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Threadneedle citywire north presentation september 2012

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  • From Docnet
  • From Retail portfolio characteristicsUSE SUBSECTORS UNLESS ITS ONE OF THE FOLLOWING: Nestle = Food producers, Anheuser-Busch) Beverages = World No.1 Brewer;(Umicore) Chemicals = Metals; (Sika) Construction & Materials = Speciality Chemicals; KoninklijkeVopak = Vopak; AirLiquide – Industrial Gasses; SAMPO – nonlife insurance
  • From Retail portfolio characteristics
  • From Retail portfolio characteristics
  • For Pan European Smaller Companies Fund
  • Transcript

    • 1. Threadneedle European Select FundDavid Dudding – Fund Manager September 2012
    • 2. Agenda1. Introduction2. Investment process3. Threadneedle European Select Fund4. Stock examplesAP. AppendixPT/12/01387 2
    • 3. 1Introduction
    • 4. Threadneedle European Select FundStrong long – term track record 2012 Annualised (%) 2011 2010 2009 2008 2007 1 year 3 years 5 years 10 years YTD Threadneedle European 18.5 -0.1 26.5 32.0 -40.7 4.2 14.3 19.4 2.3 8.6 Select Fund FTSE World Europe ex UK 9.9 -12.5 9.7 30.7 -42.3 6.2 -2.9 6.1 -4.8 4.9 Relative return +7.8 +14.2 +15.3 +1.0 +2.6 -1.8 +17.6 +12.5 +7.4 +3.5Source: FactSet as 31 July 2012. Fund returns gross of tax and TER for comparison with indices. All data is quoted in €. Gross performance from 31 March 2010onwards is based on daily cash flows and valuations, from 1 January 2008 to 31 March 2010 based on Global Close prices, and prior to January 2008 based on 12pmprices. Fund data is quoted on a bid to bid basis with income re-invested at bid. Index data provided by Thomson Financial DataStream. The relative returns shown arecalculated on a geometric basis.PT/12/01491 4
    • 5. Threadneedle‟s European equity credentialsA leader in European equity €31.5 billion AuM across all portfolios1 Excellent long-term performanceDeep resource 24-strong European equity team2 Close interaction across asset classes Dedicated risk managementClear investment philosophy, consistently applied Stock selection key source of return Culture of collaboration and debateSource: Threadneedle as at 31 July 2012.1 AuM includes externally managed portfolios, and includes UK-specific assets of €18.3 billion.2 Includes 14 UK-specific investment professionals as at 8 December 2011.PT/12/01386 5
    • 6. Equity investment team Leigh Harrison William Davies Head of Equities Deputy Head of Equities Asia ex. Japan and UK Europe Global Equities US Japan Emerging Markets Simon Brazier Philip Dicken Vanessa Donegan William Davies Cormac Weldon Sarah Williams Mark Westwood Ann Steele George Gosden Esther Perkins Stephen Moore Koji Oki Chris Kinder Dan Ison Rafael Polatinsky Stephen Thornber Diane Sobin Blake Hutchins Paul Doyle Irina Miklavchich Neil Robson Paul Gannon Aamod Mishra David Dudding Gigi Chan Jonathan Crown William Warren Jonathan Barber Mark Heslop Lisa Lim Pauline Nepgen Brad Colton Richard Colwell Fred Jeanmaire Natasha Ebtehadj Ashish Kochar Nafis Chowdhury Stacey Cassidy Nick Davis Daniel Isidori James Foreman Olivia Miller Dan Vaughan Ilan Furman Ben Needham Stephane Jeannin1 Georgina Hellyer James Thorne Francis Ellison1 Robert Banham Governance and SRI Dealers Simon Haines Douglas Cairns1 Neil Finlay1 Iain Richards Danny Burton Chris Fox Cathrine de Coninck-Smith Nicholas Hawkes Benjamin Malone Fionnuala O‟Grady Oliver Hill Gary YoungSource: Threadneedle Investment s as at 22 June 2012.1 Investment Specialist.PT/12/01425 6
    • 7. 2Investment process
    • 8. European Select investment process Idea generation Research / debate Implementation Macro and themes Portfolio construction European equity team and other Stock analysis investment professionals Risk management Company meetings Investable universe – 1,500 companies 45-60 holdingsPT/12/01564 8
    • 9. Investment process – stock analysisPorter‟s Five Forces Supplier power Barriers to Degree of Threat of entry rivalry substitution Buyer powerPT/12/01299 9
    • 10. How stocks get into the portfolio Idea generation Research and debate Implementation Company meetings  European team met Brenntag  Deeper company analysis focuses on building conviction based on:  Barriers to entry; giving Brenntag pricing power and Threadneedle equity teams high margins  Preference for industry  Bought Sept 2010  Positioning in fast-growing consolidation  Currently 1.9% of portfolio Emerging Markets  Index weight of 0.0%1  The structural trend to outsource low volume  Held across a range of Macro and themes chemical distribution European equity portfolios  Productivity enhancements;  Stock review meeting development of E.M supply chains; environmental regulation Building conviction1 Source: HSBC Smaller European Companies Index as at 30 June 2012.PT/12/01564 10
    • 11. Brenntag Porter‟s Five Forces Supplier powerAbsolute performance and relative strength  Several thousand suppliers  Provide crucial service / access2-year performance¹ to market 180 170 Threat of Barriers to entry Degree of rivalry 160 substitution 150 Rebased = 100  Scale / network  Only 7% market 140  Breadth of offer share  In-house 130  Virtuous cycle  Market leader 120 110 Buyer power 100 90  10,000 products to 160,000 customers 80  Critical to customer process Jul 10 Nov 10 Mar 11 Jul 11 Nov 11 Mar 12 Jul 12  Low volumes Brenntag Brenntag relative to FTSE W Europe IndexYear to Dec2 2011 2012e 2013e  19% of sales from emerging markets, Growth through accretive acquisitions P/E 17.4x 13.7x 12.3x + Growth.  Exposed to resilient end-markets: food, EV/EBITDA 9.3x 8.3x 7.7x cosmetics, water treatment  Focus on outsourcing RoE 17% 18% 18%1 Source: Datastream, as at 31 July 2012. Performance in EUR and rebased to 100. Initial purchase – September 2010.2 Source: Bloomberg, as at 2 August 2012.PT/12/01564 11
    • 12. 3Threadneedle European Select Fund
    • 13. Threadneedle European Select FundTop 10 holdings Company Description Fund (%) Index (%)1 Nestlé Food Producers 6.6 4.8 Anheuser-Busch InBev World No.1 Brewer 6.2 1.4 Schneider Electric Electronic & Electrical Equipment 5.7 0.7 Brenntag Chemicals 5.1 0.1 Fresenius Medical Care Health Care Equipment & Services 4.9 0.4 Air Liquide Industrial Gasses 4.8 0.8 Sampo Nonlife Insurance 4.7 0.3 Svenska Handelsbanken Banks 4.2 0.5 Unilever Food Producers 4.0 1.2 BASF Chemicals 3.9 1.5Source: Threadneedle as at 31 July 2012.1 FTSE W Europe ex UK.PT/12/01491 13
    • 14. Threadneedle European Select FundSector positioningPortfolio breakdown by FTSE sector 30% 25.7% 25% 19.6% 19.0% 20% 18.6% 18.1% 14.6% 13.4% 13.0% 15% 11.4% 10% 8.4% 7.1% 5.1% 5.2% 4.8% 4.7% 5% 3.6% 3.6% 3.1% 0.7% 0.0% 0% Consumer Industrials Basic Health Care Financials Consumer Technology Oil & Gas Telecoms Utilities Goods Materials Services Threadneedle European Select Fund FTSE World Europe ex UK IndexSource: Threadneedle as at 31 July 2012. Excludes Cash at 0.2%.PT/12/01491 14
    • 15. Threadneedle European Select FundGeographic positioningPortfolio breakdown by country 23.8% 22.8% 25% 19.9% 19.6% 18.7% 17.1% 20% 11.6% 15% 7.6% 10% 5.8% 5.7% 6.4% 6.2% 5.2% 4.7% 3.8% 3.0% 2.5% 2.4% 2.9% 1.9% 1.6% 2.1% 1.4% 5% 1.0% 0.4% 1.4% 0.0% 0.0% 0.0% 0.0% 0% Ireland Italy Turkey Other France Spain Sweden Finland Poland Switzerland Belgium Norway Germany Denmark Netherlands Threadneedle European Select Fund FTSE World Europe ex UK IndexSource: Threadneedle as at 31 July 2012. Excludes Cash at 0.2%.Other includes: Austria, Czech Republic, Greece, Hungary and Portugal.PT/12/01491 15
    • 16. 4Stock examples
    • 17. Air LiquideStock performance versus index  Global leader in industrial gases2-year performance1 125  Top 4 control 70%+ of global market 120 115  Play on industrialisation of emerging markets and Rebased = 100 110 clean energy technology (e.g. carbon capture 105 and storage) 100 95  30-year record of uninterrupted EPS growth 90 Jul 10 Nov 10 Mar 11 Jul 11 Nov 11 Mar 12 Jul 12  Dividend yield 2.6% Air Liquide Air Liquide relative to FTSE W Europe Index 2012e2 2013e2 EV/EBITDA 9.4x 8.6x P/E 18.2x 16.4x ROE 16% 16%1 Source: Datastream, as at 31 July 2012, in local currency.2 Source: Bloomberg.14 August 2012PT/12/01381 17
    • 18. NestléShare price performance relative to index  Well balanced growth – geographically, by2-year performance1 category, across price points 130 125  No.1 or No.2 in most categories 120 Rebased = 100 115 110  Equity yields more than bonds 105 100 95  Growth drivers – emerging markets, nutrition, out 90 of home eating, innovation 85 80 Jul 10 Nov 10 Mar 11 Jul 11 Nov 11 Mar 12 Jul 12  AA credit rating Nestlé Nestlé relative to the FTSE W Europe Index 2012e2 20132 P/E 18.0x 16.6x EV/EBITDA 12.2x 11.2x ROE 18% 19%1 Source: Datastream, as at 31 July 2012, in local currency.2 Source: Bloomberg.14 Aug 2012PT/12/01381 18
    • 19. Anheuser-Busch InBevStock performance versus index  World‟s largest brewer2-year performance1  50% market share in the US 170 160  70% market share in Brazil 150  Concentrating industry Rebased = 100 140 130 120 110  Pushing up prices in US 100 90  Volume growth in emerging markets 80 70 Jul 10 Nov 10 Mar 11 Jul 11 Nov 11 Mar 12 Jul 12  Iconic brands – Budweiser, Becks, Stella Artois Anheuser-Busch InBev Anheuser-Busch InBev relative to FTSE W Europe Index  More acquisitions / cost cutting to comeYear to Dec2 2012e 2013e  Management own significant stake P/E 17.6x 16.1x EV/EBITDA 10.8x 9.5x ROE 18% 18%1 Source: Datastream, as at 31 July 2012, in local currency.2 Source: Bloomberg.14 August 2012PT/12/01381 19
    • 20. Fresenius Medical CareStock performance versus index2-year performance1  Dialysis growth driven by ageing populations and dietary change 150 140  No.1 player in clinics – lowest cost operator offers 130 governments savings Rebased = 100 120 110  No.1 dialysis products producer 100 90  Significant barriers to entry 80 Jul 10 Nov 10 Mar 11 Jul 11 Nov 11 Mar 12 Jul 12 Fresenius Medical Care Fresenius Medical Care relative to FTSE W Europe Index 2012e2 2013e2 P/E 18.8x 17.2x EV/EBITDA 10.4x 9.5x ROE 14% 13%1 Source: Datastream, as at 31 July 2012, in local currency.2 Source: Bloomberg.14 August 2012PT/12/01381 20
    • 21. APAppendix
    • 22. Eurozone macro – short term painGDP vs. PMI1  GDP will follow PMI down  Deleveraging and austerity mean banks must improve balance sheets  Years of muddling throughBank balance sheets21 Source: Barclays Research, Datastream, Bloomberg, 31 July 2012.2 Source: Deutsche Bank, May 2012.PT/12/01632 22
    • 23. GreeceGreece government debt / GDI1  Austerity alone is counterproductive  Patience with Greece at an end  Greece likely to leave the Euro  Central banks‟ response keyGreece: Number of persons 65+21 Source: IMF and BofA Merrill Lynch Global Research, 17 May 2012.2 Source: US Census Bureau: ISI Group.PT/12/01632 23
    • 24. “Agenda 2010” – Germany‟s reforms created an industrial powerhouse Gerhard Schröder Angela Merkel  Germany – “The EU‟s biggest and weakest economy” The Economist, March 2003  Reforms started in 2003  Reforms included cuts to pension, health care and unemployment benefits and also tax cuts  “The powerhouse of the Eurozone”German Unemployment1 FT, March 2012 22 Labour reforms start to work 20 18  The reforms were successful, but were painful and 16 14 took years 12 10 8 6 4 Reunification 2 1980 1984 1988 1992 1996 2000 2004 2008 2012 Germany (Pan): unemployment rate % Germany (West): unemployment rate % Germany (East): unemployment rate %1 Source: Barclays as at 30 April 2012.PT/12/01632 24
    • 25. The case for equitiesBearish sentiment1 2.00 1,800  Sentiment has become extremely bearish 1.50 1,600 1.00 1,400 0.50  European equities even more out of favour 0.00 1,200 -0.50 1,000 -1.00 800 -1.50 -2.00 600 2007 2008 2009 2010 2011 2012 S&P 500 Sentiment Excessive Optimism Excessive Pessimism IndexEuropean equities oversold relative to US equities21 Source: ASR Ltd / Thomson Datastream.2 Source: Nomura.PT/12/01632 25
    • 26. What next?Equities are cheap1  Volatility to continue 30 26  Stick to defensive, growth stocks 22 Trend P/E (x) 18  Remain alive to political environment 14  Many alpha opportunities are emerging 10 6  A stockpicker‟s paradise May 81 May 85 May 89 May 93 May 97 May 01 May 05 May 09 Jan 80 Jan 84 Jan 88 Jan 92 Jan 96 Jan 00 Jan 04 Jan 08 Jan 12 Sep 82 Sep 86 Sep 90 Sep 94 Sep 98 Sep 02 Sep 06 Sep 10  “Business as usual” for European Select Trend PE Ex-Bubble Ave +1sd -1sdExporters vs. Domestics21 Source: Mirabaud Securities LLP, 26 June 2012.2 Source: BofA Merrill Lynch Global Research, 17 May 2012. Domestic and Exporter baskets based on sales exposures in and outside the domicile of company.PT/12/01632 26
    • 27. BiographyDAVID DUDDINGFund Manager David Dudding joined Threadneedle in 1999 as an Analyst. He manages the Threadneedle European Select Fund and the Threadneedle European Smaller Companies Fund. David previously worked for John Swire and Sons in Hong Kong and for Investors Chronicle as a Financial Journalist. He holds a Modern History degree and a European Politics Masters degree from Oxford University. He is a CFA Charterholder. Threadneedle start date: 1999 Industry start date: 1999 27
    • 28. Key Risks of the Threadneedle European Select FundMarket Risk – The value of investments can fall as well as rise and investors might not get back the sum originally invested, especially ifinvestments are not held for the long termCurrency Risk – Where investments are made in assets that are denominated in foreign currency, changes in exchange rates mayaffect the value of the investmentsEffect of portfolio concentration – The fund has a concentrated portfolio (holds a limited number of investments and/or takes largepositions in a relatively small number of stocks) and if one or more of these investments declines or is otherwise affected, it may have apronounced effect on the fund‟s valueVolatility Risk – The fund may exhibit significant price volatilityPT/12/01491 28
    • 29. Important notesFor internal use by institutional clients, distributors, intermediaries and consultants only (not to be passed on to any third party)Past performance is not a guide to future performance.The value of investments and any income from them can go down as well as up.Threadneedle Investment Funds ICVC (“TIF”) is an open-ended investment company structured as an umbrella company, incorporated in England and Wales, authorised and regulated in the UK by theFinancial Services Authority (FSA) as a UCITS scheme.TIF is registered for public offer in Austria, Belgium, France, Germany, Hong Kong, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Switzerland (some sub-funds only) and the UK. Shares inthe Funds may not be offered to the public in any other country and this document must not be issued, circulated or distributed other than in circumstances which do not constitute an offer to the public andare in accordance with applicable local legislation.TIF is registered with Danish Financial Services Authority for marketing to professional investors only. The Funds may not be offered or sold to retail investors in Denmark.TIF is authorised in Spain by the Comisión Nacional del Mercado de Valores (CNMV) and registered with the relevant CNMVs Registered with number 482.Het compartiment is op grond van artikel 1:107 van de Wet op het financieel toezicht opgenomen in het register dat wordt gehouden door de Autoriteit Financiële Markten. / Pursuant to article 1:107 of theAct of Financial Supervision, the subfund is included in the register that is kept by the AFM.Income may fluctuate in accordance with market conditions and taxation arrangements. The difference at any one time between the sale and repurchase price of units in the scheme means that theinvestment should be viewed as a medium to long term investment. Investments may be subject to sudden and large falls in value, and the investor could lose the total value of the initial investment.Shares in the Funds may not be offered, sold or delivered directly or indirectly in the United States or to or for the account or benefit of any “U.S. Person”, as defined in Regulation S under the 1933 Act.Subscriptions to a Fund may only be made on the basis of the current Prospectus and the Key Investor Information Document, as well as the latest annual or interim reports and the applicable terms &conditions. Please refer to the „Risk Factors‟ section of the Prospectus for all risks applicable to investing in any fund and specifically this Fund. The above documents are available in English, French,German, Portuguese, Italian, Spanish and Dutch (no Dutch Prospectus) and can be obtained free of charge on request from the following:Austria: Raiffeisen Zentralbank Österreich AG, Am Stadtpark 9, 1030 Wien (TIF and TSIF), and Erste Bank, Graben 21 A-1010 Wien (TFIF); Belgium: J.P. Morgan Chase Bank Brussels, 1, Boulevard duRoi Albert II, 1210 Brussels; France: BNP Paribas Securities Services, 66 rue de la Victoire, 75009 Paris; Germany: JP Morgan AG, Junghofstr. 14, 60311 Frankfurt, Ireland: J.P. Morgan BankAdministration Services (Ireland) Limited, J.P. Morgan House International Financial Services Centre, Dublin 1 Italy: State Street Bank S.p.A., via Col Moschin 16, 20136 Milano; Luxembourg: State StreetBank Luxembourg S.A., 49 Avenue J. F. Kennedy, 1855 Luxembourg; The Netherlands: Fortis Intertrust, Rokin 55, 1012 KK Amsterdam; Spain: any appointed distributor listed on the Spanish FinancialRegulator‟s website (www.cnmv.es); UK: Threadneedle Investments‟ Client Services department P.O. Box 1331, Swindon SN38 7TA.The mention of any specific shares or bonds should not be taken as arecommendation to deal.The research and analysis included in this document has been produced by Threadneedle Investments for its own investment management activities, may have been acted upon prior to publication and ismade available here incidentally. Any opinions expressed are made as at the date of publication but are subject to change without notice. Information obtained from external sources is believed to bereliable but its accuracy or completeness cannot be guaranteed.This presentation and its contents are confidential and proprietary. The information provided in this presentation is for the sole use of those attending the presentation. It may not be reproduced in any formor passed on to any third party without the express written permission of Threadneedle Investments. This presentation is the property of Threadneedle Investments and must be returned upon request.Threadneedle Investments is a brand name and both the Threadneedle Investments name and logo are trademarks or registered trademarks of the Threadneedle group of companies.Issued by Threadneedle Investment Services Limited. Registered in England and Wales, Registered No. 3701768, St Mary Axe, London EC3A 8JQ, United Kingdom. Authorised and regulated in the UK bythe Financial Services Authority.PL5/09/193 29

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