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Stair lifts and reading glasses

VIEWS: 42 PAGES: 8

									                                                                                                                                                                                Edition N°7
                                                                                                                                                                           1st quarter 2011
                                                                                                                                                                           MARKETING NOTICE




                            Fund profile                         Markets                              Special feature                       Frontier Markets                  Contact
                            Schroders’ new demographic          Go West! Strong corporate            “We only have one chance,”            What effect will revolutions,     We hope we’re still
                            fund seeks to benefit from                                               says Sir David King, former           massive demonstrations            here for you in 30
                                                                earnings and other positive
                                                                                                                                           and political unrest mean for     years’ time! Take a
                            the 21st century’s megatrend.       surprises in the US.                 scientific advisor to the                                               look at your Retail
                                                                                                                                           stock markets in the affected
                                                                                                     UK government.                        countries and regions?            Funds team!
                                                Page 2/3                              Page 5                               Page 6                               Page 8                   Page 8



Editorial
                                                 Stair lifts and reading glasses
                                                 Demographic change will lead to major changes in societies worldwide – more and more
                                                 megacities in emerging markets, and more pairs of reading glasses here at home.

                                                                                                                                                       countries, too – Italy, Germany and
                       Ketil Petersen,
                                                                                                                                                       Austria,for example – will also probably
                       (30 years older),                                                                                                               age rapidly. And last but not least, the
                       CEO                                                                                                                             birth rate is declining. In many
Megatrends and marketing fads                                                                                                                          European countries this has been the
Close scrutiny of innovations is one of                                                                                                                case for years, and it is now occurring
the main tasks of an independent                                                                                                                       in China, and will probably affect India
media. Some say that demographic                                                                                                                       in around 2030. This will cause the
funds are a marketing strategy to push
                                                                                                                                                       working age population between 15
yet another overblown fund theme onto
                                                                                                                                                       and 64 to shrink slowly but steadily
the market. With all due respect to the
scepticism that is a journalist’s
                                                                                                                                                       worldwide. Demographic change is a
professional metier, they’re wrong.                                                                                                                    megatrend for the next 40 years. Which
Demographic change is a real                                                                                                                           means that this tide cannot be turned
“megatrend”, not a marketing strategy.                                                                                                                 back, even if we got a grip on our
It’s worth taking a look back to the                                                                                                                   homemade problems, such as the
height of dot.com euphoria to compare                                                                                                                  slump in the birth rate caused by the
one with the other. At the time, new                                                                                                                   pill, the difficulty of combining career
ideas were in demand as never before,                                                                                                                  and children, and the rising financial
quickly becoming first a small online                                                                                                                  and social demands on potential
company, then an IPO and finally the             A world in upheaval: In western industrialized countries the “Zimmer frame” (age 65+) generation      parents.
next hot stock on the NASDAQ.                    is the only section of the population growing steadily. Apart from this group, numbers are falling.      However, as an investor it is possible
Naturally enough, new thematic funds             But in parts of emerging markets, population numbers are rocketing. Demographic change
sprouted like mushrooms. IPO funds,              cannot be stopped – and it brings considerable investment opportunities with it.                      to prepare for these developments and
which only invested in new offerings,                                                                                                                  draw the right conclusions from them.
were particularly hip. Virtually all of these    The term “demographic change” is about                to around 330 million Chinese                   Business will have to adapt to the
funds have failed. A more critical               as sexy as the term “pensions”. No-one                being over 65 in 2050?                          changing        demographic      realities.
approach would have been appropriate,            likes to think about it. It is too abstract and     … there are already more Kentucky                 For  example, the greying of society is
but everyone got carried away with the           too far removed from our own everyday                 Fried Chicken restaurants and                   a boon for the healthcare sector, growth
euphoria, including the press. But               lives – and yet we are all riding the long            Starbucks branches in China than                in emerging markets is good for the
fashionable     funds       were        never    wave of demographic change that will                  in the US?                                      infrastructure sector, and consumption
Schroders’ thing – retaining the trust
                                                 alter the world as we know it. The                  … the world’s population will be                  habits will change worldwide. In short,
and confidence of our investors has
                                                 phenomenon of demographic change can                  around 9 billion in 2050, and 98%               investors should be on the lookout for
always been our primary concern. So it
is with utmost conviction that we are
                                                 be approached in a number of different                will live in countries which we call            companies set to benefit from
launching our demographic fund.                  ways; one way is through statistics.                  “emerging       markets”     today?             demographic change and achieve
Virginie Maisonneuve, Schroders’ Head                                                                  Incidentally, 84% of the world’s                sustainable growth. That makes the
of Global Equities, has been looking at          Did you know that…                                    population already lives in                     whole topic sound much more
the themes of climate change, “Chindia”          … life expectancy has been increasing                 emerging markets.                               interesting, doesn’t it?
and demographic change for years.                   by three months annually since
With the help of Jürgen Lanzer, our                 1840? The life expectancy of                     This is not a tide that can be
demographics fund manager, she has                  newborns is 78.5 years in                        rolled back
built up a unique global database on                Denmark, 79.1 in Finland, 80.1 in                By combining a whole host of individual              Schroders has been named
demographic change covering both
                                                    Norway, 80.8 in Iceland and 81.0                 factors like these, we get a view of what            European Asset Management
industrialized countries and emerging
                                                    in Sweden.                                       demographic change really means.                     Company of the year for the second
markets. Schroders is not jumping on a
                                                 … the average age globally was 28.4 in              Currently most of the world’s                        year in a row.
bandwagon or pandering to a fad with
this fund launch. We are in the driving             2009? Kenyans are 18.7 years old                 population growth is in emerging                                         More on page 7
seat and leading the way!                           on average, Egyptians 24.8,                      markets, and they will account for
                                                    Mexicans 26.3, Chinese 34.1,                     around 98% of the increase forecast
I wish you pleasant reading.
                                                    Austrians 42.2 and Germans 43.8.                 between now and 2050 – from
                                                 … in 2030 a quarter of the population               6.8  billion today to 9 billion.
                                                    of industrialized nations will be of             Many developed countries, by contrast,
                                                    pensionable age, compared with                   are already ageing rapidly. The worst hit
                                                    only a tenth of the population in                is Japan, whose population (currently
                                                    emerging markets?                                127  million) could halve by 2100 if
                                                 … China’s one child policy will lead                current trends continue. But European
  Fund profile



  Schroder ISF1 Global Demographics & Wealth Dynamics
                                                                                                                                                        Schroder ISF Global

  Finding tomorrow’s winners                                                                                                                            Demographics & Wealth
                                                                                                                                                        Dynamics is managed by
                                                                                                                                                        Jürgen Lanzer (pictured)
  Over the next 40 years demographic change will not only affect economic                                                                               and Charles Somers.
  growth and living standards, but will also impact policy in terms of taxation,                                                                        Jürgen Lanzer has 12 years
  labour markets and general legislation.                                                                                                               of investment experience.
                                                                                                                                                        He joined Schroders as an
                                                                                                                                                        analyst in 2007 and is
                                                                                                                                   responsible for the insurance sector in the
  With many emerging markets experiencing                        Jürgen Lanzer and Charles Somers, the managers of
                                                                                                                                   Global Equities team. Prior to joining Schroders,
  a  population explosion and industrialized nations             Schroder ISF Global Demographics & Wealth
                                                                                                                                   Jürgen Lanzer worked for WestAM and UBS.
  ageing, the consequences of divergent population               Dynamics. Launched in November 2010, the fund                     Charles Somers joined Schroders as a US
  trends for the world economy are complex. As these             offers investors the opportunity to benefit from the              stocks analyst in 1998, concentrating initially on
  are mostly long-term developments, many investors              global trend of demographic change. The portfolio is              the healthcare and financial sectors. He has
  prefer to ignore them when analysing the operating             widely diversified globally and is currently focused              been responsible for the consumer goods
  environment and earnings sustainability of                     on six core issues.                                               and consumer durables sectors since 2008.
  companies. Demographic change will alter the                                                                                     The two managers are supported by a Global
  competitive landscape for many companies and                   Core themes of demographic change                                 Equity team of around 70 sector specialists
  sectors. This in turn will have a direct impact on               Rising consumption in emerging markets                          and analysts.
  strategic planning and long-term decisions.                      Rising infrastructure expenditure in emerging
     Companies will have to rethink their brand                    markets with increasing population                     established international and local brands.
  positioning, production and productivity, and                    Growing demand for financial services in               Demographic change is a process of adjustment and
  marketing and purchasing with an eye on emerging                 emerging markets                                       evolution. In our view this calls for an innovative and
  markets and ageing consumers, as consumption                     Changing eating habits in emerging markets             pragmatic investment strategy. As the Greek
  habits will have changed dramatically in twenty to               Health: an ageing population brings more               philosopher Heraclitus remarked in 500 BC: “There
  thirty years’ time. Companies such as Yum! Brands                illnesses and rising health costs in western           is nothing as permanent as change.”
  (which includes Kentucky Fried Chicken), which see               countries                                                 The fund’s investment universe currently
  demographic change as an opportunity, will adapt                 Strong demand for pension services in western          comprises around 9,000 stocks globally. Pre-selection
  their business model in time and probably be among               countries and rising demand in emerging                from this investment universe is carried out through
  tomorrow’s winners. In ageing societies, healthcare              countries                                              quantitative research. Schroders monitors markets
  companies are likely to earn higher profits if,                                                                         worldwide, analyses demographic trends and is able
  for  example, heart disease, cancer and cognitive                The fund managers believe that globalisation will to respond quickly if new developments emerge.
  diseases become more widespread or greater                     tend to erode the distinction between industrialized Schroders Research, which comprises around
  emphasis is placed on disease prevention. Examples             nations and emerging markets as far as individual 70  global sector specialists and analysts in local
  of possible investments are Pfizer and Rhön-Klinik AG.         stock selection is concerned. Demographic change – markets, covers around 90% of global equity markets.
  Infrastructure is likely to be another sector which            be it population growth or ageing – will impact At the country level, the analysts take account of
  will benefit from demographic change as the mega-              consumption everywhere, creating new business local preferences and lifestyles just as much
  cities of the emerging world grow ever larger and              opportunities. The decision in                                                  as   fundamental economic
  new cities spring up as a result of population growth.         favour of an investment “Schroders is launching a global fund that will data and the impact of
  At the same time, minor changes could determine                should be based on a              focus on the trends of the future. This is    demographic change on
  the success or failure of companies. Will today’s              company’s ability to adapt to    exactly the right way to benefit from global   economic         growth      and
  homeowners eventually buy stair lifts for their semis,         changes       in     consumer       changes. The fund’s prospects are           consumption. At  individual
  or will bungalows with wheelchair access become                behaviour, irrespective of the promising, as it looks forward, not in the rear- stock level, the research team
  increasingly popular? Will laser eye treatment or              country in which the company                     view mirror.”                  monitors how demographic
  reading glasses come out on top? And who,                      is based. The challenge for                        Euro fondsxpress 51/2010 trends impact companies,
  for  example, will succeed in designing a mobile               investors is to spot successful                                                 their competitors and their
  telephone which future older generations are happy             companies early and to foresee the impact that economic environment (e.g. their customer base),
  to use? Questions such as these are asked daily by             changes in consumer behaviour will have on and therefore their earnings outlook.



   Schroder ISF Global Demographics & Wealth Dynamics2                          Reasons to invest                                       Investment risks
                                 A, EUR hedged,         A, USD,                  	 chroder ISF Global Demographics & Wealth
                                                                                   S
                                                                                   	                                                       B
                                                                                                                                          	 ecause Schroder ISF Global Demographics
                                                                                                                                           	
                                 acc.                   acc.                        Dynamics invests worldwide in companies                & Wealth Dynamics invests in stockmarkets
                                                                                    expected to benefit from the impact of                 worldwide, it is exposed to corresponding
   ISIN                          LU0557291076           LU0557290698                demographic change on the world economy.               volatility.
                                                                                    T
                                                                                   	 he fund focuses on a long-term trend which
                                                                                    	                                                      T
                                                                                                                                          	 he fund can also invest in emerging
                                                                                                                                           	
   Currency                      EUR                    USD                         is not yet reflected in conventional                   markets stocks and small-sized companies,
                                                                                    consensus forecasts.                                   which may entail higher risks than large
   Launch date                   23 November 2010
                                                                                    T
                                                                                   	 he fund invests in a concentrated stock
                                                                                    	                                                      international stocks, including increased
   Fund managers                 Jürgen Lanzer, Charles Somers                      portfolio of around 40 to 60 stocks, which are         volatility and lower liquidity.
                                                                                    selected without reference to a benchmark.
   Number of holdings            40-60                                              The fund can also invest in small caps.                T
                                                                                                                                          	 he fund does not offer any capital
                                                                                                                                           	
                                                                                                                                           protection. The value of the units in the fund
                                                                                    T
                                                                                   	 he managers use a disciplined and active
                                                                                    	                                                      may at any time fall below the price that the
   Benchmark3                    MSCI All Countries World Index                     investment process with integrated risk                investor paid for the units, resulting in losses.
                                                                                    management.
                                 Up to 5.0% of the total subscription
                                                                                   	 chroders Research covers around 90% of
                                                                                    S
                                                                                    	
                                                                                                                                           T
                                                                                                                                          	 he fund may use financial derivatives as
                                                                                                                                           	
   Maximum initial fee           amount (5.26315% of the net asset value                                                                   part of its investment process. This may
                                                                                    global equity markets. Around 70 global sector
                                 per unit)                                          specialists and analysts are onsite in all             increase the fund’s volatility by increasing the
                                                                                    important markets.                                     impact of market events.
   Management fee (p.a.)         1.50%
                                                                                    T
                                                                                   	 here is a EUR-hedged unit class.
                                                                                    	                                                     	Investing in the USD unit class carries
                                                                                                                                           	
                                                                                                                                           currency risks for EUR investors.



  1 Schroder ISF stands for Schroder International Selection Fund throughout this document. 2 Source: Schroders. Data correct as at 31 December 2010. The name of the fund is expected to
  change to Schroder ISF Global Demographic Opportunities in February 2011. 3 For illustrative purposes only. The fund has a free choice in picking the stocks for its portfolio.



2 | Schroders Expert 1st quarter 2011
                                                                                                                                                                                                                                                                                                                              Fund profile



  Fund managers Jürgen Lanzer and Charles Somers                                             prospects. The portfolio can therefore diverge                                                                         a weighting of 47% in the index. Schroder ISF Global
use the MSCI All Countries World Index as their                                              sharply from the benchmark, for example in its                                                                         Demographic Opportunities & Wealth Dynamics is
benchmark, but pick stocks independently from the                                            geographical allocation. It can contain an emerging                                                                    therefore focused on finding tomorrow’s winners,
index. Based on fundamental analysis they select                                             markets allocation of over 50%, while the index only                                                                   wherever they may be.
around 40 to 60 stocks for the portfolio which in                                            has a weighting of around 13% in emerging market
their view will be able to adapt to demographic                                              stocks. Conversely, the portfolio’s allocation to North
change and are not yet priced to reflect these growth                                        American stocks could be only 20%, compared to


Consumption changes with age4                                                                                             Rising demand for financial services in Asia5
  Annual expenditure in USD

  The younger generation tends to spend money on entertainment, clothing,                                                   Growth of financial services in Asia                                                                       Credit card density
  alcohol and electronic gadgets, while the older generation spends more on
  package tours, medicines and nursing care.
  (USD)                                                                                                                     (Billion USD)                                                                                             Credit cards per person
                                                                                                                                                                                                                 CAGR
  25,000                                                                                                                    5,000                                                                                                     3.0
                                     Youth           Setting up home                                                                                                                                             12%
                                     Clothing        Property                                                               4,500
                                     Entertainment   Furniture                                                                                                                                                                        2.5                                                                                     2.43
                                                                                                                            4,000
                                     Restaurants     Children                                                                                                                                                                                                                                                                                                  2.7
                                     Alcohol         Car                                                                    3,500                                                                                                                                                                        2.00
  20,000                                                                                                                                                                                                                              2.0
                                                                                                                            3,000
                                                                                                                                                                                         16%
                                                                                                                            2,500                                                                                                     1.5

                                                                                                                            2,000
  15,000                                                                                                                                                                                                                              1.0
                                                                                                                            1,500
                                                                 Family life           Pension                                                         11%
                                                                                                                            1,000
                                                                 Education             Health                                                                                                                                         0.5
                                                                 Food                  Nursing care                          500
                                                                 Pension provision     Package tours                                                                                                                                                0.02                       0.09
                                                                                                                 Age
  10,000                                                                                                                         0                                                                                                      0
                                  Under 25     25–34        35–44       45–54        55–64        65–74    75 and over                              1997                         2001                          2008        2013(e)                 India                      China                      Korea              Japan                           USA




Vital statistics globally5                                                                                                The best of both worlds
                                                 Average age                    Births           Life expectancy            The portfolio of Schroder ISF Global Demographics & Wealth
                                                     in years              per woman                     in years           Dynamics as at 31 December 20107
 Afghanistan                                                  17.6                   6.53                      44.64        Regions                                                                                                   Sectors
 India                                                       25.3                    2.72                      69.89       (%)                                                                                                        (%)          Structural
                                                                                                                                                                                                                                                   focus
                                                                                                                            60                                                                                                        30
 Mexico                                                      26.3                    2.34                      76.06
                                                                                                                            55
 Indonesia                                                   27.6                    2.31                      70.76        50                                                                                                        25
                                                                                                                            45
 World                                                       28.4                    2.58                      66.57        40                                                                                                        20

 Brazil                                                      28.6                    2.21                      71.99        35
                                                                                                                            30                                                                                                        15
 China                                                       34.1                    1.79                      73.47        25
                                                                                                                            20                                                                                                        10
 USA                                                         36.7                    2.05                       78.11       15
 Russia                                                      38.4                    1.41                      66.03        10                                                                                                         5
                                                                                                                             5
 Austria                                                     42.2                    1.39                      79.50         0                                                                                                         0
                                                                                                                                 Emerging markets


                                                                                                                                                        North America


                                                                                                                                                                        Europe (ex UK)


                                                                                                                                                                                          Pacific (ex Japan)


                                                                                                                                                                                                               UK


                                                                                                                                                                                                                       Japan


                                                                                                                                                                                                                               Cash




                                                                                                                                                                                                                                             Financials

                                                                                                                                                                                                                                                          Consumer goods


                                                                                                                                                                                                                                                                              Consumer
                                                                                                                                                                                                                                                                           discretionary
                                                                                                                                                                                                                                                                                           Industrials

                                                                                                                                                                                                                                                                                                          Energy




                                                                                                                                                                                                                                                                                                                                                          Utilities
                                                                                                                                                                                                                                                                             Healthcare




                                                                                                                                                                                                                                                                                                                                        Basic materials



                                                                                                                                                                                                                                                                                                                                                                      Cash
                                                                                                                                                                                                                                                                                                                          technology
                                                                                                                                                                                                                                                                                                                          Information

                                                                                                                                                                                                                                                                                                                   Telecommunication
                                                                                                                                                                                                                                                                                                                             services




 Germany                                                     43.8                    1.41                      79.26
 Japan                                                       44.2                    1.21                       82.12
 The average person globally is around 15 years younger than an average German
 or Austrian, has more children and a much shorter life expectancy.                                                         ■ Fund                  ■ MSCI All Countries World Index



4 Source: United States Consumer Expenditure Survey, UN data, IMF, Bloomberg, National Statistics, Schroders. 5 Source: UBS, US Census Bureau, IMF, Higgins et al, Schroders.
CAGR = compound annual growth rate in per cent. 2010 data. 6 Source: www.welt-auf-einen-blick.de. All data is for 2009. 7 Source: Schroders. Data correct as at 31 December 2010.




Fewer and fewer children eat chocolates. The confectionery sector has to adapt
 Births (thousands) in Germany

                                                                                                                          Looking more closely at one of the largest countries in Europe, Germany,
                                                                                                                          with a long-term fertility rate of 1.4 children, Germany will age inexorably and
                                                                                                                          probably lose 12 to 18 million of today’s population of 82 million by 2050. Half of
 Photo: Die Welt, Sergej Glanze




                                                                                                                          the population will be over 50 years of age by then. As a result, the confectionery
                                                                                                                          sector has to adapt its range of chocolates, sweets and chewing gum for the
                                                                                                                          growing “Zimmer frame” generation. Wrigley, for example, not only manufactures
                                                                                                                          traditional bubble gum for children. With its campaign “A Gum a Day”, the chewing
                                                                                                                          gum manufacturer is currently attempting to extol the medicinal benefits of
                                                                                                                          chewing gum. Wrigley claims that it can protect against the symptoms of
                                                                                                                          heartburn, ear pressure and a dry mouth – and of course is good for the teeth.




                                                                                                                                                                                                                                            Schroders Expert 1st quarter 2011 | 3
  Markets




  Two-speed world
  Over the next six months, our forecast for the global economy can be best described as a “two speed world”.
  The emerging markets are leading the economic recovery. In contrast, we forecast sub-trend growth in the major
  OECD economies, as the de-leveraging process continues to temper consumer spending.
  Experts expect robust growth of 6.2% in the emerging                   impact of fiscal tightening. Rate hikes are not                     In addition, valuations of emerging equities are
  markets this year. This means emerging markets will                    expected in the US or the eurozone until the spring              looking more extended. In contrast, we have moved
  contribute more than half of forecast global growth                    of 2012. In the UK, we are expecting a rate rise before          to an overweight on the US – valuations here are
  of 3.6%. In contrast, we forecast sub-trend growth in                  the end of the year, as inflation is significantly higher        attractive, earnings upgrades are strong and
  the major OECD countries over the next two years,                      than in the US and the eurozone at over 3%. Over in              corporate confidence is improving, which is reflected
  as the deleveraging process continues to temper                        the emerging world, policy is also expected to tighten           in M&A activity. Meanwhile, we have moved to
  consumer spending and fiscal deficit reduction                         more rapidly in response to inflationary pressures               a  moderate overweight in Japan, as the yen has
  begins in some countries through higher taxes.                         and concerns about asset price bubbles. China is                 stabilized and valuations are attractive. Moreover,
  In  2011 we are expecting higher taxes, primarily                      forecast to raise interest rates in 2011 and allow               Japan is not as directly impacted by developments in
  driven by Europe. Developments in the eurozone as                      modest appreciation of the RMB.                                  the eurozone.
  a whole present more of a headwind than a following                                                                                        In the bond sector, we are neutral overall;
  wind for the world economy. Here, too, growth is                       Asset allocation                                                 we  remain positive on high yield and negative on
  two-speed. Germany is the only developed nation                        We are increasing our overweight exposure in                     government bonds. Inflation is expected to stay
  going through a ‘V-shaped’ recovery, and there has                     equities within our asset allocation. The valuation of           subdued, except in emerging markets, and private
  been a sharp recovery in consumer confidence across                    equities looks attractive, and we are currently in               sector demand for credit is still very low, although
  Central and Northern Europe. However, Southern                         a  recovery phase of the economic cycle where                    there are signs that activity is strengthening. As long
  Europe and Ireland are seeing weak growth and                          equities tend to outperform other asset classes.                 as policy rates remain as low as they are now, the
  almost non-existent consumer confidence.                               There  has also been a very strong recovery in                   search for yield will remain the dominant theme for
     We do not believe that the euro crisis is over.                     corporate earnings, with an increase of over                     bond investors.
  Concerns over the solvency of several eurozone                         50%  in  the US last year. M&A (mergers and
  countries are likely to flare up throughout the year,                  acquisitions) activity has also recovered somewhat,
  although the worst should be contained by EU and                       and quantitative easing is also supportive of equities.
  IMF support. We expect the euro to remain intact in                    We have upgraded Europe (ex UK) from underweight
  2011. On a five-year view, however, we could see                       to neutral, given that concerns about sovereign debt
  some peripheral nations leave the single currency,                     look to have been priced in. Peripheral Europe looks
  if  no steps towards a common economic and tax                         relatively bleak, but Germany and other Northern
  policy are taken.                                                      Europe markets are going through a strong recovery.
     We expect monetary policy to remain loose in                        In comparison, we have reduced emerging markets
  2011, particularly in industrialized nations, firstly to               from overweight to neutral – while economic growth
  maintain growth and secondly to accommodate the                        rates are robust, inflation is weighing on the region.
                                                                              BIP
                                                  8
   Schroders                             forecast and Portfolio1
                                             6                                                           5,7
   GDP growth in %                                4       Inflation in %                                       Key rates in %                               Currencies/oil price
    7                                                     6                                              2,7   2.00                                                          Current 12/2011(e) 12/ 2012(e)
                                                  2                                                      1,6   1.80
    6                                     6.0             5                                              1,5                                    1.75
                                                  0                                                4.5         1.60                                         USD/EUR            1.32      1.25        1.20
                                                          4
    5                                                                                                          1.40
                                                 –2       3                                                                                     1.25
                                                                                                               1.20                                         USD/GBP            1.55      1.60        1.60
    4                                                                                              2.1
                                          3.5             2                                                    1.00
    3                                            –4                                                0.9
                                          2.7             1                                                    0.80                                         JPY/USD            84.0      85.0        90.0
                                                                                                   0.8         0.60
    2                                     1.8 –6        0
                                          1.5         2009                    2010                –0.2
                                                                                                   2011        0.40                                         GBP/EUR            0.85      0.78        0.75
    1                                                  –1                                                                                       0.25
                                                                                                               0.20
                                                      USA          Euroraum       Japan      Schwellenländer                                                Oil (Brent Crude)
    0                                                     –2                                                   0.00                                                           91.8       84.5        87.1
         2010          2011(e)         2012(e)                 2010           2011(e)          2012(e)                2010      2011(e)     2012(e)         in USD

                                           US         Eurozone          Japan           Emerging markets        World

   Weighting of asset classes since June 2010                                                                  Equity allocation (current)
   100%
                                                                       Absolute Return            3.0%
                                                                       Convertible bonds          3.2%                                                    Equities comprise 41.1% of the total allocation
    80%                                                                                                                                                   and break down as follows:
                                                                       Private Equity             2.3%
                                                                       Infrastructure             6.0%                                                      Equities, global 38.20%              (–0.45%)
    60%                                                                Cash & equivalents         5.0%
                                                                                                                                                            Equities, US 18.49%                  (+6.66%)
                                                                       Corporate bonds
                                                                       (investment grade)         1.0%                                                      Equities, emerging markets 11.68% (0.33%)
    40%                                                                High-yield bonds          14.3%                                                      Equities, UK 9.73%                   (–1.38%)
                                                                       Emerging market bonds 11.9%                                                          Equities, Pacific (ex Japan) 12.41% (–0.39%)
    20%                                                                Commodities                9.0%
                                                                                                                                                            Equities, Europe (ex UK) 9.25%       (+5.01%)
                                                                       Property                   3.2%
                                                                                                                                                            Equities, Japan 0.00%                (±0.00%)
                                                                       Equities                  41.1%
        0%
             06/10   07/10   08/10    09/10       10/10        11/10




  1 Source: Schroders, Datastream, IMF. Data for GDP, inflation, policy rates and market prices at 31 December 2010. Key figures for 2011 (e) and 2012 (e) are estimated figures for the year-end.
  Emerging markets comprise Argentina, Brazil, Bulgaria, Chile, China, Colombia, Croatia, the Czech Republic, Estonia, Hungary, India, Indonesia, Latvia, Lithuania, Malaysia, Mexico, Peru, the
  Philippines, Poland, Romania, Russia, Slovakia, South Africa, South Korea, Taiwan, Thailand, Turkey, Ukraine and Venezuela. Asset allocation (total and equities) refers to the Strategic Solutions –
  Schroder Global Diversified Growth Fund portfolio. Data correct as at 30 November 2010.



4 | Schroders Expert 1st quarter 2011
                                                                                                                                                                   Markets




Go West!                                                                                                          Ticker

                                                                                                                           Equities
Despite ongoing concerns about the strength and durability of the
US recovery, there are plenty of reasons to remain optimistic on the                                                       US Strong corporate balance sheets,
outlook for corporate America in 2011.                                                                                     mergers & acquisitions increasing, loose
                                                                                                                           monetary policy, weak US dollar positive
Ironically, many US companies have had a “good”         labour markets. On housing, we are very much of                    for large global companies.
recession, having cut costs and restructured early      the view that the market should not get markedly                   Schroder ISF US All Cap
in the downturn, enabling them to enjoy strong          worse in 2011. Indeed, in the second half of the                   Europe Weak growth prospects due to
productivity gains. This has in turn allowed US         year we think there is a good possibility that it                  structural debt issues, but strong
companies to benefit from a strong pickup in free       could move forward quite positively as the                         resurgence in Germany and Northern
cash flow and profits as economic conditions have       currently high levels of inventory begin to clear.                 Europe; much of the bad news priced in.
                                                                                                                           Schroder ISF European Special Situations
improved. Aside from these “self help” measures,        Broadly, we would expect the housing market to
large US companies with a global reach are well         have a neutral to slightly positive impact on                      Japan The yen looks to have stabilised,
positioned to benefit                                                           growth       in      2011.                 which is positive for exports; Japan is
                                                                                                                           notdirectly affected by the problems in
from strong rates of                                                            The  labour markets
                                                                                                                           the eurozone.


                                                                           Foto: fotolia
economic growth in                                                              are  likely       to    be                 Schroder ISF Japanese Equity Alpha
countries such as China                                                         key   in  determining
                                                                                                                           Pacific (ex Japan) Loose US monetary
and India. Indeed, for                                                          consumer confidence and
                                                                                                                           policy is positive as it boosts liquidity in
some US firms, emerging                                                         behaviour      in    2011.                 the region; close ties with China mean
markets now account for                                                         It  is  encouraging that                   that further policy tightening could
a third to a half of all                                                        temporary employment                       hamper market returns.
revenues – which makes                                                          has already started to                     Schroder ISF Pacific Equity
them a growth driver for                                                        pick  up. Obviously the                    Emerging markets Currently enjoys
the US as well.                                                                 debate about how to                        the best growth prospects due to strong
                                                                                kickstart employment will                  structural fundamentals including trade
Why do investors                                                                continue      and      the                 surplus positions; but valuations are
choose to invest in                                                             Obama  administration                      now extended.
the US?                                                                         undoubtedly paid a penalty                 Schroder ISF Global Emerging Market
Irrespective of crises and                                                      at the mid-term elections                  Opportunities
economic cycles, US                                                             for its perceived failings
companies are often the                                                         here, but overall we                       Fixed income
recognised leaders and                                                          believe the worst is                       Government Central banks are expected
innovators      in     their                                                    behind us now.                             to keep policy rates low against a low
respective fields. This                                                                                                    inflationary backdrop; the fact that the world
applies both to “old”                                                             Preferred sectors                        economy is on a sustainable growth path is
sectors, such as healthcare,                                                      While we don’t seek to                   putting government bond yields under
defence and aerospace,                                                            take large sector positions,             increasing pressure.
and to “new” ones, such as internet and                 we do have our favourites. Areas such as energy                    Schroder ISF US Global Bond
communications technology. These companies              and industrials present us with plenty of investment               Investment Grade (IG) Corporate With
also operate in a society which encourages rather       ideas at present, and diversified financials is also an            yields on government bonds persistently low,
than hinders entrepreneurship. It is difficult, for     interesting sector at the moment. Valuations are                   IG bonds remain a high-yielding alternative;
instance, to envisage businesses such as Apple,         attractive and the market is assuming – incorrectly                however, valuations have extended.
                                                                                                                           Schroder ISF Global Corporate Bond
Microsoft, Google or Facebook emanating from            in our view – that profits won’t recover to anything
anywhere other than the US and becoming so              near the levels seen in the last decade. There is                  High yield The general recovery in
                                                                                                                           corporate profits is supportive.
successful. That won’t change in 2011 or indeed at      potential for positive surprises here and this is the
                                                                                                                           Schroder ISF Global High Yield
any point in the foreseeable future.                    “growth gap” that we seek to exploit. More generally,
                                                        while US large cap equities are no longer as cheap                 Emerging market debt Many emerging
                                                                                                                           sovereign issuers have a domestic
M&A revival                                             as they once were, they are far from being
                                                                                                                           economy in better fiscal shape than their
The recovery in M&A is very positive. Many US           expensive. On a 12-month forward PE, the S&P is
                                                                                                                           developed peers. However, the contraction
companies are generating large profits, have solid      only on 13 times earnings. That compares                           in sovereign spreads suggests that
balance sheets and barely any gearing.                  favourably with its long-term average.                             valuations for some countries are trading
Some companies are using their free cash flow for                                                                          towards the more expensive end.
capital expenditure to enhance their own                Monetary policy needs to balance risks                             Schroder ISF Emerging Markets Debt
competitiveness. However, others are using that         The Fed will continue its $600bn bond purchase                     Absolute Return
cash to make acquisitions that are immediately          programme (i.e. quantitative easing or QE) until                   Index-linked We expect global inflation to
accretive to earnings. To put it another way,           July 2011 and is unlikely to tighten policy any time               remain subdued, except in the UK.
companies can either use their free cash to invest      soon. It is important that it exits from QE at the                 Schroder ISF Global Inflation Linked Bond
and make acquisitions or they can leave it on           right time to balance the risks to growth on one
deposit where it will earn around a quarter of          side with the obvious inflation risk on the other.                 Alternative investments
one per cent. In our view, that is not a particularly   The Fed’s current policy is pushing the dollar
                                                                                                                           Property Valuations are fair relative to
difficult decision if a company wants to boost          down. A weaker dollar will boost US companies’
                                                                                                                           history and other assets; growth prospects
its earnings.                                           exports. But this runs the risk of encouraging                     are limited.
                                                        protectionism and currency devaluations by other                   Schroder ISF Global Property Securities
Has the recession fundamentally altered                 nations if the dollar is perceived to be artificially              Commodities The world economy is
the propensity to spend?                                weak, which would harm US exports.                                 recovering and there is sufficient liquidity;
While we have to recognise the consumer as a risk,      US  companies are still benefiting from the weak                   strong demand from emerging markets.
it is worth remembering that it is the wealthier        dollar currently, but there are two sides to
sections of US society that drive consumption.          this coin.
These wealthier consumers have been less affected                                                                          Expected performance:
by the downturn and continue to spend. As far as                                                                           Positive        Neutral     Negative

the outlook for consumers in general is concerned,
two issues will be crucial in 2011: housing and


                                                                                                                                      Schroders Expert 1st quarter 2011 | 5
  Special feature



 “We only have one chance”                                                                                                                     Sir David King
                                                                                                                                               Sir David’s area of expertise
  Sir David King is director of the Smith School of Enterprise and Environment                                                                 is physical chemistry,
                                                                                                                                               with a particular interest in
  at the University of Oxford. As a guest of the Schroders Secular Market Forum,                                                               climate change. He was
  he shared his thoughts on climate change and the challenge posed by the                                                                      chief scientific advisor to
  depletion of the world’s natural resources.                                                                                                  the British government
                                                                                                                                               from 2000 to 2007.
  The legacy of population growth                          Food supply
  The human race has a track record of mismanaging         Given the need to increase food production, we need
  the earth’s natural resources, as illustrated by the     to be far smarter about capacity per hectare than we      conventional oil reserves are in the hands of
  destruction of China’s Loess valley ecosystem during     have been. This means farming efficiently, soil           international oil companies – 85% resides in the hands
  the 1400s. Overfarming resulted in extensive top soil    management and the implementation of crop                 of national companies. The concentration of oil and
  erosion and sand clouds that still impact Beijing,       development techniques. After 15 years of research        mineral resources in certain nations and the
  Korea and Japan today. At that time, the solution was    and sophisticated selective breeding we have              consequent potential for conflict is very concerning.
  to relocate to a more fertile region. Clearly, with      developed the means to grow flood-resistant rice          We therefore need to look at alternatives, e.g.
  a global population of 6.8 billion people, this option   crops. The same result could have been achieved more      unconventional oils (such as tar sand oil), of which
  is not open to us today.                                 rapidly with the use of genetic modification              there is a vast supply, but significant difficulties
                                                           techniques. However, the European aversion to             associated with their use. Indeed, demand trends are
  Unique challenges                                        GM crops is holding back the commercial application       already pushing international oil companies into
  The level and density of the global population of these new methods. But to meet the rising demand                 unconventional oil production far too quickly.
  presents major challenges that are all interconnected. for food, these techniques are essential. The technology    In  other words, beyond the boundaries appropriate
                                                           is available to provide flood-resistant, drought-         for the technology that currently exists. The key
  Water                                                    resistant and saline-resistant crops, but the social      message is that we need to remove our dependency on
  Without managing our supplies more effectively, acceptability of genetic modification has not kept                 fossil fuels as quickly as possible. If we don’t succeed in
  the  world is set to face a global freshwater shortage pace. Wealth creation in the developing economies           doing so, we look set to face an oil price crisis with the
  by  mid century. Shortages are already appearing is  increasing meat consumption, which necessitates               potential to trigger another financial shock. Our  oil
  on  a  regional level, with the “green belt” of further crop production and results in greater water               production processes to date have been simple and
  Australia a prime example. Traditionally a significant consumption. Fish consumption per head has                  wasteful given the perception of oil as a cheap
  area for crop production,                                                       increased      and       massive   commodity. Data from Cambridge University highlights
  the  state of Victoria has faced “Some eminent cosmologists think that overfishing means that there                massive inefficiencies in the current conversion rate
  eight successive years of            the future for humanity is to get into a   could be no more large fish in     from primary energy to total useful energy (of the
  drought, such that one third of     spaceship and find another planet, but the           oceans       by     the   total primary energy burnt globally per annum, only
  domestic water is sourced that planet will not have the right levels mid-21st century. Recent                      12% is produced as “useful energy”). In this sense we
  through desalination. However, of ecosystem services that this planet experiments                 to establish     are facing one of the greatest innovation and wealth
  desalination is a highly energy-     provides. We only have one chance.”        fishing protection zones (such     creation challenges since the beginning of the
  intensive production process,                                                   as in the Cape Cod region)         industrial revolution. There are massive opportunities
  which is often fuelled by coal. The burning of coal not have been proven to work and should be replicated on       for energy efficiency gains and for finding alternative
  only creates energy supply and security concerns, but a larger scale elsewhere in the world.                       means of energy production, but these also present
  also contributes to climate change and desertification.                                                            huge technical and economic challenges.
  We haven’t yet mastered solar-powered desalination, Climate change
  but this would be a big win going forward.               The temperature of the earth went through                 Successful environmental management
                                                           a maximum 50 million years ago, at around 12 degrees      To come full circle, it is worth returning to China’s
  Health                                                   higher than pre-industrial temperatures. Greenhouse       Loess plateau. Twelve years ago, the Chinese
  Climate change also poses a challenge for health, gas levels were significant at that time. A large                government began replanting the area on an enormous
  in the sense that diseases are moving to new locations proportion of these gases were absorbed by the oceans,      scale. To date, an area the size of Belgium has been
  as temperatures rise. Furthermore, an increasingly forests and permafrost over millions of years.                  regreened, with the full plateau (approximately the
  globalised economy means that air travel can The  development of civilisation in the past 12,000                   size of France) set to be regreened by 2020.
  facilitate the spread of a new infectious disease to the years, with the introduction of farming processes and     The  terracing of the area and the creation of arable
  rest of the world within three months.                   deforestation, has been accompanied by another            land has been a source of wealth creation for the local
                                                           significant increase in greenhouse gas emissions.         farmers, and other biodiverse systems are returning.
  Minerals                                                 Greenhouse gases have risen from the 275 parts per        This is an astonishing example of effective
  Dwindling resources and the uneven distribution of million (ppm) typically seen during a “warm” period             land  management.
  resources around the world create both economic and (as opposed to an ice age) to 388ppm today, and are
  political challenges. Estimated copper reserves, for still rising at 2ppm per year. However, we have not yet       Where now?
  example, would be exhausted in 50 years if current seen a corresponding increase in temperature levels,            The financial crisis has provided somewhat of
  consumption trends are extrapolated. Demand with the global average only about 0.8°C higher. While                 a  breather for the environment by reducing the
  continues to grow, however, notably from China. greenhouse gases are by no means the only factor                   volume of emissions produced globally. However,
  Its resource needs cannot be met internally and Africa behind temperature rises, they are a significant            business as usual will put us back on a dangerous
  is proving an important investment destination. contributor. According to data from the Hadley                     track. Encouragingly, the Copenhagen and Cancun
  This has parallels with the European colonisation of Centre, if we reach 450ppm there is a 20% chance that         climate change conferences and the surrounding
  Africa during the Industrial Revolution.                 the global temperature will rise by over 3.5°C –          publicity led to over 70 countries announcing their
                                                           significantly beyond the global agreement to              commitment to tackling climate change. These nations
  Ecosystems                                               prevent  a  temperature rise greater than 2°C. If we      currently account for 85% of greenhouse gas
  Given the important role forests play in absorbing follow a  business-as-usual path and levels exceed              emissions. Whilst much more needs to be done in
  carbon dioxide from the atmosphere and providing 650ppm, a rise of over 3.5°C becomes the most likely              terms of effectively managing our resources, this
  the biodiversity necessary for human survival, there outcome. We need to prevent this, since the melting of        widespread international recognition sets us off
  is  a conflict of interest with food production. the Greenland ice sheet alone would result in a six               a good start.
  Food  production needs to increase by 50% within metre rise in sea levels around the world.
  15   years to satisfy current growing demand.
  The  challenge is whether this demand can be met Energy security and supply
  without removing the ecosystems on which we rely The production capacity associated with conventional
  (which is what is happening at the moment).              oil is not sufficient to meet rising demand.
                                                           Furthermore, only around 15% of the remaining


6 | Schroders Expert 1st quarter 2011
                                                                                                                                                                                                   News



Notices                                                                                              Award winner
                                                                                                     Schroder ISF Global                                                    Morningstar 1
    Schroders is further expanding its range of 20 emerging market equity funds
                                                                                                     Climate Change Equity                                                  /
with Schroder ISF Frontier Markets Equity (ISIN A, USD, acc.: LU0562313402).
The fund was launched in December 2010 and is authorised for immediate sale                          The investment story
in the Nordic countries. The fund seeks to benefit from the dynamic growth of                        Greenhouse gases are threatening the earth’s ecosystem. Governments and
countries on the threshold of becoming established emerging markets – “frontier                      business are attempting to avert the worst consequences of global warming and at
markets” whose equity markets are still relatively small and illiquid, but have the                  least mitigate damage that is already unavoidable. The transition to a low-carbon
potential for dynamic growth. These include Kuwait, Qatar, the United Arab                           economy will have consequences for companies and their competitive
Emirates, Argentina, Nigeria and Pakistan. The Middle East accounts for around                       environment. New technologies will be created, patterns of demand will change
                                                                                                     and environmental costs will rise. Companies which adjust flexibly to change or
60% of the MSCI Frontier Markets Index, which is the fund’s benchmark. The
                                                                                                     contribute to combating global warming themselves could turn the industrial
fund is managed from Dubai by Rami Sidani, head of the Middle East and Africa
                                                                                                     revolution of the 21st century to their own advantage.
region and co-fund manager of Schroder ISF Middle East.
                                                                                                     The fund
   New benchmark: Since the beginning of the year the MSCI World TR Net has                          Schroder ISF Global Climate Change Equity opens up the opportunities of the new
replaced the MSCI All Countries World TR Net as the benchmark for Schroder                           industrial revolution to investors. It invests in stocks of companies whose products
ISF Global Equity Yield (ISIN A, USD, acc.: LU0225284248) and Schroder ISF                           or services help to limit the impact of global warming or adapt to unavoidable
Global Dividend Maximiser (ISIN A, USD, acc.: LU0306806265). The MSCI                                changes. Limiting the impact of global warming comprises solutions such as higher
World TR Net is the benchmark generally used by both funds’ peer group and                           energy efficiency, reduced dependence on coal and oil, and the development of
better reflects their portfolios. The previous benchmark contained 22 emerging                       renewable energies and of carbon dioxide capture and storage technology.
markets which do not feature in the fund portfolios or only play a limited role.                     Adapting  to change involves strategies to alleviate the consequences of harvest
                                                                                                     failures, deforestation, water shortages, floods and damage to fragile ecosystems.
   Change of fund manager: Schroder ISF Strategic Bond (ISIN A, USD, acc.:
LU0201322137) and Schroder ISF Global Bond (ISIN A, USD, acc.:                                         Performance since launch (29 June 2007) 2
LU0106256372) have been managed by Bhupinder Bahra and Frederick Bourgoin                            Return (USD) in %
since the beginning of 2011. Bhupinder Bahra is a quantitative research specialist                     50%                                                    42.76%
with 17 years’ investment experience. Frederick Bourgoin is also a quantitative                        40%
                                                                                                                                                                        29.99%
bond analyst. Both joined Schroders’ quantitative bond team as analysts in 2006                        30%
                                                                                                       20%
and have been managing Schroder ISF Global Inflation Linked Bond (A, EUR,                                       9.50%                                                                         11.76%
                                                                                                       10%                                                                            4.03%
acc.: LU018781048) since the beginning of the year, together with David Scammell.                       0%
                                                                                                                         –0.12 %
David is Head of UK & European Interest Rate Strategies, and has 21 years’                            –10%
investment experience. Nick Gartside, the fund’s previous manager, left Schroders                     –20%
                                                                                                      –30%
in December 2010.
                                                                                                      –40%                            –44.77%
                                                                                                                                                –40.71%
                                                                                                      –50%
                                                                                                               06/2007–12/2007        12/2007–12/2008        12/2008–12/2009         12/2009–12/2010
History of Schroders                                                                                          Schroder ISF Global Climate Change Equity, A, USD, acc.      MSCI World Net Return (USD)

Baron Sir John Henry Schröder                                                                          ISIN              LU0302445910 (A class, USD, acc.)

                                          Eldest son and heir to Johann Heinrich,
                                                                                                     Investment risks
                                          John Henry Schröder was born in
                                                                                                        S
                                                                                                       	 chroder ISF Global Climate Change Equity invests in stockmarkets worldwide
                                                                                                        	
                                          Hamburg in 1825. He entered the firm
                                                                                                        and is therefore exposed to corresponding volatility.
                                          in  London in 1841, aged sixteen,
                                                                                                        Th
                                                                                                       	 e fund can also invest in emerging markets and smaller companies with
                                                                                                        	
                                          becoming a partner in 1849. He took
                                                                                                        higher risks. The fund does not offer capital any protection.
                                          British citizenship in 1864 but maintained
                                                                                                        Th
                                                                                                       	 e value of the units in the fund may at any time fall below the price that the
                                                                                                        	
                                          strong links with Hamburg. Together with                      investor paid for the units, resulting in losses.
                                          his father he turned J. Henry Schröder &                      Th
                                                                                                       	 e fund may use financial derivatives as part of the investment process.
                                                                                                        	
                                          Co. from a prosperous Anglo-German                            This may increase the fund’s volatility by increasing the impact of market events.
  Baron Sir John Henry Schröder,          trading company into a  prominent                             I
                                                                                                       	 nvesting in the USD unit class carries currency risks for EUR investors.
                                                                                                        	
  1825–1910                               merchant bank.


Asset Manager of the Year
                       Schroders was named European Asset Management
                       Company of the year at the Funds Europe Awards in
                       December 2010 for the second year in a row – beating                          1 Source: Morningstar. Data as at 31 December 2010. 2 Source: Schroders. Data as at
                       Aberdeen, Amundi, Carmignac and RCM in the process. In                        31 December 2010. Performance based on unit class A, USD, acc. Calculation based on
                       addition, and also for the second year in a row, the Funds                    reinvestment of all income and net of annual management fee, but does not include the
                                                                                                     initial fee, or any other fees, charges, transaction costs or taxes, which would have a
Europe jury awarded Schroders the prize for the best European marketing campaign                     negative impact on the performance figure if included. The fund is also available in unit class
of the year (for Schroder ISF Emerging Markets Debt Absolute Return).                                A, hedged in EUR, acc. (ISIN LU0306804302). Foreign currency investments are subject to
                                                                                                     currency fluctuations. Past performance is not a reliable indicator of future performance.



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                                                                                                                                                            Schroders Expert 1st quarter 2011 | 7
Service



Frontier Markets see Political Unrest
What effect will revolutions, massive                             festering problems are its very own. The king has         of KD  1000 and free food for every citizen in
demonstrations and political unrest                               agreed to some concessions and is freeing prominent       celebration of the nation’s anniversary. Oman has
mean for stock markets in the affected                            political prisoners. We believe compromises will be       raised the minimum wage for its citizens.
                                                                  made and a solution should be reached shortly.               In Saudi Arabia, the king has announced
countries and regions? Down 20%?
                                                                    Protests have also spread to places like Yemen,         USD  35bn worth  of spending measures after
Or even worse?                                                    Algeria and Libya. One should keep in mind that           returning from three months abroad for medical
                                                                  these countries are not part of the GCC, nor are their    treatment. This includes increased support for small
Well, looking at the Frontier Markets from mid                    economies integrated within the Gulf. These remain        businesses and education of low income families and
December 2010 to end of February 2011, to the                     extremely closed economies, accessed with difficulty      students studying abroad. The king is very popular
surprise of many the drop was only around 8%.                     and where FDI levels continue to be low. In Yemen         and his reforms measures taken over the past decade
Apparently these kinds of events are to a great extend            President Ali Abdullah Saleh has agreed not to run        have not gone unnoticed. However, there is a Day of
already calculated into the market pricing. But what is           for re-elections, and in Algeria the government has       Rage being called for March 11th and whilst support
happening in the Middle East and North Africa area?               agreed to abolish a 19 years old emergency law,           is expected to be low, surprises, as we have seen, are
   The ousting of President Mubarak is proving                    caving to the protests on the street.                     perfectly possible. A strong turn-out at the rally will
to  be  a pivotal moment for the MENA region with                   In Syria: There have been press reports of efforts to   certainly lead to a significant increase in uncertainty
events in Egypt rapidly spreading over to                         organise protests, but as yet major demonstrations        with an obvious impact on the oil price and global
neighbouring countries.                                           have not materialised.                                    stock markets.
   In Bahrain: several tens of thousands of supporters              Libya is catching the world’s attention right now          In the medium to longer term, political liberalisation
of the Shiite led opposition have poured into the                 and it is difficult at this stage to gauge how the        across the region should be a strong positive. In the
streets of Manama calling for the devolution of some              revolution will end. It seems that more bloodshed is      short term there remains a high degree of uncertainty
power from the palace to the elected parliament.                  to come before the regime either collapses or reaches     and further volatility is likely. If protests do not
The protests do not come as a surprise and tensions               a compromise. What we do know is that the conflict        materialise in Saudi some very interesting buy
have been building for years between the ruling                   will remain within Libyan boarders but could very         opportunities should fairly quickly materialise. It is
Sunni family and the shi’a population (70% of                     well drag.                                                relatively difficult to get access to these markets and
populace). It is important to note this is not driven by            Regional governments will be pushing ahead with         an efficient way of doing that is by using the
hunger but by demands for more empowerment to                     reforms and more welfare distribution measures.           Schroder ISF Frontier Markets Equity Fund.
an oppressed majority and that Bahrain’s long                     Kuwait for example has already announced the grant



Top M1 rating awarded by Fitch Ratings
The renowned rating agency Fitch awarded Schroders                business franchise in a controlled manner, building on    In  Fitch’s view, asset management companies which
its highest Asset Manager rating of M1 in December                a diversified product and client mix under challenging    have the M1 rating are less vulnerable to make
2010. Among the 21 rated asset management                         market conditions. Fitch noted in particular the          mistakes in investment and functional areas. The M1
companies worldwide, Schroders is the only traditional            turnaround achieved in rebuilding the institutional       rating awarded to Schroders also reflects the company’s
asset manager with an M1.1 Previously, Schroders had              business over the past two years. The  institutional      long history and independence, as well as its high
the second-highest rating of M2+. The rating covers all           assets under management have increased by 64% since       profitability and liquidity, which ensures a solid
London-based investment activities of the company                 end-2008. According to Fitch, the recent evolution of     financing of all financial investment resources.
with the exception of the alternative asset management            the company has been particularly supported by the        This includes a large and strong team of experienced
business. Fitch is an important international rating              enhanced risk management organisational framework,        investment experts, an effective, analytical investment
agency alongside Moody’s, Standard & Poor’s and                   which operated effectively in 2010. The rating action     process, robust risk management and a solid
Morningstar. The main driver for the rating upgrade               also recognized the ability of the company to deal with   technological investment infrastructure.
was Schroders’ proven capacity to grow its robust                 new business complexities and strong net inflows.


    Who we are

1               Source: Fitch Ratings. Data as at 31 December 2010.              Viggo Johansen,                                         Lars K. Jelgren,
                 Ketil Petersen,
                                                                                 Head of Institutional Sales, Nordic                     Head of Intermediary Sales, Nordic
                 Country Head Nordic Region
                                                                                 Sweden, Finland                                         Direct phone: +45 3373 4891
                 Direct phone: +45 3373 4899
                                                                                 Direct phone: +46 8 545 136 65                          Mobile: +45 2212 8822
                 Mobile: +45 5120 8079
                                                                                 Mobile: +46 70 678 55 30                                Sweden direct phone: +46 70 678 55 30
                 Email: ketil.petersen@schroders.com
                                                                                 Email: viggo.johansen@schroders.com                     Email: lars.jelgren@schroders.com



                 Lykke Jensen,                                                   Peter Johansen,                                         Victor Rozental,
                 Chief Operational Officer                                       Senior Institutional Sales                              Intermediary Sales
                 Direct phone: +45 3373 4898                                     Direct phone: +45 3373 4896                             Direct phone: +46 8 545 136 62
                 Mobile: +45 2410 2667                                           Mobile: +45 4080 2843                                   Mobile: +46 70 853 1922
                 Email: lykke.jensen@schroders.com                               Email: peter.johansen@schroders.com                     Email: victor.rozental@schroders.com



                                                                                 Ubbe Strihagen,                                         Dorthe Kjærulf,
                 Marianne Pedersen,
                                                                                 Director, Property Sales                                Client Service Executive
                 Business Manager
                                                                                 Direct phone: +46 8 545 136 66                          Direct phone: +45 3373 4895
                 Direct phone: +45 3315 1822
                                                                                 Mobile: +46 70 520 33 80                                Mobile: +45 2073 1020
                 Email: marianne.pedersen@schroders.com
                                                                                 Email: ubbe.strihagen@schroders.com                     Email: dorthe.kjaerulf@schroders.com



     Visiting Adresses
     Store Strandstraede 21, 2nd                                      Sveavägen 9, 15th
     DK-1255 Copenhagen K
     Phone: +45 3315 1822
                                                                      SE-111 57 Stockholm
                                                                      Phone: +46 8 678 40 10
                                                                                                                                  We’re here to help you.
     Fax: +45 3315 0650                                               Fax: +46 8 678 44 10
     www.schroders.com/dk                                             www.schroders.com/se

								
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