Cautious Managed Fund

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<p><strong>Your capital is at risk. Past performance is not a guide to future returns.</strong></p> <p>&nbsp;</p> <p class="MsoNormal"><strong>Barry Templeton:</strong> I'd like to start with a relatively simple point about how we invest on your behalf.</p> <p class="MsoNormal">We are long-term, bottom-up active growth investors, and we apply that discipline across both the equity and bond allocations of our managed portfolios.</p> <p class="MsoNormal">But this asks us to balance two forces that can sometimes pull in opposite directions, staying invested in exceptional companies for the long term, while recognising that share prices can occasionally run ahead of the fundamentals.</p> <p class="MsoNormal">Two examples of this from this quarter are of contrasting fame. The recently IPO'd US company SpaceX and Japan's Taiyo Yuden. I'll come back to SpaceX shortly, but first, Taiyo Yuden.</p> <p class="MsoNormal">This may not be a company at the forefront of many clients' minds, but it is a large and increasingly important manufacturer of small but essential component parts that help modern electronic systems from smartphones to datacentres work reliably.</p> <p class="MsoNormal">We bought Taiyo Yuden in April. By late May, after a rapid increase in the share price, we had trimmed the holding. That was not because our long-term view had changed. It was because when a share price moves a long way in a short period, the balance of risk and reward can change too.</p> <p class="MsoNormal">That is one of the points I want to emphasise today. Our starting point, especially so within equities, is to remain invested where we see exceptional long-term compounding potential. But we will recycle capital when markets capture the upside faster than expected.</p> <p class="MsoNormal">Stepping back, the market backdrop during the quarter continued to be shaped by several notable forces.</p> <p class="MsoNormal">Artificial intelligence remained the dominant equity theme. Geopolitical risk kept oil prices elevated, raising inflation and growth concerns before pressure faded towards quarter end. Credit markets were also supportive for high-quality borrowers.</p> <p class="MsoNormal">In that environment, our managed strategies delivered positive, absolute and relative returns. That is pleasing, although over the longer-term timeframes on which we ask clients to judge us, performance still has ground to make up.</p> <p class="MsoNormal">The strongest contributors were closely connected to AI and its enablers. South Korea's Samsung Electronics performed well, helped by demand for memory and processing chips. Japan's Murata and SoftBank were also notable contributors alongside ASML, the Dutch semiconductor equipment supplier.</p> <p class="MsoNormal">The detractors were more varied. Babcock, the defence and engineering company, Denmark's Royal Unibrew and AstraZeneca, the UK-listed pharmaceutical company, all weighed on returns.</p> <p class="MsoNormal">We've now sold Royal Unibrew. It remains a good business with strong brands and a respectable operating record, but we no longer saw enough upside to justify its place in the portfolio relative to other opportunities.</p> <p class="MsoNormal">The bond allocation also contributed positively. Government bond positions in Colombia and Hungary helped, reflecting potential structural benefits from recent political developments. Alongside taking profits in Colombia, we've also reduced our UK gilt overweight and the overall duration of the bond allocation.</p> <p class="MsoNormal">The important point, however, is not simply that the quarter was positive. It is what it says about how the portfolio is being managed, actively, selectively and with a clear focus on balancing long-term growth with discipline.</p> <p class="MsoNormal">This slide gives three examples of that approach.</p> <p class="MsoNormal">First, SSE. This was a new purchase during the quarter, giving the portfolio exposure to a UK-listed utility with long-term investment opportunities in electricity infrastructure and the energy transition. It's not the most fashionable part of the market, but it is the sort of differentiated growth driver we want alongside more headline-grabbing names.</p> <p class="MsoNormal">Speaking of which, SpaceX. What makes this company so unusual is not just the activities it is involved in, but the degree to which it is integrated across rockets, satellites and connectivity.</p> <p class="MsoNormal">The combination of engineering ambition, cost advantage and commercial reach is why we view SpaceX as one of the most exceptional growth companies in the portfolio, although clearly it is not without risks.</p> <p class="MsoNormal">As I mentioned earlier, while we participated in the IPO a few weeks ago, the extent of the very early share price appreciation meant we reduced the position back to its initial starting point. Like Taiyo Yuden, this was unusual, but done with discipline, upside capture, and overall portfolio construction in mind.</p> <p class="MsoNormal">Lastly on the page, Novo Nordisk, which has been sold from the portfolio.</p> <p class="MsoNormal">As with Royal Unibrew, this remains a good company, but it is also an example of how quality can coexist with disappointing share price outcomes for longer than expected and where our view on the timing and odds of renewed upside no longer looked attractive enough.</p> <p class="MsoNormal">Shifting now from performance and transactions to our sense of optimism for what lies ahead. One of our longstanding investment tenets is that over reasonable time periods, share prices follow earnings and sales.</p> <p class="MsoNormal">And it remains the case that our attention should be on core fundamentals rather than on shorter-term political or economic headlines.</p> <p class="MsoNormal">This slide gives some insight into our optimism.</p> <p class="MsoNormal">The equity portfolio is forecast to deliver stronger earnings and sales growth than the benchmark, while remaining financially resilient, with net debt to equity materially lower than the benchmark.</p> <p class="MsoNormal">Now, these are only a small part of our investment process, but the combination matters. We want companies with attractive long-term growth prospects and the resilience to keep making progress through a range of financial conditions, including the more challenging ones.</p> <p class="MsoNormal">One final point before I sum up. A common client question over the past few months is whether the portfolio has become too exposed to AI and its related touchpoints.</p> <p class="MsoNormal">Our response is twofold. First, AI is very likely to be a transformative technology for the global economy, and we want exposure to the breadth of companies that can benefit. But not every AI-exposed share price will be justified, which is why we take profits when valuations move too far, or sell when the investment case no longer stands up.</p> <p class="MsoNormal">Second, we are continuing to broaden the portfolio. The recent purchases I mentioned bring different growth drivers alongside longstanding holdings such as the UK's Bunzl, Amazon and Nvidia. That breadth is deliberate.</p> <p class="MsoNormal">For managed and cautious managed clients, the balance between equities and bonds differs by portfolio, but the aim is consistent. Long-term growth through a diversified, actively managed, balanced portfolio.</p> <p class="MsoNormal">Thank you for listening.</p> <p class="MsoNormal">&nbsp;</p> <p>&nbsp;</p> <h3>Important information and risk factors</h3> <p>This recording was produced and approved in July 2026 and has not been updated subsequently. It represents views held at the time and may not reflect current thinking.</p> <p>The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.</p> <p>This communication contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research, and Baillie Gifford and its staff may have dealt in the investments concerned.</p> <p>Baillie Gifford &amp; Co and Baillie Gifford &amp; Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). Baillie Gifford &amp; Co Limited is an Authorised Corporate Director of OEICs.</p> <p>Investment markets can go down as well as up and market conditions can change rapidly. The value of an investment in the Fund, and any income from it, can fall as well as rise and investors may not get back the amount invested.</p> <p>The Fund’s share price can be volatile due to movements in the prices of the underlying holdings and the basis on which the Fund is priced.</p> <p>Further details of the risks associated with investing in the Fund can be found in the Key Investor Information Document, copies of which are available at www.bailliegifford.com&nbsp;or the Prospectus which is available by calling the ACD.</p>