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

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES

Investment Company Act file number        811-10145                     

BAILLIE GIFFORD FUNDS

(Exact name of registrant as specified in charter)

1 Greenside Row, Edinburgh, Scotland, UK, EH1 3AN

(Address of principal executive offices) (Zip code)

Angus N G Macdonald
1 Greenside Row, Edinburgh, Scotland, UK, EH1 3AN

(Name and address of agent for service)

Registrant’s telephone number, including area code: 011-44-131-275-2000

Date of fiscal year end: December 31

Date of reporting period: January 1, 2011 to December 31, 2011

The registrant, an open-end investment company registered pursuant to Section 8(b) of the Investment Company Act of 1940 (the “Act”), has not filed a registration statement that has gone effective under the Securities Act of 1933 (the “1933 Act”) because beneficial interests in the registrant are issued and sold solely in private transactions that do not involve any public offering within the meaning of Section 4(2) of the 1933 Act. Accordingly, this report is not filed under Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934.

Item 1. Reports to Stockholders.

The registrant’s annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows:

Baillie Gifford Funds

International Equity Fund
EAFE Fund
EAFE Choice Fund
Emerging Markets Fund
Global Alpha Equity Fund

Annual Report
December 31, 2011

INDEX

Baillie Gifford International Equity, EAFE, EAFE Choice, Emerging Markets and Global Alpha Equity Funds

	Page Number
Management Discussion	1
Fund Expenses	10
International Equity Fund
Industry Diversification Table	13
Portfolio of Investments	14
Statement of Assets and Liabilities	18
Statement of Operations	19
Statements of Changes in Net Assets	20
Financial Highlights
Selected Data for Class 1	21
Selected Data for Class 2	22
Selected Data for Class 3	23
Selected Data for Class 4	24
EAFE Fund
Industry Diversification Table	25
Portfolio of Investments	26
Statement of Assets and Liabilities	29
Statement of Operations	30
Statements of Changes in Net Assets	31
Financial Highlights
Selected Data for Class 1	32
Selected Data for Class 2	33
Selected Data for Class 3	34

INDEX (continued)

	Page Number
Selected Data for Class 4	35
EAFE Choice Fund
Industry Diversification Table	36
Portfolio of Investments	37
Statement of Assets and Liabilities	41
Statement of Operations	42
Statements of Changes in Net Assets	43
Financial Highlights
Selected Data for Class 2	44
Selected Data for Class 4	45
Emerging Markets Fund
Industry Diversification Table	46
Portfolio of Investments	47
Statement of Assets and Liabilities	50
Statement of Operations	51
Statements of Changes in Net Assets	52
Financial Highlights
Selected Data for Class III	53
Global Alpha Equity Fund
Industry Diversification Table	54
Portfolio of Investments	55
Statement of Assets and Liabilities	59
Statement of Operations	60
Statement of Changes in Net Assets	61
Financial Highlights
Selected Data for Class 3	62

INDEX

Baillie Gifford International Equity, EAFE, EAFE Choice, Emerging Markets and Global Alpha Equity Funds

	Page Number
Notes to Financial Statements	63
Report of Independent Registered Public Accounting Firm	83
Supplemental Information	84

Management Discussion

The Baillie Gifford International Equity Fund

Market Conditions and Review of performance during 2011

Markets in 2011 were characterized by periods of intense volatility; from the Arab spring to the Tohoku earthquake to the Eurozone sovereign debt issues, international equity markets struggled and the ‘risk-off’ trade prevailed for most of the year. Eurozone contagion fears were very much to the fore with particular concerns over a credit and liquidity squeeze, as European banks sought to deleverage and raise capital. 

The International Equity Fund Class 2 returned -11.94% during 2011, outperforming the MSCI ACWI ex US Index which returned -13.33% for the year.

We have been, and remain, optimistic about the outlook for the companies in the portfolio. Of course, this has not been reflected in share prices or asset values - yet. As always we focus on the long term (and this appears to be even more of a differentiator in today’s markets). The gap between winners and losers is widening, but stock markets are being even more inefficient and indiscriminate than usual. Commentators assume that falling share prices must reflect deterioration in the real world, but the underlying dynamic is one of gradual improvement. This cannot be ignored indefinitely and the confidence we have in the companies in which we invest should be reflected in share prices at some point. Although the portfolio’s absolute returns were disappointing, the portfolio outperformed its benchmark over the year, with the majority of relative outperformance attributable to stock selection. Top contributors included British American Tobacco which is perhaps unsurprising given its perceived defensive growth qualities. Japanese holdings, Rakuten (e-commerce), and Fast Retailing (clothing retailer) also performed well, following strong results. The Olympus saga which came to light during the last quarter continues, and the stock was one of the biggest detractors in 2011. We still believe that the medical business in particular remains a very attractive asset and we still see a strong core business but the situation is fast moving and there are naturally potential developments which could lead us to revise our opinion.

We continue to find exciting opportunities for the portfolio. For example, we have taken a holding in Trend Micro (one of the major players in the global market for computer virus software), Want Want (a producer and distributor of snacks across the Greater China region), and Sberbank (Russia’s leading bank). The portfolio is dominated by well-financed businesses, whose growth prospects depend largely on demand from the robust half of the global economy. The portfolio retains a strong bias towards companies that are well placed to benefit from rising domestic consumption in Emerging Markets. The output of our bottom-up stock picking has resulted in many of the European holdings in the portfolio having end markets that are further East. The portfolio has limited direct exposure to European banks, with Svenska Handelsbanken, a traditional well capitalised Swedish bank, now being the only such holding. There is also limited exposure to other businesses which depend on a revival of the Western consumer. A sharp recovery in lower quality financials remains a risk to the portfolio, but we remain committed to our style. The portfolio comprises a diverse range of companies, but on the whole the attributes of a strong industry background, durable competitive advantage, good management and a healthy balance sheet are important aspects of all the holdings that should stand the portfolio in good stead.

Investment Strategies used to manage the Fund

Baillie Gifford is a growth manager with a bottom up approach to stock picking. We aim to invest in companies that will generate sustainable earnings growth above that of the market over the long term. In determining the potential of a company, we analyse industry background, competitive advantage, management attitudes and financial strength, and finally we consider valuation. We meet the

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management of the companies within our investment universe and revisit the investment case for the portfolio’s holdings on a regular basis to ensure that our expectations are being met.

The ACWI ex US Alpha Portfolio Construction Group is responsible for the overall strategy and stock selection process. They meet regularly to discuss both buy and sell ideas and the level of conviction for existing holdings. We will continue to monitor the long term prospects for the Fund’s holdings and make changes where appropriate.

Our focus has not changed; we aim to identify exciting growth businesses in a position to significantly grow their earnings and cash flow over the long term.

Outlook

We have three main areas of disagreement with the current gloomy consensus:

1.	A resolution to the European crisis is hard to predict, but we believe that there is significant commitment to the eurozone, and that the southern European countries are not without redemption.
2.	Evidence of a recovery in the US may be starting to emerge.
3.	Developing economies such as China continue to be much better resourced than their Western counterparts. There are durable long term forces at play based on urbanisation, emulation and education. Whilst the year ahead will no doubt present further political and economic challenges, we believe that there are many exciting opportunities for the patient investor.

Fund Performance for periods ended 12/31/11 (Average Annual Total Returns)
	One Year			Since Inception (February 7, 2008)
The International Equity Fund Class 2		-11.94	%		-2.19	%
MSCI ACWI (ex US) Index		-13.33	%		-5.34	%

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Management Discussion

The Baillie Gifford EAFE Fund

Market Conditions and Review of performance during 2011

Markets in 2011 can be characterised by raised levels of volatility against a backdrop of pessimistic news coverage. The first half of 2011 brought several newsworthy events: Chinese drought, Australian floods, widespread political unrest in the Arab world and the Eastern Japanese Earthquake. Despite these events international markets posted positive absolute returns over the same period. In the second half of the year markets panicked over the ongoing peripheral European debt worries. Share prices fell indiscriminately as many market participants predicted doomsday scenarios for Europe and the resultant pain that would be felt by the global economy. Negative sentiment ultimately dominated and international markets fell during 2011.

The EAFE Fund Class 2 produced a return of -11.70% during 2011, slightly outperforming the MSCI EAFE Index which returned -11.73% for the year.

We are excited by increasingly rapid developments in the world of technology. The pace of change in the world seems to us to be increasing; the implications of new technologies, network effects, tipping points and non-linear growth profiles for companies feature strongly in our investment discussions. Baidu and Rakuten are two companies we believe benefit from these trends and have observed particularly good returns over the year. Baidu is China’s leading Internet search engine. It’s an innovative company, working in a structurally growing industry. It works with, rather than against the Chinese government, and its dominant market position is advantageous to the authorities in monitoring/controlling the online space. The stock has performed well over the year as the company exceeded its expectations, almost doubling profits. Rakuten is a Japanese e-commerce conglomerate whose main business is an online shopping mall called “Ichiba”. Its strong performance has been driven by increased online spending in its home market.

In the third quarter Hewlett-Packard made a bid for Autonomy, a UK software specialist held by the Fund. Following Autonomy’s announcement that they intended to accept the bid, we sold the shares at a significant premium.

However, it wasn’t all good news in the technology sector. Nintendo was our greatest source of disappointment. Its ongoing insistence that its games should only be played on its own hardware suggest it may lose out to the Smartphone revolution that is transforming gaming. We also suffered setbacks in our alternative energy holdings Vestas Windsystems, and SMA Solar, as falling government subsidies, near term excess supply and rising Chinese competition made conditions difficult in the short term at least.

Investment Strategies used to manage the Fund

Baillie Gifford is a growth manager with a bottom up approach to stock picking. We aim to invest in companies that will generate sustainable earnings growth above the market over the long term. In determining the potential of a company, we analyse industry background, competitive advantage, management attitudes and financial strength, and finally we consider valuation. We meet the management of the companies within our investment universe and revisit the investment case for the portfolio’s holdings on a regular basis to ensure that our expectations are being met.

The EAFE Alpha Portfolio Construction Group is responsible for the overall strategy and stock selection process. They meet regularly to discuss both buy and sell ideas and the level of conviction in their continuing holdings.

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Our focus has not changed; we aim to identify exciting growth businesses in a position to significantly grow their earnings and cash flow over the long term.

Outlook

We have three main areas of disagreement with the current gloomy consensus:

1.	A resolution to the European crisis is hard to predict, but we believe that there is significant commitment to the eurozone, and that the southern European countries are not without redemption.
2.	Evidence of a recovery in the US may be starting to emerge.
3.	Developing economies such as China continue to be much better resourced than their Western counterparts. There are durable long term forces at play based on urbanisation, emulation and education. Whilst the year ahead will no doubt present further political and economic challenges, we believe that there are many exciting opportunities for the patient investor.

Fund Performance for periods ended 12/31/11 (Average Annual Total Returns)
	One Year			Since Inception (March 6, 2008)
The EAFE Fund Class 2		-11.70	%		-3.05	%
MSCI EAFE Index		-11.73	%		-6.09	%

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Management Discussion

The Baillie Gifford EAFE Choice Fund

Market Conditions and Review of performance during 2011

Markets in 2011 can be characterised by raised levels of volatility against a backdrop of pessimistic news coverage. The first half of 2011 brought several newsworthy events: Chinese drought, Australian floods, widespread political unrest in the Arab world and the Eastern Japanese Earthquake. Despite these events international markets posted positive absolute returns over the same period. In the second half of the year markets panicked over the ongoing peripheral European debt worries. Share prices fell indiscriminately as many market participants predicted doomsday scenarios for Europe and the resultant pain that would be felt by the global economy. Negative sentiment ultimately dominated and international markets fell during 2011.

The EAFE Choice Fund Class 2 produced a return of -12.54% during 2011, underperforming the MSCI EAFE Index which returned -11.73% for the year.

Detractors from relative performance included Billabong, the Australian surf and apparel manufacturer/retailer. The Australian retail sector has had a difficult year with the expensive cost of living as well as the strong Australian dollar driving customers into increasing their purchases from abroad. Adverse weather conditions have also heavily impacted sales during the year. Another detractor was Olympus, the Japanese manufacturer of cameras and endoscopes. We still believe that the medical business in particular remains a very attractive asset and we still see a strong core business but the situation is fast moving and there are naturally potential developments which could lead us to revise our opinion.

The top contributor to relative performance over the year was the UK property website Rightmove, which now has the highest market share of any property website in the UK. The next top two contributors we sold during the year. The increased valuation being applied to Japan Tobacco led us to dispose of the fund’s holding towards the end of the year. During the Fall, we also sold the fund’s holding in Autonomy, the UK-based company which designs sophisticated search software for corporate and government customers. The company announced an agreed takeover by Hewlett Packard. Though we regretted no longer being able to benefit from exposure to such an interesting growth company, the large premium offered to Autonomy shareholders provided some comfort.

We hope we are suitably paranoid about the dangers of naivety and are conscious that our investments cannot operate in a bubble, sheltered from some potentially important macro developments. Nevertheless, from our perspective, much of the recent gloomy market commentary has often overshadowed what we felt were decent trading updates and encouraging comments from the management of the companies in the portfolio.

Investment Strategies used to manage the Fund

Baillie Gifford is a growth manager with a bottom up approach to stock picking. We aim to invest in companies that will generate sustainable earnings growth above the market over the long term. In determining the potential of a company, we analyse industry background, competitive advantage, management attitudes and financial strength, and finally we consider valuation. We meet the management of the companies within our investment universe and revisit the investment case for the portfolio’s holdings on a regular basis to ensure that our expectations are being met.

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The International Focus Portfolio Construction Group (PCG) is responsible for the overall strategy and stock selection process used to select investments for the fund. The PCG meets regularly to discuss both buy and sell ideas and the level of conviction in existing holdings.

Our focus remains as it always has; to identify exciting growth businesses in a position to grow their earnings and cash flow over the long term.

Outlook
We have three main areas of disagreement with the current gloomy consensus:

1.	A resolution to the European crisis is hard to predict, but we believe that there is significant commitment to the eurozone, and that the southern European countries are not without redemption.
2.	Evidence of a recovery in the US may be starting to emerge.
3.	Developing economies such as China continue to be much better resourced than their Western counterparts. There are durable long term forces at play based on urbanisation, emulation and education. Whilst the year ahead will no doubt present further political and economic challenges, we believe that there are many exciting opportunities for the patient investor.

Fund Performance for periods ended 12/31/11 (Average Annual Total Returns)
	One Year			Since Inception (December 17, 2009)*
The EAFE Choice Fund Class 2		-12.54	%		1.24	%
MSCI EAFE Index		-11.73	%		-2.27	%

*          Class 2 had no shareholders from January 16, 2010 to March 24, 2010. All shares of this class were redeemed at $10.48 on January 19, 2010. New shares were issued at $10.20 on March 25, 2010.

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Management Discussion

The Baillie Gifford Emerging Markets Fund

Market Conditions and Review of performance during 2011

For the year ended December 31, 2011, The Emerging Markets Fund Class III fell 20.20% while its benchmark, the MSCI Emerging Markets Index, fell 18.17%.

For the first half of the year the MSCI Emerging Markets Index was almost unchanged, however, as market concerns over the European debt crisis intensified, coupled with renewed fears over slowing growth in a number of emerging countries, the Emerging Markets index fell dramatically during the third quarter and failed to recover sufficiently for the remainder of the year. Countries perceived to have strong domestic economies such as Indonesia and Malaysia were among the top performing markets, while those with heavy export exposure, such as China and Taiwan, were among the worst.

Politics played a significant role throughout the year. Egypt suffered from its popular uprising to end the year as the worst performing country in the index, while nationwide protests against the recent Duma elections in Russia helped reverse the country’s strong first half performance. In Europe, politicians’ inability to find a workable solution to the region’s debt crisis had negative ramifications for a number of Eastern European countries, with Poland and Hungary the worst performers. Finally, political bureaucracy coupled with concerns over its trade deficit and currency, continued to weigh on the Indian market which fell nearly 40% over the year.

Overall the largest detractor from relative performance was being underweight in a number of sectors perceived to be defensive by the market. Telecommunications is the most notable example, with the fund’s underweight position in China Mobile the single biggest hindrance to relative returns.

Despite holdings in Baidu and China Shenhua Energy contributing to relative performance over the year, stock selection overall in China detracted from relative performance. Most notable was the fund’s exposure to the Chinese rail companies CSR Corp and China Railway Construction. The sector was hit by a trio of issues: a corruption scandal at the Ministry of Rail, July’s high speed rail crash and concerns over future rail investment.

On the positive side, a number of the fund’s smaller oil and gas exploration companies added to relative performance with Tullow Oil being one of the top contributors. Operational performance throughout the year was strong, with the company’s large, and potentially transformational drilling result at their Zaedyus exploration well in French Guiana, being a major catalyst for the share price.

Stock selection in South Korea was the largest contributor to relative performance by country, driven by Hyundai Glovis and Samsung Electronics. Glovis, the logistics business of the Hyundai Motor Group, saw its shares rise on the back of solid auto sales at Hyundai and Kia, and further market share gains within the Hyundai chaebol. Samsung Electronic’s results continue to be very strong, particularly in mobile devices and components where Samsung’s sales have been exploding, the company recently overtaking Apple to become the world’s largest vendor of smartphones with a c.25% global market share.

Investment Strategies used to manage the Fund

Baillie Gifford is a growth manager with a bottom up approach to stock picking. We aim to invest in companies that will generate sustainable earnings growth above the market over the long term. In determining the potential of a company, we analyse industry background, competitive advantage, management attitudes and financial strength, and finally we consider valuation. We meet the

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management of the companies within our investment universe and revisit the investment case for the portfolio’s holdings on a regular basis to ensure that our expectations are being met.

The Emerging Markets investment team is responsible for the overall strategy and stock selection process, led by the most senior investment managers. The team meets regularly to discuss both buy and sell ideas and to determine the level of conviction in the Fund’s holdings.

Outlook

The fundamentals underpinning growth in the emerging markets remain intact, and the Fund retains a strong pro cyclical growth bias to reflect, and benefit from this belief. During a year of heightened risk aversion and volatility, such a position has not been conducive to strong relative performance. The companies we invest in continue to exhibit strong operational performance and are likely to be major beneficiaries as we move from a period of rate tightening to loosening in emerging economies. Valuations are at the bottom of their long term norms and with fundamental structural attractions, the emerging markets are a compelling place to invest for those with long term time horizons.

Fund Performance for periods ended 12/31/11 (Average Annual Total Returns)
	One Year			Five Year			Since Inception (April 4, 2003)
The Emerging Markets Fund Class III		-20.20	%		3.87	%		19.25	%
MSCI Emerging Markets Index		-18.17	%		5.15	%		17.04	%

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Management Discussion

The Global Alpha Equity Fund

Market Conditions and Review of performance during 2011

Not applicable: The Global Alpha Equity Fund was funded in November 2011.

Investment Strategies used to manage the Fund

Baillie Gifford is a growth manager with a bottom up approach to stock picking. We aim to invest in companies that will generate sustainable earnings growth above the market over the long term. In determining the potential of a company, we analyse industry background, competitive advantage, management attitudes and financial strength, and finally we consider valuation. We meet the management of the companies within our investment universe and revisit the investment case for the portfolio’s holdings on a regular basis to ensure that our expectations are being met.

The Global Alpha Portfolio Review Group (a small group of senior investors) is responsible for bringing ideas to the three Global Alpha Investment Managers. After considering debate within a wider group, the three investment managers (who are responsible for the overall strategy and stock selection process) typically pose a series of questions for each potential holding:

• How does the business compare globally?

• What does the stock bring to the portfolio?

• Where do we differ from the market?

Only when a stock stands up against all three questions will it go forward for inclusion.

We look to make long-term investments in well-managed businesses which enjoy sustainable competitive advantages. Our core belief is that share prices ultimately follow earnings.

Outlook

We have three main areas of disagreement with the current gloomy consensus:

1.	A resolution to the European crisis is hard to predict, but we believe that there is significant commitment to the eurozone, and that the southern European countries are not without redemption.
2.	Evidence of a recovery in the US may be starting to emerge.
3.	Developing economies such as China continue to be much better resourced than their Western counterparts. There are durable long term forces at play based on urbanisation, emulation and education. Whilst the year ahead will no doubt present further political and economic challenges, we believe that there are many exciting opportunities for the patient investor.

Page 9

Fund Expenses (unaudited)

As a shareholder of the Baillie Gifford International Equity Fund, the Baillie Gifford EAFE Fund, the Baillie Gifford EAFE Choice Fund, the Baillie Gifford Emerging Markets Fund and/or the Baillie Gifford Global Alpha Equity Fund (together, the “Funds”), you incur two types of costs: (1) transaction costs, which may include purchase premiums and redemption fees and (2) ongoing costs, including management fees, shareholder service 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 the 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, 2011 to December 31, 2011.

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 the period. Simply divide the account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of each table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as purchase premiums and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

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Fund Expenses (unaudited)(continued)

	Beginning Account Value 7/01/11		Ending Account Value 12/31/11		Annualized Expense Ratio Based on the Period 7/01/11 to 12/31/11			Expenses Paid During the Period 7/01/11 to 12/31/11
Baillie Gifford International Equity Fund - Class 1
Actual	$	1,000.00	$	850.26		0.84	%	$	3.92
Hypothetical (5% return before expenses)	$	1,000.00	$	1,020.97		0.84	%	$	4.28
Baillie Gifford International Equity Fund - Class 2
Actual	$	1,000.00	$	850.65		0.67	%	$	3.13
Hypothetical (5% return before expenses)	$	1,000.00	$	1,021.83		0.67	%	$	3.41
Baillie Gifford International Equity Fund - Class 3
Actual	$	1,000.00	$	851.04		0.59	%	$	2.75
Hypothetical (5% return before expenses)	$	1,000.00	$	1,022.23		0.59	%	$	3.01
Baillie Gifford International Equity Fund - Class 4
Actual	$	1,000.00	$	851.55		0.56	%	$	2.61
Hypothetical (5% return before expenses)	$	1,000.00	$	1,022.38		0.56	%	$	2.85
Baillie Gifford EAFE Fund - Class 1
Actual	$	1,000.00	$	835.42		0.79	%	$	3.65
Hypothetical (5% return before expenses)	$	1,000.00	$	1,021.22		0.79	%	$	4.02
Baillie Gifford EAFE Fund - Class 2
Actual	$	1,000.00	$	835.60		0.61	%	$	2.82
Hypothetical (5% return before expenses)	$	1,000.00	$	1,022.13		0.61	%	$	3.11
Baillie Gifford EAFE Fund - Class 3
Actual	$	1,000.00	$	836.52		0.54	%	$	2.50
Hypothetical (5% return before expenses)	$	1,000.00	$	1,022.48		0.54	%	$	2.75
Baillie Gifford EAFE Fund - Class 4
Actual	$	1,000.00	$	836.11		0.51	%	$	2.36
Hypothetical (5% return before expenses)	$	1,000.00	$	1,022.63		0.51	%	$	2.60
Baillie Gifford EAFE Choice Fund - Class 2
Actual	$	1,000.00	$	839.54		0.66	%	$	3.06
Hypothetical (5% return before expenses)	$	1,000.00	$	1,021.88		0.66	%	$	3.36
Baillie Gifford EAFE Choice Fund - Class 4
Actual	$	1,000.00	$	840.44		0.56	%	$	2.60
Hypothetical (5% return before expenses)	$	1,000.00	$	1,022.38		0.56	%	$	2.85
Baillie Gifford Emerging Markets Fund - Class III
Actual	$	1,000.00	$	823.57		0.72	%	$	3.31
Hypothetical (5% return before expenses)	$	1,000.00	$	1,021.58		0.72	%	$	3.67
Baillie Gifford Global Alpha Equity Fund - Class 3 (a)
Actual	$	1,000.00	$	987.49		0.64	%	$	0.80
Hypothetical (5% return before expenses)	$	1,000.00	$	1,021.98		0.64	%	$	3.26

^(a) Commencement of investment operations is November 15, 2011.

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Fund Expenses (unaudited)(concluded)

Expenses are calculated using the annualized expense ratio for the Funds, which represents the ongoing expenses as a percentage of net assets for the six-months ended 12/31/11. 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 days in the most recent fiscal half-year; and then dividing that result by the number of days in the calendar year. Expense ratios for the most recent fiscal half-year may differ from expense ratios based on the one-year data in the financial highlights.

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INDUSTRY DIVERSIFICATION TABLE
December 31, 2011 (unaudited)	Baillie Gifford International Equity Fund

	Value		% of Total Net Assets
Airlines	$	14,039,935		1.1	%
Apparel		35,158,331		2.8
Auto Manufacturers		9,343,497		0.7
Banks		112,743,808		8.8
Beverages, Food & Tobacco		55,553,798		4.3
Biotechnology		16,977,666		1.3
Commercial Services		76,691,551		6.0
Construction & Building Materials		30,708,876		2.4
Distribution/Wholesale		27,746,621		2.2
Diversified Financial Services		78,168,888		6.1
Diversified Industrials		21,990,053		1.7
Electronic & Electrical Equipment		72,328,973		5.7
Engineering & Construction		8,014,083		0.6
Engineering & Machinery		72,753,294		5.7
Food Producers & Processors		98,054,326		7.7
Healthcare - Products		31,706,676		2.5
Insurance		23,193,630		1.8
Internet		61,545,394		4.8
Investment Companies		5,830,494		0.5
Media & Photography		22,279,748		1.7
Mining & Metals		116,616,739		9.1
Office/Business Equipment		16,537,956		1.3
Oil & Gas		134,778,786		10.5
Real Estate		10,427,038		0.8
Retailers - General		26,442,195		2.1
Semiconductors		33,885,695		2.6
Software		21,595,400		1.7
Transportation		21,652,606		1.7
Travel & Leisure		3,158,807		0.3
Total Value of Investments		1,259,924,864		98.5
Other assets less liabilities		19,358,451		1.5
Net Assets	$	1,279,283,315		100.0	%

The accompanying notes are an integral part of the financial statements.

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PORTFOLIO OF INVESTMENTS
December 31, 2011	Baillie Gifford International Equity Fund

	Shares		Value
COMMON STOCKS - 95.9%
ARGENTINA - 2.4%
MercadoLibre, Inc.		272,600	$	21,682,604
YPF SA ADR		274,800		9,530,064
				31,212,668
AUSTRALIA - 3.9%
Brambles Ltd.		3,237,446		23,637,392
Cochlear Ltd.		218,512		13,877,914
Woolworths Ltd.		502,947		12,909,808
				50,425,114
BELGIUM - 0.7%
Groupe Bruxelles Lambert SA		136,495		9,080,245
BERMUDA - 1.4%
Seadrill Ltd.		531,233		17,716,126
BRAZIL - 2.6%
BM&F Bovespa SA		1,663,200		8,738,432
OGX Petroleo e Gas Participacoes SA (a)		1,328,000		9,697,017
Petroleo Brasileiro SA ADR		624,700		15,523,795
				33,959,244
CANADA - 5.6%
Cenovus Energy, Inc.		294,857		9,791,423
Eldorado Gold Corp.		922,018		12,688,778
Fairfax Financial Holdings Ltd.		67,018		28,748,502
IAMGOLD Corp.		614,268		9,755,933
Ritchie Bros. Auctioneers, Inc.		482,463		10,633,526
				71,618,162
CHINA - 8.6%
Baidu, Inc. ADR (a)		159,150		18,536,201
Cheung Kong Holdings Ltd.		879,000		10,427,038
China Shenhua Energy Co., Ltd., Class H		3,583,500		15,496,020
Hang Seng Bank Ltd.		1,087,300		12,879,514
Hong Kong Exchanges and Clearing Ltd.		1,221,500		19,436,505
Kunlun Energy Co., Ltd.		12,322,000		17,473,436
Pacific Basin Shipping Ltd.		2,336,000		932,701
Want Want China Holdings Ltd.		14,492,000		14,435,210
				109,616,625
DENMARK – 2.9%
A P Moller - Maersk A/S, B Shares		1,373		9,031,150
DSV A/S		654,099		11,688,755
Novozymes A/S, B Shares		551,080		16,977,666
				37,697,571
FINLAND - 2.5%
Kone Oyj, B Shares		413,989		21,432,320
Sampo Oyj, A Shares		421,010		10,414,108
				31,846,428
FRANCE - 3.7%
CFAO		274,254		9,278,415
Compagnie Generale d’Optique Essillor International SA		252,921		17,828,762
Edenred		509,039		12,486,715
Lafarge SA		226,404		7,925,760
				47,519,652

The accompanying notes are an integral part of the financial statements.

Page 14

PORTFOLIO OF INVESTMENTS (continued)
December 31, 2011	Baillie Gifford International Equity Fund

	Shares		Value
GERMANY - 1.6%
Aixtron SE NA		392,901	$	4,993,438
Deutsche Boerse AG (a)		292,951		15,332,376
				20,325,814
INDIA - 0.4%
Infrastructure Development Finance Co., Ltd.		3,384,707		5,830,494
IRELAND - 2.9%
CRH Plc.		533,265		10,584,511
James Hardie Industries SE CDI		1,749,753		12,198,605
Ryanair Holdings Plc. ADR (a)		503,946		14,039,935
				36,823,051
JAPAN - 9.1%
Canon, Inc.		375,800		16,537,956
Fast Retailing Co., Ltd.		104,700		19,045,436
Inpex Corp.		1,976		12,441,347
Mitsui & Co., Ltd.		841,000		13,034,865
Olympus Corp.		551,300		7,246,780
Rakuten, Inc. (a)		19,823		21,326,589
Shimano, Inc.		64,900		3,158,807
SMC Corp.		93,100		14,978,463
Trend Micro, Inc. (a)		294,500		8,781,856
				116,552,099
NETHERLANDS - 2.8%
Heineken Holding NV		365,187		14,924,006
Unilever NV CVA		600,039		20,631,424
				35,555,430
NORWAY - 0.6%
Aker Solutions ASA		764,565		8,014,083
PERU - 1.4%
Credicorp Ltd.		159,814		17,494,838
PORTUGAL - 0.4%
Galp Energia, SGPS, SA, B Shares		345,490		5,076,114
RUSSIA - 2.0%
Magnit OJSC GDR Reg S		553,179		11,687,595
Sberbank of Russia ADR (a)		610,500		6,038,200
X5 Retail Group NV GDR Reg S (a)		337,276		7,687,917
				25,413,712
SINGAPORE - 2.6%
DBS Group Holdings Ltd.		1,607,219		14,266,130
United Overseas Bank Ltd.		1,624,483		19,117,800
				33,383,930
SOUTH AFRICA - 2.5%
Massmart Holdings Ltd.		453,482		9,475,863
Naspers Ltd., N Shares		510,050		22,279,748
				31,755,611
SOUTH KOREA - 3.1%
Hyundai Mobis (a)		36,775		9,343,496
Samsung Electronics Co., Ltd.		32,908		30,270,028
				39,613,524

The accompanying notes are an integral part of the financial statements.

Page 15

PORTFOLIO OF INVESTMENTS (continued)
December 31, 2011	Baillie Gifford International Equity Fund

	Shares		Value
SPAIN - 1.3%
Inditex SA		197,378	$	16,112,895
SWEDEN - 5.0%
Atlas Copco AB, B Shares		1,919,816		36,342,511
Svenska Handelsbanken AB, A Shares		1,056,721		27,691,984
				64,034,495
SWITZERLAND - 3.2%
Nestle SA		703,914		40,421,222
TAIWAN - 4.4%
Hon Hai Precision Industry Co., Ltd. GDR Reg S		2,129,276		11,659,277
MediaTek, Inc.		1,658,371		15,179,076
Taiwan Semiconductor Manufacturing Co., Ltd. ADR		2,237,975		28,892,257
				55,730,610
TURKEY - 2.2%
Anadolu Efes Biracilik ve Malt Sanayii AS		1,057,861		12,720,594
BIM Birlesik Magazalar AS		392,851		10,878,875
Turkiye Garanti Bankasi A/S		1,426,192		4,433,840
				28,033,309
UNITED KINGDOM - 16.1%
Amlin Plc.		2,624,000		12,779,522
Antofagasta Plc.		853,654		16,144,654
BG Group Plc.		770,361		16,457,588
BHP Billiton Plc.		478,707		13,995,217
British American Tobacco Plc.		588,305		27,909,199
Capita Group Plc. (The)		1,164,670		11,357,401
Experian Plc.		1,366,679		18,576,517
Hargreaves Lansdown Plc.		885,000		5,913,073
Premier Farnell Plc.		2,853,058		7,973,812
Rio Tinto Plc.		536,200		26,191,318
Sage Group Plc. (The)		2,804,251		12,813,544
Tullow Oil Plc.		969,802		21,071,876
Wolseley Plc.		444,800		14,711,756
				205,895,477
Total Common Stocks
(cost $1,249,656,486)				1,226,758,543
PREFERRED STOCKS - 2.6%
BRAZIL - 2.6%
Itau Unibanco Holding SA ADR		583,055		10,821,501
Vale SA ADR		1,084,700		22,344,820
Total Preferred Stocks
(cost $37,816,745)				33,166,321
TOTAL INVESTMENTS - 98.5%
(cost $1,287,473,231)				1,259,924,864
Other assets less liabilities - 1.5%				19,358,451
NET ASSETS - 100.0%			$	1,279,283,315
(a) Non-income producing security.
ADR - American Depositary Receipt.
CDI – Chess Depository Interest.

The accompanying notes are an integral part of the financial statements.

Page 16

PORTFOLIO OF INVESTMENTS (concluded)
December 31, 2011	Baillie Gifford International Equity Fund

GDR - Global Depositary Receipt.

Reg S - is a safe harbor that defines when an offering of securities will be deemed to come to rest abroad and therefore is not subject to the registration obligations imposed under Section 5 of the 1933 Act. The regulation includes two safe harbor provisions: an issuer safe harbor and a resale safe harbor. In each case, the regulation demands that offers and sales of the securities be made outside the United States and that no offering participant (which includes the issuer, the banks assisting with the offer and their respective affiliates) engage in “directed” selling efforts. In the case of issuers for whose securities there is substantial U.S. market interest, the regulation also requires that no offers and sales be made to U.S. persons (including U.S. persons physically located outside the United States).

The accompanying notes are an integral part of the financial statements.

Page 17

STATEMENT OF ASSETS AND LIABILITIES
December 31, 2011	Baillie Gifford International Equity Fund

ASSETS
Investments, at value (cost $1,287,473,231)	$	1,259,924,864
Cash		10,772,263
Foreign cash, at value (cost $11,885,955)		11,501,687
Dividends receivable		1,071,873
Tax reclaims receivable		530,083
Other assets		3,541
Total Assets		1,283,804,311
LIABILITIES
Payable for investments purchased		2,462,180
Management fee payable		890,828
Servicing fee payable		806,414
Distributions payable		186,516
Accrued expenses		175,058
Total Liabilities		4,520,996
NET ASSETS	$	1,279,283,315
COMPOSITION OF NET ASSETS
Paid-in capital	$	1,319,891,707
Distributions in excess of net investment income		(4,311,735	)
Accumulated net realized loss on investments and foreign currency transactions		(8,340,562	)
Net unrealized depreciation in value of investments and foreign currencies		(27,956,095	)
	$	1,279,283,315
NET ASSET VALUE, PER SHARE
Class 1 ($63,867,829 / 7,386,655 shares outstanding),
unlimited authorized, no par value	$	8.65
Maximum Purchase Price Per Share (Note D)	$	8.67
Minimum Redemption Price Per Share (Note D)	$	8.64
Class 2 ($831,065,435 / 96,351,045 shares outstanding),
unlimited authorized, no par value	$	8.63
Maximum Purchase Price Per Share (Note D)	$	8.65
Minimum Redemption Price Per Share (Note D)	$	8.62
Class 3 ($367,326,527 / 42,088,429 shares outstanding),
unlimited authorized, no par value	$	8.73
Maximum Purchase Price Per Share (Note D)	$	8.75
Minimum Redemption Price Per Share (Note D)	$	8.72
Class 4 ($17,023,524 / 1,909,237 shares outstanding),
unlimited authorized, no par value	$	8.92
Maximum Purchase Price Per Share (Note D)	$	8.94
Minimum Redemption Price Per Share (Note D)	$	8.91

The accompanying notes are an integral part of the financial statements.

Page 18

STATEMENT OF OPERATIONS
For the Year Ended December 31, 2011	Baillie Gifford International Equity Fund

INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $1,760,173)	$	23,772,620
Interest		1,354
Total Investment Income		23,773,974
EXPENSES
Management fee (Note B)		2,979,600
Shareholder Servicing fees - Class 1 Shares (Note B)		316,544
Shareholder Servicing fees - Class 2 Shares (Note B)		1,622,323
Shareholder Servicing fees - Class 3 Shares (Note B)		594,275
Shareholder Servicing fees - Class 4 Shares (Note B)		34,200
Fund Accounting		487,004
Custody		270,468
Legal		89,967
Professional fees		41,030
Transfer Agency		31,147
Trustees’ fees		24,001
Insurance		8,103
Miscellaneous		9,578
Total Expenses		6,508,240
Net Investment Income		17,265,734
REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Net realized loss from:
Investments		(4,461,760	)
Foreign currency transactions		(443,238	)
		(4,904,998	)
Net change in unrealized depreciation on:
Investments		(154,502,583	)
Translation of assets and liabilities in foreign currencies		(527,909	)
		(155,030,492	)
Net realized and unrealized loss on investments and foreign currency transactions		(159,935,490	)
NET DECREASE IN NET ASSETS FROM OPERATIONS	$	(142,669,756	)

The accompanying notes are an integral part of the financial statements.

Page 19

STATEMENTS OF CHANGES IN NET ASSETS Baillie Gifford International Equity Fund

	For the Year Ended December 31, 2011			For the Year Ended December 31, 2010
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income	$	17,265,734		$	5,789,617
Net realized gain (loss) from investments and foreign currency transactions		(4,904,998	)		8,814,714
Net change in unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies		(155,030,492	)		70,633,112
Net increase (decrease) in net assets from operations		(142,669,756	)		85,237,443
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class 1		(778,756	)		(1,213,165	)
Class 2		(11,585,292	)		(7,775,994	)
Class 3		(5,308,632	)		(2,843,440	)
Class 4		(245,693	)		(383,650	)
Capital gains:
Class 1		(68,430	)		—
Class 2		(888,373	)		—
Class 3		(387,865	)		—
Class 4		(17,595	)		—
Total Dividends and Distributions		(19,280,636	)		(12,216,249	)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net proceeds from shares subscribed:
Class 1		3,193,600			58,565,548
Class 2		569,743,090			197,769,223
Class 3		264,227,433			128,255,931
Class 4		—			18,009,486
Purchase premiums:
Class 1		92,442			90,426
Class 2		770,898			346,429
Class 3		413,391			98,509
Class 4		26,649			13,573
Redemption fees:
Class 1		661			4,011
Class 2		5,972			16,205
Class 3		3,008			2,837
Class 4		187			983
Dividends and distributions reinvested:
Class 1		660,671			980,900
Class 2		12,473,665			7,775,994
Class 3		5,696,497			2,843,440
Class 4		263,288			383,650
Cost of shares redeemed:
Class 1		(2,503,755	)		(61,133,453	)
Class 2		(107,151,339	)		(11,517,276	)
Class 4		(1,444,465	)		—
Increase in Net Assets from Transactions in Shares of Beneficial Interest		746,471,893			342,506,416
Total Increase in Net Assets		584,521,501			415,527,610
NET ASSETS
Beginning of year		694,761,814			279,234,204
End of year (including distributions in excess of net investment income of $4,311,735 and $3,215,796, respectively)	$	1,279,283,315		$	694,761,814

The accompanying notes are an integral part of the financial statements.

Page 20

FINANCIAL HIGHLIGHTS Baillie Gifford International Equity Fund

Selected data for a Class 1 Share outstanding throughout each period:

	For the Year Ended December 31, 2011			For the Year Ended December 31, 2010			For the Year Ended December 31, 2009			For the Period July 1, 2008(a) through December 31, 2008
Net asset value, beginning of period	$	9.97		$	8.86		$	6.07		$	10.52
From Investment Operations
Net investment income(b)		0.17			0.12			0.16			0.03
Net realized and unrealized gain (loss) on investments and foreign currency transactions		(1.38	)		1.15			2.70			(4.42	)
Net increase (decrease) in net asset value from investment operations		(1.21	)		1.27			2.86			(4.39	)
Dividends and Distributions to Shareholders
Dividends from net investment income		(0.11	)		(0.17	)		(0.08	)		(0.08	)
Distributions from net realized gain on investments		(0.01	)		—			—			—
Total Dividends and Distributions		(0.12	)		(0.17	)		(0.08	)		(0.08	)
Proceeds from Purchase Premiums and Redemption Fees(b)		0.01			0.01			0.01			0.02
Net asset value, end of period	$	8.65		$	9.97		$	8.86		$	6.07
Total Return
Total investment return based on net asset value(c)		(12.07	)%		14.44	%		47.24	%		(41.51	)%
Ratios/Supplemental Data
Net assets, end of period (000’s omitted)	$	63,868		$	72,366		$	64,512		$	63,086
Ratio of net expenses to average net assets, after waiver		0.84	%		0.86	%		0.93	%(d)		0.90	%*(d)
Ratio of net expenses to average net assets, before waiver		0.84	%		0.86	%		0.94	%(d)		1.05	%*(d)
Ratio of net investment income to average net assets		1.72	%		1.36	%		2.17	%		1.14	%*
Portfolio turnover rate		11	%		24	%		17	%		71	%

*	Annualized.
(a)	Commencement of investment operations.
(b)	Calculated based upon average shares outstanding during the period.
(c)	Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions, if any, at net asset value during the period, and redemption on the last day of the period. Total return is not annualized for periods less than one year.
(d)	Baillie Gifford Overseas Limited had contractually agreed to waive its fees and/or bear other expenses through March 31, 2009 to the extent that such Fund’s total annual operating expenses (excluding interest, taxes and extraordinary expenses) exceeded 0.90% for Class 1 Shares.

The accompanying notes are an integral part of the financial statements.

Page 21

FINANCIAL HIGHLIGHTS (continued) Baillie Gifford International Equity Fund

Selected data for a Class 2 Share outstanding throughout each period:

	For the Year Ended December 31, 2011			For the Year Ended December 31, 2010			For the Year Ended December 31, 2009			For the Period February 7, 2008(a) through December 31, 2008
Net asset value, beginning of period	$	9.95		$	8.84		$	6.07		$	10.00
From Investment Operations
Net investment income(b)		0.16			0.13			0.09			0.16
Net realized and unrealized gain (loss) on investments and foreign currency transactions		(1.36	)		1.15			2.80			(4.03	)
Net increase (decrease) in net asset value from investment operations		(1.20	)		1.28			2.89			(3.87	)
Dividends and Distributions to Shareholders
Dividends from net investment income		(0.12	)		(0.18	)		(0.13	)		(0.08	)
Distributions from net realized gain on investments		(0.01	)		—			—			—
Total Dividends and Distributions		(0.13	)		(0.18	)		(0.13	)		(0.08	)
Proceeds from Purchase Premiums and Redemption Fees(b)		0.01			0.01			0.01			0.02
Net asset value, end of period	$	8.63		$	9.95		$	8.84		$	6.07
Total Return
Total investment return based on net asset value(c)		(11.94	)%		14.65	%		47.76	%		(38.51	)%
Ratios/Supplemental Data
Net assets, end of period (000’s omitted)	$	831,065		$	447,232		$	214,722		$	50,756
Ratio of net expenses to average net assets, after waiver		0.67	%		0.68	%		0.70	%(d)		0.72	%*(d)
Ratio of net expenses to average net assets, before waiver		0.67	%		0.68	%		0.70	%(d)		0.94	%*(d)
Ratio of net investment income to average net assets		1.74	%		1.43	%		1.12	%		1.84	%*
Portfolio turnover rate		11	%		24	%		17	%		71	%

*	Annualized.
(a)	Commencement of investment operations.
(b)	Calculated based upon average shares outstanding during the period.
(c)	Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions, if any, at net asset value during the period, and redemption on the last day of the period. Total return is not annualized for periods less than one year.
(d)	Baillie Gifford Overseas Limited had contractually agreed to waive its fees and/or bear other expenses through March 31, 2009 to the extent that such Fund’s total annual operating expenses (excluding interest, taxes and extraordinary expenses) exceeded 0.72% for Class 2 Shares.

The accompanying notes are an integral part of the financial statements.

Page 22

FINANCIAL HIGHLIGHTS (continued)	Baillie Gifford International Equity Fund
Selected data for a Class 3 Share outstanding throughout each period:

	For the Year Ended December 31, 2011			For the Period September 1, 2010(a) through December 31, 2010
Net asset value, beginning of period	$	10.06		$	8.53
From Investment Operations
Net investment income(b)		0.17			0.02
Net realized and unrealized gain (loss) on investments and foreign currency transactions		(1.37	)		1.69
Net increase (decrease) in net asset value from investment operations		(1.20	)		1.71
Dividends and Distributions to Shareholders
Dividends from net investment income		(0.13	)		(0.19	)
Distributions from net realized gain on investments		(0.01	)		—
Total Dividends and Distributions		(0.14	)		(0.19	)
Proceeds from Purchase Premiums and Redemption Fees(b)		0.01			0.01
Net asset value, end of period	$	8.73		$	10.06
Total Return
Total investment return based on net asset value(c)		(11.85	)%		20.19	%
Ratios/Supplemental Data
Net assets, end of period (000’s omitted)	$	367,327		$	154,209
Ratio of net expenses to average net assets		0.60	%		0.61	%*
Ratio of net investment income to average net assets		1.75	%		0.76	%*
Portfolio turnover rate		11	%		24	%

*	Annualized.
(a)	Commencement of investment operations.
(b)	Calculated based upon average shares outstanding during the period.
(c)	Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions, if any, at net asset value during the period, and redemption on the last day of the period. Total return is not annualized for periods less than one year.

The accompanying notes are an integral part of the financial statements.

Page 23

FINANCIAL HIGHLIGHTS (concluded)	Baillie Gifford International Equity Fund
Selected data for a Class 4 Share outstanding throughout each period:

	For the Year Ended December 31, 2011			For the Period July 30, 2010(a) through December 31, 2010
Net asset value, beginning of period	$	10.28		$	9.00
From Investment Operations
Net investment income(b)		0.20			0.04
Net realized and unrealized gain (loss) on investments and foreign currency transactions		(1.43	)		1.42
Net increase (decrease) in net asset value from investment operations		(1.23	)		1.46
Dividends and Distributions to Shareholders
Dividends from net investment income		(0.13	)		(0.19	)
Distributions from net realized gain on investments		(0.01	)		—
Total Dividends and Distributions		(0.14	)		(0.19	)
Proceeds from Purchase Premiums and Redemption Fees(b)		0.01			0.01
Net asset value, end of period	$	8.92		$	10.28
Total Return
Total investment return based on net asset value(c)		(11.86	)%		16.38	%
Ratios/Supplemental Data
Net assets, end of period (000’s omitted)	$	17,024		$	20,955
Ratio of net expenses to average net assets		0.56	%		0.58	%*
Ratio of net investment income to average net assets		2.03	%		0.97	%*
Portfolio turnover rate		11	%		24	%

*	Annualized.
(a)	Commencement of investment operations.
(b)	Calculated based upon average shares outstanding during the period.
(c)	Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions, if any, at net asset value during the period, and redemption on the last day of the period. Total return is not annualized for periods less than one year.

The accompanying notes are an integral part of the financial statements.

Page 24

INDUSTRY DIVERSIFICATION TABLE
December 31, 2011 (unaudited)	Baillie Gifford EAFE Fund

		Value		% of Total Net Assets
Aerospace/Defense		$	64,974,498		3.9	%
Apparel			75,517,174		4.5
Auto Manufacturers			16,454,148		1.0
Banks			187,290,622		11.2
Beverages, Food & Tobacco			99,151,731		5.9
Biotechnology			29,734,947		1.8
Chemicals			47,557,345		2.8
Commercial Services			29,256,315		1.7
Construction & Building Materials			43,653,343		2.6
Cosmetics/Personal Care			41,527,021		2.5
Distribution/Wholesale			7,720,583		0.5
Diversified Financial Services			56,227,500		3.4
Diversified Industrials			41,913,587		2.5
Electronic & Electrical Equipment			43,233,307		2.6
Energy - Alternate Sources			13,946,539		0.8
Engineering & Machinery			138,739,709		8.3
Healthcare - Products			22,082,568		1.3
Insurance			39,131,142		2.3
Internet			195,756,616		11.7
Investment Companies			696,453		0.0
Media & Photography	��		8,069,076		0.5
Mining & Metals			88,893,558		5.3
Motorcycles			12,568,000		0.8
Office/Business Equipment			29,282,479		1.8
Oil & Gas			85,690,010		5.1
Pharmaceuticals			43,246,924		2.6
Retailers - General			116,038,852		6.9
Semiconductors			63,870,487		3.8
Toys/Games/Hobbies			6,219,333		0.4
Travel & Leisure			7,943,668		0.5
Total Value of Investments			1,656,387,535		99.0
Other assets less liabilities			17,236,791		1.0
Net Assets		$	1,673,624,326		100.0	%

The accompanying notes are an integral part of the financial statements.

Page 25

PORTFOLIO OF INVESTMENTS
December 31, 2011	Baillie Gifford EAFE Fund

	Shares		Value
COMMON STOCKS - 96.5%
AUSTRALIA - 6.4%
Brambles Ltd.		4,007,030	$	29,256,315
Fortescue Metals Group Ltd.		6,378,224		27,901,538
Woodside Petroleum Ltd.		929,975		29,111,037
Woolworths Ltd.		789,720		20,270,791
				106,539,681
BRAZIL - 1.9%
B2W Companhia Global do Varejo		170,000		820,265
BM&F Bovespa SA		2,831,600		14,877,191
OGX Petroleo e Gas Participacoes SA (a)		2,103,500		15,359,694
				31,057,150
CHILE - 0.6%
Sociedad Quimica y Minera de Chile SA ADR		182,700		9,838,395
CHINA - 10.7%
Baidu, Inc. ADR (a)		719,400		83,788,518
China Merchants Bank Co., Ltd., Class H		7,685,500		15,444,687
CNOOC Ltd.		6,201,000		10,812,960
Hong Kong Exchanges and Clearing Ltd.		1,209,000		19,237,604
Li & Fung Ltd.		4,190,000		7,720,583
Ports Design Ltd.		1,473,500		2,222,317
Tencent Holdings Ltd.		1,961,000		39,265,827
				178,492,496
DENMARK - 3.0%
Novo Nordisk A/S, B Shares		222,497		25,561,172
Novozymes A/S, B Shares		677,090		20,859,780
Vestas Wind Systems A/S (a)		433,940		4,667,067
				51,088,019
FRANCE - 6.0%
Compagnie Generale d’Optique Essillor International SA		313,266		22,082,568
L’Oreal SA		325,646		33,915,875
PPR		307,626		43,910,210
				99,908,653
GERMANY - 4.7%
Adidas AG		488,261		31,723,746
Aixtron SE NA		826,231		10,500,694
Axel Springer AG		188,034		8,069,076
HeidelbergCement AG		275,042		11,649,232
SMA Solar Technology AG		166,480		9,279,472
TUI AG (a)		1,280,627		7,943,668
				79,165,888
INDIA - 0.7%
Housing Development Finance Corp.		744,200		9,126,882
Reliance Capital Ltd.		624,200		2,757,266
				11,884,148
IRELAND - 0.5%
James Hardie Industries SE CDI		1,242,501		8,662,239
ISRAEL - 1.1%
Teva Pharmaceutical Industries Ltd. ADR		438,200		17,685,752

The accompanying notes are an integral part of the financial statements.

Page 26

PORTFOLIO OF INVESTMENTS (continued)
December 31, 2011	Baillie Gifford EAFE Fund

	Shares		Value
JAPAN - 11.4%
Canon, Inc.		665,400	$	29,282,479
Gree, Inc.		533,400		18,336,306
Hoya Corp.		675,000		14,511,905
Kyocera Corp.		91,200		7,313,659
Nintendo Co., Ltd.		45,300		6,219,334
Rakuten, Inc. (a)		50,533		54,365,965
Rohm Co., Ltd.		159,700		7,426,206
SMC Corp.		187,900		30,230,432
Yamada Denki Co., Ltd.		144,010		9,809,849
Yamaha Motor Co., Ltd.		993,700		12,568,000
				190,064,135
LUXEMBOURG - 0.5%
Oriflame Cosmetics SA		241,659		7,611,146
Reinet Investments SCA (a)		39,281		696,453
				8,307,599
PERU - 0.7%
Credicorp Ltd.		109,245		11,959,050
SINGAPORE - 0.6%
Singapore Exchange Ltd.		2,164,000		10,228,557
SOUTH AFRICA - 0.4%
Impala Platinum Holdings Ltd.		344,800		7,138,704
SOUTH KOREA - 1.4%
Celltrion, Inc. (a)		281,207		8,875,167
Samsung Electronics Co., Ltd.		15,200		13,981,537
				22,856,704
SPAIN - 4.7%
Banco Santander SA		4,605,502		34,792,882
Inditex SA		536,456		43,793,428
				78,586,310
SWEDEN - 8.3%
Alfa Laval AB		1,146,004		21,642,796
Atlas Copco AB, A Shares		2,894,744		62,024,264
Sandvik AB		1,844,043		22,544,285
Svenska Handelsbanken AB, A Shares		1,264,043		33,124,976
				139,336,321
SWITZERLAND - 7.9%
ABB Ltd. (a)		1,274,374		23,940,728
Compagnie Financiere Richemont SA, Br A		814,169		40,954,912
Geberit AG (a)		121,432		23,341,872
Swatch Group AG (The)		18,818		7,004,384
Syngenta AG (a)		128,361		37,718,950
				132,960,846
TAIWAN - 0.8%
Taiwan Semiconductor Manufacturing Co., Ltd. ADR		1,094,606		14,131,364
TURKEY - 1.5%
Turkiye Garanti Bankasi A/S		8,060,606		25,059,348

The accompanying notes are an integral part of the financial statements.

Page 27

PORTFOLIO OF INVESTMENTS (concluded)
December 31, 2011	Baillie Gifford EAFE Fund

	Shares		Value
UNITED KINGDOM - 22.7%
ARM Holdings PLC		4,251,000	$	39,238,429
BG Group Plc.		1,194,251		25,513,352
BHP Billiton Plc.		1,842,055		53,853,316
British American Tobacco Plc.		912,659		43,296,557
Meggitt Plc.		4,896,999		26,805,047
Prudential Plc.		3,955,000		39,131,142
Rolls-Royce Holdings Plc. (a)		3,296,701		38,169,451
SABMiller Plc.		749,000		26,332,067
Signet Jewelers Ltd.		260,659		11,316,915
Standard Chartered Plc.		2,113,480		46,226,786
TESCO Plc.		4,718,570		29,523,107
				379,406,169
Total Common Stocks (cost $1,511,434,306)				1,614,357,528
PREFERRED STOCKS - 2.5%
BRAZIL - 1.5%
Itau Unibanco Holding SA ADR		1,114,380		20,682,893
Petroleo Brasileiro SA ADR		208,300		4,892,967
				25,575,860
GERMANY - 1.0%
Porsche Automobil Holding SE		308,217		16,454,147
Total Preferred Stocks (cost $44,747,747)				42,030,007
TOTAL INVESTMENTS – 99.0% (cost $1,556,182,053)				1,656,387,535
Other assets less liabilities - 1.0%				17,236,791
NET ASSETS - 100.0%			$	1,673,624,326

(a) Non-income producing security.

ADR - American Depositary Receipt.

CDI – Chess Depository Interest.

The accompanying notes are an integral part of the financial statements.

Page 28

STATEMENT OF ASSETS AND LIABILITIES
December 31, 2011	Baillie Gifford EAFE Fund

ASSETS
Investments, at value (cost $1,556,182,053)	$	1,656,387,535
Cash		17,863,048
Foreign cash, at value (cost $1,062,995)		1,051,782
Dividends receivable		1,241,352
Receivable for investments sold		1,131,838
Tax reclaims receivable		1,018,506
Other assets		7,139
Total Assets		1,678,701,200
LIABILITIES
Distributions payable		2,820,690
Management fee payable		1,016,001
Servicing fee payable		943,609
Accrued expenses		296,574
Total Liabilities		5,076,874
NET ASSETS	$	1,673,624,326
COMPOSITION OF NET ASSETS
Paid-in capital	$	1,625,887,277
Distributions in excess of net investment income		(20,363,165	)
Accumulated net realized loss on investments and foreign currency transactions		(32,115,430	)
Net unrealized appreciation in value of investments and foreign currencies		100,215,644
	$	1,673,624,326
NET ASSET VALUE, PER SHARE
Class 1 ($19,879,648 / 2,359,545 shares outstanding), unlimited authorized, no par value	$	8.43
Maximum Purchase Price Per Share (Note D)	$	8.45
Minimum Redemption Price Per Share (Note D)	$	8.42
Class 2 ($682,295,374 / 81,222,582 shares outstanding), unlimited authorized, no par value	$	8.40
Maximum Purchase Price Per Share (Note D)	$	8.42
Minimum Redemption Price Per Share (Note D)	$	8.39
Class 3 ($502,186,814 / 59,673,074 shares outstanding), unlimited authorized, no par value	$	8.42
Maximum Purchase Price Per Share (Note D)	$	8.44
Minimum Redemption Price Per Share (Note D)	$	8.41
Class 4 ($469,262,490 / 55,650,843 shares outstanding), unlimited authorized, no par value	$	8.43
Maximum Purchase Price Per Share (Note D)	$	8.45
Minimum Redemption Price Per Share (Note D)	$	8.42

The accompanying notes are an integral part of the financial statements.

Page 29

STATEMENT OF OPERATIONS
For the Year Ended December 31, 2011	Baillie Gifford EAFE Fund

INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $2,793,697)	$	32,730,338
Interest		518
Total Investment Income		32,730,856
EXPENSES
Management fee (Note B)		4,251,152
Shareholder Servicing fees - Class 1 Shares (Note B)		99,209
Shareholder Servicing fees - Class 2 Shares (Note B)		2,084,339
Shareholder Servicing fees - Class 3 Shares (Note B)		874,779
Shareholder Servicing fees - Class 4 Shares (Note B)		810,273
Fund Accounting		848,672
Custody		303,672
Legal		179,524
Trustees’ fees		37,896
Professional fees		36,409
Transfer Agency		33,329
Insurance		16,335
Miscellaneous		15,948
Total Expenses		9,591,537
Net Investment Income		23,139,319
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain from:
Investments		5,711,479
Foreign currency transactions		138,821
		5,850,300
Net change in unrealized depreciation on:
Investments		(257,554,143	)
Translation of assets and liabilities in foreign currencies		(31,282	)
		(257,585,425	)
Net realized and unrealized loss on investments and foreign currency transactions		(251,735,125	)
NET DECREASE IN NET ASSETS FROM OPERATIONS	$	(228,595,806	)

The accompanying notes are an integral part of the financial statements.

Page 30

STATEMENTS OF CHANGES IN NET ASSETS Baillie Gifford EAFE Fund

	For the Year Ended December 31, 2011			For the Year Ended December 31, 2010
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income	$	23,139,319		$	14,393,740
Net realized gain (loss) from investments and foreign currency transactions		5,850,300			(7,567,912	)
Net change in unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies		(257,585,425	)		215,116,306
Net increase (decrease) in net assets from operations		(228,595,806	)		221,942,134
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income:
Class 1		(346,240	)		(352,363	)
Class 2		(13,101,782	)		(13,025,637	)
Class 3		(10,003,634	)		(2,057,412	)
Class 4		(9,427,671	)		(7,188,225	)
Total Dividends		(32,879,327	)		(22,623,637	)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net proceeds from shares subscribed:
Class 1		—			51,397,000
Class 2		80,411,056			421,789,035
Class 3		455,761,252			124,954,270
Class 4		49,900,000			29,940,000
Purchase premiums:
Class 1		9,732			45,179
Class 2		340,633			453,389
Class 3		198,341			69,127
Class 4		210,125			297,723
Redemption fees:
Class 1		721			1,369
Class 2		25,164			12,409
Class 3		14,429			1,217
Class 4		15,257			8,149
Dividends reinvested:
Class 1		346,240			352,363
Class 2		11,867,864			10,917,409
Class 3		8,388,124			2,057,412
Class 4		9,427,671			7,188,225
Cost of shares redeemed:
Class 1		—			(83,366,730	)
Class 2		(234,455,958	)		(122,918,227	)
Class 3		(10,015,023	)		—
Increase in Net Assets from Transactions in Shares of Beneficial Interest		372,445,628			443,199,319
Total Increase in Net Assets		110,970,495			642,517,816
NET ASSETS
Beginning of year		1,562,653,831			920,136,015
End of year (including distributions in excess of net investment income of $20,363,165 and $10,810,628, respectively)	$	1,673,624,326		$	1,562,653,831

The accompanying notes are an integral part of the financial statements.

Page 31

FINANCIAL HIGHLIGHTS	Baillie Gifford EAFE Fund
Selected data for a Class 1 Share outstanding throughout each period:

	For the Year Ended December 31, 2011			For the Year Ended December 31, 2010			For the Period January 2, 2009(a) through December 31, 2009
Net asset value, beginning of period	$	9.73		$	8.47		$	6.01
From Investment Operations
Net investment income(b)		0.11			0.14			0.12
Net realized and unrealized gain (loss) on investments and foreign currency transactions		(1.26	)		1.23			2.36
Net increase (decrease) in net asset value from investment operations		(1.15	)		1.37			2.48
Dividends to Shareholders
Dividends from net investment income		(0.15	)		(0.12	)		(0.03	)
Proceeds from Purchase Premiums and Redemption Fees(b)		(0.00	)(c)		0.01			0.01
Net asset value, end of period	$	8.43		$	9.73		$	8.47
Total Return
Total investment return based on net asset value(d)		(11.82	)%		16.36	%		41.49	%
Ratios/Supplemental Data
Net assets, end of period (000’s omitted)	$	19,880		$	22,567		$	41,798
Ratio of net expenses to average net assets		0.78	%		0.79	%		0.84	%*(e)
Ratio of net investment income to average net assets		1.16	%		1.52	%		1.61	%*
Portfolio turnover rate		11	%		13	%		9	%

*	Annualized.
(a)	Commencement of investment operations.
(b)	Calculated based upon average shares outstanding during the period.
(c)	Rounds to less than $0.005 per share.
(d)	Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions, if any, at net asset value during the period, and redemption on the last day of the period. Total return is not annualized for periods less than one year.
(e)	Baillie Gifford Overseas Limited had contractually agreed to waive its fees and/or bear other expenses through March 31, 2009 to the extent that such Fund’s total annual operating expenses (excluding interest, taxes and extraordinary expenses) exceeded 0.98% for Class 1 Shares.

The accompanying notes are an integral part of the financial statements.

Page 32

FINANCIAL HIGHLIGHTS (continued)	Baillie Gifford EAFE Fund
Selected data for a Class 2 Share outstanding throughout each period:

	For the Year Ended December 31, 2011			For the Year Ended December 31, 2010			For the Year Ended December 31, 2009			For the Period March 6, 2008(a) through December 31, 2008
Net asset value, beginning of period	$	9.70		$	8.44		$	5.85		$	10.00
From Investment Operations
Net investment income(b)		0.13			0.10			0.07			0.10
Net realized and unrealized gain (loss) on investments and foreign currency transactions		(1.27	)		1.29			2.60			(4.20	)
Net increase (decrease) in net asset value from investment operations		(1.14	)		1.39			2.67			(4.10	)
Dividends to Shareholders
Dividends from net investment income		(0.16	)		(0.14	)		(0.09	)		(0.07	)
Proceeds from Purchase Premiums and Redemption Fees(b)		(0.00	)(c)		0.01			0.01			0.02
Net asset value, end of period	$	8.40		$	9.70		$	8.44		$	5.85
Total Return
Total investment return based on net asset value(d)		(11.70	)%		16.60	%		45.75	%		(40.79	)%
Ratios/Supplemental Data
Net assets, end of period (000’s omitted)	$	682,295		$	923,723		$	499,797		$	86,508
Ratio of net expenses to average net assets		0.60	%		0.62	%		0.65	%(e)		0.75	%*(e)
Ratio of net investment income to average net assets		1.33	%		1.14	%		0.95	%		1.75	%*
Portfolio turnover rate		11	%		13	%		9	%		16	%

*	Annualized.
(a)	Commencement of investment operations.
(b)	Calculated based upon average shares outstanding during the period.
(c)	Rounds to less than $0.005 per share.
(d)	Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions, if any, at net asset value during the period, and redemption on the last day of the period. Total return is not annualized for periods less than one year.
(e)	Baillie Gifford Overseas Limited had contractually agreed to waive its fees and/or bear other expenses through March 31, 2009 to the extent that such Fund’s total annual operating expenses (excluding interest, taxes and extraordinary expenses) exceeded 0.80% for Class 2 Shares.

The accompanying notes are an integral part of the financial statements.

Page 33

FINANCIAL HIGHLIGHTS (continued)	Baillie Gifford EAFE Fund
Selected data for a Class 3 Share outstanding throughout each period:

	For the Year Ended December 31, 2011			For the Period April 19, 2010(c) through December 31, 2010			For the Period January 1, 2009 through January 5, 2009(b)			For the Period April 28, 2008(a) through December 31, 2008
Net asset value, beginning of period	$	9.72		$	8.87		$	5.86		$	10.67
From Investment Operations
Net investment income(d)		0.13			0.08			(0.00	)(e)		0.09
Net realized and unrealized gain (loss) on investments and foreign currency transactions		(1.26	)		0.91			0.17			(4.85	)
Net increase (decrease) in net asset value from investment operations		(1.13	)		0.99			0.17			(4.76	)
Dividends to Shareholders
Dividends from net investment income		(0.17	)		(0.15	)		—			(0.08	)
Proceeds from Purchase Premiums and Redemption Fees(d)		(0.00	)(e)		0.01			—			0.03
Net asset value, end of period	$	8.42		$	9.72		$	6.03	(b)	$	5.86
Total Return
Total investment return based on net asset value(f)		(11.61	)%		11.25	%		2.90	%		(44.37	)%
Ratios/Supplemental Data
Net assets, end of period (000’s omitted)	$	502,187		$	139,344		$	—	(b)	$	224,557
Ratio of net expenses to average net assets		0.54	%		0.56	%*		0.57	%*		0.67	%*
Ratio of net investment income to average net assets		1.35	%		1.26	%*		(0.21	)%*		1.85	%*
Portfolio turnover rate		11	%		13	%		9	%		16	%

*	Annualized.
(a)	Commencement of investment operations.
(b)	Class has no shareholders from January 6, 2009 to April 18, 2010. All shares of this class were redeemed at $6.03 on January 5, 2009. New shares were issued at $8.87 on April 19, 2010.
(c)	Recommencement of investment operations.
(d)	Calculated based upon average shares outstanding during the period.
(e)	Rounds to less than $0.005 per share.
(f)	Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions, if any, at net asset value during the period, and redemption on the last day of the period. Total return is not annualized for periods less than one year.

The accompanying notes are an integral part of the financial statements.

Page 34

FINANCIAL HIGHLIGHTS (concluded)	Baillie Gifford EAFE Fund
Selected data for a Class 4 Share outstanding throughout each period:

	For the Year Ended December 31, 2011			For the Year Ended December 31, 2010			For the Period January 2, 2009(a) through December 31, 2009
Net asset value, beginning of period	$	9.74		$	8.47		$	6.03
From Investment Operations
Net investment income(b)		0.13			0.12			0.11
Net realized and unrealized gain (loss) on investments and foreign currency transactions		(1.27	)		1.29			2.41
Net increase (decrease) in net asset value from investment operations		(1.14	)		1.41			2.52
Dividends to Shareholders
Dividends from net investment income		(0.17	)		(0.15	)		(0.09	)
Proceeds from Purchase Premiums and Redemption Fees(b)		(0.00	)(c)		0.01			0.01
Net asset value, end of period	$	8.43		$	9.74		$	8.47
Total Return
Total investment return based on net asset value(d)		(11.67	)%		16.77	%		41.89	%
Ratios/Supplemental Data
Net assets, end of period (000’s omitted)	$	469,262		$	477,020		$	378,541
Ratio of net expenses to average net assets		0.50	%		0.52	%		0.55	%*(e)
Ratio of net investment income to average net assets		1.41	%		1.38	%		1.67	%*
Portfolio turnover rate		11	%		13	%		9	%

*	Annualized.
(a)	Commencement of investment operations.
(b)	Calculated based upon average shares outstanding during the period.
(c)	Rounds to less than $0.005 per share.
(d)	Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions, if any, at net asset value during the period, and redemption on the last day of the period. Total return is not annualized for periods less than one year.
(e)	Baillie Gifford Overseas Limited had contractually agreed to waive its fees and/or bear other expenses through March 31, 2009 to the extent that such Fund’s total annual operating expenses (excluding interest, taxes and extraordinary expenses) exceeded 0.70% for Class 4 Shares.

The accompanying notes are an integral part of the financial statements.

Page 35

INDUSTRY DIVERSIFICATION TABLE
December 31, 2011 (unaudited)	Baillie Gifford EAFE Choice Fund

	Value		% of Total Net Assets
Apparel	$	3,773,691		2.4	%
Auto Manufacturers		3,019,036		2.0
Banks		13,442,855		8.7
Beverages, Food & Tobacco		12,579,311		8.2
Biotechnology		2,674,022		1.7
Chemicals		2,387,417		1.5
Commercial Services		3,810,800		2.5
Construction & Building Materials		1,713,272		1.1
Cosmetics/Personal Care		2,488,485		1.6
Distribution/Wholesale		2,601,781		1.7
Diversified Financial Services		3,648,378		2.4
Diversified Industrials		2,797,033		1.8
Electronic & Electrical Equipment		6,615,305		4.3
Engineering & Machinery		13,993,113		9.1
Entertainment		3,285,142		2.1
Food Producers & Processors		6,728,961		4.4
Healthcare - Products		6,071,804		3.9
Insurance		1,635,432		1.1
Internet		6,602,348		4.3
Investment Companies		3,850,617		2.5
Media & Photography		2,889,203		1.9
Mining & Metals		5,737,478		3.7
Motorcycles		996,637		0.6
Office/Business Equipment		702,681		0.5
Oil & Gas		15,577,590		10.1
Pharmaceuticals		8,033,092		5.2
Retailers - General		5,801,949		3.8
Semiconductors		3,080,334		2.0
Software		626,210		0.4
Telecommunication Services		971,138		0.6
Toys/Games/Hobbies		1,933,025		1.3
Travel & Leisure		121,680		0.1
Total Value of Investments		150,189,820		97.5
Other assets less liabilities		3,814,351		2.5
Net Assets	$	154,004,171		100.0	%

The accompanying notes are an integral part of the financial statements.

Page 36

PORTFOLIO OF INVESTMENTS
December 31, 2011	Baillie Gifford EAFE Choice Fund

	Shares		Value
COMMON STOCKS - 96.4%
AUSTRALIA - 6.9%
Aristocrat Leisure Ltd.		724,345	$	1,626,864
Billabong International Ltd.		429,714		777,438
Brambles Ltd.		258,106		1,884,495
Cochlear Ltd.		54,781		3,479,195
Seek Ltd.		261,347		1,515,316
Woolworths Ltd.		49,222		1,263,446
				10,546,754
BELGIUM - 1.7%
Colruyt SA		28,520		1,077,452
Groupe Bruxelles Lambert SA		23,053		1,533,587
				2,611,039
BERMUDA - 2.5%
Cafe de Coral Holdings Ltd.		758,000		1,735,348
Seadrill Ltd.		64,046		2,135,874
				3,871,222
CHINA - 3.0%
BOC Hong Kong Holdings Ltd.		476,000		1,123,193
Hong Kong Exchanges and Clearing Ltd.		56,700		902,210
Li & Fung Ltd.		1,412,000		2,601,781
				4,627,184
DENMARK - 5.1%
Carlsberg A/S, B Shares		45,979		3,237,545
Jyske Bank A/S (a)		45,775		1,122,241
Novo Nordisk A/S, B Shares		15,898		1,826,413
Novozymes A/S, B Shares		53,070		1,634,980
				7,821,179
FINLAND - 2.2%
Kone Oyj, B Shares		47,295		2,448,475
Nokia Oyj		201,447		971,138
				3,419,613
FRANCE - 3.9%
BioMerieux		17,895		1,277,199
Legrand SA		45,867		1,469,148
Neopost SA		10,449		702,681
Total SA		51,298		2,617,622
				6,066,650
GERMANY - 1.7%
Adidas AG		21,758		1,413,681
Celesio AG		74,159		1,173,040
				2,586,721
INDIA - 0.8%
Mahindra & Mahindra Ltd. GDR		96,122		1,225,556

The accompanying notes are an integral part of the financial statements.

Page 37

PORTFOLIO OF INVESTMENTS (continued)
December 31, 2011	Baillie Gifford EAFE Choice Fund

	Shares		Value
JAPAN - 14.7%
Asahi Group Holdings Ltd.		103,500	$	2,270,468
Fast Retailing Co., Ltd.		8,700		1,582,572
Inpex Corp.		275		1,731,463
Kao Corp.		91,200		2,488,485
MS&AD Insurance Group Holdings, Inc.		88,600		1,635,432
Namco Bandai Holdings, Inc.		136,200		1,933,025
Olympus Corp.		106,200		1,395,988
Rakuten, Inc. (a)		1,480		1,592,259
Rohm Co., Ltd.		24,800		1,153,224
Sankyo Co., Ltd.		32,800		1,658,278
Shimano, Inc.		2,500		121,680
SMC Corp.		9,500		1,528,415
THK Co., Ltd.		96,600		1,902,800
Trend Micro, Inc. (a)		21,000		626,210
Yamaha Motor Co., Ltd.		78,800		996,637
				22,616,936
KAZAKHSTAN - 0.8%
KazMunaiGas Exploration Production GDR Reg S		81,350		1,232,697
NETHERLANDS - 0.9%
QIAGEN NV (a)		95,538		1,315,410
SINGAPORE - 2.2%
DBS Group Holdings Ltd.		100,000		887,628
United Overseas Bank Ltd.		210,163		2,473,313
				3,360,941
SOUTH AFRICA - 1.8%
Clicks Group Ltd. (a)		272,045		1,557,848
Lonmin Plc.		83,311		1,269,351
				2,827,199
SOUTH KOREA - 1.0%
Samsung Electronics Co., Ltd. GDR		3,250		1,492,404
SPAIN - 2.2%
Corporacion Financiera Alba		33,976		1,324,462
Distribuidora Internacional de Alimentacion SA (a)		458,467		2,063,954
				3,388,416
SWEDEN - 7.5%
Atlas Copco AB, B Shares		203,585		3,853,906
Investor AB, B Shares		135,824		2,526,155
Scania AB, B Shares		121,500		1,793,480
Svenska Handelsbanken AB, A Shares		131,543		3,447,160
				11,620,701
SWITZERLAND - 9.6%
Geberit AG (a)		8,913		1,713,272
Nestle SA		72,502		4,163,320
Roche Holding AG - Genusschein		29,764		5,033,639
Schindler Holding AG, Participating Certificates		20,895		2,428,833
UBS AG (a)		126,172		1,496,739
				14,835,803

The accompanying notes are an integral part of the financial statements.

Page 38

PORTFOLIO OF INVESTMENTS (continued)
December 31, 2011	Baillie Gifford EAFE Choice Fund

	Shares		Value
TAIWAN - 1.6%
Hon Hai Precision Industry Co., Ltd. GDR Reg S		154,607	$	846,582
Taiwan Semiconductor Manufacturing Co., Ltd. ADR		123,000		1,587,930
				2,434,512
TURKEY - 1.3%
Turkiye Garanti Bankasi A/S		649,009		2,017,682
UNITED KINGDOM - 21.6%
AMEC Plc.		66,321		934,016
ASOS Plc. (a)		74,239		1,424,530
BG Group Plc.		100,033		2,137,052
BHP Billiton Plc.		99,000		2,894,310
Cairn Energy Plc. (a)		326,230		1,341,220
Hargreaves Lansdown Plc.		187,000		1,249,429
Imperial Tobacco Group Plc.		68,200		2,580,704
Intertek Group Plc.		61,000		1,926,305
John Wood Group Plc.		261,832		2,604,355
Johnson Matthey Plc.		83,793		2,387,417
Kazakhmys Plc.		109,000		1,573,817
Mitchells & Butlers Plc. (a)		394,334		1,431,301
Pearson Plc.		81,600		1,531,513
Reed Elsevier Plc.		168,656		1,357,690
Rightmove Plc.		107,148		2,070,243
Standard Chartered Plc.		66,512		1,454,774
Unilever Plc.		76,509		2,565,641
Weir Group Plc. (The)		58,000		1,830,684
				33,295,001
UNITED STATES - 3.4%
Central European Distribution Corp. (a)		150,495		658,416
Coca-Cola Enterprises, Inc.		68,589		1,768,224
Mettler-Toledo International, Inc. (a)		11,850		1,750,363
Protalix BioTherapeutics, Inc. (a)		210,759		1,039,042
				5,216,045
Total Common Stocks (cost $168,265,852)				148,429,665
PREFERRED STOCKS - 1.1%
BRAZIL - 1.1%
Itau Unibanco Holding SA ADR		49,400		916,864
Petroleo Brasileiro SA ADR		35,900		843,291
Total Preferred Stocks (cost $2,275,120)				1,760,155
TOTAL INVESTMENTS - 97.5%
(cost $170,540,972)				150,189,820
Other assets less liabilities - 2.5%				3,814,351
NET ASSETS - 100.0%			$	154,004,171

(a) Non-income producing security.
ADR - American Depositary Receipt.
GDR - Global Depositary Receipt.

The accompanying notes are an integral part of the financial statements.

Page 39

PORTFOLIO OF INVESTMENTS (concluded)
December 31, 2011	Baillie Gifford EAFE Choice Fund

Reg S - is a safe harbor that defines when an offering of securities will be deemed to come to rest abroad and therefore is not subject to the registration obligations imposed under Section 5 of the 1933 Act. The regulation includes two safe harbor provisions: an issuer safe harbor and a resale safe harbor. In each case, the regulation demands that offers and sales of the securities be made outside the United States and that no offering participant (which includes the issuer, the banks assisting with the offer and their respective affiliates) engage in “directed” selling efforts. In the case of issuers for whose securities there is substantial U.S. market interest, the regulation also requires that no offers and sales be made to U.S. persons (including U.S. persons physically located outside the United States).

The accompanying notes are an integral part of the financial statements.

Page 40

STATEMENT OF ASSETS AND LIABILITIES
December 31, 2011	Baillie Gifford EAFE Choice Fund

ASSETS
Investments, at value (cost $170,540,972)	$	150,189,820
Cash		3,361,256
Foreign cash, at value (cost $375,875)		374,579
Tax reclaims receivable		181,044
Dividends receivable		113,572
Other assets		779
Total Assets		154,221,050
LIABILITIES
Servicing fee payable		99,458
Management fee payable		84,208
Accrued expenses		33,213
Total Liabilities		216,879
NET ASSETS	$	154,004,171
COMPOSITION OF NET ASSETS
Paid-in capital	$	178,402,890
Distributions in excess of net investment income		(456,421	)
Accumulated net realized loss on investments and foreign currency transactions		(3,589,769	)
Net unrealized depreciation in value of investments and foreign currencies		(20,352,529	)
	$	154,004,171
NET ASSET VALUE, PER SHARE
Class 2 ($115,242,271 / 12,188,909 shares outstanding),
unlimited authorized, no par value	$	9.45
Maximum Purchase Price Per Share (Note D)	$	9.47
Minimum Redemption Price Per Share (Note D)	$	9.44
Class 4 ($38,761,900 / 4,032,673 shares outstanding),
unlimited authorized, no par value	$	9.61
Maximum Purchase Price Per Share (Note D)	$	9.63
Minimum Redemption Price Per Share (Note D)	$	9.60

The accompanying notes are an integral part of the financial statements.

Page 41

STATEMENT OF OPERATIONS
For the Year Ended December 31, 2011	Baillie Gifford EAFE Choice Fund

INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $295,935)	$	3,932,986
Interest		457
Total Investment Income		3,933,443
EXPENSES
Management fee (Note B)		358,803
Shareholder Servicing fees - Class 2 Shares (Note B)		256,412
Shareholder Servicing fees - Class 3 Shares (Note B)		35,521
Shareholder Servicing fees - Class 4 Shares (Note B)		51,423
Fund Accounting		106,518
Custody		36,068
Legal		13,304
Transfer Agency		11,406
Professional fees		5,942
Trustees’ fees		3,476
Insurance		1,782
Miscellaneous		45
Total Expenses		880,700
Net Investment Income		3,052,743
REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Net realized loss from:
Investments		(946,449	)
Foreign currency transactions		(165,155	)
		(1,111,604	)
Net change in unrealized depreciation on:
Investments		(30,552,556	)
Translation of assets and liabilities in foreign currencies		(17,161	)
		(30,569,717	)
Net realized and unrealized loss on investments and foreign currency transactions		(31,681,321	)
NET DECREASE IN NET ASSETS FROM OPERATIONS	$	(28,628,578	)

The accompanying notes are an integral part of the financial statements.

Page 42

STATEMENTS OF CHANGES IN NET ASSETS Baillie Gifford EAFE Choice Fund

	For the Year Ended December 31, 2011			For the Year Ended December 31, 2010
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income	$	3,052,743		$	1,183,182
Net realized gain (loss) from investments and foreign currency transactions		(1,111,604	)		146,001
Net change in unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies		(30,569,717	)		9,725,912
Net increase (decrease) in net assets from operations		(28,628,578	)		11,055,095
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class 2		(2,470,163	)		(578,172	)
Class 3		—			(717,647	)
Class 4		(857,019	)		—
Capital gains:
Class 2		(1,996,170	)		—
Class 4		(660,614	)		—
Total Dividends and Distributions		(5,983,966	)		(1,295,819	)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net proceeds from shares subscribed:
Class 2		94,603,761			41,317,200
Class 3		12,974,210			50,906,024
Class 4		85,142,331			—
Purchase premiums:
Class 2		112,132			53,804
Class 3		15,513			58,067
Class 4		48,523			—
Redemption fees:
Class 2		46,700			—
Class 3		2,949			—
Class 4		14,196			—
Dividends and distributions reinvested:
Class 2		4,466,333			578,172
Class 3		—			717,647
Class 4		1,517,633			—
Cost of shares redeemed:
Class 2		(3,204,807	)		(31,435,095	)
Class 3		(70,172,331	)		—
Class 4		(39,359,248	)		—
Increase in Net Assets from Transactions in Shares of Beneficial Interest		86,207,895			62,195,819
Total Increase in Net Assets		51,595,351			71,955,095
NET ASSETS
Beginning of year		102,408,820			30,453,725
End of year (including distributions in excess of net investment income of $456,421 and $205,045, respectively)	$	154,004,171		$	102,408,820

The accompanying notes are an integral part of the financial statements.

Page 43

FINANCIAL HIGHLIGHTS Baillie Gifford EAFE Choice Fund

Selected data for a Class 2 Shares outstanding throughout each period:

	For the Year Ended December 31, 2011			For the Year Ended December 31, 2010(a)			For the Period December 17, 2009(b) through December 31, 2009
Net asset value, beginning of period	$	11.24		$	10.15		$	10.00
From Investment Operations
Net investment income(c)		0.21			0.13			0.00	(d)
Net realized and unrealized gain (loss) on investments and foreign currency transactions		(1.64	)		1.37			0.15
Net increase (decrease) in net asset value from investment operations		(1.43	)		1.50			0.15
Change in NAV During Period of Inactivity(a)		—			(0.28	)		—
Dividends and Distributions to Shareholders
Dividends from net investment income		(0.21	)		(0.14	)		0.00	(d)
Distributions from net realized gain on investments		(0.17	)		—			—
Total Dividends and Distributions		(0.38	)		(0.14	)		0.00	(d)
						��
Proceeds from Purchase Premiums and Redemption Fees(c)		0.02			0.01			—
Net asset value, end of period	$	9.45		$	11.24		$	10.15
Total Return
Total investment return based on net asset value(e)		(12.54	)%		15.22	%		1.52	%
Ratios/Supplemental Data
Net assets, end of period (000’s omitted)	$	115,242		$	46,487		$	30,454
Ratio of net expenses to average net assets		0.65	%		0.71	%*		0.82	%*
Ratio of net investment income to average net assets		1.97	%		1.53	%*		0.41	%*
Portfolio turnover rate		46	%		20	%		0	%

*	Annualized.
(a)	For the period January 1, 2010 to January 15, 2010 and March 25, 2010 to December 31, 2010. Class had no shareholders from January 16, 2010 to March 24, 2010. All shares of this class were redeemed at $10.48 on January 19, 2010. New shares were issued at $10.20 on March 25, 2010.
(b)	Commencement of investment operations.
(c)	Calculated based upon average shares outstanding during the period.
(d)	Amount is less than $0.005.
(e)	Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions, if any, at net asset value during the period, and redemption on the last day of the period. Total return is not annualized for periods less than one year.

The accompanying notes are an integral part of the financial statements.

Page 44

FINANCIAL HIGHLIGHTS (concluded) Baillie Gifford EAFE Choice Fund

Selected data for a Class 4 Share outstanding throughout the period:

	For the Period April 19, 2011(a) through December 31, 2011
Net asset value, beginning of period	$	11.66
From Investment Operations
Net investment income(b)		0.19
Net realized and unrealized loss on investments and foreign currency transactions		(1.87	)
Net decrease in net asset value from investment operations		(1.68	)
Dividends and Distributions to Shareholders
Dividends from net investment income		(0.22	)
Distributions from net realized gain on investments		(0.17	)
Total Dividends and Distributions		(0.39	)
Proceeds from Purchase Premiums and Redemption Fees(b)		0.02
Net asset value, end of period	$	9.61
Total Return
Total investment return based on net asset value(c)		(14.23	)%
Ratios/Supplemental Data
Net assets, end of period (000’s omitted)	$	38,762
Ratio of net expenses to average net assets		0.55	%*
Ratio of net investment income to average net assets		2.44	%*
Portfolio turnover rate		46	%

*	Annualized.
(a)	Commencement of investment operations.
(b)	Calculated based upon average shares outstanding during the period.
(c)	Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions, if any, at net asset value during the period, and redemption on the last day of the period. Total return is not annualized for periods less than one year.

The accompanying notes are an integral part of the financial statements.

Page 45

INDUSTRY DIVERSIFICATION TABLE
December 31, 2011 (unaudited)	Baillie Gifford Emerging Markets Fund

	Value		% of Total Net Assets
Advertising	$	2,672,079		0.7	%
Aerospace/Defense		2,095,328		0.6
Auto Manufacturers		11,826,817		3.2
Banks		50,541,139		13.5
Computers		3,005,714		0.8
Construction & Building Materials		12,571,502		3.4
Diversified Financial Services		11,399,075		3.0
Diversified Industrials		4,469,902		1.2
Electronic & Electrical Equipment		49,120,578		13.1
Engineering & Construction		1,953,691		0.5
Food Producers & Processors		5,453,545		1.5
Holding Companies-Diversified		5,597,137		1.5
Insurance		19,222,333		5.1
Internet		12,914,565		3.5
Investment Companies		4,884,469		1.3
Media & Photography		6,696,374		1.8
Mining & Metals		57,038,366		15.3
Motorcycles		3,639,453		1.0
Oil & Gas		65,227,944		17.5
Real Estate		3,380,755		0.9
Retailers - General		17,409,785		4.7
Telecommunication Services		3,525,600		0.9
Transportation		10,543,801		2.8
Total Value of Investments		365,189,952		97.8
Other assets less liabilities		8,242,366		2.2
Net Assets	$	373,432,318		100.0	%

The accompanying notes are an integral part of the financial statements.

Page 46

PORTFOLIO OF INVESTMENTS
December 31, 2011	Baillie Gifford Emerging Markets Fund

	Shares		Value
COMMON STOCKS - 88.8%
ARGENTINA - 0.7%
MercadoLibre, Inc.		34,700	$	2,760,038
AUSTRALIA - 0.5%
African Petroleum Corp., Ltd. (a)		4,847,300		1,983,124
BRAZIL - 5.1%
Embraer SA ADR		83,082		2,095,328
Petroleo Brasileiro SA ADR		208,700		5,186,195
Vale SA ADR		554,200		11,887,590
				19,169,113
CANADA - 2.7%
First Quantum Minerals Ltd.		240,300		4,729,340
Niko Resources Ltd.		111,000		5,254,999
				9,984,339
CHINA - 16.5%
Baidu, Inc. ADR (a)		57,100		6,650,437
Bank of China Ltd., Class H		11,320,200		4,151,079
China Construction Bank Corp., Class H		5,871,290		4,078,261
China National Building Material Co., Ltd., Class H		2,118,000		2,388,106
China Railway Construction Corp., Ltd., Class H		6,744,500		3,700,265
China Shenhua Energy Co., Ltd., Class H		2,329,000		10,071,223
China Taiping Insurance Holdings Co., Ltd. (a)		1,300,000		2,404,303
CNOOC Ltd.		2,871,000		5,006,291
CSR Corp., Ltd., Class H		6,851,000		3,897,674
Focus Media Holding Ltd. ADR (a)		137,100		2,672,079
Hang Lung Properties Ltd.		1,191,000		3,380,755
Ping An Insurance Co. of China Ltd., Class H		644,000		4,225,138
Tencent Holdings Ltd.		175,000		3,504,090
Want Want China Holdings Ltd.		5,475,000		5,453,545
				61,583,246
EGYPT - 0.4%
Commercial International Bank Egypt SAE		210,181		653,638
Egyptian Financial Group - Hermes Holding SAE (a)		559,492		936,826
				1,590,464
GUERNSEY - 0.5%
Chariot Oil & Gas Ltd. (a)		1,032,799		1,708,393
INDIA - 4.2%
ACC Ltd.		120,700		2,582,361
GAIL India Ltd.		321,310		2,318,991
Hero Motocorp Ltd.		101,500		3,639,453
Housing Development Finance Corp.		356,700		4,374,575
Infrastructure Development Finance Co., Ltd.		1,579,000		2,719,984
				15,635,364
INDONESIA - 5.4%
Astra International Tbk PT		609,500		4,966,874
Bank Rakyat Indonesia Persero Tbk PT		5,578,000		4,146,256
Bumi Resources Tbk PT		20,300,000		4,850,216
Semen Gresik Persero Tbk PT		3,091,500		3,900,770
Tambang Batubara Bukit Asam Tbk PT		1,185,000		2,263,149
				20,127,265
IRELAND - 1.6%
Kenmare Resources Plc. (a)		8,181,115		5,854,747

The accompanying notes are an integral part of the financial statements.

Page 47

PORTFOLIO OF INVESTMENTS (continued)
December 31, 2011	Baillie Gifford Emerging Markets Fund

	Shares		Value
MALAYSIA - 1.0%
Public Bank Bhd		277,200	$	1,169,482
Public Bank Bhd - Foreign Market		634,900		2,642,982
				3,812,464
MEXICO - 2.5%
America Movil SAB de CV, Series L ADR		156,000		3,525,600
Wal-Mart de Mexico SAB de CV, Series V		2,075,660		5,696,846
				9,222,446
PERU - 1.1%
Credicorp Ltd.		37,100		4,061,337
RUSSIA - 4.7%
Gazprom OAO ADR		354,850		3,780,550
NovaTek OAO GDR Reg S		25,600		3,202,438
Petropavlovsk Plc.		214,759		2,055,151
Sberbank of Russia ADR (a)		671,300		6,639,548
X5 Retail Group NV GDR Reg S (a)		87,300		1,989,929
				17,667,616
SOUTH AFRICA - 4.8%
Gold Fields Ltd.		174,090		2,669,475
Impala Platinum Holdings Ltd.		77,900		1,612,834
Lonmin Plc.		306,203		4,665,398
Massmart Holdings Ltd.		103,248		2,157,448
Naspers Ltd., N Shares		153,300		6,696,374
				17,801,529
SOUTH KOREA - 14.5%
Cheil Industries, Inc.		50,900		4,469,901
E-Mart Co., Ltd.		14,410		3,484,489
Hyundai Engineering & Construction Co., Ltd. (a)		31,900		1,953,691
Hyundai Glovis Co., Ltd.		39,800		6,646,127
Hyundai Mobis (a)		27,000		6,859,943
LG Corp.		78,700		4,202,398
LS Corp.		21,100		1,394,739
NHN Corp.		16,400		3,005,714
Samsung Electronics Co., Ltd.		18,250		16,787,043
Samsung Fire & Marine Insurance Co., Ltd.		28,200		5,171,315
				53,975,360
TAIWAN – 8.9%
China Life Insurance Co., Ltd.		9,194,931		7,421,578
Far Eastern Department Stores Ltd.		3,465,329		4,081,073
Hon Hai Precision Industry Co., Ltd.		2,931,945		8,018,095
MediaTek, Inc.		399,680		3,658,272
Taiwan Semiconductor Manufacturing Co., Ltd.		4,101,310		10,247,532
				33,426,550
THAILAND - 2.6%
Bank of Ayudhya PCL NVDR		8,341,000		5,805,568
Siam Commercial Bank PCL		1,048,100		3,862,885
				9,668,453
TURKEY - 0.9%
Turkiye Garanti Bankasi AS		1,085,823		3,375,679
TURKMENISTAN - 3.3%
Dragon Oil Plc.		1,751,815		12,460,513

The accompanying notes are an integral part of the financial statements.

Page 48

PORTFOLIO OF INVESTMENTS (concluded)
December 31, 2011	Baillie Gifford Emerging Markets Fund

	Shares		Value
UNITED KINGDOM - 6.9%
Evraz Plc. (a)		535,500	$	3,116,099
Gulf Keystone Petroleum Ltd. (a)		2,908,401		8,636,562
Kazakhmys Plc.		226,000		3,263,144
Tullow Oil Plc.		495,900		10,774,925
				25,790,730
Total Common Stocks (cost $308,708,376)				331,658,770
PREFERRED STOCKS - 9.0%
BRAZIL - 7.4%
Banco Bradesco SA		352,129		5,805,102
Bradespar SA		127,400		2,164,485
Companhia Energetica de Minas Gerais		257,542		4,593,713
Itau Unibanco Holding SA		227,700		4,149,322
Itausa - Investimentos Itau SA		1,006,652		6,087,674
Petroleo Brasileiro SA		426,600		4,914,963
				27,715,259
SOUTH KOREA - 1.6%
Samsung Electronics Co., Ltd.		10,035		5,815,923
Total Preferred Stocks (cost $25,682,014)				33,531,182
TOTAL INVESTMENTS - 97.8% (cost $334,390,390)				365,189,952
Other assets less liabilities - 2.2%				8,242,366
NET ASSETS - 100.0%			$	373,432,318

(a) Non-income producing security.
ADR - American Depositary Receipt.
GDR - Global Depositary Receipt.
NVDR – Non-Voting Depositary Receipt.
PCL - Public Company Limited.

Reg S - is a safe harbor that defines when an offering of securities will be deemed to come to rest abroad and therefore is not subject to the registration obligations imposed under Section 5 of the 1933 Act. The regulation includes two safe harbor provisions: an issuer safe harbor and a resale safe harbor. In each case, the regulation demands that offers and sales of the securities be made outside the United States and that no offering participant (which includes the issuer, the banks assisting with the offer and their respective affiliates) engage in “directed” selling efforts. In the case of issuers for whose securities there is substantial U.S. market interest, the regulation also requires that no offers and sales be made to U.S. persons (including U.S. persons physically located outside the United States).

The accompanying notes are an integral part of the financial statements.

Page 49

STATEMENT OF ASSETS AND LIABILITIES
December 31, 2011	Baillie Gifford Emerging Markets Fund

ASSETS
Investments, at value (cost $334,390,390)	$	365,189,952
Cash		7,572,810
Foreign cash, at value (cost $1,085,920)		1,087,575
Dividends receivable		216,187
Receivable for Indian capital gains tax refund		245,986
Other assets		1,849
Total Assets		374,314,359
LIABILITIES
Management fee payable		465,718
Payable for investments purchased		201,175
Servicing fee payable		95,227
Accrued expenses		119,921
Total Liabilities		882,041
NET ASSETS	$	373,432,318
COMPOSITION OF NET ASSETS
Paid-in capital	$	353,379,672
Distributions in excess of net investment income		(648,079	)
Accumulated net realized loss on investments and foreign currency transactions (net of Indian capital gains tax)		(10,099,692	)
Net unrealized appreciation in value of investments and foreign currencies		30,800,417
	$	373,432,318
NET ASSET VALUE, PER SHARE
Class III ($373,432,318 / 25,585,051 shares outstanding),
unlimited authorized, no par value	$	14.60
Maximum Purchase Price Per Share (Note D)	$	14.68
Minimum Redemption Price Per Share (Note D)	$	14.56

The accompanying notes are an integral part of the financial statements.

Page 50

STATEMENT OF OPERATIONS
For the Year Ended December 31, 2011	Baillie Gifford Emerging Markets Fund

INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $757,936)	$	7,623,910
Interest		3,309
Total Investment Income		7,627,219
EXPENSES
Management fee (Note B)		2,120,458
Shareholder Servicing fees - Class III Shares (Note B)		427,592
Fund Accounting		267,712
Custody		237,384
Professional fees		35,418
Legal		27,527
Trustees’ fees		9,008
Transfer Agency		8,427
Insurance		4,231
Miscellaneous		253
Total Expenses		3,138,010
Net Investment Income		4,489,209
REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Net realized loss from:
Investments (net of Indian capital gains tax refund $245,986)		(6,414,241	)
Foreign currency transactions		(613,294	)
		(7,027,535	)
Net change in unrealized depreciation on:
Investments		(93,254,529	)
Translation of assets and liabilities in foreign currencies		(28,343	)
		(93,282,872	)
Net realized and unrealized loss on investments and foreign currency transactions		(100,310,407	)
NET DECREASE IN NET ASSETS FROM OPERATIONS	$	(95,821,198	)

The accompanying notes are an integral part of the financial statements.

Page 51

STATEMENTS OF CHANGES IN NET ASSETS Baillie Gifford Emerging Markets Fund

	For the Year Ended December 31, 2011			For the Year Ended December 31, 2010
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income	$	4,489,209		$	2,879,098
Net realized gain (loss) from investments and foreign currency transactions		(7,027,535	)		37,258,180
Net change in unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies		(93,282,872	)		36,100,235
Net increase (decrease) in net assets from operations		(95,821,198	)		76,237,513
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class II		—			(305,494	)
Class III		—			(12,226,712	)
Capital gains:
Class III		(8,786,194	)		(11,767,673	)
Total Dividends and Distributions		(8,786,194	)		(24,299,879	)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net proceeds from shares subscribed:
Class III		4,972,500			191,123,814
Purchase premiums:
Class II		—			25,949
Class III		27,500			185,582
Redemption fees:
Class III		11,027			20,050
Dividends and distributions reinvested:
Class II		—			305,494
Class III		8,786,194			23,994,385
Cost of shares redeemed:
Class I		—			(54,124,301	)
Class II		—			(51,710,765	)
Class III		(4,411,028	)		(8,020,050	)
Increase in Net Assets from Transactions in Shares of Beneficial Interest		9,386,193			101,800,158
Total Increase (Decrease) in Net Assets		(95,221,199	)		153,737,792
NET ASSETS
Beginning of year		468,653,517			314,915,725
End of year (including distributions in excess of net investment income of $648,079 and $6,722,587, respectively)	$	373,432,318		$	468,653,517

The accompanying notes are an integral part of the financial statements.

Page 52

FINANCIAL HIGHLIGHTS Baillie Gifford Emerging Markets Fund

Selected data for a Class III Share outstanding throughout each year:

	For the Year Ended December 31, 2011			For the Year Ended December 31, 2010			For the Year Ended December 31, 2009			For the Year Ended December 31, 2008			For the Year Ended December 31, 2007
Net asset value, beginning of year	$	18.71		$	16.49		$	8.47		$	22.17		$	21.42
From Investment Operations
Net investment income(a)		0.18			0.13			0.09			0.16			0.38
Net realized and unrealized gain (loss) on investments and foreign currency transactions		(3.94	)		3.09			8.21			(12.15	)		9.45
Net increase (decrease) in net asset value from investment operations		(3.76	)		3.22			8.30			(11.99	)		9.83
Dividends and Distributions to Shareholders
Dividends from net investment income		—			(0.52	)		(0.29	)		(0.21	)		(0.50	)
Distributions from net realized gain on investments		(0.35	)		(0.49	)		—			(1.48	)		(8.61	)
Return of capital		—			—			—			(0.03	)		—
Total Dividends and Distributions		(0.35	)		(1.01	)		(0.29	)		(1.72	)		(9.11	)
Proceeds from Purchase Premiums and Redemption Fees(a)		(0.00	)(b)		0.01			0.01			0.01			0.03
Net asset value, end of year	$	14.60		$	18.71		$	16.49		$	8.47		$	22.17
Total Return
Total investment return based on net asset value(c)		(20.20	)%		19.73	%		98.09	%		(56.41	)%		46.59	%
Ratios/Supplemental Data
Net assets, end of year (000’s omitted)	$	373,432		$	468,654		$	216,394		$	124,412		$	209,920
Ratio of net expenses to average net assets		0.73	%		0.79	%		0.80	%		0.87	%		0.87	%
Ratio of net investment income to average net assets		1.05	%		0.75	%		0.76	%		1.04	%		1.48	%
Portfolio turnover rate		41	%		40	%		56	%		61	%		61	%

(a)	Calculated based upon average shares outstanding during the year.
(b)	Rounds to less than $0.005 per share.
(c)	Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions, if any, at net asset value during the period, and redemption on the last day of the period. Total return is not annualized for periods less than one year.

The accompanying notes are an integral part of the financial statements.

Page 53

INDUSTRY DIVERSIFICATION TABLE
December 31, 2011 (unaudited)	Baillie Gifford Global Alpha Equity Fund

	Value		% of Total Net Assets
Advertising	$	1,502,168		1.4	%
Aerospace/Defense		1,470,415		1.4
Agriculture		2,370,414		2.3
Airlines		447,153		0.4
Banks		8,178,922		7.8
Beverages, Food & Tobacco		6,411,339		6.1
Biotechnology		746,961		0.7
Chemicals		993,208		1.0
Commercial Services		8,569,225		8.2
Construction & Building Materials		401,476		0.4
Distribution/Wholesale		2,612,924		2.5
Diversified Financial Services		2,782,745		2.7
Diversified Industrials		1,138,964		1.1
Electronic & Electrical Equipment		3,851,541		3.7
Engineering & Machinery		5,343,557		5.1
Entertainment		1,034,666		1.0
Food Producers & Processors		3,344,747		3.2
Healthcare - Products		2,932,315		2.8
Healthcare - Services		944,593		0.9
Insurance		7,031,844		6.7
Internet		6,076,118		5.8
Investment Companies		831,680		0.8
Machinery-Diversified		861,834		0.8
Media & Photography		2,802,447		2.7
Mining & Metals		2,070,835		2.0
Motorcycles		1,722,614		1.6
Oil & Gas		7,651,308		7.3
Pharmaceuticals		2,636,809		2.5
Retailers - General		7,154,914		6.8
Semiconductors		3,478,303		3.3
Telecommunication Services		4,164,886		4.0
Textiles		552,595		0.5
Toys/Games/Hobbies		1,351,130		1.3
Total Value of Investments		103,464,650		98.8
Other assets less liabilities		1,256,134		1.2
Net Assets	$	104,720,784		100.0	%

The accompanying notes are an integral part of the financial statements.

Page 54

PORTFOLIO OF INVESTMENTS (continued)
December 31, 2011	Baillie Gifford Global Alpha Equity Fund

	Shares		Value
COMMON STOCKS - 96.5%
AUSTRALIA - 2.3%
Brambles Ltd.		271,399	$	1,981,551
Cochlear Ltd.		6,811		432,573
				2,414,124
BELGIUM - 1.1%
Groupe Bruxelles Lambert SA		17,121		1,138,964
BRAZIL - 2.6%
BM&F Bovespa SA		197,000		1,035,035
Odontoprev SA		43,500		620,346
OGX Petroleo e Gas Participacoes SA (a)		148,500		1,084,343
				2,739,724
CANADA - 2.5%
Fairfax Financial Holdings Ltd.		4,056		1,748,947
Ritchie Bros. Auctioneers, Inc.		38,996		861,032
				2,609,979
CHINA - 3.7%
Baidu, Inc. ADR (a)		5,200		605,644
China Mobile Ltd.		94,000		913,265
Hong Kong Exchanges and Clearing Ltd.		35,900		571,241
Mindray Medical International Ltd. ADR		29,930		767,405
Shanda Interactive Entertainment Ltd. ADR (a)		6,841		273,708
Shandong Weigao Group Medical Polymer Co., Ltd., Class H		540,000		485,092
Sina Corp. (a)		4,600		239,200
				3,855,555
DENMARK - 1.3%
Carlsberg A/S, B Shares		15,223		1,071,905
Jyske Bank A/S (a)		13,871		340,068
				1,411,973
GERMANY - 0.7%
Deutsche Boerse AG (a)		15,021		786,164
GREECE - 1.4%
Coca-Cola Hellenic Bottling Co. SA (a)		85,882		1,472,771
INDONESIA - 0.4%
Bank Negara Indonesia Persero Tbk PT		1,110,000		464,305
IRELAND - 0.8%
CRH Plc.		20,227		401,476
Ryanair Holdings Plc. ADR (a)		16,050		447,153
				848,629
JAPAN - 6.2%
Inpex Corp.		274		1,725,167
Namco Bandai Holdings, Inc.		95,200		1,351,130
Olympus Corp.		34,500		453,499
Rohm Co., Ltd.		16,800		781,216
Tokyo Electron Ltd.		9,700		491,476
Yamaha Motor Co., Ltd.		136,200		1,722,614
				6,525,102

The accompanying notes are an integral part of the financial statements.

Page 55

PORTFOLIO OF INVESTMENTS (continued)
December 31, 2011	Baillie Gifford Global Alpha Equity Fund

	Shares		Value
MEXICO - 1.1%
America Movil SAB de CV, Series L ADR		49,100	$	1,109,660
NETHERLANDS - 1.1%
QIAGEN NV (a)		35,900		495,779
VistaPrint NV (a)		23,301		713,011
				1,208,790
NORWAY - 0.6%
Norsk Hydro ASA		133,101		614,415
RUSSIA - 0.8%
Gazprom OAO ADR		74,050		788,924
SINGAPORE - 0.8%
DBS Group Holdings Ltd.		94,000		834,371
SOUTH AFRICA - 3.4%
Clicks Group Ltd. (a)		194,183		1,111,976
Naspers Ltd., N Shares		40,366		1,763,247
Standard Bank Group Ltd.		58,594		715,757
				3,590,980
SOUTH KOREA - 1.5%
Samsung Electronics Co., Ltd. GDR Reg S		3,350		1,538,325
SWEDEN - 4.9%
Atlas Copco AB, B Shares		107,150		2,028,371
Investor AB, B Shares		44,717		831,680
Svenska Handelsbanken AB, A Shares		86,104		2,256,405
				5,116,456
SWITZERLAND - 10.5%
ABB Ltd. (a)		44,248		831,255
Compagnie Financiere Richemont SA, Br A		36,797		1,850,989
Julius Baer Group Ltd. (a)		24,287		946,037
Nestle SA		48,103		2,762,244
Roche Holding AG - Genusschein		12,537		2,120,237
Schindler Holding AG, Participating Certificates		21,369		2,483,931
				10,994,693
TAIWAN - 1.4%
Taiwan Semiconductor Manufacturing Co., Ltd. ADR		112,200		1,448,502
TURKEY - 1.5%
Anadolu Efes Biracilik ve Malt Sanayii AS		39,749		477,975
BIM Birlesik Magazalar AS		21,035		582,504
Turkiye Garanti Bankasi AS ADR		157,647		490,282
				1,550,761
TURKMENISTAN - 0.5%
Dragon Oil Plc.		67,810		482,327

The accompanying notes are an integral part of the financial statements.

Page 56

PORTFOLIO OF INVESTMENTS (continued)
December 31, 2011	Baillie Gifford Global Alpha Equity Fund

	Shares		Value
UNITED KINGDOM - 12.6%
Aggreko Plc.		21,000	$	657,103
British American Tobacco Plc.		25,000		1,186,000
Bunzl Plc.		83,000		1,138,879
Cairn Energy Plc. (a)		141,000		579,689
Hays Plc.		426,002		423,182
HSBC Holdings Plc.		116,000		885,543
Man Group Plc.		200,000		390,305
Prudential Plc.		240,000		2,374,583
Rolls-Royce Holdings Plc. (a)		127,000		1,470,416
Vodafone Group Plc.		515,000		1,435,864
Wolseley Plc.		79,000		2,612,924
				13,154,488
UNITED STATES - 32.8%
Altria Group, Inc.		26,596		788,571
Amazon.com, Inc. (a)		8,321		1,440,365
Bed Bath & Beyond, Inc. (a)		12,782		740,973
CarMax, Inc. (a)		19,415		591,769
Cisco Systems, Inc.		39,054		706,096
Deere & Co.		11,142		861,834
eBay, Inc. (a)		55,378		1,679,615
EOG Resources, Inc.		12,550		1,236,300
FLIR Systems, Inc.		60,128		1,507,409
Google, Inc., Class A (a)		2,845		1,837,585
Illumina, Inc. (a)		11,400		347,472
International Game Technology		60,155		1,034,666
Intuitive Surgical, Inc. (a)		1,623		751,465
Markel Corp. (a)		4,152		1,721,710
Mastercard, Inc., Class A		4,464		1,664,268
Medco Health Solutions, Inc. (a)		9,241		516,572
Mohawk Industries, Inc. (a)		9,233		552,595
Moody’s Corp.		33,557		1,130,200
National Oilwell Varco, Inc.		12,021		817,308
New York Community Bancorp, Inc.		100,740		1,246,154
Omnicom Group, Inc.		33,696		1,502,168
PepsiCo, Inc.		33,198		2,202,687
Philip Morris International, Inc.		20,156		1,581,843
Praxair, Inc.		9,291		993,208
Progressive Corp. (The)		29,024		566,258
Seattle Genetics, Inc. (a)		23,900		399,489
Walgreen Co.		56,036		1,852,550
Wal-Mart Stores, Inc.		16,845		1,006,657
Walt Disney Co. (The)		27,712		1,039,200
Waters Corp. (a)		14,982		1,109,417
WellPoint, Inc.		14,258		944,593
				34,370,997
Total Common Stocks (cost $102,208,148)				101,070,979
PREFERRED STOCKS - 2.3%
BRAZIL - 2.3%
Petroleo Brasileiro SA ADR		39,900		937,251
Vale SA ADR		70,700		1,456,420
Total Preferred Stocks (cost $2,635,438)				2,393,671

The accompanying notes are an integral part of the financial statements.

Page 57

PORTFOLIO OF INVESTMENTS (concluded)
December 31, 2011	Baillie Gifford Global Alpha Equity Fund

	Value
TOTAL INVESTMENTS - 98.8% (cost $104,843,586)	$	103,464,650
Other assets less liabilities - 1.2%		1,256,134
NET ASSETS - 100.0%	$	104,720,784

(a) Non-income producing security.
ADR - American Depositary Receipt.
GDR - Global Depositary Receipt.

Reg S - is a safe harbor that defines when an offering of securities will be deemed to come to rest abroad and therefore is not subject to the registration obligations imposed under Section 5 of the 1933 Act. The regulation includes two safe harbor provisions: an issuer safe harbor and a resale safe harbor. In each case, the regulation demands that offers and sales of the securities be made outside the United States and that no offering participant (which includes the issuer, the banks assisting with the offer and their respective affiliates) engage in “directed” selling efforts. In the case of issuers for whose securities there is substantial U.S. market interest, the regulation also requires that no offers and sales be made to U.S. persons (including U.S. persons physically located outside the United States).

The accompanying notes are an integral part of the financial statements.

Page 58

STATEMENT OF ASSETS AND LIABILITIES
December 31, 2011	Baillie Gifford Global Alpha Equity Fund

ASSETS
Investments, at value (cost $104,843,586)	$	103,464,650
Cash		482,980
Foreign cash, at value (cost $741,927)		912,936
Dividends receivable		189,107
Receivable for investments sold		86,031
Other assets		94
Total Assets		105,135,798
LIABILITIES
Payable for investments purchased		331,993
Management fee payable		39,015
Servicing fee payable		26,010
Accrued expenses		17,996
Total Liabilities		415,014
NET ASSETS	$	104,720,784
COMPOSITION OF NET ASSETS
Paid-in capital	$	106,148,539
Net realized loss on investments and foreign currency transactions		(51,242	)
Net unrealized depreciation in value of investments and foreign currencies		(1,376,513	)
	$	104,720,784
NET ASSET VALUE, PER SHARE
Class 3 ($104,720,784 / 10,615,669 shares outstanding), unlimited authorized, no par value	$	9.86
Maximum Purchase Price Per Share (Note D)	$	9.88
Minimum Redemption Price Per Share (Note D)	$	9.85

The accompanying notes are an integral part of the financial statements.

Page 59

STATEMENT OF OPERATIONS
For the Period November 15, 2011* through December 31, 2011	Baillie Gifford Global Alpha Equity Fund

INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $3,106)	$	229,663
Total Investment Income		229,663
EXPENSES
Management fee (Note B)		39,015
Shareholder Servicing fees - Class 3 Shares (Note B)		26,010
Fund Accounting		9,616
Professional fees		3,851
Custody		2,884
Legal		768
Transfer Agency		740
Trustees’ fees		444
Insurance		364
Miscellaneous		123
Total Expenses		83,815
Net Investment Income		145,848
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) from:
Investments		(51,242	)
Foreign currency transactions		6,556
		(44,686	)
Net change in unrealized appreciation (depreciation) on:
Investments		(1,378,936	)
Translation of assets and liabilities in foreign currencies		2,423
		(1,376,513	)
Net realized and unrealized loss on investments and foreign currency transactions		(1,421,199	)
NET DECREASE IN NET ASSETS FROM OPERATIONS	$	(1,275,351	)

* Commencement of investment operations.

The accompanying notes are an integral part of the financial statements.

Page 60

STATEMENT OF CHANGES IN NET ASSETS Baillie Gifford Global Alpha Equity Fund

	For the Period November 15, 2011* through December 31, 2011
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income	$	145,848
Net realized loss from investments and foreign currency transactions		(44,686	)
Net change in unrealized depreciation on investments and translation of assets and liabilities in foreign currencies		(1,376,513	)
Net decrease in net assets from operations		(1,275,351	)
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income:
Class 3		(158,199	)
Total Dividends		(158,199	)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net proceeds from shares subscribed:
Class 3		105,996,135
Dividends reinvested:
Class 3		158,199
Increase in Net Assets from Transactions in Shares of Beneficial Interest		106,154,334
Total Increase in Net Assets		104,720,784
NET ASSETS
Beginning of period		—
End of period	$	104,720,784

* Commencement of investment operations.

The accompanying notes are an integral part of the financial statements.

Page 61

FINANCIAL HIGHLIGHTS Baillie Gifford Global Alpha Equity Fund

Selected data for a Class 3 Shares outstanding throughout the period:

	For the Period November 15, 2011(a) through December 31, 2011
Net asset value, beginning of period	$	10.00
From Investment Operations
Net investment income(b)		0.01
Net realized and unrealized loss on investments and foreign currency transactions		(0.14	)
Net decrease in net asset value from investment operations		(0.13	)
Dividends to Shareholders
Dividends from net investment income		(0.01	)
Net asset value, end of period	$	9.86
Total Return
Total investment return based on net asset value(c)		(1.25	)%
Ratios/Supplemental Data
Net assets, end of period (000’s omitted)	$	104,721
Ratio of net expenses to average net assets		0.64	%*
Ratio of net investment income to average net assets		1.12	%*
Portfolio turnover rate		3	%

*	Annualized.
(a)	Commencement of investment operations.
(b)	Calculated based upon average shares outstanding during the period.
(c)	Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions, if any, at net asset value during the period, and redemption on the last day of the period. Total return is not annualized for periods less than one year.

The accompanying notes are an integral part of the financial statements.

Page 62

NOTES TO FINANCIAL STATEMENTS
December 31, 2011

Note A – Organization and Accounting Policies

Each of Baillie Gifford International Equity Fund (“International Equity Fund”), Baillie Gifford EAFE Fund (“EAFE Fund”), Baillie Gifford EAFE Choice Fund (“EAFE Choice Fund”), Baillie Gifford Emerging Markets Fund (“Emerging Markets Fund”), and Baillie Gifford Global Alpha Equity Fund (“Global Alpha Equity Fund”) (each, a “Fund”, and collectively, the “Funds”) is a series of Baillie Gifford Funds (the “Trust”). The Trust is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended. The Trust is organized as a Massachusetts business trust under the laws of Massachusetts pursuant to an Amended and Restated Agreement and Declaration of Trust dated August 17, 2001, as subsequently amended. International Equity Fund, EAFE Fund, EAFE Choice Fund and Global Alpha Equity Fund offer four classes of shares, Class 1, Class 2, Class 3 and Class 4 shares, and Emerging Markets Fund offers three classes of shares, Class I, Class II and Class III shares (an unlimited number of shares are authorized, without par value). At December 31, 2011, shares issued and outstanding for the International Equity Fund were of Class 1, Class 2, Class 3 and Class 4 shares, shares issued and outstanding for the EAFE Fund were of Class 1, Class 2, Class 3 and Class 4 shares, shares issued and outstanding for the EAFE Choice Fund were of Class 2 and Class 4 shares, shares issued and outstanding for the Emerging Markets Fund were of Class III and shares issued outstanding for Global Alpha Equity Fund was of Class 3 shares.

The financial statements of the Funds have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Management is required to make certain estimates and assumptions that affect the reported amounts of assets and liabilities for the Funds and disclosure of contingent assets and liabilities for the Funds at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations for the Funds during the reporting period. Actual results could differ from those estimates.

The following is a summary of significant accounting policies followed by the Funds.

Valuation of Investments
Equity securities listed on an established securities exchange are normally valued at their last sale price on the exchange where primarily traded. Equity securities listed on the NASDAQ National Market System are valued at the NASDAQ Official Closing Price. Equity securities listed on an established securities exchange or on the NASDAQ National Market System for which there is no reported sale during the day, and in the case of over-the-counter securities not so listed, are valued at the mean between the last available bid and asked prices. Other securities for which current market quotations are not readily available (or for which quotations are not believed to be reliable due to market changes that occur after the most recent available quotations are obtained or any other reason), and all other assets, are taken at fair value as determined in good faith by Baillie Gifford Overseas Limited (the “Manager”), pursuant to procedures approved by the trustees of the Trust (the “Trustees”). The actual calculations may be made by persons acting pursuant to the direction of the Trustees or by pricing services.

Page 63

NOTES TO FINANCIAL STATEMENTS (continued)

Generally, trading in foreign securities markets is substantially completed each day at various times prior to close of regular trading on the New York Stock Exchange. Occasionally, events affecting the value of foreign fixed income securities and of equity securities of non-U.S. issuers not traded on a U.S. exchange may occur between the completion of substantial trading of such securities for the day and the close of regular trading on the New York Stock Exchange, which events may not be reflected in the computation of a Funds’ net asset values. If events materially affecting the value of the Funds’ portfolio securities occur during such period, then these securities will be valued at their fair value as determined in good faith by the Manager, pursuant to procedures approved by the Trustees. The Funds utilize a third party pricing service which for all equity securities, except those traded on a Canadian, Latin American or U.S. exchange, applies a fair value adjustment that seeks to reflect changes in such securities’ market prices since the close of the market on which they are traded. To the extent that securities are valued using this service, they will be classified as Level 2 securities in the fair value measurement framework described below.

The Funds invest in obligations of foreign entities and securities denominated in foreign currencies. Such investments involve risk not typically involved with domestic investments. Such risks include fluctuations in foreign exchange rates, inability to convert proceeds into U.S. dollars, application of foreign tax laws, foreign investment restrictions, less publicly available information about foreign financial instruments, less liquidity resulting from substantially less trading volume, more volatile prices, and generally less government supervision of foreign securities markets and issuers.

Fair Value Measurement
The Funds are subject to fair value accounting standards that define fair value, establish a framework for measuring fair value in accordance with GAAP and require certain disclosures about fair value measurements. Various inputs are used in determining the value of the Funds’ investments. These inputs are summarized in the three broad levels listed below.

Level 1 — quoted prices in active markets for identical securities

Level 2 — other significant observable inputs (including quoted prices in inactive markets for identical securities and for similar securities in active and inactive markets)

Level 3 — significant unobservable inputs (including each Fund’s assumptions in determining the fair value of investments)

The following is a summary of the inputs used as of December 31, 2011 in valuing the Funds’ assets carried at fair value:

International Equity Fund	Level 1		Level 2		Level 3
Investments in Securities
Common Stocks	$	227,412,581	$	999,345,962	$	—
Preferred Stocks		33,166,321		—		—
Total	$	260,578,902	$	999,345,962	$	—

Page 64

NOTES TO FINANCIAL STATEMENTS (continued)

EAFE Fund	Level 1		Level 2		Level 3
Investments in Securities
Common Stocks	$	168,460,229	$	1,445,897,299	$	—
Preferred Stocks		25,575,860		16,454,147		—
Total	$	194,036,089	$	1,462,351,446	$	—
EAFE Choice Fund	Level 1		Level 2		Level 3
Investments in Securities
Common Stocks	$	11,601,214	$	136,828,451	$	—
Preferred Stocks		1,760,155		—		—
Total	$	13,361,369	$	136,828,451	$	—
Emerging Markets Fund	Level 1		Level 2		Level 3
Investments in Securities
Common Stocks	$	59,619,011	$	272,039,759	$	—
Preferred Stocks		27,715,259		5,815,923		—
Total	$	87,334,270	$	277,855,682	$	—
Global Alpha Equity Fund	Level 1		Level 2		Level 3
Investments in Securities
Common Stocks	$	49,322,140	$	51,748,839	$	—
Preferred Stocks		2,393,671		—		—
Total	$	51,715,811	$	51,748,839	$	—

For the International Equity Fund fair value of Level 2 and Level 1 investments at 12/31/10 was $563,051,449 and $126,122,185, respectively. $15,358,634 was transferred out of Level 2 into Level 1 and $2,196,793 was transferred out of Level 1 into Level 2 during the fiscal year ended 12/31/11.

For the EAFE Fund fair value of Level 2 investments at 12/31/10 was $1,384,915,742. $35,012,105 was transferred out of Level 2 into Level 1 during the fiscal year ended 12/31/11.

For the Emerging Markets Fund fair value of Level 2 and Level 1 investments at 12/31/10 was $374,741,792 and $86,551,331, respectively. $27,122,019 was transferred out of Level 2 into Level 1 and $12,972,267 was transferred out of Level 1 into Level 2 during the fiscal year ended 12/31/11.

These transfers were all as a result of using third-party vendor modeling tools to reflect any (lack of) significant market movements between the time at which the Funds valued their securities and the earlier closing of foreign markets.

It is the Fund’s policy to recognize transfers in and transfers out at the fair value as of the beginning of period.

Derivative and Hedging Disclosure
GAAP requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments,

Page 65

NOTES TO FINANCIAL STATEMENTS (continued)

and disclosures about credit-risk-related contingent features in derivative agreements. The Funds did not utilize derivatives for the year ended December 31, 2011.

Foreign Currency Translation
The accounting records of the Funds are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the applicable rate of exchange to determine the value of investments, assets and liabilities. For the Funds, purchases and sales of securities, and income and expenses are translated at the prevailing rate of exchange on the respective dates of such transactions. The Funds do not isolate that portion of net realized and unrealized gains and losses on investments resulting from changes in foreign exchange rates from the impact arising from changes in market prices. Such fluctuations are included with net realized and unrealized gain or loss from investments.

Net realized foreign exchange gains and losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the differences between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds’ books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities, other than investments in securities, resulting from changes in the exchange rates.

Forward Foreign Currency Contracts
The Funds may enter into forward foreign currency contracts in connection with planned purchases or sales of securities, or to hedge against changes in currency exchange rates affecting the values of securities denominated in a particular currency. A forward exchange currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Fluctuations in the value of forward foreign currency exchange contracts are recorded for book purposes as unrealized gains or losses on foreign currency related transactions by a Fund. When forward contracts are closed, the Funds record realized gains or losses equal to the differences between the values of such forward contracts at the time each was opened and the value at the time each was closed. Such amounts are recorded in net realized gain or loss on foreign currency related transactions.

The Funds’ maximum risk of loss from counterparty credit risk is the net value of the cash flows to be received from the counterparty at the end of the contract’s life. This risk may be mitigated by having a master netting arrangement between the Funds and the counterparty which may permit the Funds to offset amounts payable by the Funds to the same counterparty against amounts to be received; and by the receipt of collateral from the counterparty by the Funds to cover the Funds’ exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable.

The Funds may be party to financial instruments with off-balance-sheet risk, primarily forward contracts, in order to minimize the impact of adverse changes in the relationship between the U.S. dollar and various foreign currencies. These instruments involve market risk in excess of the amount recognized in the Statement of Assets and Liabilities. Risks arise from the possible inability of counter parties to meet the terms of their contracts, future adverse movement in currency values and contract positions that are not exact offsets. The contract amount indicates the extent of the Funds’ involvement in such currencies.

Page 66

NOTES TO FINANCIAL STATEMENTS (continued)

At December 31, 2011, the Funds did not have any forward foreign currency contracts.

Securities Transactions and Investment Income
The Funds’ securities transactions are recorded on the trade date. Realized gains or losses on sales of investments are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date and interest income is recorded on an accrual basis.

Investment income, expenses (other than those specific to a particular class of shares), and realized and unrealized gains and losses on investments are allocated to the separate classes of shares based upon their relative net asset value on the date income is earned or expensed and realized and unrealized gains and losses are incurred.

Federal Taxes
Each Fund intends to qualify to be taxed as a “regulated investment company” under the provisions of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), and as such will not be subject to U.S. federal income tax on income (including any net realized capital gains) which is distributed in accordance with the provisions of the Code to the Funds’ shareholders. Therefore, no U.S. federal income tax provision is required.

Investment income received from investments in foreign currencies may be subject to foreign withholding tax. Whenever possible, the Funds will attempt to operate so as to qualify for reduced tax rates or tax exemptions in those countries with which the United States has a tax treaty.

In addition to the requirements of the Code, the Funds may also be subject to capital gains tax in India on gains realized upon sale of Indian securities, payable upon repatriation of sales proceeds. Any realized losses in excess of gains may be carried forward to offset future gains. Funds with exposure to Indian securities accrue a deferred liability for unrealized gains in excess of available carryforwards on Indian securities based on existing tax rates and holding periods of the securities. As of December 31, 2011, there are no deferred liabilities recorded as estimates for potential future India capital gains taxes. As of December 31, 2011, the Emerging Markets Fund recorded a receivable for Indian capital gains tax refund of $216,187.

The Funds are subject to tax accounting standards that provide guidance for how certain and uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. These standards require the evaluation of tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold would be recorded as a reduction in a tax benefit or expense in the current year. Management has evaluated the application of these standards and has determined no liabilities for income tax related expenses are required in the financial statements of the Funds. For the International Equity Fund, EAFE Fund and Emerging Markets Fund the tax periods 2008 through present remain subject to examination by the Internal Revenue Service. For the EAFE Choice Fund, the tax periods 2009 through present remain subject to examination.

Page 67

NOTES TO FINANCIAL STATEMENTS (continued)

At December 31, 2011, for Federal income tax purposes, the following Funds had capital loss carryforwards available to offset future capital gains through the years indicated. To the extent that these loss carryforwards are utilized, capital gains so offset will not be distributed to shareholders.

The Regulated Investment Company Modernization Act of 2010 (the “Act”) eliminated the eight-year carryover period for capital losses that arise in taxable years beginning after its enactment date of December 22, 2010. Consequently, these capital losses can be carried forward for an unlimited period. However, capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Additionally, post-enactment capital loss carryovers will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. For the Emerging Markets Fund, $7,004,891 is characterized as short-term capital losses and has no expiration.

Fund	Capital Loss Available Through 2016		Capital Loss Available Through 2017		Capital Loss Available Through 2018		Capital Loss No Expiration		Capital Loss Available Total
EAFE	$	7,597,549	$	3,833,395	$	10,342,233	$	—	$	21,773,177
Emerging Markets		—		—		—		7,004,891		7,004,891

During the year ended December 31, 2011, $1,319,983 and $9,320,652 of capital loss carryforwards were utilized by International Equity Fund and EAFE Fund, respectively.

Realized capital losses, currency losses and passive foreign investment company (“PFIC”) losses incurred after October 31 (“post-October losses”) within the taxable year are deemed to arise on the first business day of each Fund’s next taxable year. During the year ended December 31, 2011, the Funds shown below incurred and will elect to defer net post-October losses as indicated.

Page 68

NOTES TO FINANCIAL STATEMENTS (continued)

At December 31, 2011, the components of accumulated earnings on tax basis were as follows:

Fund	Undistributed Net Ordinary Income		Late-Year Specified Losses			Capital Loss Carryforwards			Post October Capital Losses			Net Unrealized Appreciation (Depreciation) on Investments and Foreign Currencies			Total Accumulated Earnings (Losses)
International Equity	$	597,677	$	—		$	—		$	(7,426,426	)	$	(33,779,643	)	$	(40,608,392	)
EAFE		—	$	(1,467,277	)		(21,773,177	)		(7,342,151	)		78,319,654			47,737,049
EAFE Choice		—		(39,190	)		—			(2,035,913	)		(22,323,616	)		(24,398,719	)
Emerging Markets		5,972,732		—			(7,004,891	)		(1,548,181	)		22,632,986			20,052,646
Global Alpha Equity		—		—			—			(51,242	)		(1,376,513	)		(1,427,755	)

The differences between the components of distributable earnings on a tax basis and the amounts reflected in the Statements of Assets and Liabilities are primarily due to the differing book/tax treatment of realized losses on wash sales and mark to market income on securities categorized as PFICs.

For the year ended December 31, 2011, the following reclassifications have been made on the Statement of Assets and Liabilities as a result of certain differences in the computation of net investment income and net realized capital gains under U.S. federal income tax rules and regulations versus GAAP, such as the treatment of foreign currency gains and losses and the redesignation of dividends:

Fund	Undistributed (Distributions in Excess of) Net Investment Income			Accumulated Net Realized Gains (Losses) on Investments and Foreign Currencies			Paid-in Capital
International Equity	$	(443,300	)	$	443,300		$	—
EAFE		187,471			(138,821	)		(48,650	)
EAFE Choice		23,063			(14,832	)		(8,231	)
Emerging Markets		1,585,299			(1,585,299	)		—
Global Alpha Equity		12,351			(6,556	)		(5,795	)

Page 69

NOTES TO FINANCIAL STATEMENTS (continued)

Dividends and Distributions to Shareholders
The Funds intend to distribute each year, as dividends, substantially all net investment income and net capital gains realized. All such dividends or distributions are credited in the form of additional shares of the Funds at net asset value on the ex-dividend date unless the shareholder elects to receive dividends and distributions in cash. Currently, the Funds’ policies are to distribute net investment income and net capital gains on an annual basis. Such distributions are determined in conformity with U.S. federal income tax regulations, which may differ from GAAP.

For the years ended December 31, 2011 and December 31, 2010, the tax character of the dividends paid were:

Fund	Ordinary Income				Long-Term Capital Gains
	2011		2010		2011		2010
International Equity	$	18,258,723	$	12,216,249	$	1,021,913	$	—
EAFE		32,879,327		22,623,637		—		—
EAFE Choice		3,327,188		1,295,819		2,656,778		—
Emerging Markets		—		12,532,206		8,786,194		11,767,673
Global Alpha Equity		158,199		N/A		—		N/A

For tax purposes, short-term capital gain distributions, if any, are considered ordinary income distributions.

Note B – Investment Management and Other Services

The Funds are advised and managed by the Manager. The Manager, an investment adviser registered with the SEC, is a wholly owned subsidiary of Baillie Gifford & Co.

Under an investment advisory agreement between the Manager and the Trust on behalf of the Funds, each Fund pays the Manager a quarterly management fee, in arrears, at the following annual rate of the respective Fund’s average net assets (calculated by taking the average of all determinations of net asset value made at the end of each month).

Page 70

NOTES TO FINANCIAL STATEMENTS (continued)

Fund	Management Fee
International Equity		0.30	%
EAFE		0.25	%
EAFE Choice		0.25	%
Emerging Markets		0.50	%
Global Alpha Equity Fund		0.30	%

For the year ended December 31, 2011, the Funds incurred management fees as follows:

Fund	Management Fee
International Equity	$	2,979,600
EAFE		4,251,152
EAFE Choice		358,803
Emerging Markets		2,120,458
Global Alpha Equity		39,015

Each Fund has adopted a Shareholder Servicing Plan providing that the Fund may pay the Manager, or any other entity that acts from time to time as the shareholder servicing agent with respect to a class of Fund shares, for services rendered and expenses borne in connection with the provision of services provided to Fund investors and/or the maintenance of shareholder accounts. For these services, the Funds pay the Manager a fee at the annualized rate of the Funds’ average daily net assets attributed to each class of share as follows:

	International Equity			EAFE			EAFE Choice*			Emerging Markets			Global Alpha Equity
Class 1/I		0.45	%		0.45	%		0.45	%		0.30	%		0.45	%
Class 2/II		0.27	%		0.27	%		0.27	%		0.25	%		0.27	%
Class 3/III		0.20	%		0.20	%		0.20	%		0.10	%		0.20	%
Class 4		0.17	%		0.17	%		0.17	%		N/A			0.17	%

* EAFE Choice Fund Class 3 was redeemed on April 18, 2011.

For the year ended December 31, 2011, the Funds incurred shareholder servicing fees for each class of share as follows:

	International Equity		EAFE		EAFE Choice*		Emerging Markets		Global Alpha Equity
Class 1/I	$	316,544	$	99,209	$	N/A	$	N/A	$	N/A
Class 2/II		1,622,323		2,084,339		256,412		N/A		N/A
Class 3/III		594,275		874,779		35,521		427,592		26,010
Class 4		34,200		810,273		51,423		N/A		N/A

* EAFE Choice Fund Class 3 was redeemed on April 18, 2011.

Page 71

NOTES TO FINANCIAL STATEMENTS (continued)

Note C – Investment Transactions

Purchases and proceeds from sales of securities (excluding in-kind purchases and redemptions and short-term securities) for the year ended December 31, 2011 were as follows:

Fund	Purchases		Sales
International Equity	$	756,831,099		111,760,581
EAFE		564,745,113		188,790,359
EAFE Choice		71,253,060		66,505,975
Emerging Markets		180,215,211		176,399,073
Global Alpha Equity		15,653,533		2,611,234

For the year ended December 31, 2011, the cost of in-kind purchases and the proceeds from in-kind redemptions were as follows:

Fund	Purchases		Sales
International Equity	$	84,645,054	$	—
EAFE		—		—
EAFE Choice		75,493,929		—
Emerging Markets		—		—
Global Alpha Equity		91,852,528		—

Gains and losses on in-kind redemptions are not recognized at the Fund level for tax purposes.

The Funds’ cost of investments and gross unrealized appreciation (depreciation) at December 31, 2011 for U.S. federal income tax purposes were as follows:

Fund	Cost of Investments		Gross Appreciation		Gross Depreciation			Net Appreciation (Depreciation)
International Equity	$	1,293,296,779	$	107,794,189	$	(141,166,104	)	$	(33,371,915	)
EAFE		1,578,078,043		284,657,395		(206,347,903	)		78,309,492
EAFE Choice		172,512,059		7,490,782		(29,813,021	)		(22,322,239	)
Emerging Markets		342,557,821		73,287,801		(50,655,670	)		22,632,131
Global Alpha Equity		104,843,586		2,307,513		(3,686,449	)		(1,378,936	)

Page 72

NOTES TO FINANCIAL STATEMENTS (continued)

Note D – Transactions in Shares of Beneficial Interest

	International Equity Fund
	Class 1 Shares For the Year ended December 31, 2011						Class 2 Shares For the Year ended December 31, 2011
	Shares			Amount			Shares			Amount
Shares sold		317,744		$	3,193,600			60,511,350		$	569,743,090
Redemption fees		—			661			—			5,972
Purchase premium		—			92,442			—			770,898
Shares issued in reinvestment of dividends and distributions		76,588			660,671			1,449,533			12,473,665
Shares redeemed		(265,138	)		(2,503,755	)		(10,570,958	)		(107,151,339	)
Net increase		129,194		$	1,443,619			51,389,925		$	475,842,286

	International Equity Fund
	Class 3 Shares For the Year ended December 31, 2011				Class 4 Shares For the Year ended December 31, 2011
	Shares		Amount		Shares			Amount
Shares sold		26,104,755	$	264,227,433		—		$	—
Redemption fees		—		3,008		—			187
Purchase premium		—		413,391		—			26,649
Shares issued in reinvestment of dividends and distributions		654,236		5,696,497		29,598			263,288
Shares redeemed		—		—		(159,296	)		(1,444,465	)
Net increase (decrease)		26,758,991	$	270,340,329		(129,698	)	$	(1,154,341	)

Page 73

NOTES TO FINANCIAL STATEMENTS (continued)

	International Equity Fund
	Class 1 Shares For the Year ended December 31, 2010						Class 2 Shares For the Year ended December 31, 2010
	Shares			Amount			Shares			Amount
Shares sold		6,429,370		$	58,565,548			21,187,358		$	197,769,223
Redemption fees		—			4,011			—			16,205
Purchase premium		—			90,426			—			346,429
Shares issued in reinvestment of dividends and distributions		100,220			980,900			791,115			7,775,994
Shares redeemed		(6,555,138	)		(61,133,453	)		(1,318,563	)		(11,517,276	)
Net increase (decrease)		(25,548	)	$	(1,492,568	)		20,659,910		$	194,390,575
	International Equity Fund
	Class 3 Shares For the Period September 1, 2010* through December 31, 2010						Class 4 Shares For the Period July 30, 2010* through December 31, 2010
	Shares			Amount			Shares			Amount
Shares sold		15,042,567		$	128,255,931			2,001,054		$	18,009,486
Redemption fees		—			2,837			—			983
Purchase premium		—			98,509			—			13,573
Shares issued in reinvestment of dividends and distributions		286,871			2,843,440			37,881			383,650
Net increase		15,329,438		$	131,200,717			2,038,935		$	18,407,692

*Commencement of investment operations.

Page 74

NOTES TO FINANCIAL STATEMENTS (continued)

	EAFE Fund
	Class 1 Shares For the Year ended December 31, 2011						Class 2 Shares For the Year ended December 31, 2011
	Shares			Amount			Shares			Amount
Shares sold		—		$	—			8,255,508		$	80,411,056
Redemption fees		—			721			—			25,164
Purchase premium		—			9,732			—			340,633
Shares issued in reinvestment of dividends and distributions		41,193			346,240			1,416,156			11,867,864
Shares redeemed		—			—			(23,632,453	)		(234,455,958	)
Net increase (decrease)		41,193		$	356,693			(13,960,789	)	$	(141,811,241	)
	EAFE Fund
	Class 3 Shares For the Year ended December 31, 2011						Class 4 Shares For the Year ended December 31, 2011
	Shares			Amount			Shares			Amount
Shares sold		45,553,346		$	455,761,252			5,563,608		$	49,900,000
Redemption fees		—			14,429			—			15,257
Purchase premium		—			198,341			—			210,125
Shares issued in reinvestment of dividends and distributions		999,123			8,388,124			1,120,783			9,427,671
Shares redeemed		(1,211,109	)		(10,015,023	)		—			—
Net increase		45,341,360		$	454,347,123			6,684,391		$	59,553,053

Page 75

NOTES TO FINANCIAL STATEMENTS (continued)

	EAFE Fund
	Class 1 Shares For the Year ended December 31, 2010						Class 2 Shares For the Year ended December 31, 2010
	Shares			Amount			Shares			Amount
Shares sold		6,277,444		$	51,397,000			48,708,526		$	421,789,035
Redemption fees		—			1,369			—			12,409
Purchase premium		—			45,179			—			453,389
Shares issued in reinvestment of dividends and distributions		37,102			352,363			1,132,791			10,917,409
Shares redeemed		(8,931,336	)		(83,366,730	)		(13,859,539	)		(122,918,227	)
Net increase (decrease)		(2,616,790	)	$	(31,570,819	)		35,981,778		$	310,254,015
	EAFE Fund
	Class 3 Shares For the Period April 19, 2010* through December 31, 2010						Class 4 Shares For the Year ended December 31, 2010
	Shares			Amount			Shares			Amount
Shares sold		14,118,529		$	124,954,270			3,547,856		$	29,940,000
Redemption fees		—			1,217			—			8,149
Purchase premium		—			69,127			—			297,723
Shares issued in reinvestment of dividends and distributions		213,185			2,057,412			743,569			7,188,225
Net increase		14,331,714		$	127,082,026			4,291,425		$	37,434,097
*Recommencement of investment operations.

Page 76

NOTES TO FINANCIAL STATEMENTS (continued)

	EAFE Choice Fund
	Class 2 Shares For the Year ended December 31, 2011						Class 3 Shares For the Period January 1, 2011 through April 18, 2011
	Shares			Amount			Shares			Amount
Shares sold		7,863,808		$	94,603,761			1,123,961		$	12,974,210
Redemption fees		—			46,700			—			2,949
Purchase premium		—			112,132			—			15,513
Shares issued in reinvestment of dividends and distributions		472,068			4,466,333			—			—
Shares redeemed		(282,044	)		(3,204,807	)		(6,019,552	)		(70,172,331	)
Net increase (decrease)		8,053,832		$	96,024,119			(4,895,591	)	$	(57,179,659	)

	EAFE Choice Fund
	Class 4 Shares For the Period April 19, 2011* through December 31, 2011
	Shares			Amount
Shares sold		7,485,386		$	85,142,331
Redemption fees		—			14,196
Purchase premium		—			48,523
Shares issued in reinvestment of dividends and distributions		157,773			1,517,633
Shares redeemed		(3,610,486	)		(39,359,248	)
Net increase		4,032,673		$	47,363,435
*Commencement of investment operations.

Page 77

NOTES TO FINANCIAL STATEMENTS (continued)

	EAFE Choice Fund
	Class 2 Shares For the Period Ended December 31, 2010**						Class 3 Shares For the Period January 15, 2010* through December 31, 2010
	Shares			Amount			Shares		Amount
Shares sold		4,083,379		$	41,317,200			4,832,454	$	50,906,024
Purchase premium		—			53,804			—		58,067
Shares issued in reinvestment of dividends and distributions		51,698			578,172			63,137		717,647
Shares redeemed		(3,000,728	)		(31,435,095	)		—		—
Net increase		1,134,349		$	10,514,081			4,895,591	$	51,681,738
*Commencement of investment operations.
**For the Period January 1, 2010 to January 15, 2010 and March 25, 2010 through December 31, 2010.
	Emerging Markets Fund
	Class III Shares For the Year ended December 31, 2011
	Shares			Amount
Shares sold		296,721		$	4,972,500
Redemption fees		—			11,027
Purchase premium		—			27,500
Shares issued in reinvestment of dividends and distributions		573,613			8,786,194
Shares redeemed		(337,810	)		(4,411,028	)
Net increase		532,524		$	9,386,193

Page 78

NOTES TO FINANCIAL STATEMENTS (continued)

	Emerging Markets Fund
	Class I Shares For the Period January 1, 2010 to January 15, 2010						Class II Shares For the Period January 1, 2010 to October 20, 2010
	Shares			Amount			Shares			Amount
Purchase premium		—		$	—			—		$	25,949
Shares issued in reinvestment of dividends and distributions		—			—			17,369			305,494
Shares redeemed		(3,223,085	)		(54,124,301	)		(2,751,773	)		(51,710,765	)
Net decrease		(3,223,085	)	$	(54,124,301	)		(2,734,404	)	$	(51,379,322	)
	Emerging Markets Fund
	Class III Shares For the Year ended December 31, 2010
	Shares			Amount
Shares sold		11,050,026		$	191,123,814
Redemption fees		—			20,050
Purchase premium		—			185,582
Shares issued in reinvestment of dividends and distributions		1,295,798			23,994,385
Shares redeemed		(417,973	)		(8,020,050	)
Net increase		11,927,851		$	207,303,781

Page 79

NOTES TO FINANCIAL STATEMENTS (continued)

	Global Alpha Equity Fund
	Class 3 Shares For the Period November 15, 2011* to December 31, 2011
	Shares		Amount
Shares sold		10,599,613	$	105,996,135
Shares issued in reinvestment of dividends and distributions		16,056		158,199
Net increase		10,615,669	$	106,154,334

*Commencement of investment operations.

Funds charge purchase premiums and redemption fees as follows:

Fund	Purchase Premium		Redemption Fee
	(Basis Point)		(Basis Point)
International Equity		20		15
EAFE		20		15
EAFE Choice		20		15
Emerging Markets		55		25
Global Alpha Equity		20		15

The purchase premiums and redemption fees may be waived or reduced by the Manager if the brokerage and transaction costs in connection with the purchase or redemption are minimal or in other circumstances in the Manager’s discretion.

Note E – Beneficial Ownership

The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a Fund creates a presumption of control under Section 2(a)(9) of the 1940 Act. As of December 31, 2011, Kentucky Teachers’ Retirement System owned 28.04% of the EAFE Fund; the Guardian Life Insurance Company owned 25.17%, Graphic Packaging Holdings Company owned 26.92% and the Municipal Fire & Police Retirement System of Iowa owned 47.91% of the EAFE Choice Fund; Nebraska State Investment Council owned 30.77% of the Emerging Markets Fund; and Freeport McMoran Corporation Defined Benefit Master Trust owned 100%

Page 80

NOTES TO FINANCIAL STATEMENTS (continued)

of the Global Alpha Equity Fund. Purchase and redemption activity of these accounts may have a significant effect on the operation of the Fund.

Note F – Commitments and Contingencies

Each of the Funds indemnifies the Trust’s officers and Trustees for certain liabilities that might arise from their performance of their duties to the Fund. Additionally, in the normal course of business, each Fund enters into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.

Note G – New Accounting Pronouncements

In April 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-03 “Reconsideration of Effective control for Repurchase Agreements.” The objective of ASU 2011-03 is to improve the accounting for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. Under previous guidance, whether or not to account for a transaction as a sale was based on, in part, if the entity maintained effective control over the transferred financial assets. ASU 2011-03 removes the transferor’s ability criterion from the effective control assessment. This guidance is effective prospectively for interim and annual reporting periods beginning on or after December 15, 2011. At this time, management is evaluating the implications of ASU No. 2011-03 and its impact on the financial statements has not been determined.

In May 2011, the FASB issued ASU No. 2011-04 “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”. ASU 2011-04 includes common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. ASU 2011-04 will require reporting entities to disclose the following information for fair value measurements categorized within Level 3 of the fair value hierarchy: quantitative information about the unobservable inputs used in the fair value measurement, the valuation processes used by the reporting entity and a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs. In addition, ASU 2011-04 will require reporting entities to make disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2011. Management has evaluated the implications of ASU No. 2011-04 and has determined there is no impact on the financial statements other than the additional disclosure presented.

Page 81

NOTES TO FINANCIAL STATEMENTS (concluded)

Note H – Subsequent Events

Events or transactions that occur after the financial statement date but before the financial statements are issued are categorized as recognized or non-recognized for financial statement purposes. Management of the Funds has evaluated subsequent events and has determined there were no events that required recognition or disclosure in the Funds’ financial statements.

Page 82

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees of Baillie Gifford Funds
and Shareholders of Baillie Gifford International Equity Fund,
Baillie Gifford EAFE Fund, Baillie Gifford EAFE Choice Fund, Baillie Gifford Emerging Markets
Fund and Baillie Gifford Global Alpha Equity Fund

We have audited the accompanying statements of assets and liabilities of Baillie Gifford International Equity Fund, Baillie Gifford EAFE Fund, Baillie Gifford EAFE Choice Fund, Baillie Gifford Emerging Markets Fund and Baillie Gifford Global Alpha Equity Fund, each a series of shares of beneficial interest of Baillie Gifford Funds, including the portfolios of investments, as of December 31, 2011, and the related statements of operations for the year or period then ended and the statements of changes in net assets for each of the years and periods presented in the two-year period then ended and the financial highlights for each of the years and periods presented in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2011 by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Baillie Gifford International Equity Fund, Baillie Gifford EAFE Fund, Baillie Gifford EAFE Choice Fund, Baillie Gifford Emerging Markets Fund and Baillie Gifford Global Alpha Equity Fund as of December 31, 2011, the results of their operations for the year or period then ended, the changes in their net assets for each of the years and periods presented in the two-year period then ended, and their financial highlights for each of the years and periods presented in the five-year period then ended, in conformity with accounting principles generally accepted in the United States of America.

	BBD, LLP
Philadelphia, Pennsylvania
February 24, 2012

Page 83

Supplemental Information (unaudited)

Qualified dividend income of as much as $21,076,928, $32,923,627, $3,689,142, $5,547,640 and $217,740 was taxable to the International Equity, EAFE, EAFE Choice, Emerging Markets and Global Alpha Equity Funds, respectively, through December 31, 2011. The Funds intend to designate the maximum amount of dividends that qualify for the reduced tax rate pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003.

For the year ended December 31, 2011, International Equity Fund, EAFE Choice Fund and Emerging Markets Fund designated $1,021,913, $2,656,778 and $8,786,193 as long-term capital gains dividends, respectively.

For corporate shareholders, the percentage of ordinary income distributions for the year ended December 31, 2011 qualified for the corporate dividends-received deduction for each fund is:

Fund	Dividends-received Deductions
International Equity	0.00%
EAFE	0.00%
EAFE Choice	0.00%
Emerging Markets	0.00%
Global Alpha Equity	63.19%

In January 2012, you will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the U.S. federal tax status of distributions received by you in the calendar year 2011.

Page 84

Supplemental Information (unaudited) (continued)

MANAGEMENT OF THE TRUST

The following tables set forth the Trustees and Officers of the Trust, their principal occupations during the past five years, and certain other information.

Name and Age(1)	Position(s) Held with Trust	Length of Time Served(2)	Principal Occupation During Past 5 Years(3)	Number of Funds in Fund complex overseen by Trustee
Trustees
John G. Barrie, Jr. Age: 71	Trustee	Since 2000	Retired. Formerly: Assistant Treasurer, Dominion Resources, Inc. (electric and gas utility).	5
George W. Browning Age: 70	Trustee	Since 2007	Retired. Formerly: Managing Director, Client Service, Babson Capital Management, LLC (investment manager).	5
Bruce C. Long Age: 66	Trustee	Since 2009	CEO, k STREAM LLC (financial services); Consultant, Carpenter Group (financial services); Consultant, DALBAR, Inc., (financial measurements). Formerly: Executive Vice President, Guardian Life Insurance (financial services) and director of various entities.	5
Interested Trustee
Peter Hadden(4) Age: 54	Trustee, Chairman of the Board and President	Since 2009	Partner, Baillie Gifford & Co. (investment manager); Director, Baillie Gifford Overseas Ltd. (investment adviser).	5
Officers (other than Officers who are also Trustees)
Edward H. Hocknell Age: 51	Vice President	Since 2000	Partner, Baillie Gifford & Co. (investment manager); Director, Baillie Gifford Overseas Limited (investment adviser).	N/A
Alan Paterson Age: 44	Vice President	Since 2000	Partner, Baillie Gifford & Co. (investment manager).	N/A
Dickson Jackson Age: 40	Vice President	Since 2005	Director, Investment Operations, Baillie Gifford & Co. (investment manager); Director, Baillie Gifford Overseas Limited (investment adviser).	N/A
Andrew Telfer Age: 44	Vice President	Since 2008	Partner, Baillie Gifford & Co. (investment manager); Director, Baillie Gifford Overseas Limited (investment adviser).	N/A
Peter Cooke Age: 47	Vice President	Since 2008	Partner, Baillie Gifford & Co. (investment manager); Chief Executive, Baillie Gifford Overseas Limited (investment adviser).	N/A
Nigel Cessford Age: 48	Treasurer	Since 2005	Head of Overseas Institutional Clients Accounting Department, Baillie Gifford & Co. (investment manager).	N/A
Angus N.G. Macdonald Age: 46	Secretary	Since 2000	Head of Legal for the Baillie Gifford Group (investment manager).	N/A
Graham Laybourn Age: 45	Chief Compliance Officer	Since 2005	Director, Regulatory Risk & Legal, Baillie Gifford & Co. (investment manager); Chief Compliance Officer, Baillie Gifford Overseas Limited (investment adviser).	N/A

Page 85

Supplemental Information (unaudited)(concluded)

(1)	The address of each trustee and Officer of the Trust is c/o Baillie Gifford Funds, Calton Square, 1 Greenside Row, Edinburgh, Scotland EH1 3AN.
(2)	There is no stated term of office for the trustees. The Chairman of the Board, President, Secretary, and Treasurer of the Trust are elected annually by the Trustees. Other officers may be elected or appointed by the trustees at any time.
(3)	Previous positions during the past five years with Baillie Gifford & Co., the Manager and Baillie Gifford Group are omitted if not materially different from the positions listed.
(4)	Mr. Hadden is an “interested person” (as defined in the 1940 Act) of the Trust or the Manager due to his positions with the Manager (Baillie Gifford Overseas Ltd.) and his role as an officer of the Trust.

Additional information regarding the Trustees is in the Funds’ Statement of Additional Information and is available upon request, without charge, by calling Baillie Gifford Overseas Limited at 011-44-131-275-2000.

A description of the Funds’ proxy voting policies and procedures related to portfolio securities is available without charge, upon request, by calling Baillie Gifford Overseas Limited at 011-44-131-275-2000 or on the SEC’s website at http://www.sec.gov. Shareholders may submit to the Trust claim for reimbursement of telephone charges incurred in placing such calls.

Information regarding how the Funds’ voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is also available without charge upon request by calling Baillie Gifford Overseas Limited at 011-44-131-275-2000 or by accessing the Fund’s Form N-PX on the SEC’s website at http://www.sec.gov. Shareholders may submit to the Trust claim for reimbursement of telephone charges incurred in placing such calls.

Each of the Funds files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Form N-Q is available on the SEC’s website at http://www.sec.gov. The Funds’ Form N-Q may also be viewed and copied at the SEC’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.

Page 86

Item 2. Code of Ethics.

(a)	As of December 31, 2011, the registrant has adopted a code of ethics (the “Code of Ethics”) that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.
(b)	Not applicable.
(c)	The registrant has not amended its Code of Ethics during the period covered by the shareholder report presented in Item 1 hereto.
(d)	The registrant has not granted a waiver or an implicit waiver from a provision of its Code of Ethics during the period.
(e)	Not applicable.
(f)	The registrant’s Code of Ethics is attached hereto as an exhibit

Item 3. Audit Committee Financial Expert.

The registrant’s Board of Trustees has determined that Mr. John G. Barrie, Jr., a member of the Board’s Audit Oversight Committee, is an audit committee financial expert. Mr. Barrie is “independent” for purposes of this Item 3 of Form N-CSR. Mr. Barrie formerly served in various supervisory and managerial positions in accounting and finance at Dominion Resources, Inc. and affiliates. In these positions, Mr. Barrie was extensively involved in the preparation, analysis and use of corporate financial statements. In the capacity of Assistant Treasurer of Dominion Resources, Inc., Mr. Barrie had principal responsibility for administering the investment of over $1 billion of retirement plan assets, and was involved with internal and external auditors in establishing internal controls and procedures relating to the administration and reporting of retirement plan investments.

Item 4. Principal Accountant Fees and Services.

(a) - (d)

Fees for Services Rendered to the Registrant

Fiscal Year	Audit Fees		Audit-Related Fees		Tax Fees		All Other Fees
2010	$	76,000	$	0	$	16,000	$	0
2011	$	86,000	$	0	$	20,000	$	0

Audit fees include amounts for auditing and reporting on the financial statements and the financial highlights included in the Funds annual report to the shareholders, issuance of the auditor’s consent to be included in the Funds’ annual amendment to the Registration Statement on Form N-1A, issuance of the auditor’s report on internal controls for inclusion in form N-SAR and provision of comments on the Funds’ interim financial statements (as requested). The audit fees above represent the amounts billed for services provided for the fiscal year indicated, not the amounts billed during such year.

Audit-related fees include amounts billed for assurance and related services rendered to the registrant, including consultations related to financial accounting and reporting standards. The audit-related fees above represent the amounts billed during the fiscal year indicated.

Tax fees include amounts for services rendered to the registrant for tax compliance, tax planning and tax advice, including tax return preparation and review of and participation in determining required income and capital gains distributions. The tax fees above represent the amounts billed during the fiscal year indicated.

(e) (1) Engagements that are required to be pre-approved by the registrant’s Audit Oversight Committee, “the Committee”, may be pre-approved (i) at any regular or special meeting of the Committee or (ii) by any member of the Committee, provided that such member must report, for informational purposes only, any pre-approval decisions to the Board at its next regularly scheduled meeting.

(e) (2) Not applicable.

(f) Not applicable.

(g) The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant and rendered to the registrant’s investment adviser and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant were as follows:

2010: $16,000

2011: $20,000

The amount set forth for each fiscal year includes: (i) the aggregate of amounts disclosed in Item 4 (b), (c), and (d) above for Audit-Related Fees, Tax Fees and All Other Fees, plus (ii) the aggregate amount of any non-audit fees billed to the registrant’s investment adviser and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant. This additional amount under clause (ii) for the 2010 fiscal year totaled $0 and for the 2011 fiscal year totaled $0.

(h) In evaluating the independence of the registrant’s accountant, the Audit Oversight Committee of the registrant’s Board of Trustees considered the provision of non-audit services, which were not pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X, rendered to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant and determined that the provision of such services, if any, is compatible with maintaining the principal accountant’s independence.

Item 5. Audit Committee of Listed Registrants.

Not applicable.

Item 6. Investments.

(a) The schedule of investments is included as part of the report to shareholders filed under Item 1 of this form.

(b) In accordance with Section 13(c) of the Investment Company Act of 1940, the registrant has divested itself of the following securities since the filing of its last report on Form N-CSR:

Name of Issuer	Exchange Ticker Symbol	Security Identifier (CUSIP number)	Total number of shares divested	Date securities were divested	Amount Held on Filing Date	Statute
A P Moller – Maersk	MAERSKB DC	K0514G101	13 35 49 5 28	10/18/2011 10/18/2011 10/19/2011 10/20/2011 10/21/2011	None.	Sudan Accountability and Divestment Act of 2007; Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010
Atlas Copco	ATCOB SS	049255805	9,948	10/5/2011	203,585	Sudan Accountability and Divestment Act of 2007; Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Not applicable.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable.

Item 10. Submission of Matters to a Vote of Security Holders.

Not applicable.

Item 11. Controls and Procedures.

(a) The President and Treasurer of the registrant have concluded, based on their evaluation of the effectiveness of the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act) as of a date within 90 days of the filing date of this report on Form N-CSR, that to the best of their

knowledge the design and operation of such procedures provide reasonable assurance that information required to be disclosed by the registrant in this report on Form N-CSR is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

(b) There has been no change in the registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. Exhibits.

(a)(1) Code of Ethics.

(a)(2)(i) Certification of the Principal Executive Officer required by Rule 30a-2 under the Act.

(a)(2)(ii) Certification of the Principal Financial Officer required by Rule 30a-2 under the Act.

(a)(3) Not applicable.

(b) Not applicable.

SIGNATURES

Pursuant to the requirements of the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant)		BAILLIE GIFFORD FUNDS
By	/s/ Peter Hadden
	Peter Hadden, President
Date	March 7, 2012

Pursuant to the requirements of the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By	/s/ Peter Hadden
	Peter Hadden, President
Date	March 7, 2012
By	/s/ Nigel Cessford
	Nigel Cessford, Treasurer
Date	March 7, 2012