Zurich Investment Funds ICVC Interim Report & Accounts (unaudited) for the period ended 30 November 2017
Zurich Investment Funds ICVC Contents Directory 3 Authorised Status 4 Sub-Fund Cross-Holdings 4 Securities Financing Transactions Regulations 4 Regulatory Disclosure 5 Zurich Horizon Multi-Asset Fund I Investment Objective and Policy 6 Investment Report 7 Portfolio Statement 9 Fund Information 10 Statement of Total Return 17 Statement of Change in Net Assets Attributable to Shareholders 17 Balance Sheet 18 Notes to the Financial Statements 19 Distribution Tables 20 Zurich Horizon Multi-Asset Fund II Investment Objective and Policy 22 Investment Report 23 Portfolio Statement 25 Fund Information 26 Statement of Total Return 33 Statement of Change in Net Assets Attributable to Shareholders 33 Balance Sheet 34 Notes to the Financial Statements 35 Distribution Tables 36 Zurich Horizon Multi-Asset Fund III Investment Objective and Policy 38 Investment Report 39 Portfolio Statement 41 Fund Information 42 Statement of Total Return 49 Statement of Change in Net Assets Attributable to Shareholders 49 Balance Sheet 50 Notes to the Financial Statements 51 Distribution Tables 52 Page 1
Zurich Investment Funds ICVC Contents continued Zurich Horizon Multi-Asset Fund IV Investment Objective and Policy 54 Investment Report 55 Portfolio Statement 57 Fund Information 58 Statement of Total Return 65 Statement of Change in Net Assets Attributable to Shareholders 65 Balance Sheet 66 Notes to the Financial Statements 67 Distribution Tables 68 Zurich Horizon Multi-Asset Fund V Investment Objective and Policy 70 Investment Report 71 Portfolio Statement 73 Fund Information 74 Statement of Total Return 81 Statement of Change in Net Assets Attributable to Shareholders 81 Balance Sheet 82 Notes to the Financial Statements 83 Distribution Tables 84 General Information 86 Page 2
Zurich Investment Funds ICVC Directory Authorised Corporate Director ( ACD ) Zurich Investment Services (UK) Limited The Grange Bishops Cleeve, Cheltenham Gloucestershire GL52 8XX Authorised and regulated by the Financial Conduct Authority Directors of the ACD Helen Pickford James Sykes Jonathan Thompson (Resigned 3 November 2017) Matt Vincent (Appointed 25 September 2017) David White Investment Manager Columbia Threadneedle Investments Cannon Place 78 Cannon Street London EC4N 6AG Authorised and regulated by the Financial Conduct Authority Registrar & Administrator Northern Trust Global Services Limited 50 Bank Street Canary Wharf London E14 5NT Authorised and regulated by the Financial Conduct Authority Depositary Northern Trust Global Services Limited 50 Bank Street Canary Wharf London E14 5NT Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority Independent Auditors PricewaterhouseCoopers LLP 2 Glass Wharf Bristol, BS2 0FR 3
Zurich Investment Funds ICVC Authorised Status Zurich Investment Funds ICVC ( the Company ) is an investment company with variable capital incorporated in England and Wales under registered number IC1030 and authorised by the FCA with effect from 18 March 2015 and is a Non- UCITS type scheme as defined in rule 1.2.1 of the Collective Investment Schemes Sourcebook (COLL Sourcebook), as amended. The Company has an unlimited duration. Shareholders are not liable for the debts of the Company. A Shareholder is not liable to make any further payment to the Company after he has paid the price on purchase of the Shares. Sub-Fund Cross-Holdings No sub-fund held s in any other sub-fund within the ICVC during the year. Securities Financing Transactions Regulations Additional disclosures are required when a Fund invests in Securities Financing Transactions (SFTs). However as none of the Funds invested in SFTs in the year ended 30 November 2017, no additional disclosures have been provided. Authorised Status Sub-Fund Cross-Holdings Securities Financing Transactions Regulations 4
Zurich Horizon Multi-Asset Fund I Zurich Horizon Multi-Asset Fund I Investment Objective and Policy The sub-fund aims to grow investment through a combination of income and capital growth over the medium to long term. The sub-fund will aim to achieve this objective, whilst remaining within Risk Profile 1. The sub-fund s potential gains and losses will be constrained by the aim of keeping within the asset allocation embodied in the Risk Profile. The sub-fund will invest predominantly in collective investment schemes managed or operated by companies within the Investment Manager s group of companies, with the intention of outperforming a notional investment in the strategic weighting of asset classes produced by the Risk Profile Service Provider. The sub-fund will mainly have exposure to fixed income securities including corporate bonds and government bonds. The sub-fund will also have exposure to UK equities and may have exposure to equities in other developed markets (including US, Japan and Europe). There will be no exposure to property. Investments in collective investment schemes may also include those managed, operated or advised by the ACD, or a company in the ACD s group of companies. The sub-fund may also gain exposure to money market instruments, cash and near cash. The sub-fund may use derivatives for the purposes of Efficient Portfolio Management although it may use derivatives for investment purposes upon 60 days notice to holders. Some of the collective investment schemes that the subfund invests in may use derivatives for the purposes of investment management. The sub-fund may borrow on a temporary basis up to 10% of the value of the sub-fund. The duration of any temporary borrowing is not expected to exceed five Business Days. Risk profile 1 This Fund is aligned to Risk profile 1, which means that it aims to deliver growth through assets that demonstrate moderate price fluctuations, with greater emphasis placed on fixed income securities and lower exposure to equities. 6
Zurich Horizon Multi-Asset Fund I Investment Report As ACD, Zurich Investment Services agrees the long term asset allocation on a quarterly basis with Evalue (see page 86 for information on Evalue) for Fund I and then supervises the active management of the underlying portfolios by Columbia Threadneedle Investments (CTI) against these benchmarks. The following Fund Performance Report is written in conjunction with CTI: Fund Performance For the 6 months to the end of November 2017, the Horizon Multi-Asset Fund I underperformed the strategic benchmark by 0.26% (actual Fund performance compared to Evalue benchmark). The Fund also underperformed the broad peer group. Over longer periods the Fund continues to perform very well against both the strategic benchmark and the broad peer group. The main asset classes in Fund I are UK Equities and UK Bonds; the key drag to performance over the period has been stock selection decisions in the underlying UK Equity funds. The corporate bonds performed better but did not fully offset the underperformance in UK equities. Tactical asset allocation decisions did also add some value during the period. Since the end of May, financial markets have been marked by historically low volatility. The global economy, with the exception of the UK, has been going through a period of rare synchronised expansion. Company profits are rising, trade is expanding, and growth is robust in the US, Europe and beyond. In contrast companies in the UK have not performed so well and the domestic economy is slowing as a result of Brexit uncertainty. This is a concern not only for local companies but also those that invest in the UK. Should trade talks yield constructive progress, we may yet see a more certain framework within which companies and investors can make forward-looking decisions. For the time being, activity in the UK is slowing and a hard Brexit could send a geo-political shockwave through global economies and markets. As a driving force for the UK economy, the consumer s reaction to Brexit will have an important role to play. Coupled with the Bank of England potentially looking at further interest rate rises in the future, consumers enthusiasm to spend may be tempered in 2018. We see more value in UK Equities over bonds but are keeping a close eye on the Brexit strategy as this unfolds. All things being equal though, equities should continue to perform in 2018 as on a valuation basis UK equities look reasonably cheap. On the other side, there is unlikely to be much upside in credit markets because valuations are too rich, although that s not to say investors should avoid the asset class entirely. 7
Zurich Horizon Multi-Asset Fund I Investment Report continued Fund Performance compared to Investment Association Sector Average Columbia Threadneedle Investments Investment Manager 30 November 2017 8
Zurich Horizon Multi-Asset Fund I Portfolio Statement as at 30 November 2017 Holding Investment Market value Percentage of total net assets % United Kingdom Collective Investment Schemes 99.26% (98.94%) 2,585,576 Threadneedle Sterling Bond* 3,074 21.94 3,987,833 Threadneedle UK* 4,257 30.38 1,858,554 Threadneedle UK Corporate Bond* 2,211 15.78 158,369 Threadneedle UK Equity Income 170 1.21 1,918,565 Threadneedle UK Fixed Interest* 3,202 22.85 357,571 Threadneedle UK Select 474 3.38 144,137 Threadneedle UK Smaller Companies 522 3.72 13,910 99.26 Net Investments 99.26% (98.94%) 13,910 99.26 Net other assets 104 0.74 Total net assets 14,014 100.00 Comparative figures shown in brackets relate to 31 May 2017. All assets are income s unless otherwise stated. * Accumulation class Total purchases for the period: 3,168,522 Total sales for the period: 3,778,892 9
Zurich Horizon Multi-Asset Fund I Fund Information The Comparative Tables on pages 11 to 16 give the performance of each active class in the sub-fund. The Return after charges disclosed in the Comparative Tables is calculated as the return after operating charges per divided by the opening net asset value per. It differs from the sub-fund s performance disclosed in the Investment Report, which is calculated based on the latest published price. Portfolio transaction costs are incurred when investments are bought or sold by a Fund in order to achieve the investment objective. These transaction costs affect an investor in different ways depending on whether they are joining, leaving or continuing with their investment in the Fund. Direct transaction costs include broker commission and taxes. Broker commission includes the fee paid to a broker to execute the trades and research costs. In addition, there are indirect portfolio transaction costs arising from the dealing spread the difference between the buying and selling prices of underlying investments in the portfolio. Unlike s whereby broker commissions and stamp duty are paid by the fund on each transaction, other types of investments (such as bonds, money instruments, derivatives) do not have separately identifiable transaction costs; these costs form part of the dealing spread. Dealing spreads vary considerably depending on the transaction value and broader market sentiment. 10
Zurich Horizon Multi-Asset Fund I Fund Information continued Comparative Tables Class Z Income Shares SPACE 30.11.17 31.05.17 31.05.16 Change in Net Asset Value per Opening net asset value per 1 56.89 50.83 48.60 Return before operating charges* (0.75) 7.12 3.17 Operating charges (0.23) (0.46) (0.41) Return after operating charges (0.98) 6.66 2.76 Distributions on income s (0.41) (0.60) (0.53) Closing net asset value per 55.50 56.89 50.83 * After direct transaction costs of: 30.11.17 31.05.17 31.05.16 Performance Return after charges (1.72)% 13.10% 5.68% Other Information Closing net asset value () 561 679 356 Closing number of s 1,009,799 1,193,882 700,471 Operating charges 2 0.84% 0.84% 0.83% Direct transaction costs % % % 30.11.17 31.05.17 31.05.16 3 Prices Highest price 56.79 57.14 51.05 Lowest price 55.12 51.08 48.04 11
Zurich Horizon Multi-Asset Fund I Fund Information continued Comparative Tables continued Class Z Accumulation Shares SPACE 30.11.17 31.05.17 31.05.16 Change in Net Asset Value per Opening net asset value per 1 58.14 51.37 50.00 Return before operating charges* (0.76) 7.23 1.78 Operating charges (0.24) (0.46) (0.41) Return after operating charges (1.00) 6.77 1.37 Distributions (0.42) (0.61) (0.54) Retained distributions on accumulation s 0.42 0.61 0.54 Closing net asset value per 57.14 58.14 51.37 * After direct transaction costs of: 30.11.17 31.05.17 31.05.16 Performance Return after charges (1.72)% 13.18% 2.74% Other Information Closing net asset value () 13,400 14,246 11,468 Closing number of s 23,450,583 24,500,972 22,323,727 Operating charges 2 0.84% 0.84% 0.83% Direct transaction costs % % % 30.11.17 31.05.17 31.05.16 3 Prices Highest price 58.05 58.17 51.38 Lowest price 56.34 51.60 48.30 12
Zurich Horizon Multi-Asset Fund I Fund Information continued Comparative Tables continued Class E Accumulation Shares SPACE 30.11.17 31.05.17 31.05.16 Change in Net Asset Value per Opening net asset value per 1 58.29 51.38 50.73 Return before operating charges* (0.78) 7.24 0.95 Operating charges (0.17) (0.33) (0.30) Return after operating charges (0.95) 6.91 0.65 Distributions (0.48) (0.73) (0.25) Retained distributions on accumulation s 0.48 0.73 0.25 Closing net asset value per 57.34 58.29 51.38 * After direct transaction costs of: 30.11.17 31.05.17 31.05.16 Performance Return after charges (1.63)% 13.45% 1.28% Other Information Closing net asset value () 4 6 1 Closing number of s 6,270 9,748 1,962 Operating charges 2 0.59% 0.59% 0.58% Direct transaction costs % % % 30.11.17 31.05.17 31.05.16 4 Prices Highest price 58.21 58.32 51.40 Lowest price 56.51 51.63 50.39 13
Zurich Horizon Multi-Asset Fund I Fund Information continued Comparative Tables continued Class I Income Shares SPACE 30.11.17 31.05.17 Change in Net Asset Value per Opening net asset value per 1 57.15 56.05 Return before operating charges* (0.83) 1.52 Operating charges (0.21) (0.42) Return after operating charges (1.04) 1.10 Distributions on income s (0.42) Closing net asset value per 55.69 57.15 * After direct transaction costs of: 30.11.17 31.05.17 Performance Return after charges (1.82)% 1.96% Other Information Closing net asset value () 1 1 Closing number of s 1,787 1,787 Operating charges 2 0.74% 0.74% Direct transaction costs % % 30.11.17 31.05.17 5 Prices Highest price 57.03 57.15 Lowest price 55.34 55.91 14
Zurich Horizon Multi-Asset Fund I Fund Information continued Comparative Tables continued Class I Accumulation Shares SPACE 30.11.17 31.05.17 Change in Net Asset Value per Opening net asset value per 1 58.17 57.05 Return before operating charges* (0.80) 1.54 Operating charges (0.21) (0.42) Return after operating charges (1.01) 1.12 Distributions (0.44) Retained distributions on accumulation s 0.44 Closing net asset value per 57.16 58.17 * After direct transaction costs of: 30.11.17 31.05.17 Performance Return after charges (1.74)% 1.96% Other Information Closing net asset value () 48 1 Closing number of s 84,511 1,755 Operating charges 2 0.74% 0.74% Direct transaction costs % % 30.11.17 31.05.17 5 Prices Highest price 58.07 58.17 Lowest price 56.34 56.91 15
Zurich Horizon Multi-Asset Fund I Fund Information continued Comparative Tables continued 1 Class Z Income Shares and Z Accumulation Shares were issued at 48.60p and 50.00p on 27 March 2015 respectively. Class E Accumulation Shares were issued at 50.73p on 1 April 2016. Class I Income Shares and I Accumulation Shares were issued at 56.05p and 57.05p on 2 May 2017 respectively. The operating charges and direct transaction costs percentages figures disclosed have been annualised. For the purpose of calculating the change in net assets per these figures are actual and have not been annualised. 2 The operating charges are calculated in accordance with the CESR/10-674 guidelines for the OCF and when the OCF is calculated based on the last financial year it will be the same as the operating charges. However, unlike operating charges, the OCF has a future proofing element that might require it to be estimated or calculated based on a more recent 12-month period. The operating charges expressed both in per unit and percentage terms may include a synthetic element determined in the same way as for the OCF. Included within the OCF are synthetic costs which include the OCF of the underlying funds weighted on the basis of their investment proportion. 3 Class Z Income Shares and Class Z Accumulation Shares were launched 27 March 2015. 4 Class E Accumulation Shares was launched 1 April 2016. 5 Class I Income Shares and I Accumulation Shares were launched 2 May 2017. 16
Zurich Horizon Multi-Asset Fund I Statement of Total Return for the period ended 30 November 2017 (unaudited) 01.06.17 to 30.11.17 01.06.16 to 30.11.16 Income Net capital (losses)/gains (354) 365 Revenue 160 143 Expenses (54) (48) Interest payable and similar charges Net revenue before taxation 106 95 Taxation (7) (7) Net revenue after taxation 99 88 Total return before distributions (255) 453 Distributions (101) (90) Change in net assets attributable to holders from investment activities (356) 363 Statement of Change in Net Assets Attributable to Shareholders for the period ended 30 November 2017 (unaudited) 01.06.17 to 30.11.17 01.06.16 to 30.11.16 Opening net assets attributable to holders 14,933 11,825 Amounts receivable on creation of s 2,686 4,374 Amounts payable on cancellation of s (3,348) (3,651) (662) 723 Change in net assets attributable to holders from investment activities (see above) (356) 363 Retained distribution on accumulation s 99 88 Closing net assets attributable to holders 14,014 12,999 The difference between the opening net assets and the comparative closing net assets is the movement in the second half of the year. 17
Zurich Horizon Multi-Asset Fund I Balance Sheet as at 30 November 2017 (unaudited) 30.11.17 31.05.17 Assets: Fixed assets: Investments 13,910 14,774 Current assets: Debtors 92 156 Cash and bank balances 112 124 Total assets 14,114 15,054 Liabilities: Creditors: Distribution payable on income s (4) (3) Other creditors (96) (118) Total liabilities (100) (121) Net assets attributable to holders 14,014 14,933 18
Zurich Horizon Multi-Asset Fund I Notes to the Financial Statements for the period ended 30 November 2017 (unaudited) 1. Accounting Policies (a) Basis of accounting The financial statements have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of investments and in accordance with Financial Reporting Standard (FRS) 102 and the Statement of Recommended Practice for UK Authorised Funds issued by the IA in May 2014. 19
Zurich Horizon Multi-Asset Fund I Distribution Tables for the period ended 30 November 2017 Class Z Income Shares Interim Distribution (in ) Group 1: Shares purchased prior to 1 June 2017 Group 2: Shares purchased from 1 June 2017 to 30 November 2017 Group Net Income Equalisation 2017 Net Distribution Payable 2016 Net Distribution Paid 1 0.4111 0.4111 0.3693 2 0.4096 0.0015 0.4111 0.3693 Class Z Accumulation Shares Interim Accumulation (in ) Group 1: Shares purchased prior to 1 June 2017 Group 2: Shares purchased from 1 June 2017 to 30 November 2017 Group Net Accumulation Equalisation 2017 Net Accumulation 2016 Net Accumulation 1 0.4204 0.4204 0.3733 2 0.1946 0.2258 0.4204 0.3733 Class E Accumulation Shares Interim Accumulation (in ) Group 1: Shares purchased prior to 1 June 2017 Group 2: Shares purchased from 1 June 2017 to 30 November 2017 Group Net Accumulation Equalisation 2017 Net Accumulation 2016 Net Accumulation 1 0.4781 0.4781 0.4299 2 0.3280 0.1501 0.4781 0.4299 20
Zurich Horizon Multi-Asset Fund I Distribution Tables continued for the period ended 30 November 2017 Class I Income Shares 1 Interim Distribution (in ) Group 1: Shares purchased prior to 1 June 2017 Group 2: Shares purchased from 1 June 2017 to 30 November 2017 Group Net Income Equalisation 2017 Net Distribution Payable 1 0.4180 0.4180 2 0.4180 0.4180 Class I Accumulation Shares 1 Interim Accumulation (in ) Group 1: Shares purchased prior to 1 June 2017 Group 2: Shares purchased from 1 June 2017 to 30 November 2017 Group Net Accumulation Equalisation 2017 Net Accumulation 1 0.4410 0.4410 2 0.4337 0.0073 0.4410 1 There are no comparative distribution tables for Class I Shares as the class was launched 2 May 2017. 21
Zurich Horizon Multi-Asset Fund II Zurich Horizon Multi-Asset Fund II Investment Objective and Policy The sub-fund aims to grow investment through a combination of income and capital growth over the medium to long term. The sub-fund will aim to achieve this objective, whilst remaining within Risk Profile 2. The sub-fund s potential gains and losses will be constrained by the aim of keeping within the asset allocation embodied in the Risk Profile. The sub-fund will invest predominantly in collective investment schemes managed or operated by companies within the Investment Manager s group of companies, with the intention of outperforming a notional investment in the strategic weighting of asset classes produced by the Risk Profile Service Provider. The sub-fund will mainly have an exposure to fixed income securities and to the s of companies constituted or operating within developed markets (for example, UK, US, Europe and Japan), with some exposure to UK property. Investments in collective investment schemes may also include those managed, operated or advised by the ACD, or a company in the ACD s group of companies. In addition, the sub-fund may gain exposure to money market instruments, cash and near cash. The sub-fund may use derivatives for the purposes of Efficient Portfolio Management although it may use derivatives for investment purposes upon 60 days notice to holders. Some of the collective investment schemes that the subfund invests in may use derivatives for the purposes of investment management. The sub-fund may borrow on a temporary basis up to 10% of the value of the sub-fund. The duration of any temporary borrowing is not expected to exceed five Business Days. Risk profile 2 This Fund is aligned to Risk profile 2, which means that it aims to deliver growth through assets that demonstrate moderate price fluctuations, with emphasis placed on fixed income securities and equities and some exposure to property. 22
Zurich Horizon Multi-Asset Fund II Investment Report As ACD, Zurich Investment Services agrees the long term asset allocation on a quarterly basis with Evalue (see page 86 for information on Evalue) for Fund II and then supervises the active management of the underlying portfolios by Columbia Threadneedle Investments (CTI) against these benchmarks. The following Fund Performance Report is written in conjunction with CTI: Fund Performance For the 6 months to the end of November 2017, the Horizon Multi-Asset Fund II has outperformed the strategic benchmark by 0.11% (actual Fund performance compared to Evalue benchmark) and also outperformed the broad peer group. Over longer periods the Fund has continued to perform well specifically versus the broad peer group. The Fund mainly invests in fixed income securities and developed market equities, with some exposure to UK property. CTI s tactical asset allocation decisions added value over the period specifically in European and Japanese equities and UK corporate bonds. Stock selection decisions did not help returns with underperformance coming mainly from the UK equity funds Since the end of May, financial markets have been marked by historically low volatility. The global economy, with the exception of the UK, has been going through a period of rare synchronised expansion. Corporate profits are rising, trade is expanding, and growth is robust in the US, Europe and beyond. Asia is benefiting from this global phenomenon and a continued uplift in China. Japanese equities, they are finding a sweet spot due to increased strength in corporate earnings and evidence of ongoing corporate reform driving better returns for holders. On a monetary policy level, despite the US Federal Reserve modestly tightening in the US, and the Bank of England raising rates for the first time in a decade, global monetary policy remains very accommodating. In contrast companies in the UK have not performed so well and the domestic economy is slowing as a result of Brexit uncertainty. This is a concern not only for local companies but also those that invest in the UK. Should trade talks yield constructive progress, we may yet see a more certain framework within which companies and investors can make forward-looking decisions. For the time being, activity in the UK is slowing and a hard Brexit could send a geo-political shockwave through global economies and markets. As a driving force for the UK economy, the consumer s reaction to Brexit will have an important role to play. Coupled with the Bank of England potentially looking at further interest rate rises in the future, consumers enthusiasm to spend may be tempered in 2018. The upward trend of support for European populist parties was not as widespread in 2017 as the market expected, yet the potential for political instability in the region remains. Spain s situation with Catalonia could still undermine European co-ordination going forward. In Germany, we are yet to see a cohesive government emerge, and the forthcoming general election in Italy could potentially result in a lurch to the populist right. So, while markets are currently optimistic about these events, they could impact the cohesiveness seen in Europe over the last year. All things being equal, equities should continue to perform well in 2018. However, the macro-economic backdrop is still supportive for equities and in 2018 we envisage prices rising moderately driven by continued strong fundamentals and earnings growth. There is unlikely to be much upside in credit markets because valuations are too rich. With an absence of monetary tightening or large-scale fiscal changes on the horizon, Asia, Japan and Europe currently appear to be the best areas to take cyclical exposure to global growth. However, with geo-political and economic risks on the horizon, 2018 will require the skill of active managers to manage portfolios prudently and find investment opportunities that deliver consistent investment returns In terms of the major asset classes, we are most constructive on equities and versus credit and core government bonds. We also believe property is still a good diversifier and we see some value to be generated in this asset class. 23
Zurich Horizon Multi-Asset Fund II Investment Report continued Fund performance compared to Investment Association Sector Average Columbia Threadneedle Investments Investment Manager 30 November 2017 24
Zurich Horizon Multi-Asset Fund II Portfolio Statement as at 30 November 2017 Holding Investment Market value Percentage of total net assets % United Kingdom Collective Investment Schemes 99.36% (99.88%) 4,496,825 Threadneedle American* 14,192 21.49 2,064,313 Threadneedle European* 5,413 8.20 6,258,843 Threadneedle Japan* 4,413 6.68 5,779,608 Threadneedle Sterling Bond* 6,872 10.41 3,875,020 Threadneedle UK* 4,137 6.27 14,776,120 Threadneedle UK Corporate Bond* 17,579 26.62 373,334 Threadneedle UK Equity Income 402 0.61 2,086,991 Threadneedle UK Fixed Interest* 3,483 5.27 5,364,874 Threadneedle UK Property AIF* 7,122 10.79 1,139,340 Threadneedle UK Select 1,510 2.29 134,080 Threadneedle UK Smaller Companies 485 0.73 65,608 99.36 Net Investments 99.36% (99.88%) 65,608 99.36 Net other assets 423 0.64 Total net assets 66,031 100.00 Comparative figures shown in brackets relate to 31 May 2017. All assets are income s unless otherwise stated. * Accumulation class Total purchases for the period: 25,375,574 Total sales for the period: 9,502,448 25
Zurich Horizon Multi-Asset Fund II Fund Information The Comparative Tables on pages 27 to 32 give the performance of each active class in the sub-fund. The Return after charges disclosed in the Comparative Tables is calculated as the return after operating charges per divided by the opening net asset value per. It differs from the sub-fund s performance disclosed in the Investment Report, which is calculated based on the latest published price. Portfolio transaction costs are incurred when investments are bought or sold by a Fund in order to achieve the investment objective. These transaction costs affect an investor in different ways depending on whether they are joining, leaving or continuing with their investment in the Fund. Direct transaction costs include broker commission and taxes. Broker commission includes the fee paid to a broker to execute the trades and research costs. In addition, there are indirect portfolio transaction costs arising from the dealing spread the difference between the buying and selling prices of underlying investments in the portfolio. Unlike s whereby broker commissions and stamp duty are paid by the fund on each transaction, other types of investments (such as bonds, money instruments, derivatives) do not have separately identifiable transaction costs; these costs form part of the dealing spread. Dealing spreads vary considerably depending on the transaction value and broader market sentiment. 26
Zurich Horizon Multi-Asset Fund II Fund Information continued Comparative Tables Class Z Income Shares SPACE 30.11.17 31.05.17 31.05.16 Change in Net Asset Value per Opening net asset value per 1 58.23 50.56 49.18 Return before operating charges* 0.93 8.54 2.48 Operating charges (0.24) (0.45) (0.41) Return after operating charges 0.69 8.09 2.07 Distributions on income s (0.27) (0.42) (0.69) Closing net asset value per 58.65 58.23 50.56 * After direct transaction costs of: 30.11.17 31.05.17 31.05.16 Performance Return after charges 1.18% 16.00% 4.21% Other Information Closing net asset value () 3,344 3,067 1,851 Closing number of s 5,702,065 5,267,679 3,660,692 Operating charges 2 0.82% 0.82% 0.83% Direct transaction costs % % % 30.11.17 31.05.17 31.05.16 3 Prices Highest price 59.70 58.49 51.28 Lowest price 57.22 50.08 47.94 27
Zurich Horizon Multi-Asset Fund II Fund Information continued Comparative Tables continued Class Z Accumulation Shares SPACE 30.11.17 31.05.17 31.05.16 Change in Net Asset Value per Opening net asset value per 1 59.46 51.25 50.00 Return before operating charges* 0.96 8.67 1.66 Operating charges (0.25) (0.46) (0.41) Return after operating charges 0.71 8.21 1.25 Distributions (0.27) (0.43) (0.83) Retained distributions on accumulation s 0.27 0.43 0.83 Closing net asset value per 60.17 59.46 51.25 * After direct transaction costs of: 30.11.17 31.05.17 31.05.16 Performance Return after charges 1.19% 16.02% 2.50% Other Information Closing net asset value () 60,285 45,976 21,649 Closing number of s 100,198,723 77,317,346 42,238,336 Operating charges 2 0.82% 0.82% 0.83% Direct transaction costs % % % 30.11.17 31.05.17 31.05.16 3 Prices Highest price 60.97 59.44 51.68 Lowest price 58.41 50.76 48.13 28
Zurich Horizon Multi-Asset Fund II Fund Information continued Comparative Tables continued Class E Accumulation Shares SPACE 30.11.17 31.05.17 31.05.16 Change in Net Asset Value per Opening net asset value per 1 59.60 51.28 50.83 Return before operating charges* 0.93 8.64 0.75 Operating charges (0.17) (0.32) (0.30) Return after operating charges 0.76 8.32 0.45 Distributions (0.33) (0.54) (0.34) Retained distributions on accumulation s 0.33 0.54 0.34 Closing net asset value per 60.36 59.60 51.28 * After direct transaction costs of: 30.11.17 31.05.17 31.05.16 Performance Return after charges 1.28% 16.22% 0.89% Other Information Closing net asset value () 4 3 1 Closing number of s 5,787 5,819 1,956 Operating charges 2 0.57% 0.57% 0.58% Direct transaction costs % % % 30.11.17 31.05.17 31.05.16 4 Prices Highest price 61.16 59.58 51.69 Lowest price 58.56 50.80 50.62 29
Zurich Horizon Multi-Asset Fund II Fund Information continued Comparative Tables continued Class I Income Shares SPACE 30.11.17 31.05.17 Change in Net Asset Value per Opening net asset value per 1 58.52 57.38 Return before operating charges* 0.92 1.56 Operating charges (0.21) (0.42) Return after operating charges 0.71 1.14 Distributions on income s (0.31) Closing net asset value per 58.92 58.52 * After direct transaction costs of: 30.11.17 31.05.17 Performance Return after charges 1.21% 1.99% Other Information Closing net asset value () 1 1 Closing number of s 1,746 1,746 Operating charges 2 0.72% 0.72% Direct transaction costs % % 30.11.17 31.05.17 5 Prices Highest price 60.01 58.49 Lowest price 57.48 57.32 30
Zurich Horizon Multi-Asset Fund II Fund Information continued Comparative Tables continued Class I Accumulation Shares SPACE 30.11.17 31.05.17 Change in Net Asset Value per Opening net asset value per 1 59.48 58.32 Return before operating charges* 0.93 1.58 Operating charges (0.22) (0.42) Return after operating charges 0.71 1.16 Distributions (0.31) Retained distributions on accumulation s 0.31 Closing net asset value per 60.19 59.48 * After direct transaction costs of: 30.11.17 31.05.17 Performance Return after charges 1.19% 1.99% Other Information Closing net asset value () 2,397 1 Closing number of s 3,982,633 1,718 Operating charges 2 0.72% 0.72% Direct transaction costs % % 30.11.17 31.05.17 5 Prices Highest price 61.00 59.45 Lowest price 58.43 58.26 31
Zurich Horizon Multi-Asset Fund II Fund Information continued Comparative Tables continued 1 Class Z Income Shares and Z Accumulation Shares were issued at 49.18p and 50.00p on 27 March 2015 respectively. Class E Accumulation Shares were issued at 50.83p on 1 April 2016. Class I Income Shares and I Accumulation Shares were issued at 57.38p and 58.32p on 2 May 2017 respectively. The operating charges and direct transaction costs percentages figures disclosed have been annualised. For the purpose of calculating the change in net assets per these figures are actual and have not been annualised. 2 The operating charges are calculated in accordance with the CESR/10-674 guidelines for the OCF and when the OCF is calculated based on the last financial year it will be the same as the operating charges. However, unlike operating charges, the OCF has a future proofing element that might require it to be estimated or calculated based on a more recent 12-month period. The operating charges expressed both in per unit and percentage terms may include a synthetic element determined in the same way as for the OCF. Included within the OCF are synthetic costs which include the OCF of the underlying funds weighted on the basis of their investment proportion. 3 Class Z Income Shares and Class Z Accumulation Shares were launched 27 March 2015. 4 Class E Accumulation Shares was launched 1 April 2016. 5 Class I Income Shares and I Accumulation Shares were launched 2 May 2017. 32
Zurich Horizon Multi-Asset Fund II Statement of Total Return for the period ended 30 November 2017 (unaudited) 01.06.17 to 30.11.17 01.06.16 to 30.11.16 Income Net capital gains 474 1,457 Revenue 521 193 Expenses (212) (108) Interest payable and similar charges Net revenue before taxation 309 85 Taxation (60) (15) Net revenue after taxation 249 70 Total return before distributions 723 1,527 Distributions (258) (75) Change in net assets attributable to holders from investment activities 465 1,452 Statement of Change in Net Assets Attributable to Shareholders for the period ended 30 November 2017 (unaudited) 01.06.17 to 30.11.17 01.06.16 to 30.11.16 Opening net assets attributable to holders 49,048 23,501 Amounts receivable on creation of s 21,848 14,889 Amounts payable on cancellation of s (5,617) (4,668) 16,231 10,221 Change in net assets attributable to holders from investment activities (see above) 465 1,452 Retained distribution on accumulation s 287 90 Closing net assets attributable to holders 66,031 35,264 The difference between the opening net assets and the comparative closing net assets is the movement in the second half of the year. 33
Zurich Horizon Multi-Asset Fund II Balance Sheet as at 30 November 2017 (unaudited) 30.11.17 31.05.17 Assets: Fixed assets: Investments 65,608 48,989 Current assets: Debtors 1,836 616 Cash and bank balances 283 348 Total assets 67,727 49,953 Liabilities: Creditors: Bank overdrafts (171) Distribution payable on income s (15) (15) Other creditors (1,510) (890) Total liabilities (1,696) (905) Net assets attributable to holders 66,031 49,048 34
Zurich Horizon Multi-Asset Fund II Notes to the Financial Statements for the period ended 30 November 2017 (unaudited) 1. Accounting Policies (a) Basis of accounting The financial statements have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of investments and in accordance with Financial Reporting Standard (FRS) 102 and the Statement of Recommended Practice for UK Authorised Funds issued by the IA in May 2014. 35
Zurich Horizon Multi-Asset Fund II Distribution Tables for the period ended 30 November 2017 Class Z Income Shares Interim Distribution (in ) Group 1: Shares purchased prior to 1 June 2017 Group 2: Shares purchased from 1 June 2017 to 30 November 2017 Group Net Income Equalisation 2017 Net Distribution Payable 2016 Net Distribution Paid 1 0.2686 0.2686 0.1417 2 0.0835 0.1851 0.2686 0.1417 Class Z Accumulation Shares Interim Accumulation (in ) Group 1: Shares purchased prior to 1 June 2017 Group 2: Shares purchased from 1 June 2017 to 30 November 2017 Group Net Accumulation Equalisation 2017 Net Accumulation 2016 Net Accumulation 1 0.2741 0.2741 0.1475 2 0.1162 0.1579 0.2741 0.1475 Class E Accumulation Shares Interim Accumulation (in ) Group 1: Shares purchased prior to 1 June 2017 Group 2: Shares purchased from 1 June 2017 to 30 November 2017 Group Net Accumulation Equalisation 2017 Net Accumulation 2016 Net Accumulation 1 0.3336 0.3336 0.2080 2 0.2695 0.0641 0.3336 0.2080 36
Zurich Horizon Multi-Asset Fund II Distribution Tables continued for the period ended 30 November 2017 Class I Income Shares 1 Interim Distribution (in ) Group 1: Shares purchased prior to 1 June 2017 Group 2: Shares purchased from 1 June 2017 to 30 November 2017 Group Net Income Equalisation 2017 Net Distribution Payable 1 0.3069 0.3069 2 0.3069 0.3069 Class I Accumulation Shares 1 Interim Accumulation (in ) Group 1: Shares purchased prior to 1 June 2017 Group 2: Shares purchased from 1 June 2017 to 30 November 2017 Group Net Accumulation Equalisation 2017 Net Accumulation 1 0.3055 0.3055 2 0.1322 0.1733 0.3055 1 There are no comparative distribution tables for Class I Shares as the class was launched 2 May 2017. 37
Zurich Horizon Multi-Asset Fund III Zurich Horizon Multi-Asset Fund III Investment Objective and Policy The sub-fund aims to grow investment through a combination of income and capital growth over the medium to long term. The sub-fund will aim to achieve this objective, whilst remaining within Risk Profile 3. The sub-fund s potential gains and losses will be constrained by the aim of keeping within the asset allocation embodied in the Risk Profile. The sub-fund will invest predominantly in collective investment schemes managed or operated by companies within the Investment Manager s group of companies, with the intention of outperforming a notional investment in the strategic weighting of asset classes produced by the Risk Profile Service Provider. The sub-fund will mainly have exposure to the s of companies constituted or operating within developed markets (for example UK, US, Europe and Japan), lower exposure to fixed income securities, including corporate bonds, and some exposure to UK property. Investments in collective investment schemes may also include those managed, operated or advised by the ACD, or a company in the ACD s group of companies. In addition, the sub-fund may gain exposure to money market securities, cash and near cash. The sub-fund may use derivatives for the purposes of Efficient Portfolio Management although it may use derivatives for investment purposes upon 60 days notice to holders. Some of the collective investment schemes that the sub-fund invests in may use derivatives for the purposes of investment management. The sub-fund may borrow on a temporary basis up to 10% of the value of the sub-fund. The duration of any temporary borrowing is not expected to exceed five Business Days. Risk profile 3 This Fund is aligned to Risk profile 3, which means that it aims to deliver growth through assets that may demonstrate moderate to large price fluctuations with greater emphasis placed on equity and lower exposure to fixed income securities and some exposure to property. 38
Zurich Horizon Multi-Asset Fund III Investment Report As ACD, Zurich Investment Services agrees the long term asset allocation on a quarterly basis with Evalue (see page 86 for information on Evalue) for Fund III and then supervises the active management of the underlying portfolios by Columbia Threadneedle Investments (CTI) against these benchmarks. The following Fund Performance Report is written in conjunction with CTI: Fund Performance For the 6 months to the end of November 2017, the Horizon Multi-Asset Fund III has outperformed the strategic benchmark by 0.31% (actual Fund performance compared to Evalue benchmark) and is broadly in line with the broad peer group. Over longer periods the Fund has performed very well against both the strategic benchmark and the broad peer group. The Fund invests in developed market equities and some exposure to UK fixed income and UK property. CTI's tactical asset allocation and stock selection decisions have added value overall. Asset allocation decisions added the lion s of out-performance with UK Gilts, Corporate bonds and Japanese equity positioning providing the strongest outcomes. Stock selection decisions have been most effective in Japanese equities and UK corporate bonds. Since the end of May, financial markets have been marked by historically low volatility. The global economy, with the exception of the UK, has been going through a period of rare synchronised expansion. Corporate profits are rising, trade is expanding, and growth is robust in the US, Europe and beyond. Asia is benefiting from this global phenomenon and a continued uplift in China. Japanese equities, they are finding a sweet spot due to increased strength in corporate earnings and evidence of ongoing corporate reform driving better returns for holders. On a monetary policy level, despite the US Federal Reserve modestly tightening in the US, and the Bank of England raising rates for the first time in a decade, global monetary policy remains very accommodating. In contrast companies in the UK have not performed so well and the domestic economy is slowing as a result of Brexit uncertainty. This is a concern not only for local companies but also those that invest in the UK. Should trade talks yield constructive progress, we may yet see a more certain framework within which companies and investors can make forward-looking decisions. For the time being, activity in the UK is slowing and a hard Brexit could send a geo-political shockwave through global economies and markets. As a driving force for the UK economy, the consumer s reaction to Brexit will have an important role to play. Coupled with the Bank of England potentially looking at further interest rate rises in the future, consumers enthusiasm to spend may be tempered in 2018. The upward trend of support for European populist parties was not as widespread in 2017 as the market expected, yet the potential for political instability in the region remains. Spain s situation with Catalonia could still undermine European co-ordination going forward. In Germany, we are yet to see a cohesive government emerge, and the forthcoming general election in Italy could potentially result in a lurch to the populist right. So, while markets are currently optimistic about these events, they could impact the cohesiveness seen in Europe over the last year. All things being equal, equities should continue to perform well in 2018. However, the macro-economic backdrop is still supportive for equities and in 2018 we envisage prices rising moderately driven by continued strong fundamentals and earnings growth. There is unlikely to be much upside in credit markets because valuations are too rich. With an absence of monetary tightening or large-scale fiscal changes on the horizon, Asia, Japan and Europe currently appear to be the best areas to take cyclical exposure to global growth. However, with geo-political and economic risks on the horizon, 2018 will require the skill of active managers to manage portfolios prudently and find investment opportunities that deliver consistent investment returns In terms of the major asset classes, we are most constructive on equities and versus credit and core government bonds. We also believe property is still a good diversifier and we see some value to be generated in this asset class. 39
Zurich Horizon Multi-Asset Fund III Investment Report continued Fund performance compared to Investment Association Sector Average Columbia Threadneedle Investments Investment Manager 30 November 2017 40
Zurich Horizon Multi-Asset Fund III Portfolio Statement as at 30 November 2017 Holding Investment Market value Percentage of total net assets % United Kingdom Collective Investment Schemes 99.28% (99.79%) 9,572,209 Threadneedle American* 30,211 24.12 1,491,592 Threadneedle American Select* 4,865 3.88 4,539,232 Threadneedle European* 11,903 9.50 217,057 Threadneedle European Select* 742 0.59 12,721 Threadneedle European Smaller Companies* 122 0.10 14,742,690 Threadneedle Japan* 10,395 8.30 39,503 Threadneedle Sterling Bond* 47 0.04 2,406,683 Threadneedle Sterling Short Dated Corporate Bond 2,585 2.06 8,141,792 Threadneedle UK* 8,691 6.94 29,522,649 Threadneedle UK Corporate Bond* 35,123 28.04 856,644 Threadneedle UK Equity Income 922 0.74 10,117,745 Threadneedle UK Property AIF* 13,431 10.72 3,156,087 Threadneedle UK Select 4,183 3.34 313,643 Threadneedle UK Smaller Companies 1,135 0.91 124,355 99.28 Net Investments 99.28% (99.79%) 124,355 99.28 Net other assets 908 0.72 Total net assets 125,263 100.00 Comparative figures shown in brackets relate to 31 May 2017. All assets are income s unless otherwise stated. * Accumulation class Total purchases for the period: 46,079,273 Total sales for the period: 10,174,200 41
Zurich Horizon Multi-Asset Fund III Fund Information The Comparative Tables on pages 43 to 48 give the performance of each active class in the sub-fund. The Return after charges disclosed in the Comparative Tables is calculated as the return after operating charges per divided by the opening net asset value per. It differs from the sub-fund s performance disclosed in the Investment Report, which is calculated based on the latest published price. Portfolio transaction costs are incurred when investments are bought or sold by a Fund in order to achieve the investment objective. These transaction costs affect an investor in different ways depending on whether they are joining, leaving or continuing with their investment in the Fund. Direct transaction costs include broker commission and taxes. Broker commission includes the fee paid to a broker to execute the trades and research costs. In addition, there are indirect portfolio transaction costs arising from the dealing spread the difference between the buying and selling prices of underlying investments in the portfolio. Unlike s whereby broker commissions and stamp duty are paid by the fund on each transaction, other types of investments (such as bonds, money instruments, derivatives) do not have separately identifiable transaction costs; these costs form part of the dealing spread. Dealing spreads vary considerably depending on the transaction value and broader market sentiment. 42
Zurich Horizon Multi-Asset Fund III Fund Information continued Comparative Tables Class Z Income Shares SPACE 30.11.17 31.05.17 31.05.16 Change in Net Asset Value per Opening net asset value per 1 59.76 50.35 50.30 Return before operating charges* 1.61 10.38 1.29 Operating charges (0.25) (0.45) (0.40) Return after operating charges 1.36 9.93 0.89 Distributions on income s (0.36) (0.52) (0.84) Closing net asset value per 60.76 59.76 50.35 * After direct transaction costs of: 30.11.17 31.05.17 31.05.16 Performance Return after charges 2.28% 19.72% 1.77% Other Information Closing net asset value () 2,889 2,391 1,534 Closing number of s 4,754,172 4,001,244 3,045,580 Operating charges 2 0.81% 0.81% 0.81% Direct transaction costs % % % 30.11.17 31.05.17 31.05.16 3 Prices Highest price 61.94 60.11 51.33 Lowest price 58.95 49.73 46.75 43
Zurich Horizon Multi-Asset Fund III Fund Information continued Comparative Tables continued Class Z Accumulation Shares SPACE 30.11.17 31.05.17 31.05.16 Change in Net Asset Value per Opening net asset value per 1 61.31 51.19 50.00 Return before operating charges* 1.64 10.58 1.59 Operating charges (0.25) (0.46) (0.40) Return after operating charges 1.39 10.12 1.19 Distributions (0.37) (0.53) (0.93) Retained distributions on accumulation s 0.37 0.53 0.93 Closing net asset value per 62.70 61.31 51.19 * After direct transaction costs of: 30.11.17 31.05.17 31.05.16 Performance Return after charges 2.27% 19.77% 2.38% Other Information Closing net asset value () 118,386 83,900 37,290 Closing number of s 188,799,394 136,844,635 72,843,182 Operating charges 2 0.81% 0.81% 0.81% Direct transaction costs % % % 30.11.17 31.05.17 31.05.16 3 Prices Highest price 63.55 61.31 51.77 Lowest price 60.47 50.54 47.16 44
Zurich Horizon Multi-Asset Fund III Fund Information continued Comparative Tables continued Class E Accumulation Shares SPACE 30.11.17 31.05.17 31.05.16 Change in Net Asset Value per Opening net asset value per 1 61.46 51.23 50.70 Return before operating charges* 1.64 10.56 0.81 Operating charges (0.18) (0.33) (0.28) Return after operating charges 1.46 10.23 0.53 Distributions (0.43) (0.64) (0.44) Retained distributions on accumulation s 0.43 0.64 0.44 Closing net asset value per 62.92 61.46 51.23 * After direct transaction costs of: 30.11.17 31.05.17 31.05.16 Performance Return after charges 2.38% 19.97% 1.05% Other Information Closing net asset value () 27 17 1 Closing number of s 42,379 28,094 1,964 Operating charges 2 0.56% 0.56% 0.56% Direct transaction costs % % % 30.11.17 31.05.17 31.05.16 4 Prices Highest price 63.76 61.46 51.78 Lowest price 60.63 50.57 50.39 45