Gei miami

The case for Global Equity Income

William Davies – Head of Global Equity

June 2013

For institutional investors

Wholesale

Any mention of Funds are purely for information only. The Funds mentioned are not registered for sale in the US. 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.

For investment professionals only, not for US investors

October 2013

1. The market environment, and why income strategies will continue to attract investors

2. How to approach income investing

3. The advantages of a global approach

4. Summary and conclusion

Agenda

2

Threadneedle Global Equity team

Over $6bn in global equity AUM

Source: Threadneedle as at 30 September 2013.

14 years’ experience

5 years at Threadneedle



William Davies

Head of Global Equity





Jonathan Crown

Fund Manager



Ashish Kochar

Fund Manager

Pauline Grange

Fund Manager

Esther Perkins

Fund Manager


1 year at Threadneedle

Neil Robson

Fund Manager



Stephen Thornber

Fund Manager


1 year at Threadneedle

James Foreman

Client Portfolio Analyst

3

Threadneedle – experienced equity income management

Over $6 billion in equity income AUM

Source: Threadneedle as at 30 September 2013..

Stephen Thornber

Global Income


4

Benchmark MSCI AC World FTSE All Share S&P 500 MSCI Europe MSCI Asia (ex Japan)

Holdings 75-95 45-60 50-70 30-50 50-60

Leigh Harrison

UK Income


Diane Sobin

US Income


Nick Davis

Pan-European Income


George Gosden

Asian Income


The market environment 1

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

Global economic outlook

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.

6

Institutional

2014 GDP growth forecast (%)

Developed Markets Threadneedle Consensus

US 2.5 2.7

UK 2.3 2.1

Japan 1.5 1.7

Europe 0.7 0.9

2014 GDP growth forecast (%)

Emerging Markets Threadneedle Consensus

China 7.5 7.4

India1 5.5 5.9

Russia 2.8 3.3

Brazil 3.0 2.6

The taper caper

7

Source: Bloomberg, September 2013.

1.50

1.75

2.00

2.25

2.50

2.75

3.00

Jan-13 Apr-13 Jul-13 Oct-13

Rising rates have put bond proxies under pressure

Fed Chairman Ben Bernanke:

“the winding-down process due to start this year”

US 10 year treasury yield (%)

Interest rates and inflation

8

10 year breakeven inflation expectations1 Yield on US 10 year treasury bonds

0

1

2

3

4

5

6

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Our view

Futures

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2003 2004 2006 2008 2010 2012 2014 2016 2018

% %

Source: Bloomberg and Threadneedle Investments as at 30 September 2013.

1 Derived from Treasury Inflation Protected Securities market (TIPS).

Rates are likely to stay low for longer

Performance profile

Source: FactSet Alpha Tester, CLSA Asia-Pacific Markets March 2013. MSCI-weighted USD total return with monthly rebalancing.

(4)

(2)

0

2

4

6

8

10

12

14

Expansion Downturn Slowdown Recovery

(%)

MSCI AC World – Quintile one dividend yield annualised outperformance since 1995

High dividend investing has performed in most economic conditions

9

Demographic changes

Source: UN, World Population Aging 1950-2050. Published September 2012.

10

Proportion of global population 60 years or older

8%

10%

21%

0%

5%

10%

15%

20%

25%

1950 2000 2050

Year People over 60 years old

2000 606 million

2050 2 billion

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Rising demand for income

Yield choices

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.

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2.6 2.7

1.8

0.7

3.6

4.45.0

4.1 3.93.5 3.5

4.03.5

4.6

5.35.7

6.4

5.5 5.6

4.7

6.6

5.9

4.7

0

1

2

3

4

5

6

7

8

9

10

US

UK

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Ja

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Me

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Bla

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%

Equities (FY14) Investment Grade (10yr) Government Debt (10yr) Emerging Market Debt (USD 10yr)

Zero income growth

5-10% annual income growth1

Equities continue to offer more attractive income

How to approach income investing 2

Dividend paying stocks have outperformed

The highest yielding quintile has performed best

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.

Cumulative performance since 1995

0

200

400

600

800

1000

1200

Dec 94 May 96 Oct 97 Mar 99 Aug 00 Jan 02 Jun 03 Nov 04 Apr 06 Sep 07 Feb 09 Jul 10 Dec 11 May 13

Ind

ex

First quintile dividend yield Second quintile dividend yield MSCI AC World

13

Global Equity Income philosophy

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

When dividend investing, a balanced and

diversified portfolio is important to control risk

14

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.

Growth

Portfol

io

Sustainability

Income

Quality

Income

Investment process

Select stocks based on

valuation and conviction

Manage risk though

diversification and balance

Implementation

Global team and regional

equity teams

Macro and themes

Company meetings

Focused idea generation Always

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Dividend

yield > 4%

Typical characteristics:

Earnings growth >5%

Dividend growth >5%

Gearing <75%

Dividend cover >1.25x

Detailed fundamental analysis

Investable universe: 1300 stocks 400 stocks 75-95 stocks

Research and debate

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.

A robust and consistent process

Source: Threadneedle Investments as at 30 June 2013. Analysis is adjusted for cash levels.

16

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jun 07 Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13

Balancing the portfolio

Sources of income Characteristics Typical weighting Examples

Compounders Reliable growth, strong cash flow generation c.35%

Assets High levels of fixed or financial assets c.25%

Secular growers Sustainable high growth potential c.20%

Cyclicals Most sensitive to economic conditions c.20%

Kraft, AstraZeneca

National Grid, HSBC

Hugo Boss, AIMIA

Rio Tinto, Total

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Global Equity Income Fund

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.

Any mention of Funds are purely for information only. The Funds mentioned are not registered for sale in the US. 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.

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Portfolio Style SkylineTM


Source: Threadneedle Investments as at 30 June 2013.

1 Based on institutional share class with income distributed



0%

1%

2%

3%

4%

5%

6%

7%

8%

2008 2009 2010 2011 2012 2013

Portfolio MSCI AC World

Portfolio dividend yield versus benchmark Historic net distribution yield1

0%

1%

2%

3%

4%

5%

6%

7%

8%

2008 2009 2010 2011 2012

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UPDATE CHART ON RIGHT IN JAN AND JULY

Delivering a high income stream

Superior total return performance

Performance versus benchmark (USD)

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USD

Source: FactSet as at 30 September 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

USD. Past performance is not a guide to future returns.1 Outperformance shown is calculated on a geometric basis, annualised against the MSCI AC World Index.

Any mention of Funds are purely for information only. The Funds mentioned are not registered for sale in the US. 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.

4.8%

18.1%

13.8%

22.0%

11.9% 14.9%

8.3%10.8%

18.4%

2.0%

YTD 1 year 3 years 5 years Since inception

(30 June 2007)

Threadneedle Global Equity Income Fund MSCI AC World

Outperformance1 +2.8% +3.0% +2.7% +3.4% +2.7%

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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.



Performance versus peers since inception (30 June 2007)

Top quartile returns

Relatively low tracking error

Top decile information ratio

Top decile consistency

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Any currency

Consistent and superior risk adjusted returns

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The advantages of a global approach 3

Dividend growth

Source: FactSet, CLSA Asia-Pacific Markets, March 2013.

0

5

10

15

20

25

30

35

Russia China Singa-

pore

Brazil South

Africa

EM Australia AxJ India Korea Taiwan Japan World DM Europe France USA UK Germany HK

DP

S C

AG

R s

ince

200

0 (%

)

MSCI regions and markets – Dividend CAGR since 2000

Global markets offer the potential for superior growth

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A wide opportunity set of high dividend stocks

Global income investors can diversify without compromise

Source: Bloomberg as at 30 August 2013. Market cap measured in USD.

World

All companies, Market Cap > $1 billion and dividend yield > 4% 1304

Sector breakdown:

Financials 474

Energy 157

Utilities 131

Industrials 123

Consumer discretionary 111

Materials 91

Telecommunications 89

Technology 60

Consumer staples 56

Healthcare 12

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Global themes

A go anywhere approach

Source: Threadneedle Investments as at 30 September 2013.

The mention of stocks is not a recommendation to deal.

Themes Portfolio strategy Stocks

Emerging market consumer Rising wages support increasing consumption

New areas of expenditure

Opportunities for global brands

Ambev, Hugo Boss,

Las Vegas Sands, NagaCorp

Defensive growth Steady growers with large moats

Predictable recurring revenues

Improving cost bases and increasing dividends

Imperial Tobacco, Kraft,

GlaxoSmithKline, Sydney Airport

US shale energy revolution Growth of shale oil/gas volume in the US

Increased capex in energy industry

Low cost input for energy consumers

LyondellBasell, HollyFrontier,

Enterprise Products

De-leveraging Banks need to down-size balance sheets

Distressed sellers offer opportunities

Well capitalised players take advantage

Blackstone, Intermediate Capital,

Newcastle Investment Corp

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Emerging market consumer

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.

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0%

20%

40%

60%

80%

100%

120%

UK

US

Ko

rea

Ta

iwa

n

Th

aila

nd

So

uth

Afr

ica

Hu

ng

ary

Po

lan

d

Cze

ch

Re

pu

blic

Ch

ina

Bra

zil

Tu

rke

y

Ind

on

esia

Ind

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Ru

ssia

Ho

us

eh

old

de

bt

*

50

100

150

200

250

300

350

400

00 02 04 06 08 10

Ind

ex

Brazil China Indonesia Russia

Household debt as percentage of GDP (%)1 Robust growth in retail sales2

Summary and conclusion 4

Summary

A compelling proposition

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27

Global equity income strategies are likely to

continue to rise in popularity

A consistently successful approach emphasises:

Sustainably high dividends and growth

A balanced portfolio, trading defensiveness for upside

A global approach offers superior growth, a

large opportunity set

Growth

Portfol

io

Sustainability

Income

Quality

Income

Appendix 7

6

8

10

12

14

16

18

20

Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13

MSCI World Index MSCI World High Dividend Index

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PE ratio progression

Valuation of high dividend companies

High dividend stocks remain at a discount

Source: Bloomberg as at 30 September 2013. Uses BEst (current annual) PE ratio.

Source: MSCI index data as at 30 September 2013.

30

11.1 11.210.3

13.412.7

14.414.1

11.7

Europe Asia Pacific Japan USA

High dividend index Regular Index

Forward PE ratios

Regional variations exist

Valuation of high dividend companies

The MSCI High Dividend Yield Indices:

Are derived from country, regional or composite level MSCI Equity indices (herein, “Parent Indices”)

Include only securities that offer a higher than average dividend yield relative to their respective Parent Index and

pass dividend sustainability screens

Must have a dividend yield at least 30% higher than the Parent Index yield

Must have a reasonable pay-out and a non-negative 5y dividend per share growth rate

Offer broad market coverage

Are free float market capitalisation weighted

How are MSCI High Dividend Yield Indices constructed?

A high dividend yield benchmark

Source: MSCI High Dividend Yield Indices Methodology, May 2011.

31

WILLIAM DAVIES

Head of Global Equities and Deputy Head of Equities

Biography

William Davies is Head of Global Equities and Deputy Head of Equities at Threadneedle Investments. He manages

retail and institutional funds including the Threadneedle Global Select Fund.

Prior to taking up his current roles William was Head of European Equities for 12 years (until 2011), during which

time he oversaw a period of very strong performance and significant growth in assets.

William joined Threadneedle at the company’s inception in 1994. Prior to this, he worked for Eagle Star

Investments1. He has also worked for Hambros Bank as a European Investment Manager where he led the

European equity team.

William holds a BA (Hons) degree in Economics from Exeter University.

Threadneedle start date: 1994

Industry start date: 1985

1 Eagle Star Investments became part of Threadneedle in 1994.

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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 Investments1 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

33

1 Eagle Star Investments became part of Threadneedle in 1994.

Any mention of Funds are purely for information only. The Funds mentioned are not registered for sale in the US. 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.

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

Global equities funds key risks

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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.

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.

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 in the US by Threadneedle International Limited (“TINTL”), a UK.-based investment management firm provides financial services to individual and institutional investors.

TINTL is registered as an investment adviser with the U.S. Securities and Exchange Commission and is authorised and regulated in the conduct of its investment business in the UK

by the UK Financial Conduct Authority.

Important notes

35

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