Threadneedle European Select Fund

David Dudding – Fund Manager September 2012

1. Introduction

2. Investment process

3. Threadneedle European Select Fund

4. Stock examples

AP. Appendix

Agenda

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Introduction

1

Threadneedle European Select FundStrong long – term track record

Source: FactSet as 31 July 2012. Fund returns gross of tax and TER for comparison with indices. All data is quoted in €. Gross performance from 31 March 2010 onwards is based on daily cash flows and valuations, from 1 January 2008 to 31 March 2010 based on Global Close prices, and prior to January 2008 based on 12pm prices. Fund data is quoted on a bid to bid basis with income re-invested at bid. Index data provided by Thomson Financial DataStream. The relative returns shown are calculated on a geometric basis.

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Annualised (%)2012 YTD

2011 2010 2009 2008 2007 1 year 3 years 5 years 10 years

Threadneedle European Select Fund

18.5 -0.1 26.5 32.0 -40.7 4.2 14.3 19.4 2.3 8.6

FTSE World Europe ex UK 9.9 -12.5 9.7 30.7 -42.3 6.2 -2.9 6.1 -4.8 4.9

Relative return +7.8 +14.2 +15.3 +1.0 +2.6 -1.8 +17.6 +12.5 +7.4 +3.5

A leader in European equity

€31.5 billion AuM across all portfolios1

Excellent long-term performance

Deep resource

24-strong European equity team2

Close interaction across asset classes

Dedicated risk management

Clear investment philosophy, consistently applied

Stock selection key source of return

Culture of collaboration and debate

Threadneedle’s European equity credentials

Source: Threadneedle as at 31 July 2012.1 AuM includes externally managed portfolios, and includes UK-specific assets of €18.3 billion.2 Includes 14 UK-specific investment professionals as at 8 December 2011.

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6

Equity investment team

Source: Threadneedle Investment s as at 22 June 2012.1 Investment Specialist.

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Leigh HarrisonHead of Equities

William DaviesDeputy Head of Equities

Mark Heslop

Governance and SRI

Iain Richards

Cathrine de Coninck-Smith

Fionnuala O’Grady

Dealers

Danny Burton Chris Fox

Nicholas Hawkes Benjamin Malone

William Davies

Stephen Thornber

Jonathan Crown

Pauline Nepgen

Esther Perkins

Ashish Kochar

Neil Robson

UK

Simon Brazier

Chris Kinder

Blake Hutchins

Aamod Mishra

Mark Westwood

Jonathan Barber

Richard Colwell

Stacey Cassidy

Europe

Philip Dicken

Dan Ison

Paul Doyle

David Dudding

Ann Steele

Fred Jeanmaire

Nick Davis

Asia ex. Japan and Emerging Markets

Vanessa Donegan

Rafael Polatinsky

George Gosden

Gigi Chan

Lisa Lim

Ilan Furman

Natasha Ebtehadj

Georgina Hellyer

Daniel Isidori

Irina Miklavchich

Robert Banham

Japan

Sarah Williams

Koji Oki

US

Cormac Weldon

Stephen Moore

Paul Gannon

William Warren

Brad Colton

Nafis Chowdhury

Diane Sobin

Olivia Miller

Global Equities

Douglas Cairns1

James Foreman

Stephane Jeannin1

Oliver Hill Gary Young

James Thorne

Dan Vaughan

Simon Haines

Neil Finlay1

Francis Ellison1

Ben Needham

Investment process

2

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European Select investment process

8

Idea generation

Macro and themes

European equity team and other investment professionals

Company meetings

Implementation

Portfolio construction

Risk management

Research / debate

Stock analysis

Investable universe – 1,500 companies 45-60 holdings

Investment process – stock analysisPorter’s Five Forces

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Buyer power

Degree of rivalry

Barriers to entry

Threat of substitution

Supplier power

How stocks get into the portfolio

10

1 Source: HSBC Smaller European Companies Index as at 30 June 2012.

Research and debate ImplementationIdea generation

Company meetings European team met Brenntag

Threadneedle equity teams Preference for industry

consolidation

Macro and themes Productivity enhancements;

development of E.M supply chains; environmental regulation

Deeper company analysis focuses on building conviction based on:

Barriers to entry; giving Brenntag pricing power and high margins

Positioning in fast-growing Emerging Markets

The structural trend to outsource low volume chemical distribution

Stock review meeting

Bought Sept 2010 Currently 1.9% of portfolio Index weight of 0.0%1

Held across a range of European equity portfolios

Building conviction

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Brenntag

11

1 Source: Datastream, as at 31 July 2012. Performance in EUR and rebased to 100. Initial purchase – September 2010.2 Source: Bloomberg, as at 2 August 2012.

Year to Dec2 2011 2012e 2013e

P/E 17.4x 13.7x 12.3x

EV/EBITDA 9.3x 8.3x 7.7x

RoE 17% 18% 18%

80

90

100

110

120

130

140

150

160

170

180

Jul 10 Nov 10 Mar 11 Jul 11 Nov 11 Mar 12 Jul 12

Reb

ased

= 1

00

Brenntag Brenntag relative to FTSE W Europe Index

Only 7% market share

Market leader

Degree of rivalry

Scale / network Breadth of offer Virtuous cycle

Barriers to entry

In-house

Threat of substitution

Several thousand suppliers Provide crucial service / access

to market

Supplier power

10,000 products to 160,000 customers Critical to customer process Low volumes

Buyer power

Porter’s Five Forces

+ Growth.

19% of sales from emerging markets, Growth through accretive acquisitions

Exposed to resilient end-markets: food, cosmetics, water treatment

Focus on outsourcing

Absolute performance and relative strength2-year performance¹

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Threadneedle European Select Fund

3

Threadneedle European Select FundTop 10 holdings

Source: Threadneedle as at 31 July 2012.1 FTSE W Europe ex UK.

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Company Description Fund (%) Index (%)1

Nestlé Food Producers 6.6 4.8

Anheuser-Busch InBev World No.1 Brewer 6.2 1.4

Schneider Electric Electronic & Electrical Equipment 5.7 0.7

Brenntag Chemicals 5.1 0.1

Fresenius Medical Care Health Care Equipment & Services 4.9 0.4

Air Liquide Industrial Gasses 4.8 0.8

Sampo Nonlife Insurance 4.7 0.3

Svenska Handelsbanken Banks 4.2 0.5

Unilever Food Producers 4.0 1.2

BASF Chemicals 3.9 1.5

Threadneedle European Select Fund Sector positioning

Source: Threadneedle as at 31 July 2012. Excludes Cash at 0.2%.

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18.6% 18.1%

3.6% 3.1%0.7%

5.2%3.6%

7.1%4.8%

13.4%11.4%

25.7%

0.0%

5.1%

19.6%

8.4%

4.7%

14.6%13.0%

19.0%

0%

5%

10%

15%

20%

25%

30%

ConsumerGoods

Industrials BasicMaterials

Health Care Financials ConsumerServices

Technology Oil & Gas Telecoms Utilities

Threadneedle European Select Fund FTSE World Europe ex UK Index

Portfolio breakdown by FTSE sector

Threadneedle European Select Fund Geographic positioning

Source: Threadneedle as at 31 July 2012. Excludes Cash at 0.2%.Other includes: Austria, Czech Republic, Greece, Hungary and Portugal.

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19.6

%

17.1

%

4.7%

3.8%

2.9%

0.0%

0.0%

0.0%

0.0%

2.5%

5.7%

3.0%

2.4%

0.4%

5.8%

1.4%

1.0% 1.9%

11.6

%

6.4%

23.8

%

1.4%2.

1%

6.2%

18.7

%

19.9

%

5.2%

22.8

%

7.6%

1.6%

0%

5%

10%

15%

20%

25%

Ger

man

y

Fra

nce

Sw

itzer

land

Sw

eden

Fin

land

Bel

gium

Net

herla

nds

Den

mar

k

Nor

way

Ital

y

Irel

and

Spa

in

Tur

key

Pol

and

Oth

er

Threadneedle European Select Fund FTSE World Europe ex UK Index

Portfolio breakdown by country

Stock examples

4

Air Liquide

1 Source: Datastream, as at 31 July 2012, in local currency.2 Source: Bloomberg.14 August 2012

17

Stock performance versus index2-year performance1

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Global leader in industrial gases

Top 4 control 70%+ of global market

Play on industrialisation of emerging markets and clean energy technology (e.g. carbon capture and storage)

30-year record of uninterrupted EPS growth

Dividend yield 2.6%90

95

100

105

110

115

120

125

Jul 10 Nov 10 Mar 11 Jul 11 Nov 11 Mar 12 Jul 12

Reb

ased

= 1

00

Air Liquide Air Liquide relative to FTSE W Europe Index

2012e2 2013e2

EV/EBITDA 9.4x 8.6x

P/E 18.2x 16.4x

ROE 16% 16%

Nestlé

1 Source: Datastream, as at 31 July 2012, in local currency.2 Source: Bloomberg.14 Aug 2012

18

Share price performance relative to index2-year performance1

2012e2 20132

P/E 18.0x 16.6x

EV/EBITDA 12.2x 11.2x

ROE 18% 19%

Well balanced growth – geographically, by category, across price points

No.1 or No.2 in most categories

Equity yields more than bonds

Growth drivers – emerging markets, nutrition, out of home eating, innovation

AA credit rating80

85

90

95

100

105

110

115

120

125

130

Jul 10 Nov 10 Mar 11 Jul 11 Nov 11 Mar 12 Jul 12

Re

ba

se

d =

10

0

Nestlé Nestlé relative to the FTSE W Europe Index

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Anheuser-Busch InBev

1 Source: Datastream, as at 31 July 2012, in local currency.2 Source: Bloomberg.14 August 2012

19

Stock performance versus index2-year performance1

Year to Dec2 2012e 2013e

P/E 17.6x 16.1x

EV/EBITDA 10.8x 9.5x

ROE 18% 18%

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70

80

90

100

110

120

130

140

150

160

170

Jul 10 Nov 10 Mar 11 Jul 11 Nov 11 Mar 12 Jul 12

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d =

10

0

Anheuser-Busch InBev

Anheuser-Busch InBev relative to FTSE W Europe Index

World’s largest brewer

50% market share in the US

70% market share in Brazil

Concentrating industry

Pushing up prices in US

Volume growth in emerging markets

Iconic brands – Budweiser, Becks, Stella Artois

More acquisitions / cost cutting to come

Management own significant stake

Fresenius Medical Care

Stock performance versus index2-year performance1

20

Dialysis growth driven by ageing populations and dietary change

No.1 player in clinics – lowest cost operator offers governments savings

No.1 dialysis products producer

Significant barriers to entry

2012e2 2013e2

P/E 18.8x 17.2x

EV/EBITDA 10.4x 9.5x

ROE 14% 13%

80

90

100

110

120

130

140

150

Jul 10 Nov 10 Mar 11 Jul 11 Nov 11 Mar 12 Jul 12

Re

ba

se

d =

10

0

Fresenius Medical Care

Fresenius Medical Care relative to FTSE W Europe Index

1 Source: Datastream, as at 31 July 2012, in local currency.2 Source: Bloomberg.14 August 2012

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Appendix

AP

22

GDP will follow PMI down

Deleveraging and austerity mean banks must improve balance sheets

Years of muddling through

Eurozone macro – short term pain

1 Source: Barclays Research, Datastream, Bloomberg, 31 July 2012.2 Source: Deutsche Bank, May 2012.

GDP vs. PMI1

30

40

50

60

70

2007 2008 2009 2010 2011 2012

-8%-6%-4%-2%0%2%4%6%8%

Eurozone manufacturing PMI Germany GDP y/y% (rhs)France GDP y/y% (rhs) Italy GDP y/y% (rhs)Spain GDP y/y% (rhs) Eurozone GDP y/y% (rhs)

Bank balance sheets2

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23

Austerity alone is counterproductive

Patience with Greece at an end

Greece likely to leave the Euro

Central banks’ response key

Greece

1 Source: IMF and BofA Merrill Lynch Global Research, 17 May 2012.2 Source: US Census Bureau: ISI Group.

Greece government debt / GDI1

Greece: Number of persons 65+2

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24PT/12/01632

Germany – “The EU’s biggest and weakest economy” The Economist, March 2003

Reforms started in 2003

Reforms included cuts to pension, health care and unemployment benefits and also tax cuts

“The powerhouse of the Eurozone” FT, March 2012

The reforms were successful, but were painful and took years

“Agenda 2010” – Germany’s reforms created an industrial powerhouse

1 Source: Barclays as at 30 April 2012.

Gerhard Schröder

German Unemployment1

2468

10121416182022

1980 1984 1988 1992 1996 2000 2004 2008 2012

Germany (Pan): unemployment rate %Germany (West): unemployment rate %Germany (East): unemployment rate %

Labour reforms start to work

Reunification

Angela Merkel

25

Sentiment has become extremely bearish

European equities even more out of favour

The case for equities

1 Source: ASR Ltd / Thomson Datastream.2 Source: Nomura.

-2.00

-1.50

-1.00

-0.50

0.00

0.50

1.00

1.50

2.00

2007 2008 2009 2010 2011 2012

600

800

1,000

1,200

1,400

1,600

1,800

S&P 500 Sentiment Excessive Optimism

Excessive Pessimism Index

European equities oversold relative to US equities2

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Bearish sentiment1

26

Volatility to continue

Stick to defensive, growth stocks

Remain alive to political environment

Many alpha opportunities are emerging

A stockpicker’s paradise

“Business as usual” for European Select

What next?

1 Source: Mirabaud Securities LLP, 26 June 2012.2 Source: BofA Merrill Lynch Global Research, 17 May 2012. Domestic and Exporter baskets based on sales exposures in and outside the domicile of company.

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Exporters vs. Domestics2

Equities are cheap1

6

10

14

18

22

26

30

Jan

80M

ay 8

1

Sep

82

Jan

84M

ay 8

5S

ep 8

6Ja

n 88

May

89

Sep

90

Jan

92M

ay 9

3S

ep 9

4Ja

n 96

May

97

Sep

98

Jan

00M

ay 0

1S

ep 0

2Ja

n 04

May

05

Sep

06

Jan

08M

ay 0

9S

ep 1

0Ja

n 12

Tre

nd

P/E

(x)

Trend PE Ex-Bubble Ave +1sd -1sd

Biography

27

DAVID DUDDINGFund Manager

David Dudding joined Threadneedle in 1999 as an Analyst. He manages the Threadneedle European Select Fund and the Threadneedle European Smaller Companies Fund.

David previously worked for John Swire and Sons in Hong Kong and for Investors Chronicle as a Financial Journalist.

He holds a Modern History degree and a European Politics Masters degree from Oxford University.

He is a CFA Charterholder.

Threadneedle start date: 1999Industry start date: 1999

Key Risks of the Threadneedle European Select Fund

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Market Risk – The value of investments can fall as well as rise and investors might not get back the sum originally invested, especially if investments are not held for the long term

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

Effect of portfolio concentration – The fund has a concentrated portfolio (holds a limited number of investments and/or takes large positions in a relatively small number of stocks) and if one or more of these investments declines or is otherwise affected, it may have a pronounced effect on the fund’s value

Volatility Risk – The fund may exhibit significant price volatility

For internal use by institutional clients, distributors, intermediaries and consultants only (not to be passed on to any third party)

Past performance is not a guide to future performance.

The value of investments and any income from them can go down as well as up.

Threadneedle Investment Funds ICVC (“TIF”) is an open-ended investment company structured as an umbrella company, incorporated in England and Wales, authorised and regulated in the UK by the Financial Services Authority (FSA) as a UCITS scheme.

TIF is registered for public offer in Austria, Belgium, France, Germany, Hong Kong, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Switzerland (some sub-funds only) and the UK. Shares in the Funds may not be offered to the public in any other country and this document must not be issued, circulated or distributed other than in circumstances which do not constitute an offer to the public and are in accordance with applicable local legislation.

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

TIF is authorised in Spain by the Comisión Nacional del Mercado de Valores (CNMV) and registered with the relevant CNMV's Registered with number 482.

Het compartiment is op grond van artikel 1:107 van de Wet op het financieel toezicht opgenomen in het register dat wordt gehouden door de Autoriteit Financiële Markten. / Pursuant to article 1:107 of the Act of Financial Supervision, the subfund is included in the register that is kept by the AFM.

Income may fluctuate in accordance with market conditions and taxation arrangements. The difference at any one time between the sale and repurchase price of units in the scheme means that the investment should be viewed as a medium to long term investment. Investments may be subject to sudden and large falls in value, and the investor could lose the total value of the initial investment.

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

Subscriptions to a Fund may only be made on the basis of the current Prospectus and the Key Investor Information Document, as well as the latest annual or interim reports and the applicable terms & conditions. Please refer to the ‘Risk Factors’ section of the Prospectus for all risks applicable to investing in any fund and specifically this Fund. The above documents are available in English, French, German, Portuguese, Italian, Spanish and Dutch (no Dutch Prospectus) and can be obtained free of charge on request from the following:

Austria: Raiffeisen Zentralbank Österreich AG, Am Stadtpark 9, 1030 Wien (TIF and TSIF), and Erste Bank, Graben 21 A-1010 Wien (TFIF); Belgium: J.P. Morgan Chase Bank Brussels, 1, Boulevard du Roi Albert II, 1210 Brussels; France: BNP Paribas Securities Services, 66 rue de la Victoire, 75009 Paris; Germany: JP Morgan AG, Junghofstr. 14, 60311 Frankfurt, Ireland: J.P. Morgan Bank Administration Services (Ireland) Limited, J.P. Morgan House International Financial Services Centre, Dublin 1 Italy: State Street Bank S.p.A., via Col Moschin 16, 20136 Milano; Luxembourg: State Street Bank Luxembourg S.A., 49 Avenue J. F. Kennedy, 1855 Luxembourg; The Netherlands: Fortis Intertrust, Rokin 55, 1012 KK Amsterdam; Spain: any appointed distributor listed on the Spanish Financial Regulator’s website (www.cnmv.es); UK: Threadneedle Investments’ Client Services department P.O. Box 1331, Swindon SN38 7TA.The mention of any specific shares or bonds should not be taken as a recommendation to deal.

The research and analysis included in this document has been produced by Threadneedle Investments for its own investment management activities, may have been acted upon prior to publication and is made available here incidentally. Any opinions expressed are made as at the date of publication but are subject to change without notice. Information obtained from external sources is believed to be reliable but its accuracy or completeness cannot be guaranteed.

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Issued by Threadneedle Investment Services Limited. Registered in England and Wales, Registered No. 3701768, St Mary Axe, London EC3A 8JQ, United Kingdom. Authorised and regulated in the UK by the Financial Services Authority.

Important notes

29PL5/09/193