Third Quarter 2013
Schroders Absolute Return EMD and Currency Fund As of September 30, 2013 Quarterly Investment Report
Schroder Fund Advisors LLC. Member FINRA, SIPC 875 Third Avenue, New York, NY 10022-6225 (800) 730-2932 www.schroderfunds.com
Investment Report – Third Quarter 2013
Schroders Absolute Return EMD and Currency Fund Overview Fund Objective
Investment Approach
Fund Valuation
Schroder Absolute Return EMD and Currency Fund seeks a positive absolute return from capital growth and income. — — — —
The EMD Fund focuses on absolute returns as the primary goal Principles of both risk control and return maximization operate concurrently Investment process based on fundamental, quantitative, technical and sentiment analysis Extensive in-house research is applied across a broad EMD universe, as well as across the debt sectors and currencies of those countries — Actively managed with the ability to hold up to 40% in cash
Total net assets (all share classes) Fund Value at June 30, 2013
$120,275,383
Fund Value at September 30, 2013
$160,077,813
Source: SEI
Performance Periods to September 30, 2013
Total returns (%)
3 months
1 Year
3 Year
5 Year
Since Inception*
Fund (Investor)
-0.10
3.81
n/a
n/a
1.88
Fund (Advisor)
-0.10
3.58
n/a
n/a
1.64
0.07
0.29
n/a
n/a
0.37
Relative Performance (Investor)
-0.17
3.52
n/a
n/a
1.51
Relative Performance (Advisor)
-0.17
3.29
n/a
n/a
1.27
3-Month USD Fixed Libor
Source: Schroders. Net of fees. *Inception Date: 12/15/2011
Performance versus benchmark (%)
5.0 3.8
4.0 3.0
1.9
2.0 1.0
0.4
0.3
0.1
0.0 -1.0
-0.1 3 Month
1 Year Fund (Investor)
Calendar year performance (%)
Since Inception 3-Month USD Fixed Libor
2012 Investor
3.90
Advisor
3.57
Benchmark
0.44
Source: Schroders
Performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown. Principal value and investment returns will fluctuate so that shares, when redeemed, my be worth more or less than their original costs. For the most recent month-end performance, visit www.schroderfunds.com or call (800) 730-2932.
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Investment Report – Third Quarter 2013
Schroders Absolute Return EMD and Currency Fund Performance Review 3Q 2013 Review
Page 2
–
The Schroder Absolute Return EMD and Currency Fund maintained its defensive investment stance during the quarter under review. This cautious positioning was characterized by the fund’s holdings of high cash balances, ultra-low exposure to duration and to credit markets, as well as small (albeit higher) holdings in currencies. This defensive stance has allowed the fund to weather the renewed impulsive sell-off, which occurred in August.
–
Following the August decline in most EM bonds and currencies, some stabilization has occurred during the month of September. Indeed, most assets have only consolidated around their recent lows while others have seen a more noticeable bounce.
–
The Indian Rupee and the South African Rand are among the assets which have rebounded. There is now a distinct possibility that the August sell-off in these two currencies may have been the final spike which usually occurs at the late stages of a bear market (see outlook section below).
–
While the investment team continues to be broadly cautious towards high duration bonds and credits on account of unattractive valuations, the August sell-off has led to an improvement in our Valuation and Sentiment indicators for a number of currencies. Therefore, portfolio activity focused on purchasing currencies such as the Russian Ruble, the Polish Zloty, the South African Rand and the Indian Rupee. In total, these purchases represent 25% of the fund’s Net Asset Value.
Investment Report – Third Quarter 2013
Schroders Absolute Return EMD and Currency Fund Investment Outlook Global
Page 3
The deceleration in global credit growth which we have highlighted in the previous edition of these notes is persisting. Economic activity in EMs is already slowing down as a result of this stalling financial liquidity but Developed economies have so far shown more resilience by continuing their modest recoveries.
The sharp slowdown in US bank lending - led by rapidly contracting securities credit - has reached alarming levels. If not reversed soon, these rapidly tightening financial conditions have the potential to trigger renewed turmoil.
The Federal Reserve appears to have been surprised by this sharp tightening in credit conditions: its recent unexpected decision not to taper should perhaps be viewed within this context. In other words, the Fed has been forced into an unprecedented policy flip flop. The sharp slowdown in credit creation could also lead to a loss of faith in the efficacy of continuous pump priming. More than ever, the credibility of the Fed is at stake.
Policymakers, particularly in the US and China, are coming to the realization that a step back from the extraordinary monetary policies of the last 5 years is proving very hard to achieve in an orderly manner. Moreover, it is becoming clear that these policies have not only failed to create the conditions for a balanced and sustainable recovery but they have also led to the formation of a bond bubble, notably in Emerging Markets. The imbalances and investment excesses in EM, accommodated by years of easy money, have only recently started to be recognized.
Indeed, Brazil, Turkey, South Africa, India, Indonesia and Ukraine are among the countries where deteriorating macro-economic fundamentals have been exposed and where the policies in place have started to be challenged by market participants. The recent withdrawal of capital from these countries has provoked weakness in currencies and has forced policymakers to begin tightening.
The required macro-economic adjustments in EM are well advanced in countries that were first to experience a crisis, notably in Eastern Europe and Vietnam. These countries offer selected investment opportunities (see below). Elsewhere, policy changes are not yet significant and the valuations on offer are not yet compelling enough to warrant a confident positioning. High duration bonds and credits should be particularly approached with caution, notwithstanding the possibility of a short-term bounce supported by our Chart and Sentiment Indicators (see below). Such a short-term bounce could occur during Q4, a period with favorable seasonality for a number of EM assets.
Investment Report – Third Quarter 2013
Schroders Absolute Return EMD and Currency Fund
The outlook for Asian markets remains clouded by the strong likelihood of the Chinese economy suffering badly in the next few years. China’s unprecedented credit boom now shows clear signs of deceleration, which is likely to be the precursor to broadening payments problems and a debilitating banking crisis. With this as backdrop, it is no wonder that Asian currencies have been trending weaker in recent months.
Though Fundamental Analysis still highlights the excellent prospects for the economies of Philippines, Thailand and Taiwan, expectations of strong performance of assets even in these “good” Asian countries must now be tempered and possibly abandoned. For a country with weaker fundamentals such as Indonesia, while allowing for a period of calm after the recent volatility, policymakers will likely remain under pressure, in the next few quarters, to produce the magnitude of policy response needed to reverse this year’s sizeable capital outflows.
Vietnamese assets – a haven of stability within the region through the summer months – will remain a core holding within our funds in the near future, supported by growing appreciation from foreign investors of the country’s recent achievements in terms of economic stabilization and of the government’s renewed emphasis on reform (notably its commitment to the Trans Pacific Partnership).
Indian markets now offer some interest: improved monetary policy under the new RBI Governor, together with trade account adjustments, may signal the worst is behind us for the Rupee, at least for the time being.
We have highlighted in the previous editions of these notes the significant improvements in the balance of payments achieved by most countries in Europe. These improvements have been corroborated by the recent resilience of European currencies. Such resilience should persist, even in Poland and Hungary, where the latest policy setbacks should not derail the on-going macro-economic adjustments. The Polish Zloty and the Hungarian Forint remain on our buy list.
Greek assets have remained firm recently, despite intermittent concerns about political stability. The latest piece of the reform puzzle in Greece has been the consolidation and recapitalization of the banking system. Banking stabilization is also supported by recovering deposit growth, which has reinforced the foundations for a growth recovery. Earlier this year, we took some of the hefty profits made on restructured Greek bonds, but the reinstating of this exposure is now warranted as the recent correction appears to have run its course.
The slowdown in Russia has not been met with expansionary monetary and fiscal policies. Fears that the recently appointed Central Bank Chairman would embark upon an aggressive easing have proved to be unfounded. Policy continuity should be supportive for investments in the Ruble. In contrast, Ukraine’s assets are suffering from the rapidly declining FX reserves and from the weak outlook for foreign trade.
Turkey’s recent improvement in the trade balance shows that the required economic rebalancing has started. However, these improvements are still too small to take Turkey’s balance of payments out of the danger zone. The tensions surrounding the upcoming elections in Turkey could be a catalyst for renewed pressure on the country’s financial assets.
South Africa’s reliance on short-term foreign capital is equally a reason for concern. However, this has already been discounted to a large degree by the persistently weak Rand. Recent wage negotiations and the elections in Zimbabwe have passed without the feared social and political dislocation in South Africa. This could lead to a relief rally for the Rand from its recent oversold levels.
Asia
Eastern Europe, Middle East and Africa
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Investment Report – Third Quarter 2013
Schroders Absolute Return EMD and Currency Fund
Caution remains warranted towards this region. The upcoming elections in Brazil, Colombia, Chile, Uruguay, Argentina and Venezuela are likely to make the outlook even more clouded. We expect very little in terms of the much-needed reforms in the period immediately ahead.
Mexico is, perhaps, an exception, as the country continues to implement pro-market policies, but the recent growth slowdown is making investments in Mexican assets less appealing.
Economies in Argentina and Venezuela will continue to suffer from years of political mismanagement. Andean countries will attempt once again to implement (with perhaps some success) counter cyclical policies but their competitiveness remains an issue. The same could be said about Brazil but here, at least, there is some value in local bonds (offering yields in excess of 11.5%). An updated detailed review of Brazil is planned.
The outlook for global liquidity conditions has become worrisome. Bank credit in the US has decelerated further, Eurozone commercial banks are experiencing rapid balance sheet contraction and China’s money growth continues to trend lower. Moreover, our Analysis shows that the rapid official liquidity creation in Japan (courtesy of the BOJ) is not flowing to the rest of the world.
Our Model still scores most European countries relatively well due to continued macroeconomic adjustments. Hungary’s risk ranking improvement is particularly noticeable. Developed countries (US, Eurozone, Japan and the UK) still score positively due to reduced balance of payments vulnerabilities and improved competitiveness. South Korea, Taiwan and the Philippines are now the only countries in EM Asia which have retained good scores. Overall, poor and deteriorating country scores have become more prevalent in Asia and in Latin America, with Malaysia and Mexico being the latest to register negative scores for the first time in many years.
Turkey remains the country most at risk of a crisis because of long-standing imbalances. China is also in a precarious position as the Model is highlighting that the Credit Cycle Indicator has reached unsustainable levels. This has occurred while China’s Competitiveness Measure has seen substantial deterioration. India, Indonesia and Brazil remain very poorly scored, notwithstanding some improvements with regards to balance of payments indicators used in the Model.
Our valuation Models show that EM bonds and currencies remain broadly overvalued. The currencies and bonds which have re-priced the most in recent months (e.g. in Brazil, Indonesia and India) have only just reached fair value. Valuations for Stock Markets are more appealing (both for Developed and EM countries).
Latin America
Quantitative Analysis
Page 5
Investment Report – Third Quarter 2013
Schroders Absolute Return EMD and Currency Fund Chart Analysis
Page 6
In many EM assets, Momentum and Trend indicators confirm the negative dynamics highlighted in our previous notes, while Pattern Analysis suggests the possibility of a short-term rebound from recent oversold conditions. Such a rebound should not be large enough to invalidate the prevailing negative long-term trends. For example, in EM External Debt, a short-term correction taking Turkey 30’s to 175 (from 160 currently) and Russia 30’s to 123 (from 118 currently) appears to be underway and could last until year-end. However, this should not invalidate the change in trend to lower prices initiated earlier this year. US treasuries should follow a similar sequence of events with the 10year yield expected to drop towards 2% by year-end before the trend to higher yields reasserts itself.
The primary trend in EM local debt is to higher yields but, like other fixed income markets, this coming quarter could see corrections as Pattern Analysis suggests the recent weakness may have run its course. Indonesian and Brazilian local bond yields appear to have already completed a 5-wave rise in yields and, based on Elliott Wave Analysis, a correction is now due. South African bonds tried and failed to break out higher of the long-term yield range, suggesting a correction to lower yields is also coming.
In currency markets, the Euro looks set to continue to outperform the US Dollar with an initial target of €/$ 1.42. During the quarter, the Malaysian Ringgit, Thai Baht and Philippines Peso did break below 2012 lows but the break was immediately retraced, which raised the possibility of a false break. The Indian Rupee may have a ‘spike top’ in place suggesting the recent weakness has run its course. However, if all these Asian currencies fail to recover (by returning to new lows for the year), an impulsive sell-off would become a distinct possibility.
The Technical outlook for Developed stock markets remains positive with Point & Figure charts suggesting much higher levels over coming years. Greek, Spanish and Polish stock markets should perform strongly. In contrast to last quarter, the outlook for Emerging stock markets has improved with the majority being positive or neutral and only a handful remaining with a negative Technical outlook.
Investment Report – Third Quarter 2013
Schroders Absolute Return EMD and Currency Fund Sentiment Analysis
Sentiment Analysis has turned positive for all Emerging Market currencies apart from China, Colombia, Mexico and Peru. Our Consensus Forecast Model (CFM) remains positive for all European currencies. More importantly this quarter, is the fact that the CFM has also generated “buy signals” for all Asian currencies (except the Renminbi) for the first time since 2008. Investors appear to have given up on Emerging Market currencies. Overall, the CFM Diffusion Index is now the most positive it has been for EM currencies since its inception in 2005. Therefore, our Short Term Sentiment Cycle shows that currencies have been through “Capitulation” during this summer and have become “Out of Fashion”. Evidence of investors returning to EM currencies would indicate “Early Adoption” – the most positive area of the Short Term Sentiment Cycle.
External Debt has moved rapidly through the Short Term Sentiment Cycle with clear evidence during the quarter of “Acceptance”, which is characterized by investors’ recognition that the fundamentals have changed. Our shorter term Sentiment indicators suggest “Capitulation” has occurred in EM Sovereign External Debt indicating the Short-Term Sentiment Cycle is now close to positive for this sector. For example, Fund Manager Risk Index have given a buy signal for Sovereign External Debt (i.e. Fund Manager Beta has turned up from low levels) while surveys suggest Sovereign External Debt exposure is at multi-year lows. This corroborates the outlook for the short-term rebound highlighted in the Chart section above. However, anecdotal evidence suggests that investors remain heavily invested in EM Corporates.
Sentiment Analysis for Developed Bonds is also positive in the short-term with many surveys highlighting extreme short positions in US Treasury bonds. 12 Months Consensus forecasts for yields have risen more rapidly than the current market level, thereby maintaining the CFM buy signal in place last quarter.
Short-Term Sentiment Analysis is broadly positive for EM stocks, with most markets being either in “Out of Fashion” or in “Early Adoption” – the positive phases of the Cycle.
There is a broad agreement among the investment gurus we monitor that “QE” has created large and unsustainable imbalances in most economies. Most gurus believe that further pump priming is likely, possibly forced by the markets. However, renewed monetary easing is likely to be ineffective. Marc Faber notes that “after having lost control over the long-term bond market, the Fed will also lose control over stocks, which could easily decline by 20-30% from the current level”. Developed stock markets are broadly seen to be experiencing a “late cycle rally”. Some (e.g. Ray Dalio) see France and Emerging Markets as epicenters of the next crisis. The problems in Europe are generally viewed as unresolved and the ability to pay of sovereigns could be tested (in this regard, K. Bass sees Japan as the most vulnerable economy – a view not shared by others such as S. Druckenmiller who remains moderately long Japanese stocks).
While some expect a bounce in bond markets from recent oversold levels, there is common perception that the long-term trend is for higher yields (with F. Zulauf expecting the global cyclical uptrend in yields to resume later this year). Another broad agreement between the great investors we monitor is the belief that Gold offers value at current levels and should therefore be accumulated.
Monitoring of Opinions of Great Investors
Page 7
Investment Report – Third Quarter 2013
Schroders Absolute Return EMD and Currency Fund Fund Positioning during 3Q 2013
1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00
External Local Cash Net USD exposure
Performance Performance Attribution 3 months to September 30, 2013
Country Mexico
China
India
Indonesia
Malaysia
Singapore
Thailand
Page 8
Bond Currency Type External Bonds Local Currency Bonds Total External Bonds Local Currency Bonds Total External Bonds Local Currency Bonds Total External Bonds Local Currency Bonds Total External Bonds Local Currency Bonds Total External Bonds Local Currency Bonds Total External Bonds Local Currency Bonds Total
Bond
FX Return
Currency Forwards
Currency
Total
0
0
15 15 0
-17 -17 0
-11
-28
-14
0 0 0
0 0 0
9
9
9
0 0 0
0 0 0
2
2
1
0 0 0
-7 -7 0
5
-2
-2
1 1 0
-4 -4 0
3
-1
0
0 0 0
10 10 0
-10
0
-1
5 5
-3 -3
-2
-5
0
Investment Report – Third Quarter 2013
Schroders Absolute Return EMD and Currency Fund Performance Attribution (continued…)
Country Vietnam
Czech Republic
EURO
Hungary
Poland
Russia
South Africa
United States
Greece
Total Fund
Bond Currency Type External Bonds Local Currency Bonds Total External Bonds Local Currency Bonds Total External Bonds Local Currency Bonds Total External Bonds Local Currency Bonds Total External Bonds Local Currency Bonds Total External Bonds Local Currency Bonds Total Total External Bonds Local Currency Bonds Total External Bonds Local Currency Bonds Total External Bonds Local Currency Bonds Total External Bonds Local Currency Bonds Total
2
FX Return 0
1 3
-1 -1
0
0
0 0 0
28 28 0
-28
0
1
0 0 0
0 0 0
-3
-3
-3
5 5 0
6 6 0
-10
-4
0
15 15 0
38 38 0
-37
1
16
0 0 0 0
0 0 0 0
-2 0
-2 0
-2 0
0 0 0
0 0 0
-20
-20
-20
1 1 37
0 0 11
0
0
1
0 37 39
0 11
0
11
48
-43 *Actual Performance Residual
38
Bond
42 81
Currency Forwards
Currency
Total
0
-1
2
*Please note that attribution is calculated as the contribution from various positions to the gross portfolio return.
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48 10
Investment Report – Third Quarter 2013
Schroders Absolute Return EMD and Currency Fund Top Ten Holdings As of September 30, 2013
Preferred Issue ID
Page 10
Quantity
% Total Market Value
1. United States Treasury Bill
912796CC1
3/13/2014
10,000,000.00
6.18%
2. United States Treasury Bill
912796AE9
11/14/2013
9,000,000.00
5.56%
3. United States Treasury Bill
912796BM0
11/29/2013
8,000,000.00
4.94%
4. Poland Government Bond
B3DSHG6
4/25/2014
23,500,000.00
4.73%
5. Singapore Government Bond
B01L8M9
7/1/2014
9,250,000.00
4.67%
6. Singapore Government Bond
Securities mentioned are for illustrative purposes only and should not be viewed as a recommendation to buy/sell.
Maturity Date
B4S6QH6
10/1/2014
9,140,000.00
4.55%
7. United States Treasury Bill
912796BW8
1/30/2014
7,000,000.00
4.32%
8. Mexican Cetes
EJ6557395
4/30/2014
893,000,000.00
4.12%
9. Mexican Cetes
B95TS00
4/3/2014
822,281,000.00
3.81%
912796AQ2
1/9/2014
6,000,000.00
10. United States Treasury Bill Total
3.71% 46.59%
Investment Report – Third Quarter 2013
Schroders Absolute Return EMD and Currency Fund Country and Regional Exposures External Debt
Country exposure
Local Debt
China
at September 30, 2013
Regions and sectors are mentioned for illustrative purposes only and should not be viewed as a recommendation to buy/sell. Current exposures are shown for the Schroder Absolute Return EMD and Currency Fund, a US registered mutual fund. Exposures are not static and should not be viewed as an investment recommendation.
Currency 7.7
Hong Kong
0.2
India
0.5
TOTAL
Hedge
7.7 0.2
3.4
3.9
Indonesia †
0.4
0.4
-0.4
Malaysia †
1.0
1.0
-1.0
Singapore ^
9.6
9.6
-9.5
Thailand ^
5.4
5.4
-5.3
4.1
4.5
Vietnam
0.4
ASIA TOTAL
1.1
32.7
-16.2
Mexico ^
14.8
20.5
14.8
-11.0
LATIN AMERICA TOTAL
14.8
14.8
-11.0
5.9
5.9
-5.9
Czech Republic † Greece
11.1
4.2
4.2
Hungary ^
3.3
3.3
-1.8
Poland ^
6.1
6.1
-2.7
Russia EASTERN EUROPE TOTAL
4.2
15.3
South Africa United Arab Emirates
0.3
AFRICA / MIDDLE EAST TOTAL
0.3
4.2
4.2
4.2
23.7
3.3
3.3
-10.4
0.3 3.3
EUR
3.6 2.5
Cash
22.7
TOTAL
5.6
50.6
18.6
100.0
-37.6
Source: Schroders. † Hedged, ^ Partially Hedged
EUR 2.5%
Regional Allocation at September 30, 2013
Regions and sectors are mentioned for illustrative purposes only and should not be viewed as a recommendation to buy/sell. Current exposures are shown for the Schroder Absolute Return EMD and Currency Fund, a US registered mutual fund. Exposures are not static and should not be viewed as an investment recommendation. The “Average Credit Quality” shown is the average credit rating of the securities in the portfolio, not a credit rating that has been assigned to the portfolio itself.
Page 11
Cash / T-Bills 22.7%
Asia 32.7%
# of Holdings Average Duration Corporate Exposure US$ Exposure Average Maturity Average Credit Quality
Latin America 14.8% Africa / ME 3.6%
Source: Schroders.
Eastern Europe 23.7%
57 1.02 Years 1.4% 62% 1.40 Years A
Investment Report – Third Quarter 2013
Schroders Absolute Return EMD and Currency Fund Important Information Fees and Expenses (%) as of May 31, 2013 Gross: Net:
Investor Shares
Advisor Shares
2.12 1.16
2.40 1.41
In order to limit the Fund's expenses, the Fund's adviser has contractually agreed through February 28, 2014 to pay or reimburse the Fund to the extent that Total Annual Fund Operating Expenses (other than Acquired Fund Fees and Expenses, other indirect acquired fund expenses, interest, taxes, and extraordinary expenses), for the Fund's Investor Shares, exceed 1.15% of Investor Shares' average daily net assets and, for the Fund's Advisor Shares, exceed 1.40% of Advisor Shares' average daily net assets. If there are Acquired Fund Fees and Expenses, other indirect acquired fund expenses, interest, taxes, or extraordinary expenses other than estimated amounts included in Total Annual Fund Operating Expenses above, the Net Annual Fund Operating Expenses of the Fund will be higher than shown. The expense limitation may only be terminated during its term by the Board of Trustees.
Please consider a fund’s investment objectives, risks, charges and expenses carefully before investing. For a free prospectus, which contains this and other information on any Schroders Fund, visit www.schroderfunds.com, call your financial advisor or call (800) 730-2932. Read the prospectus carefully before investing. Index Definitions: 3-month USD Fixed Libor - The 3-month USD Fixed Libor is the average interest rate that lending banks in London charge when lending to other banks. The Libor is an average of the interest rate banks pay to borrow for 3 months. The views and opinions contained herein are those of the Schroders EMD team, and do not necessarily represent Schroder Investment Management North America Inc.’s house view. These views and opinions are subject to change. All investments, domestic and foreign, involve risks including the risk of possible loss of principal. The market value of a fund’s portfolio may decline as a result of a number of factors, including adverse economic and market conditions, prospects of stocks in the portfolio, changing interest rates, and real or perceived adverse competitive industry conditions. Investing overseas involves special risks including among others, risks related to political or economic instability, foreign currency (such as exchange, valuation, and fluctuation) risk, market entry or exit restrictions, illiquidity and taxation. Emerging markets pose greater risks than investments in developed markets. Please see the prospectus for a full description of the risks associated with the fund. Risks associated with Emerging Market Debt: This document contains terms for discussion purposes only and is not intended to provide the sole basis for evaluation of the instruments described. Emerging Market Debt investment carries significant risks and should only be considered by sophisticated investors who understand the nature of these risks. Performance shown is past performance. Exchange rate changes may cause the value of any foreign investments to rise or fall. This document does not constitute an offer to sell or any solicitation of any offer to buy securities or any other instrument described in this document. The information and opinions contained in this document have been obtained from sources we consider to be reliable. No responsibility can be accepted for errors of facts obtained from third parties. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions. The opinions stated in document include some forecasted views. We believe that we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee that any forecasts or opinions will be realized. Sectors/securities illustrate examples of types of sectors/securities in which the fund invested and may not be representative of the fund's current or future investments. Portfolio sectors/securities and allocations are subject to change at any time and should not be viewed as a recommendation to buy/sell. Countries mentioned are shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. Past performance is not a guide to future performance. The value of investments can go down as well as up and is not guaranteed. Schroder Investment Management North America Inc. (“SIMNA Inc.”) is an investment advisor registered with the U.S. SEC. It provides asset management products and services to clients in the U.S. and Canada including Schroder Capital Funds (Delaware), Schroder Series Trust and Schroder Global Series Trust, investment companies registered with the SEC (the “Schroder Funds”.) Shares of the Schroder Funds are distributed by Schroder Fund Advisors LLC, a member of the FINRA. SIMNA, Inc. and Schroder Fund Advisors LLC are indirect, wholly-owned subsidiaries of Schroders plc, a UK public company with shares listed on the London Stock Exchange. Schroder Investment Management Ltd. is the UK based investment subsidiary of Schroders plc. The ratings of Standard & Poor's Corporation (S&P) and Moody's Investor Service, Inc. represent these companies' opinions as to the quality of the securities they rate. Ratings are relative and subjective and are not absolute standards of quality. The quality classification of bonds by rating is based on the higher credit ratings of either Moody's or S&P. For example, a bond rated A1/AA- by Moody's and S&P, respectively, would be included in the double A quality tier. Schroder Fund Advisors LLC, Member FINRA, SIPC 875 Third Avenue, New York, NY 10022-6225 (800) 730-2932 www.schroderfunds.com QIR-EMD
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