Fund charges and costs explained

There are a number of charges and costs incurred when investing in the funds of our SICAV, Threadneedle (Lux). The charges that you pay are used to cover the costs of running the fund, including our charge for managing the fund, and the costs of distributing and administering it. The value of your investment will reflect these charges and will be lower as a result of them.

Charges vary from fund to fund and from share class to share class. Further information about specific charges can be found in the relevant Fund Prospectus and on the Funds and Prices page of our website where you can search for your fund by name/ISIN.

The total cost of your investment may comprise of the following:

Entry charge

This is often referred to as the initial charge or entry charge and may be taken from an investment (initial or subsequent investment) before the investment is placed or shares are purchased.

We do not normally apply entry charges, but if you buy our funds through certain distributors they may apply an entry charge.

Exit charge

This may also be referred to as the redemption charge and relates to the amount of money that may be taken from an investment before the proceeds of your investment are paid out.

Columbia Threadneedle Investments does not charge exit fees to UK investors.

Exchange fee or switching charge

This is a charge that may be taken from an investment should an investor decide to switch money from one share class or fund to another share class or fund of the SICAV.

The maximum fee that can be charged for any of the SICAV funds is 0.75% of the value of your investment. For further information regarding switching please refer to the section of the SICAV’s prospectus with the heading “Exchange Privilege”.

There are a number of charges and costs borne by the funds each year as described below. The Ongoing Charges Figure (OCF) is an industry standard way of measuring the aggregate effect of a number of these charges.

Ongoing charges figure (OCF)
The OCF is based on the last year’s expenses and may vary from year to year. It includes charges such as the fund’s asset management fee, registration fee, custody fees and distribution cost but excludes the costs of buying or selling assets for the fund (unless these assets are shares of another fund). For any new funds or share classes, the OCF may be estimated until a full year’s expenses are available.

The following form part of the OCF:

• Asset management fee
  This is a charge paid to us, or any sub-advisors, for managing your investment in a fund. It varies from fund to fund, and also from share class to share class. The fees are accrued each day and paid to us each month.
• Operating expenses
  This is a fixed fee that covers the costs of operating the SICAV and includes, among other things:

• • taxes;
  • expenses for legal and auditing services;
  • cost of printing proxies, share certificates, shareholders’ reports and notices, prospectuses and Key Investor Information and other promotional expenses;
  • fees and charges of the custodian* and its correspondents, and of the domiciliary agent, administrative agent, registrar and transfer agent and of any paying agent;
  • listing fees;
  • fees of unaffiliated directors of the SICAV, expenses of the directors and officers of the SICAV and the subadvisors relating to attendance at meetings of the directors and of the Shareholders of the SICAV;
  • translation costs, accounting and pricing costs (including the calculation of the net asset value per share);
  • regulatory fees;
  • insurance, litigation and other extraordinary or non-recurring expenses; and
  • all other expenses properly payable by the SICAV.

Details of the operating expenses charged for each share class can be found in the appendices to the prospectus of the SICAV. Threadneedle Management Luxembourg S.A. bears the excess of any operating expenses incurred above the annual rate, and is entitled to retain any surplus operating to the extent that the fees received exceed the actual expenses of the SICAV.

*Please note that for certain share classes, the custody fees aren’t included in the operating expenses. Please refer to the SICAV’s prospectus for full details.

Performance fee

There are a number of our funds that charge a performance fee if certain performance criteria are met. For further information please refer to the SICAV’s prospectus.

The performance fee is a payment made to Threadneedle Management Luxembourg S.A., or any sub advisors, for generating returns in excess of a set target. It is paid in addition to the asset management fee. If the performance of the fund does not meet this target, a performance fee will not be payable. There is no maximum fee.

Performance fees apply to the following SICAV funds:

• Threadneedle (Lux) Pan European Absolute Alpha
• Threadneedle (Lux) American Absolute Alpha

For further information on the operation of the performance fee, including worked examples, please refer to the SICAV prospectus.

Portfolio transaction costs (PTC)

This includes the expenses that arise from selling or buying investments in the fund, including redemption fees, transfer fees and broker commissions. These occur as part of the day-to-day active management of the fund and also as a result of the fund receiving subscriptions and redemptions (although in the case of subscriptions and redemptions over a certain threshold, the dilution adjustment will cover the portfolio transaction costs).

If you are invested in a fund that invests in other funds there will be costs associated with the underlying funds.

For detail of how this works, please consult the Prospectus.

Dilution adjustment

The SICAV funds operate a single pricing policy (the funds are bought and sold at the same price) and we reserve the right to charge investors a dilution adjustment when buying or selling shares in a SICAV fund. This is to protect existing shareholders from the costs of buying or selling underlying investments following large purchases or sales of shares of the relevant funds. The amount of any such dilution adjustment is calculated by reference to the estimated costs of dealing in the underlying investments. The dilution adjustment results in an increase in the buying price of the fund (in the case of inflows), or a decrease in the selling price (in the case of outflows).

Dilution adjustment affects everyone who deals on a particular day when there are large net inflows into or outflows from a fund. Details of the dilution adjustment can be found in the section of the SICAV’s prospectus with the heading “Dilution Adjustment”.

Under current legislation, investors that are not resident in Luxembourg are not subject to capital gains or income tax unless they have a permanent establishment in Luxembourg to which the share capital of the SICAV is allocated.

Retail share classes of the SICAV are subject to a tax of 0.05% per annum (“taxe d’abonnement”) based on the amount invested in the SICAV at the end of each calendar quarter. Institutional share classes are also subject to a taxe d’abonnement of 0.01%. The “taxe d’abonnement” is included in the operating expenses, as described in the Annual Charges section.

Columbia Threadneedle does not offer tax advice. If you are unsure about any tax related issues you should consult a tax adviser.

For examples on the operation of performance fees for the applicable funds, please refer to the SICAV prospectus.