REG - Baillie Gifford UK - Annual Financial Report
03/07/2025 16:00
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RNS Number : 6684P Baillie Gifford UK Growth Trust PLC 03 July 2025
Baillie Gifford UK Growth Trust plc
Legal Entity Identifier: 549300XX386SYWX8XW22
Regulated Information Classification: Annual Financial and Audit Reports
Annual Report and Financial Statements
Further to the statement of audited annual results announced to the Stock
Exchange on 13 June 2025, Baillie Gifford UK Growth Trust plc ("UK Growth" or
"the Company") announces that the Company's Annual Report and Financial
Statements for the year ended 30 April 2025, 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
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
It is also available on the UK Growth page of the Baillie Gifford website at:
bgukgrowthtrust.com (http://www.bgukgrowthtrust.com) (as is the statement of
audited annual results announced by the Company on 13 June 2025).
Responsibility Statement of the UK Growth Directors in respect of the Annual
Financial Report
The UK Growth Directors confirm that, to the best of their knowledge:
- 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;
- the Strategic Report includes a fair review of the development and
performance of the business and the position of the issuer, together with a
description of the principal risks and uncertainties they face; and
- 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 pages 51 and 52 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. A description of these risks and
how they are being managed or mitigated is set out below. There have been no
significant changes to the nature of the principal risks during the year. On
pages 30 to 33 of the Annual Report and Financial Statements, an upwards
arrow, dash or downwards arrow has been included to show if the risk level has
increased, not changed or decreased since it was reported in last year's
Annual Report and Financial Statements.
The Board considers heightened macroeconomic and geopolitical concerns to be
factors which exacerbate existing areas of risk as categorised and further
explained below.
What is the risk? How is it managed? Current assessment of risk
Financial risk: The Company's assets consist predominately of listed The Board has, in particular, considered the impact of heightened market Risk level: High
securities and its principal and emerging risks are therefore market related volatility due to macroeconomic factors such as higher inflation and interest
and include market risk (comprising currency risk, interest rate risk and rates and geopolitical concerns. To monitor and, where possible, mitigate This risk is unchanged and remains high due to high levels of market
other price risk), liquidity risk and credit risk. An explanation of those these risks the Board considers at each meeting various portfolio metrics volatility as a result of heightened geopolitical concerns and the threat to
risks and how they are managed is contained in note 18 on pages 83 to 87 of including individual stock performance, the composition and diversification of trade from increased protectionism.
the Annual Report and Financial Statements. the portfolio by sector, purchases and sales of investments and the top and
bottom contributors to performance. The Managers provide rationale for stock
selection decisions. A strategy meeting is held annually.
What is the risk? How is it managed? Current assessment of risk
Investment strategy risk: Pursuing an investment strategy to fulfil the To mitigate this risk, the Board regularly reviews and monitors: the Company's Risk level: High
Company's objective which the market perceives to be unattractive or objective and investment policy and strategy; the investment portfolio and its
inappropriate, or the ineffective implementation of an attractive or performance; the level of discount/premium to net asset value at which the This risk remains high as the market's appetite for growth stocks, typically
appropriate strategy, may lead to reduced returns for shareholders and, as a shares trade; and movements in the share register and raise any matters of held by the Company, declined during the recent period of heightened
result, a decreased demand for the Company's shares. This may lead to the concern with the Managers. macroeconomic and geopolitical concern.
Company's shares trading at a widening discount to their net asset value.
What is the risk? How is it managed? Current assessment of risk
Discount risk: The discount/premium at which the Company's shares trade To manage this risk, the Board monitors the level of discount/premium at which Risk level: High
relative to its net asset value can change. The risk of a widening discount is the shares trade and the Company has authority to buy back its existing shares
that it may undermine investor confidence in the Company. when deemed by the Board to be in the best interests of the Company and its The Company's shares continued to trade at a discount. In the year to 30 April
shareholders. 2025, the Company bought back 17,403,697 shares. In January 2025, the Board
determined to use buybacks to endeavour to maintain a single digit discount,
in normal market conditions.
What is the risk? How is it managed? Current assessment of risk
Climate and governance risk: Perceived problems on Environmental, Social and This is mitigated by the Investment Managers' thorough ESG stewardship and Risk level: Moderate
Governance ('ESG') matters in an investee company could lead to that company's engagement policies, which are available to view on the Managers' website:
shares being less attractive to investors, adversely affecting its share bailliegifford.com and have been reviewed and endorsed by the Company, and are The Investment Manager continued to employ strong ESG stewardship and
price, in addition to potential valuation issues arising from any direct fully integrated into the investment process as well as the extensive upfront engagement policies.
impact of the failure to address the ESG weakness on the operations or and ongoing due diligence which the Investment Managers undertake on each
management of the investee company (for example in the event of an industrial investee company. This due diligence includes assessment of the risks inherent
accident or spillage). Repeated failure by the Investment Manager to identify in climate change (see page 54 of the Annual Report and Financial Statements).
ESG weaknesses in investee companies could lead to the Company's own shares The Directors have considered the impact of climate change on the Financial
being less attractive to investors, adversely affecting its own share price. Statements of the Company and this is included in note 1 to the Financial
Statements on page 75 of the Annual Report and Financial Statements.
What is the risk? How is it managed? Current assessment of risk
Regulatory risk: Failure to comply with applicable legal and regulatory To mitigate this risk, Baillie Gifford's Business Risk, Internal Audit and Risk level: Low
requirements such as the tax rules for investment companies, the FCA Listing Compliance Departments provide regular reports to the Audit Committee on
Rules and the Companies Act could lead to suspension of the Company's Stock Baillie Gifford's monitoring programmes. Major regulatory change could impose All control procedures were working effectively and there were no material
Exchange listing, financial penalties, a qualified audit report or the Company disproportionate compliance burdens on the Company. In such circumstances regulatory changes that have impacted the Company during the year.
being subject to tax on capital gains. Changes to the regulatory environment representation is made to ensure that the special circumstances of investment
could 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
What is the risk? How is it managed? Current assessment of risk
Custody and depositary risk: Safe custody of the Company's assets may be To mitigate this risk, the Audit Committee receives six monthly reports from Risk level: Low
compromised through control failures by the Depositary, including breaches of the Depositary confirming safe custody of the Company's assets held by the
cyber security. Custodian. Cash and portfolio holdings are independently reconciled to the All control procedures were working effectively.
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. 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 risk: Failure of Baillie Gifford's systems or those of other third To mitigate this risk, Baillie Gifford has a comprehensive business continuity Risk level: Low
party service providers could lead to an inability to provide accurate plan which facilitates continued operation of the business in the event of a
reporting and monitoring or a misappropriation of assets. service disruption or major disaster. The Audit Committee reviews Baillie All control procedures were working effectively.
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.
What is the risk? How is it managed? Current assessment of risk
Leverage risk: The Company may borrow money for investment purposes (sometimes To mitigate this risk, all borrowing facilities require the prior approval of Risk level: Low
known as 'gearing' or 'leverage'). If the investments fall in value, any the Board and leverage levels are discussed by the Board and Managers at every
borrowings will magnify the impact of this loss. If borrowing facilities are meeting. Covenant levels are monitored regularly. The Company's investments The willingness of lenders to initiate and maintain lending facilities has
not renewed, or loan covenants are breached, the Company may have to sell are predominately in listed securities, at present, that are readily improved. Current borrowings are well below levels where loan covenants may be
investments to repay borrowings. realisable. Further information on leverage can be found on page 99 and in the breached. The current one year, £30m revolving credit facility expires in
Glossary of terms and Alternative Performance Measures on pages 100 to 102 of July 2025 and negotiations are underway to replace this facility.
the Annual Report and Financial Statements.
What is the risk? How is it managed? Current assessment of risk
Political risk: Political change in areas in which the Company invests or may Political developments are monitored and considered by the Board. The Board Risk level: High
invest may have practical consequences for the Company. continues to assess the potential consequences for the Company's future
activities including those that may arise from growing protectionism. The This risk remains high as governments and consumers around the world continue
Board also remains watchful of broader geopolitical tensions. to assess the impact of heightened geopolitical tensions.
What is the risk? How is it managed? Current assessment of risk
Cyber security risk: A cyber attack on Baillie Gifford's network or that of a To mitigate this risk, the Audit Committee reviews Reports on Internal Risk level: Moderate
third party service provider could impact the confidentiality, integrity or Controls published by Baillie Gifford and other third party service providers.
availability of data and systems. Baillie Gifford's Business Risk Department report to the Audit Committee on This risk remains moderate as the continuation of geopolitical tensions could
the effectiveness of information security controls in place at Baillie Gifford lead to cyber attacks. Emerging technologies, including AI, could potentially
and its business continuity framework. Cyber security due diligence is increase information security risks. In addition, service providers operate a
performed by Baillie Gifford on third party service providers which includes a hybrid approach of remote and office working, thereby increasing the potential
review of crisis management and business continuity frameworks. of a cyber security threat.
Emerging risks: As explained on pages 51 and 52 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 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 security risks including developing AI and quantum computing
capabilities, new coronavirus variants or similar public health threats. The
Board also notes that increased levels of government borrowing may result in
an elevated level of interest rates and/or increased market volatility. This
is mitigated by the Board discussing at each Board meeting economic and
geopolitical factors and how these might impact the Company. The Board also
considers the Investment Managers' close links to the investee companies and
their ability to ask questions on contingency plans. The Investment Managers
believe the impact of such events may be to slow the pace of growth rather
than to invalidate the investment rationale over the long term. The Managers
monitor certain emerging risks and have established a group to manage the
response to any future events that might result in heightened levels of market
volatility. Regular exercises are carried out to test the Managers' response
to various scenarios.
Baillie Gifford & Co Limited
Company Secretaries
4 July 2025
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