Baillie Gifford UK Growth Fund : Annual Report - April 2020

BAILLIE GIFFORD

UK GROWTH FUND PLC

Annual Report and Financial Statements 30 April 2020

Contents

1Financial HighlightsStrategic Report

• 2Chairman's Statement

• 4One Year Summary

• 5Five Year Summary

• 6Business Review

• 9The Managers' Core Investment Principles

• 9The Managers' Stewardship Principles

• 10Managers' Report

• 12List of Investments

• 14Ten Year Record

Governance Report

15Directors and Management

17Directors' Report

20Corporate Governance Report

24Audit Committee Report

26Directors' Remuneration Report

28Statement of Directors' Responsibilities

Investor Disclosure Document

The EU Alternative Investment Fund Managers Directive requires certain information to be made available to investors prior to their investment in the Company. The Company's Investor Disclosure Document is available for viewing atwww.bgukgrowthfund.com.

Financial Report

29Independent Auditors' Report

35Income Statement

36Balance Sheet

37Statement of Changes in Equity

38Cash Flow Statement

39Notes to the Financial StatementsShareholder Information

48Notice of Annual General Meeting

51Further Shareholder Information

52Cost-effective Ways to Buy and Hold

Shares in Baillie Gifford UK Growth Fund

53Communicating with Shareholders

55Glossary of Terms and Alternative

Performance Measures

Notes

None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

Investment trusts are UK public listed companies and as such comply with the requirements of the UK Listing Authority. They are not authorised or regulated by the Financial Conduct Authority.

Baillie Gifford UK Growth Fund plc currently conducts its affairs, and intends to continue to conduct its affairs, so that the Company's Ordinary Shares can qualify to be considered as a mainstream investment product and can be recommended by Independent Financial Advisers to ordinary retail investors in accordance with the rules of the Financial Conduct Authority (FCA) in relation to non-mainstream investment products.

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

If you are in any doubt as to the action you should take you should consult your stockbroker, bank manager, solicitor,accountant or other independent financial adviser authorised under the Financial Services and Markets Act 2000 immediately if you are in the United Kingdom or, if not, from another appropriately authorised financial adviser.

If you have sold or otherwise transferred all of your holding in Baillie Gifford UK Growth Fund plc, please forward this document, together with accompanying documents, but not your personalised Form of Proxy, as soon as possible to the purchaser of transferee, or to the stockbroker, bank or other agent through whom the sale or transfer was or is being effected for delivery to the purchaser or transferee.

Financial Highlights

The principal investment objective of the Company is to achieve capital growth predominantly from investment in UK equities, with the aim of providing a total return in excess of the FTSE All-Share Index.

Financial Highlights - Year to 30 April 2020

Share Price (14.6%)

NAV (12.5%)

Benchmark*(16.7%)

Source: Refinitiv/Baillie Gifford. All figures are stated on a total return basis. Total return is an Alternative Performance Measure - see Glossary of Terms and Alternative Performance Measures on pages 55 and 56. Comparatives for 2019 can be found on page 4.

NAV, Share Price and Benchmark

110

(figures rebased to 100 at 30 April 2019 )

100

90

NAV

Share priceBenchmark*

80

70

A 2019

MJJASONDJFMA 2020

Discount† to Net Asset Value

(figures plotted on a weekly basis)

Discount

MJJASONDJF

*The benchmark is the FTSE All-Share Index.

† Alternative performance measure - see Glossary of Terms and Alternative Performance Measures on pages 55 and 56.

Source: Refinitiv/Baillie Gifford and relevant underlying index providers. See disclaimer on page 54.

Past performance is not a guide to future performance.

A	M	A
2019	2020

Strategic Report

Strategic Report

The Strategic Report, which includes pages 2 to 14 and incorporates the Chairman's Statement has been prepared in accordance with the Companies Act 2006.

Chairman's Statement

Covid-19

In these uncertain times, my fellow Directors and I would like to take this opportunity to extend our thoughts to all affected by recent events, and our gratitude to those working tirelessly for the benefit of all.

Your Board has been monitoring how the Managers and other service providers have been responding to developments and has sought assurances that, operationally, they are acting responsibly towards their employees whilst maintaining appropriate standards of service to the Company. The portfolio managers in turn have continued to seek similar assurances from the companies held in the portfolio.

Annual General Meeting ('AGM')

It is intended that the Company's AGM will be held on Wednesday 5 August 2020 at 12.00 noon at the offices of Baillie Gifford,

1 Greenside Row, Edinburgh, EH1 3AN. Whilst normally inviting shareholders to attend, this doesn't seem possible at the current time, so shareholders are encouraged to submit their votes by proxy rather than attempt to do so in person. The meeting itself will involve the minimum number of people necessary for it to be quorate so anyone not authorised to attend will be declined entry for health reasons. Should the situation change, further information will be made available through the Company's website atwww.bgukgrowthfund.comand the London Stock Exchange regulatory news service.

Performance

For the year to 30 April 2020, the Company's net asset value ('NAV') total return (capital and income) was negative 12.5% compared to a negative 16.7% for the FTSE All-Share Index total return.

The Company's share price total return over the same period was negative 14.6%. Whilst disappointing to see a fall in value, it is good to see our quality portfolio outperforming the broader market in these difficult times.

02Annual Report 2020

The longer term prospects for our companies look exciting.

The Managers' review on pages 10 and 11 highlights some of the interesting developments in the portfolio as well as some of the issues faced.

Stewardship

As long-term 'actual' investors, the portfolio managers' focus is on promoting the best long-term performance outcomes for the businesses in which they invest, actively engaging with companies on those issues which could impact their long-term potential and supporting actions which they believe will maximise returns in future years. As part of the investment research process, consideration is given to relevant environmental, social and governance issues and the impact these may have on future returns.

The portfolio managers invest in companies at different stages in their evolution and across different industries and are wary of prescriptive policies and rules, believing that these can run counter to thoughtful and beneficial corporate stewardship. The approach adopted therefore favours a small number of simple stewardship principles which help shape interactions with companies. These principles, along with their core investment principles, are set out on page 9.

Share Buy-backs and Issuance from Treasury

No shares were bought back during the year to 30 April 2020. At the forthcoming AGM, the Board will ask shareholders to renew the mandate to repurchase up to 14.99% of the outstanding shares. The 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 Board also believes that the Company benefits from the flexibility of being able to re-issue any shares that might be held in treasury and is therefore looking to renew the annual issuance authority. At present there are 10,396,700 shares, 6.9% of the Company's issued share capital as at 30 April 2020, held in treasury. To avoid any dilution to existing investors, these would only be re-issued at a premium to NAV and after associated costs.

Strategic Report

Gearing

During the year, the Company replaced its Scotiabank £35 million revolving one year credit facility with a £20 million revolving credit loan facility with National Australia Bank. This new facility contains the option to increase the amount borrowed to £35 million.

No borrowings were drawn in the period and this continues to be the position.

The Board sets internal guidelines for the portfolio managers' use of gearing which are altered from time to time but are subject to net effective gearing not representing more than 20% of shareholders' funds.

Earnings and Dividends

The net revenue return per share for the year was 3.75p, versus 5.12p in 2019. A final dividend of 3.10p per share, payable on 12 August 2020 to shareholders on the register as at 10 July 2020, is being recommended. Shareholders should not rely on receiving a regular or growing level of income from the Company as its priority is capital growth. Any dividend paid will be 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.

Diversity Policy

The Board believes that maintaining a diversity of thought and experience on the Board, and at an operational level within Baillie Gifford, represents the best way of discharging its responsibilities to shareholders. In furtherance of this belief, the Board will look for the best ways to increase the diversity of gender, ideas, professional experiences and cultural backgrounds to which the Company is exposed.

The Board will continue to monitor diversity on an ongoing basis, having regard to developments in Corporate Governance Code and wider market practice, and seek to ensure that the Company retains the benefits of a diversity of thought and experience going forward. As circumstances allow, the Company will continue to look for opportunities to broaden the diversity to which the Company is exposed, in furtherance of this commitment.

Financial Conduct Authority ('FCA') ValueAssessment

Shareholders might be aware that new FCA rules require Alternative Investment Fund Managers to assess the overall value that their authorised unit trusts and open-ended funds deliver to investors. Although these rules do not apply to investment trusts, it should be noted that, over the course of the Company's financial year, the Company's Committees and Board assessed various costs levied by third party service providers as well as the Managers and Secretaries, and the quality of service received.

I can therefore report that at present it is the Board's view that charges levied by third parties and the Managers and Secretaries are reasonable.

Outlook

The long-term ramifications of Covid-19 on the UK and global economies are unknown, but it is likely that in the short-term the trading environment for many companies will be exceptionally challenging. On top of this, whilst the UK has left the European Union, the risks of a disorderly Brexit remain high.

The Board and Managers have attempted to consider the implications of such matters sensibly and dispassionately and remain convinced that exceptional UK growth companies are still able to exploit their competitive strengths over the long-term and take advantage of the opportunities that follow severe economic dislocation. Patient investors should, therefore, be rewarded in due course.

Carolan Dobson Chairman

19 June 2020

For a definition of terms, see Glossary of Terms and Alternative Performance Measures on pages 55 and 56. Past performance is not a guide to future performance.