Sun Life Rainbow MPF Scheme · Sun Life Rainbow MPF Scheme Year ended 31 December 2017 1 Scheme report for the year ended 31 December 2017 The Trustee is pleased to present the reports

Sun Life Rainbow MPF Scheme

31 December 2017

Sun Life Rainbow MPF Scheme Year ended 31 December 2017

Contents Page(s) Scheme report 1 - 4 Investment report 5 - 95 Independent auditor’s report 96 - 99 Independent auditor’s assurance report 100 - 102 Statement of assets and liabilities attributable to members 103 - 105 Statement of comprehensive income 106 - 108 Statement of changes in net assets attributable to members 109 - 111 Cash flow statement 112 Notes to the financial statements 113 - 162


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Scheme report for the year ended 31 December 2017

The Trustee is pleased to present the reports and financial statements of Sun Life Rainbow MPF Scheme (the “Scheme”) for the year ended 31 December 2017.

The Scheme is a master trust scheme established by a Trust Deed dated 31 January 2000, as amended from time to time. It consists of fourteen constituent funds, except for Sun Life MPF Core Accumulation Fund and Sun Life MPF Age 65 Plus Fund which only have one class of units each, each of which has two classes of units: Class A and Class B. Class B units are generally available to personal account members and employee members of those employers who, at the participation commencement date to the Scheme or at 1 December 2000, whichever is the later, have:

(i) no less than 100 employee members participating in the Scheme;

(ii) assets transferred to the Scheme from other occupational retirement schemes; or

(iii) their occupational retirement schemes administered by Sun Life Hong Kong Limited.

Class A units are available to other members of the Scheme not falling into any of the above categories.

In 2017, the Trust Deed and governing rules of the Scheme has been changed to cater for the implementation of Default Investment Strategy, which commences on 1 April 2017. Information about the rules, operation and structure of the Scheme is available in the Principal Brochure, Employer Information Guide and Member Information Guide. Members may also contact the service hotline of the Scheme at 3183 1888 or through fax at 3183 1889 for further information.

Financial development of the Scheme

As at 31 December 2017, the net asset value of the Scheme was HK$54,171.7 million (2016: HK$35,371.5 million). During the year, total contributions and transfers in received and receivable amounted to HK$10,877.6 million (2016: HK$7,146.1 million) while total benefits paid and payable and transfers out to other schemes (exclusive of forfeitures) amounted to HK$3,124.9 million (2016: HK$1,849.6 million).

For the year ended 31 December 2017, the Scheme recognised a net gain of HK$11,266.9 million (2016: gain of HK$290.9 million) which was attributed to a net realised and unrealised investment gain of HK$11,846.5 million (2016: gain of HK$734.5 million), interest from bank deposits of HK$30.2 million (2016: HK$15.5 million), exchange gain of HK$17.3 million (2016: exchange loss of HK$11.3 million) and operating expenses of HK$635.1 million (2016: HK$448.7 million).


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Scheme report for the year ended 31 December 2017 (continued)

Directory of parties

Trustee Sun Life Trustee Company Limited 10th Floor, Sun Life Tower The Gateway, 15 Canton Road Kowloon, Hong Kong

Sponsor1 Sun Life Hong Kong Limited 10th Floor, Sun Life Tower The Gateway, 15 Canton Road Kowloon, Hong Kong

Custodian RBC Investor Services Trust Hong Kong Limited 51st Floor, Central Plaza 18 Harbour Road Wanchai, Hong Kong

Administrator1 BestServe Financial Limited 10th Floor, One Harbourfront 18 Tak Fung Street Hunghom, Kowloon, Hong Kong

Investment Manager1 Sun Life Asset Management (HK) Limited 10th Floor, Sun Life Tower The Gateway, 15 Canton Road Kowloon, Hong Kong


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Directory of parties (continued)

Delegate of the Investment Manager (for Sun Life MPF Conservative Fund and Sun Life MPF RMB and HKD Fund) Invesco Hong Kong Limited 41st Floor, Champion Tower 3 Garden Road Central, Hong Kong

Bankers The Hongkong and Shanghai Banking Corporation Limited 1 Queen’s Road Central Hong Kong

Standard Chartered Bank (Hong Kong) Limited 19th Floor, Standard Chartered Tower 388 Kwun Tong Road Kowloon, Hong Kong

Auditor KPMG 8th Floor, Prince’s Building 10 Chater Road Central, Hong Kong

1 Associates of the Trustee

Directors of the Trustee

All directors can be contacted at the following address: 10th Floor, Sun Life Tower The Gateway, 15 Canton Road Kowloon, Hong Kong

During the year, the directors of the Trustee were as follows: Carolyn Ann BUTLER Nigel Robin HAZELL LAI Man Wah Teresa LI Tsui Lai Michelle LEE Mei Fun Cynthia Judy YANG


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Directors of the Sponsor

The directors can be contacted at the following address:

10th Floor, Sun Life Tower The Gateway, 15 Canton Road Kowloon, Hong Kong

During the year and up to the date of this report, the directors of the Sponsor are as follows:

CHOU Chia Ling Niall Mario O’HARE Fabien Gerald JEUDY (appointed on 12 January 2017) Jason Lee Clayton CARNE (appointed on 26 June 2017) Claude Alan ACCUM (appointed on 30 June 2017) Stuart John VALENTINE (appointed on 1 July 2017) Marwan Jason DEHNI (resigned on 12 January 2017) Kevin David STRAIN (resigned on 30 June 2017) Kenneth TOONG Ken Kwok (resigned on 1 July 2017)

Directors of the Administrator

The directors can be contacted at the following address: 10th Floor, Sun Life Tower The Gateway, 15 Canton Road Kowloon, Hong Kong

During the year and up to the date of this report, the directors of the Administrator are as follows: LUK Kwai Sim Belinda Shiney PRASAD Jeffrey Todd KOZAN (appointed on 17 January 2017)


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Investment report for the year ended 31 December 2017

This Investment Report provides analyses of the investments of the Scheme and its constituent funds of the movements in net asset value (“NAV”) and performance of the constituent funds.

Each constituent fund of the Scheme has been approved by the Mandatory Provident Fund Schemes Authority (the “Authority”) and the Securities and Futures Commission (the “SFC”). The fourteen constituent funds operating during the year are:

(1) Sun Life MPF RMB and HKD Fund

(2) Sun Life MPF Conservative Fund

(3) Sun Life MPF Hong Kong Dollar Bond Fund

(4) Sun Life MPF Hong Kong Equity Fund

(5) Sun Life MPF Global Bond Fund

(6) Sun Life MPF Stable Fund

(7) Sun Life MPF Balanced Fund

(8) Sun Life MPF Growth Fund

(9) Sun Life MPF Asian Equity Fund

(10) Sun Life MPF Global Equity Fund (has been renamed as Sun Life MPF Multi-Sector Equity Fund with effect from 1 March 2018)

(11) Sun Life MPF Greater China Equity Fund

(12) Sun Life FTSE MPF Hong Kong Index Fund

(13) Sun Life MPF Age 65 Plus Fund

(14) Sun Life MPF Core Accumulation Fund


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Investment report for the year ended 31 December 2017 (continued)

The investment policies of the respective constituent funds are as follows:

(i) Sun Life MPF RMB and HKD Fund

The Sun Life MPF RMB and HKD Fund is a money market fund which seeks to achieve long-term total returns through investments primarily in a portfolio of money market and debt instruments denominated in RMB and HKD. The constituent fund is expected to hold 60%-70% of its net asset value in assets denominated and settled in RMB and the remaining 30%-40% in assets denominated and settled in HKD. The return of the constituent fund over the long term is expected to follow the trend of the RMB and HKD denominated money market and debt instruments.

The constituent fund achieves its investment objective through direct investments in RMB and HKD denominated money market instruments and debt instruments. Such money market instruments include mainly cash, fixed deposits, certificate of deposits and treasury bills, whereas debt instruments include mainly notes, government bonds and corporate bonds both in fixed and floating rate. All RMB denominated money market instruments and debt instruments (except cash and fixed deposits) will be issued or distributed outside mainland China, and will be settled in RMB. Cash and fixed deposits will be placed with banks in Hong Kong. Money market instruments and debt instruments may be issued by governments and quasi-government entities, banks, financial institutions and other corporations. The constituent fund will only invest in debt instruments that meet the credit rating requirements under the guidelines established by the Authority.

The constituent fund will not invest in securities issued within Mainland China through any qualified foreign institutional investor (“QFII”) quota.


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The investment policies of the respective constituent funds are as follows: (continued)

(i) Sun Life MPF RMB and HKD Fund (continued)

The normal asset allocation for the constituent fund as a percentage of NAV is expected to be:

By investment type: − Money market instruments 70% - 100% − Debt instruments 0% - 30%

By currency: − RMB denominated investments 60% - 70% − HKD denominated investments 30% - 40%

Investments of the constituent fund will be limited to money market instruments with not more than 12 months in maturity and debt instruments with a remaining maturity of not more than 2 years.

The constituent fund is suitable for members who are prepared to take a medium-to-long term time horizon and are prepared to accept a moderate level of risk in order to gain a higher level of return than is available from the Sun Life MPF Conservative Fund.

The constituent fund will in effect maintain an effective currency exposure to HKD of not less than 30%. This will either result from investment exposure or currency hedging operations of the investments.

The constituent fund will not engage in securities lending transactions, financial futures and option trading.

Members in the Scheme should be informed that:

(a) investments in the constituent fund are 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 subscription value; and

(b) the constituent fund is not subject to the supervision of the Hong Kong Monetary Authority.


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(ii) Sun Life MPF Conservative Fund

The Sun Life MPF Conservative Fund seeks to provide members with a regular increase in value, with minimal risk to the underlying capital but with no guarantee of repayment of capital. The Sun Life MPF Conservative Fund achieves this result by investing primarily in money market instruments, cash deposits as well as short term corporate and government debt securities denominated in Hong Kong dollars. Where investment is made in debt securities of non-government issues, the constituent fund will only invest where the credit rating of the debt securities is in line with the guidelines established by the Authority.

The constituent fund will invest in Hong Kong dollar denominated instruments, i.e. it will have a 100% effective exposure to the Hong Kong dollar; and it will not engage in securities lending transactions, financial futures and option trading.

The normal asset allocation for the Sun Life MPF Conservative Fund as a percentage of NAV is expected to be:

− HKD money market instruments, deposits and 100% short term corporate and government debt securities

The Sun Life MPF Conservative Fund is suitable for members who wish to take a very conservative approach towards investing their retirement savings, with the major emphasis on capital protection and returns approximating Hong Kong dollar bank savings rates.

Members in the Scheme should be informed that:

(a) investments in the Sun Life MPF Conservative Fund are 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 subscription value; and

(b) the Sun Life MPF Conservative Fund is not subject to the supervision of the Hong Kong Monetary Authority.


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(iii) Sun Life MPF Hong Kong Dollar Bond Fund

The Sun Life MPF Hong Kong Dollar Bond Fund is a fixed income fund which seeks to provide members with a return in excess of that achievable from bank deposits and money market securities.

The Sun Life MPF Hong Kong Dollar Bond Fund achieves this objective by investing in a portfolio of APIFs and/or Approved ITCISs, which in turn will invest at least 70% in bonds and other debt instruments which are denominated in Hong Kong dollars.

The investment managers of the underlying APIFs and/or Approved ITCISs have the discretion to diversify the portfolio by investing in bonds or other debt instruments denominated in currencies other than Hong Kong dollars, provided such bonds or debt instruments meet the investment requirements prescribed by the Authority.

Under normal asset allocation, through its investments in APIFs and/or Approved ITCISs, the Sun Life MPF Hong Kong Dollar Bond Fund will invest at least 70% of its net asset value in Hong Kong dollar denominated bonds and debt instruments.

Where investments denominated in currencies other than HKD are made, the currency exposure will be hedged back into HKD to minimise the currency risk.

The underlying APIFs and/ or Approved ITCISs may employ a portion of its assets in other securities permitted by the Regulation including, without limitation, money market instruments or interests in other collective investment schemes such as authorized unit trusts and index-tracking collective investment schemes. Assets of the underlying APIFs and/or Approved ITCISs may also be applied for acquiring futures contracts, options or forward currency transactions for the purpose of hedging against market and exchange rate risks; or entering into repurchase agreements. Any such use of derivative instruments or repurchase agreements will be effected in accordance with the applicable regulatory requirements and the terms of the constitutive documents of the underlying APIFs and/or Approved ITCISs. The Sun Life MPF Hong Kong Dollar Bond Fund itself will not engage in securities lending transactions, financial futures and option trading or enter into repurchase agreements.


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(iii) Sun Life MPF Hong Kong Dollar Bond Fund (continued)

As the securities that the underlying APIFs and/or Approved ITCISs will invest in are normally traded on a daily basis, the net asset value of the Sun Life MPF Hong Kong Dollar Bond Fund may be subject to the changes in interest rate yields at which the bonds are traded. An increase in interest rates may result in a decline in the net asset value of the Sun Life MPF Hong Kong Dollar Bond Fund over short periods of time. Bonds with longer maturities tend to be more sensitive to interest rate movements than those with shorter maturities. Lower rated securities, whilst offering a higher yield, tend to have greater risk.

The Sun Life MPF Hong Kong Dollar Bond Fund is suitable for members who are prepared to take a medium term investment horizon and are prepared to accept a low to moderate level of risk in order to gain a higher level of return than is available from the Sun Life MPF Conservative Fund.

(iv) Sun Life MPF Hong Kong Equity Fund

The Sun Life MPF Hong Kong Equity Fund is an equity fund which seeks to provide members with long term capital appreciation by investing primarily in equities and equity-related securities (including but not limited to warrants and convertible bonds) listed on the Stock Exchange of Hong Kong Limited (“Hong Kong Stock Exchange”).

Given the above investment objectives, the Sun Life MPF Hong Kong Equity Fund will be subject to short term volatility of stock market and the ensuing possibility of negative returns over short to medium term investment horizons.


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(iv) Sun Life MPF Hong Kong Equity Fund (continued)

The Sun Life MPF Hong Kong Equity Fund will invest in a portfolio of APIFs and/ or Approved ITCISs, which in turn will invest at least 70% in equities and equity-related securities (including but not limited to warrants and convertible bonds) listed on the Hong Kong Stock Exchange. In addition, investment managers of the underlying APIFs and/ or Approved ITCISs may invest in securities issued by Hong Kong companies or other entities which in the investment manager’s opinion have significant assets, business, production activities, trading or other business interests in Hong Kong and traded in international markets. Investment managers of the underlying APIFs and/ or Approved ITCISs may also invest in offshore securities or instruments (such as American depositary receipts (“ADRs”) and global depositary receipts (“GDRs”) or in other securities permitted by the Regulation (including, without limitation, interests in other collective investment schemes such as authorized unit trusts and index-tracking collective investment schemes). ADRs are traded on the US stock markets while GDRs are traded and cleared internationally on the European and US markets.

Under normal asset allocation, through its investments in APIFs and/or Approved ITCISs, the Sun Life MPF Hong Kong Equity Fund will invest at least 70% of its net asset value in Hong Kong equities and equity-related securities (including but not limited to warrants and convertible bonds) listed on the Hong Kong Stock Exchange. Actual asset and country weightings of the Sun Life MPF Hong Kong Equity Fund are determined by factors of the macro and micro economic conditions of the countries in which the underlying APIFs and/ or Approved ITCISs invest in. The geographical allocation of the underlying APIFs and/ or Approved ITCISs is classified in terms of the location of the primary listing of the securities except that in the case of the ADRs, GDRs or other depositary receipts, classification is in terms of the location of the primary listing of the underlying stocks.

The currency exposure of the Sun Life MPF Hong Kong Equity Fund, in line with the underlying APIFs and/ or Approved ITCISs, is expected to be primarily in Hong Kong dollars. Where investments of the underlying APIFs and/ or Approved ITCISs are made in securities which are traded on foreign markets in foreign currencies, the currency exposure will be managed at the discretion of the investment manager of the underlying APIFs and/ or Approved ITCISs, but it is likely that the impact of currency volatility on the portfolio will be limited.


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(iv) Sun Life MPF Hong Kong Equity Fund (continued)

The underlying APIFs and/ or Approved ITCISs may employ a portion of their assets in futures contracts, options and forward currency transactions for the purpose of hedging against market and exchange rate risks. Assets of the underlying APIFs and/ or Approved ITCISs may also be applied for the purpose of entering into securities lending transactions. Any such use of derivative instruments or securities lending transactions will be effected in accordance with the applicable regulatory requirements and the terms of the constitutive documents of the underlying APIFs and/ or Approved ITCISs. The Sun Life MPF Hong Kong Equity Fund itself will not engage in securities lending transactions, financial futures and option trading or enter into repurchase agreements.

The Sun Life MPF Hong Kong Equity Fund is suitable for members who are able to take a longer term investment horizon in order to access the higher returns usually available from equity investments and are prepared to accept a high level of risk so attached.

(v) Sun Life MPF Global Bond Fund

The Sun Life MPF Global Bond Fund seeks to provide members with total return usually in excess of that achievable from bank deposits and money market securities.

The Sun Life MPF Global Bond Fund achieves this objective by investing primarily in a portfolio of APIFs and/ or Approved ITCISs with a diversified portfolio of global bonds and other debt instruments that meet the requirements of the Regulation.

The Sun Life MPF Global Bond Fund will maintain an effective currency exposure to Hong Kong dollars of not less than 30%. This will either result from investment exposure or currency hedging operations of the underlying APIFs and/ or Approved ITCISs.

Actual country weightings are determined by factors of the macro and micro economic conditions of the countries in which the underlying APIFs and/ or Approved ITCISs invest in.


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(v) Sun Life MPF Global Bond Fund (continued)

The underlying APIFs and/ or Approved ITCISs may employ a portion of their assets in other securities permitted by the Regulation including money market instruments or other investments that are consistent with the objectives of the fund. Assets of the underlying APIFs and/ or Approved ITCISs may also be applied for acquiring futures contracts, options or forward currency transactions for the purpose of hedging against market and exchange rate risks; or entering into repurchase agreements. Any such use of these derivative instruments and repurchase agreements will be in accordance with the applicable regulatory requirements and the terms of the constitutive documents of the underlying APIFs and/ or Approved ITCISs. The Sun Life MPF Global Bond Fund itself will not engage in securities lending transactions, financial futures and option trading or enter into repurchase agreements.

As the securities that the underlying APIFs and/ or Approved ITCISs will invest in are normally traded on a daily basis, the net asset value of the Sun Life MPF Global Bond Fund may be subject to the changes in interest rate yields at which the bonds are traded. An increase in interest rates may result in a decline in the net asset value of the Sun Life MPF Global Bond Fund over short periods of time. Bonds with longer maturities tend to be more sensitive to interest rate movements than those with shorter maturities. Lower rated securities, whilst offering a higher yield, tend to have greater risk.

The Sun Life MPF Global Bond Fund is suitable for members who are prepared to take a medium term time horizon and are prepared to accept a low to moderate level of risk in order to gain a higher level of return than is available from the Sun Life MPF Conservative Fund.


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(vi) Sun Life MPF Stable Fund

The Sun Life MPF Stable Fund is a balanced fund which seeks to provide members with steady capital appreciation.

The Sun Life MPF Stable Fund achieves its investment policy by investing in a portfolio of APIFs and/ or Approved ITCISs, which in turn invest in the following assets – money market securities, cash deposits, fixed income securities and global equity securities.

The Sun Life MPF Stable Fund is suitable for members who are prepared to accept a moderate degree of risk in order to gain a higher return than may be available from the Sun Life MPF Conservative Fund.

Normal asset allocation for the Sun Life MPF Stable Fund is expected to be:

By investment type:

− Fixed income/money market investments 70% (range 50% - 90%)

− Equity investments 30% (range 10% - 50%)

Country allocations may vary according to the change of country market capitalization. The asset and country allocations of the Sun Life MPF Stable Fund are determined by factors of the macro and micro economic conditions of the countries underlying APIFs and/ or Approved ITCISs invest in and may therefore change from time to time.

The Sun Life MPF Stable Fund will maintain an effective exposure to the Hong Kong dollar of at least 30%. This will result from investment exposure or currency hedging operations of the underlying APIFs and/ or Approved ITCISs.


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(vi) Sun Life MPF Stable Fund (continued)

The underlying APIFs and/ or Approved ITCISs may employ a portion of its assets in other securities permitted by the Regulation including, without limitation, money market instruments or interests in other collective investment schemes such as authorized unit trusts and index-tracking collective investment schemes. The assets of the underlying APIFs and/ or Approved ITCISs may also be applied for acquiring futures contracts, options and forward currency transactions for the purpose of hedging against market and exchange rate risks. Assets of the underlying APIFs and/ or Approved ITCISs may also be applied for the purpose of entering into securities lending transactions or repurchase agreements. Any such use of derivative instruments, securities lending transactions or repurchase agreements will be effected in accordance with the applicable regulatory requirements and the terms of the constitutive documents of the underlying APIFs and/ or Approved ITCISs. The Sun Life MPF Stable Fund itself will not engage in securities lending transactions, financial futures and option trading or enter into repurchase agreements.

(vii) Sun Life MPF Balanced Fund

The Sun Life MPF Balanced Fund is a balanced fund which seeks to provide members with moderate capital appreciation over the medium to long term. The Sun Life MPF Balanced Fund achieves this result by investing in a portfolio of APIFs and/ or Approved ITCISs, which in turn invest in the following assets: money market securities, cash deposits, fixed income securities and global equity securities. As such, the investment will, to a certain extent, be subject to the short term volatility of equity markets. The diversification of the portfolio between fixed income and equity securities is intended to reduce the impact of the short term risk, while enabling the Sun Life MPF Balanced Fund to meet its longer term objectives.

The Sun Life MPF Balanced Fund is suitable for members who are able to take a medium to longer term investment horizon in order to access the potentially higher returns usually available from equity investments.


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(vii) Sun Life MPF Balanced Fund (continued)

The normal asset allocation for the Sun Life MPF Balanced Fund is expected to be:

By investment type:

− Fixed income/money market investments 30% - 70%

− Equity investments 30% - 70%

Country allocations may vary according to the change of country market capitalization. The asset and country allocations of the Sun Life MPF Balanced Fund are determined by factors of the macro and micro economic conditions of the countries underlying APIFs and/ or Approved ITCISs invest in and may therefore change from time to time.

The Sun Life MPF Balanced Fund will in effect maintain an effective exposure to the Hong Kong dollar of at least 30%. This will either result from investment exposure or currency hedging operations of the underlying APIFs and/ or Approved ITCISs.

The underlying APIFs and/ or Approved ITCISs may employ a portion of its assets in other securities permitted by the Regulation including, without limitation, money market instruments or interests in other collective investment schemes such as authorized unit trusts and index-tracking collective investment schemes. Assets of the underlying APIFs and/ or Approved ITCISs may also be applied for acquiring futures contracts, options or forward currency transactions for the purpose of hedging against market and exchange rate risks. Assets of the underlying APIFs and/ or Approved ITCISs may also be applied for the purpose of entering into securities lending transactions or repurchase agreements. Any such use of derivative instruments, securities lending transactions or repurchase agreements will be effected in accordance with applicable regulatory requirements and the terms of the constitutive documents of the underlying APIFs and/ or Approved ITCISs. The Sun Life MPF Balanced Fund itself will not engage in securities lending transactions, financial futures and option trading or enter into repurchase agreements.


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(viii) Sun Life MPF Growth Fund

The Sun Life MPF Growth Fund is an equity fund which seeks to provide members with significant capital appreciation over the medium term to longer term, through investing in a portfolio of APIFs and/or Approved ITCISs, which in turn will invest primarily in equity investments. Given the primary focus on equity investments, the Sun Life MPF Growth Fund will usually maintain a limited exposure to fixed income securities. As such, the investment will be subject to the short term volatility of equity markets, which may result in a negative return over short term periods.

The Sun Life MPF Growth Fund is suitable for members who are able to take a longer term investment horizon in order to access the potentially higher returns usually available from equity investments and are prepared to accept the risk so attached.

The normal asset allocation for the Sun Life MPF Growth Fund is expected to be:

By investment type:

− Fixed income/money market investments 10% - 50%

− Equity investments 50% - 90%

The country allocations may vary according to the change of country market capitalization. The asset and country allocations of the Sun Life MPF Growth Fund are determined by factors of the macro and micro economic conditions of the countries underlying APIFs and/ or Approved ITCISs invest in and may therefore change from time to time.

The Sun Life MPF Growth Fund will in effect maintain an effective exposure to the Hong Kong dollar of at least 30%. This will either result from investment exposure or currency hedging operations of the underlying APIFs and/ or Approved ITCISs.


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(viii) Sun Life MPF Growth Fund (continued)

The underlying APIFs and/ or Approved ITCISs may employ a portion of its assets in other securities permitted by the Regulation including, without limitation, money market instruments or interests in other collective investment schemes such as authorized unit trusts and index-tracking collective investment schemes. Assets of the underlying APIFs and/ or Approved ITCISs may also be applied for acquiring futures contracts, options or forward currency transactions for the purpose of hedging against market and exchange rate risks. Assets of the underlying APIFs and/ or Approved ITCISs may also be applied for the purpose of entering into securities lending transactions or repurchase agreements. Any such use of derivative instruments, securities lending transactions or repurchase agreements will be effected in accordance with the applicable regulatory requirements and the terms of the constitutive documents of the underlying APIFs and/ or Approved ITCISs. The Sun Life MPF Growth Fund itself will not engage in securities lending transactions, financial futures and option trading or enter into repurchase agreements.

(ix) Sun Life MPF Asian Equity Fund

The Sun Life MPF Asian Equity Fund seeks to provide members with long term capital growth.

The Sun Life MPF Asian Equity Fund achieves this objective through investing in a portfolio of APIFs and/ or Approved ITCISs that will invest at least 70% in Asian equities, including but not limited to Hong Kong, Singapore, South Korea, Taiwan, Thailand and Malaysia, but will not include Japan.

Under normal asset allocation, through its investments in APIFs and/ or Approved ITCISs, the Sun Life MPF Asian Equity Fund will invest at least 70% of its net asset value in Asian equities, including but not limited to Hong Kong, Singapore, South Korea, Taiwan, Thailand and Malaysia, but will not include Japan.

The Sun Life MPF Asian Equity Fund will maintain an effective currency exposure to Hong Kong dollars of not less than 30%. This will either result from investment exposure or currency hedging operations of the underlying APIFs and/ or Approved ITCISs.


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(ix) Sun Life MPF Asian Equity Fund (continued)

The underlying APIFs and/ or Approved ITCISs may employ a portion of its assets in futures contracts, options and forward currency transactions for the purpose of hedging against market and exchange rate risks. Assets of the underlying APIFs and/ or Approved ITCISs may also be applied for the purpose of entering into securities lending transactions. Any such use of derivative instruments or securities lending transactions will be effected in accordance with the applicable regulatory requirements and the terms of the constitutive documents of the underlying APIFs and/ or Approved ITCISs. The Sun Life MPF Asian Equity Fund itself will not engage in securities lending transactions, financial futures and option trading or enter into repurchase agreements.

The Sun Life MPF Asian Equity Fund is only suitable for members who are willing to assume a relatively higher level of risk to achieve potentially higher long term returns.

(x) Sun Life MPF Global Equity Fund

The Sun Life MPF Global Equity Fund seeks to achieve long-term capital appreciation through investments in global equities.

The Sun Life MPF Global Equity Fund achieves this objective through investing in a portfolio of APIFs and/ or Approved ITCISs.

Given the above investment objective, investors should regard the Sun Life MPF Global Equity Fund as a high risk investment. The return of the fund over the long term is expected to follow the trend of growth of global equity markets.

The underlying APIFs and/ or Approved ITCISs of the Sun Life MPF Global Equity Fund will invest worldwide in a geographically diversified portfolio of listed securities in world markets. It will normally invest up to 100% of net asset in global equities. Investments in general may cover a global range of markets including but not limited to Asia, Australasia, Japan, Europe and North America.

The Sun Life MPF Global Equity Fund will maintain an effective currency exposure to Hong Kong dollars of not less than 30%. This will either result from investment exposure or currency hedging operations of the underlying APIFs and/ or Approved ITCISs.


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(x) Sun Life MPF Global Equity Fund (continued)

The underlying APIFs and/ or Approved ITCISs may employ a portion of its assets in other securities permitted by the Regulation including, without limitation, money market instruments or interests in other collective investment schemes such as authorized unit trusts and index-tracking collective investment schemes. Assets of the underlying APIFs and/ or Approved ITCISs may also be applied for acquiring financial futures and option contracts for hedging purposes only. Assets of the underlying APIFs and/ or Approved ITCISs may also be applied for the purpose of entering into securities lending transactions. Any such use of derivative instruments, securities lending transactions will be effected in accordance with the applicable regulatory requirements and the terms of the constitutive documents of the underlying APIFs and/ or Approved ITCISs. The Sun Life MPF Global Equity Fund itself will not engage in securities lending transactions, financial futures and option trading or enter into repurchase agreements.

(xi) Sun Life MPF Greater China Equity Fund

The Sun Life MPF Greater China Equity Fund seeks to achieve long-term capital appreciation through investments in Hong Kong, China and Taiwan-related securities.

The Sun Life MPF Greater China Equity Fund achieves this objective through investing in a portfolio of APIFs and/ or Approved ITCISs.

Given the above investment objective, investors should regard the Sun Life MPF Greater China Equity Fund as a high risk investment. The return of the fund over the long term is expected to follow the trend of the growth of Greater China-related equity markets.

The underlying portfolio of APIFs and/ or Approved ITCISs of the Sun Life MPF Greater China Equity Fund invests at least 70% of their net asset value in a portfolio of listed securities issued by companies with either assets in, or revenues derived from, the People’s Republic of China, Hong Kong and Taiwan which are listed, traded or dealt in on regulated exchanges subject to the restrictions in the Regulation.

Under normal asset allocation, through its investments in APIFs and/or Approved ITCISs, the Sun Life MPF Greater China Equity Fund will invest at least 70% of its net asset value in a portfolio of listed securities issued by companies with either assets in, or revenues derived from, the People’s Republic of China, Hong Kong and Taiwan which are listed, traded or dealt in on regulated exchanges subject to the restrictions in the Regulation.


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(xi) Sun Life MPF Greater China Equity Fund (continued)

The Sun Life MPF Greater China Equity Fund will maintain an effective currency exposure to Hong Kong dollars of not less than 30%. This will either result from investment exposure or currency hedging operations of the underlying APIFs and/ or Approved ITCISs.

The underlying APIFs and/ or Approved ITCISs may employ a portion of its assets in other securities permitted by the Regulation including, without limitation, money market instruments or interests in other collective investment schemes such as authorized unit trusts and index-tracking collective investment schemes. Assets of the underlying APIFs and/ or Approved ITCISs may also be applied for acquiring financial futures and option contracts for hedging purposes only. Assets of the underlying APIFs and/ or Approved ITCISs may also be applied for the purpose of entering into securities lending transactions. Any such use of derivative instruments or securities lending transactions will be effected in accordance with the applicable regulatory requirements and the terms of the constitutive documents of the underlying APIFs and/or Approved ITCISs. The Sun Life MPF Greater China Equity Fund itself will not engage in securities lending transactions, financial futures and option trading or enter into repurchase agreements.

(xii) Sun Life FTSE MPF Hong Kong Index Fund

The Sun Life FTSE MPF Hong Kong Index Fund is an equity index fund which seeks to provide members with investment results that, before fees and expenses, closely track the performance of the FTSE MPF Hong Kong Index.

The Sun Life FTSE MPF Hong Kong Index Fund achieves this objective through investing solely in the BlackRock Hong Kong Equity Index Fund, a sub-fund of the BlackRock Premier Funds. The BlackRock Hong Kong Equity Index Fund is an Approved ITCIS, and managed by BlackRock Asset Management North Asia Limited.

To achieve the investment objective of the BlackRock Hong Kong Equity Index Fund, BlackRock Asset Management North Asia Limited intends to invest primarily in securities included in the FTSE MPF Hong Kong Index using a Representative Sampling Strategy. The BlackRock Hong Kong Equity Index Fund may hold securities that are not included in the FTSE MPF Hong Kong Index.


22



(xii) Sun Life FTSE MPF Hong Kong Index Fund (continued)

The BlackRock Hong Kong Equity Index Fund will primarily invest directly in the equity securities of the FTSE MPF Hong Kong Index. The BlackRock Hong Kong Equity Index Fund may invest up to 10% of its latest available net asset value in financial derivative instruments for the purposes of hedging and non-hedging including investment, and/or return optimization. The BlackRock Hong Kong Equity Index Fund does not intend to use financial derivative instruments extensively for investment purposes.

The BlackRock Hong Kong Equity Index Fund will not directly or indirectly invest in China A shares, B shares and/or debt securities.

The Sun Life FTSE MPF Hong Kong Index Fund will maintain an effective currency exposure to Hong Kong dollars of not less than 30%.

The BlackRock Hong Kong Equity Index Fund does not currently intend to enter into any stock lending, repurchase or similar over-the-counter transactions. The Sun Life FTSE MPF Hong Kong Index Fund itself will not engage in securities lending transactions or repurchase agreements, financial futures and option trading.

Whilst the investment objective of the Sun Life FTSE MPF Hong Kong Index Fund and the BlackRock Hong Kong Equity Index Fund is to track the FTSE MPF Hong Kong Index, there can be no assurance that the performance of the Sun Life FTSE MPF Hong Kong Index Fund and the BlackRock Hong Kong Equity Index Fund will at any time be identical to that of the FTSE MPF Hong Kong Index. Investment in the Sun Life FTSE MPF Hong Kong Index Fund is essentially subject to the same risks of the BlackRock Hong Kong Equity Index Fund.

The Sun Life FTSE MPF Hong Kong Index Fund is designed for members who are willing to assume a relatively higher level of risk to achieve potentially higher long term returns.


23




FTSE MPF Hong Kong Index

The FTSE MPF Hong Kong Index is a free float adjusted market capitalization index consisting of Hong Kong and China constituent securities listed on the Hong Kong and Singapore stock markets. The base currency of the FTSE MPF Hong Kong Index is Hong Kong dollars. The FTSE MPF Hong Kong Index forms part of the FTSE MPF Index Series which is compiled and managed by FTSE International Limited (“FTSE”). The FTSE MPF Index Series is based on the FTSE All-World Index Series. Specifically, the FTSE MPF Hong Kong Index consists of the Hong Kong listed HSBC Holdings and eligible large and mid cap Hong Kong and China companies (H Shares, Red Chips and P Chips listed on the Stock Exchange of Hong Kong) from the FTSE All-World Index. The FTSE MPF Hong Kong Index is an unhedged total return index – this means that (i) the index will not hedge its non-Hong Kong dollar currency exposure in the index back into Hong Kong dollars and (ii) the index measures the price movements of constituents assuming any cash distributions after dividend withholding tax are reinvested back into the index.

Index Provider Disclaimer

The Sun Life FTSE MPF Hong Kong Index Fund is not in any way sponsored, endorsed, sold or promoted by FTSE or the London Stock Exchange Group companies (“LSEG”) (together the “Licensor Parties”) and none of the Licensor Parties make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to (i) the results to be obtained from the use of the FTSE MPF Hong Kong Index (upon which the Sun Life FTSE MPF Hong Kong Index Fund is based), (ii) the figure at which the FTSE MPF Hong Kong Index is said to stand at any particular time on any particular day or otherwise, or (iii) the suitability of the FTSE MPF Hong Kong Index for the purpose to which it is being put in connection with the Sun Life FTSE MPF Hong Kong Index Fund. None of the Licensor Parties have provided or will provide any financial or investment advice or recommendation in relation to the FTSE MPF Hong Kong Index to Sun Life Trustee Company Limited or to its clients. The FTSE MPF Hong Kong Index is calculated by FTSE or its agent. None of the Licensor Parties shall be (a) liable (whether in negligence or otherwise) to any person for any error in the FTSE MPF Hong Kong Index or (b) under any obligation to advise any person of any error therein. All rights in the FTSE MPF Hong Kong Index vest in FTSE. “FTSE®” is a trade mark of LSEG and is used by FTSE under licence.


24




Description of Index Methodology of the FTSE MPF Hong Kong Index

In accordance with the rules set out for the management of the FTSE MPF Index Series, exchanges that are not approved by the Authority will be excluded from the calculation of the FTSE MPF Index Series.

More information about the FTSE MPF Hong Kong Index including the index rules, further information of the index methodology, the latest index value (published daily), index information, monthly reports (including top 10 largest constituents and weighting information) and other important news relating to the FTSE MPF Hong Kong Index can be obtained from the website of the index provider at www.ftse.com/hkmpf. FTSE and BlackRock Asset Management North Asia Limited (or its connected persons) are independent of each other. The index methodology of the FTSE MPF Hong Kong Index is subject to change from time to time and investors may refer to this website for up-to-date information about the index methodology.

(xiii) Sun Life MPF Age 65 Plus Fund

Investment Objective

The investment objective of the Sun Life MPF Age 65 Plus Fund is to provide stable growth to members by investing in a globally diversified manner.


25



(xiii) Sun Life MPF Age 65 Plus Fund (continued)

Investment Structure

The Sun Life MPF Age 65 Plus Fund is a feeder fund and invest in an APIF, namely, Schroder MPF Core 20/80 Fund, which in turn invests in two APIFs as allowed under the Regulation. The investment structure of the Sun Life MPF Age 65 Plus Fund is illustrated as follows:

Managed by Sun Life Asset Management

(HK) Limited

Managed by Schroder Investment Management

(Hong Kong) Limited

Asset Allocation

Through the underlying investment of Schroder MPF Core 20/80 Fund, the Sun Life MPF Age 65 Plus 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 asset allocation to Higher Risk Assets may vary between 15% and 25% due to differing price movements of various equity and bond markets. The principal underlying investments will be in securities listed on stock exchanges, government and corporate bonds and cash deposits worldwide. The asset allocation of the Sun Life MPF Age 65 Plus Fund to equities and fixed income instruments and money market instruments is set out below. Members should note that the actual allocation may at times be varied as market, economic and other conditions change. In any case, the Sun Life MPF Age 65 Plus Fund will at all times comply with the asset allocation requirements applicable to Age 65 Plus Fund (as defined in the MPF Ordinance). Subject to the above, the investment manager of the Schroder MPF Core 20/80 Fund invested by the Sun Life MPF Age 65 Plus Fund has discretion as to the asset allocation of the Schroder MPF Core 20/80 Fund.

Sun Life MPF

Age 65 Plus Fund

Schroder MPF

Core 20/80 Fund

APIF

APIF


26




Geographical Allocation Global equities 15% to 25%

Asia Pacific excluding Japan 0% to 12.5% United States 1.5% to 17.5% Japan 0% to 6.25% Europe 1.5% to 12.5% Others 0% to 7.5%

Fixed income securities and money market instruments 75% to 85% US Dollar 7.5% to 76.5% Global currencies Ex US Dollar 7.5% to 76.5%

Investment Strategy

The two underlying APIFs invested by the Schroder MPF Core 20/80 Fund will be actively managed with reference to the constituent index for equity securities and the constituent index for fixed income securities (each a “Constituent Index”) under the Reference Portfolio respectively. The two underlying approved pooled investment funds adopt an investment strategy which selects securities based on certain characteristics such as (in the case of equity securities) attractive valuation, high quality, and low return volatility, and (in the case of fixed income securities) maturity, credit rating and liquidity, to build a diversified portfolio of equity securities and a diversified portfolio of fixed income securities, respectively. Up to 10% of the net asset value of the underlying APIFs may be invested in securities other than the underlying securities of the respective Constituent Index with the aim to enhance returns or reduce portfolio risks when compared to similar underlying securities of the respective Constituent Index.

Hong Kong Dollar Currency Exposure

The Sun Life MPF Age 65 Plus Fund will maintain an effective currency exposure to Hong Kong dollars of not less than 30%. This will result from investment exposure or currency hedging operations of the underlying APIFs and/or the Sun Life MPF Age 65 Plus Fund.


27




Use of Derivatives, Securities Lending and Repurchase Agreement

The Sun Life MPF Age 65 Plus Fund itself will not engage in securities lending transactions, financial futures and option trading or enter into repurchase agreements. The underlying APIFs may employ a portion of its assets in acquiring futures contracts, options and forward currency transactions for hedging purposes. The underlying APIFs do not intend to enter into securities lending transactions or repurchase agreements. Any such use of derivative instruments will be effected in accordance with the applicable regulatory requirements and the terms of the constitutive documents of the underlying APIFs.

Risk Inherent and Expected Return

The risk profile of Sun Life MPF Age 65 Plus Fund is determined by the Investment Manager with reference to that of Schroder MPF Core 20/80 Fund, which in turn is determined by Schroder Investment Management (Hong Kong) Ltd, based on various factors including volatility, investment objective and policy and asset allocation. This risk profile is provided for reference only, and may be updated periodically based on prevailing market conditions.

The risk level of Sun Life MPF Age 65 Plus Fund is low and, as such, is suitable for members with 15 or less years before retirement.

The return of the Sun Life MPF Age 65 Plus Fund over the long term is expected to be similar to the return of the Reference Portfolio.

(xiv) Sun Life MPF Core Accumulation Fund

Investment Objective

The investment objective of the Sun Life MPF Core Accumulation Fund is to provide capital growth to members by investing in a globally diversified manner.


28



(xiv) Sun Life MPF Core Accumulation Fund (continued)

Investment Structure

The Sun Life MPF Core Accumulation Fund is a feeder fund and invest in an APIF, namely, Schroder MPF Core 60/40 Fund, which in turn invests in two APIFs as allowed under the Regulation. The investment structure of the Sun Life MPF Core Accumulation Fund is illustrated as follows:

Managed by Sun Life Asset Management

(HK) Limited

Managed by Schroder Investment Management

(Hong Kong) Limited

Asset Allocation

Through the underlying investment of the Schroder MPF Core 60/40 Fund, the Sun Life MPF Core Accumulation 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 asset allocation to Higher Risk Assets may vary between 55% and 65% due to differing price movements of various equity and bond markets. The principal underlying investments will be in securities listed on stock exchanges, government and corporate bonds and cash deposits worldwide. The asset allocation of the Sun Life MPF Core Accumulation Fund to equities and fixed income instruments and money market instruments is set out below. Members should note that the actual allocation may at times be varied as market, economic and other conditions change. In any case, the Sun Life MPF Core Accumulation Fund will at all times comply with the asset allocation requirements applicable to Core Accumulation Fund (as defined in the MPF Ordinance). Subject to the above, the investment manager of the Schroder MPF Core 60/40 Fund invested by the Sun Life MPF Core Accumulation Fund has discretion as to the asset allocation of the Schroder MPF Core 60/40 Fund.

Sun Life MPF Core Accumulation Fund

Schroder MPF

Core 60/40 Fund

APIF

APIF


29




Geographical Allocation Global equities 55% to65%

Asia Pacific excluding Japan 0% to 32.5% United States 5.5% to 45.5% Japan 0% to 16.25% Europe 5.5% to 32.5% Others 0% to 19.5%

Fixed income securities and money market instruments 35% to 45% US Dollar 3.5% to 40.5% Global currencies Ex US Dollar 3.5% to 40.5%

Investment Strategy

The two underlying APIFs invested by the Schroder MPF Core 60/40 Fund will be actively managed with reference to the constituent index for equity securities and the constituent index for fixed income securities (each a “Constituent Index”) under the Reference Portfolio respectively. The two underlying approved pooled investment funds adopt an investment strategy which selects securities based on certain characteristics such as (in the case of equity securities) attractive valuation, high quality, and low return volatility, and (in the case of fixed income securities) maturity, credit rating and liquidity, to build a diversified portfolio of equity securities and a diversified portfolio of fixed income securities, respectively. Up to 10% of the net asset value of the underlying APIFs may be invested in securities other than the underlying securities of the respective Constituent Index with the aim to enhance returns or reduce portfolio risks when compared to similar underlying securities of the respective Constituent Index.

Hong Kong Dollar Currency Exposure

The Sun Life MPF Core Accumulation Fund will maintain an effective currency exposure to Hong Kong dollars of not less than 30%. This will result from investment exposure or currency hedging operations of the underlying APIFs and/or the Sun Life MPF Core Accumulation Fund.


30



Use of Derivatives, Securities Lending and Repurchase Agreement

The Sun Life MPF Core Accumulation Fund itself will not engage in securities lending transactions, financial futures and option trading or enter into repurchase agreements. The underlying APIFs may employ a portion of its assets in acquiring futures contracts, options and forward currency transactions for hedging purposes. The underlying APIFs do not intend to enter into any securities lending transactions or repurchase agreements. Any such use of derivative instruments will be effected in accordance with the applicable regulatory requirements and the terms of the constitutive documents of the underlying APIFs.

Risk Inherent and Expected Return

The risk profile of Sun Life MPF Core Accumulation Fund is determined by the Investment Manager with reference to that of Schroder MPF Core 60/40 Fund, which in turn is determined by Schroder Investment Management (Hong Kong) Ltd, based on various factors including volatility, investment objective and policy and asset allocation. This risk profile is provided for reference only, and may be updated periodically based on prevailing market conditions.

The risk level of Sun Life MPF Core Accumulation Fund is medium and, as such, is suitable for members with more than 10 years before retirement.

The return of Sun Life MPF Core Accumulation Fund over the long term is expected to be similar to the return of the Reference Portfolio.


31


Review

Global stock markets enjoyed broad rally in 2017, with the MSCI AC World Net Total Return Index surging by 24.9%, largely attributable to synchronized strong corporate earnings growth on the back of stable global economic recovery. Technology related companies led the global advance. Hong Kong and Asian markets outperformed rest of the world from a geographic perspective. European equity markets recorded solid returns on better-than-expected economic data and corporate earnings growth, despite strengths of the Euro and British Pound against the weak US dollar. In the US, passage of corporate tax cuts were positively embraced and expectation of a boost to company profits fueled strong market rally. Modest and telegraphed rate hikes by the US Fed were well-received by investors. During the year, escalating tension and rhetoric between US and North Korea, political upheaval in Europe with the Catalan separatist movement in Spain and an inconclusive German election have done little to dampen strong momentum and sentiment of global market. MSCI AC Asia ex Japan Net Total Return Index increased by 42.8% in 2017. Strong Asian currencies amid the weak US dollar further enhanced performance. South Korea, India and Hong Kong equity markets outperformed while Taiwan and Malaysia underperformed in the region. Strong rally by some of the largest tech names led to broad gains across Asian tech sector, benefiting South Korean and to a lesser extent Taiwan. India benefited from flood of local liquidity that outstripped flows from foreign investors. MSCI Hong Kong Net Total Return Index rose by 37.2% in 2017, being the biggest annual gain since 2009. The market was buoyed by synchronized global economic growth, modest inflation, ample liquidity in financial system and money inflows from mainland China. Despite heightened tension and rhetoric between US and North Korea and uncertainty in global politics, Hong Kong market maintained its steady ascend on the back of bullish sentiment and strong capital inflow. Growing acceptance of the Shenzhen and Shanghai Stock Connect Schemes facilitated money inflows from mainland China and buoyed market turnover, reaching the highest annual turnover since 2009. Despite strong rally among some of the biggest tech names fueled broad gains across Asian tech sector, Taiwan underperformed due to concerns of topline sales growth of Apple’s latest smartphones, which most component suppliers and main assemblers are Taiwan-based.


32


Review (continued)

On the fixed income side, the Citigroup World Government Index registered 7.49% return in USD terms. Benign inflation helped to keep medium-to-long term government bond yields well anchored despite major central banks policy stance turned slightly more hawkish. In the year, US Fed lifted interest rate 3 times and started shrinking its balance sheet while Bank of England lifted interest rate for first time in more than 10 years. Still, the impact was mainly felt in the short end of the yield curve with 2-year US government bond yield moved up 66 bps to 1.88% and 2-year UK government bond yield move up 36 bps to 0.44%. On the other hand, the longer end was much less affected with 10-year US government bond yield fell 3 bps to 2.41% and 10-year UK government bond fell 5 bps to 1.19%. As a result, US and UK yield curve has flattened in year 2017. In Eurozone, government bond yield moved up across the curve as inflation picked up mildly. 2-year and 10-year German government bond yields moved up by 14 bps to -0.63% and 22 bps to 0.43% respectively. 2-year and 10-year French government bond yields rose 20 bps to -0.49% and 10 bps respectively. As for Japan, there was little change in inflation outlook and monetary policy. 10-year Japan government bond yield moved marginally up by 0.2 bps to 0.048%. The Renminbi (RMB) strengthened against US dollar throughout the year primarily on the back of weak US dollar that buoyed most currencies. The decision by MSCI to include China A-share into its emerging market equity indexes at mid-year also boosted the attractiveness of the RMB. At year end, the Central Economic Work Conference confirmed its intention to maintain a prudent and neutral monetary policy. Stable policy plus improving economic growth led investors to stay positive on RMB. In Hong Kong, ample liquidity in the banking system and stabilization of RMB exchange rate helped Hong Kong government bonds to outperform US counterpart of similar tenure early in the year. Additional issuance of Exchange Fund Note and stock IPOs locked up record funds in the second half resulted in tighter liquidity condition and exerted upward pressure on Hong Kong bond yield. For the full year, yields of 2-year, 5-year and 10-year Exchange Fund Note moved up by 1 bps to 1.30%, up by 8 bps to 1.64% and down by 10 bps to 1.75% respectively. Meanwhile 2-year, 5-year and 10-year US government bond yields moved up by 69 bps to 1.88%, up by 28 bps to 2.21% and down by 4 bps to 2.41%.


33

Investment report for the year ended 31 December 2017 (continued) (Expressed in Hong Kong dollars)

Investment income and performance Sun Life MPF RMB and HKD Fund 2017 2016 2015 Net appreciation/(depreciation) of

investments - unrealised $ 3,471,371 $ 1,340,138 $ (4,254,921) Net return/(loss) from investments -

realised 3,334,351 (921,603) 2,121,665

Sun Life MPF Conservative Fund 2017 2016 2015 Net appreciation/(depreciation) of

investments - unrealised $ 1,050,262 $ (1,453,182) $ 282,291 Net return from investments - realised 2,305,729 3,086,616 773,859

Sun Life MPF Hong Kong Dollar Bond Fund 2017 2016 2015 Net appreciation/(depreciation) of

investments - unrealised $ 35,061,695 $ (48,193,486) $ 13,708,065 Net return from investments - realised 36,540,048 41,003,639 23,479,967

Sun Life MPF Hong Kong Equity Fund

2017 2016 2015

Net appreciation/(depreciation) of investments - unrealised $6,085,242,382 $(242,209,858) $(166,948,297)

Net return from investments - realised 1,670,134,248 597,491,608 313,834,181


34


Investment income and performance (continued) Sun Life MPF Global Bond Fund 2017 2016 2015 Net appreciation/(depreciation) of

investments - unrealised $ 17,014,835 $ (6,413,786) $ (2,585,914) Net return/(loss) from investments - realised 397,862 7,352,518 (2,210,045)

Sun Life MPF Stable Fund 2017 2016 2015 Net appreciation/(depreciation) of

investments - unrealised $ 273,353,554 $ (35,352,724) $ (20,649,565) Net return from investments - realised 189,396,299 71,229,922 32,437,400

Sun Life MPF Balanced Fund 2017 2016 2015 Net appreciation/(depreciation) of

investments - unrealised $ 389,507,914 $ (64,894,314) $ (16,279,816) Net return from investments - realised 149,453,624 114,127,871 29,097,991

Sun Life MPF Growth Fund 2017 2016 2015

Net appreciation/(depreciation) of investments - unrealised $ 835,259,838 $ (128,533,660) $ (25,062,968)

Net return from investments - realised 321,067,504 265,486,619 48,570,102

Sun Life MPF Asian Equity Fund

2017 2016 2015

Net appreciation/(depreciation) of investments - unrealised $ 453,272,555 $ 18,543,557 $ (133,528,086)

Net return from investments - realised 68,595,418 26,012,849 24,195,154


35


Investment income and performance (continued) Sun Life MPF Global Equity Fund (Note 1) 2017 2016 2015 Net appreciation/(depreciation) of


realised 160,454,462 (1,659,493) 31,176,676

Sun Life MPF Greater China Equity Fund 2017 2016 2015 Net appreciation/(depreciation) of

investments - unrealised $ 492,696,112 $ 26,090,280 $(153,213,665) Net return from investments - realised 132,211,142 5,961,129 42,644,613

Sun Life FTSE MPF Hong Kong Index Fund 2017 2016 2015 Net appreciation/(depreciation) of


realised 43,259,291 (5,776,893) 1,699,662

Sun Life MPF Age 65 Plus Fund (Note 2)_ 2017 2016 2015 Net appreciation of investments -

unrealised $ 2,267,584 $ - $ - Net return from investments - realised 403,717 - -


36


Investment income and performance (continued) Sun Life MPF Core Accumulation Fund (Note 2) 2017 2016 2015 Net appreciation of investments -

unrealised $ 26,014,080 $ - $ - Net return from investments - realised 2,341,074 - -

Sun Life RCM MPF Capital Stable Fund (Note 3) 2017 2016 2015 Net depreciation of investments -

unrealised $ - $ (1,724,706) $ (4,739,972) Net return from investments - realised - 6,592,541 1,377,933

Sun Life RCM MPF Stable Growth Fund (Note 3) 2017 2016 2015 Net depreciation of investments -


Sun Life RCM MPF Balanced Fund (Note 3) 2017 2016 2015 Net depreciation of investments -


Note 1: Sun Life MPF Global Equity Fund has been renamed as Sun Life MPF Multi- Sector Equity Fund with effect from 1 March 2018.

Note 2: Sun Life MPF Age 65 Plus Fund and Sun Life MPF Core Accumulation Fund were launched on 1 April 2017.

Note 3: Sun Life RCM MPF Capital Stable Fund, Sun Life RCM MPF Stable Growth Fund and Sun Life RCM MPF Balanced Fund ceased having any investments and operations starting from 27 May 2016 and were terminated on 2 December 2016.


37


Sun Life MPF RMB and HKD Fund

Investment portfolio

Nominal

value Market value

% of net assets

Quoted investments Bonds Denominated in Renminbi People's Republic of China

Government 1.94% 18/08/2018 15,000,000 $ 17,867,683 3.52 ICBCIL Finance Co Ltd 3.9%

18/06/2018 15,000,000 17,938,092 3.54

$ 35,805,775 7.06 ---------------------- ----------- Certificates of deposit Denominated in Hong Kong Dollar Agricultural Bank of China 0%

01/06/2018 5,000,000 $ 4,966,005 0.98 Agricultural Bank of China 0%

23/04/2018 10,000,000 9,950,910 1.96 Agricultural Bank of China 1.58%

13/03/2018 10,000,000 10,008,695 1.97 Bank of China 0% 04/07/2018 12,000,000 11,896,260 2.34 Bank of China 0% 27/04/2018 10,000,000 9,947,770 1.96 Bank of China 1.07% 12/01/2018 5,000,000 5,025,548 0.99 Bank of China 1.4% 21/05/2018 12,000,000 12,004,416 2.37

$ 63,799,604 12.57 ---------------------- -----------


38


Sun Life MPF RMB and HKD Fund (continued)

Investment portfolio (continued)

Nominal

value Market value

% of net assets

Quoted investments (continued) Certificates of deposit (continued) Denominated in Renminbi Agricultural Bank of China 3.7%

08/03/2018 10,000,000 $ 12,109,588 2.39 China Development Bank 4.85%

22/02/2018 5,000,000 6,244,413 1.23

$ 18,354,001 3.62

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

$ 82,153,605 16.19

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

Total quoted investments * $ 117,959,380 23.25 Other net assets 389,403,942 76.75

Net assets attributable to the members at 31 December 2017 $ 507,363,322 100.00

Total investments at cost * $ 116,004,619

* Investments are accounted for on a trade date basis.


39



Statement of movements in investment portfolio Portfolio Holdings

As at 31 December

2016 Additions Deductions

As at 31 December

2017 Quoted investments Bonds Denominated in Renminbi Agricultural Bank Of China Ltd (Dubai

Branch) 3.5% 11/09/2017 - 8,000,000 8,000,000 - Bsh Hausgeraete Gmbh 3.8%

24/07/2017 - 10,000,000 10,000,000 - Caterpillar Financial Services Corp 3.4%

25/11/2017 - 7,000,000 7,000,000 - China Orient Asset Management 4.1%

22/01/2017 18,000,000 - 18,000,000 - People's Republic of China Government

1.94% 18/08/2018 - 15,000,000 - 15,000,000 Eastern Creation Investment II Holdings

Ltd 3.75% 27/06/2017 13,000,000 - 13,000,000 - ICBCIL Finance Co Ltd 3.9% 18/06/2018 - 15,000,000 - 15,000,000 Jingneng Clean Energy Investment

Holdings Ltd 4.3% 23/12/2017 - 15,000,000 15,000,000 - Rizhao Port 4.25% 15/05/2017 4,000,000 8,000,000 12,000,000 - Sinochem Corp 3.55% 13/05/2017 15,000,000 - 15,000,000 - United Kingdom of Great Britain And

Northern Ireland (Government) 2.7% 21/10/2017 - 15,000,000 15,000,000 -


40



Statement of movements in investment portfolio (continued) Portfolio Holdings

As at 31 December


As at 31 December

2017 Quoted investments (continued) Certificates of deposits Denominated in Hong Kong Dollar Agricultural Bank of China 0%

20/07/2017 - 10,000,000 10,000,000 - Agricultural Bank of China 0%

23/04/2018 - 10,000,000 - 10,000,000 Agricultural Bank of China 0%

01/06/2018 - 5,000,000 - 5,000,000 Agricultural Bank of China 0.88%

16/01/2017 14,000,000 - 14,000,000 - Agricultural Bank of China 1.2%

29/05/2017 8,000,000 - 8,000,000 - Agricultural Bank of China 1.58%

13/03/2018 - 10,000,000 - 10,000,000 Bank of China 0% 27/09/2017 - 4,500,000 4,500,000 - Bank of China 0% 27/04/2018 - 10,000,000 - 10,000,000 Bank of China 0% 04/07/2018 - 12,000,000 - 12,000,000 Bank of China 1.07% 12/01/2018 - 5,000,000 - 5,000,000 Bank of China 1.18% 14/03/2017 10,000,000 - 10,000,000 - Bank of China 1.3% 13/11/2017 10,000,000 - 10,000,000 - Bank of China 1.4% 21/05/2018 - 12,000,000 - 12,000,000 China Development Bank 1.29%

26/07/2017 - 5,000,000 5,000,000 - China Development Bank 1.3%

23/11/2017 10,000,000 - 10,000,000 - China Development Bank 1.43%


26/10/2017 - 5,000,000 5,000,000 - Denominated in Renminbi Agricultural Bank of China 3.7%

08/03/2018 - 10,000,000 - 10,000,000 China Construction Bank 0% 28/03/2017 4,000,000 - 4,000,000 - China Development Bank 4.85%

22/02/2018 - 5,000,000 - 5,000,000


41


Sun Life MPF Conservative Fund


Nominal

value Market value % of net

assets Quoted investments Certificates of deposit Denominated in Hong Kong Dollar Bank of China 0% 04/07/2018 90,000,000 $ 89,221,949 2.75 Bank of China 0% 27/04/2018 40,000,000 39,791,080 1.23 Bank of China 1.07% 12/01/2018 75,000,000 75,383,213 2.33 Bank of China 1.4% 21/05/2018 80,000,000 80,029,437 2.47 China Development Bank 0% 17/05/2018 83,000,000 82,491,708 2.55 China Development Bank 1.54% 14/06/2018 70,000,000 69,997,442 2.16

$ 436,914,829 13.49

Total quoted investments * $ 436,914,829 13.49 Other net assets 2,802,958,285 86.51

Net assets attributable to the members at 31 December 2017 $ 3,239,873,114 100.00

Total investments at cost * $ 436,029,808



42


Sun Life MPF Conservative Fund (continued)


As at 31

December 2016 Additions Deductions

As at 31

December 2017

Quoted investments Certificate of deposits Denominated in Hong Kong Dollar Agricultural Bank of China 1.2%

29/05/2017 8,000,000 - 8,000,000 - Bank of China 0% 04/07/2018 - 90,000,000 - 90,000,000 Bank of China 0% 27/04/2018 - 40,000,000 - 40,000,000 Bank of China 0% 27/09/2017 - 60,000,000 60,000,000 - Bank of China 1% 10/08/2017 15,000,000 - 15,000,000 - Bank of China 1.07% 12/01/2018 - 75,000,000 - 75,000,000 Bank of China 1.3% 13/11/2017 38,000,000 - 38,000,000 - Bank of China 1.4% 21/05/2018 - 80,000,000 - 80,000,000 China Development Bank 0%

17/05/2018 - 83,000,000 - 83,000,000 China Development Bank 1.29%




14/06/2018 - 70,000,000 - 70,000,000


43


Sun Life MPF Hong Kong Dollar Bond Fund


Holdings Market value % of net

assets Quoted investments Approved pooled investment funds First State MPF Umbrella Fund − First State MPF Hong Kong Bond Fund 97,136,206 $ 1,461,899,899 66.14 Invesco Pooled Investment Fund − HK$ Bond Fund Class B 26,834,669 498,448,610 22.55 Principal Life Style Fund − Principal Hong Kong Bond Fund 19,022,258 219,779,364 9.94

Total quoted investments * $ 2,180,127,873 98.63 Other net assets 30,282,708 1.37


Total investment at cost * $ 2,129,561,302

* Investment is accounted for on a trade date basis.


44


Sun Life MPF Hong Kong Dollar Bond Fund (continued)


As at 31 December


As at 31 December

2017 Quoted investments Approved pooled investment funds First State MPF Umbrella Fund − First State MPF Hong Kong Bond Fund 94,417,707 55,884,588 53,166,089 97,136,206 Invesco Pooled Investment Fund − HK$ Bond Fund Class B 21,020,705 33,382,053 27,568,089 26,834,669 Principal Life Style Fund − Principal Hong Kong Bond Fund - 19,022,258 - 19,022,258


45


Sun Life MPF Hong Kong Equity Fund



assets Quoted investments Approved pooled investment funds Allianz Global Investors Choice Fund − Allianz Choice Hong Kong Fund Ordinary

Class I 52,392,997 $ 2,888,949,855 11.12 First State MPF Umbrella Fund − First State MPF Hong Kong Equity Fund 332,869,626 14,849,314,067 57.11 Franklin MPF Fund − Franklin MPF Hong Kong Equity Fund

Class X 74,783,378 773,260,129 2.97 Principal Life Style Fund − Principal Hong Kong Equity Fund 11,378,987 511,599,256 1.97 Schroder Institutional Pooled Fund − Hong Kong Equity Fund Class B 92,616,471 6,723,946,533 25.86






46


Sun Life MPF Hong Kong Equity Fund (continued)


As at 31 December


As at 31 December

2017 Quoted investments Approved pooled investment funds Allianz Global Investors Choice Fund − Allianz Choice Hong Kong Fund

Ordinary Class I 83,246,357 39,782,874 70,636,234 52,392,997 First State MPF Umbrella Fund − First State MPF Hong Kong Equity

Fund 358,137,087 81,675,478 106,942,939 332,869,626 Franklin MPF Fund − Franklin MPF Hong Kong Equity

Fund Class X - 74,783,378 - 74,783,378 Principal Life Style Fund − Principal Hong Kong Equity Fund - 11,378,987 - 11,378,987 Schroder Institutional Pooled Fund − Hong Kong Equity Fund Class B 55,674,654 36,941,817 - 92,616,471


47


Sun Life MPF Global Bond Fund



assets Quoted investments Approved pooled investment funds First State MPF Umbrella Fund − First State MPF Asia Region Bond

Fund 2,456,706 $ 57,093,847 10.91 − First State MPF Global Bond Fund 6,802,822 125,852,207 24.04 Invesco Pooled Investment Fund − HK$ Bond Fund Class B 1,734,109 32,210,728 6.15 − International Bond Fund Class B 1,362,037 32,858,462 6.28 − MPF Bond Fund Class B 1,770,280 40,000,000 7.64 Templeton MPF Investment Funds − Templeton MPF Global Bond Fund

Class A 9,041,394 187,699,341 35.86

Total quoted investments * $ 475,714,585 90.88 Other net assets 47,743,999 9.12


Total investment at cost * $ 470,200,009



48


Sun Life MPF Global Bond Fund (continued)


As at 31 December


As at 31 December

2017 Quoted investments Approved pooled investment funds First State MPF Umbrella Fund − First State MPF Asia Region Bond

Fund - 2,456,706 - 2,456,706 − First State MPF Global Bond Fund 10,902,025 7,367,371 11,466,574 6,802,822 Invesco Pooled Investment Fund − HK$ Bond Fund Class B 2,958,154 2,293,464 3,517,509 1,734,109 − International Bond Fund Class B 2,295,916 1,807,503 2,741,382 1,362,037 − MPF Bond Fund Class B - 1,770,280 - 1,770,280 Templeton MPF Investment Funds − Templeton MPF Global Bond Fund

Class A 3,964,544 9,445,737 4,368,887 9,041,394


49


Sun Life MPF Stable Fund



assets Quoted investments Approved pooled investment funds Allianz Global Investors Choice Fund − Allianz Choice Asian Fund Ordinary

Class I 3,017,377 $ 141,726,198 3.69 − Allianz Choice Hong Kong Fund

Ordinary Class I 4,879,436 269,052,101 7.00 First State MPF Umbrella Fund − First State MPF Asia Region Bond

Fund 16,664,489 387,282,724 10.07 − First State MPF Asia Region Equity

Fund 2,827,868 224,080,260 5.83 − First State MPF Global Bond Fund 55,729,004 1,030,986,587 26.81 − First State MPF Hong Kong Bond

Fund 14,161,885 213,136,369 5.54 − First State MPF Hong Kong Equity

Fund 8,309,598 370,691,167 9.64 − Stewart Investors MPF Global

Equity Fund 11,717,493 273,837,811 7.12 Schroder MPF Umbrella Fund − Schroder MPF International Fund

Class B 16,943,339 346,491,283 9.01 Templeton MPF Investment Funds − Templeton MPF Global Bond Fund

Class A 17,531,939 363,963,054 9.46



Total investments at cost * $ 3,244,745,307



50


Sun Life MPF Stable Fund (continued)


As at 31 December


As at 31 December

2017 Quoted investments Approved pooled investment funds Allianz Global Investors Choice Fund − Allianz Choice Asian Fund Ordinary

Class I 4,695,491 1,573,138 3,251,252 3,017,377 − Allianz Choice Hong Kong Fund

Ordinary Class I 3,946,656 2,011,477 1,078,697 4,879,436 First State MPF Umbrella Fund − First State MPF Asia Region Bond

Fund 22,395,446 11,568,319 17,299,276 16,664,489 − First State MPF Asia Region Equity

Fund 2,430,001 1,037,103 639,236 2,827,868 − First State MPF Global Bond Fund 40,909,147 42,680,328 27,860,471 55,729,004 − First State MPF Hong Kong Bond Fund 29,172,304 11,757,162 26,767,581 14,161,885 − First State MPF Hong Kong Equity

Fund 4,588,416 5,374,894 1,653,712 8,309,598 − Stewart Investors MPF Global Equity

Fund 21,740,185 9,423,668 19,446,360 11,717,493 Schroder MPF Umbrella Fund − Schroder MPF International Fund

Class B - 16,943,339 - 16,943,339 Templeton MPF Investment Funds − Templeton MPF Global Bond Fund

Class A 7,109,543 34,867,987 24,445,591 17,531,939


51


Sun Life MPF Balanced Fund







Fund 2,543,109 201,515,957 5.77 − First State MPF Global Bond Fund 24,149,498 446,765,713 12.79 − First State MPF Hong Kong Bond


Fund 9,293,882 414,600,076 11.87 − Stewart Investors MPF Global


Class B 49,249,872 1,007,159,921 28.83 Templeton MPF Investment Funds − Templeton MPF Global Bond Fund

Class A 17,214,229 357,367,394 10.23






52


Sun Life MPF Balanced Fund (continued)


As at 31 December


As at 31 December



Ordinary Class I 6,038,536 1,661,739 3,485,722 4,214,553 First State MPF Umbrella Fund − First State MPF Asia Region Bond Fund 10,500,575 5,102,762 5,060,388 10,542,949 − First State MPF Asia Region Equity

Fund 3,969,473 911,929 2,338,293 2,543,109 − First State MPF Global Bond Fund 18,886,834 16,225,417 10,962,753 24,149,498 − First State MPF Hong Kong Bond Fund 16,189,293 3,972,798 10,533,523 9,628,568 − First State MPF Hong Kong Equity Fund 7,744,364 2,843,860 1,294,342 9,293,882 − Stewart Investors MPF Global Equity


Class B 7,411,976 47,268,726 5,430,830 49,249,872 Templeton MPF Investment Funds − Templeton MPF Global Bond Fund

Class A 5,957,271 21,608,967 10,352,009 17,214,229


53


Sun Life MPF Growth Fund







Fund 4,176,877 330,975,733 5.57 − First State MPF Global Bond Fund 13,029,471 241,045,214 4.06 − First State MPF Hong Kong Bond


Fund 25,358,265 1,131,232,202 19.03 − Stewart Investors MPF Global


Class B 92,898,844 1,899,781,448 31.96 Templeton MPF Investment Funds − Templeton MPF Global Bond Fund

Class A 19,377,282 402,272,374 6.77






54


Sun Life MPF Growth Fund (continued)


As at 31 December


As at 31 December



Ordinary Class I 13,279,324 3,080,265 8,028,591 8,330,998 First State MPF Umbrella Fund − First State MPF Asia Region Bond

Fund 9,445,116 3,423,582 1,634,873 11,233,825 − First State MPF Asia Region Equity

Fund 6,676,013 1,361,165 3,860,301 4,176,877 − First State MPF Global Bond Fund 10,990,763 4,013,903 1,975,195 13,029,471 − First State MPF Hong Kong Bond Fund 13,744,485 2,659,795 9,852,995 6,551,285 − First State MPF Hong Kong Equity

Fund 18,701,890 12,957,210 6,300,835 25,358,265 − Stewart Investors MPF Global Equity


Class B 22,091,163 81,415,690 10,608,009 92,898,844 Templeton MPF Investment Funds − Templeton MPF Global Bond Fund

Class A 10,108,171 12,051,128 2,782,017 19,377,282


55






Class I 21,123,662 $ 992,178,435 52.65 Schroder Institutional Pooled Funds − Hong Kong Equity Fund Class B 2,432,174 176,575,570 9.37 Schroder MPF Umbrella Fund − Schroder MPF Asian Fund Class B 12,750,306 696,421,714 36.96






56


Sun Life MPF Asian Equity Fund (continued)


As at 31 December


As at 31 December


Class I 20,975,214 4,569,442 4,420,994 21,123,662 Schroder Institutional Pooled Funds − Hong Kong Equity Fund Class B 2,432,174 - - 2,432,174 Schroder MPF Umbrella Fund − Schroder MPF Asian Fund Class B 10,526,317 5,249,462 3,025,473 12,750,306


57


Sun Life MPF Global Equity Fund



assets Quoted investments Approved pooled investment funds Invesco Pooled Investment Fund − Global Equities Fund Class B 30,211,733 $ 918,521,276 34.55 Schroder MPF Umbrella Fund − Schroder MPF International Fund

Class B 82,184,478 1,680,672,591 63.23






58


Sun Life MPF Global Equity Fund (continued)


As at 31 December


As at 31 December

2017 Quoted investments Approved pooled investment funds Invesco Pooled Investment Fund − Global Equities Fund Class B 47,480,751 24,250,946 41,519,964 30,211,733 Schroder MPF Umbrella Fund − Schroder MPF International Fund

Class B 35,452,829 68,926,225 22,194,576 82,184,478


59


Sun Life MPF Greater China Equity Fund



assets Quoted investments Approved pooled investment funds Allianz Global Investors Choice Fund − Allianz Choice Greater China Fund

Ordinary Class I 79,667,102 $ 1,443,567,903 63.12 Invesco Pooled Investment Fund − Hong Kong and China Fund Class B 14,711,821 813,615,193 35.57






60


Sun Life MPF Greater China Equity Fund (continued)


As at 31 December


As at 31 December

2017 Quoted investments Approved pooled investment funds Allianz Global Investors Choice Fund − Allianz Choice Greater China Fund

Class I 56,171,366 35,600,462 12,104,726 79,667,102 Invesco Pooled Investment Fund − Hong Kong and China Fund Class B 23,083,897 4,001,316 12,373,392 14,711,821


61


Sun Life FTSE MPF Hong Kong Index Fund



assets Quoted investment Approved index-tracking collective investment

scheme BlackRock Premier Funds − BlackRock Hong Kong Equity Index Fund

Class I2 4,192,391 $ $657,431,007 98.80

Total quoted investment * $ $657,431,007 98.80 Other net assets 7,962,753 1.20

Net assets attributable to the members at 31 December 2017 $ $665,393,760 100.00

Total investment at cost * $ $539,920,858



62


Sun Life FTSE MPF Hong Kong Index Fund (continued)


As at 31 December


As at 31 December

2017 Quoted investment Approved index-tracking collective

investment scheme BlackRock Premier Funds − BlackRock Hong Kong Equity Index

Fund Class I2 3,043,714 3,481,954 2,333,277 4,192,391


63


Sun Life MPF Age 65 Plus Fund



assets HKD Quoted investment Approved pooled investment fund Schroder MPF Umbrella Fund − Schroder MPF Core 20/80 Fund Class B 16,611,000 $ 172,256,076 97.11

Total quoted investment * $ 172,256,076 97.11 Other net assets 5,117,501 2.89





64


Sun Life MPF Age 65 Plus Fund (continued)


As at 31 December


As at 31 December

2017 Quoted investment Approved pooled investment fund Schroder MPF Umbrella Fund − Schroder MPF Core 20/80 Fund

Class B - 21,723,188 5,112,188 16,611,000


65





assets HKD Quoted investment Approved pooled investment fund Schroder MPF Umbrella Fund − Schroder MPF Core 60/40 Fund Class B 54,754,732 $ 600,659,407 99.16

Total quoted investment * $ 600,659,407 99.16 Other net assets 5,071,313 0.84





66


Sun Life MPF Core Accumulation Fund (continued)


As at 31 December


As at 31 December

2017 Quoted investment Approved pooled investment fund Schroder MPF Umbrella Fund − Schroder MPF Core 60/40 Fund

Class B - 65,227,969 10,473,237 54,754,732


67


Performance table 2017 Net asset value Fund expense ratio

Total net

asset value per unit Class A

per unit Class B per unit Class A Class B

% % % (1) Sun Life MPF RMB and

HKD Fund 507,363,322 1.0483 1.0503 N/A 1.33 1.27 N/A (2) Sun Life MPF

Conservative Fund 3,239,873,114 1.1015 1.1052 N/A 0.96 0.95 N/A (3) Sun Life MPF Hong Kong

Dollar Bond Fund 2,210,410,581 1.3720 1.4166 N/A 1.80 1.59 N/A (4) Sun Life MPF Hong Kong

Equity Fund 26,000,087,674 6.4208 6.6295 N/A 1.77 1.57 N/A (5) Sun Life MPF Global Bond

Fund 523,458,584 0.9603 0.9758 N/A 2.02 1.83 N/A (6) Sun Life MPF Stable Fund 3,845,456,390 2.0888 2.1567 N/A 1.88 1.67 N/A (7) Sun Life MPF Balanced

Fund 3,493,896,855 2.4513 2.5309 N/A 1.87 1.66 N/A (8) Sun Life MPF Growth

Fund 5,943,467,685 2.8341 2.9262 N/A 1.83 1.63 N/A (9) Sun Life MPF Asian Equity

Fund 1,884,453,782 1.6119 1.6439 N/A 2.01 1.81 N/A (10) Sun Life MPF Global

Equity Fund (Note 1) 2,658,111,000 1.3726 1.3999 N/A 2.04 1.84 N/A (11) Sun Life MPF Greater

China Equity Fund 2,287,109,534 1.3546 1.3804 N/A 2.06 1.86 N/A (12) Sun Life FTSE MPF Hong

Kong Index Fund 665,393,760 1.3502 1.3502 N/A 1.02 1.02 N/A (13) Sun Life MPF Age 65 Plus

Fund (Note 2) 177,373,577 N/A N/A 1.0243 N/A N/A 0.77 (14) Sun Life MPF Core

Accumulation Fund (Note 2) 605,730,720 N/A N/A 1.0788 N/A N/A 0.78

Note 1: Sun Life MPF Global Equity Fund has been renamed as Sun Life MPF Multi-Sector Equtiy Fund with effect from 1 March 2018.



68


Performance table (continued) 2016 Net asset value Total net per unit per unit Fund expense ratio asset value Class A Class B Class A Class B % % (1) Sun Life MPF RMB and HKD

Fund 398,897,054 0.9820 0.9833 1.34 1.29 (2) Sun Life MPF Conservative

Fund 1,742,521,825 1.1014 1.1052 0.80 0.79 (3) Sun Life MPF Hong Kong

Dollar Bond Fund 1,762,291,126 1.3402 1.3806 1.78 1.57 (4) Sun Life MPF Hong Kong

Equity Fund 17,033,288,275 4.5183 4.6560 1.78 1.58 (5) Sun Life MPF Global Bond

Fund 376,812,322 0.9325 0.9457 1.84 1.63 (6) Sun Life MPF Stable Fund 2,767,337,067 1.8321 1.8879 1.78 1.58 (7) Sun Life MPF Balanced Fund 2,310,852,172 2.0507 2.1131 1.78 1.58 (8) Sun Life MPF Growth Fund 3,931,600,436 2.2641 2.3330 1.79 1.59 (9) Sun Life MPF Asian Equity

Fund 1,233,016,918 1.1639 1.1846 2.00 1.79 (10) Sun Life MPF Global Equity

Fund 1,717,128,040 1.1147 1.1346 2.02 1.81 (11) Sun Life MPF Greater China

Equity Fund 1,638,370,432 0.9983 1.0153 2.07 1.86 (12) Sun Life FTSE MPF Hong

Kong Index Fund 340,201,041 0.9601 0.9601 1.02 1.02 (13) Sun Life RCM MPF Capital

Stable Fund (Note) N/A N/A N/A 0.84 0.76 (14) Sun Life RCM MPF Stable

Growth Fund (Note) N/A N/A N/A 0.84 0.76 (15) Sun Life RCM MPF Balanced

Fund (Note) N/A N/A N/A 0.83 0.75

Note: Sun Life RCM MPF Capital Stable Fund, Sun Life RCM MPF Stable Growth Fund and Sun Life RCM MPF Balanced Fund ceased having any investments and operations starting from 27 May 2016 and were terminated on 2 December 2016. The Fund Expense Ratio (“FER”) for these three constituent funds was based on their total expense and average net asset value per unit for the period from 1 January 2016 to 27 May 2016.


69


Performance table (continued) 2015 Net asset value Total net per unit per unit Fund expense ratio asset value Class A Class B Class A Class B % % (1) Sun Life MPF RMB and HKD

Fund $ 402,035,617 $ 1.0076 $ 1.0084 1.35 1.29 (2) Sun Life MPF Conservative

Fund 1,170,801,507 1.1014 1.1051 0.84 0.83 (3) Sun Life MPF Hong Kong

Dollar Bond Fund 1,393,600,045 1.3589 1.3976 1.78 1.58 (4) Sun Life MPF Hong Kong

Equity Fund 15,136,771,619 4.4967 4.6244 1.77 1.57 (5) Sun Life MPF Global Bond

Fund 230,914,178 0.9205 0.9316 1.80 1.60 (6) Sun Life MPF Stable Fund 2,011,310,681 1.8153 1.8668 1.79 1.59 (7) Sun Life MPF Balanced Fund 1,656,138,828 2.0151 2.0723 1.80 1.59 (8) Sun Life MPF Growth Fund 3,056,635,656 2.1999 2.2623 1.79 1.59 (9) Sun Life MPF Asian Equity

Fund 1,110,631,357 1.1405 1.1585 2.03 1.83 (10) Sun Life MPF Global Equity

Fund 1,260,482,827 1.0918 1.1090 2.05 1.85 (11) Sun Life MPF Greater China

Equity Fund 1,577,297,988 0.9987 1.0137 2.06 1.85 (12) Sun Life FTSE MPF Hong Kong

Index Fund 217,357,857 0.9390 0.9390 1.07 1.07 (13) Sun Life RCM MPF Capital

Stable Fund 183,587,291 1.0384 1.0543 1.99 1.79 (14) Sun Life RCM MPF Stable

Growth Fund 243,103,268 1.0375 1.0539 1.98 1.78 (15) Sun Life RCM MPF Balanced

Fund 173,513,145 1.0470 1.0635 1.99 1.78


70


Performance table (continued) 2017

Highest

issue price Lowest

redemption price Net investment return

(note) Class A Class B Unit price Class A Class B Unit price Class A Class B % % % (1) Sun Life MPF RMB

and HKD Fund $ 1.0499 $ 1.0516 $ N/A $ 0.9833 $ 0.9846 $ N/A 6.75 6.81 N/A (2) Sun Life MPF

Conservative Fund 1.1015 1.1052 N/A 1.1014 1.1052 N/A 0.01 0.00 N/A (3) Sun Life MPF Hong

Kong Dollar Bond Fund 1.3995 1.4441 N/A 1.3396 1.3805 N/A 2.37 2.61 N/A

(4) Sun Life MPF Hong

Kong Equity Fund 6.5275 6.7382 N/A 4.5512 4.6899 N/A 42.11 42.39 N/A (5) Sun Life MPF

Global Bond Fund 0.9763 0.9914 N/A 0.9281 0.9412 N/A 2.98 3.18 N/A (6) Sun Life MPF

Stable Fund 2.0890 2.1569 N/A 1.8320 1.8879 N/A 14.01 14.24 N/A (7) Sun Life MPF

Balanced Fund 2.4515 2.5311 N/A 2.0543 2.1168 N/A 19.53 19.77 N/A (8) Sun Life MPF

Growth Fund 2.8343 2.9264 N/A 2.2711 2.3403 N/A 25.18 25.43 N/A (9) Sun Life MPF Asian

Equity Fund 1.6365 1.6686 N/A 1.1727 1.1936 N/A 38.49 38.77 N/A (10) Sun Life MPF

Global Equity Fund (Note 1) 1.3732 1.4005 N/A 1.1207 1.1407 N/A 23.14 23.38 N/A

(11) Sun Life MPF

Greater China Equity Fund 1.3752 1.4011 N/A 1.0012 1.0182 N/A 35.69 35.96 N/A

(12) Sun Life FTSE MPF

Hong Kong Index Fund 1.3522 1.3522 N/A 0.9660 0.9660 N/A 40.63 40.63 N/A

(13) Sun Life MPF Age

65 Plus Fund (Note 2) N/A N/A 1.0275 N/A N/A 0.9980 N/A N/A N/A

(14) Sun Life MPF Core

Accumulation Fund (Note 2) N/A N/A 1.0799 N/A N/A 0.9981 N/A N/A N/A

Note 1: Sun Life MPF Global Equity Fund has been renamed as Sun Life MPF Multi-Sector Equity Fund with effect from 1 March 2018.



71



Highest

issue price Lowest

redemption price Net investment

return (note) Class A Class B Class A Class B Class A Class B % % (1) Sun Life MPF RMB and HKD

Fund $ 1.0251 $ 1.0261 $ 0.9819 $ 0.9832 (2.54) (2.49) (2) Sun Life MPF Conservative

Fund 1.1014 1.1052 1.1012 1.1050 0.00 0.01 (3) Sun Life MPF Hong Kong

Dollar Bond Fund 1.4032 1.4449 1.3324 1.3730 (1.38) (1.22) (4) Sun Life MPF Hong Kong

Equity Fund 4.8993 5.0453 3.8444 3.9545 0.48 0.68 (5) Sun Life MPF Global Bond

Fund 1.0030 1.0164 0.9219 0.9331 1.30 1.51 (6) Sun Life MPF Stable Fund 1.9600 2.0185 1.7717 1.8223 0.93 1.13 (7) Sun Life MPF Balanced Fund 2.1899 2.2551 1.9214 1.9762 1.77 1.97 (8) Sun Life MPF Growth Fund 2.4134 2.4853 2.0487 2.1071 2.92 3.13 (9) Sun Life MPF Asian Equity

Fund 1.2742 1.2960 0.9993 1.0152 2.05 2.25 (10) Sun Life MPF Global Equity

Fund 1.1315 1.1510 0.9427 0.9578 2.10 2.31 (11) Sun Life MPF Greater China

Equity Fund 1.0920 1.1099 0.8274 0.8400 (0.04) 0.16 (12) Sun Life FTSE MPF

Hong Kong Index Fund 1.0419 1.0419 0.7791 0.7791 2.25 2.25 (13) Sun Life RCM MPF Capital

Stable Fund (Note 3) N/A N/A N/A N/A N/A N/A (14) Sun Life RCM MPF Stable

Growth Fund (Note 3) N/A N/A N/A N/A N/A N/A (15) Sun Life RCM MPF Balanced

Fund (Note 3) N/A N/A N/A N/A N/A N/A

Note 3: Sun Life RCM MPF Capital Stable Fund, Sun Life RCM MPF Stable Growth Fund and Sun Life RCM MPF Balanced Fund ceased having any investments and operations starting from 27 May 2016 and were terminated on 2 December 2016.


72



Highest

issue price Lowest





Dollar Bond Fund 1.3674 1.4058 1.3370 1.3723 1.49 1.69 (4) Sun Life MPF Hong Kong


Fund 0.9619 0.9716 0.9103 0.9212 (3.92) (3.73) (6) Sun Life MPF Stable Fund 1.8952 1.9464 1.7884 1.8380 (0.77) (0.57) (7) Sun Life MPF Balanced Fund 2.1411 2.1988 1.9607 2.0153 (0.54) (0.34) (8) Sun Life MPF Growth Fund 2.3780 2.4422 2.1125 2.1714 (0.36) (0.16) (9) Sun Life MPF Asian Equity

Fund 1.4415 1.4623 1.0804 1.0966 (10.45) (10.27) (10) Sun Life MPF Global Equity

Fund 1.2920 1.3106 1.0267 1.0424 (4.79) (4.60) (11) Sun Life MPF Greater China

Equity Fund 1.3199 1.3379 0.9431 0.9567 (6.97) (6.78) (12) Sun Life FTSE MPF

Hong Kong Index Fund 1.2283 1.2283 0.8782 0.8782 (7.53) (7.54) (13) Sun Life RCM MPF Capital

Stable Fund 1.1153 1.1310 1.0297 1.0449 (3.55) (3.36) (14) Sun Life RCM MPF Stable

Growth Fund 1.1486 1.1652 1.0167 1.0322 (4.03) (3.84) (15) Sun Life RCM MPF Balanced

Fund 1.1957 1.2129 1.0114 1.0269 (4.47) (4.28)


73



Highest

issue price Lowest







Fund 0.9954 1.0041 0.9531 0.9626 (1.56) (1.37) (6) Sun Life MPF Stable Fund 1.8709 1.9188 1.7706 1.8139 1.40 1.59 (7) Sun Life MPF Balanced Fund 2.0853 2.1388 1.9287 1.9759 1.49 1.69 (8) Sun Life MPF Growth Fund 2.2891 2.3478 2.0609 2.1114 1.72 1.93 (9) Sun Life MPF Asian Equity



Equity Fund 1.1214 1.1353 0.9498 0.9604 2.65 2.85 (12) Sun Life FTSE MPF

Hong Kong Index Fund 1.0710 1.0710 0.9091 0.9091 1.84 1.83 (13) Sun Life RCM MPF Capital



Fund 1.1531 1.1682 1.0622 1.0764 (3.18) (2.99)


74



Highest

issue price Lowest



Fund $ 1.0407 $ 1.0405 $ 1.0144 $ 1.0138 2.44 2.48 (2) Sun Life MPF Conservative




Fund 1.0129 1.0190 0.9596 0.9664 (4.18) (3.99) (6) Sun Life MPF Stable Fund 1.8100 1.8533 1.7008 1.7403 2.43 2.64 (7) Sun Life MPF Balanced Fund 1.9968 2.0449 1.8300 1.8725 6.28 6.50 (8) Sun Life MPF Growth Fund 2.1704 2.2231 1.9337 1.9786 10.23 10.45 (9) Sun Life MPF Asian Equity




Hong Kong Index Fund 1.0000 1.0000 0.9864 0.9865 (0.28) (0.27) (13) Sun Life RCM MPF Capital

Stable Fund 1.0925 1.1048 1.0222 1.0327 2.62 2.83 (14) Sun Life RCM MPF Stable

Growth Fund 1.1077 1.1207 0.9979 1.0086 6.63 6.84 (15) Sun Life RCM MPF Balanced

Fund 1.1320 1.1453 0.9810 0.9915 11.13 11.36


75



Highest

issue price Lowest



Fund $ 1.0174 $ 1.0167 $ 0.9977 $ 0.9967 1.59 1.53 (2) Sun Life MPF Conservative




Fund 1.0345 1.0402 1.0058 1.0103 (0.18) 0.03 (6) Sun Life MPF Stable Fund 1.7651 1.8043 1.6455 1.6787 7.06 7.27 (7) Sun Life MPF Balanced Fund 1.8829 1.9246 1.6990 1.7347 10.38 10.60 (8) Sun Life MPF Growth Fund 1.9745 2.0183 1.7200 1.7562 13.69 13.92 (9) Sun Life MPF Asian Equity




Hong Kong Index Fund N/A N/A N/A N/A N/A N/A (13) Sun Life RCM MPF Capital



Fund 1.0207 1.0306 0.8974 0.9051 13.27 13.50


76



Highest

issue price Lowest



Fund $ N/A $ N/A $ N/A $ N/A N/A N/A (2) Sun Life MPF Conservative

Fund

1.1011

1.1048

1.1007

1.1045 0.00 0.01 (3) Sun Life MPF Hong Kong


Equity Fund 3.8878 3.9586 2.9100 2.9674 (10.94) (10.76) (5) Sun Life MPF Global Bond

Fund 1.0518 1.0553 0.9917 0.9938 1.09 1.28 (6) Sun Life MPF Stable Fund 1.7272 1.7605 1.5995 1.6310 (1.53) (1.33) (7) Sun Life MPF Balanced Fund 1.8360 1.8715 1.6195 1.6514 (3.79) (3.60) (8) Sun Life MPF Growth Fund 1.9196 1.9566 1.6135 1.6453 (5.94) (5.75) (9) Sun Life MPF Asian Equity







Fund 1.0443 1.0509 0.8328 0.8388 (10.93) (10.76)


77



Highest

issue price Lowest







Fund 1.0345 1.0361 0.9633 0.9641 0.66 0.87 (6) Sun Life MPF Stable Fund 1.7021 1.7325 1.5309 1.5568 6.90 7.11 (7) Sun Life MPF Balanced Fund 1.7918 1.8238 1.5453 1.5715 9.87 10.09 (8) Sun Life MPF Growth Fund 1.8566 1.8897 1.5413 1.5674 12.63 12.85 (9) Sun Life MPF Asian Equity







Fund 1.0183 1.0238 0.8371 0.8409 8.17 8.40


78



Highest

issue price Lowest







Fund N/A N/A N/A N/A N/A N/A (6) Sun Life MPF Stable Fund 1.5839 1.6092 1.2476 1.2657 15.21 15.44 (7) Sun Life MPF Balanced Fund 1.6261 1.6521 1.1692 1.1861 23.14 23.38 (8) Sun Life MPF Growth Fund 1.6459 1.6722 1.0822 1.0979 31.73 32.00 (9) Sun Life MPF Asian Equity







Fund 0.9518 0.9550 0.6426 0.6439 24.24 24.48


79



Highest

issue price Lowest




Fund

1.1002

1.1040

1.0912

1.0934 0.83 0.98 (3) Sun Life MPF Hong Kong


Equity Fund 3.3252 3.3654 1.3633 1.3820 (48.17) (48.07) (5) Sun Life MPF Global Bond

Fund N/A N/A N/A N/A N/A N/A (6) Sun Life MPF Stable Fund 1.5844 1.6048 1.2587 1.2762 (14.24) (14.07) (7) Sun Life MPF Balanced Fund 1.7044 1.7249 1.1789 1.1953 (23.51) (23.35) (8) Sun Life MPF Growth Fund 1.8121 1.8339 1.0856 1.1007 (31.87) (31.73) (9) Sun Life MPF Asian Equity







Fund 1.0642 1.0646 0.6599 0.6608 (24.87) (24.74)


80


Performance table (continued)

Note: The net 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. For constituent funds that were launched during the years, the net investment return is calculated by comparing the net asset value per unit at the year end against the initial subscription price of the investment funds of $1.00 in the respective years that the constituent funds were launched.


81


Trustee’s commentary

Analysis of the investments held by the Scheme

Annualized return (in terms of %)

1 year 5 years 10 years Since

Launch

Sun Life MPF Conservative Fund Launch date: 01/12/2000

Class A 0.01% 0.01% 0.09% 0.57%

Class B 0.00% 0.01% 0.11% 0.59%

Benchmark / Performance Target

(Lipper MPF Conservative Fund category median)

0.01% 0.04% 0.15% 0.63%

Deviation from the benchmark /performance target

Below Below Below Below

Trustee’s commentary The performance was slightly below the benchmark for the specified periods. Even though the US Federal Reserve has begun raising rates and the Hong Kong Monetary Authority has followed suit by raising rates through its discount window, abundant liquidity in the banking system allowed banks to keep deposit rates at record low levels. This persistently low interest rates offered by banking institutions presented a challenging environment for the fund to deliver meaningful returns.


82


Trustee’s commentary (continued)

Analysis of the investments held by the Scheme (continued)



Launch

Sun Life MPF Hong Kong Dollar Bond Fund Launch date: 01/12/2000

Class A 2.40% 0.23% 1.40% 1.87%

Class B 2.61% 0.43% 1.60% 2.06%


(Lipper MPF Hong Kong Dollar Bond Fund category median)

3.25% 0.80% 1.71% 1.26%


Below Below Below Above

Trustee’s commentary The performance was above benchmark since launch; albeit below the benchmark for 1 year, 5 years and 10 years. Continued global economic growth remains supportive to business environment and corporate earnings. The fund has been adding exposure to corporate issues while maintaining a balanced weighting between credit and higher quality government and quasi-government issues. The focus on quality has resulted in slightly lower portfolio yield and performance that trailed peer group in recent years.


83






Launch

Sun Life MPF RMB and HKD Fund Launch date: 30/06/2012

Class A 6.76% 0.63% N/A 0.86%

Class B 6.81% 0.68% N/A 0.89%


(Lipper MPF RMB and HKD Money Market Fund category median)

6.28% 0.71% N/A 0.79%


Above Below N/A Above

Trustee’s commentary The performance was above benchmark for 1 year and since launch; albeit slightly below benchmark for 5 years.


84






Launch


Launch date: 01/01/2010

Class A 2.98% -1.12% N/A -0.50%

Class B 3.19% -0.92% N/A -0.30%


(Lipper MPF Global Bond Fund category median)

5.12% -0.16% N/A 2.06%


Below Below N/A Below

Trustee’s commentary The performance was below benchmark for the specified periods. Continued global economic growth remains supportive to business environment and corporate earnings. The fund has been adding exposure to corporate issues while maintaining a balanced weighting between credit and higher quality government and quasi-government issues. The focus on quality has resulted in lower portfolio yield and performance that trailed peer group in recent years. In the past year, the fund's exposure to emerging market bonds and currencies, notably in Asian and Latin American, had led to its performance trailing peer group as yields of government bonds from major developed countries generally moved lower during the course of the year. The fund's short duration also did not pan out as yield curves generally flattened with the short end rising more than the medium-to-longer end.


85






Launch

Sun Life MPF Age 65 Plus Fund


N/A N/A N/A N/A


(Lipper MPF DIS Age 65 Plus Fund category median)

N/A N/A N/A N/A


N/A N/A N/A N/A

Trustee’s commentary The fund was launched in April 2017 and has less than a year's history by year end.


86






Launch

Sun Life MPF Stable Fund Launch date: 01/12/2000

Class A 14.02% 3.47% 2.82% 4.41%

Class B 14.24% 3.68% 3.02% 4.60%


(Lipper MPF Lifestyle (>20-40% Equity) Fund category median)

12.50% 2.51% 2.14% 3.59%


Above Above Above Above

Trustee’s commentary The performance was above benchmark for the specified periods.


87






Launch



N/A

N/A

N/A

N/A


(Lipper MPF DIS Accumulation Fund category median)

N/A N/A N/A N/A


N/A N/A N/A N/A

Trustee’s commentary The fund was launched in April 2017 and has less than a year's history by year end.


88






Launch

Sun Life MPF Balanced Fund Launch date: 01/12/2000

Class A 19.54% 5.47% 3.67% 5.39%

Class B 19.78% 5.68% 3.88% 5.58%



17.62% 4.22% 2.54% 4.15%





89






Launch

Sun Life MPF Growth Fund Launch date: 01/12/2000

Class A 25.18% 7.56% 4.52% 6.29%

Class B 25.43% 7.77% 4.73% 6.49%



22.83% 6.03% 2.77% 4.73%





90






Launch

Sun Life MPF Global Equity Fund (Note)


Class A 23.14% 7.20% N/A 3.27%

Class B 23.39% 7.42% N/A 3.48%


(Lipper MPF Global Equity Fund category median)

21.06% 9.22% N/A 5.85%


Above Below N/A Below

Trustee’s commentary The performance was above benchmark for 1 year; albeit below the benchmark for 5 years and since launch. The fund benefitted from strategic asset allocation that overweighted Hong Kong relative to other developed markets throughout the course of the year. The fund’s longer term performance was a result of its structural overweight in Hong Kong equities since inception and that Hong Kong market was trailing developed markets for an extended period of time. Such structural rigidity was removed when the current multi-manager structure took effect at around mid-2016.

Note: Sun Life MPF Global Equity Fund has been renamed as Sun Life MPF Multi-Sector Equity Fund with effect from 1 March 2018.


91






Launch



Class A 38.51% 8.01% N/A 4.98%

Class B 38.78% 8.22% N/A 5.18%


(Lipper MPF Asia ex Japan Equity Fund category median)

39.61% 7.44% N/A 13.87%


Below Above N/A Below

Trustee’s commentary The performance was above benchmark for 5 years; albeit below the benchmark for 1 year and since launch. Asian equity markets rallied strongly in the past year benefitting from continued global economic growth and capital inflows. The fund’s relative underweight in certain markets, including India, has caused it to slightly trail its peers. For the since-launch period, the fund’s historic overweight exposure to Hong Kong market, which lagged behind other regional markets in earlier years, led to its underperformance.


92






Launch



Class A 35.70% 6.58% N/A 3.14%

Class B 35.98% 6.80% N/A 3.33%


(Lipper MPF Greater China Equity Fund category median)

37.24% 8.46% N/A 5.26%


Below Below N/A Below

Trustee’s commentary The performance was below benchmark for the specified periods. Since mid-2016, the fund has been restructured to Greater China equity mandate, from Hong Kong equity mandate, hence the longer term performance is not relevant. For the past year, the fund’s overweight position to Hong Kong has added value though unfavorable security selection has detracted more value and caused mild underperformance against peers.


93






Launch

Sun Life FTSE MPF Hong Kong Index Fund Launch date: 10/12/2013

Class A 40.62% N/A N/A 7.68%

Class B 40.62% N/A N/A 7.68%


(Lipper MPF Hong Kong Equity (Index Tracking) Fund category median)

39.30% N/A N/A 11.56%


Above N/A N/A Below

Trustee’s commentary The performance was above benchmark for 1 year; albeit below the benchmark for since launch. Among all Hong Kong Index tracking funds in the MPF market, the fund is the only one that tracks the FTSE Hong Kong Index, whereas most all others track the Hang Seng Index. The Hang Seng Index is highly concentrated and focused on giant cap stocks and the financial sector. The FTSE Hong Kong Index is a lot more broad-based and has exposure to mid- and smaller caps. For the since launch period, Hong Kong market has been mainly led by large to giant cap stocks hence causing fund to trail the category median.


94






Launch

Sun Life MPF Hong Kong Equity Fund Launch date: 01/12/2000

Class A 42.11% 9.52% 6.78% 11.50%

Class B 42.39% 9.74% 6.99% 11.70%


(Lipper MPF Hong Kong Equity Fund category median)

41.05% 7.50% 2.03% 7.82%




I l n n

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Investment report


for the year ended 31 December 2017 (continued) (Expressed in Hong Kong dollars)

Trustee's assessment framework and action

On a quarterly basis, the Board of Trustee meets to discuss the operational and investment performance of the Sun Life Rainbow MPF Scheme (the "Scheme"). Evaluation of investment performance considers both qualitative and quantitative factors. These include a review of the firm (ownership, turnover of key personnel, assets under management, and regulation and/or compliance) and the fund (turnover of key investment professionals, investment process, investment policies, fund assets, and performance vs. benchmark and peers). Any issues of concern are monitored until the Board of Trustee is satisfied they have been adequately addressed. In cases where serious concerns persist, the Trustee will initiate a fund search to identify a suitable replacement manager.

Overall performance of constituent funds under the Scheme in 2017 is deemed satisfactory. Of the twelve constituent funds with more than one-year history (i.e., not counting the two DIS funds that were launched in April of the year), seven outperformed their respective peer median - of which, six ranked in the first quartile according to Lipper's categorization. For constituent funds that performed less well , these are being closely monitored with clear communication made to the underlying investment manager to enhance investment returns via asset allocation/rebalancing and/or addition/removal of approved pooled investment fund.

With effect on 1 March 2018, the Sun Life MPF Global Equity Fund has been renamed Sun Life MPF Multi-Sector Equity Fund. As the change of fund name implies, investment focus would be changed from geographic to sectoral. It is believed by adopting a sector approach the fund may attain better diversification and also better able to capture economic and market cyclicality.

For and on behalf of Sun Life Trustee Company Limited

Hong Kong,

2 2 JUN 2018

95

96

Independent auditor’s report to the Trustee of Sun Life Rainbow MPF Scheme

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Sun Life Rainbow MPF Scheme (“the Scheme”) set out on pages 103 to 162, which comprise the statement of assets and liabilities attributable to members as at 31 December 2017, the statement of comprehensive income, the statement of changes in net assets attributable to members and the cash flow statement for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the financial statements give a true and fair view of the financial position of the Scheme as at 31 December 2017, and of its financial transactions and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

Basis for Opinion

We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) and with 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 are independent of the Scheme in accordance with the HKICPA’s Code of Ethics for Professional Accountants (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Information Other than the Financial Statements and Auditor’s Report Thereon

The Trustee of the Scheme is responsible for the other information. The other information comprises all 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 whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

97

Independent auditor’s report to the Trustee of Sun Life Rainbow MPF Scheme (continued)

Report on the Audit of the Financial Statements (continued)

Responsibilities of Trustee for the Financial Statements

The Trustee of the Scheme is responsible for the preparation of the financial statements that give a true and fair view in accordance with 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 financial statements, the Trustee of the Scheme is responsible for assessing the Scheme’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Trustee either intends to liquidate the Scheme or to cease operations, or has no realistic alternative but to do so.

In addition, the Trustee of the Scheme is required to ensure that the financial statements have been properly prepared in accordance with sections 80, 81, 83 and 84 of the Mandatory Provident Fund Schemes (General) Regulation (“General Regulation”).

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. This report is made solely to you, in accordance with section 102 of the General Regulation, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. In addition, we are required to assess whether the financial statements of the Scheme have been properly prepared, in all material respects, in accordance with sections 80, 81, 83 and 84 of the General Regulation.

98

Independent auditor’s report to the Trustee of Sun Life Rainbow MPF Scheme (continued)

Report on the Audit of the Financial Statements (continued)

Auditor’s Responsibilities for the Audit of the Financial Statements (continued)

As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Scheme's internal control.

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

Conclude on the appropriateness of the Trustee’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Scheme’s ability to continue as a going concern. If we conclude that a material uncertainty 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 to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the Trustee of the Scheme 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.

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Independent auditor's report to the Trustee of Sun Life Rainbow MPF Scheme (continued)

Report on matters under the Mandatory Provident Fund Schemes (General) Regulation

a. In our opinion, the financial statements have been properly prepared, in all material respects, in accordance with sections 80, 81, 83 and 84 of the General Regulation.

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.

~~G, Certified Public Accountants

8th Floor, Prince's Building 1 O Chater Road Central, Hong Kong

22 June 2018

99

100

Independent auditor’s assurance report to the Trustee of Sun Life Rainbow MPF Scheme

We have audited the financial statements of Sun Life Rainbow MPF Scheme (the “Scheme”) for the year ended 31 December 2017 in accordance with Hong Kong Standards on Auditing and with reference to Practice Note 860.1 (Revised), The Audit of Retirement Schemes (“PN 860.1 (Revised)”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), and have issued an unqualified auditor’s report thereon dated 22 June 2018.

Pursuant to section 102 of the Mandatory Provident Fund Schemes (General) Regulation (“General Regulation”), we are required to report whether the Scheme complied with certain requirements of the Mandatory Provident Fund Schemes Ordinance (“MPFSO”) and the General Regulation.

Trustee’s Responsibility

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 Authority”) under section 28 of the MPFSO with respect to forbidden investment practices and the requirements of sections 37(2), 51 and 52 and Part 10 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), 34DI(1) and (2), 34DJ(2), (3), (4) and (5) and 34DK(2) of the MPFSO are complied with; and

d. the Scheme assets are not subject to any encumbrance, otherwise than as permitted by the General Regulation.

Our Independence and Quality 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.

The firm applies Hong Kong Standard on Quality Control 1 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.

101

Independent auditor’s assurance report to the Trustee of Sun Life Rainbow MPF Scheme (continued)

Auditor’s Responsibility

Our responsibility is to report solely to you, on the Scheme’s compliance with the above requirements based on the results of the procedures performed by us, in accordance with section 102 of the General Regulation, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

We conducted our 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 PN 860.1 (Revised) 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 on PN 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:

1. in our opinion:

a. proper accounting and other records have been kept during the year ended 31 December 2017 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 Authority under section 28 of the MPFSO with respect to forbidden investment practices and the requirements of sections 37(2), 51 and 52 and Part 10 of, and Schedule 1 to, the General Regulation have been complied with, in all material respects, as at 31 March 2017, 30 September 2017 and 31 December 2017;

c. the requirements specified in the MPFSO 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 Sun Life MPF Core Accumulation Fund and Sun Life MPF Age 65 Plus Fund have been complied with, in all material respects, as at 30 June 2017, 30 September 2017 and 31 December 2017;

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Independent auditor's assurance report to the Trustee of Sun Life Rainbow MPF Scheme (continued)

Opinion (continued)

Based on the foregoing: (continued)

1. in our opinion: (continued)

d. the requirements specified in the MPFSO under sections 3401(1) and (2) with respect to the transfer of accrued benefits to an account and specified notice, and 34DJ(2), (3), (4), (5) with respect to locating scheme members relating to Sun Life MPF Core Accumulation Fund and Sun Life MPF Age 65 Plus Fund have been complied with, in all material respects, during the period from 1 April 2017 to 31 December2017; and

e. the requirements specified in section 34DD(4)(b) of the MPFSO with respect to the controls of out-of-pocket expenses of the Sun Life MPF Core Accumulation Fund and Sun Life MPF Age 65 Plus Fund have been complied with, in all material respects, as at 31 December 2017.

2. as at 31 December 2017, the Scheme assets were not subject to any encumbrance, otherwise than as permitted by the General Regulation.

Other Matter

The requirements specified in the MPFSO under section 34DK(2) with respect to the transfer of accrued benefits to an account and specified notice relating to Sun Life MPF Core Accumulation Fund and Sun Life MPF Age 65 Plus Fund are not applicable to the Trustee during the year ended 31 December 2017 as the default investment arrangement of the Scheme prior to 1 April 2017 was not guaranteed funds. Accordingly, there is no reporting on this section.

Intended Users and Purpose

This report is intended solely for submission by the Trustee to the Authority pursuant to section 102 of the General Regulation, and is not intended to be, and should not be, used by anyone for any other purposes.

~ Certified Public Accountants

8th Floor, Prince's Building 10 Chater Road Central, Hong Kong

22 June 2018

102

Sun Life Rainbow MPF Scheme Financial statements for the year ended 31 December 2017

103

Statement of assets and liabilities attributable to members as at 31 December 2017 (Expressed in Hong Kong dollars)

Note Sun Life MPF RMB and HKD Fund Sun Life MPF Conservative Fund Sun Life MPF Hong Kong Dollar

Bond Fund Sun Life MPF Hong Kong Equity

Fund Sun Life MPF Global Bond Fund Sun Life MPF Stable Fund 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 Assets Cash at bank $ 388,288,134 $ 287,215,693 $ 2,803,087,416 $ 1,639,603,214 $ 17,014,983 $ 17,603,787 $ 257,367,453 $ 59,518,435 $ 3,306,045 $ 3,612,453 $ 15,929,383 $ 9,715,735 Amounts receivable on sales of

investments - - - - 17,085,994 11,623,979 60,843,293 28,799,692 41,426,034 715,295 209,511,724 3,945,544 Amounts receivable on subscriptions 2,369,881 170,692 29,465,011 14,874,102 18,500,477 10,827,233 43,595,882 27,696,304 5,345,276 547,853 13,890,070 3,934,604 Contributions receivable - - - - - - - - - - - - Interest and other receivables 1,297,780 840,434 4,999,431 2,570,894 - - - - 299,239 96,751 764,168 173,179 Investments 117,959,380 117,193,836 436,914,829 100,710,231 2,180,127,873 1,738,117,948 25,747,069,840 16,977,047,781 475,714,585 373,101,374 3,621,247,554 2,758,876,855

Total assets $ 509,915,175 $ 405,420,655 $ 3,274,466,687 $ 1,757,758,441 $ 2,232,729,327 $ 1,778,172,947 $26,108,876,468 $17,093,062,212 $ 526,091,179 $ 378,073,726 $ 3,861,342,899 $ 2,776,645,917 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Liabilities Amounts payable on redemptions $ 1,900,599 $ 1,515,202 $ 31,209,130 $ 14,036,388 $ 19,284,420 $ 13,386,149 $ 73,618,001 $ 35,184,883 $ 1,940,612 $ 732,710 $ 10,842,208 $ 5,502,569 Amounts payable on purchases of

investments - 4,457,012 - - - - - - - - - - Benefits payable - - - - - - - - - - - - Forfeiture payable - - - - - - - - - - - - Accruals and other payables 651,254 551,387 3,384,443 1,200,228 3,034,326 2,495,672 35,170,793 24,589,054 691,983 528,694 5,044,301 3,806,281

Liabilities (excluding net assets attributable to members) $ 2,551,853 $ 6,523,601 $ 34,593,573 $ 15,236,616 $ 22,318,746 $ 15,881,821 $ 108,788,794 $ 59,773,937 $ 2,632,595 $ 1,261,404 $ 15,886,509 $ 9,308,850

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

Net assets attributable to members $ 507,363,322 $ 398,897,054 $ 3,239,873,114 $ 1,742,521,825 $ 2,210,410,581 $ 1,762,291,126 $26,000,087,674 $17,033,288,275 $ 523,458,584 $ 376,812,322 $ 3,845,456,390 $ 2,767,337,067 Number of units in issue 3 Class A 122,549,620 107,257,760 706,119,763 417,776,067 398,211,788 347,609,530 869,984,175 863,749,289 131,594,748 100,238,991 431,865,564 403,504,836 Class B 360,759,764 298,569,006 2,227,615,042 1,160,320,273 1,174,665,689 939,056,953 3,079,269,320 2,820,168,451 406,921,244 299,608,565 1,364,757,012 1,074,255,845 Net assets attributable to members

per unit Class A 1.0483 0.9820 1.1015 1.1014 1.3720 1.3402 6.4208 4.5183 0.9603 0.9325 2.0888 1.8321 Class B 1.0503 0.9833 1.1052 1.1052 1.4166 1.3806 6.6295 4.6560 0.9758 0.9457 2.1567 1.8879

The notes on pages 113 to 162 are an integral part of the financial statements.


104

Statement of assets and liabilities attributable to members as at 31 December 2017 (continued) (Expressed in Hong Kong dollars)

Note Sun Life MPF Balanced Fund Sun Life MPF Growth Fund Sun Life MPF Asian Equity Fund Sun Life MPF Global Equity Fund (1) Sun Life MPF Greater China Equity

Fund Sun Life FTSE MPF

Hong Kong Index Fund 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 Assets Cash at bank $ 27,977,634 $ 6,194,955 $ 43,623,230 $ 10,225,325 $ 19,097,705 $ 5,164,721 $ 43,663,247 $ 21,304,215 $ 28,792,900 $ 8,526,994 $ 5,790,762 $ 1,979,003 Amounts receivable on sales of

investments 5,450,223 4,259,284 10,991,527 7,386,050 4,371,539 1,977,351 18,281,511 13,107,468 6,653,333 3,568,652 3,671,619 910,719 Amounts receivable on subscriptions 7,983,497 3,085,847 10,661,742 5,579,247 3,632,879 1,747,549 21,576,980 13,488,960 5,868,755 2,026,022 4,071,297 4,609,966 Contributions receivable - - - - - - - - - - - - Interest and other receivables 643,989 144,464 579,951 245,055 - - - - - - - - Investments 3,465,203,931 2,305,865,535 5,897,800,571 3,921,915,639 1,865,175,719 1,228,445,218 2,599,193,867 1,686,025,138 2,257,183,096 1,631,191,672 657,431,007 334,130,583

Total assets $ 3,507,259,274 $ 2,319,550,085 $ 5,963,657,021 $ 3,945,351,316 $ 1,892,277,842 $ 1,237,334,839 $ 2,682,715,605 $ 1,733,925,781 $ 2,298,498,084 $ 1,645,313,340 $ 670,964,685 $ 341,630,271 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Liabilities Amounts payable on redemptions $ 8,679,874 $ 5,440,050 $ 12,165,596 $ 8,186,018 $ 4,784,731 $ 2,198,830 $ 20,249,068 $ 13,901,636 $ 7,593,965 $ 4,059,124 $ 5,044,318 $ 1,143,644 Amounts payable on purchases of

investments - - - - - - - - - - - - Benefits payable - - - - - - - - - - - - Forfeiture payable - - - - - - - - - - - - Accruals and other payables 4,682,545 3,257,863 8,023,740 5,564,862 3,039,329 2,119,091 4,355,537 2,896,105 3,794,585 2,883,784 526,607 285,586

Liabilities (excluding net assets attributable to members) $ 13,362,419 $ 8,697,913 $ 20,189,336 $ 13,750,880 $ 7,824,060 $ 4,317,921 $ 24,604,605 $ 16,797,741 $ 11,388,550 $ 6,942,908 $ 5,570,925 $ 1,429,230

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

Net assets attributable to members $ 3,493,896,855 $ 2,310,852,172 $ 5,943,467,685 $ 3,931,600,436 $ 1,884,453,782 $ 1,233,016,918 $ 2,658,111,000 $ 1,717,128,040 $ 2,287,109,534 $ 1,638,370,432 $ 665,393,760 $ 340,201,041

Number of units in issue 3 Class A 356,654,045 308,889,820 506,802,288 451,905,043 296,433,775 281,009,585 458,902,836 398,317,948 473,000,277 482,600,914 128,731,355 96,318,796 Class B 1,035,052,410 793,804,817 1,540,290,064 1,246,646,891 855,684,536 764,796,680 1,448,772,096 1,122,067,436 1,192,675,030 1,139,203,493 364,088,752 258,012,742 Net assets attributable to members

per unit Class A 2.4513 2.0507 2.8341 2.2641 1.6119 1.1639 1.3726 1.1147 1.3546 0.9983 1.3502 0.9601 Class B 2.5309 2.1131 2.9262 2.3330 1.6439 1.1846 1.3999 1.1346 1.3804 1.0153 1.3502 0.9601


r l

( r

Statement of assets and liabilities attributable to members as at 31 December 2017 (continued) (Expressed in Hong Kong dollars)

Assets

Cash at bank Amounts receivable on sales of

investments Amounts receivable on subscriptions Contributions receivable Interest and other receivables Investments

Total assets

Liabilities

Amounts payable on redemptions Amounts payable on purchases of

investments Benefits payable Forfeiture payable Accruals and other payables

Liabilities (excluding net assets attributable to members)

Note Sun Life MPF Age 65 Plus Sun Life MPF Core Sun Life RCM MPF Capital Sun Life RCM MPF Stable Sun Life RCM MPF Balanced

Fund !2J Accumulation Fund r2J Stable Fund !3! Growth Fund !3J Fund !3J

2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

$ 1,126,182 $ - $ 2,577,449 $ - $ - $ - $ - $ - $ - $ -

2,000,858 3,530,412 4,229,565 3,264,008

172,256,076 600,659,407

$ 179,618,681 $ - $ 610,031,333 $ - $ - $ - $ - $ - $ - $ --------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------

$ 2,114,619 $ - $ 3,844,Cl24 $ - $ - $ - $ - $ - $ - $ -

130,485 456,592

$ 2,245,104 $ - $ 4,:ID,616 $ - $ - $ - $ - $ - $ - $ -

$

$


Scheme Total 2017 2016 2017 2016

186,802,721 $ 162,004,982 $ 3,844,445,244 $2,233,269,512

383,824,007 76,294,034 (174,455,380) (88,588,379) 279,124,009 219,334,007 279,124,009 219,334,007

8,584,558 4,070,777 50,093,937,735 33,172,621 ,810

291,472,250 $ 293,351,510 $54,609,916,513 $35,705,591,040 -------------- -------------- -------------- --------------

$ (203,271, 165) $ (105,287,203) $ - $

4,457,012 237,347,476 169,573,429 237,347,476 169,573,429 59,740,005 69,861 ,038 59,740,005 69,861,038 68,146,485 40,014,583 141 ,133,005 00,193,190

$ 161,932,801 $ 174,161,847 $ 438,220,486 $ 334,004,669

Net assets attributable to members $ 177,373,577 $ - $ 005,730,720 $ - $ - $ - $ - $ - $ - $ - $ 129,509,449 $ 119,189,663 $54,171,693,Cl27 $35,371,500,371

Number of units in issue

Net assets attributable to members per unit

3 173,163,486 561 ,483,589

1.0243 1.0788

(1)

(2)

(3)

Sun Life MPF Global Equity Fund has been renamed as Sun Life MPF Multi-Sector Equity Fund with effect from 1 March 2018.

Sun Life MPF Age 65 Plus Fund and Sun Life MPF Core Accumulation Fund were launched on 1 April 2017.

Sun Life RCM MPF Capital Stable Fund, Sun Life RCM MPF Stable Growth Fund and Sun Life RCM MPF Balanced Fund ceased having investments and operations starting from 27 May 2016 and were terminated on 2 December 2016.

Approved and authorised for issue by the Trustee on

) )

2 2 JUN 2018

) For and on behalf of ) Sun Life Trustee Company Limited ) )


105


106

Statement of comprehensive income for the year ended 31 December 2017 (Expressed in Hong Kong dollars)



Fund Sun Life MPF Global Bond Fund Sun Life MPF Stable Fund 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 Income Net gain/(loss) on investments 5 $ 6,805,722 $ 418,535 $ 3,355,991 $ 1,633,434 $ 71,601,743 $ (7,189,847) $ 7,755,376,630 $ 355,281,750 $ 17,412,697 $ 938,732 $ 462,749,853 $ 35,877,198 Interest on bank deposits 9,819,152 5,864,383 20,379,735 9,710,315 - - - - - - - - Exchange gain/(loss) 17,281,689 (11,321,739) - - - - - - - - - - Other income - - 1,184 - - 1,567 - 4,683 926,529 130,423 2,918,089 197,298

Total investment income/(loss) $ 33,906,563 $ (5,038,821) $ 23,736,910 $ 11,343,749 $ 71,601,743 $ (7,188,280) $ 7,755,376,630 $ 355,286,433 $ 18,339,226 $ 1,069,155 $ 465,667,942 $ 36,074,496 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Expenses Administration fees 7(a) $ 3,044,133 $ 2,815,672 $ 13,381,626 $ 6,902,536 $ 15,299,650 $ 12,466,905 $ 167,348,891 $ 121,070,856 $ 3,397,941 $ 2,427,865 $ 25,106,186 $ 18,711,488 Management fees 7(b) 1,740,122 1,608,917 6,089,276 2,407,552 6,645,171 3,721,917 76,651,098 39,149,995 1,270,346 719,863 9,364,589 5,395,905 Servicing fees 7(c) - - - - 3,450,990 3,838,118 37,984,432 37,380,257 767,757 729,915 5,671,140 5,676,141 Trustee fees 7(d) 273,982 254,972 1,666,163 410,710 1,497,421 1,247,041 15,674,197 11,510,946 327,677 239,284 2,438,156 1,879,607 Custodian fees 414,775 386,896 1,645,559 1,036,553 612,997 520,737 5,546,346 4,030,821 205,487 153,455 930,161 721,150 Sub-custodian fees 29,139 40,804 40,902 32,312 - - - - - - - - Auditor's remuneration 8,917 10,835 67,706 48,400 42,465 52,037 527,328 469,353 9,835 11,452 76,797 80,223 Legal and professional expenses 1,422 5,191 5,761 17,149 6,153 19,546 60,463 201,553 1,301 3,714 9,429 29,331 Annual authority fee - - - - - - - - - - - - MPF insurance indemnity premiums - 3 - 5,901 - 4,632 - 27,713 - 1,614 - 8,207 Publishing fees 3,586 4,384 20,619 15,002 15,905 17,048 177,609 171,616 3,572 3,304 26,152 25,807 Bank charges 8,394 5,895 7,870 6,200 - - - - - - - - Fact sheet fees - 1,474 - 7,643 - 9,060 - 59,985 - 2,062 - 15,325 Postage and printing fees 118,149 90,650 636,573 354,160 531,791 392,644 5,771,330 3,711,172 116,658 81,385 873,409 608,042 Compensation fund levy - - - - - - - - - - - - Other expenses 2,293 1,455 5,550 1,455 5,384 1,455 42,396 1,455 2,259 1,455 7,837 1,455

Total operating expenses $ 5,644,912 $ 5,227,148 $ 23,567,605 $ 11,245,573 $ 28,107,927 $ 22,291,140 $ 309,784,090 $ 217,785,722 $ 6,102,833 $ 4,375,368 $ 44,503,856 $ 33,152,681

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

Increase/(decrease) in net assets attributable to members $ 28,261,651 $ (10,265,969) $ 169,305 $ 98,176 $ 43,493,816 $ (29,479,420) $ 7,445,592,540 $ 137,500,711 $ 12,236,393 $ (3,306,213) $ 421,164,086 $ 2,921,815



107

Statement of comprehensive income for the year ended 31 December 2017 (continued) (Expressed in Hong Kong dollars)



Hong Kong Index Fund 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 Income Net gain on investments 5 $ 538,961,538 $ 49,233,557 $ 1,156,327,342 $ 136,952,959 $ 521,867,973 $ 44,556,406 $ 490,492,741 $ 68,495,523 $ 624,907,254 $ 32,051,409 $ 165,626,446 $ 8,954,046 Interest on bank deposits - - - - - - - - - - - - Exchange gain - - - - - - - - - - - - Other income 2,152,446 150,671 1,981,154 249,531 - - - 5,708 - 113 - -

Total investment income $ 541,113,984 $ 49,384,228 $ 1,158,308,496 $ 137,202,490 $ 521,867,973 $ 44,556,406 $ 490,492,741 $ 68,501,231 $ 624,907,254 $ 32,051,522 $ 165,626,446 $ 8,954,046 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Expenses Administration fees 7(a) $ 22,211,843 $ 15,577,621 $ 38,274,249 $ 27,095,971 $ 12,163,355 $ 9,015,896 $ 16,941,162 $ 11,024,814 $ 15,225,267 $ 12,290,890 $ 2,965,972 $ 1,537,073 Management fees 7(b) 9,442,184 4,743,138 17,133,661 8,292,065 9,663,100 6,437,394 13,978,532 7,931,551 12,958,096 8,856,308 117,386 40,792 Servicing fees 7(c) 5,010,303 4,688,705 8,648,555 8,272,540 2,746,997 2,782,048 3,829,577 3,358,966 3,426,360 3,784,005 98,865 68,483 Trustee fees 7(d) 2,189,578 1,567,181 3,719,829 2,692,676 1,194,405 895,902 1,639,327 1,100,985 1,541,869 1,265,980 247,163 128,090 Custodian fees 835,756 620,341 1,355,506 991,447 784,856 579,682 1,094,165 708,400 978,960 787,004 247,162 128,089 Sub-custodian fees - - - - - - - - - - - - Auditor's remuneration 69,767 67,706 122,184 111,992 38,160 33,798 58,133 45,861 43,837 44,896 14,596 8,835 Legal and professional expenses 7,966 24,613 13,508 43,236 4,382 14,940 5,525 17,579 5,938 20,662 1,062 21,323 Annual authority fee - - - - - - - - - - - - MPF insurance indemnity premiums - 7,251 - 9,653 - 1,521 - 4,024 - 1,383 - 1,086 Publishing fees 23,511 21,731 40,334 37,637 12,897 12,688 17,806 15,257 16,061 17,454 4,177 2,754 Bank charges - - - - - - - - - - - - Fact sheet fees - 13,464 - 19,565 - 4,342 - 7,455 - 5,365 - 1,335 Postage and printing fees 761,804 516,333 1,311,613 861,775 417,822 271,063 577,142 347,854 526,936 366,286 127,583 64,729 Compensation fund levy - - - - - - - - - - - - Other expenses 6,806 1,455 10,698 1,455 4,372 1,455 5,429 1,455 5,256 1,455 2,225 1,455

Total operating expenses $ 40,559,518 $ 27,849,539 $ 70,630,137 $ 48,430,012 $ 27,030,346 $ 20,050,729 $ 38,146,798 $ 24,564,201 $ 34,728,580 $ 27,441,688 $ 3,826,191 $ 2,004,044

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

Increase in net assets attributable to members $ 500,554,466 $ 21,534,689 $ 1,087,678,359 $ 88,772,478 $ 494,837,627 $ 24,505,677 $ 452,345,943 $ 43,937,030 $ 590,178,674 $ 4,609,834 $ 161,800,255 $ 6,950,002



108

Statement of comprehensive income for the year ended 31 December 2017 (continued) (Expressed in Hong Kong dollars)

Note Sun Life MPF Age 65 Plus

Fund (2) Sun Life MPF Core

Accumulation Fund (2) Sun Life RCM MPF Capital

Stable Fund (3) Sun Life RCM MPF Stable

Growth Fund (3) Sun Life RCM MPF Balanced

Fund (3) Scheme Total 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 Income Net gain/(loss) on investments 5 $ 2,671,301 $ - $ 28,355,154 $ - $ - $ 4,867,835 $ - $ 3,180,089 $ - $ (754,080) $ - $ - $11,846,512,385 $ 734,497,546 Interest on bank deposits - - - - - - - - - - 15,574 11,955 30,214,461 15,586,653 Exchange gain/(loss) - - - - - - - - - - - - 17,281,689 (11,321,739) Other income 89 - - - - 12,238 - 10,985 - 14,017 - - 7,979,491 777,234

Total investment income/(loss) $ 2,671,390 $ - $ 28,355,154 $ - $ - $ 4,880,073 $ - $ 3,191,074 $ - $ (740,063) $ 15,574 $ 11,955 $11,901,988,026 $ 739,539,694 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Expenses Administration fees 7(a) $ 256,395 $ - $ 969,776 $ - $ - $ 601,853 $ - $ 781,865 $ - $ 533,956 $ - $ - $ 336,586,446 $ 242,855,261 Management fees 7(b) 160,247 - 606,110 - - 344,848 - 448,922 - 307,762 - - 165,819,918 90,406,929 Servicing fees 7(c) - - - - - 268,216 - 349,163 - 239,369 - - 71,634,976 71,435,926 Trustee fees 7(d) 38,459 - 145,466 - - 65,435 - 83,148 - 54,643 - - 32,593,692 23,396,600 Custodian fees 25,512 - 96,496 - - 38,316 - 49,880 - 34,196 - - 14,773,738 10,786,967 Sub-custodian fees - - - - - - - - - - - - 70,041 73,116 Auditor’s remuneration 2,896 - 10,278 - - 2,128 - 2,819 - 2,053 - - 1,092,899 992,388 Legal and professional expenses - - - - - - - - - - - - 122,910 418,837 Annual authority fee - - - - - - - - - - - - - - MPF insurance indemnity premiums - - - - - - - - - - - - - 72,988 Publishing fees 759 - 2,694 - - - - - - - - - 365,682 344,682 Bank charges - - - - - - - - - - 70,778 58,622 87,042 70,717 Fact sheet fees - - - - - - - - - - - - - 147,075 Postage and printing fees 14,201 - 50,204 - - - - - - - - - 11,835,215 7,666,093 Compensation fund levy - - - - - - - - - - - - - - Other expenses 895 - 896 - - 529 - 529 - 529 - - 102,296 19,047

Total operating expenses $ 499,364 $ - $ 1,881,920 $ - $ - $ 1,321,325 $ - $ 1,716,326 $ - $ 1,172,508 $ 70,778 $ 58,622 $ 635,084,855 $ 448,686,626

------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Increase/(decrease) in net assets

attributable to members $ 2,172,026 $ - $ 26,473,234 $ - $ - $ 3,558,748 $ - $ 1,474,748 $ - $ (1,912,571) $ (55,204) $ (46,667) $11,266,903,171 $ 290,853,068

(1) Sun Life MPF Global Equity Fund has been renamed as Sun Life MPF Multi-Sector Equity Fund with effect from 1 March 2018.

(2) Sun Life MPF Age 65 Plus Fund and Sun Life MPF Core Accumulation Fund were launched on 1 April 2017.

(3) Sun Life RCM MPF Capital Stable Fund, Sun Life RCM MPF Stable Growth Fund and Sun Life RCM MPF Balanced Fund ceased having investments and operations starting from 27 May 2016 and were terminated on 2 December 2016.



109

Statement of changes in net assets attributable to members for the year ended 31 December 2017 (Expressed in Hong Kong dollars)



Fund Sun Life MPF Global Bond Fund Sun Life MPF Stable Fund 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 Balance at the beginning of the year $ 398,897,054 $ 402,035,617 $ 1,742,521,825 $ 1,170,801,507 $ 1,762,291,126 $ 1,393,600,045 $17,033,288,275 $15,136,771,619 $ 376,812,322 $ 230,914,178 $ 2,767,337,067 $ 2,011,310,681 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Proceeds on subscriptions of units 3,11 $ 224,796,051 $ 102,133,397 $ 2,830,957,504 $ 1,225,636,611 $ 1,217,653,926 $ 981,757,523 $ 6,002,129,038 $ 3,810,342,515 $ 311,126,439 $ 258,154,055 $ 1,546,865,211 $ 1,121,698,475 Payments on redemptions of units 3,12 (144,591,434) (95,005,991) (1,333,775,520) (654,014,469) (813,028,287) (583,587,022) (4,480,922,179) (2,051,326,570) (176,716,570) (108,949,698) (889,909,974) (368,593,904)

Net subscriptions $ 80,204,617 $ 7,127,406 $ 1,497,181,984 $ 571,622,142 $ 404,625,639 $ 398,170,501 $ 1,521,206,859 $ 1,759,015,945 $ 134,409,869 $ 149,204,357 $ 656,955,237 $ 753,104,571 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Increase/(decrease) in net assets

attributable to members $ 28,261,651 $ (10,265,969) $ 169,305 $ 98,176 $ 43,493,816 $ (29,479,420) $ 7,445,592,540 $ 137,500,711 $ 12,236,393 $ (3,306,213) $ 421,164,086 $ 2,921,815

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

Balance at the end of the year $ 507,363,322 $ 398,897,054 $ 3,239,873,114 $ 1,742,521,825 $ 2,210,410,581 $ 1,762,291,126 $26,000,087,674 $17,033,288,275 $ 523,458,584 $ 376,812,322 $ 3,845,456,390 $ 2,767,337,067



110

Statement of changes in net assets attributable to members for the year ended 31 December 2017 (continued) (Expressed in Hong Kong dollars)



Hong Kong Index Fund 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

Balance at the beginning of the year $ 2,310,852,172 $ 1,656,138,828 $ 3,931,600,436 $ 3,056,635,656 $ 1,233,016,918 $ 1,110,631,357 $ 1,717,128,040 $ 1,260,482,827 $ 1,638,370,432 $ 1,577,297,988 $ 340,201,041 $ 217,357,857 ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- Proceeds on subscriptions of units 3,11 $ 1,172,319,293 $ 870,298,059 $ 1,695,408,397 $ 1,177,506,321 $ 490,111,173 $ 285,824,419 $ 1,381,418,520 $ 977,143,162 $ 540,896,397 $ 371,401,706 $ 487,715,249 $ 236,214,150 Payments on redemptions of units 3,12 (489,829,076) (237,119,404) (771,219,507) (391,314,019) (333,511,936) (187,944,535) (892,781,503) (564,434,979) (482,335,969) (314,939,096) (324,322,785) (120,320,968)

Net subscriptions $ 682,490,217 $ 633,178,655 $ 924,188,890 $ 786,192,302 $ 156,599,237 $ 97,879,884 $ 488,637,017 $ 412,708,183 $ 58,560,428 $ 56,462,610 $ 163,392,464 $ 115,893,182 ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- Increase in net assets attributable

to members $ 500,554,466 $ 21,534,689 $ 1,087,678,359 $ 88,772,478 $ 494,837,627 $ 24,505,677 $ 452,345,943 $ 43,937,030 $ 590,178,674 $ 4,609,834 $ 161,800,255 $ 6,950,002

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

Balance at the end of the year $ 3,493,896,855 $ 2,310,852,172 $ 5,943,467,685 $ 3,931,600,436 $ 1,884,453,782 $ 1,233,016,918 $ 2,658,111,000 $ 1,717,128,040 $ 2,287,109,534 $ 1,638,370,432 $ 665,393,760 $ 340,201,041



111

Statement of changes in net assets attributable to members for the year ended 31 December 2017 (continued) (Expressed in Hong Kong dollars)

Note Sun Life MPF Age 65 Plus

Fund (2) Sun Life MPF Core

Accumulation Fund (2) Sun Life RCM MPF Capital

Stable Fund (3) Sun Life RCM MPF Stable

Growth Fund (3) Sun Life RCM MPF Balanced

Fund (3) Scheme Total 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 Balance at the beginning of the year $ - $ - $ - $ - $ - $ 183,587,291 $ - $ 243,103,268 $ - $ 173,513,145 $ 119,189,663 $ 127,706,988 $35,371,506,371 $29,951,888,852 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Proceeds on subscriptions of units 3,11 $ 225,280,227 $ - $ 685,113,417 $ - $ - $ 31,433,710 $ - $ 37,476,500 $ - $ 20,401,043 $ (7,934,203,437) $ (4,361,325,582) $10,877,587,405 $ 7,146,096,064 Payments on redemptions of units 3,12 (50,078,676) - (105,855,931) - - (218,579,749) - (282,054,516) - (192,001,617) 7,944,578,427 4,352,854,924 (3,344,300,920) (2,017,331,613)

Net subscriptions/(redemptions) $ 175,201,551 $ - $ 579,257,486 $ - $ - $ (187,146,039) $ - $ (244,578,016) $ - $ (171,600,574) $ 10,374,990 $ (8,470,658) $ 7,533,286,485 $ 5,128,764,451 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Increase/(decrease) in net assets

attributable to members $ 2,172,026 $ - $ 26,473,234 $ - $ - $ 3,558,748 $ - $ 1,474,748 $ - $ (1,912,571) $ (55,204) $ (46,667) $11,266,903,171 $ 290,853,068

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

Balance at the end of the year $ 177,373,577 $ - $ 605,730,720 $ - $ - $ - $ - $ - $ - $ - $ 129,509,449 $ 119,189,663 $54,171,696,027 $35,371,506,371



(3) Sun Life RCM MPF Capital Stable Fund, Sun Life RCM MPF Stable Growth Fund and Sun Life RCM MPF Balanced Fund ceased having investments and operations starting from 27 May 2016 and were terminated on 2 December 2016.



112

Cash flow statement for the year ended 31 December 2017 (Expressed in Hong Kong dollars) Note 2017 2016 Cash flows from operating activities Increase in net assets attributable to

members

$11,266,903,171 $ 290,853,068 Adjustments for:

Net increase in investments (16,921,315,925) (4,535,700,438) Net decrease/(increase) in bank deposits

with original maturity over 3 months

183,263,708 (215,356,059) Change in amounts receivable/payable

on sales/purchases of investments

(311,987,045) (35,532,993) Net increase in interest and other

receivables

(4,513,781) (1,711,411) Increase in accruals and other payables 50,939,815 5,428,738

Net cash outflow from operating activities

$ (5,736,710,057) $ (4,492,019,095)

---------------------- ---------------------- Cash flows from financing activities Contributions and transfers in received $10,817,797,403 $ 7,101,786,714 Benefits and transfers out paid 8 (3,057,152,431) (1,760,482,724) Forfeitures paid 8 (229,495,475) (157,899,232)

Net cash inflow from financing activities $ 7,531,149,497 $ 5,183,404,758 ---------------------- ----------------------

Net increase in cash and cash equivalents

$ 1,794,439,440 $ 691,385,663

Cash and cash equivalents

at the beginning of the year

1,378,131,588 686,745,925

Cash and cash equivalents at the end of the year

$ 3,172,571,028 $ 1,378,131,588

Analysis of balance of cash and cash equivalents:

Cash at bank $ 3,844,445,244 $ 2,233,269,512 Less: Bank deposits with original maturity

over 3 months

(671,874,216) (855,137,924)

$ 3,172,571,028 $ 1,378,131,588



113

Notes to the financial statements (Expressed in Hong Kong dollars)

1 The Scheme

Sun Life Rainbow MPF Scheme (the “Scheme”) is a master trust scheme established and governed by a Trust Deed dated 31 January 2000, as amended from time to time. The Scheme is registered under Section 21 of the Hong Kong Mandatory Provident Fund Schemes Ordinance (the “MPF Ordinance”) and is required to comply with the MPF Ordinance and the relevant regulations, guidelines and codes issued by the Hong Kong Mandatory Provident Fund Schemes Authority (the “Authority”).

The Scheme consists of fourteen constituent funds which are presented separately on the face of the statement of assets and liabilities attributable to members, the statement of comprehensive income and the statement of changes in net assets attributable to members.

The constituent funds operating in the current and previous years are:

(1) Sun Life MPF RMB and HKD Fund

(2) Sun Life MPF Conservative Fund

(3) Sun Life MPF Hong Kong Dollar Bond Fund

(4) Sun Life MPF Hong Kong Equity Fund

(5) Sun Life MPF Global Bond Fund

(6) Sun Life MPF Stable Fund

(7) Sun Life MPF Balanced Fund

(8) Sun Life MPF Growth Fund

(9) Sun Life MPF Asian Equity Fund

(10) Sun Life MPF Global Equity Fund (has been renamed as Sun Life MPF Multi-Sector Equity Fund with effect from 1 March 2018)


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1 The Scheme (continued)

(11) Sun Life MPF Greater China Equity Fund

(12) Sun Life FTSE MPF Hong Kong Index Fund

(13) Sun Life MPF Age 65 Plus Fund (launched on 1 April 2017)

(14) Sun Life MPF Core Accumulation Fund (launched on 1 April 2017)

(15) Sun Life RCM MPF Capital Stable Fund (ceased having any investments and operations starting from 27 May 2016; terminated on 2 December 2016)

(16) Sun Life RCM MPF Stable Growth Fund (ceased having any investments and operations starting from 27 May 2016; terminated on 2 December 2016)

(17) Sun Life RCM MPF Balanced Fund (ceased having any investments and operations starting from 27 May 2016; terminated on 2 December 2016)


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1 The Scheme (continued)

The “Scheme” column represents:

(i) the movement between the current year-end and prior year-end for contributions receivable and contributions surcharge receivable. Contributions receivable and contributions surcharge receivable are contributions due, but not yet received from employers and members as at year-end;

(ii) the timing difference between contribution and redemption requests being received by the Scheme and the transactions being processed by the constituent funds;

(iii) expenses charged to, and income received by, the Scheme and not attributable to specific constituent funds; and

(iv) the elimination of the impact of fund switching between constituent funds and fund classes.

As at 31 December 2017, the Sun Life MPF RMB and HKD Fund and the Sun Life MPF Conservative Fund hold investments directly. The Sun Life FTSE MPF Hong Kong Index Fund, the Sun Life MPF Core Accumulation Fund and the Sun Life MPF Age 65 Plus Fund are feeder funds each investing in a corresponding index-tracking collective investment scheme or approved pooled investment fund (as the case may be). The other constituent funds are portfolio management funds that invest into a range of underlying funds. These portfolio management funds are multi-management funds and their assets are invested in multiple underlying funds managed by various investment managers selected by Sun Life Asset Management (HK) Limited (the “Investment Manager”). The underlying funds in which the constituent funds invest shall be referred to as the “Investment Funds”.

All the Investment Funds are set up as pooled investment funds in accordance with Part IV of Schedule 1 of the Mandatory Provident Fund Schemes (General) Regulation (the “Regulation”), and have been approved by the Authority and the SFC as APIFs or as ITCISs approved by the Authority pursuant to the Regulation (“Approved ITCISs”).


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2 Summary of significant accounting policies

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

(a) Statement of compliance

The financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (the “HKFRSs”), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (the “HKASs”) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”), accounting principles generally accepted in Hong Kong, the relevant provisions of the Trust Deed, as amended from time to time, and the relevant disclosure requirements set out in the MPF Ordinance, the Hong Kong Mandatory Provident Fund Schemes (General) Regulation (the “General Regulation”), the Hong Kong Code on MPF Investments Funds (the “MPF Code”) and Guideline II.4 (the “MPF Guideline”) issued by the Hong Kong Mandatory Provident Fund Schemes Authority. A summary of the significant accounting policies adopted by the Scheme is set out below.

The HKICPA has issued certain new and revised HKFRSs that are first effective or available for early adoption for the current accounting period of the Scheme. Note 2(c) provides information on any changes in accounting policies resulting from initial application of these developments to the extent that they are relevant to the Scheme for the current and prior accounting periods reflected in these financial statements.

(b) Basis of preparation

The financial statements are presented in Hong Kong dollars.

The measurement basis used in the preparation of the financial statements is historical cost basis except that financial assets and financial liabilities are stated at their fair value as explained in the accounting policies set out below.

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

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.


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2 Summary of significant accounting policies (continued)

(c) Changes in accounting policies

The HKICPA has issued a number of amendments to HKFRSs that are first effective for the current accounting period of the Scheme. None of these developments have had a material effect on how the Scheme’s results and financial position for the current or prior periods have been prepared or presented.

The Scheme has not applied any new standard or interpretation that is not yet effective for the current accounting period.

(d) Financial assets and financial liabilities

(i) Recognition and initial measurement

Financial assets and financial liabilities at fair value through profit or loss are initially recognised on the trade date, which is the date on which the Scheme becomes a party to the contractual provisions of the instrument. Other financial assets and financial liabilities are recognised on the date on which they are originated.

Financial assets and financial liabilities at fair value through profit or loss are initially recognised at fair value, with transaction costs recognised in profit or loss. Financial assets or financial liabilities not at fair value through profit or loss are initially recognized at fair value plus transaction costs that are directly attributable to their acquisition or issue.

(ii) Classification

The Scheme classifies financial assets and financial liabilities into the following categories.

Financial assets at fair value through profit or loss:

− Designated as at fair value through profit or loss: investments

Financial assets at amortised cost:

− Loans and receivables: cash at bank, amounts receivable on sales of investments, amounts receivable on subscriptions, contributions receivable, interest and other receivable

A financial instrument is classified as held for trading if:

− it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term; or

− on initial recognition, it is part of a portfolio that is managed together and for which there is evidence of a recent pattern of short-term profit taking.


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(d) Financial assets and financial liabilities (continued)

(ii) Classification (continued)

All investments are designed at fair value through profit or loss upon initial recognition as all investments are managed and their performance is evaluated on a fair value basis in accordance with the Scheme’s documented investment strategy, and the information provided internally to the relevant parties of the Scheme is on a fair value basis.

A non-derivative financial asset with fixed or determinable payments may be classified as a loan and receivable unless it is quoted in an active market or is an asset for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration.

(iii) Measurement

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 comprehensive income in the period in which they arise. Investments are derecognised when the rights to receive cash flows from the investments have expired or the Scheme has transferred substantially all risks and rewards of ownership.

(iv) Fair value measurement principles

“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 participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Scheme has access at that date. The fair value of a liability reflects its non-performance risk.

When available, the Scheme measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as ‘active’ if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The Scheme measures financial assets quoted in an active market at a bid price.

If there is no quoted price in an active market, then the Scheme uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

(v) Amortised cost measurement

The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.


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(vi) Impairment

A financial asset not classified at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence of impairment. A financial asset or a group of financial assets is “impaired” if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset(s) and that loss event(s) had an impact on the estimated future cash flows of that asset(s) that can be estimated reliably.

Objective evidence that financial assets are impaired includes significant financial difficulty of the borrower or issuer, default or delinquency by a borrower, restructuring of the amount due on terms that the Scheme would not otherwise consider, indications that a borrower or issuer will enter bankruptcy, or adverse changes in the payment status of the borrowers.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against receivables. Interest on the impaired asset continues to be recognised. If an event occurring after the impairment was recognised causes the amount of impairment loss to decrease, then the decrease in impairment loss is reversed through profit or loss.

(vii) Derecognition

The Scheme derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Scheme neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control of the financial asset.

On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset that is derecognised) and the consideration received (including any new asset obtained less any new liability assumed) is recognised in profit or loss. Any interest in such transferred financial assets that is created or retained by the Scheme is recognised as a separate asset or liability.

The Scheme enters into transactions whereby it transfers assets recognised on its statement of assets and liabilities attributable to members, but retains either all or substantially all of the risks and rewards of the transferred assets or a portion of them. If all or substantially all of the risks and rewards are retained, then the transferred assets are not derecognised. Transfers of assets with retention of all or substantially all of the risks and rewards include sale and repurchase transactions.


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(vii) Derecognition (continued)

The Scheme derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.

The Scheme uses the weighted average method to determine realised gains and losses on derecognition.

(viii) Offsetting

Financial assets and financial liabilities are offset and the net amount presented in the statement of assets and liabilities attributable to members when, and only when, the Scheme has a legal right to offset the amounts and it intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis for gains and losses from financial instruments at fair value through profit or loss and foreign exchange gains and losses.

(e) Income and expenses

Realised and unrealised gains or losses on investments are included in the statement of comprehensive income. Realised gains or losses include net gains or losses on contracts which have been settled or for which offsetting contracts have been entered into.

Interest income on assets other than those designated by the trustee as “financial assets at fair value through profit or loss” at inception is recognised on a time-apportioned basis using the effective interest method.

Expenses are accounted for on an accruals basis.

(f) Translation of foreign currencies

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”). This is the Hong Kong dollar as all contributions and benefit payments, subscriptions and redemptions of units, reporting to the members as well as settlement of fees and expenses are carried out in Hong Kong dollars.

The Scheme and its constituent funds have adopted the Hong Kong dollar as their presentation currency as all members are based in Hong Kong.


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(g) Subscription and redemption of units

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. 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.

(h) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition, net of bank overdrafts, if any, for the purpose of the cash flow statement.

(i) Amounts receivable on sales of investments

Amounts receivable on sales of investments represent receivables for investments sold that have been contracted for but not yet delivered by the end of the year.

Amounts receivable on sales of investments are initially measured at fair value plus incremental direct transaction costs, and subsequently measured at their amortised cost using the effective interest rate.

(j) Contributions

Contributions are accounted for on an accruals basis.

(k) Benefits

Benefits are accounted for on an accruals basis.

(l) Transfer values

Transfer values are accounted for on the effective date of transfer.

(m) 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 applied in reducing the future contributions of the employer, or in such other manner as the trustee may determine, having consulted the employers (including payment to the employers). Forfeitures arising from such cases which have not been designated for the benefit of existing members and which have not been returned to the employers would be treated as liabilities of the Scheme.


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(n) Related parties

(1) A person, or a close member of that person’s family, is related to the Scheme if that person:

(i) has control or joint control over the Scheme;

(ii) has significant influence over the Scheme; or

(iii) is a member of the key management personnel of the Scheme.

(2) An entity is related to the Scheme if any of the following conditions applies:

(i) The entity and the Scheme are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others);

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member);

(iii) Both entities are joint ventures of the same third party;

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity;

(v) The entity is a post-employment benefit plan for the benefit of employees of an entity related to the Scheme;

(vi) The entity is controlled or jointly controlled by a person identified in (1); or

(vii) A person identified in (1)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

(viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the Scheme or to the Scheme’s parent.

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.


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(o) Units in issue

The Scheme classifies financial instruments issued as financial liabilities or equity instruments in accordance with the substance of the contractual terms of the instruments.

A puttable financial instrument that includes a contractual obligation for the Scheme to repurchase or redeem that instrument for cash or another financial asset is classified as equity instruments if it meets all of the following conditions:

− it entitles the holder to a pro rata share of the Scheme’s net assets in the event of its liquidation;

− it is in the class of instruments that is subordinate to all other classes of instruments;

− all financial instruments in the class of instruments that is subordinate to all other classes of instruments have identical features;

− apart from the contractual obligation for the Scheme to repurchase or redeem the instrument for cash or another financial asset, the instrument does not include any other features that would require classification as a liability; and

− the total expected cash flows attributable to the instrument over its life are based substantially on the profit or loss, the change in the recognised net assets or the change in the fair value of the recognised and unrecognised net assets of the Scheme over the life of the instrument.

In addition to the instrument having all the above features, the Scheme must have no other financial instrument or contract that has:

− total cash flows based substantially on the profit or loss, the change in the recognised net assets or change in the fair value of the recognised and unrecognised net assets of the Scheme; and

− the effect of substantially restricting or fixing the residual return to the puttable instrument holders.

The redeemable units are not in the class of instruments that are subordinate to all other classes of instruments which have identical features. Therefore, they do not meet the criteria for equity classification and therefore are classified as financial liabilities. They are measured at the present value of the redemption amounts.


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(p) Segment reporting

An operating segment is a component of the Scheme that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Scheme’s other components, whose operating results are reviewed regularly by the chief operating decision maker (the “CODM”) to make decisions about resources allocated to the segment and assess its performance, and for which discrete financial information is available. Segment results that are reported to the Chief Executive Officer of the trustee acting as the CODM include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

3 Number of units in issue 2017 2016 Class A Class B Class A Class B Sun Life MPF RMB and

HKD Fund Balance at the beginning

of the year 107,257,759.93 298,569,005.51 108,455,043.69 290,319,649.13 Units issued 61,204,821.68 158,204,967.44 32,307,414.66 68,971,820.46 Units redeemed (45,912,961.81) (96,014,209.40) (33,504,698.42) (60,722,464.08)

Balance at the end of the year 122,549,619.80 360,759,763.55 107,257,759.93 298,569,005.51


Balance at the beginning

of the year 417,776,067.41 1,160,320,273.06 311,545,650.11 748,954,892.93 Units issued 642,747,645.00 1,920,898,861.74 302,253,370.47 807,798,120.23 Units redeemed (354,403,949.02) (853,604,093.03) (196,022,953.17) (396,432,740.10)

Balance at the end of the year 706,119,763.39 2,227,615,041.77 417,776,067.41 1,160,320,273.06

Sun Life MPF Hong Kong Dollar Bond Fund



Balance at the end of the year 398,211,788.25 1,174,665,689.20 347,609,530.14 939,056,952.67


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3 Number of units in issue (continued)

2017 2016 Class A Class B Class A Class B Sun Life MPF Hong

Kong Equity Fund Balance at the beginning

of the year 863,749,288.66 2,820,168,450.55 792,317,935.55 2,502,819,358.53 Units issued 240,737,858.79 805,992,115.58 238,218,880.27 602,515,746.43 Units redeemed (234,502,972.84) (546,891,246.31) (166,787,527.16) (285,166,654.41)






Sun Life MPF Stable Fund


of the year 403,504,835.80 1,074,255,844.98 314,934,429.34 771,171,734.06 Units issued 183,987,539.18 574,873,592.02 175,680,148.87 408,816,593.68 Units redeemed (155,626,811.23) (284,372,424.63) (87,109,742.41) (105,732,482.76)





Balance at the end of the year 356,654,045.34 1,035,052,409.69 308,889,819.86 793,804,816.85


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2017 2016 Class A Class B Class A Class B Sun Life MPF Growth

Fund Balance at the beginning



Sun Life MPF Asian

Equity Fund Balance at the beginning



Sun Life MPF Global Equity Fund (Note 1)






of the year 482,600,913.91 1,139,203,493.13 482,260,483.30 1,080,825,894.48 Units issued 132,874,134.41 312,357,174.52 134,833,900.90 241,968,220.62 Units redeemed (142,474,771.09) (258,885,637.18) (134,493,470.29) (183,590,621.97)



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2017 2016 Class A Class B Class A Class B Sun Life FTSE MPF Hong

Kong Index Fund Balance at the beginning



Sun Life MPF Age 65 Plus Fund (Note 2)

Number of units Number of units Balance at the beginning

of the year - N/A Units issued 222,534,007.85 N/A Units redeemed (49,370,521.66) N/A

Balance at the end of the year 173,163,486.19 N/A

Sun Life MPF Core Accumulation Fund (Note 2)


of the year - N/A Units issued 663,121,632.28 N/A Units redeemed (101,638,043.31) N/A

Balance at the end of the year 561,483,588.97 N/A


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2017 2016 Class A Class B Class A Class B Sun Life RCM MPF Capital

Stable Fund (Note 3) Balance at the beginning

of the year N/A N/A 63,102,344.23 111,980,735.90 Units issued N/A N/A 12,990,037.07 16,977,592.01 Units redeemed N/A N/A (76,092,381.30) (128,958,327.91)

Balance at the end of the year N/A N/A - -

Sun Life RCM MPF Stable Growth Fund (Note 3)




Sun Life RCM MPF Balanced Fund (Note 3)






Note 3: Sun Life RCM MPF Capital Stable Fund, Sun Life RCM MPF Stable Growth Fund and Sun Life RCM MPF Balanced Fund ceased having investments and operations starting from 27 May 2016 and were terminated on 2 December 2016.


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4 Financial risk management

The Scheme and its constituent funds are exposed to various risks which are discussed below.

(a) Market risk

The Scheme’s investment objective is to provide members with reasonable investment return or capital appreciation from their investment in accordance to the investment policies as set out in the investment report. The holding of securities and investing activities undertaken pursuant to this objective involves certain inherent risks. Below is a description of the principal risks inherent in the Scheme’s activities along with the actions it has taken to manage these risks.

As at 31 December 2017, the Scheme’s financial instruments mainly included investments in debt securities (only held by the Sun Life MPF RMB and HKD Fund and Sun Life MPF Conservative Fund) and sub-funds of umbrella unit trusts (the “Sub-Funds”) which in turn invested in instruments including equity and debt securities. These are held in accordance with the Scheme’s investment objectives and policies.

The Sun Life MPF RMB and HKD Fund, the Sun Life MPF Conservative Fund and the Sub-Funds buy, sell or hold financial assets and liabilities in order to take advantage of changes in market prices or rates.

The risks arising from the Scheme’s operations are market risk comprising equity price risk, foreign currency risk, interest rate risk and also credit risk and liquidity risk. The Trustee reviews the policies for managing each of these risks and they are summarised below. These policies have remained substantially unchanged since the beginning of the year to which these financial statements relate. The Trustee actively monitors market and economic data in their ongoing consideration of risk on a regular basis. A summary of the Scheme’s investment policies is set out in the investment report.

(b) Price risk

Price risk is the risk that value of investments will fluctuate as a result of changes in market prices (other than those arising from interest rate risk or currency risk), whether caused by factors specific to an individual investment, its issuer or all factors affecting all instruments traded in the market.

The Scheme is exposed to other price risk arising from changes in net assets of the underlying sub-funds.

The Sub-Funds strive to invest in strong businesses with quality management and at sensible prices. Price risk is mitigated and monitored by the Investment Manager of the Sub-funds on a regular basis by constructing a diversified portfolio of investments across difference issuers, sectors and markets.


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4 Financial risk management (continued)

(b) Price risk (continued)

Sensitivity analysis

As at the reporting date, the investments in sub-funds held by each Constituent Fund were as follows. A 5% (2016: 5%) increase in prices of the investments held by each Constituent Fund at the reporting date, with all other variables held constant, would have increased the net assets of the respective Constituent Fund and the changes in net assets attributable to members by the amount shown below. A 5% (2016: 5%) decrease in prices would have an equal but opposite effect. The analysis is performed on the same basis for 2016. As at 31 December 2017

Sun Life MPF

RMB and HKD Fund Sun Life MPF

Conserative Fund Sun Life MPF Hong Kong

Dollar Bond Fund Sun Life MPF

Hong Kong Equity Fund Sun Life MPF

Global Bond Fund Sun Life MPF Stable Fund


Investments $ 117,959,380 $ 436,914,829 $ 2,180,127,873 $ 25,747,069,840 $ 475,714,585 $ 3,621,247,554 $ 3,465,203,931 Increase in net assets and changes in net assets

attributable to members 5,897,969 21,845,741 109,006,394 1,287,353,492 23,785,729 181,062,378 173,260,197 Percentage change in net assets 1.16% 0.67% 4.93% 4.95% 4.54% 4.71% 4.96%

As at 31 December 2017



Sun Life MPF Global Equity Fund (1)



Sun Life MPF Age 65 Plus Fund (2)

Sun Life MPF Core Accumulation Fund (2)

Investments $ 5,897,800,571 $ 1,865,175,719 $ 2,599,193,867 $ 2,257,183,096 $ 657,431,007 $ 172,256,076 $ 600,659,407 Increase in net assets and changes in net assets

attributable to members 294,890,029 93,258,786 129,959,693 112,859,155 32,871,550 8,612,804 30,032,970 Percentage change in net assets 4.96% 4.95% 4.89% 4.93% 4.94% 4.86% 4.96%


Sun Life MPF

RMB and HKD Fund Sun Life MPF

Conserative Fund Sun Life MPF Hong Kong

Dollar Bond Fund Sun Life MPF

Hong Kong Equity Fund Sun Life MPF

Global Bond Fund Sun Life MPF Stable Fund


Investments $ 117,193,836 $ 100,710,231 $ 1,738,117,948 $ 16,977,047,781 $ 373,101,374 $ 2,758,876,855 $ 2,305,865,535 Increase in net assets and changes in net assets

attributable to members 5,859,692 5,035,512 86,905,897 848,852,389 18,655,069 137,943,843 115,293,277 Percentage change in net assets 1.47% 0.29% 4.93% 4.98% 4.95% 4.98% 4.99%




Sun Life MPF Global Equity Fund (1)

Sun Life MPFGreater China Equity Fund


Sun Life MPF Age 65 Plus Fund (2)

Sun Life MPF Core Accumulation Fund (2)

Investments $ 3,921,915,639 $ 1,228,445,218 $ 1,686,025,138 $ 1,631,191,672 $ 334,130,583 $ N/A $ N/A Increase in net assets and changes in net assets

attributable to members 196,095,782 61,422,261 84,301,257 81,559,584 16,706,529 N/A N/A Percentage change in net assets 4.99% 4.98% 4.91% 4.98% 4.91% N/A N/A




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(c) Currency risk

Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The functional currency of all constituent funds is the Hong Kong dollars (“HKD”). As at 31 December 2017 and 2016, the Sun Life MPF Conservative Fund neither directly nor indirectly held any assets in currencies other than HKD. As a result, there was no currency risk exposure for this constituent fund.

As at 31 December 2017 and 2016, the Sun Life MPF RMB and HKD Fund directly held assets in currencies other than the HKD. For all other constituent funds, the underlying sub-funds may directly or indirectly invest in a variety of financial instruments denominated in currencies other than Hong Kong dollar, which may expose the Scheme’s investments to indirect currency risk. The investment manager of the underlying sub-funds has policies and procedures to manage portfolios effectively and mitigate the currency risk. Details are provided in the financial statements of the underlying sub-funds.

The following table summarises the foreign currency positions of the Sun Life MPF RMB and HKD Fund via its investment holdings as at 31 December 2017 and 2016 and shows the estimated percentage changes in values of the positions assuming 15% (2016: 15%) change in the underlying exchange rates occur immediately and uniformly across all currencies. The changes in value do not necessarily reflect the best or worst case scenarios and actual results may differ, but the reasonable possible change of the foreign currency position. Since the HKD is pegged to the United States dollars (“USD”), it is not considered to have significant currency risk and is not reported in the table below:

(All amounts stated in HKD equivalent) 2017 2016 Sun Life MPF RMB and HKD Fund − Non HKD/USD currency position $ 314,079,993 $ 259,386,866

− Estimated possible change in exchange rate 15% 15%

− Estimated change in NAV $ 47,111,999 $ 38,908,030


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(d) Interest rate risk

The Scheme held the Sub-Funds or debt securities as investments at 31 December 2017. The carrying values of the investments as disclosed in the statement of assets and liabilities were subject to direct or indirect interest rate risks for the holdings in debt instruments.

The strategy of the Sun Life MPF RMB and HKD Fund, the Sun Life MPF Conservative Fund or the Sub-Funds is to acquire fixed income securities that are attractively priced in relation to the perceived credit risk. The Investment Managers recognise and accept that losses may occur. The Sub-Funds may utilise derivative products to manage interest rate risks on a limited basis.

The fair values of the fixed income investments of the Sun Life MPF RMB and HKD Fund, the Sun Life MPF Conservative Fund or the Sub-Funds fluctuate in response to changes in market interest rates. Increases and decreases in prevailing interest rates generally translate into decreases and increases in fair values of those instruments. Additionally fair value of interest rate sensitive instruments may be affected by the creditworthiness of the issuer, prepayment options, relative values of alternative investments, the liquidity of the instrument and other general market conditions. Fixed interest rate investments may be more sensitive to interest rate changes than variable rate investments.

Interest rate risk is mitigated by the Investment Managers by constructing a diversified portfolio of fixed income securities with differing modified duration and term to maturity characteristics, which acts to reduce the overall exposure of the Sun Life MPF RMB and HKD Fund, the Sun Life MPF Conservative Fund or the Sub-Funds to interest rate risk and makes decisions accordingly about the composition of the portfolio of fixed income securities of the Sun Life MPF RMB and HKD Fund, the Sun Life MPF Conservative Fund or the Sub-Funds in order to ensure the interest rate risk in the portfolio is maintained at an appropriate level.


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(d) Interest rate risk (continued)

As at 31 December 2017 and 2016, the interest rate exposures of the Sun Life MPF RMB and HKD Fund and the Sun Life MPF Conservative Fund were as follows:

Sun Life MPF RMB and HKD Fund 2017 2016

Up to 1 year Non-interest

bearing Total Up to 1 year Non-interest

bearing Total Assets Investments $ 117,959,380 $ - $ 117,959,380 $ 117,193,836 $ - $ 117,193,836 Cash at bank 388,288,134 - 388,288,134 287,215,693 - 287,215,693 Amounts receivable

on subscriptions - 2,369,881 2,369,881 - 170,692 170,692 Other assets - 1,297,780 1,297,780 - 840,434 840,434

Total assets $ 506,247,514 $ 3,667,661 $ 509,915,175 $ 404,409,529 $ 1,011,126 $ 405,420,655

Liabilities Liabilities (excluding

net assets attributable to the members) $ - $ 2,551,853 $ 2,551,853 $ - $ 6,523,601 $ 6,523,601

Total interest

sensitivity gap $ 506,247,514 $ 404,409,529

Sun Life MPF Conservative Fund 2017 2016

Up to 1 year Non-interest

bearing Total Up to 1 year Non-interest

bearing Total Assets Investments $ 436,914,829 $ - $ 436,914,829 $ 100,710,231 $ - $ 100,710,231 Cash at bank 2,803,087,416 - 2,803,087,416 1,639,603,214 - 1,639,603,214 Amounts receivable

on subscriptions - 29,465,011 29,465,011 - 14,874,102 14,874,102 Other assets - 4,999,431 4,999,431 - 2,570,894 2,570,894 Total assets $3,240,002,245 $ 34,464,442 $3,274,466,687 $1,740,313,445 $ 17,444,996 $1,757,758,441 Liabilities

Liabilities (excluding

net assets attributable to the members) $ - $ 34,593,573 $ 34,593,573 $ - $ 15,236,616 $ 15,236,616

Total interest

sensitivity gap $3,240,002,245 $1,740,313,445


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(d) Interest rate risk (continued)

The Scheme is exposed to interest rate risk via its holding of fixed income securities or the Sub-Funds. The following table summarises the estimated effects of hypothetical 100 basis points (“bps”) change in interest rates on NAV of the fixed income securities or the Sub-Funds of the Scheme that are subject to interest rate risk. It is assumed that the changes occur immediately and uniformly to each relevant category of instruments. The hypothetical changes in market interest rates do not reflect what could be deemed best or worst case scenarios but considered to be a reasonable possible change in market interest rate. Variations in market interest rates could produce significant changes in the timing of repayments due to prepayment options available. For these reasons, actual results might differ from those reflected in the table.

Assuming a 100 bps (2016: 100bps) decrease in market interest rate, the estimated percentage increase in NAV of the Sub-Funds and the constituent funds are as follows:

The Sub-Funds:

As at 31 December 2017 % increase

in NAV First State MPF Asia Region Bond Fund 5.67% First State MPF Global Bond Fund 7.88% First State MPF Hong Kong Bond Fund 4.55% Invesco Pooled Investment Fund - HK$ Bond Fund Class B 4.14% Invesco Pooled Investment Fund - International Bond Fund Class B 5.66% Templeton MPF Global Bond Fund Class A 1.22% Principal Life Style Fund - Principal Hong Kong Bond Fund 2.49% Schroder MPF Core 20/80 Fund 5.65% Schroder MPF Core 60/40 Fund 2.74%

As at 31 December 2016 % increase

in NAV First State MPF Asia Region Bond Fund 5.08% First State MPF Global Bond Fund 7.36% First State MPF Hong Kong Bond Fund 4.49% Invesco Pooled Investment Fund - HK$ Bond Fund Class B 4.32% Invesco Pooled Investment Fund - International Bond Fund Class B 5.73% Templeton MPF Global Bond Fund Class A 1.39%


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(d) Interest rate risk (continued) 2017 2016 The constituent funds: Sun Life MPF RMB and HKD Fund 0.08% 0.11% Sun Life MPF Conservative Fund 0.05% 0.05% Sun Life MPF Hong Kong Dollar Bond Fund 4.19% 4.39% Sun Life MPF Global Bond Fund 2.94% 5.38% Sun Life MPF Stable Fund 3.05% 3.55% Sun Life MPF Balanced Fund 1.72% 2.08% Sun Life MPF Growth Fund 0.73% 0.93% Sun Life MPF Age 65 Plus Fund (Note) 5.48% - Sun Life MPF Core Accumulation Fund (Note) 2.72% -

The same percentage increase in market interest rate would have an equal but opposite effect.

Sun Life MPF Hong Kong Equity Fund, Sun Life MPF Asian Equity Fund, Sun Life MPF Global Equity Fund, Sun Life MPF Greater China Equity Fund and Sun Life FTSE MPF Hong Kong Index Fund invested in Sub-Funds which invested primarily in equity financial instruments. Thus, they were not exposed to significant interest rate risk and were not included in the table above.

Note: Sun Life MPF Age 65 Plus Fund and Sun Life MPF Core Accumulation Fund were launched on 1 April 2017.


136


(e) Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation to pay dues in time. The Scheme invests mainly in debt securities and Sub-Funds of umbrella unit trusts. The Sub-Funds invest in debt instruments which are in turn exposed to credit risks. The investment managers of the umbrella unit trusts have credit review processes in place. This ensures review and monitoring of credit quality and credit risk exposure on an ongoing basis, which helps protect portfolios from anticipated negative credit events. The credit risks arising from these Sub-Funds are mitigated through diversification and control on exposure to any single issuer in the portfolio. There are internal control limits that ensure that exposures are orderly and not concentrated.

As at 31 December 2017 and 2016, the Sun Life MPF RMB and HKD Fund and the Sun Life MPF Conservative Fund invested in debt securities and held bank deposits with the following credit quality:


As at 31 December

2017

As at 31 December

2016 Bonds: − AA-(1) or Aa3(2) $ - $ - − A+(1) or A1(2) 17,867,683 4,451,949 − A(1) or A2(2) 17,938,092 14,319,750 − A-(1) or A3(2) - 16,567,721 − BBB(1) or Baa2(2) - 20,311,225 Certificate of deposits: − issued by authorised financial institutions

in Hong Kong 82,153,605 61,543,191

$ 117,959,380 $ 117,193,836 Bank deposits with: − authorised financial institutions in Hong Kong 370,091,943 276,606,967 − overseas bank: RBC Investor Services Bank 18,196,191 10,608,726

$ 506,247,514 $ 404,409,529


137


(e) Credit risk (continued)


As at 31 December

2017

As at 31 December

2016 Certificate of deposits: − issued by authorised financial institutions

in Hong Kong $ 436,914,829 $ 100,710,231

$ 436,914,829 $ 100,710,231 Bank deposits with: − authorised financial institutions in Hong Kong 2,749,942,832 1,610,828,549 − overseas bank: RBC Investor Services Bank 53,144,584 28,774,665

$ 3,240,002,245 $ 1,740,313,445

(1) Determined by Standard and Poor’s Ratings Services

(2) Determined by Moody’s Investors Service

The Sun Life MPF RMB and HKD Fund and the Sun Life MPF Conservative Fund’s financial assets exposed to credit risks were concentrated in the following industries:


As at 31 December

2017

As at 31 December

2016 Banking and finance $ 100,091,697 $ 81,854,416 Industrial - 30,887,471 Government 17,867,683 - Transportation - 4,451,949

$ 117,959,380 $ 117,193,836


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(e) Credit risk (continued)

Sun Life MPF Conservative Fund 2017 2016 Banking and finance $ 436,914,829 $ 100,710,231

$ 436,914,829 $ 100,710,231

The Scheme’s assets are safeguarded and administered by the Custodian. The Sponsor analyses the credit risk of the Scheme’s custodian regularly. The Scheme only has deposits with approved banks with credit ratings of Baa2 (Moody’s) or BBB (Standard & Poor’s), or with higher credit ratings. The corporate credit quality grade of the Custodian is Aa3 (Moody’s).

(f) Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.

The Scheme is exposed to liquidity risk of benefit payments. It therefore invests the majority of its assets in underlying investments that are traded in an active market and can be readily disposed of.

The Scheme’s objective with regard to liquidity is to ensure continuity of funding. The assets of the Sun Life MPF RMB and HKD Fund, the Sun Life MPF Conservative Fund and the Sub-Funds comprise mainly of readily realisable securities which can be sold freely to meet funding commitments if necessary. Liquidity positions are monitored on a regular basis and action taken as necessary to maintain an adequate level of liquidity to meet all known funding requirements.

Apart from liquidity risk related to benefit payments, the Scheme does not consider that there is any other significant liquidity risk.

(g) Fair value information

As at 31 December 2017, the only financial investments of the Scheme carried at fair value were investments.

The major method and assumptions used in estimating the fair values are stated in note 2(d)(iv) to the financial statements.

The carrying amounts of the Scheme’s financial instruments carried at cost or amortised cost are not materially different from their fair values as at 31 December 2017 and 2016.


139

5 Net gain/(loss) on investments 2017 2016 Sun Life MPF RMB and HKD Fund Change in unrealised gain or loss in value of

investments $ 3,471,371 $ 1,340,138 Realised gain/(loss) on sale of investments 3,334,351 (921,603)

$ 6,805,722 $ 418,535

Sun Life MPF Conservative Fund Change in unrealised gain or loss in value of

investments $ 1,050,262 $ (1,453,182) Realised gain on sale of investments 2,305,729 3,086,616

$ 3,355,991 $ 1,633,434

Sun Life MPF Hong Kong Dollar Bond Fund Change in unrealised gain or loss in value of


$ 71,601,743 $ (7,189,847)

Sun Life MPF Hong Kong Equity Fund Change in unrealised gain or loss in value of

investments $ 6,085,242,382 $ (242,209,858) Realised gain on sale of investments 1,670,134,248 597,491,608

$ 7,755,376,630 $ 355,281,750

Sun Life MPF Global Bond Fund Change in unrealised gain or loss in value of

investments $ 17,014,835 $ (6,413,786) Realised gain on sale of investments 397,862 7,352,518

$ 17,412,697 $ 938,732


140

5 Net gain/(loss) on investments (continued) 2017 2016 Sun Life MPF Stable Fund Change in unrealised gain or loss in value of


$ 462,749,853 $ 35,877,198

Sun Life MPF Balanced Fund Change in unrealised gain or loss in value of


$ 538,961,538 $ 49,233,557

Sun Life MPF Growth Fund Change in unrealised gain or loss in value of


$ 1,156,327,342 $ 136,952,959

Sun Life MPF Asian Equity Fund Change in unrealised gain or loss in value of

investments $ 453,272,555 $ 18,543,557 Realised gain on sale of investments 68,595,418 26,012,849

$ 521,867,973 $ 44,556,406

Sun Life MPF Global Equity Fund (Note 1) Change in unrealised gain or loss in value of

investments $ 330,038,279 $ 70,155,016 Realised gain/(loss) on sale of investments 160,454,462 (1,659,493)

$ 490,492,741 $ 68,495,523

Sun Life MPF Greater China Equity Fund Change in unrealised gain or loss in value of

investments $ 492,696,112 $ 26,090,280 Realised gain on sale of investments 132,211,142 5,961,129

$ 624,907,254 $ 32,051,409


141

5 Net gain/(loss) on investments (continued) 2017 2016 Sun Life FTSE MPF Hong Kong Index Fund Change in unrealised gain or loss in value of

investments $ 122,367,155 $ 14,730,939 Realised gain/(loss) on sale of investments 43,259,291 (5,776,893)

$ 165,626,446 $ 8,954,046

Sun Life MPF Age 65 Plus Fund (Note 2) Change in unrealised gain or loss in value of

investments $ 2,267,584 $ - Realised gain on sale of investments 403,717 -

$ 2,671,301 $ -

Sun Life MPF Core Accumulation Fund (Note 2)

Change in unrealised gain or loss in value of

investments $ 26,014,080 $ - Realised gain on sale of investments 2,341,074 -

$ 28,355,154 $ -

Sun Life RCM MPF Capital Stable Fund (Note 3)


investments $ - $ (1,724,706) Realised gain on sale of investments - 6,592,541

$ - $ 4,867,835


142

5 Net gain/(loss) on investments (continued) 2017 2016 Sun Life MPF Stable Growth Fund

(Note 3) Change in unrealised gain or loss in value of


$ - $ 3,180,089

Sun Life RCM MPF Balanced Fund (Note 3)



$ - $ (754,080)


Note2: Sun Life MPF Age 65 Plus Fund and Sun Life MPF Core Accumulation Fund were launched on 1 April 2017.

Note 3: Sun Life RCM MPF Capital Stable Fund, Sun Life RCM MPF Stable Growth Fund and Sun Life RCM MPF Balanced Fund ceased having investments and operations starting from 27 May 2016 and were terminated on 2 December 2016.


143

6 Involvement with unconsolidated structured entities

The Scheme has concluded that the Approved Pooled Investment Funds (“APIFs”) and an approved ITCIS in which its constituent funds (except Sun Life MPF RMB and HKD Fund and Sun Life MPF Conservative Fund) invest, but that they do not consolidate, meet the definition of structured entities because:

− the voting rights in the APIFs and the ITCIS are not dominant rights in deciding who controls them because they relate to administrative tasks only;

− each APIF’s and the ITCIS’s activities are restricted by its prospectus; and

− the APIFs and the ITCIS have narrow and well-defined objectives to provide investment opportunities to investors.

The table below describes the types of structured entities that the constituent funds do not consolidate but in which they hold an interest.

Type of structured entity Nature and purpose Interest held by the

constituent funds Approved pooled investment

funds and an approved index-tracking collective investment scheme

To manage assets on behalf of third party investors and generate fees for the investment managers. Financed through the issue of units to investors.

Investment in units issued by the funds.

The table below sets out interest held by the constituent funds in unconsolidated structured entities. The maximum exposure to loss is the carrying amount of the financial assets held.

31 December 2017

Investment in investment funds

Number of

investee funds Total net assets

Carrying amount included

in financial assets at fair

value through profit or loss

Sun Life MPF Hong Kong Dollar Bond Fund − Approved pooled investment funds 3 $12,539,522,263 $ 2,180,127,873

Sun Life MPF Hong Kong Equity Fund − Approved pooled investment funds 5 $46,343,810,823 $25,747,069,840

Sun Life MPF Global Bond Fund − Approved pooled investment funds 6 $16,101,915,190 $ 475,714,585


144

6 Involvement with unconsolidated structured entities (continued)

31 December 2017 (continued)


Number of





Sun Life MPF Stable Fund − Approved pooled investment funds 10 $51,190,305,377 $ 3,621,247,554

Sun Life MPF Balanced Fund − Approved pooled investment funds 10 $51,190,305,377 $ 3,465,203,931

Sun Life MPF Growth Fund − Approved pooled investment funds 10 $51,190,305,377 $ 5,897,800,571

Sun Life MPF Asian Equity Fund − Approved pooled investment funds 3 $25,492,033,525 $ 1,865,175,719

Sun Life MPF Global Equity Fund (Note 1) − Approved pooled investment funds 2 $16,069,964,725 $ 2,599,193,867

Sun Life MPF Greater China Equity Fund − Approved pooled investment funds 2 $18,150,801,231 $ 2,257,183,096

Sun Life FTSE MPF Hong Kong Index Fund − Approved index-tracking collective investment

scheme 1 $ 1,323,550,000 $ 657,431,007

Sun Life MPF Age 65 Plus Fund (Note 2) − Approved pooled investment fund 1 $ 210,620,560 $ 172,256,076

Sun Life MPF Core Accumulation Fund (Note 2) − Approved pooled investment fund 1 $ 753,290,303 $ 600,659,407

Note:1 Sun Life MPF Global Equity Fund has been renamed as Sun Life MPF Multi-Sector Equity Fund with effect from 1 March 2018.



145


31 December 2016


Number of





Sun Life MPF Hong Kong Dollar Bond Fund − Approved pooled investment funds 2 $ 3,570,071,921 $ 1,738,117,948

Sun Life MPF Hong Kong Equity Fund − Approved pooled investment funds 3 $31,660,281,734 $16,977,047,781

Sun Life MPF Global Bond Fund − Approved pooled investment funds 4 $ 9,128,863,640 $ 373,101,374

Sun Life MPF Stable Fund − Approved pooled investment funds 9 $38,083,887,998 $ 2,758,876,855

Sun Life MPF Balanced Fund − Approved pooled investment funds 10 $42,846,649,371 $ 2,305,865,535

Sun Life MPF Growth Fund − Approved pooled investment funds 10 $39,321,881,636 $ 3,921,915,639

Sun Life MPF Asian Equity Fund − Approved pooled investment funds 3 $16,259,314,685 $ 1,228,445,218

Sun Life MPF Global Equity Fund − Approved pooled investment funds 2 $ 9,758,703,580 $ 1,686,025,138

Sun Life MPF Greater China Equity Fund − Approved pooled investment funds 2 $12,870,312,919 $ 1,631,191,672

Sun Life FTSE MPF Hong Kong Index Fund − Approved index-tracking collective investment

scheme 1 $ 821,591,858 $ 334,130,583

Sun Life RCM MPF Capital Stable Fund (Note) − Approved pooled investment fund - $ - $ -

Sun Life RCM MPF Stable Growth Fund (Note) − Approved pooled investment fund - $ - $ -

Sun Life RCM MPF Balanced Fund (Note) − Approved pooled investment fund - $ - $ -

Note: Sun Life RCM MPF Capital Stable Fund, Sun Life RCM MPF Stable Growth Fund and Sun Life RCM MPF Balanced Fund ceased having any investments and operations starting from 27 May 2016 and were terminated on 2 December 2016.


146


During the year, the constituent funds did not provide financial support to the APIFs and the ITCIS and has no intention of providing financial or other support.

The constituent funds can redeem units in the APIFs and the ITCIS on a daily basis.

7 Transactions with associates

The following is a summary of transactions with related parties during the year. All such transactions were entered into in the ordinary course of business and on normal commercial terms.

Except as otherwise disclosed in the financial statements and in this note, the Scheme and its constituent funds did not have any material transactions with the Trustee, the Investment Manager or their associates or delegates during the year.

(a) Administration fees

The Administrator, BestServe Financial Limited, is entitled to receive an administration fee based on the NAV of the constituent funds.

The administration fee is charged per annum as follows: Class A Class B Unit class Sun Life MPF RMB and HKD Fund 0.7% 0.7% N/A Sun Life MPF Conservative Fund 0.54% 0.54% N/A Sun Life FTSE MPF Hong Kong

Index Fund 0.6% 0.6% N/A Sun Life MPF Age 65 Plus Fund N/A N/A 0.4% Sun Life MPF Core Accumulation

Fund N/A N/A 0.4% All other constituent funds 0.85% 0.75% N/A

The administration fees are calculated and accrued on each valuation day and paid monthly in arrears. The fees earned during the year are disclosed in the statement of comprehensive income.


147

7 Transactions with associates (continued)

(a) Administration fees (continued)

The administration fees payable as at 31 December were as follows: 2017 2016 Sun Life MPF RMB and HKD Fund $ 306,488 $ 245,540

Sun Life MPF Conservative Fund $ 1,463,670 $ 518,075

Sun Life MPF Hong Kong Dollar Bond Fund $ 1,490,787 $ 1,194,297

Sun Life MPF Hong Kong Equity Fund $ 17,188,921 $ 11,560,836

Sun Life MPF Global Bond Fund $ 349,108 $ 253,271

Sun Life MPF Stable Fund $ 2,559,211 $ 1,854,643

Sun Life MPF Balanced Fund $ 2,327,073 $ 1,560,272

Sun Life MPF Growth Fund $ 3,957,977 $ 2,647,479

Sun Life MPF Asian Equity Fund $ 1,250,445 $ 837,327

Sun Life MPF Global Equity Fund (Note 1) $ 1,769,580 $ 1,147,623

Sun Life MPF Greater China Equity Fund $ 1,519,756 $ 1,120,292

Sun Life FTSE MPF Hong Kong Index Fund $ 338,685 $ 172,611


148


(a) Administration fees (continued) 2017 2016 Sun Life MPF Age 65 Plus Fund (Note 2) $ 57,843 $ -

Sun Life MPF Core Accumulation Fund (Note 2) $ 201,739 $ -



(b) Management fees

The Investment Manager, Sun Life Asset Management (HK) Limited is entitled to receive management fees as a percentage of the NAV of the constituent funds.

The fees incurred during the year are disclosed in the statement of comprehensive income.

Sun Life Asset Management (HK) Limited is entitled to receive management fees per annum as follows:

NAV of the constituent funds: Class A Class B Unit class Sun Life MPF RMB and HKD Fund 0.40% 0.40% N/A Sun Life MPF Conservative Fund 0.30% 0.30% N/A Sun Life MPF Asian Equity Fund 0.695% 0.695% N/A Sun Life MPF Global Equity Fund 0.745% 0.745% N/A Sun Life MPF Greater China Equity

Fund 0.745% 0.745% N/A Sun Life FTSE MPF Hong Kong

Index Fund 0.27% 0.27% N/A Sun Life MPF Age 65 Plus Fund N/A N/A 0.25% Sun Life MPF Core Accumulation

Fund N/A N/A 0.25% All other constituent funds 0.55% 0.55% N/A


149


(b) Management fees (continued)

The management fees paid to Sun Life Asset Management (HK) Limited are calculated and accrued on each valuation day and paid monthly in arrears.

The management fees payables as at 31 December were as follows: 2017 2016 Sun Life MPF RMB and HKD Fund $ 175,226 $ 140,254

Sun Life MPF Conservative Fund $ 877,799 $ 95,940

Sun Life MPF Hong Kong Dollar Bond Fund $ 665,502 $ 479,703



Sun Life MPF Stable Fund $ 1,010,836 $ 693,573

Sun Life MPF Balanced Fund $ 1,006,979 $ 633,415

Sun Life MPF Growth Fund $ 1,781,027 $ 1,129,266

Sun Life MPF Asian Equity Fund $ 991,968 $ 664,861

Sun Life MPF Global Equity Fund (Note 1) $ 1,467,677 $ 932,718

Sun Life MPF Greater China Equity Fund $ 1,300,435 $ 930,206


150


(b) Management fees (continued) 2017 2016 Sun Life FTSE MPF Hong Kong Index Fund $ 13,848 $ 7,112

Sun Life MPF Age 65 Plus Fund (Note 2) $ 36,152 $ -




(c) Servicing fees

The Sponsor, Sun Life Hong Kong Limited, is entitled to receive a servicing fee from the constituent funds other than the Sun Life MPF RMB and HKD Fund, Sun Life MPF Conservative Fund, Sun Life MPF Age 65 Plus Fund and Sun Life MPF Core Accumulation Fund as follows: Class A Class B Sun Life FTSE MPF Hong Kong Index Fund 0.02% per annum 0.02% per annum All other constituent funds 0.175% per annum 0.175% per annum

The servicing fees are calculated and accrued on each valuation day and paid monthly in arrears. Servicing fees paid and payable for the year are disclosed in the statement of comprehensive income.


151


(c) Servicing fees (continued)

The servicing fees payables as at 31 December were as follows: 2017 2016 Sun Life MPF Hong Kong Dollar Bond Fund $ 336,656 $ 268,938



Sun Life MPF Stable Fund $ 579,379 $ 417,622

Sun Life MPF Balanced Fund $ 525,885 $ 351,059

Sun Life MPF Growth Fund $ 895,641 $ 596,795

Sun Life MPF Asian Equity Fund $ 282,394 $ 188,593

Sun Life MPF Global Equity Fund (Note) $ 400,870 $ 258,830

Sun Life MPF Greater China Equity Fund $ 342,201 $ 251,101


Note: Sun Life MPF Global Equity Fund has been renamed as Sun Life MPF Multi-Sector Equity Fund with effect from 1 March 2018.


152


(d) Trustee fees

The Trustee, Sun Life Trustee Company Limited, is entitled to receive a trustee fee of 0.15% and 0.05% per annum of the NAV of the Class A and Class B units of all the constituent funds respectively other than the Sun Life MPF RMB and HKD Fund, the Sun Life MPF Conservative Fund, Sun Life FTSE MPF Hong Kong Index Fund, Sun Life MPF Age 65 Plus Fund and Sun Life MPF Core Accumulation Fund.

The trustee fee of the Sun Life MPF RMB and HKD Fund is 0.10% and 0.05% per annum of the NAV of the Class A and Class B units.

The trustee fee of the Sun Life MPF Conservative Fund and Sun Life FTSE MPF Hong Kong Index Fund is 0.05% per annum of the NAV of both of the Class A and Class B units.

The trustee fee of Sun Life MPF Core Accumulation Fund and Sun Life MPF Age 65 Plus Fund is 0.06% per annum of their NAV respectively.

The trustee fees are calculated and accrued on each valuation day and paid monthly in arrears. The fees earned during the year are disclosed in the statement of comprehensive income.

The trustee fees payable as at 31 December were as follows: 2017 2016 Sun Life MPF RMB and HKD Fund $ 27,450 $ 22,170

Sun Life MPF Conservative Fund $ 135,525 $ 47,639

Sun Life MPF Hong Kong Dollar Bond Fund $ 143,980 $ 117,703



Sun Life MPF Stable Fund $ 243,493 $ 183,755

Sun Life MPF Balanced Fund $ 225,709 $ 155,629

Sun Life MPF Growth Fund $ 379,642 $ 259,773


153


(d) Trustee fees (continued) 2017 2016 Sun Life MPF Asian Equity Fund $ 121,733 $ 82,575

Sun Life MPF Global Equity Fund (Note 1) $ 168,749 $ 112,546

Sun Life MPF Greater China Equity Fund $ 152,401 $ 114,312


Sun Life MPF Age 65 Plus Fund (Note 2) $ 8,677 $ -




8 Cash and cash equivalents

Reconciliation of liabilities arising from financing activities

The table below details changes in the Scheme’s liabilities from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are liabilities for which cash flows were, or future cash flows will be, classified in the cash flow statement as cash flows from financing activities.

Benefits payable

Forfeitures payable Total

At 1 January 2017 $ 169,573,429 $ 69,861,038 $ 239,434,467 Changes from financing cash

flows: Benefits and transfers out 3,124,926,478 - 3,124,926,478 Benefits and transfers out paid (3,057,152,431) - (3,057,152,431) Forfeitures - 219,374,442 219,374,442 Forfeitures paid - (229,495,475) (229,495,475)

At 31 December 2017 $ 237,347,476 $ 59,740,005 $ 297,087,481


154

9 Contributions

Mandatory contributions for both the employers and members are equal to 5% of the members’ relevant income up to $30,000 per month except for members earning less than $7,100 per month where the members’ mandatory contribution is nil.

Self-employed persons must contribute 5% of their relevant income subject to a maximum contribution of $1,500 per month or $18,000 per year to the Scheme unless their relevant income is less than $7,100 per month or $85,200 per year where the mandatory contribution is nil.

Employers, members or self-employed persons under the Scheme may choose to make voluntary contributions as top-up contributions in addition to the mandatory contributions for each contribution period.

The Special Private Contributions has been launched by the Scheme on 29 April 2011 that members can make their additional voluntary contributions to the Scheme on a regular basis (in an amount not lower than $300 per month) or in lump sum (in an amount not lower than $3,000 per payment).

10 Benefits

Members will become entitled to benefits in respect of mandatory contributions to the Scheme in the circumstances set out in the MPF Ordinance.

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.

With effect from 1 February 2016, benefits whether due to mandatory or voluntary contributions payable to an employee member or self-employed person on the grounds of retirement at age 65 or early retirement at age 60 may be paid in instalments, if the member so elects.


155

11 Subscriptions

Proceeds on issue of units in the statement of changes in net assets attributable to members are derived from the following: 2017 2016 From employers − Mandatory $ 1,266,933,718 $ 1,022,007,695 − Voluntary 353,221,514 239,311,171 From employees and self-employed persons − Mandatory 1,266,433,156 1,031,574,512 − Voluntary 65,284,027 61,750,462 Special private contributions 99,344,905 55,567,490

Contribution received and receivable $ 3,051,217,320 $ 2,410,211,330 Group transfers in from other schemes 1,870,167,776 1,246,787,479 Individual transfers in from other schemes 5,918,154,346 3,466,124,460 Bonus unit rebate 38,047,963 22,972,795

$10,877,587,405 $ 7,146,096,064

12 Redemptions

Payments on redemption of units in the statement of changes in net assets attributable to members are derived from the following: 2017 2016 Permanent departure $ 363,775,494 $ 233,241,838 Refund of additional voluntary contributions

to leavers 174,091,836 113,859,698 Death 43,836,250 25,526,851 Retirement 276,956,483 163,007,705 Early retirement 131,801,789 68,633,560 Total incapacity 9,805,538 6,862,479 Terminal illness 6,841,844 5,676,499 Small balance 6,393 29,375

Benefits paid and payable $ 1,007,115,627 $ 616,838,005 Group transfers out to other schemes 268,015,451 240,281,219 Individual transfers out to other schemes 1,849,795,400 992,474,512 Forfeitures 219,374,442 167,737,877

$ 3,344,300,920 $ 2,017,331,613


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13 Capital management

The capital of the Scheme is represented by the net assets attributable to members. Subscriptions and redemptions during the year are shown in the statements of changes in net assets attributable to members. The amount of net assets attributable to members can change significantly on a daily basis as the constituent funds of the Scheme are subject to daily subscriptions and redemptions at the discretion of 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.

For capital management purpose, the Trustee performs the following:

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

− redeem and issue units of the constituent funds of the Scheme in accordance with the Trust Deed and the rules of the Scheme.

14 Accrued benefits

The total accrued benefits vested in the members’ accounts amounted to $53,552,759,771 as at 31 December 2017 (2016: $35,157,581,716).

15 Tax status of the Scheme

The Scheme is a registered scheme under the MPF Ordinance and is, therefore, a recognised scheme for Hong Kong Profits Tax purposes. The policy of the Inland Revenue Department (“IRD”), as set out in IRD Practice Note No. 23, 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 Scheme’s financial statements.

16 Soft commission arrangements

During the year, the Managers and their 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 (2016: Nil).

17 Security lending arrangements

During the year, the Scheme and its constituent funds did not enter into any security lending arrangements (2016: Nil).

18 Negotiability of assets

At 31 December 2017 and 2016, there were no statutory or contractual requirements restricting the negotiability of the assets of the Scheme and its constituent funds.


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19 Commitments

The Scheme and its constituent funds had no commitments as at 31 December 2017 and 2016.

20 Contingent liabilities

The Scheme and its constituent funds had no contingent liabilities as at 31 December 2017 and 2016.

21 Marketing expenses

No advertising expenses, promotional expenses, commissions or brokerage fees paid and payable to the Mandatory Provident Fund (“MPF”) intermediaries were deducted from the Scheme or its constituent funds during the years ended 31 December 2017 and 2016.

22 Deferred expenses

In accordance with section 37 of the General Regulation, administrative expenses for the Sun Life MPF Conservative Fund which have not been deducted in the respective months may be deducted in the following twelve months. As at 31 December 2017, the amount of deferred administrative expenses amounted to $1,231,695 (2016: $3,772,911).

23 Segment information

The CODM of the Scheme makes strategic resource allocations on behalf of the Scheme. The operating segments were determined based on the reports reviewed by the CODM, which are used to make strategic decisions. The CODM is responsible for the Scheme’s entire portfolio and considers the business as a single operating segment. The asset allocation decisions are based on a single, integrated investment strategy, and the Scheme’s performance is evaluated on an overall basis.

The internal reporting provided to the CODM for the Scheme’s assets, liabilities and performance is prepared on a consistent basis with the measurement and recognition principles of HKFRSs.

The Scheme is established and domiciled in Hong Kong. During the year ended 31 December 2017 and 2016, the revenue of the Scheme was derived from investment funds established and domiciled in Hong Kong and bank deposits placed with authorised financial institutions in Hong Kong.

The segment information provided to the CODM is the same as that disclosed in the statement of comprehensive income.

The Scheme has a diversified population of members. No individual member holds more than 10% of the net assets of the Scheme. The Scheme has no assets classified as non-current assets as at 31 December 2017 and 2016.


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24 Payments charged to default investments strategy constituent funds or scheme members who invest in the constituent funds

Sun Life MPF Age 65 Plus Fund and Sun Life MPF Accumulation Fund are designated as default investment strategy (“DIS”) constituent funds with effect from 1 April 2017. Payments for services, out-of-pocket expenses and other payments charged to the DIS constituent funds are disclosed below. Payments for services and out-of-pocket expenses are those defined in the MPF Ordinance.

During the period from 1 April 2017 to 31 December 2017

Sun Life MPF Age 65 Plus

Fund

Sun Life MPF Core

Accumulation Fund

a) Payments for services − Administration fees $ 256,395 $ 969,776 − Custodian fees 25,512 96,496 − Management fees 160,247 606,110 − Trustee fees 38,459 145,466

Total payments for services $ 480,613 $ 1,817,848 --------------------- --------------------- b) Out-of-pocket expenses − Auditor’s remuneration $ 2,896 $ 10,278 − Postage and printing fees 14,201 50,204 − Publishing fees 759 2,694 − Other expenses 895 896

Total out-of-pocket expenses $ 18,751 $ 64,072 --------------------- --------------------- c) Payments other than (a) and (b) above $ - $ - --------------------- ---------------------

Total payments $ 499,364 $ 1,881,920

Out-of-pocket expenses expressed as a

percentage of net asset value of the DIS constituent funds 0.020% 0.018%

The net asset value used for calculating the percentage is the average of the net asset value of the DIS constituent funds as at the last dealing day of each month during the period from 1 April 2017 to 31 December 2017.


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25 Non-adjusting events after the reporting period

Subsequent to the end of the reporting period, the investment objectives, policies and strategies of Sun Life MPF Global Equity Fund (renamed as Sun Life MPF Multi-Sector Equity Fund with effect from 1 March 2018), Sun Life MPF RMB and HKD Fund, Sun Life MPF Global Bond Fund, Sun Life MPF Greater China Equity Fund and Sun Life MPF Asian Equity Fund were changed with effect from 1 March 2018. For details please refer to the Principal Brochure for Sun Life Rainbow MPF Scheme.

26 Possible impact of amendments, new standards and interpretations issued but not yet effective for the year ended 31 December 2017

Up to the date of issue of these financial statements, the HKICPA has issued a number of amendments, new standards and interpretations which are not yet effective for the year ended 31 December 2017 and which have not been adopted in these financial statements.

Of these developments, the following may be relevant to the Fund’s operations and financial statements:

Effective for accounting periods

beginning on or after HKFRS 9, Financial instruments 1 January 2018 HKFRS 15, Revenue from Contracts with Customers 1 January 2018 HK(IFRIC) 22, Foreign currency transactions and advance consideration

1 January 2018

HK(IFRIC) 23, Uncertainty over income tax treatments 1 January 2019

The Fund is in the process of making an assessment of what the impact of these amendments, new standard and interpretations is expected to be in the period of initial application. So far the Fund has identified some aspects of the new standards which may have a significant impact on the financial statements. Further details of the expected impacts are discussed below. While the assessment has been substantially completed for HKFRS 9, the actual impacts upon the initial adoption of the standard may differ as the assessment completed to date is based on the information currently available to the Fund, and further impacts may be identified before the standard is initially applied in the Fund’s financial statements for the year ended 31 December 2018. The Fund may also change its accounting policy elections, including the transition options, until the standards are initially applied in the financial statements.


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26 Possible impact of amendments, new standards and interpretations issued but not yet effective for the year ended 31 December 2017 (continued)

HKFRS 9, Financial instruments

HKFRS 9 replaces HKAS 39 Financial Instruments: Recognition and Measurement. It includes revised guidance on the classification and measurement of financial instruments and a new expected credit loss model for calculating impairment on financial assets. It also carries forward the guidance on recognition and derecognition of financial instruments from HKAS 39.

Classification of financial assets and financial liabilities

HKFRS 9 contains a new classification and measurement approach for financial assets that reflects the business model in which assets are managed and their cash flow characteristics.

The standard includes three principal classification categories for financial assets: measured at amortised cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). It eliminates the existing HKAS 39 categories of held to maturity, loans and receivables and available for sale.

Based on the Fund’s assessment, this standard is not expected to have a material impact on the classification of financial assets of the Fund. This is because:

− financial instruments currently classified as FVTPL under HKAS 39 are designated into this category because they are managed on a fair value basis in accordance with a documented investment strategy. Accordingly, these financial instruments will be mandatorily measured at FVTPL under HKFRS 9; and

− financial instruments currently measured at amortised cost are: cash at bank, amounts receivable on sales of investments, amounts receivable on subscriptions, contributions receivable, interest and other receivables, prepayments, amounts payable on redemption, amounts payable on purchases of investments, benefits payable, forfeiture payable and accruals and other payables. These instruments meet the solely payments of principal and interest (SPPI) criterion and are held in a held-to-collect business model. Accordingly, they will continue to be measured at amortised cost under HKFRS 9.


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Impairment of financial assets

HKFRS 9 replaces the “incurred loss” model in HKAS 39 with a forward-looking “expected credit loss” (ECL) model. This will require considerable judgement about how changes in economic factors affect ECLs, which will be determined on a probability-weighted basis.

The new impairment model will apply to financial assets measured at amortised cost or FVOCI, except for investments in equity instruments.

Under HKFRS 9, loss allowances will be measured on either of the following bases:

− 12-month ECLs: these are ECLs that result from possible default events within the 12 months after the reporting date; and

− lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument.

Based on the Fund’s assessment, changes to the impairment model are not expected to have a material impact on the financial assets of the Fund. This is because:

− the majority of the financial assets are measured at FVTPL and the impairment requirements do not apply to such instruments; and

− the financial assets at amortised cost are short-term (i.e. no longer than 12 months) and of high credit quality. Accordingly, the ECLs on such assets are expected to be small.

Hedge accounting

The Fund does not apply hedge accounting; therefore, HKFRS 9 hedge accounting-related changes do not have an impact on the financial statements of the Fund.

Disclosures

HKFRS 9 will require extensive new disclosures, in particular about credit risk and ECLs. The Fund has completed an analysis to identify data gaps against current processes and is designing the system and controls changes that they believe will be necessary to capture the required data.


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Transition

Changes in accounting policies resulting from the adoption of HKFRS 9 will generally be applied retrospectively, except as described below.

− The Fund will take advantage of the exemption allowing them not to restate comparative information for prior periods with respect to classification and measurement (including impairment) changes. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of HKFRS 9 will be adjusted to net assets attributable to unitholders as at 1 January 2018.

− The following assessments have to be made by the Fund on the basis of the facts and circumstances that exist at the date of initial application.

− The determination of the business model within which a financial asset is held.

− The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at FVTPL.

Documents

Sun Life Rainbow MPF Scheme · Sun Life Rainbow MPF Scheme Year ended 31 December 2017 1 Scheme report for the year ended 31 December 2017 The Trustee is pleased to present the reports