1. For professional adviser use only | www.sandwfunds.com From Zero to Hero The return of the Zero Dividend Preference share James Burns June 2009

2. For professional adviser use only | www.sandwfunds.com 2 A return for Zeros Three drivers Tax  Benefits arising from tax changes  2010/11 highest rate of income tax 50% / div tax rate 42.5% / CGT 18% Issuance  Investment Trusts likely to raise capital  Efficient & reasonably secure Usage  School fees planning  Any liability-driven investment

3. For professional adviser use only | www.sandwfunds.com 3 A quick recap Issued as part of package  Income / Ordinary / Capital shares Limited life set at launch Pre-determined maximum capital return  Cover  Hurdle rate  Gross Redemption Yield (GRY) Usually paid ahead of all other shareholders No income

4. For professional adviser use only | www.sandwfunds.com 4 JZ Capital Partners Share Price since launch Life of a Zero - JZ Capital Partners At launch 25/06/99 Launch price100p Redemption date 24/06/09 Redemption price 215.8925p Cover at launch 2.65x (Estimated) Hurdle rate at launch -9.3 per annum (Estimated) GRY8% per annum 0 50 100 150 200 250 Price Expected NAV 25 June 1999 25 June 2000 25 June 2001 25 June 2002 25 June 2003 25 June 2004 25 June 2005 25 June 2006 25 June 2007 25 June 2008

5. For professional adviser use only | www.sandwfunds.com 5 History “…the Tay Bridge collapsed in December 1879 but that didn’t stop people from correcting and improving bridge design and moving on. They didn’t all revert to paddling about in rowing boats.” * Source: *Association of Investment Companies (AIC), 01/06/09.

6. For professional adviser use only | www.sandwfunds.com 6 Jupiter Second Split conventional Zero Managed by Philip Gibbs At launch 01/11/04 Launch price 60.0p (58.65p opening entitlement) Redemption date 30/10/09 Redemption price 84.15p Cover at launch1.16x Hurdle rate at launch -2.95% per annum GRY7.5% per annum 50 55 60 65 70 75 80 85 1 Nov 2004 1 May 2005 1 Nov 2005 1 May 2006 1 Nov 2006 1 May 2007 1 Nov 2007 1 May 2008 1 Nov 2008 1 May 2009 Price Expected NAV Jupiter Second Split share price

7. For professional adviser use only | www.sandwfunds.com 7 Groups you may know managing Investment Trusts with Zeros Aberdeen Invesco JP Morgan Jupiter M&G Premier

8. For professional adviser use only | www.sandwfunds.com 8 Synthetic Zeros Huge issuance of structured products Passive management based on an index Return profile very similar to conventional zeros Capital protection within limits Capped upside Be aware of counterparty risk

9. For professional adviser use only | www.sandwfunds.com 9 Japanese Accelerated synthetic Zero Based on Nikkei 225 Details At launch 10,092 (100p), 5x growth up to max 200p (12,110) Redemption date 17/12/09 GRY 7.5% per annum 80 100 120 140 160 180 18 Dec 2003 18 Dec 2004 18 Dec 2005 18 Dec 2006 18 Dec 2007 18 Dec 2008 Japanese Accelerated share price

10. For professional adviser use only | www.sandwfunds.com 10 A renaissance for Zeros? Demand and appetite for trusts to issue Zeros Traditional sources of bank borrowing for investment trusts limited Long-term financing opportunities from large existing investment trusts to offer “super-covered” Zeros Talk of AIC encouraging issuance

11. For professional adviser use only | www.sandwfunds.com 11 Ecofin Water & Power Opportunities  Portfolio of global water, gas and electric power companies  Launch:  date: July 2009  price: 100p  7 years  Redemption:  date: July 2016  price: 160.578p (not guaranteed)  7% GRY  Hurdle: -19 per annum  4.5x covered Recent developments - new issue

12. For professional adviser use only | www.sandwfunds.com 12 Recent developments - rollover issue JZ Capital Partners  Portfolio of private equity investments  Launch:  date 22/06/09  price 215.8p  7 years  Redemption:  date 22/06/16  price 369.84p (not guaranteed)  8% GRY  Hurdle: -13.4 per annum  Minimum 3.0x covered

13. For professional adviser use only | www.sandwfunds.com 13 Smith & Williamson MM Cautious Growth Fund Fund of funds provide accessibility & spread of risk Primarily Zeros, mixture of conventional (56%)* and synthetic (21%)* as well as some other lower risk asset classes A balanced, well-diversified portfolio for those not wanting to take the risk of individual Zeros * As at 29 th May 2009

14. For professional adviser use only | www.sandwfunds.com 14 In summary Renaissance for Zeros Your clients seek tax efficiency Potentially attractive returns Could have a place in most multi-manager portfolios Multi-manager approach provides a diversification solution for IFAs

15. For professional adviser use only | www.sandwfunds.com 15 Important information Investment does involve risk. The value of investments can go down as well as up. The investor may not receive back in total the original amount invested. Past performance is not a guide to future performance. Rates of tax are those prevailing at the time and are subject to change without notice. Clients should always seek appropriate tax advice from their financial adviser before committing funds for investment. When investments are made in overseas securities, movements in exchange rates may have an effect on the value of that investment. The effect may be favourable or unfavourable. Splits may be financially geared and also provide gearing to their share types through their capital structure (structural gearing). The returns to each class of share are governed by the effects of the entitlements of the other share classes. Shares in splits will high levels of financial gearing in addition to their structural gearing will be exposed to higher risk. Shares further down the order of entitlement are subject to greater gearing and higher risk within the structure. This document contains information believed to be reliable but no guarantee, warranty or representation, express or implied, is given as to their accuracy or completeness. This is neither an offer or a solicitation to buy or sell any investment referred to in this document. Smith & Williamson Investment Management documents may contain future statements which are based on our current opinions, expectations and projections. Smith & Williamson Investment Management does not undertake any obligation to update or revise any future statements. Actual results could differ materially from those anticipated. Appropriate advice should be taken before entering into transactions. No responsibility can be accepted for any loss arising from action taken or refrained from based on this publication. Issued by Smith & Williamson Investment Management Limited. Smith & Williamson MM Cautious Growth Fund is a sub-fund of Smith & Williamson Investment Funds PLC, a Dublin-based (UCITS) OEIC with segregated liability between sub-funds. The scheme is FSA Recognised. Smith & Williamson Investment Management Limited is the Investment Manager and the Distributor.