•CIFM (HK) RMB China A Focus Fund (The “Fund”) is a sub-fund of CIFMHK Funds. It is a Hong Kong domiciled umbrella structure unit trust and is governed by the laws of Hong Kong.
•The Sub-Fund primarily invests in equity securities issued or listed in China through the RQFII quota of the Manager.
•The Sub-Fund is an investment fund. Investing in the Sub-Fund is not the same as deposits with a bank. There is no guarantee of the repayment of principal. Further, there is no guarantee that the investment objective of the Sub-Fund can be achieved. The value of investments held by the Sub-Fund may fall as well as rise and investors may not get back the original investments.
•There is also no guarantee of dividend or distribution payments during the period you hold the units of the Sub-Fund.
Equity investment / volatility risk :
•Investment in equity securities is subject to market risk. The prices of such securities may also be volatile and a number of factors may affect stock prices, including changes in investment sentiment, political environment, economic environment, regional or global economic instability, currency and interest rate fluctuations.
•If the market value of equity securities in which the Sub-Fund invests in goes down, its Net Asset Value may be adversely affected, and investors may suffer substantial losses.
Interest rate risk：
•Generally, the prices of debt securities rise when interest rates fall, whilst their prices fall when interest rates rise. Any increase in interest rates or change in marco-economic policies in PRC may adversely impact the value of the Sub-Fund’s investments in bonds or debt instruments.
•Investment in debt instruments is subject to the credit risk of the issuers which may not be able to make timely payments of principal and/or interest. In the event of a default or credit rating downgrading of the issuers of the debt instruments held by the Sub-Fund, valuation of the Sub-Fund’s portfolio may become more difficult and investors may suffer a substantial loss as a result.
•The Sub-Fund may also encounter difficulties or delays in enforcing its rights against debt instruments issuers who will generally be incorporated in the PRC and therefore not subject to the laws of Hong Kong. This may result in significant loss to the Sub-Fund.
Valuation risk :
•Valuation of a Sub-Fund’s investments may involve uncertainties and judgmental determinations, and independent pricing information may not at all times be available. If such valuations should prove to be incorrect, the Net Asset Value of the Sub-Fund may be adversely affected.
Concentration risk :
•Given that the top 30 holdings of the Sub-Fund shall account for no less than 70% of the Sub-Fund’s investment in equities, the Sub-Fund may be adversely affected by the performance of those equities, subject to increased price volatility and more susceptible to adverse economic, market, political or regulatory event affecting that market, industry, group of industries, sector or asset class.
Risk Relating to Investing in the China Market/ Single country investment :
•The Sub-Fund invests primarily in securities related to the China market and may be subject to additional concentration risk. Investment in the China market is subject to emerging market risk including political, economic, legal, regulatory and liquidity risks. The Sub-Fund may also be subject to the risks associated with changes in the PRC laws and regulations, which may have retrospective effect and may adversely affect the Sub-Fund.
•The China debt securities market may be subject to higher volatility compared to more developed markets. The prices of securities traded in such market may be subject to fluctuations, leading to higher volatility in the Sub-Fund’s Net Asset Value.
PRC Tax Risk :
•The Manager will make provisions for any PRC taxes payable by the Sub-Fund on gross realised and unrealised gains on PRC securities other than equity investments, at a rate of 10%. Such provisions may be excessive or inadequate to meet the actual tax liabilities. In case of any shortfall between the provisions and actual tax liabilities, which will be debited from the Sub-Fund’s assets, the asset value of the Sub-Fund will be adversely affected.
•The Manager will not make provision for gross realised or unrealised capital gains derived from trading of PRC equity investment (including China A-Shares from 17 November 2014 onwards.
Investment in China A-Share market :
•The price at which securities may be purchased or sold by the Sub-Fund and the Net Asset Value of the Sub-Fund may be adversely affected if trading markets for China A-Shares are limited or absent. The China A-Share market may be more volatile and unstable (for example, due to the risk of suspension of a particular stock or government intervention) than those in more developed markets and may result in significant fluctuations in the prices of the China A-Shares traded on such markets and thereby may affect the Net Asset Value of the Sub-Fund.
Liquidity risk :
•Some of the Sub-Fund’s investments (such as investment in small/medium sized companies) may be subject to higher liquidity risk. These investment may reduce returns for or result in substantial losses to the Sub-Fund if the Sub-Fund is unable to sell such securities at the time or price that is desirable.
•The bid and offer spread of Renminbi bonds may be high and the Sub-Fund may therefore incur significant trading costs and may even suffer losses when selling such investments.
• The Sub-Fund may not be able to sell its bond or debt instrument holdings at prices the Manager considers advantageous and may need to hold the bonds or debt instruments until their maturity date.
Risks Relating to RQFII :
•The Sub-Fund will invest in equity securities and RMB-denominated debt in China primarily through a RQFII which is subject to applicable regulations imposed by the PRC authorities. Although repatriations by RQFIIs in respect of the Sub-Fund are currently not subject to repatriation restrictions, lock-up periods or prior approval, there is no assurance that PRC rules and regulations will not change or that repatriation restrictions will not be imposed in the future. Any changes to the relevant rules may have an adverse impact on investors’ investment in the Sub-Fund and any restrictions on repatriation of the invested capital and net profits may impact on the Sub-Fund’s ability to meet redemption requests from the unitholders.
•Investment in securities through a RQFII will be subject to custodial risk of the RQFII Custodian appointed for purpose of safekeeping assets in the PRC. In addition, the execution and settlement of transactions or the transfer of any funds or securities may be conducted by brokers in the PRC. If the RQFII Custodian or the PRC brokers default, the Sub-Fund may not be able to recover all of its assets and may incur a substantial or even a total loss.
•The Sub-Fund may not have exclusive use of the entire RQFII quota granted by SAFE 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 products. 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.
Risks Relating to RMB Currency :
•RMB is currently not freely convertible and is subject to exchange controls by the Chinese government and investors may be adversely affected by movements of the exchange rates between RMB and other currencies.
•There is no guarantee that RMB will not depreciate. Investors may be adversely affected by movements of exchange rates between the RMB and the class currency of the Units they invest in and may suffer losses arising from such fluctuations. All or part of the subscription monies in a non-RMB denominated class will be converted into RMB for investment in underlying securities, while realisation proceeds in RMB will be converted to the relevant class currency for payment of redemption proceeds.
•The offshore RMB (the “CNH”) rate may be at a premium or discount to the exchange rate for onshore RMB (the “CNY”) and there may be significant bid and offer spreads. In calculating the value of the non-RMB classes and its non-RMB denominated and settled underlying assets, the Manager will apply the CNH exchange rate. The fluctuation in the CNH/CNY exchange rate could therefore have an impact on investors for such non-RMB classes and its non-RMB denominated and settled underlying assets. If investors convert Hong Kong Dollar or any other currency into RMB so as to invest in the Sub-Fund and subsequently convert the RMB redemption proceeds back into Hong Kong Dollar or any other currency, they may suffer a loss if RMB depreciates against Hong Kong Dollar or such other currency.
Risk in investing in financial derivative instruments :
•The Sub-Fund may invest in financial derivative instruments for hedging and non-hedging purposes which are subject to additional risks, including credit risk of the issuer, liquidity risk, counterparty risk and valuation risk. Financial derivative instruments may involve an embedded leverage. A relatively small adverse market movement could expose the Sub-Fund to the possibility of a loss exceeding the original amount invested. In adverse situation, the Sub-Fund’s use of financial derivative instruments may become ineffective in hedging and the Sub-Fund may suffer significant losses.
Small and Medium-Sized Companies Risk :
•The Sub-Fund may invest in small and medium-sized companies. Stock prices of these companies tend to be more volatile than those of large-sized companies due to a lower degree of liquidity, greater sensitivity to changes market conditions and higher uncertainty over future growth prospects. That may therefore have an adverse impact on the Net Asset Value of the Sub-Fund.
Investment involves risks. Investors should not make investment decisions based on this document alone. Before making any investment decision, investors should carefully read the “explanatory memorandum” and the “product key facts statement” of the Fund (collectively named as “Offering Documents”) for further details, including the risk factors. Information sources in this document are considered reliable but you should conduct your own verification of information contained herein. Past performance information (if there is any) is not indicative of future performance. The Fund does not have any guarantees. You may not get back the full amount of money you invest.
This website is for information purpose only and does not constitute an offer or invitation or inducement in any form to enter into any securities or investment transactions, nor does it constitute any investment advice and hence must not be construed as such. It does not express any view as to the suitability of any investments described therein for any individual investor. Before acting on the content in this document, you should read the Offering Documents of the Fund and consider whether any such investment is suitable for your particular circumstances. If necessary, you should seek independent professional advice.
The Fund has been authorized by the Securities and Futures Commission of Hong Kong (“SFC”). However, SFC authorization is not a recommendation or endorsement of the Fund nor does it guarantee the commercial merits of the Fund or its performance. It does not mean the Fund is suitable for all investors nor is it an endorsement of its suitability for any particular investor or class of investors.
This website has been prepared and issued by CIFM Asset Management (Hong Kong) Limited but has not been reviewed by the SFC.