sun life mpf master trust reports and financial …

SUN LIFE MPF MASTER TRUST

REPORTS AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED

30TH SEPTEMBER 2018

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REPORTS AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH SEPTEMBER 2018

Co11te11ts Pages

Scheme report 1-5

Investment report 6 - 71

Independent auditor's report 72 - 74

Scheme

Statement qfnet assets available for benefits 75

Statement of changes in net assets available for benefits 76 - 77

Statement of cash flows

Constituent funds

Statement of financial position 79 - 83

Statement of comprehensive income 84-88

Statement of changes in net assets attributable to members

Statement of cash flows 93-97

Notes to the financial statements 98 -159

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SCHEME REPORT FOR THE YEAR ENDED 30TH SEPTEMBER 2018

1 Backgrolll1d

Sun Life MPF Master Trust (the "Scheme") is a master trust scheme set up 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 a trust deed dated 31st January 2000 and amended from time to time, latest supplemental deed to deed of substitution dated on 9th December 2016 between Sun Life Hong Kong Limited as sponsor and HSBC Provident Fund Trustee (Hong Kong) Limited as trustee (the "Trustee"). The Scheme is registered under Section 21 of the Ordinance.

2 Fina11cial developme11t

The Scheme commenced operations on 31st January 2000. The total contributions received and receivable including transfers-in and benefits paid and payable including transfers-out during the year were HK$175,488,930 (2017: HK$164,608,150) and HK$124,854,143 (2017: HK$103,206,758) respectively. The net asset value of the Scheme as at 30th September 2018 was HK$1, 778,217,930 (2017: HK$1,710,432,905). The Scheme has 2,618 (2017: 2,682) members as at 30th September 2018.

3 Cl1anges to tl1e goventlng rules

The Scheme was established by a Trust Deed dated 31st January 2000, as amended by a Deed of Substitution dated 19th July 2000, a Supplemental Trust Deed dated 13th August 2002, a Deed of Substitution dated 3rd June 2003, a Supplemental Trust Deed dated 19th November 2008, a Deed of Substitution dated3othSeptember 2009, a First Supplemental Trust Deed dated 26th September 2012, a Second Supplemental Trust Deed dated 31st August 2015, a Third Supplemental Trust Deed dated 30th September 2015, a Fourth Supplemental Trust Deed dated 18th December 2015 and a Fifth Supplemental Trust Deed dated 9th December 2016. The First Addendum to Offering Memorandum was issued in August 2015 which forms part of the Offering Memorandum dated January 2014. The Second Addendum to Offering Memorandum was issued in July 2018 which forms part of the Offering Memorandum dated December 2016. The latest Offering Memorandum of the Scheme dated December 2016.

With effect from 1st April 2017, under the Mandatory Provident Fund Schemes (Amendment) Ordinance (June 2016), each MPF scheme has to offer a Default Investment Strategy ("DIS"). The DIS represents a major reform of the MPF System. Its aim is to provide scheme members with better retirement protection. The DIS also addresses scheme members' concerns about the high fee levels of MPF funds and the difficulties in making fund choices. If, for any reasons, scheme members do not give their trustees an investment instruction for their MPF benefits, their MPF benefits will be invested automatically in accordance with the DIS. Scheme members can also opt to invest either according to the DIS or in the individual funds under the DJS. The DJS is an investment solution consisting of two mixed assets funds: the Core Accumulation Fund and the Age 65 Plus Fund. Each DIS has three features: globally diversified investment, automatic reduction of investment risk as scheme members approach retirement age, and fee caps.

There have been no other changes to the governing rules of the Scheme during the financial years ended 30th September 2017 and 2018.

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4 Major service providers

Particulars of the Trustee and service providers engaged by the Trustee for the purposes of the Scheme during the year ended 30th September 2018 are set out below.

Trustee and Custodiru1 HSBC Provident Fund Trustee (Hong Kong) Limited Level 13 · 1 Queen's Road Central Hong Kong

Spo11sor Sun Life Hong Kong Limited 10th floor Sun Life Tower The Gateway 15 Canton Road, Kowloon Hong Kong

Investment Manager Schroder Investment Management (Hong Kong) Limited Leve]33 Two Pacific Place 88 Queensway Hong Kong

Auditor PricewaterhouseCoopers 22nd Floor, Prince's Building Central Hong Kong

Adm.iJ.1istrator a11d Record Keeper BestServe Financial Limited 10/F, One Harbourfront 18 Tak Fung Street Hung Hom, Kowloon Hong Kong

Ba11ks The Hongkong and Shanghai Banking Corporation Limited 1 Queen's Road Central Hong Kong

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4 Major service providers (Co11th1ued)

Banks (Continued) ANZ Bank 13 Floor, Three Exchange Square 8 Connaught Place Central Hong Kong

Bank of China (Hong Kong) Limited Bank of China Tower 1 Garden Road Hong Kong

BNP Paribas, Hong Kong Branch 59-63/F, Two IFC 8 Finance Street Central Hong Kong

National Australia Bank Limited Level 27, One Pacific Place 88 Queensway Hong Kong

Hang Seng Bank Limited 83 Des Voeux Road Central Hong Kong

Dah Sing Bank Limited 36th Floor, Dah Sing Financial Centre 108 Gloucester Road Hong Kong

Standard Chartered Bank (Hong Kong) Limited 4-4ADesVoeux Road Central Hong Kong

DBS Bank (Hong Kong) Limited 18th Floor, The Center 99 Queen's Road Central Hong Kong

Citibank, N.A. 50/F Citibank Tower, Citibank Plaza 3 Garden Road, Central Hong Kong

Agricultural Bank of China Limited, Hong Kong Branch 25/F, Agricultural Bank of China Tower 50 Connaught Road Central Hong Kong

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4 Major service providers (Co11til1ued)

Banks (continued) Bank ofCOmmuniCatiOns CO., Ltd:, Hong Kong Branch 20 Pedder Street Central Hong Kong

China Construction Bank (Asia) Corporation Limited 28/F, CCB Tower No.3 Connaught Road Central Hong Kong

Oversea-Chinese Banking Corporation Limited 9/F, Nine Queen's Road Central Hong Kong

Industrial and Commercial Bank of China (Asia) Limited 33/F, ICBC Tower, 3 Garden Road, Central, Hong Kong

Bank accounts have been maintained vvith The Hongkong and Shanghai Banking Corporation Limited and Hang Seng Bank Limited which are associates of the Trustee. The Chairman of The Hongkong and Shanghai· Banking Corporation Limited is Mr. John Flint, with effective from 21st

February 2018, (Mr. Stuart Gulliver was the Chairman until 21st February 2018) at 1 Queen's Road Central, Hong Kong. The Chairman of Hang Seng Bank Limited is Dr. Raymond K F Ch'ien at 83 Des Voeux Road Central, Hong Kong.

Solicitors Linklaters 10th Floor, Alexandra House 18 Chater Road Hong Kong

Deacons 5th Floor, Alexandra House 18 Chater Road Hong Kong

5 Directors oftl1e Trustee

Directors of the Trustee during the year \¥ere:

Sai Kit HEUNG Mark Ivan BOYNE Elaine Yuen Man LO Sau Ling TSE Horace Kwan Hor CHAU (appointed on 19th December 2017) Daniel Gareth HANKINSON (appointed on 29th January2018) Anthony James BLOOMFIELD (resigned on 29th January 2018)

The business address of the above directors is:

HSBC Main Building 1 Queen's Road Central, Hong Kong

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6 Furtl1er i.J.llor1natio11

Members can obtain information about the Scheme and its operations fro1n the Sun Life Hong Kong Limited's '"'ebsite at wv.rw.sunlife.com.hk. 24-hour Phone Response Services are available for MPF members and e1nployers at 2971 0200. They may also contact BestServe Financial Limited, the Administrator of the Scheme, for information relating to members' issues.

Sun Life Hong Kong Limited is a Foreign Account Tax Compliance Act ("FATCA") compliant organisation. Please find the FATCA classification of this entity and its Global Intermediary Identification Number ("GUN") below. Effective from 1 j'th December 2018, the 11 GI!Ns of the constituent frmd were deregistered from Internal Revenue Service.

FATCA entity classification: Non-reporting !GA FF!/ Registered Sponsored Investment Entity

At 30th September 2018 and during the year, the Scheme is a master trust scheme and offering the following 13 constituent funds.

Sponsored entity GUN: Schroder MPF Capital Guaranteed Portfolio Schroder MPF Conservative Portfolio Schroder MPF RMB and HKD Fixed Income Portfolio Schroder MPF Capital Stable Portfolio Schroder MPF Stable Growth Portfolio Schroder MPF Balanced Investment Portfolio Schroder MPF Growth Portfolio Schroder MPF International Portfolio Schroder MPF Asian Portfolio Schroder MPF Hong Kong Portfolio Schroder MPF Global Fixed Income Portfolio Schroder MPF Core Accumulation Fund> Schroder MPF Age 65 Plus Fund'

1 The constituent funds were launched on 1st April 2017.

LFXG35.00006.SF.344 LFXG35.00003.SF.344 LFXG35.00007.SF.344 LFXG35.00004.SF.344 LFXG35.00010.SF.344 LFXG35.00002.SF.344 LFXG35.00005.SF.344 LFXG35.00009.SF.344 LFXG35.00001.SF.344 LFXG35.00008.SF.344 LFXG35.00011.SF.344 Not applicable Not applicable

Sponsoring entity: Effective from ist December 2016, Sun Life Hong Kong Limited has replaced Schroder Investment Management (Hong Kong) Limited as the Sponsor of the Scheme.

Dated: 27th March 2019

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INVESTMENT REPORT FOR THE YEAR ENDED 30TH SEPTEMBER 2018

Co1nme11tary

Sun Life MPF Master Trust (the "Scheme") offers a choice of 13 constituent funds namely Schroder MPF Capital Guaranteed Portfolio, Schroder MPF Conservative Portfolio, Schroder MPF RMB and HKD Fixed Income Portfolio, Schroder MPF Capital Stable Portfolio, Schroder MPF Stable Growth Portfolio, Schroder MPF Balanced Investment Portfolio, Schroder MPF Growth Portfolio, Schroder MPF International Portfolio, Schroder MPF Asian Portfolio, Schroder MPF Hong Kong Portfolio, Schroder MPF Global Fixed Income Portfolio, Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund.

For the year ended 30th September 2018, investments of the constituent funds were in accordance with the respective investment policies as stated in the Offering Document. With effect from 1st April 20171 under the Mandatory Provident Fund Schemes (Amendment) Ordinance (June 2016), each MPF scheme has to offer a Default Investment Strategy ("DIS"). The DIS represents a major reform of the MPF System.

The Trustee, HSBC Provident Fund Trustee (Hong Kong) Limited, confirmed that based on the information received from the Investment Manager, Schroder Investment Management (Hong Kong) Limited, during the year, to the best of the knowledge and belief of the Trustee, the investment policies for each constituent fund of the Scheme were complied with.

1 Stateme11t ofi11vestment objective and policies

The Scheme offers a choice of13 constituent funds, ranging across the risk and reward. scale. Refer to page 5 for the names of the 13 constituent funds.

Each of the 13 constituent funds has a different investment policy, achieved through investing its assets into an approved pooled investment fund (other than the Schroder MPF Conservative Portfolio which invests directly in permitted investments). These policies are outlined below.

1.1 Commo11 policies on investments wl1ich apply to eacl1 co1tstitue11t fund

(i) Each constituent fund (other than the Schroder MPF Conservative Portfolio) will invest its assets in a single pooled investment fund but may also hold cash from time to tinie, up to a maximum of 5% of the net asset value of each constituent fund.

(ii) None of the constituent funds (other than the Schroder MPF Conservative Portfolio) will have direct holdings of equities or bonds, its interest in such investments being achieved through an approved pooled investment fund.

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1 Stateme11t: ofiI1vestJn~11t objective a11d policies (Conti11ued)

1.1 Commo11 policies 011 i.J.1vestme11ts wl1icl1 apply to eac]1 co1tstitue11t fu11d (Co11tinued)

(iii) None of the constituent funds \vill trade in futures or options, but may enter into currency forward contracts for the purposes of currency hedging. Their approved pooled investment funds may acquire futures and options for the purposes of investment or hedging subject to the restrictions in Schedule 1 to the Hong Kong Mandatory Provident Fund Schemes (General) Regulation (the "General Regulation"),

(iv) None of the constituent funds or their approved pooled investment funds will lend securities.

(v) Each constituent fund is subject to the investment and borrowing restrictions in Schedule 1 of the Mandatory Provident Fund Schemes (General) Regulation.

(vi) The intention is that the constituent funds (other than the Schroder MPF Conservative Portfolio) only invest in the underlying approved pooled investment funds which have no less than 30% in Hong Kong dollar investments. However, the constituent funds may hedge currency from time to time. The Schroder MPF Conservative Portfolio will invest directly in pennitted investments and will at all times have an effective Hong Kong currency exposure of 100%.

(vii) Investments may, however, only be acquired for the constituent funds in those countries or markets where the Trustee is satisfied that suitable arrangements can be made for their custody.

1.2 Schroder MPF Capital Guara11teed Portfolio

(i) The objective of the constituent fund is to achieve a positive return, after expenses, for as long as the investor remains invested in the constituent fund.

(ii) The constituent fund will invest in a single approved pooled investment fund which in turn will invest in global bonds, equities and cash with the current proposed asset allocation of a range of 67% to 95%, 0% to 33% and 0% to 33% of the asset value respectively. The approved pooled investment fund is globally diversified but with a bias towards Hong Kong. The approved pooled investment fund will hold a minimum of 67% in Hong Kong dollar investments at all times through direct holdings in equities, bonds and cash and/or currency hedging.

(iii) The single approved pooled investment fund is a Class G insurance policy and will be managed, issued and guaranteed by FWD Life Insurance Company (Bermuda) Limited ("FWD'~.

(iv) Investments in the insurance policy (i.e. the underlying approved pooled investment fund) are held as the assets of FWD. In the event where FWD is liquidated, members may not have access to their investments temporarily, or their value may be reduced.

(v) The constituent fw1d is low risk and, as such is appropriate for those who vvish to ensure that their benefits are not substantially less than their contributions at the end of a 5-year period or at age 65.

(vi) The overall returns of the constituent fund will be those achieved from the underlying approved pooled investment fund less expenses, charges and fees at the constituent fund level.

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1 State1ne11t ofi11vestme11t objective and policies (Co11tiJ1ued)

1.2 Schroder MPF Capital Guaranteed Portfolio (Continued)

(vii) An investment in the constituent fund is not guaranteed at the constituent fund level, but the underlying approved pooled investment fund in which the assets of the portfolio will be invested is a guaranteed insurance policy.

(viii) The guarantee structure results in a dilution in performance.

1.3 Schroder MPF Conservative Portfolio

(i) The objective of the constituent fund is to provide a return, after expenses, which matches or exceeds the Hong Kong dollar savings rate.

(ii) The constituent fund's investments will be limited by the investment restrictions for a MPF conservative fund as defined in the MPF legislation and guidelines. In summary, these are as follows:

• deposits, less than 12 months' maturity with banks meeting specific requirements;

• debt securities, with a maturit:;y of 2 years or less issued by or guaranteed by the Government of the Hong Kong Special Administrative Region, the Exchange Fund, a company wholly owned by the Hong Kong Government; or a foreign government or multi-lateral agency (such as the World Bank) with the highest credit rating;

• debt securities, \"Ii.th a maturit:;y of 1 year or less with a credit rating level set by the Mandatory Provident Fund Schemes Authority;

• the average maturity of all securities must not exceed 90 days;

• the constituent fund must be wholly invested in Hong Kong dollar currency investments.

(iii) The constituent fund will hold a minimum of 100% in Hong Kong dollar investments at all times through direct holdings in the restricted investments shown above.

(iv) The constituent fund is low risk and, as such, is suitable for investors with less than 3 years before retirement.

(v) It should be noted that an investment in the constituent fund is not the same as placing funds on deposit with a bank or deposit-taking company and that there is no obligation to redeem the investment at the offer value. It should also be noted that the constituent fund is not subject to the supervision of the Hong Kong Monetary Authority.

(vi) The long-term return is expected to be in line with deposit rates for Hong Kong dollars.

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1 Statement of.i11vestme11t objective a11d policies (Co11th1ued)

1.4 Schroder MPF RMB and HKD Fixed Income Portfolio

(i) The objective of the constituent fund is to provide a long-term return a capital growth and income in Hong Kong dollar terms through investment in a portfolio consisting mainly RMB and HKD denominated debt securities.

(ii) The constituent fund invests in a single approved pooled investment fund, a sub-fund of the Schroder Institutional Pooled Funds namely, the RMB and Hong Kong Fixed Income Fund, which primarily invests in fixed and floating rate debt securities denominated in Renminbi and Hong Kong dollar issued by government, quasi-government, financial and corporate issuers worldwide. It may also invest in Renminbi and Hong Kong dollar denominate money market instruments including fixed deposits, certificates of deposit, commercial paper, treasury bills and cash. The current proposed allocation of the assets is:

Asset Allocation Debt securities Money market instruments

Currency Allocation

70%to 100% 0%to30%

Renminbi 30% to 70% Hong Kong dollar 30% to 100% Other currencies* 0% to 30% *expected to be mainly United State dollar but may also be other Asian currencies

(iii) The approved pooled investment fund will hold a minimum of 30% in Hong Kong dollar investments at all times.

(iv) The constituent fund is low risk and, as such, is suitable for investors with between 3 and 5 years before retirement.

(v) The long-term return is expected to be associated primarily with the volatility and growth in the RMB and HKD denominated debt securities.

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1 Stateme11t ofi11vestmen.t objective a11d policies (Co11ti11ued)

1.5 Schroder MPF Capital Stable Portfolio

(i) The objective of the constituent fund is to achieve a long-term return in line with Hong Kong price inflation (as measured by the Consumer Price Index Type A).

(ii) The constituent fund will invest in a single approved pooled investment fund which is a fund of funds investing in other Schroder managed funds. The underlying investments of the portfolio will primarily include quoted securities, government and corporate bonds and cash deposits worldwide. The portfolio is thus globally diversified but is biased towards Hong Kong. The current proposed allocation of the assets is:

Bonds US Dollar Global currencies ex US Dollar ex Hong Kong dollar Hong Kong dollar

Equities Hong Kong Asia ex Hong Kong ex Japan United States Japan Europe Others

Cash or cash equivalents

40%to 70% 5%to 60% 5% to 40% 0%to50%

15% to40% o%to 20% o%to 15% o%to 15% 0% to io% o%to 10%

0%to5%

o%to 30%

(iii) The constituent fund is suitable for inclusion in a lifecycle range of products.

(iv) The approved pooled investment fund will hold a minimum of 30% in Hong Kong dollar investments at all times.

(v) The constituent fund is mediwn risk and, as such, is suitable for investors with between 5 and 1 o years before retirement.

(vi) The long-term return is expected to be in line with Hong Kong price inflation.

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1 Stateme11t ofinvest1ne11t objective a11d policies (Co11ti11ued)

1.6 Schroder MPF Stable Growth Portfolio

(i) The objective of the constituent fund is to achieve a long-term return in excess of Hong Kong price inflation (as measured by the Consumer Price Index Type A).

(ii) The constituent fund v.ill invest in a single approved pooled investment fund which is a fund of funds investing in other Schroder managed funds. The underlying investments of the portfolio will primarily include quoted securities, government and corporate bonds and cash deposits worldwide. The portfolio is thus globally diversified but is biased towards Hong Kong. The current proposed allocation of the assets is:




20%to 60% 5%to55% 5% to6o% 0%to30%

30%to 60% 5% to30% o%to 15% 0% to 25% 0%to15% o%to 15% 0%to5%

0%to20%



(v) The constituent fund is medium risk and, as such, is suitable for investors with between 5 and 10 years before retirement.

(vi) The long-term return is expected to be in line with Hong Kong price inflation.

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1 Stateme11t ofi.J:1vestme11t objective a11d policies (Co11til1ued)

1.7 Sch.roder MPF Bala11ced h1vestme11t Portfolio

(i) The objective of the constituent fund is to achieve a long-term return in excess of salary inflation in Hong Kong (as indicated by the Hong Kong Monthly Digest of Statistics as published by the Census and Statistics Department of the Government of Hong Kong Special Administrative Region).

(ii) The constituent fund will invest in a single approved pooled investment fund which is a fund of funds investing in other Schroder managed funds. The underlying investments of the portfolio will primarily include quoted securities, government and corporate bonds and cash deposits worldwide. The portfolio is thus globally diversified but is biased towards Hong Kong. The current proposed allocation of the assets is:




0%to40% 0%to25% 0%to40% o%to 20%

45% to 85% 10% to40% o%to 25% 5%to30% o%to 20% o%to 25% 0% to 10%

o%to 20%

(iii) The constituent fund is suitable for inclusion in a lif ecycle range of products.


(v) The risk profile of the constituent fund is relatively high and, as such, is suitable for investors with more than 10 years before retirement.

(vi) The long-term return is expected to be modestly in excess of salary inflation in Hong Kong.

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1 Stateme11t ofh1vesbne11t objective and policies (Co11ti11ued)

1.8 Schroder MPF Growth Portfolio

(i) The objective of the constituent fund is to achieve long-term return in excess of salary inflation in Hong Kong (as indicated by the Hong Kong Monthly Digest of Statistics as published by the Census and Statistics Department of the Government of Hong Kong Special Administrative Region).

(ii) The constituent fund will invest in a single approved pooled investment fund which is a fund of funds investing in other Schroder managed funds. The underlying investments of the portfolio will primarily include quoted securities, government and coiporate bonds and cash deposits worldwide. The portfolio is thus globally diversified but is biased towards Hong Kong. The current proposed allocation of the assets is:




o%to 20%

0% to 15% o%to 20% o%to 10%

60% to 100% 0%to50% 0%to30% 0%to40% 0% to20% 0%to30% 0%to5%

0% to30%



(v) The risk profile of the constituent fund is relatively high and, as such, is suitable for investors with more than 10 years before retirement.

(vi) The long-term return is expected to be modestly in excess of salary inflation in Hong Kong (as indicated by the Hong Kong Monthly Digest of Statistics as published by the Census and Statistics Department of the Government of Hong Kong Special Administrative Region).

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1 Stateme11t ofi11vesbne11t objective a11d policies (Co11ti11ued)

1.9 Schroder MPF I11ternatio11al Portfolio

(i) The objective of the constituent fund is to achieve long-term capital grovvth.

(ii) The constituent fund will invest in a single approved pooled investment fund which is a fund of funds investing in other Schroder managed funds. The underlying investments of the portfolio will primarily include quoted securities and cash deposits worldwide. The portfolio is globally diversified. The current proposed allocation of the assets is:

Equities Pacific ex Japan United States Japan Europe Others


60% to 100% o%to 20%

10%to 70% o%to 25% 10% to50% o%to 20%

o%to 40%

(iii) It will hold a minimum of 30% in Hong Kong dollar investments at all times.

(iv) The risk profile of the constituent fund is relatively high and, as such, is suitable for investors seeking long-term capital appreciation.

(v) The long-term return is expected to be modestly in excess of Hong Kong price inflation (as measured by the Consumer Price Index Type A).

1.10 Scliroder MPF Asian Portfolio

(i) The objective of the constituent fund is to achieve long-term capital growth.

(ii) The constituent fund will invest in a single approved pooled investment fund and the noncash investments of which will primarily invest in Asian (ex-Japan) equities. The fund may hold cash, bank deposits or cash equivalents for ancillary purposes. The current proposed allocation of assets is:

Equities Hong Kong Singapore Malaysia Korea Taiwan Thailand Philippines India Others

Cash and cash equivalents

60%to100% 20%to 70% 0%to30% o%to 20% o%to 40% o%to 40% o%to 20% o%to 10% o%to 40% 0% to 10%

0%to40%

(iii) The approved pooled investment fund will hold a minimum of 30% in Hong Kong dollar investments at all times.

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1 Stateme11t ofinvest1ne11t objective a11d policies (Co11ti11ued)

1.10 Scl1roder MPF Asia11 Portfolio (Co11tiI1ued)

(iv) The risk profile of the constituent fund is relatively high and, as such, is suitable for investors seeking long-term capital appreciation.


1.11 Schroder MPF Hong Kong Portfolio

(i) The objective of the constituent fund is to achieve long-term capital growth.

(ii) The constituent fund vvill invest in a single approved pooled investment fund namely, the Hong Kong Equity Fnnd, a sub-fund of the Schroder Institutional Pooled Funds, which primarily invests in Hong Kong equities. The approved pooled investment flllld may hold cash, bank deposits or cash equivalents for ancillary purposes. The current proposed allocation of the assets is:

Equities Hong Kong


90%to 100% 90% to 100%

o%to 10%

(iii) It will hold a minimwn of 30% in Hong Kong dollar investments at all times.

(iv) The risk profile of the constituent fund is relatively high and, as such, is suitable for investors with more than 10 years before retirement.


1.12 Schroder MPF Global Fixed Income Portfolio

(i) The objective of the constituent fund is to provide security of capital and a comparatively high income return.

(ii) The constituent fund 'Will invest in a single approved pooled investment fund which makes direct investments primarily in fixed interest and floating rate securities, money market instruments and cash deposits while maintaining a high income yield. The fund may hold cash, bank deposits or cash equivalents for ancillary purposes. The current proposed allocation of the assets is:

Bonds US Dollar Global currencies ex US Dollar


70%to 100% 10%to 90% 10%to90%

0%to30%


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1 Stateme11t ofi11vestme11t objective and policies (Co11ti11ued)

1.12 Schroder MPF Global Fixed Income Portfolio (Continued)

(iv) The constituent fund is not a guaranteed fund. It cannot be guaranteed that the performance of the constituent fund will generate a return and there may be circumstances where no return is generated or the capital is lost.

(v) The constituent fund is low risk and, as such, is suitable for investors \vi th between 3 and 5 years before retirement.

(vi) The long-term risk and return of the constituent fund will be associated primarily with the volatility and growth in global bonds.

1.13 Schroder MPF Core Accumulation Fund

(i) The objective of the constituent fund is to provide capital growth to members by investing in a globally diversified manner.

(ii) The constituent fund will invest in a single approved pooled investment fund namely, the Schroder MPF Core 60/ 40 Fund, which in turn invests in two approved pooled investment funds as allowed under the Mandatory Provident Fund Schemes (General) Regulation. The constituent fund will hold 60% of its net assets in higher risk assets (such as global equities), with the remainder investing in lower risk assets (such as global fixed income and money market instruments). The underlying investments of the portfolio will primarily include quoted securities, government and corporate bonds and cash deposits worldwide. The current proposed allocation of the assets is:

Bonds and money market instruments US dollar Global currencies ex US Dollar

Equities Asia Pacific ex Japan United States Japan Europe Others

35%to45% 3.5% to 40.5% 3.5% to 40.5%

55%to 65% 0%to32.5% 5.5% to 45.5% o%to 16.25% 5.5% to 32.5% o%to 19.5%


(iv) The risk profile of the constituent fund is relatively medium and, as such, is suitable for investors with more than 10 years before retirement.

(v) The Investment Manager of the constituent fund will not trade in currency forwards, futures or options butthe investment manager of the Schroder MPF Core 60/ 40 Fund (and its nnderlying approved pooled investment funds) may enter into currency forward contracts, futures contracts and options contracts for the account of the Schroder MPFCore 60/ 40 Fund (and its underlying approved pooled investment funds) for hedging purposes only. The Investment Manager of the constituent fund and the investment manager of the Schroder MPF Core 60/40 Fund (and its underlying approved pooled investment funds) does not intend to engage in securities lending or repurchase agreement.

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1 Stateme11t ofiI1vesbne11t objective a11d policies (Co11tinued)

1.14 Schroder MPF Age 65 Plus Fm1d

(i) The objective of the constituent fund is to provide stable growth to members by investing in a globally diversified manner.

(ii) The constituent fund will invest in a single approved pooled investment fund namely, the Schroder MPF Core 20/80 Fund, which in turn invests in two approved pooled investment funds as allowed under the Mandatory Provident Fund Schemes (General) Regulation. The constituent fund will hold 20% of its net assets in higher risk assets (such as global equities), with the remainder investing in lower risk assets (such as global fixed income and money market instruments). The underlying investments of the portfolio will primarily include quoted securities, government and corporate bonds and cash deposits worldwide. The current proposed allocation of the assets is:

Bonds and money market instruments US Dollar Global cW'rencies ex US Dollar

Equities Asia Pacific ex Japan United States Japan Europe Others

75% to85% 7.5% to 76.5% 7.5% to 76.5%

15%to 25% o%to 12.5% i.5% to 17.5% o%to 6.25% i.5% to 12.5% o%to 7.5%


(iv) The risk profile of the constituent fund is relatively low and, as such, is suitable for investors with 15 or less years before retirement.

(v) The Investment Manager of the constituent fund will not trade in cW"rency forwards, futures or options but the investment manager of the Schroder MPF Core 20/80 Fund (and its underlying approved pooled investment funds) may enter into currency forward contracts, futures contracts and options contracts for the account of the Schroder MPF Core 20/80 Fund (and its underlying approved pooled investment funds) for hedging purposes only. The Investment Manager of the constituent fund and the investment manager of the Schroder MPF Core 20/80 Fund (and its underlying approved pooled investment funds) does not intend to engage in securities lending or repurchase agreement.

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2 Market review and outlook for tl1e year ended 3otl1 September 2018

Schroder MPF Capital Guara11teed Portfolio

Market Review

China and Hong Kong equities continued to record positive returns in the fourth quarter of 2017.

Chinese equities advanced as the Q3 real GDP growth crone broadly in line with expectations, rising 6.8% year-on-year. The announcement of a targeted reserve ratio requirement (RRR) cut for some banks that would go into effect in 2018 also supported sentiment for Chinese banking stocks. Consumer staples and healthcare were the best performing sectors. Property rebounded amid the stabilising home prices and housing activities. In Hong Kong, stocks delivered positive returns with Macau ganiing stocks in particular performing well. Hong Kong banks also advanced on the back of rising interbank rates. In fixed income, the 10-year US Treasury yield rose Sbps over the quarter amid growing momentum behind a tax reform bill which is expected to stimulate growth and inflation, while the interest rate hike by the US Fed also put pressure on yields. In credit, corporate bonds finished the quarter vvith positive total returns, outperforming government bonds. Investment grade credit outperformed high yield as the investors took profit from the latter having reached elevated valuations. Asian bonds and emerging market debt also finished the quarter up, helped by strong investors' risk appetite and the US dollar weakness.

Moving into 2018, Chinese equities gained in a volatile first quarter of 2018. The markets had a strong start to the year led by technology stocks and Chinese banks. But they witnessed a sharp selloff in early February, led by systematic corrections in US. The markets posted further declines in March. The sell-off in late March was led by concerns over US-China trade tensions, in the wake of the Trump administration's announcement of tariffs on Chinese goods. In bond markets, government yields rose markedly over the quarter. US io-year Treasury yields rose by 33bps and the yield curve continued to flatten modestly, vvith shorter-dated maturities further impacted by the March rate hike and substantial issuance. In credit, corporate bonds declined and underperformed government bonds, as volatility in the equity market spilt over into credit spread, while investment grade credit saw larger negative returns than high yield, as the latter is less affected by the change in base yields. Elsewhere, emerging local currency sovereign bonds made strong gains as the US dollar weakened, but hard currency sovereign and corporate bonds suffered from both rising base yield and vvidening spreads.

Chinese and Hong Kong equities retreated in the second quarter of 2018. Investor sentiment was dampened by concerns over growing risk of a trade war, rising US Treasury yields, and soft China economic data alongside Chinese yuan depreciation. Government bond yields rose significantly in April before risk aversion led to the buying of perceived safe havens. The US 1 a-year Treasury yields rose by i2bps as the US Federal Reserve raised interest rates ti.vice over the quarter as expected. Global corporate bonds made negative total returns and underperformed government bonds on widening spreads given concerns on growth. Both investment grade and high yield credit fell. Elsewhere, emerging market bonds had a difficult quarter, particularly local currency bonds which were hurt by the strengthening US dollar.

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2 Market review.a11d outlook fortl1e year e11ded 3otl1 September 2018 (Co11tinued)

Schroder MPF Capital Guaranteed Portfolio (Continued)

Market Review (Continued)

In the third quarter, Chinese equities remained under pressure following the implementation of tariffs from the US on a total of $250 billion of Chinese goods. There was little progress in bilateral trade negotiations and China responded with tariffs on $110 billion of US goods. Meanwhile, Chinese macroeconomic data disappointed. The authorities announced a range of targeted economic support measures, including a shift to fiscal stimulus and credit easing. The central bank also re-introduced macro prudential measures to stabilise the renminbi. In fixed income, government bond yields rose over the quarter despite a bout of safe haven demand in August. The US 10-year Treasury yields rose by 2obps amid the stability in growth and employment figures which allowed the Federal Reserve to enact its widely anticipated increase in the federal funds rate by 25bps, while the rather hawkish tone by the chairman Powell put further pressure on yields. In credit, global corporate bonds saw marginal gains, with high yield outperforming investment grade. Elsewhere, emerging market bonds experienced a tumultuous quarter. Hard currency sovereign and corporate EM bonds made positive returns, but local currency was down.

Market Outlook

Further to the risks to global growth brought by trade wars and protectionism, global markets are also having to contend with the combination of quantitative and monetary tightening as well as fiscal easing in the US and consequent US dollar strength. This, together with higher oil prices, is putting pressure on weaker emerging market countries and currencies. These challenges are coming at a time when China's focus on quality growth as well as economic and social stability has brought about a crackdown on the shado\.Y banking sector and the issuance of wealth management products with implicit guarantees. :rhis drive to deleverage and increase regulatory oversight on these problem areas led to worries of a growth scare coming into 2018. Tighter credit conditions have also in turn led to a rise in credit defaults this year. Although positive for the longer-term stability of the financial system, this tightening is leading to a continued deceleration in broader credit growth in the system, which is starting to feed through into slower growth in the economy. Tightened liquidity domestically combined with external headwinds posed by trade have continued to weigh heavily on Chinese markets, particularly onshore.

While the trend of deleveraging remains, there are signs of selective easing and policy support from the government. These include the delayed implementation of wealth management products regulations, RRR (reserve requirement ratio) cuts, acceleration of issuance of local government bonds, and encouraging bank lending to small and mediUm enterprises. There are also potential changes to tax regimes in support of domestic conswnption. These aim to provide a cushion of support, although we have not yet seen any new major stimulus to kick-start a new cyclical upsvving. The govern.ment1s agenda for deleveraging and structural reforms while maintaining a reasonable economic growth rate remains a delicate balance.

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2 Market review and outlook for tlte year e11ded 3otl1 September 2018 (Co11tiI1ued)

Schroder MPF Capital Guaranteed Portfolio (Continued)

Market Outlook (Continued)

Lately, a slew of policies have also been announced to tackle the social aspects and well-being of citizens in China. These include new regulations pertaining to online gaming, healthcare (generic drug prices tender), school operators, after-class tutoring and natural gas operators. Notably the equity risk premium for companies operating in these affected sectors will need to be adjusted given the rising uncertainty. Compounded by the growth headwinds discussed, earnings could see further downward pressure in the months to come.

In fixed income, we remain cautious on government bonds. Follovving the rise in yields, bond valuations have turned less rich but are still unattractive at current levels. More importantly, US economic data remains relatively robust along with rising inflationary pressures. Among the bond markets, we are negative on US treasuries and German Bunds but neutral on Japanese government bonds. However, short-term duration could provide better hedge especially the market seems to start showing some concerns over growth. We are neutral on emerging market debt bonds denominated in USD and local currency. For credit, although technical support for Asian credit remains stronger within the emerging market universe, spreads would remain under pressure given lower investors' appetite.

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2 Market review a11d outlook for the year e11ded 3.otl1 September 2018. (Co11ti11ued)

Scluoder MPF Conservative Portfolio

Market Review

In a reversal of last year's trend, volatility returned to markets in QI 2018, picking up sharply from 20171s low levels and impacting risk assets. US Treasury yield curve generally flattened across the 12-month period ending September 2018, with the 10-year yield rising markedly from 2.33% as at the end of September 2017 to 3.06% as at the end of September 2018.

The fourth quarter of 2017was marked by growing momentum behind a US tax reform bill which is expected to stimulate growth and inflation. In QI 20181 expectations of US growth, inflation and interest rates shifted higher but market sentiment was negatively impacted by rising trade tensions between the US and China in March. The second quarter of 2018 saw protectionist trade rhetoric from the US dominating the headlines as the US targeted both its allies and China. As trade tensions continued to escalate and ease several times over the quarter, the tit-for-tat tariffs threats and potential peace negotiations created much market uncertainty and left markets jittery on the prospects of a full blown trade war. In Q3 20I8, US economic growth and earnings data remained robust, and this ultimatelyovershadowed simmering concerns around the escalating US-China trade war. The US initially targeted $34 billion of Chinese products with a 25% tariff in early July, before increasing tariffs on another $16 billion in late August and an additional 10% tariff on $200 billion of Chinese goods in September (set to rise to 25% in January). Stability in growth and employment figures allowed the Federal Reserve (Fed) to enact its widely anticipated increase in the federal funds rate by 25 basis points in Q3 20I8. The committee dropped its long-standing description of monetary policy as "accommodative", and reaffirmed its outlook for further gradual hikes into 20I9. As yet, US industrial activity indicators show little impact from the trade wars.

Meanwhile, anxiety over Italy's political risk eased off a little in QI 20I8 with the formation of a coalition government between Italy's populist M5S and Lega parties. The announcement by the ECB in its June meeting on the unwinding of quantitative easing (QE) in December 20I8, together with a more dovish stance with its nine-month forward guidance for a potential rate hike, added uncertainty to the market in June.

Elsewhere in Hong Kong, the HIBOR surged over the year ending September 2018. 3-month HIBOR rose from a low of 0.78% as at the end of September 20I7 to 2.28% as at the end of September 20I8. In QI 20I8, fears of capital outflows from rising US interest rates resulted in investors swapping Hong Kong dollar funding for US dollar funding and pushed up the HIBOR. In Q2 2018, the Hong Kong Monetary Authority intervened in the foreign exchange market several times amid a persistently weak Hong Kong dollar (HKD) due to active carry trade activity in order to maintain the USDHKD peg at 7.8500. The new bond issuance market was leaner than expected in 2018 while the convergence of HIBOR to LIBOR was slower than expected over the period. Recent economic data also suggested that growth remains soft - Hong Kong's August Purchasing Managers' Index (PM!) remained in negative territory for the fifth month as the US-Sino trade disputes continued to weigh on economic sentiment. The bustling city was hit by Typhoon Mangkhut - the strongest storm of the year, which flooded and resulted in a serious and extensive damage to the city in September.

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2 Market review a11d outlook for the year e11ded 3otl1 September 2018 (ContiI1ued)

Schroder MPF Conservative Portfolio (Continued)

Market Reyjew (Co11tiJ1uedl

Against this backdrop, the Sub-Fund posted a positive return of o.86% (HKD, net of fees) for the 12-month period under review and outperformed the. MPF A prescribed savings rate benchmark which returned 0.01%. The HKD government bond yields rose in line with the high correlation with US Treasury yields, resulting in negative returns from HKD bonds overall. HKD government bonds returned -1.79% (as measured by the iBoxx ALB! Hong Kong Government Bond Index, in HKD) while HKD denominated corporates fared better with a -1.15% return (the iBoxx ALB! Hong Kong Non-Government Bond Index, in HKD) during the period under review.

Market Outlook

The third quarter of the year has been anything but quiet, with bond markets on the receiving end of volatility. The combination of improving US economic data and a US Federal Reserve who is keen to return to monetary policy "normalcy'' suggests that the US treasury market is unlikely to see yields stay at current levels for too long. Yet, what has probably surprised both bond bears and bulls has been the lack of surprise in the rate of interest rate hikes by the Fed. We believe that it is unlikely that the Fed will surprise markets with a sudden hike - at least not this year. Instead the Fed will seek to create an aura of continued predictability in monetary policy.

On the Asian front, the impact of higher US yields has put pressure on Asian Central Banks in the region to tighten their monetary policies to limit any significant moves in their currencies - perhaps with the exception of India1 Indonesia and Philippines. We have also witnessed a rise in USD denominated bond yields as the impact of tighter funding costs and some weakness in certain Chinese high yield issuers have forced market participants to reassess the credit worthiness of the market.

Over in Hong Kong, our expectation of HIBOR converging to LIBOR still remains intact and we continue to expect HIBOR to rise. In addition, excess liquidity in the market is expected to continue tightening and lending cost is expected to continue increasing on the back of rising US interest rates and a reduction of Chinese inflows to Hong Kong.

In the short term1 market noise around Sino-US trade war and US politics will result in some volatility. However, the fW1damentals in Asian countries with current account surplus, such as Hong Kong1 should provide resilien·ce to withstand market volatility.

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2 Market review a11d outlook for tl1e year e11ded 3otl1 September 2018 (Co11ti.J1ued)

Schroder MPF RMB and HKD Fixed Income Portfolio

Market Review

In a reversal of last year's trend, volatility returned to markets in Qi 2018, picking up sharply from 2017's low levels and impacting risk assets. US Treasury yield curve generally flattened across the 12-month period ending September 2018, with the 10-year yield rising markedly from 2.33% as at the end of September 2017 to 3.06% as at the end of September 2018.

The fourth quarter of2017 was marked by growing momentum behind a US tax reform bill which is expected to stimulate growth and inflation. In QI 2018, expectations of US growth, inflation and interest rates shifted higher but market sentiment was negatively impacted by rising trade tensions between the US and China in March. The second quarter of 2018 saw protectionist trade rhetoric from the US dominating the headlines as the US targeted both its allies and China. As trade tensions continued to escalate and ease several times over the quarter, the tit-for-tat tariffs threats and potential peace negotiations created much market uncertainty and left markets jittery on the prospects of a full blown trade war. In Q3 2018, US economic growth and earnings data remained robust, and this ultimately overshadowed simmering concerns around the escalating US-China trade war. The US initially targeted $34 billion of Chinese products with a 25% tariff in early July, before increasing tariffs on another $16 billion in late August and an additional 10% tariff on $200 billion of Chinese goods in September (set to rise to 25% in January). Stability in growth and employment figures allowed the Federal Reserve (Fed) to enact its widely anticipated increase in the federal funds rate by 25 basis points in Q3 2018. The committee dropped its I Ong-standing description of monetary policy as "accommodative", and reaffirmed its outlook for further gradual hikes into 2019. As yet1 US industrial activity indicators show little impact from the trade wars.

Meanwhile, anxiety over Italy's political risk eased off a little in Q1 2018 with the formation of a coalition government between Italy's populist M5S and Lega parties. The announcement by the ECB in its June meeting on the unwinding of quantitative easing (QE) in December 2018, together with a more dovish stance with its nine-month forward guidance for a potential rate hike, added uncertainty to the market in June.

Elsewhere in Hong Kong, the HIBOR surged over the year ending September 2018. 3-month HIBOR rose from a low of 0.78% as at the end of September 2017 to 2.28% as at the end of September 2018. In Qi 2018, fears of capital outflows from rising US interest rates resulted in investors swapping Hong Kong dollar funding for US dollar funding and pushed up the HIBOR. In Q2 2018, the Hong Kong Monetary Authority intervened in the foreign exchange market several times amid a persistently weak Hong Kong dollar (HKD) due to active carry trade activity in order to maintain the USDHKD peg at 7.8500. The new bond issuance market was leaner than expected in 2018 while the convergence of HIBOR to LIBOR was slower than expected over the period. Recent economic data also suggested that growth remains soft - Hong Kong's August Purchasing Managers' Index (PM!) remained in negative territory for the fifth month as the US-Sino trade disputes continued to weigh on economic sentiment.

Over in China, broad macro growth data in Q4 2017 continued on the uptrend, with August's manufacturing PMI coming in at a 6-month high of 51.6. A similar positive expansion was noted in August's seiv:ices PM! which posted a three-month high of 52.7. The quarter also saw the launch of the "Bond Connect" scheme which enabled foreign investors to access China's onshore bond market via Hong Kong. The annual Central Economic Work Conference held in Q4 2017 saw greater emphasis placed on financial deleveraging, poverty reduction for general population and environmental protection. In 2018, the co1nbination of lackluster infrastructure investments, rising onshore bond defaults, policy induced financial deleveraging measures by PBoC, escalating trade tensions with the US and a depreciating RMB posed as headwinds to Chinese economic growth and resulted in a 1noderation of growth from Q2 2018 onwards.

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2 Market review a11d outlook for tl1e year e11ded 30th September 2018 (ContiI1ued)

Schroder MPF RMB and HKD Fixed hlcome Portfolio (Continued} ··

Market Review (Co11tinuedl

Against this backdrop, the Sub-Fund posted a positive return of i.12% (B share class, HKD, net of fees) for the 12-month period under review but underperformed the benchmark which returned 1.25%. The HKD government bond yields rose in line with the high correlation with US Treasury yields. HKD government bonds returned -1.79% (as measured by the iBoxx ALB! Hong Kong Government Bond Index, in HKD) while HKD denominated corporates fared better with a -1.15% return (the iBoxxALBI Hong Kong Non-Government Bond Index, in HKD) duringthe period under review. Conversely, RMB denominated offshore bonds rose by +4.20% in CNH (as measured by the iBoxx ALB! China Offshore Bond Index) while the CNH currency depreciated by 3.12% against the Hong Kong dollar for the 1 year ending September 2018.

Market Outlook

The third quarter of the year has been anything but quiet, with bond markets on the receiving end of volatility. The combination of improving US economic data and a US Federal Reserve who is keen to return to monetary policy "normalcy" suggests that the US treasury market is unlikely to see yields stay at current levels for too long. Yet, what has probably surprised both bond bears and bulls has been the lack of surprise in the rate of interest rate hikes by the Fed. We believe that it is unlikely that the Fed will surprise markets with a sudden hike - at least not this year. Instead the Fed will seek to create an aura of continued predictability in monetary policy.

On the Asian front, the impact of higher US yields has put pressure on Asian Central Banks in the region to tighten their monetary policies to limit any significant moves in their currencies - perhaps with the exception of India, Indonesia and Philippines. We have also witnessed a rise in USD denominated bond yields as the impact of tighter funding costs and some weakness in certain Chinese high yield issuers have forced market participants to reassess the credit worthiness of the market.

Over in Hong Kong, our expectation of HIBOR converging to LIBOR still remains intact and we continue to expect HIBOR to rise. In addition, excess liquidity in the market is expected to continue tightening and lending cost is expected to continue increasing on the back of rising US interest rates and a reduction of Chinese inflows to Hong Kong.

In China, the growth momentum is expected to moderate for the remainder of the year. Recently announced measures suggest that China's priority is now to stabilize growth momentum, in view of Sino-US trade disagreements and the reduction imposed on the economy from deleveraging of the shadow banking system though tighter funding costs and falling property market. Broad macro stability is expected in the short term as we believe the central government still has adequate fiscal resources to address potential effects of a slowdown in grovvth and issues in- the banking system. Monetary policy has some room to stimulate growth via credit expansion but less via interest rates, given concerns on fuelling capital outflow and a potential negative impact on the Chinese yuan. A continuation of monetary policy easing and ample money market liquidity will be positive for China bond investors.

In the short term, market noise around Sino-US trade war and US politics will result in some volatility. However, the fundamentals in Asian countries with current account surplus, such as Hong Kong, should provide resilience to withstand market volatility.

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2 Market review and outlook for the year e11ded 3otl1 September 2018 (Co11tinued)

Schroder MPF Capital Stable Portfolio/Schroder MPF Stable Growth Portfolio/Schroder MPF Balanced Investment Portfolio/Schroder MPF Growth Portfolio

Market Review

Global equities capped off a strong year with gains across most markets in Q4. In developed markets, Japan led gains while the yen ended little changed thanks to the positive macroeconomic data and strong corporate earnings. This was followed by US equities, which moved higher on the news of the long-awaited tax reform bill, with big permanent cuts for corporations as the centrepiece of the package. On the other hand, despite encouraging earnings in the quarter, European equities saw negative returns amid profit-taking and the expectation of tapering of quantitative easing by the EW'Opean Central bank (ECB). Elsewhere, emerging market equities outperformed with most of the countries delivering strong returns on the back of increasing investors' sentiment, earnings growth and a weak US dollar. In fixed income, the 10-year US Treasury yield rose 8bps over the quarter amid growing momentum behind a tax reform bill which is expected to stimulate growth and inflation, while the interest rate hike by the US Fed also put pressure on yields. On the other hand, yields in Europe generally moved lower. The ECB announced the reduction of asset purchases, but extended the programme. In credit, corporate bonds finished the quarter vvith positive total returns, outperforming government bonds. Investment grade credit outperformed high yield as the investors took profit from the latter having reached elevated valuations. Asian bonds and emerging market debt also finished the quarter up, helped by strong investors' risk appetite and.the US dollar weakness. Commodities advanced over the quarter, with industrial metals posting the largest gains as Chinese demand remained firm. In the currency space, the US dollar index fell -1% over the quarter, after posting two months of positive gains at the start. The greenback fell against the Euro and British Pound, while gaining value relative to other developed currencies.

Going into 2018, global equity markets declined. Despite a strong start buoyed by ongoing strength in economic data and the confirmation of US tax reform, markets '"ere unnerved by higher-thanexpected inflation data in February and fears over US-China trade sanctions. In developed markets, US equities were among the stronger region despite negative performance in absolute terms. It was followed by European equities, as softer macroeconomic data weighed on sentiment. Japanese equities fell the most in major developed markets on global trade tensions and a stronger Yen. On the other hand, Asian and emerging markets registered positive gains in the first quarter in spite of the pick-up in market volatility. In bond markets, government yields rose markedly over the quarter. US 10-yearTreasuryyields rose by33bps and the yield curve continued to flatten modestly while the IO-year Bund went up 7bps. In credit, corporate bonds declined and underperformed government bonds, as volatility in the equity market spilt over into credit spread, while investment grade credit saw larger negative returns than high yield, as the latter is less affected by the change in base yields. Elsewhere, emerging local currency sovereign bonds made strong gains as the US dollar weakened, but hard currency sovereign and corporate bonds suffered from both rising base yield and widening spreads. C.ommodities fell over the quarter, vvith industrial metals posting the largest losses amid rising global trade tensions and concerns that further escalation could impact demand. C.onversely, energy continued to record solid gains, supported by OPEC production cuts. In the currency space, the US dollar index fell -2% over the quarter and the greenback depreciated against most major currencies including the Euro and British Pound

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2 Market review ru1d outlook for tl1e year e11ded 3otl1September2018 (Co11t:iJ1ued)

Schroder MPF Capital Stable Portfolio/Schroder MPF Stable Growth Portfolio/Schroder MPF Balanced Investment Portfolio/Schroder MPF Growth Portfolio (Continued)

Market Review (Co11tinued)

Global equities made gains in a volatile second quarter against resilient economic and earnings data vied with an unsettling geopolitical backdrop. In developed markets, US equities were the top performer given the support from positive earnings momentum and robust economic data which outshone the China-US trade posturing. Eurozone equities also posted positive returns in Euro terms with the energy and technology sectors leading gains. However, the market was do'Wil in USD terms given the depreciation of the Euro. Similarly, Japanese equities in JPY were up slightly but lost value in USD terms. On the other hand, emerging markets rmderperformed and declined with US dollar strength a significant headwind. Escalating trade tensions led to concern over the impact on global trade, contributing to weakness across the region. Asian markets which are the most exposed to a slowdown in global trade were especially vulnerable. In bond markets, government bond yields rose significantly in April before risk aversion led to the buying of perceived safe havens. The US 10-year Treasury yields rose +12bps as the US Federal Reserve raised interest rates twice over the quarter as expected. Conversely, European yields moved lower, with the 10-year BWld yields falling -2obps following the Italian political turmoil which fuelled risk-off sentiment.

Global corporate bonds made negative total returns and Wlderperformed government bonds on widening spreads given concerns on gro\¥1:h. Both investment grade and high yield credit fell. Elsewhere, emerging market bonds had a difficult quarter, particularly local currency bonds, hurt by the strengthening US dollar. Commodities posted a slightly positive return over the quarter. Crude oil prices continued to rally following the decision by President Trump's decision to withdraw the US from the Iran nuclear accord. In the currency space, the US dollar index rose and the greenback continued to strengthen against most major currencies.

In Q3 2018, global equities made gains against the backdrop of the ongoing US-China trade war. US equities were the top performer as economic growth and earnings data remained extremely robust, ultimately overshadowing trade concerns. Japan also recorded strong gains amid a weaker yen while European equities gains were modest, but the market was down in USD tenns given the depreciation of the Euro. Emerging markets equities remained under pressure and underperformed developed markets, with US dollar strength and political uncertainty weighing. Asian equities were weighed down by China, which is the epicentre of the trade-dispute. In bond markets, government bond yields rose over the quarter despite a bout of safe haven demand in August. The US 10-year Treasury yields rose +20bps amid the stability in growth and employment figures which allowed the Federal Reserve to enact its widely anticipated increase in the federal funds rate by 25bps, while the rather hawkish tone by the chairman Powell put further pressure on yields. The German 10-year Bunds followed a similar path, though they retraced some ground late on in September following the Italian budget annoWlcement. In credit, global corporate bonds saw marginal gains, with high yield outperforming investment grade. Elsewhere, emerging market bonds experienced a tumultuous quarter. Hard currency sovereign and corporate EM bonds made positive returns, but local currency was down. Commodities posted a negative return over the quarter, led lower by industrial metals which recorded steep declines on global trade uncertainty. By contrast, the energy segment was positive as oil prices rallied amid supply concerns linked to the re-imposition of US sanctions on Iran. In the currency space, the US dollar index rose and the greenback continued to strengthen against most major developed currencies apart from the Canadian dollar and Swiss Franc.

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2 Mal'ket review ru1d outlook for tl1e year ei1ded 3ot11September2018 (Co11ti.J1ued)

Schroder MPF Capital Stable Portfolio/Schroder MPF Stable Growth Portfolio/Schroder MPF Balanced Investment Portfolio/Schroder MPF Growth Po1-tfolio (Continued)

Market Outlook

Overall, we maintain a constructive view on equities as the economic fundamental backdrop and strong earnings momentum remain supportive of the asset class. That being said, equities have also very recently responded to rising bond yields with corrections across the board. In the US, earnings growth remains a key support, while in the rest of the world, price weakness means that valuations have improved. Our conviction is that as long as the growth environment remains intact, earnings could continue to support returns despite rising interest rates and bond yields. Therefore 1ve believe it is important to stay dynamic in managing the equity exposure, and we continue to manage a diversified portfolio with protection measures implemented due to the continued evolving of the various risk scenarios.

Within equities, we continue to prefer the US as the economy remains the most resilient in terms of growth and earnings momentum. We have recently upgraded Japanese equity to a positive rating in recognition of early signs of earnings recovery and relatively attractive valuations. On the other hand, we expect European equities to perform. in-line with the global market. Political risk continues to remain in the spotlight while the region still offers reasonable value compared to other developed markets. Elsewhere, economic fundamentals are still intact in emerging markets and we believe that we are over the worst of the sharp losses in recent months. This region also offers an attractive valuation discount versus their developed peers. However, trade tensions remain in the spotlight and a relatively firm US dollar could remain as a near-term headwind.

With regard to the duration view, we remain negative on government bonds. Bond valuations have turned less rich but are still unattractive at current levels. On the other hand, growth remains robust along with rising inflationary pressures. Credit spreads remain under pressure given lower investors' appetite despite, therefore we maintain our cautious stance towards credit.

For currencies, we continue to hold a short-term tactical positive view on the US dollar, which should provide the portfolio with some diversification amid rising volatility. Despite its expensive valuation, we see room for further deterioration in growth and political sentiment against a continued backdrop ofliquidity tightness.

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2 Market review and outlook for t11e year e11ded 3otl1 September 2018 (Co11til1ued)

Sch.roder MPF l11ter11atio11al Portfolio

Market Review

Global equities capped off a strong year with gains across most markets in Q4. In developed markets, Japan led gains while the yen ended little changed thanks to the positive macroeconomic data and strong corporate earnings. This was followed by US equities, which moved higher on the news of the long-awaited tax reform bill, with big permanent cuts for corporations as the centrepiece of the package. On the other hand, despite encouraging earnings in the quarter, European equities saw negative returns amid profit-taking and the expectation of tapering of quantitative easing by the European Central bank (ECB). Elsewhere, emerging market equities outperformed with most of the countries delivering strong returns on the back of increasing investors' sentiment, earnings growth and a weak US dollar.

Going into 2018, global equity markets declined. Despite a strong start buoyed by ongoing strength in economic data and the confirmation of US tax reform, markets were unnerved by higher-thanexpected inflation data in February and fears over US-China trade sanctions. In developed markets, US equities were among the stronger region despite negative performance in absolute terms. It was followed by European equities, as softer macroeconomic data weighed on sentiment. Japanese equities fell the most in major developed markets on global trade tensions and a stronger Yen. On the other hand, Asian and emerging markets registered positive gains in the first quarter in spite of the pick-up in market volatility.

Global equities made gains in a volatile second quarter against resilient economic and earnings data vied with an unsettling geopolitical backdrop. In developed markets, US equities were the top performer given the support from positive earnings momentum and robust economic data which outshone the China-US trade posturing. Eurozone equities also posted positive returns in Euro terms with the energy and technology sectors leading gains. However, the market was down in USD terms given the depreciation of the Euro. Similarly, Japanese equities in JPY were up slightly but lost value in USD terms. On the other hand, emerging markets underperformed and declined with US dollar strength a significant headwind. Escalating trade tensions led to concern over the impact on global trade, contributing to weakness across the region. Asian markets which are the most exposed to a slowdown in global trade were especially vulnerable.

In Q3 2018, global equities made gains against the backdrop of the ongoing US-China trade war. US equities were the top performer as economic grnwth and earnings data remained extremely robust, ultimately overshadowing trade concerns. Japan also recorded strong gains amid a weaker yen while European equities gains were modest, but the market was down in USD terms given the depreciation of the Euro. Emerging markets equities remained under pressure and underperformed developed markets, with US dollar strength and political uncertainty weighing. Asian equities were weighed down by China, which is the epicentre of the trade-dispute.

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2 Market review a11d outlook for tlte year e11ded 3otl1 September 2018 (Cont:U:1ued)

Schroder MPF InternationalPortfolio (Continued)

Market Outlook

Overall, we inaintain a constructive view on equities as the economic fundamental backdrop and strong earnings momentum remain supportive of the asset class. That being said, equities have also very recently responded to rising bond yields with corrections across the board. In the US, earnings gro\r\rt:h remains a key support, while in the rest of the world, price weakness means that valuations have improved. Our conviction is that as long as the growth environment remains intact, earnings could continue to support returns despite rising interest rates and bond yields. Therefore we believe it is important to stay dynamic in managing the equity exposure, and we continue to manage a diversified portfolio with protection measures implemented due to the continued evolving of the various risk scenarios.

Within equities, we continue to prefer the US as the economy remains the most resilient in terms of growth and earnings momentum. We have recently upgraded Japanese equity to a positive rating in recognition of early signs of earnings recovery and relatively attractive valuations. On the other hand, we expect European equities to perform in-line with the global market. Political risk continues to remain in the spotlight while the region still offers reasonable value compared to other developed markets. Elsewhere, economic fundamentals are still intact in emerging markets and we believe that we are over the worst of the sharp losses in recent months. This region· also offers an attractive valuation discount versus their developed peers .. However, trade tensions .remain in the spotlight and a relatively firm US dollar could remain as a near-term headwind

In terms of currencies, we continue to hold a short-term tactical positive view on the US dollar, which should provide the portfolio with some diversification amid rising volatility. Despite its expensive valuation, we see room for further deterioration in growth and political sentiment against a continued backdrop ofliquidity tightness.

Scl1roder MPF Asian Portfolio

Market Review

The Sub-Fund posted positive returns over the review period and trailed the benchmark index. From a country perspective, underweight position in Taiwan and negative stock selection in Korea were the key detractors although this was partially mitigated by our positive stock selection in China. On a sector basis, our negative stock selection in consumer services and technology were the key detractors, whereas our positive stock selection in financials, oil & gas and consumer goods added to performance.

Asian equities finished with another quarter of strong performance in the fourth quarter of 2017.

India and Korea generated the strongest gains. India outperformed as the government announced plans for a significant recapitalisation for state-controlled banks. Korea benefited from China's effort to reset relations, which had deteriorated after South Korea proceeded with its THAAD missile deployment. Hong Kong and China recorded strong gains but finished slightly behind the index. In China, Q3 GDP growth was stable at 6.8% altl1ough higher frequency data reflected a moderate deterioration in activity. The 19th Communist Party Congress Was held during October and emphasised a focus on the quality of growth while addressing structural risks. In addition, China's increased scrutiny and regulation over the shadow banking sector has led to hardening of bond yields over the recent months. Elsewhere, Thai stocks outperformed, supported by upbeat GDP numbers. Indonesian stocks performed in-line with the broader market. Taiwanese stocks underperformed amid the volatility in technology stocks during the quarter.

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2 Market reView a11d outlook for tlte year e11ded 3otl1 September 2018 (Cont:iJ1ued)

Schroder MPF Asian Portfolio (Continued)

Market Reyiew (ContiJ1uedl

Coming into 2018, Asian equities saw a rise in volatility linked to global trade concerns in the first quarter1 finishing in negative territory. The prospect of a regulatory backlash for major technology firms also weighed on sentiment of the market. Thailand was among the best-performing markets, supported by strong performance from energy and utilities stocks. Taiwan, where technology stocks led the market higher, and Malaysia also recorded strong returns. Chinese equities generated solid gains and finished ahead of the index as macroeconomic data was more resilient than expected; GDP growth for 2017 accelerated to 6.9% year-on-year and higher frequency data was relatively firm. In contrast, the Philippines and Indonesia posted sharp falls. In the Philippines, currency weakness was a headwind amid rising inflation and as the current account moved into deficit. In Indonesia, signs of deterioration in policy and ongoing subdued growth weighed on sentiment. India also lagged, owing to concerns over a reported fraud at a state bank and weak performance from the ruling BharatiyaJanata Party in state by-elections. The market also faced headwinds from higher oil prices and global interest rate tightening.

Regional equities were broadly dovvn in the second quarter, with global trade concerns serving to increase risk aversion. ASEAN markets were among the weakest index countries while Korea also fell sharply. This was despite positive developments with regards to peace on the Korean peninsula; an Inter-Korea Summit in April saw leaders from the South and North pledge to agree to a formal end to the war between the two sides. US President Trump subsequently met with North Korean leader Kim Jong-un in Singapore in June. In Malaysia, the market declined after the unexpected election victory of Mahathir Mohamad's Harapan alliance ended the ruling coalition's 60 years in power. Taiwan also underperformed with technology names leading the market lower. India, which had underperformed by a wide margin in Qi, and China finished in negative territory but held up better than the wider index. In China, the central bank cut the reserve requirement ratio for banks by a total of t.25% over the quarter to encourage lending and support growth. However, a combination of slowing domestic growth momentum and global trade uncertainty contributed to weakness later in the quarter and the currency depreciated relative to the US dollar.

Asian equities lost value in the third quarter, primarily due to weakness in China. Chinese equities were negatively impacted by escalation in trade tensions, with the US moving ahead with several rounds of tariff implementation and China retaliating vvith measures of its ovvn. Meanwhile, Chinese macroeconomic data disappointed. The authorities announced a range of targeted economic support measures, including a shift to fiscal stimulus and credit easing. The central bank also re-introduced macro prudential measures to stabilise the renminbi by increasing the cost of speculation via forward contracts. India underperformed with rupee weakness a headwind amid rising inflation and concerns over the trade deficit given oil price strength. C.Onversely1 Thailand recorded robust returns with financials and energy stocks among the best performing names. The approval of laws required for a prospective election in 2019 was perceived as positive. Taiwan, where semiconductor stocks supported performance, and Malaysia also generated solid gains and outperformed

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2 Market review and outlook for tl1e year ended 3otl1 September 2018 (ContiI1ued)


Market Outlook

The ongoing trade war has taken a turn for the worse and is a significant headwind to global growth in 2019. What started with US imposing tariff on US$5obn of Chinese imports has now increased to US$25obn with a threat to include the remaining US$$26obn of goods under tariff as well. In the event where the entire basket of Chinese exports to the US is subject to a 25% tariff, it will constitute an export income shock of about 1% of China's GDP. While it is difficult at this stage to assess and quantify the direct impact from these tariffs, there is likely to be second order impact on investment cycle as capex slows down and supply chains across China get disrupted. There are also likely negative implications for overall valuation levels as risk appetite diminishes amidst ongoing retaliatory trade rhetoric and slowing growth.

China's efforts towards financial deleveraging and reigning in the opaque shadow credit has also negatively impacted the Chinese economy which has been slowi.ng down so far in 2018. Given the emerging risks to growth from trade friction and deleveraging efforts, there has been a subtle shift in the approach of policy makers. Policy environment has become more accommodative through RRR cuts, increased credit availability for private enterprises and tax relief for consumers. Asset management guidelines have been revised to provide for more flexibility in managing the WMP transition. The State Council's tone has also turned more pro-growth wi_th a focus on keeping the economy stable during times of external uncertainty.

High oil prices, forex volatility and the Fed tightening cycle have also been impeding growth in several Asian countries. The Philippines, India and Indonesia have seen a worsening of their external finances with higher oil prices negatively impacting their current account deficit. Currencies, as a result, have come under pressure and has led the respective central banks to raise interest rates. This could negatively impact the consumption and investment cycles in these countries. Recently oil prices have weakened as the Iran sanctions have been diluted and OPEC has increased oil supply. This should on the margin provide some relief to oil importing countries in Asia.

The new administration in Malaysia has made significant changes like repealing GST, reviewing large infrastructure projects, leadership changes at government institutions, etc. The country is likely to go through a phase of disruption as the coalition government formulates and implements its new growth policies. We remain cautious due to a lack of reasonably valued bottom-up ideas in Malaysia. The political calendar for South Asia will remain busy with elections in Thailand, Indonesia and India set to take place in 2019.

The earnings growth outlook for the technology sector is modest for hard\¥are comPanies on the lack of new product cycles and increasing competition from Chinese companies. Taiwanese technology companies in particular would require careful evaluation as they are most at risk from emerging Chinese competition. Similarly, the Chinese internet sector is facing increased risks from weaker macro, higher competition and closer regulatory scrutiny. While valuations have adjusted lower across the board, softening growth outlook is likelyto keep these stocks under pressure in the near term.

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2 Market review a11d outlook fortl1e year e11ded 3otl1 September 2018 (Co11tiI1ued)


Market Outlook (Continued)

Fmancial sector, in particular Banks have benefited from the rising interest rate cycle in the last . couple of years. With slowing global growth, the tailwinds from higher interest rates is likely to fade

in 2019. This may pose a challenge to banks, especially in Hong Kong and Singapore which have benefited from rising interest rates. However, within Financials, the insurance sector remains an attractive investment opportunity both regionally and in China where the need and demand for health and life insurance remains on structural uptrend.

Our investment outlook has turned more cautious, and we continue to be mindful of the potential growth moderation. We have reduced exposure to technology names in both the internet and hardware sub-sectors this year on moderating growth outlook. Within the hardware space, we continue to like Korean memory names where valuations are attractive albeit rising capex implies that memory prices have likely peaked. Rising capex in this sector is being deployed towards more advanced technology nodes and the incremental output is unlikely to be significantly disruptive for this oligopolistic industry as long as demand does not fall off sharply. Rising capex intensity and use of cutting edge advanced manufacturing technologies provides a high entry barrier to the sector. In the internet and ecommerce space, the Chinese internet companies are witnessing growth deceleration, stricter regulations and rising investments towards new business areas of entertainment, cloud and fintech. Given these near term headwinds we have tactically reduced exposure to the sector.

Within financials, we have selectively taken profits in Hong Kong banks, which have benefited from rising interest rate cycle. We are less confident on future interest rate increases given the slower and uncertain economic environment. We have added to Korea insurance sector on improving pricing for health insurance. We have also added to the healthcare sector in China within the drug distribution space where ongoing consolidation and falling interest rates would provide earnings support for this working capital intensive sector. Another area we like is oore Hong Kong commercial landlords, where new supply is limited but vacancy remains very low, supporting rental renewals to remain stable or trend higher.

After a year of strong earnings growth in 2017, the outlook for 2018/19 is still of growth, albeit at a more modest pace. Consensus EPS growth expectations for 2018/19 remains double-digit, whereas we believe a high single digit outcome is more likely on the assumption that China vmI provide sufficient policy support and offset the negative drag to the economy from trade war. Following the recent market correction, valuations are now looking much more reasonable and are trading below long-term average levels.

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2 Market review a11d outlook for tl1e year e11ded 3otl1 September 2018 (Co11tb1ued)

Schroder MPF Hong Kong Portfolio

Market Review

The Sub-Fund posted a positive return over the period and outperformed the benchmark. From a country perspective, positive stock selection in Hong Kong vvas the key contributor. On a sector basis, positive stock selection in financials was the key contributor, although this was partially offset by stock selection in industrials, consumer services and oil & gas sectors.

Hong Kong and China equities recorded positive returns in the fourth quarter of 2017. Chinese equities advanced as the real GDP growth in the third quarter came broadly in line with expectations, rising 6.8% year-on-year. The announcement of a targeted Reserve Ratio Requirement (RRR) cut for some banks that would go into effect in 2018 also supported sentiment for Chinese banking stocks. C.Onsumer staples and healthcare were the best performing sectors. Properties rebounded amid the stabilising home prices and housing activities. In Hong Kong, stocks delivered positive returns with Macau gaming stocks in particular perfonning well. Hong Kong banks also advanced on the back of rising interbank rates.

Hong Kong and China equities were volatile and ended marginally up for the first quarter of 2018, following the stellar run in 2017. The markets had a strong start to the year led bytechnology stocks and Chinese banks butconsequentlywitnessed a sharp sell-off in early February following systematic corrections in US. The markets posted further declines in March. The sell-off in late March was led by concerns over US China trade tensions, in the wake of the Trump administration's announced tariffs on Chinese goods.

Hong Kong and China equities were down in Q2, with global trade concerns serving to increase risk aversion. In China, the central bank cut the reserve requirement ratio for banks by a total of 1.25% over the quarter to encourage lending and support growth. However, a combination of slowing domestic growth momentwn and global .trade uncertainty contributed to weakness later in the quarter and the currency depreciated relative to the US dollar.

Hong Kong and Chinese equities performed poorly over the third quarter, largely in response to the escalation in trade tensions with the US. The healthcare, information technology and consumer discretionary sectors endured the most significant losses. Meanwhile, the energy and telecoms sectors outperformed strongly, the former thanks to the rising oil price.

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2 Market review a11d outlook for tl1e year e11ded 3ot11 September 2018 (Co11tiJ.1ued)

Schroder MPF Hong Kong Portfolio·( Continued).

Market Outlook

For the US-China trade war, continued uncertainties will slow global trade and GDP growth, drag down investment spending and weigh on hiring decisions of businesses. The 10% tariff on US$2oobn of Chinese imports to the US has now been enacted and this is slated to go up to 25% by Jan 2019 if no further compromise can be made between the two governments. This brings a total of around US$25obn of exports now subject to tariffs and the US is threatening to put a third round of tariffs on the remaining US$267bn worth of imports from China. All eyes are now on the G20 summit meeting in late November in Argentina betvveen Trump and Xi and whether any deals can be struck betvveen the two nations.

Going over to China, the trend of deleveraging and slowing economic growth remains but there are signs of selective easing from the government. These include the delayed implementation of regulations on wealth management product, RRR cuts, the acceleration of issuance of local government bonds, encouraging banks' lending to small and medium enterprises, the State Council's guideline to support domestic consumption, and potential changes to tax regimes, to name a few. Our view is that these policies are aimed at providing a downside cushion rather than a large stimulus to growth. Weak RMB, high debt levels, elevated property prices and the continued trend of deleveraging will also limit the leeway for government to stimulate aggressively. The government's agenda for deleveraging and structural reforms whilst maintaining a reasonable economic growth rate has always been a delicate balancing act.

Lately, there have also been a slew of policies announced to tackle the social aspects and well-being of citizens in China. There have been new government regulations relating to online gaming, healthcare (generic drug prices tender), school operators, after-class tutoring and natural gas operators which have affected the investment cases of the companies in their respective industries. Notably the equity risk premium of these sectors under scrutiny will need to be adjusted upwards, given the rising uncertainty. Coupled vvith the deterioration in economic growth prospects and the government's directives mentioned above, earnings revisions of many corporates could see further downgrades in the months to come.

In the short term, we prefer stocks with a value bias, and those without heightened expectations and are non-consensus holdings. These opportW1ities are generally presented in the energy, financials and industrial sectors currently. However, with a medium term view, the normalization of interest rates/exit of quantitative easing in the US as well as the shift of China into consumption-driven and service-oriented industries are actually healthy developments for the long term sustainability of these economies. We will look to further pullbacks in markets to invest at more. reasonable valuations. We favour opportunities in travel & leisure, consumption· and insurance sectors for exposure in the long term secular growth stories of economy.

As for Hong Kong, we have seen the first prime rate hike of 12.5bps in ten years. Big banks could see a slight margin drag from a simultaneous savings rate increase but the overall HIBOR hike should more than compensate for the negatives. Hence we continue to favour big banks with the likes of HSBC and BOC Hong Kong given their leverage to rising rates and dividend yield support. Elsewhere, we have an overweight in property landlords given limited supply in office space and steady growth in retail sales. Selectively, we have added conglomerates given their attractive valuation, solid balance sheet and good visibility of their earnings trajectory. There are also opportunities from several corporate actions taken to close the discounts to their net asset values.

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2 Market review a11d outlook for tl1e year ended 3otl1 September 2018 (Co11til1ued)

Schroder MPF Global Fixed Income Portfolio

Market Review

In the final quarter of 2017, the 10-year US Treasury yield rose 8bps over the quarter amid growing momentum behind a tax reform bill which is expected to stimulate growth and inflation, while the interest rate hike by the US Fed also put pressure on yields. In credit, corporate bonds finished the quarter with positive total returns, outperforming government bonds. Investment grade credit outperformed high yield as the investors took profit from the latter having reached elevated valuations. Asian bonds and emerging market debt also finished the quarter up, helped by strong investors' risk appetite and the US dollar weakness.

Going into 2018, government yields rose markedly over the quarter. US 10-year Treasury yields rose by 33bps and the yield curve continued to flatten modestly, "With shorter-dated maturities further impacted by the March rate hike and substantial issuance. In credit, corporate bonds declined and underperformed government bonds, as volatility in the equity market spilt over into credit spread, while investment grade credit saw larger negative returns than high yield, as the latter is less affected by the change in base yields. Elsewhere, emerging local currency sovereign bonds made strong gains as the US dollar weakened, but hard currency sovereign and corporate bonds suffered from both rising base yield and widening spreads.

Government bond yields rose significantly in April before risk aversion led to the buying of perceived safe havens over the second quarter. The US 10-year Treasury yields rose by 12bps as the US Federal Reserve raised interest rates twice over the quarter as expected. Conversely, European yields moved lower following the Italian political turmoil which fuelled risk-off sentiment. Global corporate bonds made negative total returns and underperlormed government bonds on widening spreads given concerns on growth. Both investment grade and high yield credit fell. Elsewhere, emerging market bonds had a difficult quarter, particularly local currency bonds, hurt by the strengthening US dollar.

In the third quarter of 2018 1 government bond yields rose despite a bout of safe haven demand in August. The US 10-yearTreasuryyields rose by2obps amid the stability in growth and employment figures which allowed the Federal Reserve to enact its widely anticipated increase in the federal funds rate by 25bps, while the rather hawkish tone by the chairman Powell put further pressure on yields. The German IO-year Bunds followed a similar path, though they retraced some ground late on in September following the Italian budget announcement. In credit, global corporate bonds saw marginal gains, with high yield outperforming investment grade. Elsewhere, emerging market bonds experienced a tumultuous quarter. Hard currency sovereign and corporate EM bonds made positive returns, but local currency was down.

Market Outlook

In fixed income, we remain cautious on government bonds. Following the rise in yields, bond valuations have turned less rich but are still unattractive at current levels. More importantly, US economic data remains relatively robust along with rising inflationary pressures. Among the bond markets, we, are negative on US treasuries and German Bunds but neutral on Japanese government bonds. However, short-term duration could provide better hedge especially the market seems to start showing some concerns over growth. We are neutral on emerging market debt bonds denominated in USD and local currency. For credit, although technical support for Asian credit remains stronger within the emerging market universe, spreads would remain under pressure given lower investors' appetite.

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2 Market review a11d outlook for tl1e year e11ded 3ot11 September 2018 (Co11tiI1ued)

Schroder MPF Core Accumulation Fund/Sclu·oder MPF Age 65 Plus Fund

Market Reyjew

Global equities capped off a strong year with gains across most markets in Q4. In developed markets, Japan led gains while the yen ended little changed thanks to the positive macroeconomic data and strong corporate earnings. This was followed by US equities, which moved higher on the news of the long-awaited tax reform bill, with big permanent cuts for corporations as the centrepiece of the package. On the other hand, despite encouraging earnings in the quarter, European equities saw negative returns amid profit-taking and the expectation of tapering of quantitative easing by the European Central bank (ECB). Elsewhere, emerging market equities outperformed with most of the countries delivering strong returns on the back of increasing investors' sentiment1 earnings growth and a weak US dollar. In fixed income, the 10-year US Treasury yield rose 8bps over the quarter amid growing momentum behind a tax reform bill which is expected to stimulate growth and inflation, while the interest rate hike by the US Fed also put pressure on yields. On the other hand, yields in Europe generally moved lower. The ECB announced the reduction of asset purchases, but extended the programme.

Going into 2018, global equity markets declined. Despite a strong start buoyed by ongoing strength in economic data and the confirmation of US tax reform1 markets were unnerved by higher-thanexpected inflation data in February and fears over US-China trade sanctions. In developed markets, US equities were among the stronger region despite negative performance in absolute terms. It was followed by European equities1 as softer macroeconomic data '\i\1eighed on sentiment. Japanese equities fell the most in major developed markets on global trade tensions and a stronger Yen. On the other hand, Asian and emerging markets registered positive gains in the first quarter in spite of the pick-up in market volatility. In bond markets, government yields rose markedly over the quarter. US 10-year Treasury yields rose by 33bps and the yield curve continued to flatten modestly while the lO-year Bund went up 7bps.

Global equities made gains in a volatile second quarter against resilient economic and earnings data vied with an unsettling geopolitical backdrop. In developed markets1 US equities were the top performer given the support from positive earnings momentum and robust economic data which outshone the China-US trade posturing. Eurozone equities also posted positive returns in Euro terms with the energy and technology sectors leading gains. However, the market was down in USD terms given the depreciation of the Euro. Similarly, Japanese equities in JPY were up slightly but lost value in USD terms. On the other hand, emerging markets underperformed and declined with US dollar strength a significant headwind. Escalating trade tensions led to concern over the impact on global trade, contributing to weakness across the region. Asian markets which are the most exposed to a slowdo'Wll in global trade were especially vulnerable. In .bond markets, government bond yields rose significantly in April before risk aversion led to the buying of perceived safe havens. The US 10-year Treasury yields rose +12bps as the US Federal Reserve raised interest rates twice over the quarter as expected. Conversely, European yields moved lower, with the 10-year Bund yields falling -2obps following the Italian political turmoil which fuelled risk-off sentiment.

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2 Market review and outlook fortl1e year e11ded 3ot11 September 2018 (Co11tiI1ued)

Schroder MPF Core Accumulation Fund/Schroder MPF Age 65 Plus Fund (Continued)

Market Review (Continued)

In Q3 2018, global equities made gains against the backdrop of the ongoing US-China trade war. US equities were the top performer as economic growth and earnings data remained extremely robust, ultimately overshadowing trade concerns. Japan also recorded strong gains amid a weaker yen while European equities gains were modest, but the market was down in USD terms given the depreciation of the Euro. Emerging markets equities remained under pressure and underperformed developed markets, with US dollar strength and political uncertainty weighing. Asian equities were weighed down by China, which is the epicentre of the trade-dispute. In bond markets, government bond yields rose over the quarter despite a bout of safe haven demand in August. The US 10-year Treasury yields rose +2obps amid the stability in growth and employment figures which allowed the Federal Reserve to enact its widely anticipated increase in the federal funds rate by 25bps1 while the rather hawkish tone by the chairman Powell put further pressure on yields. The German 10-year Bunds followed a similar path, though they retraced some ground late on in September following the Italian budget announcement.

Market Outlook

Given the requirement of low benchmark relative risk of the strategy, asset allocation is maintained closed to the reference portfolio over the period.

Within the equity portfolio, we continue to maintain a balanced approach with exposure to the four style strategies namely value, minimum volatility, quality and momentum. As we enter the late cycle environment, quality stocks should provide some defensiveness to the portfolio. In addition, rising inflation expectation in the current environment will provide tailvvind for our value oriented exposure. This is balanced by the exposures to momentum and minimum volatility which could act as a hedge should inflation fails to pick up.

The bond portfolio is managed to deliver a return close to the market index, and thus positioning of the portfolio remains very close to the benchmark. The fixed income portfolio is also 100% hedged back to Hong Kong dollar from a currency point of view.

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3 Trustee's commentary 011 ru1alysis of the i.J1vestments held by the Scl1e1ne a11d supportiI1g i.Jrl'ormatiol'1 of its comme11tary

Scliroder MPF Capital Guarm1teed Portfolio

- OrdinaryClass - Class B Launch date: 1st December 2000

Performance Target (Note 1)

Deviation from t11e performai1ce target - OrdinaryClass

- Class B

Trustee commentary

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Annualized return (in terms of%) Since

1 year

-1.1096

Outperform

Outperform

5 years

0.92% 1.22%

0.60%

Outperform

Outperform

10 years

1.80%

Outperform

Outperform

Launch

N/A

N/A

N/A

According to the Investment Manager, the performance of the fund was mainly attributable to the following factors:

The US Federal Reserve raised policy rates during the September 2018 meeting, meeting market expectation. Implementation of tariffs by the US on China was an unexpectedly milder. 10 years US Treasuries rose to over 3% on better sentiment to end of the month at 3.06%. Although negative rise sentiment persisted to weigh on markets, it wi1l be partia1ly offset by the robust growth in most economies.



3 Trustee's comme11tary 011 ru1alysis of the Divestments l1eld by tl1e Scl1en1e a11d supportlltg information of its commentary ( Co11tinued)

Scln"oder MPF Conservative Portfolio - Ordinary Class - Class B Launch date: 1st December 2000

Performance Target (Note 1) DeTI.ation from tlte performru1ce target - OrdinaryClass

- Class B

Trustee commentary

Schroder MPF RMB and HKD Fixed h1come Portfolio

- Ordinary Class - C1ass B Launch date: 1st December 2000

Performru1ceTarget (Note 2) Deviati.011 from tl1e performaJ1ce target

- Ordinary Class

- Class B

Tnlstee conunentary

RESTRICTED

Annualized return (in terms of%} Since

iyear 5 years 10 years Launch

0.00% 0.04% 0.06% 0.72% 0.00% 0.00% 0.04% 0.73%

0.08% 0.06% 0.09% N/A

Under- Under- Under- N/A perform perform perform


Given the operation of section 37 of the Mandatory Provident Fund Schemes (General) Regulation, the return of the fund has underperformed as compared to the market median as the prescribed savings rate remains relatively steady at around 0.007% since June 2009.

Alu1ualized retur11 (in terms of%)

1year 5 years 10 years Since Launch

-0.45% 0.72% 0.84% 1.54% -0.29% 0.89% 1.08% 1.81%

1.20% 2.60% 3.10% N/A



According to the information provided by the Investment Manager, the performance of the fund was mainly attributable to the following factors:

Owing to the depreciation of CNH against the Hong Kong Dollar, the currency allocation detracted from performance especially from the CNH allocation The above detractment was offset by the following factors:

The fund benefited from its overvveight duration bias, particularly from the overweight to the 2-

year duration bucket of the CNH Chinese sovereign curve, where yields fell. The sector allocation, especially the allocation to corporates, contributed positively to the fund.



3 Trustee's collllne11tary 011 w1alysis of the investments l1eld by tl1e Scheme a11d supporting informatio11 of its commentary (Co11ti11ued)

Schroder MPF Capital Stable Portfolio - Ordinary Class - ClassB La.unch date: 1st December 2000


Deviatio11 from tlte performru1ce target - Ordinary Class

- Class B

Trustee comme11tary

RESTRICTED

Alu1ualized rehlr11 (in terms of%) Since

1 year 5 years 10 years Launch

-0.81% i.35% 2.55% 2.62% -0.60% 1.56% 2.85% 2.89%

-0.10% 1.70% 3.10% N/A



According to the information provided by Investment Manager, the performance of the fund was mainly attributable to the following factors:

The global expansion continues to be led by the US with European growth stabilising but remaining slower than some had envisaged. Rising global bond yields have reflected this, especially in the US, where further rate hikes are being embedded into valuations. Government bond yields broadly rose over the quarter due to positive economic data, particularly from the US. This drives down the valuation ofbonds. The performance of the fund was partly compensated by the rise in equity markets has primarily been attributable to continued corporate earnings momentum and a benign economic backdrop.



3 Trustee's comme11tary 011 ru1alysis of tl1e iI1vestme11ts l1eld by tl1e Scheme and supporti.J.1g iI1formatio11 of its comme11tary (Co11ti.J.1ued)

Schroder MPF Stable Growth Portfolio - Ordinary Class - Class B Launch date: 1st December 2000


Deviati.011 from the performru1ce target - OrdinaryClass

- Class B

Trustee commentary

RESTRICTED


1year 5 years 10 years Launch

0.33% 2.89% 4.11% 3-49% 0.52% 3.11% 4.41% 3.74%

1.00% 3.20% 4.20% N/A

Under- Under-. Under- N/A perform perform perform

Under- Under- Out- N/A perform perform perform

According to information provided by Investment Manager, the performance of the fund was mainly attributable to the following factors:

The global expansion continues to be led by the US with European gro\.\'th stabilising but remaining slower than some had envisaged. Rising global bond yields have reflected this, especially in the US, where further rate hikes are being embedded into valuations Government bond yields broadly rose over the quarter due to positive economic data, particularly from the US. This drives down the valuation of bonds. The performance of the fund was partly compensated by the rise in equity markets has primarily been attributable to continued corporate earnings momentum and a benign economic backdrop.



3 Trustee's coinmentary on ru1alysis of tl1e iI1vestrne11ts held by the Scl1eme a11d supportb1g i.J1formatio11 of its comme11tary (Co11ti11ued)

Schroder MPF Balanced Iuvesbnent Portfolio

- Ordinary Class - Class B Launch date: 1st December 2000


Deviati.011 from tlte performance target - Ordinary Class

- Class B

Trustee conune11tary

RESTRICTED

Alu1ualized retur11 (i11 terms of%) 'Since


1.60% 443% 5.51% 4.23% 1.83% 4.64% 5.79% 444%

2.40% 4.40% 5.20% N/A

Under- Out- Out- N/A perform perform perform



The global expansion continues to be led by the US with European growth stabilising but remaining slower than some had envisaged. Rising global bond yields have reflected this, especially in the US, where further rate hikes are being embedded into valuations. Government bond yields broadly rose over the quarter due to positive economic data, particularly from the US. This drives dovm the valuation of bonds. The performance of the fund was partly compensated by the rise in equity markets has primarily been attributable to continued corporate earnings momentum and a benign economic backdrop.



3 Trustee's comme11tary on a:nalysis of tl1e invesbne11ts l1eld by tlte Scheme and supporting i:nformatio11 of its com1ne11tary (Co11tinued)

Schroder MPF Growth Portfolio - OrdinaryClass - Class B La.unch date: 1st December 2000

Performru1ce Target (Note 1)

Deviation from tlte perfornuu1ce target - OrdinaryC!ass

- Class B


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2.74% 5.87% 6.89% 4.94% 2.92% 6.08% 7.16% 5.11%

340% 5.50% 5.60% N/A



According to iriformation provided by Investment Manager, the performance of the fund was mainly attributable to the following factors:

The global expansion continues to be led by the US with European growth stabilising but remaining slower than some had envisaged Rising global bond yields have reflected this, especially in the US, where further rate hikes are being embedded into valuations. Government bond yields broadly rose over the quarter due to positive economic data, particularly from the US. This drives down the valuation of bonds. The performance of the fund was partly compensated by the rise in equity markets has primarily been attributable to continued corporate earnings momentum and a benign economic backdrop.



3 Trustee's comme11tary 011 ru1alysis of tl1e i.J:1vestme11ts l1eld by tl1e Scheme a11d supporting iliformatio11 of its commentary (Co11ti11ued)

Schroder MPF h1ten1atio11al Portfolio - Ordinary Class - ClassB Launch date: 1st December 2000


Deviation from the performance target - Ordinary Class

- Class B

Trustee commentary

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Almualized return (in terms of%) Since


7.36% 7.72% 7.02% 2.89% 7.58% 7-93% 7.35% 3.31%

7.30% 6.80% 6.10% N/A

Out- Out- Out- N/A perform perform perform



The rise in equity markets has primarily been attributable to continued corporate earnings momentum arid a benign economic backdrop. Lead indicators of economic growth and business profits in international economies remain quite strong, and central bank monetary policy remains largely expansionary.



3 Trustee's commentary 011 analysis of tl1e i.J.1vestme11ts l1eld by the Scl1eme and supporti.J1g iliformatio11 of its comme11tary (Co11tinued)

Scliroder MPF Asian Portfolio - Ordinary Class - Class B Launch date: 1st December 2000


Deviation from tlte performance target - OrdinaryC!ass

- Class B


RESTRICTED -45-

Almualized return (in terms of%) Since


-0.80%

Outperform

Outperform

5.40%

Outperform

Outperform

7.70%

Outperform

Outperform

N/A

N/A

N/A


Korean memory stocks' valuations were attractive although ns1ng capital expenditure implies that memory pricing has likely peaked. Chinese internet companies continued to see strong revenue growth. However pressure on profitability is becoming more visible from the investments being made to incubate future growth in newer areas. For financials, whilst interest rate expectation has been dented recently, it was believe that select financials across the region will continue to deliver steady earnings.



3 Trustee's conune11tary on ru1alysis of tl1e h1vestme11ts held by tl1e Scheme and supporth1g htformation_ of its comme11tary (Continued)

Schroder MPF Hong Kong Portfolio - OrdinaryClass - Class B La.unch date: 1st December 2000


Deviatio11 from t11e performru1ce target - OrdinaryClass

- Class B

Trustee connne11tary

RESTRICTED

A:1111ualized return (in terms of%) Since

I year 5 years 10 years Launch

0.05% 5.87% 741% 7.52% 0.26% 6.08% 7.66% 7.78%

0.10% 5.60% 6.80% N/A




Fund exposure was balanced between those companies that have outgrown the relatively mature Hong- Kong economy and were delivering· attractive growth from their regional or global footprints - banks, insurance companies, conglomerates, manufacturing businesses etc. The continued uptrend in US and Hong Kong Dollar interest rates was supporting margins and revenues for some of the financial names and should underpin healthy earnings this year.



3 Trustee's comme11tary 011 rutalysis of tlte i.J1vestme11ts l1eld by the Scheme a11d support:iJ1g informatio11 of its comme11tary (Co11ti11ued)


- Ordinary Class - Class B Launch date: i3th January 2014 Performance Target (Note 1)

Deviation from tlte performance target - Ordinary Class

- Class B

Trustee cornme11tary

RESTRICTED -47-


1 year 5 years io years Launch

-3.03% N/A N/A -0.89% -3.oi% N/A N/A -1.46%

-2.30% N/A N/A N/A

Under- N/A N/A N/A perform

Under- N/A N/A N/A perform

According to the Investment Manager, the performance of the fund was mainly attributable to the following factors:

Government Bond Yields broadly rose due to positive economic data, particularly from the US. This drives down the valuation ofbonds. The global expansion continues to be led by the US with European Growth stabilising but remaining slower than some had envisaged. Rising global bond yields have reflected this, especially in the US, where further rate hikes are being embedded into valuations. Escalating trade tensions contributed to the softness of global manufacturing indicators earlier in the year.



3 Trustee's comme11tary 011 m1alysis of the i.J:1vesbne11ts ]1eld by tl1e Scheme a11d supporti.11g htfor1natio11 of its commentary ( Co11ti.J.1ued)

Sclll'oder MPF Core Accumulati.011 Fmtd Launch date: 1st April 2017 Performru1ce Target (Note 3)

Deviation from the performance target


Schroder MPF Age 65 Plus Fw1d Launch date: 1st April 2017 Performance Target (Note 3)

Deviation from t11e perforn1ance target

Trustee conunentary

RESTRICTED -48 -



5.00% N/A N/A 6.05%

5.30% N/A N/A 7.59%

Under- N/A N/A Under-perform perform

The performance of the fund was slightly below that of the reference portfolio.



0.69%

Underperform

N/A

N/A

N/A

N/A

N/A

N/A

1.20%

2.28%

Underperform

The performance of t~e fund was slightly below that of the reference portfolio.



4 Trustee's perfor1nance assessme11t fran1ework a11d trustee's actio11, if any, to increase efficiency oftl1e scl1em.e aitd i11vestme11t return (value) for members

The Trustee has an Investment Committee represented by members of the Board of Directors of the Trustee to review the Investment Managers' fund performance on a regular basis. The criteria for assessment of the overall performance and capabilities of the Investment Manager are :-

Compliance with Investment Objectives tracking error from benchmark performance and benchmark asset allocation

Breaches in investment restrictions and other regulations

Quantitative assessment - Fund performance relative to benchmark, peer comparison and risk level

Note 1: The performance target represents the market median provided in the Willis Towers Watson MPF Performance Book ('WfW') as of 30 September 2018.

Note 2: No comparative figures provided by WfW as the investment objective of the fund is different from other funds in the category. The performance of the fund is compared against the internal benchmark of the Investment Manager.

Note 3: The performance target represents the performance of the reference portfolio during the period.

RESTRICTED -49 -



5 Distribution of constitue11t funds

As at 30th September 2018, 2017 and 2016, the contributions received were allocated to the Scheme's constituent funds as follovvs:

Schroder MPF Capital Guaranteed Portfolio

Schroder MPF Conservative Portfolio Schroder MPF RMB and HKD Fixed Income Portfolio

Schroder MPF Capital Stable Portfolio Schroder MPF Stable Growth Portfolio Schroder MPF Balanced Investment Portfolio

Schroder MPF Growth Portfolio Schroder MPF International Portfolio Schroder MPF Asian Portfolio Schroder MPF Hong Kong Portfolio Schroder MPF Global Fixed Income Portfolio

Schroder MPF Core Accumulation Fund Schroder MPF Age 65 Plus Fund


Schroder MPF Conservative Portfolio Schroder MPF RMB and HKD Fixed Income Portfolio

Schroder MPF Capital Stable Portfolio Schroder MPF Stable Growth Portfolio Schroder MPF Balanced Investment Portfolio

Schroder MPF Growth Portfolio Schroder MPF International Portfolio Schroder MPF Asian Portfolio Schroder MPF Hong Kong Portfolio Schroder MPF Global Fixed Income Portfolio

Schroder MPF Core Accumulation Fund Schroder MPF Age 65 Plus Fund

RESTRICTED

2018 HK$

76,710,742 81,988,679

54,151,389 87,419,724

146,181,316

286,045,124 188,924,007 183,514,604 288,932,677

. 287,073,865

12,360,744 67,760,930

8,389,278

1,769,453,079

Net asset value 2017

HK$

65,212,319 66,984,123

47,s20,291 76,900,472

143,229,877

282,118,349 186,337,653 171,013,740

304,004,599 303,246,921

8,757,548 47,403,325 3,829,688

1,706,358,905

2016 HK$

53,418,894 60,231,321

46,792,597 69,182,141

126,586,566

276,712,834 155,438,i 70 140,138,393 253,505,714

245,680,843

96 of the total investments of the Scheme 2018 2017 2016

% % %

4.34 3.82 3.73 4.63 3.93 +20

3.06 2.77 3.27 4.94 4.51 +83 8.26 8.39 8.83

16.17 16.53 19.31 10.68 10.92 10.85 10.37 10.02 9.78 16.33 17.82 17.69 16.22 17.77 17.14

0.70 0.51 0.37 3.83 2.78 0.47 0.23

100.00 100.00 100.00

-50 -



6 b1vestme1"1t portfolio ru:1d moveme11ts of htvestment portfolio

6.1 Invest1ne11t portfolio as at 3otl1 September 2018

Fair % of net Holdings value asset value

HK$

Scl1roder MPF Capital Guaranteed Portfolio

FWD MPF Capital Guaranteed Policy 3,647.432 76,851,398 100.18

Total investments at cost 69,943,590

Schroder MPF RMB and HKD Fixed htcome Portfolio

Schroder Institutional Pooled Funds - RMB and HKD Fixed Income Fund 3,749,188 56,360,411 104.08


Schroder MPF Capital Stable Portfolio

Schroder MPF Umbrella Fund - Schroder MPF Capital Stable Fund 4,379,396 85,748,579 98.09


Scl1roder MPF Stable Growth Portfolio

Schroder MPF Umbrella Fund - Schroder MPF Stable Growth Fund 6,556,178 148,104,065 101.32

Total investments at cost 119)023,676

RESTRICTED - 51 -



6 Investme11.t portfolio and moveme11ts of iI1vestme11t portfolio (Co11tinued)

6.1 h1vestme11.t portfolio as at 30th September 2018 (Co11ti:l1ued)

Fair % of net Holdings value asset value

HK$

Schroder MPF Balanced htvestment Portfolio

Schroder MPF Umbrella Fund - Schroder MPF Balanced Investment Fund 11,315,056 286,384,075 100.12


Scl1roder MPF Growt11 Portfolio Schroder MPF Umbrella Fund - Schroder MPF Growth Fund 6,669,789 189,155,212 100.12


Scltroder MPF h1ternatio11al Portfolio

Schroder MPF Umbrella Fund - Schroder MPF International Fund 8,828,574 183,722,619 100.11

Total investments at cost u5,772,888

Scl1roder MPF Asian Portfolio Schroder MPF Umbrella Fund - Schroder MPF Asian Fund 5,73i,249 289,256,135 100.11


Schroder MPF Hong Kong Portfolio Schroder Institutional Pooled Funds - Hong Kong Equity Fund 4,581,518 284,716,157 99.18


RESTRICTED -52 -



6 b1vestmel'1t portfolio ru1d moveme11ts of i.J1vestme11t portfolio (Co11ti11ued)

6.1 h1vestmel'1t portfolio as at 3otl1 Septe1nher 2018 (Co11tit1ued)

Schroder MPF Global Fixed I11come Portfolio

Schroder Institutional Pooled Funds - Global Bond Fund

Total investments at cost

Scl1roder MPF Core Accumulation Fund

Schroder MPF Umbrella Fund - Schroder MPF Core 60/ 40 Fund


Schroder MPF Age 65 Plus Fm1d Schroder MPF Umbrella Fund -Schroder MPFCore 20/80 Fund


Holdings

775,448

6,012,590

Fair value HK$

7,760,539

% of net asset value

99.55

99.38

Note: Investments are accounted for on a trade date basis. The underlying approved pooled investment funds were established in Hong Kong.

RESTRICTED - 53 -



6 htvestment portfolio aitd move1ne11ts of iI1vestme11t portfolio (Conti11ued)

6.2 Moveme11ts i.J.1portfolio11olclings for tl1e year e11ded 30th September 2018

30th 30th September September

2017 2018 Holdings Additions Disposals Holdings


FWD MPF Capital Guaranteed Policy 3,121,658 1,050,298 524,524 3,647,432

Schroder MPF RMB and HKD Fixed J11come Portfolio

Schroder Institutional Pooled Funds - RMB and HKD Fixed Income Fund 3,147,649 1,277,346 675,807 3,749,188


Schroder MPF Umbrella Fund - Schroder MPF Capital Stable Fund 3,93i,791 979,378 531,773 4,379,396

Schroder MPF Stable Growth Portfolio

Schroder MPF Umbrella Fund - Schroder MPF Stable Growth Fund 6,433,285 992,543 869,650 6,556,i78

Schroder MPF Balanced Investment Portfolio

Schroder MPF Umbrella Fund - Schroder MPF Balanced Investment Fund 11,457,334 1,225,228 1,367,506 11,315,056

Schroder MPF Growth Portfolio Schroder MPF Umbrella Fund - Schroder MPF Growth Fund 6,829,744 679,092 839,047 6,669,789

Schroder MPF futernational Portfolio

Schroder MPF Umbrella Fund - Schroder MPF International Fund 8,922,632 936,624 1,030,682 8,828,574

Schroder MPF Asian Portfolio Schroder MPF Umbrella Fund - Schroder MPF Asian Fund 6,059,129 627,028 954,908 5,731,249

RESTRICTED -54-



6 h1vestn1ent portfolio rutd moveme11ts ofiJ1vestme11t portfolio (Continued)

6.2 Moveme11ts iI1 portfolio l1oldi11gs for tl1e year en.ded goth September 2018 (Continued)

30th 30th September September

2017 2018 Holdings Additions Disposals Holdings


Schroder Institutional Pooled Funds - Hong Kong Equity Fund 4,922,242 729,195 1,069,919 4,581,518

Schroder MPF Global Fixed h1come Portfolio

Schroder Institutional Pooled Funds - Global Bond Fund 538,735 473,102 236,389 775,448

Schroder MPF Core Accumulation Fund

Schroder MPF Umbrella Fund - Schroder MPF Core 60/ 40 Fund 4,453,952 2,332,987 774,349 6,012,590

Schroder MPF Age 65 Plus Fund Schroder MPF Umbrella Fund - Schroder MPF Core 20/80 Fund 369,248 614.485 236,809 746,924

RESTRICTED -55 -



7 Performa11ce table

7.1 Schroder MPF Capital Guaranteed Portfolio

Net loss excluding capital appreciation/ (depreciation)

Capital appreciation/( depreciation) - realised and unrealised 1

Value of scheme assets derived from investments

Total net asset value

Net asset value per unit 2

Ordinary Class Class B

Frmd expense ratio Ordinary Class Class B

Transaction costs Ordinary Class ClassB

2018 HK$

(668,054)

346,827

76,851,398

76,710,742

16.46 17.35

i.96% i.77%

2017 2016

HK$ HK$

(469,804) (476,497)

1,434,170 2,272,646

65,367,528 53,344,954

65,212,319 53,418,894

16.53 16.30 17.38 17.11

Performance record for the past 10 years/year of inception

Highest Lowest issue price redemption price Net annualised

per rmit per unit investment return 3

Ordinary Ordinary Ordinary Class Class B Class Class B Class Class B HK$ HK$ HK$ HK$ % %

2018 16.94 17.83 16.35 17.23 (0.4) (0.2) 2017 16.61 17.47 15.76 16.55 1.4 1.6 2016 16.35 17.17 15.57 16.33 3.3 3.5 2015 16.66 17.44 14.04 14.68 9.7 9.8 2014 14-84 15.49 14.39 15.05 (3.1) (2.8) 2013 15.63 16.27 14.63 15.25 (4.5) (4.2) 2012 15.55 16.17 14.91 15.46 3.6 3.9 2011 15.51 16.04 14.98 15.50 (1.4) (1.1) 2010 15.23 15.75 14.51 14.98 4.8 5.1 2009 14.56 15.01 13.26 13.66 5.7 5.9

= -- =

The constituent fund is a feeder fund which invests in an approved pooled investment fund.

2 The net asset value per unit has been rounded down to the next complete cent in accordance with the Trust Deed of the Scheme.

3 The net annualised investment return is calculated by comparing the net asset value per unit at the end of the year against the net asset value per unit at the beginning of the year.

RESTRICTED - 56 -



7 Performa11ce table (Co11t:iJ:1ued)

7.2 Schroder MPF Co11servative Portfolio

Net income excluding capital appreciation/ (depreciation)

Income derived from investments Interest on bank deposits




Fund expense ratio Ordinary Class Class B

Transaction costs Ordinary Class Class B

2018

HK$ 2017 HK$

4.470

360,444

2016 HK$

3,995

60,231,321

Performance record for the past 1 o years/year of inception

2018 2017

2016 2015 2014 2013 2012

2011

2010

2009

Highest issue price

per unit Ordinary

Class HK$

Class B HK$

11.36 11.38 11.36 11.38 11.36 11.38 11.36 11.38 11.35 11.38 11.34 11.39 11.34 11.38 11.35 11.39 11.35 11.39 11.35 11.39

Lowest redemption price

per unit Ordinary

Class HK$

11.36 11.36 11.36 11.35 11.34 11.34 11.34 11.34 11.34 11.29

Class B HK$

11.38 11.38 11.38 11.38 11.38 11.38 11.38 11.38 11.38 11.34

Net annualised investment return 2


% %

0.1 0.1

0.1

The net asset value per unit has been rounded down to the next complete cent in accordance with the Trust Deed of the Scheme.


RESTRICTED -57-



7 Performance table (Continued)

7.3 Schroder MPF RMB and HKD Fixed Income Portfolio







Fund expense ratio Ordinary Class ClassB


2018 HK$

(516,479)

56,360,411

54,151,389

2017 2016 HK$ HK$

(383,814) (393,699)

1,117,324 9i,765

47,025,253 46,174,607

47,320,291 46,792,597

13.20 13.01 13.82 13.59


2018 2017

2016 2015

2014 2013 2012

2011

2010

2009

Highest issue price

per unit Ordinary

Class HK$

Class B HK$

13.71 14.36 13.38 14.01 13.i6 13.74 13.18 13.73 12.88 13.42 13.16 13.67 13.14 13.62 13.11 13.55

12.88 13.27 12.56 12.86


per unit Ordinary

Class HK$

13.09 12.63 12.81 12.82 12.58 12.45 12.86 12.36 12.20

12.03

Class B HK$

13.72 13.20

13.37 13.35 13.09 12.95 13.30 12.75 12.54 12.35


Ordinary Class

%

(0.5) 1.5

(0.7) 2.4 1.0

(3.2) 0.5 1.6 4.0 2.1

Class B %

(0.3) 1.7

(o.6) 2.5 1.2

(3.0) 0.9 1.9 4-3 2.3


2 The net asset value per unit has been rounded dovvn to the next complete cent in accordance with the Trust Deed of the Scheme.


RESTRICTED - 58 -




7.4 Schroder MPF Capital Stable Portfolio

2018 2017 2016 HK$ HK$ HK$

Net loss excluding capital appreciation/ (depreciation) (742,365) (609,973) (554,192)

Capital appreciation/(depreciation) - realised and unrealised 1 (137,544) 3,619,308 3,742,420

Value of scheme assets derived from investments 85,748,579 76,905,824 69,108,480

Total net asset value 87,419,724 76,900,472 69,182,141


Ordinary Class 15.85 15.98 15.39 Class B 16.63 16.73 16.09

Fund expense ratio Ordinary Class 1.79% Class B 1.59%




per unit per unit investment return 3


2018 16.88 17.68 15.76 16.53 (o.8) (o.6) 2017 16.15 16.91 14.60 15.27 3.8 4.0 2016 15.50 16.20 14.36 14.99 4.8 5.1 2015 15.67 16.32 14.62 15.25 (2.9) (2.7) 2014 15.47 16.09 14.79 15.38 2.1 2.3 2013 15.18 15.74 14.33 14.88 1.0 1.4 2012 14.67 15.18 13.39 13.79 8.2 8.7 2011 14.65 15.06 13.53 13.93 (4.8) (4.3) 2010 14.24 14.60 13.20 13.49 6.8 7.3 2009 13.36 13.64 11.21 11.47 8.2 8.3




RESTRICTED - 59 -



7 Perfor1nai1ce table (Co11ti.J.1ued)

7.5 Schroder MPF Stable Growth Portfolio









2018 HK$

(1,265,317)

1,804,813

148,104,065

146,181,316

18.45 19.24

i.74% 1.54%


Highest Lowest

2017

HK$

(1,149,047)

12,598,003

143,462,256

143,229,877

18.39 19.14

2016 HK$

(963,375)

8,635,410

126,400,509

126,586,566

16.97 17.63

issue price redemption price Net annualised per unit per unit investment return 3


2018 19.96 20.78 18.20 18.98 0.3 0.5 2017 18.55 19.30 16.26 16.89 8.4 8.6 2016 17.14 17.79 15.38 15.95 6.6 6.8 2015 17.56 18.18 15.79 16.37 (4.0) (3.7) 2014 17.09 17.67 15.95 16.48 3.6 3.8 2013 16.31 16.81 15.19 15.63 4.0 4.4 2012 15.42 15.85 13.44 13.76 12.3 12.8 2011 15.49 15.82 13.63 13.95 (6.1) (5.6) 2010 14.6! 14.88 13.22 13.45 8.1 8.5 2009 13.57 13.77 !0.23 10.46 9.5 9.5




RESTRICTED - 60 -



7 Performa11ce table (Co11tinued)

7.6 Scliroder MPF Balru1ced h1vestment Portfolio









2018

HK$

(2,434,947)

7,321,382

286,384,075

286,045,124

20.92 21.69

1.73% i.53%


Highest Lowest

2017

HK$

(2,492,472)

38,380,747

282,652,422

282,118,349

20.58 21.30

2016

HK$

(2,i57,954)

23,606,955

276,533,962

276,712,834

18.19 18.79

issue price per unit

Ordinary

redemption price per unit

Ordinary


Ordinary Class HK$

2018 22.92 2017 20.76 2016 18.40 2015 19.18 2014 18.40 2013 17.17 2012 15.79 2011 16.15 2010 14.83 2009 13.67

Class B HK$

23.74 21.48 19.01 19.76 18.93 17.62 16.14 1641 15.03 13.80

Class HK$

20.45 17.54 15.92 16.59 16.76 15.45 13.20

13.46 13.06 9.22

Class B HK$

21.21

18.12

16.42 17.10

17.22

15.81 13.44 13.70 13.21 9.42

Class %

1.7 13.1

8.3 (5.1) 5.0 7.1

15.8 (8.3) 9.3

10.8

Class B %

1.8 13.4 8.6

(4.9) 5.3 7.5

16.3 (7.9) 9.6

10.9




RESTRICTED - 61 -




7.7 Schroder MPF Growth Portfolio



Value of scheme assets derived from· investments






2018 HK$

(1,637,517)

7,143,618

189,155,212

188,924,007


Highest Lowest

2017 2016 HK$ HK$

(1,490,138) (1,191,327)

30,392,302 15,490,424

186,725,189 155,642,089

186,337,653 155.438,170

23.00 19.49 23.62 19.98

issue price per unit

Ordinary


Ordinary


Ordinary Class HK$

2018 26.27 2017 23.19 2016 19.76 2015 21.01

2014 19.83 2013 18.24 2012 16.34 2011 16.92 2010 15.27 2009 13.88

Class B HK$

26.99 23.82 20.25 21.47 20.24

18.85 16.58 17.06 15.36 13.91

Class HK$

22.91 18.85 16.46 17.43 17.61 15.97 13.01

13.37 13.10 8.46

Class B HK$

23.57 19.33 16.85 17.83 17.95 16.22 13.14 13.51 13.15 8.61

=

Class %

2.7 18.0 10.1

(6.3) 6.3 9.3

20.0

(11.2) 11.4 12.9

Class B %

2.9 18.2 10.4 (6.1) 6.5 9.6

20.6 (10.8)

11.6 12.8

=



3 The net annualised investment return is calculated by comparing the net asset value per unit at the end of the year againstt.he net asset value per unit at the beginning of the year.

RESTRICTED - 62 -




7.8 Scl1roder MPF I11ter11atio11al Portfolio


Capital appreciation/(depreciation) - realised and unrealised '







2018 HK$

(1,497,111)

183l722,619

183,s14,604

16.62 17.88


Highest Lowest

2017 2016 HK$ HK$

(1,333,930) (1,076,270)

25,756,878 13,959,895

171,314,540 140,369,393

171,013,740 140,138,393

1548 13.26 16.62 14.20

issue price redemption price Net annualised per unit per unit investment return 3

Ordinary Ordinary Ordinary Class Class B Class Class B Class ClassB HK$ HK$ HK$ HK$ % %

2018 17.45 18.74 15.56 16.71 7-4 7.6 2017 15.48 16.62 12.75 13.67 16.7 17.0 2016 13.44 14.40 11.38 12.18 10.1 10.3 2015 13.71 14.65 11.82 12.64 (4.8) (4.6) 2014 12.97 13.84 11.64 12.40 10.4 10.6 2013 11.70 12.46 9.36 9.94 17.4 18.0 2012 9.93 10.54 7.96 8.41 19.5 19.9 2011 10.19 10.74 8.08 8.53 (6.6) (6.2) 2010 9.14 9.59 7.82 8.21 4.9 5.3 2009 8.45 8.85 5.15 5.52 (1.1) (o.8)




RESTRICTED - 63 -




7.9 Schroder MPF Asian Portfolio


Capital appreciation/(depreciation) - realised and unrealised 1






Transaction costs Ordinary Class ClassB

2018 HK$

(2,553, 723)

2,237,895

289,256,135

288,932,677

41.93 43.09

I.82% i.62%

2017 HK$

(2,361,726)

53,537,863

304,652,991

304,004,599

42.17 43.24


Highest Lowest issue price redemption price

2016

HK$

(1,886,253)

32,074,053

253,387,388

253,505,714

35.12 35.94

Net annualised per unit per unit investment return 3


2018 48.60 49.86 40.74 41.86 (o.6) (0.3) 2017 43.29 44.38 31.97 32.74 20.1 20.3 2016 35.71 36.54 27.99 28.61 13.1 13.3 2015 37.87 38.64 30.04 30.67 (7.1) (7.0) 2014 35.57 36.24 29.56 30.09 8.7 9.0 2013 32.79 33.32 28.44 28.91 I.9 2.2 2012 30.20 30.61 23.56 23.76 21.5 22.1

2011 31.93 32.19 23.83 24.04 (11.9) (11.5) 2010 28.20 28.32 23.15 23.21 15.4 15.8 2009 24.58 24.61 11.95 12.21 28.9 28.4

=




RESTRICTED - 64 -



7 Performai1ce table (Con:tit1ued)

7.10 Schroder MPF Hong Kong Portfolio


Capital appreciation/(depreciation) - realised and unrealised 1







2018

HK$

(2,527,i79)

4,977,242

284,716,157

287,073,865

36.43 38.04

1.69% 1.49%

Perlormance record for the past 10 years/year of inception

Highest Lowest

2017 HK$

(2,346,551)

61,976,088

302,817,808

303,246,921

36.40 37.94

2016 HK$

(1,794,415)

29,321,446

245,103,622

245,680,843

29.35 30.53

issue price per nnit

Ordinary


Ordinary


Ordinary Class HK$

2018 43.74 2017 37.37 2016 30.30 2015 34.82 2014 30.76 2013 28.85 2012 25.69 2011 29.07 2010 26.50 2009 23.15

Class B HK$

45.61 38.94 31.51 36.12 31.86 29.75 26.38 29.69 27.04 23.55

Class HK$

34.01 27.78 23.10

25.91 26.18 24.41 19.37 20.58 21.65 11.44

Class B HK$

35.51 28.91 24.00 26.90 27.08 25.22 19.86 21.10

22.06 n.85

Class %

0.1 24.0 n.9 (6.6) 2.6 8.6

20.4 (21.0) 18.9 25.0

Class B %

0.3 24.3 12.1

(6.4) 2.8 9.1

21.0

(20.7) 19.2 24.7


2 The net asset value per unit has been rounded dovvn to the next complete cent in accordance with the Trust Deed of the Scheme.

3 The net annualised investment return is calculated by comparing the net asset value per w1it at the end of the year against the net asset value per unit at the beginning of the year.

RESTRICTED - 65 -



7 Performa11.ce table (Co11ti.J.1ued)

7.i1 Schroder MPF Global Fixed Income Portfolio

Net loss excluding capital appreciation/(depreciation)








RESTRICTED - 66 -

2018 HK$

(103,321)

12,304,649

12,360,744

9.59 9.33

1.11% 1.05%

2017 2016 HK$ HK$

(116,851) (30,722)

34,681 222,093

8,694.475 5,158,438

8,757,548 5,329,697

9.85 10.09 9.57 9.81




7.11 Schroder MPF Global Fixed Income Po1'1folio (Continued)


2018 2017

2016 2015

Highest issue price

per unit Ordinary

Class HK$

Class B HK$

10.13 9.85 10.12 9.84 10.17 9.88 10.07 9.76

2014 (Year of inception) 4 10.12 9.85 =


per unit Ordinary

Class HK$

9.59 9.28 9.46 9.52 9.78

Class B HK$

9.33 9.02 9.18 9.24 7.97



% %

(2.6) (2.5) (2.4) (2.4) 5.1 5.3

(3.3) (3.1) (o.6) (3.7)


2 The net asset value per unit has been rounded do'W!l to the next complete cent in accordance "1th the Trust Deed of the Scheme.

3 The net annualised investment return is calculated by comparing the net asset value per unit at the end of the year against the net asset value per unit at the beginning of the year. For the first financial period (13th January 2014 to 30th September 2014 for Ordinary Class and 29th January 2014 to 30th September 2014 for Class B), the initial offer price (HK$10.oo for Ordinary Class units and HK$10.oo for Class B units) is used and the actual net investment return is shown vvithout annualisation.

4 Pursuant to the Notice to Unitholders issued by the Trustee of Schroder MPF Global FIXed Income Portfolio (the "Affected Fund"), the net asset value ("NAV") per unit of the Affected Fund during the period from 13th January 2014 to 12th February 2014 (the "Affected Period'') was understated. The remedial action had been taken by the Trustee to ensure the interests of the unitholders in the Affected Fund would not have been affected.

RESTRICTED - 67 -




7.12 Schroder MPF Core Accumulatio11 Flll1d2


Capital appreciation/(depreciation) - realised and unrealised i



Net asset value per unit 3.4

Ordinary Class ClassB

Fund expense ratio

Transaction costs

RESTRICTED -68 -

2018 2017 HK$ HK$

(507,364) (190,050)

3,224,409 1,233,872

67,341,012 47,078,267

67,760,930 47,403,325

10.92 N/A N/A N/A 10.40

0.95%




7.12 Schroder MPF Core Accumulation Fund2 (Continued)



per unit per unit investment returns HK$ HK$ %

2018 4 11.20 10.43 5.0 2017 (Year of inception)

Ordinary Class Class B ' 10.42 9.96 4.0

=

i The constituent fund is a feeder fund which invests in an approved pooled investment fund.

2 The constituent fund was launched on ist April 2017.

s The net asset value per unit has been rounded down to the next complete cent in accordance with the Trust Deed of the Scheme.

4 Effective from 16th July 2018, Schroder MPF Core Accumulation Fund only has one class of units each and therefore not subject to any class. Prior to 16th July 2018, Schroder MPF Core Accumulation Fund only issued Class B units and those unitholders had become the unitholders of the single class of units on 16th July 2018.

s The net annualised investment return is calculated by comparing the net asset value per unit at the end of the year against the net asset value per unit at the beginning of the year. For the first financial period (5th of April 2017 (date of commencement of operations) to 30th September 2017) where the initial offer price of HK$10.oo for Class B units is used and the actual net investment return is shown without annualisation.

RESTRICTED - 69 -




7.13 Schroder MPF Age 65 Plus Fund2

Net loss excluding capital appreciation/(depreciation)




Net asset value per unit 3,4


Fund expense ratio

Transaction costs

RESTRICTED -70 -

2018 2017 HK$ HK$

(54,387) (14,555)

85,301 36,578

7,760,539 3,770,027

8,389,278 3,829,688

l0.18 N/A N/A N/A 10.11

0.95%




7.13 Schroder MPF Age 65 Plus Fund2 (Continued)



per unit per unit investment return s HK$ HK$ %

2018 4 10.33 10.10 0.7 2017 (Year of inception)

Ordinaiy Class Class B 10.19 9.98 1.1


2 The constituent fund was launched on 1st April 2017.

s The net asset value.per unit has been rounded down to the next complete cent in accordance with the Trust Deed of the Scheme.

4 Effective from 16th July 2018, Schroder MPF Age 65 Plus Fund only has one class of units each and therefore not subject to any class. Prior to 16th July 2018, Schroder MPF Age 65 Plus Fund only issued Class B units and those unitholders had become the unitholders of the single class of units on 16th July 2018.

5 The net annualised investment return is calculated by comparing the net asset value per unit at the end of the year against the net asset value per unit at the beginning of the year. For the first financial period (5th April 2017 (date of commencement of operations) to 30th September 2017) where the initial offer price of HK$10.oo for Class B units is used and the actual net investment return is shown without annualisation.

RESTRICTED - 71 -

INDEPENDENT AUDITOR'S REPORT TO THE TRUSTEE OF SUN LIFE MPF MASTER TRUST (THE "SCHEME")

Report 011 the Audit of tl1e Fb1a11cial Stateme11ts

Opi1rlo11

What we have audited

The financial statements of Sun Life MPF Master Trust (the "Scheme") and each ofits constituent funds, Schroder MPF ·Capital Guaranteed Portfolio, Schroder MPF Conservative Portfolio, Schroder MPF RMB and HKD Fixed Income Portfolio, Schroder MPF Capital Stable Portfolio, Schroder MPF Stable Growth Portfolio, Schroder MPF Balanced Investment Portfolio, Schroder MPF Growth Portfolio, Schroder MPF International Portfolio, Schroder MPF Asian Portfolio, Schroder MPF Hong Kong Portfolio, Schroder MPF Global Fixed Income Portfolio, Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund set out on pages 75 to 159, which comprise:

• the statement of net assets available for benefits of the Scheme ru1d the statement of financial position of each of its constituent funds as at 30th September 2018;

• the statement of comprehensive income of each of the constituent funds for the year then ended;

• the statement of changes in net assets available for benefits of the Scheme and the statement of changes in net assets attributable to members of each of its constituent funds for the year then ended;

• the statement of cash flows of the Scheme and each of its constituent funds for the year then ended; and

• the notes to the financial statements, which include a summary of significant accounting policies.

Our opinion

In our opinion, the financitil statements give a true and fair view of the financial position of the Scheme and each of its constituent funds as at 30th September 2018, and of their financial transactions and cash flov,rs for the year then ended in accordance \Vith Hong Kong Financial Reporting Standards ("HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA").

Basis for Opi11io11

We conducted our audit in accordance with Hong Kong Standards on Auditing C'HKSAs") and vv:ith reference to Practice Note 860.1 (Revised), "The Audit of Retirement Schemes" issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Scheme and each of its constituent funds in accordance vv:ith the HK!CPA's Code of Ethics for Professional Accountants (the "Code"), and we have fulfilled our other ethical responsibilities in accordance vv:ith the Code.

RESTRICTED -72 -


Report 011 tl1e Audit of tl1e Fi.J.1ancial Stateme11ts (Co11tinued)

Ot11er h1formatio11

The Trustee is responsible for the other information. The other information comprises all of the information included in the annual report other than the financial statements and our auditor's 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 \vhether 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 tl1e Trustee and Those Cl1arged witl1 Governance for the Finru1cial Statements

The Trustee is responsible for the preparation of the fmancial statements that give a true and fair view in accordance vvith HKFRSs issued by the HKICPA and for such internal control as the Trustee determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the fmancial statements, the Trustee is responsible for assessing the Scheme's and each of its constituent funds' ability to continue as a going concern, disclosing, as applicable, 1natters related to going concern and using the going concern basis of accounting unless the Trustee either intends to liquidate the Scheme and its constituent fW1ds or to cease operations, or has no realistic alternative but to do so.

In addition, the Trustee is required to ensure that the financial state1nents have been properly prepared in accordance vvith sections So1 S1, S3 and S4 of the Hong Kong Mandatory Provident Fund Schemes (General) Regulation (the "General Regulation").

Those charged vv:ith governance are responsible for overseeing the Scheme's and each of its constituent funds' financial reporting process.

Auditor's Responsibilities for tl1e Audit of tl1e FiI1a11cial 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 auditor's report that includes our opinion. We report our opinion solely to you, as a body, in accordance \\1th section 102 of the General Regulation, and for no other purpose. We do not a.._._smne responsibility tO\\•ards 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 fmancial statements of the Scheme and each of its constituent funds have been properly prepared, in all material respects, in accordance with sections So, S1, S3 and S4 of the General Regulation.

RESTRICTED - 73 -


Report 011 the Audit of tl1e FiJ.1a11cial Stateme11ts (Co11thlued)

Auditor's Respo11sibilities for tl1e Audit of tl1e Financial Stateme11ts (Co11tinued)

As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain professional skepticism 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 Scheme's and its constituent funds' internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Trustee.

• Conclude on the appropriateness of the Trustee's use of the going concern basis of accormting and, based on the audit evidence obtained, whether a material rmcertainty exists related to events or conditions that may cast significant doubt on the Scheme's and its constituent funds' ability to continue as a going concern. If we conclude that a material rmcertainty exists, we are required to draw attention in our auditor's 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 auditor's report. However, future events or conditions may cause the Scheme and its constituent 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 those charged with governance 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.

Report on matters m1der tl1e General Regulatio11

a. In our opinion, the financial statements of the Scheme and each of its constituent funds have been properly prepared, in all material respects, in accordance with sections So, 81, 83 and 84 of the General Regulation.

b. 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.

Pricewaterl1ouseCoopers Certified Public Accountants

Hong Kong, 271:h March 2019

RESTRICTED - 74 -


STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS - SCHEME AS AT 30TH SEPTEMBER 2018

Note 2018 HK$

Assets Current assets Bank balances 6(e) 15,145,057 Amounts receivable on redemption of units in constituent funds 8,305,239

Contributions receivable From employers 7,364,355 From members 4,556,929

Investments in constituent funds 3 1,769.453,079

Total assets 1,804,824,659

Liabilities Current liabilities Benefits payable 5,700,441 F9rfeitures payable 10,090,811 Severance payment payable 134,850 Transfers-out payable 4,025,865 Amounts payable on subscription of units in constituent funds 6,357,562

Other payables 297,200

Liabilities (excluding net assets available for benefits attributable to members) 26,606,729

Net assets available for benefits attributable to 1nembers 1, 778,217,930

2017 HK$

8,610,881

2,170,231

5,809,029 3,874,077

1,706,358,905

1,726,823,123

2,069,932 7,176,932

5,521,897

1,363,948 257,509

16,390,218

1,710,432,905

The financial statements were approved by the board of directors of HSBC Provident Fund Trustee (Hong Kong) Limited on 27th March 2019 and were signed on its behalf by:

4!&-~~.L .......... ..... .

The notes on pages 98 to 159 are an integral part of the financial statements.

RESTRICTED - 75 -


STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS - SCHEME FOR THE YEAR ENDED 30TH SEPTEMBER 2018

IJ1come Interest on bank deposits Net change in unrealised appreciation/ depreciation in value of investments in constituent funds

Net realised gain on redemption of units in constituent funds

Other income

Total investment income

Expenses Administrative and other expenses

NetiI1come

Contributio11s received and receivable From employers Mandatory Additional voluntary

From members Mandatory Additional voluntary

Contribution surcl1arge received mtd receivable

Trru1sfers~in

Individual transfers-in from other schemes

Benefits paid and payable Retirement Early retirement Permanent departure Death · Refund of additional voluntary contributions to

leavers Total incapacity

Note

8

9

2018 HK$

26

(42,i67,272)

68,833,538 2,638

26,668,930

5,699

26,663,231

38,854,409 50,298,990

37,i99,209 18,894,i63

145,246, 771

7,612

30,242,159

8,033,973 5,878,053

16,055,647 168,797


RESTRICTED

2017 HK$

24

174,841,208

42,317,966

217,159,i 98

5,569

217,153,629

38,04i,647 47,396,917

36,583,264 17,782,951

139,804,779

30,087

24,803,371

8,108,600 4,508,095 13,571,258

541,452

598,685 17,314

27,345,404


STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS - SCHEME (CONTINUED) FOR THE YEAR ENDED 30TH SEPTEMBER 2018

Trrutsfers-out Group transfers-out to other schemes Individual transfers-out to other sche1nes

Forfeitures

Severa11ce payments, long service payinents mid ot11ers

Cl1ange ht J'1et assets available for he11efits attributable to members

Net assets available for benefits attributable to members at tl1e begitu1ing oftl1e year - Members' accounts

Net assets available for be11efits attributable to members at tl1e e11d of tl1e year - Members' accounts

2018 HK$

25,616,873 69,100,800

94,717,673

6,738,998

1,710,432,905


RESTRICTED -77-

2017

HK$

75,86i,354

75,861354

3,652,943

273, 779,640


STATEMENT OF CASH FLOWS - SCHEME FOR THE YEAR ENDED 30TH SEPTEMBER 2018

2018 2017 HK$ HK$

Casl1 flows from operati11g activities Net income 26,663,231 217,153,629

Adjustments: - Interest on bank deposits (26) (24)

Operating profit before working capital changes 26,663,205 217,153,605 Increase in investments in constituent funds (63,094,174) (273,341,735) Increase in amounts receivable on redemption of units in constituent funds (6,135,008) (892,579)

Increase in amounts payable on subscription of units in constituent funds 4,993,614 437,061

Increase in other payables 39,691 17,331

Cash used in operations (37,532,672) (56,626,317) Interest received 26 24

Net casl1.used iJ1 operati.J1g activities (37,532,646) (56,626,293)

Casl1 flows from fu1a11ci.J.1g activities Contributions, transfers-in and others received 173,258,364 166,165,625 Benefits, transfers-out, forfeitures and others paid (129,191,542) (101,152,119)

Net casl1 generated Il·om fu1anc:h1g activities 44,066,822 65,013,506

Net increase in cash and cash equivalents 6,534,176 8,387,213 Cash and cash equivalents atthe beginning of the year 8,610,881 223,668

Casl1 at1d casl1 equivalents at t11e end oftl1e year 15,145,057 8,610,881

Analysis of balance of cash and casl1 equivalents: Bank balances 15,145,057 8,610,881


RESTRICTED

SUN lJFE MPF MASTER TRUST

STATEMENf OF FINANCIAL POSffiON - CONSTITUENf FUNDS AS AT 30TH SEPTEMBER 2018

Assets Current assets Bank balances Bank deposit interest receivable Amounts receivable on sale ofinvestinents Amounts receivable on subscription Investments Other receivables

Total assets

Liabilities Current liabilities Al.nounts payable on rede1nptio11 Establishment costs payable Accruals and other payables

Liabilities (excluding net assets attributable to members)

Net assets attributable to members

Note

3, 5(b)


2018 2017 HK$ HK$

11,254

76,851,398

76,862,652

27,559

124,351

151,910 ----------------

76,710,742

1,904 6,597

65,367,528

2,557 37,177

128,781

168,515 ----------------

65,212,319


RESTRICTED -79 -

Schroder MPF Conservative Portfolio

2018 2017 HK$ HK$

83,574,719 128,681

2,488,645

180,865

2,669,510 ----------------

81,988,679

6?,958,326 41,663

66,372

68,116,084

984,574

147,387

1,131,961 ----------------

66,984,123


2018 HK$

2,186,449

94,874

2,28~,323 ----------------

54,151,389

2017 HK$

16,203

47,025,253

4?,469,023

17,866 29,379

101,487

148,732 ----------------

47.320,291

SUN LIFE MPFMASTER TRUST

STATEMENT OF F1NANCIAL POSITION - CONSTITUENT FUNDS AS AT 30TH SEPTEMBER 2018


Note 2018 2017 HK$ HK$

Assets Current assets Bank balances 43,051 37,988 Amounts receivable on sale of investJ.nents 69,385 Amounts receivable on subscription 1,763,938 148,566 Invest1nents 3, 5(b) 85,748,579 76,905,824

Total assets 87,555,568 77,161,763 -------------- --------------

Liabilities Current liabilities Amounts payable on rede1nption 625 70,004 Establislnnent costs payable 46,383 Accruals and other payables 135,219 144,904

Liabilities (excluding net assets attributable to members) 135,844 261,291

-------------- --------------

Net assets attributable to members 8?,419,724 76,900,472


RESTRICTED -Bo -

Schroder MPF Schroder MPF Stable Growth Portfolio Balanced Investment Portfolio

2018 2017 2018 2017 HK$ HK$ HK$ HK$

65,730 86,915 104,104 128,426 249,161 63,773 250,188 167,214

14,594 16,984 148,104,065 143462,256 286,384,075 282,652,422

148418,956 143,627,538 286,738,367 282,965,046 -------------- -------------- -------------- ----------------

2,014,504 65,214 273,639 216,824 87,420 171,928

223,136 245,027 419,604 457,945

2,237,640 397,661 693,243 846,697 -------------- -------------- -------------- ----------------

146,181,316 143,229,877 286,045,124 282,118,349


STATEMENT OF FINANCIAL POSITION - CONSTITUENT FUNDS AS AT 30TH SEPTEMBER 2018

Schroder MPF Growth Portfolio

Note 2018 2017 HK$ HK$

Assets Current assets Bank balances 51,441 84,283 Amounts receivable on sale of investments 68,062 61,646 .Amounts receivable on subscription 25,029 Investments 3, 5(b) 189,155,212 186,725,189

Total assets 189,274,715 186,896,147 -------------- --------------

Liabilities Current liabilities Amounts payable on redemption 70,558 133,270 Establishment costs payable 113,549 Accruals and other payables 280,150 311,675


-------------- --------------

Net assets attributable to members 188,924,007 186,337,653


RESTRICTED -81-

Schroder MPF Schroder MPF International Portfolio Asian Portfolio

2018 2017 2018 2017 HK$ HK$ HK$ HK$

65,187 79,612 95,251 113,335 372,589 68,257 215,902 130,855

14,353 8,063 14,668 183,722,619 171,314,s40 289,256,135 304,652,991

184,160,395 171,476,762 289,575,351 304,911,849 -------------- -------------- -------------- ----------------

374,026 75,149 220,762 238,440 102,923 179,315

271,765 284,950 421,912 489,495

645,791 463,022 642,674 907,250 -------------- -------------- -------------- ----------------

183,514,604 171,013,740 288,932,677 304,004,599



Assets Current assets Bank balances Ainounts receivable on sale of investments Alnounts receivable on subscription Investments

Total assets

Liabilities Current liabilities Amounts payable on rede1nption Establislnnent costs payable Accruals and other payables

liabilities (excluding net assets attributable to members)

Net assets attributable to members

Note

3, 5(b)

The notes on pages 98 to 159 are an integral part of the financial state1nents.

RESTRICTED -82-


2018 2017

HK$ HK$

119,893 160,766 325,058 123,700

2,673,105 1,020,333 284,716,157 302,817,808

28?,834,213 304,122,607 -------------- --------------

352,519 211,138

177.978 407,829 486,570

760,348 875,686 -------------- --------------

287,073,865 303,246,921


2018

HK$

55,322

18,815 12,304,649

12,378,786 --------------

173

17,869

18,042 --------------

12,360,744

2017 HK$

80,267 17.419

443 8,694,475

8,792,604 --------------

17,584 4,007

13,465

35,056 --------------

8,757,548




Note 2018 2017 HK$ HK$

Assets Cw-rent assets Bank balances 147,675 413,790 Bank deposit interest receivable Ainounts receivable on sale of investments 249,i29 121,788 Atnounts receivable on subscription 355,580 11,531 Investments 3, 5(b) 6?,341,012 4?,078,267 Other receivables

Total assets 68,093,396 47,625,376 -------------- --------------

Liabilities Current liabilities Amounts payable on rede1nption 249,366 121,849 Establishment costs payable 27,159 Accruals and other payables 83,100 73,043


-------------- --------------Net assets attributable to members 6?,?60,930 47,403,325

Schroder MPF Age 65 Plus Fund Total 2018 2017 2018 2017 HK$ HK$ HK$ HK$

56,372 42,603 84,462,300 69,618,683 128,681 41,663

38,284 7,646 1,768,373 849,790 583,736 24,479 6,357,562 1,363,949

7,760,539 3,770,027 1,687,704,851 1,640,466,580 464 49,723

8,438,931 3,844,755 1,780,422,231 1,712,390,388 -------------- -------------- ---------------- ----------------

38,302 7,651 8,297,127 2,162,120

1,517 978,735 11,351 5,899 2,672,025 2,890,628

49,653 15,067 10,969,152 6,031,483 -------------- -------------- ---------------- ----------------

8,389,278 3,829,688 1,769,453,079 1,706,358,905

Note: As at 30th September 2018 and 2017, the redeemable units were recognised as equity for Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund. Refer to note 2(q) for details.

The financi stateme s were ap~roved ~he bo of directors of HSBC Provident Fund Trustee (Hong I<ong) Limited on 2?th March 2019 and were signed on . ~/

... ··~··0.: ~-···· ......... :: Director 1rector

The notes on pages 98 to 159 are an integral part of the financial state1nents. RESTRICTED - 83 -


STATEMENT OF COMPREHENSIVE INCOME - CONSTITUENT FUNDS FOR THE YEAR ENDED 30TH SEPTEMBER2018


Note 2018 2017 HK$ HK$

Income Interest on bank deposits 4 12 Net change in unrealised appreciation/depreciation in value of investments (920,025) 761,579

Net realised gain/Ooss) on sale of investments 1,266,852 672,591

Other inco1ne 1,510

Total investment income 348,341 1,434,182 ------------- -------------

Expenses Investment manage1nent fee 6(a) Trustee fee 6(b) 72,664 57,i98 Adininistration fee 6(c) 473,171 369,012 Establishment cost 6(d) 37,177 Legal and professional fee 6(d) 14,600 Adininistrative expenses 6(d) 109,133 6,429

Total operating expenses 669,568 469,816 ------------- -------------

(Decrease)/increase in net assets attributable to members (321,227) 964,366


RESTRICTED

Schroder MPF Schroder MPF RMB and HKD Conservative Portfolio Fixed hlcome Portfolio

2018 2017 2018 2017 HK$ HK$ HK$ HK$

784,212 360,444 28 61

(249,955) 1,126,068

382,522 (8,744) 1,193

784,212 360,444 133,788 1,117,385 ------------- ------------- ------------- -------------

99.448 116,845 95,775 55,756 45,217 472,189 100,574 357,602 290,921

29,379 13,162

89,741 159,625 91,180 18,358

778,223 355,974 517,700 383,875 ------------- ------------- ------------- -------------

5,989 4.470 (383,912) 733,510


STATEMENT OF COMPREHENSIVE INCOME- CONSTITUENT FUNDS FOR THE YEAR ENDED 30TH SEPTEMBER 2018

Schroder MPF Schroder MPF Schroder MPF Capital Stable Portfolio Stable Growth Portfolio Balanced Investment Portfolio

Note 2018 2017 2018 2017 2018 2017 HK$ HK$ HK$ HK$ HK$ HK$

Income Interest on bank deposits 5 10 7 19 14 24 Net change in unrealised appreciation/depreciation in value of investlnents (1,760,054) 2,579,496 (2,689415) . 8,840,383 (2,822,518) 21,167,722

Net realised gain on sale of investments 1,622,510 1,039,812 4,494,228 3,757,620 10,143,900 17,213,025 Other inco1ne 1,884 3,550 6,982

Total investment (loss)/income (135,655) 3,619,318 1,808,370 12,598,022 7,328,378 38,380,771 ------------- ------------- ------------- ------------- ------------- --------------

Expenses Trustee fee 6(b) 85,476 72,062 150,618 133,174 290,843 281,827 Ad1ninistration fee 6(c) 525,332 444,321 923,179 816,349 1,820,660 1,794,763 Establishment cost 6(d) 46,383 87,420 171,928 Legal and professional fee 6(d) 15,526 20,443 31,168 A<lininistrative expenses 6(d) 117,920 47,217 174,634 112,123 299,272 243,978

Total operating expenses 744,254 609,983 1,268,874 1,149,066 2,441,943 2492,496 ------------- ------------- ------------- ------------- ------------- --------------

(Decrease)/increase in net assets attributable to members (879,909) 3,009,335 539496 11,448,956 4,886435 35,888,275


.RESTRICTED -85-


STATEMENT OF COMPREHENSIVE INCOME- CONSTITUENT FUNDS FOR THE YEAR ENDED 30TH SEPTEMBER 2018

Schroder MPF Schroder MPF Schroder MPF Growth Portfolio Inten1ational Portfolio Asian Portfolio

Note 2018 2017 2018 2017 2018 2017 HK$ HK$ HK$ HK$ HK$ HK$

Income Interest on bank deposits 9 6 8 6 14 19 Net change in unrealised appreciation/depreciation in value of investments (1,803,812) 25,017,756 6,472,803 21,645,070 (17,300,509) 44,526,602

Net realised gain on sale of investments 8,947.430 5,374,546 7,810,500 4,111,808 19,538,404 9,011,261 Other inco1ne 4,612 4,180 7,283

Total investment income 7,148,239 30,392,308 14,287,491 25,756,884 2,245,192 53,53?,882 ------------- -------------- ------------- -------------- ------------- --------------

Expenses Trustee fee 6(b) 194,378 169,066 179,862 154,990 308,766 267,707 Adininistration fee 6(c) 1,213,480 1,053,795 1,092,790 938,069 1,917,157 1,652,672 Establishment cost 6(d) 113,550 102,923 179,315 Legal and professional fee 6(d) 23,648 22,694 31,986 Administrative expenses 6(d) 210,632 153.733 205,953 137,954 303,111 262,051

Total operating expenses 1,642,138 1,490,144 1,501,299 1,333,936 2,561,020 2,361,745 ------------- -------------- ------------- -------------- ------------- --------------

Increase/( decrease) in net assets attributable to members 5,506,101 28,902,164 12,786,192 24,422,948 (315,828) 51,176,137


RESTRICTED -86 -


STATEMENT OF COMPREHENSIVE INCOME - CONSTITUENT FUNDS FOR THE YEAR ENDED 30TH SEPTEMBER2018

Note

Income Interest on bank deposits Net change in unrealised appreciation/depreciation in value of investments

Net realised gain on sale of invest1nents Other income

Total investment income/(loss)

Expenses Investment inanagement fee 6(a) Trustee fee 6(b) Adininistration fee 6(c) Establisbmentcost 6(d) Legal and professional fee 6(d) Administrative expenses 6(d)

Total operating expenses

Increase/( decrease) in net assets attributable to members


RESTRICTED


2018 2017 HK$ HK$

14 44

(16,499,468) 53,336,595 21,476,710 8,639,493

7,228

4,984,484 61,976,132 -------------- --------------

310,292 268,520 1,895,857 1,638,502

177.977 31,869

296403 261,596

2,534,421 2,346,s95 -------------- --------------

2,450,063 59,629,537


2018 2017 HK$ HK$

7 9

(341,909) (1,725) 90,140 36,406

163

(251,599) 34,690 -------------- --------------

30,876 19,563 6,175 3,912

39,061 24,858 59,837

9,664 17,715 8,690

103,491 116,860 -------------- --------------

(355,090) (82,170)


STATEMENT OF COMPREHENSIVE INCOME- CONSTITUENT FUNDS FOR THE YEAR ENDED 30TH SEPTEMBER2018


Note 2018 20171

HK$ HK$

Income Interest on bank deposits 32 15 Net change in unrealised appreciation/depreciation in value of investlnents 2,774,395 1,183,619

Net realised gain on sale of investments 450,014 50,253 Other income 1,103

Total investment income 3,225,544 1,233,887 -------------- --------------

Expenses Invest1nent management fee 6(a) 139,170 39,675 Trustee fee 6(b) 55,648 15,835 Adininistration fee 6(c) 222,673 63,479 Establishment cost 6(d) 27,159 Legal and professional fee 6(d) 4,926 Adininistrative expenses 6(d) 86,082 43,917

Total operating expenses 508,499 190,065 -------------- --------------

Increase in net assets attributable to members 2,717,045 1,043,822

Schroder MPF Age 65 Plus Fund

2018 20171

HK$ HK$

6 1

52,365 30,302 32,936 6,276

62

85,369 36,579 -------------- --------------

15,593 3,165 6,234 1,263

24,948 5,063 1,517

532 7,148 3,548

54,455 14,556 -------------- --------------

30,914 22,023

1 For the period from 5th April 2017 (date of connnencement ofoperations) to 30th September 2017.

Total 2018 2017 HK$ HK$

784,360 360,670

(35,088,102) 180,213,467 76,256,146 49,904,347

39,750

41,992,154 230,478,484 -------------- ----------------

285,087 62,403 1,833,557 1,566,546

10,978,099 9,192,378 1,034,565

220,218

2,008,924 l,459,219

15,325,885 13,315,111 -------------- ----------------

26,666,269 217,163,373

Note: The increase in net assets attributable to 1ne1nbers represented total comprehensive income for Sclrroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund.


RESTRICTED -88-


STATEMENT OF CHANGES IN NET ASSETS ATI'RIBUTABLE TO MEMBERS - CONSTITUENT FUNDS FOR THE YEAR ENDED 30TH SEPTEMBER 2018

Balance at the beginning of the year

Proceeds from

Note

subscription of units 4 Payments on redemption of units 4

Net subscription/ (redemption)

(Decrease)/increase in net assets attributable to members


2018 2017 HK$ HK$

65,212,319 53,418,894 -------------- --------------

22,524,778 16,35?,983

(10,705,128) (5,528,924)

11,819,650 10,829,059 -------------- --------------


2018 2017

HK$ HK$

66,984,123 60,231,321 -------------- ----------------

54,675,133 34,312,297

(39,676,566) (2?,563,965)

14,998,567 6,748,332 -------------- ----------------

4,470

Schroder MPF RMB and HKO Fixed Income Portfolio

2018 2017 HK$ HK$

47,320,291 46,792,597 -------------- --------------

19,720,360 6,218,595

(12,505,350) ( 6,424,411)

7,215,010 (205,816) -------------- --------------

(383,912) 733.510


2018 2017 HK$ HK$

76,900,472 69,182,141 -------------- --------------

21,376,054 11,917,018

(9,976,893) (7,208,022)

11,399,161 4,708,996 -------------- --------------

3,009335 -------------- -------------- -------------- ---------------- -------------- -------------- -------------- --------------

Balance at the end of the year 65,212,319 81,988,679


RESTRICTED

47.320,291


STATEMENT OF CHANGES IN NET ASSETS ATfRIBUTABLE TO MEMBERS - CONSTITUENT FUNDS FOR THE YEAR ENDED 30TH SEPTEMBER 2018


Proceeds from subscription of units

Payments on redemption of units

Net subscription/ (redemption)

Increase in net assets attributable to members

Note

4

4


2018 2017 HK$ HK$

143,229,877 126,586,566 -------------- --------------

23,051,317 24,861,604

(20,639,374) (19,667,249)

2,411,943 5,194,355 -------------- --------------

Schroder MPF Balanced Investment

Portfolio 2018 2017 HK$ HK$

282,118,349 276,712,834 -------------- ----------------

31,783,004 41,245,972

(32,742,664) (71,728,732)

(959,660) (30,482,760) -------------- ----------------

35,888,275


2018 2017 HK$ HK$

186,337,653 155438,170 -------------- --------------

19,718,053 18,339,510

(22,637,800) (16,342,191)

(2,919,747) 1,997,319 -------------- --------------

5.506,101 28,902,164

Schroder MPF International Portfolio

2018 2017 HK$ HK$

171,013,740 140,138,393 -------------- --------------

19,203,773 18,150,325

(19,489,101) (11,697,926)

(285,328) 6452,399 -------------- --------------

24422,948 -------------- -------------- -------------- ---------------- -------------- -------------- -------------- --------------

Balance at the end of the year


RESTRICTED


STATEMENT OF CHANGES IN NET ASSETS ATfRIBUTABLE TO MEMBERS - CONSTITUENT FUNDS FOR THE YEAR ENDED 30TII SEPTEMBER 2018


Proceeds fro1n subscription of units Payments on redemption of units

Net (redemption)/subscription

(Decrease)/increase in net assets attributable to members

Note

4 4

Schroder MPF Asian Portfolio 2018 2017 HK$ HK$

304,004,599 253,505,714 -------------- ----------------

33,676,854 28,951,326 (48432,948) (29,628,578)

(14,756,094) (677,252) -------------- ----------------

51,176,137


2018 2017 HK$ HK$

303,246,921 245,680,843 -------------- ----------------

50,220,164 43,947,865 (68,843,283) (46,011,324)

(18,623,119) (2,063,459) -------------- ----------------

2,450,063 59,629,537


2018 2017 HK$ HK$

8,757,548 5,329,697 -------------- --------------

7,816,318 5,902,648 (3,858,032) (2,392,627)

3,958,286 3,510,021 -------------- --------------

(82,170) -------------- ---------------- -------------- ---------------- -------------- --------------

Balance at the end of the year 12,360,744


RESTRICTED - 91 -


STATEMENT OF CHANGES IN NET ASSETS A'ITRIBUTABLE TO MEMBERS- CONSTITUENT FUNDS FOR THE YEAR ENDED 30TH SEPTEMBER 2018


Proceeds from subscription of units Payments on redemption of units

Net subscription

Increase in net assets attributable to members

Balance at the end of the year

Note

4 4

Schroder MPF Core Accmnulation Fund

2018 20171

HK$ HK$

47,403,325 -------------- --------------

26,179,149 50,375,270 (8,538,589) (4,015,767)

17,640,560 46,359,503 -------------- --------------

2,717,045 1,043,822 -------------- --------------

67,760,930 47,403,325


2018 20171

HK$ HK$

3,829,688 -------------- --------------

6,981,:i80 4,998,600 (2,452,704) (1,190,935)

4,528,676 3,807,665 -------------- --------------

30,914 22,023 -------------- --------------

8,389,278 3,829,688

1 For the period from 5th April 2017 (date of commencement of operations) to 30th September 2017.

Total 2018 2017 HK$ HK$

1,706,358,905 1,433,017,170 -------------- ----------------

336,926,337 305,579,013 (300,498,432) (249,400,651)

36,427,905 56,178,362 -------------- --------------

26,666,269 217,163,373 -------------- ----------------

1,769,453,079 1,706,358,905

Note: For the Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund, the net assets attributable to members was classified as equity as at 30th September 2018 and 2017.

The notes on pages 98 to 159 are an h1tegra1 part of the financial state1nents.

RESTRICTED -92-


STATEMENT OF CASH FLOWS - CONSTITUENT FUNDS FOR THE YEAR ENDED 30TH SEPTEMBER 2018


2018 HK$

Cash flows from operating activities (Decrease)/increase in net assets attributable to members (321,227)

Adjustlnents: - Interest on bank deposits (4)

Operating Ooss)/profit before working capital changes (321,231) Net increase in investments, amounts receivable and payable on sale and purchase of investments (11,481,966)

Decrease/(increase) in other receivables -(Decrease)/increase in accruals and other payables (4,430) (Decrease)/increase in establishment cost payable (37,177)

Cash used in operations (11,844,804) Interest received 4

Net cash (used in)/ generated from operating activities (11,844,800)

--------------Cash flows from financing activities Proceeds on subscription of units Payments on redemption of units

22,s31,375 (10,680,126)

Net cash generated from/(used in) financing activities 11,851,249

--------------Net increase/( decrease) in cash and cash equivalents 6,449 Cash and cash equivalents as at the beginning of the year 4,805

Cash and cash equivalents as at the end of the year 11,254

Analysis of balances of cash and cash equivalents: Bank balances 11,254


RESTRICTED

2017 HK$

964,366

(12)

964,354

(12,024,478)

(47,530) 37,177

(11,070,477) 12

(11,070,465) --------------16,354,986 (5,526,963)

10,828,023 --------------

(242,442) 247,247

4,805

4,805

-93-

Schroder MPF Schroder MPF RMB and HKD Conservative Portfolio Fixed Income Portfolio

2018 2017 2018 2017 HK$ HK$ HK$ HK$

5,989 4,470 (383,912) 733,510

(784,212) (360,444) (28) (61)

(778,223) (355,974) (383,940) 733,449

(9,318,955) (836,207) 49,259 (49,528) - -33,478 126,848 (6,613) (37,404)

(29,379) 29,379

(695,486) (278,654) (9,738,887) (110,783) 697,194 350,544 28 61

1,708 71,890 (9,738,859) (110,722) -------------- -------------- -------------- --------------53,78?,180 34,521,975 19,720,360 6,218,595

(38,172,495) (26,854,373) (10,336,767) (6,437,526)

15,614,685 7,667,602 9,383,593 (218,931) -------------- -------------- -------------- --------------15,616,393 7,739,492 (355,266) (329,653) 67,958,326 60,218,834 427,567 757,220

83,574,719 67,958,326 72,301 427,567

83,574,719 6?,958,326 72,301 427,567



Schro<ier MPF Capital Stable Portfolio

2018 2017 HK$ HK$

Cash flows from operating activities (Decrease)/increase in net assets attributable to me1nbers (879,909) 3,009,335

Adjust1ne11ts: - Interest on bank deposits (5) (10)

Operating (loss)/profit before working capital changes (879,914) 3,009,325 Net increase in investments, ainounts receivable and

payable on sale and purchase of investments (8,773,370) (?,864,669) Decrease in accruals and other payables (9,685) (24,725) (Decrease)/increase in establishment cost payable (46,383) 46,383

Cash (used in)/generated from operations (9,709,352) (4,833,686) Interest received 5 10

Net cash (used in)/generated from operating activities (9,709,347) (4,833,676)

-------------- --------------Cash flows from financing activities PrOceeds on subscription of units 19,760,682 11,768,452 Payments on rede1nption of units (10,046,272) (7,140,077)

Net cash generated from/(used in) financing activities 9,714,410 4,628,375

-------------- --------------

Net increase/( decrease) in cash and cash equivalents 5,063 (205,301) Cash and cash equivalents as at the beginning of the year 37.988 243,289

Cash and cash equivalents as at the end of the year 43,051 37,988

Analysis of balances of cash and cash equivalents: Bank balances 43,051 37,988

The notes on pages 98 to 159 are an integral part of the financial statements. RESTRICTED - 94-

Schroder MPF Schroder MPF Stable Growth Portfolio Balanced Investment Portfolio

2018 2017 2018 2017 HK$ HK$ HK$ HK$

539,496 11,448,956 4,886,435 35,888,275

(7) (19) (14) (24)

539.489 11,448,937 4,886,421 35,888,251

(4,827,197) (17,124,754) (3,814,627) (6,306,705) (21,891) (7,485) (38,341) (22,911)

(8?,420) 87,420 (171,928) 171,928

(4,397,019) (5,595,882) 861,525 29,730,563 7 19 14 24

( 4,397,012) (5,595,863) 861,539 29,730,587 -------------- -------------- -------------- --------------

23,065,911 24,847,610 31,799,988 41,286,934 (18,690,084) (19,603,396) (32,685,849) (71,548,243)

4,375,827 5,244,214 (885,861) (30,261,309) -------------- -------------- -------------- --------------

(21,185) (351,649) (24,322) (530,722) 86,915 438,564 128,426 659,148

65,730 86,915 104,104 128,426

65,730 86,915 104,104 128,426




2018 2017 HK$ HK$

Cash flows from operating activities Increase/(decrease) in net assets attributable to members 5,506,101 28,902,164


Operating profit/Ooss) before working capital changes 5,506,092 28,902,i58 Net increase/decrease in inveshnents, amounts receivable and payable on sale and purchase of invest1nents (2,436,439) (31,089,136)

(Decrease)/increase in accruals and other payables (3i,525) 15,764 (Decrease)/increase in establish1nent cost payable (113,549) 113,549

Cash generated from/(used in) operations 2,924,579 (2,057,665) Interest received 9 6

Net cash generated from/(used in) operating activities 2,924,588 (2,05?,659)

-------------- --------------Cash flows from financing activities Proceeds on subscription of units 19,743,082 18,506,124 Payments on rede1nption of units (22,700,512) (16,454,257)

Net cash (used in)/generated from financing activities (2,957,430) 2,051,867

-------------- --------------

Net (decrease)/increase in cash and cash equivalents (32,842) (5,792) Cash and cash equivalents as at the beginning of the year 84,283 90,075

Cash and cash equivalents as at the end of the year 51,441 .84,283

Analysis of balances of cash and cash equivalents: Bank balances 51.441 84,283

The notes on pages 98 to 159 are an integral part of the financial state1nents. RESTRICTED -95-

Schroder MPF Schroder MPF International Portfolio Asian Portfolio

2018 2017 2018 2017 HK$ HK$ HK$ HK$

12,786,192 24,422,948 (315,828) 5i,176,137

(8) (6) (14) (19)

12,786,184 24,422,942 (315,842) 51,176,118

(12,712,411) (31,032,381) 15,311,809 (51,360,905) (13,i8s) 14,295 (67,583) 46,328

(102,923) 102,923 (179,315) 179,315

(42,335) (6,492,221) 14,749,069 40,856 8 6 14 19

(42,327) ( 6,492,215) 14,749,083 40,875 -------------- -------------- -------------- --------------

19,218,126 18,190,848 33,683,459 28,944,961 (19,i90,224) (11,658,127) (48,450,626) (29.433.912)

27,902 6,532,721 (14,767,167) (488,951) -------------- -------------- -------------- --------------

(14,425) 40,506 (18,084) (448,076) 79,612 39,106 113,335 561,411

65,187 79,612 95,251 113,335

65,187 79,612 95,251 113,335



Cash flows from operating activities Increase/(decrease) in net assets attributable to 1ne1nbers

Adjustments: - Interest on bank deposits

Operating profit/(loss) before working capital changes Net increase/ decrease in investments, amounts receivable and payable on sale and purchase of investments

(Decrease)/increase in accruals and other payables (Decrease)/increase in establish1nent cost payable

Cash generated from/( used in) operations Interest received

Net cash generated from/( used in) operating activities

Cash flows from financing activities Proceeds on subscription of units Paytnents on redemption of units

Net cash (used in)/ generated from financing activities

Net decrease in cash and cash equivalents Cash and cash equivalents as at the beginning of the year

Cash and cash equivalents as at the end of the year

Analysis of balances of cash and cash equivalents: Bank balances


RESTRICfED -96-


2018 2017 HK$ HK$

2,450,063 59,629,537

(14) (44)

2450,049 59,629,493

17,900,293 (57,799,897) (78,741) 50,964

(177,978) 177>978

20,093,623 2,058,538 14 44

20,093,637 2,058,582 -------------- --------------

48,567,392 43,210,142 (68,701,902) (46,113,254)

( 20,134,510) (2,903,112) -------------- --------------

(40,873) (844,530) 160,766 1,005,296

119,893 160,766

119,893 160,766


2018 2017 HK$ HK$

(355,090) (82,170)

(7) (9)

(355,097) (82,179)

(3,s92, 755) (3,272,067) 4,404 6,227

(4,007) 4,007

(3,947,455) (3,344,012) 7 9

(3,947,448) (3,344,003) -------------- --------------

7,797,946 5,953,467 (3,875,443) (2,656,546)

3,922,503 3,296,921 -------------- --------------

(24,945) (47,082) 80,267 127,349

55,322 80,267

55,322 80,267


STATEMENT OF CASH FWWS - CONSTITUENT FUNDS FOR THE YEAR ENDED 30TH SEPTEMBER2018


2018 20171

HK$ HK$

Cash flows from operating activities Increase in net assets attributable to members 2,717,045 1,043,822


Operating profit before working capital changes 2,717,013 1,043,807 Net increase in investments, amounts receivable and payable on sale and purchase of investments (20,390,086) (4?,200,055)

Decrease/(increase) in other receivables Increase/(decrease) in accruals and other payables 10,057 73,043 (Decrease)/increase in establishment cost payable (27,159) 27,159

Cash used in operations (17,690,175) (46,056,046) Interest received 32 15

Net cash used in operating activities (17,690,143) (46,056,031) -------------- --------------

Cash flows from financing activities Proceeds on subscription of units 25,835,100 50,363,739 Payments on redemptioi:- of units (8,411,072) (3,893,918)

Net cash generated from financing activities 17,424,028 46,469,821 -------------- --------------

Net (decrease)/increase in cash and cash equivalents (266,115) 413,790 Cash and cash equivalents as at the beginning of the year 413,790

Cash and cash equivalents as at the end of the year 147,675 413,790

Analysis of balances of cash and cash equivalents: Bank balances 14?,675 413,790


2018 20171 HK$ HK$

(6)

30,908

(4,021,150)

5.452 (1,517)

6,422,123 (2,422,053)

4,000,070 --------------

56,372

56,372

22,023

(1)

22,022

(3,777,673)

5,899 1,517

(3,748,235) 1

(3,748,234) --------------

4,974,121 (1,183,284)

3,790,837 --------------

42,603

42,603

42,603

1 For the period from 5tb April 2017 (date of commencement of operations) to 30th September 2017. The notes on pages 98 to 159 are an integral part of the financial statements. · RESTRICTED - 97 -

Total 2018 HK$

2017 HK$

26,666,269

(784,360) (360,670)

25,881,909 216,802,703

(48,156,854) (269,688,927) 49,259 (49,528)

(218,603) 199,313 (978,735) 978,735

(23,423,024) (51,757,704) 69?,342 350,770

(22,725,682) (51,406,934) -------------- ----------------

331,932,724 305,141,954 (294,363,425) (248,503,876)

37,569,299 56,638,078 -------------- ----------------

14,843,617 5,231,144 69,618,683 64,387,539

84,462,300 69,618,683

84,462,300 69,618,683


NOTES TO THE FINANCIAL STATEMENTS

1 The Scheme

SW1 Life MPF Master Trust (the "Scheme") is established and governed by its trust deed dated 31st January 2000, as amended. The Scheme is registered under Section 21 of the Hong Kong Mandatory Provident FW1d Schemes Ordinance (the "Ordinance") and is required to comply with the Ordinance and the relevant regulations, guidelines and codes issued by the Mandatory Provident FW1d Schemes Authoriiy (the "MPFA").

The Scheme comprises 13 (2017: 13) constituent fW1ds ("constituent funds") as at the end of the reporting year. F.ach of the constituent fW1ds is approved by the MPFA and has its own investment policy and predetermined fees and charges. Contributions and benefits are dealt with at the scheme level whereas investments in approved pooled investment funds are dealt with at the constituent fW1ds level.

With effect from 1 April 2017, W1der the Mandatory Provident Fund Schemes (Amendment) Ordinance (June 2016), each MPF scheme has to offer a Default Investment Strategy ("DIS"). The DIS represents a major reform of the MPF System. Its aim is to provide scheme members with better retirement protection. The DIS is an investment solution consisting of two mixed assets fW1ds: the Core Accumulation FW1d and the Age 65 Plus Fund. Each DIS has three features: globally diversified investment, automatic reduction of investment risk as scheme members approach retirement age, and fee caps.

Units of the constituent funds of the Scheme are issued in two classes1 Ordinary Class (which was presented as Class A in prior years) and Class B1 except for Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus FW1d. Effective from 16th July 2018, Schroder MPF Core Accumulation FW1d and Schroder MPF Age 65 Plus Fund only have one class of units each and therefore not subject to any class. Prior to 16th July 2018, Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund only issued Class B and those unltholders had become the unitholders of the single class of units on 16th July 2018.

The financial information of the Scheme comprises (i) the statement of net assets available for benefits as at 30th September 2018, and the statement of changes in net assets available for benefits and statement of cash flows for the year ended 30th September 2018 of the Scheme on a standalone basis; and (ii) the statement of financial position as at 30th September 2018, and the statement of comprehensive income, statement of changes in net assets attributable to members and statement of cash flows for the year ended 30th September 2018 for each of the Scheme's constituent funds.

RESTRICTED



2 Summary of significant accow1ti11g policies

The principal accounting policies adopted in the preparation of financial statements of the Scheme and its constituent funds are set out below. These policies have been consistently applied to all the years presented, unless othervvise stated.

(a) Basis of preparation

The financial statements have been prepared in accordance ViTith Hong Kong Financial Reporting Standards (the "HKFRS") issued by the Hong Kong Institute of Certified Public Accountants. The financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities held at fair value through profit or loss.

The preparation of financial statements in conformity vvith HKFRS requires the Trustee to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. The estimates and associated assumptions are based on historical experience and va.Tious other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

All references to net assets throughout the financial statements refer to net assets attributable to membe.rs unless otherwise stated. All the assets and liabilities are held for the purpose of being traded or are expected to be realised within one year.

Standards and amendments to existing standards effective 1st October 2017

Amendments to HKAS 7, 'Statement of Cash Flows' became effective for annual periods beginning on or after 1st January 2017. These amendments require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. Adoption of these amendments did not have a material impact on the Scheme's and its constituent funds' financial statements.

The amendments to HKAS7 require disclosure of changes in liabilities arising from financing activities, see note 1 o.

There are no other standards, amendments to standards or interpretations that are effective for annual periods beginning on 1st October 2017that have a material effect on the financial statements of the Scheme and its constituent funds.

RESTRICTED -99 -



2 Summary of significa11t accou11ti11g policies ( Co11th1ued)

(a) Basis of preparation (Continued)

New standards and amendments to standards that are relevant to the Scheme and its constituent funds but are not yet effective and have not been early adopted by the Scheme and its constituent funds

HKFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. It replaces the multiple classification and measurement models in HK.AS 39 and is effective for reporting periods beginning on or after 1st January2018.

Classification and measurement of debt assets will be driven by the entity's business model for managing the financial assets and contractual cash flow characteristics of the financial assets. A debt instrument is measured amortised cost if the objective of the business model is to hold the financial asset for the collection of the contractual cash flows and the contractual cash flows wtder the instrument solely represent payments of principal and interest (SPPI). A debt instrument is measured at fair value through other comprehensive income if the objective of the business model is to hold the financial asset both to collect contractual cash flows from SPPI and to sell. All other debt instruments must be recognised at fair value through profit or loss. An entity may however, at initial recognition, irrevocably designate a financial asset as measured at fair value through profit or loss if doing so eliminates or significantly reduces a measurement or recognition inconsistency. Derivative and equityinstruments are measured at fair value through profit or loss unless, for equity instruments not held for trading, an irrevocable option is taken to measure at fair value through other comprehensive income. HKFRS 9 also introduces a new expected credit loss (ECL) impairment model.

On adoption of HKFRS 9 the Scheme's and its constituent fwtds' investment portfolio will continue to be classified as fair value through profit or loss. Other financial assets which are held for collection will continue to be measured at amortised cost with no material impact expected from application of the new impairment model. As a result, the adoption of HKFRS 9 is not expected to have a material impact on the Scheme's and its constituent funds' financial statements.

In addition to the aboVe, a number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1st October 2017, and have not been applied in preparing these financial statements. None of these are expected to have a material effect on the financial statements of the Scheme and its constituent funds.

RESTRICTED -100 -



2 Summary of sigi.1ifica11t accom1ti.J.1g policies (Continued)

(b) In.vestments

All investments have been designated by the Trustee as "financial assets at fair value through profit or loss" at inception.

Purchases and sales of investments are accounted for on the trade date basis. Investments are initially recognised at fair value, excluding transaction costs which are expensed as incurred, and are subsequently re-measured at fair value. Realised and unrealised gains and losses on investments are included in the statement of changes in net assets available for benefits for the Scheme and statement of comprehensive income for the constituent funds in the year in which they arise. Investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Scheme and its constituent funds have transferred substantially all risks and rewards of ownership.

Fair value estimation

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market and participants at the measurement date. The fair value of financial assets and liabilities traded in active markets are based on quoted market prices at the close of trading on the reporting date.

Investments in constituent funds by the Scheme are valued at their respective closing net asset value per unit. Investments in approved pooled investment funds by the constituent funds are fair valued based on last traded prices.

(c) Structured entities

A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting ri'ghts relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. A structured entity often has some or all of the following features or attributes; (a) restricted activities, (b) a narrow and well-defined objective, such as to provide investment opportunities for investors by passing on risks and rewards associated with the assets of the structured entity to investors, (c) insufficient equity to permit the structured entity to finance its activities without subordinated financial support and (d) finailcing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks (tranches).

RESTRICTED - 101 -



2 Summary of sigi1ificant accom1ting policies (Co11tinued)

(c) Structured entities (Continued)

The Scheme and the constituent funds consider all of their investments in other funds ("Investee Funds") to be investments in unconsolidated structured entities. The Scheme and the constituent funds invest in Investee Funds whose objective is to achieve long term capital growth. The Investee Funds are managed by related and unrelated asset managers who apply various investment strategies to accomplish their respective investment objectives. The Investee Funds finance their operations by issuing redeemable units which are puttable at the holder's option and entitles the holder to a proportional stake in the respective fund's net assets. The Scheme and constituent funds hold redeemable units in each of their Investee Funds.

The change in fair value of each Investee Funds is included in the statement of comprehensive income in "Net change in unrealised appreciation/depreciation in value of investments".

(d) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

(e) Amou11ts receivable 011 sale/payable on_ purcl1ase of investments

Amounts receivable on sale/payable on purchase of investments represent receivables for investments sold and payables for investments purchased that have been contracted for but not yet delivered by the end of the year.

(f) Accounts receivables

Accounts receivables are recognized initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of receivables is established when there is objective evidence that the Scheme and its constituent funds will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Accounts receivables are classified as current assets if the collections of receivables are expected in the one year of less. If not, they are presented as non-current assets.

(g) Accounts payables and accruals

Accounts payables and accruals are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Accounts payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

01) h1come and expe115es

Interest income is recognised on a time proportion basis using the effective interest method.

Other income and expenses are accounted for on an accruals basis.

RESTRICTED -102 -



2 Summary of sig1tlficant accom1tlng policies (Conti.J.1ued)

(i) Translatio11 offoreigi1 currencies

(i) Functional and presentation currency

Items included in the financial statements of the Scheme and its constituent funds are measured using the currency of the primary economic environment in which they operate (the "functional currency''). The financial statements are presented in Hong Kong dollars, which is the functional and presentation currency of the Scheme and its constituent_ funds.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign currency assets and liabilities are translated into the functional currency using the exchange rate prevailing at the year end date.

Foreign exchange gains and losses arising from translation are included in the statement of changes in net assets available for benefits for the Scheme and the statement of comprehensive income for the constituent funds.

Foreign exchange gains and losses relating to cash and cash equivalents are presented in the statement of changes in net assets available for benefits for the Scheme and the statement of comprehensive income for the constituent funds within exchange gains or losses.

Foreign exchange gains and losses relating to the financial assets and liabilities carried at fair value through profit or loss are presented in the statement of changes in net assets available for benefits within "net realised gain/Ooss) on redemption of units in constituent funds" and "net change in unrealised appreciation/depreciation in value of investments in constituent funds" for the Scheme, and in the statement of comprehensive income within "net realised gain/(loss) on sale of investments" and '1net change in unrealised appreciation/depreciation in value of investments" for the constituent funds.

G) Contributions

Contributions are accounted for on an accruals basis.

(k) Benefits

Benefits are accounted for on an accruals basis.

0) Tra11sfers-in

Transfers-in amounts are recognised when the right to receive payment is established.

(m) Transfers-out

Transfers-out amounts are accounted for when the obligation to make payment is established.

(n) Forfeitures

If a member ceases to be a member, the part of the employer's voluntary balance not otherwise disposed of in accordance with the rules of the Scheme may be either maintained in the Trustee's account to offset against future employer's contributions or returned to the employer.

RESTRICTED -103 -



2 Summary of sigili:fica11t accom1th1g policies (Co11ti.J.1ued)

(o) Proceeds a11d payine11ts 011 subscriptio11 a11d redemptio11 ofmtits

The net asset value of the constituent funds is computed on each business day. Prices for subscriptions and redemptions on each dealing day are based on the closing valuation of that dealing day.

Proceeds and payments for units subscribed and redeemed are included in the statement of changes in net assets attributable to members of the constituent funds.

(p) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank, demand deposits with banks and other financial institutions with original maturities of three months or less from the date of placement, and shortterm, highly liquid investments that are readily convertible into known amounts of cash which are subject to an insignificant risk of changes in value.

(q) Redeemable units

A constituent fund issues redeemable units, which are redeemable at the holder's option represents puttable financial instruments of a constituent fund. Puttable financial instruments are classified as equity in accordance with HKAS 32 (Amendment), "Financial instruments: Presentation" if they meet all the following criteria:

• the puttable financial instruments entitle the holder to a pro-rata share of net asset value; • the puttable financial instruments are the most subordinated units in issue and unit features

are identical; • there are no contractual obligations to deliver cash or another financial asset; and • the total expected cash flows from the puttable financial instrument over its life are based

substantially on the profit or loss of a constituent fund.

Otherwise, puttable financial instruments are classified as financial liability.

Redeemable units for Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund are recognised as equities while redeemable units for Schroder MPF Capital Guaranteed Portfolio1

Schroder MPF Conservative Portfolio, Schroder MPF RMB and HKD Fixed Income Portfolio, Schroder MPF Capital Stable Portfolio, Schroder MPF Stable Growth Portfolio, Schroder MPF Balanced Investment Portfolio, Schroder MPF Growth Portfolio, Schroder MPF International Portfolio, Schroder MPF Asian Portfolio, Schroder MPF Hong Kong Portfolio and Schroder MPF Global Fixed Income Portfolio are recognised as financial liabilities.

The redeemable units of the constituent funds are issued or redeemed at the holder's option at prices based on the constituent funds1 net asset value per unit as at the close of business on the relevant dealing day. The constituent funds1 net asset value per unit is calculated by dividing the net assets attributable to the unitholders with the total number of outstanding units.

(r) Income Tax

The Scheme is registered under the Ordinance and is therefore a recognised scheme for Hong Kong profits tax purposes. The policy of the Hong Kong Inland Revenue Department ("!RD"), as set out in IRD Practice Note No. 231 is that "recognised retirement schemes and their trustees are not considered to be subject to profits tax on their investment income". Accordingly, no provision for Hong Kong profits tax has been made in the Scheme1s financial statements.

RESTRICTED -104 -



3 h1vest1nents

2018 2017 HK$ HK$

Tl1e Scl1eme

Investments in constituent funds Schroder MPF Capital Guaranteed Portfolio 76,710,742 65,212,319 Schroder MPF Conservative Portfolio 81,988,679 66,984,i23 Schroder MPF RMB and HKD Fixed Income Portfolio 54,151,389 47,320,291 Schroder MPF Capital Stable Portfolio 87,419,724 76,900,472 Schroder MPF Stable Growth Portfolio 146,181,316 143,229,877 Schroder MPF Balanced Investment Portfolio 286,045,124 282,118,349 Schroder MPF Growth Portfolio 188,924,007 186,337,653 Schroder MPF International Portfolio 183,514,604 171,013,740 Schroder MPF Asian Portfolio 288,932,677 304,004,599 Schroder MPF Hong Kong Portfolio 287,073,865 303,246,921 Schroder MPF Global Fixed Income Portfolio 12,360,744 8,757,548 Schroder MPF Core Accumulation Fund 67,760,930 47,403,325 Schroder MPF Age 65 Plus Fund 8,389,278 3,829,688

Investments at fair value 1,769,453,079 1,706,358,905

Investments at cost 1,388,340, 774 1,283,079,328

2018 2017 HK$ HK$

Constituent fu11ds

§chroder M!2F Cajlital Guaranteed Portfolio FWD MPF Capital Guaranteed Policy' 76,851,398 65,367,528

§chroder MPF RMB and HKD Fixed Income Portfolio Schroder Institutional Pooled Funds • RMB and HKD FIXed Income' 56,360,411 47,025,253

§chroder MPF Cajlital Stable Portfolio Schroder MPF Umbrella Fund - Schroder MPF Capital Stable Fund' 85,748,579 76,905,824

§chroder MPF Stable Growth Portfolio Schroder MPF Umbrella Fund - Schroder MPF Stable Growth Fund' 148,104,065 143,462,256

Schroder MEF Balanced Investment Portfolio Schroder MPF Umbrella Fund - Schroder MPF Balanced Investment Fund' 286384,075 282,652,422

RESTRICTED -105.

3



l11vest1ne11ts (Co11tii1ued)

2018 2017

HK$ HK$

Constituent funds (Continued)

Schroder MPF Growth Portfolio Schroder MPF Umbrella Fund - Schroder MPF Growth Fund' 189,155,212 186,725,189

Schroder MPF Internationa] Portfolio Schroder MPF Umbrella Fund - Schroder MPF International Fund2 183,722,619 171,314,540

Schroder MPF Asian Portfolio Schroder MPF Umbrella Fund - Schroder MPF Asian Fund' 289,256,i35 304,652,991

Schroder MPF Hong Kong Portfolio Schroder Institutional Pooled Funds - Hong Kong Equity Fund' 284,716,157 302,817,808

Schroder MPF Global Fixed Income Portfolio Schroder Institutional Pooled Funds - Global Bond Fund' 12,304,649 8,694,475

Schroder MPF Core Accumulation Fund Schroder MPF Umbrella Fund - Schroder MPF Core 60/ 40 Fund' 67,341,012 47,078,267

Schroder MPF Age 65 Plus Fund Schroder MPF Umbrella Fund - Schroder MPF Core 20/80 Fund' 7,760,539 3,770,027

Investments at fair value 1,687,704,851 1,640,466,580

Investments at cost 1,270,661,284 i,188,334,911

1 This policy guarantees that the capital will be preserved at the end of every five years. ' These funds are managed by Schroder Investment Management (Hong Kong) Limited, the

Invest1nent Manager of the Scheme.

RESTRICTED -106 -

·sUN LIFE MPF MASTER TRUST


4 Number of units in issue and net assets attributable to members per unit

(a) Net assets attributable to members

Net assets attributable to in embers represent a liability in the statement of net assets of the constituent funds, carried at the rede1nption amount that would be payable at the year end date if the members exercised the right to redeem units in the constituent funds.

(b) Number of units in issue and net assets attributable to members per unit

The net assets attributable to inembers per unit are calculated by dividing the net assets attributable to 1ne1nbers by the number of units in issue at the year end. The movement of the number of units in issue during the year and the net assets attributable to members per unit as at year end are as follows:

I

I

Units outstanding at the beginning of the year

Units issued Units redee1ned

Units outstanding at the end of the year

Net assets attributable to me1nbers per unit

RESTRICTED

Schroder MPF Capital Guaranteed Portfolio 2018 2017

Ordinary Ordinary Class Class B Class Units Units Units

1,909,271 1,935,326 1,534,826 734,850 582,869 581,169

(189,360) (428,101) (206,724)

2,454,761 2,090,094 1,909,271

HK$ HK$ HK$

16.46 17.35 16.53

-107-

Class B Units

1,658,657 403,634 (126,965)

1,935,326

HK$

17.38

Schroder MPF Conservative Portfolio 2018 2017


2,083,468 3,803,860 1,790,861 1,232,758 3,573,900 558,036 (410,285) (3,076,954) (265,429)

2,905,941 4,300,806 2,083,468

HK$ HK$ HK$

11.36 11.38 11.36

Class B Units

3,502,955 2,458,083 (2,157,178)

3,803,860

HK$

11.38



4 Number of Wiits in issue and net assets attributable to members per Wiit (Continued)

(b) Number of Wiits in issue and net assets attributable to members per Wiit (Continued)

Schroder MPF RMB and HKD Fixed Income Portfolio Schroder MPF Capital Stahle Portfolio 2018 2017 2018 2017

Ordinary Ordinary Ordinary Ordinary Class Class B Class Class B Class Class B Class Class B Units Units Units Units Units Units Units Units

Units outstanding at the beginning of the year 1,065,259 2,405,618 1,007,366 2,477,542 1,506,298 3,155,430 1,492,056 2,871,496

Units issued 337,154 1,078,540 207,695 261,204 582,954 696,991 346,592 414,193 Units redeemed (150,443) (749,246) (149,802) (333,128) (291,389) (310,041) (332,350) (130,259)

Units outstanding at the end of the year 1,251,970 2,734,912 1,065,259 2,405,618 1,797,863 3,542,380 1,506,298 3,155,430

HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ Net assets attributable to 1nembers per unit 13.14 13.78 13.20 13.82 15.85 16.63 15.98 16.73

RESTRICTED -108 -



4 Number of units in issue and net assets attributable to members per unit (Continued)

(b) Number of units in issue and net assets attributable to members per unit (Continued)

Schroder MPF Stable Growth Portfolio Schroder MPF Balanced Investment Portfolio


Units issued Units redeemed



RESTRICTED

2018 Ordinary

Class Units

2,330,796 547.649

(239,443)

2,639,002

HK$

18.45

Class B Units

5,242,164 646,257

(822,311)

5,066,110

HK$

19.24

2017 Ordinary

Class Class B Units Units

2,477,391 4,793,972 493,483 923,404

(640,078) (475,212)

2,330,796 5,242,164

HK$ HK$

18.39 19.14

-109 -

2018 2017 Ordinary Ordinary

Class Class B Class Class B Units Units Units Units

5,256,690 8,160,399 6,830,420 8,112,409 727,282 736,321 1,140,272 1,027,334

(700,950) (806,666) (2,714,002) (979,344).

5,283,022 8,090,054 5,256,690 8,160,399

HK$ HK$ HK$ HK$

20.92 21.69 20.58 21.30


NOTES TO THE FINANCIAL STA1EMENTS




Units issued Units redeemed

Schroder MPF Growth Portfolio 2018 2017


3,039,620 4,928,606 2,863,685 391,041 414,835 501,509

(422,237) (497,977) (325,574)

Class B Units

4,985,126 377,118

(433,638)

Schroder MPF International Portfolio 2018 2017


3,113,362 7,385,163 2,813,219 564,466 571,485 621,107

(373,155) (766,547) (320,964)

Units outstanding at the end of the year 3,008,424 4,845,464 3,039,620 4,928,606 3,304,673 7,190,101 3,113,362


RESTRICTED

HK$

23.63

HK$ HK$

24.31 23.00

-110-

HK$ HK$ HK$ HK$

23.62 16.62 17.88 15.48

Class B Units

7,237,394 610,017

(462,248)

7,385,163

HK$

16.62





Schroder MPF Asian Portfolio Schroder MPF Hong Kong Portfolio




Net assets attributable to members per unit

RESTRICTED

2018 Ordinary

Class Units

2,500,120

406,972 (418,875)

2,488,217

HK$

41.93

2017 Ordinary

Class B Class Units Units

4,591,064 2,354,063 340,968 349,708

(648,685) (203,651)

4,283,347 2,500,120

HK$ HK$

43.09 42.17

-111-

2018 2017 Ordinary Ordinary

Class B Class Class B Class Units Units Units Units

4,752,208 2,531,492 5,562,811 2,487,062 420,918 402,153 859,567 397.541

(582,062) (564,157) (1,145,183) (353,111)

4,591,064 2,369,488 5,27p95 2,531,492

HK$ HK$ HK$ HK$

43.24 36.43 38.04 3640

Class B Units

5,654,749 944,750

(1,036,688)

5,562,811

HK$

37.94



4 Number of units in issue and net assets attributable to members per rmit (Continued)


Schroder MPF Global Fixed Income Portfolio Schroder MPF Core Accumulation Fund 2018 2017 2018 1 2017

Ordinary Ordinary Ordinary Class Class B Class Class B Class Class B Units Units Units Units Units Units Units

Units outstanding at the beginning of the year 559,393 338,902 275,309 259,843 4,555,485

Units issued 470,798 327,212 377.773 234,030 2,438,641 4,946,967 Units redee1ned (278,047) (113,116) (93,689) (154,971) (791,597) (391,482)

Units outstanding at the end of the year 752,144 552,998 559,393 338,902 6,202,529 4,555,485

Effective from 16th July 2018, Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund only have one class of units each and therefore not subjectto any class. Prior to 16th July 2018, Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund only issued Class B and those unitholders had become the unitholders of the single class of units on 16th July 2018.

RESTRICTED -112-





Net assets attributable to members per unit (i)

Adjustment for different basis adopted for establishment cost per unit (ii)

Net assets attribqtable to me1nbers per unit (iii)

Schroder MPF Global Fixed Income Portfolio 2018 2017

Ordinary Ordinary Class Class B Class HK$ HK$ HK$

9.58 9.31 9.85

0.01 0.02 0.05

9.59 9.33 9.90

(i) Net Assets Value ("NAV'') is calculated according to HKFRSs.

Class B HK$

9.57

9.61

Schroder MPF Core Accu1nulation Fund 2018 1 2017


HK$ HK$ HK$

10.92 1040

10.92

(ii) In accordance with the Scheme's Consolidated Offering Document, tbe establishment cost of Schroder MPF Global Fixed Income Portfolio will be amortised over five years. However, the accounting policy of the Sche1ne for the purpose of :financial state1nents preparation in compliance with Hl<FRSs is to expense the establislnnent cost in the statement of comprehensive income as incurred. The differences between expensing the establishment cost as incurred in accordance with HKFRSs and capitalisation and amortisation of the establishment cost indicated in the Scheme's Consolidated Offering Document resulted in adjustments in the net asset attributable to me1nbers. This resulted in a decrease of HI($21,586 (2017: HK$ 4i,530) in the statement of financial position as at 30th September 2018 and an increase of HK$19,944 (2017: a decrease of HK$ 4i,530) is recognised in the statement of comprehensive income for the year ended 30th September 2018 of Schroder MPF Global Fixed Income Portfolio.

(iii) NAV is calculated according to the conditions stated in the Scheme's Consolidated Offering Document.

RESTRICTED

Effective from i6th July 2018, Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund only have one class of units each and therefore not subject to any class.

-113-




(b) Number ofuuits in issue and net assets attributable to members peruuit (Continued)




Net assets attributable to inembers per unit

Schroder MPF Age 65 Plus Fund 2018 1 2017

Ordinary Class

Units Units

378,644 685,236

(240,374)

823,506

HK$ HK$

10.18

Class B Units

496,814 (118,170)

378,644

HK$

10.11

Effective from 16th July 2018, Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund only have one class of units each and therefore not subject to any class. Priorto 16th July 2018, Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund only issued Class B and those unitholders had become the unitholders of the single class of units on 16th July 2018.

RESTRICTED -114-



5 Fina11cial risk ma11ageme11t

(a) Strategy in using f"111a11cial i.J1strume11ts

The investment objective of Schroder MPF Capital Guaranteed Portfolio is to achieve a positive return, after expenses, for as long as the investor remains invested in the constituent fund. The investment objective of Schroder MPF Conservative Portfolio is to provide a return, after expenses, which matches or exceeds the Hong Kong dollar savings rate. The investment objective of Schroder MPF RMB and HKD Fixed Income Portfolio is to provide a long term return of capital growth and income in Hong Kong dollars terms through investment in a portfolio consisting mainly of RMB and HKD denominated debt securities. The investment objective of Schroder MPF Capital Stable Portfolio is to achieve a long-term return in line with Hong Kong price inflation (as measured by the Consumer Price Index Type A). The investment objective of Schroder MPF Stable Growth Portfolio is to achieve a long-term return in excess of Hong Kong price inflation (as measured by the Consumer Price Index Type A). The investment objective of Schroder MPF Balanced Investment Portfolio and Schroder MPF Growth Portfolio is to achieve a long-term return in excess of salary inflation in Hong Kong (as indicated by the Hong Kong Monthly Digest of Statistics as published by the Census and Statistics Department of the Government of Hong Kong Special Administrative Region). The investment objective of Schroder MPF International Portfolio, Schroder MPF Asian Portfolio and Schroder MPF Hong Kong Portfolio is to achieve long-term capital growth. The investment objective of Schroder MPF Global Fixed Income Portfolio is to provide security of capital and a comparatively high income return. The investment objective of Schroder MPF Core Accumulation Fund is to provide capital growth to members by investing in a globally diversified manner. The investment objective of Schroder MPF Age 65 Plus Fund is to provide stable growth to members by investing in a globally diversified manner.

Except for the Schroder MPF Conservative Portfolio that holds only bank balances, other constituent funds achieve their respective investment objectives through investing in approved pooled investment funds that are either unit trusts or insurance policies which ultimately invest in equities, debt securities and money market instruments in designated markets. The constituent funds are therefore exposed to market price risk, interest rate risk, credit risk, liquidity risk and currency risk arising from the financial instruments held.

With effect from 1 April 2017, under the Mandatory Provident Fund Schemes (Amendment) Ordinance (June 2016), each MPF scheme has to offer a Default Investment Strategy ("DIS"). The DIS represents a major reform of the MPF System. Its aim is to provide scheme members with better retirement protection. The DIS is an investment solution consisting of two mixed assets funds: the Core Accumulation Fund and the Age 65 Plus Fund. Each DIS hasthree features: globally diversified investment, automatic reduction of investment risk as scheme members approach retirement age, and fee caps.

The risks and the respective risk management policies employed by the Scheme and its constituent funds to manage these risks are discussed below:

RESTRICTED - ll5 -



5 Fi11a11cial risk mru:1ageme11t ( Co11tinued)

(b) Market price risk

Market price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific to the individual instrument or factors affecting all instruments in the market.

All investments present a risk of loss of capital. The constituent funds' market price risk is managed through diversification of the underlying investment portfolio of the approved pooled investment funds held. The constituent funds' overall market positions are monitored on a regular basis by the Investment Manager.

As at year end, the overall market exposures for the constituent funds were as follows:

Scl1roder MPF Capital Guaranteed Portfolio

2018 201 Fair value

HK$ Cost HK$

% of net Fair value Cost HK$

%ofnet assets Held for trading

FWD MPF Capital Guaranteed

assets HK$

Policy 76,851,398 69,943,590 100.18% 65,367,528 57,539,695 100.24%

Schroder MPF Capital Guaranteed Portfolio invests in FWD MPF Capital Guaranteed Policy ("the insurance policy'') which in turns invests in listed/quoted equities and debt securities.

The following table shows the net market exposures of the investments in the insurance policy:

FWD MPF Capital Guaranteed Policy America Asia Pacific (excl. Japan and Hong Kong) Europe Hong Kong Japan Others

RESTRICTED -116 -

% of total iJ:1vestments of the i.J1sura11ce policy

2018 2017

41.50% 47.90% 2.20% 2.10%

35.20% 26.90% 12.30% 12.00%

7.70% 8.50% 0.60% 0.60%

99.50% 98.00%



5 Fina11cial risk manageme11t (Co11ti.J1ued)

(b) Market price risk (Continued)


2018 201 Fair value

HK$ Cost HK$

% of net Fair value Cost % ofnet HK$ assets Held for trading Assets HK$

Schroder Institutional Pooled Funds -RMBandHKD Fixed Income Fund 56,360,411 55,344,861 104.08% 47,025,253 45,759,748 99.38%

Schroder MPF RMB and HKD Fixed Income Portfolio invests in a single approved pooled investment fund, a sub-fund of the Schroder Institutional Pooled Funds - RMB and HKD Fixed Income Fund (the "underlying fund'1 which in turns invests in RMB and HKD denominated debt securities and money market instruments including fixed deposits, certificates of deposits, commercial papers, treasury bills and cash.

The following table shows the net market exposures of the investments in the underlying fund:

Schroder 1I1stitutio11al Pooled Fmtds - RMB a11d HKD Fixed hlcome Fw1d

Listed/ quoted debt securities Australia British Virgin Islands Canada Cayman Islands China France Germany Great Britain Honduras Hong Kong Japan Malaysia Netherlands New Zealand Saudi Arabia Singapore South Africa South Korea United States

Foreig11 excl1an_ge forward co11tracts

RESTRICTED -117-

% of net assets of the underlying fund

2018 2017

11.63% 9.61% 5.67% 5.04% 7.44% 3.29% 6.82% 2.35% 5.05% 8.68% 4.81% 4.38% 2.79% 6.04% 4.01% 7.39% 1.39% 0.48%

16.49% 11.15% 0.00% 0.95% 0.00% 1.36% 6.95% 4.38% 4.65% 1.59% 2.33% 0.00% 5.09% 5.40% 0.00% 0.73% 11.01% 16.96% 0.00% 5.18%

96.13% 94.96% 0.17% 0.00%

96.30% 94.96%



5 Fb1a11ci~ risk manage1ne11t (Co11tinued)



Held for trading

Schroder MPF Umbrella Fund -Schroder MPF Capital Stable

Fair value HK$

2018

Cost HK$

%of net Fair value

assets HK$

201

Cost HK$

% of net assets

Fund 85,748,579 74,886,545 98.09% 76,905,824 64,283,736 100.01%

Schroder MPF Capital Stable Portfolio invests in Schroder MPF Capital Stable Fund (the "underlying fund"). The underlying fund invests in a portfolio of approved pooled investment funds which in turns invest in listed equities and quoted debt securities.


Schroder MPF Capital Stable Fund America Asia Pacific Europe Others

Foreig11 exc]1ru1ge forward contracts

RESTRICTED -118 -

% of net assets of the underlying fund

2018 2017

32.47% 33.62% 3146% 32.76% 30.05% 27.64%

4.i2% 0.83%

98.10% 94.85% 0.01% 0.01%

98.11% 94.86%



5 FiI1ancial risk ma11ageme11t (Co11ti.J1ued)


Schroder MPF Stable Growth Portfolio 2018

Held for trading

Schroder MPF Umbrella Fund -Schroder MPF

Fair value HK$

Cost % of net HK$ assets

Fair value HK$

201 Cost % of net HK$ assets

Stable Growth Fund 148,104,065 119,023,676 101.32% 143,462,256 111,692,452 100.16%

Schroder MPF Stable Growth Portfolio invests in Schroder MPF Stable Growth Fund (the "underlying fWld"). The underlying fund invests in a portfolio of approved pooled investment frmds which in turns invest in listed equities and quoted debt securities.


Schroder MPF Stable Growth Fnnd America Asia Pacific Europe Others

Foreig11 excl1ange forward co11tracts

RESTRICTED - 119 -

% of11et assets oftl1e w1derlying fund

2018 2017

30.88% 30.45% 38.60% 40.80% 27.39% 25.30% 0.76% 0.62%

97.63% 97.17% 0.00% 0.00%

97.63% 97.17%



5 Fi11a11cial risk managemei1t ( Co11th1ued)


Schroder MPF Balanced I11vestme11t Portfolio

Held for trading

Schroder MPF Umbrella Fund -Schroder MPF Balanced Investment Fund

Fair value HK$

2018


Fair value HK$


Schroder MPF Balanced Investment Portfolio invests in Schroder MPF Balanced Investment Fund (the "underlying fund"), The underlying fund invests in a portfolio of approved pooled investment funds which in turns invest in listed equities and quoted debt securities.

The following table shows the net market exposures of the investments in the underlying fWld:

Scliroder MPF Balanced h1vestme11t Fund America Asia Pacific Europe Others

Foreig11 excl1a11ge forwards co11tracts


Held for trading


Fair value HK$

2018


% of net assets oftlte m1derlying fund

Fair value HK$

2018 2017

28.27% 45.91% 23.20%

0.59%

97.9796 0.01%

97.98%

01

26.87""6 48.72% 22.20%

0.44%

98.23% 0.00%

98.23%


Growth Fund 189,155,212 125,1441591 l00.12% 186,725,189 120,910,756 100.21%

Schroder MPF Growth Portfolio invests in Schroder MPF Growth Fund (the "underlying fund"). The underlying fund invests in a portfolio of approved pooled investment funds which in turns invest in listed equities and quoted debt securities.

RESTRICTED -120 -



5 FiJ1ancial risk ina11age1ne11t (Conti.J.1ued)


Schroder MPF Growth Portfolio (Continued)


Schroder MPF Growth Fund America Asia Pacific Europe Others

Foreign exchange forward contracts

Scl1roder MPF l11ternatio11al Portfolio

2018

Held for trading

Schroder MPF Umbrella Fund -Schroder MPF International Fund

Fair value HK$


% of11et assets oftl1e w1derlying fund

2018 2017

24.92% 52.96% 19.71% 0.03%

97.62% 0.01%

97.63%

Fair value HK$

201

22.87% 55.83% 20.16%

0.02%

98.88% 0.00%

98.88%

Cost % of net HK$ Assets

Schroder MPF International Portfolio invests in Schroder MPF International Fund (the "underlying fund"), The underlying fund invests in a portfolio of approved pooled investment funds which in turns invest in listed equities.

The following table shows the net market exposures of the investments in the underlying fwtd:

Scltroder MPF I11ter11ational Fm1d America Asia Pacific Europe Others

Foreig11 excl1ru1ge forward contracts

RESTRICTED -121 -

% of net assets oftl1e nnderlying fund

2018 2017

57.01% 51.78% 23.46% 24.61% 19.04% 23.33%

0.01% 0.01%

99.52% 99.73% 0.16% 0.10%

99.68% 99.83%



5 FiI1a11cial risk 1naJ1ageme11t (Co11tiJ1ued)


Schroder MPF Asian Portfolio

Held for trading

Schroder MPF Umbrella Fund -Schroder MPF Asian

Fair value HK$

20 8 Cost % of net HK$ assets

Fair value HK$


Fund 289,256,135 195,764,010 100.11% 304,652,991193,860,357 100.21%

Schroder MPF Asian Portfolio invests in Schroder MPF Asian Fund (the "underlying fund") which in turns invests in listed equities.


Scl1roder MPF Asia11 Fund LiSted equities America Asia Pacific

Foreigtt excl1ru1ge forward co11tracts


Held for trading

Schroder Institutional Pooled Funds -Hong Kong Equity

Fair value HK$

2018

%of Cost net HK$ assets

% of net assets oftlte w1derlying fund

2018 2017

3.43% 91.99%

95.42% 0.02%

95.44%

Fair value HK$

201

0.00%

97.29%

97.29% 0.00%

97.29%


Fund 284,716,157 220,092,849 99.18% 302,817,808 221,695,032 99.86%

Schroder MPF Hong Kong Portfolio invests in a sub-fund of the Schroder Institutional Pooled Funds - Hong Kong Equity Fund which in turns invests in Hong Kong equities.

RESTRICTED - 122 -



5 Fi.J.1a11cial risk manageme11t ( Co11tii1ued)



The followi.ng table shows the net market exposures of the investments in the underlying fund:

Schroder Institutional Pooled Funds - Hong Kong Equity Fund Listed equities China Hong Kong Singapore United States

Schroder MPF Global FiXed Income Portfolio

2018

%of Fair value Cost net

Held for trading HK$ HK$ assets

Schroder Institutional Pooled Funds -Global Bond Fund 12,304,649 12,46:2,864 99.55%

% of11et assets oftlte m1derlying fund

2018 2017

0.00%

95.73% 1.36% 2.48%

99.57%

201

Fair value Cost HK$ HK$

8,694.475 8,510,781

0.36% 91.12% 2.44% 4.88%

98.80%

% ofnet assets

99.28%

Schroder MPF Global Fixed Income Portfolio invests in Schroder Institutional Pooled Funds -Global Bond Fund (the "underlying fund") which in turns invests in quoted debt securities and derivative financial instruments.

RESTRICTED -123 -



5 Fina11cial risk 1na11ageme11t (Co11ti.11ued)


Schroder MPF Global Fixed Income Portfolio (Continued)


Schroder fostitutional Pooled Funds - Global Bond Fund Listed/quoted debt securities Australia Austria Belgium British Virgin Islands Canada Cayman Islands Denmark Finland France Germany Great Britain Ireland Israel Italy Japan Luxembourg Mexico Netherlands Norway Philippines Poland Singapore South Korea United States

Foreign excl1a11ge forward co11tracts

RESTRICTED -124-

% of net assets oftl1e underlying fund

2018 2017

2.69% 0.60% 1.82% 0.42% 2.45% 0.60% 0.04% 0.63% 5.04%

12.79% 4.29% 0.16% 0.24% 1.67%

17.34% 9.41% 0.00% 6.65% 0.06% 2.95% 0.32% 0.00%

2.72% 25.59%

3.94% 0.60% 0.63% 0.42% 1.70% o.61% 0.19% 0.62% 3.89%

14.28% 4.00% 0.16% 0.24% 0.00% 11.43% 8.58% 0.59% 6.84% 0.31% 2.80% 0.32% 1.21% 4.72%

30.38%



5 Fh1a11cial risk ma11ageme11t (Co11tinued)


Scliroder MPF Core Accumulation Fund

Held for trading


Fair value HK$

2018

Cost HK$

Core 60/40 Fund 67,341,012 63,382,998

%of net

assets Fair value

HK$

201


Schroder MPF Core Accumulation Fund invests in Schroder MPF Umbrella Fund - Schroder MPF Core 60/ 40 Fund (the "underlying fund") which in turns invests in two approved pooled investment funds as allowed under the Mandatory Provident Fund Schemes (General) Regulation.


Schroder MPFCore 60/40 Fund America Asia Pacific Europe Others

RESTRICTED -125-

% of11et assets oftlte underlying fund

2018 2017

52.87% 48.33% 15.29% 16.36% 29.05% 29.71% 0.46% 0.41%

97.67% 94.81%



5 Fi11ancial risk ma11ageme11t (Co11tll1ued)

(h) Market price risk (Continued)


2018 201 Fair value Cost % of net Fair value Cost % of net

Held for trading HK$ HK$ assets HK$ HK$ assets

Schroder MPF Umbrella Fund -Schroder MPF Core 20/80 Fund 7,760,539 7,677,872 92.51% 3,770,027 3,739,725 98.44%

Schroder MPF Age 65 Plus Fund invests in Schroder MPF Umbrella Fund - Schroder MPF Core 20/80 Fund (the "underlying fund") which in turns invests in two approved pooled investment funds as allowed under the Mandatory Provident Fund Schemes (General) Regulation.

The follovving table shows the net market exposures of the investments in the underlying fund:

Schroder MPF Core 20/80 Fund America Asia Pacific Europe Others

RESTRICTED -126 -

% of11et assets oftl1e underlying fund

2018 2017

46.22% 43.62% 12.86% 13.23% 38.21% 38.23%

0.16% 0.14%

97.45% 95.22%



5 Fina11cial risk ma11ageme11t (Co11ti.J1ued)


The table below summarizes the impact on the constituent funds' net assets attributable to members as a result of increases/(decreases) of the key indices to which the constituent funds' underlying investments are exposed. The analysis is based on the assumption that the indices had increased/( decreased) by the respective percentage with all other variables held constant and the fair value of the constituent funds' investments moved according to the historical correlation with the indices. Market price risk for the Schroder MPF RMB and HKD Fixed Income Portfolio and Schroder MPF Global Fixed Income Portfolio are disclosed in note 5( c) under interest rate risk. The Schroder MPF Conservative Portfolio had no market price risk as it did not hold any investments as at 30th September 2018 and 2017.

Constituent funds

Schroder MPF Capital Guaranteed Portfolio (Not&)



Schroder MPF Balanced Investment Portfolio




RESTRICTED

Benchmark components

Ff SE MPF Asia Pacific ex Japan ex HK, FTSE MPF China, FTSE Europe, FTSE MPF Hong Kong, FTSEJapan, FTSE N.America(Note')

FTSE MPF Asia Pacific ex Japan ex HK, FTSE MPFChina, FTSE Europe, FTSE MPF Hong Kong, FTSE Japan, FTSE N.America(Note')

FTSE MPF Asia Pacific ex Japan ex HK, FTSE MPF China, FrSE Europe, FTSE MPF Hong Kong, FTSE Japan, FTSE N .America(Note2)

FfSE MPF Asia Pacific ex Japan ex HK, FrSE MPF China, FrSE Europe, FrSE MPF Hong Kong, FrSE Japan, FTSE N.America(Note')

FTSE MPF Asia Pacific ex Japan ex HK, FTSE MPF China, FTSE Europe, FTSE MPF Hong Kong, FrSE Japan, FTSE N.America, FTSE MPF Allworld IDX(Note') .

FrSE MPF Asia Pacific ex JP ex AU ex NZ

-127-

Benchmark increases/ (decreases) by 5%

Impact on Impact on net assets net assets

attributable attributable to members to members

2018 2017 HK$ HK$

3,842,570 3,268,376

1,327,425 1,188,203

3,764,659 3,5n,874

10,112,222 9,737,792

9,009,600

11,868,535 11,702,687



5 Fh1a11cial risk ma11ageme11t ( Co11tiJ1ued)


Col)stituent funds


Schroder MPF Core Accumulation Fund 1

Schroder MPF Age 65 Plus Fund 1

Benchmark components

FrSE MPF Hong Kong

FrSE MPF Allworld !DX

FrSE MPF Allworld !DX

1 The constituent funds were launched on 1st April 2017.

Benchmark increases/ (decreases) by 5%

Impact on Impact on net assets net assets

attributable attributable to members to members

2018 2017

HK$ HK$

14,033,549 13,462,714

35,799

Note'-The Schroder MPF Capital Guaranteed Portfolio provides a guarantee payable upon 5 years of continuous investment or over a lesser period if the member reaches 65. The analysis is based on the asswnption that with all other variables held constant and the fair value of the policy's investments will be impacted by the same extent as the market movement.

Note2 -The composition of benchmark components depends on the weighted investment holdings of the respective underlying funds.

RESTRICTED -128 -



5 Fh1a11cial risk ma11ageme11t ( Co11tinued)


The Investment Manager has used their view of what would be a "reasonable shift" in each key market to estimate the change for use in the market sensitivity analysis above.

Disclosures above are shown in absolute terms, changes and impacts could be positive or negative. Changes in market index% are revised annually depending on the Investment Manager's current view of market volatility and other relevant factors.

Each constituent fund's investments in Investee Funds are subject to the terms and conditions of the respective Investee Funds' offering doctunents and are susceptible to market price risk arising from uncertainties about future values of those Investee Funds. The right of the constituent fund to request redemption of its investments in the Investee Funds is on daily basis.

Each constituent fund's holding in an Investee FW1d, as a percentage of the Investee Fund's total net asset value,-will vary from time to time dependent on the volume of subscriptions and redemptions at the Investee Fund level. It is possible that each constituent fund, may, at any point of time, hold a majority of an Investee Fund's total units in issue.

The exposure to investments in Investee Funds at fair value by strategy employed is disclosed in the following table. These investments are included in '1investments" in the statement of financial position of each of the constituent fund.


Listed/quoted investment funds

Capital Guaranteed Insurance Policy

2018

Number of Investee

Funds Fair value HK$

1

2017

%of Number of %of net Investee net

assets Funds Fair value assets HK$

100.24%

During the year ended 30th September 2018 total net gains incurred on investments in Investee Fund was HK$346,827 (2017: total net gains incurred HK$1,434,170). As at 30th September 2018 and 30th September 2017 there were no capital commitment obligations and no amounts due to Investee Funds for unsettled purchases.


201'8 2017

Listed/quoted Number of %of Number of %of investment Investee net Investee net funds Funds Fair value assets Funds Fair value assets

HK$ HK$

Fixed income fund 1 56,360,411 104.08% 1 47,025,253 99.38%

During the year ended 30th September 2018 total net gains incurred on investments in Investee Fund was HK$132,567 (2017: total net gains incurred HK$1,117,324). As at 30th September 2018 and 30th September 2017 there were no capital commitment obligations and no amounts due to Investee Funds for unsettled purchases.

RESTRICTED - 129 -



5 Fi11a11cial 1·isk ma11ageme11t (Continued)




Multi-Asset Fund

Number of Investee

Funds

1

2018

Fair value HK$

2017

%of Numberof %of net Investee net

assets Funds Fair value assets HK$

98.09% 1 76,905,824 100.01%

During the year ended 30th September 2018 total net loss incurred on investments in Investee Fund was HK$137,544 (2017: total net gains incurred HK$3,619,308). As at 30th September 2018 and 30th September 2017 there were no capital commitment obligations and no amounts due to Investee Funds for unsettled purchases.


2018 2017


HK$ HK$

Multi-Asset Fund 1 148,104,065 101.32% 143,462,256 100.16%

During the year ended 30th September 2018 total net gains incurred on investments in Investee Fund was HK$1,804,813 (2017: total net gains incurred HK$12,598,003). As at 30th September 2018 and 30th September 2017 there were no capital commitment obligations and no amounts due to Investee Funds for unsettled purchases.

Schroder MPF Balanced h1vestme11t Portfolio

2018 2017


HK$ HK$

Multi-Asset Fund 286,384,075 100.12% 1 282,652,422 100.19%

During the year ended 30th September 2018 total net gains incurred on investments in Investee Fund was HK$7,321,382 (2017: total net gains incurred HK$38,380,747). As at 30th September 2018 and 30th September 2017 there were no capital commitment obligations and no amounts due to Investee Fnnds for unsettled purchases.

RESTRICTED -130 -



5 Fi.J.1ru1cial risk ma11ageme11t (Co11tiJ1ued)


Sclu·oder MPF Growth Portfolio

2018 2017


HK$ HK$

Multi-Asset Fund 1 189,155,212 100.12% 186,725,189 100.21%


Scliroder MPF Inter11ational Portfolio

2018 2017


HK$ HK$

Equity fund 183,722,619 100.11% 171,314,540 100.18%

During the year ended 30th September 2018 total net gains incurred on investments in Investee Fund was HK$14,283,303 (2017: totai net gains incurred HK$25,756,878). As at 30th September 2018 and 30th September 2017 there were no capital commitment obligations and no amounts due to Investee Funds for unsettled purchases.


2018 2017


HK$ HK$

Equity fund 1 289,256,135 100.11% 1 304,652,991 100.21%


RESTRICTED -131 -



5 FiI1ancial risk ma11ageme11t (Co11tb1ued)




Equity fund

Number of Investee

Funds

2018

Fair value HK$

% of Number of net

assets Investee

Funds

2017

Fair value HK$

302,817,808

%of net

assets

99.86%

During the year ended 30th September 2018 total net gains incurred on investments in Investee Fund was HK$4,977,242 (2017: total net gains incurred HK$6i,976,088). AB at 30th September 2018 and 30th September 2017 there were no capital commitment obligations and no amounts due to Investee Funds for unsettled purchases.


2018 2017


HK$ HK$

Fixed income fund 1 12,304,649 99.55% 8,694,475 99.28%

During the year ended 30th September 2018 total net loss incurred on investments in Investee Fund was HK$25i,769 (2017: total net gains incurred HK$34,681). As at 30th September 2018 and 30th September 2017 there were no capital commitment obligations and no amounts due to Investee Funds for unsettled purchases.

Scllroder MPF Core Accumulation Fw1d

2018 2017


HK$ HK$

Multi-Asset Fund 1 67,3411012 99.38% 1 47,078,267 99.31%

During the year ended 30th September 2018 total net gains incurred on investments in Investee Fund was HK$3,224,409 (2017: total net gains incurred HK$i,233,872). AB at 30th September 2018 and 30th September 2017 there were no capital commitment obligations and no amounts due to Investee Funds for unsettled purchases.

RESTRICTED -132-



5 Fi11ancial risk mai1ageme11t (Co11tinued)



2018 2017


HK$ HK$

Multi-Asset Fund 1 7,760,539 92.51% 1 3,770,027 98.44%

During the year ended 30th September 2018 total net gains incurred on investments in Investee Fund was HK$85,301 (2017: total net gains incurred HK$36,578). As at 30th September 2018 and 30th September 2017 there were no capital commitment obligations and no amounts due to Investee Funds for unsettled purchases.

(c) Interest rate risk

Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates.

As at 30th September 2018 and 2017, the majority of the financial assets and liabilities of the Scheme, Schroder MPF Capital Guaranteed Portfolio, Schroder MPF Asian Portfolio, Schroder MPF Hong Kong Portfolio and Schroder MPF International Portfolio are non-interest bearing. As a result, the Scheme and these constituent fwids are not subject to significant amounts of risk due to fluctuations in the prevailing levels of market interest rates. Any excess cash and cash equivalents are invested at short-term market interest rates.

For the Schroder MPF Conservative Portfolio, the widerlying assets include mainly bank balances. For the Schroder MPF Balanced Investment Portfolio, Schroder MPF Capital Stable Portfolio, Schroder MPF Growth Portfolio, Schroder MPF RMB and HKD Fixed Income Portfolio, Schroder MPF Stable Growth Portfolio, Schroder MPF Global Fixed Income Portfolio, Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund, the underlying investment funds invest partly in debt securities and money market instruments. These constituent fwids are therefore exposed to risk due to fluctuations in the prevailing levels of market interest rates.

At year end, should the relevant market interest rates have moved down by 5 basis points v.rith all other variables held constant, the impacts on the net assets attributable to members of these 9 (2017: 9) constituent funds are shown at the table below. The same change in opposite direction would cause the opposite movement in the net assets attributable to members by equal amounts.

RESTRICTED -133 -



5 Fh1ancial risk ma11ageme11t (Continued)

(c) Interest rate risk (Continued)

Estimated Estimated Constitue11t fwtds impact i1npact

2018 2017 HK$ HK$

Schroder MPF Balanced Investment Portfolio 236,i39 208,762

Schroder MPF Capital Stable Portfolio 180,523 150,335

Schroder MPF Growth Portfolio 37.539 30,090

Schroder MPF RMB and H KD Fixed Income Portfolio 43,884 27,017

Schroder MPF Conservative Portfolio 4,932 4,020

Schroder MPF Stable Growth Portfolio 225,865 196,962

Schroder MPF Global Fixed Income Portfolio 42,107 28,892

Schroder MPF Core Accumulation Fund 92,237 63,195

Schroder MPF Age 65 Plus Fund 22,115 10,645

The Investment Manager has used their view of what would be a "reasonable possible shift11 in the market interest rates to estimate the change for use in the interest rate risk sensitivity analysis above.

Disclosures above are shown in absolute terms, changes and impacts could be positive or negative. Changes in basis points are revised annually depending on the Investment Manager's current view of market interest rate sensitivity and other relevant factors.

( d) Credit and custody risk

Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with the Scheme and its constituent funds.

Certain transactions entered into by the constituent funds may expose them to the risk associated with counterparties not able to fulfill their obligations. To mitigate this risk, the constituent funds only buy and sell through brokers who have been approved as an acceptable counterparty according to the Investment Manager's internal counterparty credit review procedures.

The Scheme's fmancial assets that are potentially subject to concentration of credit risk consist principally of bank deposits of HK$15,i45,057 (2017: HK$8,610,881) wbich are placed with The Hongkong and Shanghai Banking Corporation Limited with credit rating issued by S&P at the year end of A-1+ (2017: A-i+ ).

The constituent funds' financial assets which are potentially subject to concentration of credit risk consist principally of bank deposits and investments held with the custodians. The table below summarises the deposits placed vvith banks and investments placed with custodian at 30th September 2018 and 2017:

RESTRICTED -134 -



5 Fi11a11cial risk ma11age1ne11t (Co11ti.J1ued)

(d) Credit and custody risk (Continued)


Credit Source of HK$ rating credit rating

At 30th September 2018 Custodian HSBC Provident Fund Trustee (Hong Kong) Limited 76,85i,398 A-1+ S&P

Bank The Hongkong and Shanghai Banking

Corporation Limited 11,254 A-1+ S&P

At 30th September 2017 Custodian HSBC Provident Fund Trustee (Hong Kong) Limited 65,367,528 A-1+ S&P

Bank The Hongkong and Shanghai Banking Corporation Limited 4,805 A-1+ S&P

Sc11roder MPF Conservative Portfolio


At 30th September 2018 Banks Agricultural Bank of China 8,115,898 A-1 S&P ANZ Bank 7,503,471 A-1+ S&P Bank of China, Hong Kong Branch 4,509,078 A-1 S&P Bank of Communications, Hong Kong Branch 3,821,831 A-2 S&P BNP Paribas, Hong Kong Branch 6,500,000 A-1 S&P China Construction Bank (Asia) 7,857,630 A-1 S&P Dah Sing Bank Limited 6,756,779 P-1 Moody's DBS Bank Ltd 6,333,162 A-1+ S&P The Hongkong and Shanghai Banking Corporation Limited 4.470,828 A-1+ S&P

Industrial and Commercial Bank of China S&P (Asia) 7,920,480 A-1

National Australia Bank Limited 6,742,322 A-1+ S&P Standard Chartered Bank 6,692,314 A-1 S&P Oversea-Chinese Banking Corporation Ltd 6,350,926 A-1+ S&P

83,574,719

RESTRICTED -135-



5 Fil1a11cial risk ma11agement (Co11ti.I1ued)

(d) Credit a11d custody risk (Co11ti.J.1ued)

Schroder MPF Conservative Portfolio (Continued)

Credit Source of HK$ rati.J1g credit rating

At 3otl1 September 2017 Banks Agricultural Bank of China 5,023,938 A-1 S&P ANZ Bank i,96i,889 A-1+ S&P Bank of China, Hong Kong Branch 6,121,221 A-1 S&P Bank of Communications, Hong Kong Branch 4,811,265 A-2 S&P BNP Paribas, Hong Kong Branch 4,066,730 A-1 S&P China Construction Bank (Asia) 6,280,826 A-1 S&P Citibank N.A. 3,151,593 A-1 S&P Dah Sing Bank Limited 5,197,752 P-2 Moody's DBS Bank Ltd 3,776,400 A-1+ S&P Hang Seng Bank 4,134.772 A-1+ S&P The Hongkong and Shanghai Banking Corporation Limited 4,550,984 A-1+ S&P

Industrial and Commercial Bank of China (Asia) 5,539,846 A-1 S&P

National Australia Bank Limited 3,902,866 A-1+ S&P Standard Chartered Bank 4,147,666 A-1 S&P Oversea-Chinese Banking Corporation Ltd 5,290,578 A-1+ S&P

67,958,326


Credit Source of HK$ rati.J.1g credit rating

At 3otl1 September 2018 Custodian HSBC Provident Fund Trustee (Hong Kong) Limited 56,360,411 A-1+ S&P




RESTRICTED



5 Financial risk ma11ageme11t ( Co11tinued)









Credit Source of HK$ rati.J.1g credit ratit1g




Bank The Hongkong and Shanghai Banking Corporation Llmited 86,915 A-1+ S&P

RESTRICTED -137-



5 Fina11cial risk manageme11t (Continued)


Schroder MPF Balanced Invesnnent Portfolio

C1·edit Source of HK$ rating credit rating






Credit Source of HK$ rat:htg credit rating





RESTRICTED -138 -



5 Financial risk mru1ageme11t (Co11tinued)



Credit Source of HK$ rat:iI1g credit rating


Bank The Hongkong and Shanghai Banking Corporation Llmiteq 65,187 A-1+ S&P




Credit Source of HK$ rath1g credit rati.11g





RESTRICTED


NOTESTOTHEFINANCIALSTATEMENTS

5 Filtancial risk manageme11t (Co11th1ued)



Credit Source of HK$ ratiI1g credit rating

At 3ot]1 September 2018 Custodian HSBC Provident Fund Trustee (Hong Kong) Limited 284, 716,157 A-1+ S&P

Bank The Hongkong and Shanghai Banking Corporation Limited u9,893 A-1+ S&P

At 30th September 2017 Custodian HSBC Provident Fund Trustee (Hong Kong) Llmited 302,8171808 A-1+ S&P



Credit Source of HK$ rath1g credit rating


Bank The Hongkong and Shanghai Banking cOrporation Limited 55,322 A-1+ S&P

At 30th September 2017 Custodian HSBC Provident Fund Trustee (Hong Kong) Llmited 8,694,475 A-1+ S&P


RESTRICTED -140-



5 Fi11ancial risk ma11ageme11t (Co11t:iJ1ued)


Scl1roder MPF Core Accumulation Fund

Credit Source of HK$ rathtg credit rati11g

At 3otl1 September 2018 Custodian HSBC Provident Fund Trustee (Hong Kong) Limited 671341,012 A-1+ S&P

~ The Hongkong and Shanghai Banking Corporation Limited 147,675 A-1+ S&P



Schroder MPF Age 65 Plus Fw1d

Credit Source of HK$ rati.J1g credit rati11g



At 30th September 2017 Custodian HSBC Provident Fw1d Trustee (Hong Kong) Limited 3,770,027 A-1+ S&P

Bank The Hongkong and Shanghai Banking Corporation Llmited 42,603 A-1+ S&P

All constituent funds (other than the Schroder MPF Capital Guaranteed Portfolio and Schroder MPF Conservative Portfolio) invested in approved pooled investment funds as at 30th September 2018 and 2017, which managed by Schroder Investment Management (Hong Kong) Limited, also the Investment Manager of the Scheme and its constituent funds. As such, these constituent funds are not exposed to Significant credit risk.

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5 Fina11cial risk ma11ageme11t (Co11ti.J1ued)


As at 30th September 2018 and 2017, Schroder MPF Capital Guaranteed Portfolio invested in an insurance policy issued by a reputable insurer, FWD Llfe Insurance Company (Bermuda) Limited. FWD Life Insurance Company (Bermuda) Limited is a part of FWD Group whose long-term credit rating is As (2017: As) by Moody's. As such, Schroder MPF Capital Guaranteed Portfolio is not exposed to significant credit risk.

The maximum exposure to credit risk at year end is the carrying amount of the financial assets as shown on the statement of net assets available for benefits for the Scheme and the statement of net assets for the constituent funds.

None of the assets is impaired nor past due but not impaired.

( e) liquidity risk

Liquidity risk is the risk that an enterprise will encounter difficulty in settling a liability.

In accordance with the Mandatory Provident Fund legislation, for the Scheme the maximwn intervals for a request for redemption and the actual payment of accrued benefits (whether from mandatory or voluntary contributions) and a request by the Trustee of the Scheme for redemption and the actual payment to the Trustee of the Scheme of redemption proceeds of the underlying pooled investment funds of any constituent fund will be thirty days.

The constituent funds are exposed to daily cash redemptions of units in the constituent funds. The constituent funds invest the majority of their assets in investments that are considered to be readily realisable.

The financial liabilities of the Scheme and its constituent funds as a:t 30th September 2018 and 2017 were due within 1 month based on the remaining period at the year end date to the contractual maturity date. Balances due vvithin 12 months equal their carrying balances, as the impact of discounting is not significant.

Units are redeemed on demand at members' option of the constituent funds. However, the Trustee does not envisage that the contractual maturity of less than one month for net assets attributable to members will be representative of the actual cash outflows, as members typically retain them for the long term. As at 30th September 2018 and 2017, no individual member held more than 10% of each constituent fund's units.

The Scheme and its constituent funds manage their liquidity risk by investing in investments that they expect to be able to liquidate within 1 month or less. The expected liquidity of all assets of the Scheme and its constituent funds is less than 1 month.

(f) Currency risk

Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates.

As at 30th September 2018 and 2017, the Scheme and its constituent funds did not have any assets or liabilities denominated in currencies other than their functional currency, Hong Kong dollar. As a result, the Scheme and its constituent funds have no currency exposure.

RESTRICTED -142 -



5 Fh1ancial risk ma11ageme11t (Continued)

(g) Fair value estimation

The fair value of financial assets and liabilities traded in active markets (such as trading securities) are based on quoted market prices at the close of trading on the year end date. The constituent funds utilise the last traded market price as its fair valuation inputs for both financial assets and financial liabilities.

An active market is a market in which transactions for the asset or liability take place vvith sufficient frequency and volume to provide pricing information on an ongoing basis.

A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an ann's length basis.

The carrying value less impairment provision of other receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the constituent funds for similar financial instruments.

HKFRS 13 requires the constituent funds to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).

• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).

Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability.

The determination of what constitutes 'observable' requires significant judgment by the constituent funds. The constituent funds consider observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

The following table analyses within the fair value hierarchy the constituent funds' investments (by class) measured at fair value at 30th September 2018 and 2017:

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5 Fina11cial risk ma11agement ( Co11tiI1ued)

(g) Fair value estimatio11 (Co11tinued)

Scl1roder MPF Capital Guara11teed Portfolio

At 30th September 2018 Assets Level 1 Level 2 Level 3 Total balance

HK$ HK$ HK$ HK$ Held for trading FWD MPF Capital

Guaranteed Policy 76,851,398 76,851,398

Total assets at fair value tl1rougl1 profit or loss 76,85i,398 76,851,398


HK$ HK$ HK$ HK$ Held for trading FWD MPF Capital

Guaranteed Policy 65,367,528 65,367,528

Total assets at fair value througl1 profit or loss 65,367,528 65,367,528

Schroder MPF RMB and HKD Fixed hlcome Portfolio


HK$ HK$ HK$ HK$ Held for trading Schroder Institutional Pooled

Funds - RMB and HKD Fixed Income Fund 56,360,411 56,360,411

Total assets at fair value tl1rougl1 profit or loss 56,360,411 56,360,411

At 3otl1 September 2017 Assets Level 1 Level 2 Level 3 Total balance


Funds - RMB and HKD Fixed Income Fund 47,025,253 47,025,253

Total assets at fair value through profit or loss 47,025,253 47,025,253

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5 FiI1a11cial risk ma11agement ( Co11ti.J.1ued)

(g) Fair value estimation (Conti.J1ued)



HK$ HK$ HK$ HK$ Held for trading Schroder MPF Umbrella

Fund - Schroder MPF Capital Stable Fund 85,748,579 85,748,579




Fund - Schroder MPF Capital Stable Fund 76,905,824 76,905,824


Schroder MPF Stable Growth Po1-tfolio

At 3otl1 September 2018 Assets Level 1 Level 2 Levels Total balance


Fund - Schroder MPF Stable Growth Fund 148,104,065 148,104,065

Total assets at fair value tl1roug11 profit or loss 148,104,065 148,104,065



Fund - Schroder MPF Stable Growth Fund 143,462,256 143,462,256

Total assets at fair val11e tl1rougl1 profit or loss 143,462,256 143,462,256

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5 Fi11a11cial risk ma11ageme11t (Co11tinued)

(g) Fair value estimatio11 (Co11ti.J1ued)

Sein-oder MPF Bala11ced h1vesbne11t Portfolio



Fund - Schroder MPF Balanced Jnvestinent Fund 286,384,075 286,384,075




Fund - Schroder MPF Balanced Investment Fund 282,652,422 282,652,422





Fund - Schroder MPF Growth Fund 189,155,212 189,155,212




Fund - Schroder MPF Growth Fund 186,725,189 186,725,i89


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5 Fh1a11cial risk 1na11ageme11t (Co11tinued)

(g) Fair value estimatio11 (Continued)

Sc]1roder MPF I11ternatio11al Portfolio



Fund - Schroder MPF International Fund 183,722,619 183,722,619

Total assets at fair value tl1rough profit or loss 183,722,619 183,722,619



Fund - Schroder MPF International Fund 171,314,540 171,314,540

Total assets at fair value tltrough profit or loss 171,314,540 171,314,540




Fund - Schroder MPF Asian Fund 289,256,135 289,256,135


At 3otl1 Septe1nher 2017 Assets Level 1 Level 2 Level 3 Total balance


Fund - Schroder MPF Asian Fund 304,652,991 304,652,991

Total assets at fair value tl1rougl1 pro:fit or loss 304,652,991 304,652,991

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5 Fi.J.1ru1cial risk ma11ageme11t (Con_ti.J.1ued)

(g) Fair value esthnatio11 (Conti.J.1ued)



HK$ . HK$ HK$ HK$ Held for trading Schroder Institutional Pooled

Funds - Hong Kong Equity Fund 284,716,157 284,716,157




Funds - Hong Kong Equity Fund 302,817,808 302,817,808





Funds - Global Bond Fund 12,304,649 12,304,649




Funds - Global Bond Fund 8,694.475 8,694.475

Total assets at fair value through profit or loss 8,694.475 8,694.475

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NOTESTOTHEFINANCIALSTATEMENTS

5 Fina11cial risk manageme11t (Continued)

(g) Fair value estimatio11 (Co11th1ued)

Scln·oder MPF Core Accum1tlatio11 Fu11d



Fund - Core 60 / 40 Fund 67,341,012 67,341,012

Total assets at fair value tlirough profit or loss 67,341,012 67,341,012



Fund - Core 60 / 40 Fund 47,078,267 47,078,267

Total assets at fair value through profit or loss 47,078,267 47,078,267




Fund - Core 20/80 Fund 7,760,539 7,760,539

Total assets at fair value throug)1 profit or loss 7,760,539 7,760,539



Fund - Core 20/80 Fund 3,770,027 3,770,027

Total assets at fair value thro11gl1 profit or loss 3,770,027 3,770,027

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5 Fina11cial risk manageme11t (Co11tiI1ued)

(g) Fair value estimation (Continued)

Investments whose values are based on quoted market prices in active markets, and therefore classified '\vithin level I, include quoted invesbnent funds. The constituent funds do not adjust the quoted price for these instruments.

Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within level 2,

Investments classified within level 3 have significant unobservable inputs, as they trade infrequently. As of 30th September 2018 and 2017, the constituent funds did not hold any investments classified in level 3.

For the year ended 30th September 2018 and 2017 there were no transfers betvveen levels of investments held by the constituent funds.

The financial assets and liabilities included in the statement of financial position, other than investments, are carried at amortised cost; their carrying values are a reasonable approximation of fair value. There are no other assets or liabilities not at fair value but for which the fair value is disclosed.

01) Capital risk rna11ageme11t

The capital of the constituent funds is represented bythe units in the constituent funds, and shown as net assets attributable to members in the statement of financial position. The amount of net assets attributable to members for each constituent fund can change significantly on a daily basis as the constituent funds are subject to daily subscriptions and redemptions at the discretion of members. Subscriptions and redemptions of Wlits during the year are shown in the statement of changes in net assets attributable to members. The constituent funds' objective when managing capital is to safeguard their ability to continue as a going concern in order to provide retirement benefits to members and benefits for other stakeholders and to maintain a strong capital base to support the development of the investment activities of the constituent funds.

In order to maintain or adjust the capital structure, the policy of the constituent ftmds is to perform the following:

monitor the l~vel of daily subscriptions and redemptions relative to the liquid assets; and redeem and issue units in accordance vvith the trust deed of the Scheme.

The Trustee and the Investment Manager monitor capital on the basis of the value of net assets attributable 'to members.

(i) Fi.J.1ancial i.J.1struments by category oftl1e Scl1eme and tl1e co11stitue11t fu11ds

Financial assets

Apart from investments as disclosed in the statement of financial position, all other financial assets as disclosed in the statement of financial position, including bank deposit interest receivable, amounts receivable on sale of investments, amounts receivable on subscription and bank balances are categorised as "loans and receivables".

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5 Fi11ancial risk ma11ageme11t (Co11tinued)

(i) Fina11cial i11strume11ts by category of tl1e Scheme a11d tlte co11stitue11t ftu1ds (Continued)

Financial liabilities

All financial liabilities as disclosed in the statement of financial position, including amounts payable on redemption and accruals and other payables are categorised as "other financial liabilities".

6 Transactions witlt related parties/ associates

Except as disclosed in Note 3 and below, the Scheme and its constituent funds did not have any transactions with related parties, including the Trustee, the Investment Manager and their associates or delegates of the Investment Manager during the year ended 30th September 2018 and 2017. Associates or delegates of the Investment Manager or Trustee are those as defined in the Ordinance established by the MPF A

All related party transactions were entered into in the ordinary course of business and on normal commercial terms.

(a) I11vestment manageme11t fee

The Investment Manager, Schroder Investment Management (Hong Kong) Limited, is entitled to receive a fee calculated daily at 0.25% per .annum of the net asset value of the Schroder MPF Conservative Portfolio, Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund and 0.30% per annum of the net asset value of the Schroder MPF Global Fixed Income Portfolio.

There is no investment management fee charged to any other constituent funds of the Scheme for the year ended 30th September 2018 and 2017.

The investment management fee payables as at year end were as follows:





RESTRICTED - 151 -

2018

HK$

3,065

6,753

1,616

2017

HK$

9,711



6 Tra1tsactions witl1 related parties/associates (Co11ti11ued)

(b) Trustee fee

The Trustee, HSBC Provident Fund Trustee (Hong Kong) Limited, is entitled to receive a fee calculated daily at 0.1 % per annum of the net asset value of the respective constituent funds, except for Schroder MPF Conservative Portfolio which is calculated daily at 0.15% per annum of the net asset value of the constituent fund and for Schroder MPF Global Fixed Income Portfolio which is calculated daily at 0.06% per annum of the net asset value of the constituent fund.

The trustee fee payables as at year end were as follows:

2018 2017 HK$ HK$

Schroder MPF Capital Guaranteed Portfolio 6,259 5,316


Schroder MPF RMB and HKD Fixed Income Portfolio 4,628 3,886



Schroder MPF Balanced Investment Portfolio 23,332 23,214

Schroder MPF Growth Portfolio 15,336 15,308

Schroder MPF International Portfolio 14,966 13,910

Schroder MPF Asian Portfolio 23,500 25,115

Schroder MPF Hong Kong Portfolio 22,857 25,120

Schroder MPF Global Fixed Income Portfolio 613 430


Schroder MPF Age 65 Plus Fund 646 313

RESTRICTED -152-



6 Tra11Sactio11s witl1 related parties/associates (Conth1ued)

(c) Administration fee

The Administrator, BestServe Financial Limited, is entitled to receive a fee calculated daily. The difference is borne by the Investment Manager out of its own resources. The administration fee rates were as follows:


Schroder MPF Capital Guaranteed Portfolio 0.75% 0.55%

Schroder MPF Conservative Portfolio 0.75% 0.60%

Schroder MPF RMB and HKD Fixed Income Portfolio 0.75% 0.60%

Schroder MPF Capital Stable Portfolio 0.75% 0.55%

Schroder MPF Stable Growth Portfolio 0.75% 0.55% Schroder MPF Balanced Investment Portfolio 0.75% 0.55%

Schroder MPF Growth Portfolio 0.75% 0.55%

Schroder MPF International Portfolio 0.75% 0.55% Schroder MPF Asian Portfolio 0.75% 0.55% Schroder MPF Hong Kong Portfolio 0.75% 0.55%

Schroder MPF Global Fixed Income Portfolio 0.40% 0.35%

Prior to 16th July 20181 the administration fee rates was charged at 0.40% per annum to Ordinary Class and Class B Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund.

Effective from 16th July 2018, Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund only have one class of units respectively and therefore not subject to any class. Effective from 16th July 2018, the administration fee was charged at 0.40% per annum to Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund respectively.

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6 Tra1tsactio11s witl1 related parties/associates (Contil1ued)

(c) Administration fee (Continued)

The administration fee payables as at year end were as follows:

2018 2017

HK$ HK$

Schroder MPF Capital Guaranteed Portfolio 41,026 34,341


Schroder MPF RMB and HKD Fixed Income Portfolio 29,798 251026





Schroder MPF International Portfolio 91,216 84,385

Schroder MPF Asian Portfolio 146,048 155,537




Schroder MPF Age 65 Plus Fund 2,585 1,254

RESTRICTED -154 -



6 Trai1sactions witl1 related parties/associates (Co11tinued)

( d) Administrative expe11ses and establisl1ment cost

The Sponsor is entitled to receive an reimbursement in respect of establishment cost, legal and professional fee and all other administrative expenses paid on behalf of the constituent funds such as auditor's remuneration, fund publication costs, accounting, stamp duties, printing, publishing of notices, compensation fund levy paid to the MPFA, regulatory charges and safe custody and bank charges (if applicable) except for Schroder MPF Conservative Portfolio which is calculated daily at a maximum of 0.25% per annum of the net asset value of the respective constituent funds in order to cap charges to a maximum amount (the "cap amount").

As at 30th September 2017, the establishment cost payables by each constituent funds to the Investment Manager, which was also the Sponsor prior to 1st December 2016 were stated in the statement of financial position. As at 30th September 2018, there is no establishment cost payable by each con~ituent funds.

The administrative expenses payables to the Sponsor as at year end were as follows: 2018 2017 HK$ HK$

Schroder MPF Capital Guaranteed Portfolio 77,066 89,i24

Schroder MPF Conservative Portfolio 96,766 134.490

Schroder MPF RMB and HKD Fixed Income Portfolio 72,575

Schroder MPF Capital Stable Portfolio 99,924

Schroder MPF Stable Growth Portfolio 16i,095



Schroder MPF International Portfolio 186,655

Schroder MPF Asian Portfolio 308,843




Schroder MPF Age 65 Plus Fund 6,504

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6 Transactions witl1 related parties/associates (Conti11ued)

(e) Bank balances

As at 30th September 2018, the Scheme and its constituent funds placed bank deposits amounted to HK$15,i45,057 (2017: HK$8,610,881) and HK$5,358,409 (2017: HK$10,346,113) respectively with related companies of the Trustee. Refer to Note 5(d) for details. For the year ended 30th September 2018, interest income amounted to HK$26 (2017: HK$24) and HK$32,041 (2017: HK$16,503) have been earned by the Scheme and its constituent funds from the bank deposits placed with the related companies of the Trustee.

7 Payments cl1arged to default i:J1vestme11ts strategy ("DIS") constituent ftutds or scheme or members wl10 i.11vest ht tlte constitue11t fwtds

In accordance with the Mandatory Provident Fund legislation, the aggregate of the payments for services of the Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund must not, in a single day, exceed a daily rate of 0.75% per annum of the net asset value of each of the Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund divided by the number of days in the year.

The above aggregate payments for services include, but is not limited to, the fees paid or payable for the services provided by the Trustee, the Administrator, the Investment Manager, the Custodian and the Sponsor and/or promoter (if any) of each of the Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund and its underlying investment fund(s), and any of the delegates from these parties and such fees are calculated as a percentage of the net asset value of each of the Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund and its underlying investment fund(s), but do not include any out-of-pocket expenses incurred by each of the Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund and their underlying investment fund(s).

In accordance with the Mandatory Provident Fund legislation, the total amount of all payments that are charged to or imposed on a DIS constituent fund or members who invest in a DIS constituent fund, for out-of-pocket expenses incurred by the Trustee on a recurrent basis in the discharge of the Trustee's duties to provide services in relation to a DIS constituent fnnd, shall not in a single year exceed 0.2% of the net asset value of each of the Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund.

For this purpose, out-of-pocket expenses include, for example, annual audit expenses, printing or postage expenses relating to recurrent activities (such as issuing annual benefit statements), recurrent legal and professional expenses, safe custody charges which are customarily not calculated as a percentage of the net asset value and transaction costs incurred by a DIS constituent fund in connection with recurrent acquisition of investments for the DIS constituent fund (including, for example, costs incurred in acquiring underlying investment funds) and annual statutory expenses (such as compensation fund levy where relevant) of the DIS constituent fund.

Out-of-pocket expenses that are not incurred on a recurrent basis may still be charged to or imposed on a DIS constituent fund and such out-of-pocket expenses are not subject to the above statutory limit.

Payment for services, out-of-pocket expenses and other payment charged to the Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund are disclosed below. Payments for services and out-of-pocket expenses are those defined in the MPF Ordinance.

RESTRICTED -156-



7 Payme11ts charged to default il1vestme11ts strategy ("DIS") co11stitue11t fm1ds or sclteme or members wl10 h1vest ht tl1e co11stituent fwtds (Co11ti.J.1ued)

Schroder MPF Schroder MPF Core Age 65 Plus Accumulation Fund Fund

2018 2017 1 2018 2017 1

HK$ HK$ HK$ HK$

Payine11ts for services - Investment management fee 139,170 39,675 15,593 3,165 - Trustee fee 55,648 15,835 6,234 1,263 - Administration fee 222,673 63,479 24,948 5,063

Total paynie11ts services 417,491 u8,989 46,775 9.491 ----------- ---------- ----------- -----------

Out-of-pocket expenses Listing fee expenses 25,340 14 Auditor fee expenses 56313 43,917 6,526 3,548 Professional fee expenses 4,926 532 Printing fee expenses 3,737 365 SFC annual fee expenses 492 43 Other expenses 200 200

Total out-of-pocket expe11ses 91,008 43,917 7,680 3,548 ----------- ---------- ----------- -----------

Otl1er payments Establishment cost 27,159 1,517

Total otl1er payments 27,159 1,517 ----------- ---------- ----------- -----------

Total payme11ts 508,499 190,065 54.455 14,556

Out-of-pocket expenses expressed as a percentage of average net asset value as at the last dealing day of each month of the constituent funds 0.15% 0.12% 0.12% 0.12%

1 During the period from 5th April 2017 (date of commencement of operations) to 30th September 2017.

8 Contributio11s

Mandatory contributions for both the employers and members are equal to 5% of the members' relevant income up to HK$30,ooo per month but in respect of members earning less than HK$7,100 per month, the members' mandatory contribution is nil.

Self-employed persons must contribute 5% of their relevant income subject to a maximum contribution of HK$1,500 per month to the Scheme unless their relevant income is less than HK$7,100 per month.

Any contributions made to the Scheme by the employers or members in excess of their mandatory contributions are additional vollllltarycontributions.

RESTRICTED -157-



9 Benefits

Members will become entitled to benefits in respect of mandatory contributions to the Scheme in the circumstances set out in the· Ordinance. Currently, these circumstaiices include where the members (i) reach the age of 65; (ii) permanently cease employment after reaching the age of 60; (iii) become totally incapacitated; (iv) permanently depart from Hong Kong; (v) die or (vi) have the right to claim a small balance pursuant to the Ordinance.

With effect from 1 February 2016, under the Mandatory Provident Fund Schemes (Amendment) Ordinance 2015 - section 15 Withdrawal of Accrued Benefits, the scheme member can choose one of the following ways to manage MPF benefits: (a) withdraw MPF benefits by instalments, (b) withdraw all MPF benefits in a lump sum and (c) retain all the MPF benefits in the account for continuous investment.

Members will become entitled to benefits in respect of voluntary contributions to the Scheme in circumstances set out in the trust deed and the relevant participation agreement.

10 Reco11ciliatio11 ofmoveme11t in liabilities arising from f"mru:1cing activities

The Scheme Benefits Forfeitures Severance Transfers-out payable payable payment payable payable

HK$ HK$ HK$ HK$ Beginning balance as at 30th September 2017 and 1st October 2017 2,069,932 7,176,932 5,521,897 Charged to statement of changes in net assets available for benefits 30,136,470 6,738,998 2,781,607 94,717,673 Cash outflow (26,505,961) (3,825,119) (2,646,757) (96,213,705)

Ending balance as at 30th September 2018 5,700,441 10,090,811 134,850 4,025,865

11 Ba1tlc. loru1s, overdrafts and otl1er borrowings

The Scheme and its constituent funds had no bank loans, overdrafts or other borrowings as at 30th September 2018 and 2017.

12 Accrued be11efits

The total accrued benefits vested in the members' accounts amounted to HK$1,730,043,727 as at 30th September 2018 (2017: HK$i,662,745,747).

13 Soft commissio11 arra11geme11ts

During the year, the Investment Manager and its associates did not enter into any soft commission arrangements with brokers in relation to dealings in the assets of the Scheme and its constituent funds (2017: nil).

14 Security le11di.J1g arra11geme11ts

During the year, the Scheme and its constituent funds did not enter into any security lending arrange1nents (2017: nil).

RESTRICTED -158 -



15 Negotiability of assets

As at 30th September 2018 and 2017, there v.•as no statutory or contractual requirement restricting the negotiability of the assets of the Scheme and its constituent funds.

16 Co1nmitme11ts

The Scheme and its constituent funds had no commitm~nts as at 30th September 2018 and 2017.

17 Co11tinge11t liabilities

The Scheme and its constituent funds had no contingent liabilities as at 30th September 2018 and 2017.

18 Ma1•keting expenses

There have been no advertising expenses, promotional expenses or commissions or brokerage fees paid and payable to the MPF intermediaries deducted from the Scheme or its constituent funds during the year ended 30th September 2018 and 2017.

19 Subseque11t eve11t

No significant events have occurred since the year end date which would impact on the financial position of the Scheme pisclosed in the statement of net assets available for benefits as at 30th September 2018 or on the results and cash flows of the Scheme for the year ended on that date.

20 Approval offi11ancial statements

The financial statements were approved by the Trustee on 27th March 2019.

RESTRICTED -159 -


INDEPENDENT AUDITOR'S ASSURANCE REPORT

FOR THE YEAR ENDED

30TH SEPTEMBER 2018

RESTRICTED

INDEPENDENT AUDITOR'S ASSURANCE REPORT TO THE TRUSTEE OF SUN LIFE MPF MASTER TRUST

We have audited the financial statements of Sun Life MPF Master Trust and each of its constituent funds (hereafter referred to as the "Scheme") for the year ended 30th September 2018 in accordance with Hong Kong Standards on Auditing and with reference to Practice Note 860.i (Revised) "The Audit of Retirement Schemes" issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA"), and have issued an unqualified auditor's report thereon dated 27th March 2019.

Pursuant to section 102 of the Hong Kong Mandatory Provident Fund Schemes (General) Regulation (the "General Regulation"), we are required to report whether the Scheme complied viii.th certain requirements of the Hong Kong Mandatory Provident Fund Schemes Ordinance (the "Ordinance") and the General Regulation.

Trustee's Respo11sibility

The General Regulation requires the Trustee to ensure that:

(a) proper accounting and other records are kept in respect of the constituent funds of the Scheme, the Scheme assets and all financial transactions entered into in relation to the Scheme;

(b) the requirements specified in the guidelines made by the Mandatory Provident Fund Schemes Authority (the 11MPFA") under section 28 of the Ordinance with respect to forbidden investment practices and the requirements of sections 37(2), 51 and 52 and Part X of, and Schedule 1 to, the General Regulation are complied with;

(c) the requirements under sections 34DB(1)(a), (b), (c) and (d), 34DC(1), 34DD(1) and (4) and 34DJ(3), (4) and (5) of the Ordinance are complied with; and

( d) the Scheme assets are not subject to any encumbrance, otherwise than as permitted by the General Regulation.

Our hldependence and Qualicy Control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

Our firm applies Hong Kong Standard on Quality Control I issued by the HKICPA and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

RESTRICTED

INDEPENDENT AUDITOR'S ASSURANCE REPORT TO THE TRUSTEE OF SUN LIFE MPF MASTER TRUST (Continued)

Auditor's Responsibility (Continued)

Our responsibility is to report solely to the Trustee, in accordance with section 102 of the General Regulation, on the Scheme's compliance with the above requirements based on the results of the procedures performed by us, and for no other purpose. We do not assun1e responsibility towards or accept liability to any other person for the contents of this report.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3000 (Revised) "Assurance Engagements Other Than Audits or Reviews of Historical Financial Information" and with reference to Practice Note 860.1 (Revised) "The Audit of Retirement Schemes" issued by the HKICPA. We have planned and performed our work to obtain reasonable assurance on whether the Scheme has complied with the above requirements.

We have planned and performed such procedures as we considered necessary with reference to the procedures recommended in Practice Note 860.1 (Revised), which included reviewing, on a test basis, evidence obtained from the Trustee regarding the Scheme's compliance with the above requirements.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

Based on the foregoing:

(a) in our opinion:

(i) proper accounting and other records have been kept during the year ended 30th September 2018 in respect of the constituent funds of the Scheme, the Scheme assets and all financial transactions entered into in relation to the Scheme; and

(ii) the requirements specified in the guidelines made by the MPFA under section 28 of the Ordinance with respect to forbidden investment practices and the requirements of sections 37(2), 51 and 52 and Part X of, and Schedule 1 to, the General Regulation have been complied with, in all material respects, as at 30th September 2018, 10th August 2018 and 271h April 2018; and

(iii) the requirements specified in the Ordinance under sections 34DB(1)(a), (b), (c) and (d), 34DC(1) and 34DD(1) and (4)(a) with respect to the investment of accrued benefits and control of payment for services relating to Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund have been complied with, in all material respects, as at 30th September 2018, 10th August 2018 and 27th April 2018; and

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INDEPENDENT AUDITOR'S ASSURANCE REPORT TO THE TRUSTEE OF SUN LIFE MPF MASTER TRUST (Continued)

Opinion (Continued)

(iv) the requirements specified in the Ordinance under sections 34DJ(3), (4) and (5) with respect to locating scheme members relating to Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund have been complied with, in all material respects, during the year ended 30th September 2018; and

(v) the requirements specified in section 34DD(4)(b) of the Ordinance with respect to the controls of out-of-pocket expenses of the Schroder MPF Core Accumulation Fund and Schroder MPF Age 65 Plus Fund have been complied with, in all material respects, as at 30th September 2018.

(b) as at 30th September 2018, the Scheme assets were not subject to any encumbrance, otherwise than as permitted by the General Regulation.

Other Matter

The requirements specified in the Ordinance under sections 34D1(1) and (2) and 34DK(2) with respect to the transfer of accrued benefits to an account and specified notice, and 34DJ(2) 'With respect to locating scheme members relating to Schroder MPF Core Accumuiation Fund and Schroder MPF Age 65 Plus Fund are not applicable to the Trustee for the year ended 30th September 2018 as the Trustee has completed the relevant transitional provisions during the year ended 30th September 2017. Accordingly, there is no reporting on these sections.

I11te11ded Users an.d Purpose

This report is intended solely for submission by the Trustee to the MPFA pursuant to section 102 of the General Regulation, and is not intended to be, and should not be, used by anyone for any other purpose.

PricewaterhouseCoopers Certified Public Accountants

Hong Kong, 27th March 2019

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