Threadneedle Absolute Return Bond Fund

Annual Short Report 30 April 2018 Fund Manager s Report Adrian Hilton Performance of Class 1 Accumulation shares* Over the twelve months to 30 April 2018, the published share price of Class 1 accumulation shares in the Threadneedle Absolute Return Bond Fund has fallen from 57.07p to 56.04p. Using noon prices, the performance of the Class 1 share class was -1.80% and -1.39% for the Class 2 share class compared to a return of +1.26% for the Morningstar UK Unit Trusts/OEICS (IA) Absolute Return Peer Group (on a bid to bid basis, with income reinvested for a UK basic rate taxpayer). For information purposes, the LIBOR 3 Month Deposit Rate returned +0.44%. Market Overview and Portfolio Activity For much of the period, equities outperformed bonds, due to positive global economic data, improving corporate results and the prospect, then reality that President Trump would overhaul the US tax code. However, in early 2018, equities sold off sharply. Initially, this was due to increased fears that copious central bank stimulus could soon come to an end. Later, worries about a trade war came into focus as the Trump administration announced sweeping tariffs on a range of imports. Core government bond yields rose over the period as key central banks made further moves to normalise policy, and as investors feared that further steps in this direction could be stronger than previously anticipated. The aforementioned optimism over earnings, Trump s tax cuts and economic markers also hurt core bonds but aided riskier debt, particularly high yield bonds. Over the review period, the Federal Reserve hiked rates three times, and in October, started scaling down its balance sheet. However, neither these moves, nor generally buoyant US economic markers, were sufficient to stem the dollar s slide. The currency was hurt by jitters about protectionism, anticipation that Trump s tax cuts would increase the US fiscal deficit and the various controversies engulfing his administration. By contrast, the euro trended higher due to robust economic indicators from the eurozone and generally less angst about euroscepticism. These factors encouraged the European Central Bank to reduce its bond purchases in January though the bank extended the scheme till September 2018. High inflation prompted the Bank of England to raise rates in November, despite sluggish domestic growth and Brexit-related uncertainty. The latter was compounded by the Ongoing Charges Figure loss of the Conservatives parliamentary majority in June s general election. By contrast, in Japan, a landslide victory for Prime Minister Shinzo Abe s party in a snap election in October prompted increased optimism over the country s political and economic prospects. Within rates strategies, we generally favoured US Treasuries relative to German bunds, given the attractive spreads and our expectations of relative monetary policy movements. We retain this preference; we see the prospects of normalising European Central Bank (ECB) policy lifting eurozone bond yields. Initially, we held curve steepening exposure at the front end of the US money market curve, where expectations for policy tightening looked under-priced. We also positioned for the re-steepening of the bund curve, where we expected policy normalisation to come in the form of tapering of bond purchases rather than rate hikes. In the second half of 2017, we broadly held a long duration bias as we viewed the drivers of lower yields as remaining generally intact. In early 2018, we opened a position in South African government bonds; we felt optimism around politics would lead foreign investors to appreciate a steep curve and high real rates. Within currency strategies, we generally held and still favour a negative bias to the US dollar. We initially maintained a long euro bias given the improving economic backdrop, reduced political risk and increased market focus on the ECB s tapering. This was held against shorts in the yen and the pound; we expected no hawkish shifts from central banks in the UK and Japan. We pared back our long euro bias over the third quarter of 2017 to leave the portfolio neutral on the euro given that pricing around the euro and the dollar had become asymmetric with regards to central bank policy and political risks. The flattening of the US yield curve in response to a faster pace of US rate hikes is not one we expect to reverse; we still feel that dynamics favour low long-dated bond yields. The boost to US growth from the fiscal package should prove temporary, rather than durable, as corporates appear to be favouring increased buybacks over raising wages and increasing investment. This should prevent the US curve from steepening. The increase in the US federal deficit on the back of the recentlyannounced fiscal boost could widen the current-account deficit, given the economy s proximity to full employment. As has been the case historically, a larger combined federal and current-account deficit could lead to a weaker dollar. Moreover, the flattening US yield curve decreases the attractiveness of US fixed income on a hedged basis. This should hurt the US dollar in the context of funding a wider current-account deficit. Fund Facts Fund Accounting and Distribution Dates Accounting Dates Payment Dates 30 April 30 June 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 30 April 2018 30 April 2017 Class 1 Accumulation shares 1.07% 1.33% Class 1 EUR Hedged Accumulation shares 1 1.31% Class 1 Gross accumulation shares 1.07% 1.38% Class 1 EUR Hedged Gross accumulation shares 1 1.31% *In pound Sterling and against UK peer group.

Share class 30 April 2018 30 April 2017 Class 1 USD Hedged Gross accumulation shares 1 1.31% Class 2 Accumulation shares 0.65% 0.71% Class 2 Gross accumulation shares 0.65% 0.71% Class 2 EUR Hedged Gross accumulation shares 1 0.70% Class X Gross accumulation shares 0.08% 0.04% 1 Closed 21 November 2017. Summary of Fund Performance Performance History (%) Share class 2018 1 2017 2016 2015 2014 1 2013 Class 1 Accumulation shares -1.32-1.75-5.21-3.14 +0.32-0.88 Class 1 EUR Hedged Accumulation shares 2-2.93-4.94 Class 1 Gross accumulation shares -1.32-1.76-5.22-3.15 +0.31-0.88 Class 1 EUR Hedged Gross accumulation 2-2.93-5.27 Class 1 USD Hedged Gross accumulation 2-1.36-4.11 Class 2 Accumulation shares -1.18-1.31-4.56-2.50 +1.07-0.35 Class 2 Gross accumulation shares -1.19-1.30-4.57-2.49 +1.00-0.21 Class 2 EUR Hedged Gross accumulation shares 2-2.54-4.73 Class X Gross accumulation shares -0.98-0.74-3.92-1.84 +1.79 +0.67 1 To 30 April 2018. 2 Commenced 24 February 2016 and closed 21 November 2017. 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) NAV pence per share Number of shares in issue As at Share class NAV ( ) 30 April 2018 Class 1 Accumulation shares 12,382,394 56.02 22,104,303 30 April 2017 Class 1 Accumulation shares 19,887,039 57.04 34,866,304 30 April 2016 Class 1 Accumulation shares 30,696,965 60.43 50,794,716 30 April 2017 Class 1 EUR Hedged Accumulation shares 9,980 99.80 10,000 30 April 2016 Class 1 EUR Hedged Accumulation shares 9,858 98.58 10,000 30 April 2018 Class 1 Gross accumulation shares 1,744,820 57.39 3,040,164 30 April 2017 Class 1 Gross accumulation shares 2,001,639 58.44 3,425,285 30 April 2016 Class 1 Gross accumulation shares 39,830,141 61.92 64,329,631 30 April 2017 Class 1 EUR Hedged Gross accumulation shares 9,980 99.80 10,000 30 April 2016 Class 1 EUR Hedged Gross accumulation shares 9,858 98.58 10,000 30 April 2017 Class 1 USD Hedged Gross accumulation shares 10,170 101.70 10,000 30 April 2016 Class 1 USD Hedged Gross accumulation shares 9,500 95.00 10,000 30 April 2018 Class 2 Accumulation shares 13,016,049 60.19 21,625,148 30 April 2017 Class 2 Accumulation shares 17,931,804 61.03 29,384,069 30 April 2016 Class 2 Accumulation shares 40,212,032 64.25 62,586,519 30 April 2018 Class 2 Gross accumulation shares 696,356 62.29 1,117,939 30 April 2017 Class 2 Gross accumulation shares 4,034,006 63.15 6,387,577 30 April 2016 Class 2 Gross accumulation shares 70,599,521 66.50 106,168,549 30 April 2017 Class 2 EUR Hedged Gross accumulation shares 10,053 100.53 10,000 30 April 2016 Class 2 EUR Hedged Gross accumulation shares 9,870 98.67 10,000 30 April 2018 Class X Gross accumulation shares 2,933 97.74 3,001 30 April 2017 Class X Gross accumulation shares 2,957 98.53 3,001 30 April 2016 Class X Gross accumulation shares 3,093 103.07 3,001 Only available to eligible investors.

Distribution History/Share Price Range Threadneedle Absolute Return Bond Fund Pence per share Highest share price (pence) Lowest share price (pence) Year to Share class 30 April 2018 Class 1 Accumulation shares 0.7347 57.21 55.97 30 April 2017 Class 1 Accumulation shares 60.99 56.86 30 April 2016 Class 1 Accumulation shares 66.90 58.96 30 April 2018 Class 1 EUR Hedged Accumulation shares¹ 109.31 98.99 30 April 2017 Class 1 EUR Hedged Accumulation shares 110.37 93.82 30 April 2016 Class 1 EUR Hedged Accumulation shares 2 102.95 98.00 30 April 2018 Class 1 Gross accumulation shares 0.7528 58.61 57.35 30 April 2017 Class 1 Gross accumulation shares 62.48 58.25 30 April 2016 Class 1 Gross accumulation shares 68.54 60.41 30 April 2018 Class 1 EUR Hedged Gross accumulation shares¹ 109.31 98.99 30 April 2017 Class 1 EUR Hedged Gross accumulation shares 110.37 93.82 30 April 2016 Class 1 EUR Hedged Gross accumulation shares 2 102.95 98.03 30 April 2018 Class 1 USD Hedged Gross accumulation shares¹ 103.77 97.16 30 April 2017 Class 1 USD Hedged Gross accumulation shares 111.14 90.52 30 April 2016 Class 1 USD Hedged Gross accumulation shares 2 100.48 95.10 30 April 2018 Class 2 Accumulation shares 1.0466 61.29 60.14 30 April 2017 Class 2 Accumulation shares 0.3729 64.85 60.82 30 April 2016 Class 2 Accumulation shares 70.69 62.60 30 April 2018 Class 2 Gross accumulation shares 1.0830 63.43 62.23 30 April 2017 Class 2 Gross accumulation shares 0.3752 67.12 62.95 30 April 2016 Class 2 Gross accumulation shares 73.16 64.79 30 April 2018 Class 2 EUR Hedged Gross accumulation shares¹ 110.26 99.72 30 April 2017 Class 2 EUR Hedged Gross accumulation shares 0.6070 110.84 94.06 30 April 2016 Class 2 EUR Hedged Gross accumulation shares 2 0.0380 103.03 98.03 30 April 2018 Class X Gross accumulation shares 2.2535 99.27 97.65 30 April 2017 Class X Gross accumulation shares 1.2435 104.05 98.20 30 April 2016 Class X Gross accumulation shares 0.2869 112.71 100.28 1 Closed 21 November 2017. 2 Commenced 24 February 2016. Past performance is not a guide to future performance.

Classification of Investments 30 April 2018 vs 30 April 2017 60% 50% 30 April 2018 30 April 2017 40% 30% 20% 10% 0% United Kingdom Russia South Korea Netherlands Belgium South Africa Spain Mexico France Germany New Zealand Norway United States of America Derivatives Net other assets Portfolio Information Top Five Holdings as at 30 April 2018 % of Fund United Kingdom Gilt 1.25% 22/07/2018 21.59 United Kingdom Gilt 1.75% 22/07/2019 18.19 United Kingdom Gilt 4.5% 07/03/2019 9.27 Russian Federal Bond 7.5% 18/08/2021 9.05 Volkswagen Financial Services 2.625% 22/07/2019 7.30 Top Five Holdings as at 30 April 2017 % of Fund Russian Federal Bond 7.5% 18/08/2021 13.88 United Kingdom Gilt 1.25% 22/07/2018 12.13 United Kingdom Gilt 1% 07/09/2017 8.00 Severn Trent Utilities Finance 6% 22/01/2018 4.73 Telefonica Emisiones 5.375% 02/02/2018 4.71 Investment Objective and Policy The investment objective of the Absolute Return Bond Fund is to achieve a total positive return over a 12 month period in all market conditions. There is a risk to capital, and there is no guarantee that such a return will be achieved within 12 months, or any other timescale. The ACD s investment policy is to invest the assets of the Fund so as to gain exposure to global bond and currency markets. The ACD will invest primarily in derivatives, cash and near cash, fixed interest securities, index linked securities, money market instruments and deposits. At times the portfolio may be concentrated in any one or a combination of such assets. The ACD may take long and short positions through derivatives in such issues. 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 Appointment of Michelle Scrimgeour on 14 August 2017; Resignation of Mr Don Jordison on 1 May 2018. Changes to the Prospectus During the period from 1 May 2017 to 30 April 2018 the following changes were made to the Prospectus of Threadneedle Specialist Investment Funds ICVC (the Company): Updates to include disclosures required as a result of implementation of the Securities Financing Transaction Regulation (SFTR) in relation to funds investing in total return swaps Updates to reflect changes being made to UK tax on distributions so that all payments are paid gross of UK tax Updates to the list of funds managed by the ACD and the directors of the ACD Addition of W Shares available to investors in the Global Equity Income Fund Update to list of countries where the funds are available Updates require for MiFID II Introduction of compulsory conversion clause Inclusion of the Global Focus Fund Removal of the Target Return Fund following its closure Inclusion of information about the use of Hong Kong Stock Connect by certain funds Addition of a new share class for the Global Extended Alpha Fund (Class A, a, retail share class with no performance fee) Updated privacy statement for GDPR General updates (taxation, dilution adjustments, performance, available share classes)

Changes to the Instrument of Incorporation The Instrument of Incorporation of the Company was amended on 22 December 2017 to introduce a compulsory conversion clause and 4 April 2018 to remove the Target Return Fund following its closure and add the Global Focus Fund. 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 2019. 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 Fund 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. No Capital Guarantee Risk: Positive returns are not guaranteed and no form of capital protection applies. Counterparty Risk: The fund may enter into financial transactions with selected counterparties. Any financial difficulties arising at these counterparties could significantly affect the availability and the value of fund assets. Issuer Risk: The Fund invests in securities whose value would be significantly affected if the issuer refused, was unable to or was perceived to be unable to pay. 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. Inflation Risk: Most bond and cash funds offer limited capital growth potential and an income that is not linked to inflation. Inflation is likely to affect the value of capital and income over time. Interest Rate Risk: Changes in interest rates are likely to affect the fund s value. In general, as interest rates rise, the price of a fixed rate bond will fall, and vice versa. Valuation Risk: The fund s assets may sometimes be difficult to value objectively and the actual value may not be recognised until assets are sold. Active Currency Investment Risk: The fund actively invests directly in foreign currency instruments. Currency markets are complex and exchange rates are sensitive to political and market events. This aspect of the fund s investment policy may affect the value of your investments. Short Selling Risk: Short selling intends to make a profit from falling prices. However if the value of the underlying investment increases, the value of the short position will decrease. The potential losses are unlimited as the prices of the underlying investments can increase very significantly in a short space of time. Investment in Derivatives Risk: The Investment Policy of the fund allows it to invest materially in derivatives. Leverage Risk: Leverage amplifies the effect that a change in the price of an investment has on the fund s value. As such, leverage can enhance returns to investors but can also increase losses, including losses in excess of the amount invested. Further risks applicable to the fund can be found in the Prospectus. Risk and Reward Profile As at 30 April 2018 the figure for the risk and reward profile disclosed in the most recent KIID representing this fund is 3. The fund is in this specific category because historically it has shown a medium to low 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.

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 Annual 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 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 42 20457 Hamburg Germany Independent Auditor PricewaterhouseCoopers LLP Atria One 144 Morrison Street Edinburgh EH3 8EX Authorised Corporate Director Client Services Details UK Investors Address: Threadneedle Investment Services Limited PO Box 10033 Chelmsford Essex CM99 2AL Telephone (dealing & customer enquiries): 0800 953 0134* Fax (dealing): 0845 113 0274 Email (enquiries): questions@service.columbiathreadneedle.co.uk Asian Investors Address: Threadneedle Investment Services Limited International Financial Data Services 47, avenue JF Kennedy L-1855 Luxembourg Telephone (dealing & customer enquiries): +852 3667 7111* Fax (dealing): +352 2452 9807 Email (enquiries): threadneedleenquiries@statestreet.com All Other Investors Address: Threadneedle Investment Services Limited International Financial Data Services 47, avenue JF Kennedy L-1855 Luxembourg Telephone (dealing & customer enquiries): +352 464 010 7020* Fax (dealing): +352 2452 9807 Email (enquiries): questions@service.columbiathreadneedle.co.uk Website: columbiathreadneedle.com Paying and Information Agent in Belgium CACEIS Belgium S.A. avenue du Port 86 C b 320 1000 Brussels Belgium Representative and Paying Agent in Switzerland BNP Paribas Securities Services, Paris, succursale de Zurich Selnaustrasse 16 8002 Zurich Switzerland *Calls will be recorded. **International Financial Data Services (UK) Limited changed its name to DST Financial Services Europe Limited on 15 August 2017. To find out more visit columbiathreadneedle.com Threadneedle Investment Services Limited, ISA Manager, Authorised Corporate Director and Unit Trust Manager. Registered No. 3701768. 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 ENUK 234005