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Schroder GAIA Egerton Equity

Quarterly Fund Update
First Quarter 2018

Portfolio characteristics Portfolio structure

Fund manager John Armitage (Egerton) Gross/net exposure (%)

Long Equities 108.4

Managed fund since 25 November 2009
Short Equities -51.2
Fund launch date 25 November 2009 Total gross exposure 159.7

Fund benchmark* MSCI World TR Net (local currencies) Total net exposure 57.2
Options (delta-adjusted) -11.7
Fund size $1,639 million
Total gross exposure (delta-adjusted) 171.3
Ongoing charge** 1.67% Total net exposure (delta-adjusted) 45.5
Number of positions*
Performance fee 20% excess return above EONIA +
1% subject to a High Water Mark Long 50

Source: Schroders, as at 31 March 2018. Short 112

*Please note the fund is benchmark unconstrained; index returns are
provided for reporting purposes only. Source: Schroders as at 31 March 2018. Figures are on a delta-
**The ongoing charges figure is as at 28 February 2018 and may vary from adjusted basis.*Excluding index options and government bonds.
year to year for the C Acc EUR share class.

Discrete monthly returns since inception (%)

C accumulation shares (EUR)
Year* Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2018 4.2 5.0 -0.3 -0.5
2017 15.0 2.6 1.6 1.2 2.9 3.6 -1.0 3.0 1.5 -1.4 2.7 -0.9 -1.4
2016 -3.7 -4.3 -2.5 1.8 -2.1 3.6 -3.6 2.7 0.4 0.8 -1.7 0.8 0.7
2015 8.3 0.9 1.7 1.0 -1.2 2.8 -0.4 4.3 -2.4 -1.7 3.6 0.3 -0.8
2014 3.4 -2.6 3.0 -2.1 -1.5 2.1 0.0 -1.0 2.1 0.0 1.2 2.0 0.3
2013 23.3 2.5 2.9 2.8 0.5 3.3 0.1 2.6 -2.7 2.5 1.8 2.5 2.6
2012 12.0 2.6 3.6 2.2 -0.0 -2.6 1.3 1.0 0.2 1.4 -0.6 2.3 0.2
2011 -4.2 -2.0 2.0 -1.4 1.2 -0.2 -0.4 -0.2 -3.4 -1.8 3.5 -0.4 -1.1
2010 14.4 -2.9 0.8 5.2 -0.0 -2.9 0.2 2.6 -0.7 4.7 3.2 -0.0 3.6
2009 1.8 - - - - - - - - - - -1.1 2.9
Source: Schroders as at 31 March 2018. NAV to NAV, net of fees. Fund launch date: 25 November 2009. *Year-to-date performance is shown for years
where monthly returns are not displayed for the full year.

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.

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First Quarter 2018
Cumulative returns to 31 March 2018 (%)
C accumulation shares (EUR)
130 Since
3 months 1 year 3 years
110 launch

90
Schroder
70 4.2 13.6 20.5 98.8
GAIA Egerton Equity
50
30 MSCI World TR Net
-2.3 9.9 16.7 123.5
10 (local currencies)
-10 Source: Schroders as at 31 March 2018. NAV to NAV, net of fees. Fund
3 months 1 year 3 years Since launch launch date: 25 November 2009.

Portfolio Index 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.

What happened in the market and portfolio

Markets closed the quarter somewhat down, with the US, which was flat, outperforming Japan and Europe, perhaps helped by dollar
weakness. The key feature of the quarter was volatility. 'Somewhat down' masked a very strong start to the year in January, a 10%
sell-off, a rally, and a subsequent sell-off. The S&P, the Stoxx 600 and the Nikkei are currently 8-12% off their highs.

The reasons for this volatility are not hard to find. They include the prospect of an end to monetary stimulus, policy-making by
tweets, trade sanctions raising the prospect of trade wars, improved global growth prompting inflation fears, pressures on a market-
leading sector, technology, and positioning and the new market mechanics of today.

The fund made a positive return, driven by outperformance from its longs and its shorts (which it steadily built up through the
quarter).

Stock highlights
21st Century Fox
The fund repurchased a holding in 21st Century Fox (Fox) in early 2018, which it had owned previously from October 2010 to May
2015. The broader structural threats facing the media industry have by no means dissipated, but Fox is best-positioned to face these,
and Disney’s proposed bid for most of its assets highlights the value inherent in the group, and prompted our investment.

Disney proposed to acquire the majority of the Fox assets on 14 December 2017, in exchange for 0.277 shares of its stock, or the
equivalent of $27.80 per Fox share (at today’s prices). Prior to the close of the transaction Fox will spin off, and so retain, as New Fox
(NF), the Fox Broadcast network, Fox News and some smaller (mainly sports-related) cable network channels.

The proposed transaction carries some regulatory risk due to the strong position Disney will have in both sports and film/TV
production, but we believe that the odds of its approval are very high. The success of Netflix has changed the balance of power in
studio production, reducing the theoretical market share and power Disney would have in TV and film content, and a third-party
buyer could ultimately be found for the Regional Sports Networks if Disney is not permitted to keep them.

NF is trading on PE and P/FCF multiples of 7.4x and 6x our June 2020 estimates, and we forecast that revenues/EBITDA, EPS, and FCF
will grow mid single-digit, low double-digit and by 20%, per annum, on average, over 2018-2021.

Fox News alone accounts for almost 75% of NF's EBITDA, and, as management has often said, is a juggernaut. Viewership is 40%
greater than that of its next closest competitor and it was the most watched basic cable network in 2016 and 2017; its ratings were
up 16% in the 2015/16 season, up 40% in 2016/17 and, despite the tough presidential election comp, are virtually flat so far this
season. Affiliate fees and advertising have thus grown at low double-digit, and mid/high single-digit rates respectively, which is one
of the industry's best performances.

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We assume a significant slowdown in overall revenue growth, to mid single-digit rates on average, which we think is very
conservative, particularly since affiliate fees, which grow faster than advertising, are two-thirds of overall revenues. Fox did not
renew a number of very expensive talent contracts, because of sexual harassment lawsuits, and so we expect only low single-digit
growth in costs. EBITDA should thus grow at high single-digit rates, and generate c.70% of NF's EBITDA growth.

Fox Broadcast accounts for half of revenues but only 20% of NF's EBITDA. The broadcast networks continue to suffer from structural
erosion, as viewing shifts online, and Fox also had a particularly difficult period between 2013 and 2015, when one of its franchise
shows, American Idol, experienced a ratings collapse, and it was forced to spend heavily on programming. Viewership grew 14%
during the 2016/17 season and so far this season is down around 5% (a significant improvement from the 20% declines of the less
recent past). Fox recently paid a very high price to buy the Thursday Night Football rights, and, pro-forma for these, sports will
generate 75-80% of viewership. NFL ratings have been weak, but sports commands an advertising and retransmission price
premium, because very little programming can capture large live audiences. We expect retransmission revenues to nearly double to
$2bn by FY2021, but still forecast EBITDA at flat throughout our forecast period.

The balance of profits and growth is generated by the smaller cable networks such as Fox Sports 1 (“FS1”). FS1 was launched in 2013,
and is still trying to establish itself against ESPN. ESPN's ratings have been dropping, because of the hit to NFL ratings, but FS1 has
managed to grow its audience, driven by college football and basketball, Major League Baseball and the Ultimate Fighting
Championships – all of which have been more stable franchises. As FS1 and the other smaller networks continue to gain distribution
reach we expect continued growth in their affiliate and advertising revenues.

One of the key benefits of the proposed Disney transaction is the step-up in tax basis that Fox will see in its retained assets as part of
the spin-off, which will create a tax shield of at least $1.5 billion per annum over the next 15 years. NF will have very strong free cash
flow, and ex acquisitions or share buybacks, could be virtually debt-free by FY2021. We expect, however, that management will
allocate some of NF's FCF and leverage capacity to the purchase of additional TV stations, which will help further accelerate growth in
retransmission revenues (and FCF).

DBS Group Holdings

The fund bought a small holding in DBS Group Holdings (DBS) in late 2017 and has since added to the position.

DBS is the leading ASEAN bank, with 280 branches across 18 markets, and is a consumer and institutional/corporate bank, with a
wealth management business. c.65% of its revenues are generated in its home market of Singapore, where it holds approximately
half of the local retail savings market, a quarter of the mortgage market, one-third of the bancassurance market (by new business)
and around about 1 in 2 of Singapore’s online and mobile banking customers.

We believe that DBS is one of, if not the, leading digital banks globally, because of a significant transformation programme over the
last four years. Its digital strategy has three core aims: pre-empting disruptors in its core markets of Singapore and Hong Kong;
disrupting incumbents via a purely digital (i.e. branchless) presence in India and Indonesia; and improving business profitability in
other business areas. The programme has been pervasive across the bank, encompassing technology (e.g. moving computing power
to the cloud and closing data centres), improving the customer journey (for example tracking and reducing customer hours spent on
banking related tasks) and transforming the culture of the bank to embrace a ‘start-up mindset’.

The early results have been encouraging, both in the consumer and in the institutional bank. Digital customers in the consumer
bank have increased from 33% to 39% of the total since 2015 and are likely to reach 60% in the medium term; they generate around
twice the income of traditional customers, with a cost: income ratio of 34%, and a 27% ROE, some 19 points lower and 8% higher
respectively than for traditional customers. Furthermore, the market-leading customer solutions DBS has developed for its
treasury/FX platform, trade finance, and transaction banking products are driving a structural increase in the profitability (as
measured by return on assets and equity) of these wholesale businesses.

The bank is benefiting from several external tailwinds. Credit growth is accelerating and likely to run at high single-digit rates for the
next couple of years. DBS is highly sensitive to interest rate increases because current and savings accounts constitute c.60% of its
deposits, and Singaporean interbank rates have started to rise and are likely to continue to do so, as the Federal Reserve (Fed) raises
US rates.

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Furthermore, we forecast double-digit non-interest income growth, driven by strength in the wealth management business, as well
as a rebound in regional trade, which will have knock-on effects on activity-based income streams in SME and institutional banking.
We feel that improving revenues and economies of scale arising from technology, in combination with the long term and consistent
approach that management has taken to IT investment, can yield considerable operating leverage.

Credit is likely to be supportive to the bank's performance, absent a full-blown trade war. The Singaporean banking sector has a
relatively high exposure to local oil and gas services, which has suffered from a difficult operating environment in recent years, and
DBS has been proactive in recognising losses and marking collateral to scrap value, and we feel comfortable that its approach has
been appropriately conservative. Asset quality remains robust outside oil and gas and we expect overall credit losses to be run at
cyclically low levels (<30bps) for at least the next couple of years.

DBS has a strong balance-sheet with a 13.9% core equity tier 1 ratio at end-2017, and the group raised its pay-out ratio significantly in
2017 (via a 55% rise in the ordinary, and a special dividend). The shares trade at 8.8x our conservative forecast of 2020 EPS, and a
4.6% 2018 dividend yield.

Outlook and strategy

Investors face various macro cross-currents, some positive but many negative. Economic conditions are positive – ISI's weekly
company surveys have just hit their highest level since August 2005, and stand well above their post-GFC averages – and inflation
remains relatively subdued. Corporate earnings have been and look set to remain strong in aggregate, helped, of course by the US
tax reduction.

The secular 'winners' of today's economy continue to flourish, and seem to be continually strengthening their market positions,
although almost all average or sub-par businesses struggle to grow.

Global markets have pulled back, and valuations of many companies now look more affordable, particularly in the technology sector,
absent a major move up in bond yields. The markets' recent weakness and volatility reflects other factors.

The Fed has signalled an end to QE, Chinese policy is tighter and at some stage Japan and Europe will exit this 'new world'. Dollar
cash will in time be a competitive asset, and it is difficult to be fully confident that an exit from 'unconventional' monetary policy will
be free of policy error, or a bond market panic.

The current round of tariff announcements from the US may be simply a bargaining/negotiating posture, but it is unsettling and
negative for business and investor sentiment. Trade wars do induce business slowdowns and can 'blow up' (the fund's) individual
positions.

The fund's long-short structure reflects the somewhat bifurcated nature of the market:

 We have confidence in the prospects of the fund's individual longs, the earnings prospects of which we feel are above-
average and which trade on attractive valuations relative to their growth rates; yet

 More companies than ever before face disruption and threats to their operations, while many are having to resort to
accounting games to make their financials look more attractive than in fact they are;

As well as some of the headwinds outlined above. the fund's short exposure should provide it with some protection in the event of
markets heading lower, except in periods of:

 Abrupt, risk-off sell-offs, in which winners are liquidated wholesale and;

 A significant rotation from winners to losers for more than a short period.

Risk Considerations
The capital is not guaranteed. The value of the fund will move similarly to the equity markets. Emerging equity markets may be more
volatile than equity markets of well established economies. The title of securities may be jeopardised through fraud, negligence or
mere oversight in some countries. However the access to such markets may provide a higher return to your investment in line with
its risk profile. The fund may hold indirect short exposure in anticipation of a decline of prices of these exposures or increase of
interest rate where relevant. The fund may be leveraged, which may increase the volatility of the fund. The fund may not hedge all of
its market risk in a down cycle. Investments into foreign currencies entail exchange risks. Investments in money market instruments

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First Quarter 2018
and deposits with financial institutions may be subject to price fluctuations or default of the issuer. Some of the invested and
deposited amounts may not be returned to the fund. The investments denominated in a foreign currency of the share-class may not
be hedged back to the currency denomination of the share-class. The share-class will be positively or negatively impacted by the
market movements between those currencies.

Performance attribution as at 31 March 2018*

Summary performance attribution Month (%) Quarter (%) Year to date (%)
Long equity -1.8 4.5 4.5
Short equity 2.1 3.7 3.7
Corporate bonds 0.0 0.0 0.0
Index options 0.1 0.0 0.0
FX hedging 0.0 -0.6 -0.6
Total 0.4 7.5 7.5

Top 5 contributors Type Country Sector Quarter (%)

Airbus Long Netherlands Industrials 0.8
Adobe Systems Long United States Information Technology 0.6
Undisclosed Short United States Industrials 0.5
Undisclosed Short UK Information Technology 0.4
Applied Materials Long United States Information Technology 0.4

Bottom 5 contributors Type Country Sector Quarter (%)

Southwest Airlines Long United States Industrials -0.5
Charter Communications Long United States Consumer Discretionary -0.4
Praxair Long United States Materials -0.4
Alaska Air Long United States Industrials -0.3
Undisclosed Short United States Consumer Discretionary -0.3

Region Month (%) Quarter (%) Year to date (%)

Europe ex UK -0.2 1.5 1.5
United Kingdom 0.4 1.0 1.0
North America -1.2 2.3 2.3
Pacific ex Japan 0.2 -0.1 -0.1
Japan 0.1 0.0 0.0
Emerging Markets -0.2 0.2 0.2
Other (including FX Hedging, Options) 1.4 2.6 2.6
Total 0.4 7.5 7.5

Sector Month (%) Quarter (%) Year to date (%)

Consumer Discretionary 0.7 0.5 0.5
Consumer Staples 0.2 0.2 0.2
Energy 0.1 0.2 0.2
Financials -0.6 0.6 0.6
Healthcare 0.0 -0.2 -0.2
Industrials -0.6 1.2 1.2
Information Technology -0.4 2.5 2.5
Materials -0.2 -0.4 -0.4
Telecommunication Services 0.0 0.1 0.1
Utilities 0.0 0.0 0.0
Other (including FX Hedging, Options) 1.3 2.8 2.8
Total 0.4 7.5 7.5
Source: Schroders. *Analysis expressed on a gross of fees basis using a total return methodology. The impact of any currency movement at security
level is reflected within each of the relevant strategies. All data is rounded to one decimal place; as such, any small discrepancies can be attributed to
this.

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.

Schroder GAIA Egerton Equity

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First Quarter 2018
Key positions as at 31 March 2018 (%)
Top 10 long positions
Holding Sector Weight (%)
1 Airbus Industrials 7.2
2 Safran Industrials 4.7
3 Praxair Materials 3.8
4 Microsoft Information Technology 3.7
5 Charter Communications Consumer Discretionary 3.7
6 Adobe Systems Information Technology 3.6
7 Wynn Resorts Consumer Discretionary 3.5
8 AIA Group Financials 3.5
9 London Stock Exchange Financials 3.3
10 Bank of America Financials 3.3

Top 5 short positions Country allocation

Sector Country Weight Sector Net Weight (%)

1 Consumer Discretionary US -1.8 United States 19.1

2 Information Technology US -1.6 France 12.9

3 Industrials US -1.5 Germany 6.0

4 Consumer Discretionary DE -1.5 Hong Kong 3.3

5 Consumer Staples US -1.5 China 3.2

Source: Schroders.
Canada 2.4
Portfolio positioning as at 31 March 2018 Russia 2.3
Sector allocation
India 1.2
Sector Net Weight (%)
Singapore 0.9
Financials 22.9
Austria 0.8
Information Technology 22.7
Switzerland 0.5
Industrials 14.3
United Kingdom 0.4
Consumer Discretionary 4.3
Italy -0.1
Materials 3.5
Denmark -0.5
Real Estate -0.2 Israel -0.5

Energy -1.0 Japan -0.7

Utilities -1.1 Spain -0.7

Telecommunication Services -1.4 South Korea -0.8

South Africa -0.8

Health Care -2.8
Australia -1.1
Consumer Staples -3.7
Sweden -2.3
Others -12.0
Total 45.5
Total* 45.5

Source: Schroders. Analysis based on market exposure as a percentage

of total fund size excluding currency forward contracts.

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Important Information:
This document does not constitute an offer to anyone, or a solicitation by anyone, to subscribe for shares of Schroder GAIA (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), copied o which can be obtained, free of charge, from
Schroder Investment Management (Luxembourg) 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.
Egerton has expressed its own views and opinions in this document and these may change.
This document is issued by Schroder Investment Management Ltd., 31, Gresham Street, EC2V 7QA, who is authorised and regulated by the Financial
Conduct Authority. For your security, communication may be taped or monitored.
The fund is currently closed for new subscriptions; however, to the extent that capacity becomes available new subscriptions will be
considered. To the extent you wish to subscribe in the fund, when there is available capacity, please contact Schroder Investment
Management (Luxembourg) S.A. who can explain the process and your name can be added to a waiting list which will be considered on a “first
come first served” basis.
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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
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which apply to the third party data.

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First Quarter 2018