Threadneedle Investment Funds ICVC pdf

Aggregated Financial Statements for Threadneedle Investment Funds ICVC STATEMENT OF TOTAL RETURN for the accounting period 8th March 2011 to 7th March 2012 Net revenue/expenses after tax

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threadneedle.com Threadneedle

Investment Funds ICVC

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Threadneedle Investment Funds ICVC

Threadneedle Investment Funds ICVC market a variety

of share classes, offering a selection of net income,

gross income, net accumulation or gross accumulation

of distributable income Different classes or

combinations of classes are available on different funds.

The range of share classes that exists are as follows;

Class 1, Class 1 Hedged, Class 2, Class 2i, Class 2

Hedged and Class X.

All share types and classes are covered in this Annual

Report.

Aggregated Financial Statements for

Notes to the Aggregated Financial Statements for

UK:

Europe:

US:

American Smaller Companies Fund (US) 105 – 107

Japan:

Pacific Basin & Emerging Markets:

International:

Institutional Funds:

Statement of Authorised Corporate

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Portfolio Statements:

Pan European Smaller Companies Fund 198 – 201

American Smaller Companies Fund (US) 225 – 226

Contents

(continued)

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Threadneedle Investment Funds ICVC

Registered Number IC000002

Registered Office

60 St Mary Axe, London EC3A 8JQ

Director

There is a sole director, the Authorised Corporate Director

(the “ACD”), which is Threadneedle Investment Services

Limited.

Board of Directors of the ACD

Chairman and Chief Executive

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This is the Annual Report and Accounts for Threadneedle

Investment Funds ICVC, which reviews the performance of

the funds and financial markets over the 12 months to

7th March 2012.

During the period under review, financial markets

experienced phases of ‘risk on’ or ‘risk off’ as they were

buffeted by a number of important economic and geopolitical

events Initially, markets had to contend with the ‘Arab

Spring’, the earthquake and tsunami in Japan, the marked

slowdown in global growth and the spiralling sovereign debt

problems in the eurozone.

After the sharp falls seen in the summer, equity markets

rallied strongly in the latter part of the review period In

December, markets were buoyed by the Long-Term

Refinancing Operation (LTRO) from the European Central

Bank This alleviated immediate liquidity pressures in the

eurozone, allowing European banks to secure three-year

funding on particularly favourable terms In recent months,

equity markets have also responded positively to some

stronger economic data from the US and a number of

emerging markets.

Against the backdrop of fluctuating risk appetite, government

bonds performed well over the year as a whole, helped by

their ‘safe haven’ appeal Investment grade and high yield

corporate bonds, along with emerging market bonds, also

posted positive returns with investors drawn to the attractive

yields available on these assets.

Overall, the global economic climate remains challenging and, in this environment, companies with strong business models and robust balance sheets should fare significantly better than their weaker competitors Moreover, it is particularly encouraging to see that many of the stronger companies are returning cash to investors in the form of higher dividends and share buybacks Equity valuations continue to look attractive by historical comparison and also relative to other asset classes.

We hope that you find the individual fund reports informative If you would like further information regarding any aspect of your investment, or about other Threadneedle products, please either contact us directly or speak to your financial adviser Alternatively, you may find it helpful to visit threadneedle.com for further information about

Threadneedle.

Thank you for your continued support.

Crispin Henderson Director

Director’s Report

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Aggregated Financial Statements for

STATEMENT OF TOTAL RETURN

for the accounting period 8th March 2011 to 7th March 2012

Net revenue/(expenses) after taxation qqqqqqqqqqr368,176 320,561

Total return before distributions 239,347 2,020,154

Finance costs: Distributions qqqqqqqqqqr(429,719) (385,068)

Change in net assets attributable to

shareholders from investment activities zzzzzzzzzzzzzzz(190,372) 1,635,086

STATEMENT OF CHANGE IN NET ASSETS ATTRIBUTABLE

TO SHAREHOLDERS

Opening net assets attributable to shareholders 19,301,636 17,292,591

Movement due to sales and repurchases

of shares:

Amounts receivable on the issue of shares 5,266,122 5,253,263

Amounts payable on the cancellation of shares (5,593,183) (5,072,856)

(299,319) 180,407

Change in net assets attributable to

shareholders from investment activities

(see statement of total return above) (190,372) 1,635,086

Retained distribution on accumulation shares 207,369 182,573

Unclaimed distribution monies brought back

Liabilities Derivative liabilities qqqqqqqqqqr(4,893) (18,639)

Distribution payable on income shares qqqqqqqqqqr(55,571) (56,449)

Net assets attributable to shareholders 19,025,484 19,301,636zzzzzzzzzzzzzzzThe aggregated financial statements represent the sum of theindividual funds within the umbrella company Further analysis of thedistribution and the net asset position can be found within thefinancial statements of the individual funds

We hereby certify the Annual Report and Accounts on behalf of theDirectors of Threadneedle Investment Services Limited

4th May 2012

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Notes to the financial statements

For the accounting period 8th March 2011 to 7th March 2012

1 ACCOUNTING POLICIES

(1) Basis of accounting

The financial statements have been prepared under the historical

cost basis, as modified by the revaluation of investments and in

accordance with UK Generally Accepted Accounting Practice

(“UKGAAP”), and in accordance with the Statement of

Recommended Practice (the “SORP”) for Financial Statements of

Authorised Funds issued by the Investment Management

Association (IMA) in October 2010

(2) Aggregation

The aggregated accounts represent the sum of the individual funds

within the umbrella company Further analysis of the distribution

and the net asset position can be found within the financial

statements of the individual funds

(3) Recognition of revenue

Revenue is included in the Statement of Total Return on the

following bases:

Dividends on quoted equities and preference shares are

recognised when the security is traded ex-dividend

Dividends, interest and other income receivable include any

withholding taxes but exclude any other taxes such as attributable

tax credits

Special dividends are treated as either revenue or capital

depending on the facts of each particular case

Stock dividends are recognised as revenue on the basis of the

market value of the shares at the date they are quoted ex-dividend

Interest on debt securities and bank and short-term deposits is

recognised on an earned basis

In the case of debt securities any difference between acquisition

cost and maturity value is recognised as revenue over the life of the

security using the effective yield basis of calculating amortisation

Dividends and distributions from collective investment schemes are

recognised when the security is quoted ex-dividend

Underwriting commission is recognised when the issue takes place,

except where the fund is required to take up all or some of the

shares underwritten, in which case an appropriate proportion of the

commission is deducted from the cost of those shares

Underwriting commission is treated as revenue except for the

proportion that is deducted from the cost of shares, which is capital

Stocklending revenue and any associated charges are recognised

on an accruals basis

Equalisation on distributions received is treated as a repayment of

capital and deducted from the cost of the investment

Management fee rebates

In the absence of a rebate mechanism an indirect charge for

management fees would occur in respect of investments in other

Threadneedle funds Any such target funds themselves bear a

management fee, which reduces the values of those funds from

what they otherwise would be The rebate mechanism operates to

ensure that investors in the Fund bear only the fee validly

applicable to them Depending upon the ACD’s treatment of

management fees within the underlying funds, where management

fees are charged to capital, any rebate is classified as a capital item

and does not form part of the amount available for distribution

(4) Treatment of expenses (including management expenses)

All expenses other than those relating to the purchase and sale of

investments, are included in expenses, in the Statement of Total

Return Expenses are recognised on an accrual basis and include

irrecoverable VAT where appropriate The ACD’s charges in respect

of the following funds, are added back for the purpose of

determining the amount available for distribution:

Dollar Bond Fund

Emerging Market Bond Fund

European Bond Fund

Global Bond Fund

High Yield Bond Fund

Monthly Extra Income Fund

Sterling Bond Fund

Strategic Bond Fund

UK Equity Income Fund

UK Growth & Income Fund

UK Monthly Income Fund

(5) Allocation of revenue and expenses to multiple share classes

The allocation of revenue and expenses to each share class isbased upon the proportion of the fund’s capital net assetsattributable to each share class, on the day the revenue is earned

or the expense is suffered

Revenue equalisation, annual management charge and registrationfees are specific to each share class

(6) Allocation of return on hedged share classes

Hedged share classes allow the ACD to use currency hedgingtransactions to reduce the effect of exchange rate fluctuationsbetween the Reference Currency or Reference Currencies and theHedged Currency (for further definitions refer to page 278) Whereundertaken, the allocation of return in relation to hedgingtransactions is applied in respect of that hedged share class only

(7) Distribution policy

In accordance with the Collective Investment SchemesSourcebook, where the revenue from investments exceeds theexpenses for any share class, a distribution will be made from thatshare class Should expenses exceed revenue for any share class,there will be no distribution for that share class and the shortfallwill be transferred to capital

Revenue attributable to Accumulation shareholders is retained atthe end of each distribution period and represents a reinvestment

of revenue

The following funds distribute on a monthly basis and use a fixedrate distribution for the first 11 months as set by the Fund Manager

at the beginning of the accounting year:

UK Monthly Income FundWhere distributions are unclaimed for a period of six years theseare brought back into the relevant fund as capital

(8) Basis of valuation of investments

The investments of the fund are valued at fair market prices at

12 noon (UK time), being the valuation point on the last workingday of the accounting period

Investments are stated at their fair value which generally is the bidvaluation of each security

These bid values are sourced from independent pricing sources; tothe extent that an independent pricing source is not available thenquotes are obtained from a broker Where the ACD deems thatthese valuations are unrepresentative of a fair valuation of thesecurity, a fair valuation adjustment is applied based upon theACD’s opinion of fair value

(9) Exchange rates

Assets and liabilities expressed in foreign currencies at the end ofthe accounting period are translated into sterling at the exchangerates ruling at 12 noon (UK time), being the valuation point on thelast working day of the accounting period

Transactions denominated in a foreign currency are translated intosterling at the exchange rates ruling at the date of the transaction

(10)Deferred tax

Deferred tax liabilities are provided in full in respect of all items forwhich recognition falls in different accounting periods foraccounting and taxation purposes and deferred tax assets arerecognised to the extent that they are considered recoverable.Further analysis of the deferred tax assets can be found within thefinancial statements of the individual funds

of Total Return

The revenue return element in respect of Futures is calculated byreference to the quoted yield of the index upon which the Future isbased compared to LIBOR The revenue so calculated mayrepresent revenue or expenses in a fund’s accounts, in accordancewith whether the fund has held a net long or short position, whenconsidering the accounting period as a whole The revenue orexpense position is reversed where LIBOR exceeds the quotedyield of the relevant index

Ongoing premia on credit default swaps are charged or credited torevenue/expenses on an accruals basis, depending on whetherprotection is bought or sold

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The premium that may be received on an option is treated as

revenue where the motives and circumstances determine that the

return is income in nature and there is no immediate capital loss

generated at the time the transaction is entered into

Any positions open at the period end are reflected in the Balance

Sheet at their market value, either using available market prices or

the ACD’s assessment of the fair value, based on counterparty

valuations and appropriate pricing models

Cash held at future brokers as margin is reflected separately within

“Cash and bank balances”

Derivative revenue and expense are netted off for the purposes of

disclosure The net balance is disclosed within either the revenue

or finance cost note depending on whether the balance is in a net

revenue or expense position respectively

2 NET CAPITAL GAINS/(LOSSES)

Net capital gains/(losses) during the period comprise:

Management fee rebate on collective

Payable to the ACD or associates of the ACD,

and the agents of either of them:

(231,118) (228,736)zzzzzzzzzzzzzzzPayable to the depositary or associate of the

depositary, and the agents of either of them:

(2,405) (2,626)zzzzzzzzzzzzzzzOther expenses:

b) Factors affecting taxation charge for period qqqqqqqqqqr

Net revenue before taxation zzzzzzzzzzzzzzz388,789 338,853Net revenue before taxation multiplied by

the standard rate of corporation tax of 20% (77,758) (67,771)Effects of:

Adjustments in respect of prior periods qqqqqqqqqqr– (5)Current tax charge for period (note 5a) zzzzzzzzzzzzzzz(20,613) (18,292)

c) Capital gains tax

Capital gains tax charge in statement of total return for period (note 5a) qqqqqqqqqqr647 (1,775)Provision at end of period zzzzzzzzzzzzzzz(1,128) (1,775)

6 DEBTORS

Amounts receivable for the issue of shares 171,797 97,270

United Kingdom income tax recoverable qqqqqqqqqqr30 14

8 RELATED PARTY TRANSACTIONS

Threadneedle Investment Services Limited, as AuthorisedCorporate Director (ACD), is a related party and acts as principal inrespect of all transactions of shares in the funds

The aggregate monies received through issues and paid oncancellations are disclosed in the Statement of Change in NetAssets Attributable to Shareholders

Further analysis of the amounts due to or from, and payable toThreadneedle Investment Services Limited can be found within thefinancial statements of the individual funds

The following funds invest in a number of sub-funds of Threadneedle

Notes to the financial statements (continued)

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9 SHARES

Funds currently have up to 6 share classes; Class 1, Class 1 Hedged,

Class 2, Class 2i, Class 2 Hedged and Class X shares Where a fund

has more than one share class, each class may suffer different

expenses

Consequently the level of net revenue attributable to each share

class will differ Further analysis of the annual management charge

and registration fees on each share class can be found within the

‘Shareholder Funds’ note of the individual funds

10 STOCKLENDING

During the period under review, the Company has entered into

certain stocklending transactions to increase the revenue of the

funds

The following funds have benefited from these arrangements

during the period:

American Fund

American Select Fund

American Smaller Companies Fund (US)

Asia Fund

Dollar Bond Fund

Emerging Market Bond Fund

European Bond Fund

European Corporate Bond Fund

European Fund

European High Yield Bond Fund

European Select Fund

European Smaller Companies Fund

Global Bond Fund

Global Select Fund

High Yield Bond Fund

Japan Fund

Japan Smaller Companies Fund

Latin America Fund

Pan European Fund

Pan European Smaller Companies Fund

Sterling Bond Fund

Strategic Bond Fund

UK Corporate Bond Fund

UK Equity Income Fund

UK Growth & Income Fund

UK Fund

UK Institutional Fund

UK Monthly Income Fund

UK Overseas Earnings Fund

UK Select Fund

UK Smaller Companies Fund

The funds have earned £7,975,000 (2011: £5,043,000) and paid fees

of £1,153,000 (2011: £663,000) to Threadneedle Investment Services

Limited and £1,236,000 (2011: £713,000) to J.P Morgan to process

these arrangements The aggregate value of stock on loan at the

end of the annual accounting period was £789.78m

(2011: £878.35m), whilst the value of collateral held for these

arrangements was £840.51m (2011: £918.48m) The collateral was

held as either securities transferred in CREST by a DBV (Delivery

by Value) or Gilt DBV, or in the form of overseas government

bonds, supranational bonds or certificates of deposit The nature

and value of collateral held is analysed by asset class in the table

12 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS

In pursuing their investment objectives, each of the funds mayhold a number of financial instruments These financialinstruments comprise securities, derivatives and otherinvestments, cash balances, debtors and creditors that arisedirectly from the funds’ operations, for example, in respect of salesand purchases awaiting settlement, amounts receivable forcreations and payable for redemptions and debtors for accruedrevenue

The funds may also enter into a range of derivative transactionswhose purpose is efficient portfolio management In addition thefunds only execute derivative contracts where both the derivativeinstrument and the counterparty have been approved by the ACD

A sensitivity analysis for the relevant funds is shown in their notes

to the financial statements, contained within the full accounts,where derivative holdings could impact the fund significantly Themain risks arising from financial instruments and the ACD’spolicies for managing these risks are stated below These policieshave been applied throughout the period under review Thesepolicies have been consistent for both the current and prior period

to which these financial statements relate

Market price risk

Market price risk arises mainly from uncertainty about future prices

of financial instruments held It represents the potential loss thefunds might suffer through holding market positions in the face ofprice movements This means the value of an investor’s holdingmay go down as well as up and an investor may not recover theamount invested Bond funds hold a range of fixed interestinstruments which may be difficult to value and/or liquidate.Investors should consider the degree of exposure of these funds inthe context of all their investments

The funds’ investment portfolios are exposed to market pricefluctuations, which are monitored by the ACD as per the policies asset out in the Prospectus The investment guidelines and

investment and borrowing powers set out in the Instrument ofIncorporation, the Prospectus and in the Financial ServicesAuthorities Collective Investment Schemes Sourcebook describethe nature of the market price risk to which the fund will be exposed

Liquidity risk

Liquidity risk is the risk that the fund can not raise sufficient cash tomeet its liabilities when due One of the key factors influencing thiswill be the ability to sell investments at, or close to, the fair valuewithout a significant loss being realised

Under normal circumstances, the funds will remain close to fullyinvested However, where circumstances require: either because aview of illiquid securities markets or high levels of redemptions inthe fund, the fund may hold cash and/or more liquid assets.Temporary higher liquidity levels may also arise during thecarrying out of a change in asset allocation policy, or following alarge issue of shares

The ACD manages the fund’s cash to ensure it can meet itsliabilities The ACD receives daily reports of subscriptions andredemptions enabling the ACD to raise cash from the fund’sportfolio in order to meet redemption requests In addition the ACDmonitors market liquidity of all securities, with particular focus onthe FRN market, seeking to ensure the funds maintain sufficientliquidity to meet known and potential redemption activity Fundcash balances are monitored daily by the ACD and Administrator.Where investments cannot be realised in time to meet anypotential liability, the fund may borrow up to 10% of its value toensure settlement All of the fund’s financial liabilities are payable

on demand or in less than one year

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Credit risk

Credit risk arises from three main sources Firstly, the possibility

that the issuer of a security will be unable to pay interest and

principal in a timely manner Secondly, for asset backed

investments (including FRNs) there is the possibility of default of

the issuer and default in the underlying assets meaning that the

fund may not receive back the full principal originally invested

Thirdly, there is counterparty risk, which is the risk that the

counterparty will not deliver the investment for a purchase, or cash

for a sale after the fund has fulfilled its responsibilities, which

could result in the funds suffering a loss

In order to manage credit risk the funds are subject to investment

limits for issuers of securities Issuer credit ratings are evaluated

periodically and an approved issuer list is maintained and

monitored In addition the funds only buy and sell investments

through brokers which have been approved by the ACD as an

acceptable counterparty and limits are set and monitored to cover

the exposure to any individual broker Changes in broker’s

financial ratings are periodically reviewed

Some funds will invest in what are considered riskier bonds (below

investment grade) This brings the potential for increased risk of

default and could affect both the income and the capital value of

the fund Further details can be found in the sub-fund financial

statements

Interest rate risk

Interest rate risk is the risk that the value of the funds’ investments

will fluctuate as a result of changes in interest rates All the funds

invest in floating rate securities The income of these funds may be

affected by changes in interest rates relevant to particular

securities or as a result of the ACD being unable to secure similar

returns on the expiry of contracts or sale of securities The value of

fixed interest securities may be affected by interest rate

movements or the expectation of such movements in the future

Interest receivable on bank deposits or payable on bank overdraft

positions will be affected by fluctuations in interest rates

The interest rate risk profile for the relevant funds is shown in their

notes to the financial statements, contained within the full

accounts

Foreign currency risk

Foreign currency risk is the risk that the value of the funds’

investments will fluctuate as a result of changes in foreign

currency exchange rates For those funds where a proportion of the

net assets of the fund are denominated in currencies other than the

fund’s base currency, the balance sheet can be affected by

movements in exchange rates The ACD monitors the foreign

currency exposure of the funds and may seek to manage exposure

to currency movements by using forward exchange contracts or by

hedging the value of investments that are priced in other

currencies The foreign currency risk profile for the relevant funds

is shown in their notes to the financial statements, contained

within the full accounts

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Threadneedle UK Fund

Total return before distributions (828) 170,555

Finance costs: Distributions 6 qqqqqqqqqqr(22,920) (16,026)

shareholders from investment activities zzzzzzzzzzzzzzz(23,748) 154,529

TO SHAREHOLDERS

Opening net assets attributable to shareholders 1,296,052 1,126,049

of shares:

Amounts receivable on the issue of shares 240,551 309,986

Amounts payable on the cancellation of shares (378,390) (296,279)

(137,839) 13,707

Dividend distribution in pence per share

Class 1 Shares Net Income Distribution Gross Tax Net Distribution Distribution Period Revenue Credit Revenue Equalisation Paid/Payable Paid

2011/2012 2010/2011 Group 1

08/03/11 to 07/09/11 1.0310 0.1031 0.9279 – 0.9279 0.6777 08/09/11 to 07/03/12 0.4351 0.0435 0.3916 – 0.3916 0.1585

Group 2

08/03/11 to 07/09/11 0.4641 0.0464 0.4177 0.5102 0.9279 0.6777 08/09/11 to 07/03/12 0.1803 0.0180 0.1623 0.2293 0.3916 0.1585

Total distributions in the period 1.3195 0.8362 Class 2 Shares

Net Income Distribution Gross Tax Net Distribution Distribution Period Revenue Credit Revenue Equalisation Paid/Payable Paid

2011/2012 2010/2011 Group 1

08/03/11 to 07/09/11 1.3377 0.1338 1.2039 – 1.2039 0.9216 08/09/11 to 07/03/12 0.7253 0.0725 0.6528 – 0.6528 0.4233

Group 2

08/03/11 to 07/09/11 0.6500 0.0650 0.5850 0.6189 1.2039 0.9216 08/09/11 to 07/03/12 0.3126 0.0313 0.2813 0.3715 0.6528 0.4233

Total distributions in the period 1.8567 1.3449

Investment Report

Investment Objective

To achieve capital growth

Investment Policy

The ACD’s investment policy is to invest the

assets of the Fund principally in equities of

companies domiciled in the UK or which have

significant UK operations If the ACD

considers it desirable, it may further invest in

other securities (including fixed interest

securities, other equities and money market

securities)

Performance of Net Income Class 1

Shares*

Over the twelve months to 7th March 2012,

the published share price of the Threadneedle

UK Fund has fallen from 87.61p to 87.20p

Looking at performance within its peer group,

the total return on the Fund for the twelve

months ending 29th February 2012, including

net reinvested income, is +4.23% as

compared to a median return of +1.43% over

the same period (For information the FTSE

All-Share Total Return Index returned +1.53%

over the same period)

Portfolio Activity

The period under review was a challengingone for the UK stock market, with initialtentative gains giving way to a significantsell-off over the summer, followed by ameaningful recovery in the final three months

of the reporting period The net result wasthat the FTSE All-Share Index was littlechanged on the year However, the fundcomfortably outperformed the market indelivering a healthy return

The fund’s sector positioning provedbeneficial, with the below-benchmarkweighting in financials adding particularvalue However, the bulk of theoutperformance came from stock selection

Highlights included speciality plasticsbusiness Filtrona, house builder Persimmon,and cash and carry operator Booker Thediverse nature of these companies illustratesthe breadth of good opportunities available inthe market At the same time the fund did nothold Lloyds Banking Group or BHP Billitonand, with both stocks losing significant value,this decision proved correct

Throughout the year, rather than gettingcaught up in the daily news flow on the

eurozone crisis or the domestic economy, wepursued a stock-picking approach Newpurchases included Imperial Tobacco, a high-yielding company with significant exposure

to fast-growing international markets; andcontract caterer Compass, a business with avery strong balance sheet and good structuralgrowth opportunities Elsewhere, we alsobought into jet engine producer Rolls-Royce,where long-term maintenance contractsprovide good visibility of earnings

Among the key disposals were powergeneration equipment supplier Aggreko,where we sold out at a significant profitfollowing an excellent period of performance

Profits were also locked in through partialsales of Filtrona and packaging companyRexam

Looking ahead, we will continue to undertakecareful research of companies, so that we caninvest in long-term winners and add to ourholdings with confidence on any marketsetbacks We believe that this approach willcontinue to support strong relativeperformance

*In pound Sterling and against UK peer group.

Please refer to pages 256-267 for comparative tables.

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Class 2 Shares

Net Accumulation

Distribution Gross Tax Net Net Revenue Net Revenue

Period Revenue Credit Revenue Equalisation Accumulated Accumulated

2011/2012 2010/2011 Group 1

Group 2: shares purchased during a distribution period

DISTRIBUTION TABLE

(continued)

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The accounting policies for the Fund are the same as those

disclosed in the aggregated financial statements on page 6

zzzzzzzzzzzzzzzOther expenses:

6 FINANCE COSTS

Distributions and Interest

The distribution takes account of revenue received on the creation

of shares and revenue deducted on the cancellation of shares andcomprises:

Details of the distribution per share are set out in the table onpages 10 and 11

7 DEBTORS

Amounts receivable for the issue of shares 27,854 3,301

Amounts payable for the cancellation of shares (5,258) (1,240)

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Threadneedle Investment Services Limited, as Authorised Corporate

Director (ACD), is a related party and acts as principal in respect of

all transactions of shares in the Fund

The aggregate monies received through issues and paid on

cancellations are disclosed in the Statement of Change in Net

Assets Attributable to Shareholders

Any amounts due to or from Threadneedle Investment Services

Limited at the end of the accounting period in relation to share

issues and cancellations are disclosed in Notes 7 and 8

Amounts payable to Threadneedle Investment Services Limited in

respect of fund management and registration services are disclosed

in Note 4 and amounts outstanding at the year end in Note 8

Threadneedle Investment Services Limited did not enter into

securities transactions with the Fund during the period

All transactions have been entered into in the ordinary course of

business on normal commercial terms

10 SHAREHOLDER FUNDS

UK Fund currently has two share classes; Class 1 and Class 2

shares The charges on each share class are as follows:

Annual management charge

The net asset value of each share class, the net asset value per

share, and the number of shares in each class are given in the

comparative table on page 256 The distribution per share class is

given in the distribution table on pages 10 and 11 All classes have

the same rights on winding up

11 STOCKLENDING

During the period under review the UK Fund has entered into

stocklending arrangements The Fund has earned £54,000

(2011: £158,000) and paid fees of £8,000 (2011: £22,000) to

Threadneedle Investment Services Limited and £8,000 (2011: £23,000)

to J.P Morgan to process these arrangements The value of stock on

loan at the end of the accounting period was £25.89m (2011:

£29.22m), whilst the value of collateral held for these arrangements

was £28.84m (2011: £31.17m) The collateral was held as either

securities transferred in CREST by a DBV (Delivery by Value) or Gilt

DBV, or in the form of overseas government bonds, supranational

bonds or certificates of deposit

The nature and value of collateral held is analysed by asset class in

the table below

Analysis of Collateral Held

The analysis and tables provided below refer to the narrativedisclosure on derivatives and other financial instruments risks onpages 8 and 9

Currency exposures

A small proportion of the net assets of the Fund are denominated incurrencies other than Sterling, with the effect that the balance sheetand total return can be affected by currency movements

Net foreign currency assets

Monetary monetary exposures exposures Total

Interest rate risk profile of financial assets and financial liabilities

The interest rate risk profile of the Fund’s financial assets andfinancial liabilities at 7th March 2012 was:

Financial Floating rate Fixed rate assets not financial financial carrying assets assets interest Total

Fair value of financial assets and financial liabilities

There is no material difference between the value of the financialassets and liabilities, as shown in the balance sheet, and their fairvalue

(continued)

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(continued)

13 CONTINGENT LIABILITIES AND COMMITMENTS

There are no contingent liabilities and commitments outstanding(2011: Nil)

14 PORTFOLIO TRANSACTION COSTS

Analysis of total purchase costs

Purchases in period before transaction costs 307,596 783,034

Gross purchases total zzzzzzzzzzzzzzz309,313 787,433

Analysis of total sale costs

Total sales net of transaction costs zzzzzzzzzzzzzzz447,090 788,626

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Threadneedle UK Select Fund

Total return before distributions 3,273 36,734

TO SHAREHOLDERS

Opening net assets attributable to shareholders 270,557 247,870

of shares:

(42,044) (11,267)

(see statement of total return above) qqqqqqqqqqr(1,126) 34,077

Closing net assets attributable to shareholders zzzzzzzzzzzzzzz227,343 270,557

2011/2012 2010/2011 Group 1

08/03/11 to 07/09/11 1.0946 0.1095 0.9851 – 0.9851 0.5787 08/09/11 to 07/03/12 0.3921 0.0392 0.3529 – 0.3529 0.0610

Group 2

08/03/11 to 07/09/11 0.6829 0.0683 0.6146 0.3705 0.9851 0.5787 08/09/11 to 07/03/12 0.2057 0.0206 0.1851 0.1678 0.3529 0.0610

2011/2012 2010/2011 Group 1

assets of the Fund for growth, through a

concentrated, actively managed portfolio The

select investment approach means that the

ACD has the flexibility to take significant stock

and sector positions which may lead to

increased levels of volatility The portfolio will

consist primarily of equities of companies

domiciled in the UK, or which have significant

UK operations If the ACD considers it

desirable, it may further invest in other

securities (including fixed interest securities,

other equities and money market securities)

Shares*

Over the twelve months to 7th March 2012, the

published share price of the Threadneedle UK

Select Fund has risen from 81.59p to 82.13p

net reinvested income, is +4.92% as compared

to a median return of +1.43% over the sameperiod (For information the FTSE All-ShareTotal Return Index returned +1.53% over thesame period)

We believe that economic growth in the UK islikely to remain lacklustre as both thegovernment and consumers continue to rein

in their spending and reduce their level ofindebtedness It is for this reason that wecontinue to focus on companies andgeographies that can still deliver good growthdespite the tough economic backdrop

Therefore, we are targeting firms whichgenerate a high proportion of their sales andprofits from overseas markets, and companieswhich sell products and services to otherbusinesses rather than to the government orthe UK consumer

Over recent months, we have reduced thefund’s exposure to defensive areas of themarket such as tobacco, pharmaceuticals andtelecoms, as these sectors performed stronglywhen the eurozone sovereign debt crisisworsened in the second half of 2011 We usedthe stock market weakness during this period

to add several new companies to the portfolio

which are more economically sensitive as wefeel that global growth will remain intactdespite the problems in Europe Examples ofsuch companies include the leading globaladvertising business WPP, oil services firmAmec and packaging company DS Smith

The corporate sector remains in goodfinancial health and this is likely to lead to acontinued pick-up in merger and acquisitionactivity As sales growth is likely to remaindifficult in a low growth world, manymultinational firms may find it easier to buygrowth via the UK stock market

Consequently, the UK Select Fund has severalmidsized global businesses with good nichetechnologies, which we believe are ripe fortakeover by larger multinationals Examplesare Premier Oil, technology firm Spirent, andseveral companies in the industrial sector

Equity valuations continue to look good valueversus history and in comparison with otherasset classes such as cash or bonds

Consequently, we are finding plenty ofattractive companies in which to invest

Trang 17

6 FINANCE COSTS

Deduct: Revenue received on creation of sharesqqqqqqqqqqr(110) (63)Net distribution for the period zzzzzzzzzzzzzzz4,399 2,657

Details of the distribution per share are set out in the table onpage 15

7 DEBTORS

Amounts payable for the cancellation of shares (625) (1,332)

Trang 18

UK Select Fund currently has two share classes; Class 1 and Class 2

shares The charges on each share class are as follows:

given in the distribution table on page 15 All classes have the same

rights on winding up

11 STOCKLENDING

During the period under review the UK Select Fund has entered into

stocklending arrangements The Fund has earned £7,000

(2011: £21,000) and paid fees of £1,000 (2011: £3,000) to Threadneedle

Investment Services Limited and £1,000 (2011: £3,000) to J.P

Morgan to process these arrangements The value of stock on loan

at the end of the accounting period was £1.19m (2011: £4.97m),

whilst the value of collateral held for these arrangements was

£1.35m (2011: £5.23m) The collateral was held as either securities

transferred in CREST by a DBV (Delivery by Value) or Gilt DBV, or in

the form of overseas government bonds, supranational bonds or

certificates of deposit

the table below

(continued)

Trang 19

(continued)

Purchases in period before

Trang 20

Threadneedle UK Smaller Companies Fund

Net revenue/(expenses) after taxation qqqqqqqqqqr670 419

Total return before distributions 759 50,223

shareholders from investment activities zzzzzzzzzzzzzzz(33) 49,623

TO SHAREHOLDERS

of shares:

(2,555) 11,644

(see statement of total return above) qqqqqqqqqqr(33) 49,623

Closing net assets attributable to shareholders zzzzzzzzzzzzzzz190,226 192,482

2011/2012 2010/2011 Group 1

The ACD’s investment policy is to invest the assets

of the Fund primarily in the equities of smaller

companies that are domiciled in the UK or have

significant UK operations

If the ACD considers it desirable it may further

invest up to one third of the total assets of the Fund

in other securities (including fixed interest

securities, other equities and money market

securities) For liquidity purposes it may invest in

cash and near cash

Shares*

Smaller Companies Fund has risen from 136.29p to

138.87p

Looking at performance within its peer group, the

total return on the Fund for the twelve months

ending 29th February 2012, including net reinvested

income, is +6.74% as compared to a median return of

+2.24% over the same period (For information the

Hoare Govett Smaller Companies (ex Investment

Trusts) Index returned +3.90% over the same period)

During the 12-month period under review themarket moved higher and the fund outperformedthe index However, it was a very volatile year andthe market fell over the first six months, followingincreasing concerns over economic growth inEurope and the US, before recovering strongly inthe second six months The crisis in Greece fuelledconcerns in other eurozone countries that if debtlevels could not be managed it would lead to aneconomic depression Eventually, the easing ofmonetary and fiscal policy helped to stimulate theeurozone economy but at lower levels than wereexpected at the start of the year

Economic growth is likely to remain low in Europe

as national debt is paid down, and there is a dangerthat a misguided policy response could have asignificant impact on economic activity However,

in an environment of lower economic growth thefund’s strategy of investing in high qualitycompanies exposed to structural growth shouldlead to superior returns

The fund’s sector positioning remained biasedtowards areas of structural growth, which provedbeneficial The fund was heavily invested intechnology, engineering, industrial and chemicalcompanies, whilst having only a limited exposure

to areas oriented to the UK domestic economy UK

consumers and the government have too muchdebt and demand for products and services willremain depressed

Individual holdings that provided strong returnsduring the year included IP Group, OxfordInstruments, iomart, Elementis, Galliford Try, CoveEnergy, Genus, Mulberry, Senior and BarrattDevelopments IP Group invests in intellectualproperty from UK universities One of thecompany’s investments, Oxford Nanopore, hasdeveloped a low-cost machine to sequence genes.The product is to be launched later this year andwill ultimately be capable of diagnosing geneticdiseases in the doctor’s surgery Mulberry isbenefiting from huge demand for its handbagsfrom emerging market consumers, but also closer

to home in Europe During the review period, westarted new holdings in Anite, Barratt

Developments, Hansteen, Petra, Rank, Salamander,Spirit and Ubisense Conversely, the fund sold out

of holdings in Mothercare, Centamin Egypt andPendragon Both Hamworthy and Holidaybreakwere acquired by other companies

High quality, smaller companies are uniquelypositioned to benefit from the current environment.Small companies with plenty of cash are in astrong position to invest, acquire and grow, whichshould lead to superior investment returns

Trang 21

Net revenue before taxation multiplied by

6 FINANCE COSTS

Distributions

Deduct: Revenue received on creation of sharesqqqqqqqqqqr(82) (69)

Shortfall transfer from capital to revenue qqqqqqqqqqr122 181Net distribution for the period zzzzzzzzzzzzzzz792 600Details of the distribution per share and any share class with ashortfall are set out in the table on page 19

7 DEBTORS

Amounts payable for the cancellation of shares (78) (4,322)

Trang 22

UK Smaller Companies Fund currently has two share classes; Class 1

and Class 2 shares The charges on each share class are as follows:

The net asset value of each share class, the net asset value per share,

and the number of shares in each class are given in the comparative

table on page 256 The distribution per share class is given in the

distribution table on page 19 All classes have the same rights on

winding up

11 STOCKLENDING

During the period under review the UK Smaller Companies Fund

has entered into stocklending arrangements The Fund has earned

£162,000 (2011: £41,000) and paid fees of £23,000 (2011: £5,000) to

loan at the end of the accounting period was £9.76m (2011: £10.00m),

the table below

There are no material assets denominated in currencies other thanSterling

The interest rate risk profile of the fund’s financial assets andfinancial liabilities at 7th March 2012 was:

Total sales net of transaction costs zzzzzzzzzzzzzzz85,259 113,144Notes to the financial statements

(continued)

Trang 23

Threadneedle UK Growth & Income Fund

shareholders from investment activities zzzzzzzzzzzzzzz3,523 30,841

TO SHAREHOLDERS

of shares:

2,329 (12,030)

2011/2012 2010/2011 Group 1

08/03/11 to 07/09/11 1.4354 0.1435 1.2919 – 1.2919 1.1125 08/09/11 to 07/03/12 0.8813 0.0881 0.7932 – 0.7932 0.6730

Group 2

08/03/11 to 07/09/11 0.5538 0.0554 0.4984 0.7935 1.2919 1.1125 08/09/11 to 07/03/12 0.3464 0.0346 0.3118 0.4814 0.7932 0.6730

2011/2012 2010/2011 Group 1

08/03/11 to 07/09/11 1.5661 0.1566 1.4095 – 1.4095 1.2085 08/09/11 to 07/03/12 0.9733 0.0973 0.8760 – 0.8760 0.7435

Group 2

08/03/11 to 07/09/11 0.6042 0.0604 0.5438 0.8657 1.4095 1.2085 08/09/11 to 07/03/12 0.6830 0.0683 0.6147 0.2613 0.8760 0.7435

To provide long term capital growth with a

reasonable and growing income

of the Fund primarily in ‘blue chip’ large capitalised

UK companies, but including, when deemed

appropriate small and medium-sized companies,

predominantly from the UK

Shares*

published share price of the Threadneedle UK Growth

& Income Fund has risen from 62.11p to 62.82p

ending 29th February 2012, including net reinvested

income, is +6.79% as compared to a median return

of +1.43% over the same period (For information

the FTSE All-Share Total Return Index returned

+1.53% over the same period)

In the early part of the reporting period, markets had

to contend with the implications of the Japanese

earthquake and political unrest in North Africa and

the Middle East However, it was primarily concerns

about the European sovereign debt crisis spreading

from the peripheral countries to Italy in late July,compounded by the loss by the US of its AAA creditrating in early August, which culminated in a severecontraction of risk appetite over the summer Thesecond half of the review period saw significantpolitical fall-out in the eurozone, with newgovernments in Greece, Italy and Spain However,the introduction by the European Central Bank of itsLong-Term Refinancing Operation (LTRO) just beforeChristmas alleviated fears of a second credit crunchand provided a boost to global equity markets

Investors were also cheered by some better USeconomic data and markets maintained theirpositive momentum into the new year

In terms of portfolio activity, during the first half ofthe reporting period we added to holdings withdefensive characteristics such as pharmaceuticalbusiness GlaxoSmithKline and Imperial Tobacco, ahigh-yielding company with significant exposure tofast-growing international markets We alsoestablished a new position in National Grid, usingthe proceeds from the sale of HSBC Elsewhere, wetook some profits on Filtrona, the speciality plasticscompany In the second half of the period, weparticipated in a rights issue from DS Smith as thecompany was using the proceeds to fund anattractive acquisition Elsewhere, we reduced theexposure to mining group Anglo American andadded to the position in BAE during December

The fund posted a good performance over thereporting period in absolute terms and also relative

to its peer group, helped by strong stock selection

There were notable positive contributions fromholdings across a range of different industries,including Booker, Imperial Tobacco, Rolls-Royce,Johnson Matthey, GlaxoSmithKline, BT andStagecoach A feature common to all of these stockswas strong dividend growth

Growth in western economies will remain sub-trendfor a number of years, as governments tackle theirdebt burdens Liquidity injections, such as the LTRO,will not prevent this very low growth environmentbecause UK and European banks, in particular, stillneed to delever and repair their balance sheets,building up sufficient capital in order to recogniseand absorb further loan losses However, widercorporate profitability could remain relativelyrobust Companies have reduced their ownindebtedness by around half over the last fouryears, so they have more of a cushion to withstandany economic shocks, and the prospects for UKdividend growth have improved

We continue to find attractively valuedopportunities in a wide range of sectors and areconfident that a carefully selected portfolio candeliver healthy returns For example, despite theongoing pressures facing domestic consumers, webelieve Marks & Spencer and ITV are interestingshares, where the valuations do not reflect theextent to which these businesses are starting toimprove

Trang 24

Current tax charge for period (note 5a) zzzzzzzzzzzzzzz– 1The Fund has not recognised a deferred tax asset of £12,125,810(2011: £11,416,113) arising as a result of having unutilisedmanagement expenses It is unlikely that these expenses will beutilised in future years

6 FINANCE COSTS

Annual management charge to capital qqqqqqqqqqr3,367 3,286Net distribution for the period zzzzzzzzzzzzzzz9,833 8,585Details of the distribution per share are set out in the table onpage 22

7 DEBTORS

Trang 25

8 CREDITORS

Amounts payable for the cancellation of shares (354) (388)

UK Growth & Income Fund currently has two share classes; Class 1

given in the distribution table on page 22 All classes have the same

rights on winding up

11 STOCKLENDING

During the period under review the UK Growth & Income Fund has

entered into stocklending arrangements The Fund has earned

the form of overseas government bonds or supranational bonds

the table below

(continued)

Trang 26

(continued)

Trang 27

Threadneedle UK Equity Income Fund

TO SHAREHOLDERS

of shares:

Amounts receivable on the issue of shares 355,463 182,207

302,685 152,549

2011/2012 2010/2011 Group 1

08/03/11 to 07/09/11 1.2778 0.1278 1.1500 – 1.1500 1.0800 08/09/11 to 07/12/11 0.9683 0.0968 0.8715 – 0.8715 – 08/12/11 to 07/03/12 0.7176 0.0718 0.6458 – 0.6458 1.4801

Group 2

08/03/11 to 07/09/11 0.3698 0.0370 0.3328 0.8172 1.1500 1.0800 08/09/11 to 07/12/11 0.2692 0.0269 0.2423 0.6292 0.8715 – 08/12/11 to 07/03/12 0.5386 0.0539 0.4847 0.1611 0.6458 1.4801

Net Accumulation

Net Net Distribution Gross Tax Net Revenue Revenue Period Revenue Credit Revenue Equalisation Accumulated Accumulated

2011/2012 2010/2011 Group 1

08/03/11 to 07/09/11 1.2778 0.1278 1.1500 – 1.1500 1.0800 08/09/11 to 07/12/11 1.1102 0.1110 0.9992 – 0.9992 – 08/12/11 to 07/03/12 0.7842 0.0784 0.7058 – 0.7058 1.5414

Group 2

08/03/11 to 07/09/11 0.3283 0.0328 0.2955 0.8545 1.1500 1.0800 08/09/11 to 07/12/11 0.3078 0.0308 0.2770 0.7222 0.9992 – 08/12/11 to 07/03/12 0.4099 0.0410 0.3689 0.3369 0.7058 1.5414

To achieve an above average rate of income

combined with sound prospects for capital

growth

assets of the Fund primarily in UK equities It

may, however, invest in other securities such

as convertibles and gilts

Shares*

Over the twelve months to 7th March 2012,

the published share price of the Threadneedle

UK Equity Income Fund has fallen from 67.36p

to 66.36p

net reinvested income, is +6.43% as

compared to a median return of +2.60% over

the same period (For information the FTSE

All-Share Total Return Index returned +1.53%

over the same period)

The period under review was a challengingone for the UK stock market, with initialtentative gains giving way to a significant sell-off over the summer of 2011 followed by ameaningful recovery in the final threemonths The net result was that the FTSE All-Share Index was little changed on the year

In terms of sectors, the fund’s lack of exposure

to banks proved highly beneficial Elsewhere,the increased weighting in consumer staplesalso added value However, the bulk of thefund’s outperformance came from stockselection Highlights included specialityplastics business Filtrona, cash and carryoperator Booker and public transport providerStagecoach The diverse nature of thesecompanies illustrates the breadth of goodopportunities available in the market At thesame time, the preference for BT overVodafone within telecoms also worked well

With the fund attracting significant inflowsduring the period under review, purchaseseasily outweighed sales We had been adding

to undervalued defensive stocks such asCentrica, Imperial Tobacco, AstraZeneca andGlaxoSmithKline since late 2010 and we

continued this process during the first half ofthe year Our increased focus on defensivessubsequently helped performance during themore volatile conditions of summer 2011

Elsewhere, we established new positions inMarks & Spencer, which is doing well undernew management and has an opportunity towin back market share We also bought intopackaging company DS Smith on weaknessduring the summer, subsequently topping upour position in a rights issue to fund anacquisition that we support Conversely, wedisposed of the holding in Anglo American,leaving the fund zero-weighted in miners

Looking ahead, we believe that the marketcan make further progress However,challenges remain and the eurozone crisis hasnot yet been resolved, despite recent actionsfrom the European Central Bank We continue

to focus on well-managed companies withstrong balance sheets and believe that equityincome products are likely to remain in favourgiven the attractive yield relative to gilts andcash deposits

Trang 28

Class 2 Shares

Net Income

Distribution Gross Tax Net Distribution Distribution

Period Revenue Credit Revenue Equalisation Paid/Payable Paid

2011/2012 2010/2011 Group 1

(continued)

Trang 29

6 FINANCE COSTS

Annual management charge to capital qqqqqqqqqqr13,455 9,898Net distribution for the period zzzzzzzzzzzzzzz43,022 31,701Details of the distribution per share are set out in the table onpages 26 and 27

7 DEBTORS

Trang 30

UK Equity Income Fund currently has two share classes; Class 1

given in the distribution table on pages 26 and 27 All classes have

the same rights on winding up

11 STOCKLENDING

During the period under review the UK Equity Income Fund has

£142,000 (2011: £103,000) and paid fees of £18,000 (2011: £14,000)

to Threadneedle Investment Services Limited and £19,000

(2011: £14,000) to J.P Morgan to process these arrangements The

value of stock on loan at the end of the accounting period was

£12.92m (2011: £60.25m), whilst the value of collateral held for

these arrangements was £13.72m (2011: £64.18m) The collateral

was held as either securities transferred in CREST by a DBV

(Delivery by Value) or Gilt DBV, or in the form of overseas

government bonds, supranational bonds or certificates of deposit

the table below

There were no material assets denominated in currencies otherthan Sterling in 2011

(continued)

Trang 31

(continued)

Trang 32

Threadneedle UK Monthly Income Fund

TO SHAREHOLDERS

of shares:

(2,797) (24,510)

2011/2012 2010/2011 Group 1

08/03/11 to 07/04/11 0.2111 0.0211 0.1900 – 0.1900 0.1800 08/04/11 to 07/05/11 0.2111 0.0211 0.1900 – 0.1900 0.1800 08/05/11 to 07/06/11 0.2111 0.0211 0.1900 – 0.1900 0.1800 08/06/11 to 07/07/11 0.2111 0.0211 0.1900 – 0.1900 0.1800 08/07/11 to 07/08/11 0.2111 0.0211 0.1900 – 0.1900 0.1800 08/08/11 to 07/09/11 0.2111 0.0211 0.1900 – 0.1900 0.1800 08/09/11 to 07/10/11 0.2111 0.0211 0.1900 – 0.1900 0.1800 08/10/11 to 07/11/11 0.2111 0.0211 0.1900 – 0.1900 0.1800 08/11/11 to 07/12/11 0.2111 0.0211 0.1900 – 0.1900 0.1800 08/12/11 to 07/01/12 0.2111 0.0211 0.1900 – 0.1900 0.1800 08/01/12 to 07/02/12 0.2111 0.0211 0.1900 – 0.1900 0.1800 08/02/12 to 07/03/12 0.4096 0.0410 0.3686 – 0.3686 0.2549

Group 2

08/03/11 to 07/04/11 – – – 0.1900 0.1900 0.1800 08/04/11 to 07/05/11 – – – 0.1900 0.1900 0.1800 08/05/11 to 07/06/11 – – – 0.1900 0.1900 0.1800

To achieve an above average income combined

with sound prospects for capital growth Income

will be paid monthly

of the Fund primarily in UK equities It may,

however, invest in other securities such as

convertibles and gilts

Shares*

Monthly Income Fund has fallen from 58.23p to

58.06p

ending 29th February 2012, including net

reinvested income, is +6.60% as compared to a

median return of +2.60% over the same period (For

information the FTSE All-Share Total Return Index

returned +1.53% over the same period)

Over the past year, the Japanese tsunami, ‘Arab

Spring’, the ending of the second phase of US

quantitative easing (QE), domestic riots, and rising

tension between Israel and Iran all made theheadlines However, it was primarily concernsabout European sovereign indebtedness spreadingfrom the peripheral economies to Italy in late July,compounded by the loss by the US of its AAA creditrating in early August, which led to a severecontraction in risk appetite during the summer

As a result, the UK equity market fell by almost10% in the first week of August However, theintroduction by the European Central Bank of itsLong-Term Refinancing Operation (a form of QE) inDecember stabilised the markets and they ralliedinto the new year Despite trading in a range ofapproximately 5,000 to 6,100 over the reportingperiod, the FTSE All-Share Index ended the yearonly marginally lower

Market gyrations tended to reflect an exaggeratedresponse to the underlying economic outlook andthe prospects for corporate profitability Domesticeconomic growth remained subdued asdeleveraging, government austerity, falling realwages and negligible job creation combined toproduce sub-trend economic growth and a weakerrecovery than the one experienced in the 1930s

However, despite the challenging backdrop, UKcorporate profitability remained relatively robustreflecting the global nature of the domestic stockmarket The prospective price/earnings ratio forthe UK market fell to its lowest level for almost

18 years, at 10.5x

The fund moved to a more defensive stance inthe early part of the year Profits taken inoutperforming industrial stocks such as IMI andGKN were reinvested in the more defensive areas

of tobacco, pharmaceuticals, telecoms and utilities

Fund purchases included Imperial Tobacco, BT andPennon This strategy helped to mitigate lossesduring the summer Latterly, the fund also began

to add selectively to financials, with new holdings

in HSBC and Close Brothers, while existingpositions in Amlin and Aviva were increased Inaddition, holdings in industrials such as Halma andSpectris were topped up at lower levels using theproceeds from profit-taking in stocks such as BATand United Utilities

With companies almost halving their indebtednessover the last four years and with dividend coverrising to more than 2.5x, the prospects for UKdividend growth have improved With this morefavourable backdrop, the fund has increased its 11regular monthly distributions from 0.18p to 0.19pper share Combined with a larger increase in thefinal month, the overall dividend payments for thereporting period rose by 10% Over the comingyear, the fund’s monthly payments are set toincrease from 0.19p to 0.20p per share Takentogether, these increases will restore the fund’spayments to their previous peak levels

Trang 33

6 FINANCE COSTS

Annual management charge to capital qqqqqqqqqqr7,741 7,690Net distribution for the period zzzzzzzzzzzzzzz22,391 21,143Details of the distribution per share are set out in the table onpage 31

Trang 34

UK Monthly Income Fund currently has one share class; Class 1

shares The charges are as follows:

Registration fees

The net asset value, the net asset value per share, and the number

of shares are given in the comparative table on page 257 The

distribution is given in the distribution table on page 31

11 STOCKLENDING

During the period under review the UK Monthly Income Fund has

the table below

(continued)

Trang 35

(continued)

Trang 36

Threadneedle Monthly Extra Income Fund

TO SHAREHOLDERS

of shares:

Liabilities

Distribution payable on income shares qqqqqqqqqqr(592) (537)

Net assets attributable to shareholders zzzzzzzzzzzzzzz131,541 119,651

2011/2012 2010/2011 Group 1

08/03/11 to 07/04/11 0.2167 0.0217 0.1950 – 0.1950 0.1850 08/04/11 to 07/05/11 0.2167 0.0217 0.1950 – 0.1950 0.1850 08/05/11 to 07/06/11 0.2167 0.0217 0.1950 – 0.1950 0.1850 08/06/11 to 07/07/11 0.2167 0.0217 0.1950 – 0.1950 0.1850 08/07/11 to 07/08/11 0.2167 0.0217 0.1950 – 0.1950 0.1850 08/08/11 to 07/09/11 0.2167 0.0217 0.1950 – 0.1950 0.1850 08/09/11 to 07/10/11 0.2167 0.0217 0.1950 – 0.1950 0.1850 08/10/11 to 07/11/11 0.2167 0.0217 0.1950 – 0.1950 0.1850 08/11/11 to 07/12/11 0.2167 0.0217 0.1950 – 0.1950 0.1850 08/12/11 to 07/01/12 0.2167 0.0217 0.1950 – 0.1950 0.1850 08/01/12 to 07/02/12 0.2167 0.0217 0.1950 – 0.1950 0.1850

To achieve a high level of income with prospects

of capital growth Income will be paid monthly

of the Fund primarily in Sterling denominated

fixed interest securities and UK equities

Shares*

published share price of the Threadneedle

Monthly Extra Income Fund has risen from 57.01p

to 57.77p

ending 29th February 2012, including net

reinvested income, is +7.56% as compared to a

median return of +3.69% over the same period In

view of the nature of the Fund, and its investment

remit, there is no directly comparable market

index

The period under review was a challenging one

for equity markets, with the Japanese earthquake,

tensions in the Middle East and North Africa and

particularly the ongoing eurozone debt crisis all

sapping risk appetite However, towards the end

of 2011 the European Central Bank’s Long-TermLiquidity Operation (LTRO) alleviated investorconcerns about a potential second credit crunch,allowing markets to end the period on an upbeatnote

Relative safe-haven ‘core’ government bondsperformed well, with US treasuries, gilts and coreEuropean bonds all posting good returns It wasalso a positive year for investment gradecorporate bonds, which we continue to favourover gilts given the yield pick-up and the strength

of company balance sheets

The fund’s performance over the review periodwas good in absolute terms and also relative to itspeer group This was helped by strong stockselection in both the equity and bond portions ofthe portfolio Within equities, there were notablepositive contributions from holdings across arange of different industries, including Booker,Imperial Tobacco, BT, Rolls-Royce andGlaxoSmithKline A feature common to all ofthese stocks was strong dividend growth

The bond part of the portfolio is overweight in thebanking sector Banks are on a path to becomingmore tightly regulated, more liquid and bettercapitalised, all of which should support creditquality Bank bond prices fell in the middle of theyear on the back of eurozone debt concerns, butthere was a strong rebound from the fourth quarter

onwards This was chiefly a result of the LTRO,which removed the risk of a major bank failure, aswell as banks tendering their own debt securities

The bond portfolio is also overweight in emergingmarket (EM) debt Many EM sovereigns have bettercredit fundamentals than developed marketgovernments, which provides scope for ‘self-help’

should the economic cycle turn down again

At the time of writing, the fund is investedapproximately 77% in equities and 21% in bonds

This reflects our broad preference for equities,based on relative valuations However, during theyear we used tactical asset allocation switches toimprove overall returns For instance, in May 2011

we took some profits on equities before themarkets sold off in the summer and increased thefund’s bond holdings

Economic growth in western economies willremain below trend for a number of years, asgovernments tackle their debt burdens However,corporate profitability is likely to remain relativelyrobust Companies have reduced their ownindebtedness by around half over the last fouryears, so they have more of a cushion towithstand any economic shocks, and theprospects for UK dividend growth have improved

We continue to find attractive opportunities in awide range of sectors and are confident that acarefully selected portfolio can deliver healthyreturns

Trang 37

(continued)

Trang 38

disclosed in the aggregated financial accounts on page 6

6 FINANCE COSTS

Deduct: Revenue received on creation of sharesqqqqqqqqqqr(106) (19)Net distribution for the period zzzzzzzzzzzzzzz5,359 4,757

Net distribution for the period zzzzzzzzzzzzzzz5,359 4,757Details of the distribution per share are set out in the table on pages 35 and 36

Trang 39

8 CREDITORS

Monthly Extra Income Fund currently has one share class; Class 1

shares The charges are as follows:

Registration fees

The net asset value, the net asset value per share, and the number

of shares are given in the comparative table on page 257 The

distribution is given in the distribution table on pages 35 and 36

11 STOCKLENDING

During the period under review the Monthly Extra Income Fund has

the table below

Trang 40

The only material amounts of non interest-bearing assets relate to

forward foreign exchange contracts At 7th March 2012, the Fund

had outstanding open forward foreign exchange contracts of

£30,000 (2011: (£19,000))

The Fund’s floating rate investments earn interest which is variable,

based on LIBOR or its overseas equivalent

Cash balances are held in floating rate accounts where interest is

calculated with reference to prevailing market rates

There is no material difference between the value of the financial

assets and liabilities, as shown in the balance sheet, and their fair

value

Sensitivity analysis

Sensitivity or value at risk is not shown since the value of the

derivatives at year end is small in the context of the overall

portfolio The same is true of the prior year

There are no contingent liabilities and commitments outstanding

(2011: Nil)

(continued)

Tiêu đề	Threadneedle Investment Funds ICVC Annual Report and Accounts March 2012
Trường học	University of London
Chuyên ngành	Investment Funds
Thể loại	Annual Report
Năm xuất bản	2012
Thành phố	London

Định dạng
Số trang	286
Dung lượng	2,31 MB