Delivering Income and Preserving Capital

For professional advisers only.

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Contents

• Demand for income

• Importance of maintaining real capital value

• Cazenove Capital’s pedigree

• Cazenove Capital’s solution

• Q&A

Demand for income

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Collapse of interest rates

UK Bank & Building Society Deposit Rates: Notice Accounts

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2005 2006 2007 2008 2009 2010

%

Source: Thomson Datastream to September 2010

-5-

Real Wage Deflation (since mid 2008)

UK Average Earnings (excl. bonuses) vs CPI

3mm/yy % Change

0

1

2

3

4

5

6

2001 2003 2005 2007 2009

Average earnings (excl. bonuses)

CPI

Source: Thomson Datastream to October 2010

-6-

Is there inflation?

Source: Telegraph Website/Evening Standard website Jan 2011

-7-

Persistent low rates – reversing savings ratio?

UK Savings Ratio

%

Source: Thomson Datastream to August 2010

-2

0

2

4

6

8

10

12

14

16

1980 1985 1990 1995 2000 2005 2010

-8-

UK Equity Income

High % level of income

Compound effect of income beats market

Income from market largest contribution to growth

Fact: Some investors investing in income funds do so for income.

Headlines

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Behind the headlines….capital loss after income10 year cumulative capital return of the median fund in the IMA UK Equity Income Sector and adjusted for real purchasing power (using CPI)

Source: Cazenove Capital/Lipper to August 2010

Cumulative capital return (%)

-50

-40

-30

-20

-10

0

10

20

30

40

Aug-00 Aug-01 Aug-02 Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10

Median fund -9.9%

Median fund adjusted for real purchasing power -27.2%

Importance of maintaining real capital value

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Income is derived from capital

Source: Cazenove Capital

Year 1 Year 2 Year 3 Year 4 Year 5

Capital £100,000 £100,000 £100,000 £100,000 £100,000

Income £4,000 £4,000 £4,000 £4,000 £4,000

Inflation 2.5%

Real Capital £97,500 £95,062 £92,686 £90,368 £88,109

Real Income £3,803 £3,707 £3,614 £3,525 £3,436

Maintain real value

Real Capital £102,500 £105,062 £107,689 £110,381 £113,140

Real Income £4,100 £4203 £4,308 £4,416 £4,526

Effect on income

Income Diff £100 £203 £308 £416 £526

% Loss -2.5% -5% -7.7% -10.4% -13.2%

Cazenove Capital’s pedigree

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Cazenove MM Diversity Fund: since launch

Cazenove Multi-Manager Diversity A Acc (MF)

IMA Cautious Managed (IN)

FTSE All Share TR (IN)

Percentage Growth Total Return, Tax Default, In LC

1825 Days From 01/09/05 To 31/08/100.0 0.0

2.5 2.5

5.0 5.0

7.5 7.5

10.0 10.0

12.5 12.5

15.0 15.0

17.5 17.5

20.0 20.0

22.5 22.5

25.0 25.0

27.5 27.5

30.0 30.0

32.5 32.5

35.0 35.0

32.0

11.6

20.3

= CPI +4% pa over 5 years

Source: Lipper

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Performance (Ann)

Cazenove MM Diversity Fund – risk/return

Source: Lipper

Volatility (Ann)

-4

-2

0

2

4

6

8

10

12

0 5 10 15 20

IMA Cautious Managed

Cazenove Multi-Manager Diversity A Acc

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1/3 Equities

1/3 Fixed Income & Cash

1/3 Alternatives

Cazenove Multi-Manager Diversity Fund

Example of groups with funds in held at 4.10.2010. Logo permissions received.

Cazenove Capital’s solution

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Cazenove Diversity Income Fundlaunched 15th December 2010

• targets 4% income pa, paid quarterly

• targets capital in line with inflation (CPI)

• follows our proven multi-asset approach

The fund

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Back testing data - disclaimer

The back tested data is for illustration purposes only.

Assumptions have been made about portfolio positions to provide a representation of how the Cazenove Diversity Income Fund may perform in different market conditions.

This is shown for indicative purposes only and is not a guarantee of the likely future performance or volatility of the Cazenove Diversity Income Fund.

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Using indices and passive allocation

FTSE avg return: 7.8% FTSE Volatility: 14.9%

Blend avg return: 8.0% Blend Volatility: 7.3%

5 year rolling real residual value of £100

(multi-asset blend vs 100% UK Equity allowing for 4% real income distribution)

Source: Cazenove Capital/Lipper to October 2010Illustrative purposes only.

Real residual fund (£)

0

50

100

150

200

250

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

5 years ending

Multi-asset blend

100% UK Equity

Target

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-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

Apr-08 Jul-08 Oct-08 J an-09 Apr-09 J ul-09 Oct-09

Total Return: 2008-2009

Percentage Growth Total Return, Tax Default, In GBP

Source: Lipper.

Cazenove Diversity Income - Model 4 (MP) 10.4e%

Cazenove Multi-Manager Diversity A Acc (MF) 5.1%

IMA Cautious Managed (IN) -3.2%

IMA UK Equity Income (IN) -12.7%

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Cazenove Diversity Income Fund: the portfolio

Source Cazenove Capital at 4.1.2011

Fixed Income and Cash 47.6%

M&G Optimal Income 13.63%

Old Mutual Global Strategic Bond 8.55%

Aegon Strategic Global Bond 6.39%

Invesco Tactical Bond 6.45%

Cazenove Strategic Bond 4.7%

GBP Sterling 4.7%

US Dollar 3.17%

Equities 40.8%

Invesco Perpetual Income 13.75%

CF Walker Crips Equity Income 9.29%

J O Hambro Cap Mgt UK Opps 8.54%

M&G Global Dividend 4.08%

Schroder Asian Income Maximiser 5.17%

Alternative 11.6%

Eclectica 3.23%

Jupiter Absolute Return 6.76%

Cazenove UK Absolute Target 1.59%

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RDR ready share classes

Cazenove Multi-Manager Diversity

Fund:AMC 1% or 0.5% pa. Yield 1.7%

Cazenove Diversity Income Fund:AMC 1% or 0.5% pa. Yield target 4%

(Income & Accumulation share classes for both)

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Access: Cazenove Diversity Income Fund

Q&A

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Disclaimer

The stated target yield for the Cazenove Diversity Income Fund is not guaranteed.

This document is issued by Cazenove Capital Management Limited (Cazenove Capital). It is for information purposes only and does not constitute an offer to enter into any contract/agreement nor a solicitation to buy or sell any investment or to provide any services referred to therein.

This document is solely for the use of professional intermediaries and is not for general public distribution.

The contents of this document are based upon sources of information believed to be reliable, however, save to the extent required by applicable law or regulations, no guarantee, warranty or representation (express or implied) is given as to its accuracy or completeness, and Cazenove Capital or connected companies, directors, officers and employees do not accept any liability or responsibility in respect of the information or any recommendations expressed herein which, moreover, are subject to change without notice.

This document has been produced based on Cazenove Capital Management’s research and analysis and represents our house view. Unless otherwise stated all views are those of Cazenove Capital Management. It may not be reproduced in any form without the express permission of Cazenove Capital Management and to the extent that it is passed on, care must be taken to ensure this is in the form which accurately reflects the information given here. Unless otherwise indicated, the source for all data is Cazenove Capital.

Past performance should not be seen as an indication of future performance. The value of investments and the income from them can go down as well as up and an investor may not get back the amount invested and may be affected by fluctuations in markets and exchange rates.

Cazenove Capital Management is the name under which Cazenove Capital Management Limited (registered No. 3017060) and Cazenove Investment Fund Management Limited (registered No. 2134680) each authorised and regulated by the Financial Services Authority and of 12 Moorgate London EC2R 6DA provide investment products and services.