Monthly Commentary. Schroder ISF* Frontier Markets Equity. Market review. Performance (%) For professional investors or advisers only.

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1 March 2012 For professional investors or advisers only Schroder ISF* Frontier Markets Equity Monthly Commentary Performance (%) 1 mth 3 mths 6 mths YTD 1 year Since launch Schroder ISF Frontier Markets Equity A Acc USD Benchmark Allan Conway and Rami Sidani Fund Managers Source: Schroders, as at 29 February All fund performance data are on a NAV to NAV basis, net income reinvested, since launch date 15 December The fund s benchmark is MSCI Frontier Markets. Market review Global equities continued to rally in February Market sentiment was supported by improving liquidity conditions in European interbank lending markets due to the ECB s Long Term Refinancing Operation, some strong economic data releases from the US and further selective policy easing in China. Towards the end of the month, the risk of an immediate Greek sovereign debt default eased after a second bailout was approved by the EU and IMF, on the condition that Greece implements further austerity measures. However, there was little evidence of the European authorities tackling the underlying structural problems in the region. The MSCI Frontier Markets index underperformed the MSCI World index and also underperformed broader emerging markets in February, reflecting frontiers low correlation to developed markets and broader GEMs. However, a number of the frontier markets benefited from strength in the oil price as political tension between Israel and Iran and recent supply disruption in Libya pushed Brent crude above $124 a barrel. In the frontier Middle Eastern markets, UAE strongly outperformed its frontier peers in February; energy-related names performed strongly, aided by the rally in crude oil prices, although some of the higher-beta banking and real estate names also delivered strong returns. Economic data releases were broadly encouraging as the HSBC purchasing managers index rose to 52.4 in December from 51.7 the previous month, driven by growth in new orders. Oman outperformed, aided by strength in the rial. At the stock level, certain oil service names performed very strongly, benefiting from the strength in the oil price and revenue growth in Inflation concerns also eased as CPI inflation softened to 3.3% year on year in December from 4.1% the previous month. Qatar outperformed its frontier peers, aided by strength in telecom and petrochemical stocks. However, some of the banking stocks were pressured by concerns over relatively modest growth in dividends given the strength of growth in earnings. On the policy front, the central bank raised risk reserve requirements for the banking sector to 2.5% from 1.5%. Banks will have two years to fulfil the requirement. Lebanon underperformed as sentiment continued to be adversely affected by the unrest in neighbouring Syria. However, the market was supported by strength in some of the banking sector names. On the inflation front, CPI rose 0.1% month on month in January. Tunisia underperformed. Inflation concerns provided a drag on sentiment as annual CPI accelerated to 5.1% in January from 4.2% in December. On the policy front, the central bank kept interest rates on hold at 3.5%. In other developments, security problems continued to provide a source of concern following clashes between the National Guard and gunmen in the east of the country. Jordan underperformed, with rising energy costs providing a drag on sentiment, although some of the commodity-related names in the index performed strongly. Turning to policy, the central bank raised interest rates by half a percentage point; the central bank said the move was designed to contain inflation and maintain the competitiveness of dinar-denominated investments. Kuwait underperformed, with the market subject to some political uncertainty ahead of the parliamentary elections, which saw the Islamist-led opposition take 34 of the 50 seats in the National Assembly. In other developments, the governor of the central bank resigned in protest against the unprecedented increase in government spending. Bahrain underperformed as fears of further unrest weighed on sentiment ahead of the one-year anniversary of anti-government protests in mid-february. At the stock level, defensive names in areas such as telecoms outperformed. *Schroder International Selection Fund is referred to as Schroder ISF throughout this document.

2 Market review (cont d) In frontier Asia, Bangladesh strongly outperformed its frontier peers in February as the market rallied following January s heavy sell-off. Sentiment was also supported by speculation that the authorities would provide compensation for investors who have been affected by the sell-off (compensation measures were subsequently announced in early March). Vietnam outperformed, aided by easing inflation concerns and hopes that the central bank may begin to loosen policy in Commercial banks lowered borrowing costs during the month, providing a further boost to sentiment, while the local stock exchange confirmed that trading hours would be extended from 5 March 2012 in order to help boost liquidity. Pakistan outperformed, aided by strength in a number of the commodity and banking-related names in the local index. However, inflation concerns provided a headwind as annual CPI re-accelerated to 10.1% in January from 9.8% in December. On the policy front, the central bank kept the discount rate unchanged at 12.0%. In other developments, Indian officials visited Pakistan to review progress in the normalisation of trade relations between the two countries. Mauritius underperformed, with leisure-related names performing poorly amid fears that the eurozone (the main source of tourists) could slip into recession this year. Mauritius also cut its forecast for tourist arrivals in 2012 at the end of the month. On the inflation front, annual CPI remained steady at 4.8% in January. Sri Lanka underperformed, largely reflecting weakness in the rupee. At the start of the month, the central bank unexpectedly raised interest rates by 50bps to dampen credit growth the first increase in interest rates since A few days later, the central bank said that it would remove its currency trading band in order to help conserve FX reserves. In other developments, the government raised petroleum prices, adding to inflation concerns. Frontier European markets delivered mixed returns in February. Serbia outperformed its frontier peers, reflecting strength in oil-related names, which were buoyed by strength in crude oil prices and sell-side upgrades. However, currency concerns weighed after Serbia failed to reach an agreement with the IMF over the country s 2012 budget. The central bank kept interest on hold to support the dinar and also sold euros at the end of the month after the dinar hit an all-time low against the single currency. Kazakhstan outperformed, with market sentiment boosted by a further rally in global commodity prices; energy-related names in particular performed strongly. On the policy front, the central bank cut its key refinancing rate to 7% from 7.5%. Romania outperformed, reflecting a strong rally in oil and gas-related names. Turning to policy, the central bank cut interest rates at the start of the month to a record low of 5.5%, as largely expected. However, growth-related data releases disappointed as GDP growth slowed more than expected in Q4 2011, rising a seasonally-unadjusted 1.9% from the same period a year earlier. Estonia outperformed, supported by robust profits growth for certain retail-related names. However macro dated disappointed as CPI accelerated to 4.5% year on year in January while GDP growth eased to 4.0% year on year in Q from 8.5% in Q3. Lithuania outperformed, aided by strength in some of the telco stocks in the local index. In other developments, Q4 GDP growth was revised up to 4.4% year on year, while the prime minister confirmed that the country intends to adopt the euro in Slovenia underperformed, reflecting weakness in certain retail-related names after a high-profile takeover in the sector was abandoned. At the end of the month, data confirmed that Slovenia has slipped into recession, with GDP contracting 0.7% from the previous quarter after shrinking a revised 0.4% in the previous three months. Croatia underperformed, despite a rally in the kuna. Market sentiment suffered as the government proposed a 12% tax on dividend payouts; VAT will also increase to 25% on 1 March. In other developments, the IMF warned that Croatian GDP could contract in 2012 due to weak growth prospects. Ukraine underperformed, with sovereign debt concerns weighing on sentiment as the country continues to seek cheaper gas supplies from Russia rather than agreeing to the terms of the IMF s aid package. The government also unveiled plans to impose duties on chemical and metal exports. At the stock level, telco and gas-related names ranked among the weakest performers. Bulgaria underperformed as heavy flooding led to the disruption of coal production and the temporary suspension of power exports while GDP data confirmed a slowdown as growth eased to 1.5% year on year in Q4 from 1.6% in Q3. Frontier African markets also produced mixed returns. Kenya outperformed broader frontiers, aided by strength in a number of the banking sector names. Turning to policy, the central bank left its key lending rate on hold at the start of February, as expected, in order to support the shilling and combat inflation. Nigeria underperformed, reflecting weakness in some of the construction-related names. Lower-beta names in areas such as foods and beverages also underperformed. Inflation concerns also provided a headwind for the market as the annual inflation rate rose to 12.6% in January from 10.3% in December, ahead of expectations. Looking at the Latin frontier markets, Argentina suffered a heavy sell-off in February, sharply underperforming broader frontiers. Energy-related names performed poorly amid concerns that the government is preparing to announce changes to the energy sector. CPI inflation remained elevated at 9.7% year on year in January while the IMF continued to question the quality of the official Argentine economic statistics.

3 Performance comment On an underlying basis, fund performance was strongly ahead of the benchmark in February; both country selection and stock selection added to returns. In terms of country selection, the fund benefited from its overweight positions in UAE and Kazakhstan, which outperformed, and its underweight positions in Kuwait and Argentina, which underperformed. The off-benchmark position in Saudi Arabia also provided a strongly positive contribution to returns in February. However, the zero weights in Vietnam and Kenya, which outperformed, detracted from returns. Stock selection was positive in Kuwait, Nigeria, UAE and Bangladesh. It was negative in Kazakhstan and Oman. Outlook Saudi Arabia remains our largest overweight. The Saudi market offers strong bottom-up investment opportunities and also benefits from a favourable macro outlook. We stay overweight Qatar as the economy benefits from strong rates of growth and we continue to find attractive bottom-up ideas. In UAE we are overweight as the market is cheap relative to its peers. In Kazakhstan, we maintain an overweight position as the market offers strong stock-picking opportunities. We are overweight Oman as the market benefits from improving valuations. In Nigeria we increased our overweight position in early March, reflecting cheap valuations and an improving political backdrop. Lebanon and Ukraine were moved to overweight from neutral in early March. The Lebanese market offers attractive valuations but remains subject to political uncertainty. Ukraine offers reasonable valuations and has an improving, in our view. As of early March 2012, the fund is neutrally positioned in Bangladesh and Pakistan. Bangladesh benefits from strong macroeconomic growth but equity valuations are rich. Pakistan is very cheaply valued but the political environment remains unstable. In early March, we moved from neutral to underweight Sri Lanka. While there are some strong growth opportunities in Sri Lanka, valuations are now rich relative to frontier peers. Vietnam was moved from zero weight to underweight, reflecting an improving. In terms of our other underweight positions, we maintain a significant bias against Kuwait. The Kuwaiti market remains relatively expensive compared to its peers and offers only limited value opportunities. We remain underweight Argentina as although valuations are attractive, the macroeconomic environment is deteriorating. We maintain an underweight in Mauritius. The Mauritian market continues to offer reasonable valuations overall, but there are few opportunities at the stock level. We have no exposure to the remaining countries in the MSCI Frontier Markets index. We have zero weights in Romania and Kenya due to deteriorating s in both countries. We have no holdings in Tunisia as the market remains subject to liquidity concerns and political instability. We have a zero weight in Croatia as there are limited opportunities at the stock level and the economic environment is deteriorating. In Jordan there are only limited bottom-up opportunities and the market continues to suffer from weak price momentum. Elsewhere, we regard Bahrain and Slovenia as offering only limited stock picking opportunities, and Bahrain continues to suffer from a lack of liquidity. Estonia, Lithuania, Bulgaria and Serbia account for only a very small percentage of the MSCI Frontier Markets benchmark in aggregate and we continue to have no exposure to these markets due to major liquidity concerns. Source: Schroders, as at 29 February 2012.

4 Country allocation Target and Active figures reflect allocations following the investment meeting at the stated date. Target: the target % holding in the fund. Active: over/underweight positions that the fund holds relative to the benchmark. The figures under Target and Active may change until the new targets/active allocations are made. Frontiers MSCI FM Target 02/09/12 Active Tgt 02/09/12 Target Active Tgt Comments Kazakhstan Strong bottom up opportunities Saudi Arabia Strong bottom up opportunities, favourable macro outlook Qatar Strong growth and strong bottom up ideas UAE Cheap valuations Oman Improving valuations Nigeria Cheap valuations, improving political backdrop Lebanon Attractive valuations, political uncertainty Ukraine Reasonable valuations, improving Bangladesh Strong macro growth, rich valuations Pakistan Very cheap valuations, unstable political environment Sri Lanka (0.4) Strong growth opportunities, rich valuations Mauritius (0.5) 0.6 (0.5) Reasonable valuations, limited stock opportunities Romania (1.1) 0.0 (1.1) Deteriorating Kenya (2.2) 0.0 (2.4) Deteriorating Tunisia (0.9) 0.0 (0.9) Liquidity concerns, political instability Kuwait (7.5) 21.7 (7.5) Limited value opportunities and relatively expensive valuations Vietnam (2.0) 1.0 (1.6) Improving Croatia (2.5) 0.0 (2.3) Jordan (0.9) 0.0 (0.9) Limited stock opportunities, deteriorating Limited value opportunities and weak momentum Bahrain (0.6) 0.0 (0.6) Illiquid and limited opportunities Argentina (0.5) 5.0 (0.5) Attractive valuations, deteriorating Slovenia (2.0) 0.0 (2.0) Limited stock opportunities Estonia (0.4) 0.0 (0.4) Major liquidity concerns Lithuania (0.3) 0.0 (0.3) Major liquidity concerns Bulgaria (0.1) 0.0 (0.1) Major liquidity concerns Serbia (0.3) 0.0 (0.3) Major liquidity concerns Total: Liquidity: Grand Total: Markets over 15%, max -10%, under 15%, max -5%. Source: Schroders, as at 13 March 2012.

5 Fund information Fund Managers Allan Conway and Rami Sidani Total Fund Size (Million) USD 40.5 Fund Base Currency USD Fund Launch Date 15 December 2010 Source: Schroders, as at 29 February The opinions in this document are true as at the date indicated in the commentary. Post commentary events may affect the opinion given and investors should contact their financial advisor. The views and opinions contained herein are those of the emerging markets equity team, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. Risk warnings: Investments in equities are subject to market risk and, potentially, to currency exchange rate risk. This fund may use financial derivative instruments as a part of the investment process. This may increase the fund s price volatility by amplifying market events. Important information: 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 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 originally invested. Third party data is owned or licensed by the data provider and may not be reproduced or extracted and used for any other purpose without the data provider s consent. Third party data is provided without any warranties of any kind. The data provider and issuer of the document shall have no liability in connection with the third party data. The prospectus and/or contains additional disclaimers which apply to the third party data. Issued by Schroder Investment Management Limited, 31 Gresham Street, London EC2V 7QA. Registered No: England. Authorised and regulated by the Financial Services Authority. For the Middle East only: Schroder Investment Management Limited is regulated by the Dubai Financial Services Authority and entered on the DFSA register under Firm Reference Number: F This fund is not subject to any form of regulation or approval by the DFSA. This document is intended for professional investors only as defined by the DFSA rules which can be accessed from their website w41384