THREADNEEDLE UK EQUITY FUND RANGE

Transcription

1 INVESTOR GUIDE THREADNEEDLE UK EQUITY FUND RANGE nthreadneedle UK Fund nthreadneedle UK Absolute Alpha Fund nthreadneedle UK Equity Alpha Income Fund nthreadneedle UK Equity Income Fund nthreadneedle UK Extended Alpha Fund nthreadneedle UK Growth & Income Fund nthreadneedle UK Mid 250 Fund nthreadneedle Monthly Extra Income Fund nthreadneedle UK Monthly Income Fund nthreadneedle UK Select Fund nthreadneedle UK Smaller Companies Fund threadneedle.co.uk

2 Please read this important information. You cannot predict future performance by looking at past performance. The value of investments, and the income from them, can go down as well as up, and you may not get back what you put in. Threadneedle is unable to provide financial advice and you should not interpret anything in this guide as advice. If you are unsure about anything you should speak to a financial adviser. For details of one in your area please go to Please note that Threadneedle does not endorse or the advisers found on it. The material in this brochure is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. We have also included a glossary on page 24 to help you with the financial terms used.

3 CONTENTS 01 Introduction Why UK Equities Growth or Income Our experienced team A range of funds to meet investors needs Threadneedle s UK Equity Fund range Ratings explained Glossary Further information...26

4 4 01 INTRODUCTION

5 Investor Guide Threadneedle UK Equity Fund Range At Threadneedle Investments we believe that there is a better way to manage money. By bringing together a diverse and disciplined team of UK equity investment professionals in one location, we have created an environment for the very best investment ideas. What does this mean for our clients? As those who invest with Threadneedle have found, it means being sure that we re constantly striving to out-think our peers. This brochure gives you some background on the opportunities offered by the UK equity market. It also highlights our UK equity range of funds, each offering a different route to access the investment potential of the UK market. If you are unsure of the best products to suit your investment goals you should speak to a financial adviser. 5

6 6 02 WHY UK EQUITIES

7 Investor Guide Threadneedle UK Equity Fund Range Shares in UK companies continue to be a popular choice for UK investors. The broad range of businesses on offer, and the familiarity of many of the companies featured, make the UK market an attractive option for novices and highly sophisticated investors alike. While short-term conditions all too often affect inexperienced investors appetite for equities, many professional commentators agree that investing in the stock market is a good way to seek long-term returns. The UK market is the second largest equity market in the world behind the US. It is broadly diversified with more than two-thirds of company earnings coming from outside the UK and in our view it is attractively valued versus its history, other equity markets and asset classes. Growth and yield Within the market there are different types of shares. Growth companies typically fund their expansion by ploughing their profits back into the business opening new offices, building factories, developing new products and so on. The investment return that these companies provide comes largely from changes in the share price. Some other companies, meanwhile, may opt to distribute most of their profits to shareholders in the form of dividends. These higher yielding companies also aim to grow their dividends over time. When investing in these companies, the return comes from two sources: changes in the share price and dividends. Higher yielding companies tend to be more mature and often operate in industries with highly predictable revenues, such as utilities. These factors help them to pay high and rising dividends. However, it is important to remember that past performance is not a guide to future returns. 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. 7

8 8 03 GROWTH OR INCOME

9 Investor Guide Threadneedle UK Equity Fund Range The appeal of income UK equity income funds generally aim to provide an income (this is often referred to as yield) in excess of that generated by the FTSE All-Share. Most will look to grow their income, and the capital value of their investments over time. Their income generation characteristics give investors an attractive degree of flexibility, allowing them to: nreceive regular payments from the fund, which may be used to supplement a pension, for example, or nreinvest dividends in the fund to boost long-term returns. The power of reinvested income The power of compound interest is frequently underestimated. Reinvesting income back into a fund of this type buys you more shares, which should then provide more income, to buy more shares, and so on. The graph below shows how this virtuous circle can significantly boost returns. Past performance is not a guide to the future. However, the power of reinvested income, together with the ability of well-established companies to weather difficult times, has provided the opportunity for equity income funds to outperform the wider market over the long term. The appeal of growth Investors with a long-term time horizon (we usually define this as over 5 years) and no need for regular income often opt for growth funds. Because these funds do not have a yield target, they can invest more of their capital in areas of the market that pay lower dividends, such as technology and smaller companies. This gives them the potential to deliver superior growth via share price appreciation. The illustration below is for comparative purposes only. It uses market indices so does not necessarily reflect what an investor would have received by investing in a collective fund. The figures represent the actual returns from each index and do not include any charges, fees or taxation levies, that an investor would expect to incur. It is not possible to invest directly in these indices. There are different risk factors involved when investing in equities compared with cash deposits and investors are reminded that the value of investments and any income from them can go down as well as up. Past performance is not a guide to future returns. The value of 10,000 invested over last 20 years 70,000 60,000 50,000 High Yielding UK Shares with dividend reinvested (UK Equity Income) UK Shares with dividend reinvested Cash UK Shares Capital Only Non Gilts Property 40,000 30,000 20,000 10,000 - Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Source: Thomson Datastream and Threadneedle as at Cash represented by Three Month LIBOR rate. UK shares capital only represented by FTSE All Share Index, capital return only. UK shares with dividend income reinvested represented by FTSE All Share Index, with dividends reinvested. High yielding UK shares with dividend income reinvested represented by FTSE 350 Higher Yield Index, with dividends reinvested. Bond (Non Gilts) represented by IBOXX Non Gilts All Maturities. Property is represented by Investment Property Databank (IPD). For illustration purposes only. 9

10 10 04 OUR EXPERIENCED TEAM

11 Investor Guide Threadneedle UK Equity Fund Range At Threadneedle we have a specific team of fund managers and analysts dedicated to managing UK equities. The 10 strong team of fund managers and investment professionals is headed by Leigh Harrison, Threadneedle s Head of Equities, who has over 31 years investment experience. The team includes specialists focusing on income, growth and smaller companies as well as analysts with specific expertise in different industries. The team employs a clear way of managing money that is based on communication and the sharing of ideas. Meeting companies is at the core of our approach and the team sees the management of hundreds of companies each year. The human touch The hard, analytical research is complemented by human insight into the themes driving share prices. The team has gained this insight by having an average of more than 15 years experience* in managing UK funds. Long-term thinkers In their pursuit of excellent performance, our managers are not tied to a set way of thinking. This means that the funds can exploit opportunities wherever they appear in the UK market. Typically, at any given time there are a number of themes influencing the market these may be to do with changes in the path of economic growth, interest rates or inflation, or they may be regulatory developments impacting specific industries. Identifying key themes early, finding the companies that will benefit and backing those companies with conviction is central to the team s approach. Moreover, these themes can change and the team seeks to incorporate holdings benefiting from several different themes in the portfolios at all times. This diversity is an important risk control in the funds, protecting performance if themes do not develop as anticipated. *Information as at

12 Investor Guide Threadneedle UK Equity Fund Range Our fund managers and analysts Jonathan Barber Jonathan joined Threadneedle in 1994 and is a Fund Manager. He has 24 years industry experience and specialises in utilities, property and chemicals. Leigh Harrison Leigh is Threadneedle s Head of Equities. He has 31 years industry experience and joined Threadneedle in Stacey Cassidy Stacey joined Threadneedle in 2012 as a UK equity analyst. She has 6 years industry experience and specialises in oil & gas, retailers, technology and consumer staples. Chris Kinder Chris joined Threadneedle in 2010 as a Fund Manager in the UK high alpha team. He has 13 years industry experience and specialises in banks, oil services, aerospace and mining. Richard Colwell Richard joined Threadneedle in 2010 as a Fund Manager in the UK equity income team. He has 24 years industry experience and specialises in health care, insurance media. Matt Evans Matt joined Threadneedle in October 2013 as a Fund Manager. He has 15 years industry experience and covers the small and mid-cap sectors. James Thorne James joined Threadneedle in 2010 as a Fund Manager. He has 15 years industry experience and covers the small and mid cap sectors. Mark Westwood Mark joined Threadneedle in September 2006 as a Fund Manager in the UK equities team. He has 16 years industry experience and covers leisure, other financials and telecoms. Andrew Evans Andrew joined Threadneedle in April 2014 as a senior analyst on the UK equities team. He has 12 years industry experience and has responsibility for transport, industrials and support services. 12

13 05 A RANGE OF FUNDS TO MEET INVESTORS NEEDS 13

14 Investor Guide Threadneedle UK Equity Fund Range Threadneedle s extensive UK equity fund range offers options for income and growth. All of our funds are driven by the same teambased research so, whilst they may focus on different areas of the UK stock market, they all aim to deliver the best possible performance within their own investment remit. Although please be aware that past performance is not a guide to future returns. The Investment Management Association (IMA) is the trade body for the UK s asset management industry. The IMA also maintains and regularly reviews a sector classification system into which member IMA firms classify their UK funds. This allows investors to compare funds from different companies which are in the same sector as they will have similar overall investment objectives. IMA sector definitions* UK Equity Income: Funds which invest at least 80% in UK equities and which aim to achieve a historic yield on the distributable income in excess of 110% of the FTSE All Share yield at the fund s year end. UK All Companies: Funds which invest at least 80% of their assets in UK equities which have a primary objective of achieving capital growth. UK Smaller Companies: Funds which invest at least 80% of their assets in UK equities of companies which form the bottom 10% by market capitalisation. UK Equity & Bond: Funds which invest at least 80% of their assets in the UK, between 20% and 80% in UK fixed interest securities and between 20% and 80% in UK equities. These funds aim to have a yield in excess of 120% of the FTSE All Share Index. Targeted Absolute Return: Funds managed with the aim of delivering positive returns in any market conditions, but returns are not guaranteed. Funds in this sector may aim to achieve a return that is more demanding than a greater than zero after fees objective. Funds in this sector must clearly state the timeframe over which they aim to meet their stated objective to allow the IMA and investors to make a distinction between funds on this basis. The timeframe must not be longer than three years. Sector (IMA) Threadneedle UK equity income fund range UK Equity Income UK All Companies Targeted Absolute Return UK Smaller Companies UK Equity & Bond UK Equity Income Fund UK Fund UK Absolute Alpha Fund UK Smaller Companies Fund Monthly Extra Income Fund UK Monthly Income Fund UK Equity Alpha Income Fund UK Growth & Income Fund UK Select Fund UK Mid 250 Fund UK Extended Alpha Fund 14 *As at

15 06 THREADNEEDLE S UK EQUITY FUND RANGE For a breakdown of the Investment Management Association s (IMA) sector definitions see page 20. Investor Guide Threadneedle UK Equity Fund Range IMA UK Equity Income Sector UK Equity Income UK Monthly Income Fund UK Equity Alpha Income Fund Mainstream UK equity income fund Monthly paying UK equity income fund Highly focused UK equity income fund Fund Objective and Policy The aim of the Fund is to provide income with the potential to grow the amount you invested as well. The Fund invests at least two-thirds of its assets in shares of UK companies. The Fund makes active investment decisions. Fund characteristics ntypically invests in 45 to 60 holdings spread across sectors nco-managed by Leigh Harrison, Head of Equities and AA rated by Citywire and Richard Colwell, AAA rated by Citywire npays income quarterly nindex: FTSE All Share nlaunched September 1985 nretail On-going Charges Figure (OCF): 1.62% (as at ) nminimum investment 2,000. Available within an ISA and via most platforms and fund supermarkets Fund Objective and Policy The aim of the Fund is to provide income with the potential to grow the amount you invested as well. The Fund invests at least two-thirds of its assets in shares of companies in the UK. The Fund makes active investment decisions. Fund characteristics ntypically invests in a portfolio of 50 to 70 holdings na track record of delivering both income and growth nmanaged by Jonathan Barber who is A rated by Citywire none of the few funds that can pay income monthly nindex: FTSE All Share nlaunched January 1964 nretail On-going Charges Figure (OCF): 1.62% (as at ) nminimum investment 2,000. Available within an ISA and via most platforms and fund supermarkets Fund Objective and Policy The aim of the Fund is to provide income with the potential to grow the amount you invested as well. The Fund invests at least two-thirds of its assets in shares of UK companies or companies that have significant operations there. The Fund s investment approach means it can invest significantly in particular companies and industries. This means it will typically hold fewer investments than other funds. The Fund makes active investment decisions. Fund characteristics ntypically invests in a portfolio of 25 to 35 holdings spread across sectors nco-managed by Leigh Harrison, Head of Equities and AA rated by Citywire, and Richard Colwell, AAA rated by Citywire nbronze rated by Morningstar OBSR npays income in June and December nindex: FTSE All Share nlaunched May 2006 nretail On-going Charges Figure (OCF): 1.62% (as at ) nminimum investment 2,000. Available within an ISA and via most platforms and fund supermarkets About the Fund nconviction driven core UK equity income offering the Fund typically invests in 45 to 60 companies across a broad range of industries, with the aim of generating a dividend yield greater than 110% of that of the FTSE All Share Index. nstrong risk adjusted returns Fund Managers Leigh Harrison and Richard Colwell have built a strong track record of risk adjusted returns across both rising and falling markets. nmanaged for total return, not just income yield is constructed at the portfolio level, not the stock level. The Fund is therefore able to combine higher yielding investments with dividend and/or capital growth opportunities. nplain vanilla investment approach the Fund does not use derivatives and does not hold bonds or overseas equities. About the Fund nconsistent monthly income payments one of the few UK equity income funds to pay income monthly. The first 11 distributions are of equal size, with the final distribution typically twice the monthly level. nstrong risk adjusted returns Fund Manager Jonathan Barber has run the Fund since June 2002 and has built a strong track record of risk adjusted returns across both rising and falling markets. nmanaged for total return, not just income yield is constructed at the portfolio level, not the stock level. The Fund is therefore able to combine higher yielding investments with dividend and/or capital growth opportunities. nplain vanilla investment approach the Fund does not use derivatives and does not hold bonds or overseas equities. About the Fund nthe most concentrated offering in our UK equity income range the Fund typically invests in 25 to 35 companies, representing our highest conviction ideas, across a broad range of industries. The Fund aims to generate a dividend yield greater than 110% of that of the FTSE All Share index. nstrong risk adjusted returns Fund Managers Leigh Harrison and Richard Colwell have built a strong track record of risk adjusted returns across both rising and falling markets. nmanaged for total return, not just income yield is constructed at the portfolio level, not the stock level. The Fund is therefore able to combine higher yielding investments with dividend and/or capital growth opportunities. nplain vanilla investment approach the Fund does not use derivatives and does not hold bonds or overseas equities. Ratings and awards Ratings and awards Ratings and awards Key risks Investment risk: The value of investments can fall as well as rise and investors might not get back the sum originally invested. 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. 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 the Fund s value is likely to fall and rise more frequently and pronounced than other funds. Key risks Investment risk: The value of investments can fall as well as rise and investors might not get back the sum originally invested. 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. 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. Key risks Investment risk: The value of investments can fall as well as rise and investors might not get back the sum originally invested. 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. 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 on-going charges figure (OCF) is based on the last year s expenses and may vary from year to year. It includes charges such as the fund s annual management charge, registration fee, custody fees and distribution cost but excludes the costs of buying or selling assets for the Fund (unless these assets are shares of another fund). For a more detailed breakdown please visit 15

16 Investor Guide Threadneedle UK Equity Fund Range IMA UK All Companies Sector UK Fund UK Growth & Income Fund UK Select Fund A diversified UK equity fund Fund Objective and Policy The aim of the Fund is to grow the amount you invested. The Fund invests at least two-thirds of its assets in shares of companies in the UK or companies that have significant UK operations. The Fund makes active investment decisions. Aims to offer the best of both worlds: capital growth and income Fund Objective and Policy The aim of the Fund is to grow the amount you invested and provide income as well. The Fund invests at least two-thirds of its assets in shares of large, well known companies with good growth records, in the UK. It is also able to invest, when needed, in small and medium sized companies. The Fund makes active investment decisions. A high conviction growth fund Fund Objective and Policy The aim of the Fund is to grow the amount you invested. The Fund invests at least two-thirds of its assets in UK companies or companies that have significant UK operations. The Fund s investment approach means it can invest significantly in particular companies and industries. This means it will typically have fewer investments than other funds. The Fund makes active investment decisions. Fund characteristics nrelatively diversified portfolio of typically 50 to 70 holdings nmanaged by Chris Kinder who is A rated by Citywire nindex: FTSE All Share nlaunched in September 1985 nretail Ongoing Charges Figure (OCF): 1.66% (as at ) nminimum investment 2,000. Available within an ISA and via most platforms and fund Supermarkets Fund characteristics nrelatively diversified portfolio of typically 35 to 55 holdings nmanaged by Richard Colwell who is AAA rated by Citywire nindex: FTSE All Share nlaunched in November 1966 nbronze rated by Morningstar OBSR nretail Ongoing Charges Figure (OCF): 1.63% (as at ) nminimum investment 2,000. Available within an ISA and via most platforms and fund Supermarkets Fund characteristics nrelatively diversified portfolio of typically 40 to 50 holdings nmanaged by Mark Westwood who is rated AA by Citywire nindex: FTSE All Share nlaunched in March 1934 nretail Ongoing Charges Figure (OCF): 1.67% (as at ) nminimum investment 2,000. Available within an ISA and via most platforms and fund Supermarkets About the Fund nconviction driven UK Equity fund the Fund follows a research driven bottom-up approach. It is not closely tied to the benchmark and is not restricted by company size, sector or investment style. nstrong risk adjusted returns both Threadneedle and Fund Manager Chris Kinder have a strong track record of risk adjusted returns. About the Fund na bottom up, best ideas portfolio unconstrained contrarian approach, aiming to generate strong performance through the investment cycle by unearthing attractive businesses which have fallen out of favour. na longer-term investment perspective low turnover, seeking to gain a full and detailed understanding of a business, and actively engage with management. nstrong risk adjusted returns Fund Manager Richard Colwell has built a strong track record of both absolute and relative risk adjusted returns across the market cycle. nmanaged for total return whilst typically maintaining a yield above that of the market the fund is able to pursue the optimal balance of growth and income opportunities to maximise total return. About the Fund nconviction driven concentrated UK Equity fund the Fund follows a research driven bottom-up approach. It is unconstrained by index, company size, stock and sector. nstrong risk adjusted returns Fund Manager Mark Westwood has built a strong track record of risk adjusted returns across the market cycle. Ratings and awards Ratings and awards Ratings and awards Key risks Investment risk: The value of investments can fall as well as rise and investors might not get back the sum originally invested. 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. 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. Volatility risk: The Fund may exhibit significant price volatility. Key risks Investment risk: The value of investments can fall as well as rise and investors might not get back the sum originally invested. 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. 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. Key risks Investment risk: The value of investments can fall as well as rise and investors might not get back the sum originally invested. 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 construction: 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 on-going charges figure (OCF) is based on the last year s expenses and may vary from year to year. It includes charges such as the fund s annual management charge, registration fee, custody fees and distribution cost but excludes the costs of buying or selling assets for the Fund (unless these assets are shares of another fund). For a more detailed breakdown please visit 16

17 Investor Guide Threadneedle UK Equity Fund Range IMA UK All Companies Sector IMA Targeted Absolute Return Sector UK Mid 250 Fund UK Extended Alpha Fund UK Absolute Alpha Fund A flexible mid-cap fund that aims to generate growth Fund Objective and Policy The aim of the Fund is to grow the amount you invested. The Fund invests at least two-thirds of its assets in shares of medium sized companies in the UK that are part of the FTSE 250 (excluding Investment Trusts) Index. The Fund makes active investment decisions. Aims to deliver capital growth from a portfolio of both long and short positions in UK equities Fund Objective and Policy The aim of the Fund is to grow the amount you invested. The Fund invests at least two-thirds of its assets in UK companies or companies that have significant operations there. The Fund invests directly in shares or by using derivatives. Derivatives are sophisticated investment instruments linked to the rise and fall of the price of other assets. The Fund may also make use of short selling techniques (which are designed to make a profit from falling prices) and leverage (which increases the effect that a change in the price of an investment has on the Fund s value). The Fund s investment approach means it can at times invest significantly in particular companies and industries. This means that for such periods it will typically hold fewer investments than other funds. The Fund makes active investment decisions. Aims to achieve an annual absolute return, irrespective of market Fund Objective and Policy The aim of the Fund is to make a positive return for you over the longer term, notwithstanding changing market conditions. The Fund invests at least two-thirds of its assets in UK companies, or companies that have significant operations there and, when appropriate, cash. The Fund invests directly in shares or by using derivatives. Derivatives are sophisticated investment instruments linked to the rise and fall of the price of other assets. The Fund may also make use of short selling techniques (which are designed to make a profit from falling prices) and leverage (which increases the effect that a change in the price of an investment has on the Fund s value). The Fund makes active investment decisions. Fund characteristics na targeted portfolio of typically up to 50 holdings nco-managed by James Thorne who is + rated by Citywire, and Matt Evans nindex: FTSE 250 Ex. Investment Trusts nlaunched in September 2003 nretail Ongoing Charges Figure (OCF): 1.63% (as at ) nminimum investment 2,000. Available within an ISA and via most platforms and fund Supermarkets About the Fund na concentrated fund with a sharp focus on high conviction ideas it aims to out perform both the FTSE 250 Index and the IMA UK All Companies sector from a portfolio of typically up to 50 holdings ncomprehensive UK equity range the Fund is part of a UK equity range that offers options from large-cap holdings to equity income and specialist funds nco Fund Managers James Thorne and Matt Evans focus on finding stocks with sustainable growth, particularly when the forecasts and the rating given by the market fail to appreciate the stock s full potential Fund characteristics ntypically 50 to 80 long and short positions nmanaged by Chris Kinder who is A rated by Citywire nlaunched in December 2010 nretail Ongoing Charges Figure (OCF): 1.44% (as at ) nminimum investment 2,000. Available within an ISA and via most platforms and fund Supermarkets About the Fund nenhanced alpha generating capabilities by using the wider investment powers allowed under UCITS regulations, the Fund can fully express a negative view on a stock by taking a short position, and can extend the alpha generated from long positions, whilst keeping the net exposure to the market broadly around 100%. nhigh conviction stock picking approach derived from bottom up in-house fundamental analysis using stringent valuation criteria leading to a clear risk/reward trade-off. nstrong risk adjusted returns both Threadneedle and Fund Manager Chris Kinder have a long successful track record of alpha generation in long/short UK equities. Fund characteristics ntypically 60 to 90 long and short positions nmanaged by Chris Kinder who is A rated by Citywire, and Mark Westwood who is AA rated by Citywire nretail Ongoing Charges Figure (OCF): 1.64% (as at ) nminimum investment 2,000. Available within an ISA and via most platforms and fund Supermarkets About the Fund na diversified Fund investing in the UK equity market with an absolute return mandate over the long term. The Fund aims to generate 8-10% p.a. over a market cycle (typically defined as three to five year investment horizon) and a positive return greater than zero over a 12 month period. nthe objective is to achieve absolute return, irrespective of market conditions, over the long term by primarily investing in equity securities and equity related derivatives, of corporate issuers headquartered in the United Kingdom. nthe Fund s exposure to any equities may be gained through both long and short positions and investments may also include the use of forward transactions and collective investment schemes. The managers take a long term view when holding stocks in order to maximise potential gains from changing markets. Ratings and awards Ratings and awards Ratings and awards Key risks Investment risk: The value of investments can fall as well as rise and investors might not get back the sum originally invested. 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. 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. Key risks Investment risk: The value of investments can fall as well as rise and investors might not get back the sum originally invested. 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. Volatility risk: The Fund may exhibit significant price volatility. Valuation risk: The Fund s assets may sometimes be difficult to value objectively and the true value may not be recognised until assets are sold. Short selling risk: Short selling is designed to make a profit from falling prices. However, if the value of the underlying investment increases, the short position will negatively affect the Fund s value. 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. 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. Investment in derivatives: The investment policy of the Fund allows it to invest materially in derivatives. Key risks Investment risk: The value of investments can fall as well as rise and investors might not get back the sum originally invested. 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. No capital guarantee: Positive returns are not guaranteed and no form of capital protection applies. Volatility risk: The Fund may exhibit significant price volatility. Counterparty risk: The Fund may enter into financial transactions with selected counterparties. Any financial difficulties arising at these counterparties could significantly affect the availability and the value of fund assets. Valuation risk: The Fund s assets may sometimes be difficult to value objectively and the true value may not be recognised until assets are sold. Short selling risk: Short selling is designed to make a profit from falling prices. However, if the value of the underlying investment increases, the short position will negatively affect the Fund s value. 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. Investment in derivatives: The investment policy of the Fund allows it to invest materially in derivatives. The on-going charges figure (OCF) is based on the last year s expenses and may vary from year to year. It includes charges such as the fund s annual management charge, registration fee, custody fees and distribution cost but excludes the costs of buying or selling assets for the Fund (unless these assets are shares of another fund). For a more detailed breakdown please visit 17

18 IMA UK Smaller Co. Sector UK Smaller Companies Fund Offering access to small and medium sized UK companies IMA UK Equity & Bond Sector Monthly Extra Income Fund Monthly income from a portfolio of equities and bonds Fund Objective and Policy The aim of the Fund is to grow the amount you invested. The Fund invests at least two-thirds of its assets in shares of smaller companies in the UK or companies that have significant operations there. As it invests in smaller companies, the Fund will mainly choose shares from companies that are included in the Numis Smaller Companies Index and listed on the London Stock Exchange s Alternative Investment Market. The Fund makes active investment decisions. Fund Objective and Policy The aim of the Fund is to provide income with the potential to grow the amount you invested as well. The Fund invests at least two-thirds of its assets in shares in UK companies and in bonds (which are similar to a loan and pay a fixed or variable interest rate) issued in British Pounds. The Fund makes active investment decisions. Fund characteristics ndiversified portfolio of typically 65 to 90 holdings nco-managed by James Thorne who is + rated by Citywire and Matt Evans nindex: Numis Smaller Companies Index nlaunched in February 1995 nretail Ongoing Charges Figure (OCF): 1.69% (as at ) nminimum investment 2,000. Available within an ISA and via most platforms and fund Supermarkets About the Fund nsmaller companies are fundamentally attractive small cap stocks have outperformed large cap stocks over the long term, and offer the potential for transformational growth. npragmatic approach the Fund balances growth and valuation, scalability and sustainability. It is diversified by growth drivers and themes, with market risk typically less than the index and liquidity risk carefully managed. nstrong risk adjusted returns Fund Managers James Thorne and Matt Evans have built a strong track record of risk adjusted returns across the market cycle. Fund characteristics ntypically invests in a portfolio of 40 to 60 holdings nmanaged by Richard Colwell, AAA rated by Citywire and Alasdair Ross, A rated by Citywire nlaunched in October 1999 nretail Ongoing Charges Figure (OCF): 1.39% (as at ) nminimum investment 2,000. Available within an ISA and via most platforms and fund Supermarkets About the Fund nconsistent monthly income payments one of the few UK equity income funds to pay income monthly. nstrong risk adjusted returns the co-fund managers have built a strong track record of risk adjusted returns across the market cycle. nmanaged to achieve both growth and income the Fund combines the growth potential of large, blue chip UK stocks with the income opportunity generated from a portfolio of UK and overseas investment grade fixed income bonds. Ratings and awards Ratings and awards Key risks Investment risk: The value of investments can fall as well as rise and investors might not get back the sum originally invested. 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. Liquidity risk: The Fund invests in assets that are not always readily saleable without suffering a discount to fair value. The portfolio may have to lower the selling price, sell other investments or forego another, more appealing investment opportunity. 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. Key risks Investment risk: The value of investments can fall as well as rise and investors might not get back the sum originally invested. 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. Volatility risk: The Fund may exhibit significant price volatility. Issuer risk: The Fund invests in securities whose value would be significantly affected if the issuer either refused to pay, or was unable to pay or perceived to be unable to pay. The on-going charges figure (OCF) is based on the last year s expenses and may vary from year to year. It includes charges such as the fund s annual management charge, registration fee, custody fees and distribution cost but excludes the costs of buying or selling assets for the Fund (unless these assets are shares of another fund). For a more detailed breakdown please visit 18

19 07 RATINGS EXPLAINED 19

20 Investor Guide Threadneedle UK Equity Fund Range Threadneedle funds and fund managers regularly receive ratings. These ratings are provided by independent rating agencies based on a number of investment criteria. Citywire Fund Manager Ratings The Citywire Fund Manager Ratings track the performance of individual fund managers whilst agencies such as OBSR and Standard & Poor s focus on funds. The ratings given run from + to AAA (AAA being the highest possible rating). Citywire Rating definitions* In order to be rated, a fund manager will need to beat his or her benchmark over a three-year period. A benchmark is often the relevant stock market index. Fewer than 25% of fund managers that Citywire track actually achieve this, and managers in this select group will either receive a Citywire+, A, AA, or the top AAA rating. The four ratings bands are assigned in the following way: The top 10% of managers in this elite group will gain the highest AAA rating. The next 20% will be awarded the AA rating the following 30% will get a single A rating and the remaining 40% will gain a Citywire + rating. Each Citywire rated fund manager will have one universal rating, reflecting the performance on every fund he or she runs across the 35 countries in our database. 20 *Source: Morningstar OBSR, Citywire, Rayner Spencer Mills, FundCalibre and Square Mile.

21 Investor Guide Threadneedle UK Equity Fund Range Morningstar OBSR Rating definitions* Morningstar OBSR is an independent ratings company which gives ratings based on performance and quality of investment process. The ratings given run from Gold to Bronze, (Gold being the highest possible rating). This is the highest rating awarded. It is given to funds which demonstrate very powerful investment processes and disciplines which they believe will translate into exceptional long-term performance. The Morningstar OBSR Gold Rating is an indication of excellence. This is determined using the same methodology as for the Morningstar OBSR Gold Rating. The Morningstar OBSR Silver Rating is an indication of highly superior quality based on process and track record. This is again determined using a methodology consistent with that applied for both other ratings. A fund which achieves the Morningstar OBSR Bronze Rating status is a highly commendable one. Rayner Spencer Mills Rated Fund Service* Rayner Spencer Mills (RSM) are an independent research company. They rate funds using both quantitative and qualitative measures. RSM do not grade their rated funds as they believe that all the funds rated are worthy of recommendation. *Source: Morningstar OBSR, Citywire, Rayner Spencer Mills, FundCalibre and Square Mile. 21

22 Investor Guide Threadneedle UK Equity Fund Range Morningstar Rating definitions Morningstar rates mutual funds from five to one stars based on how well they ve performed (after adjusting for risk and accounting for all sales charges) in comparison to similar funds. Within each Morningstar category, the top 10% of funds receive five stars, the next 22.5% four stars, the middle 35% three stars, the next 22.5% two stars, and the bottom 10% receive one star. Funds are rated for up to three time periods three, five, and ten years and these ratings are combined to produce an overall rating. Funds with less than three years history are not rated. Ratings are objective, based entirely on a mathematical evaluation of past performance. They re a useful tool for identifying funds worthy of further research, but shouldn t be considered buy or sell recommendations. 22

23 Investor Guide Threadneedle UK Equity Fund Range FundCalibre Elite Fund Ratings The FundCalibre investment research team analyses funds which are widely available to UK retail investors and identifies those which they believe have the most skillful managers. Following comprehensive analysis, where Fund Calibre believe the manager can consistently deliver positive value over time a fund is awarded a proprietary Elite Fund rating. Around 10% of 3,000 funds available to investors will be rated. Square Mile Ratings A AA AAA The Square Mile Academy of Funds is a showcase of all funds which Square Mile is prepared to recommend to clients. There three different categories of fund ratings: Recommended Funds, Recommended Risk- Targeted Funds and Positive Prospects. Recommended funds: funds are rated A, AA, or AAA (AAA being the highest possible rating), as a mark of quality and a reflection of the level of conviction Square Mile has in a fund s ability to deliver on expectations. To address the requirements of an evolving regulatory environment, particular attention is paid to investment outcomes, ensuring that a vehicle meets specific client requirements: capital accumulation; capital preservation; inflation protection and income. Recommended risk-targeted funds ranges: specifically for risk-targeted fund ranges, funds are categorised into meaningful peer groups and their ability to add value while remaining within their stated risk parameters is assessed. Recommended risk-targeted fund ranges will carry an R rating. Positive Prospects: pinpoints funds that have real potential to deliver but where the manager, strategy or process might be new and therefore as yet unproven in all market conditions. 23

24 24 08 GLOSSARY

25 Investor Guide Threadneedle UK Equity Fund Range Alpha: the part of a fund s performance that is attributable to fund manager skill Balance sheet: accounting statement detailing a company s assets and liabilities at a given point in time Beta: the part of a fund s performance that is attributable to moves in the market. Also, the extent to which a fund is exposed to moves in an underlying market Capital growth: an investment return generated by changes in the price of a share Compound interest: the interest calculated on the initial loan and also on the accumulated interest of previous periods of a loan, in other words it is the interest on the interest. Cyclical: company whose profits are relatively dependent on the pace of economic growth Dividend: a payment made to shareholders from part of a company s profits Dividend yield: valuation measure defined as the dividend divided by the share price Enhanced income funds: funds that use covered call options to boost the income generated by equity holdings Extended alpha: an alternative name for 130/30 funds (see above) FTSE All Share: main benchmark for UK portfolio performance. This is a composite index of nearly all UK shares on the London Stock Exchange and covers small, medium and large companies Futures: derivative contracts whereby one party agrees to purchase something from another party at a set price and date Income: the receipt of dividends from a company into a fund. These can be reinvested back into the fund or paid out to investors Liquidity: the ease or difficulty with which an investment can be bought or sold Long investing: the purchase of an investment with the expectation of an increase in its price Non-cyclical: company whose profits are relatively independent of the economic cycle Ongoing Charges Figure (OCF): A single percentage snapshot of the total cost of your investment, including all fees and charges Profit: the excess of cash generated by a business over the cash used during the period Revenue: proceeds of a company s sales Reinvested income: when income that can be paid out by a fund to an investor is reinvested back into a fund to buy additional shares Sector: way of grouping companies according to the industry that they operate in Valuation: way of assessing the cheapness of company shares. Examples include price to earnings ratio and dividend yield Volatility: the extent to which the value of an investment fluctuates over time UCITS: Undertaking for Collective Investments in Transferable Securities. The UCITS legislation widens the range of investments open to those funds which are designed to use the full investment powers, e.g. Threadneedle UK Absolute Alpha Fund 25

26 26 09 FURTHER INFORMATION

27 Investor Guide Threadneedle UK Equity Fund Range Fund charges and minimum investment For up to date details of charges applying to Funds in our UK Equity range, please see the latest Key Investor Information Document (KIID) available at nminimum investment 2,000 also available within an ISA. Our fund range is available via most platforms and fund supermarkets. Threadneedle does not offer investment advice. If you are unsure about your investments you should speak to a financial adviser. For details of one in your area please go to Please note that Threadneedle does not endorse or the advisers found on it. Contact us You can contact us in a variety of ways: Telephone: * Fax: Our team is available from 8am to 6pm, Monday to Friday. Website: Our website contains information on all our products and services and gives you full details of all fund prices. You can also download the Fund prospectus, Key Investor Information Documents, and the latest annual and interim reports. questions@service.threadneedle.co.uk Post: Threadneedle Investment Services Limited PO Box 10033, Chelmsford, Essex CM99 2AL *Telephone calls may be recorded. 27