Threadneedle American Smaller Companies Fund (US)

Transcription

1 Interim Short Report 7 September 2017 Fund Manager s Report Nicolas Janvier Performance of Class 1 Accumulation shares* Over the six months to 7 September 2017, the published share price of the Threadneedle American Smaller Companies Fund (US) has fallen from p to p. Looking at the sterling performance within its peer group, the total return on the fund for the six months ending 31 August 2017, including net reinvested income, is -2.78% as compared to a median return of -2.39% over the same period. (For information the S&P 400 Mid Cap Index returned -2.56% over the same period). Market Overview and Portfolio Activity The S&P 500 edged upwards over the six months to September 7, rising 5.2% in US dollar terms. From a sector viewpoint over the period, the market was led higher by technology and healthcare. Technology stocks have been propelled by a global synchronised recovery, while expectations for the Trump administration s fiscal expansion and tax reform plans have waned. Similarly, the Trump administration s failures to deliver on healthcare reform, and the softening of the drug pricing rhetoric, have been the prime catalysts for the sector s outperformance. The laggards over the period were telecoms and energy. Despite falling inflation, the US Federal Reserve raised interest rates by 25 basis points in June, maintaining its forecast for another hike in 2017 and three in However, stronger-than-expected corporate earnings and dovish commentary from the US Federal Reserve propelled the market to record highs. Macro-economic data was less inspiring but did continue to indicate steady growth overall, but sentiment had been buoyed by better-than-expected US job-creation numbers. Towards the end of the review period equities lost some ground and volatility increased as investors were unsettled by escalating tensions between the US and North Korea. During the six month period, new positions included Bank of the Ozarks, Westar Energy and Wabco. For Bank of the Ozarks, the heavy concentration of its loan business in commercial real estate (currently 66% of loans) has weighed on the company s shares. But the bank is sustaining healthy credit and operating metrics, and growth levels above those of its competitors, and we believe it is heading towards a re-rating. With Westar, we added a position on weakness after the company s proposed merger with Great Plains Energy was blocked by the Kansas regulator. The business benefits from better earnings growth potential than its peers. Wabco is benefiting from secular growth in safety and fuel efficiencies, driven by a combination of regulations and fleet demand for productivityimproving technologies. Cyclically, the company should see demand growth from the gradual recovery in vehicle markets in both Western Europe and North American Free Trade Agreement. Over the longer term, the company has exposure to the growth in autonomous trucking. More recently, we initiated new positions in Masonite International and ELF Beauty. For Masonite, the company operates in a duopoly, with solid pricing dynamics and improving volumes. We initiated a position in the stock following price weakness from second-quarter margin pressures, which we believe are transitory. ELF Beauty is an emerging mass market cosmetics company gaining shelf space. We initiated a new position in the stock after seeing price weakness driven by temporary weakness in the company s profitability. During this period we exited stocks including PacWest Bancorp, Graco and Louisiana-Pacific. We also sold Panera Bread following its proposed takeover bid. Recent months have seen a number of challenges for the Trump administration, as a result of which the market is now reflecting a high degree of scepticism about the potential progrowth impact of the Republican agenda. This is reflected in the underperformance of high tax-paying and high buyback stocks of more domestically focused companies. In terms of valuation, the market expects double-digit earnings growth this year and next, driven by a solid domestic economic background and a global synchronised recovery outside of the US. 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 September March 2017 Class 1 Income shares 1.67% 1.67% Class 1 Accumulation shares 1.67% 1.67% Class 2 Accumulation shares 1.06% 1.06% Class X Accumulation shares 0.05% 0.05% Class Z Income shares 0.88% 0.88% Class Z Accumulation shares 0.88% 0.88% The Ongoing Charges Figure is annualised based on the fees incurred during the accounting period or since commencement date. *In pound Sterling and against UK peer group.

2 Summary of Fund Performance Performance History (%) Share class Class 1 Income shares Class 1 Accumulation shares Class 2 Accumulation shares Class X Aaccumulation shares Class Z Income shares Class Z Accumulation shares To 31 August Commenced 18 September Commenced 21 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, unless otherwise stated. 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 September 2017 Class 1 Income shares 18,266, ,091,629 7 March 2017 Class 1 Income shares 20,563, ,469,878 7 March 2016 Class 1 Income shares 12,017, ,582,910 7 March 2015 Class 1 Income shares 18,728, ,240,803 7 September 2017 Class 1 Accumulation shares 217,215, ,407,354 7 March 2017 Class 1 Accumulation shares 243,762, ,663,936 7 March 2016 Class 1 Accumulation shares 170,237, ,052,373 7 March 2015 Class 1 Accumulation shares 201,498, ,217,325 7 September 2017 Class 2 Accumulation shares 250,089, ,826,971 7 March 2017 Class 2 Accumulation shares 329,205, ,974,566 7 March 2016 Class 2 Accumulation shares 209,416, ,917,770 7 March 2015 Class 2 Accumulation shares 265,189, ,531,995 7 September 2017 Class X Accumulation shares 8, ,000 7 March 2017 Class X Accumulation shares 8, ,000 7 March 2016 Class X Accumulation shares 6,806, ,483,000 7 March 2015 Class X Accumulation shares 7,050, ,493,001 7 September 2017 Class Z Income shares 15,041, ,332,997 7 March 2017 Class Z Income shares 13,833, ,259,494 7 March 2016 Class Z Income shares 6,515, ,080,103 7 March 2015 Class Z Income shares 5,153, ,853,753 7 September 2017 Class Z Accumulation shares 230,406, ,185,524 7 March 2017 Class Z Accumulation shares 329,541, ,668,272 7 March 2016 Class Z Accumulation shares 135,121, ,343,853 7 March 2015 Class Z Accumulation shares 110,979, ,380,748 Distribution History/Share Price Range Highest Lowest Year to Share class Pence per share 7 September 2017 Class 1 Income shares March 2017 Class 1 Income shares March 2016 Class 1 Income shares March 2015 Class 1 Income shares September 2017 Class 1 Accumulation shares March 2017 Class 1 Accumulation shares March 2016 Class 1 Accumulation shares March 2015 Class 1 Accumulation shares September 2017 Class 2 Accumulation shares March 2017 Class 2 Accumulation shares March 2016 Class 2 Accumulation shares March 2015 Class 2 Accumulation shares

3 Highest Lowest Year to Share class Pence per share 7 September 2017 Class X Accumulation shares March 2017 Class X Accumulation shares March 2016 Class X Accumulation shares March 2015 Class X Accumulation shares September 2017 Class Z Income shares March 2017 Class Z Income shares March 2016 Class Z Income shares March 2015 Class Z Income shares September 2017 Class Z Accumulation shares March 2017 Class Z Accumulation shares March 2016 Class Z Accumulation shares March 2015 Class Z Accumulation shares Past performance is not a guide to future performance. Classification of Investments 7 September March vs 7 vs March 7 March % 25% 7 September March % 15% 10% 5% 0% Financials Industrials Consumer goods Technology Consumer services Health care Basic materials Utilities Oil & gas Net other assets Portfolio Information Top Five Holdings as at 7 September 2017 % of Fund CyrusOne 3.34 Bank of the Ozarks 3.11 CubeSmart 3.06 American Homes 4 Rent 2.89 Pool Corporation 2.80 Top Five Holdings as at 7 March 2017 % of Fund Zions Bancorporation 3.27 Pacwest Bancorp 3.16 Associated Banc-Corp 3.09 CyrusOne 2.89 American Homes 4 Rent 2.72

4 Investment Objective and Policy To achieve capital growth. The ACD s investment policy is to invest the assets of the Fund primarily in the equities of smaller companies that are domiciled in the US or have significant US operations. If the ACD considers it desirable it may further invest up to one third of the total assets of the Fund in other securities (including fixed interest securities, other equities and money market securities). For liquidity purposes it may invest in cash and near cash. 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; Appointment of Michelle Scrimgeour on 14 August Changes to the Prospectus During the period from 8 March 2017 to 7 September 2017 the following changes were made to the Prospectus of the Threadneedle Investment Funds ICVC (the Company): Addition of new share classes for mergers of funds of TIF II into five TIF funds on 12 May 2017; 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 There were no changes to the instrument of incorporation of the Company during the period from 8 March 2016 to 7 September Changes to the share class names With effect from 6 April 2017, all payments from the Funds are paid gross of UK tax, following changes to the way savings and investments are taxed in the UK. As a result of the change, the word net has been removed from the names of all the share classes that were previously net paying shares. 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. Liquidity Risk: The fund holds assets which could prove difficult to sell. The fund may have to lower the selling price, sell other investments or forego more appealing investment opportunities. 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. High Volatility Risk: The fund typically carries a risk of high volatility due to its portfolio composition or the portfolio management techniques used. This means that the fund s value is likely to fall and rise more frequently and this could be more pronounced than with other funds. Further risks applicable to the fund can be found in the Prospectus. Risk and Reward Profile As at 7 September 2017 the figure for the risk and reward profile disclosed in the most recent KIID representing this fund is 6. The fund is in this specific category because historically it has shown a 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.

5 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 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 *International Financial Data Services (UK) Limited changed its name to DST Financial Services Europe Limited on 15 August **Calls will be recorded.

6 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