Q&A roadshow 2016

What is a Strategic

Credit Fund?

For professional advisers only. This material is not suitable for retail clients

Peter Harvey | Fund Manager

Questions

What is a Strategic Credit Fund?

What is your view on high yield debt?

Where are the opportunities in high yield debt?

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Schroder Strategic Credit Fund

Credit fund, with a total return objective (Libor +3% p.a. over medium term)

Flexible combination of high yield and investment grade debt

Structurally low interest rate duration

Majority UK and European issuers

GBP base currency; Euro and USD hedged share classes

£1.3bn combined strategy, launched April 2006

Fund Manager: Peter Harvey since launch

2

Source: Schroders as at 31 May 2016. Source for fund rating: Rayner Spencer Mills, Square Mile as at 31 March 2016

Effective interest rate duration

Schroder Strategic Credit Structurally low duration

3

Source: Barclays Point/Schroders, Option-Adjusted Duration from Barclays Point, 30 April 2016

0

1

2

3

4

5

6

7

8

Schroder Strategic Credit Barclays Euro High Yield Barclays Global High Yield Barclays £ credit

Net rating exposure

4

Notes: Schroders FIA, data as at 30 April 2016

Investment Grade Non Investment Grade

Average of Moody’s, Fitch and S&P

Contribution to spread duration (bps)

0.0 0.1 0.1

0.8

1.3

0.8

0.1

0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

AAA AA A BBB BB B CCC Unrated

Investment Grade Non Investment Grade

Average of Moody’s, Fitch and S&P

Largest issuers – Below A

5

Notes: Schroders FIA, 30 April 2016; * Asterisk indicates the position is mainly or entirely senior secured holding. Bonds rated below A- as per the average rating of Moody’s, S&P and Fitch. The

securities shown are for illustrative purposes only and not a recommendation to buy or sell shares

Issuer Sector MV (%)

Virgin Media* Cable & Telecom 3.2

Numericable* Cable & Telecom 2.6

Tesco Supermarket 2.1

Ardagh* Packaging 2.0

Jaguar Land Rover Automotive 1.8

Unity Media* Cable & Telecom 1.7

Koninklijke Telecom 1.5

Ineos Basic industry 1.4

Infinis* Landfill Gas 1.3

IDH* Healthcare 1.3

Issuer Sector MV (%)

RBS Banking 1.3

Wind* Telecom 1.3

J Sainsbury Supermarket 1.2

Spirit* Pubs 1.2

Play Mobile* Telecom 1.2

Empark* Car Parks 1.2

Cable & Wireless Telecom 1.1

Old Mutual Insurance 1.1

First Hydro* Hydro Electric 1.1

Thames Water Utilities 1.0

Schroder Strategic Credit Fund Historical Performance

6

Source: Schroders, gross cumulative returns since inception 31 December 2007 to 31 May 2016, net income reinvested. Bid to Bid. *Benchmark is the UK 3 Month Treasury Bill. Schroder Strategic Credit was launched

on 12 March 2014 to accommodate a transfer of shareholders from the Cazenove fund to the Schroders. Prior to 12 March 2014 the fund uses the track record of Cazenove Strategic Credit Fund (launched on 4 April

2006) as a performance track record. Past performance is not a guide to future performance and may not be repeated

%

-15

-10

-5

0

5

10

15

20

25

30

35

40

45

50

55

60

65

70

75

Apr

20

06

Jul 200

6

Oct 20

06

Jan 2

00

7

Apr

20

07

Jul 200

7

Oct 20

07

Jan 2

00

8

Apr

20

08

Jul 200

8

Oct 20

08

Jan 2

00

9

Apr

20

09

Jul 200

9

Oct 20

09

Jan 2

01

0

Apr

20

10

Jul 201

0

Oct 20

10

Jan 2

01

1

Apr

20

11

Jul 201

1

Oct 20

11

Jan 2

01

2

Apr

20

12

Jul 201

2

Oct 20

12

Jan 2

01

3

Apr

20

13

Jul 201

3

Oct 20

13

Jan 2

01

4

Apr

20

14

Jul 201

4

Oct 20

14

Jan 2

01

5

Apr

20

15

Jul 201

5

Oct 20

15

Jan 2

01

6

Apr

20

16

Fund Benchmark*

% 3yr 5yr Since Inception

Portfolio Return (Ann.) 4.6 4.8 5.4

Volatility 2.0 2.7 4.0

What is your view on

high yield debt?

High Yield Credit Spreads

270

320

370

420

470

520

570

620

670

720

Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16

HY – € HY – $

Eur 3 year Average: 388bp

8

Source: Schroders, Bloomberg, Data as of 31 May 2016

Over government bonds (bp)

Mergers & Acquisitions Activity US$ billion (LTM)

9

Source: Bloomberg, announced M&A transactions, last twelve months (April 2016).

0

500

1,000

1,500

2,000

2,500

3,000

Jan 00 Apr 01 Jul 02 Oct 03 Jan 05 Apr 06 Jul 07 Oct 08 Jan 10 Apr 11 Jul 12 Oct 13 Jan 15 Apr 16

US ($bn) Europe ($bn)

High Yield Net Leverage

10

2.4

2.6

2.8

3.0

3.2

3.4

3.6

3.8

4.0

Mar 03 Jan 04 Nov 04 Sep 05 Jul 06 May 07 Mar 08 Jan 09 Nov 09 Sep 10 Jul 11 May 12 Mar 13 Jan 14 Nov 14 Sep 15

US EU

Source: Morgan Stanley, Dec 2015; Leverage is Net Debt / EBITDA

Where are the

opportunities in high

yield debt?

Sector exposure % Net Asset Value

12

Source: Schroders FIA. Data is for year ending 31 May 2016 for the Schroder Strategic Credit fund.

Sectors shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell.

0

1

2

3

4

5

6

7

8

9

10

BBs are historically wide to BBBs European credit spread ratio

13

Source: Schroders, Bloomberg, ML, Data as of 31 May 2016

1.8

2.0

2.2

2.4

2.6

2.8

3.0

3.2

3.4

1.2

1.4

1.6

1.8

2.0

2.2

HY B / HY BB BB Non-Fins / BBB Non-Fins (rhs)

IG Banks cheapened up considerably during Q1

14

Source: J.P. Morgan; data as of 31 May 2016, US investment grade data.

Lower growth and dis-inflationary pulse from EM

15

Source: Bloomberg, 31 May 2016

US and UK LIBOR and EURIBOR futures

16

Source: Bloomberg, 23 May 2016. Forecast risk warning: Please see the information slide at the end of this presentation

-0.5

0.0

0.5

1.0

1.5

2.0

Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20

90 day £ futures Eurodollar futures Euribor futures

Rates %

For professional advisers only. This material is not suitable for retail clients.

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. Schroders has expressed its own views and these may change. The data contained in this document has been sourced by Schroders and should be independently verified

before further publication or use.

This presentation is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or

sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed

to be reliable but Schroder Unit Trusts Limited (Schroders) does not warrant its completeness or accuracy. No responsibility can be accepted for error of fact or opinion. This does not exclude or

restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Reliance should not

be placed on the views and information in the document when taking individual investment and/or strategic decisions.

The distribution yield reflects the amounts that may be expected to be distributed over the next twelve months as a percentage of the mid-market unit price at the date shown. The underlying yield

reflects the annualised income net of expenses of the fund (calculated in accordance with relevant accounting standards) as a percentage of the mid-market unit price of the fund at the date shown.

Both yields are based on a snapshot of the portfolio on that day shown. They do not include any preliminary charge and investors may be subject to tax on distributions. This fund invests partly or

wholly in bonds and thus will tend to be less volatile than funds that invest in pure equities. However, the capital value of a bond fund and the level of its income will still fluctuate. This fund invests

partly in higher yielding bonds which will be issued by borrowers with lower credit ratings. Such bonds will have a greater risk of default by the lender and the incidence of such risk may have a

negative impact on income and capital value. The fund may extensively use derivative instruments and forward transactions to meet its investment objectives. Further information on the risks

associated with derivatives and the risks associated with the fund can be found in the full Prospectus and Key Investor Information document. The levels and bases of tax assumptions may change.

Forecast risk warning: The forecasts included in this presentation should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own

assumptions which may change. We accept no responsibility for any errors of fact or opinion and assume no obligation to provide you with any changes to our assumptions or forecasts. Forecasts

and assumptions may be affected by external economic or other factors

Source for ratings: Rayner Spencer Mills and SquareMile as at 30 April 2016

Issued in June 2016 by Schroder Unit Trusts, 31 Gresham Street, London, EC2V 7QA. Registered no. 4191730 England. Authorised and regulated by the Financial Conduct Authority. UK10794

Important information

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15/06/2016 09:58:17