www.cazenovecapital.com

POWERING INCOME

Cazenove UK Equity Income Fund

Matt Hudson, Fund Manager

Robert Thorpe, Head of UK Retail

For professional advisers only

Equity yields vs bonds

Source: Datastream & Bloomberg, gross market yield:

01/01/07 to 31/12/12 - 2 -

UK Equities 3.76

10 year gilt 1.82 AAA-AA 1.49

AAA-A 1.94

BBB 3.38

BB-B (HY) 6.43

US Equities 2.20

10 year treasury 1.76 AAA-AA 2.32

AAA-A 2.03

BBB 3.32

BB-B (HY) 5.89

Eurozone Equities 4.40 10 year bund 1.31

AAA-AA 1.25

AAA-A 1.53

BBB 3.27

HY 6.47

0

2

4

6

8

10

12

Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12

Div

iden

d y

ield

(%

)

FTSE MIB (Italy)

IBEX 35 (Spain)

DAX

S&P 500

Nikkei 225

FTSE All-Share

UK equities - a leading equity income source

Source: Datastream & Bloomberg

: 01/01/07 to 31/12/12 - 3 -

Three Citywire AAA UK managers - three UK sector leaders

IMA: UK All Companies IMA: UK Equity Income IMA: UK Smaller Companies

UK Opportunities Fund UK Equity Income Fund UK Smaller Companies Fund

Nominated UK growth fund

of the year 2012 Investment Week Awards

Winner UK smaller companies fund of the year

2012 Investment Week Awards

Nominated UK equity income fund

of the year 2012 Investment Week Awards

2012 Industry’s best selling

UK equity fund*

2012 Industry’s best selling

UK small cap fund*

2013 Industry’s best selling

….….?

*Source: Cazenove Capital. 2012 net sales versus IMA sector

- 4 -

Cazenove UK Equity Income Fund

Philosophy, process & performance

UK equity income – the power of compounding

*Source: Lipper, Dec 1985 – Dec 2012

**Source: Cazenove Capital Management

5 years ended 31/12/12 (B Income class)

Income reinvested outperforms*

5 years cumulative income returns**

Cazenove UK Equity Income

Fund 25.6%

FTSE All-Share

Index 20.3%

0.00

200.00

400.00

600.00

800.00

1000.00

1200.00

1400.00

Dec 85 Dec 90 Dec 95 Dec 00 Dec 05 Dec 10

Inde

x r

eba

sed

to

100

as o

f D

ec 8

5

FTSE All-Share Price Index FTSE All-Share Total Return Index

- 6 -

Appreciating capital

*Source: Lipper, B (Inc) share class, net income reinvested

31/12/05 to 30/11/12

Annualised returns*

- 7 -

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

IMA UK Equity Income FTSE All-Share Cazenove UK Equity Income B Inc

Total Return % (Annualised)

Capital Return % (Annualised)

Portfolio strategy – income through the cycle

Market yield & dividend

growth

Dividend growth &

rerating

Slowdown Recession Recovery Expansion

High & secure yield Low / no yield,

high capital growth

Stock:

Delivers:

Phase:

- 8 -

Where are we in the business cycle(s)?

UK Markit Manufacturing PMI

Source: Markit & Thomson Datastream at 28/09/12

UK Manufacturing PMI vs FTSE All-Share

EPS estimates

30

35

40

45

50

55

60

65

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Headline Index New Orders

30

35

40

45

50

55

60

65

-50

-40

-30

-20

-10

0

10

20

1999 2001 2003 2005 2007 2009 2011

Earnings revisions last 6 months Manufacturing PMI

- 9 -

Income portfolio construction – driving returns

December

2005

December

2006

December

2007

December

2008*

December

2009

December

2010

December

2011

December

2012

Premium real yields 44 49 68 86 60 54 55 60

Superior dividend growth 37 30 21 6 10 20 30 24

Capital Returns 19 21 11 8 30 26 15 16

No of stocks 69 78 58 51 68 57 52 55

- 10 -

• Business cycle

• Pragmatic income

• Focused approach

Cazenove UK Equity Income Fund year end positioning

Source: Cazenove Capital Management

*cash 4.7% at year end 2008

Cazenove UK Equity Income Fund

Current views

Relative price against FTSE All Share (base=100)

1200

1400

1600

1800

2000

2200

2400

2600

130

140

150

160

170

180

190

200

Feb '09 Feb '10 Feb '11 Feb '12

Best Standard EPS Adjusted 2013 (LHS) Price (RHS)

Safety first – the bubble in security

Source: Morgan Stanley & Cazenove Capital at 20/12/12

• Secure growth has re-rated over deep cyclicals/value stocks from 2007

• Driven by the search for safety…

• …and emerging market growth over developed market maturity

Unilever price: relative performance and 2013 earnings forecasts

- 12 -

Income investing – yield at a premium (1)

Source: Mirabaud

• Investors mistaking

‘low volatility’ for

growth

• ‘Secure’ dividend

stocks squeezed

upwards

• Value traps 0

20

40

60

80

100

120

140

160

180

200

220

Trend P/E relative Average + 1 SD - 1 SD

Severn Trent: Trend P/E relative, 1990 - 2012

- 13 -

Trend historic EPS growth rate = 5.2%

Income investing – yield at a premium (2)

Source: Mirabaud

• ‘High volatility’ stock

de-rated is the

opposite side of the

trade

• Value opportunities

0

20

40

60

80

100

120

140

Trend P/E relative Average + 1 SD - 1 SD

Barclays: Trend P/E relative, 1990 - 2012

- 14 -

Trend historic EPS growth rate = 3.9%

Dividend recoveries

*Source: MSDW/Datastream, FTSE, Global Financial Data,

Morgan Stanley Research **Source: Cazenove Capital

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

Jan-73 Jan-77 Jan-81 Jan-85 Jan-89 Jan-93 Jan-97 Jan-01 Jan-05 Jan-09

FTSE All Share – Dividend Per Share Growth (YoY %)*

Year Dividend

distributions (net) 2007 4.39p

2008 5.12p

2009 4.84p

2010 4.55p

2011 4.86p

2012 5.12p

Cazenove UK Equity Income Fund**

- 15 -

Portfolio strategy – active positions

Source: Cazenove Capital Management 31/12/2012

Market Cap Exposures Index Portfolio

FTSE 100 84.3% 60.8%

FTSE 250 13.4% 29.5%

FTSE Small Cap 2.3% 1.5%

AIM - 0.2%

Ex Index - 3.1%

Cash - 4.9%

Portfolio Risk

Predicted Tracking error p.a. 4.1%

Beta 0.91

# of stocks 55

Underweight Market Overweight

-4.54% BP

-4.48% Shell A

-3.72% GlaxoSmithKline

-3.26% Shell B

-2.55% Diageo

-1.86% HSBC

-1.61% Unilever

-1.50% SAB Miller

-1.75% Standard Chartered

-2.54% BHP Billiton

easyJet +1.76%

Legal & General +1.73%

Berendsen +1.67%

GKN +1.65%

Aberdeen Asset +1.61%

DS Smith +1.61%

Resolution +1.60%

Rio Tinto +1.59%

BT Group +1.58%

Babcock +1.56%

- 16 -

Cazenove UK Equity Income Fund

- 17 -

-50

-40

-30

-20

-10

0

10

20

30

40

Cazenove UK Equity Income B Inc

IMA UK Equity Income

5 year cumulative performance

Source: Lipper 31/12/07 to 31/12/12

Summary

• UK Equity yields look attractive compared to other equity markets

• A business cycle fund offers an alternate UK equity income approach

• Cazenove UK strength: three UK managers AAA rated by Citywire

• Cazenove UK Equity Income Fund 1st decile over 1, 2, 3 ,4 and 5 years*

Citywire rating to 30/11/12.*Source: Lipper B (Inc) reinvested to 30/11/12..**Source: Cazenove Capital B (Inc) net

income reinvested. †Source: Cazenove Capital, B (Inc) net income reinvested. ††X class 0.75% AMC, minimum

investment £1million (waived via adviser platforms), A class 1.0% AMC, minimum investment £25, 000, B class 1.5%

AMC, minimum investment £1000.

• Fund has delivered above market and sector yield for last 5 calendar years**

• Capital returns a key focus

• Historic yield of 4%†

• From 0.75% AMC – across all major platforms††

Thank you

Q&A

Issued by Cazenove Capital Management which is the name under which Cazenove Capital Management

Limited and Cazenove Investment Fund Management Limited both authorised and regulated by the Financial

Services Authority provide investment products and services. Past performance is not a guide to 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 originally invested and may be affected by fluctuations in exchange rates. The

levels and bases of tax assumptions may change. This document is for information purposes only and does not

constitute an offer to enter into any contract/agreement nor is it a solicitation to buy or sell any investment or to

provide any services referred to therein. Details of the terms and risk warnings are contained in the Prospectus

and Key Investor Information Document. This document is intended for Professional Advisers, Professional

Intermediaries and non-private clients only.

Regulatory information and risk warnings

- 20 -

Appendix

The Cazenove UK Equity Income Fund – summary

Internal Performance Objective:

Benchmark FTSE All-Share Index

Number of stocks Current 55, minimum 35

Portfolio Restrictions

(Rel to FTAS)

Stock +5% / No minimum

Sector +10 / No minimum

50% max weight in mid-cap,10% max in

small/ AIM/ other

(+ minimum 80% in UK Equities)

Tracking Risk 4-8% target range, current 4.1%

Launch Date 6 May 2005

Fund Size £175m

Structure UK Domiciled, UCITS III

Base Currency £ (Sterling)

Historic Yield 4.0%

• Pragmatic income

• Income and Capital returns

• Business cycle approach

• Focused portfolio

• Top decile 1, 3 and 5 years*

*Source. Cazenove Capital Management, fund ranking in

Lipper UK Equity Income universe as at 30/11/12. There

is no guarantee that the target will be met.

“The Fund aims to outperform by 1.5% over rolling 3 year periods and achieve a minimum yield of 110%

of the benchmark yield”

- 22 -

Cazenove UK Equity Income Fund – portfolio through the cycle

Source: Cazenove Capital Management

*cash 4.7% at year end 2008

Business cycle (+ve) active weights for

Cazenove UK Equity Income

Business cycle (-ve) active weights for

Cazenove UK Equity Income

December

2005

December

2006

December

2007

December

2008*

December

2009

December

2010

December

2011

December

2012

Premium real yields 44 49 68 86 60 54 55 60

Superior dividend growth 37 30 21 6 10 20 30 24

Capital Returns 19 21 11 8 30 26 15 16

No of stocks 69 78 58 51 68 57 52 55

- 23 -

0

5

10

15

20

25

30

35

40

Acti

ve w

eig

ht

(%)

Commodity Cyclical Consumer Cyclical Financial

Growth Growth Defensive Industrial Cyclical

Value Defensive

-40

-35

-30

-25

-20

-15

-10

-5

0

Acti

ve w

eig

ht

(%)

Commodity Cyclical Consumer Cyclical Financial

Growth Growth Defensive Industrial Cyclical

Value Defensive

Business cycle investing – market analysis

• Sector market divides are not homogenous. They do not necessarily help us determine the

behaviour of these stocks within the cycle.

• Define the beta of stocks and allocate them to seven style groupings:

Commodity Cyclicals Growth Financials Growth Defensives

Consumer Cyclicals Value Defensives

Industrial Cyclicals

HIGHER BETA LOWER BETA

• Pragmatic approach combining top-down macro view with earnings based security selection

• Avoid permanent style / size bias

• Demand for products and services changes throughout the business cycle

• Operational gearing of companies impacts profitability of companies

- 24 -

• Commodity Cyclicals – stocks whose revenues are linked either directly or indirectly to a particular commodity product

such as oil, steel, gas, mining, bulk chemicals e.g. BP, Rio Tinto

• Consumer Cyclicals – cyclical stocks which rely on consumer spending for their revenues e.g. retailers, automotives,

house builders, leisure, general retail e.g. Marks & Spencer, easyJet

• Industrial Cyclicals – stocks which manufacture capital goods or which have revenues linked to industrial production

e.g. engineering, aerospace, construction e.g. GKN, Vesuvius

• Growth – stocks which grow revenues well in excess of GDP with a high degree of uncertainty or volatility e.g. luxury

goods, medical technology, IT e.g. Smith and Nephew, ARM Holdings

• Financials/Interest Rate Sensitive – stocks whose business depends on interest rate spreads, financial markets and

asset valuations e.g. banks, insurers, real estate e.g. Barclays, Land Securities

• Growth Defensives – stocks which grow revenues in excess of GDP with a low volatility and high visibility e.g. support

services, food retailers e.g. Pearson, Compass group

• Value Defensives – stocks which grow revenues at or below GDP with low volatility and high visibility e.g.

telecommunications, pharmaceuticals, utilities, food producers, beverages, tobacco, e.g. GlaxoSmithKline, Vodafone

Business cycle investing - seven style groupings

- 25 -

Business cycle investing - horses for courses

Source: Thomson Datastream

31.12.99 -

12.03.03

12.03.03 -

15.06.07

15.06.07 -

03.03.09

03.03.09 -

30.04.12

Morgan Crucible Electronic & Electrical Cyclical -74% +272% -42% +129%

Bodycote Industrial Engineering Cyclical -55% +114% -26% +120%

Cookson General Industrials Cyclical -80% +98% -78% +246%

Diageo Beverages Defensive +147% -17% +40% 19%

Unilever Food Producers Defensive +178% -35% +57% -2%

Reed Elsevier Media Defensive +72% -23% +43% -38%

Stock Sector Style

Performance relative to FTSE All Share*

- 26 -

• Franchise

• Income

• Optionality

Stock selection - Filtrona

A value trap

A growth stock

Recovery to growth

Source: Thomson Datastream, 20/01/05 to 20/01/11 Weekly

HIGH 397.30 10/1/12, LOW 110.25 23/6/09, LAST 380.30

BOUGHT

SOLD

2005 2006 2007 2008 2009 2010 2011 2012

100

150

200

250

300

350

400

450

- 27 -

Source: Cazenove Capital at 31/12/12

Portfolio strategy – business cycle style tilts

14.8

6.7

9.3

7.0

1.2

29.3

Overweight Underweight Neutral/ NA

5.1

26.7

- 28 -

Change over 12 months

vs FTSE All-Share Fund % Index %

Key income portfolio

holdings

Commodity Cyclicals -13.8% 25.6 Rio Tinto

Consumer Cyclicals +29.9% 5.4 Easyjet

Industrial Cyclicals +14.3% 6.1 Elementis

Financials +21.7% 19.4 Aviva

Other/Cash/Unallocated = 4.3 Cineworld

Growth +1.6% 4.3 Sage

Growth Defensives +10.2% 9.1 Babcock

Value Defensives -8.8 % 25.7 BATS

Cazenove UK Equity Income Fund – performance analysis

-3.00

-2.00

-1.00

0.00

1.00

2.00

3.00

Blue = Positive IMA Sector Return Red = Negative Sector Return

Cazenove UK Equity Income relative to IMA UK Equity Income (%)

Source: Lipper 30/06/2005 to 30/11/2012

- 29 -