IMPORTANT INFORMATION 1. (the Sub-Fund ) is a physical exchange traded fund which it will invest directly in the PRC treasury bonds that are issued by the Ministry of Finance of the PRC through the Manager s status as a Renminbi qualified foreign institutional investor ( RQFII ). In the event the quota is reached and the Manager is unable to acquire additional RQFII quota, the Manager may suspend creations of Units. In such event the trading price of a Unit may be at a premium to the NAV of each Unit. 2. The Sub-Fund is one of the first RQFII, RMB denominated exchange traded funds investing directly in PRC Treasury Bonds listed in the Hong Kong Stock Exchange ( SEHK ). As such, the Manager, the Trustee and certain service providers connected to the Sub-Fund have no operating experience with regard to a PRC Treasury Bond ETF. The listing, trading and settlement of Units may not be capable of being implemented as envisaged. 3. The RQFII policy and rules are in the early stages of its operation and there may be uncertainty to its implementation and such policy and rules are subject to change. Such uncertainty and change of the laws and regulations may adversely impact the Sub-Fund. 4. The Sub-Fund has dual counter traded Units which are traded and settled in both RMB and HKD. The SEHK s dual counter model in Hong Kong is relatively new and relatively untested nature of the dual counter for exchange traded fund may bring additional risks for investing in the Sub-Fund. Investors without RMB accounts may buy and sell HKD traded Units should note that distributions are made in RMB only. As such, investors may suffer a foreign exchange loss and incur foreign exchange associated fees and charges to receive their dividend. 5. Retail investors can only buy or sell Units on SEHK. The trading price of the Units on SEHK is subject to market forces and may trade at a substantial premium or discount to the NAV per Unit. 6. The Sub-Fund invests in sovereign debt securities and such investments involve special risks. The repayment of debts by a government is subject to various factors including the economic and political factors. The governmental entity that controls the repayment of sovereign debt may not be able or willing to repay the principal and/or interest when due in accordance with the terms of such debt. The Sub-Fund s recourse against a defaulting sovereign is limited. 7. The Index tracks the performance of the PRC and is concentrated in bonds of a single issuer, namely the Ministry of Finance of the PRC only. The NAV of the Sub-Fund is therefore likely to be more volatile than a more broad-based fund, as the Index is more susceptible to fluctuations in value resulting from adverse changes in the financial condition of the PRC government and changes in economic or political conditions which affect the PRC. 8. The Manager may, at its discretion, pay dividends out of capital. The Manager may also, at its discretion, pay dividends out of gross income while all or part of the fees and expenses of the Sub-Fund are charged to/paid out of the capital of the Sub-Fund, resulting in an increase in distributable income for the payment of dividends by the Sub-Fund and therefore, the Sub-Fund may effectively pay dividends out of the capital. Payment of dividends out of capital or effectively out of the 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 out of the capital or effectively out of the capital of the Sub-Fund may result in an immediate reduction of the NAV per Unit. 9. The Sub-Fund only holds a representative sample of securities that represents the profile of the Index and may invest in bonds not included in the Index. It is therefore possible that the Sub-Fund may be subject to larger tracking error than other traditional ETFs that fully replicates the Index, other factors such as fees and expenses may also cause tracking error. 10. As the Sub-Fund invests in fixed-income securities, the Sub-Fund is subject to interest rate risk. Interest rate risk is the risk that the value of the Sub-Fund s portfolio will decline because of rising interest rates. Credit rating of issuers of fixed income instruments and credit rating of securities may be downgraded, thus adversely affecting the value and performance of the Sub-Fund holding such investments. 11. The Sub-Fund currently has access to the Treasury bond market in the PRC, the accessibility to this market is subject to changes in regulations or administrative policies. RMB is not a freely convertible currency as it is subject to foreign exchange control policies of the PRC government. Any PRC government s policies on exchange control and repatriation restrictions are subject to change and may reduce the liquidity of the Sub-Fund. Further, any devaluation of the RMB could adversely affect the value of investors investments in the Sub-Fund. Investors whose base currency is not the RMB may be adversely affected by changes in the exchange rates of the RMB. If investors wish or intend to convert the redemption proceeds paid by the Sub-Fund or sale proceeds into a different currency, they are subject to the relevant foreign exchange risk and may incur loss from such conversion as well as associated fees and charges. 12. The Sub-Fund is passively managed and the manager will not adopt any temporary defensive position against any market downturn. Therefore when there is a decline in the Index, the Sub-Fund will also decrease in value. Investors may suffer significant losses accordingly. 13. Governments and regulators may intervene in the financial markets, such as by the imposition of trading restrictions. This may affect the operation and market making activities of the Sub-Fund, and may have an unpredictable impact on the Sub-Fund. 14. The Sub-Fund is an investment fund and may not be suitable for all investors. You may suffer losses from investing in the Sub-Fund, including the loss of your investment capital. Investors shall not make investment decisions by solely relying on the information contained in this material. Investors shall carefully read the Sub-Fund s offering documents and Key Fact Statements (including product features and risk factors contained therein). 15. This advertisement is issued by and has not been reviewed by the Hong Kong Securities and Futures Commission. HKEx Listed. Direct access to China onshore RMB treasury bonds Stock Code: Direct Investment HKD RMB Flexible Quarterly Investment Distribution Average Yield to Maturity of the Index Largest RQFII Manager # www.csopasset.com/rmb-bond-etf # ChinaBond 5-Year Treasury Bond Index. * Yield to Maturity is the discount rate that equates the present value of a bond's cash flows with its market price (including accrued interest). The Index Average Yield to Maturity is the weighted average of the Index's individual bond holding Yield to Maturities based upon Net Asset Value. It is not indicative of the return of the Fund. Source: China Central Depositary & Clearing Co., Ltd, as of 30 May 2014. ^ Intending to distribute income in RMB quarterly in January, April, July and October having regard to the Sub-Fund s net income after fees and costs at the manager s discretion. The frequency and amounts of income distribution (if any) is not guaranteed. Source: the SAFE, as of 30 May 2014. # The website and the QR code website link have not been reviewed by the SFC of Hong Kong and may contain information of funds not authorised by the SFC.
Investment Objective The Sub-Fund aims to provide investment results that, before fees and expenses, closely correspond to the performance of the ChinaBond 5-year Treasury Bond Index (the Index ). Investment Strategy The Sub-Fund adopts a representative sampling strategy to achieve its investment objective. A representative sampling strategy involves investing in a representative sample of securities that collectively has an investment profile that reflects the profile of the Index. It is intended that the Sub-Fund will invest not less than 80% of its NAV in the PRC Treasury Bonds included in the Index which have a term to maturity of over 4 years and less than 7 years, through the RQFII investment quota granted to the Manager by the State Administration of Foreign Exchange (the SAFE ). However the Sub-Fund may also invest not more than 20% of its NAV in debt securities that are not included in the Index which have a term to maturity of less than 10 years, provided that the sample closely reflects the overall characteristics of the Index which the Manager believes will help the Sub-Fund achieve its investment objective. The Sub-Fund currently intends to invest in bonds via the inter-bank bond market. The Manager will adopt a pure fixed income strategy. The Sub-Fund will not seek to have any exposure to equity or convertible securities. What is RQFII? RQFII (RMB Qualified Foreign Institutional Investor) is a policy initiative of the China Mainland authorities which allows qualified RQFII holders to channel RMB funds raised in Hong Kong to mainland securities markets. RQFII funds can invest RMB directly into mainland equity and bond markets (including the inter-bank bond and exchange-traded bond markets) through the RQFII quotas, granting retail investors access to mainland securities markets. CSOP Asset Management Limited ( CSOP ) currently holds the largest RQFII quota as of 30 May 2014. (Source: the SAFE ) Why? The 1st RQFII Treasury Bond ETF The 1st RQFII China Treasury Bond ETF investing in China onshore treasury bonds, managed by the largest RQFII manager, CSOP, which is also the provider of the largest RQFII ETF, CSOP FTSE China A50 ETF (82822 / 2822) (Source: Bloomberg, as of 30 May, 2014) Investing in Onshore China Treasury Bonds Investing directly in RMB denominated and settled PRC treasury bonds that are issued by the Ministry of Finance of the PRC and distributed within the PRC Tracking ChinaBond 5-year Treasury Bond Index As a renowned China bond market benchmark, ChinaBond 5-year Treasury Bond Index is compiled and published by China Central Depositary & Clearing Co., Ltd. ( CCDC ), which undertakes the function of centralized depository and settlement for the inter-bank bond market and was established on proposal from People s Bank of China and the Ministry of Finance of the PRC. The Index is a total return index, comprising fixed-rate interest bearing PRC Treasury Bonds that has a term to maturity of over 4 years and less than 7 years, a category with adequate stock size and sufficient liquidity. Thus, it is feasible to track, replicate and sample A Flexible RMB Investment Instrument Denominated in RMB, traded in both RMB and HKD Quarterly Distribution Intending to distribute income in RMB quarterly in January, April, July and October having regard to the Sub-Fund s net income after fees and costs at the manager s discretion. The frequency and amounts of income distribution (if any) is not guaranteed
Comparison between Offshore China Treasury Bonds and Offshore China Treasury Bonds Currency RMB denominated / traded RMB denominated / RMB & HKD traded Purchase Channel Bank HKEx Minimum Purchase Size 10,000 RMB Around 2,000 RMB / Lot Holding Period 2-5 years lock period HKEx real-time trading Yield to Maturity 2.80%** 4.01%*** Distribution Semi-annual / annual distribution Quarterly distribution* * Intending to distribute income in RMB quarterly in January, April, July and October having regard to the Sub-Fund s net income after fees and costs at the manager s discretion. The frequency and amounts of income distribution (if any) is not guaranteed. ** Refers to the yield to maturity of the offshore China treasury bonds whose maturity date is 18 August 2018. Source: Bloomberg, as of 30 May 2014. *** Yield to Maturity is the discount rate that equates the present value of a bond's cash flows with its market price (including accrued interest). The Index Average Yield to Maturity is the weighted average of the Index's individual bond holding Yield to Maturities based upon Net Asset Value. It is not indicative of the return of the Fund. Source: China Central Depositary & Clearing Co., Ltd., as of 30 May 2014. Why Onshore China Treasury Bonds? Compared with China treasury bonds issued and distributed outside the PRC and treasury bonds issued by other main economies in the world, China treasury bonds issued and distributed in the PRC have relatively higher yield. Benchmark Yield Curve in Major Economies China (Onshore) China (Offshore) US Germany Japan Source: Bloomberg, as of 30 May 2014 Potential of RMB Appreciation RMB appreciated 33.58% against HKD since 2006 to 30 May 2014. CNYHKD Currency Source: Bloomberg, as of 30 May 2014
ChinaBond 5-year Treasury Bond Index Index Performance* 1 month 3 months 6 months Since Inception** Index* 1.46% 2.20% 4.06% 29.03% Top 5 Index Constituents* Rank Maturity Date Years to Maturity Coupon % of Index Credit Rating of the Bond Issuer*** Yield to Maturity 1 7 June 2019 5.01 3.14% 6.51% 3.85% 2 8 March 2019 4.76 3.41% 6.47% 3.85% 3 17 October 2020 6.37 4.07% 6.30% 4.04% 4 11 July 2020 6.10 3.46% 6.20% 4.10% 5 18 April 2020 5.87 3.29% 6.08% 4.12% * Index cumulative performance is for reference only. Performance of the Index does not indicate actual performance or indicate any possible future performance of the fund. ** Cumulative performance is calculated since the inception data on 27 December 2007. *** The credit rating is due to the credit rating of bond issuer from Moody s Investors Service. Source: CCDC, as of 30 May 2014 Key Facts Investment Manager Trustee and Registrar Custodian PRC Custodian Underlying Index Base Currency Trading Currency Exchange Listing Stock Code Inception Price Trading Board Lot Size Total Expense Ratio ETF Website HSBC Institutional Trust Services (Asia) Limited The Hongkong and Shanghai Banking Corporation Limited HSBC Bank (China) Company Limited ChinaBond 5-year Treasury Bond Index Renminbi (RMB) RMB / HKD SEHK - Main Board 83199 (RMB Counter) ; 3199 (HKD Counter) About 20 yuan RMB 100 units Estimated to be 0.49% p.a. www.csopasset.com/rmb-bond-etf # # The website has not been reviewed by the SFC of Hong Kong and may contain information of funds not authorised by the SFC.
CSOP: Leading the World s China Investment ( CSOP ) was founded in 2008; it is the first offshore asset manager set up by a regulated asset management company in China. Leading the World s China Investment, the slogan that CSOP associates itself with, highlights the commitment CSOP has made towards bringing the theme of China Investments to the competitive international market. Leveraging on its local expertise, CSOP looks to build trusted partnership with international investors who are seeking to invest into China; building upon its overseas presence, CSOP can also offer unique international investment opportunities to domestic Chinese institutional and individual investors. CSOP is licensed by the Hong Kong Securities and Futures Commission ( SFC ) to carry on Type 1 (Dealing in Securities), Type 4 (Advising on Securities) and Type 9 (Asset Management) regulated activities under Part V of the Securities and Futures Ordinance. CSOP manages public and private funds, provides investment advisory services and manages discretionary accounts for institutional investors, with total assets under management and advisory of USD 6.69 billion as of 30 May 2014 (Source: CSOP). In terms of AUM, CSOP is the largest RMB Qualified Foreign Institutional Investor ( RQFII ) asset management company (Source: SAFE, as of 30 May 2014). Under RQFII scheme, CSOP launched its first Hong Kong mutual fund - CSOP Shen Zhou RMB Fund and a series of ETFs- CSOP FTSE China A50 ETF, CSOP CES A80 ETF and. In 2014, CSOP was named as the China Offshore Fund House of the Year by Asian Investor and Best China Manager in Hong Kong by Asia Asset Management. China Offshore Fund House of the Year ETF Manager of the Year Hong Kong, Best China Manager Hong Kong, Best RQFII Manager Hong Kong, Best RQFII Product Hong Kong, Best RQFII ETF Ms. Ding Chen, CEO of CEO of the Year Index Provider Disclaimer (the Sub-Fund ) is not in any way sponsored, endorsed, sold or promoted by China Central Depository & Clearing Co., Ltd ( CCDC ). CCDC does not make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to (i) the results to be obtained from the use of the ChinaBond 5-year Treasury Bond Index (the Index ) (upon which the Sub-Fund is based), (ii) the figure at which the Index is said to stand at any particular time on any particular day or otherwise, and (iii) the suitability of the Index for the purpose to which it is being put in connection with the Sub-Fund. CCDC has not provided and will not provide any financial or investment advice or recommendation in relation to the Index to the Manager or to Unitholders. The Index is calculated by CCDC. CCDC will not be (a) liable (whether in negligence or otherwise) to any person for any error in the Index or (b) under any obligation to advise any person of any error therein. All rights in the Index vest in CCDC. Disclaimer Any prediction, projection or forecast of any the economic indicators, income indicators, or the economic trends is not necessarily indicative of the future performance of the Sub-Fund. Investment involves risk. Please refer to the Explanatory Memorandum and the Key Facts Statement (including the full text of the risk factors stated therein) for details of the risks of investing in the Fund. Future performance and the capital value of the Fund are not guaranteed. Past performance figures are not an indicative for future performance. The value of units may rise as well as fall. Investors are reminded that in certain circumstances their right to redeem may be suspended. We recommend investors obtain and read a copy of the Prospectus and the Product Key Facts before investing. This material has not been reviewed by SFC in Hong Kong. The information contained in this material is provided by, and should not be reproduced or distributed without the permission of CSOP Asset Management Limited. Issuer:, 24 June 2014 Address: 2801-2803 Two Exchange Square, 8 Connaught Place, Central, Hong Kong Telephone: (852) 3406 5688 Website: www.csopasset.com