AROUND THE

WORLD IN 80

MINUTES

European

CazenoveInvestment

Management

For professional advisers only

Europe's perfect storm

Deflationary policy environment

Constitutional crisis

Deleveraging environment

Low-growth world

Growth at risk

Perfect investment opportunity?

2

Investor confidence undermined 3

2011 net mutual outflows in Europe -€65bn

Source: Lipper at 31/12/11

Professional opinion divided

CPI actual between 2-3% in 2011

Only high forecasters achieved credibility

Deflationary concerns avoided for now

4

Consensus of economists and bank advisers fragmented

<2.5% experts were correct on €489bn funding

LTRO success is deemed critical for illiquid markets

Deep recession avoided?

2nd LTRO spread of forecasts*

Source: *UBS Survey at 17/02/12, **Absolute Research Strategy at 01/02/12

Eurozone inflation forecasts** (%)

Crisis? What crisis?

UK National debt more likely to exceed 100% GDP

Eurozone debt looks stable relative

US S&P AAA credit rating unlikely to restored in the medium term

Confidence in European inter-bank lending increasing

LTRO judged a success

European currency crisis avoided for now

5

Gross debt as a % of GDP* Euribor-OIS spread (bps)

Source: Thomson Datastream at February 2012, Bloomberg at 23/02/12

“Eurozone crisis

putting pressure on

EM equities”

FT Adviser - 27 Feb 2012

“Europe Delays Debt Talks

After Signs of

Uncertain Support”

New York Times – 29 Feb 2012

“Europe's financial crisis sparks protests”Washington Post – 28 Feb 2012

“EU Crisis:

Will Greece

wreck the

Eurozone?”

Economic Times - 14 Feb 2012

Eurozone GDP proportionate to media hype? 6

Eurozone countries as a % of total GDP

PIGS (less Italy) economies 17.6% of 2011 GDP

Source: Thomson Datastream at 31/12/11

Budget deficits falling

2010: universal flouting of 3% budget deficit rule

Austerity impacting debt

Even Germany almost in surplus

2011: German economy grew by 3%

Italy and Germany within deficit rule

7

Eurozone government budget deficits as a % GDP

* Forecasts

Source: Thomson Datastream at February 2012

Franco-German business optimism positive

Private sector companies only

Historic PMI rallies precede strong equity revisions

February PMI forecasts a ‘soft’ landing in China

Oil price risk would require a trend back to $140

8

PMIs rebounded in January

Source: Thomson Datastream at February 2012

Eurozone power house resilient

Exports GDP Growth vs business survey (%)

9

Germany

Index of investor and analyst expectations

6 month outlook

Largest confidence jump since 2009

Hopes of debt crisis resolution

Economy proves resilience

Investor confidence survey

Source: Bloomberg at February 2012

German export-led recovery

Strong demand from non-EU countries

Diversified export market

Weakening euro will boost industrial exports

Underexposed to the US market

10

% of total exports

Source: Thomson Datastream at 30/11/12

European export exposure

Germany, UK and France < 20% exposure to PIIGS exports

11

European Union’s 3 largest economies export exposure

Eurozone’s export exposure to the rest of the world

Source: Thomson Datastream at 31/12/11

Eurozone exports well positioned for global economic recovery

Risk of European market rally?

Price earnings a leading indicator for increasing equity returns

History offers a ‘clue’ to correlated earnings recovery to undervalued assets

12

Europe vs price earnings

Source: Thomson Datastream at 23/02/12

Trough to peak recoveries in European equities 13

FTSE World Europe (since inception maximum 2 year recovery periods)

Source: Thomson Datastream at 23/02/12

“If past history was all there was to the game, the richest people would be librarians” - Warren Buffett

Are European equities good value? 14

Large international companies trade at a premium

Active managers need to identify value

Dividend records can inflate price relative to growth

Beware of valuation traps just because a stock is cheap

International demand is key. In 2010, 41% of UK market was owned by overseas investors*

*Source: ONS at 28/02/12 **Source: Bloomberg at 23/02/12 ┼ Source: Mirabaud at 12/03/12

Combined Market Cap** 24.2%

9.8x

12.7%

11.8x

14.1%

13.8xAverage P/E

UK Europe (ex-UK) US

Market Trend P/E┼ 16.2x 10.3x 17.6x

US recovery impact 15

-6

-4

-2

0

2

4

6

60

120

240

1997 1999 2001 2003 2005 2007 2009 2011

US

GDP

YoY

%

Inde

x re

base

d at

100

at s

tart

of 1

997

(log

scal

e)

Germany PMI Manufacturing US GDP (RHS) FTSE World Europe

Source: Thomson Datastream at 23/02/12

European business and investors responding to US recovery

Is the reverse yield gap back? 16

Source: Thomson Datastream at 23/02/12

Low equity growth outlook increases pressure for tangible returns - DIVIDENDS

Yie

ld

Low growth outlook encourages dividend opportunity 17

Source: Thomson Datastream at 23/02/12

100+ European stocks with yields higher than their P/E

Yie

ld

Cazenove European active weightings 18

Style Grouping Fund % Index Key Stocks

Commodity Cyclicals 12.5 ENI

Consumer Cyclicals 7.0 Publicis Groupe

Financials 20.5 Allianz

Growth 10.6 Bureau Veritas

Growth Defensives 19.5 Bayer

Industrial Cyclicals 14.0 Alstom

Value Defensives 16.1 Sanofi

Source: Cazenove Capital Management at 31/01/12

17.3

21.5

13.8

Underweight Overweight

15.0

14.0

4.3

11.7

Neutral

Cazenove European Income Fund launch 19

Only 2nd European Fund launch to be managed by Chris Rice (OBSR AA rated)

Dual objective*

– Income (110% of the Index)

– Capital growth (index +2% net of fees over 3 years rolling)

Quarterly distribution

Concentrated approach: 30-50 stocks

European Income funds limited strong reputational fund managers

1st May launch

*Not guaranteedSubject to FSA approval

Disclaimer

This document is 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. 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 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 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.

20

C12009_Around the World - Cazenove European 2012 Powerpoint Presentation.ppt