RNS Announcement

Baillie Gifford European Growth Trust plc

Legal Entity Identifier: 213800QNN9EHZ4SC1R12

Regulated Information Classification:

Interim Financial Report Results for the six months to 31 March 2026

Baillie Gifford European Growth Trust's objective is to achieve capital growth over the long-term from a diversified portfolio of European securities. At 31 March 2026 the Company had total assets of £340 million.

Baillie Gifford European Growth Trust is managed by Baillie Gifford, an Edinburgh-based fund management group with approximately £179 billion under management and advice.

Baillie Gifford European Growth Trust is a listed UK company. The value of its shares and any income from them can fall as well as rise and investors may not get back the amount invested. The Company is listed on the London Stock Exchange and is not authorised or regulated by the Financial Conduct Authority. You can find up-to-date performance information about Baillie Gifford European Growth Trust at bgeuropeangrowth.com:^‡

Past performance is not a guide to future performance. Total return information is sourced from LSEG, Baillie Gifford and relevant underlying index providers. See disclaimer at end of this announcement.

15 May 2026

For further information please contact:

Naomi Cherry, Baillie Gifford & Co

Tel: 0131 275 2000

Jonathan Atkins, Director, Four Communications

Tel: 0203 920 0555 or 07872 495396

^‡            Neither the contents of the Managers' website nor the contents of any website accessible from hyperlinks on the Managers' website (or any other website) is incorporated into, or forms part of, this announcement.

The following is the unaudited Interim Financial Report for the six months to 31 March 2026 which was approved by the Board on 14 May 2026.

Chairman's Statement

The period to 31 March 2026 has been one of development for the Company with the Board announcing the appointment of a new portfolio manager, effective from 1 April 2026, at a time when performance has fallen short of both our expectations and those of shareholders.

In March 2026, we confirmed that Joe Faraday would succeed Stephen Paice and Chris Davies as portfolio manager. The Board would like to thank Stephen and Chris for their longstanding contribution to the Company and for establishing its differentiated growth approach. Joe is a highly experienced investor within Baillie Gifford's European Equities team, and we believe his approach, maintaining the Company's growth focus while seeking broader stock and sector diversification, positions the portfolio more effectively for improved relative performance.

Joe assumed management of the portfolio after the period end. In his report, which follows this statement, he explains the changes he has made to the portfolio.

The Board remains firmly focused on improving performance, while retaining the growth style and private company exposures that differentiate the Company.

Performance

The net asset value per share ('NAV') total return over the six months to 31 March 2026 was -9.2% compared to a total return of 4.4% for the FTSE Europe ex UK Index, in sterling terms. The share price total return over the period was -8.8%, and the discount to NAV narrowed modestly from 8.6% to 8.2%.

The Company's existing 100% performance conditional tender, over the four years to 30 September 2028, remains in place. Since the start of the performance measurement period on 1 October 2024, the NAV total return has been -4.3% compared to a total return of 20.6% for the FTSE Europe ex UK Index, in sterling terms. This level of underperformance is clearly disappointing and underlines the need for change.

Further details on performance and portfolio activity are provided in the Managers' Report below.

Share Buybacks

Over the course of the Company's six months to 31 March 2026, the Company bought back 28,697,500 shares at a total cost of approximately £30.4m, representing in the region of 8.8% of the Company's issued share capital at the start of the financial year.

The Board will continue to use the buyback to support the imbalance between supply and demand in the company shares and to assist in the management of the Company's discount. The shares repurchased by the Company are held in Treasury and are available to be reissued, at a premium, when market conditions permit.

Outlook

The Company has a distinctive mandate, with its focus on growth and ability to access private companies. The changes made at the end of the period were aimed at staying true to the mandate, whilst improving its delivery. We believe the changes made are a positive step towards better execution, and ultimately stronger performance.

David Barron
Chairman
14 May 2026

Interim management Report

Howard Marks, the founder of Oaktree and a well-regarded credit investor, has often argued that preparation matters more than prediction, a point that felt especially relevant over the six months to 31 March 2026. For much of the period, European markets appeared relatively stable. Inflation was gradually moving back towards target, growth remained modestly positive, and investors had become more comfortable with the macroeconomic backdrop. Intertwined with that narrative, though, was a sell-off in certain technology stocks, particularly software names, driven by concerns about AI disruption. The stability was also further disrupted sharply in March as conflict in the Middle East erupted. This interim report outlines the impact on markets and the portfolio, the actions taken following both the market shock and the investment manager change, and why the Trust's portfolio is now in a stronger position.

In March, disruption in the Strait of Hormuz, missile strikes on LNG facilities in Qatar, and lower Saudi oil production drove a sharp rise in energy prices globally and weakened consumer confidence across Europe. While the region's energy system proved more resilient than during the 2022 Russia-Ukraine crisis, inflation still rose meaningfully, and confidence fell to a two-year low.

Central banks responded cautiously. The European Central Bank left rates unchanged but warned that the conflict had increased uncertainty around both inflation and growth. Elsewhere, policy divergence continued, with Norges Bank retaining a hawkish stance, Poland cutting rates modestly, and the Swiss National Bank signalling a greater willingness to counter rapid Swiss Franc appreciation.

Despite the volatility, Europe had entered this period on firmer foundations than in 2022, with stronger energy and supply chain infrastructure, and a more supportive policy backdrop. The events of March clearly highlighted how quickly external shocks can alter inflation expectations, growth sentiment, and market leadership. The range of possible outcomes now for Europe has again widened materially, reinforcing the value of resilience and preparedness over a reliance on precise macroeconomic forecasts.

Performance

Over the six months to 31 March 2026, the Company's NAV total return was -9.2% and the share price total return was -8.8%, compared with 4.4% for the FTSE Europe ex UK benchmark. Those figures are clearly disappointing.

At a high level, companies that could evidence near-term cash flows, defensiveness, and explicit energy price correlation performed well. The shortfall was in many respects less about one sector or factor than about concentration in a cluster of stock-specific detractors, where certain larger, rapid-growth holdings saw notable downgrades. In addition, the portfolio also underperformed due to the limited exposure to high-performing sectors such as banks, insurers, utilities, and energy, which dragged down relative performance throughout the period, particularly in March when the oil and gas shock hit.

In an increasingly AI-driven world, with software, platforms and e-commerce companies, the market moved quickly to stress-test business models under higher discount rates, shorter valuation horizons, and greater uncertainty about future competitive boundaries. The sell-off in those areas was stark. Topicus, Prosus and Adyen all fell by around a third. Hypoport, Allegro and Reply were also heavily marked down. These all saw sizeable valuation deratings on the back of AI threat concerns, though operational progress and earnings growth have remained broadly encouraging.

There were genuine positives, even if they were not large enough to compensate. Semiconductor equipment was the clearest bright spot. ASML and ASM International both performed strongly. Among other holdings, healthcare businesses Roche and Sandoz, logistics supply chain business DSV, and mining equipment provider Epiroc all performed well. Among the private holdings, Bending Spoons has continued to deliver strong operational progress and M&A, with an IPO now expected this year.

Portfolio changes

Toward the end of the period, a deliberate repositioning was implemented. As a result, the portfolio is now built around a far broader range of growth types and earnings drivers. These now include structural rearmament in defence, infrastructure-like compounding in telecoms, capital strength and rate sensitivity in financials, and cash generation in energy.

Among the new additions, Allianz, the insurer and asset manager, offers exposure to strong underwriting franchises and earnings that should travel better in a firmer inflationary environment than many investors assume. Swiss Re, with its strong position in reinsurance and dependable underwriting and investment returns, also has a defensive earnings profile. Deutsche Telekom, with its breadth of telecom operations across Europe and North America, offers a rare combination of infrastructure-like cash flows, scale, and strategic relevance. Airbus, the leading global airframer, adds exposure to a high-quality yet different industrial franchise. Rheinmetall, the German-listed defence business, provides the portfolio with direct exposure to Europe's rearmament imperative, now seen as structural and lasting. A further example is LPP, an apparel retailer focused on Poland, Eastern Europe and beyond. It has exemplary financials, is growing quickly, and is backed by a combination of founder and professional management.

The new inclusion of several banks was equally important. CaixaBank, AIB, KBC, UBS and Bank of Piraeus all feature a combination of bancassurance models, strong capital positions, and management that is driven and aligned. Importantly, they are all growing earnings at well above the market rate and are expected to generate strong overall capital returns to supplement that growth.

New positions were taken in several long-term-focused, well-governed holding companies: Investor AB, which has an excellent collection of global industrial businesses and a century on is still managed by the Wallenberg family; Ackermans & van Haaren, with its marine and banking operations with a history back to 1876; and Groupe Bruxelles Lambert with its public and private combined investment portfolio.

Other new positions also included the impressively well-run utility Iberdrola, and several German-listed businesses to add broader exposure there, including Nemetschek, Knorr-Bremse, Rational, and CTS Eventim.

Lastly, a new holding has been taken in TotalEnergies, a differentiated energy company comprising a resilient upstream portfolio, a leading global LNG franchise, and a growing integrated power business. This mix provides resilience, drives strong cash generation, is underpinned by disciplined reinvestment, and, as well as growing, delivers substantial shareholder returns via dividends and buybacks.

To fund these changes, a variety of holdings were exited outright. Hypoport, Edenred, LVMH, Novo Nordisk, Amplifon, Reply, EQT, Kinnevik, Topicus, Camurus and Sandoz were all sold, alongside several other smaller positions. Some had performed poorly and demanded a harder assessment of their opportunity cost. Others, such as Sandoz, had worked and were sold based on share price strength and valuation. In each case, the question was the same: is this still the best use of capital once valuation, concentration, timing, and the range of possible outcomes are considered together? Where the answer became less compelling, capital was recycled.

Outlook

Europe rarely offers a settled backdrop, and the current one is no exception. Rather than rely on a single forecast, the portfolio is positioned to navigate a range of scenarios. There is upside inflation risk through energy. There is downside growth risk through weaker confidence and real incomes, against a policy backdrop more constrained than during the last major energy shock.

In a de-escalation scenario for the Middle East conflict, energy prices normalise, confidence recovers, and the market's recent preference for defensiveness begins to fade. In that world, the portfolio should still participate, because it retains meaningful exposure to idiosyncratic growth businesses that the market does not fully appreciate.

In a prolonged disruption scenario, the backdrop is less comfortable: weaker demand, stickier energy-driven inflation, and tighter policy for longer. Even there, the portfolio now owns more businesses with robust and visible cash generation, stronger balance sheets, regulated or contractual revenue streams, and direct exposure to secular and defensive areas such as insurance, utilities, defence, and selected financials.

This does not, and cannot, amount to a promise of a smooth performance recovery. It does, however, leave the period with a sturdier starting point. The portfolio retains its growth credentials but is better positioned to navigate volatility rather than endure it. If market confidence improves, there remains meaningful upside. If the external backdrop stays unsettled, there is more resilience than before.

The past six months have been tough. The right response to a difficult period is not to become theatrical about the macro, nor to pretend that a setback is automatically self-correcting. It is to take decisive action where the evidence is clear. That is what has been done. To return to Howard Marks's point: prediction remains overrated; preparation is not. The portfolio is now better prepared.

Joe Faraday
Baillie Gifford
14 May 2026

For a definition of terms see Glossary of terms and Alternative Performance Measures below.

Total return information sourced from LSEG, Baillie Gifford and relevant underlying index providers.

The principal risks and uncertainties facing the Company are set out below.

Past performance is not a guide to future performance.

List of investments

as at 31 March 2026

^U    Denotes private company investment.

*   For a definition of terms see Glossary of terms and Alternative Performance Measures below.

†   New holding bought during the period (Amplifon, AutoStore, Camurus, Edenred, EQT, Hypoport, Kinnevik, LVMH, Novo Nordisk, Reply, Sandoz, Soitec, Topicus.com were sold during the period).

Income statement (unaudited)

The total column of this statement is the profit and loss account of the Company. The supplementary revenue and capital columns are prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in the above statements derive from continuing operations.

A Statement of Comprehensive Income is not required as all gains and losses of the Company have been reflected in the above statement.

The accompanying notes below are an integral part of the Financial Statements.

Balance Sheet

(unaudited)

* See Glossary of terms and Alternative Performance Measures below.

Statement of changes in equity (unaudited)

For the six months ended 31 March 2026

For the six months ended 31 March 2025

* The capital reserve balance at 31 March 2026 includes investment holding gains on investments of £54,709,000 (31 March 2025 - gains of £21,483,000).

Cash flow statement
(unaudited)

For the six months to 31 March

*   Cash from operations includes dividends received in the period of £1,309,000 (31 March 2025 - £1,200,000) and deposit interest received of £12,000 (31 March 2025 - £19,000).

†   Cash and cash equivalents represent cash at bank and short-term money market deposits repayable on demand.

Notes to the Financial Statements

1.       Principal accounting policies

The condensed Financial Statements for the six months to 31 March 2026 comprise the statements together with the related notes below. They have been prepared in accordance with FRS 104 'Interim Financial Reporting' and the AIC's Statement of Recommended Practice issued in November 2014 and updated July 2022 with consequential amendments and have not been audited or reviewed by the Auditor pursuant to the Auditing Practices Board Guidance 'Review of Interim Financial Information'. The Financial Statements for the six months to 31 March 2026 have been prepared on the basis of the same accounting policies as set out in the Company's Annual Report and Financial Statements at 30 September 2025.

Going concern

The Directors have considered the nature of the Company's principal risks and uncertainties, as set out below and the ongoing impact of geopolitical and macroeconomic challenges. In addition, the Company's investment objective and policy, assets and liabilities and projected income and expenditure, together with the dividend policy have been taken into consideration and it is the Directors' opinion that the Company has adequate resources to continue in operational existence for the foreseeable future. The Company's assets, the majority of which are investments in quoted securities which are readily realisable, exceed its liabilities significantly. All borrowings require the prior approval of the Board and gearing levels are reviewed by the Board on a regular basis. The Directors consider it appropriate to adopt the going concern basis of accounting in preparing these Financial Statements and confirm that they are not aware of any material uncertainties which may affect the Company's ability to continue to do so over a period of at least twelve months from the date of approval of these Financial Statements.

2.       Financial information

The financial information contained within this Interim Financial Report does not constitute statutory accounts as defined in sections 434 to 436 of the Companies Act 2006. The financial information for the year ended 30 September 2025 has been extracted from the statutory accounts which have been filed with the Registrar of Companies. The Auditor's Report on those accounts was not qualified, did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report, and did not contain a statement under sections 498(2) or (3) of the Companies Act 2006.

3.       Investment management

Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford & Co, was appointed by the Company as its Alternative Investment Fund Manager (AIFM) and Company Secretary on 29 November 2019. The investment management function has been delegated to Baillie Gifford & Co. The management agreement can be terminated on three months' notice. The annual management fee is 0.55% of the lower of (i) the Company's market capitalisation and (ii) the Company's net asset value (which shall include income), in either case up to £500 million, and 0.50% of the amount of the lower of the Company's market capitalisation or net asset value above £500 million, calculated and payable quarterly.

4.       Finance costs

5.       Net return per ordinary share

Net return per ordinary share is based on the above totals of revenue and capital and the weighted average number of ordinary shares in issue during each period.

There are no dilutive or potentially dilutive shares in issue.

6.       Tax on ordinary activities

'* During the period to 31 March 2026, the Company received £233,000 of taxation relating to EU law claims.

7.       Ordinary Dividends

No interim dividend has been declared in respect of the current period.

8.       Fair value hierarchy

The Company's investments are financial assets held at fair value through profit or loss. The fair value hierarchy used to analyse the basis on which the fair values of financial instruments held at fair value through the profit or loss account are measured is described below. Fair value measurements are categorised on the basis of the lowest level input that is significant to the fair value measurement.

Level 1 - using unadjusted quoted prices for identical instruments in an active market;

Level 2 - using inputs, other than quoted prices included within Level 1, that are directly or indirectly observable (based on market data); and

Level 3 - using inputs that are unobservable (for which market data is unavailable).

An analysis of the Company's financial asset investments based on the fair value hierarchy described above is shown below.

Unlisted investments are valued at fair value by the Directors following a detailed review and appropriate challenge of the valuations proposed by the Managers. The Managers' unlisted valuation policy applies methodologies consistent with the International Private Equity and Venture Capital Valuation Guidelines ('IPEV'). These methodologies can be categorised as follows: (a) market approach (multiples, industry valuation benchmarks and available market prices); (b) income approach (discounted cash flows); and (c) replacement cost approach (net assets). The Company's holdings in unlisted investments are categorised as Level 3 as unobservable data is a significant input to their fair value measurements.

9.       Financial liabilities

The Company has a €30 million overdraft credit facility with The Northern Trust Company for the purpose of pursuing its investment objective. At 31 March 2026, nil had been drawn down under the facility (31 March 2025 - nil, 30 September 2025 - nil). Interest is charged at 1.25% above the European Central Bank Main Refinancing Rate. On 8 December 2020 the Company issued €30 million of long-term, fixed rate, senior, unsecured privately placed notes ('loan notes'), with a fixed coupon of 1.57% to be repaid on 8 December 2040 and on 24 June 2021 issued a further €30 million of loan notes with a fixed coupon of 1.55% to be repaid on 24 June 2036. At 31 March 2026 the book value of the loan notes amounted to £52,350,000 (31 March 2025 - £50,136,000, 30 September 2025 - £52,291,000). The fair value of the loan notes at 31 March 2026 was £37,249,000 (31 March 2025 - £35,735,000, 30 September 2025 - £38,445,000).

10.     Share capital

The Company has authority to allot shares under section 551 of the Companies Act 2006. The Board has authorised use of this authority to issue new shares at a premium to net asset value in order to enhance the net asset value per share for existing shareholders and improve the liquidity of the Company's shares. In the six months to 31 March 2026 no ordinary shares were issued (in the year to 30 September 2025 no ordinary shares were issued).

The Company also has authority to buy back shares. In the six months to 31 March 2026 no ordinary shares were bought back for cancellation and 28,697,500 ordinary shares were bought back into treasury at a cost of £30,354,000 (in the year to 30 September 2025 no ordinary shares were bought back for cancellation and 27,060,412 ordinary shares were bought back into treasury at a cost of £26,852,000).

Between 1 April 2026 and 13 May 2026, no shares were issued and 4,345,000 shares were bought back into treasury.

11.     Related Party Transactions

There have been no transactions with related parties during the first six months of the current financial year that have materially affected the financial position or the performance of the Company during that period and there have been no changes in the related party transactions described in the last Annual Report and Financial Statements that could have had such an effect on the Company during that period.

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

Principal risks and uncertainties

The principal risks facing the Company are investment strategy risk, cyber security risk, political and associated economic risk, financial risk, private company investment risk, climate and governance risk, discount risk, custody and depositary risk, operational risk, leverage risk, regulatory risk. An explanation of these risks and how they are managed is set out on pages 32 to 36 of the Company's Annual Report and Financial Statements for the year to 30 September 2025 which is available on the Company's website: bgeuropeangrowth.com. The principal risks and uncertainties have not changed since the date of the Annual Report.

Responsibility statement

We confirm that to the best of our knowledge:

a)       the condensed set of Financial Statements has been prepared in accordance with FRS 104 'Interim Financial Reporting';

b)       the Interim Management Report includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.7R (indication of important events during the first six months, their impact on the Financial Statements and a description of the principal risks and uncertainties for the remaining six months of the year); and

c)       the Interim Financial Report includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein).

By order of the Board
David Barron
Chairman
14 May 2026

Glossary of terms and Alternative Performance Measures ('APM')

Total assets

This is the Company's definition of Adjusted Total Assets, being the total value of all assets less current liabilities, before deduction of all borrowings.

Shareholders' funds and net asset value

Also described as shareholders' funds, net asset value ('NAV') is the value of all assets held less all liabilities (including borrowings). The NAV per share is calculated by dividing this amount by the number of ordinary shares in issue (excluding shares held in treasury).

Net asset value (borrowings at book value)

Borrowings are valued at nominal book value (book cost).

Net asset value (borrowings at fair value) (APM)

Borrowings are valued at an estimate of their market worth.

Net asset value (reconciliation of NAV at book value to NAV at fair value)

The per share figures above are based on 296,025,367 (31 March 2025 - 341,628,622) ordinary shares of 2.5p, being the number of ordinary shares in issue at the interim end.

Net liquid assets

Net liquid assets comprise current assets less current liabilities, excluding borrowings.

(Discount)/premium (APM)

As stock markets and share prices vary, an investment trust's share price is rarely the same as its NAV per share. When the share price is lower than the NAV per share it is said to be trading at a discount. The size of the discount is calculated by subtracting the share price from the NAV per share and is usually expressed as a percentage of the NAV per share. If the share price is higher than the NAV per share, it is said to be trading at a premium.

Total return (APM)

The total return is the return to shareholders after reinvesting the net dividend on the date that the share price goes ex-dividend.

*   The dividend adjustment factor is calculated on the assumption that the final dividend of 0.72p (30 September 2025 - 0.60p) paid by the Company during the period was reinvested into shares of the Company at the cum income NAV per share/share price, as appropriate, at the ex-dividend date.

Gearing (APM)

At its simplest, gearing is borrowing. Just like any other public company, an investment trust can borrow money to invest in additional investments for its portfolio. The effect of the borrowing on the shareholders' assets is called 'gearing'. If the Company's assets grow, the shareholders' assets grow proportionately more because the debt remains the same. But if the value of the Company's assets falls, the situation is reversed. Gearing can therefore enhance performance in rising markets but can adversely impact performance in falling markets. Gross gearing is the Company's borrowings expressed as a percentage of shareholders' funds. Gearing represents borrowings less cash and cash equivalents expressed as a percentage of shareholders' funds.

Active share (APM)

Active share, a measure of how actively a portfolio is managed, is the percentage of the portfolio that differs from its comparative index. It is calculated by deducting from 100 the percentage of the portfolio that overlaps with the comparative index. An active share of 100 indicates no overlap with the index and an active share of zero indicates a portfolio that tracks the index.

Third party data provider disclaimer

No third party data provider ('Provider') makes any warranty, express or implied, as to the accuracy, completeness or timeliness of the data contained herewith nor as to the results to be obtained by recipients of the data. No Provider shall in any way be liable to any recipient of the data for any inaccuracies, errors or omissions in the index data included in this document, regardless of cause, or for any damages (whether direct or indirect) resulting therefrom.

No Provider has any obligation to update, modify or amend the data or to otherwise notify a recipient thereof in the event that any matter stated herein changes or subsequently becomes inaccurate.

Without limiting the foregoing, no Provider shall have any liability whatsoever to you, whether in contract (including under an indemnity), in tort (including negligence), under a warranty, under statute or otherwise, in respect of any loss or damage suffered by you as a result of or in connection with any opinions, recommendations, forecasts, judgements, or any other conclusions, or any course of action determined, by you or any third party, whether or not based on the content, information or materials contained herein.

FTSE Index data

Source: London Stock Exchange Group plc and its group undertakings (collectively, the 'LSE Group').
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