Investeringsforeningen Investin - K Invest Globale Aktier II Report … · 2019-02-04 · Commentary Report for the quarter ended 31 December 2018 04 Throughout 2018, we have been

BAILLIE GIFFORD OVERSEAS LIMITED

Investeringsforeningen Investin - K Invest Globale Aktier II

Report for the quarter ended 31 December 2018

Contents

01 Summary

02 Commentary

05 Statistics Summary

06 Market Background

07 Performance

09 Portfolio Overview

10 Transactions

12 Portfolio Characteristics

13 Governance

26 Trading

30 Valuation

36 Fund Reconciliation

38 Legal Notices

Contacts

Gavin Scott [email protected] Tel: +44 (0)131 275 2797

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

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).

Architectural Detail © Archimage

https://clients.bailliegifford.com/

Executive Summary Report for the quarter ended 31 December 2018 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)

10.8 9.7 1.5

Since Inception* (p.a.) 5.3 4.8 0.8

One Year -3.8 -4.2 -4.6

Quarter -12.8 -12.9 -11.3

*11 January 2017 Source: StatPro, MSCI

We remain steadfast in our fundamental approach amid recent market volatility and negative sentiment

Our Global Alpha Research Agenda has helped us focus on corporate fundamentals and long-term structural change

We are confident that the portfolio is invested in a range of companies with attractive long-term growth prospects

Valuation (after net flow of DKK -9,209,371)

30 September 2018

DKK 407,365,019

31 December 2018

DKK 344,835,342

Commentary Report for the quarter ended 31 December 2018 02

We welcome the opportunity for measured

reflection provided by the recent ebb and flow of equity markets.

Market backdrop

The Spartathlon is an ultra-long distance running event in which competitors run a staggering 246 kilometres, starting at the Acropolis in Athens and finishing in Sparta, an ancient town in central Greece. As well as encountering elemental hurdles including searing heat, driving rain and thunderstorms, runners must also navigate significant mental challenges. These should not be underestimated. Indeed, to quote one of this year’s competitors, “I think the first half you run with your legs and the next half you run with your mind”. The cognitive functioning of one’s mind is pushed to its limit by exhaustion and lack of sleep, with many citing darkness as a devilish enemy. Mental discipline is a fundamental ingredient of success both in ultra-marathon running and

long-term investing. Arguably, this discipline is tested most in the investment arena when markets are volatile, and sensationalist headlines abound. The latest instalment of the Brexit saga, tit-for-tat trade tariff exchanges between the US and China and teeth gnashing over the impact that rising rates and a strong dollar may have on emerging markets, have provided ample ammunition for market commentators. These headlines and the return of volatility to equity markets (the MSCI All Country World Index was down 13% in USD over the latest quarter1) prove a distraction for many. Our job is to ignore these short-term travails. The fundamental tenets of our investment approach – being active, bottom-up and long-term – remain the bedrock of what we do on your behalf.

You should take comfort from the fact that throughout our quarterly musings we have consistently referred to our Global Alpha Research Agenda. It is a genuinely helpful framework to focus and direct much of our investment work. Importantly, not only has demonstrable progress been made against our agenda this year, but it helps us focus on corporate fundamentals and long-term structural change.

Runners can face changeable conditions throughout the Spartathlon event.

© 2018 Spartathlon/Sparta Photo Club.

1 Source: MSCI.


Portfolio positioning

We welcome the opportunity for measured reflection provided by the recent ebb and flow of equity markets. For the long-term investor, periods of volatility can present excellent opportunities to add to existing positions where share prices have been unjustly punished. Indeed, we recently added to Naspers, the South African online and media business. It seems to us to be perennially undervalued, given its attractive portfolio of internet assets. We believe the company’s stake of around 30% in Tencent, the Chinese social media, gaming and payments business, is valuable. Tencent is successfully building out its online ecosystem which is becoming an integral part of Chinese society. For example, Tenpay, the company’s mobile payment application, is driving the country’s transformation to a cashless society. This is true not only for ‘big-ticket’ items, but day-to-day essentials such as groceries, where market vendors are increasingly averse to cash-based transactions. Elsewhere in its portfolio, Naspers is focusing on higher-returning investments and divesting non-core assets. This allows the company to allocate capital to where management believe the most attractive growth opportunities reside and should support share price appreciation over the long term.

The ‘Platforms Part III’ theme within our Research Agenda has yielded notable changes to the portfolio this year. As a reminder, we challenged ourselves to consider the barriers to growth of our largest platform holdings and identify the next wave of platform ‘winners’. This

has resulted in a broadening and flattening of the platform exposure, which now accounts for around 23% of the portfolio. Compared to five years ago, the median market capitalisation for these holdings has halved, whilst the number of sectors has proliferated to include food delivery, consumer finance and media entertainment. We dedicated two recent portfolio review groups (the forum at which we discuss ideas and review the portfolio with our regional representatives) to ‘testing-the-upside’ of some of our largest platform positions. This involves assessing the degree of confidence we retain in the share prices of these positions being able to double on a five-year view. Whilst we mull over potential actions, our initial assessment is that plenty of upside remains for a majority of these stocks. Furthermore, we are excited by earlier-stage opportunities afforded to the portfolio by companies such as Lending Tree in consumer finance and Grubhub in online food delivery.

Elsewhere, the ‘Valuations and Praise for Diversification’ theme has been an important genesis of new positions within your portfolio. We have introduced several new, uncorrelated holdings throughout the year and continue to appreciate the diversification such stocks bring to the Global Alpha portfolio. We added for a second time this year to Kirby, which we initially purchased in January 2016. A tank barge operator on the inland and coastal waterways of the east coast of the US, Kirby continues to consolidate a fragmented industry. Volume growth is being supported by demand from the petrochemicals industry and selective acquisitions have served to increase the company’s market share and allow for steady price increases. Overall, we do not believe that the current share price reflects the strength or longevity of Kirby’s growing position and have therefore increased the position.

Kirby is experiencing growing demand from the petrochemicals sector.

© Courtesy of Kirby.

A man scans a QR code with his mobile phone to pay for vegetables at a market.

© STR/AFP/Getty Images.


Throughout 2018, we have been mulling over developments within the semiconductor sector. The Global Alpha strategy’s exposure had been upwards of 10% earlier this year. However, this has been significantly reduced to around 5%. Semiconductor holdings have been good investments for your portfolio, but we have concerns about the cyclical nature of the industry and emerging competition from China. It is on these grounds that we reduced TSMC, the Taiwanese semiconductor manufacturer, for the second time this year. This work forms part of the ‘Impact of a Data Driven World’ theme within this year’s Research Agenda.

Finally, there are a handful of positions which we have reduced to accurately reflect our conviction in their long-term growth prospects. These include SAP, the German enterprise management software business which is embracing cloud-based solutions, and Fiat Chrysler, the European automobile business whose transformation is well and truly underway following the successful rebranding of Jeep in the US. We also elected to trim the position in Verisk. The company predominantly serves the insurance market in the US by providing data and analytics which helps to improve their underwriting capabilities. In all cases, we believe that there may be more growth to come but recognise that our view is less differentiated than it once was.

…we remain focused on corporate

fundamentals and the search for enduring growth opportunities.

Outlook

We believe that the portfolio is well positioned for future growth. First and foremost, we are confident in the ability of the companies that we hold on behalf of clients to grow their revenues and earnings at above average rates over the long term. Second, we believe many of these companies are supported by lasting structural growth drivers such as growing discretionary spend in many emerging markets, the rise of technology and the internet, and advances in medical care. Just as the successful long-distance runner is not distracted by happenings at the roadside, we remain focused on corporate fundamentals and the search for enduring growth opportunities.

Statistics Summary Report for the quarter ended 31 December 2018 05

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 102

Number of Countries 22

Number of Sectors 10

Number of Industries 36

Active Share* 91%

Rolling One Year Turnover 19%

*Source: APT, MSCI

Asset Name % of Portfolio

Naspers 3.9

Amazon.com 3.6

Anthem Inc 2.9

Prudential 2.6

AIA Group 2.3

Alphabet Inc Class C 2.1

Mastercard 2.1

Moody's 2.0

Alibaba 2.0

ICICI Bank ADR 2.0

New Purchases During Quarter

Asset Name

Service Corp.Intl.

Shopify 'A'

Complete Sales During Quarter

Asset Name

China Biologic Products Holdings Inc

Dia

OC Oerlikon

Market Background Report for the quarter ended 31 December 2018 06

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

-9.9

-9.7

-9.6

-7.1

-4.1

-0.2

-15 -10 -5 0

Europe ex UK

Emerging Markets

UK

Developed Asia

MSCI AC World

North America

-11.2

-10.7

-9.4

-8.0

-5.4

-5.1

-3.1

-2.1

-0.5

7.6

7.6

-15 -10 -5 0 5 10

Materials

Financials

Industrials

Energy

Telecommunications

Consumer Staples

Consumer Discretionary

Real Estate

Information Technology

Health Care

Utilities

-12.3

-11.6

-11.2

-10.7

-10.3

-5.9

-15 -10 -5 0

North America

Europe ex UK

MSCI AC World

Developed Asia

UK

Emerging Markets

-18.7

-15.6

-14.1

-12.9

-11.8

-10.3

-8.0

-4.9

-4.4

-2.2

2.6

-20 -15 -10 -5 0 5

Energy

Information Technology

Industrials

Consumer Discretionary

Materials

Financials

Health Care

Consumer Staples

Telecommunications

Real Estate

Utilities

Performance Report for the quarter ended 31 December 2018 07


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) 10.8 1.5 9.3

Since Inception* (p.a.) 5.3 0.8 4.6

One Year -3.8 -4.6 0.9

Quarter -12.8 -11.3 -1.5

Source: StatPro, MSCI

Returns Since Inception*

*11 January 2017 Source: StatPro, MSCI

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Fund Benchmark

Performance Report for the quarter ended 31 December 2018 08


Stock Level Attribution

Top and Bottom Ten Contributors to Relative Performance

Since Inception* to 31 December 2018

Asset Name Contribution (%)

Amazon.com 1.8

Anthem Inc 1.1

NVIDIA 0.8

Abiomed 0.8

Naspers 0.7

Mastercard 0.6

Moody's 0.6

General Electric 0.6

GrubHub Inc 0.5

Resmed Inc 0.5

Apache -1.3

Microsoft -0.6

CRH -0.6

Stericycle -0.5

Ryanair -0.4

Ctrip.Com International -0.4

Bank of Ireland (Dublin) -0.4

Apple -0.4

Martin Marietta Materials -0.4

Signify NV -0.4

*11 January 2017

Source: StatPro, MSCI

One Year to 31 December 2018

Asset Name Contribution (%)

Amazon.com 1.2

Abiomed 0.7

Anthem Inc 0.6

Mastercard 0.5

Banco Bradesco 0.5

Resmed Inc 0.4

Advanced Micro Devices 0.4

NVIDIA 0.4

Visa Inc-Class A Shares 0.3

AJ Gallagher & Co 0.3

Prudential -0.7

Naspers -0.7

Apache -0.6

Microsoft -0.4

Ryanair -0.3

Stericycle -0.3

CRH -0.3

Signify NV -0.3

Bank of Ireland (Dublin) -0.3

Rohm -0.3

Portfolio Overview Report for the quarter ended 31 December 2018 09

Top Ten Holdings

Company Name Description of Business % of Portfolio

Naspers Media and e-commerce company 3.9

Amazon.com Online retailer 3.6

Anthem Healthcare insurer 2.9

Prudential International life insurer 2.6

AIA Asian life insurer 2.3

Alphabet Online search engine 2.1

MasterCard Global electronic payments network and related services 2.1

Moody's Credit rating agency 2.0

Alibaba Online commerce company 2.0

ICICI Bank Indian retail and corporate bank 2.0

Total 25.3

Sector Weights (%)

1 Financials 27.9

2 Communication Services 14.3

3 Consumer Discretionary 13.9

4 Industrials 13.6

5 Information Technology 10.5

6 Health Care 10.0

7 Materials 5.0

8 Energy 2.5

9 Consumer Staples 2.0

10 Real Estate 0.4

11 Cash -0.2

Total 100.0

Regional Weights (%)

1 North America 47.1

2 Emerging Markets 19.9

3 Europe (ex UK) 17.2

4 Developed Asia Pacific 11.4

5 UK 4.5

6 Cash -0.2

Total 100.0

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Transaction Notes Report for the quarter ended 31 December 2018 10

New Purchases

Stock Name Transaction Rationale

Service Corp.Intl. We have taken a holding in Service Corporation International, America's largest funeral and cemetery company. The company operates 1,600 funeral homes and 500 cemeteries in North America. As the largest national player in a highly fragmented industry, Service Corp is best-placed to lead future consolidation. The company is able to bring significant operational improvements to the businesses it acquires. In addition to this, we believe the demographics of the US will cause a modest acceleration in the underlying business' growth rate over the next twenty years - higher birth rates after the Second World War will translate into higher death rates over the next couple of decades. Strong barriers to entry in the sector, thanks to the planning restrictions, capital intensity and regulatory hurdles involved in building cemeteries and crematoria, put Service Corp. in an enviable position. Through sector consolidation and steady underlying growth we believe Service Corp. to be a stalwart-like, reliable business that can generate a low-to-mid teen annual return for decades to come, and believe it is worthy of a place in your portfolio.

Shopify 'A' Shopify is a Canadian technology company that enables small businesses to set up and sell products online. It specialises in providing simple, low-cost software and hosting services that enable budding ecommerce entrepreneurs to move online quickly and cost efficiently. The company has grown rapidly in recent years but still appears to be only at the very early stages of tapping into the opportunity ahead of it. With a founder who remains actively involved, both as CEO and a major shareholder, and a product offering that is strongly liked by and increasingly useful to its customers, we feel that the chances of success and value creation are sufficiently large to justify a holding.

Notable Additions


Kirby We believe Kirby is a business that continues to improve on all fronts. Its inland-marine business

is likely to see accelerating volume growth as demand from the petrochemical industry

improves, while the coastal business appears to have stabilised after a period of difficulty. In

addition to this, the previously loss making diesel-engine business (servicing and maintenance)

has returned to growth and profitability. In our view, the share price does not reflect this early-

stage turnaround in operational performance. Therefore, we have elected to add to your holding.

Naspers We have taken the opportunity to add to your holding in Naspers following a period of weak

share-price performance. This weakness has, in part, been driven by the broader market sell-off,

with Naspers being one of a cohort of technology stocks that have been disproportionately

affected by increased equity-market volatility. Recent work looking at the potential upside for

Naspers reinforced our view that the current share price significantly underestimates the long-

term value of its underlying assets, and the optionality provided by future investments.

Pernod Ricard SA Pernod Ricard manufactures and distributes premium wines and spirits globally. Key brands

include Jameson, Martell, Beefeater, Ricard and Mumm Champagne. Following further evidence

of an acceleration in demand in key emerging markets (notably India and China), and with

greater conviction in organic growth rates from here, we have elected to make this a larger

holding for your portfolio.

Transaction Notes Report for the quarter ended 31 December 2018 11

Complete Sales


China Biologic Products Holdings Inc

We have become disenchanted with the governance at China Biologic which we fear will handicap future returns for external shareholders. A switch of domicile from US to Cayman Islands (which we opposed) severely restricted independent shareholders' rights and this was followed by a succession of profit disappointments, a poorly explained acquisition and more recently by management changes and a rejected takeover offer. We now have little confidence that this company is being managed for the benefit of outside shareholders and suspect that the underlying plasma business is also coming under competitive and regulatory pressures.

Dia We have previously been impressed by management's capital allocation and strategy to focus on those geographic regions where it has leading market shares (Spain, Argentina and Brazil). Its pricing strategy, however, which resulted in relatively high and unsustainable margins, now means that its core Iberian business is facing more competition from discounters like Lidl. In the long run, there is still an opportunity to grow its business in Latin America, but we have weakening conviction in its financial returns and have sold the shares to fund more attractive ideas in the portfolio.

OC Oerlikon Our original investment case for Oerlikon was built around a significant planned restructure. A strong core surface-coatings business was being hampered by a cyclical textile-machine business and a capital-intensive drive-systems business. The restructuring story has now largely played out, with most of the group's non-core assets having been disposed of and the textiles division, which was in a downturn, also having recovered strongly. Looking ahead, the surface coatings business is expanding into additive manufacturing, which will require much more capital in the future. As the shares have performed well and much of the progress we'd hoped for has materialised, we have decided to sell the holding to fund more interesting opportunities elsewhere.

Notable Reductions


Fiat Chrysler Automobiles We have made a small reduction to your holding in Fiat in order to fund new positions which we believe have higher probability adjusted upside. Fiat Chrysler owns a strong portfolio of brands including Dodge, Jeep, Maserati, and Alfa Romeo. We remain impressed by the long-term vision of the management team and the stewardship of the Agnelli family, and we believe the turnaround planned by the late CEO, Sergio Marchionne, to be largely complete. Set against this are concerns around demand trends, increasing competition in the SUV market and uncertainties with regard to the company's longer term strategy and positioning in a world of electric vehicles. On balance, a smaller holding felt appropriate.

SAP We remain enthusiastic about SAP's growth prospects as it shifts from on-premise to cloud-based Enterprise Resource Planning (ERP) solutions. However, we were unnerved by recent M&A activity as SAP acquired online data analytics company, Qualtrics, at a demanding valuation. This, in combination with a less attractive current valuation for SAP itself, led us to decide that a smaller holding was appropriate.

TSMC ADR We made a small reduction to your holding in the Taiwanese semiconductor manufacturer, TSMC, to provide funding for buying ideas elsewhere in the portfolio. Our conviction in the long-term prospects for the company is based on a combination of scale, technological lead and fast-growing end markets. It remains a sizeable holding, but we have been reducing portfolio exposure to semiconductor businesses in recognition of recent strong performance in a cyclical industry.

Verisk Analytics We have reduced your holding in Verisk to fund some new ideas in the portfolio. Verisk provides risk-bearing businesses with data and analytics to help improve their underwriting capabilities. The company has been progressing largely as we had expected since we purchased a holding in late 2016, but recent share price outperformance means that the valuation is less compelling so we decided to reduce the holding size marginally.

Portfolio Characteristics Report for the quarter ended 31 December 2018 12

Portfolio Characteristics

Key Statistics

Number of Holdings 102

Number of Countries 22

Number of Sectors 10

Number of Industries 36

Active Share* 91%

Rolling One Year Turnover 19%

*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

Our approach to investment risk reaches beyond traditional tool kits. In recent months, this has included an in-depth review of the performance and correlation characteristics of the four growth categories in 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 month end market value, summed over 12 months. Turnover is a measure of average investment horizon, the lower the turnover the longer the average investment horizon.

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Governance Summary Report for the quarter ended 31 December 2018 13

Voting Activity

Votes Cast in Favour

Companies 11

Resolutions 96

Votes Cast Against

Companies 1

Resolutions 4

Votes Abstained/Withheld

Companies 1

Resolutions 1

We take governance and sustainability issues seriously as, in addition to the broader social context, they affect a company's investment returns

Our Governance and Sustainability team has grown over the last decade. Their work now extends beyond proxy voting, to thematic and company research, thought leadership, and liaison with regulators and clients

Our ambition is to keep evolving and improving in all areas of our governance and sustainability work

Company Engagement

Engagement Type Company

Corporate Governance Alphabet Inc., Amazon.com, Inc., Anthem Inc., NovoCure Ltd, SAP SE, SiteOne Landscape Supply, Inc., Stericycle, Inc., Tesla, Inc.

Environmental/Social Arthur J. Gallagher & Co., Myriad Genetics, Inc.

AGM or EGM Proposals Visa Inc.

Executive Remuneration CRH plc

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

engagements are available on request.


Over the last decade our Governance and Sustainability team at Baillie Gifford has grown significantly. Ten years ago, this team comprised four specialists who had only just started to engage with companies on issues beyond those listed on the AGM agenda. Until that time, consideration of wider governance matters had been the reserve of portfolio managers.

Today, the Governance and Sustainability team has 13 specialists engaged in a wide array of activities. Proxy voting remains a core focus, but the team’s work now extends to thematic and company specific research, thought leadership at industry conferences, working with regulators and, increasingly, engaging with our clients to explain our approach to ESG matters. The team is located on the investment floor, alongside our analysts and investment managers. For the Global Alpha strategy, we have a dedicated specialist from the team who works with the portfolio managers to further incorporate governance and sustainability factors into our research.

Proxy voting has always been a core function of the Governance and Sustainability team. For clients that have delegated this responsibility, we vote on all proxies for

all holdings. We have developed our own proprietary software to track our votes and record engagements, and an annual audit is conducted to ensure that no votes have been missed.

We are open-minded about the different ways to govern and manage a company, and sceptical about the usefulness of overly prescriptive policies or checklists when voting. While we consult third party proxy voting analyses as a reference point, we do not follow their recommendations. All of our voting decisions are made on a case-by-case basis that is grounded in fundamental research. This rigour ensures a regular pattern where the governance team actively look at every holding in your portfolio at least once per year (in many cases it is much more frequent). In every case, we take an active approach to voting decisions and engage with companies where more information is required, or on contentious resolutions. These situations often involve the governance specialists collaborating with portfolio managers, both in company engagements and on voting decisions. This process allows portfolio managers to focus their time on the most important voting issues across the portfolio.


The team also has a responsibility for broader company engagements. Sometimes this work is an offshoot of the aforementioned engagement around AGM resolutions, at other times it relates to topics that are designed to support our fundamental company research. The decision to invest in a particular company involves a great deal of thinking about that company’s culture, governance structures and role in society. The Governance and Sustainability team can add a lot of value to these topics. Recently the governance specialists and portfolio managers have collaborated in meetings with Stericycle, Ryanair, Tesla and Anthem. The most common topic is executive remuneration, but recent engagements have included board structures and interactions and employee welfare. Thematic research is also used to understand broader industry topics, such as comparing effective tax rates and looking at gender diversity on company boards.

The team are actively working to shape the dialogue in the wider governance community. This involves attending and presenting at industry conferences. For a number of years, we have been running educational seminars in Japan, Taiwan, and South Korea, and taking part in the Asian Corporate Governance Association. In the UK and US we have been active supporters and participants in Governance Week. The team also regularly attend conferences outside the narrow ESG silo; examples include academic conferences, such as the Emerging Markets Corporate Governance Network research conference at the Netherlands Central Bank, and the CLSA Investor Forum in Hong Kong.

There has been an increase in the level of transparency that we provide on all of these activities, in line with the requirements of the UK Stewardship Code and beyond. The team now spend a significant amount of time answering queries from clients and meeting with a growing range of stakeholders. We expect this trend to continue and that we will increasingly be asked not only about our ESG activities, but for insights into how asset owners should be thinking about issues such as climate change and diversity.

The Governance and Sustainability team has a broad remit, with ESG research that spans topics from deep science to complex social issues. To meet this requirement, we have built a team with a broad skill set and a diverse range of industry experience. Team members have backgrounds in law, corporate governance, the hydrocarbon industry, business intelligence, international development, corporate sustainability and climate change, as well as members who have been promoted through our graduate recruitment programme.

This is a fascinating and challenging topic. We take governance and sustainability issues seriously, not because of an interest in shareholder rights per se, but because these topics affect not only an individual company’s investment returns, but also the broader social context in which all businesses operate. The picture set out here is a snapshot of where we are today. Our ambition is to keep evolving and improving in all areas of our governance and sustainability work. As with all things at Baillie Gifford though, this work will always be focused on bottom-up fundamental company analysis.

Governance Engagement Report for the quarter ended 31 December 2018 16

Company Engagement Report

Alphabet Inc. In keeping with its technology sector peers, Alphabet faced challenges in 2018 relating to data governance and corporate culture. A recent staff walkout in protest against the company's handling of sexual harassment cases also attracted significant international media coverage. The company's newly established quarterly governance calls are therefore a welcome development. Management have taken the harassment issues seriously, and announced commitments to all employees, offering further channels of communication for reporting concerns, along with further education and training. Whilst much of this is still work in progress, Alphabet's commitment to employees was clearly emphasised. We look forward to an update at the next quarterly conference call.

Amazon.com, Inc. On a 2018 governance and sustainability update call with Amazon, we covered several subjects, including the ongoing issue of employee working conditions and measures to combat fake customer reviews on the website. The call was helpful and insightful, and we were encouraged by Amazon's recent moves to improve employee engagement at facilitation centres and its commitment to addressing and removing fake reviews.

Arthur J. Gallagher & Co. Following a review of the portfolio from a tax perspective, we had a call with AJ Gallagher which provide insurance brokerage, consulting, and third party claims settlement and administration services in the US and internationally. In the US, through investment partnerships with a clean coal company, AJ Gallagher has taken advantage of legislation that allows tax credits for clean coal projects. With the legislation expiring, the company will stop accumulating tax credits in 2019 and 2020. However, it has sufficient credits to reduce tax liabilities into the mid to late 2020s. Although the practice is legal and the company is transparent about the arrangements, we advised that our preference is for the company to focus on its core business rather conducting activities in an area outside of this solely for tax benefits. Such practices increase complexity in accounting and can act as a distraction from core business areas. The company will take our comment on board in future decisions surrounding tax arrangements and is not currently looking for alternative arrangements in this area.

NovoCure Ltd We arranged a call with Novocure's Head of HR, Bill Burke, following our decision to oppose the executive pay plan at this year's AGM. Our main concern was a special, large equity grant to Executive Chairman, Bill Doyle. The proposal received a considerable level of dissent and the company acknowledged it could have done better at explaining its rationale to shareholders. It was keen to reassure us that there will be no re-occurrence. We also discussed the board, which has been refreshed in the past 18-24 months, resulting in more independence and enhanced executive and industry experience. Burke explained the aim of having a collaborative and cohesive team, highlighting a reputation for integrity and executive experience of making challenging decisions as two key characteristics of board members. We were pleased to learn more about the company's efforts to support a healthy corporate culture, including enhanced employee engagement and stock ownership. This was a productive engagement and we look forward to developing our understanding of the business and its governance.

SAP SE Following a sizeable oppose vote against remuneration in 2016 and the discharge of the board in 2017 (because of a lack of change to remuneration), the chairman opened dialogue with shareholders during 2018. As part of this, we met him earlier in the year to discuss our views on the company's governance. We met again in December to reflect on the subsequent progress. Having had limited contact in the past, the chair remarked how beneficial he has found consulting a range of shareholders. It has resulted in the company complying with all aspects of the German Governance Code and making improvements to remuneration policy. We welcomed the company's progress on governance. We encouraged further transparency on succession planning for the position of chair and the structure of the remuneration policy. We do not believe the long-term incentive plan is sufficiently stringent as awards begin for underperformance against peers. The chair was receptive to our points on succession and other ways remuneration could be structured for better alignment with shareholders. However, any further changes will likely take place after revisions to the German Corporate Governance Code come into force next year. We will meet the company again at the capital markets day in February.

Governance Engagement Report for the quarter ended 31 December 2018 17

Company Engagement Report

SiteOne Landscape Supply, Inc. We spoke with the Chief Operating Officer, Pascal Convers, and General Counsel, Briley Brisendine, as part of the company's outreach programme to discuss corporate governance. Following the IPO in May 2016 and the subsequent sell-down of private equity holdings, the board has undergone significant change by adding six independent non-executives. Brisendine believes the company has constructed a high-quality board, with the long-term outlook for the business enabling it to attract directors that would not otherwise be drawn to a company of this size. Acquisitions and consolidation of the market is a core part of SiteOne's growth strategy. The board provides oversight and guidance to management on these deals and its approval is required for all transactions. Convers explained that management and the board have a very good relationship based on effective communication, including a detailed breakdown of potential targets and a routine review of all successful and unsuccessful deals. We look forward to future engagement, including the opportunity to speak with a member of the board.

Voting Report for the quarter ended 31 December 2018 18

Votes Cast in Favour

Companies Voting Rationale

Alibaba, Autohome Inc - ADR, BHP Billiton, CyberAgent Inc, Hays, Myriad Genetics Inc, Orica, Pernod Ricard SA, Ping An Insurance, Resmed Inc, Wabtec

We voted in favour of routine proposals at the aforementioned meetings.

Votes Cast Against

Company Meeting Details Resolution(s) Voting Rationale

CyberAgent Inc AGM 14/12/18

2.9-2.11 We opposed the election of three new inside directors given the ratio of independence on the Board.

CyberAgent Inc AGM 14/12/18

3 We opposed a Deep Discount Stock Option Plan due to the inclusion of outside directors in the plan.

Votes Abstained

Company Meeting Details Resolution(s) Voting Rationale

Resmed Inc Annual 15/11/18

4 We abstained on the executive compensation as we have some concerns regarding the structure of the long-term incentive plan, including the opportunity for retesting.

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

Summary Transaction Listing Report for the quarter ended 31 December 2018 19

Proceeds

(DKK)

Book Cost

(DKK)

Profit/Loss

(DKK)

Total Purchases 31,104,501

Accrued Interest 0

31,104,501

Total Sales 37,280,187 -37,576,675 -296,489

Accrued Interest 0

37,280,187 -37,576,675 -296,489

Total Net Investment/Disinvestment -6,175,685

Net Accrued Interest 0

Total -6,175,685

Transaction Listing Report for the quarter ended 31 December 2018 20

Last Trade

Date

Asset

Name

Quantity

Price

Proceeds

(DKK)

Book Cost

(DKK)

Profit/Loss

(DKK)

Quantity

Balance

Book Cost

Balance (DKK)

Purchases

04/12/18 58.Com Inc Adr 685

USD 60.88

274,281 6,565 2,770,091

28/11/18 Advantest Corp 1,400

JPY 2,367

192,534 22,900 2,956,678

28/12/18 AIA Group 14,400

HKD 64.20

779,087 145,600 7,405,853

27/11/18 AJ Gallagher & Co 518

USD 76.60

261,118 9,179 3,925,076

27/12/18 Alibaba 702

USD 149.28

689,677 7,645 7,934,973

27/12/18 Alphabet Inc Class C 96

USD 1,056.01

667,229 1,075 7,119,198

27/11/18 Amazon.com 56

USD 1,606.17

593,627 1,373 11,497,479

27/12/18 Anthem Inc 403

USD 280.40

743,553 5,752 7,965,750

27/12/18 Apache 3,363

USD 31.49

696,959 30,792 8,005,272

14/11/18 B3 S.A. 4,200

BRL 25.79

188,669 52,800 2,150,591

27/11/18 Baidu.com ADR 184

USD 184.50

223,412 3,092 4,363,497

27/12/18 Banco Bradesco Pref 8,000

BRL 37.54

507,131 103,200 5,496,722

04/12/18 Bank of Ireland (Dublin) 5,690

EUR 5.46

234,331 73,230 3,898,402

15/11/18 BHP Billiton 1,361

GBP 15.72

184,546 28,270 4,082,841

27/12/18 CH Robinson 712

USD 83.48

391,266 5,850 3,124,336

20/12/18 Chegg 2,114

USD 28.89

401,750 2,114 401,750

27/11/18 CRH 1,638

GBP 21.66

302,452 27,781 6,208,303

27/11/18 Deutsche Boerse 313

EUR 113.25

264,527 3,729 2,914,824

27/12/18 EOG Resources 688

USD 98.59

445,339 5,986 3,995,948

27/11/18 Facebook 292

USD 135.73

260,820 4,697 4,930,374

27/12/18 Fairfax Financial Holdings 166

CAD 584.36

476,188 1,218 3,848,297

27/12/18 Fiat Chrysler Automobiles 5,685

EUR 13.67

580,101 33,888 3,663,915

27/12/18 First Republic Bank 680

USD 86.69

388,075 5,041 3,127,334

31/12/18 HDFC Corp 2,342

INR 1,938.63

424,218 28,765 4,953,546


Last Trade

Date

Asset

Name

Quantity

Price

Proceeds

(DKK)

Book Cost

(DKK)

Profit/Loss

(DKK)

Quantity

Balance

Book Cost

Balance (DKK)

17/12/18 ICICI Bank ADR 4,619

USD 9.94

303,435 109,832 6,235,822

27/12/18 Infineon Technologies AG 3,095

EUR 17.37

401,470 12,525 1,907,326

28/12/18 Kansai Paint Co Ltd 3,400

JPY 2,096

418,098 10,900 1,509,784

14/12/18 Kirby 3,082

USD 74.65

1,513,177 10,135 5,148,083

14/11/18 Markel 25

USD 1,091.23

180,455 592 4,033,415

27/12/18 MarketAxess Holdings 432

USD 213.17

606,932 2,479 3,204,852

27/12/18 Martin Marietta Materials 372

USD 182.88

446,943 3,593 4,859,808

27/12/18 Mastercard 481

USD 197.84

626,188 5,825 6,154,128

27/12/18 Moody's 645

USD 149.74

635,668 7,607 7,183,336

28/12/18 MS&AD Insurance 3,200

JPY 3,251

607,959 25,500 5,218,835

27/12/18 Naspers 2,431

ZAR 2,791.67

3,139,399 10,123 14,680,012

27/12/18 NetEase.com ADR 251

USD 240.41

397,487 913 1,673,005

20/12/18 Novocure Ltd 242

USD 32.11

50,985 242 50,985

28/12/18 Olympus 2,400

JPY 3,257

457,677 15,000 3,494,842

27/12/18 Pernod Ricard SA 2,205

EUR 139.67

2,305,425 5,671 5,768,788

28/12/18 Ping An Insurance 11,000

HKD 72.93

676,185 95,500 5,930,984

27/12/18 Prudential 5,553

GBP 14.98

702,799 75,849 11,262,942

27/11/18 Resmed Inc 380

USD 104.94

262,419 6,400 3,745,962

27/12/18 Richemont 1,013

CHF 62.03

416,309 6,609 3,448,944

27/11/18 Royal Caribbean Cruises 357

USD 110.46

259,516 6,170 4,307,208

15/11/18 Ryanair 1,934

EUR 11.95

174,199 43,079 5,174,463

27/12/18 SAP 984

EUR 89.16

655,096 9,400 6,406,094

27/12/18 Schibsted 2,028

NOK 290.29

445,680 17,454 3,234,640

17/12/18 Schindler 304

CHF 200.31

401,612 3,346 4,585,063

04/12/18 Seattle Genetics 562

USD 63.87

236,078 8,491 3,327,237


Last Trade

Date

Asset

Name

Quantity

Price

Proceeds

(DKK)

Book Cost

(DKK)

Profit/Loss

(DKK)

Quantity

Balance

Book Cost

Balance (DKK)

27/11/18 Service Corp.Intl. 5,698

USD 43.68

1,614,176 15,774 4,344,882

03/10/18 Shopify 'A' 479

USD 161.81

499,032 2,128 2,056,375

28/12/18 Sumitomo Mitsui Trust 1,500

JPY 4,135

363,705 15,000 3,797,775

27/12/18 Teradyne 1,925

USD 31.78

403,033 9,329 2,197,635

27/11/18 Thermo Fisher Scientific 166

USD 239.92

262,096 3,116 4,040,410

04/12/18 TSMC ADR 927

USD 38.61

235,417 18,627 4,545,129

27/11/18 Verisk Analytics 329

USD 121.05

262,098 5,487 3,553,019

27/12/18 Visa Inc-Class A Shares 812

USD 132.74

709,332 7,744 5,746,670

17/12/18 Waters 210

USD 189.86

263,531 3,319 3,977,805

Total Purchases 31,104,501


Last Trade

Date

Asset

Name

Quantity

Price

Proceeds

(DKK)

Book Cost

(DKK)

Profit/Loss

(DKK)

Quantity

Balance

Book Cost

Balance (DKK)

Sales

22/10/18 58.Com Inc Adr 542

USD 65.45

230,161 -230,056 105 5,880 2,495,809

20/12/18 Advanced Micro Devices 1,556

USD 19.54

199,840 -140,416 59,424 7,795 703,436

23/10/18 Advantest Corp 1,700

JPY 2,139

209,520 -218,560 -9,041 21,500 2,764,144

20/12/18 AIA Group 18,400

HKD 63.59

973,723 -932,756 40,967 141,600 7,191,588

22/10/18 AJ Gallagher & Co 620

USD 72.73

292,583 -262,285 30,298 8,661 3,663,958

19/12/18 Alibaba 924

USD 144.06

869,287 -963,674 -94,388 7,427 7,742,419

19/12/18 Alphabet Inc Class C 129

USD 1,078.27

908,313 -852,361 55,951 1,049 6,945,874

20/12/18 Amazon.com 163

USD 1,682.29

1,793,110 -1,358,806 434,304 1,275 10,676,829

19/12/18 Anthem Inc 549

USD 267.45

958,779 -749,745 209,034 5,630 7,760,706

19/12/18 Apache 4,532

USD 34.60

1,024,016 -1,197,069 -173,053 29,814 7,835,934

22/10/18 B3 S.A. 5,200

BRL 24.38

221,721 -209,918 11,803 48,600 1,961,922

22/10/18 Baidu.com ADR 205

USD 197.48

262,669 -291,856 -29,187 2,908 4,140,085

19/12/18 Banco Bradesco Pref 8,600

BRL 38.84

561,702 -456,157 105,545 100,400 5,325,365

22/10/18 Bank of Ireland (Dublin) 4,743

EUR 6.23

220,240 -257,310 -37,070 67,540 3,664,071

22/10/18 BHP Billiton 1,684

GBP 15.52

221,140 -243,960 -22,821 26,909 3,898,295

19/12/18 CH Robinson 751

USD 85.01

419,478 -401,177 18,301 5,539 2,958,879

01/11/18 China Biologic Products

Holdings Inc

1,137

USD 66.41

493,106 -694,361 -201,255 0 0

22/10/18 CRH 1,806

GBP 21.46

328,025 -407,986 -79,961 26,143 5,905,851

22/10/18 Deutsche Boerse 259

EUR 113.78

219,825 -200,945 18,880 3,416 2,650,297

16/10/18 Dia 12,297

EUR 1.71

156,348 -382,702 -226,354 0 0

19/12/18 EOG Resources 784

USD 101.72

521,911 -527,002 -5,091 5,686 3,825,959

22/10/18 Facebook 219

USD 156.12

221,837 -232,153 -10,316 4,405 4,669,554

19/12/18 Fairfax Financial Holdings 216

CAD 606.42

643,841 -688,756 -44,914 1,161 3,690,323

19/12/18 Fiat Chrysler Automobiles 13,955

EUR 14.14

1,472,866 -1,522,808 -49,942 32,043 3,488,273


Last Trade

Date

Asset

Name

Quantity

Price

Proceeds

(DKK)

Book Cost

(DKK)

Profit/Loss

(DKK)

Quantity

Balance

Book Cost

Balance (DKK)

19/12/18 First Republic Bank 685

USD 85.40

384,366 -428,177 -43,810 4,743 2,964,732

20/12/18 HDFC Corp 2,819

INR 1,850.40

475,635 -483,973 -8,338 27,905 4,795,224

18/12/18 HTC 17,000

TWD 39.67

142,973 -241,059 -98,085 50,000 708,996

19/12/18 ICICI Bank ADR 9,339

USD 10.32

633,364 -530,231 103,133 100,493 5,705,591

19/12/18 Infineon Technologies AG 2,647

EUR 17.60

347,794 -411,378 -63,584 11,128 1,729,436

21/12/18 Kansai Paint Co Ltd 2,800

JPY 2,050

336,160 -393,604 -57,444 9,400 1,321,385

22/10/18 Kirby 448

USD 74.34

216,092 -230,886 -14,794 7,053 3,634,905

22/10/18 Markel 35

USD 1,102.42

250,356 -237,837 12,519 567 3,852,961

19/12/18 MarketAxess Holdings 495

USD 208.60

675,636 -635,409 40,228 2,331 3,006,580

19/12/18 Martin Marietta Materials 479

USD 170.05

532,426 -654,032 -121,605 3,458 4,710,826

19/12/18 Mastercard 694

USD 198.71

900,482 -724,945 175,538 5,685 5,985,685

19/12/18 Moody's 872

USD 151.41

861,930 -822,464 39,466 7,453 7,046,496

21/12/18 MS&AD Insurance 4,200

JPY 3,299

806,292 -864,546 -58,254 24,600 5,052,034

20/12/18 Naspers 886

ZAR 2,798.38

1,133,393 -1,303,049 -169,656 9,915 14,413,298

19/12/18 NetEase.com ADR 206

USD 238.83

323,245 -383,518 -60,272 822 1,530,347

26/10/18 OC Oerlikon 6,524

CHF 11.97

509,560 -632,064 -122,503 0 0

21/12/18 Olympus 2,900

JPY 3,478

587,437 -685,477 -98,040 14,300 3,355,663

19/12/18 Pernod Ricard SA 544

EUR 140.32

569,732 -549,372 20,360 5,508 5,597,299

20/12/18 Ping An Insurance 14,000

HKD 73.17

852,465 -871,193 -18,728 92,500 5,757,905

19/12/18 Prudential 7,698

GBP 14.50

934,780 -1,152,661 -217,881 74,013 11,055,755

22/10/18 Resmed Inc 437

USD 102.79

291,448 -252,875 38,573 6,020 3,483,542

19/12/18 Richemont 1,012

CHF 63.37

424,375 -537,306 -112,931 6,127 3,253,037

22/10/18 Royal Caribbean Cruises 440

USD 115.06

328,498 -306,380 22,118 5,813 4,047,691

22/10/18 Ryanair 2,976

EUR 12.00

266,415 -361,667 -95,252 41,145 5,000,264

19/12/18 SAP 2,445

EUR 91.41

1,667,622 -1,670,353 -2,731 9,127 6,230,944


Last Trade

Date

Asset

Name

Quantity

Price

Proceeds

(DKK)

Book Cost

(DKK)

Profit/Loss

(DKK)

Quantity

Balance

Book Cost

Balance (DKK)

19/12/18 Schibsted 2,387

NOK 288.70

527,625 -437,022 90,603 16,571 3,050,476

22/10/18 Schibsted B 450

NOK 268.50

95,347 -73,230 22,117 0 0

19/12/18 Schindler 554

CHF 207.39

754,970 -760,269 -5,299 3,019 4,136,971

22/10/18 Seattle Genetics 627

USD 70.71

287,680 -244,439 43,241 7,929 3,091,159

22/10/18 Service Corp.Intl. 1,036

USD 43.80

294,394 -284,244 10,151 14,749 4,046,633

21/12/18 Sumitomo Mitsui Trust 1,700

JPY 4,081

406,303 -431,474 -25,171 14,400 3,654,837

19/12/18 Teradyne 2,357

USD 32.25

497,106 -565,355 -68,249 8,624 2,059,114

22/10/18 Thermo Fisher Scientific 198

USD 224.83

288,844 -253,595 35,249 2,950 3,778,314

13/11/18 TSMC ADR 15,237

USD 38.74

3,869,459 -3,710,005 159,454 17,700 4,309,712

12/12/18 Verisk Analytics 1,370

USD 118.14

1,059,902 -883,431 176,471 4,505 2,917,141

19/12/18 Visa Inc-Class A Shares 1,043

USD 137.03

934,376 -766,417 167,959 7,519 5,558,481

19/12/18 Waters 317

USD 186.13

387,660 -379,923 7,737 3,002 3,597,883

Total Sales 37,280,187 -37,576,675 -296,489

Total Net Investment/Disinvestment -6,175,685 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 2018 26

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

HSBC Bank Plc 24,849,139 0.0 0.0 100.0 5,085 0 5,085 5,085 0 0 0

Morgan Stanley & Co.

International PLC 22,803,882 0.0 0.0 100.0 4,804 0 4,804 4,804 0 0 0

Merrill Lynch International 12,848,431 0.0 0.0 100.0 3,823 0 3,823 3,823 0 0 0

Liquidnet Europe Limited 2,612,119 0.0 0.0 100.0 832 0 832 832 0 0 0

Cowen and Company, LLC 1,311,569 0.0 0.0 100.0 656 0 656 656 0 0 0

RBC Europe Limited 1,122,641 0.0 0.0 100.0 786 0 786 786 0 0 0

BTIG, LLC 1,120,856 0.0 0.0 100.0 560 0 560 560 0 0 0

UBS AG 676,079 0.0 0.0 100.0 186 0 186 186 0 0 0

Sanford C. Bernstein Limited 314,536 0.0 0.0 100.0 220 0 220 220 0 0 0

Allen & Company LLC 312,547 0.0 0.0 100.0 156 0 156 156 0 0 0

Other Brokers * 387,428 0.0 0.0 100.0 38 0 38 38 0 0 0

Total 68,359,227 0.0 0.0 100.0 17,146 0 17,146 17,146 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 2.9 0.0 97.1 100.0 0.0 100.0 100.0 0.0 0.0 0.0

Investeringsforeningen Investin - K Invest Globale Aktier II Average Commission Rate 0.0251 %

BG Average * 0.0397 %

Total commission paid as a percentage of the value of the fund 0.0050 %

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

Non-Equity Trading Analysis Report for the quarter ended 31 December 2018 27

Direct Currency Transactions

Counterparty Spot Transaction Value* (DKK)

Forward Transaction Value (DKK)

Total (DKK)

Bank of New York Mellon (Custodian) 69,711,558 0 69,711,558

Northern Trust Company 6,772,085 0 6,772,085

RBC Investor Services 6,713,862 0 6,713,862

State Street Bank 2,206,271 0 2,206,271

National Australia Bank 1,262,193 0 1,262,193

Brown Brothers Harriman 486,982 0 486,982

Total 87,152,950 0 87,152,950

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

Income and Costs Summary Report for the quarter ended 31 December 2018 28

Income

DKK

Underwriting commission 0

Stock Lending 0

Total Income 0

Costs

DKK

Fund management fees 453,448

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

Tax

VAT 0

Stamp Duty 338

Other transaction taxes and levies 31,533

31,871

Total Costs 485,318

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 2018 29

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) by the end of 2018 and replace with revised disclosures. A more detailed Costs & Charges disclosure is available on request.

Summary Valuation Report for the quarter ended 31 December 2018 30

Description Book Cost (DKK)

Market Value (DKK)

Fund (%)

Gross Income (DKK)

Equities

UK 19,406,745 15,630,824 4.5 512,627

North America 168,391,000 162,325,040 47.1 1,336,225

Europe (ex UK) 69,192,056 59,211,838 17.2 1,275,030

Developed Asia Pacific 42,225,017 39,458,224 11.4 842,231

Emerging Markets 74,624,428 68,781,760 19.9 763,669

Total Equities 373,839,246 345,407,686 100.2 4,729,782

Total Cash and Deposits -572,344 -572,344 -0.2 175,713

Total 373,266,902 344,835,342 100.0 4,905,495

Valuation Report for the quarter ended 31 December 2018 31

Asset Name Nominal Holding

Market Price

Book Cost (DKK)

Market Value (DKK)

Fund (%)

Equities

Naspers 10,123 ZAR 2,892.27 14,680,012 13,286,636 3.9

Amazon.com 1,275 USD 1,501.97 10,676,829 12,501,101 3.6

Anthem Inc 5,752 USD 262.63 7,965,750 9,861,433 2.9

Prudential 75,849 GBP 14.02 11,262,942 8,841,128 2.6

AIA Group 145,600 HKD 65.00 7,405,853 7,890,887 2.3

Alphabet Inc Class C 1,075 USD 1,035.61 7,119,198 7,267,441 2.1

Mastercard 5,825 USD 188.65 6,154,128 7,173,474 2.1

Moody's 7,607 USD 140.04 7,183,336 6,954,122 2.0

Alibaba 7,645 USD 137.07 7,934,973 6,840,640 2.0

ICICI Bank ADR 100,493 USD 10.29 5,705,591 6,750,377 2.0

Banco Bradesco Pref 103,200 BRL 38.65 xd 5,496,722 6,718,159 1.9

Visa Inc-Class A Shares 7,744 USD 131.94 5,746,670 6,669,889 1.9

SAP 9,400 EUR 86.93 6,406,094 6,097,861 1.8

Pernod Ricard SA 5,671 EUR 143.30 5,768,788 6,064,372 1.8

Ping An Insurance 95,500 HKD 69.15 5,930,984 5,506,133 1.6

HDFC Corp 28,765 INR 1,968.35 4,953,546 5,294,132 1.5

Apache 30,792 USD 26.25 8,005,272 5,276,477 1.5

CRH 27,781 GBP 20.71 6,208,303 4,783,412 1.4

Resmed Inc 6,400 USD 113.87 3,745,962 4,757,361 1.4

MS&AD Insurance 25,500 JPY 3,132 5,218,835 4,751,960 1.4

Thermo Fisher Scientific 3,116 USD 223.79 xd 4,040,410 4,552,133 1.3

TSMC ADR 18,627 USD 36.91 4,545,129 4,488,113 1.3

Kirby 10,135 USD 67.36 5,148,083 4,456,590 1.3

AJ Gallagher & Co 9,179 USD 73.70 3,925,076 4,416,108 1.3

Service Corp.Intl. 15,774 USD 40.26 4,344,882 4,145,648 1.2

Martin Marietta Materials 3,593 USD 171.87 4,859,808 4,031,198 1.2

Facebook 4,697 USD 131.09 4,930,374 4,019,453 1.2

Markel 592 USD 1,038.05 4,033,415 4,011,592 1.2

Royal Caribbean Cruises 6,170 USD 97.79 xd 4,307,208 3,938,732 1.1

Schindler 3,019 CHF 194.70 4,136,971 3,892,396 1.1

BHP Billiton 28,270 GBP 16.52 4,082,841 3,881,865 1.1

Schibsted 17,454 NOK 290.00 3,234,640 3,815,878 1.1

Waters 3,002 USD 188.65 3,597,883 3,696,956 1.1

Sumitomo Mitsui Trust 15,000 JPY 4,022 3,797,775 3,589,584 1.0

Fairfax Financial Holdings 1,218 CAD 600.98 3,848,297 3,498,622 1.0

Tesla Inc 1,603 USD 332.80 3,191,515 3,482,520 1.0

Ryanair 43,079 EUR 10.75 5,174,463 3,455,843 1.0

MarketAxess Holdings 2,479 USD 211.31 3,204,852 3,419,585 1.0

EOG Resources 5,986 USD 87.21 3,995,948 3,407,845 1.0

CH Robinson 5,850 USD 84.09 3,124,336 3,211,272 0.9

Fiat Chrysler Automobiles 33,888 EUR 12.68 3,663,915 3,207,109 0.9

Verisk Analytics 4,505 USD 109.04 2,917,141 3,206,694 0.9



Market Price

Book Cost (DKK)

Market Value (DKK)

Fund (%)

Baidu.com ADR 3,092 USD 158.60 4,363,497 3,201,249 0.9

Seattle Genetics 8,491 USD 56.66 3,327,237 3,140,597 0.9

Advantest Corp 22,900 JPY 2,244 2,956,678 3,057,519 0.9

Olympus 15,000 JPY 3,375 3,494,842 3,012,145 0.9

TD Ameritrade Holding Corp 9,344 USD 48.96 3,177,487 2,986,421 0.9

SMC 1,500 JPY 33,240 3,341,544 2,966,628 0.9

Deutsche Boerse 3,729 EUR 104.95 2,914,824 2,920,484 0.8

Bureau Veritas 21,692 EUR 17.80 3,487,135 2,880,564 0.8

CyberAgent Inc 11,400 JPY 4,245 3,157,110 2,879,343 0.8

First Republic Bank 5,041 USD 86.90 3,127,334 2,859,653 0.8

GrubHub Inc 5,702 USD 76.81 2,898,947 2,859,050 0.8

Zillow Group Inc Class C 13,460 USD 31.58 4,394,448 2,774,815 0.8

Richemont 6,609 CHF 63.00 3,448,944 2,757,175 0.8

Atlas Copco B 18,904 SEK 193.32 3,148,973 2,690,834 0.8

Signify NV 17,564 EUR 20.47 3,893,992 2,683,004 0.8

Bank of Ireland (Dublin) 73,230 EUR 4.86 3,898,402 2,655,861 0.8

Sberbank Spon ADR 37,035 USD 10.96 3,588,755 2,649,718 0.8

Jardine Matheson 5,400 USD 69.58 2,154,794 2,452,760 0.7

Svenska Handelsbanken 33,631 SEK 98.30 2,879,519 2,434,163 0.7

Wabtec 5,279 USD 70.25 3,053,646 2,420,889 0.7

Myriad Genetics Inc 12,616 USD 29.07 2,460,551 2,394,107 0.7

B3 S.A. 52,800 BRL 26.81 xd 2,150,591 2,384,250 0.7

58.Com Inc Adr 6,565 USD 54.21 2,770,091 2,323,223 0.7

Autohome Inc - ADR 4,447 USD 78.23 2,090,216 2,271,001 0.7

AP Moller Maersk B 271 DKK 8,184.00 2,901,381 2,217,864 0.6

Netflix Inc 1,242 USD 267.66 2,430,080 2,170,111 0.6

Jefferies Financial 18,121 USD 17.36 2,827,774 2,053,566 0.6

Ritchie Bros Auctioneers (USA) 9,447 USD 32.72 1,970,904 2,017,827 0.6

Rohm 4,800 JPY 7,040 2,632,761 2,010,596 0.6

Interactive Brokers Group 5,638 USD 54.39 2,023,644 2,001,801 0.6

Epiroc B 33,874 SEK 78.88 1,975,688 1,967,387 0.6

Shopify 'A' 2,128 USD 138.45 2,056,375 1,923,275 0.6

Ctrip.com International 10,844 USD 27.06 3,357,755 1,915,553 0.6

Teradyne 9,329 USD 31.38 2,197,635 1,911,018 0.6

Chipotle Mexican Grill 652 USD 431.79 2,030,888 1,837,795 0.5

Orica 22,017 AUD 17.25 1,896,587 1,745,406 0.5

Genmab 1,618 DKK 1,067.50 1,911,037 1,727,215 0.5

Stericycle 6,948 USD 36.69 3,040,569 1,664,119 0.5

Infineon Technologies AG 12,525 EUR 17.37 1,907,326 1,623,052 0.5

LendingTree 1,103 USD 219.57 2,104,804 1,580,976 0.5

Albemarle 3,073 USD 77.07 xd 1,925,254 1,546,054 0.4

Just Eat 30,431 GBP 5.87 2,192,595 1,484,623 0.4

Hays 122,273 GBP 1.40 1,868,367 1,423,208 0.4



Market Price

Book Cost (DKK)

Market Value (DKK)

Fund (%)

Howard Hughes 2,227 USD 97.62 1,819,935 1,419,175 0.4

Sands China 49,200 HKD 34.30 1,611,004 1,407,053 0.4

NetEase.com ADR 913 USD 235.37 1,673,005 1,402,810 0.4

Kansai Paint Co Ltd 10,900 JPY 2,114 1,509,784 1,371,015 0.4

Spotify Technology SA 1,805 USD 113.50 2,231,663 1,337,365 0.4

Mail.ru Group GDR 8,708 USD 23.46 1,674,798 1,333,593 0.4

Meituan Dianping 35,600 HKD 43.90 2,050,177 1,303,064 0.4

Alnylam Pharmaceuticals 2,646 USD 72.91 1,598,176 1,259,371 0.4

SiteOne Landscape Supply 3,469 USD 55.27 1,525,295 1,251,614 0.4

Persol Holdings 12,100 JPY 1,636 1,807,410 1,177,822 0.3

Line Corp 5,100 JPY 3,775 1,240,040 1,145,508 0.3

Advanced Micro Devices 7,795 USD 18.46 703,436 939,344 0.3

DistributionNOW 12,004 USD 11.64 1,177,476 912,128 0.3

Tsingtao Brewery 'H' 28,000 HKD 31.60 949,589 737,728 0.2

Chegg 2,114 USD 28.42 401,750 392,198 0.1

HTC 50,000 TWD 35.35 708,996 375,383 0.1

Novocure Ltd 242 USD 33.48 50,985 52,890 0.0

Total Equities 373,839,246 345,407,686 100.2

Cash and Deposits

DKK Uncommitted Cash -7,675,836.97 -7,675,837 -7,675,837 -2.2

USD Uncommitted Cash 1,075,521.53 7,020,951 7,020,951 2.0

ZAR Uncommitted Cash 912,921.97 414,286 414,286 0.1

INR Uncommitted Cash -1,698,348.28 -158,802 -158,802 0.0

BRL Uncommitted Cash -102,678.69 -172,942 -172,942 -0.1

Total Cash and Deposits -572,344 -572,344 -0.2

Total 373,266,902 344,835,342 100.0

Valuation Policy Report for the quarter ended 31 December 2018 34

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 2018 35

Code Currency Local to DKK

AUD Australian dollar 0.2176

BRL Brazilian real 0.5937

CAD Canadian dollar 0.2092

EUR euro 0.1340

HKD Hong Kong dollar 1.1994

INR Indian rupee 10.6948

JPY Japanese yen 16.8070

TWD New Taiwan dollar 4.7085

NOK Norwegian krone 1.3265

ZAR South African rand 2.2036

GBP sterling 0.1203

SEK Swedish krona 1.3581

CHF Swiss franc 0.1510

USD US dollar 0.1532

Fund Reconciliation Report for the quarter ended 31 December 2018 36

Market Value 30 September 2018

(DKK)

Net Investment/ Disinvestment

(DKK)

Capital Gain/Loss

(DKK)

Market Value 31 December 2018

(DKK)

Equities

UK 19,286,253 -268,574 -3,386,854 15,630,824

North America 195,020,891 -1,017,321 -31,678,529 162,325,040

Europe (ex UK) 71,019,814 -1,379,545 -10,428,431 59,211,838

Developed Asia Pacific 44,306,191 -500,375 -4,347,591 39,458,224

Emerging Markets 75,259,569 -3,009,869 -3,467,940 68,781,760

404,892,717 -6,175,685 -53,309,346 345,407,686

Cash and Deposits

Danish krone 200,000 -7,875,837 0 -7,675,837

sterling 0 -525 525 0

US dollar 2,225,427 4,773,553 21,971 7,020,951

euro 43,681 -41,156 -2,525 0

Japanese yen 0 7,696 -7,696 0

Other Currencies 3,194 85,355 -6,006 82,542

2,472,302 -3,050,914 6,268 -572,344

Total 407,365,019 -9,226,599 -53,303,077 344,835,342

Fund Reconciliation Report for the quarter ended 31 December 2018 37

(DKK) Book Cost (DKK)

Market Value (DKK)

As at 30 September 2018

Equities 380,311,420.34 404,892,717.20

Cash and Deposits 2,472,301.85 2,472,301.85

382,783,722.19 407,365,019.05

Income

Income from Shares and Securities 960,309.06

Deposit Interest 13,201.65

Tax Recovered 7,351.07

980,861.78

Charges

Portfolio Accounting Fees -545,947.34

Management Fee -453,447.55

-999,394.89

Others

Currency Revaluation 1,304.67

1,304.67

Net Total Income and Charges -17,228.44 -17,228.44

Change in Market Value of Investments 0.00 -53,012,856.94

Profit/Loss on Sales -296,488.58 -296,488.58

Profit/Loss on Currency 6,268.19 6,268.19

Cash transferred to/from Portfolio -9,209,370.89 -9,209,370.89

As at 31 December 2018 373,266,902.47 344,835,342.39

Of which:

Equities 373,839,246.37 345,407,686.29

Cash and Deposits -572,343.90 -572,343.90

Total 373,266,902.47 344,835,342.39

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 2018 -12,387,967.72

November 2018 10,084,858.79

December 2018 -6,906,261.96

-9,209,370.89

Legal Notices Report for the quarter ended 31 December 2018 38

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)

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Investeringsforeningen Investin - K Invest Globale Aktier II Report … · 2019-02-04 · Commentary Report for the quarter ended 31 December 2018 04 Throughout 2018, we have been