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  • 1. BAILLIE GIFFORDThis presentation has been prepared for use by professional advisers and intermediaries only. It is not intended for use by retail clients.Baillie Gifford American FundApril 2013
  • 2. Baillie Gifford Baillie Gifford American Fund April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361This is a marketing communication and should not be considered as advice or arecommendation to buy, sell or hold a particular investment. This presentationcontains information on investments which does not constitute independentinvestment research.Accordingly, it is not subject to the protections afforded toindependent research and Baillie Gifford and its staff may have dealt in theinvestments concerned. Investment markets and conditions can change rapidlyand as such the views expressed should not be taken as statements of fact norshould reliance be placed on these views when making investment decisions.The Fund’s share price can be volatile due to movements in the prices of theunderlying holdings and the basis on which the Fund is priced.As with any investment, your clients capital is at risk. Past performance isnot a guide to future returns.Important Information and Risk FactorsRegistered Office: Baillie Gifford & Co LimitedCalton Square, 1 Greenside Row, Edinburgh EH1 3ANTelephone 0800 917 4752 Fax: 0131 275 3955 www.bailliegifford.com/intermediariesYour call may be recorded for training or monitoring purposes.Copyright © Baillie Gifford & Co 2009. Authorised and regulated by the Financial Services Authority.
  • 3. April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361 1Baillie Gifford Baillie Gifford American FundA Differentiated Approach – North American EquitiesLong-term, bottom-up, growth investors with a quality biasPerformance:—— +1.9% p.a. relative to S&P 500 Composite Index since launchAppointed by Vanguard in 2008Source: FE, Baillie Gifford American Fund (B Inc), annualised, 31st July 1997 to 31st March 2013, in sterling, total return.
  • 4. April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361 2Baillie Gifford Baillie Gifford American FundSpecialist MandatesBaillie Gifford American FundBaillie Gifford North American Equity Pension FundBaillie Gifford Worldwide North American FundVanguardTwo other segregated clientsNorth American AUM£bn1 Firmwide 17.92 Managed by Team 2.93 Specialist Mandates 0.7Source: Baillie Gifford & Co.As at 31st March 2013.Committed US equity investors with growing client base
  • 5. April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361 3Baillie Gifford Baillie Gifford American FundOur PhilosophyActive management—— Beating the index means differing from itGrowth is rewarded—— Superior compounding profits growth leads to long-runoutperformance – searching for under-appreciated growthQuality is valuable—— The market struggles to assess the long-term value of a ‘widemoat’ business or superior capital allocation by a management teamLong Term—— Investment not speculation; we seek to turn time and volatilityto our advantageGlobal Perspective—— Global insights benefit regional stock pickingThe Decline in Active Management Across theIndustry in the USASource: Cremers and Petajisto.The share of US all-equity mutual fund assets in each active sharecategory in 1980–2009.80–100% 60–80% 40–60%20–40% 0–20%19881980 19961992 2000 2004 20081984YearActive Share Over TimeShareofmutualfundassets(%)0604080100209070503010
  • 6. April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361 4Baillie Gifford Baillie Gifford American FundGenuinely Long-termThe market—— New York Stock Exchange turnover around 100% per annum—— Wall Street preoccupied with short-term trends, has persistenttendency to undervalue sustainable earnings growthOur approach—— Longer-term perspective, turnover averages < 30% per annum—— Fundamental research, with a focus on businesscharacteristics, to identify companies with above average,sustainable earnings growth—— We believe Baillie Gifford’s partnership structureis a crucial advantageExploitable opportunities for longer-term investorsTurnoverRolling annual turnover to 31st March 2013%Mar05Mar06Mar07Mar08Mar09Mar10Mar11Mar12Mar13Mar04020406080100Mar02Mar03Source: Baillie Gifford & Co
  • 7. 5Baillie Gifford Baillie Gifford American Fund April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361Genuinely ActiveEquity market inefficiencies exist and are exploitable forthe benefit of our clients through active managementActive ShareSource: APT, Baillie Gifford & CoPredicted Tracking Error%YearMar1301234568Predicted TE: Barra Predicted TE: APT7Mar12Mar01Mar02Mar03Mar04Mar05Mar06Mar07Mar08Mar09Mar10Mar11Active Share vs S&P 500%Year0203040506070809010010Mar13Mar07Mar08Mar09Mar10Mar11Mar12Mar06Mar01Mar02Mar03Mar04Mar05Source: APT, Baillie Gifford & Co
  • 8. 6Baillie Gifford Baillie Gifford American Fund April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361Genuinely Global46%* of S&P 500 revenues were derived fromoutside the USThe global context to competitive position andindustry backdrop is often crucialGlobal insights benefit regional stock pickingGlobal investment firm with a culture ofinformation sharing*2011.Global investors, regional specialistsForeign sales as % of S&P 500 total sales2003 2004 2005 2006 2007 2008 2009 2010 2011%4041424344454647484950Foreign Sales as % of S&P 500 Total SalesSource: Standard and Poors/William Blair International Ltd.
  • 9. 7Baillie Gifford Baillie Gifford American Fund April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361Regional Stock Selection: Global InsightGlobal ResearchNorth American ResearchSingle location – culture of debate – shared insightAnnual review of NorthAmerican materials sectorAugust 2012Brazilian Agriculture SectorCompany meetings reviewFebruary 2011What happens in theagricultural sector when1.3bn people changetheir diets?October 2011Visit to Monsanto’sR&D facilityOctober 2012Meeting at Baillie Giffordwith Syngenta CFOFebruary 2013Monsanto’s research reportand stock discussionSeptember 2011View on the biggest growthopportunities in the biotechseed industryOctober 2011
  • 10. 8Baillie Gifford Baillie Gifford American Fund April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361Price relative to S&P 500 Composite – Price IndexPrice1601401006020020121208040201120102009200820072006200520042003MonsantoPrice and Price Relative ChartSource: Thomson Datastream, March 2003 – March 2013.Original Purchase AdditionsReductionsAdditions
  • 11. April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361 9Baillie Gifford Baillie Gifford American FundThe TeamExperienced team with consistentapproachGeneralists with sector responsibilitiesStrong internal relationships with globalinvestment teams and research groupsTeam approach to research, individual decision making for conviction stock pickingIan TabbererInvestment Manager—— 12 years’ experience—— 5 years with Baillie GiffordGary RobinsonInvestment Manager—— 10 years’ experience—— 10 years with Baillie GiffordMick BrewisHead of NorthAmerican Equities—— 28 years’ experience—— 28 years with Baillie Gifford+ 2 graduates/analysts
  • 12. April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361 10Baillie Gifford Baillie Gifford American FundFrom Idea Generation to Ownership1. Discovery 2. Debate 3. Decision—— US universe >5,000 companies—— Focus on Market Cap of >$1.5bn,c.1,000 companies —— Attractive businesses proposed for the focus list—— Detailed research and monitoring –focus list 125-150 companies—— Benefit from diversity of views—— Continuous processUS Equity PortfoliosNorthAmericanFocus ListNorth AmericanTeamGlobalSectorAnalystsGlobalTeamsStock Review Meeting North American Team Invitees:—— Product Specialists—— Global Sector Analysts—— Global Investment ManagersInvestment Manager—— Individual accountability for:—— Stock selection—— Portfolio shape—— Position sizes—— PerformanceStock Review Meeting
  • 13. 11Baillie Gifford Baillie Gifford American Fund April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361PortfolioSource: Baillie Gifford & Co, as at 31st March 2013.Total may not sum due to rounding.Stock Name Weight (%)Progressive 4.5Monsanto 4.2eBay 4.0First Republic Bank 4.0US Bancorp 3.9Colgate-Palmolive 3.9Berkshire Hathaway 3.8Brown-Forman 3.6United Parcel Service 3.5Johnson & Johnson 3.2M&T Bank 3.2Harley-Davidson 3.2Pfizer 3.2Watsco 3.2TripAdvisor 3.1Life Technologies 3.0Google 2.8Exxon Mobil 2.6Xilinx 2.6CarMax 2.5Analog Devices 2.5Stock Name Weight (%)Apache 2.2Fairfax Financial 2.0Waters 1.9Beam 1.7Linear Technology 1.7OReilly Automotive 1.6Altera 1.5Home Depot 1.5Markel 1.4Danaher 1.4Bristol Myers Squibb 1.4Rockwell Automation 1.3Omnicom 1.3Seattle Genetics 1.2Martin Marietta Materials 0.9Idexx Laboratories 0.9F5 Networks 0.8EOG Resources 0.7Teradata 0.6Cash 3.7100.0Sector AnalysisSource: Baillie Gifford & Co, as at 31st March 2013.Total may not sum due to rounding.Health Care14.8%InformationTechnology16.4%Consumer Staples9.2%Financials22.8%ConsumerDiscretionary13.2%Industrials9.4%Energy 5.5%Materials 5.1%Cash 3.6%
  • 14. 12Baillie Gifford Baillie Gifford American Fund April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361OutlookTwo key points for a low growth world economy—— America has advantages that mean it should do relatively well—— Innovation, enterprise culture, efficiency, demographics,functioning banking system, deep capital markets,reserve currency, energy resource—— Quality growth stocks with idiosyncratic, sustainable growth driversshould do well—— Exceptional management and competitive advantages lead tomarket share gains. Selective secular growth opportunities
  • 15. 13Baillie Gifford Baillie Gifford American Fund April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361Top Ten Holdings – Growth DriversProgressive Innovative Snapshot usage based technology disrupting the auto insurance marketMonsanto Unmatched seed and biotech advantages in young growth industry. Large Latin American opportunityeBay Major beneficiary of e-commerce growth, including transition to mobileFirst Republic Bank Undiscovered gem with unique customer service offering in high growth nicheUS Bancorp Market share gains from weaker banks. A cheap housing playColgate-Palmolive Emerging market consumer play with best-in-class developed market managementBerkshire Hathaway Strong business franchises with domestic bias, and growth helped by re-investment of prodigious cashflowBrown-Forman Iconic Jack Daniel’s brand in reinvigorated bourbon categoryUPS Finally starting to benefit from competitive strengths and e-commerce trendsJohnson & Johnson Improving drug pipeline in sector with improving prospects
  • 16. April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361 14Baillie Gifford Baillie Gifford American FundGlobalisation Creates American OpportunitiesExamples of companies with world leading competitive positionsInformation Technology Health Care Industrials EnergyGoogle Life Technologies Danaher Exxon MobilF5 Networks Waters Rockwell Automation EOG ResourcesXilinx Johnson & Johnson United Parcel ServiceeBay PfizerTripAdvisor Seattle GeneticsAnalog DevicesAgriculture Consumer Insurance AdvertisingMonsanto Colgate-Palmolive Berkshire Hathaway OmnicomBrown-FormanHarley-DavidsonBeamSource: Baillie Gifford & Co.Winning in global markets through innovation, technological edge,service, market position and brand strength
  • 17. April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361 15Baillie Gifford Baillie Gifford American FundBaillie Gifford American FundSource: FE, Baillie Gifford American Fund (B Inc), annualised periods to 31st March 2013, in sterling, total return.*Inception date: 31st July 1997.19.111.910.98.35.115.112.512.19.27.01 year 3 years 5 years 10 years Since inception05101520BG American B Inc S&P 500 Composite Index%p.a.Annualised Performance
  • 18. April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361 16Baillie Gifford Baillie Gifford American FundFrequency of Outperformance1 Year Periods 3 Year Periods 5 Year PeriodsPeriods Outperformed 124 145 124Total Periods 187 151 127% Outperformed 66 96 98All 1, 3 and 5 year rolling periods measured monthly between 30th September 1997 and 31st March 2013.Source: FE, BG American B Inc compared to S&P 500, total return in sterling.
  • 19. April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361 17Baillie Gifford Baillie Gifford American FundConclusionReasons to choose Baillie Gifford for US equities—— Good long-term performance—— Long-term, stock picking, quality growth approach works well in US—— Committed US equity investors with growing client base—— Partnership structure supports long-term perspective for effectivedecision making—— Culture of debate in global investment firm provides shared insights—— Flexible approach to sectors – search for underappreciated future growth—— Balanced portfolio means lower performance volatility—— US stocks attractive in a global context—— A great time for quality growth stocks—— Focused selection of world class companies
  • 20. Appendix
  • 21. April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361 19Baillie Gifford Baillie Gifford American FundWhat Makes Baillie Gifford Different?Stability and consistency Continuity of partnership, people,philosophy and processLong-term investment horizonBest ideas, actively managedportfoliosGlobal investment firm with singlelocation and culture of debateThe market is increasingly short termPortfolios differentiated from benchmarksGlobal perspective and shared insights
  • 22. April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361 20Baillie Gifford Baillie Gifford American FundPortfolio GuidelinesPortfolio Guidelines—— Style: Growth—— 40–50 holdings—— Max stock weighting + 7% vs S&P 500 Composite Index—— Max/min sector weightings +/- 12% vs S&P 500 Composite Index—— Market Cap >$1.5bn—— Time horizon: 3–5 years—— Active Money c.80%—— Tracking Error Range (indicative) 4–8%
  • 23. April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361 21Baillie Gifford Baillie Gifford American FundStock ResearchOur primary research goal is to identify attractive growthcompanies with sustainable returns on capitalIndustry backgroundCompetitive advantagePotential(to achieve above average returns) Financial strengthManagement attitudesDelivery(capitalising on the opportunity)Is it in the price?ValuationFundamental research covering qualitative factors and accounts analysis
  • 24. April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361 22Baillie Gifford Baillie Gifford American FundIndustry Background:—— Benificiary of cyclical upturn in consumer discretionary spending inthe US. Under exploited opportunities internationallyCompetitive Advantage:—— Iconic brand with passionate and loyal customersManagement:—— New CEO is dramatically improving the efficiency of manufacturingoperations. Took tough but necessary decision to reduce dealerinventories to sensible levelsFinancial Characteristics:—— High return on equity. Rising operating margins mean substantialearnings growth should be possible as revenues recoverValuation: Multiple fails to capture the significant scope for recovery in earnings,and the high quality nature of the underlying businessHarley-Davidson – Motorcycle Manufacturer
  • 25. April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361 23Baillie Gifford Baillie Gifford American FundHarley-Davidson – Motorcycle ManufacturerPrice and Price Relative ChartSource: Thomson Datastream, March 2003 – March 2013.807050301002012604020201120102009200820072006200520042003Price relative to S&P 500 Composite – Price IndexPriceOriginal Purchase Additions
  • 26. April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361 24Baillie Gifford Baillie Gifford American FundIndustry Background:—— Immature industry with substantial growth potential. One out of everytwo dollars spent online is in the travel sectorCompetitive Advantage:—— Leading player in the online travel review space and true ‘network effect’businessManagement:—— CEO and founder Steve Kaufer manages the business for the long termFinancial Characteristics:—— Low capital intensity drives very high margins and returnsTripAdvisor – Online Travel WebsiteValuation: modest earnings multiple for a business with huge,underappreciated, long-term growth potential
  • 27. April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361 25Baillie Gifford Baillie Gifford American FundSize AnalysisSize Split – as at 31st March 2013Source: Baillie Gifford & Co and UBS.
  • 28. April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361 26Baillie Gifford Baillie Gifford American FundSell DisciplineIndustryBackgroundCompetitivePositionManagement FinancialCharacteristicsValuationQ1 2012 Edwards Lifesciences ü üIntuitive Surgical üPepsico ü üQ2 2012 Johnson Controls ü üOracle ü üSchlumberger ü üWalgreen ü üQ3 2012 Ritchie BrothersAuctioneersü ü üQ4 2012 Praxair ü üQ1 2013 Apple ü ü ü üTechne üNational Oilwell Varco ü ü üCenovus ü üBed, Bath & Beyond ü üSource: Baillie Gifford & Co.Does not include complete sales as a result of spin offs or takeovers.
  • 29. April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361 27Baillie Gifford Baillie Gifford American FundPortfolio Risk Monitoring ProcessBaillie Gifford Risk Team North American TeamNorth American Portfolio—— Monthly active share and tracking errorreview—— Semi-annual Risk Review—— Report to the Investment Risk Committee—— Monthly peer review by North AmericanTeam—— Portfolio presentation to Baillie Giffordinvestors and product specialistsA rigorous and consistent monitoring process
  • 30. April 2013BG American Fund 7866 0413.inddRef: Intermediaries PRE OC 0361 28Baillie Gifford Baillie Gifford American FundBaillie Gifford American FundSource: FE, Baillie Gifford American Fund (B Inc), cumulative performance to 31st March 2013, in sterling, total return.*Inception date: 31 July 1997.19.140.267.9121.9117.615.142.276.6141.8187.81 year 3 years 5 years 10 years Since inception050100150200BG American B Inc S&P 500 Composite Index%Cumulative Performance