TIDMBGUK
RNS Number : 2074F
Baillie Gifford UK Growth Trust PLC
06 July 2023
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 16 June 2023, 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
2023, 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 .
It is also available on the UK Growth page of the Baillie
Gifford website at: bgukgrowthtrust.com (as is the statement of
audited annual results announced by the Company on 16 June
2023).
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 25 and 26 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. There have been no
significant changes to the principal risks during the year. A
description of these risks and how they are being managed or
mitigated is set out below.
The Board considers heightened macroeconomic and geopolitical
concerns to be factors which exacerbate existing areas of risk as
categorised and further explained below.
Financial Risk - the Company's assets consist mainly of listed
securities and its principal and emerging risks are therefore
market related and include market risk (comprising currency risk,
interest rate risk and other price risk), liquidity risk and credit
risk. An explanation of those risks and how they are managed is
contained in note 18 on pages 50 to 53 of the Annual Report and
Financial Statements. The Board has, in particular, considered the
impact of heightened market volatility since the Covid-19 pandemic
and over recent months due to macroeconomic factors such as higher
inflation and interest rates and geopolitical concerns, including
the Russia-Ukraine conflict. To monitor and, where possible,
mitigate these risks the Board considers at each meeting various
portfolio metrics including individual stock performance, the
composition and diversification of 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.
Investment Strategy Risk - pursuing an investment strategy to
fulfil the Company's objective which the market perceives to be
unattractive or inappropriate, or the ineffective implementation of
an attractive or appropriate strategy, may lead to reduced returns
for shareholders and, as a result, a decreased demand for the
Company's shares. This may lead to the Company's shares trading at
a widening discount to their net asset value. To mitigate this
risk, the Board regularly reviews and monitors: the Company's
objective and investment policy and strategy; the investment
portfolio and its performance; the level of discount/premium to net
asset value at which the shares trade; and movements in the share
register.
Climate and Governance Risk - as investors place increased
emphasis on Environmental, Social and Governance (ESG) issues,
perceived problems on ESG matters in an investee company could lead
to that company's shares being less attractive to investors,
adversely affecting its share price, in addition to potential
valuation issues arising from any direct impact of the failure to
address the ESG weakness on the operations or management of the
investee company (for example in the event of an industrial
accident or spillage). Repeated failure by the Investment Manager
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. This is mitigated by the Investment
Managers' thorough ESG stew ardship and engagement policies, which
are available to view on the Managers' website: bailliegifford.com
and have been reviewed and endorsed by the Company, and are fully
integrated into the inves tment process as well as the extensive
upfront and ongoing due diligence which the Investment Managers
undertake on each investee company. This due diligence includes
assessment of the risks inherent in climate change (see page 27 of
the Annual Report and Financial Statements ).
Discount Risk - the discount/premium at which the Company's
shares trade relative to its net asset value can change. The risk
of a widening discount is that it may undermine investor confidence
in the Company. To manage this risk, the Board monitors the level
of discount/premium at which the shares trade and the Company has
authority to buy back its existing shares when deemed by the Board
to be in the best interests of the Company and its
shareholders.
Regulatory Risk - failure to comply with applicable legal and
regulatory requirements such as the tax rules for investment trust
companies, the FCA Listing Rules and the Companies Act could lead
to suspension of the Company's Stock Exchange listing, financial
penalties, a qualified audit report or the Company being subject to
tax on capital gains. To mitigate this risk, Baillie Gifford's
Business Risk, Internal Audit and Compliance Departments provide
regular reports to the Audit Committee on Baillie Gifford's
monitoring programmes. Major regulatory change could impose
disproportionate compliance burdens on the Company. In such
circumstances representation 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.
Custody and Depositary Risk - safe custody of the Company's
assets may be compromised through control failures by the
Depositary, including cyber security incidents. To mitigate this
risk, the Audit Committee receives six monthly reports from the
Depositary 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. 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.
Operational Risk - failure of Baillie Gifford's systems or those
of other third party service providers could lead to an inability
to provide accurate reporting and monitoring or a misappropriation
of assets. To mitigate this risk, Baillie Gifford has a
comprehensive business continuity plan which facilitates continued
operation of the business in the event of a service disruption or
major disaster. The Audit Committee reviews Baillie 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. The other key third party service providers have not
experienced significant operational difficulties affecting their
respective services to the Company.
Cyber Security Risk - a cyber attack on Baillie Gifford's
network or that of a third party service provider could impact the
confidentiality, integrity or availability of data and systems. To
mitigate this risk, the Audit Committee reviews Reports on Internal
Controls published by Baillie Gifford and other third party service
providers. Baillie Gifford's Business Risk Department report to the
Audit Committee on the effectiveness of information security
controls in place at Baillie Gifford and its business continuity
framework. Cyber security due diligence is performed by Baillie
Gifford on third party service providers which includes a review of
crisis management and business continuity frameworks.
Leverage Risk - the Company may borrow money for investment
purposes (sometimes known as 'gearing' or 'leverage'). If the
investments fall in value, any borrowings will magnify the impact
of this loss. If borrowing facilities are not renewed, the Company
may have to sell investments to repay borrowings. To mitigate this
risk, all borrowing facilities require the prior approval of the
Board and leverage levels are discussed by the Board and Managers
at every meeting. Covenant levels are monitored regularly. The
Company's investments are in listed securities that are readily
realisable. Further information on leverage can be found on page 61
of the Annual Report and Financial Statements and in the Glossary
of Terms and Alternative Performance Measures on pages 62 and 63 of
the Annual Report and Financial Statements .
Political Risk - political developments are monitored and
considered by the Board. Following the departure of the UK from the
European Union, the Board continues to assess the potential
consequences for the Company's future activities including those
that may arise from further constitutional change.
Emerging Risks - as explained on pages 25 and 26 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 risk, new coronavirus variants or
similar public health threats. This is mitigated by 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.
Baillie Gifford & Co Limited
Company Secretaries
6 July 2023
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END
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