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  • 1. Equity Income:Opportunitiesfor today, andthe long-termIan KellyIncome Fund Manager November 2012 | For professional investors or advisors only
  • 2. The time is rightfor equity income Performance is strong Cash is a risky asset Government bonds – not an option Dividends are resilient Maximiser strategy generates additional income
  • 3. Schroders’ European and Global Equity Yield FundsStrong performance vs. all peersPeriods to 30 September 2012 Income Performance in US$% YTD 1 year 2 years p.a. 3 years p.a. Paid Schroder ISF Global Equity Yield +15.9 +23.8 +8.7 +8.0 4.0% MSCI World Net TR +13.0 +21.6 +7.9 +7.5 Peer group ranking Q1 Q1 Q1 Q1 Schroder ISF* Global Dividend Maximiser +14.7 +24.1 +8.8 +7.7 8.0% Performance in EUR% YTD 1 year 2 years p.a. 3 years p.a. Income Paid Schroder ISF European Equity Yield +15.1 +25.7 +7.1 +7.4 4.0% MSCI Europe Net TR +12.3 +22.3 +4.8 +6.5 Peer group ranking Q2 Q1 Q1 Q1 Schroder ISF European Dividend Maximiser +15.5 +26.4 +7.4 +7.3 8.0%Source: Morningstar. Performance is based on ‘A Acc’ shares, bid to bid, net of fees. The peer group rankings in the top table are based on Global Equity; Offshore andInternational Funds & the peer group rankings in the bottom table are based on a combination of ‘Europe Large Cap Blend’, ‘Europe Large Cap Growth’ and ‘Europe Large CapValue funds, domiciled in Luxembourg*Schroder International Selection Fund is referred to as Schroder ISF throughout this presentationCitywire Event | November 2012 2
  • 4. Schroders’ European and Global Equity Yield FundsStrong performance vs. value and income peersPeriods to 30 September 2012 Income Performance in US$% YTD 1 year 2 years p.a. 3 years p.a. Paid Schroder ISF Global Equity Yield +15.9 +23.8 +8.7 +8.0 4.0% Peer Group Average +9.2 +15.1 +3.5 +4.0 Fund relative to universe average +6.7 +8.7 +5.2 +4.0 Ranking 1/84 2/83 8/76 10/71 Income Performance in EUR% YTD 1 year 2 years p.a. 3 years p.a. Paid Schroder ISF European Equity Yield +15.1 +25.7 +7.1 +7.4 4.0% Peer Group Average +11.4 +19.5 +1.9 +3.2 Fund relative to universe average +3.7 +6.2 +5.2 +4.2 Ranking 10/72 2/83 4/67 3/63Source: Morningstar. Performance is based on ‘A Acc’ shares, bid to bid, net of fees. The peer group rankings in the top table are based on Global Equity Large Cap Value;Offshore and International Funds domiciled in Luxembourg & the peer group rankings in the bottom table are based on ‘Europe Large Cap Value’ funds, domiciled in LuxembourgCitywire Event | November 2012 3
  • 5. Cash is a risky assetInvestors need returns to fight inflationSpending power of £100,000 at various rates of inflation£110,000£100,000 £90,573 £90,000 £82,193 2%, £82,035 £80,000 £74,726 £70,000 4%, £67,556 £60,000 6%, £55,839 £50,000 £40,000 0 1 2 3 4 5 6 7 8 9 10 Years Central banks are choosing inflation over defaultSource: Schroder analysisCitywire Event | November 2012 4
  • 6. Government bonds are not an option10-year yields at 30-year lows%1612 8 4 0 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Germany UK US Why buy government bonds with negative real returns?Source: Datastream. As at 22 October 2012Citywire Event | November 2012 5
  • 7. Government bonds are not an optionGovernment bonds have already appreciated The current 10-year US Treasury was issued in 1992 at $99 and pays $7.25 per annum Investors have received $150 in coupons, and the price has risen to $152Source: Bloomberg. US Treasury is 7¼ bond issued 15 August 1992. Dividends and coupons reinvested. As at 6 September 2012Citywire Event | November 2012 6
  • 8. Government bonds are not an optionLimited return potential with capital risk We only get this 1.7% return if we commit our money for 10 years. If we sell earlier, we could lose or gain substantially Over one year, our total return will depend on the prevailing interest rates: 30% Total return 20% Movement 10 year bond 30 year bond 10% in rates (1.7% yield) (3.0% yield) 0% -1.00% 9% 26% -10% +0.50% -2% -5% -20% +2.00% -11% -27% -30% +3.00% -16% -37% -40% -50% +4.00% -21% -45% -1.00% +1.00% +3.00% 10 year bond 30 year bondSource: Bloomberg and Schroder calculations. As at 14 May 2012. Return sensitivities are approximations. Not a recommendation to buy or sell any securityCitywire Event | November 2012 7
  • 9. Global markets: Yield spectrumYield to maturity and earnings yield Swiss 2 year Bond -0.29% Germany 2 Year Bond Japan 10 Year Bond Germany 10 Year Bond US 10 Year Bond UK 10 Year Bond France 10 Year Bond Bar Cap Euro Corp Brazilian 10 Year Bond iBoxx $ Inv Grade Corp Bond Fund US 30 Year Bond Italian 10 Year BondiBoxx $ High Yield Corp Bond Fund iBoxx Euro High Yield Bond India Equity Japan Equity US Equity Switzerland Equity Sweden Equity UK Equity Germany Equity France Equity Italy Equity Brazil Equity China Equity Russia Equity 0 2 4 6 8 10 12 14 16 18 Yield Schroders Global CPI Target 2012 %Source: Bloomberg and IShares website. Latest Yields available as at 24 October 2012. Earnings Yield is based on FY1 P/ECitywire Event | November 2012 8
  • 10. High-yield bonds orhigh-yield stocks?
  • 11. Investors paying a premium for the safety of credit assetsThe yield pickup of high-yield credit is close to record lowsYield of high-yield corporate credit vs. dividend yield of ‘quality’ high-yield stocks (%)18%16%14%12%10% 8% 6% 4% 2% 0% Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11Source: Bloomberg, Societe Generale, Schroder analysis. High-yield corporate credit is represented by the Merrill Lynch HY USD Corporate Bond IndexHigh-yielding stocks are represented by the Societe Generale Global Quality Income Index, which is available on Bloomberg as SGQINTR IndexCitywire Event | November 2012 10
  • 12. Investors paying a premium for the safety of credit assetsDespite cyclical low default ratesDefault rate of high-yield corporate credit (%)16%14%12%10% 8% 6% 4% 2% 0% Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11Source: Bloomberg, Societe Generale, Schroder analysis. High-yield corporate credit is represented by the Merrill Lynch HY USD Corporate Bond IndexHigh-yielding stocks are represented by the Societe Generale Global Quality Income Index, which is available on Bloomberg as SGQINTR IndexCitywire Event | November 2012 11
  • 13. Which investment has the better balance sheet?Very different asset backing25%20%15%10% 5% 0% AA+/Aa1 BB+/Ba1 CC/Ca AAA/Aaa AA-/Aa3 BBB+/Baa1 BBB/Baa2 BB-/Ba3 CCC+/Caa1 CCC/Caa2 A+/A1 A-/A3 B+/B1 B-/B3 C/C NR/Other AA/Aa2 A/A2 BBB-/Baa3 BB/Ba2 B/B2 CCC-/Caa3 iShares iBOXX EUR Liquid High Yield SISF European Equity YieldSource: Bloomberg, Societe Generale, Schroder analysis. As at 17 September 2012Citywire Event | November 2012 12
  • 14. Which investment has the better balance sheet?Very different asset backing25%20%15%10% 5% 0% AA+/Aa1 BB+/Ba1 CC/Ca AAA/Aaa AA-/Aa3 BBB+/Baa1 BBB/Baa2 BB-/Ba3 CCC+/Caa1 CCC/Caa2 A+/A1 A-/A3 B+/B1 B-/B3 C/C NR/Other AA/Aa2 A/A2 BBB-/Baa3 BB/Ba2 B/B2 CCC-/Caa3 IShares IBOXX Global HY (GHYG) Schroder ISF Global Equity YieldSource: Bloomberg, Societe Generale, Schroder analysis. As at 17 September 2012Note: Subsidiary rating was used for Zurich Insurance Company (AA-), as the parent is not ratedCitywire Event | November 2012 13
  • 15. Dividend income is resilientManagement teams avoid cutting dividendsDividend cuts vs. earnings cuts in five European recessions 1970s 1980s 1990s TMT 2009 0% -10% -20% -30% -40% -50% -60% Fall in Earnings Dividend cuts Dividend cuts ex financialsSource: UBS. MSCI Europe dividend paid. As at 31 December 2011Citywire Event | November 2012 14
  • 16. Dividend income is resilientDividends have grown, despite the crisis10 year CAGR dividend growth (%)10% 2011 dividend growth 8.9% 9% US 18.2% 8% UK 18.1% 7% Europe 17.9% 5.5% 6% Asia 11.7% 5% 4.0% 3.9% 4% 3% 2% 1% 0% Asia US Europe UKSource: Datastream, MSCI, Morgan Stanley Research. As at 31 December 2011Citywire Event | November 2012 15
  • 17. Dividends are not just for a crisisDividends and growth are the key to equity returnsReal returns (%) 7.0 5.4 5.3 5.3 6.0 4.8 5.0 4.1 3.5 4.0 3.0 2.3 2.0 1.0 0.0-1.0-2.0-3.0-4.0-5.0 UK US France Germany Australia Canada Japan Dividend Yield Dividend Growth Multiple Expansion Total Annualised ReturnsSource: Société Générale Cross Asset Research, MSCI. Data from 31 December 1969 to 31 January 2012Citywire Event | November 2012 16
  • 18. Equity IncomeInvestmentPhilosophy
  • 19. Investment philosophyFocus on long-term outperformanceAim To deliver a gross dividend income 100 bps above the MSCI benchmark To outperform the MSCI benchmark index by 300 bps per annum over 3 years (gross of fees)Philosophy We believe that high-yielding stocks deliver superior long-term total returns to the broader market We believe that high-yield equity strategies can outperform the index in different market environments. We are not bear-market investorsExecution We believe through detailed fundamental analysis we are able to identify the most important drivers of a business. By asking ourselves where we differ from the market either financially or operationally we are able to articulate our investment thesis and clearly identify what we believe will drive the share price Identifying shares where our investment thesis is not priced in enables us to buy shares below their intrinsic valueCitywire Event | November 2012 18
  • 20. Long-term outperformanceTotal returns are strongly influenced by dividend yieldsEuropean stock returns by quintile of dividend return, market cap weighted, December 1989 to June 2012Annualised returns (%)1210 8 6 4 2 0 1 2 3 4 5Source: Factset. Schroder analysis. Data taken from constituents of FTSE World Europe and S&P Europe as at 30 June 2012. The chart illustrates the total return of portfolioswhich are rebalanced every six months into stocks ranging from the highest (1) to the lowest (5) dividend yielding stocks in Europe. Note that trading costs are not consideredCitywire Event | November 2012 19
  • 21. Long-term outperformanceWe aim to outperform through different market conditions1,8001,6001,4001,200 1,0851,000 800 685 600 534 400 443 228 200 151 0 Dec-91 Dec-94 Dec-97 Dec-00 Dec-03 Dec-06 Dec-09 Sep-92 Sep-95 Sep-98 Sep-01 Sep-04 Sep-07 Sep-10 Jun-90 Mar-91 Jun-93 Mar-94 Jun-96 Mar-97 Jun-99 Mar-00 Jun-02 Mar-03 Jun-05 Mar-06 Jun-08 Mar-09 Jun-11 Mar-12 Q1 Q2 Q3 Q4 Q5 UniverseSource: Factset. Schroder analysis. Data taken from constituents of FTSE World Europe and S&P Europe as at 30 June 2012. The data shows relative performance of thedifferent yield quintiles of European stocks since 1989. Note that trading costs are not consideredCitywire Event | November 2012 20
  • 22. We are honest to our beliefsDiversification within the yield universeFund weight by European market yield Fund weight by global yield quintilequintile (trailing 12 months) (trailing 12 months) 1 2 3 4 5 1 2 3 4 5 60% 50% 46% 50% 45% 50% 40% 35% 35% 40% 35% 30% 30% 25% 19% 20% 20% 15% 8% 10% 10% 6% 1% 5% 0.0% 0.0% 0% 0% 5.3% 3.7% 2.5% 1.3% 0.0% 4.2% 2.7% 1.7% 0.7% 0.0% Lowest trailing dividend yield within each quintile Lower bound of dividend yield within each quintileSource: Bloomberg. Schroder analysis. Global universe: Global stocks over $1bn market capitalisation. European universe: European stocks over EUR 500mmarket capitalisation. As at 30 August 2012. Weights exclude cash holdings. Funds are Schroder ISF European Equity Yield (left-hand chart), and Schroder ISF Global EquityYield (right-hand chart)Citywire Event | November 2012 21
  • 23. Investment philosophyDividends impose discipline upon profitable companies High Balance Capital Income Reduced yielding between payout discipline and downside risk stocks and investment quality in weak markets = = = = = Stable Strong Higher ROE Reduced risk Potential income capital and margins and volatility for out- discipline of returns performance Dividend investing imposes discipline upon the fund managerCitywire Event | November 2012 22
  • 24. Fundamental researchIn depth analysis on a local basisTools Company meetings (12,000+ p.a.) Proprietary valuation model (DCF, sum-of-the-parts, earnings forecasts) Common macro inputOutput Style-neutral, quality-biased fundamental research available on a common platform Stocks graded 1 – 4 vs. local peers and Fair Market Values Local analysts provide in depth quality fundamental research and provide stock ranks information accessed efficiently through the GRIDUse of the GRiD is for illustrative purposes only and information is subject to change at any timeAny securities mentioned are for illustrative purposes only and should not be viewed as a recommendation to buy/sellAt Schroders, globally, the local analysts rates stocks from 1 – 4 (1 being a strong buy and 4 being a strong sell)The ratings are used as a starting point when focusing the international and global equity teams researchCitywire Event | November 2012 23
  • 25. Stock example: High growth and high yield potentialStock example: Sembcorp Marine – Analyst graded 2 Sembcorp Marine is the marine and offshore engineering arm of Sembcorp Industries, which holds a 61% stake in the company. Sembcorp Marines forte is in rig building, offshore conversions and ship repair. It also has a 30% stake in Cosco Shipyard Group and a 5% stake in Cosco CorpSembcorp Marine relative to MSCI World Investment thesis240  Sembcorp Marine is very well positioned in the high growth220 areas of rig building and offshore conversions, with proven expertise and execution track record, 3 and 5 year earnings200 growth of >100% and >300% respectively180  Strong commitment to shareholder returns: 5 year dividend growth 37%, 3 year dividend growth 60.3%160 (including special dividends)140  Future growth well underpinned by increased global offshore120 drilling, in particular Brazil100 80 Dividend yield: 2.2% Jul-09 Jul-10 Jul-11 Jul-12 Apr-09 Oct-09 Jan-10 Apr-10 Oct-10 Jan-11 Apr-11 Oct-11 Jan-12 Apr-12 5 year dividend growth: 16.2% p.a. Sembcorp Marine relative to MSCI WorldSource: Datastream. As at 3 September 2012. Data in USDCitywire Event | November 2012 24
  • 26. Stock example: Dividend investing provides disciplineStock example: Tate & Lyle – Analyst graded 1 Tate & Lyle PLC is a provider of speciality food ingredients and solutions. The Company and its subsidiary and associated undertakings together with its joint ventures develops, manufactures and markets food and industrial ingredients made from renewable resources Exited Position Investment thesis 60 3% of Fund 50  Tate & Lyle is a 142 year-old company. When the NAV 40 company appointed a new CEO from Reckitt Benckiser 30 Initiated it was apparent that the market had underestimated 20 position the inefficiencies which had built up, and his ability to 10 cut costs 0-10  Mr Ahmed integrated Tate & Lyle’s sales into the R&D-20 efforts to ensure that ideas for new products feed into Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 the R&D process Tate & Lyle relative performance % to MSCI Europe6.0  Why we sold our position5.5  Around the 2011 half-year results, management’s tone5.0 changed, and indicated that future investment would hinder4.5 dividend growth potential4.03.5 Dividend yield: 4.1%3.0 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Tate & Lyle Dividend Yield % 5 year dividend growth: 3.0% p.a.Source: Bloomberg and Thomson Reuters. Performance based on total return and is updated to 31 August 2012Citywire Event | November 2012 25
  • 27. How it’s investedSchroder ISF Global Equity YieldRegional exposure (%) Sector exposure (%) 1.1 1.1 3.4 13.5 10.1 21.7 29.4 6.1 10.6 3.7 10.7 10.8 8.7 6.6 10.7 39.2 12.6 North America Europe ex UK Financials Utilities Telecoms Con Staples Asia/Pacific Ex Japan Emerging Markets Industrials Materials Con Disc Energy UK Cash Health Care Technology CashSource: Schroders. As at 30 September 2012Citywire Event | November 2012 26
  • 28. How it’s investedSchroder ISF European Equity YieldCountry exposure (%) Sector exposure (%) 4.3 4.3 8.7 11.8 20.2 13.7 2.2 11.5 26.9 13.0 12.3 16.2 7.3 9.5 10.7 1.7 5.7 8.3 11.9 Italy UK Ireland Financials Utilities Telecoms Con Staples Germany Switzerland France Industrials Materials Con Disc Energy Benelux Scandinavia Cash Health Care CashSource: Schroders, as at 30 September 2012Citywire Event | November 2012 27
  • 29. Schroders’Maximiser Strategy
  • 30. Schroders’ Maximiser strategyTwo independent sources of income not linked to interest rate policy 8% target yield1 Step 1 Step 2 Dividends from around 50–80 stocks in actively managed equity income portfolio c. 4.0%1 p.a. + Premium from selling covered call options2 c.4.0%1 p.a. Two layers of fund management, but only one layer of fees1The gross target yield quoted is an estimate and is not guaranteed2Only some upside is sold, in order to preserve the potential for capital growth over the option termSource: Schroders, 31 August 2012Citywire Event | November 2012 29
  • 31. Schroders’ Maximiser strategyExchanging some uncertain potential gain for certainty of income Potential capital growth that is Option premium: sold for upfront payment* circa 4% p.a.** We retain the first amount ofStrike price potential capital growth Initial equity value Dividend income: circa Stock price 4% p.a.** 100% 8% yield p.a.**We repeat this process on a rolling 3 monthly basisThe repeated application of the overlay over three-monthly periods will increase the income paid to investors and reducevolatility, but there is the potential the performance or capital value may be eroded*Only some upside is sold to preserve the potential for capital growth over the option term.**The gross target yield quoted is an estimate and is not guaranteedCitywire Event | November 2012 30
  • 32. Risk controlSale of call options via competitive auction – we select the highest pricesExample: Auction on 2 May 2012 for Schroder ISF European Dividend MaximiserAverage weighted strike price was 110.10%. Notional amount overwritten was 83.6% of NAVStock Counterparty A Counterparty B Counterparty C Price on expiry Option premiumSampo 109.32% 109.00% 109.30% 107.68% 1.00%Admiral 105.71% 107.00% 106.50% 93.95% 2.10%British Land 105.96% 107.50% 106.00% 108.85% 1.00%Tecnicas Reunidas 111.53% 113.00% 114.70% 126.14% 1.05%Swedbank 114.03% 113.00% 114.75% 105.97% 1.30% No counterparty risk – cash settlement two days after trading No leverage employed – we never sell potential upside unless we own the underlying stockSource: Schroders, 31 August 2012Citywire Event | November 2012 31
  • 33. The Maximiser overlayExample: BASF%80 20/07/11 2.00% 15/04/11 1.00%70 14/08/12 1.85% 11/1/11 1.50% 09/05/12 2.00% 28/10/11 1.20% 01/02/12 1.65%6050 BASF share price4030 Feb 11 Feb 12 Dec 10 Dec 11 Jun 11 Jun 12 Apr 11 Apr 12 Aug 11 Oct 11 Aug 12Source: Schroders, Bloomberg, 31 August 2012Citywire Event | November 2012 32
  • 34. Schroder ISF European Dividend MaximiserHow has the overlay performed? Holdings Fund price Start of Notional overwritten with call Average Option Option strategy Holdings growth quarter as % of NAV option strike price premium1 contribution1 capped (A Acc) Oct ’07 97.2% 58 110.5% 1.29% 0.88% 5 -9.59% Jan ’08 97.1% 56 114.0% 1.17% 1.11% 0 -8.87% Apr ’08 95.7% 58 114.7% 1.11% 0.86% 2 -10.41% Jul ’08 88.1% 51 114.4% 1.20% 0.72% 4 -5.45% Oct ’08 77.0% 51 123.3% 1.10% 1.08% 0 -15.03% Jan ’09 90.7% 53 124.5% 1.16% 1.13% 0 -9.97% Apr ’09 87.8% 51 120.9% 1.10% 0.10% 1 9.48% Jul ’09 59.7%2 52 110.6% 1.19% -2.85% 34 12.40% Oct ’09 63.4%2 48 108.9% 1.09% 0.00% 17 5.94% Jan ’10 59.1%2 43 108.6% 0.93% 0.10% 10 1.71% Apr ’10 60.8%2 49 103.6% 1.09% 0.75% 5 -5.58% Jul ’10 78.5%2 51 110.6% 1.00% 0.16% 12 6.13% Oct ’10 72.6%2 49 107.8% 0.99% -1.27% 19 6.20%Source: Schroders, 30 September 20111Gross Premium as a % of NAV2Strategy adjusted for fast rising markets – greater proportion of the portfolio left uncappedCitywire Event | November 2012 33
  • 35. Schroder ISF European Dividend MaximiserHow has the overlay performed? Holdings Fund price Start of Notional overwritten with call Average Option Option strategy Holdings growth quarter as % of NAV option strike price premium1 contribution1 capped (A Acc) Jan ’11 86.8% 50 108.9% 1.07% 0.19% 13 1.11% Apr ‘11 92.2% 54 109.3% 1.20% 1.08% 4 -3.35% Jul ‘11 94.6% 54 109.8% 1.38% 1.14% 4 -5.87% Oct ‘11 80.0% 52 114.2% 1.11% 0.64% 9 8.34% Jan ‘12 82.4% 49 111.2% 1.01% -0.15% 11 3.47% May ‘12 83.6% 45 110.1% 1.06% 0.28% 7 2.31% Aug ‘12 83.0% 45 108.8% 1.01% - - -Source: Schroders, 30 August 20121Gross Premium as a % of NAVCitywire Event | November 2012 34
  • 36. Schroders’ Global and European Equity Yield FundsStrong performance vs. all peersPeriods to 30 September 2012 Income Performance in USD% YTD 1 year 2 years p.a. 3 years p.a. Paid Schroder ISF Global Equity Yield +15.9 +23.8 +8.7 +8.0 4.0% MSCI World Net TR +13.0 +21.6 +7.9 +7.5 Peer group ranking Q1 Q1 Q1 Q1 Schroder ISF Global Dividend Maximiser +14.7 +24.1 +8.8 +7.7 8.0% Performance in EUR% YTD 1 year 2 years p.a. 3 years p.a. Income Paid Schroder ISF European Equity Yield +15.1 +25.7 +7.1 +7.4 4.0% MSCI Europe Net TR +12.3 +22.3 +4.8 +6.5 Peer group ranking Q2 Q1 Q1 Q1 Schroder ISF European Dividend Maximiser +15.5 +26.4 +7.4 +7.3 8.0%Source: Morningstar. Performance is based on ‘A Acc’ shares, bid to bid, net of fees. The peer group rankings in the top table are based on Global Equity; Offshore andInternational Funds and the peer group rankings in the bottom table are based on a combination of ‘Europe Large Cap Blend’, ‘Europe Large Cap Growth’ and ‘Europe Large CapValue funds, domiciled in LuxembourgCitywire Event | November 2012 35
  • 37. SummaryOpportunities for today and the long-term Hiding in cash is dangerous – inflation will erode clients’ assets Government bond yield are at historic lows (and if yields ‘recover’ then by definition you are losing capital) Equities offer attractive real yields, and dividends are surprisingly resilient Performance is strong in the European and Global equity yield funds Schroder’s Maximiser strategy can generate additional incomeCitywire Event | November 2012 36
  • 38. Appendix
  • 39. Top 20 holdingsSchroder ISF Global Equity Yield Analyst Top 20 holdings Weight (%) P/E Yield (%) Characteristics of top 20 Grading Microsoft 3.4 1 9.9 2.7 17% Graded 1 Time Warner Cable 2.5 3 17.3 2.3 67% Graded 2 Sanofi 2.5 2 11.1 4.0 16% Graded 3 Merck & Co 2.3 2 12.2 3.7 0% Graded 4 Pfizer 2.1 2 11.6 3.5 Average P/E 10.9 CNOOC 2.1 2 8.8 2.7 Average yield 3.8% Prudential 2.1 2 12.3 3.2 Vodafone 2.0 1 10.9 5.4 Legal & General 2.0 2 9.5 5.1 Stock concentration Newmont Mining Corp. 2.0 n/a 13.6 2.5 Roche 1.9 2 13.7 3.9 Number of holdings 64 JPMorgan Chase & Co 1.9 2 8.6 2.7 Top 10 holdings 23% General Electric 1.8 2 14.6 3.0 Top 20 holdings 41% Telecom Italia 1.8 2 6.6 7.9 Michelin 1.8 2 7.7 3.4 Rio Tinto 1.8 3 8.4 3.6 Market cap split Volkswagen 1.8 3 6.6 2.2 Arkema 1.7 1 9.9 4.9 Over $5bn 92% Deutsche Telekom 1.7 2 13.8 7.3 $1bn to $5bn 8% Marathon Oil 1.7 n/a 11.2 2.2 Less than $1bn 0%Source: Schroders/FactSet as at 30 September 2012. P/E (FY1) and Yield sourced from FactSet as at 30 September 2012. Averages use simple averagesCitywire Event | November 2012 38
  • 40. Top 20 holdingsSchroder ISF European Equity Yield Analyst Top 20 holdings Weight (%) P/E Yield (%) Characteristics of top 20 Grading Sanofi 4.5 2 11.3 4.0 22% Graded 1 Vodafone 4.1 1 11.2 5.4 56% Graded 2 Statoil 3.9 1 8.4 4.4 17% Graded 3 Deutsche Telekom 3.8 2 13.5 7.3 5% Graded 4 Roche 3.8 2 13.8 3.9 Average P/E 10.3 Royal Dutch Shell 3.8 2 8.2 4.9 Average yield 4.9% Bayer 3.0 2 12.7 2.5 Total 2.8 2 7.4 5.9 BAE Systems 2.7 3 7.7 5.8 Stock concentration Imperial Tobacco 2.7 4 11.6 4.3 Novartis 2.5 2 12.2 3.9 Number of holdings 51 DNB 2.5 1 9.0 2.9 Top 10 holdings 37% Swedbank 2.4 1 10.0 4.3 Top 20 holdings 59% Tesco 2.2 3 9.9 4.5 SNAM 2.2 n/a 12.5 7.0 Legal & General 2.2 2 9.7 5.1 Market cap split Ageas 2.1 2 8.1 4.3 Swiss Re 2.0 n/a 9.8 5.0 Over $5bn 90% ENI 2.0 3 8.4 6.2 $1bn to $5bn 8% Atlantia 1.8 2 11.4 5.9 Less than $1bn 2%Source: Schroders/FactSet as at 30 September 2012. P/E (FY1) and Yield sourced from FactSet as at 30 September 2012. Averages use simple averagesCitywire Event | November 2012 39
  • 41. Fund ManagerIan Kelly – Income Fund Manager Ian is the fund manager of the Schroder ISF European Equity Yield and the co-manager of the Schroder ISF European Dividend Maximiser Ian has been working with Sonja Laud in the management of yield products since February 2010 and has had sole responsibility for the European Yield portfolios since December 2010 Joined Schroders in May 2007 as an analyst specialising in European insurance and automobiles Ian completed a PhD in Biophysics at Newcastle University and a Masters degree in Investment Management at Cass Business School, London Chartered Financial Analyst (CFA) charter holderCitywire Event | November 2012 40
  • 42. Fund ManagerSonja Laud – Income Fund Manager Sonja is the fund manager of the Schroder ISF Global Equity Yield and the co-manager of the Schroder ISF Global Dividend Maximiser Sonja joined Schroders in 2005 Investment career commenced in 2001 on joining DWS Investment GmbH, Frankfurt where she was a senior fund manager in global equities, running the successful DWS ‘Top Dividende’ Global Yield Fund Sonja qualified as a Master of Science at the European School of Management Chartered Financial Analyst (CFA) charter holderTrack record at DWS Inception* to 2004 31 August 2005 DWS top dividend 61.7 19.8 MSCI World index 38.8 6.5 Difference +22.9 +13.3 Peer group rank 34/444 6/453Source for DWS track record: Standard & Poors, German registered, Equity Global, cumulative returns in USD*Inception date 30 April 2003Citywire Event | November 2012 41
  • 43. Co-Manager for Schroder ISF European & Global Dividend MaximiserThomas See, Head of Structured Fund Management Having been part of the team that conceived, structured and launched Schroders’ Maximiser range of funds, Thomas now has responsibility for the range as Head of Schroders’ Structured Fund Management team. Thomas has been closely involved with the management of the funds and the communication of the investment strategy to the investing public since inception. Thomas has 23 years of investment experience, having joined Schroders’ Investment Banking division in 1988. Thomas worked in structured investments, project financing, tax and property financing, until the investment bank was sold to Citibank in 2000. Thomas rejoined Schroder Investment Management in 2005 to build the open ended structured funds business. BA (Double First with Distinction); PhD in Engineering at Cambridge UniversityCitywire Event | November 2012 42
  • 44. Important informationRisk Warnings: Investments in equities are subject to market risk and, potentially, to currency exchange rate risk. This fund may use financialderivative instruments as a part of the investment process. This may increase the fund’s price volatility by amplifying market events.Important Information: This presentation does not constitute an offer to anyone, or a solicitation by anyone, to subscribe for shares of SchroderInternational Selection Fund (the “Company”). Nothing in this document should be construed as advice and is therefore not a recommendation tobuy or sell shares.Subscriptions for shares of the Company can only be made on the basis of its latest prospectus together with the latest audited annual report (andsubsequent unaudited semi-annual report, if published), copies of which can be obtained, free of charge, from Schroder Investment Management(Luxembourg) S.A.An investment in the Company entails risks, which are fully described in the prospectus.Past performance is not a reliable indicator of future results, prices of shares and the income from them may fall as well as rise and investors maynot get the amount originally invested.Third party data is owned or licensed by the data provider and may not be reproduced or extracted and used for any other purpose without thedata providers consent. Third party data is provided without any warranties of any kind. The data provider and issuer of the presentation shallhave no liability in connection with the third party data. The Prospectus and/or www.schroders.com contains additional disclaimers which apply tothe third party data.FTSE International Limited (“FTSE”) © FTSE 2012. “FTSE®” is a trade mark of London Stock Exchange Plc and The Financial Times Limited andis used by FTSE International Limited under licence. All rights in the FTSE indices and / or FTSE ratings vest in FTSE and/or its licensors. NeitherFTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and / or FTSE ratings or underlying data. No furtherdistribution of FTSE Data is permitted without FTSE’s express written consent.Schroders has expressed its own views and opinions in this document and these may change.This presentation is issued by Schroder Investment Management, 31 Gresham Street, London, EC2V 7QA, who is authorised and regulated bythe Financial Services Authority. Registration No 1893220, England.Citywire Event | November 2012 43

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