INTERIM REPORT (UNAUDITED) FOR THE PERIOD ENDED 30 June 2017
MANAGER HFT Investment Management (HK) Limited ("HFT HK") HFT HK is the Hong Kong-based subsidiary and international arm of HFT Investment Management Co., Ltd. HFT HK offers a wide range of China and Greater China investment strategies. HFT Investment Management Co., Ltd. ( HFT ) Shanghai-based HFT is the only Chinese-based Asset Manager that has Fitch rating Highest standards (CHN) (February 2016). HFT is an asset management company in mainland China; a joint-venture between Haitong Securities and BNP PARIBAS ASSET MANAGEMENT Asia Limited. Its domestic activities span mutual funds, investment advisory and enterprise annuities & segregated accounts. Its investment team covers equity, fixed income and money market instruments. HFT s Fixed Income capabilities include domestic mutual funds, enterprise annuities & mandates and QFII products. Bond management at HFT started in 2003 and has expanded steadily over the years to reach RMB 86.27 billion as of June 2017. FUND INFORMATION Manager: Trustee: Custodian: Dealing frequency: Base currency: Financial year end: HFT Investment Management (HK) Limited BNP Paribas Trust Services (Hong Kong) Limited BNP Paribas Securities Services, Singapore Branch Daily RMB 31 December -1-
CONTENTS Page(s) Administration 3-4 Report of Manager 5 Statement of Assets and Liabilities (Unaudited) 6 Statement of Comprehensive Income (Unaudited) 7 Statement of Changes in Net Assets Attributable to Unitholders (Unaudited) 8 Units in Issue (Unaudited) 9 Statement of Movements in Portfolio Holdings (Unaudited) 10 Investment Portfolio (Unaudited) 11-12 -2-
Administration Manager HFT Investment Management (HK) Limited 30th Floor, Three Exchange Square 8 Connaught Road Central Hong Kong Directors of the Manager Mr. HU Guangtao Mr. MENG Ning (appointed on 15 March 2017) Mr. TAO Wangxiong Mr. VERVOORN Jelle Mr. XI Wanrong Ms. ZHANG Ming (appointed on 06 February 2017) Mr. ZHANG Wenwei Trustee BNP Paribas Trust Services (Hong Kong) Limited 21/F, PCCW Tower Taikoo Place 979 King s Road Quarry Bay Hong Kong Registrar & Transfer Agent BNP Paribas Securities Services, Hong Kong Branch 21/F, PCCW Tower Taikoo Place 979 King s Road Quarry Bay Hong Kong Global Custodian and Administrator BNP Paribas Securities Services, Singapore Branch 20 Collyer Quay #01-01 Singapore 049319-3-
Administration (continued) RQFII Custodian Industrial and Commercial Bank of China Limited No. 55 Fuxingmennei Street Xicheng District Beijing People's Republic of China Auditor KPMG 8th Floor, Prince's Building 10 Chater Road Central Hong Kong Legal Counsel to the Manager Deacons 5/F, Alexandra House 18 Chater Road Central Hong Kong -4-
REPORT OF MANAGER At the beginning of the year, the stock market picked up due to expectations of economic recovery and the policy of the Belt and Road, especially for consumer staples and cyclical sectors. By the end of Q1, the market slightly declined because of liquidity tightness. Later with the announcement of Xiong An New Area and Guangdong-Hong Kong-Macao Greater Bay Area, major indices surged again and SSE Composite Index once reached 3295 points. However, the market tumbled again with authorities emphasis on de-leverage and risk control in the financial system. Until the end of May, market sentiment gradually recovered with new policies on stock-selling of major shareholders, as well as regulatory measures began to stabilize. Besides, MSCI s inclusion of China s A-share further pushed the market opening and broadened channels of overseas investment in China. Manufacturing PMI rebounded to 51.7% in June, indicating a strong momentum of economic growth under strict financial regulations. In the market of government bond and policy bank bond, the 10 year T-bond yield reached a high of 3.67% on May 23 rd as a result of tighter market supervision. Bond yields went down in the first half of June as the PBOC injected liquidity through MLF operations. This trend was reinforced by the PBOC not raising interest rates, thus diverging from the Federal Reserve. Meanwhile, doubling with better-than-expected economic data of May, yields for long-term bonds dropped quickly and yield curve tended to be flat. In the market of credit bond, issuance in the primary market expanded in June compared with previous months. Companies became willing to expand production owing to stable demand and relatively low inventory. Turnover slightly increased in the secondary market and transactions remained at a subdued level. Credit spreads partially widened and the overall yield curve moved down. The RMB appreciated on a trade weighted basis in the current weak US dollar environment. Offshore RMB money market rates came down on stronger RMB. Given the yield pick-up of onshore commercial paper over the offshore RMB money market rates, we focus on making allocation to onshore bond investment. We will continuously monitor the gap between onshore and offshore money market rates and adjust allocation in order to enhance yield for the portfolio. HFT Investment Management (HK) Limited 31 August 2017-5-
STATEMENT OF ASSETS AND LIABILITIES (Unaudited) As at 30 June 2017 As at 30 June 2017 As at 31 December 2016 Assets Cash and cash equivalents 1,078,463 7,884,520 Financial assets at fair value through profit or loss 105,779,092 139,742,980 Interest receivable 1,860,704 2,435,456 Prepayment and other receivables 211,368 31,887 Total assets 108,929,627 150,094,843 Liabilities Dividend distribution 1,271,966 1,191,157 Accrued expenses and other payables 493,581 405,946 Tax payables 107,488 106,514 Total liabilities 1,873,035 1,703,617 Net assets attributable to unitholders* 107,056,592 148,391,226 Number of units in issue - Class A units 988,735 1,298,885 - Class B units 3,851 8,851 - Class C units 9,428 9,428 - Class D units 348 348 - Class I units - 70,382 Net asset value per unit - Class A units 100.99 100.82 - Class B units 632.36 631.75 - Class C units 502.72 501.79 - Class D units 79.13 78.92 - Class I units - 100.71 * The difference between net assets attributable to unitholders and recalculated net assets (number of units in issues times net asset value per unit) is due to rounding. -6-
STATEMENT OF COMPREHENSIVE INCOME (Unaudited) For the period ended 30 June 2017 Period from 01 January 2017 to 30 June 2017 Period from 01 January 2016 to 30 June 2016 RMB RMB Income Interest income 2,014,839 4,919,412 Net gain/(loss) from financial assets at fair value through profit or loss 348,106 (456,356) Net foreign exchange (losses) (16,997) (9,601) Total revenue 2,345,948 4,453,455 Management fee 302,784 732,014 Trustee fee 6,139 14,958 Custodian fee 47,237 112,392 Auditors' remuneration 67,492 66,847 Transaction costs 49,405 133,650 Other operating expenses 49,597 83,743 Total operating expenses 522,654 1,143,604 Income before distributions to unitholders 1,823,294 3,309,851 Distributions to unitholders (1,270,548) (5,580) Increase in net assets attributable to unitholders before tax 552,746 3,304,271 Taxation (84,833) (113,424) Increase in net assets attributable to unitholders and total comprehensive income for the period 467,913 3,190,847-7-
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS (Unaudited) For the period ended 30 June 2017 Period from 01 January 2017 to 30 June 2017 Period from 01 January 2016 to 31 December 2016 RMB RMB Unitholders net assets at the beginning of the period/year 148,391,226 464,920,921 Transactions with unitholders Subscriptions of units 227,721 26,440,263 Redemption of units (42,030,268) (344,427,172) (41,802,547) (317,986,909) Increase in net assets attributable to unitholders and total comprehensive income for the period/year 467,913 1,457,214 Unitholders net assets at the end of the period/year 107,056,592 148,391,226-8-
UNITS IN ISSUE For the period ended 30 June 2017 (Unaudited) Class A Class B Class C Class D Class I Balance at 01 January 2017 1,298,885 8,851 9,428 348 70,382 Subscriptions of units during the period 2,252 - - - - Redemption of units during the period (312,402) (5,000) - - (70,382) Balance at 30 June 2017 988,735 3,851 9,428 348 - Class A Class B Class C Class D Class I Balance at 01 January 2016 4,430,654 21,136 9,428 92 - Subscriptions of units during the year 142,327 1-648 120,000 Redemption of units during the year (3,274,096) (12,286) - (392) (49,618) Balance at 31 December 2016 1,298,885 8,851 9,428 348 70,382-9-
STATEMENT OF MOVEMENTS IN POTFOLIO HOLDINGS (unaudited) For the period ended 30 June 2017 % of net asset value as at 30 June 2017 % of net asset value as at 31 December 2016 Debt securities - Unlisted but quoted bonds 98.81 94.17 Other net assets 1.19 5.83 Total net assets 100.00 100.00-10-
INVESTMENT PORTFOLIO (Unaudited) As at 30 June 2017 Debt securities Bonds Nominal Value Market Value RMB % of Net Assets China Listed/Quoted debt securities Agricultural Development Bank Of China 2.31% due 27/07/2017 10,000,000 9,992,660 9.33 China Government Bond 2.14% due 04/08/2017 5,990,000 5,984,280 5.59 Export-Import Bank Of China 2.22% due 17/10/2017 20,000,000 19,916,960 18.60 GD Power Development Company Limited 2.82% due 28/07/2017 10,000,000 9,987,610 9.33 Huaneng Renewables Corporation Limited 2.5% due 08/08/2017 10,000,000 9,978,440 9.32 Ningbo Zhoushan Port Company Limited 3.1% due 22/08/2017 10,000,000 9,979,570 9.32 Shandong Gold Group Company Limited 2.97% due 04/08/2017 10,000,000 9,983,130 9.33 Shougang Corporation 3.32% due 24/07/2017 10,000,000 9,990,190 9.33 Sichuan Chuantou Energy Company Limited 3.37% due 15/08/2017 10,000,000 9,984,060 9.33 Zijin Mining Group Company Limited 3.05% due 11/08/2017 10,000,000 9,982,192 9.33 Total Listed/Quoted debt securities 105,779,092 98.81 OTHER NET ASSETS 1,277,500 1.19 NET ASSETS AS OF 30 JUNE 2017 107,056,592 100.00 TOTAL INVESTMENT, AT COST 105,595,133-11-
DISCLAIMER ( the sub- Fund ), a sub-fund of the HFT (HK) China Investment Series II, has been authorized by the SFC; however, such authorization is not an official recommendation or endorsement of the Fund nor does it guarantee the commercial merits of the sub-fund or its performance. It does not mean the sub- Fund is suitable for all investors nor is it an endorsement of its suitability for any particular investor or class of investors. This material has not been reviewed by the SFC. This publication does not constitute an offer or solicitation of any transaction in any securities referred to herein. The content of this publication does not constitute investment advice to any person. Any recommendation contained herein may not be suitable for all investors. Although the information contained herein has been obtained from sources believed to be reliable, its accuracy and completeness cannot be guaranteed. This HFT Investment Management (HK) Limited publication and any recommendation contained herein speak only as of the date hereof and are subject to change without notice. HFT Investment Management (HK) Limited has no obligation to update or amend any information contained herein. This publication is being furnished to you for informational purposes only and on the condition that it will not form a primary basis for any investment decision. Investors must make their own determination of the appropriateness of an investment in any securities referred to herein based on the legal, tax and accounting considerations applicable to such investors and their own investment strategy. By virtue of this publication, neither HFT Investment Management Co., Ltd or HFT Investment Management (HK) Limited, nor any of their employees shall be responsible for any investment decision. -12-
Suite 3003,30/F,Three Exchange Square 8 Connaught Place Central, Hong Kong T:+852 2923 0700 F:+852 2923 0701 E:info.hk@hftfund.com Visit our website www.hftfund.com.hk -12-