The £275 million Baillie Gifford UK Growth Trust plc said its net asset value (NAV) total return was 15.6% for the year to April 30, 2026, compared to a total return of 25.2% for the FTSE All-Share Index.

The fund’s share price total return for the same period was 18.2%.

The fund said: “After outperforming in the first half of the company’s financial year, performance was poor in the second half.

“The portfolio’s lack of Oil & Gas, Mining and Banks exposure explains much of the underperformance. Stock selection was also a negative contributor, particularly among the platform and software related businesses which derated notably on fears of disruption from AI.

“Of the names held, the largest detractors to relative performance were Auto Trader, Experian and Rightmove. Renishaw and Just Group were among the notable positive contributors to relative performance …”

The investment trust has been managed by Milena Mileva and Iain McCombie.

The fund’s chairman Neil Rogan said: “We have pressed Baillie Gifford to bring in a third co-manager, James Smith.

“James, unusually for them, has a decade of experience working elsewhere before joining Baillie Gifford in 2022 and will work alongside Iain and Milena.

“We expect to see a small increase in the number of holdings and an increase in portfolio turnover from less than 5% towards 20% p.a. as a greater emphasis is put on portfolio construction and sell discipline.

“Importantly, the portfolio will retain its strong growth credentials and should be quicker to adapt to changing conditions.”

A final dividend of 6.20p per share is being recommended (2025: 5.70p).

Chairman Rogan wrote: “Patience has clearly been eroded by the shortfall in relative performance over the last five years.

“In 2024 we introduced a five-year performance conditional tender offer through which shareholders, if they wish, will be able to sell their entire holding at NAV less 2% if NAV total return over the five years to 30 April 2029 does not beat the FTSE All-Share Index.

“The first two years of this period (to 30 April 2026) show NAV total return at +24%, behind the Index total return of +35%.

“This shortfall is concerning so the board has reviewed the situation with our corporate broker and adviser and will continue to consult with major shareholders.

“Our findings show that poor stock selection accounts for around three-quarters of the underperformance against the FTSE All-Share Index over the last five years, with sector allocation responsible for most of the rest …

“We hear that there is a clear appetite for a UK investment trust with high active share and a long-term approach to growth investing.

“We recognise that shareholder patience is thin. Ours is too: The Board is mindful of the 2027 Continuation Vote and the 2029 performance conditional tender offer.

“While we believe that the probability of success has improved, we know that we need to see clear evidence of recovery to pass beyond these two hurdles.”

Fund managers Milena Mileva and Iain McCombie wrote: “It is disappointing to report that the company’s portfolio has underperformed the FTSE All-Share Index as noted by the chairman, even if the absolute return was strong.

“We had noted in the interim report, when performance was slightly ahead, that adaptability was key for businesses and management.

“However, ‘events’ as interpreted by the stock market, can sometimes play havoc in the short term and in the second half of the company’s financial year there were two notable negative impacts on the portfolio.

“The first was the AI induced panic that occurred in the latter part of 2025, which impacted the share prices of a number of our businesses, and which is discussed in more detail below.

“The other negative was the attack on Iran by the US and Israel, which has led to the strategically important Strait of Hormuz being closed to shipping. This has led to a spike in the oil price and worries about raw material shortages, both of which are inflationary and likely to impact global economic growth.

“Neither we, nor anybody else, can make sensible predictions about how the situation in the Middle East will play out.

“What we do know is that the initial market reaction was to shun or mark down growth businesses, and this hurt our performance.

:Going back to the point of adaptability, we are fairly confident that the businesses in the portfolio will adapt to the tricky backdrop, but demonstrating this will require patience.”