Fund (Net)

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1 Overview Fund objective Key features To generate long-term returns before fees in excess of traditional capitalisation weighted global equity indices but with lower downside risks relative to the indices. The Fund invests in a diversified portfolio of equity and equity related securities of companies worldwide using a Quality-based investment strategy. Modern Growth style alternative we focus on seeking high Quality companies which offer stable growth, are profitable and financially strong. Embracing breadth exploiting opportunities from more than 5,000 stocks globally. Stock weights are determined by fundamentals, and not by a stock's size in an index. Bottom up, index unconstrained investing maximises the potential return by minimising dead money allocated to expensive stocks simply to satisfy index constraints. Performance to 31 March 2018 Relative to MSCI All Country World ex Australia Index Calendar year Total returns (AUD %) MSCI AC World ex Australia Excess (Net) 2018 YTD Rolling periods Total returns (AUD %) 1 month 3 mths FYTD 1 Year 3 Years 5 Years p.a. p.a. SI p.a.* SI cum* MSCI AC World ex Australia Excess (Net) Relative to MSCI World ex Australia Index Calendar year Total returns (AUD %) MSCI World ex Australia Excess (Net) 2018 YTD Rolling periods Total returns (AUD %) 1 month 3 mths FYTD MSCI World ex Australia 1 Year 3 Years Excess (Net) p.a. 5 Years p.a. SI p.a.* SI cum* Past performance is not a reliable indicator of future performance. The difference between the fund and benchmark returns may not equal stated excess returns due to rounding. *Since inception from 2 June Page 1

2 Market and fund commentary Market review Over the quarter, global equity markets declined, despite getting off to a strong start. Markets were initially unnerved by higher-than-expected inflation data in the US in February, which prompted concerns that the Federal Reserve could raise interest rates more quickly than expected. That was before fears over US-China trade sanctions, as well as mounting regulatory pressures for the technology sector, added to instability. Technology and consumer discretionary stocks were the only sectors to post positive performance over the quarter. US equities began 2018 strongly, buoyed by ongoing strength in economic data, robust earnings and the confirmation of a major tax reform package. Indeed, macroeconomic prints remained broadly positive throughout Q1. However, February and March saw a marked increase in volatility as investors digested the destabilising potential of elevated US inflation prints and US-China trade sanctions. Overall, US equities declined over the period. The weakest performance was in telecoms and consumer staples although most sectors fell. Continental European equities also fell in the first quarter, driven by worries about the path of US interest rates and the outlook for global trade despite an encouraging economic backdrop in the Eurozone. UK equities were negatively impacted by sterling strength, which was in turn driven by progress with Brexit negotiations, better-than-expected macroeconomic data and growing expectations that base rates could rise faster than previously anticipated. Across the emerging markets, equities registered a positive return, in local currency terms, despite the rise in market volatility stemming from global trade tensions. Fund commentary The strategy underperformed over the quarter, primarily driven by stock selection within the consumer discretionary, staples and financials sectors, most notably in the US. The main detractor over the quarter was the consumer discretionary sector, where our retail exposure proved a headwind. This was primarily due to not holding Amazon and Netflix, stocks that do not meet our valuation criteria. Our UK positioning weighed on relative performance, most notably in the media industry where our holding in WPP struggled. Within consumer staples, our positioning in the US and the UK had a negative impact on performance. Despite a strong contribution from our overweight in Dr Pepper Snapple Group, our holdings in US food & drink industry giants Campbell Soup and General Mills detracted as the industry lagged over the quarter. In the UK, some of our favoured high yield stocks also impeded return. Our holdings in the financials sector also hurt performance, specifically in the US, driven by positioning in consumer finance and asset management companies. The fund s industrials positioning proved a headwind, driven by a combination of US and emerging market exposure. However, this was offset somewhat by positioning in Japan, most notably Central Japan Railway, a company which we favour on both our business quality and valuation measures. Although the technology sector s contribution was slightly negative in aggregate, the fund benefited from its US exposure. In particular, overweight positions in IT services companies (most notably Cognizant) added value, while not holding Facebook also proved beneficial. Elsewhere, our avoidance of US energy and real estate contributed positively. At the regional level, stock selection in Japan was positive. In particular, our Japanese telecoms exposure (KDDI and NTT DOCOMO) and overweight positions in the country s pharmaceutical industry (e.g. Astellas and Kaken) added to performance. Page 2

3 Market and fund commentary (continued) The strategy remains positioned in companies generating high and relatively stable profits, with strong balance sheets. This leads us to hold relatively large positions in healthcare, consumer staples and telecoms (adding to the latter over the quarter). Within healthcare we see a broad range of attractive opportunities in US and European pharmaceuticals as well as US healthcare providers. These overweight positions are funded in part by underweight positions in the financials and consumer discretionary sectors. In technology, our preferred areas remain high quality boring companies with strong balance sheets and rising dividends, and overlooked software developers. However, steady rebalancing over the quarter has seen a net reduction here, to a lower-than-index exposure, in most part from trading out of US stocks that are no longer attractively valued. Although the US market contains a surfeit of high quality companies, on the whole these companies are more expensively valued than their counterparts in other geographies. Therefore, from a regional point of view, the strategy is underweight the US market versus its benchmark. The strategy is overweight the UK versus the benchmark even after some profit-taking over the quarter. Rebalancing over the quarter has also added to our exposure within emerging markets and Continental Europe. Page 3

4 Attribution against MSCI All Country World ex Australia Index Sector 2018 Q1 Telecommunication Services Energy Real Estate Utilities Health Care Materials Consumer Staples Industrials Information Technology Financials Consumer Discretionary Stock Selection (%) Asset Allocation (%) Region 2018 Q1 Japan United Kingdom Fund details as at 31 March 2018 Fund size A$40m APIR code Redemption price Inception date 02 June 2009 Buy/Sell spread Continental Europe Emerging Markets Emea Emerging Markets Asia Emerging Markets Latam Pacific Ex Japan North America Distribution frequency Normally twice yearly June and Dec Management costs 0.98% Fund characteristics as at 31 March Stock Selection (%) Asset Allocation (%) The attribution analysis shown above is intended to provide an indicative summary of the contributions to relative performance. The information is generated using Factset, a multi-currency performance analytical system. The estimated attribution Sector and Region performance is reconciled with and adjusted to the reported official performance figures. SCH0041AU Nil ActiveShare NumHoldings Fund MSCI All Country World ex Australia Active share 77.6% N/A Number of stocks 357 2,495 Source: Schroders Page 4

5 Fund weights versus MSCI All Country World ex Australia Index Sector Fund (%) Index (%) As at Consumer Staples Health Care Telecommunication Services Industrials Materials Insurance & Asset Mgt Real Estate Information Technology Utilities Energy Consumer Discretionary Banks Cash Region Fund (%) Index (%) As at United Kingdom Pacific ex Japan Continental Europe Japan Emerging Markets North America -6.8 Cash 0.0 Size Fund (%) Index (%) As at Mega Large The difference between the fund and benchmark weights may not equal stated active weights due to rounding. Mid Small Micro Schroder Investment Management Australia Limited Level 20 Angel Place, 123 Pitt Street, Sydney NSW 2000 Phone: Fax: (02) Investment in the Schroder Global Quality Fund may be made on an application form accompanying the current Product Disclosure Statement, available from Schroder Investment Management Australia Limited (ABN AFSL ) ( Schroders ).This Report is intended solely for the information of the person to whom it is provided by Schroders. It should not be relied on by any person for the purposes of making investment decisions. Total returns are calculated using exit price to exit price, after fees and expenses, and assuming reinvestment of income. Gross returns are calculated using exit price to exit price and are gross of fees and expenses. The repayment of capital and performance of the Funds is not guaranteed by Schroders or any company in the Schroders Group. Past performance is not a reliable indicator of future performance. Unless otherwise stated the source for all graphs and tables contained in this report is Schroders. Opinions constitute our judgment at the time of issue and are subject to change. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation. For security reasons telephone calls may be recorded. Third party data is owned by the applicable third party identified above and is provided for your internal use only. Such data may not be reproduced or re-disseminated and may not be used to create any financial instruments or products or any indices. Such data is provided without any warranties of any kind. Neither the third party data owner nor any other party involved in the publication of this document can be held liable for any error. The terms of the third party s specific disclaimers are set forth in the Important Information section at Page 5