F&C Fund Société d Investissement à Capital Variable

Transcription

1 F&C Fund Société d Investissement à Capital Variable Semi-Annual Report (Unaudited) as at 31 March 2017 R.C.S. Luxembourg B 82782

2

3 Contents Manager s Report 2 Board of Directors 3 Schedule of Investments 4 Distribution of Investments by Economic Sector 8 Statement of Net Assets 9 Changes in number of shares outstanding 9 Statement of Operations and Changes in Net Assets 10 Comparative key figures 11 Notes to the Financial Statements 12 Securities Financing Transactions 18 Administration of the Fund 21 Copies of the annual and interim reports may be obtained from the registered office of F&C Fund (the Fund ) at: 49, avenue J.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg and from foreign representatives and will be posted to shareholders on request. Convening notices of all general meetings will be sent to the holders of registered shares by post at least eight days prior to the meeting. The Articles of Incorporation of the Fund have been filed with the Registre de Commerce et des Sociétés of Luxembourg where they are available for inspection and copies can be obtained upon request. The net asset value of each of the Fund s shares is quoted in or on Bloomberg, Reuters and The issue and redemption prices are also available from State Street Bank Luxembourg S.C.A., 49, avenue J.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg. No subscription can be received on the basis of financial reports. Subscriptions are only valid if made on the basis of the current prospectus, the latest key investor information documents and by the latest annual and the most recent interim report, if published thereafter. The information contained in this report is historical and not necessarily indicative of future performance. Page 1

4 Manager s Report Dear Shareholders This report covers the 6-month period to 31 March 2017 Over the six months to 31 March 2017, the A share class produced a total return of 1.3% whilst the I share class produced a total return of 1.7%. The returns include the coupon payments made in January 2017 of for the A share class, for the I share class. Global equity markets made gains over the six months to the end of March Russia was one of the top performers, supported by some improvement in sentiment on its domestic economy and firmer oil prices. Brazil was another strong performer on hopes that new political leadership could help the economy emerge from its severe recession. US equities staged a rally, with Donald Trump s win raising the prospect of increased US economic growth on expectations that the new administration would cut taxes while also ramping up infrastructure spending. Overall, investors positioned themselves for increased US fiscal stimulus and higher global growth, inflation and interest rates as a result of Donald Trump s victory. In commodity markets, Brent oil futures rose from $49 to $53 per barrel as landmark agreements between OPEC (Organisation of the Petroleum Exporting Countries) and non-opec members to cut oil production provided some support to the market. As the period progressed, however, this move was partly counter-balanced by US crude inventories reaching record highs. Commodities were generally supported by robust economic data from the US, eurozone and China. US interest rates rose over the period, with the Federal Reserve increasing rates at its December and March meetings, having indicated that it would make two further increases during As well as generally robust US economic data and higher inflation, US interest rate expectations also rose on the back of Donald Trump s win in the US presidential election, given the incoming administration s agenda to increase fiscal stimulus. The European Central Bank (ECB) extended its quantitative easing programme to the end of 2017, albeit with monthly asset purchases being reduced from 80 billion to 60 billion. Against improving eurozone economic data and rising inflation, German 10-year bund yields moved out of negative territory during the period. UK gilt yields also moved higher, with economic data defying expectations of a Brexit-related slowdown. Polls indicating that far-right candidate Marine Le Pen would win the first round of the French presidential race pushed the spread between German and French government bonds to four-year highs. Investors are starting to question the US administration s ability to deliver stimulus via tax reform and infrastructure spending, and whether it can do this in a manner that will satisfy the expectations that have helped propel equity markets to record highs. As European economic data continues to improve, we should see the valuation discount on European equities narrow further. By contrast, in the UK, the triggering of Article 50 and higher inflation have raised concerns about the political and economic challenges ahead, including the resilience of consumer spending. In Japan, accelerating real exports support our view that competitive exporters offer an attractive investment opportunity. Overall, we still believe that sustainable growth companies will outperform over the long term, due to their robust cash flows, focus on growing franchise value and commitment to improving total shareholder returns. Overall, we remain cautious on the prospects for government bonds. We expect the Bank of England (BoE) to maintain its monetary policy. The BoE s current accommodative stance and ongoing quantitative easing measures, along with Governor Mark Carney s pledge to counter any Brexit-related slowdown should continue to limit the scope for UK yields to rise. Although UK inflation has already breached the BoE s 2% target, a recovery in sterling from oversold levels along with weaker UK economic growth could see inflation undershoot elevated market expectations. We see little economic slack in the US economy and believe increases in infrastructure spending and tax cuts are likely to be more inflationary than productive. We expect to see a continuing repricing of inflation risk premia on the back of higher energy costs, tight US labour markets, an impending construction boom and expected fiscal easing. In Europe, economic data remains strong but political risk remains high. While there has been no change to official eurozone policy, the European Central Bank appears to have adopted a more hawkish tone given the higher inflation expectations and improvement in the economic outlook. Christopher Childs Fund Manager April 2017 Note: The figures stated in this report are historical and not necessarily indicative of future performance. Page 2

5 Board of Directors Chairman Patrick Johns Non-executive adviser to F&C Norfolk United Kingdom Directors Jacques Elvinger Partner Elvinger Hoss Prussen 2, Place Winston Churchill L-1340 Luxembourg Grand Duchy of Luxembourg Bernd Kalis Head of Product Management Securities Business HypoVereinsbank Retail & Private Banking UniCredit Bank AG Arabellastrasse 12 D Munich Germany Hugh Moir Head of Operations and IT F&C Asset Management plc Exchange House Primrose Street London EC2A 2NY United Kingdom Enrico Turchi Managing Director Pioneer Asset Management S.A. 8-10, rue Jean Monnet L-2180 Luxembourg Grand Duchy of Luxembourg Ernst Hagen Executive Director F&C Netherlands BV Jachthavenweg 109E 1081 KM Amsterdam The Netherlands Page 3

6 Schedule of Investments as at 31 March 2017 Security Description Rate Maturity Date Currency Quantity/ Nominal Value Market Value % of Net Assets TRANSFERABLE SECURITIES ADMITTED TO AN OFFICIAL EXCHANGE LISTING OR TRADED ON OTHER REGULATED MARKETS BONDS Germany Bundesrepublik Deutschland 3.00% EUR 5,000,000 5,598, Bundesrepublik Deutschland - Series % EUR 8,100,000 8,747, Bundesrepublik Deutschland - Series % EUR 4,600,000 5,044, Bundesschatzanweisungen 0.00% EUR 12,500,000 12,518, Bundesschatzanweisungen 0.00% EUR 9,000,000 9,029, Bundesschatzanweisungen 0.00% EUR 9,000,000 9,064, ,002, United States United States Treasury Inflation Indexed Bonds 0.25% USD 45,941,504 42,614, TOTAL BONDS 92,617, SHARES Japan Japan Hotel REIT Investment 2,644 1,706, TOTAL SHARES 1,706, FUNDS France Amundi ETF Euro Stoxx 50 UCITS ETF 'C' 144,800 10,325, Amundi ETF MSCI Emerging Markets UCITS ETF A 2,300,634 8,790, Amundi ETF MSCI Europe Ex UK UCITS ETF 'C' 861,200 23,265, ,381, Ireland ishares $ Corporate Bond UCITS ETF 103,025 10,897, ishares JP Morgan $ Emerging Markets Bond UCITS ETF 23,823 2,496, Leadenhall UCITS ILS Fund 'B' 39,940 4,142, ,536, Luxembourg Falcon Fund SICAV - Twelve-Falcon Insurance Linked Strategy Fund 23,445 2,493, United Kingdom F&C Investment Funds ICVC - Maximum Income Bond Fund C 11,654,464 7,295, United States ishares US Aerospace & Defense ETF 26,900 3,740, SPDR S&P Homebuilders ETF 113,300 3,943, ,684, TOTAL FUNDS 77,390, TOTAL TRANSFERABLE SECURITIES ADMITTED TO AN OFFICIAL EXCHANGE LISTING OR TRADED ON OTHER REGULATED MARKETS 171,714, TOTAL INVESTMENTS 171,714, OTHER ASSETS 5,742, TOTAL NET ASSETS 177,457, The accompanying notes form an integral part of these financial statements Page 4

7 Schedule of Investments as at 31 March 2017 (continued) DERIVATIVES FORWARD FOREIGN EXCHANGE CONTRACTS Buy Nominal Sell Nominal Maturity Date Unrealised Gain/(Loss) Unrealised Gain on Forward Foreign Exchange Contracts AUD 84,800 EUR (60,054) AUD 1,120,081 NZD (1,220,000) ,814 CAD 3,790,637 USD (2,810,000) ,888 CZK 72,210,000 EUR (2,686,484) ,781 EUR 1,245,685 AUD (1,750,000) ,032 EUR 6,178 HKD (51,289) EUR 1,794,140 SEK (17,050,000) ,513 EUR 128,340 USD (137,201) EUR 1,108,284 USD (1,180,000) ,878 GBP 2,136 EUR (2,489) HKD 4,950 EUR (590) HKD 24,303 EUR (2,910) INR 194,290,000 USD (2,830,978) ,616 INR 94,640,000 USD (1,442,023) ,821 JPY 1,154,810 EUR (9,676) JPY 127,960,000 USD (1,137,397) ,235 NZD 2,610,000 AUD (2,373,893) ,999 NZD 1,700,000 USD (1,178,270) ,853 SEK 75,718,360 EUR (7,930,000) SEK 15,742,895 NOK (15,170,000) SGD 9,875 EUR (6,556) SGD 7,509 EUR (5,009) SGD 1,030,000 USD (726,829) ,637 USD 2,992,184 INR (194,290,000) USD 1,150,966 JPY (127,960,000) ,451 USD 1,164,909 KRW (1,302,170,000) USD 2,796,631 KRW (3,121,320,000) ,144 USD 2,701,376 KRW (3,010,170,000) ,002 Total Unrealised Gain on Forward Foreign Exchange Contracts 271,521 Unrealised Loss on Forward Foreign Exchange Contracts AUD 37,734 EUR (26,931) (58) AUD 16,053 EUR (11,463) (30) AUD 2,383,779 NZD (2,610,000) (4,973) EUR 3,636,169 GBP (3,139,341) (32,298) EUR 3,636,106 GBP (3,139,341) (32,362) EUR 138,000 JPY (16,530,027) (684) EUR 1,723,919 JPY (206,496,400) (8,542) EUR 7,254 JPY (866,895) (19) EUR 6,632,156 USD (7,165,515) (60,224) EUR 1,233,936 USD (1,333,317) (11,343) EUR 6,631,420 USD (7,165,515) (60,960) EUR 21,023,735 USD (22,716,987) (193,264) EUR 128,982 USD (139,370) (1,186) EUR 3,797,091 USD (4,102,909) (34,905) EUR 3,797,513 USD (4,102,909) (34,484) EUR 21,026,070 USD (22,716,987) (190,929) EUR 1,234,073 USD (1,333,317) (11,206) EUR 128,996 USD (139,370) (1,171) EUR 9,958 USD (10,709) (43) INR 47,250,000 USD (727,679) (26) INR 44,860,000 USD (690,871) (25) INR 102,180,000 USD (1,573,634) (57) JPY 127,780,000 USD (1,152,027) (2,677) KRW 3,121,320,000 USD (2,799,014) (7,372) KRW 1,302,170,000 USD (1,166,714) (2,146) KRW 1,819,150,000 USD (1,629,917) (2,998) NOK 15,170,000 SEK (16,071,705) (35,077) NZD 1,220,000 AUD (1,117,998) (334) SEK 17,050,000 EUR (1,793,010) (7,383) SGD 1,010,000 USD (723,284) (431) USD 1,609,090 CAD (2,160,000) (10,978) USD 1,149,958 CAD (1,550,000) (12,273) USD 8,600,000 CAD (11,599,594) (99,506) USD 2,810,657 CNH (19,590,000) (25,409) USD 2,373,168 EUR (2,240,000) (26,908) USD 707,759 INR (47,250,000) (18,598) USD 686,195 INR (44,860,000) (4,347) USD 1,567,418 INR (102,180,000) (5,755) USD 1,298,942 JPY (148,115,000) (30,860) USD 4,500,000 JPY (514,570,500) (122,830) USD 1,538,003 KRW (1,819,150,000) (82,939) The accompanying notes form an integral part of these financial statements Page 5

8 Schedule of Investments as at 31 March 2017 (continued) Buy Nominal Sell Nominal Maturity Date Unrealised Gain/(Loss) USD 1,177,678 NZD (1,700,000) (8,405) USD 1,435,184 SGD (2,040,000) (23,164) USD 2,886,266 TWD (90,470,000) (89,821) Total Unrealised Loss on Forward Foreign Exchange Contracts (1,299,000) FUTURES CONTRACTS Description Currency Number of Contracts Maturity Date Commitment Unrealised Gain/(Loss) Unrealised Gain on Futures Contracts EURO-BTP EUR ,682,800 3,278 EURO-OAT EUR ,469,760 32,184 FTSE 100 Index GBP (7) (595,424) 4,728 German Federal Republic Bond 10YR EUR ,437, ,729 German Federal Republic Bond 2YR EUR ,867,365 6,225 German Federal Republic Bond 5YR EUR (112) (14,761,600) 2,240 Hang Seng Index HKD (9) (1,306,418) 9,356 Short EURO-BTP EUR (248) (27,838,000) 22,320 UK Long Gilt Bond GBP ,071,390 75,574 US Treasury Bond Ultra Long USD (18) (2,703,241) 25,666 US Treasury Note 10YR USD ,083, ,154 US Treasury Note 5YR USD , US Treasury Note 5YR USD (84) (9,245,977) 22,089 US Treasury Ultra 10YR USD (13) (1,627,394) 4,178 Total Unrealised Gain on Futures Contracts 49,643, ,379 Unrealised Loss on Futures Contracts EURO-BTP EUR (186) (24,308,340) (445,190) EURO-BUXL EUR (38) (6,405,280) (38,000) EURO STOXX 50 EUR (551) (18,877,260) (476,640) German Federal Republic Bond 10YR EUR (160) (25,827,200) (37,730) MSCI Singapore Free Index SGD (25) (584,400) (9,702) NIKKEI 225 Index JPY ,227,058 (180,064) S&P 500 E-mini Index USD ,433,123 (65,476) SPI 200 AUD (32) (3,336,840) (51,924) UK Long Gilt Bond GBP (49) (7,308,767) (66,618) US Treasury Note 10YR USD (167) (19,449,250) (76,009) Total Unrealised Loss on Futures Contracts (80,437,156) (1,447,353) OPTION CONTRACTS Currency Quantity Description Maturity Date Market Value Unrealised Gain/(Loss) Purchased Options EUR 2,900,000 Call EUR / Put USD, Strike Price ,845 11,470 GBP 6,000,000 Put GBP / Call USD, Strike Price (45,082) USD 8,000 Put S&P 500 Index, Strike Price ,311 (60,561) USD 8,140,000 Put USD / Call KRW, Strike Price ,450 63,237 Total Purchased Options 476,613 (30,936) SWAP CONTRACTS Currency Notional Amount Pay / Receive Maturity Date Commitment Unrealised Gain/(Loss) Inflation Swaps GBP 3,100,000 UK Retail Prices Index ,787 23,787 USD 4,000,000 US CPI Urban Consumers NSA Index (10,668) (10,668) Total Inflation Swaps 13,119 13,119 Interest Rate Swaps EUR 1,880, EURIBOR 6M (149,095) (149,095) EUR 2,000, EURIBOR 6M (74,470) (74,470) EUR 4,050, EURIBOR 6M (66,119) (66,119) EUR 2,450, EURIBOR 6M (45,644) (45,644) GBP 1,530, ICE LIBOR 6M ,284 9,284 The accompanying notes form an integral part of these financial statements Page 6

9 Schedule of Investments as at 31 March 2017 (continued) Currency Notional Amount Pay / Receive Maturity Date Commitment Unrealised Gain/(Loss) GBP 3,100, ICE LIBOR 6M , ,997 Total Interest Rate Swaps (213,047) (213,047) Currency Notional Amount Pay / Receive Maturity Date Commitment Unrealised Gain/(Loss) Total Return Swaps USD 33,893,075 F&C Gear Strategy Index (*) (**) , ,764 USD 7,858,206 MLEIFCLS Index (*) (**) (190,871) (190,871) Total Return Swaps 221, ,893 Unrealised Gain on Swap Contracts 558,832 Unrealised Loss on Swap Contracts (536,867) (*) The Fund is the payer of the negative performance and the receiver of the positive performance of the underlying for both Total Return Swaps positions. (**) The composition of the underlying Total Return Swap affords the fund participation in a market neutral equity strategy. The counterparties for forward foreign exchange contracts were Barclays Bank Plc. Wholesale, BNP Paribas S.A., Canadian Imperial Bank of Commerce, Citibank N.A., HSBC Bank Plc., ING Bank NV, JP Morgan Securities Plc., Royal Bank of Canada (UK), Société Générale S.A. and Westpac Banking Corp. The counterparty for futures contracts was Goldman, Sachs & Co. The counterparty for option contracts were Barclays Bank Plc. (total commitment of EUR 38,214), Citibank N.A. (total commitment of EUR 45,089), Goldman, Sachs & Co. (total commitment of EUR 398,871) and JP Morgan Securities Plc. (total commitment of EUR 25,375). The counterparty for swap contracts were JPMorgan Chase Bank N.A. and Merrill Lynch International. Collateral held for the above described derivatives includes EUR 6,911,132 held as cash at the brokers and a quantity of -1,077,000 German Bonds and 472,000 French Bonds held as non cash collateral. The accompanying notes form an integral part of these financial statements Page 7

10 Distribution of Investments by Economic Sector as at 31 March 2017 Sector % of Net Assets Sovereign Financial Services Real Estate 0.96 Total Investments Other Assets 3.24 Total Net Assets The accompanying notes form an integral part of these financial statements Page 8

11 Statement of Net Assets As at 31 March March 30 September Notes EUR EUR ASSETS Investments at market value 2 171,714, ,521,832 Investments at cost 163,621, ,518,571 Purchased options contracts at market value 2 476, ,091 Unrealised gain on futures contracts 2 771, ,837 Unrealised gain on forward foreign exchange contracts 2 271, ,264 Unrealised gain on swap contracts 2 558, ,437 Subscriptions receivable - 46,301 Dividends and interest receivable 418, ,655 Balance at bankers: Cash and deposits 2 1,112,773 2,091,339 Cash held at brokers 6,911,132 4,717,328 Total Assets 182,235, ,634,084 LIABILITIES Written options contracts at market value 2-80,085 Unrealised loss on futures contracts 2 1,447, ,662 Unrealised loss on forward foreign exchange contracts 2 1,299, ,643 Unrealised loss on swap contracts 2 536,867 - Redemptions payable 179,097 13,983 Investment management and management company fees 7,8,13 200, ,091 Expenses and taxes 317, ,956 Bank overdraft Overdraft at brokers 797,787 89,974 Total Liabilities 4,778,588 1,716,394 NET ASSETS 177,457, ,917,690 Changes in number of shares outstanding from 1 October 2016 to 31 March 2017 Shares Shares Shares Shares outstanding at issued redeemed outstanding at 30 September March 2017 F&C HVB-Stiftungsfonds Class A Shares Class A Acc Shares 17, ,048 16,486 Class A Shares 175,993 3,664 10, ,941 F&C HVB-Stiftungsfonds Class I Shares Class I Shares 2, ,658 The accompanying notes form an integral part of these financial statements Page 9

12 Statement of Operations and Changes in Net Assets For the period ended 31 March March 31 March Notes EUR EUR INCOME Dividends (net of withholding taxes) 2 401,014 1,071,099 Interest (net of withholding taxes) 2 345,705 - Security lending income 15 2,836 4,224 Total Income 749,555 1,075,323 EXPENDITURE Investment management and management company fees 7,8,13 (1,124,248) (1,249,934) Administration and depositary fees 10 (93,374) (100,218) Audit, tax and legal fees (45,604) (50,890) Taxe d'abonnement 6 (43,746) (48,724) Bank interest and charges (9,898) (65,185) Directors' fees 11 (12,926) (12,005) Sundry expenses (76,075) (78,584) Total Expenditure (1,405,871) (1,605,540) Net equalisation 3 16,471 13,949 Net income from operations (639,845) (516,268) Net realised gain / (loss) on sales of investments (999,677) 2,416,102 Net realised gain / (loss) on foreign exchange and forward foreign exchange contracts 2,198,603 (123,321) Net realised (loss) on options contracts (188,697) - Net realised gain / (loss) on futures contracts (2,058,278) 1,278,850 Net realised gain on swap contracts 1,751,773 2,509,126 Net realised gain for the period 63,879 5,564,489 Net change in unrealized appreciation / (depreciation) on investments 2 4,090,380 (3,283,551) Net change in unrealised appreciation / (depreciation) on forward foreign exchange contracts 2 (1,093,100) 2,064,457 Net change in unrealised appreciation / (depreciation) on options contracts 2 99,233 (1,114,557) Net change in unrealised appreciation / (depreciation) on futures contracts 2 (361,149) 1,029,629 Net change in unrealised (depreciation) on swap contracts 2 (461,472) (98,863) Net change in unrealised appreciation / (depreciation) on foreign currencies 2 4,052 (3,039) Total net investment income for the period 2,341,823 4,158,565 Subscriptions of shares 3,938,937 3,838,052 Redemptions of shares (11,077,248) (15,021,697) Dividends paid 14 (3,664,028) (5,436,821) Total finance costs (10,802,339) (16,620,466) Net assets at the beginning of the period 185,917, ,298,106 Net assets at the end of the period 177,457, ,836,205 The accompanying notes form an integral part of these financial statements Page 10

13 Comparative key figures 31 March 30 September 30 September EUR EUR EUR Total Net Assets 177,457, ,917, ,298,106 F&C HVB-Stiftungsfonds Class A Shares Class A Acc Shares Number of shares 16,486 17,244 19,151 Net asset value per share 1, , , Class A Shares Number of shares 168, , ,636 Net asset value per share F&C HVB-Stiftungsfonds Class I Shares Class I Shares Number of shares 2,658 2,358 2,712 Net asset value per share 1, , , The accompanying notes form an integral part of these financial statements Page 11

14 Notes to the Financial Statements as at 31 March GENERAL F&C Fund (hereafter referred to as the "Fund") is a limited liability company incorporated in Luxembourg under the provisions of the Law of 10 August 1915 (as amended) relating to commercial companies, and qualifies as a Part I SICAV (Société d Investissement à Capital Variable) under the Law of 17 December 2010 relating to undertakings for collective investment (as amended). It was incorporated by notarial act on 11 July 2001 for an indefinite period. The Articles of Incorporation of the Fund authorise the Board of Directors of the Fund (the Board ) to issue shares, at any time, in different portfolios (each, a Portfolio ). As at 31 March 2017, only one Portfolio is offered for subscription: F&C HVB-Stiftungsfonds, issuing three classes of shares: class A shares with no restriction on issue, class I shares reserved to institutional investors and class A Acc shares with no restriction on issue. The objective of F&C HVB-Stiftungsfonds is to make available to investors participation in a broadly diversified global portfolio of debt and equity securities as well as derivatives which enable a distributions to be made, whilst maintaining the long term value of the property of the Portfolio. It is expected that the majority of the Portfolio s assets will be invested in equities, debt securities and derivatives within the limits set out in the investment restrictions in the Fund s prospectus. Debt securities may include both investment grade and below investment grade debt securities. The Board has adopted the ALFI Code of Conduct, which sets out the principles of good governance, and considers that the Fund has been in compliance with it in all material respects throughout the financial period ended 31 March The Investment Manager exercises the votes attached to the Fund s equity investments based on its Corporate Governance Operational Guidelines. UCITS V came into effect in March UCITS V aims to increase the level of protection already offered to investors in UCITS and to improve investor confidence in UCITS. It aims to do so by enhancing the rules on the responsibilities of depositaries and by introducing remuneration policy requirements for UCITS fund managers. It also aims to ensure that all EU regulators responsible for the supervision of UCITS funds and their managers have a common minimum set of powers available to investigate infringements. Remuneration Policy The European Union Directive 2014/91/EU (known as the UCITS V Directive ) came into effect on 18 March The Management Company is required to operate a remuneration policy in accordance with applicable requirements of the UCITS V Directive. Details of the management company s remuneration and associated financial disclosures will be made within the annual report for the period to 30 September ACCOUNTING POLICIES The financial statements are prepared in accordance with Luxembourg regulations relating to undertakings for collective investment and are expressed in Euro ("EUR"). Valuation of securities The value of any transferable securities which are quoted or dealt in on any official stock exchange or regulated market, which operates regularly and is recognised and open to the public, (a regulated market ) is based on the last available price, on such stock exchange or regulated market applicable on the valuation day. If a security is not traded or admitted on any official stock exchange or any other regulated market, or in the case of a security so traded or admitted and if the last available price does not reflect the fair value of the security, it is valued on the basis of its foreseeable sales price. Investment in Funds Investments in open-ended undertakings for collective investment ( UCIs ) are valued on the basis of the last available net asset value of the units or shares of such UCIs. Foreign exchange conversion Assets and liabilities denominated in currencies other than the Fund s reporting currency have been translated at the rates of exchange ruling at 31 March 2017, the time of the determination of the Net Asset Value. Cost of investments, income and expenditure denominated in currencies other than the Fund s reporting currency have been translated at the exchange rates ruling on the day of transaction. The exchange gain or loss arising from the translation of these items is taken into account in the determination of the results of operations. Page 12

15 Notes to the Financial Statements (continued) as at 31 March 2017 As at 31 March 2017, the following EUR/USD exchange rate has been used: 1 EUR = USD. Income and expenses Dividends are credited to income, net of irrecoverable withholding tax, on the date upon which the relevant securities are declared 'ex-dividend'. Interest income, net of irrecoverable withholding tax is accrued on a daily basis and includes the amortisation of premiums and accretion of discounts. Valuation of futures contracts Initial margin deposits are made upon entering into futures contracts and can be made either in cash or securities. During the period the futures contract is open, changes in the value of the contract are recognized as unrealised gains or losses by "marking-to-market" on a daily basis to reflect the market value of the contract at the end of each day's trading. Variation margin payments are made or received, depending upon whether unrealised losses or gains are incurred. When the contract is closed, the Fund records a realised gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund's basis in the contract. Valuation and presentation of forward foreign exchange contracts The unrealised gain or loss on open forward foreign exchange contracts is calculated as the difference between the contracted rate and the rate to close out the contract. Realised profit or loss includes net gains or losses on forward foreign exchange contracts which have been settled or offset by other contracts with the same counterparty. Valuation and presentation of option contracts For a purchased option an amount equal to the premium paid is recorded as an investment and is subsequently adjusted to the current market value of the option purchased. Premiums paid for the purchase of options which expire unexercised are treated on the expiration date as realised losses. If a purchased put option is exercised, the premium is subtracted from the proceeds of the sale of the underlying security, foreign currency or index in determining whether the Fund has realised a gain or a loss. If a purchased call option is exercised, the premium increases the cost basis of the security, foreign currency or index purchased by the Fund. For a written option an amount equal to the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current market value of the option written. Premiums received from written options which expire unexercised are treated by the Fund on the expiration date as realised gains. If a written call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether the Fund has realised a gain or a loss. If a written put option is exercised, the premium reduces the cost basis of the security purchased by the Fund. Valuation of swap contracts Total Return Swaps Total return swaps are marked at each NAV calculation date. The estimated market value is based on the valuation elements laid down in the contracts, and is obtained from third party pricing agents, market makers or internal models. Variance Swaps A variance swap is an over-the-counter financial derivative that allows speculation on or hedge risks associated with the volatility of some underlying product, like an exchange rate, interest rate or stock index. One leg of the swap will pay an amount based upon the realised variance of the price changes of the underlying product. Conventionally, these price changes will be daily log returns, based upon the most commonly used closing price. The other leg of the swap will pay a fixed amount, which is the strike, quoted at the deal's inception. Thus the net payoff to the counterparties will be the difference between these two and will be settled in cash at the expiration of the deal, though some cash payments will likely be made along the way by one or the other counterparty to maintain the agreed upon margin. Correlation Swaps A correlation swap is an over-the-counter financial derivative that allows speculation on or hedge risks associated with the observed average correlation of a collection of underlying products, where each product has periodically observable prices, as with a commodity, exchange rate, interest rate or stock index. The fixed leg of a correlation swap pays the notional times the agreed strike, while the floating leg pays the annualised realised correlation. Dispersion Swaps A dispersion swap allows investors to buy or sell volatility on an index and sell or buy volatility on the stated component of that index. Page 13

16 Notes to the Financial Statements (continued) as at 31 March 2017 Dividend Swaps Dividend swaps allow investors to take a view on the future cash dividend payouts attached to an individual share, stock index or bundle of shares without the need to own the underlying securities. Payments are made when the dividend swap matures and are calculated according to the dividends paid out. Volatility Swaps Volatility swap agreements involve two parties agreeing to exchange cash flows based on the measured volatility of a specified underlying asset. One party agrees to exchange a fixed rate or volatility strike payment for the floating rate or unrealised volatility on the underlying asset with respect to the notional amount. At inception, the volatility strike is generally chosen such that the fair value of the swap is zero. At the maturity date, a net cash flow is exchanged, where the payoff amount is equivalent to the difference between the unrealised volatility of the underlying asset and the volatility strike multiplied by the notional amount. As a receiver of the realised price volatility, the Fund would receive the payoff amount when the realised volatility of the underlying asset is greater than the volatility strike and would owe the payoff amount when the volatility is less than the strike. As a payer of the realised price volatility the Fund would owe the payoff amount when the realised volatility of the underlying asset is greater than the volatility strike and would receive the payoff amount when the volatility is less than the strike. This type of agreement is essentially a forward contract on the future realised volatility of the underlying asset. Swap contracts are marked to market based on daily prices obtained from third party pricing agents and verified against the value from the counterparty. Unrealised gains or losses on swaps are recorded under Unrealised profit/unrealised loss on swap contracts in the statement of net assets. Realised gains or losses and change in unrealised gains or losses are recorded under Net realised gains/(losses) on swap contracts and under Change in net unrealized appreciation/(depreciation) on swap contracts in the statement of operations and changes in net assets. The change in the value of the swap is reported as Change in net unrealised appreciation/(depreciation) on swap contracts, until termination of the contract when it is realised. Periodic interest payments to be paid or received are accrued on a daily basis and included in interest income or interest expense. Cash and cash equivalents Cash and other liquid assets will be valued at their face value with interest accrued, where applicable. Interest is also accrued on bank overdrafts. All cash at bank balances are held either by State Street Bank Luxembourg S.C.A., or in overnight deposit with a third party institution approved by the Board or directly with a sub-custodian. Income from securities lending The Fund may lend its portfolio securities to specialised banks and credit institutions and other financial institutions of high standing and highly qualified registered brokers/dealers, or through recognised clearing institutions such as Clearstream or Euroclear subject to complying with the provisions set forth in the CSSF Circular 08/356. Cash collateral received by the Fund in relation to these transactions will not be reinvested. Income from securities lending is recognised by the Fund when payment is received from the borrowers. 3. EQUALISATION The Fund follows the accounting practice known as equalisation by which a portion of the issue and redemption price representing, on a per share basis, accrued distributable investment income (excluding capital gains or losses), is credited or charged to distributable income. The amounts attributable to this income equalisation account are included in the proceeds from subscriptions to the Fund s shares or in the payment for the Fund s shares redeemed, and in the Net equalisation, items of the Statement of Operations and Changes in Net Assets. As at 31 March 2017, the amounts attributable to income equalisation have been disclosed separately as net equalisation in the Statement of Operations and Changes in Net Assets. 4. STOCK EXCHANGE QUOTATION Certain of the shares of the F&C HVB-Stiftungsfonds are listed on the Luxembourg Stock Exchange. 5. INITIAL OFFERING PRICE AND MINIMUM INVESTMENT AMOUNTS The shares of F&C HVB-Stiftungsfonds (class A shares) were initially offered on 25 July 2001 at the initial subscription price of EUR 1,000 per share. The shares of F&C HVB-Stiftungsfonds (class I shares) were initially offered on 1 December 2004 at the initial subscription price of EUR 1, per share. Page 14

17 Notes to the Financial Statements (continued) as at 31 March 2017 The shares of F&C HVB-Stiftungsfonds (class A Acc shares) were initially offered on 15 January 2008 at the initial subscription price of EUR 1,000 per share. For class A and A Acc shares, the minimum investment amounts to EUR 2,500, exclusive of the initial charge. For class I shares, the minimum investment amounts to EUR 10,000,000, exclusive of the initial charge. The Board may on a discretionary basis reduce or waive the minimum investment required. Moreover, there is no subsequent minimum investment for any class of shares. 6. TAXATION The Fund is not subject to taxation in Luxembourg on its income, profits or gains. However, the Fund is liable in Luxembourg to a subscription tax ( taxe d abonnement ) of 0.05% per annum of its net assets, such tax being payable quarterly and calculated on the basis of the Total Net Assets of the Fund at the end of the relevant quarter. The rate of the annual subscription tax is reduced to 0.01% per annum for the Portfolio or share classes which, in accordance with Article 174 of the Law, invest exclusively in money market instruments as defined in the Grand-Ducal Regulation of 14 April 2003 and in respect of share classes which are only sold to and held by institutional investors. No stamp duty or other tax will be payable in Luxembourg on the issue of shares in the Fund. 7. INVESTMENT MANAGEMENT FEE In accordance with the prospectus, the Investment Manager, for its investment management services provided to the Fund, is entitled to receive up to 2% per annum of the applicable net asset value for the class A shares and class A Acc shares and up to 0.60% for class I shares. For the period under review, the investment management fee was 1.25% of the applicable net asset value for the classes A and A Acc shares, and 0.60% for the class I shares. 8. MANAGEMENT COMPANY FEE FundRock Management Company S.A. (the "Management Company") is the management company of the Fund. For its services, the Management Company receives a fee determined as per the tables below, with an annual minimum of EUR 25,000: Assets under management Up to EUR 150 million From EUR 150 million to 1 billion Above EUR 1 billion Fee per annum 3.25 bp 3.00 bp 2.75 bp 9. FORMATION EXPENSES The formation expenses of the Fund have been amortised over a five year period. 10. ADMINISTRATION AND DEPOSITARY FEES For the period under review, in remuneration for its services, the Fund paid to State Street Bank Luxembourg S.C.A., the following fees: Custody: An asset charge of up to 0.50% of the assets under custody plus a transaction charge. Administrative services: Assets under management First EUR 2.82 billion From EUR 2.82 billion to EUR 4.5 billion Excess above EUR 4.5 billion Fee per annum 4.55 bp 3.50 bp 2.00 bp Other administrative fees in addition to the fees above are also payable to State Street Bank Luxembourg S.C.A. for services including transaction processing and transfer agency related activities. 11. DIRECTORS' FEES Directors' fees are determined from time to time by decision of the general meeting of shareholders. Those Directors of the Fund who are employees of F&C Asset Management plc (the parent of the Investment Manager) or any of its subsidiaries or connected to UniCredit Bank AG or the Legal Adviser to the Fund, waive their fees in carrying out their duties as Directors of the Fund. The chairman, Patrick Johns, is entitled to a fee of EUR 15,000 per annum. Page 15

18 Notes to the Financial Statements (continued) as at 31 March USE OF DEALING COMMISSION The Investment Manager is regulated by the UK Financial Conduct Authority ( FCA ) for the conduct of its business in the United Kingdom. The rules of the FCA restrict the use of dealing commission to execution and research services. Services are only eligible for payment with commission if they qualify as substantive research by meeting specific criteria set by the FCA. These are known as permitted services. The Investment Manager executes transactions on behalf of the Fund with a number of selected brokers. In the normal course of business, the Investment Manager has entered, or may enter into, arrangements ( Commission Sharing Arrangements ) whereby research credits accrued to the broker through trading can be recovered and redirected to one or more third parties, as payment for the provision of eligible investment research to the Investment Manager. The services received under such arrangements are directly relevant to and assist in the cost-effective provision of management services generally by the Investment Manager and are consistent with practices in the markets in which the Investment Manager does business. 13. RELATED PARTY TRANSACTIONS The Investment Manager may pass on to the Fund certain expenses, as approved by the Board, incurred in the marketing of the Fund. The maximum chargeable during any accounting period is 0.025% of the Net Asset Value of the Fund or the respective Portfolio(s). The Investment Manager is also entitled to a service fee not exceeding EUR 50,000 per annum for its approach in the area of socially responsible investment, through its Responsible Engagement Overlay service. During the financial period ended 31 March 2017, under the securities lending programme (as described in note 2), State Street Bank GmbH, London Branch earned EUR 567 as securities lending agent. The Investment Manager earned EUR 378 for their monitoring and oversight of the securities lending programme. 14. DIVIDEND PAID DURING THE PERIOD Dividend payment of EUR per class A share and EUR per class I share was paid on 16 January 2017 (ex-date 12 January 2017) to the shareholders of these classes. In line with the Fund s Prospectus dated March 2017, any future dividends of less than EUR 100 generated by a shareholder s investment in a class of a Portfolio will be automatically reinvested in the subscription of further shares of the class to which such dividends relate. 15. SECURITIES LENDING As at 31 March 2017, the Fund had no securities on loan. The income earned from the securities lending program is reflected net of fees in the statement of operations and changes in net assets as disclosed in note 2. State Street Bank GmbH, London Branch as the securities lending agent receives a 15% fee for their services. The Investment Manager as the Fund s securities lending co-ordinator receives an administration fee of 10% to cover operational costs. As a result, the Fund receives 75% of the gross revenues generated from securities lending. 16. NET ASSET VALUE The net asset value, the issue price and the redemption price, is available at the registered office of the Fund and will be published regularly in or on: Bloomberg, Reuters and PORTFOLIO CHANGES A statement detailing the changes in the portfolio during the reference period can be obtained free of charge from the registered office of the Fund and from CACEIS Bank Deutschland GmbH, Munich and from UniCredit Bank Austria AG, Vienna as disclosed on page SUBSEQUENT EVENTS There were no material events which occurred after the end of the financial period, which would have a bearing on the understanding of the financial statements. Page 16

19 Notes to the Financial Statements (continued) as at 31 March APPROVAL OF THE FINANCIAL STATEMENTS The Board of Directors approved the financial statements on 15 May Page 17

20 Securities Financing Transactions GLOBAL DATA The following table details the the value of Total Return Swaps (TRS) as a proportion of the portfolio Net Assets, as at 31 March The value of TRS is based on the Unrealised Gain/(Loss) on an absolute basis. As at 31 March 2017 there were no securities lending transactions. Portfolio Portfolio currency % of Net Assets F&C HVB-Stiftungsfonds EUR 0.34% CONCENTRATION DATA The following table lists the ten largest issuers by market value of non-cash collateral received by the portfolio by way of title transfer collateral arrangement across OTC derivative transactions (including TRS), as at 31 March 2017: Portfolio currency Market value of noncash collateral % of Net Assets Non-cash collateral issuer BMO Global Absolute Return Bond Federal Republic of Germany EUR 394, % French Republic EUR 514, % Total EUR 909, % The following table details the unrealised value of TRS on an absolute basis, analysed by counterparty, as at 31 March 2017: Counterparty s country of incorporation Portfolio currency Unrealised profit/loss Counterparty F&C HVB-Stiftungsfonds JP Morgan Securities Plc. United Kingdom EUR 412,764 Merrill Lynch International United Kingdom EUR 190,871 Total EUR 603,635 AGGREGATE TRANSACTION DATA The following table provides an analysis of the type and quality of non-cash collateral received and posted by the portfolios in respect of OTC derivative transactions (including TRS), as at 31 March 2017: Portfolio currency Market value of non-cash collateral received Market value of non-cash collateral posted Non-cash collateral F&C HVB-Stiftungsfonds Fixed Income Investment grade EUR 514, ,978 Total EUR 514, ,978 Investment grade securities are those issued by an entity with a minimum investment grade credit rating from at least one globally recognised credit rating agency, Standard & Poor s, Moody s or Fitch, as defined in the Prospectus. Page 18

21 Securities Financing Transactions The following table provides a currency analysis of the cash and non-cash collateral received or posted by the portfolios, in respect of OTC derivative transactions (including TRS), as at 31 March 2017: Portfolio currency Market value of cash collateral received Market value of cash collateral posted Market value of non-cash collateral received Market value of non-cash collateral posted Currency F&C HVB-Stiftungsfonds OTC derivative transactions AUD EUR - (28,530) - - EUR EUR - 6,690, , ,978 GBP EUR - (180,301) - - HKD EUR - 2, JPY EUR - 209, KRW EUR SGD EUR - (753) - - USD EUR - (579,390) - - Total EUR - 6,113, , ,978 The following table provides an analysis of the maturity tenor of the collateral received and posted by the portfolios in respect of OTC derivative transactions (including TRS) as at 31 March 2017: Portfolio currency Market value of cash collateral received Market value of cash collateral posted Market value of non-cash collateral received Market value of non-cash collateral posted Maturity tenor F&C HVB-Stiftungsfonds Less than one day EUR One day to one week EUR One week to one month EUR One month to three months EUR Three months to one year EUR Above one year EUR , ,978 Open EUR - 6,113, Total EUR - 6,113, , ,978 In case of non-cash collateral, the above maturity tenor analysis has been based on the contractual maturity date of the security received as collateral. The following table provides an analysis of the maturity tenor of outstanding TRS as at 31 March 2017: Maturity tenor Portfolio currency Unrealised profit/loss F&C HVB-Stiftungsfonds Less than one day EUR - One day to one week EUR - One week to one month EUR - One month to three months EUR - Three months to one year EUR 603,635 Above one year EUR - Open EUR - Total EUR 603,635 The above maturity tenor analysis has been based on the contractual maturity date of the the relevant TRS transaction. All securities lending transactions entered into by the portfolios are subject to a written legal agreement between the portfolios and the Lending Agent, and separately between the Lending Agent and the approved borrowing counterparty. Collateral received in exchange for securities lent is transferred under a title transfer arrangement. Collateral received is delivered to and held in an account in the name of the Depositary on behalf of the portfolios. Collateral received is segregated from the assets belonging to the Fund s Depositary or the Lending Agent. Page 19

22 Securities Financing Transactions All OTC derivative transactions are entered into by the portfolios under an International Swaps and Derivatives Associations, Inc. Master Agreement ( ISDA Master Agreement ) or similar agreement. An ISDA Master Agreement is a bilateral agreement between the portfolios and a counterparty that governs OTC derivative transactions (including TRS) entered into by the parties. The parties exposures under the ISDA Master agreement are netted and collateralised together, therefore any collateral disclosures provided in the report are in respect of all OTC derivative transactions entered into by the portfolios under the ISDA Master agreement, not just TRS. All collateral received/posted by the portfolios under the ISDA Master Agreement is transferred bilaterally under a title transfer arrangement. Collateral received by the portfolios is held in an account in the name of the Depositary on behalf of the portfolios. Collateral received is segregated from the assets belonging to the Fund s Depositary. DATA ON REUSE OF COLLATERAL As at 31 March 2017, none of the cash collateral received in respect of OTC derivative transactions (including TRS) was re-invested. In respect of securities lending transactions, the Fund does not accept cash collateral in the securities lending program. Non-cash collateral received by way of title transfer collateral arrangement in relation to securities lending transactions and OTC derivative transactions, cannot be sold, re-invested or pledged. SAFEKEEPING OF COLLATERAL The following table provides an analysis of the amounts of non-cash collateral received by the portfolios in respect of OTC derivatives transactions (including TRS) and held by the Funds Depositary (or through its delegates) or through a third party Depositary, as at 31 March 2017: Portfolio currency OTC derivative transactions Depositary F&C HVB-Stiftungsfonds State Street Bank Luxembourg S.C.A. EUR 514,039 Total EUR 514,039 DATA ON RETURN AND COST For the securities lending transactions the breakdown of return and cost by portfolio is disclosed in the Notes. Please refer to the Securities lending note. All returns from OTC derivative transactions (including TRS) will accrue to the portfolio and are not subject to any returns sharing agreement with the portfolio s manager or any other third parties. TRS transactions costs are not separately identifiable. For these investments, transaction costs are included in the purchase and sales price and are part of the gross investment performance of each portfolio. Returns are identified as the realised gains and change in unrealised appreciations on Swaps contract during the reporting period. Page 20