TIDMBGEU
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
It is also available on the Company's page of the Baillie
Gifford website at: 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:
3/4 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;
3/4 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
3/4 the Annual Report and Financial Statements, taken as a
whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company's
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 The Company's assets consist The Board has, in particular, This risk is increasing
Risk mainly of listed securities considered the impact of due to increased market
(89% of the investment heightened volatility as a result
portfolio) and its principal market volatility due to of heightened macroeconomic
and emerging financial macroeconomic and geopolitical concerns.
risks are therefore market factors such as higher
related and include market inflation
risk (comprising currency and interest rates and
risk, interest rate risk geopolitical
and other price risk), concerns. In order to oversee
liquidity risk and credit this risk, the Board considers
risk. An explanation of at each meeting various metrics
those risks and how they including regional and
are managed is contained industrial
in note 19 to the Financial sector weightings, top and
Statements on pages 101 bottom stock contributors
to 107 of the Annual Report to performance along with
and Financial Statements. sales and purchases of
investments.
Individual investments are
discussed with 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 To mitigate this risk, the This risk is increasing
strategy risk strategy to fulfil the Board regularly reviews and as the market's appetite
Company's objective which monitors the Company's for growth stocks,
the market perceives to objective typically held by the
be unattractive or and investment policy and Company, has decreased
inappropriate, strategy, the investment during the recent period
or the ineffective portfolio of heightened macroeconomic
implementation and its performance, the level and geopolitical concern.
of an attractive or appropriate of discount/premium to net
strategy, may lead to reduced asset value at which the shares
returns for shareholders trade and movements in the
and, as a result, a decreased share register and raises
demand for the Company's any matters of concern with
shares. This may lead to the Managers.
the 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
--------------- --------------------------------- -------------------------------- ------------------------------
Political Political change in areas To mitigate this risk This risk is increasing
and in which the Company invests developments as governments and
associated or may invest may have are closely monitored and consumers around the
economic risk financial consequences considered by the Board and world continue to assess
for the Company. are regularly discussed at the impact of geopolitical
Board meetings. and macroeconomic tensions.
--------------- --------------------------------- -------------------------------- ------------------------------
What is the risk? How is it managed? Current assessment
of risk
--------------- --------------------------------- -------------------------------- ------------------------------
Discount The discount/premium at To manage this risk, the Board The Company's discount
risk which the Company's shares monitors the level of widened slightly during
trade relative to its net discount/premium the year.
asset value can change. at which the shares trade
The risk of a widening and the Company has authority
discount is that it may to buy back its existing
undermine investor confidence shares,
in the Company. 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 Failure to comply with To mitigate this risk, Baillie There have been no
risk applicable legal and regulatory Gifford's Business Risk, material regulatory
requirements such as the Internal changes that have impacted
tax rules for investment Audit and Compliance the Company during
trust companies, the FCA Departments the year.
Listing Rules and the Companies provide regular reports to
Act could lead to suspension the Audit Committee on Baillie
of the Company's Stock Gifford's monitoring
Exchange listing, financial programmes.
penalties, a qualified Major regulatory change could
audit report or the Company impose disproportionate
being subject to tax on compliance
capital gains. Changes burdens on the Company. In
to the regulatory environment such circumstances
could negatively impact representation
the Company. is made to ensure that the
special circumstances of
investment
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 To mitigate this risk, the All control procedures
depositary assets may be compromised Audit Committee receives are working effectively.
risk through control failures six-monthly
by the Depositary, including reports from the Depositary
breaches of cyber security. confirming safe custody of
the Company's assets held
by the Custodian. Cash and
portfolio holdings are
independently
reconciled to the Custodian's
records by the Managers who
also agree uncertificated
private 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 To mitigate this risk, Baillie All control procedures
risk systems or those of other Gifford has a comprehensive are working effectively.
third party service providers business continuity plan which
could lead to an inability facilitates continued operation
to provide accurate reporting of the business in the event
and monitoring or a of a service disruption. The
misappropriation Audit Committee reviews Baillie
of assets. 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 To mitigate this risk, all The Company has in
money for investment purposes borrowings require the prior place long term borrowings,
(sometimes known as 'gearing' approval of the Board and expiring in 2036 and
or 'leverage'). If the leverage levels are discussed 2040.
investments fall in value, by the Board and Managers
any borrowings will magnify at every meeting. Covenant
the extent of this loss. levels are monitored regularly.
If borrowing facilities The majority of the Company's
are not renewed, the Company investments are in quoted
may have to sell investments securities that are readily
to repay borrowings. 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 This is mitigated by the The Investment Manager
governance environmental, Managers' continues to employ
risk social and governance ('ESG') strong ESG stewardship and strong ESG stewardship
matters in an investee engagement policies which and engagement policies.
company could lead to that are available to view on the
company's shares being Managers' website,
less attractive to investors, bailliegifford.com/esg,
adversely affecting its and which have been reviewed
share price, in addition and endorsed by the Company,
to potential valuation and which have been fully
issues arising from any integrated into the investment
direct impact of the failure process. Due diligence includes
to address the ESG weakness assessment of the risks
on the operations or management inherent
of the investee company in climate change (see page
(for example in the event 70 of the Annual Report and
of an industrial accident Financial Statements.).
or spillage). Repeated
failure 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 To mitigate this risk, the This risk is seen as
security risk Gifford's network or that Audit Committee reviews Reports increasing due to recent
of a third party service on Internal Controls published indications that the
provider could impact the by Baillie Gifford and other continuation of geopolitical
confidentiality, integrity third party service providers. tensions could lead
or availability of data Cyber security due diligence to cyber attacks. Emerging
and systems. is performed by Baillie Gifford technologies, including
on third party service AI, could potentially
providers increase information
which includes a review of security risks. In
crisis management and business addition, service providers
continuity frameworks. operate a hybrid approach
of remote and 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 This is mitigated by the No change in assessment
and 69 of the Annual Report Managers' of risk.
and Financial Statements, close links to the investee
the Board has regular companies and their ability
discussions to ask questions on contingency
on principal risks and plans. The Managers believe
uncertainties, including the impact of such events
any risks which are not may be to slow growth rather
an immediate threat but than to invalidate the
could arise in the longer investment
term. The Board considers rationale over the long term.
that the key emerging risks
arise from the
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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