Brexit Seminar A view from UK and EU companies

June 2017

18.00 Introduction John Gordon, Head of Business Development

18.05 An economic update Caspar Rock, Chief Investment Officer, and James Sym, Manager of European (ex UK) Fund, Schroders

18.30 Q&A

19.00 A taste of English and European wines and canapés

20.00 Event closes

Agenda

1

John Gordon, Head of Business Development

Introduction

Caspar Rock, Chief Investment Officer

The global economy

Advanced economies vs. emerging markets GDP growth

Consensus forecast for GDP growth

Source: Datastream.

This is normal

4

1.7 1.9 2.0

4.4 4.7 4.9

-2

-1

0

1

2

3

4

5

6

7

8

2010 2011 2012 2013 2014 2015 2016 2017 2018

% Y

oY

Developed markets Emerging markets

Consensus forecasts

World growth vs. world trade (% YoY) Intra/extra-eurozone trade (€bn)

World trade

Source: Datastream.

A slow fix

5

60

80

100

120

140

160

180

200

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

With countries inside the eurozoneWith countries outside the eurozone

-20

-15

-10

-5

0

5

10

15

20

-6

-4

-2

0

2

4

6

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

World growth World trade (RHS)

US

Eurozone

UK

Inflation

Source: Datastream. “Core” inflation excludes food and energy.

The deflation scare becomes a distant memory

6

-3

0

3

6

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

% Y

oY

Headline Core

-3

0

3

6

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

% Y

oY

Headline Core

-3

0

3

6

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

% Y

oY

Headline Core

Expenditure contributions to UK GDP growth Consensus forecasts through time

UK GDP growth

Source: Datastream, Bloomberg, Cazenove Capital. ^Based on average of City forecasts in March.

Contributions and consensus forecasts

7

GDP growth

Household consumption

Government expenditure

Fixed investment

Net trade

Inventory change

2014 3.1 1.4 0.5 1.1 -0.4 0.5

2015 2.2 1.5 0.3 0.6 0.0 -0.2

2016 1.8 1.9 0.2 0.1 -0.4 0.0

2017F^ 1.5 1.2 0.2 -0.1 0.4 -0.2

2018F^ 1.3 0.7 0.1 0.1 0.4 0.0

0

0.5

1

1.5

2

2.5

Jan 16 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17

% Y

oY

2016 2017 2018

UK General Election 2017 Voting intentions

Source: Wikipedia/Absolutelypuremilk. UK opinion polling for the 2017 election including polls which were released on or before 31 May 2017 (moving average is calculated from the last ten polls).

8

9

Source: Twitter.

–Synchronised growth in developed and emerging economies

– Inflation trending up in major economies

–Major central banks face rising pressure to normalise policy

–European politics in focus in 2017

–Gilts remain expensive

–European equity valuations are more attractive than those in the US

–We are no longer US$ bulls

–Emerging markets and Asia are becoming more attractive

Investment views

10

Key macro

themes

Key investment

views

Equity Fixed Income Alternative Cash

Neutral Negative Positive

James Sym, Manager of European (ex UK) Fund, Schroders

An economic update

Brexit

12

01 What’s at risk from an investor’s point of view?

02 What are companies telling me?

03 What’s more important then…?

What’s at risk?

England 1990

14

Romania 1990

15

Romania 2016 Renault’s Dacia plant

16

England 2016

Securities shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell. Past performance is not a guide to future performance. The value of an investment and the income from it may go up or down and investors may not get back the amount originally invested.

17

The company view

The company view?

– “we do not foresee any direct material impact” – Intesa – “brexit will have no consequence on our strategy” – Valeo – “no major issue” – Orange – “95% of UK costs are in GBP, so no effect on margins” – Sopra – “we have no operations in the UK” – Swedbank – “there could be a positive safe haven impact for our assets” – UBM development – “no obvious negative consequence at this stage” – Altran – “Direct impact is negligible” – Allianz – “we have contigency plans, but too early to say” – Wienerberger – “we reduced exposure ahead of the vote” – Euler

– And so on!!!

The overwhelming message is…

Business as usual 19

A380

20

Airbus and Boeing

Airbus vs. Boeing

0

25

50

75

100

0

100

200

300

400

500

600

700

800

1975 1980 1985 1990 1995 2000 2005 2010

Boeing Airbus Boeing Market Share (percent) Airbus Market Share (percent)

Source: Company data. Note: 2011 Airbus deliveries over 530, industry sources say. Figures due on January 2017. Boeing data includes McDonnell-Douglas pre-merger.

Deliveries and market share

Airbus reforms into one European company

21

Large commercial aircraft

– Number of jobs

74,000

– 16 year total capital investment

circa €39 billion

– Shareholder return since 2000

222% or €45 billion

Airbus

22

GBP/USD

Net long positioning GBP/USD No. of contracts (000’s)

GBP vs. USD Price and sentiment

1.0

1.2

1.4

1.6

1.8

2.0

2.2

1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017-120

-100

-80

-60

-40

-20

0

20

40

60

80

100

2004 2006 2008 2010 2012 2014 2016

Sterling weakness extreme Past performance is not a guide to future performance. The value of an investment and the income from it may go up or down and investors may not get back the amount originally invested. Source: LHS chart, Bloomberg, Schroders, April 1987 to April 2017. RHS chart, Credit Suisse Research, January 2004 to April 2017.

+2 S.D.

-2 S.D.

23

One thought from one of Europe’s biggest spenders of capital…

The company view – impact on the UK

“I rather think given the currency move that the impact on our investment plans in the UK will be more investment not less...”

Airbus CFO

24

INFLATION What’s more important?

25

68

70

72

74

76

78

80

82

84

86

85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17

Euro area Capacity utilization (%) Median

– 10 years of underinvestment means that there is less slack in industrial assets than one thinks – Some consumer end markets, such as car sales, have actually recovered pretty well – Our portfolio benefited from many of these recoveries: UK brick prices are up 30% in 2 years

Why is an inflation surprise coming? Capacity utilisation is above the long-run median

Source: JP Morgan, as at March 2016. Forecast risk warning: Please refer to the important information slide at the end of this presentation. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.

26

The components of employee nominal compensation in the eurozone

Why is an inflation surprise coming? Even Europe now has a relatively tight labour market

– Although unemployment remains high, it is falling and there is little slack in the labour market – This is even more pronounced in the US – We can identify pockets of actually quite high wage inflation (e.g. R&D engineers, Germany) Source: Eurostat, Datastream, Kepler Cheuvreux, as at Q4 2016. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.

% Yoy,pp

27

-5-4-3-2-10123456

03 04 05 06 07 08 09 10 11 12 13 14 15 16

Compensation per hour - contrib. Hours worked per employee - contrib. Number of employees - contrib. Employee nominal compensation

Implications of inflation A completely different portfolio will be needed

Source: Schroders.

28

Higher inflation =

higher nominal growth +

interest rates +

end of QE Completely different portfolio

What we own Inflation protection

Source: Schroders. Sectors listed are for illustrative purposes only and should not be viewed as a recommendation to buy or sell.

29

Financials More insurance than banks Telecommunications Incumbents over challengers Tech Not overpaying for an investment cycle Tyres A surprising beneficiary of inflation Pharma Anti-consensual, increasingly good value

Not expensive

Not over-owned

Not bond proxies

Not excessively cyclical

Inflation beneficiaries

33%

21%

7%

6%

11%

Q&A

A taste of English and European wines and canapés

Disclaimers We undertake to comply with our obligations under the Financial Services and Markets Act 2000 and the disclaimers set out in this section do not exclude or restrict liability for any duty to clients under this Act or any other applicable regulatory authority.

Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. The material in this document is for information purposes only and the services, securities, investments and funds described may not be available to or suitable for you. Not all strategies are appropriate at all times.

We have taken all reasonable care to ensure that the information contained within this document is accurate, up to date, and complies with all prevailing UK legislation. However, no liability can be accepted for any errors or omissions, or for any loss resulting from its use. Any data and material provided ahead of an investment decision are for information purposes only. Unit and share prices are for information purposes only, they are not intended for trading purposes. We shall not be liable for any errors or delays in these prices or in the provision of this information, or for any actions taken in reliance thereon.

We reserve the right to amend, alter, or withdraw any of the information contained in this document at any time and without notice. No liability is accepted for such changes.

This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.

Risk warnings You should consider the following risks:

Investment risk: Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.

Taxation: Statements concerning taxation are based on our understanding of the taxation law in force at the time of publication. The levels and bases of taxation may change. You should obtain professional advice on taxation where appropriate before proceeding with any investment.

Exchange rates: Investments in overseas securities are exposed to movements in exchange rates. These may cause the sterling value of units to go up or down.

Debt securities: Investments in higher yielding bonds issued by borrowers with lower credit ratings may result in a greater risk of default and have a negative impact on income and capital value. Income payments may constitute a return of capital in whole or in part. Income may be achieved by foregoing future capital growth.

Emerging markets: You should be aware of the additional risks associated with investment in emerging and developing markets. These include: higher volatility of markets; systems and standards affecting trading, settlement, registration and custody of securities all possibly lower than in developed markets; lack of liquidity in markets and exchanges leading to lower marketability of securities and greater price fluctuation; significant currency volatility, possibly resulting in adoption of exchange controls; lower shareholder protection or information to investors provided from the legal infrastructure and accounting, auditing and reporting standards.

Disclaimers, risk warnings and regulatory status

32

Risk warnings (continued) Unregulated collective investment schemes: Unregulated collective investment schemes and other non-mainstream pooled investments (NMPIs) are unlikely to offer a level of investor protection equivalent to that available for UK regulated investments. Such schemes may deal infrequently and may limit redemption.

Structured products: Structured products are usually issued by financial institutions and in the event of these institutions going into liquidation or failing to comply with the terms of the securities you may not receive the anticipated returns and you may lose all or part of the money you originally invested. If you sell your investment before its maturity date the investment may achieve a price less than the original investment. The performance of these investments may depend on indices and defined calculations which may differ from direct investments.

Gearing: Some of the investments we may make on your behalf could be in investment companies which use gearing as a strategy or invest in other investment companies which use gearing, such as investment trusts. The strategy which the issuer of such securities uses or proposes to use may result in movements in the price of the securities being more volatile than the movements in the price of underlying investments. Such investments may be subject to sudden and large falls in value and you may get back nothing at all if there is a sufficiently large fall.

Regulated Mortgages: Schroder & Co. Limited is authorised by the Prudential Regulation Authority to administer, advise on, arrange (bring about) and enter into a regulated mortgage contract. Your home may be repossessed if you do not keep up repayments on your mortgage.

All data contained within this document is sourced from Cazenove Capital unless otherwise stated. Where FTSE International Limited (“FTSE”) data is used, “FTSE” is a trade mark of the London Stock Exchange Group of companies and is used by FTSE International Limited under licence. All rights in the FTSE indices vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices or underlying data. No further distribution of FTSE data is permitted without FTSE’s express written consent.

Company particulars and regulatory status This document is issued by Cazenove Capital which is part of the Schroder Group and is a trading name of Schroder & Co. Limited, who together with connected companies provide the services described.

Schroder & Co Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered office is at 31 Gresham Street, London EC2V 7QA. Registered Number 2280926 England.

Services supplied by Schroder & Co. Limited and connected companies may be subject to value added tax (VAT). Schroder & Co. Limited is registered for VAT in the United Kingdom (GB 243868730).

For the purposes of the Data Protection Act 1998, the data controller in respect of any personal data you supply is Schroder & Co. Limited. Personal information you supply may be processed for the purposes of investment administration by the Schroder Group, which may include the transfer of data outside of the European Economic Area. Schroder & Co. Limited may also use such information for marketing activities unless you notify it otherwise in writing.

For your security, communications may be recorded or monitored.

Disclaimers, risk warnings and regulatory status

33

Thank you

Appendix

36

Schroder European Alpha Income Fund As at 30 April 2017

Performance in GBP % 6 months 1 year 2 years 3 years Since inception1

Schroder European Alpha Income Fund ‘Z Acc’ +8.0 +30.0 +28.1 +35.9 +140.8

FTSE World Europe Ex UK +9.6 +28.8 +23.7 +32.4 +96.2

Relative -1.6 +1.2 +4.4 +3.5 +44.6

Quartile Q3 Q1 Q2 Q2 Q12

1Launch date: 02 May 2012. 2Top decile. Source: Morningstar, bid to bid with net income reinvested to 30 April 2017, net of fees in GBP. Quartile rankings are based on Z share class (main unit share class), IA Europe ex UK peer group. Source of ratings: Morningstar, FE Trustnet and Rayner Spencer Mills, as at 30 April 2017. Please refer to the Morningstar disclaimer at the end of the presentation. Past performance is not a guide to future performance and may not be repeated. *As at 31 March 2017.

James Sym is responsible for £1.2bn of assets under management.*

Discrete yearly performance % Q1/16–Q1/17 Q1/15–Q1/16 Q1/14–Q1/15 Q1/13–Q1/14 Q1/12–Q1/13

Schroder European Alpha Income Fund ‘Z Acc’ +31.4 -2.6 +4.3 +42.0 –

Benchmark +27.9 -4.2 +7.5 +17.3 –

Contact John Gordon Head of Business Development D 0207 658 3887 john@cazenovecapital.com 12 Moorgate London EC2R 6DA cazenovecapital.com