1. HSBC INVESTMENT FUNDS TRUST 1.1 HSBC ASIAN BOND FUND 1.2 HSBC CHINA MOMENTUM FUND 1.3 HSBC CHINA GROWTH FUND 1.4 HSBC ASIAN HIGH YIELD BOND FUND

Transcription

1 Investment s Trust Annual Report 2017

2 Contents 1. INVESTMENT FUNDS TRUST 1.1 ASIAN BOND FUND 1.2 CHINA MOMENTUM FUND 1.3 CHINA GROWTH FUND 1.4 ASIAN HIGH YIELD BOND FUND Investment Adviser s Reports 1 Trustee s Report 3 Independent Auditors Report to the Unitholders 4 Statement of Financial Position 7 Statement of Comprehensive Income 11 Statement of Changes in Net Assets Attributable to Unitholders/Statement of Changes in Equity 13 Cash Flow Statement 16 Distribution Statement 18 Notes to the Financial Statements 22 Portfolio Statement (Unaudited) 71 Statement of Movements in Portfolio Holdings (Unaudited) 89 Performance Record (Unaudited) ADMINISTRATION 104 Page 3. BOARD OF DIRECTORS OF INVESTMENT FUNDS (HONG KONG) LIMITED 105

3 Investment Adviser s Report Asian Bond Market Review Asia US dollar credit held up well in the year ending at 31 July 2017, as tightening in spreads offset the rise in US treasury yields. Post Trump s victory in the US Presidential Election in November 2016, the market was expecting increasing fiscal stimulus from Trump to lead to a higher fiscal deficit and potentially more US treasury supply. This sent the benchmark 10 year US treasury yield to its 2-year high in mid December Coming into 2017, the US treasury yield curve flattened, as the Fed has delivered another two rate hikes since December US treasury yields at the belly to long-end of the curve declined, with no meaningful progress in the pro-growth fiscal policies proposed by Trump and soft inflation persistently below the Fed s 2% target. Spreads tightened for both investment grade and noninvestment grade names, as demand for Asia dollar credit remained strong with the return of flows into emerging market. Over the past year, the delivered a positive return and outperformed its benchmark gross of fees, mainly thanks to our favourable credit selection (particularly in quasi sovereign issues). Going forward, the continues to hold a neutral to underweight stance in duration and we look to manage this exposure more tactically given the potential event risk and geopolitical risk. We remain constructive in Asia dollar credit, with support from solid macro and credit fundamentals for the region. Demand from both Asian local investors and global investors should stay resilient on the back of continued search for yields and high quality of Asia dollar credit relative to other emerging market peers. In addition, Asia dollar credit has become more attractive on a relative basis compared to other major corporate bond markets, which should provide further support for the strategy. China Momentum Market Review Despite some political turbulences such as the unexpected U.S. president election result and the increasing geopolitical tensions between US and North Korea, the Chinese equity markets finished its year ended 31 July 2017 on a strong note, as Chinese economy and corporations continued to show signs of strength. Leading economic indicator such as PPI, industrial profits and PMI rebounded from their troughs in late 2015/early This was achieved on the back of government s effort in pressing forward the supply-side reform since late 2015 to clear excessive production capacity and restore competitiveness across different sectors. These curtailment efforts translated into improving earnings in traditional sectors such as commodities and industrials. On the new economy front, continued product innovation in technology sector and the resulting rise of online advertising also fueled economic growth and consumer expenditures. This explained why the equity market rally has been broad-based. Another driver behind the upbeat offshore Chinese market since the middle of 2016 is the strong southbound inflow into the market thanks to the launch of the stock connect programmes as well as the green light given by the Chinese government to insurers to invest in Hong Kong stocks since Q Total inflow from China through the stock connect system in the first 7 months of 2017 already exceeded 75% of the total inflows in The inflow from China has not only supported the valuation of offshore Chinese equities but also create liquidity to the overall market. The s strongest contribution came from stock selection in the consumer discretionary, namely automobile and education, and information technology sectors. We believe the outlook of Chinese economy remains healthy as supply side reform continued and recently we have seen a renewed effort in state-owned enterprises form. Recovery of global economy will also help China s economic growth by means of strong export. Having said that, we are mindful of the rising geopolitical risks resulting from the escalating tension between the US and Korea. The liquidity risk from the unwinding of Balance Sheet by Fed may also create market volatility. China Growth Market Review Despite some political turbulences such as the unexpected U.S. president election result and the increasing geopolitical tensions between US and North Korea, the Chinese equity markets finished its year ended 31 July 2017 on a strong note, as Chinese economy and corporations continued to show signs of strength. Leading economic indicator such as PPI, industrial profits and PMI rebounded from their troughs in late 2015/early This was achieved on the back of government s effort in pressing forward the supply-side reform since late 2015 to clear excessive production capacity and restore competitiveness across different sectors. These curtailment efforts translated into improving earnings in traditional sectors such as commodities and industrials. On the new economy front, continued product innovation in technology sector and the resulting rise of online advertising also fueled economic growth and consumer expenditures. This explained why the equity market rally has been broad-based. Another driver behind the upbeat offshore Chinese market since the middle of 2016 is the strong southbound inflow into the market 1

4 Investment Adviser s Report thanks to the launch of the stock connect programmes as well as the green light given by the Chinese government to insurers to invest in Hong Kong stocks since Q Total inflow from China through the stock connect system in the first 7 months of 2017 already exceeded 75% of the total inflows in The inflow from China has not only supported the valuation of offshore Chinese equities but also create liquidity to the overall market. The s strongest contribution came from stock selection in the consumer discretionary, namely automobile and education, and information technology sectors. We believe the outlook of Chinese economy remains healthy as supply side reform continued and recently we have seen a renewed effort in state-owned enterprises form. Recovery of global economy will also help China s economic growth by means of strong export. Having said that, we are mindful of the rising geopolitical risks resulting from the escalating tension between the US and Korea. The liquidity risk from the unwinding of Balance Sheet by Fed may also create market volatility. back of continued search for yields and high quality of Asia dollar credit relative to other emerging market peers. In addition, Asia dollar credit has become more attractive on a relative basis compared to other major corporate bond markets, which should provide further support for the strategy. Global Asset Management (Hong Kong) Limited 10 November 2017 Asian High Yield Bond Market Review Asia US dollar high yield credit held up well in the year ending at 31 July 2017, as spreads tightened amid investors search for yields. Thanks to its shorter duration, the strategy was less affected by the rise in US treasury yields. Post Trump s victory in the US Presidential Election in November 2016, the market was expecting increasing fiscal stimulus from Trump to lead to a higher fiscal deficit and potentially more US treasury supply. This sent the benchmark 10 year US treasury yield to its 2-year high in mid December Coming into 2017, the US treasury yield curve flattened, as the Fed has delivered another two rate hikes since December US treasury yields at the belly to long-end of the curve declined, with no meaningful progress in the pro-growth fiscal policies proposed by Trump and soft inflation persistently below the Fed s 2% target. Non-investment grade sovereign issues rallied in the year, in particular for Mongolia. Corporate names also performed well with names from the Macau, India and Indonesian complex leading the rally. During the year, the delivered a good positive return and outperformed its benchmark gross of fees, with most of the outperformance from our favourable credit selection in particular from cyclical and industrials issues. Going forward, the continues to hold a neutral to underweight stance in duration and we look to manage this exposure more tactically given the potential event risk and geopolitical risk. We remain constructive in Asia dollar credit, with support from solid macro and credit fundamentals for the region. Demand from both Asian local investors and global investors should stay resilient on the 2

5 Trustee s Report Investment s Trust ( the Trust ) We hereby confirm that, to the best of our knowledge in our opinion, the Manager of the sub-funds within the Trust ( the subfunds ) has, in all material respects, managed the sub-funds in accordance with the provisions of the Trust Deed dated 13 November 1995, as amended, for the year ended 31 July ) Bertha TAM ) For and on behalf of Dickson LEE ) Trustee (Cayman) Limited, ) Trustee ) 3

6 Independent Auditors Report to the Unitholders Report on the Audit of Financial Statements Opinion We have audited the financial statements of Asian Bond, China Momentum, China Growth and Asian High Yield Bond ( the sub-funds ), sub-funds of Investment s Trust, set out on pages 7 to 70, which comprise the statements of financial position as at 31 July 2017, the statements of comprehensive income, the statements of changes in net assets attributable to unitholders/statement of changes in equity, the cash flow statements and the distribution statements for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the financial statements give a true and fair view of the financial disposition of the sub-funds at 31 July 2017, and of their financial transactions and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards ( HKFRSs ) issued by the Hong Kong Institute of Certified Public Accountants ( HKICPA ). Basis for Opinion We conducted our audit in accordance with Hong Kong Standards on Auditing ( HKSAs ) issued by the HKICPA. Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the sub-funds in accordance with the HKICPA s Code of Ethics for Professional Accountants ( the Code ) together with the ethical requirements that are relevant to our audit of the financial statements in Cayman Islands, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Information Other than the Financial Statements and Auditors Report Thereon The Manager and the Trustee of the sub-funds are responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements and our auditors report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Manager and the Trustee of the Sub-s for the Financial Statements The Manager and the Trustee of the sub-funds are responsible for the preparation and fair presentation of financial statements in accordance with HKFRSs issued by the HKICPA 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 preparing the financial statements, the Manager and the Trustee of the sub-funds are responsible for assessing the sub-funds ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Manager and the Trustee of the sub-funds either intend to liquidate the sub-funds or to cease operations, or have no realistic alternative but to do so. In addition, the Manager and the Trustee of the sub-funds are required to ensure that the financial statements have been properly prepared in accordance with the relevant provisions of the Trust Deed as amended ( the Trust Deed ) and the relevant disclosure provisions of Appendix E of the Code on Unit Trusts and Mutual s ( the SFC Code ) issued by the Hong Kong Securities and Futures Commission. 4

7 Independent Auditors Report to the Unitholders Auditors Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. This report is made solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. In addition, we are required to assess whether the financial statements of the sub-funds have been properly prepared, in all material respects, in accordance with the relevant provisions of the Trust Deed and the relevant disclosure provisions of Appendix E of the SFC Code. As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the sub-funds internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Manager and the Trustee of the sub-funds. Conclude on the appropriateness of the Manager s and the Trustee s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the sub-funds ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the sub-funds to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Manager and the Trustee of the sub-funds regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 5

8 Independent Auditors Report to the Unitholders Report on matters under the relevant provisions of the Trust Deed and the relevant disclosure provisions of Appendix E of the SFC Code In our opinion, the financial statements have been properly prepared, in all material respects, in accordance with the relevant provisions of the Trust Deed and the relevant disclosure provisions of Appendix E of the SFC Code. KPMG P.O. Box 493 Century Yard, Cricket Square Grand Cayman KY Cayman Islands 10 November

9 Statement of Financial Position Investment s Trust as at 31 July 2017 Note 2017 As at 31 July As at 31 July As at 31 July As at 31 July China Asian Asian Bond Momentum China High Yield Growth Bond ASSETS Financial assets at fair value through profit or loss 5, 12(g) 2,367,636,862 74,498, ,032, ,480,606 Interest receivable 24,887, ,561,866 Dividends receivable 395,959 2,298,543 Subscriptions receivable 9,651,013 1,236,569 24,675,758 Amounts due from brokers 6 10,305, ,326 7,223,287 1,100,016 Cash and cash equivalents 7(b) 25,592,472 1,618,193 1,788,023 20,258,727 2,438,072,917 77,019, ,578, ,076,973 LIABILITIES Redemptions payable 17,035, ,538 6,276,433 9,851,921 Amounts due to brokers 6 14,510, ,822 5,463,868 10,986,652 Taxes payable Distributions payable 11 8,251,805 3,862,665 Other payables 7(a), 7(c), 7(d) 2,264, , ,477 1,298,015 42,063,442 1,131,263 12,305,778 25,999,253 Net assets attributable to unitholders 2,396,009,475 75,887, ,273, ,077,720 Representing: Financial liabilities 2,396,009, ,273, ,077,720 Equity 75,887,888 Total number of units in issue AC HKD class 9(a) 51,353, ,395 AC SGD class 9(b) 9,683 AC class 9(c) 631,809 1,153,233 23,350, ,622 AM HKD class 9(d) 433,283, ,421,346 AM class 9(e) 157,193,355 61,493,635 AMH AUD class 9(f) 14,577,785 3,938,576 AMH EUR class 9(g) 1,921,932 1,334,392 IC class 9(h) 13,585,877 1,341,644 ID class 9(i) 2,907,224 ZD class 9(j) 1,431,325 30,206 7

10 Statement of Financial Position Investment s Trust as at 31 July 2017 Net asset value per unit Note 2017 As at 31 July As at 31 July As at 31 July As at 31 July China Asian Asian Bond Momentum China High Yield Growth Bond AC HKD class 9(k) AC SGD class 9(k) AC class 9(k) AM HKD class 9(k) AM class 9(k) AMH AUD class 9(k) AMH EUR class 9(k) IC class 9(k) ID class 9(k) ZD class 9(k)

11 Statement of Financial Position Investment s Trust as at 31 July 2017 Note 2016 As at 31 July As at 31 July As at 31 July As at 31 July China Asian High Asian Momentum China Growth Yield Bond Bond ASSETS Financial assets at fair value through profit or loss 5, 12(g) 3,351,403,140 60,007, ,787, ,506,208 Interest receivable 34,149,478 11,385,747 Dividends receivable 266,192 1,624,460 Subscriptions receivable 41,200, ,687 17,438,415 Amounts due from brokers 6 14,246, ,355 6,827,370 6,791,275 Cash and cash equivalents 7(b) 8,800,471 8,017,667 13,569,482 28,392,075 3,449,800,932 68,510, ,928, ,513,720 LIABILITIES Financial liabilities at fair value through profit or loss 5, 12(g) 70,979 Redemptions payable 38,277,247 70,907 3,177,895 11,898,964 Amounts due to brokers 6 9,596, ,794 7,949,351 9,146,222 Taxes payable ,515,122 41,790 Distributions payable 11 12,944,529 3,029,368 Other payables 7(a), 7(c), 7(d) 3,268, , , ,035 64,086,773 6,905,414 11,760,365 25,113,568 Net assets attributable to unitholders 3,385,714,159 61,604, ,168, ,400,152 Representing: Financial liabilities 3,385,714, ,168, ,400,152 Total equity 61,604,592 Total number of units in issue AC HKD class 9(l) 83,447, ,029 AC SGD class 9(m) 9,683 AC class 9(n) 461,597 1,414,559 33,481, ,038 AM HKD class 9(o) 660,419, ,884,891 AM class 9(p) 219,698,875 46,872,152 AMH AUD class 9(q) 17,819,764 2,951,951 AMH EUR class 9(r) 2,466, ,269 IC class 9(s) 6,014,232 ID class 9(t) 3,730,144 ZD class 9(u) 11,697,349 9

12 Statement of Financial Position Investment s Trust as at 31 July 2017 Net asset value per unit Note 2016 As at 31 July As at 31 July As at 31 July As at 31 July China Asian High Asian Momentum China Growth Yield Bond Bond AC HKD class 9(v) AC SGD class 9(v) AC class 9(v) AM HKD class 9(v) AM class 9(v) AMH AUD class 9(v) AMH EUR class 9(v) IC class 9(v) ID class 9(v) ZD class 9(v) Approved by the Trustee and the Manager on 10 November ) Bertha TAM ) For and on behalf of Dickson LEE ) Trustee (Cayman) Limited, ) Trustee ) ) ) For and on behalf of Guillermo Eduardo MALDONADO-CODINA ) Investment s Chun Pong Stephen TAM ) (Hong Kong) Limited, ) Manager ) The notes on pages 22 to 70 form part of these financial statements. 10

13 Statement of Comprehensive Income Investment s Trust for the year ended 31 July 2017 Note Year ended 31 July Asian Bond 2017 Year ended 31 July Year ended 31 July Year ended 31 July China Asian High Momentum China Growth Yield Bond Interest income 7(b) 42,409 5, ,450 Dividend income 1,368,450 9,641,984 Net gains from financial instruments at fair value through profit or loss 3 51,105,790 19,723, ,374,418 48,321,034 Net foreign exchange (losses)/gains (145,492) (19,431) (164,484) 6,271,456 Other income 7(c), 7(d) 2,637, , ,819 1,082,103 Total revenue 53,640,511 21,202, ,290,483 55,719,043 Management fees 7(a) 27,387,848 1,168,509 5,938,641 11,245,515 Transaction costs 7(d), 7(e) 37, ,130 1,590,539 22,160 Trustee s fees 7(c) 3,024,077 84, ,346 1,204,275 Registrar s fees 7(a) 126,385 5,657 19,913 48,947 Administrative fees 7(a) Auditors remuneration 16,417 22,606 28,436 16,440 Legal and professional fees 19,565 8,921 6,431 11,639 Safe custody fees, bank charges and miscellaneous expenses 7(d) 487,776 33, , ,495 Total operating expenses 31,099,497 1,597,889 8,132,910 12,698,471 Net profit from operations before taxation 22,541,014 19,604, ,157,573 43,020,572 Taxation 4 (310,943) 8,186,832 (575,039) (313,582) Net profit from operations before distributions 22,230,071 27,791, ,582,534 42,706,990 Distributions to unitholders 11 (90,722,877) (41,825,300) (Decrease)/increase in net assets attributable to unitholders and total comprehensive income for the year (68,492,806) 27,791, ,582, ,690 11

14 Statement of Comprehensive Income Investment s Trust for the year ended 31 July 2017 Note Year ended 31 July Asian Bond 2016 Year ended 31 July Year ended 31 July Year ended 31 July China Asian High Momentum China Growth Yield Bond Interest income 7(b) 46,488 16,376 Dividend income 2,457,610 14,730,253 Net gains/(losses) from financial instruments at fair value through profit or loss 3 217,317,696 (10,013,932) (88,651,109) 79,732,088 Net foreign exchange gain/(loss) 261,353 (2,069) 21,679 (440,351) Other income 7(c), 7(d) 46, ,449 Total revenue/(loss) 217,672,180 (7,558,391) (73,899,177) 79,496,562 Management fees 7(a) 21,511,716 1,155,339 8,018,781 8,237,282 Transaction costs 7(d), 7(e) 25, ,391 2,787,664 24,979 Trustee s fees 7(c) 2,516,786 84, , ,653 Registrar s fees 7(a) 156,880 7,600 42, ,561 Administrative fees 7(a) 1,387 3,062 3,463 Auditors remuneration 9,197 15,451 14,641 2,770 Legal and professional fees 15,984 1,651 3,003 13,517 Safe custody fees, bank charges and miscellaneous expenses 7(d) 411,669 29, , ,009 Total operating expenses 24,649,036 1,642,979 11,589,324 9,490,771 Net profit/(loss) from operations before taxation 193,023,144 (9,201,370) (85,488,501) 70,005,791 Taxation 4 (215,961) (125,957) (969,857) (221,085) Net profit/(loss) from operations before distributions 192,807,183 (9,327,327) (86,458,358) 69,784,706 Distributions to unitholders 11 (80,541,355) (38,222,088) Increase/(decrease) in net assets attributable to unitholders and total comprehensive income for the year 112,265,828 (9,327,327) (86,458,358) 31,562,618 The notes on pages 22 to 70 form part of these financial statements. 12

15 Statement of Changes in Net Assets Attributable to Unitholders/Statement of Changes in Equity Investment s Trust for the year ended 31 July 2017 Note 2017 Year ended Year ended Year ended 31 July 31 July 31 July China Asian High Momentum China Growth Yield Bond Year ended 31 July Asian Bond Balance at the beginning of the year 3,385,714,159 61,604, ,168, ,400,152 (Decrease)/increase in net assets attributable to unitholders and total comprehensive income for the year (68,492,806) 27,791, ,582, ,690 Subscriptions of units (excluding equalisation) AC HKD class 29,994,624 1,888,331 AC class 2,868,879 72,789,963 3,295,435 AM HKD class 494,182, ,439,480 AM class 912,469, ,404,064 AMH AUD class 103,078,009 40,248,375 AMH EUR class 9,480,902 10,040,342 IC class 114,960,567 39,506,095 ID class 2,553,202 ZD class 19,625, ,727 Redemptions of units (excluding equalisation) AC HKD class (75,280,526) (2,129,865) AC class (743,009) (12,452,925) (182,444,804) (700,694) AM HKD class (792,028,317) (155,403,337) AM class (1,487,530,005) (291,349,591) AMH AUD class (127,238,475) (33,038,491) AMH EUR class (15,337,214) (4,910,049) IC class (18,645,157) (25,957,111) ID class (11,243,577) ZD class (125,677,115) (179,397) Income equalisation on subscriptions and redemptions 10 (1,988,350) (1,054,875) (537,069) 106,564 (921,211,878) (13,507,800) (155,477,812) 181,795,878 Balance at the end of the year 2,396,009,475 75,887, ,273, ,077,720 13

16 Statement of Changes in Net Assets Attributable to Unitholders/Statement of Changes in Equity Investment s Trust for the year ended 31 July 2017 Note 2016 Year ended Year ended Year ended 31 July 31 July 31 July China Asian High Momentum China Growth Yield Bond Year ended 31 July Asian Bond Balance at the beginning of the year 1,494,420,242 82,815, ,416, ,721,892 Increase/(decrease) in net assets attributable to unitholders and total comprehensive income for the year 112,265,828 (9,327,327) (86,458,358) 31,562,618 Subscriptions of units (excluding equalisation) AC HKD class 41,969,712 (79,199) AC class 1,720,614 75,555,236 2,505,113 AM HKD class 1,095,538, ,630,299 AM class 2,092,440, ,924,156 AMH AUD class 182,288,635 30,125,344 AMH EUR class 24,926,706 7,244,821 IC class 88,584,233 34,818,695 ID class 54,441,893 ZD class 7,486,951 14

17 Statement of Changes in Net Assets Attributable to Unitholders/Statement of Changes in Equity Investment s Trust for the year ended 31 July 2017 Note 2016 Year ended Year ended Year ended 31 July 31 July 31 July China Asian High Momentum China Growth Yield Bond Year ended 31 July Asian Bond Redemptions of units (excluding equalisation) AC HKD class (119,597,768) (164,970) AC class (1,090,303) (11,927,493) (240,344,828) (2,342,956) AM HKD class (521,105,053) (100,804,910) AM class (1,021,467,491) (164,338,488) AMH AUD class (77,198,376) (38,767,021) AMH EUR class (10,901,093) (8,481,472) IC class (75,756,012) (34,960,775) ID class (20,257,824) ZD class (38,777,246) Income equalisation on subscriptions and redemptions 10 (1,845,933) 43, ,286 (1,192,995) 1,779,028,089 (11,883,677) (241,789,362) 110,115,642 Balance at the end of the year 3,385,714,159 61,604, ,168, ,400,152 The redeemable units of China Momentum are classified as equity under HKAS 32. Therefore this sub-fund presents a statement of changes in equity, and the issue and redemption of units and distributions to unitholders are treated as transactions with owners and recorded directly in the statement of changes in equity for the year ended 31 July 2017 and 31 July 2016 for China Momentum. The redeemable units of Asian Bond, China Growth and Asian High Yield Bond are classified as financial liabilities and these sub-funds present a statement of changes in net assets attributable to unitholders and the issue and redemption of units are treated as transactions with unitholders. The distributions are treated as finance cost and are recognised in the statement of comprehensive income for the year ended 31 July 2017 and 31 July The notes on pages 22 to 70 form part of these financial statements. 15

18 Cash Flow Statement Investment s Trust for the year ended 31 July 2017 Year ended 31 July Asian Bond 2017 Year ended 31 July Year ended 31 July Year ended 31 July China Asian High Momentum China Growth Yield Bond Operating activities Interest received 42,409 5, ,450 Dividends received 1,238,683 8,967,901 Management fees paid (27,949,281) (1,145,324) (5,964,220) (11,051,531) Trustee s fees paid (3,144,187) (84,037) (435,857) (1,216,401) Payments on purchase of investments (954,056,364) (56,375,458) (336,502,414) (1,357,012,121) Proceeds from sale of investments 2,007,046,771 61,866, ,750,754 1,222,643,348 Taxes paid (310,959) 1,671,710 (616,829) (313,582) Other operating income received/(expenses paid) 1,482,544 (232,903) (1,485,350) 7,253,000 Cash provided by/(used in) operating activities 1,023,110,933 6,944, ,714,697 (139,652,837) Financing activities Proceeds from issue of units including equalisation 1,692,733, ,960, ,775,560 Payments on redemption of units including equalisation (2,603,636,857) (13,344,169) (255,456,173) (515,264,068) Distributions paid (95,415,601) (40,992,003) Cash (used in)/provided by financing activities (1,006,318,932) (13,344,169) (153,496,156) 131,519,489 Net increase/(decrease) in cash and cash equivalents 16,792,001 (6,399,474) (11,781,459) (8,133,348) Cash and cash equivalents at the beginning of the year 8,800,471 8,017,667 13,569,482 28,392,075 Cash and cash equivalents at the end of the year 25,592,472 1,618,193 1,788,023 20,258,727 16

19 Cash Flow Statement Investment s Trust for the year ended 31 July 2017 Year ended 31 July Asian Bond 2016 Year ended 31 July Year ended 31 July Year ended 31 July China Asian High Momentum China Growth Yield Bond Operating activities Interest received 46,488 16,376 Dividends received 2,304,200 14,227,222 Management fees paid (20,109,337) (1,200,192) (8,497,330) (8,119,224) Trustee s fees paid (2,382,063) (87,703) (605,202) (920,664) Payments on purchase of investments (2,565,441,135) (77,374,610) (668,146,606) (1,143,735,048) Proceeds from sale of investments 864,253,370 87,235, ,756,712 1,097,571,771 Taxes paid (215,981) (277,570) (1,155,755) (221,085) Other operating income received/(expenses paid) 34,224 (427,336) (3,124,257) (611,386) Cash (used in)/provided by operating activities (1,723,814,434) 10,172, ,454,784 (56,019,260) Financing activities Proceeds from issue of units including equalisation 3,518,869, ,801, ,968,299 Payments on redemption of units including equalisation (1,737,606,973) (11,827,451) (365,478,656) (343,851,719) Distributions paid (77,889,191) (38,454,864) Cash provided by/(used in) financing activities 1,703,373,019 (11,827,451) (241,676,659) 64,661,716 Net (decrease)/increase in cash and cash equivalents (20,441,415) (1,654,737) (24,221,875) 8,642,456 Cash and cash equivalents at the beginning of the year 29,241,886 9,672,404 37,791,357 19,749,619 Cash and cash equivalents at the end of the year 8,800,471 8,017,667 13,569,482 28,392,075 The notes on pages 22 to 70 form part of these financial statements. 17

20 Distribution Statement Investment s Trust for the year ended 31 July 2017 Year ended 31 July Asian Bond 2017 Year ended 31 July Year ended 31 July Year ended 31 July China Asian High Momentum China Growth Yield Bond Amount available for distribution brought forward 3,385,714,159 61,604, ,168, ,400,152 Net (paid or payable)/received or receivable on issue and redemption of units (921,211,878) (13,507,800) (155,477,812) 181,795,878 Income before distributions after taxation 22,230,071 27,791, ,582,534 42,706,990 Amount available for distribution to unitholders 2,486,732,352 75,887, ,273,162 1,009,903,020 Distributions to unitholders (90,722,877) (41,825,300) Amount available for distribution carried forward 2,396,009,475 75,887, ,273, ,077,720 Year ended 31 July Asian Bond 2016 Year ended 31 July Year ended 31 July Year ended 31 July China Asian High Momentum China Growth Yield Bond Amount available for distribution brought forward 1,494,420,242 82,815, ,416, ,721,892 Net received or receivable/(paid or payable) on issue and redemption of units 1,779,028,089 (11,883,677) (241,789,362) 110,115,642 Income/(loss) before distributions after taxation 192,807,183 (9,327,327) (86,458,358) 69,784,706 Amount available for distribution to unitholders 3,466,255,514 61,604, ,168, ,622,240 Distributions to unitholders (80,541,355) (38,222,088) Amount available for distribution carried forward 3,385,714,159 61,604, ,168, ,400,152 18

21 Distribution Statement Investment s Trust for the year ended 31 July 2017 Note Year ended 31 July 2017 Year ended 31 July 2016 Distribution Date of Distribution Date of per unit distribution per unit distribution Distribution history Asian Bond Class AM HKD First distribution August August 2015 Second distribution September September 2015 Third distribution October October 2015 Fourth distribution November November 2015 Fifth distribution December December 2015 Sixth distribution January January 2016 Seventh distribution February February 2016 Eighth distribution March March 2016 Ninth distribution April April 2016 Tenth distribution May May 2016 Eleventh distribution June June 2016 Twelfth distribution July July 2016 Class AM First distribution August August 2015 Second distribution September September 2015 Third distribution October October 2015 Fourth distribution November November 2015 Fifth distribution December December 2015 Sixth distribution January January 2016 Seventh distribution February February 2016 Eighth distribution March March 2016 Ninth distribution April April 2016 Tenth distribution May May 2016 Eleventh distribution June June 2016 Twelfth distribution July July 2016 Class AMH AUD First distribution August August 2015 Second distribution September September 2015 Third distribution October October 2015 Fourth distribution November November 2015 Fifth distribution December December 2015 Sixth distribution January January 2016 Seventh distribution February February 2016 Eighth distribution March March 2016 Ninth distribution April April 2016 Tenth distribution May May 2016 Eleventh distribution June June 2016 Twelfth distribution July July

22 Distribution Statement Investment s Trust for the year ended 31 July 2017 Note Year ended 31 July 2017 Year ended 31 July 2016 Distribution Date of Distribution Date of per unit distribution per unit distribution Distribution history Asian Bond Class AMH EUR First distribution August August 2015 Second distribution September September 2015 Third distribution October October 2015 Fourth distribution November November 2015 Fifth distribution December December 2015 Sixth distribution January January 2016 Seventh distribution February February 2016 Eighth distribution March March 2016 Ninth distribution April April 2016 Tenth distribution May May 2016 Eleventh distribution June June 2016 Twelfth distribution July July 2016 Class ID First distribution July July 2016 Class ZD First distribution July July 2016 Distribution history Asian High Yield Bond Class AM HKD First distribution August August 2015 Second distribution September September 2015 Third distribution October October 2015 Fourth distribution November November 2015 Fifth distribution December December 2015 Sixth distribution January January 2016 Seventh distribution February February 2016 Eighth distribution March March 2016 Ninth distribution April April 2016 Tenth distribution May May 2016 Eleventh distribution June June 2016 Twelfth distribution July July

23 Distribution Statement Investment s Trust for the year ended 31 July 2017 Note Year ended 31 July 2017 Year ended 31 July 2016 Distribution Date of Distribution Date of per unit distribution per unit distribution Distribution history Asian High Yield Bond Class AM First distribution August August 2015 Second distribution September September 2015 Third distribution October October 2015 Fourth distribution November November 2015 Fifth distribution December December 2015 Sixth distribution January January 2016 Seventh distribution February February 2016 Eighth distribution March March 2016 Ninth distribution April April 2016 Tenth distribution May May 2016 Eleventh distribution June June 2016 Twelfth distribution July July 2016 Class AMH AUD First distribution August August 2015 Second distribution September September 2015 Third distribution October October 2015 Fourth distribution November November 2015 Fifth distribution December December 2015 Sixth distribution January January 2016 Seventh distribution February February 2016 Eighth distribution March March 2016 Ninth distribution April April 2016 Tenth distribution May May 2016 Eleventh distribution June June 2016 Twelfth distribution July July 2016 Class AMH EUR First distribution August August 2015 Second distribution September September 2015 Third distribution October October 2015 Fourth distribution November November 2015 Fifth distribution December December 2015 Sixth distribution January January 2016 Seventh distribution February February 2016 Eighth distribution March March 2016 Ninth distribution April April 2016 Tenth distribution May May 2016 Eleventh distribution June June 2016 Twelfth distribution July July 2016 The notes on pages 22 to 70 form part of these financial statements. 21

24 Notes to the Financial Statements 1 The Trust Investment s Trust ( the Trust ) is an open ended umbrella unit trust which was established under a trust deed dated 13 November 1995, as amended (the Trust Deed ), and is governed by the laws of the Cayman Islands. The Trust registered under the Mutual s Law of the Cayman Islands on 10 November The four sub-funds ( the subfunds ) of the Trust included under this report are: Asian Bond China Momentum China Growth Asian High Yield Bond Asia ex Japan Equity Index, was created under the Trust on 9 December The financial statements of this sub fund is not included under this report because separate set of financial statements is prepared solely for this sub-fund. The sub-funds included under this report commenced their operations on the dates as set out below: Date of commencement Asian Bond 13 November 1995 China Momentum 28 October 2003 China Growth 5 July 2007 Asian High Yield Bond 23 May 2011 The objective of Asian Bond is to achieve a reasonably high income whilst maintaining a prudent policy of capital conservation for the unitholders through investing in fixed interest securities and government bonds within the Asian region. The objective of China Momentum is to achieve long-term capital appreciation by investing in securities issued by or linked to the companies that are positioned to benefit from the strong economic growth and rising investment opportunities in Mainland China ( China ). The objective of China Growth is to seek longterm capital growth by investing in a portfolio of equities issued by companies located in China or deriving a preponderant part of their income and/or assets from China, and instruments linked to such investments. The objective of Asian High Yield Bond is to achieve a higher level of income and capital appreciation through investing primarily in a diversified portfolio of higher yielding fixed income securities including investment grade, non investment grade and unrated bonds that are primarily denominated in United States dollars, traded or issued by issuers in the Asian markets. All sub-funds included under this report are authorised by the Hong Kong Securities and Futures Commission ( SFC ) under Section 104 of the Hong Kong Securities and Futures Ordinance ( HKSFO ) and are governed by the Hong Kong Code on Unit Trusts and Mutual s issued by the SFC. The financial statements of the sub-funds are presented in United States dollars. The Trust Deed does not contain any requirement that a combined set of financial statements for the Trust itself be prepared. 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 as a 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, as amended, and the relevant disclosure provisions of the Hong Kong Code on Unit Trusts and Mutual s issued by the SFC. A summary of the significant accounting policies adopted by the Trust is set out below. (b) Basis of preparation of the financial statements The functional and presentation currency for the sub-funds is United States dollars reflecting the fact that a majority of the participating redeemable units of the sub-funds are issued and redeemed in United States dollars. The financial statements are prepared on a fair value basis for financial assets and financial liabilities at fair value through profit or loss and derivative financial instruments. Other financial assets and financial liabilities are stated at amortised cost or redemption amount (redeemable units). 22

25 Notes to the Financial Statements The preparation of financial statements in conformity with HKFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the 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 accounting policies have been applied consistently by the sub-funds and are consistent with those used in the previous year. (c) Changes in accounting policies The HKICPA has issued a number of amendments to HKFRSs that are first effective for the current accounting period of the sub-funds. None of these developments have had a material effect on how the sub-funds results and financial position for the current or prior periods have been prepared or presented. The sub-funds have not applied any new standard or interpretation that is not yet effective for the current accounting period (see note 15). (d) Foreign currency translation Foreign currency exchange differences relating to investments at fair value through profit or loss are included in net gains or losses from financial instruments at fair value through profit or loss. All other foreign currency exchange differences relating to monetary items including cash and cash equivalents are presented separately in profit or loss. (e) (i) Financial instruments Classification All of the sub-funds investments are classified 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-funds have acquired principally for the purpose of short-term profit-taking. These include investments in equities and debt securities, equitylinked instruments and forward contracts. 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 at amortised cost that are classified as loans and receivables include interest receivable, dividends receivable, subscriptions receivable and amounts due from brokers. Financial liabilities at amortised cost include redemptions payable, amounts due to brokers, taxes payable, distributions payable and other payables. Financial liabilities arising from the redeemable units issued by Asian Bond, China Growth and Asian High Yield Bond are carried at the redemption amount. Foreign currency transactions during the year are translated into the reporting currencies of the respective sub-funds 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 the reporting currencies of the respective sub-funds at the foreign exchange rates ruling at the date of the statement of financial position. 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. (ii) Recognition The sub-funds recognise financial assets and financial liabilities on the date they become a party to the contractual provisions of the instruments. 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. 23