REG - Baillie Gifford Euro - Annual Financial Report
01/12/2023 11:00
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RNS Number : 4040V Baillie Gifford European Growth Tst 01 December 2023
Baillie Gifford European Growth Trust plc (BGEU)
Legal Entity Identifier: 213800QNN9EHZ4SC1R12
Regulated Information Classification: Annual Financial and Audit Reports
Annual Report and Financial Statements
Further to the preliminary statement of audited annual results announced to
the Stock Exchange on 17 November 2023, Baillie Gifford European Growth Trust
PLC ("the Company") announces that the Company's Annual Report and Financial
Statements for the year ended 30 September 2023, including the Notice of
Annual General Meeting, has 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
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
It is also available on the Company's page of the Baillie Gifford website at:
bgeuropeangrowth.com (http://www.bgeuropeangrowth.com/) (as is the preliminary
statement of audited annual results announced by the Company on 17 November
2023).
Statement of Directors' Responsibilities in respect of the Annual Report and
the Financial Statements
Each of the Directors, whose names and functions are listed within the
Directors and Managers section of the Annual Report and Financial Statements,
confirm that, to the best of their knowledge:
¾ the Financial Statements, prepared in accordance with the applicable set
of accounting standards, give a true and fair view of the assets, liabilities,
financial position and net return of the Company;
¾ the Strategic Report includes 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); and
¾ 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 position and performance, business model
and strategy.
Principal and emerging risks relating to the Company
As explained on page 68 of the Annual Report and Financial Statements there is
an ongoing process for identifying, evaluating and managing the risks faced by
the Company. The Directors have undertaken a robust assessment of the
principal and emerging risks facing the Company, including those that would
threaten the business model, future performance, solvency or liquidity. A
description of these risks and how they are being managed or mitigated is set
out below:
What is the risk? How is it managed? Current assessment of risk
Financial Risk The Company's assets consist mainly of listed securities (89% of the The Board has, in particular, considered the impact of heightened market This risk is increasing due to increased market volatility as a result of
investment portfolio) and its principal and emerging financial risks are volatility due to macroeconomic factors such as higher inflation and interest heightened macroeconomic and geopolitical concerns.
therefore market related and include market risk (comprising currency risk, rates and geopolitical concerns. In order to oversee this risk, the Board
interest rate risk and other price risk), liquidity risk and credit risk. An considers at each meeting various metrics including regional and industrial
explanation of those risks and how they are managed is contained in note 19 to sector weightings, top and bottom stock contributors to performance along with
the Financial Statements on pages 101 to 107 of the Annual Report and sales and purchases of investments. Individual investments are discussed with
Financial Statements. the portfolio manager together with general views on the investment markets
and sectors. A strategy session is held annually.
What is the risk? How is it managed? Current assessment of risk
Investment Pursuit of an investment strategy to fulfil the Company's objective which the To mitigate this risk, the Board regularly reviews and monitors the Company's This risk is increasing as the market's appetite for growth stocks, typically
market perceives to be unattractive or inappropriate, or the ineffective objective and investment policy and strategy, the investment portfolio and its held by the Company, has decreased during the recent period of heightened
strategy risk implementation of an attractive or appropriate strategy, may lead to reduced performance, the level of discount/premium to net asset value at which the macroeconomic and geopolitical concern.
returns for shareholders and, as a result, a decreased demand for the shares trade and movements in the share register and raises any matters of
Company's shares. This may lead to the Company's shares trading at a widening concern with the Managers.
discount to their net asset value.
What is the risk? How is it managed? Current assessment of risk
Political and Political change in areas in which the Company invests or may invest may have To mitigate this risk developments are closely monitored and considered by the This risk is increasing as governments and consumers around the world continue
financial consequences for the Company. Board and are regularly discussed at Board meetings. to assess the impact of geopolitical and macroeconomic tensions.
associated
economic risk
What is the risk? How is it managed? Current assessment of risk
Discount The discount/premium at which the Company's shares trade relative to its net To manage this risk, the Board monitors the level of discount/premium at which The Company's discount widened slightly during the year.
asset value can change. The risk of a widening discount is that it may the shares trade and the Company has authority to buy back its existing
risk undermine investor confidence in the Company. shares, when deemed by the Board to be in the best interests of the Company
and its shareholders.
What is the risk? How is it managed? Current assessment of risk
Regulatory risk Failure to comply with applicable legal and regulatory requirements such as To mitigate this risk, Baillie Gifford's Business Risk, Internal Audit and There have been no material regulatory changes that have impacted the Company
the tax rules for investment trust companies, the FCA Listing Rules and the Compliance Departments provide regular reports to the Audit Committee on during the year.
Companies Act could lead to suspension of the Company's Stock Exchange Baillie Gifford's monitoring programmes. Major regulatory change could impose
listing, financial penalties, a qualified audit report or the Company being disproportionate compliance burdens on the Company. In such circumstances
subject to tax on capital gains. Changes to the regulatory environment could representation is made to ensure that the special circumstances of investment
negatively impact the Company. trusts are recognised. Shareholder documents and announcements, including the
Company's published Interim 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.
What is the risk? How is it managed? Current assessment of risk
Custody and Safe custody of the Company's assets may be compromised through control To mitigate this risk, the Audit Committee receives six-monthly reports from All control procedures are working effectively.
failures by the Depositary, including breaches of cyber security. the Depositary confirming safe custody of the Company's assets held by the
depositary Custodian. Cash and portfolio holdings are independently reconciled to the
Custodian's records by the Managers who also agree uncertificated private
risk portfolio holdings to confirmations from investee companies. The Custodian's
audited 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. In addition, the existence of assets
is subject to annual external audit.
What is the risk? How is it managed? Current assessment of risk
Operational Failure of Baillie Gifford's systems or those of other third party service To mitigate this risk, Baillie Gifford has a comprehensive business continuity All control procedures are working effectively.
providers could lead to an inability to provide accurate reporting and plan which facilitates continued operation of the business in the event of a
risk monitoring or a misappropriation of assets. service disruption. The Audit Committee reviews Baillie Gifford's Report on
Internal Controls and 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.
What is the risk? How is it managed? Current assessment of risk
Leverage risk The Company may borrow money for investment purposes (sometimes known as To mitigate this risk, all borrowings require the prior approval of the Board The Company has in place long term borrowings, expiring in 2036 and 2040.
'gearing' or 'leverage'). If the investments fall in value, any borrowings and leverage levels are discussed by the Board and Managers at every meeting.
will magnify the extent of this loss. If borrowing facilities are not renewed, Covenant levels are monitored regularly. The majority of the Company's
the Company may have to sell investments to repay borrowings. investments are in quoted securities that are readily realisable. Further
information on leverage can be found on page 119 of the Annual Report and
Financial Statements and the Glossary of terms and alternative performance
measures on pages 122 to 124 of the Annual Report and Financial Statements.
What is the risk? How is it managed? Current assessment of risk
Climate and Perceived problems on environmental, social and governance ('ESG') matters in This is mitigated by the Managers' strong ESG stewardship and engagement The Investment Manager continues to employ strong ESG stewardship and
an investee company could lead to that company's shares being less attractive policies which are available to view on the Managers' website, engagement policies.
governance to investors, adversely affecting its share price, in addition to potential bailliegifford.com/esg, and which have been reviewed and endorsed by the
valuation issues arising from any direct impact of the failure to address the Company, and which have been fully integrated into the investment process. Due
risk ESG weakness on the operations or management of the investee company (for diligence includes assessment of the risks inherent in climate change (see
example in the event of an industrial accident or spillage). Repeated failure page 70 of the Annual Report and Financial Statements.).
by the Managers 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.
What is the risk? How is it managed? Current assessment of risk
Cyber A cyber attack on Baillie Gifford's network or that of a third party service To mitigate this risk, the Audit Committee reviews Reports on Internal This risk is seen as increasing due to recent indications that the
provider could impact the confidentiality, integrity or availability of data Controls published by Baillie Gifford and other third party service providers. continuation of geopolitical tensions could lead to cyber attacks. Emerging
security risk and systems. Cyber security due diligence is performed by Baillie Gifford on third party technologies, including AI, could potentially increase information security
service providers which includes a review of crisis management and business risks. In addition, service providers operate a hybrid approach of remote and
continuity frameworks. office working, thereby increasing the potential of a cyber security threat.
What is the risk? How is it managed? Current assessment of risk
Emerging risk As explained on page 68 and 69 of the Annual Report and Financial Statements, This is mitigated by the Managers' close links to the investee companies and No change in assessment of risk.
the Board has regular discussions on principal risks and uncertainties, their ability to ask questions on contingency plans. The Managers believe the
including any risks which are not an immediate threat but could arise in the impact of such events may be to slow growth rather than to invalidate the
longer term. The Board considers that the key emerging risks arise from the investment rationale over the long term.
interconnectedness of global economies and the related exposure of the
investment portfolio to external and emerging threats such as escalating
geopolitical tensions, cyber security risks including developing AI and
quantum computing capabilities, and new coronavirus variants or similar public
health threats.
Baillie Gifford & Co Limited
Company Secretaries
1 December 2023
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