Baillie Gifford UK Growth Trust : Annual Report and Financial Statements 30 April 2023

Carolan Dobson, Chairman

Performance

For the year to 30 April 2023, the Company's net asset value ('NAV') total return (capital and income) was 1.1% compared to 6.0% for the FTSE All-Share Index total return. Whilst the wild divergence of performance in the share prices of companies perceived to offer either growth or value was more muted this year compared to last, it still persisted, resulting in a disappointing return from a portfolio focused on growth companies. There were also some disappointing individual company outcomes, see the Managers' Report on pages 11 and 12, but no more than might be normally expected. The Company's share price total return over the same period was negative 1.3%.

Examining in detail the current profits and turnover and the portfolio managers' expectations for future trading for the companies in the portfolio shows that the majority of the companies at the profits and revenue level are performing as expected against a backdrop of a difficult UK economy with interest rates and inflation sharply higher than for the last

15 years. The portfolio managers continue to be enthused by the long term prospects of the companies held, as evidenced by the low level of portfolio turnover over the year, of 5%.

Share Issuance and Buy-backs

There has been little investor appetite to invest in UK equities over the past year and this, coupled with some disappointing performance, has resulted in the shares standing at the financial year end at a 14.1% discount to the Company's NAV compared to 11.8% a year earlier. The discount on the AIC UK All Companies sector was 11.9% compared to 10.6% for the same period

last year.

The Company's share buy-back policy seeks to operate in the best interests of shareholders by taking into account the relative level of the Company's share price discount to NAV when compared with peer group trusts, the absolute level of discount, volatility in the level of discount and the impact from share buy-back activity on the long-term liquidity of the Company's issued shares.

The Company has steadily bought back shares throughout the year, buying into treasury 2,975,000 shares, which represents 1.9% of the Company's issued share capital as at 30 April 2022. Since the financial year end, a further 105,000 shares have been bought back into treasury. However, it needs more investor demand for UK growth equities to materially narrow the Company's discount.

The Company benefits from the flexibility of being able to issue new shares or to re-issue any shares that might be held in treasury when there is sufficient demand at a premium to NAV as this helps to improve trading liquidity and reduces ongoing costs by being asset accretive. The Company is seeking to renew the annual issuance authority at its Annual General Meeting ('AGM'). To avoid any dilution to existing investors, shares held in treasury and any new shares would only be re-issued/issued at a premium to NAV and after associated costs.

Gearing

During the year, the Company replaced its one-year £20m revolving credit facility with The Royal Bank of Scotland International Limited with a one-year £30m revolving credit facility with the same counterparty. Drawn and invested gearing stood at 5% and 3% of shareholders' funds as at the Company's year end compared to 2% for both a year earlier.

The Board sets internal guidelines for the portfolio managers' use of gearing which are altered from time to time but are subject to the absolute amount of any gearing not representing more than 20% of net asset value of the Company at the time of drawdown. Should the level be subsequently breached, then the portfolio managers would be asked to make sales should there be insufficient cash available to reduce the absolute amount of

any gearing to below 20%.

Earnings and Dividends

The net revenue return per share for the year was 4.05p, versus 4.39p in 2022. A final dividend of 3.60p per share, payable on 15 September 2023 to shareholders on the register as at

18 August 2023, is being recommended to shareholders.

The Company's priority is capital growth so shareholders should not rely on receiving a regular or growing level of income from their investment in this Company. Any dividend paid is by way of a single final payment and the Board expects that such dividends would represent approximately the minimum permissible to maintain investment trust status after taking account of variables.

Board Composition

I intend to step down from the Board no later than next year's AGM and, in line with good corporate governance, will play no role in the recruitment of my successor. Accordingly, I have asked Mr Andrew Westenberger to chair a Nomination Committee to appoint my successor.

An external recruitment consultant will be engaged shortly to undertake the selection of a list of suitable candidates for consideration by the Nomination Committee, after which a recommendation will be put to the Board for approval. The external recruitment consultant will be asked to put forward candidates with the desired skillset and also with a diverse range of characteristics. The Board is ambitious to meet and support the Listing Rule diversity targets and will take these and any other best practice matters into account when determining the appropriateness of a candidate and final appointment. The importance of diversity will be an important factor in the candidate shortlist.

TCFD and Consumer Duty

The Board welcomes the new FCA regulation which requires Managers of UK based investment vehicles, including investment trusts such as Baillie Gifford UK Growth Trust managed by Baillie Gifford, to produce product-level TCFD (Task Force on Climate- related Financial Disclosures) reports. These reports are a framework designed to disclose information to investors and other stakeholders about the climate-related risks and opportunities in the respective investment vehicle and are a snapshot in time. The Board sees this as a valuable addition to the detailed information already provided by Baillie Gifford to help shareholders assess the climate impact of the investment portfolio. The report produced by Baillie Gifford for our Company, as at end December 2022 and which will be updated annually, can be found at bgukgrowthtrust.com. It shows the portfolio measuring favourably across a number of metrics when compared to the FTSE All-Share benchmark.

The FCA has also introduced new regulations designed to place the interests of consumers at the heart of the businesses it regulates. Investment trusts that are externally managed and not authorised by the FCA, like Baillie Gifford UK Growth Trust plc, are not themselves in scope for the new Consumer Duty regulations, although they and their boards continue to be subject to duties under the Companies Act, the Listing Rules and the Corporate Governance Code. Baillie Gifford as the Company's Manager is subject to the Consumer Duty regulations in respect of a number of its investment products, including shares in the Company. One of its obligations is to undertake an Assessment of Value on these 'products' on a regular basis appropriate to the nature and duration of the product. This assessment is similar, though not identical, to the annual evaluation conducted by the Board of performance and quality of service, costs and shareholder interest. Baillie Gifford has conducted its initial Assessment of Value on Baillie Gifford UK Growth Trust plc and has concluded that the Company does provide value. This Assessment of Value will enable distributors of the Company's shares (such as platforms) to undertake their own assessments under the Consumer Duty regulations and continue to make shares in Baillie Gifford UK Growth Trust plc available to current and potential shareholders.

Strategic Report

Annual General Meeting

It is intended that the Company's AGM will be held on Thursday 7 September 2023 at 12.00 noon at the Institute of Directors, 116 Pall Mall, London SW1Y 5ED. Shareholders are warmly invited to attend. Should the situation change, further information will be made available through the Company's website at bgukgrowthtrust.com and the London Stock Exchange regulatory news service. The meeting will include a presentation by the portfolio managers on the prospects for UK equities and the positioning of the portfolio. They and the Board will be available to answer any questions. Light refreshments will

be available.

Outlook

Whilst the broader macro-economic environment is undoubtedly uncertain, the vast majority of holdings in the portfolio are expected to grow well in excess of the market and are high quality and resilient. The portfolio managers aim to hold future winners through the cycle, so financial resilience is particularly important. This is why they do not typically invest in highly indebted companies, which means that the portfolio has a lower net debt-to-equity ratio compared to the broader index.

The portfolio managers' approach remains one of patient investment in a portfolio of growth companies, with strong competitive positions, run by sensible management teams. As long-term stock pickers, the portfolio managers are well placed to assess and invest in such names.

Carolan Dobson

Chairman

15 June 2023