Objective

The investment objective of the Sub-Fund is to provide investment results that, before deduction of fees andexpenses, closely correspond to the performance of the HSI ESG Enhanced Index (the “Index”).

Strategy

In order to achieve the investment objective of the Sub-Fund, the Sub-Fund will adopt a full replication strategy bydirectly investing all, or substantially all, of the Sub-Fund's assets in securities constituting the Index ("IndexSecurities") in substantially the same weightings as these Index Securities have in the Index. The Manager willnot use a representative sampling strategy other than in exceptional circumstances.
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Under exceptional circumstances (i.e. due to restrictions, suspensions of trading, limited availability of certain IndexSecurities, corporate events, or as the Manager believes there is significant market mispricing or foreseeablemarket turbulence), where it is not feasible or not in the best interest of investors to acquire certain securities whichare constituents of the Index and/or it is not cost efficient, by reference to the Sub-Fund's Net Asset Value, to usea full replication strategy, the Manager may without prior notice to shareholders, also use a representative samplingstrategy to invest in the following, in its absolute discretion, and as often as the Manager believes is appropriate,in order to achieve the investment objective of the Sub-Fund by tracking the Index as closely as possible to thebenefit of shareholders:
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​(i) a representative sample whose performance is closely correlated with the Index, but whoseconstituents may or may not themselves be constituents of the Index; and/or
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(ii) other collective investment schemes (CIS). "CIS" means an exchange traded fund and/or an unlistedindex tracking fund which tracks an index that has a high correlation with the Index. The Sub-Fund'sability to invest in other CIS may not exceed 10% of its Net Asset Value and the Sub-Fund will not holdmore than 10% of any units issued by any single CIS; and/or
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(iii) financial derivative instruments (FDIs) (e.g. futures contracts) with no more than 10% of the Sub-Fund'sNet Asset Value for investment and hedging purposes, where the Manager believes such investmentswill help the Sub-Fund achieve its investment objective and are beneficial to the Sub-Fund.
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In pursuing a representative sampling strategy, the Manager may cause the Sub-Fund to deviate from the Indexweighting on condition that the maximum deviation from the Index weighting of any constituent will not exceed 3%or such other percentage as determined by the Manager after consultation with the SFC.
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If any non-constituent of the Index is held in the portfolio, for reasons other than Index rebalancing and Index relatedcorporate action, to enhance transparency the Manager will disclose the name and weighting of such nonconstituent securities and other CIS on the Manager's website immediately after the purchase and it will be reporteddaily until its disposal.
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The Sub-Fund may conduct securities lending transactions, sale and repurchase transactions and/or reverserepurchase transactions in aggregate for up to 10% of its Net Asset Value.
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Other than pursuing a representative sampling strategy during exceptional circumstances as disclosed above, theManager does not intend to invest in FDIs for any purpose.

Index


The Index aims to combine the Hang Seng Index ("HSI", the base index) with ESG (namely environmental, social and governance) initiatives from international lens.

The universe of the Index comprises the constituents of the HSI, with exclusion policy applied. The constituents of the HSI must be securities of companies that are listed on the Main Board of the SEHK (including Foreign Companies with primary listing on the SEHK). "Foreign Companies" are companies which are (i) incorporated outside Hong Kong; (ii) non-mainland China companies (i.e. non-H-shares, non-Red-chips and non-P-chips companies); or (iii) companies with history, headquarters, management and/or a principal place of business outside Hong Kong, Macau or mainland China. Stapled securities and biotech companies with stock names that end with marker "B" are excluded.
The exclusion policy of the Index will be based on three ESG screenings, namely, (i) the ESG Risk Rating screening based on the ESG Risk Ratings from Sustainalytics (the "ESG Risk Ratings") (the "ESG Risk Rating Screening"), (ii) the United Nation Global Compact ("UNGC") principle screening based on the UNGC compliance ratings from Sustainalytics, ESG Book and ISS (the "UNGC Principle Screening"), as well as (iii) the controversial product involvement screening based on the controversial product involvement data from Sustainalytics (the "Controversial Product Involvement Screening").

(i) ESG Risk Rating Screening: The constituents in the HSI are ranked based on their ESG Risk Ratings from Sustainalytics in descending order (i.e. Rank 1 corresponds to the highest ESG risk). The 10 constituents in the HSI with the highest ESG Risk Ratings will be excluded from the Index, subject to the following buffer zone rule. Securities excluded due to ESG Risk Rating Screening in the last index review and newly added constituent(s) to the HSI need to rank below 15th to be included to the Index, while securities not excluded due to ESG Risk Rating Screening in the last index review need to rank on or above 5th to be excluded from the Index. If the number of excluded securities is greater than 10, the excluded security(ies) with the lowest ESG Risk Ratings will be added to the Index in order to maintain the number of excluded securities at 10.

If the number of excluded securities is smaller than 10, the remaining constituent(s) of the Index with the highest ESG Risk Ratings will be removed from the Index in order to maintain the number of excluded securities at 10. The ESG Risk Ratings measure the degree to which a company's economic value is at risk from financially material ESG risk factors. The ESG Risk Ratings are composed of three building blocks that contribute to a company's overall rating, namely, corporate governance, material ESG issues and idiosyncratic issues (being the occurrence of controversial/unexpected event). The ESG Risk Ratings are built on a two-dimensional approach, starting with the "exposure" dimension reflecting the extent to which a company is exposed to material ESG risks, followed by the "management" dimension assessing how well the company manages its exposure to those risks. These two dimensions are applied across the three building blocks upon which the overall ESG Risk Ratings for a company is determined. Ultimately, the ESG risk scores across each of the three building blocks are aggregated to arrive at an overall risk assessment for the ESG Risk Ratings. Please refer to the Prospectus for further details on the ESG Risk Ratings.

(ii) UNGC Principle Screening: UNGC compliance ratings from Sustainalytics, ESG Book and ISS (the "UNGC Data Providers") are used. A constituent of the HSI will be excluded from the Index if it meets the UNGC non-compliance criteria for a majority (i.e. more than 50%) of the UNGC Data Providers that cover the constituent. Please refer to the Prospectus for details on the UNGC non-compliance criteria.

(iii) Controversial Product Involvement Screening: A constituent of the HSI will be excluded from the Index if it reaches any of the following thresholds of controversial product involvement:

Product Involvement Screening Areas	Threshold
Thermal Coal Extraction	Greater than or equal to 5% of revenue
Thermal Coal Power Generation	Greater than or equal to 5% of revenue
Tobacco Products Production	Greater than or equal to 5% of revenue
Tobacco Products Retail	Greater than or equal to 5% of revenue
Controversial Weapon Tailor-made and Essential	Any involvement
Controversial Weapons Non-tailor-made and Non-essential	Any involvement

The remaining securities of the HSI after the three screenings above are applied will be tilted based on the ESG Risk Ratings. Weights of constituents with lower (higher) ESG Risk Ratings are tilted to be given higher (lower) weights, subject to a 4% cap on individual constituent for Foreign Companies constituent and a 8% cap on other individual constituent weight for each other Index constituent. Foreign Companies constituents are further subject to an aggregate constituent weighting cap at 10%.
The Index is a net total return index. A net total return index reflects the reinvestment of dividends or coupon payments, after deduction of any withholding tax (including surcharges for special levies, if applicable).

The Index was launched on 29 November 2021. As of 3 December 2024, the Index had a free-float adjusted market capitalisation of HK$ 2.24 trillion and 70 constituents. As of 31 December 2022, 12 HSI constituents have been excluded from the Index after applying the relevant screening process. It is intended that the overall ESG Risk Rating of the Sub-Fund's portfolio will achieve at least 20% improvement over that of HSI .

The Index is denominated in HKD and is calculated with a base value of 6000 as of 7 December 2018. It is calculated and disseminated real-time at 2-second intervals during trading hours of the SEHK. The Index is compiled and managed by Hang Seng Indexes Company Limited ("HSIL" or "Index Provider"), a wholly-owned subsidiary of Hang Seng Bank Limited. The Manager and its connected persons are independent of the Index Provider.

​Index constituents

The constituents of the Index together with their respective weightings and additional information of the Index arepublished at the website of HSIL at www.hsi.com.hk/eng/indexes/all-indexes/hsiesgs. This website has not beenreviewed by the SFC.

Index code

Bloomberg Index Code: HSIESGSN
Reuters Code: .HSIESGSN
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