Threadneedle Investment Funds ICVC European Select Fund Volatility The price of the Fund s investments may rise and fall sharply in the short-term and

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1 Issuer: Threadneedle Portfolio Services Hong Kong Limited 天利投資管理香港有限公司 PRODUCT KEY FACTS Threadneedle Investment Funds ICVC European Select Fund 6 April 2018 Quick facts This statement provides you with key information about this product. This statement is a part of the offering document. You should not invest in this product based on this statement alone. Fund Manager Threadneedle Investment Services Limited (Authorised Corporate Director/ACD): Investment Manager: Threadneedle Asset Management Limited (internal delegation, UK) Depositary: Citibank Europe plc, UK Branch Custodian: Citibank N.A. Ongoing charges over a year: Class 1: 1.60% # Dealing frequency: Daily Base currency: GBP Dividend policy: Accumulation Shares: No dividend distribution Financial year end of this Fund: 7 March Minimum investment: Class 1: US$ 3,000 initial, US$ 750 additional (including US$ hedged share classes) EUR 2,500 initial, EUR 750 additional GBP 2,000 initial, GBP 1,000 additional SGD 4,000 initial, SGD 1,000 additional (hedged share classes) # Since the administration fee for this share class was reduced on 1 February 2018, the ongoing charges figure is an estimate only. The figure is established based on the estimated total asset management fee and operating expenses of the share class and is expressed as a percentage of the average net asset value of the share class over a 12-month period. This figure may vary from year to year. What is this product? Threadneedle Investment Funds ICVC European Select Fund (the Fund ) is a sub-fund of Threadneedle Investment Funds ICVC, an investment company (i.e. a mutual fund) with variable capital constituted in England and Wales. The home regulator of Threadneedle Investment Funds ICVC is the Financial Conduct Authority ( FCA ) in the UK. Objective and Investment Strategy Investment Objective To achieve above average capital growth. Investment Policy The investment policy is to invest at least two-thirds of the assets of the Fund in a relatively concentrated portfolio of equities of companies domiciled in Continental Europe or with significant Continental European operations. The select investment approach means that the Fund has the flexibility to take significant stock and sector positions which may lead to increased levels of volatility. The Fund may also invest in other securities (including fixed interest securities, other equities and money market securities). The Fund will not use financial derivative instruments extensively for hedging or efficient portfolio management purposes. The Fund does not currently use financial derivative instruments for investment purposes. What are the key risks? Investment involves risks. Please refer to the offering document for details including the risk factors. Investment There is no guarantee that the investment objective of the Fund can be achieved. The value of investments held by the Fund 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. 1

2 Threadneedle Investment Funds ICVC European Select Fund Volatility The price of the Fund s investments may rise and fall sharply in the short-term and this may result in a higher volatility of the Fund s value. Equity Securities The value of equity securities held by the Fund may be affected by various factors. A fall in their value will affect the price of the Fund. Concentration Short-term price volatility is likely to be particularly evident in the Fund as it invests in a concentrated portfolio of equity securities. Geographical Concentration The Fund s investments are concentrated in Europe. This may result in higher volatility than funds which comprise broad-based global investments. European Sovereign Crisis The Fund mainly has investment exposure to Europe. In light of the current Eurozone crisis which may unfold in a number of ways, including but not limited to the downgrading of the credit ratings of European countries, the default or bankruptcy of one or more sovereigns within the Eurozone, the departure of some, or all, relevant EU Member States from the Eurozone and the break-up of the Eurozone, the Fund may be subject to a number of increased risks (such as volatility, liquidity and currency risks). This may adversely impact the performance and value of the Fund. Currency Where investments are made in assets that are denominated in multiple currencies, changes in exchange rates may affect the value of the investments. Investor Currency Where investments in the Fund are in currencies other than your own, changes in exchange rates may affect the value of your investments. Hedge/Basis The use of financial derivative instruments for hedging and/or efficient portfolio management purposes may become ineffective in adverse situations or if the ACD or the Investment Manager employs a strategy that does not correlate well with the Fund s investments. This may result in a significant loss to the Fund. How has the Fund performed? 40% 30% 20% 10% 29.5% 24.2% 24.4% 19.5% 10.9% 16.8% 14.8% 0% -10% -20% -30% -2.6% -4.5% -40% -50% -41.6% Past performance information is not indicative of future performance. Investors may not get back the full amount invested. The computation basis of the performance is based on the calendar year end, NAV-To-NAV, with dividend reinvested. These figures show by how much the share class increased or decreased in value during the calendar year being shown. Performance data has been calculated in Euro including ongoing charges and excluding subscription fee and redemption fee you might have to pay. Fund launch date: 21 August Share Class 1 accumulation (Euro) launch date: 21 August The Fund Manager views Share Class 1 accumulation (Euro) shares, being the retail share class denominated in the Fund s primary investment currency, as the most appropriate representative share class. Is there any guarantee? This Fund does not have any guarantees. You may not get back the full amount of money you invest. 2

3 What are the fees and charges? Charges which may be payable by you You may have to pay the following fees when dealing in the shares of the Fund. Fee Subscription Fee (Initial Charge) Switching Fee and Conversion Fee Redemption Fee (Redemption Charge) Threadneedle Investment Funds ICVC European Select Fund What you pay Class 1: Up to 5.00% of the gross amount invested Switching into shares of another fund. For the avoidance of doubt you are only permitted to switch into a fund which is authorised in Hong Kong by the SFC: Up to the prevailing initial charge for the class of shares acquired Conversion into another class within the Fund: Nil Nil Ongoing fees payable by the Fund The following expenses will be paid out of the Fund. They affect you because they reduce the return you get on your investments. Management fee* (Management charge) Custodian fee Performance fee Administration fee* (Ongoing registration and general expenses payable to the ACD) Depositary fee* Annual rate Class 1: 1.50% of the net asset value Depending on the country in which the assets are held, up to 0.44% of the assets held by the Custodian Not applicable Class 1: 0.08% of the net asset value 0.01% of the net asset value * These fees may be increased by giving at least 60 days notice to affected shareholders in accordance with FCA Rules. Other fees You may have to pay other fees when dealing in the shares of the Fund. Additional Information You generally buy and redeem shares at the Fund s next-determined net asset value after the ACD receives your request in good order before 12 noon (UK time) on each dealing day. The Hong Kong Representative/your distributor may impose different deadlines for receiving requests from investors. Please check with your distributor regarding its internal dealing cut-off time. The net asset value of this Fund is calculated on each business day in England and Wales and the price of shares is published daily on the website 1. You may obtain the past performance information of other shares offered to Hong Kong investors from 1. Important If you are in doubt, you should seek professional advice. The SFC takes no responsibility for the contents of this statement and makes no representation as to its accuracy or completeness. 1 The website has not been reviewed by the SFC. It may contain information on funds which are not authorised for sale to the public in Hong Kong and are not available to Hong Kong investors. 3

4 INFORMATION FOR HONG KONG INVESTORS THREADNEEDLE INVESTMENT FUNDS ICVC 6 APRIL 2018 THREADNEEDLE INVESTMENT FUNDS ICVC INFORMATION FOR HONG KONG INVESTORS

5 Information for Hong Kong Investors Threadneedle Investment Funds ICVC Information for Hong Kong Investors Threadneedle Investment Funds ICVC If you are in any doubt about the contents of the Prospectus accompanying this document, or about this document itself, you should consult your stockbroker, bank manager, solicitor, accountant or other professional adviser. No offer shall be made to the public of Hong Kong in respect of the above unauthorised Funds. The issue of the Prospectus was authorised by the SFC only in relation to the offer of the above SFC-authorised Funds to the public of Hong Kong. Warning: In relation to the Funds of Threadneedle Investment Funds ICVC (the Company ) set out in the Prospectus, only the following Funds are authorised by the Securities and Futures Commission ( SFC )* pursuant to Section 104 of the Securities and Futures Ordinance and hence may be offered to the public of Hong Kong: Intermediaries should take note of this restriction. Class X Shares, Class 2 Shares, Class 2i Shares, Class D Shares, Class L Shares, Class N Shares and Class Z Shares of each of the Funds will not be made available for public offers in Hong Kong. UK Equity Income Fund UK Monthly Income Fund UK Corporate Bond Fund Sterling Bond Fund UK Growth and Income Fund UK Fund UK Smaller Companies Fund UK Select Fund UK Overseas Earnings Fund Dollar Bond Fund American Fund American Select Fund American Smaller Companies Fund (US) Japan Fund European Bond Fund European Fund European Select Fund European Smaller Companies Fund Asia Fund Latin America Fund Emerging Market Bond Fund Global Bond Fund Global Select Fund High Yield Bond Fund Pan European Fund Pan European Smaller Companies Fund European High Yield Bond Fund Strategic Bond Fund Please note that the Prospectus is a global offering document and therefore also contains details of the following Funds which are not authorised by the SFC:- Monthly Extra Income Fund UK Institutional Fund Sterling Fund European Corporate Bond Fund The information in this document is current as at 6 April Threadneedle Investment Services Limited, the Authorised Corporate Director (the ACD ) of the Company, is the person responsible for the information contained in the Prospectus and this document and accepts responsibility accordingly. Hong Kong Representative and Constitutive Documents The Hong Kong Representative is: HSBC Institutional Trust Services (Asia) Limited 1 Queen s Road Central Hong Kong Attention: Transfer Agency, Fund Services Tel: Fax: The Company has entered into an agreement dated 17 March 1998 with the Hong Kong Representative (formerly known as Bermuda Trust (Far East) Limited), under which the Hong Kong Representative will undertake certain functions in Hong Kong on behalf of the Company, in accordance with the SFC Code on Unit Trusts and Mutual Funds. The Company will pay an annual fee of US$5,000 to the Hong Kong Representative for these services. The documents of the Company referred to under the section Documents of the Company in the Prospectus may be inspected free of charge at, or purchased at a reasonable price from, the offices of the Hong Kong Representative at the above address. The Key Investor Information referred to in the Prospectus is not available for distribution to Hong Kong investors. The Key Investor Information is available only upon the specific request of a Hong Kong investor directed to the ACD Client Services Department at the details provided in the Directory section of the Prospectus following his or her receipt of the Hong Kong offering documents. The Key Investor Information will be sent to the relevant Hong Kong investor directly from the service provider of the Company outside Hong Kong, together with another copy of the Hong Kong offering documents and a personalised cover letter. The terms of the Key Investor Information are reflected in the Hong Kong offering documents. *SFC authorisation is not a recommendation or endorsement of the Company or the Funds, nor does it guarantee the commercial merits of the Company or the Funds or their performance. It does not mean the Company or the Funds are suitable for all investors nor is it an endorsement of their suitability for any particular investor or class of investors. 3

6 Information for Hong Kong Investors Threadneedle Investment Funds ICVC Investment Advisory Arrangements Threadneedle Asset Management Limited may, subject to its own liability, delegate the discretionary investment management of part of the assets of the following Fund(s) to one or more third parties within the Ameriprise Financial, Inc. group of companies: Japan Fund The delegate of Threadneedle Asset Management Limited for the above Fund(s) is Columbia Management Investment Advisers, LLC, the registered address of which is at 100 Federal Street Boston, MA 02110, United States. Minimum Subscriptions and Holdings The minimum subscriptions and holding for Hong Kong residents are: Class 1 Shares (including hedged shares) Minimum Investment US$3,000 / GBP 2,000 / EUR 2,500 / JPY 280,000 / SGD 4,000 / CHF 3,000 Subsequent Subscription US$750 / GBP 1,000 / EUR 750 / JPY 140,000 / SGD 1,000 / CHF 750 Minimum Holding US$750 / GBP 500 / EUR 750 / JPY 70,000 / SGD 1,000 / CHF 750 Class M Shares (including hedged shares) Minimum Investment US$3,000 Subsequent Subscription US$750 Minimum Holding US$750 ACD s Fees As remuneration for carrying out its duties and responsibilities for Class 1 Shares and Class M Shares as the authorised corporate director of and the registrar to the Company, the ACD is paid an annual fee out of each of the Funds of the Company as set out in the Prospectus in the section Charges payable to the ACD. The fee is calculated with reference to the Net Asset Value of the relevant Funds. Custodian s Fees The remuneration of the Custodian of the property of the Company for acting as Custodian is calculated at an ad valorem rate determined by the territory or country in which the assets of each Fund are held. Currently, the lowest rate is 0.002% and the highest rate is 0.44%. In addition, the Custodian makes a transaction charge determined by the territory or country in which the transaction is effected. Currently, these transaction charges range from 3 to 90 per transaction. Depositary s Fee The Depositary currently charges a periodic charge at such annual percentage rate of 0.01% being paid on the same basis as the ACD s annual management charge. In addition, the Depositary will be entitled to receive reimbursement for expenses properly incurred by it in the discharge of its duties or exercising any of the powers conferred upon it in relation to the Company and each Fund as set out in the Prospectus in the section Depositary s fee. Risk Factors Before investing in the Company, potential investors should consider the risks involved. Please see the section headed Investment objectives, policies and other details of the Funds in the Prospectus for specific risks associated with each Fund and the section headed Risk factors in the Prospectus for risks associated with investing in the Company. Neither the ACD nor the Investment Manager guarantees the performance of the Company or the repayment of capital from the Company. Prospective investors should be aware that the price of Shares in the Funds and the income from Shares (if any) may go down as well as up. There is no assurance that the investment objectives of the Funds will be achieved. Investors should note that the information contained in the Investor Profile section in the investment objective and policy of each Fund in the Prospectus is provided for reference only. Before making any investment decisions, investors should consider their own specific circumstances, including, without limitation, their own risk tolerance level, financial circumstances, investment objectives, etc. If you are in doubt about this information, you should consult your stockbroker, bank manager, solicitor, accountant or other financial adviser. Use of Derivatives and Forward Transactions Each of the Funds is permitted by the FCA Rules to use derivatives and forward transactions for the purposes of efficient portfolio management ( EPM ) 1. The types of derivatives and forward transactions that may be so used for EPM purposes by the Funds include futures, forwards, options and swaps. The price of derivatives and forward transactions can be very volatile because a small movement in the price of the underlying security, index, interest rate or currency may result in a substantial movement in the price of the instrument. In addition, derivatives and forward transactions are subject to a variety of other risks, including liquidity risk (e.g. when particular derivative instruments become difficult to purchase or sell), credit risk (e.g. when an issuer or counterparty fails to honour its obligations under the derivative contract, or a lowering of the credit rating of an instrument leading to decreased liquidity of the instrument) and the risk of non-performance by the counterparty, including risks relating to the financial soundness and creditworthiness of the counterparty. Other risks include the risks relating to the valuation of derivatives and forward transactions as these transactions are complex and their valuation may involve subjective elements. The use of derivatives for hedging and/or EPM purposes may become ineffective in adverse situations or if the ACD or the Investment Manager employs a strategy that does not correlate well with the Funds investments. This may result in a significant loss to the Funds. Nevertheless, owing to the limited exposure to derivatives and forward transactions under EPM, the ACD does not consider that such use of derivatives and forward transactions will increase the risk profile of any Fund. 1 Efficient portfolio management is defined in the Prospectus to mean the use of techniques and instruments which relate to transferable securities and approved money-market instruments which fulfill the following criteria: (a) they are economically appropriate in that they are realised in a cost effective way; and (b) they are entered into for one or more of the following specific aims: - reduction of risk; - reduction of cost; - generation of additional capital or income for the scheme with a risk level which is consistent with the risk profile of the scheme and the risk diversification rules laid down in COLL. 4

7 Information for Hong Kong Investors Threadneedle Investment Funds ICVC Use of Derivatives and Forward Transactions specific to the Strategic Bond Fund The Strategic Bond Fund may invest in derivatives and forward transactions extensively for the purposes of investment, hedging and efficient portfolio management. The use of derivatives and forward transactions for investment purposes may increase the risk profile of the Strategic Bond Fund, and may lead to higher volatility in the net asset value of the Strategic Bond Fund. The types of derivatives and forward transactions that the Strategic Bond Fund may invest in are, but are not limited to, interest rate derivatives, foreign currency derivatives and credit derivatives. The Portfolio intends to use duration, credit spread and currency strategies in respect of the use of financial derivative instruments, which may be used in accordance with the Portfolio s investment objective and policy. The Strategic Bond Fund s exposure also involves short sales of investments and leverage. The expected level of leverage of the Strategic Bond Fund is 0-100%, calculated using the commitment approach methodology. In certain circumstances the actual level of leverage may be higher than this expected level. Such circumstances include, but are not limited to, adjusting exposures as a result of substantial subscriptions and redemptions, holding of opposite derivative trades which have minimal market risk and use of certain derivative instruments which have large exposure numbers but low market risk (when these derivative instruments are deemed the most efficient instruments to use in order to reflect a market view). In addition to the risks associated with derivatives and forward transactions set out under the section headed Use of Derivatives and Forward Transactions above, investors should also read the following description of these specific types of derivatives and their associated risks, as well as the risks associated with the use of a short-selling strategy and leverage, are set out below: Interest Rate Derivatives An interest rate derivative is a derivative where the underlying asset is the right to pay or receive a notional amount of money at a given interest rate. These allow the portfolio to express positive or negative views on interest rate movements (or more generally how the entire interest rate yield curve might move, i.e. they include a duration element). Interest rate derivatives can be used for hedging interest rate exposure or taking exposure to interest rates. Symmetric instruments such as swaps or interest rate futures carry the risk that the manager of the Strategic Bond Fund calls the market direction incorrectly, whilst asymmetric instruments such as interest rate options allow for more refined views on how much the market might move and in which direction, and so express views on a range of other risks, including exposure to the volatility of the underlying. Credit Default Swaps A credit default swap allows the transfer of default risk between two parties. Credit default swaps also allow the ACD to take a view on the creditworthiness of the underlying entity. Credit default swaps can be used to both buy and sell credit protection. Bought protection represents an investment where a premium is paid for receiving a level of protection against a bond defaulting. The level of risk is limited to the premium paid. Sold protection represents an investment where a premium has been received for providing a level of protection against a bond defaulting. The maximum level of risk is the value of the bond, however, the Strategic Bond Fund may not have any legal recourse against the reference entity and will not benefit from any collateral securing the reference entity s debt obligations. The value of a credit default swap may also change depending on the changes in the credit spread of the reference entity which is a reflection of its credit worthiness. Forward contracts on currencies A forward contract is a non-standardised contract between two parties to buy or sell an asset at a specified future time at a price agreed today. In forward contracts on currencies, the contract holders are obligated to buy or sell the currency at a specified price, at a specified quantity and on a specified future date. Forward contracts, unlike futures contracts, are not traded on exchanges and are not standardised. Forward trading is substantially unregulated; there is no limitation on daily price movement and speculative positions limits are not applicable. Forward contracts on currencies are exposed to the risk that the exchange rate of the currency changes against the Strategic Bond Fund before expiry of the forward contract. It is also subject to interest rate risk of the underlying currencies as well as counterparty risk. Risks associated with using a short selling strategy and leverage The Strategic Bond Fund s exposure involves short sales of investments and leverage, which increases the risk of the Strategic Bond Fund. The term short sales refers to an exposure through derivatives to the selling of securities that are not owned by the seller at the time of the sale in anticipation that its value will fall. However, if the value of that security increases, it will have a negative effect on the Strategic Bond Fund s value. The risks arising from using a short-selling strategy are different from that of a fund using a traditional long-only strategy. Leverage has the overall effect of increasing positive returns, but causes a faster decrease in the value of assets if prices fall. Downgrading Risk Investment grade securities may be subject to the risk of being downgraded to below investment grade securities. In the event of downgrading in the credit ratings of a security or an issuer relating to a security, a Fund s investment value in such security may be adversely affected. The ACD may or may not dispose of the securities, subject to the investment objectives of the relevant Fund. In the event of investment grade securities being downgraded to below investment grade securities, the Fund will also be subject to the risks outlined in the paragraph headed 10. High Yield Bond in the Prospectus under the section Risk factors. Risks related to the European sovereign crisis Certain Funds may invest substantially in Europe. The current Eurozone crisis continues to raise uncertainty with little or no clarity on an enduring solution. Potential scenarios could include, among other things, the downgrading of the credit ratings of European countries, the default or bankruptcy of one or more sovereigns within the Eurozone, the departure of some, or all, relevant EU Member States from the Eurozone, or any combination of the above or other economic or political events. These may lead to the Euro no longer being a valid trading currency, and to additional 5

8 Information for Hong Kong Investors Threadneedle Investment Funds ICVC legal and operational risks to the Funds. It may also cause uncertainty as to the operation of certain terms of agreements that are governed by the law of an exiting EU Member State and may require the redenomination of some, or all, Euro-denominated sovereign debt, corporate debt and securities (including equity securities). In such circumstances, a large number of investors could decide to redeem their investments in the Funds at the same time. These events may increase volatility, liquidity and currency risks associated with investments in Europe and the Funds may potentially be adversely affected by any or all of the above factors, or there may be additional unintended consequences. Risk of Termination Each of the Funds may be terminated in certain circumstances which are summarised under the section headed Winding up of the Company or a Fund of the Company in the Prospectus. In the event of the termination of any of the Funds, the Company would have to distribute to the Shareholders their pro rata interest in the assets of the Fund. It is possible that at the time of such sale or distribution, certain investments held by the Fund may be worth less than the initial cost of such investments, resulting in a corresponding loss to the Shareholders. Moreover, any organisational expenses with regard to the Shares that had not yet become fully amortised would be debited against the Fund s assets at that time and the Fund would have to meet any outstanding liabilities which would affect the value of the Fund at the time of the termination. Shareholder Concentration Risk A Fund with high shareholder concentration may have compounded funding liquidity risks, i.e., where the relevant Fund is held by a small number of shareholders, a single redemption request may constitute a relatively large portion of the Fund size. In such circumstances, the Fund may be subject to higher liquidity risks and may be adversely affected. Liquidity Risk Please refer to the paragraph headed 19. Liquidity Risk in the Prospectus under the section Risk factors for disclosures relating to liquidity risk. Where it is disclosed in the Prospectus that dealings in the fund may be limited due to issues of capacity, it refers to the fact that dealings in the Funds which are Limited Issue Funds may be limited due to issues of capacity. This is because the ACD may decide to limit the capacity of the relevant Limited Issue Fund to issue Shares. Currently, none of the Funds are Limited Issue Funds. Publication of Prices The Net Asset Value for each Share Class of each Fund will be available daily on the website Other Funds Managed by the ACD The ACD also acts as manager or the Authorised Corporate Director in respect of the funds set out in the section Management and administration: The Authorised Corporate Director in the Prospectus. These funds, other than Threadneedle Specialist Investment Funds ICVC, are not authorised in Hong Kong and therefore will not be available to Hong Kong residents. Applications by Hong Kong Investors Applications may be made direct to Threadneedle Investment Services Limited in the UK in accordance with the Prospectus, or through the Company s Hong Kong Representative. No money should be paid to any intermediary in Hong Kong who is not licensed or registered to carry on Type 1 regulated activity under Part V of the Securities and Futures Ordinance. Dealing Charges The initial charges, conversion fees and switching fees applicable to Hong Kong investors are set out in the section Dealing Charges in the Prospectus. Initial Charge applicable to Hong Kong investors Class 1 Shares and Class M Shares up to 5% of the gross amount invested. The ACD will give written notice to the shareholders not less than 60 days before implementing any increase to the rates of initial charge set out above. Fair Value Pricing To the extent permitted by the FCA and subject to appropriate controls, the ACD may use a technique known as fair value pricing to adjust underlying security prices by reference to external price indicators and appropriate trigger levels so that the valuation of the Funds will more accurately reflect market developments on any given Dealing Day. The fair value pricing technique is applicable to all of the Funds but will be most likely applied to six Funds of the Company, namely, the American Fund, American Select Fund, American Smaller Companies Fund (US), Latin America Fund, Global Bond Fund and the Global Select Fund. Not less than 25% of the assets of each of these six Funds have been invested in US or other North American securities. The fair value pricing technique is applied to adjust the latest closing prices of such US or North American securities, which do not reflect the market developments after close of the relevant US or North American markets, as at the valuation of these Funds at 12 noon UK time on a given Dealing Day. Deferred redemption As disclosed in the section headed Deferred redemption in the Prospectus, in times of high redemptions, where requested redemptions exceed 10% of a Fund s value, to protect the interest of continuing Shareholders, the ACD may defer redemptions at a particular valuation point on a Dealing Day, to the Valuation Point on the next Dealing Day. Please note that such deferral would be made in respect of redemption requests in excess of 10% of the relevant Fund s value on a pro-rata basis. Subject to sufficient liquidity being raised at the next Valuation Point, all deferred redemption requests relating to the earlier valuation point will be completed before those relating to the later Valuation Point are considered. 6

9 Information for Hong Kong Investors Threadneedle Investment Funds ICVC Suspension of Dealings in the Company The ACD may, with the prior agreement of the Depositary, and must without delay if the Depositary so requires, temporarily suspend the issue, cancellation, sale and redemption of Shares in any or all of the Funds where due to exceptional circumstances it is in the interests of all the Shareholders in the relevant Fund or Funds. The circumstances under which suspension of dealing may occur include, for example, those where the ACD cannot reasonably ascertain the value of the assets or realise assets of the Fund, or the closure or suspension of dealing on a relevant exchange. During any suspension, a holder may withdraw his redemption notice provided that such withdrawal is in writing and is received before the end of the suspension. Any notice not withdrawn will be dealt with on the Dealing Day next following the end of the suspension. Stock lending and Repo Contracts The Company currently engages in stock lending activities with the Custodian acting as stock lending agent on behalf of the Depositary. The purpose of such stock lending activities is to generate additional income for the Company with an acceptable degree of risk. The ACD and the Depositary must ensure that the suspension is only allowed to continue for as long as is justified having regard to the interests of Shareholders. In particular, exceptional circumstances that may require or indicate the possible need for suspension of dealing may include: (i) significant disruption to the trading of equity or debt securities in a market or markets in which a Fund is wholly or substantially invested, as a consequence of which the ACD and/or the Depositary do not believe that they can establish a reasonable estimate of the value at which investments in that market could be sold or purchased, which may itself include the suspension of a market; (ii) the failure of settlement systems related to the trading of equities/ bonds/currencies in market or markets in which a Fund is wholly or substantially invested, as a consequence of which it is not possible to trade and settle investments in a manner that is necessary to meet redemptions by Shareholders; (iii) a Fund is in receipt of a substantial volume of redemption instructions and as a result of trading conditions (e.g. relative lack of liquidity in relevant markets), the ACD and/or the Depositary do not believe that they can currently establish a reasonable estimate of the value at which investments in that market could be sold; (iv) the systems used for valuing the assets of a Fund and pricing Shares in that Fund, or information feeds from custodian banks, have been disrupted to such an extent that it is not possible to provide a reliable valuation of such assets; and (v) any other significant event that may directly impact the ACD s ability to price Shares in a Fund. Any temporary suspension of dealing in respect of the Company and/ or any of the Funds shall be notified to the SFC immediately and, where possible, all reasonable steps will be taken to bring any period of temporary suspension to an end as soon as possible. If the ACD declares such suspension, the relevant notice of suspension of dealing in Shares will be published immediately following such decision and at least once a month during the period of suspension on the website Under an agreement between the Company, the Depositary, the Investment Manager and the Custodian, the Custodian is entitled to a payment for providing stock lending services to the Company. The fee payable to the Custodian is calculated as a percentage of the gross income from stock lending and will be 12.5% of the income generated by the stock lending activity. The remaining amount of income that is generated by virtue of the stock lending activity is then applied to the Scheme Property of the Company being 87.5%. The Company will only enter into stock lending arrangements with counterparts authorised by the FCA which includes minimum standards of capital requirement of such counterparts. The Depositary or the Custodian at the time of transfer of securities receives collateral to cover against the risk of the future redelivery of securities not being completed. The Depositary accepts a variety of collateral (such as readily realisable securities), the value of which is at least equal in value, at the time of the transfer to the Depositary, to the value of the securities transferred by the Depositary. Please see the section headed Charges payable to the ACD, and the sections headed 44. Stock lending and 45. Treatment of collateral in Appendix II of the Prospectus for further details. Notwithstanding that it is stated under the section of Appendix II headed 44. Stock lending of the Prospectus that repo contracts may be entered into in respect of the Company, the Company does not in fact enter into such contracts. This document will be amended if the Company wishes to make use of repo contracts in the future. Limitation on Charges The ACD and the Investment Manager may not obtain a rebate on any fees or charges levied by an underlying collective investment scheme or its management company. Appendix V of the Prospectus Investors should note that Appendix V of the Prospectus, which includes performance information in relation to the sub-funds of the Company, must be read together with Schedule 1 to this document, which sets out detailed performance information of the Funds. 7

10 Information for Hong Kong Investors Threadneedle Investment Funds ICVC Notice to Shareholders To the extent permitted by the FCA Rules, notice to Shareholders of the Company may be made by way of publishing the information on or by including the information in a mailing to the shareholders. Notwithstanding the above, notice to the Hong Kong investors will continue to be issued by letter or by way of a statement in the relevant reports or accounts. Reports and Financial Statements Annual long report and financial statements of the Company will be made available and published within four months of the close of each annual accounting period and half-yearly long report and financial statements will be published within two months of the close of each interim accounting period. Printed copies of the annual and half-yearly long report and financial statements will be available from the offices of the Hong Kong Representative. Shareholders can also obtain electronic copies of the annual and half-yearly long reports and financial statements from Within the timeframes noted above, the ACD will make the short report which details the performance and activities of a Fund over the accounting period available on the website The ACD will provide hard copies of short reports to Shareholders upon request. Only English versions of the reports and financial statements mentioned above are prepared in respect of the Company. UCITS Directive 2009/65/EC Notwithstanding the incorporation into the Prospectus of the Company of the availability of investment powers under the UCITS Directive 2009/65/EC, it is the intention of the ACD that each Fund (save the Fund detailed below) may use financial derivatives and forward transactions for hedging and efficient portfolio management. However, each Fund (save the Fund detailed below) will not use financial derivatives instruments and forward transactions extensively for hedging, efficient portfolio management or investment purposes. The Strategic Bond Fund may invest in financial derivative instruments extensively for investment, hedging and efficient portfolio management purposes. Shareholders will be given prior written notification of not less than 1 month or as otherwise directed by the SFC should there be any intended change to the investment objectives, policy and/or restrictions applicable to any Fund in the future. The Prospectus and/or this document will also be updated accordingly. Overview of Risk Management Process in relation to Derivatives and Forward Transactions Financial Derivative Instruments The following sections provide a summary of the risk management policy and procedures concerning the Funds investment in derivatives and forward transactions. Further information in relation to such policies and procedures is available from the Hong Kong Representative. Risk Management Oversight Process In accordance with the FCA s Collective Investment Schemes Sourcebook R (as may be updated or amended) the ACD must use a risk management process, which enables it to monitor and measure as frequently as appropriate the risk of each Fund s positions and their contribution to the overall risk profile of each Fund. This analysis has to be capable of being carried out at least daily or at each valuation point whichever is the more frequent. The details of the risk management process must be notified by the ACD to the FCA in advance of the use of the process and must include the methods for estimating risks in derivatives and forward transactions and the types of derivatives and forward transactions to be used by the Funds together with their underlying risks and any relevant quantitative limits. The Depositary of the Company has to take reasonable care to review the risk management process. Risk Governance Framework The ACD and the Investment Manager have a fully independent risk team who analyse, monitor and report investment risks (market risk), counterparty risks as well as formal prospectus investment restrictions. Investment risk and counterparty risk are reported on and monitored on a daily basis. The investment risk on all funds is reviewed and assessed formally in regular risk management committees which involve members of the risk department as well as relevant personnel from the fund management department. Exceptions and summaries are reported to Threadneedle s Risk Committee, which is a sub-committee of the Board of the ACD. Counterparty risk is considered formally at Threadneedle s Credit Committee, which also reports exceptions and summary reports to Threadneedle s Board Risk Committee. Risk Control Framework The investment and counterparty risk control framework at Threadneedle includes the following elements: Regulatory investment restrictions and prospectus investment restrictions are monitored daily and controlled by Threadneedle s mandate compliance system. 8

11 Information for Hong Kong Investors Threadneedle Investment Funds ICVC Counterparty credit exposures are subject to guidelines across the business as well as at the individual Fund level. If the guidelines are exceeded then the Fund Manager will be asked to explain the reason and the Risk team may force the Fund Manager to take corrective action. The calculation of counterparty exposures includes the market value of positions and instruments as well as the potential future exposure of derivatives and forward transactions. In addition to any applicable regulatory and Prospectus based investment restrictions, investment risk is controlled via an internal guideline framework. The internal guideline framework produces risk focused management information for both the risk department as well as for the fund management department. The guideline framework facilitates identification and discussion of portfolio investment risk characteristics. The exposure measures used for investment risk are tailored to suit the exposures that each Fund is exposed to, therefore although there are some standard exposure measures applicable to all Funds, there would typically be exposure measures used for fixed income Funds that are not applicable to equity Funds. The exposure measures used include standard statistical measures of risk; such as tracking error and VAR. The exposure measures used also include risk measures designed to identify concentrations of risk; such as exposures to a particular industrial sector, or individual company. These measures of risk exposure are supplemented by stress tests. Stress tests are also typically tailored to the nature of individual funds, or groups of funds with similar characteristics. Investment risk for derivatives is typically calculated by converting derivatives into equivalent positions in the underlying instruments. Regulatory Limitations Controlling Risk When using derivatives and forward transactions, the following limitations will be adhered to: Counterparties will be first class institutions and first class professionals specialising in these types of transactions. Exposure to any single counterparty in instruments traded on a regulated stock exchange will not exceed 20% of the net asset value of the portfolio. The overall risk exposure related to derivatives and forward transactions will be in compliance with UCITS rules. The derivatives and forward transactions will be valued and counterparty limits monitored by an independent valuation process. International Swaps and Derivatives Association documentation will be executed for swaps to mitigate transaction risk with the counterparty. Risk exposure may not be increased by more than 10% by means of temporary borrowing. Derivatives and forward transactions which are deemed to be free of counterparty risk must be listed on a national exchange. Liquidity Risk Management The ACD has established a liquidity risk management policy which enables it to identify, monitor and manage the liquidity risks of each Fund and to ensure that the liquidity profile of the investments of each Fund will facilitate compliance with the Fund s obligation to meet redemption requests. Such policy, combined with the liquidity management tools of the ACD, also seeks to achieve fair treatment of Shareholders and safeguard the interests of remaining Shareholders in case of sizeable redemptions. The ACD s liquidity policy takes into account different factors including but not limited to the investment strategy; the liquidity profile; the redemption policy; the dealing frequency; the ability to enforce redemption limitations and the fair valuation policies of the relevant Fund. These measures seek to ensure fair treatment and transparency for all investors. The liquidity management policy involves monitoring the profile of investments held by the relevant Fund on an on-going basis to ensure that such investments are appropriate to the redemption policy. Further, the liquidity management policy includes details on periodic stress testing carried out by the ACD to manage the liquidity risk of each Fund under normal and exceptional market conditions. Risk information is updated and reported on a daily basis. Guidelines are set for each Fund and liquidity is monitored on a daily basis against these guidelines. The liquidity stress test in the ACD s guidelines considers the percentage of the portfolio of the Funds that could be liquidated within one day pro-rata (i.e. without changing the portfolio composition of the Funds). Investigation is undertaken promptly in instances where liquidity is found to fall outside of the guidelines. Any liquidity risk issues that are identified are escalated through the risk governance framework as detailed in the ACD s risk management policy. For Funds for which the value at risk (VaR) approach is used to measure exposure, additional reverse stress tests are also applied, analysing a range of forward-looking scenarios and the likely impact of each scenario is considered and reviewed/challenged monthly by the ACD s risk management working group. The ACD has assigned a designated team responsible for risk management to carry out the liquidity risk monitoring function and they are functionally independent from the day-to-day portfolio investment manager. The oversight of liquidity risk management is performed by the risk management committee. The following tools may be employed by the ACD to manage liquidity risks: In times of high redemptions, where requested redemptions exceed 10% of a Fund s value, the ACD may defer redemptions at a particular 9

12 Information for Hong Kong Investors Threadneedle Investment Funds ICVC valuation point on a Dealing Day, to the Valuation Point on the next Dealing Day. If such limitation is imposed, this would restrict the ability of a Shareholder to redeem in full the Shares the Shareholder intends to redeem on a particular Dealing Day; Under certain circumstances (for example, large volumes of deals) this may have an adverse effect on the Shareholders interest in the Fund. In order to prevent this effect, called dilution, the ACD has the power to apply a dilution adjustment to the subscription and/or redemption of Shares. Where a dilution adjustment is made, it will increase the dealing price when there are net inflows into a Fund and decrease the dealing price when there are net outflows. As a result of a dilution adjustment, the issue price or the redemption price (as the case may be) will be higher or lower than the issue price or redemption price (as the case may be) which otherwise would be if such dilution adjustment has not been made; The ACD may temporarily suspend the issue, cancellation, sale and redemption of Shares in any or all of the Funds where due to exceptional circumstances. During such period of suspension, Shareholders would not be able to redeem their investments in the relevant Fund. Investors may refer to the sections Deferred redemption, Other Dealing Information and Suspension of dealings in the Company in the Prospectus and the sections Deferred redemption, and Suspension of Dealings in the Company in this document for details of the above tools. Share Classes which may pay fees and expenses out of capital The Income Shares of following Funds may pay dividends out of gross income whilst charging all or part of the ACD s fee, as well as all or part of other fees and expenses of the Company to the capital of the relevant Fund:- UK Equity Income Fund UK Monthly Income Fund Sterling Bond Fund UK Growth and Income Fund Dollar Bond Fund European Bond Fund Emerging Market Bond Fund Global Bond Fund High Yield Bond Fund Strategic Bond Fund This will result in an increase in distributable income for the payment of dividends and an effective payment of dividends out of capital by the relevant Funds. Investors should note that payment of dividends out of capital amounts to a return or withdrawal of part of an investor s original investment or from any capital gains attributable to that original investment. Any distributions involving payment of dividends effectively out of a Fund s capital may result in an immediate reduction of the Net Asset Value per Share. The above policy may be amended subject to the SFC s prior approval and by giving not less than one month s notice to affected Shareholders. The composition of the dividends (i.e. the relative amounts paid out of (i) net distributable income and (ii) and capital) for the last 12 months are available from the Hong Kong Representative on request and also on the website Hong Kong Taxation The following summary sets out the ACD s understanding of current law and practice in Hong Kong, which may be subject to change. The Company will not be subject to any tax in Hong Kong unless it is held to be carrying on in Hong Kong a business earning revenue profits which arise in or are derived from Hong Kong. It is not intended that the Company will carry on such business in Hong Kong. Shareholders will not be subject to any tax in Hong Kong in respect of their acquisition, holding or disposal of Shares in the Company except where transactions in such Shares form part of a trade, profession or business carried on in Hong Kong when the relevant gains may attract Hong Kong profits tax. Foreign Account Tax Compliance Act ( FATCA ) Please see the section headed Foreign Account Tax Compliance Act in the main body of the Prospectus for information relating to FATCA. In case FFIs choose not to comply with FATCA, FATCA will impose a withholding tax of 30% on all withholdable payments derived from U.S. sources, including dividends, interest and certain derivative payments made on or after 1 July In addition, starting from 1 January 2017, gross proceeds such as sales proceeds and returns of principal derived from stocks and debt obligations generating U.S. source dividends or interest will be treated as withholdable payments. It is expected that certain non-u.s. source payments attributable to amounts that would be subject to FATCA withholding (referred to as passthru payments ) will also be subject to FATCA withholding, though the definition of passthru payment in U.S. Treasury Regulations is currently pending and the related rules may be subject to change. On 12 September 2012, the United States and the United Kingdom signed an intergovernmental agreement for the implementation of FATCA (the UK IGA ). Pursuant to the UK IGA, UK FFIs pass information to HM Revenue & Customs (HMRC) who will then automatically exchange this information with the U.S. Internal Revenue Service (the IRS ). The Company and its Funds have registered with the IRS as a UK reporting financial institution. in accordance with FATCA and other current related legislation. The Company has put in place appropriate processes and procedures to maintain its compliance with the statutory requirements, including ensuring that the Company obtain the required certification from its clients and investors as necessary to mitigate any requirement upon the Company to withhold or report such clients under the legislation. Although the Company will attempt to satisfy any obligation imposed on it to avoid the imposition of FATCA withholding tax, no assurance can be given that the Company will be able to satisfy these obligations. 10