[PPT] - Euro Corporate Strategy European Credit Team February 2016 For PowerPoint Presentation

SLIDE 1

Euro Corporate Strategy

European Credit Team

February 2016

For professional investors only. This material is not suitable for retail clients *Schroder International Selection Fund is referred to as Schroder ISF

SLIDE 2

Source: Schroders, as at 30 September 2015 *As at 31 December 2015

Bermuda Cayman Islands Mexico City New York Philadelphia Amsterdam Copenhagen Frankfurt Geneva Gibraltar Guernsey Jersey London Luxembourg Madrid Milan Paris Rome Stockholm Zurich Beijing Hong Kong Jakarta Seoul Shanghai Singapore Sydney Taipei Tokyo Buenos Aires São Paulo Chile Dubai (Investment offices in blue)

Independent

 Established in 1804  Schroder family controls 48%* of voting equity

Stable

 Strong balance sheet and stable ownership

structure

 We can invest in our business through the market

cycle Focused

 Asset management is our sole business  We have no conflicts of interest

Able to support you

 Global investment resources  €400.0bn AUM across the major asset classes

Schroders’ offices

Schroders

Organisational strengths

1

SLIDE 3

€400.0bn total AUM* €102.9bn fixed income division AUM**

Schroders fixed income

Funds under management

2 Source: Schroders. *Data represents AUM by product sold. **Data represents AUM by investment desk. ^Other includes Convertibles, Insurance Linked, and Alternative Rates

Strategies. The charts may not add to 100% due to rounding.

30 September 2015 30 September 2015

SLIDE 4

Schroders European credit

Your investment team – integrated investment and research

3 **Includes municipals, securitised, insurance-linked and convertibles. ***London-based resources only. ****London and Zurich-based resources only. Source: Schroders, as at 31 January 2016.

Financials Communications Utilities Industrials Quantitative Strategy

Robert Kendrick Sam Tomlinson Stephen Hunnisett Patrick McCullagh Charlotte Peat Dan Pearson Carter Holloran Bartek Pastwa Rhys Thomas Alex Stephansen Rajeev Shah Szevak Nszdejan Yow Tzu Lim

Sterling Credit Euro Credit High Yield Global Credit

Alix Stewart Patrick Vogel Konstantin Leidman Peter Harvey Michael Scott Lucette Yvernault Jonathan Golan, Martin Coucke Specialist Fixed Income Portfolio Management Teams (no. portfolio managers) Specialist Analyst Teams (no. analysts) Specialist Product Team (no. specialists) Credit Rates EMD Extended sectors ** European Credit North American Credit Asia, Australia & EMD Credit Quant, Strategy & Economy*** Portfolio- specific**** Multi-Sector Credit 15 24 8 10 11 14 12 14 6 5 5

SLIDE 5

Schroders: Diversified capabilities

Local expertise delivered globally

4 Source: Schroders, as at 31 December 2015

Equities

Asia/Pan Pacific Emerging Markets European Global/International Japan Large, Mid and Small Cap Other sector/single country specialist QEP Single country UK US Value, Growth

EMD and Commodities

Emerging Market Debt – Absolute Return Global Currency Private Equity

Multi-Asset

GAIA (Global Alternative Investor Access Global Balanced Hedge Funds – FoF and single strategy Multi-Manager Regional Balanced Structured Products Tailored Benchmark

Fixed Income

Asian Corporate, High Yield Discretionary Money Management Duration specific Emerging Market Debt – Relative Return European Global Government, Aggregate Index Linked Insurance-Linked Securities Other specialist/single country UK US

Property – UK and Global

Schroders offices

Bermuda Cayman Islands Mexico City New York Philadelphia Amsterdam Copenhagen Frankfurt Geneva Gibraltar Guernsey Jersey London Luxembourg Madrid Milan Paris Rome Stockholm Zurich Beijing Hong Kong Jakarta Seoul Shanghai Singapore Sydney Taipei Tokyo Buenos Aires São Paulo Chile Dubai (Investment offices in blue)

SLIDE 6

Aim: Continue to be the superior information ratio provider in credit

Why Schroders for European Credit?

 Strong consistent track record through bull and bear markets  Integrated global investment framework that maximises skills from the global fixed income group

and beyond (e.g. macro, EMD, quant, equity team etc.)

 Credit research fully aligned to credit investment process  Innovative themes-based research and investment approach

5

SLIDE 7

A common approach applied across credit strategies

6

ISF EURO Corporate ISF EURO Credit Conviction ISF EURO High Yield All Maturities Corporate Bond Long Dated Corporate Bond ISF EURO Credit Absolute Return ISF Strategic Credit Monthly High Income ISF Global Multi Credit Credit Value Type Benchmark Relative Benchmark Relative Benchmark Relative Benchmark Relative Benchmark Relative Absolute Return Absolute Return Total Return Total Return Total Return Objective BM +100bp p.a. gross

ver a cycle

BM +200bp p.a. gross

ver a cycle

BM +150bp p.a. gross

ver a cycle

BM +75bp p.a. gross

ver a cycle

BM+75bp p.a. gross

ver a cycle

Euribor +3% p.a. gross T-Bills +3% p.a. gross

ver a cycle

1st Quartile Peer Group Returns Ref BM +3-4% p.a. (L+5%) gross over a cycle 7-9% total return p.a.

ver the

cycle Benchmark BoAML Euro Corporate iBoxx Euro Corporate BBB BoA Merrill Lynch Euro High Yield Constrained Index – HEC0 BoAML Sterling Non-Gilts All Stocks BoAML +15Yrs Sterling Non-Gilts All Stocks 3m Euribor 3m UK T-Bill Reference

nly:

BoAML European ccy HY Constrained (HPC0) Ref: Barclays Multiverse ex Treasury, A to B Unconstrain ed BM agnostic Lead Fund Manager Patrick Vogel Sep 2012 Patrick Vogel Sep 2012 Konstantin Leidman Nov 2012 Alix Stewart Aug 2012 Alix Stewart Aug 2012 Patrick Vogel Peter Harvey Apr 2006 Michael Scott Aug 2012 Patrick Vogel Konstantin Leidman Fund Size €6,384m €990m €240m £862m £292m €25m £1,227m £241m €100m* TBC Inception date Jun 2000 Dec 2013 Nov 2012 Feb 2001 Jan 2001 Nov 2015 Apr 2006 Feb 2000 TBL in 2016 TBL in 2016

Source: Schroders as at 31 December 2015. ISF Global Multi Credit to be launched in H1 2016 and Credit Value in H2 2016. * Segregated portfolio funded November 2015 to seed fund launch.

Fund range

SLIDE 8

European credit performance

Our performance is competitive

7 Source: Morningstar peer groups, data as at 31 January 2016. Schroder ISF Euro Corp Bd A Acc, Schroder ISF Euro Credit Convct A Acc. Grouped by: Morningstar Category - EAA OE EUR Corporate Bond. Schroder ISF Euro High Yield A Acc grouped by EAA OE EUR High Yield Bond. *Euro Corporate Bond : Patrick took over managing 01/09/2012. Euro Credit Conviction: Launched 18/12/13. Euro High Yield: Launched 14/11/12.

31 January 2016 1 year 2 years (p.a.) Since current management was in place* Fund Peer Group Ave. Difference Quartile Ranking Fund Peer Group Ave. Difference Quartile Ranking Fund Peer Group Ave. Difference Quartile Ranking Euro Corporate Bond

0.54
1.78

+1.24 1 3.98 2.45 +1.53 1 5.13 3.60 +1.53 1

Euro Credit Conviction

0.61
1.78

+1.17 1 4.41 2.45 +1.96 1 4.61 3.55 +1.06 1

Euro High Yield

1.47

1.20

+2.67 1 3.24 1.26 +1.98 1 5.87 4.10 +1.77 1

SLIDE 9

European Credit composite performance

Competitive performance across the range

8 Source: Schroders GIPS composite data to 31 January 2016. Data from the current investment team. * Euro Credit Conviction composite Incepted 31 January 2014.

Composite 1yr Excess Return 2yr Excess Return p.a. 3yr Excess Return p.a. 3yr Information Ratio Benchmarked Strategies Euro Corporate Bond 1.25% 1.68% 2.00% 2.70 Euro Credit Conviction 2.06% 2.52%

2.59*

Euro High Yield 3.70% 2.13% 1.49% 1.31 Composite 1yr Return 2yr Return p.a. 3yr Return p.a. 3yr Sharpe Ratio Unconstrained Total Return Strategies Monthly High Income 4.51% 5.76% 7.53% 1.68 Strategic Credit 2.09% 2.62% 3.44% 1.43

SLIDE 10

Performance track record

Monthly excess returns (up and down markets)

9

Up markets Down markets

Schroders Euro Corporate Bond Composite

SLIDE 11

Process

SLIDE 12

Our approach to portfolio management

Integrated investment process



Broader team approach to investment management



Hands-on involvement with credit research Innovative and creative evolution of the investment process



Themes-based investment style



A formalised procedure that continually reviews the process to successfully deliver performance in varying investment environments A balanced portfolio construction



Aiming for consistent out-performance of the market by implementing different investment themes into the strategy



Portfolio construction focuses on building low correlated alpha sources while minimising risk



Include offsets in portfolio construction to ensure not all themes are pointing in same direction

11

SLIDE 13

Investment process overview

Themes-driven process

12 Source: Schroders

Multiple Credit Investment Themes

Diversified by theme Diversified by horizon

Security selection

37 credit analysts Fully aligned research process

Credit Strategy

Input Credit Scorecard

Fundamentals
Valuations
Systemic
Technical

Output Cross market relative value Risk bias

Risk Management

SLIDE 14

Investment process

Themes

 Multiple, forward-looking themes diversified by style and time horizon  Regular discussion and formulation of credit themes likely to drive markets  Diversity of themes and horizons aid risk management  Recognise real value by identifying second and third order effects of themes

13 Source: Bloomberg Z-spread, Renault 3.625% 19 September 2018 was traded on issue date 11 September 2013. Updated on 8 May 2014

Illustration:

Theme: Europe is going through a cyclical recovery, which will benefit European consumers Theme: The Yen has faced a sharp devaluation. This will benefit Nissan, of which Renault holds a 40% stake, as exports to the US accelerate, aided by improving consumer demand in the US Theme: Growing US energy self-sufficiency. The shale gas revolution is likely to switch America’s role into becoming a net energy

exporter. This will put downward pressure on petrol prices and will

boost car sales Theme: Growing income gap. Renault has a very strong range at the budget end of the market – Romanian manufactured Dacia – appealing to consumers with a lower disposable income

SLIDE 15

Innovation in credit research

Themes direct focus, understanding business models to pick the winners

 Credit research is fully aligned with credit themes which promotes deeper

understanding of business models, and the reaction to credit themes. Forward looking analysis focuses on understanding the 1st, 2nd and 3rd order effects of themes on companies

14

Company A Company D Company B Company E Company C

Asia Revenues Internet Trade Bank Deleveraging

Company F

Income Gap

Ties with multiple themes: High conviction

SLIDE 16

Investment process

Credit strategy

 Monthly meetings to assess top-down views on credit and identify potential changes  The output is the European credit scorecard of our views with scores of -3 to +3

– the input scorecard summarises our views for macroeconomics, corporate fundamentals, systemic risks and technicals – the output score summarises our top-down sector views and off benchmark markets

15 Source: Schroders, Monthly Credit Strategy Meeting, 5th August 2014

Illustration:

* - Current score (previous score)

SLIDE 17

Investment process

Proprietary tools for quantitative credit and relative value analysis

 Screening tool that covers 95% of global universe with over 60 statistical fields to identify

momentum or mean reversion

 A two dimensional process over time horizons and across investment universes  Ability to create both market neutral strategies and take advantage of market timing  Extensive curve analysis to determine opportunity value across CDS tenor and bond maturities  Decomposition into alpha and beta adjusted performance versus index and Schroders bespoke

‘Super Sectors’

16 Source: Schroders

Illustration:

Index Schroders Analyst Net 3Mnth Beta to Currrent (09-May) Z-Spread change (bp) 3 Mnth Hist 6 Mnth CDS Basis 3M Beta implied Alpha Isin Bond Market Sector Amt (mn) Pos (mn) Rating Cntry Rec. Lev Index Sector Price Yld TW MDur TW G-Sprd G-Sprd Cntry CDS basis Z-Sprd 1D 1W 1M 3M YTD Min Max Z-Score Z-Scor RSI 3M Z-Score Vs. Index

Vs. Sector

XS0763 ABBNVX 2 5/8 03/26/19 Capital Goods 1,250 A2/A/BBB+ CH 0.3x 0.44 0.60 106.81 1.41 5.44 89 128

7

49

1
6
16
15

42 63

0.6
1.2

42.7 0.0

2
7

FR0010 ALOFP 4 09/23/14 Capital Goods 743 Baa2/BBB/NR FR 3S 1.4x 0.47 0.64 104.50 0.69 1.33 68 65

5

37

1
10
13
28
31

37 66

2.2
2.8

21.1 0.9

14
19

FR0010 ALOFP 2 7/8 10/05/15 Capital Goods 500 Baa2/BBB/NR FR 3S 1.4x 0.52 0.72 104.76 0.87 2.31 83 70 21 46

2
7
13
31
37

46 78

1.7
2.1

29.3 0.6

15
21

FR0011 ALOFP 3 7/8 03/02/16 Capital Goods 500 Baa2/BBB/NR FR 3S 1.4x 0.59 0.82 107.96 0.99 2.68 93 76 25 53

1
5
14
33
44

52 86

1.7
1.8

22.5 0.6

15
22

FR0010 ALOFP 4 1/8 02/01/17 Capital Goods 750 Baa2/BBB/NR FR 3S 1.4x 0.73 1.01 110.25 1.29 3.47 111 85 38 72

5
10
31
36

71 103

1.6
1.9

27.7 0.5

9
17

FR0011 ALOFP 2 1/4 10/11/17 Capital Goods 350 Baa2/BBB/NR FR 3S 1.4x 0.76 1.04 103.36 1.46 4.15 117 86 54 78

1
5
6
33
30

78 110

1.2
1.7

31.2 0.2

10
18

FR0010 ALOFP 3 5/8 10/05/18 Capital Goods 500 Baa2/BBB/NR FR 3S 1.4x 0.80 1.10 110.13 1.65 4.86 120 86 72 82

1
6
5
34
41

82 114

1.4
1.7

27.9 0.2

9
18

FR0010 ALOFP 4 1/2 03/18/20 Capital Goods 750 Baa2/BBB/NR FR 3S 1.4x 0.99 1.36 115.36 2.07 5.96 139 98 75 101

1
8
8
39
46

101 139

1.5
1.8

30.1 0.4

9
20

XS0604 AMCAU 4 5/8 04/16/19 Capital Goods 550 Baa2/BBB/NR AU 4MD 2.6x 0.71 0.98 116.76 1.64 5.28 111

128

27 72

1
11
9
12
14

72 91

3.3
3.3

30.8 1.2 10 2 XS0907 AMCAU 2 3/4 03/22/23 Capital Goods 300 Baa2e/BBB/NR AU 4MD 2.6x 0.97 1.34 101.46 2.58 8.53 127

66

19 106

7
3

106 115 32.8

0.3

XS0302 ATCOA 4 3/4 06/05/14 Capital Goods 340 A2/A/NR SE 0.4x 0.09 0.13 104.63 0.41 1.02 39

37

3 10 1

5

3

2
6

5 15

0.3
0.5

48.1

1.1

1 XS0757 ATCOA 2 5/8 03/15/19 Capital Goods 500 A2/A/NR SE 0.4x 0.37 0.51 107.21 1.33 5.42 82 3 16 42

1
6

1

6
6

35 52

0.6
1.1

47.1 0.1 5 1 XS0896 ATCOA 2 1/2 02/28/23 Capital Goods 500 A2/A/NR SE 0.4x 0.50 0.70 103.62 2.09 8.62 78 38 14 57 1

6

4 51 65 42.3

0.2

XS0633 CAT 2 3/4 06/06/14 Capital Goods 600 A2/A/A US 2S 0.7x 0.14 0.20 102.45 0.46 1.04 44 35

1

15

2

2

6
10

10 23

0.7
1.2

48.7 0.0

2
3

XS0782 CAT 1 3/8 05/18/15 Capital Goods 600 A2/A/A US 2S 0.7x 0.21 0.28 101.53 0.61 1.97 59 38 1 24

1
3

2

5
6

15 29

0.1
0.5

53.1

0.5

1

1

FR0010 CEIFP 3 7/8 09/23/16 Capital Goods 1,250 3.00 NR/BBB-/NR FR 3S 1.10 1.52 107.28 1.64 3.11 151 128 112

6
12
39
60

111 149

1.6
1.7

25.6

5
18

FR0011 CEIFP 4 5/8 10/05/17 Capital Goods 900 2.00 NR/BBB-/NR FR 3S 1.20 1.65 111.38 1.91 3.94 162 131 124 1

8
13
36
62

123 159

1.9
1.6

20.0 1

13

FR0010 CEIFP 4 3/8 11/06/19 Capital Goods 750 2.00 NR/BBB-/NR FR 3S 1.25 1.73 112.42 2.29 5.60 167 129 129 1

9
14
42
65

128 168

1.8
1.6

19.4

3
18

FR0010 CEIFP 3 1/2 03/22/21 Capital Goods 750 2.00 NR/BBB-/NR FR 3S 1.40 1.93 106.13 2.63 6.83 173 129 140

2
11
19
49
62

140 187

2.0
2.1

14.8

6
22

FR0010 CEIFP 4 7/8 09/23/24 Capital Goods 1,000 NR/BBB-/NR FR 3S 1.54 2.13 115.08 3.26 8.66 180 125 163

1
13
15
40
62

163 201

2.3
1.7

19.9 8

10

XS0640 DE 3 1/4 06/22/16 Capital Goods 300 A2/A/NR US 3S 0.1x 0.28 0.39 107.53 0.80 2.92 70 41

9

30 1

2
1
7
3

24 41

0.7
1.0

41.7

1.0

2

2

XS0445 EADFP 4 5/8 08/12/16 Capital Goods 1,000 2.30 A2/A-/BBB+ NL 3S

1.6x

0.35 0.49 111.94 0.89 2.99 78 63 11 38

1
4
3
8
6

33 48

1.1
1.5

38.1

1.9

3

1

XS0176 EADFP 5 1/2 09/25/18 Capital Goods 500 A2/A-/BBB+ NL 3S

1.6x

0.48 0.67 121.36 1.35 4.67 91 66 29 53

2
5
2
3
15

51 62

1.5
1.3

43.6

1.5

12 7

SLIDE 18

Investment process

Fundamental research

 Integrated credit team aligned with investment process is a major differentiator  No sector silo approach to investment or research  Understanding business models and the relationship between issuers  Working together to understand the supply chain and revenue relationships across sectors  Identify the under-researched bond issuers that lie outside the scope of standard research

processes

17 Source: Schroders, Analyst Handbook, 5th June 2014

Illustration:

SLIDE 19

Outlook and positioning

SLIDE 20

Summary outlook for European credit

Fundamental



European growth set to continue led by the ‘weaker’ states. Inflation expectations driven by global growth, oil and commodities



US & UK growth momentum moderating. China slowdown poses risk to global growth.



Europe is behind the US in the credit cycle



Improved Eurozone credit conditions



Volatility in yield providing better entry, volatility in spread giving more alpha opportunities Systemic risks



China risk to the fore, ISIS needs to be monitored



EM economic fundamentals challenged Technicals



Positioning has become more risk-averse



Flows into Euro IG space are negative so far in 2016

19

SLIDE 21

Macro Credit Clock

Source: Schroders , OECD, February 2016 20

SLIDE 22

Global Growth

Europe remains on track: domestic demand and loosening policy

21

SLIDE 23

Investment grade non-financial companies

Earnings concerns?

Sources: Schroders, S&P Capital IQ, MS Research as at December 2015 Based on >€/$ 500m market cap universe ~970 European and ~ 1,600 North American non-financials companies

Earnings concerns

Higher for North American companies. % of North American companies with negative LTM EPS at a cycle high

22

SLIDE 24

IG non-financials BBB excluding energy, metals and mining (base currency) IG non-financials BBB excluding energy, metals and mining (base currency)

Valuations

Cross currency adjusted – € IG more attractive excl. energy, metals and mining

Source: Schroders, Barclays, Bloomberg, Data as of January 2016

Yield to Worst (%) Yield to Worst (%) Avg life

Cross Currency Adjusted

Avg life

23

SLIDE 25

Euro IG

Valuations – spread distributions

Opportunities in security selection

Source: Schroders, January 2016

OAS

24

Mean Median

SLIDE 26

Schroder ISF Euro Corporate Bond

Performance and (gross) attribution

25 Source: Schroders, gross of all fees, based on end of day market prices for benchmark comparison * 2012 since current management were in place – 01/09/12

Date Fund Return Index Return Alpha (bps) FX (bps) Rates (bps) Sovereign (bps) Credit (bps) Residual (bps) 2012* 4.38% 3.55% 83 3 3 58 19 2013 5.11% 2.39% 272

1
22

29 226 39 2014 9.91% 8.25% 165

1
6

58 96 17 2015 1.76%

0.43%

219

4

1 22 188 13 Jan-15 1.49% 0.87% 62 1 6 54 2 Feb-15 1.22% 0.64% 58 2 6 51

1

Mar-15 0.10%

0.06%

16

5

17 6 Apr-15

0.36%
0.49%

13

1

12 2 May-15

0.51%
0.43%
8

3

2
8
1

Jun-15

1.94%
1.92%
2
2

6 1

10

3 Jul-15 1.60% 1.21% 38 1 1 36 1 Aug-15

0.92%
0.76%
16

2 1

18
1

Sep-15

0.59%
0.66%

7 2 3 1 1 Oct-15 1.74% 1.35% 39

2

1 42

2

Nov-15 0.76% 0.69% 7

3

3 7 1 Dec-15

0.77%
0.82%

5

2

1 5 1 Jan-16 0.11% 0.59%

49

4 2

54

Total 22.84% 14.96% 788

7
16

128 588 95

SLIDE 27

Value in non-cyclical, non-financial subordinated bonds

Orange: customer growth, maintaining market share, reducing debt

Source: Bloomberg, February 2016 26

Orange equity price vs corporate bond price Orange corporate bond price vs total debt / capital

SLIDE 28

Value in subordinated insurance

Aviva: Robust capital position

Source: Aviva 2015 Interim Results August 2015, Bloomberg, February 2016 27

Aviva equity vs corporate bond price

SLIDE 29

Sector allocation

Schroder ISF EURO Corporate Bond

Positioning

28 Source: Schroders, Bank of America Merrill Lynch. Based on un-audited data as at 29 January 2016 *Fund issuer number treats each CDS index as a single issuer and excludes the non-credit line items (Futures Fixed Income, Margin Cash Balance, SYN, Synthetic Cash Fixed Income, Currency). **Memo: High yield bonds are also included in the other sector breakdown in the rest of the chart The chart will not add up to 100 as it does not include futures, IRS, forwards, TRS, cash synthetic or the CDS float (non-active leg of the CDS)

Fund Benchmark

Assets under management €6.5 billion €1.8 trillion Effective Yield 2.0% 1.3% OAS +212 +148 Effective Duration 4.9 4.9 Number of issuers* 224 553 Average Credit Weighting BBB+ A-

Market value (%)

Hedged Currency (%MV)

GBP 7.43 USD 5.97

SLIDE 30

Schroder ISF EURO Corporate Bond

Positioning in industrials

Sector allocation breakdown for industrials in the fund

29 Source: Schroders, Bank of America Merrill Lynch. Breakdown of Industrials in the fund by MLX level 3. Based on un-audited data as at 29 January 2016

Market value (%)

SLIDE 31

Schroder ISF EURO Corporate Bond

Rating breakdown

30 Source: Schroders/Bank of America Merrill Lynch/Fixed Income Analytics as at 29 January 2016, Based on un-audited data *Bank of America Merrill Lynch EMU Corporate Index (Bloomberg ticker: ER00 Index). Ratings by average of S&P, Moody’s and Fitch The chart will not add up to 100 as it does not include futures, IRS, forwards, TRS, cash synthetic or the CDS float (non-active leg of the CDS)

Market value (%)

SLIDE 32

Schroder ISF EURO Corporate Bond

Top 10 Ticker overweights and underweights by MV(%)

31 Source: Schroders FIA at 29 January 2016, Based on un-audited data. The above is for information only and is not a recommendation to buy or sell. Overweights and underweights by market value (%) versus the benchmark (including single name CDS but excluding bunds and CDS indices)

Ticker Name Overweight (%) T AT&T Inc +2.04 YBS Yorkshire Building Society +1.95 BKIR Bank of Ireland +1.83 ANNGR Vonovia SE +1.76 FCACAP FCA Bank SpA +1.75 HTHROW Heathrow Funding +1.52 LLOYDS Lloyds Banking Group PLC +1.38 AVLN Aviva PLC +1.36 SSELN SSE PLC +1.15 FLYFP Fonciere Lyonnaise +1.10 Ticker Name Underweight (%) ACAFP Credit Agricole Groupe

2.17

RABOBK Rabobank

2.17

ENIIM ENI SpA

2.11

VW Volkswagen AG

1.66

BNP BNP Paribas SA

1.54

HSBC HSBC Holdings PLC

1.33

TELEFO Telefonica SA

1.23

GE General Electric Co

1.20

BFCM Credit Mutuel-CIC Group

1.02

BMW BMW

0.95

SLIDE 33

Appendix

SLIDE 34

Fund profile

Schroder ISF Euro Corporate Bond

33 *This is not a complete set of fund rules and represents the typical internal, non mandatory limits under which the fund is managed Please note that such limits may be deviated from and are subject to change without notice

Fund Managers:

Patrick Vogel supported by the credit team

Peer Group:

Micropal Fixed Income EUR-corporate bond

Benchmark:

Bank of America Merrill Lynch EMU Corporate index (Bloomberg ticker = ER00 Index)

Aim:

To consistently outperform the market, leading to competitive peer group performance over the market cycle

Style:

A fully integrated global fixed income platform combining expertise across all fixed income sectors



Top down research identifying themes driving all fixed income sectors



Multiple themes applied though credit selection into diversified credit strategies



Emphasis on disciplined and rigorous credit research

Guidelines*:



Maximum 10% in cash; maximum 20% in cash and government bonds



Maximum of 20% in total in High Yield



Maximum 20% in non Euro denominated assets



Hedged 100% to Euro



Overall portfolio duration: Benchmark +/- 2 years



Derivatives used include: currency forwards, interest rate futures, interest rate swaps, and credit default swaps



2x limit on fund value-at-risk relative to benchmark value-at-risk (including all derivatives)



Max 50% in long risk or short risk CDS positions

SLIDE 35

This document does not constitute an offer to anyone, or a solicitation by anyone, to subscribe for shares of Schroder International Selection Fund (the “Company”). Nothing in this document should be construed as advice and is therefore not a recommendation to buy or sell shares Subscriptions for shares of the Company can only be made on the basis of its latest Key Investor Information Document and prospectus, together with the latest audited annual report (and subsequent unaudited semi-annual report, if published), copies of which can be obtained, free of charge, from Schroder Investment Management (Luxembourg) S.A. An investment in the Company entails risks, which are fully described in the prospectus Past performance is not a reliable indicator of future results, prices of shares and the income from them may fall as well as rise and investors may not get the amount

riginally invested

Schroders has expressed its own views and opinions in this document and these may change This document is issued by Schroder Investment Management Ltd., 31, Gresham Street, EC2V 7QA, who is authorised and regulated by the Financial Conduct Authority. For your security, all telephone calls are recorded Risk Considerations A security issuer may not be able to meet its obligations to make timely payments of interest and principal. This will affect the credit rating of those securities The currency derivative instruments employed are subject to the risk of default by the counterparty. The unrealised gain on the transaction as well as some of the desired market exposure may therefore be lost The Fund’s operations depend on third parties and it may suffer disruption or loss in the event of their failure The fund may use financial derivative instruments as part of the investment process. There is no guarantee that they will deliver the expected results

Important information

34