Threadneedle Asia Fund - Morningstar...

Threadneedle Asia Fund

Vanessa Donegan March 2011

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Agenda

Threadneedle Asia Equity Team

Investment process

Market background and outlook

Portfolio positioning and performance

Appendix

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01Threadneedle Asia Equity Team

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Life and pension funds

Sovereign wealth funds

Asia equity flagship fund

Threadneedle China Opportunities Fund

$6.8 billion1 managed in Asia (ex. Japan) equities

Asian TeamInvestment expertise

Wealth of experience

Specialist knowledge

Role of fund manager and analyst combined

Dynamic and pro-active style

Proven track records

Consistent performance

1 Source: Threadneedle as at 31 December 2010

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Asian TeamInvestment expertise

Source: Threadneedle as at 30 September 2010

Dedicated Specialist Expertise

George GosdenDeputy Head ofAsia ex. Japan17 years’ experience

Gigi ChanFund Manager10 years’ experience

Natasha EbtehadjInvestment Analyst2 years’ experience

Lisa LimInvestment Analyst3 years’ experience

Rafael PolatinskyFund Manager6 years’ experience

Vanessa DoneganHead of Global Emerging Market and Asia ex. Japan Equities

Douglas CairnsInvestment Specialist17 years’ experience

Therese NiklassonHead of SRI6 years’ experience

Daniel BelchersCommodity Analyst9 years’ experience

David DonoraHead of Commodities29 years’ experience

Agnes BelaischHead of Emerging Market Strategy14 years’ experience

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02Investment process

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What do we believe?

Careful monitoring of risk benefits our

clients

Different investment styles outperform at different stages of

the investment cycle

Attracting and retaining bright

people who enjoy sharing ideas is key

Single, shared investment platform

leads to outperformance

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Strong interconnection

Role of fund manager and analyst combined

Advantages of a single location

Benefits of global sector overlay

Team members incentivised to pool ideas

Asia Team fully integrated into Threadneedle process

Focus on teamwork

Source: Threadneedle as at 30 September 2010

Government and Corporate Bond Team

Global Sector Teams

Regional Equity Team

Strategy Team

Asia Team

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Matrix approach

TaiwanTechnologyMaterials (shared)

George Gosden

IndonesiaConsumerNatasha Ebtehadj

IndiaKoreaAustralia (shared)

Energy (shared)Materials (shared)Industrials (shared)

Rafael Polatinsky

MalaysiaSingaporeThailandPhilippines

HealthcareTelecomsIndustrials (shared)

Lisa Lim

Hong KongChina

Energy (shared)Utilities

Gigi Chan

Australia (shared)BanksInsurance

Vanessa Donegan

GeographySector

Source: Threadneedle as at 30 June 2010

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Our approach in Asia – an integrated process

Portfolio construction and managementIdea generation

650+ companies (MSCI Asia Pacific Index) plus off benchmark opportunities

Ind

ex s

cree

nin

gCompany meetings

Macro and themes

Regional teams

Global sector teams

Assessment

‘Core list’ of c.80 names

Industry analysis

Valuation

Management quality

Economic, credit and ESG overlay

Stock selection Portfolio

Mandatory stocks must be held

Accountability

Risk management

Reports and monitoring

Style analysis

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Investment process Sources of idea generation

Company meetingsc.500 individual company contacts per yearRegional visitsMain source of idea generation for teamExcellent access to senior management as one of UK’s largest investors in region

Regional TeamsStock ideas from country specialistsWeekly stock meetings, screening

Global Sector TeamsInput from Global Sector specialist analysts, regular Global Sector meetings to encourage flow of ideas between equity and credit teams

Macro and themesMonthly economics and themes meetingsFocus on identifying sources of structural changeEconomics meetings to set investment context utilising views of specialist economics team

Information is common, ideas are scarce

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Finding alpha – field work is crucial

623 company meetings conducted in 2010

67 Hong Kong

11 Philippines

623Total

4 Other

18 Thailand

20 Malaysia

36 Singapore

36 Korea

40 India

46 Australia

51 Taiwan

52 Indonesia

242 China

Company meetingsCountry

Source: Threadneedle as at 27 January 2011

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Investment themes

Asset reflation

Services

Domestic Asia

Wealthmanagement

Trading up

Commodities

Demographics

InfrastructureClean techDigital

highway

Conglomerates

Ag-flation

Inflation pulse

Automation

Technology

M&ACorporate spending

Global recovery

Distributors Substitutes

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Investment themes stock exampleIndustrial automation

Rising Chinese wages and strong corporate capex leading to investment surge in automation technologies

Theme highlighted in monthly Themes and Industrial Global Sector meetings

Delta Electronics – Taiwanese electronics manufacturer expanding into provision of Industrial automation equipment. 22% ROE 5% dividend yield

Source: HSBC Investment Banking as at 30 August 2010

Industrial robot penetration

0

50

100

150

200

250

300

350

400

Japan US Germany SouthKorea

Italy China France IndiaIn

stal

led

units

of i

ndus

tria

l rob

ots

('000

s)

2009 2012E

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Source: Merrill Lynch as at 31 March 2010. Data as at end of 2008

Passenger car penetration

Rising disposable income to drive auto demand from low base

Fund plays this theme

Astra International – dominant share in Indonesia’s cars and two wheelers market

Maruti Suzuki – leading auto brand in India

Dongfeng Motor – top auto producer in China with three strategic partners

Hyundai Motor – dominant share in Korea, gaining share in US, India and China

LG Chemical – global leader in hybrid vehicle technology

0

50

100

150

200

250

300

350

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010U

nits

per

'000

per

sons

Korea Taiwan Japan China Indonesia

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16Portfolio strategy applied

Themes Stocks

Domestic AsiaTencent, Astra International, New Oriental Education, CTRIP, Genting, Hong Kong Exchange

Corporate spendingDelta Electronics, Hyundai Heavy, Samsung Engineering, Samsung Electronics, Taiwan Semiconductor

InfrastructureChina National Building, Larsen & Toubro, BHEL, Rio Tinto, BHP Billiton

Inflation pulseWharf, Swire Pacific, Li & Fung, LG Chem, Formosa Plastics, China Yurun, Noble Group

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Stock selectionConsistent framework for fundamental analysis

Valuation analysis

Economic profitPERP/BHOLTLoved / unloved

Economic, credit and ESG view

Utilising views and strengths of other teams

Industry analysis

SWOT analysisFranchisesProfit outlook

Management quality

Regular contact with senior decision makers

Relative to history, sector and global peers

Benefits of integrated approach

Fundamental research Can they deliver?

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Portfolio construction Turning high conviction ideas into high conviction portfolios

Focused research

Conviction assessment

ValuationStock ideas pitched at weekly meetings

Risk assessment

Volatility Sector / country riskESG score

Liquidity assessment

Daily volume analysis by dedicated dealing team

Obligatory overweight positions in our best

research ideas

Core list

Conviction buy ideas

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Portfolio construction Threadneedle Asia Fund risk parameters

Underpins a disciplined investment process

Limits volatility

Ensures diversificationUpper quartilePerformance target

+/- 8%Relative sector weightings

+/- 3%Relative stock weightings

3 - 6%Tracking error range

Threadneedle Asia Fund’s constraints

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Sample daily risk report

Monitoring and risk control – multiple checks

Fund Managers and Compliance use LatentZero Sentinel to ensure constraints are respected

Continuous independent review of portfolio risk by Investment Risk team, employing

Review of active risk

Stress tests

Effective style analysis

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03Market background and outlook

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Outlook – economic growth in Asia remains well supported

Consumption supported by low interest rates

Rising capacity utilisation will support investment spending

Asian currencies are under upward pressure

Risk of capital inflows causing instability

Upside risk to inflation from rising commodity prices

Source: Thompson DataStream as at 31 December 2010

60

80

100

120

140

160

180

200

Dec 08 Apr 09 Aug 09 Dec 09 Apr 10 Aug 10 Dec 10

MSCI AC World Index – Price Index

MSCI AC Asia Pacific ex Japan Index – Price Index

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Emerging economies are slowing, not stalling

Threadneedle GDP forecasts


0.2%

-5.0%-4.0%

-2.4%

1.6% 1.5%

2.9%

7.4%

9.1%

-5.2%

4.5%

6.0%

8.4%

3.5%

9.8%

6.0%

3.0%

1.5%1.4%1.0%

6.2%

4.2%

9.2%8.3%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Korea Indonesia India China Japan UK Europe US

2009 2010E 2011E

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24

Asia ex Japan CPI

Source: UBS as at 31 January 2011

Food prices driving up core inflation … oil a key risk

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Asia (ex. Japan) Core CPI YoY Asia (ex. Japan) Food CPI YoY

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25

US ISM Index suggests stable export growth

Source: Credit Suisse as at 31 January 2011

Outlook for Asian exports

20

25

30

35

40

45

50

55

60

65

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

ISM

-30%

-20%

-10%

0%

10%

20%

30%

40%

Exp

ort

US ISM manufacturing composite (lag by 6m) Non-Japan Asia export (3MMA YoY)

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Source: CEIC, BNP Paribas estimates as at 21 February 2011. For China’s fixed investment, growth rates are in nominal terms, due to the absence of data, while for other markets, forecasts are in real terms

Fixed investment

Fixed investment growth in Asia is accelerating

Source: FactSet consensus estimates, MSCI, BNP Paribas as at 21 February 2011

Non-financial corporate capex as % of sales

-3%

0%

3%

6%

9%

12%

15%

18%

21%

24%

Ch

ina

Ind

ia

Ind

on

esi

a

Th

aila

nd

Ma

lays

ia

Ta

iwa

n

Ko

rea

Sin

ga

po

re

Ph

ilip

pin

es

(YoY

)

Trend (2005–2010E CAGR) 2011E 2012E

8.0%

8.5%

9.0%

9.5%

10.0%

10.5%

11.0%

11.5%

12.0%

12.5%

13.0%

2002 2003 2004 2005 2006 2007 2008 2009 2010E

(% o

f sal

es)

MSCI Asia ex-Japan AXJ ex-China

China decelerating

Higher growth vs. trend

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27

Banking system loan growth

Source: Credit Suisse as at 28 February 2011

Asian credit cycle broadening out

-5%

0%

5%

10%

15%

20%

25%

30%

35%

China Hong Kong India Indonesia Singapore Malaysia Thailand Taiwan Korea Australia

2009 YoY 2010 YoY

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Source: Merrill Lynch as at 31 March 2010. Data as at end of 2008

Mortgage lending as % of GDP

Rapid urbanisation supports mortgage demand

Demand for luxury goods is exploding

Changing consumption patterns support demand for new services

Penetration of financial products is low

Asian consumers are relatively underleveraged

Rising middle class supports consumption growth

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

UK

US

Ta

iwa

n

Ho

ng

Ko

ng

Sin

ga

po

re

Ma

lays

ia

Ko

rea

Ch

ina

Th

aila

nd

Ind

ia

Ind

on

esi

a

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Ample potential for income growth

Per capita consumption is growing rapidly…

Source: BNP Paribas as at 31 October 2010

0

200

400

600

800

1,000

1,200

1,400

1,600

1985 1989 1993 1997 2001 2005 2009

($)

China India Indonesia

…but from a low base

Source: BNP Paribas as at 31 October 2010. Per capita consumption 2009

0

5

10

15

20

25

30

35

US

Fra

nce

Ge

rma

ny

Jap

an

UK

Ho

ng

Sin

ga

po

reK

ore

aT

aiw

an

Bra

zil

Me

xico

Ma

lays

ia

Ind

on

esi

aC

hin

aIn

dia

($ in

'000

s)

GDP per capita

Source: BNP Paribas as at 31 October 2010

100

1,000

10,000

100,000

1990 1996 2002 2008 2014 2020 2026

(Log

sca

le in

$)

China IndonesiaIndia Japan

China in 2009 = $3,680;roughly Japan in 1973

Japan, 1952–1994

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30

Source: Goldman Sachs as at 31 August 2010

China GDP breakdown

-0.41.2 1.4 1.8 1.8 1.5 1.0 0.7 0.9 1.8 1.6 1.6 1.2 1.0

5.34.7

2.33.0

4.0 3.52.7 3.0 2.9 3.1 2.5 3.5 3.9

3.0 3.9 3.4 3.4

6.0 3.4

1.7

1.9 4.1 4.4 6.3 5.5 4.45.6

6.0

4.6

8.6

4.4

0.0

0.6

4.1 1.3

-0.1

1.2

0.0

2.02.6

0.9 0.0

1.31.2 1.2

2.11.8

5.4

0.1 0.6 2.6

-4.3

0.2

10.9 10.0

9.37.8 7.6

8.4

8.39.1

10.0 10.111.3

12.714.2

9.6 9.110.1

9.0

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E

pp

co

ntr

ibu

tio

n t

o G

DP

gro

wth

Government consumption Private consumption Fixed investment Net exports GDP

Forecasts

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Source: BNP Paribas as at 30 November 2010

Government debt

Indonesia – positive macro environment

Beneficiary of strength in commodities

Stable currency and structurally lower inflation

Sovereign debt re-rating

Falling cost of credit

Public and private sectors have deleveraged0

10

20

30

40

50

60

70

80

90

100

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Central Government Debt Average yearly Rating

BBB

B+

BB

CC

(% o

f G

DP

)

(S&

P o

utlo

ok)

CCC+

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Source: Deutsche Bank as at 30 November 2010

Strong GDP and income growth

Indonesian consumption growth

Underpenetrated and young population of 240 million

4th largest market in terms of consumption within Asia ex-Japan

Strong wage growth

Low household debt ratio0

1,000

2,000

3,000

4,000

5,000

6,000

2000 2010F 2015F($

)

0

10

20

30

40

50

60

Million people

GDP / capita (LHS) Income above $4,500 / annum (RHS)

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Source: UBS as at 30 November 2010. Calendar convention: 2009 is fiscal year to March 2010

Contribution to GDP growth (UBS estimates, pp)

India's growth firmly on a recovery path

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E

0%

2%

4%

6%

8%

10%

12%

Consumption Gross Investment Net Exports GDP

Forecast

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Indian infrastructure planned spend

Regional investment themeRising infrastructure spend

0

50

100

150

200

250

300

350

400

9th Plan(FY 97–FY 02)



($ in

bill

on)

Airports IrrigationPorts PowerRailways RoadsTelecom Urban infrastructure and housing

Favourable demographics

High savings rates

Rising middle class

Underdeveloped infrastructure

Source: Plan documents, CIDC draft paper for construction sector in 11th Plan, UBS

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35

Source: DataStream as at 31 January 2011. All data quoted in local currency

Asia country performance over last 18 months

90

100

110

120

130

140

150

160

Jul 09 Sep 09 Nov 09 Jan 10 Mar 10 May 10 Jul 10 Sep 10 Nov 10 Jan 11

Reb

ased

MSCI Asia Pacific ex Japan MSCI China MSCI Thailand MSCI IndonesiaMSCI Singapore MSCI Hong Kong MSCI Korea MSCI Taiwan

MSCI India MSCI Australia

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Source: I/B/E/S, DataStream, CLSA Asia-Pacific Markets as at 31 January 2011

MSCI Asia ex Japan 12-month forward P/E

Asian valuations are undemanding

Source: I/B/E/S, DataStream, CLSA Asia-Pacific Markets as at 31 January 2011

MSCI Asia ex Japan 12-month forward P/E relative to MSCI US 12-month forward P/E

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

7.0

8.5

10.0

11.5

13.0

14.5

16.0

17.5

19.0

20.5

22.0

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

37

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37

% of stocks with dividend yields greater than respective country short-term rates

Source: UBS as at 30 August 2010

Dividend growth supportive of domestic investor participation

0%

10%

20%

30%

40%

50%

60%

70%

80%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

38

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Source: OECD, Goldman Sachs Research estimates as at 30 November 2009

Share of major economies in global GDP 1800–2050E

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1800 1850 1900 1950 2000 2020E 2050E

% o

f wor

ld G

DP

North America Western Europe Russia Latin America Japan China India ROW

Asian economies, in particular AEJ

will become significantly more

important in the global economy

39

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04Fund positioning and performance

39

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40

Threadneedle Asia Fund vs. MSCI AC Asia Pacific ex. Japan Index

Source: Threadneedle as at 31 January 2011. TIP includes Thailand, Indonesia and the Philippines. Excludes Cash at 1.5%, US at 0.7%, UK at 0.1% and Europe at 0.3%

Threadneedle Asia FundGeographic breakdown

20.6

%

8.4%

7.8%

3.4%

2.5%4.

3% 5.1%

3.0%

0.0%

14.4

%

13.5

%

9.9%

17.1

%

0.3%

7.3%

14.9

%

25.7

%

12.5

%

8.8%

18.1

%

0%

5%

10%

15%

20%

25%

30%

China South Korea Australia Hong Kong Taiwan India TIP Singapore Malaysia New Zealand

Threadneedle Asia Fund Index

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41

Threadneedle Asia Fund vs. MSCI AC Asia Pacific ex. Japan Index

Source: Threadneedle as at 31 January 2011. Excludes Cash at 1.5% and unclassified at 0.4%

Threadneedle Asia FundSector breakdown

17

.8%

15

.3%

13

.2%

12

.0%

11

.8%

7.4

%

5.7

%

4.5

%

3.0

%

3.0

%

2.9

%

0.8

%

0.8

%

19

.9%

14

.0%

13

.7%

9.4

%

6.7

%

7.1

%

7.6

%

2.6

% 4.4

% 5.8

%

4.7

%

2.7

%

1.4

%

0%

5%

10%

15%

20%

25%

Banks InformationTechnology

Materials Industrials ConsumerDiscretionary

Real Estate Energy DiversifiedFinancials

Insurance ConsumerStaples

Telecoms Utilities Health Care

Threadneedle Asia Fund Index

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42

Source: Threadneedle as at 31 January 2011. Active position is relative to the MSCI AC Asia Pacific ex. Japan Index. The mentioning of any specific share is not a recommendation to buy

Threadneedle Asia Fund’s active positions

Top 10 holdings

Sector Fund (%)

Samsung Electronics Information Technology 4.6

BHP Billiton Materials 3.7

Rio Tinto Materials 3.0

CNOOC Energy 2.9

Taiwan Semiconducters Information Technology 2.8

Aust & Nz Bank Financials 2.2

Hyundai Mobis Consumer Discretionary 1.9

China Construction Bank Financials 1.9

LG Chem Materials 1.8

Hyundai Consumer Discretionary 1.8

Top 10 overweight positions

Sector Active (%)

Rio Tinto Materials 2.0

CNOOC Energy 1.8

Samsung Information Technology 1.7

Hyundai Mobis Consumer Discretionary 1.5

Swire Pacific Financials 1.4

LG Chem Materials 1.3

Li & Fung Consumer Discretionary 1.3

Ping An Insurance Financials 1.3

Samsung Engineering Industrials 1.3

State Bank of India Financials 1.2

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Market capitalisation ($m)

43

Threadneedle Asia FundAn attractive risk / reward profile

Threadneedle Asia Fund offers focused exposure to Asia, holding c.100 stocks compared with 673 in the MSCI Asia ex Japan Index

Threadneedle Asia Fund also offers attractively priced growth

Average

11.2x

2012PER

2010PER

2011PER

Historic Book Price

Gross dividend

yield

31 January 2011 19.5x 12.6x 2.5x 2.0%


0%

10%

20%

30%

40%

50%

60%

70%

80%

10,000+ 1,000–10,000

350–1,000

0–350

Cash

Fund Index

44

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44

Asia ex Japan market performance from lows to peaks

Source: MSCI, Citi Investment Research & Analysis. Calculations based on MSCI Asia Pacific ex Japan Index

The three phases of Asian market recovery

0%

50%

100%

150%

200%

250%

300%

350%

400%

0 6 12 18 24 30 36 42 48 54 60

Dec 74 Nov 82 Nov 87 Sep 90 Aug 98 Mar 03 Feb 09 Median (1974–2003)

Months after trough

P/BV, P/Sales, P/CF work best

Earnings rev, P/E, Fcst net margin

Price momentum, Earnings rev

Phase 1 Phase 2 Phase 3

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45

Asia ex Japan Price to Book – large vs. small cap premium

Source: MSCI, Citi Investment Research & Analysis. Calculations based on MSCI Asia ex Japan Index

Large capitalisation stocks cheap relative to history

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

46

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Source: Merrill Lynch Asia Pacific Quantitative Strategy

Asia Pacific style relative performance – 2010

Investment style analysis – Asia ex Japan region

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

Value Growth Quality Risk Momentum Dividend Smallsize

Per

form

ance

rel

ativ

e to

MS

CI A

sia

Pac

ific

ex

Japa

n

Style Skylines™ show benchmark-relative Style Tilts™. Sample Size Adjusted Tilts, calculated from both the size and breadth of portfolio positions, assess the deliberateness of the Tilts and enable comparisons across portfolios of differing structures. Additional analysis factors, sector (and country) adjustments and Tilt Contribution reports may also be informative.

Portfolio Style Skyline™

-2.0-2.3

0.2

-0.2

-1.3

-0.6

1.92.4

1.01.5

0.61.0 0.9 1.0 0.9 0.7

-1.2

0.5

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

Bo

ok

to P

rice

Div

ide

nd

Ea

rnin

gs

Yld

C'F

low

Yie

ld

Sa

les

to P

rice

EB

ITD

A to

Rtn

on

Eq

uity

Ea

rnin

gs

Inco

me

/Sa

les

Sa

les

Gro

wth

IBE

S 1

2M

th

IBE

S 1

Yr

Re

v

Ma

rke

t Ca

p

Ma

rke

t Be

ta

Mo

me

ntu

m

Mo

me

ntu

m

De

bt/E

qu

ity

Fo

reig

n

Style factors

Sty

le T

ilt™

47

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+6.5%-9.7%-3.4%-3.3%-2.1%Relative return

80

3.3%

1.1%

3 months

Cumulative performance

90

9.8%

-0.9%

3 years

34

57.2%

67.4%

5 years

88

23.8%

19.6%

1 year

90

17.4%

13.5%

6 months

Percentile rank

Peer group median


Source: Morningstar as at 31 January 2011. All data is quoted in $ in S&P Offshore & International Universe. Fund data is quoted on a bid to bid basis with gross income re-invested at bid. Fund data is gross of tax and net of fees

Threadneedle Asia FundPerformance in the S&P Offshore & International Universe ($)

48

PL02/11/160

-1.8%

3.3%

1.4%

3 months


-6.5%

12.3%

5.0%

3 years

+8.0%

67.5%

80.8%

5 years

-2.3%

24.7%

21.8%

1 year

-2.1%

16.9%

14.4%

6 months

Relative return

MSCI AC AP ex Jap (Chain Linked with BEMI pre 1999)


Threadneedle Asia FundPerformance vs. MSCI AC AP ex. Japan Index ($)

Source: Morningstar / Thompson / DataStream as at 31 January 2011. 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 gross income re-invested at bid. Fund returns calculated Gross of TER (and Tax) for comparison with index

49

PL01/11/231

73

-2.3%

18.5%

15.8%

2004

27

+2.3%

46.0%

49.3%

2003

44

+1.4%

-8.6%

-7.3%

20021

9

+7.4%

30.4%

40.1%

2006

+1.3%+11.8%-7.8%+1.3%-3.5%Relative return

89

17.6%

13.4%

2010

Annualised performance

5

33.7%

49.4%

2007

36

19.4%

20.9%

2005

83

-49.9%

-53.8%

2008

38

67.2%

69.4%

2009

Percentile rank2

Peer group median


Source: Morningstar as at 31 December 2010. All data is quoted in $ in S&P Offshore and International Universe. Fund data is quoted on a bid to bid basis with gross income re-invested at bid. Fund data is gross of tax and net of fees1 Fund Manager start date 28 February 20022 A fund with performance placing it in the first decile ranks amongst the best 10% in the peer group during a specified period

Threadneedle Asia FundPerformance in the S&P Offshore and International Universe ($)

50

PL01/11/231

-5.1%

23.0%

16.7%

2004

+2.6%

48.7%

52.6%

2003

-1.1%

-5.1%

-6.2%

20021

+1.9%

21.0%

23.3%

2005

-2.7%

18.4%

15.2%

2010


+10.5%

37.2%

51.5%

2007

+7.1%

33.2%

42.7%

2006

-2.8%

-51.6%

-53.0%

2008

-0.9%

73.7%

72.1%

2009

Relative return


ThreadneedleAsia Fund

Threadneedle Asia FundPerformance vs. MSCI AC AP ex. Japan Index ($)

Source: Morningstar / Thompson / DataStream as at 31 December 2010. 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 gross income re-invested at bid. Fund returns calculated Gross of TER (and Tax) for comparison with index1 Fund Manager start date 28 February 2002

51

PL02/11/160

+2.6%-10.5%-5.0%-3.1%-2.2%Relative return

54

3.6%

1.3%

3 months


54

39.0%

24.4%

3 years

23

81.9%

86.6%

5 years

57

27.8%

21.4%

1 year

59

14.9%

11.3%

6 months

Percentile rank

Peer group median


Source: Morningstar as at 31 January 2011. All data is quoted in £ in S&P UK Unit Trusts / OEICs Universe. Fund data is quoted on a bid to bid basis with gross income re-invested at bid. Fund data is gross of tax and net of fees

Threadneedle Asia FundPerformance in the S&P UK Unit Trusts / OEICs Universe (£)

52

PL02/11/160

-1.8

3.1%

1.3%

3 months


-6.5

39.4%

30.3%

3 years

+8.0

85.8%

100.7%

5 years

-2.3

24.8%

21.9%

1 year

-2.1

14.3%

11.9%

6 months

Relative return



Threadneedle Asia FundPerformance vs. MSCI AC AP ex. Japan Index (£)

Source: Morningstar / Thompson / DataStream as at 31 January 2011. 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 gross income re-invested at bid. Fund returns calculated gross of TER (and Tax) for comparison with index

53

PL01/11/230

62

-1.2%

8.3%

7.0%

2004

45

+0.8%

33.8%

34.9%

2003

32

+1.6%

-17.9%

-16.6%

20021

14

+5.0%

17.1%

22.9%

2006

+1.3%+8.8%-5.3%0.0%-3.7%Relative return

82

22.8%

18.3%

2010


17

34.6%

46.4%

2007

33

33.8%

35.5%

2005

76

-32.9%

-36.5%

2008

50

52.5%

52.5%

2009

Percentile rank2

Peer group median


Source: Morningstar as at 31 December 2010. All data is quoted in £ in S&P UK Unit Trusts / OEICs Universe. Fund data is quoted on a bid to bid basis with gross income re-invested at bid. Fund data is gross of tax and net of fees1 Fund Manager start date 28 February 20022 A fund with performance placing it in the first decile ranks amongst the best 10% in the peer group during a specified period

Threadneedle Asia FundPerformance in the S&P UK Unit Trusts / OEICs Universe (£)

54

PL01/11/230

-5.1%

14.7%

8.9%

2004

+2.6%

33.7%

37.2%

2003

-1.1%

-14.2%

-15.2%

20021

+1.9%

35.3%

37.9%

2005

-2.7%

22.1%

18.8%

2010


+10.5%

34.9%

49.0%

2007

+7.1%

16.8%

25.2%

2006

-2.8%

-33.0%

-34.9%

2008

-0.9%

54.6%

53.3%

2009

Relative return



Threadneedle Asia FundPerformance vs. MSCI AC AP ex. Japan Index (£)

Source: Morningstar / Thompson / DataStream as at 31 December 2010. 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 gross income re-invested at bid. Fund returns calculated Gross of TER (and Tax) for comparison with index1 Fund Manager start date 28 February 2002

55

PL01/11/195

Reasons for underperformance in 2010

Overweight China

Overweight large cap stocks

Overweight technology sector during Q1

Underweight Taiwan in Q4

Also underweight small cap ASEAN

56

PL11/09/188

APAppendix – Biographies

56

57

Vanessa is Head of Asia and Global Emerging Markets. In addition to her leadership role, Vanessa has analytical responsibility for the banking and insurance sectors across the region and shares responsibility for Australia and the materials sectors. Vanessa began her career in 1981 with Grieveson Grant Stockbrokers where she progressed to manage Far Eastern investments. She joined Allied Dunbar Asset Management in 1986, where she was responsible for the management of Far Eastern funds. Allied Dunbar Asset Management became part of Threadneedle in 1994. Vanessa holds a degree in classics from Oxford University.

Threadneedle start date: 1994

Industry start date: 1981

VANESSA DONEGAN

Biography

58

PL1/09/245

George Gosden joined Threadneedle in 2010 as a senior fund manager on the Asian Equities team. He is the deputy head of the team and has research responsibility for the technology sector and the markets of Taiwan and Korea. He also manages a number of institutional portfolios.

Prior to joining Threadneedle, George was a Director at Insight Investment, where he managed retail and institutional funds for the Asian and International equity teams. He previously managed Asian equities at Clerical Medical and Equitable Life. George has MA in Economic Development & International Trade and a BA in Economics from the University of Nottingham.



GEORGE GOSDEN

Biography

59

Gigi Chan joined Threadneedle in 2000 and is a Fund Manager specialising in Asian Equities.

She manages the Threadneedle China Opportunities Fund and the Allied Dunbar Far East Asia ex-Japan Fund. She is also a member of the oil & gas and consumer products global sector research teams and has country research responsibilities for China and Hong Kong.

Gigi graduated from St Hilda’s College, Oxford with a degree in Politics, Philosophy and Economics. She also holds a postgraduate diploma in law from the London College of Law and is a CFA Charterholder.

Threadneedle start date: 2000Industry start date: 2000

GIGI CHAN

Biography

60

PL01/10/228

Rafael Polatinsky joined Threadneedle in 2007 as a fund manager on the Asian equities team. He is manager or deputy manager on a number of Asia Pacific and Emerging Market institutional mandates, and also manages the Threadneedle India Fund. His research responsibilities include the Indian market and the energy and materials sectors. Rafael started his career at Arthur Andersen in South Africa, before joining Deutsche Bank in London.

Prior to joining Threadneedle, he was an investment analyst / deputy fund manager on the Asian emerging markets team at WestLB Mellon Asset Management. Rafael holds a Bachelor of Accounting degree and a Bachelor of Commerce degree from the University of Witwatersrand, Johannesburg, and is also a Chartered Accountant (South Africa) and a CFA charterholder.



RAFAEL POLATINSKY

Biography

61

Natasha Ebtehadj joined Threadneedle in 2008 as a graduate trainee and has now assumed responsibility for the consumer and industrials sectors and the Indonesian market for the Asia Pacific equity team. She has a Masters degree in Modern Chinese Studies from Oxford University and a BSc in Economics & Politics from Warwick University. She is currently a CFA Level 2 candidate.



NATASHA EBTEHADJ

Biography

62

PL09/08/040

Lisa Lim joined Threadneedle in 2007. She is an analyst covering Malaysia, Singapore, Thailand and the Philippines as well as the healthcare and telecoms sectors.

She graduated from the University of Cambridge with a PhD in engineering in 2007 and an MA (first class honours) in Manufacturing Engineering Tripos in 2000. Lisa is also a CFA Charterholder.



LISA LIM

Biography

63

PL11/08/135

Douglas Cairns joined Threadneedle in 2007 and is responsible for providing detailed information on Threadneedle’s capabilities and investment views, particularly with regard to Asia and Emerging Markets, to clients and consultants.

Douglas started off his career in the financial sector as an Analyst in Corporate Finance for Bankers Trust Company. He then moved to Schroder Investment Management where he started as a UK Equity Analyst and was promoted internally to UK Institutional Pension Fund Manager. Douglas moved to Thailand, with Schroder’s, to take up the role of Chief Investment Officer in Thailand from 1996 to 2001. In 2002 he was promoted to Chief Executive Officer.

From 2002 to 2007 Douglas was self-employed as a consultant and speaker and also is a published author.

He has a Masters degree from Edinburgh University, is a qualified pilot and flying instructor and also holds the Investment Management Certificate.

Threadneedle start date: 2007Industry start date: 1989

DOUGLAS CAIRNS

Biography

64

09x/07/036

Important notes

Past performance is not a guide to future returns. The value of investments and any income from them is not guaranteed and may fall as well as rise. Exchange rate movements could increase or decrease the value of underlying investments/holdings. The dealing price of the funds may include a dilution adjustment, further details are available in the Prospectus.

Threadneedle Investment Funds ICVC (“TIF”) and Threadneedle Specialist Investment Funds ICVC (“TSIF”) are open ended investment companies (OEICs) with variable capital and limited liability incorporated in England and Wales under registered No. IC000002 (TIF) and No. IC000232 (TSIF). TIF and TSIF are subject to UK law and are authorised by the Financial Services Authority (FSA) with effect from 18. June 1997 (TIF) and from 9 May 2003 (TSIF). TIF and TSIF comply with the UCITS Directive 85/611/ EEC (as amended by directives 2001/107/EC and 2001/108/EC). The investment manager is Threadneedle Asset Management Limited.

References in this document to any fund do not constitute an offer or invitation to subscribe to shares in such a fund. Subscriptions to a fund may only be made on the basis of the current Prospectus or Simplified Prospectus and the supplement as well as the annual or interim report. Copies can be obtained free of charge on request.

The mention of any specific shares or bonds should not be taken as a recommendation to deal and anyone considering dealing in these financial instruments should consult a stockbroker or financial adviser. The research and analysis included in this document has been produced by Threadneedle for its own investment management activities, may have been acted upon prior to publication and is made available here incidentally. In some instances the information contained in this publication, other than statements of fact, was obtained from external sources believed to be reliable but its accuracy or completeness cannot be guaranteed. Any opinions expressed are made as at the date of publication but are subject to change without notice.

The information provided in this presentation is for the sole use of those intermediaries attending the presentation. It may not be reproduced in any form without the express permission of Threadneedle and to the extent that it is passed on care must be taken to ensure that this is in a form which accurately reflects the information presented here.

Index returns assume reinvestment of dividends and capital gains and unlike fund returns do not reflect fees or expenses. The index is unmanaged and cannot be invested in directly.

The Threadneedle China Opportunities Fund and Threadneedle Asia Fund invest in emerging markets, which may carry risk associated with failed or delayed settlements of market transactions and with registration and custody of settlements. Emerging markets are generally less well regulated than in the UK, and may involve a higher risk. The funds can make investments in derivatives and there are additional risks associated with this type of investment.

Threadneedle Asset Management LimitedRegistered in England and WalesRegistered no. 57320460 St Mary AxeLondon EC3A 8JQ

Threadneedle Investments is a brand name and both the Threadneedle name and logo are trademarks or registered trademarks of the Threadneedle group of companies.

For investment professional use only

Not for onward distribution too, or to be relied upon by private investors.

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