Investment involves risks. Please refer to the Prospectus for details including as to the risk factors.

1.     General 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.     Passive investment risks

·         The Sub-Fund is passively managed and the Manager will not have the discretion to adapt to market changes due to the inherent investment nature of the Sub-Fund and will not take defensive positions in declining markets. Falls in the Index are expected to result in corresponding falls in the Net Asset Value of the Sub-Fund.

3.     Equity market risk

·         The Sub-Fund’s investment in equity securities is subject to general market risks, whose value may fluctuate due to various factors, such as changes in investment sentiment, political and economic conditions and issuer-specific factors.

4.     New index risk

·         The Index is a new index. The Index has minimal operating history by which investors can evaluate its previous performance. There can be no assurance as to the performance of the Index. The Sub-Fund may be riskier than other exchange traded funds tracking more established indices with longer operating history.

5.     Metals and mining sector concentration risk

·         The constituents of the Index, and accordingly the Sub-Fund’s investments, are concentrated in companies in the metals and mining sector. The value of the Sub-Fund may be more volatile than that of a fund having a more diverse portfolio of investments and may be more susceptible to adverse economic, political, policy, foreign exchange, liquidity, tax, legal or regulatory event affecting the metals and mining sector.

·         The price of gold and other precious metals may fluctuate substantially over short periods of time along with changes in financial markets and economic stability. Such fluctuations could adversely affect the profitability of the companies in the metals and mining sector, and hence affecting the Sub-Fund’s performance.

·         Securities of companies involved in the extraction or commerce of materials, such as gold and other precious metals, may operate in countries with less developed markets and legal framework. Such companies may be more prone to risks linked to political instability, changes in taxation or regulation.

·         Investments in global natural resources equities may be dependent upon the general supply situation of the natural resources, the expected output, extraction and production as well as the expected demand, and can for this reason be especially volatile.

6.     Geographical concentration risk

·         As the Index constituents concentrate in companies operating in Mainland China, the investment of the Sub-Fund may be similarly concentrated. 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 China markets.

7.     Emerging markets risk

·         The Sub-Fund invests in companies operating in Mainland China, which is an emerging market, and 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.

8.     Hong Kong listed Chinese companies risks

·         In tracking the Index, the Sub-Fund will invest in some companies the securities of which are listed on the SEHK and have substantial business operations in mainland China. Investing in such securities is subject to the risks of investing in emerging markets generally. This may involve increased risks and special considerations not typically associated with investment in companies based 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.

·         The promulgation of new tax laws, regulations and practice affecting Hong Kong listed Chinese companies may operate to the advantage or disadvantage of the Unitholders. There is a possibility that the current tax laws, regulations and practice applicable to Hong Kong listed Chinese companies will be changed with retrospective effect in the future.

9.     Risk of investing in other collective investment schemes

·         The Sub-Fund may invest in other CISs and will be subject to the risks associated with the underlying funds. The Sub-Fund does not have control of the investments of the underlying funds and there is no assurance that the investment objective and strategy of the underlying funds will be successfully achieved which may have a negative impact to the Net Asset Value of the Sub-Fund.

·         If the Sub-Fund invests in other active or passive investment products managed by the Manager or connected person of the Manager, all initial charges and redemption charges on these listed or unlisted funds must be waived, and the Manager must not obtain rebate of any fees or charges levied by these funds or any quantifiable monetary benefits in connection with investments in these funds. In case any conflicts of interest may still arise out of such investments, the Manager will use its best endeavours to resolve it fairly.

10.  Securities lending transactions risk

·         Securities lending transactions may involve the risk that the borrower may fail to return the securities lent out in a timely manner and the value of the collateral may fall below the value of the securities lent out.

11.  Currency risk

·         Underlying investments of the Sub-Fund may be denominated in currencies other than the base currency of the Sub-Fund. The performance and the Net Asset Value of the Sub-Fund may therefore be affected unfavourably by movements in the exchange rate between HKD and such other currencies and changes in exchange rate control policies.

12.  RMB currency and conversion risks

·         Units under RMB counter are traded in RMB. RMB is currently not freely convertible and is subject to foreign exchange control and restrictions.

·         Non-RMB based investors are exposed to foreign exchange risks and there is no guarantee that the value of RMB against the investors’ base currencies will not depreciate. Any depreciation of RMB could adversely affect the value of investors’ investment in the Sub-Fund.

·         Although offshore RMB (CNH) and onshore RMB (CNY) are the same currency, they trade at different rates. Any divergence between CNH and CNY may adversely impact investors.

13.  Trading difference risk

·         As the markets in which the Sub-Fund invests may be open when Units are not priced, the value of the securities in the Sub-Fund’s portfolio may change on days when investors will not be able to purchase or sell the Sub-Fund’s Units. Differences in trading hours between the overseas stock exchanges and the SEHK may also increase the level of premium or discount of the Unit price to its NAV.

14.  Trading risks

·         The trading price of the Units on the SEHK is driven by market factors such as the demand and supply of the Units. Therefore, the Units may trade at a substantial premium or discount to the Net Asset Value of the Sub-Fund.

·         As investors will pay certain charges (e.g. trading fees and brokerage fees) to buy or sell Units on the SEHK, investors may pay more than the Net Asset Value per Unit when buying Units on the SEHK, and may receive less than the Net Asset Value per Unit when selling Units on the SEHK.

·         The trading and settlement of the RMB traded Units may not be capable of being implemented as envisaged. The Units in the RMB counter are RMB denominated securities traded on the SEHK and settled in CCASS. Not all stockbrokers or custodians may be ready and able to carry out trading and settlement of the RMB traded Units. The limited availability of RMB outside Chinese Mainland may also affect the liquidity and trading price of the RMB traded Units.

15.  Tracking error risk

·         The Sub-Fund may be subject to tracking error risk, which is the risk that its performance may not track that of the Index exactly. This tracking error may result from the investment strategy used, and fees and expenses. The Manager will monitor and seek to manage such risk in minimising tracking error. There can be no assurance of exact or identical replication at any time of the performance of the Index by the Sub-Fund.

16.  Multi-counter risk

·         Where there is any limitation on the level of services by brokers and HKSCC participants, Unitholders may only be able to trade their Units in certain but not all counters only, which may inhibit or delay an investor dealing. The market price of Units traded in each counter may deviate significantly. As such, investors may pay more or receive less when buying or selling Units traded in one counter than the equivalent amount in the currency of another counter if the trade of the relevant Units took place on that other counter.

·         Investors who buy Units on the RMB counter or USD counter may be subject to currency exchange risk as the Net Asset Value of the Sub-Fund is calculated in HKD.

17.  Distribution out of/effectively out of capital risk

·         Payment of dividends out of capital and/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 such original investments. Any such distributions may result in an immediate reduction of the NAV per Unit of the Sub-Fund. This may also reduce the capital that the Sub-Fund has available for investment in future and may constrain capital growth.

18.  Reliance on market maker risks

·         Liquidity in the market for the Units may be adversely affected if there is no or only one market maker for the Units. The Manager will seek to mitigate this risk by ensuring that at least one market maker gives not less than 3 months’ notice prior to terminating market making arrangement under the relevant market maker agreement. Liquidity in the market for the Units may be adversely affected if there is no market maker for Units in a particular counter. It is possible that there is only one SEHK market maker for the Sub-Fund, or the Manager may not be able to engage a substitute market maker within the termination notice period of a market maker. There is no guarantee that any market making activity will be effective.

·         There may be less interest by potential market makers making a market in Units denominated and traded in RMB. Any disruption to the availability of RMB may adversely affect the capability of market makers in providing liquidity for the Units.

19.  Early termination risk

·         The Sub-Fund may be terminated early under certain circumstances, for example, where there is no market maker, the Index is no longer available for benchmarking or if the size of the Sub-Fund falls below HKD100 million. Any amount recovered by a unitholder on termination of the Sub-Fund may be less than the capital initially invested by the unitholder, resulting in a loss to the unitholder.