CIFM (HK) RMB Diversified Income Fund
Official Name CIFM (HK) RMB Diversified Income Fund Fund Short Name Diversified Income Fund
Fund Manager CIFM Asset Management (Hong Kong) Limited Fund Type

Umbrella Structure Unit Trust

Trustee

State Street Trust (HK) Limited
Base Currency RMB
RQFII Custodian China Construction Bank Corporation
Other Currency

HKD, USD

Investment Objective

The Fund seeks to achieve long term capital appreciation by investing in debt securities and equity securities which are denominated and settled in RMB and are issued or listed in China through the RQFII quota of the Manager.

Investment Scope

■The Sub-Fund may invest not more than 20% of its net asset value in (A) RMB denominated and settled equity securities which include, but are not limited to, China A-Shares (including initial public offerings) and (B) equity funds which are authorised by the CSRC for offer to the retail public in the PRC.
■The Sub-Fund will invest not less than 80% of its net asset value in debt securities which are denominated and settled in RMB and are issued or listed in China. These instruments include (A) RMB denominated and settled debt securities (including but are not limited to fixed rate or floating rate bonds, convertible bonds, commercial papers, central bank bills, short-term financing bills and certificates of deposits) issued and distributed within mainland China, and (B) fixed income funds which are authorized by the China Securities Regulatory Commission (“CSRC”) for offer to the retail public in the People’s Republic of China (the“PRC”, which excludes Hong Kong, Macau and Taiwan for purposes of this document).The bonds in which the Sub-Fund invests may be issued by the Chinese governments (including municipal bonds issued by local governments and bonds issued by local government financing vehicles such as Urban Investment Bonds , quasi-government organizations, banks, financial institutions and other corporate entities.

Dividend Policy

Class A, X and Y: No dividend distribution (Income, if any, will be re-invested)
Classes PA, PX and PY: Dividends, if declared, will be distributed on a monthly basis, subject to the Manager’s discretion. Distribution may be paid out of capital or effectively out of capital and may immediately reduce the net asset value of the relevant class of units.

Distributor

Bank of Taiwan, Hong Kong Branch

 

CITIC Securities International Company Limited

Convoy Asset Management Limited

CTBC BANK CO.,LTD. (Hong Kong Branch)

iFAST Financial (HK) Limited

 

Mega International Commercial Bank Hong Kong Branch

Noah Holdings (Hong Kong) Limited

 

OCBC Wing Hang

 

PFC International Company Limited

Shanghai Pudong Development Bank Co., Ltd., Hong Kong Branch Standard Chartered Bank (Hong Kong) Limited Taiwan Cooperative Bank Hong Kong Branch

The Shanghai Commercial & Savings Bank, Ltd., Hong Kong Branch

Wing Lung Bank Limited

 

 

 

The Product

•CIFM (HK) RMB Diversified Income Fund (The “Fund”) is a sub-fund of CIFM Funds. It is a Hong Kong domiciled umbrella structure unit trust and is governed by the laws of Hong Kong.
•The Fund invests in debt securities and equity securities issued or listed in China through RQFII quota of Manager.

Risk Disclosure

Investment Risk:
•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.
•There is also no guarantee of dividend or distribution payments during the period you hold the units of the Sub-Fund.
•The value of investments held by the Sub-Fund may fall as well as rise and investors may not get back the original investments.
Risk Relating to Investing in a Single Market / the China Market:
•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, and such changes 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.
PRC Tax Risk:
• In light of a notice issued by the Ministry of Finance of the PRC (the (“MoF”), the State Administration of Taxation of the PRC (the “SAT”) and the China Securities Regulatory Commission under Caishui [2014] No.79, the Manager, acting in the best interest of Unitholders, has assessed the withholding income tax (WIT) provisioning approach. The Manager does not make provision for gross realised or unrealised capital gains derived from the trading of PRC equity investments (including China A-Shares) from 17 November 2014 onwards.
• Pursuant to the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (“China-HK Arrangement”) and Beijing State Tax Bureau’s agreement to the Sub-Funds’ tax treaty application, the Manager, after having carefully considered the assessment and having taken and considered independent professional tax advice, has determined that no provision for WIT will be made on gross realised or unrealised capital gains derived from trading of PRC debt securities with effect from 31 July 2017.
• The Manager will make a WIT provision of 10% for the account of the Sub-Fund on PRC sourced passive income (such as dividend income or interest income) arising from investments in PRC securities.
• In light of another notice issued by the MoF and SAT under Caishui [2016]  No. 36  announcing that the B2V Pilot Program will be rolled out to cover all the remaining industries, including financial services, the Manager, after having carefully considered the assessment and having taken and considered independent professional tax advice, has determined to make a provision for  PRC Value-Added Tax (“VAT”)  in an amount equal to the total of (i) for VAT, 6% of the bond coupon interest (except PRC government bonds or local government bonds) received by the Sub-Fund;plus (ii) for the potential local surtaxes on VAT, 12% of the VAT amount stated in (i) with effect from 23 January 2018.

• There is a possibility of the rules being changed and taxes being applied retrospectively. There is a risk that taxes may be levied in the future on the Sub-Fund for which no provision is made, which may potentially cause substantial loss to the Sub-Fund. Unitholders may be disadvantaged depending upon the final tax liabilities, the level of provision and when they subscribed and/or redeemed their Units. If no provision is made by the Manager in relation to all or part of the actual tax levied by the SAT in the future, investors should note that the Net Asset Value of the Sub-Fund may be lowered, as the Sub-Fund will ultimately have to bear the full amount of tax liabilities. In this case, the additional amount of tax liabilities will only impact Units in issue at the relevant time, and the then existing Unitholders and subsequent Unitholders will be disadvantaged as such Unitholders will bear, through the Sub-Fund, a disproportionately higher amount of tax liabilities as compared to that borne before the actual tax liabilities are levied.


Risks Relating to RQFII:
•The Sub-Fund will invest in RMB-denominated debt and equity securities 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 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 RQFII rules have only been recently announced and are novel in nature – their application may depend on the interpretation of the Chinese authorities. Any changes to the relevant rules may have an adverse impact on investors’ investment in the Sub-Fund.
• 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. 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.
Risks Relating to Debt Securities:
•Credit risk - The Sub-Fund is exposed to the credit/insolvency risk of issuers of the RMB denominated debt securities it invests in. Such securities are typically unsecured debt obligations and are not supported by collateral. The Sub-Fund is therefore fully exposed to the credit/insolvency risk of its counterparties as an unsecured creditor. In the event of bankruptcy or insolvency of any of the Sub-Fund's counterparties, the Sub-Fund may experience delays in liquidating its positions and may, thereby, incur significant losses (including declines in the value of its investment) or the inability to redeem any gains on investment during the period in which the Sub-Fund seeks to enforce its rights, and fees and expenses incurred in enforcing its rights. These may result in a significant loss to the Sub-Fund.
•Risk relating to credit rating – The rating criteria and methodology used by Chinese local rating agencies may be different from those adopted by most of the established international credit rating agencies. Therefore, such rating system may not provide an equivalent standard for comparison with securities rated by international credit rating agencies and making investment based on the credit rating rated by Chinese local credit rating agencies may result in a loss to the Sub-Fund.
•Risks relating to below investment grade or unrated bonds and/or debt instruments - Some of the RMB denominated bonds and/or debt instruments may be rated below investment grade or unrated. Below investment grade or unrated bonds and/or debt instruments (with exception to central bank notes/bills, government bonds, treasury bonds and policy bank bonds) would generally be considered to have a higher credit risk and a greater possibility of default than more highly rated securities. As a result, such investments assume greater risks because of generally reduced liquidity and greater fluctuation in value. Valuation of the aforesaid bonds and/or debt instruments is more difficult. These may negatively impact the net asset value of the Sub-Fund.
•Interest rate risk - Investing in RMB denominated debt securities will subject the Sub-Fund to interest rate risk. Generally, the prices of debt securities rise when interest rates fall, whilst their prices fall when interest rates rise. The Chinese government’s macro-economic policies and controls will have significant influence over the capital markets in China. Changes in fiscal policies, such as interest rates policies, may have an adverse impact on the pricing of debt securities, and thus the return of the Sub-Fund.
•Downgrading risk - Investment grade securities (which for the purpose of this Sub-Fund, means securities which are rated BBB- or above by PRC credit rating agencies) may be subject to the risk of being downgraded to below investment grade securities. If the Sub-Fund continues to hold such securities, it will be subject to additional risk of loss. The Manager may or may not be able to dispose of the debt instruments that are being downgraded.
•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. The value of debt securities may be affected by changing market conditions or other significant market events affecting valuation. For example, in the event of downgrading of an issuer, the value of the relevant debt securities may decline rapidly.
•Liquidity risk - The RMB denominated debt securities market is at a developing stage and the trading volume may be lower than those of the more developed markets. The Sub-Fund may invest in debt securities which are not listed. Even if the debt securities are listed, the market for such securities may be inactive. The Sub-Fund is therefore subject to liquidity risks and may suffer losses in trading such instruments. The bid and offer spreads of the price of such securities may be large, so the Sub-Fund may incur significant trading and realisation costs and may suffer losses accordingly.
•Risks associated with urban investment bonds (城投債) - Urban investment bonds (城投債) are issued by local government financing vehicles (“LGFVs”), such bonds are typically not guaranteed by local governments or the central government of the Mainland. In the event that the LGFVs default on payment of principal or interest of the urban investment bonds (城投債), the Sub-Fund could suffer substantial loss and the NAV of the Sub-Fund could be adversely affected.
Risks relating to distribution out of capital:
•Distributions of the Sub-Fund may be paid out of the capital or effectively out of capital of the Sub-Fund.The Manager may also in its discretion pay dividends out of gross income while charging / paying all or part of the Sub-Fund’s fees and expenses to/out of the capital of the Sub-Fund, resulting in an increase in distributable income for the payment of dividends by the Sub-Fund. Therefore the Sub-Fund may effectively pay dividends out of capital. Investors should note that payment of distributions out of capital or 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 such distributions may result in an immediate reduction of the NAV of the relevant units.

 

Disclaimer

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.

 

     
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