Schroder Global Value Fund Overview Portfolio objective To generate long-term returns before fees in excess of traditional capitalisation weighted global equity indices by investing in a diversified portfolio of equity and equity related securities of companies worldwide excluding Australia using a Value based investment strategy. Key features Value style - attractively priced companies with strong fundamentals outperform in the long run. Embracing breadth - exploiting opportunities from more than 15,000 stocks globally. Bottom-up, index unconstrained investing - minimal sector, region or size constraints maximises the potential return and minimises dead money allocated to expensive stocks simply to satisfy inefficient index constraints. Focus on risk management and portfolio construction - a highly diversified portfolio minimises stock specific risk whilst retaining a high degree of conviction. Performance to 31 Relative to MSCI All Country World ex Australia calendar year Total returns (AUD) YTD 2015 2014 2013 2012 2011 Fund (Gross) -3.45 +7.38 +13.70 +48.29 +13.51-8.95 MSCI AC World ex Australia -3.28 +10.04 +14.10 +43.24 +14.48-7.24 Excess (Gross) -0.16-2.67-0.40 +5.05-0.98-1.71 Fund (Net) -3.53 +6.33 +12.60 +46.85 +12.41-9.84 Excess (Net) -0.24-3.71-1.50 +3.61-2.08-2.60 rolling periods Total returns (AUD) 1 month 3 mths FYTD 1 Year Relative to MSCI World ex Australia calendar year 3 Years 5 Years SI * SI Cum* Fund (Gross) -3.45-8.57-5.22 +0.10 +18.58 +11.38 +6.83 +100.31 MSCI AC World ex Australia -3.28-7.78-2.78 +2.88 +18.67 +12.05 +5.37 +73.40 Excess (Gross) -0.16-0.79-2.43-2.78-0.08-0.67 +1.46 +26.92 Fund (Net) -3.53-8.79-5.76-0.87 +17.43 +10.30 +5.96 +83.83 Excess (Net) -0.24-1.02-2.98-3.75-1.23-1.75 +0.59 +10.44 Total returns (AUD) YTD 2015 2014 2013 2012 2011 Fund (Gross) -3.45 +7.38 +13.70 +48.29 +13.51-8.95 MSCI World ex Australia -3.23 +11.80 +15.01 +48.03 +14.14-5.34 Excess (Gross) -0.22-4.42-1.31 +0.26-0.64-3.62 Fund (Net) -3.53 +6.33 +12.60 +46.85 +12.41-9.84 Excess (Net) -0.30-5.46-2.41-1.18-1.74-4.50 rolling periods Total returns (AUD) 1 month 3 mths FYTD 1 Year 3 Years 5 Years SI * SI Cum* Fund (Gross) -3.45-8.57-5.22 +0.10 +18.58 +11.38 +6.83 +100.31 MSCI World ex Australia -3.23-7.38-1.16 +4.85 +20.76 +13.57 +5.53 +76.03 Excess (Gross) -0.22-1.19-4.06-4.75-2.17-2.19 +1.31 +24.28 Fund (Net) -3.53-8.79-5.76-0.87 +17.43 +10.30 +5.96 +83.83 Excess (Net) -0.30-1.41-4.60-5.72-3.33-3.27 +0.44 +7.80 Page 1 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 are from 26 July 2005. Calendar year return in the year of inception is from 26 July 2005. The MSCI AC World ex Australia Index includes stocks of both developed and emerging markets as defined by MSCI whilst the MSCI World ex Australia Index incorporates all the developed markets only.
Monthly commentary Market update The year got off to a dramatic start with sharp declines in share prices globally hitting the headlines. In the third worst January for global equities on record, the MSCI AC World fell by 6.0% in USD terms. There was an indiscriminate flight from risk assets (equities, corporate bonds and commodities) as concerns about the health of the global economy mounted. The announcement that China had experienced its slowest annual growth in 25 years did little to reassure investors already spooked by confusion over Beijing s stance on the yuan. This was accompanied by further alarming declines in the oil price which fell below $30 per barrel to plumb 12-year lows. Sentiment did improve, to some extent, towards the end of the month. While the US Federal Reserve stopped short of ruling out another rate rise in March, the tone of the Open Market Committee minutes fuelled speculation that rates may not rise as quickly as had been forecast. Meanwhile, markets were taken by surprise by the Bank of Japan s announcement that it would join the European Central Bank in adopting negative interest rates. On a regional view, in spite of experiencing its worst opening fortnight on record, the US outperformed other markets (although MSCI USA still ended the month down by 5.3%). While Emerging Markets continued to underperform the global benchmark, declining by 6.5%, they were not the worst casualties of the month and fared somewhat better than Europe ex-uk (-6.8%), Japan (-8.2%), and Pacific ex-japan (-8.8%). Indeed, January saw Japan officially enter bear market territory (defined as a 20% fall in share prices from the cycle peak). The US is now the only region not to have entered a bear market. Sectors were mostly down over the month with the exception of utilities which managed to end January in positive territory. The running order in terms of sector performance was hardly surprising given the level of risk aversion apparent in markets with utilities closely followed by other traditional defensive areas such as staples and telecoms. At the other end of the spectrum, the continued rout in commodity prices yielded yet another dismal month for materials and financials also endured steep falls. Fund commentary QEP Global Value was slightly behind the index as falling markets and high volatility drove a flight to traditional defensive but expensive sectors. Our strategic low allocation to expensive areas of utilities and consumer staples, particularly in the US, proved a headwind to relative performance. Banks and insurance companies saw a sell-off with little discrimination on quality, meaning that our holdings in the UK and the US were also a detractor. However, we look upon volatility in these industries as an opportunity to benefit from any over-reaction in high quality companies. Elsewhere, stock selection was positive in industrials and consumer discretionary with our positions within the US and Continental Europe, benefiting from some reassessment of valuations in these cyclical sectors. Our positions in telecoms in Japan, Asia and Continental Europe were another positive contributor, although the gains were partially offset by our underweight to the more expensive US telecoms. Amongst defensives we retain our preference for telecoms (outside of the US) and healthcare stocks globally (European pharmaceuticals in particular). US utilities and telecoms remain unattractive in our view. There is a broad range of global opportunities within cyclical sectors. Our preference in consumer discretionary is for companies in well-established and shareholder-friendly industries such as retail, media and auto component makers. In technology, our preference is for traditional US companies such as Intel and Microsoft and high quality Japanese and Emerging Market stocks, rather than excitable stocks in areas like social media. In industrials, we maintain our exposure to a range of attractively-priced, high quality opportunities, particularly within the US defence and machinery industries. In the energy and materials sectors we favour high quality companies trading on depressed valuations. Diversified chemical companies, particularly in Japan, remain good value. In the mining industry, our preference remains for larger, lower cost, diversified producers. Within energy, large integrated oil & gas stocks tend to offer attractive dividend yields and strong balance sheets. We continue to avoid the higher-cost producers, such as Canadian oil sands. The strategy s exposure to financials remains driven first by our view of the quality (risk) of a company and then the right valuation for any opportunity. Within insurance we maintain our preference for high Page 2
quality companies with a focus on long-term business strength and diversity. We continue to see a broad range of opportunities in the banking sector from high quality but over-sold banks in the US to lower quality but recovering banks in Europe. Page 3
Attribution against MSCI AC World ex Australia* Sector Consumer Discretionary Industrials Materials Consumer Staples Health Care Utilities Information Technology Telecommunications Energy Financials -0.50-0.40-0.30-0.20-0.10 0.00 0.10 0.20 0.30 Stock Selection (%) Asset Allocation (%) Region Japan Emerging Asia Emerging EMEA Continental Europe Pacific Ex Japan Emerging Latin America United Kingdom North America -0.50-0.40-0.30-0.20-0.10 0.00 0.10 0.20 0.30 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. *Effective from 31, attribution is presented against MSCI AC World Ex Australia. Portfolio characteristics Fund MSCI AC World ex Australia Tracking error* 1.8% N/A Active share 70.9% N/A Number of stocks 713 2,416 Source: Schroders, *Style Research Fund details Page 4 Portfolio size $A534m APIR code SCH0030AU Redemption price $0.7850 Inception date 26 July 2005 Buy/Sell spread 0.20%/0.15% Management costs 0.98% Distribution frequency Normally twice yearly June and Dec
Portfolio weights versus MSCI AC World ex Australia* Sector 15.4 10.2 7.3 4.2 8.8 6.5 5.1 4.1 13.0 12.4 6.2 6.2 13.5 14.5 9.7 11.1 1.5 3.2 11.3 13.3 1.3 3.4 6.8 10.9 0.1 0.0 Industrials Materials Energy Telecommunication Services Health Care Insurance & Asset Mgt Information Technology Banks Real Estate Consumer Discretionary Utilities Consumer Staples-4.1 Cash -1.0-1.4-1.7-2.0-2.1 5.1 3.1 2.4 1.0 0.6 0.0 0.1 Region 11.6 8.1 12.9 9.7 9.7 6.8 3.7 1.5 16.7 16.1 45.4 57.7 0.1 0.0 Japan Emerging Markets United Kingdom Pacific ex Japan Continental Europe North America Cash -12.3 3.5 3.1 2.9 2.1 0.6 0.1 Market capitalisation 46.2 70.6 26.9 25.0 19.3 4.4 6.7 0.0 0.8 0.0 Mega Large Mid Small Micro -24.4 1.9 0.8 6.7 14.9 The difference between the fund and benchmark weights may not equal stated active weights due to rounding. *Effective from 31, asset allocation is presented against MSCI AC World Ex Australia 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 Value 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