Citywire oct 2013

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  • Updated from Style Research. I:\QUANT\Shared\Style Analysis.Keep formatting as is.
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  • Updated from Iris – Active Position [H29]
  • Citywire oct 2013

    1. 1. Global Equity Income Citywire Wealth Manager Retreat Stephen Thornber – Fund Manager For institutional investors June 2013 17th & !8th October 2013
    2. 2. Contents 1. Product features 2. Performance 3. Team 4. Investment process 5. Portfolio positioning 6. Market outlook 7. Summary 8. Appendix 2
    3. 3. Threadneedle Global Equity Income Fund Portfolio characteristics Distinguishing features Threadneedle Global Equity Income Fund High yield  Dividend yield > 4% buy discipline  No income enhancement strategies Benchmark MSCI AC World Outperformance target Portfolio style   Expected tracking error A significant dividend tilt 3% p.a. 3%-8% Growth embedded by stock selection Stock weightings Sector weightings Regional weightings +/- 25% versus benchmark 75-95 Fund AUM A record of strong performance in differing market conditions +/- 10% versus benchmark Number of holdings Performance  +/- 4% versus benchmark £650m A fund for income or total return Source: Threadneedle Investments as at 30 September 2013. Past performance is not a guide to future returns. Where references are made to fund characteristics and features these may be subject to change over time and subject to prevailing market conditions. Actual investment parameters will be agreed and set out in the prospectus or formal investment management agreement. Please note that the outperformance target does not form part of the fund‟s objectives and may not be attained.. 3
    4. 4. Performance YTD 1 Year 3 years 5 years Since inception1 Threadneedle Global Equity Income Fund (net) 17.0% 24.4% 15.4% 10.5% 6.7% Peer group median (IMA Global Equity Income) 14.1% 20.3% 11.5% 7.8% 3.5% 1 2 1 1 1 YTD 1 year 3 years 5 years Since inception1 Threadneedle Global Equity Income Fund (gross) 18.1% 26.0% 17.3% 12.6% 8.8% MSCI AC World Index (gross) 14.0% 21.2% 12.5% 8.6% 5.6% Relative Performance +3.6% +4.0% +4.3% +3.7% +3.0% Annualised Quartile ranking Annualised An outstanding track record Source: Morningstar / FactSet, 30 June 2013. Net fund data on a bid-bid basis with net income re-invested at bid. Gross fund returns gross of tax and TER for comparison with indices. Gross performance from 31 March 2010 onwards 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 12pm prices. 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 are calculated on a geometric basis. All data is quoted in GBP. Past performance is not a guide to future returns. 1 Fund inception 30 June 2007. 4
    5. 5. Threadneedle – experienced equity income management Stephen Thornber Nick Davis George Gosden UK Income US Income Pan-European Income Asian Income 25 years‟ experience Holdings Diane Sobin Global Income Benchmark Leigh Harrison 29 years‟ experience 27 years‟ experience 9 years‟ experience 19 years‟ experience MSCI AC World FTSE All Share S&P 500 MSCI Europe MSCI Asia (ex Japan) 75-95 45-60 50-70 30-50 50-60 Over $8 billion in equity income AUM Source: Threadneedle as at 30 September 2013.. 5
    6. 6. Global Equity Income philosophy Income Yield >4%  We believe dividends are an underappreciated signal of investment quality  Our focus is companies with a high dividend yield, growth, and a robust balance sheet  Growth When dividend investing, a balanced and diversified portfolio is important to control risk Earnings >5% Dividends >5% Portfoli Quality Income o Sustainability Gearing <75% Dividend cover >1.25x High, growing, and sustainable dividends Note: Stock and portfolio characteristics may be subject to change over time and subject to prevailing market conditions. Actual investment parameters will be agreed and set out in the prospectus or formal investment management agreement. 6
    7. 7. Dividend paying stocks have outperformed Cumulative performance since 1995 1200 1000 Index 800 600 400 200 0 Dec 94 May 96 Oct 97 Mar 99 Aug 00 Jan 02 Jun 03 First quintile dividend yield Nov 04 Apr 06 Sep 07 Second quintile dividend yield Feb 09 Jul 10 Dec 11 May 13 MSCI AC World High dividend investing - a consistently successful strategy Source: CLSA, FactSet Alpha Tester as at 30 June 2013. Note: Backtest based on MSCI universe with more than 3 analyst coverage. MSCI weighted US-dollar total return with monthly rebalancing. 7
    8. 8. Investment process Focused idea generation Research and debate Global team and regional equity teams Typical characteristics: Select stocks based on valuation and conviction  Dividend yield > 4% Company meetings Investable universe: Earnings growth >5%  Dividend growth >5%  Gearing <75%  Macro and themes Implementation Dividend cover >1.25x Manage risk though diversification and balance Detailed fundamental analysis 400 stocks 1300 stocks 75-95 stocks A robust and consistent process Note: Stock and portfolio characteristics may be subject to change over time and subject to prevailing market conditions. Actual investment parameters will be agreed and set out in the prospectus or formal investment management agreement. 8
    9. 9. Portfolio positioning Sector weighting 0% 5% Regional weighting 10% 15% 20% 21% 22% Financials 0% 25% 10% 20% 30% 40% 50% 60% 34% North America 52% 8% Technology 12% 10% Cons. Discretionary 12% 10% 10% Cons. Staples Japan 8% Industrials 18% 15% Europe ex UK 5% 8% 10% Energy 10% 10% Healthcare 9% 10% 7% 6% Materials Telecommunications Utilities UK Asia ex Japan 17% 8% 13% 5% 9% 4% 6% Fund Emerging Markets Index 3% Source: Threadneedle Investments as at 30 June 2013. Benchmark is the MSCI AC World Index. Cash position of 1.7% not shown. 9 11% 11% Fund Index
    10. 10. Investment theme in practice – Deleveraging Global alternative asset manager 2-year performance relative to MSCI AC World Index Idea generation 160  Rebased = 100 140 Global team identifies large alternative asset managers as structural winners, with near term catalysts Research and debate 120    Bought 80 60 Aug 11 Dec 11 Apr 12 Aug 12 Dec 12 Apr 13 Bank deleveraging is creating growth opportunities Performance fee income is set to grow strongly  100 Investors are increasing allocations to alternatives, and to larger players within alternatives Strong cash flow generation and low capital intensity mean dividends are the primary use of cash Aug 13 Implementation   Market underappreciating Blackstone‟s market position, resources, and performance fee growth Source: Datastream as at 31 August 2013. Total return performance in USD and rebased to 100. The mention of stocks is not a recommendation to deal. 10 Larger position reflecting strong upside potential and conviction Position adds to US and financials where portfolio was u/w
    11. 11. Blackstone Affordable apartments in Berlin Swooping on prime London 2011: Buys 6,800 apartments and 73 commercial units Reported cost: €220m 2009: Buys 50% stake in Broadgate office estate from British Land Cost: £1.07bn (£77m equity) 2012: Acquires c.14,000 apartments and c.450 commercial properties Reported cost: €450m 2013: Sells 6,900 apartments to Deutsche Wohnen for €369m 2013: Sells stake to TEMASEK for £1.7bn (c.£600m equity) Geared property investments paying off Source: Reuters, Bloomberg news reports. 11
    12. 12. US shale energy revolution Estimated World LNG Prices UK $ $9.94 Cove Point $3.34 Lake Charles $3.20 $ Belgium $9.82 Korea $15.35 $ Spain $ $10.07 $ India $13.32 $ $ $ $ Japan $15.35 China $14.95 Rio de Janeiro $ $14.71 Bahia Blanca $ $15.71 Bought August 2010 Bought March 2012 Source: FERC, Waterborne Energy Inc – Prices taken on 5 September 2013 (USD per MMBTu). The mention of stocks is not a recommendation to deal. 12 Bought August 2012
    13. 13. Investment theme in practice – US shale energy revolution Chemicals and polymers manufacturer 2-year performance relative to MSCI AC World Index Idea generation 220  200 US desk highlighted that LYB benefits from widening margins as its cost base is dependent upon natural gas while its end products are priced off crude oil Rebased = 100 180 Research and debate 160  Global energy team view is that US energy exports are constrained by infrastructure and politics in the near term  New management team is focused on improving the business - closing inefficient plants, not expanding capacity  120 Ethane should remain cost advantaged until new US production capacity comes online in 2017  140 Strong cash flow used to strengthen the balance sheet and increase shareholder returns Bought 100 80 60 Jun 11 Oct 11 Feb 12 Jun 12 Oct 12 Feb 13 Jun 13 Implementation  Market underestimating the scale and sustainability of cost advantage and significant cash return potential Source: Datastream as at 30 June 2013. Total return performance in USD and rebased to 100. The mention of stocks is not a recommendation to deal. 13 Industry remains susceptible to commodity and macro risks, so a smaller position size is appropriate
    14. 14. Emerging market consumer Household debt as percentage of GDP (%)1 Robust growth in retail sales2 350 80% 300 60% 250 Index 400 100% Household debt 120% 40% 150 20% Bought July 2007 India Russia * Indonesia Turkey Brazil China Czech Republic Poland Hungary South Africa Thailand Taiwan Korea US 100 UK 0% 200 50 00 02 Brazil Bought November 2012 Bought January 2013 04 China 06 08 Indonesia Bought March 2013 1 Source: Haver Analytics, GS Global ECS Research, US Federal Reserve, Bank of England as at December 2010. *Consumer Loans and Individual Credit Cards as % of GDP (excluding other types of bank loans – mortgage loans etc.). **Bank loans (personal) to households as % of GDP. 2 Source: Haver as at 29 February 2012. The mention of stocks is not a recommendation to deal. 14 10 Russia
    15. 15. Investment theme in practice – Emerging market consumer Premium apparel Idea generation 2-year performance relative to MSCI AC World Index  140 Global team identified Hugo Boss as a high yield consumer goods company growing in emerging markets Research and debate Low level of debt and strong free cash flow generation enables a high dividend pay out  Growing through expansion in Asia where the brand has a lower exposure then peers  Building brand image through flagship stores, applying a template luxury peers have used with success  Rebased = 100  120 Risk that deterioration of european market outweighs growth in Asia Bought 100 80 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13 Sep 13 Implementation  High and sustainable dividends with exposure to growth of consumer spending, particularly in Asia Source: Datastream as at 30 September 2013. Total return performance in US dollars and rebased to 100. The mention of stocks is not a recommendation to deal. 15 Position size of c.1.3% reflecting a balance between attractive growth prospects and macro risks of the consumer segment
    16. 16. Global economic outlook 2014 GDP growth forecast (%) Developed Markets Threadneedle Consensus US 2.5 2.7 UK 2.3 Japan Europe 2014 GDP growth forecast (%) Emerging Markets Threadneedle Consensus China 7.5 7.4 2.1 India1 5.5 5.9 1.5 1.7 Russia 2.8 3.3 0.7 0.9 Brazil 3.0 2.6  US – Improving housing and labour markets support growth, inflation remains benign, growth accelerates to 2.5% in 2014  Japan – Policy changes creating positive change, challenges in implementation ahead  Europe –Signs of a bottom appearing, a slow and protracted recovery ahead  Emerging markets – Strong growth but trajectory is downwards, BRIC‟s each face major and different challenges Source: Threadneedle, as at 30 September 2013. These estimates and forecasts are as of the date provided and are subject to change without notice at any time based upon market and other factors. None of Threadneedle, its directors, officers or employees make any representation, warranty, guaranty or other assurance that any of these estimates or forecasts will prove to be accurate. 1 Fiscal year. 16
    17. 17. Summary: Global Equity Income Fund High yield Portfolio style Performance  Dividend yield > 4% buy discipline  Growth No income enhancement strategies  Growth embedded by stock selection  Portfoli Quality Income o A significant dividend tilt  Income A record of strong performance in differing market conditions Sustainability A compelling proposition Where references are made to portfolio features these may be subject to change over time and subject to prevailing market conditions. Actual investment parameters will be agreed and set out in the prospectus or formal investment management agreement. 17
    18. 18. Appendix 7
    19. 19. Global Equity team William Davies Head of Global Equity 27 years‟ experience 19 years at Threadneedle Esther Perkins Fund Manager 14 years‟ experience 5 years at Threadneedle Neil Robson Fund Manager Stephen Thornber Fund Manager 26 years‟ experience 1 year at Threadneedle 25 years‟ experience 19 years at Threadneedle Pauline Grange Fund Manager Jonathan Crown Fund Manager 12 years‟ experience 6 years at Threadneedle Ashish Kochar Fund Manager 11 years‟ experience 7 years at Threadneedle James Foreman Client Portfolio Analyst 7 years‟ experience 4 years at Threadneedle 4 years‟ experience 1 year at Threadneedle An experienced and diverse team Source: Threadneedle as at 30 June 2013. 19
    20. 20. Global Equity Income  Founded in 2007  6 year track record under lead fund manger Stephen Thornber  Experienced, committed and long tenured portfolio managers  Extending the Threadneedle income investment franchise  Over US$8bn of equity income AUM Stephen Thornber Jonathan Crown Building on a strong tradition of income investing Source: Threadneedle Investments as at 30 June 2013. 20
    21. 21. Global Equity Income Fund Absolute (%) Active (%) Blackstone +2.0 +2.0 2.9% CME +1.7 +1.7 13.2 13.2 Kraft Foods +1.7 +1.6 0.92 1.00 Sampo +1.7 +1.6 Rio Tinto +1.6 +1.5 Novartis +1.6 +1.1 Total +1.6 +1.3 Seadrill +1.6 +1.6 Enterprise Product Partners +1.6 +1.6 HSBC Fundamental statistics +1.5 +0.9 Fund 88 2407 Dividend yield 4.8% P/E (this year consensus) Beta Top 10 holdings Benchmark Number of stocks Market capitalisation weighting 0% 10% 20% 30% 50% 60% 25% $50bn+ 42% 44% 48% $7-$50bn <$7bn 40% 28% 10% Fund Index Top 10 Total Source: Threadneedle Investments as at 30 June 2013. Benchmark is the MSCI AC World Index. Cash position of 1.7% not shown. 21 16.6%
    22. 22. Stock selection strategy – thematic areas Themes Portfolio strategy Emerging market consumer    Defensive growth    US shale energy revolution    De-leveraging    Stocks Rising wages support increasing consumption New areas of expenditure Opportunities for global brands Ambev, Hugo Boss, Las Vegas Sands, NagaCorp Steady growers with large moats Predictable recurring revenues Improving cost bases and increasing dividends Imperial Tobacco, Kraft, GlaxoSmithKline, Sydney Airport Growth of shale oil/gas volume in the US Increased capex in energy industry Low cost input for energy consumers LyondellBasell, HollyFrontier, Enterprise Products Banks need to down-size balance sheets Distressed sellers offer opportunities Well capitalised players take advantage Blackstone, Intermediate Capital, Newcastle Investment Corp Reflecting Threadneedle thematic thinking Source: Threadneedle Investments as at 30 September 2013. The mention of stocks is not a recommendation to deal. 22
    23. 23. Global Equity Income Fund Portfolio Style SkylineTM A significant dividend tilt and a mild growth bias Source: Style Research as at 30 June 2013. Style Skylines™ created with, embodies and/or executes proprietary software and/or data under license from Style Research Ltd. © Style Research Ltd. All Rights Reserved. Must not be redistributed by third parties. 23
    24. 24. Investment process in practice – DiGi.com purchase Idea generation Research / debate Yield – 6% initially, 4.7% currently1 Threadneedle equity teams  Discussions with European and Asian teams highlights that DiGi.com (49% owned by Telenor) is attractive Macro and themes  Added to portfolios in June 2011 with an initial position size of 1% Funded by sale of Telenor to manage sector overweight position Increased weight in secular growth Sustainability – zero debt (controlling shareholder needs cash flow) Growth of the EM consumer  Growth – upgraded network expected to reduce costs, improve margins and result in >5%p.a. earnings and dividend growth Implementation Secular growth of mobile data and smartphone penetration Analysis focused on earnings drivers and cash flow generation: Company meetings  Asian analyst met management when visiting Malaysia  Asian and Global teams met CFO in London 1. Revenue growth 2. Margin improvement 3. Capex profile Valuation offers significant upside Currently c.0.8% of portfolio2 Held by a number of portfolios across Threadneedle Teamwork, thorough analysis and disciplined implementation Note: The mention of stocks is not a recommendation to deal. 1 Bloomberg as at 30 September 2013. 2 Based on a representative account as at 30 September 2013. 24
    25. 25. DiGi.com versus Telenor Stock performance relative to MSCI AC World index 220 200 Rebased = 100 180  Fast growing Malaysian  160 Established Scandinavian 140 Bought 120 100 Sold 80 Jun 11 Oct 11 Feb 12 Jun 12 Telenor Oct 12 Feb 13 Jun 13 DiGi.com Continuously seeking stronger investment ideas Source: Datastream as at 30 June 2013, in USD. The mention of stocks is not a recommendation to deal. 25
    26. 26. Sell discipline  Dividend yield falls below 4%  Review dividend growth – if growth takes the yield above 4% in the next 12 months hold, otherwise sell Case study:  Global team notice weakness in the stock price   Dividend cut   Sell unless dividend yield remains above 4% and growth remains attractive - then we may continue to hold  Investigate with EM team and external analysts Threat of change to the regulatory framework is apparent  Target price reached  (Brazilian Electric Utility) Sold across all global equity portfolios CEMIG – relative to MSCI World AC Index 220 Discuss with the lead analyst, sell if no longer attractive 200  Change in the investment case   Rebased = 100 180 Sell if no longer attractive Portfolio risk considerations  Sold 160 140 120 Bought 100 80 Partial or full sale as determined to be optimal 60 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13 Proactive management Source: Datastream as at 30 June 2013, in USD. The mention of stocks is not a recommendation to deal. . 26
    27. 27. Global Equity Income Fund Historic net distribution yield1 Portfolio dividend yield versus benchmark 8% 8% 7% 7% 6% 6% 5% 5% 4% 4% 3% 3% 2% 2% 1% 1% 0% 0% 2008 2009 2010 2011 2012 2008 2009 2010 Portfolio Source: Threadneedle Investments as at 30 June 2013. 1 Based on institutional share class with income distributed. 27 2011 2012 MSCI AC World 2013
    28. 28. Threadneedle Global Equity Income Fund Performance versus benchmark (GBP) 19.0% 20.6% 24.6% 18.1% 16.8% 12.4% 11.7% -2.4% -16.3% -6.2% -19.5% 2008 2009 2010 2011 Threadneedle Global Equity Income Fund Outperformance1 14.0% +3.9% -1.3% +6.7% 2012 YTD MSCI AC World +4.0% +0.6% +3.6% Outperformance in most market conditions Source: FactSet as at 30 June 2013. Fund data is gross of fees. Gross fund returns gross of tax and TER for comparison with indices. Gross performance from 31 March 2010 onwards 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 12pm prices. 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 are calculated on a geometric basis. All data is quoted in GBP. Past performance is not a guide to future returns. 1 Outperformance shown is calculated on a geometric basis, against the MSCI AC World Index. 28
    29. 29. Global Equity Income Strategy Quarterly relative returns since inception (30 June 2007) 4.3% 3.9% 4.2% 3.9% 2.7% 2.1% 1.6% 1.1% 0.7% 2.6% 1.5% 0.8% 0.1% 0.3% 0.1% -0.2% -0.2% -0.7% -0.2% -0.4% -1.5% -2.3% -2.3% -3.0% Q3 Q4 2007 Q1 Q2 Q3 2008 Q4 Q1 Q2 Q3 2009 Q4 Q1 Q2 Q3 2010 Q4 Q1 Q2 Q3 Q4 Q1 2011 Q2 Q3 2012 Q4 Q1 Q2 2013 15 outperforming quarters out of a total of 23 Source: Threadneedle Investments as at 30 June 2013. Composite data is gross of fees. Outperformance shown is calculated on an geometric basis, against the MSCI World All-Countries Index. Strategy referred to is the Threadneedle Global Equity Income Composite. 29
    30. 30. Global Equity Income Fund Performance versus peers since inception (30 June 2007)  Top quartile returns  Relatively low tracking error  Top decile information ratio  Top decile consistency Consistent and superior risk adjusted returns Source: Mercer Investment Consulting as at 30 June 2013. Risk and return characteristics calculated monthly in USD versus the MSCI AC World Index. Bars show the positions in the universe of funds of the 95th percentile, upper quartile, median, lower quartile and 5th percentile. 30
    31. 31. Performance profile MSCI AC World – Quintile one dividend yield performance since 1995 12 85 80 10 75 8 70 4 (%) 65 60 (%) 6 55 2 50 0 45 (2) 40 Expansion Downturn Slowdown Annualised outperformance Recovery Batting average (RHS) High dividend investing is suited to most economic conditions Source: FactSet Alpha Tester, CLSA Asia-Pacific Markets March 2013. MSCI-weighted USD total return with monthly rebalancing. Note: Batting average is the consistency of outperformance, calculated as months outperformed / total months in respective market conditions. 31
    32. 32. Yield choices 10 5-10% annual income growth1 9 8 Zero income growth 7 % 6 5.3 5.0 5 4.4 5.7 5.5 3.9 5.9 5.6 4.7 4.6 4.1 3.6 4 3 6.6 6.4 4.7 4.0 3.5 3.5 3.5 2.6 2.7 1.8 2 0.7 1 Government Debt (10yr) Emerging Market Debt (USD 10yr) Investment Grade (10yr) Valid Solucoes NagaCorp Radiant Elec. DiGi.com BOC Hong Kong AT&T Blackstone Total S.A. GlaxoSmithKline Vodafone AT&T Blackstone Total S.A. GlaxoSmithKline Vodafone Russia Indonesia Brazil Mexico Japan Germany UK US 0 Equities (FY14) Equities continue to offer more attractive returns Source: Bloomberg as at 30 September 2013. Equity dividend yields are consensus FY14. The mention of stocks is not a recommendation to deal. 1 Expected medium term dividend growth of a representative portfolio. 32
    33. 33. Valuation of high dividend companies PE ratio progression 20 18 16 14 12 10 8 6 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 MSCI World Index Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 MSCI World High Dividend Index High dividend stocks remain at a discount Source: Bloomberg as at 30 September 2013. Uses BEst (current annual) PE ratio. 33
    34. 34. Valuation of high dividend companies Forward PE ratios 14.1 12.7 11.7 11.1 14.4 13.4 11.2 10.3 Europe Asia Pacific Japan High dividend index USA Regular Index Regional variations exist Source: MSCI index data as at 30 September 2013. 34
    35. 35. Valuations by market High yield* defensives: Relative PE peak-to-trough High yield*: Relative PE peak-to-trough 1.5 1.5 Peak LT avg Current 1.3 Expensive 1.4 Trough 1.4 1.8 1.3 Expensive 1.1 (x) 1.2 1.1 (x) 1.2 1.0 1.0 0.9 0.9 0.8 0.8 0.7 0.7 0.6 0.6 0.5 0.5 USA Europe Japan APxJ 0.4 USA Europe Japan APxJ High yield defensives are expensive in some markets * Based on yield more than 3%. MSCI universe with monthly rebalancing. Defensive based on MSCI GICS Level 1 sectors. Source: FactSet alpha tester, CLSA Asia-Pacific Markets, March 2013. 35
    36. 36. Valuations by yield range MSCI world: Current PE versus average since 2003 17 Stocks within 3-7% dividend yield range are still cheaper than low-dividend yield stocks 16 15 Expensive compared to history PE (x) 14 13 12 11 10 9 8 0-2 2-3 3-4 4-5 5-7 >7 Dividend yield range (%) Current Median since 2003 High dividend stocks are not expensive Source: FactSet alpha tester, CLSA Asia-Pacific Markets, March 2013. Note: Aggregated PE is based on weighted average. 36
    37. 37. 1 Jun 13 Dec 12 Jun 12 Dec 11 Jun 11 Dec 10 Jun 10 Dec 09 Jun 09 Dec 08 Jun 08 Dec 07 Jun 07 0.70 Source: Threadneedle Investments as at 30 June 2013. 1 Against MSCI AC World Index. 37 Jun-13 Dec-12 Jun-12 Dec-11 Active position (%) 1.10 Jun-11 Ex-ante beta Dec-10 Jun-10 Dec-09 Jun-09 Dec-08 Jun-08 4 Dec-07 5 Jun-07 Jun-13 Dec-12 Jun-12 Dec-11 Jun-11 Dec-10 Jun-10 Dec-09 Jun-09 Dec-08 3 Jun-08 8 Dec-07 Ex-ante tracking error (%)¹ Jun-07 Key risk metrics changes Global Equity Income Fund 100 7 1.00 95 6 90 0.90 85 0.80 2 80 75
    38. 38. Sector allocation changes Global Equity Income Strategy Sector weightings relative to MSCI AC World Index – 2007 to 2012 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% Healthcare Information Technology Dec 07 Consumer Discretionary Dec 08 Telecoms Utilities Materials Dec 09 Dec 10 Source: Threadneedle Investments; MSCI as at 31 December 2012. Based on a representative account of the strategy. 38 Industrials Consumer Staples Dec 11 Energy Dec-12 Financials
    39. 39. Regional allocation changes Global Equity Income Strategy Regional weightings relative to MSCI AC World Index – 2007 to 2012 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% North America Latin America and Other Dec 07 Dec 08 Europe inc. UK Dec 09 Japan Dec 10 Source: Threadneedle Investments; MSCI as at 31 December 2012. Based on a representative account of the strategy. 39 Dec 11 Asia Dec-12
    40. 40. Market capitalisation allocation changes Global Equity Income Strategy Market capitalisation weightings relative to MSCI AC World Index – 2007 to 2012 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% >$50bn $7 to $50bn Dec 07 Dec 08 Dec 09 <$7bn Dec 10 Source: Threadneedle Investments; MSCI as at 31 December 2012. Based on a representative account of the strategy. 40 Dec 11 Dec-12
    41. 41. Biography STEPHEN THORNBER Fund Manager Stephen Thornber has managed the Threaneedle Global Equity Income Fund since its inception in 2007, and is responsible for several institutional funds. He heads the energy sector research team. Prior to joining the global equities team Stephen was a UK fund manager and spent five years managing the Threadneedle UK Monthly Income Fund. He has also worked as a fund manager for Eagle Star Investments 1 and for the Kuwait Investment Office. Stephen has an honours degree in Business and Finance from Plymouth Polytechnic and is an associate member of the UK Society of Investment Professionals. Threadneedle start date: 1994 Industry start date: 1987 1 Eagle Star Investments became part of Threadneedle in 1994. 41
    42. 42. Biography JONATHAN CROWN Fund Manager Jonathan Crown joined Threadneedle Investments in 2005 as an investment analyst on the credit team. In 2008 he moved from the fixed income team to the global equities team and has been fund manager of global core funds since 2010 and deputy fund manager of the Threadneedle Global Equity Income Fund since 2011. He is also deputy head of the financials sector research team. Prior to joining Threadneedle, he worked at Dresdner Kleinwort Wasserstein as an investment grade credit analyst covering financials. Jonathan has an MA (Hons) Degree in Economics from the University of St Andrews. Threadneedle start date: 2005 Industry start date: 2001 42
    43. 43. Global equities funds key risks Key Risks applying to all the funds: Market Risk: The value of investments can fall as well as rise and investors might not get back the sum originally invested. Currency Risk: Where investments are made in assets that are denominated in multiple currencies, changes in exchange rates may affect the value of the investments. Investor Currency Risk: Where investments in the fund are in currencies other than your own, changes in exchange rates may affect the value of your investments. Effect of portfolio concentration: The fund has a concentrated portfolio (holds a limited number of investments and/or takes large positions in a relatively small number of stocks) and if one or more of these investments declines or is otherwise affected, it may have a pronounced effect on the fund‟s value. High Volatility Risk: The fund typically carries a risk of high volatility due to its portfolio composition or the portfolio management techniques used. This means that the fund‟s value is likely to fall and rise more frequently and pronounced than with other funds The following key risks also apply to the Global Extended Alpha Fund: Liquidity Risk: The fund may hold assets that are not always readily saleable without suffering a discount to fair value. The fund may have to lower the selling price, sell other investments or forego another, more appealing investment opportunity. Valuation Risk: The fund‟s assets may sometimes be difficult to value objectively and the actual value may not be recognised until assets are sold. Short Selling Risk: Short selling intends to make a profit from falling prices. However if the value of the underlying investment increases, the value of the short position will decrease. The potential losses are unlimited as the prices of the underlying investments can increase very significantly in a short space of time. Leverage Risk: Leverage amplifies the effect that a change in the price of an investment has on the fund‟s value. As such, leverage can enhance returns to investors but can also increase losses, including losses in excess of the amount invested. Investment in Derivatives: The Investment Policy of the fund allows it to invest materially in derivatives. 43
    44. 44. Important notes (1) For internal use and for Professional and/or Qualified Investors only (not to be used with or passed on to retail clients) Past performance is not a guide to future performance. The value of investments and any income is not guaranteed and can go down as well as up and may be affected by exchange rate fluctuations. This means that an investor may not get back the amount invested. Threadneedle Specialist Investment Funds ICVC (“TSIF”) is an open-ended investment company structured as an umbrella company, incorporated in England and Wales, authorised and regulated in the UK by the Financial Conduct Authority (FCA) as a UCITS scheme. TSIF is registered for public offer in Austria, Belgium, France, Germany, Hong Kong (some sub-funds only), Italy, Luxembourg, the Netherlands, Spain, Switzerland (some sub-funds only) and the UK. Shares in the 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 and are in accordance with applicable local legislation. TSIF 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. TSIF is authorised in Spain by the Comisión Nacional del Mercado de Valores (CNMV) and registered with the relevant CNMV's Registered with number 481. 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 the Act of Financial Supervision, the subfund is included in the register that is kept by the AFM. 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. This material is for information only and does not constitute an offer or solicitation of an order to buy or sell any securities or other financial instruments, or to provide investment advice or services. 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 Austria: Raiffeisen Zentralbank Österreich AG, Am Stadtpark 9, 1030 Wien; in Belgium: J.P. Morgan Chase Bank Brussels, 1, Boulevard du Roi Albert II, 1210 Brussels; in France: BNP Paribas Securities Services, 66 rue de la Victoire, 75009 Paris; in Germany: JP Morgan AG, Junghofstr. 14, 60311 Frankfurt; in Ireland: J.P. Morgan Bank Administration Services (Ireland) Limited, J.P. Morgan House International Financial Services Centre, Dublin 1; in Italy: State Street Bank S.p.A., via Col Moschin 16, 20136 Milano; in Luxembourg: State Street Bank Luxembourg S.A., 49 Avenue J. F. Kennedy, 1855 Luxembourg; in the Netherlands: Fortis Intertrust, Rokin 55, 1012 KK Amsterdam; in Spain: any appointed distributor listed on the Spanish Financial Regulator‟s website (www.cnmv.es); in the UK; Threadneedle Investments‟ Client Services department P.O. Box 1331, Swindon SN38 7TA. 44
    45. 45. Important notes (2) Please read the Prospectus before investing. For Swiss investors: 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, which can be obtained free of charge on request, 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 and the instrument of incorporation are available on request from our representative and Paying Agent in Switzerland, BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16,CH-8002 Zurich. The mention of any specific shares or bonds should not be taken as a recommendation to deal. This document is a marketing communication. The research and analysis included in this document have not been prepared in accordance with the legal requirements designed to promote its independence and have been produced by Threadneedle Investments for its own investment management activities, may have been acted upon prior to publication and is made available here incidentally. Any opinions expressed are made as at the date of publication but are subject to change without notice and should not be seen as investment advice. Information obtained from external sources is believed to be reliable 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 form or 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. 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 by the Financial Conduct Authority. 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. 45

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