HFT (HK) China Investment Series II HFT (HK) China RMB Money Market Fund (the Sub-Fund)

Transcription

1 PRODUCT KEY FACTS HFT (HK) China Investment Series II HFT (HK) China RMB Money Market Fund (the Sub-Fund) Issuer: HFT Investment Management (HK) Limited October 2017 This statement provides you with key information about this product. This statement is a part of the fund s Explanatory Memorandum. You should not invest in this product based on this statement alone. Quick facts Manager and RQFII Holder: Trustee: Global Custodian and Administrator: HFT Investment Management (HK) Limited BNP Paribas Trust Services (Hong Kong) Limited BNP Paribas Securities Services, Singapore Branch Registrar and Transfer Agent: PRC Custodian: Ongoing charges over a year 1 : (Based on average Net Asset Value ( NAV )) Dealing frequency: Base currency: Dividend policy: Financial year end of this fund: Minimum initial investment: BNP Paribas Securities Services, Hong Kong Branch Industrial and Commercial Bank of China Limited Class A: 0.71% Class B: 0.71% Class C: 0.71% Class D: 0.70% Class H: Not applicable as this class has not been launched Daily RMB Semi-annual (if any) subject to the Manager s discretion. Dividends will not be paid out of capital. At the Manager s discretion, dividends maybe paid out of gross income and all or part of the fees and expenses may be charged to capital, resulting in an increase in distributable income for the payment of dividends by the Sub-Fund and therefore, dividends may be paid effectively out of capital. This may result in an immediate reduction of NAV per Unit. 31 December Class A Units: RMB1,000 Class B Units: USD1,000 Class C Units: SGD1,000 Class D Units: HKD1,000 Class H Units: AUD1,000

2 Minimum subsequent investment: Class A Units: RMB1,000 Class B Units: USD1,000 Class C Units: SGD1,000 Class D Units: HKD1,000 Class H Units: AUD1,000 Minimum holding: Minimum redemption amount: Class A Units: RMB1,000 Class B Units: USD1,000 Class C Units: SGD1,000 Class D Units: HKD1,000 Class H Units: AUD1,000 Class A Units: RMB1,000 Class B Units: USD1,000 Class C Units: SGD1,000 Class D Units: HKD1,000 Class H Units: AUD1,000 1 Ongoing charges are generally payments deducted from the assets of the Sub-Fund where such deductions are required and permitted by applicable laws and regulations, the constitutive documents and offering documents of the Sub-Fund. The ongoing charges figure is based on the latest audited annual financial statements and is calculated with reference to the ongoing expenses chargeable during the financial period from 1 January 2016 to 31 December 2016 to the average NAV of the respective class of the Sub-Fund as at the financial year ended 31 December 2016 and expressed as a percentage. This figure may vary from year to year. What is this product? The HFT (HK) China RMB Money Market Fund is a sub-fund of HFT (HK) China Investment Series II which is a unit trust established as an umbrella fund under the laws of Hong Kong. The Sub-Fund invests its assets primarily in short-term deposits and debt securities in the People s Republic of China ( PRC ) and Hong Kong, all of which will be denominated and settled in RMB, as more fully described below under Investment Strategy. The Sub-Fund will invest directly in the PRC s domestic securities markets through the Manager s status as a Renminbi Qualified Foreign Institutional Investor ( RQFII ). Investors should note that purchase of a Unit in the Sub-Fund is not the same as placing funds on deposit with a bank or deposit taking company and that the Sub-Fund is not subject to the supervision of the Hong Kong Monetary Authority. The Sub-Fund does not have a constant NAV. The Manager has no obligation to redeem Units at the offer value. Objectives and Investment Strategy Objective The Sub-Fund seeks a rate of return significantly higher than that normally available for personal deposits of the Base Currency by investing primarily in RMB-denominated short-term PRC Government bonds, other RMB-denominated short-term debt instruments (such as debt instruments issued by multinational organisations, financial institutions and other corporations), and RMB-denominated money market 2

3 3 HFT (HK) China RMB Money Market Fund instruments, as well as cash or cash equivalents in the PRC and Hong Kong, as more fully described and subject to the conditions set forth under Investment Strategy below. These include, without limitation, RMB-denominated short-term debt and money market instruments issued and distributed in the PRC and Hong Kong. There is no assurance that the Sub-Fund will achieve its investment objective. Investment Strategy The Sub-Fund seeks to invest: (a) (b) by virtue of the Manager s quota and capacity under the RQFII framework, not less than 80% of its total NAV in RMB-denominated and settled short-term debt instruments issued by governments, quasi-government organisations, multinational organisations, financial institutions and other corporations and distributed within the PRC that are traded on the inter-bank bond market and/or the exchange-traded bond markets, and the credit ratings of such debt instruments (if any) will be given by PRC local credit rating agencies; and not more than 20% of its total NAV in RMB-denominated and settled short-term debt instruments issued and distributed in Hong Kong, the credit ratings of such which, if any, will be given by international credit rating agencies (such as Standard & Poor s, Moody s and Fitch); in each case, subject to the conditions set forth below. The Sub-Fund may borrow up to 10% of its total NAV but only on a temporary basis for the purpose of meeting redemption requests or defraying operating expenses. The Sub-Fund will maintain an average portfolio maturity not exceeding 90 days, and will not purchase an instrument with a remaining maturity of more than 397 days, or two years in the case of Government and other public securities. The Sub-Fund may invest in cash or bank deposit to manage liquidity and to diversify portfolio risk. Not more than 10% of the Sub-Fund s NAV will be invested in securities issued or guaranteed by a single sovereign issuer (including its government, a public or local authority) with a credit rating below investment grade. For instruments issued and distributed in the PRC, the Sub-Fund will not invest in securities (i) with a shortterm credit rating below A-1 or a long-term credit rating below AA as rated by a PRC local credit rating agency, or (ii) that are unrated, except (a) unrated securities with a long-term issuer credit rating at or above AA as rated by a PRC local credit rating agency or (b) in the case of PRC government bonds and bonds issued by PRC policy banks, which are normally unrated. For instruments issued and distributed in Hong Kong, the Sub-Fund will not invest in securities (i) with a short-term credit rating below A-2 (or its equivalent) or a long-term credit rating below A- (or its equivalent) as rated by an international credit rating agency, or (ii) that are unrated, except unrated securities with a long-term issuer credit rating at or above A- (or its equivalent) as rated by an international credit rating agency. The Sub-Fund will not invest in securities that do not comply with the conditions stated above. Subject to the above, the aggregate value of the Sub-Fund s holding of instruments and deposits issued by a single issuer will not exceed 10% of the total NAV of the Sub-Fund except: (i) where the issuer is a substantial financial institution and the total amount does not exceed 10% of the issuer's issued capital and published reserves, the limit may be increased to 25%; or (ii) in the case of Government and other public securities, up to 30% may be invested in the same issue; or (iii) in respect of any deposit of less than US$1,000,000 or its equivalent in RMB, where the Sub-Fund cannot otherwise diversify as a result of its size. Currently the Sub-Fund has no intention to invest in structured products or financial derivative instruments for non-hedging purposes and the Manager will not enter into any securities lending, repurchase or reverserepurchase transactions in respect of the Sub-Fund. If this changes in the future, prior approval of the SFC will be sought and not less than one month s notice will be provided to Unitholders before the Sub-Fund and/or the Manager enter(s) into any such transaction. The Sub-Fund will not invest in convertible bonds, Urban Investment Bonds ( 城投債 ), or asset-backed securities (including asset-backed commercial papers). The following is the target investment allocation of the Sub-Fund, subject to the conditions set forth above.

4 Investors should note that the Manager may at any time adjust the allocation having regard to prevailing market conditions in the future and, despite the target allocation indicated below, may choose to allocate up to 100% in cash or cash equivalents as the Manager determines appropriate in the interest of the Sub- Fund. Such circumstances would include, for instance, market conditions where prices for fixed income instruments as an asset class are adversely affected (whether caused by political events, terrorism, natural disasters or otherwise) and, as a result, the Manager determines that the risks of maintaining the target allocation would significantly outweigh the benefits involved. Indicative investment allocation Type of instruments RMB-denominated short-term debt/money market instruments issued and distributed in the PRC (that are not securities (i) with a short-term credit rating below A-1 or a long-term credit rating below AA as rated by a PRC local credit rating agency, or (ii) that are unrated, except (a) unrated securities with a longterm issuer credit rating at or above AA as rated by a PRC local credit rating agency or (b) in the case of PRC government bonds and bonds issued by PRC policy banks, which are normally unrated) RMB - denominated short-term debt/money market instruments issued and distributed in Hong Kong (that are not securities (i) with a short-term credit rating below A-2 (or its equivalent) or a long-term credit rating below A- (or its equivalent) as rated by an international credit rating agency, or (ii) that are unrated, except unrated securities with a long-term issuer credit rating at or above A- (or its equivalent) as rated by an international credit rating agency) Percentage limits (of the Sub-Fund s NAV) 80 (minimum) - 100% (maximum) 0 (minimum) - 20% (maximum) Cash or cash equivalents 0 (minimum) - 10% (maximum) The Manager will actively manage the debt instruments and cash deposits with a combination of top-down and bottom-up processes. What are the key risks? Investment involves risks. Please refer to the Explanatory Memorandum for details including the risk factors. 1. Risks associated with fixed income instruments Risks of investing in PRC bond markets The financial market of the PRC is at an early stage of development, and bonds held by the Sub- Fund are not expected to be rated by any rating agency of an international standard. Such instruments are generally subject to a higher degree of credit risk and a lower degree of liquidity, which may result in greater fluctuations in value, and the value may also be more difficult to ascertain. The NAV of the Sub-Fund may be more volatile and may be adversely impacted as a result. Risks associated with local PRC credit ratings Local credit rating agencies in the PRC must be approved by the relevant PRC authorities to conduct ratings business and are also subject to industry self-regulation. However, the local PRC rating process may lack transparency and the rating standards may be significantly different from that adopted by internationally recognised credit rating agencies. There is little assurance that credit ratings are independent, objective and of adequate quality. In selecting the Sub-Fund s bond portfolio, the Manager may refer to credit ratings given by local PRC credit rating agencies for reference but will primarily rely on its own internal analysis to evaluate each bond independently. Investors should also exercise caution before relying on any local credit ratings. 4

5 Credit risk 5 HFT (HK) China RMB Money Market Fund Investment in fixed income instruments is subject to the credit risk of the issuers which may be unable or unwilling to make timely payments of principal and/or interest. In the event of a default or credit rating downgrading of the issuers of the fixed income instruments held by the Sub-Fund, valuation of the Sub-Fund s portfolio may become more difficult, the Sub-Fund s value will be adversely affected and investors may suffer a substantial loss as a result. The Sub-Fund may also encounter difficulties or delays in enforcing its rights against the issuers who will generally be incorporated in the PRC. Changing market conditions or other significant credit events, such as credit rating downgrades, may pose valuation risk as in such circumstances, valuation of the Sub-Fund s investments may involve uncertainties and judgemental determinations as there is a possibility that independent pricing information may at times be unavailable. If such valuations should prove to be incorrect, the NAV of the Sub-Fund may need to be adjusted and may be adversely affected. Such events or credit rating downgrades may also subject the Sub-Fund to increased liquidity risk which may adversely affect the NAV of the Sub-Fund. Valuation risk Securities held by the Sub-Fund may subsequently become illiquid due to events relating to the issuer of the securities, market and economic conditions and regulatory sanctions, and there may be cases where no clear indication of the value of the Sub-Fund s portfolio securities is available. If this situation occurs, the NAV of the Sub-Fund may not accurately reflect the value of the assets held by it, as such investors interest may be adversely affected if they purchase or redeem Units during such period and the value of the Sub-Fund may be adversely impacted. Market volatility also may result in a discrepancy between the market price of investments and their fair value. In such circumstances, the Manager may, with the consent of the Trustee, adjust the value of the securities or permit some other valuation method to be used to ascertain the fair value of the investments of the Sub-Fund. Interest rate risk Generally, the value of fixed income instruments is expected to be inversely correlated with changes in interest rates. Any increase in interest rates or changes in macro-economic policies in the PRC (including monetary policy and fiscal policy) may adversely impact the value of the Sub- Fund s fixed income portfolio. 2. Investment and concentration risks You should be aware that investment in the Sub-Fund is subject to normal market fluctuations and other risks inherent in the Sub-Fund s assets. Accordingly, there is a risk that you may not recoup the original amount invested in the Sub-Fund or may lose a substantial part or all of your investment. The Sub-Fund s exposure primarily to a single country (i.e. China) subjects it to greater concentration risk. The Sub-Fund is likely to be more volatile than a broadly-based fund such as global or regional investment fund as it is more susceptible to fluctuation in value resulting from adverse conditions in a single country. 3. Risk relating to the RQFII regime In the event of any default of either a PRC broker or the PRC Custodian in the execution or settlement of any transaction or in the transfer of any funds or securities in the PRC, the Sub-Fund may encounter delays in recovering its assets which may in turn impact the NAV of the Sub-Fund. Repatriations by RQFIIs in respect of fund such as the Sub-Fund conducted in RMB are not subject to any restrictions, lock-up periods or prior approval. There is no assurance, however, that PRC rules and regulations will not change or that repatriation restrictions will not be imposed in the future. Any restrictions on repatriation of the invested capital and net profits may impact on the Sub-Fund s ability to meet redemption requests from Unitholders. Similarly, change and uncertainty of the laws and regulations in the PRC in general (including the RQFII policy and rules) may adversely impact the Sub-Fund and such changes may also have potential retrospective effect. The Manager may from time to time make available RQFII quota for the purpose of the Sub-Fund s

6 direct investment into Mainland China. The Sub-Fund may not have exclusive use of the entire RQFII quota granted by the State Administration of Foreign Exchange of the PRC to the RQFII (i.e. the Manager), as the RQFII may in its discretion allocate RQFII quota which may otherwise be available to the Sub-Fund to other public fund products under the Manager's management. Subject to SAFE's approval, the Manager may also allocate RQFII quotas to other non-public fund products and/or accounts. There can be no assurance that the RQFII can allocate sufficient RQFII quota to the Sub-Fund to meet all applications for subscription of Units in the Sub-Fund. 4. RMB currency risk The Base Currency of the Sub-Fund is RMB. Subscription moneys and redemption proceeds may be paid in RMB or in the relevant class currency. RMB is currently not a freely convertible currency as it is subject to foreign exchange control policies and repatriation restrictions imposed by the PRC government. Assets of the Sub-Fund will be denominated in RMB. There is no guarantee that the RMB will appreciate in value against the HKD or any other currency, or that the strength of the RMB may not weaken. In such case an investor may enjoy a gain in RMB terms but suffer a loss when converting funds from RMB back into HKD (or any other currency). Any depreciation of the RMB will decrease the value of RMB-denominated assets the Sub-Fund may hold and of any dividends that the Sub- Fund may receive from such investments, which may have a detrimental impact on the NAV of the Sub-Fund, and vice versa. When calculating the value of the subscription/redemption prices/dividend payments of Units of a non-rmb denominated class, the Manager will apply the exchange rate for offshore RMB ( CNH ), which may be at a premium or discount to the exchange rate for onshore RMB ( CNY ). Currency conversion is also subject to availability of RMB at the relevant time. The growth of the CNH market is subject to many constraints as a result of PRC laws and regulations on foreign exchange. There can be no assurance that the Manager will be able to obtain sufficient RMB for currency conversion if there are one or more sizeable subscriptions for Units of non-rmb classes of the Sub-Fund over a short period of time. This may result in a need for the Manager to close the relevant class to further subscriptions. In the event of an insufficiency of CNH available for conversion for the payment of redemption proceeds of a RMB denominated class for legal or regulatory reasons (such as currency controls), such payment may be delayed until after the relevant legal or regulatory requirements are satisfied. 5. Exchange rate risks Investors whose assets and liabilities are predominantly in HKD or in currencies other than RMB should take into account the potential risk of loss arising from fluctuations in value between such currencies and the RMB, for example, if an investor converts another currency into RMB so as to invest in Units of a RMB denominated class and subsequently converts redemption proceeds/dividend payments (in RMB) back into such other currency, the investor may suffer loss due to the fluctuation in exchange rate between such currency and RMB over such period. The value of Units of classes that are not denominated in RMB may be adversely affected by changes in exchange rates between the relevant class currency and RMB, if RMB subsequently depreciates. For example, if an investor invests in Units of a non-rmb denominated class and RMB subsequently depreciates, the investor s investment will decrease in value since the majority of the Sub-Fund s assets are RMB-denominated, and the investor will suffer loss. Assets of the Sub-Fund may be denominated in currencies other than the subscription/redemption/dividend payment currencies of the relevant class. The Sub-Fund may be subject to exchange rate risks, and may be adversely affected by changes in exchange rates between RMB, being the base currency of the Sub-Fund, and/or the relevant subscription/redemption/dividend payment currencies. In addition, any class not denominated in the RMB will be exposed to possible adverse currency fluctuations between its currency of denomination and the RMB. 6

7 6. Risks relating to the PRC Investing in emerging markets, such as the PRC, involves a greater risk of loss than investing in more developed markets due to, among other factors, greater political, tax, economic, foreign exchange, liquidity and regulatory risks. Investing in PRC-related companies and in the PRC markets involve certain risks and special considerations not typically associated with investment in more developed economies or markets, such as greater political, tax, economic, foreign exchange, liquidity, legal and regulatory risk. The concentration of the Sub-Fund s investments in PRC-related companies may result in greater volatility than portfolios which comprise broad-based global investments. There are risks and uncertainties associated with the current Chinese tax laws, regulations and practice in respect of capital gains realised by RQFIIs on its investments in the PRC (which may have retrospective effect). After careful consideration of the Manager s assessment and having taken and considered independent professional tax advice, the Manager has determined that: (i) the Sub-Fund will not make any withholding income tax provision for the account of the Sub-Fund in respect of the gross realised and unrealised capital gains derived from the disposal of PRC debt securities and (ii) the Sub-Fund will make a provision of 10% on interest from RMB denominated bonds (except PRC government bonds which are State treasury bonds issued by the in-charge finance department of the State Council) issued by PRC tax resident enterprises, dividend from securities investment funds and interest from RMB bank deposits if the withholding income tax is not withheld at source. It should be noted, however, that there are uncertainties regarding this policy. It is possible that the applicable tax laws may be changed or that the PRC tax authorities may hold a different view. Any shortfall between the provision and the actual tax liabilities, which will be debited from the Sub-Fund s assets, will adversely affect the Sub-Fund s NAV. The actual tax liabilities may be lower than the tax provision made. Depending on the timing of their subscriptions and/or redemptions, investors may be disadvantaged as a result of any shortfall of tax provision and will not have the right to claim any part of the overprovision (as the case may be). The Sub-Fund may invest in securities in respect of which the PRC imposes limitations or restrictions on foreign ownership or holdings. Such legal and regulatory restrictions or limitations may have adverse effects on the liquidity and performance of the Sub-Fund. 7. Liquidity risk The PRC s bond market is still in a stage of development and the bid and offer spread of RMB bonds, whether traded on the inter-bank or listed bond market, may be high and the Sub-Fund may therefore incur significant trading costs and may even suffer losses when selling such investments. In the absence of a regular and active secondary market, the Sub-Fund may not be able to sell its bond holdings at prices the Manager considers advantageous and may need to hold the bonds until their maturity date. If sizeable redemption requests are received, the Sub-Fund may need to liquidate its listed bonds at a discount in order to satisfy such requests and the Sub-Fund may suffer losses. 8. Operational and Settlement risk The Sub-Fund may be exposed to risks associated with settlement procedures and default of counterparties in the inter-bank bond market in the PRC. Any significant delays in the settlement of transactions or the registration of a transfer may affect the ability to ascertain the value of the Sub- Fund s portfolio and adversely affect the Sub-Fund. Where its counterparty does not perform its obligations under a transaction, the Sub-Fund will sustain losses. The Sub-Fund may also be exposed to settlement risks relating to the PRC exchange-traded bond market settled through the China Securities Depository and Clearing Co., Ltd. ( CSDCC ). Although it is the intention of CSDCC that it will deliver payment or securities to the Sub-Fund (as a delivering participant or a receiving participant respectively), a delay may occur if the counterparty to the Sub-Fund fails to fulfil its payment or delivery obligation. 9. Dividend risk There is no assurance that the Sub-Fund will declare to pay dividends or distributions. The ability 7

8 of the Sub-Fund to pay distributions depends, in part, on interest payments made by issuers of securities held by the Sub-Fund. There can be no assurance that such companies will be able to honour payment obligations. 10. Distributions payable effectively out of capital risk Dividends may be distributed out of gross income while all or part of the fees and expenses are charged to capital, resulting in an increase in distributable income for the payment of dividends and therefore, the Sub-Fund may effectively pay dividend out of capital. Payment of dividends effectively out of capital amounts to a return or withdrawal of part of an investor s original investment or from any capital gains attributable to that original investment. Any distributions involving payment of dividends effectively out of capital may result in an immediate reduction of the NAV per unit. How has the fund performed? 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Is there any guarantee? 3.5% Past performance information is not indicative of future performance. Investors may not get back the full amount invested. The computation basis of the performance is based on the calendar year end, NAV-To-NAV, with dividend reinvested. Class A, being a unit class with the same reference currency as the Sub- Fund and not restricted to certain types of clients, is selected as the representative unit class. These figures show by how much the Class A unit class increased or decreased in value during the calendar year being shown. Performance data has been calculated in RMB including ongoing charges and excluding subscription fee and redemption fee you might have to pay. Where no past performance is shown there was insufficient data available in that year to provide performance. HFT (HK) China RMB Money Market Fund launch date: April 2014 Class A launch date: April 2014 For further information on the performance of other unit classes, please refer to (this website has not been reviewed by the SFC) This Sub-Fund does not have any guarantees. You may not get back the full amount of money you invest. What are the fees and charges? 2.1% Charges which may be payable by you You may have to pay the following fees when dealing in the Units of the Sub-Fund. 8

9 Fee Subscription fee Switching fee (i.e. conversion fee) Redemption fee HFT (HK) China RMB Money Market Fund What you pay Up to 0.5% of the amount you buy Not Applicable Not Applicable Ongoing fees payable by the Sub-Fund The following expenses will be paid out of the Sub-Fund. They affect you because they reduce the return you get on your investments. Management fee 0.33%* Performance fee Trustee fee Up to 0.01% Custodian fee ** Up to 0.1% Administration fee *** Up to 0.04% Formation costs are amortised over a period of five accounting periods. Other fees Annual rate (as a % of the Sub-Fund s NAV) Nil The Sub-Fund may have to pay other fees when dealing in the investments of the Sub-Fund. The Sub- Fund is not subject to any minimum fee. * You should note that the current rate of some fees may be increased, up to a specified permitted maximum, by giving affected Unitholders at least one month s prior notice. For details please refer to the section headed Expenses and Charges in the Explanatory Memorandum. ** Inclusive of fees payable to the PRC Custodian. ***Inclusive of fund administration fee and transfer agency fee. Additional information You generally buy and redeem units at the Sub-Fund s NAV which is determined on the dealing day on which your request is received in good order at or before 5:00 pm (Hong Kong time), being the Sub- Fund s dealing cut-off time. Before placing your subscription orders or redemption request, please check with your distributor for the distributor's internal dealing cut-off time (which may be earlier than the Sub-Fund s dealing cut-off time). The Sub-Fund s NAV and the latest subscription and redemption prices of units are available on the Manager s website (this website has not been reviewed by the SFC) will be published daily in the South China Morning Post and the Hong Kong Economic Times. The compositions of the dividends (i.e. the relative amounts paid out of (i) net distributable income and (ii) capital) for the last 12 months will be available from the Manager on request and on the Manager s website. Important If you are in doubt, you should seek professional advice. The SFC takes no responsibility for the contents of this statement and makes no representation as to its accuracy or completeness. 9