PRODUCT KEY FACTS STATEMENT

Transcription

1 Issuer: Hang Seng Investment Management Limited This is an exchange traded fund. PRODUCT KEY FACTS STATEMENT Hang Seng H-Share Index ETF 30 December 2016 This statement provides you with key information about the Hang Seng H-Share Index ETF (the H-Share ETF ). This statement is a part of the Hong Kong Offering Document of the H-Share ETF. You should not invest in the H-Share ETF based on this statement alone. Quick Facts Stock code: HKD Counter RMB Counter Trading lot size: Manager: Trustee, Custodian & Registrar: Underlying Index: Trading Currency: Base Currency: HKD Counter 200 Units RMB Counter 200 Units Hang Seng Investment Management Limited HSBC Provident Fund Trustee (Hong Kong) Limited Hang Seng China Enterprises Index HKD Counter Hong Kong dollars (HKD) RMB Counter Renminbi (RMB) Hong Kong dollars (HKD) Financial year end of the H-Share ETF: 31 December Dividend Policy: Semi-annual cash dividends (if any) at the discretion of the Manager, which are expected to be in respect of the first half and the second half of each calendar year respectively. The Manager currently intends to make declaration of dividend in June and November of each year. Each Unitholder will receive dividends in HKD only (whether holding HKD traded Units or RMB traded Units). There is no guarantee of regular distribution of dividends and if dividend is paid the amount being distributed. The Manager may, at its discretion, pay dividend out of capital. The Manager may also, at its discretion, pay dividend out of gross income while all or part of the fees and expenses of the H-Share ETF are charged to/paid out of the capital of the H-Share ETF, resulting in an increase in distributable income for the payment of dividends by the H-Share ETF and therefore, the H-Share ETF may effectively pay dividend out of capital. Payment of dividends 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 distributions of dividends involving payment of dividends out of capital or effectively out of capital may result in an immediate reduction of the Net Asset Value per Unit. Ongoing charges over a year*: 0.64% Tracking Difference of 2015 # : 0.14% ETF Website: * The ongoing charges figure is based on annualised ongoing expenses for the period ended 30 June 2016 expressed as a percentage of the H-Share ETF s average Net Asset Value for the same period. It includes the fees of the Manager and the Trustee. Please refer to the Fees and Expenses Payable by the H-Share ETF section in the Hong Kong Offering Document for details. This figure may vary from year to year.

2 # This is the actual tracking difference of the calendar year Investors should refer to the ETF website for more up-to-date information on actual tracking difference. What is the H-Share ETF? The H-Share ETF is part of the Hang Seng Investment Index Funds Series, a unit trust established as an umbrella fund under the laws of Hong Kong. The H-Share ETF is a physical ETF meaning that it invests directly in and holds securities. Units of the H-Share ETF are listed on The Stock Exchange of Hong Kong Limited ( SEHK ). Objective and Investment Strategy Objective The H-Share ETF is an index-tracking fund which aims to match, before expenses, as closely as practicable the performance of the Hang Seng China Enterprises Index (the H-Share Index ). Investment Strategy The Manager primarily adopts a replication strategy. The H-Share ETF invests in substantially all the constituent stocks of the H-Share Index in substantially the same weightings (i.e. proportions) as these stocks have in the H-Share Index. In order to maximise portfolio management efficiency, minimise transaction costs and tracking error, exposure to the H-Share Index may also be obtained through other index-tracking strategies or financial instruments from which the return to the H-Share ETF substantially reflects the performance of the H-Share Index. Such strategies and instruments are chosen based on their correlation to the H-Share Index and cost efficiency in order to reflect the characteristics of the H-Share Index. Hence, the Manager may decide to utilise a representative sampling strategy or another investment strategy from time to time to achieve the H-Share ETF s investment objective. Although financial instruments may be used (as aforesaid), they will not be used extensively for investment purpose. Currently, the Manager has no intention to have any securities lending, repurchase or similar over-the-counter transactions entered into for the account of the H-Share ETF. In the future, where the Manager intends to have any securities lending, repurchase or similar over-the-counter transactions entered into for the account of the H-Share ETF, subject to SFC s prior approval, 1 month s prior notice will be given to the relevant Unitholders. Index The H-Share Index, launched on 8 August 1994, tracks the performance of mainland China enterprise with H-Share listings in Hong Kong. The universe of the H-Share Index comprises all H-share companies that have their primary listing on the Main Board of the SEHK. The H-Share Index is calculated with a base value of 2000 as of 3 January It is calculated on a 2-second basis during trading hours of the SEHK and its closing value is based on the official closing prices of the constituent stocks in the H-Share Index announced by the SEHK. The H-Share Index is compiled and managed by Hang Seng Indexes Company Limited, a wholly-owned subsidiary of Hang Seng Bank Limited. All H-share companies that have their primary listing on the Main Board of SEHK passing the eligibility screening (which consists of the listing history requirement and turnover screening) will be included in the eligibility list for constituent selection. All stocks on the eligibility list are ranked by the full market capitalization and freefloat-adjusted market capitalization. For each eligible stock, a combined market capitalization ranking is calculated based on the ranking of the full market capitalization and freefloat-adjusted market capitalization. The 40 stocks that have the highest combined market capitalization ranking will be selected as constituents of the H-shares Index. The review of the H-Share Index is conducted quarterly. The H-Share Index adopts a freefloat-adjusted market capitalization weighted methodology with a 10% cap

3 on each constituent weighting. As at 16 December 2016, the respective weightings of the top 10 largest constituent stocks of the H-Share Index were as follows: Stock Code Stock Name Weighting (%) 3988 Bank of China Ltd. - H Share Industrial and Commercial Bank of China Ltd. - H Share China Construction Bank Corporation - H Share Ping An Insurance (Group) Co. of China Ltd. - H Share China Life Insurance Co. Ltd. - H Share China Petroleum & Chemical Corporation - H Share PetroChina Co. Ltd. - H Share Agricultural Bank of China Ltd. - H Share China Merchants Bank Co., Ltd. - H Share China Pacific Insurance (Group) Co., Ltd. - H Share 2.66 For details, please refer to the website of the index compiler, Hang Seng Indexes Company Limited, at What are the key risks? Investment involves risks. Please refer to the What are the Risks of Investing in the H-Share ETF? section in the Hong Kong Offering Document of the H-Share ETF for details. 1. Investment Risk The H-Share ETF is an investment fund. There is no guarantee of the repayment of principal. Therefore your investment in the H-Share ETF may suffer losses. 2. Tracking Error Risk There can be no assurance that the performance of the H-Share ETF will be identical to the performance of the H-Share Index. Factors such as the fees and expenses borne by the H-Share ETF, the timing differences associated with portfolio re-balancing, the prices at which the constituent stocks of the H-Share Index are acquired or disposed by the H-Share ETF, the market condition at the relevant time, the index-tracking strategies or financial instruments used will affect the performance of the H-Share ETF relative to the H-Share Index. 3. RMB trading and settlement of Units Risk Not all brokers or custodians may be ready and able to carry out trading and settlement of the RMB traded Units. The limited availability of RMB outside the PRC may also affect the liquidity and trading price of the RMB traded Units. 4. Dual Counter Risk If there is a suspension of the inter-counter transfer of Units between the HKD counter and the RMB counter for any reason, Unitholders will only be able to trade their Units in the relevant counter on the SEHK. The market price on the SEHK of Units traded in HKD and of Units traded in RMB may deviate significantly due to different factors, such as market liquidity, supply and demand in each counter and the exchange rate between the RMB and the HKD (in both the onshore and the offshore markets). As such investors may pay more or receive less when buying or selling Units traded in HKD on the SEHK than in respect of Units traded in RMB and vice versa. Investors without RMB accounts may buy and sell HKD traded Units only. Such investors will not be able to buy or sell RMB traded Units. Investors without HKD accounts should note that distributions are made in HKD only. As such, investors may suffer a foreign exchange loss and incur foreign exchange associated fees and charges to receive their dividend.

4 Not all brokers and CCASS Participants may be familiar with and able to buy Units in one counter and to sell Units in the other or to carry out inter-counter transfers of Units or to trade both counters at the same time. This may inhibit or delay an investor dealing in both HKD traded Units and RMB traded Units and may mean an investor can only trade in one currency. 5. Passive Investment Risk The H-Share ETF is passively managed. The Manager does not have the discretion to select stocks individually or to take defensive positions in declining markets. Hence, any fall in the H-Share Index will result in a corresponding fall in the value of the H-Share ETF. The composition of the H-Share Index may change and stocks currently comprising the H-Share Index may subsequently be delisted. Other stocks may also be added subsequently to become constituent stocks of the H-Share Index. 6. Concentration Risk There is a high concentration risk. The investments of the H-Share ETF concentrate in H-shares, and to the extent that the H-Share Index concentrates in the securities of a particular industry or group of industries, the investments of the H-Share ETF may be similarly concentrated. The performance of the H-Share ETF could depend heavily on the performance of that industry or group of industries, and the H-Share ETF is therefore likely to be more volatile than a broad-based fund. In addition, in seeking to reflect the weightings of constituent stocks of the H-Share Index, investments of the H-Share ETF may be concentrated in a single constituent stock or several constituent stocks. The performance of the H-Share Index and the H-Share ETF may be significantly affected by the price fluctuation of one or several of the constituent stocks of the H-Share Index. 7. Trading risk Generally, retail investors can only buy or sell Units of the H-Share ETF on SEHK. The trading price of the Units of the H-Share ETF on SEHK is subject to market forces and may trade at a substantial premium/discount to their Net Asset Value, and may deviate significantly from the Net Asset Value per Unit. 8. Mainland China Related Risk Investing in mainland China, an emerging market, involves special considerations and risks, such as greater price volatility, less developed regulatory and legal framework, economic, social and political instability, etc. 9. Risks associated with distribution out of capital or effectively out of capital The Manager may, at its discretion, pay dividend out of capital. The Manager may also, at its discretion, pay dividend out of gross income while all or part of the fees and expenses of the H-Share ETF are charged to/paid out of the capital of the H-Share ETF, resulting in an increase in distributable income for the payment of dividends by the H-Share ETF and therefore, the H-Share ETF may effectively pay dividend out of capital. Payment of dividends 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 distributions involving payment of dividends out of the capital of the H-Share ETF or effectively out of the capital of the H-Share ETF may result in an immediate reduction of the Net Asset Value per Unit of the H-Share ETF. 10. PRC Tax Risk Where the H-Share ETF invests in H-shares of which the incomes (such as dividends) are derived from mainland China, if any, the H-Share ETF is subject to withholding of PRC Enterprise Income Tax imposed in mainland China; and such withholding tax will reduce the income from the H-Share ETF and adversely affect the performance of the H-Share ETF. The H-Share ETF may also be subject to other taxes imposed in mainland China, which may reduce the income from, and/or the value of, the relevant investments in the H-Share ETF. 11. RMB Currency and Foreign Exchange Risk

5 The H-Share ETF is denominated in HKD but has Units traded in RMB. RMB is currently not freely convertible and is subject to exchange controls and restrictions. Investors may be adversely affected by the movement of the exchange rate between RMB and other currencies. The base currency of the H-Share ETF is HKD. RMB based investors who buy and sell Units traded in HKD are therefore exposed to foreign exchange risk as a result of fluctuations in the RMB exchange rate against the HKD. Non-RMB based investors who buy and sell RMB traded Units will be exposed to foreign exchange rate fluctuations between the RMB and other currencies, in particular, the relevant investor s base currency. There is no guarantee that the value of RMB against the investors base currencies (for example HKD) will not depreciate. If investors wish or intend to convert sale proceeds (in RMB on RMB traded Units or in HKD on HKD traded Units) into a different currency, they are subject to the relevant foreign exchange risk and may incur loss from such conversion as well as associated fees and charges. 12. Reliance on Market Maker Risk Although the Manager will ensure that at least one market maker will maintain a market for the Units traded in each counter and that at least one market maker for each counter gives not less than 3 months prior notice before terminating the relevant market making arrangement(s), liquidity in the market for the Units may be adversely affected if there is no market maker for the RMB and the HKD traded Units. It is possible that there is only one SEHK market maker to each counter. Further the Manager may not be able to engage a substitute market maker within the termination notice period of the market maker. There is also no guarantee that any market making activity will be effective. RMB traded Units are traded and settled in RMB. There may be less interest by potential market makers making a market in Units traded in RMB. Furthermore, any disruption to the availability of RMB may adversely affect the capability of market makers in providing liquidity for the Units. 13. Termination Risk The H-Share ETF may be terminated early under certain circumstances. It is possible that, at the time of such termination, investors have to realize their investment loss and will not be able to receive an amount equal to their capital originally invested. Investors should refer to Termination of the H-Share ETF in the Hong Kong Offering Document for further details. How has the H-Share ETF performed? Past performance information is not indicative of future performance. Investors may not get back the full amount invested. The computation basis of the total return performance is based on the calendar year end, Net Asset Value -To-Net Asset Value, with dividend (if any) reinvested.

6 These figures show by how much the H-Share ETF increased or decreased in value during the calendar year being shown. Performance data has been calculated in HKD including ongoing charges and excluding your trading costs on SEHK. The Benchmark of the H-Share ETF is Hang Seng China Enterprises Index (total return with dividend reinvested, net of PRC withholding tax). H-Share ETF launch date: Is there any guarantee? The H-Share ETF does not have any guarantees. You may not get back the full amount of money you invest. What are the fees and charges? Please refer to paragraph (2)(i) in Appendix 1 (Current Fees and Charges) of the Hong Kong Offering Document of the H-Share ETF for details of other fees and expenses applicable to the in-kind creation or redemption of Units. Charges incurred when trading the H-Share ETF on SEHK Fee Brokerage Fee What you pay Market rates SFC Transaction Levy % 1 SEHK Trading Fee 0.005% 2 Stamp Duty Nil Inter-counter transfer HKD5 3 1 SFC Transaction Levy of % of the trading price of the Units is payable by each of the buyer and the seller. 2 SEHK Trading Fee of 0.005% of the trading price of the Units is payable by each of the buyer and the seller. 3 HKSCC will charge each CCASS Participant a fee of HKD5 per instruction for effecting an inter-counter transfer of the H-Share ETF between one counter and the other counter. Investors should check with their brokers regarding any additional fees. Ongoing fees payable by the H-Share ETF The following expenses will be paid out of the H-Share ETF. They affect you because they reduce the Net Asset Value of the H-Share ETF which may affect the trading price. Fee Management Fee^ Trustee Fee^ Performance Fee Annual rate (as a % of the Net Asset Value of the H-Share ETF) 0.55% per annum 0.050% per annum on the first HKD15 billion of the Net Asset Value; 0.045% per annum on the next HKD15 billion of the Net Asset Value; 0.030% per annum on the next HKD15 billion of the Net Asset Value; and 0.025% per annum on the Net Asset Value in excess of HKD45 billion. Nil Administration Fee Nil ^ Please note that the annual rate stated is the rate charged currently as specified in the Hong Kong Offering Document of the H-Share ETF. It may be increased up to a permitted maximum rate as set out in the Hong Kong Offering Document of the H-Share ETF by giving 1 month s prior notice to relevant Unitholders. Additional Information You can find the following information of the H-Share ETF, both in the English and Chinese languages, at the H-Share ETF s website at (this website has not been reviewed by the SFC): The H-Share ETF s Hong Kong Offering Document (including this Product Key Facts Statement as may be updated from time to time) The compositions of the dividends (i.e. the percentages of dividends being paid out of (i) net distributable income and (ii) capital) for a rolling 12-month period (such information is also available from the Manager on request) The latest semi-annual and annual financial reports of the H-Share ETF

7 The near real-time estimated Net Asset Value per Unit throughout each Dealing Day in HKD and in RMB The last closing Net Asset Value in HKD only and the last closing Net Asset Value per Unit in HKD and in RMB Any notices and announcements The latest list of Participating Dealers and market makers The near real-time estimated Net Asset Value per Unit in RMB is indicative and for reference only. This is updated every 15 seconds during the SEHK trading hours. The near real-time estimated Net Asset Value per Unit in RMB does not use a real-time RMB: HKD foreign exchange rate it is calculated using the estimated Net Asset Value per Unit in HKD multiplied by an assumed foreign exchange rate using the Tokyo Composite 3:00 p.m. Tokyo time (2:00 p.m. Hong Kong time) mid rate quoted by Bloomberg for offshore RMB (CNH) on the previous SEHK trading day. The last closing Net Asset Value per Unit in RMB is indicative and for reference only and is calculated using the last closing Net Asset Value per Unit in HKD multiplied by an assumed foreign exchange rate using the Tokyo Composite 3:00 p.m. Tokyo time (2:00 p.m. Hong Kong time) mid rate quoted by Bloomberg for offshore RMB (CNH) as of the same Dealing Day. Please refer to the Hong Kong Offering Document for details. Important If you are in doubt, you should seek professional advice. The SFC takes no responsibility for the contents of this statement and makes no representation as to its accuracy or completeness. This material is issued by Hang Seng Investment Management Limited, a wholly-owned subsidiary of Hang Seng Bank Limited.