Threadneedle Global Equity Income Fund - Threadneedle Investments

OEIC
Equity
Newsletter – GBP, June 2013
Threadneedle Global Equity Income Fund
Stephen Thornber
Fund Manager
Key Facts
Fund Description:
The Fund aims to achieve a
high and growing income
over the long-term
combined with prospects
for capital growth from a
diversified portfolio of
typically 75 to 95
companies from around
the world.
Launch date:
30 June 2007
Fund size*:
£370.2m
US$563.1m
Index:
MSCI AC World Index
ISIN codes
Retail (Net Income):
GBP: GB00B1Z2MW38
US$: GB00B1Z2MZ68
Institutional (Net Income):
GBP: GB00B1Z2MX45
US$: GB00B1Z2N865
*As at 31 May 2013.
Key market activity this month
Global equity markets made moderate gains in May, lifted initially by a robust corporate earnings
season and continued support from central bankers. The European Central Bank cut interest rates by
0.25% to 0.5% during the month, a move that reassured European equity markets. However,
uncertainty over the tapering of the US Federal Reserve‟s stimulus programme weighed on sentiment
towards the end of the month. In Asia, equities were negatively affected by weaker-than-expected
Chinese manufacturing data, while Japanese equities retreated sharply as investors took profits after a
strong run, and as JGB yields rose on the prospects of inflation. Meanwhile, emerging markets nudged
slightly ahead, despite investors reducing allocations in favour of the US market, where the outlook was
more favourable and the dollar strengthening.
Fund performance - cumulative periods (net of fees) as at 31 May 2013
%
1
Month
6
Month
1
Year
3
Years
5
Years
Since Inception
(30 June 2007)
Threadneedle Global Equity Income Fund 1.0% 21.5% 32.4% 53.1% 53.8% 51.9%
MSCI AC World Index 2.5% 18.5% 28.6% 37.9% 41.9% 43.1%
Peer group median 1.9% 17.5% 27.7% 38.4% 38.7% 27.9%
Quartile ranking 4 1 1 1 1 1
As at 31 May 2013. Fund data sourced from Threadneedle/Morningstar, in GBP. Fund performance based on retail GBP shareclass, ISIN GB00B1Z2MW38. Index
data provided by Thomson Financial DataStream. Peer group used is UK IMA - Global Equity Income Sector. Net performance based on 12pm prices, unadjusted
income reinvested.
Performance
The fund underperformed in May, as investors rotated into cyclical sectors of the market and as
sentiment towards the US economy continued to strengthen. The fund‟s underweight in the US and
defensive sector positioning were the primary cause of underperformance. Defensive sectors including
utilities, telecoms, and consumer staples underperformed while the technology and consumer
discretionary sectors outperformed. Regionally, North America outperformed and an overweight
position in Asia ex-Japan detracted, although this was partially offset by being underweight Japan.
Stock selection was best in the financials and materials sectors and least favourable in the energy and
industrial sectors.
In the financials sector, holdings in asset managers, including Och-Ziff Capital Management,
Blackstone, and Intermediate Capital, continued to outperform. Och-Ziff‟s funds have delivered solid
performance and are seeing improved inflows, which give us confidence that it can grow earnings and
deliver its very high dividend yield. Blackstone is a direct beneficiary of improving asset prices as
investors eye significant performance fee income as key funds reach high water marks.
In the materials sector, the US chemical manufacturer LyondellBasell reached new highs after
announcing a 10% share repurchase programme and a 25% increase in its regular quarterly dividend.
This follows a doubling of the dividend last year and a significant special dividend. We expect another
substantial special dividend this year while the company benefits from the wide spread between global
chemical prices and low cost US shale gas. Other highlights included Renault, as auto sales growth
supports improved profitability, and gaming & hotel complex operator NagaCorp, which announced a
strong increase in visitation.
In the energy sector, the US shale producer Linn Energy underperformed after operational issues saw
the company deliver disappointing first quarter earnings. A rotation out of high dividend stocks saw Linn
and other US yield plays, including Kinder Morgan and Enterprise Products, both of which operate
pipeline infrastructure, sold down. The US utility Southern Co. was also impacted.
Information for Investment Professionals Page 1 of 3

Performance (continued)
Australian holdings underperformed in May, partly as a result of weakness in the Australian dollar and partly as a result of a
rotation out of high yielding equities. Coca-Cola Amatil suffered a sharp fall after it said first half profit would fall amid discounting
and import competition. Holdings in Wesfarmers, Suncorp, Telstra and Amcor also underperformed. Other detractors included the
Singaporean telecom Starhub, which incurred several broker downgrades after strong performance. Japanese REIT holdings
including Nomura Real Estate Residential and Activia Properties also fell as the Japanese market experienced volatility.
Activity
Trading activity was subdued during May, with New Residential Investment Corp, the only new holding, and itself a result of a spinoff
from existing position Newcastle Investment Corp. The new holding will likely be sold in the upcoming months.
As cash built up within the fund it was deployed to top-up existing holdings in the technology industry, which look particularly
attractive at current levels, or to add to newer smaller positions where our conviction has increased. These positions included
technology stocks Delta Electronics, Siliconware Precision and Radiant Opto-Electronics as well as Hugo Boss and security
printing firm Valid Solucoes.
Fund positioning
Fundamental statistics
Top ten holdings
Fund Index Fund Active
Number of stocks 85 2,410 Blackstone 2.2% +2.2%
Dividend yield 4.77 2.87 Kraft 1.8% +1.7%
P/E (this year consensus) 13.4 13.6 HSBC 1.7% +1.1%
P/B 2.3 1.9 Novartis 1.7% +1.2%
Beta 0.92 1.00 Delta Electronics 1.7% +1.6%
Consensus Long Term Growth (I/B/E/S) 7.9 11.0 Rio Tinto 1.7% +1.5%
Seadrill 1.6% +1.6%
Sampo 1.6% +1.5%
Roche 1.6% +1.0%
GlaxoSmithKline 1.6% +1.2%
Sector weightings
Regional weightings
Financials
Consumer Staples
Energy
Cons. Discretionary
Health Care
Telecoms
Industrials
Materials
Utilities
I.T.
0 5 10 15 20 25
% weighting
North America
Far East
Europe
United Kingdom
Japan
Latin America
Other
0 10 20 30 40 50 60
% weighting
Key:
Fund
Index
All data as at 31 May 2013. Index used is MSCI AC World Index.
Information for Investment Professionals Page 2 of 3

Outlook
The US economic outlook continues to improve while Europe faces major challenges, both political and economic. We are
prepared for increased volatility in the short term as the market grapples with the timing and quantum of a tapering of US
quantitative easing. We have seen a rotation into more economically-sensitive stocks during the month, a reversal of year to date
trends. Given the modest growth outlook we retain our balanced positioning, and generally are of the view that interest rates will
remain low for years to come. Our positioning will continue to favour stocks that offer both a high dividend yield and growth over
stocks with yield alone or „bond proxies‟ which we think are susceptible to weakness.
Fund Objective and Policy
The aim of the Fund is to provide income with the potential to grow the amount you invested as well. The Fund invests at least
two-thirds of its assets in shares of companies worldwide. The Fund makes active investment decisions.
Key risks
Market Risk: The value of investments can fall as well as rise and investors might not get back the sum originally invested.
Currency Risk: Where investments are made in assets that are denominated in multiple currencies, changes in exchange rates
may affect the value of your investments.
Investor Currency Risk: Where investments in the fund are in currencies other than your own, changes in exchange rates may
affect the value of your investments.
High Volatility Risk: The fund typically carries a risk of high volatility due to its portfolio composition or the portfolio management
techniques used. This means that the fund‟s value is likely to fall and rise more frequently and pronounced than with other funds.
Important information. For internal use and for Professional and/or Qualified Investors only (not to be used with or passed on to retail clients).
All information as at 31.05.2013 unless otherwise shown. Past performance is not a guide to future performance. The value of investments and any income is
not guaranteed and can go down as well as up. This means that an investor may not get back the amount invested. Threadneedle Specialist Investment
Funds ICVC (“TSIF”) 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 Conduct Authority (FCA) as a UCITS scheme. TSIF is registered for public offer in Austria, Belgium, France, Germany,
Hong Kong (some sub-funds only), Italy, Luxembourg, the Netherlands, 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. TSIF 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. TSIF is authorised in Spain by the Comisión
Nacional del Mercado de Valores (CNMV) and registered with the relevant CNMV‟s Registered with number 481. Pursuant to article 1:107 of the Act of
Financial Supervision, the subfund is included in the register that is kept by the AFM. 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. This material is for
information only and does not constitute an offer or solicitation of an order to buy or sell any securities or other financial instruments, or to provide investment
advice or services. Please read the Prospectus before investing. 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: Raiffeisen Zentralbank
Österreich AG, Am Stadtpark 9, 1030 Wien, Austria; J.P. Morgan Chase Bank Brussels, 1, Boulevard du Roi Albert II, 1210 Brussels, Belgium;1 BNP Paribas
Securities Services, 66 rue de la Victoire, 75009 Paris, France; JP Morgan AG, Junghofstr. 14, 60311 Frankfurt, Germany; J.P. Morgan Bank Administration
Services (Ireland) Limited, J.P. Morgan House International Financial Services Centre, Dublin 1, Ireland; State Street Bank S.p.A., via Col Moschin 16, 20136
Milano, Italy; State Street Bank Luxembourg S.A., 49 Avenue J. F. Kennedy, 1855 Luxembourg; Fortis Intertrust, Rokin 55, 1012 KK Amsterdam, Netherlands;
any appointed distributor listed on the Spanish Financial Regulator‟s website www.cnmv.es or Threadneedle Investments‟ Client Services department, PO
Box 10033, Chelmsford, Essex, CM99 2AL. The fund characteristics described above are internal guidelines (rather than limits and controls). They do not
form part of the fund‟s objective and policy and are subject to change without notice in the future. 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 and should not be seen as
investment advice. 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 Conduct 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
Issued 06.13 | Valid to 07.13 | T13598
Information for Investment Professionals Page 3 of 3