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FAQs HSBC Asset Management HSBC Chinese Equity Fund Be part of the emergence of China The HSBC Chinese Equity Fund provides • Hong Kong H Shares - mainland companies (registered in investors with the potential to enhance returns China) that are listed in Hong Kong. by diversifying their investment portfolio and • Hong Kong China Plays - companies incorporated in Hong by participating in the growth potential of the Kong with signiﬁcant business interests in China. Chinese economy. • Hong Kong Red Chips - companies set up or registered in The following are answers to some of the Hong Kong with mainland China management. frequently asked questions about the HSBC • Shenzhen B Shares - companies incorporated in mainland Chinese Equity Fund. China and listed (in foreign $) on the B-share market of Shenzhen. About the Fund • Shanghai B Shares - companies incorporated in mainland 1 What are the investment objectives of the HSBC China and listed (in foreign $) on the B-share market of Chinese Equity Fund? Shanghai. The HSBC Chinese Equity Fund (‘Fund’) aims to provide: Note: Shenzhen and Shanghai A shares are traded and quoted in local currency (the Renminbi) and are not • long-term capital growth (over a period of at least ﬁve generally available to foreign investors. years) by investing primarily in a diversiﬁed portfolio of equity and equity-related securities of publicly- 5 What is the benchmark for the Fund? traded companies registered, or with an ofﬁcial listing, on a stock exchange in the People’s Republic of China The benchmark for the HSBC Chinese Equity Fund is the (‘China’), as well as investing in securities of public CLSA China World Index (Credit Lyonnaise Securities companies that have a signiﬁcant business or investment Asia) – in Australian dollars unhedged over rolling ﬁve- link with China; and year periods. • net returns above its benchmark, which is the CLSA China World Index (Credit Lyonnaise Securities Asia) 6 Why has HSBC chosen the CLSA China World – Australian dollar unhedged over rolling ﬁve-year index as the benchmark for the Fund? periods. We believe the CLSA China World Index is the most representative index against which the Fund should be 2 What will the Fund invest in? compared. The index is appropriate because it: The Fund will invest primarily in equity and equity- • includes all classes of China shares weighted by market related securities issued by large, actively traded capitalisation, which reﬂects the investment universe of companies. It may also include securities in appropriate our Fund; and smaller companies and may invest in Chinese warrants • excludes Hong Kong blue chip and Taiwan stocks that are and similar securities. not in our investment universe. 3 Will the Fund invest purely in China? Other common indices are not appropriate for comparative purposes, for the following reasons: The Fund will invest primarily in equity securities of • MSCI China Free — one stock, China Mobile, accounts companies listed on stock exchanges in China, including for 21 per cent of index weighting Hong Kong SAR. The Fund will also invest in securities of companies listed on other stock exchanges outside • MSCI Golden Dragon — China stocks account for only of China, but which have a signiﬁcant business or 22 per cent of the index, with the balance in Hong Kong investment link with China. blue chips (42 per cent) and Taiwan (36 per cent) A portion of the Fund’s holdings may be in the form of • Hang Seng China Enterprise Index — Includes only H cash or cash equivalents. shares • Hang Seng China Corporate Index — Includes only red 4 What types of shares can the Fund invest in? chips The Fund will invest in the ﬁve types of Chinese shares that are generally available to foreign investors. They are: Chinese Equity Fund Frequently asked questions 7 How does the Fund compare to similar funds? 11 What advantages does HSBC have when it comes to investing in China? As at September 2004, the HSBC Chinese Equity Fund has no directly comparable fund in the Australian market. It is the HSBC Asset Management prides itself on local knowledge. only Chinese Equity retail unit trust available in Australia. We believe our long-standing presence in Asia, proximity The closest competitor is the Aberdeen China Opportunities and access to local companies and skilled investment Fund, which is a ‘wholesale’ fund (typically available via professionals give us an advantage over our competitors. We investor master trusts or wrap accounts) with a minimum are on the ground and intimately involved in the market. The investment of A$20,000. HSBC Group has ofﬁces in 11 Chinese cities, and our staff of over 1,000 includes more than 70 investment professionals. Over 90 per cent of HSBC staff in China were recruited Who manages the Fund? locally, which means they not only know the local market, they also understand the language and culture in which 8 Who manages the HSBC Chinese Equity Fund? business is conducted. Because our investment specialists live HSBC Asset Management (Australia) Limited is the in the markets in which we invest, they can easily visit local responsible entity and issuer of units in the Fund. companies. Last year, the Asia (ex-Japan) team made over 1,000 company visits. 9 Who is the investment adviser for the Fund? What Globally, HSBC Asset Management has assets under does this mean? management of over A$254 billion, of which over A$32.4 billion is managed by the Asia (ex-Japan) team. Of course, The investment adviser for the HSBC Chinese Equity Fund HSBC didn’t build this portfolio overnight. We have a long is HSBC Asset Management (Hong Kong) Limited. This history of doing business in China. We trace our roots in means that investment decisions are made by HSBC Asset China back to 1865. And in 1973, HSBC was one of the ﬁrst Management investment specialists located in Hong Kong. fund managers to open an ofﬁce in Hong Kong. The same team that manages HSBC’s ﬂagship Chinese equity fund – the HSBC GIF Chinese Equity Fund – will manage HSBC Australia’s Chinese equity fund. The Fund’s Why invest in China? investment objectives and strategy are identical to those of the ﬂagship fund, which is an overseas investment vehicle 12 Why should investors consider a long-term that is managed by HSBC Asset Management (Hong Kong) investment in China? Is China’s growth sustainable? Limited. The ﬂagship fund is one of the largest and longest- Should investors be concerned about China’s running Chinese equity funds in the world, with over A$1.8 political environment? billion in funds under management (as at 31 July 2004). It For answers to these and other questions you may have about commenced in June 1992 and is sold in over 20 countries. investing in China, please refer to the Meet the Manager brochure, featuring an interview with Richard Wong, 10 Who actually manages the Fund’s portfolio? And portfolio manager for the HSBC Chinese Equity Fund. what are their credentials? The HSBC Chinese Equity Fund’s 13 What type of investor is the HSBC Chinese Equity portfolio manager is Richard Wong. Fund suitable for? Richard is a Director of HSBC Asset The Fund may be suitable for investors seeking capital Management (Hong Kong) Limited growth over a long-term investment horizon. Investors in this and Director, Asia (ex-Japan) Fund should be willing to accept a high level of volatility in Equities. As Head of the China team, the value of their investment. It is not suitable for those with Richard has overall responsibility for a very low tolerance for risk in their returns, or for those who Chinese equities investment. Richard have a short time horizon for their investments. The minimum manages HSBC’s ﬂagship Chinese suggested time horizon is ﬁve years. equity fund, the HSBC GIF Chinese Equity Fund, which is one of the largest and longest-running Chinese equity funds in the world, with over A$1.8 billion in 14 Who may invest in the HSBC Chinese Equity Fund? funds under management (as at 31 July 2004). The Fund is open for investment to persons receiving the For more information on Richard, please refer to the Meet the product disclosure statement (PDS) in Australia. The PDS Manager brochure, featuring an interview with Richard Wong. has not been registered as an investment offer in any other country. FAQs 15 How does the HSBC Chinese Equity Fund fit into a 20 Why have an ‘initial offer period’ and ‘minimum client’s existing portfolio? fundraising’? For investors with an appropriate tolerance for risk, the The reason for the initial offer period is to encourage HSBC Chinese Equity Fund should represent only a small investors to invest in the Fund. If the minimum fundraising part of their diversiﬁed international equity holdings. amount is not raised, the Fund will not proceed. This decision Investors should consult their ﬁnancial adviser regarding the has been made in the best interests of investors, as it would suitability of the HSBC Chinese Equity Fund as part of their be very difﬁcult to closely mirror the investment strategy of total investment portfolio. the ﬂagship HSBC GIF Chinese Equity Fund with a smaller fund size. If the Fund does not proceed, investors will miss 16 How should investors approach China? the opportunity of accessing the investment capability and skill of the HSBC Asia (ex Japan) investment team, who The greater the opportunity, the greater the risk - China is are experts in the market. HSBC has a long and successful no exception to this investment rule. Despite the wonderful history in Asia – we trace our roots back to 1865 – and opportunities it offers, investing in China is not for short-term the portfolio manager of the HSBC Chinese Equity Fund, or conservative investors. The investment horizon should be Richard Wong, currently manages one of the world’s largest at least ﬁve years. It’s a volatile market and many investors and longest-running Chinese equity funds. may be tempted to time the market. This is a risky strategy with China. Instead, it’s much wiser to make a long-term 21 When and why will the Fund close? What if I miss commitment so investors can ride out the ups and downs. out? Because of its inherent volatility, for most investors China should represent only a small percentage of a high-risk The Fund will temporarily close to new investors at 5.00pm investor’s equity exposure. AEDT on Friday, 17 December 2004. If an investor misses out on investing in the HSBC Chinese Equity Fund during the initial offer period, we anticipate What is the ‘initial offer period’ and re-commencing accepting applications from as early as April what does this mean? 2005, providing the minimum fundraising amount is raised. However, by not investing during the initial offer period, 17 What is the ‘initial offer period’? investors run the risk of the Fund not proceeding at all, and The HSBC Chinese Equity Fund will be open to receive thus missing out on the opportunity to invest with HSBC applications for an initial offer period, between 1 October – experts in the Chinese equity market. 2004 and 5.00pm on 17 December 2004. The Fund will be temporarily closed to new investors at 5.00pm AEDT on 22 Will the Fund re-open after the initial offer period? 17 December 2004, although we anticipate that we will re- If so, for how long? commence accepting applications in April 2005. We reserve the right to accept applications for other classes of units in At this stage, we anticipate that we will re-commence the Fund after 17 December 2004. accepting applications in the Fund in April 2005, provided that the minimum fundraising is reached by the end of the initial offer period. We anticipate that the Fund will remain 18 What does ‘minimum fundraising’ mean? open from this time onwards. The minimum fundraising is a dollar amount that the Fund needs to raise in order to be viable. The minimum fundraising 23 Why should I invest in the HSBC Chinese Equity amount is needed so that HSBC Australia’s Chinese Equity Fund now, during the initial offer period, rather Fund can mirror the Group’s ﬂagship Chinese Equity Fund than after the Fund re-opens? – the HSBC GIF Chinese Equity Fund. The aim is to raise total applications of at least A$20 million (although we If investors hold off investing during the initial offer period, will proceed with a lower amount where the Fund is able to the risk is that the minimum fundraising amount will not mirror the ﬂagship fund). If we do not receive the minimum be reached, and the Fund will not proceed. Investors will fundraising amount by the end of the initial offer period, the miss the opportunity of investing in a Chinese equity fund Fund will not proceed. In this case, application money will managed by the same team of experts that manage one of the be returned to investors as soon as is practicable. world’s largest and longest-running Chinese equity funds. 19 What interest will I earn during the initial offer period? Applications received during the initial offer period will be held in a non-interest bearing trust account, in line with standard industry practice. This means investors will not receive any interest during the initial offer period. FAQs HSBC Asset Management 24 From what date will the Fund’s investment the Australian dollar falls in relation to foreign currencies, performance be calculated? the Australian dollar value of foreign securities will rise because selling them will bring investors a higher amount Provided that the minimum fundraising amount is reached in Australian dollars. by the end of the initial offer period, we anticipate the Fund’s performance will be calculated from Monday, Conversely, when the value of the Australian dollar rises, 20 December 2004. the Australian dollar value of foreign securities falls because their sale would earn fewer Australian dollars. The currency in China is the yuan, which is currently Managing risks pegged to the US dollar. 25 What are the significant risks associated with investing in the HSBC Chinese Equity Fund? Product details The following are the main risks associated with investing 27 What are the key features of the Fund? in the Fund: Minimum investment $5,000 • Individual investment risk Minimum additional investment $1,000 • Market risk • Interest rate risk Minimum withdrawal $1,000 • Currency risk Minimum balance $5,000 • Derivative risk Income distribution frequency Yearly, after • Foreign market risk the end of June • Concentration risk Unit prices and performance information for all • Fund risk HSBC funds can be found on our website at www.assetmanagement.hsbc.com.au or by calling the For more information, please refer to page 5 of the HSBC HSBC Client Services team on 1800 331 613. Chinese Equity Fund product disclosure statement dated 1 October 2004. You will ﬁnd more detailed information on the HSBC Chinese Equity Fund in the product 26 How will currency fluctuations affect the Fund’s disclosure statement (PDS) issued 1 October 2004. performance? For a copy of the PDS, speak to your ﬁnancial adviser, contact the HSBC Client Services Team Funds that hold investments in foreign securities are on 1800 331 613 or visit our website at subject to currency risk to the extent that this exposure www.assetmangement.hsbc.com.au. is not directly hedged by foreign exchange contracts. Simply put, changes in the currency exchange rates between Australia and a country where a Fund holds an investment will affect the Australian dollar value of that investment, because it must be bought and sold with a foreign currency. Ignoring other risks, when the value of This publication is issued by HSBC Asset Management (Australia) Limited (ABN 34 004 778 545, AFSL 232594) (‘HSBC’) who is the responsible entity of the HSBC Chinese Equity Fund. Units in the HSBC Chinese Equity Fund are issued by HSBC. Copies of the product disclosure statement are available from HSBC at Level 29, 140 William Street, Melbourne Victoria 3000. You should consider the product disclosure statement in deciding whether to acquire or continue to hold units in the fund. HSBC, its ofﬁcers, employees and agents believe that the information in this document is correct at the time of compilation but do not warrant the accuracy of that information. Forecasts in this publication are predictive in character, based on numerous assumptions including the forecast outlook for key variables and may be affected by various factors including inaccurate assumptions, risks and unforeseen events. Accordingly, actual results may differ materially from those forecast. This publication provides general information only and is not intended to constitute general or personal ﬁnancial product advice or a recommendation. It has not been prepared taking into account your particular objectives, ﬁnancial situation or needs. Therefore, before making an investment decision based on any information contained in this publication, you should assess whether the information is appropriate to your particular objectives, ﬁnancial situation and needs. You can either assess the information yourself or seek the help of an adviser. You should obtain and consider the product disclosure statement relating to a ﬁnancial product before making any decision about whether to acquire the product. Save for statutory liability which cannot be excluded, HSBC disclaims all responsibility for any loss or damage which any person may suffer from reliance on information in this document whether the loss or damage is caused by any fault or negligence on the part of HSBC or otherwise.
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