Threadneedle Specialist Investment Funds ICVC pptx

Interest rate risk profile of financial assets and financial liabilities The interest rate risk profile of the Fund’s financial assets andfinancial liabilities at 30th April 2012 was: Fi

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Threadneedle Specialist Investment Funds ICVC

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Threadneedle Specialist Investment Funds ICVC

Threadneedle Specialist 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 2 Hedged, Class X and Limited Issue Class.

All share types and classes are covered in this Annual Report.

Aggregated Financial Statements for

Threadneedle Specialist Investment Funds ICVC 4

Notes to the Aggregated Financial Statements for

Threadneedle Specialist Investment Funds ICVC 5 – 8

UK Mid 250 Fund 9 – 11

UK Extended Alpha Fund 12 – 16

UK Equity Alpha Income Fund 17 – 19

UK Absolute Alpha Fund 20 – 22

Absolute Return Bond Fund 23 – 28

Target Return Fund 29 – 34

Pan European Accelerando Fund 35 – 38

Pan European Equity Dividend Fund 39 – 43

American Extended Alpha Fund 44 – 47

China Opportunities Fund 48 – 51

Global Emerging Markets Equity Fund 52 – 55

Emerging Market Local Fund 56 – 60

Global Extended Alpha Fund 61 – 64

Global Equity Income Fund 65 – 69

Statement of Authorised Corporate Director’s (ACD) Responsibilities 70 Statement and Report of the Depositary 70

Portfolio Statements:

UK Mid 250 Fund 72 – 73

UK Extended Alpha Fund 74 – 75

UK Equity Alpha Income Fund 76 – 77

UK Absolute Alpha Fund 78 – 79

Absolute Return Bond Fund 80 – 84

Target Return Fund 85 – 88

Pan European Accelerando Fund 89 – 90

Pan European Equity Dividend Fund 91 – 93

American Extended Alpha Fund 94 – 95

China Opportunities Fund 96 – 98

Global Emerging Markets Equity Fund 99 – 103

Emerging Market Local Fund 104 – 106

Global Extended Alpha Fund 107 – 109

Global Equity Income Fund 110 – 113

Ongoing Charges Figure Summary 122

Shares Issued and Redeemed Summary 124

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Threadneedle Specialist Investment Funds ICVC

Registered Number IC000232

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

Specialist Investment Funds ICVC, which reviews the

performance of the funds and financial markets over the

12 months to 30th April 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 Markets had to contend with the ‘Arab Spring’, the

after-effects of the earthquake and tsunami in Japan, the

marked slowdown in global growth and the spiralling

sovereign debt problems in the eurozone.

The summer saw sharp falls in equity markets across the

globe amid heightened worries over the eurozone debt crisis.

However, markets rallied during the late autumn and winter

as further measures were put in place to tackle the debt

problems in the eurozone periphery, and notably Greece In

particular, markets were buoyed by the European Central

Bank’s Long-Term Refinancing Operation (LTRO), which was

announced in December This alleviated immediate liquidity

pressures and allowed European banks to secure three-year

funding on particularly favourable terms During this period,

equity markets also responded positively to some stronger

economic data from the US.

Towards the end of the reporting period, the positive effects

of the LTRO began to fade and concerns over the debt crisis

and poor growth prospects for Europe returned to the fore.

European populations are increasingly voicing their

objections to the austerity measures designed to repair

government finances and are making their feelings known at

the ballot box Following the fall of the incumbent Greek,

Italian and Spanish governments late last year, more recent

elections have seen the collapse of the Dutch government,

while the anti-austerity socialist François Hollande was

elected French president shortly after the end of the period.

More worryingly, the recent Greek elections proved

inconclusive, with strong gains by political factions calling for

the renegotiation of the EU’s bailout terms.

Against the backdrop of fluctuating risk appetite, government

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

their ‘safe haven’ appeal and quantitative easing by central

banks Investment grade and high yield corporate bonds,

together with emerging market bonds, also posted positive

returns with investors drawn to the attractive yields available

on these assets Official interest rates in the major developed

economies remained at historic lows to support economic

activity.

While much of the developed world is facing a difficult year, there continue to be exciting opportunities amongst emerging markets, which together account for around 50% of global GDP These countries are enjoying continued growth in consumer spending and, in contrast to developed economies, their governments have plenty of scope to support economic expansion

In the challenging conditions facing the developed world, companies with strong business models and robust balance sheets should fare significantly better than their weaker counterparts 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.

Elsewhere, bond yields in the core government markets remain at historically low levels and we prefer the prospects for corporate and emerging market bonds.

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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Net revenue/(expenses) after taxation qqqqqqqqqqr18,378 17,102

Total return before distributions (19,781) 63,346

Finance costs: Distributions qqqqqqqqqqr(26,517) (22,775)

Change in net assets attributable to

shareholders from investment activities zzzzzzzzzzzzzzz(46,298) 40,571

STATEMENT OF CHANGE IN NET ASSETS ATTRIBUTABLE

TO SHAREHOLDERS

for the accounting period 1st May 2011 to 30th April 2012

2012 2011

£000 £000 Opening net assets attributable to shareholders 1,744,720 2,444,985

Movement due to sales and repurchases

of shares:

Amounts receivable on the issue of shares 799,438 559,925

Amounts payable on the cancellation of shares (617,565) (1,313,214)

181,873 (753,289)

Change in net assets attributable to

shareholders from investment activities

(see statement of total return above) (46,298) 40,571

Retained distribution on accumulation shares qqqqqqqqqqr11,370 11,211

Closing net assets attributable to shareholders zzzzzzzzzzzzzzz1,892,876 1,744,720

Assets Investment assets weerwerrqqqqqqqq1,698,608 1,678,491

Cash and bank balances weerwerrqqqqqqqq250,131 125,720Total other assets weerwerrqqqqqqqq311,606 183,086Total assets weerwerrqqqqqqqq2,010,214 1,861,577

Liabilities Derivative liabilities weerwerrqqqqqqqq(12,216) (15,395)

Distribution payable on income shares weerwerrqqqqqqqq(8,443) (6,667)Total other liabilities weerwerrqqqqqqqq(105,122) (101,462)Total liabilities weerwerrqqqqqqqq(117,338) (116,857)

Net assets attributable to shareholders rczzxvvvvvvvvzzzzzzzzzzzzr1,892,876 1,744,720The aggregated financial statements represent the sum of the individualfunds within the umbrella company Further analysis of the distributionand the net asset position can be found within the financial statements

of the individual funds

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

P J W Reed T N Gillbanks

29th June 2012

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Notes to the financial statements

For the accounting period 1st May 2011 to 30th April 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, or in the

case of offshore funds when revenue is reported

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

(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:

Emerging Market Local FundGlobal Equity Income FundPan European Equity Dividend Fund

UK Equity Alpha Fund

In addition, the ACD is entitled to receive a performance fee in the

event of the NAV per share of the Fund outperforming the relevant

benchmark index, in respect of the following funds:

American Extended Alpha FundGlobal Extended Alpha FundPan European Accelerando Fund

UK Absolute Alpha Fund

UK Extended Alpha FundAny fees arising as a result of outperformance are charged to

capital The performance fee is only chargeable at the end of any

Performance Period ie 31 December, and will be paid within one

month of that date If no performance fee has been charged since

the launch of the Share Class, no performance fee will be payable

until such time as there is an Excess Return and there is a

performance fee accrual at the end of the Performance Period

Further details including the relevant benchmark index, can be

found within the “Expenses” note of the individual funds

(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 126) 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

Where 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 return 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

The premium that may be received on an option is treated asrevenue where the motives and circumstances determine that thereturn is income in nature and there is no immediate capital lossgenerated at the time the transaction is entered into

Any positions open at the period end are reflected in the BalanceSheet at their market value, either using available market prices orthe ACD’s assessment of the fair value, based on counterpartyvaluations and appropriate pricing models

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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 in the current year

2 NET CAPITAL GAINS/(LOSSES)

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

Payable to the ACD or associates of the ACD,

and the agents of either of them:

(21,692) (21,677)

qqqqqqqqqqqqq

Payable to the depositary or associate of the

depositary, and the agents of either of them:

Revenue collection expenses qqqqqqqqqqqqq(21) (18)

*Including irrecoverable VAT where applicable.

**The ACD is entitled to receive a performance fee for the Pan

European Accelerando, UK Extended Alpha, American Extended

Alpha, Global Extended Alpha and the UK Absolute Alpha Funds in

the event of the NAV per Share of the Fund outperforming the

relevant benchmark index (with reinvestment, calculated at market

close) by the “hurdle rate” (as set by the fund) or more over the

performance period The performance fee is set (by fund) as a

percentage of the outperformance The performance fee by its

nature is a capital charge, and is therefore charged to capital for the

purpose of the calculation of distribution.

qqqqqqqqqqqqq

Total current tax (note 5b) zzzzzzzzzzzzzzzzzz(1,107) (752)Total tax charge for the period zzzzzzzzzzzzzzzzzz(1,107) (752)

b) Factors affecting taxation charge for periodqqqqqqqqqqqqq

Net revenue before taxation zzzzzzzzzzzzzzzzzz19,485 17,854Net revenue before taxation

multiplied by the standard rate of

Distributions treated as tax deductable qqqqqqqqqqqqq1,089 1,705Current tax charge for period (note 5a) zzzzzzzzzzzzzzzzzz(1,107) (752)

6 DEBTORS

2012 2011

£000 £000

Amounts receivable for the issue of shares 13,246 22,326

Total creditors zzzzzzzzzzzzzzzzzz(54,475) (85,265)

8 RELATED PARTY TRANSACTIONS

Threadneedle Investment Services Limited, as Authorised CorporateDirector (ACD), is a related party and acts as principal in respect of alltransactions of shares in the funds

The aggregate monies received through issues and paid oncancellations are disclosed in the Statement of Change in Net AssetsAttributable 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

All transactions have been entered into the ordinary course ofbusiness on normal commercial terms

9 SHARES

Funds currently may have up to 5 share classes; Class 1, Class 1Hedged, Class 2, Class X and Limited Issue Class shares Where afund has more than one share class, each class may suffer differentexpenses Consequently the level of net revenue attributable to eachshare class will differ Further analysis of the annual managementcharge and registration fees on each share class can be found withinthe ‘Shareholder Funds’ note of the individual funds

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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 Extended Alpha Fund

Absolute Return Bond Fund

China Opportunities Fund

Emerging Market Local Fund

Global Emerging Markets Equity Fund

Global Extended Alpha Fund

Global Equity Income Fund

Pan European Accelerando Fund

Pan European Equity Dividend Fund

Target Return Fund

UK Equity Alpha Fund

UK Extended Alpha Fund

UK Mid 250 Fund

The funds have earned £743,000 (2011: £289,000) and paid fees of

£98,000 (2011: £39,000) to Threadneedle Investment Services Limited

and £106,000 (2011: £41,000) to J.P Morgan to process these

arrangements The aggregate value of stock on loan at the end of the

annual accounting period was £39.07m (2011: £18.47m), whilst the

value of collateral held for these arrangements was £41.70m (2011:

£20.95m) 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 or supranational bonds

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

the table below

Analysis of Collateral Held

Total Total Value £000 % of Total Value £000 % of Total

Bonds qqqqqqqqqqqqqqqqqqqqqqqq41,704 100 20,952 100

vvzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz

11 DILUTION ADJUSTMENT

Under certain circumstances the ACD has the power to charge a

dilution adjustment on the purchase and/or redemption of shares

If charged, the dilution adjustment will be paid into the fund Full

details of the operation of the scheme can be found in the Prospectus

12 DERIVATIVE AND OTHER FINANCIAL INSTRUMENTS

In pursuing their investment objectives, each of the funds may hold a

number of financial instruments These financial instruments

comprise securities, derivatives and other investments, cash

balances, debtors and creditors that arise directly from the funds’

operations, for example, in respect of sales and purchases awaiting

settlement, amounts receivable for creations and payable for

redemptions and debtors for accrued revenue

The funds may also enter into a range of derivative transactions

whose purpose is efficient portfolio management In addition the

funds only execute derivative contracts where both the derivative

instrument 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 The main risks

arising from financial instruments and the ACD’s policies for

managing these risks are stated below These policies have been

applied throughout the period under review These policies 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 the funds

might suffer through holding market positions in the face of price

movements This means the value of an investor’s holding may go

down as well as up and an investor may not recover the amount

invested Bond funds hold a range of fixed interest instruments whichmay 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 investmentand borrowing powers set out in the Instrument of Incorporation, theProspectus and in the Financial Services Authorities CollectiveInvestment Schemes Sourcebook describe the nature of the marketprice 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 in thefund, the fund may hold cash and/or more liquid assets

Temporary higher liquidity levels may also arise during the carryingout of a change in asset allocation policy, or following a large issue ofshares

The ACD manages the fund’s cash to ensure it can meet its liabilities.The ACD receives daily reports of subscriptions and redemptionsenabling the ACD to raise cash from the fund’s portfolio in order tomeet redemption requests In addition the ACD monitors marketliquidity of all securities, with particular focus on the FRN market,seeking to ensure the funds maintain sufficient liquidity to meetknown and potential redemption activity Fund cash balances aremonitored daily by the ACD and Administrator

Where investments cannot be realised in time to meet any potentialliability, the fund may borrow up to 10% of its value to ensuresettlement All of the fund’s financial liabilities are payable ondemand or in less than one year

Thirdly, there is counterparty risk, which is the risk that thecounterparty will not deliver the investment for a purchase, or cashfor a sale after the fund has fulfilled its responsibilities, which couldresult in the funds suffering a loss

In order to manage credit risk the funds are subject to investmentlimits for issuers of securities Issuer credit ratings are evaluatedperiodically and an approved issuer list is maintained and monitored

In addition the funds only buy and sell investments through brokerswhich have been approved by the ACD as an acceptable counterpartyand limits are set and monitored to cover the exposure to anyindividual broker Changes in broker’s financial ratings areperiodically reviewed

Some funds will invest in what are considered riskier bonds (belowinvestment grade) This brings the potential for increased risk ofdefault and could affect both the income and the capital value of thefund Further details can be found in the sub-fund financialstatements

Interest rate risk

Interest rate risk is the risk that the value of the funds’ investmentswill fluctuate as a result of changes in interest rates All the fundsinvest in floating rate securities The income of these funds may beaffected by changes in interest rates relevant to particular securities

or as a result of the ACD being unable to secure similar returns on theexpiry of contracts or sale of securities The value of fixed interestsecurities may be affected by interest rate movements or theexpectation of such movements in the future

Interest receivable on bank deposits or payable on bank overdraftpositions will be affected by fluctuations in interest rates

The interest rate risk profile for the relevant funds is shown in theirnotes to the financial statements, contained within the sub-fundaccounts

(continued)

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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 sub-fund accounts

Notes to the Aggregated Financial Statements for Threadneedle Specialist Investment Funds ICVC Notes to the financial statements

(continued)

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Threadneedle UK Mid 250 Fund

STATEMENT OF TOTAL RETURN

2012 2011 Notes £000 £000

Income

Net revenue/(expenses) after taxation qqqqqqqqqqr1,614 713

Total return before distributions 709 13,600

Finance costs: Distributions 6 qqqqqqqqqqr(1,613) (715)

shareholders from investment activities zzzzzzzzzzzzzzz(904) 12,885

TO SHAREHOLDERS

2012 2011

£000 £000 Opening net assets attributable to shareholders 85,450 59,068

of shares:

Amounts payable on the cancellation of shares (10,551) (8,951)

6,856 12,665

(see statement of total return above) (904) 12,885

Retained distribution on accumulation shares qqqqqqqqqqr1,619 784

Closing net assets attributable to shareholders zzzzzzzzzzzzzzz93,000 85,450

BALANCE SHEET

as at 30th April 2012

2012 2011 Notes £000 £000 Assets

Investment assets qqqqqqqqqqr90,761 82,029

Dividend distribution in pence per share

01/05/11 to 30/04/12 2.9827 0.2983 2.6844 – 2.6844 1.5269

Group 2

01/05/11 to 30/04/12 2.2723 0.2272 2.0451 0.6393 2.6844 1.5269

Total distributions in the period 2.6844 1.5269

Group 2: shares purchased during a distribution period

Investment Report

Investment Objective

The investment objective of the UK Mid 250 Fund is

to achieve capital growth from a portfolio of UK

‘mid cap’ equities

Investment Policy

The ACD’s investment policy is to invest the assets

of the Fund primarily in a selection of medium sized

companies which are constituents of the FTSE 250

(ex Investment Trusts) Index If the ACD considers it

desirable, it may also invest in companies which are

not included in that index, and may hold cash

and/or money market instruments

Performance of Net Accumulation

Class 1 Shares*

Over the twelve months to 30th April 2012, the

published share price of the Threadneedle UK Mid

250 Fund has risen from 130.02p to 130.22p

For comparison, using noon prices, the

performance of the Class 1 share class was +0.15%

and +0.74% for the Class 2 share class compared to

a return of –2.21% for the Morningstar UK Unit

Trusts/OEICs – (IMA) UK All Companies Peer Group

(on a bid to bid basis, with income reinvested for a

UK basic rate taxpayer)

For information purposes, using global close prices,the total return of the FTSE Mid 250 (ex InvestmentTrusts) Index was –1.43%

The fund strongly outperformed its benchmark indexthrough the majority of 2011, but then gave backsome of this relative outperformance in early 2012 as

an aggressive ‘risk rally’ took place in the markets

Throughout the reporting period, the fund’s holdingswere concentrated on companies with leadingmarket shares in their own industry niches, goodvisibility provided by large and reliable order books,and strong balance sheets Examples include Meggitt(aerospace sub-systems), AZ Electronic Materials(speciality chemicals for semiconductormanufacture) and Hunting (oil services) During the

review period, the fund both started and built upholdings in companies displaying strong inwardoperational focus, with such ‘self-help’ providing anextra source of profits growth over and above that oftheir markets Examples include Berendsen (laundryand washroom servicing in north-western Europe),Persimmon (UK housebuilder) and Melrose(diversified industrials group) Towards the end of theperiod, we took some profits on holdings such asMeggitt and Hunting Moreover, we used the early

2012 market rally to reduce or close some positionswhere we felt the company’s management hadpoorly executed their business strategy Examplesinclude Logica (software and consulting) andInvensys (software and control systems)

Looking ahead, there are considerable economicuncertainties Developed world economies arefacing high levels of debt and low growth asausterity programmes are implemented Incontrast, developing economies remain the engines

of global growth and indeed the UK stock marketprovides significant exposure to these countries.However, emerging economies are not without thechallenges of political risk, ‘growing pains’, andcontagion from the over-leveraged West In thisenvironment, the fund maintains a bias towardshigh quality stocks with strong, focused andsustainable growth strategies

*In pound Sterling and against UK peer group.

Please refer to page 114 for comparative tables.

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The accounting policies for the Fund are the same as those

disclosed in the aggregated financial statements on page 5

(1,090) (877)

zzzzzzzzzzzzzzz

the standard rate of corporation tax of 20% (326) (145)Effects of:

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 onpage 9

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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 are disclosed in Notes 7

and 8 as Amounts receivable on issue of shares or Amounts

payable on cancellation of shares

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 Mid 250 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 114 The distribution per share class is

given in the distribution table on page 9 All classes have the same

rights on winding up

11 STOCKLENDING

During the period under review the UK Mid 250 Fund has entered

into stocklending arrangements The Fund has earned £4,000 (2011:

£20,000) and paid fees of Nil (2011: £3,000) to Threadneedle

Investment Services Limited and Nil (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 £4.74m (2011: £1.83m), whilst the

value of collateral held for these arrangements was £5.05m (2011:

£1.94m) 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

12 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS

The analysis and tables provided below refer to the narrativedisclosure on derivatives and other financial instruments risks onpages 7 and 8

Currency exposures

There are no material assets denominated in currencies other thanSterling

Interest rate risk profile of financial assets and financial liabilities

The interest rate risk profile of the Fund’s financial assets andfinancial liabilities at 30th April 2012 was:

Financial Floating rate Fixed rate assets not financial financial carrying assets assets interest Total Currency 2012 £000 £000 £000 £000

Currency 2011 £000 £000 £000 £000

Financial Floating rate Fixed rate liabilities not financial financial carrying liabilities liabilities interest Total Currency 2012 £000 £000 £000 £000

Currency 2011 £000 £000 £000 £000

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

There are no material amounts of non interest-bearing financialassets, other than equities, which do not have maturity dates.Cash balances are held in floating rate accounts where interest iscalculated with reference to prevailing market rates

13 CONTINGENT LIABILITIES AND COMMITMENTS

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

14 PORTFOLIO TRANSACTION COSTS

Gross purchases total zzzzzzzzzzzzzzz42,047 41,635

Analysis of total sale costsGross sales before transaction costs 32,344 32,186

Total sales net of transaction costs zzzzzzzzzzzzzzz32,306 32,153

(continued)

Trang 14

Threadneedle UK Extended Alpha Fund

2012 2011 Notes £000 £000

Net revenue/(expenses) after taxation qqqqqqqqqqr462 233

Total return before distributions 710 1,958

Finance costs: Distributions 6 qqqqqqqqqqr(474) (263)

shareholders from investment activities zzzzzzzzzzzzzzz236 1,695

TO SHAREHOLDERS

2012 2011

of shares:

Retained distribution on accumulation shares qqqqqqqqqqr477 254

BALANCE SHEET

2012 2011 Notes £000 £000 Assets

The investment objective of the UK Extended Alpha

Fund is to achieve above average capital growth

from a concentrated portfolio of UK equities

The ACD’s investment policy is to actively manage

an exposure primarily to a concentrated portfolio of

UK equities, i.e equities of companies domiciled in

the UK, or which have significant UK operations, by

investing directly or indirectly in such securities

This approach means that the ACD has the flexibility

to take significant stock and sector positions which

may lead to increased levels of volatility If the ACD

considers it desirable it may further invest up to one

third of the assets of the Fund in markets outside

the United Kingdom The Fund’s exposure may be

gained through long and short positions

The ACD may take long and short positions through

the use of derivatives and forward transactions In

addition in order to gain long exposure, the ACD

may invest in equities, collective investment

schemes including exchange traded funds and/or

related indices If the ACD considers it desirable, it

may hold a substantial proportion or all of the Fund

in cash and/or other securities (including fixed

interest securities and money market instruments)

Performance of Net Accumulation Class 1 Shares*

Over the twelve months to 30th April 2012, thepublished share price of limited issue shares in theThreadneedle UK Extended Alpha Fund has risenfrom 246.55p to 254.66p

For comparison, using noon prices, theperformance of the Class 1 share class was +3.29%

a return of –2.21% for the Morningstar UK UnitTrusts/OEICs – (IMA) UK All Companies Peer Group(on a bid to bid basis, with income reinvested for a

For information purposes, using global close prices,the total return of the FTSE All-Share Index was–2.00%

Portfolio Activity

The 12-month period ended 30th April 2012 was adifficult one for UK equities and the FTSE All-ShareIndex delivered a negative return of –2.0% amidsthigh levels of volatility The challenging marketconditions were largely due to macroeconomicconcerns surrounding European sovereign bondmarkets in Spain, Italy and Greece This resulted inconsiderable uncertainty for the underlyingeconomies following the implementation ofausterity measures, and for the eurozone bankswhich have been beset by asset quality issues,funding difficulties and aggressive regulatory

intervention The concerns in Europe have beenexacerbated by the unconvincing economicrecovery in the US and the slowdown seen indeveloping markets such as China

Despite these difficulties, the UK Extended AlphaFund was able to deliver a positive absolute returndue to the focus in the long book on high quality,resilient companies such as GlaxoSmithKline,Pearson, Unilever and Compass Group andsuccessful short positions in lower qualitycompanies which have delivered meaningful profitdisappointments

In spite of the many macroeconomic issues yet to beresolved, we remain cautiously optimistic on theoutlook for UK equities The real value in the marketappears to be concentrated in large, resilient,economically insensitive businesses and so wecontinue to own companies such as GlaxoSmithKline,

BT, Imperial Tobacco and Centrica We also seeselective opportunities in quality companies exposed

to global growth trends such as Rolls-Royce, WPP andCompass Group We remain cautious on companiesdirectly exposed to the eurozone financial crisis, such

as banks, and businesses selling to the UKgovernment and the UK consumer

In this more difficult environment, we feel that themost reliable driver of returns is likely to be stockspecific, and we have a number of uncorrelatedpositions in both the long and short books

Trang 15

Class X Shares

Net Accumulation

Distribution Gross Tax Net Net Revenue Net Revenue

Period Revenue Credit Revenue Equalisation Accumulated Accumulated

2011/2012 2010/2011 Group 1

01/05/11 to 30/04/12 4.1149 0.4115 3.7034 – 3.7034 2.0687

Group 2

01/05/11 to 30/04/12 4.1149 0.4115 3.7034 – 3.7034 2.0687

DISTRIBUTION TABLE

(continued)

Trang 16

(176) (187)

zzzzzzzzzzzzzzz

** The ACD is entitled to receive a performance fee in the event of the

NAV per Share of the Fund outperforming the FTSE All Share Index

(with revenue reinvested, calculated at market close) by 2% (being

the “hurdle rate”) or more over the performance period The

performance fee is set at 20% of the outperformance Performance

fees are calculated on a calendar basis and may vary substantially

from year to year depending on how a fund has performed against

its benchmark As the accounting period falls during the calculation

period of the performance fee, the performance fees are accrued at

that point in time, but may not represent the actual amount that will

be paid Therefore, previously accrued amounts may be required to

be reversed The performance fee by its nature is a capital charge,

and is therefore allocated to capital when calculating the distribution.

A performance fee of £29,321 was paid during the reporting period

in respect of the calendar year ended 31st December 2011

representing 0.16% of the NAV at that date.

5 TAXATION

2012 2011

£000 £000 a) Analysis of charge in period

b) Factors affecting taxation charge for period qqqqqqqqqqrNet revenue before taxation zzzzzzzzzzzzzzz462 233Net revenue before taxation multiplied by

6 FINANCE COSTS

Performance fee charged to capital qqqqqqqqqqr12 30Net distribution for the period zzzzzzzzzzzzzzz474 263Details of the distribution per share are set out in the table onpages 12 and 13

7 DEBTORS

2012 2011

£000 £000

Amounts receivable for the issue of shares 22 431

Amounts payable for the cancellation of shares – (102)

Trang 17

UK Extended Alpha Fund currently has three share classes; Class 1,

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

given in the distribution table on pages 12 and 13 All classes have

the same rights on winding up

11 STOCKLENDING

During the period under review the UK Extended Alpha Fund has

entered into stocklending arrangements The Fund has earned

£1,000 (2011: £3,000) and paid fees of Nil (2011: £500) to

Threadneedle Investment Services Limited and Nil (2011: £500) to

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

loan at the end of the accounting period was £0.94m (2011: £0.15m),

whilst the value of collateral held for these arrangements was

£1.06m (2011: £0.15m) 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

Currency 2011 £000 £000 £000 £000

of a basket of securities, including capital appreciation ordepreciation, has been received in exchange for a series of periodiccash flows calculated by reference to financing costs, stock loanfees and interest in respect of short positions The Swap is subject

to a monthly reset process, thereby crystallising returns and riskexposure each month The use of short selling strategies increasesthe risk profile of the Fund, and may result in a higher degree ofvolatility than a fund that does not employ short exposure Anysuch positions entered into are regularly reviewed by the fundmanager

At 30th April 2012, the Fund had outstanding portfolio swaps of

(continued)

Trang 18

2012 2011

£000 £000

Analysis of total purchase costs

Purchases in period before

Analysis of total sale costs

Gross sales before transaction costs 10,554 17,019

(continued)

Trang 19

Threadneedle UK Equity Alpha Income Fund

2012 2011 Notes £000 £000

Income

Net revenue/(expenses) before taxation 9,109 7,334

Net revenue/(expenses) after taxation qqqqqqqqqqr9,109 7,320

Total return before distributions 5,729 32,048

Finance costs: Distributions 6 qqqqqqqqqqr(11,790) (9,451)

TO SHAREHOLDERS

2012 2011

of shares:

29,030 16,056

(see statement of total return above) qqqqqqqqqqr(6,061) 22,597

BALANCE SHEET

2012 2011 Notes £000 £000 Assets

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

01/05/11 to 31/10/11 1.0744 0.1074 0.9670 – 0.9670 1.0013 01/11/11 to 30/04/12 1.4233 0.1423 1.2810 – 1.2810 1.1061

Group 2

01/05/11 to 31/10/11 0.4962 0.0496 0.4466 0.5204 0.9670 1.0013 01/11/11 to 30/04/12 0.7262 0.0726 0.6536 0.6274 1.2810 1.1061

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

01/05/11 to 31/10/11 1.1236 0.1124 1.0112 – 1.0112 1.0395 01/11/11 to 30/04/12 1.4860 0.1486 1.3374 – 1.3374 1.1513

Group 2

01/05/11 to 31/10/11 0.5452 0.0545 0.4907 0.5205 1.0112 1.0395 01/11/11 to 30/04/12 0.8177 0.0818 0.7359 0.6015 1.3374 1.1513

The investment objective of the UK Equity Alpha

Income Fund is to achieve a reasonable and growing

income with the prospects of capital growth from a

concentrated portfolio of UK equities

of the Fund in a concentrated portfolio of

predominantly UK equities The Alpha Income

investment approach is a highly focused

management style, which gives the ACD 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

Performance of Net Income Class 1

Shares*

published share price of the Threadneedle UK

Equity Alpha Income Fund has fallen from 49.91p

to 48.40p

For comparison, using noon prices, the

performance of the Class 1 share class was +1.33%

a return of –0.59% for the Morningstar UK Unit

Trusts/OEICS – (IMA) UK Equity Income Peer Group

(on a bid to bid basis, with income reinvested for a

For information purposes, using global closeprices, the total return of the FTSE All-Share Indexwas –2.00%

The period under review was a challenging one for

UK equities The domestic economy struggled togenerate any growth under the weight of thegovernment’s fiscal consolidation plan, whileexternal factors including the ongoing eurozonedebt crisis, the ramifications of the ‘Arab Spring’

and the knock-on effects of the Japanese tsunamialso affected risk appetite However, despite thesedifficulties, companies continued to generatehealthy cash flows Moreover, in many cases, thesecash flows were put to use in shareholder-friendlyways such as increased dividends

The fund comfortably outperformed the market on atotal return basis, delivering a modest gain against afalling FTSE All-Share Index Sector positioning andstock selection both added value The two worst-performing sectors over the year were financials andmaterials and the fund benefited from being zero-weighted in the former and significantlyunderweight in the latter

Stock-level highlights included cash & carryoperator Booker, where a highly respectedmanagement team has succeeded in improving

shareholder returns despite a difficult retailbackdrop Elsewhere, BT also performed strongly

as the market became more confident that thecompany could generate sufficient growth toreduce its pension deficit – as evidenced by a £2bnpayment into the scheme late in the period whichshould underpin the outlook for dividends Inaddition, defensive, cash-generative companiessuch as BAT and Imperial Tobacco served the fundwell, while our avoidance of HSBC, Man Group andTesco also proved beneficial

We continued to pursue an active, stock-pickingstyle during the period Among the largestpurchases were Marks & Spencer, which we expect

to be a long-term winner in the retail sector; andBAE Systems, a lowly-valued defence companywhere the valuation more than reflects thechallenges facing the industry as a result ofreduced government spending We also added toUnilever, where recent market share gains have notyet been reflected in the share price Conversely,

we cut back the position in engineering businessGKN as part of a move to moderate the fund’scyclical exposure early in the period, and alsoreduced the holding in Aviva

Looking ahead, the market continues to face anumber of uncertainties and, as a result, volatilitymay remain a feature in the short term However, weremain confident that a carefully selected portfolio ofquality companies will deliver healthy returns

Trang 20

(2,805) (2,225)

zzzzzzzzzzzzzzz

Total tax charge for period zzzzzzzzzzzzzzz– (14)

b) Factors affecting taxation charge for period qqqqqqqqqqrNet revenue before taxation zzzzzzzzzzzzzzz9,109 7,334Net revenue before taxation multiplied by

the standard rate of corporation tax of 20% (1,822) (1,467)Effects of:

6 FINANCE COSTS

Total finance costs zzzzzzzzzzzzzzz11,791 9,452

Annual management charge to capital qqqqqqqqqqr2,681 2,131Net distribution for the period zzzzzzzzzzzzzzz11,790 9,451Details of the distribution per share are set out in the table onpage 17

7 DEBTORS

2012 2011

£000 £000

Amounts receivable for the issue of shares 2,485 6,411

Amounts payable for the cancellation of shares (2) –

Trang 21

UK Equity Alpha Income Fund currently has two share classes;

Class 1 and Class 2 shares The charges on each share class are as

11 STOCKLENDING

During the period under review the UK Equity Alpha Income Fund

has entered into stocklending arrangements The Fund has earned

£22,000 (2011: £25,000) and paid fees of £1,500 (2011: £3,000) to

Threadneedle Investment Services Limited and £1,500 (2011:

£4,000) to J.P Morgan to process these arrangements The value of

stock on loan at the end of the accounting period was £4.85m (2011:

Nil), whilst the value of collateral held for these arrangements was

£5.55m (2011: Nil) The collateral was held as either securities

the form of overseas government bonds or supranational bonds

the table below

Currency 2011 £000 £000 £000 £000

There are no material amounts of non interest-bearing financialassets, other than equities, which do not have maturity dates.Cash balances are held in floating rate accounts where interest iscalculated with reference to prevailing market rates

(continued)

Trang 22

Threadneedle UK Absolute Alpha Fund

10th Sep

2010 to 30th Apr

2012 2011 Notes £000 £000

Income

Finance costs: Derivative expense 6 qqqqqqqqqqr(241) (31)

Net revenue/(expenses) before taxation (245) (212)

Net revenue/(expenses) after taxation qqqqqqqqqqr(245) (212)

Total return before distributions 765 970

shareholders from investment activities zzzzzzzzzzzzzzz690 959

TO SHAREHOLDERS

10th Sep

2010 to 30th Apr

2012 2011

£000 £000 Opening net assets attributable to shareholders 15,472 –

of shares:

Amounts payable on the cancellation of shares (4,567) (3)

47,893 14,486

BALANCE SHEET

2012 2011 Notes £000 £000 Assets

Cash and bank balances 8 qqqqqqqqqqr29,264 6,313

Liabilities Derivative liabilities qqqqqqqqqqr(6) (5)

Class 1 Shares

There is no distribution for the accounting period 1st May 2011 to 30th April

2012, as expenses exceed revenue (2011: Nil).

01/05/11 to 30/04/12 0.2216 0.0222 0.1994 – 0.1994 0.1599

Group 2

01/05/11 to 30/04/12 0.2079 0.0208 0.1871 0.0123 0.1994 0.1599

Class 2 Hedged Shares

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

2011/2012 2010/2011 Group 1

The investment objective of the UK Absolute Alpha

Fund is to achieve an absolute return, irrespective of

market conditions, over the long term

The ACD’s investment policy is to principally invest

in: equity securities, or equity related derivatives,

of corporate issuers headquartered in the United

Kingdom (or corporate issuers who exercise a

predominate part of their activity in the United

Kingdom) fixed interest securities, cash, or money

market instruments If the ACD considers it

desirable, the ACD may invest in securities and

derivatives related to corporate issuers

headquartered outside the United Kingdom The

Fund’s exposure to any equities may be gained

through long and short positions

The ACD may take long and short positions

through the use of derivatives and forward

transactions In addition in order to gain long

exposure the ACD may invest in equities, collective

investment schemes including exchange traded

funds and/or related indices

Class 1 Shares*

published share price of the Threadneedle UK

Absolute Alpha Fund has risen from 107.29p to109.68p

For comparison, using noon prices, theperformance of the Class 1 share class was +2.23%

a return of –1.10% for the Morningstar UK UnitTrusts/OEICS – (IMA) UK Absolute Return PeerGroup (on a bid to bid basis, with incomereinvested for a UK basic rate taxpayer)

For information purposes, the UK LIBOR 3 Monthreturned +0.96%

The 12-month period ended 30th April 2012 was adifficult one for UK equities and the FTSE All-ShareIndex delivered a negative return of –2.0% amidsthigh levels of volatility The challenging marketconditions were largely due to macroeconomicconcerns surrounding European sovereign bondmarkets in Spain, Italy and Greece This resulted inconsiderable uncertainty for the underlyingeconomies following the implementation ofausterity measures, and for the eurozone bankswhich have been beset by asset quality issues,funding difficulties and aggressive regulatoryintervention The concerns in Europe have beenexacerbated by the unconvincing economicrecovery in the US and the slowdown seen indeveloping markets such as China

Despite these difficulties, the Threadneedle UKAbsolute Alpha Fund was able to deliver a positiveabsolute return due to the focus in the long book

on high quality, resilient companies such asGlaxoSmithKline, Pearson, Unilever and CompassGroup and successful short positions in lowerquality companies which have deliveredmeaningful profit disappointments

In spite of the many macroeconomic issues yet to

be resolved, we remain cautiously optimistic on theoutlook for UK equities The real value in the marketappears to be concentrated in large, resilient,economically insensitive businesses and so wecontinue to own companies such as

GlaxoSmithKline, BT and Centrica We also seeselective opportunities in quality companiesexposed to global growth trends such as Rolls-Royce, WPP and Compass Group We remaincautious on companies directly exposed to theeurozone financial crisis, such as banks, andbusinesses selling to the UK government and the

UK consumer

In this more difficult environment, we feel that themost reliable driver of returns is likely to be stockspecific, and we have a number of uncorrelatedpositions in both the long and short books

Trang 23

10th Sep

2010 to 30th Apr

2012 2011

£000 £000

(702) (317)

zzzzzzzzzzzzzzz

NAV per Share of the Fund outperforming the 3 Month LIBOR (with

revenue reinvested, calculated at market close) The performance

fee rate of 20% is multiplied by the Excess Return Performance fees

are calculated on a calendar basis and may vary substantially from

year to year depending on how a fund has performed against its

benchmark As the accounting period falls during the calculation

be paid Therefore, previously accrued amounts may be required to

be reversed The performance fee by its nature is a capital charge,

and is therefore allocated to capital when calculating the distribution.

A performance fee of £479,972 was paid during the reporting period

in respect of the calendar year ended 31st December 2011

representing 1.12% of the NAV at that date.

2010 to 30th Apr

2012 2011

b) Factors affecting taxation charge for period qqqqqqqqqqrNet revenue before taxation zzzzzzzzzzzzzzz(245) (212)Net revenue before taxation multiplied by

the standard rate of corporation tax of 20% 49 42Effects of:

6 FINANCE COSTS

Distributions

of shares and revenue deducted on the cancellation of shares and

2010 to 30th Apr

Performance fee charged to capital qqqqqqqqqqr304 223Net distribution for the period zzzzzzzzzzzzzzz75 11Details of the distribution per share are set out in the table onpage 20

Total cash and bank balances zzzzzzzzzzzzzzz29,264 6,313

£000 £000

Amounts payable for the cancellation of shares (140) –

Threadneedle UK Absolute Alpha Fund

Trang 24

in respect of short positions The Swap is subject to a monthly resetprocess, thereby crystallising returns and risk exposure each month.The use of short selling strategies increases the risk profile of theFund, and may result in a higher degree of volatility than a fund thatdoes not employ short exposure Any such positions entered into areregularly reviewed by the fund manager

The fixed rate financial assets include deposits which have a weightedaverage interest rate of 0.38% (2011: 0.42%)

Other than equities, which do not have maturity dates, the onlymaterial amounts of non interest-bearing assets relate to forwardforeign exchange contracts, futures and options and portfolioswaps At 30th April 2012, the Fund had outstanding open forwardforeign exchange contracts, futures and options and portfolioswaps with a net value of £215,000 (2011: £2,000)

Cash balances are held in floating rate accounts where interest iscalculated with reference to prevailing market rates

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

10th Sep

2010 to 30th Apr

UK Absolute Alpha 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 analysis and tables provided below refer to the narrative

disclosure on derivatives and other financial instrument risks on

pages 7 and 8

A small proportion of the net assets of the Fund are denominated in

currencies other than Sterling, with the effect that the balance sheet

and total return can be affected by currency movements

Net foreign currency assets

Monetary monetary exposures exposures Total Currency 2012 £000 £000 £000

Currency 2011 £000 £000 £000

The interest rate risk profile of the Fund’s financial assets and

financial liabilities at 30th April 2012 was:

Trang 25

Threadneedle Absolute Return Bond Fund

2012 2011 Notes £000 £000

Net revenue/(expenses) after taxation qqqqqqqqqqr634 2,195

Total return before distributions 519 (6,963)

Finance costs: Distributions 6 qqqqqqqqqqr(1,095) (2,195)

shareholders from investment activities zzzzzzzzzzzzzzz(576) (9,158)

TO SHAREHOLDERS

2012 2011

of shares:

(77,328) (68,630)

(see statement of total return above) (576) (9,158)

Retained distribution on accumulation shares qqqqqqqqqqr1,017 1,967

BALANCE SHEET

2012 2011 Notes £000 £000 Assets

Liabilities Derivative liabilities qqqqqqqqqqr(7,822) (8,797)

Interest distribution in pence per share

Class 1 Shares

2012, as expenses exceed revenue (2011: 0.0026).

Class 2 Shares

Gross Accumulation

Distribution Gross Gross Revenue Gross Revenue

The investment objective of the Absolute Return

Bond Fund is to achieve a total positive return in all

market conditions

of the Fund so as to gain exposure to global bond

and currency markets The ACD will invest primarily

in derivatives, cash and near cash, fixed interest

securities, index linked securities, money market

instruments and deposits At times the portfolio

may be concentrated in any one or a combination

of such assets The ACD may take long and short

positions through derivatives in such issues

Class 1 Shares*

published share price of the Threadneedle Absolute

Return Bond Fund has risen from 62.27p to 62.46p

Using noon prices, the performance of the Class 1

share class was +0.31% and +0.87% for the Class 2

share class compared to a return of –1.10% for the

Morningstar UK Unit Trusts/OEICS – (IMA) Absolute

Return Peer Group (on a bid to bid basis, with

income reinvested for a UK basic rate taxpayer)

For information purposes, the LIBOR 3 Month

Deposit Rate returned +0.96%

The fund started the period with short positions in

US treasuries, UK gilts and Japanese governmentbonds This reflected our views that core developedcountries’ bond markets offered poor value andthat sovereign credit quality would continue todecline As the peripheral eurozone crisis mounted,and Greece edged closer to a debt restructuring,

we entered a curve flattening position in Germanbunds via bond futures in July Downwardrevisions to our global growth forecasts in Augustmade ‘safe haven’ bonds more attractive despiteyields being low; accordingly, we increasedduration exposure We entered a short position inItalian BTPs to take advantage of increased marketscrutiny concerning the solvency of Italy The fundended the period with short positions in long-datedgilts, treasuries and bunds as valuations wereunattractive, pricing in severe recessions

From May, we held long positions in a selection ofAsian currencies against the US dollar, includingthe Chinese renminbi, as strong economic growthand persistent inflation in emerging marketsincreased the possibility of interest rate hikes

Following downgrades to global GDP forecasts, wecut our exposure to emerging market currencies asthese tend to be more sensitive to growth Towardsthe end of the period, we rebuilt the exposure toselect emerging currencies as growth fears overChina subsided We held a short Swiss franc

position as we felt the currency had becomeovervalued Due to the damage that the franc’sappreciation had done to Swiss companies, theSwiss National Bank announced it would support afloor against the euro, which led to an immediatedepreciation thereby benefiting the fund We endedthe period with a strong preference for the USdollar, especially versus the euro, as the inability ofthe authorities to produce a credible solution toperipheral countries’ solvency issues led tospeculation over the future of the single currency.Throughout the period, we held a strong convictionthat sovereign credit quality would deteriorate inthe eurozone Accordingly, we held long creditdefault swap (CDS) protection on select Europeaneconomies such as Belgium, Spain, France andItaly, which benefited from the market pricing inincreased probabilities of default by thesecountries We also held CDS protection on theITraxx Senior Financials Index

We maintained the credit quality of the core bondportfolio at a high level throughout the year.Following the provision of unlimited three-yearliquidity to the banking system by the ECB, weincreased the percentage of high quality financials

in the core portfolio as the chances of default weregreatly reduced

Trang 26

Class X Shares

Trang 27

5 TAXATION

2012 2011

Total tax charge for the period zzzzzzzzzzzzzzz– –

b) Factors affecting taxation charge for periodqqqqqqqqqqr

Net revenue before taxation zzzzzzzzzzzzzzz634 2,195Net revenue before taxation multiplied by

Distributions treated as tax deductible qqqqqqqqqqr127 439Current tax charge for period (note 5a) zzzzzzzzzzzzzzz– –The Fund has not recognised a deferred tax asset of £464 (2011:

£140) arising as a result of having unutilised management expenses.These expenses will only be utilised if the treatment of interestdistributions made by the Fund or the nature of capital gainschanges

Interest distributions have been made in respect of all distributionsduring the period Income Tax at 20% will be accounted for onshareholders’ behalf to the HM Revenue & Customs

Shortfall transfer from capital to revenue qqqqqqqqqqr461 –Net distribution for the period zzzzzzzzzzzzzzz1,095 2,195Details of the distribution per share and any share class with ashortfall are set out in the table on pages 23 and 24

7 DEBTORS

2012 2011

£000 £000

(5,100) (5,906)

zzzzzzzzzzzzzzz

Trang 28

9 CREDITORS

2012 2011

£000 £000

Amounts payable for the cancellation of shares (1,465) (9,671)

and 9

Absolute Return Bond Fund currently has three share classes; Class

1, Class 2 and Class X shares The charges on each share class are

12 STOCKLENDING

During the period under review the Absolute Return Bond Fund has

entered into stocklending arrangements The Fund has earned

£17,000 (2011: £5,000) and paid fees of £2,000 (2011: £500) to

Threadneedle Investment Services Limited and £2,000 (2011: £500)

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

loan at the end of the accounting period was £7.95m (2011: £2.52m),

whilst the value of collateral held for these arrangements was

£8.37m (2011: £2.66m) The collateral was held as either securities

the form of overseas government bonds or supranational bonds

the table below

A substantial proportion of the net assets of the Fund aredenominated in currencies other than Sterling, with the effect thatthe balance sheet and total return can be significantly affected bycurrency movements

Trang 29

(continued)

Fixed rate Fixed rate financial assets Non-interest financial assets Weighted average bearing assets Weighted average period for which Weighted average interest rate rate is fixed period Currency 2012 2011 2012 2011 2012 2011

% % years years years years

The only material amounts of non interest-bearing assets relate tocredit default swaps, forward foreign exchange contracts andfutures and options Derivatives including credit default swaps,forward foreign exchange contracts and futures and options areused in this portfolio to take active positions in FX markets, interestrates and credit markets Derivatives are employed when they arethe cheapest and most efficient method of gaining exposure Thisincreases the risk profile of the Fund and may result in a higherdegree of volatility All open positions are regularly reviewed by thefund manager The Fund has entered into various credit defaultswaps, forward foreign exchange contracts, futures and optionscontracts during this accounting period Such contracts commit theFund to future deliveries or receipts, typically three monthsforward, of assets and liabilities, at prices decided at the point ofstriking the contract They therefore allow the fund manager to limitrisk, or to enhance Fund performance in return for the acceptance

of greater risk At 30th April 2012, the Fund had outstanding creditdefault swaps, open forward foreign exchange contracts, futuresand options with a net value of £8,626,000 (2011: (£2,870,000))

The Fund’s floating rate investments earn interest which is variable,based on LIBOR or its overseas equivalent

Sensitivity analysis

Due to the use of derivatives, the percentage movement in thevalue of the fund will be different from the percentage movement inthe markets The impact upon the fund of the different marketmovement is illustrated below

Change in Change in Change in Market Value Value Value Fund Fund

2012 2012 2011 Interest Rates

Trang 30

(continued)

There are no contingent liabilities and commitments outstanding

(2011: Nil)

The purchases and sales are not subject to portfolio transaction

costs

The total cost of purchases during the period was £511,725,491 and

proceeds received from sales were £627,611,948

Trang 31

Threadneedle Target Return Fund

BALANCE SHEET

2012 2011 Notes £000 £000 Assets

Liabilities Derivative liabilities qqqqqqqqqqr(4,245) (4,830)

Interest distribution in pence per share

Class 1 Shares

Class 2 Shares

Gross Income

Distribution Gross Distribution Distribution

The investment objective of the Target Return Fund

is to target a total positive return in all market

conditions

of the Fund to gain exposure to global bond and

currency markets The ACD will invest in

derivatives, cash and near cash, fixed interest

securities, index linked securities, money market

instruments and deposits At times the portfolio

may be concentrated in any one or a combination

of such assets The ACD may take long and short

positions through derivatives in such issues Where

securities are non-euro denominated they may be

hedged into Euros on a Portfolio Currency level

Class 1 Shares

published share price of the Threadneedle Target

Return Fund has risen from 1.1661 to 1.1762 Euros

The performance of the Class 1 gross accumulation

share class was +0.84% and +1.52% for the Class 2

gross accumulation share class, in EUR terms

For information purposes, the Euribor 3 Month

Deposit Rate returned +1.34%

The fund started the period with short positions in

US treasuries, UK gilts and Japanese governmentbonds This reflected our views that core developedcountries’ bond markets offered poor value andthat sovereign credit quality would continue todecline As the peripheral eurozone crisis mounted,and Greece edged closer to a debt restructuring,

we entered a curve flattening position in Germanbunds via bond futures in July Downwardrevisions to our global growth forecasts in Augustmade ‘safe haven’ bonds more attractive despiteyields being low; accordingly, we increasedduration exposure We entered a short position inItalian BTPs to take advantage of increased marketscrutiny concerning the solvency of Italy The fundended the period with short positions in long-datedgilts, treasuries and bunds as valuations wereunattractive, pricing in severe recessions

From May, we held long positions in a selection ofAsian currencies against the US dollar, includingthe Chinese renminbi, as strong economic growthand persistent inflation in emerging marketsincreased the possibility of interest rate hikes

Following downgrades to global GDP forecasts, wecut our exposure to emerging market currencies asthese tend to be more sensitive to growth Towardsthe end of the period, we rebuilt the exposure toselect emerging currencies as growth fears overChina subsided We held a short Swiss franc

position as we felt the currency had becomeovervalued Due to the damage that the franc’sappreciation had done to Swiss companies, theSwiss National Bank announced it would support afloor against the euro, which led to an immediatedepreciation thereby benefiting the fund We endedthe period with a strong preference for the USdollar, especially versus the euro, as the inability ofthe authorities to produce a credible solution toperipheral countries’ solvency issues led tospeculation over the future of the single currency.Throughout the period, we held a strong convictionthat sovereign credit quality would deteriorate inthe eurozone Accordingly, we held long creditdefault swap (CDS) protection on select Europeaneconomies such as Belgium, Spain, France andItaly, which benefited from the market pricing inincreased probabilities of default by thesecountries We also held CDS protection on theiTraxx Senior Financials Index

We maintained the credit quality of the core bondportfolio at a high level throughout the year.Following the provision of unlimited three-yearliquidity to the banking system by the ECB, weincreased the percentage of high quality financials

in the core portfolio as the chances of default weregreatly reduced

2012 2011 Notes £000 £000

Net revenue/(expenses) after taxation qqqqqqqqqqr511 2,621

Total return before distributions (20,222) (25,250)

Finance costs: Distributions 6 qqqqqqqqqqr(819) (2,621)

shareholders from investment activities zzzzzzzzzzzzzzz(21,041) (27,871)

TO SHAREHOLDERS

2012 2011

£000 £000 Opening net assets attributable to shareholders 299,307 1,045,647

of shares:

(25,735) (721,552)

(see statement of total return above) (21,041) (27,871)

Retained distribution on accumulation shares qqqqqqqqqqr817 2,618

Trang 32

Class X Shares

2011/2012 2010/2011

Class 1 USD Hedged Shares

Class 1 CHF Hedged Shares

Trang 33

(2,270) (4,646)

zzzzzzzzzzzzzzz

b) Factors affecting taxation charge for period qqqqqqqqqqrNet revenue before taxation zzzzzzzzzzzzzzz511 2,621Net revenue before taxation multiplied by

Distributions treated as tax deductible qqqqqqqqqqr102 524Current tax charge for period (note 5a) zzzzzzzzzzzzzzz– –The Fund has not recognised a deferred tax asset of £278 (2011: £203)arising as a result of having unutilised management expenses.These expenses will only be utilised if the treatment of interestdistributions made by the Fund or the nature of capital gainschanges

Interest distributions have been made in respect of all distributionsduring the period Income Tax at 20% will be accounted for onshareholders’ behalf to the HM Revenue & Customs

Shortfall transfer from capital to revenue qqqqqqqqqqr308 –Net distribution for the period zzzzzzzzzzzzzzz819 2,621Details of the distribution per share and any share class with ashortfall are set out in the table on pages 29 and 30

7 DEBTORS

2012 2011

£000 £000

Amounts receivable for the issue of shares 2,373 536

Trang 34

9 CREDITORS

2012 2011

£000 £000

Amounts payable for the cancellation of shares (8,359) (5,376)

Total creditors zzzzzzzzzzzzzzz(10,822) (11,927)

and 9

Target Return Fund currently has three share classes; Class 1,

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

£4.35m (2011: Nil) The collateral was held as either securitiestransferred in CREST by a DBV (Delivery by Value) or Gilt DBV, or inthe form of overseas government bonds or supranational bonds.The nature and value of collateral held is analysed by asset class inthe table below

Trang 35

% % years years years years

The only material amounts of non interest-bearing assets relate tocredit default swaps, forward foreign exchange contracts andfutures and options Derivatives including credit default swaps,forward foreign exchange contracts and futures and options areused in this portfolio to take active positions in FX markets, interestrates and credit markets Derivatives are employed when they arethe cheapest and most efficient method of gaining exposure Thisincreases the risk profile of the Fund and may result in a higherdegree of volatility All open positions are regularly reviewed by thefund manager The Fund has entered into various credit defaultswaps, forward foreign exchange contracts, futures and optionscontracts during this accounting period Such contracts commit theFund to future deliveries or receipts, typically three monthsforward, of assets and liabilities, at prices decided at the point ofstriking the contract They therefore allow the fund manager to limitrisk, or to enhance Fund performance in return for the acceptance

of greater risk At 30th April 2012, the Fund had outstanding creditdefault swaps, open forward foreign exchange contracts, futuresand options with a net value of £3,657,000 (2011: (£1,341,000)).The Fund’s floating rate investments earn interest which is variable,based on LIBOR or its overseas equivalent

Trang 36

The purchases and sales are not subject to portfolio transactioncosts

The total cost of purchases during the period was £349,307,306 andproceeds received from sales were £382,179,799

(continued)

Trang 37

Threadneedle Pan European Accelerando Fund

2012 2011 Notes £000 £000

Income

Net revenue/(expenses) before taxation 215 (1,427)

Net revenue/(expenses) after taxation qqqqqqqqqqr68 (1,485)

Total return before distributions (7,021) 14,418

TO SHAREHOLDERS

2012 2011

of shares:

(8,726) (7,930)

(see statement of total return above) (7,419) 14,162

BALANCE SHEET

2012 2011 Notes £000 £000 Assets

01/05/11 to 30/04/12 1.6689 0.1669 1.5020 – 1.5020 0.9180

Group 2

01/05/11 to 30/04/12 0.8649 0.0865 0.7784 0.7236 1.5020 0.9180

The investment objective of the Pan European

Accelerando Fund is to achieve above average capital

growth

The ACD’s investment policy is to actively manage a

concentrated portfolio of primarily European equities

including UK Equities with the ability to hold cash

and/or money market securities in order to enable

the pursuit of the Fund’s investment objective This

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

primarily consist of equities of companies domiciled

in Europe including the UK or which have a

significant part of their economic activities in Europe

and/or the UK Where securities are non-euro

denominated they may be hedged into Euros If the

ACD considers it desirable it may hold a substantial

proportion or all of the Funds in cash and/or money

market instruments

Class 1 Shares*

published share price of the Threadneedle Pan

European Accelerando Fund has fallen from 157.48p

to 141.20p in sterling terms and from 1.7707 to 1.7370

For information purposes, using global close prices,the total return of the MSCI Europe Index was–13.48%

European equity markets suffered a sharp decline atthe end of the summer of 2011, amid growingconcerns over the health of the euro, the sovereigndebt crisis in Greece, and contagion affecting Italy andSpain Inaction and disagreement amongst eurozonepoliticians exacerbated the problems A recovery inearly 2012 was prompted by the introduction of theLong-Term Refinancing Operation by the ECB, whichprovided over €1trillion of loans in two tranches

However, this recovery proved short-lived and wasbrought to an end by concerns over the Spanisheconomy, and reaction against austerity, whichprompted government changes in France and Greece

Coupled with this, slowing growth in China hastempered optimism for exporters

Given the ramifications of these developments forboth domestic and financial sectors, we successfullyensured that the fund’s exposure to these areas was

limited The fund was underweight in financialsthroughout the year and held no banks, utilities ortelecommunications stocks at the end of the period.Similarly, the fund’s exposure to peripheral eurozonemarkets has been well below that of the index Thisstrategy ensured that the fund’s performance, whilstnegative in absolute terms, was well ahead of thebenchmark index

During the first part of the review period we boughtVodafone, the UK-based telecommunicationsbusiness, which has benefited from restructuring andfrom its position outside the eurozone The sharesheld up well in the latter part of the period and wetook the opportunity to sell this position In addition,

we bought the Swedish manufacturing business AtlasCopco as we wanted to maintain the position inindustrials with emerging market exposure.Conversely, we sold Rio Tinto to reduce the exposure

to the materials sector at a time when expectations forglobal growth were being reduced, which was likely

to hinder the progression of commodity prices andthe prospects for mining companies In the secondpart of the year, we bought the high-quality Danishpharmaceutical business Novo Nordisk, and EADS,the Airbus manufacturer which is a strong beneficiary

of a weak euro We also bought Persimmon, the UKhousebuilder In contrast, we sold Nestlé, which hadperformed well over a number of years

Trang 38

(1,025) (2,536)

zzzzzzzzzzzzzzz

NAV per Share of the Fund outperforming the MSCI Europe Index Inc

UK (with revenue reinvested, calculated at market close) by 1.5%

(being the “hurdle rate”) or more over the performance period The

performance fee is set at 20% of the outperformance Performance

fees are calculated on a calendar basis and may vary substantially

from year to year depending on how a fund has performed against its

benchmark As the accounting period falls during the calculation

be paid Therefore, previously accrued amounts may be required to be

reversed The performance fee by its nature is a capital charge, and is

therefore allocated to capital when calculating the distribution.

5 TAXATION

2012 2011

the standard rate of corporation tax of 20% (43) 285Effects of:

£466,905) arising as a result of having unutilised managementexpenses It is unlikely that these expenses will be utilised in futureyears

6 FINANCE COSTS

Performance fee charged to capital qqqqqqqqqqr330 1,741Net distribution for the period zzzzzzzzzzzzzzz398 256Details of the distribution per share are set out in the table onpage 35

7 DEBTORS

2012 2011

£000 £000

Amounts payable for the cancellation of shares (18) (10,000)

Total creditors zzzzzzzzzzzzzzz(10,382) (15,420)

Trang 39

and 8

Pan European Accelerando Fund currently has two share classes;

Class 1 and Class 2 shares The charges on each share class are as

11 STOCKLENDING

During the period under review the Pan European Accelerando

Fund has entered into stocklending arrangements The Fund has

earned £35,000 (2011: £97,000) and paid fees of £5,000 (2011:

£13,000) to Threadneedle Investment Services Limited and £5,000

(2011: £13,000) to J.P Morgan to process these arrangements The

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

£3.91m (2011: £6.97m), whilst the value of collateral held for these

arrangements was £4.09m (2011: £8.28m) 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

Trang 40

There is no material difference between the value of the financial

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

value

There are no material amounts of non interest-bearing financial

assets, other than equities, which do not have maturity dates

As at 30th April 2012, the Fund had no outstanding open forward

foreign exchange contracts (2011: Nil)

Cash balances are held in floating rate accounts where interest is

calculated with reference to prevailing market rates

There are no contingent liabilities and commitments outstanding

(2011: Nil)

2012 2011

£000 £000

Analysis of total purchase costs

Purchases in period before

Analysis of total sale costs

Gross sales before transaction costs 117,785 115,685

(continued)

Tiêu đề	Threadneedle Specialist Investment Funds ICVC Annual Report and Accounts April 2012
Trường học	University of London
Chuyên ngành	Financial Management
Thể loại	annual report
Năm xuất bản	2012
Thành phố	London

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Số trang	136
Dung lượng	1,27 MB