NINTH ADDENDUM Explanatory Memorandum dated 29 July 2009… unit trust prospectu… · 2 November...

Haitong Unit Trusts

Haitong Middle Kingdom Fund Haitong SRI Asia Fund

Haitong China Fund (the “Funds”)

NINTH ADDENDUM

This Ninth Addendum should be read in conjunction with and forms part of the Explanatory Memorandum dated 29 July 2009, as amended by an addendum dated 2 November 2009, a second addendum dated 20 May 2010, a third addendum dated 3 June 2010, a fourth addendum dated 20 October 2010, a fifth addendum dated 12 November 2010, a sixth addendum dated 27 May 2011, a seventh addendum dated 7 October 2011 and an eighth addendum dated 1 March 2012 (the “Explanatory Memorandum”). Haitong International Investment Managers Limited, the manager of the Funds (the “Manager”), accepts responsibility for the information contained in this Ninth Addendum as being accurate at the date of publication. Change of Directors of the Managers Mr. Lee Yiu Wing has ceased to be a director of Manager with effect from 1 December 2012. The Explanatory Memorandum shall be amended accordingly by the deletion of the sub-paragraph headed “Directors of the Manager” under the section headed “MANAGEMENT AND ADMINISTRATION” and the replacement with the following: “Directors of the Manager: Lin Yong Poon Mo Yiu Xie Zhengyang Zhang Xinjun Zhang Yibin” Haitong International Investment Managers Limited 1 December 2012

Haitong Unit Trusts



EIGHTH ADDENDUM

This Eighth Addendum should be read in conjunction with and forms part of the Explanatory Memorandum dated 29 July 2009, as amended by an addendum dated 2 November 2009, a second addendum dated 20 May 2010, a third addendum dated 3 June 2010, a fourth addendum dated 20 October 2010, a fifth addendum dated 12 November 2010, a sixth addendum dated 27 May 2011 and a seventh Addendum dated 7 October 2011 (the “Explanatory Memorandum”). All capitalized terms herein contained shall have the same meaning in this Eighth Addendum as in the Explanatory Memorandum. Haitong International Investment Managers Limited, the manager of the Funds (the “Manager”), accepts responsibility for the information contained in this Eighth Addendum as being accurate at the date of publication. Change of Directors of the Manager Mr. Lau Yiu Wai ceased to be a director of Manager with effect from 1 March 2012, and Mr. Lin Yong, Mr. Lee Yiu Wing, Mr. Zhang Xinjun and Mr. Xie Zhengyang were appointed as directors of Manager with effect from 1 March 2012. The Explanatory Memorandum shall be amended accordingly by the deletion of the sub-paragraph headed “Directors of the Manager” under the section headed “MANAGEMENT AND ADMINISTRATION” and the replacement with the following: “Directors of the Manager: Lin Yong Lee Yiu Wing Poon Mo Yiu Xie Zhengyang Zhang Xinjun Zhang Yibin” Haitong International Investment Managers Limited 1 March 2012

Haitong Unit Trusts



SEVENTH ADDENDUM

This Seventh Addendum should be read in conjunction with and forms part of the Explanatory Memorandum dated 29 July 2009, as amended by an addendum dated 2 November 2009, a second addendum dated 20 May 2010, a third addendum dated 3 June 2010, a fourth addendum dated 20 October 2010, a fifth addendum dated 12 November 2010 and sixth addendum dated 27 May 2011 (the “Explanatory Memorandum”). All capitalized terms herein contained shall have the same meaning in this Seventh Addendum as in the Explanatory Memorandum. Haitong International Investment Managers Limited, the manager of the Funds (the “Manager”), accepts responsibility for the information contained in this Seventh Addendum as being accurate at the date of publication. Change of Directors of the Managers Mr. Leung Chi Chung and Mr. Yan Kai Chi Danny were ceased to be a director of Manager on 12 September 2011 and Mr. Zhang Yibin was appointed as a director of Manager with effect from 12 September 2011. The Explanatory Memorandum shall be amended accordingly by the deletion of all contents under the following sub-paragraph of the section headed “MANAGEMENT AND ADMINISTRATION” of the Explanatory Memorandum and corresponding substitution therefore is as follows: “Directors of the Manager: Lau Yiu Wai Poon Mo Yiu Zhang Yibin” Haitong International Investment Managers Limited 7 October 2011

Haitong Unit Trusts



SIXTH ADDENDUM

This Sixth Addendum should be read in conjunction with and forms part of the Explanatory Memorandum dated 29 July 2009, as amended by an addendum dated 2 November 2009, a second addendum dated 20 May 2010, a third addendum dated 3 June 2010, a fourth addendum dated 20 October 2010 and a fifth addendum dated 12 November 2010 (the “Explanatory Memorandum”). All capitalized terms herein contained shall have the same meaning in this Sixth Addendum as in the Explanatory Memorandum. The Manager accepts responsibility for the information contained in this Sixth Addendum as being accurate at the date of publication. SFC Authorisation The sixth paragraph under the section entitled “PRELIMINARY INFORMATION” shall be deleted in its entirety and replaced by the following: “The Funds have been authorised by the Securities and Futures Commission in Hong Kong. SFC authorisation is not a recommendation or endorsement of the Funds nor does it guarantee the commercial merits of the Funds or their performance. It does not mean the Funds are suitable for all investors nor is it an endorsement of its suitability for any particular investor or class of investors. The Manager accepts responsibility for the information contained in this Explanatory Memorandum as being accurate at the date of publication.” Enquiries and Complaints Handling The following new paragraph shall be inserted as the last paragraph under the section entitled “PRELIMINARY INFORMATION”: - “Investors may contact the Manager for any quiries or complaints in relation to the Funds. To contact the Manager, investors may either: In writing to: 22/F Li Po Chun Chambers, 189 Des Voeux Road, Central, Hong Kong Telephone: (852) 2116 8200 Email: [email protected] The Manager will respond to any enquiry or complaint in writing or by telephone.” Language of Reports The first paragraph under the section entitled “REPORTS AND ACCOUNTS＂shall be deleted in its entirety and replaced by the following: “The financial year end of each Fund is 30th June. The Annual Reports and Accounts (in English only) will be sent to Unitholders as soon as possible (and in any event within 4 months) after the end of the relevant financial year. The Manager will also send out unaudited semi-annual reports (in English only) to Unitholders shortly (and in any event within 2 months) after 31st December in each year.” Website The following new paragraph shall be inserted as the last paragraph under the section entitled “INTRODUCTION”: “Information relating to the Fund, including the latest versions of the Fund’s offering documentation, circulars, notices, announcements, financial reports and the latest available Net Asset Value will be available on the website www.htisec.com/htiim.” Haitong International Investment Managers Limited 27 May 2011

Taifook Unit Trusts

Taifook Middle Kingdom Fund Taifook SRI Asia Fund

Taifook China Fund (the “Funds”)

FIFTH ADDENDUM This Fifth Addendum should be read in conjunction with and forms part of the Explanatory Memorandum dated 29 July 2009, as amended by an addendum dated 2 November 2009, second addendum dated 20 May 2010, third addendum dated 3 June 2010 and fourth addendum dated 20 October 2010 (the “Explanatory Memorandum”). All capitalized terms herein contained shall have the same meaning in this Fifth Addendum as in the Explanatory Memorandum. The Manager accepts full responsibility for the accuracy of the information contained in this Fifth Addendum and confirm, 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 misleading. Resignation of Director of the Manager Mr. Li Pak Wang, Daniel has ceased to be a director of the Manager with effect from 5 October 2010. The Explanatory Memorandum shall be amended under the following sub-paragraph of the section headed “MANAGEMENT AND ADMINISTRATION” of the Explanatory Memorandum and corresponding substitution therefore is as follows: “Directors of the Manager: Lau Yiu Wai Leung Chi Chung Poon Mo Yiu Yan Kai Chi Danny” Change of Name of the Funds With effect from 29 November 2010, the Funds will be renamed as follows:

Current name New name Taifook Unit Trusts Haitong Unit Trusts Taifook Middle Kingdom Fund Haitong Middle Kingdom Fund Taifook SRI Asia Fund Haitong SRI Asia Fund Taifook China Fund Haitong China Fund

Change of Name of the Manager With effect from 22 November 2010, all references in the Explanatory Memorandum to the name of the Manager, “Taifook Investment Managers Limited” is changed to “Haitong International Investment Managers Limited“. In addition, the section entitled “MANAGEMENT” of the Explanatory Memorandum shall be deleted in entirety and replaced by the following: “The Manager of the Funds is Haitong International Investment Managers Limited (“HTIIM”) which is formerly known as Taifook Investment Managers Limited. HTIIM is registered with the Securities and Futures Commission in Hong Kong as a licensed corporation under the Securities and Futures Ordinance (Cap. 571 of The Laws of Hong Kong) (the “SFO”) to conduct Type 1 (dealing in securities), Type 4 (advising on securities) and Type 9 (asset management) of the regulated activities. HTIIM has a long history in fund management activities with its predecessor began offering a wide range of investment services, including unit trusts and discretionary portfolio management services for corporate and private clients, in the early 1970s. The primary investment focus of HTIIM is in the Asia Pacific region while investments are also made in other regions, including the U.S. and Europe. HTIIM is a wholly owned subsidiary of Haitong International Securities Group Limited (“Haitong International”; SEHK Stock Code 0665; formerly known as Taifook Securities Group Limited), which is listed on the Stock Exchange of Hong Kong. With more than 30 years of history, Haitong International provides a wide spectrum of integrated financial services covering corporate finance, asset management and brokerage services to global and local institutional and corporate clients as well as individual investors. With effect from 21 December 2009, Haitong International Holdings Limited (“Haitong International Holdings”; formerly known as Hai Tong (HK) Financial Holdings Limited), a company incorporated in Hong Kong and wholly owned by the leading mainland securities firm - Haitong Securities Company Limited (“Haitong”; SSE Stock Code: 600837.SH), has acquired Taifook Securities Group Limited from NWS Holdings Limited and become Haitong International’s major shareholder. The Manager is entitled under the Trust Deeds to delegate all or part of its powers, duties and discretion under the Trust Deeds and has delegated to HSBC Institutional Trust Services (Asia) Limited the functions of valuing the Funds' assets and calculating the subscription and redemption prices. The Manager may appoint investment advisers for the Funds, subject to the prior approval of the Securities and Futures Commission and provided the fees for such investment advisers are borne by the Manager.” Taifook Investment Managers Limited 12 November 2010

Taifook Unit Trusts

Taifook Middle Kingdom Fund

Taifook SRI Asia Fund Taifook China Fund

(the “Funds”)

FOURTH ADDENDUM This Fourth Addendum should be read in conjunction with and forms part of the Explanatory Memorandum dated 29 July 2009, as amended by an addendum dated 2 November 2009, second addendum dated 20 May 2010, and third addendum dated 3 June 2010 (the “Explanatory Memorandum”). All capitalized terms herein contained shall have the same meaning in this Fourth Addendum as in the Explanatory Memorandum. The Manager accepts full responsibility for the accuracy of the information contained in the Fourth Addendum and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement misleading. Termination of Taifook Emerging Economies Fund The Manager of the Funds has terminated the Taifook Emerging Economies Fund with effect from 18 August 2010. All references to the Taifook Emerging Economies Fund in the Explanatory Memorandum shall be deemed removed accordingly. Taifook Investment Managers Limited 20 October 2010

Taifook Unit Trusts


Taifook SRI Asia Fund Taifook Emerging Economies Fund Taifook China Fund (the “Funds”)

THIRD ADDENDUM This Third Addendum should be read in conjunction with and forms part of the Explanatory Memorandum dated 29 July 2009, as amended by an addendum dated 2 November 2009 and second addendum dated 20 May 2010 (the “Explanatory Memorandum”). All capitalized terms herein contained shall have the same meaning in this Third Addendum as in the Explanatory Memorandum. The Manager accepts responsibility for the accuracy, as at the date of this Addendum, of the information contained in it. The Explanatory Memorandum is amended as follows with immediate effect. Change of Directors Mr. Li Pak Wang, Daniel was appointed as a director of Taifook Investment Managers Limited with effect from 20 May 2010. The Explanatory Memorandum shall be amended under the following sub-paragraph of the section headed “MANAGEMENT AND ADMINISTRATION” of the Explanatory Memorandum and corresponding substitution therefore is as follows: “Directors of the Manager: Lau Yiu Wai Leung Chi Chung Li Pak Wang, Daniel Poon Mo Yiu Yan Kai Chi Danny” Taifook Investment Managers Limited 3 June 2010

Taifook Unit Trusts


Taifook SRI Asia Fund Taifook Emerging Economies Fund Taifook China Fund (the “Funds”)

SECOND ADDENDUM This Second Addendum should be read in conjunction with and forms part of the Explanatory Memorandum dated 29 July 2009, as amended by an addendum dated 2 November 2009 (the “Explanatory Memorandum”). All capitalized terms herein contained shall have the same meaning in this Second Addendum as in the Explanatory Memorandum. The Manager accepts responsibility for the accuracy, as at the date of this Addendum, of the information contained in it. The Explanatory Memorandum is amended as follows with immediate effect. Resignation of Directors of the Manager Both Mr. Cheng Chi Ming Brian and Mr. Sen Tung Ning have ceased to be directors of the Manager with effect from 2 November 2009 and 14 November 2009 respectively. Accordingly, all disclosures pertaining to them in the Explanatory Memorandum stand withdrawn. Change in the Ultimate Controlling Shareholder of the Manager The 3rd paragraph under the section entitled “MANAGEMENT” shall be deleted and replaced by the following: “TFIM is a wholly owned subsidiary of Taifook Securities Group Limited (“Taifook”; SEHK Stock Code 0665), which is listed on the Stock Exchange of Hong Kong. With more than 30 years of history, Taifook provides a wide spectrum of integrated financial services covering corporate finance, asset management and brokerage services to global and local institutional and corporate clients as well as individual investors. With effective from 21 December 2009, Hai Tong (HK) Financial Holdings Limited (“Hai Tong (HK)”), a company incorporated in Hong Kong and wholly owned by the leading mainland securities firm - Haitong Securities Company Limited (“Haitong”; SSE Stock Code: 600837.SH), has acquired Taifook from NWS Holdings Limited and become Taifook’s major shareholder.” Change of Name of The Bank of Bermuda Limited The name of The Bank of Bermuda Limited, the Alternate Trustee of the Funds, has been changed to HSBC Bank Bermuda Limited with effect from 3 May 2010 and all references to The Bank of Bermuda Limited are amended accordingly and the term “The Alternate Trustee” shall be construed accordingly. Taifook Investment Managers Limited 20 May 2010

Taifook Unit Trusts


Taifook Emerging Economies Fund Taifook China Fund (the “Funds”)

ADDENDUM This Addendum should be read in conjunction with and forms part of the Explanatory Memorandum dated 29 July 2009 (the “Explanatory Memorandum”). All capitalized terms herein contained shall have the same meaning in this Addendum as in the Explanatory Memorandum. The Manager accepts responsibility for the accuracy, as at the date of this Addendum, of the information contained in it. Changes of Dealing Deadline With effect from 3 December 2009, the dealing deadline for requests for the application and redemption of Units of the Funds will be 3:00 p.m. (Hong Kong time) on the relevant Valuation Date. References to such dealing deadline in the Explanatory Memorandum, under the sections headed “Application for Units” and “Redemption of Units”, shall be amended accordingly. Change of Address of HSBC Institutional Trust Services (Asia) Limited Due to the change of address of HSBC Institutional Trust Services (Asia) Limited, all references to the address of HSBC Institutional Trust Services (Asia) Limited in the Explanatory Memorandum are amended accordingly to 1 Queen’s Road Central, Hong Kong with effect from 22 March 2010. Taifook Investment Managers Limited 2 November 2009

Taifook Unit Trusts


Taifook Emerging Economies Fund Taifook China Fund

EXPLANATORY MEMORANDUM

29 July 2009

Issuer: Taifook Investment Managers Limited

IMPORTANT:

♦ The Taifook Unit Trusts may invest directly in equity, money market instruments

and/or fixed income instruments, each with a different risk profile.

♦ The Taifook Unit Trusts involve investments in emerging markets and will be

subject to higher volatility, liquidity, political, legal and currency risks. In

particular, the Taifook China Fund, which concentrates on investment in the PRC,

will be subject to higher concentration risks than funds with a more diversified

investment policy and higher exposure to risks associated to the PRC market.

♦ The investment decision is yours but you should not invest unless the intermediary

which sells you the fund has advised you that the fund is suitable for you and has

explained why, including how investment in the fund will be consistent with your

investment objectives.

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MANAGEMENT AND ADMINISTRATION

Manager: Taifook Investment Managers Limited 25/F., New World Tower, 16-18 Queen’s Road Central, Hong Kong General Line: (852) 2848 4333 Pricing Hotline: (852) 2528 5263 Directors of the Manager:

Lau Yiu Wai Sen Tung Ning Poon Mo Yiu Leung Chi Chung Yan Kai Chi Danny Cheng Chi Ming Brian

Trustee and Registrar Bank of Bermuda (Cayman) Limited P O Box 513 HSBC House 68 West Bay Road Grand Cayman, KY1-1106 Cayman Islands Alternate Trustee:

The Bank of Bermuda Limited Bank of Bermuda Building, 6 Front Street Hamilton HM11 Bermuda Trustee’s and Registrar's Agent:

HSBC Institutional Trust Services (Asia) Limited 39th Floor, Dorset House Taikoo Place 979 King's Road Quarry Bay Hong Kong Solicitors:

Deacons 5th Floor, Alexandra House 18 Chater Road, Central Hong Kong

Auditors:

KPMG Century Yard, Cricket Square George Town Grand Cayman Cayman Islands

British West Indies

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INTRODUCTION

The Taifook Unit Trusts (the "Funds") were established under the laws of Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”). Details of the constituent documents of the Funds are set out below in the section headed "Trust Deeds".

This Explanatory Memorandum covers four unit trusts (each a "Fund"), namely:-

Fund Currency

Taifook Middle Kingdom Fund Hong Kong dollars

Taifook SRI Asia Fund Hong Kong dollars

Taifook Emerging Economies Fund Hong Kong dollars

Taifook China Fund US dollars

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PRELIMINARY INFORMATION

Important - If you are in any doubt about the contents of this Explanatory

Memorandum, you should consult your stockbroker, bank manager, solicitor,

accountant or other financial advisor.

In particular, nationals or residents of, or persons domiciled in, countries other than Hong Kong should consult their financial advisors and take legal advice as appropriate as to whether any government or other consents are required, or other formalities need to be observed and as to any taxation effects, foreign exchange restrictions or exchange control requirements applicable, to enable them to acquire Units. Distribution of this Explanatory Memorandum is not authorised in any jurisdiction unless it is accompanied by copies of the latest annual reports and accounts of the Funds and, if later, copies of the most recent semi-annual reports which form part of this Explanatory Memorandum. Receipt of any document about the Funds does not constitute an offer of Units in those jurisdictions in which it is illegal to make such an offer. In particular, the Units have not been registered under the United States Securities Act 1933 and are not being offered in the United States of America or its territories or possessions or areas subject to its jurisdiction, nor may they be so offered except pursuant to an exemption under the United States Securities Act of 1933. The Funds are not authorised under the United Kingdom Financial Services Act 1986 (the "FSA") in the United Kingdom and accordingly this Explanatory Memorandum must not be distributed in the United Kingdom other than to certain categories of person as specified in regulations made under the FSA. Such categories include certain persons with sufficient expertise such as authorized persons, who understand the risks involved. Units issued in respect of the Funds after the date of this Explanatory Memorandum are offered on the basis only of the information contained in this Explanatory Memorandum, the annual report and accounts and semi-annual report mentioned above and such additional document(s), if any, as may be issued by the Manager expressly in conjunction with the issue of this Explanatory Memorandum. Any further information or representations made by any dealer, salesman or other person must be regarded as unauthorized and must accordingly not be relied upon. The delivery of this Explanatory Memorandum or the other documents mentioned above or the offer, issue or sale of units shall not in any way constitute a representation that the information and representations given herein or in such documents is correct as at any time subsequent to the date of such documents. The Funds have been authorised by the Securities and Futures Commission in Hong Kong, but in authorising the Funds the Securities and Futures Commission does not take any responsibility for the financial soundness of the Funds or for the correctness of any statements made or opinions expressed in this regard. Authorisation by the Securities and Futures Commission does not imply official approval or

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recommendation. The Manager accepts responsibility for the accuracy, as at the date of this Explanatory Memorandum, of the information contained in it. The Trustee of the Funds is situated in the Cayman Islands and as such the Funds have been categorised as a "Regulated Mutual Fund" under the Mutual Funds' Law of the Cayman Islands. Bank of Bermuda (Cayman) Limited has agreed to provide the principal office of the Funds for the purposes of the Mutual Funds Law.

Investors should note that the price of Units may go down as well as up.

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POLICY AND OBJECTIVES OF THE FUNDS

Each Fund has a separate and distinct investment objective and policy. The investment objective and policy of the respective Funds are set out below:-


The Fund has been established to manage a portfolio of publicly quoted equity or equity-linked securities of companies within the Pacific region whose business relates substantially or in part to the People's Republic of China (the "PRC"). It is envisaged that the majority of such investments will be made in Hong Kong companies or companies listed on The Stock Exchange of Hong Kong Limited but investment in the PRC itself as well as Taiwan, Singapore, Japan and other countries will be considered if deemed appropriate by the Manager. The Fund aims to achieve capital growth.

Taifook SRI Asia Fund

The objective of the Fund is to achieve long term capital growth by investing in the Asia excluding Japan region using a diversified portfolio. Geographical orientation is at the Manager’s discretion and the Fund will not necessarily invest only in shares and will from time to time invest in listed equity-linked instruments as well as fixed income products. The Fund will be applying Socially Responsible Investing principles. In doing so, the Fund will not only screen out companies which are undesirable according to social and sustainability standards but place emphasis on companies which support a social or sustainability agenda. The Manager believes that those companies who dismiss their social and environmental responsibilities may jeopardise their future operations and therefore reduce their investment potential. To determine which companies are committed to their social and environmental responsibilities both now and in the future, the Manager shall assess each company using the investment decision making criteria listed below. The Manager believes this type of assessment will help to retain the Fund’s original intention of balancing growth and stability. In general, the increased presence of the following factors in the country in which a company is situated is considered positive:-

Democracy Protection of Human Rights

the increased presence of the following factors in the country in which a company is situated is considered negative:-

Terrorism

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Illegal Narcotics the presence of the following factors in a company is considered positive:-

Good corporate governance Public Accountability Community Development Equal Opportunity & other progressive employee policies Environment protection & energy/material saving policies, processes or products Accreditation by agencies monitoring environmental or social policies Supplier motivation to practise SRI policies

the presence of the following factors in a company is considered negative:- Revenue from the sale of products or services related to the Military, Tobacco, Gambling or Alcohol industries Building or operating of nuclear facilities Deforestation Animal Testing

Taifook Emerging Economies Fund The Fund has been established to manage a portfolio of equity or equity-linked securities, selected from stock markets of newly-industrialising and developing countries. The geographical focus of the Fund is on the Asia Pacific region but opportunities in countries outside this region will be considered if the Manager thinks it is appropriate.

Taifook China Fund

The policy of the Fund is to achieve maximum capital growth for Unitholders through management of a portfolio of investments linked to the economy of the PRC. The Fund will be denominated in US dollars. The Manager invests the assets primarily in quoted equity securities of the PRC companies. These securities will normally be listed on the stock exchanges of Shanghai, Shenzhen or Hong Kong. At present, the Fund will only be able to hold "B shares" which are Renminbi denominated special shares in the PRC companies listed on an authorised exchange for investment only by non-PRC legal persons and individuals and traded in foreign currency (currently US dollars and HK dollars). Common shares denominated in Renminbi in PRC companies which are so listed are for investment only by the PRC legal persons and individuals ("A" shares). Apart from the differences in trading currency and the holders, the "A" and "B" shares carry the same rights and obligations. The Manager may invest the Fund’s assets in quoted equity securities of companies in Greater China which have the majority of their assets in the PRC or derive the majority of their earnings from the PRC. The Fund aims to achieve capital growth.

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The Manager may in the future consider seeking a listing for the Fund on The Stock Exchange of Hong Kong Limited and/or on one of the stock exchanges of the PRC, if and when the relevant PRC regulations permit such a listing, but no guarantee can be given by the Manager that any such listing will be sought or if sought, be granted.

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RISK FACTORS

The Funds are not guaranteed and accordingly are subject to market

fluctuations and to the risks inherent in all investments. The price of Units of any

Fund and the income from them may go down as well as up.

The Funds may be subject to the following risks: Equity market risks: Investors should be aware that although equities offer higher returns over the long term, investing in equities inherently leads to greater volatility than investing in fixed income instruments. For Funds investing in equity securities, prices of such securities (which are affected by many factors) will have a direct impact on the value of the Units. Although the Manager aims to reduce risks of loss, investors may still suffer a loss of their investments. Equity markets are volatile and returns may vary from year to year. Liquidity risks: Certain types of assets or securities may be less liquid. Further, when market conditions are unusual or a market is particularly thin, a Fund may encounter difficulties in selling its underlying assets.

Currency risks: Changes in currency exchange rates may affect the performance of the Funds to the extent that the Funds’ investments are denominated in currencies other than the Funds’ respective base currencies. Credit risks: The value of a Fund may fall if any of the financial institutions or companies with which cash is invested or deposited or which are a counterparty to transactions suffers insolvency or other difficulties. This risk is reduced to the extent that the exposure to any single institution will be subject to diversification requirements under the Securities and Futures Commission’s Code on Unit Trusts and Mutual Funds. Risks associated with fixed income instruments: Funds may invest in fixed income instruments (such as bonds). The value of such investments may rise or fall sharply as interest rates fluctuate. As a general rule, the value of fixed-rate instruments will increase when interest rates fall, and vice versa. Further, investments in fixed income instruments will subject the relevant Funds to the credit risks of the issue or issuer. Hedging risks: While the Manager may enter into hedging transactions to seek to reduce risk, there is no guarantee that hedging will be successful in all circumstances. In so far as permitted under the Securities and Futures Commission’s Code on Unit Trusts and Mutual Funds, hedging may involve the use of more risky and complex instruments. Emerging market risks:In accordance with the Funds' investment policies, the assets of the Funds will to a certain extent invest in new and emerging markets. Investors should therefore be aware of a number of special risk factors attendant in investing in the Funds particularly in respect of investments in the emerging markets:-

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(1) Volatility

Many of the emerging markets are relatively small, have low trading volumes, suffer periods of illiquidity and significant price volatility.

(2) Investment and repatriation restrictions

A number of the emerging markets restrict, to varying degrees, foreign investment in securities. Therefore, some attractive equity securities may not be available to the Funds because foreign shareholders hold the maximum amount permissible under current law. Repatriation of investment income, capital and the proceeds of sales by foreign investors may require governmental registration and/or approval in some of these markets and may be subject to currency exchange control restrictions.

(3) Settlement risk Settlement systems in some of the emerging markets may be less well organised than in developed markets. Thus there may be a risk that settlement may be delayed and that cash or securities of the Funds may be in jeopardy because of failure or of defects in the systems.

(4) Legal, political and social factors Some emerging markets may be undergoing significant legal, political and economic development and lack the social, political and economic stability of more developed countries. Such instability may result from authoritarian governments, social unrest, ethnic, religious and other conflicts and hostile relations with neighbouring countries. Unanticipated legal, political or social development may adversely affect the value of the Funds' investment in these countries.

(5) Different financial treatment Accounting, auditing and financial reporting standards in some of the emerging markets are different from the developed countries standards. As a result, certain material disclosures may not be made, and information may not be available, to the Funds and other investors than would be in the case if the Funds' investments were restricted to securities in developed markets.

Specific risk factors applicable to Taifook China Fund

Single market risk: The investments of the Fund is concentrated in a single geographical area, and is therefore subject to higher concentration risk than funds following a more diversified investment policy.

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Risks associated with investments in the PRC: The PRC is an emerging market for foreign investment. An investment in the Fund is therefore subject to more risks than investments in developed markets. The Manager will seek to minimise these risks but investors should be aware of the following: (1) Political and economic risk

The PRC has a communist government with a centrally planned economy. In 1978 the PRC opened the economy to market-related reform. This process has recently been extended to financial markets. The ongoing debate in the PRC concerning the pace and extent of the present reforms mean that these policies may be changed or reversed resulting in more restrictions on foreign investment and a change of policy towards the issuance of B shares.

(2) Foreign exchange risk

Some of the securities of PRC companies are denominated in Renminbi whereas the Fund is denominated in US dollars. The settlement system for "B" shares allows for purchases and sales of securities and payment of dividends in US or Hong Kong dollars. Renminbi is not a freely convertible currency. The value of the units may change significantly as a result of movements in the rates of exchange between Renminbi and the US dollar/HK dollar creating foreign exchange losses of gains.

(3) Market risk

The Fund will invest primarily in the stock markets of the PRC and therefore represents an investment in one emerging market which has only a small number of listed stocks available to the Fund. This lack of B shares may lead to trading volatility with dramatic swings in prices. It may also make it difficult to invest the Fund's assets. The choice of investments is therefore limited and once the Fund is invested liquidity may be affected. The settlement system of the Shanghai and Shenzhen exchanges are operational but still in the stage of development so that their dependability is unproven. In addition, there is a low level of regulation and enforcement activity in these new securities market.

(4) Corporate risk

The framework in PRC law for companies limited by shares is still at the drafting stage, and therefore the rights of shareholders including foreign investors and the conduct of corporate entities including those with listed shares are not yet clearly defined. As the laws and the stock exchanges are quite newly established, the effectiveness of any protection for investors is uncertain. The accounting standards in the PRC differ from the International Accounting Standards; notable differences include methods of accounting for consolidation, depreciation and provision for bad debts and auditing standards.

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Accounts prepared in accordance with the PRC accounting standards may therefore present different results than if prepared to international standards.

MANAGEMENT

The Manager of the Funds is Taifook Investment Managers Limited (“TFIM”) which is formerly known as Kingsway Fund Management Limited. TFIM is registered with the Securities and Futures Commission in Hong Kong as a licensed corporation under the Securities and Futures Ordinance (Cap. 571 of The Laws of Hong Kong) (the “SFO”) to conduct Type 1 (dealing in securities), Type 4 (advising on securities) and Type 9 (asset management) of the regulated activities.

TFIM has a long history in fund management activities with its predecessor began offering a wide range of investment services, including unit trusts and discretionary portfolio management services for corporate and private clients, in the early 1970s. The primary investment focus of TFIM is in the Asia Pacific region while investments are also made in other regions, including the U.S. and Europe.

TFIM is a wholly owned subsidiary of Taifook Securities Group Limited (“Taifook Group”), which is listed on the Stock Exchange of Hong Kong (Stock Code: 665). With more than 30 years of history and supported by its substantial shareholder, Cheng Yu Tung family – the principal shareholder of Chow Tai Fook Enterprises Limited and New World Development Company Limited, Taifook Group has built its extensive network in Hong Kong, Macau and major cities in China, providing a wide spectrum of integrated financial services covering retail brokerage and corporate finance services including sponsorship of initial public offerings, underwriting and placing. It also provides nominee and custodian services. The Manager is entitled under the Trust Deeds to delegate all or part of its powers, duties and discretion under the Trust Deeds and has delegated to HSBC Institutional Trust Services (Asia) Limited the functions of valuing the Funds' assets and calculating the subscription and redemption prices. The Manager may appoint investment advisers for the Funds, subject to the prior approval of the Securities and Futures Commission and provided the fees for such investment advisers are borne by the Manager.

TRUSTEE

The Trustee of the Funds is Bank of Bermuda (Cayman) Limited, which was incorporated in the Cayman Islands on 21 June 1988 and is a licensed trust company under the Banks and Trust Companies Law (Revised) and a licensed mutual fund administrator pursuant to the Mutual Funds Law (Revised). Under the Trust Deeds, the Trustee is responsible for the safekeeping of the assets of the Funds. The Trustee may, however, appoint any person or persons to be the custodian of such securities. The investments of the Funds will normally be held for the Trustee by, or to the order of, HSBC Institutional Trust Services (Asia) Limited.

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The Trustee has also appointed HSBC Institutional Trust Services (Asia) Limited to act as its agent in Hong Kong in relation to its duties as the Registrar of the Funds. The register of Unitholders will, however, be kept by the Trustee in the Cayman Islands. HSBC Institutional Trust Services (Asia) Limited was incorporated in Hong Kong in 1974 and is registered as a trust company under the Trustee Ordinance in Hong Kong. Both the Trustee and the Trustee’s and Registrar’s Agent are indirect wholly owned subsidiaries of HSBC Holdings plc, a public company incorporated in England and Wales. The HSBC Group is one of the largest banking and financial services organisations in the world with well-established businesses in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa.

Neither the Trustee nor the Trustee’s and Registrar’s Agent will participate in transactions or activities or make any payments denominated in US dollars, which, if carried out by a US person, would be subject to sanctions of the Office of Foreign Assets Control.

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APPLICATION FOR UNITS

Units may be acquired on any Valuation Date at the unit value determined on that day (see “Valuation and Price Calculation” below). The Valuation Dates are every business day in Hong Kong except Saturday (“Hong Kong Business Days”). Application should be made by returning the duly completed and signed application form to the Manager. Application forms can be obtained from the Manager. Applications may be sent by fax. The Manager shall proceed with the application once the duly completed and signed application form or the fax thereof is received. Confirmation will also be issued once the application is successfully completed. To avoid any doubt, please note that save and except the initial subscription where investors are required to return the original completed and signed application form together with other required documents as set out in the application form to the Manager, no original application forms need to be produced by the investors for all subsequent subscription unless specifically requested by the Manager. Investors should be reminded that if they choose to send application forms by fax, they bear their own risk of the forms not being received by the Manager and the risk of sending duplication of orders to the Manager. Investors should therefore, for their own benefit, confirm with the Manager the receipt of the form. Notwithstanding the above, the Manager reserves the right not to effect application pending receipt of the original completed and signed application form and if such rights are exercised, the Manager shall notify the relevant unitholders of such decision forthwith. To take effect on a Valuation Date an application must be received by 5:00p.m. Hong Kong time on that Valuation Date. Applications received on a day which is not a Hong Kong Business Day or after 5:00p.m. on any day will be treated as having been received on the next Valuation Date. Attention of investors is drawn to the "Anti – Money Laundering Regulations" set out on page 30. The subscription monies should be forwarded in full as outlined below at the same time such application form is sent to the Manager. Each applicant whose application is accepted will be sent a contract note by HSBC Institutional Trust Services (Asia) Limited confirming details of the purchases of Units. The minimum initial investment amount for each Fund is HK$5,000, or the equivalent amount in US dollars in the case of Taifook China Fund (which amount shall be the “Minimum Contribution” under the Trust Deed of this Fund), with subsequent minimum investments of no less than HK$5,000, or the equivalent amount in US dollars in the case of Taifook China Fund (which amount shall be the “Minimum Contribution” under the Trust Deed of this Fund), in both cases inclusive of the initial charge. Payment of subscription monies should normally be made in HK dollars for all the Funds with the exception of the Taifook China Fund, for which payment of subscription monies should be made in US dollars. If an applicant pays in any other currency acceptable to the Manager then it will be converted by the Trustee at the cost and expense of the applicant. Payment should be made in any of the following ways:-

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(a) by telegraphic transfer in US dollars (net of any bank charges) to:-

HSBC Bank USA (SWIFT Address: MRMDUS33) 452 Fifth Avenue New York U.S.A. A/C Name : HSBC Institutional Trust Services (Asia) Limited – IFS

Subscription Account

A/C No. : 000-14116-0 For credit to the respective Fund: Taifook Middle Kingdom Fund Taifook Emerging Economies Fund Sub account No. : 541094 Sub account No. : 541102 Taifook SRI Asia Fund Taifook China Fund Sub account No. : 541110 Sub account No. : 541060

quoting as reference the full name of the applicant∗; or (b) by telegraphic transfer in Hong Kong dollars (net of any bank charges) to:-

The Hongkong and Shanghai Banking Corporation Limited (SWIFT Address: HSBCHKHHHKH) 1 Queen’s Road Central Hong Kong A/C Name: HSBC Institutional Trust Services (Asia) Limited – IFS

Subscription Account A/C No: 502-547839-001

For credit to the respective Fund: Taifook Middle Kingdom Fund Taifook Emerging Economies Fund Sub account No. : 541094 Sub account No. : 541102 Taifook SRI Asia Fund Taifook China Fund Sub account No. : 541110 Sub account No. : 541060

In each case the remitter should instruct the remitting bank to send a SWIFT advice (format MT103) to HSBC Institutional Trust Services (Asia) Limited (SWIFT Address: BTFEHKHH) advising details of remittance, including the

∗ Applicants should ensure that the remitting bank quotes the name of the ordering customer (i.e. remitting party) on the telegraphic transfer remittance advice (SWIFT format MT103) when subscription monies are paid by telegraphic transfer to enable the Manager and the Trustee and Registrar to complete anti-money laundering verifications.

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full name of the applicant and the Fund(s) to which the application relates, for ease of identification.

(c) by cheque or bank draft sent to the Manager. Each cheque or bank draft should

be made payable to “HSBC Institutional Trust Services (Asia) Limited” and bear the name of the applicant on its reverse along with the name of the respective Fund.

If payment is made by cheque or banker's draft applicants should be aware the Manager may not process an application to subscribe for Units until the Manager has received cleared funds in respect of such payment. Applicants should further note that it may take several weeks for the Manager to receive cleared funds where subscription monies are paid by US dollar cheques or US dollar banker's drafts. Application monies will not be accepted in cash and will not be treated as having been received unless paid in any of the ways described above. No money should be paid to any intermediary in Hong Kong who is not licensed or registered to carry on Type 1 regulated activity (dealing in securities) under the SFO. If payment in full in cleared funds and the original application form (if applicable) have not been received within five Hong Kong Business Days of the Valuation Date upon which the application was dealt with, the Manager may enforce payment of the sum due or cancel the Units applied for, at its discretion. Units will only be issued in registered form. No certificates will be issued to Unitholders. Instead, Unitholders will receive confirmation of their holdings from HSBC Institutional Trust Services (Asia) Limited following receipt of the subscription monies in cleared funds and the duly completed and signed application form. If an applicant wishes to make his application through an intermediary, the applicant is advised to satisfy himself that the relevant intermediary has all relevant approvals and/or registrations (an intermediary in Hong Kong should be a licensed corporation or registered institution under the SFO) which it may require in order to receive clients' money and the intermediary is adequately supervised by an appropriate regulatory authority. Under the Trust Deeds the Manager is given the exclusive right to accept or reject applications for Units. The provisions as to the valuation and pricing of Units are set out below in the section headed "Valuation and Price Calculation".

REDEMPTION OF UNITS

Units may be redeemed on any Valuation Date, at the redemption price applicable as at the close of business in Hong Kong on such day. The Manager shall proceed with the redemption once the duly completed and signed redemption notice is received. The form of redemption notice can be obtained from the Manager and such notice can be given by fax. Confirmation will also be issued once the redemption is successfully

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completed. To avoid any doubt, no original redemption notice needs to be produced by the Unitholders unless as specifically requested by the Manager. If a certificate has been previously issued, in case of redemption, Unitholders are required to return the original certificate to the Manager before the redemption proceeds can be released to them and there is a form to be endorsed on the reverse of the certificate. A notice of redemption to be given by joint unitholders must be signed by all joint Unitholders. If the redemption notice (either originals or fax copies) and the certificate (if any) are received before 5:00 p.m. Hong Kong time on a Valuation Date, such redemption shall take effect on that Valuation Date; if not or such redemption notice (either originals or fax copies) and the certificate (if any) are received on a day which is not a Hong Kong Business Day, such redemption shall take effect on next Valuation Date. Unitholders should be reminded that if they choose to send notices of redemption by fax, they bear their own risk of the notices not being received by the Manager and the risk of sending duplication of orders to the Manager. Unitholders should therefore for their own benefit confirm with the Manager the receipt of the notices. Notwithstanding the above, the Manager reserves the right not to effect redemption pending receipt of the original completed and signed notice of redemption and if such rights are exercised, the Manager shall notify the relevant unitholders of such decision forthwith. The minimum amount which can be redeemed at any one time is HK$5,000, or the equivalent amount in US dollars in the case of Taifook China Fund, and a Unitholder may not make a partial redemption if this would result in his holding being less than the minimum holding of HK$5,000, or the equivalent amount in US dollars in the case of Taifook China Fund. There is no redemption charge payable. Redemption proceeds will normally be paid in HK dollars, with the exception of Taifook China Fund which will be paid in US dollars, by cheque in favour of registered holder sent by HSBC Institutional Trust Services (Asia) Limited as soon as possible and at the latest within 21 days from the Valuation Date on which the redemption is effected or, if later, the day of receipt of the duly completed and signed notice (either originals or fax copies) and the original certificate (if any). No certificate will be issued in respect of any balance of the Units held after the partial redemption has been effected. The Trustee may arrange for payment of redemption proceeds by telegraphic transfer or in another currency approved by the Manager if the Unitholder so wishes but the cost of conversion and other charges or expenses will be deducted from the redemption proceeds. No third party payments are allowed. The Manager has power to compulsorily redeem Units in certain circumstances set out in the Trust Deeds if the holding of Units by investors may result in adverse tax or other consequences for the Funds, the Manager or the Trustee or their associates.

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VALUATION AND PRICE CALCULATION

The Trust Deeds provide for the Net Asset Value of the Funds to be determined on each Valuation Date by reference to the value of each asset of the Funds as at the Valuation Point (i.e. time) on that Valuation Date. The current Valuation Point is 6.00 p.m. Hong Kong time. The Manager has power from time to time on one month's notice to the Trustee and the Unitholders to change the Valuation Dates to such other day or days as it thinks fit or to increase or decrease the number of Valuation Dates. In addition the Manager may at any time with the consent of the Trustee change the Valuation Point on such Valuation Dates. The Net Asset Value of the Funds and the price of Units depend inter alia on the value of the Funds' investments. The Net Asset Value of each Fund is established by deducting from the aggregate value of the assets of the Fund its liabilities (including accrued charges and expenses and a provision for contingent liabilities, where appropriate). The Net Asset Value per Unit is determined by dividing the Net Asset Value of the Fund by the total number of Units in issue. Quoted investments are normally valued at the latest available closing price on the stock exchange or market on which the investment is listed, traded or ordinarily dealt in. As for future contracts, they are included in, or deducted from, the assets of the Funds in respect of each outstanding contract entered into on behalf of the Funds an amount equal to the gain or loss respectively which would have accrued to the Funds at the time as at which the relevant valuation is made if the Manager had at the time closed out the position of the Funds under such futures contract by entering into an equal and opposite futures contract at market prices prevailing at that time. The Manager may after consultation with the Auditor or by some other person appropriately qualified and approved by the Trustee adjust the value of any investment or permit some other method of valuation to be used if the Manager considers that such adjustment or other method of valuation is more appropriate. To calculate the subscription price the Net Asset Value is divided by the number of Units in issue to give the Net Asset Value per Unit and the amount of the initial charge is added and the resulting figure is rounded up to two (2) decimal places. To calculate the redemption price the Net Asset Value is divided by the number of Units in issue to give a price per Unit and the resulting figure is rounded down to two (2) decimal places. The Trust Deeds contain provisions for a fiscal charge to be added to the subscription price and deducted from the redemption price, however it is not the Manager's present intention to levy this charge. Unitholders will be given 3 months’ advance notice if the Manager decides to levy a fiscal charge. The Manager may deal in Units and subscriptions and redemptions may accordingly at the Manager's discretion be either for the direct account of the Funds or sales or purchases by the Manager.

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PUBLICATION OF PRICES

The offer and redemption prices of Units are published in the South China Morning Post and the Hong Kong Economic Journal, and such other newspaper(s) as the Manager may determine.

SUSPENSION OF DEALINGS

The Trust Deeds contain powers for the Manager to cease to issue or redeem Units in certain circumstances where for example the markets, on which investments of the Funds are listed, are closed otherwise than for ordinary holidays or where any dealings on such markets are restricted or suspended, or there is a breakdown in the means of communication normally used so that valuation of the investments cannot be promptly and accurately ascertained. Full details of these circumstances are contained in the Trust Deeds. If there is a suspension of dealings the Manager will give notice to any person whose subscription or redemption request is affected by the suspension.

LIMITS ON REDEMPTION

In the event of redemption requests being received in excess of 10% of the Units in issue, the Manager may with the approval of the Trustee and with a view to protecting the interests of Unitholders, limit the number of Units to be redeemed to 10% of the Units in issue. In that event, applications for redemption will be scaled down pro rata so that all Unitholders wishing to redeem their Units on that day redeem the same proportion of such Units. Units not so redeemed will be carried forward for redemption on the next Valuation Date, subject to the same limitation. Alternatively, the Manager may sell a proportion of the Funds' assets corresponding to the proportion of the Units to be redeemed and recalculate the redemption price based on the investments actually sold and in such event, the redemption proceeds will usually be payable only when the proceeds of sale of such investments are received.

CHARGES AND EXPENSES

The Manager

The Manager is entitled under the Trust Deed of each Fund to a management fee at a maximum rate of 2.5 per cent per annum of the Net Asset Value of the Fund, calculated and accrued on each Valuation Date and payable monthly in arrears. The Manager currently receives a management fee at the rate of 1.5 per cent per annum for Taifook China Fund and 1.2 per cent per annum for Taifook SRI Asia Fund. The management fee for the other Funds are currently set at 1.75 per cent per annum. The Manager may only increase the level of its fee up to 2.5 per cent per annum by giving to the Trustee and the Unitholders not less than three months' notice in writing or at such earlier date as may be approved by Extraordinary Resolution.

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The Manager is also entitled to receive an initial charge on the issue of Units of up to 5 per cent of the aggregate of the Net Asset Value per Unit, fiscal charge (if any) and the initial charge. The Manager may rebate to agents a commission on the sale of Units which is payable out of the initial charge. The Manager and its associates may enter into portfolio transactions for or with the Funds either as agent, in which case they may receive and retain customary brokerage commissions, or with the approval of the Trustee as principal in accordance with normal market practice. The Funds will generally pay brokerage at customary institutional full service brokerage rates. The Manager and its associates will not receive cash or other rebates from brokers or dealers in respect of transactions from the Funds but may enter into soft commission arrangements for the provision to the Manager or its associates of goods and services which are of demonstrable benefit to Unitholders. Execution of transactions for the Funds will be consistent with best execution standards.

The Trustee

The Trustee is entitled to receive a maximum rate of 0.5 per cent per annum of the Net Asset Value of each Fund as trustee fee, payable quarterly in arrears. The Trustee currently receives a trustee fee of 0.3 per cent per annum of the Net Asset Value of each Fund and may only increase the level of fees to the maximum level with the agreement of the Manager and by giving to Unitholders not less than three months' notice in writing. The Trustee is entitled under the Trust Deeds to receive a minimum trustee fee of HK$250,000 per annum, however it is currently only entitled to receive a minimum fee of HK$125,000 per annum in the Funds except Taifook China Fund. In the case of Taifook China Fund, the Trustee is entitled to receive a minimum fee of US$30,000 per annum and it is currently entitled to receive US$30,000 per annum. Such minimum fee can be increased up to the stated maximum with the approval of the Manager and upon three months' notice to Unitholders. The Funds are liable to pay a number of expenses in addition to the fees payable to the Manager and the Trustee. These expenses include the cost of investing and realising the assets of the Funds, of safe-keeping the investments which includes the fee of any custodian or sub-custodian (including transaction fees which may be payable to associates of the Trustee), fees payable to the Cayman Islands government, any tax or similar duties payable by the Funds, the cost of publishing, printing and circulating the annual report and notices of Unitholders' meetings, the costs of publishing offer and redemption prices and other communications to Unitholders. The Funds also bear legal expenses incurred by the Manager or the Trustee in enabling the Funds to conform to new legislation or in connection with any supplemental deed giving effect to an authorised alteration, modification or variation of the Trust Deeds. The costs and expenses of auditing the Funds, their legal costs, the costs of obtaining or maintaining the approval of any regulatory authority for the

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Funds, the Manager's and the Trustee's expenses properly incurred, and any other costs incurred by the Manager or the Trustee wholly and exclusively for the benefit of the Funds, are also borne by the Funds. Under the Trust Deeds, the Manager may also receive the benefit of rounding adjustments made in the calculation of subscription and redemption prices.

TAXATION

The following comments are based on advice received by the Manager regarding current law and practice and are intended to assist investors. Investors should appreciate that as a result of changing law or practice, or unfulfilled expectations as to how the Funds or investors will be regarded by revenue authorities in different jurisdictions, the taxation consequences for investors may be otherwise than as stated below.

Investors should consult their professional advisers on the possible tax

consequences on their subscribing for, purchasing, holding, selling or redeeming

Units under the laws of their countries of citizenship, residence, ordinary

residence or domicile.

General

Under the current legislation and practice in Hong Kong there is no tax on capital gains made in Hong Kong or elsewhere. It is not the Manager's intention that the Funds should realise any revenue profits from dealing in securities or otherwise and any revenue profits relating to dealings in securities, futures contracts or foreign exchange contracts will be exempted from Hong Kong profits tax. Income received by the Funds is not liable to tax in Hong Kong. Dividends, interest and other income received by the Funds from outside Hong Kong may be received subject to withholding taxes in the countries in which the payment is made and these taxes would not normally be recoverable by the Funds. Hong Kong is not a party to any relevant double taxation agreement.

Specific taxation consequences for investors of Taifook China Fund Pursuant to regulations issued by the State Council in 1984 dividends and profit distributions received from sources in Shenzhen or Shanghai are subject to a 10% PRC withholding tax. Accordingly if the B shares listed on the Shenzhen Stock Exchange or Shanghai Securities Exchange are issued by companies established in Shenzhen or Shanghai, dividends received by the Fund from its investment in these B shares will be subject to a 10% withholding tax. Further, provided that the B shares in a company constitute not less than 25% of the company's total issued capital, the Shenzhen or Shanghai tax authority, as the case may be, may confer a sino-foreign joint venture status on that company, whereby dividends from that company will be exempt from PRC dividend withholding tax. Any gains on the disposal of B shares are in practice not subject to tax at the date after June 1992 but the relevant tax laws are being reviewed and may be subject to change. Stamp duty, brokerage charges and

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other transfer fees/levies may be levied on a transfer of shares in PRC companies depending on where the transfer is deemed to have been effected.

Unitholders

Unitholders will not be taxed in Hong Kong on gains realised from the sale or redemption of Units unless this forms part of their trade, profession or business of dealing in securities, when such gains may be liable to profits tax. Units may be regarded as Hong Kong assets for the purposes of Hong Kong estate duty and as Hong Kong stock for the purpose of stamp duty on transfer and thus may attract stamp duty on the transfer of Units.

BORROWING

The Trust Deeds of the Funds permit borrowing to be made for the account of the Funds but only up to the value of 25% of the latest Net Asset Value of the Funds at the time the borrowing is made. The Funds' assets may be charged or pledged as security for the borrowing. The Manager may from time to time borrow for the purposes of providing monies to permit any payment required to be made out of the Funds under the Funds' Trust Deeds or required to be made from the Funds in connection with the investment of the Funds.

INVESTMENT RESTRICTIONS

The Trust Deeds set restrictions on the acquisition of investments by the Manager for each Fund and these are that the Manager may not, inter alia, invest:- 1. more than 10% of the Funds' Net Asset Value in the securities of any one issuer; 2. in more than 10% of the total nominal amount of all issued securities of that

class of a security of any one class in any company or body; 3. more than 15% of the Funds' Net Asset Value in unquoted investments; 4. more than 15% of the Funds' Net Asset Value in options and/or warrants (other

than options and warrants utilised for hedging purposes) for which purpose the value of the options and warrants is the market value thereof;

5. more than 10% of the Funds' Net Asset Value in gold, silver, platinum, or other

bullion; 6. more than 10% of the Funds' Net Asset Value in mutual funds or unit trusts;

however, the Manager may not invest in mutual funds or unit trusts, which are managed by the Manager or its associates if the overall total initial charges, management fees or any other costs and charges borne by the relevant Fund and payable to the Manager or any of its associates will be increased as a result of

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such investments, subject to the assessment of such costs and charges in consultation with the Funds’ auditors;

7. more than 50% of aggregate value of all underlying securities in any particular

market in index futures contracts in that market for hedging purposes; 8. more than 20% of the Funds' Net Asset Value in commodities (including bullion)

and futures contracts; and 9. by writing call options in respect of securities comprised in the funds if the

exercise price or the aggregate of exercise prices would be more than 25% of the Funds' Net Asset Value.

Note: 5 and 7 above do not apply to Taifook China Fund.

The Manager does not currently expect to use the investment techniques described in 8 and 9 above except for hedging purposes. Options, warrants and financial futures contracts (save as described in 7 above) may be entered into for hedging purposes without limit. If these limits are exceeded the Manager may not add further to such investments and must effect such changes in the investments of the Funds as may be necessary to remedy the situation as soon as reasonably practicable, unless it decides that it is not in the best interests of the Unitholders to do so. The Manager may invest the Funds in Unrestricted Investments without limit and the above restrictions will not apply thereto. Unrestricted Investments are securities issued or guaranteed by governments and international organisations. However, the Manager may not invest more than 30% of each Fund's Net Asset Value in any one issue and may only invest all of the Funds' assets in Unrestricted Investments if it invests in at least six different issues. The Manager may invest in another unit trust or mutual fund on behalf of the Funds but only subject to the restrictions from time to time imposed by the Securities and Futures Commission in Hong Kong. Short selling of investments or currencies is not permitted. Uncovered options may not be written. The Funds are prohibited from holding real estate, or any option right or interest in respect thereof and may not acquire any investment which would involve it in unlimited liability. No investment can be acquired in any class of securities of a company in which any director or officer of the Manager individually holds beneficially more than 0.5% or collectively they hold more than 5% of that class.

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The Funds shall not lend, assume, guarantee, endorse or otherwise become directly or contingently liable for or in connection with any obligation or indebtedness of any person without the prior written consent of the Trustee. The Funds shall not include any securities of which a call is to be made for any sum unpaid on such securities unless that call could be met in full out of cash or near cash by the relevant Fund’s assets, the amount of which has not already been taken account for the purposes of investment restriction 9 above.

INCOME

The Trust Deeds empower the Manager to distribute the income of the Funds but it is the Manager's intention to accumulate it and make no distribution. If distributions were to be made, then on the reinvestment of a distribution in Units, the initial charge would not be payable.

REPORTS AND ACCOUNTS

The financial year end of each Fund is 30th June. The Annual Reports and Accounts will be sent to Unitholders as soon as possible (and in any event within 4 months) after the end of the relevant financial year. The Manager will also send out unaudited semi-annual reports to Unitholders shortly (and in any event within 2 months) after 31st December in each year.

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TRUST DEEDS


The Fund was established under Hong Kong law by a Trust Deed dated 18th April 1989 and made between SHK Unit Trust Managers Limited as Manager, Standard Chartered International Trustee Limited (as it was then known) as Trustee and Standard Chartered Trust Company Limited as Alternate Trustee. This Trust Deed has been amended by supplemental trust deeds dated 16th October 1989, 1st June 1991, 31st March 1992, 7th June 1993, 15th April 1996, 24th June 1999, 31st October 2001 and 9th July 2007 respectively and a Deed of Retirement and Appointment dated 20th May 1995 and a Deed of Retirement and Appointment of Manager and Modification of the Trust Deed constituting Taifook Middle Kingdom Fund dated 24th October 2003. Since the Fund was established, the Trustee and the Alternate Trustee have changed. Bank of Bermuda (Cayman) Limited and The Bank of Bermuda Limited became Trustee and Alternate Trustee respectively with effect from 30th September 1994. The Fund was formerly known as Polaris Middle Kingdom Fund and Kingsway Middle Kingdom Fund before 1st August 2001 and 1st August 2007 respectively and was changed to its present name with effect from 1st August 2007.

Taifook SRI Asia Fund The Fund was established under Hong Kong law by a Trust Deed dated 18th April 1989 and made between SHK Unit Trust Managers Limited as Manager, Standard Chartered International Trustee Limited (as it was then known) as Trustee and Standard Chartered Trust Company Limited as Alternate Trustee. This Trust Deed has been amended by supplemental trust deeds dated 16th October, 1989, 1st June 1991, 26th November 1991, 2nd December 1991, 31st March 1992, 7th June 1993, 15th April 1996, 24th June 1999, 31st October 2001, 7th October 2002 and 9th July 2007 respectively, a Deed of Retirement and Appointment dated 20th May 1995 and a Deed of Retirement and Appointment of Manager and Modification of the Trust Deed constituting Taifook SRI Asia Fund dated 24th October 2003. Since the Fund was established, the Trustee and the Alternate Trustee have changed. Bank of Bermuda (Cayman) Limited and The Bank of Bermuda Limited became Trustee and Alternate Trustee respectively with effect from 30th September 1994. The Fund was formerly known as Polaris Growth Fund, Kingsway Growth Fund and Kingsway SRI Asia Fund before 1st August 2001, 7th October 2002 and 1st August 2007 respectively and was changed to its present name with effect from 1st August 2007.

Taifook Emerging Economies Fund The Fund was established under Hong Kong law by a Trust Deed dated 18th April 1989 and made between SHK Unit Trust Managers Limited as Manager, Standard Chartered International Trustee Limited (as it was then known) as Trustee and

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Standard Chartered Trust Company Limited as Alternate Trustee. This Trust Deed has been amended by supplemental trust deeds dated 16th October 1989, 1st June 1991, 31st March 1992, 7th June 1993, 15th April 1996, 24th June 1999, 31st October 2001 and 9th July 2007 respectively, a Deed of Retirement and Appointment dated 20th May 1995 and a Deed of Retirement and Appointment of Manager and Modification of the Trust Deed constituting Taifook Emerging Economies Fund dated 24th October 2003. Since the Fund was established, the Trustee and the Alternate Trustee have changed. Bank of Bermuda (Cayman) Limited and The Bank of Bermuda Limited became Trustee and Alternate Trustee respectively with effect from 30th September 1994. The Fund was formerly known as Polaris Emerging Economies Fund and Kingsway Emerging Economies Fund before 1st August 2001 and 1st August 2007 respectively and was changed to its present name with effect from 1st August 2007.

Taifook China Fund The Fund was established under Hong Kong Law by a Trust Deed dated 1st June 1992 and made between SHK Unit Trust Managers Limited as Manager, Standard Chartered Equitor International Trustee Limited (as it was then known) as Trustee and Standard Chartered Trust Company Limited as Alternate Trustee. This Trust Deed has been amended by a Deed of Retirement and Appointment dated 20th May 1995, three supplemental trust deeds dated 15th April 1996, 24th June 1999, 31st October 2001 and 9th July 2007 respectively and a Deed of Retirement and Appointment of Manager and Modification of the Trust Deed constituting Taifook China Fund dated 24th October 2003. Since the Fund was established, the Trustee and the Alternate Trustee have changed. Bank of Bermuda (Cayman) Limited and The Bank of Bermuda Limited became Trustee and Alternate Trustee respectively with effect from 30th September 1994. The Fund was formerly known as Polaris China Fund and Kingsway China Fund before 1st August 2001 and 1st August 2007 respectively and was changed to its present name with effect from 1st August 2007. Copies of the Trust Deeds (as amended) and the Investment Management Agreements may be inspected free of charge during normal working hours at the offices of the Manager and the Trustee and copies obtained therefrom at a reasonable charge not exceeding HK$200, or US$25 in the case of Taifook China Fund, for each copy document supplied. The Trust Deeds contain provisions for the indemnification of the parties and their exclusion from liability in certain circumstances. Unitholders and intending applicants are advised to consult the terms of the Trust Deeds. The Trustee and Manager may agree to modify the Trust Deeds by supplemental deed provided that the Trustee certifies that such modification (a) is expedient for the economical, simple, advantageous or profitable working or management of the Funds and is not materially detrimental to the interests of Unitholders and does not operate to release to any material extent the Trustee, the Manager, or any other person from any liability or responsibility to Unitholders, and does not increase the costs and

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charges payable out of the Funds or (b) is necessary in order to comply with fiscal or other statutory or official requirements.

UNITHOLDERS' MEETINGS

Meetings of Unitholders may be convened by the Manager or the Trustee and the Manager is required to convene a meeting on the request of the holders of not less than 1/10 of the Units for the time being in issue. Unitholders will be given not less than 14 days' notice of any meeting. Unitholders may appoint proxies to attend and vote on their behalf. Unitholders may by ordinary resolution, that is a simple majority of the votes passed for and against the relevant proposal, elect a chairman of the meeting, adjourn a meeting and approve further Unrestricted Investments. In addition, Unitholders may by Extraordinary Resolution, that is a 75% majority of the votes, of those present or represented at the meeting, passed for the relevant proposal, approve an increase in the management fee, sanction a modification of the Trust Deeds as approved by the Manager and the Trustee, remove the Trustee, terminate the Funds or approve amalgamation with another trust. The quorum required for all meetings is Unitholders present in person or by proxy representing 25% of the Units in issue on the day immediately preceding the date of the meeting. The Manager and its associates may not be counted in the quorum at any meeting nor vote in respect of Units beneficially held by them if the Manager or any of its associates has a material interest in the business to be transacted at the meeting. However, such restrictions in relation to the required quorum and voting by the Manager do not apply at an adjourned meeting where the original meeting was inquorate. Separate notice will be given of the re-convened meeting. Equivalent restrictions apply to voting by the Trustee and its associates and the counting of Units held by the Trustee for quorum purposes. On a show of hands, every individual Unitholder present in person and every corporate Unitholder present by representative has one vote. On a poll, every Unitholder present in person, by proxy or by representative has one vote for every whole Unit held. A poll may be demanded by the chairman or by one or more Unitholders present in person or by proxy, representing 5% of the Units in issue.

DURATION OF THE FUNDS

The Funds will continue indefinitely until terminated as provided in the Trust Deeds. The Trustee may terminate the Funds in certain circumstances which include the passing of any laws rendering it illegal or in the opinion of the Trustee impracticable or inadvisable to continue the Funds. The Manager may terminate the Funds in certain circumstances which include the situation where the aggregate Net Asset Value of the Funds fall below HK$50 million, or US $5 million in the case of Taifook China Fund, for a continuous period of 3 months. Three months' notice of any decision by the

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Manager to terminate the Funds will be given to Unitholders. The Trustee may terminate the Funds if an Extraordinary Resolution of the Unitholders is passed at any time sanctioning the termination. Upon termination of the Funds, all investments forming part of the Funds will be sold, such sale being carried out and completed in such manner and within such period as the Trustee deems fit. The Trustee will distribute to the Unitholders pro rata to the Units held by them all the net cash proceeds derived-from the realisation of the Funds' assets after making provisions for all costs, charges, expenses and claims arising out of the liquidation of the Funds. Every such distribution will be made in respect of Units for which a certificate is in issue against production of the Unit certificate upon which will be endorsed a memorandum of every interim distribution made and on a final distribution the certificate will be surrendered to the Trustee. Where a certificate has not been issued, a certificate of payment signed by the Trustee shall be given to Unitholders. The Trustee shall not be bound except in the final distribution to pay out less than HK$0.50 per Unit, or US$0.50 per Unit in the case of Taifook China Fund. Any distribution which remains unclaimed for a period of 6 years after the date on which it is first made available will be paid to the Manager.

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ANTI MONEY LAUNDERING REGULATIONS

As part of the Manager and the Trustee and Registrar's responsibility for the prevention of money laundering, the Manager and the Trustee and Registrar, each of their respective affiliates, subsidiaries or associates may require a detailed verification of the applicant's identity and the source of the payment of application monies. Each of the Manager and the Trustee and Registrar reserve the right to request such information as is necessary to verify the identity of an applicant and the source of payment. In the event of delay or failure by the applicant to produce any information required for verification purposes, either the Manager or the Trustee and Registrar may refuse to accept the application and the subscription monies relating thereto and may delay the payment of any redemption proceeds. None of the Manager, the Trustee and Registrar or their delegates shall be liable to the applicant for any loss suffered by the applicant as a result of the rejection or delay of any subscription or payment of redemption proceeds. If any person in the Cayman Islands involved in the business of the Funds (including the Trustee and Registrar) has a suspicion or believes that a payment to the Funds (by way of subscription or otherwise) is derived from or represent the proceeds of criminal conduct, that person is required to report such suspicion to the Cayman Islands Reporting Authority pursuant to The Proceeds of Criminal Conduct Law, 1996 of the Cayman Islands.

NINTH ADDENDUM Explanatory Memorandum dated 29 July 2009… unit trust prospectu… · 2 November...

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Transcript of NINTH ADDENDUM Explanatory Memorandum dated 29 July 2009… unit trust prospectu… · 2 November...