Schroder ISF* Emerging Asia Quarterly Fund Update

Marketing material for professional investors and advisers only Schroder ISF* Emerging Asia Quarterly Fund Update Third quarter 2018 Cumulative returns to 30 September 2018 (%) A Accumulation shares, USD returns 60 Summary The fund underperformed the benchmark in a volatile quarter for emerging Asian equities. 40 20 0-20 3 months 1 year 3 years 5 years Portfolio Index % 3 mths 1 yr 3 yrs 5 yrs Stock selection in India, as well as in the financials and consumer discretionary sectors detracted from returns. These offset gains in stock selection in China and in IT. Portfolio activity was light in the current volatile environment, although we initiated new positions in HK Exchanges & Clearing and Galaxy Entertainment as valuations got to attractive levels. The portfolio is relatively defensive in the current environment, with most part of its exposure being towards the domestic economy and structural themes rather than externally via exporters. Schroder ISF Emerging Asia -4.0 2.9 46.2 58.0 Portfolio characteristics MSCI Emerging Markets Asia Net TR -1.8 1.0 44.3 35.2 Source: Schroders, bid to bid, net of fees with net income reinvested. 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. Calendar year returns (%) Fund Index** 2017 43.5 42.8 Fund manager Louisa Lo Managed fund since 09 January 2004 Fund launch date 09 January 2004 Fund benchmark Fund size Ongoing charge 1.87% 1 MSCI Emerging Markets Asia Net TR $3,467.7 million Source: Schroders, as at 30 September 2018. 1 Based on the last year s expenses for the year ending May 2018. 2016 10.3 6.1 2015 7.3 9.8 2014 8.5 2.5 2013 0.6-0.2 Source: Schroders, as at 31 December 2017 ** MSCI Emerging Markets Asia Net TR. A Acc net of fees *Schroder International Selection Fund is referred to as Schroder ISF. Schroder ISF* Emerging Asia Third quarter 2018 1

What happened in the market? Emerging Asian equities fell in a volatile third quarter, with US dollar strength and the US-China trade dispute weighing on risk appetite. The Chinese market was the main drag on index returns as the US implemented tariffs on a total of $250 billion of Chinese goods, some of which are set to increase in January, and threatened tariffs on a further $267 billion of goods. There was little progress in bilateral trade negotiations and China responded with tariffs on $110 billion of US goods. Meanwhile, Chinese macroeconomic data disappointed. The authorities announced a range of targeted economic support measures, including a shift to fiscal stimulus and credit easing. The central bank also re-introduced macro prudential measures to stabilise the renminbi. ongoing concerns over rising inflation and a widening of the trade deficit, linked to higher crude oil prices. Conversely, Thailand recorded a robust return with financials and energy stocks among the best performing names. The approval of laws required for a prospective election in 2019 was perceived as positive. Taiwan, where semiconductor stocks supported performance, and Malaysia also generated solid gains and outperformed. The best performing sector across the region was the energy sector. Oil prices climbed amid supply concerns linked to the re-imposition of US sanctions on Iran, the first phase of which took place during September. Telecoms also outperformed. The worst performing sectors were consumer discretionary and real estate. Indian equities also underperformed as credit and liquidity issues in the financial sector exacerbated Performance attribution (%) Allocation effect Selection effect Sector Total effect 0.0 0.7 Information technology 0.8 0.1 0.1 Consumer staples 0.2 Telecoms 0.1 Healthcare 0.0 0.0 Energy 0.1 Materials 0.2 0.1 0.0 0.0 0.0 0.0 Utilities 0.0-0.2 Real estate 0.1-0.5 Industrials -0.4-0.7 Consumer discretionary -0.8 0.1-1.3 Financials -1.2 Source: FactSet, average positions over the quarter by MSCI sector. The fund posted a loss of -4.0% (A Acc USD) in a volatile third quarter and underperformed the index, which declined -1.8% (also in USD terms). From a country perspective, the main detractor was negative stock selection in India and, to a lesser extent, Korea. Positive stock selection in China and Taiwan could only partially mitigate this. On the sector front, negative stock selection in financials and consumer discretionary detracted, while information technology stockpicking was positive. Key individual detractors from performance included an overweight in Vipshop. The Chinese online retailer s share price fell alongside the broader sector amid concerns around Chinese consumption, as well as due to disappointing guidance on the progress of its tie-up with Tencent and JD.com. An overweight position in Sands China also detracted from fund returns. Its share price fell on macro uncertainty and consumption weakness. In addition, some junkets have started to see slower credit repayments. However, the higher exposure of Sands China to the mass market (ie more tourist-related) should give it more support than other names which Schroder ISF* Emerging Asia Third quarter 2018 2

have higher exposure to the VIP market, which is more impacted by the stock market and the liquidity environment. An overweight in China s Midea Group also detracted due to concerns over a slowdown in air-conditioner sales due to the impact of tighter credit on the property market. On the other side of the ledger, the leading contributor to returns was Taiwan Semiconductor Manufacturing, where we are overweight. The firm remains the leader in foundries and has a better technological capability than its peers. The global competitive landscape has been a tailwind for the firm as competitors like Intel are having difficulty keeping up with the more advanced technology (such as 7nm). During the quarter Intel gave up on developing in this area, which bolstered Taiwan Semiconductor s share price. Other contributors included Petrochina, which benefited from the rising oil price. A nil weighting in JD.com also benefited returns, as the Chinese online retailer sold off sharply over domestic consumption concerns. Personal problems troubling the chairman also led to increased uncertainty of the company s management and near-term outlook. Top stock contributors (%) Top stock detractors (%) Stock Relative weight Total return Stock Relative weight Total return Taiwan Semiconductor Manufacturing +1.6 +21.1 Vipshop -42.5-0.6 PetroChina +2.4 +8.3 Sands China -15.3-0.4 JD.com -0.6-33.0 Midea Group -22.3-0.3 Alibaba -2.2-11.2 Reliance Industries 22.3-0.2 PT Semen Indonesia +0.7 +34.0 Netmarble -24.2-0.2 Source: FactSet, average positions over the quarter. Portfolio positioning as at 30 September 2018 (%) Sector Relative weighting (%) Financials 4.1 Industrials 2.0 Consumer discretionary 1.4 Energy 0.6 Real estate Healthcare Utilities -1.0 Telecoms -1.1 Information technology -1.6 Materials -2.8 Consumer staples Source: FactSet. -3.8 Schroder ISF* Emerging Asia Third quarter 2018 3

Key portfolio activity During the quarter we took a new position in HK Exchanges & Clearing. This was to narrow our underweight in the firm after its shares corrected following a very strong start to the year. As sentiment on the Hong Kong market moderates in this current environment, we believe the share price now implies that the current lower rate of trading activity will continue, a level we believe to be more sustainable and reasonable. We also added to China Mengniu Dairy, whose share price looks reasonable to us after the recent correction. The Chinese dairy market remains strong and Mengniu is gaining market share. New product launches and a new distribution channel are fuelling its revenue growth. We also initiated a new position in casino hotel firm Galaxy Entertainment. Its leadership position in the premium mass segment is expected to continue driving its earnings growth. Key sales from the portfolio over the period included Sinopec, which we exited following its recent strong outperformance. We also took profits on Largan Precision and exited the position in the supplier of smart-phone camera lenses. This was due to our caution on the volume of sales via Apple given high pricing and the lack of must-have features in new smart phones. We also closed our position in Wharf Real Estate Investment, as we think mall growth could start to wane due to the slowdown in the Chinese economy and the depreciation of the renminbi. Top stock overweights (%) Stock Sector Relative weight HSBC Financials +3.6 Sands China Consumer Discretionary +3.1 BOC Hong Kong Financials +2.9 Petrochina Energy +2.5 Prada Consumer Discretionary Source: FactSet as at 30 September 2018. Outlook and strategy +2.0 Earlier optimism that Sino-US trade issues can be resolved through negotiations has given way to increasing concerns that trade tensions will escalate further for tariffs to impact all of China s exports to the US. Beyond trade, further deterioration in Sino-US relations have also been marked by events including references made by Trump and his administration to China s meddling in America s democracy and upcoming elections. The initial impact from the trade war and tariffs will be limited, but concerns are on the rise in terms of how this will go on to impact consumption and private investment, as well as potential disruption and relocation of existing supply chains. Further to the risks to global growth brought by trade wars and protectionism, global markets are also having to contend with the combination of quantitative and monetary tightening as well as fiscal easing in the US and consequent US dollar strength. This together with higher oil prices are putting pressure on weaker emerging market countries and currencies. However, in contrast to previous taper tantrums, most emerging Asian economies generally look better-placed today from a macro perspective. Current account deficits have been reduced, with most Asian countries running a surplus. While we may continue to see risk-off -driven selling of assets and FX in emerging markets in response to any sharp US dollar moves, we do not expect this to escalate into any systemic problems on the ground in Asia. The greatest pressure today is being seen in India, Indonesia and the Philippines, all of which are running current account deficits and are oil importers, and are being forced to raise rates to support their currencies and constrain domestic demand. For China, these challenges are coming at a time when China s focus on quality growth as well as economic and social stability has brought about a crackdown on the shadow banking sector and the issuance of wealth management products with implicit guarantees. This drive to deleverage and increase regulatory oversight on these problem areas led to worries of a growth scare coming into 2018. Tighter credit conditions have also in turn led to a rise in credit defaults this year. Although positive for the longer term stability of the financial system this tightening is leading to a continued deceleration in broader credit growth in the system, which is starting to feed through into slower growth in the economy. Tightened liquidity domestically combined with external headwinds posed by trade have continued to weigh heavily on Chinese markets and sentiment, particularly onshore. Whilst the trend of deleveraging remains, there are signs of selective easing and policy support from the government. These include the delayed implementation of wealth management products Schroder ISF* Emerging Asia Third quarter 2018 4

regulations, RRR cuts, acceleration of issuance of local government bonds, and encouraging bank lending to small and medium enterprises. There are also potential changes to tax regimes in support of domestic consumption. These aim to provide a cushion of support, and we have not yet seen any new major stimulus to kickstart a new cyclical upswing. The government s agenda for deleveraging and structural reforms whilst maintaining reasonable economic growth rate remains a delicate balance. Equity markets have been very quick to price in a slowdown in growth and aggregate PE multiples for the regional index have corrected from around +1 standard deviation above average in January, to slightly below average levels today. While for many of the more highly rated growth stocks in the region, corrections have been even more severe as investors have sold their winners from the preceding market upswing. Portfolio positioning The portfolio remains relatively defensive in the current environment, with most part of its exposure being towards domestic economies in the region and structural themes rather than externally via exporters. Broadly speaking, the portfolio is overweight Greater China markets and India while maintaining the underweights in ASEAN markets. On the sector front, the portfolio is underweight technology stocks, having taken profits aggressively coming into 2018. With recent regulatory headwinds as well as concerns over softer consumption impacting internet and e-commerce names, we remain underweight. In hardware, we are positioned mainly in Taiwan across a number of industries including semiconductors, iphone supply chain companies as well as other component makers. We are overweight in consumer discretionary, with exposures to travel-related services, gaming and leisure, as well as household appliance manufacturers, where we have taken a structural view on longer term consumption trends. We are also overweight financials, mainly in interest rate sensitive exposures via Hong Kong banks with dividend yield support and Indian private banks supported by structural growth prospects. looking for opportunities to re-enter or rotate into favoured names with better visibility as value reemerges. Risk considerations The capital is not guaranteed. In order to access restricted markets, the fund may invest in structured products. Should the counterparty default, the value of these structured products may be nil. Investments denominated in a currency other than that of the share-class may not be hedged. The market movements between those currencies will impact the share-class. Investments in small companies can be difficult to sell quickly which may affect the value of the fund and, in extreme market conditions, its ability to meet redemption requests upon demand. The fund will not hedge its market risk in a down cycle. The value of the fund will move similarly to the markets. Emerging markets will generally be subject to greater political, legal, counterparty and operational risk. Emerging equity markets may be more volatile than equity markets of well established economies. Investments into foreign currencies entail exchange risks. The fund may hold indirect short exposure in anticipation of a decline of prices of these exposures or increase of interest rate. Changes in China's political, legal, economic or tax policies could cause losses or higher costs for the fund. The portfolio is now slightly underweight Energy and Healthcare after we took profits there following recent strong performance. The focus on companies with strong fundamentals remains, and with recent market weakness, we will be Schroder ISF* Emerging Asia Third quarter 2018 5

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 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 (Europe) 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. Louisa Lo has expressed her own views and opinions in this document and these may change. Schroders will be a data controller in respect of your personal data. For information on how Schroders might process your personal data, please view our Privacy Policy available at www.schroders.com/en/privacy-policy or on request should you not have access to this webpage. This document is issued by Schroder Investment Management Ltd., 1 London Walll Place, EC2Y 5AU, who is authorised and regulated by the Financial Conduct Authority. For your security, communications may be taped or monitored. Third Party Data Disclaimer: 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 www.schroders.com contains additional disclaimers which apply to the third party data. Schroder ISF* Emerging Asia Third quarter 2018 6