20131003 global ops - citiwire paris

Threadneedle (Lux) Global Opportunities Bond Fund

For investment professional use only

Jim Cielinski October 2013

Distinguishing features


* Note this is not guaranteed

Source: Threadneedle Investments as at 31 August 2013.

2 PT/12/01216

Incorporating best ideas from across the Fixed

Income team

Macro Strategies: Duration, Yield Curve, Currency

Asset Allocation

Securitised EMD and Corporate Credit Strategies

Focus on relative value opportunities and producing

consistent alpha

Best Ideas

Consistent positive track-record since inception

Exceeded performance target of 4.5pct per annum

since inception

Consistent

Alpha

Multi-

disciplinary

team

Expertise across fixed income markets

Firm-wide co-operation & debate strengthen

investment conclusions

Fund Manager Jim Cielinski

Benchmark Citigroup 1 Month deposit index

Target

Tracking Error

5-7pct tracking error over a

market cycle

Fund size 229 million USD

Fund launch

date Aug 2011

Aim to generate positive returns in excess of the benchmark plus 4.5%* (gross of fees) in any 12 month period,

irrespective of market conditions

How Threadneedle Approaches Absolute Return Fixed Income

3

Aim for positive returns in any rolling twelve month period, and manage risk in a manner consistent with that

objective.

The aim of fixed income in a portfolio is to:

1) Provide income and return

2) Protect wealth

3) Provide diversification

Absolute return must seek ways to satisfy these goals.

A focus on alpha rather than beta, requiring a constant emphasis on relative value strategies

Seek the best risk-adjusted returns from across the fixed income markets, regardless of sector

Seek low-to-moderate correlations with interest rates and risk premia, but not zero correlation

Limited interest rate risk; investment grade quality

Portfolio Manager

Ultimately responsible for fund performance

Responsible for adherence to risk budget

Ensure diversification across performance drivers,

avoiding excessive correlations that could lead to

unintended risks

Strategy teams

Propose best ideas within their respective strategies

Measured on the performance of the trade ideas that are

incorporated into the fund

Combining Ownership and Teamwork

4 PT/12/01108

Global

Opportunities

Bond

Fund

Asset Allocation

Team

Securitized

Credit Team

Investment

Grade Corporate

Credit Team

High Yield

Corporate

Credit Team

Developed

Market

Macro Team

Emerging Market

Macro Team

Total return 12 month projections for various market environments from 31 August 2013

Portfolio Construction Pinpointing the best risk-adjusted returns

Source: Bloomberg, Threadneedle as at 31 August 2013.

* Additional default rates and recovery values assumed

3.7%0.6%

-3.2%

2.4% 2.4%0.7%

4.4%

8.8% 10.5%

-4.6%

3.6%

8.6%

-8%

-4%

0%

4%

8%

12%

Double dip Slow growth Recovery

US Treasuries USD Investment Grade USD Emerging Market Sovereign US High Yield

5 PT/12/01953

Identify best ideas

Apply common scenarios to a range of assets

Identify best risk-adjusted returns

Coordinate with broader fixed income team to implement ideas

Risk Budgeting is the Foundation for Sustainable Performance

6

The fund does not allow any one strategy to

overwhelm the others

Maximum risk is set at 2x target risk in each

strategy

Diversification improves risk control

A broad opportunity set allows the fund to

access the best risk-adjusted returns across

the cycle.

Contribution to portfolio risk

(Total 6.10%)

Duration & yield curve

1.00%

Country selection

0.80%

Currency 0.90%

Strategic (short duration)

1.70% Cross-asset class 1.10%

Security Selection:

OECD sovereign

0.60%

Security Selection: Emerging

market 0.75%

Security Selection: High yield

0.75%

Security Selection: Investment

grade corporate 0.60%

Security Selection: Securitised (ABS/MBS)

0.75%


Gross Performance in USD


Past performance is not a guide to future performance.

7

-0.54

-1.45

0.31

1.12

3.35

6.04 6.04

0.01 0.04 0.10 0.13 0.20 0.23 0.23

1 Month 3 Month 6 Month Year to Date 1 Year Annualised 2 Year Annualised Since FundInception (Sep

2011) Annualised

Global Opportunities Bond Fund (Gross, USD) CITIGROUP USD Euro Deposit 1m

Performance (%) 1 Month 3 Month 6 Month Year to Date 1 Year

Annualised

2 Year

Annualised

Since Fund

Inception

(Sep 2011)

Annualised

Global Opportunities Bond

Fund (Gross, USD) -0.54 -1.45 0.31 1.12 3.35 6.04 6.04

CITIGROUP USD Euro

Deposit 1m 0.01 0.04 0.10 0.13 0.20 0.23 0.23

Excess Return -0.55 -1.49 0.21 0.99 3.14 5.79 5.79

The fund diversifies across alpha sources

The fund typically employs 80-100 trades, although the largest 10-12 trades may account for roughly half the risk

Overall

Interest Rate Duration: 0.6 years

Credit Spread Duration: 2.5 years

Average credit rating: BBB+

Asset Allocation

Long 0.35 years HY (focus on BB credit rating sector)

Long 0.80 years Corporate IG (primarily short maturity)

Long 1.20 years EMD (external sovereign and quasi

sovereign)

Long HY CDX Index vs. US IG (beta-adjusted)

Current Strategy

PT/12/01697

Source: Threadneedle as at 31 August 2013

8

Rates

Short Euro rates vs. Sweden

Short JPY (JGB future)

Long interest-futures vs short longer-dated bond futures in

US, Europe and UK

FX

Long USD vs. CHF

Long USD vs. CAD

Long EUR vs. SEK

Long JPY vs. USD

Incorporating the best ideas of each of Threadneedle’s Fixed Income strategy teams.

Insulation from higher interest rates

Designed to generate alpha rather than be reliant on beta across the cycle

Positive and consistent track record exceeding targets since inception

Why Threadneedle for Global Opportunities Bond Fund?

PT/12/01697


9

AP1

Appendices: Current Themes

Trade examples

Performance Charts

Team and Biographies

Current Themes in Fixed Income

11

Investors: The search for yield will continue

Asset Managers: A focus on alpha will supplant a fixation on beta as rates begin rising

Economics: The struggle for sustainable growth will create volatility – embrace it!

Markets: The crisis carousel; the ride is not over yet

We have witnessed a meaningful short term correction in rates

PT/12/02041

Government Bond Yields

(UK, US and German 10 year bond yields)

Credit Spreads

(investment grade, high yield & emerging market

bonds relative to government yields)

Source: Bloomberg, September 2013.

12

Spreads are attractive; core bond yields are not

0

2

4

6

8

10

12

91 93 95 97 99 01 03 05 07 09 11 13

Yie

ld (

pct

)

UK US Germany

0

200

400

600

800

1000

1200

1400

1600

1800

2000

97 99 01 03 05 07 09 11 13Sp

read

(b

ps)

High Yield Investment Grade Emerging Government

1,1

1,2

1,3

1,4

1,5

1,6

1,7

1,8

2006 2007 2008 2009 2010 2011 2012 2013

EU

R/C

HF

Background

Switzerland was perceived as the ultimate safe haven

through to the financial crisis resulting in an excessive

demand for the Swiss Francs

As a result, the significant appreciation of the Swiss franc

posed a threat to the Swiss economy and increased the risks

of a more severe deflationary environment

Swiss National Bank announced a minimum exchange rate

of SFr 1.20 per euro

Rationale

Expectation of a reversal in the exchange rate as nominal

and real rates on SFr deposits become negative

Zero to slightly negative returns combined with the

depreciation in the SFr will result in a mass exodus from the

SFr and the depreciation in the Swiss Franc

Risk on environment improves causing outflows from SFr

into higher yielding countries and riskier return assets

Trade Example Strategic Long EUR/CHF

13

Announcement by

SNB to implement a

minimum exchange

rate

3 years of appreciation

as CHF claims safe

haven status

Will we see a return to historic levels?

Source: Threadneedle Investments, Bloomberg September 2013

EUR CHF Cross Rate

Source: Threadneedle Investments, Bloomberg September 2013

14 PT/12/02041

0

1

2

3

4

5

6

2007 2009 2011 2013 2015 2017

%

US 10 yr

ECB rates

Fed funds

Our view

(on US rates)

Trade Example Rate expectations are too aggressive

Long short dated rates

In anticipation that the forward path of policy rates is too

aggressive

Tepid growth and inflation will allow central banks to

adhere to forward guidance

A long position in short dated interest rates now provides

an attractive hedge to a risk-off environment.

Expected path of short term interest rates

Opportunities exists within the credit markets to add alpha without taking “default risk”

The corporate credit team has had a positive view on subordinated financial debt from select issuers, for example

RBS, over the past few years, this view has been implemented using directional trades

However a number of opportunities have emerged where significant alpha can be gained on an RV basis, by

hedging a subordinate financial bond using the CDS market

This limits the effect of an issuer default or tail risk on the combined trade

Trade Example Security Selection

15 PT/12/01953

RBS Lower Tier 2 4.5pct January 2016 versus RBS Sub CDS

Trade details

Bought RBS Lower Tier 2 January 2016 in September 2011, callable at par from 2011. Bought at 70.01 which equates to a YTM of

959bps

Market assuming bonds will not be called before maturity

Against this bought protection on RBS sub to March 2016 at a spread of 761bps

In March 2012 bonds were tendered at 86 for exchange into RBS 10.5pct 10yr nc 5 at a price of 99.87. The new bonds traded post

issue at 104

CDS spreads had since tightened in to approximately 560 bps by March 2012

If RBS does improve the fund picks up the option on a par call (less unlikely) or a liability management exercise

(which is what happened)

Resulting in mark to market profit of around 10pts (and no default risk) in March 2012

Trade Example Security Selection

16 PT/12/01953


Gross Performance in USD



17

-0.54

-1.45

0.31

1.12

3.35

6.04 6.04

0.01 0.04 0.10 0.13 0.20 0.23 0.23

1 Month 3 Month 6 Month Year to Date 1 Year Annualised 2 Year Annualised Since FundInception (Sep

2011) Annualised

Global Opportunities Bond Fund (Gross, USD) CITIGROUP USD Euro Deposit 1m

Performance (%) 1 Month 3 Month 6 Month Year to Date 1 Year

Annualised

2 Year

Annualised

Since Fund

Inception

(Sep 2011)

Annualised

Global Opportunities Bond

Fund (Gross, USD) -0.54 -1.45 0.31 1.12 3.35 6.04 6.04

CITIGROUP USD Euro

Deposit 1m 0.01 0.04 0.10 0.13 0.20 0.23 0.23

Excess Return -0.55 -1.49 0.21 0.99 3.14 5.79 5.79


Monthly Performance in USD



18

Performance (%) Sep

2011

Oct

2011

Nov

2011

Dec

2011 2011

Global Opportunities Bond Fund (Gross, USD) 0.61 1.34 0.21 0.22 2.38

USD Libor 1 Month 0.02 0.02 0.02 0.02 0.08

Excess Return 0.59 1.31 0.19 0.20 2.29

Performance (%) Jan

2012

Feb

2012

Mar

2012

Apr

2012

May

2012

Jun

2012

Jul

2012

Aug

2012

Sep

2012

Oct

2012

Nov

2012

Dec

2012 2012

Global Opportunities Bond Fund (Gross, USD) 1.46 1.00 0.60 -0.10 0.15 1.05 0.73 1.16 1.15 0.65 -0.09 0.47 8.23

USD Libor 1 Month 0.02 0.02 0.02 0.02 0.02 0.03 0.02 0.03 0.02 0.01 0.02 0.02 0.25

Excess Return 1.44 0.97 0.58 -0.12 0.14 1.02 0.7 1.13 1.14 0.64 -0.11 0.45 7.98

Performance (%) Jan

2013

Feb

2013

Mar

2013

Apr

2013

May

2013

Jun

2013

Jul

2013

Aug

2013

YTD

2013

Global Opportunities Bond Fund (Gross, USD) 1.41 -0.60 -0.59 1.32 1.06 -1.89 1.00 -0.54 1.12

USD Libor 1 Month 0.02 0.02 0.02 0.02 0.02 0.02 0.01 0.01 0.13

Excess Return 1.40 -0.62 -0.61 1.31 1.04 -1.91 0.99 -0.55 0.99


Attribution Summary



19

Attribution (%) Jan

2012 Feb

2012 Mar 2012

Apr 2012

May 2012

Jun 2012

Jul 2012

Aug 2012

Sep 2012

Oct 2012

Nov 2012

Dec 2012

TOTAL 2012

Duration 0.23 -0.27 -0.35 0.30 0.25 -0.12 0.24 -0.05 -0.02 0.01 0.19 -0.17 0.24

Country 0.03 -0.22 0.05 0.06 0.26 -0.16 0.13 -0.03 -0.01 0.02 -0.03 0.07 0.17

Curve -0.05 0.14 0.07 -0.09 0.02 0.07 0.02 0.00 0.01 0.03 0.05 0.10 0.38

Inflation 0.00 0.00 0.00 -0.01 0.03 -0.01 0.05 0.03 0.03 0.04 0.00 0.00 0.17

Allocation 1.25 1.35 0.58 -0.33 -0.79 0.62 0.53 0.54 0.80 0.54 -0.20 0.45 5.58

Selection 0.33 0.08 -0.04 0.07 -0.10 0.57 0.14 0.42 -0.01 0.01 0.05 0.10 1.67

Currency -0.35 -0.03 0.30 -0.14 0.42 0.01 -0.46 0.52 0.32 0.12 -0.27 0.01 0.45

Reporting Residual 0.03 -0.07 0.01 0.04 0.06 0.05 0.08 -0.26 0.03 -0.12 0.12 -0.09 -0.10

Total Portfolio 1.46 1.00 0.60 -0.10 0.15 1.05 0.73 1.16 1.15 0.65 -0.09 0.47 8.23

Attribution (%) Jan

2013 Feb

2013 Mar 2013

Apr 2013

May 2013

Jun 2013

Jul 2013

Aug 2013

YTD 2013

Duration -0.16 -0.03 0.17 0.08 -0.33 -0.30 0.01 -0.11 -0.67

Country -0.15 0.05 -0.07 0.22 -0.29 -0.71 0.14 -0.27 -1.08

Curve 0.10 -0.02 -0.19 0.12 0.21 0.13 -0.15 0.28 0.48

Inflation 0.01 -0.01 0.03 -0.02 0.02 0.01 0.01 0.01 0.06

Allocation 1.06 -0.23 0.15 0.72 -0.11 -1.24 0.74 -0.44 0.65

Selection 0.23 0.09 -0.25 -0.01 0.32 0.16 0.71 -0.11 1.14

Currency 0.32 -0.46 -0.44 0.21 1.25 0.05 -0.46 0.11 0.58

Reporting Residual 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total Portfolio 1.41 -0.60 -0.59 1.32 1.06 -1.89 1.00 -0.54 1.12

Threadneedle Fixed Income Team

Threadneedle as at 1 July 2013

Jim Cielinski Head of Fixed Income

FI Dealing and Cash Management

Emma Photis

Paul Witchalls

Mandy Coatsworth

Gabriel Heskin

Cindy Larke

Sarah Kendrick

Macro

Developed Markets

Matthew Cobon

Dave Chappell

Martin Harvey

Richard Stevens

Matt Rees

Alexander Batten

Cindy Larke

Emerging Markets

Henry Stipp

John Peta

Matthew Cobon

Clifford Lau

Zara Kazaryan

Mindaugas Lepeska

Gabriel Heskin

Xiong Wei Poh

20

Securitized and Corporate Credit

High Yield

Barrie Whitman

Michael Poole

David Backhouse

Jeff Mueller

Jenny Wong

Gareth Simmons

Craig Nicol

Investment Grade

David Oliphant

Simon Bond

Alasdair Ross

Zara Kazaryan

David Morgan

Paul Smillie

Jonathan Pitkänen

Arabella Duckworth

Ryan Staszewski

Tammie Chan

Xiong Wei Poh

Karan Samtani

Sarah Kendrick

Securitized

Henry Cooke

Ashley Burtenshaw

Steven Fleming

Shane Stanton

Michael Groom

Commodities

David Donora

Daniel Belchers

Nicolas Robin

Ullaas Misra

Asset Allocation

Jim Cielinski

Alasdair Ross

Henry Stipp

Dave Chappell

Henry Cooke

Michael Poole

Client Portfolio Management

James Waters

Andrew Key

Quantitative Analysis

Sanjay Roy

Ullaas Misra

Alessandro Tarello

Robust track record in managing corporate credit Threadneedle Credit Opportunities - Gross monthly performance

Fund data sourced from Threadneedle/Morningstar, in €. Index data provided by Thomson Financial DataStream.

Fund data is based on Global Close. Fund data is gross of T.E.R to facilitate comparison with the indices

*Inception date used for performance calculation is 30 April 2009; actual launch date was 29 April 2009

21

2009 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

Threadneedle Credit

Opportunities Fund 0.87% 1.10% 1.63% 0.62% 1.11% 0.85% 0.98% 0.77% 7.94%

Citigroup EUR 1 Month Euro

Deposit Index 0.08% 0.06% 0.05% 0.04% 0.02% 0.02% 0.01% 0.02% 0.30%


Threadneedle Credit

Opportunities Fund 1.08% 0.42% 1.17% 1.02% -0.50% 0.28% 1.15% 0.59% 1.03% 0.93% -0.02% 0.87% 8.38%

Citigroup EUR 1 Month Euro

Deposit Index 0.02% 0.02% 0.02% 0.02% 0.02% 0.03% 0.02% 0.03% 0.03% 0.04% 0.06% 0.06% 0.37%


Threadneedle Credit

Opportunities Fund 0.95% 0.77% 0.44% 0.39% 0.37% -0.12% 0.16% -1.84% -1.55% 2.04% -1.12% 1.57% 2.01%

Citigroup EUR 1 Month

Euro Deposit Index 0.06% 0.06% 0.07% 0.07% 0.10% 0.09% 0.10% 0.11% 0.10% 0.10% 0.10% 0.09% 1.05%


Threadneedle Credit

Opportunities Fund 1.60% 1.74% 0.76% 0.18% -0.31% 0.61% 0.86% 0.62% 0.65% 0.32% 0.18% 0.33% 7.90%


Euro Deposit Index 0.08% 0.08% 0.08% 0.02% 0.02% 0.02% 0.03% 0.01% 0.01% 0.01% 0.01% 0.00% 0.28%

PT/12/01687


Threadneedle Credit

Opportunities Fund 0.34% 0.52% 0.44% 0.51% 0.11% -0.41% 0.63% 0.38% 2.55%


Euro Deposit Index 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Robust track record in managing corporate credit Threadneedle European Corporate Bond Fund (Gross Performance in EUR)



22

-0.21

-0.89

1.47

5.92 5.99

6.86

-0.24

-1.08

0.67

4.37 4.46

6.18

1 Month 3 Month Year to Date 1 Year Annualised 3 Years Annualised 5 Years Annualised

European Corporate Bond Fund (Gross, EUR) iBoxx Euro Corporate

Performance (%) 1 Month 3 Month Year to Date 1 Year

Annualised

3 Years

Annualised

5 Years

Annualised

European Corporate Bond

Fund (Gross, EUR) -0.21 -0.89 1.47 5.92 5.99 6.86

iBoxx Euro Corporate -0.24 -1.08 0.67 4.37 4.46 6.18

Excess Return 0.03 0.19 0.79 1.48 1.47 0.64

Biography

JIM CIELINSKI

Head of Fixed Income

Jim Cielinski joined Threadneedle in 2010 as Head of Fixed Income. In this role he is responsible for the overall

management of the fixed income business, including investment process, product development and investment

strategy. He is also a key participant in Threadneedle’s asset allocation process.

Prior to joining Threadneedle Jim spent 12 years at Goldman Sachs, leaving as Head of Global Credit – Investment

Grade. He has also held senior investment roles at Utah Retirement Systems and Brown Brothers Harriman.

Jim graduated from the University of Utah in 1983 with a BSc in Finance and gained an MBA from New York

University in 1988.

Threadneedle start date: 2010

Industry start date: 1983

23

Biography

24

DAVID OLIPHANT

Fund Manager

David began his career in 1989 with Eagle Star Investment Managers1 as a Sterling Bond analyst. He progressed to

managing multi-currency portfolios for Eagle Star and then from 1994, for Threadneedle.

David chairs the Fixed Income Themes meeting and is Head of Investment Grade Credit.

He graduated in 1988 with an honours degree in economics from the University of St Andrews. He is an associate

member of the UK Society of Investment Professionals.



1 Eagle Star Investment Managers became part of Threadneedle in May 1994.

Biography

MARTIN HARVEY

Fund Manager

Martin Harvey joined Threadneedle in July 2006 and manages or co-manages a number of global and European

bond portfolios.

He has been supporting Threadneedle’s Absolute Return capability since 2007, with specific responsibility for

maintaining the short-dated bond portfolio, idea generation and monitoring the overlay strategies. He also plays an

active role in the formulation of the investment department’s economic forecasts.

Before joining Threadneedle, Martin worked for HSBC as a research assistant to the Chief Economist.

He graduated in 2006 from the University of Bath with a First Class BSc (Hons) in Economics and is a CFA

Charterholder.



25

The following key risks apply to the Threadneedle (Lux) Global Opportunities Bond Fund:

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

No Capital Guarantee – Positive returns are not guaranteed and no form of capital protection applies.

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.

Liquidity Risk – The fund may hold 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.

Inflation Risk – Most bond and cash funds offer limited capital growth potential and an income that is not linked to inflation. Therefore, inflation can

affect the real value of capital and income over time.

Interest Rate Risk – Changes in interest rates are likely to affect the fund’s value. In general, as interest rates rise, the price of a fixed rate bond will

fall, and vice versa.

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.

Volatility Risk – The fund may exhibit significant price volatility.

Key Risks

26 PT/12/01405

The following key risks apply to the Threadneedle European Corporate Bond Fund:

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

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.

Liquidity Risk - The fund may hold 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.

Inflation Risk - Most bond and cash funds offer limited capital growth potential and an income that is not linked to inflation. Therefore, inflation can

affect the real value of capital and income over time.

Interest Rate Risk - Changes in interest rates are likely to affect the fund’s value. In general, as interest rates rise, the price of a fixed rate bond will

fall, and vice versa.

Key Risks

27 PT/12/01405

Currency Risk – Where investments are made in assets that are denominated in foreign currency, changes in exchange rates may affect the value of the

investments.

No capital guarantee - Positive returns are not guaranteed and no form of capital protection applies.

Issuer - The fund invests in securities whose value would be significantly affected if the issuer either refused to pay or was unable to pay.

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.

Inflation Risk - Most bond funds offer limited capital growth potential and an income that is not linked to inflation. Therefore, inflation can affect the value of capital

and income over time.

Interest Rate Risk - Changes in interest rates are likely to affect the fund’s value. In general, as interest rates rise, the price of a fixed rate bond will fall, and vice

versa. Duration is a measure of the extent to which this is the case, with a longer duration suggesting higher sensitivity to interest rate moves.

Volatility Risk - The fund may exhibit significant price volatility.

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.

Derivatives Risk - Investment in derivatives may result in losses in excess of the amount invested.

The Key Risks of Threadneedle Credit Opportunities Fund

28 New Template May 2012

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 (Lux) is an investment company with variable capital (Société d’investissement à capital variable, or "SICAV") formed under the laws of the Grand Duchy of

Luxembourg. The SICAV issues, redeems and exchanges shares of different classes, which are listed on the Luxembourg Stock Exchange. The management company of the SICAV

is Threadneedle Management Luxembourg S.A, who is advised by Threadneedle Asset Management Ltd. and/or selected sub-advisors.

The SICAV is registered in Austria, Belgium, France, Finland, Germany, Hong Kong, Italy, Luxembourg, The Netherlands, Portugal, Spain, Sweden, Switzerland, Taiwan and the UK;

however, this is subject to applicable jurisdictions and some sub-funds and/or share classes may not be available in all jurisdictions. 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.

Threadneedle (Lux) is authorised in Spain by the Comisión Nacional del Mercado de Valores (CNMV) and registered with the relevant CNMV's Registered with number 177.

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 by writing to the

SICAV’s registered office at 31, Z.A. Bourmicht, L-8070 Bertrange, Grand Duchy of Luxembourg and/or from in Austria: Erste Bank, Graben 21 A-1010 Wien; in Belgium: J.P. Morgan

Chase Bank Brussels, 1, Boulevard du Roi Albert II, 1210 Brussels; in France from CACEIS Bank, 1/3 Place Valhubert, 75013 Paris;

in Finland from Eufex Bank Plc, Keilaranta 19, 02150 Espoo; in Germany from JP Morgan AG, Junghofstr. 14, 60311 Frankfurt, in the UK from JPMorgan Worldwide Securities Serv

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.

Important notes

29 PL5/09/193

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 can be obtained from our representative and Paying Agent in

Switzerland, RBC Investor Services Bank S.A., Esch-sur-Alzette, succursale de Zurich, Badenerstrasse 567, Case Postale 101, CH-8066 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.

Threadneedle Management Luxembourg S.A. Registered with the Registre de Commerce et des Societes (Luxembourg), Registered No. B 110242, 74, rue Mühlenweg, L-2155

Luxembourg, Grand Duchy of Luxembourg.

In the UK issued by Threadneedle Asset Management Limited. Registered in England and Wales, Registered No. 573204, 60 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.

ices, 60 Victoria Embankment, London EC4Y 0JP; in Sweden from Skandinaviska Enskilda Banken AB (publ), Sergels Torg 2, 106 40 Stockholm.

Important notes

30 PL5/09/193

Threadneedle Investment Funds ICVC (“TIF”) is an open-ended investment company structured as an umbrella company, incorporated in England and Wales, authorised and regulated in the UK by the

Financial Conduct Authority (FCA) as a UCITS scheme.

TIF is registered for public offer in Austria, Belgium, Finland, France, Germany, Hong Kong, Ireland, Italy, Luxembourg, the Netherlands, Portugal, 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.

TIF is registered with Danish Financial Services Authority for marketing to professional investors only. The Funds may not be offered or sold to retail investors in Denmark.

TIF is authorised in Spain by the Comisión Nacional del Mercado de Valores (CNMV) and registered with the relevant CNMV's Registered

with number 482.

Income may fluctuate in accordance with market conditions and taxation arrangements. The difference at any one time between the sale and repurchase price of units in the scheme means that the

investment should be viewed as a medium to long term investment. Investments may be subject to sudden and large falls in value, and the investor could lose the total value of the initial investment.

Shares in the Funds may not be offered, sold or delivered directly or indirectly in the United States or to or for the account or benefit of any “U.S. Person”, as defined in Regulation S under the 1933 Act.

Subscriptions to a Fund may only be made on the basis of the current Prospectus and the Key Investor Information Document, as well as the latest annual or interim reports and the applicable terms &

conditions. Please refer to the ‘Risk Factors’ section of the Prospectus for all risks applicable to investing in any fund and specifically this Fund. The above documents are available in English, French,

German, Portuguese, Italian, Spanish and Dutch (no Dutch Prospectus) and can be obtained free of charge on request from:

- in Austria: Raiffeisen Zentralbank Österreich AG, Am Stadtpark 9, 1030 Wien (TIF and TSIF), and Erste Bank, Graben 21 A-1010 Wien (TFIF);

- 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 Finland: Eufex Bank Plc, Keilaranta 19, 02150 Espoo, Finland (TIF)

- 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 UK; Threadneedle Investments’ Client Services department P.O. Box 1331, Swindon SN38 7TA.

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.

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.

Important notes

31 PL5/09/193

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