Annual Short Report 1 June 2017 Fund Manager s Report Alex Lyle Performance Over the twelve months to 1 June 2017, the UK equity market, as measured by the FTSE All-Share Index (Total Return), rose by +24.52%. The offer price of accumulation units in the Trust rose by 22.92% from 139.20p to 171.10p during the same period. Please note that the FTSE All-Share Index (Total Return) return quoted above is at global close as of 31 May 2017, although the Trust is valued at 12 noon on the following day. Market Overview and Portfolio Activity Global equities performed very strongly over the period under review, with all of the major regional markets posting double-digit returns in local currency terms. The returns for UK-based investors were even stronger due to the weakness of sterling following the UK s vote to leave the European Union. Over the year as a whole, equity markets benefited from a marked improvement in global risk appetite, a rise in commodity prices, some better-than-expected corporate results, ongoing monetary stimulus and signs of economic stabilisation in China. Donald Trump s victory in November s US presidential election fuelled a strong market rally amid expectations of lower taxes, looser regulation and increased infrastructure spending. There were strong gains by cyclical (economy sensitive) stocks as new stimulus measures from the Trump administration could help boost global growth. Technology stocks have performed particularly well since the election. Within the US, robust employment data and solid economic growth heightened expectations for a rate hike. The Federal Reserve (Fed) duly delivered a rise of 25 basis points in both December and March. However, investors were reassured by the Fed s dovish comments that accompanied the second hike. Markets in the US and UK hit successive record highs in 2017, and key European markets scaled new heights as populist political parties in Europe lost ground. Sentiment was also supported by the continuation of record low interest rates in both Japan and the eurozone. Additionally, the European Central Bank extended its bond-buying scheme until at least December 2017. Throughout the year, the Bank of Japan endeavoured to boost inflation and weaken the yen, with mixed success. In the UK, the Bank of England (BoE) cut rates to a historic low after the Brexit vote, to help support the economy. Economic activity globally has generally been more robust than expected, particularly in the UK which has proved more resilient than many commentators predicted at the time of the Brexit vote. The muchanticipated triggering of Article 50 by Theresa May on 29 March, followed by the announcement of a UK general election on 8 June, had little immediate impact on the market. Emerging markets produced strong gains despite the rise in US interest rates and Trump s protectionist rhetoric. There was some thawing of relations between the US and China following April s meeting between the presidents of both countries. Core government bond markets experienced mixed fortunes. The market in Japan posted a negative return in contrast to the gains seen in the UK and Europe, while returns from US Treasury bonds were flat. The UK bond market was the best performer, buoyed by the BoE s measures to steady financial markets after the Brexit vote. In addition to cutting rates to 0.25%, the central bank introduced a bank-funding scheme and expanded its bond-purchasing programme to include corporate as well as government bonds. The latter measure provided further support for UK investment-grade corporate bonds, while high-yield bonds and emerging market bonds also had a strong year, buoyed the improvement in risk appetite. Early in the reporting period, we reduced the trust s exposure to European equities, given the initial uncertainty caused by the Brexit vote. However, later in the year we added back to Europe, as some of the political risk had dissipated and we were encouraged by the strength of company earnings and appealing valuations. During the year, we felt it prudent to realise some gains on UK equities following their strong performance. The shares of companies with substantial overseas earnings have performed particularly well as these firms are beneficiaries of the weaker pound. Other portfolio adjustments included a reduction in the trust s exposure to Japanese equities and an increased allocation to bonds. Having increased the weighting in US equities early in the period, we subsequently took some profits. As a result of the strong rise in the US market, equities looked relatively fully valued. There is also some debate as to whether President Trump will be able to deliver a major cut in corporate taxation, which in many cases has already been factored into valuations. Following the strong performance of stock markets in Asia and emerging markets, we realised some gains by reducing the holdings in the Asia Fund and the Global Emerging Markets Equity Fund. While political developments continue to pose a risk for Europe, the immediate threats have dissipated following the recent victories by pro-eu candidates in the French and Dutch elections. We continue to monitor global factors including the US political situation, the oil price and China s economic outlook, all of which can influence global equity markets. As regards bond markets, the prolonged easing of monetary policy by major central banks has driven down core government bond yields. More recently, there has been an increasing focus on the limits to monetary stimulus and the prospect of new fiscal stimulus is gaining credibility. While our long-term view of low real interest rates in developed economies remains intact, there is a risk of near-term corrections as markets adjust to changes in the desired policy mix. Election Update The commentary contains a market background with a snapshot of investor sentiment during the period under review. Although the UK election has since taken place, the result has no retroactive bearing on what investors were thinking prior to the vote. Fund Facts Fund Accounting and Distribution Dates Accounting Dates Payment Dates 1 June 1 August
Ongoing Charges Figure The Ongoing Charges Figure (OCF) 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. For a more detailed breakdown please visit columbiathreadneedle.com/fees. Unit class 1 June 2017 1 June 2016 Accumulation units 1.75% 1.72% Summary of Trust Performance Performance History (%) Unit class 2017 1 2016 2015 2014 2013 2012 Accumulation units +7.23 +16.09 +3.59 +5.56 +19.61 +13.39 1 To 31 May 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, 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) NAV pence per unit Number of units in issue As at Unit class NAV ( ) 1 June 2017 Accumulation units 20,509,809 161.83 12,673,646 1 June 2016 Accumulation units 18,068,940 131.55 13,735,437 1 June 2015 Accumulation units 19,608,715 135.46 14,475,440 Distribution History/Unit Price Range Pence per unit Highest offer price (pence) Lowest bid price (pence) Year to Unit class 1 June 2017 Accumulation units 0.9373 171.10 142.60 1 June 2016 Accumulation units 1.0888 143.00 117.80 1 June 2015 Accumulation units 0.9569 147.10 113.90 Past performance is not a guide to future performance.
Classification of Investments 1 June 2017 vs 1 June 2016 20% 1 June 2017 1 June 2016 15% 10% 5% 0% Collective investment schemes Corporate bonds Banks Pharmaceuticals & biotechnology Personal goods Electronic & electrical equipment Software & computer services Portfolio Information Top Five Holdings as at 1 June 2017 Construction & materials Media Travel & leisure Health care equipment & services Support services Oil & gas producers Financial services Automobiles & parts Life insurance Nonlife insurance Technology hardware & equipment Beverages General retailers % of Trust Threadneedle Asia Fund 6.44 Threadneedle Global Emerging Markets Equity Fund 3.40 Royal Dutch Shell B Shares 1.45 Nestle 1.44 Sika 1.32 Top Five Holdings as at 1 June 2016 Chemicals Industrial engineering Tobacco Mobile telecommunications Food producers Aerospace & defence Food & drug retailers Leisure goods Gas, water & multiutilities General industrials Industrial transportation Fixed line telecommunications Oil equipment, services & distribution Real estate investment trusts Government bonds Household goods & home construction Real estate investment & services Electricity Industrial metals & mining Net other assets % of Trust Threadneedle Asia Fund 6.49 Threadneedle Global Emerging Markets Equity Fund 3.40 Royal Dutch Shell B Shares 1.65 GlaxoSmithKline 1.44 Novo Nordisk 1.29
Investment Objective and Policy To achieve capital growth. The Manager s investment policy is to invest primarily in UK equities, UK government securities and fixed interest investments and worldwide equities. The Manager does not envisage remaining fully invested at all times and may utilise stock lending, forward transactions and derivatives in order to hedge against price or currency fluctuations and to facilitate Efficient Portfolio Management. 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 directors of the Manager The following changes have been made to the directors of the Manager: Appointment of Ms. Laura Weatherup on 11 July 2016 Appointment of Mr. Dominik Kremer on 22 July 2016 Resignation of Mr. Tim Gillbanks on 31 March 2017 Increase to the Trustee s Fee From 1 June 2016, the fee payable to the Trustee was increased from 0.008% to 0.01% per annum. This was agreed as a result of additional services to be performed by the Trustee. Changes to the Prospectus There have been no changes made to the prospectus during the period from 2 June 2016 to 1 June 2017. Changes to the Trust Deed There have been no changes made to the trust deeds during the period from 2 June 2016 to 1 June 2017. Key Risks Investment Risk: The value of investments can fall as well as rise and investors might not get back the sum originally invested. Derivatives for EPM/Hedging Risk: The investment policy of the trust allows it to invest in derivatives for the purposes of reducing risk or minimising the cost of transactions. Volatility Risk: The trust may exhibit significant price volatility. Effect of Dual Pricing Risk: The trust is dual priced and there is a difference between the buying price and the selling price of units. Further risks applicable to the trust can be found in the Prospectus. Risk and Reward Profile As at 1 June 2017 the figure for the risk and reward profile disclosed in the most recent KIID representing this trust is 5. The trust is in this specific category because historically it has shown a medium to high level of volatility (how much the value of the trust went up and down compared to other categories). It is based on past performance data in pound sterling. If your investment in the trust 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 trust.
General Information The information in this report is designed to enable unitholders to make an informed judgement on the activities of the trust 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 Manager and on our website. For more information about the activities and performance of the trust during the period and previous periods, please contact the Manager at the administration address noted below, or visit our website at columbiathreadneedle.com. Contacts: Manager Threadneedle Investment Services Limited (Authorised and Regulated by the Financial Conduct Authority (FCA)) Registered Office Cannon Place 78 Cannon Street London EC4N 6AG Client Services Details Address: Threadneedle Investment Services Limited PO Box 10033, Chelmsford, Essex CM99 2AL Telephone UK Investors: (dealing & customer enquiries): 0800 953 0134* Telephone non-uk Residents: (dealing & customer enquiries): +352 46 40 10 7020* Fax UK Investors (dealing): 0845 113 0274 Fax non-uk Investors (dealing): +352 2452 9807 Email (enquiries): questions@service.columbiathreadneedle.co.uk Registrar Threadneedle Investment Services Limited Delegated to: International Financial Data Services (UK) Limited (Authorised and regulated by the FCA) St Nicholas Lane Basildon Essex SS15 5FS Directors of the Manager K Cates (non-executive) T Gillbanks (Resigned from the Board on 31 March 2017) D Jordison D Kremer (Appointed to the Board on 22 July 2016) A Roughead (non-executive) L Weatherup (Appointed to the Board on 11 July 2016) Investment Manager Threadneedle Asset Management Limited (Authorised and regulated by the FCA) Registered Office Cannon Place 78 Cannon Street London EC4N 6AG * Calls will be recorded. Trustee Citibank Europe plc, UK Branch (Authorised by the Prudential Regulatory Authority (PRA) and regulated by the FCA and PRA) Head Office and Registered Office Citigroup Centre Canada Square Canary Wharf London E14 5LB Legal Advisers Eversheds LLP One Wood Street London EC2V 7WS Independent Auditor PricewaterhouseCoopers LLP Atria One 144 Morrison Street Edinburgh EH3 8EX
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 191635