FIDELITY RETIREMENT MASTER TRUST FUND. Annual Report and Accounts

Transcription

1 FIDELITY RETIREMENT MASTER TRUST FUND Annual Report and Accounts December 2006

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3 REPORTS AND FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2006 Contents Pages Scheme Report 1-3 Report of the Manager 4-6 Investment Report 7-29 Independent Auditor s Report to the Trustee Master Trust Scheme Statement of Net Assets 32 Statement of Changes in Net Assets Available for Benefits Statement of Cash Flows 35 Constituent Funds Statement of Operations Statement of Net Assets Statement of Movements in Net Assets Attributable to Unitholders Notes to the Financial Statements 51 61

4 1 SCHEME REPORT The Trustee hereby submits the scheme report together with the audited financial statements of the Fidelity Retirement Master Trust (the Scheme ) for the year ended 31st December The Scheme The Scheme is a master trust scheme for the purpose of providing benefits to members in accordance with the Hong Kong Mandatory Provident Fund Schemes Ordinance (the Ordinance ). The Scheme is established under the trust deed dated 31st January 2000, as amended, between Fidelity Investments Management (Hong Kong) Limited as investment manager (the Manager ) and HSBC Institutional Trust Services (Asia) Limited as trustee (the Trustee ). The Scheme is registered under Section 21 of the Ordinance. Financial developments The Scheme commenced operations on 1st December The total contributions received and receivable including transfers in and benefits paid and payable including transfers out during the year were HK$1,636,481,467 (2005: HK$1,326,813,740) and HK$641,818,955 (2005: HK$279,142,415) respectively. The net asset value as at 31st December 2006 was HK$8,711,606,420 (2005: HK$6,463,085,723). The Scheme had 193,971 (2005: 170,887) members as at 31st December Changes to the governing rules There have been no changes to the governing rules of the Scheme during the year. Particulars of the service providers Particulars of the Trustee and service providers engaged by the Trustee for the purposes of the Scheme during the year ended 31st December 2006 are set out below. Trustee, Custodian and Administrator HSBC Institutional Trust Services (Asia) Limited 1 Queen s Road Central Hong Kong Manager Fidelity Investments Management (Hong Kong) Limited 17th Floor, One International Finance Centre 1 Harbour View Street Central, Hong Kong

5 2 SCHEME REPORT Particulars of the service providers (Continued) Bank The Hong Kong and Shanghai Banking Corporation Limited (holding company of the Trustee) HSBC Main Building 1 Queen s Road Central Hong Kong Legal Adviser Deacons 5th Floor, Alexandra House Chater Road Central, Hong Kong Auditors PricewaterhouseCoopers 33 rd Floor, Cheung Kong Center 2 Queen s Road Central Hong Kong Directors of the Trustee Andrew Lai Wah Law Bryan Nicholas Radley (resigned on 20 Mar 2007) James Julius Bertram Lilian Loi Loi Wong Alastair Elliot Murray Loretta Yuk Sheung Ma (appointed on 10 August 2006) The business address of the above directors is HSBC Main Building, 1 Queen s Road Central, Hong Kong.

6 3 SCHEME REPORT Directors of the Bank Vincent Cheng Hoi Chuen Dr William Fung Kwok Lun Dr Raymond Ch ien Kuo Fung Stephen K Green Victor Li Tzar Kuoi Dr Lo Ka Shui Jack So Chak Kwong T Brian Stevenson Dr Patrick Wang Shui Chung Dr Rosanna Wong Yick-ming Marjorie Yang Mun Tak Michael R P Smith Laura Cha May Lung Raymond Or Ching Fai Peter Wong Tung Shun Mody Zia Christopher Dale Pratt Michael F Geoghegan (appointed on 1 June 2006) Stuart T Gulliver (appointed on 22 September 2006) The business address of the above directors is HSBC Main Building, 1 Queen s Road Central, Hong Kong. Further information Scheme members can obtain further information about the Scheme and its operations from the Trustee, the Scheme s hotline number or the web site at

7 4 REPORT OF THE MANAGER Annual Report This Annual Report does not constitute an offer of units. Units are offered on the basis of the information contained in the current Principal Brochure (and the documents referred to within it). Copies of the current Principal Brochure and latest annual report for the Fidelity Retirement Master Trust ( the Scheme ) are available from the registered office of the Manager or from any of the companies registered as distributors of the Scheme.

8 5 REPORT OF THE MANAGER 2006 Global Market Review United States Despite a volatile year, US equities reached a six-year high in December. Concerns about higher oil prices, a slowing economy and rising interest rates undermined investor confidence during the first half of the year, although strong corporate earnings provided encouragement. Towards the end of the year, investors took heart from falling oil prices and a series of M&A announcements. After growing at an annual rate of 5.6% in the first three months of 2006, the economy slowed to 2.6% in the second quarter and to 2.0% in the third. The slowdown was largely attributable to an increasingly weak housing market. However, robust consumer spending bolstered the GDP growth rate to 3.5% in the fourth quarter. Lower oil prices helped keep inflation in check later in the year. Against this backdrop, the Federal Reserve increased interest rates to 5.25% in four steps, but left them on hold in August, mainly in response to slower economic growth, reflecting, in part, the gradual cooling of the housing market. Europe European equities touched six-year highs towards the end of the year, despite having experienced a volatile May and June. The region s share prices drew support from a high level of takeover activity, coupled with generally upbeat corporate results and positive economic signs. Nevertheless, investors were concerned about the direction of oil prices and interest rates, as well as the slowing US growth rate. At sector level, utilities were among the best performers in 2006 in aggregate, as they benefited from M&A speculation in the segment. However, healthcare companies lagged amid fears that the victory of the Democrats in the US mid-term elections could result in increased government intervention in drug pricing. Economic growth in the eurozone was 0.5% in the third quarter of 2006, compared with 1.0% in the second. However, business confidence reached multi-year highs and unemployment fell across the region. Meanwhile, the European Central Bank implemented a series of rate hikes with the aim of maintaining price stability; its key rate reached 3.5% in December. Japan The Japanese equity markets ended the year in the positive territory despite charting an uneven course during the year. Large caps outperformed smaller companies during this period, reflecting investor preference for blue-chips amid increased uncertainty and market volatility. Japanese equities declined in the second quarter against the backdrop of falling global equities, relinquishing some of the gains accumulated in late 2005 and early There was a recovery in late July, as geopolitical tensions eased and the prospect of further monetary tightening in the US receded. Weak economic data in Japan and the US precipitated a surge in net selling by overseas investors in September. However, Japanese equities rose to a seven-month high in December. Investors drew confidence from the Bank of Japan s (BoJ) Tankan survey, a weaker yen, and buoyant global equity markets. However, at its final policy meeting for 2006, the BoJ decided to maintain its current interest rate target of 0.25%. Overall, the Japanese growth momentum has slowed, with the consumer and retail sectors not growing as strongly as expected. While rising wages and asset prices are likely to support consumer spending, slower global growth, a sharp appreciation in the value of the yen, and the timing and extent of any interest rate hikes could derail Japan s recovery.

9 6 REPORT OF THE MANAGER Pacific ex Japan Asian stock markets ended the year on a high note, marking the fourth year of an extended bull run. Asian equities significantly outperformed a majority of their global peers, primarily driven by high levels of liquidity, strong earnings, robust economic growth and acceleration in M&A activity. However, investment sentiment swung between extremes and markets charted an uneven course during the year. Although all the markets in the region, with the exception of Thailand, ended the review period in positive territory, there was considerable variation in performance. In December, Hong Kong s Hang Seng Index touched its all-time high amid increasing fund raising activity. Singapore s benchmark Straits Times Index also climbed to a record high driven by continued inflows of foreign funds. Elsewhere in the region, Taiwan s bourse surged to a six-year high due to spurt in net exports and M&A activity. Meanwhile, Korea s KOSPI ended the year very close to its historical high. Benchmark indices in India, Indonesia, Malaysia and China also hit new zeniths in December. Conversely, Thailand suffered from negative sentiment following the capital control measures announced by the government. In spite of these steps being partially recalled soon after, investor confidence was shaken. Bonds Global bond markets posted positive returns in 2006, although they began on a weak note due to rising oil prices and expectations of monetary policy tightening by the major central banks. However, oil prices eased after an unusually warm autumn lowered the consumption of heating fuel. Bonds rallied in the second half of the year amid concerns about a slowdown in the US and a decline in oil prices, although they subsequently fell in light of stronger-than-expected US growth towards the end of the year. Investment-grade corporate bonds outperformed government-issued debt across major bond markets, except in Japan, where the reverse was true. Within corporate bonds, lower rated BBB bonds outperformed higher rated AAA issues. Sub-investment grade securities were the best performing asset class, reflecting investor sentiment in favour of high-yielding assets. US government bonds outperformed other major government bond markets, while European government bonds were the only ones to end 2006 with negative returns. All market returns are in local currency terms. Director of the Manager 15th June 2007

10 7 INVESTMENT REPORT The Scheme commenced operations on 1st December The Scheme offers fourteen constituent funds with different investment policies. The constituent funds of the Scheme are Asia Pacific Equity Fund, Balanced Fund, Capital Preservation Fund, Capital Stable Fund, Global Equity Fund, Growth Fund, Hong Kong Bond Fund, Hong Kong Equity Fund, MultiManager Balanced Fund, MultiManager Capital Stable Fund, MultiManager Growth Fund, MultiManager Stable Growth Fund, Stable Growth Fund and World Bond Fund. All constituent funds are feeder funds which invest in approved pooled investment funds managed by the Manager. Separate and distinct investment policies are applied in the investments of each constituent fund. The respective investment objectives and policies are set out below. There have been no changes to the investment objectives and policies during the year which would materially affect the risk attached to the investments of the Scheme. The Trustee of the Scheme confirmed that based on the information received from the Manager of the Scheme during the year, to the best of the knowledge and belief of the Trustee, the investment objectives and policies for each constituent fund of the Scheme were complied with. Asia Pacific Equity Fund to act as a feeder fund and invest all of its assets in the Asia Pacific Equity Fund (MPF) of the Fidelity Global Investment Fund; to focus investments into the equity markets of Asia Pacific; to produce returns that are related to those achieved on the major stock market indices of Asia Pacific; to have the flexibility to invest in bonds in a limited manner; and to manage the volatility of returns in the short term. Balanced Fund to act as a feeder fund and invest all of its assets in the Balanced Fund of the Fidelity Global Investment Fund; to build capital value over the long term; to provide a degree of asset diversification within a predominantly equity portfolio; to maintain a broad geographic diversification with a bias towards Hong Kong; and to manage the volatility of returns in the short term. Capital Preservation Fund to act as a feeder fund and invest all of its assets in the HK$ Money Fund of the Fidelity Global Investment Fund; to provide a positive return each month equal to or better than the HKD savings account rate; to focus investments into short term instruments; to invest only into HKD securities; and to ensure that there is minimal risk to the capital.

11 8 INVESTMENT REPORT Capital Stable Fund to act as a feeder fund and invest all of its assets in the Capital Stable Fund of the Fidelity Global Investment Fund; to produce a positive return over the long term; to focus investments towards less volatile assets of bonds and cash whilst retaining some equity exposure; to maintain a broad geographic diversification with a bias towards Hong Kong; and to ensure that the risk to the capital base is limited in the short term. Global Equity Fund to act as a feeder fund and invest all of its assets in the Global Equity Fund of the Fidelity Global Investment Fund; to focus investments into the global equity markets; to produce returns that are related to those achieved on the major world stock market indices; to have the flexibility to have limited investment into bonds; and to manage the volatility of returns in the short term. Growth Fund to act as a feeder fund and invest all of its assets in the Growth Fund of the Fidelity Global Investment Fund; to build real wealth over the long term; to focus investments into the global equity markets; to have the flexibility to invest in global bonds; to maintain a broad geographic diversification with a bias towards Hong Kong; and to manage the volatility of returns in the short term. Hong Kong Bond Fund to act as a feeder fund and invest all of its assets in the Hong Kong Bond Fund of the Fidelity Global Investment Fund; to invest in the world bond markets with a focus on Hong Kong Dollar denominated bonds and issuers; to produce returns that are related to those achieved on the major bond market indices; to limit the volatility of returns in the short term in Hong Kong Dollar market terms; and to minimise currency volatility by implementing a HKD hedged strategy (where investments are made other than in HKD). Hong Kong Equity Fund to act as a feeder fund and invest all of its assets in the Hong Kong Equity Fund of the Fidelity Global Investment Fund; to focus investments into the equity markets and companies of Hong Kong and Greater China; to produce returns that are related to those achieved on the major stock market indices of Hong Kong; to have the flexibility to invest in bonds in a limited manner; and to accept a high level of return volatility in the short term.

12 9 INVESTMENT REPORT MultiManager Balanced Fund to act as a feeder fund and invest all of its assets in the MultiManager Balanced Fund of the Fidelity Global Investment Fund; to build capital value over the long term; to provide a degree of asset diversification within a predominately equity portfolio; to have the flexibility to vest in fixed income securities and cash; to maintain a broad geographic diversification with a bias towards Hong Kong; and to manage the volatility of returns in the short term. MultiManager Capital Stable Fund to act as a feeder fund and invest all of its assets in the MultiManager Capital Stable Fund of the Fidelity Global Investment Fund; to produce a positive return over the long term; to focus investment towards less volatile assets of fixed income securities and cash whilst retaining some equity exposure; to maintain a broad geographic diversification with a bias towards Hong Kong; and to ensure that the risk to the capital base is limited in the short term. MultiManager Growth Fund to act as a feeder fund and invest all of its assets in the MultiManager Growth Fund of the Fidelity Global Investment Fund; to build real wealth over the long term; to focus investment into the global equity markets; to have the flexibility to invest in fixed income securities and cash; to maintain a broad geographic diversification with a bias towards Hong Kong; and to manage the volatility of returns in the short term. MultiManager Stable Growth Fund to act as a feeder fund and invest all of its assets in the MultiManager Stable Growth Fund of the Fidelity Global Investment Fund; to generate a positive return over the long term; to broadly diversify the portfolio as to asset type as between equities and fixed income securities; to have the flexibility to invest in fixed income securities and cash; to maintain a broad geographic diversification with a bias towards Hong Kong; and to limit the volatility of returns in the short term. Stable Growth Fund to act as a feeder fund and invest all of its assets in the Stable Growth Fund of the Fidelity Global Investment Fund; to generate a positive return over the long term; to broadly diversify the portfolio as to asset type as between equities and bonds; to maintain a broad geographic diversification with a bias towards Hong Kong; and to limit the volatility of returns in the short term. World Bond Fund to act as a feeder fund and invest all of its assets in the World Bond Fund of the Fidelity Global Investment Fund; to focus investments into the bond markets of the world; to produce returns that are related to those achieved on the major bond market indices; to limit the volatility of returns in the short term.

13 10 INVESTMENT REPORT Performance table Asia Pacific Equity Fund HK$ Net loss excluding capital appreciation (108,863) Capital appreciation - realised and unrealised # 4,176,844 Value of scheme assets derived from investments 48,455,058 Total net asset value 48,397,239 Net asset value per unit Highest issue price Lowest redemption price Net annual investment return 1 HK$ HK$ % Net annual investment return represents the percentage change in the unit price during the year. For the first financial period (7th August 2006 to 31st December 2006), the actual net investment return is shown. The fund was launched on 7th August # The constituent fund is a feeder fund which invests in an approved pooled investment fund. During the period ended 31st December 2006, there was no distribution income from the approved pooled investment fund. As a result, there was no other investment income except for the appreciation of the investments as stated above.

14 11 INVESTMENT REPORT Performance table (Continued) Balanced Fund HK$ HK$ HK$ Net loss excluding capital appreciation (18,628,412) (14,849,671) (11,784,471) Capital appreciation - realised and unrealised # 261,188, ,507, ,580,805 Value of scheme assets derived from investments 1,586,310,411 1,236,152, ,599,313 Total net asset value 1,584,149,012 1,234,489, ,848,177 Net asset value per unit Highest issue price Lowest redemption price Net annual investment return 1 HK$ HK$ % (8.077) (12.802) Net annual investment return represents the percentage change in the unit price during the year. For the first financial period (1st December 2000 to 31st December 2000), the actual net investment return is shown. # The constituent fund is a feeder fund which invests in an approved pooled investment fund. During the year ended 31st December 2006, there was no distribution income from the approved pooled investment fund. As a result, there was no other investment income except for the appreciation of the investments as stated above.

15 12 INVESTMENT REPORT Performance table (Continued) Capital Preservation Fund HK$ HK$ HK$ Net loss excluding capital appreciation (10,578,979) (7,712,021) (68,744) Capital appreciation - realised and unrealised # 32,680,963 15,390, ,203 Income derived from investments Bank interest 19, Value of scheme assets derived from investments 976,860, ,161, ,526,061 Total net asset value 981,082, ,616, ,788,612 Net asset value per unit Highest issue price Lowest redemption price Net annual investment return 1 HK$ HK$ % Net annual investment return represents the percentage change in the unit price during the year. For the first financial period (1st December 2000 to 31st December 2000), the actual net investment return is shown. # The constituent fund is a feeder fund which invests in an approved pooled investment fund. During the year ended 31st December 2006, there was no distribution income from the approved pooled investment fund. As a result, there was no other investment income except for the appreciation of the investments as stated above.

16 13 INVESTMENT REPORT Performance table (Continued) Capital Stable Fund HK$ HK$ HK$ Net loss excluding capital appreciation (8,157,494) (7,132,482) (6,018,648) Capital appreciation - realised and unrealised # 67,671,194 12,636,165 44,219,837 Value of scheme assets derived from investments 661,503, ,191, ,683,283 Total net asset value 660,574, ,412, ,790,431 Net asset value per unit Highest issue price Lowest redemption price Net annual investment return 1 HK$ HK$ % (6.207) Net annual investment return represents the percentage change in the unit price during the year. For the first financial period (1st December 2000 to 31st December 2000), the actual net investment return is shown. # The constituent fund is a feeder fund which invests in an approved pooled investment fund. During the year ended 31st December 2006, there was no distribution income from the approved pooled investment fund. As a result, there was no other investment income except for the appreciation of the investments as stated above.

17 14 INVESTMENT REPORT Performance table (Continued) Global Equity Fund HK$ HK$ HK$ Net loss excluding capital appreciation (4,544,918) (2,390,699) (1,263,591) Capital appreciation - realised and unrealised # 59,054,720 20,583,091 12,108,179 Value of scheme assets derived from investments 438,656, ,194, ,934,483 Total net asset value 438,200, ,985, ,820,926 Net asset value per unit Highest issue price Lowest redemption price Net annual investment return 1 HK$ HK$ % Net annual investment return represents the percentage change in the unit price during the year. For the first financial period (2nd July 2003 to 31st December 2003), the actual net investment return is shown. # The constituent fund is a feeder fund which invests in an approved pooled investment fund. During the year ended 31st December 2006, there was no distribution income from the approved pooled investment fund. As a result, there was no other investment income except for the appreciation of the investments as stated above.

18 15 INVESTMENT REPORT Performance table (Continued) Growth Fund HK$ HK$ HK$ Net loss excluding capital appreciation (24,727,022) (19,056,732) (14,933,243) Capital appreciation - realised and unrealised # 415,383, ,815, ,127,999 Value of scheme assets derived from investments 2,154,565,294 1,617,991,655 1,259,573,998 Total net asset value 2,151,660,742 1,615,821,064 1,257,341,832 Net asset value per unit Highest issue price Lowest redemption price Net annual investment return 1 HK$ HK$ % (13.117) (16.396) Net annual investment return represents the percentage change in the unit price during the year. For the first financial period (1st December 2000 to 31st December 2000), the actual net investment return is shown. # The constituent fund is a feeder fund which invests in an approved pooled investment fund. During the year ended 31st December 2006, there was no distribution income from the approved pooled investment fund. As a result, there was no other investment income except for the appreciation/(depreciation) of the investments as stated above.

19 16 INVESTMENT REPORT Performance table (Continued) Hong Kong Bond Fund HK$ HK$ HK$ Net loss excluding capital (depreciation)/appreciation (761,215) (422,300) (285,507) Capital (depreciation)/appreciation - realised and unrealised # 2,742,935 (55,308) 295,292 Value of scheme assets derived from investments 70,835,647 35,472,602 16,511,233 Total net asset value 70,756,159 35,427,251 16,476,024 Net asset value per unit Highest issue price Lowest redemption price Net annual investment return 1 HK$ HK$ % (2.520) (0.073) (4.690) 1 Net annual investment return represents the percentage change in the unit price during the year. For the first financial period (8th July 2003 to 31st December 2003), the actual net investment return is shown. # The constituent fund is a feeder fund which invests in an approved pooled investment fund. During the year ended 31st December 2006, there was no distribution income from the approved pooled investment fund. As a result, there was no other investment income except for the appreciation of the investments as stated above.

20 17 INVESTMENT REPORT Performance table (Continued) Hong Kong Equity Fund HK$ HK$ HK$ Net loss excluding capital appreciation (15,492,670) (11,669,816) (8,834,751) Capital appreciation - realised and unrealised # 385,233,742 82,291, ,582,451 Value of scheme assets derived from investments 1,415,393, ,515, ,946,785 Total net asset value 1,413,532, ,191, ,586,336 Net asset value per unit Highest issue price Lowest redemption price Net annual investment return 1 HK$ HK$ % (16.268) (18.076) Net annual investment return represents the percentage change in the unit price during the year. For the first financial period (1st December 2000 to 31st December 2000), the actual net investment return is shown. # The constituent fund is a feeder fund which invests in an approved pooled investment fund. During the year ended 31st December 2006, there was no distribution income from the approved pooled investment fund. As a result, there was no other investment income except for the appreciation of the investments as stated above.

21 18 INVESTMENT REPORT Performance table (Continued) MultiManager Balanced Fund HK$ Net loss excluding capital appreciation (126,562) Capital appreciation - realised and unrealised # 1,667,557 Value of scheme assets derived from investments 19,608,624 Total net asset value 19,737,352 Net asset value per unit Highest issue price Lowest redemption price Net annual investment return 1 HK$ HK$ % Net annual investment return represents the percentage change in the unit price during the year. For the first financial period (16th January 2006 to 31st December 2006), the actual net investment return is shown. The fund was launched on 16th January # The constituent fund is a feeder fund which invests in an approved pooled investment fund. During the period ended 31st December 2006, there was no distribution income from the approved pooled investment fund. As a result, there was no other investment income except for the appreciation of the investments as stated above.

22 19 INVESTMENT REPORT Performance table (Continued) MultiManager Capital Stable Fund HK$ Net loss excluding capital appreciation (42,328) Capital appreciation - realised and unrealised # 274,003 Value of scheme assets derived from investments 6,429,331 Total net asset value 6,512,828 Net asset value per unit Highest issue price Lowest redemption price Net annual investment return 1 HK$ HK$ % Net annual investment return represents the percentage change in the unit price during the year. For the first financial period (16th January 2006 to 31st December 2006), the actual net investment return is shown. The fund was launched on 16th January # The constituent fund is a feeder fund which invests in an approved pooled investment fund. During the period ended 31st December 2006, there was no distribution income from the approved pooled investment fund. As a result, there was no other investment income except for the appreciation of the investments as stated above.

23 20 INVESTMENT REPORT Performance table (Continued) MultiManager Growth Fund HK$ Net loss excluding capital appreciation (272,918) Capital appreciation - realised and unrealised # 4,769,008 Value of scheme assets derived from investments 45,422,756 Total net asset value 45,891,010 Net asset value per unit Highest issue price Lowest redemption price Net annual investment return 1 HK$ HK$ % Net annual investment return represents the percentage change in the unit price during the year. For the first financial period (16th January 2006 to 31st December 2006), the actual net investment return is shown. The fund was launched on 16th January # The constituent fund is a feeder fund which invests in an approved pooled investment fund. During the period ended 31st December 2006, there was no distribution income from the approved pooled investment fund. As a result, there was no other investment income except for the appreciation of the investments as stated above.

24 21 INVESTMENT REPORT Performance table (Continued) MultiManager Stable Growth Fund HK$ Net loss excluding capital appreciation (85,621) Capital appreciation - realised and unrealised # 883,169 Value of scheme assets derived from investments 11,778,260 Total net asset value 11,982,801 Net asset value per unit Highest issue price Lowest redemption price Net annual investment return 1 HK$ HK$ % Net annual investment return represents the percentage change in the unit price during the year. For the first financial period (16th January 2006 to 31st December 2006), the actual net investment return is shown. The fund was launched on 16th January # The constituent fund is a feeder fund which invests in an approved pooled investment fund. During the period ended 31st December 2006, there was no distribution income from the approved pooled investment fund. As a result, there was no other investment income except for the appreciation of the investments as stated above.

25 22 INVESTMENT REPORT Performance table (Continued) Stable Growth Fund HK$ HK$ HK$ Net loss excluding capital appreciation (13,280,520) (10,722,128) (8,540,331) Capital appreciation - realised and unrealised # 147,921,706 48,585,460 75,400,601 Value of scheme assets derived from investments 1,112,855, ,932, ,161,797 Total net asset value 1,111,327, ,737, ,884,548 Net asset value per unit Highest issue price Lowest redemption price Net annual investment return 1 HK$ HK$ % (2.535) (9.563) Net annual investment return represents the percentage change in the unit price during the year. For the first financial period (1st December 2000 to 31st December 2000), the actual net investment return is shown. # The constituent fund is a feeder fund which invests in an approved pooled investment fund. During the year ended 31st December 2006, there was no distribution income from the approved pooled investment fund. As a result, there was no other investment income except for the appreciation of the investments as stated above.

26 23 INVESTMENT REPORT Performance table (Continued) World Bond Fund HK$ HK$ HK$ Net loss excluding capital appreciation/ (depreciation) (1,475,640) (1,006,928) (686,001) Capital appreciation/(depreciation) - realised and unrealised # 4,543,839 (2,545,345) 3,476,940 Value of scheme assets derived from investments 135,272,292 83,921,699 50,734,816 Total net asset value 135,148,981 83,854,342 50,679,542 Net asset value per unit Highest issue price Lowest redemption price Net annual investment return 1 HK$ HK$ % (5.141) Net annual investment return represents the percentage change in the unit price during the year. For the first financial period (8th July 2003 to 31st December 2003), the actual net investment return is shown. # The constituent fund is a feeder fund which invests in an approved pooled investment fund. During the year ended 31st December 2006, there was no distribution income from the approved pooled investment fund. As a result, there was no other investment income except for the appreciation of the investments as stated above.

27 24 INVESTMENT REPORT Distribution of constituent funds As at 31st December 2006, 2005 and 2004, the contributions received were allocated to the Scheme s constituent funds as follows: Net asset value HK$ HK$ HK$ Asia Pacific Equity Fund 48,397, Balanced Fund 1,584,149,012 1,234,489, ,848,177 Capital Preservation Fund 981,082, ,616, ,788,612 Capital Stable Fund 660,574, ,412, ,790,431 Global Equity Fund 438,200, ,985, ,820,926 Growth Fund 2,151,660,742 1,615,821,064 1,257,341,832 Hong Kong Bond Fund 70,756,159 35,427,251 16,476,024 Hong Kong Equity Fund 1,413,532, ,191, ,586,336 MultiManager Balanced Fund 19,737, MultiManager Capital Stable Fund 6,512, MultiManager Growth Fund 45,891, MultiManager Stable Growth Fund 11,982, Stable Growth Fund 1,111,327, ,737, ,884,548 World Bond Fund 135,148,981 83,854,342 50,679,542 8,678,955,343 6,428,536,862 5,053,216,428

28 25 INVESTMENT REPORT Distribution of constituent funds (Continued) As at 31st December 2006, 2005 and 2004, the contributions received were allocated to the Scheme s constituent funds as follows: % of the total investments of the Scheme Asia Pacific Equity Fund 0.6% - - Balanced Fund 18.3% 19.2% 19.5% Capital Preservation Fund 11.3% 12.3% 13.3% Capital Stable Fund 7.6% 8.8% 9.7% Global Equity Fund 5.0% 3.7% 2.3% Growth Fund 24.8% 25.1% 24.9% Hong Kong Bond Fund 0.8% 0.5% 0.3% Hong Kong Equity Fund 16.3% 15.3% 14.9% MultiManager Balanced Fund 0.2% - - MultiManager Capital Stable Fund 0.1% - - MultiManager Growth Fund 0.5% - - MultiManager Stable Growth Fund 0.1% - - Stable Growth Fund 12.8% 13.8% 14.1% World Bond Fund 1.6% 1.3% 1.0% 100.0% 100.0% 100.0%

29 26 INVESTMENT REPORT Investment portfolio as at 31st December 2006 Holdings Units Fair value HK$ % of net assets Asia Pacific Equity Fund Fidelity Global Investment Fund - Asia Pacific Equity Fund (MPF) 4,054, ,455, % Total investments, at cost 44,663,380 Balanced Fund Fidelity Global Investment Fund - Balanced Fund 13,011, ,586,310, % Total investments, at cost 1,095,292,193 Capital Preservation Fund Fidelity Global Investment Fund - HK$ Money Fund 11,429, ,860, % Total investments, at cost 935,528,199 Capital Stable Fund Fidelity Global Investment Fund - Capital Stable Fund 5,794, ,503, % Total investments, at cost 531,148,806 Global Equity Fund Fidelity Global Investment Fund - Global Equity Fund 3,376, ,656, % Total investments, at cost 364,953,290 Growth Fund Fidelity Global Investment Fund - Growth Fund 17,362, ,154,565, % Total investments, at cost 1,404,672,756 Hong Kong Bond Fund Fidelity Global Investment Fund - Hong Kong Bond Fund 873, ,835, % Total investments, at cost 68,165,788

30 27 INVESTMENT REPORT Investment portfolio as at 31st December 2006 (Continued) Holdings Units Fair value HK$ % of net assets Hong Kong Equity Fund Fidelity Global Investment Fund - Hong Kong Equity Fund 10,350, ,415,393, % Total investments, at cost 909,003,951 MultiManager Balanced Fund Fidelity Global Investment Fund - MultiManager Balanced Fund 1,714, ,608, % Total investments, at cost 18,079,380 MultiManager Capital Stable Fund Fidelity Global Investment Fund - MultiManager Capital Stable Fund 599, ,429, % Total investments, at cost 6,184,861 MultiManager Growth Fund Fidelity Global Investment Fund - MultiManager Growth Fund 3,872, ,422, % Total investments, at cost 41,242,919 MultiManager Stable Growth Fund Fidelity Global Investment Fund - MultiManager Stable Growth Fund 1,062, ,778, % Total investments, at cost 11,109,456 Stable Growth Fund Fidelity Global Investment Fund - Stable Growth Fund 9,374, ,112,855, % Total investments, at cost 834,111,698 World Bond Fund Fidelity Global Investment Fund - World Bond Fund 1,603, ,272, % Total investments, at cost 130,897,825 Note: The underlying approved pooled investment fund was established in Hong Kong and accounted for on a trade date basis.

31 28 INVESTMENT REPORT Statement of movements in portfolio holdings for the period/year ended 31st December 2006 Holdings 31st December 2005 Units Additions Units Disposals Units Holdings 31st December 2006 Units Asia Pacific Equity Fund Fidelity Global Investment Fund - Asia Pacific Equity Fund (MPF) - 4,833, , ,054, Balanced Fund Fidelity Global Investment Fund - Balanced Fund 12,202, ,954, ,146, ,011, Capital Preservation Fund Fidelity Global Investment Fund - HK$ Money Fund 9,590, ,797, ,959, ,429, Capital Stable Fund Fidelity Global Investment Fund - Capital Stable Fund 5,520, ,601, ,326, ,794, Global Equity Fund Fidelity Global Investment Fund - Global Equity Fund 2,152, ,164, , ,376, Growth Fund Fidelity Global Investment Fund - Growth Fund 16,248, ,292, ,177, ,362, Hong Kong Bond Fund Fidelity Global Investment Fund - Hong Kong Bond Fund 458, , , , Hong Kong Equity Fund Fidelity Global Investment Fund - Hong Kong Equity Fund 9,925, ,591, ,166, ,350, MultiManager Balanced Fund Fidelity Global Investment Fund - MultiManager Balanced Fund - 2,257, , ,714, MultiManager Capital Stable Fund Fidelity Global Investment Fund - MultiManager Capital Stable Fund - 866, , ,

32 29 INVESTMENT REPORT Statement of movements in portfolio holdings for the year period/ended 31st December 2006 (Continued) Holdings 31st December 2005 Units Additions Units Disposals Units Holdings 31st December 2006 Units MultiManager Growth Fund Fidelity Global Investment Fund - MultiManager Growth Fund - 5,428, ,556, ,872, MultiManager Stable Growth Fund Fidelity Global Investment Fund - MultiManager Stable Growth Fund - 1,712, , ,062, Stable Growth Fund Fidelity Global Investment Fund - Stable Growth Fund 8,652, ,395, ,673, ,374, World Bond Fund Fidelity Global Investment Fund - World Bond Fund 1,038, ,057, , ,603,

33 30 INDEPENDENT AUDITOR S REPORT TO THE TRUSTEE OF FIDELITY RETIREMENT MASTER TRUST (THE SCHEME ) Report on the financial statements We have audited the financial statements of the Scheme set out on pages 32 to 61, which comprise the Statement of Net Assets of the Scheme and the Statement of Net Assets of each of its constituent funds as at 31st December 2006, and the Statement of Changes in Net Assets Available for Benefits and Statement of Cash Flows of the Scheme and the Statement of Operations and Statement of Movements in Net Assets Attributable to Unitholders of each of its constituent funds for the year then ended, and a summary of significant accounting policies and other explanatory notes. Trustee s responsibility for the financial statements The Trustee of the Scheme is responsible for the preparation and the true and fair presentation of these financial statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and is responsible for ensuring that the financial statements have been properly prepared in accordance with sections 80, 81, 83 and 84 of the Hong Kong Mandatory Provident Fund Schemes (General) Regulation (the General Regulation ). This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit and to report our opinion solely to you, as a body, in accordance with section 102 of the General Regulation, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on Auditing and with reference to Practice Note The audit of retirement schemes issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Scheme s preparation and the true and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Scheme s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Trustee, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

34 31 INDEPENDENT AUDITOR S REPORT TO THE TRUSTEE OF FIDELITY RETIREMENT MASTER TRUST (THE SCHEME ) (continued) Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Scheme as at 31st December 2006 and of its financial transactions and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards. Report on matters under the General Regulation In our opinion, the financial statements have been properly prepared, in all material respects, in accordance with sections 80, 81, 83 and 84 of the General Regulation. We have obtained all the information and explanations which, to the best of our knowledge and belief, are necessary for the purpose of our audit. PricewaterhouseCoopers Certified Public Accountants Hong Kong, 15th June 2007

35 32 STATEMENT OF NET ASSETS - MASTER TRUST SCHEME Note HK$ HK$ Assets Investments in constituent funds 7 8,678,955,343 6,428,536,862 Amounts receivable on sales of investments 8,692,856 5,182,191 Contributions receivable From employers 67,925,636 61,116,575 From members 43,306,621 40,558,215 Bank balances 33,199,348 28,328,634 Other assets 44,293 35,095 Total assets 8,832,124,097 6,563,757,572 Liabilities Other payables 563, ,098 Benefits payable 93,841,539 77,953,085 Forfeitures payable 26,113,127 21,800,666 Total liabilities (excludes the net assets attributable to unitholders) 120,517, ,671, Net assets attributable to unitholders 8,711,606,420 6,463,085,723 On behalf of HSBC Institutional Trust Services (Asia) Limited Director Director 15th June th June 2007 The accompanying notes form an integral part of these financial statements.

36 33 STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS - MASTER TRUST SCHEME Note HK$ HK$ Investment income Bank interest 675, ,089 Net realised gains on disposal of constituent funds 293,479, ,384,721 Change in unrealised appreciation in value of constituent funds 996,428, ,863,854 Other income Total investment income 1,290,584, ,443, Expenses Administrative expenses 466,651 10,050 Total expenses 466,651 10, Increase in net assets attributable to unitholders 1,290,117, ,433,614 Balance at the beginning of the year 6,463,085,723 5,048,556, Contributions received and receivable 5 From employers Mandatory 510,312, ,821,690 Additional voluntary 239,094, ,917,249 From members Mandatory 467,649, ,435,727 Additional voluntary 73,456,782 59,063,427 Contribution surcharge received and receivable 42,836 14,041 Transfers in Group transfers in from other schemes 93,698,070 13,820,973 Individual transfers in from other schemes 252,270, ,754,674 1,636,524,303 1,326,827, Benefits paid and payable 6 Retirement 15,287,022 4,923,147 Early retirement 5,406,631 3,486,817 Death 7,106,539 1,026,003 Permanent departure 52,262,941 32,212,212 Total incapacity 358, ,978 Small balance 42,317 35,380

37 34 STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS - MASTER TRUST SCHEME (CONTINUED) Note HK$ HK$ Refund of additional voluntary contributions to leavers 138,158, ,341,643 Transfers out Group transfers out to other schemes 184,544, ,752 Individual transfers out to other schemes 238,652, ,338,483 Forfeitures 36,302,594 31,589, ,121, ,731, Movements during the year 958,402,754 1,016,096, Increase in net assets attributable to unitholders 1,290,117, ,433, Balance at the end of the year 8,711,606,420 6,463,085,723 The accompanying notes form an integral part of these financial statements.

38 35 STATEMENT OF CASH FLOWS - MASTER TRUST SCHEME HK$ HK$ Operating activities Increase in net assets attributable to unitholders 1,290,117, ,433,614 Adjustment for - Bank interest (675,713) (195,089) 1,289,442, ,238,525 Net realised gains/(losses) on disposal of constituent funds (293,479,819) (105,384,721) Change in unrealised (appreciation)/depreciation in value of constituent funds (996,428,268) (292,863,854) (Increase)/Decrease in other assets (9,198) (35,095) (Decrease)/Increase in other payables (355,087) 561,049 Bank interest received 675, ,089 Subscription of units in constituent funds (2,673,288,330) (1,799,478,104) Redemption of units in constituent funds 1,709,267, ,497,114 Net cash outflow from operating activities (964,175,488) (978,269,997) Financing activities Contributions and transfers in received 1,626,966,836 1,313,323,976 Benefits, transfers out and forfeitures paid (657,920,634) (330,517,237) Net cash inflow from financing activities 969,046, ,806, Net increase in cash and cash equivalents 4,870,714 4,536,742 Cash and cash equivalents at beginning of the year 28,328,634 23,791,892 Cash and cash equivalents at end of the year 33,199,348 28,328,634 Analysis of balances of cash and cash equivalents: Bank balances 33,199,348 28,328,634 The accompanying notes form an integral part of these financial statements.

39 STATEMENT OF OPERATIONS - CONSTITUENT FUNDS Asia Pacific Equity Fund Balanced Fund Capital Preservation Fund Note HK$ HK$ HK$ HK$ HK$ Income Net realised gains on disposal of investments 385,166 61,785,861 24,064,027 11,277,693 3,375,785 Change in unrealised appreciation/(depreciation) in value of investments 3,791, ,403,058 82,443,154 21,403,270 12,015,154 Reimbursement income 11 6, Other income ,144 19, Total income 4,183, ,189, ,509,325 32,700,439 15,391, Expenses Trustee fee 4(b) 18,108 3,454,480 2,730,385 1,325, ,120 Administration fees 4(b) 54,325 10,363,439 8,191,154 6,697,959 5,140,882 Member Services fee 4(a) 18,108 3,454,480 2,730,385 1,631, ,790 Indemnity insurance , ,611 77,778 75,448 Auditors remuneration - 89,876 51,126 58,865 34,862 Handling fees 3,360 60,360 95,500 60,540 96,200 Compensation fund levy to the MPFA 14, , , , ,144 Other expenses 6, , , , ,933 Total expenses 115,129 18,628,597 14,851,815 10,598,455 7,712, Increase in net assets attributable to unitholders 4,067, ,560,507 91,657,510 22,101,984 7,678,918 1 For the period from 7th August 2006 (date of commencement of operations) to 31st December 2006 The accompanying notes form an integral part of these financial statements. 36