Don Jordison

Threadneedle Investment ConferenceThreadneedle Property Investments Limited

February 2012

Agenda

01 Property – the asset class

02 Why invest now?

03 Recent Transactions

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Property – the asset class

01

Keeping perspective – property rewards the long-term investor

Source: Datastream as at 30 September 1999 to 31 December 2011. All data is total return and in GBP

UK asset class total returns since 1999

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0

50

100

150

200

250

300

350

400

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Reb

ased

= 1

00

FTSE All Share Total Return FTA British Government Fixed All Stocks Total ReturnUK IPD: Property Total Return Index (time weighted) NADJ FTSE 350 Real Estate

… exploiting property market volatility is extremely difficult

+36.9%

+108.8%+127.6%

+41.6%

Total return correlation analysis

Correlation with All property Property shares FT All Share FT Gilts 5–15 years

All property 0.20 0.11 -0.20

Property shares 0.20 0.68 0.14

FT All Share 0.11 0.68 0.11

FT Gilts 5–15 years -0.20 0.14 0.11

Source: Threadneedle/Thomson Datastream/Factset. All index data from 31 January 1987 to 31 December 2011. All Property = IPD Index, Property Share = FTSE 350 Real Estate

Property stands alone … equities are equities

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UK property investment – key features

� Secured upon real assets

� Secure and diverse rental income stream

� Upwards only rent reviews with an average unexpired lease length of circa 7 years

� Mature market with stable and transparent legal infrastructure

� Diversified international occupier base – highly liquid

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Offers defensive qualities to global investors

Why invest now?

02

The story so far?

Source: IPD Monthly Index as at 30 September 2011

Boom to bust

40

50

60

70

80

90

100

110

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51

Inde

xed:

Mon

th 0

= 1

00

Number of monthsFrom June 2007

+16%

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OPEN ENDED FUND CRASH QUANTITATIVE EASING BANK REFINANCING

- 44%

IPD Monthly Index – All Property NIY

Source: IPD Monthly Index as at 31 December 2011

IPD initial yield 2002 - 2012

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4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

Initial yield on UK Commercial property vs long gilts

Source: IPD, Bloomberg, BoE as at 31 December 2011

Is property really cheap?

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Source: IPD, Bloomberg, BoE as at 31 December 2011

We need to use the correct comparison

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Source: IPD, Bloomberg, BoE as at 31 December 2011

Do rents match inflation?

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% of property loans maturing each year

Debt watershed approaches

Source: De Montfort University / DTZ as at 30 December 2010

Bank refinancing creates opportunity

• £157bn of UK property debt due to mature 2010–2013

• £50bn of loans estimated to be in default

• Basel II legislation motivates UK banks to work-out non-performing loans

• Debt available only to high calibre borrowers

• Banks remain risk averse

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Dash for liquidity =property oversold

2015–201911%

After 201918%

2013 – £23.0bn

10%

2012 – £32.4bn

14%

20149%

2010 – £52.6bn

23%

2011 – £34.7bn

15%

UK Property total return forecast 2011–2017

Source: IPD Monthly Index and BGC / Cushman & Wakefield as at 31 December 2011

The future looks less exciting?

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A return to property fundamentals

10.2 24.0 10.7 6.3 6.5 6.6 6.2

6.3

6.2 7.7 8.8 8.58.3 7.7 7.5

7.3 7.5 7.7 7.1

6.6 6.0

4.9 6.1 6.9

-10.0 -27.1

3.92.6-0.4

3.10.8-4.7-11.9

-7.9 -8.34.2

11.6 12.2 12.4

-5.6 1.2

5.9

5.49.5 8.3

8.2

5.2

8.27.1

6.82.92.92.90.5

14.5

2.2

-22.5

-5.5

18.118.818.911.210.4

7.110.5

14.112.215.4

9.43.2

15.316.3

-0.1-0.7-6.4

16.7

31.2

17.0 8.1

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Capital appreciation Annual income All Property Future - Mid Price Return Annual total return

Property market pricing metrics

Source: PMA Main Scenario, IPD, Haver, ONS

Property is cheap vs. bonds but expensive vs. equities

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Equivalent yield

Income return

Income return vs. nominal bonds

Yield gap vs. real bonds

Yield ratio vs. real bonds

Yield gap vs. corporate bondsRP vs. bonds

Equivalent yield vs. equities earnings yield

Initial yield – prime debt cost

Debt availability

Capital values vs. trend

199320062010LT average

Cheap

CheapCheap

Cheap

Expensive

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Sector and geographical breakdown

Geographical

Source: Threadneedle as at 31 December 2011

Sector

Source: Threadneedle as at 31 December 2011

16

Cash (inc. Debtors/Creditors)

20.6%

Investment input4.6%

Retail Warehouse15.5%

Industrial14.9%

Other 0.5%

Retail26.8%

Offices17.1%

Wales8.9%

North10.0%

Yorks/Humber6.2%

East0.0%

Southern54.3%

Midlands14.1%

Scotland5.6% London

0.9%

• Net Initial Yield: 7.4%*

*As at 31/12/2011PT/12/00927

Recent Transactions

03

600 & 650 Aztec West Business Park, Bristol

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� Price £4,080,000

� 10.5% Net Initial Yield

� Unexpired lease term 4 years

� Low Gross Capital Value of £179 per sq ft.

� let to Wimpey Homes Holdings Ltd andCo-operative Legal Services (D&B 5A1)

� 24,786 sqft of well specified office accommodation.

� Excellent car parking ratio of 1:180 sqft.

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600 Aztec West

650 Aztec West

Units 1-8 Wincheap Trade Park, Canterbury

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� Price £3,750,000

� 9.6% Net Initial Yield

� 9 unit Trade park scheme adjacent to a retail park and a Morrisons supermarket

� Low gross capital value of £57.00psf

� 70% of income secured to highly regarded covenants including Wolseley Centres Ltd, Screwfix Direct Ltd, Dreams Plc and Howden Joinery Properties Ltd

� Lease, 7.3 years.

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Southampton Road Retail Park, Fareham

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� Price £11,100,000.

� 7.1% Net Initial Yield

� Let to Argos and Dunelm on FRI leases until 2021 and 2026

� Let at £12.50 psf and £11.50psf respectively

� 68,784 sqft of accommodation within OldSouthampton Road Retail Park

� Low site cover of 29%

� Parking Ratio 1:260 sqft

20

The Rock & Hub, Slyfield Industrial Estate, Guildford

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� Price £5,235,000

� 7.3% Net Initial Yield

� New 15 year Lease to Snow and Rock Ltd (D&B 4A1)

� RPI linked rent reviews with cap at 4% and collar at 2%.

� 2 Modern industrial units providing 52,864 sqft of accommodation.

21

B & Q, Mostyn Broadway, Llandudno, Wales LL30 1PJ

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� Price £5,440,000.

� 7.5% Net Initial Yield.

� Let to B&Q Plc (D & B 5A1) until 2020

� Let at £12.50 psf overall.

� Low site cover of 29%

� Prominently located between 2 retails parks

� Parking Ratio 1:220 sqft

22

y

The Pavilion Shopping Centre, Tonbridge

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� Price £9,400,000

� 8.0% Net Initial Yield on expiry of rent free periods.

� 18 unit shopping centre of 50,000 sqft

� Rents between £43.00 and £58.00 psf ITZA

� Tenants include Monsoon, Boots, Specsavers Opticians ltd, Santander, Blockbuster, Shoe Zone

� 12 Lease renewals in 2010/2011

23

Bricket House, 10 Bricket Road St Albans AL1 3JT

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� Price £3,520,000

� 13.6% Net Initial Yield

� Constructed late 1980’s, provides 26,291 sqft of well configured office accommodation

� Low gross capital value of £141psf

� Let to PriceWaterhouseCoopers Services Limited until 23rd June 2013 at £506,300 per annum equating to £19.27 psf

� 24,786 sqft of well specified office accommodation.

� Excellent car parking ratio of 1:286 sqft.

� Lease re-gear or refurbish/re-let opportunity.

CSB House, 28 Clarendon Road, Watford

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� Price £2,400,000

� 21.9% Net Initial Yield

� Constructed 1989, provides 20,000 sqft of well configured office accommodation

� Let to Beverage Services Ltd (Guarantor from Coca Cola Holdings UK Ltd) until 28th September 2014 at £555,000 per annum.

� Low gross capital value of £126 psf

� Refurbish/re-let opportunity.

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Threadneedle Property Investments Ltd

For Investment Professionals use onlyStatus of this DocumentThis document is not an offer to invest in any Threadneedle Property Investments Ltd funds (“Funds”). Nothing in this document should be taken as a recommendation to acquire an interest in any Funds.The information and opinions contained in this document are for background purposes only and do not purport to be full or complete. 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.Investment WarningInvestment in the Funds carries substantial risk. There can be no assurance that the Funds investment objectives will be achieved. The value of the Funds investments and the income derived from those investments is not fixed and may fall as well as rise. There can be no guarantee that any appreciation in the value of the Fund's investments will occur. Past performance is not a guide to future returns. The Funds will invest in different properties to those in which Threadneedle’s previous property funds invested, and these previous funds may have invested at different points in the economic cycle and in different market conditions.Restricted DistributionThe distribution of this document and the offering of interests in the Funds in certain jurisdictions may be restricted. Persons into whose possession this document comes are required to inform themselves about and to observe any such restrictions. Interests in the Funds are being offered on a professional investor or private placement basis only, and are not being offered to the publicSubscriptions to a fund may only be made on the basis of the current Prospectus or Simplified Prospectus and the latest annual or interim reports, which can be obtained free of charge on request. Threadneedle Investment Funds ICVC (“TIF”) and Threadneedle Specialist Investment Funds ICVC (“TSIF”) are open-ended investment companies structured as umbrella companies; incorporated in England and Wales, authorised and regulated in the UK by the Financial Services Authority (FSA) and are UCITS III compliant.Please note that any Funds mentioned in this presentation have not been registered with the Financial Supervisory Authority in Sweden and accordingly shares in the Funds may not be offered to the public in Sweden. This document must not be used, circulated or distributed other than in circumstances which do not constitute an offer to the public and are in accordance with applicable local legislation.

PT/12/00927 26

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