What really matters?

Investors should carefully consider the objectives, risks, charges and expenses of the fund before investing. This information and other information about the fund can be found in the prospectus and summary prospectus. For a prospectus or summary prospectus please visit our website at https://usmutualfund.bailliegifford.com. Please carefully read the fund’s prospectus and related documents before investing. Securities are offered through Baillie Gifford Funds Services LLC, an affiliate of Baillie Gifford Overseas Limited and a member of FINRA.

A new year is a good prompt to take stock. Not of the loudest headlines, but of the quieter developments that end up shaping the next decade. The things that really matter for long-term compounding growth.

We’re only a few days into 2026, and already the events in Venezuela on 3 January will undoubtedly be one of the main news stories of the year.

Two decades ago, at the end of 2006, the highlight reel would have looked similarly obvious: geopolitical conflicts (Iraq and Afghanistan), Zidane’s World Cup headbutt, and lighter but popular stories such as the uproar over Pluto losing planet status. The American Dialect Society even picked ‘to be plutoed’ as its Word of the Year.

We’re not dismissing the importance of any of these events. The fallout from huge geopolitical events is inherently unknowable in the moment. But time eventually reveals what truly matters for long-term growth investing.

For example, 2006 also included things most people didn’t discuss at dinner. Amazon introduced Simple Storage Service (S3) and Elastic Compute Cloud (EC2), metered storage and compute delivered over the web.

In hindsight, that was an early step toward the cloud as we know it, and it helped lay the groundwork for how media, commerce and communication operate today.

YouTube also launched in 2005 and has gone on to replace traditional TV across the world, built on top of cloud technologies.

As long-term growth investors, that’s the point. Every year brings change and significant events at an increasingly rapid rate. Our job is to keep asking a simpler question:

What is most likely to drive growth and compounding over the next five to 10 years?

What matters: fundamentals

2025 was a volatile year for US equities.

Trade uncertainty dominated the early months, and concerns about ‘irrational exuberance’ around AI grew later in the year, despite obvious advantages coming from this technology.

Our US Growth portfolios delivered strong absolute returns, but we lagged the major indices across the year following an AI-sentiment-related sell-off in October and November.

Stepping back, the lesson for us is not about any single month. It is about what actually drove outcomes.

Ask most growth investors what caused 2022’s stock market drawdown, and you will hear some version of ‘the rate cycle’.

That explanation is partly right. Valuation compression was real.

Still, one factor often gets underweighted in the retelling: fundamentals weakened.

As demand cooled after Covid, earnings expectations fell. Markets responded as you would expect.

Within the Russell 3000 Growth index, companies with rising earnings per share (EPS) forecasts held up materially better than those facing estimate cuts. When valuation multiples compress, fundamental resilience becomes increasingly important.

Today, the fundamental picture across our portfolio remains healthy. We saw an average revenue growth of roughly 20 per cent in 2025, and we expect a similar pace in 2026.

We are also seeing improving operating leverage and higher earnings before interest and tax (EBIT) margins in several holdings.

What matters: the engines of growth

Fundamentals reveal where a business stands. The more important question is what keeps it moving for the next five to 10 years.

Our conviction is anchored in the structural changes we have invested in over the years: the internet, the cloud, and the ongoing digitisation of workflows across the economy.

As more systems move online, software becomes more capable, data becomes more useful, and compute becomes easier to access. Those pieces reinforce each other and expand the capabilities of what companies can build.

AI is a good example of that dynamic. It felt ‘new’ to many people in 2023, but it was enabled by decades of innovation and investment, including lower compute costs, richer datasets, better tools, and stronger distribution through modern platforms.

If those inputs continue to improve, we think the opportunity in AI-led change stays broad, even when headlines swing from enthusiasm to scepticism quarter by quarter.

What matters: AI (and what we think gets missed)

Does AI matter? Yes.

Where we differ from the daily debate is the framing.

‘Bubble or no bubble’ is an important discussion from a risk perspective, but it must also be viewed through the lens of opportunity.

We find it helpful to separate the two types of AI beneficiaries:

• First are the companies tied directly to the spending cycle, the picks-and-shovels side of the buildout. Their results can be sensitive to capital expenditure (capex) budgets and timing.
• Second are the deployers: businesses using AI to become structurally stronger through improved operations, better products and faster decision-making.

The capital expenditure (capex) path from here is uncertain. The deployer's story is more straightforward because it is already showing up in day-to-day execution. Even if AI spending slows, the tools are widely available and continue to improve quickly. That gives well-run teams room to keep iterating.

We are seeing this in operating metrics across parts of the portfolio:

• Lemonade: the digital insurance company’s premium growth has remained strong while expense growth has been far slower, which management attributes in part to AI-driven efficiency.
• Shopify: growth at the ecommerce platform has continued with a flat headcount over two years, supported by internal automation and AI enablement.
• Guardant: demand for the blood sequencing company’s Guardant360 product has accelerated, supported by an AI-enabled platform and workflow improvements.

This is why we believe the most interesting AI story often sits away from day-to-day capex commentary.

What matters: portfolio construction in an uncertain world

We should not expect uncertainty to fade, especially after the most recent developments in the Americas.

Tariffs, geopolitics and shifting narratives will keep markets cycling between risk-on and risk-off.

That makes portfolio construction more important than ever. Over the past 18 months, we have focused on improving resilience by raising the minimum level of financial maturity required and balancing different sources of demand across the portfolio.

The risk-off periods in 2025, including April’s ‘Liberation Day’ and the pullbacks in October and November, tested those guardrails. We have seen progress.

The delivered tracking error has trended downward from its mid-2022 peak, although we still view it as higher than we want over a full cycle.

Currency: US Dollar. Source: Baillie Gifford, Revolution.

That work shows up in concrete decisions. We added durable growth exposure, such as Medline. We reinitiated Alphabet. We also adjusted position sizes across the book, adding to steadier compounders and trimming a few of the most volatile transformational holdings.

We will still look different from US benchmarks. The portfolio is more concentrated and more growth-tilted than the S&P 500 and Russell Growth indices.

It is also worth noting that the benchmarks themselves have become more volatile as concentration has increased.

Looking into 2026: staying focused on what matters

The feeling of discombobulation many of us experienced when reading the headlines on 3 January reminds us that, ultimately, we cannot know which stories will dominate the next 12 months. We can only control the questions we come back to:

• Are fundamentals improving in a way that is visible in revenue, margins and cash generation?
• Are the long-term growth drivers still intact, and are they strengthening?
• Are we backing businesses that use new tools, especially AI, to execute better and widen competitive advantages
• Have the leaders of these companies built the cultural agility to adapt to change? If so, this provides a genuine competitive advantage.
• Is the overall portfolio built to endure volatility without giving up long-term upside?

That mindset keeps us focused during these times of change, and it leaves us optimistic about what comes next.

Risk factors 

This content 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.

As with all mutual funds, the value of an investment in the fund could decline, so you could lose money.

The most significant risks of an investment in the Baillie Gifford US Equity Growth Fund are Investment Style Risk, Growth Stock Risk, Long-Term Investment Strategy Risk, Geographic Focus Risk and Non-Diversification Risk. The Fund is managed on a bottom up basis and stock selection is likely to be the main driver of investment returns. Returns are unlikely to track the movements of the benchmark. The prices of growth stocks can be based largely on expectations of future earnings and can decline significantly in reaction to negative news. The Fund is managed on a long-term outlook, meaning that the Fund managers look for investments that they think will make returns over a number of years, rather than over shorter time periods. The Fund focuses on investments in the US, meaning it may offer less diversification and be more volatile than other funds. The Fund may have a smaller number of holdings with larger positions in each relative to other mutual funds. Other Fund risks include: Conflicts of Interest Risk, Developed Markets Risk, Equity Securities Risk, Environmental, Social and Governance Risk, Focused Investment Risk, Government and Regulatory Risk, Information Technology Risk, Initial Public Offering Risk, Large-Capitalization Securities Risk, Liquidity Risk, Market Disruption and Geopolitical Risk, Market Risk, New and Smaller-Sized Funds Risk, Service Provider Risk, Small-and Medium-Capitalization Securities Risk and Valuation Risk.

For more information about these and other risks of an investment in the fund, see “Additional Information about Principal Strategies and Risks” in the prospectus. The Baillie Gifford U.S. Equity Growth
Fund seeks capital appreciation. There can be no assurance, however, that the fund will achieve its investment objective. 

The fund is distributed by Baillie Gifford Funds Services LLC. Baillie Gifford Funds Services LLC is registered as a broker-dealer with the SEC, a member of FINRA and is an affiliate of Baillie Gifford Overseas Limited.

All information is sourced from Baillie Gifford & Co and is current unless otherwise stated.

The images used in this article are for illustrative purposes only.

The Baillie Gifford U.S. Equity Growth Fund

(Share Class K) as of December 31, 2025

Source: Baillie Gifford & Co

Annualised total return as of December 31, 2025 (%)

Source: Baillie Gifford & Co, Bank of New York Mellon, S&P, Russell. Share Class launch date: April 28, 2017. NAV returns in US dollars.

The performance data quoted represents past performance and is no guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For the most recent month-end performance please visit our website at www.bailliegifford.com/usmutualfund/usequitygrowthfund

The Fund's primary benchmark is the S&P 500 Index. The benchmark changed on April 30, 2024. Performance is shown against the primary and secondary benchmarks. The secondary benchmark is the Russell 1000 Growth Index.

Returns are based on the K share class from 28 April 2017. Prior to that date returns are calculated based on the oldest share class of the fund adjusted to reflect the K share class fees where these fees are higher.

The Baillie Gifford fund’s performance shown assumes the reinvestment of dividend and capital gain distributions and is net of management fees and expenses. Returns for periods less than one year are not annualised. From time to time, certain fees and/or expenses have been voluntarily or contractually waived or reimbursed, which has resulted in higher returns. Without these waivers or reimbursements, the returns would have been lower. Voluntary waivers or reimbursements may be applied or discontinued at any time without notice. Only the Board of Trustees may modify or terminate contractual fee waivers or expense reimbursements. Fees and expenses apply to a continued investment in the funds. All fees are described in each fund’s current prospectus.

Expense Ratios: All mutual funds have expense ratios which represent what shareholders pay for operating expenses and management fees. Expense ratios are expressed as an annualized percentage of a fund's average net assets paid out in expenses. Expense ratio information is as of the Fund's current prospectus, as revised and supplemented from time to time. The net expense ratios for this fund are contractually capped (excluding taxes, sub-accounting expenses and extraordinary expenses), through April 30, 2026.

The S&P 500® covers large-cap U.S. equities. The index includes 500 leading companies and covers approximately 80% of available market capitalization. The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the US equity universe. It includes Russell 1000 companies with higher forecasted growth values. These unmanaged indexes do not reflect fees and expenses. The Fund is more concentrated than the indexes shown.

Top ten holdings as of December 31, 2025

It should not be assumed that recommendations/transactions made in the future will be profitable or will equal performance of the securities mentioned. A full list of holdings is available on request. The composition of the fund's holdings is subject to change. Percentages are based on securities at market value.

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