Allianz Global Investors Asia Fund

Transcription

1 Annual Report Allianz Global Investors Asia Fund

2 Content Page(s) Management and administration 1 Manager s report 3 Allianz Selection European Equity Dividend Trustee s report 7 Independent auditor s report to the unitholders 8 Statement of assets and liabilities 10 Statement of comprehensive income 11 Statement of changes in equity / Statement of changes in net assets attributable to unitholders 12 Cash flow statement 13 Distribution statement 14 Notes to the financial statements 15 Portfolio statement (Unaudited) 37 Statement of movement in portfolio holdings (Unaudited) 40 Performance record (Unaudited) 41 Allianz Selection Income and Growth Trustee s report 42 Independent auditor s report to the unitholders 43 Statement of assets and liabilities 45 Statement of comprehensive income 46 Statement of changes in equity / Statement of changes in net assets attributable to unitholders 47 Cash flow statement 48 Distribution statement 49 Notes to the financial statements 50 Portfolio statement (Unaudited) 77 Statement of movement in portfolio holdings (Unaudited) 90 Performance record (Unaudited) 91 Allianz Selection Total Return Asian Equity Trustee s report 92 Independent auditor s report to the unitholders 93 Statement of assets and liabilities 95 Statement of comprehensive income 97 Statement of changes in net assets attributable to unitholders 98 Cash flow statement 99 Distribution statement 101 Notes to the financial statements 102 Statement of movement in portfolio holdings (Unaudited) 123 Performance record (Unaudited) 124

3 Page(s) Allianz Selection US High Yield Trustee s report 125 Independent auditor s report to the unitholders 126 Statement of assets and liabilities 128 Statement of comprehensive income 129 Statement of changes in net assets attributable to unitholders 130 Cash flow statement 131 Distribution statement 132 Notes to the financial statements 133 Portfolio statement (Unaudited) 150 Statement of movement in portfolio holdings (Unaudited) 160 Performance record (Unaudited) 161 Allianz Selection US Income Trustee s report 163 Independent auditor s report to the unitholders 164 Statement of assets and liabilities 166 Statement of comprehensive income 168 Statement of changes in net assets attributable to unitholders 169 Cash flow statement 170 Distribution statement 172 Notes to the financial statements 173 Statement of movement in portfolio holdings (Unaudited) 193 Performance record (Unaudited) 194

4 Management and administration Manager Allianz Global Investors Asia Pacific Limited ( the Manager ) 27/F, ICBC Tower 3 Garden Road Central Hong Kong Sub-Managers Allianz Global Investors US LLC 600 West Broadway 31st Floor, San Diego CA United States Allianz Global Investors GmbH Bockenheimer Landstrasse D Frankfurt am Main Germany Directors of the Manager Mr. Raymond C.K. Chan Mr. Kam Wah Ip Mr. Ka Yiu Desmond Ng Mr. Andrew Douglas Eu (ceased to be a director of the company effective from 1 January 2016) Mr. Daniel Lehmann (appointed on 1 January 2016) Ms. Tze Ling Yu (appointed on 1 January 2016) Trustee and Custodian HSBC Institutional Trust Services (Asia) Limited ( the Trustee ) 1 Queen s Road Central Hong Kong 1

5 Registrar Allianz Global Investors Asia Pacific Limited ( the Registrar ) 27/F, ICBC Tower 3 Garden Road Central Hong Kong Legal adviser as to matters of Hong Kong and United States law Dechert 27th Floor, Henley Building 5 Queen s Road Central Hong Kong Auditor KPMG Certified Public Accountants 8th Floor, Prince s Building 10 Chater Road Central Hong Kong 2

6 Manager s report Allianz Selection European Equity Dividend, European stock markets (as measured by the broad market index MSCI Europe T.R.) lost about 11% in value. A deterioration in the growth prospects of emerging countries, political tensions in some European countries and the UK s shock decision to leave the EU weighed on investors sentiment. With the Eurozone falling back into deflation and economic activity remaining lackluster, the European Central Bank cut its main interest rate to zero. It also announced that it would increase its asset purchase programme from EUR60 billion to EUR80 billion each month. However, there were some signs of economic improvement as first-quarter GDP growth accelerated. The sub-fund outperformed its market segment during the period due to successful stock selection, mainly within Financials and the Consumer space. On the other hand, a general overweight of Financials and an underweight of Consumer Staples companies detracted from performance. From a country perspective, an overweight of as well as stock selection within the UK contributed most to performance. Please refer to the simplified and full sales prospectuses for additional information on the sub-fund. The performance in the period under review can be found in the table Performance record (Unaudited) at the end of the financial statements. Notwithstanding existing negative factors (political uncertainty, low earnings growth at corporate level, uncertainty about the course of US monetary policy, liquidity risks, valuations in some regions), equities offer good prospects over the longer term. Monetary policy should play a supporting role overall. Structurally, the hunt for returns and capital income is supporting the equity markets. In Europe, both economic and political risks have increased since the UK referendum. The forthcoming Brexit is testing the confidence of both companies and consumers. The risk of recession in the UK has risen and will probably impact economic developments on the European mainland. From a global perspective, however, the direct effects of a weaker UK economy would seem to be negligible. Unemployment continued to fall in the Eurozone. The devaluation of the Euro is producing a growing current account surplus. Valuations of European equities seem attractive compared to their US counterparts. The ratio of positive to negative revisions of analysts earnings expectations ( revision momentum ) for European equities has improved further. 3

7 Allianz Selection Income and Growth, the sub-fund returned 2.51%. For comparison purposes, the S&P 500 Index gained 3.99% and the overall U.S. bond market, as measured by the Barclays Aggregate Bond Index, rose 6.00%. Several factors influenced all three asset classes in the reporting period including commodity prices, technical pressure, global central bank policies, corporate earnings, the US treasury market, global economic data, and lastly, the risk on trade. Consequently, the path for the convertible bond, high-yield bond and large-cap equity markets was volatile. For reference, the convertible universe returned -4.46%, as measured by the BofA Merrill Lynch All US Convertibles Index; and high yield bonds, as measured by the BofA Merrill Lynch US High Yield Master II Index, advanced 1.71%. Finally, the Russell 1000 Growth Index increased 3.02%. The sub-fund provided consistent income throughout the reporting period and the returns of the individual sleeves were consistent with the returns of their respective asset classes. On average, equity holdings outperformed high-yield bond holdings, which outperformed convertible bond holdings. Please refer to the simplified and full sales prospectuses for additional information on the sub-fund. The performance in the period under review can be found in the table Performance record (Unaudited) at the end of the financial statements. Given the extreme volatility levels that have recently been present in the marketplace, the short-term forecasts for the high yield, convertible, and equity markets are challenging. The path for all three markets may be choppy and, at times, may require strong conviction. Investors would be wise to take advantage of lower prices when they present themselves. 4

8 Manager s report (continued) Allianz Selection Total Return Asian Equity Asia ex Japan equities struggled to perform in the second half of 2015 with investors concerned about a hard landing in China and the uncertainty around the timing of the US interest rate hike. The strengthening of US dollar ( USD ) has posed a headwind for emerging markets. The Renminbi ( RMB ) weakened as the People s Bank of China announced changes in the way it values its currency, indicating that it would now measure the currency against a basket of currencies, rather than just the USD. As a result the International Monetary Fund announced it would add the Chinese currency to the basket of currencies that make up its lending reserve. Coming into 2016, most Asian equity markets suffered their worst start of a year in decades. Fuelled by the fear of further slowdown in China, competitive RMB devaluation and weakness in crude oil prices, some markets even entered into bearmarket territory in January and early part of February. However, sentiment started to reverse in mid-february and there was a strong rally that lasted till April. We believe a couple of improvements contributed to the return of confidence, including softening USD, stabilization of RMB, a shift of focus back to economic growth in China, and joint stimulus efforts by global central banks. Stabilizing commodity prices also triggered the rally. The sub-fund underperformed the benchmark for the period until the date of cessation of operations (i.e. from 1 July 2015 to 29 April 2016). Stock selection in information technology was the top detractor; while stock selection in industrials contributed the most. By country, stock selection in Taiwan was the biggest detractor; while stock selection in Indonesia helped partially offset the performance drag. On stock specifics, our position in China Life Insurance was the top detractor. Though the insurance premium growth in China remained encouraging due to low penetration rate, investors were concerned about the declining investment returns amidst the collapsing China A share market and the dropping of onshore bond yields. Therefore stock prices corrected significantly. Though we are still long term positive on this stock, we have trimmed down positions to control the risk contribution to the portfolio. On the other hand, Pakuwon, an Indonesian property developer, was the top contributor over the period. As domestic consumption continued to support the purchasing power of local consumers, shopping mall developers enjoyed good volume and rental income growth. We believe that financial contagion risk, not trade, is the main risk that Asian equity markets face from Brexit. Though the UK is the fifth largest economy in the world, its weight in Asian exports is relatively low. Therefore a trade driven negative impact on the region is likely to be contained. The key risk from Brexit for Asia is a significantly stronger USD which is typically negative for emerging markets and may result in capital outflows. Having said that, the counterbalance is that potential rises in US interest rates have been pushed back and it has been noticeable how stable Asian capital markets have been in the Brexit aftermath. In this market environment with elevated levels of volatility, the natural outcome is for stocks which offer certainty through either visible earnings growth or stable dividends to outperform and we are already well positioned in these areas. In particular, we find more of these opportunities among companies that can benefit from domestic growth trends within Asia, including consumption upgrade, advanced manufacturing, rising demand for healthcare, and mobile data growth. 5

9 Allianz Selection US High Yield, the sub-fund returned 1.02%. The US high-yield bond market, as measured by the BofA Merrill Lynch US High Yield Master II Index, returned 1.71%. Several factors influenced the high-yield bond market in the reporting period including commodity prices, technical pressure, global central bank policies, corporate earnings, the US treasury market, global economic data, and lastly, the risk on trade. Consequently, the path for the high-yield bond market was volatile. In the sub-fund, industry exposure that had a positive impact on relative performance included technology, telecom wireline and healthcare. Conversely, industry exposure that negatively impacted relative performance included energy, theaters & entertainment and automotive & auto parts. In addition, an underweight in CCC-rated bonds, which underperformed the overall market, was beneficial; however, an underweight in BB-rated bonds held back relative returns as the lowest-yielding, tightest-spread issues outperformed. Please refer to the simplified and full sales prospectuses for additional information on the sub-fund. The performance in the period under review can be found in the table Performance record (Unaudited) at the end of the financial statements. Among fixed-income alternatives, high-yield bonds should return to their historical norm as a contributor from both a diversification and a relative-performance perspective. Interest rates will have a negligible impact on the high-yield market given the relative average spread and dollar market price today. The Fed path, earnings trends, commodity prices and global growth will all influence the outlook. Allianz Selection US Income For the reporting period until the date of cessation of operations of the sub-fund (i.e. from 1 July 2015 to 8 October 2015), returns for US corporate bonds with shorter-term maturities were positive. The investment grade corporate bond universe returned 0.4%, as measured by the BofA Merrill Lynch US Corporate 1-5 year Index. High-yield bonds, as measured by the BofA Merrill Lynch US 0-5 Year BB-B US High Yield Constrained Index, declined 2.6%. Several factors influenced all three asset classes in the reporting period, including falling commodity prices, technical pressure and negative sentiment, the US Federal Reserve s activity, earnings and the dollar, and global economic data. The sub-fund s overall return since its inception was consistent with the combined performance of the underlying asset classes mentioned above. In particular, investment-grade bond holdings, on average, provided relative outperformance compared to high-yield bond holdings and added stability to the performance of the overall sub-fund. Please refer to the simplified and full sales prospectuses for additional information on the sub-fund. The performance in the period under review can be found in the table Performance record (Unaudited) at the end of the financial statements. 6

10 Trustee s report Allianz Selection European Equity Dividend ( the Sub-Fund ) We hereby confirm that, to the best of our knowledge, the Manager of the Sub-Fund has, in all material respects, managed the Sub-Fund in accordance with the provisions of the trust deed dated 10 September 2014, for the year ended 30 June ) ) For and on behalf of ) HSBC Institutional Trust Services (Asia) Limited ) ) 7

11 Independent auditor s report to the unitholders of Allianz Selection European Equity Dividend ( the Sub-Fund ) Report on the Financial Statements We have audited the financial statements of Allianz Selection European Equity Dividend ( the Sub-Fund ), a sub-fund of the Allianz Global Investors Asia Fund, set out on pages 10 to 36, which comprise the statement of assets and liabilities as at 30 June 2016, and the statement of comprehensive income, statement of changes in equity / statement of changes in net assets attributable to unitholders, cash flow statement and distribution statement for the year then ended and a summary of significant accounting policies and other explanatory information. Manager s and Trustee s responsibilities for the financial statements The Manager and the Trustee are responsible for the preparation of financial statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants, and for such internal control as the Manager and the Trustee determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In addition, the Manager and the Trustee also have responsibilities to ensure that the financial statements comply with the relevant disclosure provisions of the trust deed dated 10 September 2014 and the relevant disclosure requirements set out in Appendix E to the Hong Kong Code on Unit Trusts and Mutual Funds issued by the Hong Kong Securities and Futures Commission ( the Code ). Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. This report is made solely to you 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 audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Sub-Fund s preparation of the financial statements that give a true and fair view 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 Sub-Fund s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Manager and the Trustee, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Sub-Fund as at 30 June 2016, and of its transactions and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards. 8

12 Independent auditor s report to the unitholders of Allianz Selection European Equity Dividend ( the Sub-Fund ) (continued) Report on Disclosure Requirements under the Code We report that the financial statements have been properly prepared in accordance with the relevant disclosure provisions of the trust deed dated 10 September 2014 and the relevant disclosure requirements set out in the Code. Certified Public Accountants 8th Floor, Prince s Building 10 Chater Road Central, Hong Kong 9

13 Allianz Selection European Equity Dividend Statement of Assets and Liabilities as at 30 June 2016 (Expressed in Euros) Assets Note EUR EUR Investments 5 110,852, ,229,814 Amounts receivable on foreign currency forward contracts 10(f) 932, ,246 Subscriptions receivable 1,330 2,021,597 Debtors on sale of investments 4,126,345 12,817 Dividend receivable 531, ,640 Cash and cash equivalents 6(d) 1,120,395 6,288,366 Liabilities 117,564, ,598,480 Amounts payable on foreign currency forward contracts 10(f) 49,177 2,619,765 Redemptions payable 4,675, ,368 Creditors on purchase of investments 182, ,959 Other payables 6(a), 6(b), 6(c), 6(d) 248, ,181 5,156,387 4,416,273 Net assets attributable to unitholders 112,408, ,182,207 Representing: Financial liabilities 139,182,207 Total equity 112,408,166 Number of units outstanding Class AM Distribution H2-RMB 8(a) 86,530, ,836, Class IT Accumulation EUR 8(a) 1,000, Net asset value per unit Class AM Distribution H2-RMB 8(b) RMB 9.62 RMB Class IT Accumulation EUR 8(b) EUR Approved by the Trustee and the Manager on ) ) For and on behalf of ) HSBC Institutional Trust Services (Asia) Limited ) ) ) ) ) For and on behalf of ) Allianz Global Investors Asia Pacific Limited ) The notes on pages 15 to 36 form part of these financial statements. 10

14 Allianz Selection European Equity Dividend (continued) Statement of Comprehensive Income for the year ended 30 June 2016 (Expressed in Euros) Note Year ended 30 June 2016 EUR Period from 14 October 2014 (date of commencement) to 30 June 2015 EUR Income Dividend income 7,493,224 2,239,023 Net losses on investments 3 (18,582,856) (5,122,075) Net foreign exchange losses (5,544,877) (311,361) (16,634,509) (3,194,413) Expenses Investment management fee 6(a) (2,141,079) (437,539) Transaction costs (211,092) (338,480) Trustee s fee 6(b) (100,990) (23,244) Administrative fees (54,962) (39,398) Registrar s and transfer agent s fees 6(c) (28,309) (7,065) Auditors remuneration (5,286) (8,618) Formation costs (79,546) Safe custody fees, bank charges and miscellaneous expenses 6(b), 6(d) (115,182) (68,429) (2,656,900) (1,002,319) Net loss before taxation (19,291,409) (4,196,732) Taxation 4 (1,005,173) (342,259) Net loss before distributions (20,296,582) (4,538,991) Distributions to holders of Class AM Distribution H2-RMB 9 (3,031,068) (1,975,409) Decrease in net assets attributable to unitholders and total comprehensive income for the year/period (23,327,650) (6,514,400) The notes on pages 15 to 36 form part of these financial statements. 11

15 Allianz Selection European Equity Dividend (continued) Statement of Changes in Equity / Statement of Changes in Net Assets Attributable to Unitholders for the year ended 30 June 2016 (Expressed in Euros) Note Year ended 30 June 2016 EUR Period from 14 October 2014 (date of commencement) to 30 June 2015 EUR Balance at the beginning of the year/period 139,182,207 Decrease in net assets attributable to unitholders and total comprehensive income for the year/period (23,327,650) (6,514,400) Transactions with unitholders Issuance of units 131,999, ,061,697 Redemption of units (125,385,598) (12,365,090) Distributions to unitholders 9 (10,060,349) (3,446,391) 145,696,607 Balance at the end of the year/period 112,408, ,182,207 * According to HKAS 32, the redeemable units of the Sub-Fund were classified as financial liabilities as at 30 June 2015 and reclassified as equity instruments during the year ended 30 June After the reclassification, the Sub- Fund presented statement of changes in equity, and the issue and redemption of units and distributions are treated as transactions with owners and recorded directly in the statement of changes in equity. Please see note 2 (k) for further details. The notes on pages 15 to 36 form part of these financial statements. 12

16 Allianz Selection European Equity Dividend (continued) Cash Flow Statement for the year ended 30 June 2016 (Expressed in Euros) Year ended 30 June 2016 EUR Period from 14 October 2014 (date of commencement) to 30 June 2015 EUR Operating activities Net loss before taxation (19,291,409) (4,196,732) Adjustments for: Net losses on investments 18,582,856 5,122,075 Net foreign exchange losses 5,544, ,361 Dividend income (7,493,224) (2,239,023) Operating cash flow before changes in working capital (2,656,900) (1,002,319) (Decrease)/increase in other payables (14,863) 263,181 Cash used in operating activities (2,671,763) (739,138) Dividends received 7,319,187 1,881,383 Tax paid (1,005,173) (342,259) Net cash generated from operating activities 3,642, ,986 Investing activities Purchase of investments (89,396,226) (144,962,717) Sale of investments and settlement of foreign currency forward contracts 80,973,642 8,145,128 Net cash used in investing activities (8,422,584) (136,817,589) Financing activities Proceeds from issuance of units 134,019, ,040,100 Payments on redemption of units (121,316,044) (11,758,722) Distributions paid (13,091,417) (1,975,409) Net cash (used in)/generated from financing activities (387,638) 142,305,969 Net (decrease)/increase in cash and cash equivalents (5,167,971) 6,288,366 Cash and cash equivalents at the beginning of the year/period 6,288,366 Cash and cash equivalents at the end of the year/period 1,120,395 6,288,366 The notes on pages 15 to 36 form part of these financial statements. 13

17 Allianz Selection European Equity Dividend (continued) Distribution Statement for the year ended 30 June 2016 Year ended 30 June 2016 EUR Period from 14 October 2014 (date of commencement) to 30 June 2015 EUR Amount available for distribution brought forward 139,182,207 Net received or receivable on issue and redemption of units 6,613, ,696,607 Loss before distributions after taxation (20,296,582) (4,538,991) Amount available for distribution 125,499, ,157,616 Distributions to unitholders (13,091,417) (1,975,409) Amount available for distribution carried forward 112,408, ,182,207 Distribution history Allianz Selection European Equity Dividend Note Year ended 30 June 2016 Distribution Date of per unit distribution RMB Period from 14 October 2014 (date of commencement) to 30 June 2015 Distribution Date of per unit distribution RMB Class AM Distribution H2-RMB First distribution July November 2014 Second distribution August December 2014 Third distribution September January 2015 Fourth distribution October February 2015 Fifth distribution November March 2015 Sixth distribution December April 2015 Seventh distribution January May 2015 Eighth distribution February June 2015 Ninth distribution March 2016 Tenth distribution April 2016 Eleventh distribution May 2016 Twelfth distribution June 2016 The notes on pages 15 to 36 form part of these financial statements. 14

18 Allianz Selection European Equity Dividend (continued) Notes to the Financial Statements (Expressed in Euros) 1 The Sub-Fund Allianz Selection European Equity Dividend ( the Sub-Fund ) is a sub-fund of Allianz Global Investors Asia Fund ( the Trust ). The Trust is an open-ended unit trust established under a trust deed dated 10 September 2014 ( the Trust Deed ), and governed by the laws of Hong Kong. The objective of the Sub-Fund is to achieve long-term capital growth primarily through equity-based investments in European markets that are expected to achieve high dividend returns. The Sub-Fund is authorised by the Hong Kong Securities and Futures Commission ( SFC ) under section 104 of the Hong Kong Securities and Futures Ordinance ( HKSFO ) and is governed by the Hong Kong Code on Unit Trusts and Mutual Funds issued by the SFC. 2 Significant accounting policies (a) Statement of compliance The financial statements 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 and the relevant disclosure requirements of the Hong Kong Code on Unit Trusts and Mutual Funds issued by the SFC. A summary of the significant accounting policies adopted by the Sub-Fund is set out below. 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 Sub-Fund. The Sub-Fund has not applied any new standard or interpretation that is not yet effective for the current accounting period (note 12). (b) Basis of preparation of the financial statements The functional and presentation currency of the Sub-Fund is the Euros ( EUR ). The financial statements are prepared on a fair value basis for investments. Other financial assets and financial liabilities are stated at amortised cost. The preparation of the 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 estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The previous financial statements were prepared in respect of the period from 14 October 2014 (date of commencement) to 30 June 2015 (i.e. non full year basis), however the current financial statements were prepared in respect of the period from 1 July 2015 to 30 June 2016 (i.e. full year basis). Consequently, the comparative figures shown on the statement of comprehensive income, statement of changes in equity/statement of changes in net assets attributable to unitholders, cash flow statement, distribution statement and related notes are not fully comparable. 15

19 2 Significant accounting policies (continued) (c) Foreign currency translation Foreign currency transactions during the year are translated into Euros at the exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated into Euros at the foreign exchange rates ruling at the date of statement of assets and liabilities. Foreign currency exchange differences arising on translation and realised gains and losses on disposals or settlements of monetary assets and liabilities are recognised in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated to Euros at the foreign currency exchange rates ruling at the dates that the values are determined. Foreign currency exchange differences relating to investments are included in net gains/(losses) on investments. All other foreign currency exchange differences relating to monetary items including cash and cash equivalents are presented separately in profit or loss. (d) Financial instruments (i) Classification All of the Sub-Fund s investments are designated as financial assets or financial liabilities at fair value through profit or loss. This category comprises financial instruments held for trading, which are instruments that the Sub-Fund has acquired principally for the purpose of short-term profit-taking. These include investments in equities. All derivatives in a net receivable position (positive fair value) are reported as financial assets. All derivatives in a net payable position (negative fair value) are reported as financial liabilities. Financial assets that are classified as loans and receivables include subscriptions receivable, debtors on sale of investments and dividend receivable. Financial liabilities at amortised cost include redemptions payable, creditors on purchase of investments and other payables. Financial liabilities arising from the redeemable units issued by the Sub-Fund are carried at the redemption amount. (ii) Recognition The Sub-Fund recognises financial assets and financial liabilities on the date it becomes a party to the contractual provisions of the instrument. A regular way purchase or sale of financial assets is recognised using trade date accounting. From this date any gains and losses arising from changes in fair value of the financial assets or financial liabilities are recorded. Financial liabilities are not recognised unless one of the parties has performed their obligations under the contract or the contract is a derivative contract not exempted from the scope of Hong Kong Accounting Standard ( HKAS )

20 Allianz Selection European Equity Dividend (continued) Notes to the Financial Statements (continued) (Expressed in Euros) 2 Significant accounting policies (continued) (d) Financial instruments (continued) (iii) Measurement Financial instruments are measured initially at fair value (transaction price). Transaction costs on investments are expensed immediately. Subsequent to initial recognition, all instruments classified at fair value through profit or loss are measured at fair value with changes in their fair values recognised in profit or loss. Financial assets classified as loans and receivables are carried at amortised cost using the effective interest rate method, less impairment losses, if any. Financial liabilities other than those at fair value through profit or loss are measured at amortised cost using the effective interest rate method. Financial liabilities arising from the redeemable units issued by the Sub-Fund are carried at the redemption amount representing the unitholders right to a residual interest in the Sub-Fund s assets. (iv) Fair value measurement principles 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 Sub-Fund has access at that date. The fair value of a liability reflects its non-performance risk. When available, the Sub-Fund 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. If there is no quoted price in an active market, then the Sub-Fund uses valuation techniques that maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction. The Sub-Fund recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which the change has occurred. (v) Impairment Financial assets that are stated at cost or amortised cost are reviewed at each date of the statement of assets and liabilities to determine whether there is objective evidence of impairment. If any such indication exists, an impairment loss is recognised in profit or loss as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective interest rate. If in a subsequent period the amount of an impairment loss recognised on a financial asset carried at amortised cost decreases and the decrease can be linked objectively to an event occurring after the write-down, the write-down is reversed through profit or loss. 17

21 2 Significant accounting policies (continued) (d) Financial instruments (continued) (vi) Derecognition The Sub-Fund derecognises a financial asset when the contractual rights to the cash flows from the financial assets expire, or it transfers the financial asset together with substantially all the risks and rewards of ownership, and the transfer qualifies for derecognition in accordance with HKAS 39. A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expires. The Sub-Fund uses the weighted average cost method to determine realised gains and losses on derecognition. (vii) Offsetting Financial assets and financial liabilities are offset and the net amount is reported in the statement of assets and liabilities when the Sub-Fund has a legally enforceable right to offset the recognised amounts and it intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. (viii) Specific instruments Foreign currency forward contracts The Sub-Fund enters into various foreign currency forward contracts for the purposes of hedging the portfolio which obligate the Sub-Fund to deliver currencies at specified future dates. These outstanding foreign currency forward contracts are revalued at the forward rates of exchange applicable to the relevant contracts at the reporting date. Unrealised gains and losses arising therefrom and realised gains and losses on closed contracts are dealt with in profit or loss. (e) Cash and cash equivalents Cash and cash equivalents comprise current deposits with banks. Cash and cash equivalents are 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, and are held for the purpose of meeting short term cash commitments rather than for investment or other purposes. (f) Income recognition Provided it is probable that the economic benefits will flow to the Sub-Fund and the revenue and costs if applicable, can be measured reliably, revenue is recognised in profit or loss as follows: Dividend income Dividend income from listed investments is recognised when the share price of the investment goes ex-dividend. Dividends from other investments are recognised in profit or loss as dividend income when declared. In some cases, the Sub-Fund may choose to receive dividends in the form of additional shares rather than cash. In such cases, the Sub-Fund recognises the dividend income for the amount of the equivalent cash dividend with the corresponding debit treated as an additional investment. 18

22 Allianz Selection European Equity Dividend (continued) Notes to the Financial Statements (continued) (Expressed in Euros) 2 Significant accounting policies (continued) (g) Expenses All expenses are recognised in profit or loss on an accruals basis. (h) Foreign exchange gains and losses Foreign exchange gains and losses on investments are recognised together with other changes in the fair value. Included in profit or loss line item Net foreign exchange losses are net of foreign exchange gains and losses on monetary financial assets and financial liabilities other than those classified as fair value through profit or loss. (i) Related parties (a) A person, or a close member of that person s family, is related to the Sub-Fund if that person: (i) (ii) (iii) has control or joint control over the Sub-Fund; has significant influence over the Sub-Fund; or is a member of the key management personnel of the Sub-Fund. (b) An entity is related to the Sub-Fund if any of the following conditions applies: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) The entity and the Sub-Fund are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others). 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). Both entities are joint ventures of the same third party. One entity is a joint venture of a third entity and the other entity is an associate of the third entity. The entity is a post-employment benefit plan for the benefit of employees of an entity related to the Sub-Fund. The entity is controlled or jointly controlled by a person identified in (a). 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). The entity, or any member of a group of which it is a part, provides key management personnel services to the Sub-Fund or to the Sub-Fund 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. 19

23 2 Significant accounting policies (continued) (j) Subscriptions and redemptions The Sub-Fund recognises unitholders subscriptions and allots units upon receipt of a valid subscription application and derecognise them upon receipt of a valid redemption application. (k) Units in issue The Sub-Fund 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 issuer to repurchase or redeem that instrument for cash or another financial asset is classified as equity instruments if it meets the following conditions: (i) (ii) (iii) (iv) (v) it entitles the holder to a pro rata share of the Sub-Fund s net assets in event of the Sub-Fund s 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 Sub-Fund 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 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 Sub-Fund over the life of the instrument. The Sub-Fund had two classes of redeemable units in issue Class AM Distribution H2-RMB and Class IT Accumulation EUR. All the classes belong to the most subordinate class of financial instruments in the Sub- Fund and rank pari passu in all material respects and have the same terms and conditions other than different management fee rate and distribution rights. The redeemable units provide unitholders with the right to require redemption for cash at a value proportionate to the unitholders share in the Sub-Fund s net assets at each daily redemption date, and also in the event of the Sub-Fund s liquidation. The redeemable units were classified as financial liabilities and are measured at the present value of the redeemable amounts. On 8 October 2015, all units in Class IT Accumulation EUR were redeemed. Accordingly, the only remaining class of units in issue, Class AM Distribution H2-RMB, met all the conditions above for equity classification and was reclassified as equity instruments with effect from 8 October (l) Distributions to holders of redeemable units Distributions to holders of redeemable units classified as financial liabilities are recognised in profit or loss when they are authorised and no longer at the discretion of the Sub-Fund. Distributions to holders of redeemable units classified as equity instruments are recognised in the statement of changes in equity. 20

24 Allianz Selection European Equity Dividend (continued) Notes to the Financial Statements (continued) (Expressed in Euros) 3 Net losses on investments Year ended 30 June 2016 EUR Period from 14 October 2014 (date of commencement) to 30 June 2015 EUR Movement of unrealised gains or losses (1,983,552) (5,685,438) Realised (losses)/gains (16,599,304) 563,363 Net losses (18,582,856) (5,122,075) 4 Taxation No provision for Hong Kong Profits Tax has been made in the financial statements as the income of the Sub-Fund is exempt from taxation under section 26A(1A) of the Hong Kong Inland Revenue Ordinance. Dividend income received by the Sub-Fund is subject to withholding tax imposed in certain countries of origin. Dividend income is recognised gross of taxes and the corresponding withholding tax is recognised as tax expense. 5 Investments EUR EUR Equities Listed shares 110,852, ,229,814 Investments, at cost 118,521, ,915,252 Net unrealised depreciation in value of investments (7,668,990) (5,685,438) Investments, at fair value 110,852, ,229,814 21

25 6 Transactions with the Trustee, Manager and Connected Persons The following is a summary of significant related party transactions or transactions entered into during the year/period between the Sub-Fund and the Trustee, the Manager and their Connected Persons. Connected Persons are those as defined in the Code on Unit Trusts and Mutual Funds issued by the SFC. All transactions during the year between the Sub-Fund and the Trustee, the Manager and their Connected Persons were entered into in the ordinary course of business and under normal commercial terms. To the best of the knowledge of the Trustee and the Manager, the Sub- Fund did not have any other transactions with Connected Persons except for those disclosed below. (a) The Sub-Fund is managed by Allianz Global Investors Asia Pacific Limited ( the Manager ) which receives a management fee, payable monthly in arrears, equivalent to a percentage per annum of the net asset value of the relevant class of units of the Sub-Fund as follows: % charged % charged For Class AM Distribution H2-RMB 1.50% p.a. 1.50% p.a. For Class IT Accumulation EUR 0.75% p.a. 0.75% p.a EUR EUR (i) Management fee for the year/period 2,141, ,539 (ii) Management fee payable at year/period end 150, ,439 (b) The trustee of the Sub-Fund is HSBC Institutional Trust Services (Asia) Limited ( the Trustee ), a subsidiary within the HSBC Group. The Trustee receives a trustee s fee, payable monthly, equivalent to 0.07% per annum of the net asset value of the Sub-Fund, subject to a minimum annual fee of USD8,000. In addition, the Trustee provides valuation services to the Sub-Fund in return for a valuation fee EUR EUR (i) Trustee s fee for the year/period 100,990 23,244 (ii) Trustee s fee payable at year/period end 7,028 7,522 (iii) Valuation fee for the year/period 14,322 11,864 (iv) Valuation fee payable at year/period end 1,134 1,508 (c) The registrar of the Trust is Allianz Global Investors Asia Pacific Limited ( the Registrar ) which receives a registrar s fee EUR EUR (i) Registrar s fee for the year/period 28,309 7,065 (ii) Registrar s fee payable at year/period end 4,352 3,196 22

26 Allianz Selection European Equity Dividend (continued) Notes to the Financial Statements (continued) (Expressed in Euros) 6 Transactions with the Trustee, Manager and Connected Persons (continued) (d) Bank accounts are maintained with The Hongkong and Shanghai Banking Corporation, a subsidiary within the HSBC Group. The balances of the accounts are set out below: EUR EUR Cash at bank at year/period end 1,120,395 6,288,366 There is no interest income arising from this account during the current year and prior period. In addition, it provides safe custody services and services in connection with purchases and sales transactions to the Sub-Fund in return for a safe custody fee and a transaction handling fee respectively EUR EUR (i) Safe custody fee for the year/period 30,692 5,534 (ii) Transaction handling fee as included in miscellaneous expenses for the year/period 29,723 49,747 (iii) Transaction handling fee payable as included in other payables at year/period end 2,862 7,548 (e) (f) The counterparty of all foreign currency forward contracts held by the Sub-Fund during the year is The Hongkong and Shanghai Banking Corporation. All outstanding foreign currency forward contracts as at 30 June 2016 are set out in note 10 (f). In its purchases and sales of investments, the Sub-Fund utilises the brokerage services of HSBC Investment Banking Group Limited and HSBC Bank plc, which are members of the HSBC Group. Details of transactions effected through these companies are as follows: HSBC Investment Banking Group Limited HSBC Bank Plc Commission paid for the year/period EUR 5,501 EUR 2,004 EUR 2 Average rate of commission 0.09% 0.04% 0.00% Total aggregate value of such transactions for the year/period EUR 5,968,823 EUR 5,574,498 EUR 35,305 Percentage of such transactions in value to total transactions for the year/period 3.29% 3.68% 0.02% 23

27 6 Transactions with the Trustee, Manager and Connected Persons (continued) (g) The Sub-Fund held investments in Allianz SE and HSBC Holdings plc as at 30 June 2016 and during the year, which are the ultimate holding company of the Manager and the Trustee respectively. The details of the market value of these investments and dividend income received for the year/period are as follows: EUR EUR (i) Market value at year/period end 5,533,185 8,962,899 (ii) Dividend income received for the year/period 529, ,833 (h) During the year ended 30 June 2016, the Sub-Fund s units were subscribed and redeemed by the Manager and its affiliates as follows: (i) Allianz Lebensversicherungs-AG Class IT Accumulation EUR Number of units in issue brought forward 1,000, Units subscribed during the year/period 1,000, Units redeemed during the year/period (1,000, ) Number of units in issue carried forward 1,000, Soft commission arrangements As regards to the Sub-Fund, the Manager has not entered into any soft commission arrangements. 8 Units issued and redeemed (a) Capital movement Year ended 30 June 2016 Period from 14 October 2014 (date of commencement) to 30 June 2015 (i) Class AM Distribution H2-RMB Number of units in issue brought forward 79,836, Units issued during the year/period 88,891, ,172, Units redeemed during the year/period (82,196, ) (7,336, ) Number of units in issue carried forward 86,530, ,836, (ii) Class IT Accumulation EUR Number of units in issue brought forward 1,000, Units issued during the year/period 1,000, Units redeemed during the year/period (1,000, ) Number of units in issue carried forward 1,000, The Sub-Fund is not subject to any externally imposed capital requirements. 24