#1Schroders Welcome to Schroders Investor Day 2019 Peter Harrison, Group Chief Executive 15 May 2019#21 Alh. Closer proximity to consumer 500 Grow Wealth offering Investing for growth Expand core business Target client longevity Technology GI Grow Private Assets and Alternatives Rebalance business towards private markets Schroders#3Moving closer to our end customer 2 Start 09:00 09:10 09:40 10:10 10:40 10:55 11:25 11:55 End 09:10 09:40 10:10 10:40 10:55 11:25 11:55 12:15 Speaker Peter Harrison Peter Hall James Rainbow Susan Soh Break Graham Kellen Jessica Ground Peter Harrison and Richard Keers Presentation Introduction Wealth Management at Schroders An introduction to Schroders Personal Wealth Schroders in Asia: a business strategy for a digital age The digital asset manager Sustainability at Schroders Summary and Q&A Schroders#4Schroders Wealth Management at Schroders Investor Day Peter Hall, Global Head of Wealth Management 15 May 2019#5The Wealth Management sector has attractive features Growth 7% 4 6% 5% 4% 3% 2% 1% 0% Longevity (yrs) 14 12 10 8 6 4 2 0 Wealth Management Asset Management Revenue margin (bps) 80 70 60 50 40 30 20 10 0 Source: Schroders and Oliver Wyman "Trends and Opportunities in UK Financial Advice" March 2019. Growth rates are CAGR projections to 2023 and exclude passive and alternatives. Schroders#6A strong franchise across the UK wealth management spectrum... LO Charities 5 HNW Cazenove Capital £32bn client assets 135 advisers Source: Schroders. Press release announcing joint venture of 22 October 2018. Schroders personalwealth £65bn client assets with 705 advisers £13bn client assets 320 advisers Affluent -Benchmark Capital £20bn client assets 250 advisers Schroders#7...generating significant profits... £m 6 Net income Costs Profit before tax¹ Schroder Wealth 268.9 (182.4) 86.5 Source: Schroders, correct to 31 December 2018. ¹Before exceptional items. 249.9% 2019 proforma figures. Full year 2018 Benchmark Capital 20.9 (14.0) 6.9 Wealth Management 289.8 (196.4) 93.4 Annualised proforma 2019 Schroders Personal Wealth² 68 (51) 17 Schroders#8...and achieving a turnaround in growth Net new business and annualised net new revenue NNB £bn 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 (0.2) Q1 Source: Schroders. 7 Q2 2017 Q3 Q4 Q1 Q2 Q3 2018 Net new business -Annualised net new revenue 2017 - 2018 Q4 ANNR £m 16 14 12 10 8 6 4 2 0 (2) Net new business as percentage of average AUM 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% 2015 2016 || 2017 2018 Schroders#9Unique strengths across the spectrum Charities 8 HNW Cazenove Capital Source: Schroders. Multi-jurisdiction capability Schroders personalwealth LBG client referrals Affluent -Benchmark Schroders global investment expertise Capital Benchmark platform Differentiated, aspirational brands Unique distribution access - Benchmark technology Schroders multi-jurisdiction booking Schroders institutional asset management expertise Schroders#10Cazenove to build upon existing strong franchises... ...and capture new opportunities Charities 9 Number one in UK charities Family offices 101 families with £10.6bn AUM Private client lawyers/ accountants Winner 2019 Total Wealth Solutions HNW Source: Schroders. Charity Finance November 2018, based on data as at 30 June 2018. PAM Private Asset Managers AWARDS Entrepreneurs One in four SME banking relationships at LBG City professionals MAGIC CIRCLE AWARDS Financial Advisory Firm of the Year Citywealth 2017 WINNER Cazenove Capital Schroders#11M 8 wamey Schroders Personal Wealth designed as a standalone JV, drawing upon LBG's customer base and #3012 Schroders' investment expertise and technology 1 Targets growing need for financial advice in the UK, particularly in pensions for affluent individuals 10 (2 Standalone business with independent Board and entrepreneurial approach, drawing on strengths of two parents 3) Open architecture approach (4) Challenger mentality leveraging digital opportunities Source: Schroders. - Schroders#12Benchmark Capital to offer award-winning technology to the JV and a complementary channel targeting the affluent segment Benchmark Capital 11 SEI Custodian Azure Source: Schroders. Fusion Investment platform and front end to SEI Azure cloud hosted Enable Core advice platform voyant Visualisation Client portal Professional Adviser 2018 awards WINNER Best Network Winner Professional Adviser Awards 2018 Best Network Schroders#13Priority 1: Strengthen organic growth further Recruitment Source: Schroders. 12 Freeing up capacity $ £ > ¥ € Culture o по 10 По Retention O Schroders#14Priority 2: Offer institutional quality investment proposition Segregated portfolios Cazenove Capital Sterling Balanced Portfolios - Direct Equity ARC Sterling Balanced Asset Private Client Index 13 Sustainable investing Ⓒ Private Assets 1000 Funds at Institutional rates Cumulative performance to 31 December 2018 (%) 3 years 1 year -1.4 15.7 -5.1 10.0 5 years 27.9 17.1 Source: Schroders. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested. Source: Asset Risk Consultants PCI (ARC) www.assetrisk.com. The Cazenove Capital performance numbers are in sterling and net of all fees including our annual management charge, trading commissions and underlying fund fees - including any in-house fund fees. It should be noted that historical performance previous to the merger is based on individual investment processes for Schroder & Co. Limited and Cazenove Capital Management Limited respectively. Schroders#15Priority 3: Leverage digital as competitive advantage through scalable and efficient platforms Prospecting Source: Schroders. 14 Onboarding Client management Scalable and efficient multi-jurisdiction platform Client reporting Schroders#16Priority 4: Build a unique model in Asia Independent asset managers 15 ThirdRock Source: Schroders. HNW Schroders Bank partnerships Maybank Affluent Schroders#17Priority 5: Pursue acquisition opportunities selectively Good track record of successful acquisitions and integrations: - - C.Hoare & Co Discretionary assets from long-established UK wealth manager 16 Benchmark Capital Technology-driven business focused on UK affluent market ThirdRock Singapore-based independent wealth manager Source: Schroders. Criteria for potential acquisitions: - Provide a new capability or Have a good cultural fit Generate attractive returns nable long-term growth Be consistent with delivering organic growth in existing business and strong digital capability Schroders#18M wamey - Our goal unique sources of growth leading brands global institutional investment expertise. WWWXXXXX 66 Become a top 3 player across charities, HNW and affluent financial planning in UK Wealth Management, drawing upon our: Source: Schroders INC SURENDES Be known in our target client segments as the best people to help as trusted advisers. 99 Schroders#19Any questions?#20Schroders Schroders Personal Wealth - launching June 2019 Investor Day James Rainbow, Chief Executive of Schroders Personal Wealth 15 May 2019 For professional investors only. Not for retail clients#21Communications The new business has generated a lot of interest In the press... 2,183 articles FT FINANCIAL TIMES 700 positive 1,463 neutral sky Daily Mail NEWS Source: Kantar Media and Brandwatch 1 October 2018 - 7 May 2019. On social... 3,475 mentions online fit 1,358 tweets 20 Schroders personalwealth#22Market background There has never been a greater need for financial advice Changing approach to retirement In 2018, the percentage of people aged 50-64 in work was 72.4% In 2010, the same number was 65% Pensions complexity 1.25m people working today forecast to breach the Pensions Lifetime Allowance I Great wealth transfer Annual inheritance forecast to rise 66% from £69bn in 2017 to £115bn in 2027 Source: Centre for Ageing Better, Royal London Policy Paper 31, CEBR and Kings Court Trust, Rise of the Inheritance Economy 2017, World Economic Forum, Deutsche Bank. I 21 An ageing population For the first time in history, there are now more people over 65 than under 5 Schroders personalwealth#23The advice market in numbers Adviser numbers gradually rebuilding after RDR - but the picture remains very fragmented Number of staff advising 30,000 25,000 20,000 15,000 10,000 5,000 O 27,080 25,997 26,339 23,865 22,168 23,640 23,864 25,611 2009 2010 2011 2012 2013 2014 2015 2016 Source: PIMFA The Financial Advice Market In Numbers, 2018. 26,311 2017 Average number of advising staff per firm 6.00 5.00 4.00 3.00 2.00 1.00 0.00 5.08 5.11 2009 2010 5.12 2011 4.66 4.40 4.53 4.53 4.62 2012 2013 2014 2015 2016 22 4.77 2017 Schroders personalwealth#24Making the case for more access to advice A societal need for advice and the challenges of delivering it - March increase in FOS compensation limit (to £350,000) continues increase in regulatory burden and PII problems for advisers - Vanguard research shows investors who use an adviser have an average return 3% p.a. greater than those who DIY - Research studies by Dalbar, Morningstar, IFI Canada support this - Value of adviser relationship mainly found to be in investor behaviour, asset allocation and tax optimisation - Policy recognises the advice gap but little evidence of real progress Fragmented market has significant consequences - Increasing regulatory burden - Inability to train our next generation of advisers - Inability to invest in new service models 2353 Schroders personalwealth#25The advice market in numbers Significant change in mix of fees and commissions since RDR £4,000 £3,000 £2,000 £1,000 £0 2013 Source: FCA June 2018, Autus Data Services. 2014 Commission (Net) 2015 Fees/charges 2016 Other revenue 24 2017 Schroders personalwealth#26Very few use fixed fees and hourly rates as the sole method of charging How do you charge your clients? 60% 50% 40% 30% 20% 10% 0% £ based on an hourly rate Source: Schroders Adviser Survey, November 2018. £ fixed fee 2014 2015 2016 % of AUM/advice 2017 2018 25 A combination of up to all three Schroders personalwealth#27Post-RDR fee mix has shown advisers increasing annual fees AUM based fees Average % fee based on assets 50% 40% 30% 20% 10% 0% 0.5% p.a Source: Schroders Adviser Survey, November 2018. 0.75% p.a. 2014 2015 2016 2017 1% p.a. 2018 More than 1% p.a. 26 Schroders personalwealth#2856% of clients have assets >£200k while only 1% have assets <£50k Average client size remains critically important 80% 70% 60% 50% 40% 30% 20% 10% 0% <£50k Source: Schroders Adviser Survey, November 2018. £50k £100k 2016 2017 >£100k - £200k 2018 >£200k 27 Schroders personalwealth#29Do you believe new technology represents a threat or an opportunity to your business? Nearly 80% of advisers see technology as an opportunity. We agree. 80% 70% 60% 50% 40% 30% 20% 10% 0% Threat Source: Schroders Adviser Survey, November 2018. 2016 Opportunity 2017 2018 No impact 28 Schroders personalwealth#30How we will work with our clients Giving you the best of all worlds Your Personal Wealth Adviser Able to consider your circumstances and goals holistically Enabled to create the best financial outcomes for you National footprint so your adviser is always local to you + Technology that helps, not hinders - 24/7 online access to your latest financial plan View all your investments in one place, in real time + Simple and clear planning solutions -Straightforward products, aligned to your needs Strong investment expertise Simple, good value pricing no hidden fees - 29 Schroders personalwealth#31Unbundled, straightforward costs No exit charges and no hidden fees Initial advice Flat rate Ongoing advice Tiered 2000 DPM Flat rate Platform Flat rate 30 Schroders personalwealth#32Transition states A programme has been established to deliver the stand-alone Joint Venture through five transition states 8 818 TSO Customer comms In-scope Customers notified of JV via formal communications Launch of the JV micro site April 2019 TS1 Launch of JV OpCo OpCo Set up under the remit and control of LBG Colleagues TUPE into JV legal entity SMR responsibilities in place and operational June 2019 000 TS2 Benchmark comes online Customer consent obtained to move to target Benchmark platform Colleagues use both LBG and Benchmark systems Progressive customer and asset migration begins July 2019 ☐ TS3 ACD authorised and funds transferred New ACD is set-up and operational Funds transferred when customer comms and FCA approval is received TS4 Change of ownership Share sales completed, ownership changes to 50.1% LBG and 49.9% Schroders Late 2019 31 TS5 Stand-alone Joint Venture JV exits LBG Transitional Service Agreements (TSAs) All customers are on Benchmark Future JV products developed and offered to the market 2020 Schroders personalwealth#33Schroders Schroders in Asia: a business strategy for a digital age Investor Day Susan Soh, Country Head of Singapore 15 May 2019#34Well positioned across Asia Significant depth and breadth in investment and distribution - - Presence in 8 countries in the region AUM and revenues of £90.9bn and £477.3m respectively¹ 33 Over 40 years' investment expertise in Asia Pacific Over 900 staff employed in the region, of which 110 are Investment professionals Source: Schroders, as at 31 December 2018. ¹Excludes 30% stake in BOCOM and 25% stake in Axis. Investment centres 2Wealth Management Asia and Australasia Australia China | Hong Kong2 Indonesia Japan Republic of Korea Singapore² Taiwan Schroders#35Getting closer to clients in Asia Strategic stake, partnership and acquisition over the past year Strategic stake in Source: Schroders. 34 WeInvest Partnership with Maybank Maybank Acquisition of Third Rock ThirdRock Schroders#36The evolving landscape The financial ecosystem and the client are changing ♥ 35 Technology Digitisation of data Automation Source: Schroders. ■ Investors Millennials demand convenience Increased awareness of preferences 6 Regulators Digital banks, non-FIs Open banking How should asset managers reinvent themselves? Distributors Scaling Emphasis on user journey Personalisation Schroders#37The reinvention journey Strategy for a digital age Productivity enhancement 36 Efficiencies through automation and digitalisation Source: Schroders. & Strategic acquisitions Technology/digital capabilities e.g. WeInvest 미 Distribution enablement Digital tools supporting distributors Provider of solutions Transition from a product provider to a provider of solutions Schroders#38Getting closer to the end client Sparking smarter relationships Source: Schroders. 37 AI as a service Advisory as a service Platform as a service Schroders strategic capabilities Equities, Fixed Income, Multi-Asset Private Assets & Alternatives AI augmented Solutions Model Portfolio Services WeInvest Over 500 Investment professionals worldwide Life goals SchrodersGO invest Q Alternative risk profiling Digital training Over 200 years' experience of Investment markets 000 Schroders#39Platform as a service Support intermediaries on their digital transformation journey WeInvest Wealth technology provider End to end digital investing experience for RM assisted clients Cloud-hosted infrastructure and API Risk profiling, thematic products and strategic market place Middle and back office integration Source: Schroders. 38 SchrodersGO Chat bot for client servicing Phase 1: Real-time fund and market info Phase 2: Thought Leadership 0 Digital training Digital sales training Investment 101 Gamification Platform as a service Product Training CPD hours Schroders#40Advisory as a service Partnering with intermediaries to enhance wealth advisory Model portfolio solutions (risk-based) 39 Support financial advisors, institutions and investors they serve Strategic asset allocation In-house views from Multi-asset Actively monitored and regularly reviewed Source: Schroders. Life goals solutions (goal-based) Traditional products are one-size fits all Solutions for changing life goals and events Solutions for specific preferences investIQ Advisory as a service Alternative risk profiling Complement traditional risk profiling and KYC Designed for end investors Integrated into client onboarding Evaluates client investment profiles 40,000 tests completed globally Available in 17 countries and 15 languages Result: getting closer to clients, improved client longevity Schroders#41Aspirations - Al as a service Harnessing client data in an open banking environment AI augmented solutions 40 In-house data science and robotics teams Integration of anonymised client data into our investment solutions Source: Schroders. 000 Banks' data Open API 9000 - Third party apps and services AL (0) (0) (0) (0 Schroders#42Examples of B2B2C partnerships in Asia Through client-centric solutions and digital tools # 41 이 Invest IQ as alternative KYC Tool Client-centric solutions SchrodersGo, digital training rollout Local distributor. Source: Schroders. FINANCIAL Citi Maybank 1 Ⓡ # Schroders#43A client-centric solution with a Singapore bank Source: Schroders. 42 GI Life goals xx Investment capability Digitalisation Where the client is truly at the centre of an investment solution Schroders#44Maybank: a life with principles ESG, Shariah, Sustainability, Philanthropy Leverage ratio Source: Schroders. 43 Financial instruments Prohibited activities Purification 目 Interest-taking deposits Schroders#45Strategic benefits Source: Schroders 44 Get closer to the end client by delivering customised solutions focused on solving client-specific problems Improve the longevity of the intermediary - client relationship, by becoming the financial partner for life Increase cost efficiency of our business by using technology Schroders#46Any questions?#47Schroders The digital asset manager Investor Day Graham Kellen, Chief Digital Officer 15 May 2019 #DigitalSchroders#48Enabling disruptive technologies We are at a unique 'Super convergence' point in technical evolution: a 4th industrial revolution Last 3 years focused on understanding and enabling innovative technologies Source: Schroders. 47 Cloud A.I. Mobile Big data Our work over the next 3 years will be enabling the adoption of the following: Analytics Intelligent agents Social Deep learning New interfaces Blockchain Robotics Next gen visualisation Schroders#49Digital strategy and innovation focus areas Core area of organisational focus and support Customer experience improvement Analytics and data science Source: Schroders. 48 Operational processes digitisation & Key enablers Ⓡ Business model digitisation strategy FinTech and innovation o 00 00 00 People and organisation retraining Emerging technologies Schroders#5049 Customer experience improvement Schroders#51Technical sophistication - digitally savvy and native clients Connecting with the increasingly connected client Source: Schroders. 50 XIXUV At home t At the game 4P At the bar/ restaurant B At work Manel Burtparades bow % Consumer retail W e SICCE 1 In the car With the customer Away from home t G+ f in Pay Schroders#52Changing user experience Experience is now a vital part of the 'Product' Every user interaction, client facing financial tool or service delivered must be: Client-centric - Omni-device and touch aware Intuitive and 'smart' Frictionless Engaging UI/UX Cohesive holistic design Consistent style and brand - - - - Source: Schroders. 51 Schroders Introducing strategic capabilities Harnessing our expertise to meet our clients' investment needs About Us SHOW ME GLOBAL✓ Welcome to Schreders We've ce of what matters mest to you Annual Report and Accounts 2018 Lock back at 2018 and find Insights Our stary View p Schroders Our business is structured and a number of strategic capabilities, which combine requirements centuries we've incked to the long term, helping clients plan for the future with ideas and investments but Our business At Schroders Introducing strategic capabilities About Us Welcome to Schrodurs We're here to take care of what matters most to you - our CEO explains how. Harnessing our expertise to meet our clients' investment needs Annual Report and SHOW ME ✔ Anto ind GLOBAL ✓ Insights Our business is structured around a number of strategic capabilities, which combine to meet a variety of client requirements. View capabilities People Our story For over two centuries we've looked to the long term, helping our clients plan for the future with ideas and investments built to stand the test of time. Our busin At Schroc clients at everything Schroders Act Introducing strategic capabilities Heing our expertise to motor pe Schroders#53Customer engagement digitsation Key area of focus - Content personalisation - Hyper personalisation of marketing - Preference capture - Digital interaction tracking 52 Client interaction data analysis Machine learning based client action insights Source: Schroders. 17:04 Most Recent PERSPECTIVE What could derail Britain's infrastructure investing boom? 09 April 2019 Economics > LOW OWN Schroders Lens O SNAPSHOT D Infographic: A view of the world economy in March 2019 18 March 2019 D SNAPSHOT Global economic outlook: slowdown, not recession 11 March 2019 SNAPSHOT D P PE 01 eeting Notes Tracker | Overview 17:05 Search invest IQ schroders.com Share C m 0% Someone has left you a small pile of money in their will. You're going to invest it yourself. Which would you be most likely to G Schroders#5453 Operational processes digitisation Schroders#55Robotic Automation Programme Intelligent automation results 2019 79 bots delivered to date 10 functions using bots to execute tasks Source: Schroders. 54 100+ FTE benefits achieved 200 staff trained to run and manage bots 5 offices around the globe have benefited from RPA POC on machine learning and natural language processing completed FTE benefits or equivalent by function O ■Operations Corporate Wealth Investment/product Finance Distribution ■Technology Schroders#56The Data Insight Unit's vision Using data science and machine learning to unlock the value in data for decision making Provide data science research service Unlock the value in data by engaging in research-on-demand to help our investment teams make higher-conviction decisions Make available new data assets Find, acquire and make available new sources of information as Data Assets for the firm Source: Schroders. 55 GO00 Build insight products Scale that value by building Insight Products which anticipate opportunities or generalise frequent requests Expertise in data science Our expertise is in Data Science tools and techniques: Intelligence Augmentation (IA), Artificial Intelligence (AI), Behavioural Science, and Big Data Schroders#57Digital investment innovation The fund manager toolkit is changing Source: Schroders. 56 Robotics Analytics and insights Insights and scalability Data platform AI and ML Schroders#5857 Business model digitisation strategy Schroders#59Our traditional role Asset management 1980s-2017 The evolving role of digital in asset management's client channel Product Manufacture e.g. mutual funds Digital 1.0: Marketing 2001+ 58 Near total focus Acquisition, retention, growth, loyalty Focus has been on the distributor 'as customer' Commercial benefit top line, i.e. revenue Source: Schroders. 2010+ Distributor Bank, IFA, Wealth Manager, DFM, MPS, Insurer End Investor Advised, XO, Robo-Advised, Hybrid-Advised, Discretionary-Managed Digital 2.0: Sales, service and operations Digitisation of the distribution value chain (up to and including the distributor) Create capacity to scale and reduce operational risk through RPA etc. Commercial benefit bottom line, i.e. cost Schroders#60'Digital 3.0' Digital co-creation in the distribution value chain The evolving role of digital in asset management's client channel 2001+ Product Manufacture e.g. mutual funds Digital 1.0: Remains responsible 59 Marketing Source: Schroders. Digital 2.0: Distributor Bank, IFA, Wealth Manager, DFM, MPS, Insurer 2010+ Co-creation and co-operation Sales, service and operations End Investor Advised, XO, Robo-advised, Hybrid-advised, Discretionary-managed Digital 3.0: Digital Distribution Co-operate closely with our strategic distributors, with digital as a primary channel Engage the end investor; inform, educate and entertain to drive AUM for our mutual benefit Provide and benefit from expertise and technology as well as product 2018+ Schroders#6160 음 음음 음 People and organisation retraining Schroders#62Digital skills programme Bridging the skills gap and creating a first class digitally-enabled workforce The digital training programme aims to build: - Digital confidence - Digital competence 61 It has established success criteria and KPIs to allow us to track the effectiveness of training at each tier level Source: Schroders. Masters Electives Foundations Design and evolve the transformation of the organisation Lead and participate in the transformation of the organisation Understand the transformation of the organisation Schroders#63Technology enablement & acceleration Asset and Wealth Management leadership are showing a "surprising complacency about technological innovation" when compared to their counterparts in the wider financial sector, according to a report by PwC. Schroders can exploit this to our advantage. We have identified areas of greatest opportunity. And are actively engaging with startups & accelerating the adoption of latest technologies to co-create the future of investment management. Source: Schroders. 62 AI & ML Data analytics RegTech & compliance Client engagement Cyber security Investment Employee engagement Blockchain Schroders#64Cobalt programme We believe that collaboration & innovation is key to solving industry challenges Schroders startup in residence programme brings innovative and relevant startups into the Schroders environment, develops their propositions and co-creates the future of wealth and asset management Selection criteria 63 Ⓒ Aligned with strategic priorities Tangible benefits within 12 months Source: Schroders. (ii) Few other enterprise clients in Financial Services 18 Can be used across the business At product stage Compatibility with Schroders' values Startup engagement 'funnel' 400+ 150+ Startups seen 30+ Referred to business for interest Intro meetings 100+ occurred or being scheduled Working with (PoC or active contract) Hackathons - Global initiative where teams across the business work intensively on ideas 100+ participants 69 ideas submitted 2 pitch events - APAC followed by Global n Innovation research trips US - NYC, Seattle, San Francisco Israel in 2018 China planned in 2019 Schroders#65Digital strategy and innovation activity summary Transforming Schroders Customer experience improvement 64 Operational processes digitisation Source: Schroders. Client engagement digitisation strategy Enhanced product & sales analytics strategy Co-creating Investment sales support solutions API research with sophisticated partners Digital 3.0 strategy Schroders Personal Wealth design Mass customisation research Blockchain research + Business model digitisation strategy oo 음음 00 People and organisation retraining ● ● Data & insights democratisation Foundry (data science work bench) strategy AI & Machine Learning adoption strategy Robotics process automation Digital education to enable productivity and adoption Technology enablement & acceleration programme Cobalt & Fintech engagement programme Internal Innovation strategy Schroders#66Any questions?#67Schroders Sustainability at Schroders Investor Day Jessica Ground, Global Head of Stewardship 15 May 2019#68Sustainability A perfect storm Alpha generation 67 Environmental and social change is accelerating creating a gap between winners and losers Source: Schroders. Global challenges Require finance's involvement to solve 000 Regulatory pressure More scrutiny on how companies are being held to account End client interest Savers are increasingly focused on sustainability- related issues Schroders#69Social impacts are becoming financial costs As their role has expanded, large businesses face growing pressures Large companies have become 20-30% more important to economies and societies over last 20y % 45 40 35 30 25 20 1950 68 1960 1970 1980 1990 2000 2010 Fortune Global 500 revenues as share of global GDP (LHS) Large companies' share of total US employment (LHS) OECD corporate profits as share of GDP (RHS) % 12 11 10 9 8 7 6 5 4 3 Growing pressures to contribute to societies; irresponsible behaviour is becoming a liability % 0.6 0.5 0.4 0.3 0.2 0.1 0.0 1975 1985 1995 Regulatory costs % US GDP (LHS) OECD avg corporate tax rate (RHS) Public mistrust of major US companies (RHS) 2005 2015 % 60 50 40 30 20 10 0 Source: Fortune, IMF, OECD, BEA, Gulling et al., OECD tax database, General Social Survey, American Action Forum, Heritage Foundation, Schroders calculations and estimates. Note: data from Fortune is not available prior to the 1990s; we have estimated the equivalent values, using data from Thomson Reuters. Schroders#70Sustainability growing in importance Over 2/3 believe it will become more important Institutional 2018 2017 2018 2017 69% 69 63% 29% 2% 75% 72% 26% 11% North America 2018 2017 20% 5% 18% 10% Latin America More important 83% 74% Europe 2018 2017 13% 4% 16% 10% Unchanged 2018 2017 68% 59% Asia 74% 67% 33% 8% Overall 24% 8% Less important 21% 5% 24% 9% Retail 64% 64% have increased their allocation to sustainable investments over the past 5 years interested in sustainable investment funds e.g. climate change and good corporate governance 76% of investors felt sustainable investing is more important than 5 years ago Source: Schroders Institutional Investor Study 2018, conducted between 1-30 June 2018. This study was commissioned by Schroders and undertaken by an independent research agency, CoreData Research, to study institutional investors across North America, Europe, Latin America and Asia to analyse their attitudes towards sustainable investments, investment objectives and risk. Respondents represent a variety of institutions, including pension funds, foundations, endowments and sovereign wealth funds. The 650 institutional respondents were sourced from 15 different countries and were split as follows: 175 in North America, 250 in Europe, 175 in Asia and 50 in Latin America. Statistics in the circles on the right from the Global Investor Study 2018. Schroders#71Sustainability Our experience and expertise 20years+ ESG integration 16 dedicated ESG specialists With 150years+ combined investment experience at Schroders 70 2,200+ engagements in 2018 Across 52 countries globally With 5,200+ company meetings voted on¹ A+ UN PRI annual assessment² #1 2017 ShareAction Responsible Investment Survey of European asset managers³ Top 5 2017 AODP Global Climate 50 Asset Manager Index4 Tier 1 signatory UK Stewardship Code5 Source: Schroders, as at 31 January 2019, unless otherwise stated. As at 31 December 2018. 2PRI, 2015, 2016, 2017 and 2018 Assessment Reports. ³ShareAction, 'Lifting the Lid: Responsible Investment Performance of European Asset Managers', March 2017. 4Asset Owners Disclosure Project, 'Global Climate Index 2017', April 2017. 5Financial Reporting Council 2016 Assessment. Schroders#72But why is sustainability so difficult? Source: Schroders. 71 III Variety of definitions and regional differences Performance and transparency concerns 8 Complex area of investment with a number of different solutions Schroders#73Majority find sustainable investment a challenge Global Institutional response 23% 72 56% 21% Very challenging Somewhat challenging Not challenging Why do you find sustainable investment a challenge? Performance concerns Lack of transparency and reported data Difficulty measuring and managing risk Cost Investment committee is not comfortable making sustainable investments I do not believe in sustainable investments I do not consider there to be any challenges to investing in sustainable investments Other 2018 51% 48% 33% 29% 15% 18% 13% 2% Source: Schroders Institutional Investor Study 2018, conducted between 1-30 June 2018. This study was commissioned by Schroders and undertaken by an independent research agency, CoreData Research, to study institutional investors across North America, Europe, Latin America and Asia to analyse their attitudes towards sustainable investments, investment objectives and risk. Respondents represent a variety of institutions, including pension funds, foundations, endowments and sovereign wealth funds. The 650 institutional respondents were sourced from 15 different countries and were split as follows: 175 in North America, 250 in Europe, 175 in Asia and 50 in Latin America. Schroders#74The broad spectrum of sustainability and ESG It spans financial and social investments Financial benefits. D O O Integrated 73 ESG research Voting Engagement Source: Schroders. - Sustainable Best in class Controversy avoidance Screened Excluding companies involved with certain activities or industries 0 Impact Specific social benefit - Potential for financial return Social benefits O Philanthropy Address societal challenge(s) No financial return for investors Schroders#75Schroders Sustainability Accreditation Providing clarity on how ESG factors are considered Screened 74 SCHRODERS SUSTAINABILITY ACCREDITATION Screened Negative screening beyond cluster munitions and anti-personnel mines Source: Schroders, as at 28 February 2019. Integrated SCHRODERS SUSTAINABILITY ACCREDITATION Integrated Sustainability is a building block of the investment process Screened Integrated Sustainable SCHRODERS SUSTAINABILITY ACCREDITATION Sustainable SCHRODERS SUSTAINABILITY ACCREDITATION Sustainable Sustainability is a cornerstone of the investment process Schroders#76Engagement Increasingly important 2018 engagement topics Environmental Biodiversity Climate change Environmental policy/ strategy Forests Pollution Social Environmental products and Human capital services management Waste management Water management Customers Environmental supply chain Human rights Labour standards Data security 75 Health and safety Nutrition and obesity Product safety Social policy/ strategy Supply chain management Governance Accounting practices Auditors Board committees Board structure Business integrity Corporate strategy ESG governance and sustainability strategy Governance oversight Remuneration Shareholder rights Succession planning Transparency and disclosure Voting Number of engagements 2,500 2,000 1,500 1,000 500 0 Source: Schroders, as at 31 December 2018. Top ten topics we engaged with companies are shown in bold. 2014 2015 Change facilitation 2016 2017 Fact-finding 2018 Schroders#77Can ESG be done passively? Name Mining Auto Industrial conglomerate Healthcare Manufacturing conglomerate Restaurant group Leisure Oil and gas Financial Telecommunications Retailer Div. Financial Retailer Retailer Financial Telecommunications MSCI pre event A 76 BBB AAA AAA AAA A BB AA A B BBB A BB A BBB AA MSCI change +1 +3 +3 +6 0 +1 +2 +3 +3 +1 +3 +1 +2 +1 +3 -1 MSCI post event BBB CCC BBB CCC AAA BBB CCC BB B CCC CCC BBB CCC BBB CCC AAA Indexed, latest-100 130 Auchy 120 110 100 90 80 Average rating pre and post controversy 3.69 www - 866 L 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 +1.06 4.76 Mn DJSI FTSE4GOOD · ειοτ ham 2014 2015 2016- 2017 2018 2019 Source: Thomson Reuters, MSCI, Schroders., based on data as at 31 January 2017. Ratings adjusted as to numbers as follows: AAA=1, AA=2, A=3. BBB=4, BB=5, B=6, CCC=7. Companies mentioned are for illustrative purposes only and are not intended to be a recommendation to buy or sell any security. Schroders#78Expanding on traditional analysis Into poorly understood areas Traditional model Our model Governance 77 Management quality Company Source: Schroders. Suppliers Governance Management quality Employees Regulators Company u uuonus ՏՏոլստաաօ Customer 000 GD Do 000 Do & Governance Are the right structures in place? Regulators How strict is the regime overseeing the industry? Communities What sort of influence does the company have with its neighbours? Suppliers How sustainable is their supply chain? 8 OO 14 Management quality How good are those in charge? Customers Does the company care about the end customer? Environment What policies are in place to protect the world? Employees How do management treat their workers? A company's sustainability is dependent on more than just financial metrics Schroders#79Expanding on traditional analysis In an evidence based manner through Context Themes 78 735 global ESG trends for 47 sub-sectors Companies 10,000 companies covered Source: Schroders. As at 31 December 2018. Ⓡ Metrics ~150 data points from 50 sources ⠀⠀ Time 2 years in the making 0 0 Conventional data sources energy ENERGY STAR THOMSON REUTERS Unconventional data sources ★ Trustpilot WorldLII 0 glassdoor RASFF AGR AIRLINE QUALITY RATING Business & Human Rights Resource Centre Schroders#80Expanding on traditional analysis In an evidence based manner through Context Context calculated Score: 41% Context analyst Score: 44% Consumer good company vs. peers Customers 70 60 50 40 30 20 10 0 Supplier Regulators and governments 79 0 Management quality Local communities Employees 43.7 Environment Governance Source: Schroders. For illustrative purposes only and should not be viewed as a recommendation to buy or sell. 用 000 # 70 Employees Glassdoor employee rating: 3/5 compared to 3.5/5 for the sector Governance Lowest level of audit and nomination committee independence Employees Training hours per employee significantly worse than sector Schroders#81But why is sustainability so difficult? Investment insight 80 A deeper understanding of how the world is changing that can evolve over time Delivering alpha A proprietorial evidence based way of identifying winners and losers A Better stewardship Active ownership to mitigate the risks that can not be eliminated Investment focused Products that meet beneficiary expectations in performance and sustainability terms The views and opinions contained herein are those of the Schroders Sustainable Investment team and are subject to change. No investment strategy or technique can guarantee future results. Schroders#82Any questions?#83Thank you for attending Schroders Investor Day 2019#84Important information These presentation slides may contain forward-looking statements with respect to the financial condition, performance and position, strategy, results of operations and businesses of the Schroders Group. Such statements and forecasts involve risk and uncertainty because they are based on current expectations and assumptions but relate to events and depend upon circumstances in the future and you should not place reliance on them. Without limitation, any statements preceded or followed by or that include the words 'targets', 'plans', 'sees', 'believes', 'expects', 'aims', 'confident', 'will have', 'will be', 'will ensure', 'likely', 'estimates' or 'anticipates' or the negative of these terms or other similar terms are intended to identify such forward-looking statements. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by forward-looking statements and forecasts. Forward-looking statements and forecasts are based on the Directors' current view and information known to them at the date of this statement. The Directors do not make any undertaking to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Nothing in these presentation slides should be construed as a forecast, estimate or projection of future financial performance. This presentation is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Investment Management Ltd (Schroders) does not warrant its completeness or accuracy. The data has been sourced by Schroders and should be independently verified before further publication or use. No responsibility can be accepted for error of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Company names are mentioned for illustrative purposes only and should not be viewed as a recommendation to buy or sell securities issued by those companies. 83 Schroders