Trump and The World

1. Trump and The World For Professional Investors or Advisors Only. *Schroder International Selection Fund is referred to as Schroder ISF throughout this presentation

2. Trump Victory25 million jobs and Mexican Wall? • High probability of Trade wars • Fiscal policies ; tax cuts and high spending • Higher Interest Rate, higher inflation and bigger budget deficit • Economy will cool as inflation and interest rates rise • Trump will raises tariffs on China and Mexico products • Higher wages • Overall growth will weakening • Increase global uncertainty • Bond yields are likely to increase • Equity market will de-rate • Assets price drop • Protectionism come back and global growth lower • The countries with dependence on global trade will suffer • USD in demand but out look uncertain • Boost by higher yield but higher inflation. • Deterioration in US foreign relations with the rest of the world

5. Economic Scenario • Currency wars return: • China might devalues the Chinese Yuan by 10% as the currency now stand at overvalues, • Japanese Yen could follow it as Japan is the largest trading partner of China, and then possible follow by ECB in response the move from China and Japanese. • Trade wars • The election of Trump as President brings a more protectionist tome to US trade policy with significant increase in tariffs. Other countries will retaliate and the world economy descend in a trade war. • US recession • Slower growth in US tips into recession and will bring confidence down • China hard landing • A wave of bond defaults and losses shakes the financial market and could trigger the devaluation of Chinese Yuan. The global growth slows as china commodity demand drop and commodity producers will be hit harder • Brexit Shake Europe

6. Indonesia fares relatively better amongst EM

7. Indonesia fares relatively better amongst EM

8. Indonesia fares relatively better amongst EM

9. Indonesia Inflation trajectory may have been bottoming, nevertheless real rate is sufficient buffer. Term structure remains very steep at 200bps , a little fine tuning perhaps? Monetary policy fortunately still have room for maneuver, though not much Source : asianbondsonline.adb.or Source : www.BI.go.id

10. Asian Local Bond Markets Remains the best performing market across Asia Nevertheless, a long bull market has made the curve yield spread becomes tight. A good year for bond investors Source : asianbondsonline.adb.org

11. IDR Bond Market Bond yield- real Bond yield- nominal

12. IDR Bond Market Local institutional investors have generally met OJK requirement this year. Source : BNP Paribas

13. Tax amnesty- 1st Phase Result A Promising Chapter Source: MoF • Net asset declaration reached Rp 3,600 T – 90% of Govt target – 30% of our GDP. • Penalty received amounted to Rp 97 T equivalent to 0.8% of GDP. • Generated Rp 137 tn of repatriated asset.

14. Tax amnesty- 1st Phase Result The Benefit of Tax amnesty Source: MoF • Easing fiscal pressure Penalty revenue amounting to 0.8% of GDP should support boost in infra-spending at 1.6% of GDP. • Deeper tax base Long lasting impact on fiscal space. • Wider tax base? Not yet – expect higher participation from SMEs in 1Q17 1st phase : ~370k tax payers participated, ~16k new taxpayers registered (~1.7-0.1% of total NPWP) • Improving liquidity from repatriated asset? 10 bn USD repatriated Expect a proportion of it is in the form of SPV declaration whose investment already placed onshore. • Restoring confidence Increased tax scrutiny in the last 2 years have hurt confidence in both investment and consumption.

15. Tax amnesty- 1st Phase Result Asset Declaration Source: MoF

16. Tax amnesty- 1st Phase Result The most successful tax amnesty in the world

17. Sectors Overview

18. Consumer U-shape Recovery • Expecting gradual recovery in consumption with revenue growth slowdown bottomed in 2015 along with manageable inflation and Rupiah. • Potential Risk: 134% increase in electricity bill for 18m households (30% of the total households in Indonesia), vs minimum wage would only be at 10%, coupled with anomaly in weather that might disrupt harvest hence impacting low-end spending power. • Big consumer companies with strong brand equity are in better position. Expect sales growth to improve, although not back prior to 2012-2013 Revenue growth trend – 12M trailing IDR movement in line with consumer confidence Source: Companies Source: Companies Source: Bloomberg Source: Companies

19. Telecommunication Healthy industry outlook • Seeing benign competitive environment which allows for price increases. • More friendly regulatory environment • Significant data consumption growth. Strong industry growth (Rpbn) Rapid increase in data consumption (in tetrabyte) Source: Companies Source: Companies

20. Infra / Construction Strong Growth from Infra Spending • The government is committed to accelerate infrastructure spending with fuel subsidy removed, higher allocation on infra budget and capital injection to SOEs • Rolling out of infra projects should improve with new land acquisition bill. • SoE contractors are set for strong earnings with 38% new contract growth in 2015 and are targeting 37% growth in 2016. Strong Order Book with Infra Spending Higher Infra Budget From Fuel Subsidy Savings Source: Government. Source: Companies.

21. Auto New model launching driving volume growth • Astra seeing strong car sales (up 15% yoy) supported by new launch 7-seater low-cost Calya and Sigra which demand was ahead of projection • Buyer profile of Calya/Sigra are mostly 1st time car buyers, age 30-40 with family and monthly income of Rp15m per month • Better product positioning has allowed Astra to see almost 6% market share gain to 55%. • Motorcycle sales however are still slow partly due to high motorcycle penetration as well as weak purchasing power from commodity regions

22. Healthcare Update • We are constructive on the healthcare and hospital industry due to the low penetration of healthcare spending in Indonesia. • Impact from BPJS-rollout has stabilized and we have seen strong growth return to private hospitals and volume pick-up for pharmaceutical companies. • Rising middle class and the rollout of universal healthcare also gives a positive boost to health awareness. Rebound in branded drug sales MIKA’s Oupatient Admissions MIKA’s Inpatient Admissions

23. Banks New NPL formation should slow going forward • Loan growth decelerated to 6.7% yoy in August 2016 from 10% yoy in 2015 due to weak demand from corporates and SME • With M2 growth picking up slightly to 8%, this may provide leading indicator that loan growth has already bottomed out and expected to pick up in the next few months • In the face of still high NPL, banks are reluctant to cut lending rates which lagged versus deposit rate decline by 25-50bp • While loans-at-risk may remain relatively high, we think the bulk of NPL downgrade is behind us at least for some of the banks Source: BI Source: BI

24. Media Lacklustre earnings growth • We are negative on the sector due to tepid earnings growth and unattractive valuation. • Although the advertising environment has improved compared to last year, earnings growth remain lackluster due to a slower-than-expected pick up in revenues and higher cost. • Structurally, our long term view also suggest that TV companies cannot enjoy the previously high growth rates as digital advertising increases at the expense of other advertising channels such as print, radio, and TV. Media revenue growth is correlated with GDP growth Lackluster earnings growth Source: Company & UBS

25. CPO Plantations Remains Challenging • Competition against other edible oil, especially soy, remains which limits CPO price improvement, despite El-Nino impact. • We are skeptical on Indonesia biodiesel story, which will likely to face challenge from continuing low level oil price environment. Spread between Soy & CPO is Unexciting Soybean and CPO price has fallen sine 2010 highs Malaysia Inventory still at highs Source: MPOB, CIMB Research Source: CLSA Research, Bloomberg. Source: CLSA Research, Bloomberg.

26. Cement Oversupply Situation Remains • Demand growth should rebound in 2016 with economic recovery, better infrastructure development and low 2015 base. • However capacity utilization should still decline due to rising supply from new entrants and incumbents • While cost pressures are falling with lower electricity, coal and transportation costs, rising competition should also put pressure on pricing. Weak Pricing Power Falling Utilization on New Capacity Source: Morgan Stanley Research.. Source: Companies.

27. Property - Cautious Oversupply Situation Remains • Recent macro-prudently has been supportive to the sector: • Sales tax reduction from 5% to 2.5%. • Relaxation on 2nd home indent mortgage. • Further relaxation on foreign ownership. • Expect a solid end-user demand amid mortgage rate breaching historic low. • Home prices in secondary market however has been declining, bringing potential competition with primary. • Furthermore, low no of participants of tax amnesty would potentially persist hunting in the zoo next year, depleting wealth creation and hence investment demand – big segment that our listed developers are exposed to.

28. Coal Update • Coal price has rallied from a low of $51/t this year to currently $83/t. • The rally was driven by Chinese government regulations that reduced the number of working days for coal producers from 330 days to 276 days, which resulted in a supply decline of around 10% YoY. • At the same time, demand picked up following a hotter-than-expected summer and a pick-up in power consumption in China. • However, starting in September the government has relaxed production again and allowed up to 900 mines to produce an aggregate of additional 1mt per day and views RMB460/t (equivalent to Newcastle of $62/t) as a sustainable level and thus we expect this rally to be unsustainable. Pick up in power consumption Coal price rally induced by Chinese govt regulations Source: Bloomberg Source : CLSA Research.

29. Disclaimer Disclosure Statement – Indonesia This presentation is prepared exclusively for the benefit and internal use of the potential investor in order to indicate, on a preliminary basis, the feasibility of a possible transaction or transactions and does not carry any right of publication or disclosure to any other party. This presentation is incomplete without reference to, and should be viewed in conjunction with, the oral briefing provided by PT. Schroder Investment Management Indonesia. The information in this presentation is based on management forecasts and reflects prevailing conditions and our views as of this date, all of which are accordingly subject to change. In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us by or on behalf of the potential investor or which was otherwise reviewed by us. Past performance and any forecasts are not necessarily a guide to future or likely performance. You should remember that the value of investments and income from them can go down as well as up and is not guaranteed. Exchange rate changes may cause the value of the overseas investments to rise or fall. Potential investors should be aware that such investments involve market risk and should be regarded as long-term investments. Derivatives carry a high degree of risk and should only be considered by sophisticated investors. This document is for information purposes only. It is not intended as promotional material in any respect and may not be circulated, published, reproduced or distributed to any other person without our prior written consent. This document is not an offer or solicitation for the purchase or sale of any financial instrument described herein, and is not intended to provide a basis for evaluation or assessment of the instruments described. This document is not intended to provided, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. PT Schroder Investment Management Indonesia (PTSIMI) had received an investment manager license from, and is supervised by the Indonesian Financial Services Authority (OJK).” PT. Schroder Investment Management Indonesia Indonesian Stock Exchange Building, Tower 1, 30th Floor Jl. Jend. Sudirman Kav. 52-53, Jakarta 12190, Indonesia