THREADNEEDLE INVESTMENT FUNDS II ICVC · 6/30/2016 · Threadneedle Investment Funds II ICVC...

THREADNEEDLEINVESTMENT FUNDS II ICVC

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UNAUDITED INTERIM REPORT AND FINANCIAL STATEMENTSTHREADNEEDLE INVESTMENT FUNDS II ICVCJUNE 2016

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Threadneedle Investment Funds II ICVC Unaudited Interim Report and Financial Statements June 2016

Contents

Company Information .................................................................. 2

Directors’ Report .......................................................................... 3

Threadneedle UK Equity Income Fund ..................................... 4 – 8

Threadneedle UK Growth Fund ................................................. 9 – 12

Threadneedle European ex-UK Growth Fund ......................... 13 – 17

Threadneedle Japan Growth Fund ........................................... 18 – 20

Threadneedle Pacific ex-Japan Growth Fund ........................ 21 – 23

Threadneedle US Equity Income Fund ..................................... 24 – 26

Portfolio Statements:

Threadneedle UK Equity Income Fund ..................................... 27

Threadneedle UK Growth Fund ................................................. 28

Threadneedle European ex-UK Growth Fund ......................... 29

Threadneedle Japan Growth Fund ........................................... 30 – 31

Threadneedle Pacific ex-Japan Growth Fund ........................ 32 – 33

Performance Summary ............................................................... 34

Risk and Reward Profiles............................................................ 35

Further Information ...................................................................... 36 – 37

Directory ........................................................................................ 38

Important Information ................................................................. 39

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CompanyThreadneedle Investment Funds II ICVC (the Company) Registered Number IC24

Registered OfficeCannon Place, 78 Cannon Street, London, EC4N 6AG

DirectorThere is a sole director, the Authorised Corporate Director (the ACD), which is Threadneedle Investment Services Limited.

Board of Directors of the ACDK Cates (non-executive) (Appointed to the Board 29 March 2016) C D Fleming (Resigned from the Board 29 April 2016) T N Gillbanks D Jordison D Kremer (Appointed on 22 July 2016) A Roughead (non-executive) L Weatherup (Appointed to the Board 11 July 2016)

Company Information

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The ACD, Threadneedle Investment Services Limited has pleasure in presenting the Unaudited Interim Report and Financial Statements for each of the funds for Threadneedle Investment Funds II ICVC for the 6 months to 30 June 2016.

The Threadneedle US Equity Income Fund is currently being terminated, following its merger with the US Equity Income Fund, a sub-fund of Threadneedle Specialist Investment Funds ICVC on 20 May 2016.

We hope that you find the report informative. Should you require any further information regarding any aspect of your investment, or about our other products, we would be pleased to help. Alternatively, you may find it helpful to visit columbiathreadneedle.com for further information about Columbia Threadneedle Investments.

Thank you for your continued support.

Tim Gillbanks Director

DIRECTORS’ STATEMENTWe hereby certify the Interim Report and Financial Statements for each of the funds listed on page 1 (contents page) on behalf of the directors of Threadneedle Investment Services Limited.

D Jordison T N GillbanksDirector Director

18 August 2016

Directors’ Report

Threadneedle UK Equity Income Fund

4


Investment Report Investment Objectives and PoliciesThe objective of the Fund is to achieve a high level of income combined with long-term capital growth from investments principally in UK equities.

The Fund will normally be invested in a range of blue chip, medium and smaller companies in order to generate yield and maximise return whilst moderating the risk of equity investment at any particular point in the economic and business cycle. The Fund may also invest in other transferable securities, collective investment schemes, money market instruments, deposits, and cash and near cash when deemed appropriate.

Derivatives and forward transactions shall be used only for the purposes of efficient portfolio management and hedging. Subject to at least 60 days’ notice to Shareholders, derivatives may also be used for investment purposes, which may change the risk profile of the Fund.

Performance of Retail Income Shares*Over the six months to 30 June 2016, the published share price of Threadneedle UK Equity Income Fund has fallen from 171.50p to 171.40p. Looking at performance within its peer group, the total return on the fund for the six months ending 30 June 2016, including net reinvested income, is +1.57% as compared to a median return of -2.22% over the same period. (For comparison the FTSE All-Share Total Return Index returned +4.27% over the same period).

Market Overview and Portfolio Activity UK equities, as measured by the FTSE All-Share index, rose by 3.8% during the period under review. In a challenging start to the period, equities at home and overseas were rattled by low and volatile oil prices, and weakening Chinese economic growth and concerns over its global impact. However, sentiment improved as the quarter progressed, boosted by accommodative central-bank policy and talk of an oil-production freeze.

As the period progressed, investor sentiment increasingly moved in line with changing perceptions around the UK’s vote on its European Union membership. Having largely priced in a vote to remain in the days preceding the vote, markets reacted with shock when the UK voted, by a margin of 52% to 48%, to leave.

Sterling bore much of the impact of investor unease, hitting its weakest level in three decades, but yields on 10-year gilts also took a battering, reaching record lows. The FTSE All-Share initially plunged before staging a rally on the prospect of higher earnings for FTSE 100 companies, many of whose overseas and export earnings stand to benefit from a weaker pound. Bank of England Governor Mark Carney suggested that interest-rate cuts might be necessary this summer to counteract an economic slowdown.

During the period, we continued to build up some of our core holdings, including Pearson (educational services), GlaxoSmithKline (pharmaceuticals), Centrica (utilities) and Morrison Wm (supermarkets). After facing a difficult time

earlier in the year, Pearson has released some positive updates and is starting to make headway in implementing changes to its strategy. Originally a contrarian recovery play, Morrisons has performed strongly in the last six months, registering two straight quarters of growth in like-for-like sales. The company also rallied on news that it is to partner with ecommerce giant Amazon to establish a delivery service.

Following the Leave vote, larger caps and defensive complex stocks should be more resilient in choppy markets. In the short term our focus is on finding select opportunities to add UK firms that have been sold-off aggressively and where market sentiment is creating cheaper valuations. Mergers and acquisitions may also be a theme, as overseas companies see the weaker pound as an opportunity to revisit UK bid targets. UK investors who can maintain a longer-term focus and withstand some choppy waters will likely be rewarded with exciting opportunities.

The comparatives used within the Statement of Change in Net Assets Attributable to Shareholders are for the corresponding period of the previous year. Therefore the opening net assets attributable to shareholders for the current period are at 31 December 2015 whilst the figure disclosed in the comparatives’ closing net assets attributable to the shareholders is at 30 June 2015.

STATEMENT OF TOTAL RETURNfor the accounting period 1 January 2016 to 30 June 2016

2016 2015£000 £000

IncomeNet capital gains 5,650 4,821 Revenue 7,659 6,316

Expenses (113) (124)

Net revenue before taxation 7,546 6,192 Taxation – –

Net revenue after taxation 7,546 6,192

Total return before distributions/accumulations 13,196 11,013 Distributions/Accumulations (7,599) (6,255)

Change in net assets attributable to shareholders from investment activities 5,597 4,758

STATEMENT OF CHANGE IN NET ASSETS ATTRIBUTABLE TO SHAREHOLDERSfor the accounting period 1 January 2016 to 30 June 2016

2016 2015 £000 £000

Opening net assets attributable to shareholders 289,882 275,501 Amounts receivable on the issue of shares 33,855 28,239 Amounts payable on the cancellation of shares (7,445) (30,909)

26,410 (2,670)Dilution levy 95 88 Change in net assets attributable to shareholders from investment activities (see Statement of total return above) 5,597 4,758 Retained distribution on accumulation shares 7,459 6,046

Closing net assets attributable to shareholders 329,443 283,723

BALANCE SHEETas at 30 June 2016

December 2016 2015 £000 £000

AssetsFixed assets:

Investments 316,078 284,798

Current assets:Debtors 2,494 1,160 Short term deposits 11,005 1,001 Cash and bank balances 149 3,081

Total assets 329,726 290,040

Liabilities

Creditors:Other creditors (83) (60)Distribution payable (200) (98)

Total liabilities (283) (158)

Net assets attributable to shareholders 329,443 289,882

DISTRIBUTION TABLESfor the accounting period 1 January 2016 to 30 June 2016

Dividend distribution in pence per shareRetail Income Share ClassDistributionPeriod

Net Revenue Equalisation

Distribution Paid/Payable

Distribution Paid

2016 2015Group 101/01/16 to 31/03/16 1.2954 – 1.2954 1.225201/04/16 to 30/06/16 2.8913 – 2.8913 2.7365Group 201/01/16 to 31/03/16 1.0525 0.2429 1.2954 1.225201/04/16 to 30/06/16 0.8331 2.0582 2.8913 2.7365Total distributions in the period 4.1867 3.9617

LV=Group Accumulation Share ClassDistributionPeriod


Accumulation Paid/Payable

Accumulation Paid


*In pound sterling and against UK peer group.Please refer to pages 6–7 for comparative tables.


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DISTRIBUTION TABLES(continued)

Second Retail Income Share ClassDistributionPeriod



Distribution Paid


Institutional Income Share ClassDistributionPeriod



Distribution Paid


Institutional Accumulation Share ClassDistributionPeriod



Accumulation Paid


Group 2: shares purchased during a distribution period.


6

Comparative Table


Retail Income LV=Group Accumulation30/06/2016 31/12/2015 31/12/2014 30/06/2016 31/12/2015 31/12/2014

Change in net assets per shareOpening net asset value per share (p) 169.85 170.13 166.21 244.23 232.80 217.09

Return before operating charges (p)* 6.95 8.38 11.84 10.11 11.56 15.86Operating charges (p) (0.86) (1.84) (1.79) (0.05) (0.13) (0.15)

Return after operating charges (p)* 6.09 6.54 10.05 10.06 11.43 15.71

Distributions on income share (p) (4.19) (6.82) (6.13) – – –

Closing net asset value per share (p) 171.75 169.85 170.13 254.29 244.23 232.80

Retained distributions on accumulation share (p) – – – 6.07 9.51 8.16

*after direct transaction costs† of (p): 0.10 0.16 0.47 0.14 0.22 0.63

PerformanceReturn after charges (%) 3.58 3.84 6.05 4.12 4.91 7.24

Other informationClosing net asset value (£’000) 999 1,100 953 312,191 272,426 258,205Closing number of shares 581,523 647,859 559,979 122,769,149 111,544,342 110,914,881Operating charges (%)** 1.04*** 1.05 1.06 0.04*** 0.05 0.07Direct transaction costs (%) 0.06 0.09 0.28 0.06 0.09 0.28

Prices Highest share price (p) 173.40 186.10 175.30 251.90 255.70 235.70Lowest share price (p) 155.50 162.80 154.20 223.90 227.70 209.10

Second Retail Income Institutional Income30/06/2016 31/12/2015 31/12/2014 30/06/2016 31/12/2015 31/12/2014




Distributions on income share (p) (4.04) (6.62) (5.98) (3.96) (6.42) (5.75)




Other informationClosing net asset value (£’000) 913 1,195 2,553 9,946 9,470 8,608Closing number of shares 550,784 726,946 1,543,073 6,123,260 5,909,060 5,386,022Operating charges (%)** 1.54*** 1.55 1.56 0.59*** 0.60 0.62Direct transaction costs (%) 0.06 0.09 0.28 0.06 0.09 0.28



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Comparative Table(continued)


Institutional Accumulation30/06/2016 31/12/2015 31/12/2014

Change in net assets per shareOpening net asset value per share (p) 235.77 225.97 211.88

Return before operating charges (p)* 9.73 11.23 15.43Operating charges (p) (0.69) (1.43) (1.34)

Return after operating charges (p)* 9.04 9.80 14.09

Distributions on income share (p) – – –

Closing net asset value per share (p) 244.81 235.77 225.97

Retained distributions on accumulation share (p) 5.85 9.20 7.94

*after direct transaction costs† of (p): 0.13 0.21 0.61

PerformanceReturn after charges (%) 3.84 4.34 6.65

Other informationClosing net asset value (£’000) 5,394 5,691 5,182Closing number of shares 2,203,292 2,413,912 2,293,429Operating charges (%)** 0.59*** 0.60 0.62Direct transaction costs (%) 0.06 0.09 0.28

Prices Highest share price (p) 242.80 247.80 228.90Lowest share price (p) 216.00 221.00 203.20

**The operating charges figure is represented by the Ongoing Charges Figure (OCF). The OCF is the European standard method of disclosing the charges of a share class of a fund based on the last 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). The Key Investor Information Document (KIID) contains the current OCF. Where the fund invests in other funds, the calculation includes the funds share of the expenses of the underlying funds less any fee rebates received.

***The OCF has been annualised for the period. †Transaction costs have not been reduced by any amounts collected from Dilution levies.


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Notes to the financial statementsfor the accounting period 1 January 2016 to 30 June 2016

1 ACCOUNTING POLICIES(1) Basis of accounting

The interim financial statements have been prepared on the historical cost basis, as modified by the revaluation of investments, in compliance with FRS 102 and in accordance with the Statement of Recommended Practice for Authorised Funds (SORP) issued by the Investment Management Association in May 2014. Unless otherwise stated all other accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2015 and are described in those financial statements.

(2) Notes In accordance with the guidelines of the SORP the funds have taken advantage of the facility not to provide further notes to the financial statements.

Threadneedle UK Growth Fund

9


Investment Report Investment Objectives and PoliciesThe objective of the Fund is to achieve long-term capital growth from investments principally in UK equities.

The Fund will normally be invested in a range of blue chip, medium and smaller companies in order to maximise the return whilst moderating the risk of equity investment at any particular point in the economic and business cycle. The Fund may also invest in other transferable securities, collective investment schemes, money market instruments, deposits, and cash and near cash when deemed appropriate.


Performance of Retail Accumulation Shares*Over the six months to 30 June 2016, the published share price of Threadneedle UK Growth Fund has fallen from 201.20p to 190.90p. Looking at performance within its peer group, the total return on the fund for the six months ending 30 June 2016, including net reinvested income, is -5.12% as compared to a median return of -1.88% over the same period. (For comparison the FTSE All-Share Total Return Index returned +4.27% over the same period).

Market Overview and Portfolio Activity UK equities, as measured by the FTSE All-Share index, rose by 3.8% during the period under review. In a challenging

start to the period, equities at home and overseas were rattled by low and volatile oil prices, and weakening Chinese economic growth and concerns over its global impact. However, sentiment improved as the quarter progressed, boosted by accommodative central-bank policy and talk of an oil-production freeze.

As the period progressed, investor sentiment increasingly moved in line with changing perceptions around the UK’s vote on its European Union membership. Having largely priced in a vote to remain in the days preceding the vote, markets reacted with shock when the UK voted, by a margin of 52% to 48%, to leave.

Sterling bore much of the impact of investor unease, hitting its weakest level in three decades, but yields on 10-year gilts also took a battering, reaching record lows. The FTSE All-Share initially plunged before staging a rally on the prospect of higher earnings for FTSE 100 companies, many of whose overseas and export earnings stand to benefit from a weaker pound. Bank of England Governor Mark Carney suggested that interest-rate cuts might be necessary this summer to counteract an economic slowdown.

During the period, we continued to build up some of our core holdings, including GlaxoSmithKline (pharmaceuticals), Legal & General and Prudential Financial (insurance and pensions) and Imperial Brands (tobacco). We also opened a new position in Morgan Advanced Materials, which had fallen to very attractive levels and has good overseas

earnings exposure. Among sales, we exited HSBC. We feel that the bank faces relative diseconomies of scale, and we favour other companies in the sector. As part of a move to keep the fund focused, we also exited GKN and InterContinental Hotels, which we no longer deem to be among our best ideas.

Following the Leave vote, larger caps and defensive stocks have been far more resilient in these choppy markets and we have significant exposure to overseas earners. While investors may be tempted to sell down domestics and buy more dollar earners, we would argue it is probably now too late to make this adjustment given the scale of the outperformance of defensive large caps versus cyclical domestic stocks since the Brexit vote.

Mergers & acquisitions will continue to be a key theme, as overseas companies see the weaker pound as an opportunity to dust down UK bid targets. UK investors who can maintain a longer-term focus and withstand some turbulent times will likely be rewarded with exciting opportunities.



2016 2015£000 £000

IncomeNet capital (losses)/gains (4,939 ) 1,979 Revenue 2,476 956

Expenses (95) (83)

Net revenue before taxation 2,381 873 Taxation (28) –

Net revenue after taxation 2,353 873

Total return before accumulations (2,586) 2,852 Accumulations (2,353) (873)

Change in net assets attributable to shareholders from investment activities (4,939) 1,979


2016 2015 £000 £000


40,127 7,026 Dilution levy 214 – Change in net assets attributable to shareholders from investment activities (see Statement of total return above) (4,939) 1,979 Retained distribution on accumulation shares 2,745 964



December 2016 2015 £000 £000

AssetsFixed assets:


Current assets:Debtors 1,731 941 Short term deposits 6,502 1,001 Cash and bank balances 262 3,316

Total assets 133,293 94,961

Liabilities

Creditors:Other creditors (1,864) (1,679)

Total liabilities (1,864) (1,679)



Dividend distribution in pence per shareRetail Accumulation Share ClassDistribution Period


Accumulation Payable

Accumulation Paid

2016 2015Group 101/01/16 to 30/06/16 3.1891 – 3.1891 2.8386Group 201/01/16 to 30/06/16 1.2335 1.9556 3.1891 2.8386Total distributions in the period 3.1891 2.8386

LV=Group Accumulation Share ClassDistribution Period



Accumulation Paid


*In pound sterling and against UK peer group.Please refer to page 11 for comparative tables.


10



Second Retail Accumulation Share ClassDistribution Period



Accumulation Paid


Institutional Accumulation Share ClassDistribution Period



Accumulation Paid




11

Comparative Table


Retail Accumulation LV=Group Accumulation30/06/2016 31/12/2015 31/12/2014 30/06/2016 31/12/2015 31/12/2014


Return before operating charges (p)* (5.34) 22.02 11.43 (9.19) 37.68 19.34 Operating charges (p) (1.05) (2.18) (1.95) (0.13) (0.40) (0.31)

Return after operating charges (p)* (6.39) 19.84 9.48 (9.32) 37.28 19.03


Retained distributions on accumulation share (p) 3.19 4.26 3.77 7.18 10.75 9.37


PerformanceReturn after charges (%) (3.18) 10.95 5.52 (2.69) 12.07 6.57

Other informationClosing net asset value (£’000) 8,660 9,015 8,889 117,562 79,719 30,398 Closing number of shares 4,450,331 4,485,555 4,906,995 34,904,542 23,031,358 9,842,259 Operating charges (%)** 1.08 *** 1.12 1.11 0.08 *** 0.12 0.11 Direct transaction costs (%) 0.27 0.58 0.47 0.27 0.58 0.47

PricesHighest share price (p) 202.50 203.50 183.70 350.10 350.18 312.90 Lowest share price (p) 179.40 177.80 164.50 309.30 303.20 279.80

Second Retail Accumulation Institutional Accumulation30/06/2016 31/12/2015 31/12/2014 30/06/2016 31/12/2015 31/12/2014


Return before operating charges (p)* (5.00) 20.50 10.45 (6.49) 26.69 13.76 Operating charges (p) (1.43) (2.95) (2.68) (0.74) (1.59) (1.39)

Return after operating charges (p)* (6.43) 17.55 7.77 (7.23) 25.10 12.37




PerformanceReturn after charges (%) (3.43) 10.34 4.80 (2.96) 11.46 5.99

Other informationClosing net asset value (£’000) 26 51 190 5,181 4,497 2,434 Closing number of shares 14,563 27,218 112,172 2,188,035 1,842,731 1,111,937 Operating charges (%)** 1.58 *** 1.62 1.63 0.63 *** 0.67 0.66 Direct transaction costs (%) 0.27 0.58 0.47 0.27 0.58 0.47

PricesHighest share price (p) 188.30 189.70 172.20 246.30 247.00 221.90 Lowest share price (p) 167.10 166.60 154.30 217.90 214.90 198.60




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Threadneedle European ex-UK Growth Fund

13


Investment Report Investment Objectives and PoliciesThe objective of the Fund is to achieve long-term capital growth from investments principally in European equities, excluding the UK.

The Fund will normally be invested in a range of European markets to maximise the return whilst moderating the risk of equity investment at any particular point in the economic and business cycle. The Fund may also invest in other transferable securities, collective investment schemes, money market instruments, deposits, and cash and near cash when deemed appropriate.


Performance of Retail Accumulation Shares*Over the six months to 30 June 2016, the published share price of Threadneedle European ex-UK Growth Fund has risen from 347.40p to 350.10p. Looking at performance within its peer group, the total return on the fund for the six months ending 30 June 2016, including net reinvested income, is +0.78% as compared to a median return of +2.33% over the same period. (For comparison the FTSE World Europe ex UK Total Return Index returned +4.81% over the same period).

Market Overview and Portfolio Activity During the six months to the end of June 2016, the best-performing markets within the benchmark index were Hungary, Turkey and Norway, while laggards included Greece

and Italy. In sector terms, energy and consumer staples led the outperformers, but financials fell sharply.

European markets endured volatile trading conditions during the review period. Markets were whipsawed as concerns regarding China’s economy intensified, before abating somewhat. The oil price was another source of concern, reaching multi-year lows before firming again. Geopolitical tensions escalated, and ISIS extremists launched attacks in Brussels. The prospect of a prolonged period of low interest rates, sub-optimal economic growth and an increasingly punitive regulatory environment also prompted speculation regarding the stability of some of Europe’s financial institutions.

However, investors were heartened by news that the European Central Bank had unleashed a further round of measures designed to stimulate the economy and drive inflation upwards. Economic data in the eurozone was broadly encouraging, GDP growth for the first quarter of 2016 reached 0.6% and the region’s composite purchasing managers’ index remained in expansionary territory throughout the review period.

European markets received a shock in June, when the UK voted to leave the EU, introducing a period of economic uncertainty and boosting support for anti-EU and anti-euro factions elsewhere. Sterling fell sharply, the UK prime minister resigned, the S&P ratings agency removed the UK’s AAA credit rating and the Scottish National Party called for another independence referendum. European equities fell, notably financial stocks and others exposed to Brexit risks. However, central banks stood ready to provide support, encouraging a relief rally in equity markets towards the end of the review period.

New holdings included Nestlé, Deutsche Telekom and Royal Dutch Shell. Food group Nestlé has a powerful brand portfolio and an extensive global presence − the stock also has defensive merits. Deutsche Telekom has exciting expansion opportunities in the US, and the stock was trading at an attractive valuation. We initiated a position in Anglo-Dutch oil major Royal Dutch Shell as the outlook for energy stocks improved − the UK-quoted stock is also likely to benefit from sterling weakness.

Mindful of the turbulence in financial markets, we trimmed several stocks in the sector, including ING Groep and UBS. We sold Italian bank Intesa Sanpaolo; the Italian banking system is under strain and is threatening to recapitalise, which would be detrimental for existing shareholders. We also reduced Bayer, after the chemicals company submitted an unsolicited and financially ambitious takeover bid for Monsanto.

Equity markets dislike uncertainty and may be fragile in the wake of the UK’s vote to leave the EU. It will take time before the full political, financial and economic repercussions become clear, and there is the risk of anti-EU political contagion. November’s presidential election in the US will also command attention. We continue to monitor the oil price and China’s economic outlook, both of which have affected equity markets in recent months. Global geopolitical tensions may create additional volatility.

However, market corrections also provide us with investment opportunities, and we may see a resurgence in mergers and acquisitions particularly as interest rates are likely to remain low in the UK and Europe, as well as in the US. Quantitative easing, relatively low energy prices and loose credit conditions continue to help the trading environment for European companies.

The comparatives used within the Statement of Change in Net Assets Attributable to Shareholders are for the corresponding period of the previous year. Therefore the opening net assets attributable to shareholders for the current period are at 31 December 2015 whilst the figure disclosed in the comparatives’ closing net assets attributable to the shareholders is at 30 June 2015.The comparative numbers have been restated to bring them in line with the requirements of the Statement of Recommended Practice (SORP) in May 2014.

**


2016 2015£000 £000

IncomeNet capital (losses)/gains (6,761) 12,412 Revenue 4,880 3,206

Expenses (458) (274) **

Net revenue before taxation 4,422 2,932 Taxation (316) 205


Total return before distributions/accumulations (2,655) 15,549 Distributions/Accumulations (4,106) (3,137)

Change in net assets attributable to shareholders from investment activities (6,761) 12,412


December 2016 2015 £000 £000

AssetsFixed assets:


Current assets:Debtors 4,652 1,382 Cash and bank balances 10 184

Total assets 235,944 199,191

Liabilities:

Investment liabilities: (2,070) (869)

Creditors:Other creditors (2,333) (196)Distribution payable (2,297) –Bank overdrafts (2,002) –

Total liabilities (8,702) (1,065)



Dividend distribution in pence per shareRetail Accumulation Share ClassDistributionPeriod



Accumulation Paid


LV=Group Accumulation Share ClassDistributionPeriod



Accumulation Paid



2016 2015 £000 £000


33,934 20,588 Dilution levy 58 55 Change in net assets attributable to shareholders from investment activities (see Statement of total return above) (6,761) 12,412 Retained distribution on accumulation shares 1,885 2,016


*In pound sterling and against UK peer group.Please refer to pages 15–16 for comparative tables.


14



Second Retail Accumulation Share ClassDistributionPeriod



Accumulation Paid




Distribution Payable

Distribution Paid


Institutional Income GBP Hedged Share ClassDistributionPeriod


Distribution Payable

Distribution Paid


Institutional Accumulation Share Class DistributionPeriod



Accumulation Paid




15

Comparative Table


Retail Accumulation LV=Group Accumulation30/06/2016 31/12/2015 31/12/2014 30/06/2016 31/12/2015 31/12/2014








Other informationClosing net asset value (£’000) 1,537 1,557 1,356 94,746 98,494 83,297Closing number of shares 434,827 447,854 440,940 22,867,214 24,287,118 23,459,786Operating charges (%)** 1.19*** 1.16 1.15 0.19*** 0.16 0.15Direct transaction costs (%) 0.14 0.28 0.18 0.14 0.28 0.18

PricesHighest share price (p) 352.40 360.30 317.40 412.80 417.10 366.20Lowest share price (p) 307.90 304.20 271.10 359.60 351.30 312.40

Institutional Accumulation Second Retail Accumulation30/06/2016 31/12/2015 31/12/2014 30/06/2016 31/12/2015 31/12/2014



Return after operating charges (p)* 3.95 25.08 1.06 2.41 20.44 (0.62




PerformanceReturn after charges (%) 1.88 13.59 0.58 1.31 12.51 (0.38

Other informationClosing net asset value (£’000) 1,477 1,515 1,245 109 248 245Closing number of shares 691,519 722,328 674,468 58,525 134,842 150,104Operating charges (%)** 0.74*** 0.71 0.70 1.71*** 1.66 1.65Direct transaction costs (%) 0.14 0.28 0.18 0.14 0.28 0.18



16

Comparative Table(continued)


Institutional Income Institutional Income GBP Hedged30/06/2016 31/12/2015 31/12/2014 30/06/2016 31/12/2015 31/12/2014


Return before operating charges (p)* 3.52 19.98 1.75 (8.18) 23.10 9.09Operating charges (p) (0.57) (1.09) (0.97) (0.55) (1.10) (0.94)

Return after operating charges (p)* 2.95 18.89 0.78 (8.73) 22.00 8.15




PerformanceReturn after charges (%) 1.89 13.52 0.55 (5.56) 15.99 6.20

Other informationClosing net asset value (£’000) 255 292 241 129,118 96,020 50,359Closing number of shares 162,996 187,505 172,527 88,606,193 61,144,059 36,589,567Operating charges (%)** 0.74*** 0.71 0.70 0.74*** 0.71 0.70Direct transaction costs (%) 0.14 0.28 0.18 0.14 0.28 0.18





17






Threadneedle Japan Growth Fund

18


Investment Report Investment Objectives and PoliciesThe objective of the Fund is to achieve long-term capital growth from investments principally in Japanese equities.

The Fund will normally be invested in a range of Japanese companies to maximise the return whilst moderating the risk of equity investment at any particular point in the economic and business cycle. The Fund may also invest in other transferable securities, collective investment schemes, money market instruments, deposits, and cash and near cash when deemed appropriate.


Performance of Group Accumulation Shares*Over the six months to 30 June 2016, the published share price of Threadneedle Japan Growth Fund has risen from 179.10p to 184.40p. Looking at performance within its peer group, the total return on the fund for the six months ending 30 June 2016, including net reinvested income, is +2.96% as compared to a median return of +4.30% over the same period. (For comparison the TOPIX Index returned +5.31% over the same period).

Market Overview and Portfolio Activity Following a strong performance in 2015, the last six months have witnessed a sharp setback in the Japanese equity market. The TOPIX index posted a double-digit decline in local-currency terms, although the stronger yen has benefited returns in sterling terms. The market has been buffeted by the gyrations in the Japanese currency. The strength of the yen has negative connotations for the country’s export-oriented economy, with major exporters such as auto and technology companies facing increasing competitive pressures.

During the six-month period global equity markets, including Japan, experienced two notable bouts of volatility. Initially markets fell sharply in January amid growing concerns over the Chinese economic slowdown and the slump in the oil price. Markets rallied from mid-February, but the decision by UK voters to leave the European Union (EU) following the June referendum caused further market volatility. Investors viewed the yen as a ‘safe haven’, causing it to strengthen against other major currencies.

At the end of January, the Bank of Japan surprised financial markets with its decision to adopt negative interest rates. The central bank lowered the base rate from 0 to -0.1%, in an attempt to promote economic activity and stimulate inflation. This announcement only weakened the yen temporarily, and it is hard to gauge the extent to which negative interest rates will help the Japanese economy. Given the global economic

uncertainty triggered by the UK’s vote to leave the EU, the Bank of Japan may embark on further monetary easing.

During the review period, we significantly reduced the fund’s holding in bicycle component manufacturer Shimano on concerns over the near-term risks to earnings following a cautious meeting with the management. The stock had previously performed well but faces headwinds from the stronger yen. Other sales included the fund’s positions in Yaskawa, Nissan Chemical and shoe retailer ABC-MART.

Following a number of company meetings in Japan, we added several new positions. These included the retailer J Front Retailing, tractor manufacturer Kubota and chocolate maker Meiji. Meiji is Japan’s largest chocolate company and specialises in probiotic yoghurt drinks. Other new purchases included FujiFilm and Sohgo Security Services.

Looking ahead, there are a number of key themes that we will continue to emphasise in the fund such as beneficiaries of domestic infrastructure spending, strong franchises and firms benefiting from the growth in domestic demand. Despite the best efforts of the Bank of Japan, the yen has continued to strengthen since the start of the year, but it is still possible to find some attractive opportunities among the higher-quality Japanese exporters.



2016 2015£000 £000

IncomeNet capital gains 555 8,324 Revenue 574 522

Expenses (31) (33)

Net revenue before taxation 543 489 Taxation (57) (52)

Net revenue after taxation 486 437

Total return before accumulations 1,041 8,761 Accumulations (486) (437)

Change in net assets attributable to shareholders from investment activities 555 8,324


2016 2015 £000 £000


(3,043) (9,201)Dilution levy 8 21 Change in net assets attributable to shareholders from investment activities (see Statement of Total Return above) 555 8,324 Retained distribution on accumulation shares 493 408



December 2016 2015 £000 £000

AssetsFixed assets:


Current assets:Debtors 763 254 Cash and bank balances 993 546


Liabilities

Creditors:Other creditors (943) (133)




Dividend distribution in pence per shareLV=Group Accumulation Share Class DistributionPeriod



Accumulation Paid





Accumulation Paid





19

Comparative Table


LV=Group Accumulation Institutional Accumulation30/06/2016 31/12/2015 31/12/2014 30/06/2016 31/12/2015 31/12/2014


Return before operating charges (p)* 4.01 27.71 (1.97 3.96 27.71 (2.03Operating charges (p) (0.13) (0.25) (0.21) (0.60) (1.21) (1.03)

Return after operating charges (p)* 3.88 27.46 (2.18 3.36 26.50 (3.06




PerformanceReturn after charges (%) 2.14 17.80 (1.39 1.86 17.16 (1.94

Other informationClosing net asset value (£’000) 53,068 55,056 62,026 35 34 32 Closing number of shares 28,591,385 30,295,732 40,206,870 18,642 18,908 20,497 Operating charges (%)** 0.16 *** 0.15 0.14 0.71 *** 0.70 0.69 Direct transaction costs (%) 0.06 0.15 0.15 0.06 0.15 0.15

Prices Highest share price (p) 185.50 186.80 158.40 184.20 186.70 159.50 Lowest share price (p) 148.10 154.00 135.20 147.40 154.10 135.80




20





(2) NotesIn accordance with the guidelines of the SORP the funds have taken advantage of the facility not to provide further notes to the financial statements.

(3) Post balance sheet eventSubsequent to the period end, market fluctuations have resulted in changes to the fund value as described in the table below:

Net asset value per shareShare class 30 June 2016 12 August 2016 % movementLV=Group accumulation shares 184.40p 207.80p 12.69Institutional accumulation shares 183.10p 206.20p 12.62

Threadneedle Pacific ex-Japan Growth Fund

21


Investment Report Investment Objectives and PoliciesThe objective of the Fund is to achieve long-term capital growth from investments principally in Far East equities, excluding Japan.

The Fund will normally be invested in a range of Far East markets to maximise the return whilst moderating the risk of equity investment at any particular point in the economic and business cycle. The Fund may also invest in other transferable securities, collective investment schemes, money market instruments, deposits, and cash and near cash when deemed appropriate.


Performance of Group Accumulation Shares*Over the six months to 30 June 2016, the published share price of Threadneedle Pacific ex-Japan Growth Fund has risen from 394.90p to 440.40p. Looking at performance within its peer group, the total return on the fund for the six months ending 30 June 2016, including net reinvested income, is +11.52% as compared to a median return of +12.97% over the same period. (For comparison the MSCI AC Asia Pacific ex Japan Total Return Index returned +13.01% over the same period).

Market Overview and Portfolio Activity The MSCI AC Asia Pacific ex Japan index posted a small positive return in local-currency terms over the six months

under review. However, the index performed much better in sterling terms, posting a double-digit return, as the pound weakened in the wake of the UK’s EU membership referendum and the vote to leave.

During the six-month period, global equity markets including those in Asia experienced two notable bouts of volatility. Initially markets fell sharply in January amid growing concerns over China’s economic slowdown and the weakness of the renminbi. GDP data revealed that in 2015 the Chinese economy grew at its slowest pace for 25 years. Sentiment was also hurt by the further slump in the price of oil and other commodities at the start of the year. In mid-February Chinese equities, along with other Asian markets, benefited from an improvement in global risk appetite and a rally in commodity prices. Dovish comments from the US Federal Reserve that it would proceed slowly on monetary policy tightening were also taken positively. Markets rallied from mid-February, but the decision by UK voters to leave the EU caused renewed market volatility.

Across the Asian region, central banks embarked on further monetary easing to support economic activity. Bank Indonesia, for example, cut its benchmark lending rate on several occasions, bringing it down to 6.5%, while the Reserve Bank of India cut rates to 6.5%, the lowest level since January 2011. The Bank of Korea cut its policy rate to a record low and the Taiwanese central bank also lowered rates. Alongside supportive policies from the central banks, governments announced additional fiscal stimulus.

Throughout the period we continued to favour higher-quality companies with strong franchises and business models. The fund also has selective exposure to companies on

attractive valuations offering restructuring opportunities with catalysts for change. New purchases included Reliance Industries on expectations of better refining margins and attractive valuations. We also increased the exposure to the energy sector, adding to Chinese oil company Sinopec and establishing a new position in Sinopec Shanghai Petrochemical, where cash flow is improving on the back of cost cutting and reduced capital expenditure. Another area we favour is the Chinese internet sector, where we opened a new position in Baidu.com. The company should benefit from the structural shift towards mobile internet usage in China.

On the sales side, we reduced the exposure to the financial sector across the region, mainly via banks and brokers, given our concerns over a worse-than-expected asset quality cycle and a muted outlook for loan growth. Sales included Australia-based banks AMP, ANZ and National Bank, and Mandiri in Indonesia (where we switched into Bank Rakyat), CTBC Bank in Taiwan and Axis Bank in India. As the focus in the financial sector is on visible earnings growth, we added a number of real estate investment trusts to the portfolio.

Looking ahead, the UK’s decision to leave the EU was clearly unexpected by the markets and is likely to lead to a downward revision to global growth forecasts. China also continues to be a source of nervousness. However, following the recent global sell-off, Asian equity valuations have fallen to even more attractive levels. The region seems better positioned to ride out further volatility, supported by relatively stable currencies and improving earnings revisions. We are also encouraged by the continued trend towards higher dividend pay-outs across the region.


2016 2015£000 £000

IncomeNet capital gains 3,909 249 Revenue 675 652

Expenses (35) (37)

Net revenue before taxation 640 615 Taxation (67) (50)

Net revenue after taxation 573 565

Total return before accumulations 4,482 814 Accumulations (573) (565)

Change in net assets attributable to shareholders from investment activities 3,909 249


2016 2015 £000 £000

Opening net assets attributable to shareholders 39,852 31,747Amounts receivable on the issue of shares 120 11,341Amounts payable on the cancellation of shares (3,513) (776)

(3,393) 10,565

Dilution levy 9 48Change in net assets attributable to shareholders from investment activities (see Statement of total return above) 3,909 249Retained distribution on accumulation shares 551 570



December 2016 2015 £000 £000

AssetsFixed assets:


Current assets:Debtors 205 147Cash and bank balances 871 744


Liabilities:

Creditors:Other creditors (22) (27)




Dividend distribution in pence per shareLV=Group Accumulation Share ClassDistributionPeriod



Accumulation Paid





Accumulation Paid






22

Comparative Table


LV=Group Accumulation Institutional Accumulation30/06/2016 31/12/2015 31/12/2014 30/06/2016 31/12/2015 31/12/2014


Return before operating charges (p)* 47.96 (16.72) 52.83 26.24 (9.15) 29.21Operating charges (p) (0.47) (0.93) (1.26) (0.85) (1.78) (1.87)

Return after operating charges (p)* 47.49 (17.65) 51.57 25.39 (10.93) 27.34




PerformanceReturn after charges (%) 12.00 (4.27) 14.25 11.69 (4.79) 13.62

Other informationClosing net asset value (£’000) 40,503 39,464 31,186 425 388 561Closing number of shares 9,137,747 9,971,699 7,543,644 175,182 178,886 246,127Operating charges (%)** 0.24*** 0.22 0.33 0.79*** 0.77 0.89Direct transaction costs (%) 0.13 0.22 0.28 0.13 0.22 0.28





23






(3) Post balance sheet eventSubsequent to the period end, market fluctuations have resulted in changes to the fund value as described in the table below:

Net asset value per shareShare class 30 June 2016 12 August 2016 % movementLV=Group accumulation shares 440.40p 491.90p 11.69Institutional accumulation shares 241.00p 269.00p 11.62

Threadneedle US Equity Income Fund

24


Investment Report Investment Objectives and PoliciesThe objective of the Fund is to achieve a high level of income combined with the potential for long-term capital growth.

The Fund will invest principally in a portfolio of US equities, unconstrained by company size or sector classification. The Fund may also invest in other transferable securities, collective investment schemes, money market instruments, deposits, and cash and near cash when deemed appropriate.


Market Overview and Portfolio Activity US markets endured a difficult start to the year as investors worried about poor Chinese economic data and its impact on domestic Chinese equities. Equities subsequently rebounded as rising oil prices, better US economic data and accommodative central-bank action bolstered investors’ appetite for risk. On the economic front, in March, labour-market data showed continued strength, fourth-quarter GDP data indicated better-than-expected consumer spending, and even manufacturing activity, an area of prior weakness, rebounded.

In the latter part of the period, supportive manufacturing and consumer data contrasted with a decline in first-quarter corporate earnings. Expectations of an interest rate rise

were pushed out as labour market data suggested the pace of job creation was moderating.

Key activity during the period included opening a position in AbbVie. The pharmaceutical company provides an attractive dividend yield and favourable risk/reward profile, reflecting what we believed to be excessive pessimism ahead of a decision regarding the intellectual property rights for its treatments for arthritis and other autoimmune diseases. We also initiated a position in lodging business Extended Stay America, whose management team is well placed to narrow the discount to peers by successfully turning the business around. IT-services company Leidos was added to the portfolio. The firm’s new management team should be able to capture opportunities within government and healthcare businesses driven by demand in areas including cybersecurity and health-record processing.

Among key sales, we exited stocks Lowes and Eli Lilly, as we felt they no longer offered a compelling risk/reward profile.

We believe the US is relatively better placed than many other markets to weather turbulence created by Brexit. This is due to the liquidity and diversity of the market, which has historically shown more resilient earnings than other markets during global downturns. We see greater probability of a shift in market leadership as secular growth companies should enjoy an advantage in earnings stability relative to more cyclically exposed areas of the market. A more volatile environment may also favour financially stable, quality businesses. Within portfolios we acknowledge the

short-term headwinds that higher volatility brings, as stock correlations spike. However, we have been active in looking for the attractive long-term investment opportunities that occur when quality businesses are mispriced by the market.

The Threadneedle US Equity Income Fund is currently being terminated, following its merger with the US Equity Income Fund, a sub-fund of Threadneedle Specialist Investment Funds ICVC on 20 May 2016.



2016 2015£000 £000

IncomeNet capital gains/(losses) 2,016 (517)Revenue 1,257 1,474

Expenses (65) (46)

Net revenue before taxation 1,192 1,428Taxation (152) (202)


Total return before distributions 3,056 709Distributions (1,092) (1,263)

Change in net assets attributable to shareholders from investment activities 1,964 (554)


2016 2015 £000 £000

Opening net assets attributable to shareholders 89,628 99,709Amounts receivable on the issue of shares 7,595 2,761Amounts payable on the cancellation of shares** (99,189) (22,673)

(91,594) (19,912)Dilution levy 2 10Change in net assets attributable to shareholders from investment activities (see Statement of total return above) 1,964 (554)

Closing net assets attributable to shareholders – 79,253


December 2016 2015 £000 £000

AssetsFixed assets:

Investments – 87,243Current assets:

Debtors 1 269Cash and bank balances 447 2,864

Total assets 448 90,376

Liabilities:

CreditorsOther creditors (65) (75)Distribution payable (383) (673)


Net assets attributable to shareholders – 89,628


Dividend distribution in pence per shareLV=Group Income Share ClassDistributionPeriod



Distribution Paid

2016*** 2015Group 101/01/16 to 31/03/16 1.2675 – 1.2675 1.202401/04/16 to 20/05/16 0.6791 – 0.6791 –Group 201/01/16 to 31/03/16 0.4680 0.7995 1.2675 1.202401/04/16 to 20/05/16 0.5744 0.1047 0.6791 –Total distributions in the period 1.9466




Distribution Paid

2016*** 2015Group 101/01/16 to 31/03/16 1.2325 – 1.2325 1.175301/04/16 to 20/05/16 0.6597 – 0.6597 –Group 201/01/16 to 31/03/16 0.9371 0.2954 1.2325 1.175301/04/16 to 20/05/16 0.4611 0.1986 0.6597 –Total distributions in the period 1.8922


*In pound sterling and against UK peer group. **The Fund merged on 20 May 2016. ***Please note the fund merged on 20 May 2016. A distribution was made for the period ended 20 May 2016.Please refer to page 25 for comparative tables.


25

Comparative Table


LV=Group Income Institutional Income30/06/2016*** 31/12/2015 31/12/2014 30/06/2016*** 31/12/2015 31/12/2014


Return before operating charges (p)* 10.19 5.49 25.58 6.07 5.45 25.06Operating charges (p) 0.00 (0.15) (0.14) 0.00 (1.09) (0.99)



Cancellation price (170.70) 0.00 0.00 (162.30) 0.00 0.00

Closing net asset value per share (p) – 162.46 161.84 – 158.12 158.34



Other informationClosing net asset value (£’000) – 77,974 97,326 – 11,654 2,383Closing number of shares – 47,994,738 60,136,928 – 7,370,628 1,504,596Operating charges (%)** – 0.09 0.09 – 0.69 0.69Direct transaction costs (%) 0.01 0.05 0.05 0.01 0.05 0.05


**The operating charges figure is represented by the Ongoing Charges Figure (OCF). The OCF is the European standard method of disclosing the charges of a share class of a fund based on the last 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). The Key Investor Information Document (KIID) contains the current OCF. Where the fund invests in other funds, the calculation includes the funds share of the expenses of the underlying funds less any fee rebates received.

***The Fund merged on 20 May 2016. †Transaction costs have not been reduced by any amounts collected from Dilution levies.


26




The interim financial statements have been prepared on the historical cost basis, as modified by the revaluation of investments, in compliance with FRS 102 and in accordance with the Statement of Recommended Practice for Authorised Funds (SORP) issued by the Investment Management Association in May 2014. The financial statements of the sub-fund US Equity Income have been prepared on a break up basis. Assets have been recorded at their realisable value and liabilities have been recorded at their settlement value. Any additional costs to the point of termination will be borne by the ACD. Unless otherwise stated all other accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2015 and are described in those financial statements.


27



Holding Investment Value

£000

% of Net Asset

Value Holding Investment Value

£000

% of Net Asset

Value

Portfolio Statementas at 30 June 2016

Aerospace & Defence 4.57% (5.17%)133,022 Aero Inventory* – –

1,736,191 BAE Systems 9,098 2.76 2,479,879 Cobham 3,901 1.19

286,349 Rolls-Royce 2,037 0.62 20,330,779 Rolls-Royce Holdings** – –

15,036 4.57

Automobiles & Parts 0.84% (1.09%)1,023,668 GKN 2,757 0.84

Chemicals 2.14% (2.15%)1,334,024 Elementis 2,664 0.81

155,902 Johnson Matthey 4,367 1.33 7,031 2.14

Construction & Materials 0.93% (1.28%)168,555 Kier Group 1,773 0.54 204,124 Morgan Sindall 1,296 0.39

3,069 0.93

Electronic & Electrical Equipment 0.88% (1.07%)732,490 Morgan Advanced Materials 1,700 0.51 169,662 Oxford Instruments 1,206 0.37

2,906 0.88

Equity Investment Instruments 2.15% (2.01%)1,296,513 3i Group 7,092 2.15

Financial Services 0.89% (0.99%)2,666,622 Sherborne Investors Guernsey ‘B’ 2,933 0.89

Fixed Line Telecommunications 3.66% (4.79%)2,942,680 BT Group 12,065 3.66

Food & Drug Retailers 5.11% (4.25%)3,046,439 Booker Group 5,282 1.60 6,171,049 Morrison (Wm) Supermarkets 11,565 3.51

16,847 5.11

Food Producers & Processors 2.28% (5.36%)1,125,090 Tate & Lyle 7,521 2.28

Gas, Water & Multiutilities 8.26% (7.54%)4,769,023 Centrica 10,745 3.26

763,896 National Grid 8,368 2.54 470,247 Pennon Group 4,444 1.35 353,953 United Utilities 3,660 1.11

27,217 8.26

General Industrials 3.56% (4.31%)1,578,355 Smith (David S) 6,097 1.85

486,897 Smiths Group 5,614 1.71 11,711 3.56

General Retailers 2.17% (2.79%)2,246,710 Marks & Spencer 7,160 2.17

Industrial Engineering 0.93% (0.65%)218,283 IMI 2,110 0.64 221,626 Melrose Industries 943 0.29

3,053 0.93

Industrial Transportation 0.77% (0.62%)1,374,471 Wincanton 2,550 0.77

Life Insurance 5.72% (7.25%)592,796 Chesnara 1,630 0.50

4,112,061 Legal & General 7,838 2.38 576,114 Phoenix Group 4,615 1.40

1,623,787 Standard Life 4,759 1.44 18,842 5.72

Media & Entertainment 8.04% (7.33%)3,841,863 ITV 6,904 2.09 1,118,482 Pearson 10,810 3.28

639,289 Reed Elsevier 8,784 2.67 26,498 8.04

Non-Life Insurance 2.80% (2.72%)1,846,724 RSA Insurance 9,219 2.80

Oil & Gas Producers 4.29% (3.61%)685,683 Royal Dutch Shell ‘B’ 14,139 4.29

Personal Goods 3.78% (0.00%)348,541 Unilever 12,467 3.78

Pharmaceuticals & Biotechnology 13.11% (12.64%)488,728 AstraZeneca 21,824 6.62

1,332,703 GlaxoSmithKline 21,370 6.49 43,194 13.11

Support Services 7.84% (8.86%)336,419 Atkins (WS) 4,457 1.35

2,636,648 Electrocomponents 6,861 2.08 1,984,689 Hays 1,937 0.59 3,792,251 Rentokil Initial 7,327 2.23

135,290 Wolseley 5,236 1.59 25,818 7.84

Tobacco 5.36% (5.38%)435,527 Imperial Brands 17,652 5.36

Travel & Leisure 5.86% (6.39%)581,700 Compass 8,266 2.51 115,556 Go-Ahead 2,259 0.69

1,504,089 Rank 3,220 0.98 1,285,044 Stagecoach 2,970 0.90

366,361 Wetherspoon (JD) 2,586 0.78 19,301 5.86

Total value of investments 95.94% (98.25%) 316,078 95.94

Net other assets 4.06% (1.75%) 13,365 4.06

Net assets 329,443 100.00

Comparative figures shown in brackets relate to 31 December 2015.

Note: All assets are securities and admitted to official exchanges unless otherwise stated.

*Suspended.

**Delisted, entitlement shares.

28




£000

% of Net Asset


£000

% of Net Asset

Value


Aerospace & Defence 1.96% (1.75%) 136,424 Aero Inventory* – – 493,172 BAE Systems 2,584 1.96

2,584 1.96

Automobiles & Parts 0.00% (2.14%)

Banks 0.00% (3.33%)

Beverages 3.50% (2.83%) 220,644 Diageo 4,603 3.50

Chemicals 1.54% (0.00%) 72,090 Johnson Matthey 2,019 1.54

Construction & Materials 0.98% (1.00%) 2,092,994 Breedon Aggregates 1,287 0.98

Electronic & Electrical Equipment 2.00% (0.00%) 1,134,133 Morgan Advanced Materials 2,632 2.00

Equity Investment Instruments 0.87% (0.69%) 31,623 Electra Private Equity 1,151 0.87

Financial Services 6.06% (5.71%) 517,065 Intermediate Capital Group 2,535 1.93 167,553 London Stock Exchange Group 4,239 3.23

1,079,323 Sherborne Investors Guernsey ‘B’ 1,187 0.90 7,961 6.06

Fixed Line Telecommunications 3.78% (3.97%) 1,211,865 BT Group 4,969 3.78

General Industrials 0.00% (0.96%)

General Retailers 1.52% (1.19%) 318,026 Inchcape 1,997 1.52

Healthcare Equipment & Services 3.67% (3.19%) 380,985 Smith & Nephew 4,823 3.67

Home Construction 1.17% (1.12%) 895,431 McCarthy And Stone 1,534 1.17

Household Goods 4.67% (4.92%) 698,191 Crest Nicholson Holdings 2,486 1.89 48,866 Reckitt Benckiser 3,660 2.78

6,146 4.67

Life Assurance 10.55% (12.15%) 2,601,961 Legal & General 4,959 3.77

418,398 Prudential Financial 5,257 4.00 465,163 St. James’s Place Capital 3,652 2.78

13,868 10.55

Media & Entertainment 8.43% (8.06%) 393,633 Informa 2,866 2.18

1,353,039 ITV 2,432 1.85 746,178 Merlin Entertainments 3,286 2.50 160,813 WPP 2,494 1.90

11,078 8.43

Oil & Gas Producers 7.17% (6.34%) 456,898 Royal Dutch Shell ‘B’ 9,421 7.17

Pharmaceuticals & Biotechnology 9.97% (7.64%) 130,580 AstraZeneca 5,831 4.44 453,506 GlaxoSmithKline 7,272 5.53

13,103 9.97

Real Estate 2.74% (2.91%) 137,800 Derwent London 3,597 2.74

Support Services 3.68% (4.86%) 593,824 Howden Joinery 2,280 1.73 66,086 Wolseley 2,558 1.95

4,838 3.68

Tobacco 10.96% (8.59%) 132,695 British American Tobacco 6,426 4.89 196,750 Imperial Brands 7,974 6.07

14,400 10.96

Travel & Leisure 9.73% (12.81%) 214,930 Compass 3,054 2.32

2,332,287 FirstGroup 2,339 1.78 317,231 Greene King 2,474 1.88 895,786 Stagecoach 2,070 1.58 334,851 TUI AG 2,850 2.17

12,787 9.73


Net other assets 5.05% (3.84%) 6,631 5.05

Net assets 131,429 100.00



*Suspended.

29




£000

% of Net Asset


£000

% of Net Asset

Value


Belgium 3.38% (3.69%)78,688 AB InBev 7,684 3.38

Denmark 5.47% (6.18%)39,269 Christian Hansen 1,924 0.85

188,771 Novo Nordisk ‘B’ 7,545 3.3229,257 Pandora 2,969 1.30

12,438 5.47

Finland 2.35% (2.25%)66,598 Kone ‘B’ 2,279 1.00

101,434 Sampo Oyj 3,068 1.355,347 2.35

France 21.19% (19.10%)86,864 Amundi 2,704 1.19

239,998 Axa 3,550 1.5642,916 Essilor International 4,239 1.87

271,046 Groupe Eurotunnel 2,151 0.95570,262 Havas 3,305 1.4523,522 Iliad 3,560 1.5743,882 Ingenico 3,829 1.6861,240 Legrand Promesses 2,350 1.0328,986 L’Oreal 4,131 1.8241,328 Pernod Ricard 3,436 1.5153,728 Schneider Electric 2,368 1.04

214,853 Total 7,745 3.4190,554 Vinci 4,793 2.11

48,161 21.19

Germany 13.43% (16.13%)27,355 Allianz (registered) 2,900 1.2747,667 Bayer 3,559 1.5790,902 Brenntag 3,271 1.4427,073 Continental 3,797 1.6718,119 Deutsche Borse 1,106 0.49

566,097 Deutsche Telekom 7,179 3.1689,089 Fresenius Medical Care 5,779 2.5428,149 Linde 2,927 1.29

30,518 13.43

Ireland 7.85% (8.40%)289,348 CRH 6,212 2.73156,477 Kingspan 2,550 1.1238,719 Paddy Power 3,041 1.34

637,198 Ryanair 6,042 2.6617,845 7.85

Italy 2.95% (4.34%)165,204 Atlantia 3,067 1.3539,144 EI Towers 1,485 0.65

651,841 Infrastrutture Wireless 2,147 0.956,699 2.95

Netherlands 9.55% (12.27%)97,883 Akzo Nobel 4,585 2.0224,090 ASML Holdings 1,769 0.78

299,981 ING Groep 2,286 1.01373,842 RELX 4,848 2.13235,606 Unilever 8,205 3.61

21,693 9.55

Norway 1.03% (0.00%)262,760 DNB 2,334 1.03

Spain 7.98% (6.45%)85,690 Amadeus IT Holdings 2,797 1.23

397,769 Cellnex Telecom 4,638 2.04324,401 Ferrovial 4,700 2.07211,762 Grifols ‘A’ 3,565 1.5797,362 Industria De Diseno Textil 2,420 1.07

18,120 7.98

Sweden 5.83% (6.17%)336,347 Assa Abloy ‘B’ 5,087 2.2495,560 Atlas Copco 1,822 0.80

638,565 Nordea Bank 3,963 1.74267,325 Svenska Handelsbanken 2,384 1.05

13,256 5.83

Switzerland 17.91% (13.77%)26,795 Cie Financiere Richemont ‘A’ 1,166 0.51

189,398 Nestle (registered) 10,929 4.81166,261 Novartis (registered) 10,226 4.5064,184 Roche Holding 12,617 5.551,194 Sika ‘B’ 3,737 1.65

209,227 UBS 2,019 0.8940,694 17.91

United Kingdom 2.06% (0.00%)228,376 Royal Dutch Shell ‘A’ 4,676 2.06

United States 0.79% (1.00%)22,532 Autoliv SDB 1,789 0.79

Forward Foreign Exchange Contracts (0.90%) ((0.44%))Bought Sterling 12,386,261: Sold Swiss Franc 16,510,900 J.P Morgan (312) (0.14)Bought Sterling 4,214,681: Sold Danish Krone 38,582,019 J.P Morgan (98) (0.04)Bought Sterling 61,866,586: Sold Euro 76,192,218 J.P Morgan (1,504) (0.66)Bought Sterling 6,161,671: Sold Swedish Krona 71,481,545 J.P Morgan (156) (0.07)Bought Swiss Franc 202,781: Sold Sterling 152,189 J.P Morgan 4 –Bought Danish Krone 475,796: Sold Sterling 51,785 J.P Morgan 1 –Bought Euro 939,115:Sold Sterling 760,150 J.P Morgan 21 0.01 Bought Swedish Krona 880,783:Sold Sterling 75,708 J.P Morgan 2 –

(2,042) (0.90)

Total value of investments* 100.87% (99.31%) 229,212 100.87

Net other assets (0.87%) (0.69%) (1,970) (0.87)

Net assets 227,242 100.00



*This figure includes derivative liabilities.

30




£000

% of Net Asset


£000

% of Net Asset

Value


Automobiles & Parts 7.21% (7.45%)33,800 Koito Manufacturing 1,152 2.1770,600 Mazda Motor 699 1.3293,400 Nissan Motor 625 1.1826,300 Suzuki Motor 528 0.9922,400 Toyota Motor 825 1.55

3,829 7.21

Banks 5.96% (8.97%)226,000 Chiba Bank 791 1.49208,000 Fukuoka Financial Group 507 0.95562,300 Mitsubishi UFJ Financial 1,869 3.52

3,167 5.96

Building Material & Construction 4.45% (3.45%)211,000 Maeda 1,231 2.32288,200 Penta-Ocean Construction 1,131 2.13

2,362 4.45

Chemicals 2.35% (4.63%)26,600 Nitto Denko Corporation 1,248 2.35

Electricity 1.14% (1.50%)34,800 Electric Power Development 603 1.14

Electronic Appliances & Components 7.18% (8.73%)107,500 Alps Electric 1,496 2.82139,000 Hitachi 430 0.8119,700 Horiba 643 1.211,000 Keyence 504 0.958,900 Murata Manufacturing 738 1.39

3,811 7.18

Food 5.75% (2.24%)41,100 Fuji Oil 569 1.0716,500 Meiji 1,254 2.3636,500 Suntory Beverage & Food 1,230 2.32

3,053 5.75

General Industrials 0.78% (1.26%)236,000 Mitsubishi Materials 416 0.78

General Retailers 4.60% (4.68%)21,300 Don Quijote 586 1.1018,600 Izumi 538 1.0264,900 J Front Retailing 499 0.9468,000 Rakuten 546 1.0351,000 Takashimaya 272 0.51

2,441 4.60

Household Goods & Textiles 1.44% (3.40%)83,600 Sekisui Chemical 764 1.44

Industrial Engineering 6.59% (8.46%)216,000 Ebara Corporation 882 1.66

6,800 Fanuc 820 1.5477,500 Kubota 773 1.4640,600 OSG 502 0.9485,100 Tadano 524 0.99

3,501 6.59

Industrial Metals 0.92% (0.85%)34,300 Nippon Steel 490 0.92

Leisure & Hotels 8.01% (9.27%)5,100 Nintendo 542 1.02

93,400 Panasonic 600 1.1343,100 Resort Trust 691 1.301,700 Shimano 193 0.36

97,800 Skylark 923 1.7459,900 Sony 1,305 2.46

4,254 8.01

Media 1.74% (2.36%)26,600 Dentsu 924 1.74

Mobile Telecommunications 1.16% (0.00%)27,200 KDDI 617 1.16

Pharmaceuticals & Biotechnology 9.29% (4.50%)44,000 Astellas Pharma 513 0.9714,200 Kaken Pharmaceutical 692 1.3017,200 Kose 1,076 2.0359,600 Kyowa Hakko Kogyo 754 1.4218,600 Shionogi 755 1.4268,200 Sumitomo Dainippon Pharma 879 1.658,200 Takeda Pharmaceutical 265 0.50

4,934 9.29

Real Estate 4.54% (3.39%)166 Industrial & Infrastructure 694 1.31

48,000 Mitsubishi Estate 655 1.2347,400 Nomura Real Estate Holdings 614 1.1683,900 Tosei 447 0.84

2,410 4.54

Software & Computer Services 7.06% (5.78%)78,900 Capcom 1,355 2.5585,600 ITOCHU Techno-Solutions 1,370 2.5836,800 SCSK 1,025 1.93

3,750 7.06

Speciality & Other Finance 7.11% (8.54%)40,700 Anicom Holdings 849 1.6055,400 Dai-ichi Mutual Life Insurance 455 0.86

205,000 Daiwa Securities Group 803 1.5184,000 Japan Exchange Group 715 1.3419,900 Nihon M&A Center 955 1.80

3,777 7.11

Support Services 3.36% (2.49%)218,000 Hanwa Corporation 841 1.5825,700 Sohgo Security Services 944 1.78

1,785 3.36

Technology Hardware & Equipment 5.01% (4.43%)17,200 Fujifilm 495 0.9329,100 Hitachi High-Technologies 590 1.1129,200 Lasertec 264 0.50

152,000 NEC 262 0.4939,200 Sato 544 1.0342,300 Seiko Epson 503 0.95

2,658 5.01

31



Portfolio Statement(continued)


£000

% of Net Asset

Value

Transport 2.82% (2.41%)

229,000 Tokyu 1,496 2.82


Net other assets 1.53% (1.21%) 813 1.53

Net assets 53,103 100.00



32




£000

% of Net Asset


£000

% of Net Asset

Value


Australia 17.72% (19.61%)54,224 Amcor 440 1.0844,010 BHP Billiton 456 1.1118,478 Commonwealth Bank of Australia 763 1.8612,366 CSL 771 1.886,270 Domino’s Pizza Enterprises 237 0.58

155,093 Healthscope 246 0.6035,241 Lend Lease Group 245 0.6050,513 Link Administration Holding 223 0.5413,918 Macquarie Group 534 1.3050,055 QBE Insurance Group 290 0.7120,851 Rio Tinto 528 1.29

371,856 Spotless Group Holdings 230 0.5694,711 Transurban Group 631 1.54

285,793 Vicinity Centres 525 1.2869,926 Westpac Banking 1,141 2.79

7,260 17.72

Bermuda 0.00% (0.63%)

Cayman Islands 11.38% (9.98%)17,204 Alibaba Group Holding ADR 1,023 2.505,385 Baidu.com ADR 665 1.62

37,416 Cheung Kong Property Holding 174 0.4372,416 CK Hutchison Holdings 590 1.44

194,707 Dali Foods Group 83 0.20124,900 Tencent Holdings 2,123 5.19

4,658 11.38

China 6.12% (8.04%)1,433,000 China Construction Bank 708 1.731,385,000 China Petroleum & Chemical ‘H’ 747 1.82

208,000 Ping An Insurance 684 1.67336,000 Sinopec Shanghai Petrochemical 114 0.2861,500 Zhuzhou CRS Times Electric ‘H’ 252 0.62

2,505 6.12

Hong Kong 11.91% (11.60%)372,000 AIA Group 1,659 4.05194,000 Bank Of China (Hong Kong) Holdings 434 1.06141,000 China Mobile (Hong Kong) 1,206 2.95144,000 China Overseas Land & Investments 340 0.83144,000 China Resources Beer Holdings 234 0.57324,000 Guangdong Investment 369 0.90

9,285 Hong Kong Exchanges and Clearing 168 0.4168,500 Techtronic Industries 212 0.526,673 Ultratech Cement P Note 08/07/2019 252 0.62

4,874 11.91

India 7.19% (7.38%)40,894 Asian Paints P Note 31/07/2018 455 1.112,012 Eicher Motors P Note 08/08/2019 429 1.05

73,208 ICICI Bank ADR 393 0.9626,284 Infosys ADR 351 0.866,814 Larsen & Toubro P Note 18/09/2017 113 0.287,875 Larsen & Toubro P Note 22/02/2017 131 0.329,900 Maruti Suzuki P Note 15/02/2017 459 1.121,772 Maruti Suzuki P Note 08/12/2020 82 0.20

12,710 Reliance Industries 272 0.666,819 UltraTech Cement LEPO 02/03/2017 258 0.63

2,943 7.19

Indonesia 3.29% (3.73%)662,100 Bank Rakyat Indonesia 404 0.99338,200 Matahari Department Store 382 0.93772,600 Mitra Keluarga Karyasehat 119 0.29

2,381,700 Surya Citra Media IDR 442 1.081,347 3.29

Ireland 0.00% (1.04%)

Israel 0.53% (0.62%)228,500 Sarine Technologies 216 0.53

216 0.53

Korea 12.61% (12.68%)1,755 Amorepacific Corporation 492 1.20

10,445 Kia Motors 293 0.7216,733 Korea Electric Power 653 1.593,023 LG Chemicals 510 1.25

833 Naver Corporation 384 0.942,073 Samsung Electronics 1,918 4.695,696 Samsung Life Insurance 372 0.91

21,903 Shinhan Financial Group 538 1.315,160 12.61

Luxembourg 0.91% (0.63%)180,000 Samsonite International 371 0.91

371 0.91

Malaysia 2.83% (0.96%)290,000 IHH Healthcare Berhad 353 0.86362,300 IJM Corporation Berhad 233 0.57423,550 Karex Berhad 189 0.46146,300 Tenaga Nasional Berhad 382 0.94

1,157 2.83

Netherlands 1.22% (1.10%)145,975 Dabur India P Note 20/05/2019 499 1.22

499 1.22

Philippines 3.74% (3.16%)25,110 Ayala Corporation 339 0.835,875 Globe Telecom 222 0.54

19,265 GT Capital Holdings 440 1.08193,810 Metropolitan Bank and Trust 276 0.6776,590 Universal Robina 253 0.62

1,530 3.74

Singapore 3.21% (2.13%)63,384 DBS Group 555 1.36

354,100 Keppel DC REIT 219 0.53657,600 Mapletree Commercial Trust 541 1.32

1,315 3.21

Taiwan 11.03% (10.28%)361,000 Advanced Semiconductor

Engineering 306 0.7548,000 Catcher Technology 264 0.64

1,001,805 E.Sun Financial Holdings 440 1.08232,000 Far EasTone Telecommunications 419 1.02

7,000 Largan Precision 478 1.1732,853 Makalot Industrial 114 0.2869,000 President Chain Store 401 0.98

501,181 Taiwan Semiconductor Manufacturing 1,883 4.60109,000 Wistron Neweb 208 0.51

4,513 11.03

33



Portfolio Statement(continued)


£000

% of Net Asset

Value

Thailand 3.73% (3.71%)49,300 Airports of Thailand 408 1.0079,515 Kasikornbank FB 288 0.7025,600 Siam Cement 258 0.63

428,100 Thai Beverage 215 0.53279,300 Thai Oil 357 0.87

1,526 3.73

Warrants 0.00% (0.55%)


Net other assets 2.58% (2.17%) 1,054 2.58

Net assets 40,928 100.00



34


Performance Summaryfor the six months ended 30 June 2016

Funds Sector Index

Retail Shares Net

Return %

Institutional Shares

Net Return %

Sector Median

Net Return %

Index Total

Return %


(IA) UK Equity Income FTSE All-Share* +1.57 +1.82 -2.22 +4.27


(IA) UK All Companies

FTSE All-Share* -5.12 -4.91 -1.88 +4.27


(IA) Europe Excluding UK

FTSE World Europe ex UK* ≠+0.78 +1.03 +2.33 +4.81


(IA) Japan TOPIX* ≠+2.96 +2.69 +4.30 +5.31


(IA) Asia Pacific Excluding Japan

MSCI AC Asia Pacific ex Japan*

≠+11.52 +11.26 +12.97 +13.01

The Fund Sector is taken from the UK Unit Trusts/OEICs universe. Comparing the fund’s performance to this Fund Sector is only relevant for UK Investors.

≠This represents the “Group” share class of the fund.

*Denotes official benchmark.

Net returns (source: Morningstar) are calculated using official 2pm prices, bid to bid basis with net income reinvested and are net of assumed fees and expenses but does not include any initial charges (unless otherwise stated). All data shown is in GBP.

35


Fund Share Class SRRI

Threadneedle UK Equity Income Fund Retail income shares 5LV=Group accumulation shares 5Second retail income shares 5

Institutional income shares 5Institutional accumulation shares 5

Threadneedle UK Growth Fund Retail accumulation shares 5LV=Group accumulation shares 5

Second retail accumulation shares 5Institutional accumulation shares 5

Threadneedle European ex-UK Growth Fund Retail accumulation shares 6LV=Group accumulation shares 6Second retail accumulation shares 6Institutional income shares 6

Institutional income GBP hedged shares 6Institutional accumulation shares 6

Threadneedle Japan Growth Fund LV=Group accumulation shares 6 Institutional accumulation shares 6Threadneedle Pacific ex-Japan Growth Fund LV=Group accumulation shares 6 Institutional accumulation shares 6

The Synthetic risk and reward indicator (SRRI) is explained in the table below:

SRRI

1 The fund is in this specific category because historically it has shown a low level of volatility (how much the value of the fund went up and down compared to other categories).

2 The fund is in this specific category because historically it has shown a relatively low level of volatility (how much the value of the fund went up and down compared to other categories).

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).

4 The fund is in this specific category because historically it has shown a medium level of volatility (how much the value of the fund went up and down compared to other categories).

5 The fund is in this specific category because historically it has shown a medium to high level of volatility (how much the value of the fund went up and down compared to other categories).

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).

7 The fund is in this specific category because historically it has shown a very high level of volatility (how much the value of the fund went up and down compared to other categories).

The Risk and Reward Profile 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.

Historical data may not be a reliable indication of the future risk profile of the funds.

The SRRI category shown is not guaranteed to remain unchanged and that the categorisation of the funds may shift over time. The KIID contains the current SRRI.

The lowest category does not mean a risk-free investment.

No form of capital protection or capital guarantee applies to any of the funds.

Risk and Reward Profiles

36


The CompanyThe Company, an open-ended investment company with variable capital, is an umbrella company currently consisting of six sub-funds (each a “Fund”). It is authorised and regulated by the Financial Conduct Authority, register number 188233 with effect from 3rd March 1999. Incorporated in England and Wales No. IC24. Head Office: Cannon Place, 78 Cannon Street, London EC4N 6AG.

The Funds are segregated portfolios of assets and, accordingly, the assets of a Fund belong exclusively to that Fund and shall not be used to discharge directly or indirectly the liabilities of, or claims against, any other person or body, including the umbrella, or any other Fund, and shall not be available for any such purpose.

A prospectus (the Prospectus), which describes each fund in detail, is available from the ACD and distributors. Each fund has the investment powers equivalent to those of a UCITS scheme (as defined in the FCA rules). Other funds may be launched in the future.

The Authorised Corporate Director (ACD)The ACD is the sole director of the Company and is responsible for all aspects of its administration and management. The ACD is Threadneedle Investment Services Limited which is authorised and regulated by the Financial Conduct Authority, register number 190437. The ACD is a member of The Investment Association. It is incorporated in England and Wales No. 03701768 and its registered office is Cannon Place, 78 Cannon Street, London EC4N 6AG. Please note the administration address for all correspondence to the ACD is PO BOX 10033, Chelmsford, CM99 2AL and the telephone number is 0800 953 0134 (calls may be recorded).

The ultimate holding company of the ACD is Ameriprise Financial, Inc., a corporation incorporated in Delaware, USA.

The DepositaryThe Depositary acts as the custodian for all assets relating to the Company. The Depositary is HSBC Bank plc, 8 Canada Square, London, E14 5HQ. The Depositary is regulated by the FCA and authorised and regulated by the Prudential Regulation Authority.

Increase to the Depositary’s feeAs a result of the implementation of EU Directive 2014/91/EU (UCITS V), the ACD and the Depositary have agreed that an additional fee of £4,500 per year will be payable to the Depositary under the Depositary Services Agreement for the Company for each of the Funds.

Closure of Threadneedle US Equity Income FundThe Threadneedle US Equity Income Fund is currently being terminated, following its merger with the US Equity Income Fund, a sub-fund of Threadneedle Specialist Investment Funds ICVC on 20 May 2016.

Changes to the directors of the ACDThe following changes have been made to the directors of the ACD:

■■ Appointment of Ms. Kath Cates (non-executive director) on 29 March 2016;

■■ Resignation of Mr. Campbell Fleming on 29 April 2016;

■■ Appointment of Ms. Laura Weatherup on 11 July 2016;

■■ Appointment of Mr. Dominik Kremer on 22 July 2016.

Changes to the ProspectusDuring the period from 1 January 2016 to 30 June 2016 the main changes to the Prospectus of the Company were as follows:

■■ Deletion of references to the Threadneedle US Equity Income Fund, following its merger with the US Equity Income Fund, a sub-fund of Threadneedle Specialist Investment Funds ICVC;

■■ Addition of information required for compliance with the UCITS V Directive, including additional information about the depositary and its delegates, and details of the ACD’s remuneration policy;

■■ Updates to sections providing information on the performance and dilution levy of the Funds, relating performance, taxation;

■■ Updates to the list of funds managed by the ACD and the directors of the ACD.

Changes to the Instrument of IncorporationThe instrument of incorporation was updated during the period to remove references to the Threadneedle US Equity Income Fund, which was merged by scheme of arrangement with a fund of Threadneedle Specialist Investment Funds ICVC on 20 May 2016.

Subscription DaysShares may be purchased or sold on any business day. The price of shares is calculated daily. A forward pricing basis is used. Prices are published on our website (columbiathreadneedle.com) or are available by telephone on 0800 953 0134 (calls may be recorded).

Repurchase of SharesShareholders may offer all their shares for sale to the ACD. Alternatively, they may offer a lesser number for sale, provided they retain at least the minimum holding referred to on page 37. All sale instructions must be made to the ACD in writing. The shares will be purchased from the shareholder at the next Valuation Point and a contract note confirming the sale will be sent.

In times of high redemptions, where requested redemptions exceed 10% of a Fund’s value, to protect the interests of continuing Shareholders, the ACD may defer redemptions at a particular Valuation Point on a Dealing Day, to the valuation point on the next Dealing Day. This will allow the ACD to match the sale of Scheme Property to the level of redemptions, and should reduce the impact of dilution on a Fund. Subject to sufficient liquidity being raised at the next Valuation Point all deals relating to the earlier Valuation Point will be completed before those relating to the later Valuation Point are considered.

DilutionEach fund may suffer dilution (reduction) in the value of the scheme property as a result of the costs incurred in dealing in its investments and of any spread between the buying and selling prices of these investments. It is not, however, possible to predict accurately whether dilution will occur at any point in time.

In order to counter this, the ACD may require the payment of a dilution levy. In cases where a dilution levy is made the value of the capital of the scheme property will not be adversely affected by dilution. If charged, the dilution levy will be shown in addition to (but not part of) the price of shares on their issue by the Company or sale by the ACD and as a deduction to the price of shares on their cancellation by the Company or redemption by the ACD. The ACD has no entitlement to the dilution levy. It will either be paid into the Company, in the case of an issue of shares by the Company or sale by the ACD, or retained in the Company in the case of a cancellation of shares by the Company or a redemption by the ACD.

The need to charge a dilution levy will depend on the volume of net purchases or redemptions, as described below. The ACD may charge a dilution levy on any purchase or redemption of shares if, in its opinion, the existing Shareholders (for purchases) or continuing Shareholders (for redemptions) might otherwise materially be adversely affected. A dilution levy must be imposed only in a manner, that so far as practicable, is fair to all Shareholders or potential Shareholders.

Further Information

37


Further Information(continued)

In particular, the dilution levy may be charged in the following circumstances:

■■ if the fund is experiencing large levels of net purchases (i.e. purchases less redemptions) relative to its size;

■■ if the fund is experiencing large levels of net redemptions (i.e. redemptions less purchases) relative to its size;

■■ on “large deals”. For these purposes, a large deal is defined as a purchase or a redemption in excess of £1,000,000 or 2% or more of the value of the fund whichever shall be lower;

■■ in any other case where the ACD is of the opinion that the interests of existing/continuing Shareholders and potential Shareholders require the imposition of a dilution levy.

In order to reduce the volatility in the rate of any dilution levy, the ACD may take account of the trend of the fund to expand or to contract; and the transactions in shares at a particular Valuation Point.

Characteristics of SharesThe Company is structured as an umbrella company and currently consists of 6 different sub-funds. Several classes of share may be issued in respect of each fund, distinguished by their criteria for subscription and fee structure.

Share ClassMinimum

Initial Investment

Eligibility

Retail income shares £1,000 Retail Investors

Retail accumulation shares £1,000 Retail Investors

LV=Group income shares N/A Institutional investors within the LV= group of companies

LV=Group accumulation shares

N/A Institutional investors within the LV= group of companies

Second retail income shares

£500 Retail Investors

Second retail accumulation shares

£500 Retail Investors

Institutional income shares £500,000 Non-Retail Investors

Institutional income GBP hedged shares

£500,000 Non-Retail Investors

Institutional accumulation shares

£500,000 Non-Retail Investors

Different criteria apply if purchasing shares through the Threadneedle Regular Savings Facility. The limits for minimum initial investment, minimum subsequent investment and minimum holding of shares may be waived at the discretion of the ACD. For further information please refer to the Prospectus.

Foreign Account Tax Compliance Act (FATCA)Threadneedle and its funds (Threadneedle) have registered with the US Internal Revenue Service in accordance with FATCA and other current related legislation. Threadneedle has put in place appropriate processes and procedures to maintain its compliance with the statutory requirements, including ensuring that Threadneedle obtain the required certification from its clients and investors as necessary to mitigate any requirement upon Threadneedle to withhold or report such clients under the legislation. This registration and compliance process should ensure that Threadneedle should not suffer withholding under FATCA.

Income EqualisationSince each fund operates equalisation, the first allocation made after the acquisition of shares will include an amount of equalisation. This amount represents the ACD’s best estimate of the income included in the price at

which the shares were acquired (subject to grouping where appropriate) and represents a capital repayment for UK tax purposes which should be deducted from the cost of shares in arriving at any capital gain realised on their subsequent disposal.

Regulatory Disclosure and ConstitutionThis document has been issued by Threadneedle Investment Services Limited as ACD of the Company. The Company is an investment company with variable capital incorporated under Regulation 14 (Authorisation) of the Open-Ended Investment Companies Regulations 2001. It is an umbrella company for the purposes of the rules of the Collective Investment Schemes Sourcebook (COLL) of the Financial Conduct Authority.

The Company currently comprises of five securities funds: Threadneedle UK Equity Income Fund, Threadneedle UK Growth Fund, Threadneedle European ex-UK Growth Fund, Threadneedle Japan Growth Fund and Threadneedle Pacific ex-Japan Growth Fund.

The value of investments held by the funds and the revenue from them may go down as well as up, and when you redeem your shares you may not get back the amount you put in. When a Fund holds overseas investments, currency exchange rates will be an extra factor affecting its performance. If the investment growth for your Fund is less than the charges deducted, the value of your capital will go down.

The shareholders are not liable for the debts of the Company.

Application for SharesThe first investment in shares of the Company can be made using a standard application form, available from Threadneedle Investment Services Limited, PO Box 10033, Chelmsford, CM99 2AL; telephone 0800 953 0134 (calls may be recorded). Additional investments can be made by letter or by telephone.

Shares in the Company can be bought or sold on a forward pricing basis. That is, if full instructions (and payment in the case of a request to buy shares) are received prior to 2pm on a business day, the price received will be the price calculated later that day. Instructions received after 2pm will be dealt with at the price calculated on the next business day.

Publication of PricesThe daily prices of the shares in each class of shares in each fund are currently published on our website (columbiathreadneedle.com) or can be obtained by telephone on 0800 953 0134 (please note calls may be recorded for training and monitoring purposes). We may also, at our sole discretion, decide to publish certain share prices on third party websites or publications.

Key Investor Information Document (KIID) – Subscription requirementsThe KIID is a pre-contractual document and investors will have to confirm that they have read the latest KIID before making a subscription. Columbia Threadneedle Investments 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.

Website PublicationThe financial statements are published at columbiathreadneedle.com, which is a website maintained by Threadneedle Investment Services Limited. The maintenance and integrity of the website maintained by Threadneedle Investment Services Limited, so far as it relates to the Threadneedle Investment Funds II ICVC, is the responsibility of Threadneedle Investment Services Limited. Visitors to the website need to be aware that legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in their jurisdiction.

38


Authorised Corporate Director (ACD) Threadneedle Investment Services Limited Cannon Place78 Cannon Street LondonEC4N 6AG

ACD Client Services Address:Threadneedle Investment Services Limited PO Box 10033Chelmsford Essex CM99 2ALTelephone UK Investors: (dealing & customer enquiries): 0800 953 0134* Telephone non-UK Residents: (dealing & customer enquiries): +352 4640 10 7020* Fax UK Investors (dealing): 0845 113 0274Fax non-UK Residents (dealing): +352 2452 9807Email (enquiries): [email protected]

Investment ManagerThreadneedle Asset Management Limited(authorised and regulated by the Financial Conduct Authority (FCA)) Cannon Place78 Cannon Street LondonEC4N 6AG

DepositaryHSBC Bank plc(regulated by the FCA and authorised and regulated by the Prudential Regulation Authority (PRA)) 8 Canada SquareLondon E14 5HQ

RegistrarThreadneedle Investment Services Limited delegated to: International Financial Data Services (UK) Limited (authorised and regulated by the FCA)IFDS HouseSt. Nicholas Lane BasildonEssex SS15 5FS

AdministratorHSBC Bank plc(regulated by the FCA and authorised and regulated by the PRA) 8 Canada SquareLondon E14 5HQ

CustodianHSBC Bank plc(regulated by the FCA and authorised and regulated by the PRA) 8 Canada SquareLondon E14 5HQ

Legal Advisers Eversheds LLP One Wood Street LondonEC2V 7WS

AuditorErnst & Young LLP1 More London Place LondonSE1 2AF

Directory

*Calls may be recorded.

39


References in this document to any fund do not constitute an offer or invitation to subscribe to shares in such a fund. We recommend you obtain detailed information before the purchase of shares. Subscriptions to a fund may only be made on the basis of the current Prospectus or Key Investor Information Document and the latest annual and interim reports.

Past performance is not a guide to future returns. The value of investments and any income from them is not guaranteed and may fall as well as rise and the investor may not get back the original investment. Exchange rate movements could increase or decrease the value of underlying investments/ holdings. The dealing price of the funds may include a dilution adjustment. Further details are available in the Prospectus.

The mention of any specific shares or bonds should not be taken as a recommendation to deal and anyone considering dealing in these financial instruments should consult a stockbroker or financial adviser. The research and analysis included in this document has been produced by Threadneedle for its own investment management activities, may have been acted upon prior to publication and is made available here incidentally. Any opinions expressed are made as at the date of publication but are subject to change without notice.

All the risks currently identified as being applicable to the fund are set out in the “Risk Factors” section of the Prospectus

Important Information

Key Risks of the fundsThe following table and definitions show the key risks applying to each fund.

Funds/Key risks Inve

stm

ent

Curr

ency

Polit

ical

and

Fin

anci

al

Deriv

ativ

es fo

r EPM

/Hed

ging

High

Vol

atili

ty

Liqu

idity

Threadneedle UK Equity Income Fund X X X X

Threadneedle UK Growth Fund X X X X

Threadneedle European ex-UK Growth Fund X X X X

Threadneedle Japan Growth Fund X X X X

Threadneedle Pacific ex-Japan Growth Fund X X X X X X

Threadneedle US Equity Income Fund X X X X

Description of the 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.

Political and Financial Risk: The fund invests in markets where economic and regulatory risk can be significant. These factors can affect liquidity, settlement and asset values. Any such event can have a negative effect on the value of your investment.

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.

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.

Further risks applicable to the funds can be found in the Prospectus.

To find out more visit columbiathreadneedle.comThreadneedle 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 149537

THREADNEEDLE INVESTMENT FUNDS II ICVC · 6/30/2016 · Threadneedle Investment Funds II ICVC...

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Transcript of THREADNEEDLE INVESTMENT FUNDS II ICVC · 6/30/2016 · Threadneedle Investment Funds II ICVC...