HARVEST OPPORTUNITIES FUNDS (HONG KONG) EXPLANATORY MEMORANDUM AUGUST

Transcription

1 HARVEST OPPORTUNITIES FUNDS (HONG KONG) EXPLANATORY MEMORANDUM AUGUST

2 IMPORTANT INFORMATION FOR INVESTORS Important: If you are in doubt about the contents of this Explanatory Memorandum, you should seek independent professional financial advice. This Explanatory Memorandum comprises information relating to Harvest Opportunities Funds (Hong Kong) ( Fund ) and its sub-funds ( Sub-Funds ). The Fund is an open-ended unit trust established as an umbrella unit trust under the laws of Hong Kong by a trust deed dated 11 August 2014 ( Trust Deed ) between HSBC Institutional Trust Services (Asia) Limited ( Trustee ) as trustee and Harvest Global Investments Limited ( Manager ) as manager. The Manager accepts full responsibility for the accuracy of the information contained in this Explanatory Memorandum and the Product Key Facts Statement of each Sub-Fund, and confirms, having made all reasonable enquiries, that to the best of its knowledge and belief there are no other facts the omission of which would make any statement in this Explanatory Memorandum or the Product Key Facts Statement misleading. However, neither the delivery of this Explanatory Memorandum and the Product Key Facts Statement nor the offer or issue of Units shall under any circumstances constitute a representation that the information contained in this Explanatory Memorandum or the Product Key Facts Statement is correct as of any time subsequent to the date of publication. This Explanatory Memorandum and the Product Key Facts Statement may from time to time be updated. Distribution of this Explanatory Memorandum must be accompanied by a copy of the Product Key Facts Statement of each Sub-Fund and the latest available annual report and audited accounts of the Fund and the Sub-Fund(s) (if any) and any subsequent unaudited semi-annual accounts. Units of the Sub-Fund(s) are offered on the basis only of the information contained in this Explanatory Memorandum, the Product Key Facts Statement and (where applicable) the above mentioned annual reports and audited accounts and unaudited semi-annual accounts. Any information given or representations made by any dealer, salesman or other person and (in either case) not contained in this Explanatory Memorandum or the Product Key Facts Statement should be regarded as unauthorised and accordingly must not be relied upon. Hong Kong Authorisation and Approval The Fund and the Sub-Fund(s) have been authorised by the SFC pursuant to section 104 of the SFO. The SFC s authorisation is not a recommendation or endorsement of the Fund and the Sub-Fund(s) nor does it guarantee the commercial merits of the Fund and the Sub-Fund(s) or their performance. It i

3 does not mean the Fund or the Sub-Fund(s) is suitable for all investors nor is it an endorsement of its suitability for any particular investor or class of investors. Selling restrictions General: No action has been taken to permit an offering of Units of the Sub-Fund(s) or the distribution of this Explanatory Memorandum or the Product Key Facts Statement in any jurisdiction other than Hong Kong where action would be required for such purposes. Accordingly, this Explanatory Memorandum or the Product Key Facts Statement may not be used for the purpose of an offer or solicitation in any jurisdiction or in any circumstances in which such offer or solicitation is not authorised. Further, Units of the Sub-Fund(s) may not be offered or sold, directly or indirectly, to any persons for reoffering or resale, in any jurisdiction where such action is not authorised. Receipt of this Explanatory Memorandum or the Product Key Facts Statement does not constitute an offer of Units of the Sub-Fund(s) in those jurisdictions in which it is illegal to make such an offer. United States: In particular, potential investors should note that the Units have not been and will not be registered under the United States Securities Act of 1933 (as amended) or under the securities law of any state or political sub-division of the United States of America or any of its territories, possessions or other areas subject to its jurisdiction including the Commonwealth of Puerto Rico (collectively, the United States ) No person has registered nor will register as a commodity pool operator of the Trust or any Sub-Fund under the Commodity Exchange Act of 1936, as amended (the CEA ) and the rules thereunder (the CFTC Rules ) of the Commodity Futures Trading Commission (the CFTC ), and the Trust and the Sub-Funds have not been and will not be registered under the United States Investment Company Act of 1940, as amended, nor under any other United States federal laws. The Units are being offered and sold outside of the United States in reliance on an exemption from the registration requirements of the Securities Act pursuant to Regulation S thereunder ( Regulation S ). Accordingly, the Units may not be offered, sold, pledged or otherwise transferred except (i) in an Offshore Transaction (as such term is defined under Regulation S) and (ii) to or for the account or benefit of a Permitted Transferee. A Permitted Transferee means any person who is not any of: (a) a U.S. person as defined in Rule 902(k)(1) of Regulation S; (b) a person who comes within any definition of U.S. person for the purposes of the CEA or any CFTC rule, guidance or order proposed or issued under the CEA (for the avoidance of doubt, any person who is not a "Non-United States person" as such term is defined under CFTC Rule ii

4 4.7(a)(1)(iv), but excluding, for purposes of subsection (D) thereof, the exception for qualified eligible persons who are not Non-United States persons, shall be considered a U.S. person); or (c) a resident of the United States for purposes of, and as defined in implementing regulations proposed or issued under, Section 13 of the U.S. Bank Holding Company Act of 1956, as amended ( BHC Act ). As defined in the implementing regulations issued under Section 13 of the BHC Act, SEC Release No. BHCA-1; File No. S , resident of the United States means a person that is a U.S. person as defined in rule 902(k) of Regulation S. Transfers of Units within the United States or to any person other than a Permitted Transferee are prohibited. Any transfer of Units to a person other than a Permitted Transferee (a Non-Permitted Transferee ) will be void ab initio and of no legal effect whatsoever. Accordingly, any purported transferee of any legal or beneficial ownership interest in a Unit in such a transaction will not be entitled to any rights as a legal or beneficial owner of such interest in such Unit. The foregoing restrictions on the offer, sale, pledge or other transfer of Units to a Non-Permitted Transferee may adversely affect the ability of an investor in the Units to dispose of the Units in the secondary market, if any, and significantly reduce the liquidity of the Units. As a result, the value of the Units may be materially adversely affected. As defined in Rule 902(k)(1) of Regulation S, U.S. person means: (a) Any natural person resident in the United States; (b) Any partnership or corporation organized or incorporated under the laws of the United States; (c) Any estate of which any executor or administrator is a U.S. person; (d) Any trust of which any trustee is a U.S. person; (e) Any agency or branch of a non-u.s. entity located in the United States; (f) Any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person; (g) Any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; and (h) Any partnership or corporation if: (i) organized or incorporated under the laws of any non-u.s. jurisdiction; and (ii) formed by a U.S. person principally for the purpose of investing in securities not registered under the Securities Act, unless it is organized or incorporated, and owned, by iii

5 accredited investors (as defined in Rule 501(a) of Regulation D under the Securities Act) who are not natural persons, estates or trusts. As defined in CFTC Rule 4.7, modified as indicated above, Non-United States person means: (a) A natural person who is not a resident of the United States; (b) A partnership, corporation or other entity, other than an entity organized principally for passive investment, organized under the laws of a non-u.s. jurisdiction and which has its principal place of business in a non-u.s. jurisdiction; (c) An estate or trust, the income of which is not subject to United States income tax regardless of source; (d) An entity organized principally for passive investment such as a pool, investment company or other similar entity; provided, that units of participation in the entity held by persons who do not qualify as Non-United States persons represent in the aggregate less than 10% of the beneficial interest in the entity, and that such entity was not formed principally for the purpose of facilitating investment by persons who do not qualify as Non-United States persons in a pool with respect to which the operator is exempt from certain requirements of part 4 of the Commodity Futures Trading Commission s regulations by virtue of its participants being Non-United States persons; and (e) A pension plan for the employees, officers or principals of an entity organized and with its principal place of business outside the United States. As defined in the CFTC's Interpretive Guidance and Policy Statement regarding Compliance with Certain Swaps Regulations, 78 Fed. Reg (Jul. 26, 2013).), U.S. person means: (a) A natural person who is a resident of the United States; (b) Any estate of a decedent who was a resident of the United States at the time of death; (c) Any corporation, partnership, limited liability company, business or other trust, association, joint-stock company, fund or any form of enterprise similar to any of the foregoing (other than an entity described in prongs (d) or (e), below) (a ``legal entity''), in each case that is organized or incorporated under the laws of a state or other jurisdiction in the United States or having its principal place of business in the United States; (d) Any pension plan for the employees, officers or principals of a legal entity described in prong (c), unless the pension plan is primarily for foreign employees of such entity; iv

6 (e) Any trust governed by the laws of a state or other jurisdiction in the United States, if a court within the United States is able to exercise primary supervision over the administration of the trust; (f) any commodity pool, pooled account, investment fund, or other collective investment vehicle that is not described in prong (c) and that is majority-owned by one or more persons described in prong (a), (b), (c), (d), or (e), except any commodity pool, pooled account, investment fund, or other collective investment vehicle that is publicly offered only to non-u.s. persons and not offered to U.S. persons; (g) Any legal entity (other than a limited liability company, limited liability partnership or similar entity where all of the owners of the entity have limited liability) that is directly or indirectly majority-owned by one or more persons described in prong (a), (b), (c), (d), or (e) and in which such person(s) bears unlimited responsibility for the obligations and liabilities of the legal entity; and (h) Any individual account or joint account (discretionary or not) where the beneficial owner (or one of the beneficial owners in the case of a joint account) is a person described in prong (a), (b), (c), (d), (e), (f), or (g). Each person who offers, sells, pledges or otherwise transfers Units has exclusive responsibility for ensuring that its offer, sale, pledge or other transfer is not to or for the account or benefit of any person other than a Permitted Transferee as such term is defined as of the date of such offer, sale, pledge or other transfer. The Units have not been approved, reviewed or disapproved by the United States Securities and Exchange Commission ( SEC ) or any other regulatory agency in the United States, nor has the SEC or any other regulatory agency in the United States passed upon the accuracy or adequacy of this document or the merits of the Units. Any representation to the contrary is a criminal offence. Furthermore, the Units do not constitute, and have not been marketed as, contracts for the sale of a commodity for future delivery (or options thereon) subject to the CEA, and neither trading in the Units nor this document has been approved by the CFTC under the CEA, and no person other than a Permitted Transferee may at any time trade or maintain a position in the Units. AIFMD None of the Fund, the Trustee or the Manager has complied with, or currently intends to comply with, the requirements of the Alternative Investment Fund Managers Directive ("AIFMD") of the European Union. Accordingly, (i) no direct or indirect offering or placement by or on behalf of the Fund, the v

7 Trustee or the Manager (including by any intermediary, distribution agent, placement agent or other person) of Units may be made to or with investors domiciled or with a registered office in member states of the European Union in breach of either the applicable requirements under the AIFMD or the applicable requirements under the private placement regime in each relevant member state and (ii) the Fund, the Trustee and the Manager will only accept subscriptions for Units from investors domiciled or with a registered office in the member states of the European Union in accordance with the applicable laws and regulations of the European Union and the relevant member states. Notwithstanding the foregoing, the Fund and the Manager reserve the right to take such steps, including to make such amendments to this Explanatory Memorandum, as they reasonably deem to be appropriate in their sole discretion, in order to comply with any applicable requirements under the AIFMD or under the private placement regime in any relevant member state. Potential applicants for Units should inform themselves as to (a) the possible tax consequences, (b) the legal requirements and (c) any foreign exchange restrictions or exchange control requirements which they might encounter under the laws of the countries of their incorporation, citizenship, residence or domicile and which might be relevant to the subscription, holding or disposal of Units. Some of the information in this Explanatory Memorandum is a summary of corresponding provisions in the Trust Deed. Investors should refer to the Trust Deed for further details. Investment involves risk and investors should note that losses may be sustained on their investment. There is no assurance that the investment objective of the respective Sub-Fund will be achieved. Investors should read the Explanatory Memorandum, particularly the section headed Risk Factors, and the section headed Specific Risk Factors in the relevant Appendix, before making their investment decisions. Please note that this Explanatory Memorandum must be read together with the relevant Appendix and/or Addendum to this Explanatory Memorandum which relate to a specific Sub- Fund of the Fund. The Appendix and/or Addendum set out the details relating to the Sub-Fund (which may include, without limitation, specific information on the Sub-Fund and additional terms, conditions and restrictions applicable to the Sub-Fund). The provisions of an Appendix and/or an Addendum supplement this Explanatory Memorandum. Enquiries Investors may contact the Manager for any enquiries or complaints in relation to the Fund and any Sub-Fund. To contact the Manager, investors may write to the Manager (address at 31/F, One Exchange Square, 8 Connaught Place, Central, Hong Kong). The Manager will respond to any enquiry or complaint in writing. vi

8 Further Information Investors may access the website of the Manager at for further information on the Fund and the Sub-Fund(s), including this Explanatory Memorandum and the Product Key Facts Statement, annual and semi-annual reports and latest Net Asset Values. This website has not been reviewed or authorised by the SFC. vii

9 TABLE OF CONTENTS Heading Page Number DIRECTORY OF PARTIES...1 DEFINITIONS...2 THE FUND...11 MANAGEMENT AND ADMINISTRATION OF THE FUND...12 MANAGER...12 INVESTMENT ADVISER...14 TRUSTEE AND REGISTRAR...14 CUSTODIAN AND PRC CUSTODIAN...17 AUTHORISED DISTRIBUTORS...17 AUDITORS...18 OTHER SERVICE PROVIDERS...18 INVESTMENT CONSIDERATIONS...19 INVESTMENT OBJECTIVE AND POLICIES...19 INVESTMENT RESTRICTIONS...19 BORROWING RESTRICTIONS...22 BREACH OF INVESTMENT AND BORROWING RESTRICTIONS...22 SECURITIES LENDING AND REPURCHASE /REVERSE REPURCHASE TRANSACTIONS...22 RISK FACTORS...23 INVESTING IN THE FUND...45 CLASSES OF UNITS...45 INITIAL OFFER...45 MINIMUM SUBSCRIPTION LEVEL...45 SUBSEQUENT SUBSCRIPTION...45 ISSUE PRICE...46 SUBSCRIPTION CHARGE...46 MINIMUM INITIAL SUBSCRIPTION AMOUNT AND MINIMUM SUBSEQUENT SUBSCRIPTION AMOUNT...47 APPLICATION PROCEDURES...47 PAYMENT PROCEDURES...48 GENERAL...49 RESTRICTIONS ON ISSUE...50 REDEMPTION OF UNITS...51 REDEMPTION OF UNITS...51 REDEMPTION PRICE...51 REDEMPTION CHARGE...52 REDEMPTION AMOUNT AND MINIMUM HOLDING AMOUNT...52 REDEMPTION PROCEDURES...53 PAYMENT OF REDEMPTION PROCEEDS...53 RESTRICTIONS ON REDEMPTION...55 COMPULSORY REDEMPTION OF UNITS...56 viii

10 CONVERSION...57 CONVERSION OF UNITS...57 SWITCHING FEE...57 CONVERSION PROCEDURES...59 RESTRICTIONS ON CONVERSION...59 VALUATION AND SUSPENSION...60 CALCULATION OF NET ASSET VALUE...60 ADJUSTMENT OF PRICES...63 SUSPENSION...63 DISTRIBUTION POLICY...66 ACCUMULATION CLASSES...66 DISTRIBUTION CLASSES...66 FEES AND EXPENSES...68 MANAGEMENT FEE...68 PERFORMANCE FEE...68 TRUSTEE AND REGISTRAR FEE...68 NOTICE FOR FEE INCREASE...69 ESTABLISHMENT COSTS...69 GENERAL EXPENSES...69 TRANSACTIONS WITH CONNECTED PERSONS,CASH REBATES AND SOFT DOLLARS...70 TAXATION...72 HONG KONG...72 CHINA...73 OTHER JURISDICTION(S)...73 GENERAL INFORMATION...74 REPORTS AND ACCOUNTS...74 PUBLICATION OF PRICES...74 TERMINATION OF FUND OR A SUB-FUND...74 TRUST DEED...76 VOTING RIGHTS...76 TRANSFER OF UNITS...76 ANTI-MONEY LAUNDERING REGULATIONS...77 CONFLICTS OF INTEREST...78 FACSIMILE INSTRUCTIONS...80 FORFEITURE OF UNCLAIMED PROCEEDS OR DISTRIBUTIONS...80 MARKET TIMING...80 CERTIFICATION FOR COMPLIANCE WITH FATCA OR OTHER APPLICABLE LAWS...81 POWER TO DISCLOSE INFORMATION TO TAX AUTHORITIES...81 PERSONAL DATA...82 DOCUMENTS AVAILABLE FOR INSPECTION...82 APPENDIX 1 HARVEST CHINA SELECT BOND FUND...83 ix

11 DIRECTORY OF PARTIES Manager Harvest Global Investments Limited 31/F, One Exchange Square 8 Connaught Place Central Hong Kong Investment Adviser Harvest Fund Management Co., Ltd. 16/F, China Resources Building No. 8, Jianguomen, Beidajie Beijing China Trustee and Registrar HSBC Institutional Trust Services (Asia) Limited ( ) 1 Queen s Road Central Hong Kong Custodian The Hongkong and Shanghai Banking Corporation Limited 1 Queen s Road Central Hong Kong PRC Custodian HSBC Bank (China) Company Limited 33/F, HSBC Building Shanghai ifc 8 Century Avenue Pudong Shanghai China Directors of the Manager ZHAO Xuejun CHOY Peng Wah WRIGHT Lindsay Megan WANG Wei Solicitors to the Manager Deacons 5/F, Alexandra House 18 Chater Road Central Hong Kong Auditors PricewaterhouseCoopers 21/F Edinburgh Tower 15 Queen s Road Central Hong Kong 1

12 DEFINITIONS The defined terms used in this Explanatory Memorandum have the following meanings:- Appendix Accounting Date Accounting Period Amortisation Period Application Form Authorised Distributor Base Currency Business Day the appendix containing specific information in relation to a Sub- Fund or a Class or Classes of Units in relation thereto which is enclosed with this Explanatory Memorandum and which forms part of this Explanatory Memorandum 31 December in each year or such other date or dates in each year as the Manager may from time to time select in respect of any Sub-Fund after consultation with the Trustee and notification to the Unitholders of such Sub-Fund. The first Accounting Date of the Fund is 31 December 2014 a period commencing on the date of establishment of the Fund or the relevant Sub-Fund (as the case may be) or on the date next following an Accounting Date of the relevant Sub-Fund and ending on the next succeeding Accounting Date for such Sub-Fund in relation to the Fund and/or a Sub-Fund, such period as specified in the relevant Appendix over which establishment costs of the Fund and/or such Sub-Fund will be amortised the prescribed application form for the subscription of Units and for the avoidance of doubt, the Application Form does not form part of this Explanatory Memorandum any person appointed by the Manager to distribute Units of some or all of the Sub-Funds to potential investors in relation to a Sub-Fund, means the currency of account of the Sub- Fund as specified in the relevant Appendix a day (other than a Saturday or Sunday) on which banks in Hong Kong are open for normal banking business or such other day or days in relation to a Sub-Fund as the Manager, in consultation with the Trustee, may determine from time to time and as specified in the relevant Appendix, provided that where as a result of a number 8 typhoon signal, black rainstorm warning or other similar event, the period during which banks in Hong Kong are open on any day is 2

13 reduced, such day shall not be a Business Day unless the Manager, in consultation with the Trustee, determine otherwise Cancellation Fee China or PRC China A-Shares "Class" Class Currency Code connected person cancellation fee of such amount as the Manager and the Trustee may from time to time determine to represent the administrative costs involved in processing the application for such Units being cancelled subject to a maximum amount of 2% of the subscription amount the People s Republic of China excluding Hong Kong, Macau and Taiwan for purpose of this Explanatory Memorandum shares issued by companies incorporated in the PRC and listed on the Shanghai Stock Exchange or the Shenzhen Stock Exchange, traded in Renminbi and available for investment by domestic (Chinese) investors, holders of QFII and RQFII, and foreign strategic investors approved by the China Securities Regulatory Commission means any class of Units in issue in relation to a Sub-Fund in relation to a Class in a Sub-Fund, means the currency of account of such Class as specified in the relevant Appendix the Overarching Principles Section and Section II- Code on Unit Trusts and Mutual Funds of the SFC Handbook for Unit Trusts and Mutual Funds, Investment-Linked Assurance Schemes and Unlisted Structured Investment Products or any handbook, guideline and code issued by the Commission, as may be amended from time to time in relation to a company, means: (a) (b) (c) (d) any person or company beneficially owning, directly or indirectly, 20% or more of the ordinary share capital of that company or able to exercise, directly or indirectly, 20% or more of the total votes in that company; or any person or company controlled by a person who or which meets one or both of the descriptions given in (a); or any member of the group of which that company forms part; or any director or officer of that company or of any of its connected persons as defined in (a), (b) or (c) above 3

14 Conversion Form Custodian Explanatory Memorandum Fund Hong Kong Harvest Global Investments Limited HK$ or HKD HSBC Institutional Trust Services (Asia) Limited IFRS Ineligible Investor Initial Offer Period Initial Offer Price the prescribed conversion form for the conversion of Units and for the avoidance of doubt, the Conversion Form does not form part of this Explanatory Memorandum The Hongkong and Shanghai Banking Corporation Limited this Explanatory Memorandum including the Appendices, as each may be amended, updated or supplemented from time to time Harvest Opportunities Funds (Hong Kong) Hong Kong Special Administrative Region of the PRC Harvest Global Investments Limited Hong Kong Dollars, the lawful currency of Hong Kong HSBC Institutional Trust Services (Asia) Limited ( ) International Financial Reporting Standards unless otherwise agreed by the Manager in consultation with the Trustee, whether generally or in a particular case, means any person, corporation, or other entity who is a US person and for this purpose, a US person is defined as (i) an individual who is a United States citizen, a US green card holder, or a resident of the United States for U.S. federal income tax purposes, (ii) a corporation or partnership organized under the laws of the United States or any political subdivision thereof, or (iii) an estate or trust, the income of which is subject to U.S. federal income taxation regardless of its source; in relation to a Sub-Fund or a Class or Classes of Units, such period as the Manager may determine for the purpose of making an initial offer of Units of such Sub-Fund or such Class or Classes and as specified in the relevant Appendix (if applicable) the price per Unit during the Initial Offer Period as determined by the Manager and as specified in the relevant Appendix (if applicable) 4

15 Investment Adviser IOP Deadline Issue Price Local Newspapers Manager Minimum Initial Subscription Amount Minimum Holding Amount Minimum Redemption Amount Minimum Subsequent Subscription Amount Minimum Subscription Level the sub-investment manager or investment adviser appointed in respect of a Sub-Fund, the details of which as specified in the relevant Appendix (if applicable) 5.00 p.m. (Hong Kong time) on the last Business Day of the Initial Offer Period of a Sub-Fund or a particular Class of Units or such other time on such Business Day or such other day as the Manager may from time to time determine and as specified in the relevant Appendix the issue price of a Unit of a particular Class after the expiry of the Initial Offer Period calculated in accordance with the Trust Deed and as described below under Investing in the Fund - Issue Price Hong Kong Economic Journal and South China Morning Post, or such other English language and Chinese language daily newspapers as the Manager may determine and notify the Unitholders in advance and this Explanatory Memorandum will be updated accordingly to reflect such change Harvest Global Investments Limited in its capacity as the manager of the Fund and its Sub-Funds or such other entity as may be appointed from time to time as the manager of the Fund and its Sub-Funds the minimum initial investment for Units in a Sub-Fund or a Class of Units and as specified in the relevant Appendix the minimum number or value of Units of any Sub-Fund or Class of Units which must be held by any Unitholder and as specified in the relevant Appendix the minimum number or value of Units of any Sub-Fund or Class of Units to be redeemed by any Unitholder in respect of a partial redemption of Units and as specified in the relevant Appendix the minimum additional subscriptions for Units in a Sub-Fund or a Class of Units and as specified in the relevant Appendix the total minimum subscription amount, if applicable, to be received on or prior to the close of the Initial Offer Period and as specified in the relevant Appendix 5

16 Net Asset Value PRC Custody Agreement PRC Policy Banks (each a PRC Policy Bank ) in relation to a Sub-Fund means the net asset value of such Sub-Fund or, as the context may require, of a Unit of the Class or Classes relating to such Sub-Fund, calculated in accordance with the provisions of the Trust Deed and as summarised below under Valuation and Suspension - Calculation of Net Asset Value the custodian agreement entered into between the Trustee, the Manager, the Custodian and the PRC Custodian, as amended from time to time Agricultural Development Bank of China, the China Development Bank and the Export-Import Bank of China and such other banks which may be designated as a Policy Bank ( ) by the relevant authority in China PRC Securities means China A-Shares, Renminbi denominated corporate and government bonds, securities investment fund and warrants listed on the PRC stock exchanges or Renminbi denominated corporate and government bonds issued outside the PRC by PRC tax residents QFII qualified foreign institutional investor approved pursuant to the relevant PRC regulations (as amended from time to time) Redemption Charge Redemption Day the redemption charge (if any) payable upon redemption of Units and as specified in the relevant Appendix in relation to a Sub-Fund, or, as the context may require, of a particular Class relating to a Sub-Fund, such Business Day or such other day or days as the Manager, in consultation with the Trustee, may from time to time determine, either generally or in respect of a particular Class or Classes of Units, for effecting any requests for redemption of Units in that Sub-Fund or the relevant Class or Classes and as specified in the relevant Appendix 6

17 Redemption Deadline Redemption Form Redemption Price Refund Period Registrar Restricted Person in relation to a Redemption Day, such time by which a redemption request in respect of a Sub-Fund or a Class of Units must be received either on such Redemption Day or on such other Business Day or day as the Manager, in consultation with the Trustee, may from time to time determine generally or in relation to any particular jurisdiction in which Units of that Sub-Fund or the relevant Class may from time to time be sold and as specified in the relevant Appendix the prescribed redemption form for the redemption of Units and for the avoidance of doubt, the Redemption Form does not form part of this Explanatory Memorandum the price at which Units will be redeemed as determined in accordance with the Trust Deed and as described below under Redemption of Units - Redemption Price ten (10) Business Days from the relevant Subscription Day or close of the relevant Initial Offer Period (as the case may be) or such other period as specified in the relevant Appendix within which subscription moneys in respect of an application which was rejected or a Sub-Fund or a Class of Units which was not launched will be returned to the relevant applicant HSBC Institutional Trust Services (Asia) Limited means any person or persons: (a) (b) who is an Ineligible Investor; in circumstances (whether directly or indirectly affecting such person or persons and whether taken alone or in conjunction with any other persons, connected or not, or any other circumstances appearing to the Manager to be relevant) which, in the opinion of the Manager, might result in the Manager, the Trustee or the relevant Sub-Fund incurring or suffering any liability to taxation or suffering any other potential or actual pecuniary disadvantage or would subject the Manager, the Trustee or the relevant Sub-Fund to any additional regulation to which the Manager, the Trustee or the relevant 7

18 Sub-Fund might not otherwise have incurred or suffered or been subject; or (c) (d) in breach of, or reasonably deemed by the Manager to be in breach of, any applicable anti-money laundering or identification verification or national status or residency requirements imposed on him (whether under the terms of any underlying investment arrangement or otherwise) including without limitation the issue of any warranty or supporting document required to be given to the Trustee, the Registrar or the Manager; or in breach of any applicable law or applicable requirements of any country or governmental authority. RQFII PRC Custodian Securities Market Semi-Annual Accounting Date SFC SFO Sub-Fund Subscription Charge Subscription Day Renminbi Qualified Foreign Institutional Investor approved pursuant to the relevant PRC regulations (as amended from time to time) HSBC Bank (China) Company Limited any stock exchange, over-the-counter market or other organised securities market that is open to the international public and on which such securities are regularly traded 30 June in each year or such other date or dates in each year as the Manager may from time to time select in respect of any Sub-Fund and notify to the Trustee and the Unitholders of such Sub-Fund. The first Semi-Annual Accounting Date of the Fund is 30 June 2015 the Securities and Futures Commission of Hong Kong the Securities and Futures Ordinance, Laws of Hong Kong (Chapter 571), as amended a separate pool of assets of the Fund that is invested and administered separately the subscription charge (if any) payable on the issue of Units and as specified in the relevant Appendix in relation to a Sub-Fund, or, as the context may require, of a particular Class relating to a Sub-Fund, such Business Day or such other day or days as the Manager, in consultation with the Trustee, may from time 8

19 to time determine, either generally or in respect of a particular Class or Classes of Units, for effecting any requests for subscription of Units in that Sub-Fund or the relevant Class or Classes and as specified in the relevant Appendix Subscription Deadline Switching Fee Trust Deed Trustee Unit Unitholder U.S. US$ or USD Valuation Day in relation to a Subscription Day, such time by which an application for subscription in respect of a Sub-Fund or a Class of Units must be received either on such Subscription Day or on such other Business Day or day as the Manager, in consultation with the Trustee, may from time to time determine generally or in relation to any particular jurisdiction in which Units of that Sub-Fund or the relevant Class may from time to time be sold and as specified in the relevant Appendix the switching fee (if any) payable on the conversion of Units and as specified in the relevant Appendix the trust deed dated 11 August 2014 establishing the Fund and entered into by the Manager and the Trustee (as amended from time to time) HSBC Institutional Trust Services (Asia) Limited in its capacity as trustee of the Fund and its Sub-Funds or such other entity as may be appointed from time to time as the trustee of the Fund and its Sub- Funds a unit in a Sub-Fund a person registered as a holder of a Unit United States of America US Dollars, the lawful currency of the United States of America each Business Day on which the Net Asset Value of a Sub-Fund and/or the Net Asset Value of a Unit or a Class of Unit falls to be calculated and in relation to each Subscription Day or Redemption Day (as the case may be) of any Class or Classes of Units means either such Subscription Day or Redemption Day (as the case may be) or such other Business Day or day as the Manager, in consultation with the Trustee, may from time to time determine, either generally 9

20 or in relation to a particular Sub-Fund or Class of Units, and as specified in the relevant Appendix Valuation Point the close of business in the last relevant market to close on a relevant Valuation Day or such other time on that day or such other day as the Manager, in consultation with the Trustee, may determine from time to time either generally or in relation to a particular Sub-Fund or Class of Units and as specified in the relevant Appendix. 10

21 THE FUND The Fund is an open-ended unit trust established as an umbrella fund pursuant to the Trust Deed and governed by the laws of Hong Kong. All Unitholders are entitled to the benefit of, are bound by and deemed to have notice of the provisions of the Trust Deed. The Fund is organised as an umbrella fund and details of each of its current Sub-Fund(s) and/or their respective Class or Classes of Units are set out in the relevant Appendix. Subject to any applicable regulatory requirements and approvals, the Manager may in its sole discretion create further Sub-Funds or determine to issue additional Classes or multiple Classes in relation to each Sub-Fund in the future. Each Sub-Fund is established as a separate trust under the Trust Deed, and the assets of each Sub- Fund will be invested and administered separately from the assets of, and shall not be used to meet liabilities of, the other Sub-Fund(s). The Base Currency of a Sub-Fund will be set out in the relevant Appendix. Each Class of Units within a Sub-Fund will be denominated in the Class Currency thereof, which may be the Base Currency of the Sub-Fund to which such Class relates or such other currency of account as specified in the relevant Appendix. 11

22 Manager MANAGEMENT AND ADMINISTRATION OF THE FUND The Manager of the Fund is Harvest Global Investments Limited. Harvest Global Investments Limited ( HGI ) was established in Hong Kong in September 2008 and is a wholly owned subsidiary of Harvest Fund Management Co., Ltd registered in China. HGI obtained licences from the Securities and Futures Commission in Hong Kong in February 2009 to conduct Type 1 (dealing in securities), Type 4 (advising on securities) and Type 9 (asset management) regulated activities. In September 2009, the Chinese Equities and Asian equity teams at Deutsche Asset Management joined HGI. The Manager undertakes the management of the assets of the Fund. The Manager may appoint Investment Adviser and delegate any of its management functions in relation to assets of specific Sub- Funds to such Investment Adviser. In the event that an Investment Adviser (with investment management functions) is appointed by the Manager in respect of an existing Sub-Fund, at least one (1) month s prior notice will be provided to Unitholders of such Sub-Fund and this Explanatory Memorandum and/or the relevant Appendix will be updated to include such appointment. The Manager may also appoint Investment Advisers to provide investment advice to the Manager in relation to such Sub-Fund(s) as the Manager may determine from time to time. In the event that an Investment Adviser is appointed by the Manager to provide investment advice without delegating investment management functions, no notice will be provided to Unitholders of the relevant Sub-Fund. The Manager shall not be exempted from or indemnified against any liability imposed under the laws of Hong Kong or for breach of trust through fraud or negligence for which it may be liable in relation to its duties, or be indemnified against such liability by Unitholders or at Unitholders' expense. Directors of Manager Details of the directors of the Manager are as follows: Zhao Xuejun Chairman of the Board of Directors and Non-Executive Director Dr. Zhao is the Chief Executive Officer and board member of Harvest Fund Management Co., Ltd. He has worked in the financial industry for over 20 years, of which 18 years at management level. Dr. Zhao joined Harvest in October Under his leadership, Harvest has become one of the top asset management companies in China. Harvest managed over RMB 277 billion of assets including assets from retail, institutional, overseas investors by the end of 2012 and was ranked as the first among the 12

23 joint venture fund managers and second in the industry in terms of total assets. Prior to joining Harvest, Dr. Zhao was the deputy general manager of Dacheng Fund and served in executive group in the brokerage company on commodity futures, commodities exchange and import and export corporation. Dr. Zhao holds a PhD in economics from Guanghua School of Management, Peking University. He is currently the Vice President of Asset Management Association of China. Choy Peng Wah Vice Chairman of the Board of Directors and Executive Director Mr. Choy Peng Wah is the Chief Executive Officer of the Manager and joined the Manager in February He has more than 17 years of Asian fund management experience. Prior to joining Harvest Global Investments Limited, Mr. Choy was the Deputy Chief Executive Officer of Fullerton Fund Management Company Ltd. and before that Regional Head, Sales and Distribution for Prudential s fund management business in Asia. Prior to Prudential, Mr. Choy was the Chief Executive Officer at Deutsche Asset Management Asia, ex-japan, based in Singapore for 7 years. During his time at Deutsche, he was responsible for Deutsche s expansion into South Korea, India and China. Mr. Choy started his career at Citibank Singapore as an executive trainee and has worked in Citibank s offices in New York and Hong Kong in a variety of capacities. Mr. Choy holds a Masters in Business Administration from McGill University in Canada. Lindsay Megan Wright Vice Chairman of the Board of Directors and Non-Executive Director Ms. Lindsay Wright is the Head of Strategy for the Harvest Group and Head of Harvest Alternative Investment Partners, the newly established alternatives business of the Harvest Fund Management Group. Ms. Wright joined Harvest Alternative Investment Partners in September 2010 and has more than 20 years of experience in the financial industry. Prior to joining Harvest Alternative Investment Partners, Ms. Wright was Managing Director and Global Head of Strategy and Business Development for Deutsche Asset Management/DWS based in New York. Her previous positions at Deutsche Asset Management and Deutsche Bank which spanned 24 years included Head of Strategy and Business Development for Deutsche Asset Management, Asia Pacific and Middle East region based in Singapore, Chief Operating Officer Deutsche Asset Management, Asia Pacific based in Tokyo, Managing Director and Partner, DB Capital Partners Asia Pacific, the direct private equity business of Deutsche Bank, based in Sydney and Managing Director, Chief Financial and Operating Officer Deutsche Bank New Zealand (formerly Bankers Trust New Zealand) based in Auckland. Ms. Wright holds a Bachelor of Commerce degree major in law and accounting from Auckland University in New Zealand. 13

24 Wang Wei Non-Executive Director Ms. Wang Wei is the Chief Compliance Officer of Harvest Fund Management Co., Ltd. and joined Harvest Fund Management Co., Ltd. in January Ms Wang had been the Head of Legal at Harvest Fund Management Co., Ltd. Prior to joining Harvest Fund Management Co., Ltd,, Ms. Wang has worked in the Law School of China University of Political Science and Law, Beijing Lutong United Law Firm, Beijing Zhihao Law Firm and New China Insurance Company Limited. Ms. Wang holds a Master Degree of Law from the China University of Political Science and Law. Investment Adviser The Manager has appointed Harvest Fund Management Co., Ltd. to act as Investment Adviser and provide investment advice to the Manager in relation to such Sub-Fund(s) as the Manager may determine from time to time. Harvest Fund Management Co., Ltd ( HFM ) was established in 1999 in China as one of the first 10 asset management institutions authorised by the Chinese government as part of its strategy to open up and develop the financial sector. HFM became a joint venture asset management company in June Currently the shareholders are China Credit Trust Co., Ltd, Lixin Investment Co., Ltd and Deutsche Asset Management (Asia) Limited. HFM is a leading asset manager in China with assets under management in excess of US$50 billion as of 31 December HFM offers a wide range of investment funds. It also manages national and local social security funds, corporate annuity funds, offshore securities and segregated accounts. The Manager may appoint other Investment Adviser(s) in respect of a Sub-Fund, the details of which will be specified in the relevant Appendix (if applicable). Trustee and Registrar The Trustee of the Fund is HSBC Institutional Trust Services (Asia) Limited. The Trustee also acts as the Registrar of each Sub-Fund, and provides services in respect of the establishment and maintenance of the register of the Unitholders. The Trustee was incorporated with limited liability in Hong Kong in 1974 and is registered as a trust company under the Trustee Ordinance (Chapter 29 of the Laws of Hong Kong) and approved by the Mandatory Provident Funds Scheme Authority as trustee of registered MPF Schemes under the Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong). HSBC Institutional Trust Services (Asia) Limited is an indirectly wholly owned subsidiary of The Hongkong 14

25 and Shanghai Banking Corporation Limited, which is a bank licensed under the Banking Ordinance (Chapter 155 of the Laws of Hong Kong). Under the Trust Deed, the Trustee is responsible for the safe-keeping of the assets of the Fund and the Sub-Fund, subject to the provisions of the Trust Deed. The Trustee may from time to time appoint such person or persons as it thinks fit (including, without limitation, any of its connected persons) to hold as custodian, co-custodian, nominee, agent, all or any of the investments, assets or other property comprised in the trust fund or any of the sub-funds and may empower any such custodian, co-custodian, nominee or agent to appoint, with the prior consent in writing of the Trustee, co-custodians and/or sub-custodians (each such custodian, nominee, agent, co-custodian and sub-custodian a Correspondent ). The Trustee is required to (a) exercise reasonable care and diligence in the selection, appointment and on-going monitoring of Correspondents and (b) be satisfied that Correspondents retained remain suitably qualified and competent to provide the relevant services to the Sub-Fund(s). The Trustee shall be responsible for the acts and omissions of any Correspondent which is a connected person of the Trustee as if the same were the acts or omissions of the Trustee but provided that the Trustee has discharged its obligations set out in (a) and (b) as set out in this paragraph, the Trustee shall not be liable for any act, omission, insolvency, liquidation or bankruptcy of any Correspondent which is not a connected person of the Trustee. For the purpose of the foregoing Correspondent shall include the Custodian and the PRC Custodian. The Custodian is The Hongkong and Shanghai Banking Corporation Limited and the PRC Custodian is HSBC Bank (China) Company Limited. The Trustee shall not be liable for: (i) any act, omission, insolvency, liquidation or bankruptcy of Euro-clear Clearing System Limited or Clearstream Banking S.A. or any other recognised depositary or clearing system which may from time to time be approved by the Trustee and the Manager; or (ii) the custody or control of any investments, assets or other property which is under the custody or held by or on behalf of a lender in respect of any borrowing made by the Trustee for the purposes of the Fund or the Sub-Fund. Subject as provided in the Trust Deed, the Trustee shall not be liable for losses caused by the performance of investments made by the Fund and/or the Sub-Fund. Subject as provided in the Trust Deed, the Trustee is entitled to be indemnified from the assets of the Fund and/or the Sub-Fund from and against any and all actions, proceedings, liabilities, costs, claims, damages, expenses, including all reasonable legal, professional and other similar expenses (other than any liability to Unitholders imposed under Hong Kong law or resulting from breaches of trust through fraud or negligence on the part of the Trustee or any of its officers, employees, agents or delegates for which the Trustee would be liable under the Trust Deed), which may be incurred by or asserted 15

26 against the Trustee in performing its obligations or duties in connection with the Fund or the Sub- Fund. Subject to applicable law and the provisions of the Trust Deed, the Trustee shall not, in the absence of breaches of trust through fraud or negligence on the part of the Trustee or any agent, subcustodian or delegate appointed by the Trustee for which the Trustee would be liable under the Trust Deed, be liable for any losses, costs or damage to the Fund, the Sub-Fund or any Unitholder. The Trustee in no way acts as guarantor or offeror of the Units or any underlying investment. The Trustee has no responsibility or authority to make investment decisions, or render investment advice with respect to the Fund or the Sub-Fund, which is the sole responsibility of the Manager. The Trustee will not participate in transactions and activities, or make any payments denominated in US dollars, which, if carried out by a US person, would be subject to sanctions by The Office of Foreign Assets Control (the OFAC ) of the US Department of the Treasury. The OFAC administers and enforces economic sanction programs primarily against countries and groups of individuals, such as terrorists and narcotics traffickers by using the blocking of assets and trade restrictions to accomplish foreign policy and national security goals. In enforcing economic sanctions, OFAC acts to prevent prohibited transactions, which are described by OFAC as trade or financial transactions and other dealings in which US persons may not engage unless authorised by OFAC or expressly exempted by statute. OFAC has the authority to grant exemptions to prohibitions on such transactions, either by issuing a general licence for certain categories of transactions, or by specific licences issued on a case-by-case basis. HSBC group of companies has adopted a policy of compliance with the sanctions issued by OFAC. As part of its policy, the Trustee may request for additional information if deemed necessary. The appointment of the Trustee may be terminated in the circumstances set out in the Trust Deed. The Trustee is entitled to the fees set out in the Fees and Expenses section and to be reimbursed for all costs and expenses in accordance with the provisions of the Trust Deed. The Manager has sole responsibility for making investment decisions in relation to the Fund and/or the Sub-Fund and the Trustee (including its delegate) is not responsible and has no liability for any investment decision made by the Manager. Except as provided in the Trust Deed or expressly stated in this Explanatory Memorandum and/or required by the Code, neither the Trustee nor any of its employees, service providers or agents are or will be involved in the business affairs, organisation, sponsorship or investment management of the Fund or the Sub-Fund, and they are not responsible for the preparation or issue of this Explanatory Memorandum other than the description under The Trustee and Registrar in the Management and Administration of the Fund section. 16