HERMES INVESTMENT FUND

Transcription

1 Société d'investissement à Capital Variable (Investment Company organised under the laws of the Grand Duchy of Luxembourg) ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS As of 31 March 2015 Luxembourg R.C.S. B No subscriptions can be received on the basis of financial reports. Subscriptions are only valid if made on the basis of the current prospectus accompanied by the latest available annual report and audited financial statements and unaudited semiannual report if published thereafter.

2 TABLE OF CONTENTS ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS MANAGEMENT AND ADMINISTRATION... 3 REPORT OF THE BOARD OF DIRECTORS... 6 REPORT OF THE RÉVISEUR D ENTREPRISES AGRÉÉ... 8 STATEMENT OF NET ASSETS STATEMENT OF OPERATIONS STATEMENT OF CHANGES IN NET ASSETS CHANGES IN THE NUMBER OF SHARES OUTSTANDING STATISTICAL INFORMATION STATEMENT OF SECURITIES PORTFOLIO HERMES INVESTMENT FUND - EURO SHORT/MEDIUM TERM BOND FUND NOTES TO THE FINANCIAL STATEMENTS INFORMATION TO SHAREHOLDERS UNAUDITED SUPPLEMENTARY INFORMATION TOTAL EXPENSE RATIO & PORTFOLIO TURNOVER RATE RISK MANAGEMENT PROCESS

3 MANAGEMENT AND ADMINISTRATION BOARD OF DIRECTORS CHAIRMAN Mr Romain MOEBUS Member of the Management Board VP Bank (Luxembourg) SA 26, avenue de la Liberté L-1930 Luxembourg, Grand Duchy of Luxembourg MEMBERS (until 30 June 2014) Mr Enrico MELA Managing Director VPB Finance S.A. 26, avenue de la Liberté L-1930 Luxembourg, Grand Duchy of Luxembourg (until 14 June 2014) Mr Joachim KUSKE Executive Director VPB Finance S.A. 26, avenue de la Liberté L-1930 Luxembourg, Grand Duchy of Luxembourg (since 15 June 2014) Ralf Funk Executive Director VPB Finance S.A. 26, avenue de la Liberté L-1930 Luxembourg, Grand Duchy of Luxembourg (since 1 July 2014 till 6 December 2014) Rolf Diderrich Executive Director VPB Finance S.A. 26, avenue de la Liberté L-1930 Luxembourg, Grand Duchy of Luxembourg (since 1 January 2015) Eduard von Kymmel Executive Director VPB Finance S.A. 26, avenue de la Liberté L-1930 Luxembourg, Grand Duchy of Luxembourg REGISTERED OFFICE 26, avenue de la Liberté P.O. Box 923 L-2019 Luxembourg, Grand Duchy of Luxembourg REGISTRATION NUMBER Luxembourg R.C.S. B Luxembourg VAT number LU

4 MANAGEMENT AND ADMINISTRATION (continued) ALTERNATIVE INVESTMENT FUND MANAGER AND INVESTMENT ADVISERS For the Sub-Fund Hermes Investment Fund Euro Short/Medium Term Bond Fund (Alternative Investment Fund Manager) VPB Finance S.A. 26, avenue de la Liberté L-1930 Luxembourg, Grand Duchy of Luxembourg (Investment Adviser) VP Bank (Luxembourg) SA 26, avenue de la Liberté L-1930 Luxembourg, Grand Duchy of Luxembourg For the Sub-Fund Hermes Investment Fund Opti Rate (liquidated as of 2 October 2014) (Alternative Investment Fund Manager) VPB Finance S.A. 26, avenue de la Liberté L-1930 Luxembourg, Grand Duchy of Luxembourg (Investment Adviser) Privalux Management S.A. 43, boulevard Prince Henri L-1724 Luxembourg, Grand Duchy of Luxembourg DEPOSITARY AND PAYING AGENT VP Bank (Luxembourg) SA 26, avenue de la Liberté L-1930 Luxembourg, Grand Duchy of Luxembourg CENTRAL ADMINISTRATION VPB Finance S.A. 26, avenue de la Liberté L-1930 Luxembourg, Grand Duchy of Luxembourg 4

5 MANAGEMENT AND ADMINISTRATION (continued) CABINET DE RÉVISION AGRÉÉ Deloitte Audit Société à responsabilité limitée 560, rue de Neudorf L-2220 Luxembourg, Grand Duchy of Luxembourg LEGAL ADVISOR (until 12 March 2015) Hogan Lovells (Luxembourg) LLP 10A, rue des Mérovingiens L-8070 Bertrange, Grand Duchy of Luxembourg (since 13 March 2015) Arendt & Medernach SA 14, rue Erasme L-2082 Luxembourg 5

6 REPORT OF THE BOARD OF DIRECTORS To the Shareholders of HERMES INVESTMENT FUND Société d Investissement à Capital Variable 26, avenue de la Liberté L-1930 Luxembourg Grand Duchy of Luxembourg Hermes Investment Fund Euro Short/Medium Term Bond Fund The sub-fund s start to the financial year was characterised by falling interest rates. Bond prices of the periphery countries such as Italy and Spain in particular were moving in only one direction. Investors shifted from government bonds to corporate bonds, as government bonds were yielding only low interest. The European Central Bank (the ECB ) announced a reduction of the key interest rates in mid- June from 0.25% to 0.10% and negative interest on deposits for banks of -0.10% for the first time. By making available long-term tenders, Draghi has been implying a zero-interest rate policy into The US Federal Bank (the FED ) continued to reduce bond purchases. Nevertheless, interest rates also fell towards record lows in the US. The ECB reduced the interest rate to the zero line in September. It also provided a cash injection to the commercial banks in the form of long-term loans totalling EUR 83 billion. This is intended to boost the demand for credit, since momentum in the economy of the eurozone has slackened. The Fed was still reducing bond purchases month by month, since the employment market in particular has experienced an upturn over the year as a whole. Because increasing interest rates were also expected in Europe due to the end of bond purchases in the US, the duration of the sub-fund s portfolio has been cut back sharply by sales of Bobl futures. During the fourth quarter, the ECB had to contend with the consequences of the impending Greek election (Grexit), weak oil prices and the associated deflation risks. Since the ECB s previous measures were not effective, it became ever more likely that it would initiate a bond purchase programme. Banks and institutional investors are apparently stocking up on government bonds. Some yields on the bond markets are negative. In contrast to European interest rate policy, the US central bank has concluded its bond purchase programme. Since yields are at a record low, the sub-fund has held strongly to its extremely short duration. The sub-fund had to contend with stronger returns, so that predominantly only the sub-fund s bonds were sold and no new investments were made. Maturities were also utilised to generate cash for returns. In the first quarter of 2015, the ECB decided to purchase EUR 60 billion of European government bonds every month. The programme is intended to run into the second half of The ECB will be purchasing over EUR 1 trillion of government bonds as part of the programme, which aims to stimulate the economy in the eurozone and bring inflation within the target range. Since yields are at a record low, the sub-fund is holding strongly to its extremely short duration. The market for short-run bonds is currently at a standstill. Predominantly long-term bonds are being issued. Once again, a greater number of returns has also been registered. 6

7 REPORT OF THE BOARD OF DIRECTORS Sub-fund Performance 2015 (continued) Hermes Investment Fund - Euro Short/Medium Term Bond Fund Class A: -1.28% (in EUR) Hermes Investment Fund Opti Rate On 2 October 2014, as the assets under management of Hermes Investment Fund Opti Rate decreased below EUR 1,000,000.00, the Board of Directors of the Fund resolved to put the sub-fund into liquidation as from 3 October Luxembourg, 27 May 2015 The Board of Directors of the Fund Notice: The information in this report represents historical data and is not an indication of future results. 7

8 Deloitte. Deloitte Audit Soc1ete a responsabilite limitee 560, rue de Neudorf L-2220 Luxembourg B.P L-1011 Luxembourg Tel: Fax: REPORT OF THE REVISEUR D'ENTREPRISES AGREE To the Shareholders of HERMES INVESTMENT FUND Societe d'lnvestissement a Capital Variable 26, avenue de la Liberte L-1930 Luxembourg Grand Duchy of Luxembourg Following our appointment by the annual general meeting of Shareholders dated 11 July 2014, we have audited the accompanying financial statements of Hermes Investment Fund (the "Fund") and of each of its sub-funds which comprise the statement of net assets and the statement of securities portfolio as at 31 March 2015 and the statement of operations and the statement of changes in net assets for the year then ended, and a summary of significant accounting policies and other explanatory notes to the financial statements. Responsibility of the Board of Directors of the Fund for the financial statements The Board of Directors of the Fund is responsible for the preparation and fair presentation of these financial statements in accordance with the Luxembourg legal and regulatory requirements relating to the preparation and fair presentation of the financial statements and for such internal control as the Board of Directors of the Fund determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Responsibility of the reviseur d'entreprises agree Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted for Luxembourg by the Commission de Surveillance du Secteur Financier. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the reviseur d'entreprises agree's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the reviseur d'entreprises agree considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors of the Fund, as well as evaluating the overall presentation of the financial statements. Societe a responsabilite limitee au capital de RCS Luxembourg B Autonsat1on d'etabllssement:

9 Deloitte. REPORT OF THE REVISEUR D'ENTREPRISES AGREE (continued) We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of Hermes Investment Fund and of each of its sub-funds as of 31 March 2015, and of the results of their operations and changes in their net assets for the year then ended in accordance with the Luxembourg legal and regulatory requirements relating to the preparation of the financial statements. Other matter Supplementary information included in the annual report has been reviewed in the context of our mandate but has not been subject to specific audit procedures carried out in accordance with the standards described above. Consequently, we express no opinion on such information. However, we have no observation to make concerning such information in the context of the financial statements taken as a whole. Luxembourg, 26 June

10 STATEMENT OF NET ASSETS As of 31 March 2015 Hermes Investment Fund - Euro Short/Medium Term Bond Fund (in EUR) Combined (in EUR) 1 ASSETS Securities portfolio (at cost) 16,761, ,761, Unrealised appreciation/depreciation (-) 175, , Securities portfolio at market value 16,936, ,936, Cash at banks 618, , Receivables on subscriptions 13, , Receivables on interest on bonds 123, , TOTAL ASSETS 17,692, ,692, LIABILITIES Payables on redemptions -420, , Accrued expenses -32, , Unrealised loss on futures contracts A230-7, , TOTAL LIABILITIES -460, , NET ASSETS 17,231, ,231, The accompanying notes form an integral part of these financial statements. 10

11 STATEMENT OF OPERATIONS For the year/period ended 31 March 2015 Hermes Investment Fund - Euro Short/Medium Term Bond Fund Hermes Investment Fund - Opti Rate * Combined (in EUR) (in EUR) (in EUR) INCOME 1 Interest on bonds 433, , , Other income - 19, , TOTAL INCOME 433, , , EXPENSES Investment advisory and management fees -26, , , Depositary and central administration fees -56, , , Subscription tax -12, , Depreciation of formation expenses -1, , , Professional expenses -11, , , Transaction costs -3, , , Other charges -46, , , Interest paid on bank overdraft TOTAL EXPENSES -158, , , NET INCOME/LOSS (-) FROM INVESTMENTS 274, , , Realised gain on foreign exchange Realised loss on foreign exchange Realised loss on futures contracts -432, , Realised gain on sales of securities 139, , , Realised loss on sales of securities -352, , , NET REALISED PROFIT/LOSS (-) FOR THE YEAR/PERIOD -370, , , CHANGE IN UNREALISED APPRECIATION/DEPRECIATION (-) Unrealised gain on foreign exchange Unrealised gain on futures contracts 6, , Unrealised gain on securities 174, , , Unrealised loss on securities -123, , , INCREASE/DECREASE (-) IN NET -313, , , ASSETS AS A RESULT OF OPERATIONS (* For the period till the liquidation on 2 October 2014) The accompanying notes form an integral part of these financial statements. 11

12 STATEMENT OF CHANGES IN NET ASSETS For the year/period ended 31 March 2015 Hermes Investment Fund - Euro Short/Medium Term Bond Fund Hermes Investment Fund - Opti Rate * Combined (in EUR) (in EUR) (in EUR) 1 NET ASSETS Beginning of the year/period 30,254, ,543, ,798, CHANGES FROM INVESTMENT ACTIVITIES Increase/decrease (-) in net assets as a result of operations for the year/period -313, , , CHANGES FROM CAPITAL TRANSACTIONS Proceeds from shares issued 4,580, , ,775, Payments for shares redeemed -17,289, ,859, ,149, Payment for shares liquidated , , ,709, ,632, ,341, NET ASSETS End of the year/period 17,231, ,231, (* For the period till the liquidation on 2 October 2014) The accompanying notes form an integral part of these financial statements. 12

13 CHANGES IN THE NUMBER OF SHARES OUTSTANDING For the year/period ended 31 March 2015 Hermes Investment Fund - Euro Short/Medium Term Bond Fund Class A Number of shares at the beginning of the year/period 281, Number of shares issued 42, Number of shares redeemed -161, Number of shares outstanding at the end of the year/period 162, Hermes Investment Fund - Opti Rate* Class A Number of shares at the beginning of the year/period 38, Number of shares issued 1, Number of shares redeemed -32, Number of shares liquidated on 2 October , Number of shares outstanding at the end of the year/period - (* Liquidated on 2 October 2014) The accompanying notes form an integral part of these financial statements. 13

14 STATISTICAL INFORMATION 31 March March March 2013 Total Fund Net Assets of the Fund (in EUR) 17,231, ,798, ,646, Hermes Investment Fund - Euro Short/Medium Term Bond Fund Total net assets (in EUR) 17,231, ,254, ,767, Class A Shares outstanding 162, , , Net asset value per share (in share class currency) Hermes Investment Fund - Opti Rate Total net assets (in EUR) * - 4,543, ,879, Class A Shares outstanding - 38, , Net asset value per share (in share class currency) (* Liquidated on 2 October 2014) The accompanying notes form an integral part of these financial statements. 14

15 HERMES INVESTMENT FUND - EURO SHORT/MEDIUM TERM BOND FUND STATEMENT OF SECURITIES PORTFOLIO AS AT 31 MARCH 2015 (in EUR) Transferable securities admitted to an official stock exchange listing Bonds Nominal Value/ % of Currency Quantity Description Market Value Net Assets EUR 300,000 ANGLO AMERICAN CAPITAL PLC / % 308, EUR 1,000,000 BASF SE / VRN 1,001, EUR 500,000 BAYER AG / VRN 500, EUR 200,000 BBVA FIN SA UNIPERSONAL / % 205, EUR 250,000 BMW FIN NV / % 253, EUR 300,000 BPCE SA / % 307, EUR 100,000 CATERPILLAR INTL FIN LTD / VRN 100, EUR 235,000 CONTI-GUMMI FIN BV / % 245, EUR 200,000 DAIMLER AG / % 202, EUR 500,000 DAIMLER AG / % 501, EUR 1,000,000 DEUTSCHE PFANDBRIEFBANK AG / % 1,028, EUR 1,000,000 DEUTSCHE PFANDBRIEFBANK AG / % 1,007, EUR 850,000 DEUTSCHE PFANDBRIEFBANK AG / % 861, EUR 400,000 FRANCE TELECOM SA / % 407, EUR 250,000 GE CAPITAL EUROPEAN FUNDING / VRN 251, EUR 800,000 GE CAPITAL EUROPEAN FUNDING / VRN 800, EUR 100,000 GENERAL MOTORS FIN INT BV / VRN 99, EUR 300,000 GRENKE FIN PLC / % 307, EUR 500,000 GRENKE FIN PLC / % 519, EUR 300,000 HELLA KGAA HUECK & CO / % 306, EUR 300,000 IBERDROLA FINANZAS SA / SER % 302, EUR 300,000 ING GROEP NV S / VRN 300, EUR 100,000 INTESA SANPAOLO SPA S / VRN 99, EUR 600,000 JP MORGAN CHASE & CO / VRN 601, EUR 150,000 KBC IFIMA NV / % 162, EUR 500,000 KONINKLIJKE KPN NV / % 504, EUR 150,000 LEASEPLAN CORP NV S / % 154, EUR 300,000 MAN SE / SR 1% 301, EUR 300,000 METRO FIN BV / % 306, EUR 300,000 MONDELEZ INTL INC / % 304, EUR 1,000,000 RABOBANK NEDERLAND / VRN 1,000, EUR 100,000 SANOFI SA / VRN 100, EUR 300,000 SCANIA CV AB / % 304, EUR 100,000 SNAM S.P.A / % 104, EUR 150,000 SWEDBANK AB / % 153, EUR 300,000 UNICREDIT SPA / % 308, EUR 1,000,000 UNICREDIT SPA / VRN 1,004, EUR 500,000 VOLKSWAGEN BANK GMBH / VRN 500, EUR 500,000 VW INTL FIN NV / % 506, Total transferable securities admitted to an official stock exchange listing 16,235, The accompanying notes form an integral part of these financial statements. 15

16 HERMES INVESTMENT FUND - EURO SHORT/MEDIUM TERM BOND FUND STATEMENT OF SECURITIES PORTFOLIO AS AT 31 March 2015 (in EUR) (continued) Transferable securities dealt on another regulated market Bonds Nominal Value/ % of Currency Quantity Description Market Value Net Assets EUR 700,000 CATERPILLAR INTL FIN LTD / % 701, Total transferable securities dealt on another regulated market 701, TOTAL SECURITIES PORTFOLIO 16,936, The accompanying notes form an integral part of these financial statements. 16

17 HERMES INVESTMENT FUND - EURO SHORT/MEDIUM TERM BOND FUND STATEMENT OF SECURITIES PORTFOLIO AS AT 31 March 2015 (in EUR) (continued) Breakdown by country % of Net Assets Belgium France 4.73 Germany Ireland Italy 8.80 Netherlands Spain 2.95 Sweden 2.66 United Kingdom 1.79 United States of America 5.26 TOTAL Breakdown by currency % of Net Assets EUR TOTAL The accompanying notes form an integral part of these financial statements. 17

18 NOTES TO THE FINANCIAL STATEMENTS AS OF 31 March 2015 Note 1 Organisation and objective of the Fund General information Hermes Investment Fund (the Fund ) has been incorporated on 29 December 2005 under Luxembourg law as a société d investissement à capital variable ( SICAV ) with multiple sub-funds (the sub-funds ). The Fund has been registered under number B at the Luxembourg Commercial Register. The Fund is an undertaking for collective investment (a UCI ) registered in the Grand Duchy of Luxembourg pursuant to Part II of the Luxembourg law of 17 December 2010 on UCI (the UCI Law ) and qualifies as an externally managed alternative investment fund ("AIF") within the meaning of the corpus of rules formed by (a) Directive 2011/61/EC of the European Parliament and of the Council of 8 June 2011 on alternative investment fund managers (the "Directive"), (b) the Commission Delegated Regulation (EU) No 231/2013 of 19 December 2012 supplementing the Directive (the "Regulation"), (c) the Luxembourg law of 12 July 2013 on alternative investment fund managers ("AIFM Law") and (d) any binding guideline or other delegated act and regulation issued from time to time by any relevant authorities in respect of the Directive (together the "AIFM Rules"). List of sub-funds as per the prospectus at the beginning of the financial year of the Fund: Hermes Investment Fund - Euro Short/Medium Term Bond Fund Class A Shares Class B Shares Hermes Investment Fund - Opti Rate Class A Shares As of 31 March 2015, the following sub-funds and Classes of Shares were active: Hermes Investment Fund - Euro Short/Medium Term Bond Fund Class A Shares On 2 October 2014, as the assets under management of Hermes Investment Fund Opti Rate decreased below EUR 1,000,000.00, the Board of Directors of the Fund resolved to put the sub-fund into liquidation as from 3 October Currently, Shares are offered only with accumulation of income and gains and accordingly, no distribution of income through a declaration of dividends will be made. Note 2 Summary of significant accounting policies The financial statements of the Fund are prepared in accordance with generally accepted accounting policies and Luxembourg regulations relating to undertakings for collective investment. The combined financial statements are expressed in EUR and are presented for information purposes only. a) Foreign currency translation 18

19 NOTES TO THE FINANCIAL STATEMENTS AS OF 31 March 2015 (continued) For the preparation of the combined financial statements as of 31 March 2015 in EUR, the statements of each sub-fund denominated in currencies other than EUR (the base currency) are translated at the exchange rates prevailing as at year/period-end (please refer to Note 8). Combined statements are obtained by the arithmetic sum of statements of each individual sub-fund. In each sub-fund, investments as well as other assets and liabilities stated in foreign currencies are translated into the base currency at the exchange rates prevailing as at year/period-end. The costs of investments are at historical exchange rates. Transactions in foreign currency during the year/period are translated at the rates prevailing at the date of transaction. Realised and unrealised exchange gains and losses, if any, are recorded in the statement of operations of each sub-fund. Outstanding forward foreign exchange contracts as of year/period-end are evaluated based on forward foreign exchange rates for the remaining period up to final maturity. Realised and unrealised exchange gains and losses, if any, are recorded in the statement of operations of each sub-fund. To the extent that forward foreign exchange contracts are contracted to hedge the currency exposure of a given share class, such results are directly attributed to that respective share class. b) Investments The value of securities, which are dealt on a stock exchange or dealt on an other regulated market providing reliable price quotations are valued at the latest price available on the valuation day. In the event that any securities held in the portfolio are not listed on any stock exchange or not traded on any other regulated market or if the price obtained as described above is not representative of the fair market value of the securities, the value of such securities will be based on the reasonably foreseeable sales price determined prudently and in good faith by the Board of Directors of the Fund. Shares in investment funds are valued on the basis of the net asset value ( NAV ) per share of such funds as of valuation date as confirmed by the administration agents or other representatives of such funds. In instances where no such values are available, the funds are valued either at estimated net asset values per share, as made available by the respective administration agents or fund representatives, or at the latest available published NAVs per share. Such values may significantly differ from price quotes, which would have been determined as of the reporting date. The cost of investments sold is determined on the basis of the weighted average price method. c) Forward foreign exchange contracts Forward foreign exchange contracts are valued at forward market rates for the remaining period from valuation date to the maturity of the contract. 19

20 NOTES TO THE FINANCIAL STATEMENTS AS OF 31 March 2015 (continued) d) Futures contracts on securities Initial margin deposits are made upon entering into futures contracts and can be made either in cash or securities. During the period for which the future contract is open, changes in the value of the contract are recognised as unrealised gains or losses by marking to market on a daily basis to reflect the value of the contract at the end of each day s trading. Variation margin payments are made or received, depending on whether unrealised losses or gains are incurred. When the contract is closed, the sub-fund records a realised gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund basis in the contract. Futures contracts on securities remaining open at the closing date are valued by reference to the last known market price. Any unrealised gains and losses are included in the statement of net assets. e) Income recognition Interest income is accounted for gross on an accrual basis. Dividends are accrued on the date upon which the relevant security becomes ex-dividend; these are accounted for net of any applicable withholding taxes in the relevant country. Note 3 Net asset value a) Computation The net asset values of the various sub-funds are determined in relation to such business days as further specified in the prospectus of the Fund by dividing the net assets of the relevant sub-fund by the number of shares issued and outstanding in the relevant sub-fund. b) Redemption of Shares Each Shareholder of a sub-fund has the right to request at any time the redemption of his/her Shares at an amount equal to the net asset value of the relevant sub-fund as described in the preceding paragraph. For each sub-fund the Fund may temporarily suspend the calculation of the NAV per share, the redemption and the conversion of Shares under certain well-defined circumstances as disclosed in the prospectus of the Fund. Note 4 Depositary and central administration fees VP Bank (Luxembourg) SA is acting as Depositary and as Paying Agent and VPB Finance S.A. is acting as Central Administration. The commissions and fees for the administrative and depositary services are payable monthly and are calculated on the average of the total net assets of the respective sub-fund in accordance with the prospectus and the agreements dated 20 December 2011, as amended on 22 July

21 NOTES TO THE FINANCIAL STATEMENTS AS OF 31 March 2015 (continued) Note 5 Taxes The Fund is registered under Luxembourg law as an investment fund (SICAV). Accordingly, no Luxembourg income or capital gains tax is, at present, payable. It is subject, however, to the Luxembourg subscription tax ( taxe d abonnement ) calculated at the annual rate of 0.05% for Class A and Class B Shares of the NAV of the Class of Shares at the end of each quarter. The tax is accrued for at each NAV calculation and is payable at the end of each calendar quarter. However, no tax is levied on the asset value represented by shares held in other undertakings for collective investment falling under Luxembourg law. Interest and dividend income may be subject to non-recoverable withholding tax in the country of origin. Note 6 Formation expenses The costs and expenses incurred in connection with the formation of the Fund respectively in connection with the launching of new sub-funds and the initial issue of Shares are amortised over a period not exceeding 5 years. Note 7 Investment advisory and management fee The Fund has appointed the following Alternative Investment Fund Manager for the sub-funds shown below: Hermes Investment Fund Euro Short/Medium Term Bond Fund VPB Finance S.A. The Fund has further appointed VP Bank (Luxembourg) SA to advise VPB Finance S.A. in the management of the sub-fund s assets. Hermes Investment Fund Opti Rate VPB Finance S.A. The Fund has further appointed Privalux Management S.A. to advise VPB Finance S.A. in the management of the sub-fund s assets. The Alternative Investment Fund Manager is entitled to receive from the respective sub-fund a fee payable quarterly in arrears, calculated as a percentage of the average NAV of the relevant sub-fund during the relevant quarter. Hermes Investment Fund Euro Short/Medium Term Bond Fund - Class A Shares 0.10% p.a. (excluding taxes) - Class B Shares 0.40% p.a. (excluding taxes) Hermes Investment Fund Opti Rate - Class A Shares 1.55% p.a. (excluding taxes) 21

22 NOTES TO THE FINANCIAL STATEMENTS AS OF 31 March 2015 (continued) Note 8 Exchange rates Exchange rates used as of 31 March 2015 are shown below: 1 EUR = USD Note 9 Forward foreign exchange contracts There were no forward foreign exchange contracts outstanding as of the date of this financial statement. Note 10 Related party transactions All transactions with related parties were entered into the ordinary course of business and under normal commercial terms. The related parties to the Fund are the Alternative Investment Fund Manager and the Investment Advisers. The fees for the related parties are described in notes 4 and 7. As of 31 March 2015, the sub-funds had not invested in related parties and there were no direct shareholdings in the Fund by any member of the Board of Directors of the Fund. Note 11 Changes in securities portfolio Information about the changes that have occurred in the securities portfolio of the sub-funds during the year/period can be obtained free of charge at the Registered Office of the Fund or from the Depositary. Note 12 Futures contracts on securities At the date of the report following futures contracts on securities were open: Hermes Investment Fund Euro Short/Medium Term Bond Fund Quantity Description Maturity Currency Unrealised gain / loss (-) (in EUR) Sell open -50 Euro BOBL Future 9 June 2015 EUR -7, TOTAL -7,

23 INFORMATION TO SHAREHOLDERS The articles of incorporation, the prospectus, the statement of changes in the composition of the portfolios, the unaudited semi-annual and annual reports and audited financial statements are available free of charge at the registered office of Hermes Investment Fund, 26, avenue de la Liberté, L-1930 Luxembourg or from the Depositary. The semi-annual and annual reports contain general information about the Fund as well as data showing the Fund's development and its total net assets. The business year begins on 1 April and ends on 31 March of the following year. 23

24 Unaudited supplementary information As of 31 March

25 TOTAL EXPENSE RATIO For the year/period ended 31 March 2015 Hermes Investment Fund Euro Short/Medium Term Bond Fund Total Expense Ratio (TER) 0.57% For the year/period ended 2 October 2014 (Date of Liquidation) Hermes Investment Fund Opti Rate Total Expense Ratio (TER) 1.74% Total expense ratio (TER) The calculation of the Total Expense Ratio is based on the stipulated fees and commissions paid by the sub-funds on the average net sub-fund assets during the business year (annualized). PORTFOLIO TURNOVER RATE For the year/period ended 31 March 2015 Hermes Investment Fund Euro Short/Medium Term Bond Fund Portfolio Turnover Rate (PTR) % For the year/period ended 2 October 2014 (Date of Liquidation) Hermes Investment Fund Opti Rate Portfolio Turnover Rate (PTR) % Portfolio turnover rate (PTR) The Portfolio Turnover Rate indicates the turnover rate of the portfolio holdings of the respective subfund and is computed using the following formula, as stated in the CSSF Circular 03/122: PTR = [(Total 1 Total 2) / M] * 100, with: Total 1 Total 2 M = Total of securities transactions during the relevant period = X + Y where X = purchases of securities and Y = sales of securities. = Total of transactions in shares of the sub-fund during the relevant period = S + T where S = subscriptions of shares of the sub-fund and T = redemptions of shares of the sub-fund = Average net assets of the sub-fund. 25

26 Risk Management Process For the year/period ended 31 March 2015 Risk Warnings Interest change risk Investing in securities at a fixed rate of interest is connected with the possibility that the current interest rate at the time of issuance of a security could change. If the current interest rate increases as against the interest at the time of issue, fixed rate securities will generally decrease in value. Conversely, if the current interest rate falls, fixed rate securities will increase in value. These developments mean that the current yield of fixed rate securities roughly corresponds to the current interest rate. However, such fluctuations can have different consequences, depending on the maturity of fixed rate securities. Fixed rate securities with shorter maturity carry smaller price risks than fixed rate securities with longer maturity. On the other hand, fixed rate securities with shorter maturity generally have smaller yields than fixed rate securities with longer maturity. Currency risk If a sub-fund directly or indirectly holds assets which are denominated in foreign currencies, unless the foreign currency positions are hedged, it shall be subject to currency risk. In the event of a devaluation of the foreign currency against the reference currency of the sub-fund, the value of the assets held in foreign currencies shall fall. Liquidity risk Particularly in the case of illiquid (restricted market) securities, even moderately-sized orders may lead to considerable changes in prices for both purchases and sales. If an asset is not liquid, there is a risk it may not be possible to sell the asset or to only sell it at a considerable discount. In the case of purchase, the illiquidity of an asset may cause the purchase price to rise considerably. Credit risk The creditworthiness of the issuer of a security or money market instrument directly or indirectly held by a sub-fund may subsequently fall. This normally leads to a fall in the price of the relevant security that exceeds general market fluctuations. Counterparty risk The issuer of a security held directly or indirectly by a sub-fund or the debtor of a claim belonging to a sub-fund may become insolvent. The corresponding assets of the sub-fund may become worthless as a result of this. Commitment approach With the commitment approach, the positions from derivative financial instruments are converted into their corresponding underlying equivalents using the delta approach. In doing so, the netting and hedging effects between derivative financial instruments and their underlyings are taken into account. The total of these underlying equivalents may not exceed the total net value of the fund s portfolio. The global exposure of the sub-funds is calculated using the commitment approach as detailed in applicable laws and regulations including but not limited to the CSSF Circular 11/

27 Leverage Hermes Investment fund Euro Short/Medium Term Bond Fund During the period from 22 July 2014 to 31 March 2015 the average leverage was (net method): 0.74% (gross method): 1.35% Hermes Investment fund Opti Rate During the period from 22 July 2014 to 2 October 2014 (Date of Liquidation) the average leverage was (net method): 0.92% (gross method): 0.92% Remuneration of the AIFM during the financial year (1 April March 2015): Total remuneration paid by the AIFM thereof fixed remuneration thereof variable remuneration 2.99 million CHF 2.92 million CHF 0.07 million CHF Number of Beneficiaries 27.2 thereof Senior management 0.5 thereof Risk takers and other identified staff 3.5 Carried interest paid by the AIF n/a Total remuneration paid to Risk takers thereof Senior management thereof other Risk takers 0.44 million CHF 0.11 million CHF 0.33 million CHF Corporate governance statement The Board of Directors of the Fund confirms its adherence with the ALFI (Association Luxembourgeoise des Fonds d Investissement) Code of Conduct for Luxembourg Investment Funds. 27