At least 70% of the net asset value of the Sub-Fund (“NAV”) | High
yield debt securities (including convertible bonds), which may be USD, EUR or
HKD denominated or offshore RMB denominated (“Dim Sum” bonds), issued by or
fully guaranteed by listed or unlisted corporations which have their main
operations (or majority of assets) in or have their majority of their income
derived from Asia. Up to 100% of the NAV may be invested in debt
securities which are unrated or rated below investment grade. |
Up to 30% of the NAV in aggregate | •Onshore China exposure (up to 20% of the NAV) •Investment grade debt securities •Equity securities •Other collective investment schemes and money market funds •Financial derivative instruments (“FDIs”) for investment purpose |
Principal
investments
The Sub-Fund will
invest 70% to 100% of its NAV in a portfolio of high yield debt securities,
which may be USD, EUR or HKD denominated or offshore RMB denominated (“Dim Sum”
bonds, i.e. bonds issued outside China but denominated in RMB), issued by or
fully guaranteed by listed or unlisted corporations which have their main
operations (or majority of assets) in or have their majority of their income
derived from Asia; and where the Manager believes such debt securities are
being traded at significant discount to their underlying intrinsic values. For the avoidance of doubt, the issuers of
the debt securities who have a majority of their income derived from Asia as
mentioned above may be based in or outside Asia.
and
non-convertible bonds, fixed and floating rate bonds or other similar
securities. A long-term debt security is considered investment grade if its
credit rating is BBB- or higher by Standard & Poor's and Fitch Ratings or
Baa3 or higher by Moody's or equivalent rating as rated by an international
credit rating agency. A short-term debt security is considered investment grade
if its credit rating is A-3 or higher by Standard & Poor’s or F3 or higher
by Fitch Ratings or P-3 or higher by Moody’s or equivalent rating as rated by
an international credit rating agency.
For the purpose of the Sub-Fund, “unrated” refers to where neither the
instrument itself nor its issuer has a credit rating assigned by international
credit rating agencies. For a debt
security which itself does not have a credit rating, the Manager will assess
the debt security by reference to the credit rating of the issuer, the
guarantor or the keepwell provider.
High
yield debt securities may be issued or traded in developed markets or emerging
markets. There is no set proportion
between investments in developed markets and emerging markets, therefore
investments in emerging markets may be up to 100% of the NAV.
Up to 100% of the Sub-Fund’s NAV may be invested in convertible bonds
(issued and/or guaranteed by issuers such as corporations, financial
institutions and banks). The Sub-Fund’s expected total maximum investments in
debt instruments with loss-absorption features (“LAP”) e.g. contingent
convertible bonds (“CoCos”) and senior non-preferred debts will be up to 30% of
its NAV. CoCos may have non-viability and/or loss absorption convertible
features, i.e. they are subject to compulsory conversion out of the issuer’s
control. They are hybrid capital
securities that absorb losses when the capital of the issuer falls below a
certain level, and may be compulsorily redeemed upon the occurrence of a
trigger event which may be out of the issuer’s control. They are risky and
highly complex investment instruments. Under certain circumstances CoCos can be
converted into shares of the issuing company, potentially at a discounted
price, or cause the permanent write-down to zero of the principal investment
and/or accrued interest such that the principal amount invested may be lost on
a permanent or temporary basis. In the
event convertible bonds are converted into shares resulting in deviation from
the indicative asset allocation, the Manager will arrange for the shares to be
sold within 10 business days. The Sub-Fund may also 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.
The Sub-Fund will not invest more than 10% of
its NAV in debt securities issued and/or guaranteed by a single sovereign
issuer (including its government, public or local authority) which is below
investment grade and/or unrated.
The Sub-Fund will invest in a broadly diversified portfolio of debt
securities with no fixed duration, term structure or industry sector weightings
in the allocation of assets in developed markets. Selection of investments will
be determined by the availability of attractive investment opportunities.
Under
exceptional circumstances (e.g. market crash or major crisis) or adverse market
conditions, the Sub-Fund may be invested temporarily up to 100% of its NAV in
liquid assets such as bank deposits, certificates of deposit, commercial paper
and treasury bills, and investments in investment grade debt securities may
temporarily increase to up to 100%.
Other debt
securities
The Sub-Fund may also invest up to 30% of the NAV in investment grade
debt securities. Onshore China exposure
will be up to 20% of the NAV, which may include investments in debt securities
issued by or fully guaranteed by the PRC government and/or government related
entities and urban investment bonds (城投債).
Urban investment bonds are debt instruments issued by local government
financing vehicles ("LGFVs") in the China listed bond and interbank
bond market. These LGFVs are separate legal entities established by local
governments and/or their affiliates to raise financing for public welfare
investment or infrastructure projects.
Equity securities
The
Sub-Fund may also invest less than 30% of its NAV in shares listed on Hong
Kong, Singapore or U.S. stock exchanges (including American Depositary Receipts
and preference shares). This includes
any listed equities the SubFund may hold as a result of the conversion of the
convertible bonds, i.e. the Sub-Fund’s aggregate exposure in equities will not
exceed 30% of the Sub-Fund’s NAV. The Sub-Fund will not hold equities that are
unlisted.
Financial
derivative instruments (“FDIs”) and other investments
The Sub-Fund may also invest in units in any unit trust or shares in any
mutual fund corporation or any other collective investment scheme (including
those managed by the Manager or its connected persons) authorised by the SFC or
in recognised jurisdiction schemes and may hold cash, deposits, and other money
market instruments (such as but not limited to treasury bills, commercial
papers, certificates of deposit as considered appropriate by the Manager). The
SubFund will not invest more than 30% of its NAV in the above
instruments/investments.
transaction
is economically similar to secured borrowing, with the counterparty of the
Sub-Fund receiving securities as collateral for the cash that it lends to the
Sub-Fund.
recognised credit rating agencies) or which are SFC-licensed
corporations or are registered institutions with the Hong Kong Monetary
Authority. Any incremental income
generated will be credited to the account of the Sub-Fund after deducting any
fees charged by parties operating such transactions. It is the intention of the
Manager to sell the securities for cash equal to the market value of the
securities provided to the counterparty. Cash obtained in sale and repurchase
transactions will be used for liquidity management, re-investment and hedging
purposes. Where cash received by the Sub-Fund is used for re-investment, such
cash may only be re-invested in accordance with Chapter 7 of the SFC’s Code on
Unit Trusts and Mutual Funds (the “Code”) and the provisions set out under the
section “Investment Objective, Strategy and Restrictions” in the Explanatory
Memorandum.
E Fund Management (Hong Kong) Co., Limited is the issuer of this report.
This report is neither an offer nor solicitation to purchase units of the fund;
applications for units may only be made on forms of application available with
the Explanatory Memorandum. Investments are subject to investment risks, fund
value may go up as well as down and past performance is not indicative of
future performance. Investors should read carefully the Explanatory Memorandum
(including the section “Risk Factors”) for the relevant risks associated with
the investment in the fund before investing.
Distribution of this report may be restricted in
certain jurisdictions. This report does not constitute the distribution of any
information or the making of any offer or solicitation by anyone in any
jurisdiction in which such distribution or offer is not authorized or to any
person to whom it is unlawful to distribute such a report or make such an offer
or solicitation. This report is exempted from pre-vetting and authorization by
the Securities and Futures Commission of Hong Kong and has not been reviewed by
the Securities and Futures Commission of Hong Kong.
SFC authorization is not a recommendation or
endorsement of a scheme nor does it guarantee the commercial merits of a scheme
or its performance. It does not mean the scheme is suitable for all investors
nor is it an endorsement of its suitability for any particular investor or
class of investors.