GFI Unit Trust Series - GFI Income Fund
GFI Unit Trust Series - GFI Income Fund
Important Notes

1. Capitalized terms not otherwise defined herein shall have the same meanings as set forth in the applicable Explanatory Memorandum.

2. Investors should note that the website is not reviewed by the SFC.

3. The Manager accepts full responsibility for the accuracy of the information contained in the 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 Explanatory Memorandum or the Product Key Facts Statement misleading.

4. 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 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.

5. Investment involves risks. Before making any investment decisions, perspective investors are reminded to peruse carefully the Explanatory Memorandum, Product Key Facts Statement and the latest annual report together with any subsequently published semi-annual report (if any) of the Fund and the Sub-Fund(s). The Fund may not be suitable for all investors.

6. All information and materials contained in this page are prepared for general information purposes only, and shall not, in whole or in part, be regarded as an offer to sell, to subscribe, or provide any recommendation to sell investments. 

 

 

Key Risks

Investment involves risks.  Please refer to the Explanatory Memorandum for details including the risk factors.

 

1.  Investment risk

   The Sub-Fund’s investment portfolio may fall in value due to any of the key risk factors below and therefore your investment in the Sub-Fund may suffer losses. There is no guarantee of the repayment of principal.

 

2.  Risks associated with fixed income securities

 

Credit risk

   The Sub-Fund is exposed to the credit/default risk of the issuers of the fixed income securities that the Sub-Fund may invest in.

 

Interest rate risk

   Investment in the Sub-Fund is subject to interest rate risk. In general, the prices of fixed income securities rise when interest rates fall, whilst their prices fall when interest rates rise.

 

Volatility and liquidity risk

   The fixed income securities in some of the markets in which the Sub-Fund invests may be subject to higher volatility and lower liquidity compared to more developed markets.  The prices of securities traded in such markets may be subject to fluctuations.  The bid and spreads of the price of such securities may be large and the Sub-Fund may incur significant trading costs.

 

Credit rating and downgrading risk

   Credit ratings assigned by rating agencies are subject to limitations and do not guarantee the creditworthiness of the security and/or their issuer at all times.

   The credit rating of a debt security or its issuer may subsequently be downgraded.  In the event of such downgrading, the value of the Sub-Fund may be adversely affected. The Manager may or may not be able to dispose of the fixed income securities that are being downgraded.

 

Credit rating agency risk

   The credit appraisal system in the Mainland China and the rating methodologies employed in the Mainland China may be different from those employed in other markets.  Credit ratings given by the Mainland China rating agencies may therefore not be directly comparable with those given by other international rating agencies.

 

Sovereign debt risk

   The Sub-Fund’s investment in securities issued or guaranteed by governments may be exposed to political, social and economic risks. In adverse situations, the sovereign issuers may not be able or willing to repay the principal and/or interest when due or may request the Sub-Fund to participate in restructuring such debts. The Sub-Fund may suffer significant losses when there is a default of sovereign debt issuers.

 

Lower-rated and unrated securities risk

   The Sub-Fund may invest in debt securities rated below investment grade (in the case where the credit rating is designated/assigned by an internationally recognised credit agency) or rated below AA+ by a Mainland credit rating agency (in the case the credit rating is designated/assigned by a Mainland China credit rating agency) or unrated. Such securities are generally subject to lower liquidity, higher volatility and greater risk of loss of principal and interest than higher-rated debt securities.

 

Valuation risk

   Valuation of the Sub-Fund’s investments may involve uncertainties and judgmental determinations.  If such valuation turns out to be incorrect, this may affect the NAV calculation of the Sub-Fund.

 

“Dim Sum” bond (i.e. bonds issued outside of Mainland China but denominated in RMB) market risks

   The “Dim Sum” bond market is still a relatively small market which is more susceptible to volatility and illiquidity. The operation of the “Dim Sum” bond market as well as new issuances could be disrupted causing a fall in the NAV of the Sub-Fund should there be any promulgation of new rules which limit or restrict the ability of issuers to raise RMB by way of bond issuances and/or reversal or suspension of the liberalisation of the offshore RMB (CNH) market by the relevant regulator(s).

 

Risks associated with collateralised and/or securitised products (such as asset backed securities, mortgage backed securities and asset backed commercial papers)

   The Sub-Fund invests in collateralised and/or securitised products (e.g. asset backed securities and mortgage backed securities) which may be highly illiquid and prone to substantial price volatility. These instruments may be subject to greater credit, liquidity and interest rate risk compared to other debt securities. They are often exposed to extension and prepayment risks and risks that the payment obligations relating to the underlying assets are not met, which may adversely impact the returns of the securities.

 

Risks of investing in convertible bonds

   Convertible bonds are a hybrid between debt and equity, permitting holders to convert into shares in the company issuing the bond at a specified future date. As such, convertibles will be exposed to equity movement and greater volatility than straight bond investments. Investments in convertible bonds are subject to the same interest rate risk, credit risk, liquidity risk and prepayment risk associated with comparable straight bond investments.

 

Risks associated with CIBM

   Investing in the CIBM via Bond Connect is subject to regulatory risks and various risks such as volatility risk, liquidity risk, settlement and counterparty risk as well as other risk factors typically applicable to debt securities. The relevant rules and regulations on this regume are subject to change which may have potential retrospective effect. In the event that the relevant Mainland Chinese authorities suspend account opening or trading on CIBM, the Sub-Funds ability to invest in the CIBM will be adversely affected. In such event, the Sub-Fund’s ability to achieve its investment objective will be negatively affected.

 

Risk associated with urban investment bonds

   Urban investment bonds are issued by LGFVs, such bonds are typically not guaranteed by local governments in Mainland China or the central government of the People’s Republic of China. In the event that the LGFVs default on payment of principal or interest of the urban investment bonds, the Sub-Fund could suffer substantial loss and the NAV of the Sub-Fund could be adversely affected.

 

3.  Risk relating to geographical allocation strategy

   The allocation of the Sub-Fund’s investments by geographical locations changes based on macro-economic conditions. The investments of the Sub-Fund may be periodically rebalanced and therefore the Sub-Fund may incur greater transaction costs than a fund with static allocation strategy. Such geographical allocation strategy may not achieve the desired results under all circumstances and market conditions.

 

4.  Concentration risk

   Not more than 90% of the Sub-Fund’s NAV may be invested in offshore fixed income securities issued by Mainland Chinese companies or its subsidiaries or the companies who revenues are mainly from Mainland China. In addition, the Sub-Fund may invest not more than 75% of its NAV in bonds issued by corporations in a single industry/sector (e.g. real estate companies, banks or other financial institutions). The Sub-Fund’s investments may therefore be concentraded in companies associated with Mainland China, or specific industry sectors. The value of the Sub-Fund may be more volatile than that of a fund having a more diverse portfolio of investments.

   The value of the Sub-Fund may be more susceptible to adverse economic, political, policy, foreign exchange, liquidity, tax, legal or regulatory event affecting the Mainland Chinese market.

 

5.  Emerging market risk

   The Sub-Fund invests in emerging markets which may involve increased risks and special considerations not typically associated with investment in more developed markets, such as liquidity risks, currency risks/control, political and economic uncertainties, legal and taxation risks, settlement risks, custody risk and the likelihood of a high degree of volatility.

 

6.  Risk associated with instruments with loss-absorption features

   The Sub-Fund may invest in instruments with loss-absorption features which typically include terms and conditions specifying that the instrument is subject to being written off, written down, or converted to ordinary shares on the occurrence of a trigger event (i.e. when the issuer, or the resolution entity if the issuer is not a resolution entity, is near or at the point of non-viability; or when the issuer’s capital ratio falls to a specified level), such as total loss-absorbing capacity eligible instruments, contingent convertible debt securities and instruments which qualify as Additional Tier 1 or Tier 2 capital instruments as defined in the Banking (Capital) Rules. 

   Debt instruments with loss-absorption features are subject to greater risks when compared to traditional debt instruments as such instruments are typically subject to the risk of being written down or converted to ordinary shares upon the occurrence of a pre-defined trigger event (e.g. when the issuer is near or at the point of non-viability or when the issuer’s capital ratio falls to a specified level), which are likely to be outside of the issuer’s control. Such trigger events are complex and difficult to predict and may result in a significant or total reduction in the value of such instruments.

   In the event of the activation of a trigger, there may be potential price contagion and volatility to the entire asset class. Debt instruments with loss-absorption features may also be exposed to liquidity, valuation and sector concentration risk.

   The Sub-Fund may invest in contingent convertible debt securities, commonly known as CoCos, which are highly complex and are of high risk. Upon the occurrence of the trigger event, CoCos may be converted into shares of the issuer (potentially at a discounted price), or may be subject to the permanent write-down to zero. Coupon payments on CoCos are discretionary and may be cancelled by the issuer at any point, for any reason, and for any length of time.

   The Sub-Fund may invest in senior non-preferred debts. While these instruments are generally senior to subordinated debts, they may be subject to write-down upon the occurrence of a trigger event and will no longer fall under the creditor ranking hierarchy of the issuer. This may result in total loss of principal invested.

 

 

7.  Risks associated with exposure to RMB

 

RMB currency and conversion risk

   RMB is currently not freely convertible and is subject to exchange controls and restrictions.

   Where the Sub-Fund invests in RMB denominated investments, the value of such investments may be affected favourably or unfavourably depending on the changes in exchange rate between RMB and the base currency of the Sub-Fund. There can be no assurance that RMB will not be subject to devaluation. Any devaluation of the RMB could adversely affect the value of investors’ investments in the Sub-Fund.

   Non-RMB based investors are exposed to foreign exchange risk and there is no guarantee that the value of RMB against the investors’ base currencies (e.g. HKD) will not depreciate.  Any depreciation of RMB could adversely affect the value of the investor’s investment in the Sub-Fund.

   Although offshore RMB (CNH) and onshore RMB (CNY) are the same currency, they trade at different rates. The CNH rate may be at a premium or discount to the exchange rate for CNY and there may be significant bid and offer spreads.  Any divergence between CNH and CNY may adversely impact the NAV of the Sub-Fund and thus the investors.

   Under exceptional circumstances, payment of redemptions and/or dividend payment may be delayed due to the exchange controls and restrictions applicable to RMB.

 

RMB class(es) related risk

   When calculating the value of the RMB denominated class(es), CNH will be used. The value of the RMB denominated class(es) thus calculated will be subject to fluctuation.

   Non-RMB based (e.g. Hong Kong) investors may have to convert HKD or other currencies into RMB when investing in the RMB denominated class(es). Subsequently, investors may also have to convert the RMB redemption proceeds (received when selling the units) and RMB distributions received (if any) back to HKD or other currencies. During these processes, investors will incur currency conversion costs and may suffer losses in the event that RMB depreciates against HKD or such other currencies upon receipt of the RMB redemption proceeds and/or RMB distributions (if any).

   For RMB denominated class(es), since the unit prices are denominated in RMB, but the Sub-Fund will not be fully invested in RMB-denominated underlying investments and its base currency is USD, so even if the prices of the non-RMB denominated underlying investments and/or value of the base currency rise or remain stable, investors may still incur losses if RMB appreciates against the currencies of the non-RMB denominated underlying investments and/or the base currency more than the increase in the value of the non-RMB denominated underlying investments and/or the base currency.

   Furthermore, under the scenario where RMB appreciates against the currencies of the non-RMB denominated underlying investments and/or the base currency of the Sub-Fund (i.e. HKD), and the value of the non-RMB denominated underlying investments decreased, the value of investors’ investments in RMB denominated class(es) may suffer additional losses.

 

8.  Mainland China tax risk

   There are risks and uncertainties associated with the current Mainland China tax laws, regulations and practice in respect of the gains and income realised via Bond Connect.  Any increased tax liabilities on the Sub-Fund may adversely affect the Sub-Fund’s NAV.

   Based on professional and independent tax advice, the Manager will make provisions from the Sub-Fund’s assets for Mainland China withholding income tax (“WIT”) at a rate of 10% in respect of the interests paid by Mainland China tax resident enterprises (except for government bonds) where such Mainland China WIT has not been withheld at source. Also, based on professional and independent tax advice, the Manager will not make provision for (i) any Mainland China WIT and value-added tax (“VAT”) in respect of realised and unrealised capital gain derived from the trading of Mainland China debt securities; and (ii) any Mainland China VAT in respect of interest income derived from Mainland China debt securities.

  In case of any shortfall between the provisions and actual tax liabilities, which will be debited from the Sub-Fund’s assets, the Sub-Fund’s asset value will be adversely affected.  Depending on the timing of their subscriptions and/or redemptions, investors may be disadvantaged as a result of any shortfall of tax provision and will not have the right to claim any part of the overprovision (as the case may be).

 

9.  Currency and foreign exchange risk

   Underlying investments of the Sub-Fund may be denominated in currencies other than the base currency of the Sub-Fund. Also, a class of units may be designated in a currency other than the base currency of the Sub-Fund or the currency of its underlying investment. The NAV of the Sub-Fund may be affected unfavorably by fluctuations in the exchange rates between these currencies and the base currency and by changes in exchange rate controls.

 

10. Risks associated with investment in financial derivative instruments

   The Sub-Fund may use financial derivative instruments for investment and hedging purposes. The use of such derivatives exposes the Sub-Fund to additional risks, including counterparty/credit risk, liquidity risk, valuation risk, volatility risk and over-the-counter transaction risk. The leverage element/component of a financial derivative instrument can result in a loss significantly greater than the amount invested in the derivative by the Sub-Fund. Moreover, the use of financial derivative instruments for hedging may become ineffective, and the Sub-Fund may suffer substantial loss. Exposure to derivatives may lead to a high risk of significant loss by the Sub-Fund.

 

11. Risk relating to sale and repurchase transactions

   In the event of the failure of the counterparty with which collateral has been placed, the Sub-Fund may suffer loss as there may be delays in recovering collateral placed out or the cash originally received may be less than the collateral placed with the counterparty due to inaccurate pricing of the collateral or market movements.

 

12. Risk relating to reverse repurchase transactions

   In the event of the failure of the counterparty with which cash has been placed, the Sub-Fund may suffer loss as there may be delay in recovering cash placed out or difficulty in realising collateral or proceeds from the sale of the collateral may be less than the cash placed with the counterparty due to inaccurate pricing of the collateral or market movements.

 

13. Risks associated with distribution out of capital or effectively out of capital

   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 investments.  Any such distributions may result in an immediate reduction of the NAV per unit.

Net Asset Value
Date Class I Class A Class B
04/07/2020RMB -
USD -
HKD -
RMB -
USD -
04/06/2020RMB -
USD -
HKD -
RMB -
USD -
04/03/2020RMB -
USD -
HKD -
RMB -
USD -
04/02/2020RMB -
USD -
HKD -
RMB -
USD -
04/01/2020RMB -
USD -
HKD -
RMB -
USD -
Key Facts

Manager:

GF International Investment Management Limited

Trustee:

BOCI-Prudential Trustee Limited

Custodian:

Bank of China (Hong Kong) Limited

Dealing frequency:

Daily, each day (other than a Saturday or Sunday) on which banks in Hong Kong are open for normal banking business

Base currency:

USD

Dividend policy:

Currently on a monthly basis for Class A (USD) Units, Class A (HKD) Units, Class A (RMB) Units, Class I (USD) Units, Class I (HKD) Units and Class I (RMB) Units, Class B (USD) Units, Class B (HKD) Units and Class B (RMB) Units, subject to the Manager’s discretion.

Distributions may, at the Manager’s discretion, be paid out of the capital or effectively out of the capital of the Sub-Fund, which will result in an immediate decrease of net asset value (“NAV”) of the Units.

Financial year end of the Sub-Fund:

31 December

Class

Class A (USD) Units, Class A (HKD) Units and

Class A (RMB) Units

 

Current

Maximum

Subscription Charge

(% of the total subscription amount)

 

2%

5%

Redemption Charge

(% of the total redemption amount)

2%

5%

Management Fee

(% of the Net Asset Value of the relevant Class per annum)

1.2%

3%

INVESTING IN THE FUND AND REDEMPTION OF UNITS

Classes

Class A (USD) Units

Class A (HKD) Units

Class A (RMB) Units

 

 

 

 

Minimum Initial Subscription Amount

USD100

HKD1,000

RMB1,000

 

 

 

 

Minimum Subsequent Subscription Amount

USD100

HKD1,000

RMB1,000

 

 

 

 

Minimum Redemption Amount

USD100

HKD1,000

RMB1,000

 

 

 

 

Minimum Holding Amount

USD100

HKD1,000

RMB1,000

 

 

 

 

Class

Class I (USD) Units, Class I (HKD) Units and

Class I (RMB) Units

 

Current

Maximum

Subscription Charge

(% of the total subscription amount)

0%

5%

Redemption Charge

(% of the total redemption amount)

0%

5%

Management Fee

0.8%

3%

 

 

 

INVESTING IN THE FUND AND REDEMPTION OF UNITS

Classes

Class I (USD) Units*

Class I (HKD) Units*

Class I (RMB) Units*

 

 

 

 

Minimum Initial Subscription Amount

USD20,000,000

HKD200,000,000

RMB200,000,000

 

 

 

 

Minimum Subsequent Subscription Amount

USD1,000,000

HKD10,000,000

RMB10,000,000

 

 

 

 

Minimum Redemption Amount

USD1,000,000

HKD10,000,000

RMB10,000,000

 

 

 

 

Minimum Holding Amount

USD200,000

HKD1,000,000

RMB1,000,000

 

 

Class

Class B (USD) Units, Class B (HKD) Units and

Class B (RMB) Units

 

Current

Maximum

Subscription Charge

(% of the total subscription amount)

0%

5%

Redemption Charge

(% of the total redemption amount)

0%

5%

Management Fee

0.4%

3%

 

 

 

INVESTING IN THE FUND AND REDEMPTION OF UNITS

Classes

Class B (USD) Units*

Class B (HKD) Units*

Class B (RMB) Units*

 

 

 

 

Minimum Initial Subscription Amount

USD50,000,000

HKD400,000,000

RMB400,000,000

 

 

 

 

Minimum Subsequent Subscription Amount

USD10,000,000

HKD100,000,000

RMB100,000,000

 

 

 

 

Minimum Redemption Amount

USD10,000,000

HKD100,000,000

RMB100,000,000

 

 

 

 

Minimum Holding Amount

USD200,000

HKD1,000,000

RMB1,000,000

      

* Class I and Class B Units are offered to institutional investors only and are not available to the public in Hong Kong.

 

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