Retail Distribution Review Question & Answer - Threadneedle ...

August 2012
Information for Investment Professionals
Retail Distribution Review
Question & Answer
August 2012
Threadneedle Investment Funds
Threadneedle Specialist Investment Funds
Threadneedle Focus Investment Funds
Threadneedle Managed Funds
Threadneedle UK Property Trust
threadneedle.com

Retail Distribution Review Question & Answer August 2012
The information contained in this section applies to the
following fund ranges:
Threadneedle Investment Funds
Threadneedle Specialist Investment Funds
Threadneedle Focus Investment Funds
Threadneedle Managed Funds
Threadneedle UK Property Trust
Q What is Threadneedle’s RDR offering?
A Whilst all funds are affected by the implementation of the RDR, we are in the process
of extending our current product offering in order to be “RDR ready”. Notably, we will
be launching a new commission-free “clean” share class (class ‘Z’) to complement our
existing ‘R’ and ‘I’ share classes. An example is shown below:
Example: Threadneedle UK Equity Income Fund:
Share class Annual management charge Minimum initial investment
Retail (‘R’ / Class 1 /
Unit A)
1.50% £2,000
Institutional (‘I’ /
Class 2 / Unit B)
1.00% £500,000
‘Z’ share class 0.75% £1,000,000
The ‘Z’ share class will be available for the benefit of your advised clients, via platforms
that choose to operate a clean share class model. In these circumstances we will waive
the minimum investment requirement.
Timeline and implementation
We will be launching additional share classes for all the funds listed below on either
1st October or 15th October as indicated below:
1st October Share Class Launches
Threadneedle Investment Funds
American
American Select
American Smaller Cos.
Asia
Emerging Market Bond
European
European High Yield
European Select
Global Bond
Global Select
High Yield Bond
Latin America
Strategic Bond
UK Equity Income
UK
UK Growth & Income
UK Monthly Income
UK Select
Threadneedle Specialist Investment Funds
UK Absolute Alpha UK Equity Alpha Income UK Mid 250
15th October Share Class Launches
Threadneedle Investment Fund
Japan
Japan Smaller Companies
Monthly Extra Income
Pan European
Sterling Bond
UK Smaller Companies
Threadneedle Specialist Investment Funds
China Opportunities
Emerging Market Local
Global Emerging Market
Equity
Global Equity Income
Pan European Accelerando
Pan European Equity
Dividend
Target Return
For full details on the share classes available including income and accumulation details for
each of the above funds, please visit www.threadneedle.com/rdr
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Retail Distribution Review Question & Answer August 2012
Q We will be launching additional share classes for the
following funds in 2013
• nThreadneedle Dollar Bond Fund
• nThreadneedle Emerging Market Bond Fund
• nThreadneedle European Bond Fund
• nThreadneedle European Corporate Bond Fund
• nThreadneedle European Smaller Companies Fund
• nThreadneedle Pan European Smaller Companies Fund
• nThreadneedle UK Overseas Earnings Fund
A If we receive investment into the above funds between 31 December 2012 and the
launch of the clean share classes and depending on which business model you are
planning to operate, we will invest into either the existing retail or institutional share
classes (where applicable and subject to the usual minimum investment amounts).
Q What about funds that are not listed above?
A For some of our funds the existing institutional class provides a ready-made RDR
solution, so it is not necessary to launch new ‘Z’ share classes. This applies to the
following funds:
Fund / Trust Retail ‘R’ Institutional ‘I’
Absolute Return Bond 1.25% 0.65%
American Extended Alpha 1.50% 0.75%
Credit Opportunities 1.25% 0.65%
Defensive
Defensive Equity & Bond
Equity & Bond
Global Equity
0.25% plus the average of the
underlying funds
0.25% plus the average of the
underlying funds
0.25% plus the average of the
underlying funds
0.25% plus the average of the
underlying funds
0.0% plus the average
of the underlying funds
0.0% plus the average
of the underlying funds
0.0% plus the average
of the underlying funds
0.0% plus the average
of the underlying funds
Global Extended Alpha 1.50% 0.75%
Global Equity & Bond 0.25% plus the average of the 0.0% plus the average
underlying funds
of the underlying funds
Managed Income
0.25% plus the average of the
underlying funds
UK Corporate Bond 0.75% 0.50%
UK Extended Alpha 1.25% 0.75%
UK Institutional 1.50% 0.75%
UK Property 1.50% 0.75%
0.0% plus the average
of the underlying funds
For each of the above funds, we will be making the ‘I’ class available for the benefit of your
advised clients, via platforms that choose to operate a clean share class model. In these
circumstances we intend to waive the minimum investment requirement set out in the
Prospectus.
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Retail Distribution Review Question & Answer August 2012
Q When will Threadneedle begin operating according to RDR?
A Any advised business received from 31 December 2012 onwards will be subject to the
RDR and therefore invested in the RDR share classes detailed previous pages. Businesses
operating an RDR model before 31 December 2012, will be able to access all available
share classes from October onwards. Please note that the ‘Z’ classes and the above listed
‘I’classes will be available to platforms from October but the availability for investment via
each platform is dependent on their individual RDR roll-out timeline.
The new share classes will be available for investment from launch subject to the minimum
investment requirements.
Q What happens if I have advised a client before 31 December
2012 but not sent through their investment until after this date?
A To be eligible for commission, our transfer agent must receive your client’s investment on
or before 28 December 2012.
Q Why have you changed your Terms of Business?
A We have updated our Terms of Business with effect from 1st October 2012 which will allow
commission terms to be set up on the relevant share classes until 31 December 2012
when the Financial Service Authority’s rules change. We will continue to pay commission
as required from the 1st October to 31st December 2012.
Q What is Threadneedle’s default position regarding RDR?
A Threadneedle’s working assumption is that all business received on behalf of UK retail
clients from adviser firms is “advised” business, i.e. affected by the ban on commission
on new business from 31 December following the RDR. However, we recognise that many
firms offer other services, in which case we need to understand your requirements in more
detail (see below).
Non-Advised Only
We recognise that some firms will specialise in discretionary management services and/or
execution only services. If your firm will not be providing any new advisory services from
31 December 2012, please tell us so we can designate your business accordingly. If you
require a mix of commission and non-commission paying share classes, we will need to
assign different agency codes to each for new business.
Mixed Model: Advised and Non-Advised
We recognise that some firms offer a mix of advised and non-advised services. As
commission can still be paid on discretionary and execution only business, we need to
know whether your firm plans to offer these services from 31 December 2012 alongside
advisory business (on which commission cannot be paid). To avoid the payment of
commission on advisory business in error, it will be necessary to assign separate agent
codes for advised and non-advised business.
Once you have informed us of your business model for post-RDR investments, please
ensure you quote the correct Agent Code on all of your deal instructions to ensure we pay
commission when it is correct to do so.
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Retail Distribution Review Question & Answer August 2012
Q How do I let Threadneedle know about my plans for writing
new business following the roll out of the RDR?
A We have set up a specific website to capture your requirements. Log on to
www.threadneedle.com/rdr This form asks for your agent number, post code,
company name and then gives three options on how you plan to write new business
with Threadneedle from 31st December 2012 onwards:
1. Advised
2. Non-advised
3. Mixed model
Q What about my clients’ legacy holdings?
A All legacy business currently invested with Threadneedle will continue on the same
basis following the introduction of the RDR. Therefore any advised business that you
currently receive commission on will continue on that basis after 31 December 2012
subject to Financial Service Authority Regulations unless you or your client instruct us
to stop it. Commission payments on legacy business may be affected if a new advice
event occurs. This is explained in more detail at www.fsa.gov.uk/rdr
Q What does Threadneedle define as new advised business?
A Under the guidelines issued by the Financial Services Authority in relation to the RDR,
new business is defined as any instance where new advice is given. New lump sum
investments and new regular savings would be considered new business as would
fund switches.
Q What is Threadneedle’s approach to pricing and share class
availability for RDR?
A The Retail Share Class is used by a variety of clients through a variety of channels. It
will continue to meet the needs of “legacy business” and meet future new business
needs, for example execution only channels and platforms that elect to retain bundled
pricing models. The Retail share class will remain available to retail investors dealing
directly with Threadneedle, or through an adviser (however commission will not be
available on new business from 31st December 2012).
Advisers may also wish to consider our ‘Z’ share classes or ‘I’ classes, which will
be available to platforms with unbundled pricing models. Subject to the minimum
investment criteria, classes ‘I’ and ‘Z’ are also available directly from Threadneedle for
high-net-worth individuals and other advised or non-advised clients such as institutions;
wealth managers and corporate investors. Platforms will select share classes that best
suit their operating model.
With effect from 31 December 2012, Threadneedle does not intend to apply any initial
charges on UK retail advised client new business. Initial charges remain (in accordance
with each fund’s prospectus) for legacy regular savings plans and non-RDR business
where there is a requirement to pay initial commission to a distributor (for example, an
execution-only broker).
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Retail Distribution Review Question & Answer August 2012
Q I have a client who is a regular saver - will commission
continue to be paid on this business?
A Based on our current understanding of the regulations, commission can continue on
in-force savings plans established before 31 December 2012 until such time as a new
advice event occurs (or until you or your client requests for it to be stopped, whichever
occurs first).
If the amount of the regular savings plan is increased, and no other changes made, we
would continue to pay commission on the original amount only.
Q What if I use a fund supermarket, platform, aggregator or
life company?
A Any arrangements you may have regarding your clients’ investments in Threadneedle
funds via an aggregator, platform or nominee should be reviewed directly with the
aggregator, platform provider or nominee.
Q Are investments within an ISA affected by the RDR?
A Yes, they are. Legacy business will continue to pay commission but any new advice
events affecting ISA investments will be affected by the RDR.
Q Where can I find more information about charges?
A More information can be found at www.threadneedle.com/rdr
Q Why have I received a different letter from Threadneedle
regarding your RDR plans?
A You may receive two or even three letters from us regarding our plans for the RDR.
This is because we have three transfer agents (TAs): Bank of New York Mellon (BNYM),
IFDS and IFDS Luxembourg.
How to contact
Threadneedle about
the RDR.
You can contact us in a variety
of ways:
Email
rdr@threadneedle.com
Website
www.threadneedle.com/rdr
Phone
Please contact our RDR helpline
Threadneedle representative
on 0207 464 5044
In November 2011, Liverpool Victoria Portfolio Managers limited (LVPM) transferred the
operation of their funds to Threadneedle Investment Services Limited. These funds use
IFDS as their TA whilst our existing funds are with BNYM.
For our Threadneedle (Lux) SICAV range, the TA is IFDS Luxembourg. We will be
announcing our RDR plans for this range of funds at the end of September.
The funds referred to in this letter are administered by BNYM.
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Find out more
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Speak to your usual Threadneedle Investments contact.
Important information. For internal use by institutional clients, distributors, intermediaries and consultants only (not to be passed on to any third party). The value of investments and any income from
them can go down as well as up. Threadneedle Investment Funds ICVC (“TIF”), Threadneedle Specialist Investment Funds ICVC (“TSIF”), Threadneedle Focus Investment Funds ICVC (“TFIF”) are openended
investment companies structured as umbrella companies, incorporated in England and Wales, authorised and regulated in the UK by the Financial Services Authority (FSA) as UCITS schemes. The
Threadneedle Managed Funds range consists of six unit trusts: the Threadneedle Global Equity Fund, Threadneedle Global Equity & Bond Fund, Threadneedle Equity & Bond Fund, Threadneedle Defensive
Equity & Bond Fund, Threadneedle Defensive Fund and Threadneedle Managed Income Fund (together ‘the Trusts’). The Trusts are Authorised Unit Trust Schemes within Section 243 of the Financial Services
and Markets Act 2000 and are constituted pursuant to the Financial Services Authority’s Collective Investment Schemes Sourcebook (COLL), as amended from time to time. The Trusts are UCITS schemes
for the purpose of COLL. Threadneedle UK Property Fund is an FSA authorised unit trust pursuant to section 234 (1) of the Financial Services and Markets Act 2000. It is a “non-UCITS retail scheme” for the
purposes of the Financial Services Authority’s Collective Investment Scheme Sourcebook. Subscriptions to a Fund may only be made on the basis of the current Prospectus and the Key Investor Information
Document , as well as the latest annual or interim reports, which can be obtained free of charge on request, and the applicable terms & conditions. Please refer to the ‘Risk Factors’ section of the Prospectus
for all risks applicable to investing in any fund. The above documents are available in English, French, German, Portuguese, Italian, Spanish and Dutch (no Dutch Prospectus) and free of charge on request
from Threadneedle Investments, Client Services department P.O. Box 1331, Swindon SN38 7TA. 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. 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. Threadneedle
Investments is a brand name and both the Threadneedle Investments name and logo are trademarks or registered trademarks of the Threadneedle group of companies. threadneedle.com
Information for Investment Professionals
(not for onward distribution to, or to be relied upon by, private investors).
Issued 08.12 | Valid to 12.12 | T11300-BNY