Guide to Investing

MARCH 2015
INVESTOR GUIDE
INTRODUCING INVESTING
COLUMBIATHREADNEEDLE.COM

PLEASE READ THIS IMPORTANT INFORMATION.
This guide is designed to help you learn about financial products and
understand the risks and rewards of investing.
Past performance is not a guide to future returns. The value of investments,
and the income from them, can go down as well as up and you may not get
back what you put in.
Columbia Threadneedle Investments is unable to provide financial advice
and you should not interpret anything in this guide as advice. If you are
unsure about anything you should speak to a financial adviser. For details
of one in your area please go to www.unbiased.co.uk. Please note we do
not endorse this site or the advisers found on it.
The material in this brochure is for information purposes only and is not
intended as an offer or solicitation with respect to the purchase or sale
of any security.
To help your understanding of specific terms, we have also included
a glossary of terms on page 26.

CONTENTS
01 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
02 What investing means. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
03 Should you invest?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
04 Types of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
05 Collective investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
06 Asset allocation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
07 Tax wrappers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
08 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
09 How to invest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10 Understanding Key Investor Information Documents (KIIDs).. . . . . 24
11 Glossary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Investing to secure a healthy financial future can
be a daunting challenge – the old adage that the
value of investments can move down as well as
up remains as true now as it ever did.
01
INTRODUCTION

For beginner investors, the thought of investments
falling in value can be far more worrying than it is for
experienced investors – usually because beginners
have not fully analysed their attitude to risk.
Learning about financial products and understanding
the risk and rewards on offer can help even the
most inexperienced investor to make informed
investment decisions.
But it’s not easy. There are thousands of different
investment products, from shares and funds to
complex financial instruments such as derivatives,
but investor education is key to demystifying this
complex world.
Every investor is different. Some have been investing
from an early age, while others have come into
money later in life. Some investors wish to squirrel
away small, regular amounts; others have a large
lump sum they wish to invest.
Whatever your background and whatever your
circumstances, once you understand exactly
how much risk you are prepared to take,
you have a better chance of generating the
returns you desire from your investments.
Even more sophisticated investors will analyse
their attitude to risk as they themselves mature,
because the investment decisions we make when
we are younger are often very different from those
we make when we are older.
3
Investor Guide: Introducing Investing

Investing is when you put your money to work to
help you meet your long-term financial needs.
When you invest,you take more risk with your
money than you do with a high street savings
account,but for that risk you hope to have a
greater chance of a higher long-term return.
02
WHAT INVESTING MEANS

Source: Thomson Datastream and Columbia Threadneedle Investments as at 30.09.2013. Cash represented by Three Month LIBOR rate. UK shares represented by FTSE All Share Index, capital return only. UK shares with dividend income reinvested
represented by FTSE All Share Index, with dividends reinvested. High yielding UK shares with dividend income reinvested represented by FTSE 350 Higher Yield Index, with dividends reinvested. £ Bond (Non Gilts) represented by IBOXX £ Non Gilts All
Maturities. Property is represented by Investment Property Databank (IPD). For illustration purposes only.
There are many different types of investments and
each has its pros and cons, but while investing can
potentially help you grow your money, it can also
result in you losing some or all of it.
The chart above shows the returns an investor could
expect to receive having invested £10,000 over the
last 20 years in various different investment types.
The returns from each type of investment
go through peaks and troughs over the years.
The chart illustrates that choosing the right asset
class, depending on your investment goals and
timeframes is critical.
The chart uses market indices so does not
necessarily reflect what an investor would have
received by investing in a collective fund. The figures
represent the actual returns from each index and
do not include any charges, fees or taxation levies,
that an investor would expect to incur. It is not
possible to invest directly in these indices.
There are different risk factors involved when
investing in equities compared with cash deposits
and investors are reminded that the value of
investments and any income from them can go
down as well as up. Past performance is not
a guide to future returns.
£54,127
£50,654
£44,732
£26,164
£22,859
£24,045
£10k graph
High Yielding UK Shares with dividend reinvested
UK Shares with dividend reinvested Cash UK Shares Capital Only £ Bonds (Non Gilts)*
Property
£-
£10,000
£20,000
£30,000
£40,000
£50,000
£60,000
Dotcom crash
Global
Financial Crisis
UK interest rates
cut to historic lows
Sep-93
Sep-94
Sep-95
Sep-96
Sep-97
Sep-98
Sep-99
Sep-00
Sep-01
Sep-02
Sep-03
Sep-04
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
*Non Gilt investment begins in 31st Dec 1997
The value of £10,000 invested over 20 years
5

Before you invest you need to ask yourself whether
it’s the right time.
03
SHOULDYOU INVEST?

Generally, people are in a better position to invest
if they have paid off debt, have adequate pension
provisions, and have already accumulated enough
cash in savings to cover any short-term expenses or
financial goals, such as car repairs, holidays, home
maintenance etc.
If you have all that covered, you are likely to be in
a better position to invest for the longer term and
assess your attitude to risk. In order to get a better
return, an investor must take on more risk, which
usually means investing in something riskier than
a bank or building society savings account.
Taking greater risk with your savings can potentially
help you to grow your money faster over the long
term, but there is a danger you could lose some
or all of your cash.
To help reduce the risk, a sensible investor usually
constructs a diversified portfolio that is spread
among a number of different types of investment
(also known as asset classes).
Asset allocation – the practice of dividing your
investment portfolio among different assets such as
cash, equities, bonds, property and commodities – is
the key to aiming to smooth your overall returns. The
theory is that you reduce your overall risk of losing
money because each asset class has a different
correlation to the others; for example when shares
rise, people may find bonds less attractive so the
prices may often fall. At a time when the stock
market begins to fall, investors may seek to invest
their money in ‘real’ assets such as gold or property.
By diversifying a portfolio investors will seek not to
second guess these fast moving markets where
one asset outperforms another and then falls back,
but by smoothing overall returns with a portfolio
containing a mixture of these assets.
To truly diversify investors should look to diversify
within each asset class they own too. Looking at
shares alone, for example, investors could
spread their investments between large and
small companies, between UK and overseas
companies, and across sectors that are likely
to perform differently at different times such
as the retail sector versus pharmaceuticals.
Understanding your own attitude to risk will help
you pick investments that deliver the return you
expect. Think about your investment objectives and
timeframe – the more time you have, the more risk
you may be able to take. Consider your risk appetite:
higher returns often mean higher volatility and higher
risk, but if you can’t stomach losing money then you
shouldn’t look to take on too much risk.
7

Investors can choose to invest in anything from
savings accounts and property,to the stock market
and fine wine.Only by learning about each can you
make an informed decision as to which asset you
feel most comfortable investing in.
04
TYPES OF INVESTMENTS

DEFINITION
Cash is the stuff that sits in your back pocket or your
purse and can be deposited in current accounts and
savings accounts. Sophisticated fund managers can
also keep investors’ money in cash. They might hold
a tiny part of an investment fund in cash to keep it
safer than other assets, or they might run a fund
that only invests in cash deposits.
MAIN CHARACTERISTICS
Cash is a safer asset than, say, shares or bonds,
so the returns are typically smaller. In theory a bank
could fail, but the Financial Services Compensation
Scheme (FSCS) guarantees £85,000 per person on
deposits, per authorised bank or building society.
RISKS
The main risk with cash is that the returns are
usually far lower than with other assets, making
it more likely to be eroded by inflation. Think of a
basket of goods worth £100 today. If inflation was
2% consistently, in 40 years, time you would need
approximately £220 to buy the same basket of
goods. If you are investing for the long term and
need to generate an inflation-busting return you
need to find an account that beats inflation.
DEFINITION
An equity, also known as a share, gives investors
a stake in a company. If the company does well
the value of the shares may rise and you may be
able to sell them at a profit. However, they may also
fall, making them a high-risk asset. Shareholders are
also entitled to share in any profits which are usually
distributed in the form of a dividend payment.
Equities can be bought and sold on stock
exchanges around the world – in the UK alone
there is a vast array of company shares to
choose from.
Investors can make a return when the price
of a share goes up (some sophisticated investors
can actually bet on a share price falling) and also
if the company distributes a share of its profits via
‘dividends’. Not all companies that make a profit pay
dividends, however – they may choose, for example,
to reinvest that profit in the business.
You can also buy equities listed on stock exchanges
around the world, from the more developed markets
(US, Europe and Japan) to high-risk developing
markets (Brazil, Russia, India and China.)
RISKS
A company’s share price can be affected by a huge
number of factors, from the number of products
a company sells to issues that affect whole national
economies, making equities a risky investment.
If the company doesn’t do well, you may not get any
dividends and the value of the shares could fall or,
in some cases, cease to have any value at all.
If the company went bankrupt all shares are likely
to be worthless. As there is a chance you might
not get your money back, equities are considered
higher-risk investments.
Equities also have the potential to make a generous
return, making them a popular choice for most
investors looking to invest for the long term, whether
directly or via a collective investment fund.
CASH EQUITIES
9

BONDS PROPERTY
10
DEFINITION
Bonds are loans to companies, local authorities
or the government. So you lend your money to
a company or government and you are paid interest
in return. They usually pay a fixed rate of interest
each year (known as the coupon) and aim to pay
back the capital at the end of a stated period
(known as the maturity date). This is why bonds
are sometimes referred to as fixed interest.
Corporate bonds are issued by companies such
as Tesco and BT Group as a way of raising money
to invest in their business. Government bonds
are issued by a government – in the UK these
are known as gilts. Once a bond has been issued,
it can be traded on a stock exchange, where the
price will rise or fall based on supply and demand;
while it can also be influenced by the wider economy
and investor predictions of how bank interest rates
will change.
RISKS
You will usually receive a smaller coupon from
institutions that are more creditworthy and a larger
coupon from those less creditworthy, reflecting
the higher risk that they might not pay you back.
The amount of interest a bond or gilt pays is fixed,
which means that if interest rates fall they can
become more attractive; though if interest rates
rise they become less attractive, as investors may
not be willing to accept the extra risk for less return
compared to savings accounts if the coupon is not
much higher.
DEFINITION
Investors can invest in the buy-to-let market or
commercial property – shops, offices and industrial
warehouses, usually accessed via a collective fund
of some type rather than directly. Investors benefit
from rental income and the price of the property
itself should it rise in value.
Commercial property is very different from residential
property (i.e., the house we buy, sell and live in) and
does not always rise and fall in line with residential
property market movements.
RISKS
The value of the property itself could fall in value,
while buildings might remain empty, meaning there
will be no tenants to pay rent. Moreover, commercial
property is not a ‘liquid’ investment, meaning it can
be difficult to buy and sell property quickly and easily
and valuations are based on opinions, not fact, as
property is difficult to value accurately and costs
a lot of money to buy and sell.
But many investors like to include some property
in their portfolio because it helps them to diversify:
for example, investors might still receive rental
income even if equity dividends fall and vice versa.

11
COMMODITIES
DEFINITION
Commodities are raw materials for production:
agricultural products such as wheat and cattle,
energy products such as oil and gasoline,
and metals such as gold, silver and aluminium.
There are also “soft” commodities, or those
that cannot be stored for long periods of time,
which include sugar, cotton, cocoa and coffee.
Whether it’s metals, energy or agricultural products,
commodities are often traded on a ‘futures market’,
where buyers purchase the obligation to receive a
specific quantity of the commodity at a specific date
and price. This helps protect commodity producers
because it often takes a long time to produce,
say, grain, and during that time prices could
fluctuate dramatically.
RISKS
Commodities are generally considered to be
riskier than other assets and are highly volatile.
They are very dependent on outside forces
such as the wider economy, or political issues,
such as oil in the Middle East. They are therefore
only suitable for sophisticated investors.

Instead of buying assets – such as equities –
directly,investors can pool their cash with others by
investing in a collective investment,such as a fund.
They invest across a wide range of companies,
sectors,countries and,often,other funds.
05
COLLECTIVE
INVESTMENTS

13
Collective funds allow investors to diversify
their assets at the same time as accessing
the experience of a professional fund manager.
Investors can invest lump sums of as little as
£1,000 or set-up regular savings plans from
as little as £50 a month. Please note that these
sums vary between groups – always check
before investing.
Collective funds are sometimes grouped into
geographical areas such as the UK, Europe,
the US or Far East, and are further categorised
by their investment strategy such as Growth or
Income. There are thousands of funds split into
many different sectors.
The most common type of collective investments are
collective investment schemes such as unit trusts/
open ended investment companies (OEICs)
and investment companies.
UNIT TRUSTS AND OPEN-ENDED
INVESTMENT COMPANIES
A unit trust is an investment fund shared by lots of
different investors. The fund is divided into segments
called ‘units’, which investors buy to own a stake in
the fund. The price of each unit is based on the value
of the assets owned by the fund.
Unit trusts are open-ended, meaning they get bigger
as more people invest and smaller as investors
withdraw their money. There are usually two different
prices, making a unit trust a “dual priced fund”.
The two prices are:
nn The ‘offer’ price – the price you pay
to buy units, and;
nn The ‘bid’ price – the price you get
for selling units.
The difference between the buying and
selling prices is the bid/offer spread,
which broadly comprises the initial charge
plus the difference between the buying and
selling prices of the underlying investments
plus any other costs involved in buying or
selling the underlying investments.
This means that when investments are
bought or sold as a result of other investors
joining or leaving the fund your investment is
sheltered from the costs of these transactions.
The buying (offer) and selling (bid) prices of the
fund are generally dependent on whether more
people are buying units in the fund than selling,
and vice versa.

Open-ended investment companies (OEICs) work
in the same way as unit trusts but package their
investments into shares – not units – and have
a single price, so there is no bid/offer spread.
Like a unit trust, an OEIC is open-ended so the
size of the overall fund will get bigger or smaller
as more or less people invest. Sometimes,
a fund manager will charge investors in a single
priced fund a “dilution levy” or “adjustment”.
This is done to protect existing shareholders from
the costs of buying or selling underlying investments,
as a result of large investors joining or leaving
the fund. A dilution adjustment affects everyone
who deals on a particular day when there
are large investors joining/leaving the fund,
whereas a dilution levy only affects the
individuals who trigger the price movement.
Offshore funds work in the same way as unit
trusts or OEICs, but are domiciled in an offshore
territory (such as the British Virgin Islands or
the Cayman Islands) where the tax regime is
often favourable to the investment manager
or the investor. Income in the form of dividends,
for example, can be subject to less tax than it
would in a UK-domiciled fund. This tax-free income
can be reinvested for even greater capital gains.
But while the tax advantages can lead to increased
performance or a higher level of income, offshore
funds are sometimes not subject to the same
rigorous financial regulation as domestic funds,
making them generally higher-risk – and not
ideally-suited for beginner investors.
14

CLOSED-ENDED INVESTMENT
VEHICLES / INVESTMENT TRUSTS
Investment trusts are similar to unit trusts and
OEICs in that they invest in shares, bonds or property
and provide the opportunity for investors to spread
risk. However, when you invest in an investment
trust you are buying shares in a company – not units
in a fund. Investment trust shares are quoted on
the stock market and are thus publicly traded
in the same way as equities. You take a stake
in an investment trust by buying its shares.
Investment trusts are ‘closed-ended’ funds
because there are a set number of shares
and this number does not change
regardless of the number of investors.
Investment trusts are considered slightly higher risk
than unit trusts and OEICs because they are allowed
to borrow money to invest – this is called ‘gearing’.
An investment trust that is geared is a higher-risk
investment than one that is not geared because
the manager has borrowed that extra cash with
which to invest. While gearing can increase returns
if the manager makes the correct investment call,
it can amplify losses if the manager’s purchases fall
in value – his underlying assets will fall in value plus
he still owes the money he borrowed.
But while gearing can make investment trusts
higher-risk, a manager who is highly-geared is likely
to have a strong conviction that what he is investing
in is a good prospect – or he wouldn’t take on that
additional risk.
The value of the assets held by an investment trust
may be different from the actual share price, which
means their shares can trade at a discount or a
premium to the value of the underlying assets.
This exaggerates the pattern of share price
performance – both upwards and downwards when
compared to returns from unit trusts and OEICs.
If you are unsure whether investing in an investment
trust is right for you, speak to a financial adviser.
15

Dividing your investment portfolio among different
assets such as cash,equities,bonds,property and
commodities,is the key to aiming to smooth your
overall returns.
06
ASSETALLOCATION

You must make sure you review your portfolio
regularly because the right asset allocation for your
needs will change over the years as your investment
goals change.
For example, when you are in your twenties and
starting investing for retirement you might have
a high proportion of your money in equities, as you
have 30+ years to ride out the peaks and troughs
of the stock market. When you are retired you will
concentrate on generating income from your capital
and trying not to let your capital deplete too fast,
so you may move more of your portfolio into bonds.
It is up to you to make sure your investments are
still meeting your objectives as you move through
life. But just as your goals may change, so your
investments will go through periods of under and
over-performance. This means you should always
keep on top of your investments to ensure they
are performing adequately.
MULTI-MANAGER FUNDS /
MULTI-ASSET FUNDS
As the name suggests, Multi-manager funds invest
in a number of underlying funds, which in turn invest
in a range of different companies across varying
sectors, regions and asset types. A Multi-manager
will research these funds and select a blend of
what he believes are the best funds available
into one single fund.
Multi-manager funds come in two types:
nn Funds of funds invest in existing unit trusts,
OEICs or investment trusts run by other
fund managers.
nn Manager of managers give a selection
of external managers a chunk of money
to manage.
There will be a pre-set framework for the fund,
which dictates how much of the portfolio should
be given over to equities, fixed interest and other
asset classes. The fund manager then decides
which firms and managers have the best skills
to run each part of the portfolio and hands out
mandates telling each manager how their particular
part should be run.
There are also hybrid multi-manager funds that use
a mixture of both strategies.
Multi-asset funds invest across the asset classes
and are categorised according to the mix of assets
the manager invests in (i.e. what percentage of
equities, shares, bonds and property he holds).
17

While the only certain things in life are death and
taxes,there are tax-efficient wrappers that allow
investors to shelter their investments from tax.
07
TAXWRAPPERS

INDIVIDUAL SAVING ACCOUNTS
(ISAS)
ISAs are a tax-free or tax efficient account for your
savings or investments. In July 2014 new rules
were introduced to ISAs which means they offer
more flexibility to both savers and investors and
allow individuals to shelter more money than ever
before in a tax-free environment.
Savers and investors can now invest in any
combination of cash and stock and shares they
like, and are allowed to move their cash freely
between the two types at any time. They can hold
their cash and stock market investments with the
same provider or choose different ones. So whereas
previously you could only transfer money from a
Cash ISA to a Stocks and Shares ISA, you can now
switch money either way (this applies to previous
years’ ISA savings too).
JUNIOR ISA (JISA)
On 3 January 2011 Child Trust Funds (CTF)
were scrapped for new savers and were replaced
with JISAs.
A JISA allows family and friends to invest into a tax-
efficient account on behalf of a child and there’s no
income tax or capital gains tax to pay on the interest.
The 10% tax on dividends taken at source remains.
nn JISAs are only available to children born on or
after 3 January 2011, or children aged under 18
but born before 1 September 2002 (when the CTF
was introduced) and so never had a CTF. However
from April 2015 you can transfer your child’s CTF
into a Junior ISA.
nn Parents can choose from a cash or a stocks
and shares version.
nn Junior ISAs are free from income and capital
gains tax
nn Your child can’t touch the money until they are
18 - the account is held in the child’s name but
is opened and managed by you. The child can
take control at 16, but can’t touch the money
until they turn 18. Once they are 18, the money
belongs to them to do with as they like.
SELF-INVESTED PERSONAL PENSIONS
(SIPPS)
Sipps allow you to place a variety of pension
assets in a tax-free wrapper, with no income or
capital gains tax to pay. However, while the likes of
equities, derivatives, futures options and gold are
included, some assets are not allowed to be placed
within the Sipp wrapper.
For full details of which assets are allowed, speak
to a financial adviser or your pension provider.
Tax treatment depends on individual circumstances.
Tax concessions are not guaranteed and tax
legislation may change in the future.
19

When you buy a Collective Investment,there is
a range of fees applicable,depending on how
you invest.
08
FEES

Initial fees: A one-off fee charged at the time
you buy the fund. These have in the past been
as high as 5.5% of the sum invested. A portion of
this fee was typically used to pay financial adviser
commission. However, advisers can no longer
accept commission in this way due to legislation
called the Retail Distribution Review (RDR).
For this reason and also increased competition
from discount brokers and fund supermarkets/
platforms, initial charges have largely disappeared.
Ongoing charges figure (OCF): The OCF is an
industry wide standard calculation that illustrates
most fees and charges borne by a fund. This figure
is used by investors as it offers a single snapshot
of how much you are paying for a fund and makes
it easy to see the impact of charges on returns.
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 annual management charge,
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).
Annual management charge (AMC): This annual fee
covers the cost of fund management. The AMC tends
to be around 1% – 1.5%. Actively managed funds
tend to have higher annual management fees, while
tracker (passive) funds tend to have lower charges.
Performance fees: Some actively managed funds
may levy a performance fee, though this is a small
and decreasing number of funds.
Investors should note that these charges can
vary considerably. For more information on charges,
visit www.columbiathreadneedle.com/fees
21

There are a few different ways in which investors
can buy funds: direct from the fund manager,
via a fund platform,or via a financial adviser.
09
HOWTO INVEST

A fund manager will usually levy an initial charge so
it makes sense to use an adviser, a broker or a fund
platform which allows you to compare and purchase
different investments online.
An independent financial adviser will help you choose
what to invest in, and will discuss your financial
goals, your attitude to risk and advise you of the
most appropriate investment for your circumstances.
If you have decided what to invest in yourself and do
not need advice, you can use a broker (who does not
give advice – also known as an execution-only broker
or a discount broker), through which you can invest
in funds, investment trusts, Exchange Traded Funds
(ETFs) and other assets.
You can do this using a tax-efficient wrapper such
as an Individual Savings Account (ISA) to shield
your investments from the taxman.
Whether you use your ISA allowance or not,
a discount broker or fund platform allows you
to simply pick the fund you wish to invest in,
and choose whether to invest a lump sum or
to make regular investments. Most brokers and
platforms allow you to manage your investments
online and can be accessed easily via telephone.
There are many other assets and ways to access
them, from derivatives to Exchange-Traded Funds.
If you are interested in adding less mainstream
assets to your portfolio, you should seek the advice
of a qualified financial adviser before doing so.
23

Under regulatory rules, this Key Investor Information
Document (KIID) must list the following details:
nn Exactly what you are purchasing
nn What its key investment objectives are,
as well as its investment policy
nn How risky it is likely to be
nn How it has performed in the past
nn How much you will pay for it
Most of these categories are self-explanatory,
but it’s worth expanding on a couple of them.
The risk and reward section, for example, is crucial:
it is where the investment provider tells the investor
exactly how risky the investment is, on a scale of
one to seven, where one is the least risky and
seven the most risky. By reading this, the investor
can be under no illusion as to the potential
volatility and risk of the investment they are
about to purchase.
When it comes to charges, investors should also
pay attention. The KIID lists the maximum charges
you will pay when you buy as well as when you sell
units in a fund. It will also tell you what you will pay
in the way of annual running costs. But, crucially,
it will not detail the effect of these charges on your
investment, nor will it include any performance fees
or transaction costs.
A practical information section will also list where
you can find further information on the fund you
have bought, where to find the latest price of your
investment and performance details. It should
also tell you how to switch your investment.
A KIID is a useful way for investors to compare funds
offered by various fund houses as they all contain
the same information to aid comparison.
Read it carefully to ensure you do not get any
surprises once you’ve started your investment
journey.
Supplementary Information
Document (SID)
This offers additional information that is not
in the KIID. A SID should contain the likes of:
Supplementary Information
Document (SID)
This offers additional information that is not in the
KIID. A SID should contain the likes of:
nn What to do if you change your mind about
the purchase
nn How to complain
nn How you can escalate your complaint if you
are unhappy with the response you receive
from the fund manager
nn Where you can seek compensation – namely,
via the Financial Ombudsman – and how
much you might be entitled to in compensation
if successful.
25

11
GLOSSARY
Active funds: An active fund has a manager at the helm (and
usually a team of analysts and researchers) who will select
the assets he or she believes will increase in value. Actively-
managed funds have the capacity to outperform their peers
and the market as a whole. They are usually slightly more
expensive than passive funds because investors must pay
for the manager’s expertise.
Bonds: Bonds are debt issued by governments or companies
to raise money. Bonds promise a set amount of interest until
the bond matures at a fixed date in the future.
Closed-ended funds: A company that invests in other
companies or assets. With a closed-ended fund, such as an
investment trust, there are a set number of shares and this
number does not change regardless of the number
of investors.
Commodities: Raw materials and agricultural products used
across the world, such as wheat, livestock, oil or precious
metals.
Commission: A payment, which may be made by the firm
which manages a fund, from the fund’s annual management
charge, to an intermediary that provides financial advice, but
only if you have invested in the fund before 1st January 2013
or are making ongoing regular investments in a fund based
on advice received before 1st January 2013.
The amount payable is usually based on a percentage of the
value of the capital invested.
After 1st January 2013, fund management firms cannot
pay commission to advisers on newly-advised purchases.
Advisers will instead agree a fee with you, their clients.
Dilution levy: Open-ended companies such as unit trusts
grow or shrink in size as people invest or exit the fund. If
more people suddenly buy the fund than sell it, the manager
will have to dip into the markets and buy more assets to
ensure the fund can grow in size. Similarly, if more people
sell at any time, he has to sell assets to meet those share
redemptions. Either way, this attracts dealing fees for the
fund, so the management group usually reserves the right to
charge a dilution levy to cover this cost. Not all management
groups apply the levy, but where they do, they either charge
it to the fund itself or to the buyers and sellers who created
the cost.
26
Here is a simple reference guide
to some of the technical terms
that you may come across as you
explore your investment options.

Dilution adjustment: Without a dilution levy, the
dealing fees arising from net purchasers or sellers of
a fund can dilute the fund itself (that is, reduce the
value of the remaining units or shares). Sometimes a
management group will adjust
the price to reflect this.
Discount: The flip-side of a premium, a discount
is the amount by which the share price is less
than the net asset value per share.
Dividend: A payment made to shareholders from
part of a company’s profits.
Equities: Ownership of a company in the form
of a stock, traded on stock exchanges.
ETF: An Exchange-Traded Fund. These can be
bought and sold like single company shares, but
they track an index or commodity, allowing investors
the convenience of purchasing a broad basket of
securities in a single transaction, essentially offering
the convenience of a stock with the diversification
offered by a pooled fund, such as a unit trust.
Gearing: When you borrow money to buy assets.
The technique is widely used by investment trust
managers. The more a manager uses gearing,
the greater the potential for profit or loss,
because if markets rise in value, the company
will make enough profit to pay back the debt
(and interest) and leave something extra for
shareholders. But if markets fall, the manager
may not be able to cover the borrowing and interest
costs, and could make a loss. So the more an
investment company gears, the higher the risk.
Gilts: Specifically, a UK government bond
(see Bonds).
Indices: A way of measuring the collective value of
a number of assets (e.g. the FTSE 100 Index gives
a single value for the combined value of the 100
companies within it).
Investment trust: A closed-ended company (see
closed-ended funds).
Open-ended funds: A collective investment fund that
invests in other companies and assets. As more
people invest in the fund, it gets bigger; it shrinks
as people take their money out.
OEIC (open-ended investment company):
A type of open-ended fund, with a single price.
Ongoing Charges Figure (OCF): A single percentage
snapshot of the total cost of your investment,
including all fees and charges.
Passive / Tracker funds: Passive funds aim to
replicate the performance of an index,
such as the FTSE 100. This means performance will
rarely exceed that of the index it is tracking. However,
because they usually require no active management,
they tend to be cheaper than active funds.
Premium: This is the percentage amount by which a
closed-ended fund’s share price exceeds the value
of its assets (as expressed by its net asset value
per share or NAV). If an investment trust is much in
demand, its share price can easily rise to a premium
over its net asset value.
27

28
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Important information. The value of investments and any income is not guaranteed and can go down as well as up and may be affected by exchange rate fluctuations. This means that an investor may not get back
the amount invested. The research and analysis included in this document has been produced by Columbia 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 Asset Management Limited. Registered in England and Wales, No. 573204. Registered Office: Cannon Place,
78 Cannon Street, London, EC4N 6AG. Authorised and regulated in the UK by the Financial Conduct Authority. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.
columbiathreadneedle.com Issued 03.15 | Valid to 09.15 | J22075
To find out more visit
COLUMBIATHREADNEEDLE.COM
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