BOCHK All Weather
Hong Kong Equity Fund

Investment in funds/sub-funds may involve risks and may not be suitable for all investors. Past performance is not indicative of future results. Investors should read carefully the relevant fund documents for details including but not limited to the risk factors before making any investment decisions. Printed copies of the fund documents or other information of the funds/sub-funds are available from the distributors of the respective funds/sub-funds and BOCHK Asset Management Limited. The above information does not constitute any offer or recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to the investors' needs.

Market risk

• The Sub-Fund is an investment fund. The Sub-Fund's investment portfolio may fall in value and therefore your investment in the Sub-Fund may suffer losses.

Concentration risk

• The Sub-Fund focuses its investments in the Hong Kong/China market and its portfolio of investments may not be diversified compared to other broad-based funds. It may be subject to additional concentration risk.

China market/emerging markets risk

• The Sub-Fund may be subject to the risks of investing in the China market or emerging markets generally, such as greater political, social, economic, foreign exchange, liquidity and regulatory risks.

Equity investment/volatility risk

• Equity investment is subject to risks that the market value of the stocks may go down as well as up. Prices of equity securities may be volatile. If the market value of equity securities in which the Sub-Fund invests in goes down, investors may suffer substantial losses.

Risks relating to debt securities

• Investment in debt securities is subject to the credit risk of the issuers which may be unable or unwilling to make timely payments on principal and/or interest. If the issuers default, the performance of the Sub-Fund will be adversely affected.
• Below investment grade securities are considered to have a higher credit risk and a greater possibility of default than more highly rated securities. Investment grade securities may be subject to the risk of being downgraded. In the event of downgrading, the risks of default may be higher, and the Sub-Fund's investments in such securities may be adversely affected.
• Debt securities are sensitive to changes in interest rates. Generally, the prices of debt securities rise when interest rates fall, vice versa. Longer term debt securities are usually more sensitive to interest rate changes.

RMB currency risk/Risks relating to RMB denominated securities

• Investors may invest in RMB-hedged Units of the Sub-Fund. Non-RMB based investors (e.g. Hong Kong investors) may have to convert Hong Kong dollar or other currency(ies) into RMB when investing in RMB-hedged Units and subsequently convert the RMB redemption proceeds and/or dividend payment (if any) back to Hong Kong dollar or such other currency(ies). Investors will incur currency conversion costs and may suffer losses depending on the exchange rate movements of RMB relative to Hong Kong dollar or such other currencies.
• Class denominated in RMB will generally be valued with reference to the offshore RMB (known as "CNH") rather than the onshore RMB (known as "CNY"). While CNH and CNY represent the same currency, they are traded in different and separate markets which operate independently. As such, CNH does not necessarily have the same exchange rate and may not move in the same direction as CNY.
• The Sub-Fund may have exposure to securities that are denominated in RMB. RMB is currently not a freely convertible currency and is subject to foreign exchange controls and repatriation restrictions imposed by the Chinese government. There is no guarantee that RMB will not depreciate. The Sub-Fund may suffer losses in case of depreciation of RMB.

Risks relating to RQFII funds

Risks relating to RMB denominated securities:

• RQFII funds primarily invest in PRC securities that are denominated in RMB. RMB is currently not a freely convertible currency and is subject to foreign exchange controls and repatriation restrictions imposed by the Chinese government. There is no guarantee that RMB will not depreciate. The Sub-Fund may suffer losses in case of depreciation of RMB.

Risks relating to the RQFII regime:

• There is no assurance that sufficient quota will be available for investment by a RQFII fund. Therefore the Sub-Fund’s ability to obtain exposure to the PRC domestic securities market may be limited by the availability of RQFII quota.
• There is no guarantee that restrictions will not be imposed in relation to repatriation of capital out of China by RQFII funds. Any restrictions on repatriation of the invested capital out of China may impact on RQFII funds’ ability to meet redemption requests from the Sub-Fund. Therefore, the Sub-Fund may be subject to liquidity risk insofar as it invests in RQFII funds.
• The rules relevant to RQFII are novel in nature and their application may depend on the interpretation given by the relevant Chinese regulatory authorities. Any changes to the relevant rules may have an adverse impact on investments made by the RQFII funds and hence the Sub-Fund’s performance.

Investment in China A-Share market via RQFII funds:

• The Sub-Fund may have exposure to the China A-Share market through investment in RQFII funds. The China A-Share market is undergoing development, and may have limited liquidity, lower trading volume and higher volatility. This may result in significant fluctuations in the prices of the securities traded on such markets and thereby may affect the value of the Sub-Fund.
• Securities listed on the China stock exchanges may be suspended. A suspension will render it impossible for the RQFII funds to liquidate positions or, when the suspension is lifted, to liquidate positions at a favourable price. The Sub-Fund may therefore suffer a loss in its investment in such RQFII funds.

Risks relating to RQFII ETFs:

• RQFII exchange traded funds (“RQFII ETFs”) which seek to track a China A-Share market index may be subject to tracking errors. Their units may be traded at a substantial premium or discount to their net asset value. Further, RQFII ETFs are novel in nature. They may be riskier than traditional exchange traded funds investing in non-PRC markets. Their operation depends heavily on the expertise of the RQFII ETF’s manager (or its mainland parent company).

Investment in PRC bond markets via RQFII funds:

• The Sub-Fund may have exposure to the PRC bond markets through investment in RQFII funds. Investment in the PRC bond markets via RQFII funds is subject to liquidity risks as there may not be an active secondary market for PRC bonds. The bid and offer spreads may be large and significant trading costs may be incurred.

PRC taxation:

• RQFII funds’ investment in the PRC is subject to PRC tax liabilities. Even if tax provisions are made, the value of RQFII funds may be adversely affected if there is a shortfall between the provisions and actual tax liabilities.

Exchange-traded funds (ETFs)

• The trading prices of units/shares in an ETF may be at a discount or premium to the net asset value of the units/shares. Valuation of units/shares in an ETF will primarily be made by reference to the last traded price. Where the Sub-Fund buys at a premium, it may suffer losses and may not fully recover its investment in the event of termination of the ETF.
• An ETF may not be able to perfectly track the index it is designed to track. The return from investing in an ETF may therefore deviate from the return of its tracking index.
• An ETF which is designed to track a market index is not “actively managed”, therefore when there is a decline in the relevant index, the ETF will also decrease in value. The ETF may not adopt any temporary defensive position against market downturns. The Sub-Fund may lose part or all of its investment in the ETF.
• There can be no assurance that an active trading market will exist for units/shares of an ETF.
• Synthetic ETFs are subject to the credit risk of the counterparties who issue the derivatives that are used to track the underlying index. If the counterparties default, the Sub-Fund may suffer substantial losses of its investment in the relevant ETFs.

PRC tax risk

• The Sub-Fund may be exposed to risks associated with changes in current Chinese tax laws, regulations and practice, which may have retrospective effect. In particular, there are still uncertainties as to the income and turnover tax treatment on capital gains derived from the trading of China B-Shares issued by PRC tax resident companies.
• Under 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 (“the Arrangement”), capital gains derived by Hong Kong tax residents from alienation of shares issued by PRC tax resident companies may be taxed in the PRC if the recipient, at any time within 12 months preceding such alienation, had a participation of at least 25% of the capital in that Chinese company or if the PRC company is an immovable properties-rich company (i.e. PRC companies in which 50% or more of their assets are comprised, directly or indirectly, of immovable properties situated in the PRC). Due to the Sub-Fund’s investment restrictions, the Sub-Fund cannot hold more than 10% of any ordinary shares issued by any single issuer. In such a case, the capital gains derived from the alienation of the shares of non-immovable properties-rich China B-Shares companies may be exempted from the PRC Withholding Income Tax (“WIT”), subject to the approval of the PRC tax authorities. The aforesaid capital gain tax exemption will only apply if approval is obtained from the PRC tax authorities. Before a Hong Kong tax resident can enjoy relief under the Arrangement, a Hong Kong Tax Resident Certificate (“HKTRC”) issued by the Inland Revenue Department (“IRD”) should be submitted to the relevant PRC tax authority for this purpose.
• As at the date of this Explanatory Memorandum, the Sub-Fund has not yet obtained the HKTRC from the IRD nor obtained any approval from the PRC tax authorities on the tax relief under the Arrangement.
• Accordingly, the Manager will make a provision for the withholding of 10% PRC WIT for the gross realized and unrealized capital gains derived by the Sub-Fund from trading of China B-Shares issued by PRC tax resident companies which are immovable properties-rich companies. After careful consideration of the Manager’s assessment and having taken and considered independent professional tax advice relating to the Sub-Fund’s eligibility to benefit from the Arrangement, and in accordance with such advice, the Manager considers that the Sub-Fund is a Hong Kong tax resident for the purpose of the Arrangement and should be able to enjoy a WIT exemption on capital gains derived from the disposal of PRC securities (except, where relevant, capital gains derived from the alienation of the shares of immovable properties-rich companies) under the Arrangement. In this regard, the Manager will not be making any WIT provisions for gross realized and unrealized capital gains derived from the trading of all other PRC securities.
• It is possible that the applicable tax laws may be changed, that the PRC tax authorities may hold a different view, that the assessment of immovable properties-rich companies by the Manager may be incorrect or that the Manager may not be able to obtain a HKTRC on behalf of the Sub-Fund. In such case the Sub-Fund may have greater tax liabilities in the PRC than provided for. Any shortfall between the provision and actual tax liabilities, which will be debited from the Sub-Fund’s assets, will cause the Sub-Fund’s Net Asset Value to be adversely affected. In this case, existing and subsequent investors will be disadvantaged as they will bear a disproportionately higher amount of tax liabilities as compared to the liability at the time of investment in the Sub-Fund. On the other hand, the actual tax liabilities may be lower than the tax provision made. In that case, persons who have already redeemed their Units in the Sub-Fund before the actual tax liabilities are determined will not be entitled or have any right to claim any part of such overprovision.

REITs

• The prices of REITs are affected by changes in the value of the underlying properties owned by the REITs.
• Real estate investments are relatively illiquid and this may affect the ability of a REIT to vary its investment portfolio or liquidate part of its assets in response to changes in economic conditions, international securities markets, foreign exchange rates, interest rates, real estate markets or other conditions.
• Returns from REITs are dependent on management skills. Investments made by REITs generally may not be diversified, and may be subject to the risks associated with adverse developments in relevant property sectors.
• REITs are subject to risk of defaults by borrowers or tenants. In the event of a default, a REIT may experience delays in enforcing its rights and may suffer losses as a result.

Risks relating to hedging and the hedged classes

• There can be no assurance that any currency hedging strategy employed by the Manager will fully and effectively eliminate the currency exposure of the Sub-Fund. If the counterparties of derivative instruments used for hedging purposes default, investors of the unhedged share classes may be exposed to the currency exchange risk on an unhedged basis and may suffer losses as a result.
• The effects of hedging will be reflected in the Net Asset Values of the hedged classes. Similarly, any expenses arising from such hedging transactions will be borne by the hedged classes in relation to which they have been incurred which may be significant depending on the prevailing market conditions.
• While hedging strategies may protect investors in the hedged classes against a decrease in the value of the Sub-Fund’s base currency relative to the class currency of the hedged classes, but it may also preclude investors from benefiting from an increase in the value of the Sub-Fund’s base currency.

Derivative risk

• The Sub-Fund may use derivative instruments (i.e. currency forward contracts, swaps, financial futures and options contracts) for hedging purposes. There can be no assurance that any hedging techniques will fully and effectively eliminate the risk exposure of the Sub-Fund.
• The price of a derivative instrument can be very volatile. A derivative instrument is subject to the risk that the counterparty of the instrument will not fulfil its obligations to the Sub-Fund, and this may result in losses to the Sub-Fund.
• Derivative instruments may be illiquid and are complex in nature. In adverse situations, the Sub-Fund’s use of derivatives for hedging may become ineffective and the Sub-Fund may suffer significant losses.

The Sub-Fund does not have any guarantees. You may not get back the full amount of money you invest.