Baillie Gifford Funds N-CSRCertified annual shareholder report (management investment company)

Baillie Gifford China A Shares Growth Fund

Baillie Gifford China Equities Fund

Baillie Gifford Developed EAFE All Cap Fund

Baillie Gifford EAFE Plus All Cap Fund

Baillie Gifford Emerging Markets Equities Fund

Baillie Gifford Emerging Markets ex China Fund

Baillie Gifford Global Alpha Equities Fund

Baillie Gifford Health Innovation Equities Fund

Index

Baillie Gifford China A Shares Growth Fund

Market Conditions and Review of Performance during 2023

The Fund underperformed the MSCI China A Onshore Index for the year. It was a challenging year in both absolute and relative terms. The consumer, largely shell-shocked from COVID-19 lockdowns and witnessing challenges in the property sector, has been cautious with the large cash pile it built up during those lockdowns. The service sector has perked up as travel and entertainment returns, but the extent of China's consumption recovery has been more gradual than many commentators had expected. Markets seeking catalysts don't like gradual, and domestic investors have supported companies in the energy, utilities and financial sectors, often with significant state ownership and whose growth profiles tend not to attract us as long-term investors. The private sector, seeing a weaker domestic economy and reeling from the memory of regulatory headwinds and a lack of trust in government and credibility in its policymaking, has been slow to invest and employ; weaker income growth did little to help the consumption recovery. Further, the weaker global backdrop has reduced the impact of exports on China's growth.

Yet, the world's second largest economy is growing far in excess of advanced economies, with interest rates not far off 20-year lows, a stabilizing property sector and consumption gradually returning. Stimulus measures have been incremental rather than transformational, with supportive policy including bond issuance to support disaster recovery spending, relaxation of policy in the property sector, measures to boost capital markets and the repetitive voicing of government support for the private sector. The market's disappointing response suggests an ongoing skepticism about the government's ability to handle its economic issues and the scale of its response.

There was more positive news on the geopolitical front. President Xi's visit to the US and meeting with President Biden brought with it a helpful change in tone, leaving behind the more aggressive discussion of containment and suppression from earlier in the year in favor of mutual respect, peaceful coexistence and finding areas for cooperation. However, we're conscious of elections in Taiwan and the US in 2024 which will continue to shine a light on the geopolitical environment.

While investor sentiment and flows have driven a large portion of the share price performance in recent times and share prices have diverged from their fundamentals, it is those fundamentals that we remain focused on. Many of

control the cost. While we believe that the macro backdrop remains a near term headwind, in our opinion, the longer-term need for greater construction efficiency through digitization remains a strong driving force, and we believe Glodon should benefit most as a market leader.

We are of the view that short term market performance doesn't tell us much about the long-term outcomes of the companies in which we have invested for you, and we expect there to be periods of time when stock market performance is driven by factors beyond the operational performance of individual companies. Whilst volatility may last a while, experience has taught us to remain steadfastly focused on the fundamentals and ride out these relatively short-term bouts with the aim of securing good long-term returns for shareholders.

Investment Strategies used to manage the Fund

We are long-term, active growth investors and invest in domestically listed Chinese companies (A-shares) that we believe have exceptional long-term growth prospects. The Fund is a concentrated, purely stock-driven, unconstrained

Baillie Gifford China Equities Fund

Market Conditions and Review of Performance during 2023

The Fund underperformed the MSCI China All Shares Index for the year. It has been another challenging year for Chinese equity markets. The consumer, largely shell-shocked from COVID-19 lockdowns and witnessing challenges in the property sector has been cautious with the large cash pile it built up during those lockdowns. The service sector has perked up as travel and entertainment returns, but the extent of China's consumption recovery has been more gradual than many commentators had expected. Markets seeking catalysts don't like gradual. The private sector, seeing a weaker domestic economy and reeling from the memory of regulatory headwinds and a lack of trust in government and credibility in its policymaking, has been slow to invest and employ; weaker income growth did little to help the consumption recovery. Further, the weaker global backdrop has reduced the impact of exports on China's growth.

Yet, the world's second largest economy is growing far in excess of advanced economies, with interest rates not far off 20-year lows, a stabilizing property sector and consumption gradually returning. Stimulus measures have been incremental rather than transformational, with supportive policy including bond issuance to support disaster recovery spending, relaxation of policy in the property sector, measures to boost capital markets and the repetitive voicing of government support for the private sector. The market's disappointing response suggests an ongoing skepticism about the government's ability to handle its economic issues and the scale of its response.

There was more positive news on the geopolitical front. President Xi's visit to the US and meeting with President Biden brought with it a helpful change in tone, leaving behind the more aggressive discussion of containment and suppression from earlier in the year in favor of mutual respect, peaceful coexistence and finding areas for cooperation. However, we're conscious of elections in Taiwan and the US in 2024 which will continue to shine a light on the geopolitical environment.

While investor sentiment and flows have driven a large portion of the share price performance in recent times and share prices have diverged from their fundamentals, it is those fundamentals that we remain focused on. Many of the headwinds discussed above have been reflected in valuations, resulting in a derating of the portfolio over the

We are of the view that short term market performance doesn't tell us much about the long-term outcomes of the companies in which we have invested for you, and we expect there to be periods of time when stock market performance is driven by factors beyond the operational performance of individual companies. Whilst volatility may last a while, experience has taught us to remain steadfastly focused on the fundamentals and ride out these relatively short-term bouts with the aim of securing good long-term returns for shareholders.

Investment Strategies used to manage the Fund

We are long-term, active growth investors and invest in Chinese companies that we believe have substantial long-term growth prospects, regardless of where they are listed, their size in an index or their market capitalization. To do so, we look for businesses in attractive industries that enjoy sustainable competitive advantages and which we believe have the management and financial strengths to allow them

Baillie Gifford Developed EAFE All Cap Fund

Market Conditions and Review of Performance during 2023

2023 presented a mixed picture for the global economy, with a range of factors impacting market conditions. Inflation remained a persistent concern, although there were indications that it may be starting to ease, with core inflation falling in response to central bank interest rate increases. Despite these challenges, growth exceeded expectations, with robust GDP growth, and labor markets remaining tight. However, geopolitical concerns, economic uncertainty and supply chain shortages continued to pose challenges for markets and economies, creating a complex and dynamic investment landscape.

Overall, international equity markets performed strongly, recouping almost all of their losses from 2022. However, it was a bumpy ride, particularly for growth stocks. European markets outperformed those in Developed Asia with Information Technology, Industrials and Consumer Discretionary sectors leading the way. A higher interest rate environment helped Banks within Financials, despite the Silicon Valley Bank and Credit Suisse wobbles earlier in the year. Conversely, Consumer Staples, which are often considered "bond proxies," produced more modest returns.

Looking at investment performance, the Fund delivered strong investment returns in the latest calendar year, although it fell short of its benchmark. The Fund has faced a challenging investment environment in recent years, resulting in longer-term outcomes that are below our expectations. However, through our bottom-up lens of individual companies, we believe that there are grounds for continued long-term optimism. In our opinion, most of the companies held in the Fund are executing well operationally and remain financially robust. This is crucial for long-term investment success. The Fund remains focused on a balance of growth, quality and resilience across its holdings.

Positive contributors over the past 12 months include some of the Fund's online disruptors, such as Spotify and Auto Trader.

Swedish music streaming service, Spotify, has continued to deliver strong growth in both its user base and revenues, while also taking steps to manage costs and prioritize profitability. The platform has surpassed its own projections for monthly active users and is on track to reach 600 million by its financial year-end. In a bid to further

growth has been lackluster, with slower growth in the US and Europe, and continued weakness in China where the government is investigating hospital procurement practices. Despite these short-term headwinds, we think that Olympus enjoys several long-term advantages, including customer loyalty, regulatory approvals, and significant research and development spending. In our opinion, these factors position the company as the dominant player in a growing segment of the medical technology market.

Other notable detractors to the Fund's relative performance included our preference for Asian-focused life insurers rather than Banks within the Financials sector, and poor performance from Healthcare holdings.

The Fund holds what we view as world-class businesses, led by aligned management teams who are committed to long-term growth. Our investment process has been tried and tested over 30 years, and we consistently strive to enhance our approach to portfolio construction, monitoring and idea generation. Based on our analysis of the Fund's holdings and the portfolio management team's deep expertise, we are optimistic about the long-term prospects of the Fund's investments.

Investment Strategies used to manage the Fund

Baillie Gifford is a growth manager with a bottom-up approach to stock picking. Bottom-up investing is an

Baillie Gifford EAFE Plus All Cap Fund

Market Conditions and Review of Performance during 2023

2023 presented a mixed picture for the global economy, with a range of factors impacting market conditions. Inflation remained a persistent concern, although there were indications that it may be starting to ease, with core inflation falling in response to central bank interest rate increases. Despite these challenges, growth exceeded expectations, with robust GDP growth and labor markets remaining tight. However, geopolitical concerns, economic uncertainty and supply chain shortages continued to pose challenges for markets and economies, creating a complex and dynamic investment landscape.

Overall, international equity markets performed strongly, recouping almost all of their losses from 2022. However, it was a bumpy ride, particularly for growth stocks. European markets outperformed those in Developed Asia with Information Technology, Industrials and Consumer Discretionary sectors leading the way. A higher interest rate environment helped Banks within Financials, despite the Silicon Valley Bank and Credit Suisse wobbles earlier in the year. Conversely, Consumer Staples, which are often considered "bond proxies," produced more modest returns.

Looking at investment performance, the Fund delivered strong investment returns in the latest calendar year, although it fell short of its benchmark. The Fund has faced a challenging investment environment in recent years, resulting in longer-term outcomes that are below our expectations. However, through our bottom-up lens of individual companies, we believe that there are grounds for continued long-term optimism. In our opinion, most of the companies held in the Fund are executing well operationally and remain financially robust. This is crucial for long-term investment success. The Fund remains focused on a balance of growth, quality and resilience across its holdings.

Positive contributors over the past 12 months include some of the Fund's digital platforms, such as MercadoLibre and Spotify.

MercadoLibre is a leading e-commerce platform in Latin America and also provides digital financial services across the region. Despite a challenging macro environment, the group delivered impressive operational results in 2023. The market responded positively to the rapid growth of sales and profits across both business

government is investigating hospital procurement practices. Despite these short-term headwinds, we think that Olympus enjoys several long-term advantages, including customer loyalty, regulatory approvals, and significant research and development spending. In our opinion, these factors position the company as the dominant player in a growing segment of the medical technology market.

Other notable detractors to the Fund's relative performance included our preference for Asian-focused life insurers rather than Banks within the Financials sector, and poor performance from Healthcare holdings.

The Fund holds what we view as world-class businesses, led by aligned management teams who are committed to long-term growth. Our investment process has been tried and tested over 30 years, and we consistently strive to enhance our approach to portfolio construction, monitoring and idea generation. Based on our analysis of the Fund's holdings and the portfolio management team's deep expertise, we are optimistic about the long-term prospects of the Fund's investments.

Investment Strategies used to manage the Fund

Baillie Gifford is a growth manager with a bottom-up approach to stock picking. Bottom-up investing is an approach that focuses on analyzing individual stocks and de-emphasizes the significance of economic and market

Baillie Gifford Emerging Markets Equities Fund

Market Conditions and Review of Performance during 2023

2023 was a better year for absolute returns from emerging markets (EM) when compared to 2022 or 2021. That said, returns were mixed across the markets.

Investors in Brazil, Mexico, India, Taiwan, and South Korea all enjoyed strong absolute returns, but those in China were left wanting in 2023. You'll likely remember the huge levels of enthusiasm (hype) around China's post lockdown reopening at the beginning of 2023. However, billions of dollars quickly fled the Chinese market when the economic data showed that growth expectations had run ahead of reality. Despite well publicized problems, especially in the property market, the International Monetary Fund still expect a 5.4% growth rate in 2023 for China.

Market participants have been penal and valuations in China now look extremely low in our view. We remain underweight with respect to China in the Fund, with underlying holdings that look very different to those in the Fund's benchmark. To be clear, we believe we have been correct in being underweight China. We've been challenging our contrarian instincts regularly, and we continue to balance our constructive views on a range of companies with the more challenging market context.

Towards the end of 2023, the US Federal Reserve indicated that, as US inflation data had improved, it could stop increasing interest rates and is now signaling that interest rates will come down. This has potentially meaningful implications for growth assets. However, as emerging markets investors, we are equally, if not more interested, in the implications for the strength of the US Dollar.

The traditional market commentary suggests that a strong dollar is bad for EM. We've been exploring the view that we might be reaching an important confluence of factors such that the dollar influence on EM is actually declining. Firstly, EM to EM trade is increasing (the share of EM-to-EM exports in total EM exports is now approaching half), secondly: barriers are being put in place as the West tries to remove China from supply chains and from some of its end markets, and thirdly: Foreign Direct Investment into China has plummeted. As such, we remain open to the idea of a meaningful reduction in USD trade dependency and USD based capital and infrastructure

retains a strong brand presence in Chinese insurance, competing against poor state-run peers. The structural drivers remain in place for the insurance market, with a lack of a social security net and rising middle class incomes over the long term. On the other hand, we are noticing a change in tone from the government towards the private financial sector and are wary of a possible increase in regulatory pressure, with some of the excesses being taken out of the system. We continue to debate whether we should expect more 'national service' for the likes of Ping An.

Whilst we spend most of our time analyzing individual companies, in much of our commentary over the last year or so, we've highlighted the way that EM as a whole responded to the pandemic and its after effects, without massive stimulus. EM hasn't had the inflation pressures we've seen in much of the developed world. As such, interest rates continued to rise in Developed Markets during 2023, whilst they didn't in most Emerging Markets.

We have been drawn to the argument that as the macro conditions in EM have improved relative to their developed peers in recent years, the 'safe havens' of the world may be changing. We watched with interest in November, when US Treasury Yields (5 year) pushed higher than the 5 year yield on investment-grade sovereign emerging market debt. It's tempting to form any forward-looking view purely by continuing this macro thinking, not least because elections will occur in 2024 in countries which represent over half of the MSCI Emerging Markets weight. Of course, the macro environment is important, but it's critical that this does not dominate our thinking.

We will hit our 30-year anniversary of managing Global Emerging Markets portfolios this year. The evidence over time clearly shows that stock selection has been the key driver of long-term returns for our investment approach. We will continue to spend the majority of our time focused on companies. To that end, we're extremely enthusiastic about the number of opportunities available, across a wide range of countries and sectors.

Baillie Gifford Emerging Markets ex China Fund

Market Conditions and Review of Performance during 2023

It was a strong year for returns for the Fund. Investors in Brazil, Mexico, India, Taiwan, and South Korea all enjoyed strong absolute returns, with some of the smaller markets more subdued. Towards the end of 2023, the US Federal Reserve indicated that, as US inflation data had improved, it could stop increasing interest rates and is now signaling that interest rates will come down. This has potentially meaningful implications for growth assets generally, though for Emerging Markets, the strength of the dollar is also important.

The dollar has essentially been on an upward trajectory against other currencies since the Global Financial Crisis. It's been suggested in financial commentary for many years that a strong dollar is bad for Emerging Markets, as many of these countries are traditionally linked with an over-reliance on dollar financing. The dollar trajectory is likely to continue to impact market sentiment towards Emerging Markets, but there is a question of whether its influence is in fact waning in some cases and what the implications of this might be.

Over the years, some of the Emerging Markets have found themselves with reputations as export titans, with 'the West' being key beneficiaries of the low-cost goods and services on offer. But since the turn of the millennium, more and more of the exports from Emerging Markets have been making their way to other Emerging Markets. The share of EM-to-EM exports in total EM exports is now approaching half. At the same time as this trend has steadily gained momentum, trade relations between China and the West have soured.

This greater intra-EM trade is happening while increasing technical, regulatory, and cultural barriers are being put in place, as the West tries to remove China from supply chains and from some of its end markets. However, as this splintering occurs, trade doesn't just freeze up. Rather, it naturally needs to find other economic routes. We must then think through the potentially significant implications of this for the likes of Indonesia, Brazil or India, alongside other major dollar trade barriers, such as sanctions against Russia.

Otherwise, the macro-outlook over the past year and the broad economic picture hasn't changed much. We believe inflation is well controlled and interest rates are

mature gaming segment to the earlier stage e-commerce and financial technology opportunities. In a higher interest rate environment, the market's focus shifted away from companies investing for the future, and SEA's share price has suffered as a result. In the most recent results, management re-emphasized the focus on long-term profitability, which means that patience will be required through some short-term share price volatility. Other detractors included HDFC Bank in India, which is the result of a mega merger this year between parent Housing Development Housing Corporation and its subsidiary HDFC Bank. The deal has raised uncertainty with some market participants. Oil and Gas company PTTEP in Thailand also detracted from performance over the year as a delay in a project in Mozambique and diversification into a Scottish wind farm asset raised some short-term concerns towards the year end.

Elsewhere, it has been pleasing to see a strong rebound from the semiconductor companies in the portfolio, with TSMC, Mediatek and SK Hynix, making strong contributions over the full year. Customers have been working through their excess inventory and the outlook for orders appears to be picking up. We have been encouraged by ongoing high levels of investment by the Fund's semiconductor holdings, even through more challenging cyclical conditions. SK Hynix has tripled its research and development spend since 2015. It has benefitted more recently from being a key supplier of High Bandwidth Memory, which is critical for use in artificial intelligence servers, and has seen strong orders from NVIDIA to ensure delivery in 2024. In the same sector, Silergy, a stock we had previously increased the Fund's position in when its share price was compressed, was a notable strong performer in the fourth quarter.

In India, market valuations for a number of the midcaps in particular have reached eyewatering levels. Money has flowed rapidly into the Indian market. We recently asked our investment team whether a modest underweight to the 'best long term story in EM' is really suitable for GEM portfolios, to which the response was, '...just remember we are investing in companies, not stories.' Good point, well made. We've watched with interest as private equity and promoters have been selling Indian equities again.

The level of relative performance that has been achieved in 2023, despite value outperforming growth, is encouraging but in truth, not a surprise given that we are agnostic to the sources of earnings growth. While some of the Fund's largest holdings, the likes of Petrobras in Brazil, HDFC Bank and Reliance Industries in India, and

Baillie Gifford Global Alpha Equities Fund

Market Conditions and Review of Performance during 2023

Global stock markets made a strong comeback in 2023, recovering the loss sustained in 2022. Breakthroughs in artificial intelligence earlier in the year restored a sense of optimism, and the widely forecast recession failed to materialize. Meanwhile, inflationary pressures subsided, and the US Federal Reserve's rate tightening cycle was put on hold. In the latter part of the year, the market looked forward to pricing-in interest rate cuts next year rather than increases.

Over the year, the MSCI ACWI Index returned 22.81%, while the Fund returned 19.69% for Class 3 shares. The headline number masked an unusually narrow market recovery, whereby a handful of the largest technology-led firms (now referred to as the 'Magnificent Seven') accounted for much of the market's rise.

Nevertheless, there were numerous bright spots across the portfolio last year; many companies met or exceeded market expectations, delivering strong operational results. Building materials companies CRH and Martin Marietta were able to maintain price increases for their products and supplies even as inflation fell. At the same time, demand in key end markets such as infrastructure remained strong. In a similar vein, Ryanair, Europe's leading low-cost airline, was able to fill its fleet of aircraft with vacation goers eager to make up for lost time during the pandemic. Ryanair made key strategic decisions through the pandemic that led to capacity gains, meaning they were in a stronger position to take advantage of the booming demand than other airlines.

In the Fund's disruptor profile, many of the companies that were strongly out of favor in 2022 were rewarded in share price terms for adapting their businesses to the current environment. Companies shifted focus from 'growth-at-all-costs' towards increasing or pulling forward profitability. The likes of Meta, Shopify and DoorDash showcased strong execution and cost discipline which, combined with a reacceleration in growth, was positively received by the market.

Despite many companies displaying strong operational strength, there were areas of disappointment. In the first quarter of 2023, a regional banking crisis precipitated by Silicon Valley Bank caused turmoil across the financial sector. The Fund had an investment in one of the banks caught up in the crisis, New York-based Signature Bank, which was taken into receivership. The events show how

Amperex Technology Co., Comfort Systems USA, Floor & Décor Holdings, LVMH Moet Hennessy Louis Vuitton SE, Nippon Paint Holdings Co., NVIDIA Corp., PDD Holdings, Samsung Electronics Co., Sartorius Stedim Biotech, Pool Corp., Signature Bank, Texas Instruments Inc., YETI Holdings

Baillie Gifford Health Innovation Equities Fund

Market Conditions and Review of Performance during 2023

In 2023, the stock prices of innovative healthcare companies suffered due to a combination of headwinds to the sector, in addition to the uncertain macroeconomic environment that hit growth stocks. These headwinds included a tougher funding environment for biotechnology companies, tightening budgets for healthcare systems, and weakness across life sciences more broadly. Additionally, the potential impact of Novo Nordisk and Eli Lilly's obesity drugs, where widespread adoption could improve general health and reduce the need for a number of medical treatments, weighed on the stock prices of many healthcare companies. In this environment, we saw a divergence of outcomes across the sector, with the high-growth companies we look to invest in experiencing stock price weakness and any negative news punished harshly. For these reasons, despite a recovery in performance in the last quarter of the year, the Class K shares delivered a (11.72)% return in 2023 compared to 22.81% for the MSCI ACWI Index.

The patience that the Fund investors have shown after the Fund's poor performance is greatly appreciated. We understand that it has been difficult. However, we have never been more excited about the revolution underway in human health and the opportunity to identify the outliers driving it. With advancements in new drug types, diagnostics, surgical devices, and medical software, we believe that innovation will unlock progress and drive returns over the long term as fundamentals become less obscured by market uncertainty. These underlying fundamentals remain strong as the portfolio continues to deliver long-term sales and earnings growth higher than the average across all companies that make up the index, yet valuations remain depressed. With early signs that sentiment is improving, we're optimistic for the future ahead.

Moderna and Genmab were among the biggest detractors to relative performance in 2023. Moderna's stock price has fallen significantly in 2023 due to weak COVID-19 vaccine sales and manufacturing adjustments as it scales back capacity. However, its combination vaccines could materially increase uptake, and we believe that its respiratory syncytial virus (RSV) vaccine is superior to competitors in what is approximately a $9bn market. With

Investment Strategies used to manage the Fund

The Fund seeks to meet its objective by investing primarily in companies that we believe have the potential to bring substantial improvements in human health and healthcare systems.

We aim to find companies that are driving innovation across the full value chain of human health, categorized into five 'buckets': (i) understanding of diseases, (ii) diagnostic healthcare tools, (iii) treatment for disease, (iv) prevention of diseases, and (v) operational efficiency in the healthcare industry.

We employ a bottom-up stock-picking approach that seeks to make long-term investments in well-managed healthcare businesses with genuine and sustainable competitive advantages. We believe these companies will generate sustainable earnings growth above the market over the long term. In determining the potential of a company, we conduct fundamental research focused on: (i) the opportunity for it to deliver superior returns; (ii) its ability to execute on that opportunity; and (iii) the current valuation. Inputs into this research normally include its

Baillie Gifford International Alpha Fund

Market Conditions and Review of Performance during 2023

Although international equities generally performed strongly, recouping most of their losses from 2022, it was anything but a smooth ride, particularly for growth stocks. Higher-quality businesses, with stronger fundamentals, outperformed during the first quarter of the year, and it appeared as though the wind was changing. A normalization of supply chains helped many of the Fund's holdings get back on track; whilst the fragilities of what we perceive to be lower-quality companies, notably banks, were exposed. During the third quarter, some unexpectedly stubborn inflation data caused interest rate expectations to jump, grabbing the attention of investors, and reversing share price moves from earlier in the year.

Towards the end of the year, a clear picture then emerged that inflation was slowing, leading central banks across the developed world to turn more dovish, and to begin to signal an end to interest rate tightening. Sentiment shifted dramatically and growth stocks rebounded.

In this context, the Fund outperformed its benchmark in 2023.

The top contributors to performance include MercadoLibre, Ryanair and CRH.

MercadoLibre is a leading Latin American e-commerce and digital platform business. The company recently surpassed 100 million monthly active e-commerce users for the first time, and the firm recently opened its first regional fulfilment center in Rio de Janeiro, which should allow it to increase its same-day shipping footprint. While the stock price may fluctuate from quarter to quarter, operational performance has been remarkably consistent, and we believe it is well-positioned to deliver structural growth in the long term.

One of Europe's largest airlines, Ryanair, has performed well after emerging from the COVID-19 pandemic and has taken significant market share. Their recent results were strong, with revenues rising by 30% year-on-year, driven by higher fares and passenger volumes. Management also announced plans to pay out 25% of profit after tax through dividends in the future, a sign of confidence that was taken well by the market. We believe Ryanair is uniquely positioned as one of Europe's lowest-cost airlines and should continue to take market share for many years.

Trading over the period

Our new buy and complete sale decisions, which are a result of our bottom-up stock research, are listed below:

New buys:

Technoprobe SpA, Nihon M&A Centre Holdings, Recruit Holdings Co., HDFC Bank Ltd., Silergy Corp.,

Baillie Gifford International Concentrated Growth Equities Fund

Market Conditions and Review of Performance during 2023

2023 provided a turbulent environment for equity investors. Markets were whipsawed by China's reopening, United States regional banking turmoil, the euphoria surrounding advances in artificial intelligence, war in the Middle East, and surprisingly dynamic moves in bond yields. Tensions between the United States and China intensified over the year, creating a more ambiguous environment for companies dependent on both markets.

Continuing interest rate increases have pushed investors towards proven and profitable assets that offer predictability. We are skeptical that this approach provides the best long-term rewards, given the inherent uncertainty of the future and the structural changes we see emerging.

Considering this context, we have adhered to our philosophy and process, focusing on businesses with the potential to deliver exceptional growth over the long term. We seek to hold 20-35 of the exceptional growing companies in international markets. In line with our investment philosophy, portfolio turnover remains low.

Rapidly growing companies often have the most volatile share prices. So, we will undoubtedly face challenging periods of performance. Still, we are grateful for the support of long-term shareholders, enabling us to capitalize on the transformative opportunities that lie ahead. In 2023, the Fund underperformed its benchmark with a return of 14.92% for Class K shares versus a benchmark return of 16.21% for the MSCI ACWI ex USA Index.

The most significant positive contributor to performance was MercadoLibre, which operates an e-commerce platform and provides financial services across Latin America. According to World Data Lab, 113 million people are projected to enter the global consumer middle class in 2024, which we think presents a tremendous opportunity for companies in the areas where this growth is projected. Steered by a what we believe to be a world-class management team, MercadoLibre continued progressing despite a challenging operating environment in 2023. The market responded favorably to the impressive growth in its e-commerce and financial technology segments, and we believe there is significant potential for further expansion given the low penetration rates of e-commerce and financial services in the region.

growth opportunities in multiple e-commerce channels, as, in 2023, management continued investing in innovation and growth, and operational progress was strong.

Moderna is a leading player in messenger ribonucleic acid (mRNA) therapeutics, probably best known for its successful development of the COVID-19 vaccine. It was among the top detractors in 2023 as the market struggled to look beyond Moderna's impressive first act. We believe its recent financial performance didn't offer much insight into the company's prospects. Management recently provided long-term guidance of between $10-15bn in revenues from its oncology, rare and latent disease pipeline over the next ten years. This was in addition to six major vaccine launches within its respiratory franchise and expectations of $8-15bn annual sales by 2027. In the last quarter of 2023, the company announced positive data from a trial of Moderna's mRNA-4157 in combination with the cancer drug Keytruda in patients with high-risk skin cancer. After about three years, the combination reduced the risk of recurrence or death by 49% and the risk of distant metastasis or death by 62%, compared with Keytruda alone.

Finally, Delivery Hero, the German company that operates online food delivery services in over 70 countries, was a detractor last year. Its share price was hit at the beginning of 2023 as results failed to meet market expectations, and growth in its Asia segments suffered because of reopening post-pandemic. The market was also concerned about the rate at which the company was burning free cash flow and its ability to maintain profitability. In 2023, management confirmed that they were exploring the disposal of its Foodpanda business in some Southeast Asian countries and pivoted to focus on profitability over growth. The company also focused on improving its capital structure and liquidity position. We believe exiting these loss-making regions was sensible, and

Baillie Gifford International Growth Fund

Market Conditions and Review of Performance during 2023

2023 provided a turbulent environment for equity investors. Markets were whipsawed by China's reopening, United States regional banking turmoil, the euphoria surrounding advances in artificial intelligence, war in the Middle East, and surprisingly dynamic moves in bond yields. Tensions between the United States and China intensified over the year, creating a more ambiguous environment for companies dependent on both markets.

Continuing interest rate increases have pushed investors towards proven and profitable assets that offer predictability. We are skeptical that this approach provides the best long-term rewards, given the inherent uncertainty of the future and the structural changes we see emerging.

Throughout all this, we remain focused on identifying opportunities in the rapidly changing global economy. We are committed to maintaining a high active share, keeping portfolio turnover similar to last year, and focusing on company fundamentals. We continue to develop broad and deep knowledge networks and engage with diverse sources to enhance our ability to form differentiated views to deliver returns for shareholders. We will undoubtedly face challenging periods, but we are grateful for the support of long-term shareholders, enabling us to capitalize on the transformative opportunities that lie ahead. In 2023, the Fund underperformed its benchmark with a return of 14.31% for Class 2 shares versus a benchmark return of 16.21% for the MSCI ACWI ex USA Index.

The positive contributors to performance were companies sharing strong cultures and management teams capable of adapting intelligently to changing and uncertain circumstances.

Spotify is an excellent example of this. In 2022, the company was among the Fund's largest detractors but was the top contributor in 2023. Following a period of high operational expenditure, management made a 17% reduction to Spotify's workforce as they pivoted to focus on operating efficiency in response to capital scarcity. In the third quarter of 2023, Spotify reported its first operating profit in two years. Free cash flow has been boosted by its measures to rein in costs. More impressively, this has not come at the expense of user growth. Growth in monthly active users, paid subscribers, and advertising revenues continues to be strong and ahead of the company's forecasts.

Genmab is a Danish biotech company with a proprietary antibody-based drug development platform. It was featured as a top contributor to performance in 2022. But during 2023, its share price decline reflected a general rotation out of defensive sectors, healthcare in this case. The market also responded negatively to news flow and near-term uncertainty regarding the outcome of specific drug trials in 2023. We believe the investment case remains strong and that Genmab's proprietary pipeline will allow it to enhance its commercial capabilities further. In addition, it showed continued strong growth in recurring revenue, including higher royalty revenues from products like DARZALEX.

Another healthcare company that was among the top detractors was the Japanese online medical platforms operator M3. It reported weak performance from its core pharmaceutical marketing support business owing to cost reductions at foreign pharmaceutical companies over the year. Management guidance was below market consensus, reflecting the drop off in COVID-19-related business and the impact of reinvestment in the business. Given the continued adoption of digital marketing in healthcare and growth in its overseas business, we see strong potential for longer-term growth.

Investment Strategies used to manage the Fund

As active bottom-up stock pickers, our ability to add value is derived from patient ownership of exceptional growth companies. Our investment process is designed to identify

Baillie Gifford International Smaller Companies Fund

Market Conditions and Review of Performance during 2023

During 2023, the Fund returned 13.41% for Class K shares compared to the MSCI ACWI ex USA Small Cap Index return of 16.23%.

Whilst markets generally enjoyed something of a recovery during 2023, unlike historic rebounds, small caps have largely lagged rather than led their large cap peers. We believe that this is primarily due to the shape of this particular rally. Historic market recoveries have been off-the-back of falling interest rates which, all else being equal, favor long duration assets, and capital hungry businesses, i.e. small cap growth. In this case however recovery has pre-empted falling interest rates, favoring larger businesses with greater short-term cash flows and less requirement for external capital. Without wanting to make any macro forecasts, we'd hope that in an economy where both inflation and interest rates have hopefully peaked, the subsequent fall in both should allow small cap assets to regain lost ground. Meanwhile, the upside to small cap share price recovery lagging larger peers is that it leaves the door open for us to find compelling, mispriced investment opportunities, both within the Fund and through new ideas. We remain optimistic that these will drive long term performance for years to come.

Many Japanese holdings performed weakly during the year. The largest detractor was Raksul, which owns a portfolio of internet platform businesses targeting traditional industries. Like most fast growing digital businesses, it has gone through a period of adjustments. Over the past 18 months, it has increased its focus on its more profitable companies and is being more selective about those it acquires. One of its platforms utilizes underused printing capacity to provide high quality printing at low cost. It was hard hit during the pandemic but has recovered strongly and, amidst strong demand and rising input costs, has successfully raised prices several times in the past 18 months.

Another detractor was Victoria, a consolidator in the European flooring industry. It suffered due to a combination of weak markets and internal governance lapses that led to a qualified opinion on its latest annual report. Its auditors expressed concerns about transparency in the accounts of a carpet company it acquired in 2021 however Victoria believed that the issue was not significant

managing small and all-cap portfolios across different geographies, and our ability to employ a longer-term investment horizon than most of the market. This long-termism is fundamental to how we exploit the asymmetry available in equity returns.

Central to our investment process is our 'Radar' framework. We assess all potential new and existing holdings against this. It has six spokes (opportunity, edge, alignment, scalability, sustainability, insight) which represent what we believe are the most important factors to the investment case. We recognize that special companies can come in different shapes, and often the most exciting companies will score very highly in few, rather than all, categories.

Baillie Gifford Long Term Global Growth Fund

Market Conditions and Review of Performance during 2023

Market sentiment has been fluctuating over the year, with concerns about inflation one day and central banks keeping rates steady the next. However, the recent dovish tone from monetary authorities is improving market sentiment towards growth companies. Consequently, the Fund portfolio has delivered a return of 36.60% for Class 2 shares during the period, 13.79% ahead of the MSCI ACWI Index. The LTGG team remains committed to identifying and holding exceptional growth stocks at the forefront of multi-decade transformations.

At its core, LTGG's task is futureproofing. Investing with an eye on the next ten years, instead of the next quarter, necessitates adaptability, diligent capital allocation, and resilience from our holdings. Now that capital costs have increased, unruly companies have been required to pull back, while the disciplined outliers have been able to forge ahead and win share from those in retreat. This has been the clear theme emerging from our interactions with several holdings, and we have been excited to see the strength of the green shoots across the portfolio.

Reflecting on the last twelve months, NVIDIA, PDD Holdings and Shopify were among the most notable contributors to the Fund's relative performance during the year.

According to CEO Jensen Huang, a new era of computing has begun as companies shift from general-purpose to accelerated computing and generative artificial intelligence (AI) technologies. NVIDIA has reported record revenues of over $18 billion in the recent quarter, up over 200% compared to last year, mainly due to record data center revenues. The company's earnings per share also rose significantly, 12x compared to the previous year. Major cloud service providers announced the implementation of massive NVIDIA H100 AI chip infrastructures while leading enterprise IT systems and software providers announced partnerships to bring NVIDIA AI to every industry.

PDD Holdings has delivered rapid revenue growth over the past year, rising over 90% year-on-year, combined with a 50% increase in profits compared to last year. The company continues to invest in agricultural and supply chain technology and supports infrastructure to improve

Illumina remains the market leader in next-generation genome sequencing with over 20,000 installed machines and a near-monopoly on the industry, with a 95% share of the clinical market. However, we have concerns about future growth. The acquisition of Grail has faced challenges from the European Commission and Federal Trade Commission, which could be a distraction from the core business. The profitability of the core sequencing machines business has slipped, innovation is underwhelming, and competitive pressures are increasing. Combined with recent management changes, we have decided to move on as we have higher convictions in other holdings.

Though this commentary pertains to the year 2023, as ever our focus is on the much longer-term prospects for companies in the Fund over five to ten years and beyond. Our role as stock-pickers remains as relevant as ever. We are forever seeking to identify the small number of exceptional companies with compelling operational performance and opportunities for long-term growth. The trading undertaken for the portfolio in 2023 reflects our excitement in what we believe will be transformative growth companies over our investment horizon. We believe the potential for upside from here remains vast.

Baillie Gifford U.S. Discovery Fund

Market Conditions and Review of Performance during 2023

In 2023, we saw a tentative recovery in sentiment as increasing optimism about the US Federal Reserve's taming of inflation and the direction of interest rates in 2024 caused markets to rally. Additionally, excitement about the application of new generative artificial intelligence models pushed technology stocks higher, although this was somewhat limited to the largest US technology companies. However, with rates remaining elevated and capital scarce, investors' time horizons remain short, and their risk tolerance muted.

For the high-growth, immature companies we invest in, this backdrop has pushed down valuations and impaired returns as investors seek short-term certainty over long-term potential. The Fund's overweight exposure to healthcare has also hit returns after the sector has been affected by tightening budgets and limited access to capital for biotechnology companies. This meant the Class K shares delivered a return of 10.87%, compared to 18.93% for the Russell 2500 Growth Index in 2023.

Despite the difficult performance, there are grounds for considerable optimism. In our opinion, small-cap valuations are significantly depressed relative to their large-cap equivalents as investors look for safety in larger companies. This bias to certainty and the short term discounts the power of compounding growth over long periods. The Fund seeks to invest in companies poised to drive and enable powerful secular trends such as artificial intelligence and automation, healthcare innovation and digitalisation that can deliver exactly this type of growth. Their immaturity, evidenced by the level of cash flows further out in the future, is creating valuation discrepancies that can be exploited for those with a longer view that can embrace uncertainty. With many of the companies in the Fund making measures to focus spending to narrow in on profitability, and with many de-risking developments to follow in 2024, we are excited about the outlook from here.

Novocure and Ambarella were among the biggest detractors to relative performance in 2023.

Novocure's share price fell almost 80% over the last 12 months due to an unexpected trial failure in August in the treatment of ovarian cancer. Novocure has developed Tumour Treating Field (TTF) devices, which use electromagnetic fields to halt and reverse cancer progression. Novocure hopes to expand their use, which is

of its standard service. This speed advantage could help it land large customers who currently synthesise DNA in-house. This, combined with the use of NGS accelerating in the clinic, means, in our view, there is significant upside ahead.

Investment Strategies used to manage the Fund

Baillie Gifford is a growth manager with a bottom-up approach to stock picking. Bottom-up investing is an investment approach that focuses on the analysis of individual stocks and deemphasizes the significance of economic cycles and market cycles. We aim to deliver excellent long-term investment returns by investing in a portfolio of high potential, immature smaller companies in the United States with a view to owning them over a 5-10 year investment time horizon as they grow. We focus

Baillie Gifford U.S. Equity Growth Fund

Market Conditions and Review of Performance during 2023

Over the past year, the Fund's Class K shares delivered a return of 46.02%, outperforming its primary benchmark, the Russell 1000 Growth Index. It substantially outperformed its secondary S&P 500 benchmark. 2023 was a rewarding year for US equity investors. Markets still appeared fixated on the path of interest rates, which rose several times in 2023. But a reversal in tone by the US Federal Reserve seemingly prompted renewed optimism about interest rate cuts in 2024 and that the US might deliver reduced inflation without recession, a so-called "soft landing".

While important, we don't believe the Fund's prospects hinge on this factor to the degree share prices might suggest. The Fund's holdings have shored up their finances and become more cost-conscious. In our view, that's healthy, and a good thing for future profitability. We believe that this good health enables their continued pursuit of large opportunities. Longer-acting developments like the deployment of artificial intelligence (AI) tools may become more significant over the Fund's five-year investment time horizon. We think stock markets tend to overestimate the importance of short-term factors while underestimating the influence of long-term drivers on returns.

The Fund, through our bottom-up stock selection approach, has invested in companies enabling consumer and business shifts online that are earlier in their transitions than many might appreciate. It includes innovative healthcare companies enabling a shift towards more personalized and affordable healthcare. It also includes companies electrifying transport, supporting local business growth, and changing education. We think that these businesses have the potential to thrive as others fall away in a more challenging environment.

Shopify, the largest contributor to the Fund's performance in 2023, provides merchant software enabling businesses to sell online. Shopify cut costs, jettisoned its lower-margin logistics business, and has now focused more of its energies on the advancing AI opportunity. It has already delivered tools from back-office automation to consumer-facing assistants. The range and sophistication of merchant services should thus improve over time, growing the value of Shopify's offering. We welcome the clarity of Shopify's strategy. In our view, the company is

We continue to pursue this growth for clients, seeking to find and hold a rare few companies that can deliver attractive returns over the long term.

Investment Strategies used to manage the Fund

The Fund seeks to meet its objective by identifying exceptional growth businesses and owning them for long enough that the advantages of their business models and cultural strengths become the dominant drivers of their stock prices. The concentrated and committed nature of the strategy means that we generally deliver significantly different returns versus indices over any shorter time frame. However, our long-term time horizon allows us to capture the disproportionate impact of successful investments, harnessing the asymmetry of returns inherent in equity markets. In our terms, an exceptional growth business has a special culture, addresses a large market opportunity and possesses an edge that gives it a high

As a shareholder of Baillie Gifford China A Shares Growth Fund, Baillie Gifford China Equities Fund, Baillie Gifford Developed EAFE All Cap Fund, Baillie Gifford EAFE Plus All Cap Fund, Baillie Gifford Emerging Markets Equities Fund, Baillie Gifford Emerging Markets ex China Fund, Baillie Gifford Global Alpha Equities Fund, Baillie Gifford Health Innovation Equities Fund, Baillie Gifford International Alpha Fund, Baillie Gifford International Concentrated Growth Equities Fund, Baillie Gifford International Growth Fund, Baillie Gifford International Smaller Companies Fund, Baillie Gifford Long Term Global Growth Fund, Baillie Gifford U.S. Discovery Fund and/or Baillie Gifford U.S. Equity Growth Fund, you incur two types of costs: (1) transactional costs and (2) ongoing costs, including advisory fees, administration and supervisory fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from July 1, 2023 to December 31, 2023.

Actual Expenses

The first line of each table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over

Expenses are calculated using the annualized expense ratio for the Fund, which represents the ongoing expenses as a percentage of net assets for the period ended December 31, 2023. Expenses are calculated by multiplying the annualized expense ratio by the average account value for the period; then multiplying the result by the number of