BAILLIE GIFFORD. City of Fresno Retirement Systems May 27, Julie Skedd and Matt Dey

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1 BAILLIE GIFFORD City of Fresno Retirement Systems May 27, 2014 Julie Skedd and Matt Dey

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3 Relationship with Baillie Gifford The City of Fresno Retirement Systems appointed Baillie Gifford on September 5, 2008 Objective: To outperform the MSCI All Country World ex US Index by 200 basis points (net of fees) over a four to six year horizon Relative (net of fees) performance +265 basis points (p.a.) over five years to April 30, 2014 Baillie Gifford 1

4 Baillie Gifford Long established asset management partnership Stability: organic growth since 1908 Autonomy: owned by 40 full-time partners Single focus: investment management Add value through stock selection Existing clients before growth of assets Superstock/Getty Images 2

5 What Makes Baillie Gifford Different? Stability and consistency Continuity of partnership, people, philosophy and process Long-term investment horizon The market is increasingly short term Best ideas, actively managed portfolios Portfolios differentiated from benchmarks Culture conducive to long-term thinking Ideal platform for long term investment 3

6 Portfolio Construction Group Members Team Experience Years experience* Members Team Experience Years experience* Gerald Smith Global Opportunities 27 years Andrew Stobart Emerging Markets 23 years Chairman Emerging Markets, Japan, North America, Europe UK, Japan, North America Angus Franklin ACWI ex US Alpha 20 years Elaine Morrison Developed Asia 25 years Europe, UK, Emerging Markets Japan, Europe, UK Jonathan Bates ACWI ex US Alpha 21 years Andrew Strathdee UK 19 years North America, Developed Asia, UK Europe, Developed Asia + 3 Institutional Client Representatives * All with Baillie Gifford Average 23 years experience 4

7 Committed, Long-term Investors Low Overlap with Benchmark () Apr 09 Apr 10 Apr 11 Apr 12 Apr 13 Apr 14 Overlap of City of Fresno Portfolio vs MSCI ACWI ex US Rolling One Year Turnover () Apr 09 Apr 10 Apr 11 Apr 12 Apr 13 Apr 14 Rolling 12 month turnover of City of Fresno Portfolio Source: Baillie Gifford 5

8 Long-term, patient approach 69 of portfolio held for over 3 years Holding Periods 46 of portfolio held for over 5 years Compared to an average market holding period of under 1 year* Plenty of new stock ideas Regular review of existing holdings < 3 years 3-5 years 5-10 years > 10 years Source: Baillie Gifford, as at April 30, 2014 Holding periods based on a representative ACWI ex US Alpha portfolio. Holding weights based on the City of Fresno Retirement Systems portfolio Well managed, quality growth companies with durable competitive advantages *Source: Bank of England 6

9 Region and Sector Exposure Portfolio Regional Positions Portfolio Sector Positions UK Equity Emerging Markets Europe Canada Developed Asia Industrials Information Technology Consumer Staples Consumer Discretionary Materials Utilities Telecommunication Services Health Care Energy Financials As at April 30, 2014 Excludes cash City of Fresno Weightings are a residual of stock selection MSCI ACWI ex US City of Fresno MSCI ACWI ex US 7

10 Invest In Companies, Not Current Affairs There will always be companies with sustainable competitive advantages to invest in The developing world s growth is a long term structural trend regardless of short term market volatility Market volatility can present opportunity for long term investors Making fewer decisions tends to raise the quality of those decisions 8

11 Performance Review

12 Net Performance Periods to April 30, 2014 Fund Benchmark Relative Fiscal YTD* Months Years (p.a.) Years (p.a.) Since Inception** (p.a.) Source: Baillie Gifford, net of fees * Fiscal Year July 1 June 30 ** September 30, 2008 Periods to March 31, 2014 Fund Benchmark Relative Fiscal YTD* Months Years (p.a.) Years (p.a.) Since Inception** (p.a.) Source: Baillie Gifford, net of fees * Fiscal Year July 1 June 30 ** September 30,

13 Stock Level Attribution Top/ Bottom 5 Contributors to Performance 12 Months to April 30, 2014 Fund Benchmark Contribution Continental Naspers Baidu Naver Lafarge Kunlun Energy* Treasury Wine Estates Massmart Garanti Bankasi* IDFC Top/ Bottom 5 Contributors to Performance 3 Years to April 30, 2014 Fund Benchmark Contribution Svenska Handelsbanken Naspers Fast Retailing TSMC Continental Aixtron* Tullow Oil Rio Tinto Eldorado Gold* YPF* Source: StatPro/Baillie Gifford * No longer held in the portfolio 10

14 Your Portfolio UK Canada Developed Asia Europe Emerging Markets Cash Total Consumer Discretionary Burberry 0.6 Rakuten 1.4 Continental 1.6 Naspers 2.4 ASOS 0.4 Fast Retailing 1.0 Inditex 1.6 Hyundai Mobis 0.7 Shimano 0.9 Sky Deutschland Consumer Staples British American Tobacco 2.0 Woolworths 0.9 Nestlé 2.9 Magnit 1.0 Treasury Wine Estates 0.5 Unilever 1.4 Want Want 1.0 Heineken 1.3 BIM Birlesik Magazalar 0.8 Massmart 0.5 Sun Art Retail Energy Tullow Oil 1.2 Cenovus Energy 0.5 Seadrill 0.5 BG Group 0.9 Galp Energia 0.4 Petrofac Financials Prudential 1.8 Fairfax Financial 1.3 H K Exchanges & Clearing 1.6 Svenska Handelsbanken 2.5 Credicorp 0.8 Standard Chartered 1.3 United Overseas Bank 1.5 Sampo 1.5 Itau Unibanco 0.6 Amlin 1.1 Japan Exchange Group 0.9 Deutsche Börse 1.5 Sberbank 0.5 Hargreaves Lansdown 0.9 Hang Seng Bank 0.9 IDFC 0.4 St. James's Place Health Care Cochlear 0.7 Novo Nordisk 1.3 Essilor International

15 UK Canada Developed Asia Europe Emerging Markets Cash Total Industrials Capita 1.5 Ritchie Bros. Auctioneers 0.6 SMC 1.3 Atlas Copco 2.1 Embraer 0.9 Wolseley 1.5 Brambles 1.1 Kone 2.0 Experian 1.4 Fanuc 1.0 Ryanair 1.5 Rolls-Royce 1.0 Toyota Tsusho 1.0 DSV 1.3 Volvo 1.0 Brenntag 1.0 Edenred 0.9 MTU Aero Engines Information Technology ARM Holdings 1.9 Trend Micro 0.8 SAP 1.2 TSMC 2.8 Premier Farnell 0.6 Tokyo Electron 0.7 Samsung Electronics 2.8 Baidu 1.3 Naver 1.2 MercadoLibre 0.9 Hon Hai Precision Materials Rio Tinto 2.3 James Hardie Industries 1.2 Lafarge 1.6 BHP Billiton 0.8 CRH 1.0 Antofagasta 0.6 Novozymes SK Telecom 0.9 China Mobile 0.8 Telecommunication Services Cash Total Source: Baillie Gifford, as at April 30,

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17 Appendices

18 Portfolio Characteristics Consistent growth and quality bias Historic Portfolio Characteristics: April 30, Portfolio Characteristics: April 30, Historic Earnings Growth* Return on Equity** Debt/Equity Value Price/Earnings** x Historic Earnings Growth* Return on Equity** 23.2 Debt/Equity Value Price/Earnings** x City of Fresno Portfolio Benchmark City of Fresno Portfolio Benchmark Source: UBS * Trailing 5 years ** 1 year forward estimate 13

19 Significant Transactions* New Purchases ASOS Rolls-Royce Standard Chartered Novo Nordisk MTU Aero Engines SAP Japan Exchange Group Toyota Tsusho Sun Art Retail Embraer SK Telecom Complete Sales GBL Aker Solutions Eldorado Gold Westport Innovations Mitsui Olympus Cheung Kong China Shenhua Energy Kunlun Energy NHN Entertainment Garanti Bankasi Source: Baillie Gifford * 12 Months to April 30, 2014 Rolling One Year Turnover: 11** Average trading costs of 8.3 basis points** Saving of 13.1 basis points versus the Elkins McSherry Universe** ** 12 months to March 31,

20 Firm-wide Assets Under Management Client Domicile $bn North America UK Asia Middle East/Other Australasia Europe Total Mandate Type $bn Global/International Equity Global International Regional Equities Regional Developed Markets Emerging Markets Fixed Income & Multi Asset Multi Asset Fixed Income Total Source: Baillie Gifford, as at March 31, 2014 Totals may not sum due to rounding 15

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