Hermes Investment Funds Public Limited Company

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Hermes Investment Funds Public Limited Company (An umbrella investment company with variable capital and having segregated liability between its Sub- Funds incorporated with limited liability in Ireland)

Annual Report and Audited Financial Statements For the financial year ended 31 December 2016

Company Registration Number: 463628

Hermes Investment Funds Public Limited Company Contents

Management and Administration ...... 3

Directors’ Report ...... 4

Investment Manager Information ...... 8

Investment Manager’s Report ...... 10

Custodian’s Report to the Shareholders ...... 37

Depositary’s Report to the Shareholders ...... 38

Independent Auditor’s Report ...... 39

Portfolio Statements ...... 41

Balance Sheet ...... 130

Income Statement ...... 139

Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares ...... 147

Cash Flow Statement ...... 155

Notes to the Financial Statements ...... 164

Unaudited Schedule of Significant Portfolio Movements ...... 271

Unaudited Investment Manager Remuneration Disclosure ...... 297

Unaudited Securities Financing Transaction Regulation Disclosures ...... 298

Hermes Investment Funds Public Limited Company Management and Administration

Directors Registered Office Paul McNaughton (Chairman) (Irish)1 Georges Court Justin Egan (Irish)1 54-62 Townsend Street Brian Collins (Irish)1 Dublin 2 Joseph Kagan (British)2 Ireland Harriet Steel (British)2 Ian Kennedy (British)3 Ian Pascal (British)4

Investment Manager and Distributor Advisor on voting and engagement Hermes Investment Management Limited Hermes Equity Ownership Services Limited Lloyds Chambers Lloyds Chambers 1 Portsoken Street 1 Portsoken Street London E1 8HZ London E1 8HZ England ...... England

Depositary/Custodian Administrator, Registrar, Transfer Agent and Secretary Northern Trust Fiduciary Services (Ireland) Limited Northern Trust International Fund Georges Court Administration Services (Ireland) Limited 54-62 Townsend Street Georges Court Dublin 2 54-62 Townsend Street Ireland Dublin 2 Ireland

Independent Auditor Legal Advisor to the Company Deloitte Matheson (from 11 January 2016) Chartered Accountants & Statutory Audit Firm 70 Sir John Rogerson's Quay Deloitte & Touche House Dublin 2 Earlsfort Terrace ...... Ireland Dublin 2 ...... Ireland ...... William Fry (up to 10 January 2016) Fitzwilton House Wilton Place Dublin 2 Ireland

1Non-executive Directors, independent of Investment Manager 2 Non-executive Directors 3 Ian Kennedy is an Alternate Director to Joseph Kagan 4 Ian Pascal is an Alternate Director to Harriet Steel

Hermes Investment Funds Public Limited Company Directors’ Report

The Directors of Hermes Investment Funds Public Limited Company (the “Company”) present their Annual Report and the Audited Financial Statements of the Company for the financial year ended 31 December 2016.

Statement of Directors' Responsibilities The Directors’ are responsible for preparing the Directors’ report and the financial statements in accordance with the Companies Act 2014 and the applicable regulations.

Irish company law requires the Directors to prepare financial statements for each financial year. Under the law, the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“relevant financial reporting framework”). Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the assets, liabilities and financial position of the Company as at the financial year end date and of the profit or loss of the Company for the financial year and otherwise comply with the Companies Act 2014.

In preparing those financial statements, the Directors are required to:

 select suitable accounting policies for the Company financial statements and then apply them consistently;  make judgements and estimates that are reasonable and prudent;  state whether the financial statements have been prepared in accordance with applicable accounting standards, identify those standards, and note the effect and the reasons for any material departure from those standards; and  prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for ensuring that the Company keeps or causes to be kept adequate accounting records which correctly explain and record the transactions of the Company, enable at any time the assets, liabilities, financial position and profit or loss of the Company to be determined with reasonable accuracy, enable to ensure that the financial statements and Directors’ Report comply with the Companies Act 2014 and with the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2011 (“the UCITS Regulations”), as amended and Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in Transferable Securities) Regulations 2015 (the "Central Bank UCITS Regulations”) and enable the financial statements to be audited. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Principal Activity The Company was incorporated on 23 October 2008 under the laws of the Republic of Ireland as an open ended umbrella type investment company with variable capital and limited liability in which different funds may be created from time to time. The Company is authorised by the Central Bank as an Investment Company pursuant to the Central Bank UCITS Regulations.

Business Review Please refer to the Investment Manager Reports on pages 10 to 36 for a review of business.

The principal risks and uncertainties faced by the Company are the investment risks associated with the portfolio of investments held for the account of each sub-fund (the term “sub-fund” relates to the sub funds listed on pages 164 to 168) and the operational risks associated with their management and administration (see note 7 to the Financial Statements).

Hermes Investment Funds Public Limited Company Directors’ Report (continued)

Accounting Records The measures taken by the Directors to secure compliance with the requirements of sections 281 to 285 of the Companies Act 2014 with regard to the keeping of accounting records are the use of appropriate systems and procedures and employment of competent persons. The accounting records of the Company are maintained by Northern Trust International Fund Administration Services (Ireland) Limited, at Georges Court, 54-62 Townsend Street, Dublin 2, Ireland.

Transactions Involving Directors There were no contracts or agreements of any significance in relation to the business of the Company in which the Directors had any interest, as defined in the Companies Act, 2014, at any time during the financial year, other than those set out in note 5 to the Financial Statements.

Revenue The results of operations for the financial year are set out in the Income Statement on pages 139 to 142.

Directors’ Interests in Shares of the Company No Director, nor the Company Secretary, had any beneficial interest in the shares of the Company throughout the financial year.

Distributions Details of distributions paid and proposed are set out in note 12 to the Financial Statements.

Independent Auditor The independent auditor, Deloitte, have indicated their willingness to continue in office in accordance with section 383(2) of the Companies Act, 2014.

Directors The Directors of the Company who served at any time during the financial year are stated below:

Paul McNaughton Justin Egan Brian Collins Emily Mousley (resigned 1 July 2016) Harriet Steel Joseph Kagan (appointed 10 August 2016) Ian Kennedy (resigned 1 July 2016 as alternate Director to Emily Mousley) Ian Kennedy (appointed 10 August 2016 as alternate Director to Joseph Kagan) Ian Pascal (appointed 25 February 2016 as alternate Director for Harriet Steel)

Connected Persons The Central Bank UCITS Regulations require that any transaction carried out with a UCITS by a management company or depositary to the UCITS, the delegates or sub-delegates of the management company or depositary and any associated or group of such a management company, depositary, delegate or sub-delegate (“connected persons”) must be carried out as if negotiated at arm’s length. Transactions must be in the best interests of the shareholders.

The Board of Directors are satisfied that there are arrangements (evidenced by written procedures) in place, to ensure that the obligations set out in Regulation 41(1) of the Central Bank UCITS Regulations are applied to all transactions with connected persons, and are satisfied that transactions with connected persons entered into during the year complied with the obligations set out in Regulation 41(1) of the Central Bank UCITS Regulations.

Significant Events During the Financial Year On 1 January 2016, income equalisation was introduced on the following funds; the Hermes Global Emerging Markets Fund, the Hermes Global Equity Fund, the Hermes UK Small and Mid Cap Companies Fund, the Hermes European Alpha Equity Fund, the Hermes Europe Ex-UK Equity Fund, the Hermes US SMID Equity Fund, the Hermes Asia Ex-Japan Equity Fund, the Hermes Global Equity ESG Fund, the Hermes Multi Asset Inflation Fund, the Hermes Global Small Cap Equity Fund and the Hermes US All Cap Equity Fund.

Hermes Investment Funds Public Limited Company Directors’ Report (continued)

Significant Events During the Financial Year (continued) The Hermes UK Small and Mid Cap Companies Fund and the Hermes Active UK Inflation-Linked Bond Fund terminated on 15 February 2016 and 29 February 2016 respectively. All proceeds were subsequently returned to shareholders.

The annual KIID update was completed on 29 January 2016.

Ian Pascal was appointed Alternate Director to Harriet Steel on 25 February 2016.

On 18 March 2016, Northern Trust Fiduciary Services (Ireland) Limited, previously Custodian of the Company for the period 1 January 2016 to 17 March 2016, was appointed Depositary of the Company, in compliance with the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2016 that came into force on the same date.

On 30 March 2015, the Central Bank of Ireland published two sets of regulations: Client Asset Regulations (“CAR”) and Investor Money Relations (“IMR”) which strengthens the safeguards around client assets and investor money. On 1 March 2016 a new bank account was set up in the Company’s name in line with the Central Bank of Ireland requirements. Any subscription monies not yet applied to the sub-funds or that have been redeemed but not yet paid out from the funds will form the balance of this account.

The Company issued an addendum to the prospectus on 5 May 2016, which detailed the change from custody fees to Depositary for the sub-funds.

A notice was sent to the shareholders of Hermes Asia Ex-Japan Equity Fund on 11 May 2016 to notify them of changes to the capacity management measures introduced on 11 May 2016.

On 13 June 2016, the Company issued a stand-alone supplement on the Hermes Europe Ex-UK Equity Fund, covering the introduction of a new M share class.

On 1 July 2016, following her resignation from Hermes Fund Managers Limited, Emily Mousley resigned as a Director of the Company. At the same date, Ian Kennedy resigned as Alternate Director to Emily Mousley.

An application to appoint Joseph Kagan as a Director of the Company was submitted to the Central Bank of Ireland and was approved on 10 August 2016. At the same date, Ian Kennedy was appointed Alternate Director to Joseph Kagan.

A notice was sent to the shareholders of Hermes Asia Ex-Japan Equity Fund on 18 August 2016 advising that from 19 August 2016, the Fund has been re-opened to new investors. A daily limit will still be imposed for all subscriptions.

Effective 1 September 2016, three of the sub-funds changed their names as follows:

 Hermes Sourcecap European Alpha Fund – now Hermes European Alpha Equity Fund  Hermes Global High Yield Bond Fund – now Hermes Global High Yield Credit Fund  Hermes Sourcecap Europe Ex-UK Fund – now Hermes Europe Ex-UK Equity Fund

The Prospectus, Supplements and Memorandum and Articles for the Fund were updated on 1 September 2016. Included in the update were changes in relation to UCITS V and CBI Rulebook disclosures. Also included were the Fund name changes and Director appointments.

Subsequent Events For details of all events affecting the Company subsequent to the year end which would impact on the Financial Statements, please see note 17.

Hermes Investment Funds Public Limited Company Investment Manager Information

Responsibility: a core value

Hermes Investment Management is an active asset manager working to deliver excellent, long-term, risk adjusted performance – responsibly. We strive to lead the debate and contribute to the transformation of the investment industry for the benefit of our clients, their stakeholders and, ultimately, society at large.

Our agenda and activities are driven by the long term objectives of our clients’ beneficiaries and we act in their interests.

Responsibility in practice

We have a comprehensive programme to ensure our responsibility approach and activities are integrated seamlessly in our funds and stewardship service. This includes:

- Delivering sustainable performance within the terms of the mandate and within the clients’ risk appetite - Taking into account all material investment factors including environmental, social and governance (ESG) factors, ensuring that we are informed though not constrained by these considerations - Acting as a responsible, engaged, long-term steward of investments encompassing constructive dialogue and taking action where necessary - Engaging with public policy makers and industry bodies to encourage a sustainable economy beyond the timeframe of a specific mandate

Hermes investment teams across Real Estate, Equities and Fixed Income integrate ESG factors into their investment decisions by accessing in-house expertise, proprietary and third-party research. This includes Hermes’ proprietary ESG Dashboard which provides an ESG score per stock and the ESG Portfolio Monitor, which provides a holistic view of ESG statistics at a portfolio level. The ESG dashboard and Portfolio Monitor draw on best-in-class data from various sources including Sustainalytics, Trucost as well as voting and engagement progress data from Hermes EOS, Hermes’ stewardship service. Through the dashboard and close interaction with the EOS team, our investment teams are able to benefit from the unique data insights and positive impact of our engagement work.

Hermes EOS, which provides stewardship services for more than 40 institutional investors, is a global market leader in voting and engagement with both companies and public policy makers. The team votes over 9,000 companies and actively engages with over 500 companies a year at executive and board level on a range of issues including board governance, executive remuneration, risk management, business strategy, corporate culture, carbon, pollution, water stress, labour and community rights. We are also active participants in a wide range of public policy discussions and our Chief Executive, Saker Nusseibeh, founded the 300 Club, an independent forum for discussion and debate about the responsibilities of the investment industry.

Whilst the responsibility for implementation resides with all Hermes personnel, the ESG integration programme is led, coordinated and supported by a small dedicated team: a head of responsibility reporting to the CEO and a senior executive responsible for co-ordination and execution. This team is further supported by the Responsibility Working Group, which meets quarterly, to set Hermes policy and lead initiatives. The Responsibility Working Group includes the CEO, investment, business development and responsibility representatives as members.

Voting

Over the course of 2016, for Hermes Investment Funds Plc, we voted at 477 shareholder meetings (5,614 resolutions). At 181 of those meetings we opposed one or more resolutions. We voted with management by exception at 15 meetings and abstained at 3 meetings. We supported management on all resolutions at the remaining 278 meetings.

Hermes Investment Funds Public Limited Company Investment Manager Information (continued)

Voting (continued)

Statistics Total

Total meetings voted in favour 278

Meetings where voted against (or voted against AND abstained) 181

Meetings where abstained 3

Meetings where voted with management by exception 15

Total meetings 477

Source: Hermes 01/01/2016 - 31/12/2016

Engagement

Over the course of 2016, for Hermes Investment Funds Plc, we engaged with 177 companies on 519 issues. Hermes’ holistic approach to engagement means that we typically engage with companies on more than one issue simultaneously. The engagements included in these figures are in addition to our discussions with companies around voting matters.

Theme Global Environmental 80 Social and Ethical 117 Governance 222 Strategy and Risk 100 Total 519

Source: Hermes 01/01/2016 - 31/12/2016

Hermes Investment Funds Public Limited Company Investment Manager’s Report

Performance Update

Returns to the year ended 31 December 2016

One Year

Return % Benchmark % Performance

Hermes Global Emerging Markets Fund1 30.06 32.63 (1.93) Hermes Global Equity Fund1 30.11 28.24 1.46 Hermes European Alpha Equity Fund 16.57 20.51 (3.26) Hermes Global High Yield Credit Fund 10.92 15.52 (3.99) Hermes Europe Ex-UK Equity Fund 17.28 19.69 (2.02) Hermes US SMID Equity Fund1,2 43.38 38.84 3.27 Hermes Asia Ex-Japan Equity Fund1 30.65 24.30 5.11 Hermes Global Equity ESG Fund1 26.29 28.66 (1.84) Hermes Multi Strategy Credit Fund4 9.38 16.21 (5.88) Hermes Multi Asset Inflation Fund6 4.64 2.49 2.10 Hermes Global Small Cap Equity Fund1 34.20 34.44 (0.18) Hermes US All Cap Equity Fund1,3 33.06 33.02 0.03 Hermes Absolute Return Credit Fund5 2.61 3.92 (1.27)

Note: Relative performance returns are calculated on a geometric basis Total Return in GBP except Global High Yield Credit in EUR, Multi Strategy Credit in USD and Absolute Return Credit in USD, net of fees (this is the 'F' Share Class). Returns based on midday F GBP Acc NAV since seeding with midday Z GBP Acc NAV fee adjusted synthetic history except Hermes Global High Yield Credit Fund F EUR Acc and Hermes Multi Strategy Credit Fund F USD Acc. All Fund returns are based on midday pricing apart from the Credit Funds which are based on close of business. All benchmarks/targets are based on close of business prices.

1 Benchmark is net of withholding tax 2 Russell 2500 TR net benchmark is calculated from the penultimate working day of each month 3 Russell 3000 TR net benchmark is calculated from the penultimate working day of each month 4 BofA Merrill Lynch Global High Yield Index (Hedged USD) is a measure used to monitor the performance of the Hermes Multi-Strategy Credit Fund but not the benchmark 5 3M LIBOR +3% is a target not a benchmark 6 RPI% is not the benchmark of Multi Asset Inflation Fund but a comparator

Hermes Investment Funds Public Limited Company Investment Manager’s Report (continued)

Hermes Global Emerging Markets Fund

Market Review The MSCI Emerging Markets Index rose 11.2% during the period in dollar terms to outperform developed markets. The recovery in commodities and the topping out of the dollar were key factors, but lack of income in the developed world also enticed huge fund flows in search of yield. Progress was knocked back by Donald Trump’s US Presidential election victory, with concerns about the effects of a stronger Dollar (making it harder for companies and countries to repay Dollar-denominated debts) and trade sanctions weighing.

The prospect of fiscal stimulus leading to stronger growth in the US, inflation, and increases in interest rates sent Treasury yields and the Dollar higher. Those emerging markets and currencies perceived to be the most sensitive to a tighter global interest rate environment posted the steepest declines. This included Turkey, Malaysia and Indonesia.

Mexico and the Peso declined amid concerns that the incoming US administration could implement protectionist trade measures. Chinese stocks were impacted following weaker investment sentiment, in part owing to capital outflows as the Renminbi depreciated, as well as concerns surrounding trade policies following Trump’s election victory.

In contrast, a recovery in energy and commodity prices was beneficial to a number of markets. Russia was one of the best-performing markets, benefitting as oil prices rallied following the OPEC agreement to cut production. Latin America outperformed regionally, led by Brazil which rose 66% as the government’s decision to impeach President Dilma Rousseff gave investors fresh hope that sensible economic policies would return to spark a sustainable economic recovery. Interim president Michel Temer appointed a new cabinet and a series of policy measures which were well received by the market. Returns were further boosted by the relative strength of the Brazilian Real to the Dollar.

Investment Strategy We reduced our Chinese exposure, trimming names that outperformed during 2016 owing to increasing long- term risks to ‘old-China’ sectors like Basic Materials and Industrials (making ‘new-China’ Information Technology and Consumer Discretionary more vulnerable too). These risks are arising from FX deterioration, spiralling debt and increased risks of capital outflows. India remains our largest relative overweight, given our expectation that Prime Minister Nerendra Modi’s structural reforms should underwrite sustainable long-term growth and modernise the country. We favour well-managed, quality businesses with robust financial structures, that are willing to compete through innovation and efficiency, and are well placed to benefit from India’s positive structural trends. In the most recent quarter we initiated a position in Samsung Electronics, given our expectations that earnings will recover and the potential for the group to restructure into a more shareholder- friendly organisation. The Korean electronics major has extended its dominant market position in memory, which is expected to enjoy a cyclical upturn in 2017. It will be sole supplier of OLED to Apple next year and we expect a normalisation of the handset division after the Galaxy Note 7 fiasco.

In Latin America, we reduced our Mexican exposure in the fourth quarter, cutting financial holdings Banorte and Banregio owing to the near-term headwinds expected following Trump’s election. In Brazil we added Klabin, a paper and packaging producer, at an attractive entry point based on promising growth projects and improved visibility on cash flow generation and deleveraging. We added Lojas Renner, Brazil’s largest fashion retailer, which operates a fast fashion model comparable to Inditex, H&M, and Uniqlo in a highly fragmented market. We took profits in BB Seguridades, the Brazilian insurance and brokerage services company, and sold Embraer, an aircraft manufacturer, owing to challenging market conditions and our concerns about its governance. We added non-benchmark stock Pampa Energia, Argentina's largest independent integrated energy company, which should benefit from expected improvements in the Argentine electricity sector.

Hermes Investment Funds Public Limited Company Investment Manager’s Report (continued)

Hermes Global Emerging Markets Fund (continued)

Investment Strategy (continued) In the Europe, Middle East and Africa (EMEA) region, we trimmed our exposure to South African names given the difficult macro environment and political turmoil. We sold MTN, the telecommunications business, following a rebound in its share price after the settlement of a fine set by the Nigerian regulator and appointment of a new CEO, and sold Investec given Brexit headwinds for its UK business. More recently we initiated a position in the Foschini Group, an African chain-store retailer, because of its attractive valuation considering its above-peer sales growth in a tough environment. In Russia we initiated a position in Sberbank, whose superior franchise enables the Russian bank to attract cheaper deposits and enjoy a widening of spreads even in tough scenarios and Magnit, a supermarket retailer which should benefit from a rebound in consumer sentiment as the Russian economy recovers.

Performance Review The Fund returned 30.1%, underperforming its benchmark index by 1.9% in Sterling terms, net of fees. Our overweight in China, which underperformed, and our underweight in Brazil, the strongest-performing market, detracted from returns. It follows that the weakness of the Renminbi and appreciation of the Real also harmed returns. Stock selection in China, Korea and Mexico helped offset losses from holdings in Brazil and Russia.

Tong Yang, a Taiwanese auto-parts manufacturer, was the largest contributor to relative performance on improving margins owing to a better product mix, product efficiency and new Chinese plants which started to contribute to revenues. BB Seguridade, the Brazilian insurance and financial services provider, benefitted from solid quarterly results and improved market sentiment. Brazil was the best performing emerging market in 2016, rising more than 66%. The Chinese liquor maker Kweichow Moutai rose as prospects for the sector finally improved following China’s anti-corruption crackdown several years ago.

The most significant detractor was the Fund’s holding in Embraer, the Brazilian commercial and corporate aircraft manufacturer, which fell on lower-than-expected quarterly results due to margin pressure. Shenzhen International fell after reporting weaker-than-expected results owing to declining margins in its logistics businesses. Chinese equities delivered just 0.9% returns over the period as Yuan depreciation, weak trade date and tightening liquidity all weighed on sentiment. Meanwhile, Russian internet company Mail.ru declined as investor concerns of growth deceleration and the UK’s Brexit vote weighed on shares.

Outlook Trump's cabinet is unabashedly protectionist, which will affect all markets – including the US. We also expect a ‘border tax’ levied on goods imported to the US to have negative effects globally. However, given Trump's tendency to go for the grand gesture, a grand bargain seems the most likely outcome, and this is what markets seem to be implying.

A low cost of capital, competitive exchange rates, scope for fiscal stimulus (if required) and relatively settled politics provide macroeconomic support for global emerging markets this year. Furthermore, reasonable valuations and a decent growth outlook underpin their microeconomic foundations. Together these factors should largely offset the risk of retrograde policies emanating from a populist US administration.

Hermes Investment Management Limited February 2017

Hermes Investment Funds Public Limited Company Investment Manager’s Report (continued)

Hermes Global Equity Fund

Market Review Markets in 2016 were driven by a series of inflection points. China’s currency devaluation in the first weeks of the year raised concerns of a slowdown in China affecting global GDP growth. This led investors towards defensive large, high quality, high yield names. Risk appetite soon changed though as a weakening Dollar and signs that commodity prices had started to stabilise ignited a sharp rotation into previously unloved stocks, led by the resources sector.

Politics came to the fore as we approached the mid-point of the year as the UK electorate voted to leave the European Union, causing a dramatic rise in risk aversion. Brexit was the first of three anti-establishment political shocks in 2016 with Donald Trump’s election victory and the defeat of Mateo Renzi in the Italian constitutional reform referendum. Although the lead up to each event created increasing uncertainty, the reaction to each was progressively more muted.

The biggest influences over the second half of the year were rising yields and inflation expectations. This heralded a further change in investor positioning with increased selling pressure on bond proxies and more buying of financials and resources. Elsewhere, the oil price continued to rise, approaching $55 towards the end of the year after OPEC agreed to cut oil production, which gave the Energy sector a further boost after a strong run over the year.

The Health Care sector was weak owing to pricing pressure in the US. It is also one of the traditional defensive sectors and the preference for the cheaper cyclical part of the market provided a further headwind. Against this backdrop, the MSCI World Index returned 28.2% in Sterling terms.

Investment Strategy There were no enhancements to the investment process over the year and we remained focused on stock selection, with neutral regional and sector weightings.

The Fund uses systematic fundamental analysis to assess the attractiveness of over 5,000 stocks on a daily basis. This analysis involves a disciplined bottom-up stock selection process, which is based on well- documented anomalies and trends in investor behaviour. The Fund aims to take advantage of systematic behavioural biases of market participants while remaining cognisant of the risks associated with the modelling of such behaviour.

We determine fair value for a stock by using metrics from the full range of a company’s financial statements, and our modelling employs a wide variety of stock characteristics (often referred to as factors) designed to proxy expected investment returns and the behaviour of market participants. The Fund’s multi-factor approach ensures we remain exposed to a range of styles and it aims to generate consistent out performance in all market environments. We closely monitor the performance of each factor with the aim of building stock selection models that deliver consistent and sustainable excess returns.

Portfolio modelling is utilised in the portfolio construction process to trade-off between expected return and portfolio risk, allowing for both portfolio constraints and transaction costs. The process is further supplemented by portfolio exposure analysis using our proprietary risk modelling system, MultiFRAME, which allows us to assess the Fund’s exposure to any quantifiable risk factor.

Unlike traditional quantitative strategies, analysis is also completed on a disciplined subjective, stock level basis. The team uses their extensive experience to challenge the output of the investment model and remove trades subject to significant non-quantifiable factors or unreliable inputs.

Performance Review The Fund returned 30.1% over the period, outperforming the benchmark index by 1.5%. Stock selection was the main driver of relative returns from a sector, country and regional perspective during the period. From a sector perspective, the biggest contributors to relative returns were Consumer Discretionary, Energy and Industrials, while Telecoms was a modest detractor.

Hermes Investment Funds Public Limited Company Investment Manager’s Report (continued)

Hermes Global Equity Fund (continued)

Performance Review (continued) From a regional viewpoint, North America, driven by stock selection in the US was the dominant influence on the excess return. Europe also added significant value with contributions across a broad range of countries with Norway, Germany and Finland adding the most value, while the UK was the only major detractor. Japan and Asia Pacific were modest detractors.

The biggest individual contributions came from the Energy sector through Oasis Petroleum, Aker BP and Marathon Petroleum. Each stock benefited from the rising oil price that approached $55 towards the end of 2016. In addition, Aker BP finalised the BP Norge transaction and benefited further after its dividend restriction was removed.

The biggest detractors were Unicredit, Novo Nordisk and Kroger. Unicredit fell as yields continued to decline in the first half of the year and then concerns over high bad debt levels in the Italian banking sector. Novo Nordisk fell in the latter third of the year over pricing pressure on diabetes drugs in the US, while Kroger declined as deflationary pressures on grocery prices mounted in the US.

The big question at the moment though is whether the recent rotation towards value is a major inflection point or a false dawn. Consensus earnings expectations continue to favour the cyclical part of the market, but, given the re-rating, much of this will be priced into valuations already. This provides a clear risk to this area of the market, as failure to live up to expectations is likely to be treated severely.

Another reason why investors are likely to be more discerning in 2017 is the current low level of dispersion, which was driven by the variety of top down influences that affected markets over the year. This cannot continue indefinitely especially as the performance gap between value and growth closes and any increase in dispersion will ultimately benefit those that focus on the fundamental merits of individual companies.

Hermes Investment Management Limited February 2017

Hermes Investment Funds Public Limited Company Investment Manager’s Report (continued)

Hermes European Alpha Equity Fund

Market Review Markets experienced a series of inflection points in 2016, as the merits of individual companies took a backseat for much of the period. The year was kick-started by China’s devaluation of its currency, which saw investors flock towards large, high-quality, high-yielding stocks. However, a weakening Dollar and preliminary signs that commodity prices were stabilising triggered a sharp rotation into downtrodden, unloved stocks, led by the resources sector.

In the subsequent months the discussion turned to Brexit. This was to be the first of three political shocks over the year, followed by Donald Trump’s US election victory and Italian Prime Minister Matteo Renzi’s failed constitutional referendum later in the year. Although these events hogged the headlines, the impact of each on the equity markets was progressively more muted. This was partly because investors were focusing more on central bank activity, as bond yields and inflation expectations had started to rise in July. This heralded a further change in investor positioning, with increased selling pressure on stable growers (often labelled bond proxies) and more buying of financials and resources companies, which accelerated after the US election.

These sentiment swings were punctuated by brief periods of discriminate buying and selling around the quarterly earnings seasons, when fundamentals were the clear driver. In these periods, the portfolio performed well, with the majority of its holdings meeting or beating expectations. In fact, up until the end of the third quarter, our holdings’ sustainable earnings growth was one of the key factors behind the Fund’s positive relative performance over the period.

All this proved to be challenging for the Fund, which suffered a downturn in performance over the final quarter that ultimately led to it underperforming over the year.

Investment Strategy The Fund’s broad positioning has stayed constant over the year, with a firm bias towards future growth in the form of positive earnings revisions and forward-looking and sustainable growth, according to Style Research. The changes we made to its sector positions were a residual element of the bottom-up stock picking approach that the team uses.

The biggest change to the Fund’s GICS sector positioning over 2016 came in Consumer Discretionary, which saw its overweight position increase as a result of our purchase of Pandora and positive performance from the likes of Adidas, Sodexo and Valeo. Our overweight in Information Technology decreased following the takeover of ARM Holdings and the underperformance of firms such as Wirecard and Worldpay over the year. The other major move came in the Materials sector, which saw its underweight position increase in size as a result of our sale of Linde at the start of 2016 and the outperformance of resources names that we did not hold in the portfolio over the year.

Despite the recent underperformance, we remain comfortable with the shape of the current Portfolio. The majority of its holdings continue to deliver positive earnings growth, which should ultimately drive shareholder returns over the long term regardless of whether the recent market rotation towards value is indeed a major inflection point or just a false dawn.

Performance Review The Fund returned 16.6%, lagging the benchmark index by 3.3% over the year. Its underlying factor exposures were a significant cause of its underperformance over the year. Over 2016 the portfolio’s lower dividend yield than the market was the main cause of underperformance from a factor perspective, particularly in the first half of the year as yields continued to fall. In the final quarter, the chief detractors were value factors such as price- to-book, with our underweight in Financials a major element in this.

Sector allocation was the cause of the underperformance over the year, while stock selection (including currency effects) was a modest detractor. Overall, the biggest contributions came from Financials, Consumer Goods and Technology, while the biggest detractors were Basic Materials, Industrials and Healthcare.

Hermes Investment Funds Public Limited Company Investment Manager’s Report (continued)

Hermes European Alpha Equity Fund (continued)

Performance Review (continued) At the individual company level, sustainable earnings growth was a major influence on relative returns, with Adidas, Sberbank and ARM the top three contributors to the Fund’s relative return over the year. Sberbank also received a boost from the increasing oil price and higher yields over 2016, while ARM was taken over by Softbank during the summer.

Novo Nordisk was the biggest detractor, falling in the final few months of 2016 owing to pricing pressure on diabetes drugs in the US. Nokia declined after it settled its patent dispute with Samsung for a lower sum than anticipated. It was also affected by Ericsson’s profit warning resulting from weakness in its Networks division, which had a read-across for Nokia’s own networks exposure. Telecom Italia fell in the first half of the year and was affected by concerns over the Italian economy, the company’s high debt, and the bankruptcy of Brazilian telecom operator Oi, which was one of the main suitors for its Brazilian operations.

Outlook We have long said that economic cycles will be short and shallow and we see little reason to believe this will change in the near future. The world has become more leveraged and servicing increasingly bloated debt levels has become more onerous, which is not a strong foundation for sustained growth. The current consensus view reminds us of our old adage to avoid anchoring yourself to the past by assuming past correlations and trends will repeat themselves.

Our approach is firmly focused on the bottom-up, as ultimately the economic value of a company is driven by the cashflows it generates, and this will be reflected in shareholder returns over time. This is why we spend a large portion of our time talking to firms to understand the risks and opportunities they face not only as a company, but also as part of an industry.

These conversations inform our world view. It is a view based on reality and not the extrapolation of short-term trends. If we begin to see the opportunity set spread to the more cyclical parts of the market, the Fund will evolve to reflect this. This requires real evidence of sustainable growth in cyclical firms’ respective operating environments, but our conversations with companies have so far failed to provide strong evidence of such improvements.

Hermes Investment Management Limited February 2017

Hermes Investment Funds Public Limited Company Investment Manager’s Report (continued)

Hermes Global High Yield Credit Fund

Market Review 2016 has proved to be a very strong year for global high yield, but the technically fuelled rally needs to be treated with caution given the drivers – namely distressed energy and government bonds – are not likely to continue to perform in the same way going forward.

Throughout 2016 there were no shortage of catalysts driving spreads tighter. The referendum vote in the UK and the Republican sweep of the US elections raised inflation expectations and the Federal Reserve (“Fed”) raising interest rates at its December meeting boosted sentiment driving risk assets higher. In bond markets, US Treasury yields moved higher throughout the latter of the year on the back of a hawkish Fed and the expectations of more active rates rises in 2017.

Nonetheless, the total return for the global high market was over 15% for the year. With the significant rally in global government bond yields, those high yield bonds trading with a reduced sensitivity to interest rates outperformed over the year, further boosted by a rise in the price of oil, aiding stressed commodity names and shrinking further the tail of the high yield market.

The Fund remains long the front and long end of credit curves, but underweight the “belly”. Owing to value, our geographic preference remains with US and hard-currency emerging markets versus Europe. With that said, we continue to be wary of the stressed part of the market (largely US Dollar energy related) and instead focus our attention on picking up premium through pro cyclical, companies in US and emerging markets, reverse-Yankees into Europe and the UK and also Sterling securities.

In the defensive bucket we see the opportunity in bearish positioning to US retail via Macy’s. Additionally we see the packaging sector being increasingly overvalued and have entered a bearish capital structure trade in Reynolds.

Investment Strategy Throughout the period, based on a suite of factors - fundamental, technical, valuation - we focused our appetite for risk on higher credit quality opportunities. These views, which are current in the Fund, were expressed by adding high-quality high yield and investment grade risk in Basic Materials, Energy, Financials and Telecom. Owing to the exogenous forces of central banks flattening credit curves, we have a preference for longer-dated, lower-cash price securities. Indeed we have found further opportunities in the corporate hybrid space, including Enbridge. Although our geographic preference remains with the US credit market, we believe pockets of value remain in Europe down the capital structure of investment grade names. Meantime, our diversified exposure to hard-currency emerging market debt remains.

At the confluence of historically low government bond rates, and the rising correlation between risk assets and government bonds, we are running duration at a low level. Between the low duration of the Fund and the avoidance of government bonds as a “capital protection trade”, we believe a breakdown of the correlation between interest rates and risk assets – a key risk for credit – would be well mitigated by current positioning.

Performance Review Given the up-in-quality bias of the Fund in the context of a high-beta rally, performance was in-line with expectations. The Fund returned -4.0% relative performance, lagging the benchmark return of 15.5%. This benchmark return was inflated by the extremely positive tail winds of distressed energy and interest rates – neither of which form a significant part of our strategy.

We continued to keeps the Fund’s duration lower than the benchmark, which was a meaningful headwind in the context of a more hawkish Fed, with the expectation of a harder monetary stance and the likelihood of more active rates rises in 2017.

Sources of relative performance came from the banking, insurance and basic industry sectors. Detractors of performance were Energy, capital goods and leisure.

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Hermes Global High Yield Credit Fund (continued)

Performance Review (continued) Strong single name performance came from our underweight allocation to Energy, with oil prices rising and beginning to stabilise – with MPLX and EP Energy both up relative over the year. An overweight in Basic Industry also had some strong names providing positive relative returns over the year, including Range Resources, Gerdau, BHP Billiton and Huntsman.

Detractors of relative performance came from the Energy sector, in particular distressed names such as Petrobras, Chesapeake Energy and Petroleos de Venezuela. While these all rallied over the year, it does not form a significant part of our Strategy.

In terms of credit quality, our up in quality bias led to underperformance over the year.

On a geographic basis, we saw outperformance from Western Europe, but given the underweight in North America and emerging markets we lagged in those regions.

Outlook As we look ahead into 2017, we believe the path to outperformance will require fund managers to focus much more on the fixed-income characteristics of the credit management. For example, we believe an over-reliance on the traditional inverse relationship holding up between risky assets and government bonds could be a mistake. We have already seen that relationship breakdown several times over the last few years, given the historically low rate environment. Therefore a dogmatic belief in duration to provide protection in periods of extreme volatility could place capital at risk.

To manage this risk we believe that for the purpose of protecting capital, it makes sense to be duration-light in credit strategies, particularly given the asymmetric return profile of interest rates. Another of the many unintended consequences of the prolonged low rate environment sits at the confluence of the global hunt for yield and the ability for companies to refinance their debt with more generous covenant packages.

Since 2014 we have seen a substantial decline in recovery rates. Given these conditions, in the context of a somewhat muted economic outlook, as credit managers chase performance down the rating scale, they are magnifying their bets more than ever before because with low recovery rates, downside risks are far greater.

In 2017 we do not believe that gambling with default risk to deliver performance makes sense. Therefore, in addition to respecting the breakdown in the traditional relationships between risky assets and “duration”, to generate performance one must have the flexibility to capture the valuation anomalies that reveal themselves when looking at credit markets in a seamless way on a global basis.

We must avoid the well-trodden path of traditional credit management. In order to deliver outperformance for our clients we are compelled to invest with strategies that align with where credit markets are going, not where they have been.

Hermes Investment Management Limited February 2017

Hermes Investment Funds Public Limited Company Investment Manager’s Report (continued)

Hermes Europe Ex-UK Equity Fund

Market Review Markets experienced a series of inflection points in 2016, as the merits of individual companies took a backseat for much of the period. The year was kick-started by China’s devaluation of its currency, which saw investors flock towards large, high-quality, high-yielding stocks. However, a weakening dollar and preliminary signs that commodity prices were stabilising triggered a sharp rotation into downtrodden, unloved stocks, led by the resources sector.

These sentiment swings were punctuated by brief periods of discriminate buying and selling around the quarterly earnings seasons, when fundamentals were the clear driver. In these periods, the Fund performed well, with the majority of its holdings meeting or beating expectations. In fact, up until the end of the third quarter, our holdings’ sustainable earnings growth was one of the key factors behind the Fund’s positive relative performance over the period.

All this proved to be challenging for the Fund, which suffered a downturn in performance over the final quarter that ultimately led to it underperforming over the year.

The biggest change to the Fund’s GICS sector positioning over 2016 came in Industrials, which went from being underweight to overweight. The increase was caused mainly by the purchase in Kion Group.The Consumer Discretionary sector saw its overweight position increase as a result of our purchase of Paddy Power Betfair and positive performance from the likes of Adidas and Valeo. Our underweight in Financials increased in 2016 owing to the sales in UBS and TopDanmark, although the change in position was tempered by strong performance from ING Groep and Bankinter over the year. The other major move came in the Materials sector, which saw its underweight position increase in size as a result of our sale of Linde at the start of 2016.

Performance Review The Fund returned 17.3%, lagging the benchmark index by 2.0% over the year. Its underlying factor exposures were a significant cause of its underperformance over the year. Over 2016 the portfolio’s lower dividend yield than the market was the main cause of underperformance from a factor perspective, particularly in the first half of the year as yields continued to fall. In the final quarter the chief detractors were value factors, such as price- to-book, with our underweight in Financials a major element in this.

Stock selection was the cause of the underperformance over 2016, while sector allocation was a modest contributor to relative returns. Overall, the biggest contributions came from Consumer Goods and Technology, while the biggest detractors were Financials, Health Care and Basic Materials.

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Hermes Europe Ex-UK Equity Fund (continued)

Performance Review (continued) At the individual company level, sustainable earnings growth was a major influence on relative returns, with Adidas, Randgold and MTU Aero Engines the top three contributors to the Strategy’s relative return over the year. Randgold also received a boost from a combination of its defensive qualities, especially in the first half of the year, and the resources-led rotation.

Novo Nordisk, Telecom Italia and UBS detracted the most over the year. Novo Nordisk fell in the final few months of 2016 owing to pricing pressure on diabetes drugs in the US. Telecom Italia declined in the first half of the year and was affected by concerns over the Italian economy, the company’s high debt, and the bankruptcy of Brazilian telecom operator Oi, which was one of the main suitors for its Brazilian operations. We have now sold this position. UBS saw its earnings challenged, fuelled by increased market volatility, while the unrelenting decline in bond yields over the first half of the year provided a headache for all banks, including UBS.

Our approach is firmly focused on the bottom-up, as ultimately the economic value of a company is driven by the cashflows it generates and this will be reflected in shareholder returns over time. This is why we spend a large portion of our time talking to management, to understand the risks and opportunities they face not only as a company, but also as part of an industry.

These conversations inform our world view. It is a view based on reality and not hope, which is driven by the extrapolation of short-term trends. If we begin to see the opportunity set spread to the more cyclical parts of the market, the Fund will evolve to reflect this. This requires real evidence of sustainable pick-up in cyclical firms’ respective operating environments, but our conversations with companies have so far failed to provide strong evidence of such improvements. However we maintain a flexible mind-set, and stand ready to pounce should the opportunity present itself.

Hermes Investment Management Limited February 2017

Hermes Investment Funds Public Limited Company Investment Manager’s Report (continued)

Hermes US SMID Equity Fund

Market Review Global macroeconomics were dominated by the build-up to the presidential election and subsequent victory of Donald Trump and the Republican Party. Trump’s plans to cut taxes, boost infrastructure spending and reduce regulations were seen as positive for domestic growth and small and mid-cap equities performed particularly well, with the Russell 2000 and Russell 2500 recording respective gains of 21.3% and 17.6% in US Dollars.

The Federal Reserve (“Fed”) raised interest rates in December, signifying confidence in the continued strength of the US economy. Macroeconomic data largely improved, including a decline in the unemployment rate, strong non-farm payrolls data and higher-than-expected GDP growth of 3.5% year-on-year in the third quarter. Rising bond yields and the Fed rate rise led to a shift out of higher quality defensive stocks into value.

At the sector level, cyclicals were the standout performers, led by Materials & Processing which rose 32%, followed by Producer Durables which rose 26%. Health Care was the worst performing sector, down 6%.

Investment Strategy In the first quarter, we recycled profits out of some holdings that performed well in 2015 and in the market sell- off into names which, in our view, offered greater value. Many of these were value stocks that we already held and which appeared oversold, principally Producer Durables and Materials and Processing businesses.

We purchased two real-estate investment trusts (REITS) over the period; Weingarten Realty Investors, which offers a broad spread of high-quality retail assets, and Retail Opportunity Investments, which owns high-quality community shopping centres. Both companies provide an attractive yield. We also initiated a position in Cooper Companies, a contact lens manufacturer that is well positioned to benefit as a significant proportion of customers transition from frequent use to daily lenses. We added Axalta Coating Systems, which is exposed to the automotive refinish market, an area we regard as more attractive than the exposure to used-car sales volumes and automobile finance offered by Carmax, which we sold. We also sold two regional banks, First Republic and East West, seeing less value in them given our expectations (at the time) for the prolonged low interest rate environment.

We purchased Wabtec which engineers and manufactures freight railroad and passenger transit equipment. We sold Waddell & Reed in a switch for SEI Investments Company, which is a beneficiary of the trend to outsourcing of non-core capabilities in the financial services industry. We sold American Water Works after a period of strong performance to purchase Alliant Energy, a diversified utility company, and Intersil following a bid by Japan’s Renesas Electronics. We trimmed Wex and Matthews International after a strong run and added to oil-related stocks Oceaneering and Kirby following the oil price weakness in the third quarter.

Since the election, we have tilted the strategy marginally more towards cyclicals, acknowledging the likely fiscal tailwind and pro-growth policies at the outset of the Trump regime. We trimmed our positions in lower-beta names and added to banks and industrial companies, which are likely beneficiaries of an improved outlook for economic growth.

Performance Review During the period the Fund returned 43.4%, outperforming the benchmark index by 3.3% in Sterling terms, net of fees. This outperformance resulted mainly from strong stock selection, notably in Health Care and Technology. The underweight to Utilities also proved helpful.

Cognex (machine vision systems) was the biggest contributor to relative performance after delivering strong results with revenues above the high end of guidance. Martin Marietta, a cement and aggregates company, rose on strong earnings driven by a tangible recovery in the construction industry and expectations that margins will receive a boost from fiscal stimulus following Trump’s election. Clarcor, a leading manufacturer of filtration products for the transportation, industrial and environmental market, moved higher after agreeing to be acquired by Parker-Hannifin at approximately a 17% premium relative to the all-time high.

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Hermes US SMID Equity Fund (continued)

Performance Review (continued) Diplomat Pharmacy, a specialist pharmacy company, was the largest detractor to returns given lower-than- expected sales of its Hepatitis C drug and a change in the way direct and indirect remuneration fees are charged to pharmacies by pharmacy benefit managers. Steris, a sterilisation equipment and services provider, fell relative to peers with divestitures slowing top line growth and a softer than expected second fiscal quarter. East West Bancorp declined (pre-election) as investors judged global macro concerns to result in lower-for- longer rate levels and by economic concerns in China as it serves a significant part of the Chinese population on the West coast.

Outlook We believe Trump’s election has materially changed the investment environment from one of low interest rates and low growth to a pro-growth, fiscally stimulated economy. Over the medium term we remain highly positive on US small and mid-caps, as plans for a reduction in corporate and personal taxation, the proposed lower tax rate on repatriated overseas corporate cash and reduced regulation are all likely to act as helpful tailwinds. We continue to find good entry points in high-quality companies to be held for the long-term.

Hermes Investment Management Limited February 2017

Hermes Investment Funds Public Limited Company Investment Manager’s Report (continued)

Hermes Asia Ex-Japan Equity Fund

Market Review During the period, the benchmark MSCI AC Asia ex Japan IMI rose 4.2% in Dollar terms. The A-share index fell by 15.3%, being among the poorer performing large markets. The off-benchmark H Share China Enterprises index rose by 1.0%. A number of key risk factors lead Chinese equities to plunge during the year. These included heightened concerns over slowing economic growth, the deterioration of credit quality, property curbs, tightening liquidity as well as depreciation of the Yuan, and capital outflows. The Hong Kong market underperformed as the shadow of China’s slowing economy hung over it, while the UK’s vote for Brexit and Donald Trump’s US election victory weighed on the trade-reliant economy. Taiwan benefited from gains in technology stocks and Indian equities underperformed as the economic fallout from the government demonetisation measures in the fourth quarter weighed on investors sentiment.

Investment Strategy At the start of the year, for the first time since the Fund’s inception, we hedged part of our exposure to the Renminbi. This made us more comfortable in taking larger positions in Chinese stocks, many of which were trading cheaply precisely because some investors were concerned about the potential for the currency to weaken. We believe that buying the cheapening Chinese stocks while (inexpensively) hedging some of the associated currency risk is a sensible and more precise way of gaining our desired Chinese equity exposure for the Fund in the context of this dynamic.

We initiated a position in Samsung SDI, a global Lithium-ion Battery manufacturer, which produces small-sized batteries for Information Technology products and large-sized for electric vehicles systems. It also has valuable other investments, notably (together with Samsung Electronics) an equity stake in Samsung Display, a global leader in mobile AMOLED, the leading display technology for phones. We expect Samsung Display to be able to sustain its technology leadership (with attendant higher profitability) for at least two years.

We initiated a position in the much unloved Hyundai Motors, the world’s fifth largest auto maker in the world. It is trading at a multi-year trough valuation and recently added Hyundai Steel, one of the world’s cheapest steel companies, after it had underperformed its peers. We expect the Korean steel market to improve as China cuts the capacity of its less-efficient steel plants more aggressively. We added to our position in China BlueChemical as, in our view, its stock price does not yet fully reflect the recovery in fertiliser and methanol prices. We sold Korea Electric Power, as Korean-Won-denominated fuel costs rose.

Performance Review During the period the Fund returned 30.7%, outperforming the benchmark index by 5.1% in sterling terms, net of fees. This outperformance resulted mainly from stock selection in Korea and our overweight in that country. Selected stocks in China helped to offset the negative impact from our overweight position there and the weakness in the Renminbi.

Our performance in 2016 was satisfactory, driven in part by a late surge in quality cyclical stocks as they joined the rally in the deep cyclicals that had started earlier in the year.

At the stock level, the biggest contributor to the Portfolio’s relative performance was the cyclically sensitive Hyundai Engineering and Construction, which rose as it won overseas orders and on improving working capital management. Powertech Technology, the world’s largest memory chip packaging and testing service provider, rose after earnings beat on increased demand across its three product lines. Xinyi Glass, one of China’s largest glass producers, was the third largest contributor after it gained on strong demand resulting from increased construction activity.

Not being invested in Taiwan Semiconductor Manufacturing detracted most from performance, as the technology giant performed strongly during the period. China’s online search leader Baidu fell on concerns relating to a toughening regulatory environment following misleading advertising carried on its portal. New regulations limit the amount of advertising that can be carried per page, and advertising now needs to be identified as such. Korea’s Youngone, the original equipment manufacturer of outdoor apparel, declined on disappointing quarterly numbers and continuous stock sales by their largest shareholder amid a worsening political backdrop for Asian exporters.

Hermes Investment Funds Public Limited Company Investment Manager’s Report (continued)

Hermes Asia Ex-Japan Equity Fund (continued)

Outlook Since the strategy’s inception seven years ago, our benchmark has only risen approximately 20% cumulatively in Dollar terms. This means it has lagged behind some other large indices, such as the S&P 500 which has more than doubled over the same period. The underperformance of our benchmark, its inexpensive level seven years ago and the growth in regional companies’ assets and earnings since then leaves it looking attractive relative to stocks from elsewhere in the world, in our view.

Given our positioning in what we consider to be the most attractive stocks within the region, we believe the Fund is well positioned to outperform not only its benchmark, but also other broad global indices over the next seven to ten years.

Hermes Investment Management Limited February 2017

Hermes Investment Funds Public Limited Company Investment Manager’s Report (continued)

Hermes Global Equity ESG Fund

Investment Strategy There were no enhancements to the investment process over the year and we remained focused on stock selection, with neutral regional and sector weightings.

The Fund uses systematic fundamental analysis to assess the attractiveness of over 5,000 stocks on a daily basis. This analysis involves a disciplined bottom-up stock selection process, which is based on well- documented anomalies and trends in investor behaviour. The Fund aims to take advantage of systematic behavioural biases of market participants, while remaining cognisant of the risks associated with the modelling of such behaviour.

We determine fair value for a stock by using metrics from the full range of a company’s financial statements, and our modelling employs a wide variety of stock characteristics (often referred to as factors) designed to proxy expected investment returns and the behaviour of market participants. The team employs a best-in-class ESG approach and is embedded the model through the team’s proprietary QESG score. The Fund’s multi-factor approach ensures we remain exposed to a range of styles and it aims to generate consistent out performance in all market environments. We closely monitor the performance of each factor with the aim of building stock selection models that deliver consistent and sustainable excess returns.

Performance Review The Fund returned 26.3% over the period, lagging the benchmark index by 1.8%. From a sector perspective, the biggest contributors to relative returns were the Consumer Staples and Discretionary sectors, while detractions from Financials, Health Care and Materials caused the Fund to underperform.

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Hermes Global Equity ESG Fund (continued)

Performance Review (continued) From a regional viewpoint, Japan was the only positive contribution, while Europe and North America were the major detractors. The UK and Italy were the main drivers of the underperformance in Europe, while Spain and Netherlands were modest contributors. Both the US and Canada detracted from relative returns in North America.

The biggest individual contributions came from the Energy sector through Oasis Petroleum, Cummins and Lam Research. Oasis benefited from the rising oil price that approached $55 towards the end of 2016. Cummins rose steadily over 2016 as it consistently delivered on its targets. Lam Research also increased steadily over the year having consistently delivered on earnings as it grows market share, which led to a strong positive guidance statement for 2017.

The biggest detractors were McKesson, Novo Nordisk and Unicredit. McKesson and Novo Nordisk fell in the latter third of the year over pricing pressure in the US. Unicredit declined as yields continued to fall in the first half of the year and then concerns over high bad debt levels in the Italian banking sector.

Outlook Looking ahead it remains unclear how Trump’s presidency will evolve, his rhetoric suggests he will be firmly pro- growth. If his plans for a cut to corporate tax come to fruition this will undoubtedly be a significant boon for US companies. His cabinet selections and rhetoric, however, do not suggest that tackling global warming, corruption and inequality are high on his agenda, which could pose a material risk over the longer term.

Hermes Investment Management Limited February 2017

Hermes Investment Funds Public Limited Company Investment Manager’s Report (continued)

Hermes Multi Strategy Credit Fund

Market Review 2016 to date has proved to be a very strong year for global high yield – but the technically fuelled rally needs to be treated with caution given the drivers – namely distressed energy and government bonds – are not likely to continue to perform in the same way going forward.

Throughout 2016 there was no shortage of catalysts driving spreads tighter. The referendum vote in the UK and the Republican sweep of the US elections raised inflation expectations and the Federal Reserve (“Fed”) raising rates at its December meeting have boosted sentiment driving risk assets higher. In bond markets, U. S. Treasury yields moved higher throughout the latter of the year on the back of a hawkish Fed, and the expectations of more active rates rises in 2017.

Investment Strategy Throughout the period, based on a suite of factors — fundamental, technical, valuation — we have focused our appetite for risk on higher credit quality opportunities. These views, which are current in the Fund, were expressed by adding high-quality high yield and investment grade risk in Basic Materials, Energy, Financials and Telecom. Owing to the exogenous forces of central banks flattening credit curves, we have a preference for longer-dated, lower-cash price securities. Indeed we have found further opportunities in the corporate hybrid space, including Enbridge. Although our geographic preference remains with the US credit market, we believe pockets of value remain in Europe down the capital structure of investment grade names. Meantime, our diversified exposure to hard-currency emerging market debt remains.

At the confluence of historically low government bond rates and the rising correlation between risk assets and government bonds, we are running duration at a low level. Between the low duration of the Fund and the avoidance of government bonds as a “capital protection trade”, we believe a breakdown of the correlation between interest rates and risk assets – a key risk for credit – would be well mitigated by current positioning.

Performance Review The Fund returned 9.4% over 2016, underperforming the broader global high yield market return of 16.2%.

Fund performance remains above target and both the best selection and defensive buckets are performing as anticipated. The primary driver of performance over the first and second quarters was the strong performance of the best selection bucket, while performance on the defensive bucket was immaterial in the supportive market environment. However, the defensive bucket acted as a cushion in more volatile first and second quarter conditions.

Within the best selection bucket, allocation to emerging markets, North America and the preference for high quality credits were the key drivers of absolute performance.

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Hermes Multi Strategy Credit Fund (continued)

Performance Review (continued) Our up in quality bias had very strong returns over the year with names rated BB and above. We were hedged against rate moves, with the strategy retaining only the spread component of risk. This ensured we were able to capture the flight to quality, while neutralising the negative impact of rate moves.

Strong single name performance came from our overweight allocation to the Basic Industry, with Anglo American, Range Resources and Gerdau all outperforming over the course of 2016.

The biggest detractions of absolute performance came from distressed energy names, however this does not form a significant part of our strategy.

More cyclical areas took the hit of low rates over the course of the year with single name selection in the technology and electronics sectors being a detractor of performance with Dell, HP and NXP Semiconductors all down.

Outlook As we look ahead into 2017 we believe the path to outperformance will require fund managers to focus much more on the fixed-income characteristics of credit management. For example, we believe that an over-reliance on the traditional inverse relationship holding up between risky assets and government bonds could be a mistake. We have already seen that relationship breakdown several times over the last few years, given the historically low rate environment. Therefore a dogmatic belief in duration to provide protection in periods of extreme volatility could place capital at risk.

To manage this risk we believe that defensive strategies can be constructed in credit products. We also believe that for the purpose of protecting capital, it makes sense to be duration-light in credit strategies, particularly given the asymmetric return profile of interest rates. Another of the many unintended consequences of the prolonged low rate environment sits at the confluence of the global hunt for yield and the ability for companies to refinance their debt with more generous covenant packages.

Looking into 2017 we must again avoid the well-trodden path of traditional credit management. In order to deliver outperformance for our clients we are compelled to invest with strategies that align with where credit markets are going, not where they have been.

Hermes Investment Management Limited February 2017

Hermes Investment Funds Public Limited Company Investment Manager’s Report (continued)

Hermes Multi Asset Inflation Fund

Market Review 2016 witnessed wild market swings as a result of multiple market events, many of which were surprising.

In terms of inflation, a shift in market expectations surprised many market participants in 2016 and brought inflation risk back in to the spotlight. The inflation rate in the UK, as measured by the Retail Price Index (RPI), more than doubled, increasing by 1.3 percentage points to 2.5%, up from its low of 0.7% in October 2015. Meanwhile, five-year UK breakeven rates – the market’s expectation of future inflation – peaked at 3.2%, up from lows of 1.9% in late February. The primary influences on inflation were the base effect of the rise in oil prices and the impact of Sterling’s fall on the price of imported goods.

Global equity markets suffered in January and early February with revised earnings expectations, owing to fears of a global economic slowdown primarily driven by concerns over a slowing Chinese economy and falling energy prices. Equity markets temporarily recovered in the second quarter as risk appetite improved when central banks reacted with further loosening before another equity sell-off following the Brexit vote. In the second half of the year equities broadly recovered, while experiencing some volatility as markets monitored central bank activity. Equities then rallied in December through to the end of the year as global markets reacted positively to Donald Trump’s plans to use fiscal stimulus.

Global government bonds had a mixed year. In the first half they were one of the best performing asset classes, reaching record low yields owing to a shift down in interest rates across the yield curve. This was buoyed by loose monetary policy and investors’ seeking safe havens despite already negative bond yields in some countries. However in the second half of the year they gave back some of their gains, as bond yields jumped in November to price in rising inflation expectations from anticipated US fiscal stimulus following Trump’s election victory.

Credit spreads had a strong year. Spreads widened in the early part of the year when all risk assets suffered but then recovered as the credit outlook improved supported by higher energy prices, while corporate defaults stayed at very low levels.

Recovering from a negative previous year commodities had a positive year in 2016. Precious Metals was the leading sector in the first half of the year, with the gold price peaking in early July as investors looked for safe havens. However, it tailed off in the second half as risk appetite increased and the Dollar strengthened. Crude oil rebounded from lows of $27 in mid-February to reach nearly $55 a barrel, as the demand outlook improved and OPEC agreed to control supply. Agriculture and Industrial Metals were also positive as global demand picked up, with the latter surging during November as demand expectation rose in anticipation of US fiscal policies.

Finally, currency had an important influence on investment returns, with the Dollar strengthening against most currencies as the Federal Reserve’s intention to tighten resumed. The largest gain for the Dollar was against Sterling, which fell sharply following the UK’s decision to exit the European Union.

Investment Strategy The Fund is a dynamic multi-asset growth fund with built-in inflation protection. It consists of two types of assets: matching and enhancing. Matching assets have a fundamental relationship with inflation and the ability to protect the real value of capital and enhancing assets have the ability to outperform inflation and generate capital growth.

By combining these two types of assets in one portfolio, we aim to generate annualised real returns of 3% above UK RPI across rolling three-year periods, with a relatively low tracking error to inflation. Our asset- allocation process is driven by a systematic assessment of the relationships between the assets in the portfolio and inflation. As such, RPI is more than a performance benchmark: it drives our entire investment process, from asset selection and portfolio construction to risk management.

Hermes Investment Funds Public Limited Company Investment Manager’s Report (continued)

Hermes Multi Asset Inflation Fund (continued)

Investment Strategy (continued) The marketed return target of the Fund is to deliver 3% real return over a three-year cycle (i.e. RPI +3%). We have defined a specific level of risk necessary to achieve this return target in terms of annualised volatility and tracking error volatility to inflation (TEVI). Specifically, we are targeting annualised volatility of 5% and a TEVI of less than 5%.

Performance Review The Fund returned 4.6% net of fees for 2016, which was above its target of UK RPI. The matching portfolio was the main contributor to returns throughout this period, adding 5.4%, while the enhancing portfolio lost 0.5% (both measured as close of business gross contributions). The Fund’s built-in inflation protection helped generate returns during a challenging year, demonstrating the benefit of embedding inflation protection within a diversified growth portfolio.

The matching portfolio is performing well in an environment where both inflation expectations and the rate of RPI have increased. Matching assets, selected because they have either a contractual or fundamental link to inflation, boosted returns. Inflation breakevens contributed 2.5%, commodity sectors (Petroleum, Agriculture and Industrial Metals) added 1.8%, while real assets and credit spreads returned 0.5% and 0.4% respectively.

In a year of unpredictable events, the performance of inflation-enhancing assets was mixed, resulting in a negative annual return from the enhancing portfolio. Global government bonds contributed 2.3% and global credit added 0.4%, while the remaining enhancing assets detracted: equities by -1.5%, risk factors by -1.1% and Precious Metals by -0.5%.

Since inception in November 2014, although the Fund met its target for 2016, it has so far performed below its target. This is primarily because of underperformance in 2015 from the matching component predominantly driven by reduced commodity prices although part of this was recovered in 2016. The Fund, has maintained its risk objectives in a challenging environment for growth assets with both TEVI and volatility below 5%.

Outlook Commodity prices have recently stabilised and this, combined with the fall in Sterling, is likely to keep inflation elevated through the first half of 2017. The UK government seems inclined to follow the lead of the Trump administration and use fiscal policies to boost growth, which could have a bigger impact on the economy than quantitative easing (“QE”) has so far. To some extent, these factors are already priced in. However in the medium term other factors could push inflation higher for a longer period than the market currently anticipates.

For instance, the rise of protectionist policies in the US could spur inflation and hit growth. Also, the consensus view is that QE has failed to generate inflation. It has generated plenty of liquidity but this has not been transmitted to the economy as expected. Unless it is reabsorbed, this latent liquidity could amplify any inflationary effect caused by fiscal stimulus. Meanwhile, major central banks have stated an intention to ignore inflation’s expected overshoot in 2017. Their stated belief is that, with rates so low, there is plenty of ammunition to fight inflation. Yet if the dilemma between battling inflation and supporting growth persists, policymakers may be reluctant to tighten financial conditions. This may boost inflation expectations further and impact the actual rate of inflation. In our view, inflation is more likely to rise this year than fall.

Taking a portfolio-wide view, we believe that being at such a major political and economic inflection point calls for a moderate level of risk. History shows that in a reflationary environment bonds and equities become increasingly correlated, so we will rely on additional tools such as cross-asset momentum and relative-value strategies to maintain a balanced portfolio. We continue to favour simplicity and liquidity in our approach, while maintaining a dynamic inflation defence at all times.

Hermes Investment Management Limited February 2017

Hermes Investment Funds Public Limited Company Investment Manager’s Report (continued)

Hermes Global Small Cap Equity Fund

Market Review Markets in 2016 experienced a series of sharp inflection points. China’s currency devaluation in the first weeks of the year raised concerns of a domestic slowdown that would affect global growth. This led investors towards defensive large, high quality, high yield names. Risk appetite soon changed though as a weakening Dollar and signs that commodity prices had stabilised ignited a sharp rotation into previously unloved stocks, led by the resources sector.

Politics came to the fore at the mid-point of the year as the UK referendum resulted in a vote to leave the European Union, causing a dramatic rise in risk aversion. Brexit was the first of three anti-establishment political shocks in 2016 with Donald Trump’s US election victory and the defeat of Matteo Renzi in the Italian constitutional reform referendum. Though uncertainty built ahead of each event, the reaction to each was progressively more relaxed.

The biggest influences over the second half of the year were rising yields and inflation expectations. This heralded a further change in investor positioning, with increased selling pressure on bond proxies and more buying of financials and resources. The oil price continued to rise, approaching $55 towards the end of the year, after OPEC agreed to cut oil production, giving the Energy sector a further boost after a strong year.

Throughout this macro activity during 2016, we saw global small caps outperform global large caps. In Sterling terms, the MSCI World Small Cap Index delivered a return of 35.2%, versus the MSCI World Cap Index return of 29.1%.

Investment Strategy The Global Small Cap Strategy is a bottom-up, stock-picked Fund. The lead manager aims to invest in high- quality stocks over the long term and runs a relatively concentrated portfolio of between 50-70 holdings. The team believe this number of holdings is adequately concentrated to provide sufficient stock-specific risk for alpha generation, and is large enough to achieve a desired objective of broad sector and regional neutrality. The team looks for stocks that have high returns on equity and/or high sustainability of revenue and returns. The strategy exhibits a slight growth bias.

The approach is designed to capitalise on alpha generation opportunities among smaller companies by exploiting the inefficiencies of the market, which result from a lack of information and interest, and uncovering undervalued quality stocks at prices below their intrinsic value.

Macro factors are not taken into consideration directly (namely stock positions taken to reflect a macro view), but indirectly via assumptions used in valuation models. The strategy does not engage in thematic or momentum investing.

The strategy is an extension of the manager’s long standing capability in small caps. Hermes Investment Management has managed small cap assets since 1987 and global small cap specifically since July 2011.

Performance Review For 2016 the Fund returned 34.2%, underperforming the benchmark by -0.2% in Sterling terms, net of fees. The Fund performance is based on a net asset value struck at midday (including fees), but compared with the benchmark struck at the prior day’s close, and in Sterling terms. On a comparable basis, namely the end of day, in Dollar terms and gross of fees, the Fund produced a moderate outperformance of 0.6%, rising 13.4% versus the benchmark’s 12.7%. Attribution of performance here is made on this basis.

On a sector basis, both stock selection and asset allocation contributed positively, 1.1% and 0.2%, with currency (-0.8%) contributing negatively to performance.

Best performing sectors included Information Technology and Health Care. Financials and the Consumer sectors were the main detractors.

Hermes Investment Funds Public Limited Company Investment Manager’s Report (continued)

Hermes Global Small Cap Equity Fund (continued)

Performance Review (continued) Cognex (machine vision systems) was the biggest individual contributor after delivering strong results with revenues above the high end of guidance. Wintrust Financial Corp, a multi-bank holding company, showed strong operating leverage after several acquisitions in 2015 had caused a temporary ramp-up in expenses. It also benefitted from a fourth quarter rally across the banking sector. Clarcor, a leading manufacturer of filtration products for the transportation, industrial and environmental markets, agreed to be acquired by Parker-Hannifin in December at a +23% premium.

Diplomat Pharmacy, a specialist pharmacy, was the largest detractor given lower-than-expected sales of its Hepatitis C drug and a change in the way direct and indirect remuneration fees are charged to pharmacies by pharmacy benefit managers Nobia, a Swedish kitchen manufacturer and retailer, has significant sales exposure to the UK and underperformed post Brexit, owing to the fall in Sterling, and concerns around the outlook for the UK consumer. Steris, a sterilisation equipment and services provider, was weak due to slower sales growth and a softer than expected second fiscal quarter.

Outlook Performance in the fourth quarter suggests the Fund is well placed for either a continued rally, where its “full-on” cyclicals should produce further relative performance, or a downturn, given the portfolio’s low beta, should the market take fright at Trump’s actions or other geopolitical shocks occur. Whichever the case, the end of the “lower for longer” interest rate era should mean that investment in high quality/low volatility stocks will be a less crowded space going forward and therefore that pricing inefficiencies will allow us more investment opportunity.

Even though we expect modest earnings growth to continue, rising interest rates will be a test for the ratings which the market has attributed to those earnings. A further increase in the rate of growth will likely be necessary to compensate for the decline in the market’s price/earnings ratio (or its inverse, an increasing earnings yield) that would be commensurate with increased rates; a substantial prop for the market in recent years has been taken away.

Hermes Investment Management Limited February 2017

Hermes Investment Funds Public Limited Company Investment Manager’s Report (continued)

Hermes US All Cap Equity Fund

Market Review The Russell 3000 index finished the period with the Index up 12.8% in US Dollars. The macro environment was dominated towards the end of the period by the Presidential election result. All four major US indices reached record highs as Donald Trump’s election victory is expected to shift the investment environment to a pro-growth, fiscally stimulated economy. Rising bond yields and the Federal Reserve interest rate rise in December have led to a shift out of higher quality defensive stocks into value. Higher beta stocks did well, while small caps outperformed mid and large caps. At the sector level, cyclicals were the standout performers, led by Energy which rose 26% followed by Materials & Processing which rose 23%. Health Care was the worst performing sector declining 3%.

Investment Strategy During the year, we established new positions in several large cap stocks with durable competitive advantages but at that time were out of favour with investors. One example is Procter and Gamble, which is currently undergoing a portfolio restructuring. We expect revenues to accelerate next year when management can focus on gaining back share, and it currently trades at a discount to branded consumer goods peers. We initiated a position in Citigroup, which offers a diversified exposure to an improving global economy. Through cost cutting and balance-sheet rationalisation, the company’s management team is executing a turnaround plan which should see its return on equity eclipse the cost of capital. Another financial share we bought was Charles Schwab, a leading broker offering wealth management services to customers. With $2.6trn in client assets, this speaks to the strength of the franchise. It looks like a good bottom up story which also offers us interest rate and market sensitivity.

We reduced American Water Works after a strong run and our concern that Utilities now look expensive relative to other sectors. The US Utilities sector has large amounts of debt which will become more expensive to service as interest rates move higher. We reduced our position in Microsoft because the share had re-rated as investors became excited about the Azure cloud business, yet Amazon Web Services is adding revenue equivalent to double the entire revenue of Azure each quarter. Our two semiconductor holdings combined in July when Analog Devices agreed to acquire Linear Technology to form an analogue powerhouse. Given Linear shareholders are being paid in cash, we sold our shares and added to our Analog Devices holding.

Performance Review The Fund returned 33.1% over the period in Sterling terms, net of fees, in line with its benchmark which returned 33.0%. Performance was driven primarily by stock selection, notably in Technology and Materials sectors, offsetting losses from stock selection in Health Care and our underweight in REITs.

The largest individual contribution to relative performance was the Fund’s holding in the cement and aggregates company Martin Marietta. It rose on strong earnings, which were driven by a tangible recovery in the construction industry and the expected boost from the multi-year US transportation bill over 2016. The other two top contributors surged on takeover bids. Linear Technology rose after Analog Devices agreed to acquire the company for $15bn to create an analogue powerhouse. The bid price represented a 30% premium. Clarcor, a leading manufacturer of filtration products for the transportation, industrial and environmental markets, moved higher after agreeing to be acquired by Parker-Hannifin.

Valeant Pharmaceuticals was the largest detractor over the period after the drug developer and distributor downgraded 2016 guidance and highlighted the risk of a debt default given a delay in filing accounts. We subsequently exited the position (in the second quarter). Stericycle reported another disappointing quarter and cut its 2016 guidance as hazardous waste and international businesses remained weak and the US medical waste business is facing some pricing pressure. Express Scripts sold off on concerns that Anthem (a health insurer accounting for 16% of revenue) might terminate its contract. We sold the position owing to concerns about strategic positioning.

Hermes Investment Funds Public Limited Company Investment Manager’s Report (continued)

Hermes US All Cap Equity Fund (continued)

Outlook The US economy appears to be moving on from the so-called ‘new normal’ environment of low interest rates, low inflation and limited growth, which has dominated since the recession. With President Trump vowing to ramp up fiscal stimulus against a backdrop of low unemployment and increasing wage inflation, it seems only a matter of time before growth and inflation begin to rise in earnest. On 17-times earnings, the broad US market does not look expensive given the prospect of double-digit earnings growth. Any benefit from a reduction in the corporate tax rate would provide an additional tailwind. At the stock level, we continue to find good entry points into interesting, high-quality companies that we believe are long-term winners within their respective sectors.

Hermes Investment Management Limited February 2017

Hermes Investment Funds Public Limited Company Investment Manager’s Report (continued)

Hermes Absolute Return Credit Fund

Throughout 2016 there was no shortage of catalysts driving spreads tighter. The referendum vote in the UK and the Republican sweep of the US elections, raised inflation expectations and the Federal Reserve (“Fed”) raising interest rates at its December meeting have boosted sentiment driving risk assets higher. In bond markets, US Treasury yields moved higher throughout the latter of the year on the back of a hawkish Fed, and the expectations of more active rates rises in 2017.

Investment Strategy Throughout the period, based on a suite of factors - fundamental, technical, valuation, we have focused our appetite for risk on higher credit quality opportunities. These views, which are current in the Fund, were expressed by adding high-quality high yield and investment grade risk in Basic Materials, Energy, Financials and Telecom. Owing to the exogenous forces of central banks flattening credit curves, we have a preference for longer-dated, lower-cash price securities. Indeed we have found further opportunities in the corporate hybrid space including Enbridge. Although our geographic preference remains with the US credit market, we believe that pockets of value remain in Europe down the capital structure of investment grade names. Meantime, our diversified exposure to hard-currency emerging market debt remains.

At the confluence of historically low government bond rates and the rising correlation between risk assets and government bonds, we are running duration at a low level. Between the low duration of the Fund and the avoidance of government bonds as a ‘capital protection trade’, we believe that a breakdown of the correlation between interest rates and risk assets – a key risk for credit – would be well mitigated by current positioning.

Performance Review In 2016 the Fund returned 2.6% versus its target (3m LIBOR + 3%) 3.9%. The Fund performed as expected. Our core long and core short positions largely offset each other, as systemic risk dominated the idiosyncratic characteristics of credit instruments. Income strategies contributed positively to the overall performance, while exhibiting minimal volatility.

At sector level, our exposure to Basic Industry, Banking and Automotive boosted returns, while Technology & Electronics, Energy and Services detracted from returns.

Our up in quality bias had very strong returns over the year with names rated BB and above. We were hedged against rate moves, with the strategy retaining only the spread component of risk. This ensured we were able to capture the flight to quality, while neutralising the negative impact of rate moves.

Strong single name performance came from our overweight allocation to the Basic Industry, with Anglo American, Masco and Vale all generating strong returns.

Hermes Investment Funds Public Limited Company Investment Manager’s Report (continued)

Hermes Absolute Return Credit Fund (continued)

Performance Review (continued) The biggest detractions of absolute performance came from distressed energy names, such as Weatherford, however this does not form a significant part of our Strategy. Other detractors at a security level included KB Home, Arcelor Mittal and Morrison.

Outlook As we look ahead into 2017 we believe the path to outperformance will require fund managers to focus much more on the fixed-income characteristics of credit management. For example, we believe that an over-reliance on the traditional inverse relationship holding up between risky assets and government bonds could be a mistake. We have already seen that relationship break down several times over the last few years, given the historically low rate environment. Therefore a dogmatic belief in duration to provide protection in periods of extreme volatility could place capital at risk.

To manage this risk, we believe that defensive strategies can be constructed in credit products. We also believe that for the purpose of protecting capital, it makes sense to be duration-light in credit strategies, particularly given the asymmetric return profile of interest rates. Another of the many unintended consequences of the prolonged low rate environment sits at the confluence of the global hunt for yield and the ability for companies to refinance their debt with more generous covenant packages.

Looking into 2017 we must once again avoid the well-trodden path of traditional credit management, in order to deliver outperformance for our clients we are compelled to invest with strategies that align with where credit markets are going, not where they have been.

Hermes Investment Management Limited February 2017

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016

Hermes Global Emerging Markets Fund Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

American Depositary Receipts: 16.41% (2015: 20.25%)

Argentina: 1.60% (2015: 1.16%)

158,879 Banco Macro ADR 10,166,667 0.75 340,726 Pampa Energia ADR 11,663,051 0.85

Total Argentina 21,829,718 1.60

Brazil: 0.00% (2015: 2.33%) - -

India: 2.75% (2015: 2.36%)

159,137 HDFC Bank ADR 9,680,304 0.71 3,764,224 ICICI Bank ADR 27,855,258 2.04

Total India 37,535,562 2.75

People's Republic of China: 3.46% (2015: 4.83%)

541,749 Alibaba ADR 47,310,940 3.46

Total People's Republic of China 47,310,940 3.46

Russian Federation: 3.63% (2015: 2.73%)

1,219,180 MMC Norilsk Nickel ADR 20,384,690 1.49 2,537,434 Sberbank of Russia ADR 29,218,553 2.14

Total Russian Federation 49,603,243 3.63

Taiwan: 4.97% (2015: 6.84%)

847,198 Siliconware Precision Industries ADR 6,082,882 0.45 2,120,266 Taiwan Semiconductor Manufacturing ADR 61,763,349 4.52

Total Taiwan 67,846,231 4.97

Total American Depositary Receipts 224,125,694 16.41

Equities: 77.59% (2015: 72.83%)

Brazil: 7.66% (2015: 2.66%)

2,697,000 BB Seguridade Participacoes 23,450,733 1.72 2,502,058 Itau Unibanco - Preferred 26,022,264 1.90 3,365,337 Klabin 18,322,356 1.34 2,096,600 Lojas Renner 14,925,561 1.09 1,043,900 Ultrapar Participacoes 21,954,391 1.61

Total Brazil 104,675,305 7.66

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Emerging Markets Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 77.59% (2015: 75.16%) (continued)

Chile: 1.21% (2015: 0.00%)

2,069,898 SACI Falabella 16,487,037 1.21

Total Chile 16,487,037 1.21

Egypt: 0.00% (2015: 0.94%) - -

Hong Kong: 5.38% (2015: 8.98%)

4,993,800 AIA 28,174,265 2.06 3,090,000 Galaxy Entertainment 13,468,480 0.99 8,882,000 Techtronic Industries 31,841,899 2.33

Total Hong Kong 73,484,644 5.38

Hungary: 1.96% (2015: 3.14%)

1,271,006 Richter Gedeon 26,818,517 1.96

Total Hungary 26,818,517 1.96

India: 13.61% (2015: 14.52%)

1,510,418 Bharat Forge 20,174,885 1.48 991,179 Container Corporation of India 16,211,260 1.19 1,677,588 HCL Technologies 20,464,992 1.50 1,844,109 HDFC Bank 32,773,895 2.40 380,826 Hero MotoCorp 17,078,253 1.25 5,715,293 Motherson Sumi Systems 27,490,164 2.01 12,168,310 Power Grid of India 32,899,438 2.40 2,625,454 Tech Mahindra 18,912,398 1.38

Total India 186,005,285 13.61

Indonesia: 2.55% (2015: 3.83%)

40,135,400 Bank Rakyat Indonesia Persero 34,780,538 2.55

Total Indonesia 34,780,538 2.55

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Emerging Markets Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 77.59% (2015: 72.83%) (continued)

Mexico: 2.44% (2015: 3.09%)

3,485,289 Banorte 17,252,313 1.26 2,903,847 Banregio Grupo Financiero 16,145,309 1.18

Total Mexico 33,397,622 2.44

People's Republic of China: 11.17% (2015: 11.99%)

169,495 China Biologic Products 18,283,426 1.34 14,059,000 China Mengniu Dairy 27,086,222 1.99 14,475,319 Shenzhen International 21,093,565 1.54 3,520,600 Tencent 86,124,639 6.30

Total People's Republic of China 152,587,852 11.17

Peru: 0.92% (2015: 0.00%)

79,394 Credicorp 12,516,464 0.92

Total Peru 12,516,464 0.92

Republic of South Korea: 9.17% (2015: 6.63%)

686,095 KB Financial 24,312,689 1.78 57,445 Samsung Electronics 85,706,152 6.27 68,918 Samsung Fire & Marine Insurance 15,320,817 1.12

Total Republic of South Korea 125,339,658 9.17

Russian Federation: 1.87% (2015: 0.00%)

142,624 Magnit 25,500,801 1.87

Total Russian Federation 25,500,801 1.87

South Africa: 4.64% (2015: 4.23%)

1,652,505 Foschini 19,152,449 1.40 10,368,371 Life Healthcare 24,618,273 1.80 1,572,979 Shoprite 19,643,334 1.44

Total South Africa 63,414,056 4.64

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Emerging Markets Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 77.59% (2015: 75.16%) (continued)

Taiwan: 9.59% (2015: 9.87%)

3,296,000 Advantech 26,027,243 1.91 13,335,000 Chipbond Technology 19,012,171 1.39 10,328,715 Hon Hai Precision Industry 26,984,325 1.98 2,104,200 Land Mark Optoelectronics 17,562,748 1.29 1,378,237 Phison Electronics 10,926,171 0.80 8,078,641 Tong Yang Industry 15,917,146 1.16 1,611,000 Tung Thih Electronic 14,470,958 1.06

Total Taiwan 130,900,762 9.59

Thailand: 1.08% (2015: 2.32%)

1,069,550 Siam Cement PCL 14,814,000 1.08

Total Thailand 14,814,000 1.08

Turkey: 0.54% (2015: 0.63%)

2,305,054 Aygaz 7,399,947 0.54

Total Turkey 7,399,947 0.54

United Arab Emirates: 1.55% (2015: 0.00%)

1,119,372 NMC Health 21,206,591 1.55

Total United Arab Emirates 21,206,591 1.55

United States: 2.25% (2015: 0.00%)

10,745,344 Samsonite 30,692,866 2.25

Total United States 30,692,866 2.25

Total Equities 1,060,021,945 77.59

P-Notes: 3.13% (2015: 1.76%)

People's Republic of China: 3.13% (2015: 1.76%)

449,100 Gree Electric Appliances 09/01/20/20 (CLSA) 1,591,027 0.12 3,925,914 Hangzhou Hikvision Digital Technology 09/01/2020 (CLSA) 13,450,754 0.99 185,686 Huayu Automotive Systems 08/08/2019 (CLSA) 426,173 0.03

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Emerging Markets Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

P-Notes: 3.13% (2015: 1.76%) (continued)

People's Republic of China: 3.13% (2015: 1.76%) (continued)

5,531,163 Huayu Automotive Systems 13/11/2019 (CLSA) 12,694,733 0.93 4,243 Kweichow Moutai 08/08/2019 (CLSA) 204,014 0.01 298,172 Kweichow Moutai 16/06/2020 (CLSA) 14,336,885 1.05

Total People's Republic of China 42,703,586 3.13

Total P-Notes 42,703,586 3.13

Financial Derivative Instruments: 1.39% (2015: 4.01%)

Warrants: 1.39% (2015: 4.01%)

People's Republic of China: 1.39% (2015: 4.01%)

1,996,916 Gree Electric Appliances 16/02/2018 7,074,477 0.52 929,616 Gree Electric Appliances 31/08/2018 3,293,351 0.24 54,013 Hangzhou Hikvision Digital Technology 13/11/2017 185,056 0.01 1,969,180 Hangzhou Hikvision Digital Technology 09/04/2019 6,746,698 0.49 4 Kweichow Moutai 26/01/2017 192 - 35,865 Kweichow Moutai 22/05/2018 1,724,482 0.13

Total People's Republic of China 19,024,256 1.39

Total Warrants 19,024,256 1.39

Forward Currency Contracts: 0.00% (2015: 0.00%)

Currency Currency Currency Maturity Unrealised % of Counterparty Buys Sells Rate Date Gain Net Assets $

State Street EUR 503,265 USD 527,018 1.0472 31/01/2017 5,297 - State Street EUR 169,790 USD 177,789 1.0471 31/01/2017 1,803 - State Street USD 23,256 GBP 18,827 1.2353 31/01/2017 76 - State Street EUR 969 USD 1,015 1.0472 31/01/2017 10 - State Street EUR 969 USD 1,015 1.0472 31/01/2017 10 - State Street EUR 906 USD 949 1.0472 31/01/2017 10 - State Street USD 167 GBP 135 1.2352 31/01/2017 1 - State Street USD 70 GBP 57 1.2352 31/01/2017 - -

Unrealised Gains on Forward Currency Contracts 7,207 -

Total Financial Derivative Instruments 19,031,463 1.39

Total financial assets at fair value through profit or loss 1,345,882,688 98.52

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Emerging Markets Fund (continued) Fair Value % of Financial assets at fair value through profit or loss $ Net Assets

Financial liabilities at fair value through profit or loss

Financial Derivative Instruments: 0.00% (2015: 0.00%)

Forward Currency Contracts: 0.00% (2015: 0.00%)

Currency Currency Currency Maturity Unrealised % of Counterparty Buys Sells Rate Date Loss Net Assets $

State Street USD 17 EUR 16 1.0469 31/01/2017 - - State Street USD 18 EUR 17 1.0473 31/01/2017 - - State Street USD 18 EUR 17 1.0473 31/01/2017 - - State Street USD 43 EUR 41 1.0473 31/01/2017 - - State Street USD 43 EUR 41 1.0473 31/01/2017 - - State Street USD 573 GBP 468 1.2261 31/01/2017 (2) - State Street GBP 10,377 USD 12,819 1.2353 31/01/2017 (43) - State Street USD 8,718 EUR 8,325 1.0471 31/01/2017 (88) - State Street GBP 24,610 USD 30,402 1.2353 31/01/2017 (101) - State Street USD 23,251 EUR 22,202 1.0473 31/01/2017 (233) - State Street GBP 2,874,641 USD 3,551,176 1.2353 31/01/2017 (11,816) -

Unrealised Losses on Forward Currency Contracts (12,283) -

Total Financial Derivative Instruments (12,283) -

Total financial liabilities at fair value through profit or loss (12,283) -

Net financial assets at fair value through profit or loss 1,345,870,405 98.52 (2015: 98.85%) (Cost: $1,279,719,115)

Net Cash (2015: 2.72%) 22,015,906 1.61

Other Net Liabilities (2015: (1.57)%) (1,750,854) (0.13)

Net Assets Attributable to Holders of Redeemable Participating Shares 1,366,135,457 100.00

Portfolio Classification % of Total Assets

Transferable securities admitted to official stock exchange listing 93.58 Transferable securities traded on a regulated market 3.11 Financial derivative instruments dealt in on a regulated market 1.39 Cash 1.60 Other Assets 0.32 Total 100.00

The counterparty for the forward currency contracts is State Street Bank and Trust Company (S&P: A, Moody’s: Aa1).

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Equity Fund Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 99.03% (2015: 99.79%)

Australia: 2.20% (2015: 2.08%)

180,171 APA 1,115,587 0.36 175,766 Bank of Queensland 1,507,382 0.48 105,901 BHP Billiton Ltd 1,917,428 0.61 34,332 Caltex Australia 755,556 0.24 152,060 LendLease 1,606,202 0.51

Total Australia 6,902,155 2.20

Austria: 0.33% (2015: 0.28%)

28,896 OMV 1,035,651 0.33

Total Austria 1,035,651 0.33

Belgium: 0.00% (2015: 0.49%) - -

Canada: 2.99% (2015: 2.65%)

15,068 Agrium 1,524,582 0.49 37,925 Alimentation Couche-Tard 1,723,275 0.55 35,139 Canadian National Railway 2,395,284 0.76 33,894 Rogers Communications 1,316,465 0.42 48,886 Toronto-Dominion Bank 2,421,985 0.77

Total Canada 9,381,591 2.99

Denmark: 1.54% (2015: 1.75%)

46,820 Danske Bank 1,427,171 0.45 23,719 DONG Energy 909,315 0.29 11,500 NKT Holding 802,364 0.26 46,669 Novo Nordisk 1,682,423 0.54

Total Denmark 4,821,273 1.54

Finland: 1.37% (2015: 1.41%)

34,232 Amer Sports 913,124 0.29 19,252 Cargotec 865,453 0.27 28,204 Metso 807,429 0.26 159,511 Stora Enso 1,714,756 0.55

Total Finland 4,300,762 1.37

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Equity Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 99.03% (2015: 99.79%) (continued)

France: 2.93% (2015: 3.27%)

41,882 BNP Paribas 2,652,317 0.85 25,606 Legrand 1,457,993 0.46 11,420 Renault 1,015,773 0.32 15,022 Sodexo 1,727,506 0.55 41,061 Valeo 2,341,896 0.75

Total France 9,195,485 2.93

Germany: 3.51% (2015: 3.57%)

14,955 Adidas 2,360,976 0.75 11,762 Duerr 944,716 0.30 19,582 Fresenius Medical Care 1,674,552 0.53 17,192 Henkel 1,795,142 0.57 19,170 SAP 1,675,354 0.54 78,244 Schaeffler 1,159,238 0.37 42,802 Vonovia 1,394,838 0.45

Total Germany 11,004,816 3.51

Hong Kong: 1.20% (2015: 1.85%)

387,000 AIA 2,183,396 0.70 96,000 Cheung Kong Infrastructure 763,835 0.24 14,664 Jardine Matheson 810,186 0.26

Total Hong Kong 3,757,417 1.20

Ireland: 0.95% (2015: 1.83%)

185,260 Cairn Homes 264,107 0.08 94,940 Ryanair 1,458,233 0.47 54,823 Smurfit Kappa 1,260,043 0.40

Total Ireland 2,982,383 0.95

Italy: 0.75% (2015: 1.23%)

1,403,402 Telecom Italia 1,026,280 0.33 459,134 UniCredit 1,322,659 0.42

Total Italy 2,348,939 0.75

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Equity Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 99.03% (2015: 99.79%) (continued)

Japan: 7.86% (2015: 8.62%)

220,000 77 Bank 1,061,012 0.34 17,800 Fujifilm 675,044 0.22 63,600 Hakuhodo 783,137 0.25 170,000 Hitachi 918,722 0.29 18,600 Honda Motor 543,153 0.17 79,500 Inpex 796,054 0.26 33,700 ITOCHU 447,239 0.14 106,600 Japan Post 1,329,936 0.42 41,100 Kao 1,947,369 0.62 118,400 Kirin 1,925,158 0.61 13,700 Kyocera 680,870 0.22 276,600 Mitsubishi Chemical 1,792,833 0.58 32,900 Nippon Telegraph & Telephone 1,381,887 0.44 13,000 Nitto Denko 997,024 0.32 32,700 Seiko Epson 692,056 0.22 21,900 Seven & I 833,902 0.27 4,500 Shimamura 561,418 0.18 29,700 Sumitomo Mitsui Financial Group 1,132,686 0.36 51,800 T&D 684,569 0.22 106,300 Toagosei 1,046,229 0.33 39,100 Toyota Motor 2,299,626 0.74 23,300 Yamato 473,491 0.15 15,300 Yaoko 608,363 0.19 56,100 Yokohama Rubber Co 1,005,478 0.32

Total Japan 24,617,256 7.86

Jersey: 0.84% (2015: 0.49%)

33,442 Randgold Resources 2,618,583 0.84

Total Jersey 2,618,583 0.84

Netherlands: 2.65% (2015: 2.11%)

18,232 ASML Holding 2,036,004 0.65 27,478 Heineken 2,063,092 0.66 214,518 ING Groep 3,002,669 0.96 58,090 Koninklijke Ahold Delhaiz 1,215,512 0.38

Total Netherlands 8,317,277 2.65

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Equity Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 99.03% (2015: 99.79%) (continued)

Norway: 1.71% (2015: 1.20%)

81,187 Aker BP 1,450,358 0.46 119,779 Frontline 864,544 0.28 9,742 Leroy Seafood 541,015 0.17 30,867 Marine Harvest 559,672 0.18 214,687 Nordic Semiconductor 863,369 0.27 342,923 Petroleum Geo-Services 1,087,450 0.35

Total Norway 5,366,408 1.71

Singapore: 1.04% (2015: 1.00%)

12,987 Broadcom 2,335,972 0.75 32,522 Jardine Cycle & Carriage 928,010 0.29

Total Singapore 3,263,982 1.04

Spain: 0.97% (2015: 0.89%)

45,343 Ebro Foods 952,617 0.30 103,841 Gamesa Tecnologica 2,096,625 0.67

Total Spain 3,049,242 0.97

Sweden: 0.87% (2015: 0.87%)

33,050 Axfood 521,320 0.17 57,431 Hexpol 537,580 0.17 142,267 Volvo 1,663,032 0.53

Total Sweden 2,721,932 0.87

Switzerland: 2.04% (2015: 2.66%)

52,110 ABB 1,101,633 0.35 15,842 Roche 3,618,316 1.15 6,122 Zurich Insurance Group 1,683,332 0.54

Total Switzerland 6,403,281 2.04

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Equity Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 99.03% (2015: 99.79%) (continued)

United Kingdom: 4.36% (2015: 5.51%)

20,843 AstraZeneca 1,129,360 0.36 49,591 BTG 359,635 0.11 52,405 Greggs 626,635 0.20 513,775 Hays 942,381 0.30 272,248 HSBC 2,182,670 0.70 65,727 National Grid 764,749 0.24 110,271 Prudential 2,187,273 0.70 53,273 Smith & Nephew 796,268 0.25 1,316,885 Vodafone 3,218,193 1.03 443,438 Worldpay 1,457,077 0.47

Total United Kingdom 13,664,241 4.36

United States: 58.92% (2015: 56.03%)

82,243 Abbott Laboratories 3,150,729 1.00 23,840 Accenture 2,789,518 0.89 21,343 Allstate 1,585,358 0.51 7,497 Alphabet Class A 6,019,191 1.92 3,817 Alphabet Class C 2,987,909 0.95 4,735 Amazon.com 3,622,985 1.16 26,475 American Tower Reits 2,816,675 0.90 46,042 American Water Works 3,348,174 1.07 19,421 Amgen 2,870,035 0.92 39,925 Analog Devices 2,937,682 0.94 63,310 Apple 7,390,176 2.36 160,340 Bank of America 3,527,480 1.12 35,921 Berkshire Hathaway 5,856,919 1.87 10,236 Boeing 1,593,643 0.51 40,795 BorgWarner 1,610,995 0.51 15,725 Bunge 1,113,802 0.35 20,184 Capital One Financial 1,758,228 0.56 18,812 Chubb 2,487,699 0.79 64,148 Cisco Systems 1,953,948 0.62 15,577 Cognex 997,863 0.32 46,487 Comcast 3,258,274 1.04 8,953 Constellation Brands 1,376,434 0.44 11,803 Cooper Cos 2,071,308 0.66 15,256 Cummins 2,081,224 0.66 29,239 CVS Health 2,309,881 0.74 40,832 Delta Air Lines 2,013,426 0.64 30,061 Dollar Tree 2,324,918 0.74 18,939 Dr Pepper Snapple 1,722,691 0.55 31,542 Duke Energy 2,460,907 0.79 16,084 Eagle Materials 1,591,351 0.51

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Equity Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 99.03% (2015: 99.79%) (continued)

United States: 58.92% (2015: 56.03%) (continued)

56,521 East West Bancorp 2,871,267 0.92 34,231 Eaton 2,314,358 0.74 17,684 Exxon Mobil 1,597,749 0.51 34,462 Facebook 4,009,654 1.28 126,557 Ford Motor 1,547,792 0.49 128,234 General Electric 4,066,300 1.30 28,609 General Mills 1,784,057 0.57 51,942 Hess 3,267,152 1.04 12,610 Humana 2,558,821 0.82 20,245 Ingersoll-Rand 1,529,915 0.49 20,348 Ingredion 2,557,337 0.82 52,529 JPMorgan Chase 4,511,716 1.44 26,328 Kirby 1,762,660 0.56 91,141 Kroger 3,152,567 1.01 24,701 Lam Research 2,646,712 0.84 9,359 Lockheed Martin 2,345,272 0.75 13,904 M&T Bank 2,163,880 0.69 31,230 Macy's 1,133,337 0.36 169,814 Marathon Oil 2,983,632 0.95 20,790 Marathon Petroleum 1,048,856 0.33 890 Markel 804,186 0.26 9,840 McKesson 1,395,115 0.44 18,325 MEDNAX 1,226,492 0.39 41,393 Merck 2,443,843 0.78 40,768 MetLife 2,193,318 0.70 78,364 Micron Technology 1,745,166 0.56 242,762 Oasis Petroleum 3,663,279 1.17 24,042 Occidental Petroleum 1,721,407 0.55 7,704 O'Reilly Automotive 2,169,755 0.69 76,984 Pfizer 2,501,210 0.80 15,455 PPG Industries 1,473,016 0.47 17,993 Robert Half International 878,958 0.28 17,166 RPM International 926,449 0.30 19,244 Shire 1,101,076 0.35 38,183 State Street 2,965,292 0.95 16,303 STERIS 1,101,105 0.35 21,914 Thermo Fisher Scientific 3,100,393 0.99 44,507 TJX 3,369,625 1.07 25,383 Travelers 3,104,087 0.99 46,062 Verizon Communications 2,475,372 0.79 22,092 VF 1,184,794 0.38 31,746 Visa 2,486,664 0.79

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Equity Fund (continued) Nominal Financial assets and liabilities at fair value through profit Fair Value % of Holdings or loss $ Net Assets

Equities: 99.03% (2015: 99.79%) (continued)

United States: 58.92% (2015: 56.03%) (continued)

72,813 Wells Fargo 3,993,065 1.27 26,634 West Pharmaceutical Services 2,270,016 0.72 15,119 Western Digital 1,034,593 0.33 35,359 Zoetis 1,895,950 0.60

Total United States 184,706,683 58.92

Total Equities 310,459,357 99.03

Total financial assets at fair value through profit or loss 310,459,357 99.03

Financial liabilities at fair value through profit or loss

Financial Derivative Instruments: 0.00% (2015: 0.00%)

Forward Currency Contracts: 0.00% (2015: 0.00%)

Currency Currency Currency Maturity Unrealised % of Counterparty Buys Sells Rate Date Loss Net Assets $

Northern Trust GBP 24,651 USD 30,404 1.2334 03/01/2017 (78) -

Unrealised Losses on Forward Currency Contracts (78) -

Total Financial Derivative Instruments (78) -

Total financial liabilities at fair value through profit or loss (78) -

Net financial assets at fair value through profit or loss 310,459,279 99.03 (2015: 99.79%) (Cost: $279,689,187)

Net Cash (2015: 0.28%) 2,932,200 0.94

Other Net Assets (2015: (0.07%)) 95,381 0.03

Net Assets Attributable to Holders of Redeemable Participating Shares 313,486,860 100.00

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Equity Fund (continued)

% of Total Portfolio Classification Assets

Transferable securities admitted to official stock exchange listing 98.96 Cash 0.94 Other assets 0.10 Total 100.00

The counterparty for the forward currency contracts is Northern Trust (S&P: AA-, Moody’s: Aa2).

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes European Alpha Equity Fund Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss € Net Assets

American Depositary Receipts: 2.61% (2015: 1.35%)

Russian Federation: 2.61% (2015: 1.35%)

1,790,578 Sberbank of Russia ADR 19,525,100 2.61

Total Russian Federation 19,525,100 2.61

Total American Depositary Receipts 19,525,100 2.61

Equities: 96.80% (2015: 97.99%)

Belgium: 1.64% (2015: 2.51%)

200,781 UCB 12,279,766 1.64

Total Belgium 12,279,766 1.64

Denmark: 5.29% (2015: 3.56%)

556,604 Novo Nordisk 19,001,550 2.54 166,920 Pandora 20,588,694 2.75

Total Denmark 39,590,244 5.29

Finland: 2.60% (2015: 3.12%)

4,242,027 Nokia 19,462,420 2.60

Total Finland 19,462,420 2.60

France: 11.10% (2015: 9.05%)

415,869 Legrand 22,423,656 2.99 208,061 Renault 17,524,978 2.34 187,305 Sodexo 20,397,515 2.72 423,163 Valeo 22,855,034 3.05

Total France 83,201,183 11.10

Germany: 19.01% (2015: 18.82%)

186,845 Adidas 27,933,328 3.73 331,758 Bayer 32,671,528 4.36 331,613 Deutsche Boerse 25,816,072 3.44

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes European Alpha Equity Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss € Net Assets

Equities: 96.80% (2015: 97.99%) (continued)

Germany: 19.01% (2015: 18.82%) (continued)

358,577 Fresenius 26,534,698 3.54 372,072 ProSiebenSat.1 Media 13,627,137 1.82 389,188 Wirecard 15,878,870 2.12

Total Germany 142,461,633 19.01

Ireland: 1.01% (2015: 2.18%)

75,474 Paddy Power Betfair 7,604,006 1.01

Total Ireland 7,604,006 1.01

Italy: 0.00% (2015: 4.43%) - -

Netherlands: 9.37% (2015: 6.64%)

219,805 ASML Holding 23,244,379 3.10 2,447,806 Delta Lloyd 13,022,328 1.74 2,558,286 ING Groep 33,910,081 4.53

Total Netherlands 70,176,788 9.37

Norway: 5.22% (2015: 3.04%)

1,449,235 DNB 20,385,459 2.72 1,072,310 Statoil 18,754,050 2.50

Total Norway 39,139,509 5.22

Spain: 12.42% (2015: 10.98%)

129,417 Aena 16,843,623 2.25 604,297 Amadeus IT 26,184,189 3.49 1,373,904 Gamesa Tecnologica 26,269,044 3.51 736,640 Inditex 23,734,541 3.17

Total Spain 93,031,397 12.42

Sweden: 4.02% (2015: 5.01%)

362,275 Hennes & Mauritz 9,592,023 1.28 894,219 Swedbank 20,563,793 2.74

Total Sweden 30,155,816 4.02

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes European Alpha Equity Fund (continued) Nominal Financial assets and liabilities at fair value through profit Fair Value % of Holdings or loss € Net Assets

Equities: 96.80% (2015: 97.99%) (continued)

Switzerland: 6.18% (2015: 9.05%)

102,835 Dufry 12,139,819 1.62 158,101 Roche 34,195,362 4.56

Total Switzerland 46,335,181 6.18

United Kingdom: 18.94% (2015: 19.60%)

1,790,335 Auto Trader 8,511,629 1.14 4,889,604 ConvaTec 13,317,724 1.77 1,551,227 GlaxoSmithKline 28,109,762 3.75 393,885 Imperial Brands 16,225,329 2.17 1,629,563 Merlin Entertainments 8,481,958 1.13 248,981 Reckitt Benckiser 19,810,649 2.64 451,387 Schroders 15,728,136 2.10 7,647,424 Vodafone 17,697,648 2.36 4,524,300 Worldpay 14,077,873 1.88

Total United Kingdom 141,960,708 18.94

Total Equities 725,398,651 96.80

Total financial assets at fair value through profit or loss 744,923,751 99.41

Financial liabilities at fair value through profit or loss

Financial Derivative Instruments: (0.03)% (2015: 0.00%)

Forward Currency Contracts: (0.03)% (2015: 0.00%)

Currency Currency Currency Maturity Unrealised % of Counterparty Buys Sells Rate Date Loss Net Assets €

State Street CHF 950 EUR 887 0.9342 31/01/2017 (3) - State Street USD 6,964 EUR 6,650 0.9550 31/01/2017 (67) - State Street GBP 21,080 EUR 24,870 1.1798 31/01/2017 (332) - State Street USD 63,098 EUR 60,257 0.9550 31/01/2017 (603) - State Street USD 87,207 EUR 83,280 0.9550 31/01/2017 (833) - State Street GBP 53,779 EUR 63,447 1.1798 31/01/2017 (847) - State Street CHF 557,103 EUR 520,407 0.9341 31/01/2017 (1,874) - State Street USD 399,034 EUR 381,048 0.9549 31/01/2017 (3,793) - State Street USD 998,778 EUR 954,648 0.9558 31/01/2017 (10,380) - State Street GBP 1,740,277 EUR 2,052,947 1.1797 31/01/2017 (27,195) -

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes European Alpha Equity Fund (continued) Fair Value % of Financial assets at fair value through profit or loss € Net Assets

Forward Currency Contracts: (0.03)% (2015: 0.00%) (continued)

Currency Currency Currency Maturity Unrealised % of Counterparty Buys Sells Rate Date Loss Net Assets €

State Street USD 3,462,083 EUR 3,306,042 0.9549 31/01/2017 (32,905) (0.01) State Street USD 4,834,306 EUR 4,616,415 0.9549 31/01/2017 (45,946) (0.01) State Street GBP 4,546,533 EUR 5,363,394 1.1797 31/01/2017 (71,047) (0.01)

Unrealised Losses on Forward Currency Contracts (195,825) (0.03)

Total Financial Derivative Instruments (195,825) (0.03)

Total financial liabilities at fair value through profit or loss (195,825) (0.03)

Net financial assets at fair value through profit or loss 744,727,926 99.38 (2015: 99.34%) (Cost: €660,887,409)

Net Cash (2015: 0.59%) 7,686,888 1.03

Other Net Liabilities (2015: 0.07%) (3,074,788) (0.41)

Net Assets Attributable to Holders of Redeemable Participating Shares 749,340,026 100.00

% of Total Portfolio Classification Assets

Transferable securities admitted to official stock exchange listing 98.82 Cash 1.02 Other assets 0.16 Total 100.00

The counterparty for the forward currency contracts is State Street Bank and Trust Company (S&P: A, Moody’s: Aa1).

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global High Yield Credit Fund Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss € Net Assets

Corporate Bonds: 80.05% (2015: 76.20%)

Brazil: 4.63% (2015: 6.09%)

1,447,000 Gerdau Trade 4.750% 15/04/2023 1,317,014 0.45 875,000 GTL Trade Finance 7.250% 16/04/2044 778,768 0.26 1,150,000 JBS USA 5.750% 15/06/2025 1,109,386 0.38 3,700,000 Marfrig Europe 8.375% 09/05/2018 3,693,160 1.26 1,220,000 Marfrig Holdings Europe 8.000% 08/06/2023 1,200,163 0.41 2,560,000 Vale Overseas 5.875% 10/06/2021 2,548,471 0.87 2,956,000 Vale Overseas 6.250% 10/08/2026 2,921,669 1.00

Total Brazil 13,568,631 4.63

Canada: 0.15% (2015: 0.64%)

475,000 Enbridge 6.000% 15/01/2077 450,344 0.15

Total Canada 450,344 0.15

Chile: 1.20% (2015: 1.06%)

3,571,000 VTR Finance 6.875% 15/01/2024 3,504,134 1.20

Total Chile 3,504,134 1.20

Finland: 0.45% (2015: 0.49%)

1,250,000 Stora Enso 7.250% 15/04/2036 1,321,403 0.45

Total Finland 1,321,403 0.45

France: 1.58% (2015: 0.00%)

4,450,000 Faurecia 3.625% 15/06/2023 4,641,350 1.58

Total France 4,641,350 1.58

Germany: 2.61% (2015: 3.22%)

3,247,000 Dresdner Funding Trust I 8.151% 30/06/2031 3,563,819 1.22 4,189,000 Schaeffler Finance 4.250% 15/05/2021 4,070,846 1.39

Total Germany 7,634,665 2.61

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global High Yield Credit Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss € Net Assets

Corporate Bonds: 80.05% (2015: 76.20%) (continued)

India: 0.00% (2015: 0.31%) - -

Ireland: 1.55% (2015: 2.33%)

600,000 AerCap Ireland Capital 4.625% 01/07/2022 587,343 0.20 1,400,000 Ardagh Packaging Finance 6.750% 15/05/2024 1,503,041 0.51 2,500,000 Smurfit Kappa Acquisitions 4.875% 15/09/2018 2,447,262 0.84

Total Ireland 4,537,646 1.55

Italy: 5.04% (2015: 2.27%)

3,085,000 Intesa Sanpaolo 5.017% 26/06/2024 2,707,229 0.92 5,500,000 Telecom Italia 7.375% 15/12/2017 6,787,351 2.32 5,343,000 Wind Acquisition Finance 7.375% 23/04/2021 5,280,946 1.80

Total Italy 14,775,526 5.04

Japan: 0.74% (2015: 0.97%)

1,950,000 SoftBank 5.250% 30/07/2027 2,161,088 0.74

Total Japan 2,161,088 0.74

Luxembourg: 2.04% (2015: 1.73%)

1,800,000 Altice Financing 6.500% 15/01/2022 1,783,361 0.61 883,000 Altice Luxembourg 7.250% 15/05/2022 947,018 0.33 1,029,966 ARD Finance 6.625% 15/09/2023 1,033,906 0.35 2,350,000 Millicom International Cellular 6.000% 15/03/2025 2,197,381 0.75

Total Luxembourg 5,961,666 2.04

Mexico: 1.27% (2015: 2.45%)

166,000 Cemex Finance 4.625% 15/06/2024 171,498 0.06 1,170,000 Cemex 4.375% 05/03/2023 1,204,925 0.41 950,000 Cemex 6.125% 05/05/2025 923,205 0.31 1,358,000 Cemex 7.750% 16/04/2026 1,429,135 0.49

Total Mexico 3,728,763 1.27

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global High Yield Credit Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss € Net Assets

Corporate Bonds: 80.05% (2015: 76.20%) (continued)

Netherlands: 4.38% (2015: 0.00%)

1,125,000 GTH Finance 6.250% 26/04/2020 1,120,913 0.38 1,890,000 NXP 3.875% 01/09/2022 1,818,772 0.63 2,566,000 NXP 4.625% 15/06/2022 2,554,444 0.87 803,000 VimpelCom 5.950% 13/02/2023 793,674 0.27 4,000,000 VimpelCom 6.255% 01/03/2017 3,819,787 1.30 2,731,000 Ziggo Secured Finance 4.250% 15/01/2027 2,734,632 0.93

Total Netherlands 12,842,222 4.38

Norway: 0.24% (2015: 0.18%)

1,688,000 Norske Skogindustrier 8.000% 24/02/2023 712,169 0.24

Total Norway 712,169 0.24

Russian Federation: 3.85% (2015: 6.28%)

325,000 Gaz Capital 4.625% 15/10/2018 343,690 0.12 2,000,000 Gaz Capital 4.950% 06/02/2028 1,869,410 0.64 3,250,000 MMC Finance 5.550% 28/10/2020 3,287,860 1.12 3,200,000 Rosneft International Finance 4.199% 06/03/2022 2,998,974 1.03 2,700,000 Severstal Via Steel Capital 5.900% 17/10/2022 2,757,405 0.94

Total Russian Federation 11,257,339 3.85

South Africa: 1.20% (2015: 1.38%)

4,000,000 Sappi Papier 7.500% 15/06/2032 3,526,902 1.20

Total South Africa 3,526,902 1.20

Turkey: 0.96% (2015: 1.04%)

700,000 Turk Telekomunikasyon 3.750% 19/06/2019 659,848 0.23 2,409,000 Turk Telekomunikasyon 4.875% 19/06/2024 2,141,275 0.73

Total Turkey 2,801,123 0.96

United Kingdom: 6.49% (2015: 8.58%)

2,000,000 AA Bond 5.500% 31/07/2043 2,404,437 0.82 750,000 National Westminster Bank 29/11/2049 501,265 0.17 2,096,000 New Look Secured Issuer 6.500% 01/07/2022 2,351,004 0.80 1,420,000 PGH Capital 5.750% 07/07/2021 1,856,365 0.63

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global High Yield Credit Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss € Net Assets

Corporate Bonds: 80.05% (2015: 76.20%) (continued)

United Kingdom: 6.49% (2015: 8.58%) (continued)

1,338,000 PGH Capital 6.625% 18/12/2025 1,630,120 0.56 2,000,000 Royal Bank of Scotland 5.500% 31/12/2049 1,906,750 0.65 2,062,000 Tesco 2.700% 05/01/2017 1,955,685 0.67 6,500,000 Tesco 5.500% 15/11/2017 6,332,236 2.16 58,182 Virgin Media Secured Finance 6.000% 15/04/2021 71,262 0.03

Total United Kingdom 19,009,124 6.49

United States: 41.67% (2015: 37.18%)

5,100,000 Actavis Funding 4.550% 15/03/2035 4,800,627 1.64 2,950,000 ADT 4.875% 15/07/2032 2,321,403 0.79 200,000 ADT 6.250% 15/10/2021 206,684 0.07 3,000,000 Air Lease 4.250% 15/09/2024 2,893,532 0.99 1,423,000 Ally Financial 4.125% 30/03/2020 1,365,999 0.47 5,827,000 Ally Financial 4.625% 30/03/2025 5,462,381 1.86 1,755,000 Altice US Finance I 5.500% 15/05/2026 1,701,339 0.58 2,800,000 Antero Resources 5.625% 01/06/2023 2,730,979 0.93 980,000 Arconic 5.720% 23/02/2019 988,362 0.34 5,233,000 CenturyLink 5.800% 15/03/2022 5,089,765 1.74 5,479,000 Charter Communications Operating 4.908% 23/07/2025 5,484,094 1.87 1,500,000 CIT 5.000% 15/05/2018 1,443,470 0.49 4,125,000 CIT 5.000% 01/08/2023 4,047,760 1.38 4,000,000 Clearwire Communications 8.250% 01/12/2040 3,972,505 1.36 6,316,000 Dell 5.400% 10/09/2040 5,000,104 1.71 3,400,000 Domtar 6.750% 15/02/2044 3,284,563 1.12 3,178,000 EMC 1.875% % 01/06/18 2,980,661 1.02 1,048,000 Freeport-McMoRan 2.150% 01/03/2017 988,632 0.34 1,000,000 Freeport-McMoRan 2.300% 14/11/2017 945,722 0.32 1,300,000 Freeport-McMoRan 5.450% 15/03/2043 1,026,097 0.35 700,000 General Motors Financial 3.150% 15/01/2020 668,293 0.23 7,000,000 General Motors Financial 3.200% 13/07/2020 6,661,994 2.27 3,130,000 Goodyear Tire & Rubber 5.000% 31/05/2026 2,961,414 1.01 3,650,000 HCA 4.750% 01/05/2023 3,551,375 1.21 1,400,000 HCA 5.000% 15/03/2024 1,368,808 0.47 814,000 HCA 5.875% 15/02/2026 796,829 0.27 1,645,000 Hess 3.500% 15/07/2024 1,503,589 0.51 3,000,000 Huntsman International 4.250% 01/04/2025 3,032,250 1.04 2,400,000 International Lease Finance 8.750% 15/03/2017 2,307,856 0.79 4,139,000 Kinder Morgan Energy Partners 4.700% 01/11/2042 3,669,371 1.25 1,000,000 Kinder Morgan Energy Partners 5.300% 15/09/2020 1,019,229 0.35 872,000 Kinder Morgan Energy Partners 5.625% 01/09/2041 833,128 0.28 1,333,000 Lear 4.750% 15/01/2023 1,295,402 0.44

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global High Yield Credit Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss € Net Assets

Corporate Bonds: 80.05% (2015: 76.20%) (continued)

United States: 41.67% (2015: 37.18%) (continued)

3,550,000 Marathon Oil 3.850% 01/06/2025 3,269,644 1.12 3,500,000 MPLX 4.500% 07/15/2023 3,374,724 1.15 3,550,000 MPLX 4.875% 01/06/2025 3,466,268 1.18 63,000 Plains All American Pipeline 2.850% 31/01/2023 56,543 0.02 1,517,000 Plains All American Pipeline 4.500% 15/12/2026 1,461,888 0.50 4,428,000 Range Resources 5.000% 08/15/2022 4,192,904 1.43 250,000 Range Resources 5.750% 01/6/2021 249,467 0.09 5,900,000 Rite Aid 6.125% 01/04/2023 6,034,249 2.06 4,250,000 T-Mobile USA 6.375% 01/03/2025 4,316,485 1.47 2,000,000 Toll Brothers Finance 4.375% 15/04/2023 1,898,554 0.65 2,500,000 Toll Brothers Finance 4.875% 15/11/2025 2,334,677 0.80 2,799,000 Valeant Pharmaceuticals International 4.500% 15/05/2023 2,043,690 0.70 2,955,000 Vulcan Materials 4.500% 01/04/2025 2,941,692 1.01

Total United States 122,045,002 41.67

Total Corporate Bonds 234,479,097 80.05

Floating Rate Notes: 10.98% (2015: 13.38%)

Australia: 1.96% (2015: 1.59%)

4,449,000 BHP Billiton Finance 22/10/2077 5,750,677 1.96

Total Australia 5,750,677 1.96

Austria: 0.31% (2015: 0.04%)

1,000,000 RZB Finance Jersey IV 31/12/2049 895,550 0.31

Total Austria 895,550 0.31

Belgium: 2.04% (2015: 1.37%)

4,450,000 Solvay Finance 29/05/2049 4,651,670 1.59 1,250,000 Solvay Finance 31/12/2049 1,342,985 0.45

Total Belgium 5,994,655 2.04

France: 3.57% (2015: 2.23%)

3,300,000 Groupama 29/05/2049 3,102,083 1.06 2,078,000 SES 31/12/2049 2,112,807 0.72 5,250,000 Total 31/12/2049 5,244,094 1.79

Total France 10,458,984 3.57

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global High Yield Credit Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss € Net Assets

Floating Rate Notes: 10.98% (2015: 13.38%) (continued)

Ireland: 1.01% (2015: 4.76%)

2,900,000 Allied Irish Banks 26/11/2025 2,947,212 1.01

Total Ireland 2,947,212 1.01

Italy: 0.00% (2015: 0.84%) - -

Portugal: 0.75% (2015: 1.60%)

2,100,000 Energias de Portugal 16/09/2075 2,198,440 0.75

Total Portugal 2,198,440 0.75

Russian Federation: 0.44% (2015: 0.00%)

1,325,000 Sberbank of Russia 26/12/2024 1,279,776 0.44

Total Russian Federation 1,279,776 0.44

United Kingdom: 0.90% (2015: 0.95%)

2,630,000 Barclays Bank 29/12/2049 2,646,115 0.90

Total United Kingdom 2,646,115 0.90

Total Floating Rate Notes 32,171,409 10.98

Financial Derivative Instruments: 1.55% (2015: 0.82%)

Credit Default Swaps: 1.29% (2015: 0.58%)

Credit Default Swaps: Receive Fixed (Sell Protection) - Unrealised Gains: 1.29% (2015: 0.58%)

European Union: 0.49% (2015: 0.13%)

(4,356,000) Altice Finco 5% 20/12/2021 (JP Morgan) 322,736 0.11 (3,700,000) Anglo American 5% 20/12/2021 (Goldman Sachs) 478,292 0.16 (2,000,000) Arcelormittal 5% 20/06/2018 (BNP Paribas) 124,747 0.04 (2,000,000) Telecom Italia 1% 20/09/2017 (Credit Suisse) 7,188 - (750,000) Tesco 1% 20/06/2017 (Credit Suisse) 2,677 -

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global High Yield Credit Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss € Net Assets

Financial Derivative Instruments: 1.55% (2015: 0.82%) (continued)

Credit Default Swaps: 1.29% (2015: 0.58%) (continued)

Credit Default Swaps: Receive Fixed (Sell Protection) - Unrealised Gains: 1.29% (2015: 0.58%) (continued)

European Union: 0.49% (2015: 0.13%) (continued)

(1,550,000) UPC 5% 20/12/2021 (Goldman Sachs) 186,009 0.07 (2,400,000) Virgin Media Finance 5% 20/03/2023 (Credit Suisse) 275,083 0.09 (500,000) Virgin Media Finance 5% 20/03/2023 (JP Morgan) 57,309 0.02

Total European Union 1,454,041 0.49

United States: 0.80% (2015: 0.45%)

(3,000,000) American Axle & Manufacturing 5% 20/12/2021 (Goldman Sachs) 244,941 0.08 (5,000,000) Calpine Corporation 5% 20/12/2021 (Goldman Sachs) 311,081 0.11 (850,000) Goodyear Tire & Rubber 5% 20/06/2023 (Goldman Sachs) 131,129 0.04 (4,850,000) International Lease Finance 5% 20/12/2021 (BNP Paribas) 746,717 0.25 (5,250,000) JP Morgan 1% 20/06/2017 (Credit Suisse) 18,159 0.01 (3,750,000) NRG Energy 5% 20/12/2021 (Goldman Sachs) 176,325 0.06 (5,750,000) AES Corporation 5% 20/12/2021 (JP Morgan) 645,563 0.23 (767,000) United States Steel Corporation 5% 20/12/2019 (BNP Paribas) 60,015 0.02

Total United States 2,333,930 0.80

Total Credit Default Swaps: Receive Fixed (Sell Protection) - Unrealised Gains 3,787,971 1.29

Total Credit Default Swaps 3,787,971 1.29

Forward Currency Contracts: 0.18% (2015: 0.22%)

Currency Currency Currency Maturity Unrealised % of Counterparty Buys Sells Rate Date Gain Net Assets €

Commonwealth EUR 25,099,412 GBP 21,000,000 1.1952 15/03/2017 539,708 0.18 Bank State Street EUR 20,901 GBP 17,791 1.1748 31/01/2017 71 - State Street EUR 175 GBP 149 1.1748 31/01/2017 1 - State Street EUR 115 GBP 98 1.1748 31/01/2017 - -

Unrealised Gains on Forward Currency Contracts 539,780 0.18

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global High Yield Credit Fund (continued) Nominal Financial assets and liabilities at fair value through profit Fair Value % of Holdings or loss € Net Assets

Financial Derivative Instruments: 1.55% (2015: 0.82%) (continued)

Futures Contracts - Unrealised Gains: 0.08% (2015: 0.02%)

Clearing Broker Description Currency No. of Unrealised % of Contracts Gain Net Assets € United States: 0.08% (2015: 0.02%)

Goldman Sachs Ultra Bond (Cbt) March 2017 USD (84) 169,055 0.06 Goldman Sachs 10 Year Treasury Note March 2017 USD (108) 51,202 0.02

Total United States 220,257 0.08

Total Futures Contracts - Unrealised Gains 220,257 0.08

Total Financial Derivative Instruments 4,548,008 1.55

Total financial assets at fair value through profit or loss 271,198,514 92.58

Financial liabilities at fair value through profit or loss

Financial Derivative Instruments: (0.80%) (2015: (1.90%))

Credit Default Swaps: (0.19%) (2015: (0.97%))

Credit Default Swaps: Receive Fixed (Sell Protection) - Unrealised Losses: (0.19%) (2015: (0.97%))

European Union: 0.00% (2015: (0.44%)) - -

United States: (0.19%) (2015: (0.53%))

(4,500,000) Canadian Natural Resources 1% 20/12/2021 (BNP Paribas) (72,652) (0.02) (5,000,000) Enbridge Income 1% 20/12/2021 (BNP Paribas) (113,174) (0.04) (1,650,000) J.C Penny Company 5% 20/12/2021 (Goldman Sachs) (68,576) (0.02) (3,200,000) Tenet 5% 20/12/2021 (Goldman Sachs) (308,178) (0.11)

Total United States (562,580) (0.19)

Total Credit Default Swaps: Receive Fixed (Sell Protection) - Unrealised Losses (562,580) (0.19)

Total Credit Default Swaps (562,580) (0.19)

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global High Yield Credit Fund (continued) Fair Value % of Financial liabilities at fair value through profit or loss € Net Assets

Financial Derivative Instruments: (0.80%) (2015: (1.90%)) (continued)

Forward Currency Contracts: (0.58%) (2015: (0.91%))

Currency Currency Currency Maturity Unrealised % of Counterparty Buys Sells Rate Date Loss Net Assets €

State Street USD 8 EUR 8 0.9547 31/01/2017 - - State Street USD 987 EUR 942 0.9542 31/01/2017 (7) - State Street GBP 182,095 EUR 213,925 1.1748 31/01/2017 (728) - State Street USD 121,253 EUR 115,700 0.9542 31/01/2017 (889) - State Street GBP 277,409 EUR 325,899 1.1748 31/01/2017 (1,109) - State Street USD 239,701 EUR 229,040 0.9555 31/01/2017 (2,073) - State Street USD 11,291,936 EUR 10,774,265 0.9542 31/01/2017 (82,200) (0.03) State Street GBP 21,791,069 EUR 25,600,079 1.1748 31/01/2017 (87,125) (0.03) Northern Trust EUR 205,417,777 USD 219,000,000 0.9380 15/03/2017 (1,508,609) (0.52)

Unrealised Losses on Forward Currency Contracts (1,682,740) (0.58)

Futures Contracts - Unrealised Losses: (0.03%) (2015: (0.02%))

Clearing Broker Description Currency No. of Unrealised % of Contracts Loss Net Assets € European Union: (0.03%) (2015: (0.01%))

Goldman Sachs Euro-Bobl Eux March 2017 EUR (11) (11,880) - Goldman Sachs Euro-Bund Eux March 2017 EUR (35) (85,750) (0.03)

Total European Union (97,630) (0.03)

United States: (0.00%) (2015: (0.01%)) - -

Total Futures Contracts - Unrealised Losses (97,630) (0.03)

Total Financial Derivative Instruments (2,342,950) (0.80)

Total financial liabilities at fair value through profit or loss (2,342,950) (0.80)

Net financial assets at fair value through profit or loss 268,855,564 91.78 (2015: 88.50%) (Cost: €246,458,476)

Net Cash (2015: 9.87%) 20,619,962 7.04

Other Net Assets (2015: 1.63%) 3,450,431 1.18

Net Assets Attributable to Holders of Redeemable Participating Shares 292,925,957 100.00

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global High Yield Credit Fund (continued) % of Total Assets

Portfolio Classification

Transferable securities traded on a regulated market 89.05 OTC financial derivative instruments 1.45 Financial derivative instruments dealt on a regulated market 0.07 Cash 8.18 Other net assets 1.25 Total 100.00

The counterparties for the forward currency contracts are: Northern Trust (S&P: AA-, Moody’s: Aa2), Commonwealth Bank of Australia (S&P: AA-, Moody’s: Aa2) and State Street Bank and Trust Company (S&P: A, Moody’s: Aa1).

The clearing broker for the futures contracts is Goldman Sachs (S&P: A+, Moody’s: A3).

The counterparties for the credit default swaps are: BNP Paribas (S&P: BB+, Moody’s: A1), Credit Suisse (S&P: A, Moody’s: A1), Goldman Sachs (S&P: A+, Moody’s: A3) and JP Morgan (S&P: A+, Moody’s: A3).

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Europe Ex-UK Equity Fund Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss € Net Assets

Equities: 99.53% (2015: 99.58%)

Belgium: 1.42% (2015: 2.33%)

53,259 UCB 3,257,320 1.42

Total Belgium 3,257,320 1.42

Denmark: 2.89% (2015: 6.18%)

194,652 Novo Nordisk 6,645,101 2.89

Total Denmark 6,645,101 2.89

Finland: 0.00% (2015: 2.70%) - -

France: 11.50% (2015: 6.01%)

102,042 Legrand 5,502,105 2.39 66,780 Renault 5,624,879 2.45 215,917 Ubisoft Entertainment 7,287,199 3.17 148,529 Valeo 8,022,051 3.49

Total France 26,436,234 11.50

Germany: 36.05% (2015: 28.92%)

48,723 Adidas 7,284,089 3.17 97,953 Bayer 9,646,411 4.20 84,108 Deutsche Boerse 6,547,808 2.85 82,352 Duerr 6,263,693 2.72 228,735 Freenet 6,114,087 2.66 100,193 Fresenius 7,414,282 3.23 130,127 Kion 6,865,501 2.99 63,737 Merck 6,335,458 2.75 65,421 MTU Aero Engines 7,140,702 3.11 109,572 ProSiebenSat.1 Media 4,013,075 1.74 84,889 Rocket Internet 1,622,229 0.71 102,311 Sartorius - Preferred 7,323,421 3.18 154,096 Wirecard 6,287,117 2.74

Total Germany 82,857,873 36.05

Ireland: 1.26% (2015: 2.29%)

28,782 Paddy Power Betfair 2,899,787 1.26

Total Ireland 2,899,787 1.26

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Europe Ex-UK Equity Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss € Net Assets

Equities: 99.53% (2015: 99.58%) (continued)

Italy: 4.39% (2015: 6.93%)

783,818 Cerved Information Solutions 6,149,052 2.68 1,638,555 Intesa Sanpaolo 3,935,809 1.71

Total Italy 10,084,861 4.39

Jersey: 2.55% (2015: 1.94%)

78,930 Randgold Resources 5,852,647 2.55

Total Jersey 5,852,647 2.55

Netherlands: 13.43% (2015: 12.39%)

158,397 ASM International 6,771,472 2.94 60,392 ASML Holding 6,386,454 2.78 116,617 Euronext 4,552,145 1.98 620,354 ING Groep 8,222,792 3.58 132,379 TKH 4,937,737 2.15

Total Netherlands 30,870,600 13.43

Norway: 1.98% (2015: 1.34%)

259,703 Statoil 4,542,048 1.98

Total Norway 4,542,048 1.98

Spain: 14.00% (2015: 12.59%)

44,995 Aena 5,856,099 2.55 162,297 Amadeus IT 7,032,329 3.06 734,587 Bankinter 5,400,684 2.35 383,861 Gamesa Tecnologica 7,339,422 3.19 202,928 Inditex 6,538,340 2.85

Total Spain 32,166,874 14.00

Sweden: 0.00% (2015: 1.97%) - -

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Europe Ex-UK Equity Fund (continued) Nominal Financial assets and liabilities at fair value through profit Fair Value % of Holdings or loss € Net Assets

Equities: 99.53% (2015: 99.58%) (continued)

Switzerland: 10.06% (2015: 13.99%)

51,222 Dufry 6,046,830 2.63 53,088 Roche 11,482,301 5.00 14,862 Syngenta 5,599,404 2.43

Total Switzerland 23,128,535 10.06

Total Equities 228,741,880 99.53

Financial Derivative Instruments: 0.00% (2015: 0.02%)

Forward Currency Contracts: 0.00% (2015: 0.02%)

Currency Currency Currency Maturity Unrealised % of Counterparty Buys Sells Rate Date Gain Net Assets €

State Street EUR 73,166 GBP 62,474 1.1711 31/01/2017 444 - State Street EUR 4,777 USD 4,998 0.9558 31/01/2017 52 -

Unrealised Gains on Forward Currency Contracts 496 -

Total Financial Derivative Instruments 496 -

Total financial assets at fair value through profit or loss 228,742,376 99.53

Financial liabilities at fair value through profit or loss

Financial Derivative Instruments: (0.04%) (2015: 0.00%)

Forward Currency Contracts: (0.04%) (2015: 0.00%)

Currency Currency Currency Maturity Unrealised % of Counterparty Buys Sells Rate Date Loss Net Assets €

State Street GBP 11 EUR 13 1.1801 31/01/2017 - - State Street GBP 11 EUR 13 1.1801 31/01/2017 - - State Street GBP 993 EUR 1,172 1.1797 31/01/2017 (16) - State Street GBP 993 EUR 1,172 1.1797 31/01/2017 (16) - State Street USD 4,998 EUR 4,784 0.9571 03/01/2017 (51) - State Street USD 16,474 EUR 15,746 0.9558 31/01/2017 (171) - State Street USD 32,312 EUR 30,858 0.9550 31/01/2017 (309) - State Street GBP 52,243 EUR 61,636 1.1798 31/01/2017 (822) -

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Europe Ex-UK Equity Fund (continued) Fair Value % of Financial liabilities at fair value through profit or loss € Net Assets

Financial Derivative Instruments: (0.04%) (2015: 0.00%) (continued)

Forward Currency Contracts: (0.04%) (2015: 0.00%) (continued)

Currency Currency Currency Maturity Unrealised % of Counterparty Buys Sells Rate Date Loss Net Assets €

State Street USD 1,864,573 EUR 1,780,534 0.9549 31/01/2017 (17,721) (0.01) State Street GBP 4,519,875 EUR 5,331,946 1.1797 31/01/2017 (70,631) (0.03)

Unrealised Losses on Forward Currency Contracts (89,737) (0.04)

Total Financial Derivative Instruments (89,737) (0.04)

Total financial liabilities at fair value through profit or loss (89,737) (0.04)

Net financial assets at fair value through profit or loss 228,652,639 99.49 (2015: 99.60%) (Cost: €173,651,787)

Net Cash (2015: 0.47%) 1,269,016 0.55

Other Net Liabilities (2015: (0.07%)) (97,640) (0.04)

Net Assets Attributable to Holders of Redeemable Participating Shares 229,824,015 100.00

Portfolio Classification % of Total Assets Transferable securities admitted to official stock exchange listing 99.45 Cash 0.55 Total 100.00

The counterparty for the forward currency contracts is State Street Bank and Trust Company (S&P: A, Moody’s: Aa1).

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes US SMID Equity Fund Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 98.31% (2015: 98.11%)

Canada: 3.41% (2015: 5.58%)

Consumer, Cyclical: 3.41% (2015: 4.18%) 254,694 Alimentation Couche-Tard 11,573,047 1.38 667,844 Gildan Activewear 17,056,736 2.03

Total Consumer, Cyclical 28,629,783 3.41

Industrial: 0.00% (2015: 1.40%) - -

Total Canada 28,629,783 3.41

United States: 94.90% (2015: 92.53%)

Basic Materials: 3.76% (2015: 3.09%) 504,004 Axalta Coating Systems 13,754,269 1.64 330,892 RPM International 17,858,241 2.12

Total Basic Materials 31,612,510 3.76

Communications: 2.22% (2015: 1.50%) 343,475 John Wiley & Sons 18,650,693 2.22

Total Communications 18,650,693 2.22

Consumer, Cyclical: 6.85% (2015: 7.90%) 247,504 Brunswick 13,545,894 1.61 409,527 LKQ 12,646,194 1.50 114,991 MSC Industrial Direct 10,733,260 1.28 168,956 Newell Brands 7,653,707 0.91 492,706 Sally Beauty Holdings 13,022,220 1.55

Total Consumer, Cyclical 57,601,275 6.85

Consumer, Non-cyclical: 19.28% (2015: 23.78%) 376,733 AMN Healthcare Services 14,636,077 1.74 96,470 Bio-Rad Laboratories 17,676,198 2.10 97,915 Cooper Cos 17,183,103 2.04 547,990 Diplomat Pharmacy 7,047,151 0.84 132,715 Equifax 15,749,289 1.87 194,418 Haemonetics 7,770,887 0.93 158,734 Matthews International 12,099,499 1.44 216,100 MEDNAX 14,463,573 1.72 310,641 STERIS 20,980,693 2.50 206,762 West Pharmaceutical Services 17,622,325 2.10 150,261 WEX 16,835,242 2.00

Total Consumer, Non-cyclical 162,064,037 19.28

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes US SMID Equity Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 98.31% (2015: 98.11%) (continued)

United States: 94.90% (2015: 92.53%) (continued)

Energy: 3.15% (2015: 1.78%) 409,070 Oceaneering International 11,548,046 1.37 890,806 Superior Energy Services 14,947,725 1.78

Total Energy 26,495,771 3.15

Financial: 22.64% (2015: 22.94%) 267,177 Alexander & Baldwin 11,908,079 1.42 36,316 Alleghany 22,123,344 2.63 283,708 Bank of the Ozarks 14,894,670 1.77 269,314 Brown & Brown 12,062,574 1.43 103,519 Ellie Mae 8,810,502 1.05 165,382 Reinsurance of America 20,828,209 2.48 730,905 Retail Opportunity Investments Reits 15,261,296 1.82 356,759 SEI Investments 17,623,895 2.10 112,724 Signature Bank 16,836,457 2.00 403,002 Weingarten Realty Investors Reits 14,197,760 1.69 18,877 White Mountains Insurance 15,801,937 1.88 275,391 Wintrust Financial 19,957,586 2.37

Total Financial 190,306,309 22.64

Industrial: 25.02% (2015: 18.11%) 157,330 AptarGroup 11,593,648 1.38 164,188 CLARCOR 13,534,017 1.61 269,600 Clean Harbors 15,027,504 1.79 214,002 Cognex 13,708,968 1.63 115,305 Eagle Materials 11,408,277 1.36 450,104 FLIR Systems 16,365,781 1.95 218,574 Genesee & Wyoming 15,210,565 1.81 296,441 Kirby 19,846,725 2.36 59,449 Martin Marietta Materials 13,366,513 1.59 444,076 Matson 15,840,191 1.88 519,878 National Instruments 16,100,622 1.91 342,374 Simpson Manufacturing 15,163,744 1.80 200,659 Wabtec 16,763,053 1.99 237,641 Woodward 16,451,886 1.96

Total Industrial 210,381,494 25.02

Technology: 8.53% (2015: 9.51%) 183,075 ANSYS 16,963,730 2.01 212,553 Broadridge Financial Solutions 14,209,168 1.69 115,989 CACI International 14,533,422 1.73

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes US SMID Equity Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 98.31% (2015: 98.11%) (continued)

United States: 94.90% (2015: 92.53%) (continued)

Technology: 8.53% (2015: 9.51%) (continued) 110,206 Jack Henry & Associates 9,828,171 1.17 245,206 Silicon Laboratories 16,220,377 1.93

Total Technology 71,754,868 8.53

Utilities: 3.45% (2015: 3.92%) 392,364 Alliant Energy 14,984,381 1.78 483,297 MDU Resources 14,039,778 1.67

Total Utilities 29,024,159 3.45

Total United States 797,891,116 94.90

Total Equities 826,520,899 98.31

Financial Derivative Instruments: 0.02% (2015: 0.00%)

Forward Currency Contracts: 0.02% (2015: 0.00%)

Currency Currency Currency Maturity Unrealised % of Counterparty Buys Sells Rate Date Gain $ Net Assets

State Street EUR 16,478,281 USD 17,256,040 1.0472 31/01/2017 173,478 0.02 State Street CHF 4,551,803 USD 4,452,664 0.9782 31/01/2017 28,573 - State Street EUR 2,444,366 USD 2,559,738 1.0472 31/01/2017 25,733 - State Street CHF 717,293 USD 701,671 0.9782 31/01/2017 4,503 - State Street EUR 23,537 USD 24,625 1.0462 31/01/2017 271 - State Street CHF 36,547 USD 35,751 0.9782 31/01/2017 229 - State Street USD 42,714 GBP 34,579 1.2353 31/01/2017 139 - State Street EUR 9,795 USD 10,234 1.0448 03/01/2017 110 - State Street USD 20,350 GBP 16,474 1.2353 31/01/2017 66 - State Street GBP 4,435 USD 5,439 1.2264 31/01/2017 21 -

Unrealised Gains on Forward Currency Contracts 233,123 0.02

Total Financial Derivative Instruments 233,123 0.02

Total financial assets at fair value through profit or loss 826,754,022 98.33

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes US SMID Equity Fund (continued) Fair Value % of Financial liabilities at fair value through profit or loss $ Net Assets

Financial Derivative Instruments: 0.00% (2015: 0.00%)

Forward Currency Contracts: 0.00% (2015: 0.00%)

Currency Currency Currency Maturity Unrealised % of Counterparty Buys Sells Rate Date Loss $ Net Assets

State Street USD 559 CHF 572 0.9781 31/01/2017 (4) - State Street USD 10,946 CHF 11,191 0.9781 31/01/2017 (71) - State Street USD 10,248 EUR 9,795 1.0463 31/01/2017 (112) - State Street USD 68,511 CHF 70,044 0.9781 31/01/2017 (447) - State Street USD 45,446 EUR 43,400 1.0471 31/01/2017 (459) - State Street USD 112,680 EUR 107,611 1.0471 31/01/2017 (1,143) - State Street USD 431,823 EUR 412,382 1.0471 31/01/2017 (4,364) - State Street GBP 2,952,813 USD 3,647,746 1.2353 31/01/2017 (12,136) - State Street GBP 3,788,176 USD 4,679,708 1.2353 31/01/2017 (15,569) -

Unrealised Losses on Forward Currency Contracts (34,305) -

Total Financial Derivative Instruments (34,305) -

Total financial liabilities at fair value through profit or loss (34,305) -

Net financial assets at fair value through profit or loss 826,719,717 98.33 (2015: 98.11%) (Cost: $745,320,009)

Net Cash (2015: 1.93%) 14,604,449 1.74

Other Net Liabilities (2015: (0.04%)) (563,610) (0.07)

Net Assets Attributable to Holders of Redeemable Participating Shares 840,760,556 100.00

Portfolio Classification % of Total Assets

Transferable securities admitted to official stock exchange listing 97.95 OTC financial derivative instruments 0.03 Cash 1.73 Other assets 0.29 Total 100.00

The counterparty for the forward currency contracts is State Street Bank and Trust Company (S&P: A, Moody’s: Aa1).

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Asia Ex-Japan Equity Fund Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

American Depositary Receipts: 13.00% (2015: 9.56%)

People's Republic of China: 13.00% (2015: 9.56%)

Communications: 11.97% (2015: 8.40%) 1,002,493 Alibaba ADR 87,547,714 3.75 710,490 Baidu ADR 118,296,585 5.07 2,872,645 JD.com ADR 73,654,618 3.15

Consumer, Non-cyclical: 1.03% (2015: 1.16%) 564,477 New Oriental Education & Technology ADR 24,007,207 1.03

Financial: 0.00% (2015: 2.79%) - -

Total People's Republic of China 303,506,124 13.00

Republic of South Korea: 0.00% (2015: 0.10%)

Utilities: 0.00% (2015: 0.10%) - -

Total American Depositary Receipts 303,506,124 13.00

Equities: 77.13% (2015: 83.44%)

Hong Kong: 2.49% (2015: 4.97%)

Consumer, Cyclical: 2.49% (2015: 4.97%) 8,277,000 Lifestyle China 1,974,641 0.08 25,400,500 Lifestyle International 32,755,608 1.40 28,712,640 Xinyi Glass 23,475,010 1.01

Total Hong Kong 58,205,259 2.49

India: 4.40% (2015: 5.09%)

Utilities: 4.40% (2015: 5.09%) 9,362,892 GAIL India 60,589,099 2.59 15,641,419 Power Grid of India 42,289,677 1.81

Total India 102,878,776 4.40

Japan: 3.11% (2015: 1.76%)

Technology: 3.11% (2015: 1.76%) 5,009,000 Nexon 72,557,578 3.11

Total Japan 72,557,578 3.11

People's Republic of China: 19.07% (2015: 23.98%)

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Asia Ex-Japan Equity Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 77.13% (2015: 83.44%) (continued)

People's Republic of China: 19.07% (2015: 23.98%) (continued)

Basic Materials: 1.40% (2015: 1.88%) 117,561,774 China BlueChemical 32,594,775 1.40

Consumer, Cyclical: 4.00% (2015: 4.72%) 46,614,559 Belle International 26,209,061 1.12 106,742,000 China Dongxiang 19,271,112 0.83 49,118,000 Dongfeng Motor 47,949,044 2.05

Consumer, Non-cyclical: 5.76% (2015: 6.79%) 91,442,824 COSCO Shipping Ports 91,860,856 3.93 35,072,121 Tingyi Cayman Islands 42,649,812 1.83

Diversified: 1.72% (2015: 2.59%) 16,180,177 China Merchants International 40,145,025 1.72

Energy: 2.09% (2015: 1.83%) 65,220,000 Kunlun Energy 48,781,167 2.09

Industrial: 2.33% (2015: 3.38%) 53,786,000 Beijing Capital International Airport 54,378,686 2.33

Utilities: 1.77% (2015: 0.00%) 8,720,997 Beijing Enterprises 41,217,677 1.77

Total People's Republic of China 445,057,215 19.07

Republic of South Korea: 31.79% (2015: 36.09%)

Basic Materials: 7.00% (2015: 6.73%) 625,843 Hyundai Steel 29,535,561 1.27 332,157 LG Chem 71,777,593 3.07 1,523,161 LOTTE Fine Chemical 38,652,827 1.66 468,386 Soulbrain 23,423,178 1.00

Communications: 2.45% (2015: 0.00%) 634,768 Samsung SDI 57,285,736 2.45

Consumer, Cyclical: 7.85% (2015: 6.36%) 418,125 E-Mart 63,352,273 2.71 40,614 GS Home Shopping 5,783,746 0.25 264,264 Hyundai Motors 31,944,481 1.37 202,287 Hyundai Motors - Preferred 16,028,205 0.69 191,939 Hyundai Motors - 2nd Preferred 15,796,271 0.68 1,985,554 Youngone 50,386,844 2.15

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Asia Ex-Japan Equity Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 77.13% (2015: 83.44%) (continued)

Republic of South Korea: 31.79% (2015: 36.09%) (continued)

Financial: 8.47% (2015: 10.02%) 1,681,241 Daishin Securities 14,476,657 0.62 2,030,073 Hana Financial 52,525,071 2.25 1,636,316 KB Financial 57,985,035 2.48 283,736 KIWOOM Securities 16,914,218 0.72 139,982 Samsung Card 4,601,164 0.20 230,162 Samsung Fire & Marine Insurance 51,166,167 2.20

Industrial: 2.05% (2015: 2.47%) 1,348,838 Hyundai Engineering & Construction 47,797,869 2.05

Technology: 3.97% (2015: 4.51%) 62,048 Samsung Electronics 92,573,684 3.97

Utilities: 0.00% (2015: 5.90%) - -

Total Republic of South Korea 742,006,580 31.79

Singapore: 1.92% (2015: 2.38%)

Consumer, Cyclical: 1.92% (2015: 2.38%) 71,426,900 Genting Singapore 44,737,590 1.92

Total Singapore 44,737,590 1.92

Taiwan: 12.61% (2015: 7.21%)

Financial: 2.16% (2015: 1.76%) 50,685,078 China Life Insurance 50,403,573 2.16

Industrial: 2.87% (2015: 1.80%) 18,871,320 Nan Ya Printed Circuit Board 14,433,524 0.62 15,550,000 Radiant Opto-Electronics 27,115,641 1.16 8,816,000 Simplo Technology 25,412,095 1.09

Technology: 7.58% (2015: 3.65%) 13,167,000 Chipbond Technology 18,772,647 0.80 11,056,010 Foxconn Technology 29,261,772 1.25 6,372,000 MediaTek 42,804,245 1.84 31,927,990 Powertech Technology 86,187,444 3.69

Total Taiwan 294,390,941 12.61

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Asia Ex-Japan Equity Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 90.13% (2015: 93.00%) (continued)

Thailand: 1.74% (2015: 1.96%)

Consumer, Cyclical: 1.74% (2015: 1.96%) 178,840,655 AP Thailand 37,455,633 1.60 15,337,048 AP Thailand GDR 3,212,127 0.14

Total Thailand 40,667,760 1.74

Total Equities 1,800,501,699 77.13

P-Notes: 5.28% (2015: 3.15%)

People's Republic of China: 5.28% (2015: 3.15%)

8,972,730 Wuliangye Yibin 17/01/2017 (Citigroup) 44,518,272 1.91 14,997,085 Wuliangye Yibin 18/05/2020 (CLSA) 74,408,158 3.19 867,962 Wuliangye Yibin 16/12/2021 (CLSA) 4,306,400 0.18

Total People's Republic of China 123,232,830 5.28

Total P-Notes 123,232,830 5.28

Financial Derivative Instruments: 0.15% (2015: 0.00%)

Forward Currency Contracts: 0.15% (2015: 0.00%)

Currency Currency Currency Maturity Unrealised % of Counterparty Buys Sells Rate Date Gain Net Assets $

HSBC USD 22,000,000 CNH 148,632,000 0.1480 24/02/2017 1,012,543 0.04 HSBC USD 22,000,000 CNY 149,072,000 0.1476 24/02/2017 933,590 0.04 HSBC USD 15,000,000 CNH 101,347,500 0.1480 24/02/2017 689,311 0.03 HSBC USD 15,000,000 CNY 101,670,000 0.1475 24/02/2017 632,299 0.03 State Street EUR 16,933,548 USD 17,732,794 1.0472 31/01/2017 178,271 0.01 State Street CHF 4,657,659 USD 4,556,215 0.9782 31/01/2017 29,237 - State Street EUR 1,633,915 USD 1,711,034 1.0472 31/01/2017 17,201 - Northern Trust EUR 267,306 USD 279,327 1.0450 03/01/2017 2,948 - State Street EUR 26,229 USD 27,465 1.0471 31/01/2017 278 - State Street USD 25,574 GBP 20,703 1.2353 31/01/2017 83 - State Street USD 13,609 GBP 11,017 1.2353 31/01/2017 44 -

Unrealised Gains on Forward Currency Contracts 3,495,805 0.15

Total Financial Derivative Instruments 3,495,805 0.15

Total financial assets at fair value through profit or loss 2,230,736,458 95.56

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Asia Ex-Japan Equity Fund (continued) Fair Value % of Financial liabilities at fair value through profit or loss $ Net Assets

Financial Derivative Instruments: 0.00% (2015: (0.01%))

Forward Currency Contracts: 0.00% (2015: (0.01%))

Currency Currency Currency Maturity Unrealised % of Counterparty Buys Sells Rate Date Loss Net Assets $

State Street USD 27,545 EUR 26,305 1.0471 31/01/2017 (278) - State Street USD 72,878 CHF 74,509 0.9781 31/01/2017 (476) - State Street USD 310,947 EUR 296,948 1.0471 31/01/2017 (3,142) - State Street GBP 1,953,425 USD 2,413,156 1.2353 31/01/2017 (8,029) - State Street GBP 3,616,189 USD 4,467,245 1.2353 31/01/2017 (14,862) -

Unrealised Losses on Forward Currency Contracts (26,787) -

Total Financial Derivative Instruments (26,787) -

Total financial liabilities at fair value through profit or loss (26,787) -

Net financial assets at fair value through profit or loss 2,230,709,671 95.56 (2015: 96.14%) (Cost: $2,278,345,172)

Net Cash (2015: 3.07%) 104,959,611 4.50

Other Net Liabilities (2015: 0.79%) (1,227,023) (0.06)

Net Assets Attributable to Holders of Redeemable Participating Shares 2,334,442,259 100.00

% of Total Portfolio Classification Assets

Transferable securities admitted to official stock exchange listing 89.70 Transferable securities traded on a regulated market 5.25 OTC financial derivative instruments 0.15 Cash 4.48 Other assets 0.42 Total 100.00

The counterparties for the forward currency contracts are State Street Bank and Trust Company (S&P: A, Moody’s: Aa1), Northern Trust Company (S&P: AA-, Moody's: Aa2) and HSBC Bank (S&P: AA-, Moody’s Aa2).

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Equity ESG Fund Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 98.34% (2015: 98.85%)

Australia: 1.74% (2015: 1.69%)

31,638 Caltex Australia 696,269 0.49 166,175 LendLease 1,755,298 1.25

Total Australia 2,451,567 1.74

Austria: 1.33% (2015: 1.29%)

52,066 OMV 1,866,079 1.33

Total Austria 1,866,079 1.33

Canada: 0.85% (2015: 0.69%)

11,800 Agrium 1,193,926 0.85

Total Canada 1,193,926 0.85

Denmark: 2.95% (2015: 3.85%)

40,849 Danske Bank 1,245,163 0.89 17,496 DONG Energy 670,744 0.47 28,598 ISS 966,780 0.69 35,072 Novo Nordisk 1,264,350 0.90

Total Denmark 4,147,037 2.95

Finland: 2.79% (2015: 2.25%)

36,824 Amer Sports 982,264 0.70 17,804 Metso 509,696 0.36 226,000 Stora Enso 2,429,518 1.73

Total Finland 3,921,478 2.79

France: 2.03% (2015: 1.70%)

50,140 Valeo 2,859,713 2.03

Total France 2,859,713 2.03

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Equity ESG Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 98.34% (2015: 98.85%) (continued)

Germany: 2.76% (2015: 1.85%)

21,653 Henkel 2,260,947 1.61 49,790 Schaeffler - Preferred 737,673 0.53 26,937 Vonovia 877,827 0.62

Total Germany 3,876,447 2.76

Hong Kong: 0.73% (2015: 2.50%)

129,000 Cheung Kong Infrastructure 1,026,404 0.73

Total Hong Kong 1,026,404 0.73

Hungary: 0.54% (2015: 0.37%)

26,898 OTP Bank 766,335 0.54

Total Hungary 766,335 0.54

Indonesia: 0.29% (2015: 0.20%)

1,390,000 Telekomunikasi Indonesia Persero 410,629 0.29

Total Indonesia 410,629 0.29

Ireland: 1.08% (2015: 2.09%)

98,769 Ryanair 1,517,044 1.08

Total Ireland 1,517,044 1.08

Italy: 1.06% (2015: 1.40%)

519,326 UniCredit 1,496,058 1.06

Total Italy 1,496,058 1.06

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Equity ESG Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 98.34% (2015: 98.85%) (continued)

Japan: 8.03% (2015: 9.35%)

17,600 FUJIFILM 667,459 0.47 174,000 Hakuhodo 2,142,546 1.52 42,300 Japan Post 527,733 0.38 125,200 Kirin 2,035,724 1.45 59,000 Nippon Telegraph & Telephone 2,478,156 1.76 16,800 Nitto Denko 1,288,462 0.92 25,600 Seiko Epson 541,793 0.39 42,100 Sumitomo Mitsui Financial Group 1,605,592 1.14

Total Japan 11,287,465 8.03

Jersey: 0.61% (2015: 0.00%)

10,952 Randgold Resources 857,566 0.61

Total Jersey 857,566 0.61

Netherlands: 1.11% (2015: 0.69%)

13,958 ASML Holding 1,558,718 1.11

Total Netherlands 1,558,718 1.11

Norway: 1.48% (2015: 2.76%)

39,688 Aker BP 709,003 0.50 59,812 Frontline 431,713 0.31 6,600 Leroy Seafood 366,526 0.26 31,553 Marine Harvest 572,111 0.41

Total Norway 2,079,353 1.48

People's Republic of China: 2.47% (2015: 2.67%)

88,000 China Mobile 932,820 0.66 220,000 China Resources Gas 618,476 0.44 384,000 Ping An Insurance Group 1,921,349 1.37

Total People's Republic of China 3,472,645 2.47

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Equity ESG Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 98.34% (2015: 98.85%) (continued)

Republic of South Korea: 3.19% (2015: 2.55%)

30,000 Hyundai Engineering & Construction 1,063,090 0.76 27,000 Hyundai Marine & Fire Insurance 704,173 0.50 970 Samsung Electronics 1,447,210 1.03 5,700 Samsung Fire & Marine Insurance 1,267,139 0.90

Total Republic of South Korea 4,481,612 3.19

Spain: 0.92% (2015: 1.02%)

64,000 Gamesa Tecnologica 1,292,206 0.92

Total Spain 1,292,206 0.92

Sweden: 0.00% (2015: 0.46%) - -

Switzerland: 1.22% (2015: 0.00%)

7,500 Roche 1,713,002 1.22

Total Switzerland 1,713,002 1.22

Taiwan: 1.82% (2015: 0.74%)

422,470 Hon Hai Precision Industry 1,103,726 0.78 260,000 Taiwan Semiconductor Manufacturing 1,464,209 1.04

Total Taiwan 2,567,935 1.82

United Kingdom: 4.07% (2015: 6.74%)

41,897 Greggs 500,985 0.36 477,898 Hays 876,574 0.62 854,895 Lloyds Banking 654,573 0.47 121,393 Prudential 2,407,883 1.71 391,178 Worldpay 1,285,358 0.91

Total United Kingdom 5,725,373 4.07

United States: 55.27% (2015: 51.99%)

58,794 Abbott Laboratories 2,252,398 1.60 10,566 Accenture 1,236,328 0.88 2,649 Alphabet Class A 2,126,829 1.51

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Equity ESG Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 98.34% (2015: 98.85%) (continued)

United States: 55.27% (2015: 51.99%) (continued)

2,359 Alphabet Class C 1,846,602 1.31 10,584 American Tower Reits 1,126,032 0.80 23,283 American Water Works 1,693,140 1.20 9,800 Amgen 1,448,244 1.03 13,600 Analog Devices 1,000,688 0.71 21,992 Apple 2,567,126 1.83 75,686 Bank of America 1,665,092 1.18 8,069 Berkshire Hathaway 1,315,650 0.94 15,881 Capital One Financial 1,383,394 0.98 10,500 Chubb 1,388,520 0.99 79,740 Cisco Systems 2,428,880 1.73 34,100 Comcast 2,390,069 1.70 7,803 Cooper Cos 1,369,348 0.97 16,396 Cummins 2,236,742 1.59 26,751 CVS Health 2,113,329 1.50 70,962 Delta Air Lines 3,499,136 2.49 18,172 Eagle Materials 1,797,938 1.28 33,049 East West Bancorp 1,678,889 1.19 14,716 Exxon Mobil 1,329,591 0.95 11,143 Facebook 1,296,488 0.92 136,000 Ford Motor 1,663,280 1.18 58,000 General Electric 1,839,180 1.31 33,223 Hess 2,089,727 1.49 26,260 Ingersoll-Rand 1,984,468 1.41 8,399 Ingredion 1,055,586 0.75 29,988 Kroger 1,037,285 0.74 29,800 Lam Research 3,193,069 2.27 6,877 M&T Bank 1,070,268 0.76 21,832 Macy's 792,283 0.56 22,374 Marathon Petroleum 1,128,768 0.80 15,570 McKesson 2,207,515 1.57 49,826 Micron Technology 1,109,625 0.79 173,078 Oasis Petroleum 2,611,747 1.86 4,453 O'Reilly Automotive 1,254,143 0.89 40,484 State Street 3,143,986 2.24 19,572 Thermo Fisher Scientific 2,769,047 1.97 34,241 TJX 2,592,386 1.84 25,313 Travelers 3,095,526 2.20 10,819 VF 580,223 0.41 17,000 Visa 1,331,610 0.95

Total United States 77,740,175 55.27

Total Equities 138,308,767 98.34

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Equity ESG Fund (continued) Fair Value % of Financial assets at fair value through profit or loss $ Net Assets

Financial Derivative Instruments: 0.00% (2015: 0.00%)

Forward Currency Contracts: 0.00% (2015: 0.00%)

Currency Currency Currency Maturity Unrealised % of Counterparty Buys Sells Rate Date Gain Net Assets $

Northern Trust NOK 273,811 USD 31,441 0.1148 03/01/2017 384 -

Unrealised Gains on Forward Currency Contracts 384 -

Total Financial Derivative Instruments 384 -

Total financial assets at fair value through profit or loss 138,309,151 98.34 (2015: 98.85%) (Cost: $132,111,977)

Net Cash (2015: 1.06%) 2,316,432 1.65

Other Net Liabilities (2015: 0.09%) 16,094 0.01

Net Assets Attributable to Holders of Redeemable Participating Shares 140,641,677 100.00

Portfolio Classification % of Total Assets Transferable securities admitted to official stock exchange listing 98.24 Cash 1.65 Other assets 0.11 Total 100.00

The counterparties for the forward currency contracts Northern Trust Company (S&P: AA-, Moody's: Aa2).

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Multi Strategy Credit Fund Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Corporate Bonds: 79.74% (2015: 76.07%)

Austria: 0.00% (2015: 0.04%) - -

Belgium: 0.00% (2015: 0.26%) - -

Brazil: 5.64% (2015: 5.57%)

6,750,000 GTL Trade Finance 5.893% 29/04/2024 6,750,000 0.78 2,125,000 GTL Trade Finance 7.250% 16/04/2044 1,994,844 0.23 17,281,000 Marfrig Europe 8.375% 09/05/2018 18,193,437 2.10 4,830,000 Marfrig Holdings Europe 8.000% 08/06/2023 5,011,608 0.58 5,640,000 Vale Overseas 5.875% 10/06/2021 5,922,000 0.69 10,481,000 Vale Overseas 6.250% 10/08/2026 10,926,443 1.26

Total Brazil 48,798,332 5.64

Chile: 1.27% (2015: 0.87%)

10,629,000 VTR Finance 6.875% 15/01/2024 11,001,015 1.27

Total Chile 11,001,015 1.27

France: 0.00% (2015: 1.45%) - -

Germany: 1.95% (2015: 3.21%)

12,773,000 Dresdner Funding Trust I 8.151% 30/06/2031 14,786,855 1.71 1,811,000 Schaeffler Finance 4.250% 15/05/2021 1,856,275 0.21 215,000 Volkswagen International Finance 1.600% 20/11/2017 214,485 0.03

Total Germany 16,857,615 1.95

Hong Kong: 0.75% (2015: 0.71%)

6,550,000 FTL Capital 4.125% 25/04/2023 6,488,633 0.75

Total Hong Kong 6,488,633 0.75

Ireland: 0.89% (2015: 1.21%)

5,300,000 AerCap Ireland Capital 4.625% 01/07/2022 5,472,250 0.63 2,000,000 Ardagh Packaging Finance 6.750% 15/05/2024 2,264,761 0.26

Total Ireland 7,737,011 0.89

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Multi Strategy Credit Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Corporate Bonds: 79.74% (2015: 76.07%) (continued)

Italy: 5.85% (2015: 3.91%)

4,550,000 Intesa Sanpaolo 2.375% 13/01/2017 4,550,653 0.53 1,192,000 Intesa Sanpaolo 3.875% 16/01/2018 1,208,148 0.14 10,601,000 Intesa Sanpaolo 5.017% 26/06/2024 9,812,195 1.13 14,750,000 Telecom Italia 7.375% 15/12/2017 19,199,023 2.22 15,207,000 Wind Acquisition Finance 7.375% 23/04/2021 15,853,298 1.83

Total Italy 50,623,317 5.85

Luxembourg: 2.41% (2015: 0.74%)

5,095,000 Altice Financing 6.500% 15/01/2022 5,324,275 0.61 3,342,000 Altice Luxembourg 7.250% 15/05/2022 3,780,535 0.44 4,394,145 ARD Finance 6.625% 15/09/2023 4,652,452 0.54 5,500,000 Millicom International Cellular 6.000% 15/03/2025 5,424,375 0.63 1,650,000 Millicom International Cellular 6.000% 15/03/2025 Euro-Dollar 1,627,313 0.19

Total Luxembourg 20,808,950 2.41

Mexico: 4.01% (2015: 1.05%)

900,000 America Movil 0.000% 28/05/2020 921,983 0.11 11,240,000 America Movil 2.125% 10/03/2028 11,965,295 1.38 300,000 America Movil 3.125% 16/07/2022 296,157 0.03 1,990,000 America Movil 3.750% 28/06/2017 2,138,761 0.25 1,080,000 Cemex 4.375% 05/03/2023 1,173,133 0.14 3,400,000 Cemex 6.125% 05/05/2025 3,485,000 0.40 7,596,000 Cemex 7.750% 16/04/2026 8,431,560 0.98 1,050,000 Cemex Finance 4.625% 15/06/2024 1,144,170 0.13 4,700,000 Cemex Finance 9.375% 12/10/2022 5,134,750 0.59

Total Mexico 34,690,809 4.01

Netherlands: 2.29% (2015: 1.48%)

6,975,000 GTH Finance 6.250% 26/04/2020 7,330,153 0.85 11,808,000 Ziggo Secured Finance 4.250% 15/01/2027 12,471,052 1.44

Total Netherlands 19,801,205 2.29

People's Republic of China: 1.09% (2015: 0.00%)

9,882,000 Sinopec 2.000% 29/09/2021 9,436,569 1.09

Total People's Republic of China 9,436,569 1.09

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Multi Strategy Credit Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Corporate Bonds: 79.74% (2015: 76.07%) (continued)

Russian Federation: 5.72% (2015: 5.22%)

1,300,000 MMC Finance 4.375% 30/04/2018 1,332,224 0.15 12,300,000 MMC Finance 5.550% 28/10/2020 13,124,556 1.52 2,000,000 MMC Finance 6.625% 14/10/2022 2,234,000 0.26 9,300,000 Rosneft International Finance 4.199% 06/03/2022 9,192,957 1.06 3,000,000 Severstal Via Steel Capital 4.450% 19/03/2018 3,058,545 0.35 9,000,000 Severstal Via Steel Capital 5.900% 17/10/2022 9,694,575 1.12 1,000,000 Steel Capital 5.900% 17/10/2022 1,077,175 0.12 1,197,000 VimpelCom 5.950% 13/02/2023 1,247,873 0.15 8,507,000 VimpelCom 6.255% 01/03/2017 8,568,506 0.99

Total Russian Federation 49,530,411 5.72

South Africa: 1.04% (2015: 0.14%)

2,460,000 Sappi Papier 7.500% 15/06/2032 2,287,800 0.26 6,652,000 Sappi Papier 7.750% 15/07/2017 6,751,780 0.78

Total South Africa 9,039,580 1.04

Spain: 0.61% (2015: 2.00%)

3,800,000 Telefonica Emisiones 5.597% 12/03/2020 5,288,320 0.61

Total Spain 5,288,320 0.61

Turkey: 1.06% (2015: 1.00%)

5,300,000 Turk Telekomunikasyon 3.750% 19/06/2019 5,269,525 0.61 4,192,000 Turk Telekomunikasyon 4.875% 19/06/2024 3,930,126 0.45

Total Turkey 9,199,651 1.06

United Kingdom: 7.40% (2015: 9.97%)

800,000 Anglo American Capital 2.625% 27/09/2017 802,000 0.09 3,429,000 Barclays 1.875% 08/12/2023 3,666,385 0.42 5,700,000 New Look Secured Issuer 6.500% 01/07/2022 6,743,516 0.78 2,980,000 PGH Capital 5.750% 07/07/2021 4,109,045 0.47 2,670,000 PGH Capital 6.625% 18/12/2025 3,431,027 0.40

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Multi Strategy Credit Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Corporate Bonds: 79.74% (2015: 76.07%) (continued)

United Kingdom: 7.40% (2015: 9.97%) (continued)

9,625,000 Tesco 2.700% 05/01/2017 9,628,542 1.11 26,000,000 Tesco 5.500% 15/11/2017 26,715,702 3.09 4,900,000 Virgin Media Secured Finance 5.500% 15/01/2021 6,717,218 0.78 855,855 Virgin Media Secured Finance 6.000% 15/04/2021 1,105,654 0.13 856,000 Virgin Media Secured Finance 6.250% 28/03/2029 1,113,775 0.13

Total United Kingdom 64,032,864 7.40

United States: 37.76% (2015: 37.24%)

10,900,000 Actavis Funding 4.550% 15/03/2035 10,821,907 1.25 14,089,000 Air Lease 4.250% 15/09/2024 14,332,986 1.66 5,077,000 Ally Financial 4.125% 30/03/2020 5,140,463 0.59 12,873,000 Ally Financial 4.625% 30/03/2025 12,728,179 1.47 1,010,000 Ally Financial 6.250% 01/12/2017 1,049,138 0.12 5,695,000 Altice US Finance I 5.500% 15/05/2026 5,823,138 0.67 6,996,000 CenturyLink 5.800% 15/03/2022 7,177,056 0.83 18,121,000 Charter Communications Operating 4.908% 23/07/2025 19,130,892 2.21 1,000,000 CIT 4.250% 15/08/2017 1,015,000 0.12 7,966,000 CIT 5.000% 01/08/2023 8,244,810 0.95 7,500,000 Clearwire Communications 8.250% 01/12/2040 7,856,250 0.91 1,775,000 Dell 5.400% 10/09/2040 1,482,125 0.17 2,000,000 Diamond 1 Finance 7.125% 15/06/2024 2,221,605 0.26 2,000,000 Domtar 6.250% 01/09/2042 1,938,426 0.22 5,255,000 Domtar 6.750% 15/02/2044 5,354,524 0.62 16,702,000 EMC 1.875% % 01/06/18 16,522,537 1.91 5,712,000 General Motors Financial 3.000% 25/09/2017 5,767,703 0.67 5,100,000 General Motors Financial 3.150% 15/01/2020 5,135,570 0.59 19,700,000 General Motors Financial 3.200% 13/07/2020 19,775,244 2.28 1,000,000 General Motors Financial 3.250% 15/05/2018 1,013,438 0.12 14,150,000 HCA 4.750% 01/05/2023 14,521,438 1.68 3,550,000 HCA 5.000% 15/03/2024 3,660,938 0.42 1,686,000 HCA 5.875% 15/02/2026 1,740,795 0.20 9,360,000 Hewlett Packard Enterprise 2.450% 05/10/2017 9,413,787 1.09 9,000,000 Huntsman International 4.250% 01/04/2025 9,594,797 1.11 2,551,000 International Lease Finance 8.750% 15/03/2017 2,587,363 0.30 1,650,000 Kinder Morgan 7.000% 15/06/2017 1,688,469 0.20 2,631,000 Kinder Morgan Energy Partners 4.700% 01/11/2042 2,460,178 0.28 10,772,000 Kinder Morgan Energy Partners 5.625% 01/09/2041 10,855,278 1.25 10,736,000 Kinder Morgan Energy Partners 5.950% 15/02/2018 11,201,975 1.29 3,433,000 Kinder Morgan Finance 6.000% 15/01/2018 3,575,332 0.41 4,233,000 Lear 4.750% 15/01/2023 4,338,825 0.50

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Multi Strategy Credit Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Corporate Bonds: 79.74% (2015: 76.07%) (continued)

United States: 37.76% (2015: 37.24%) (continued)

450,000 MPLX 4.500% 07/15/2023 457,649 0.05 11,300,000 MPLX 4.875% 01/12/2024 11,654,080 1.35 10,800,000 MPLX 4.875% 01/06/2025 11,122,617 1.29 1,750,000 MPLX 5.500% 02/15/2023 1,820,900 0.21 16,661,000 Range Resources 5.000% 08/15/2022 16,640,174 1.92 100,000 Range Resources 5.750% 01/06/2021 105,250 0.01 19,500,000 Rite Aid 6.125% 01/04/2023 21,035,625 2.43 2,525,000 Sprint Spectrum 3.360% 20/09/2021 2,536,034 0.29 1,450,000 Tenet Healthcare 8.000% 01/08/2020 1,435,645 0.17 11,600,000 T-Mobile USA 6.375% 01/03/2025 12,426,500 1.44 7,671,000 Valeant Pharmaceuticals International 4.500% 15/05/2023 5,907,634 0.68 12,949,000 Vulcan Materials 4.500% 01/04/2025 13,596,450 1.57

Total United States 326,908,724 37.76

Total Corporate Bonds 690,243,006 79.74

Floating Rate Notes: 15.36% (2015: 15.89%)

Australia: 3.14% (2015: 1.36%)

19,904,000 BHP Billiton Finance 22/10/2077 27,136,045 3.14

Total Australia 27,136,045 3.14

Austria: 0.41% (2015: 0.00%)

3,800,000 RZB Finance Jersey IV Ltd 31/12/2049 3,589,409 0.41

Total Austria 3,589,409 0.41

Belgium: 2.46% (2015: 2.03%)

19,300,000 Solvay Finance 29/05/2049 21,279,218 2.46

Total Belgium 21,279,218 2.46

Canada: 0.21% (2015: 0.00%)

1,817,000 Enbridge 6.000% 15/01/2077 1,817,000 0.21

Total Canada 1,817,000 0.21

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Multi Strategy Credit Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Floating Rate Notes: 15.36% (2015: 15.89%) (continued)

France: 3.26% (2015: 2.69%)

9,500,000 Groupama 29/10/2049 9,656,895 1.12 17,596,000 Total 31/12/2049 18,538,501 2.14

Total France 28,195,396 3.26

Ireland: 1.32% (2015: 3.97%)

10,700,000 Allied Irish Banks 26/11/2025 11,469,558 1.32

Total Ireland 11,469,558 1.32

Italy: 0.00% (2015: 0.95%) - -

Mexico: 0.14% (2015: 0.00%)

900,000 America Movil 06/09/2073 1,172,200 0.14

Total Mexico 1,172,200 0.14

Netherlands: 2.46% (2015: 2.76%)

21,171,756 NXP 11/01/2020 21,290,847 2.46

Total Netherlands 21,290,847 2.46

New Zealand: 0.35% (2015: 0.00%)

3,000,000 Reynolds Group 20/01/2023 3,036,477 0.35

Total New Zealand 3,036,477 0.35

United Kingdom: 1.61% (2015: 1.55%)

4,890,000 Barclays Bank 29/04/2049 6,099,138 0.70 7,390,000 Barclays Bank 29/12/2049 7,842,364 0.91

Total United Kingdom 13,941,502 1.61

United States: 0.00% (2015: 0.58%) - -

Total Floating Rate Notes 132,927,652 15.36

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Multi Strategy Credit Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Financial Derivative Instruments: 2.15% (2015: 2.45%)

Credit Default Swaps: 1.45% (2015: 1.82%)

Credit Default Swaps: Pay Fixed (Buy Protection) - Unrealised Gains: 0.31% (2015: 1.24%)

European Union: 0.05% (2015: 0.61%)

10,300,000 Credit Agricole 1% 20/12/2021 (Merrill Lynch) 418,075 0.05 26,250,000 Safeway 1% 20/12/2021 (Goldman Sachs) 40,897 -

Total European Union 458,972 0.05

United States: 0.26% (2015: 0.63%)

3,450,000 Dell 1% 20/09/2020 (Goldman Sachs) 106,370 0.01 3,450,000 Dell 1% 20/09/2020 (Goldman Sachs) 106,370 0.01 3,450,000 Dell 1% 20/09/2020 (Goldman Sachs) 106,370 0.01 34,000,000 Domtar 1% 20/12/2021 (Goldman Sachs) 668,906 0.08 35,900,000 HP 1% 20/12/2021 (Goldman Sachs) 195,157 0.02 9,167,000 Macy's 1% 20/12/2021 (Goldman Sachs) 356,540 0.04 18,333,000 Macy's 1% 20/12/2021 (Goldman Sachs) 713,041 0.09

Total United States 2,252,754 0.26

Total Credit Default Swaps: Pay Fixed (Buy Protection) - Unrealised Gains 2,711,726 0.31

Credit Default Swaps: Receive Fixed (Sell Protection) - Unrealised Gains: 1.14% (2015: 0.58%)

European Union: 0.75% (2015: 0.36%)

(9,350,000) Airbus 1% 20/06/2017 (BNP Paribas) 36,935 0.01 (1,750,000) Airbus 1% 20/06/2017 (BNP Paribas) 6,913 - (1,000,000) Airbus 1% 20/09/2017 (BNP Paribas) 5,837 - (10,000,000) Airbus 1% 20/09/2017 (Citigroup) 58,375 0.01 (2,000,000) Airbus 1% 20/09/2017 (Citigroup) 11,675 - (4,000,000) Airbus 1% 20/09/2017 (Citigroup) 23,350 - (5,000,000) Airbus 1% 20/09/2017 (Credit Suisse) 29,187 - (1,500,000) Airbus 1% 20/09/2017 (Credit Suisse) 8,756 - (5,644,000) Altice Finco 5% 20/12/2021 (JP Morgan) 441,058 0.05 (5,000,000) Anglo American 5% 20/06/2018 (Merrill Lynch) 338,644 0.04 (12,600,000) Anglo American 5% 20/12/2021 (Goldman Sachs) 1,717,955 0.20

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Multi Strategy Credit Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Financial Derivative Instruments: 2.15% (2015: 2.45%) (continued)

Credit Default Swaps: 1.45% (2015: 1.82%) (continued)

Credit Default Swaps: Receive Fixed (Sell Protection) - Unrealised Gains: 1.14% (2015: 0.58%) (continued)

European Union: 0.75% (2015: 0.36%) (continued)

(2,000,000) Arcelormittal 5% 20/06/2018 (Barclays) 131,577 0.02 (3,000,000) Arcelormittal 5% 20/06/2018 (BNP Paribas) 197,366 0.02 (3,000,000) Arcelormittal 5% 20/06/2018 (Merrill Lynch) 194,552 0.02 (32,000,000) CDX Itraxx 1% 20/12/2021 (JP Morgan) 461,061 0.05 (13,000,000) Schaeffler Finance 5% 20/12/2021 (BNP Paribas) 2,577,166 0.30 (18,000,000) Telecom Italia 1% 20/09/2017 (Credit Suisse) 68,237 0.01 (8,000,000) Telefonica 1% 20/06/2017 (BNP Paribas) 33,293 - (9,650,000) Telefonica 1% 20/06/2017 (Credit Suisse) 40,159 0.01 (1,000,000) Tesco 1% 20/06/2017 (BNP Paribas) 3,765 - (2,000,000) Tesco 1% 20/06/2017 (Credit Suisse) 7,529 - (9,350,000) Volkswagen 1% 20/06/2017 (BNP Paribas) 35,463 0.01 (4,350,000) Volkswagen 1% 20/06/2017 (BNP Paribas) 16,499 - (1,000,000) Volkswagen 1% 20/06/2017 (Citigroup) 3,793 - (6,000,000) Volkswagen 1% 20/09/2017 (Barclays) 33,288 - (4,000,000) Volkswagen 1% 20/09/2017 (Citigroup) 22,192 - (1,000,000) Volkswagen 1% 20/09/2017 (Citigroup) 5,548 - (3,000,000) Volkswagen 1% 20/09/2017 (Credit Suisse) 16,644 - (4,000,000) Volkswagen 1% 20/09/2017 (Credit Suisse) 22,192 - (1,500,000) Volkswagen 1% 20/09/2017 (Credit Suisse) 8,322 -

Total European Union 6,557,331 0.75

United States: 0.39% (2015: 0.22%)

(3,500,000) Ally Financial 5% 20/12/2021 (Goldman Sachs) 416,628 0.05 (16,400,000) International Lease Finance 5% 20/12/2021 (BNP Paribas) 2,663,225 0.31 (3,256,000) United States Steel Corporation 5% 20/12/2019 (BNP Paribas) 268,721 0.03

Total United States 3,348,574 0.39

Total Credit Default Swaps: Receive Fixed (Sell Protection) - Unrealised Gains 9,905,905 1.14

Total Credit Default Swaps 12,617,631 1.45

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Multi Strategy Credit Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Financial Derivative Instruments: 2.15% (2015: 2.45%) (continued)

Forward Currency Contracts: 0.63% (2015: 0.61%)

Currency Currency Currency Maturity Unrealised Counterparty Buys Buys Rate Date Gain % of $ Net Assets

Northern Trust USD 76,452,000 GBP 60,000,000 1.2742 15/03/2017 2,187,099 0.25 State Street GBP 333,167,438 USD 410,209,743 1.2312 31/01/2017 1,747,178 0.20 Northern Trust USD 117,273,200 EUR 110,000,000 1.0661 15/03/2017 854,913 0.10 State Street EUR 35,515,407 USD 37,221,816 1.0480 31/01/2017 286,178 0.03 State Street EUR 30,733,962 USD 32,210,636 1.0480 31/01/2017 247,650 0.03 State Street GBP 21,116,986 USD 26,000,120 1.2312 31/01/2017 110,741 0.01 HSBC USD 6,234,600 GBP 5,000,000 1.2469 15/03/2017 45,858 0.01 Northern Trust USD 4,340,203 GBP 3,500,000 1.2401 15/03/2017 8,084 - State Street GBP 1,057,947 USD 1,302,589 1.2312 31/01/2017 5,548 - State Street EUR 262,442 USD 275,052 1.0480 31/01/2017 2,114 - State Street GBP 107,562 USD 131,941 1.2267 31/01/2017 1,058 - State Street EUR 60,574 USD 63,429 1.0471 31/01/2017 543 - State Street EUR 55,285 USD 57,926 1.0478 31/01/2017 461 - State Street EUR 16,786 USD 17,552 1.0456 03/01/2017 153 - State Street GBP 10,493 USD 12,872 1.2267 31/01/2017 103 - State Street EUR 11,466 USD 12,006 1.0471 31/01/2017 103 - State Street GBP 16,000 USD 19,700 1.2312 31/01/2017 84 - State Street GBP 5,163 USD 6,317 1.2235 31/01/2017 67 - State Street EUR 8,224 USD 8,636 1.0502 31/01/2017 49 - State Street EUR 1,063 USD 1,114 1.0480 31/01/2017 9 - State Street EUR 5,556 USD 5,867 1.0559 31/01/2017 1 - State Street GBP 166 USD 204 1.2313 31/01/2017 1 -

Unrealised Gains on Forward Currency Contracts 5,497,995 0.63

Futures Contracts - Unrealised Gains: 0.07% (2015: 0.02%)

No. of Unrealised Clearing Broker Description Currency Contracts Gain % of $ Net Assets

United States: 0.07% (2015: 0.02%)

Goldman Sachs 10 Year Treasury Notes March 2017 USD (467) 233,500 0.03 Goldman Sachs Ultra Bond March 2017 USD (171) 363,375 0.04

Total United States 596,875 0.07

Total Futures Contracts - Unrealised Gains 596,875 0.07

Total Financial Derivative Instruments 18,712,501 2.15

Total financial assets at fair value through profit or loss 841,883,159 97.25

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Multi Strategy Credit Fund (continued) Nominal Fair Value % of Holdings Financial liabilities at fair value through profit or loss $ Net Assets

Financial Derivative Instruments: (1.71%) (2015: (2.59%))

Credit Default Swaps: (1.67%) (2015: (2.19%))

Credit Default Swaps: Pay Fixed (Buy Protection) - Unrealised Losses: (1.35%) (2015: (0.86%))

European Union: (1.04%) (2015: (0.46%))

2,750,000 Arcelormittal 5% 20/12/2021 (Citigroup) (302,035) (0.03) 11,900,000 Arcelormittal 5% 20/12/2021 (Credit Suisse) (1,306,986) (0.15) 9,333,000 Galp Energia 5% 20/12/2021 (Barclays) (1,602,460) (0.18) 9,200,000 Galp Energia 5% 20/12/2021 (Goldman Sachs) (1,579,624) (0.18) 26,250,000 Lanxess Aktiengesellschaft 1% 20/12/2021 (Citigroup) (435,894) (0.05) 2,804,000 NXP 5% 20/09/2020 (Goldman Sachs) (478,651) (0.06) 5,609,000 NXP 5% 20/09/2020 (Goldman Sachs) (957,472) (0.11) 7,011,000 NXP 5% 20/09/2020 (Goldman Sachs) (1,196,797) (0.14) 1,870,000 NXP 5% 20/09/2020 (Goldman Sachs) (319,214) (0.04) 27,200,000 STMicroelectronics 1% 20/12/2021 (Goldman Sachs) (113,028) (0.01) 5,778,000 Total 1% 20/09/2020 (Barclays) (149,192) (0.02) 3,852,000 Total 1% 20/09/2020 (BNP Paribas) (99,462) (0.01) 5,778,000 Total 1% 20/09/2020 (BNP Paribas) (149,192) (0.02) 2,889,000 Total 1% 20/09/2020 (Goldman Sachs) (74,596) (0.01) 9,000,000 Total 1% 20/12/2020 (Citigroup) (238,379) (0.03)

Total European Union (9,002,982) (1.04)

United States: (0.31%) (2015: (0.40%))

34,000,000 CDX 1% 20/12/2021 (Goldman Sachs) (514,400) (0.06) 34,400,000 International Paper 1% 20/12/2021 (Barclays) (571,509) (0.07) 6,500,000 KB Home 5% 20/12/2021 (Barclays) (540,999) (0.06) 900,000 KB Home 5% 20/12/2021 (BNP Paribas) (74,908) (0.01) 9,200,000 Pactiv 5% 20/12/2021 (Morgan Stanley) (955,911) (0.11)

Total United States (2,657,727) (0.31)

Total Credit Default Swaps: Pay Fixed (Buy Protection) - Unrealised Losses (11,660,709) (1.35)

Credit Default Swaps: Receive Fixed (Sell Protection) - Unrealised Losses: (0.32%) (2015: (1.33%))

European Union: (0.04%) (2015: (1.01%))

(10,300,000) Axa 1% 20/12/2021 (Merrill Lynch) (310,167) (0.04)

Total European Union (310,167) (0.04)

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Multi Strategy Credit Fund (continued) Nominal Fair Value % of Holdings Financial liabilities at fair value through profit or loss $ Net Assets

Financial Derivative Instruments: (1.71%) (2015: (2.59%)) (continued)

Credit Default Swaps: (1.67%) (2015: (2.19%)) (continued)

Credit Default Swaps: Receive Fixed (Sell Protection) - Unrealised Losses: (0.32%) (2015: (1.33%)) (continued)

United States: (0.28%) (2015: (0.32%))

(18,050,000) Canadian Natural Resources 1% 20/12/2021 (BNP Paribas) (307,372) (0.04) (9,000,000) CenturyLink 1% 20/12/2021 (Barclays) (884,542) (0.10) (15,550,000) Enbridge Income 1% 20/12/2021 (BNP Paribas) (371,241) (0.04) (2,900,000) Tenet 5% 20/12/2021 (Barclays) (294,577) (0.03) (5,800,000) Tenet 5% 20/12/2021 (Barclays) (589,154) (0.07)

Total United States (2,446,886) (0.28)

Total Credit Default Swaps: Receive Fixed (Sell Protection) - Unrealised Losses (2,757,053) (0.32)

Total Credit Default Swaps (14,417,762) (1.67)

Forward Currency Contracts: 0.00% (2015: (0.39%))

Currency Currency Currency Maturity Unrealised Counterparty Buys Buys Rate Date Loss % of $ Net Assets

State Street USD 9 EUR 9 1.0478 31/01/2017 - - State Street USD 715 GBP 584 1.2235 31/01/2017 (8) - State Street USD 2,328 EUR 2,222 1.0480 31/01/2017 (18) - State Street USD 4,412 EUR 3,606 1.2235 31/01/2017 (47) - State Street USD 11,695 GBP 9,499 1.2312 31/01/2017 (51) - State Street USD 11,410 EUR 10,865 1.0501 31/01/2017 (65) - State Street USD 17,577 EUR 16,786 1.0471 31/01/2017 (150) - State Street USD 295,676 GBP 240,161 1.2312 31/01/2017 (1,280) - State Street USD 274,606 EUR 262,030 1.0480 31/01/2017 (2,125) - State Street USD 313,748 EUR 299,379 1.0480 31/01/2017 (2,428) - State Street USD 3,702,690 GBP 3,007,493 1.2312 31/01/2017 (16,033) -

Unrealised Losses on Forward Currency Contracts (22,205) -

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Multi Strategy Credit Fund (continued) Fair Value % of Financial liabilities at fair value through profit or loss $ Net Assets

Financial Derivative Instruments: (1.71%) (2015: (2.59%)) (continued)

Futures Contracts - Unrealised Losses: (0.04%) (2015: (0.01%))

No. of Unrealised Clearing Broker Description Currency Contracts Loss % of $ Net Assets Germany: (0.04%) (2015: 0.00%)

Goldman Sachs Eurex Euro-Bubl March 2017 EUR (27) (30,645) - Goldman Sachs Eurex Euro-Bund March 2017 EUR (130) (334,591) (0.04)

Total Germany (365,236) (0.04)

United States: (0.00%) (2015: (0.01%)) - -

Total Futures Contracts - Unrealised Losses (365,236) (0.04)

Total Financial Derivative Instruments (14,805,203) (1.71)

Total financial liabilities at fair value through profit or loss (14,805,203) (1.71)

Net financial assets at fair value through profit or loss 827,077,956 95.54 (2015: 91.82%) (Cost: $825,065,320)

Net Cash (2015: 6.41%) 36,520,699 4.22

Other Net Assets (2015: 1.77%) 2,063,645 0.24

Net Assets Attributable to Holders of Redeemable Participating Shares 865,662,300 100.00

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Multi Strategy Credit Fund (continued) % of Total Assets

Portfolio Classification

Transferable securities traded on a regulated market 91.87 OTC financial derivative instruments 2.02 Financial derivative instruments dealt on a regulated market 0.07 Cash 4.80 Other assets 1.24 Total 100.00

The counterparties for the forward currency contracts are: HSBC (S&P: AA-, Moody's: Aa2), Northern Trust (S&P: AA-, Moody's: Aa2), and State Street Bank and Trust Company (S&P: A, Moody's: Aa1).

The clearing broker for the futures contracts is Goldman Sachs (S&P: A+, Moody's: A3).

The counterparties for the Credit Default Swaps are: Barclays (S&P: A-, Moody's: A1), BNP Paribas (S&P: BB+, Moody's: A1), Citigroup (S&P: BBB+, Moody's: Baa1), Credit Suisse (S&P: A, Moody's: A1), Goldman Sachs (S&P: A+, Moody's: A3), JP Morgan (S&P: A+, Moody's: A3), Merrill Lynch (S&P: BBB+, Moody's: Baa1), and Morgan Stanley (S&P: BBB+, Moody's: A3).

100

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Multi Asset Inflation Fund Nominal Fair Value % of Holding Financial assets at fair value through profit or loss £ Net Assets

Certificates of Deposit: 18.80% (2015: 13.36%)

Sweden: 3.13% (2015: 0.00%)

1,000,000 Svenska Handelsbank 0.340% 16/02/2017 1,000,000 3.13

Total Sweden 1,000,000 3.13

Switzerland: 3.13% (2015: 0.00%)

1,000,000 UBS 0.550% 06/02/2017 1,000,256 3.13

Total Switzerland 1,000,256 3.13

United Kingdom: 12.54% (2015: 13.36%)

1,000,000 Royal Bank Of Scotland 0.350% 10/01/2017 999,904 3.13 1,000,000 Royal Bank Of Scotland 0.350% 31/01/2017 1,000,000 3.14 1,000,000 Credit Agricole 0.000% 02/02/2017 999,701 3.13 1,000,000 Rabobank International 0.500% 04/04/2017 1,000,000 3.14

Total United Kingdom 3,999,605 12.54

Total Certificates of Deposit 5,999,861 18.80

Commercial Paper: 9.40% (2015: 16.68%)

Finland: 6.27% (2015: 3.34%)

2,000,000 OP Corporate Bank 20/01/2017 1,999,722 6.27

Total Finland 1,999,722 6.27

Germany: 3.13% (2015: 6.67%)

1,000,000 FMS Wertmanagement 09/03/2017 999,475 3.13

Total Germany 999,475 3.13

Netherlands: 0.00% (2015: 3.33%) - -

United Kingdom: 0.00% (2015: 3.34%) - -

Total Commercial Paper 2,999,197 9.40

101

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Multi Asset Inflation Fund (continued) Nominal Fair Value % of Holding Financial assets at fair value through profit or loss £ Net Assets

Government Bonds: 34.29% (2015: 31.52%)

United Kingdom: 34.29% (2015: 31.52%)

467,000 UK Treasury Inflation Linked Bond 0.125% 22/11/2019 541,617 1.69 1,525,000 UK Treasury Inflation Linked Bond 0.125% 22/03/2024 1,965,014 6.16 1,943,000 UK Treasury Inflation Linked Bond 0.125% 22/03/2026 2,409,402 7.55 1,870,000 UK Treasury Inflation Linked Bond 0.125% 22/03/2029 2,641,298 8.28 931,000 UK Treasury Inflation Linked Bond 1.250% 22/11/2027 1,754,305 5.50 992,000 UK Treasury Inflation Linked Bond 1.875% 22/11/2022 1,630,074 5.11

Total United Kingdom 10,941,710 34.29

Total Government Bonds 10,941,710 34.29

Equities: 0.16% (2015: 0.50%)

Guernsey: 0.16% (2015: 0.50%)

30,533 HICL Infrastructure 50,288 0.16

Total Guernsey 50,288 0.16

Total Equities 50,288 0.16

Exchange Traded Funds: 0.62% (2015: 1.11%)

Hong Kong: 0.62% (2015: 1.11%)

50,000 China Asset Management CSI 300 Index 197,334 0.62

Total Hong Kong 197,334 0.62

Total Exchange Traded Funds 197,334 0.62

102

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Multi Asset Inflation Fund (continued) Nominal Fair Value % of Holding Financial assets at fair value through profit or loss £ Net Assets

Reits: 3.46% (2015: 4.63%)

United Kingdom: 3.46% (2015: 4.63%)

1,374 British Land Reits 8,684 0.03 1,628 Capital & Counties Properties Reits 4,853 0.02 88,206 Centrica Reits 206,490 0.65 190 Derwent London Reits 5,252 0.02 706 Great Portland Estates Reits 4,705 0.01 1,328 Hammerson Reits 7,556 0.02 2,509 Intu Properties Reits 7,018 0.02 998 Land Securities Reits 10,589 0.03 18,092 National Grid Reits 171,114 0.54 20,480 Pennon Reits 169,779 0.53 1,611 Segro Reits 7,403 0.02 8,125 Severn Trent Reits 180,781 0.57 811 Shaftesbury Reits 7,340 0.02 9,319 SSE Reits 144,584 0.45 920 UNITE Group Reits 5,552 0.02 18,033 United Utilities Reits 162,027 0.51

Total United Kingdom 1,103,727 3.46

Total Reits 1,103,727 3.46

Financial Derivative Instruments: 1.86% (2015: 1.43%)

Credit Default Swaps: Receive Fixed (Sell Protection) - Unrealised Gains: 1.09% (2015: 0.95%)

European Union: 0.55% (2015: 0.88%)

(1,420,000) CDX iTraxx Europe Crossover Series 5% 20/12/2021 (Citibank) 113,846 0.35 (400,000) CDX iTraxx Europe Crossover Series 5% 20/12/2021 (Barclays) 32,069 0.10 (300,000) CDX iTraxx Europe Crossover Series 5% 20/12/2021 (JP Morgan) 24,052 0.08 (515,000) CDX iTraxx Europe Crossover Series 5% 20/12/2021 (Citibank) 5,835 0.02

Total European Union 175,802 0.55

United States: 0.54% (2015: 0.07%)

(2,385,000) Cdx.Na.Hy.24 5% 20/12/2021 (JP Morgan) 117,867 0.37 (825,000) Cdx.Na.Hy.24 5% 20/12/2021 (Barclays) 40,772 0.13 (285,000) Cdx.Na.Hy.24 5% 20/12/2021 (JP Morgan) 14,085 0.04

Total United States 172,724 0.54

Total Credit Default Swaps: Receive Fixed (Sell Protection) - Unrealised Gains 348,526 1.09

103

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Multi Asset Inflation Fund (continued) Nominal Fair Value % of Holding Financial assets at fair value through profit or loss £ Net Assets

Financial Derivative Instruments: 1.86% (2015: 1.43%) (continued)

Total Return Swaps - Unrealised Gains: 0.00% (2015: 0.08%)

United States: 0.00% (2015: 0.08%)

8,750,000 Xret Rec MQCC210E Pay Fixed 03/05/2017 (Macquarie)* - - 100,000 Xret Rec MQCC210E Pay Fixed 03/05/2017 (Macquarie)* - -

Total United States - -

Total Total Return Swaps - Unrealised Gains - -

Futures Contracts - Unrealised Gains: 0.33% (2015: 0.38%)

Clearing BrokerDescription Currency No. of Unrealised % of Contracts Gain Net Assets £ Germany: 0.18% (2015: 0.13%)

Goldman Sachs Euro-Bund March 2017 EUR 15 31,199 0.10 Goldman Sachs Euro-BTP Eux March 2017 EUR 13 15,532 0.05 Goldman Sachs Stoxx 50 March 2017 EUR 39 10,956 0.03

Total Germany 57,687 0.18

Hong Kong: 0.02% (2015: 0.02%)

Goldman Sachs H-Shares Index January 2017 HKD 8 6,512 0.02

Total Hong Kong 6,512 0.02

Japan: 0.01% (2015: 0.03%)

Goldman Sachs OSE Topix March 2017 JPY 8 1,932 0.01

Total Japan 1,932 0.01

United Kingdom: 0.12% (2015: 0.18%)

Goldman Sachs FTSE 100 Index March 2017 GBP 24 37,930 0.12

Total United Kingdom 37,930 0.12

United States: 0.00% (2015: 0.02%) - -

Total Futures Contracts - Unrealised Gains 104,061 0.33

*The underlying index for the Total Return Swaps is the Macquarie Commodity Customized Product 210E Index.

104

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Multi Asset Inflation Fund (continued) Nominal Financial assets and liabilities at fair value through profit Fair Value % of Holding or loss £ Net Assets

Financial Derivative Instruments: 1.86% (2015: 1.43%) (continued)

Forward Currency Contracts: 0.44% (2015: 0.02%)

Currency Currency Currency Maturity Unrealised % of Counterparty Buys Sells Rate Date Gain Net Assets £

Northern Trust USD 3,934,000 GBP 3,093,300 0.7863 20/01/2017 102,921 0.32 Northern Trust EUR 1,103,000 GBP 926,032 0.8396 20/01/2017 21,235 0.07 Northern Trust SEK 1,771,000 GBP 152,213 0.0859 20/01/2017 6,791 0.02 Northern Trust CHF 357,000 GBP 278,795 0.7809 20/01/2017 6,514 0.02 Northern Trust JPY 25,222,000 GBP 172,973 0.0069 20/01/2017 2,443 0.01 Northern Trust USD 100,000 GBP 80,272 0.8027 20/01/2017 974 - Northern Trust USD 41,000 GBP 33,104 0.8074 20/01/2017 207 -

Unrealised Gains on Forward Currency Contracts 141,085 0.44

Total Financial Derivative Instruments 593,672 1.86

Total financial assets at fair value through profit or loss 21,885,789 68.59

Financial Derivative Instruments: (0.77%) (2015: (1.00%))

Credit Default Swaps: Pay Fixed (Buy Protection) - Unrealised Losses: (0.05%) (2015: 0.00%)

United States: (0.05%) (2015: 0.00%)

415,000 Cdx.Na.Ig.27 1% 20/12/2021 (Barclays) (5,028) (0.02) 915,000 Cdx.Na.Ig.27 1% 20/12/2021 (Barclays) (11,086) (0.03)

Total United States (16,114) (0.05)

Total Credit Default Swaps: Pay Fixed (Buy Protection) - Unrealised Losses (16,114) (0.05)

Total Return Swaps - Unrealised Losses: (0.40%) (2015: (0.77%))

United States: (0.40%) (2015: (0.77%))

(8,750,000) Xret Rec MQCC210E Pay Fixed 03/05/2017 (Macquarie)* (124,907) (0.40) (100,000) Xret Rec MQCC210E Pay Fixed 03/05/2017 (Macquarie)* (1,277) -

Total United States (126,184) (0.40)

Total Total Return Swaps - Unrealised Losses (126,184) (0.40)

*The underlying index for the Total Return Swaps is the Macquarie Commodity Customized Product 210E Index.

105

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Multi Asset Inflation Fund (continued) Nominal Financial assets and liabilities at fair value through profit Fair Value % of Holding or loss £ Net Assets

Financial Derivative Instruments: (0.77%) (2015: (1.00%)) (continued)

Forward Currency Contracts: (0.00%) (2015: (0.11%)) - -

Futures Contracts - Unrealised Losses: (0.32%) (2015: (0.12%))

Clearing BrokerDescription Currency No. of Unrealised % of Contracts Loss Net Assets £ Japan: (0.00%) (2015: (0.05%)) - -

United Kingdom: (0.30%) (2015: 0.00%)

Goldman Sachs LIFFE Long Gilt March 2017 GBP (39) (95,990) (0.30)

Total United Kingdom (95,990) (0.30)

United States: (0.02%) (2015: (0.07%))

Goldman Sachs S&P 500 E-mini March 2017 USD 3 (1,862) (0.01) Goldman Sachs Russell 2000 Index Mini March 2017 USD 14 (5,369) (0.01) Goldman Sachs US 10 Year Treasury Note March 2017 USD 17 (861) -

Total United States (8,092) (0.02)

Total Futures Contracts - Unrealised Losses (104,082) (0.32)

Total Financial Derivative Instruments (246,380) (0.77)

(246,380) (0.77) Total financial liabilities at fair value through profit or loss

Net financial assets at fair value through profit or loss 21,639,409 67.82 (2015: 68.22%) (Cost: £23,194,017)

Net Cash (2015: 31.74%) 10,239,641 32.09

Other Net Assets (2015: 0.04%) 28,879 0.09

Net Assets Attributable to Holders of Redeemable Participating Shares 31,907,929 100.00

106

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Multi Asset Inflation Fund (continued) % of Total Assets

Portfolio Classification

Transferable securities admitted to official stock exchange listing 4.04 Transferable securities traded on a regulated market 34.17 Certificate of Deposit 18.65 Commercial Paper 9.32 OTC financial derivative instruments 1.52 Financial derivative instruments dealt on a regulated market 0.32 Cash 31.83 Other assets 0.15 Total 100.00

The counterparty for the forward currency contracts is Northern Trust (S&P: AA-, Moody’s: Aa2).

The clearing broker for the futures is Goldman Sachs (S&P: A+, Moody’s: A3).

The counterparties for credit default swaps are: Barclays (S&P: A-, Moody’s: A1), Citibank (S&P: BBB+, Moody’s: Baa1), and JP Morgan (S&P: A+, Moody’s: A3).

The counterparty for the total return swaps is Macquarie Bank (S&P: A, Moody’s: A3).

107

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Small Cap Equity Fund Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 95.71% (2015: 98.06%)

Australia: 2.80% (2015: 1.33%)

55,039 BT Investment Management 422,709 0.98 94,531 DuluxGroup 426,184 0.98 238,574 Evolution Mining 365,424 0.84

Total Australia 1,214,317 2.80

Austria: 1.71% (2015: 1.31%)

9,224 Schoeller-Bleckmann 741,450 1.71

Total Austria 741,450 1.71

Canada: 2.93% (2015: 2.32%)

46,870 CAE 654,712 1.51 13,149 Gildan Activewear 335,825 0.77 35,598 Raging River Exploration 279,542 0.65

Total Canada 1,270,079 2.93

France: 0.00% (2015: 0.93%) - -

Germany: 3.59% (2015: 4.17%)

32,373 Jungheinrich - Preferred 931,224 2.15 5,392 MTU Aero Engines 621,495 1.44

Total Germany 1,552,719 3.59

Hong Kong: 0.38% (2015: 1.01%)

103,000 Stella International 166,032 0.38

Total Hong Kong 166,032 0.38

Ireland: 3.35% (2015: 4.80%)

52,514 Glanbia 880,899 2.03 5,357 Paddy Power Betfair 570,380 1.32

Total Ireland 1,451,279 3.35

108

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Small Cap Equity Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 95.71% (2015: 98.06%) (continued)

Italy: 1.81% (2015: 1.97%)

48,403 Cerved Information Solutions 400,986 0.93 20,654 MARR 379,069 0.88

Total Italy 780,055 1.81

Japan: 11.37% (2015: 11.23%)

25,100 Hitachi Capital 617,493 1.43 17,300 Horiba 800,316 1.85 6,600 Hoshizaki 522,040 1.21 13,300 Kintetsu World Express 184,354 0.43 29,700 Open House 706,024 1.63 19,080 PC Depot 100,992 0.23 2,800 Relo Group 398,888 0.92 39,900 Tadano 502,226 1.16 14,200 TS Tech 365,488 0.84 26,000 Tsubakimoto Chain 211,210 0.49 12,800 Yaoko 508,957 1.18

Total Japan 4,917,988 11.37

Netherlands: 1.41% (2015: 1.66%)

18,840 Aalberts Industries 612,469 1.41

Total Netherlands 612,469 1.41

Singapore: 0.00% (2015: 0.78%) - -

South Africa: 1.20% (2015: 0.90%)

269,483 Petra Diamonds 520,815 1.20

Total South Africa 520,815 1.20

Sweden: 1.17% (2015: 1.79%)

55,166 Nobia 506,331 1.17

Total Sweden 506,331 1.17

Switzerland: 0.00% (2015: 1.17%) - -

109

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Small Cap Equity Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 95.71% (2015: 98.06%) (continued)

United Kingdom: 7.54% (2015: 7.36%)

134,224 Beazley 637,455 1.47 11,038 DCC 815,416 1.88 253,816 Ithaca Energy 316,493 0.73 120,562 Paragon Group of Companies 621,590 1.44 109,586 SSP 521,456 1.21 92,257 Tullow Oil 352,198 0.81

Total United Kingdom 3,264,608 7.54

United States: 56.45% (2015: 55.33%)

14,798 AMN Healthcare Services 574,902 1.33 7,757 AptarGroup 571,613 1.32 13,156 Bank of the Ozarks 690,690 1.59 4,152 Bio-Rad Laboratories 760,771 1.76 15,734 Brown & Brown 704,726 1.63 7,844 Brunswick 429,302 0.99 5,809 CACI International 727,868 1.68 9,846 CLARCOR 811,606 1.87 10,411 Clean Harbors 580,309 1.34 13,254 Cognex 849,051 1.96 15,721 Diplomat Pharmacy 202,172 0.47 6,677 Eagle Materials 660,622 1.53 11,993 East West Bancorp 609,244 1.41 16,647 FLIR Systems 605,285 1.40 11,913 Haemonetics 476,163 1.10 22,086 Intersil 492,960 1.14 6,041 Jack Henry & Associates 538,736 1.24 13,729 John Wiley & Sons 745,485 1.72 12,977 Kirby 868,810 2.01 13,761 LKQ 424,940 0.98 23,391 MDU Resources 679,509 1.57 5,129 MSC Industrial Direct 478,741 1.11 23,548 National Instruments 729,282 1.68 7,670 Newell Brands 347,451 0.80 8,984 Reinsurance of America 1,131,445 2.61 19,495 RPM International 1,052,144 2.43 27,377 Sally Beauty Holdings 723,574 1.67 13,053 Silicon Laboratories 863,456 1.99 4,052 Snap-on 697,552 1.61

110

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Small Cap Equity Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 95.71% (2015: 98.06%) (continued)

United States: 56.45% (2015: 55.33%) (continued)

14,674 STERIS 991,082 2.29 7,151 WD-40 832,734 1.92 16,123 Weingarten Realty Investors Reits 568,013 1.31 12,687 West Pharmaceutical Services 1,081,313 2.50 7,655 WEX 857,666 1.98 15,025 Wintrust Financial 1,088,862 2.51

Total United States 24,448,079 56.45

Total Equities 41,446,221 95.71

Reits: 2.80% (2015: 1.71%)

France: 0.80% (2015: 0.93%)

17,196 Mercialys Reits 347,381 0.80

Total France 347,381 0.80

Ireland: 0.95% (2015: 0.00%)

281,909 Green Reit 409,630 0.95

Total Ireland 409,630 0.95

Singapore: 0.00% (2015: 0.78%) - -

United States: 1.05% (2015: 0.00%)

21,852 Retail Opportunity Investments Reits 456,270 1.05

Total United States 456,270 1.05

Total Reits 1,213,281 2.80

Total financial assets at fair value through profit or loss 42,659,502 98.51

111

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Small Cap Equity Fund (continued) Fair Value % of Financial assets and liabilities at fair value through profit or loss $ Net Assets

Financial Derivative Instruments: 0.00% (2015: 0.00%)

Forward Currency Contracts: 0.00% (2015: 0.00%)

Currency Currency Currency Maturity Unrealised % of Counterparty Buys Sells Rate Date Gains Net Assets $

State Street USD 7 GBP 6 1.2360 31/01/2017 - - State Street USD 7 GBP 6 1.2358 31/01/2017 - -

Unrealised Gains on Forward Currency Contracts - -

Total Financial Derivative Instruments - -

Financial liabilities at fair value through profit or loss

Financial Derivative Instruments: 0.00% (2015: 0.00%)

Forward Currency Contracts: 0.00% (2015: 0.00%)

Currency Currency Currency Maturity Unrealised % of Counterparty Buys Sells Rate Date Loss Net Assets $

State Street GBP 1,012 USD 1,250 1.2353 31/01/2017 (4) - State Street GBP 1,016 USD 1,255 1.2353 31/01/2017 (4) -

Unrealised Losses on Forward Currency Contracts (8) -

Total Financial Derivative Instruments (8) -

Total financial liabilities at fair value through profit or loss (8) -

Net financial assets at fair value through profit or loss 42,659,494 98.51 (2015: 98.06%) (Cost: $39,126,395)

Net Cash (2015: 2.23%) 635,991 1.47

Other Net Assets (2015: (0.29%)) 10,304 0.02

Net Assets Attributable to Holders of Redeemable Participating Shares 43,305,789 100.00

112

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Global Small Cap Equity Fund (continued)

Portfolio Classification % of Total Assets

Transferable securities admitted to an official stock exchange listing 98.40 Cash 1.47 Other Assets 0.13 Total 100.00

The counterparties for the forward currency contracts are State Street Bank and Trust Company (S&P: A, Moody’s: Aa1).

113

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes US All Cap Equity Fund Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 98.26% (2015: 97.48%)

Canada: 1.85% (2015: 3.82%)

Consumer, Cyclical: 1.85% (2015: 3.82%) 2,314 Alimentation Couche-Tard 105,146 0.63 7,910 Gildan Activewear 202,021 1.22

Total Consumer, Cyclical 307,167 1.85

Total Canada 307,167 1.85

United States: 96.41% (2015: 93.66%)

Basic Materials: 2.73% (2015: 1.77%) 10,290 Freeport-McMoRan 138,709 0.84 5,820 RPM International 314,105 1.89

Total Basic Materials 452,814 2.73

Communications: 15.29% (2015: 8.29%) 626 Alphabet Class A 502,603 3.03 300 Amazon.com 229,545 1.38 8,442 AT&T 360,136 2.17 8,176 Comcast 573,056 3.45 1,800 Facebook 209,430 1.26 5,370 John Wiley & Sons 291,591 1.76 3,560 Walt Disney 372,234 2.24

Total Communications 2,538,595 15.29

Consumer, Cyclical: 7.45% (2015: 5.36%) 1,670 Costco Wholesale 269,087 1.62 3,283 Newell Brands 148,720 0.90 6,390 NIKE 326,273 1.97 1,600 WABCO 169,808 1.02 1,380 WW Grainger 322,285 1.94

Total Consumer, Cyclical 1,236,173 7.45

Consumer, Non-cyclical: 16.97% (2015: 29.56%) 6,130 Baxter International 271,314 1.63 1,457 Cooper Cos 255,689 1.54 4,882 Danaher 381,870 2.30 2,310 Equifax 274,128 1.65 3,736 Johnson & Johnson 431,471 2.60

114

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes US All Cap Equity Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 98.26% (2015: 97.48%) (continued)

United States: 96.41% (2015: 93.66%) (continued)

Consumer, Non-cyclical: 16.97% (2015: 29.56%) (continued) 1,868 MEDNAX 125,025 0.75 5,863 Procter & Gamble 494,544 2.98 3,700 STERIS 249,898 1.51 1,860 Verisk Analytics 151,962 0.92 2,120 West Pharmaceutical Services 180,688 1.09

Total Consumer, Non-cyclical 2,816,589 16.97

Energy: 6.51% (2015: 4.34%) 1,680 Concho Resources 225,355 1.36 2,321 EOG Resources 235,071 1.41 7,261 Halliburton 392,384 2.36 1,258 Pioneer Natural Resources 228,516 1.38

Total Energy 1,081,326 6.51

Financial: 23.49% (2015: 19.66%) 4,950 American Express 365,904 2.20 3,183 American International 208,487 1.25 19,298 Bank of America 424,556 2.56 12,480 Charles Schwab 493,958 2.98 6,950 Citigroup 412,691 2.49 600 Ellie Mae 51,066 0.31 400 Markel 361,432 2.18 4,430 Mastercard 459,701 2.77 3,400 Northern Trust Corporation 301,342 1.82 2,327 PNC Financial Services Group 270,165 1.63 1,718 Signature Bank 256,600 1.54 4,051 Wintrust Financial 293,576 1.76

Total Financial 3,899,478 23.49

Industrial: 13.39% (2015: 6.23%) 1,985 Cognex 127,159 0.77 6,430 Fortive 347,284 2.09 3,890 Genesee & Wyoming 270,705 1.63 5,330 Kirby 356,844 2.15 1,060 Lockheed Martin 265,625 1.60 1,482 Martin Marietta Materials 333,213 2.01 2,231 Stericycle 171,475 1.03 4,190 Wabtec 350,033 2.11

Total Industrial 2,222,338 13.39

115

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes US All Cap Equity Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Equities: 98.26% (2015: 97.48%) (continued)

United States: 96.41% (2015: 93.66%) (continued)

Technology: 8.61% (2015: 14.82%) 7,200 Analog Devices 529,776 3.19 1,740 ANSYS 161,228 0.97 2,192 Apple 255,872 1.54 1,060 CACI International 132,818 0.80 2,056 Jack Henry & Associates 183,354 1.11 2,631 Microsoft 165,490 1.00

Total Technology 1,428,538 8.61

Utilities: 1.97% (2015: 3.63%) 2,132 American Water Works 155,039 0.93 2,838 PG&E 173,373 1.04

Total Utilities 328,412 1.97

Total United States 16,004,263 96.41

Total Equities 16,311,430 98.26

REITS: 1.25% (2015: 2.07%)

United States: 1.25% (2015: 2.07%)

1,950 American Tower Reits 207,461 1.25

Total United States 207,461 1.25

Total REITS 207,461 1.25

Financial Derivative Instruments: 0.00% (2015: 0.00%)

Forward Currency Contracts: 0.00% (2015: 0.00%)

Currency Currency Currency Maturity Unrealised % of Counterparty Buys Sells Rate Date Gains Net Assets $

State Street USD 7 GBP 6 1.2356 31/01/2017 - - State Street USD 7 GBP 6 1.2356 31/01/2017 - -

Unrealised Gains on Forward Currency Contracts - -

Total Financial Derivative Instruments - -

116

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes US All Cap Equity Fund (continued) Fair Value % of Financial assets and liabilities at fair value through profit or loss $ Net Assets

Total financial assets at fair value through profit or loss 16,518,891 99.51

Financial liabilities at fair value through profit or loss

Financial Derivative Instruments: 0.00% (2015: 0.00%)

Forward Currency Contracts: 0.00% (2015: 0.00%)

Currency Currency Currency Maturity Unrealised % of Counterparty Buys Sells Rate Date Losses Net Assets $

State Street GBP 1,075 USD 1,328 1.2353 31/01/2017 (5) - State Street GBP 1,075 USD 1,328 1.2353 31/01/2017 (4) -

Unrealised Losses on Forward Currency Contracts (9) -

Total Financial Derivative Instruments (9) -

Total financial liabilities at fair value through profit or loss (9) -

Net financial assets at fair value through profit or loss 16,518,882 99.51 (2015: 99.55%) (Cost: $14,765,692)

Cash (2015: 0.45%) 89,003 0.54

Other Net Liabilities (2015: 0.00%) (7,965) (0.05)

Net Assets Attributable to Holders of Redeemable Participating Shares 16,599,920 100.00

Portfolio Classification % of Total Assets Transferable securities admitted to an official stock exchange listing 99.32 Cash 0.53 Other assets 0.15 Total 100.00

The counterparties for the forward currency contracts are State Street Bank and Trust Company (S&P: A, Moody’s: Aa1).

117

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Absolute Return Credit Fund Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Corporate Bonds: 81.13% (2015: 67.83%)

Australia: 1.19% (2015: 0.00%)

700,000 FMG Resources August 2006 9.750% 01/03/2022 815,549 1.19

Total Australia 815,549 1.19

Belgium: 0.19% (2015: 0.32%)

100,000 Anheuser-Busch 6.500% 23/06/2017 126,928 0.19

Total Belgium 126,928 0.19

Brazil: 2.47% (2015: 3.39%)

300,000 GTL Trade Finance 5.893% 29/04/2024 300,000 0.44 700,000 Marfrig Europe 8.375% 09/05/2018 736,960 1.08 625,000 Vale Overseas 6.250% 10/08/2026 651,562 0.95

Total Brazil 1,688,522 2.47

Canada: 1.23% (2015: 1.75%)

258,000 Enbridge 6.000% 15/01/2077 258,000 0.38 584,000 Royal Bank of Canada 1.400% 13/10/2017 584,020 0.85

Total Canada 842,020 1.23

Chile: 0.61% (2015: 0.37%)

400,000 VTR Finance 6.875% 15/01/2024 414,000 0.61

Total Chile 414,000 0.61

Finland: 3.06% (2015: 0.00%)

1,686,000 UPM-Kymmene 6.625% 23/01/2017 2,091,852 3.06

Total Finland 2,091,852 3.06

France: 1.26% (2015: 1.67%)

700,000 Banque Federative du Credit Mutuel 2.500% 29/10/2018 705,895 1.03 100,000 Credit Agricole 0.000% 21/04/2017 156,080 0.23

Total France 861,975 1.26

118

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Absolute Return Credit Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Corporate Bonds: 81.13% (2015: 67.83%) (continued)

Germany: 1.88% (2015: 2.35%)

220,000 Daimler 1.250% 01/12/2017 273,286 0.40 150,000 Deutsche Telekom International Finance 2.250% 06/03/2017 150,219 0.22 400,000 Dresdner Funding Trust I 8.151% 30/06/2031 463,066 0.68 200,000 Volkswagen Group of America Finance 1.250% 23/05/2017 199,695 0.29 200,000 Volkswagen International Finance 1.600% 20/11/2017 199,521 0.29

Total Germany 1,285,787 1.88

Hong Kong: 0.29% (2015: 0.00%)

200,000 FTL Capital 4.125% 25/04/2023 198,126 0.29

Total Hong Kong 198,126 0.29

Ireland: 0.30% (2015: 0.00%)

200,000 AerCap Ireland Capital 4.625% 01/07/2022 206,500 0.30

Total Ireland 206,500 0.30

Italy: 4.87% (2015: 4.10%)

300,000 Intesa Sanpaolo 2.375% 13/01/2017 300,043 0.44 920,000 Intesa Sanpaolo 3.875% 16/01/2018 932,463 1.36 1,200,000 Telecom Italia 7.375% 15/12/2017 1,561,954 2.29 109,000 Telecom Italia Capital 6.999% 04/06/2018 116,358 0.17 400,000 Wind Acquisition Finance 7.375% 23/04/2021 417,000 0.61

Total Italy 3,327,818 4.87

Luxembourg: 1.64% (2015: 0.00%)

455,000 Altice Financing 6.500% 15/01/2022 475,475 0.70 100,000 Altice Luxembourg 7.250% 15/05/2022 113,122 0.16 501,147 ARD Finance 6.625% 15/09/2023 530,607 0.78

Total Luxembourg 1,119,204 1.64

119

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Absolute Return Credit Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Corporate Bonds: 81.13% (2015: 67.83%) (continued)

Mexico: 2.90% (2015: 4.36%)

100,000 America Movil 0.000% 28/05/2020 102,443 0.15 560,000 America Movil 2.125% 10/03/2028 596,136 0.87 200,000 America Movil 3.125% 16/07/2022 197,438 0.29 310,000 America Movil 3.750% 28/06/2017 333,174 0.49 200,000 Cemex 6.125% 05/05/2025 205,000 0.30 500,000 Cemex Finance 9.375% 12/10/2022 546,250 0.80

Total Mexico 1,980,441 2.90

Netherlands: 3.25% (2015: 3.44%)

1,000,000 Heineken 1.400% 01/10/2017 1,000,586 1.46 900,000 VimpelCom 6.255% 01/03/2017 906,507 1.33 300,000 Ziggo Secured Finance 4.250% 15/01/2027 316,846 0.46

Total Netherlands 2,223,939 3.25

People's Republic of China: 2.47% (2015: 0.00%)

1,765,000 Sinopec 2.000% 29/09/2021 1,685,443 2.47

Total People's Republic of China 1,685,443 2.47

Russian Federation: 3.28% (2015: 1.09%)

200,000 MMC Finance 4.375% 30/04/2018 204,957 0.30 400,000 MMC Finance 5.550% 28/10/2020 426,815 0.62 350,000 MMC Finance 5.550% 28/10/2020 - SNR 373,463 0.55 1,000,000 Severstal Via Steel Capital 4.450% 19/03/2018 1,019,515 1.49 200,000 Severstal Via Steel Capital 5.900% 17/10/2022 215,435 0.32

Total Russian Federation 2,240,185 3.28

Spain: 1.89% (2015: 1.12%)

1,000,000 Telefonica Emisiones SAU 5.375% 02/02/2018 1,292,962 1.89

Total Spain 1,292,962 1.89

Switzerland: 0.22% (2015: 0.20%)

151,000 Glencore Funding 3.125% 29/04/2019 152,152 0.22

Total Switzerland 152,152 0.22

120

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Absolute Return Credit Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Corporate Bonds: 81.13% (2015: 67.83%) (continued)

Turkey: 0.29% (2015: 0.00%)

200,000 Turk Telekomunikasyon 3.750% 19/06/2019 198,850 0.29

Total Turkey 198,850 0.29

United Arab Emirates: 0.58% (2015: 0.41%)

200,000 Emirates Telecommunications 2.375% 18/06/2019 199,405 0.29 200,000 Emirates Telecommunications 3.500% 18/06/2024 200,468 0.29

Total United Arab Emirates 399,873 0.58

United Kingdom: 11.69% (2015: 10.49%)

457,000 Barclays 1.875% 08/12/2023 488,637 0.71 100,000 Diageo Capital 1.500% 05/11/2017 100,152 0.15 750,000 FCE Bank 4.825% 15/02/2017 930,749 1.36 100,000 PGH Capital 5.750% 07/07/2021 137,887 0.20 2,440,000 Prudential 7.750% 29/01/2049 2,500,536 3.66 600,000 Royal Bank of Scotland 6.934% 09/04/2018 680,100 0.99 1,200,000 Tesco 2.700% 05/01/2017 1,200,442 1.76 100,000 Virgin Media Secured Finance 5.500% 15/01/2021 137,086 0.20 58,182 Virgin Media Secured Finance 6.000% 15/04/2021 75,163 0.11 700,000 Vodafone 1.250% 26/09/2017 698,827 1.02 520,000 Vodafone 5.375% 05/12/2017 669,946 0.98 300,000 WPP 6.000% 04/04/2017 375,602 0.55

Total United Kingdom 7,995,127 11.69

United States: 35.57% (2015: 32.77%)

94,000 Actavis Funding 1.300% 15/06/2017 93,959 0.14 997,000 Actavis Funding 1.850% 01/03/2017 998,009 1.46 500,000 Actavis Funding 4.550% 15/03/2035 496,418 0.73 525,000 Air Lease 4.250% 15/09/2024 534,092 0.78 300,000 Ally Financial 4.625% 30/03/2025 296,625 0.43 200,000 American Tower 3.450% 15/09/2021 202,806 0.30 600,000 Arconic 5.720% 23/02/2019 638,250 0.93 500,000 Bank of America 5.420% 15/03/2017 503,648 0.74 200,000 Charter Communications Operating 4.908% 23/07/2025 211,146 0.31 500,000 CIT 5.000% 15/05/2018 507,500 0.74 50,000 CIT 5.000% 01/08/2023 51,750 0.08 12,000 CIT 6.625% 01/04/2018 12,675 0.02 100,000 Citigroup 1.350% 10/03/2017 100,026 0.15 1,000,000 Clearwire Communications 8.250% 01/12/2040 1,047,500 1.53 1,000,000 CVS Health 1.900% 20/07/2018 1,004,224 1.47

121

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Absolute Return Credit Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Corporate Bonds: 81.13% (2015: 67.83%) (continued)

United States: 35.57% (2015: 32.77%) (continued)

1,525,000 EMC 1.875% % 01/06/18 1,508,614 2.21 381,000 Freeport-McMoRan 2.150% 01/03/2017 379,095 0.55 116,000 GE Capital UK Funding 4.125% 28/09/2017 147,001 0.22 500,000 General Motors Financial 3.000% 25/09/2017 504,876 0.74 100,000 General Motors Financial 3.150% 15/01/2020 100,697 0.15 1,550,000 General Motors Financial 3.200% 13/07/2020 1,555,920 2.28 500,000 General Motors Financial 3.250% 15/05/2018 506,719 0.74 100,000 HCA 4.750% 01/05/2023 102,625 0.15 300,000 HCA 5.000% 15/03/2024 309,375 0.45 640,000 Hewlett Packard Enterprise 2.450% 05/10/2017 643,678 0.94 1,028,000 International Lease Finance 8.750% 15/03/2017 1,042,654 1.52 105,000 Kinder Morgan Energy Partners 4.700% 01/11/2042 98,183 0.14 351,000 Kinder Morgan Energy Partners 5.625% 01/09/2041 353,714 0.52 150,000 Kinder Morgan Energy Partners 5.950% 15/02/2018 156,510 0.23 1,500,000 Kinder Morgan Energy Partners 6.000% 01/02/2017 1,504,572 2.20 480,000 Kinder Morgan Finance 6.000% 15/01/2018 499,901 0.73 64,000 Lear 4.750% 15/01/2023 65,600 0.10 50,000 MPLX 4.500% 07/15/2023 50,850 0.07 50,000 MPLX 4.875% 01/12/2024 51,567 0.08 555,000 MPLX 4.875% 01/06/2025 571,579 0.84 750,000 Mylan 2.600% 24/06/2018 754,612 1.10 200,000 Phillips 66 2.950% 01/05/2017 201,132 0.29 1,000,000 Plains All American Pipeline 6.500% 01/05/2018 1,057,108 1.55 200,000 Range Resources 5.000% 15/08/2022 199,750 0.29 500,000 Rite Aid 6.125% 01/04/2023 539,375 0.79 51,000 Rite Aid 7.700% 15/02/2027 64,005 0.09 300,000 Royal Caribbean Cruises 7.250% 15/3/2018 319,500 0.47 300,000 Sprint Communications 9.000% 15/11/2018 331,500 0.48 275,000 Sprint Spectrum 3.360% 20/09/2021 276,202 0.40 50,000 Tenet Healthcare 8.000% 01/08/2020 49,505 0.07 100,000 Toll Brothers Finance 8.910% 15/10/2017 105,375 0.15 156,000 Verizon Communications 1.100% 01/11/2017 155,664 0.23 151,000 Vulcan Materials 4.500% 01/04/2025 158,550 0.23 3,250,000 Zoetis 1.875% 01/02/2018 3,250,848 4.76

Total United States 24,315,484 35.57

Total Corporate Bonds 55,462,737 81.13

Floating Rate Notes: 13.98% (2015: 22.79%)

Australia: 1.20% (2015: 1.01%)

600,000 BHP Billiton Finance 22/10/2077 818,008 1.20

Total Australia 818,008 1.20

122

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Absolute Return Credit Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Floating Rate Notes: 13.98% (2015: 22.79%) (continued)

Austria: 0.28% (2015: 0.11%)

200,000 RZB Finance Jersey IV 31/12/2049 188,916 0.28

Total Austria 188,916 0.28

Belgium: 0.64% (2015: 0.64%)

400,000 Solvay Finance 29/05/2049 441,020 0.64

Total Belgium 441,020 0.64

France: 1.60% (2015: 2.35%)

500,000 Groupama 29/10/2049 508,258 0.74 554,000 Total 31/12/2049 583,674 0.86

Total France 1,091,932 1.60

Germany: 2.93% (2015: 3.99%)

2,000,000 Daimler Finance North America 03/08/2017 2,005,405 2.93

Total Germany 2,005,405 2.93

Ireland: 0.16% (2015: 2.86%)

100,000 Allied Irish Banks 26/11/2025 107,192 0.16

Total Ireland 107,192 0.16

Italy: 0.00% (2015: 0.75%) - -

Netherlands: 2.17% (2015: 4.48%)

1,477,099 NXP 11/01/2020 1,485,408 2.17

Total Netherlands 1,485,408 2.17

United Kingdom: 1.45% (2015: 0.00%)

250,000 Barclays Bank 29/04/2049 311,817 0.46 270,000 Barclays Bank 29/12/2049 286,528 0.42 250,000 HSBC Bank PLC 29/06/2049 180,041 0.26 300,000 National Westminster Bank 29/11/2049 211,484 0.31

Total United Kingdom 989,870 1.45

123

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Absolute Return Credit Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Floating Rate Notes: 13.98% (2015: 22.79%) (continued)

United States: 3.55% (2015: 6.60%)

750,000 JPMorgan Chase 30/05/2017 926,452 1.36 1,000,000 PepsiCo 17/07/2017 1,001,087 1.46 500,000 UnitedHealth Group 17/01/2017 500,089 0.73

Total United States 2,427,628 3.55

Total Floating Rate Notes 9,555,379 13.98

Financial Derivative Instruments: 1.84% (2015: 3.00%)

Credit Default Swaps: 1.16% (2015: 2.20%)

Credit Default Swaps: Pay Fixed (Buy Protection) - Unrealised Gains: 0.39% (2015: 1.65%)

European Union: 0.11% (2015: 0.73%)

1,700,000 Credit Agricole 1% 20/12/2021 (Merrill Lynch) 69,003 0.10 1,750,000 Safeway 1% 20/12/2021 (Goldman Sachs) 4,016 0.01

Total European Union 73,019 0.11

United States: 0.28% (2015: 0.92%)

500,000 Dell 1% 20/09/2020 (BNP Paribas) 15,416 0.02 1,000,000 Dell 1% 20/09/2020 (Goldman Sachs) 30,832 0.04 2,000,000 Domtar 1% 20/12/2021 (Goldman Sachs) 39,347 0.06 2,100,000 HP 1% 20/12/2021 (Goldman Sachs) 11,416 0.02 833,000 Macy's 1% 20/12/2021 (Goldman Sachs) 32,399 0.05 1,667,000 Macy's 1% 20/12/2021 (Goldman Sachs) 64,836 0.09

Total United States 194,246 0.28

Total Credit Default Swaps: Pay Fixed (Buy Protection) - Unrealised Gains 267,265 0.39

124

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Absolute Return Credit Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Financial Derivative Instruments: 1.84% (2015: 3.00%) (continued)

Credit Default Swaps: 1.16% (2015: 2.20%) (continued)

Credit Default Swaps: Receive Fixed (Sell Protection) - Unrealised Gains: 0.77% (2015: 0.55%)

European Union: 0.51% (2015: 0.17%)

(650,000) Airbus 1% 20/06/2017 (BNP Paribas) 2,568 - (250,000) Airbus 1% 20/06/2017 (BNP Paribas) 988 - (700,000) Airbus 1% 20/09/2017 (Goldman Sachs) 4,086 0.01 (250,000) Airbus 1% 20/09/2017 (Goldman Sachs) 1,459 - (1,000,000) Anglo American 5% 20/12/2021 (Goldman Sachs) 136,346 0.20 (500,000) Arcelormittal 5% 20/06/2018 (BNP Paribas) 32,894 0.05 (400,000) Bayerische Moto 1% 20/09/2017 (Barclays) 2,691 - (500,000) Bayerische Moto 1% 20/09/2017 (Credit Suisse) 3,364 0.01 (200,000) Bayerische Moto 1% 20/09/2017 (Credit Suisse) 1,345 - (500,000) BMW Aktiengesellschaft 1% 20/06/2017 (BNP Paribas) 2,244 - (600,000) BP 1% 20/09/2017 (Barclays) 3,724 0.01 (500,000) BP 1% 20/09/2017 (Citigroup) 3,103 - (1,000,000) BP 5% 20/06/2017 (BNP Paribas) 4,193 0.01 (2,600,000) CDX Itraxx 1% 20/12/2021 (JP Morgan) 37,461 0.06 (500,000) Clariant 1% 20/06/2017 (BNP Paribas) 2,149 - (500,000) Clariant 1% 20/09/2017 (Barclays) 3,271 0.01 (500,000) Clariant 1% 20/09/2017 (BNP Paribas) 3,271 - (1,000,000) Fiat Chrysler Automobiles 5% 20/06/2018 (Barclays) 62,117 0.09 (1,000,000) Glencoreinternational 5% 20/06/2017 (Goldman Sachs) 23,607 0.04 (250,000) Safeway 5% 20/J06/2017 (BNP Paribas) 5,902 0.01 (1,000,000) Telecom Italia 1% 20/09/2017 (Credit Suisse) 3,791 0.01 (350,000) Telefonica 1% 20/06/2017 (Credit Suisse) 1,457 - (200,000) Volkswagen 1% 20/09/2017 (Credit Suisse) 1,109 - (650,000) Volkswagen Akti 1% 20/06/2017 (BNP Paribas) 2,465 - (650,000) Volkswagen Akti 1% 20/06/2017 (BNP Paribas) 2,465 - (500,000) Volkswagen Akti 1% 20/09/2017 (Barclays Bank) 2,774 -

Total European Union 350,844 0.51

United States: 0.26% (2015: 0.38%)

(1,000,000) American Tower 20/06/2018 (Goldman Sachs) 3,029 0.01 (300,000) Bank of America 1% 20/12/2017 (Credit Suisse) 1,100 - (1,000,000) Ford Motor 5% 20/06/2017 (Credit Suisse) 22,804 0.03 (500,000) Ford Motor 5% 20/06/2017 (Goldman Sachs) 11,402 0.02 (750,000) International Lease Finance 5% 20/12/2021 (BNP Paribas) 121,794 0.18 (800,000) JP Morgan 1% 20/06/2017 (Credit Suisse) 2,919 - (1,000,000) Marathon Oil 1 % 20/06/2018 (Goldman Sachs) 2,688 - (139,000) United States Steel 5% 20/12/2019 (BNP Paribas) 11,472 0.02

Total United States 177,208 0.26

125

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Absolute Return Credit Fund (continued) Nominal Fair Value % of Holdings Financial assets at fair value through profit or loss $ Net Assets

Financial Derivative Instruments: 1.84% (2015: 3.00%) (continued)

Total Credit Default Swaps: Receive Fixed (Sell Protection) - Unrealised Gains 528,052 0.77

Total Credit Default Swaps 795,317 1.16

Forward Currency Contracts: 0.64% (2015: 0.79%)

Currency Currency Currency Maturity Unrealised % of Counterparty Buys Sells Rate Date Gain Net Assets $

Northern Trust USD 11,467,800 GBP 9,000,000 1.2742 15/03/2017 328,065 0.48 State Street GBP 13,368,917 USD 16,460,372 1.2312 31/01/2017 70,109 0.10 Northern Trust USD 5,330,600 EUR 5,000,000 1.0661 15/03/2017 38,860 0.06 State Street EUR 1,010 USD 1,059 1.0480 31/01/2017 8 - State Street EUR 990 USD 1,038 1.0480 31/01/2017 8 - State Street EUR 982 USD 1,030 1.0481 31/01/2017 8 - State Street EUR 971 USD 1,018 1.0480 31/01/2017 8 - State Street CHF 982 USD 961 0.9783 31/01/2017 7 - State Street CHF 982 USD 960 0.9783 31/01/2017 7 - State Street CHF 982 USD 960 0.9783 31/01/2017 7 - State Street CHF 962 USD 941 0.9783 31/01/2017 7 - State Street GBP 1,004 USD 1,236 1.2312 31/01/2017 5 - State Street CHF 20 USD 20 0.9851 31/01/2017 - -

Unrealised Gains on Forward Currency Contracts 437,099 0.64

Futures Contracts - Unrealised Gains: 0.04% (2015: 0.01%)

No. of Unrealised Clearing BrokerDescription Currency Contracts Gain % of $ Net Assets

United States: 0.04% (2015: 0.01%)

Goldman Sachs Ultra Bond March 2017 USD (7) 14,875 0.02 Goldman Sachs 10 Year Treasury Notes March 2017 USD (18) 9,000 0.02

Total United States 23,875 0.04

Total Futures Contracts - Unrealised Gains 23,875 0.04

Total Financial Derivative Instruments 1,256,291 1.84

Total financial assets at fair value through profit or loss 66,274,407 96.95

126

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Absolute Return Credit Fund (continued) Nominal Fair Value % of Holdings Financial liabilities at fair value through profit or loss $ Net Assets

Financial Derivative Instruments: (1.54%) (2015: (2.26%))

Credit Default Swaps: (1.47%) (2015: (2.25%))

Credit Default Swaps: Pay Fixed (Buy Protection) - Unrealised Losses: (1.32%) (2015: (0.87%)

European Union: (0.94%) (2015: (0.47%))

250,000 Arcelomittal 5% 20/12/2021 (Citigroup) (27,458) (0.04) 950,000 Arcelomittal 5% 20/12/2021 (Credit Suisse) (104,339) (0.15) 667,000 Galp Energia 5% 20/12/2021 (Barclays) (114,523) (0.17) 800,000 Galp Energia 5% 20/12/2021 (Goldman Sachs) (137,359) (0.20) 1,750,000 Lanxess Aktiengesellschaft 1% 20/12/2021 (Citigroup) (29,060) (0.04) 196,000 NXP 5% 20/09/2020 (Goldman Sachs) (33,458) (0.05) 391,000 NXP 5% 20/09/2020 (Goldman Sachs) (66,745) (0.10) 489,000 NXP 5% 20/09/2020 (Goldman Sachs) (83,474) (0.12) 130,000 NXP 5% 20/09/2020 (Goldman Sachs) (22,191) (0.03) 1,800,000 Stmicroelectronics 1% 20/12/2021 (Goldman Sachs) (7,480) (0.01) 222,000 Total 1% 20/09/2020 (Barclays) (5,732) (0.01) 148,000 Total 1% 20/09/2020 (BNP Paribas) (3,821) (0.01) 222,000 Total 1% 20/09/2020 (BNP Paribas) (5,732) (0.01) 111,000 Total 1% 20/09/2020 (Goldman Sachs) (2,866) -

Total European Union (644,238) (0.94)

United States: (0.38%) (2015: 0.40%))

2,750,000 CDX 1% 20/12/2021 (Goldman Sachs) (41,606) (0.06) 2,600,000 International Paper 1% 20/12/2021 (Barclays) (43,195) (0.07) 500,000 KB Home 5% 20/12/2021 (Barclays) (41,615) (0.06) 100,000 KB Home 5% 20/12/2021 (BNP Paribas) (8,323) (0.01) 800,000 Pactiv 5% 20/12/2021 (Morgan Stanley) (83,123) (0.12) 1,000,000 Sprint Communications 5% 20/12/2017 (Credit Suisse) (40,702) (0.06)

Total United States (258,564) (0.38)

Total Credit Default Swaps: Pay Fixed (Buy Protection) - Unrealised Losses (902,802) (1.32)

Credit Default Swaps: Receive Fixed (Sell Protection) - Unrealised Losses: (0.15%) (2015: (1.38%))

European Union: (0.08%) (2015: (1.18%))

(1,700,000) Axa 1% 20/12/2021 (Merrill Lynch) (51,193) (0.08)

Total European Union (51,193) (0.08)

127

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Absolute Return Credit Fund (continued) Nominal Fair Value % of Holdings Financial liabilities at fair value through profit or loss $ Net Assets

Financial Derivative Instruments: (1.54%) (2015: (2.26%)) (continued)

Credit Default Swaps: (1.47%) (2015: (2.25%)) (continued)

Credit Default Swaps: Receive Fixed (Sell Protection) - Unrealised Losses: (0.15%) (2015: (1.38%)) (continued)

United States: (0.07%) (2015: (0.20%))

(550,000) Canadian Natural Resources 1% 20/12/2021 (BNP Paribas) (9,366) (0.01) (350,000) Enbridge Income 1% 20/12/2021 (BNP Paribas) (8,356) (0.01) (100,000) Tenet 5% 20/12/2021 (Barclays) (10,158) (0.02) (200,000) Tenet 5% 20/12/2021 (Barclays) (20,315) (0.03)

Total United States (48,195) (0.07)

Total Credit Default Swaps: Receive Fixed (Sell Protection) - Unrealised Losses (99,388) (0.15)

Total Credit Default Swaps (1,002,190) (1.47)

Forward Currency Contracts: (0.05%) (2015: (0.01%))

Currency Currency Currency Maturity Unrealised % of Counterparty Buys Sells Rate Date Loss Net Assets $

State Street USD 11 GBP 9 1.2311 31/01/2017 - - State Street USD 9 CHF 9 0.9783 31/01/2017 - - State Street USD 9 EUR 9 1.0480 31/01/2017 - - State Street USD 9 EUR 8 1.0481 31/01/2017 - - State Street USD 8 CHF 9 0.9780 31/01/2017 - - State Street USD 8 CHF 9 0.9780 31/01/2017 - - State Street USD 8 CHF 8 0.9776 31/01/2017 - - State Street USD 9 EUR 8 1.0477 31/01/2017 - - State Street USD 9 EUR 8 1.0474 31/01/2017 - - State Street USD 146,241 GBP 118,783 1.2312 31/01/2017 (633) - Northern Trust EUR 900,000 USD 962,303 1.0692 15/03/2017 (9,790) (0.01) Northern Trust GBP 800,000 USD 1,016,756 1.2709 15/03/2017 (26,558) (0.04)

Unrealised Losses on Forward Currency Contracts (36,981) (0.05)

Total Forward Currency Contracts (36,981) (0.05)

128

Hermes Investment Funds Public Limited Company Portfolio Statement As at 31 December 2016 (continued)

Hermes Absolute Return Credit Fund (continued) Fair Value % of Financial liabilities at fair value through profit or loss $ Net Assets

Financial Derivative Instruments: (1.54%) (2015: (2.26%)) (continued)

Futures Contracts - Unrealised Losses: (0.02%) (2015: (0.00%))

No. of Unrealised Clearing BrokerDescription Currency Contracts Loss % of $ Net Assets

Germany: (0.02%) (2015: 0.00%)

Goldman Sachs Eurex Euro-Bubl March 2017 EUR (4) (4,540) (0.01) Goldman Sachs Eurex Euro-Bund March 2017 EUR (4) (10,295) (0.01)

Total Germany (14,835) (0.02)

Total Futures Contracts - Unrealised Losses (14,835) (0.02)

Total Financial Derivative Instruments (1,054,006) (1.54)

Total financial liabilities at fair value through profit or loss (1,054,006) (1.54)

Net financial assets at fair value through profit or loss 65,220,401 95.41 (2015: 91.36%) (Cost: $65,268,653)

Net Cash (2015: 10.60%) 2,487,394 3.64

Other Net Assets (2015: (1.96%)) 653,571 0.95

Net Assets Attributable to Holders of Redeemable Participating Shares 68,361,366 100.00

% of Total Portfolio Classification Assets

Transferable securities traded on a regulated market 92.92 OTC financial derivative instruments 1.76 Financial derivative instruments dealt on a regulated market 0.03 Cash 3.94 Other assets 1.35 Total 100.00

The counterparty for the forward currency contracts are: Northern Trust (S&P:AA-, Moody’s: Aa2) and State Street Bank and Trust Company (S&P: A, Moody’s: Aa1).

The clearing broker for the futures is Goldman Sachs (S&P: A+, Moody’s: A3).

The counterparties for the credit default swaps are: Barclays (S&P: A-, Moody’s: A1), BNP Paribas (S&P: BB+, Moody’s: A1), Citigroup (S&P: BBB+, Moody’s Baa1), Credit Suisse (S&P: A, Moody’s: A1), Goldman Sachs (S&P: A+, Moody’s: A3) and JP Morgan ( S&P: A+, Moody’s: A3).

129

Hermes Investment Funds Public Limited Company Balance Sheet As at 31 December 2016

Hermes Global Hermes UK Small and Emerging Markets Hermes Global Equity Mid Cap Companies Hermes European Fund Fund Fund* Alpha Equity Fund Assets Notes $ $ £ € Financial assets at fair value through profit or loss 1,345,882,688 310,459,357 - 744,923,751 Cash and cash equivalents 3 22,015,906 2,932,200 219,608 7,686,888 Cash collateral on derivative positions 3 - - - - Dividends and interest receivable 3,057,452 310,223 - 708,413 Securities sold receivable 183,969 - - - Subscriptions receivable 1,137,199 - - 464,383 Sundry debtors 10,961 4,922 167 17,969 Total Assets 1,372,288,175 313,706,702 219,775 753,801,404 Liabilities Financial liabilities at fair value through profit or loss 12,283 78 - 195,825 Cash collateral on derivative positions 3 - - - - Securities purchased payable 1,318,237 - - - Accrued capital gains tax 14 3,297,756 - - - Sub-custody fee payable 4 (d) 91,276 6,967 888 23,956 Redemptions payable 268,928 - 206,207 3,811,957 Advisory fee payable 4 (b) 26,010 6,300 - 14,565 Investment Management fee payable 4 (a) 898,003 103,652 2,872 224,590 Administration fee payable 4 (c) 92,205 40,454 - 51,521 Depositary fee payable 4 (d) 49,681 14,526 - 29,056 Variation margin payable - - - - Other accrued expenses 4 (g) 98,339 47,865 9,808 109,908 Total liabilities (excluding net assets attributable to holders of redeemable participating shares) 6,152,718 219,842 219,775 4,461,378

Net assets attributable to holders of redeemable participating shares 1,366,135,457 313,486,860 - 749,340,026

For information on the Net Asset Value per Share and Shares Outstanding on each share class please refer to note 13. *Hermes UK Small and Mid Cap Companies Fund was terminated on 15 February 2016.

The accompanying notes form an integral part of these Financial Statements

130

Hermes Investment Funds Public Limited Company Balance Sheet As at 31 December 2016 (continued)

Hermes Active UK Hermes Global High Hermes Europe Ex- Hermes US SMID Inflation-Linked Bond Yield Credit Fund UK Equity Fund Equity Fund Fund* Assets Notes € € $ £ Financial assets at fair value through profit or loss 271,198,514 228,742,376 826,754,022 - Cash and cash equivalents 3 24,494,042 1,269,016 14,604,449 3,278 Cash collateral on derivative positions 3 - - - - Dividends and interest receivable 3,743,449 - 318,398 - Securities sold receivable - - - - Subscriptions receivable - - 2,119,917 - Sundry debtors 4,608 4,469 6,144 670 Total Assets 299,440,613 230,015,861 843,802,930 3,948 Liabilities Financial liabilities at fair value through profit or loss 2,342,950 89,737 34,305 - Cash collateral on derivative positions 3 3,874,080 - - - Securities purchased payable - - - - Accrued capital gains tax 14 - - - - Sub-custody fee payable 4 (d) 7,847 10,337 9,058 881 Redemptions payable - - 2,386,394 - Advisory fee payable 4 (b) 5,597 4,463 13,308 - Investment Management fee payable 4 (a) 53,289 16,096 429,161 11 Administration fee payable 4 (c) 32,643 14,856 47,325 - Depositary fee payable 4 (d) 12,243 9,764 27,846 - Variation margin payable 122,627 - - - Other accrued expenses 4 (g) 63,380 46,593 94,977 3,056 Total liabilities (excluding net assets attributable to holders of redeemable participating shares) 6,514,656 191,846 3,042,374 3,948

Net assets attributable to holders of redeemable participating shares 292,925,957 229,824,015 840,760,556 -

For information on the Net Asset Value per Share and Shares Outstanding on each share class please refer to note 13. *Hermes Active UK Inflation-Linked Bond Fund was terminated on 29 February 2016.

The accompanying notes form an integral part of these Financial Statements 131

Hermes Investment Funds Public Limited Company Balance Sheet As at 31 December 2016 (continued)

Hermes Asia Ex- Hermes Global Equity Hermes Multi Hermes Multi Asset Japan Equity Fund ESG Fund Strategy Credit Fund Inflation Fund Assets Notes $ $ $ £ Financial assets at fair value through profit or loss 2,230,736,458 138,309,151 841,883,159 21,885,789 Cash and cash equivalents 3 104,959,611 2,316,432 34,813,196 10,109,641 Cash collateral on derivative positions 3 - - 8,212,062 130,000 Dividends and interest receivable 9,356,048 153,827 10,630,804 29,023 Securities sold receivable - - - - Subscriptions receivable 381,915 - 429,000 15,259 Sundry debtors 16,844 7,845 10,593 3,066 Total Assets 2,345,450,876 140,787,255 895,978,814 32,172,778 Liabilities Financial liabilities at fair value through profit or loss 26,787 - 14,805,203 246,380 Cash collateral on derivative positions 3 - - 6,504,559 - Securities purchased payable - - 8,152,500 - Accrued capital gains tax 14 8,827,632 - - - Sub-custody fee payable 4 (d) 75,465 - 14,857 1,421 Redemptions payable 190,720 - - - Advisory fee payable 4 (b) 44,465 2,739 16,755 633 Investment Management fee payable 4 (a) 1,480,967 85,400 311,809 29 Administration fee payable 4 (c) 125,852 14,307 90,831 3,959 Depositary fee payable 4 (d) 80,168 6,167 33,213 1,427 Variation margin payable - - 231,640 - Other accrued expenses 4 (g) 156,561 36,965 155,147 11,000 Total liabilities (excluding net assets attributable to holders of redeemable participating shares) 11,008,617 145,578 30,316,514 264,849

Net assets attributable to holders of redeemable participating shares 2,334,442,259 140,641,677 865,662,300 31,907,929

For information on the Net Asset Value per Share and Shares Outstanding on each share class please refer to note 13.

The accompanying notes form an integral part of these Financial Statements

132

Hermes Investment Funds Public Limited Company Balance Sheet As at 31 December 2016 (continued)

Hermes Global Small Hermes US All Cap Hermes Absolute Cap Equity Fund Equity Fund Return Credit Fund Total Assets Notes $ $ $ £* Financial assets at fair value through profit or loss 42,659,502 16,518,891 66,274,407 5,794,145,554 Cash and cash equivalents 3 635,991 89,003 2,647,394 188,615,481 Cash collateral on derivative positions 3 - - 110,000 6,864,962 Dividends and interest receivable 17,082 7,775 876,536 23,841,367 Securities sold receivable 21,016 - - 165,892 Subscriptions receivable - - - 3,703,872 Sundry debtors 16,529 16,682 65,922 153,596 Total Assets 43,350,120 16,632,351 69,974,259 6,017,490,724 Liabilities Financial liabilities at fair value through profit or loss 8 9 1,054,006 15,384,232 Cash collateral on derivative positions 3 - - 270,000 8,789,492 Securities purchased payable - - 213,750 7,837,558 Accrued capital gains tax 14 - - - 9,812,955 Sub-custody fee payable 4 (d) 4,965 780 6,248 208,801 Redemptions payable - - - 5,763,361 Advisory fee payable 4 (b) 810 322 1,335 112,329 Investment Management fee payable 4 (a) 5,386 147 9,699 2,944,110 Administration fee payable 4 (c) 4,049 1,608 8,342 432,409 Depositary fee payable 4 (d) 1,771 704 2,920 220,627 Variation margin payable - - 9,040 299,454 Other accrued expenses 4 (g) 27,342 28,861 37,553 764,793 Total liabilities (excluding net assets attributable to holders of redeemable participating shares) 44,331 32,431 1,612,893 52,570,121

Net assets attributable to holders of redeemable participating shares 43,305,789 16,599,920 68,361,366 5,964,920,603

For information on the Net Asset Value per Share and Shares Outstanding on each share class please refer to note 13. * Euro denominated sub-funds are converted to GBP in the company total column using the year end exchange rate of 1.1715. * US Dollar denominated sub-funds are converted to GBP in the company total column using the year end exchange rate of 1.2357.

The accompanying notes form an integral part of these Financial Statements

133

Hermes Investment Funds Public Limited Company Balance Sheet As at 31 December 2015

Hermes Global Hermes UK Small and Emerging Markets Hermes Global Equity Mid Cap Companies Hermes European Fund Fund Fund Alpha Equity Fund Assets Notes $ $ £ € Financial assets at fair value through profit or loss 646,739,191 457,944,580 217,779,135 790,261,603 Cash and cash equivalents 3 17,805,174 1,269,480 3,781,042 4,715,157 Cash collateral on derivative positions 3 - - - - Dividends and interest receivable 866,075 447,572 354,878 744,129 Securities sold receivable - 899,228 - - Subscriptions receivable 813,225 - 3,343 1,269,135 Sundry debtors 20,685 18,293 18,137 69,485 Total Assets 666,244,350 460,579,153 221,936,535 797,059,509 Liabilities Financial liabilities at fair value through profit or loss 10,345 - - 2,911 Cash collateral on derivative positions 3 - - - - Distributions payable 12 14,541 5,834 2,336 26,960 Securities purchased payable 8,028,408 1,389,804 - - Accrued capital gains tax 14 3,297,756 - - - Sub-custody fee payable 4 (d) 185,609 18,040 3,440 49,240 Redemptions payable - - - 1,021,321 Advisory fee payable 4 (b) 13,283 9,338 4,300 14,628 Investment Management fee payable 4 (a) 259,414 95,685 3,294 256,866 Administration fee payable 4 (c) 117,833 93,610 42,126 126,104 Custodian fee payable 4 (d) 45,219 32,481 16,123 53,456 Variation margin payable - - - - Other accrued expenses 4 (g) 34,669 28,221 13,307 52,964 Total liabilities (excluding net assets attributable to holders of redeemable participating shares) 12,007,077 1,673,013 84,926 1,604,450

Net assets attributable to holders of redeemable participating shares 654,237,273 458,906,140 221,851,609 795,455,059

For information on the Net Asset Value per Share and Shares Outstanding on each share class please refer to note 13.

The accompanying notes form an integral part of these Financial Statements

135

Hermes Investment Funds Public Limited Company Balance Sheet As at 31 December 2015 (continued)

Hermes Active UK Hermes Global High Hermes Europe Ex- Hermes US SMID Inflation-Linked Bond Yield Credit Fund UK Equity Fund Equity Fund Fund Assets Notes € € $ £ Financial assets at fair value through profit or loss 223,002,430 254,190,537 373,785,906 19,261,227 Cash and cash equivalents 3 23,786,540 1,199,521 7,333,856 172,950 Cash collateral on derivative positions 3 2,040,000 - - - Dividends and interest receivable 4,023,777 - 103,960 44,888 Securities sold receivable - - - - Subscriptions receivable 524,475 - 274,505 - Sundry debtors 19,094 9,216 48,548 3,391 Total Assets 253,396,316 255,399,274 381,546,775 19,482,456 Liabilities Financial liabilities at fair value through profit or loss 4,718,023 3,003 22,695 54,864 Cash collateral on derivative positions 3 1,480,000 - - - Distributions payable 12 - - 2,716 - Securities purchased payable - - - - Accrued capital gains tax 14 - - - - Sub-custody fee payable 4 (d) 14,989 27,481 11,724 2,815 Redemptions payable 367,133 21,681 308,652 - Advisory fee payable 4 (b) 4,631 4,593 8,192 - Investment Management fee payable 4 (a) 38,978 43,271 114,895 12 Administration fee payable 4 (c) 61,650 44,099 66,238 26,041 Custodian fee payable 4 (d) 20,678 19,335 29,709 9,789 Variation margin payable - - - - Other accrued expenses 4 (g) 32,054 27,791 33,880 26,692 Total liabilities (excluding net assets attributable to holders of redeemable participating shares) 6,738,136 191,254 598,701 120,213

Net assets attributable to holders of redeemable participating shares 246,658,180 255,208,020 380,948,074 19,362,243

For information on the Net Asset Value per Share and Shares Outstanding on each share class please refer to note 13.

The accompanying notes form an integral part of these Financial Statements

136

Hermes Investment Funds Public Limited Company Balance Sheet As at 31 December 2015 (continued)

Hermes Asia Ex- Hermes Global Equity Hermes Multi Hermes Multi Asset Japan Equity Fund ESG Fund Strategy Credit Fund Inflation Fund Assets Notes $ $ $ £ Financial assets at fair value through profit or loss 1,542,692,783 43,853,882 724,094,462 20,733,104 Cash and cash equivalents 3 49,278,346 470,890 47,145,017 9,416,778 Cash collateral on derivative positions 3 - - 6,770,000 260,000 Dividends and interest receivable 6,893,763 42,829 10,711,200 36,233 Securities sold receivable - 102,547 39,247 - Subscriptions receivable 20,607,107 - 3,530,000 - Sundry debtors 59,455 15,626 79,353 2,854 Total Assets 1,619,531,454 44,485,774 792,369,279 30,448,969 Liabilities Financial liabilities at fair value through profit or loss 86,990 - 19,895,731 299,687 Cash collateral on derivative positions 3 - - 4,757,870 170,000 Distributions payable 12 1,099,570 - - 5 Securities purchased payable - 44,859 - - Accrued capital gains tax 14 8,827,632 - - - Sub-custody fee payable 4 (d) 285,860 5,677 29,878 3,181 Redemptions payable 3,271,279 - - - Advisory fee payable 4 (b) 33,972 926 15,951 613 Investment Management fee payable 4 (a) 1,070,021 1,412 284,539 16 Administration fee payable 4 (c) 219,828 9,418 178,065 7,698 Custodian fee payable 4 (d) 100,961 3,478 54,198 2,350 Variation margin payable - - 128,782 - Other accrued expenses 4 (g) 50,851 54,336 95,775 14,680 Total liabilities (excluding net assets attributable to holders of redeemable participating shares) 15,046,964 120,106 25,440,789 498,230

Net assets attributable to holders of redeemable participating shares 1,604,484,490 44,365,668 766,928,490 29,950,739

For information on the Net Asset Value per Share and Shares Outstanding on each share class please refer to note 13.

The accompanying notes form an integral part of these Financial Statements

137

Hermes Investment Funds Public Limited Company Balance Sheet As at 31 December 2015 (continued)

Hermes Global Small Hermes US All Cap Hermes Absolute Cap Equity Fund * Equity Fund ** Return Credit Fund ** Total Assets Notes $ $ $ £*** Financial assets at fair value through profit or loss 29,801,224 14,757,095 46,838,901 3,824,734,654 Cash and cash equivalents 3 677,868 67,566 5,144,495 122,914,925 Cash collateral on derivative positions 3 - - 260,000 6,533,188 Dividends and interest receivable 10,185 1,243 597,769 17,298,726 Securities sold receivable 178,625 - 2,738 829,354 Subscriptions receivable - - - 18,439,625 Sundry debtors 28,254 30,368 15,109 310,647 Total Assets 30,696,156 14,856,272 52,859,012 3,991,061,119 Liabilities Financial liabilities at fair value through profit or loss 11 12 1,130,648 18,183,471 Cash collateral on derivative positions 3 - - 100,000 4,556,725 Distributions payable 12 - - - 783,904 Securities purchased payable 275,388 - 1,541,100 7,652,866 Accrued capital gains tax 14 - - - 8,226,737 Sub-custody fee payable 4 (d) 3,010 1,483 13,118 453,173 Redemptions payable - - - 3,468,187 Advisory fee payable 4 (b) 628 302 1,032 79,229 Investment Management fee payable 4 (a) 59 53 105 1,492,272 Administration fee payable 4 (c) 6,156 2,960 12,622 726,243 Custodian fee payable 4 (d) 2,309 1,110 3,786 282,544 Variation margin payable - - 3,462 89,724 Other accrued expenses 4 (g) 19,025 26,055 21,724 385,150 Total liabilities (excluding net assets attributable to holders of redeemable participating shares) 306,586 31,975 2,827,597 46,380,226

Net assets attributable to holders of redeemable participating shares 30,389,570 14,824,297 50,031,415 3,944,680,893

For information on the Net Asset Value per Share and Shares Outstanding on each share class please refer to note 13. * Hermes Global Small Cap Equity Fund launched on 15 May 2015. ** Hermes US All Cap Equity Fund and Hermes Absolute Return Credit Fund launched on 29 May 2015. *** Euro denominated sub-funds are converted to GBP in the company total column using the financial year end exchange rate of 1.3568. *** US Dollar denominated sub-funds are converted to GBP in the company total column using the financial year end exchange rate of 1.4739. The accompanying notes form an integral part of these Financial Statements

138

Hermes Investment Funds Public Limited Company Income Statement For the financial year ended 31 December 2016

Hermes Global Hermes UK Small and Emerging Markets Hermes Global Equity Mid Cap Companies Hermes European Fund Fund Fund* Alpha Equity Fund Investment Income Notes $ $ £ € Dividend income 24,879,599 9,665,090 569,579 19,728,686 Bank interest income 56,144 573 2,185 5 Bond interest income - - - - Net gain/(loss) on financial assets and liabilities at fair value through profit or loss 61,301,848 27,727,978 (26,714,164) (16,962,877) Investment Management fee rebate - - - - Investment Income/(Expense) 86,237,591 37,393,641 (26,142,400) 2,765,814 Expenses General expenses 4(g) (352,152) (138,260) (33,681) (311,458) Advisory fee 4(b) (78,784) (32,863) (2,082) (58,405) Investment Management fee 4(a) (7,161,815) (1,203,464) (4,209) (2,637,492) Administration fee 4(c) (309,780) (166,063) (19,641) (249,592) Sub-custodian fee 4(d) (416,146) (33,976) (1,068) (90,240) Depositary fee 4(d) (148,857) (68,726) (3,903) (111,008) Directors’ fees 4(e) (23,027) (10,145) (1,613) (14,799) Audit fee 4(f) (23,615) (9,423) (6,266) (11,602) Operating Expenses (8,514,176) (1,662,920) (72,463) (3,484,596) Operating Profit/(Loss) 77,723,415 35,730,721 (26,214,863) (718,782) Finance costs Bank interest expense (43,454) (2,853) (8) (51,834) Income distribution 12 (190,091) (13,758) - (414,940) Net Income equalisation 1,246,399 (682,210) - (206,309) 1,012,854 (698,821) (8) (673,083) Net Profit/(Loss) before taxation 78,736,269 35,031,900 (26,214,871) (1,391,865) Taxation Withholding tax (2,508,945) (1,397,242) (34,844) (2,548,031)

Increase/(Decrease) in net assets attributable to holders of redeemable participating shares from operations 76,227,324 33,634,658 (26,249,715) (3,939,896)

*Hermes UK Small and Mid Cap Companies Fund was terminated on 15 February 2016.

The accompanying notes form an integral part of these Financial Statements

139

Hermes Investment Funds Public Limited Company Income Statement For the financial year ended 31 December 2016 (continued)

Hermes Active UK Hermes Global High Hermes Europe Ex- Hermes US SMID Inflation-Linked Bond Yield Credit Fund UK Equity Fund Equity Fund Fund* Investment Income Notes € € $ £ Dividend income - 5,312,116 5,330,644 - Bank interest income 3,035 8 53,027 337 Bond interest income 15,797,023 - - 17,896 Net gain/(loss) on financial assets and liabilities at fair value through profit or loss 10,938,271 (5,246,045) 92,275,641 677,130 Investment Management fee rebate - - - - Investment Income 26,738,329 66,079 97,659,312 695,363 Expenses General expenses 4(g) (156,838) (139,256) (247,904) (1,774) Advisory fee 4(b) (21,660) (18,434) (39,455) - Investment Management fee 4(a) (573,461) (319,488) (2,357,935) - Administration fee 4(c) (135,034) (91,246) (190,095) (965) Sub-custodian fee 4(d) (23,852) (33,281) (44,244) (1,269) Depositary fee 4(d) (37,246) (37,516) (81,426) (362) Directors’ fees 4(e) (8,390) (5,794) (10,511) - Audit fee 4(f) (7,665) (7,611) (8,954) - Operating Expenses (964,146) (652,626) (2,980,524) (4,370) Operating Profit/(Loss) 25,774,183 (586,547) 94,678,788 690,993 Finance costs Bank interest expense (77,431) (8,445) (8,379) (99) Income distribution 12 (638,083) (112,912) (25,368) - Net Income equalisation 395,923 (11,397) (115,744) (4,221) (319,591) (132,754) (149,491) (4,320) Net Profit/(Loss) before taxation 25,454,592 (719,301) 94,529,297 686,673 Taxation Withholding tax - (921,540) (758,383) -

Increase/(Decrease) in net assets attributable to holders of redeemable participating shares from operations 25,454,592 (1,640,841) 93,770,914 686,673

*Hermes Active UK Inflation-Linked Bond Fund was terminated on 29 February 2016.

The accompanying notes form an integral part of these Financial Statements

140

Hermes Investment Funds Public Limited Company Income Statement For the financial year ended 31 December 2016 (continued)

Hermes Asia Ex- Hermes Global Equity Hermes Multi Hermes Multi Asset Japan Equity Fund ESG Fund Strategy Credit Fund Inflation Fund Investment Income Notes $ $ $ £ Dividend income 48,472,722 1,738,281 - 64,339 Bank interest income 222,722 149 - 98,519 Bond interest income - - 38,245,880 264,480 Net gain on financial assets and liabilities at fair value through profit or loss 101,582,061 6,350,198 (40,499,133) 1,230,428 Investment Management fee rebate - - - - Investment Income/(Expense) 150,277,505 8,088,628 (2,253,253) 1,657,766 Expenses General expenses 4(g) (701,600) (34,686) (378,965) (16,176) Advisory fee 4(b) (145,347) (7,195) (64,750) (2,454) Investment Management fee 4(a) (14,777,877) (539,723) (3,676,987) (13) Administration fee 4(c) (450,206) (36,494) (364,199) (15,340) Sub-custodian fee 4(d) (447,695) (6,413) (61,723) (6,221) Depositary fee 4(d) (253,973) (15,526) (127,107) (5,060) Directors’ fees 4(e) (31,425) (2,012) (12,601) (470) Audit fee 4(f) (24,283) (7,035) (12,489) (5,890) Operating Expenses (16,832,406) (649,084) (4,698,821) (51,624) Operating Profit/(Loss) 133,445,099 7,439,544 (6,952,074) 1,606,142 Finance costs Bank interest expense (5,554) (324) (42,318) (1,625) Income distribution 12 (2,071,376) - (19,161,903) (2) Net Income equalisation 2,111,139 42,345 1,528,332 426 34,209 42,021 (17,675,889) (1,201) Net Profit/(Loss) before taxation 133,479,308 7,481,565 (24,627,963) 1,604,941 Taxation Withholding tax (6,330,647) (254,388) - (850)

Increase/(Decrease) in net assets attributable to holders of redeemable participating shares from operations 127,148,661 7,227,177 (24,627,963) 1,604,091

The accompanying notes form an integral part of these Financial Statements

141

Hermes Investment Funds Public Limited Company Income Statement For the financial year ended 31 December 2016 (continued)

Hermes Global Small Hermes US All Cap Hermes Absolute Cap Equity Fund Equity Fund Return Credit Fund Total Investment Income Notes $ $ $ £* Dividend income 630,492 206,562 - 88,180,440 Bank interest income 110 60 - 349,095 Bond interest income - - 1,702,529 42,663,713 Net gain/(loss) on financial assets and liabilities at fair value through profit or loss 4,404,027 1,619,037 (569,325) 153,557,757 Investment Management fee rebate - - 61,841 45,633 Investment Income 5,034,629 1,825,659 1,195,045 284,796,638 Expenses General expenses 4(g) (116,360) (99,719) (122,663) (2,165,604) Advisory fee 4(b) (2,857) (1,193) (4,513) (363,150) Investment Management fee 4(a) (38,694) (94) (47,164) (24,880,312) Administration fee 4(c) (14,567) (6,083) (28,704) (1,580,345) Sub-custodian fee 4(d) (13,221) (4,580) (19,015) (901,532) Depositary fee 4(d) (6,029) (2,512) (9,598) (687,747) Directors’ fees 4(e) (615) (258) (975) (93,326) Audit fee 4(f) (6,972) (6,869) (7,103) (112,877) Operating Expenses (199,315) (121,308) (239,735) (30,784,893) Operating Profit 4,835,314 1,704,351 955,310 254,011,745 Finance costs Bank interest expense (260) (175) (5,114) (194,227) Income distribution 12 (20,446) - (115) (16,804,845) Net Income equalisation 10,372 - 61,272 3,242,389 (10,334) (175) 56,043 (13,756,683) Net Profit before taxation 4,824,980 1,704,176 1,011,353 240,255,062 Taxation Withholding tax (92,231) (30,490) - (11,261,385)

Increase in net assets attributable to holders of redeemable participating shares from operations 4,732,749 1,673,686 1,011,353 228,993,677

* Euro denominated sub-funds are converted to GBP in the company total column using the average exchange rate of 1.2844. * US Dollar denominated sub-funds are converted to GBP in the company total column using the average exchange rate of 1.4331. Gains and losses arose from continuing and discontinued operations. The discontinued operations relate to Hermes UK Small and Mid Cap Companies Fund and Hermes Active UK Inflation-Linked Bond Fund. There were no gains or losses other than those dealt with in the Income Statement. The accompanying notes form an integral part of these Financial Statements 142

Hermes Investment Funds Public Limited Company Income Statement For the financial year ended 31 December 2015

Hermes Global Hermes UK Small and Emerging Markets Hermes Global Equity Mid Cap Companies Hermes European Fund Fund Fund Alpha Equity Fund Investment Income Notes $ $ £ € Dividend income 13,474,096 8,165,595 5,054,925 17,545,870 Bank interest income 10,451 11,307 34,447 62,124 Bond interest income - - - - Net (loss)/gain on financial assets and liabilities at fair value through profit or loss (45,396,447) (6,705,136) 32,121,829 84,172,742 Investment (Expense)/Income (31,911,900) 1,471,766 37,211,201 101,780,736 Expenses General expenses 4(g) (151,894) (100,758) (34,118) (215,601) Advisory fee 4(b) (45,233) (31,095) (16,504) (58,789) Investment Management fee 4(a) (2,040,340) (759,221) (44,895) (2,619,937) Administration fee 4(c) (215,628) (155,445) (82,521) (258,439) Sub-custodian fee 4(d) (299,659) (40,947) (7,374) (102,310) Custodian fee 4(d) (82,177) (58,296) (30,945) (101,511) Directors’ fees 4(e) (9,972) (7,328) (3,186) (13,744) Audit fee 4(f) (10,167) (7,410) (5,319) (10,207) Operating Expenses (2,855,070) (1,160,500) (224,862) (3,380,538) Operating (Loss)/Profit (34,766,970) 311,266 36,986,339 98,400,198 Finance costs Bank interest expense (8,354) (4,623) - (17,823) Income distribution 12 (15,131) (15,932) (2,337) (460,676) Net income equalisation - - - - (23,485) (20,555) (2,337) (478,499) Net (Loss)/Profit before taxation (34,790,455) 290,711 36,984,002 97,921,699 Taxation Withholding tax (1,420,094) (1,506,227) (511,721) (2,480,905) Capital gains tax 14 (1,199,893) - - -

(Decrease)/Increase in net assets attributable to holders of redeemable participating shares from operations (37,410,442) (1,215,516) 36,472,281 95,440,794

The accompanying notes form an integral part of these Financial Statements

143

Hermes Investment Funds Public Limited Company Income Statement For the financial year ended 31 December 2015 (continued)

Hermes Active UK Hermes Global High Hermes Europe Ex- Hermes US SMID Inflation-Linked Bond Yield Credit Fund UK Equity Fund Equity Fund Fund Investment Income Notes € € $ £ Dividend income - 5,128,507 3,719,730 - Bank interest income - 35,070 9,588 147 Bond interest income 17,562,274 - - 998,119 Net (loss)/gain on financial assets and liabilities at fair value through profit or loss (20,385,832) 40,572,201 6,243,713 4,349 Investment (Expense)/Income (2,823,558) 45,735,778 9,973,031 1,002,615 Expenses General expenses 4(g) (92,634) (139,053) (168,385) (49,534) Advisory fee 4(b) (20,583) (20,407) (31,472) - Investment Management fee 4(a) (484,942) (624,426) (1,354,946) (4) Administration fee 4(c) (128,642) (102,035) (157,360) (53,480) Sub-custodian fee 4(d) (25,836) (47,362) (16,213) (5,239) Custodian fee 4(d) (38,593) (38,263) (59,010) (20,055) Directors’ fees 4(e) (4,602) (4,488) (7,068) (2,178) Audit fee 4(f) (7,799) (7,748) (7,407) (5,000) Operating Expenses (803,631) (983,782) (1,801,861) (135,490) Operating (Loss)/Profit (3,627,189) 44,751,996 8,171,170 867,125 Finance costs Bank interest expense (25,431) (2,665) (922) - Income distribution 12 (106,641) (276,135) (2,717) - Net income equalisation 1,291 - - (343,239) (130,781) (278,800) (3,639) (343,239) Net (Loss)/Profit before taxation (3,757,970) 44,473,196 8,167,531 523,886 Taxation Withholding tax - (658,896) (563,744) - Capital gains tax 14 - - - -

(Decrease)/Increase in net assets attributable to holders of redeemable participating shares from operations (3,757,970) 43,814,300 7,603,787 523,886

The accompanying notes form an integral part of these Financial Statements

144

Hermes Investment Funds Public Limited Company Income Statement For the financial year ended 31 December 2015 (continued)

Hermes Asia Ex- Hermes Global Equity Hermes Multi Hermes Multi Asset Japan Equity Fund ESG Fund Strategy Credit Fund Inflation Fund Investment Income Notes $ $ $ £ Dividend income 36,550,019 817,982 - 77,461 Bank interest income 32,815 229 - 147,401 Bond interest income - - 26,533,011 384,052 Net (loss)/gain on financial assets and liabilities at fair value through profit or loss (67,619,509) 16,375 (59,212,583) (1,046,838) Investment (Expense)/Income (31,036,675) 834,586 (32,679,572) (437,924) Expenses General expenses 4(g) (461,085) (94,215) (409,921) (34,901) Advisory fee 4(b) (129,884) (3,546) (46,263) (2,450) Investment Management fee 4(a) (12,870,067) (13,929) (2,121,889) (13) Administration fee 4(c) (435,218) (17,731) (273,548) (15,313) Sub-custodian fee 4(d) (614,116) (17,321) (75,526) (6,898) Custodian fee 4(d) (197,623) (6,649) (82,849) (4,594) Directors’ fees 4(e) (29,143) (765) (11,501) (143) Audit fee 4(f) (5,725) (8,501) (8,332) (3,428) Operating Expenses (14,742,861) (162,657) (3,029,829) (67,740) Operating (Loss)/Profit (45,779,536) 671,929 (35,709,401) (505,664) Finance costs Bank interest expense (15,525) - (6,544) (402) Income distribution 12 (2,806,458) - (2,345,381) (11) Net income equalisation - - 559,032 - (2,821,983) - (1,792,893) (413) Net (Loss)/Profit before taxation (48,601,519) 671,929 (37,502,294) (506,077) Taxation Withholding tax (3,254,129) (116,352) - (7,554) Capital gains tax 14 (4,877,608) - - -

(Decrease)/Increase in net assets attributable to holders of redeemable participating shares from operations (56,733,256) 555,577 (37,502,294) (513,631)

The accompanying notes form an integral part of these Financial Statements

145

Hermes Investment Funds Public Limited Company Income Statement For the financial year ended 31 December 2015 (continued)

Hermes Global Small Hermes US All Cap Hermes Absolute Cap Equity Fund * Equity Fund ** Return Credit Fund ** Total Investment Income Notes $ $ $ £*** Dividend income 230,550 116,490 - 62,866,441 Bank interest income 49 - - 294,722 Bond interest income - - 825,222 32,033,969 Net (loss)/gain on financial assets and liabilities at fair value through profit or loss (1,706,614) (172,999) (663,548) (7,811,060) Investment (Expense)/Income (1,476,015) (56,509) 161,674 87,384,072 Expenses General expenses 4(g) (50,756) (52,835) (103,103) (1,485,627) Advisory fee 4(b) (1,549) (697) (2,370) (282,534) Investment Management fee 4(a) (59) (53) (105) (15,290,091) Administration fee 4(c) (7,745) (3,483) (14,981) (1,344,719) Sub-custodian fee 4(d) (3,797) (1,816) (15,256) (856,669) Custodian fee 4(d) (2,905) (1,306) (4,444) (509,159) Directors’ fees 4(e) (405) (196) (663) (65,952) Audit fee 4(f) (8,843) (8,843) (8,843) (80,912) Operating Expenses (76,059) (69,229) (149,765) (19,915,663) Operating (Loss)/Profit (1,552,074) (125,738) 11,909 67,468,409 Finance costs Bank interest expense - (1) (1,160) (58,034) Income distribution 12 - - (5) (4,007,899) Net income equalisation - - (8) 23,496 - (1) (1,173) (4,042,437) Net (Loss)/Profit before taxation (1,552,074) (125,739) 10,736 63,425,972 Taxation Withholding tax (35,386) (17,473) - (7,322,511) Capital gains tax 14 - - - (3,976,820)

(Decrease)/Increase in net assets attributable to holders of redeemable participating shares from operations (1,587,460) (143,212) 10,736 52,126,641 * Hermes Global Small Cap Equity Fund launched on 15 May 2015. ** Hermes US All Cap Equity Fund and Hermes Absolute Return Credit Fund launched on 29 May 2015. *** Euro denominated sub-funds are converted to GBP in the company total column using the average exchange rate for the financial year of 1.3774. *** US Dollar denominated sub-funds are converted to GBP in the company total column using the average exchange rate for the financial year of 1.5282.

The accompanying notes form an integral part of these Financial Statements 146

Hermes Investment Funds Public Limited Company Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares For the financial year ended 31 December 2016

Hermes Global Hermes UK Small Emerging Markets Hermes Global and Mid Cap Hermes European Notes Fund Equity Fund Companies Fund* Alpha Equity Fund $ $ £ € Net assets attributable to holders of redeemable participating shares at the beginning of the year 654,237,273 458,906,140 221,851,609 795,455,059

Redeemable participating share transactions Issue of redeemable participating shares for the year 806,878,984 36,560,484 39,841 93,996,439 Redemption of redeemable participating shares for the year (171,208,124) (215,614,422) (195,641,735) (136,171,576) Net increase/(decrease) in net assets from redeemable participating share transactions 635,670,860 (179,053,938) (195,601,894) (42,175,137)

Foreign exchange adjustments on aggregation 2 - - - -

Increase/(Decrease) in net assets attributable to holders of redeemable participating shares from operations 76,227,324 33,634,658 (26,249,715) (3,939,896)

Net assets attributable to holders of redeemable participating shares at the end of the year 1,366,135,457 313,486,860 - 749,340,026

*Hermes UK Small and Mid Cap Companies Fund was terminated on 15 February 2016.

The accompanying notes form an integral part of these Financial Statements

147

Hermes Investment Funds Public Limited Company Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares For the financial year ended 31 December 2016 (continued)

Hermes Active UK Hermes Global High Hermes Europe Ex- Hermes US SMID Inflation-Linked Notes Yield Credit Fund UK Equity Fund Equity Fund Bond Fund* € € $ £ Net assets attributable to holders of redeemable participating shares at the beginning of the year 246,658,180 255,208,020 380,948,074 19,362,243

Redeemable participating share transactions Issue of redeemable participating shares for the year 66,333,248 27,451,483 516,001,106 - Redemption of redeemable participating shares for the year (45,520,063) (51,194,647) (149,959,538) (20,048,916) Net increase/(decrease) in net assets from redeemable participating share transactions 20,813,185 (23,743,164) 366,041,568 (20,048,916)

Foreign exchange adjustments on aggregation 2 - - - -

Increase/(Decrease) in net assets attributable to holders of redeemable participating shares from operations 25,454,592 (1,640,841) 93,770,914 686,673

Net assets attributable to holders of redeemable participating shares at the end of the year 292,925,957 229,824,015 840,760,556 -

*Hermes Active UK Inflation-Linked Bond Fund was terminated on 29 February 2016.

The accompanying notes form an integral part of these Financial Statements 148

Hermes Investment Funds Public Limited Company Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares For the financial year ended 31 December 2016 (continued)

Hermes Asia Ex- Hermes Global Hermes Multi Hermes Multi Asset Notes Japan Equity Fund Equity ESG Fund Strategy Credit Fund Inflation Fund $ $ $ £ Net assets attributable to holders of redeemable participating shares at the beginning of the year 1,604,484,490 44,365,668 766,928,490 29,950,739

Redeemable participating share transactions Issue of redeemable participating shares for the year 863,407,847 103,799,630 224,768,767 353,099 Redemption of redeemable participating shares for the year (260,598,739) (14,750,798) (101,406,994) - Net increase in net assets from redeemable participating share transactions 602,809,108 89,048,832 123,361,773 353,099

Foreign exchange adjustments on aggregation 2 - - - -

Increase/(Decrease) in net assets attributable to holders of redeemable participating shares from operations 127,148,661 7,227,177 (24,627,963) 1,604,091

Net assets attributable to holders of redeemable participating shares at the end of the year 2,334,442,259 140,641,677 865,662,300 31,907,929

The accompanying notes form an integral part of these Financial Statements

149

Hermes Investment Funds Public Limited Company Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares For the financial year ended 31 December 2016 (continued)

Hermes Global Small Cap Equity Hermes US All Cap Hermes Absolute Notes Fund Equity Fund Return Credit Fund Total $ $ $ £* Net assets attributable to holders of redeemable participating shares at the beginning of the year 30,389,570 14,824,297 50,031,415 3,944,680,893

Redeemable participating share transactions Issue of redeemable participating shares for the year 8,184,715 101,937 17,318,598 2,055,376,732 Redemption of redeemable participating shares for the year (1,245) - - (1,080,021,384) Net increase in net assets from redeemable participating share transactions 8,183,470 101,937 17,318,598 975,355,348

Foreign exchange adjustments on aggregation 2 - - - 815,890,685

Increase in net assets attributable to holders of redeemable participating shares from operations 4,732,749 1,673,686 1,011,353 228,993,677

Net assets attributable to holders of redeemable participating shares at the end of the year 43,305,789 16,599,920 68,361,366 5,964,920,603

* Euro denominated sub-funds are converted to GBP in the company total column using the average exchange rate of 1.2243. * US Dollar denominated sub-funds are converted to GBP in the company total column using the average exchange rate of 1.3552.

The accompanying notes form an integral part of these Financial Statements

150

Hermes Investment Funds Public Limited Company Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares For the financial year ended 31 December 2015

Hermes Global Hermes UK Small Emerging Markets Hermes Global and Mid Cap Hermes European Notes Fund Equity Fund Companies Fund Alpha Equity Fund $ $ £ € Net assets attributable to holders of redeemable participating shares at the beginning of the year 506,835,984 276,258,171 185,694,598 524,521,216

Redeemable participating share transactions Issue of redeemable participating shares for the year 230,572,514 193,630,848 3,466,239 289,263,181 Redemption of redeemable participating shares for the year (45,760,783) (9,767,363) (3,781,509) (113,770,132) Net increase/(decrease) in net assets from redeemable participating share transactions 184,811,731 183,863,485 (315,270) 175,493,049

Foreign exchange adjustments on aggregation 2 - - - -

(Decrease)/Increase in net assets attributable to holders of redeemable participating shares from operations (37,410,442) (1,215,516) 36,472,281 95,440,794

Net assets attributable to holders of redeemable participating shares at the end of the year 654,237,273 458,906,140 221,851,609 795,455,059

The accompanying notes form an integral part of these Financial Statements

151

Hermes Investment Funds Public Limited Company Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares For the financial year ended 31 December 2015 (continued)

Hermes Active UK Hermes Global High Hermes Europe Ex- Hermes US SMID Inflation-Linked Notes Yield Credit Fund UK Equity Fund Equity Fund Bond Fund € € $ £ Net assets attributable to holders of redeemable participating shares at the beginning of the year 240,176,477 218,575,394 385,175,933 136,291,082

Redeemable participating share transactions Issue of redeemable participating shares for the year 38,309,716 21,578,865 108,901,741 405,281 Redemption of redeemable participating shares for the year (28,070,043) (28,760,539) (120,733,387) (117,858,006) Net increase/(decrease) in net assets from redeemable participating share transactions 10,239,673 (7,181,674) (11,831,646) (117,452,725)

Foreign exchange adjustments on aggregation 2 - - - -

(Decrease)/Increase in net assets attributable to holders of redeemable participating shares from operations (3,757,970) 43,814,300 7,603,787 523,886

Net assets attributable to holders of redeemable participating shares at the end of the year 246,658,180 255,208,020 380,948,074 19,362,243

The accompanying notes form an integral part of these Financial Statements 152

Hermes Investment Funds Public Limited Company Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares For the financial year ended 31 December 2015 (continued)

Redeemable participating share transactions Issue of redeemable participating shares for the year 965,874,807 4,238,680 476,292,408 338,782 Redemption of redeemable participating shares for the year (580,650,980) (1,138,515) (32,202,228) - Net increase in net assets from redeemable participating share transactions 385,223,827 3,100,165 444,090,180 338,782

Foreign exchange adjustments on aggregation 2 - - - -

(Decrease)/Increase in net assets attributable to holders of redeemable participating shares from operations (56,733,256) 555,577 (37,502,294) (513,631)

Net assets attributable to holders of redeemable participating shares at the end of the year 1,604,484,490 44,365,668 766,928,490 29,950,739

The accompanying notes form an integral part of these Financial Statements

153

Hermes Investment Funds Public Limited Company Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares For the financial year ended 31 December 2015 (continued)

Hermes Global Hermes Absolute Small Cap Equity Hermes US All Cap Return Credit Fund Notes Fund * Equity Fund ** ** Total $ $ $ £*** Net assets attributable to holders of redeemable participating shares at the beginning of the year - - - 2,940,918,054

Redeemable participating share transactions Issue of redeemable participating shares for the year 31,977,030 14,967,509 50,033,458 1,616,441,536 Redemption of redeemable participating shares for the year - - (12,779) (762,604,215) Net increase in net assets from redeemable participating share transactions 31,977,030 14,967,509 50,020,679 853,837,321

Foreign exchange adjustments on aggregation 2 - - - 97,798,877

(Decrease)/Increase in net assets attributable to holders of redeemable participating shares from operations (1,587,460) (143,212) 10,736 52,126,641

Net assets attributable to holders of redeemable participating shares at the end of the year 30,389,570 14,824,297 50,031,415 3,944,680,893

* Hermes Global Small Cap Equity Fund launched on 15 May 2015. ** Hermes US All Cap Equity Fund and Hermes Absolute Return Credit Fund launched on 29 May 2015. *** Euro denominated sub-funds are converted to GBP in the company total column using the average exchange rate for the financial year of 1.3774. *** US Dollar denominated sub-funds are converted to GBP in the company total column using the average exchange rate for the financial year of 1.5282.

The accompanying notes form an integral part of these Financial Statements

154

Hermes Investment Funds Public Limited Company Cash Flow Statement For the financial year ended 31 December 2016

Hermes Global Hermes UK Small Emerging Markets Hermes Global and Mid Cap Hermes European Fund Equity Fund* Companies Fund** Alpha Equity Fund Cash Flows from Operating Activities $ $ £ € Dividends received 20,179,229 8,405,280 889,613 17,216,371 Interest received 56,192 490 2,185 5 Operating expenses paid (7,929,795) (1,706,404) (132,591) (3,522,707) Purchase of financial assets (1,019,656,639) (80,140,133) (4,165,763) (185,372,687) Proceeds from sales of financial assets 374,946,929 77,417,346 7,474,963 213,930,267 Net Cash (outflow)/inflow from Operating Activities (632,404,084) 3,976,579 4,068,407 42,251,249 Cash Flows from Financing Activities Subscriptions 806,555,010 36,560,484 43,184 94,801,191 Redemptions (170,939,196) (38,169,024) (7,673,017) (133,380,940) Interest paid (42,765) (3,517) (8) (51,560) Distribution paid (204,632) (19,592) - (441,900) Income equalisation 1,246,399 (682,210) - (206,309) Net Cash inflow/(outflow) from Financing Activities 636,614,816 (2,313,859) (7,629,841) (39,279,518)

Increase/(Decrease) in cash and cash equivalents 4,210,732 1,662,720 (3,561,434) 2,971,731

Foreign exchange adjustment on aggregation (Note 2) - - - - Cash and cash equivalents at the beginning of the year 17,805,174 1,269,480 3,781,042 4,715,157 Cash and cash equivalents at the end of the year 22,015,906 2,932,200 219,608 7,686,888

Cash and cash equivalents at the end of the year is comprised of: Cash 22,015,906 2,932,200 219,608 7,686,888 Cash collateral on derivative positions (asset) - - - - Cash collateral on derivative positions (liability) - - - - 22,015,906 2,932,200 219,608 7,686,888

*Proceeds from sales of financial assets exclude a redemption made ex-specie of $177,445,398. **Hermes UK Small and Mid Cap Companies Fund was terminated on 15 February 2016. Proceeds from sales of financial assets exclude a redemption made ex- specie of £187,762,511.

The accompanying notes form an integral part of these Financial Statements

155

Hermes Investment Funds Public Limited Company Cash Flow Statement For the financial year ended 31 December 2016 (continued)

Hermes Active UK Hermes Global High Hermes Europe Ex- Hermes US SMID Inflation-Linked Bond Yield Credit Fund UK Equity Fund Equity Fund Fund* Cash Flows from Operating Activities € € $ £ Dividends received - 4,390,576 4,357,755 - Interest received 16,775,528 8 53,095 63,121 Operating expenses paid (947,641) (713,054) (2,692,664) (63,050) Purchase of financial assets (259,521,149) (38,501,221) (549,696,173) (178,192) Proceeds from sales of financial assets 219,315,748 58,790,441 189,011,803 10,804,040 Net Cash (outflow)/inflow from Operating Activities (24,377,514) 23,966,750 (358,966,184) 10,625,919 Cash Flows from Financing Activities Subscriptions 66,857,723 27,451,483 514,155,694 - Redemptions (45,887,196) (51,216,328) (147,881,796) (10,791,271) Interest paid (77,431) (8,101) (9,037) (99) Distribution paid (638,083) (112,912) (28,084) - Income equalisation 395,923 (11,397) - (4,221) Net Cash inflow/(outflow) from Financing Activities 20,650,936 (23,897,255) 366,236,777 (10,795,591)

(Decrease)/Increase in cash and cash equivalents (3,726,578) 69,495 7,270,593 (169,672)

Foreign exchange adjustment on aggregation (Note 2) - - - - Cash and cash equivalents at the beginning of the year 24,346,540 1,199,521 7,333,856 172,950 Cash and cash equivalents at the end of the year 20,619,962 1,269,016 14,604,449 3,278

Cash and cash equivalents at the end of the year is comprised of: Cash 24,494,042 1,269,016 14,604,449 3,278 Cash collateral on derivative positions (asset) - - - - Cash collateral on derivative positions (liability) (3,874,080) - - - 20,619,962 1,269,016 14,604,449 3,278 *Hermes Active UK Inflation-Linked Bond Fund was terminated on 29 February 2016. Proceeds from sales of financial assets exclude a redemption made ex-specie of £9,257,645

The accompanying notes form an integral part of these Financial Statements

156

Hermes Investment Funds Public Limited Company Cash Flow Statement For the financial year ended 31 December 2016 (continued)

Hermes Asia Ex- Hermes Global Equity Hermes Multi Hermes Multi Asset Japan Equity Fund ESG Fund Strategy Credit Fund Inflation Fund Cash Flows from Operating Activities $ $ $ £ Dividends received 39,679,872 1,372,895 2,820,291 63,171 Interest received 222,640 149 39,834,123 370,527 Operating expenses paid (16,614,007) (570,764) (4,719,848) (61,901) Purchase of financial assets (1,309,345,582) (114,594,399) (1,370,780,875) (47,685,881) Proceeds from sales of financial assets 722,849,852 26,546,808 1,211,422,977 47,710,313 Net Cash (outflow)/inflow from Operating Activities (563,207,225) (87,245,311) (121,423,332) 396,229 Cash Flows from Financing Activities Subscriptions 883,633,039 103,799,630 227,869,767 337,840 Redemptions (263,679,298) (14,750,798) (101,406,994) - Interest paid (5,444) (324) (42,318) (1,625) Distribution paid (3,170,946) - (19,161,903) (7) Income equalisation 2,111,139 42,345 1,528,332 426 Net Cash inflow from Financing Activities 618,888,490 89,090,853 108,786,884 336,634

Increase/(Decrease) in cash and cash equivalents 55,681,265 1,845,542 (12,636,448) 732,863 Foreign exchange adjustment on aggregation (Note 2) - - - -

Cash and cash equivalents at the beginning of the year 49,278,346 470,890 49,157,147 9,506,778 Cash and cash equivalents at the end of the year 104,959,611 2,316,432 36,520,699 10,239,641

Cash and cash equivalents at the end of the year is comprised of: Cash 104,959,611 2,316,432 34,813,196 10,109,641 Cash collateral on derivative positions (asset) - - 8,212,062 130,000 Cash collateral on derivative positions (liability) - - (6,504,559) - 104,959,611 2,316,432 36,520,699 10,239,641

The accompanying notes form an integral part of these Financial Statements 157

Hermes Investment Funds Public Limited Company Cash Flow Statement For the financial year ended 31 December 2016 (continued)

Hermes Global Small Hermes US All Cap Hermes Absolute Cap Equity Fund Equity Fund Return Credit Fund Total Cash Flows from Operating Activities $ $ $ £* Dividends received 531,416 169,540 389 82,129,907 Interest received 58 60 2,342,745 49,157,967 Operating expenses paid (174,377) (107,163) (276,838) (32,838,791) Purchase of financial assets (15,652,879) (10,183,630) (160,027,217) (4,211,730,620) Proceeds from sales of financial assets 7,080,768 10,040,868 137,769,179 2,717,273,502 Net Cash outflow from Operating Activities (8,215,014) (80,325) (20,191,742) (1,396,008,035) Cash Flows from Financing Activities Subscriptions 8,184,715 101,937 17,318,598 2,264,485,574 Redemptions (1,245) - - (811,513,319) Interest paid (259) (175) (5,114) (206,928) Distribution paid (20,446) - (115) (19,312,842) Income equalisation 10,372 - 61,272 3,642,561 Net Cash inflow from Financing Activities 8,173,137 101,762 17,374,641 1,437,095,046

(Decrease)/Increase in cash and cash equivalents (41,877) 21,437 (2,817,101) 41,087,011

Foreign exchange adjustment on aggregation (Note 2) - - - 20,712,552 Cash and cash equivalents at the beginning of the year 677,868 67,566 5,304,495 124,891,388 Cash and cash equivalents at the end of the year 635,991 89,003 2,487,394 186,690,951

Cash and cash equivalents at the end of the year is comprised of: Cash 635,991 89,003 2,647,394 188,615,481 Cash collateral on derivative positions (asset) - - 110,000 6,864,962 Cash collateral on derivative positions (liability) - - (270,000) (8,789,492) 635,991 89,003 2,487,394 186,690,951 * Euro denominated sub-funds are converted to GBP in the company total column using the year end exchange rate of 1.2844. * US Dollar denominated sub-funds are converted to GBP in the company total column using the year end exchange rate of 1.4331. Please note that the figures for “Purchase of financial assets” and “Proceeds from sales of financial assets” on the Cash Flow Statement differ from the figures used in the Unaudited Schedule of Significant Portfolio Movements, as the Cash Flow Statement is adjusted for any receivable or payable for financial assets at the year end.

The accompanying notes form an integral part of these Financial Statements

158

Hermes Investment Funds Public Limited Company Cash Flow Statement For the financial year ended 31 December 2015

Hermes Global Hermes UK Small Emerging Markets Hermes Global Equity Hermes Global and Mid Cap Fund Select Fund * Equity Fund Companies Fund Cash Flows from Operating Activities $ $ $ £ Dividends received 11,746,112 - 6,511,640 4,360,555 Interest received 10,315 - 11,307 34,562 Operating expenses paid (2,947,614) (147,771) (1,096,062) (311,167) Purchase of financial assets (424,345,627) - (284,879,679) (64,144,463) Proceeds from sales of financial assets 242,648,678 - 95,769,017 53,990,386 Net Cash outflow from Operating Activities (172,888,136) (147,771) (183,683,777) (6,070,127)

Cash Flows from Financing Activities Subscriptions 229,759,289 - 193,630,848 3,468,119 Redemptions (45,760,783) (55,611) (9,767,363) (3,781,509) Interest paid (8,975) - (3,931) - Distribution paid (590) - (10,098) (2) Income equalisation - - - - Net Cash inflow/(outflow) from Financing Activities 183,988,941 (55,611) 183,849,456 (313,392)

Increase/(Decrease) in cash and cash equivalents 11,100,805 (203,382) 165,679 (6,383,519) Foreign exchange adjustment on aggregation (Note 2) - - - - Cash and cash equivalents at the beginning of the period 6,704,369 203,382 1,103,801 10,164,561 Cash and cash equivalents at the end of the period 17,805,174 - 1,269,480 3,781,042

Cash and cash equivalents at the end of the period is comprised of: Cash 17,805,174 - 1,269,480 3,781,042 Cash collateral on derivative positions (asset) - - - - Cash collateral on derivative positions (liability) - - - - 17,805,174 - 1,269,480 3,781,042 *Hermes Global Equity Select Fund was terminated on 11 July 2014.

The accompanying notes form an integral part of these Financial Statements

159

Hermes Investment Funds Public Limited Company Cash Flow Statement For the financial year ended 31 December 2015 (continued)

Hermes Global Hermes Japan Equity Hermes European Hermes Global High Investment Grade Fund * Alpha Equity Fund Yield Credit Fund Fund ** Cash Flows from Operating Activities ¥ € € € Dividends received - 14,900,201 - - Interest received - 62,124 17,000,298 - Operating expenses paid (18,291,651) (3,528,572) (858,982) (162,762) Purchase of financial assets - (317,736,880) (402,629,918) - Proceeds from sales of financial assets - 132,784,459 382,976,026 - Net Cash outflow from Operating Activities (18,291,651) (173,518,668) (3,512,576) (162,762)

Cash Flows from Financing Activities Subscriptions - 288,108,938 37,785,241 - Redemptions (6,678,453) (116,025,211) (27,702,910) - Interest paid - (15,351) (25,431) - Distribution paid - (433,716) (106,641) - Income equalisation - - 1,291 - Net Cash (outflow)/inflow from Financing Activities (6,678,453) 171,634,660 9,951,550 -

(Decrease)/Increase in cash and cash equivalents (24,970,104) (1,884,008) 6,438,974 (162,762) Foreign exchange adjustment on aggregation (Note 2) - - - - Cash and cash equivalents at the beginning of the period 24,970,104 6,599,165 17,907,566 162,762 Cash and cash equivalents at the end of the period - 4,715,157 24,346,540 - Cash and cash equivalents at the end of the period is comprised of: Cash - 4,715,157 23,786,540 - Cash collateral on derivative positions (asset) - - 2,040,000 - Cash collateral on derivative positions (liability) - - (1,480,000) - - 4,715,157 24,346,540 - *Hermes Japan Equity Fund was terminated on 1 July 2014. ** Hermes Global Investment Grade Fund was terminated on 1 May 2014.

The accompanying notes form an integral part of these Financial Statements

160

Hermes Investment Funds Public Limited Company Cash Flow Statement For the financial year ended 31 December 2015 (continued)

Hermes Active UK Hermes Europe Ex- Hermes US SMID Inflation-Linked Bond Hermes Asia Ex- UK Equity Fund Equity Fund Fund Japan Equity Fund Cash Flows from Operating Activities € $ £ $ Dividends received 4,469,611 3,184,980 - 30,257,087 Interest received 35,070 9,520 1,252,651 32,828 Operating expenses paid (1,079,794) (1,999,506) (138,540) (15,197,189) Purchase of financial assets (68,884,892) (141,583,663) (92,237,175) (1,358,599,778) Proceeds from sales of financial assets 72,819,569 147,258,894 208,981,322 1,013,022,002 Net Cash inflow/(outflow) from Operating Activities 7,359,564 6,870,225 117,858,258 (330,485,050)

Cash Flows from Financing Activities Subscriptions 21,578,865 108,712,700 405,281 945,328,087 Redemptions (28,750,358) (120,424,735) (117,858,006) (577,448,999) Interest paid (2,614) (818) - (17,123) Distribution paid (276,135) (1) - (2,474,513) Income equalisation - - (343,239) - Net Cash (outflow)/inflow from Financing Activities (7,450,242) (11,712,854) (117,795,964) 365,387,452

(Decrease)/Increase in cash and cash equivalents (90,678) (4,842,629) 62,294 34,902,402 Foreign exchange adjustment on aggregation (Note 2) - - - - Cash and cash equivalents at the beginning of the period 1,290,199 12,176,485 110,656 14,375,944 Cash and cash equivalents at the end of the period 1,199,521 7,333,856 172,950 49,278,346 Cash and cash equivalents at the end of the period is comprised of: Cash 1,199,521 7,333,856 172,950 49,278,346 Cash collateral on derivative positions (asset) - - - - Cash collateral on derivative positions (liability) - - - - 1,199,521 7,333,856 172,950 49,278,346

The accompanying notes form an integral part of these Financial Statements 161

Hermes Investment Funds Public Limited Company Cash Flow Statement For the financial year ended 31 December 2015 (continued)

Hermes Global Equity Hermes Multi Hermes Multi Asset Hermes Global Small ESG Fund Strategy Credit Fund Inflation Fund Cap Equity Fund * Cash Flows from Operating Activities $ $ £ $ Dividends received 709,453 1,285,730 79,485 184,980 Interest received 229 19,720,970 530,794 48 Operating expenses paid (159,933) (2,559,373) (55,301) (73,163) Purchase of financial assets (21,981,737) (1,300,429,009) (68,538,798) (33,830,963) Proceeds from sales of financial assets 18,642,939 854,526,005 60,416,920 2,419,936 Net Cash outflow from Operating Activities (2,789,049) (427,455,677) (7,566,900) (31,299,162)

Cash Flows from Financing Activities Subscriptions 4,238,680 472,762,408 338,782 31,977,030 Redemptions (1,138,515) (32,202,228) - - Interest paid - (24,889) (402) - Distribution paid - (3,786,624) (6) - Income equalisation - 559,032 - - Net Cash inflow from Financing Activities 3,100,165 437,307,699 338,374 31,977,030

Increase/(Decrease) in cash and cash equivalents 311,116 9,852,022 (7,228,526) 677,868 Foreign exchange adjustment on aggregation (Note 2) - - - - Cash and cash equivalents at the beginning of the period 159,774 39,305,125 16,735,304 - Cash and cash equivalents at the end of the period 470,890 49,157,147 9,506,778 677,868

Cash and cash equivalents at the end of the period is comprised of: Cash 470,890 47,145,017 9,416,778 677,868 Cash collateral on derivative positions (asset) - 6,770,000 260,000 - Cash collateral on derivative positions (liability) - (4,757,870) (170,000) - 470,890 49,157,147 9,506,778 677,868 * Hermes Global Small Cap Equity Fund launched on 15 May 2015.

The accompanying notes form an integral part of these Financial Statements

162

Hermes Investment Funds Public Limited Company Cash Flow Statement For the financial year ended 31 December 2015 (continued)

Hermes US All Cap Hermes Absolute Equity Fund * Return Credit Fund * Total Cash Flows from Operating Activities $ $ £** Dividends received 97,774 (2,522) 55,336,752 Interest received - 229,975 27,999,023 Operating expenses paid (67,634) (112,487) (20,962,395) Purchase of financial assets (18,037,006) (110,174,363) (3,312,800,264) Proceeds from sales of financial assets 3,106,924 65,344,386 2,414,516,514 Net Cash outflow from Operating Activities (14,899,942) (44,715,011) (835,910,370)

Cash Flows from Financing Activities Subscriptions 14,967,509 50,033,458 1,652,132,700 Redemptions - (12,779) (782,551,927) Interest paid (1) (1,160) (70,989) Distribution paid - (5) (4,857,045) Income equalisation - (8) 36,995 Net Cash inflow from Financing Activities 14,967,508 50,019,506 864,689,734

Increase in cash and cash equivalents 67,566 5,304,495 28,779,364 Foreign exchange adjustment on aggregation (Note 2) - - 1,318,664 Cash and cash equivalents at the beginning of the period - - 94,793,360 Cash and cash equivalents at the end of the period 67,566 5,304,495 124,891,388

Cash and cash equivalents at the end of the period is comprised of: Cash 67,566 5,144,495 122,914,925 Cash collateral on derivative positions (asset) - 260,000 6,533,188 Cash collateral on derivative positions (liability) - (100,000) (4,556,725) 67,566 5,304,495 124,891,388 * Hermes US All Cap Equity Fund and Hermes Absolute Return Credit Fund launched on 29 May 2015. ** Euro denominated sub-funds are converted to GBP in the company total column using the year end exchange rate of 1.3568. ** US Dollar denominated sub-funds are converted to GBP in the company total column using the year end exchange rate of 1.4739. Please note that the figures for “Purchase of financial assets” and “Proceeds from sales of financial assets” on the Cash Flow Statement differ from the figures used in the Unaudited Schedule of Significant Portfolio Movements, as the Cash Flow Statement is adjusted for any receivable or payable for financial assets at the year end.

The accompanying notes form an integral part of these Financial Statements 163

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016

1. Incorporation and Principal Activity

Hermes Investment Funds Public Limited Company (the “Company”) was incorporated on 23 October 2008 under the laws of the Republic of Ireland as an open-ended umbrella type investment company with variable capital and limited liability in which different sub-funds may be created from time to time. The Company was authorised on 24 November 2008 by the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2011 (“the UCITS Regulations”), as amended and the Central Bank as an Undertaking for Collective Investment in Transferable Securities in accordance with the provisions of the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in Transferable Securities) Regulations, 2015.

As at 31 December 2016 there were 13 sub-funds in existence with the following share classes:

Name of the sub-fund Share Class Launch date Hermes Global Emerging Markets Fund Z GBP Accumulating 9 December 2008 Hermes Global Emerging Markets Fund R EUR Accumulating 12 October 2011 Hermes Global Emerging Markets Fund T GBP Accumulating 24 October 2011 Hermes Global Emerging Markets Fund F GBP Accumulating 9 November 2012 Hermes Global Emerging Markets Fund F USD Accumulating 20 September 2013 Hermes Global Emerging Markets Fund F GBP Accumulating Hedged 25 November 2013 Hermes Global Emerging Markets Fund F EUR Accumulating 4 February 2014 Hermes Global Emerging Markets Fund R USD Distributing 23 April 2015 Hermes Global Emerging Markets Fund R EUR Distributing 23 April 2015 Hermes Global Emerging Markets Fund F GBP Distributing 5 June 2015 Hermes Global Emerging Markets Fund R EUR Distributing Hedged 24 June 2015 Hermes Global Emerging Markets Fund R USD Accumulating 30 June 2015 Hermes Global Emerging Markets Fund F EUR Accumulating Hedged 31 July 2015 Hermes Global Emerging Markets Fund F USD Distributing 13 November 2015 Hermes Global Emerging Markets Fund G USD Accumulating 16 December 2015 Hermes Global Emerging Markets Fund G EUR Accumulating 6 January 2016 Hermes Global Emerging Markets Fund F EUR Distributing 26 April 2016 Hermes Global Emerging Markets Fund Z USD Accumulating 24 August 2016 Hermes Global Emerging Markets Fund J GBP Accumulating 2 September 2016 Hermes Global Emerging Markets Fund J GBP Distributing 2 September 2016 Hermes Global Emerging Markets Fund J USD Accumulating 2 September 2016 Hermes Global Emerging Markets Fund J USD Distributing 2 September 2016 Hermes Global Emerging Markets Fund J EUR Accumulating 2 September 2016 Hermes Global Emerging Markets Fund J EUR Distributing 2 September 2016 Hermes Global Emerging Markets Fund J GBP Accumulating Hedged 23 September 2016 Hermes Global Emerging Markets Fund J GBP Distributing Hedged 23 September 2016 Hermes Global Emerging Markets Fund J EUR Accumulating Hedged 23 September 2016 Hermes Global Emerging Markets Fund J EUR Distributing Hedged 23 September 2016 Hermes Global Emerging Markets Fund F CHF Accumulating 13 October 2016 Hermes Global Emerging Markets Fund F SGD Accumulating 24 October 2016 Hermes Global Emerging Markets Fund F SGD Distributing 24 October 2016 Hermes Global Emerging Markets Fund R SGD Accumulating 24 October 2016 Hermes Global Emerging Markets Fund R SGD Distributing 24 October 2016 Hermes Global Equity Fund Z GBP Accumulating 5 December 2008 Hermes Global Equity Fund R EUR Accumulating 12 October 2011 Hermes Global Equity Fund T GBP Accumulating 24 October 2011 Hermes Global Equity Fund F GBP Accumulating 9 November 2012 Hermes Global Equity Fund F USD Accumulating 6 November 2013 Hermes Global Equity Fund F GBP Distributing 30 December 2013 Hermes Global Equity Fund F EUR Accumulating 28 October 2014 Hermes Global Equity Fund F EUR Distributing 4 March 2015 Hermes Global Equity Fund R USD Accumulating 5 October 2015 Hermes Global Equity Fund R SGD Accumulating 18 February 2016 164

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

1. Incorporation and Principal Activity (continued)

Name of the sub-fund Share Class Launch date Hermes European Alpha Equity Fund Z GBP Accumulating 15 January 2010 Hermes European Alpha Equity Fund R EUR Accumulating 13 April 2011 Hermes European Alpha Equity Fund T GBP Accumulating 24 October 2011 Hermes European Alpha Equity Fund Z EUR Accumulating 16 November 2011 Hermes European Alpha Equity Fund F GBP Accumulating 9 November 2012 Hermes European Alpha Equity Fund F EUR Accumulating 13 November 2012 Hermes European Alpha Equity Fund F GBP Distributing 16 November 2012 Hermes European Alpha Equity Fund R GBP Accumulating 21 February 2013 Hermes European Alpha Equity Fund F EUR Distributing 14 May 2013 Hermes European Alpha Equity Fund S EUR Distributing 12 August 2013 Hermes European Alpha Equity Fund F USD Distributing 13 November 2013 Hermes European Alpha Equity Fund S GBP Distributing 26 November 2013 Hermes European Alpha Equity Fund S USD Distributing 6 December 2013 Hermes European Alpha Equity Fund S USD Accumulating Hedged 9 December 2013 Hermes European Alpha Equity Fund S EUR Accumulating 17 December 2013 Hermes European Alpha Equity Fund S GBP Distributing Hedged 19 December 2013 Hermes European Alpha Equity Fund R USD Accumulating Hedged 10 January 2014 Hermes European Alpha Equity Fund S GBP Accumulating 14 January 2014 Hermes European Alpha Equity Fund R CHF Accumulating Hedged 4 February 2014 Hermes European Alpha Equity Fund S USD Distributing Hedged 4 February 2014 Hermes European Alpha Equity Fund S GBP Accumulating Hedged 10 February 2014 Hermes European Alpha Equity Fund S USD Accumulating 17 February 2014 Hermes European Alpha Equity Fund M EUR Distributing 31 March 2014 Hermes European Alpha Equity Fund M EUR Accumulating 31 March 2014 Hermes European Alpha Equity Fund R USD Accumulating 25 July 2014 Hermes European Alpha Equity Fund R CHF Accumulating 12 December 2014 Hermes European Alpha Equity Fund R EUR Distributing 13 November 2015 Hermes Global High Yield Credit Fund Z GBP Accumulating 11 May 2010 Hermes Global High Yield Credit Fund R EUR Accumulating 11 October 2011 Hermes Global High Yield Credit Fund F GBP Accumulating 8 November 2012 Hermes Global High Yield Credit Fund F EUR Accumulating 16 May 2013 Hermes Global High Yield Credit Fund F GBP Accumulating Hedged 4 February 2014 Hermes Global High Yield Credit Fund F GBP Distributing Hedged 2 December 2014 Hermes Global High Yield Credit Fund F USD Distributing Hedged 10 December 2014 Hermes Global High Yield Credit Fund F USD Accumulating Hedged 11 December 2014 Hermes Global High Yield Credit Fund T GBP Accumulating 16 June 2015 Hermes Global High Yield Credit Fund T GBP Accumulating Hedged 8 July 2015 Hermes Global High Yield Credit Fund R USD Accumulating 22 October 2015 Hermes Global High Yield Credit Fund R EUR Distributing 14 January 2016 Hermes Europe Ex-UK Equity Fund Z GBP Accumulating 21 December 2011 Hermes Europe Ex-UK Equity Fund R EUR Accumulating 9 March 2012 Hermes Europe Ex-UK Equity Fund R GBP Accumulating 13 June 2012 Hermes Europe Ex-UK Equity Fund F GBP Accumulating 9 November 2012 Hermes Europe Ex-UK Equity Fund F EUR Accumulating 1 July 2013 Hermes Europe Ex-UK Equity Fund F GBP Distributing Hedged 29 January 2014 Hermes Europe Ex-UK Equity Fund F USD Distributing Hedged 8 April 2015 Hermes Europe Ex-UK Equity Fund F EUR Distributing 8 May 2015 Hermes Europe Ex-UK Equity Fund F GBP Distributing 4 May 2016 Hermes Europe Ex-UK Equity Fund M GBP Accumulating 6 September 2016 Hermes Europe Ex-UK Equity Fund M GBP Accumulating Hedged 6 September 2016 Hermes Europe Ex-UK Equity Fund M GBP Distributing 6 September 2016 Hermes Europe Ex-UK Equity Fund M GBP Distributing Hedged 6 September 2016 165

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

1. Incorporation and Principal Activity (continued)

Name of the sub-fund Share Class Launch date Hermes US SMID Equity Fund Z GBP Accumulating 26 September 2012 Hermes US SMID Equity Fund F GBP Accumulating 8 November 2012 Hermes US SMID Equity Fund R EUR Accumulating 8 November 2012 Hermes US SMID Equity Fund F USD Accumulating 10 April 2013 Hermes US SMID Equity Fund T GBP Accumulating 8 May 2013 Hermes US SMID Equity Fund F GBP Distributing 10 May 2013 Hermes US SMID Equity Fund F USD Distributing 14 May 2013 Hermes US SMID Equity Fund F EUR Accumulating 15 May 2013 Hermes US SMID Equity Fund F EUR Distributing 16 May 2013 Hermes US SMID Equity Fund F EUR Accumulating Hedged 19 August 2013 Hermes US SMID Equity Fund F GBP Accumulating Hedged 21 November 2013 Hermes US SMID Equity Fund F GBP Distributing Hedged 7 October 2014 Hermes US SMID Equity Fund R CHF Accumulating Hedged 10 December 2014 Hermes US SMID Equity Fund R USD Accumulating 11 December 2014 Hermes US SMID Equity Fund R EUR Accumulating Hedged 11 December 2014 Hermes US SMID Equity Fund F CHF Accumulating Hedged 30 July 2015 Hermes US SMID Equity Fund F CHF Distributing Hedged 9 August 2016 Hermes Asia Ex-Japan Equity Fund Z GBP Accumulating 1 November 2012 Hermes Asia Ex-Japan Equity Fund F GBP Accumulating 6 December 2012 Hermes Asia Ex-Japan Equity Fund R EUR Accumulating 6 December 2012 Hermes Asia Ex-Japan Equity Fund T GBP Accumulating 8 May 2013 Hermes Asia Ex-Japan Equity Fund F EUR Distributing 21 August 2013 Hermes Asia Ex-Japan Equity Fund F EUR Accumulating 21 August 2013 Hermes Asia Ex-Japan Equity Fund F GBP Distributing 28 August 2013 Hermes Asia Ex-Japan Equity Fund F USD Accumulating 1 October 2013 Hermes Asia Ex-Japan Equity Fund R USD Accumulating 1 October 2013 Hermes Asia Ex-Japan Equity Fund F EUR Accumulating Hedged 21 October 2013 Hermes Asia Ex-Japan Equity Fund F GBP Distributing Hedged 7 November 2013 Hermes Asia Ex-Japan Equity Fund R EUR Accumulating Hedged 11 March 2014 Hermes Asia Ex-Japan Equity Fund R CHF Accumulating Hedged 11 March 2014 Hermes Asia Ex-Japan Equity Fund F GBP Accumulating Hedged 18 March 2014 Hermes Asia Ex-Japan Equity Fund F USD Distributing 1 September 2014 Hermes Asia Ex-Japan Equity Fund C USD Accumulating 4 November 2014 Hermes Asia Ex-Japan Equity Fund RC USD Accumulating 4 November 2014 Hermes Asia Ex-Japan Equity Fund C EUR Accumulating 9 February 2015 Hermes Asia Ex-Japan Equity Fund C EUR Distributing 10 February 2015 Hermes Asia Ex-Japan Equity Fund C GBP Distributing 10 February 2015 Hermes Asia Ex-Japan Equity Fund C USD Distributing 11 February 2015 Hermes Asia Ex-Japan Equity Fund C GBP Accumulating 20 March 2015 Hermes Asia Ex-Japan Equity Fund RC EUR Accumulating 20 March 2015 Hermes Asia Ex-Japan Equity Fund C SGD Accumulating 14 August 2016 Hermes Global Equity ESG Fund Z USD Accumulating 1 May 2014 Hermes Global Equity ESG Fund F GBP Accumulating 7 May 2014 Hermes Global Equity ESG Fund F USD Accumulating 7 May 2014 Hermes Global Equity ESG Fund R EUR Accumulating 9 May 2014 Hermes Global Equity ESG Fund F EUR Accumulating 9 May 2014 Hermes Global Equity ESG Fund T GBP Accumulating 16 June 2015 Hermes Global Equity ESG Fund F NOK Accumulating 18 May 2016 Hermes Global Equity ESG Fund R NOK Accumulating 18 May 2016

166

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

1. Incorporation and Principal Activity (continued)

Name of the sub-fund Share Class Launch date Hermes Multi Strategy Credit Fund Z USD Accumulating 1 May 2014 Hermes Multi Strategy Credit Fund F GBP Distributing Hedged 7 May 2014 Hermes Multi Strategy Credit Fund F GBP Accumulating Hedged 7 May 2014 Hermes Multi Strategy Credit Fund F EUR Accumulating 7 May 2014 Hermes Multi Strategy Credit Fund F USD Accumulating 7 May 2014 Hermes Multi Strategy Credit Fund F EUR Accumulating Hedged 8 May 2014 Hermes Multi Strategy Credit Fund R EUR Accumulating 6 June 2014 Hermes Multi Strategy Credit Fund R EUR Accumulating Hedged 6 June 2014 Hermes Multi Strategy Credit Fund F GBP Distributing 10 July 2014 Hermes Multi Strategy Credit Fund F USD Distributing 10 July 2014 Hermes Multi Strategy Credit Fund F GBP Accumulating 6 May 2015 Hermes Multi Strategy Credit Fund T GBP Accumulating Hedged 9 July 2015 Hermes Multi Strategy Credit Fund R USD Accumulating 22 October 2015 Hermes Multi Strategy Credit Fund F EUR Distributing 9 December 2015 Hermes Multi Strategy Credit Fund R EUR Distributing 9 December 2015 Hermes Multi Strategy Credit Fund F EUR Distributing Hedged 14 January 2016 Hermes Multi Strategy Credit Fund R EUR Distributing Hedged 14 January 2016 Hermes Multi Asset Inflation Fund F GBP Accumulating Hedged 3 November 2014 Hermes Multi Asset Inflation Fund Z GBP Accumulating Hedged 3 November 2014 Hermes Multi Asset Inflation Fund F GBP Distributing Hedged 3 November 2014 Hermes Multi Asset Inflation Fund T GBP Accumulating 16 June 2015 Hermes Global Small Cap Equity Fund F EUR Accumulating 15 May 2015 Hermes Global Small Cap Equity Fund F EUR Distributing 15 May 2015 Hermes Global Small Cap Equity Fund F GBP Accumulating Hedged 15 May 2015 Hermes Global Small Cap Equity Fund F GBP Distributing Hedged 15 May 2015 Hermes Global Small Cap Equity Fund F USD Accumulating 15 May 2015 Hermes Global Small Cap Equity Fund F USD Distributing 15 May 2015 Hermes Global Small Cap Equity Fund F GBP Accumulating 15 May 2015 Hermes Global Small Cap Equity Fund R USD Accumulating 15 May 2015 Hermes Global Small Cap Equity Fund R EUR Accumulating 15 May 2015 Hermes Global Small Cap Equity Fund Z USD Accumulating 15 May 2015 Hermes Global Small Cap Equity Fund T GBP Accumulating 16 June 2015 Hermes Global Small Cap Equity Fund F GBP Distributing 25 January 2016 Hermes US All Cap Equity Fund F EUR Accumulating 29 May 2015 Hermes US All Cap Equity Fund F EUR Distributing 29 May 2015 Hermes US All Cap Equity Fund F GBP Accumulating Hedged 29 May 2015 Hermes US All Cap Equity Fund F GBP Distributing Hedged 29 May 2015 Hermes US All Cap Equity Fund F USD Accumulating 29 May 2015 Hermes US All Cap Equity Fund F USD Distributing 29 May 2015 Hermes US All Cap Equity Fund F GBP Accumulating 29 May 2015 Hermes US All Cap Equity Fund R USD Accumulating 29 May 2015 Hermes US All Cap Equity Fund R EUR Accumulating 29 May 2015 Hermes US All Cap Equity Fund Z USD Accumulating 29 May 2015 Hermes US All Cap Equity Fund T GBP Accumulating 11 August 2016 Hermes Absolute Return Credit Fund F EUR Accumulating 29 May 2015 Hermes Absolute Return Credit Fund F EUR Accumulating Hedged 29 May 2015 Hermes Absolute Return Credit Fund F EUR Distributing Hedged 29 May 2015 Hermes Absolute Return Credit Fund F CHF Accumulating Hedged 29 May 2015

167

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

1. Incorporation and Principal Activity (continued)

Name of the sub-fund Share Class Launch date Hermes Absolute Return Credit Fund F CHF Distributing Hedged 29 May 2015 Hermes Absolute Return Credit Fund F GBP Accumulating 29 May 2015 Hermes Absolute Return Credit Fund F GBP Accumulating Hedged 29 May 2015 Hermes Absolute Return Credit Fund F USD Accumulating 29 May 2015 Hermes Absolute Return Credit Fund F USD Distributing 29 May 2015 Hermes Absolute Return Credit Fund R EUR Accumulating 29 May 2015 Hermes Absolute Return Credit Fund R EUR Accumulating Hedged 29 May 2015 Hermes Absolute Return Credit Fund R EUR Distributing Hedged 29 May 2015 Hermes Absolute Return Credit Fund R CHF Accumulating Hedged 29 May 2015 Hermes Absolute Return Credit Fund R CHF Distributing Hedged 29 May 2015 Hermes Absolute Return Credit Fund R USD Accumlating 29 May 2015 Hermes Absolute Return Credit Fund Z USD Accumulating 29 May 2015 Hermes Absolute Return Credit Fund F GBP Distributing 25 September 2015 Hermes Absolute Return Credit Fund F GBP Distributing Hedged 25 September 2015 Hermes Absolute Return Credit Fund T GBP Accumulating 11 August 2016

Investment Objective

Hermes Global Emerging Markets Fund - The investment objective of the sub-fund is to provide long-term capital appreciation by investing primarily in a diversified portfolio of equity securities and equity related securities with an emerging markets bias quoted or traded on Regulated Markets in emerging market countries worldwide and the sub-fund will invest at least two-thirds of its assets in these securities. The Valuation Point of the sub-fund is twelve noon (Irish time) on each Dealing Day.

The Index this sub-fund is benchmarked against is the MSCI Emerging Markets Index.

Hermes Global Equity Fund - The investment objective of the sub-fund is to provide long-term capital appreciation by investing in a portfolio of equity securities quoted or traded on Regulated Markets worldwide. The Valuation Point of the sub-fund is twelve noon (Irish time) on each Dealing Day.

The Index this sub-fund is benchmarked against is the MSCI World Index.

Hermes UK Small and Mid Cap Companies Fund (terminated 15 February 2016) - The investment objective of the sub-fund was to provide long-term capital appreciation by investing primarily in equity securities of small and mid-capitalisation companies (excluding investment companies) listed in the United Kingdom. The Valuation Point of the sub-fund was twelve noon (Irish time) on each Dealing Day.

The Index this sub-fund was benchmarked against is the FTSE 250 Ex Investment Trust / FTSE Small Cap Ex Investment Trust Aggregated Index.

Hermes European Alpha Equity Fund - The investment objective of the sub-fund is to achieve long-term capital appreciation. The sub-fund will seek to achieve its objective by investing primarily in a diversified portfolio of equity securities and equity related securities with a European bias (including Russia and Turkey) quoted or traded on Regulated Markets. The Valuation Point of the sub-fund is twelve noon (Irish time) on each Dealing Day.

The Index this sub-fund is benchmarked against is the FTSE All World Europe Index.

Hermes Global High Yield Credit Fund - The investment objective of the sub-fund is to generate a high level of income. The sub-fund will seek to achieve its objective by investing primarily in a diversified portfolio of high yield bonds. The sub-fund may also use credit default swaps extensively.

168

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

1. Incorporation and Principal Activity (continued)

Investment Objective (continued)

Hermes Global High Yield Credit Fund (continued) - The Valuation Point of the sub-fund is close of business in the relevant market on each Dealing Day provided that if any of the relevant markets are not open on a Dealing Day, the value of the relevant investments at the close of business on the previous Dealing Day shall be used.

The Index this sub-fund is benchmarked against is the Merrill Lynch Global Non-Financial High Yield Constrained Index.

Hermes Europe Ex-UK Equity Fund - The investment objective of the sub-fund is to achieve long term capital appreciation by investing primarily in a diversified portfolio of equity securities and equity related securities with a European bias (including Russia and Turkey but excluding the United Kingdom) quoted or traded on a regulated market. The Valuation Point of the sub-fund is twelve noon (Irish time) on each Dealing Day.

The Index this sub-fund is benchmarked against is the FTSE World Europe ex-UK Index.

Hermes US SMID Equity Fund - The investment objective of the sub-fund is to provide long term capital appreciation. The sub-fund will seek to achieve its objective by investing primarily in equity or equity related securities of, or relating, to small and mid-capitalisation companies domiciled in the US, or which derive a large proportion of their income from US activities, which are listed or traded in the US or Canada and which the Investment Manager has identified as being, in its view undervalued. The Valuation Point of the sub-fund is twelve noon (Irish time) on each Dealing Day.

The Index this sub-fund is benchmarked against is the Russell 2500 Index.

Hermes Active UK Inflation-Linked Bond Fund (terminated 29 February 2016) - The investment objective of the sub-fund was to maximise total investment return (both income and capital appreciation) over the long term while also seeking to offer protection against the effects of inflation in the UK. The sub-fund sought to achieve its objective by investing predominately (i.e. at least 60% of the Fund’s Net Asset Value) in UK index-linked gilts. The Valuation Point of the sub-fund was twelve noon (Irish time) on each Dealing Day.

The Index this sub-fund was benchmarked against is the FTSE Actuaries UK Gilts Index-Linked over 5 Years Index.

Hermes Asia Ex-Japan Equity Fund - The investment objective of the sub-fund is to provide long term capital appreciation. The sub-fund will seek to achieve its objective (while meeting its regulatory diversification requirements) by investing primarily in a portfolio of equity and equity related securities (such as global depository receipts and American depository receipts) issued by companies in or deriving substantial revenues from the Asia ex-Japan region which are listed or traded on regulated markets worldwide. The Valuation Point of the sub-fund is twelve noon (Irish time) on each Dealing Day.

The Index this sub-fund is benchmarked against is the MSCI AC Asia ex Japan Index.

Hermes Global Equity ESG Fund - The investment objective of the sub-fund is to achieve long term capital appreciation by investing in worldwide equity securities with favourable ESG characteristics. The sub-fund will seek to achieve its objective by investing in a portfolio of equity securities quoted or traded on Regulated Markets worldwide. The sub-fund will invest primarily in equity securities which are component securities of the MSCI All Country World Index or equity securities of companies listed in the countries referenced in the MSCI All Country World Index. The Valuation Point of the sub-fund is twelve noon (Irish time) on each Dealing Day.

The Index this sub-fund is benchmarked against is the MSCI All Country World Index.

169

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

1. Incorporation and Principal Activity (continued)

Investment Objective (continued)

Hermes Multi Strategy Credit Fund - The investment objective of the sub-fund is to generate a high level of income targeting a high proportion of high yield credit returns while exhibiting lower volatility relative to the global high yield market. The sub-fund will seek to achieve its objective by investing in a diversified portfolio of credit securities primarily including investment grade bonds, high yield bonds, credit default swaps and money market securities (including commercial bank loans which constitute money market instruments). The sub-fund may also use equities, or equity securities (including ordinary and preference shares), bonds, futures (including futures on bonds), credit index options, equity options and equity index options. The Valuation Point of the sub-fund is close of business in the relevant market on each Dealing Day provided that if any of the relevant markets are not open on a Dealing Day, the value of the relevant investments at the close of business on the previous Dealing Day shall be used.

This sub-fund uses the Bank of America Merrill Lynch Global High Yield Index (Hedged USD) as a measure to monitor its performance but it is not benchmarked against an index.

Hermes Multi Asset Inflation Fund - The investment objective of the sub-fund is to provide capital growth by delivering a return in excess of UK inflation as measured by the Retail Price Index. The sub-fund will seek to achieve its objective by investing directly in or through the use of FDIs to gain exposure to the categories of Investments described below; commodities, cash and foreign currencies, debt, eligible CIS, FDIs, equities, financial indices, money market instruments or indirect investments in property. A decision to invest directly or to use FDIs may be made for reasons such as efficiency (i.e. it may be cheaper to gain exposure to an underlying investment than to purchase the investment directly). The Valuation Point of the sub-fund is twelve noon (Irish time) on each Dealing Day.

This sub-fund uses RPI% as a comparator but it is not benchmarked against an index.

Hermes Global Small Cap Equity Fund - The investment objective of the Fund is to provide long-term capital appreciation. The Fund will seek to achieve its investment objective by primarily investing in equity and/or equity related securities of, or relating to, small market capitalisation companies domiciled in developed markets or which derive a large proportion of their income from developed markets. The Valuation Point of the sub-fund is twelve noon (Irish time) on each Dealing Day.

The Index this sub-fund is benchmarked against is the MSCI World Small Cap index.

Hermes US All Cap Equity Fund - The investment objective of the Fund is to provide long-term capital appreciation. The Fund will seek to achieve its investment objective by primarily investing in equity and/or equity related securities of, or relating to, companies domiciled in the US or which derive a large proportion of their income from US activities. The Valuation Point of the sub-fund is twelve noon (Irish time) on each Dealing Day.

The Index this sub-fund is benchmarked against is the Russell 3000 Index.

Hermes Absolute Return Credit Fund - The investment objective of the Fund is to target a positive investment return (absolute return) over a rolling 12 month period irrespective of market conditions, but there is no guarantee that this will be achieved and your capital is in fact at risk. The Fund will seek to achieve its objective primarily by investing in a diversified portfolio of debt securities and may take both long positions and/or (through the use of FDIs) generate Synthetic Short Exposure. The Valuation Point of the sub-fund is close of business in the relevant market on each Dealing Day provided that if any of the relevant markets are not open on a Dealing Day, the value of the relevant investments at the close of business on the previous Dealing Day shall be used.

This sub-fund uses 3M LIBOR +3% as a target but it is not benchmarked against an index.

170

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

2. Significant Accounting Policies

The significant accounting policies applied in the preparation of these Financial Statements are set out below.

Basis of Preparation

The Financial Statements have been prepared in accordance with the Companies Act, 2014, International Financial Reporting Standards (“IFRS”) as adopted by the European Union and the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2011, as amended and Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in Transferable Securities) Regulations 2015.

The preparation of financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of income and expenses during the year. Actual results could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. The main areas of estimation are discussed in this note under the heading “Financial assets and liabilities at fair value through profit or loss”.

Foreign exchange translation

(a) Functional and presentation currency Items included in the Company’s Financial Statements are measured using the currency of the primary economic environment in which it operates (‘the functional currency’). The functional currency for the Hermes UK Small and Mid Cap Companies Fund, the Hermes Active UK Inflation-Linked Bond Fund and the Hermes Multi Asset Inflation Fund is Sterling, which reflects the fact that the majority of the redeemable participating shares were/are subscribed and redeemed in Sterling and a large number of the investments in their portfolios were/are denominated in Sterling. The functional currency of the Hermes Global High Yield Credit Fund, the Hermes European Alpha Equity Fund and the Hermes Europe Ex-UK Equity Fund is Euro, which reflects the fact that a large number of the investments in their portfolios are denominated in Euro. The functional currency of the Hermes Global Emerging Markets Fund, the Hermes Global Equity Fund, the Hermes US SMID Equity Fund, the Hermes Asia Ex-Japan Equity Fund, the Hermes Global Equity ESG Fund, the Hermes Multi Strategy Credit Fund, the Hermes Global Small Cap Equity Fund, the Hermes US All Cap Equity Fund and the Hermes Absolute Return Credit Fund is US Dollar which reflects the fact that a large number of the investments in their portfolios are denominated in US Dollar. All sub- funds denominated in Euro and US Dollar have been converted to Sterling in the total columns. The presentation currency of the Company is Sterling.

(b) Transactions and balances Foreign currency transactions are translated into the functional currency of each sub-fund using the exchange rates prevailing at the dates of the transactions. Assets and liabilities are translated into the functional currency of each sub-fund using exchange rates in effect at the Balance Sheet date. Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at year- end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Income Statement.

Translation differences on financial instruments held at fair value through profit or loss are reported as part of net gain/(loss) on financial assets and liabilities at fair value through profit or loss in the Income Statement.

171

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

2. Significant Accounting Policies (continued)

Foreign exchange translation (continued)

(c) Foreign exchange adjustments on aggregation For the purpose of aggregating the Financial Statements of the sub-funds, Euro and US Dollar denominated sub-funds in the Financial Statements have been translated to Sterling at the average rate of exchange for the financial year on the Income Statement and at the financial year end rate on the Balance Sheet. The exchange adjustment arising from the difference between the average rate and the year end rate, in addition to the notional exchange adjustment arising from the translation of the opening net assets are shown in the Statement of Changes in Net Assets. The method of translation has no effect on the Net Asset Value per share attributable to the individual sub-funds.

The notional adjustment translation of the Cash Flow movements at the average rate opposed to the financial year-end rate is shown in the Cash Flow Statement.

Financial assets and liabilities at fair value through profit or loss

(a) Classification In accordance with International Accounting Standard (“IAS”) 39 “Financial Instruments: Recognition and Measurement”, all investments are classified as financial assets and liabilities at fair value through profit or loss.

This category has two sub-categories: financial assets or financial liabilities held for trading; and those designated at fair value through profit or loss at inception.

(i) Financial assets and liabilities held for trading Financial assets or financial liabilities held for trading are those acquired or incurred principally for the purposes of selling or repurchasing in the short term or, if on initial recognition, are part of a portfolio of identifiable financial investments that are managed together and for which there is evidence of a recent actual pattern of short-term profit taking. Derivatives are categorised as held for trading.

(ii) Financial assets and liabilities designated at fair value through profit or loss at inception Financial assets and financial liabilities designated at fair value through profit or loss at inception are those that are managed and their performance evaluated on a fair value basis in accordance with the Company’s documented investment strategy. The Company’s policy is for the Investment Manager and the Board of Directors to evaluate the information about these financial assets on a fair value basis together with other related financial information. Equities, Exchange Traded Funds, Bonds, P-Notes, Certificates of Deposit, Commercial Paper, Reits and Floating Rate Notes are categorised as financial assets and liabilities designated at fair value through profit or loss at inception.

(b) Recognition/derecognition Purchases and sales of investments are recognised on the trade date – the date on which the Company commits to purchase or sell the investment. Investments are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred all risks and rewards of ownership. Gains and losses on the disposal of financial assets and liabilities are computed on a FIFO basis and are included in the Income Statement. Changes in unrealised gains and losses on financial assets and liabilities are recognised in the Income Statement.

(c) Measurement Financial assets and financial liabilities at fair value through profit or loss are initially recognised at fair value. Subsequent to initial recognition, all financial assets and financial liabilities at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in the fair value of the “financial assets or financial liabilities at fair value through profit or loss” category are presented in the Income Statement in the period in which they arise.

172

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

2. Significant Accounting Policies (continued)

Financial assets and liabilities at fair value through profit or loss (continued)

(c) Measurement (continued) IFRS 13 Fair Value Measurement requires the sub-funds to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

• Level I – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. The type of investments which would generally be included would include equities and derivatives listed on a securities exchange.

• Level II – Quoted prices in markets that are not considered to be active or financial instruments priced using inputs other than quoted prices and for which all significant inputs are observable, either directly or indirectly (including quoted prices for similar investments in active markets, interest rates and yield curves, credit risks, etc.). The type of investments which would generally be included in this category would include corporate bonds, government bonds, P-Notes, bank debt and certain over-the-counter derivatives.

• Level III – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable (including the Investment Manager’s own assumptions and assumptions used by the Board of Directors about what market participants would use in determining the fair value of investments). The type of investments which would generally be included in this category would include private or debt securities issued by private entities and investments priced by the Investment Manager. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.

(d) Fair value estimation IFRS 13 defines fair value as 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. The fair value of financial instruments traded in active markets (such as publicly traded derivatives and trading securities, exchange traded funds, warrants, floating rate notes, p-notes, american depositary receipts and bonds) is based on quoted market prices at the Balance Sheet date. The Company utilises the last traded market price for both financial assets and financial liabilities where the last traded price falls within the bid-ask spread. IFRS 13 allows the use of mid-market pricing or other pricing conventions (including last traded price) that are used by market participants as a practical expedient for the exit price. In circumstances where the last traded price is not within the bid-ask spread, management will determine the point within the bid-ask spread that is most representative of fair value.

Derivatives

Derivative contracts (“derivatives”) are either exchange-traded or over-the-counter (“OTC”) contracts. Exchange-traded derivatives are standard contracts traded on a regulated exchange. OTC contracts are private contracts negotiated with counterparties. Derivatives are comprised of futures, forward currency contracts, credit default swaps, total return swaps and warrants.

Derivatives are recorded at fair value. The sub-fund values exchange-traded derivative contracts at their official settlement price on the exchange where they are primarily traded. OTC derivatives are valued using market transactions and other market evidence whenever possible, including market based inputs to model, model calibration to market-clearing transactions, brokers or dealers quotations, or alternative pricing sources with reasonable levels of transparency.

173

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

2. Significant Accounting Policies (continued)

Financial assets and liabilities at fair value through profit or loss (continued)

(d) Fair value estimation (continued)

Futures

Futures contracts are valued at the last reported settlement or closing price as supplied by the exchange on which the contracts are traded and are recorded on a trade date basis. Cash balances held with Goldman Sachs are used as collateral for the futures contracts and are identified as variation margin payable in the Balance Sheet. Variation margin is valued at amortised cost plus accrued interest which approximates fair value.

Gains or losses from futures contracts are considered realised for accounting purposes on the trade date of the transaction closing or offsetting the open position.

Realised gains or losses are included in the Income Statement. Unrealised gains or losses, representing the difference between the future rate and contract rate of open futures positions, are included in the Balance Sheet and the movement in the financial year is included in the Income Statement.

Forward currency contracts

Forward currency contracts are valued at the forward rate and are marked to market on the valuation date. The change in value is included in net gain/(loss) on financial assets and liabilities at fair value through profit or loss in the Income Statement. When the contract is closed, the Company records a realised gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.

Warrants

Warrants are securities providing a return generated by a specified underlying equity or basket of equities. Investments in warrants are valued at the last reported trade price of the underlying security as of close of business at the reporting date. The resulting unrealised gains and losses for the financial year are included in the Balance Sheet and Income Statement. Realised gains and losses are included in the Income Statement.

Credit Default Swaps

Credit default swaps are OTC contracts in which the sub-fund pays or receives an interest flow in return for the counterparty accepting all or part of the risk of default or failure to pay off a reference entity on which the swap return is written. Where the sub-fund has bought protection the maximum potential loss is the value of the interest flows the sub-fund is contracted to pay until maturity of the contract. Where the sub- fund has sold protection the maximum potential loss is the nominal value of the protection sold. The credit default swaps are marked to market at each valuation point by a third party vendor and the change, if any, is recorded as a movement in unrealised gain or loss. Payments received or made as a result of a credit event or termination of the contract are recognised, net of a proportional amount of the upfront payment, as realised gains or losses.

Interest Rate Swaps

The sub-fund may enter into interest rate swaps, which are arrangements between two parties to exchange cash flows based on a notional principal amount, to manage the sub-fund’s exposure to interest rates. Interest rate swaps are marked to market daily and the change, if any, is recorded as unrealised gain/(loss). Payments made or received are recorded as part of realised gains and losses. The unrealised gain/(loss) on interest rate swap agreements is recognised as an asset/(liability) in the Balance Sheet.

174

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

2. Significant Accounting Policies (continued)

Financial assets and liabilities at fair value through profit or loss (continued)

(d) Fair value estimation (continued)

Total Return Swaps

Total return swaps involve an exchange of cash flows based on a commitment to pay interest in exchange for a market-linked return based on a notional amount. The market-linked return may include, among other things, the total return of a security or index. The valuation of total return swaps is determined using quotations provided by independent pricing services or other independent sources. The market values are based on those quotations using pricing models that consider the contractual prices of the underlying financial instruments. The net amount received/paid during the life of these swaps is included in the net realised gains/losses in the Income Statement and the change in unrealised gain or loss of these swaps is reflected in the net change in unrealised gains/losses in the Income Statement.

(e) Transaction Costs Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability. An incremental cost is one that would not have been incurred if the entity had not acquired, issued or disposed of the financial instrument. Transaction costs for the financial year of £5,709,577 (2015: £4,375,553) are expensed in the Income Statement as part of the net fair value gain/loss on financial assets and liabilities at fair value through profit or loss. Only transaction costs which are separately identifiable are disclosed. These include transaction costs paid to custodians and sub- custodians, identifiable brokerage charges and commissions, identifiable transaction related taxes and other market charges and separately identifiable transaction costs related to Financial Derivative Instruments.

Income from investments Bank and bond interest income and expense are recognised in the Income Statement using the effective interest rate method. Dividends are credited to the Income Statement on the dates on which the relevant securities are listed as "ex-dividend". Dividend income is shown gross of any withholding taxes, which is disclosed separately in the Income Statement, and net of any tax credits.

Cash and cash equivalents Cash and cash equivalents are valued at their face value together with interest accrued, where applicable. Cash and cash equivalents comprise of cash balances and short term bank overdrafts.

Net assets attributable to holders of redeemable participating shares International Accounting Standard 32 “Financial Instruments: Presentation” ("IAS 32") requires entities that issue financial instruments to classify such instruments as liabilities or equity in accordance with the substance of the contractual arrangement and the definitions contained within IAS 32. In this regard, IAS 32 requires that financial instruments that give the holder the right to put the instrument back to the issuer for cash or another financial asset be classified as a liability of the issuer.

The redeemable participating shares issued by the Company provide the redeemable participating shareholders with the right to redeem their shares for cash equal to their proportionate share of the Net Asset Value of the Company. Within the context of IAS 32 and IFRS 7 Financial Instruments: Disclosures (“IFRS 7”), the existence of the option for the redeemable participating shareholders to put the shares back to the Company in exchange for cash requires the Company to classify the redeemable participating shares as liabilities.

175

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

2. Significant Accounting Policies (continued)

Net assets attributable to holders of redeemable participating shares (continued) The liability to redeemable participating shareholders is presented on the Balance Sheet as “net assets attributable to holders of redeemable participating shares” and is determined based on the residual assets of the Company after deducting the Company’s other liabilities and management share capital.

Operating expenses The Company is responsible for all normal operating expenses including audit fees, stamp and other duties and charges incurred on the acquisition and realisation of investments. Operating expenses are recognised on an accrual basis.

Income Equalisation Income equalisation was introduced from 1 January 2016 on the Hermes Global Emerging Markets Fund, the Hermes Global Equity Fund, the Hermes UK Small and Mid Cap Companies Fund, the Hermes European Alpha Equity Fund, the Hermes Europe Ex-UK Equity Fund, the Hermes US SMID Equity Fund, the Hermes Asia Ex-Japan Equity Fund, the Hermes Global Equity ESG Fund, the Hermes Multi Asset Inflation Fund, the Hermes Global Small Cap Equity Fund and the Hermes US All Cap Equity Fund. Since 1 July 2015 Income equalisation has also been operation for the remaining four sub-funds, the Hermes Global High Yield Credit Fund, the Hermes Active UK Inflation-Linked Bond Fund, the Hermes Multi Strategy Credit Fund and the Hermes Absolute Return Credit Fund. Income equalisation is accrued income included in the price of shares purchased and redeemed during the accounting year. The subscription price of shares is deemed to include an equalisation payment calculated by reference to the accrued income of the relevant sub-fund and the first distribution in respect of any share will include a payment of capital usually equal to the amount of such equalisation payment. The redemption price of each share will also include an equalisation payment in respect of the accrued income of the relevant sub-fund up to the date of redemption. Income equalisation is accounted for in the Statement of Comprehensive Income.

New/revised standards and interpretations not yet adopted in the Financial Statements of the Company

IFRS 9 Financial Instruments IFRS 9 issued in November 2009 introduced new requirements for the classification and measurement of financial assets. IFRS 9 was subsequently amended in October 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition, and in November 2013 to include the new requirements for general hedge accounting. Another revised version of IFRS 9 was issued in July 2014 mainly to include a) impairment requirements for financial assets and b) limited amendments to the classification and measurement requirements by introducing a “fair value through other comprehensive income” (FVTOCI) measurement category for certain simple debt instruments.

Key Requirements of IFRS 9 All recognised financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are required to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to hold the financial asset to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of the subsequent accounting periods. Debt instruments that are held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are measured at FVTOCI.

176

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

2. Significant Accounting Policies (continued)

New/revised standards and interpretations not yet adopted in the Financial Statements of the Company (continued)

Key Requirements of IFRS 9 (continued) All other debt investments and equity investments are measured at their fair value at the end of subsequent accounting periods. In addition, under IFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.

The Standard currently has a mandatory effective date for annual periods beginning on or after 1 January 2018, with earlier application permitted. The Directors of the Company anticipate that the application of IFRS 9 in the future is unlikely to have a material impact on amounts reported in respect of the Company’s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of the effect of IFRS 9 until the Company undertakes a detailed review.

3. Cash and Cash Equivalents

Substantially all of the cash assets of the sub-funds are held with The Northern Trust Company, London Branch (NTC), which is a 100% indirect wholly owned subsidiary of Northern Trust Corporation which has a Standard & Poor’s credit rating of A+ and A2 from Moody’s.

Northern Trust Fiduciary Services (Ireland) Limited has appointed NTC as its Global Sub-Custodian.

Where derivatives are held on a sub-fund, the sub-funds may pledge/receive collateral as required with the derivative counterparty. The collateral pledged and received at 31 December 2016 is detailed in the following table.

177

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

3. Cash and Cash Equivalents (continued)

As at 31 December 2016, the cash amounts held with the various counterparties were as follows:

Hermes Hermes UK Global Small and Mid Hermes Emerging Hermes Global Cap Companies European Alpha Markets Fund Equity Fund Fund Equity Fund $ $ £ € The Northern Trust Company, London Branch 22,015,906 2,932,200 219,608 7,686,888 22,015,906 2,932,200 219,608 7,686,888

Hermes Hermes Active Global High Hermes Hermes US UK Inflation- Yield Credit Europe Ex-UK SMID Equity Linked Bond Fund Equity Fund Fund Fund € € $ £ The Northern Trust Company, London Branch 24,494,042 1,269,016 14,604,449 3,278 BNP Paribas (910,000) - - - Credit Suisse (500,000) - - - Goldman Sachs (1,460,000) - - - JP Morgan (1,004,080) - - - 20,619,962 1,269,016 14,604,449 3,278

Hermes Asia Hermes Global Hermes Multi Hermes Multi Ex-Japan Equity ESG Strategy Credit Asset Inflation Equity Fund Fund Fund Fund $ $ $ £ The Northern Trust Company, London Branch 104,959,611 2,316,432 34,813,196 3,084,677 Barclays - - 4,430,000 - BNP Paribas - - (4,974,559) - Citi - - 770,000 - Credit Suisse - - 1,050,000 - Goldman Sachs - - 1,022,062 424,964 ING - - - 4,600,000 JP Morgan - - (920,000) - Lloyds - - - 2,000,000 Macquarie Bank - - - 130,000 Merrill Lynch - - (610,000) - Morgan Stanley - - 940,000 - 104,959,611 2,316,432 36,520,699 10,239,641

Hermes Global Small Hermes US All Hermes Cap Equity Cap Equity Absolute Return Fund Fund Credit Fund Total $ $ $ £ The Northern Trust Company, London Branch 635,991 89,003 2,647,394 181,590,517 Barclays - - - 3,585,155 BNP Paribas - - (270,000) (5,021,144) Citi - - - 623,153 Credit Suisse - - 110,000 511,977 Goldman Sachs - - - 5,855 ING - - - 4,600,000 JP Morgan - - - (1,601,628) Lloyds - - - 2,000,000 Macquarie Bank - - - 130,000 Merrill Lynch - - - (493,667) Morgan Stanley - - - 760,733 635,991 89,003 2,487,394 186,690,951 178

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

3. Cash and Cash Equivalents (continued)

As at 31 December 2015, the cash amounts held with the various counterparties were as follows:

Hermes Hermes UK Global Small and Mid Hermes Emerging Hermes Global Cap Companies European Alpha Markets Fund Equity Fund Fund Equity Fund $ $ £ € The Northern Trust Company, London Branch 17,805,174 1,269,480 3,781,042 4,715,157 17,805,174 1,269,480 3,781,042 4,715,157

Hermes Hermes Active Global High Hermes Hermes US UK Inflation- Yield Credit Europe Ex-UK SMID Equity Linked Bond Fund Equity Fund Fund Fund € € $ £ The Northern Trust Company, London Branch 23,786,540 1,199,521 7,333,856 172,950 Citi 470,000 - - - JP Morgan 1,570,000 - - - Barclays (720,000) - - - Credit Suisse (490,000) - - - Goldman Sachs (270,000) - - - 24,346,540 1,199,521 7,333,856 172,950

Hermes Asia Hermes Global Hermes Multi Hermes Multi Ex-Japan Equity ESG Strategy Credit Asset Inflation Equity Fund Fund Fund Fund $ $ $ £ The Northern Trust Company, London Branch 49,278,346 470,890 47,145,017 6,975,661 Citi - - 260,000 - Lloyds - - - 2,000,000 Goldman Sachs - - 4,130,000 441,117 JP Morgan - - 500,000 (170,000) Merrill Lynch - - 1,880,000 - Barclays - - (4,220,000) - BNP Paribas - - (287,870) - Credit Suisse - - (250,000) - Deutsche Bank - - - 260,000 49,278,346 470,890 49,157,147 9,506,778

Hermes Global Small Hermes US All Hermes Cap Equity Cap Equity Absolute Return Fund Fund Credit Fund Total $ $ $ £ The Northern Trust Company, London Branch 677,868 67,566 5,144,495 120,473,808 Barclays - - - (3,393,810) BNP Paribas - - - (195,312) Citi - - - 522,804 Lloyds - - - 2,000,000 Credit Suisse - - (100,000) (598,607) Deutsche Bank - - - 260,000 Goldman Sachs - - 260,000 3,220,613 JP Morgan - - - 1,326,364 Merrill Lynch - - - 1,275,528 677,868 67,566 5,304,495 124,891,388

179

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

4. Fees and Other Expenses

(a) Investment Management Fees

The Investment Manager is entitled to annual fees based on a percentage of the Net Asset Value of each relevant share class. The rate applicable to each share class is detailed below:

Sub-Fund Class Z* Class T* Class F Class R Hermes Global Emerging Markets Fund Up to 3% Up to 1% Up to 1% Up to 1.50% Hermes Global Equity Fund Up to 3% Up to 1% Up to 0.55% Up to 1.10% Hermes UK Small and Mid Cap Companies Fund Up to 3% Up to 1% Up to 0.75% Up to 1.50% Hermes European Alpha Equity Fund Up to 3% Up to 1% Up to 0.75% Up to 1.50% Hermes Global High Yield Credit Fund Up to 3% Up to 1% Up to 0.65% Up to 1.25% Hermes Europe Ex-UK Equity Fund Up to 3% Up to 1% Up to 0.75% Up to 1.50% Hermes US SMID Equity Fund Up to 3% Up to 1% Up to 0.75% Up to 1.50% Hermes Active UK Inflation-Linked Bond Fund Up to 3% Up to 0.20% Up to 0.20% Up to 0.40% Hermes Asia Ex Japan Equity Fund** Up to 3% Up to 1% Up to 0.75% Up to 1.50% Hermes Global Equity ESG Fund Up to 3% Up to 1% Up to 0.55% Up to 1.10% Hermes Multi Strategy Credit Fund Up to 3% Up to 1% Up to 0.65% Up to 1.30% Hermes Multi Asset Inflation Fund Up to 3% Up to 1% Up to 0.60% Up to 1.20% Hermes Global Small Cap Equity Fund Up to 3% Up to 1% Up to 0.75% Up to 1.50% Hermes US All Cap Equity Fund Up to 3% Up to 1% Up to 0.75% Up to 1.50% Hermes Absolute Return Credit Fund Up to 3% Up to 1% Up to 0.70% Up to 1.40%

*Shareholders in these Classes will be subject to the above fees with regard to their investment in the Fund based on the Client Agreement between them and the Investment Manager. Per this agreement, these fees are charged outside of the Funds.

**The applicable rate for Class F for this sub-fund from 1 January 2016 to 1 September 2016 was up to 0.75%. From 1 September 2016, the applicable rate was up to 0.70% and from 23 December 2016, the rate reverted to up to 0.75%.

The Investment Manager is entitled to an annual fee at a rate of up to 0.60% of the Net Asset Value in respect of the Class S Shares for the Hermes European Alpha Equity Fund and an annual fee at a rate of up to 0.45% of the Net Asset Value in respect of the Class M Shares for the Hermes European Alpha Equity Fund and the Hermes Europe Ex-UK Equity Fund.

The Investment Manager is entitled to charge an annual investment management fee of up to 2.20% of the Net Asset Value in respect of the Class RC Shares and up to 1.10% of the Net Asset Value in respect of the Class C Shares of the Hermes Asia Ex-Japan Equity Fund.

The Investment Manager is entitled to an annual fee at a rate of up to 1.75% of the Net Asset Value in respect of the Class G Shares and up to 0.70% of the Net Asset Value in respect of Class J Shares for the Hermes Global Emerging Markets Fund.

Investment Manager fees of £24,880,312 (2015: £15,290,091) were charged during the financial year and fees of £2,944,110 (2015: £1,492,272) were payable at year end.

180

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

4. Fees and Other Expenses (continued)

(b) Advisory Fees (voting and engagement services) The fee payable to the Advisor on all Share Classes is 0.008% per annum calculated on the value of the sub-fund at the Commencement Date and each quarter thereafter, payable quarterly in arrears commencing on the Commencement Date. VAT will be added where appropriate.

Advisory fees of £363,150 (2015: £282,534) were charged during the financial year and fees of £112,329 (2015: £79,229) were payable at year end.

(c) Administration Fees The Company has engaged the services of Northern Trust International Fund Administration Services (Ireland) Limited, an indirect wholly-owned subsidiary of Northern Trust Corporation, to provide administration services for a fee.

In respect of the Hermes Global High Yield Credit Fund, the Hermes Multi Strategy Credit Fund, the Hermes Multi Asset Inflation Fund and the Hermes Absolute Return Credit Fund, the Administrator is entitled to an annual fee (plus any applicable value added tax) of:  0.05% of the Net Asset Value of the relevant sub-fund on the first £300,000,000;  0.04% of the Net Asset Value of the relevant sub-fund on £300,000,000 to £500,000,000;  0.035% of the Net Asset Value of the relevant sub-fund on £500,000,000 to £700,000,000;  0.025% of the Net Asset Value of the relevant sub-fund for any amounts in excess of £700,000,000

each of the foregoing being subject to a monthly minimum fee of £4,500 per Fund.

In respect of the Hermes Global Emerging Markets Fund, the Hermes Global Equity ESG Fund, the Hermes Global Equity Fund, the Hermes UK Small and Mid Cap Companies Fund, the Hermes European Alpha Equity Fund, the Hermes Europe Ex-UK Equity Fund, the Hermes US SMID Equity Fund, the Hermes Active UK Inflation-Linked Bond Fund, the Hermes Asia Ex-Japan Equity Fund, the Hermes Global Small Cap Equity Fund and the Hermes US All Cap Equity Fund the Administrator is entitled to an annual fee (plus any applicable value added tax) of:

 0.04% of the Net Asset Value of the relevant sub-fund on the first £300,000,000;  0.03% of the Net Asset Value of the relevant sub-fund on £300,000,000 to £500,000,000;  0.025% of the Net Asset Value of the relevant sub-fund on £500,000,000 to £700,000,000;  0.015% of the Net Asset Value of the relevant sub-fund for any amounts in excess of £700,000,000

each of the foregoing being subject to a monthly minimum fee of £2,750 per Fund.

Administration fees of £1,580,345 (2015: £1,344,719) were charged during the financial year and fees of £432,409 (2015: £726,243) were payable at year end.

(d) Depositary, Custodian and Sub-Custodian Fees Northern Trust Fiduciary Services (Ireland) Limited acted as Custodian of the Company up to 17 March 2016. On 18 March 2016, Northern Trust Fiduciary Services (Ireland) Limited was appointed as the Depositary of the Company. The Depositary is a Private Limited Company incorporated in Ireland on 5 July 1990 and is an indirect wholly-owned subsidiary of Northern Trust Corporation.

Up to 17 March 2016, the Custodian was entitled to an annual fee (plus any applicable value added tax) of:  0.015% of the Net Asset Value of the relevant sub-fund on the first £300,000,000;  0.0125% of the Net Asset Value of the relevant sub-fund on £300,000,000 to £500,000,000;  0.0115% of the Net Asset Value of the relevant sub-fund on £500,000,000 to £700,000,000;  0.01% of the Net Asset Value of the relevant sub-fund for any amounts in excess of £700,000,000.

181

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

4. Fees and Other Expenses (continued)

(d) Depositary, Custodian and Sub-Custodian Fees (continued)

From 18 March 2016, the Depositary is entitled to an annual fee (plus any applicable value added tax) of:  0.0175% of the Net Asset Value of the relevant sub-fund on the first £300,000,000;  0.0150% of the Net Asset Value of the relevant sub-fund on £300,000,000 to £500,000,000;  0.0140% of the Net Asset Value of the relevant sub-fund on £500,000,000 to £700,000,000;  0.0125% of the Net Asset Value of the relevant sub-fund for any amounts in excess of £700,000,000.

In addition, the Depositary and any relevant Sub-Custodian shall be entitled to recover safekeeping and transaction charges as set out in the Depositary Agreement.

Depositary fees of £687,747 (2015: £509,159) were charged during the financial year and fees of £220,627 (2015: £282,544) were payable at year end.

Sub-Custody fees of £901,532 (2015: £856,669) were charged during the financial year and fees of £208,801 (2015: £453,173) were payable at year end.

(e) Directors’ Fees The Company shall pay to the Directors such annual fees for acting as Directors of the Company as the Directors may from time to time agree, provided however that the annual fees of each Director shall not exceed €50,000 without the approval of the Board of Directors. Directors’ fees will total not more than €110,000 on a per annum basis. No other remuneration will be payable by the Company to the Directors except for out-of-pocket expenses reasonably incurred by them. Emily Mousley, Harriet Steel, Joseph Kagan, Ian Kennedy and Ian Pascal waived their rights to receive Director’s fees from the Company.

Directors fees of £93,326 (2015: £65,952) were charged during the financial year and fees of £5,312 were payable at year end (2015: £Nil).

(f) Remuneration for Audit, Audit Related and non-Audit Work Deloitte, as statutory auditors, received €93,250 + VAT (2015: €102,750 + VAT) in relation to the audit of the Company’s Financial Statements. The difference between the audit fees disclosed in the Income Statement is due to exchange rates differences. There was no other assurance, tax advisory or non-audit services provided by the statutory auditors during 2016 or 2015.

Audit fees of £112,877 (2015: £80,912) were charged during the financial year and fees of £76,956 were payable at year end (2015: £92,183).

(g) Other Fees and Expenses In addition, each sub-fund will pay the costs and expenses incurred in its operation, including, without limitation, stamp duties, taxes, the fees and expenses of the auditors, listing fees, legal expenses, the costs of printing and distributing reports, accounts and any Prospectus, publishing prices and any costs incurred as a result of a change in law or the introduction of any new law (including any costs incurred as a result of compliance with any applicable code, whether or not having the force of law).

All fees and expenses will be charged to the sub-fund in respect of which they were incurred, or where an expense is not considered by the Directors to be attributable to any one sub-fund, the expense will normally be allocated to classes of all sub-funds pro rata to the Net Asset Value of the relevant sub-funds. Details of each of the fees payable at the year end in respect of each sub-fund are disclosed in the Balance Sheet on pages 130 to 134.

182

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

5. Related Party Disclosures

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions.

(a) Investment Management The Company has appointed Hermes Investment Management Limited as Investment Manager and distributor of the Company. The Investment Manager is a wholly-owned subsidiary of Hermes Fund Managers Limited, which is a wholly-owned subsidiary of BriTel Fund Trustees Limited and is a part of BT Pension Scheme Group. The Investment Manager was incorporated under the laws of England and Wales and was established on 1 February 1990. The investment management fee rates for each of the sub-funds are disclosed in note 4. Two of the Directors of the Company who served at the financial year end, Joseph Kagan and Harriet Steel, are employees of Hermes Fund Managers Limited and Harriet Steel is a Director of the Investment Manager. BriTel Fund Trustees Limited is the majority shareholder in a number of the sub-funds. The percentage ownership of BriTel Fund Trustees Limited as at 31 December 2016 and 31 December 2015 is detailed below:

31 December 2016 Name % Held Hermes Global Emerging Markets Fund 27.02 Hermes Global Equity Fund 25.03 Hermes European Alpha Equity Fund 31.21 Hermes Global High Yield Credit Fund 66.87 Hermes Europe Ex-UK Equity Fund 88.45 Hermes US SMID Equity Fund 22.34 Hermes Asia Ex Japan Equity Fund - Hermes Global Equity ESG Fund 31.01 Hermes Multi Strategy Credit Fund 31.62 Hermes Multi Asset Inflation Fund 97.80 Hermes Global Small Cap Equity Fund 76.82 Hermes US All Cap Equity Fund 99.29 Hermes Absolute Return Credit Fund 75.66

31 December 2015 Name % Held Hermes Global Emerging Markets Fund 51.74 Hermes Global Equity Fund 52.70 Hermes UK Small and Mid Cap Companies Fund 98.13 Hermes European Alpha Equity Fund 29.24 Hermes Global High Yield Credit Fund 71.14 Hermes Europe Ex-UK Equity Fund 78.72 Hermes US SMID Equity Fund 54.63 Hermes Active UK Inflation-Linked Bond Fund 50.50 Hermes Asia Ex Japan Equity Fund - Hermes Global Equity ESG Fund 93.20 Hermes Multi Strategy Credit Fund 32.42 Hermes Multi Asset Inflation Fund 98.91 Hermes Global Small Cap Equity Fund 97.57 Hermes US All Cap Equity Fund 99.92 Hermes Absolute Return Credit Fund 99.96

183

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

5. Related Party Disclosures (continued)

(b) Advisor The Company has appointed Hermes Equity Ownership Services Limited as Advisor to provide voting and engagement services. The Advisor is a wholly-owned subsidiary of Hermes Fund Managers Limited, which is a wholly-owned subsidiary of BriTel Fund Trustees Limited and is a part of BT Pension Scheme Group.

The Advisory fees rate for each of the sub-funds is disclosed in note 4.

(c) Directors Fees Please see note 4(e) above for details of the Directors fees, the amounts charged for the year and the amounts payable at the year end.

(d) Director Support Services One of the Directors of the Company who served at the financial year end, Justin Egan, is an employee of Carne Global Financial Services Limited who are engaged by the Company to provide Director Support Services.

Director Support Services fees of €15,750 (2015: €15,750) were charged during the financial year and fees of €Nil were payable at year end (2015: €Nil).

6. Share Capital

On incorporation the authorised share capital of the Company was £1,000,000 divided into 1,000,000 Subscriber Shares of a par value of £1 each and 500,000,000,000 shares of no par value initially designated as participating shares.

Each sub-fund may issue Class F, R, or Z Shares, each of them Distributing or Accumulating shares, in one of the following currencies: Sterling, Euro, US Dollars, Swiss Franc, Swedish Krona, Norwegian Krone, Danish Krone, Hong Kong Dollar and Singapore Dollar.

All sub-funds except the Hermes Active UK Inflation-Linked Bond Fund may issue Class F, R and Z Hedged Shares, each of them Distributing or Accumulating shares, in Sterling, Euro, US Dollar, Swiss Franc, Swedish Krona, Norwegian Krone, Danish Krone, Hong Kong Dollar and Singapore Dollar. A hedged share class removes almost all of the currency risk between the base currency of the sub-fund and the investor subscription currency.

All sub-funds may issue Class T Shares and Class T Hedged Shares, each of them Distributing or Accumulating shares, in Sterling, Euro and US Dollar.

Hermes European Alpha Equity Fund may issue Class S and Class M Shares, each of them Distributing or Accumulating shares. Class S and Class M Shares are available in Sterling, Euro and US Dollars but hedged only in Sterling and US Dollar.

Hermes Global Emerging Markets Fund may issue Class G and Class J Shares, each of them Distributing or Accumulating shares. Class G Shares are available in Euro, US Dollars, Swiss Francs, Swedish Krona, Norwegian Krone, Danish Krone, Hong Kong Dollar and Singapore Dollar with hedged shares available in all the above currencies with the exception of US Dollar. Class J Shares are available in Sterling, Euro, US Dollars, Swiss Francs, Swedish Krona and Singapore Dollars with hedged shares available in all the above currencies with the exception of US Dollar.

Accumulating Share Classes are not intended to distribute dividends to Shareholders. The income and other profits will be accumulated and reinvested on behalf of Shareholders. Dividends, if paid, may be paid out of the net income of each sub-fund including interest and dividends earned by the sub-fund less expenses of the sub-fund.

184

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

6. Share Capital (continued)

Distributing Share Classes are intended to declare dividends on the Shares of the Distributing Classes of the sub-fund out of the net income of the sub-fund including interest and dividends earned by the sub-fund less expenses of the sub-fund. Dividends will be declared twice yearly and paid within two months of the date on which they have been declared.

The holders of Shares are entitled to one vote per whole Share and to such dividends as the Directors may from time to time declare.

In respect of Class Z Shares, the Minimum Subscription, Minimum Holding and Minimum Redemption will be as agreed in the Client Agreement. In respect of Class F Shares, the Minimum Subscription and Minimum Holding amounts are each £100,000 (or its foreign currency equivalent).

In respect of Class R shares, the Minimum Subscription and Minimum Holding amounts are each €1,000 (or its foreign currency equivalent). In respect of Class T shares, the Minimum Subscription and Minimum Holding amounts are each £1,000 (or its foreign currency equivalent). In respect of Class M shares, the Minimum Subscription and Minimum Holding amounts are each €200,000,000 (or its foreign currency equivalent). In respect of Class S shares, the Minimum Subscription and Minimum Holding amounts are each £50,000,000 (or its foreign currency equivalent). In respect of Class C shares, the Minimum Subscription and Minimum Holding amounts are each £100,000 (or its foreign currency equivalent). In respect of Class RC shares, the Minimum Subscription and Minimum Holding amounts are each €1,000 (or its foreign currency equivalent). In respect of Class G shares, the Minimum Subscription and Minimum Holding amounts are each €1,000 (or its foreign currency equivalent). In respect of Class J shares, the Minimum Subscription and Minimum Holding amounts are each £100,000,000 (or its foreign currency equivalent).

The Company has the power to redeem the remaining holding of any Shareholder who redeems his Minimum Holding of Shares to below the Minimum Holding or its foreign currency equivalent.

Every Shareholder will have the right to require the Company to redeem his Shares in the sub-fund on any Dealing Day (save during any period when the calculation of the Net Asset Value is suspended in the circumstances set out in the Prospectus) on furnishing to the Administrator a redemption request. All redemption requests are dealt with on a forward pricing basis, i.e. by reference to the price for Shares calculated at the Valuation Point on the relevant Dealing Day. The request for redemption of Shares must be received before 9.30 am (Irish time) on all sub-funds except the Hermes Global High Yield Credit Fund, the Multi Strategy Credit Fund and the Hermes Absolute Return Credit Fund (where the deadline is 5 pm Irish time) on the Business Day prior to the relevant Dealing Day.

All the Shares of the sub-fund may be redeemed at the discretion of the Directors if, after the first anniversary of the first issue of Shares of the sub-fund, the Net Asset Value of the sub-fund falls below £250,000,000 for any period of time.

185

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

6. Share Capital (continued)

The movement in the number of redeemable participating shares during the financial year ended 31 December 2016 was as follows:

Hermes Global Emerging Markets Fund Class Opening Shares Subscriptions Redemptions Closing Shares Z GBP Accumulating 100,849,979 - - 100,849,979 R EUR Accumulating 1,944,494 17,520,646 (746,108) 18,719,032 T GBP Accumulating 1,284,612 408,554 (365,155) 1,328,011 F GBP Accumulating 54,444,184 83,667,492 (26,432,388) 111,679,288 F USD Accumulating 92,811,637 136,189,700 (47,381,345) 181,619,992 F EUR Accumulating 5,097,396 17,744,331 (1,886,697) 20,955,030 F GBP Accumulating Hedged 1,394,986 2,130,512 (758,147) 2,767,351 G USD Accumulating 1,095 49,866,365 (1,705,950) 48,161,510 R USD Distributing 1,297,065 1,444,422 (897,167) 1,844,320 R EUR Distributing 1,358,747 12,374,489 (263,996) 13,469,240 F GBP Distributing 5,922,778 70,076,473 (5,472,862) 70,526,389 R EUR Distributing Hedged 248,906 64,491 (312,897) 500 R USD Accumulating 125,550 831,593 (134,705) 822,438 F EUR Accumulating Hedged 15,427 452,110 (137,844) 329,693 F USD Distributing 500 3,980,994 (87,268) 3,894,226 G EUR Accumulating - 500 - 500 F EUR Distributing - 194,804 - 194,804 Z USD Accumulating - 2,954,006 - 2,954,006 F CHF Accumulating - 54,500 - 54,500 J GBP Accumulating - 385,962 - 385,962 J GBP Distributing - 4,414,600 - 4,414,600 J USD Accumulating - 3,391,055 - 3,391,055 J USD Distributing - 38,600 - 38,600 J EUR Accumulating Hedged - 500 - 500 J EUR Distributing - 500 - 500 J GBP Accumulating Hedged - 11,050 - 11,050 J GBP Distributing Hedged - 26,515 - 26,515 J EUR Accumulating - 500 - 500 J EUR Distributing Hedged - 500 - 500 F SGD Accumulating - 333 - 333 F SGD Distributing - 333 - 333 R SGD Accumulating - 333 - 333 R SGD Distributing - 333 - 333

Hermes Global Equity Fund Class Opening Shares Subscriptions Redemptions Closing Shares Z GBP Accumulating 62,014,932 - (43,490,504) 18,524,428 R EUR Accumulating 32,500 2,391,286 (2,373,445) 50,341 T GBP Accumulating 1,949,705 285,141 (699,414) 1,535,432 F GBP Accumulating 554,794 5,498,877 (4,126,857) 1,926,814 F GBP Distributing 26,000 - (25,000) 1,000 F USD Accumulating 20,005,462 3,493,407 (3,642,528) 19,856,341 F EUR Accumulating 62,751,296 2,415,000 (2,879,150) 62,287,146 F EUR Distributing 770,115 - - 770,115 R USD Accumulating 500 - - 500 R SGD Accumulating - 30,623 (30,300) 323

186

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

6. Share Capital (continued)

Hermes UK Small and Mid Cap Companies Fund Class Opening Shares Subscriptions Redemptions Closing Shares Z GBP Accumulating 45,613,693 - (45,613,693) - R EUR Accumulating 368,824 - (368,824) - F GBP Accumulating 1,095,692 20,812 (1,116,504) - R GBP Accumulating 3,500 - (3,500) - T GBP Accumulating 168,608 - (168,608) - F GBP Distributing 510,709 5,884 (516,593) -

Hermes European Alpha Equity Fund Class Opening Shares Subscriptions Redemptions Closing Shares Z GBP Accumulating 100,000,000 - - 100,000,000 Z EUR Accumulating 15,661,453 341,894 (212,554) 15,790,793 R EUR Accumulating 12,376,075 7,614,964 (4,151,251) 15,839,788 R GBP Accumulating 851,389 - (647,767) 203,622 T GBP Accumulating 896,052 89,831 (323,744) 662,139 F USD Distributing 180,495 - - 180,495 S GBP Distributing 1,226,026 55,252 (273,704) 1,007,574 S EUR Distributing 1,935,003 691,507 (2,538,045) 88,465 S EUR Accumulating 9,365,839 3,342,485 (2,572,434) 10,135,890 S GBP Distributing Hedged 4,641,392 573,759 (3,683,280) 1,531,871 S USD Distributing 355,545 - (70,788) 284,757 S USD Accumulating Hedged 1,381,737 420,512 (334,118) 1,468,131 F EUR Accumulating 3,481,702 2,703,619 (2,911,545) 3,273,776 F EUR Distributing 552,096 10,965 (123,599) 439,462 F GBP Accumulating 377,300 23,800 (23,665) 377,435 F GBP Distributing 11,092,595 33,840 (6,266,122) 4,860,313 R USD Accumulating Hedged 2,716,383 791,505 (860,714) 2,647,174 S GBP Accumulating 2,936,127 317,306 (247,763) 3,005,670 R CHF Accumulating Hedged 283,300 85,600 (128,400) 240,500 S USD Distributing Hedged 863,790 163,063 (852,733) 174,120 S GBP Accumulating Hedged 4,565,812 281,004 (930,074) 3,916,742 S USD Accumulating 404,789 - (36,764) 368,025 M EUR Distributing 318,497 - (55,439) 263,058 M EUR Accumulating 156,739,586 20,115,024 (34,237,981) 142,616,629 R USD Accumulating 362,717 137,500 (357,105) 143,112 R CHF Accumulating 499 - - 499 F GBP Accumulating Hedged 9,818 - (9,818) - R EUR Distributing 2,382,202 2,082,804 (2,403,912) 2,061,094

187

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

6. Share Capital (continued)

Hermes Global High Yield Credit Fund Class Opening Shares Subscriptions Redemptions Closing Shares Z GBP Accumulating 100,000,000 - - 100,000,000 R EUR Accumulating 500 - - 500 F EUR Accumulating 17,131,500 11,856,026 (6,329,433) 22,658,093 F GBP Accumulating 271,527 106,882 (107,866) 270,543 F GBP Accumulating Hedged 12,908,092 11,773,718 (5,581,187) 19,100,623 F GBP Distributing Hedged 3,063,080 14,405,348 (17,284,602) 183,826 F USD Accumulating Hedged 6,516,703 756,536 (1,995,053) 5,278,186 F USD Distributing Hedged 500 - - 500 T GBP Accumulating 316,758 - - 316,758 T GBP Accumulating Hedged 498,327 - (238,878) 259,449 R USD Accumulating 500 - - 500 R EUR Distributing - 2,785,840 (42,000) 2,743,840

Hermes Europe Ex-UK Equity Fund Class Opening Shares Subscriptions Redemptions Closing Shares Z GBP Accumulating 85,775,781 - - 85,775,781 R GBP Accumulating 2,416,062 1,567 (2,416,916) 713 R EUR Accumulating 2,059,684 13,819 (2,072,924) 579 F GBP Accumulating 4,550 12,652,365 (4,324,176) 8,332,739 F GBP Distributing Hedged 22,621,388 2,203,668 (21,018,251) 3,806,805 F EUR Accumulating 950,478 - (200,000) 750,478 F USD Distributing Hedged 1,134,245 288,237 (432,995) 989,487 F EUR Distributing 342,292 563,587 (249,121) 656,758 F GBP Distributing - 1,000 - 1,000 M GBP Accumulating - 72,282 - 72,282 M GBP Accumulating Hedged - 1,000 - 1,000 M GBP Distributing - 1,000 - 1,000 M GBP Distributing Hedged - 1,000 - 1,000

Hermes US SMID Equity Fund Class Opening Shares Subscriptions Redemptions Closing Shares F GBP Distributing 3,508,613 34,118,866 (7,668,947) 29,958,532 F GBP Accumulating 20,288,860 24,318,757 (9,895,298) 34,712,319 F EUR Distributing 497 2,955 - 3,452 F EUR Accumulating 2,425,913 2,564,556 (1,101,748) 3,888,721 F USD Distributing 15,010,545 7,571,064 (2,300,466) 20,281,143 F USD Accumulating 23,517,519 83,556,958 (9,946,809) 97,127,668 R EUR Accumulating 29,545 12,344,401 (463,046) 11,910,900 T GBP Accumulating 860,371 447,010 (287,051) 1,020,330 Z GBP Accumulating 81,885,896 - (20,254,312) 61,631,584 F EUR Accumulating Hedged 9,730 870,246 - 879,976 F GBP Accumulating Hedged 1,181,361 1,847,493 (824,025) 2,204,829 F GBP Distributing Hedged 176,537 2,782,362 (122,814) 2,836,085 R CHF Accumulating Hedged 1,009,033 106,551 (817,608) 297,976 R USD Accumulating 1,055,997 7,177,182 (1,387,769) 6,845,410 R EUR Accumulating Hedged 55,500 7,531,200 (875,241) 6,711,459 F CHF Accumulating Hedged 546,617 1,738,218 (294,067) 1,990,768 F CHF Distributing Hedged - 17,295 - 17,295

188

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

6. Share Capital (continued)

Hermes Active UK Inflation-Linked Bond Fund Class Opening Shares Subscriptions Redemptions Closing Shares Z GBP Accumulating 14,906,264 - (14,906,264) - T GBP Accumulating 368,152 - (368,152) - F GBP Accumulating 1,989 - (1,989) -

Hermes Asia Ex-Japan Equity Fund Class Opening Shares Subscriptions Redemptions Closing Shares Z GBP Accumulating 652 - - 652 R EUR Accumulating 4,314,650 690,073 (2,940,416) 2,064,307 R USD Accumulating 19,683,672 8,032,505 (8,163,738) 19,552,439 T GBP Accumulating 1,265,831 907,053 (293,861) 1,879,023 F GBP Distributing 98,557,675 71,673,312 (16,370,696) 153,860,291 F GBP Distributing Hedged 2,371,707 1,302,552 (2,039,649) 1,634,610 F GBP Accumulating 147,054,449 63,415,659 (26,556,517) 183,913,591 F EUR Distributing 9,837,493 3,430,261 (1,130,447) 12,137,307 F EUR Accumulating 92,376,816 42,757,293 (4,667,310) 130,466,799 F EUR Accumulating Hedged 2,881,920 5,789,747 (1,508,202) 7,163,465 F USD Accumulating 242,828,468 65,240,880 (33,629,123) 274,440,225 R EUR Accumulating Hedged 469,220 436,100 (184,500) 720,820 R CHF Accumulating Hedged 1,447,329 1,068,022 (461,135) 2,054,216 F GBP Accumulating Hedged 2,678,708 722,400 (379,574) 3,021,534 F USD Distributing 3,034,033 10,916,377 (1,025,474) 12,924,936 C USD Accumulating 4,128,037 11,178,498 (1,146,883) 14,159,652 RC USD Accumulating 500 - - 500 C EUR Accumulating 12,271,179 27,735,663 (750,017) 39,256,825 C EUR Distributing 2,453 2,233 (3,116) 1,570 C GBP Accumulating 37,910,451 47,317,306 (8,440,963) 76,786,794 RC EUR Accumulating 129,599 - (42,637) 86,962 C USD Distributing 11,167 7,731 (4,384) 14,514 C GBP Distributing 1,755,435 3,618,633 (4,836,535) 537,533 C SGD Accumulating - 333 - 333 Hermes Global Equity ESG Fund Class Opening Shares Subscriptions Redemptions Closing Shares Z USD Accumulating 19,846,507 - - 19,846,507 R EUR Accumulating 500 2,371,524 (1,723,365) 648,659 F GBP Accumulating 1,000 - - 1,000 F EUR Accumulating 400,500 - - 400,500 F USD Accumulating 860,500 - (220,000) 640,500 T GBP Accumulating 46,090 54,827 - 100,917 F NOK Accumulating - 500 - 500 R NOK Accumulating - 38,910,838 (3,694,978) 35,215,860

189

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

6. Share Capital (continued)

Hermes Multi Strategy Credit Fund Class Opening Shares Subscriptions Redemptions Closing Shares Z USD Accumulating 121,435,965 16,400 - 121,452,365 R EUR Accumulating 500 - - 500 R EUR Accumulating Hedged 107,534 19,357 - 126,891 F GBP Distributing 25,088,758 3,586,139 (4,858,908) 23,815,989 F GBP Distributing Hedged 302,355,429 28,288,682 (10,642,138) 320,001,973 F GBP Accumulating Hedged 2,037,222 17,977,523 (936,117) 19,078,628 F EUR Accumulating 1,938,489 15,650 - 1,954,139 F EUR Accumulating Hedged 9,667,042 37,731,323 (30,915,437) 16,482,928 F USD Distributing 245,575 538,174 (74,795) 708,954 F USD Accumulating 1,751,456 13,812,557 (637,452) 14,926,561 F GBP Accumulating 1,000 - - 1,000 T GBP Accumulating Hedged 327,999 657,094 - 985,093 R USD Accumulating 500 - - 500 F EUR Distributing 500 596,005 - 596,505 R EUR Distributing 500 - - 500 F EUR Distributing Hedged - 15,470,864 (965,735) 14,505,129 R EUR Distributing Hedged - 500 - 500

Hermes Multi Asset Inflation Fund Class Opening Shares Subscriptions Redemptions Closing Shares F GBP Accumulating Hedged 1,000 14,912 - 15,912 Z GBP Accumulating Hedged 30,000,000 - - 30,000,000 F GBP Distributing Hedged 1,000 - - 1,000 T GBP Accumulating 338,782 340,137 - 678,919

Hermes Global Small Cap Equity Fund Class Opening Shares Subscriptions Redemptions Closing Shares F EUR Accumulating 500 - - 500 F EUR Distributing 500 - - 500 F GBP Accumulating 1,000 - - 1,000 F GBP Accumulating Hedged 1,000 - - 1,000 F GBP Distributing Hedged 1,000 - - 1,000 F USD Accumulating 500 - - 500 F USD Distributing 500 - - 500 R USD Accumulating 500 - - 500 R EUR Accumulating 500 549 (549) 500 T GBP Accumulating 495,141 380,884 - 876,025 Z USD Accumulating 15,599,342 - - 15,599,342 F GBP Distributing - 4,960,214 - 4,960,214

190

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

6. Share Capital (continued)

Hermes US All Cap Equity Fund Class Opening Shares Subscriptions Redemptions Closing Shares F EUR Accumulating 500 - - 500 F EUR Distributing 500 - - 500 F GBP Accumulating Hedged 1,000 - - 1,000 F GBP Distributing Hedged 1,000 - - 1,000 F USD Accumulating 500 - - 500 F USD Distributing 500 - - 500 F GBP Accumulating 1,000 - - 1,000 R USD Accumulating 500 - - 500 R EUR Accumulating 500 - - 500 Z USD Accumulating 7,478,324 - - 7,478,324 T GBP Accumulating - 78,516 - 78,516

Hermes Absolute Return Credit Fund Class Opening Shares Subscriptions Redemptions Closing Shares F EUR Accumulating 500 - - 500 F EUR Accumulating Hedged 500 - - 500 F EUR Distributing Hedged 500 - - 500 F CHF Accumulating Hedged 500 - - 500 F CHF Distributing Hedged 500 - - 500 F GBP Accumulating 1,000 - - 1,000 F GBP Accumulating Hedged 1,000 13,154,287 - 13,155,287 F USD Accumulating 500 - - 500 F USD Distributing 500 - - 500 R EUR Accumulating 500 - - 500 R EUR Accumulating Hedged 500 - - 500 R EUR Distributing Hedged 500 - - 500 R CHF Accumulating Hedged 500 - - 500 R CHF Distributing Hedged 500 - - 500 R USD Accumlating 500 - - 500 Z USD Accumulating 25,000,500 - - 25,000,500 F GBP Distributing 1,000 - - 1,000 F GBP Distributing Hedged 1,000 - - 1,000 T GBP Accumulating - 46,090 - 46,090

The movement in the number of redeemable participating shares during the financial year ended 31 December 2015 was as follows:

Hermes Global Emerging Markets Fund Class Opening Shares Subscriptions Redemptions Closing Shares Z GBP Accumulating 100,849,979 - - 100,849,979 R EUR Accumulating 500 2,209,403 (265,409) 1,944,494 T GBP Accumulating 1,057,238 264,395 (37,021) 1,284,612 F GBP Accumulating 19,528,357 38,644,753 (3,728,926) 54,444,184 F USD Accumulating 46,563,736 58,100,756 (11,852,855) 92,811,637 F EUR Accumulating 500 5,158,112 (61,216) 5,097,396 F GBP Accumulating Hedged 8,047,067 1,165,225 (7,817,306) 1,394,986 G USD Accumulating - 1,095 - 1,095 R USD Distributing - 1,413,860 (116,795) 1,297,065 R EUR Distributing - 1,358,747 - 1,358,747 F GBP Distributing - 6,121,414 (198,636) 5,922,778

191

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

6. Share Capital (continued)

Hermes Global Emerging Markets Fund (continued) Class Opening Shares Subscriptions Redemptions Closing Shares R EUR Distributing Hedged - 248,906 - 248,906 R USD Accumulating - 125,550 - 125,550 F EUR Accumulating Hedged - 15,427 - 15,427 F USD Distributing - 500 - 500

Hermes Global Equity Fund Class Opening Shares Subscriptions Redemptions Closing Shares Z GBP Accumulating 62,014,932 - - 62,014,932 R EUR Accumulating 9,000 24,500 (1,000) 32,500 T GBP Accumulating 1,571,374 378,331 - 1,949,705 F GBP Accumulating 277,913 282,574 (5,693) 554,794 F GBP Distributing 26,000 15,000 (15,000) 26,000 F USD Accumulating 13,243,732 9,819,458 (3,057,728) 20,005,462 F EUR Accumulating 500 63,721,936 (971,140) 62,751,296 F EUR Distributing - 770,115 - 770,115 R USD Accumulating - 500 - 500

Hermes UK Small and Mid Cap Companies Fund Class Opening Shares Subscriptions Redemptions Closing Shares Z GBP Accumulating 45,613,693 - - 45,613,693 R EUR Accumulating 456,984 149,599 (237,759) 368,824 F GBP Accumulating 1,278,688 1,504,487 (1,687,483) 1,095,692 R GBP Accumulating 1,000 2,500 - 3,500 T GBP Accumulating 244,200 34,496 (110,088) 168,608 F GBP Distributing - 510,709 - 510,709

Hermes European Alpha Equity Fund Class Opening Shares Subscriptions Redemptions Closing Shares Z GBP Accumulating 100,000,000 - - 100,000,000 Z EUR Accumulating 17,765,650 - (2,104,197) 15,661,453 R EUR Accumulating 11,902,293 6,494,487 (6,020,705) 12,376,075 R GBP Accumulating 673,847 430,524 (252,982) 851,389 T GBP Accumulating 874,743 186,067 (164,758) 896,052 F USD Distributing 495 362,000 (182,000) 180,495 S GBP Distributing 4,748,332 511,777 (4,034,083) 1,226,026 S EUR Distributing 3,765,056 856,783 (2,686,836) 1,935,003 S EUR Accumulating 4,764,600 5,520,390 (919,151) 9,365,839 S GBP Distributing Hedged 3,383,539 3,750,040 (2,492,187) 4,641,392 S USD Distributing 701,634 - (346,089) 355,545 S USD Accumulating Hedged 920,870 772,568 (311,701) 1,381,737 F EUR Accumulating 1,285,169 3,595,440 (1,398,907) 3,481,702 F EUR Distributing 749,147 56,839 (253,890) 552,096 F GBP Accumulating 396,112 179,471 (198,283) 377,300 F GBP Distributing 14,907,897 18,698 (3,834,000) 11,092,595 R USD Accumulating Hedged 1,446,634 1,933,626 (663,877) 2,716,383 S GBP Accumulating 2,765,811 472,452 (302,136) 2,936,127 R CHF Accumulating Hedged 34,800 300,920 (52,420) 283,300 S USD Distributing Hedged 1,303,667 450,216 (890,093) 863,790 S GBP Accumulating Hedged 4,098,507 2,853,451 (2,386,146) 4,565,812 S USD Accumulating 407,122 41,167 (43,500) 404,789 192

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

6. Share Capital (continued)

Hermes European Alpha Equity Fund (continued) Class Opening Shares Subscriptions Redemptions Closing Shares M EUR Distributing 368,245 - (49,748) 318,497 M EUR Accumulating 83,016,413 94,076,697 (20,353,524) 156,739,586 R USD Accumulating 25,520 362,197 (25,000) 362,717 R CHF Accumulating 49,999 - (49,500) 499 F GBP Accumulating Hedged - 9,818 - 9,818 R EUR Distributing - 2,685,937 (303,735) 2,382,202

Hermes Global High Yield Credit Fund Class Opening Shares Subscriptions Redemptions Closing Shares Z GBP Accumulating 100,000,000 - - 100,000,000 R EUR Accumulating 500 - - 500 F EUR Accumulating 16,323,500 3,869,407 (3,061,407) 17,131,500 F GBP Accumulating 310,996 6,874,223 (6,913,692) 271,527 F GBP Accumulating Hedged 16,955,309 1,916,724 (5,963,941) 12,908,092 F GBP Distributing Hedged 2,125,269 995,158 (57,347) 3,063,080 F USD Accumulating Hedged 500 6,876,921 (360,718) 6,516,703 F USD Distributing Hedged 500 - - 500 T GBP Accumulating - 1,154,878 (838,120) 316,758 T GBP Accumulating Hedged - 498,327 - 498,327 R USD Accumulating - 500 - 500

Hermes Europe Ex-UK Equity Fund Class Opening Shares Subscriptions Redemptions Closing Shares Z GBP Accumulating 85,775,781 - - 85,775,781 R GBP Accumulating 4,353,914 199,548 (2,137,400) 2,416,062 R EUR Accumulating 7,008,735 125,459 (5,074,510) 2,059,684 F GBP Accumulating 1,778,650 7,100 (1,781,200) 4,550 F GBP Distributing Hedged 14,105,667 10,337,168 (1,821,447) 22,621,388 F EUR Accumulating 1,329,336 200,000 (578,858) 950,478 F USD Distributing Hedged - 1,394,988 (260,743) 1,134,245 F EUR Distributing - 372,930 (30,638) 342,292

Hermes US SMID Equity Fund Class Opening Shares Subscriptions Redemptions Closing Shares F GBP Distributing 587,587 4,066,557 (1,145,531) 3,508,613 F GBP Accumulating 15,793,883 9,390,726 (4,895,749) 20,288,860 F EUR Distributing 5,183 - (4,686) 497 F EUR Accumulating 707,103 2,429,894 (711,084) 2,425,913 F USD Distributing 12,065,715 3,857,702 (912,872) 15,010,545 F USD Accumulating 30,099,847 14,888,576 (21,470,904) 23,517,519 R EUR Accumulating 29,545 1,000 (1,000) 29,545 T GBP Accumulating 1,003,400 156,208 (299,237) 860,371 Z GBP Accumulating 93,564,728 - (11,678,832) 81,885,896 F EUR Accumulating Hedged 49,041 9,223 (48,534) 9,730 F GBP Accumulating Hedged 410,690 1,105,158 (334,487) 1,181,361 F GBP Distributing Hedged 1,049 175,488 - 176,537 R CHF Accumulating Hedged 500 4,758,780 (3,750,247) 1,009,033 R USD Accumulating 500 2,702,897 (1,647,400) 1,055,997 R EUR Accumulating Hedged 500 449,400 (394,400) 55,500 F CHF Accumulating Hedged - 546,617 - 546,617 193

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

6. Share Capital (continued)

Hermes Active UK Inflation-Linked Bond Fund Class Opening Shares Subscriptions Redemptions Closing Shares Z GBP Accumulating 106,606,264 - (91,700,000) 14,906,264 T GBP Accumulating 30,899 337,253 - 368,152 F GBP Accumulating 1,943 46 - 1,989

Hermes Asia Ex-Japan Equity Fund Class Opening Shares Subscriptions Redemptions Closing Shares Z GBP Accumulating 652 - - 652 R EUR Accumulating 4,547,276 1,735,764 (1,968,390) 4,314,650 R USD Accumulating 11,911,742 13,038,400 (5,266,470) 19,683,672 T GBP Accumulating 632,037 709,865 (76,071) 1,265,831 F GBP Distributing 71,606,750 49,685,507 (22,734,582) 98,557,675 F GBP Distributing Hedged 2,540,229 154,111 (322,633) 2,371,707 F GBP Accumulating 145,161,999 51,926,004 (50,033,554) 147,054,449 F EUR Distributing 11,368,631 2,429,672 (3,960,810) 9,837,493 F EUR Accumulating 93,829,986 35,680,128 (37,133,298) 92,376,816 F EUR Accumulating Hedged 1,876,095 3,594,319 (2,588,494) 2,881,920 F USD Accumulating 155,684,832 176,132,584 (88,988,948) 242,828,468 R EUR Accumulating Hedged 165,570 874,100 (570,450) 469,220 R CHF Accumulating Hedged 260,340 1,403,314 (216,325) 1,447,329 F GBP Accumulating Hedged 2,581,853 748,255 (651,400) 2,678,708 F USD Distributing 11,239,909 4,341,818 (12,547,694) 3,034,033 C USD Accumulating 500 4,127,537 - 4,128,037 RC USD Accumulating 500 - - 500 C EUR Accumulating - 14,890,849 (2,619,670) 12,271,179 C EUR Distributing - 2,453 - 2,453 C GBP Accumulating - 38,402,684 (492,233) 37,910,451 C GBP Accumulating Hedged - 1,574 (1,574) - RC EUR Accumulating - 134,087 (4,488) 129,599 C USD Distributing - 11,892 (725) 11,167 C GBP Distributing - 2,108,511 (353,076) 1,755,435

Hermes Global Equity ESG Fund Class Opening Shares Subscriptions Redemptions Closing Shares Z USD Accumulating 19,846,507 - - 19,846,507 R EUR Accumulating 500 - - 500 F GBP Accumulating 1,000 - - 1,000 F EUR Accumulating 500 400,000 - 400,500 F USD Accumulating 500 1,385,000 (525,000) 860,500 T GBP Accumulating - 46,090 - 46,090

Hermes Multi Strategy Credit Fund Class Opening Shares Subscriptions Redemptions Closing Shares Z USD Accumulating 121,435,965 - - 121,435,965 R EUR Accumulating 500 - - 500 R EUR Accumulating Hedged 500 107,034 - 107,534 F GBP Distributing 26,714,420 11,160,346 (12,786,008) 25,088,758 F GBP Distributing Hedged 37,321,376 270,428,874 (5,394,821) 302,355,429 F GBP Accumulating Hedged 530,339 1,580,987 (74,104) 2,037,222 F EUR Accumulating 500 1,937,989 - 1,938,489 F EUR Accumulating Hedged 4,448,539 6,245,312 (1,026,809) 9,667,042

194

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

6. Share Capital (continued)

Hermes Multi Strategy Credit Fund (continued) Class Opening Shares Subscriptions Redemptions Closing Shares F USD Distributing 169,890 176,572 (100,887) 245,575 F USD Accumulating 500 1,750,956 - 1,751,456 F GBP Accumulating - 1,000 - 1,000 T GBP Accumulating Hedged - 327,999 - 327,999 R USD Accumulating - 500 - 500 F EUR Distributing - 500 - 500 R EUR Distributing - 500 - 500

Hermes Multi Asset Inflation Fund Class Opening Shares Subscriptions Redemptions Closing Shares F GBP Accumulating 1,000 - - 1,000 Z GBP Accumulating 30,000,000 - - 30,000,000 F GBP Distributing 1,000 - - 1,000 T GBP Accumulating - 338,782 - 338,782

Hermes Global Small Cap Equity Fund Class Opening Shares Subscriptions Redemptions Closing Shares F EUR Accumulating - 500 - 500 F EUR Distributing - 500 - 500 F GBP Accumulating - 1,000 - 1,000 F GBP Accumulating Hedged - 1,000 - 1,000 F GBP Distributing Hedged - 1,000 - 1,000 F USD Accumulating - 500 - 500 F USD Distributing - 500 - 500 R USD Accumulating - 500 - 500 R EUR Accumulating - 500 - 500 T GBP Accumulating - 495,141 - 495,141 Z USD Accumulating - 15,599,342 - 15,599,342

Hermes US All Cap Equity Fund Class Opening Shares Subscriptions Redemptions Closing Shares F EUR Accumulating - 500 - 500 F EUR Distributing - 500 - 500 F GBP Accumulating Hedged - 1,000 - 1,000 F GBP Distributing Hedged - 1,000 - 1,000 F USD Accumulating - 500 - 500 F USD Distributing - 500 - 500 F GBP Accumulating - 1,000 - 1,000 R USD Accumulating - 500 - 500 R EUR Accumulating - 500 - 500 Z USD Accumulating - 7,478,324 - 7,478,324

195

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

6. Share Capital (continued)

Hermes Absolute Return Credit Fund Class Opening Shares Subscriptions Redemptions Closing Shares F EUR Accumulating - 500 - 500 F EUR Accumulating Hedged - 500 - 500 F EUR Dist Hedged - 6,500 (6,000) 500 F CHF Accumulating Hedged - 500 - 500 F CHF Distributing Hedged - 500 - 500 F GBP Accumulating - 1,000 - 1,000 F GBP Accumulating Hedged - 1,000 - 1,000 F USD Accumulating - 500 - 500 F USD Distributing - 500 - 500 R EUR Accumulating - 500 - 500 R EUR Accumulating Hedged - 500 - 500 R EUR Distributing Hedged - 500 - 500 R CHF Accumulating Hedged - 500 - 500 R CHF Distributing Hedged - 500 - 500 R USD Accumulating - 500 - 500 Z USD Accumulating - 25,000,500 - 25,000,500 F GBP Distributing - 1,000 - 1,000 F GBP Distributing Hedged - 1,000 - 1,000

7. Financial Risk Management

Strategy in using financial instruments

The sub-funds are exposed to a variety of financial risks in pursuing their stated investment objectives and policies. These risks are defined in IFRS 7 as including credit risk, liquidity risk and market risk (which in turn includes currency risk, interest rate risk and other price risk). The sub-funds take exposure to certain of these risks to generate investment returns on their portfolios, although these risks can also potentially result in a reduction in the sub-fund’s net assets.

The Investment Manager will use its best endeavours to minimise the potentially adverse effects of these risks on the sub-funds’ performance where it can do so while still managing the investments of the sub- funds in ways that are consistent with each sub-fund’s investment objectives and policies.

The risks, and the measures adopted by the Company for managing these risks, are detailed below.

Market price risk

Market price risk is defined in IFRS 7 as the risk that the fair value of a financial instrument or its future cash flows will fluctuate because of changes in market prices.

The sub-funds’ assets consist principally of bonds, equities, P-Notes, exchange traded funds, certificates of deposit, commercial paper, reits, floating rate notes, futures, forward currency contracts, credit default swaps, total return swaps and warrants.

The values of these instruments are determined by market forces and there is accordingly a risk that market prices can change in a way that is adverse to a sub-funds’ performance.

The Company has adopted a number of investment restrictions which are set out in the individual sub- funds’ Supplements to the Company’s Prospectus and which limit the exposure of the sub-funds to adverse changes in the price of any individual financial asset.

196

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Market price risk (continued)

In accordance with the Company’s policy, the Investment Manager monitors the sub-funds’ positions on a regular basis and reports regularly to the Board of Directors. The Board reviews the information on each sub-funds’ overall market exposure provided by the Investment Manager at its periodic meetings.

In addition, the Investment Manager manages the exposure of the portfolios to the risk of adverse changes in the general level of market prices through adhering to its formal risk management process, which includes the use of systems and technology to monitor overall market and position risk on a regular basis.

The maximum risk arising from an investment in a financial instrument is determined by the fair value of the financial instruments, or in the case of certain derivatives the nominal value of the underlying assets, except for short positions in derivatives and securities where the loss may potentially be unlimited.

As at 31 December 2016 and 31 December 2015 the overall market exposure for each sub-fund is as shown in the Portfolio Statements, other than for derivatives where the exposure could be greater.

At 31 December 2016 and 2015, market price risks defined by IFRS 7 applying to each sub-fund are affected by two main components: changes in market prices and currency exchange rates. The sub-funds which hold bonds will be affected by a third component, bond interest rates. IFRS 7 requires a sensitivity analysis showing how the Net Asset Values of the sub-funds would be affected by changes in each of these factors.

Market price and currency exchange rate movements primarily affect the fair values of equity securities and related instruments held on account for each sub-fund.

For details of market price risk sensitivity analysis please refer to market price and sensitivity analysis on pages 222 to 225.

Currency risk

Currency risk is defined in IFRS 7 as the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The sub-funds are exposed to currency risk as the assets and liabilities of the sub-funds may be denominated in a currency other than the functional currency of the relevant sub-funds.

The fluctuations in the rate of exchange between the currency in which the asset or liability is denominated and the functional currency could result in an appreciation or depreciation in the fair value of that asset. The Investment Manager may attempt to mitigate these risks through the use of financial derivative instruments.

In accordance with Company policy, the Investment Manager monitors the sub-funds’ currency exposure on a regular basis and reports regularly to the Board of Directors, which reviews the information provided by the Investment Manager on any significant exposures at its periodic meetings.

197

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Currency risk (continued)

At 31 December 2016 each sub-fund’s currency exposure was as follows:

Hermes Global Emerging Markets Fund

Non-monetary Assets Monetary Assets Hedging Total $’000 $’000 $’000 $’000 Brazilian Real 105,044 - - 105,044 British Pound 21,206 1,282 2,285 24,773 Chilean peso 16,487 - - 16,487 Euro - 279 411 690 Hong Kong Dollar 238,666 - (77) 238,589 Hungarian Forint 26,819 - - 26,819 Indian Rupee 186,005 - - 186,005 Indonesian Rupiah 34,781 - - 34,781 Korean Won 127,010 - - 127,010 Mexican Peso 32,393 569 436 33,398 Russian Ruble 25,765 - - 25,765 South African Rand 63,414 - - 63,414 Taiwan Dollar 130,901 4,703 - 135,604 Thai Baht 14,814 - - 14,814 Turkish Lira 7,400 - - 7,400 US Dollar 313,427 15,183 (3,068) 325,542 1,344,132 22,016 (13) 1,366,135

Hermes Global Equity Fund

Non-monetary Assets Monetary Assets Hedging Total $’000 $’000 $’000 $’000 Australian Dollar 6,925 - - 6,925 British Pound 17,450 (11) 21 17,460 Canadian Dollar 9,401 7 - 9,408 Danish Kroner 4,821 - - 4,821 Euro 42,235 3 - 42,238 Hong Kong Dollar 2,947 - - 2,947 Japanese Yen 24,671 - - 24,671 Norwegian Kroner 5,366 2 - 5,368 Singapore Dollar 928 - - 928 Swedish Krona 2,722 - - 2,722 Swiss Franc 6,403 - - 6,403 US Dollar 186,686 2,931 (21) 189,596 310,555 2,932 - 313,487

198

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Currency risk (continued)

Hermes UK Small and Mid Cap Companies Fund

Non-monetary Assets Monetary Assets Hedging Total £’000 £’000 £’000 £’000 British Pound (213) 220 - 7 Euro (7) - - (7) (220) 220 - -

Hermes European Alpha Equity Fund

Non-monetary Assets Monetary Assets Hedging Total €’000 €’000 €’000 €’000 British Pound 142,669 251 7,405 150,325 Danish Kroner 39,590 - - 39,590 Euro 424,425 6,490 (16,478) 414,437 Norwegian Kroner 39,139 - - 39,139 Swedish Krona 30,156 - - 30,156 Swiss Franc 46,335 - 519 46,854 US Dollar 19,525 946 8,368 28,839 741,839 7,687 (186) 749,340

Hermes Global High Yield Credit Fund

Non-monetary Assets Monetary Assets Hedging Total €’000 €’000 €’000 €’000 British Pound 21,062 3,168 1,470 25,700 Euro 46,379 15,351 193,278 255,008 Swiss Franc - 1 - 1 US Dollar 206,008 2,101 (195,892) 12,217 273,449 20,621 (1,144) 292,926

Hermes Europe Ex-UK Equity Fund

Non-monetary Assets Monetary Assets Hedging Total €’000 €’000 €’000 €’000 British Pound 5,853 (65) 5,317 11,105 Danish Kroner 6,645 - - 6,645 Euro 188,476 1,339 (7,216) 182,599 Norwegian Kroner 4,542 - - 4,542 Swiss Franc 23,129 - - 23,129 US Dollar - (5) 1,809 1,804 228,645 1,269 (90) 229,824

199

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Currency risk (continued)

Hermes US SMID Equity Fund

Non-monetary Assets Monetary Assets Hedging Total $’000 $’000 $’000 $’000 British Pound - 556 7,693 8,249 Canadian Dollar 11,573 1 - 11,574 Euro - 725 18,712 19,437 Swiss Franc - - 5,143 5,143 US Dollar 814,395 13,323 (31,360) 796,358 825,968 14,605 188 840,761

Hermes Active UK Inflation-Linked Bond Fund

Non-monetary Assets Monetary Assets Hedging Total £’000 £’000 £’000 £’000 British Pound (3) 3 - - (3) 3 - - Hermes Asia Ex-Japan Equity Fund

Non-monetary Assets Monetary Assets Hedging Total $’000 $’000 $’000 $’000 British Pound - 3,971 2,857 6,828 Euro - (259) 19,589 19,330 Hong Kong Dollar 503,262 - - 503,262 Indian Rupee 102,879 - - 102,879 Japanese Yen 72,740 - - 72,740 Korean Won 751,181 - - 751,181 Singapore Dollar 44,738 - - 44,738 Swiss Franc - - 4,512 4,512 Taiwan Dollar 294,391 6,966 - 301,357 Thai Baht 40,668 - - 40,668 US Dollar 416,175 94,282 47,222 557,679 Yuan Offshore - - (35,298) (35,298) Yuan Renminbi - - (35,434) (35,434) 2,226,034 104,960 3,448 2,334,442

200

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Currency risk (continued)

Hermes Global Equity ESG Fund

Non-monetary Assets Monetary Assets Hedging Total $’000 $’000 $’000 $’000 Australian Dollar 2,452 - - 2,452 British Pound 6,583 - - 6,583 Canadian Dollar 1,202 - - 1,202 Danish Kroner 4,147 - - 4,147 Euro 18,388 - - 18,388 Hong Kong Dollar 4,499 - - 4,499 Hungarian Forint 766 - - 766 Indonesian Rupiah 411 - - 411 Japanese Yen 11,305 - - 11,305 Korean Won 4,546 - - 4,546 Norwegian Kroner 2,079 (12) 18 2,085 Taiwan Dollar 2,568 21 - 2,589 Swiss Franc 1,713 - - 1,713 US Dollar 77,666 2,308 (18) 79,956 138,325 2,317 - 140,642 Hermes Multi Strategy Credit Fund

Non-monetary Assets Monetary Assets Hedging Total $’000 $’000 $’000 $’000 British Pound 83,351 1,851 350,583 435,785 Euro 123,753 2,039 (46,687) 79,105 US Dollar 616,564 32,630 (298,422) 350,772 823,668 36,520 5,474 865,662 Hermes Multi Asset Inflation Fund

Non-monetary Assets Monetary Assets Hedging Total £’000 £’000 £’000 £’000 British Pound 21,190 9,895 (4,737) 26,348 Euro 237 82 947 1,266 Hong Kong Dollar 204 22 - 226 Japanese Yen 2 22 175 199 Swedish Kronor - - 159 159 Swiss Franc - - 285 285 US Dollar (105) 219 3,311 3,425 21,528 10,240 140 31,908

201

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Currency risk (continued)

Hermes Global Small Cap Equity Fund

Non-monetary Assets Monetary Assets Hedging Total $’000 $’000 $’000 $’000 Australian Dollar 1,214 - - 1,214 British Pound 4,039 - 3 4,042 Canadian Dollar 1,251 2 - 1,253 Euro 5,325 - - 5,325 Hong Kong Dollar 166 - - 166 Japanese Yen 4,948 - (17) 4,931 Swedish Krona 506 - - 506 US Dollar 25,221 634 14 25,869 42,670 636 - 43,306

Hermes US All Cap Equity Fund

Non-monetary Assets Monetary Assets Hedging Total $’000 $’000 $’000 $’000 British pound - - 3 3 US Dollar 16,406 89 (3) 16,492 Canadian Dollar 105 - - 105 16,511 89 - 16,600

Hermes Absolute Return Credit Fund

Non-monetary Assets Monetary Assets Hedging Total $’000 $’000 $’000 $’000 British Pound 10,166 288 6,235 16,689 Euro 4,972 209 (4,335) 846 Swiss Franc - 1 4 5 US Dollar 50,335 1,990 (1,504) 50,821 65,473 2,488 400 68,361

Monetary Assets are cash and time deposits and Non-Monetary Assets are all other assets.

202

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Currency risk (continued)

At 31 December 2015 each sub-fund’s currency exposure was as follows:

Hermes Global Emerging Markets Fund

Non-monetary Assets Monetary Assets Hedging Total $’000 $’000 $’000 $’000 Brazilian Real 16,798 - - 16,798 British Pound - 120 (8) 112 Egyptian Pound 6,136 - - 6,136 Euro (15) 57 20 62 Hong Kong Dollar 136,450 - - 136,450 Hungarian Forint 20,517 - - 20,517 Indian Rupee 93,724 458 - 94,182 Indonesian Rupiah 25,071 - - 25,071 Korean Won 44,036 - - 44,036 Mexican Peso 19,189 - - 19,189 Philippine Peso 2 - - 2 South African Rand 27,668 - - 27,668 Taiwan Dollar 63,624 2,771 - 66,395 Thai Baht 15,197 - - 15,197 Turkish Lira 4,101 - - 4,101 US Dollar 163,943 14,400 (22) 178,321 636,441 17,806 (10) 654,237

Hermes Global Equity Fund

Non-monetary Assets Monetary Assets Hedging Total $’000 $’000 $’000 $’000 Australian Dollar 9,648 - - 9,648 British Pound 29,525 48 - 29,573 Canadian Dollar 12,193 7 - 12,200 Danish Kroner 8,018 - - 8,018 Euro 67,425 - - 67,425 Hong Kong Dollar 7,370 - - 7,370 Japanese Yen 39,481 - (343) 39,138 Norwegian Kroner 5,557 - - 5,557 Singapore Dollar 1,263 - - 1,263 Swedish Krona 3,983 - - 3,983 Swiss Franc 12,223 - - 12,223 US Dollar 260,996 1,214 298 262,508 457,682 1,269 (45) 458,906

Hermes UK Small and Mid Cap Companies Fund

Non-monetary Assets Monetary Assets Hedging Total £’000 £’000 £’000 £’000 British Pound 208,417 3,781 - 212,198 Euro 4,189 - - 4,189 US Dollar 5,465 - - 5,465 218,071 3,781 - 221,852 203

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Currency risk (continued)

Hermes European Alpha Equity Fund

Non-monetary Assets Monetary Assets Hedging Total €’000 €’000 €’000 €’000 British Pound 156,675 67 14,833 171,575 Danish Kroner 28,331 - - 28,331 Euro 458,864 4,652 (25,949) 437,567 Norwegian Kroner 24,214 - - 24,214 Swedish Krona 39,864 - - 39,864 Swiss Franc 71,949 - 631 72,580 US Dollar 10,766 (4) 10,562 21,324 790,663 4,715 77 795,455

Hermes Global High Yield Credit Fund

Non-monetary Assets Monetary Assets Hedging Total €’000 €’000 €’000 €’000 British Pound 15,569 208 6,700 22,477 Euro 43,853 8,597 159,915 212,365 US Dollar 164,600 15,542 (168,326) 11,816 224,022 24,347 (1,711) 246,658

Hermes Europe Ex-UK Equity Fund

Non-monetary Assets Monetary Assets Hedging Total €’000 €’000 €’000 €’000 British Pound 4,962 (33) 47 4,976 Danish Kroner 15,782 - - 15,782 Euro 189,017 1,233 5 190,255 Norwegian Kroner 3,416 - - 3,416 Swedish Krona 5,040 - - 5,040 Swiss Franc 35,728 - - 35,728 US Dollar - - 11 11 253,945 1,200 63 255,208

Hermes US SMID Equity Fund

Non-monetary Assets Monetary Assets Hedging Total $’000 $’000 $’000 $’000 British Pound - 17 2,282 2,299 Canadian Dollar 12,141 20 - 12,161 Euro - - 146 146 Swiss Franc - (59) 3,140 3,081 US Dollar 361,495 7,355 (5,589) 363,261 373,636 7,333 (21) 380,948

Hermes Active UK Inflation-Linked Bond Fund

Non-monetary Assets Monetary Assets Hedging Total £’000 £’000 £’000 £’000 British Pound 18,919 172 1,391 20,482 New Zealand Dollar 82 1 15 98 US Dollar 200 - (1,418) (1,218) 19,201 173 (12) 19,362

204

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Currency risk (continued)

Hermes Asia Ex-Japan Equity Fund

Non-monetary Assets Monetary Assets Hedging Total $’000 $’000 $’000 $’000 British Pound (1) (472) 7,495 7,022 Euro - (242) 8,107 7,865 Hong Kong Dollar 419,942 - - 419,942 Indian Rupee 81,660 - - 81,660 Japanese Yen 28,346 - - 28,346 Korean Won 584,352 - - 584,352 Singapore Dollar 38,171 - - 38,171 Swiss Franc - - 3,031 3,031 Taiwan Dollar 115,686 10,768 - 126,454 Thai Baht 31,382 - - 31,382 US Dollar 255,748 39,225 (18,714) 276,259 1,555,286 49,279 (81) 1,604,484 Hermes Global Equity ESG Fund

Non-monetary Assets Monetary Assets Hedging Total $’000 $’000 $’000 $’000 Australian Dollar 749 - - 749 British Pound 2,989 - 16 3,005 Canadian Dollar 309 - - 309 Danish Kroner 1,708 - - 1,708 Euro 5,455 - - 5,455 Hong Kong Dollar 2,292 - - 2,292 Hungarian Forint 164 - - 164 Indonesian Rupiah 88 - - 88 Japanese Yen 4,256 - (102) 4,154 Korean Won 1,146 - - 1,146 Norwegian Kroner 1,225 - - 1,225 Swedish Krona 204 - - 204 Taiwan Dollar 330 - - 330 US Dollar 22,980 471 86 23,537 43,895 471 - 44,366 Hermes Multi Strategy Credit Fund

Non-monetary Assets Monetary Assets Hedging Total $’000 $’000 $’000 $’000 British Pound 55,508 41,539 (2,787) 94,260 Euro 110,558 3,907 4,238 118,703 US Dollar 550,099 3,711 155 553,965 716,165 49,157 1,606 766,928

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Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Currency risk (continued)

Hermes Multi Asset Inflation Fund

Non-monetary Assets Monetary Assets Hedging Total £’000 £’000 £’000 £’000 British Pound 26,598 2,534 349 29,481 Euro 331 194 - 525 Japanese Yen (8) 82 - 74 US Dollar (196) 92 6 (98) Hong Kong Dollar 337 14 - 351 Yuan Renminbi - - (382) (382) 27,062 2,916 (27) 29,951

Hermes Global Small Cap Equity Fund

Non-monetary Assets Monetary Assets Hedging Total $’000 $’000 $’000 $’000 Australian Dollar 405 - - 405 British Pound 2,510 - 3 2,513 Canadian Dollar 407 1 - 408 Euro 4,492 - 21 4,513 Hong Kong Dollar 306 - - 306 Japanese Yen 3,341 - 76 3,417 Singapore Dollar 237 - - 237 Swedish Krona 543 - - 543 Swiss Franc 354 - - 354 US Dollar 17,118 676 (100) 17,694 29,713 677 - 30,390

Hermes US All Cap Equity Fund

Non-monetary Assets Monetary Assets Hedging Total $’000 $’000 $’000 $’000 US Dollar 14,461 68 - 14,529 Canadian Dollar 295 - - 295 14,756 68 - 14,824

Hermes Absolute Return Credit Fund

Non-monetary Assets Monetary Assets Hedging Total $’000 $’000 $’000 $’000 British Pound 4,542 3,319 (6) 7,855 Euro 8,884 106 - 8,990 Swiss Franc - - 1 1 US Dollar 30,911 1,879 395 33,185 44,337 5,304 390 50,031

Monetary Assets are cash and time deposits and Non-Monetary Assets are all other assets.

For details of currency risk sensivity analysis please refer to the market price and sensivity analysis on pages 222 to 225.

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Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Interest rate risk

Interest rate risk is defined in IFRS 7 as the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The majority of the sub-funds’ financial assets and liabilities are non-interest bearing and any excess cash and cash equivalents are invested at short term market interest rates. As a result, most of the sub-funds are not subject to significant amounts of risk due to fluctuations in the prevailing level of market interest rates.

The Hermes Global High Yield Credit Fund, the Hermes Multi Strategy Credit Fund, the Hermes Multi Asset Inflation Fund and the Hermes Absolute Return Credit Fund have interest-bearing financial assets and liabilities. As a result, the sub-funds are subject to the risk of potentially adverse movements in the prevailing levels of market interest rates. The Investment Manager may from time to time enter into contracts on behalf of the funds that seek to mitigate the effects of these movements.

In accordance with the sub-fund’s policy, the Investment Manager monitors the sub-funds interest rate exposures on a regular basis and reports regularly to the Board of Directors, which reviews the information provided by the Investment Manager on significant exposures at its periodic meetings.

As at 31 December 2016 the sub-funds’ interest rate exposures based on the maturity date were as follows:

Hermes Global High Yield Up to 1-5 Over Non interest Credit Fund 1 year years 5 years bearing Total € € € € € Assets Financial assets 23,165,293 44,261,208 203,011,976 760,037 271,198,514 Cash 24,494,042 - - - 24,494,042 Interest receivable - - - 3,743,449 3,743,449 Sundry debtors - - - 4,608 4,608

Total Assets 47,659,335 44,261,208 203,011,976 4,508,094 299,440,613

Liabilities Financial liabilities - 562,580 - 1,780,370 2,342,950 Cash collateral on derivative 3,874,080 positions 3,874,080 - - - Accrued expenses - - - 297,626 297,626

Total Liabilities 3,874,080 562,580 - 2,077,996 6,514,656

Net Assets 43,785,255 43,698,628 203,011,976 2,430,098 292,925,957

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Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Interest rate risk (continued)

Hermes Multi Strategy Credit Fund Up to 1-5 Over Non interest 1 year years 5 years bearing Total $ $ $ $ $ Assets Financial assets 100,588,863 200,578,966 534,620,460 6,094,870 841,883,159 Cash 34,813,196 - - - 34,813,196 Cash collateral on derivative positions 8,212,062 - - - 8,212,062 Subscription receivable - - - 429,000 429,000 Interest receivable - - - 10,630,804 10,630,804 Sundry debtors - - - 10,593 10,593

Total Assets 143,614,121 200,578,966 534,620,460 17,165,267 895,978,814

Liabilities Financial liabilities - 14,417,762 - 387,441 14,805,203 Cash collateral on derivative positions 6,504,559 - - - 6,504,559 Securities purchase payable - - - 8,152,500 8,152,500 Accrued expenses - - - 854,252 854,252

Total Liabilities 6,504,559 14,417,762 - 9,394,193 30,316,514

Net Assets 137,109,562 186,161,204 534,620,460 7,771,074 865,662,300

Hermes Multi Asset Inflation Fund Up to 1-5 Over Non interest 1 year years 5 years bearing Total £ £ £ £ £ Assets Financial assets 8,999,058 890,143 10,400,093 1,596,495 21,885,789 Cash 10,109,641 - - - 10,109,641 Cash collateral on derivative positions 130,000 - - - 130,000 Interest receivable - - - 29,023 29,023 Subscription receivable 15,259 15,259 Sundry debtors - - - 3,066 3,066

Total Assets 19,238,699 890,143 10,400,093 1,643,843 32,172,778

Liabilities Financial liabilities 126,184 16,114 - 104,082 246,380 Accrued expenses - - - 18,469 18,469

Total Liabilities 126,184 16,114 - 122,551 264,849

Net Assets 19,112,515 874,029 10,400,093 1,521,292 31,907,929

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Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Interest rate risk (continued)

Hermes Absolute Return Credit Fund Up to 1-5 Over Non interest 1 year years 5 years bearing Total $ $ $ $ $ Assets Financial assets 22,792,557 24,488,482 18,532,394 460,974 66,274,407 Cash 2,647,394 - - - 2,647,394 Cash collateral on derivative positions 110,000 - - - 110,000 Interest receivable - - - 876,536 876,536 Sundry debtors - - - 65,922 65,922

Total Assets 25,549,951 24,488,482 18,532,394 1,403,432 69,974,259

Liabilities Financial liabilities 40,703 961,487 - 51,816 1,054,006 Cash collateral on derivative positions 270,000 - - - 270,000 Securities Purchased Payable - - - 213,750 213,750 Accrued expenses - - - 75,137 75,137

Total Liabilities 310,703 961,487 - 340,703 1,612,893

Net Assets 25,239,248 23,526,995 18,532,394 1,062,729 68,361,366

As at 31 December 2015 the sub-funds’ interest rate exposure was as follows:

Hermes Global High Yield Up to 1-5 Over Non interest Credit Fund 1 year years 5 years bearing Total € € € € € Assets Financial assets 19,516,945 59,289,214 143,607,034 589,237 223,002,430 Cash 23,786,540 - - - 23,786,540 Cash collateral on derivative 2,040,000 positions 2,040,000 - - - Subscriptions Receivable - - - 524,475 524,475 Interest receivable - - - 4,023,777 4,023,777 Sundry debtors - - - 19,094 19,094

Total Assets 45,343,485 59,289,214 143,607,034 5,156,583 253,396,316

Liabilities Financial liabilities 7,142 2,385,881 14,241 2,310,759 4,718,023 Cash collateral on derivative 1,480,000 positions 1,480,000 - - - Redemptions payable - - - 367,133 367,133 Accrued expenses - - - 172,980 172,980

Total Liabilities 1,487,142 2,385,881 14,241 2,850,872 6,738,136

Net Assets 43,856,343 56,903,333 143,592,793 2,305,711 246,658,180

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Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Interest rate risk (continued)

Hermes Multi Strategy Credit Fund Up to 1-5 Over Non interest 1 year years 5 years bearing Total $ $ $ $ $ Assets Financial assets 138,278,264 225,870,831 355,105,881 4,839,486 724,094,462 Cash 47,145,017 - - - 47,145,017 Cash collateral on derivative 6,770,000 6,770,000 positions - - - Securities sold receivable - - - 39,247 39,247 Subscription receivable - - - 3,530,000 3,530,000 Interest receivable - - - 10,711,200 10,711,200 Sundry debtors - - - 79,353 79,353

Total Assets 192,193,281 225,870,831 355,105,881 19,199,286 792,369,279

Liabilities Financial liabilities 2,069,916 14,720,955 - 3,104,860 19,895,731 Cash collateral on derivative 4,757,870 4,757,870 positions - - - Accrued expenses - - - 787,188 787,188

Total Liabilities 6,827,786 14,720,955 - 3,892,048 25,440,789

Net Assets 185,365,495 211,149,876 355,105,881 15,307,238 766,928,490

Hermes Multi Asset Inflation Fund Up to 1-5 Over Non interest 1 year years 5 years bearing Total £ £ £ £ £ Assets Financial assets 9,000,085 1,238,245 8,506,633 1,988,141 20,733,104 Cash 9,416,778 - - - 9,416,778 Cash collateral on derivative 260,000 - 260,000 positions - - Interest receivable - - - 36,233 36,233 Sundry debtors - - - 2,854 2,854

Total Assets 18,676,863 1,238,245 8,506,633 2,027,228 30,448,969

Liabilities Financial liabilities - 230,337 - 69,350 299,687 Cash collateral on derivative - - 170,000 positions 170,000 - Accrued expenses - - - 28,543 28,543

Total Liabilities 170,000 230,337 - 97,893 498,230

Net Assets 18,506,863 1,007,908 8,506,633 1,929,335 29,950,739

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Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Interest rate risk (continued)

Hermes Absolute Return Credit Fund Up to 1-5 Over Non interest 1 year years 5 years bearing Total $ $ $ $ $ Assets Financial assets 15,581,983 23,703,077 7,154,015 399,826 46,838,901 Cash 5,144,495 - - - 5,144,495 Cash collateral on derivative 260,000 - 260,000 positions - - Securities sold receivable - - - 2,738 2,738 Interest receivable - - - 597,769 597,769 Sundry debtors - - - 15,109 15,109

Total Assets 20,986,478 23,703,077 7,154,015 1,015,442 52,859,012

Liabilities Financial liabilities 150,630 973,734 - 6,284 1,130,648 Cash collateral on derivative 100,000 100,000 positions - - - Accrued expenses - - - 1,596,949 1,596,949

Total Liabilities 250,630 973,734 - 1,603,233 2,827,597

Net Assets 20,735,848 22,729,343 7,154,015 (587,791) 50,031,415

Credit risk

Credit risk is defined in IFRS 7 as the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.

Transactions in securities are generally settled or paid for on delivery, or cleared through the appropriate clearing system for the market on which the securities are traded. The risk of default is not considered to be material, as delivery of securities sold is only made once the Depositary has received confirmation of payment. Payment is also only made on a purchase once confirmation of delivery of the securities has been received by the Depositary. The trade will fail if either party fails to deliver the required confirmations.

At 31 December 2016 and 2015 none of the sub-funds’ financial assets were past due or impaired.

The Depositary to the Company is Northern Trust Fiduciary Services (Ireland) Limited, an indirect wholly- owned subsidiary of Northern Trust Corporation. Northern Trust Corporation is publicly traded and a constituent of the S&P 500.

Substantially all of the cash assets are held with The Northern Trust Company, London Branch (TNTC). Cash deposited with TNTC is deposited as banker and is held on its Balance Sheet. Accordingly, in accordance with usual banking practice, TNTC’s liability to the Company in respect of such cash deposits shall be that of debtor and the Company will rank as a general creditor of TNTC. The transferrable securities are held with the Depositary, Northern Trust Fiduciary Services (Ireland) Limited. These assets are held distinct and separately from the proprietary assets of the Depositary. Securities are clearly recorded to ensure they are held on behalf of the Company. Bankruptcy or insolvency of the Depositary, and/or one of its agents or affiliates may cause the Company’s rights with respect to the securities held by the Depositary to be delayed.

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Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Credit risk (continued)

Both Northern Trust Fiduciary Services (Ireland) Limited and The Northern Trust Company, London Branch are wholly owned subsidiaries of Northern Trust Corporation. As at 31 December 2016 Northern Trust Corporation had a long term rating from Standard & Poor’s of A+ (2015: A+).

Risk is managed by monitoring the credit quality and financial positions of the Depositary the Company uses.

Northern Trust acts as its own sub-custodian in the U.S., the U.K., Ireland and Canada. In all other markets Northern Trust appoints a local sub-custodian. Northern Trust continually reviews its sub-custodian network to ensure clients have access to the most efficient, creditworthy and cost-effective provider in each market.

The Depositary is responsible for ensuring this segregation is as effective as possible in the context of the markets in which the Company operates. The Company will however only rank as an unsecured creditor in relation to any cash deposited or derivative positions with the Depositary, its related companies and its appointed agents, and is therefore subject to the credit risk of the relevant institution in this respect.

To mitigate the risks the sub-funds are exposed to from the use of the counterparties, the Investment Manager employs appropriate procedures to ensure that the counterparties are reputable institutions and that the credit risk is acceptable to the sub-fund. The sub-funds only transact with counterparties that are regulated entities subject to prudential supervision, or with high credit-ratings assigned by international credit-rating agencies. In addition, the sub-funds’ securities are maintained by the Sub-Custodian in segregated accounts. Cash is also held with the following brokers: Barclays (S&P: A-), BNP Paribas (S&P: BB+), Citi (S&P: BBB+), Credit Suisse (S&P: A), Goldman Sachs (S&P: A+), JP Morgan (S&P: A+), Macquarie (S&P: A), Merrill Lynch (S&P: BBB+), and Morgan Stanley (S&P: BBB+) (see note 3).

The Investment Manager monitors the credit quality and financial position of the Depositary and reviews the SOC 1 of the Depositary. The Company is additionally exposed to credit risk arising from the counterparties used in OTC derivatives. This risk is mitigated by the Company only engaging with counterparties which meet the Central Bank’s UCITS regulatory requirements and are approved by the Investment Manager and are continually monitored.

The Company has credit risk exposure to issuers of debt securities and P-Notes held as part of the Company’s investment portfolio. The Company limits its exposure to individual issuers of debt securities and P-Notes in accordance with the investment restrictions set out in the Company’s Prospectus. Impairment provisions are provided for any losses that have been incurred by the balance sheet date. There were no impairment provisions required as at 31 December 2016 (2015: None).

The Hermes Global Emerging Markets Fund, the Hermes Global High Yield Credit Fund, the Hermes Asia Ex-Japan Equity Fund, the Hermes Multi Strategy Credit Fund, the Hermes Multi Asset Inflation Fund and the Hermes Absolute Return Credit Fund invest in debt securities and P-Notes at the financial year end date. As at 31 December 2016 and 31 December 2015, the exposure to credit risk on the Portfolio Statements using ratings from S&P are shown on the following pages.

Hermes Global Emerging Markets Fund* Portfolio by rating category Rating 31 December 2016 31 December 2015 NR 100.00% 100.00% 100.00% 100.00%

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Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Credit risk (continued)

Hermes Global High Yield Credit Fund Portfolio by rating category Rating 31 December 2016 31 December 2015 A - 1.05% A- 1.97% 2.64% BBB+ 2.16% - BBB 6.74% 3.06% BBB- 22.03% 17.49% BB+ 19.53% 21.00% BB 17.67% 11.47% BB- 10.64% 12.27% B+ 7.71% 9.74% B 4.35% 8.02% B- 3.03% 1.79% CCC+ 0.95% 3.22% C 0.27% 0.22% NR 2.95% 8.03% 100.00% 100.00%

Hermes Asia Ex-Japan Equity Fund* Portfolio by rating category Rating 31 December 2016 31 December 2015 BBB+ 36.13% 71.63% NR 63.87% 28.37% 100.00% 100.00%

Hermes Multi Strategy Credit Fund Portfolio by rating category Rating 31 December 2016 31 December 2015 A+ 1.15% - A 0.11% 2.43% A- 4.00% 5.56% BBB+ 4.61% 2.81% BBB 11.24% 8.09% BBB- 24.89% 22.05% BB+ 15.24% 21.75% BB 13.30% 9.78% BB- 6.14% 5.24% B+ 7.98% 6.88% B 4.37% 4.23% B- 3.27% 1.83% CCC+ 1.02% 3.01% D - 0.01% NR 2.68% 6.33% 100.00% 100.00%

Hermes Multi Asset Inflation Fund Portfolio by rating category Rating 31 December 2016 31 December 2015 AA 100.00% 100.00% 100.00% 100.00%

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Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Credit risk (continued)

Hermes Absolute Return Credit Fund Portfolio by rating category Rating 31 December 2016 31 December 2015 AA+ 1.74% 0.40% AA- - 1.73% A+ 3.36% 1.10% A 6.53% 6.73% A- 6.83% 17.13% BBB+ 10.21% 10.14% BBB 19.55% 10.43% BBB- 22.93% 17.14% BB+ 11.47% 14.36% BB 4.01% 4.09% BB- 4.45% 5.81% B+ 3.44% 2.22% B 0.81% - B- 0.83% 0.31% CCC+ 0.99% 0.70% NR 2.85% 7.71% 100.00% 100.00%

*The ratings disclosed for these sub-funds are the ratings of the P-Note counterparty as the Notes themselves are not rated.

Cash, P-Notes and all asset derivatives (credit default swaps, total return swaps, futures, forward currency contracts and warrants) are also exposed to credit risk. The value of cash, P-Notes and derivative assets exposed to credit risk at 31 December 2016 and 31 December 2015 amounted to:

2016 Sub-fund $ Hermes Global Emerging Markets Fund 83,750,955 Hermes Global Equity Fund 2,932,200 Hermes US SMID Equity Fund 14,837,572 Hermes Asia Ex-Japan Equity Fund 231,688,246 Hermes Global Equity ESG Fund 2,316,432 Hermes Multi Strategy Credit Fund 61,737,759 Hermes Global Small Cap Equity Fund 635,991 Hermes US All Cap Equity Fund 89,003 Hermes Absolute Return Credit Fund 4,013,685

£ Hermes UK Small and Mid Cap Companies Fund 219,608 Hermes Active UK Inflation-Linked Bond Fund 3,278 Hermes Multi Asset Inflation Fund 10,833,313

€ Hermes European Alpha Equity Fund 7,686,888 Hermes Global High Yield Credit Fund 29,042,050 Hermes Europe Ex-UK Equity Fund 1,269,512

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Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Credit risk (continued)

2015 Sub-fund $ Hermes Global Emerging Markets Fund 67,229,795 Hermes Global Equity Fund 1,269,480 Hermes US SMID Equity Fund 7,335,180 Hermes Asia Ex-Japan Equity Fund 99,795,814 Hermes Global Equity ESG Fund 470,890 Hermes Multi Strategy Credit Fund 72,743,955 Hermes Global Small Cap Equity Fund 677,868 Hermes US All Cap Equity Fund 67,566 Hermes Absolute Return Credit Fund 6,904,001

£ Hermes UK Small and Mid Cap Companies Fund 3,781,042 Hermes Active UK Inflation-Linked Bond Fund 215,425 Hermes Multi Asset Inflation Fund 10,106,933

€ Hermes European Alpha Equity Fund 4,795,137 Hermes Global High Yield Credit Fund 27,859,978 Hermes Europe Ex-UK Equity Fund 1,264,965

Liquidity risk Liquidity risk is defined in IFRS 7 specifically as the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.

The sub-funds are exposed to daily cash redemptions of redeemable participating shares. The sub-funds invest the majority of their assets in securities and other instruments that are traded on an active market and which are considered to be liquid, as under normal market conditions they can be readily disposed of in the event that cash needs to be raised to meet redemptions or to pay expenses.

In accordance with Company policy, the Investment Manager monitors the sub-funds’ liquidity on a regular basis and reports regularly to the Board of Directors, which reviews the information provided by the Investment Manager on significant exposures at its periodic meetings.

The maturities of the relevant financial assets and liabilities at fair value through profit or loss are set out in the individual sub-fund portfolio statements. All the sub-funds’ other liabilities had maturities of up to one month after year end.

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Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Fair value measurement risk

The following is a summary of the inputs used to value each sub-fund’s assets and liabilities carried at fair value as at 31 December 2016, as discussed in note 2.

Financial assets and liabilities at fair value through profit or loss Level I Level II Level III Total Fund name $ $ $ $ Hermes Global Emerging Markets Fund P-Notes - 42,703,586 - 42,703,586 Equities 1,060,021,945 - - 1,060,021,945 American Depositary Receipts 224,125,694 224,125,694 Warrants 19,024,256 - - 19,024,256 Forward currency contracts (asset) - 7,207 - 7,207 Forward currency contracts (liability) - (12,283) - (12,283) 1,303,171,895 42,698,510 - 1,345,870,405

Hermes Global Equity Fund Equities 310,459,357 - - 310,459,357

Hermes US SMID Equity Fund Equities 826,520,899 - - 826,520,899 Forward currency contracts (asset) - 233,123 - 233,123 Forward currency contracts (liability) - (34,305) - (34,305) 826,520,899 198,818 - 826,719,717

Hermes Asia Ex-Japan Equity Fund Equities 1,800,501,699 - - 1,800,501,699 American Depositary Receipts 303,506,124 303,506,124 P-Notes - 123,232,830 - 123,232,830 Forward currency contracts (asset) - 3,495,805 - 3,495,805 Forward currency contracts (liability) - (26,787) - (26,787) 2,104,007,823 126,701,848 - 2,230,709,671

Hermes Global Equity ESG Fund Equities 138,308,767 - - 138,308,767 Forward currency contracts (asset) - 384 - 384 138,308,767 384 - 138,309,151

Hermes Multi Strategy Credit Fund Corporate Bonds - 690,243,006 - 690,243,006 Floating Rate Notes - 132,927,652 - 132,927,652 Credit Default Swaps (asset) - 12,617,631 - 12,617,631 Credit Default Swaps (liability) - (14,417,762) - (14,417,762) Forward currency contracts (asset) - 5,497,995 - 5,497,995 Forward currency contracts (liability) - (22,205) - (22,205) Futures (asset) 596,875 - - 596,875 Futures (liability) (365,236) - - (365,236) 231,639 826,846,317 - 827,077,956

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Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Fair value measurement risk (continued)

Financial assets and liabilities at fair value through profit or loss Level I Level II Level III Total Fund name $ $ $ $ Hermes Global Small Cap Equity Fund Equities 41,446,221 - - 41,446,221 Reits 1,213,281 - - 1,213,281 Forward currency contracts (liability) - (8) - (8) 42,659,502 (8) - 42,659,494

Hermes US All Cap Equity Fund Equities 16,311,430 - - 16,311,430 Reits 207,461 - - 207,461 Forward currency contracts (liability) - (9) - (9) 16,518,891 (9) - 16,518,882

Hermes Absolute Return Credit Fund Corporate Bonds - 55,462,737 - 55,462,737 Floating Rate Notes - 9,555,379 - 9,555,379 Credit Default Swaps (asset) - 795,317 - 795,317 Credit Default Swaps (liability) - (1,002,190) - (1,002,190) Futures (asset) 23,875 - - 23,875 Futures (liability) (14,835) - - (14,835) Forward currency contracts (asset) - 437,099 - 437,099 Forward currency contracts (liability) - (36,981) - (36,981) 9,040 65,211,361 - 65,220,401

Financial assets and liabilities at fair value through profit or loss Level I Level II Level III Total Fund name £ £ £ £ Hermes Multi Asset Inflation Fund Certificates of Deposit 5,999,861 - - 5,999,861 Commercial Paper 2,999,197 - - 2,999,197 Equities 50,288 - - 50,288 Government Bonds - 10,941,710 - 10,941,710 Reits 1,103,727 - - 1,103,727 Exchange traded funds 197,334 - - 197,334 Credit Default Swaps (asset) - 348,526 - 348,526 Credit Default Swaps (liability) - (16,114) - (16,114) Total Return Swaps (liability) - (126,184) - (126,184) Futures (asset) 104,061 - - 104,061 Futures (liability) (104,082) - - (104,082) Forward currency contracts (asset) - 141,085 - 141,085 10,350,386 11,289,023 - 21,639,409

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Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Fair value measurement risk (continued)

Financial assets and liabilities at fair value through profit or loss Level I Level II Level III Total Fund name € € € € Hermes European Alpha Equity Fund Equities 725,398,651 - - 725,398,651 American Depositary Receipts 19,525,100 - - 19,525,100 Forward currency contracts (liability) - (195,825) - (195,825) 744,923,751 (195,825) - 744,727,926

Hermes Global High Yield Credit Fund Corporate Bonds - 234,479,097 - 234,479,097 Floating Rate Notes - 32,171,409 - 32,171,409 Credit Default Swaps (asset) - 3,787,971 - 3,787,971 Credit Default Swaps (liability) - (562,580) - (562,580) Forward currency contracts (asset) - 539,780 - 539,780 Forward currency contracts (liability) - (1,682,740) - (1,682,740) Futures (asset) 220,257 - - 220,257 Futures (liability) (97,630) - - (97,630) 122,627 268,732,937 - 268,855,564 Hermes Europe Ex-UK Equity Fund Equities 228,741,880 - - 228,741,880 Forward currency contracts (asset) - 496 - 496 Forward currency contracts (liability) - (89,737) - (89,737) 228,741,880 (89,241) - 228,652,639

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Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Fair value measurement risk (continued)

The following is a summary of the inputs used to value each sub-funds assets and liabilities carried at fair value as at 31 December 2015.

Financial assets and liabilities at fair value through profit or loss Level I Level II Level III Total Fund name $ $ $ $ Hermes Global Emerging Markets Fund P-Notes - 11,547,245 - 11,547,245 Equities 607,601,112 - 1,260,703 608,861,815 Warrants 26,329,981 - - 26,329,981 Forward currency contracts (asset) - 150 - 150 Forward currency contracts (liability) - (10,345) - (10,345) 633,931,093 11,537,050 1,260,703 646,728,846

Hermes Global Equity Fund Equities 457,944,580 - - 457,944,580

Hermes US SMID Equity Fund Equities 373,784,582 - - 373,784,582 Forward currency contracts (asset) - 1,324 - 1,324 Forward currency contracts (liability) - (22,695) - (22,695) 373,784,582 (21,371) - 373,763,211

Hermes Asia Ex-Japan Equity Fund Equities 1,492,175,315 - - 1,492,175,315 P-Notes - 50,516,933 - 50,516,933 Forward currency contracts (asset) - 535 - 535 Forward currency contracts (liability) - (86,990) - (86,990) 1,492,175,315 50,430,478 - 1,542,605,793 Hermes Global Equity ESG Fund Equities 43,853,882 - - 43,853,882

Hermes Multi Strategy Credit Fund Corporate Bonds - 583,335,299 - 583,335,299 Floating Rate Notes - 121,930,225 - 121,930,225 Credit Default Swaps (asset) - 13,989,452 - 13,989,452 Credit Default Swaps (liability) - (16,790,871) - (16,790,871) Forward currency contracts (asset) - 4,658,337 - 4,658,337 Forward currency contracts (liability) - (3,052,493) - (3,052,493) Futures (asset) 181,149 - - 181,149 Futures (liability) (52,367) - - (52,367) 128,782 704,069,949 - 704,198,731 Hermes Global Small Cap Equity Fund Equities 29,801,224 - - 29,801,224 Forward currency contracts (liability) - (11) - (11) 29,801,224 (11) - 29,801,213

Hermes US All Cap Equity Fund Equities 14,449,518 - - 14,449,518 Reits 307,577 307,577 Forward currency contracts (liability) - (12) - (12) 14,757,095 (12) - 14,757,083

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Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Fair value measurement risk (continued)

Financial assets and liabilities at fair value through profit or loss Level I Level II Level III Total Fund name $ $ $ $ Hermes Absolute Return Credit Fund Corporate Bonds - 33,936,444 - 33,936,444 Floating Rate Notes - 11,402,951 - 11,402,951 Credit Default Swaps (asset) - 1,099,680 - 1,099,680 Credit Default Swaps (liability) - (1,124,364) - (1,124,364) Futures (asset) 4,078 - - 4,078 Futures (liability) (616) - - (616) Forward currency contracts (asset) - 395,748 - 395,748 Forward currency contracts (liability) - (5,668) - (5,668) 3,462 45,704,791 - 45,708,253

Financial assets and liabilities at fair value through profit or loss Level I Level II Level III Total Fund name £ £ £ £ Hermes UK Small and Mid Cap Companies Fund Equities 217,779,135 - - 217,779,135

Hermes Active UK Inflation-Linked Bond Fund Corporate Bonds - 193,878 - 193,878 Government Bonds - 19,024,874 - 19,024,874 Forward currency contracts (asset) - 42,475 - 42,475 Forward currency contracts (liability) - (54,864) - (54,864) - 19,206,363 - 19,206,363 Hermes Multi Asset Inflation Fund Certificates of Deposit 4,000,000 - - 4,000,000 Commercial Paper 4,995,276 - - 4,995,276 Equities 148,855 - - 148,855 Government Bonds - 9,440,526 - 9,440,526 Reits 1,386,381 - - 1,386,381 Exchange traded funds 331,911 - - 331,911 Credit Default Swaps (asset) - 285,885 - 285,885 Total Return Swaps (asset) - 23,276 - 23,276 Total Return Swaps (liability) - (230,337) - (230,337) Futures (asset) 115,387 - - 115,387 Futures (liability) (36,368) - - (36,368) Forward currency contracts (asset) - 5,607 - 5,607 Forward currency contracts (liability) - (32,982) - (32,982) 10,941,442 9,491,975 - 20,433,417

Financial assets and liabilities at fair value through profit or loss Level I Level II Level III Total Fund name € € € € Hermes European Alpha Equity Fund Equities 790,181,623 - - 790,181,623 Forward currency contracts (asset) - 79,980 - 79,980 Forward currency contracts (liability) - (2,911) - (2,911) 790,181,623 77,069 - 790,258,692

220

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Fair value measurement risk (continued)

Financial assets and liabilities at fair value through profit or loss Level I Level II Level III Total Fund name € € € € Hermes Global High Yield Credit Fund Corporate Bonds - 187,953,136 - 187,953,136 Floating Rate Notes - 33,015,856 - 33,015,856 Credit Default Swaps (asset) - 1,444,201 - 1,444,201 Credit Default Swaps (liability) - (2,407,264) - (2,407,264) Forward currency contracts (asset) - 543,300 - 543,300 Forward currency contracts (liability) - (2,254,800) - (2,254,800) Futures (asset) 45,937 - - 45,937 Futures (liability) (55,959) - - (55,959) (10,022) 218,294,429 - 218,284,407 Hermes Europe Ex-UK Equity Fund Equities 254,125,093 - - 254,125,093 Forward currency contracts (asset) - 65,444 - 65,444 Forward currency contracts (liability) - (3,003) - (3,003) 254,125,093 62,441 - 254,187,534

The following table shows the movement in Level III during the financial year:

Reconciliation of Level III Investments 31 December 2016 Hermes Global Emerging Markets Beginning balance 1,260,703 Transfers between Level I and Level III - Purchase of investments - Sale of investments (1,960,757) Realised losses (5,499,783) Change in unrealised losses 6,199,837 Ending balance -

Transfers between levels are deemed to occur at the beginning of the financial year.

No investments were transferred from Level I to Level III during the financial year ended 31 December 2016 (2015: One). The valuation techniques used by the Company are explained in the accounting policies note on pages 171 to 177. There were no changes in valuation technique during the financial year.

221

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Sensitivity analysis Some limitations of sensitivity analysis are:  markets and levels of market liquidity in conditions of market stress may bear no relation to historical patterns;  the market price risk information is a relative estimate of risk rather than a precise and accurate number; the market price information represents a hypothetical outcome and is not intended to be predictive; and  future market conditions could vary significantly from those experienced in the past.

The portfolios as at 31 December 2016 were stress tested using a risk based model by applying a 20% movement to their benchmark to determine the percentage change disclosed below:

Net Asset Value Change resulting from (%) stress test Per Share Hermes Global Emerging Markets Fund Market Price test: Decrease MSCI Emerging Markets Bmk by 20% (17.85%) $1,122,280,278 $1.91 Currency test: Change GBP/USD FX rate by 20% (8.34%) $1,252,199,760 $2.13

Hermes Global Equity Fund Market Price test: Decrease MSCI World Bmk by 20% (21.05%) $247,483,546 $2.36 Currency test: Change GBP/USD FX rate by 20% (8.74%) $286,087,380 $2.73

Hermes European Alpha Equity Fund Market Price test: Decrease FTSE All-World Europe Bmk by 20% (19.64%) €634,112,354 €1.89 Currency test: Change GBP/EUR FX rate by 20% (6.13%) €724,931,512 €2.16

Hermes Global High Yield Credit Fund Market Value: 31/12/2016 €292,925,957 Market Price test: Decrease Merrill Lynch Global Non-Financial High Yield Constrained Index by 20% (19.80%) €234,926,618 €1.45 Interest Rate test: USD/EUR/GBP/JPY rates +50bps 0.25% €293,658,272 €1.77 Currency test: USD/GBP vs EUR FX rate by 20% 1.61% €297,642,065 €1.78

Hermes Europe Ex-UK Equity Fund Market Price test: Decrease FTSE World Europe ex UK Bmk by 20% (19.25%) €185,576,487 €1.75 Currency test: Change GBP/EUR FX rate by 20% (5.14%) €218,005,242 €1.97

Hermes US SMID Equity Fund Market Price test: Decrease Russell 2500 Bmk by 20% (17.36%) $694,812,068 $2.06 Currency test: Change GBP/USD FX rate by 20% (6.43%) $786,697,282 $2.25

Hermes Asia Ex-Japan Equity Fund Market Price test: Decrease MSCI AC Asia ex Japan IMI Bmk by 20% (18.75%) $1,896,776,522 $1.90 Currency test: Change GBP/USD FX rate by 20% (8.48%) $2,136,364,970 $2.22

Hermes Global Equity ESG Fund Market Price test: Decrease MSCI AC World Bmk by 20% (20.62%) $111,636,495 $1.68 Currency test: Change GBP/USD FX rate up by 20% (8.57%) $128,582,919 $1.95

222

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Sensitivity analysis (continued)

Net Asset Value Change resulting from (%) stress test Per Share Hermes Multi Strategy Credit Fund Market Price test: Decrease Merrill Lynch Global High Yield Index by 20% (15.11%) $734,860,726 $1.47 Interest Rate test: USD/EUR/GBP/JPY rates +50bps (0.11%) $864,710,071 $1.65 Currency test: EUR/GBP vs USD FX rate by 20% (1.69%) $851,032,607 $1.62

Hermes Multi Asset Inflation Fund Inflation + 100bps 3.07% £32,887,502 £1.01 Interest Rate test: GBP rates +100bps (2.38%) £31,148,520 £0.94 Currency test: GBP + 5% 0.87% £32,185,528 £0.99

Hermes Global Small Cap Equity Fund Market Price test: Decrease MSCI World Small Cap by 20% (17.88%) $35,560,596 £1.53 Currency test: Change GBP/USD FX rate by 20% (9.24%) $39,305,922 £1.76

Hermes US All Cap Equity Fund Market Price test: Decrease Russell 3000 Bmk by 20% (20.61%) $13,178,670 £1.60 Currency test: Change GBP/USD FX rate up by 20% (6.09%) $15,589,620 £1.75

Hermes Absolute Return Credit Fund Market Price test: Decrease Merrill Lynch Global High Yield Index by 20% (5.25%) $64,772,394 $1.94 Interest Rate test: USD/EUR/GBP/JPY rates +50bps (0.20%) $68,224,643 $2.00 Currency test: EUR/GBP vs USD FX rate by 20% (0.55%) $67,985,378 $1.99

As at 31 December 2015, the results of the stress tests were as follows:

Net Asset Value Change resulting from (%) stress test Per Share Hermes Global Emerging Markets Fund Market Price test: Decrease MSCI Emerging Markets Bmk by 20% (17.94%) $536,892,464 $2.01 Currency test: Change GBP/USD FX rate by 20% (5.03%) $621,297,187 $2.33

Hermes Global Equity Fund Market Price test: Decrease MSCI World Bmk by 20% (20.04%) $366,943,246 $2.48 Currency test: Change GBP/USD FX rate by 20% (7.01%) $426,733,598 $2.88

Hermes UK Small and Mid Cap Companies Fund Market Price test: Decrease Composite Bmk by 20% (15.49%) £187,477,936 £3.93 Currency test: Change GBP/EUR FX rate by 20% (0.49%) £220,764,536 £4.62

Hermes European Alpha Equity Fund Market Price test: Decrease FTSE All-World Europe Bmk by 20% (20.28%) €634,112,354 €1.89 Currency test: Change GBP/EUR FX rate by 20% (8.86%) €724,931,512 €2.16

223

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Sensitivity analysis (continued)

Net Asset Value Change resulting from (%) stress test Per Share Hermes Global High Yield Credit Fund Market Price test: Decrease Merrill Lynch Global Non-Financial High Yield Constrained Index by 20% (17.30%) €203,986,315 €1.45 Interest Rate test: USD/EUR/GBP/JPY rates +50bps 1.09% €249,346,754 €1.77 Currency test: USD/GBP vs EUR FX rate by 20% 1.49% €250,333,387 €1.78

Hermes Europe Ex-UK Equity Fund Market Price test: Decrease FTSE World Europe ex UK Bmk by 20% (20.74%) €202,286,273 €1.75 Currency test: Change GBP/EUR FX rate by 20% (10.79%) €227,677,510 €1.97

Hermes US SMID Equity Fund Market Price test: Decrease Russell 2500 Bmk by 20% (18.09%) $312,039,378 $2.06 Currency test: Change GBP/USD FX rate by 20% (10.61%) $340,541,487 $2.25

Hermes Active UK Inflation-Linked Bond Fund Market Price test: Decrease FTSE Actuaries UK Gilts Index Linked Over 5 years Index by 20% (19.95%) £15,499,476 £1.01 Interest Rate test: GBP rates +50bps (9.22%) £17,577,044 £1.15 Currency test: EUR vs GBP FX rate by 20% (7.13%) £17,981,715 £1.18

Hermes Asia Ex-Japan Equity Fund Market Price test: Decrease MSCI AC Asia ex Japan IMI Bmk by 20% (19.01%) $1,299,417,043 $1.90 Currency test: Change GBP/USD FX rate by 20% (5.40%) $1,517,832,840 $2.22

Hermes Global Equity ESG Fund Market Price test: Decrease MSCI AC World Bmk by 20% (20.11%) $35,443,805 $1.68 Currency test: Change GBP/USD FX rate up by 20% (6.98%) $41,268,002 $1.95

Hermes Multi Strategy Credit Fund Market Price test: Decrease Merrill Lynch Global High Yield Index by 20% (11.09%) $681,876,120 $1.47 Interest Rate test: USD/EUR/GBP/JPY rates +50bps 0.28% $769,075,890 $1.65 Currency test: EUR/GBP vs USD FX rate by 20% (2.02%) $751,436,535 $1.62

Hermes Multi Asset Inflation Fund Inflation + 100bps 2.81% £30,792,355 £1.01 Interest Rate test: GBP rates +100bps (5.05%) £28,438,227 £0.94 Currency test: GBP + 5% (0.20%) £29,890,838 £0.99

Hermes Global Small Cap Equity Fund Market Price test: Decrease MSCI World Small Cap by 20% (19.01%) $24,612,630 £1.53 Currency test: Change GBP/USD FX rate by 20% (6.80%) $28,321,768 £1.76

224

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Sensitivity analysis (continued)

Net Asset Value Change resulting from (%) stress test Per Share Hermes US All Cap Equity Fund Market Price test: Decrease Russell 3000 Bmk by 20% (19.32%) $11,960,002 £1.60 Currency test: Change GBP/USD FX rate up by 20% (11.53%) $13,115,159 £1.75

Hermes Absolute Return Credit Fund Market Price test: Decrease Merrill Lynch Global High Yield Index by 20% (2.78%) $48,640,542 $1.94 Interest Rate test: USD/EUR/GBP/JPY rates +50bps (0.20%) $49,931,352 $2.00 Currency test: EUR/GBP vs USD FX rate by 20% (0.70%) $49,681,195 $1.99

Methodology for Calculating Global Exposure and Leverage

The sub-funds are required to calculate their exposure to derivatives on a daily basis using one of two alternate methods, the Commitment Approach or Value at Risk (VaR). The table below details the approach each sub-fund takes.

Sub-Fund Name Approach Hermes Global Emerging Markets Fund Commitment Approach Hermes Global Equity Fund Commitment Approach Hermes European Alpha Equity Fund Commitment Approach Hermes Global High Yield Credit Fund Commitment Approach Hermes Europe Ex-UK Equity Fund Commitment Approach Hermes US SMID Equity Fund Commitment Approach Hermes Asia Ex-Japan Equity Fund Commitment Approach Hermes Global Equity ESG Fund Commitment Approach Hermes Multi Strategy Credit Fund Commitment Approach Hermes Multi Asset Inflation Fund VaR Hermes Global Small Cap Equity Fund Commitment Approach Hermes US All Cap Equity Fund Commitment Approach Hermes Absolute Return Credit Fund VaR

The commitment conversion methodology for standard derivatives is the market value of the equivalent position in the underlying asset. This may be replaced by the notional value or the price of the futures contract where this is more conservative. Please refer to the relevant portfolio statements for the notional value of the futures contracts.

VaR is a method of estimating potential loss due to market risk, rather than a statement of leverage, using a given confidence level, or probability, over a specific time period and assuming normal market conditions. The VaR is calculated using a Historical Simulation model carried out in accordance with regulatory guidelines.

Value at Risk (VaR)

The table on the following page provides an analysis of the VaR measures and leverage levels* for the Hermes Multi Asset Inflation Fund and the Hermes Absolute Return Credit Fund which are the only sub- funds to use the VaR approach.

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Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Methodology for Calculating Global Exposure and Leverage (continued)

Hermes Multi Asset Hermes Absolute Inflation Fund Return Credit Fund Fund Risk Characteristics 2016 2015 2016 2015 VaR as at the year end 4.83% 3.80% 0.80% 0.81% Lowest leverage level employed during the year 99.69% 110.19% 125.87% 101.29% Highest leverage level employed during the year 236.95% 193.23% 250.35% 269.96% Average leverage level employed during the year 118.04% 123.93% 153.19% 154.03% Lowest VaR utilised during the year** 11.76% 12.78% 1.88% 4.25% Highest VaR utilised during the year** 26.42% 20.14% 5.81% 5.87% Average VaR utilised during the year** 17.26% 16.34% 3.70% 4.70%

VaR Parameters Value VaR approach Absolute Simulation Historical Confidence 99% Reporting time 1 month Historical window 250 days Fund type Absolute Return

Some limitations of this VaR analysis are listed below:  The models are based on historical data and cannot take account of the fact that the future market price movements, correlation between markets and levels of market liquidity in conditions of market stress may bear no relation to historical patterns;  The market price information is a relative estimate of risk rather than a precise and accurate number;  The market price information represents a hypothetical outcome and is not intended to be predictive (in the case of the probability-based methods, such as VaR, profits and losses are almost certain to exceed the reported amount with a frequency depending on the confidence interval chosen); and  Future market conditions could vary significantly from those experienced in the past.

* The leverage has been calculated using the sum of the notionals of the derivatives used. ** The VaR utilised during the year is based on the 20% absolute VaR limit.

Offsetting Financial Assets and Liabilities

The Funds enter into derivative transactions under International Swaps and Derivatives Association (ISDA) master agreements.

In general, under ISDA master agreements the amounts owed by each counterparty on a single day in respect of a single transaction outstanding in the same currency are aggregated into a single net amount that is payable by one party to the other. In certain circumstances – e.g. when a credit event such as a default occurs, all outstanding transactions (or certain transactions, specified as “Affected Transactions”) under the agreement are terminated, the termination value is assessed and only a single net amount is payable in settlement of such transactions.

ISDA master agreements can be amended to allow for multi-transactional, cross currency or cross product netting.

The above agreements do not meet the criteria for offsetting in the Balance Sheet. This is because the Company does not have any currently legally enforceable right to offset recognised amounts, because the right to offset is enforceable only on the occurrence of future events such as a default of the counterparty or other credit events. 226

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Offsetting Financial Assets and Liabilities (continued)

The carrying amounts of recognised financial instruments that are subject to the above agreements as at 31 December 2016 on Hermes Global Emerging Markets Fund, Hermes Global Equity Fund, Hermes European Alpha Equity Fund, Hermes Europe Ex-UK Equity Fund, Hermes US SMID Equity Fund, Hermes Asia Ex-Japan Fund, Hermes Global Equity ESG Fund, Hermes Global Small Cap Fund and Hermes US All Cap Fund are as follows:

Gross Amounts of Recognised Financial Net Amounts of Gross Amounts not off- Liabilities Financial Assets set in the Balance Gross Amounts off-set in the presented in Sheet of Recognised Balance the Balance Financial Cash Financial Assets Sheet Sheet Instruments Collateral Net Amount

Derivatives $ $ $ $ $ $ Hermes Global Emerging Markets Fund 7,207 - 7,207 7,207 - - Hermes US SMID Equity Fund 233,123 - 233,123 34,305 - 198,818 Hermes Asia Ex-Japan Equity - - Fund 3,495,805 3,495,805 26,787 3,469,018 Hermes Global Equity ESG Fund 384 - 384 - - 384

€ € € € € € Hermes Europe Ex-UK Equity Fund 496 - 496 496 - -

Gross Amounts of Recognised Net Amounts of Financial Financial Gross Amounts not off- Gross Amounts Assets Liabilities set in the Balance of Recognised off-set in the presented in Sheet Financial Balance the Balance Financial Cash Liabilities Sheet Sheet Instruments Collateral Net Amount Derivatives $ $ $ $ $ $ Hermes Global Emerging Markets Fund 12,283 - 12,283 7,207 - 5,076 Hermes Global Equity Fund 78 - 78 - - 78 Hermes US SMID Equity Fund 34,305 - 34,305 34,305 - - Hermes Asia Ex-Japan Equity - - - Fund 26,787 26,787 26,787 Hermes Global Small Cap Equity 8 - 8 - - 8 Fund Hermes US All Cap Equity Fund 9 - 9 - - 9

€ € € € € € Hermes European Alpha Equity Fund 195,825 - 195,825 - - 195,825 Hermes Europe Ex-UK Equity Fund 89,737 - 89,737 496 - 89,241

227

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Offsetting Financial Assets and Liabilities (continued)

The carrying amounts of recognised financial instruments that are subject to the above agreements as at 31 December 2015 on Hermes Global Emerging Markets Fund, Hermes US SMID Equity Fund, Hermes Asia Ex-Japan Equity Fund, Hermes European Alpha Equity Fund, Hermes Europe Ex-UK Equity Fund, Hermes Active UK Inflation-Linked Bond Fund, Hermes Global Small Cap Fund and Hermes US All Cap Fund were as follows:

Derivatives $ $ $ $ $ $ Hermes Global Emerging Markets Fund 150 - 150 150 - - Hermes US SMID Equity Fund 1,324 - 1,324 - - 1,324 Hermes Asia Ex-Japan Equity Fund 535 - 535 - - 535

€ € € € € € Hermes European Alpha Equity Fund 79,980 - 79,980 2,911 - 77,069 Hermes Europe Ex-UK Equity Fund 65,444 - 65,444 - - 65,444

£ £ £ £ £ £ Hermes Active UK Inflation-Linked Bond Fund 42,475 - 42,475 - - 42,475

228

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Offsetting Financial Assets and Liabilities (continued)

Gross Amounts of Recognised Net Amounts of Financial Financial Gross Amounts not off- Gross Amounts Assets Liabilities set in the Balance of Recognised off-set in the presented in Sheet Financial Balance the Balance Financial Cash Liabilities Sheet Sheet Instruments Collateral Net Amount Derivatives $ $ $ $ $ $ Hermes Global Emerging Markets Fund 10,345 - 10,345 150 - 10,195 Hermes Asia Ex-Japan Equity Fund 86,990 - 86,990 - - 86,990 Hermes US SMID Equity Fund 22,695 - 22,695 - - 22,695 Hermes Global Small Cap Equity Fund 11 - 11 - - 11 Hermes US All Cap Equity Fund 12 - 12 - - 12

€ € € € € € Hermes European Alpha Equity Fund 2,911 - 2,911 2,911 - - Hermes Europe Ex-UK Equity Fund 3,003 - 3,003 - - 3,003

£ £ £ £ £ £ Hermes Active UK Inflation-Linked Bond Fund 54,864 - 54,864 - - 54,864

The carrying amounts of recognised financial instruments that are subject to the ISDA master agreements as at 31 December 2016 on the Hermes Global High Yield Credit Fund were as follows:

Hermes Global High Yield Credit Fund Gross Amounts Gross Amounts Net Amounts of of Recognised of Recognised Financial Assets Financial Assets Financial presented in Liabilities the Balance set-off in the Sheet Balance Sheet Description € € € Derivatives 4,548,008 - 4,548,008

Total 4,548,008 - 4,548,008

229

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Offsetting Financial Assets and Liabilities (continued)

Hermes Global High Yield Net Amounts of Credit Fund (continued) Financial Assets Gross Amounts not off-set in the presented in Balance Sheet the Balance Financial Cash Collateral Net Amount Sheet Instruments

Counterparty € € € € Commonwealth Bank 539,708 - - 539,708 Credit Suisse 303,107 - 303,107 - Goldman Sachs 1,748,033 474,384 1,273,649 - JP Morgan Chase Bank 1,025,608 - 1,004,080 21,528 BNP Paribas 931,480 185,826 745,654 - Statestreet 72 72 - -

Total 4,548,008 660,282 3,326,490 561,236

Gross Amounts Gross Amounts Net Amounts of of Recognised of Recognised Financial Financial Financial Liabilities Liabilities Assets presented in set-off in the the Balance Balance Sheet Sheet Description € € € Derivatives 2,342,950 - 2,342,950

Total 2,342,950 - 2,342,950

Net Amounts of Financial Liabilities Gross Amounts not off-set in the presented in Balance Sheet the Balance Financial Cash Collateral Net Amount Sheet Instruments Counterparty € € € € Goldman Sachs 474,384 474,384 - - BNP Paribas 185,826 185,826 - - Northern Trust 1,508,609 - - 1,508,609 Statestreet 174,131 72 - 174,059

Total 2,342,950 660,282 - 1,682,668

230

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Offsetting Financial Assets and Liabilities (continued)

The carrying amounts of recognised financial instruments that are subject to the ISDA master agreements as at 31 December 2015 on the Hermes Global High Yield Credit Fund were as follows:

Total 2,033,438 - 2,033,438

Net Amounts of Financial Assets Gross Amounts not off-set in the presented in Balance Sheet the Balance Financial Cash Collateral Net Amount Sheet Instruments

Counterparty € € € € Barclays 688,273 - 688,273 - Credit Suisse 261,181 7,142 254,039 - Goldman Sachs 379,748 87,254 270,000 22,494 JP Morgan Chase Bank 157,102 157,102 - - Merrill Lynch International 3,834 - - 3,834 Northern Trust * 319,426 - - 319,426 Statestreet * 223,874 - - 223,874

Total 2,033,438 251,498 1,212,312 569,628

Gross Amounts Gross Amounts Net Amounts of of Recognised of Recognised Financial Financial Financial Liabilities Liabilities Assets presented in set-off in the the Balance Balance Sheet Sheet

Description € € € Derivatives 4,718,023 - 4,718,023

Total 4,718,023 - 4,718,023

231

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Offsetting Financial Assets and Liabilities (continued)

Hermes Global High Yield Net Amounts of Credit Fund (continued) Financial Liabilities Gross Amounts not off-set in the presented in Balance Sheet the Balance Financial Cash Collateral Net Amount Sheet Instruments

Counterparty € € € € Citigroup 527,744 - 470,000 57,744 Credit Suisse 7,142 7,142 - - Goldman Sachs 87,254 87,254 - - JP Morgan Chase Bank 1,841,083 157,102 1,570,000 113,981 Northern Trust * 2,245,560 - - 2,245,560 Statestreet * 9,240 - - 9,240

Total 4,718,023 251,498 2,040,000 2,426,525

The carrying amounts of recognised financial instruments that are subject to ISDA master agreements as at 31 December 2016 on Hermes Multi Strategy Credit Fund were as follows:

Hermes Multi Strategy Credit Fund Gross Amounts Gross Amounts Net Amounts of of Recognised of Recognised Financial Assets Financial Assets Financial presented in Liabilities the Balance set-off in the Sheet Balance Sheet Description $ $ $ Derivatives 18,712,501 - 18,712,501

Total 18,712,501 - 18,712,501

Net Amounts of Financial Assets presented in the Balance Financial Cash Collateral Net Amount Sheet Instruments Counterparty $ $ $ $ Barclays 164,864 164,864 - - BNP Paribas 5,845,183 1,002,175 4,843,008 - Citigroup 124,932 124,932 - - Credit Suisse 201,027 201,027 - - Goldman Sachs 5,025,110 5,025,110 - - HSBC 45,858 - - 45,858 JP Morgan Chase Bank 902,119 - 902,119 - Merrill Lynch International 951,271 310,167 610,000 31,104 Northern Trust 3,050,096 - - 3,050,096 Statestreet 2,402,041 22,205 - 2,379,836

Total 18,712,501 6,850,480 6,355,127 5,506,894

232

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Offsetting Financial Assets and Liabilities (continued)

Hermes Multi Strategy Credit Fund (continued) Gross Amounts Gross Amounts Net Amounts of of Recognised of Recognised Financial Financial Financial Liabilities Liabilities Assets presented in set-off in the the Balance Balance Sheet Sheet Description $ $ $ Derivatives 14,805,203 - 14,805,203

Total 14,805,203 - 14,805,203

Net Amounts of Financial Liabilities presented in the Balance Financial Cash Collateral Net Amount Sheet Instruments Counterparty $ $ $ $ Barclays 4,632,434 164,864 4,430,000 37,570 BNP Paribas 1,002,175 1,002,175 - - Citigroup 976,308 124,932 770,000 81,376 Credit Suisse 1,306,986 201,027 1,050,000 55,959 Goldman Sachs 5,599,017 5,025,110 573,907 - Merrill Lynch International 310,167 310,167 - - Morgan Stanley 955,911 - 940,000 15,911 Statestreet 22,205 22,205 - -

Total 14,805,203 6,850,480 7,763,907 190,816

The carrying amounts of recognised financial instruments that are subject to ISDA master agreements as at 31 December 2015 on Hermes Multi Strategy Credit Fund were as follows:

Total 18,828,938 - 18,828,938

233

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Offsetting Financial Assets and Liabilities (continued)

Hermes Multi Strategy Credit Net Amounts of Fund (continued) Financial Assets Gross Amounts not off-set in the presented in Balance Sheet the Balance Financial Cash Collateral Net Amount Sheet Instruments Counterparty $ $ $ $ Barclays 4,343,667 390,379 3,953,288 - BNP Paribas 609,329 388,200 221,129 - Citigroup 150,659 150,659 - - Credit Suisse 1,091,427 866,219 225,208 - Goldman Sachs 2,662,832 2,662,832 - - HSBC 3,069,394 502 - 3,068,892 JP Morgan Chase Bank 1,407,465 1,407,465 - - Merrill Lynch International 3,905,222 3,905,222 - - Statestreet * 56,077 - - 56,077 Northern Trust 1,532,866 44,443 - 1,488,423

Total 18,828,938 9,815,921 4,399,625 4,613,392

Total 19,895,731 - 19,895,731

Net Amounts of Financial Liabilities Gross Amounts not off-set in the presented in Balance Sheet the Balance Financial Cash Collateral Net Amount Sheet Instruments Counterparty $ $ $ $ Barclays 390,379 390,379 - - BNP Paribas 388,200 388,200 - - Citigroup 450,385 150,659 260,000 39,726 Credit Suisse 866,219 866,219 - - Goldman Sachs 6,541,403 2,662,832 3,878,571 - HSBC 502 502 - - JP Morgan Chase Bank 2,183,636 1,407,465 500,000 276,171 Merrill Lynch International 6,023,016 3,905,222 1,880,000 237,794 Statestreet * 3,007,548 - - 3,007,548 Northern Trust 44,443 44,443 - -

Total 19,895,731 9,815,921 6,518,571 3,561,239

234

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Offsetting Financial Assets and Liabilities (continued)

The carrying amounts of recognised financial instruments that are subject to ISDA master agreements as at 31 December 2016 on Hermes Multi Asset Inflation Fund were as follows:

Hermes Multi Asset Inflation Fund Gross Amounts Gross Amounts Net Amounts of of Recognised of Recognised Financial Assets Financial Assets Financial presented in Liabilities the Balance set-off in the Sheet Balance Sheet Description £ £ £ Derivatives 593,672 - 593,672

Total 593,672 - 593,672

Net Amounts of Financial Assets Gross Amounts not off-set in the presented in Balance Sheet the Balance Financial Cash Collateral Net Amount Sheet Instruments Counterparty £ £ £ £ Barclays 190,708 16,114 - 174,594 Citigroup 119,681 - - 119,681 Goldman Sachs 104,061 104,061 - - JP Morgan Chase Bank 38,137 - - 38,137 Northern Trust 141,085 - - 141,085

Total 593,672 120,175 - 473,497

Total 246,380 - 246,380

235

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Offsetting Financial Assets and Liabilities (continued)

Hermes Multi Asset Inflation Net Amounts of Fund (continued) Financial Liabilities Gross Amounts not off-set in the presented in Balance Sheet the Balance Financial Cash Collateral Net Amount Sheet Instruments Counterparty £ £ £ £ Barclays 16,114 16,114 - - Macquarie Bank 126,184 - 126,184 - Goldman Sachs 104,082 104,061 - 21

Total 246,380 120,175 126,184 21

The carrying amounts of recognised financial instruments that are subject to ISDA master agreements as at 31 December 2015 on Hermes Multi Asset Inflation Fund were as follows:

Description £ £ £ Derivatives 430,155 - 430,155

Total 430,155 - 430,155

Net Amounts of Financial Assets Gross Amounts not off-set in the presented in Balance Sheet the Balance Financial Cash Collateral Net Amount Sheet Instruments

Counterparty £ £ £ £ Barclays 22,731 - - 22,731 Citibank 128,386 - - 128,386 Citigroup 29,750 - - 29,750 Deutsche Bank 23,276 23,276 - - Goldman Sachs * 115,387 - - 115,387 JP Morgan Chase Bank 89,985 - 89,985 - Merrill Lynch International 15,033 - - 15,033 Northern Trust 5,607 5,607 - -

Total 430,155 28,883 89,985 311,287

236

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Offsetting Financial Assets and Liabilities (continued)

Hermes Multi Asset Inflation Fund (continued) Gross Amounts Gross Amounts Net Amounts of of Recognised of Recognised Financial Financial Financial Liabilities Liabilities Assets presented in set-off in the the Balance Balance Sheet Sheet Description £ £ £ Derivatives 299,687 - 299,687

Total 299,687 - 299,687

Net Amounts of Financial Liabilities Gross Amounts not off-set in the presented in Balance Sheet the Balance Financial Cash Collateral Net Amount Sheet Instruments

Counterparty £ £ £ £ Deutsche Bank 230,337 23,276 207,061 - Goldman Sachs * 36,368 - - 36,368 Northern Trust 32,982 5,607 - 27,375

Total 299,687 28,883 207,061 63,743

The carrying amounts of recognised financial instruments that are subject to ISDA master agreements as at 31 December 2016 on Hermes Absolute Return Credit Fund were as follows:

Hermes Absolute Return Credit Fund Gross Amounts Gross Amounts Net Amounts of of Recognised of Recognised Financial Assets Financial Assets Financial presented in Liabilities the Balance set-off in the Sheet Balance Sheet Description $ $ $ Derivatives 1,256,291 - 1,256,291

Total 1,256,291 - 1,256,291

237

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Offsetting Financial Assets and Liabilities (continued)

Hermes Absolute Return Net Amounts of Credit Fund (continued) Financial Assets Gross Amounts not off-set in the presented in Balance Sheet the Balance Financial Cash Collateral Net Amount Sheet Instruments Counterparty $ $ $ $ Barclays 74,577 74,577 - - BNP Paribas 207,820 35,599 172,221 - Citigroup 3,103 3,103 - - Credit Suisse 37,889 37,889 - - Goldman Sachs 389,339 389,339 - - JP Morgan 37,461 - - 37,461 Merrill Lynch International 69,003 51,193 - 17,810 Northern Trust 366,925 36,348 - 330,577 State Street 70,174 633 - 69,541

Total 1,256,291 628,681 172,221 455,389

Total 1,054,006 - 1,054,006

Net Amounts of Financial Liabilities Gross Amounts not off-set in the presented in Balance Sheet the Balance Financial Cash Collateral Net Amount Sheet Instruments Counterparty $ $ $ $ Barclays 235,539 74,577 - 160,962 BNP Paribas 35,599 35,599 - - Citigroup 56,517 3,103 - 53,414 Credit Suisse 145,042 37,889 107,153 - Goldman Sachs 410,012 389,339 - 20,673 Merrill Lynch International 51,193 51,193 - - Morgan Stanley 83,123 - - 83,123 Northern Trust 36,348 36,348 - - State Street 633 633 - -

Total 1,054,006 628,681 107,153 318,172

238

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Offsetting Financial Assets and Liabilities (continued)

The carrying amounts of recognised financial instruments that are subject to ISDA master agreements as at 31 December 2015 on Hermes Absolute Return Credit Fund were as follows:

Total 1,499,506 - 1,499,506

Net Amounts of Financial Assets Gross Amounts not off-set in the presented in Balance Sheet the Balance Financial Cash Collateral Net Amount Sheet Instruments Counterparty $ $ $ $ Barclays 62,804 23,100 - 39,704 BNP Paribas 166,875 56,421 - 110,454 Citibank 5,554 5,554 - - Credit Suisse 194,500 69,082 100,000 25,418 HSBC 273,368 - - 273,368 Goldman Sachs 208,501 208,501 - - JP Morgan Chase Bank 153,762 47,526 - 106,236 Merrill Lynch International 311,762 311,762 - - Northern Trust 122,380 5,551 - 116,829

Total 1,499,506 727,497 100,000 672,009

Total 1,130,648 - 1,130,648

239

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

7. Financial Risk Management (continued)

Offsetting Financial Assets and Liabilities (continued)

Hermes Absolute Return Net Amounts of Credit Fund (continued) Financial Liabilities Gross Amounts not off-set in the presented in Balance Sheet the Balance Financial Cash Collateral Net Amount Sheet Instruments Counterparty $ $ $ $ Barclays 23,100 23,100 - - BNP Paribas 56,421 56,421 - - Citibank 26,436 5,554 - 20,882 Credit Suisse 69,082 69,082 - - Goldman Sachs 434,619 208,501 226,118 - JP Morgan Chase Bank 47,526 47,526 - - Merrill Lynch International 467,796 311,762 - 156,034 Northern Trust 5,551 5,551 - - State Street 117 - - 117

Total 1,130,648 727,497 226,118 177,033

* There was no ISDA master agreement in place between this counterparty and this sub-fund as at 31 December 2015 therefore no offsetting is shown.

240

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

8. Exchange Rates

The 31 December 2016 year end exchange rates were as follows:

Exchange rate from US$ Exchange rate from US$ Australian Dollar 1.3810 Norwegian Kroner 8.6077 Brazilian Real 3.2547 Philippine Peso 49.7125 Canadian Dollar 1.3411 Russian Ruble 61.0438 Czech Koruna 25.6180 Singapore Dollar 1.4447 Danish Kroner 7.0496 South African Rand 13.6750 Egyptian Pound 18.1300 Swedish Krona 9.0846 Euro 0.9481 Swiss Franc 1.0164 Hong Kong Dollar 7.7532 Taiwan Dollar 32.2290 Hungarian Forint 292.8325 Thai Baht 35.8105 Indian Rupee 67.8700 Turkish Lira 3.5176 Indonesian Rupiah 13,472.5000 Japanese Yen 116.6350 Mexican Peso 20.6015

Exchange rate from € Exchange rate from £

Swiss Franc 1.0720 Euro 1.1715 Danish Kroner 7.4355 Hong Kong Dollar 9.5802 Pound Sterling 0.8536 Japanese Yen 144.1200 Norwegian Kroner 9.0790 New Zealand Dollar 1.7720 Swedish Krona 9.5820 US Dollar 1.2356 US Dollar 1.0547 Yuan Renminbi 8.5871

The 31 December 2015 year end exchange rates were as follows:

Exchange rate from US$ Exchange rate from US$ Australian Dollar 1.3745 Norwegian Kroner 8.8514 Brazilian Real 3.9563 Philippine Peso 47.0550 Canadian Dollar 1.3891 Singapore Dollar 1.4187 Czech Koruna 24.8753 South African Rand 3.7539 Danish Kroner 6.8698 Swedish Krona 8.4306 Egyptian Pound 7.8301 Swiss Franc 1.0010 Euro 0.9206 Taiwan Dollar 32.8470 Hong Kong Dollar 7.7502 Thai Baht 35.9850 Hungarian Forint 290.9004 Turkish Lira 2.9189 Indian Rupee 66.1563 Indonesian Rupiah 13,785.0000 Japanese Yen 120.2950 Mexican Peso 17.2712

Exchange rate from € Exchange rate from £ Euro 1.3568 Swiss Franc 1.0874 Hong Kong Dollar 11.4229 Danish Kroner 7.4627 Japanese Yen 177.3028 Pound Sterling 0.7370 New Zealand Dollar 2.1529 Norwegian Kroner 9.6152 US Dollar 1.4739 Swedish Krona 9.1582 Yuan Renminbi 9.5709 US Dollar 1.0863

241

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

9. Soft Commission Arrangements

There were no soft commission arrangements affecting the Company during the financial year ended 31 December 2016 or 31 December 2015.

10. Taxation

Under current law and practice the Company qualifies as an investment undertaking as defined in Section 739B of the Taxes Consolidation Act, 1997, as amended. On that basis, it is not chargeable to Irish tax on its income or gains.

However, Irish tax may arise on the happening of a "chargeable event". A chargeable event includes any distribution payments to shareholders or any encashment, redemption, cancellation or transfer of redeemable participating shares.

No Irish tax will arise on the Company in respect of chargeable events in respect of:

(a) a shareholder who is neither Irish resident nor ordinarily resident in Ireland for tax purposes, at the time of the chargeable event, provided appropriate valid declarations in accordance with the provisions of the Taxes Consolidation Act, 1997, as amended, are held by the Company; and (b) certain exempted Irish tax resident shareholders who have provided the Company with the necessary signed statutory declarations.

Dividends, interest and capital gains (if any) received on investments made by the Company may be subject to withholding taxes imposed by the country from which the investment income/gains are received and such taxes may not be recoverable by the Company or its shareholders.

11. Net Asset Value per Redeemable Participating Share

The Net Asset Value per redeemable participating share of each sub-fund of the Company is determined by dividing the value of the net assets of the sub-fund by the total number of redeemable participating shares in issue.

242

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

12. Distributions

The following distributions were paid during the financial year ended 31 December 2016:

Hermes Global Emerging Markets Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid $ Relevant period Class F GBP 0.00697400 01/07/2016 01/07/2016 01/07/2016 02/08/2016 107,491 01/01/2016 - 30/06/2016 Class F EUR 0.01089500 01/07/2016 01/07/2016 01/07/2016 02/08/2016 845 01/01/2016 - 30/06/2016 Class F USD 0.01408000 01/07/2016 01/07/2016 01/07/2016 02/08/2016 72,593 01/01/2016 - 30/06/2016 Class R USD 0.00776800 01/07/2016 01/07/2016 01/07/2016 02/08/2016 7 01/01/2016 - 30/06/2016 Class R EUR 0.00899100 01/07/2016 01/07/2016 01/07/2016 02/08/2016 9,155 01/01/2016 - 30/06/2016 190,091

Hermes Global Equity Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid $ Relevant period Class F GBP 0.00969100 01/07/2016 01/07/2016 01/07/2016 02/08/2016 340 01/01/2016 - 30/06/2016 Class F EUR 0.01563300 01/07/2016 01/07/2016 01/07/2016 02/08/2016 13,418 01/01/2016 - 30/06/2016 13,758

Hermes European Alpha Equity Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid € Relevant period Class F GBP 0.01762400 01/07/2016 01/07/2016 01/07/2016 02/08/2016 237,186 01/01/2016 - 30/06/2016 Class F EUR 0.03049300 01/07/2016 01/07/2016 01/07/2016 02/08/2016 15,222 01/01/2016 - 30/06/2016 Class F USD 0.02412500 01/07/2016 01/07/2016 01/07/2016 02/08/2016 3,907 01/01/2016 - 30/06/2016 Class S GBP 0.01484800 01/07/2016 01/07/2016 01/07/2016 02/08/2016 19,746 01/01/2016 - 30/06/2016 Class S EUR 0.03198300 01/07/2016 01/07/2016 01/07/2016 02/08/2016 42,882 01/01/2016 - 30/06/2016 Class S GBP 0.01570100 01/07/2016 01/07/2016 01/07/2016 02/08/2016 56,872 01/01/2016 - 30/06/2016 Class S USD 0.02508300 01/07/2016 01/07/2016 01/07/2016 02/08/2016 8,001 01/01/2016 - 30/06/2016 Class S USD 0.03002400 01/07/2016 01/07/2016 01/07/2016 02/08/2016 22,880 01/01/2016 - 30/06/2016 Class M EUR 0.03133800 01/07/2016 01/07/2016 01/07/2016 02/08/2016 8,244 01/01/2016 - 30/06/2016 414,940

Hermes Global High Yield Credit Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid € Relevant period Class F GBP 0.02707796 04/01/2016 04/01/2016 04/01/2016 01/02/2016 112,535 01/07/2015 - 31/12/2015 Class F USD 0.05348000 04/01/2016 04/01/2016 04/01/2016 01/02/2016 25 01/07/2015 - 31/12/2015 Class F GBP 0.02515700 01/07/2016 01/07/2016 01/07/2016 02/08/2016 422,559 01/01/2016 - 30/06/2016 Class F USD 0.04800000 01/07/2016 01/07/2016 01/07/2016 02/08/2016 22 01/01/2016 - 30/06/2016 Class R EUR 0.04283600 01/07/2016 01/07/2016 01/07/2016 02/08/2016 102,942 01/01/2016 - 30/06/2016 638,083

Hermes Europe Ex-UK Equity Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid € Relevant period Class F GBP 0.00823000 01/07/2016 01/07/2016 01/07/2016 02/08/2016 10 01/01/2016 - 30/06/2016 Class F EUR 0.02308000 01/07/2016 01/07/2016 01/07/2016 02/08/2016 10,396 01/01/2016 - 30/06/2016 Class F USD 0.02118100 01/07/2016 01/07/2016 01/07/2016 02/08/2016 19,172 01/01/2016 - 30/06/2016 Class F GBP 0.01393000 01/07/2016 01/07/2016 01/07/2016 02/08/2016 83,334 01/01/2016 - 30/06/2016 112,912

243

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

12. Distributions (continued)

Hermes US SMID Equity Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid $ Relevant period Class F GBP 0.00052600 01/07/2016 01/07/2016 01/07/2016 02/08/2016 12,926 01/01/2016 - 30/06/2016 Class F EUR 0.00109800 01/07/2016 01/07/2016 01/07/2016 02/08/2016 4 01/01/2016 - 30/06/2016 Class F USD 0.00079900 01/07/2016 01/07/2016 01/07/2016 02/08/2016 12,092 01/01/2016 - 30/06/2016 Class F GBP 0.00022500 01/07/2016 01/07/2016 01/07/2016 02/08/2016 346 01/01/2016 - 30/06/2016 25,368

Hermes Asia Ex-Japan Equity Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid $ Relevant period Class F GBP 0.00933100 01/07/2016 01/07/2016 01/07/2016 02/08/2016 1,667,840 01/01/2016 - 30/06/2016 Class F USD 0.01268400 01/07/2016 01/07/2016 01/07/2016 02/08/2016 243,322 01/01/2016 - 30/06/2016 Class F EUR 0.01911100 01/07/2016 01/07/2016 01/07/2016 02/08/2016 17,002 01/01/2016 - 30/06/2016 Class F GBP 0.00717900 01/07/2016 01/07/2016 01/07/2016 02/08/2016 17 01/01/2016 - 30/06/2016 Class C EUR 0.00941400 01/07/2016 01/07/2016 01/07/2016 02/08/2016 14,068 01/01/2016 - 30/06/2016 Class C GBP 0.00561500 01/07/2016 01/07/2016 01/07/2016 02/08/2016 128,984 01/01/2016 - 30/06/2016 Class C USD 0.00947000 01/07/2016 01/07/2016 01/07/2016 02/08/2016 143 01/01/2016 - 30/06/2016 2,071,376

Hermes Multi Strategy Credit Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid $ Relevant period Class F GBP 0.02117516 04/01/2016 04/01/2016 04/01/2016 01/02/2016 793,407 01/07/2015 - 31/12/2015 Class F GBP 0.01947115 04/01/2016 04/01/2016 04/01/2016 01/02/2016 8,722,990 01/07/2015 - 31/12/2015 Class F EUR 0.00452000 04/01/2016 04/01/2016 04/01/2016 01/02/2016 2 01/07/2015 - 31/12/2015 Class F USD 0.03631500 04/01/2016 04/01/2016 04/01/2016 01/02/2016 8,918 01/07/2015 - 31/12/2015 Class R EUR 0.00370000 04/01/2016 04/01/2016 04/01/2016 01/02/2016 2 01/07/2015 - 31/12/2015 Class F GBP 0.02353900 01/07/2016 01/07/2016 01/07/2016 02/08/2016 775,090 01/01/2016 - 30/06/2016 Class F GBP 0.02015300 01/07/2016 01/07/2016 01/07/2016 02/08/2016 8,378,112 01/01/2016 - 30/06/2016 Class F EUR 0.03824000 01/07/2016 01/07/2016 01/07/2016 02/08/2016 21 01/01/2016 - 30/06/2016 Class F EUR 0.03677000 01/07/2016 01/07/2016 01/07/2016 02/08/2016 465,652 01/01/2016 - 30/06/2016 Class F USD 0.03649700 01/07/2016 01/07/2016 01/07/2016 02/08/2016 17,674 01/01/2016 - 30/06/2016 Class R EUR 0.03182000 01/07/2016 01/07/2016 01/07/2016 02/08/2016 18 01/01/2016 - 30/06/2016 Class R EUR 0.03074000 01/07/2016 01/07/2016 01/07/2016 02/08/2016 17 01/01/2016 - 30/06/2016 19,161,903

Hermes Multi Asset Inflation Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid £ Relevant period Class F GBP 0.00222000 01/07/2016 01/07/2016 01/07/2016 02/08/2016 2 01/01/2016 - 30/06/2016 2

Hermes Global Small Cap Equity Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid $ Relevant period Class F EUR 0.00800000 01/07/2016 01/07/2016 01/07/2016 02/08/2016 4 01/01/2016 - 30/06/2016 Class F GBP 0.00379000 01/07/2016 01/07/2016 01/07/2016 02/08/2016 5 01/01/2016 - 30/06/2016 Class F USD 0.00716000 01/07/2016 01/07/2016 01/07/2016 02/08/2016 4 01/01/2016 - 30/06/2016 Class F GBP 0.00439400 01/07/2016 01/07/2016 01/07/2016 02/08/2016 20,433 01/01/2016 - 30/06/2016 20,446

244

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

12. Distributions (continued)

Hermes Absolute Return Credit Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid $ Relevant period Class F EUR 0.01544000 04/01/2016 04/01/2016 04/01/2016 01/02/2016 8 01/07/2015 - 31/12/2015 Class F CHF 0.01538000 04/01/2016 04/01/2016 04/01/2016 01/02/2016 8 01/07/2015 - 31/12/2015 Class F USD 0.01514000 04/01/2016 04/01/2016 04/01/2016 01/02/2016 5 01/07/2015 - 31/12/2015 Class R EUR 0.00876000 04/01/2016 04/01/2016 04/01/2016 01/02/2016 4 01/07/2015 - 31/12/2015 Class R CHF 0.00802000 04/01/2016 04/01/2016 04/01/2016 01/02/2016 5 01/07/2015 - 31/12/2015 Class F GBP 0.00356200 04/01/2016 04/01/2016 04/01/2016 01/02/2016 5 01/07/2015 - 31/12/2015 Class F GBP 0.00355000 04/01/2016 04/01/2016 04/01/2016 01/02/2016 8 01/07/2015 - 31/12/2015 Class F EUR 0.01904000 01/07/2016 01/07/2016 01/07/2016 02/08/2016 11 01/01/2016 - 30/06/2016 Class F CHF 0.01854000 01/07/2016 01/07/2016 01/07/2016 02/08/2016 9 01/01/2016 - 30/06/2016 Class F USD 0.01906000 01/07/2016 01/07/2016 01/07/2016 02/08/2016 10 01/01/2016 - 30/06/2016 Class R EUR 0.01222000 01/07/2016 01/07/2016 01/07/2016 02/08/2016 7 01/01/2016 - 30/06/2016 Class R CHF 0.01160000 01/07/2016 01/07/2016 01/07/2016 02/08/2016 6 01/01/2016 - 30/06/2016 Class F GBP 0.01145000 01/07/2016 01/07/2016 01/07/2016 02/08/2016 15 01/01/2016 - 30/06/2016 Class F GBP 0.01047000 01/07/2016 01/07/2016 01/07/2016 02/08/2016 14 01/01/2016 - 30/06/2016 115

The following distributions were declared after 31 December 2016 and in accordance with IAS 10 “Events After the Reporting Period” have not been included in liabilities at the financial year end date:

Hermes Global Emerging Markets Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid $ Relevant period Class F GBP 0.00473100 03/01/2017 03/01/2017 03/01/2017 01/02/2017 411,241 01/07/2016 - 31/12/2016 Class F EUR 0.00899700 03/01/2017 03/01/2017 03/01/2017 01/02/2017 1,851 01/07/2016 - 31/12/2016 Class F USD 0.00894700 03/01/2017 03/01/2017 03/01/2017 01/02/2017 34,842 01/07/2016 - 31/12/2016 Class R USD 0.00295200 03/01/2017 03/01/2017 03/01/2017 01/02/2017 5,444 01/07/2016 - 31/12/2016 Class R EUR 0.00289900 03/01/2017 03/01/2017 03/01/2017 01/02/2017 41,234 01/07/2016 - 31/12/2016 Class J GBP 0.00201100 03/01/2017 03/01/2017 03/01/2017 01/02/2017 10,936 01/07/2016 - 31/12/2016 Class J USD 0.00376900 03/01/2017 03/01/2017 03/01/2017 01/02/2017 145 01/07/2016 - 31/12/2016 Class J EUR 0.00296000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 2 01/07/2016 - 31/12/2016 Class J GBP 0.00160000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 52 01/07/2016 - 31/12/2016 Class J EUR 0.00124000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 1 01/07/2016 - 31/12/2016 Class F SGD 0.00213000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 - 01/07/2016 - 31/12/2016 505,748

Hermes Global Equity Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid $ Relevant period Class F GBP 0.00519000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 6 01/07/2016 - 31/12/2016 Class F EUR 0.00805300 03/01/2017 03/01/2017 03/01/2017 01/02/2017 6,549 01/07/2016 - 31/12/2016 6,555

245

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

12. Distributions (continued)

Hermes European Alpha Equity Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid € Relevant period Class F GBP 0.002153000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 12,190 01/07/2016 - 31/12/2016 Class F EUR 0.003636000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 1,598 01/07/2016 - 31/12/2016 Class F USD 0.002729000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 466 01/07/2016 - 31/12/2016 Class S GBP 0.002603000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 3,055 01/07/2016 - 31/12/2016 Class S EUR 0.005175000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 458 01/07/2016 - 31/12/2016 Class S GBP 0.001780000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 3,176 01/07/2016 - 31/12/2016 Hedged Class S USD 0.003977000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 1,072 01/07/2016 - 31/12/2016 Class S USD 0.003317000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 547 01/07/2016 - 31/12/2016 Hedged Class M EUR 0.006635000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 1,745 01/07/2016 - 31/12/2016 24,307

Hermes Global High Yield Credit Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid $ Relevant period Class F GBP 0.000271000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 5,040 01/07/2016 - 31/12/2016 Hedged Class F USD 0.000492000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 22 01/07/2016 - 31/12/2016 Hedged Class R EUR 0.000425000003/01/2017 03/01/2017 03/01/2017 01/02/2017 130,351 01/07/2016 - 31/12/2016 135,413

Hermes US SMID Equity Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid $ Relevant period Class F GBP 0.000271000 03/01/2017 03/01/2017 30/12/2016 01/02/2017 10,004 01/07/2016 - 31/12/2016 Class F EUR 0.000492000 03/01/2017 03/01/2017 30/12/2016 01/02/2017 2 01/07/2016 - 31/12/2016 Class F USD 0.000425000003/01/2017 03/01/2017 30/12/2016 01/02/2017 8,619 01/07/2016 - 31/12/2016 18,625

Hermes Asia Ex-Japan Equity Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid $ Relevant period Class F GBP 0.013070000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 2,476,397 01/07/2016 - 31/12/2016 Class F EUR 0.025902000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 331,986 01/07/2016 - 31/12/2016 Class F USD 0.015760000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 204,109 01/07/2016 - 31/12/2016 Class F GBP 0.008712000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 17,519 01/07/2016 - 31/12/2016 Hedged Class C EUR 0.013121000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 22 01/07/2016 - 31/12/2016 Class C GBP 0.007572000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 5,007 01/07/2016 - 31/12/2016 Class C USD 0.012291000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 178 01/07/2016 - 31/12/2016 3,035,218

246

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

12. Distributions (continued)

Hermes Multi Strategy Credit Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid $ Relevant period Class F GBP 0.02614600 03/01/2017 03/01/2017 03/01/2017 01/02/2017 769,350 01/07/2016 - 31/12/2016 Class F GBP 0.01988100 03/01/2017 03/01/2017 03/01/2017 01/02/2017 7,861,259 01/07/2016 - 31/12/2016 Class F EUR 0.04117200 03/01/2017 03/01/2017 03/01/2017 01/02/2017 25,904 01/07/2016 - 31/12/2016 Class F EUR 0.04093300 03/01/2017 03/01/2017 03/01/2017 01/02/2017 626,566 01/07/2016 - 31/12/2016 Class F USD 0.03743000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 26,536 01/07/2016 - 31/12/2016 Class R EUR 0.03446000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 18 01/07/2016 - 31/12/2016 Class R EUR 0.03386000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 18 01/07/2016 - 31/12/2016 9,309,651

Hermes Multi Asset Inflation Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid $ Relevant period Class F GBP 0.002580000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 3 01/07/2016 - 31/12/2016 3

Hermes Absolute Return Credit Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid $ Relevant period Class F EUR 0.017900000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 10 01/07/2016 - 31/12/2016 Hedged Class F CHF 0.016960000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 8 01/07/2016 - 31/12/2016 Hedged Class F USD 0.018060000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 9 01/07/2016 - 31/12/2016 Class R EUR 0.010760000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 6 01/07/2016 - 31/12/2016 Hedged Class R CHF 0.009880000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 5 01/07/2016 - 31/12/2016 Hedged Class F GBP 0.011670000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 14 01/07/2016 - 31/12/2016 Class F GBP 0.009150000 03/01/2017 03/01/2017 03/01/2017 01/02/2017 11 01/07/2016 - 31/12/2016 Hedged 63

247

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

12. Distributions (continued)

The following distributions were declared during the financial year ended 31 December 2015:

Hermes Global Emerging Markets Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid $ Relevant period Class F GBP 0.00228127 30/06/2015 30/06/2015 29/06/2015 04/08/2015 4 01/01/2015 - 30/06/2015 Class R USD 0.00944000 30/06/2015 30/06/2015 29/06/2015 04/08/2015 5 01/01/2015 - 30/06/2015 Class R EUR 0.00450074 30/06/2015 30/06/2015 29/06/2015 04/08/2015 579 01/01/2015 - 30/06/2015 Class R EUR 0.00284083 30/06/2015 30/06/2015 29/06/2015 04/08/2015 2 01/01/2015 - 30/06/2015 Hedged Class F GBP 0.00161485 31/12/2015 31/12/2015 31/12/2015 01/02/2016 14,168 01/07/2015 - 31/12/2015 Class F USD 0.00068000 31/12/2015 31/12/2015 31/12/2015 01/02/2016 - 01/07/2015 - 31/12/2015 Clas R EUR 0.00137394 31/12/2015 31/12/2015 31/12/2015 01/02/2016 373 01/07/2015 - 31/12/2015 Hedged 15,131

Hermes Global Equity Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid $ Relevant period Class F GBP 0.00902949 30/06/2015 30/06/2015 29/06/2015 04/08/2015 369 01/01/2015 - 30/06/2015 Class F EUR 0.01135753 30/06/2015 30/06/2015 29/06/2015 04/08/2015 9,729 01/01/2015 - 30/06/2015 Class F GBP 0.00382148 31/12/2015 31/12/2015 31/12/2015 01/02/2016 147 01/07/2015 - 31/12/2015 Class F EUR 0.00675913 31/12/2015 31/12/2015 31/12/2015 01/02/2016 5,687 01/07/2015 - 31/12/2015 15,932

Hermes UK Small and Mid Cap Companies Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid £ Relevant period Class F GBP 0.00160000 30/06/2015 30/06/2015 29/06/2015 04/08/2015 2 01/01/2015 - 30/06/2015 Class F GBP 0.00457327 31/12/2015 31/12/2015 30/12/2015 01/02/2016 2,335 01/07/2015 - 31/12/2015 2,337

248

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

12. Distributions (continued)

Hermes European Alpha Equity Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid € Relevant period Class F GBP 0.01590483 30/06/2015 30/06/2015 29/06/2015 04/08/2015 249,013 01/01/2015 - 30/06/2015 Class S GBP 0.01196453 30/06/2015 30/06/2015 29/06/2015 04/08/2015 37,147 01/01/2015 - 30/06/2015 Class F EUR 0.02814391 30/06/2015 30/06/2015 29/06/2015 04/08/2015 17,108 01/01/2015 - 30/06/2015 Class S EUR 0.02928145 30/06/2015 30/06/2015 29/06/2015 04/08/2015 61,276 01/01/2015 - 30/06/2015 Class S GBP 0.01130428 30/06/2015 30/06/2015 29/06/2015 04/08/2015 26,556 01/01/2015 - 30/06/2015 Hedged Class S USD 0.02516543 30/06/2015 30/06/2015 29/06/2015 04/08/2015 8,027 01/01/2015 - 30/06/2015 Class S USD 0.02764858 30/06/2015 30/06/2015 29/06/2015 04/08/2015 18,412 01/01/2015 - 30/06/2015 Hedged Class M EUR 0.03133810 30/06/2015 30/06/2015 29/06/2015 04/08/2015 9,985 01/01/2015 - 30/06/2015 Class F USD 0.01904141 30/06/2015 30/06/2015 29/06/2015 04/08/2015 6,192 01/01/2015 - 30/06/2015 Class F GBP 0.00079757 31/12/2015 31/12/2015 31/12/2015 01/02/2016 11,338 01/07/2015 - 31/12/2015 Class F EUR 0.00180199 31/12/2015 31/12/2015 31/12/2015 01/02/2016 995 01/07/2015 - 31/12/2015 Class F USD 0.00358672 31/12/2015 31/12/2015 31/12/2015 01/02/2016 664 01/07/2015 - 31/12/2015 Class S GBP 0.00153862 31/12/2015 31/12/2015 31/12/2015 01/02/2016 2,418 01/07/2015 - 31/12/2015 Class S EUR 0.00334738 31/12/2015 31/12/2015 31/12/2015 01/02/2016 6,477 01/07/2015 - 31/12/2015 Class S USD 0.00259723 31/12/2015 31/12/2015 31/12/2015 01/02/2016 948 01/07/2015 - 31/12/2015 Class S USD 0.00290452 31/12/2015 31/12/2015 31/12/2015 01/02/2016 2,574 01/07/2015 - 31/12/2015 Hedged Class M EUR 0.00485405 31/12/2015 31/12/2015 31/12/2015 01/02/2016 1,546 01/07/2015 - 31/12/2015 460,676

Hermes Global High Yield Credit Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid € Relevant period Class F GBP 0.02518071 30/06/2015 30/06/2015 29/06/2015 04/08/2015 106,615 01/01/2015 - 30/06/2015 Hedged Class F USD 0.05764813 30/06/2015 30/06/2015 29/06/2015 04/08/2015 26 01/01/2015 - 30/06/2015 Hedged 106,641

Hermes Europe Ex-UK Equity Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid € Relevant period Class F USD 0.00919389 30/06/2015 30/06/2015 29/06/2015 04/08/2015 9,363 01/01/2015 - 30/06/2015 Hedged Class F GBP 0.01032809 30/06/2015 30/06/2015 29/06/2015 04/08/2015 265,196 01/01/2015 - 30/06/2015 Hedged Class F EUR 0.00572841 30/06/2015 30/06/2015 29/06/2015 04/08/2015 1,576 01/01/2015 - 30/06/2015 276,135 Hermes US SMID Equity Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid $ Relevant period Class F EUR 0.00048888 30/06/2015 30/06/2015 29/06/2015 04/08/2015 1 01/01/2015 - 30/06/2015 Class F GBP 0.00007912 31/12/2015 31/12/2015 30/12/2015 01/02/2016 409 01/07/2015 - 31/12/2015 Class F EUR 0.00020277 31/12/2015 31/12/2015 30/12/2015 01/02/2016 - 01/07/2015 - 31/12/2015 Class F USD 0.00152470 31/12/2015 31/12/2015 30/12/2015 01/02/2016 2,290 01/07/2015 - 31/12/2015 Class F GBP 0.00006544 31/12/2015 31/12/2015 30/12/2015 01/02/2016 17 01/07/2015 - 31/12/2015 Hedged 2,717

249

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

12. Distributions (continued)

Hermes Asia Ex-Japan Equity Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid $ Relevant period Class F GBP 0.00839331 30/06/2015 30/06/2015 29/06/2015 04/08/2015 1,237,130 01/01/2015 - 30/06/2015 Class F USD 0.01261155 30/06/2015 30/06/2015 29/06/2015 04/08/2015 193,349 01/01/2015 - 30/06/2015 Class F EUR 0.01930324 30/06/2015 30/06/2015 29/06/2015 04/08/2015 239,120 01/01/2015 - 30/06/2015 Class F GBP 0.00671501 30/06/2015 30/06/2015 29/06/2015 04/08/2015 25,294 01/01/2015 - 30/06/2015 Hedged Class C EUR 0.01201828 30/06/2015 30/06/2015 29/06/2015 04/08/2015 33 01/01/2015 - 30/06/2015 Class C GBP 0.00560419 30/06/2015 30/06/2015 29/06/2015 04/08/2015 11,856 01/01/2015 - 30/06/2015 Class C USD 0.01274519 30/06/2015 30/06/2015 29/06/2015 04/08/2015 106 01/01/2015 - 30/06/2015 Class F GBP 0.00590385 31/12/2015 31/12/2015 30/12/2015 01/02/2016 861,757 01/07/2015 - 31/12/2015 Class F EUR 0.01616081 31/12/2015 31/12/2015 30/12/2015 01/02/2016 173,535 01/07/2015 - 31/12/2015 Class F USD 0.01101794 31/12/2015 31/12/2015 30/12/2015 01/02/2016 33,590 01/07/2015 - 31/12/2015 Class F GBP 0.00581810 31/12/2015 31/12/2015 30/12/2015 01/02/2016 20,436 01/07/2015 - 31/12/2015 Hedged Class C EUR 0.00750028 31/12/2015 31/12/2015 30/12/2015 01/02/2016 20 01/07/2015 - 31/12/2015 Class C GBP 0.00390592 31/12/2015 31/12/2015 30/12/2015 01/02/2016 10,155 01/07/2015 - 31/12/2015 Class C USD 0.00693643 31/12/2015 31/12/2015 30/12/2015 01/02/2016 77 01/07/2015 - 31/12/2015 2,806,458 Hermes Multi Strategy Credit Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid $ Relevant period Class F GBP 0.01866347 30/06/2015 30/06/2015 29/06/2015 04/08/2015 1,056,545 01/01/2015 - 30/06/2015 Class F GBP 0.00340164 30/06/2015 30/06/2015 29/06/2015 04/08/2015 1,281,867 01/01/2015 - 30/06/2015 Hedged Class F USD 0.07254298 30/06/2015 30/06/2015 29/06/2015 04/08/2015 6,969 01/01/2015 - 30/06/2015 2,345,381 Hermes Multi Asset Inflation Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid £ Relevant period Class F GBP 0.00605000 30/06/2015 30/06/2015 29/06/2015 04/08/2015 6 01/01/2015 - 30/06/2015 Class F GBP 0.00459000 31/12/2015 31/12/2015 30/12/2015 01/02/2016 5 01/01/2015 - 30/06/2015 11 Hermes Absolute Return Credit Fund Distributing Distribution Date Amount Class per unit Declared Ex-date Record Date Date paid $ Relevant period Class F EUR 0.00242141 30/06/2015 30/06/2015 29/06/2015 04/08/2015 1 01/01/2015 - 30/06/2015 Hedged Class F CHF 0.00239759 30/06/2015 30/06/2015 29/06/2015 04/08/2015 1 01/01/2015 - 30/06/2015 Hedged Class F USD 0.00230000 30/06/2015 30/06/2015 29/06/2015 04/08/2015 1 01/01/2015 - 30/06/2015 Class R EUR 0.00123761 30/06/2015 30/06/2015 29/06/2015 04/08/2015 1 01/01/2015 - 30/06/2015 Hedged Class R CHF 0.00124526 30/06/2015 30/06/2015 29/06/2015 04/08/2015 1 01/01/2015 - 30/06/2015 Hedged 5

250

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

13. Comparative Net Asset Values

Hermes Global Emerging 31 December 31 December 31 December Markets Fund Share Class 2016 2015 2014 £ £ £ Net Asset Value Z GBP Accumulating 300,061,482 228,427,841 229,168,918 Net Asset Value per share Z GBP Accumulating 2.9753 2.2650 2.2724

€ € € Net Asset Value R EUR Accumulating 61,064,672 5,723,409 1,414 Net Asset Value per share R EUR Accumulating 3.2622 2.9434 2.8285

£ £ £ Net Asset Value T GBP Accumulating 2,323,466 1,710,974 1,412,694 Net Asset Value per share T GBP Accumulating 1.7496 1.3319 1.3362

£ £ £ Net Asset Value F GBP Accumulating 169,978,216 63,712,332 23,157,040 Net Asset Value per share F GBP Accumulating 1.5220 1.1702 1.1858

$ $ $ Net Asset Value F USD Accumulating 385,977,657 182,679,594 97,815,649 Net Asset Value per share F USD Accumulating 2.1252 1.9683 2.1007

£ £ £ Net Asset Value F GBP Accumulating Hedged 2,865,458 1,352,696 8,325,795 Net Asset Value per share F GBP Accumulating Hedged 1.0355 0.9697 1.0346

€ € € Net Asset Value F EUR Accumulating 61,292,046 13,387,878 1,256 Net Asset Value per share F EUR Accumulating 2.9249 2.6264 2.5122

$ $ Net Asset Value R USD Distributing 3,346,010 2,200,101 Net Asset Value per share R USD Distributing 1.8142 1.6962

€ € Net Asset Value R EUR Distributing 24,959,012 2,283,953 Net Asset Value per share R EUR Distributing 1.8530 1.6809

£ £ Net Asset Value F GBP Distributing 81,750,897 5,315,655 Net Asset Value per share F GBP Distributing 1.1592 0.8975

€ € Net Asset Value R EUR Distributing Hedged 893 432,006 Net Asset Value per share R EUR Distributing Hedged 1.7863 1.7356

$ $ Net Asset Value R USD Accumulating 1,567,351 222,690 Net Asset Value per share R USD Accumulating 1.9057 1.7737

251

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

13. Comparative Net Asset Values (continued)

Hermes Global Emerging 31 December 31 December Markets Fund (continued) Share Class 2016 2015 € € Net Asset Value F EUR Accumulating Hedged 655,905 28,924 Net Asset Value per share F EUR Accumulating Hedged 1.9894 1.8748

$ $ Net Asset Value F USD Distributing 8,268,217 990 Net Asset Value per share F USD Distributing 2.1232 1.9796

$ $ Net Asset Value G USD Accumulating 106,210,389 2,251 Net Asset Value per share G USD Accumulating 2.2053 2.0567

€ Net Asset Value G EUR Accumulating 1,123 Net Asset Value per share G EUR Accumulating 2.2455

€ Net Asset Value F EUR Distributing 428,875 Net Asset Value per share F EUR Distributing 2.2016

$ Net Asset Value Z USD Accumulating 5,847,876 Net Asset Value per share Z USD Accumulating 1.9796

£ Net Asset Value J GBP Accumulating 404,217 Net Asset Value per share J GBP Accumulating 1.0473

£ Net Asset Value J GBP Distributing 4,623,790 Net Asset Value per share J GBP Distributing 1.0474

$ Net Asset Value J USD Accumulating 6,592,287 Net Asset Value per share J USD Accumulating 1.9440

$ Net Asset Value J USD Distributing 75,034 Net Asset Value per share J USD Distributing 1.9439

€ Net Asset Value J EUR Accumulating 1,030 Net Asset Value per share J EUR Accumulating 2.0592

€ Net Asset Value J EUR Distributing 1,030 Net Asset Value per share J EUR Distributing 2.0592

£ Net Asset Value J GBP Accumulating Hedged 10,355 Net Asset Value per share J GBP Accumulating Hedged 0.9371

252

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

13. Comparative Net Asset Values (continued)

Hermes Global Emerging 31 December Markets Fund (continued) Share Class 2016 £ Net Asset Value J GBP Distributing Hedged 24,856 Net Asset Value per share J GBP Distributing Hedged 0.9374

€ Net Asset Value J EUR Accumulating Hedged 934 Net Asset Value per share J EUR Accumulating Hedged 1.8686

€ Net Asset Value J EUR Distributing Hedged 934 Net Asset Value per share J EUR Distributing Hedged 1.8685

CHF Net Asset Value F CHF Accumulating 107,645 Net Asset Value per share F CHF Accumulating 1.9751

S$ Net Asset Value F SGD Accumulating 977 Net Asset Value per share F SGD Accumulating 2.9312

S$ Net Asset Value F SGD Distributing 977 Net Asset Value per share F SGD Distributing 2.9312

S$ Net Asset Value R SGD Accumulating 976 Net Asset Value per share R SGD Accumulating 2.9285

S$ Net Asset Value R SGD Distributing 976 Net Asset Value per share R SGD Distributing 2.9285

31 December 31 December 31 December Hermes Global Equity Fund Share Class 2016 2015 2014 £ £ £ Net Asset Value Z GBP Accumulating 63,771,241 163,192,437 155,134,217 Net Asset Value per share Z GBP Accumulating 3.4425 2.6315 2.5016

€ € € Net Asset Value R EUR Accumulating 224,016 130,557 32,797 Net Asset Value per share R EUR Accumulating 4.4500 4.0171 3.6441

£ £ £ Net Asset Value T GBP Accumulating 3,591,766 3,486,368 2,671,087 Net Asset Value per share T GBP Accumulating 2.3393 1.7882 1.6998

£ £ £ Net Asset Value F GBP Accumulating 3,856,179 853,393 408,617 Net Asset Value per share F GBP Accumulating 2.0013 1.5382 1.4703

253

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

13. Comparative Net Asset Values (continued)

Hermes Global Equity Fund 31 December 31 December 31 December (continued) Share Class 2016 2015 2014 $ $ $ Net Asset Value F USD Accumulating 47,033,675 43,874,058 29,241,966 Net Asset Value per share F USD Accumulating 2.3687 2.1931 2.2080

£ £ £ Net Asset Value F GBP Distributing 1,402 28,241 27,319 Net Asset Value per share F GBP Distributing 1.4016 1.0862 1.0507

€ € € Net Asset Value F EUR Accumulating 167,485,843 151,453,248 1,089 Net Asset Value per share F EUR Accumulating 2.6889 2.4135 2.1774

€ € Net Asset Value F EUR Distributing 1,642,125 1,486,292 Net Asset Value per share F EUR Distributing 2.1323 1.9300

$ $ Net Asset Value R USD Accumulating 1,121 1,043 Net Asset Value per share R USD Accumulating 2.2427 2.0866

S$ Net Asset Value R SGD Accumulating 1,160 Net Asset Value per share R SGD Accumulating 3.5959

Hermes UK Small and Mid Cap 31 December 31 December 31 December Companies Fund Share Class 2016 2015 2014 £ £ £ Net Asset Value Z GBP Accumulating - 217,701,294 181,971,557 Net Asset Value per share Z GBP Accumulating - 4.7727 3.9894

€ € € Net Asset Value R EUR Accumulating - 1,899,791 1,885,178 Net Asset Value per share R EUR Accumulating - 5.1509 4.1253

£ £ £ Net Asset Value F GBP Accumulating - 1,892,325 1,859,796 Net Asset Value per share F GBP Accumulating - 1.7271 1.4545

£ £ £ Net Asset Value T GBP Accumulating - 325,497 394,051 Net Asset Value per share T GBP Accumulating - 1.9305 1.6136

£ £ £ Net Asset Value R GBP Accumulating - 4,255 1,032 Net Asset Value per share R GBP Accumulating - 1.2156 1.0315

£ £ Net Asset Value F GBP Distributing - 531,776 Net Asset Value per share F GBP Distributing - 1.0413

254

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

13. Comparative Net Asset Values (continued)

Hermes European Alpha 31 December 31 December 31 December Equity Fund Share Class 2016 2015 2014 £ £ £ Net Asset Value Z GBP Accumulating 200,772,380 170,947,379 153,443,625 Net Asset Value per share Z GBP Accumulating 2.0077 1.7095 1.5344

€ € € Net Asset Value R EUR Accumulating 49,928,157 39,373,695 32,566,203 Net Asset Value per share R EUR Accumulating 3.1521 3.1814 2.7361

£ £ £ Net Asset Value T GBP Accumulating 1,214,546 1,399,449 1,226,274 Net Asset Value per share T GBP Accumulating 1.8343 1.5618 1.4019

€ € € Net Asset Value Z EUR Accumulating 57,526,241 56,731,442 54,521,996 Net Asset Value per share Z EUR Accumulating 3.6430 3.6224 3.0690

£ £ £ Net Asset Value F GBP Accumulating 581,370 498,542 473,342 Net Asset Value per share F GBP Accumulating 1.5403 1.3213 1.1950

€ € € Net Asset Value F EUR Accumulating 8,801,309 9,376,972 2,954,326 Net Asset Value per share F EUR Accumulating 2.6884 2.6932 2.2988

£ £ £ Net Asset Value F GBP Distributing 7,167,915 14,223,041 17,518,272 Net Asset Value per share F GBP Distributing 1.4748 1.2822 1.1751

£ £ £ Net Asset Value R GBP Accumulating 269,131 972,719 701,465 Net Asset Value per share R GBP Accumulating 1.3217 1.1425 1.0410

€ € € Net Asset Value F EUR Distributing 1,074,288 1,370,249 1,605,939 Net Asset Value per share F EUR Distributing 2.4446 2.4819 2.1437

€ € € Net Asset Value S EUR Distributing 214,207 4,754,086 7,987,394 Net Asset Value per share S EUR Distributing 2.4214 2.4569 2.1215

$ $ $ Net Asset Value F USD Distributing 330,648 346,270 916 Net Asset Value per share F USD Distributing 1.8319 1.9184 1.8484

£ £ £ Net Asset Value S GBP Distributing 1,185,639 1,253,264 4,442,143 Net Asset Value per share S GBP Distributing 1.1767 1.0222 0.9355

$ $ $ Net Asset Value S USD Distributing 514,485 672,226 1,279,617 Net Asset Value per share S USD Distributing 1.8067 1.8907 1.8238

255

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

13. Comparative Net Asset Values (continued)

Hermes European Alpha 31 December 31 December 31 December Equity Fund (continued) Share Class 2016 2015 2014

$ $ $ Net Asset Value S USD Accumulating Hedged 3,565,159 3,322,464 1,911,174 Net Asset Value per share S USD Accumulating Hedged 2.4284 2.4046 2.0754

€ € € Net Asset Value S EUR Accumulating 24,958,487 23,069,617 10,003,113 Net Asset Value per share S EUR Accumulating 2.4624 2.4632 2.0995

£ £ £ Net Asset Value S GBP Distributing Hedged 1,762,826 5,457,070 3,447,984 Net Asset Value per share S GBP Distributing Hedged 1.1508 1.1757 1.0190

$ $ $ Net Asset Value R USD Accumulating Hedged 5,957,839 6,110,391 2,835,607 Net Asset Value per share R USD Accumulating Hedged 2.2506 2.2495 1.9601

£ £ £ Net Asset Value S GBP Accumulating 3,630,257 3,037,573 2,583,819 Net Asset Value per share S GBP Accumulating 1.2078 1.0346 0.9342

CHF CHF CHF Net Asset Value R CHF Accumulating Hedged 567,775 679,625 72,758 Net Asset Value per share R CHF Accumulating Hedged 2.3608 2.3990 2.0907

$ $ $ Net Asset Value S USD Distributing Hedged 412,084 2,055,479 2,708,705 Net Asset Value per share S USD Distributing Hedged 2.3667 2.3796 2.0778

£ £ £ Net Asset Value S GBP Accumulating Hedged 4,656,841 5,480,098 4,225,678 Net Asset Value per share S GBP Accumulating Hedged 1.1890 1.2002 1.0310

$ $ $ Net Asset Value S USD Accumulating 662,852 752,231 719,552 Net Asset Value per share S USD Accumulating 1.8011 1.8583 1.7674

€ € € Net Asset Value M EUR Distributing 594,368 729,548 729,033 Net Asset Value per share M EUR Distributing 2.2595 2.2906 1.9797

€ € € Net Asset Value M EUR Accumulating 322,908,678 365,431,151 164,713,099 Net Asset Value per share M EUR Accumulating 2.334 2.3315 1.9841

$ $ $ Net Asset Value R USD Accumulating 252,806 667,245 45,047 Net Asset Value per share R USD Accumulating 1.7665 1.8396 1.7652 . .

256

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

13. Comparative Net Asset Values (continued)

Hermes European Alpha 31 December 31 December 31 December Equity Fund (continued) Share Class 2016 2015 2014 CHF CHF CHF Net Asset Value R CHF Accumulating 1,034 1,050 100,483 Net Asset Value per share R CHF Accumulating 2.0713 2.1042 2.0097

£ £ Net Asset Value F GBP Accumulating Hedged - 9,754 Net Asset Value per share F GBP Accumulating Hedged - 0.9935

€ € Net Asset Value R EUR Distributing 3,992,235 4,656,987 Net Asset Value per share R EUR Distributing 1.9369 1.9549 Hermes Global High Yield 31 December 31 December 31 December Credit Fund Share Class 2016 2015 2014 £ £ £ Net Asset Value Z GBP Accumulating 167,211,777 129,329,154 138,812,691 Net Asset Value per share Z GBP Accumulating 1.6721 1.2933 1.3881

€ € € Net Asset Value R EUR Accumulating 1,502 1,362 1,406 Net Asset Value per share R EUR Accumulating 3.0035 2.7240 2.8125

£ £ £ Net Asset Value F GBP Accumulating 366,759 286,550 354,745 Net Asset Value per share F GBP Accumulating 1.3556 1.0553 1.1407

€ € € Net Asset Value F EUR Accumulating 52,978,540 36,115,408 35,308,366 Net Asset Value per share F EUR Accumulating 2.3382 2.1081 2.1630

£ £ £ Net Asset Value F GBP Accumulating Hedged 21,790,791 13,178,580 17,711,000 Net Asset Value per share F GBP Accumulating Hedged 1.1408 1.0210 1.0446

£ £ £ Net Asset Value F GBP Distributing Hedged 183,575 2,895,324 2,106,312 Net Asset Value per share F GBP Distributing Hedged 0.9986 0.9452 0.9911

$ $ $ Net Asset Value F USD Distributing Hedged 1,014 952 1,000 Net Asset Value per share F USD Distributing Hedged 2.0279 1.9032 2.0007

$ $ $ Net Asset Value F USD Accumulating Hedged 11,659,520 12,824,067 1,007 Net Asset Value per share F USD Accumulating Hedged 2.2090 1.9679 2.0137

£ £ Net Asset Value T GBP Accumulating 395,619 305,988 Net Asset Value per share T GBP Accumulating 1.2490 0.9660

257

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

13. Comparative Net Asset Values (continued)

Hermes Global High Yield 31 December 31 December Credit Fund (continued) Share Class 2016 2015 £ £ Net Asset Value T GBP Accumulating Hedged 279,385 476,471 Net Asset Value per share T GBP Accumulating Hedged 1.0768 0.9561

$ $ Net Asset Value R USD Accumulating 1,014 946 Net Asset Value per share R USD Accumulating 2.0279 1.8921

€ Net Asset Value R EUR Distributing 6,035,836 Net Asset Value per share R EUR Distributing 2.1998

Hermes Europe Ex-UK Equity 31 December 31 December 31 December Fund Share Class 2016 2015 2014 £ £ £ Net Asset Value Z GBP Accumulating 174,488,554 147,682,739 130,037,540 Net Asset Value per share Z GBP Accumulating 2.0342 1.7217 1.5160

€ € € Net Asset Value R EUR Accumulating 1,889 6,741,955 19,361,194 Net Asset Value per share R EUR Accumulating 3.2623 3.2733 2.7624

£ £ £ Net Asset Value R GBP Accumulating 1,294 3,766,856 6,069,978 Net Asset Value per share R GBP Accumulating 1.8149 1.5591 1.3941

£ £ £ Net Asset Value F GBP Accumulating 13,692,206 6,375 2,210,934 Net Asset Value per share F GBP Accumulating 1.6432 1.4011 1.2430

€ € € Net Asset Value F EUR Accumulating 2,073,534 2,615,106 3,062,501 Net Asset Value per share F EUR Accumulating 2.7630 2.7514 2.3038

£ £ £ Net Asset Value F GBP Distributing Hedged 4,536,195 27,267,368 14,442,969 Net Asset Value per share F GBP Distributing Hedged 1.1916 1.2054 1.0239

$ $ Net Asset Value F USD Distributing Hedged 1,917,836 2,190,260 Net Asset Value per share F USD Distributing Hedged 1.9382 1.9310

€ € Net Asset Value F EUR Distributing 1,331,031 699,306 Net Asset Value per share F EUR Distributing 2.0267 2.0430

£ Net Asset Value F GBP Distributing 1,179 Net Asset Value per share F GBP Distributing 1.1789

258

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

13. Comparative Net Asset Values (continued)

Hermes Europe Ex-UK Equity 31 December Fund (continued) Share Class 2016 £ Net Asset Value M GBP Accumulating 74,713 Net Asset Value per share M GBP Accumulating 1.0336

£ Net Asset Value M GBP Accumulating Hedged 1,010 Net Asset Value per share M GBP Accumulating Hedged 1.0101

£ Net Asset Value M GBP Distributing 1,034 Net Asset Value per share M GBP Distributing 1.0341

£ Net Asset Value M GBP Distributing Hedged 1,010 Net Asset Value per share M GBP Distributing Hedged 1.0101

31 December 31 December 31 December Hermes US SMID Equity Fund Share Class 2016 2015 2014 £ £ £ Net Asset Value Z GBP Accumulating 152,691,806 140,442,174 149,337,953 Net Asset Value per share Z GBP Accumulating 2.4775 1.7151 1.5961

£ £ £ Net Asset Value F GBP Accumulating 81,275,323 33,132,320 24,183,615 Net Asset Value per share F GBP Accumulating 2.3414 1.6330 1.5312

€ € € Net Asset Value R EUR Accumulating 50,382,245 102,542 91,429 Net Asset Value per share R EUR Accumulating 4.2299 3.4707 3.0946

$ $ $ Net Asset Value F USD Accumulating 302,884,434 61,612,133 77,877,447 Net Asset Value per share F USD Accumulating 3.1184 2.6198 2.5873

£ £ £ Net Asset Value T GBP Accumulating 1,989,829 1,161,553 1,260,640 Net Asset Value per share T GBP Accumulating 1.9502 1.3501 1.2564

£ £ £ Net Asset Value F GBP Distributing 56,366,192 4,605,579 723,203 Net Asset Value per share F GBP Distributing 1.8815 1.3126 1.2308

$ $ $ Net Asset Value F USD Distributing 61,051,386 37,973,826 30,146,620 Net Asset Value per share F USD Distributing 3.0103 2.5298 2.4985

€ € € Net Asset Value F EUR Accumulating 14,131,297 7,180,162 1,852,000 Net Asset Value per share F EUR Accumulating 3.6339 2.9598 2.6191

259

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

13. Comparative Net Asset Values (continued)

Hermes US SMID Equity Fund 31 December 31 December 31 December (continued) Share Class 2016 2015 2014 € € € Net Asset Value F EUR Distributing 12,455 1,460 13,478 Net Asset Value per share F EUR Distributing 3.6080 2.9396 2.6003

€ € € Net Asset Value F EUR Accumulating Hedged 2,434,002 22,897 114,491 Net Asset Value per share F EUR Accumulating Hedged 2.7660 2.3532 2.3346

£ £ £ Net Asset Value F GBP Accumulating Hedged 2,917,104 1,320,409 454,238 Net Asset Value per share F GBP Accumulating Hedged 1.3231 1.1177 1.1060

£ £ £ Net Asset Value F GBP Distributing Hedged 3,693,460 194,260 1,138 Net Asset Value per share F GBP Distributing Hedged 1.3023 1.1004 1.0849

CHF CHF CHF Net Asset Value R CHF Accumulating Hedged 701,896 2,053,688 1,025 Net Asset Value per share R CHF Accumulating Hedged 2.3555 2.0353 2.0491

$ $ $ Net Asset Value R USD Accumulating 16,508,676 2,155,466 1,015 Net Asset Value per share R USD Accumulating 2.4116 2.0412 2.0304

€ € € Net Asset Value R EUR Accumulating Hedged 15,865,436 112,528 1,015 Net Asset Value per share R EUR Accumulating Hedged 2.3639 2.0275 2.0307

CHF CHF Net Asset Value F CHF Accumulating Hedged 4,457,219 1,048,509 Net Asset Value per share F CHF Accumulating Hedged 2.2389 1.9182

CHF Net Asset Value F CHF Distribution Hedged 36,653 Net Asset Value per share F CHF Distribution Hedged 2.1193

Hermes Active UK Inflation- 31 December 31 December 31 December Linked Bond Fund Share Class 2016 2015 2014 £ £ £ Net Asset Value Z GBP Accumulating - 18,919,788 136,251,428 Net Asset Value per share Z GBP Accumulating - 1.2693 1.2781

£ £ £ Net Asset Value T GBP Accumulating - 439,951 37,186 Net Asset Value per share T GBP Accumulating - 1.1950 1.2035

£ £ £ Net Asset Value F GBP Accumulating - 2,504 2,467 Net Asset Value per share F GBP Accumulating - 1.2588 1.2699

260

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

13. Comparative Net Asset Values (continued)

Hermes Asia Ex-Japan Equity 31 December 31 December 31 December Fund Share Class 2016 2015 2014 £ £ £ Net Asset Value Z GBP Accumulating 1,373 1,043 993 Net Asset Value per share Z GBP Accumulating 2.1047 1.5983 1.5218

£ £ £ Net Asset Value F GBP Accumulating 372,910,012 228,212,711 216,124,323 Net Asset Value per share F GBP Accumulating 2.0276 1.5519 1.4888

€ € € Net Asset Value R EUR Accumulating 7,679,953 14,458,248 13,903,408 Net Asset Value per share R EUR Accumulating 3.7204 3.3510 3.0575

£ £ £ Net Asset Value T GBP Accumulating 3,431,500 1,756,125 834,931 Net Asset Value per share T GBP Accumulating 1.8262 1.3873 1.3210

€ € € Net Asset Value F EUR Distributing 40,499,000 29,525,158 31,247,874 Net Asset Value per share F EUR Distributing 3.3367 3.0013 2.7486

€ € € Net Asset Value F EUR Accumulating 448,878,160 284,071,558 261,274,476 Net Asset Value per share F EUR Accumulating 3.4406 3.0751 2.7846

£ £ £ Net Asset Value F GBP Distributing 258,923,852 127,748,641 89,999,511 Net Asset Value per share F GBP Distributing 1.6829 1.2962 1.2569

$ $ $ Net Asset Value F USD Accumulating 682,168,765 556,476,812 360,498,470 Net Asset Value per share F USD Accumulating 2.4857 2.2916 2.3156

$ $ $ Net Asset Value R USD Accumulating 47,438,362 44,361,101 27,330,626 Net Asset Value per share R USD Accumulating 2.4262 2.2537 2.2944

€ € € Net Asset Value F EUR Accumulating Hedged 16,954,927 6,403,820 4,207,544 Net Asset Value per share F EUR Accumulating Hedged 2.3669 2.2221 2.2427

£ £ £ Net Asset Value F GBP Distributing Hedged 1,912,720 2,598,233 2,833,538 Net Asset Value per share F GBP Distributing Hedged 1.1701 1.0955 1.1155

261

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

13. Comparative Net Asset Values (continued)

Hermes Asia Ex-Japan Equity 31 December 31 December 31 December Fund (continued) Share Class 2016 2015 2014 € € € Net Asset Value R EUR Accumulating Hedged 1,612,169 992,555 356,098 Net Asset Value per share R EUR Accumulating Hedged 2.2366 2.1153 2.1507

CHF CHF CHF Net Asset Value R CHF Accumulating Hedged 4,502,446 3,017,080 557,583 Net Asset Value per share R CHF Accumulating Hedged 2.1918 2.0846 2.1418

£ £ £ Net Asset Value F GBP Accumulating Hedged 3,550,194 2,924,934 2,841,108 Net Asset Value per share F GBP Accumulating Hedged 1.1750 1.0919 1.1004

$ $ $ Net Asset Value F USD Distributing 26,227,742 5,712,924 21,647,358 Net Asset Value per share F USD Distributing 2.0292 1.8829 1.9259

$ $ $ Net Asset Value C USD Accumulating 30,693,820 8,278,222 1,016 Net Asset Value per share C USD Accumulating 2.1677 2.0054 2.0327

$ $ $ Net Asset Value RC USD Accumulating 1,059 990 1,015 Net Asset Value per share RC USD Accumulating 2.1180 1.9807 2.0292

€ € Net Asset Value C EUR Accumulating 88,590,941 24,838,163 Net Asset Value per share C EUR Accumulating 2.2567 2.0241

€ € Net Asset Value C EUR Distributing 3,475 4,892 Net Asset Value per share C EUR Distributing 2.2132 1.9945

£ £ Net Asset Value C GBP Distributing 686,721 1,731,396 Net Asset Value per share C GBP Distributing 1.2775 0.9863

$ $ Net Asset Value C USD Distributing 29,721 21,257 Net Asset Value per share C USD Distributing 2.0477 1.9036

£ £ Net Asset Value C GBP Accumulating 94,414,239 35,800,850 Net Asset Value per share C GBP Accumulating 1.2296 0.9444

€ € Net Asset Value RC EUR Accumulating 175,518 237,214 Net Asset Value per share RC EUR Accumulating 2.0183 1.8304

S$ Net Asset Value C SGD Accumulating 1,032 Net Asset Value per share C SGD Accumulating 3.0958

262

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

13. Comparative Net Asset Values (continued)

Hermes Global Equity ESG 31 December 31 December 31 December Fund Share Class 2016 2015 2014 $ $ $ Net Asset Value Z USD Accumulating 43,610,048 41,347,748 40,704,300 Net Asset Value per share Z USD Accumulating 2.1974 2.0834 2.0510

£ £ £ Net Asset Value F GBP Accumulating 1,507 1,193 1,122 Net Asset Value per share F GBP Accumulating 1.5073 1.1935 1.1220

$ $ $ Net Asset Value F USD Accumulating 1,401,213 1,794,629 1,032 Net Asset Value per share F USD Accumulating 2.1877 2.0856 2.0647

€ € € Net Asset Value R EUR Accumulating 1,827,619 1,309 1,167 Net Asset Value per share R EUR Accumulating 2.8175 2.6173 2.3340

€ € € Net Asset Value F EUR Accumulating 1,144,265 1,057,543 1,171 Net Asset Value per share F EUR Accumulating 2.8571 2.6406 2.3421

£ £ Net Asset Value T GBP Accumulating 127,972 46,002 Net Asset Value per share T GBP Accumulating 1.2681 0.9981

NOK Net Asset Value F NOK Accumulating 11,316 Net Asset Value per share F NOK Accumulating 22.6313

NOK Net Asset Value R NOK Accumulating 794,392,575 Net Asset Value per share R NOK Accumulating 22.5578

Hermes Multi Strategy Credit 31 December 31 December 31 December Fund Share Class 2016 2015 2014 $ $ $ Net Asset Value Z USD Accumulating 273,747,570 248,648,124 246,075,737 Net Asset Value per share Z USD Accumulating 2.2540 2.0476 2.0264

£ £ £ Net Asset Value F GBP Distributing Hedged 332,481,889 300,337,858 37,042,964 Net Asset Value per share F GBP Distributing Hedged 1.0390 0.9933 0.9925 £ £ £ Net Asset Value F GBP Accumulating Hedged 21,080,063 2,065,480 534,939 Net Asset Value per share F GBP Accumulating Hedged 1.1049 1.0139 1.0087

€ € € Net Asset Value F EUR Accumulating 5,699,745 5,019,596 1,158 Net Asset Value per share F EUR Accumulating 2.9168 2.5894 2.3155

263

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

13. Comparative Net Asset Values (continued)

Hermes Multi Strategy Credit 31 December 31 December 31 December Fund (continued) Share Class 2016 2015 2014 $ $ $ Net Asset Value F USD Accumulating 32,987,041 3,538,902 1,006 Net Asset Value per share F USD Accumulating 2.2100 2.0205 2.0125

€ € € Net Asset Value F EUR Accumulating Hedged 35,837,180 19,474,876 8,941,234 Net Asset Value per share F EUR Accumulating Hedged 2.1742 2.0146 2.0099

€ € € Net Asset Value R EUR Accumulating 1,379 1,232 1,109 Net Asset Value per share R EUR Accumulating 2.7585 2.4638 2.2173

€ € € Net Asset Value R EUR Accumulating Hedged 266,232 210,427 984 Net Asset Value per share R EUR Accumulating Hedged 2.0981 1.9568 1.9680

£ £ £ Net Asset Value F GBP Distributing 33,360,844 27,983,402 28,547,867 Net Asset Value per share F GBP Distributing 1.4008 1.1154 1.0686

$ $ $ Net Asset Value F USD Distributing 1,420,120 467,246 333,984 Net Asset Value per share F USD Distributing 2.0031 1.9027 1.9659

£ £ Net Asset Value F GBP Accumulating 1,309 1,003 Net Asset Value per share F GBP Accumulating 1.3092 1.0034

£ £ Net Asset Value T GBP Accumulating Hedged 1,059,115 321,811 Net Asset Value per share T GBP Accumulating Hedged 1.0751 0.9811

$ $ Net Asset Value R USD Accumulating 1,071 985 Net Asset Value per share R USD Accumulating 2.1413 1.9707

€ € Net Asset Value F EUR Distributing 1,310,769 996 Net Asset Value per share F EUR Distributing 2.1974 1.9921

€ € Net Asset Value R EUR Distributing 1,095 996 Net Asset Value per share R EUR Distributing 2.1906 1.9913

€ Net Asset Value F EUR Distributing Hedged 30,923,837 Net Asset Value per share F EUR Distributing Hedged 2.1319

€ Net Asset Value R EUR Distributing Hedged 1,062 Net Asset Value per share R EUR Distributing Hedged 2.1245

264

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

13. Comparative Net Asset Values (continued)

Hermes Multi Asset Inflation 31 December 31 December 31 December Fund Share Class 2016 2015 2014 £ £ £ Net Asset Value F GBP Accumulating Hedged 16,314 980 1,003 Net Asset Value per share F GBP Accumulating Hedged 1.0253 0.9798 1.0031

£ £ £ Net Asset Value Z GBP Accumulating Hedged 31,207,037 29,624,995 30,123,585 Net Asset Value per share Z GBP Accumulating Hedged 1.0402 0.9875 1.0041

£ £ £ Net Asset Value F GBP Distributing Hedged 1,009 966 1,000 Net Asset Value per share F GBP Distributing Hedged 1.0090 0.9664 0.9999

£ £ Net Asset Value T GBP Accumulating 683,569 323,798 Net Asset Value per share T GBP Accumulating 1.0068 0.9558

Hermes Global Small Cap 31 December 31 December Equity Fund Share Class 2016 2015 € € Net Asset Value F EUR Accumulating 1,135 987 Net Asset Value per share F EUR Accumulating 2.2692 1.9744

€ € Net Asset Value F EUR Distributing 1,129 987 Net Asset Value per share F EUR Distributing 2.2581 1.9731

£ £ Net Asset Value F GBP Accumulating Hedged 1,041 947 Net Asset Value per share F GBP Accumulating Hedged 1.0410 0.9472

£ £ Net Asset Value F GBP Distributing Hedged 1,040 947 Net Asset Value per share F GBP Distributing Hedged 1.0403 0.9472

$ $ Net Asset Value F USD Accumulating 1,053 946 Net Asset Value per share F USD Accumulating 2.1066 1.8914

$ $ Net Asset Value F USD Distributing 1,049 946 Net Asset Value per share F USD Distributing 2.0988 1.8914

£ £ Net Asset Value F GBP Accumulating 1,347 1,004 Net Asset Value per share F GBP Accumulating 1.3474 1.0040

265

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

13. Comparative Net Asset Values (continued)

Hermes Global Small Cap 31 December 31 December Equity Fund (continued) Share Class 2016 2015 $ $ Net Asset Value R USD Accumulating 1,041 941 Net Asset Value per share R USD Accumulating 2.0810 1.8825

€ € Net Asset Value R EUR Accumulating 1,119 982 Net Asset Value per share R EUR Accumulating 2.2379 1.9635

$ $ Net Asset Value Z USD Accumulating 33,269,522 29,651,021 Net Asset Value per share Z USD Accumulating 2.1328 1.9008

£ £ Net Asset Value T GBP Accumulating 1,175,136 491,414 Net Asset Value per share T GBP Accumulating 1.3414 0.9925

£ £ Net Asset Value F GBP Distributing 6,974,216 - Net Asset Value per share F GBP Distributing 1.4060 -

Hermes US All Cap Equity 31 December 31 December Fund Share Class 2016 2015 € € Net Asset Value F EUR Accumulating 1,132 993 Net Asset Value per share F EUR Accumulating 2.2642 1.9856

€ € Net Asset Value F EUR Distributing 1,131 992 Net Asset Value per share F EUR Distributing 2.2629 1.9848

£ £ Net Asset Value F GBP Accumulating Hedged 1,087 988 Net Asset Value per share F GBP Accumulating Hedged 1.0865 0.9876

£ £ Net Asset Value F GBP Distributing Hedged 1,087 988 Net Asset Value per share F GBP Distributing Hedged 1.0865 0.9876

$ $ Net Asset Value F USD Accumulating 1,089 986 Net Asset Value per share F USD Accumulating 2.1785 1.9723

$ $ Net Asset Value F USD Distributing 1,089 986 Net Asset Value per share F USD Distributing 2.1785 1.9723

£ £ Net Asset Value F GBP Accumulating 1,350 1,014 Net Asset Value per share F GBP Accumulating 1.3499 1.0145

266

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

13. Comparative Net Asset Values (continued)

Hermes US All Cap Equity 31 December 31 December Fund (continued) Share Class 2016 2015 $ $ Net Asset Value R USD Accumulating 1,078 983 Net Asset Value per share R USD Accumulating 2.1553 1.9660

€ € Net Asset Value R EUR Accumulating 1,119 989 Net Asset Value per share R EUR Accumulating 2.2374 1.9783

$ $ Net Asset Value Z USD Accumulating 16,483,431 14,813,672 Net Asset Value per share Z USD Accumulating 2.2042 1.9809

£ Net Asset Value T GBP Accumulating 85,617 Net Asset Value per share T GBP Accumulating 1.0904

Hermes Absolute Return 31 December 31 December Credit Fund Share Class 2016 2015 € € Net Asset Value F EUR Accumulating 1,074 1,007 Net Asset Value per share F EUR Accumulating 2.1486 2.0146

€ € Net Asset Value F EUR Accumulating Hedged 1,005 992 Net Asset Value per share F EUR Accumulating Hedged 2.0091 1.9845

€ € Net Asset Value F EUR Distributing Hedged 986 991 Net Asset Value per share F EUR Distributing Hedged 1.9730 1.9823

CHF CHF Net Asset Value F CHF Accumulating Hedged 995 988 Net Asset Value per share F CHF Accumulating Hedged 1.9905 1.9753

CHF CHF Net Asset Value F CHF Distributing Hedged 977 986 Net Asset Value per share F CHF Distributing Hedged 1.9531 1.9728

£ £ Net Asset Value F GBP Accumulating 1,263 1,031 Net Asset Value per share F GBP Accumulating 1.2631 1.0313

£ £ Net Asset Value F GBP Accumulating Hedged 13,401,930 997 Net Asset Value per share F GBP Accumulating Hedged 1.0187 0.9967

267

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

13. Comparative Net Asset Values (continued)

Hermes Absolute Return 31 December 31 December Credit Fund (continued) Share Class 2016 2015 $ $ Net Asset Value F USD Accumulating 1,021 996 Net Asset Value per share F USD Accumulating 2.0429 1.9910

$ $ Net Asset Value F USD Distributing 1,003 994 Net Asset Value per share F USD Distributing 2.0055 1.9888

€ € Net Asset Value R EUR Accumulating 1,051 1,001 Net Asset Value per share R EUR Accumulating 2.1029 2.0027

€ € Net Asset Value R EUR Accumulating Hedged 994 988 Net Asset Value per share R EUR Accumulating Hedged 1.9883 1.9761

€ € Net Asset Value R EUR Distributing Hedged 984 987 Net Asset Value per share R EUR Distributing Hedged 1.9671 1.9748

CHF CHF Net Asset Value R CHF Accumulating Hedged 984 983 Net Asset Value per share R CHF Accumulating Hedged 1.9673 1.9668

CHF CHF Net Asset Value R CHF Distributing Hedged 973 983 Net Asset Value per share R CHF Distributing Hedged 1.9457 1.9655

$ $ Net Asset Value R USD Accumulating 1,010 991 Net Asset Value per share R USD Accumulating 2.0202 1.9830

$ $ Net Asset Value Z USD Accumulating 51,723,188 50,012,029 Net Asset Value per share Z USD Accumulating 2.0689 2.0004

£ £ Net Asset Value F GBP Distributing 1,250 1,035 Net Asset Value per share F GBP Distributing 1.2501 1.0346

£ £ Net Asset Value F GBP Distributing Hedged 1,006 998 Net Asset Value per share F GBP Distributing Hedged 1.0059 0.9984

£ Net Asset Value T GBP Accumulating 48,888 Net Asset Value per share T GBP Accumulating 1.0607

268

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

14. Accrued Capital Gains Tax

These accruals relate to a capital gains tax liability in relation to the Hermes Global Emerging Markets Fund and the Hermes Asia Ex-Japan Equity Funds’ exposure to China via the P-Notes that those Funds hold over Chinese stock.

On 17 November 2014, China clarified that prior to this date realised gains would be subject to tax. They also clarified that in most cases future gains after this date would not be subject to tax, but did not confirm what most cases were. In light of this announcement, the Funds’ have continued to accrue for the payment of this tax liability on realised gains at a rate of 10%. The accrual for the payment of the tax liability on the realised gains is £9,812,955 as at 31 December 2016 (2015: £8,226,737). The movement in the total accrual year on year is due to fluctuations in the US Dollar to Sterling exchange rates. No further amounts have been accrued after 18 August 2015, following a further announcement from China. The Capital Gains Tax charge for the year ended 31 December 2016 was £Nil (2015: £3,976,820).

15. Efficient Portfolio Management

The Company may, on behalf of each sub-fund, employ (subject to the conditions and within the limits laid down by the Central Bank) techniques and instruments relating to transferable securities and money market instruments, provided that such techniques and instruments are used for efficient portfolio management purposes. Such techniques and instruments may also, on behalf of each sub-fund, include foreign exchange transactions which alter the currency characteristics of transferable securities held by the Company. The Company may also, on behalf of each sub-fund, employ (subject to the conditions and within the limits laid down by the Central Bank) techniques and instruments intended to provide protection against exchange risks in the context of the management of its assets and liabilities.

Realised gains and losses on financial instruments used for efficient portfolio management are included in the Income Statement.

16. Significant Events During the Year

On 1 January 2016, income equalisation was introduced on the following funds; the Hermes Global Emerging Markets Fund, the Hermes Global Equity Fund, the Hermes UK Small and Mid Cap Companies Fund, the Hermes European Alpha Equity Fund, the Hermes Europe Ex-UK Equity Fund, the Hermes US SMID Equity Fund, the Hermes Asia Ex-Japan Equity Fund, the Hermes Global Equity ESG Fund, the Hermes Multi Asset Inflation Fund, the Hermes Global Small Cap Equity Fund and the Hermes US All Cap Equity Fund.

The annual KIID update was completed on 29 January 2016.

The Hermes UK Small and Mid Cap Companies Fund and the Hermes Active UK Inflation-Linked Bond Fund terminated on 15 February 2016 and 29 February 2016 respectively. All proceeds were subsequently returned to shareholders.

Ian Pascal was appointed Alternate Director to Harriet Steel on 25 February 2016.

On 30 March 2015 the Central Bank of Ireland published two sets of regulations: Client Asset Regulations (“CAR”) and Investor Money Relations (“IMR”) which strengthens the safeguards around client assets and investor money. On 1 March 2016 a new bank account was set up in the Company’s name in line with the Central Bank of Ireland requirements. Any subscription monies not yet applied to the sub-funds or that have been redeemed but not yet paid out from the funds will form the balance of this account. 269

Hermes Investment Funds Public Limited Company Notes to the Financial Statements for the financial year ended 31 December 2016 (continued)

16. Significant Events During the Year (continued)

The Company issued an addendum to the Prospectus on 5 May 2016, which detailed a change in custody fees on the Fund.

A notice was sent to the shareholders of Hermes Asia Ex-Japan Equity Fund on 11 May 2016 to notify them of changes to the capacity management measures introduced on 11 May 2016.

On 13 June 2016, the Company issued a stand-alone Supplement on the Hermes Europe Ex-UK Equity Fund, covering the introduction of a new M share class.

An application to appoint Joseph Kagan as a Director of the Company was submitted to the Central Bank of Ireland and was approved on 10 August. At the same date, Ian Kennedy was appointed Alternate Director to Joseph Kagan.

Effective 1 September 2016, three of the sub-funds changed their names as follows:

17. Subsequent Events

Distributions were declared on 3 January 2017 for the following funds:

- Hermes Global Emerging Markets Fund - Hermes Global Equity Fund - Hermes European Alpha Equity Fund - Hermes Global High Yield Credit Fund - Hermes US SMID Equity Fund - Hermes Asia Ex-Japan Equity Fund - Hermes Multi Strategy Credit Fund - Hermes Multi Asset Inflation Fund - Hermes Absolute Return Credit Fund

See note 12 for further details.

On 6 March 2017, Hermes Asia Ex-Japan Equity Fund was closed to new investors.

18. Approval of Financial Statements

The Financial Statements were approved by the Board of Directors on 25 April 2017.

270

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016

Hermes Global Emerging Markets Fund Total purchases in the year $1,012,955,547 Major Purchases Nominal Holdings Cost $ Samsung Electronics 57,445 81,070,420 Tencent 1,716,700 40,258,401 Alibaba ADR 411,801 35,689,005 Taiwan Semiconductor Manufacturing ADR 1,297,231 33,782,887 Itau Unibanco - Preferred 2,870,556 27,827,724 Banorte 4,555,070 23,663,968 Magnit 142,624 23,056,669 Sberbank of Russia ADR 2,537,434 22,908,059 Ultrapar Participacoes 1,043,900 21,777,079 Land Mark Optoelectronics 1,929,000 21,761,742 Turkiye Halk Bankasi 6,237,322 21,160,025 Samsonite 6,271,318 19,805,456 China Biologic Products 169,495 19,424,230 HDFC Bank 923,753 18,712,538 BB Seguridade Participacoes 2,243,800 18,251,107 Foschini 1,652,505 18,139,071 Techtronic Industries 4,642,500 17,954,298 Tung Thih Electronic 1,361,000 17,802,297 Hero MotoCorp 380,826 17,773,969 MMC Norilsk Nickel ADR 1,238,399 17,673,238 NMC Health 1,119,372 17,437,322 Klabin 3,365,337 17,102,580 SACI Falabella 2,069,898 16,436,277 AIA 2,732,200 16,417,151 ICICI Bank ADR 2,161,715 15,891,631 Investec 2,267,708 15,836,970 Samsung Fire & Marine Insurance 62,308 15,280,605 Lojas Renner 2,096,600 15,208,343 Life Healthcare 5,809,776 14,552,299 KB Financial 511,919 14,029,105 Bank Rakyat Indonesia Persero 16,687,900 13,990,576 Shoprite 1,116,136 13,684,489 Power Grid of India 5,580,322 13,632,168 Hon Hai Precision Industry 5,174,000 13,009,476 Advantech 1,775,000 12,844,591 HCL Technologies 1,097,661 12,771,363 China Mengniu Dairy 7,196,000 12,683,152 Baidu ADR 69,818 12,495,780 Credicorp 79,394 12,431,557 Hangzhou Hikvision Digital Technology 09/01/2020 (CLSA) 2,956,519 12,248,784 Motherson Sumi Systems 2,699,077 11,775,258 Pampa Energia ADR 340,726 11,614,866 Kweichow Moutai 16/06/2020 (CLSA) 283,996 11,589,236 Banregio Grupo Financiero 1,957,303 10,912,529 Banco Macro ADR 153,341 10,464,164 Container Corporation of India 532,694 10,362,297

The above represents aggregate purchases of a security exceeding 1 per cent of the total value of purchases for the year. If there were fewer than 20 purchases that exceed 1 per cent during the year the largest 20 purchases are disclosed. 271

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes Global Emerging Markets Fund (continued) Total sales in the year $376,543,324 Major Sales Nominal Holdings Proceeds $ Baidu ADR 158,604 25,926,724 Korea Electric Power 408,379 19,434,203 MTN Group 1,958,942 18,668,925 Turkiye Halk Bankasi 6,237,322 17,995,494 Galaxy Entertainment 4,213,000 16,886,512 Embraer ADR 882,344 16,835,162 Mail.ru GDR 934,584 16,752,994 Itau Unibanco - Preferred 1,637,460 15,753,904 Banorte 2,974,829 15,479,707 Taiwan Semiconductor Manufacturing ADR 534,181 14,150,771 Investec 2,267,708 13,564,534 Samsung Fire & Marine Insurance 53,995 13,473,207 KB Financial 352,948 12,434,631 BB Seguridade Participacoes 1,172,000 10,650,884 Housing Development Finance 626,470 10,327,141 Phison Electronics 1,336,000 9,600,095 Banco Macro ADR 126,154 9,050,310 Kweichow Moutai 26/01/2017 175,581 8,272,105 China Dongxiang 37,447,000 7,428,428 Siliconware Precision Industries ADR 906,741 7,036,891 Shoprite 523,761 6,347,910 Tong Yang Industry 3,675,935 6,272,407 Tower Bersama Infrastructure 13,228,000 6,052,939 Gree Electric Appliances 09/03/2016 1,996,916 5,839,024 Siam Cement PCL 421,200 5,823,411 Kweichow Moutai 17/01/2017 120,292 5,723,718 Banregio Grupo Financiero 976,840 5,603,030 Commercial International Bank Egypt 1,257,747 5,547,039 MMC Norilsk Nickel ADR 362,296 5,253,220 Gree Electric Appliances 17/01/2017 1,311,300 4,904,015 Hangzhou Hikvision Digital Technology 13/11/2017 1,348,397 4,609,650 Alibaba ADR 47,817 4,182,216 Hon Hai Precision Industry 1,589,000 4,078,512 Richter Gedeon 183,358 3,782,735

The above represents aggregate sales of a security exceeding 1 per cent of the total value of sales for the year. If there were fewer than 20 sales that exceed 1 per cent during the year the largest 20 sales are disclosed.

272

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes Global Equity Fund Total purchases in the year $78,750,228 Major Purchases Nominal Holdings Cost $ Facebook 54,204 6,679,699 American Tower Reits 35,799 4,087,558 Cooper Cos 16,617 3,069,348 Vonovia 59,015 2,242,000 State Street 29,545 1,854,473 Oasis Petroleum 231,724 1,767,515 STERIS 23,866 1,699,278 Thermo Fisher Scientific 10,400 1,600,041 Metso 57,487 1,598,069 Leroy Seafood 31,667 1,577,090 LendLease 154,170 1,575,790 Novo Nordisk 32,110 1,559,313 Bank of America 100,000 1,507,549 DONG Energy 37,307 1,456,293 Danske Bank 46,820 1,401,727 Worldpay 366,047 1,383,653 Marathon Oil 175,000 1,372,113 Randgold Resources 15,187 1,273,757 Vodafone 451,833 1,213,989 BNP Paribas 23,318 1,114,399 Kirby 18,000 1,071,010 Roche 4,300 1,020,130 Marine Harvest 66,121 970,495 BorgWarner 28,317 950,416 Axfood 51,983 925,414 Frontline 119,779 896,596 Kroger 25,623 881,766 Amgen 5,600 844,423 Berkshire Hathaway 5,610 807,205 Abbott Laboratories 19,000 791,381

273

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes Global Equity Fund (continued) Total sales in the year $254,070,264 Major Sales Nominal Holdings Proceeds $ Apple 40,495 4,530,747 O'Reilly Automotive 16,271 4,473,947 Accenture 32,267 3,902,895 Hess 67,775 3,643,829 Eaton 54,512 3,575,020 Adidas 21,078 3,465,043 Alphabet Class A 4,295 3,453,438 Aker 205,395 3,300,999 Berkshire Hathaway 22,506 3,276,952 Oasis Petroleum 292,563 3,246,070 Novo Nordisk 71,281 3,041,710 Nestle 38,051 3,016,633 Amazon.com 3,712 3,007,358 State Street 40,084 2,911,490 General Electric 97,054 2,861,743 Lockheed Martin 11,710 2,846,010 Wells Fargo 61,250 2,833,828 American Waterworks 36,085 2,781,141 Bayer 25,856 2,724,059 Marine Harvest 155,254 2,693,728 Tyson Foods 40,500 2,627,338 Bank of America 150,885 2,591,074 Marathon Oil 168,696 2,578,448 BNP Paribas 51,504 2,554,835

274

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes UK Small and Mid Cap Companies Fund Total purchases in the year £2,817,846 Major Purchases Nominal Holdings Cost £ Marathon Oil 191,923 882,846 DONG Energy 300,000 975,000 Novo Nordisk 300,000 960,000

Total sales in the year £6,427,826 Major Sales Nominal Holdings Proceeds £ Pinewood 898,962 3,741,947 Informa 249,270 1,467,829 IMI 162,956 1,218,050

The above represents aggregate purchases of a security exceeding 1 per cent of the total value of purchases for the year or aggregate sales greater than 1 per cent of the total value of sales. If there were fewer than 20 purchases/sales that exceed 1 per cent during the year the largest 20 purchases/sales are disclosed. The above represents all cash purchases and sales during the year. Proceeds from sales of financial assets exclude a redemption made ex-specie of £187,762,511.

275

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes European Alpha Equity Fund Total purchases in the year €185,372,380 Major Purchases Nominal Holdings Cost € Reckitt Benckiser 256,319 22,712,970 Imperial Brands 409,986 19,881,781 Pandora 170,087 18,922,871 ConvaTec 4,939,073 12,425,075 Paddy Power Betfair 79,547 9,522,173 Auto Trader 1,847,217 8,967,457 Bayer 75,543 6,807,713 SABMiller 104,110 5,544,111 ING Groep 478,106 5,091,904 ProSiebenSat.1 Media 122,630 4,912,100 Statoil 381,078 4,764,228 Worldpay 1,323,340 4,502,971 Sberbank of Russia ADR 717,450 4,379,097 Deutsche Boerse 60,145 4,354,897 GlaxoSmithKline 223,795 4,089,639 Dufry 34,784 3,790,920 Valeo 71,644 3,314,250 Nokia 699,250 3,027,974 DNB 258,941 2,956,837 Legrand 57,663 2,891,470 Novo Nordisk 58,852 2,490,417 Gamesa Tecnologica 132,381 2,434,474 BG 164,407 2,280,048 Swedbank 114,637 2,230,805 Renault 27,551 2,132,690

276

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes European Alpha Equity Fund (continued) Total sales in the year €216,023,969 Major Sales Nominal Holdings Proceeds € ARM 1,440,100 26,792,554 SABMiller 499,298 25,560,065 BG 1,321,968 17,444,015 UBS 1,287,515 15,479,176 Kerry Group 232,685 15,477,004 UniCredit 3,306,500 15,279,468 Adidas 103,385 12,317,810 Linde 101,514 12,294,659 Telecom Italia 19,745,068 11,553,494 Investment AB Kinnevik 300,675 6,848,715 Sberbank of Russia ADR 921,134 6,468,469 Gamesa Tecnologica 322,668 5,281,462 Sports Direct International 1,042,324 4,990,358 UCB 46,616 3,594,225 Hennes & Mauritz 90,930 2,771,540 Wirecard 53,917 2,350,673 Roche 9,040 2,008,004 GlaxoSmithKline 87,199 1,628,071 Bayer 16,858 1,588,399 Amadeus IT 34,551 1,448,531

277

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes Global High Yield Credit Fund Total purchases in the year €224,496,209 Major Purchases Nominal Holdings Cost € Telecom Italia 7.375% 15/12/2017 6,000,000 7,652,078 Ally Financial 4.625% 30/03/2025 5,750,000 5,223,916 CenturyLink 5.800% 15/03/2022 5,233,000 4,527,751 Faurecia 3.625% 15/06/2023 4,450,000 4,458,875 Actavis Funding 4.550% 15/03/2035 5,100,000 4,405,786 Verallia Packaging 5.125% 01/08/2022 3,247,000 3,337,984 Marathon Oil 3.850% 01/06/2025 3,550,000 3,097,788 Royal Bank of Scotland 6.935% 09/04/2018 2,800,000 3,063,188 BHP Billiton Finance 22/10/2077 2,349,000 3,035,050 Dresdner Funding Trust I 8.151% 30/06/2031 2,847,000 3,030,893 Total 31/12/2049 3,250,000 3,009,188 Cott Finance 5.500% 01/07/2024 2,982,000 3,000,576 SES 31/12/2049 2,987,000 2,964,468 TVL Finance 8.500% 15/05/2023 2,280,000 2,934,077 OI European Group 3.125% 15/11/2024 2,920,000 2,920,000 Vulcan Materials 4.500% 01/04/2025 3,000,000 2,854,427 Goodyear Tire & Rubber 5.000% 31/05/2026 3,130,000 2,845,357 EMC 1.875% % 01/06/18 3,178,000 2,815,913 CNH Industrial Capital 3.875% 15/10/2021 3,077,000 2,788,226 Antero Resources 5.625% 01/06/2023 2,800,000 2,747,906 Ziggo Secured Finance 4.250% 15/01/2027 2,731,000 2,731,000 Vale Overseas 6.250% 10/08/2026 2,956,000 2,718,022 Air Lease 4.250% 15/09/2024 3,000,000 2,695,610 Ardagh Packaging Finance 6.750% 15/05/2024 2,576,000 2,653,000 Lafarge 6.500% 15/07/2016 2,800,000 2,607,763 Banque PSA Finance 4.250% 25/02/2016 2,500,000 2,501,750 PVH 3.625% 15/07/2024 2,450,000 2,450,000 Zoetis 1.875% 01/02/2018 2,750,000 2,447,776 NXP 4.625% 15/06/2022 2,566,000 2,388,199 Toll Brothers Finance 4.875% 15/11/2025 2,500,000 2,274,459 International Lease Finance 8.750% 15/03/2017 2,400,000 2,266,853 Vale Overseas 5.875% 10/06/2021 2,560,000 2,255,182

278

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes Global High Yield Credit Fund (continued) Total sales in the year €195,989,708 Major Sales Nominal Holdings Proceeds € UT2 Funding 5.321% 30/06/2016 9,284,000 9,284,000 Vale Overseas 6.250% 31/01/2017 7,351,000 6,674,662 DISH DBS 7.125% 01/02/2016 7,000,000 6,425,850 Ally Financial 3.750% 18/11/2019 5,750,000 5,344,045 CNH Industrial Capital 3.375% 15/07/2019 5,800,000 5,023,933 Cemex Espana 9.875% 30/04/2019 4,500,000 4,722,300 Lear 4.750% 15/01/2023 4,614,000 4,456,832 Hanson 6.125% 15/08/2016 3,687,000 3,447,834 Royal Bank of Scotland 6.934% 09/04/2018 2,800,000 3,055,488 Cott Finance 5.500% 01/07/2024 2,982,000 3,036,900 OI European Group 3.125% 15/11/2024 2,920,000 2,882,774 CNH Industrial Capital 3.875% 15/10/2021 3,077,000 2,807,099 TVL Finance 8.500% 15/05/2023 2,280,000 2,788,533 Prudential 7.750% 29/01/2049 2,940,000 2,712,379 Alcoa 5.950% 01/02/2037 2,837,000 2,641,205 Zoetis 1.875% 01/02/2018 2,750,000 2,544,884 Lafarge 6.500% 15/07/2016 2,800,000 2,536,761 Banque PSA Finance 4.250% 25/02/2016 2,500,000 2,500,000 PVH 3.625% 15/07/2024 2,450,000 2,498,479 Gestamp Funding Luxembourg 5.625% 31/05/2020 2,563,000 2,324,334 Societe Generale 4.750% 24/11/2025 2,500,000 2,302,061 BP Capital Markets 1.375% 10/05/2018 2,500,000 2,261,321 KB Home 7.5% 15/09/2022 2,450,000 2,212,409 Verallia Packaging 5.125% 01/08/2022 2,059,000 2,173,533 Banque Federative 2.500% 29/10/2018 2,250,000 2,114,360 Petroleos Mexicanos 6.375% 05/08/2016 2,000,000 2,027,775 ABN AMRO Bank FRN 29/03/2049 2,000,000 2,000,000

279

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes Europe Ex-UK Equity Fund Total purchases in the year €38,501,602 Major Purchases Nominal Holdings Cost € KION 144,872 6,586,476 Ubisoft Entertainment 221,535 5,846,849 Freenet 235,615 5,645,072 Paddy Power Betfair 29,648 3,573,100 Valeo 31,040 2,565,929 Randgold Resources 26,777 2,255,042 Duerr 21,677 1,428,404 Bayer 12,454 1,120,133 Legrand 18,967 955,012 Wirecard 26,988 949,442 Novo Nordisk 22,433 940,176 Deutsche Boerse 12,305 932,908 Gamesa Tecnologica 43,718 875,263 Intesa Sanpaolo 295,487 799,744 ASM International 18,959 716,598 Euronext 19,113 715,669 Cerved Information Solutions 98,397 703,464 Dufry 6,893 699,714 ProSiebenSat.1 Media 14,490 678,770 ASML Holding 5,598 470,430

280

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes Europe Ex-UK Equity Fund (continued) Total sales in the year €61,217,030 Major Sales Nominal Holdings Proceeds € UBS 450,393 5,419,288 Kerry Group 75,611 5,168,040 Hennes & Mauritz 153,180 4,790,056 Nokia 1,043,702 4,590,111 Topdanmark 210,082 4,258,167 Linde 29,524 3,555,763 Adidas 28,003 3,271,149 Randgold Resources 36,414 3,090,078 Telecom Italia 5,418,164 3,037,409 ASML Holding 23,775 2,066,987 Roche 8,630 1,999,559 Intesa Sanpaolo 946,049 1,967,362 Merck NPV 18,495 1,574,160 Gamesa Tecnologica 81,948 1,404,090 Syngenta 3,753 1,370,953 Euronext 33,196 1,289,071 UCB 18,134 1,287,972 Bayer 11,586 1,216,838 Inditex 38,430 1,135,251 Novo Nordisk 19,314 916,353 Amadeus IT 23,560 902,688 Sartorius - Preferred 6,107 899,050 ASM International 22,471 836,417 KION 14,745 761,577 Wirecard 14,969 687,931 Aena 4,923 641,954

281

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes US SMID Equity Fund Total purchases in the year $549,707,291 Major Purchases Nominal Holdings Cost $ Superior Energy Services 1,038,946 16,816,731 SEI Investments 357,859 16,784,400 Cooper Cos 98,325 16,497,180 Retail Opportunity Investments Reits 733,935 15,578,717 Alliant Energy 393,994 15,458,116 Wabtec 201,489 15,143,499 Weingarten Realty Investors Reits 404,672 15,104,036 Alleghany 26,388 14,235,362 Axalta Coating Systems 505,594 13,852,108 White Mountains Insurance 14,753 12,321,831 Matson 330,358 12,114,481 Bank of the Ozarks 284,888 12,101,250 Signature Bank 86,263 11,916,399 STERIS 172,838 11,815,767 Kirby 191,920 11,728,443 John Wiley & Sons 220,777 11,635,824 AMN Healthcare Services 364,184 11,415,890 Woodward 188,634 11,004,143 Genesee & Wyoming 163,505 10,845,298 WEX 108,967 10,010,842 Gildan Activewear 358,865 10,000,464 ANSYS 108,502 9,811,324 National Instruments 335,579 9,706,414 Bio-Rad Laboratories 60,734 9,469,813 Wintrust Financial 170,268 9,439,429 RPM International 185,018 9,207,544 Reinsurance of America 83,993 9,129,844 Martin Marietta Materials 51,532 9,095,959 West Pharmaceutical Services 117,150 9,067,672 Oceaneering International 333,900 9,052,622 Equifax 71,253 8,610,669 CACI International 76,414 8,522,048 Simpson Manufacturing 201,331 8,481,382 Brunswick 169,315 8,423,909 Silicon Laboratories 142,769 8,162,151 Diplomat Pharmacy 433,006 8,122,244 Clean Harbors 160,721 8,094,832 Alimentation Couche-Tard 175,850 8,087,835 CLARCOR 128,022 7,846,767 MEDNAX 115,062 7,705,109 LKQ 230,464 7,547,761 FLIR Systems 222,303 7,454,081

282

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes US SMID Equity Fund (continued) Total purchases in the year (continued) $549,707,291 Major Purchases (continued) Nominal Holdings Cost $ AptarGroup 93,598 7,001,534 Sally Beauty Holdings 243,845 6,776,282 Broadridge Financial Solutions 104,980 6,761,396 Cognex 127,027 6,298,809 Matthews International 98,395 6,138,429 MDU Resources 238,696 6,109,269 Eagle Materials 72,804 5,804,445

Total sales in the year $191,119,699 Major Sales Nominal Holdings Proceeds $ American Water Works 200,592 14,838,394 Markel 12,404 11,233,078 East West Bancorp 303,901 9,750,104 First Republic Bank 131,745 8,498,271 Intersil 402,156 8,390,728 Patterson Cos 171,944 7,949,472 Martin Marietta Materials 40,281 7,729,550 Superior Energy Services 438,785 7,460,120 CAE 581,316 6,987,941 CarMax 121,004 6,357,868 Jarden 107,151 6,032,389 Ellie Mae 69,108 5,845,638 Carpenter Technology Corporation 162,869 5,810,310 Woodward 89,540 5,806,410 West Pharmaceutical Services 78,494 5,681,596 CLARCOR 84,333 5,663,739 AMN Healthcare Services 148,751 5,574,037 Cognex 88,627 4,532,946 Equifax 35,188 4,271,561 Matthews International 60,995 4,037,585 LKQ 115,102 3,975,812 Alleghany 7,379 3,917,779 Silicon Laboratories 53,901 3,590,095 Waddell & Reed Financial 182,259 3,383,350 Newell Brands 67,730 3,168,720 Alimentation Couche-Tard 73,233 3,156,812 Wintrust Financial 62,576 3,096,685 WEX 29,189 3,010,856 Signature Bank 23,099 2,909,858 White Mountains Insurance 3,177 2,302,420 Reinsurance of America 19,226 2,277,695 CACI International 16,409 2,116,110

283

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes Active UK Inflation Linked Bond Fund Total purchases in the year £178,192 Major Purchases Nominal Holdings Cost £ UK Treasury Inflation Linked Bond 1.875% 22/11/2022 69,120 104,608 UK Treasury Inflation Linked Bond 0.125% 22/03/2068 42,000 73,584

Total sales in the year £10,825,406 Major Sales Nominal Holdings Proceeds £ UK Treasury Inflation Linked Bond 1.25% 22/11/2027 455,855 768,858 UK Treasury Inflation Linked Bond 2.5% 17/07/2024 222,804 759,771 UK Treasury Inflation Linked Bond 1.125% 22/11/2037 307,538 576,319 UK Treasury Inflation Linked Bond 0.125% 22/03/2058 380,524 574,508 UK Treasury Inflation Linked Bond 0.625% 22/11/2042 326,992 568,103 UK Treasury Inflation Linked Bond 2.00% 26/01/2035 246,065 567,952 UK Treasury Inflation Linked Bond 0.5% 22/03/2050 309,374 567,782 UK Treasury Inflation Linked Bond 0.125% 22/03/2068 313,695 555,673 UK Treasury Inflation Linked Bond 0.125% 22/03/2029 441,525 533,593 UK Treasury Inflation Linked Bond 0.375% 22/03/2062 277,937 522,571 UK Treasury Inflation Linked Bond 0.75% 22/03/2034 359,371 521,925 UK Treasury Inflation Linked Bond 1.25% 22/11/2055 191,408 512,868 UK Treasury Inflation Linked Bond 0.75% 22/11/2047 248,431 482,643 UK Treasury Inflation Linked Bond 0.125% 22/03/2046 314,650 410,733 UK Treasury Inflation Linked Bond 4.125% 22/07/2030 117,966 391,800 UK Treasury Inflation Linked Bond 0.625% 22/03/2040 234,823 387,988 UK Treasury Inflation Linked Bond 1.875% 22/11/2022 241,740 369,749 UK Treasury Inflation Linked Bond 0.125% 22/03/2044 267,645 366,278 UK Treasury Inflation Linked Bond 0.25% 22/03/2052 203,020 314,292 UK Treasury Inflation Linked Bond 1.25% 22/11/2032 142,373 233,478 UK Treasury Inflation Linked Bond 2.00% 22/01/2016 198,287 198,287 United States Treasury Inflation Indexed Bonds 1.375% 15/02/2044 148,200 112,296

284

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes Asia Ex Japan Equity Fund Total purchases in the year $1,309,369,782 Major Purchases Nominal Holdings Cost $ Alibaba ADR 1,143,614 97,880,991 Baidu ADR 468,841 79,130,598 JD.com ADR 3,025,713 75,071,459 Samsung SDI 634,768 61,180,227 Wuliangye Yibin 18/05/2020 (CLSA) 12,771,519 58,957,414 Korea Electric Power 1,088,802 58,756,258 MediaTek 8,059,000 58,652,935 Nexon 4,024,600 58,545,933 LG Chem 225,553 51,888,026 Beijing Enterprises 8,720,997 45,392,806 Tingyi Cayman Islands 38,306,095 38,100,842 E-Mart 244,612 35,525,069 Hyundai Motor 264,264 33,039,208 Youngone 1,048,659 30,732,377 Dongfeng Motor 27,264,000 29,684,477 Hyundai Steel 625,843 27,699,465 Powertech Technology 11,722,000 27,464,520 Foxconn Technology 10,963,000 27,167,708 Simplo Technology 7,882,000 26,451,529 New Oriental Education & Technology ADR 621,518 26,376,430 Radiant Opto-Electronics 15,550,000 25,001,158 Kunlun Energy 32,192,000 24,932,725 Samsung Fire & Marine Insurance 98,017 24,686,109 Samsung Electronics 16,086 20,804,979 SoftBank 481,000 20,363,083 Beijing Capital International Airport 16,350,000 17,613,513 Hyundai Motor - Preferred 202,287 17,497,206 Hyundai Motor - 2nd Preferred 191,939 17,390,640 Hyundai Engineering & Construction 520,424 16,217,203 Belle International 25,134,353 15,091,298 Hana Financial 723,011 13,818,004 COSCO Shipping Ports 12,449,129 13,516,135 Genting Singapore 23,896,200 13,251,820

285

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes Asia Ex Japan Equity Fund (continued) Total sales in the year $726,304,116 Major Sales Nominal Holdings Proceeds $ Korea Electric Power 3,309,199 154,442,998 Baidu ADR 358,791 60,787,604 E-House China 7,203,469 48,983,589 Hyundai Mobis 167,604 41,665,369 Soulbrain 605,166 28,881,240 Hyundai Engineering & Construction 797,209 27,521,406 Samsung Card 683,682 27,107,664 Samsung Electronics 21,351 26,392,200 Xinyi Glass 33,465,883 26,112,020 New Oriental Education & Technology ADR 643,875 25,616,770 SoftBank 481,000 23,776,115 Wumart Stores 27,219,937 21,817,733 JD.com ADR 755,768 17,257,413 Cathay Pacific Airways 9,242,000 15,246,462 Korea Gas 362,603 14,172,114 Genting Singapore 22,545,800 14,085,766 Lonking Holdings 78,403,204 12,489,102 MediaTek 1,687,000 12,325,891 Nexon 736,200 11,615,468 Alibaba ADR 141,121 9,464,111 Samsung Fire & Marine Insurance 35,614 8,884,286 Daqin Railway 03/11/2017 8,629,452 8,159,947 GS Home Shopping 53,113 8,024,474 Hana Financial 308,183 7,236,674

286

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes Global Equity ESG Fund Total purchases in the year $114,550,779 Major Purchases Nominal Holdings Cost $ Novo Nordisk 45,683 2,292,552 Marine Harvest 126,770 2,194,399 Comcast 34,100 2,148,403 State Street 35,817 2,139,528 Valeo 38,000 2,033,421 Travelers 17,500 1,976,393 Abbott Laboratories 49,307 1,941,934 Roche 7,500 1,918,853 Lam Research 22,000 1,903,782 Thermo Fisher Scientific 12,500 1,893,804 Prudential 92,618 1,876,763 TJX 24,000 1,861,079 CVS Health 19,500 1,835,827 Delta Air Lines 47,000 1,821,984 Ford Motor 136,000 1,818,283 Cisco Systems 62,000 1,808,103 McKesson 9,800 1,801,805 Nippon Telegraph & Telephone 38,000 1,727,087 Bank of America 94,686 1,682,404 Ryanair 104,000 1,641,746 Henkel 15,000 1,588,018 Oasis Petroleum 152,143 1,561,747 O'Reilly Automotive 5,800 1,538,252 General Electric 49,000 1,529,989 Kirin 90,400 1,528,809 Hess 25,866 1,499,703 American Water Works 19,000 1,494,412 Amgen 9,800 1,483,524 Cummins 12,205 1,473,877 Chubb 11,500 1,460,673 East West Bancorp 39,049 1,458,464 Cooper Cos 7,803 1,421,393 Stora Enso 161,000 1,407,381 Apple 14,600 1,396,709 ISS 35,000 1,385,839 UniCredit 460,000 1,380,339 Facebook 11,143 1,373,181 Worldpay 325,208 1,350,491 Taiwan Semiconductor Manufacturing 260,000 1,298,920 ASML Holding 12,560 1,282,898 Visa 17,000 1,280,685

287

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes Global Equity ESG Fund (continued) Total purchases in the year (continued) $114,550,779 Major Purchases (continued) Nominal Holdings Cost $ Danske Bank 40,849 1,223,539 Ping An Insurance Group 270,000 1,196,690 LendLease 119,475 1,196,306 American Tower Reits 10,584 1,193,727 Capital One Financial 16,881 1,160,017 Hakuhodo 95,000 1,159,844 Alphabet Class A 1,626 1,146,156

Total sales in the year $25,283,067 Major Sales Nominal Holdings Proceeds $ Marine Harvest 129,417 2,195,168 Tyson Foods 31,073 2,194,832 Wells Fargo 35,000 1,828,390 ARM 53,515 1,185,343 Novo Nordisk 28,311 1,148,071 Mylan 25,869 1,063,546 O'Reilly Automotive 3,280 913,228 ISS 25,000 887,327 Hargreaves Lansdown 55,112 822,371 Hero MotoCorp 17,000 765,828 Union Pacific 7,624 698,178 Ryanair 49,106 687,756 Occidental Petroleum 9,000 680,073 JPMorgan Chase 11,109 660,633 State Street 7,900 628,678 Power Assets 51,000 472,485 Hexpol 48,833 456,866 Bank of America 19,000 425,654 Cairn Homes 335,583 378,340 Nordic Semiconductor 73,601 339,045 Leroy Seafood 6,400 332,061 Alphabet Class A 420 320,457 Cheung Kong Infrastructure 40,000 318,968 Yara International 9,200 315,283 CVS Health 3,227 308,063 Hess 5,272 303,913 East West Bancorp 6,000 290,889 Nets 13,636 282,036 American Water Works 3,500 279,507 Cummins 2,124 269,787 Lam Research 2,600 263,607

288

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes Multi Strategy Credit Fund Total purchases in the year $1,379,035,792 Major Purchases Nominal Holdings Cost $

Telecom Italia 7.375% 15/12/2017 16,750,000 23,850,960 Lear 4.750% 15/01/2023 18,252,000 18,701,312 BHP Billiton Finance 22/10/2077 12,704,000 17,724,161 EMC 1.875% 01/06/2018 16,702,000 16,533,888 Ziggo Secured Finance 4.250% 15/01/2027 13,077,000 14,597,856 OI European Group 3.125% 15/11/2024 12,840,000 14,032,836 Dresdner Funding Trust I 8.151% 30/06/2031 11,173,000 13,084,668 America Movil 2.125% 10/03/2028 11,240,000 12,400,424 T-Mobile USA 6.375% 01/03/2025 11,600,000 12,085,323 Ally Financial 4.625% 30/03/2025 11,950,000 11,593,244 La Caisse Federale de Credit Mutuel Nord Europe 2.125% 12/09/2026 10,400,000 11,475,059 CNH Industrial Capital 3.875% 15/10/2021 11,538,000 11,473,503 Kinder Morgan Energy Partners 5.950% 15/02/2018 10,736,000 11,330,566 Goldman Sachs Group 1.625% 27/07/2026 10,213,000 11,225,449 Actavis Funding 4.550% 15/03/2035 10,900,000 10,745,876 Vale Overseas 6.250% 10/08/2026 10,481,000 10,487,536 PVH 3.625% 15/07/2024 9,250,000 10,374,574 Wells Fargo 1.000% 02/02/2027 9,350,000 10,171,294 National Grid Gas Finance 2.625% 22/09/2038 7,594,000 9,947,977 ARD Finance 6.625% 15/09/2023 8,776,119 9,866,552

Total sales in the year $1,279,139,377 Major Sales Nominal Holdings Proceeds $

UT2 Funding 5.321% 30/06/2016 26,337,000 29,259,091 Vale Overseas 6.250% 23/01/2017 24,295,000 24,749,890 Bank Of America 3.750% 12/07/2016 19,545,000 19,545,000 Ford Motor Credit 1.700% 09/05/2016 16,695,000 16,710,551 CIT 5.000% 15/05/2017 15,275,000 15,561,406 Telefonica Emisiones 3.992% 16/02/2016 15,300,000 15,300,000 Lear 4.750% 15/01/2023 14,019,000 14,447,238 OI European Group 3.125% 15/11/2024 12,840,000 13,595,101 Daimler Finance North America 3.500% 03/08/2025 12,833,000 13,431,018 CNH Industrial Capital 3.375% 15/07/2019 13,350,000 12,524,125 Numericable 5.375% 15/05/2022 10,750,000 12,474,986 Ally Financial 3.750% 18/11/2019 11,950,000 11,859,665 La Caisse Federale de Credit Mutuel Nord Europe 2.125% 12/09/2026 10,400,000 11,614,277 Denali Borrower 5.625% 15/10/2020 11,000,000 11,495,899 CNH Industrial Capital 3.875% 15/10/2021 11,538,000 11,476,570 Goldman Sachs Group 1.625% 27/07/2026 10,213,000 11,257,297 Intesa Sanpaolo 3.125% 15/01/2016 11,250,000 11,250,000 PVH 3.625% 15/07/2024 9,250,000 10,492,898 Wells Fargo 1.000% 02/02/2027 9,350,000 10,173,972 Barclays Bank 5.000% 22/09/2016 10,000,000 10,104,700

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes Multi Asset Inflation Fund Total purchases in the year £47,685,875 Major Purchases Nominal Holdings Cost £ OP Corporate Bank 20/01/2017 2,000,000 1,999,014 FMS Wertmanagement 18/08/2016 2,000,000 1,994,776 UK Treasury Inflation Linked Bond 0.125% 22/03/2029 1,506,000 1,928,457 UK Treasury Inflation Linked Bond 0.125% 22/03/2026 1,448,000 1,665,617 UK Treasury Inflation Linked Bond 1.250% 22/11/2027 697,000 1,206,970 The Toronto-Dominion Bank 0.890% 03/11/2016 1,000,000 1,001,126 UBS 0.550% 06/02/2017 1,000,000 1,000,458 Royal Bank Of Scotland 0.350% 31/01/2017 1,000,000 1,000,000 Citibank 0.570% 03/05/2016 1,000,000 1,000,000 Nordea Bank 0.530% 13/07/2016 1,000,000 1,000,000 Svenska Handelsbank 0.340% 16/02/2017 1,000,000 1,000,000 Svenska Handelsbank 0.550% 10/06/2016 1,000,000 1,000,000 Citibank 0.280% 1,000,000 1,000,000 Credit Agricole 0.590% 07/06/2016 1,000,000 1,000,000 BNP Paribas 0.370% 18/11/2016 1,000,000 1,000,000 Nordea Bank 0.540% 13/04/2016 1,000,000 1,000,000 Bank Of America 0.580% 09/08/2016 1,000,000 1,000,000 ING Bank 0.520% 19/10/2016 1,000,000 1,000,000 Svenska Handelsbank 0.540% 15/09/2016 1,000,000 1,000,000 National Bank Of Abu Dhabi 0.300% 28/03/2017 1,000,000 1,000,000 Nordea Bank 0.330% 11/01/2017 1,000,000 1,000,000 National Bank Of Abu Dhabi 0.610% 11/04/2016 1,000,000 1,000,000 National Bank of Abu Dhabi 0.300% 28/12/2016 1,000,000 1,000,000 Rabobank International 0.500% 04/04/2017 1,000,000 1,000,000 Svenska 0.320% 19/12/2016 1,000,000 1,000,000 National Bank Of Abu Dhabi 06/05/2016 1,000,000 999,790 Royal Bank Of Scotland 0.350% 10/01/2017 1,000,000 999,449 National Australia Bank Ltd 07/04/2016 1,000,000 999,391 Credit Agricole 0.000% 02/02/2017 1,000,000 999,386 FMS Wertmanagement 16/12/2016 1,000,000 999,179 FMS Wertmanagement 09/03/2017 1,000,000 999,080 The Toronto-Dominion Bank 23/06/2016 1,000,000 999,001 Commonwealth Bank Of Australia 05/07/2016 1,000,000 998,826 OP Corporate Bank Plc 19/10/2016 1,000,000 998,741 Standard Chartered Bank 06/06/2016 1,000,000 998,728 Westpac Banking Corporation 23/05/2016 1,000,000 998,700 Pohjola Bank Plc 20/05/2016 1,000,000 998,674 Australia New Zealand Banking 26/10/2016 1,000,000 998,646 Rabobank International 0.000% 03/10/2016 1,000,000 997,818 Australia & New Zealand Bank 0.00% 11/07/2016 1,000,000 996,541 UK Treasury Inflation Linked Bond 0.125% 22/03/2024 571,000 699,275 UK Treasury Inflation Linked Bond 1.875% 22/11/2022 346,000 550,867

290

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes Multi Asset Inflation Fund (continued) Total sales in the year £47,806,550 Major Sales Nominal Holdings Proceeds £ FMS Wertmanagement 23/02/2016 2,000,000 2,000,000 FMS Wertmanagement 18/08/2016 2,000,000 2,000,000 The Royal Bank Of Scotland 0.630% 11/05/2016 2,000,000 2,000,000 UK Treasury Inflation Linked Bond 0.125% 22/03/2026 1,424,000 1,597,124 UK Treasury Inflation Linked Bond 0.125% 22/03/2024 1,069,000 1,265,067 UK Treasury Inflation Linked Bond 1.250% 22/11/2027 602,000 1,033,249 National Bank Of Abu Dhabi 06/05/2016 1,000,000 1,000,000 ING Bank 0.520% 19/10/2016 1,000,000 1,000,000 The Toronto-Dominion Bank 23/06/2016 1,000,000 1,000,000 The Bank Of Nova Scotia 0.530% 08/01/2016 1,000,000 1,000,000 Credit Agricole 0.575% 04/02/2016 1,000,000 1,000,000 Rabobank International 0.000% 03/10/2016 1,000,000 1,000,000 Rabobank International 0.560% 26/02/2016 1,000,000 1,000,000 Bank Of America 0.570% 09/02/2016 1,000,000 1,000,000 Nordea Bank 0.530% 13/07/2016 1,000,000 1,000,000 Svenska Handelsbank 0.320% 19/02/2016 1,000,000 1,000,000 Nordea Bank 0.540% 13/04/2016 1,000,000 1,000,000 Nordea Bank 0.550% 13/01/2016 1,000,000 1,000,000 Svenska Handelsbank 0.550% 10/06/2016 1,000,000 1,000,000 Svenska Handelsbank 0.540%0 15/09/2016 1,000,000 1,000,000 Bank Of America 0.580% 09/08/2016 1,000,000 1,000,000 FMS Wertmanagement 16/12/2016 1,000,000 1,000,000 Bank Nederlandse Gemeenten 20/04/2016 1,000,000 1,000,000 National Bank Of Abu Dhabi 0.610% 11/04/2016 1,000,000 1,000,000 OP Corporate Bank 19/10/2016 1,000,000 1,000,000 Pohjola Bank Plc 20/05/2016 1,000,000 1,000,000 National Bank Of Abu Dhabi 0.300% 28/12/2016 1,000,000 1,000,000 Standard Chartered Bank 06/06/2016 1,000,000 1,000,000 Citibank 0.570% 03/05/2016 1,000,000 1,000,000 Australia & New Zealand Bank 26/10/2016 1,000,000 1,000,000 Westpac Banking Corporation 23/05/2016 1,000,000 1,000,000 Commonwealth Bank Of Australia 05/07/2016 1,000,000 1,000,000 The Toronto-Dominion Bank 17/12/2016 1,000,000 1,000,000 Pohjola Bank 24/02/2016 1,000,000 1,000,000 National Australia Bank 07/04/2016 1,000,000 1,000,000 The Toronto-Dominion Bank 0.890% 03/11/2016 1,000,000 1,000,000 Credit Agricole 0.590% 07/06/2016 1,000,000 1,000,000 BNP Paribas 0.370% 18/11/2016 1,000,000 1,000,000 Australia & New Zealand Bank 0.000% 11/07/2016 1,000,000 1,000,000 UK Treasury Inflation Linked Bond 1.875% 22/11/2022 589,000 908,005 UK Treasury Inflation Linked Bond 0.125% 22/11/2019 622,000 691,518 UK Treasury Inflation Linked Bond 0.125% 22/03/2029 400,000 514,746

291

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes Global Small Cap Equity Fund Total purchases in the year $15,377,407 Major Purchases Nominal Holdings Cost $ Horiba 16,200 647,729 Weingarten Realty Investors Reits 16,123 604,536 Bank of the Ozarks 13,156 543,907 SSP 109,586 505,001 AMN Healthcare Services 14,798 501,649 Retail Opportunity Investments Reits 21,852 482,257 DuluxGroup 94,531 466,261 Green Reit 281,909 453,357 Relo Group 2,800 446,167 Brunswick 7,844 433,154 Evolution Mining 227,448 425,833 Raging River Exploration 35,598 302,206 Tullow Oil 92,257 295,070 RPM International 6,505 276,533 WEX 3,193 253,116 CACI International 2,290 235,112 Hitachi Capital 10,300 234,286 Yaoko 5,500 229,143 DCC 2,789 223,034 STERIS 3,185 219,623 Glanbia 11,794 218,370 Ithaca Energy 253,816 218,233 West Pharmaceutical Services 3,304 214,115 PC Depot 16,100 208,307 Diplomat Pharmacy 6,361 202,596 Jungheinrich - Preferred 3,882 200,526 Silicon Laboratories 3,706 184,516 Reinsurance of America 1,950 183,349 Wintrust Financial 3,596 166,577 Sally Beauty 5,942 164,963 WD-40 1,553 161,781 Snap-On 1,041 161,106 Kirby 2,817 158,527 Cognex 3,885 155,709

292

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes Global Small Cap Equity Fund (continued) Total sales in the year $6,959,996 Major Sales Nominal Holdings Proceeds $ Signature Bank 3,838 514,557 Dufry 3,480 459,976 Carpenter Technology Corporation 12,150 433,738 Jarden 6,222 367,122 Cognex 6,116 318,157 East West Bancorp 9,265 296,708 Cambridge Industrial Trust Reits 694,106 280,418 77 Bank 75,000 277,190 Faroe Petroleum 283,051 266,480 Silicon Laboratories 4,022 263,171 FP 7,100 251,995 West Pharmaceutical Services 2,857 236,169 Waddell & Reed Financial 11,870 219,681 CLARCOR 3,593 219,557 RPM International 4,388 215,370 DCC 2,570 214,301 Hoshizaki 2,100 191,373 Newell Brands 3,312 175,506 SHW 6,187 165,645 Snap-On 985 147,068 Horiba 2,800 123,226 Wintrust Financial 1,539 111,231 Intersil 5,210 104,710 WEX 876 94,731 Glanbia 4,479 89,477 Jack Henry & Associates 1,121 85,646 Stella International 43,000 78,812 CACI International 574 72,246

293

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes US All Cap Equity Fund Total purchases in the year $10,183,630 Major Purchases Nominal Holdings Cost $ Procter & Gamble 6,453 533,054 AT&T 12,202 502,545 PG&E 6,870 435,342 Citigroup 6,950 416,097 Stericycle 3,771 387,627 Charles Schwab 12,480 378,440 Amazon.com 550 365,517 Walt Disney 3,560 359,002 Cooper Cos 2,127 353,142 Halliburton 7,261 345,417 NIKE 6,390 325,106 Verisk Analytics 3,870 318,081 WW Grainger 1,380 314,753 American Tower Reits 2,700 305,426 Wabtec 4,190 298,786 Genesee & Wyoming 3,890 297,788 ANSYS 3,510 296,458 CLARCOR 5,960 282,261 Northern Trust Corporation 3,400 275,873 John Wiley & Sons 5,370 271,094 Signature Bank 1,718 240,651 Fortive 4,730 231,056 Concho Resources 1,680 220,435 American Express 3,360 194,711 Comcast 2,796 188,388 Kellogg 2,423 184,625 CACI International 1,700 169,637 Freeport-McMoRan 10,290 166,175 Analog Devices 2,600 160,209 WABCO 1,600 157,157 Kirby 2,120 133,928 Bank of America 9,030 128,195 Danaher 1,482 120,711 Diplomat Pharmacy 6,510 111,781

294

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes US All Cap Equity Fund (continued) Total sales in the year $10,043,052 Major Sales Nominal Holdings Proceeds $ Microsoft 11,546 592,077 Linear Technology 8,893 528,190 Kellogg 7,123 513,133 American Water Works 7,330 479,588 CLARCOR 5,960 442,001 Amazon.com 550 412,176 Express Scripts 5,490 409,442 Kinder Morgan 20,550 362,277 Welltower 4,502 307,158 East West Bancorp 6,900 257,148 West Pharmaceutical Services 3,380 247,518 PG&E 4,032 242,998 Alimentation Couche-Tard 5,016 240,325 Bank of America 15,927 226,791 Equifax 1,790 214,653 CarMax 4,100 212,494 Johnson & Johnson 1,790 203,901 American International 3,591 195,836 Diplomat Pharmacy 10,910 194,805 Oracle 5,200 193,416 Martin Marietta Materials 980 185,712 Las Vegas Sands 4,260 181,565 Verisk Analytics 2,010 167,167 MEDNAX 2,332 165,895 Apple 1,660 165,050 Jarden 2,739 161,490 AT&T 3,760 161,410 Newell Brands 3,346 159,362 ANSYS 1,770 158,356 Cognex 3,490 156,252 Ellie Mae 1,800 155,402 Valeant Pharmaceuticals International 5,554 136,629 American Express 2,110 129,524 Baxter International 2,590 119,766 Stericycle 1,540 119,051 Gildan Activewear 4,360 118,292 Cooper Cos 670 114,986 Costco Wholesale 690 104,873

295

Hermes Investment Funds Public Limited Company Unaudited Schedule of Significant Portfolio Movements For the financial year ended 31 December 2016 (continued)

Hermes Absolute Return Credit Fund Total purchases in the year $158,708,907 Major Purchases Nominal Holdings Cost $ UPM-Kymmene 6.625% 23/01/2017 2,386,000 3,207,840 Carlsberg Breweries 7.250% 28/11/2016 2,350,000 3,112,211 Imperial Tobacco 5.500% 22/11/2016 2,200,000 2,966,761 Zoetis 1.875% 01/02/2018 2,750,000 2,744,154 Prudential 7.750% 29/01/2049 2,090,000 2,143,725 OI European 3.125% 15/11/2024 1,960,000 2,142,084 Sinopec 2.000% 29/09/2021 1,765,000 1,755,504 Petroleos Mexicanos 6.375% 05/08/2016 1,475,000 1,686,911 Telecom Italia 7.375% 15/12/2017 1,200,000 1,683,263 Barclays 3.250% 12/02/2027 1,200,000 1,565,889 Kinder Morgan Energy Partners 6.000% 01/02/2017 1,500,000 1,534,050 CNH Industrial 3.875% 15/10/2021 1,538,000 1,529,403 EMC 1.875% % 01/06/18 1,525,000 1,505,424 NGG Finance 2.625% 22/09/2038 1,125,000 1,473,726 CFCM Nord Europe 2.125% 12/09/2026 1,300,000 1,434,382 Ziggo Secured Finance 4.250% 15/01/2027 1,231,000 1,374,165 Goldman Sachs 1.625% 27/07/2026 1,174,000 1,290,383 Telefonica Emisiones SAU 5.375% 02/02/2018 1,000,000 1,279,363 Reed Elsevier Investments 5.625% 20/10/2016 900,000 1,264,213 CBOM Finance 5.875% 07/11/2021 1,214,000 1,214,000

Total sales in the year $136,944,771 Major Sales Nominal Holdings Proceeds $ Carlsberg Breweries 7.250% 28/11/2016 2,350,000 2,916,820 Imperial Tobacco 5.500% 22/11/2016 2,300,000 2,839,265 Petroleos Mexicanos 6.375% 05/08/2016 1,975,000 2,186,424 OI European 3.125% 15/11/2024 1,960,000 2,075,240 AT&T 2.400% 15/08/2016 1,850,000 1,851,813 UT2 Funding 5.321% 30/06/2016 1,550,000 1,737,125 ABN AMRO Bank FRN 29/03/2049 1,500,000 1,671,975 Hanson 6.125% 15/08/2016 1,640,000 1,647,544 Barclays 3.250% 12/02/2027 1,200,000 1,571,280 CNH Industrial 3.875% 15/10/2021 1,538,000 1,529,803 Wells Fargo 5.125% 15/09/2016 1,500,000 1,500,000 Reynolds American 3.500% 04/08/2016 1,500,000 1,500,000 NGG Finance 2.625% 22/09/2038 1,125,000 1,473,978 CFCM Nord Europe 2.125% 12/09/2026 1,300,000 1,451,846 Lafarge 6.500% 15/07/2016 1,400,000 1,400,000 DH Europe Finance 30/06/2017 1,200,000 1,375,651 Vale Overseas 6.250% 23/01/2017 1,300,000 1,324,341 Goldman Sachs 1.625% 27/07/2026 1,174,000 1,294,043 NXP 3.500% 15/09/2016 1,250,000 1,258,234 CBOM Finance 5.875% 07/11/2021 1,214,000 1,211,779

296

Hermes Investment Funds Public Limited Company Unaudited Investment Manager Remuneration Disclosure

The Directors of the Company who are also employees of Hermes Investment Management Limited and companies within its group structure (“Hermes”) do not receive any remuneration in respect of their services as Directors of the Company. The other Directors receive fixed remuneration in respect of their services which is set at a level determined by the Board as a whole and which is not performance related and is detailed in Note 4 (e) of the Financial Statements.

None of the Directors are currently in receipt of variable remuneration in respect of their services as Directors of the Company. Accordingly, the detailed provisions of Article 14b of Directive 2009/65/EC and the related ESMA Guidelines on sound remuneration policies under the UCITS Directive and the AIFMD (ESMA/2016/411) in relation to variable remuneration are not applicable to the Company. None of the Directors are currently in receipt of a pension from the Company. The Company has determined that the fixed remuneration payable to the Directors who are not employees of Hermes is (a) consistent with sound and effective risk management and does not encourage risk-taking which is inconsistent with the risk profile, rules or instrument of incorporation of the Company and (b) in line with the business strategy, objectives, values and interests of the Company and the investors in the Company.

The nature of the Directors’ remuneration, being fixed and not including any variable component and being determined by the Board as a whole, ensures that the Company appropriately manages any conflicts of interest in respect of remuneration. The remuneration policy of the Company, which was adopted with effect from 18 March 2016, was updated on 20 December 2016 to include additional reference to the application of the UCITS V remuneration requirements to the relevant delegates of the Company.

297

Hermes Investment Funds Public Limited Company Unaudited Securities Financing Transaction Regulation Disclosures

Securities Financing Transactions Regulation

The Securities Financing Transaction Regulation (Regulation (EU) 2015/2365) (“SFTR”) came into effect on 12 January 2016. The aim of the SFTR is to improve the transparency of securities financing transactions (“SFTs”) in the shadow banking sector, giving regulators access to detailed information to enable them to monitor risks in that sector on an ongoing basis.

The SFTR divides SFTs into four categories:

- Repurchase transactions; - Securities or commodities lending or borrowing transactions; - Buy-sell back or sell-buy back transactions; and - Margin lending transactions, which is defined broadly to capture any extension of credit ‘in connection with the purchase, sale, carrying or trading of securities’.

For the avoidance of doubt, the Company does not currently employ repurchase/reverse repurchase agreements and securities lending for the purposes of efficient portfolio management.

Currently only the Hermes Multi Asset Inflation Fund employs SFTs as defined by the SFTR and the details of those SFTs employed by the Hermes Multi Asset Inflation Fund are disclosed below in accordance with the requirements of SFTR.

Hermes Multi Asset Inflation Fund

Global Data

Assets engaged by SFT Type £ % of AUM Total return swaps (126,184) 0.22%

Concentration Data Largest collateral issuers Collateral £ Macquarie Bank Limited (130,000)

Aggregate Transaction Data

Total Return Swaps

Collateral type: Cash Collateral currency: GBP Maturity: <1 day 1 day - 1 week - 1 1-3 3 months - > 1 Open 1 week month months 1 year year maturity - Collateral (130,000) - Total Return Swaps (126,184)

Countries of counterparties: Australia Settlement & clearing type: Bilateral

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Hermes Investment Funds Public Limited Company Unaudited Securities Financing Transaction Regulation Disclosures (continued)

Reuse of Collateral

Share of collateral re-used 0%

Maximum permitted collateral re-use per prospectus Unlimited

Return on cash collateral re-investment 0

Safekeeping – Collateral Granted

Collateral held in: Collateral %

Segregated accounts - Pooled accounts 100 Other -

Return & Cost

Total Return Swaps £

Return 1,677,705 Cost (1,602,517)

The Returns line shows the realised and unrealised gain for the year and the Cost line shows the realised and unrealised losses for the year under review.

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