Overview Fund objective Key features To generate long-term returns before fees in excess of traditional capitalisation weighted global equity indices through an actively managed blend of our Value and Quality equity strategies. The strategy is implemented via a single diversified portfolio of equity and equity related securities of companies worldwide excluding Australia. The advantages of both Value and Quality in one fund strategic diversification from blending two distinct strategies which tend to outperform at different stages of the economic cycle. Embracing breadth exploiting opportunities from more than 15,000 stocks globally. Consistent philosophies and index unconstrained approach. More efficient implementation and risk management in a single fund as opposed to a fund of fund structure. Performance to 30 November 2018 Relative to MSCI All Country World ex Australia Index Calendar years Total returns (AUD %) MSCI AC World ex Australia Excess (Net) 2018 YTD 2017 2016 2015 2014 2013 2012 2011 2010 +1.55 +11.16 +11.33 +8.66 +13.36 +46.29 +14.51-7.04 +4.70 +4.53 +14.86 +8.29 +10.04 +14.10 +43.24 +14.48-7.24-1.20-2.99-3.70 +3.04-1.39-0.74 +3.05 +0.02 +0.20 +5.91 +0.64 +10.08 +10.25 +7.60 +12.19 +44.72 +13.28-8.03 +3.56-3.89-4.78 +1.96-2.44-1.91 +1.49-1.20-0.79 +4.76 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* -1.43-6.30-0.84 +0.80 +7.03 +9.93 +11.16 +158.72 MSCI AC World ex Australia -1.51-6.59-0.84 +3.02 +8.30 +11.17 +10.80 +151.23 +0.08 +0.29 +0.01-2.23-1.27-1.24 +0.36 +7.49-1.51-6.53-1.24-0.18 +5.99 +8.85 +10.02 +135.89 Excess (Net) -0.00 +0.06-0.40-3.21-2.31-2.32-0.77-15.34 Relative to MSCI World ex Australia Index Calendar year Total returns (AUD %) MSCI World ex Australia Excess (Net) 2018 YTD 2017 2016 2015 2014 2013 2012 2011 2010 +1.55 +11.16 +11.33 +8.66 +13.36 +46.29 +14.51-7.04 +4.70 +6.04 +13.38 +7.92 +11.80 +15.01 +48.03 +14.14-5.34-2.04-4.50-2.22 +3.42-3.14-1.65-1.74 +0.36-1.70 +6.74 +0.64 +10.08 +10.25 +7.60 +12.19 +44.72 +13.28-8.03 +3.56-5.40-3.30 +2.33-4.19-2.81-3.30-0.86-2.69 +5.60 Rolling periods Total returns (AUD %) 1 month 3 mths FYTD MSCI World ex Australia 1 Year 3 Years -1.43-6.30-0.84 +0.80 +7.03 +9.93 +11.16 +158.72-1.83-6.62-0.30 +4.23 +8.23 +11.74 +11.59 +167.88 +0.40 +0.32-0.53-3.43-1.20-1.81-0.43-9.17-1.51-6.53-1.24-0.18 +5.99 +8.85 +10.02 +135.89 Excess (Net) +0.32 +0.09-4 -4.41-2.24-2.89-1.57-31.99 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 8 December 2009. Page 1
Market and fund commentary Market review Following a torrid October, global equity markets recovered their poise in November with the MSCI All Country World index climbing 1.5% (in USD terms). After initially drifting lower early in the month, markets rallied as much as 3.3% in the last week as investors were cheered by the prospect of a more dovish US Federal Reserve. The Federal Reserve Chairman, Jerome Powell, said that US interest rates are just below neutral which was in marked contrast to his indication in early October when he flagged that the rates were a long way from neutrality. Rising hopes of a truce between the US and China on their trade dispute also encouraged appetite for riskier assets. The US dollar weakened in response and emerging markets posted their best month since January, in no small part due to a rebound in emerging market currencies. Europe failed to participate in the rebound due to political risk, most notably in relationship to Italy and Brexit. Japan was broadly flat on the month. Whilst Microsoft officially reclaimed the title of the world s most valuable company after its market capitalisation closed above that of Apple at the end of November, technology stocks were some of the weakest performers during the month as investors reset their expectations for future growth. Apple in particular was hit hard on the back of expectations of weak sales over the upcoming holiday season, falling 18% during the month. Semiconductor stocks also continued to weaken with the previous market darling, Nvidia, losing 22% of its value. The weakest performers during the month were energy stocks as oil prices continued to suffer from fears of oversupply. The price of Brent Crude has fallen by more than 30% since touching a four-year high in early October whilst November marked its worst month since October 2008. Weakness in energy also weighed on the US high-yield bond market where American shale companies borrow. More generally, the current high level of corporate debt has become a major talking point as the credit market looks set to post its worst year since the global financial crisis as redemptions have accelerated. Fund commentary In November, Global Blend Fund was slightly ahead of the indices, driven by strong stock selection within the technology sector, as well as positioning within the health care and industrials sectors. The relative outperformance was offset by positioning within the consumer discretionary and Japanese communication services sectors. Technology stocks were some of the weakest performers during the month as investors reset their expectations for future growth. The fund benefitted from strong stock selection from both the names we own and also ones we sidestepped. Notable contribution came from not holding Apple which was down 18% in November, one of its worst months in twenty years. This is amidst concerns that the company has reached peak iphone sales whilst Apple suppliers also reduced earnings guidance in the month. As the broader semiconductor industry continued to weaken, not holding previous market darling Nvidia contributed, as it lost 22% of its value through the month. Our longstanding positions in the health care sector (predominantly within pharmaceutical names) were beneficial as health care was the best performing sector through the month. Within industrials, the fund focuses on companies with strong financial strength and more stable business models. Larger than index positions were rewarded (e.g. Cummins & Illinois Tool Works) while avoiding more troubled industrial companies (not holding GE and Boeing Co) was also beneficial. Page 2
Market and fund commentary (continued) Within the consumer discretionary sector, the fund suffered from stock selection across a small number of names, largely attributable to earnings revision stories and the uncertain political backdrop. In particular, our larger than index positions in UK homebuilders detracted amidst Brexit speculations as names that we find cheap, profitable and financially strong suffered. Not holding Amazon, a name we do not favour based on business valuation, also weighed on returns as a more positive outlook regarding the US and China trade war emerged. These ongoing trade tensions also came to the detriment of our positions in the auto parts industry, an area of the market we regard as attractive from a valuation perspective. Meanwhile, within consumer staples, tobacco stocks were hit hard by concerns that the US Food and Drug Administration may ban menthol cigarettes or at least apply greater regulation. Holdings in US and European tobacco suffered as a consequence. In particular, our holdings in Altria detracted, falling 16% during the month whilst the industry as a whole was down by around 10%. Within communication services, longstanding positions in favoured wireless telcos e.g. KDDI Corp and NTT DOCOMO detracted due to concerns that a price war will negatively impact earnings going ahead. We continue to find attractively valued and high quality opportunities across the market. The strategy s most significant exposures remain in financials, consumer staples and healthcare. We maintain a low exposure to utilities and real estate, particularly in the US. In financials, we have continued to add to high quality value positions within US banks and life & health insurers. In this sector, we aim to take advantage of opportunities across the quality spectrum. Deep value remains within some European and Asian banks. At the other end, we continue to see high quality companies trading at what we view as very attractive valuations, particularly life & health insurers and complex banks in the US and UK. Within resources, we retain our overall preference for strong balance sheets and have identified opportunities in miners, integrated-oil and chemical companies globally. Elsewhere in cyclical sectors, we maintain a broad exposure to technology, consumer discretionary and industrials. Page 3
Attribution against MSCI All Country World ex Australia Index Sector Nov 2018 Information Technology Health Care Industrials Energy Utilities Real Estate Financials Materials Communication Services Consumer Staples Consumer Discretionary -0.40-0.30-0.20-0.10 0.00 0.10 0.20 0.30 0.40 0.50 Stock Selection (%) Asset Allocation (%) Region Nov 2018 North America Emerging Markets Emea Fund details as at 30 November 2018 Fund size A$540m APIR code Redemption price 1.0958 Inception date 8 December 2009 Buy/Sell spread 0.20%/0.15% Distribution frequency United Kingdom Emerging Markets Latam Japan Pacific Ex Japan Emerging Markets Asia Continental Europe -0.40-0.20 0.00 0.20 0.40 0.60 0.80 1.00 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 total estimated sector and region performance attribution is reconciled with and adjusted to the reported official relative return. Normally twice yearly June and Dec Management costs 8% Fund characteristics as at 30 November 2018 SCH0040AU ActiveShare NumHoldings Fund MSCI All Country World ex Australia Index Active share 74.8% N/A Number of stocks 410 2,716 Source: Schroders Page 4
Fund weights versus MSCI All Country World ex Australia Index Sector As at 11.1 8.7 Consumer Staples 12.1 10.4 Industrials 1.7 5.7 4.4 Materials 1.2 13.3 12.2 Health Care 1.1 7.2 6.3 Insurance & Asset Manager 10.5 10.5 Banks -0.1 10.2 10.5 Consumer Discretionary -0.4 14.8 15.4 Information Technology -0.6 8.2 9.2 Communication Services -1.0 5.3 6.4 Energy -1.1 0.8 2.9 Real Estate -2.0 0.7 3.1 Utilities -2.4 0.2 0.0 Cash 0.2 2.5 Region As at 8.6 5.3 16.9 14.1 10.0 7.6 United Kingdom Continental Europe Japan 3.3 2.9 2.4 2.5 1.6 Pacific ex Japan 9.3 11.5 Emerging Markets -2.1 52.4 59.9 North America -7.5 0.2 0.0 Cash 0.2 Size As at 57.1 75.6 Mega -18.5 29.3 21.5 Large 7.8 12.6 2.9 Mid 9.6 0.0 Small 0.0 0.0 Micro The difference between the fund and benchmark weights may not equal stated active weights due to rounding. www.schroders.com.au email: simal@schroders.com Schroder Investment Management Australia Limited Level 20 Angel Place, 123 Pitt Street, Sydney NSW 2000 Phone: 1300 136 471 Fax: (02) 9231 1119 Investment in the Schroder Global Blend Fund - wholesale class (the "Fund") may be made on an application form accompanying the current Product Disclosure Statement, available from Schroder Investment Management Australia Limited (ABN 22 000 443 274 AFSL 226473) ( 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 www.schroders.com.au. Page 5