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Schroder ISF* UK Alpha Income Fund Manager: Sue Noffke, Matt Bennison | Fund update: Q1 2021

Performance overview Portfolio activity – Equities globally gained ground while bond yields and – We sold out of security solutions firm G4S inflation expectations rose. UK equities kept pace with following the conclusion of the bidding war for the the recovery, while some domestically focused areas company. We also exited our position in British responded particularly well to good progress with the American Tobacco and water company Severn country’s vaccination programme and an improving Trent. economic outlook. – We invested the proceeds of these sales into new – The fund underperformed the FTSE All-Share index positions in global pharmaceutical firm over the quarter. AstraZeneca, telecoms firm BT Group and power

company Drax Group. Drivers of fund performance Outlook/positioning – Not owning banks proved detrimental for relative – We hold a range of companies that could benefit performance. We chose to reduce our exposure to from trends that have been accelerated by changes domestic banks early in 2020 based on the brought by the pandemic; companies leading unsupportive economic and interest rate environment. digitisation (Pearson, PayPoint, ) and those – Our large position in pharmaceutical firm contributing to the energy transition (Drax Group, GlaxoSmithKline, together with chemical group SSE). Croda and infrastructure group John Laing were the – We also have exposure to re-opening opportunities largest detractors to performance. as lockdowns lift (Burberry, ) and – Positive portfolio contributions came from infrastructure development (John Laing, Anglo companies expected to be strong beneficiaries of American, Balfour Beatty) as increased spend by the anticipated economic recovery such as public governments is likely to play a significant role in the transport operator National Express. recovery from the pandemic. – Other large contributors were diversified miner Anglo American that has exposure to the energy Calendar year performance (%) transition as a provider of new copper and platinum group metals capacity that are essential ingredients for a more sustainable world. Education publisher Year Fund Target Pearson is progressing further towards a digital future that offers growth opportunities and 2020 -8.1 -9.8 performed strongly. 2019 21.3 19.2

2018 -15.3 -9.5

2017 15.7 13.1

2016 8.7 16.8

Source: , net of fees, bid to bid, with net income reinvested. GBP C Acc as at 31 December 2020. The target benchmark is FTSE All-Share index

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.

*Schroder International Selection Fund is referred to as Schroder ISF throughout

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Risk considerations

Currency risk: The fund may lose value as a result of Performance risk: Investment objectives express an movements in foreign exchange rates. intended result but there is no guarantee that such a Derivatives risk: A derivative may not perform as result will be achieved. Depending on market conditions expected, may create losses greater than the cost of the and the macro economic environment, investment derivative and may result in losses to the fund. The fund objectives may become more difficult to achieve. may also materially invest in derivatives including using IBOR: The transition of the financial markets away from short selling and leverage techniques with the aim of the use of interbank offered rates (IBORs) to alternative making a return. When the value of an asset changes, reference rates may impact the valuation of certain the value of a derivative based on that asset may change holdings and disrupt liquidity in certain instruments. to a much greater extent. This may result in greater This may impact the investment performance of the losses than investing in the underlying asset. fund. Liquidity risk: In difficult market conditions, the fund Concentration risk: The fund may be concentrated in a may not be able to sell a security for full value or at all. limited number of geographical regions, industry This could affect performance and could cause the fund sectors, markets and/or individual positions. This may to defer or suspend redemptions of its shares. result in large changes in the value of the fund, both up Operational risk: Operational processes, including or down. those related to the safekeeping of assets, may fail. This may result in losses to the fund.

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Schroder ISF* UK Alpha Income 2 Fund Manager: Sue Noffke, Matt Bennison | Fund update: Q1 2021