pinebridge hong kong equity fund reports and … · 31 december 2015 . pinebridge hong kong equity...

PINEBRIDGE HONG KONG EQUITY FUND

REPORTS AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED

31 DECEMBER 2015

PineBridge Hong Kong Equity Fund

Reports and Financial Statements

For the year ended 31 December 2015

Contents

Pages

Management and professional service details 1

Manager’s report 2

Investment report 3-10

Trustee’s report 11

Independent auditor’s report 12-13

Statement of net assets 14

Statement of comprehensive income 15

Statement of changes in net assets attributable to unitholders 16

Statement of cash flows 17

Notes to the financial statements 18-32


Management and Professional Service Details

1

Manager Trustee

PineBridge Investments Hong Kong Limited AIA Company (Trustee) Limited

Level 31, Three Pacific Place, 1 Queen’s Road East 2nd Floor, AIA Building, 1 Stubbs Road,

Hong Kong Hong Kong

Administrator and Custodian Application and Redemption Agents

(up to 8 November 2015) (up to 8 November 2015)

HSBC Provident Fund Trustee (Hong Kong) Limited HSBC Institutional Trust Services (Asia) Limited

1 Queen’s Road Central 1 Queen’s Road Central

Hong Kong Hong Kong

(effective from 9 November 2015)

(effective from 9 November 2015 and up to 30

January 2016)

Citibank N.A., Hong Kong Branch Citi Fund Services (Asia), Limited

50th Floor, Citibank Tower, Citibank Plaza 50th Floor, Citibank Tower, Citibank Plaza

3 Garden Road, Central 3 Garden Road, Central

Hong Kong Hong Kong

(effective from 31 January 2016)

Citicorp Financial Services Limited

50th Floor, Citibank Tower, Citibank Plaza

3 Garden Road, Central

Hong Kong

Auditor Registered Office

PricewaterhouseCoopers 2nd Floor, AIA Building

22nd Floor, Prince’s Building 1 Stubbs Road,

Central Hong Kong

Hong Kong

Legal Advisers

Deacons

5th Floor, Alexandra House

18 Chater Road

Central, Hong Kong


Manager’s Report


2

Manager’s Market Perspective

2015 Market Overview

Hong Kong equity market had a strong start to the year, with the strong momentum sustaining for the first four

months driven by RRR and rate cuts by PBOC, the introduction of deposit insurance scheme, the broadened

access to the southbound link, and the deployment of the national One Belt One Road strategy. During this

period, China stocks outperformed Hong Kong stocks notably. Following the strong start of the year, stocks

consolidated in May and June. In May, China stocks saw profit-taking on worse-than-expected economic trend.

In June, weak sentiment in China continued, as SHCOMP fell significantly after peaking on 12th June. On

relative basis, Hong Kong stocks performed better, partly driven by the mainland-HK mutual recognition of

fund sales. In 2H2015, Hong Kong equities declined notably, mainly driven by the sharp fall in China market

and the large number of A-share suspensions which triggered onshore investors hedging offshore. China’s

economic slowdown and RMB depreciation weighed on market sentiment as well. Risk premiums sustained at

the high level throughout the third quarter. The fourth quarter featured Chinese government’s proactive fiscal

spending and stimulus measures, the recovery in auto sales and construction starts, and the cut of interest rate

and RRR. But the market remained largely weak, particularly towards end of the year.

2016 Market Outlook and Strategy

Recent macro data suggests sustained weakness in the China economy, despite rounds of monetary easing, while

companies generally relay a cautious tone. However, at this point, we believe the stock market turmoil is

unlikely to cause a systematic problem for the economy, and the government is likely to implement more fiscal

projects and monetary easing in coming year to support economic growth. Official Manufacturing PMI seems to

have stabilized at 49.7 in December though still in contraction territory -- such trend could persist in 1Q16 as we

enter the seasonally slow period. Services sector however, remains robust with Non-Manufacturing PMI hitting

54.4 in December. We expect the divergence between services & manufacturing to continue in 2016. In terms of

market outlook, we believe equity risk premium has increased amidst elevated levels of volatility in both equity

and currency markets recently. Nevertheless, a great number of stocks are now trading at valuations that are well

below their long term average. Many quality companies were sold off indiscriminately during the market

downturn. As more investment opportunities emerge, the funds will continue to focus on companies with strong

management, solid fundamentals and attractive valuations.


Investment Report

As at 31 December 2015

3

INVESTMENT PORTFOLIO

Market

Holding Value % of Net

LISTED EQUITIES Shares HK$ Assets

HONG KONG

AIA GROUP LTD 12,148,600 566,124,760 6.75%

ANTA SPORTS PRODUCTS LTD 9,971,547 212,393,951 2.52%

BANK OF CHINA LTD H SHS 11,999,000 41,516,540 0.49%

BEIJING CAPITAL INTL AIRPORT H SHS 6,168,000 51,626,160 0.62%

BOC HONG KONG HOLDINGS LTD 4,059,500 96,210,150 1.15%

BRILLIANCE CHINA AUTOMOTIVE HLDGS LTD 11,776,000 114,816,000 1.37%

BYD CO LTD H SHS 1,583,500 67,536,275 0.81%

CAR INC 7,864,000 100,973,760 1.20%

CGN POWER CO LTD H SHS 10,074,000 29,214,600 0.35%

CHEUNG KONG PROPERTY HOLDING 1,676,861 84,513,794 1.01%

CHINA CONSTRUCTION BANK H SHS 77,619,500 412,159,545 4.92%

CHINA GALAXY SECURITIES CO LTD 11,572,000 82,161,200 0.98%

CHINA JINMAO HOLDINGS GROUP LTD 20,644,000 54,706,600 0.65%

CHINA LESSO GROUP HOLDINGS LTD 11,005,000 59,537,050 0.71%

CHINA LIFE INSURANCE CO LTD H SHS 4,181,000 104,734,050 1.25%

CHINA MERCHANTS BANK CO LTD H SHS 6,411,000 117,321,300 1.40%

CHINA MERCHANTS HLDGS INTL 954,000 23,516,100 0.28%

CHINA MOBILE LTD 3,120,000 273,000,000 3.26%

CHINA OVERSEAS LAND & INVESTMENT LIMITED 17,894,000 486,716,800 5.81%

CHINA PETROLEUM & CHEMICAL CORP H SHS 17,678,000 82,733,040 0.99%

CHINA RESOURCES LAND LTD 5,752,000 129,995,200 1.55%

CHINA STATE CONSTRUCTION INTL HLDGS LTD 18,042,000 242,845,320 2.90%

CHINA TAIPING INSURANCE HOLDINGS 3,609,600 86,630,400 1.03%

CIFI HOLDINGS GROUP CO LTD 8,802,000 15,227,460 0.18%

CK HUTCHISON HOLDINGS LTD 3,843,361 402,015,561 4.80%

CNOOC LTD 5,984,000 48,290,880 0.58%

COSMO LADY HOLDINGS CO LTD 2,703,000 17,542,470 0.21%

CSPC PHARMACEUTICAL GROUP LTD 48,782,000 386,353,440 4.61%

GALAXY ENTERTAINMENT GROUP LTD 3,552,000 86,846,400 1.04%

GUANGDONG INVESTMENT LTD 4,096,000 44,974,080 0.53%

GUANGZHOU AUTOMOBILE GROUP H SHS 7,482,000 51,700,620 0.62%

HAITONG SECURITIES CO LTD H SHS 5,731,200 78,517,440 0.94%

HANERGY THIN FILM POWER GROUP 5,510,000 21,544,100 0.26%

HANG SENG BANK 577,500 85,181,250 1.02%

HONG KONG EXCHANGES AND CLEARING LTD 417,400 82,853,900 0.99%

HSBC HOLDINGS PLC 8,129,421 503,211,160 6.00%

HUANENG POWER INTL ORD CL H 4,720,000 31,576,800 0.38%

IMAX CHINA HOLDING INC 1,663,200 90,893,880 1.08%

INDUSTRIAL AND COMM BANK OF CHINA H SHS 51,739,545 242,141,071 2.89%

LENOVO GROUP LTD 16,422,000 129,241,140 1.53%

PAX GLOBAL TECHNOLOGY LTD 2,577,000 20,590,230 0.25%

PERFECT SHAPE PRC HOLDINGS LTD 10,972,000 12,837,240 0.15%

PING AN INSURANCE (GRP) CO OF CHINA H SHS 7,426,500 319,339,500 3.81%

SHENZHEN EXPRESSWAY CO LTD H SHS 2,616,000 17,919,600 0.21%

SIHUAN PHARMACEUTICAL HOLDINGS GROUP LTD 3,914,000 17,131,578 0.20%

SWIRE PROPERTIES LTD 11,433,200 256,103,680 3.06%

TENCENT HLDGS LTD 4,821,800 735,324,500 8.77%

VTECH HOLDINGS LTD 195,900 15,740,565 0.19%

WASION GROUP HOLDINGS LTD 5,952,000 48,092,160 0.57%

XINJIANG GOLDWIND SCIENCE & TECH H SHS 4,729,000 70,462,100 0.84%

XINYI SOLAR HLDGS 18,800,000 59,596,000 0.71%

YUE YUEN INDUSTRIAL HLDG SHS 1,274,500 33,583,075 0.40%

ZHUZHOU CSR TIMES ELECTRIC CO LTD H SHS 3,851,500 173,510,075 2.07%


Investment Report


4

INVESTMENT PORTFOLIO (CONTINUED)

Market

Holding Value % of Net

LISTED EQUITIES (CONTINUED) Shares HK$ Assets

HONG KONG (CONTINUED)

ZTE CORP H SHS 18,781,440 332,055,859 3.96%

TOTAL INVESTMENTS* 7,951,380,409 94.85%

TOTAL INVESTMENTS, AT COST* 7,932,396,266

* Investments are accounted for on a trade date basis.


Investment Report


5

STATEMENT OF MOVEMENTS IN INVESTMENT PORTFOLIO

Holdings

1 January 2015 Additions Deductions 31 December 2015

Shares Shares Shares Shares

LISTED EQUITIES

HONG KONG

3SBIO INC - 239,500 (239,500) -

AAC TECHNOLOGIES HOLDINGS INC - 2,420,500 (2,420,500) -

AGILE PROPERTY HOLDINGS LTD 836,000 - (836,000) -

AGRICULTURAL BANK OF CHINA LTD - 72,970,000 (72,970,000) -

AIA GROUP LTD 11,285,600 8,292,600 (7,429,600) 12,148,600

AIR CHINA LTD - 9,138,000 (9,138,000) -

ALUMINUM CORP OF CHINA LTD 5,006,000 15,654,000 (20,660,000) -

ANGANG STEEL CO LTD - 4,610,000 (4,610,000) -

ANHUI CONCH CEMENT CO LTD H SHARES 2,377,000 3,563,500 (5,940,500) -

ANTA SPORTS PRODUCTS LTD 11,875,547 14,616,000 (16,520,000) 9,971,547

ASM PACIFIC TECHNOLOGY LTD - 953,900 (953,900) -

BANK OF CHINA LTD H SHS 65,132,200 48,696,000 (101,829,200) 11,999,000

BANK OF COMMUNICATIONS CO LTD H SHS 20,686,000 14,246,000 (34,932,000) -

BBMG CORP H SHS 1,329,500 7,351,000 (8,680,500) -

BEIJING CAPITAL INTL AIRPORT H SHS - 6,168,000 - 6,168,000

BEIJING CAPITAL LAND LTD - 4,332,000 (4,332,000) -

BEIJING ENTERPRISES WATER GR - 5,830,000 (5,830,000) -

BELLE INTERNATIONAL HOLDINGS LTD - 6,731,000 (6,731,000) -

BOC HONG KONG HOLDINGS LTD 5,554,500 17,950,000 (19,445,000) 4,059,500

BRILLIANCE CHINA AUTOMOTIVE HLDGS LTD 4,852,000 20,906,000 (13,982,000) 11,776,000

BYD CO LTD H SHS 593,500 3,284,500 (2,294,500) 1,583,500

CAR INC - 10,124,000 (2,260,000) 7,864,000

CATHAY PACIFIC AIRWAYS LTD - 2,259,000 (2,259,000) -

CGN POWER CO LTD H SHS 32,723,000 121,143,000 (143,792,000) 10,074,000

CHAMPION REIT - 7,806,000 (7,806,000) -

CHEUNG KONG (HOLDINGS) LTD 1,420,000 494,000 (1,914,000) -

CHEUNG KONG INFRASTRUCTURE HOLDINGS CO

LTD

-

3,142,000

(3,142,000)

-

CHEUNG KONG PROPERTY HOLDING - 2,899,861 (1,223,000) 1,676,861

CHINA AGRI-INDUSTRIES HOLDINGS - 4,706,000 (4,706,000) -

CHINA BLUECHEMICAL LTD - 15,816,000 (15,816,000) -

CHINA CINDA ASSET MANAGEMENT CO - 18,421,000 (18,421,000) -

CHINA CITIC BANK H SHS 17,653,000 10,348,000 (28,001,000) -

CHINA COMM CONSTRUCTION CO LTD H SHS 9,290,000 25,956,000 (35,246,000) -

CHINA COMMUNICATIONS SERVICES H SHS - 22,754,000 (22,754,000) -

CHINA CONCH VENTURE HOLDINGS LTD - 986,500 (986,500) -

CHINA CONSTRUCTION BANK H SHS 68,685,500 54,969,000 (46,035,000) 77,619,500

CHINA COSCO HOLDINGS CO LTD H SHS 4,328,000 3,462,000 (7,790,000) -

CHINA EASTERN AIRLINES CORP LTD - 21,012,000 (21,012,000) -

CHINA EVERBRIGHT BANK CO LTD - 4,467,000 (4,467,000) -

CHINA EVERBRIGHT INTERNATIONAL LTD 2,102,000 1,894,000 (3,996,000) -

CHINA EVERBRIGHT LTD 2,830,000 3,026,000 (5,856,000) -

CHINA GALAXY SECURITIES CO LTD 3,356,500 17,002,000 (8,786,500) 11,572,000

CHINA GAS HOLDINGS LTD 1,414,000 1,282,000 (2,696,000) -

CHINA HIGH SPEED TRANSMISSION EQUIP - 2,616,000 (2,616,000) -

CHINA HUARONG ASSET MANAGEMENT - 34,847,000 (34,847,000) -

CHINA JINMAO HOLDINGS GROUP LTD - 20,644,000 - 20,644,000

CHINA LESSO GROUP HOLDINGS LTD - 13,920,000 (2,915,000) 11,005,000

CHINA LIFE INSURANCE CO LTD H SHS 10,683,000 6,663,000 (13,165,000) 4,181,000

CHINA MENGNIU DAIRY CO LTD - 5,374,000 (5,374,000) -

CHINA MERCHANTS BANK CO LTD H SHS 6,600,000 15,216,000 (15,405,000) 6,411,000

CHINA MERCHANTS HLDGS INTL - 1,556,000 (602,000) 954,000

CHINA MINSHENG BANKING CORP LTD H SHS 21,452,000 992,000 (22,444,000) -

CHINA MOBILE LTD 1,357,000 9,070,000 (7,307,000) 3,120,000


Investment Report


6

STATEMENT OF MOVEMENTS IN INVESTMENT PORTFOLIO (CONTINUED)

Holdings



LISTED EQUITIES (CONTINUED)


CHINA NATIONAL BUILDING MATERIAL H SHS 9,028,000 - (9,028,000) -

CHINA OVERSEAS LAND & INVESTMENT

LIMITED

3,208,000

18,582,000

(3,896,000)

17,894,000

CHINA OVERSEAS PROPERTY HOLDINGS - 4,656,667 (4,656,667) -

CHINA PACIFIC INSURANCE GR CO LTD H SHS 2,803,800 895,400 (3,699,200) -

CHINA PETROLEUM & CHEMICAL CORP H SHS - 49,656,000 (31,978,000) 17,678,000

CHINA PIONEER PHARMA HOLDINGS LTD 7,946,000 644,000 (8,590,000) -

CHINA POWER INTERNATIONAL DEVELOPMENT LTD

-

5,685,000

(5,685,000)

-

CHINA RAILWAY CONSTRUCTION CORP H SHS 6,028,500 - (6,028,500) -

CHINA RAILWAY GROUP LTD H SHS 11,028,000 - (11,028,000) -

CHINA RESOURCES BEER HOLDINGS - 2,696,000 (2,696,000) -

CHINA RESOURCES LAND LTD 5,156,000 13,917,778 (13,321,778) 5,752,000

CHINA RESOURCES POWER HOLDINGS - 5,106,000 (5,106,000) -

CHINA SHENHUA ENERGY CO LTD - 5,755,500 (5,755,500) -

CHINA SHIPPING CONTAINER LINES CO LTD H

SHS

7,001,000

14,681,000

(21,682,000)

-

CHINA SHIPPING DEVELOPMENT CO LTD H SHS 6,006,000 15,332,000 (21,338,000) -

CHINA SOUTHERN AIRLINES CO LTD - 16,854,000 (16,854,000) -

CHINA STATE CONSTRUCTION INTL HLDGS LTD 31,664,000 17,542,000 (31,164,000) 18,042,000

CHINA TAIPING INSURANCE HOLDINGS - 3,609,600 - 3,609,600

CHINA TELECOM CORP LTD H SHS 12,564,000 19,986,000 (32,550,000) -

CHINA UNICOM HONG KONG LTD 1,572,000 19,730,000 (21,302,000) -

CHOW TAI FOOK JEWELLERY GROUP LTD 5,677,000 - (5,677,000) -

CIFI HOLDINGS GROUP CO LTD - 27,934,000 (19,132,000) 8,802,000

CITIC SECURITIES CO LTD - 6,453,000 (6,453,000) -

CK HUTCHISON HOLDINGS LTD - 7,059,361 (3,216,000) 3,843,361

CLP HOLDINGS LTD - 2,506,500 (2,506,500) -

CNOOC LTD 9,037,000 39,466,000 (42,519,000) 5,984,000

COSMO LADY HOLDINGS CO LTD 7,461,000 6,309,000 (11,067,000) 2,703,000

CSPC PHARMACEUTICAL GROUP LTD 1,856,000 53,950,000 (7,024,000) 48,782,000

CSR CORP LTD H SHS 9,372,000 - (9,372,000) -

DALIAN WANDA COMMERCIAL PROPERTY H SHS - 1,888,600 (1,888,600) -

DIGITAL CHINA HOLDINGS LTD - 3,282,000 (3,282,000) -

DONGFANG ELECTRIC CO LTD H SHS 593,600 - (593,600) -

DONGFENG MOTOR GROUP CO LTD - 19,442,000 (19,442,000) -

ENN ENERGY HOLDINGS LTD - 2,162,000 (2,162,000) -

FIH MOBILE LTD - 15,731,000 (15,731,000) -

FOSUN INTERNATIONAL LTD - 2,698,000 (2,698,000) -

GALAXY ENTERTAINMENT GROUP LTD 1,672,000 4,258,000 (2,378,000) 3,552,000

GCL-POLY ENERGY HOLDINGS LTD - 28,351,000 (28,351,000) -

GEELY AUTOMOBILE HOLDINGS LTD - 9,650,000 (9,650,000) -

GF SECURITIES CO LTD - 2,564,200 (2,564,200) -

GREAT WALL MOTOR CO LTD - 6,827,500 (6,827,500) -

GREENLAND HONG KONG HOLDINGS LTD - 8,632,000 (8,632,000) -

GUANGDONG INVESTMENT LTD 2,848,000 22,606,000 (21,358,000) 4,096,000

GUANGZHOU AUTOMOBILE GROUP H SHS - 20,330,000 (12,848,000) 7,482,000

GUANGZHOU R&F PROPERTIES CO LTD H SHS 1,290,400 - (1,290,400) -

GUANGZHOU SHIPYARD INTL CO LTD H SHS 694,000 - (694,000) -

GUOTAI JUNAN INTERNATIONAL HOLDINGS - 11,937,000 (11,937,000) -

HAIER ELECTRONICS GROUP CO LTD - 1,497,000 (1,497,000) -

HAITONG SECURITIES CO LTD H SHS 2,670,800 21,266,400 (18,206,000) 5,731,200

HANERGY THIN FILM POWER GROUP - 6,964,000 (1,454,000) 5,510,000

HANG LUNG PROPERTIES LTD - 7,791,000 (7,791,000) -


Investment Report


7


Holdings





HANG SENG BANK - 1,473,200 (895,700) 577,500

HENDERSON LAND DEVELOPMENT CO LTD 571,600 1,608,000 (2,179,600) -

HENGAN INTERNATIONAL GROUP CO - 466,500 (466,500) -

HKBN LTD - 2,908,000 (2,908,000) -

HONG KONG & CHINA GAS CO LTD - 10,967,000 (10,967,000) -

HONG KONG EXCHANGES AND CLEARING LTD 1,128,100 663,400 (1,374,100) 417,400

HSBC HOLDINGS PLC 5,884,221 6,346,400 (4,101,200) 8,129,421

HUADIAN FUXIN ENERGY CORP LTD H SHS 26,054,000 26,178,000 (52,232,000) -

HUADIAN POWER INTL COMPANY H SHARES 1,352,000 10,406,000 (11,758,000) -

HUANENG POWER INTL ORD CL H - 16,928,000 (12,208,000) 4,720,000

HUANENG RENEWABLES CORP LTD H SHS 34,522,000 - (34,522,000) -

HUATAI SECURITIES CO LTD - 2,508,200 (2,508,200) -

HUTCHISON WHAMPOA LTD 690,300 828,000 (1,518,300) -

HYSAN DEVELOPMENT CO LTD - 1,100,000 (1,100,000) -

IMAX CHINA HOLDING INC - 1,663,200 - 1,663,200

INDUSTRIAL AND COMM BANK OF CHINA H SHS 25,403,545 153,100,000 (126,764,000) 51,739,545

INTIME RETAIL GROUP CO LTD - 6,259,500 (6,259,500) -

JIANGSU EXPRESSWAY CO LTD - 924,000 (924,000) -

JIANGXI COPPER COMPANY LTD H SHS 3,139,000 - (3,139,000) -

KERRY PROPERTIES LTD 1,215,000 1,813,500 (3,028,500) -

KINGSOFT CORP LTD - 3,361,000 (3,361,000) -

KWG PROPERTY HOLDING LTD 1,650,500 - (1,650,500) -

LEE & MAN PAPER MANUFACTURING - 8,737,000 (8,737,000) -

LENOVO GROUP LTD - 23,882,000 (7,460,000) 16,422,000

LI & FUNG LTD - 4,702,000 (4,702,000) -

LINK REIT 1,206,606 2,859,500 (4,066,106) -

MAANSHAN IRON & STEEL CO LTD - 16,178,000 (16,178,000) -

NEW CHINA LIFE INSURANCE CO LTD H SHS 1,665,300 4,007,500 (5,672,800) -

NEW WORLD DEVELOPMENT CO LTD - 18,742,000 (18,742,000) -

NINE DRAGONS PAPER HOLDINGS LIMITED 2,143,000 - (2,143,000) -

ORIENT OVERSEAS INTERNATIONAL LTD - 546,500 (546,500) -

PACIFIC TEXTILES HOLDINGS LTD - 7,241,000 (7,241,000) -

PAX GLOBAL TECHNOLOGY LTD 10,442,000 10,651,000 (18,516,000) 2,577,000

PEOPLE'S INSURANCE CO LTD - 19,704,000 (19,704,000) -

PERFECT SHAPE PRC HOLDINGS LTD 25,196,000 420,000 (14,644,000) 10,972,000

PETROCHINA CO LTD H SHS 16,212,000 - (16,212,000) -

PHOENIX HEALTHCARE GROUP CO LTD - 3,327,000 (3,327,000) -

PICC PROPERTY & CASUALTY CO LTD H SHS 5,794,440 3,408,000 (9,202,440) -

PING AN INSURANCE (GRP) CO OF CHINA H SHS 4,765,000 12,373,500 (9,712,000) 7,426,500

POLY PROPERTY GROUP CO LTD - 11,367,000 (11,367,000) -

POWER ASSETS HOLDINGS LTD - 2,889,500 (2,889,500) -

SA SA INTERNATIONAL HOLDINGS LTD - 3,314,000 (3,314,000) -

SANDS CHINA LTD 1,881,200 6,983,200 (8,864,400) -

SEMICONDUCTOR MANUFACTURING INTL CORP - 39,517,000 (39,517,000) -

SHANDONG WEIGAO GROUP MEDICAL H SHS - 2,628,000 (2,628,000) -

SHANGHAI ELECTRIC GROUP CO LTD H SHS 4,030,000 5,822,000 (9,852,000) -

SHANGHAI INDUSTRIAL HOLDINGS - 1,919,000 (1,919,000) -

SHANGHAI PHARMACEUTICALS HOLDINGS - 2,440,500 (2,440,500) -

SHENZHEN EXPRESSWAY CO LTD H SHS 4,424,000 2,616,000 (4,424,000) 2,616,000

SHENZHEN INVESTMENT LTD - 9,072,000 (9,072,000) -

SHENZHOU INTERNATIONAL GROUP H SHS - 2,191,000 (2,191,000) -

SHIMAO PROPERTY HOLDINGS LTD 968,500 3,666,000 (4,634,500) -

SICHUAN EXPRESSWAY CO LTD - 2,484,000 (2,484,000) -


Investment Report


8


Holdings





SIHUAN PHARMACEUTICAL HOLDINGS GROUP

LTD

17,048,000

-

(13,134,000)

3,914,000

SINO BIOPHARMACEUTICAL LTD - 5,248,000 (5,248,000) -

SINO LAND CO LTD 3,308,000 - (3,308,000) -

SINOPEC SHANGHAI PETROCHEMICAL - 21,488,000 (21,488,000) -

SINOPHARM GROUP CO H SHS 5,249,600 4,191,200 (9,440,800) -

SINOSOFT TECHNOLOGY GROUP LTD - 5,606,000 (5,606,000) -

SINOTRANS LTD - 5,807,000 (5,807,000) -

SJM HOLDINGS LTD 3,788,000 - (3,788,000) -

SUN HUNG KAI & CO LTD - 1,262,000 (1,262,000) -

SUN HUNG KAI PROPERTIES LTD 502,354 528,000 (1,030,354) -

SUNAC CHINA HOLDINGS LTD 24,087,000 450,000 (24,537,000) -

SUNNY OPTICAL TECHNOLOGY GROUP CO LTD - 741,000 (741,000) -

SWIRE PACIFIC LIMITED 839,000 542,500 (1,381,500) -

SWIRE PROPERTIES LTD 3,000,400 10,956,200 (2,523,400) 11,433,200

TECHTRONIC INDUSTRIES CO LTD - 929,500 (929,500) -

TELEVISION BROADCASTS LTD - 345,600 (345,600) -

TENCENT HLDGS LTD 3,532,300 4,592,200 (3,302,700) 4,821,800

TIANJIN DEVELOPMENT HOLDINGS LIMITED 920,000 - (920,000) -

TINGYI (CAYMAN ISLANDS) HOLDING CORP 4,918,000 1,176,000 (6,094,000) -

UNI-PRESIDENT CHINA HOLDINGS LTD - 18,834,000 (18,834,000) -

VALUE PARTNERS GROUP LTD - 6,103,000 (6,103,000) -

VTECH HOLDINGS LTD - 625,000 (429,100) 195,900

WASION GROUP HOLDINGS LTD - 10,658,000 (4,706,000) 5,952,000

WH GROUP LTD - 12,626,500 (12,626,500) -

WHARF HOLDINGS LTD - 2,336,000 (2,336,000) -

WHEELOCK AND COMPANY LIMITED 1,136,000 2,335,000 (3,471,000) -

WYNN MACAU LTD 812,800 - (812,800) -

XIAMEN INTERNATIONAL PORT CO LTD H SHS 15,736,000 - (15,736,000) -

XINJIANG GOLDWIND SCIENCE & TECH H SHS 865,000 6,921,200 (3,057,200) 4,729,000

XINYI GLASS HOLDINGS LTD - 12,096,000 (12,096,000) -

XINYI SOLAR HLDGS - 39,450,000 (20,650,000) 18,800,000

YUE YUEN INDUSTRIAL HLDG SHS - 2,438,000 (1,163,500) 1,274,500

ZHUZHOU CSR TIMES ELECTRIC CO LTD H SHS 3,590,000 4,925,000 (4,663,500) 3,851,500

ZIJIN MINING GROUP CO LTD H SHS 8,072,000 7,510,000 (15,582,000) -

ZOOMLION HEAVY IND SCIENCE&TECH CO LTD H SHS

6,001,800

-

(6,001,800)

-

ZTE CORP H SHS 2,303,000 18,478,840 (2,000,400) 18,781,440

UNLISTED RIGHTS

HONG KONG

CHINA RESOURCES LAND LTD RTS 30JAN2015 - 1,149,778 (1,149,778) -


Investment Report


9

PineBridge Hong Kong Equity Fund (the “Fund”), is a unit trust governed by its Trust Deed dated 10 August

1998, as amended, supplemented and restated. The Fund is managed in accordance with the distinct investment

policy. There have been no changes to the investment policy during the year.

Investment objectives and policies

The Fund seeks to provide capital appreciation through a managed portfolio of shares in companies listed on

The Stock Exchange of Hong Kong Limited. Hong Kong is in the Manager’s view well placed to prosper

directly from economic activities in the Asian region and the economic emergence of People’s Republic of

China.

2015 2014 2013

HK$ HK$ HK$

Investments and investment income

Total value of investments 7,951,380,409 8,483,704,417 8,106,207,71

3

Interest on bank deposits 402,804 238,183 198,005

Dividend income (net of withholding tax) 257,617,311 262,232,676 196,389,647

Net foreign currency gains/(losses) (165) (44) 70

Net income excluding capital

(depreciation)/appreciation 151,047,411 168,914,502 129,843,737

Net (depreciation)/appreciation of investments

and derivative financial instruments

- realized and unrealized (1,059,074,094) (7,929,975) 821,547,050

Performance table

Net asset value Total net Net asset

asset value value per unit

HK$ HK$

2015 - Standard units - Accumulation (Note 2) 407,143,477 29.24

2015 - Provident Fund units 7,975,823,435 33.44






Investment Report


10

Performance table (Continued)

Performance record for the past 10 years

Highest

issue price

per unit

HK$

Lowest

redemption

price per unit

HK$

Annualized

investment

return

(Note 1)

%

2015 - Standard units - Accumulation (Note 2) 38.73 27.57 (10.17)

2015 - Provident Fund units 43.88 31.40 (9.01)

2014 - Standard units - Accumulation (Note 2) 34.54 29.29 1.02

2014 - Provident Fund units 38.95 32.90 2.00

2013 - Standard units - Accumulation (Note 2) 32.46 26.15 11.95


2012 - Standard units 28.87 23.53 19.32


2011 - Standard units 33.10 21.09 (23.50)


2010 - Standard units 33.83 25.39 8.20


2009 - Standard units 30.11 14.81 61.99


2008 - Standard units 35.51 13.71 (49.54)


2007 - Standard units 40.41 21.94 51.16


2006 - Standard units 23.59 15.73 50.86

2006 - Provident Fund units 24.38 16.29 50.54 Note 1: The annualized investment return is calculated by comparing the net asset value per unit at the year end

against the net asset value per unit at the beginning of the year.

Note 2: The “Standard units” have been renamed to “Standard units - Accumulation” with effect from 27 June

2013.

Commentary by the Trustee

Based on the information received from the Manager of the Fund during the year, the Trustee of the Fund

confirmed, to the best of its knowledge and belief, that the investment objectives and policies for the Fund were

complied with.


Trustee’s Report


11

We hereby confirm that, in our opinion, the Manager of the Fund has, in all material respects, managed the

Fund for the year ended 31 December 2015 in accordance with the provisions of the Trust Deed dated 10

August 1998, as amended, supplemented and restated.

On behalf of

AIA Company (Trustee) Limited

_________________________ _____________________________

Director Director

22 April 2016

INDEPENDENT AUDITOR’S REPORT

TO THE TRUSTEE OF PINEBRIDGE HONG KONG EQUITY FUND (THE “FUND”)

12

Report on the Financial Statements

We have audited the financial statements of the Fund set out on pages 14 to 32, which comprise the statement of

net assets as at 31 December 2015, and the statement of comprehensive income, statement of changes in net

assets attributable to unitholders and statement of cash flows for the year then ended, and a summary of

significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

The Trustee and the Manager (the “Management”) of the Fund are responsible for the preparation of financial

statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by

the Hong Kong Institute of Certified Public Accountants, and are responsible for ensuring that the financial

statements have been properly prepared in accordance with the relevant disclosure provisions of the Trust Deed

dated 10 August 1998, as amended (the “Trust Deed”), the Hong Kong Mandatory Provident Fund Schemes

Ordinance (the “Ordinance”), the Hong Kong Mandatory Provident Fund Schemes (General) Regulation (the

“General Regulation”), the Code on MPF Investment Funds (the “MPF Code”), and Guidelines II.5 issued by the

Mandatory Provident Fund Schemes Authority (the “MPF Guideline”), and Appendix E of the Code on Unit

Trusts and Mutual Funds issued by the Securities and Futures Commission of Hong Kong (the “SFC Code”), and

for such internal control as the Management determines is necessary to enable the preparation of financial

statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit and to report our

opinion solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept

liability to any other person for the contents of this report.

We conducted our audit in accordance with Hong Kong Standards on Auditing and with reference to Practice

Note 860.1 (Revised) “The Audit of Retirement Schemes” issued by the Hong Kong Institute of Certified Public

Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit

to obtain reasonable assurance about whether the financial statements are free from material misstatement. We

are also required to assess whether the financial statements of the Fund have been properly prepared, in all

material respects, in accordance with the relevant disclosure provisions of the Trust Deed, the Ordinance, the

General Regulation, the MPF Code, the MPF Guideline and the SFC Code.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the

financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the

risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk

assessments, the auditor considers internal control relevant to the Fund’s preparation of financial statements that

give a true and fair view 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 Fund’s internal control. An audit also includes

evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made

by the Management, as well as evaluating the overall presentation of the financial statements.

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

opinion.

INDEPENDENT AUDITOR’S REPORT

TO THE TRUSTEE OF PINEBRIDGE HONG KONG EQUITY FUND (THE “FUND”)

(CONTINUED)

13

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Fund as at 31

December 2015, and of its financial transactions and cash flows for the year then ended in accordance with Hong

Kong Financial Reporting Standards.

Report on Other Legal and Regulatory Requirements

(a) In our opinion, the financial statements have been properly prepared, in all material respects, in

accordance with the relevant disclosure provisions of the Trust Deed, the Ordinance, the General

Regulation, the MPF Code, the MPF Guideline and the SFC Code; and

(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. PricewaterhouseCoopers Certified Public Accountants Hong Kong, 22 April 2016


Statement of Net Assets


14

31 December 31 December

2015 2014

Note HK$ HK$

Assets

Current assets

Investments 4(b) 7,951,380,409 8,483,704,417

Dividends receivable 1,611,484 4,194,154

Interest receivable 3,578 503

Amounts receivable on subscription 3,380,912 3,020,649

Amounts receivable from brokers 4,127,446 157,044,259

Cash and cash equivalents 435,422,827 73,448,488

Total assets 8,395,926,656 8,721,412,470

Liabilities

Current liabilities

Derivative financial instruments 4(b), 7 - 170

Amounts payable on redemption 7,092,336 19,745,182

Amounts payable to brokers 4,150,164 168,196,214

Accounts payable and accrued expenses 1,717,244 1,748,123

Liabilities (excluding net assets attributable to

unitholders) 12,959,744

189,689,689

Net assets attributable to unitholders 3 8,382,966,912 8,531,722,781

On behalf of On behalf of

AIA Company (Trustee) Limited PineBridge Investments

Hong Kong Limited

________________________ _________________________ ________________________

Director Director Director

The notes on pages 18 to 32 are an integral part of these financial statements.


Statement of Comprehensive Income


15

2015 2014

Note HK$ HK$

Income

Interest on bank deposits 402,804 238,183

Dividend income 270,056,580 275,327,109

Net losses on investments and derivative financial

instruments 6 (1,059,074,094) (7,929,975)

Net foreign currency gains/(losses) (165) (44)

Total investment (loss)/income (788,614,875) 267,635,273

Expenses

Management fee 9(a) 5,681,790 4,930,985

Trustee’s fee 9(b) 4,462,021 4,111,768

Custodian and administration fees 9(c) 6,619,807 6,432,060

Audit fee 284,804 151,609

Bank charges 650 650

Legal and professional fee 60,551 28,661

Other expenses 848,807 75,759

Transaction cost 89,014,109 77,824,821

Total operating expenses 106,972,539 93,556,313

Net (loss)/profit before tax (895,587,414) 174,078,960

Withholding tax 8(c) (12,439,269) (13,094,433)

(Decrease)/increase in net assets attributable to

unitholders from operations (908,026,683) 160,984,527



Statement of Changes in Net Assets Attributable to Unitholders


16

2015 2014

Note HK$ HK$

Net assets attributable to unitholders at 1 January 8,531,722,781 8,148,224,319

Issue of units 3 1,885,203,898 1,294,960,285

Redemption of units 3 (1,125,933,084) (1,072,446,350)

Net increase from unit transactions 759,270,814 222,513,935

(Decrease)/increase in net assets attributable to unitholders

from operations (908,026,683) 160,984,527

Net assets attributable to unitholders at 31 December 8,382,966,912 8,531,722,781



Statement of Cash Flows


17

2015 2014

HK$ HK$

Cash flows from operating activities

(Decrease)/increase in net assets attributable to unitholders from

operations (908,026,683)

160,984,527

Adjustment for:

Dividend income (270,056,580) (275,327,109)

Interest on bank deposits (402,804) (238,183)

Withholding tax 12,439,269 13,094,433

Operating loss before working capital changes (1,166,046,798) (101,486,332)

Net decrease/(increase) in investments 532,324,008 (377,496,704)

Net change in derivative financial instruments (170) (44)

Net decrease/(increase) in amounts receivable from brokers 152,916,813 (83,588,900)

Net (decrease)/increase in amounts payable to brokers (164,046,050) 73,285,957

Net decrease in accounts payable and accrued expenses (30,879) (109,842)

Cash used in operations (644,883,076)

(489,395,865)

Dividend income received 260,199,981 258,165,322

Interest on bank deposits received 399,729 238,184

Net cash used in operating activities (384,283,366) (230,992,359)

Cash flows from financing activities

Proceeds from issue of units 1,884,843,635 1,306,224,807

Payments on redemption of units (1,138,585,930) (1,069,872,934)

Net cash generated from financing activities 746,257,705 236,351,873

Net increase in cash and cash equivalents 361,974,339 5,359,514

Cash and cash equivalents at the beginning of the year 73,448,488 68,088,974

Cash and cash equivalents at the end of the year 435,422,827 73,448,488

Analysis of balance of cash and cash equivalents

Cash at banks 435,422,827 73,448,488



Notes to the Financial Statements


18

1. The Fund

PineBridge Hong Kong Equity Fund (the “Fund”) is a unit trust governed by its Trust Deed dated 10

August 1998, as amended, supplemented and restated. The Fund has been authorized by the Securities and

Futures Commission of Hong Kong and approved by the Mandatory Provident Fund Schemes Authority of

Hong Kong.

2. Summary of significant accounting policies

The principal accounting policies applied in the preparation of the financial statements are set out below.

These policies have been consistently applied to all the years presented, unless otherwise stated.

(a) Basis of preparation

The financial statements have been prepared in accordance with Hong Kong Financial Reporting

Standards (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants

(“HKICPA”). The financial statements have been prepared under the historical cost convention, as

modified by the revaluation of financial assets and financial liabilities (including derivative financial

instruments) at fair value through profit or loss.

The preparation of financial statements in conformity with HKFRS requires the use of certain critical

accounting estimates. It also requires the Trustee and Manager to exercise its judgment in the process

of applying the Fund’s accounting policies. The areas involving a higher degree of judgment or

complexity, or areas where assumptions and estimates are significant to the financial statements are

disclosed in note 5.

New and amended standards that are effective in the current year and have been adopted by the Fund

There are no standards, interpretations or amendments to existing standards that are effective for the

first time for the financial year beginning 1 January 2015 that would be expected to have a significant

impact on the Fund.

New standards, amendments and interpretations issued but not effective for the financial year

beginning 1 January 2015 and have not been early adopted

HKFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of

financial assets and financial liabilities. The complete version of HKFRS 9 was issued in July 2014. It

replaces the guidance in HKAS 39 that relates to the classification and measurement of financial

instruments. HKFRS 9 retains but simplifies the mixed measurement model and establishes three

primary measurement categories for financial assets: amortized cost, fair value through other

comprehensive income ("OCI") and fair value through profit or loss. The basis of classification

depends on the entity's business model and the contractual cash flow characteristics of the financial

asset. Investments in equity instruments are required to be measured at fair value through profit or loss

with the irrevocable option at inception to present changes in fair value in OCI not recycling. There is

now a new expected credit losses model that replaces the incurred loss impairment model used in

HKAS 39. For financial liabilities there were no changes to classification and measurement except for

the recognition of changes in own credit risk in other comprehensive income, for liabilities designated

at fair value through profit or loss. HKFRS 9 relaxes the requirements for hedge effectiveness by

replacing the bright line hedge effectiveness tests. It requires an economic relationship between the

hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management

actually use for risk management purposes.

Contemporaneous documentation is still required but is different to that currently prepared under

HKAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018. Early

adoption is permitted. The Fund is yet to assess HKFRS 9’s full impact.




19

2. Summary of significant accounting policies (Continued)

(a) Basis of preparation (Continued)

New standards, amendments and interpretations issued but not effective for the financial year

beginning 1 January 2015 and have not been early adopted (Continued)

There are no other standards, interpretations or amendments to existing standards that are not yet

effective that would be expected to have a significant impact on the Fund.

(b) Investments

All investments are classified as “financial assets at fair value through profit or loss”. These financial

assets are classified as held for trading or designated by the Trustee at fair value through profit or loss

at inception. Purchases and sales of investments are accounted for on a trade date basis. Investments

are initially recognized at fair value, excluding transaction costs which are expensed as incurred in the

statement of comprehensive income, and are subsequently re-measured at fair value. Realized and

unrealized gains and losses on investments are recognized in the statement of comprehensive income

within “net gains/(losses) on investments and derivative financial instruments” in the period in which

they arise. Investments are derecognized when the rights to receive cash flows from the investments

have expired or the Fund has transferred substantially all risks and rewards of ownership.

The following represent the basis of valuation for financial reporting purposes:

(i) Investments which are listed or traded on an exchange are fair valued based on last traded prices.

(ii) Investments which are not listed on an exchange or are thinly traded are valued by using quotes

from brokers.

(c) Income

Dividends on equities are recognized in the statement of comprehensive income when the Fund’s right

to receive payments is established. The corresponding withholding taxes are recorded as a separate

item in the statement of comprehensive income.

Interest income is recognized on a time-proportionate basis using the effective interest method. Other

income is accounted for on an accrual basis.

(d) Translation of foreign currencies

(i) Functional and presentation currencies

Items included in the Fund’s financial statements are measured using the currency of the primary

economic environment in which it operates (the “functional currency”). The financial statements

are presented in Hong Kong dollar, which is the Fund’s functional and presentation currency.

(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

comprehensive income.

Foreign exchange gains and losses relating to cash and cash equivalents are presented in the

statement of comprehensive income within “net foreign currency gains/(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 comprehensive income within “net

gains/(losses) on investments and derivative financial instruments”.




20

2. Summary of significant accounting policies (Continued)

(e) Expenses

Expenses are accounted for on an accrual basis.

(f) Derivative financial instruments - foreign exchange contracts

Outstanding foreign exchange contracts are valued at the year end date by reference to the rate of

exchange applicable to the outstanding term of the contract. Unrealized gains or losses on outstanding

contracts and realized gains and losses on closed contracts are shown in the statement of

comprehensive income within “net gains/(losses) on investments and derivative financial instruments”.

(g) Subscription and redemption of units

Proceeds and payments on the subscription and redemption of units are recorded in the statement of

changes in net assets attributable to unitholders. The price at which units are subscribed or redeemed is

calculated by reference to the net asset value per unit as at the close of business on the relevant dealing

day.

(h) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of net assets

where the Fund currently has a legally enforceable right to set-off the recognized amounts and there is

an intention to settle on a net basis or realize the asset and liability simultaneously.

(i) Amounts receivable from/payable to brokers

Amounts receivable from/payable to brokers represent receivables from investments sold and payables

for investments purchased that have been contracted for but not yet settled or delivered on the year end

date respectively.

(j) Cash and cash equivalents

Cash and cash equivalents include cash at banks, deposits held with banks with original maturities of

three months or less and bank overdrafts, if any.

(k) Transaction costs

Transaction costs are costs incurred to acquire financial assets or liabilities at fair value through profit

or loss. They include fees and commissions paid to agents, advisers, brokers and dealers. Transaction

costs, when incurred, are immediately recognized in profit or loss as an expense.




21

3. Number of units in issue and net assets attributable to unitholders per unit

The Fund’s capital is represented by the units in the Fund, and shown as “net assets attributable to

unitholders” in the statement of net assets.

The Fund has no restrictions on the subscriptions of units. Pursuant to the Trust Deed and subject to the

conditions and procedures set out therein, the Manager is entitled, having regard to the interests of

unitholders, to limit the total number of units which unitholders are entitled to redeem on any dealing day to

10% of the units then in issue or deemed to be in issue. Subscriptions and redemptions of units during the

year are shown in the statement of changes in net assets attributable to unitholders. Subscriptions of units

during the year ended 31 December 2014 included the capital injection of HK$36,278,625 from HSBC

Provident Fund Trustee (Hong Kong) Limited, the Fund Administrator prior to 9 November 2015, as

compensations for the pricing errors reported in the relevant notice to unitholders issued on 8 December

2014. In order to achieve the investment objectives, the Fund endeavors to invest its capital in accordance

with the investment policies as outlined in note 4, whilst maintaining sufficient liquidity to meet redemption

requests. Such liquidity is augmented by the holding of liquid investments.

Net assets attributable to unitholders represent a liability in the statement of net assets, carried at the

redemption amount that would be payable at the year end date if the unitholders exercised the right to

redeem the units in the Fund.

Number of Net asset value

units in issue per unit

HK$

2015 - Standard units - Accumulation 13,922,338 29.24

2015 - Provident Fund units 238,540,091 33.44

2014 - Standard units - Accumulation 13,641,793 32.55

2014 - Provident Fund units 220,056,361 36.75




22

3. Number of units in issue and net assets attributable to unitholders per unit (Continued)

2015

Standard

Units

- Accumulation

2015

Provident

Fund Units

2014

Standard

Units

- Accumulation

2014

Provident

Fund Units

Units Units Units Units

Balance brought forward 13,641,793 220,056,361 13,938,508 214,360,816

Total issues 3,517,221 46,896,013 3,114,116 32,646,690

Total redemptions (3,236,676) (28,412,283) (3,410,831) (26,951,145)

Balance carried forward 13,922,338 238,540,091 13,641,793 220,056,361

The Fund offers two classes of units. Provident Fund units are offered to provident fund schemes approved

by the Mandatory Provident Fund Schemes Authority. Standard units - Accumulation are offered to all

investors other than the provident fund schemes approved by the Mandatory Provident Fund Schemes

Authority. The Standard units have been renamed to “Standard units - Accumulation” with effect from 27

June 2013.

4. Financial risk management

(a) Financial risk factors

The investment objective of the Fund is to achieve capital appreciation. The Fund seeks to achieve its

investment objective through a managed portfolio of shares in listed companies quoted on The Stock

Exchange of Hong Kong Limited.

The Fund is exposed to market price risk, cash flow interest rate risk, credit and custody risk, liquidity

risk and currency risk.

The risks and the respective risk management policies employed by the Fund to manage these risks are

discussed below.

(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 Fund’s market price risk is managed through (i)

deliberate securities selection, and (ii) diversification of the investment portfolio.




23

4. Financial risk management (Continued)

(b) Market price risk (Continued)

As at year end, the overall market exposures were as follows:

2015 2014

Fair value

HK$

Cost

HK$

% of

net

assets

Fair value

HK$

Cost

HK$

% of

net

assets

Held for

trading:

Listed equities 7,951,380,409 7,932,396,266 94.85 8,483,704,417 7,835,570,954 99.44

Derivative

financial instruments

(note 7) - - - (170) - -

Net market exposures

The following table shows the net market exposure of the Fund to various markets, incorporating the

underlying market risk through all financial assets and liabilities held by the Fund as at 31 December.

2015 2014 HK$ equivalent HK$ equivalent Markets exposed to Hong Kong 7,951,380,409 8,483,704,417

The following table shows net exposures to sectors as at 31 December 2015 and 2014:

2015 2014

% % Sectors exposed to Basic Materials - 1

Communications 17 7 Consumer, Cyclical 14 7 Consumer, Non-cyclical 7 5 Diversified 1 2 Energy 2 3 Financial 48 56 Industrial 8 14 Technology 2 1 Utilities 1 4

100 100

There were no investments issued by the same issuer with market value exceeding 10% of the Fund’s

net asset value as at 31 December 2015 and 2014.




24


(b) Market price risk (Continued)

The table below summarizes the impact on net assets attributable to unitholders as a result of

increases/decreases of the key index to which the Fund is exposed. The analysis is based on the

assumption that the index had increased/decreased by the respective percentage with all other variables

held constant and the Fund’s investments moved according to the historical correlation with the index.

2015 2014

Change in market

index %

Impact HK$

Change in market

index %

Impact

HK$ +/- +/- +/- +/- FTSE MPF HK Index Total Return 6% 455,525,234 5% 406,458,939

The Manager has used their view of what would be a “reasonable shift” in the FTSE MPF HK Index

Total Return, having regard to the historical volatility of the index, to estimate the change for use in the

market price risk 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 Manager’s current view of market

volatility and other relevant factors.

(c) Cash flow 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.

The majority of the Fund’s financial assets and liabilities are non-interest bearing, as the Fund invests

mainly in listed equities. As a result, the Fund is 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.

As at 31 December 2015, the Fund had bank balances of HK$435,422,827 (2014: HK$73,448,488)

and is therefore exposed to cash flow interest rate risk which is considered by the Manager to be

minimal as they are short-term instruments all with maturities less than one month.

As the Manager believes that the Fund has no significant interest rate risk exposure, no interest rate

sensitivity analysis is disclosed.




25


(d) Credit and custody risk

The Fund is exposed to credit risk which is the risk that an issuer or counterparty will be unable or

unwilling to pay amounts in full when due.

The Fund’s financial assets which are potentially subject to concentrations of credit risk consist

principally of cash and cash equivalents and assets held with the custodian. The table below

summarizes the assets placed with banks and custodian at 31 December 2015 and 2014:

At 31 December 2015

HK$ Credit rating

Source of

credit rating

Custodian

Citibank, N.A 7,951,380,409 P-1 Moody's

Banks

Citibank, N.A 80,027 P-1 Moody's

Dah Sing Bank Limited 435,342,800 P-2 Moody's

At 31 December 2014

HK$ Credit rating

Source of

credit rating

Custodian

HSBC Provident Fund Trustee (Hong

Kong) Limited 8,483,704,417 A-1 S&P

Banks

Dah Sing Bank Limited 73,440,000 P-2 Moody’s

The Hongkong and Shanghai Banking

Corporation Limited 8,488 A-1 S&P

All derivative financial instruments represent outstanding foreign exchange contracts as disclosed in

note 7. As at 31 December 2015, the Fund did not hold any derivative financial instruments. As at 31

December 2014, the counterparty of these foreign exchange contracts is The Hongkong and Shanghai

Banking Corporation Limited. The credit rating was A-1 (S&P).

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.

None of the assets is impaired nor past due but not impaired.

All transactions in listed securities are settled/paid for upon delivery using approved and reputable

brokers. The risk of default is considered minimal since delivery of securities sold is only made when

the broker has received payment. Payment is made on a purchase when the securities have been

received by the broker. The trade will fail if either party fails to meet its obligation.

The Fund limits its exposure to credit risk by transacting the majority of its securities and contractual

commitment activities with broker-dealers, banks and regulated exchanges with high credit ratings and

that the Fund considers to be well established.




26


(e) Liquidity risk

Liquidity risk is the risk that an enterprise will encounter difficulty in settling a liability, including a

redemption request.

The Fund is exposed to daily cash redemptions of units in the Fund. The Fund invests the majority of

its assets in investments that are traded in an active market and can be readily disposed of.

The table below analyzes the Fund’s non-derivative financial liabilities into relevant maturity

groupings based on the remaining period at the year end date to the contractual maturity date. The

amounts in the table are the contractual undiscounted cash flows. Balances due within 12 months equal

their carrying balances, as the impact of discounting is not significant.

Less than 1-3 Over 3

1 month months months

HK$ HK$ HK$

At 31 December 2015

Amounts payable on redemption 7,092,336 - -

Amounts payable to brokers 4,150,164 - -

Accounts payable and accrued expenses 1,404,765 - 312,479

Net assets attributable to unitholders 8,382,966,912 - -

Total financial liabilities (excluding net

settled derivatives) 8,395,614,177 - 312,479

At 31 December 2014

Amounts payable on redemption 19,745,182 - -

Amounts payable to brokers 168,196,214 - -

Accounts payable and accrued expenses 1,597,560 3,508 147,055

Net assets attributable to unitholders 8,531,722,781 - -

Total financial liabilities (excluding net

settled derivatives) 8,721,261,737 3,508 147,055

All derivative financial instruments entered into by the Fund are settled on a net basis.

The table below analyzes the Fund’s derivative financial instruments in a loss position for which the

contractual maturities are considered to be essential to an understanding of the timing of cash flows

based on the Fund’s investment strategy.

At 31 December 2015

As at 31 December 2015, the Fund did not hold any derivative financial instruments.

Less than 1-3 Over 3

1 month months months

HK$ HK$ HK$

At 31 December 2014

Net settled derivatives

Foreign exchange contracts (170) - -




27


(e) Liquidity risk (Continued)

Units are redeemed on demand at the unitholder’s option. However, the Manager does not envisage

that the contractual maturity disclosed in the table above will be representative of the actual cash

outflows, as the unitholders typically retain the units for the medium to long term. At 31 December

2015 and 2014, no ultimate individual investor held more than 10% of the Fund’s units.

As at 31 December 2015, the Fund held cash and cash equivalents of HK$435,422,827 (2014:

HK$73,448,488) and liquid investments of HK$7,951,380,409 (2014: HK$8,483,704,417) that are

expected to readily generate cash inflows within 1 month for managing liquidity risk.

(f) Currency risk

Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign

exchange rates.

The Fund is not exposed to significant currency risk because majority of the assets and liabilities are

denominated in Hong Kong dollar, the Fund’s functional and presentation currency, and United States

dollar which is linked with the Hong Kong dollar.

Gross exposures to currency risk on foreign exchange contracts outstanding at the year end are

disclosed in note 7.

(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 Fund utilizes 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 with 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 arm’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 Fund for similar financial instruments.

HKFRS 13 requires the Fund 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 that the entity can

access at the measurement date (Level 1).

Inputs other than quoted prices included within level 1 that are observable for the asset or liability,

either directly or indirectly (Level 2).

Inputs for the asset or liability that are unobservable inputs (Level 3).

The level in the fair value hierarchy within which the fair value measurement is categorized 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.




28


(g) Fair value estimation (Continued)

The determination of what constitutes “observable” requires significant judgment by the Fund. The

Fund considers 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 analyzes within the fair value hierarchy the Fund’s investments (by class)

measured at fair value at 31 December 2015 and 2014:

At 31 December 2015

Level 1 Level 2 Level 3 Total

HK$ HK$ HK$ HK$

Assets

Held for trading:

- Listed equities 7,912,704,731 - 38,675,678 7,951,380,409

Total assets 7,912,704,731 - 38,675,678 7,951,380,409

At 31 December 2014

Level 1 Level 2 Level 3 Total

HK$ HK$ HK$ HK$

Assets

Held for trading:

- Listed equities 8,483,704,417 - - 8,483,704,417

Total assets 8,483,704,417 - - 8,483,704,417

Liabilities

Held for trading:

- Derivative financial

instruments -

(170)

-

(170)

Total liabilities - (170) - (170)

Investments whose values are based on quoted market prices in active markets, and therefore classified

within level 1 include active listed equities. The Fund does 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. These include foreign exchange contracts. As level 2 investments include

positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may

be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available

market information.

Investments classified within level 3 have significant unobservable inputs, as they trade infrequently.

As at 31 December 2015, level 3 instruments include listed equity securities that are suspended from

trading. As observable prices are not available for these securities, the Fund has used valuation

techniques including last traded price before suspension to derive the fair value of these level 3

investments. As at 31 December 2014, the Fund did not hold any investments classified in level 3.

As at 31 December 2015, the Fund has investments in two (2014: Nil) equity securities which were

suspended on 27 March 2015 and 21 May 2015, respectively. The Manager considers the last traded

price before suspension to be the best estimate of the fair value of such securities. The fair value of the

suspended securities was HK$38,675,678 in aggregate, which represented 0.46% of the Fund’s net

asset value as at 31 December 2015. Such investments were classified as level 3 due to continual

suspension of trading as at 31 December 2015.




29


(g) Fair value estimation (Continued)

Transfers between levels of the fair value hierarchy are deemed to have occurred on the date of the

stock suspension. During the year ended 31 December 2014, there was no transfer between levels.

A sensitivity analysis for level 3 positions is not presented, as it is deemed that the impact of reasonable

changes in inputs would not be significant.

The following table presents the transfers between levels for the year ended 31 December 2015.

Level 3

HK$

Opening Balance -

Transfer from Level 1 to Level 3 38,675,678

Closing Balance 38,675,678

Total gains for the year included in the statement of comprehensive income for

financial assets and liabilities held at the end of the year

-

The equity securities transferred out of level 1 relate to positions whose trading were suspended during

the year. The valuation inputs for this security were not therefore based on market observable inputs

and resulted in the reclassification to level 3.

The following table presents the movement in level 3 instruments for the year ended 31 December

2015 by class of financial instrument.

Hong Kong listed equity

HK$

Opening Balance -

Transfers into Level 3 38,675,678

Closing Balance 38,675,678

Assets and liabilities included in the statement of net assets, except for investments and derivative

financial instruments, are carried at amortized cost; their carrying values are a reasonable

approximation of fair value.

(h) Capital risk management

The capital of the Fund is represented by the net assets attributable to unitholders. The amount of net

assets attributable to unitholders can change significantly on a daily basis as the Fund is subject to

daily subscriptions and redemptions at the discretion of unitholders. The Fund’s objective when

managing capital is to safeguard the Fund’s ability to continue as a going concern in order to provide

returns for unitholders and benefits for other stakeholders and to maintain a strong capital base to

support the development of the investment activities of the Fund.

In order to maintain or adjust the capital structure, the Fund’s policy is to perform the following:

monitor the level of daily subscriptions and redemptions relative to the liquid assets; and

redeem and issue units in accordance with the Trust Deed of the Fund.

The Manager monitors capital on the basis of the value of net assets attributable to unitholders.




30

5. Critical judgment

In preparing these financial statements, the Trustee and Manager have made certain judgment which is

dependent on what might happen in the future. The judgment made by the Trustee and Manager may not

equal the related actual results. Refer to note 8(b) to the financial statements.

6. Net losses on investments and derivative financial instruments

2015 2014

HK$ HK$

Change in unrealized gains/losses in value of investments

and derivative financial instruments (629,149,150) (641,557,338)

Realized (losses)/gains on sale of investments and

derivative financial instruments (429,924,944) 633,627,363

(1,059,074,094) (7,929,975)

7. Derivative financial instruments

Derivative financial instruments represent outstanding foreign exchange contracts and are summarized

below:

At 31 December 2015

As at 31 December 2015, the Fund did not hold any derivative financial instruments.

At 31 December 2014

Contract to deliver In exchange for Settlement date Fair value

HK$

Open contracts:

US$108,324 HK$840,193 2 January 2015 (52)

US$28,296 HK$219,416 5 January 2015 (70)

US$33,243 HK$257,813 6 January 2015 (48)

(170)

8. Taxation

(a) No provision for Hong Kong profits tax has been made as the Fund is authorized as a collective

investment scheme under Section 104 of the Hong Kong Securities and Futures Ordinance and is

therefore exempted from profits tax under Section 26A(1A) of the Hong Kong Inland Revenue

Ordinance.

(b) The Fund invests in shares of companies in People's Republic of China (“PRC”) listed on the Hong

Kong Stock Exchange (“H-shares”). Under the PRC Corporate Income Tax Law, the Fund may be

liable to pay PRC tax on the capital gains realized in the trading of H-shares. However, no provision

was made for taxation from such gains in the financial statements as the Trustee and Manager believe

that the Fund can sustain a position for not filing a tax return based on the existing tax regulations and

that the enforcement of China tax on capital gains is not probable.

(c) Withholding tax was charged on dividend income received from H-shares during the year.




31

9. Transactions with Associates/Connected Persons/Related Parties

Associates and connected persons are those as defined in the Mandatory Provident Fund Schemes

Ordinance and the Code on Unit Trusts and Mutual Funds issued by the Securities and Futures Commission

of Hong Kong.

Apart from the fees as disclosed below, the Fund allows the Manager and its associates/connected persons

to subscribe for, and redeem, units in the Fund.

All transactions were entered into in the ordinary course of business and on normal commercial terms.

(a) Management fee

PineBridge Investments Hong Kong Limited, the Manager, is entitled to receive a management fee at

1.25% per annum, with a permitted maximum of 1.50% per annum, of the net asset value of the

Standard units - Accumulation, being calculated daily and payable monthly in arrears.

No management fee is charged on the Provident Fund units.

Management fee payable as at year end amounted to HK$432,418 (2014: HK$494,784).

(b) Trustee’s fee

AIA Company (Trustee) Limited, the Trustee, is entitled to receive a trustee’s fee at a permitted

maximum of 0.05% per annum of the net asset value of the Fund, being calculated daily and payable

monthly in arrears.

Trustee’s fee payable as at year end amounted to HK$356,603 (2014: HK$378,333).

(c) Custodian and administration fees

Prior to 9 November 2015, HSBC Provident Fund Trustee (Hong Kong) Limited (“HSBC”), the

former Custodian and Administrator, was entitled to receive a custodian fee of 0.09% per annum of the

daily net asset value of the Fund for the first HK$600 million and 0.06% per annum thereafter, with a

permitted maximum of 0.50% per annum.

It was also entitled to receive a valuation fee of HK$400 (2014: HK$400) for the daily valuation of the

Fund and a transaction fee of HK$200 (2014: HK$200*) for each sale or purchase of investments

undertaken by the Manager.

*: The 2014 comparative was once stated as HK$400 in the first publication of the financial statements

for the year ended 31 December 2014 due to a typographical error and was subsequently updated to

HK$200 to reflect the actual fee rate in accordance with the offering documents. The said transaction

fee rate was also stated as HK$400 in the financial statements for the years ended 31 December 2013

and 2012 when the actual fee rate was HK$200 effective from 26 March 2012. This typographical error

was confined to the transaction fee rate as disclosed in the notes to the financial statements and had no

impact on the actual charges to the Fund that were reported in the statement of comprehensive income

for the years ended 31 December 2012, 2013 and 2014.

Total custodian and administration fees for the period from 1 January 2015 to 8 November 2015

amounted to HK$6,281,428 (year ended 31 December 2014: HK$6,432,060), of which no amount was

outstanding to HSBC as at year end (2014: HK$724,444).

Effective from 9 November 2015, the Custodian and Administrator of the Fund has been changed from

HSBC to Citibank N.A., Hong Kong Branch, who is entitled to receive a custodian fee which

comprises safekeeping and transaction fees of 0.025% per annum of the net asset value of the Fund and

a transfer agency fee of US$1,500 per month, with a total permitted maximum of 0.50% per annum.

It is also entitled to receive an administrator fee of US$1,000 per month.




32

9. Transactions with Associates/Connected Persons/Related Parties (Continued)

(c) Custodian and administration fees (Continued)

Total custodian and administration fees for the period from 9 November 2015 to 31 December 2015

amounted to HK$338,379, of which HK$279,377 is payable to Citibank N.A., Hong Kong Branch as

at year end.

10. Soft commission arrangements

The Manager and its associates/connected persons have entered into soft commission arrangements with

some brokers under which certain goods and services used to support investment decision making are

obtained from third parties and are paid for by the brokers out of the commissions they receive. These may

include, for example, research and advisory services; economic and political analysis; portfolio analysis,

including valuation and performance measurement; market analysis, data and quotation services; clearing,

registrar and custodial services and investment-related publications; computer hardware and software

incidental to the above goods and services.

11. Distributions

No distribution was made during the year (2014: Nil).

12. Borrowings, contingent liabilities and commitments

The Fund had no borrowings, contingent liabilities and commitments as at 31 December 2015 and 2014.

13. Negotiability of assets

There were no statutory or contractual requirements restricting the free negotiability of assets held by the

Fund as at 31 December 2015 and 2014.

14. Subsequent events

On 4 January 2016, the revaluation of investments held at year end that were suspended on the Stock

Exchange of Hong Kong was completed. Net asset value of the Fund was decreased by HK$33,935,178 as a

result of the above revaluation, representing approximately 0.40% of the Fund’s net asset value at 31

December 2015.

15. Approval of financial statements

The financial statements were approved by the Trustee and the Manager on 22 April 2016.

pinebridge hong kong equity fund reports and … · 31 december 2015 . pinebridge hong kong equity...

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