THREADNEEDLE MANAGED FUNDS

Transcription

1 INTERIM REPORT AND UNAUDITED FINANCIAL STATEMENTS THREADNEEDLE MANAGED FUNDS NOVEMBER 2017 THREADNEEDLE MANAGED FUNDS COLUMBIATHREADNEEDLE.COM

2 Contents Introduction 2 Threadneedle Managed Equity Fund 3 7 Threadneedle Managed Equity Focused Fund 8 12 Threadneedle Managed Equity & Bond Fund Threadneedle Managed Bond Focused Fund Threadneedle Managed Bond Fund Risk and Reward Profiles* 28 Important Information* Directory* 31 *These pages, together with the investment reports, directors statements, Comparative Table Disclosure, Reconciliation of units and portfolio statements of the individual funds comprise the Authorised Fund Manager s Report. 1

3 Introduction These Interim Reports and Unaudited Financial Statements cover the 6 months to 15 November 2017 and review the performance and market background for five of the funds in the Threadneedle Managed Funds range. These comprise the Threadneedle Managed Equity Fund, Threadneedle Managed Equity Focused Fund, Threadneedle Managed Equity & Bond Fund, Threadneedle Managed Bond Focused Fund, Threadneedle Managed Bond Fund. We hope that you find the report informative. Should you require any further information regarding any aspect of your investment, or about our other products, we would be pleased to help. Alternatively, you may find it helpful to visit columbiathreadneedle.com for further information about Columbia Threadneedle Investments. Thank you for your continued support. M Scrimgeour Director 2

4 Threadneedle Managed Equity Fund Investment Report Investment Objective and Policy To provide a return by way of capital growth. The Fund will invest at least two-thirds of its assets in funds managed or operated by companies in the Threadneedle group. These funds may invest worldwide. The Fund will invest at least two-thirds of its assets in funds that invest in company shares, but also have some exposure to fixed income securities. The Fund may also hold cash, near cash and money market instruments. Up to 20% of the value of the Fund may be invested in funds that invest in derivatives for purposes other than Efficient Portfolio Management. The Fund will always invest so as to be eligible as an ISA investment. Review This report covers the period from 16 May 2017 to 15 November Fund Performance During the period under review the offer price of Class A units rose by 4.71% from p to p and the offer price of Class B units rose by 4.81% from p to p. Looking at performance within its peer group (the IA Flexible Investment Sector), the total return on the Fund for the six months ending 31 October 2017, including net reinvested income, is +7.00% as compared to a median return of +6.11% over the same period. (Source: Morningstar, bid to bid, income reinvested for a UK basic rate taxpayer). Please note that this period has been used for peer group comparisons due to updated peer group information only being available from Morningstar at month-end points. In view of the nature of the fund and its investment remit, there is no directly comparable market index. Market Overview and Portfolio Activity It was another strong period for world stock markets. Equities in Japan, Asia and global emerging markets posted double-digit returns in local currency terms, buoyed by the weaker US dollar, upbeat global growth indicators and further signs of economic stabilisation in China. Elsewhere, markets in the US and UK scaled record highs and European equities also performed well. The Managed Equity Fund performed strongly over the reporting period. Global investors were encouraged by the upward revisions to economic growth forecasts, better-than-expected company earnings, higher commodity prices, renewed prospects for US corporate tax reforms and further takeover activity. On the political front, concerns in Europe eased following the victory of pro-eu candidate Emmanuel Macron in the French presidential election and Angela Merkel s success in September s German federal elections. In the UK, April s unexpected decision by Theresa May to call a snap general election on 8 June caused some temporary jitters. Following the election, the Conservatives had to negotiate with Northern Ireland s Democratic Unionist Party to secure a working majority in parliament. In Japan, the market responded favourably to Prime Minister Abe s victory in October s general election, amid hopes that this would reinvigorate his stimulus and reform programme. Another key influence on financial markets was central bank monetary policy. The Federal Reserve (Fed) raised official US interest rates by 25 basis points (bps) to 1.0%-1.25% in June. In September, the Fed announced that it would begin unwinding its balance sheet from October, and that US interest rates may be raised again before the end of the year. The US economy and labour market have continued to strengthen. Within the UK, the Bank of England raised rates from the record low of 0.25% to 0.5% at the start of November. Inflationary pressures have increased, fuelled by sterling s weakness since the Brexit vote, and the bank has concerns over the level of household borrowing. It was a mixed period for core government bond markets. While those in the US and Europe posted positive returns in local currency terms, returns from markets in Japan and the UK were negative, with the latter the worst performer. In the credit markets, UK investment-grade corporate bonds, high yield bonds and emerging market bonds continued to benefit from investors risk appetite and the ongoing search for yield. During the review period, we felt it prudent to realise some gains on US equities, which now look relatively fully valued, and we trimmed the positions in the American Fund and American Select Fund. Additionally, we took some profits in Asian and global emerging market equities following their strong performance year to date. Conversely, we added to European equities, which should benefit from increasing economic momentum in the eurozone and strong corporate earnings. In fixed income, we reduced the position in global government bonds, via the Global Bond Fund, and pared back the exposure to high yield corporate bonds. High yield bonds are trading on richer valuations after their strong run over the past year and now offer a less attractive risk/reward opportunity. Elsewhere, we slightly increased the holding in the Threadneedle (Lux) Flexible Asian Bond. Although doubts persist about President Trump s ability to push through marketfriendly reforms, the Fed s plans to continue with interest-rate rises suggest that prospects for the US economy remain broadly positive. Improving economic data from Europe continues to provide grounds for optimism, and while any tightening of monetary policy in the eurozone and even the UK might indicate a welcome move back towards normality, it could generate some headwinds for the global economy in the near term. October saw the Fed start to unwind its balance sheet. In time, this could possibly lead to higher bond yields as more bonds come onto the market. However, for now the taper path is so gradual that we see little chance of market disruption. While the European Central Bank will begin to scale back its quantitative-easing stimulus programme from January, interest-rate rises in the eurozone appear some way off. Most economies are seeing stronger economic activity, inflation generally remains subdued and earnings expectations are rising, creating a supportive backdrop for world equities. Growth in China remains steady at a slower and more sustainable pace. We continue to monitor geopolitical risks, including developments in North Korea and the unfolding situation in Spain regarding Catalonia. We still regard equities as a more attractive proposition than bonds and expect to retain that positioning for now. Compared to their longer-term history, equities still offer better value than bonds. Directors Statements In accordance with the requirements of the Financial Conduct Authority s Collective Investment Schemes (COLL) Sourcebook, we hereby certify the Interim Report and Financial Statements on behalf of the Directors of Threadneedle Investment Services Limited. M Scrimgeour Director 21 December 2017 K Cates Director 3

5 Threadneedle Managed Equity Fund STATEMENT OF TOTAL RETURN Income Net capital gains 16,292 35,438 Revenue 3,663 3,719 Expenses (2,498) (2,351) Net revenue before taxation 1,165 1,368 Taxation (98) (112) Net revenue after taxation 1,067 1,256 Total return before distributions 17,359 36,694 Distributions (210) (235) Change in net assets attributable to unitholders from investment activities 17,149 36,459 BALANCE SHEET as at 15 November 2017 Assets: Fixed assets: May Investments 372, ,045 Current assets: Debtors 893 2,120 Cash and bank balances 3,689 1,506 Total assets 377, ,671 Liabilities: Investment liabilities (146) Creditors: Distribution payable (205) (249) Other creditors (1,964) (1,443) Total liabilities (2,169) (1,838) Net assets attributable to unitholders 374, ,833 STATEMENT OF CHANGE IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS Opening net assets attributable to unitholders 367, ,978 Amounts receivable on the issue of units 5,870 8,199 Amounts payable on the cancellation of units (16,001) (20,195) (10,131) (11,996) Change in net assets attributable to unitholders from investment activities (see statement of total return above) 17,149 36,459 Closing net assets attributable to unitholders 374, ,441 The comparatives used within the Statement of Change in Net Assets Attributable to Unitholders are for the corresponding period of the previous year. Therefore the opening net assets attributable to unitholders for the current year are at 15 May 2017 whilst the figure disclosed in the comparatives closing net assets attributable to unitholders is at 15 November DISTRIBUTION TABLE Dividend distribution in pence per unit Class T Income units Distribution Period Revenue Equalisation Distribution Distribution Paid/Payable Paid Group 1 16/05/17 to 15/11/ Group 2 16/05/17 to 15/11/ Total distributions in the period Group 2: units purchased during a distribution period. Note: Class A, Class B and Class Z distribute annually. 4

6 Threadneedle Managed Equity Fund Comparative Table Disclosure Class A Accumulation units Class B Accumulation units 15/11/ /05/ /05/ /11/ /05/ /05/2016 Change in net assets per unit Opening net asset value per unit (p) Return before operating charges (p) (1.12) (0.50) Operating charges (p) (1.60) (2.81) (2.53) (1.40) (2.45) (2.21) Return after operating charges (p)* (3.65) (2.71) Distributions (p) (1.06) (1.02) (1.47) (1.41) Retained distributions on accumulation units (p) Closing net asset value per unit (p) *after direct transaction costs of (p) Performance Return after charges (%) (2.36) (1.72) Other information Closing net asset value ( 000) 184, , ,259 83,728 84,538 80,479 Closing number of units 95,789,255 99,285, ,050,885 42,214,191 44,672,597 51,959,499 Operating charges (%)** Direct transaction costs (%) Prices Highest unit price (p) Lowest unit price (p) Class T Income units Class Z Accumulation units 15/11/ /05/ /05/ /11/ /05/ /05/2016 Change in net assets per unit Opening net asset value per unit (p) Return before operating charges (p) (0.78) Operating charges (p) (0.84) (1.47) (1.34) (0.75) (1.30) (1.17) Return after operating charges (p)* (1.95) Distributions (p) (0.47) (1.05) (0.62) (1.39) (1.26) Retained distributions on accumulation units (p) Closing net asset value per unit (p) *after direct transaction costs of (p) Performance Return after charges (%) (1.75) Other information Closing net asset value ( 000) 56,105 54,905 48,162 50,256 45,489 31,078 Closing number of units 44,096,905 45,083,172 47,926,648 35,716,826 33,932,632 28,409,238 Operating charges (%)** Direct transaction costs (%) Prices Highest unit price (p) Lowest unit price (p) ** The Operating charges are represented by the Ongoing Charges Figure (OCF) which is the European standard method of disclosing the charges of a unit class of a trust based on the financial year s expenses and may vary from year to year. It includes charges such as the trust s annual management charge, registration fee, custody fees and distribution cost but ordinarily excludes the costs of buying or selling assets for the trust (unless these assets are shares of another fund). The Key Investor Information Document (KIID) contains the current OCF. The calculation includes the trust s share of the expenses of the underlying fund less any fee rebates received. The share of the costs of the underlying funds may fluctuate due to changes in investment decisions, which may be required as a result of changes in market conditions. For a more detailed breakdown please visit columbiathreadneedle.com/fees. 1 Class T Income units commenced 30 October The Ongoing Charges Figure is annualised based on the fees incurred during the accounting period or since commencement date. 5

7 Threadneedle Managed Equity Fund Notes to the financial statements 1 ACCOUNTING POLICIES (a) Basis of accounting The financial statements have been prepared on the historical cost basis, as modified by the revaluation of investments, in compliance with FRS 102 and in accordance with the Statement of Recommended Practice for Authorised Funds (SORP) issued by the Investment Management Association in May The accounting policies applied are consistent with those of the annual financial statements for the year ended 15 May 2017 and are described in those financial statements. (b) Notes In accordance with the guidelines of the SORP the Fund has taken advantage of the facility not to provide further notes to the financial statements. 2 RECONCILIATION OF UNITS 2017 Class A Accumulation units Opening units 99,285,426 Units issued 318,398 Units redeemed (3,680,323) Net conversions (134,246) Closing units 95,789,255 Class B Accumulation units Opening units 44,672,597 Units issued 535,085 Units redeemed (2,995,495) Net conversions 2,004 Closing units 42,214,191 Class T Income units Opening units 45,083,172 Units issued 402,885 Units redeemed (1,389,152) Net conversions Closing units 44,096,905 Class Z Accumulation units Opening units 33,932,632 Units issued 2,698,348 Units redeemed (1,095,610) Net conversions 181,456 Closing units 35,716,826 6

8 Threadneedle Managed Equity Fund Portfolio Statement as at 15 November 2017 Holding Investment Value 000 % of Net Asset Value Holding Investment Value 000 % of Net Asset Value COLLECTIVE INVESTMENT SCHEMES 99.36% (99.46%) UK equity 19.95% (20.65%) 8,557,999 Threadneedle UK Absolute Alpha Fund 11, ,149,516 Threadneedle UK Equity Alpha Income Fund 7, ,043,664 Threadneedle UK Equity Income Fund 1, ,603,021 Threadneedle UK Extended Alpha Fund 7, ,487,804 Threadneedle UK Fund 13, ,357,651 Threadneedle UK Growth & Income Fund 5, ,629,343 Threadneedle UK Mid 250 Fund 4, ,138,799 Threadneedle UK Select Fund 19, ,539 Threadneedle UK Smaller Companies Fund 1, Total UK equity 74, UK bond 8.49% (9.33%) 22,870,538 Threadneedle Sterling Fund 22, ,361,863 Threadneedle UK Corporate Bond Fund 3, ,732,902 Threadneedle Sterling Short-Dated Corporate Bond Fund 5, Total UK bond 31, Overseas equity 64.25% (62.50%) 700,957 Threadneedle (Lux) American Absolute Alpha 11, ,678,131 Threadneedle (Lux) Asia Contrarian Equity 18, ,170 Threadneedle (Lux) Asian Equity Income 4, ,588 Threadneedle (Lux) Pan European Absolute Alpha 2, ,711,265 Threadneedle American Fund 21, ,312,920 Threadneedle American Select Fund 35, ,435,043 Threadneedle Asia Fund 19, ,220,147 Threadneedle European Fund 16, ,432,062 Threadneedle European Select Fund 22, ,784 Threadneedle European Smaller Companies Fund 6, ,441,681 Threadneedle Global Emerging Markets Equity Fund 10, ,632,345 Threadneedle Global Equity Income Fund 6, ,792,359 Threadneedle Global Extended Alpha Fund 8, ,687,865 Threadneedle Japan Fund 30, ,867 Threadneedle Latin America Fund 2, ,733,079 Threadneedle Pan European Focus Fund 12, ,694,390 Threadneedle Pan European Smaller Companies Fund 9, Total overseas equity 240, ,943,128 Threadneedle Emerging Market Local Fund 4, ,067,079 Threadneedle Global Bond Fund 2, ,708,692 Threadneedle Global Opportunities Bond Fund 3, ,418,800 Threadneedle High Yield Bond Fund 4, Total overseas bond 24, Total collective investment schemes 372, DERIVATIVES 0.00% (0.01%) Forward foreign exchange contracts 0.00% (0.01%) Total derivatives Total value of investments 372, Net other assets (0.53%) 2, Net assets 374, May 2017 comparatives in brackets. Total Purchases and Sales Total purchases for the period 38,658 30,972 Total sales for the period 48,352 47,499 Overseas bond 6.67% (6.98%) 250,368 Threadneedle (Lux) Flexible Asian Bond 2, ,018 Threadneedle (Lux) Global Corporate Bond 2, ,847,458 Threadneedle Dollar Bond Fund 3, ,695,523 Threadneedle Emerging Market Bond Fund 1,

9 Threadneedle Managed Equity Focused Fund Investment Report Investment Objective and Policy To provide a total return by way of capital growth and income. The Fund will invest at least two-thirds of its assets in funds managed or operated by companies in the Threadneedle group. These funds may invest worldwide. The Fund will invest with a focus on funds that invest in company shares, but will also have exposure to fixed income securities. The Fund may also hold cash, near cash and money market instruments. Up to 20% of the value of the Fund may be invested in funds that invest in derivatives for purposes other than Efficient Portfolio Management. The Fund will always invest so as to be eligible as an ISA investment. Review This report covers the period from 16 May 2017 to 15 November Fund Performance During the period under review the offer price of Class A units rose by 2.73% from p to p and the offer price of Class B units rose by 2.88% from p to p. Looking at performance within its peer group (the IA Mixed Investment 40-85% Shares Sector), the total return on the Fund for the six months ending 31 October 2017, including net reinvested income, is +5.12% as compared to a median return of +5.00% over the same period. (Source: Morningstar, bid to bid, income reinvested for a UK basic rate taxpayer). Fully updated peer group information is only available from Morningstar at month-end points. In view of the nature of the fund and its investment remit, there is no directly comparable market index. Market Overview and Portfolio Activity It was another strong period for world stock markets. Equities in Japan, Asia and global emerging markets posted double-digit returns in local currency terms, buoyed by the weaker US dollar, upbeat global growth indicators and further signs of economic stabilisation in China. Elsewhere, markets in the US and UK scaled record highs and European equities also performed well. The Managed Equity Focused Fund performed strongly over the reporting period. Global investors were encouraged by the upward revisions to economic growth forecasts, better-than-expected company earnings, higher commodity prices, renewed prospects for US corporate tax reforms and further takeover activity. On the political front, concerns in Europe eased following the victory of pro-eu candidate Emmanuel Macron in the French presidential election and Angela Merkel s success in September s German federal elections. In the UK, April s unexpected decision by Theresa May to call a snap general election on 8 June caused some temporary jitters. Following the election, the Conservatives had to negotiate with Northern Ireland s Democratic Unionist Party to secure a working majority in parliament. In Japan, the market responded favourably to Prime Minister Abe s victory in October s general election, amid hopes that this would reinvigorate his stimulus and reform programme. Another key influence on financial markets was central bank monetary policy. The Federal Reserve (Fed) raised official US interest rates by 25 basis points (bps) to 1.0%-1.25% in June. In September, the Fed announced that it would begin unwinding its balance sheet from October, and that US interest rates may be raised again before the end of the year. The US economy and labour market have continued to strengthen. Within the UK, the Bank of England raised rates from the record low of 0.25% to 0.5% at the start of November. Inflationary pressures have increased, fuelled by sterling s weakness since the Brexit vote, and the bank has concerns over the level of household borrowing. It was a mixed period for core government bond markets. While those in the US and Europe posted positive returns in local currency terms, returns from markets in Japan and the UK were negative, with the latter the worst performer. In the credit markets, UK investment grade corporate bonds, high yield bonds and emerging market bonds continued to benefit from investors risk appetite and the ongoing search for yield. During the review period, we felt it prudent to realise some gains on UK equities. Conversely, we added to European equities, which should benefit from increasing economic momentum in the eurozone and strong corporate earnings. In fixed income, we took some profits on the positions in investment grade and high yield corporate bonds. In particular, high yield bonds are trading on richer valuations after their strong run over the past year and now offer a less attractive risk/reward opportunity. Additionally, we trimmed the position in UK gilts, via the Sterling Bond Fund, and slightly increased the holding in the Threadneedle (Lux) Flexible Asian Bond. Although doubts persist about President Trump s ability to push through marketfriendly reforms, the Fed s plans to continue with interest-rate rises suggest that prospects for the US economy remain broadly positive. Improving economic data from Europe continues to provide grounds for optimism, and while any tightening of monetary policy in the eurozone and even the UK might indicate a welcome move back towards normality, it could generate some headwinds for the global economy in the near term. October saw the Fed start to unwind its balance sheet. In time, this could possibly lead to higher bond yields as more bonds come onto the market. However, for now the taper path is so gradual that we see little chance of market disruption. While the European Central Bank will begin to scale back its quantitative-easing stimulus programme from January, interest-rate rises in the eurozone appear some way off. Most economies are seeing stronger economic activity, inflation generally remains subdued and earnings expectations are rising, creating a supportive backdrop for world equities. Growth in China remains steady at a slower and more sustainable pace. We continue to monitor geopolitical risks, including developments in North Korea and the unfolding situation in Spain regarding Catalonia. We still regard equities as a more attractive proposition than bonds and expect to retain that positioning for now. Compared to their longer-term history, equities still offer better value than bonds. Directors Statements In accordance with the requirements of the Financial Conduct Authority s Collective Investment Schemes (COLL) Sourcebook, we hereby certify the Interim Report and Financial Statements on behalf of the Directors of Threadneedle Investment Services Limited. M Scrimgeour Director 21 December 2017 K Cates Director 8

10 Threadneedle Managed Equity Focused Fund STATEMENT OF TOTAL RETURN Income Net capital gains 17,324 51,451 Revenue 9,198 9,055 Expenses (4,790) (4,545) Net revenue before taxation 4,408 4,510 Taxation (374) (382) Net revenue after taxation 4,034 4,128 Total return before equalisation 21,358 55,579 Equalisation (41) (15) Change in net assets attributable to unitholders from investment activities 21,317 55,564 BALANCE SHEET as at 15 November 2017 Assets: Fixed assets: May Investments 752, ,878 Current assets: Debtors 2,164 2,917 Cash and bank balances 1,219 1 Total assets 756, ,796 Liabilities: Investment liabilities (197) Creditors: Bank overdrafts (48) Other creditors (2,442) (1,529) Total liabilities (2,442) (1,774) Net assets attributable to unitholders 753, ,022 STATEMENT OF CHANGE IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS Opening net assets attributable to unitholders 763, ,291 Amounts receivable on the issue of units 10,554 36,563 Amounts payable on the cancellation of units (41,034) (35,816) (30,480) 747 Change in net assets attributable to unitholders from investment activities (see statement of total return above) 21,317 55,564 Closing net assets attributable to unitholders 753, ,602 The comparatives used within the Statement of Change in Net Assets Attributable to Unitholders are for the corresponding period of the previous year. Therefore the opening net assets attributable to unitholders for the current year are at 15 May 2017 whilst the figure disclosed in the comparatives closing net assets attributable to unitholders is at 15 November

11 Threadneedle Managed Equity Focused Fund Comparative Table Disclosure Class A Accumulation units Class B Accumulation units 15/11/ /05/ /05/ /11/ /05/ /05/2016 Change in net assets per unit Opening net asset value per unit (p) Return before operating charges (p) (0.58) (0.61) Operating charges (p) (1.35) (2.43) (1.59) (1.17) (2.10) (1.34) Return after operating charges (p)* (2.17) (1.95) Distributions (p) (1.34) (1.33) (1.69) (1.65) Retained distributions on accumulation units (p) Closing net asset value per unit (p) *after direct transaction costs of (p) Performance Return after charges (%) (1.55) (1.36) Other information Closing net asset value ( 000) 309, , , , , ,970 Closing number of units 185,316, ,297, ,750, ,875, ,022, ,903,642 Operating charges (%)** Direct transaction costs (%) Prices Highest unit price (p) Lowest unit price (p) Class Z Accumulation units 15/11/ /05/ /05/2016 Change in net assets per unit Opening net asset value per unit (p) Return before operating charges (p) (0.22) Operating charges (p) (0.68) (1.21) (0.99) Return after operating charges (p)* (1.21) Distributions (p) (1.65) (1.55) Retained distributions on accumulation units (p) Closing net asset value per unit (p) *after direct transaction costs of (p) Performance Return after charges (%) (1.09) Other information Closing net asset value ( 000) 153, ,411 80,656 Closing number of units 114,724, ,233,194 73,712,226 Operating charges (%)** Direct transaction costs (%) Prices Highest unit price (p) Lowest unit price (p) **The Operating charges are represented by the Ongoing Charges Figure (OCF) which is the European standard method of disclosing the charges of a unit class of a trust based on the financial year s expenses and may vary from year to year. It includes charges such as the trust s annual management charge, registration fee, custody fees and distribution cost but ordinarily excludes the costs of buying or selling assets for the trust (unless these assets are shares of another fund). The Key Investor Information Document (KIID) contains the current OCF. The calculation includes the trust s share of the expenses of the underlying fund less any fee rebates received. The share of the costs of the underlying funds may fluctuate due to changes in investment decisions, which may be required as a result of changes in market conditions. For a more detailed breakdown please visit columbiathreadneedle.com/fees. The Ongoing Charges Figure is annualised based on the fees incurred during the accounting period or since commencement date. 10

12 Threadneedle Managed Equity Focused Fund Notes to the financial statements 1 ACCOUNTING POLICIES (a) Basis of accounting The financial statements have been prepared on the historical cost basis, as modified by the revaluation of investments, in compliance with FRS 102 and in accordance with the Statement of Recommended Practice for Authorised Funds (SORP) issued by the Investment Management Association in May The accounting policies applied are consistent with those of the annual financial statements for the year ended 15 May 2017 and are described in those financial statements. (b) Notes In accordance with the guidelines of the SORP the Fund has taken advantage of the facility not to provide further notes to the financial statements. 2 RECONCILIATION OF UNITS 2017 Class A Accumulation units Opening units 194,297,706 Units issued 446,328 Units redeemed (9,253,161) Net conversions (174,346) Closing units 185,316,527 Class B Accumulation units Opening units 181,022,712 Units issued 1,394,604 Units redeemed (12,506,768) Net conversions (35,129) Closing units 169,875,419 Class Z Accumulation units Opening units 112,233,194 Units issued 5,619,685 Units redeemed (3,391,688) Net conversions 263,505 Closing units 114,724,696 11

13 Threadneedle Managed Equity Focused Fund Portfolio Statement as at 15 November 2017 Holding Investment Value 000 % of Net Asset Value Holding Investment Value 000 % of Net Asset Value COLLECTIVE INVESTMENT SCHEMES 99.88% (99.81%) UK equity 28.07% (29.72%) 15,556,020 Threadneedle UK Absolute Alpha Fund 21, ,441,021 Threadneedle UK Equity Alpha Income Fund 23, ,732,468 Threadneedle UK Equity Income Fund 11, ,494,001 Threadneedle UK Fund 75, ,698,447 Threadneedle UK Growth & Income Fund 22, ,288,195 Threadneedle UK Select Fund 51, ,663,551 Threadneedle UK Smaller Companies Fund 5, Total UK equity 211, UK bond 10.96% (15.42%) 24,587,589 Threadneedle Sterling Bond Fund 14, ,214,435 Threadneedle Sterling Fund 39, ,952,585 Threadneedle Sterling Short-Dated Corporate Bond Fund 12, ,052,216 Threadneedle UK Corporate Bond Fund 16, Total UK bond 82, Overseas equity 47.87% (43.95%) 1,395,491 Threadneedle (Lux) American Absolute Alpha 23, ,427,421 Threadneedle (Lux) Asia Contrarian Equity 15, ,769 Threadneedle (Lux) Asian Equity Income 8, ,360 Threadneedle (Lux) Pan European Absolute Alpha 5, ,539,068 Threadneedle American Fund 77, ,202,594 Threadneedle Asia Fund 18, ,937,060 Threadneedle European Fund 72, ,486,104 Threadneedle European Smaller Companies Fund 12, ,536,838 Threadneedle Global Emerging Markets Equity Fund 17, ,952,615 Threadneedle Global Equity Income Fund 18, ,328,447 Threadneedle Global Extended Alpha Fund 13, ,169,594 Threadneedle Japan Fund 39, ,303,357 Threadneedle Latin America Fund 5, ,509,276 Threadneedle Pan European Focus Fund 15, ,898,282 Threadneedle Pan European Smaller Companies Fund 17, Total overseas equity 360, ,920,212 Threadneedle Global Opportunities Bond Fund 8, ,156,616 Threadneedle High Yield Bond Fund 9, ,562,602 Threadneedle Strategic Bond Fund 4, Total overseas bond 97, Total collective investment schemes 752, DERIVATIVES 0.00% (0.01%) Forward foreign exchange contracts 0.00% (0.01%) Total derivatives Total value of investments 752, Net other assets (0.18%) Net assets 753, May 2017 comparatives in brackets. Total Purchases and Sales Total purchases for the period 60,044 80,127 Total sales for the period 86,108 78,342 Overseas bond 12.98% (10.72%) 511,607 Threadneedle (Lux) Flexible Asian Bond 4, ,013,433 Threadneedle (Lux) Global Corporate Bond 11, ,854 Threadneedle (Lux) Global Strategic Bond 3, ,996,578 Threadneedle Dollar Bond Fund 12, ,020,999 Threadneedle Emerging Market Bond Fund 4, ,293,496 Threadneedle Emerging Market Local Fund 9, ,148,394 Threadneedle Global Bond Fund 29,

14 Threadneedle Managed Equity & Bond Fund Investment Report Investment Objective and Policy To provide a total return by way of capital growth and income. The Fund will invest at least two-thirds of its assets in funds managed or operated by companies in the Threadneedle group. These funds may invest worldwide. The Fund s investments will be a balance of funds that invest in fixed income securities and funds that hold company shares. The Fund may also hold cash, near cash and money market instruments. Up to 20% of the value of the Fund may be invested in funds that invest in derivatives for purposes other than Efficient Portfolio Management. The Fund will always invest so as to be eligible as an ISA investment. Review This report covers the period from 16 May 2017 to 15 November Fund Performance During the period under review the offer price of Class A units rose by 1.75% from p to p and the offer price of Class B units rose by 1.84% from p to p. Looking at performance within its peer group (the IA Mixed Investment 20-60% Shares Sector), the total return on the Fund for the six months ending 31 October 2017, including net reinvested income, is +3.19% as compared to a median return of +3.08% over the same period. (Source: Morningstar, bid to bid, income reinvested for a UK basic rate taxpayer). Fully updated peer group information is only available from Morningstar at month-end points. In view of the nature of the fund and its investment remit, there is no directly comparable market index. Market Overview and Portfolio Activity It was another strong period for world stock markets. Equities in Japan, Asia and global emerging markets posted double-digit returns in local currency terms, buoyed by the weaker US dollar, upbeat global growth indicators and further signs of economic stabilisation in China. Elsewhere, markets in the US and UK scaled record highs and European equities also performed well. The Managed Equity and Bond Fund also moved higher over the reporting period. Global investors were encouraged by the upward revisions to economic growth forecasts, better-than-expected company earnings, higher commodity prices, renewed prospects for US corporate tax reforms and further takeover activity. On the political front, concerns in Europe eased following the victory of pro-eu candidate Emmanuel Macron in the French presidential election and Angela Merkel s success in September s German federal elections. In the UK, April s unexpected decision by Theresa May to call a snap general election on 8 June caused some temporary jitters. Following the election, the Conservatives had to negotiate with Northern Ireland s Democratic Unionist Party to secure a working majority in parliament. In Japan, the market responded favourably to Prime Minister Abe s victory in October s general election, amid hopes that this would reinvigorate his stimulus and reform programme. Another key influence on financial markets was central bank monetary policy. The Federal Reserve (Fed) raised official US interest rates by 25 basis points (bps) to 1.0%-1.25% in June. In September, the Fed announced that it would begin unwinding its balance sheet from October, and that US interest rates may be raised again before the end of the year. The US economy and labour market have continued to strengthen. Within the UK, the Bank of England raised rates from the record low of 0.25% to 0.5% at the start of November. Inflationary pressures have increased, fuelled by sterling s weakness since the Brexit vote, and the bank has concerns over the level of household borrowing. It was a mixed period for core government bond markets. While those in the US and Europe posted positive returns in local currency terms, returns from markets in Japan and the UK were negative, with the latter the worst performer. In the credit markets, UK investment grade corporate bonds, high yield bonds and emerging market bonds continued to benefit from investors risk appetite and the ongoing search for yield. During the review period, we felt it prudent to realise some gains on US equities. Following the market s strong performance year to date, US equities now look relatively fully valued. We also reduced the exposure to UK equities. Conversely, we added to European equities, which should benefit from increasing economic momentum in the eurozone and strong corporate earnings. In fixed income, we lowered the exposure to global government bonds, as well as UK investment grade and high yield corporate bonds. High yield bonds are trading on richer valuations after their strong run over the past year and now offer a less attractive risk/reward opportunity. By contrast, we slightly increased the position in emerging market local currency bonds and added new holdings in the European Corporate Bond Fund and Dollar Bond Fund. We also enhanced the holdings in the Threadneedle (Lux) Global Corporate Bond and the Threadneedle (Lux) Flexible Asian Bond. Although doubts persist about President Trump s ability to push through marketfriendly reforms, the Fed s plans to continue with interest-rate rises suggest that prospects for the US economy remain broadly positive. Improving economic data from Europe continues to provide grounds for optimism, and while any tightening of monetary policy in the eurozone and even the UK might indicate a welcome move back towards normality, it could generate some headwinds for the global economy in the near term. October saw the Fed start to unwind its balance sheet. In time, this could possibly lead to higher bond yields as more bonds come onto the market. However, for now the taper path is so gradual that we see little chance of market disruption. While the European Central Bank will begin to scale back its quantitative-easing stimulus programme from January, interest-rate rises in the eurozone appear some way off. Most economies are seeing stronger economic activity, inflation generally remains subdued and earnings expectations are rising, creating a supportive backdrop for world equities. Growth in China remains steady at a slower and more sustainable pace. We continue to monitor geopolitical risks, including developments in North Korea and the unfolding situation in Spain regarding Catalonia. We still regard equities as a more attractive proposition than bonds and expect to retain that positioning for now. Compared to their longer-term history, equities still offer better value than bonds. Directors Statements In accordance with the requirements of the Financial Conduct Authority s Collective Investment Schemes (COLL) Sourcebook, we hereby certify the Interim Report and Financial Statements on behalf of the Directors of Threadneedle Investment Services Limited. M Scrimgeour Director 21 December 2017 K Cates Director 13

15 Threadneedle Managed Equity & Bond Fund STATEMENT OF TOTAL RETURN Income Net capital gains 18,353 80,441 Revenue 15,481 14,505 Expenses (6,833) (6,284) Net revenue before taxation 8,648 8,221 Taxation (1,328) (1,273) Net revenue after taxation 7,320 6,948 Total return before distributions 25,673 87,389 Distributions (539) (254) Change in net assets attributable to unitholders from investment activities 25,134 87,135 BALANCE SHEET as at 15 November 2017 Assets: Fixed assets: May Investments 1,398,036 1,391,601 Current assets: Debtors 4,819 10,417 Cash and bank balances 4,739 Total assets 1,407,594 1,402,018 Liabilities: Investment liabilities (286) Creditors: Bank overdrafts (205) Distribution payable (527) (496) Other creditors (4,848) (7,653) Total liabilities (5,375) (8,640) Net assets attributable to unitholders 1,402,219 1,393,378 STATEMENT OF CHANGE IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS Opening net assets attributable to unitholders 1,393,378 1,160,862 Amounts receivable on the issue of units 37, ,351 Amounts payable on the cancellation of units (54,258) (45,881) (16,293) 65,470 Change in net assets attributable to unitholders from investment activities (see statement of total return above) 25,134 87,135 Closing net assets attributable to unitholders 1,402,219 1,313,467 The comparatives used within the Statement of Change in Net Assets Attributable to Unitholders are for the corresponding period of the previous year. Therefore the opening net assets attributable to unitholders for the current year are at 15 May 2017 whilst the figure disclosed in the comparatives closing net assets attributable to unitholders is at 15 November DISTRIBUTION TABLE Dividend distribution in pence per unit Class T Income units Distribution Period Revenue Equalisation Distribution Distribution Paid/Payable Paid Group 1 16/05/17 to 15/11/ Group 2 16/05/17 to 15/11/ Total distributions in the period Group 2: units purchased during a distribution period. Note: Class A, Class B and Class Z distribute annually. 14

16 Threadneedle Managed Equity & Bond Fund Comparative Table Disclosure Class A Accumulation units Class B Accumulation units 15/11/ /05/ /05/ /11/ /05/ /05/2016 Change in net assets per unit Opening net asset value per unit (p) Return before operating charges (p) Operating charges (p) (1.07) (1.98) (1.83) (0.90) (1.66) (1.55) Return after operating charges (p)* Distributions (p) (1.32) (1.46) (1.65) (1.75) Retained distributions on accumulation units (p) Closing net asset value per unit (p) *after direct transaction costs of (p) Performance Return after charges (%) Other information Closing net asset value ( 000) 340, , , , , ,581 Closing number of units 224,972, ,733, ,999, ,945, ,926, ,859,425 Operating charges (%)** Direct transaction costs (%) Prices Highest unit price (p) Lowest unit price (p) Class T Income units Class Z Accumulation units 15/11/ /05/ /05/ /11/ /05/ /05/2016 Change in net assets per unit Opening net asset value per unit (p) Return before operating charges (p) Operating charges (p) (0.71) (1.32) (0.66) (0.51) (0.93) (0.88) Return after operating charges (p)* Distributions (p) (0.62) (1.21) (0.75) (1.66) (1.67) Retained distributions on accumulation units (p) Closing net asset value per unit (p) *after direct transaction costs of (p) Performance Return after charges (%) Other information Closing net asset value ( 000) 98,501 99,824 94, , , ,710 Closing number of units 84,600,094 86,814,794 92,535, ,291, ,576, ,695,297 Operating charges (%)** Direct transaction costs (%) Prices Highest unit price (p) Lowest unit price (p) ** The Operating charges are represented by the Ongoing Charges Figure (OCF) which is the European standard method of disclosing the charges of a unit class of a trust based on the financial year s expenses and may vary from year to year. It includes charges such as the trust s annual management charge, registration fee, custody fees and distribution cost but ordinarily excludes the costs of buying or selling assets for the trust (unless these assets are shares of another fund). The Key Investor Information Document (KIID) contains the current OCF. The calculation includes the trust s share of the expenses of the underlying fund less any fee rebates received. The share of the costs of the underlying funds may fluctuate due to changes in investment decisions, which may be required as a result of changes in market conditions. For a more detailed breakdown please visit columbiathreadneedle.com/fees. 1 Class T Income units commenced 30 October The Ongoing Charges Figure is annualised based on the fees incurred during the accounting period or since commencement date. 15

17 Threadneedle Managed Equity & Bond Fund Notes to the financial statements 1 ACCOUNTING POLICIES (a) Basis of accounting The financial statements have been prepared on the historical cost basis, as modified by the revaluation of investments, in compliance with FRS 102 and in accordance with the Statement of Recommended Practice for Authorised Funds (SORP) issued by the Investment Management Association in May The accounting policies applied are consistent with those of the annual financial statements for the year ended 15 May 2017 and are described in those financial statements. (b) Notes In accordance with the guidelines of the SORP the Fund has taken advantage of the facility not to provide further notes to the financial statements. 2 RECONCILIATION OF UNITS 2017 Class A Accumulation units Opening units 235,733,376 Units issued 987,247 Units redeemed (11,647,542) Net conversions (100,584) Closing units 224,972,497 Class B Accumulation units Opening units 329,926,250 Units issued 503,939 Units redeemed (20,332,623) Net conversions (151,960) Closing units 309,945,606 Class T Income units Opening units 86,814,794 Units issued 838,018 Units redeemed (3,052,718) Net conversions Closing units 84,600,094 Class Z Accumulation units Opening units 356,576,289 Units issued 27,761,445 Units redeemed (1,355,086) Net conversions 308,740 Closing units 383,291,388 16

18 Threadneedle Managed Equity & Bond Fund Portfolio Statement as at 15 November 2017 Holding Investment Value 000 % of Net Asset Value Holding Investment Value 000 % of Net Asset Value COLLECTIVE INVESTMENT SCHEMES 99.70% (99.84%) UK equity 20.36% (22.25%) 68,648,601 Threadneedle Monthly Extra Income Fund 55, ,085,332 Threadneedle UK Absolute Alpha Fund 41, ,166,969 Threadneedle UK Equity Alpha Income Fund 65, ,213,282 Threadneedle UK Equity Income Fund 10, ,102,263 Threadneedle UK Fund 62, ,790,702 Threadneedle UK Growth & Income Fund 36, ,246,877 Threadneedle UK Mid 250 Fund 3, ,588,505 Threadneedle UK Smaller Companies Fund 9, Total UK equity 285, UK bond 23.02% (24.92%) 131,774,100 Threadneedle Sterling Bond Fund 75, ,982,976 Threadneedle Sterling Fund 129, ,233,476 Threadneedle UK Corporate Bond Fund 95, ,152,777 Threadneedle Sterling Short-Dated Corporate Bond Fund 22, Total UK bond 322, Overseas equity 32.07% (30.43%) 2,225,684 Threadneedle (Lux) American Absolute Alpha 37, ,373 Threadneedle (Lux) Asia Contrarian Equity 10, ,877 Threadneedle (Lux) Asian Equity Income 13, ,330 Threadneedle (Lux) Pan European Absolute Alpha 6, ,825,330 Threadneedle American Fund 5, ,514,042 Threadneedle Asia Fund 10, ,970,798 Threadneedle European Fund 137, ,139,636 Threadneedle European Smaller Companies Fund 9, ,101,668 Threadneedle Global Emerging Markets Equity Fund 37, ,716,024 Threadneedle Global Equity Income Fund 59, ,432,373 Threadneedle Global Select Fund 81, ,640,525 Threadneedle Japan Fund 38, ,043 Threadneedle Latin America Fund 2, Total overseas equity 449, ,621,523 Threadneedle European Corporate Bond Fund 15, ,094,311 Threadneedle Global Bond Fund 186, ,498,304 Threadneedle Global Opportunities Bond Fund 16, ,237,860 Threadneedle High Yield Bond Fund 18, ,978,090 Threadneedle Strategic Bond Fund 8, Total overseas bond 339, Total collective investment schemes 1,398, DERIVATIVES 0.00% (0.01%) Forward foreign exchange contracts 0.00% (0.01%) Total derivatives Total value of investments 1,398, Net other assets (0.15%) 4, Net assets 1,402, May 2017 comparatives in brackets. Total Purchases and Sales Total purchases for the period 154, ,107 Total sales for the period 164, ,175 Overseas bond 24.25% (22.24%) 927,905 Threadneedle (Lux) Flexible Asian Bond 8, ,866,302 Threadneedle (Lux) Global Corporate Bond 21, ,074 Threadneedle (Lux) Global Strategic Bond 6, ,841,650 Threadneedle Dollar Bond Fund 30, ,092,299 Threadneedle Emerging Market Bond Fund 8, ,850,437 Threadneedle Emerging Market Local Fund 20,