Threadneedle American Fund

Transcription

1 Annual Short Report 7 March 2018 Fund Manager s Report Nadia Grant Performance of Class 1 Accumulation shares* Over the twelve months to 7 March 2018, the published share price of Class 1 Accumulation shares in the has risen from p to p. Looking at the sterling performance within its peer group, the total return on the fund for the twelve months ending 28 February 2018, including net reinvested income, is +9.07% as compared to a sector median return of +4.97% over the same period. (For information the S&P 500 Composite Index returned +5.76% over the same period). Market Overview and Portfolio Activity The S&P 500 made solid gains in US dollar terms during the period, consistently hitting record highs and climbing in every month apart from February Earlier in the period, the Federal Reserve raised interest rates by 25 basis points in June, maintaining its forecast for another hike in 2017 (which ultimately materialised in December) and three in However, stronger-than-expected corporate earnings and dovish commentary from the Federal Reserve propelled the market to record highs. US markets also finished 2017 strongly, benefiting from betterthan-expected corporate results and GDP figures, buoyant consumer confidence and strong employment data. US equities received further support from anticipation that Congress would approve President Trump s flagship tax-cutting bill. The bill, which was eventually passed on 20 December, features a permanent cut in corporation tax from 35% to 21% and smaller temporary reductions in income taxes. February saw US (and global) equities finally snap their record-breaking run of monthly gains. Treasuries and equities sold off at the start of the month as stronger-than-expected US wage growth stoked fears of higher inflation and, in turn, faster interest-rate hikes. During the period, key new positions included Union Pacific (railways), L3 Technologies (defence), MasterCard (financial services), Biogen (pharmaceuticals) and Citizens Financial Group (banking). Union Pacific has a strong and improving free cashflow, which has been boosted by tax reform in the US. The company is also benefiting from strong demand for freight services, a development that should ultimately also deliver pricing benefits. *In pound Sterling and against UK peer group. Changes to L3 Technologies management are beginning to pay off, with signs of improved execution and stronger guidance for The company should also be a key beneficiary of mid-single-digit growth in federal outlays as US defence spending picks up. In our view, though it continues to trade at a solid discount to its peers, L3 is the only prime defence stock with a legitimate case for multi-year margin improvement. MasterCard continues to enjoy compound growth, thanks largely to its exposure to positive industry trends in software-driven payments, e-commerce and international penetration. The company is also benefiting from the ongoing move from cash to card payments. MasterCard is aiming for longer-term revenue growth of 7% to 9%, mid-teens growth in earnings-per-share, and significant expansion of its margins. In our view, among large-cap companies, Biogen offers the greatest visibility on a set of catalysts that could significantly re-rate its shares in the future. We feel that the company s pipeline is not sufficiently priced into the stock, and Biogen stands a reasonable chance of bringing an innovative disease-modifying therapy, aducanumab, to market for the treatment of Alzheimer s disease. A regional bank with branches in the New England and mid-atlantic regions, Citizens Financial Group has strong capital ratios, midsingle-digit revenue growth and strong credit quality, coupled with an attractive valuation relative to its peers. The company has shown progress in controlling its expenses, and has further opportunities for margin expansion through reducing costs. We switched our utilities exposure from PG&E to Xcel Energy. Our thesis for PG&E played out, and we view Xcel as a high quality firm whose management consistently delivers on its promises. The company also benefits from high earnings visibility, as Minnesota rates have been set for the next four years. Yet despite higher quality, visibility and growth potential, the stock is currently trading in line with regulated peers. Also during the period, we exited names including Southwest Airlines, Johnson & Johnson, Lockheed Martin and Thermo Fisher Scientific. Looking ahead, the backdrop remains very supportive for US equities. US stocks are set to benefit domestically from a strong economic momentum that is further boosted by tax reforms and, internationally, from a synchronised global recovery. Fund Facts Fund Accounting and Distribution Dates Accounting Dates Payment Dates 7 March 7 May Ongoing Charges Figure The Ongoing Charges Figure (OCF) is the European standard method of disclosing the charges of a share class of a fund based on the financial 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 ordinarily excludes the costs of buying or selling assets for the fund (unless these assets are shares of another fund). Where published, the Key Investor Information Document (KIID) contains the current OCF. For a more detailed breakdown please visit columbiathreadneedle.com/fees. Share class 7 March March 2017 Class 1 Income shares 1.63% 1.62% Class 1 Accumulation shares 1.63% 1.62% Class 1 EUR Hedged Accumulation shares 1.63% 1.62% Class 2 Accumulation shares 1.06% 1.05% Class X Accumulation shares 0.06% 0.04% Class Z Income shares 0.83% 0.82% Class Z Accumulation shares 0.83% 0.82% Class Z EUR Hedged Accumulation shares 0.83% 0.82%

2 Summary of Fund Performance Performance History (%) Share class Class 1 Income shares Class 1 Accumulation shares Class 1 EUR Hedged Accumulation shares Class 2 Accumulation shares Class X Accumulation shares Class Z Income shares Class Z Accumulation shares Class Z EUR Hedged Accumulation shares To 28 February Commenced 20 September Source: Morningstar and Threadneedle. Bid to bid prices are quoted (i.e. not including any initial charge) with net income reinvested for a UK basic rate tax payer and gross income reinvested for a non-uk resident. Performance data is quoted in sterling apart from hedged share classes, where applicable, which are in the hedged currency. Past performance is not a guide to future investment performance. 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. Net Asset Value (NAV) As at Share class NAV ( ) NAV pence per share Number of shares in issue 7 March 2018 Class 1 Income shares 4,803, ,684,411 7 March 2017 Class 1 Income shares 6,091, ,250,851 7 March 2016 Class 1 Income shares 4,854, ,479,894 7 March 2018 Class 1 Accumulation shares 485,727, ,279,598 7 March 2017 Class 1 Accumulation shares 583,445, ,539,877 7 March 2016 Class 1 Accumulation shares 530,520, ,020,970 7 March 2018 Class 1 EUR Hedged Accumulation shares 4,750, ,522,027 7 March 2017 Class 1 EUR Hedged Accumulation shares 3,156, ,220,851 7 March 2016 Class 1 EUR Hedged Accumulation shares 3,126, ,591,411 7 March 2018 Class 2 Accumulation shares 1,235,583, ,761,073 7 March 2017 Class 2 Accumulation shares 1,000,698, ,406,571 7 March 2016 Class 2 Accumulation shares 940,787, ,711,104 7 March 2018 Class X Accumulation shares 247,115, ,508,964 7 March 2017 Class X Accumulation shares 159,516, ,409,227 7 March 2016 Class X Accumulation shares 6, ,000 7 March 2018 Class Z Income shares 22,354, ,312,193 7 March 2017 Class Z Income shares 19,864, ,747,635 7 March 2016 Class Z Income shares 16,342, ,961,959 7 March 2018 Class Z Accumulation shares 376,544, ,521,910 7 March 2017 Class Z Accumulation shares 393,088, ,018,806 7 March 2016 Class Z Accumulation shares 323,644, ,830,276 7 March 2018 Class Z EUR Hedged Accumulation shares 567, ,276 7 March 2017 Class Z EUR Hedged Accumulation shares 449, ,276 7 March 2016 Class Z EUR Hedged Accumulation shares 180, ,750

3 Distribution History/Share Price Range Highest share price (pence) Lowest share price (pence) Year to Share class Pence per share 7 March 2018 Class 1 Income shares March 2017 Class 1 Income shares March 2016 Class 1 Income shares March 2018 Class 1 Accumulation shares March 2017 Class 1 Accumulation shares March 2016 Class 1 Accumulation shares March 2018 Class 1 EUR Hedged Accumulation shares March 2017 Class 1 EUR Hedged Accumulation shares March 2016 Class 1 EUR Hedged Accumulation shares March 2018 Class 2 Accumulation shares March 2017 Class 2 Accumulation shares March 2016 Class 2 Accumulation shares March 2018 Class X Accumulation shares March 2017 Class X Accumulation shares March 2016 Class X Accumulation shares March 2018 Class Z Income shares March 2017 Class Z Income shares March 2016 Class Z Income shares March 2018 Class Z Accumulation shares March 2017 Class Z Accumulation shares March 2016 Class Z Accumulation shares March 2018 Class Z EUR Hedged Accumulation shares March 2017 Class Z EUR Hedged Accumulation shares March 2016 Class Z EUR Hedged Accumulation shares Past performance is not a guide to future performance.

4 25% 20% 15% 10% 5% 0% Classification of Investments 7 March vs 7 March % 20% 7 March March % 10% 5% 0% Financials Technology Portfolio Information Health care Consumer services Industrials Top Five Holdings as at 7 March 2018 % of Fund Microsoft 4.83 Apple 4.83 Amazon.com 4.14 JPMorgan Chase 3.69 Bank of America 3.32 Oil & gas Consumer goods Basic materials Utilities Collective investment schemes Net other assets Top Five Holdings as at 7 March 2017 % of Fund Apple 5.08 Alphabet Class A 4.36 Microsoft 4.19 JPMorgan Chase 3.70 Facebook 3.00

5 Investment Objective and Policy To achieve capital growth. The ACD s investment policy is to invest the assets of the Fund primarily in the stock of medium to large companies domiciled in North America or which have significant North American operations. If the ACD considers it desirable, it may further invest in other securities (including fixed interest securities, other equities and money market securities). Key Investor Information Document (KIID) Subscription requirements The KIID is a pre-contractual document and investors have to confirm that they have read the latest KIID before making a subscription. Threadneedle has the right to reject a subscription if the investor does not confirm that they have read the latest KIID at the time of application. Investors can obtain the latest KIID from columbiathreadneedle.com. Changes to the management of the ACD The following changes have been made to the directors of the ACD: Resignation of Mr Tim Gillbanks on 31 March 2017; Resignation of Mr Don Jordison on 1 May 2018; Appointment of Michelle Scrimgeour on 14 August Changes to the Prospectus During the period from 8 March 2017 to 7 March 2018 the following changes were made to the Prospectus of the Threadneedle Investment Funds ICVC (the Company): Introduction of co-management for the Japan Fund, and changes to the investment policy of the fund, effective from 1 November 2017; Introduction of a compulsory conversion clause effective from 1 February 2018; Change of the name of the transfer agent and the legal advisors for the Company; Reduction of fees for certain share classes from 1 February 2018; Inclusion of a definition of near cash ; Disclosures required as a result of changes to COLL as a result of the Markets in Financial Instruments Directive (MiFID II), including amendment to the description of Class 2 Shares and Class Z Shares; Disclosures relating to the UK s decision to leave the European Union ( Brexit ); Updates to include changes to the COLL rules (including PRN, changes regarding short reports, eligible markets); Updates to reflect changes being made to UK tax on distributions (gross vs net shares, as well as tax changes more generally); Updates to the list of funds managed by the ACD and the directors of the ACD; Enhanced disclosures regarding hedged share classes and performance fee calculations; Updates to performance, dilution adjustments and available share classes; Miscellaneous changes including address of the Financial Services Ombudsman, clarification on privacy statement, clarification of dividend payment dates, addresses of paying agents. Changes to the Instrument of Incorporation During the period from 8 March 2017 to 7 March 2018, the instrument of incorporation of the Company has been updated to include a compulsory conversion clause effective 1 February Brexit In June 2016 the United Kingdom voted to leave the European Union. While negotiations progress, there is significant uncertainty relating to the UK s withdrawal from the EU, the potential consequences and precise timeframe. It is expected that the UK will exit from the EU on 29 March Depending on the outcome of the UK s negotiations with the European Union, and the existence or otherwise of any formal implementation period, it is possible that the Funds may no longer be eligible to enjoy the rights set out in the UCITS Directive. Ceasing to be so eligible may affect the ability of non-uk domiciled investors to make new investments in the Company. The ACD is monitoring the situation and will keep shareholders informed. Key Risks Investment Risk: The value of investments can fall as well as rise and investors might not get back the sum originally invested. Currency Risk: Where investments are in assets that are denominated in multiple currencies, or currencies other than your own, changes in exchange rates may affect the value of the investments. Derivatives for EPM/Hedging Risk: The investment policy of the fund allows it to invest in derivatives for the purposes of reducing risk or minimising the cost of transactions. Volatility Risk: The fund may exhibit significant price volatility. Further risks applicable to the fund can be found in the Prospectus. Risk and Reward Profile As at 7 March 2018 the figure for the risk and reward profile disclosed in the most recent KIID representing this fund is 5. The fund is in this specific category because historically it has shown a medium to high level of volatility (how much the value of the fund went up and down compared to other categories). It is based on past performance data in pound sterling. If your investment in the fund is not in pound sterling, please check the figure for the risk and reward profile disclosed on our website (columbiathreadneedle.com) according to the currency of your investment in the fund.

6 General Information The information in this report is designed to enable shareholders to make an informed judgement on the activities of the fund during the period it covers and the results of those activities at the end of the period. For further information, please contact Threadneedle Investment Services Limited. The Long Form Report and Financial Statements is available free of charge on request from the ACD and on our website. For more information about the activities and performance of the Company during the period and previous periods, please contact the ACD at the administration address noted below, or visit our website at columbiathreadneedle.com. Contacts: Registered Office Cannon Place 78 Cannon Street London EC4N 6AG Authorised Corporate Director (ACD) Threadneedle Investment Services Limited Cannon Place 78 Cannon Street London EC4N 6AG Registrar Threadneedle Investment Services Limited Delegated to: DST Financial Services Europe Limited** Authorised and regulated by the Financial Conduct Authority (FCA) St Nicholas Lane Basildon Essex SS15 5FS Investment Manager Threadneedle Asset Management Limited Cannon Place 78 Cannon Street London EC4N 6AG Authorised Corporate Director Client Services Details UK Investors Address: Threadneedle Investment Services Limited PO Box Chelmsford Essex CM99 2AL Telephone (dealing & customer enquiries): * Fax (dealing): (enquiries): Asian Investors Address: Threadneedle Investment Services Limited International Financial Data Services 47, avenue JF Kennedy L-1855 Luxembourg Telephone (dealing & customer enquiries): * Fax (dealing): (enquiries): All Other Investors Address: Threadneedle Investment Services Limited International Financial Data Services 47, avenue JF Kennedy L-1855 Luxembourg Telephone (dealing & customer enquiries): * Fax (dealing): (enquiries): Website: columbiathreadneedle.com Depositary Citibank Europe plc, UK branch (Authorised by the Prudential Regulatory Authority (PRA) and regulated by the FCA and PRA) Citigroup Centre 33 Canada Square Canary Wharf London E14 5LB Legal Advisers Eversheds Sutherland (International) LLP One Wood Street London EC2V 7WS Baum Financial Services Law Team Grosser Burstah Hamburg Germany Independent Auditor PricewaterhouseCoopers LLP Atria One 144 Morrison Street Edinburgh EH3 8EX Paying and Information Agent in Belgium CACEIS Belgium S.A Avenue du Port 86C B Brussels Belgium Representative and Paying Agent in Switzerland BNP Paribas Securities Services, Paris, Succursale de Zurich Selnaustrasse Zurich Switzerland * Calls will be recorded. ** International Financial Data Services (UK) Limited changed its name to DST Financial Services Europe Limited on 15 August To find out more visit columbiathreadneedle.com Threadneedle Investment Services Limited, ISA Manager, Authorised Corporate Director and Unit Trust Manager. Registered No Registered in England and Wales. Registered Office: Cannon Place, 78 Cannon Street, London EC4N 6AG. Authorised and regulated by the Financial Conduct Authority. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies. columbiathreadneedle.com