in selling software, Schrödinger also operates an in-house drug development programme which is beginning to yield some interesting clinical candidates of its own. Whilst clearly validating the power of its code this also opens potential routes for drug out-licensing.

AbCellera provides antibody discovery services for pharmaceutical and biotech partners. AbCellera improves the speed, and potentially the quality, of antibody discovery by leveraging its in-house technology, which consists of a proprietary immunisation method, single cell screening, bi-specific antibody engineering and supporting data and software. We believe that its technology is differentiated and valuable, which will allow the company to capture an increasing share of antibody development programmes. The antibody therapeutics market is large and growing and AbCellera monetises this through high-margin milestone and royalty payments.

Expensify is a leading provider of expense management software. Using software to automate expense management is far from novel and has been used by large companies for decades. However, incumbents have struggled to find a profitable and efficient way to provide software to smaller and medium sized businesses (SMBs). With a distinctive approach to selling and building its products, Expensify has been able to provide expense management software to the underserved SMB market. The size of the opportunity, the company's strong customer focus and the potential for the product to evolve further by adding additional functionality around billing, invoicing and payroll led us to participate in the company's IPO.

Progyny provide fertility benefits to employees on behalf of large companies in the US. The fertility market remains vastly underserved relative to the underlying demand: 1 in 8 heterosexual couples report fertility challenges and demand from LGBTQ and single parent families is also on the rise. The current lack of access to help is due to societal taboos around fertility along with the high cost of procedures, making them out of reach for many. Progyny's business is entirely focused on improving economic access to high quality fertility services which it achieves through a combination of intelligent plan design and human support, overlayed on a nationwide network of partner fertility clinics. Data suggests that Progyny's fertility outcomes are markedly better than industry averages. There remains a vast opportunity to grow its US client base, to develop additional fertility/parenthood-related services and to expand internationally with its growing number of multi-national corporate clients.

DNA Script is a private company offering enzymatic DNA-synthesis services for the growing synthetic-biology industry, where DNA is an important building-block. Competing DNA-synthesis approaches are based on long-established chemical methods that are nearing maximum optimisation. Enzymatic DNA-synthesis has the potential to both increase the DNA-synthesis efficiency and to make the synthesis more sustainable. DNA Script is differentiated by being the first player to commercialise an enzymatic DNA printer (in the form of a benchtop instrument) and for specialising in the high-value/low-volume modified-oligo segment that can be mission-critical for customers and thus represents a promising foothold for continued commercial traction.

BillionToOne is a private company that aims to make molecular diagnostics more accurate, efficient and accessible. The company has built an innovative technology platform consisting of a DNA molecular counter which has led to the commercialisation of the first single gene non-invasive pre-natal test (NIPT), redefining the accuracy with which pregnancy screening can be carried out. But the ambition of the company is far broader; it is attempting to build its existing pre-natal business and then expanding into oncology, with the long-term goal of tackling early cancer detection via liquid biopsy. We have been impressed by the company's progress to date, alongside the first principle thinking of the founding team.

New purchases were primarily funded through reductions to Tesla as the company is maturing. We also exited the nerve repair company AxoGen as we felt we had given sufficient time for the company to improve its commercial progress.

The principal risks and uncertainties facing the Company are set out in note 11.

* See disclaimer at the end of this announcement.

Total return information sourced from Refinitiv/Baillie Gifford and relevant underlying index providers.

For a definition of terms see Glossary of Terms and Alternative Performance Measures (see note 12).

Past performance is not a guide to future performance.

Baillie Gifford Statement on Stewardship

Reclaiming Activism for Long-Term Investors

Baillie Gifford's over-arching ethos is that we are 'actual' investors. We have a responsibility to behave as supportive and constructively engaged long-term investors. We invest in companies at different stages in their evolution, across vastly different industries and geographies and we celebrate their uniqueness. Consequently, we are wary of prescriptive policies and rules, believing that these often run counter to thoughtful and beneficial corporate stewardship. Our approach favours a small number of simple principles which help shape our interactions with companies.

Our Stewardship Principles

Prioritisation of Long-Term Value Creation

We encourage company management and their boards to be ambitious and focus their investments on long-term value creation. We understand that it is easy for businesses to be influenced by short-sighted demands for profit maximisation but believe these often lead to sub-optimal long-term outcomes. We regard it as our responsibility to steer businesses away from destructive financial engineering towards activities that create genuine economic value over the long run. We are happy that our value will often be in supporting management when others do not.

A Constructive and Purposeful Board

We believe that boards play a key role in supporting corporate success and representing the interests of minority shareholders. There is no fixed formula, but it is our expectation that boards have the resources, cognitive diversity and information they need to fulfil these responsibilities. We believe that a board works best when there is strong independent representation able to assist, advise and constructively test the thinking of management.

Long-term Focused Remuneration with Stretching Targets

We look for remuneration policies that are simple, transparent and reward superior strategic and operational endeavour. We believe incentive schemes can be important in driving behaviour, and we encourage policies which create alignment with genuine long-term shareholders. We are accepting of significant pay-outs to executives if these are commensurate with outstanding long-run value creation, but plans should not reward mediocre outcomes. We think that performance hurdles should be skewed towards long-term results and that remuneration plans should be subject to shareholder approval.

Fair Treatment of Stakeholders

We believe it is in the long-term interests of companies to maintain strong relationships with all stakeholders, treating employees, customers, suppliers, governments and regulators in a fair and transparent manner. We do not believe in one-size-fits-all governance and we recognise that different shareholder structures are appropriate for different businesses. However, regardless of structure, companies must always respect the rights of all equity owners.

Sustainable Business Practices

We look for companies to act as responsible corporate citizens, working within the spirit and not just the letter of the laws and regulations that govern them. We believe that corporate success will only be sustained if a business's long-run impact on society and the environment is taken into account. Management and boards should therefore understand and regularly review this aspect of their activities, disclosing such information publicly alongside plans for ongoing improvement.

Income statement (unaudited)

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)

Statement of changes in equity (unaudited)

For the six months ended 30 April 2022

For the six months ended 30 April 2021

*  The Capital Reserve as at 30 April 2022 includes investment holding gains of £96,393,000 (30 April 2021 - gains of £680,424,000).

Condensed cash flow statement (unaudited)

^* Cash from operations includes dividends received in the period of £503,000 (30 April 2021 - £324,000).

^† Cash and cash equivalents represent cash at bank and short term money market deposits repayable on demand.

Performance of the Top 20 Holdings as at 30 April 2022 (unaudited)

* Total assets before deduction of loans.

^† Absolute and relative performance has been calculated on a total return basis over the period 1 November 2021 to 30 April

  2022. Absolute performance is in sterling terms; relative performance is against S&P Global Small Cap Index (in sterling terms).

  Source: Baillie Gifford/StatPro and relevant underlying index providers. See disclaimer at the end of this announcement.

^u  Denotes unlisted security.

^p  Denotes security where majority of the holding was previously held in the portfolio as an unlisted security.

^# More than one line of stock held. Holding information represents the aggregate of all lines of stock.

Past performance is not a guide to future performance

List of Investments as at 30 April 2022 (unaudited) 

* Total assets before deduction of loans.

^u Denotes unlisted security.

^P  Denotes security where majority of holding was previously held in the portfolio as an unlisted security.

^S Denotes suspended security.

Figures represent percentage of total assets.

# Includes holdings in ordinary shares and preference shares.

Distribution of total assets^* (unaudited)

† S&P Global Small Cap Index. Weightings exclude industries where the Company has no exposure. See disclaimer at the end of this announcement.

Distribution of total assets^* (unaudited)

* Total assets before deduction of loans.

Notes to the condensed Financial Statements (unaudited)

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 (after the deduction of shares held in treasury) during each period.

There are no dilutive or potentially dilutive shares in issue.

Investments held at fair value through profit or loss

At 30 April 2022 and 31 October 2021 all borrowings are in the form of short term floating rate borrowings and their fair value is considered equal to their book value, hence there is no difference in the net asset value at book value and fair value.

Net Liquid Assets

Net liquid assets comprise current assets less current liabilities, excluding borrowings.

Discount/Premium (APM)

As stockmarkets and share prices vary, an investment trust's share price is rarely the same as its net asset value. When the share price is lower than the net asset value 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 net asset value per share and is usually expressed as a percentage of the net asset value per share. If the share price is higher than the net asset value 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.

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 debt at fair value). The ongoing charges are calculated on the basis prescribed by the Association of Investment Companies.

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.

Invested gearing is the Company's borrowings at book value less cash and cash equivalents (as adjusted for investment and share buy back/issuance transactions awaiting settlement) expressed as a percentage of shareholders' funds.

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

Leverage (APM)

For the purposes of the Alternative Investment Fund Managers Directive, leverage is any method which increases the Company's exposure, including the borrowing of cash and the use of derivatives. It is expressed as a ratio between the Company's exposure and its net asset value and can be calculated on a gross and a commitment method. Under the gross method, exposure represents the sum of the Company's positions after the deduction of sterling cash balances, without taking into account any hedging and netting arrangements. Under the commitment method, exposure is calculated without the deduction of sterling cash balances and after certain hedging and netting positions are offset against each other.

Active Share (APM)

Active share, a measure of how actively a portfolio is managed, is the percentage of the portfolio that differs from its comparative index. It is calculated by deducting from 100 the percentage of the portfolio that overlaps with the comparative index. An active share of 100 indicates no overlap with the index and an active share of zero indicates a portfolio that tracks the index.

Unlisted Company

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

Sustainable Finance Disclosure 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 UK Growth Trust plc 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 Governance and Sustainable Principles and Guidelines as its policy on integration of sustainability risks in investment decisions.

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.

More detail on the Investment Manager's approach to sustainability can be found in the Governance and Sustainability Principles and Guidelines document, available publicly on the Baillie Gifford website (bailliegifford.com/en/uk/ about-us/literature-library/corporate-governance/governance- sustainability-principles-and-guidelines/). 

The Taxonomy Regulation establishes an EU-wide framework or criteria for environmentally sustainable economic activities in respect of six environmental objectives. It builds on the disclosure requirements under SFDR by introducing additional disclosure obligations in respect of AIFs that invest in an economic activity that contributes to an environmental objective.

The Company does not commit to make sustainable investments as defined under SFDR. As such, the underlying investments do not take into account the EU criteria for environmentally sustainable economic activities.

Third Party Data Provider Disclaimer

No third party data provider ('Provider') makes any warranty, express or implied, as to the accuracy, completeness or timeliness of the data contained herewith nor as to the results to be obtained by recipients of the data. No Provider shall in any way be liable to any recipient of the data for any inaccuracies, errors or omissions in the index data included in this document, regardless of cause, or

for any damages (whether direct or indirect) resulting therefrom.

No Provider has any obligation to update, modify or amend the data or to otherwise notify a recipient thereof in the event that any matter stated herein changes or subsequently becomes inaccurate.

Without limiting the foregoing, no Provider shall have any liability whatsoever to you, whether in contract (including under an indemnity), in tort (including negligence), under a warranty, under statute or otherwise, in respect of any loss or damage suffered by you as a result of or in connection with any opinions, recommendations, forecasts, judgements, or any other conclusions, or any course of action determined, by you or any third party, whether or not based on the content, information or materials contained herein.

S&P Index Data

The S&P Global Small Cap 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.

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