Annual Financial Report

What is the risk?

How is it managed?

Current assessment of risk

Financial Risk: The Company's assets consist mainly of listed securities (98% of the investment portfolio) and its principal financial risks are therefore market related. These include market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk.

The Company's investment strategy, including its focus on smaller companies, may result in increased volatility and periods of underperformance relative to the comparative index. Smaller companies are typically more sensitive to market sentiment and macroeconomic shocks. Macroeconomic and geopolitical developments, including heightened global instability, as well as climate-related factors such as the physical impacts of climate change and the transition to a lower-carbon economy, may exacerbate these risks.

The Company also has exposure to private company investments, which may be more difficult to value and realise. During the year, Moneytree was taken over and Spiber was written down to zero, reducing the Company's ongoing exposure to private company investments.

The Board considers at each meeting various portfolio metrics including individual stock performance and weightings, the top and bottom contributors to performance and relative sector weightings against the comparative index. The portfolio managers provide rationale for stock selection decisions and portfolio positioning.

The Board undertook a comprehensive review of the Company's investment strategy in November 2024, following which a number of changes were implemented, including the appointment of a new lead portfolio manager and deputy portfolio manager and refinements to portfolio construction. The Board continues to monitor the effectiveness of these changes closely.

The Board has also taken steps to address shareholder concerns and performance-related outcomes, including the introduction of a tender offer in 2026, a continuation vote in 2028 and a performance-triggered tender offer in 2030.

The Board considers the impact of currency movements, particularly in relation to yen/sterling exchange rates, and the interaction between portfolio assets and yen-denominated borrowings.

Private company investment risk is mitigated through limits on exposure, frequent independent valuation processes and detailed Board review. The Company's investment policy limits exposure to private companies to 10% of total assets at the time of investment.

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Risk level: High

This risk remains high given continued market volatility, ongoing macroeconomic and geopolitical uncertainty and the sensitivity of smaller companies to these conditions.

What is the risk?

How is it managed?

Current assessment of risk

Discount risk: The discount at which the Company's shares trade relative to its net asset value can change. A widening discount may undermine investor confidence and result in shareholders receiving less than the underlying net asset value when selling their shares.

There is also an increased risk of activist shareholder activity within the investment trust sector, which may seek to influence strategy, capital allocation or corporate structure. Such activity may increase share price volatility, create uncertainty for shareholders and divert the Board's time and focus away from the oversight of the Company's long-term investment strategy and performance.

To manage this risk, the Board monitors the level of discount/premium at which the shares trade, movements in the share register and investor sentiment towards the Company and the wider investment trust sector.

The Board has authority to buy back shares where considered to be in the best interests of shareholders. Over the year to 31 January 2026, the Company bought back approximately 34.2 million shares (2025 - 30.3 million), which are held in treasury.

The Board has also implemented measures to provide shareholder liquidity and address discount-related concerns, including the 15% tender offer completed in March 2026. The Board continues to engage actively with shareholders and to consider appropriate measures to address any sustained discount.

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Risk level: Moderate

This risk is considered to be reducing. The Company's discount decreased from 14.6% to 7.5% over the year to 31 January 2026, reflecting improved market conditions and the positive impact of share buybacks and other measures implemented by the Board. While the risk of discount volatility remains, the actions taken during the year have strengthened the Company's position in managing this risk.

What is the risk?

How is it managed?

Current assessment of risk

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 or loss of investment trust status.

Baillie Gifford's Business Risk, Internal Audit and Compliance departments provide regular reports to the Audit Committee on monitoring programmes and regulatory compliance.

Shareholder documents and announcements, including the Annual and Interim Reports, are subject to robust internal review processes to ensure compliance with relevant regulations. Procedures are also in place to ensure adherence to the Market Abuse Regulation and Disclosure Guidance and Transparency Rules.

Where appropriate, representations are made in respect of regulatory developments to ensure that the interests of investment trusts are recognised.

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Risk level: Low

This risk is considered to be unchanged. All control procedures continue to operate effectively.

What is the risk?

How is it managed?

Current assessment of risk

Third party service provider risk: The Company relies on third party service providers, including the Managers, depositary, custodian and registrar, for the provision of key operational, administrative and safeguarding functions. Failure of these providers' systems or controls could lead to an inability to provide accurate reporting and monitoring or result in loss or misappropriation of assets.

Custody of the Company's assets may be compromised through control failures at the depositary, custodian or registrar.

The Board has delegated the design, implementation and operation of internal controls to the Managers and Secretaries but retains overall responsibility for oversight.

Baillie Gifford & Co conducts an annual review of its system of internal controls, documented in an ISAE 3402 report which is independently reviewed by its auditor. This report is reviewed by Baillie Gifford's Business Risk Department, with a summary of key findings reported to the Audit Committee. The Audit Committee also has access to the full report and the opportunity to review and challenge its contents.

The custodian, depositary and registrar provide regular reports on their control environments, including the safekeeping of assets and maintenance of shareholder records, and independently audited internal controls reports. These are reviewed by Baillie Gifford's Business Risk Department and reported to the Audit Committee, with any issues investigated.

The Company's assets are subject to independent reconciliation and verification procedures, including confirmation of holdings with the custodian and investee companies, and are also subject to annual external audit.

The Board considers the resilience and performance of all key service providers on an ongoing basis and believes that alternative providers could be engaged if required.

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Risk level: Low

This risk is considered to be unchanged, and all control procedures are operating effectively.

What is the risk?

How is it managed?

Current assessment of risk

Cyber security risk: A cyber attack on the systems of Baillie Gifford or the Company's third party service providers could compromise the confidentiality, integrity or availability of data and systems, potentially resulting in operational disruption, financial loss or reputational damage.

The evolving nature of cyber threats, including increased sophistication of attacks and the emergence of new technologies such as artificial intelligence, may increase the likelihood and potential impact of cyber incidents. In addition, the continued use of hybrid working arrangements may increase exposure to cyber risks.

The Audit Committee receives regular reporting from Baillie Gifford's Business Risk Department on the effectiveness of information security controls and the broader cyber security framework.

Cyber security due diligence is performed on key third party service providers, including assessment of their information security controls, crisis management procedures and business continuity arrangements.

Baillie Gifford maintains comprehensive business continuity and disaster recovery plans which are designed to ensure the continued operation of systems and processes in the event of a disruption or cyber incident.

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Risk level: Moderate

This risk is considered to be increasing due to the evolving threat landscape, heightened geopolitical tensions and the increasing sophistication of cyber threats.

What is the risk?

How is it managed?

Current assessment of risk

Leverage risk: The Company may borrow money for investment purposes. If the value of investments falls, any borrowings will magnify the impact of these losses. There is also a risk that borrowing facilities may not be renewed or that covenant requirements may not be met, requiring the Company to sell investments to repay borrowings.

All borrowings require prior approval of the Board and gearing levels are discussed at each Board meeting. Compliance with loan covenants is monitored regularly.

Details of the Company's borrowing facilities are set out in note 11 to the Financial Statements. The Company's revolving credit facility with Bank of America matures in November 2027 and provides flexibility in managing gearing levels.

The majority of the Company's investments are in quoted securities which are readily realisable and could be sold to repay borrowings if required.

Gearing levels reduced during the year from 16% to 15%, reflecting a reduction in borrowings and active management of the balance sheet.

Further information on leverage is provided on page 120 and in the Glossary of terms and Alternative Performance Measures on pages 125 to 128 of the Annual Report and Financial Statements.

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Risk level: Moderate

This risk is considered to be stable.

Emerging risk: The Board also considers emerging risks, being those that may not have an immediate impact but could arise over the longer term. The Board considers 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 the societal and financial implications of escalating geopolitical tensions, cyber security risks including developing AI capabilities, and potential future public health threats.

The Board monitors these risks on an ongoing basis and considers their potential impact within the context of the material risks outlined above.

↑ Increasing Risk ↓ Decreasing Risk ─ Stable Risk

Baillie Gifford & Co Limited

Company Secretaries

13 April 2026