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Schroder ISF* Global

Fund Manager: Paul Grainger, James Ringer, Robbie Boukhoufane and Global and Team | Fund update: August 2021

Performance overview – We remain constructive on the eurozone and added to our favoured overweight Italy versus Germany. – Global bond yields rose in August. While there were We think President Draghi’s leadership will support signs of slowing growth momentum and ongoing Italy’s recovery with the country set to be a main concerns over the Covid-19 Delta variant, inflation and beneficiary of the EU recovery fund. the withdrawal of monetary policy support were the – Our currency strategy reflects our view that the main focus of markets. global economic rebound has likely peaked. This – The US 10-year yield was eight basis points (bps) worked well and we reduced the underweight higher at 1.31%, having twice come close to 1.38%. The Swedish krona and closed our underweight UK 10-year yield was up from 0.57% to 0.62%. In Australian dollar (both versus US dollar). Europe, the German 10-year yield rising from -0.46% to – Contrary to our strategic view, we moved to a small -0.38%, while Italy’s increased from 0.63% to 0.71%. overweight to the Australian dollar versus the New – For corporate bonds, investment grade made small Zealand dollar. We think the bad news on the Delta negative returns, in line with government bonds. High variant in Australia is in the price, while yield made steady gains, due to income. expectations in New Zealand could be pared back. – The fund made a negative return, but outperformed – We added to the underweight in the Canadian the Bloomberg Barclays Global Aggregate index. dollar to reflect softening of global growth and commodity prices, but closed our underweight to Drivers of fund performance sterling, both versus US dollar. – – The contribution from rates was positive overall, We added an overweight Norwegian krone, versus notably our underweight UK gilts and overweight Swiss franc, as elevated inflation and a strong China. Our directional overweight to longer-dated US economy has raised the prospect for rate hikes in Treasuries detracted, but our curve flattener positions Norway. (which we added to) performed well. – Our emerging market currency positioning saw – Currency performance was in line with the benchmark. mixed results. Our overweight to the Indian rupee Our tactical underweight euro versus US dollar contributed, amid optimism over growth and less detracted, but our more counter-cyclical positions severe effects of Covid than previously feared, while worked, notably underweight Swedish krona, versus our overweight Korean won versus Taiwanese US dollar. dollar detracted. – – Overweight corporate bonds, high yield particularly, In credit, we continue to favour European high added to performance. yield. Portfolio activity Outlook/positioning – – We stayed overweight duration, but reduced the The dichotomy between slowing growth, peaking position slightly by closing our overweight to Korea. inflation and central banks withdrawing policy We deepened our underweight to the UK, remains evident. While the tapering of US bond concentrated in the front end of the curve, as we think purchases is well accepted, the commencement of improving economic conditions may be the catalyst for rate hikes is a little more uncertain and contingent a further pricing of monetary policy withdrawal. on a continued improvement in the labour market. This will make employment data releases even – We moderated our overweight US duration stance. more crucial in driving sentiment and markets. Despite the market’s dovish interpretation of Powell’s – Jackson Hole speech, we think the Fed will ultimately Downward growth momentum is probably most manage to cap inflation expectations. We increased evident in China, where softer global demand and our underweight US inflation with growing evidence supply chain issues continue to impact the pointing to the transient nature of price increases. country’s export growth.

*Schroder International Selection Fund is referred to as Schroder ISF throughout this document 1

– Conversely, we expect the European recovery story – Past performance is not a reliable indicator of future to continue, with business surveys reflecting strong results. The value of investments and the income service growth as Covid restrictions are lifted and from them may fall as well as rise and investors may mobility increases. Nevertheless, this growth is not get the amount originally invested. accompanied by higher than expected inflation and – Some performance differences between the fund and while the temporary nature will keep the ECB the benchmark may arise because the fund accommodative, hawkish members of the performance is calculated at a different valuation governing council have the ability to move markets. point from the benchmark. Calendar year performance (%)* – Please see the respective fund factsheets for the performance of other share classes. Year Fund (A Acc) Fund (I Acc) Target 2020 8.4 9.2 9.3 2019 8.8 9.7 6.8 2018 -3.5 -2.6 -1.2 2017 7.1 8.0 7.4 2016 2.1 3.1 2.1 Source: Schroders, net of fees (where applicable), bid-bid, with net income reinvested as at 31 December 2020. Target is BBgBarc Global Aggregate TR.

Risk considerations

– ABS and MBS risk: The fund may invest in expected, may create losses greater than the cost mortgage or asset-backed securities. The of the derivative and may result in losses to the underlying borrowers of these securities may not fund. The fund may also materially invest in be able to pay back the full amount that they owe, derivatives including using short selling and which may result in losses to the fund. leverage techniques with the aim of making a – Capital risk / distribution policy: As the fund return. When the value of an asset changes, the intends to pay dividends regardless of its value of a derivative based on that asset may performance, a dividend may represent a return of change to a much greater extent. This may result in part of the amount you invested. greater losses than investing in the underlying asset. – Contingent convertible bonds: The fund may invest in contingent convertible bonds. If the – High yield bond risk: High yield bonds (normally financial strength of the issuer of a contingent lower rated or unrated) generally carry greater falls in a prescribed way, the value market, credit and liquidity risk. of the bond may fall significantly and, in the worst – IBOR risk: The transition of the financial markets case, may result in losses to the fund. away from the use of interbank offered rates – Counterparty risk: The fund may have contractual (IBORs) to alternative reference rates may impact agreements with counterparties. If a counterparty the valuation of certain holdings and disrupt is unable to fulfil their obligations, the sum that liquidity in certain instruments. This may impact the they owe to the fund may be lost in part or in investment performance of the fund. whole. – Interest rate risk: The fund may lose value as a – Credit risk: A decline in the financial health of an direct result of interest rate changes. issuer could cause the value of its bonds to fall or – Issuer risk: The fund is permitted to invest more become worthless. than 35% of its scheme property in transferable – Currency risk: The fund may lose value as a result securities and money market instruments issued or of movements in foreign exchange rates. guaranteed by an EEA State / governments of the following country: United States of America. – Currency risk / hedged shareclass: The hedging of the share class may not be fully effective and – Liquidity risk: In difficult market conditions, the residual currency exposure may remain. The cost fund may not be able to sell a security for full value associated with hedging may impact performance or at all. This could affect performance and could and potential gains may be more limited than for cause the fund to defer or suspend redemptions of unhedged share classes. its shares. – Derivatives risk – efficient portfolio – Market risk: The value of investments can go up management and investment purposes: and down and an investor may not get back the Derivatives may be used to manage the portfolio amount initially invested. efficiently. A derivative may not perform as

Schroder ISF* Global Bond

Fund Manager: Paul Grainger, James Ringer, Robbie Boukhoufane and Global Fixed Income and Currency Team | Fund update: 2 August 2021

– Operational risk: Operational processes, including such a result will be achieved. Depending on those related to the safekeeping of assets, may fail. market conditions and the macro economic This may result in losses to the fund. environment, investment objectives may become – Performance risk: Investment objectives express more difficult to achieve. an intended result but there is no guarantee that

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. Schroders has expressed its 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 (Europe) S.A., 5, rue Höhenhof, L-1736 Senningerberg, Luxembourg. Registered No. B 37.799. 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* Global Bond

Fund Manager: Paul Grainger, James Ringer, Robbie Boukhoufane and Global Fixed Income and Currency Team | Fund update: 3 August 2021