hang seng mandatory provident fund – supertrust plus · 2020-01-03 · hang seng mandatory...

Hang Seng Mandatory Provident Fund

– SuperTrust Plus

30 June 2019

Hang Seng Mandatory Provident Fund – SuperTrust Plus Year ended 30 June 2019

Contents Page(s) Directory of parties 1 - 2 Scheme report 3 - 7 Investment report 8 - 57 Independent auditor’s report on the financial statements 58 - 61 Scheme

Statement of changes in net assets available for benefits 62 Statement of net assets available for benefits 63 Cash flow statement 64

Constituent funds

Statement of comprehensive income 65 - 67 Statement of assets and liabilities 68 - 70 Statement of changes in net assets attributable to members 71 - 73

Notes to the financial statements 74 - 101 Independent auditor’s assurance report 102- 104


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Directory of parties Sponsor Hang Seng Bank Limited 83 Des Voeux Road Central Hong Kong Trustee and Custodian HSBC Provident Fund Trustee (Hong Kong) Limited HSBC Main Building 1 Queen’s Road Central Hong Kong Investment Managers HSBC Investment Funds (Hong Kong) Limited (for the approved pooled investment funds (except for the MPF Guaranteed Fund itself which is an approved pooled investment fund in the form of insurance policy) directly or indirectly invested by the constituent funds except the Hang Seng Index Tracking Fund) HSBC Main Building 1 Queen’s Road Central Hong Kong Hang Seng Investment Management Limited (for the respective approved Index-Tracking Collective Investment Schemes directly or indirectly invested by the Hang Seng Index Tracking Fund) 83 Des Voeux Road Central Hong Kong HSBC Global Asset Management (Hong Kong) Limited (for the insurance policy of the Guaranteed Fund only) HSBC Main Building 1 Queen’s Road Central Hong Kong Investment Adviser HSBC Global Asset Management (Hong Kong) Limited (for the approved pooled investment funds (except for the MPF Guaranteed Fund itself which is an approved pooled investment fund in the form of insurance policy) directly or indirectly invested by the constituent funds except the Hang Seng Index Tracking Fund) HSBC Main Building 1 Queen’s Road Central Hong Kong


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Directory of parties (continued) Administrator The Hongkong and Shanghai Banking Corporation (designated on 1 November 2018)

Limited 1 Queen’s Road Central Central, Hong Kong HSBC Life (International) Limited (retired on 1 November 2018) 18th Floor, Tower 1, HSBC Centre 1 Sham Mong Road, Kowloon Hong Kong Investment Agent Hang Seng Investment Management Limited (for the Hang Seng Index Tracking Fund only) 83 Des Voeux Road Central Hong Kong Insurer HSBC Life (International) Limited (for the insurance policy of the Guaranteed Fund only) 18th Floor, Tower 1, HSBC Centre 1 Sham Mong Road, Kowloon Hong Kong Legal Adviser Baker & McKenzie (effective from 18 March 2019) 14th Floor, One Taikoo Place 979 King’s Road, Quarry Bay Hong Kong Baker & McKenzie (prior to 18 March 2019) 14th Floor, Hutchison House 10 Harcourt Road, Central Hong Kong Auditor KPMG 8th Floor, Prince’s Building 10 Chater Road, Central Hong Kong


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Scheme report The Trustee has pleasure in submitting the scheme report together with the audited financial statements of Hang Seng Mandatory Provident Fund – SuperTrust Plus (“the Scheme”) for the year ended 30 June 2019. 1. The Scheme

The Scheme is a master trust scheme set up for the purpose of providing benefits to members in accordance with the Hong Kong Mandatory Provident Fund Schemes Ordinance (“the MPF Ordinance”). The Scheme was established under a trust deed dated 31 January 2000 between Hang Seng Bank Limited as the Sponsor and HSBC Provident Fund Trustee (Hong Kong) Limited as the Trustee. The Scheme is registered under section 21 of the MPF Ordinance.

The Trust Deed of the Scheme was amended on 1 March 2019 due to the Scheme restructuring. With effect from 1 July 2019, Hang Seng Mandatory Provident Fund – ValueChoice was merged with the Scheme. All members of the Scheme and their accrued benefits under the Hang Seng Mandatory Provident Fund – ValueChoice were transferred to the Scheme on 1 July 2019. Details on the merger can be found at the following website https://www.hangseng.com/cms/cbd/eMPF/merger_notice_190325e. pdf. The Trust Deed of the Scheme was amended on 8 April 2019 due to the addition of the tax deductible voluntary contributions feature to the Scheme. Other than the above, there was no change in the governing rules of the Scheme since the last year ended 30 June 2018.


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Scheme report (continued) 2. Financial development

(Expressed in Hong Kong dollars)

Total subscriptions

for the year ended

30 June 2019

Total subscriptions

for the year ended

30 June 2018

Net assets as at

30 June 2019

Net assets as at

30 June 2018 $’000 $’000 $’000 $’000 MPF Conservative Fund 5,372,513 5,930,045 9,406,599 8,397,010 Guaranteed Fund 1,153,354 1,440,147 3,597,184 3,427,762 Core Accumulation Fund 985,505 1,083,862 2,921,198 2,417,860 Balanced Fund 629,126 867,372 6,087,989 6,228,175 Growth Fund 925,977 1,190,430 8,267,914 8,542,656 Hang Seng Index Tracking

Fund 4,390,006 4,801,069 13,207,060 13,149,873 North American Equity Fund 1,214,441 661,948 1,799,038 1,374,512 European Equity Fund 211,433 317,932 826,390 831,008 Asia Pacific Equity Fund 638,977 878,893 3,305,138 3,325,835 Hong Kong and Chinese

Equity Fund 1,038,814 1,290,587 3,969,582 4,038,369 Global Bond Fund 767,804 1,097,399 1,346,307 1,094,825 Age 65 Plus Fund 412,713 453,486 722,339 521,455 Stable Fund 471,964 845,484 908,313 822,043 Chinese Equity Fund 1,141,223 1,752,877 2,478,186 2,609,000

3. Directory of parties

Details of those parties engaged by the Trustee for the purposes of the Scheme for the year ended 30 June 2019 are set out on pages 1 to 2.

4. Directors

The directors of HSBC Provident Fund Trustee (Hong Kong) Limited during the year and up to the date of this report are as follows:

Mark Ivan BOYNE Elaine Yuen Man LO Sau Ling TSE Horace Kwan Hor CHAU Daniel Gareth HANKINSON Rex Pak-kuen AUYEUNG (appointed on 14 June 2019) Sai Kit HEUNG (resigned on 30 June 2019)

The business address of these directors is:

HSBC Main Building 1 Queen’s Road Central Hong Kong


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Scheme report (continued) 5. Particulars of parties associated with the Trustee

HSBC Life (International) Limited

The directors of HSBC Life (International) Limited during the financial year are as follows:

Benny Man Bun TSE Kevin Ross MARTIN Kathleen Chieh Huey GAN Gregory Thomas HINGSTON Sebastian Richmond HORN Bryce Leslie JOHNS Terence Man Chung CHIU Edward Charles Lawrence MONCREIFFE Siew Boi TAN Babak NIKZAD ABBASABADI Chi Fai YAM (appointed on 1 February 2019) The Hongkong and Shanghai Banking Corporation Limited The directors of The Hongkong and Shanghai Banking Corporation Limited during the financial year are as follows: Peter Tung Shun WONG Laura May Lung CHA Zia MODY Graham John BRADLEY Christopher Wai Chee CHENG Raymond Kuo Fung CH’IEN Irene Yun-lien LEE Jennifer Xinzhe LI Victor Tzar Kuoi LI Kevin Anthony WESTLEY Francis Sock Ping YEOH Louisa Wai Wan CHEANG Yiu Kwan CHOI Bin Hwee QUEK (née CHUA) John Michael FLINT John Robert SLOSAR (resigned on 24 July 2018) Marjorie Mun Tak YANG (retired on 4 April 2019)


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Scheme report (continued) 5. Particulars of parties associated with the Trustee (continued)

Hang Seng Bank Limited

The directors of Hang Seng Bank Limited during the financial year are as follows:

Raymond Kuo Fung CH’IEN Louisa Wai Wan CHEANG John Cho Chak CHAN Nixon Lik Sang CHAN Lai Yuen CHIANG Margaret Wing Han KWAN Irene Yun Lien LEE Eric Ka Cheung LI Vincent Hong Sui LO Kenneth Sing Yip NG Peter Tung Shun WONG Michael Wei Kuo WU Kathleen Chieh Huey GAN (appointed on 10 May 2019) Sarah Catherine LEGG (resigned on 1 March 2019)

HSBC Global Asset Management (Hong Kong) Limited

The directors of HSBC Global Asset Management (Hong Kong) Limited during the financial year are as follows:

Stuart Glenn BERRY Guillermo Eduardo MALDONADO-CODINA Kevin Ross MARTIN Pedro Augusto BOTELHO BASTOS Stephen Chun Pong TAM Helen Pik Kuen WONG Rudolf Eduard Walter APENBRINK


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Investment report for the year ended 30 June 2019 1. Statement of investment objective and policies

As at 30 June 2019 and during the year, Hang Seng Mandatory Provident Fund – SuperTrust Plus (the “Scheme”) is a master trust scheme and offering the following constituent funds:

1. MPF Conservative Fund 2. Guaranteed Fund 3. Core Accumulation Fund 4. Balanced Fund 5. Growth Fund 6. Hang Seng Index Tracking Fund 7. North American Equity Fund 8. European Equity Fund 9. Asia Pacific Equity Fund 10. Hong Kong and Chinese Equity Fund 11. Global Bond Fund 12. Age 65 Plus Fund 13. Stable Fund 14. Chinese Equity Fund

Each of the constituent funds has different investment objectives and policies, achieved through investing its assets into an approved pooled investment fund.

1.1 MPF Conservative Fund

The investment objective of the MPF Conservative Fund is to achieve a rate of return higher than that available for savings deposits. This Fund shall be invested in an approved pooled investment fund (HSBC MPF “A” – MPF Conservative Fund) comprised entirely of high grade Hong Kong dollars denominated monetary instruments such as treasury bills, bills of exchange, commercial paper, certificates of deposit or interbank deposits; and other ancillary investments as allowed under the General Regulation. Such investments will have an average portfolio remaining maturity of not more than 90 days.

The purchase of a unit in the MPF Conservative Fund is not the same as placing funds on deposit with a bank or deposit-taking company. There is no obligation to redeem units at the offer value and the MPF Conservative Fund (or the approved pooled investment fund it is invested in) is not subject to the supervision of the Hong Kong Monetary Authority.

The approved pooled investment fund held by this MPF Conservative Fund may not acquire financial futures contracts and financial option contracts, may not engage in securities lending nor enter into repurchase agreements as defined in the General Regulation.


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Investment report for the year ended 30 June 2019 (continued) 1. Statement of investment objective and policies (continued)

1.1 MPF Conservative Fund (continued)

The MPF Conservative Fund does not guarantee the repayment of capital. The MPF Conservative Fund is established to comply with section 37 of the General Regulation. Fees and charges of an MPF Conservative Fund can be deducted from either (i) the assets of the fund or (ii) members’ account by way of unit deduction. This fund uses method (i) and, therefore, its unit prices, net asset value (NAV) or fund performance quoted have reflected the impact of fees and charges. There was no change in the statement of investment objective and policies during the period of this report that will materially affect the risk attached to the investments of the fund.

1.2 Guaranteed Fund

The investment objective of the Guaranteed Fund is to achieve long-term capital growth with low volatility whilst ensuring that the Guarantee is met. This Fund shall be invested in an approved pooled investment fund in form of an insurance policy (MPF Guaranteed Fund), which in turn invests in an approved pooled investment fund in form of a unit trust (HSBC MPF “A” – Mixed Asset Fund). Through such underlying investments, this Fund invests in a diversified portfolio that normally comprises global bonds, equities and cash, and the investments shall be heavily weighted in cash and/or short-term bank deposits from time to time if the Investment Manager considers it prudent to do so. Around zero percent to 50 percent of this Fund will be indirectly invested in equities while around 20 percent to 100 percent will be indirectly invested in bonds and around zero percent to 80 percent will be indirectly held in cash. The intended asset allocation aforesaid is for indication only and may be changed as and when the Investment Manager considers appropriate. For efficient portfolio management, the portfolio of the approved pooled investment fund held by this Fund (directly or indirectly, as the case may be) may acquire financial futures contracts and financial option contracts, engage in securities lending, enter into repurchase agreements, and invest in other investments as allowed under the General Regulation. The investment held by this Fund (directly or indirectly) is subject to the applicable investment restrictions from time to time, including, but not limited to, the relevant investment and borrowing restrictions as described in Schedule 1 of the General Regulation.


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1.2 Guaranteed Fund (continued)

There is a dilution of performance due to the guarantee structure of the Guaranteed Fund and its insurance policy, and a guarantee fee is payable to the Insurer.

Members investing in the Guaranteed Fund who do not hold their investments until the date or events where one of the Guarantee Conditions set out in the “Principal Brochure” is met are subject to market fluctuations and investment risks.

The Guaranteed Fund invests in an insurance policy which includes a guarantee. The insurance policy is issued by the Insurer, HSBC Life (International) Limited.

Investments in the insurance policy are held as the assets of HSBC Life (International) Limited. In the event where HSBC Life (International) Limited is liquidated, you may not have access to your investments temporarily, or their value may be reduced, and the guarantee may not be available.

Before you invest in this Fund, you should consider the risk posed by the Insurer (referred to as “credit risk”) under the circumstances set out above and, if necessary, seek additional information or advice.

Details of the terms and conditions of the guarantee are set out in the Principal Brochure.

There was no change in the statement of investment objective and policies during the period of this report that will materially affect the risk attached to the investments of the fund.

1.3 Core Accumulation Fund

The investment objective of the Fund is to provide capital growth to Members by investing in a globally diversified manner. The Fund shall invest in an approved pooled investment fund (HSBC MPF “A” – Core Accumulation Fund) which in turn invests in two or more underlying approved pooled investment fund(s) and/or Index-Tracking Collective Investment Scheme(s) (“ITCIS(s)”) as allowed under the General Regulation.


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1.3 Core Accumulation Fund (continued)

The HSBC MPF “A” – Core Accumulation Fund adopts an active investment strategy so that the investment adviser of the HSBC MPF “A” – Core Accumulation Fund may, subject to the limits of asset allocation, allocate the assets among different underlying approved pooled investment fund(s) and/or ITCIS(s) in such proportions as it shall, at its discretion, determine in response to various factors within the market environment for the best interest of the unitholders of the HSBC MPF “A” – Core Accumulation Fund. The underlying approved pooled investment fund(s) and/or ITCIS(s) may be actively managed or may adopt a passive management style against an index. There is no constraint restricting the investment adviser from investing in underlying collective investment schemes with any particular investment strategy. The investment adviser(s) of the underlying approved pooled investment fund(s) and/or ITCIS(s) in which the HSBC MPF “A” – Core Accumulation Fund invests in may appoint one or more investment sub-advisers to manage the investment of the underlying approved pooled investment fund(s), and such investment sub-advisers may include members of the HSBC Group as well as non-HSBC Group entities.

The Fund, through its underlying investments, will hold 60 percent of its net assets in Higher Risk Assets (such as global equities), with the remainder investing in Lower Risk Assets (such as global bonds and money market instruments). The asset allocation to Higher Risk Assets may vary between 55 percent and 65 percent due to differing price movements of various equity and bond markets.

For efficient portfolio management, the portfolio of the underlying approved pooled investment fund may acquire financial futures contracts and financial option contracts (for hedging purposes only if acquired directly by the underlying approved pooled investment fund), engage in securities lending, enter into repurchase agreements, and invest in other investments, as allowed under the applicable laws and regulations. The Fund will, through the investment of HSBC MPF “A” – Core Accumulation Fund maintain a minimum Hong Kong currency exposure of 30 percent, as prescribed by the General Regulation.

The risk profile of the Fund is medium. The risk profile is determined by the Sponsor and the Trustee taking into account relevant factors including price volatility, asset allocation and liquidity. The risk profile is for reference only and will be reviewed periodically. The Fund aims to achieve a return corresponding to the return of the Reference Portfolio applicable to the Fund. There was no change in the statement of investment objective and policies during the period of this report that will materially affect the risk attached to the investments of the fund.


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1.4 Balanced Fund

The investment objective of the Balanced Fund is to achieve medium-high capital growth with medium volatility. This Fund shall be invested in an approved pooled investment fund (HSBC MPF “A” – Balanced Fund), which in turn invests in two or more underlying approved pooled investment fund(s) and/or ITCIS(s) as allowed under the General Regulation. Through such underlying investments, this Fund invests in a diversified portfolio that normally comprises global bonds and equities with heavier weighting in equities.

The Investment Adviser of the approved pooled investment fund in which the Balanced Fund invests is responsible to allocate the assets to the underlying investments in such proportions as it shall, at its discretion, determine. The investment adviser(s) of the underlying approved pooled investment fund(s) may appoint one or more investment sub-advisers to manage the investment of the underlying approved pooled investment fund(s), and such investment sub-advisers may include members of the HSBC Group as well as non-HSBC Group entities.

Around 55 percent to 85 percent of the portfolio of this Fund will be indirectly invested in equities and equity related investments. The remainder of the assets will be invested in deposits, debt securities and other investments as allowed under the General Regulation. The intended asset allocation aforesaid is for indication only and may be changed as and when the Investment Manager considers appropriate.

For efficient portfolio management, the portfolio of the approved pooled investment fund held by this Fund (directly or indirectly, as the case may be) may acquire financial futures contracts and financial option contracts, may engage in securities lending, enter into repurchase agreements, and invest in other investments to the extent permitted by the General Regulation.

Investments in this Fund are subject to market fluctuations and investment risks, in particular, the risks associated with investments in global bonds and equities. As a result of a heavier weighting in equities, the volatility of this Fund is higher than investments spread equally between global bonds and equities.



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1.5 Growth Fund

The investment objective of the Growth Fund is to achieve investment returns that maximise long-term capital growth potential with medium-high volatility. This Fund shall be invested in an approved pooled investment fund (HSBC MPF “A” – Growth Fund), which in turn invests in two or more underlying approved pooled investment fund(s) and/or ITCIS(s) as allowed under the General Regulation. Through such underlying investments, this Fund invests in a diversified portfolio that normally comprises global equities, with an emphasis on Asian markets.

The Investment Adviser of the approved pooled investment fund in which the Growth Fund invests is responsible to allocate the assets to the underlying investments in such proportions as it shall, at its discretion, determine. The investment adviser(s) of the underlying approved pooled investment fund(s) may appoint one or more investment sub-advisers to manage the investment of the underlying approved pooled investment fund(s), and such investment sub-advisers may include members of the HSBC Group as well as non-HSBC Group entities.

The investment portfolio indirectly held by this Fund will comprise mainly of equities and equity-related investments. The portfolio may also include deposits, debt securities and other permitted investments up to 30 percent of the net asset value of this Fund. The intended asset allocation aforesaid is for indication only and may be changed as and when the Investment Manager considers appropriate.

For efficient portfolio management, the portfolio of the approved pooled investment fund held by this Fund (directly or indirectly, as the case may be) may acquire financial futures contracts and financial option contracts, may engage in securities lending, enter into repurchase agreements, and invest in other investments to the extent permitted by the General Regulation.

Investments in this Fund are subject to market fluctuations and investment risks, in particular, the risks associated with investments in global equities. As a result of an emphasis on Asian markets, the volatility of this Fund is higher than investments spread more evenly in global equities.



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1.6 Hang Seng Index Tracking Fund The investment objective of the Hang Seng Index Tracking Fund is to match as closely as practicable the performance of the Hang Seng Index by investing directly in an approved ITCIS (Hang Seng Index ETF) with a similar investment objective. For efficient portfolio management, the approved ITCIS held by the Hang Seng Index Tracking Fund may gain exposure to the Hang Seng Index or its constituent stocks through investing in financial instruments, engaging in borrowings, securities lending and entering into repurchase agreements, as allowed under the applicable laws and regulations. Whilst the investment objective of the Hang Seng Index Tracking Fund and the underlying approved ITCIS is to track the Hang Seng Index, there can be no assurance that the performance of the Hang Seng Index Tracking Fund and the underlying approved ITCIS will at any time be identical to the performance of the Hang Seng Index. There was no change in the statement of investment objective and policies during the period of this report that will materially affect the risk attached to the investments of the fund.

1.7 North American Equity Fund

The investment objective of the North American Equity Fund is to achieve long-term capital growth. This Fund shall be invested in an approved pooled investment fund (HSBC MPF “A” – American Equity Fund), which in turn invests in two or more underlying approved pooled investment fund(s) and/or ITCIS(s) as allowed under the General Regulation. Through such underlying investments, this Fund invests in a portfolio of carefully selected shares traded on stock exchanges in North America. The Investment Adviser of the approved pooled investment fund in which the North American Equity Fund invests is responsible to allocate the assets to the underlying investments in such proportions as it shall, at its discretion, determine. The investment adviser(s) of the underlying approved pooled investment fund(s) may appoint one or more investment sub-advisers to manage the investment of the underlying approved pooled investment fund(s), and such investment sub-advisers may include members of the HSBC Group as well as non-HSBC Group entities.


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1.7 North American Equity Fund (continued)

The investment portfolio indirectly held by this Fund will comprise mainly of equities and equity-related investments. The portfolio may also include deposits, debt securities and other permitted investments up to 30 percent of the net asset value of this Fund. The intended asset allocation aforesaid is for indication only and may be changed as and when the Investment Manager considers appropriate. For efficient portfolio management, the portfolio of the approved pooled investment fund held by this Fund (directly or indirectly, as the case may be) may acquire financial futures contracts and financial option contracts, may engage in securities lending, enter into repurchase agreements, and invest in other investments to the extent permitted by the General Regulation. Investments in this Fund are subject to market fluctuations and investment risks, in particular, the risks associated with investments in North American securities. The volatility of this regional Fund is higher than that of global security investments. There was no change in the statement of investment objective and policies during the period of this report that will materially affect the risk attached to the investments of the fund.

1.8 European Equity Fund

The investment objective of the European Equity Fund is to achieve long-term capital growth. This Fund shall be invested in an approved pooled investment fund (HSBC MPF “A” – European Equity Fund), which in turn invests in two or more underlying approved pooled investment fund(s) and/or ITCIS(s) as allowed under the General Regulation. Through such underlying investments, this Fund invests in a portfolio of carefully selected shares traded on any of the eligible markets in the United Kingdom and in other continental European countries. The Investment Adviser of the approved pooled investment fund in which the European Equity Fund invests is responsible to allocate the assets to the underlying investments in such proportions as it shall, at its discretion, determine. The investment adviser(s) of the underlying approved pooled investment fund(s) may appoint one or more investment sub-advisers to manage the investment of the underlying approved pooled investment fund(s), and such investment sub-advisers may include members of the HSBC Group as well as non-HSBC Group entities. The investment portfolio indirectly held by this Fund will comprise mainly of equities and equity-related investments. The portfolio may also include deposits, debt securities and other permitted investments up to 30 percent of the net asset value of this Fund. The intended asset allocation aforesaid is for indication only and may be changed as and when the Investment Manager considers appropriate.


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1.8 European Equity Fund (continued)

For efficient portfolio management, the portfolio of the approved pooled investment fund held by this Fund (directly or indirectly, as the case may be) may acquire financial futures contracts and financial option contracts, may engage in securities lending, enter into repurchase agreements, and invest in other investments to the extent permitted by the General Regulation. Investments in this Fund are subject to market fluctuations and investment risks, in particular, the risks associated with investments in European securities. The volatility of this regional Fund is higher than that of global security investments. There was no change in the statement of investment objective and policies during the period of this report that will materially affect the risk attached to the investments of the fund.

1.9 Asia Pacific Equity Fund

The investment objective of the Asia Pacific Equity Fund is to achieve long-term capital growth. This Fund shall be invested in an approved pooled investment fund (HSBC MPF “A” – Asia Pacific Equity Fund), which in turn invests in two or more underlying approved pooled investment fund(s) and/or ITCIS(s) as allowed under the General Regulation. Through such underlying investments, this Fund invests in a portfolio of carefully selected quoted securities on regulated stock exchanges in Asia Pacific, excluding Japan. The Investment Adviser of the approved pooled investment fund in which the Asia Pacific Equity Fund invests is responsible to allocate the assets to the underlying investments in such proportions as it shall, at its discretion, determine. The investment adviser(s) of the underlying approved pooled investment fund(s) may appoint one or more investment sub-advisers to manage the investment of the underlying approved pooled investment fund(s), and such investment sub-advisers may include members of the HSBC Group as well as non-HSBC Group entities. The investment portfolio indirectly held by this Fund will comprise mainly of equities and equity-related investments. The portfolio may also include deposits, debt securities and other permitted investments up to 30 percent of the net asset value of this Fund. The intended asset allocation aforesaid is for indication only and may be changed as and when the Investment Manager considers appropriate.


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1.9 Asia Pacific Equity Fund (continued)

For efficient portfolio management, the portfolio of the approved pooled investment fund held by this Fund (directly or indirectly, as the case may be) may acquire financial futures contracts and financial option contracts, may engage in securities lending, enter into repurchase agreements, and invest in other investments to the extent permitted by the General Regulation. Investments in this Fund are subject to market fluctuations and investment risks, in particular, the risks associated with investments in Asian securities. The volatility of this regional Fund is higher than that of global security investments. In addition, the risks inherent in the Asian markets are higher than that of the developed markets. There was no change in the statement of investment objective and policies during the period of this report that will materially affect the risk attached to the investments of the fund.

1.10 Hong Kong and Chinese Equity Fund

The investment objective of the Hong Kong and Chinese Equity Fund is to achieve long-term capital growth. This Fund shall be invested in an approved pooled investment fund (HSBC MPF “A” – Hong Kong and Chinese Equity Fund), which in turn invests in two or more underlying approved pooled investment fund(s) and/or ITCIS(s) as allowed under the General Regulation. Through such underlying investments, this Fund primarily invests in a portfolio of carefully selected securities listed on the Stock Exchange of Hong Kong, which may comprise of those Hong Kong listed Chinese equities (including H shares, red-chips and securities issued by companies deriving a preponderant part of their income and/or assets from China) and other securities listed on the Stock Exchange of Hong Kong. A portion of the investment portfolio indirectly held by this Fund may hold securities issued by companies deriving a preponderant part of their income and/or assets from Hong Kong and/or China that are listed on other stock exchanges. For the purpose of the investment objectives of the Hong Kong and Chinese Equity Fund, China means the People’s Republic of China, excludes Hong Kong, Macau and Taiwan.


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1.10 Hong Kong and Chinese Equity Fund (continued)

The Investment Adviser of the approved pooled investment fund in which the Hong Kong and Chinese Equity Fund invests is responsible to allocate the assets to the underlying investments in such proportions as it shall, at its discretion, determine. The investment adviser(s) of the underlying approved pooled investment fund(s) may appoint one or more investment sub-advisers to manage the investment of the underlying approved pooled investment fund(s), and such investment sub-advisers may include members of the HSBC Group as well as non-HSBC Group entities. The investment portfolio indirectly held by this Fund will comprise mainly of equities and equity-related investments. The portfolio may also include deposits, debt securities and other permitted investments up to 30 percent of the net asset value of this Fund. It is expected that within the portfolio’s equity and equity-related investments, around 10 percent to 75 percent may invest in Chinese equities and around 25 percent to 90 percent may invest in other equities listed in Hong Kong and/or deriving a preponderant part of their income and/or assets from Hong Kong. The intended asset allocations aforesaid are for indication only and may be changed as and when the Investment Manager considers appropriate. For efficient portfolio management, the portfolio of the approved pooled investment fund held by this Fund (directly or indirectly, as the case may be) may acquire financial futures contracts and financial option contracts, may engage in securities lending, enter into repurchase agreements, and invest in other investments to the extent permitted by the General Regulation. Investments in this Fund are subject to market fluctuations and investment risks, in particular, the risks associated with investments in Hong Kong securities. The volatility of this single country Fund is higher than that of global or regional security investments. There was no change in the statement of investment objective and policies during the period of this report that will materially affect the risk attached to the investments of the fund.


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1.11 Global Bond Fund

The investment objective of the Global Bond Fund is to achieve stable capital growth with low volatility. This Fund shall be invested in an approved pooled investment fund (HSBC MPF “A” – Global Bond Fund), which in turn invests in two or more underlying approved pooled investment fund(s) and/or ITCIS(s) as allowed under the General Regulation. Through such underlying investments, this Fund primarily invests in a portfolio of carefully selected global fixed income securities. The investment adviser(s) and investment sub-adviser(s) appointed to manage the investments of the approved pooled investment fund(s) held by this Fund directly or indirectly are members of the HSBC Group. The investment portfolio indirectly held by this Fund will comprise mainly of fixed and floating rate debt securities (up to around 10 percent of debt securities with maturity period of one year or less and the remaining debt securities with maturity period over one year). The portfolio may also include deposits and other permitted investments up to 30 percent of the net asset value of this Fund. The intended asset allocation aforesaid is for indication only and may be changed as and when the Investment Manager considers appropriate. For efficient portfolio management, the portfolio of the approved pooled investment fund held by this Fund (directly or indirectly, as the case may be) may acquire financial futures contracts and financial option contracts, may engage in securities lending, enter into repurchase agreements, and invest in other investments to the extent permitted by the General Regulation. Investments in this Fund are subject to market fluctuations and investment risks, in particular, the risks associated with debt securities. Generally, the prices of debt securities fall when interest rates rise. Change in the credit worthiness of the underlying investments may also adversely affect the value of this Fund. There was no change in the statement of investment objective and policies during the period of this report that will materially affect the risk attached to the investments of the fund.

1.12 Age 65 Plus Fund

The investment objective of the Fund is to provide stable growth for the retirement savings to Members by investing in a globally diversified manner. The Fund shall be invested in an approved pooled investment fund (HSBC MPF “A” – Age 65 Plus Fund), which in turn invests in two or more underlying approved pooled investment fund(s) and/or ITCIS(s) as allowed under the General Regulation.


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1.12 Age 65 Plus Fund (continued)

The HSBC MPF “A” – Age 65 Plus Fund adopts an active investment strategy so that the investment adviser of the HSBC MPF “A” – Age 65 Plus Fund may, subject to the limits of asset allocation, allocate the assets among different underlying approved pooled investment fund(s) and/or ITCIS(s) in such proportions as it shall, at its discretion, determine in response to various factors within the market environment for the best interest of the unitholders of the HSBC MPF “A” – Age 65 Plus Fund. The underlying approved pooled investment fund(s) and/or ITCIS(s) may be actively managed or may adopt a passive management style against an index. There is no constraint restricting the investment adviser from investing in underlying collective investment schemes with any particular investment strategy. The investment adviser(s) of the underlying approved pooled investment fund(s) and/or ITCIS(s) in which the HSBC MPF “A” – Age 65 Plus Fund invests in may appoint one or more investment sub-advisers to manage the investment of the underlying approved pooled investment fund(s), and such investment sub-advisers may include members of the HSBC Group as well as non-HSBC Group entities. The Fund, through its underlying investments, will hold 20 percent of its assets in Higher Risk Assets (such as global equities), with the remainder investing in Lower Risk Assets (such as global bonds and money market instruments). The asset allocation to Higher Risk Assets may vary between 15 percent and 25 percent due to differing price movements of various equity and bond markets. For efficient portfolio management, the portfolio of the underlying approved pooled investment fund may acquire financial futures contracts and financial option contracts (for hedging purposes only if acquired directly by the underlying approved pooled investment fund), engage in securities lending, enter into repurchase agreements, and invest in other investments, as allowed under the applicable laws and regulations. The Fund will, through the investment of HSBC MPF “A” – Age 65 Plus Fund maintain a minimum Hong Kong currency exposure of 30 percent, as prescribed by the General Regulation. The risk profile of the Fund is low. The risk profile is determined by the Sponsor and the Trustee taking into account relevant factors including price volatility, asset allocation and liquidity. The risk profile is for reference only and will be reviewed periodically. The Fund aims to achieve a return corresponding to the return of the Reference Portfolio applicable to the Fund. There was no change in the statement of investment objective and policies during the period of this report that will materially affect the risk attached to the investments of the fund.


21


1.13 Stable Fund

The investment objective of the Stable Fund is to achieve stable capital growth with low volatility. This Fund shall be invested in an approved pooled investment fund (HSBC MPF “A” – Stable Fund), which in turn invests in two or more underlying approved pooled investment fund(s) and/or ITCIS(s) as allowed under the General Regulation. Through such underlying investments, this Fund invests in a diversified portfolio that normally comprises global bonds and equities with heavier weighting in bonds. The Investment Adviser of the approved pooled investment fund in which the Stable Fund invests is responsible to allocate the assets to the underlying investments in such proportions as it shall, at its discretion, determine. The investment adviser(s) of the underlying approved pooled investment fund(s) may appoint one or more investment sub-advisers to manage the investment of the underlying approved pooled investment fund(s), and such investment sub-advisers may include members of the HSBC Group as well as non-HSBC Group entities. Around 55 percent to 85 percent of the portfolio of this Fund will be indirectly invested in debt securities, bonds and deposits. The remainder of the assets will be invested in equities and other investments as allowed under the General Regulation. The intended asset allocation aforesaid is for indication only and may be changed as and when the Investment Manager considers appropriate. For efficient portfolio management, the portfolio of the approved pooled investment fund held by this Fund (directly or indirectly, as the case may be) may acquire financial futures contracts and financial option contracts, may engage in securities lending, enter into repurchase agreements, and invest in other investments to the extent permitted by the General Regulation. Investments in this Fund are subject to market fluctuations and investment risks, in particular, the risks associated with investments in global bonds and equities. There was no change in the statement of investment objective and policies during the period of this report that will materially affect the risk attached to the investments of the fund.


22


1.14 Chinese Equity Fund

The investment objective of the Chinese Equity Fund is to achieve long-term capital growth. This Fund shall be invested in an approved pooled investment fund (HSBC MPF “A” – Chinese Equity Fund) which in turn invests in an underlying approved pooled investment fund that primarily invests in a portfolio of carefully selected shares issued by companies deriving a preponderant part of their income and/or assets from China and listed on the Stock Exchange of Hong Kong, including but not limited to H shares and red-chips. Up to 30 percent of the non-cash assets of the underlying approved pooled investment fund may include securities issued by companies deriving a preponderant part of their income and/or assets from China that are listed on other stock exchanges. For the purpose of the investment objectives of the Chinese Equity Fund, China means the People’s Republic of China, excludes Hong Kong, Macau and Taiwan. The investment adviser of the underlying approved pooled investment fund may appoint one or more investment sub-advisers to manage the investment of the underlying approved pooled investment fund, and such investment sub-advisers are members of the HSBC Group. The investment portfolio indirectly held by this Fund will comprise mainly of equities and equity-related investments. The portfolio may also include deposits, debt securities and other permitted investments up to 30 percent of the net asset value of this Fund. The intended asset allocation aforesaid is for indication only and may be changed as and when the Investment Manager considers appropriate. For efficient portfolio management, the portfolio of the approved pooled investment fund held by this Fund (directly or indirectly, as the case may be) may acquire financial futures contracts and financial option contracts, may engage in securities lending, enter into repurchase agreements, and invest in other investments to the extent permitted by the General Regulation. Investments in this Fund are subject to market fluctuations and investment risks, in particular, the risks associated with investments in securities exposed to the Chinese economy. The volatility of this single country Fund is higher than that of global or regional security investments. In addition, the risks inherent in Chinese equities are higher than that of the developed markets. There was no change in the statement of investment objective and policies during the period of this report that will materially affect the risk attached to the investments of the fund.


23

Investment report for the year ended 30 June 2019 (continued) 2. Investment Manager’s Market Review and outlook for the year ended 30

June 2019

Can you give us an overview of global equity markets in the first half of 2019?

There have been two key developments of note this year. Firstly, the US Federal Reserve’s position on interest rates has become clear after an extended ‘will they, won’t they’ waiting game that had investors on tenterhooks last year. The Fed pivoted to a more dovish stance at the beginning of 2019, putting further rates hikes on hold and adopting a data dependent approach for future policy decisions. Secondly, with respect to global economic growth - we’ve seen a degree of stabilisation, primarily in the US and in China, and this has helped anchor the world economy. To put this in context we need to flash back to 2017 when the key economies were growing strongly, in a synchronised manner, amidst low inflation. Risk assets thrived in that environment. When investors saw signs of economic growth flagging in 2018, amidst an array of other concerns – primarily the Fed’s rate hiking path and US-China trade tensions – they punished the markets, particularly in the second half of the year. While there was no material shift in the economic or business cycle in 2019, there was a change in sentiment as many of last year’s pressing concerns - including, for a brief period, the US-China trade standoff - began to fade into the background. This combined with cheap valuations after last year’s correction, unleashed the latent value in global equities, and stock markets rallied sharply in the beginning of the year before giving up some gains to the latest round of trade frictions in May. One area where the narrative has been negative, and unfairly so in our opinion, is earnings growth. There has been a lot of discussion around earnings ‘misses’ in the fourth quarter of 2018 and the first three months of 2019, but here the focus is on how accurate analysts’ estimates are. Instead, we should be thinking about whether companies are delivering better profitability and return on equity (ROE) (Figure 1). Earnings growth has undoubtedly slowed when compared with 2018, trending in single digits for most major markets, but this has largely been factored into the current stock prices. This means any upside we see from here could provide a boost.


24


June 2019 (continued)

Can you give us an overview of global equity markets in the first half of 2019? (continued)

Figure 1: Profitability forecast

EPS growth forecast PE PB RoE

2019E 2020E 2019E 2019E 2019E

China 12.40% 12.10% 11.6x 1.5x 13.10%

Asia ex Japan 4.10% 13.90% 13.2x 1.4x 10.90%

Emerging Markets 0.80% 11.60% 12.1x 1.4x 12.20%

Europe 1.20% 10.80% 13.8x 1.7x 12.20%

US 3.80% 11.70% 17.5x 3.2x 18.90%

World 2.90% 10.90% 15.3x 2.1x 14.10%

Source: Goldman Sachs, data as of May 2019. Any forecast, projection or target contained in this document is indicative only and is not guaranteed in any way. Past performance is not a reliable indicator of future returns.

What is your outlook for the rest of 2019?

Based on the most recent round of talks between the US and China, which resulted in tit-for-tat tariffs and no definite timeline for any sort of resolution, it looks like the spectre of a full-fledged trade conflict will spill over into the second half of 2019. In our opinion, the uncertainty and negative sentiment that comes with a prolonged conflict is a bigger threat to companies and markets than the potential increase in tariffs. Even in a scenario (not our base case) where the US imposes a 25% tariff on USD500bn worth of goods it imports from China, and China retaliates with similar measures, estimates suggest that the economic hit may be limited to around 50-60 basis points off their GDP growth. This is certainly not a positive development and will have a disproportionately large impact on the agricultural sector and consumers in the US, but another potential consequence is the removal of uncertainty, which will allow corporates that are currently in limbo to once again make long-term decisions and investments, such as potential supply-chain realignments.


25


June 2019 (continued) What is your outlook for the rest of 2019? (continued) In our view the US and China could reach a deal ultimately, but the timing, format and terms of any deal, let alone details of implementation, are difficult, if not impossible to predict. However, we believe trade frictions are merely a symptom of the deeper running conflict between the two nations which is being likened to a Thucydides Trap – an allusion to the Athenian historian Thucydides and the belief that when an emerging power threatens an incumbent one, it ultimately leads to conflict. Thus investors will potentially need to adjust to a longer period of geo-political uncertainty, especially as we move closer to the campaign for the 2020 US Presidential elections where US-China relations are sure to be on the agenda. What key opportunities do you see? Another shifting narrative at the global level is the intersection between conventional economics and the Modern Monetary Theory (MMT), which seems to be gaining traction with the rise of populism and the call for more fiscal stimulus in the face of slowing global economic growth. We are already experiencing this in many parts of the world where governments are choosing fiscal measures over monetary tools, and we could potentially see more if there is a dip in growth. We are buyers of risk assets, and equities in particular, in this environment. The US markets have run ahead of the others, but Japan and Europe still look undervalued and attractive. Within emerging markets, Asia stands out as others grapple with greater geo-political and economic uncertainties (new regime in Brazil, elections in Argentina and South Africa, below forecast growth in Russia). From a medium to long-term perspective we can see the fundamentals play out and the latent value emerging from these equity markets; but in the more immediate future we have to be prepared for some turbulence. What are the key considerations for global equity investors in the rest of 2019? In addition to the re-escalation of trade tensions between the US and China, there are other geo-political factors at play, especially since 2019 is a crucial election year for many emerging markets. It's always difficult to predict political outcomes and it's even harder to predict their impact on asset markets, but one lesson we can learn from history is that the effect of these political events tends to be ephemeral. The most important consideration for us as investors is political stability and policy continuity. The Asia-Pacific region in particular has witnessed a number of key elections this year but the reform agendas in major economies have not shown signs of wavering despite shifts in the political landscape. This is a positive sign for equity markets and should be a continued tailwind over the medium to long term in the region. Unpredictable as they might be, it is clear that geopolitical uncertainties have a huge impact on sentiment and can drive markets in powerful ways in the short term. The only logical action in such situations is to invest according to fundamentals; and the fundamentals as we see them are still favourable - the slowdown in economic growth has moderated, corporate profitability remains intact and inflation is still low.


26


June 2019 (continued) What are the key considerations for global equity investors in the rest of 2019? (continued) Another factor that is mostly under-priced at the moment, is inflation. Inflation remains below target in developed markets and low in emerging markets, but the trade conflict between the US and China could change that as tariffs are inflationary and so are counter measures such as onshoring manufacturing. We don’t expect inflation to come back in a big way in 2019, but we will continue to monitor it as other risk factors play out. What has driven fixed income performance so far in 2019? Looking back at developments leading into the year, most of 2018 was driven by central bank tightening, eventually contributing to a slowdown in economic growth and a market shift to risk aversion. The adverse reaction by markets highlighted an important background theme – secular stagnation forces, such as demographics, deleveraging and environmental change, continue to hold sway. With their drag on global economies, any budgetary or monetary tightening can quickly slow economic growth, revealing a lack of intrinsic strength in the recovery to be sustained at a global level. We continue to live in a world of moderate economic growth and low inflation, along with significant political uncertainty and geopolitical tensions. This environment is not particularly adverse for fixed income. At the start of 2019 our base scenario was that if a major global economic slowdown was avoided, liquidity and investors were poised to return to bond markets. The Fed policy pivot then reinforced markets. Benign fundamentals, continued global expansion, and monetary policies back to neutral or accommodative have supported all fixed income segments in 2019, with high yield, US dollar EM debt (EMD) and Asian bonds leading the way. A key driver for high-yield bond performance has been credit default rates remaining low in both Europe and the US. Asia and emerging countries have benefited from a better policy mix (tax cuts and public investment in China as an example), along with global commodity prices creeping up. A more patient Fed and tame inflation have paved the way for more neutral monetary policies across emerging markets, trending towards easing.


27


June 2019 (continued) There have been notable policy changes across key central banks this year. Looking forward, what is your outlook on rates?

Over the year-end, expectations flipped markedly. We moved from the Fed continuing to bring short-term rates closer to long-term equilibrium rates of roughly 3%, to a more patient Fed no longer prioritising the cyclical hiking path and structural balance sheet reduction. Signalling the massive change in sentiment over US monetary policy, a narrative of the Fed adopting a precautionary rate cut, started to develop as we entered the second quarter, and this was reflected in forward prices. We believe however, that the Fed will maintain a neutral policy over the remainder of the year. Whilst inflation is depressed by some temporary factors, we do not expect a pre-emptive rate cut and believe the Fed will instead react to macro data first and foremost. Keeping this in mind, along with a mostly positive outlook on growth, we maintain our short-duration bias across developed market portfolios. We acknowledge that it could take time for US and European rates to break their current range, and will pursue tactical adjustments in the near-term. In the UK, rates are also largely range-trading dependent on Brexit scenarios, but again a short-duration bias seems justified overall. We have maintained our preference for short-duration on inflation bonds and real yields, yet with a more prudent long bias on inflation break-evens, which have recovered relatively well from their trough earlier this year. In Europe, we continue to see some value in the periphery as economic growth recovers or at least holds up. Italy however, remains volatile, justifying political-induced tactical adjustments. What opportunities do you see and what are the key risks?

A lot of valuation potential has been revealed and is materialising already this year with the strong performance across fixed income assets. Investors should be expecting a more muted second half where we see little value in sovereign and investment grade credit. We continue to see some value in high yield, with a bias in Europe for relative value. We still prefer EMD thanks to the strong combination of fundamentals and improving recovery stories. Furthermore, we believe that technical, structural diversification as a tail wind will continue to support this segment. Geopolitics and trade tensions will continue to pose challenges, and we will be paying close attention to developments in Europe regarding Brexit and the Italian budget. Separately, default rates could start to creep up if any slowdown in the US economy drives notable earnings declines in the second half of the year. A keen eye should be kept on developments in the loan markets and the balance of upgrades and downgrades in the BBB segment, to which the performance in indices is very sensitive.


28


June 2019 (continued) Macro Outlook as at November 2019 Global growth continues to face headwinds from a downturn in the industrial cycle and uncertainty related to trade tensions. Nevertheless, the trend in the global Nowcast remains broadly stable at around 2%. US growth remains robust but is likely to moderate. A marked fall in some business surveys of late has increased market concerns over a sharp slowdown, but we do not expect US growth to drop materially below trend. Growth elsewhere is already below trend, although our Nowcast for China has risen gradually over recent months, consistent with improved credit dynamics. Europe remains the main underperformer. The unbalanced nature of growth leaves the global economy vulnerable to negative shocks. However, policy makers are now making a concerted effort to limit the risk of a further sharp slowdown. For the latest market outlook, please visit https://www.assetmanagement.hsbc.com.hk

https://www.assetmanagement.hsbc.com.hk/


29

Investment report for the year ended 30 June 2019 (continued) 3. Trustee’s commentary on fund performance against benchmark set by

trustee

Annualized return (in terms of %)

1 year 5 years 10 years Since

Launch MPF Conservative Fund Launch date: 01 December 2000 0.71 0.17 0.16 1.14 Benchmark MPF Prescribed Savings Rates for Cap Preservation 0.10 0.02 0.02 0.49 Deviation from the benchmark 0.61 0.15 0.14 0.65 Trustee’s commentary on performance The fund outperformed the benchmark in 1 year, 5

years, 10 years and since launch. Liquidity conditions in Hong Kong have tightened over the 1-year period, albeit having come down from the highs seen in September and December 2018 on the back of IPO funding squeezes and year end demand.

Guaranteed Fund Launch date: 01 December 2000 2.17 -0.19 0.13 0.19 Benchmark FER Adjusted - 5% Customized FTSE MPF HK + 38% Markit iboxx Asian Local Bond Index - HKD Bond + 57% 1-month HIBOR 1.26 -0.42 -0.62 0.63# Deviation from the benchmark 0.91 0.23 0.75 -0.44 Trustee’s commentary on performance The fund outperformed the benchmark in 1 year, 5

years, 10 years but underperformed the benchmark for since launch. Over the last 1 year, bond portion contributed positively to the fund while on the equity side, an overweight allocation to Health Care coupled with an underweight exposure to Consumer Services weighed on performance.


30


trustee (continued)



Launch

Core Accumulation Fund Launch date: 01 December 2000 3.97 - -

5.59 (since 01 April 2017)*

Benchmark Willis Towers Watson MPF DIS Reference Portfolio – Core Accumulation Fund 4.93 - -

6.31 (since 01 April

2017)

Deviation from the benchmark -0.96 - -

-0.72 (since 01 April

2017) Trustee’s commentary on performance The fund underperformed the Reference Portfolio

in 1 year and since launch. During the past financial period ended 30 June 2019, the fund returned positively with the main contribution coming from the fixed income side. US treasury yields fell over the period, resulting in the favorable return of global government bonds and Asian bonds. Both the equity and bond portion added value to the fund at the asset allocation level. However, at stock selection level, equity portion contributed negatively to the fund, offsetting the positive effect of the asset allocation over the period. We believe that markets are inherently inefficient over the short and medium term. Asset prices exhibit excess volatility, relative to fundamentals, often leading to market mispricing. Therefore, we believe active asset allocation based on valuation can exploit this market over reaction and mean reversion.


31


trustee (continued)



Launch Balanced Fund Launch date: 01 December 2000 0.21 2.99 5.04 3.63 Benchmark FER Adjusted - Willis Towers Watson MPF BM (Equity 60%-80%)^ 1.44 3.11 5.26 4.11 Deviation from the benchmark -1.23 -0.12 -0.22 -0.48 Trustee’s commentary on performance The fund underperformed the benchmark in 1

year, 5 years, 10 years and since launch. During the past financial period ended 30 June 2019, asset allocation was positive and stock selection was negative. Our overweight in Asian bonds added value to the portfolio. However, at stock selection level, the equity portion contributed negatively to the fund, offsetting the positive effect of the asset allocation over the period. In particular, stock selection in Hong Kong and European equities were unfavorable. We believe that markets are inherently inefficient over the short and medium term. Asset prices exhibit excess volatility, relative to fundamentals, often leading to market mispricing. Therefore, we believe active asset allocation based on valuation can exploit this market over reaction and mean reversion.


32


trustee (continued)



Launch Growth Fund Launch date: 01 December 2000 -1.31 3.34 5.78 3.69 Benchmark FER Adjusted - Willis Towers Watson MPF BM (Equity > 80%)^ 0.58 3.80 6.38 4.35 Deviation from the benchmark -1.89 -0.46 -0.60 -0.66 Trustee’s commentary on performance The fund underperformed the benchmark in 1 year,

5 years, 10 years and since launch. During the past financial period ended 30 June 2019, asset allocation was positive and stock selection was negative. Our overweight in Asian bonds added value to the portfolio. However, at stock selection level, the equity portion contributed negatively to the fund, offsetting the positive effect of the asset allocation over the period. In particular, stock selection in Hong Kong and European equities were unfavorable. We believe that markets are inherently inefficient over the short and medium term. Asset prices exhibit excess volatility, relative to fundamentals, often leading to market mispricing. Therefore, we believe active asset allocation based on valuation can exploit this market over reaction and mean reversion.


33


trustee (continued)



Launch Hang Seng Index Tracking Fund Launch date: 01 December 2000 1.33 6.97 6.88 5.75 Benchmark FER Adjusted - Hang Seng Index Total Return (Net)^ 1.52 7.05 6.97 5.76 Deviation from the benchmark -0.19 -0.08 -0.09 0.01 Trustee’s commentary on performance The fund underperformed the benchmark in 1

year, 5 year, 10 year and since launch.

During the past financial period ended 30 June 2019, the fund’s underperformance was 0.19%. The key causes are the swing pricing impact, the tracking difference of the underlying Hang Seng Index ETF, the cash drag factor and the fund price’s rounding effect. The fund price’s rounding effect contributed positively to the tracking performance of the fund, while the swing pricing impact, the tracking difference of the underlying Hang Seng Index ETF and the cash drag factor due to dividend reinvestment timing lowered the fund’s performance.


34


trustee (continued)



Launch North American Equity Fund Launch date: 01 December 2000 6.27 7.51 11.39 2.88 Benchmark FER Adjusted - FTSE MPF North America (35% HKD Hedged)^ 7.03 7.83 11.46 3.76 Deviation from the benchmark -0.76 -0.32 -0.07 -0.88 Trustee’s commentary on performance The fund underperformed the benchmark in 1

year, 5 years, 10 years and since launch. Over the last 1 year, Financials and Industrials are positive sector contributors to overall fund performance but was offset by negative selection effect in Technology and Consumer Services. Markets which are driven by extreme events or bubble-like behaviour will challenge many investment strategies e.g. the tech bubble of 2000s or the global financial crisis. Despite the strategy’s diversity, we may expect to underperform when markets trade without referencing to company fundamentals. Our observation has been that such periods are generally short lived.

European Equity Fund Launch date: 01 December 2000 -2.24 0.48 4.79 1.47 Benchmark FER Adjusted - FTSE MPF Europe (35% HKD Hedged)^ 1.93 2.20 6.47 2.37 Deviation from the benchmark -4.17 -1.72 -1.68 -0.90 Trustee’s commentary on performance The fund underperformed the benchmark in 1

year, 5 years, 10 years and since launch. Fund underperformed over the period as impacted by our Value tilt. The market was driven by a synchronized risk off environment, triggering a sharp market rotation towards stable growth and defensive stocks at the expense of Value stocks, which have been under significant pressure. We are going to diversify investment strategy of the fund in the fourth quarter of the year. We expect the fund will be benefited from different sources of alpha going forward.


35


trustee (continued)



Launch Asia Pacific Equity Fund Launch date: 01 December 2000 -2.53 1.53 5.25 6.02 Benchmark FER Adjusted - FTSE MPF Asia Pacific ex Japan (35% HKD Hedged)^ 0.08 3.19 6.47 6.47 Deviation from the benchmark -2.61 -1.66 -1.22 -0.45 Trustee’s commentary on performance The fund underperformed the benchmark in 1 year,

5 years, 10 years and since launch. Over the last 1 year, high momentum stocks were in favour, which was a headwind for performance given our valuation discipline. Stock selection in India, Basic Materials and Telecommunications sectors were key detractors. In the longer term, we are more constructive on our positioning as the recent volatility has given rise to significant mispricing opportunities for us to exploit.

Hong Kong and Chinese Equity Fund Launch date: 01 December 2000 -3.45 5.07 5.00 4.91 Benchmark FER Adjusted - FTSE MPF Hong Kong^ -1.14 5.62 5.83 6.12 Deviation from the benchmark -2.31 -0.55 -0.83 -1.21 Trustee’s commentary on performance The fund underperformed the benchmark in 1

year, 5 years, 10 years and since launch. The fund overweighted A-share liquor and Chinese insurance stocks which contributed to the overall performance, but was largely offset by the negative stock selection effect in consumer services, in particular the Macau gaming space, as the VIP segment in Macau has been weak over the past year. We diversified the investment strategy of the fund in April of 2018 in order to enhance fund performance.


36


trustee (continued)



Launch Global Bond Fund Launch date: 08 October 2009 4.97 2.67 - 2.20 Benchmark FER Adjusted - FTSE MPF WGBI (35% HKD Hedged)^ 4.87 2.85 - 2.30 Deviation from the benchmark 0.10 -0.18 - -0.10 Trustee’s commentary on performance The fund outperformed the benchmark in 1 year

but underperformed the benchmark in 5 years and since launch. During the past financial period ended 30 June 2019, selection in Asian credit bonds contributed to relative performance, led mainly by banks and Energy sectors. The overweight in Italy and Spain also lifted returns. Conversely, most non-USD/HKD currency exposure weighed on results as USD strengthened amid heightened US-China trade tensions.


37


trustee (continued)



Launch

Age 65 Plus Fund Launch date: 08 October 2009 5.46 - -

3.89 (since 01 April 2017)*

Benchmark Willis Towers Watson MPF DIS Reference Portfolio - Age 65 Plus Fund 5.57 - -

3.97 (since 01 April

2017)

Deviation from the benchmark -0.11 - -

-0.08 (since 01 April

2017) Trustee’s commentary on performance The fund underperformed the Reference Portfolio

in 1 year and since launch. During the past financial period ended 30 June 2019, the fund returned positively with the main contribution coming from global government bonds. US treasury yields fell over the period, resulting in the favorable return. Both the equity and bond portion added value to the fund at the asset allocation level. However, at stock selection level, equity portion contributed negatively to the fund, offsetting the positive effect of the asset allocation over the period. We believe that markets are inherently inefficient over the short and medium term. Asset prices exhibit excess volatility, relative to fundamentals, often leading to market mispricing. Therefore, we believe active asset allocation based on valuation can exploit this market over reaction and mean reversion.


38


trustee (continued)



Launch Stable Fund Launch date: 08 October 2009 2.19 1.44 - 2.00 Benchmark FER Adjusted - Willis Towers Watson MPF BM (Equity 20%-40%)^ 2.74 1.48 - 2.16 Deviation from the benchmark -0.55 -0.04 - -0.16 Trustee’s commentary on performance The fund underperformed the benchmark in 1

year, 5 years and since launch. During the past financial period ended 30 June 2019, both asset allocation and stock selection were negative. Our overweight in Japanese equities detracted in value. In terms of stock selection, bonds added value to the portfolio. However, stock selection in Hong Kong and European equities were particularly unfavorable, resulting in the overall negative stock selection effect. We believe that markets are inherently inefficient over the short and medium term. Asset prices exhibit excess volatility, relative to fundamentals, often leading to market mispricing. Therefore, we believe active asset allocation based on valuation can exploit this market over reaction and mean reversion.


39


trustee (continued)



Launch Chinese Equity Fund Launch date: 08 October 2009 -4.91 6.59 - 4.18 Benchmark FER Adjusted - FTSE MPF China^ -2.98 5.48 - 3.25 Deviation from the benchmark -1.93 1.11 - 0.93 Trustee’s commentary on performance The fund outperformed the benchmark in 5 years

and since launch but underperformed the benchmark in 1 year. Financials and consumer goods are positive sector contributors to overall fund performance but was offset by negative selection effect in Consumer Services, in particular the Telecommunications space and Industrials. We remain constructive and stick to our selective pro-value tilt and confirm our relative positioning.

Data as at 30 June 2019 ^ Benchmark performance is displayed on a FER adjusted basis. Refer to Appendix A for

further details on the rationale of FER adjusted benchmark performance. * Cumulative performance for the Core Accumulation Fund and Age 65 Plus Fund since

they launch as a constituent fund of DIS on 1 April 2017.

# The ‘38% Markit iboxx Asian Local Bond Index - HKD Bond + 57% 1-month HIBOR’ is used as the benchmark of bond and cash portion of the Guaranteed Fund from 1 July 2006 onward. The Markit iboxx Asian Local Bond Index data prior to 1 July 2006 is not available, for reporting purpose of the since launch return, the ‘Markit iboxx Asian USD Bond Index’ was used as a proxy of the benchmark prior to and up to 30 June 2006.


40

Investment report for the year ended 30 June 2019 (continued) 4. Trustee’s performance assessment framework and trustee’s action, if any,

to increase efficiency of the scheme and investment return (value) for members

The Trustee works in collaboration with the Sponsor in the on-going monitoring of investment of funds with the setup of Investment Performance Committee with participation from the Sponsor, Trustee and Investment Manager to review performance on a regular basis: • Benchmark and peer group comparison would be conducted with comprehensive

analysis to be provided to evaluate the factors contributing to out/underperformance

• Proposed actions and monitoring of those actions would be covered by the Committee to tackle the underperformance issues and for Investment Manager to explore alternative sources to improve fund performance including fund restructuring, adoption of new investment approach and etc.

The Trustee has also an Investment Committee represented by members of the Board of Directors of the Trustee to review the fund managers’ fund performance on a regular basis. The criteria for assessment of the overall performance and capabilities of fund managers are: • Compliance with Investment Objectives, tracking error from benchmark

performance and benchmark asset allocation

• Breaches in investment restrictions and other regulations

• Quantitative assessment - Fund performance relative to benchmark, peer comparison and risk level

• Qualitative assessment - Fund manager snapshot in various factors based on the investment

Appendix A – FER-adjusted benchmark performance calculation methodology The FER-adjusted benchmark performance is an annualized figure of the benchmark performance deducted by the Fund Expense Ratio (FER) in which the relevant Constituent Fund (CF) incurred in the captioned period. For the years where FER data is not available (i.e. financial period ended 30 June 2005 and before), the earliest available FER data would be used as proxies for those years (earliest available FER for CFs in Scheme is as of financial period ended 30 June 2006). Same proxy applies to the first year of fund launch without FER, but on a pro rata basis from the relevant CF’s launch date to the first financial year end (e.g. 1 Dec 2000 – 30 Jun 2001).


41

Investment report for the year ended 30 June 2019 (continued) 5. Distribution of constituent funds


As at 30 June 2019, 2018 and 2017, Net assets attributable to members of the Scheme’s constituent funds are as follows:

Net asset value

Fund 2019 2018 2017 $’000 $’000 $’000

MPF Conservative Fund 9,406,599 8,397,010 7,156,147 Guaranteed Fund 3,597,184 3,427,762 3,238,049 Core Accumulation Fund 2,921,198 2,417,860 1,897,580 Balanced Fund 6,087,989 6,228,175 5,976,644 Growth Fund 8,267,914 8,542,656 8,238,225 Hang Seng Index Tracking Fund 13,207,060 13,149,873 12,132,436 North American Equity Fund 1,799,038 1,374,512 1,259,433 European Equity Fund 826,390 831,008 841,027 Asia Pacific Equity Fund 3,305,138 3,325,835 3,251,584 Hong Kong and Chinese Equity Fund 3,969,582 4,038,369 3,688,669 Global Bond Fund 1,346,307 1,094,825 684,854 Age 65 Plus Fund 722,339 521,455 272,790 Stable Fund 908,313 822,043 395,895 Chinese Equity Fund 2,478,186 2,609,000 2,096,321 Scheme Level Adjustments 18,796 17,239 15,122 58,862,033 56,797,622 51,144,776

% of Net assets attributable to constituent funds of the

Scheme Fund 2019 2018 2017 % % %

MPF Conservative Fund 15.98 14.78 13.99 Guaranteed Fund 6.11 6.03 6.33 Core Accumulation Fund 4.96 4.26 3.71 Balanced Fund 10.34 10.97 11.69 Growth Fund 14.05 15.04 16.11 Hang Seng Index Tracking Fund 22.44 23.15 23.72 North American Equity Fund 3.06 2.42 2.46 European Equity Fund 1.40 1.46 1.65 Asia Pacific Equity Fund 5.62 5.86 6.36 Hong Kong and Chinese Equity Fund 6.74 7.11 7.21 Global Bond Fund 2.29 1.93 1.34 Age 65 Plus Fund 1.23 0.92 0.53 Stable Fund 1.54 1.45 0.77 Chinese Equity Fund 4.21 4.59 4.10 Scheme Level Adjustments 0.03 0.03 0.03

100.00 100.00 100.00


42

Investment report for the year ended 30 June 2019 (continued) 6. Performance

Fund Period Cumulative Return

(%)+/(-)

MPF Conservative Fund 1 July 2018 to 30 June 2019 0.71% Guaranteed Fund 1 July 2018 to 30 June 2019 2.17% Core Accumulation Fund 1 July 2018 to 30 June 2019 4.03% Balanced Fund 1 July 2018 to 30 June 2019 0.15% Growth Fund 1 July 2018 to 30 June 2019 (1.26)% Hang Seng Index Tracking Fund 1 July 2018 to 30 June 2019 1.29% North American Equity Fund 1 July 2018 to 30 June 2019 6.27% European Equity Fund 1 July 2018 to 30 June 2019 (2.31)% Asia Pacific Equity Fund 1 July 2018 to 30 June 2019 (2.53)% Hong Kong and Chinese Equity Fund 1 July 2018 to 30 June 2019 (3.45)% Global Bond Fund 1 July 2018 to 30 June 2019 5.05% Age 65 Plus Fund 1 July 2018 to 30 June 2019 5.38% Stable Fund 1 July 2018 to 30 June 2019 2.19% Chinese Equity Fund 1 July 2018 to 30 June 2019 (4.91)% Cumulative return represents the percentage change in unit price (net asset value per unit) for the year.


43

Investment report for the year ended 30 June 2019 (continued) 7. Financial summary


Fund Period Income

Net (deficit)/income excluding capital

appreciation or depreciation

Net movement in unrealised gain/(loss) on

investments Net gain/(loss) on sale

of investments

Value of the Scheme assets derived from

investment Net asset value $’000 $’000 $’000 $’000 $’000 $’000

MPF Conservative Fund 2019 2018 2017

70 - -

(83,077) (58,516) (30,274)

89,608 30,219 19,832

56,867 28,840 10,901

9,412,910 8,404,743 7,157,344

9,406,599 8,397,010 7,156,147

Guaranteed Fund 2019 2018 2017

- - -

(12) (13) (27)

89,285 (41,281) (11,719)

(12,997) (9,817) (6,397)

3,597,187 3,427,765 3,238,049

3,597,184 3,427,762 3,238,049

Core Accumulation Fund 2019 2018 2017

- - -

(13,414) (11,731) (9,039)

73,732 39,102 94,281

51,136 85,394 29,794

2,922,413 2,418,934 1,898,351

2,921,198 2,417,860 1,897,580

Balanced Fund 2019 2018 2017

40 - -

(41,193) (49,221) (49,252)

(85,151) 192,561 786,006

133,927 223,292

80,866

6,091,395 6,231,932 5,981,231

6,087,989 6,228,175 5,976,644

Growth Fund 2019 2018 2017

56 - -

(55,945) (69,898) (70,068)

(270,987) 293,385

1,355,723

215,218 398,486 131,984

8,272,523 8,547,830 8,244,887

8,267,914 8,542,656 8,238,225

Hang Seng Index Tracking Fund 2019 2018 2017

457,689 411,578 320,786

371,708 317,427 242,343

(647,164) 289,938

2,070,323

443,945 1,244,344

267,858

13,012,888 13,000,119 11,948,568

13,207,060 13,149,873 12,132,436

North American Equity Fund 2019 2018 2017

8 - -

(11,273) (8,965) (6,828)

(1,017) 22,696

104,788

94,397 129,721

57,399

1,800,027 1,375,334 1,260,144

1,799,038 1,374,512 1,259,433

European Equity Fund 2019 2018 2017

6 - -

(5,481) (5,815) (4,377)

(21,191) (32,245) 133,944

8,075 49,659 11,530

826,850 831,511 841,485

826,390 831,008 841,027

Asia Pacific Equity Fund 2019 2018 2017

22 - -

(21,926) (23,100) (16,820)

(132,504) (45,039) 627,646

70,667 221,738

47,892

3,306,960 3,327,869 3,253,329

3,305,138 3,325,835 3,251,584

Hong Kong and Chinese Equity Fund 2019 2018 2017

24 - -

(26,256) (27,962) (20,660)

(242,197) 129,852 683,223

130,537 364,876

73,669

3,971,769 4,040,844 3,690,731

3,969,582 4,038,369 3,688,669

Global Bond Fund 2019 2018 2017

2 - -

(6,456) (5,066) (3,352)

60,518 (11,700) (17,860)

6,101 14,958 4,871

1,346,917 1,095,356

685,173

1,346,307 1,094,825

684,854 Age 65 Plus Fund 2019

2018 2017

- - -

(3,076) (2,110) (1,033)

31,880 1,748 2,114

5,448 5,824 1,859

722,634 521,681 272,900

722,339 521,455 272,790

Stable Fund 2019 2018 2017

- - 5

(5,891) (4,904) (2,877)

24,278 (11,004)

15,335

1,952 20,790 3,550

908,821 822,528 396,204

908,313 822,043 395,895

Chinese Equity Fund 2019 2018 2017

12 -

125

(16,430) (17,470) (11,789)

(159,190) 57,166

353,568

46,668 332,771

37,195

2,479,543 2,610,614 2,097,494

2,478,186 2,609,000 2,096,321


(For management purposes only)

44

Investment report for the year ended 30 June 2019 (continued) 8. Performance table


MPF Conservative Fund(3) 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Total net asset value ($’000) 9,406,599 8,397,010 7,156,147 2,923,893 2,484,060 2,302,626 1,913,930 1,731,805 1,386,098 1,215,492

Net asset value per unit 12.70 12.61 12.61 12.61 12.61 12.56 12.50 12.46 12.42 12.38 Price record: Highest issue price 12.70 12.62 12.62 12.62 12.61 12.56 12.51 12.46 12.43 12.39 Lowest redemption price 12.61 12.61 12.61 12.60 12.56 12.50 12.46 12.42 12.39 12.37 Net annualised investment return⑴ 0.7% 0.0% 0.0% 0.0% 0.4% 0.5% 0.3% 0.3% 0.3% 0.1% Guaranteed Fund(3)

2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Total net asset value ($’000) 3,597,184 3,427,762 3,238,049 1,150,060 1,041,126 963,045 854,950 801,562 666,392 576,881 Net asset value per unit 10.35 10.13 10.28 10.34 10.47 10.45 10.44 10.55 10.60 10.55 Price record: Highest issue price 10.35 10.35 10.38 10.46 10.55 10.52 10.69 10.67 10.77 10.55 Lowest redemption price 10.02 10.12 10.11 10.16 10.40 10.39 10.40 10.44 10.46 10.22

Net annualised investment return⑴ 2.2% (1.5)% (0.6)% (1.2)% 0.2% 0.1% (1.0)% (0.5)% 0.5% 3.2%



45

Investment report for the year ended 30 June 2019 (continued) 8. Performance table (continued)

(Expressed in Hong Kong dollars) Core Accumulation Fund 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Total net asset value ($’000) 2,921,198 2,417,860 1,897,580 1,359,865 1,205,920 1,072,854 829,407 676,683 602,031 448,393 Net asset value per unit 18.60 17.89 16.91 15.71 16.31 16.42 14.82 14.13 15.15 13.16 Price record: Highest issue price 18.61 18.81 17.03 16.31 16.96 16.42 15.75 15.31 15.45 14.22 Lowest redemption price 16.51 16.87 15.65 14.57 15.77 14.75 13.88 13.25 13.17 12.22 Net annualised investment return⑴ 4.0% 5.8% 7.6% (3.7)% (0.7)% 10.8% 4.9% (6.7)% 15.1% 6.3%

Balanced Fund(3) 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Total net asset value ($’000) 6,087,989 6,228,175 5,976,644 2,048,201 2,015,669 1,847,377 1,509,515 1,276,157 1,216,521 888,621 Net asset value per unit 19.40 19.37 18.26 15.77 17.08 16.75 14.85 13.69 15.18 12.83 Price record: Highest issue price 19.67 21.12 18.33 17.11 17.86 16.75 15.88 15.35 15.60 14.24 Lowest redemption price 17.50 18.16 15.64 14.39 15.92 14.75 13.34 12.48 12.79 11.58 Net annualised investment return⑴ 0.2% 6.1% 15.8% (7.7)% 2.0% 12.8% 8.5% (9.8)% 18.3% 8.1%



46


(Expressed in Hong Kong dollars) Growth Fund(3) 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Total net asset value ($’000) 8,267,914 8,542,656 8,238,225 3,049,432 3,066,558 2,729,926 2,129,239 1,696,568 1,644,247 1,146,768 Net asset value per unit 19.60 19.86 18.48 15.29 17.15 16.62 14.46 12.92 14.88 12.23 Price record: Highest issue price 20.21 22.01 18.56 17.20 18.06 16.64 15.65 15.10 15.42 13.97 Lowest redemption price 17.40 18.38 15.12 13.71 15.56 14.34 12.50 11.51 12.14 10.78 Net annualised investment return⑴ (1.3)% 7.5% 20.9% (10.8)% 3.2% 14.9% 11.9% (13.2)% 21.7% 9.5%

Hang Seng Index Tracking Fund(3) 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Total net asset value ($’000) 13,207,060 13,149,873 12,132,436 4,543,508 4,762,858 3,573,508 2,890,218 2,262,870 2,126,452 1,503,461 Net asset value per unit 28.26 27.90 24.21 19.16 23.47 20.17 17.71 16.17 18.08 16.10 Price record: Highest issue price 29.46 31.44 24.36 23.46 25.05 20.54 19.81 18.43 19.95 18.13 Lowest redemption price 23.95 23.92 18.90 16.53 19.90 17.17 15.71 13.22 15.88 13.64 Net annualised investment return⑴ 1.3% 15.2% 26.4% (18.4)% 16.4% 13.9% 9.5% (10.6)% 12.3% 10.9%



47



North America Equity Fund 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Total net asset value ($’000) 1,799,038 1,374,512 1,259,433 869,919 708,453 631,163 369,327 278,447 245,502 165,534 Net asset value per unit 16.95 15.95 14.27 12.31 12.18 11.80 9.68 8.32 8.33 6.48 Price record: Highest issue price 17.11 16.84 14.40 12.53 12.59 11.80 10.06 8.77 8.57 7.69 Lowest redemption price 13.71 14.22 12.27 10.81 11.12 9.72 8.18 6.86 6.43 5.50 Net annualised investment return⑴ 6.3% 11.8% 15.9% 1.1% 3.2% 21.9% 16.3% (0.1)% 28.5% 12.5% European Equity Fund 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Total net asset value ($’000) 826,390 831,008 841,027 632,197 647,954 657,841 365,120 279,796 326,442 236,020 Net asset value per unit 13.10 13.41 13.23 10.86 12.30 12.80 10.38 8.63 11.10 8.71 Price record: Highest issue price 13.90 14.99 13.55 12.91 13.10 13.07 11.17 11.22 11.63 10.47 Lowest redemption price 11.27 13.25 10.53 10.12 11.06 10.32 8.19 7.93 8.69 7.90 Net annualised investment return⑴ (2.3)% 1.4% 21.8% (11.7)% (3.9)% 23.6% 20.0% (22.3)% 27.4% 6.1%



48

Investment report for the year ended 30 June 2019 (continued)

8. Performance table (continued) (Expressed in Hong Kong dollars)

Asia Pacific Equity Fund 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Total net asset value ($’000) 3,305,138 3,325,835 3,251,584 2,278,874 2,315,831 2,286,717 1,815,608 1,486,069 1,476,676 954,808 Net asset value per unit 29.65 30.42 29.10 22.89 25.86 27.47 24.07 22.50 26.59 20.75 Price record: Highest issue price 31.22 34.48 29.31 26.02 28.53 27.48 27.11 27.26 28.04 23.98 Lowest redemption price 26.09 28.85 22.63 19.37 24.68 23.52 22.01 19.72 20.42 16.93 Net annualised investment return⑴ (2.5)% 4.5% 27.1% (11.5)% (5.9)% 14.1% 7.0% (15.4)% 28.1% 16.8%

Hong Kong and Chinese Equity Fund 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Total net asset value ($’000) 3,969,582 4,038,369 3,688,669 2,785,169 3,189,327 2,358,382 2,004,800 1,597,690 1,701,003 1,200,268 Net asset value per unit 24.36 25.23 22.43 17.87 22.65 19.02 17.57 15.93 19.66 16.98 Price record: Highest issue price 25.91 28.82 22.56 22.58 24.37 20.06 19.95 20.08 21.64 18.97 Lowest redemption price 21.18 22.19 17.65 15.50 18.93 17.00 15.40 13.34 16.65 14.23 Net annualised investment return⑴ (3.4)% 12.5% 25.5% (21.1)% 19.1% 8.3% 10.3% (19.0)% 15.8% 13.7%



49



Global Bond Fund

Period from 12 October 2009

(date of commencement)

Year ended 30 June to 30 June 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010(2) Total net asset value ($’000) 1,346,307 1,094,825 684,854 567,710 279,429 205,563 149,570 101,874 32,048 8,926 Net asset value per unit 12.48 11.88 11.80 12.05 11.12 10.93 10.30 10.59 10.48 9.82 Price record: Highest issue price 12.48 12.21 12.19 12.05 11.35 10.93 10.88 10.89 10.55 10.26 Lowest redemption price 11.62 11.74 11.17 10.98 10.92 10.24 10.29 10.40 9.87 9.64 Net annualised investment return(1) 5.1% 0.7% (2.1)% 8.4% 1.7% 6.1% (2.7)% 1.0% 6.7% (2.2)%

Age 65 Plus Fund(3)



Year ended 30 June to 30 June 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010(2) Total net asset value ($’000) 722,339 521,455 272,790 138,959 99,230 76,736 49,482 29,270 14,207 4,426 Net asset value per unit 12.15 11.53 11.29 11.13 10.89 10.91 10.40 10.18 10.25 9.88 Price record: Highest issue price 12.16 11.73 11.38 11.15 11.28 10.91 10.70 10.28 10.32 10.09 Lowest redemption price 11.30 11.25 10.91 10.68 10.75 10.36 10.21 9.89 9.90 9.82 Net annualised investment return(1) 5.4% 2.1% 1.4% 2.2% (0.2)% 4.9% 2.2% (0.7)% 3.7% (1.2)%



50



Stable Fund



Year ended 30 June to 30 June 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010(2) Total net asset value ($’000) 908,313 822,043 395,895 249,224 180,227 143,737 93,314 60,169 25,981 6,213 Net asset value per unit 12.13 11.87 11.53 10.98 10.98 11.30 10.42 10.29 10.72 9.63 Price record: Highest issue price 12.13 12.49 11.58 11.07 11.38 11.30 10.98 10.82 10.83 10.21 Lowest redemption price 11.31 11.47 10.70 10.31 10.85 10.38 10.18 9.94 9.65 9.49 Net annualised investment return(1) 2.2% 2.9% 5.0% 0.0% (2.8)% 8.4% 1.3% (4.0)% 11.3% (3.7)%



51



Chinese Equity Fund



Year ended 30 June to 30 June 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010(2) Total net asset value ($’000) 2,478,186 2,609,000 2,096,321 1,647,942 1,999,307 1,022,302 792,864 545,233 479,146 168,262 Net asset value per unit 14.90 15.67 13.26 10.82 14.22 10.84 9.78 9.18 11.53 9.94 Price record: Highest issue price 16.08 18.43 13.38 14.07 15.58 11.51 11.38 11.78 12.36 11.00 Lowest redemption price 13.05 13.16 10.65 9.29 10.98 9.32 8.73 7.75 9.72 9.06 Net annualised investment return(1) (4.9)% 18.2% 22.6% (23.9)% 31.2% 10.8% 6.5% (20.4)% 16.0% (0.6)%

(1) The net annualised investment return represents the percentage change in unit price (net asset value per unit) for the year. Percentage change = (Unit price at the end of the year - Unit price at the beginning of the year)/Unit price at the beginning of the year. (2) The percentage represents the percentage change in unit price (net asset value per unit) for the period specified. Percentage change = (Unit price at the end of the period - Unit price at the beginning of the period)/Unit price at the beginning of the period. (3) With effect from 1 July 2016, Hang Seng Mandatory Provident Fund - SuperTrust was merged with the Scheme and all members and their accrued benefits under Hang Seng Mandatory Provident Fund - SuperTrust were transferred to the Scheme on 1 July 2016.


(For management purpose only)

52

Investment report for the year ended 30 June 2019 (continued) 9. Investment portfolio as at 30 June 2019


Investments (Trade date basis) Holdings Cost

Market value

% of net asset value

$’000 $’000 Collective investment schemes -

Hong Kong dollars MPF Conservative Fund HSBC MPF “A” – MPF

Conservative Fund 716,731,737 9,257,339 9,412,910 100.07 Guaranteed Fund MPF Guaranteed Fund 347,890,387 3,570,943 3,597,187 100.00 Core Accumulation Fund HSBC MPF “A” – Core

Accumulation Fund 131,048,729 2,607,000 2,922,413 100.04 Balanced Fund HSBC MPF “A” – Balanced Fund 261,001,975 4,979,013 6,091,395 100.06 Growth Fund HSBC MPF “A” – Growth Fund 349,706,740 6,620,076 8,272,523 100.06 Hang Seng Index Tracking Fund Hang Seng Index ETF 447,966,467 11,639,688 13,012,888 98.53 North American Equity Fund HSBC MPF “A” – American Equity

Fund 88,863,437 1,575,449 1,800,027 100.05



53

Investment report for the year ended 30 June 2019 (continued) 9. Investment portfolio as at 30 June 2019 (continued)


Investments (Trade date basis) Holdings Cost

Market value

% of net asset value

$’000 $’000 Collective investment schemes -

Hong Kong dollars (continued) European Equity Fund HSBC MPF “A” – European Equity

Fund 52,869,990 772,327 826,850 100.06 Asia Pacific Equity Fund HSBC MPF “A” – Asia Pacific

Equity Fund 93,883,723 2,875,246 3,306,960 100.06 Hong Kong and Chinese Equity

Fund HSBC MPF “A” – Hong Kong and

Chinese Equity Fund 136,240,645 3,419,302 3,971,769 100.06 Global Bond Fund HSBC MPF “A” – Global Bond Fund 99,489,394 1,282,205 1,346,917 100.05 Age 65 Plus Fund HSBC MPF “A” – Age 65 Plus Fund 54,891,804 681,516 722,634 100.04 Stable Fund HSBC MPF “A” – Stable Fund 68,189,366 873,590 908,821 100.06 Chinese Equity Fund HSBC MPF “A” – Chinese Equity

Fund 152,666,186 2,348,012 2,479,543 100.05



54

Investment report for the year ended 30 June 2019 (continued) 10. Statement of movements in portfolio holdings

% of net assets

As at

30 June 2019 As at

30 June 2018 MPF Conservative Fund Collective investment scheme 100.07 100.09 Total investments 100.07 100.09 Other net liabilities (0.07) (0.09) Total net assets 100.00 100.00 Guaranteed Fund Collective investment scheme 100.00 100.00 Total investments 100.00 100.00 Total net assets 100.00 100.00 Core Accumulation Fund Collective investment scheme 100.04 100.04 Total investments 100.04 100.04 Other net liabilities (0.04) (0.04) Total net assets 100.00 100.00 Balanced Fund Collective investment scheme 100.06 100.06 Total investments 100.06 100.06 Other net liabilities (0.06) (0.06) Total net assets 100.00 100.00



55

Investment report for the year ended 30 June 2019 (continued) 10. Statement of movements in portfolio holdings (continued)

% of net assets

As at

30 June 2019 As at

30 June 2018 Growth Fund Collective investment scheme 100.06 100.06 Total investments 100.06 100.06 Other net liabilities (0.06) (0.06) Total net assets 100.00 100.00 Hang Seng Index Tracking Fund Collective investment scheme 98.53 98.86 Total investments 98.53 98.86 Other net assets 1.47 1.14 Total net assets 100.00 100.00 North American Equity Fund Collective investment scheme 100.05 100.06 Total investments 100.05 100.06 Other net liabilities (0.05) (0.06) Total net assets 100.00 100.00 European Equity Fund Collective investment scheme 100.06 100.06 Total investments 100.06 100.06 Other net liabilities (0.06) (0.06) Total net assets 100.00 100.00



56


% of net assets

As at

30 June 2019 As at

30 June 2018 Asia Pacific Equity Fund Collective investment scheme 100.06 100.06 Total investments 100.06 100.06 Other net liabilities (0.06) (0.06) Total net assets 100.00 100.00 Hong Kong and Chinese Equity Fund Collective investment scheme 100.06 100.06 Total investments 100.06 100.06 Other net liabilities (0.06) (0.06) Total net assets 100.00 100.00 Global Bond Fund Collective investment scheme 100.05 100.05 Total investments 100.05 100.05 Other net liabilities (0.05) (0.05) Total net assets 100.00 100.00 Age 65 Plus Fund Collective investment scheme 100.04 100.04 Total investments 100.04 100.04 Other net liabilities (0.04) (0.04) Total net assets 100.00 100.00



57


% of net assets

As at

30 June 2019 As at

30 June 2018 Stable Fund Collective investment scheme 100.06 100.06 Total investments 100.06 100.06 Other net liabilities (0.06) (0.06) Total net assets 100.00 100.00 Chinese Equity Fund Collective investment scheme 100.05 100.06 Total investments 100.05 100.06 Other net liabilities (0.05) (0.06) Total net assets 100.00 100.00

58

Independent auditor’s report to the Trustee of Hang Seng Mandatory Provident Fund – SuperTrust Plus (“the Scheme”) Report on the Audit of the Financial Statements Opinion We have audited the financial statements of the Scheme set out on pages 62 to 101, which comprise the statement of net assets available for benefits of the Scheme and the statement of assets and liabilities of each of its constituent funds as at 30 June 2019, and the statement of changes in net assets available for benefits and the cash flow statement of the Scheme, and the statement of comprehensive income and the statement of changes in net assets attributable to members of each of its constituent funds for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the financial statements give a true and fair view of the financial position of the Scheme as at 30 June 2019, and of its financial transactions and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). Basis for Opinion We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) and with reference to Practice Note 860.1 (Revised), The Audit of Retirement Schemes issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Scheme in accordance with the HKICPA’s Code of Ethics for Professional Accountants (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

59

Independent auditor’s report to the Trustee of Hang Seng Mandatory Provident Fund – SuperTrust Plus (“the Scheme”) (continued) Report on the Audit of the Financial Statements (continued)

Information Other than the Financial Statements and Auditor’s Report Thereon The Trustee of the Scheme is responsible for the other information. The other information comprises all the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of Trustee and Those Charged with Governance for the Financial Statements The Trustee of the Scheme is responsible for the preparation of the financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA and for such internal control as the Trustee of the Scheme determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Trustee of the Scheme is responsible for assessing the Scheme’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Trustee of the Scheme either intends to liquidate the Scheme or to cease operations, or has no realistic alternative but to do so. In addition, the Trustee of the Scheme is required to ensure that the financial statements have been properly prepared in accordance with sections 80, 81, 83 and 84 of the Mandatory Provident Fund Schemes (General) Regulation (“the General Regulation”). Those charged with governance are responsible for overseeing the Scheme’s financial reporting process.

60

Independent auditor’s report to the Trustee of Hang Seng Mandatory Provident Fund – SuperTrust Plus (“the Scheme”) (continued) Report on the Audit of the Financial Statements (continued) Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. This report is made solely to you, in accordance with section 102 of the General Regulation, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. In addition, we are required to assess whether the financial statements of the Scheme have been properly prepared, in all material respects, in accordance with sections 80, 81, 83 and 84 of the General Regulation. As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: ‑ Identify and assess the risks of material misstatement of the financial statements, whether

due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

‑ Obtain an understanding of internal control relevant to the audit in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Scheme’s internal control.

‑ Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by the Trustee of the Scheme.

Hang Seng Mandatory Provident Fund – SuperTrust Plus Financial statements for the year ended 30 June 2019

62

Statement of changes in net assets available for benefits – Scheme for the year ended 30 June 2019 (Expressed in Hong Kong dollars)

Note 2019 2018 $’000 $’000

Income Distribution income 457,607 411,578 Other income 343 26

457,950 411,604

Expenses Administrator’s fees 4(a) (271,296) (286,347) Fund administration fees 4(b) (25,262) (14,691) Management fees 4(c) (16,329) (11,171) Sponsor fees 4(d) (29,270) (17,306) Investment agency fees 4(e) (12,508) (27,183) Trustee’s fees 4(f) (14,622) (9,957) Valuation fees 4(g) - (102) Legal and professional fees (117) - Auditor’s remuneration (338) (517) Others (6,987) (11,850) (376,729) (379,124)

Net income before net investment gains 81,221 32,480 Net investment gains Realised gains on disposal of investments 1,251,941 3,110,876 Movement of unrealised gains or losses on

investments (1,190,100) 915,398 61,841 4,026,274

Profits and total comprehensive income for the

year 143,062 4,058,754 Contributions received and receivable 5 6,230,949 6,177,864 Benefits paid and payable 6 (4,316,681) (4,588,129) Other capital receipts 8 7,081 4,357 Net increase in net assets available for benefits

attributable to members 2,064,411 5,652,846 Net assets available for benefits

attributable to members at the beginning of the year 56,797,622 51,144,776

Net assets available for benefits

attributable to members at the end of the year 58,862,033 56,797,622 The notes on pages 74 to 101 form part of these financial statements.


64

Cash flow statement – Scheme for the year ended 30 June 2019 (Expressed in Hong Kong dollars) Note 2019 2018 $’000 $’000 Operating activities

Net expenses before distribution income and net investment gains (376,386) (379,098)

Decrease in other receivables 8,217 114 (Decrease)/increase in accrued expenses and other

payables (3,229) 6,778

Net cash used in operating activities (371,398) (372,206)

Investing activities

Distributions received 413,907 445,239 Payments for purchase of investments (19,957,781) (22,845,123) Proceeds from disposal of investments 18,013,734 21,196,973

Net cash used in investing activities (1,530,140) (1,202,911)

Financing activities

Contributions received 6,226,602 6,176,928 Benefits paid (4,333,570) (4,606,939) Other capital receipts 7,081 4,357

Net cash generated from financing activities 1,900,113 1,574,346

Net decrease in cash and cash equivalents (1,425) (771)

Cash and cash equivalents at the beginning of the year 41,789 42,560

Cash and cash equivalents at the end of the year 4(h) 40,364 41,789 The notes on pages 74 to 101 form part of these financial statements.


65

Statement of comprehensive income – Constituent funds for the year ended 30 June 2019 (Expressed in Hong Kong dollars) MPF Conservative Fund Guaranteed Fund Core Accumulation Fund Balanced Fund Growth Fund Note 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Income Distribution income - - - - - - - - - - Other income 70 - - - - - 40 - 56 - 70 - - - - - 40 - 56 - Expenses Administrator’s fees 4(a) (51,312) (39,820) - - (10,816) (9,953) (32,455) (42,665) (44,078) (60,838) Fund administration fees 4(b) (5,797) (2,476) - - (580) (302) (3,275) (2,072) (4,448) (2,865) Management fees 4(c) (16,329) (11,171) - - - - - - - - Sponsor fees 4(d) (4,831) (2,064) - - (1,319) (687) (3,573) (2,260) (4,853) (3,125) Investment agency fees 4(e) - - - - - - - - - - Trustee’s fees 4(f) (3,962) (1,916) - - (475) (247) (1,489) (1,150) (2,022) (1,590) Valuation fees 4(g) - - - - - (102) - - - - Legal and professional fees - - - - (7) - (16) - (21) - Auditor’s remuneration (63) (114) - - (37) (75) (34) (49) (47) (68) Others (853) (955) (12) (13) (180) (365) (391) (1,025) (532) (1,412) (83,147) (58,516) (12) (13) (13,414) (11,731) (41,233) (49,221) (56,001) (69,898) Net (expenses)/income before net investment

gains/(losses) (83,077) (58,516) (12) (13) (13,414) (11,731) (41,193) (49,221) (55,945) (69,898) Net investment gains/(losses) Realised gains/(losses) on disposal of investments 56,867 28,840 (12,997) (9,817) 51,136 85,394 133,927 223,292 215,218 398,486 Movement of unrealised gains or losses on investments 89,608 30,219 89,285 (41,281) 73,732 39,102 (85,151) 192,561 (270,987) 293,385 146,475 59,059 76,288 (51,098) 124,868 124,496 48,776 415,853 (55,769) 691,871 Profits/(losses) and total comprehensive income for

the year 63,398 543 76,276 (51,111) 111,454 112,765 7,583 366,632 (111,714) 621,973


66

Statement of comprehensive income – Constituent funds for the year ended 30 June 2019 (continued) (Expressed in Hong Kong dollars)

Hang Seng Index Tracking

Fund North American Equity Fund European Equity Fund Asia Pacific Equity Fund Hong Kong and Chinese

Equity Fund Note 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Income Distribution income 457,607 411,578 - - - - - - - - Other income 82 - 8 - 6 - 22 - 24 - 457,689 411,578 8 - 6 - 22 - 24 - Expenses Administrator’s fees 4(a) (56,285) (52,490) (8,872) (7,571) (4,309) (4,903) (17,267) (19,504) (20,676) (23,650) Fund administration fees 4(b) (3,752) (2,404) (895) (438) (435) (282) (1,742) (1,132) (2,087) (1,364) Management fees 4(c) - - - - - - - - - - Sponsor fees 4(d) (6,254) (4,007) (977) (478) (474) (308) (1,901) (1,235) (2,276) (1,488) Investment agency fees 4(e) (12,508) (27,183) - - - - - - - - Trustee’s fees 4(f) (3,127) (2,441) (407) (242) (198) (158) (792) (630) (948) (755) Valuation fees 4(g) - - - - - - - - - - Legal and professional fees (34) - (4) - (2) - (9) - (10) - Auditor’s remuneration (72) (100) (8) (10) (5) (7) (18) (27) (22) (30) Others (3,949) (5,526) (118) (226) (64) (157) (219) (572) (261) (675) (85,981) (94,151) (11,281) (8,965) (5,487) (5,815) (21,948) (23,100) (26,280) (27,962) Net (expenses)/income before net investment

gains/(losses) 371,708 317,427 (11,273) (8,965) (5,481) (5,815) (21,926) (23,100) (26,256) (27,962) Net investment gains/(losses) Realised gains/(losses) on disposal of investments 443,945 1,244,344 94,397 129,721 8,075 49,659 70,667 221,738 130,537 364,876 Movement of unrealised gains or losses on investments (647,164) 289,938 (1,017) 22,696 (21,191) (32,245) (132,504) (45,039) (242,197) 129,852 (203,219) 1,534,282 93,380 152,417 (13,116) 17,414 (61,837) 176,699 (111,660) 494,728 Profits/(losses) and total comprehensive income for

the year 168,489 1,851,709 82,107 143,452 (18,597) 11,599 (83,763) 153,599 (137,916) 466,766


67

Statement of comprehensive income – Constituent funds for the year ended 30 June 2019 (continued) (Expressed in Hong Kong dollars) Global Bond Fund Age 65 Plus Fund Stable Fund Chinese Equity Fund Scheme level adjustments The Scheme Note 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Income Distribution income - - - - - - - - - - 457,607 411,578 Other income 2 - - - - - 12 - 21 26 343 26 2 - - - - - 12 - 21 26 457,950 411,604 Expenses Administrator’s fees 4(a) (5,172) (4,261) (2,483) (1,792) (4,641) (4,178) (12,930) (14,722) - - (271,296) (286,347) Fund administration fees 4(b) (345) (181) (133) (60) (468) (240) (1,305) (875) - - (25,262) (14,691) Management fees 4(c) - - - - - - - - - - (16,329) (11,171) Sponsor fees 4(d) (575) (301) (303) (136) (511) (262) (1,423) (955) - - (29,270) (17,306) Investment agency fees 4(e) - - - - - - - - - - (12,508) (27,183) Trustee’s fees 4(f) (287) (176) (109) (49) (213) (125) (593) (478) - - (14,622) (9,957) Valuation fees 4(g) - - - - - - - - - - - (102) Legal and professional fees (3) - (2) - (2) - (7) - - - (117) - Auditor’s remuneration (6) (6) (8) (11) (4) (3) (14) (17) - - (338) (517) Others (70) (141) (38) (62) (52) (96) (170) (423) (78) (202) (6,987) (11,850) (6,458) (5,066) (3,076) (2,110) (5,891) (4,904) (16,442) (17,470) (78) (202) (376,729) (379,124) Net (expenses)/income before

net investment gains/(losses) (6,456) (5,066) (3,076) (2,110) (5,891) (4,904) (16,430) (17,470) (57) (176) 81,221 32,480 Net investment gains/(losses) Realised gains/(losses) on

disposal of investments 6,101 14,958 5,448 5,824 1,952 20,790 46,668 332,771 - - 1,251,941 3,110,876 Movement of unrealised gains or

losses on investments 60,518 (11,700) 31,880 1,748 24,278 (11,004) (159,190) 57,166 - - (1,190,100) 915,398 66,619 3,258 37,328 7,572 26,230 9,786 (112,522) 389,937 - - 61,841 4,026,274 Profits/(losses) and total

comprehensive income for the year 60,163 (1,808) 34,252 5,462 20,339 4,882 (128,952) 372,467 (57) (176) 143,062 4,058,754

The notes on pages 74 to 101 form part of these financial statements.


68

Statement of assets and liabilities – Constituent funds as at 30 June 2019 (Expressed in Hong Kong dollars) MPF Conservative Fund Guaranteed Fund Core Accumulation Fund Balanced Fund Growth Fund Note 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Assets Investments 9, 19 9,412,910 8,404,743 3,597,187 3,427,765 2,922,413 2,418,934 6,091,395 6,231,932 8,272,523 8,547,830 Distribution receivables - - - - - - - - - - Contributions receivable - - - - - - - - - - Amounts receivable on subscription of units 59,079 111,607 10,561 28,990 3,115 6,713 1,099 3,887 3,059 11,464 Amounts receivable from disposal of investments 47,563 112,342 15,858 27,376 4,494 9,662 7,262 12,972 8,371 21,332 Other receivables - - - - - - - - - - Cash and cash equivalents 4(h) - - - - - - - - - - 9,519,552 8,628,692 3,623,606 3,484,131 2,930,022 2,435,309 6,099,756 6,248,791 8,283,953 8,580,626 Liabilities Amounts payable on purchase of investments 59,079 111,607 10,561 28,990 3,115 6,713 1,099 3,887 3,059 11,464 Benefits payable - - - - - - - - - - Forfeitures payable 6 - - - - - - - - - - Amounts payable on redemption of units 47,564 112,343 15,858 27,376 4,494 9,662 7,262 12,972 8,371 21,332 Accrued expenses and other payables 6,310 7,732 3 3 1,215 1,074 3,406 3,757 4,609 5,174 112,953 231,682 26,422 56,369 8,824 17,449 11,767 20,616 16,039 37,970 Net assets attributable to members 9,406,599 8,397,010 3,597,184 3,427,762 2,921,198 2,417,860 6,087,989 6,228,175 8,267,914 8,542,656 Number of units in issue 740,591,172 665,702,918 347,687,210 338,516,680 157,034,350 135,201,211 313,737,532 321,528,463 421,872,221 430,273,356 Net asset value per unit* HK$ 12.70 HK$ 12.61 HK$ 10.35 HK$ 10.13 HK$ 18.60 HK$ 17.88 HK$ 19.40 HK$ 19.37 HK$ 19.60 HK$ 19.85 * The net asset value per unit is calculated by dividing the exact net assets attributable to members by the exact number of units in issue.


69

Statement of assets and liabilities – Constituent funds as at 30 June 2019 (continued) (Expressed in Hong Kong dollars)



Equity Fund Note 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Assets Investments 9, 19 13,012,888 13,000,119 1,800,027 1,375,334 826,850 831,511 3,306,960 3,327,869 3,971,769 4,040,844 Distribution receivables 201,967 158,267 - - - - - - - - Contributions receivable - - - - - - - - - - Amounts receivable on subscription of units 43,750 111,005 6,758 7,443 1,230 2,800 3,205 4,510 7,467 19,113 Amounts receivable from disposal of investments 57,298 89,249 9,931 16,310 2,467 3,089 4,993 11,665 11,189 24,870 Other receivables - - - - - - - - - - Cash and cash equivalents 4(h) - 1 - - - - - - - - 13,315,903 13,358,641 1,816,716 1,399,087 830,547 837,400 3,315,158 3,344,044 3,990,425 4,084,827 Liabilities Amounts payable on purchase of investments 43,750 111,005 6,758 7,443 1,230 2,800 3,205 4,510 7,467 19,113 Benefits payable - - - - - - - - - - Forfeitures payable 6 - - - - - - - - - - Amounts payable on redemption of units 57,298 89,249 9,931 16,310 2,467 3,089 4,993 11,665 11,189 24,870 Accrued expenses and other payables 7,795 8,514 989 822 460 503 1,822 2,034 2,187 2,475 108,843 208,768 17,678 24,575 4,157 6,392 10,020 18,209 20,843 46,458 Net assets attributable to members 13,207,060 13,149,873 1,799,038 1,374,512 826,390 831,008 3,305,138 3,325,835 3,969,582 4,038,369 Number of units in issue 467,364,720 471,444,057 106,167,530 86,214,212 63,080,203 61,969,702 111,472,944 109,330,555 162,986,042 160,091,736 Net asset value per unit* HK$ 28.26 HK$ 27.90 HK$ 16.95 HK$ 15.95 HK$ 13.10 HK$ 13.41 HK$ 29.65 HK$ 30.42 HK$ 24.36 HK$ 25.23 * The net asset value per unit is calculated by dividing the exact net assets attributable to members by the exact number of units in issue.


71

Statement of changes in net assets attributable to members – Constituent funds for the year ended 30 June 2019 (Expressed in Hong Kong dollars) MPF Conservative Fund Guaranteed Fund Core Accumulation Fund Balanced Fund Growth Fund Note 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Net assets brought forward 8,397,010 7,156,147 3,427,762 3,238,049 2,417,860 1,897,580 6,228,175 5,976,644 8,542,656 8,238,225 Add: Subscriptions 5,372,513 5,930,045 1,153,354 1,440,147 985,505 1,083,862 629,126 867,372 925,977 1,190,430 Less: Redemptions (4,426,322) (4,689,727) (1,060,208) (1,199,323) (593,622) (676,347) (776,896) (982,473) (1,089,010) (1,507,977) 9,343,201 8,396,465 3,520,908 3,478,873 2,809,743 2,305,095 6,080,405 5,861,543 8,379,623 7,920,678 Other capital receipts 8 - 2 - - 1 - 1 - 5 5 9,343,201 8,396,467 3,520,908 3,478,873 2,809,744 2,305,095 6,080,406 5,861,543 8,379,628 7,920,683 Profits/(losses) and total comprehensive income for

the year 63,398 543 76,276 (51,111) 111,454 112,765 7,583 366,632 (111,714) 621,973 Net assets carried forward 9,406,599 8,397,010 3,597,184 3,427,762 2,921,198 2,417,860 6,087,989 6,228,175 8,267,914 8,542,656 Units in issue Units brought forward 665,702,918 567,359,872 338,516,680 315,118,503 135,201,211 112,217,753 321,528,463 327,368,668 430,273,356 445,896,512 Units issued 424,680,022 470,166,919 113,497,317 140,375,130 55,032,166 60,830,440 33,442,915 44,113,285 48,516,281 59,093,119 Units redeemed (349,791,768) (371,823,873) (104,326,787) (116,976,953) (33,199,027) (37,846,982) (41,233,846) (49,953,490) (56,917,416) (74,716,275) Units carried forward 740,591,172 665,702,918 347,687,210 338,516,680 157,034,350 135,201,211 313,737,532 321,528,463 421,872,221 430,273,356


72

Statement of changes in net assets attributable to members – Constituent funds for the year ended 30 June 2019 (continued) (Expressed in Hong Kong dollars)



Equity Fund Note 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Net assets brought forward 13,149,873 12,132,436 1,374,512 1,259,433 831,008 841,027 3,325,835 3,251,584 4,038,369 3,688,669 Add: Subscriptions 4,390,006 4,801,069 1,214,441 661,948 211,433 317,932 638,977 878,893 1,038,814 1,290,587 Less: Redemptions (4,501,311) (5,635,343) (872,022) (690,326) (197,454) (339,558) (575,912) (958,242) (969,687) (1,407,654) 13,038,568 11,298,162 1,716,931 1,231,055 844,987 819,401 3,388,900 3,172,235 4,107,496 3,571,602 Other capital receipts 8 3 2 - 5 - 8 1 1 2 1 13,038,571 11,298,164 1,716,931 1,231,060 844,987 819,409 3,388,901 3,172,236 4,107,498 3,571,603 Profits/(losses) and total comprehensive income for

the year 168,489 1,851,709 82,107 143,452 (18,597) 11,599 (83,763) 153,599 (137,916) 466,766 Net assets carried forward 13,207,060 13,149,873 1,799,038 1,374,512 826,390 831,008 3,305,138 3,325,835 3,969,582 4,038,369 Units in issue Units brought forward 471,444,057 501,060,516 86,214,212 88,284,772 61,969,702 63,553,531 109,330,555 111,735,563 160,091,736 164,451,751 Units issued 163,258,912 171,079,168 74,207,337 42,502,595 16,598,974 22,858,728 22,043,892 27,902,880 43,795,754 50,097,372 Units redeemed (167,338,249) (200,695,627) (54,254,019) (44,573,155) (15,488,473) (24,442,557) (19,901,503) (30,307,888) (40,901,448) (54,457,387) Units carried forward 467,364,720 471,444,057 106,167,530 86,214,212 63,080,203 61,969,702 111,472,944 109,330,555 162,986,042 160,091,736


73

Statement of changes in net assets attributable to members – Constituent funds for the year ended 30 June 2019 (continued) (Expressed in Hong Kong dollars)

Global Bond Fund Age 65 Plus Fund Stable Fund Chinese Equity Fund Scheme level adjustments Elimination for switching The Scheme

Note 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Net assets brought forward 1,094,825 684,854 521,455 272,790 822,043 395,895 2,609,000 2,096,321 17,239 15,122 - - 56,797,622 51,144,776 Add: Subscriptions 767,804 1,097,399 412,713 453,486 471,964 845,484 1,141,223 1,752,877 929 (35,861) (13,123,830) (16,397,806) 6,230,949 6,177,864 Less: Redemptions (576,485) (685,620) (246,081) (210,283) (406,033) (424,218) (1,143,087) (1,612,665) (6,381) 33,821 13,123,830 16,397,806 (4,316,681) (4,588,129) 1,286,144 1,096,633 688,087 515,993 887,974 817,161 2,607,136 2,236,533 11,787 13,082 - - 58,711,890 52,734,511 Other capital receipts 8 - - - - - - 2 - 7,066 4,333 - - 7,081 4,357 1,286,144 1,096,633 688,087 515,993 887,974 817,161 2,607,138 2,236,533 18,853 17,415 - - 58,718,971 52,738,868 Profits/(losses) and total comprehensive income for

the year 60,163 (1,808) 34,252 5,462 20,339 4,882 (128,952) 372,467 (57) (176) - - 143,062 4,058,754 Net assets carried forward 1,346,307 1,094,825 722,339 521,455 908,313 822,043 2,478,186 2,609,000 18,796 17,239 - - 58,862,033 56,797,622 Units in issue Units brought forward 92,122,196 58,043,561 45,239,632 24,152,187 69,253,725 34,322,503 166,514,743 158,043,810 Units issued 64,044,936 91,227,314 35,365,473 39,328,186 40,233,205 70,141,575 78,146,980 108,289,702 Units redeemed (48,251,602) (57,148,679) (21,173,751) (18,240,741) (34,612,568) (35,210,353) (78,289,488) (99,818,769) Units carried forward 107,915,530 92,122,196 59,431,354 45,239,632 74,874,362 69,253,725 166,372,235 166,514,743 The notes on pages 74 to 101 form part of these financial statements.


74

Notes to the financial statements (Expressed in Hong Kong dollars) 1. The Scheme

Hang Seng Mandatory Provident Fund – SuperTrust Plus (“the Scheme”) is a scheme established under a trust deed dated 31 January 2000 (“the Trust Deed”) between Hang Seng bank Limited (“the sponsor”) and HSBC Provident Fund Trustee (Hong Kong) Limited (“the Trustee”). The Trust Deed was subsequently amended by deeds of variation dated 29 November 2000, 8 January 2002, 15 August 2002, 4 July 2003, 14 September 2006, 5 May 2011, 18 October 2012, 9 April 2015, 27 August 2015, 22 December 2015, 18 May 2016, 12 December 2016, 23 June 2017, 19 March 2019 and 8 April 2019 between the Sponsor and the Trustee. The Scheme is registered under section 21 of the Hong Kong Mandatory Provident Fund Schemes Ordinance (“the MPF Ordinance”). Under the Trust Deed as subsequently amended, the Trustee is required to establish and maintain separate constituent funds into which contributions may be invested. The constituent funds are only available for investment by members of the Scheme. The Scheme had fourteen constituent funds as at 30 June 2019: - MPF Conservative Fund - Guaranteed Fund - Core Accumulation Fund - Balanced Fund - Growth Fund - Hang Seng Index Tracking Fund - North American Equity Fund - European Equity Fund - Asia Pacific Equity Fund - Hong Kong and Chinese Equity Fund - Global Bond Fund - Age 65 Plus Fund - Stable Fund - Chinese Equity Fund


75

1 The Scheme (continued) Except for Hang Seng Index Tracking Fund which invests in Hang Seng Index ETF, all constituent funds invest in MPF Guaranteed Fund or sub-funds of HSBC MPF Fund Series “A” which are approved pooled investment funds. The Scheme is generally funded by contributions from the participating employers and members. Under section 7A of the MPF Ordinance, each of the participating employers and members is required to contribute 5% of relevant income to the Scheme on a monthly basis. The contribution was subject to a maximum amount of $1,500 prescribed by section 10 and schedule 3 of the MPF Ordinance. According to section 9 and schedule 2 of the MPF Ordinance, members with monthly salary of less than the minimum level of $7,100 are exempted from contributions. Such exemption is not applicable for their employers. The Employee Choice Arrangement (“the ECA”) has been launched by the Hong Kong Mandatory Provident Fund Schemes Authority (“the Authority”) with effect from 1 November 2012. The ECA allows members to opt to transfer the member’s portion of mandatory contributions and investment returns (i.e. the accrued benefits) in their contribution accounts of the original mandatory provident fund scheme to another mandatory provident fund scheme of their own choice once a year. Alternatively, members do not have to make any change. They can retain the accrued benefits in the original mandatory provident fund scheme selected by their employers. The feature of tax deductible voluntary contributions (“TVC”) has been added to the Scheme with effect from 1 April 2019. The TVC allows eligible persons to set up a TVC account and pay TVC into such account. TVC may be eligible for tax concessions starting from the year of assessment 2019/2020. TVC is voluntary in nature. However, it is subject to the same vesting, preservation and withdrawal restrictions applicable to mandatory contributions. With effect from 1 July 2019, the Scheme merged with the Hang Seng Mandatory Provident Fund – ValueChoice. All members of the Scheme and their accrued benefits under the Hang Seng Mandatory Provident Fund – ValueChoice were transferred to the Scheme on 1 July 2019. The Scheme may be terminated on the occurrence of one or more events as specified in clause 21 of the Trust Deed as subsequently amended.

2 Significant accounting policies

(a) Statement of compliance The financial statements of the Scheme have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (“HKFRSs”), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), accounting principles generally accepted in Hong Kong, the relevant disclosure provisions of the Trust Deed dated 31 January 2000 as subsequently amended, the MPF Ordinance, the Hong Kong Mandatory Provident Fund Schemes (General) Regulation (“the General Regulation”), the Hong Kong Code on MPF Investment Funds (“the MPF Code”) and other relevant guidelines issued by the Authority. Significant accounting policies adopted by the Scheme are disclosed below.


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2 Significant accounting policies (continued) (a) Statement of compliance (continued)

The HKICPA has issued certain new and revised HKFRSs that are first effective or available for early adoption for the current accounting period of the Scheme. Note 3 provides information on any changes in accounting policies resulting from initial application of these developments to the extent that they are relevant to the Scheme for the current and prior accounting periods reflected in these financial statements.

(b) Basis of preparation of the financial statements

The functional and presentation currency of the Scheme is the Hong Kong dollar and reflects transactions which have been processed by the Trustee into the constituent funds. The financial statements are prepared on a fair value basis for financial assets and liabilities at fair value through profit or loss. Other financial assets and financial liabilities scheme are stated at amortised cost or redemption amount. The preparation of financial statements in conformity with HKFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised if the revisions affect only that period, or in the period of the revisions and future periods if the revisions affect both current and future periods.

(c) Recognition of income Distribution income from listed investments is recognised when the share price of the investment goes ex-dividend. Other income is recognised in the statement of comprehensive income on an accrual basis.

(d) Subscription for and redemption of units of the constituent funds Subscription for and redemption of units of the constituent funds are accounted for on an accrual basis.

(e) Other expenses

Other expenses are accounted for on an accrual basis.


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2 Significant accounting policies (continued) (f) Investments (i) Classification

Assets The Scheme and its constituent funds classify their investments based on both the Scheme and its constituent funds’ business model for managing those financial assets and the contractual cash flow characteristics of the financial assets. The portfolio of financial assets is managed and performance is evaluated on a fair value basis. The Scheme and its constituent funds are primarily focused on fair value information and uses that information to assess the assets’ performance and to make decisions. The Scheme and its constituent funds have not taken the option to irrevocably designate any equity securities as fair value through other comprehensive income. The contractual cash flows of the Scheme and its constituent funds’ debt securities are solely principal and interest, however, these securities are neither held for the purpose of collecting contractual cash flows nor held both for collecting contractual cash flows and for sale. The collection of contractual cash flows is only incidental to achieving the Scheme and its constituent funds’ business model’s objective. Consequently, all investments are measured at fair value through profit or loss.

(ii) Recognition, derecognition and measurement Regular purchases and sales of investments are recognised on the trade date - the date on which the Scheme and its constituent funds commit to purchase or sell the investment. Financial assets at fair value through profit or loss are initially recognised at fair value, excluding transaction costs which are expensed as incurred. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Scheme and its constituent funds have transferred substantially all risks and rewards of ownership. Subsequent to initial recognition, all financial assets at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in the fair value of the “Financial assets at fair value through profit or loss” category are presented in the Statement of Changes in Net Assets Available for Benefits of the Scheme within “Net realised gains/(losses) on redemption of units in constituent funds” and “Change in unrealised gains/losses in value of constituent funds”; and in the Statement of Comprehensive Income of the constituent funds within “Change in unrealised gains/losses in value of financial assets at fair value through profit or loss” and “Realised gains/(losses) on sales of financial assets at fair value through profit or loss” in the period in which they arise.

(iii) Valuation of investments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal, or in its absence, the most advantageous market to which the Scheme has access at that date. The fair value of a liability reflects its non-performance risk.


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2 Significant accounting policies (continued) (f) Investments (continued)

(iii) Valuation of investment (continued)

When applicable, the Scheme measures the fair value of an instrument using the quoted price in an active market for that instrument provided such price is within the bid-ask spread. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. In circumstances where quoted price is not within the bid-ask spread, the Trustee will determine the points within the bid-ask spread that are most representative of the fair value. When there is no quoted price in an active market, the Scheme uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all the factors that market participants would take into account in pricing a transaction. Investments in open-ended investment funds are recorded at the net asset value per unit as reported by the managers of such funds.

(iv) Impairment

The Scheme and its constituent funds recognise loss allowances for expected credit losses (“ECLs”) on financial assets measured at amortised cost.

The Scheme and its constituent funds measure loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured at 12-month ECLs: - financial assets that are determined to have low credit risk at the reporting date; and - other financial assets for which credit risk (i.e. the risk of default occurring over the

expected life of the asset) has not increased significantly since initial recognition. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Scheme and its constituent funds consider reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Scheme’s and its constituent funds’ historical experience and informed credit assessment and including forward-looking information. The Scheme and its constituent funds assume that the credit risk on a financial asset has increased significantly if it is more than 30 days past due. The Scheme and its constituent funds consider a financial asset to be in default when: - the borrower is unlikely to pay its credit obligations to the Scheme and its constituent

funds in full, without recourse by the Scheme and its constituent funds to actions such as realising security (if any is held); or

- the financial asset is more than 90 days past due.


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2 Significant accounting policies (continued) (f) Investments (continued)

(iv) Impairment (continued)

The Scheme and its constituent funds consider a financial asset to have low credit risk when the credit rating of the counterparty is equivalent to the globally understood definition of “investment grade”. The Scheme and its constituent funds consider this to be Baa3 or higher per Moody’s or BBB- or higher per Standard & Poor’s. Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months). The maximum period considered when estimating ECLs is the maximum contractual period over which the Scheme and its constituent funds are exposed to credit risk. Measurement of ECLs ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Scheme and its constituent funds expect to receive). ECLs are discounted at the effective interest rate of the financial asset. Credit-impaired financial assets At each reporting date, the Scheme and its constituent funds assess whether financial assets carried at amortised cost are credit-impaired. A financial asset is “credit-impaired” when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data: - significant financial difficulty of the borrower or issuer; - a breach of contract such as a default or being more than 90 days past due; or - it is probable that the borrower will enter bankruptcy or other financial reorganisation. Presentation of allowance for ECLs in the statement of assets and liabilities Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. Write-off The gross carrying amount of a financial asset is written off when the Scheme and its constituent funds have no reasonable expectations of recovering a financial asset in its entirety or a portion thereof.


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2 Significant accounting policies (continued) (g) Foreign currency translation

Foreign currency transactions during the year are translated into Hong Kong dollars at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated into Hong Kong dollars at the foreign exchange rates ruling at the reporting date. Foreign currency exchange differences arising on translation and realised gains and losses on disposals or settlements of monetary assets and liabilities are recognised in the statement of comprehensive income of the relevant constituent funds. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated to the reporting currency of the Scheme using the foreign exchange rates ruling at the dates on which the fair values were determined.

(h) Related parties

(a) A person, or a close member of that person’s family, is related to the Scheme if that person

(i) has control or joint control over the Scheme; (ii) has significant influence over the Scheme; or (iii) is a member of the key management personnel of the Scheme or the

Scheme’s parent.

(b) An entity is related to the Scheme if any of the following conditions applies (i) The entity and the Scheme are members of the same group (which means

that each parent, subsidiary and fellow subsidiary is related to the others). (ii) One entity is an associate or joint venture of the other entity (or an associate

or joint venture of a member of a group of which the other entity is a member). (iii) Both entities are joint ventures of the same third party. (iv) One entity is a joint venture of a third entity and the other entity is an

associate of the third entity. (v) The entity is a post-employment benefit plan for the benefit of employees of

an entity related to the Scheme. (vi) The entity is controlled or jointly-controlled by a person identified in (a). (vii) A person identified in (a)(i) has significant influence over the entity or is a

member of the key management personnel of the entity (or of a parent of the entity).

(viii) The entity, or any member of a group of which it is a part, provides key

management personnel services to the Scheme or to the Scheme’s parent. Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.


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2 Significant accounting policies (continued) (i) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Scheme has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation. Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(j) Contributions Contributions are accounted for on an accruals basis.

(k) Benefits Benefits are accounted for on an accruals basis.

(l) Transfers in/out Transfer-in amounts are recognised when the right to receive payment is established. Transfer-out amounts are accounted for when the obligation to make payment is established.

(m) Forfeitures Forfeitures are the amounts forfeited when member’s employment is terminated before the voluntary contributions vest. Forfeitures may be refunded to the employers or re-invested to the Scheme upon the request from the employers.

(n) Cash and cash equivalents Cash and cash equivalents comprise cash at bank, demand deposits with banks and other financial institutions with original maturities of three months or less from the date of placement, and short-term, highly liquid investments that are readily convertible into known amounts of cash which are subject to an insignificant risk of changes in value.


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2 Significant accounting policies (continued) (o) Units in issue

The Scheme classifies financial instruments issued as financial liabilities or equity instruments in accordance with the substance of the contractual terms of the instruments. A puttable financial instrument that includes a contractual obligation for the Scheme to repurchase or redeem that instrument for cash or another financial asset is classified as equity instruments if it meets all of the following conditions: - it entitles the holder to a pro rata share of the Scheme’s net assets in the event of

its liquidation; - it is in the class of instruments that is subordinate to all other classes of instruments; - all financial instruments in the class of instruments that is subordinate to all other

classes of instruments have identical features; - apart from the contractual obligation for the Scheme to repurchase or redeem the

instrument for cash or another financial asset, the instrument does not include any other features that would require classification as a liability; and

- the total expected cash flows attributable to the instrument over its life are based

substantially on the profit or loss, the change in the recognised net assets or the change in the fair value of the recognised and unrecognised net assets of the Scheme over the life of the instrument.

In addition to the instrument having all the above features, the Scheme must have no other financial instrument or contract that has: - total cash flows based substantially on the profit or loss, the change in the

recognised net assets or the change in the fair value of the recognised and unrecognised net assets of the Scheme; and

- the effect of substantially restricting or fixing the residual return to the puttable

instrument holders. The redeemable units are not in the class of instruments that are subordinate to all other classes of instruments which have identical features. Therefore, they do not meet the criteria for equity classification and therefore are classified as financial liabilities. They are measured at the present value of the redemption amount.

(p) Taxation

The Scheme is registered under the MPF Ordinance and is therefore a recognised scheme for Hong Kong Profits Tax purposes. The policy of the Hong Kong Inland Revenue Department (“IRD”), as set out in IRD Practice Note No. 23, is that “recognised retirement schemes and their trustees are not considered to be subject to profits tax on their investment income”. Accordingly, no provision for Hong Kong Profits Tax has been made in the Scheme’s financial statements.


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3 Changes in accounting policies

The HKICPA has issued a number of new HKFRSs and amendments to HKFRSs that are first effective for the current accounting period of the Scheme. Of these, the following developments are relevant to the Scheme’s financial statements: HKFRS 9, Financial instruments HKFRS 9 ‘Financial Instruments’ became effective for annual periods beginning on or after 1 January 2018. It addresses the classification, measurement and derecognition of financial assets and liabilities and replaces the multiple classification and measurement models in HKAS 39.

Classification and measurement of debt assets are driven by the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. A debt instrument is measured at amortised cost if the objective of the business model is to hold the financial asset for the collection of the contractual cash flows and the contractual cash flows under the instrument solely represent payments of principal and interest (“SPPI”). A debt instrument is measured at fair value through other comprehensive income if the objective of the business model is to hold the financial asset both to collect contractual cash flows from SPPI and to sell. All other debt instruments must be recognised at fair value through profit or loss. An entity may however, at initial recognition, irrevocably designate a financial asset as measured at fair value through profit or loss if doing so eliminates or significantly reduces a measurement or recognition inconsistency. Derivative and equity instruments are measured at fair value through profit or loss unless, for equity instruments not held for trading, an irrevocable option is taken to measure at fair value through other comprehensive income. HKFRS 9 also introduces a new expected credit loss (“ECL”) impairment model. HKFRS 9 has been applied retrospectively by the Scheme and its constituent funds and did not result in a change to the classification or measurement of financial instruments as outlined in note 2(f). The Scheme and its constituent funds’ investment portfolios continue to be classified as fair value through profit or loss and other financial assets which are held for collection continue to be measured at amortised cost. There was no material impact on adoption from the application of the new impairment model. There are no other standards, interpretations or amendments to existing standards that are effective for the first time for the financial year beginning 1 July 2018 that would be expected to have a material impact on the Scheme and its constituent funds.


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4 Transactions with related parties In addition to the transactions and balances disclosed elsewhere in these financial statements, the Scheme entered into the following material related party transactions for the year. All such transactions were entered into in the ordinary course of business and on normal commercial terms.

(a) Administrator’s fees The Scheme is administered by The Hongkong and Shanghai Banking Corporation Limited (“HSBCL”). Prior to 1 November 2018 the Scheme was administered by HSBC Life (International) Limited (“HLL”). Effective 1 December 2017, the administrator’s fees are charged from 0.410 percent to 0.545 percent per annum of the net asset value (“NAV”) of each relevant constituent fund with the exception of the Guaranteed Fund. Administrator’s fees incurred during the year amounted to $271,296,000 (2018: $286,347,000) of which HSBCL received $173,466,000 (2018: Nil) and HLL received $97,830,000 (2018: $ 286,347,000). The amount due to HSBCL in respect of administrator’s fees as at 30 June 2019 amounted to $21,969,000 (2018: Nil) while to HLL as at 30 June 2019 was Nil (2018: $ 24,045,000). During the year, $62,955,000 (2018: Nil) was contributed by HSBCL as a rebate to members of the Scheme while HLL contributed $31,680,000 (2018: $119,881,000). The amount was included in contributions received and receivable in the statement of changes in net assets available for benefits of the Scheme and subscriptions in the statement of changes in net assets attributable to members of the constituent funds.

(b) Fund administration fees

Effective 1 December 2017, the Trustee is entitled to fund administration fees, calculated each valuation date and payable monthly in arrears, based on 0.022 percent to 0.055 percent per annum of the NAV of the constituent funds with exception of the Guaranteed Fund whereby no fund administration fees were charged. The fund administration fees earned by the Trustee for the year was $25,262,000 (2018: $14,691,000). As at 30 June 2019, the amount due to the Trustee in respect of fund administration fees was $2,094,000 (2018: $2,120,000).

(c) Management fees

The management fees were charged at 0.15 percent per annum of the NAV of MPF Conservative Fund (“MCF”) for the investment management fees paid to the investment manager of the underlying approved investment fund – HSBC MPF “A” – MPF Conservative Fund. The investment manager of HSBC MPF “A” – MPF Conservative Fund is HSBC Investment Funds (Hong Kong) Limited (“HIFH”) which is a fellow subsidiary of the Administrator and the Trustee. During the year ended 30 June 2019, the management fees for MCF deductible under section 37 of the General Regulation amounted to $16,329,000 which was deducted from the assets of the MCF (2018: $11,171,000). The amount due to HIFH in respect of the management fees at the year end was $1,162,000 (2018: $1,444,000).


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4 Transactions with related parties (continued)

(d) Sponsor fees

The Sponsor of the Scheme is Hang Seng Bank Limited. Effective 1 December 2017, the sponsor receives sponsor fees which were paid out from the constituent funds for sponsoring the Scheme. Except for Guaranteed Fund, the fees are charged at 0.05 percent to 0.06 percent per annum of the NAV of all constituent funds. No Sponsor fees were charged to Guaranteed Fund. During the year ended 30 June 2019, $29,270,000 were paid out from the constituent funds to the Sponsor (2018: $17,306,000). Prior to 1 December 2017, the sponsor fees were charged at 0.05 percent per annum of the NAV of all constituent funds and paid out of administrator’s fees. During the year ended 30 June 2019, no sponsor fees were paid out of administrator’s fees. During the year ended 30 June 2018, $11,113,000 was paid out of administrator’s fees to the Sponsor. As at 30 June 2019, the amount due to this related party in respect of the sponsor fees amounted to $2,442,000 (2018: $2,477,000).

(e) Investment agency fees The Hang Seng Index Tracking Fund invests in Hang Seng Index ETF, which is managed by Hang Seng Investment Management Limited (“HSIM”). HSIM is appointed by the Trustee as its agent to perform duties relating to the investment by the Hang Seng Index Tracking Fund, including subscription and redemption of units. Effective 1 December 2017, investment agency fees are charged by HSIM at 0.10 percent per annum of the NAV of the Hang Seng Index Tracking Fund. This has been reflected in the daily unit price of the constituent fund. The investment agency fees incurred during the year amounted to $12,508,000 (2018: $27,183,000). The amount due to this related party in respect of the investment agency fees at the year end amounted to $1,050,000 (2018: $1,111,000).

(f) Trustee’s fees

The Trustee and Custodian of the Scheme is HSBC Provident Fund Trustee (Hong Kong) Limited. The Trustee receives trustee’s fees for valuation and other services from the relevant constituent funds. Effective 1 December 2017, the fees are charged at 0.018 percent to 0.025 percent per annum of the NAV of each relevant constituent fund with the exception of the Guaranteed Fund, and this has been reflected in the daily unit price of each relevant constituent fund. Prior to 1 December 2017, the fees were charged at 0.008 percent per annum of the NAV of each relevant constituent fund and this has been reflected in the daily unit price of each relevant constituent fund, except that the trustee’s fees of Core Accumulation Fund and Age 65 Plus Fund are paid out of the administrator’s fees with effect from 1 April 2017. No trustee’s fees were charged to Guaranteed Fund. Trustee’s fees incurred during the year amounted to $14,622,000 (2018: $9,957,000). The amount due to this related party in respect of trustee fees at the year end amounted to $1,206,000 (2018: $1,229,000).


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4 Transactions with related parties (continued) (g) Valuation fees

With effect from 1 April 2017 up to 1 December 2017, Core Accumulation Fund and Age 65 Plus Fund utilise the fund administration and valuation services of HSBC Institutional Trust Services (Asia) Limited (“HTHK”), which is a fellow subsidiary of the Trustee within the HSBC Group. The valuation fees were charged at a standard fee rate per valuation as set out in the table below based on the previous month end NAV of each relevant constituent fund. The service has ceased effective 1 December 2017 with charging of Trustee’s fees (see note 4(f)). Valuation fees incurred during the year amounted to Nil (2018: $102,000). There was no amount due to this related party in respect of valuation fees at the year end (2018: Nil).

Fee Rate

For NAV smaller than $400 million Waived For NAV $400 million – below $1.3 billion $250 per valuation For NAV $1.3 billion – below $2 billion $800 per valuation For NAV $2 billion or more $1,200 per valuation

(h) Cash and cash equivalents

As at 30 June 2019, the Scheme maintained bank balance of $40,364,000 (2018: $41,789,000) with HSBCL, which is a group company of the Trustee, Custodian and Administrator of the Scheme. These amounts are mainly related to contributions received from members by the Administrator which have not yet been allocated according to the members’ instructions due to cheques awaiting clearance and/or incomplete information provided by employers. During the year ended 30 June 2019, the bank interest income amounted to $6,000 (2018: $Nil) has been earned from HSBCL. There was no amount due from this related party in respect of bank interest receivable at the year end (2018: Nil).


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5 Contributions received and receivable Contributions received and receivable in the statement of changes in net assets available for benefits of the Scheme are derived from the following: The Scheme 2019 2018 $’000 $’000 From members

- Mandatory 1,827,211 1,886,798 - Additional voluntary 22,785 17,375

From employers

- Mandatory 2,442,284 2,460,732 - Additional voluntary 1,369,965 1,189,398

5,662,245 5,554,303 Transfers in

- From other schemes 471,253 500,752 471,253 500,752 Contributions surcharge 2,810 2,927 Other capital movements 94,641 119,882 6,230,949 6,177,864

6 Benefits paid and payable Benefits paid and payable in the statement of changes in net assets available for benefits of the Scheme are derived from the following: The Scheme 2019 2018 $’000 $’000 Benefits 1,289,336 1,352,915 Transfers out 3,007,077 3,207,995 Forfeitures 13,546 18,087 Other capital movements 6,722 9,132 4,316,681 4,588,129

Forfeitures may be refunded to the employers or reinvested to the Scheme upon the request from the employers. As at 30 June 2019, forfeitures amounted to $9,199,000 were reinvested in the constituent funds (2018: $9,255,000).


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7 Capital management

The capital of the constituent funds is represented by the net assets attributable to members. Subscription and redemption of units during the year are shown in the statement of changes in net assets attributable to members of the respective constituent funds. The amount of net assets attributable to members can change significantly on a daily basis as the constituent funds are subject to daily subscriptions and redemptions at the discretion of members. The constituent funds’ objective when managing capital is to safeguard their ability to continue as a going concern in order to provide retirement benefits to members and benefits for other stakeholders and to maintain a strong capital base to support the development of the investment activities of the constituent funds.

For capital management purpose, the Trustee performs the following: - monitor the level of daily subscriptions and redemptions relative to the liquid assets;

and - redeem and issue units of the constituent funds in accordance with the Trust Deed

as subsequently amended and the rules of the Scheme. 8 Other capital receipts

The other capital receipts are the dealing gains as a result of timing difference in processing member’s unit transactions and the guaranteed benefits to members which they are entitled under the insurance policies of MPF Guaranteed Fund, which Guaranteed Fund invested in.

9 Investments

2019 2018 $’000 $’000

Hang Seng Mandatory Provident Fund – SuperTrust Plus

Investments in constituent funds: MPF Conservative Fund 9,406,599 8,397,010 Guaranteed Fund 3,597,184 3,427,762 Core Accumulation Fund 2,921,198 2,417,860 Balanced Fund 6,087,989 6,228,175 Growth Fund 8,267,914 8,542,656 Hang Seng Index Tracking Fund 13,207,060 13,149,873 North American Equity Fund 1,799,038 1,374,512 European Equity Fund 826,390 831,008 Asia Pacific Equity Fund 3,305,138 3,325,835 Hong Kong and Chinese Equity Fund 3,969,582 4,038,369 Global Bond Fund 1,346,307 1,094,825 Age 65 Plus Fund 722,339 521,455 Stable Fund 908,313 822,043 Chinese Equity Fund 2,478,186 2,609,000 Other liabilities (170,400) (123,323) Investments at fair value 58,672,837 56,657,060


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9 Investments (continued)

2019 2018 $’000 $’000

Constituent funds

MPF Conservative Fund HSBC MPF “A” – MPF Conservative Fund 9,412,910 8,404,743

Guaranteed Fund MPF Guaranteed Fund 3,597,187 3,427,765

Core Accumulation Fund HSBC MPF “A” – Core Accumulation Fund 2,922,413 2,418,934

Balanced Fund HSBC MPF “A” – Balanced Fund 6,091,395 6,231,932

Growth Fund HSBC MPF “A” – Growth Fund 8,272,523 8,547,830

Hang Seng Index Tracking Fund Hang Seng Index ETF 13,012,888 13,000,119

North American Equity Fund HSBC MPF “A” – American Equity Fund 1,800,027 1,375,334

European Equity Fund HSBC MPF “A” – European Equity Fund 826,850 831,511

Asia Pacific Equity Fund HSBC MPF “A” – Asia Pacific Equity Fund 3,306,960 3,327,869

Hong Kong and Chinese Equity Fund HSBC MPF “A” – Hong Kong and Chinese Equity Fund 3,971,769 4,040,844

Global Bond Fund HSBC MPF “A” – Global Bond Fund 1,346,917 1,095,356

Age 65 Plus Fund HSBC MPF “A” – Age 65 Plus Fund 722,634 521,681

Stable Fund HSBC MPF “A” – Stable Fund 908,821 822,528

Chinese Equity Fund HSBC MPF “A” – Chinese Equity Fund 2,479,543 2,610,614


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10 Involvement with unconsolidated structured entities The Scheme has concluded that collective investment schemes in which its constituent funds invest, but that they do not consolidate, meet the definition of structured entities because: - the voting rights in the collective investment schemes are not dominant rights in

deciding who controls them as they relate to administrative tasks only; - each collective investment scheme’s activities are restricted by its prospectus; and - the collective investment schemes have narrow and well defined objectives to

provide investment opportunities to investors. The table below describes the types of structured entities that the constituent funds do not consolidate but in which they hold an interest.

Type of structured entity Nature and purpose Interest held by the

constituent funds Collective investment

schemes To manage assets on behalf of third party investors and generate fees for the investment manager These vehicles are financed through the issue of units to investors

Investment in units issued by the collective investment schemes

The table below sets out interests held by the constituent funds in unconsolidated structured entities. The maximum exposure to loss is the carrying amount of the financial assets held by the constituent funds.

30 June 2019

Investment in collective investment schemes

Number of collective

investment schemes invested Total net assets

Carrying amount included in “Investments”

$’000 $’000 MPF Conservative Fund - Approved pooled investment fund 1 38,882,792 9,412,910 Guaranteed Fund - Approved pooled investment fund 1 14,643,713 3,597,187 Core Accumulation Fund - Approved pooled investment fund 1 13,751,798 2,922,413


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10 Involvement with unconsolidated structured entities (continued)

30 June 2019 (continued)





$’000 $’000 Balanced Fund - Approved pooled investment fund 1 26,064,236 6,091,395 Growth Fund - Approved pooled investment fund 1 35,414,213 8,272,523 Hang Seng Index Tracking Fund - Approved index tracking fund 1 53,149,359 13,012,888 North American Equity Fund - Approved pooled investment fund 1 7,139,865 1,800,027 European Equity Fund - Approved pooled investment fund 1 3,239,720 826,850 Asia Pacific Equity Fund - Approved pooled investment fund 1 11,606,161 3,306,960 Hong Kong and Chinese Equity

Fund - Approved pooled investment fund 1 13,868,886 3,971,769 Global Bond Fund - Approved pooled investment fund 1 6,155,640 1,346,917 Age 65 Plus Fund - Approved pooled investment fund 1 3,310,310 722,634 Stable Fund - Approved pooled investment fund 1 3,819,297 908,821 Chinese Equity Fund - Approved pooled investment fund 1 8,898,967 2,479,543


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30 June 2018





$’000 $’000 MPF Conservative Fund - Approved pooled investment fund 1 36,054,416 8,404,743 Guaranteed Fund - Approved pooled investment fund 1 13,967,667 3,427,765 Core Accumulation Fund - Approved pooled investment fund 1 11,108,284 2,418,934 Balanced Fund - Approved pooled investment fund 1 27,082,062 6,231,932 Growth Fund - Approved pooled investment fund 1 36,709,940 8,547,830 Hang Seng Index Tracking Fund - Approved index tracking fund 1 53,306,822 13,000,119 North American Equity Fund - Approved pooled investment fund 1 5,692,093 1,375,334 European Equity Fund - Approved pooled investment fund 1 3,322,475 831,511 Asia Pacific Equity Fund - Approved pooled investment fund 1 11,895,855 3,327,869 Hong Kong and Chinese Equity

Fund - Approved pooled investment fund 1 15,383,510 4,040,844 Global Bond Fund - Approved pooled investment fund 1 4,895,630 1,095,356 Age 65 Plus Fund - Approved pooled investment fund 1 2,282,929 521,681 Stable Fund - Approved pooled investment fund 1 3,583,946 822,528


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30 June 2018 (continued)





$’000 $’000 Chinese Equity Fund - Approved pooled investment fund 1 9,383,551 2,610,614

During the year, except for the amounts invested in the collective investment schemes, the Scheme did not provide financial support to the collective investment schemes and had no intention of providing financial or other support. The constituent funds can redeem units in the collective investment schemes on a trade day basis.

11 Capital preservation fees The capital preservation fees are payable to the Administrator and deductible from the MPF Conservative Fund when net investment return exceeds the prescribed savings rate. These fees were deducted from the assets of the MPF Conservative Fund. The capital preservation fees for the year ended 30 June 2019 amounting to $83,147,000 (2018: $58,516,000) were deducted from the assets of the MPF Conservative Fund.

12 Soft commission arrangements

During the year ended 30 June 2019, the constituent funds have no soft commission arrangements (2018: Nil).

13 Security lending arrangements

During the year ended 30 June 2019, the constituent funds did not enter into any security lending arrangements (2018: Nil).

14 Negotiability of assets

As at 30 June 2019, there were no statutory or contractual requirements restricting the negotiability of the assets of the constituent funds (2018: Nil).

15 Contingent liabilities and capital commitments

As at 30 June 2019, there were no contingent liabilities or capital commitments outstanding (2018: Nil).


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16 Marketing expenses

No marketing expenses have been deducted from the constituent funds during the year ended 30 June 2019 (2018: Nil).

17 Maintenance of adequate insurance During the year ended 30 June 2019, the Trustee maintained adequate insurance coverage in respect of the Scheme. The insurance coverage indemnifies the members and the ultimate beneficiaries of the Scheme against any losses arising from any risk prescribed in section 8 of the General Regulation. The insurance policies can only be terminated by the insurer giving not less than 30 days’ written notice in advance.

18 Bank loans and other borrowings

As at 30 June 2019, there were no bank loans or other borrowings (2018: Nil). 19 Financial instruments and associated risks

The Scheme is exposed to various risks which are discussed below. (a) Market risk

Market risk embodies the potential for both losses and gains and includes currency risk, interest rate risk and other price risk. Investments of the constituent funds comprise units in collective investment schemes. This is in accordance with the Scheme’s investment policies. The underlying investment of the collective investment schemes directly or indirectly invest in a variety of financial instruments, which may expose the Scheme’s investments to the market risk. The Scheme’s market price risk is managed through diversification of the investments made by the collective investment schemes.

(i) Currency risk

The Scheme is not subject to direct currency risk as all transactions of the Scheme are denominated in Hong Kong dollar. Investments of the Scheme comprise units in collective investment schemes. The underlying collective investment schemes may directly or indirectly invest in a variety of financial instruments denominated in currencies other than Hong Kong dollar, which may expose the Scheme’s investments to indirect currency risk. The investment manager of the underlying collective investment schemes has policies and procedures to manage portfolios effectively and mitigate the currency risk. Details are provided in the financial statements of the underlying collective investment schemes.


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19 Financial instruments and associated risks (continued) (a) Market risk (continued) (ii) Interest rate risk

Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates.

The majority of the Scheme’s financial assets and liabilities are non-interest bearing. Deposits with banks are placed under current accounts which are not subject to interest rate risk. Indirect interest rate risk from underlying collective investment schemes are managed by respective investment managers. As a result, the Scheme is not subject to significant direct interest rate risk exposure.

(iii) Other price risk

Other price risk is the risk that value of investments will fluctuate as a result of changes in market prices (other than those arising from interest rate risk or currency risk), whether caused by factors specific to an individual investment, its issuer or all factors affecting all instruments traded in the market.

The Scheme is exposed to other price risk arising from changes in net assets of the underlying collective investment schemes.

The underlying collective investment schemes strive to invest in strong businesses with quality management and at sensible prices. Other price risk is mitigated and monitored by the investment manager of the underlying collective investment schemes on a regular basis by constructing a diversified portfolio of investments across different issuers, sectors and markets


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19 Financial instruments and associated risks (continued) (a) Market risk (continued) (iii) Other price risk (continued)

Sensitivity analysis

As at the reporting date, the investments in collective investment schemes held by each constituent fund were as follows. A 5% (2018: 5%) increase in prices of the investments held by each constituent fund at the reporting date, with all other variables held constant, would have increased the net assets of the respective constituent fund and the changes in net assets attributable to members by the amount shown below. A 5% (2018:5%) decrease in prices would have an equal but opposite effect. The analysis is performed on the same basis for 2018. As at 30 June 2019

MPF Conservative

Fund Guaranteed

Fund

Core Accumulation

Fund Balanced

Fund Growth

Fund

Hang Seng Index

Tracking Fund

North American

Equity Fund European

Equity Fund Asia Pacific Equity Fund

Hong Kong and Chinese Equity Fund

Global Bond Fund

Age 65 Plus Fund Stable Fund

Chinese Equity Fund

The Scheme

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Investments 9,412,910 3,597,187 2,922,413 6,091,395 8,272,523 13,012,888 1,800,027 826,850 3,306,960 3,971,769 1,346,917 722,634 908,821 2,479,543 58,672,837 Increase in net assets and changes in net

assets attributable to members 470,646 179,859 146,121 304,570 413,626 650,644 90,001 41,343 165,348 198,588 67,346 36,132 45,441 123,977 2,933,642 As at 30 June 2018

MPF Conservative

Fund Guaranteed

Fund

Core Accumulation

Fund Balanced

Fund Growth

Fund

Hang Seng Index

Tracking Fund

North American

Equity Fund European

Equity Fund Asia Pacific Equity Fund

Hong Kong and Chinese Equity Fund

Global Bond Fund

Age 65 Plus Fund Stable Fund

Chinese Equity Fund

The Scheme

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Investments 8,404,743 3,427,765 2,418,934 6,231,932 8,547,830 13,000,119 1,375,334 831,511 3,327,869 4,040,844 1,095,356 521,681 822,528 2,610,614 56,657,060 Increase in net assets and changes in net

assets attributable to members 420,237 171,388 120,947 311,597 427,392 650,006 68,767 41,576 166,393 202,042 54,768 26,084 41,126 130,531 2,832,854


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19 Financial instruments and associated risks (continued) (b) Credit risk

Credit risk is the risk that a counterparty will fail to discharge an obligation or commitment that it has entered into with the Scheme.

At the reporting date, the Scheme is exposed to the following credit risk:

2019 2018 $’000 $’000 Investments 58,672,837 56,657,060 Distribution receivables 201,967 158,267 Contributions receivable 7,736 3,389 Amounts receivable from disposal of investments 194,901 394,785 Other receivables 185 8,402 Cash and cash equivalents 40,364 41,789 Total 59,117,990 57,263,692 Indirect credit risk from underlying collective investment schemes are managed by respective investment managers. The Trustee of the Scheme considers that the credit risk is not significant. With respect to credit risk arising from the other financial assets of the Scheme, which comprise cash and cash equivalents, other receivables, amounts receivables from disposal of investment, contribution receivables and distribution receivables; the Scheme’s exposure equal to the carrying amount of these instruments. The Authority requests the Scheme to place deposits with an authorised financial institution or an eligible overseas bank according to the requirement in Schedule 1 to the General Regulation. Distribution receivables represent distributions from Hang Seng Index ETF, listed in Hong Kong Stock Exchange, which is with low default risk. The credit risk is not considered to be significant. As at 30 June 2019 and 2018, there were no significant concentrations of credit risk. Amounts arising from ECL Impairment on distribution receivables, contributions receivable, amounts receivable on subscriptions of units, amounts receivable from disposal of investments, other receivables and cash and cash equivalents have been measured on a 12-month expected loss basis and reflects the short maturities of the exposures. The Scheme considers that these exposures have low credit risk based on the external credit ratings and/or review result of the counterparties. The Scheme monitors changes in credit risk on these exposures by tracking published external credit ratings of the counterparties and/ or performed ongoing review of the counterparties.


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19 Financial instruments and associated risks (continued) (b) Credit risk (continued)

On initial application of HKFRS 9 as at 1 July 2018, the Managers considers the probability of default to be close to zero as the counterparties have a strong capacity to meet their contractual obligations in the near term. There is no impairment allowance recognised on distributions, interest and other receivable, subscriptions receivable, amounts receivable on sale of investments, fixed deposits with original maturity more than three months and cash and cash equivalents. The amount of the loss allowance did not change during the year ended 30 June 2019.

(c) Liquidity risk

Liquidity risk is the risk that the Scheme will encounter difficulty in meeting obligations associated with financial liabilities. The Scheme’s policy is to regularly monitor current and expected liquidity requirements to ensure that they maintain sufficient reserves of cash and readily realisable investments to meet benefit payments and other liquidity requirements in the short and longer term. The Scheme invests all its assets in collective investment schemes that could be readily converted into cash to meet its liquidity requirement. All financial liabilities disclosed in the statement of net assets available for benefits of the Scheme and the statement of assets and liabilities of the constituent funds mature within 6 months from the reporting date.

(d) Fair value information

The major methods and assumptions used in estimating the fair values of financial instruments are disclosed in note 2(f)(iii). The carrying amounts of all the Scheme’s financial assets and financial liabilities at the reporting date approximated their fair values. For the quoted collective investment schemes, the fair value is based on their latest net asset value per unit at the reporting date. For other financial instruments, including distribution receivables, contributions receivable, amounts receivable from disposal of investments, other receivables, amounts receivable on subscription of units, amounts payable on purchase of investments, benefits payable, accrued expenses and other payables and amounts payable on redemption of units, the carrying amounts approximate fair value due to the immediate or short-term nature of these financial instruments.

20 Deferred expenses

In accordance with section 37 of the General Regulation, administrative expenses for the MPF Conservative Fund which have not been deducted in the respective months may be deducted in the following twelve months. As at 30 June 2019, there was no deferred administrative expenses (2018: $14,110,000).


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21 Payments charged to default investments strategy constituent funds or scheme members who invest in the constituent funds

Core Accumulation fund and Age 65 Plus fund are designated as default investment strategy (“DIS”) constituent funds with effect from 1 April 2017. Payment for services, out-of-pocket expenses and other payments charged to the DIS constituent funds are disclosed below. Payments for services and out-of-pocket expenses are those defined in the MPF Ordinance.

During the year ended 30 June 2019

Core Accumulation

Fund Age 65 Plus

Fund $’000 $’000 Payments for services

- Administrator’s fees 10,816 2,483 - Fund administration fees 580 133 - Sponsor fees 1,319 303 - Trustee's fees 475 109

Total payments for services 13,190 3,028

Out-of-pocket expenses

- Legal and professional fee 7 2 - Auditor’s remuneration 37 8 - Printing and advertising fees 171 36 - Insurance premium expenses 8 2 - Bank Charges 1 -

Total out-of-pocket expenses 224 48 Total payments 13,414 3,076 Out-of-pocket expenses expressed as

a percentage of net asset value of the DIS constituent funds(1) 0.008% 0.008%

(1) The net asset value used for calculating the percentage is the average of the net asset

value of the DIS constituent funds as at the last dealing day of each month during the year ended 30 June 2019.


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21 Payments charged to default investments strategy constituent funds or scheme members who invest in the constituent funds (continued) During the year ended 30 June 2018

Core Accumulation

Fund Age 65 Plus

Fund $’000 $’000 Payments for services

- Administrator’s fees 9,953 1,792 - Fund administration fees 302 60 - Sponsor fees 687 136 - Trustee's fees 247 49

Total payments for services 11,189 2,037

Out-of-pocket expenses

- Valuation fees 102 - - Auditor’s remuneration 75 11 - Printing and advertising fees 358 61 - Insurance premium expenses 7 1

Total out-of-pocket expenses 542 73 Total payments 11,731 2,110 Out-of-pocket expenses expressed as

a percentage of net asset value of the DIS constituent funds(1) 0.024% 0.017%

(1) The net asset value used for calculating the percentage is the average of the net asset

value of the DIS constituent funds as at the last dealing day of each month during the year ended 30 June 2018.

22 Subsequent event

With effect from 1 July 2019, Hang Seng Mandatory Provident Fund – ValueChoice was merged with the Scheme. All members and their accrued benefits under the Hang Seng Mandatory Provident Fund – ValueChoice were transferred to the Scheme on 1 July 2019.


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23 Possible impact of amendments, new standards and interpretations issued but not yet effective for the year ended 30 June 2019

Up to the date of issue of these financial statements, the HKICPA has issued a number of amendments, new standards and interpretations which are not yet effective for the year ended 30 June 2019 and which have not been adopted in these financial statements. These include the following which may be relevant to the Scheme.

Effective for accounting periods

beginning on or after Annual Improvements to HKFRSs 2015-2017 Cycle 1 January 2019 HK(IFRIC) 23, Uncertainty over income tax treatments 1 January 2019

The Trustee is in the process of making an assessment of what the impact of these amendments, new standards and interpretations is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the financial statements of the Scheme.

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Independent auditor’s assurance report to the Trustee of Hang Seng Mandatory Provident Fund – SuperTrust Plus (“the Scheme”) We have audited the financial statements of the Scheme for the year ended 30 June 2019 in accordance with Hong Kong Standards on Auditing and with reference to Practice Note 860.1 (Revised), The Audit of Retirement Schemes (“PN 860.1 (Revised)”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), and have issued an unqualified auditor’s report thereon dated 11 December 2019. Pursuant to section 102 of the Mandatory Provident Fund Schemes (General) Regulation (“the General Regulation”), we are required to report whether the Scheme complied with certain requirements of the Mandatory Provident Fund Schemes Ordinance (“the MPF Ordinance”) and the General Regulation. Trustee’s Responsibility The General Regulation requires the Trustee to ensure that: (a) proper accounting and other records are kept in respect of the constituent funds of the

Scheme, the Scheme assets and all financial transactions entered into in relation to the Scheme;

(b) the requirements specified in the guidelines made by the Mandatory Provident Fund

Schemes Authority (“the Authority”) under section 28 of the MPF Ordinance with respect to forbidden investment practices and the requirements of sections 37(2), 51 and 52 and Part X of, and Schedule 1 to, the General Regulation are complied with;

(c) the requirements under sections 34DB(1)(a), (b), (c) and (d), 34DC(1), 34DD(1) and (4)

of the MPF Ordinance are complied with; and (d) the Scheme assets are not subject to any encumbrance, otherwise than as permitted by

the General Regulation. Our Independence and Quality Control We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. The firm applies Hong Kong Standard on Quality Control 1 and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

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Independent auditor’s assurance report to the Trustee of Hang Seng Mandatory Provident Fund – SuperTrust Plus (“the Scheme”) (continued) Auditor’s Responsibility Our responsibility is to report solely to you, on the Scheme’s compliance with the above requirements based on the results of the procedures performed by us, in accordance with section 102 of the General Regulation, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3000 (Revised), Assurance Engagements Other Than Audits or Reviews of Historical Financial Information and with reference to PN 860.1 (Revised) issued by the HKICPA. We have planned and performed our work to obtain reasonable assurance on whether the Scheme has complied with the above requirements. We have planned and performed such procedures as we considered necessary with reference to the procedures recommended in PN 860.1 (Revised), which included reviewing, on a test basis, evidence obtained from the Trustee of the scheme regarding the Scheme’s compliance with the above requirements. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion Based on the foregoing: (1) In our opinion:

(a) proper accounting and other records have been kept during the year ended 30 June 2019 in respect of the constituent funds of the Scheme, the Scheme assets and all financial transactions entered into in relation to the Scheme; and

(b) the requirements specified in the guidelines made by the Authority under section

28 of the MPF Ordinance with respect to forbidden investment practices and the requirements of sections 37(2), 51 and 52 and Part X of, and Schedule 1 to, the General Regulation have been complied with, in all material respects, as at 31 October 2018, 28 February 2019 and 30 June 2019; and

HANG SENGFund Expense Ratio (%)

30-Jun-19

Hang Seng Mandatory Provident Fund Supertrust Plus

- MPF Conservative Fund 0.92%

- Guaranteed Fund 2.04%

- Hang Seng Index Tracking Fund 0.79%

- Balanced Fund 1.38%

- Growth Fund 1.49%

- Core Accumulation Fund (1) 0.77%

- Hong Kong and Chinese Equity Fund 1.49%

- North American Equity Fund 1.36%

- European Equity Fund 1.37%

- Asia Pacific Equity Fund 1.47%

- Global Bond Fund 0.78%

- Age 65 Plus Fund (2) 0.78%

- Stable Fund 1.28%

- Chinese Equity Fund 1.50%

Remark

(1) Hang Seng MPF SuperTrust Plus Core Accumulation Fund was formerly known as Hang Seng MPF SuperTrust Plus Stable Growth Fund prior to 1 April 2017

(2) Hang Seng MPF SuperTrust Plus Age 65 Plus Fund was formerly known as Hang Seng MPF SuperTrust Plus Flexi-Managed Fund prior to 1 April 2017

PUBLIC

Hang Seng Mandatory Provident Fund – SuperTrust Plus Addendum to the Annual Consolidated Report for the financial year ended 30 June 2019 The purpose of this addendum is to clarify and amend the annual consolidated report for the financial year ended 30 June 2019. There is a typographical error in the first sentence of the second paragraph under the “The Scheme” section on page 3 of the consolidated report as follows:

The date of the amendment to the Trust Deed for restructuring of the scheme should be “19 March 2019” instead of “1 March 2019”.

Please find the revised “The Scheme” section in the attachment for your reference. HSBC Provident Fund Trustee (Hong Kong) Limited 16 March 2020 Encl.

Hang Seng Mandatory Provident Fund – SuperTrust Plus Attachment of Addendum to the Annual Consolidated Report

for the financial year ended 30 June 2019

Revised “The Scheme” section on page 3 of the Consolidated Report 1. The Scheme The Scheme is a master trust scheme set up for the purpose of providing benefits to members in accordance with the Hong Kong Mandatory Provident Fund Schemes Ordinance (“the MPF Ordinance”). The Scheme was established under a trust deed dated 31 January 2000 between Hang Seng Bank Limited as the Sponsor and HSBC Provident Fund Trustee (Hong Kong) Limited as the Trustee. The Scheme is registered under section 21 of the MPF Ordinance. The Trust Deed of the Scheme was amended on 19 March 2019 due to the Scheme restructuring. With effect from 1 July 2019, Hang Seng Mandatory Provident Fund – ValueChoice was merged with the Scheme. All members of the Scheme and their accrued benefits under the Hang Seng Mandatory Provident Fund – ValueChoice were transferred to the Scheme on 1 July 2019. Details on the merger can be found at the following website https://www.hangseng.com/cms/cbd/eMPF/merger_notice_190325e. pdf. The Trust Deed of the Scheme was amended on 8 April 2019 due to the addition of the tax deductible voluntary contributions feature to the Scheme. Other than the above, there was no change in the governing rules of the Scheme since the last year ended 30 June 2018.

hang seng mandatory provident fund – supertrust plus · 2020-01-03 · hang seng mandatory...

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