BAILLIE GIFFORD INVESTMENT MANAGEMENT (EUROPE) LTD - … · 2020-01-23 · see that life isn’t...

BAILLIE GIFFORD INVESTMENT

MANAGEMENT (EUROPE) LTD

Investeringsforeningen Investin - K Invest Globale Aktier II

Report for the quarter ended 31 December 2019

Contents

01 Summary

02 Commentary

06 Statistics Summary

07 Market Background

08 Performance

10 Portfolio Overview

12 Transactions

14 Portfolio Characteristics

15 Governance

33 Trading

37 Valuation

43 Fund Reconciliation

45 Legal Notices

46 Report Recipients

Contacts

Diana Philip [email protected] Tel: +44 (0)131 275 2906

Chloe Darling [email protected] Tel: +44 (0)131 275 2226

Martin Long (Administrator Contact) [email protected] Tel: +44 (0)131 275 2409

Online Reporting

You can access all your reports and other up-to-date portfolio information via our secure Online Client Service site https://clients.bailliegifford.com Please note that our monthly and quarterly reporting combine to meet our obligation to provide a periodic statement under Article 60 of Europe’s Markets in Financial

Instruments Directive II (MiFID II).

Kings Cross Station, London © Anthony Weller, Archimage Images

https://clients.bailliegifford.com/

Executive Summary Report for the quarter ended 31 December 2019 01

All investment strategies have the potential for profit and loss. Past performance is not a guide to future returns.

Performance to 31 December (%)

Fund Gross

Fund Net

Benchmark

Since Inception* (Cumulative)

50.4 48.3 31.0

Since Inception* (p.a.) 14.7 14.2 9.5

One Year 35.8 35.2 29.1

Quarter 9.8 9.6 5.9

*11 January 2017 Source: StatPro, MSCI

The world has changed greatly since the Global Alpha strategy was founded, 15 years ago. Our approach to investing, at its core, has not

This approach is centred on four foundational tenets that weave together to form our 'golden thread'

We seek to avoid the morass of meaningless noise and instead focus on what matters; namely the operating progress of the companies in the Global Alpha portfolio

Valuation (after net flow of DKK 26,228,190)

30 September 2019

DKK 595,010,236

31 December 2019

DKK 680,145,609

Commentary Report for the quarter ended 31 December 2019 02

As anyone who has ever watched a young child opening a large pile of presents will attest, the joy gained from the tenth gift is invariably less than that gleaned from the first. A surfeit of excitement, an exhaustion of the senses inevitably prevails, leading to the onset of what economists term, ‘diminishing marginal utility’.

This desire for more, and its attendant sensory numbness, is what sociologists call ‘information overload’. We might think it’s a modern phenomenon, that springs from a digital world offering unlimited, instant connectivity. However, it has been around for millennia. As early as the 1st century A.D., the Roman writer Seneca the Elder commented that the abundance of books was a distraction. Following the invention of the printing press in the mid-15th century, which marked another period of information proliferation, scholars started to complain at the diminishing quality of text, as printers rushed to produce manuscripts; the noted humanist Erasmus asked, “is there anywhere on earth exempt from these swarms of new books?”

And yet the cry, ringing down through the ages, has not been to avoid reading books. But to avoid the extraneous. Instead, we should focus on publications that add insight, not those published in pursuit of self-aggrandisement.

Investment markets are bedevilled by information overload. The (egregious) belief that more is better is now common currency amongst the titans of the world’s large financial centres. Terabytes of computing power produce a rolling feed of information. Market participants, working to the nth decimal point and with a time horizon often measured in days spend untold energy forecasting what might happen next. Will the Federal Reserve move rates? What’s the most likely Brexit outcome? How will the US-China trade spat unfold? The author of this letter happens to be on the distribution list for a number of ‘market commentaries’, produced by no doubt intelligent analysts. Below are some recent excerpts:

One of the major factors buffering the unwinds has been that P/Ls have been strong this year, providing a performance cushion that keeps traders from being forced to unwind. Nope, me neither.

Bottoming growth and high valuations mean range-bound markets but larger reversals in leadership. The sequencing of this modest recovery is key to where these reversals lie.

This week the Fed was more or less ‘Goldilocks’, NFP was strong, VIX is sub 14 and earnings continue to beat.

Goldilocks!

© TIMOTHY A. CLARY/AFP/Getty Images.


Quite what relevance these comments have to the core purpose of equity market investing – namely the provision of long-term risk capital to wealth generating activity – remains a mystery. Of far greater import surely, are the following recent developments in some of your portfolio holdings. The Canadian online platform Shopify recently launched a fulfilment network that should bring material long-term benefits in terms of merchant conversion and retention rates. Reliance Jio, the Indian mobile phone operator (part of the broader Reliance Group), now has over 400 million mobile users, giving the company a huge advantage in its aim to be the leading player in the digitalisation of India. And Alibaba, China’s dominant ecommerce platform, reported sales activity of $38.4 billion on Single’s Day (11 November 2019), all of it settled through Alipay, and with every single transaction powered by the Alibaba Cloud. The ‘Fed being more or less Goldilocks’ matters not a whit to the ambition of Alibaba to become the operating system, not just for Chinese ecommerce but, more broadly, for the Chinese economy.

Our approach

Our focus on tangible improvements in a company’s operations matters infinitely more than wading through the morass of meaningless financial noise. And this has resolutely been our approach since the Global Alpha strategy was founded in May 2005.

Fifteen years ago, the iPhone had yet to make an appearance, the world’s tallest building was Taipei 101 (it’s no longer even in the top 10) and a hitherto unknown website called YouTube was about to upload its first ever video. The world has witnessed radical change over the intervening decade and a half, yet our approach to selecting stocks remains, at its core, the same. We aim to invest in well-run companies that, we believe, can grow their revenues, cash flows and earnings at above market rates for long periods of time.

Given the extraordinary change we’ve witnessed in the world over the past 15 years, it’s worth pausing for breath and reminding you, our valued client, how we think about investment.

The world has witnessed radical change over the intervening decade and a half, yet our approach to selecting stocks remains, at

its core, the same.

Our philosophy is underpinned by four main tenets that weave together to form our ‘golden thread’:

Embracing the asymmetry of returns

Long-term stewards of capital

Reward seeking, actual investors

Balance and diversification

What do these mean in practice? Taking each in turn:

Embracing the asymmetry of returns

This is one of the great joys of equity market investing. It starts with the idea that whilst your downside is capped, your upside is entirely unlimited. You buy a share at a certain price. If that company in which you’ve bought a stake goes bust, you lose 100% of your original investment. By contrast, over time, the share price might double. It might go up tenfold. Or even by a multiple of 100. You can make many times your initial stake.

© Mehaniq/Shutterstock.


This concept sounds irresistible. So why don’t all fund managers truly embrace the asymmetry of equity market returns? Well, there are two significant hurdles that investors find hard to overcome.

The first is that true asymmetry of returns requires a very long-term mindset. The stocks that go up most tend to experience savage share price dips during their ascent. Resolve is needed to ride out these short-term lumps and bumps.

The second, related hurdle is that it requires a degree of courage to hold fast when others are selling. When a stock has dropped 40%, and clients are asking why you continue to hold it, the fear of being singled out is very real. The easy course of action is to follow the herd and sell. But the right course of action demands more. If the fundamentals of an investment case haven’t changed, then we must remain resolute, secure in the belief that the long-term upside outweighs what we stand to lose from short-term bouts of stock market volatility.

Long-term stewards of capital

The stewardship of our clients’ capital is of the greatest importance and, as such, deeply embedded into our investment process. It is perhaps best viewed through the prism of duty – an obligation that sadly seems somewhat out of synch with the direction of investment markets.

Our duty to clients is to provide lasting returns in excess of those delivered by the market. Other things being equal, a company that is well managed and acts responsibly towards its employees, its customers, the environment and to shareholders will, over the long term, outperform a company that acts irresponsibly. In other words, good governance leads to superior returns.

Related to this is the duty we owe to our investee companies, to help them fulfil their potential. We do this in several ways. We build relationships with management teams to effect change where we think it is required – engagement notes are in all our quarterly reports. We also encourage businesses to commit capital for future growth, even if that means sacrificing short-term profitability. And we encourage executive teams to resist the clamour of the quarterly earnings cycle.

The stewardship of our clients’ capital is of

the greatest importance and, as such, deeply embedded into our investment process.

Reward seeking, actual investors

We see equity market investment as the provision of long-term risk capital to businesses seeking to grow.

What do we mean by that? Well, let’s look at each part of that statement in turn:

Firstly, long-term: we have no idea what a company’s share price, or indeed what stock markets will do over the next three, six or 12 months. We leave crystal ball gazing to others. But what we do know is that over sustained periods of time, five years and beyond, share prices follow the path of earnings. Thus we think in decades, rather than quarters.

Secondly, risk capital: markets crave certainty. A huge amount of work goes into analysis of the minutiae – being right of the decimal point. But look around you and you’ll see that life isn’t certain. The success of a business in years to come can never be foretold for sure. With this as a starting point, we deliberately embrace risk and uncertainty, and companies driving far-reaching structural change. We always look to the left of the decimal point.


And finally, growth: We always invest our clients’ capital in real, return-generating activities, not clever financial market instruments. Fundamentally, these are businesses that provide what people need and want. We are looking for companies that can sustainably grow their earnings by at least 10% per annum. This may not sound spectacular but with compounding year after year it can be very meaningful.

Balance and diversification

The starting point is a recognition that growth comes in many varieties. To capture this diversity in the construction of the portfolio, we group our stocks in four growth buckets.

The first of these contains the Stalwarts. These are established businesses, typically well-known brands that have the resilience to compound reliably over long periods and, as such, serve as a vital building block for the portfolio.

The second bucket is very different. Our Rapid names are not about steady compounding but transformational disruption – the ability to attack sleepy incumbents or create new markets where no such market existed before.

The third category is our Cyclical holdings. We like areas of economic activity that are under stress. Typically, as weaker players retrench, the winners grow into that vacated space. These winners often share common characteristics – they are led by versatile management teams who allocate capital counter-cyclically. They have strong balance sheets and their product or service is at little or no risk of obsolescence.

The starting point is a recognition that growth comes in many varieties.

The final group consists of our Latent holdings. These are stocks that have suffered from periods of poor operational performance. The market lazily extrapolates such difficulties. We take a different stance. We think there will be an inflection point, beyond which the future is going to be different from the past. Crucially this is not priced in.

The end result is a diversified portfolio that captures different styles of growth, a portfolio demonstrably stronger than the sum of its parts.

Outlook

The world has changed over the past 15 years. Our approach to investing our clients’ capital, at its core, has not.

As markets become ever more short term and extractive, it is vital that we remain focused on our mission. That is to look for companies which commit capital to future growth and have the vision to think decades in advance. These are the businesses that stand a good chance of growing their revenues, their cash flows and their earnings at above market rates for significant periods of time. Only by taking significant holdings in these companies and holding them for long periods can we remain confident of continuing to add value for our clients, after fees, for the next 15 years and beyond.

Statistics Summary Report for the quarter ended 31 December 2019 06

Product Overview

Baillie Gifford is primarily a bottom-up, active investor, seeking to invest in companies that it believes enjoy sustainable competitive advantages in their industries and which will grow earnings faster than the market average. This is based on our belief that share prices ultimately follow earnings. The aim of the Global Alpha investment process is to produce above average long-term performance by picking the best growth stocks available around the world by combining the specialised knowledge of Baillie Gifford’s investment teams with the experience of some of our most senior investors.

Risk Analysis Top Ten Holdings

Key Statistics

Number of Holdings 99

Number of Countries 20

Number of Sectors 10

Number of Industries 35

Active Share* 88%

Rolling One Year Turnover 22%

*Source: APT, MSCI

Asset Name % of Portfolio

Alibaba 3.2

Amazon.com 3.1

Prudential 2.9

Moody's 2.6

Alphabet Inc Class C 2.6

Mastercard 2.5

Anthem Inc 2.4

Naspers 2.3

AIA Group 2.2

Microsoft 2.0

New Purchases During Quarter

Asset Name

Teladoc

Complete Sales During Quarter

Asset Name

Persol Holdings

Market Background Report for the quarter ended 31 December 2019 07

Index Information

Regional Returns Over One Year (%) Sector Returns Over One Year (%)

Regional Returns During Quarter (%) Sector Returns During Quarter (%)

% Change in DKK

Source: MSCI

Source: MSCI

21.2

22.0

23.5

28.4

29.8

34.1

0 10 20 30 40

Emerging Markets

Developed Asia

UK

Europe ex UK

MSCI AC World

North America

16.0

23.1

24.5

24.8

25.7

26.5

26.5

27.6

29.7

30.7

50.4

0 10 20 30 40 50 60

Energy

Materials

Utilities

Consumer Staples

Health Care

Real Estate

Financials

Communication Services

Industrials

Consumer Discretionary

Information Technology

4.1

5.5

5.9

6.0

6.9

8.8

0 5 10

Developed Asia

Europe ex UK

North America

MSCI AC World

UK

Emerging Markets

-0.5

-0.2

0.1

3.0

4.5

5.3

5.3

6.0

6.4

10.6

11.4

-5 0 5 10 15

Utilities

Consumer Staples

Real Estate

Energy

Industrials

Communication Services

Consumer Discretionary

Financials

Materials

Health Care

Information Technology

Performance Report for the quarter ended 31 December 2019 08


Performance Objective

To exceed the MSCI AC World index, net dividends reinvested, by 200-300 basis points p.a., net of fees, on a rolling five year basis.

Relative Performance

This table indicates the performance of the portfolio relative to the benchmark before fees.

Fund (%) Benchmark (%) Difference (%)

Since Inception* (Cumulative) 50.4 31.0 19.4

Since Inception* (p.a.) 14.7 9.5 5.2

One Year 35.8 29.1 6.7

Quarter 9.8 5.9 3.9

Source: StatPro, MSCI

Returns Since Inception*

*11 January 2017 Source: StatPro, MSCI

0

20

40

60

80

100

120

140

160

Jan 17 Jun 17 Dec 17 Jun 18 Dec 18 Jun 19 Dec 19

Fund Benchmark

Performance Report for the quarter ended 31 December 2019 09


Stock Level Attribution

Top and Bottom Ten Contributors to Relative Performance

Since Inception* to 31 December 2019

Asset Name Contribution (%)

Amazon.com 1.8

Moody's 1.3

Mastercard 1.0

Anthem Inc 0.9

Advantest Corp 0.9

NVIDIA 0.7

Alibaba 0.7

Naspers 0.7

Shopify 'A' 0.6

Visa Inc-Class A Shares 0.6

Apache -1.5

Apple -1.3

Microsoft -0.7

EOG Resources -0.6

Bank of Ireland (Dublin) -0.5

Baidu.com ADR -0.5

Ctrip.Com International -0.4

DistributionNOW -0.4

Ryanair -0.4

AP Moller Maersk B -0.4

*11 January 2017

Source: StatPro, MSCI

One Year to 31 December 2019

Asset Name Contribution (%)

Advantest Corp 0.8

Moody's 0.6

Shopify 'A' 0.6

Seattle Genetics 0.5

Olympus 0.5

Mastercard 0.4

Teradyne 0.4

MarketAxess Holdings 0.4

Alibaba 0.3

Martin Marietta Materials 0.3

Apple -0.9

Grubhub Inc -0.4

Baidu.com ADR -0.3

Apache -0.3

EOG Resources -0.3

CyberAgent Inc -0.2

Abiomed -0.2

Anthem Inc -0.2

Pernod Ricard SA -0.2

Prosus N.V. -0.2

Portfolio Overview Report for the quarter ended 31 December 2019 10

Top Ten Holdings

Company Name Description of Business % of Portfolio

Alibaba Online commerce 3.2

Amazon.com Online retail and computing infrastructure 3.1

Prudential International life insurer 2.9

Moody's Credit rating agency 2.6

Alphabet Online search engine 2.6

Mastercard Global electronic payments network and related services 2.5

Anthem Healthcare insurer 2.4

Naspers Media and e-commerce company 2.3

AIA Asian life insurer 2.2

Microsoft Software company 2.0

Total 25.8

Sector Weights (%)

1 Financials 24.4

2 Consumer Discretionary 16.5

3 Health Care 14.0

4 Information Technology 13.9

5 Industrials 10.9

6 Communication Services 8.7

7 Materials 5.0

8 Energy 3.2

9 Consumer Staples 1.7

10 Cash 1.4

11 Real Estate 0.4

Total 100.0

Regional Weights (%)

1 North America 49.4

2 Emerging Markets 18.6

3 Europe (ex UK) 15.1

4 Developed Asia Pacific 10.4

5 UK 5.1

6 Cash and Deposits 1.4

Total 100.0

1

2

3

4

5

6

78

1

2

3

4

5

Portfolio by Growth Profile Report for the quarter ended 31 December 2019 11

Holding

Size %

Growth Stalwarts 31.1

Rapid Growth 37.2

Cyclical Growth 19.7

Latent Growth 10.6

Total %

~2.0%

Prudential

Moody's

Mastercard

Anthem

AIA

Microsoft

SAP

Olympus

Visa

Alibaba

Amazon.com

Alphabet

Naspers

Ping An Insurance

CRH

34.0

~1.0%

Pernod Ricard

Thermo Fisher Scientific

ResMed

AJ Gallagher

Schindler

Waters

Service Corporation

International

Sysmex

Broadridge Financial Solutions

Bureau Veritas

HDFC

Facebook

ICICI Bank

Reliance Industries

Prosus

Alnylam Pharmaceuticals

Shopify

Tesla Inc

Zillow

Seattle Genetics

B3

Chipotle Mexican Grill

Schibsted

TSMC

Martin Marietta Materials

EOG Resources

Banco Bradesco

Advantest

Ryanair

SMC

Markel

Atlas Copco

Teradyne

Deutsche Boerse

Richemont

MS&AD Insurance

Kirby Corp

BHP Group

Sumitomo Mitsui Trust

Apache

Sberbank

Fairfax Financial

Signify

45.1

~0.5%

Hoshizaki Electric Illumina

Meituan Dianping

MarketAxess

Teladoc

58.com

Netflix

CyberAgent

Axon Enterprise

The Trade Desk

Novocure

Genmab

Just Eat

Autohome

Myriad Genetics

Trip.com Group

LendingTree

Abiomed

Grubhub

Spotify

Chegg

Interactive Brokers Group

Mail.ru Group

Adevinta

TD Ameritrade

SiteOne Landscape Supply

Albemarle

Ritchie Bros. Auctioneers

Epiroc

Wabtec

Jefferies Financial Group

Orica

Hays

Sands China

Brilliance China Automotive

Stericycle

Bank of Ireland

M&G plc

Howard Hughes

Tsingtao Brewery

Now Inc

19.5

Source: Baillie Gifford & Co, as at 31 December 2019. Cash: 1.4%. Totals may not sum due to rounding.

Transaction Notes Report for the quarter ended 31 December 2019 12

New Purchases

Stock Name Transaction Rationale

Teladoc Teladoc is the largest telemedicine company in North America. Telemedicine provides medical care for patients via phone or video consultation. As well as being a rapidly growing area, we believe that telemedicine will play an important role in ameliorating inefficiencies in healthcare - increasing access to care while reducing costs. Teladoc's platform is beneficial to all parties including patients, benefit payers and doctors, which has garnered regulatory and governmental support to date. Via a series of acquisitions, Teladoc has become the leading player in this new industry and we believe its position will become further entrenched as scale continues to build. The Teladoc platform is being adopted by a growing number of employers and insurance schemes, and longer-term, we believe that Teladoc is well placed to become the infrastructure sitting behind 'virtual care' in the US and internationally.

Notable Additions


Albemarle Albemarle is a US-based producer of lithium compounds and speciality chemicals. Current

revenue can be roughly split into equal thirds: bromine specialities, refining solutions and lithium

and advanced materials. Both bromine specialities and refining solutions are mature businesses

in concentrated markets and are not expected to grow earnings much above mid-single digits

from here. In recognition of this, management continue to deploy cash flow from the mature

businesses into the growing lithium and advanced materials division. Albemarle currently

produces lithium from brine (Chile and US) and from rock mining (Australia). We have opted to

take advantage of recent share-price weakness and add to your position, as we believe that the

long-term structural growth in lithium demand remains unchanged.

Alphabet Inc Class C Following work looking specifically at the remaining upside for your portfolio's Rapid Growth

holdings, we have elected to increase your allocation to Alphabet. The company's core search

business now has a vast reach, but we believe it still has a long runway for growth in digital

advertising. Monetisation of news and map applications has only just begun. YouTube is now

the dominant Western platform set to further disrupt the linear TV advertising industry and

Alphabet's relatively nascent cloud computing business will combine with the above to improve

margins over the long term. Furthermore, Waymo (autonomous vehicle technology) and

Alphabet's 'Other Bets' division bring additional potential upside to the investment case. We

remain cognisant of the risks around data privacy and the company's approach to corporate

taxation. We continue to engage with management on these topics as we believe improvements

can be made to the company's disclosures when compared to global peers.

Microsoft We are continuing to build your position size in Microsoft. The competitive moat around the

company's traditional business remains deep and wide and its Azure cloud-offering is not only

highly profitable but provides fresh growth opportunities. Furthermore, the shift from licensing

software to subscription pricing for its productivity applications expands the user base while

also providing pricing power.

Olympus Held in the portfolio since February 2009, Olympus has performed well during the period. We

continue to be enthused by the company's dominant market share in gastrointestinal

endoscopes. Following a recent meeting with management, we have opted to increase your

position to an above-average-sized holding. Significant progress is being made to transform

Olympus into a more efficient business - deepening its moat as a Stalwart in the process. The

medical business has been restructured into two divisions (endoscopic and therapeutic), more

senior positions are being filled by non-Japanese individuals (positive for international business)

and cost containment for the imaging (camera) business is ongoing.

Transaction Notes Report for the quarter ended 31 December 2019 13

Complete Sales


Persol Holdings Persol is the second largest staffing company in Japan - behind Recruit. Our original thesis was predicated on a mix-shift in the business towards high-margin 'permanent recruitment' from low-margin temporary staffing contracts. Whilst this has materialised, it has been achieved (almost exclusively) by overseas acquisitions. Persol now generates ~30% of revenues overseas where we believe it has no real competitive edge over global recruitment companies, in markets that are less profitable than the tight Japanese labour market. Following what we believe to be a number of M&A mis-steps, we have decided to sell the position on your behalf.

Notable Reductions


MarketAxess Holdings MarketAxess is an electronic bond trading platform that together with Bloomberg accounts for more than 90% of electronic bond trading globally, and more than 90% of US trading volume on its own. The core security traded on its platform is US investment grade corporate bonds. The share price has performed well over recent months and we have taken the opportunity to trim the holding to fund more out-of-favour ideas elsewhere. MarketAxess remains a ~1% position.

Seattle Genetics Seattle Genetics is a biotech company that seeks to develop anticancer drugs. Antibody Drug Conjugate (ADC) technology attaches a poison to an antibody which creates a 'smart bomb' that travels through the blood targeting specific cancer cells. The company has one drug currently generating revenue - Adcetris - which targets Hodgkin's Lymphoma. There is now strong evidence that Seattle Genetics is a global leader in this technology and management appear to have executed well, to date. We still believe the company has a bright future ahead, but a moderated position in your portfolio is reflective of our view being less differentiated than that of the market following strong share price performance.

Visa Inc-Class A Shares Global Alpha first invested in Visa in November 2012 and has not traded the position since. Over that period the shares have delivered a return in excess of 400%. We continue to believe that Visa (and Mastercard, which is also held in your portfolio) is a high-quality, cash-generative business with a deeply embedded competitive advantage and that it has significant growth remaining. Visa and Mastercard are well placed to capture the vast majority of continued growth in non-cash transactions globally (ex-China, where Alibaba and Tencent dominate). However, a small reduction to your holding in Visa reflects a valuation that has noticeably expanded throughout 2019. Visa remains an above-average-sized holding.

Portfolio Characteristics Report for the quarter ended 31 December 2019 14

Portfolio Characteristics

Key Statistics

Number of Holdings 99

Number of Countries 20

Number of Sectors 10

Number of Industries 35

Active Share* 88%

Rolling One Year Turnover 22%

*Source: APT, MSCI

Our long-term, active approach to investment is reflected in a consistently low level of turnover and a high degree of active share

Stocks selected for your portfolio represent a diverse range of growth opportunities, drivers and patterns, drawing upon a broad range of underlying business activities

We take a thoughtful approach to risk, including the use of appropriate measures and bespoke, in-depth analyses to provide meaningful challenge and review for your portfolio

Active Share (%)

Source: APT, MSCI Active Share – This is a measure of how actively managed a portfolio is. “Active Share” ranges from 0% to 100%. If the fund is exactly in line with the benchmark then

“Active Share” will be 0%. If the fund has no commonality with the benchmark then “Active Share” will be 100%. Active Share is calculated by taking 100 minus

“Common Money” (the % of the portfolio that overlaps with the index). For the calculation of “Common Money”, for each stock the smaller of either the portfolio or benchmark weight is taken, and these numbers are then summed.

Rolling One Year Turnover (%)

Rolling One Year Turnover is calculated as the lesser of the sum of all purchases and the sum of all sales in each month divided by the monthly average market value, summed over 12 months. Turnover is a measure of average investment horizon, the lower the turnover the longer the average investment horizon.

0

20

40

60

80

100

Feb 17 May 17 Aug 17 Nov 17 Feb 18 May 18 Aug 18 Nov 18 Feb 19 May 19 Aug 19 Nov 19

0

20

40

60

80

100

Jan 17 Jul 17 Jan 18 Jul 18 Jan 19 Jul 19

Governance Summary Report for the quarter ended 31 December 2019 15

Voting Activity

Votes Cast in Favour

Companies 14

Resolutions 135

Votes Cast Against

Companies 5

Resolutions 11

Votes Abstained/Withheld

Companies 1

Resolutions 1

Institutional investors have begun to pay more serious attention to ESG factors in the past decade, but the ESG research industry is relatively new

Most ESG ratings companies only focus on assessing risks. Disclosure from companies is also still very limited, so those that don't invest in sustainability reporting are marked down, regardless of their underlying performance

Investors and other users of the data need to be very careful about making judgements based on such partial information

Company Engagement

Engagement Type Company

Corporate Governance Advantest Corporation, Alibaba Group Holding Limited, Alphabet Inc., CyberAgent, Inc., Naspers Limited, Ryanair Holdings plc, SMC Corporation, Seattle Genetics, Inc., Shopify Inc., Teladoc Health, Inc., Tesla, Inc.

Environmental/Social Amazon.com, Inc., Apache Corporation, CRH plc, EOG Resources, Inc., Illumina, Inc., Kirby Corporation, Martin Marietta Materials, Inc.

AGM or EGM Proposals Advantest Corporation, BHP Group Plc, CyberAgent, Inc.

Executive Remuneration MarketAxess Holdings Inc., Prudential plc, SAP SE, Stericycle, Inc.

Notes on company engagements highlighted in blue can be found in this report. Notes on other company

engagements are available on request.


ESG and the importance of ‘the bigger picture’

As we close out one decade and enter the new, it is worth a momentary pause to reflect on how far we have come with the integration of environmental, social and governance (ESG) factors into the investment process. A recently published Baillie Gifford booklet, From Universal Rights to Global Goals charted the evolution of ESG and responsible investing over the 75 years from the founding of the United Nations through to the present day. This long-view perspective highlights the fact that the recent surge of interest in ESG integration and responsible investment is a genuinely new chapter in the development of the asset management industry: whilst there is a long and venerable history of committed individuals and organisations taking principled and progressive stances on a range of different ethical issues, it is only in the past decade that institutional investors (and by extension asset managers) have begun to pay serious attention to ESG factors.

There are two powerful, compelling and interlinked reasons for this:

First, there is an increasingly high-conviction view that, over the long term, ESG integration is rapidly becoming enlightened self-interest. As we enter what might be called ‘the age of sustainability’, when almost all countries will begin to step up to the unprecedented challenge of reducing environmental impact whilst continuing to improve the quality of life for all, well-governed companies with sustainable operations will have a better chance of commercial success in the long run.

Second, there is a new-found sense of urgency and activism across a broad spectrum of investors, driven by the view that we now need to move very rapidly if we are to address climate change and a range of other pressing sustainability challenges.

These factors have led to the rapid mainstreaming of ESG and responsible investment that we have seen in 2019. However, the booklet also serves as a reminder of how recently the ESG discipline has emerged in asset management. The founding standards and principles, as well as the supporting industry bodies and service providers, all date from the last few decades. This relative youth is most apparent in the ESG ratings industry, where a number of competing providers attempt to give listed companies an overall score for their approach to


sustainability. This is, of course, a very logical thing to do: if we are going to start allocating more capital to the most sustainable firms, we will surely need to rank their performance?

However, this is no easy feat, in part because of a lack of consistent disclosure from companies on ESG issues, but also because of the more daunting intellectual challenge of weighing up and aggregating a range of very different considerations – how do you compare workers’ rights and environmental impact against governance arrangements or the social utility of a company’s core products?

To date, most ESG ratings companies have taken the more limited approach of just assessing ESG risks in a cumulative way. All companies start in the same place, regardless of their core products, and are then marked down on a range of different headings. As mentioned above, disclosure from companies is still very limited, so companies that haven’t invested in sustainability reporting also get marked down, regardless of their underlying performance. Those with the best reports and the least identified material ESG risks are the winners, regardless of their actual net impact on society. It is because of this deeply compromised approach that you can end up with some bizarre results. For example, using some ESG ratings, two holdings in your Global Alpha portfolio, Abiomed (produces life-saving heart pumps) and Tesla (electric vehicles and renewable energy production and storage technology) are judged to be less sustainable than some oil companies, fast food chains or even big tobacco. How would we even begin to explain this to someone outside of the ESG industry echo chamber?

Furthermore, even if we do just focus on ESG risks, there is no consensus on either the appropriate rating or the financial materiality of the range of risks assessed, with significant divergence across the various providers. How important is electricity consumption to Facebook, or combatting counterfeit goods to Alibaba? How risky (or otherwise) is a dual-class share structure or combined chairman and CEO role? Hidden beneath the comforting precision of a single consolidated ESG score, the seemingly objective is deeply subjective and built on limited disclosure.

The methodological limitations of the current ratings services cannot just be dismissed as the harmless teething pains of a nascent industry. As more and more investment products come to the market underpinned by such ratings, it really does matter whether they are funnelling money to the right companies. One of the logical downsides of a process that only looks at perceived risks is to discourage investment in innovative

companies just at a time when we need innovation more than ever if we are to keep improving livelihoods whilst also transitioning to a net-zero carbon economy.

Major social advances are rarely incremental and cautiously controlled. Much of the remarkable progress in quality of life over the last few centuries was the result of calculated, innovative risk taking. Presumably, if they had been around at the time, the ESG ratings providers would have given a ‘severe risk’ warning to the Edison Electric Illuminating Company and its efforts to replace (explosive and flammable) gas lighting with electricity. The Ford Motor Company would have been slammed for ESG risks to motorists and pedestrians alike, and Merck & Co would have been excluded from all of the best ESG indexes for its pioneering efforts to commercialise the production of newly discovered penicillin. Indeed, in almost any walk of life, we would quickly encounter fundamental problems if we only thought about the risks, rather than weighing these up against the opportunities – investing, going to the doctor’s surgery, or even commuting to work. ESG is no different.

To use a different analogy, rating companies on ESG risks but not ESG opportunities is akin to rating football/soccer players on their track record of giving away penalties, whilst ignoring their goal scoring performance. We are not suggesting that any of this is easy, and to be fair the ESG ratings providers are clear about what their assessments cover – it is investors and other users of the data who need to very careful about making judgements based on partial information, or building sustainable investment products or fund-level


assessments based on these ratings alone. There needs to be much more transparency in this respect if ESG integration and responsible investment are to keep growing in importance and stature.

Finally, disruptive innovation also requires genius and conviction, and personality traits that won’t necessarily conform to the standard governance rulebook. For all of the above reasons, we do our own in-house research on ESG issues, and always try to look at the big picture for our holdings, weighing up the overall risks and opportunities in the context of the wider investment case.

To finish where we started, we are heading into a really important decade, when we will need all of entrepreneurial capitalism’s creative energy to address climate change and a range of other sustainability challenges. We should be celebrating and supporting calculated risk taking by companies that are contributing to social and environmental progress, and renewing our efforts to back the most innovative companies that will be part of the solution rather than part of the problem. We also, of course, need to step up the pressure on genuine ESG laggards. It is therefore more important than ever that the ESG industry develops a more sophisticated approach to rating companies on sustainability to ensure that precious capital and energy is deployed in all of the right places.

Governance Engagement Report for the quarter ended 31 December 2019 19

Company Engagement Report

Advantest Corporation Advantest provides testing for semiconductor and component products. We contacted the company to advise that we had voted in favour of all proposals at its annual general meeting. Management requested a meeting to discuss various ESG initiatives. Advantest has been recognised in Japanese media for promoting female participation in the workforce, having appointed a woman to the board in 2018, and has made English the official language of board meetings to help non-Japanese directors contribute to discussions. We also heard about experiments aimed at facilitating a healthy corporate culture, and progress against internal targets. One interesting insight was that the company is increasing the percentage of females in its graduate intake, but that progress to management level in Japan will take longer than in non-Japanese branches. We also discussed continued experiments with the integrated report - this year's was modelled on a UK strategic report - and how to improve disclosure in areas such as executive remuneration.

Alibaba Group Holding Limited The fact that Alibaba's partners took 18 months to agree on the company's six core values suggests that they are more than typical corporate speak. Daniel Zhang, chairman and CEO, believes these values codify the lessons and beliefs that Alibaba's co-founders historically passed on verbally to new employees - a sensible move as the company now has over 100,000 employees and aims to flourish into the next century. Values are disseminated widely as partners move between parts of the business. Zhang also spoke about the challenges caused by regulatory scrutiny. In addition to approaching regulators as early as possible ahead of new product announcements, the company is taking steps to build trust and understanding. For example, Ant Financial and AliCloud have built training tools to help regulators grasp the capabilities, implications and potential benefits of concepts such as the blockchain.

Amazon.com, Inc. We visited Amazon's fulfilment centre in Dunfermline to learn more about employee pay and working conditions. Our tour walked us through the fulfilment process, from receiving an order to completion and dispatch. This was followed by a discussion with the general manager. In recent years, the company has raised wages of warehouse staff in the US and UK to $15 and £9.50 per hour, which is in line with living wage recommendations. Additional benefits including private healthcare, further education funding and subsidised travel, ensure that pay and conditions are competitive relative to industry peers for unskilled positions. We are supportive of the company's efforts to improve working conditions and encouraged managers to provide health and safety data to allow us to monitor progress in this area. We had a subsequent call with lead independent director, Jon Rubinstein, and Kara Hurst, the head of sustainability. We discussed Amazon's Climate Pledge and ambition to be a leader in meeting the Paris Agreement goals. Rubinstein provided insight on how the board operates, supports the management team, identifies and recruits new directors and thinks about succession planning. We are fortunate to have access to key individuals that can help us understand the company's operations and corporate governance.

Apache Corporation We met Ken Neupert, the vice president for health, safety, security and environment, and other members of management to discuss corporate governance and sustainability. The board has been refreshed, with new independent director Juliet Ellis providing investment expertise. More resource has also been added to the core sustainability team, with the appointment of a specialist environmental manager. The company aspires to be a leader in ESG reporting. Its latest sustainability report complies with Task Force on Climate-related Financial Disclosures (TCFD) and is indexed against the Sustainability Accounting Standards Board (SASB). We believe Apache can do more to show how its approach influences its core operations and resilience of the business. We recommended providing scenario analysis, evaluating how the company's future carbon performance would compare to the targets in the Paris Agreement.



CRH plc Our investors and Governance and Sustainability team met the new chairman of CRH, Richie Boucher. Our conversation focused on long-term strategy, board composition, remuneration and the company's approach to carbon. We asked for a separate call to focus on carbon and this was set up a few weeks later with CRH's head of sustainability. While cement accounts for 10% of revenue, carbon produced from cement makes up 80% of the company's CO2 emissions. It has worked to reduce emissions at every stage of production. CRH is now looking at carbon capture technology to help improve efficiencies and reduce carbon emissions further. We were impressed by this proactive approach, and the transparency of its reporting is industry leading. We plan to follow up next year with a site visit. We will also have a call with the chairman to provide more detailed feedback on remuneration.

EOG Resources, Inc. We continued to engage with EOG by attending a field tour and operations visit in Midland, Texas. Over two days, the company provided a detailed explanation of how sustainability is embedded in its operations. We met over 30 employees, from COO Billy Helms to field engineers. EOG aims to be among the S&P 500's best companies and believes its distinctive culture, decentralised structure and technical proficiency enhances resilience to threats from climate change and decarbonisation. The company has cut methane emissions by 45% and increased the proportion of reused water from 6% to 21%. It is also investing in electronic fracturing fleets and solar energy, which will reduce reliance on diesel engines, providing significant environmental benefits and cost savings. Overall, we were impressed by EOG's approach to sustainability. The focus on improving its environmental impact seems aligned with ambitions to remain a best in class operator. Furthermore, innovation, emission reductions and improved water usage are grounded in efforts to remove costs and increase business efficiency. While vulnerable from the broader transition risk of decarbonisation, EOG is progressing in the areas it can control, and this should improve the resilience of the business.

Illumina, Inc. A discussion with CEO Francis deSouza helped us understand Illumina's operational progress and its contributions to society. He emphasised the significance of Illumina's collaboration with the UK National Health Service in sequencing genomes at vast scale. The opportunity is particularly significant from a societal perspective, as 95% of people have a gene variant that influences how they react to drugs, and billions of dollars are spent addressing adverse reactions. Large scale genome sequencing could deliver more personalised treatments, more efficiently. Uses vary from early diagnosis of genetic disease in children to pre-surgery checks for reactions to anaesthesia, and appropriate drug dosage based on a patient being able to metabolise drugs. We also discussed data privacy. Around 40% of customers store their genetic data in the Illumina cloud, but deSouza underlined Illumina's philosophy of acting as a good steward of customer data.

Kirby Corporation Kirby is among the larger contributors to Global Alpha's carbon footprint, although it doesn't disclose emissions details, so this rank is based on industry estimates. We met the director of environmental compliance, Morgan Johnson, at the company's Houston headquarters to discuss Kirby's approach to sustainability. Johnson explained that while it complies diligently with relevant regulations, Kirby's reporting is still developing. The company is working to codify and quantify data to improve its environmental impact. Initiatives include investing in tier four diesel engines which comply with US Environmental Protection Agency standards, using ultra-low sulphur fuel in all vessels, and working to improve logistics. The company believes it compares well with peers and is maintaining strong stakeholder relationships. We encouraged management to reflect these efforts in future sustainability reports, inlcuding specific disclosure of total emissions data and long-term objectives.



Martin Marietta Materials, Inc. Martin Marietta is a top-ten contributor to Global Alpha's carbon footprint. In recent years we have pursued a rather frustrating line of engagement with the company to encourage better disclosure of its environmental impact. We met Kirk Light, cement division president, at the company's Texas cement plant, to learn more about its approach to sustainability. Light explained that the company has invested over $1 billion in improving the efficiency of its cement facilities since 2014, including alternative fuel systems, water re-use and other patented technologies. These deliver environmental and financial benefits. Martin Marietta is also collaborating with the Portland Cement Association and Massachusetts Institute of Technology Concrete Sustainability Hub to improve cement design, reduce carbon emissions and inform future technologies. Our discussions reinforced our view that Martin Marietta is focused on operational excellence and has been underreporting its efforts to reduce its environmental footprint. The 2018 sustainability report provided a better explanation of the company's efforts and we received reassurances that the 2019 report will include firmwide emissions data along with reduction targets. The company, and the broader cement industry, have made strides to improve the environmental profile. Further improvements will rely on regulatory and policy initiatives as well as emerging carbon capture technologies.

Naspers Limited Our investment managers and Governance & Sustainability team had a call with Naspers' investor relations and chief people officer to discuss remuneration. Naspers made improvements to remuneration last year, and we supported it for the first time after years of taking voting action. The call aimed to suggest further improvements. Key for us is disclosure of targets attached to metrics in the remuneration policy. We asked for a follow-up call to discuss broader environmental, social and governance topics. This took place a few weeks later with the head of legal, company secretary and the chief people officer. We discussed the demerger process and progress regarding the listing of Prosus earlier in 2019, plus the potential changes to board composition at Naspers as a result. We also discussed the governance structure at Prosus and fed back on ways we felt it could be improved. We will follow up in the New Year.

Ryanair Holdings plc An investment manager and a member of our Governance and Sustainability team met Ryanair's company secretary in our offices. We discussed the evolving company structure and resulting changes among the management team, progress with unions, opening of new routes and bases, treatment of voting rights in a hard Brexit scenario and remuneration which received low support at the 2019 AGM (we opposed on behalf of our clients). Having engaged with members of the board as part of a collaborative meeting with other shareholders after the AGM in September, we have now requested a meeting with the incoming chairman. We hope to arrange this for early 2020 and plan to discuss issues we believe are material to the sustainability of Ryanair's business model and our investment thesis.

SAP SE We had a call with investor relations for a high-level discussion on the remuneration committee's proposed changes to remuneration policy in 2020. The detail will be available next year, but the direction of travel sounds positive. We have opposed remuneration in the past because of concerns over how stretching the targets are, and alignment with strategy. The proposed changes will result in better alignment, and we are pleased that our feedback has been taken into consideration. We look forward to reading the detail and hope the changes are sufficient for us to support.

Shopify Inc. Harley Finkelstein, the chief operating officer, stressed that Shopify should do whatever merchants require. The company has the potential to be the world's first retail operating system, comprising aggregated marketing, fulfilment, finance and more - whereby brands can maintain their direct-to-consumer relationships rather than passing through intermediated department stores or platforms. Finkelstein sees this as further democratisation of the internet. Commenting on the move into fulfilment this year, he noted that it is a distraction for brands which otherwise should focus on their products and marketing/positioning, and a problem Shopify can help to address.

SMC Corporation SMC, a pneumatic equipment manufacturer, has long demonstrated a traditional Japanese approach to corporate governance, with minimal board independence and low dividend payments. We have frequently engaged with the company on these topics. This year, the chairman's son became representative director, offering potential governance improvements. We met him and subsequently wrote a letter conveying our shared ambition to improve SMC's corporate governance to promote long-term value creation.



Stericycle, Inc. Following our engagement in June, we had a follow-up call with Stericycle to discuss final changes to executive remuneration policy. The company has responded to our suggestions to move the return on invested capital (ROIC) metric from the annual bonus to the long-term incentive plan (LTIP), place a greater weighting on performance-based awards, and introduce a total shareholder return modifier. One outstanding area is the length of the performance period in the LTIP, which is three annual targets rather than a single three-year objective. The board decided that, given ongoing uncertainty due to investment in a new enterprise resource planning system and portfolio rationalisation, moving to a single three-year target was not possible. However, the intention is to do so in future. We are encouraged by the changes and believe the company has responded to shareholder feedback. We look forward to engaging further.

Teladoc Health, Inc. We visited Teladoc to meet the new CFO, Myla Murthy. Teladoc is a telemedicine business in which we have recently taken a holding given its potential to address growing healthcare needs by offering cheaper and more convenient medical advice. During our meeting we explored the growth opportunity and tried to develop our understanding of the company culture - this takes time. With Murthy being new to the company, and the role, it was helpful to get her initial impressions.

Tesla, Inc. We had a call with Chairwoman Robyn Denholm to discuss plans to develop Tesla's corporate governance and her views on the business more generally. Denholm explained that successful execution of strategy remains the number one priority and she has been impressed by accelerating operations in Shanghai. The senior management team was described as strong, working well together and using the board more regularly for advice and support. Denholm is focused on the role of board members as constructive stewards of the business and maintains regular one-to-one dialogue with management, including CEO Musk. Work is ongoing to refresh the board and implement changes to the bylaws and articles. Efforts to reform the latter were frustrated at the 2019 AGM due to low shareholder turnout, and plans are in place to address this in 2020. We believe she has had a positive influence since her appointment, and we are supportive of her work to facilitate Tesla's long-term mission.

Voting Report for the quarter ended 31 December 2019 23

Votes Cast in Favour

Company Meeting Details Resolution(s) Voting Rationale

Microsoft Annual 04/12/19

5 We supported a shareholder proposal requesting that the company produce enhanced disclosure on gender pay disparities across their business.

Companies Voting Rationale

Adevinta Asa A, Autohome Inc - ADR, BHP Group PLC, Broadridge Financial Solutions, CyberAgent Inc, Hays, Microsoft, Myriad Genetics Inc, Orica, Pernod Ricard SA, Ping An Insurance, Prudential, ResMed, Trip.com Group

We voted in favour of routine proposals at the aforementioned meeting(s).

Votes Cast Against


BHP Group PLC AGM 17/10/19

21, 22 We opposed two shareholder proposals requesting amendments to the company's constitution and suspension of specific trade association memberships as we do not believe they are in shareholders' best interests.

CyberAgent Inc AGM 13/12/19

2.9-2.11, 3.1-3.3

We opposed the election of two outside directors and four inside directors, due to ongoing concerns over board composition.

Microsoft Annual 04/12/19

4 We opposed a shareholder proposal requesting a report on employee representation at board level as we believe it to be overly prescriptive and of limited value to shareholders.

Pernod Ricard SA MIX 08/11/19

E.16 We opposed the authority to issue shares via private placement as we do not believe this is in our clients' best interests.

ResMed Annual 21/11/19

3 We opposed the executive compensation policy as it includes a retesting provisions which we do not believe provides alignment with shareholders.

Votes Abstained


CyberAgent Inc AGM 13/12/19

2.1 We abstained on the election of the president, due to ongoing concerns over board composition.

Votes Withheld We did not withhold on any resolutions during the period.

Summary Transaction Listing Report for the quarter ended 31 December 2019 24

Proceeds

(DKK)

Book Cost

(DKK)

Profit/Loss

(DKK)

Total Purchases 78,210,738

Accrued Interest 0

78,210,738

Total Sales 52,075,448 -43,359,400 8,716,048

Accrued Interest 0

52,075,448 -43,359,400 8,716,048

Total Net Investment/Disinvestment 26,135,290

Net Accrued Interest 0

Total 26,135,290

Transaction Listing Report for the quarter ended 31 December 2019 25

Last Trade

Date

Asset

Name

Quantity

Price

Proceeds

(DKK)

Book Cost

(DKK)

Profit/Loss

(DKK)

Quantity

Balance

Book Cost

Balance (DKK)

Purchases

09/12/19 58.Com Inc Adr 726

USD 59.18

290,610 8,935 3,793,199

18/11/19 Adevinta

(Rights Take Up) 292

NOK 0.20

2,473 24,014 1,208,491

10/12/19 Advantest Corp 3,000

JPY 5,376

999,964 20,400 3,571,691

10/12/19 AIA Group 23,000

HKD 76.88

1,526,830 212,600 12,135,195

09/12/19 AJ Gallagher & Co 1,487

USD 92.28

926,609 13,286 6,498,143

09/12/19 Albemarle 1,327

USD 66.27

597,766 8,237 4,296,945

09/12/19 Alibaba 2,082

USD 196.51

2,768,480 15,643 17,610,967

09/12/19 Alnylam Pharmaceuticals 1,191

USD 120.22

969,722 9,034 5,186,550

12/12/19 Alphabet Inc Class C 558

USD 1,326.53

5,000,305 1,953 14,581,573

09/12/19 Amazon.com 211

USD 1,768.86

2,527,390 1,691 16,574,931

09/12/19 Anthem Inc 1,133

USD 281.62

2,160,845 8,251 13,095,377

09/12/19 Apache 3,455

USD 20.57

480,736 34,835 8,083,231

10/12/19 Atlas Copco B 3,729

SEK 307.40

804,450 27,334 4,822,329

09/12/19 Axon Enterprise Inc 716

USD 72.52

351,212 7,506 3,345,531

09/12/19 B3 S.A. 10,300

BRL 48.01

817,387 77,000 3,959,493

09/12/19 Banco Bradesco Pref 16,200

BRL 34.30

900,113 130,280 6,653,031

10/12/19 BHP Group PLC 4,756

GBP 16.89

709,623 40,652 6,051,433

10/12/19 Brilliance China Automotive 112,000

HKD 8.54

823,399 628,000 4,506,184

09/12/19 Broadridge Financial

Solutions

834

USD 122.93

692,191 7,176 6,067,088

10/12/19 Bureau Veritas 4,354

EUR 22.64

738,946 31,379 5,058,261

09/12/19 Chipotle Mexican Grill 136

USD 804.42

738,473 954 3,635,086

10/12/19 CRH 4,102

GBP 29.08

1,060,279 39,637 8,904,453

16/10/19 CyberAgent Inc 700

JPY 4,148

180,653 15,900 4,297,328

10/12/19 Deutsche Boerse 646

EUR 137.51

663,891 5,157 4,361,491


Last Trade

Date

Asset

Name

Quantity

Price

Proceeds

(DKK)

Book Cost

(DKK)

Profit/Loss

(DKK)

Quantity

Balance

Book Cost

Balance (DKK)

09/12/19 EOG Resources 2,124

USD 72.62

1,044,540 14,985 9,023,027

29/10/19 Epiroc B 4,449

SEK 102.22

315,661 48,830 2,987,784

09/12/19 Facebook 814

USD 198.80

1,093,316 6,781 7,617,817

09/12/19 Fairfax Financial Holdings 142

CAD 598.50

433,328 1,811 5,694,539

10/12/19 Genmab 186

DKK 1,588.55

295,529 2,213 2,692,684

10/12/19 HDFC Corp 5,143

INR 2,241.07

1,095,434 43,112 8,019,795

18/12/19 Hoshizaki Corp 400

JPY 9,995

246,126 400 246,126

09/12/19 ICICI Bank ADR 15,429

USD 14.03

1,465,484 92,074 6,443,362

09/12/19 Illumina 230

USD 326.92

508,599 2,253 5,087,164

10/12/19 Just Eat 5,296

GBP 7.82

369,880 44,092 3,043,884

15/10/19 LendingTree 75

USD 318.44

161,829 1,509 3,076,080

09/12/19 Markel 77

USD 1,137.45

593,318 856 5,964,403

15/10/19 MarketAxess Holdings 70

USD 348.93

165,505 2,561 3,917,695

09/12/19 Martin Marietta Materials 758

USD 269.26

1,382,294 5,383 7,759,887

09/12/19 Mastercard 1,193

USD 288.88

2,333,904 8,579 11,636,862

10/12/19 Meituan Dianping 8,600

HKD 97.54

722,426 50,500 3,047,155

09/12/19 Microsoft 4,380

USD 149.69

4,422,760 13,185 11,027,268

09/12/19 Moody's 1,505

USD 229.00

2,333,909 11,256 12,456,030

10/12/19 MS&AD Insurance 4,300

JPY 3,581

956,142 38,100 7,885,730

15/10/19 Myriad Genetics Inc 743

USD 29.81

150,071 17,395 3,359,601

10/12/19 Naspers 1,939

ZAR 2,062.33

1,849,261 14,305 13,746,095

09/12/19 Netflix Inc 149

USD 304.25

306,634 1,787 3,699,804

29/10/19 Novocure Ltd 644

USD 71.59

310,591 6,975 2,477,992

10/12/19 Olympus 19,700

JPY 1,551

1,906,025 107,000 7,590,678

10/12/19 Pernod Ricard SA 1,195

EUR 163.26

1,462,372 8,412 9,225,051


Last Trade

Date

Asset

Name

Quantity

Price

Proceeds

(DKK)

Book Cost

(DKK)

Profit/Loss

(DKK)

Quantity

Balance

Book Cost

Balance (DKK)

10/12/19 Ping An Insurance 15,000

HKD 90.48

1,171,970 137,000 9,252,117

10/12/19 Prosus N.V. 1,379

EUR 60.62

624,757 14,295 6,963,430

10/12/19 Prudential 20,805

GBP 13.43

2,474,041 154,148 18,661,016

10/12/19 Reliance Inds. GDR 2,733

USD 42.50

783,458 25,411 6,119,200

09/12/19 ResMed 1,195

USD 148.06

1,195,253 9,118 6,350,502

10/12/19 Richemont 1,391

CHF 73.98

702,161 9,934 5,112,782

09/12/19 Ritchie Bros Auctioneers

(USA)

1,148

USD 43.42

337,136 13,769 3,063,967

10/12/19 Ryanair 5,320

EUR 13.44

539,716 63,398 6,816,549

10/12/19 SAP 1,871

EUR 121.12

1,693,529 13,699 10,163,757

10/12/19 Sberbank Spon ADR 4,912

USD 14.87

493,638 54,012 5,260,880

10/12/19 Schibsted 4,193

NOK 263.07

810,442 25,406 4,323,911

10/12/19 Schindler 361

CHF 246.12

606,984 4,555 6,470,539

29/11/19 Seattle Genetics 929

USD 103.65

653,306 11,397 4,988,089

09/12/19 Service Corp.Intl. 2,236

USD 44.73

675,243 22,063 6,232,005

09/12/19 Shopify 'A' 346

USD 355.91

834,309 2,475 3,439,708

10/12/19 Signify NV 3,629

EUR 27.13

735,763 25,760 5,410,064

15/10/19 SiteOne Landscape Supply 330

USD 75.10

167,928 7,308 3,231,496

10/12/19 SMC 200

JPY 50,044

622,248 2,200 5,172,553

01/10/19 Spectrum Brands Holdings

Inc

(Stock Introduction)

1

USD 0.00

0 606 231,236

09/12/19 Spotify Technology SA 290

USD 146.94

288,230 2,649 2,991,322

10/12/19 Sumitomo Mitsui Trust 3,000

JPY 4,131

768,548 22,600 5,653,826

10/12/19 Sysmex Corp. 1,700

JPY 7,478

790,497 14,300 6,506,131

09/12/19 TD Ameritrade Holding Corp 1,150

USD 51.10

397,517 13,815 4,721,497

09/12/19 Teladoc 1,865

USD 71.95

914,186 6,985 3,326,854

09/12/19 Teradyne 1,672

USD 63.86

720,913 13,498 3,692,177


Last Trade

Date

Asset

Name

Quantity

Price

Proceeds

(DKK)

Book Cost

(DKK)

Profit/Loss

(DKK)

Quantity

Balance

Book Cost

Balance (DKK)

09/12/19 Tesla Inc 164

USD 341.11

378,388 2,336 4,536,881

29/10/19 The Trade Desk 220

USD 209.70

310,793 2,259 3,128,624

09/12/19 Thermo Fisher Scientific 424

USD 309.56

886,551 4,412 6,691,411

29/10/19 Trip.com Group 1,473

USD 31.29

310,498 15,075 4,281,850

09/12/19 TSMC ADR 3,843

USD 53.65

1,396,165 26,242 7,034,074

09/12/19 Visa Inc-Class A Shares 1,247

USD 182.49

1,539,497 8,776 7,845,038

09/12/19 Waters 598

USD 225.76

914,246 4,551 6,040,998

09/12/19 Zillow Group Inc Class C 3,188

USD 37.89

815,539 20,299 5,961,327

Total Purchases 78,210,738


Last Trade

Date

Asset

Name

Quantity

Price

Proceeds

(DKK)

Book Cost

(DKK)

Profit/Loss

(DKK)

Quantity

Balance

Book Cost

Balance (DKK)

Sales

08/10/19 58.Com Inc Adr 896

USD 48.47

294,971 -382,302 -87,331 8,209 3,502,589

18/11/19 Adevinta Rights Issue

(Rights Take Up) 23,722

NOK 0.20

2,429 -2,429 0 0 0

04/12/19 Adevinta Rights Issue

(Fraction) 0

NOK 0.00

64 0 64 0 0

09/12/19 Advantest Corp 1,700

JPY 5,490

580,740 -272,273 308,467 18,600 2,978,989

09/12/19 AIA Group 11,200

HKD 78.98

764,802 -628,905 135,896 194,200 10,904,767

25/11/19 AJ Gallagher & Co 671

USD 91.44

415,453 -321,265 94,188 12,417 5,945,073

25/11/19 Albemarle 702

USD 65.66

312,091 -372,739 -60,648 7,411 3,934,996

06/12/19 Alibaba 1,331

USD 192.64

1,733,148 -1,463,816 269,332 14,387 15,912,952

06/12/19 Alnylam Pharmaceuticals 872

USD 116.89

688,630 -473,564 215,065 8,246 4,542,115

25/11/19 Alphabet Inc Class C 86

USD 1,302.83

758,662 -594,020 164,642 1,431 9,884,221

06/12/19 Amazon.com 134

USD 1,760.17

1,594,028 -1,280,325 313,704 1,551 14,915,994

06/12/19 Anthem Inc 696

USD 288.16

1,355,196 -1,075,702 279,494 7,530 11,714,372

25/11/19 Apache 2,105

USD 23.54

335,545 -509,982 -174,437 31,380 7,602,494

25/11/19 Atlas Copco B 1,434

SEK 311.37

314,364 -247,893 66,471 25,405 4,391,725

25/11/19 B3 S.A. 3,700

BRL 48.76

292,000 -182,441 109,559 71,200 3,510,759

25/11/19 Banco Bradesco Pref 8,200

BRL 33.77

448,151 -415,494 32,657 118,280 5,993,245

25/11/19 Bank of Ireland (Dublin) 7,205

EUR 4.40

236,710 -350,948 -114,237 94,402 4,598,218

06/12/19 BHP Group PLC 1,836

GBP 17.03

277,001 -272,718 4,283 37,158 5,519,415

09/12/19 Brilliance China Automotive 48,000

HKD 8.61

356,720 -344,254 12,467 566,000 4,059,325

25/11/19 Broadridge Financial

Solutions

325

USD 121.47

267,310 -275,331 -8,021 6,713 5,687,071

25/11/19 Bureau Veritas 4,035

EUR 22.39

674,730 -645,212 29,518 28,508 4,561,400

25/11/19 Chipotle Mexican Grill 56

USD 774.81

293,796 -206,111 87,685 889 3,272,013

25/11/19 CRH 1,377

GBP 29.10

348,063 -305,792 42,271 37,054 8,228,612

09/10/19 CyberAgent Inc 1,400

JPY 4,020

358,180 -379,167 -20,988 15,200 4,116,675


Last Trade

Date

Asset

Name

Quantity

Price

Proceeds

(DKK)

Book Cost

(DKK)

Profit/Loss

(DKK)

Quantity

Balance

Book Cost

Balance (DKK)

25/11/19 Deutsche Boerse 276

EUR 137.61

283,752 -229,944 53,808 4,801 3,999,860

06/12/19 EOG Resources 1,432

USD 72.95

705,782 -879,346 -173,564 13,756 8,403,948

25/11/19 Epiroc B 5,412

SEK 101.65

379,453 -326,732 52,721 47,928 2,932,593

06/12/19 Facebook 469

USD 199.85

633,198 -516,442 116,755 6,211 6,839,282

08/10/19 Genmab 198

DKK 1,341.67

265,598 -234,157 31,440 2,027 2,397,155

09/12/19 HDFC Corp 2,399

INR 2,264.12

515,227 -438,279 76,948 39,213 7,163,917

06/12/19 ICICI Bank ADR 9,145

USD 14.13

872,770 -604,939 267,831 83,233 5,560,546

25/11/19 Illumina 131

USD 316.37

280,627 -296,486 -15,859 2,023 4,578,564

25/11/19 Just Eat 3,720

GBP 7.56

244,190 -256,400 -12,210 38,796 2,674,004

25/11/19 Kirby 560

USD 84.70

321,163 -291,162 30,001 13,442 6,988,926

08/10/19 LendingTree 149

USD 309.01

312,695 -302,806 9,889 1,434 2,914,251

25/11/19 Markel 38

USD 1,117.00

287,408 -262,004 25,404 779 5,371,085

30/12/19 MarketAxess Holdings 992

USD 371.55

2,482,771 -1,514,817 967,954 1,684 2,576,102

06/12/19 Martin Marietta Materials 465

USD 264.03

829,566 -648,478 181,089 4,933 6,935,706

06/12/19 Mastercard 701

USD 287.41

1,361,487 -898,342 463,145 7,837 10,185,077

09/12/19 Meituan Dianping 9,000

HKD 95.57

744,330 -508,934 235,397 45,800 2,635,812

25/11/19 Microsoft 403

USD 149.98

409,248 -305,407 103,841 9,126 6,915,994

06/12/19 Moody's 884

USD 226.31

1,352,160 -928,660 423,501 10,293 10,951,838

26/11/19 MS&AD Insurance 1,900

JPY 3,581

423,630 -389,860 33,770 34,500 7,079,032

08/10/19 Myriad Genetics Inc 1,764

USD 28.32

339,213 -339,996 -783 16,652 3,209,530

06/12/19 Naspers 1,158

ZAR 2,142.66

1,138,899 -1,115,329 23,569 13,071 12,590,499

08/10/19 Netflix Inc 153

USD 272.78

283,441 -316,944 -33,503 1,638 3,393,170

25/11/19 Novocure Ltd 517

USD 94.46

330,684 -183,673 147,011 6,458 2,294,319

09/12/19 Olympus 8,500

JPY 1,661

878,781 -574,621 304,160 98,000 6,697,770

06/12/19 Pernod Ricard SA 663

EUR 164.54

814,981 -717,832 97,149 7,719 8,392,596


Last Trade

Date

Asset

Name

Quantity

Price

Proceeds

(DKK)

Book Cost

(DKK)

Profit/Loss

(DKK)

Quantity

Balance

Book Cost

Balance (DKK)

17/10/19 Persol Holdings 15,300

JPY 1,984

1,891,326 -2,227,901 -336,575 0 0

09/12/19 Ping An Insurance 8,000

HKD 89.70

619,091 -532,812 86,279 125,000 8,325,190

25/11/19 Prosus N.V. 920

EUR 63.46

436,193 -451,500 -15,307 12,916 6,338,673

06/12/19 Prudential 13,129

GBP 13.26

1,521,690 -1,593,643 -71,952 141,631 17,192,036

25/11/19 Reliance Inds. GDR 1,350

USD 43.76

400,052 -320,810 79,242 24,039 5,712,553

06/12/19 ResMed 647

USD 147.50

644,622 -430,665 213,957 8,304 5,527,420

25/11/19 Richemont 1,329

CHF 71.98

652,515 -685,700 -33,186 8,905 4,590,726

08/10/19 Ryanair 4,318

EUR 10.63

342,807 -466,672 -123,865 58,078 6,276,834

26/11/19 Sands China 6,800

HKD 37.74

222,226 -222,362 -136 65,600 2,145,144

06/12/19 SAP 1,194

EUR 122.85

1,095,870 -861,794 234,076 12,519 9,096,483

08/10/19 Sberbank Spon ADR 3,595

USD 13.95

340,576 -349,048 -8,472 49,100 4,767,242

25/11/19 Schibsted 3,632

NOK 262.58

707,693 -606,680 101,013 23,476 3,951,752

06/12/19 Schindler 148

CHF 249.32

251,456 -206,916 44,540 4,194 5,863,555

20/12/19 Seattle Genetics 4,189

USD 115.04

3,248,485 -1,821,008 1,427,477 7,904 3,459,319

25/11/19 Service Corp.Intl. 1,326

USD 43.58

391,253 -373,491 17,762 20,836 5,868,816

25/11/19 Shopify 'A' 304

USD 320.62

661,145 -378,503 282,642 2,224 2,828,440

25/11/19 Signify NV 3,070

EUR 25.35

581,202 -646,841 -65,640 23,994 5,042,205

26/11/19 SMC 100

JPY 49,300

306,987 -227,515 79,471 2,000 4,550,305


Inc

(Fraction)

0

USD 0.00

183 0 183 606 231,236


Inc

606

USD 50.73

205,984 -231,236 -25,252 0 0

25/11/19 Spotify Technology SA 281

USD 141.70

269,609 -321,988 -52,379 2,359 2,703,091

09/12/19 Sumitomo Mitsui Trust 1,400

JPY 4,260

371,106 -348,779 22,327 20,800 5,181,864

09/12/19 Sysmex Corp. 500

JPY 7,693

239,346 -226,599 12,747 13,000 5,891,579

25/11/19 Teladoc 530

USD 81.30

291,770 -248,852 42,917 6,225 2,922,841

25/11/19 Teradyne 708

USD 62.32

298,780 -185,216 113,565 12,548 3,282,605


Last Trade

Date

Asset

Name

Quantity

Price

Proceeds

(DKK)

Book Cost

(DKK)

Profit/Loss

(DKK)

Quantity

Balance

Book Cost

Balance (DKK)

25/11/19 Tesla Inc 122

USD 344.20

284,337 -233,580 50,757 2,172 4,158,493

25/11/19 The Trade Desk 145

USD 245.42

240,961 -200,819 40,142 2,114 2,927,805

25/11/19 Thermo Fisher Scientific 188

USD 308.96

393,299 -277,460 115,839 4,142 6,112,985

25/11/19 Trip.com Group 1,093

USD 32.61

241,350 -310,452 -69,102 13,982 3,971,398

06/12/19 TSMC ADR 2,136

USD 53.93

778,323 -545,621 232,701 23,908 6,173,209

05/12/19 Visa Inc-Class A Shares 3,253

USD 180.98

3,971,164 -2,821,088 1,150,076 8,207 7,141,896

06/12/19 Waters 404

USD 223.06

608,826 -525,716 83,110 4,142 5,413,563

25/11/19 Zillow Group Inc Class C 1,335

USD 41.09

371,384 -393,858 -22,474 18,697 5,516,070

Total Sales 52,075,448 -43,359,400 8,716,048

Total Net Investment/Disinvestment 26,135,290 Transactions shown are an aggregation of all transactions in each asset during the quarter. The trade date reflects the date of the latest trade only and the price is an average of all trading during the quarter. Our monthly reporting contains a full breakdown of individual transactions. A full archive of reports can be accessed via our

secure Online Client Service site.

Equity Trading Analysis Report for the quarter ended 31 December 2019 33

Counterparty Trading Analysis

Transactions Commissions Paid Estimated Split of Commission

(%) (DKK) Execution (DKK) Research (DKK)

Value

(DKK)

Net Negotiated

Rate

Other

Rates

Total

Paid

Negotiated

Rate

Other

Rates

Retained

by Broker

Paid to

3rd Parties

Retained

by Broker

Paid to

3rd Parties

Jefferies International Limited

60,672,605 0.0 0.0 100.0 12,134 0 12,134 12,134 0 0 0

UBS AG 41,730,042 0.0 0.0 100.0 8,418 0 8,418 8,418 0 0 0

Merrill Lynch International 9,609,476 0.0 0.0 100.0 1,921 0 1,921 1,921 0 0 0

Morgan Stanley & Co.

International PLC 6,307,958 0.0 0.0 100.0 416 0 416 416 0 0 0

Piper Jaffray & Co. 2,706,090 0.0 0.0 100.0 1,353 0 1,353 1,353 0 0 0

Cowen and Company, LLC 2,679,601 0.0 0.0 100.0 1,340 0 1,340 1,340 0 0 0

Liquidnet Europe Limited 2,654,095 0.0 0.0 100.0 943 0 943 943 0 0 0

Sanford C. Bernstein Limited 1,679,101 0.0 0.0 100.0 840 0 840 840 0 0 0

SMBC Nikko Capital Markets

Limited 1,151,517 0.0 0.0 100.0 691 0 691 691 0 0 0

Luminex Trading & Analytics

LLC 796,338 0.0 0.0 100.0 27 0 27 27 0 0 0

Other Brokers * 245,978 0.0 0.0 100.0 148 0 148 148 0 0 0

Total 130,232,800 0.0 0.0 100.0 28,231 0 28,231 28,231 0 0 0

* The details of all other counterparties used during the period are available to clients upon request.

Firm-Wide Comparators

Transactions Commissions Paid Estimated Split of Commission

(%) (%) Execution (%) Research (%)

Value (%)

Net Negotiated Rate

Other Rates

Total Paid

Negotiated Rate

Other Rates

Retained by Broker

Paid to 3rd Parties

Retained by Broker

Paid to 3rd Parties

Investeringsforeningen Investin - K Invest Globale

Aktier II

100.0 0.0 0.0 100.0 100.0 0.0 100.0 100.0 0.0 0.0 0.0

BG Average * 100.0 3.5 0.0 96.5 100.0 0.0 100.0 100.0 0.0 0.0 0.0

Investeringsforeningen Investin - K Invest Globale Aktier II Average Commission Rate 0.0217 %

BG Average * 0.0365 %

Total commission paid as a percentage of the value of the fund 0.0042 %

* Based on all global equity trading conducted with counterparties by Baillie Gifford.

Non-Equity Trading Analysis Report for the quarter ended 31 December 2019 34

Direct Currency Transactions

Counterparty Spot Transaction Value* (DKK)

Forward Transaction Value (DKK)

Total (DKK)

Bank of New York Mellon (Custodian) 132,064,726 0 132,064,726

State Street Bank 21,065,057 0 21,065,057

National Australia Bank 16,752,451 0 16,752,451

Brown Brothers Harriman 14,867,601 0 14,867,601

RBC Investor Services 14,216,584 0 14,216,584

Northern Trust Company 3,735,679 0 3,735,679

Total 202,702,098 0 202,702,098

*Foreign exchange trading is on net basis; no commission paid.

Income and Costs Summary Report for the quarter ended 31 December 2019 35

Income

DKK

Underwriting commission 0

Stock Lending 0

Total Income 0

Costs

DKK

Fund management fees 733,542

Custody costs paid (Bank of New York Mellon (BNY) Brussels) 0

Tax

VAT 0

Stamp Duty 2,011

Other transaction taxes and levies 53,506

55,517

Total Costs 789,059

Management fees and VAT are reported on an ‘invoiced date’ basis and not on an accrual basis. Therefore the fees incurred relate to a prior period.

Trading Policy and Analysis Narrative Report for the quarter ended 31 December 2019 36

Baillie Gifford Trading Policy The UK Financial Conduct Authority maintains rules implemented by the UK Financial Services Authority in 2006 which set out the regulatory structure for Soft Dollar Standards with the objective of achieving transparency so that clients can better understand the charges and costs levied on the assets for which they have responsibility. The rules also emphasize the paramount duty of the investment manager, as a fiduciary, to place the interests of clients before those of the investment manager. The FCA rules state that in assessing the adequacy of prior and periodic disclosures, they will have regard to the extent to which the investment manager adopts the disclosure standards

developed by the Investment Association and the National Association of Pension Funds.

Baillie Gifford has developed disclosures which are consistent with the Investment Association Pension Fund Disclosure Code, (Third Edition). Although the Code was drawn up to meet UK requirements, we provide the disclosures for all clients. For example, this document is also used to demonstrate compliance with the CFA Institute Soft Dollar Standards and Section 28(e) of the US Securities and Exchange Act 1934. By providing this information

we believe that we meet best practice disclosure standards within the industry.

There are two distinct types of disclosure required by the Code as detailed below:-

Level 1 Disclosure Level 1 requires disclosure of Baillie Gifford’s policies, processes and procedures in relation to the management of trading costs incurred on behalf of clients. This disclosure is provided annually to clients and is called the “Trading Procedures and Control Processes” document. This document is also available on request.

Level 2 Disclosure

Level 2 requires client-specific information which is contained within this quarterly report. Level 2 aims to provide comprehensive, clear and standardised disclosure of information from which clients and their advisers can compare and monitor trading costs incurred during the fund management process and the services received in exchange for these commissions.

We have included disclosure of transactions and commissions for Equities, Bonds, Currencies and Derivatives, where relevant.

Equity Trading Analysis Summary

Where the fund gains exposure to equities via Open Ended Investment Companies (OEICs), transactions and commission analysis have been provided at the total fund level. A full disaggregation by counterparty for each of these funds is available on request. Where relevant, the proportion of commissions paid under directed or recapture

arrangements is also shown.

Non-Equity Trading Analysis The trading report for bonds represents trading volume by the fund over the quarter, analysed by counterparty. As all trades are executed on a net basis, no commission figures are available. Where the fund gains exposure to bonds via Open Ended Investment Companies (OEICs), transaction volume, by counterparty, is available for each of these funds on request.

Derivative Transactions Where derivative transactions are executed, these are analysed by counterparty (executing broker) and show market

value, underlying exposure and (execution) commission.

Foreign Exchange All foreign exchange activity, for the entire portfolio is analysed by counterparty, distinguishing between spot and forward transactions. As all trades are executed on a net basis, no commission figures are available. Where the fund gains exposure to markets via Open Ended Investment Companies (OEICs), currency transaction volume, by

counterparty, is available for each of these funds on request.

Important Note - In view of the new disclosure requirements introduced by MiFID II, the IA has withdrawn the Code effective 3 January 2018. MiFID II requires new disclosures setting out how asset managers and AFMs achieve best execution for their clients. These disclosures are considerably more detailed than the existing order execution policies in the Code (“level one” disclosures). We intend to phase out the existing disclosures (as currently included in your quarterly report) and replace with revised disclosures. A more detailed Costs & Charges disclosure is available on request.

Summary Valuation Report for the quarter ended 31 December 2019 37

Description Book Cost (DKK)

Market Value (DKK)

Fund (%)

Gross Income (DKK)

Equities

UK 33,077,731 34,924,388 5.1 1,031,052

North America 279,745,306 335,658,330 49.4 2,086,776

Europe (ex UK) 92,055,927 102,592,677 15.1 1,622,947

Developed Asia Pacific 57,911,979 70,854,462 10.4 1,246,454

Emerging Markets 106,196,701 126,602,086 18.6 931,384

Total Equities 568,987,644 670,631,944 98.6 6,918,613

Total Cash and Deposits 9,513,666 9,513,666 1.4 164,907

Total 578,501,310 680,145,609 100.0 7,083,520

Valuation Report for the quarter ended 31 December 2019 38

Asset Name Nominal Holding

Market Price

Book Cost (DKK)

Market Value (DKK)

Fund (%)

Equities

Alibaba 15,643 USD 212.10 17,610,967 22,087,129 3.2

Amazon.com 1,691 USD 1,847.84 16,574,931 20,801,110 3.1

Prudential 154,148 GBP 14.49 18,661,016 19,697,823 2.9

Moody's 11,256 USD 237.41 12,456,030 17,789,414 2.6

Alphabet Inc Class C 1,953 USD 1,337.02 14,581,573 17,382,758 2.6

Mastercard 8,579 USD 298.59 11,636,862 17,052,595 2.5

Anthem Inc 8,251 USD 302.03 13,095,377 16,589,573 2.4

Naspers 14,305 ZAR 2,290.79 13,746,095 15,600,403 2.3

AIA Group 212,600 HKD 81.80 12,135,195 14,857,896 2.2

Microsoft 13,185 USD 157.70 11,027,268 13,841,730 2.0

SAP 13,699 EUR 120.32 10,163,757 12,316,650 1.8

Olympus 107,000 JPY 1,689 7,590,678 11,070,375 1.6

Visa Inc-Class A Shares 8,776 USD 187.90 7,845,038 10,977,462 1.6

Ping An Insurance 137,000 HKD 92.10 9,252,117 10,780,055 1.6

CRH 39,637 GBP 30.42 8,904,453 10,633,395 1.6

TSMC ADR 26,242 USD 58.10 xd 7,034,074 10,149,663 1.5

Martin Marietta Materials 5,383 USD 279.64 7,759,887 10,020,796 1.5

Pernod Ricard SA 8,412 EUR 159.40 9,225,051 10,019,672 1.5

HDFC Corp 43,112 INR 2,412.55 8,019,795 9,700,358 1.4

Thermo Fisher Scientific 4,412 USD 324.87 xd 6,691,411 9,541,654 1.4

ResMed 9,118 USD 154.97 6,350,502 9,406,450 1.4

Facebook 6,781 USD 205.25 7,617,817 9,265,214 1.4

ICICI Bank ADR 92,074 USD 15.09 6,443,362 9,249,213 1.4

MS&AD Insurance 38,100 JPY 3,611 7,885,730 8,427,551 1.2

AJ Gallagher & Co 13,286 USD 95.23 6,498,143 8,422,608 1.2

EOG Resources 14,985 USD 83.76 9,023,027 8,355,491 1.2

Kirby 13,442 USD 89.53 6,988,926 8,011,448 1.2

Banco Bradesco Pref 130,280 BRL 36.17 xd 6,653,031 7,798,071 1.1

Schindler 4,555 CHF 246.20 6,470,539 7,709,437 1.1

Advantest Corp 20,400 JPY 6,160 3,571,691 7,697,679 1.1

Reliance Inds. GDR 25,411 USD 42.55 6,119,200 7,197,802 1.1

Prosus N.V. 14,295 EUR 66.53 6,963,430 7,106,694 1.0

Waters 4,551 USD 233.65 6,040,998 7,078,662 1.0

Ryanair 63,398 EUR 14.63 6,816,549 6,930,839 1.0

Alnylam Pharmaceuticals 9,034 USD 115.17 5,186,550 6,926,247 1.0

SMC 2,200 JPY 50,290 5,172,553 6,777,246 1.0

Service Corp.Intl. 22,063 USD 46.03 6,232,005 6,760,582 1.0

Shopify 'A' 2,475 USD 397.58 3,439,708 6,550,558 1.0

Sysmex Corp. 14,300 JPY 7,449 6,506,131 6,525,036 1.0

Markel 856 USD 1,143.17 5,964,403 6,514,231 1.0

Tesla Inc 2,336 USD 418.33 4,536,881 6,505,346 1.0

BHP Group PLC 40,652 GBP 17.77 6,051,433 6,369,897 0.9



Market Price

Book Cost (DKK)

Market Value (DKK)

Fund (%)

Atlas Copco B 27,334 SEK 325.20 4,822,329 6,321,319 0.9

Zillow Group Inc Class C 20,299 USD 45.94 5,961,327 6,207,892 0.9

Teradyne 13,498 USD 68.19 3,692,177 6,127,293 0.9

Seattle Genetics 7,904 USD 114.26 3,459,319 6,012,010 0.9

Sumitomo Mitsui Trust 22,600 JPY 4,337 5,653,826 6,004,084 0.9

Apache 34,835 USD 25.59 8,083,231 5,934,234 0.9

Sberbank Spon ADR 54,012 USD 16.44 5,260,880 5,911,131 0.9

Broadridge Financial Solutions 7,176 USD 123.54 xd 6,067,088 5,901,584 0.9

Fairfax Financial Holdings 1,811 CAD 609.74 5,694,539 5,668,726 0.8

B3 S.A. 77,000 BRL 42.97 3,959,493 5,475,414 0.8

Bureau Veritas 31,379 EUR 23.26 5,058,261 5,453,995 0.8

Deutsche Boerse 5,157 EUR 140.15 4,361,491 5,400,776 0.8

Signify NV 25,760 EUR 27.86 5,410,064 5,362,816 0.8

Chipotle Mexican Grill 954 USD 837.11 3,635,086 5,316,300 0.8

Richemont 9,934 CHF 76.06 5,112,782 5,194,296 0.8

Schibsted 25,406 NOK 265.30 4,323,911 5,106,186 0.8

Illumina 2,253 USD 331.74 5,087,164 4,975,510 0.7

TD Ameritrade Holding Corp 13,815 USD 49.70 4,721,497 4,570,733 0.7

SiteOne Landscape Supply 7,308 USD 90.65 3,231,496 4,410,064 0.6

Meituan Dianping 50,500 HKD 101.90 3,047,155 4,396,492 0.6

Brilliance China Automotive 628,000 HKD 8.08 4,506,184 4,335,226 0.6

MarketAxess Holdings 1,684 USD 379.11 2,576,102 4,249,970 0.6

Albemarle 8,237 USD 73.04 xd 4,296,945 4,005,054 0.6

Stericycle 9,416 USD 63.81 3,747,625 3,999,758 0.6

Ritchie Bros Auctioneers (USA) 13,769 USD 42.95 3,063,967 3,936,807 0.6

Teladoc 6,985 USD 83.72 3,326,854 3,892,908 0.6

58.Com Inc Adr 8,935 USD 64.73 3,793,199 3,850,159 0.6

Netflix Inc 1,787 USD 323.57 3,699,804 3,849,208 0.6

Epiroc B 47,928 SEK 111.05 2,932,593 3,784,965 0.6

CyberAgent Inc 15,900 JPY 3,815 4,297,328 3,715,699 0.5

Axon Enterprise Inc 7,506 USD 73.28 3,345,531 3,661,614 0.5

The Trade Desk 2,114 USD 259.78 2,927,805 3,655,857 0.5

Novocure Ltd 6,458 USD 84.27 2,294,319 3,622,844 0.5

Wabtec 6,937 USD 77.80 3,793,975 3,592,773 0.5

Bank of Ireland (Dublin) 94,402 EUR 4.88 4,598,218 3,443,855 0.5

Jefferies Financial 24,205 USD 21.37 3,384,143 3,443,405 0.5

Genmab 2,213 DKK 1,481.50 2,692,684 3,278,560 0.5

Just Eat 44,092 GBP 8.35 3,043,884 3,246,042 0.5

Orica 31,169 AUD 21.98 2,707,578 3,205,927 0.5

Autohome Inc - ADR 5,928 USD 80.01 3,002,116 3,157,410 0.5

Myriad Genetics Inc 17,395 USD 27.23 3,359,601 3,153,193 0.5

Trip.com Group 13,982 USD 33.54 3,971,398 3,121,842 0.5

M&G PLC 146,472 GBP 2.37 2,955,599 3,063,947 0.5



Market Price

Book Cost (DKK)

Market Value (DKK)

Fund (%)

LendingTree 1,509 USD 303.44 3,076,080 3,048,180 0.4

Abiomed 2,555 USD 170.59 4,117,815 2,901,503 0.4

Grubhub Inc 8,378 USD 48.64 4,199,953 2,712,767 0.4

Spotify Technology SA 2,649 USD 149.55 2,991,322 2,637,223 0.4

Howard Hughes 3,058 USD 126.80 2,457,224 2,581,281 0.4

Chegg 10,101 USD 37.91 2,251,663 2,549,158 0.4

Hays 159,018 GBP 1.82 2,365,799 2,546,678 0.4

Interactive Brokers Group 7,929 USD 46.62 2,833,884 2,460,760 0.4

Sands China 65,600 HKD 41.65 2,145,144 2,334,316 0.3

Mail.ru Group GDR 12,888 USD 22.30 2,342,650 1,913,238 0.3

Adevinta 24,014 NOK 104.00 1,208,491 1,891,999 0.3

Tsingtao Brewery 'H' 42,000 HKD 52.35 1,434,984 1,878,481 0.3

Now Inc 19,018 USD 11.24 1,811,755 1,423,016 0.2

Hoshizaki Corp 400 JPY 9,740 xd 246,126 238,654 0.0

Total Equities 568,987,644 670,631,944 98.6

Cash and Deposits

DKK Uncommitted Cash 123,593.10 123,593 123,593 0.0

USD Uncommitted Cash 1,410,556.23 9,390,073 9,390,073 1.4

Total Cash and Deposits 9,513,666 9,513,666 1.4

Total 578,501,310 680,145,609 100.0

Valuation Policy Report for the quarter ended 31 December 2019 41

Valuation Overview

Baillie Gifford maintains a valuation policy which places onus on independent valuation and includes a

valuation methodology for all asset types within the Baillie Gifford universe.

The Baillie Gifford Valuation Committee oversees the valuation process within Baillie Gifford and ensures

that the firm’s valuation policies are appropriate and adhered to. The Committee, which meets on a

quarterly basis, includes representation from around the firm. It is chaired by the Compliance and Legal

Partner.

Valuation of Securities

Prices are collected from a number of sources and this data is checked via an automated data cleansing

system with exception checking performed by a dedicated market data team.

Investments listed on Stock Exchanges are included at their official closing price on the last business day

of the reporting period.

Suspended, liquidated, and unquoted stocks are referred to the Fair Value Pricing Group for

consideration. The Fair Value Pricing Group will determine the appropriate valuation methodology.

Holdings in Baillie Gifford pooled funds are valued at month end using a single price which reflects

closing prices of the underlying assets in the funds.

Valuation of Currencies Currencies are translated at the WM Reuters closing spot rates (4pm GMT) ruling at the last business day

of the reporting period.

Transactions Realised gains or losses on the sale of securities are calculated using book cost on an average historic

cost basis.

Where applicable, dealing costs such as stamp duty, broker commissions and other taxes are included in

the purchase costs and deducted from the sales proceeds.

Where the transactions are reported in summary form, the price reported will be an average.

Exchange Rates Report for the quarter ended 31 December 2019 42

Code Currency Local to DKK

AUD Australian dollar 0.2137

BRL Brazilian real 0.6043

CAD Canadian dollar 0.1948

EUR euro 0.1338

HKD Hong Kong dollar 1.1705

INR Indian rupee 10.7223

JPY Japanese yen 16.3249

NOK Norwegian krone 1.3200

ZAR South African rand 2.1006

GBP sterling 0.1134

SEK Swedish krona 1.4062

CHF Swiss franc 0.1455

USD US dollar 0.1502

Fund Reconciliation Report for the quarter ended 31 December 2019 43

Market Value 30 September 2019

(DKK)

Net Investment/ Disinvestment

(DKK)

Capital Gain/Loss

(DKK)

Market Value 31 December 2019

(DKK)

Equities

UK 28,171,073 1,510,663 5,242,653 34,924,388

North America 295,027,791 12,864,305 27,766,233 335,658,330

Europe (ex UK) 90,237,017 3,687,696 8,667,964 102,592,677

Developed Asia Pacific 64,684,477 1,959,912 4,210,074 70,854,462

Emerging Markets 107,577,695 6,112,714 12,911,677 126,602,086

585,698,053 26,135,290 58,798,601 670,631,944

Cash and Deposits

Danish krone 465,866 -342,273 0 123,593

sterling 0 104 -104 0

US dollar 8,428,030 857,548 104,495 9,390,073

euro 0 3,743 -3,743 0

Japanese yen 0 467 -467 0

Other Currencies 418,287 -422,485 4,198 0

9,312,183 97,102 104,380 9,513,666

Total 595,010,236 26,232,393 58,902,981 680,145,609

Fund Reconciliation Report for the quarter ended 31 December 2019 44

(DKK) Book Cost (DKK)

Market Value (DKK)

As at 30 September 2019

Equities 534,136,306.07 585,698,052.88

Cash and Deposits 9,312,183.06 9,312,183.05

543,448,489.13 595,010,235.93

Income

Income from Shares and Securities 1,542,560.40

Deposit Interest 45,333.06

1,587,893.46

Charges

Management Fee -733,542.00

Portfolio Accounting Fees -514,039.90

Audit Fee -66,369.68

Stock Dividend Taxation -29,897.17

-1,343,848.75

Others

Currency Revaluation -239,842.48

-239,842.48

Net Total Income and Charges 4,202.23 4,202.23

Change in Market Value of Investments 0.00 50,082,553.04

Profit/Loss on Sales 8,716,047.72 8,716,047.72

Profit/Loss on Currency 104,380.19 104,380.19

Cash transferred to/from Portfolio 26,228,190.37 26,228,190.37

As at 31 December 2019 578,501,309.64 680,145,609.48

Of which:

Equities 568,987,643.97 670,631,943.82

Cash and Deposits 9,513,665.67 9,513,665.66

Total 578,501,309.64 680,145,609.48

Our monthly reporting contains a detailed breakdown of Income. A full archive of reports can be accessed via our secure Online Client Service site.

Cash Transfer Detail

Date Amount (DKK)

October 2019 15,690,165.69

November 2019 -24,733,201.59

December 2019 35,271,226.27

26,228,190.37

Legal Notices Report for the quarter ended 31 December 2019 45

Holdings Information Please note the fund portfolio information contained within this report is confidential, proprietary information and should be maintained as such and not disseminated. The content is intended for information purposes only and should not be disclosed to other third parties or used for the purposes of market timing or seeking to gain an unfair advantage

MSCI Source: MSCI. The MSCI information may only be used for your internal use, may not be reproduced or re-disseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an "as is" basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the "MSCI Parties") expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages.

(www.msci.com)

Report Recipients Report for the quarter ended 31 December 2019 46

The report has been issued to the following recipients: Email

Recipient Organisation

[email protected] Nykredit Portefølje Administration A/S

Mr Jakob Hommel Spektrum Fondsmæglerselskab A/S

Hard Copy

There are no hard copy recipients

Please notify the Administrator Contact (detailed on the contents page) if any of the above recipient details have changed.

BAILLIE GIFFORD INVESTMENT MANAGEMENT (EUROPE) LTD - … · 2020-01-23 · see that life isn’t...

Documents

Transcript of BAILLIE GIFFORD INVESTMENT MANAGEMENT (EUROPE) LTD - … · 2020-01-23 · see that life isn’t...