Investors should consult their professional advisers on the consequences to them of acquiring, holding, redeeming, transferring or selling units under the relevant laws of the jurisdictions to which they are subject, including the tax consequences and any exchange control requirements. These consequences, including the availability of, and the value of, tax relief to investors will vary with the law and practice of the investors’ country of citizenship, residence, domicile or incorporation and their personal circumstances. The following statements regarding taxation are based on advice received by the Fund regarding the law and practice in force in Hong Kong at the date of this document. Investors should be aware that levels and bases of taxation are subject to change and that the value of any relief from taxation depends upon the individual circumstances of the taxpayer. The Fund is not expected to be subject to Hong Kong tax in respect of any of its authorised activities.
No tax will be payable by unitholders in Hong Kong in respect of dividends or other income distributions of the Fund or in respect of any capital gains arising on a sale, redemption or other disposal of units, except that Hong Kong profits tax may arise where such transactions form part of a trade, profession or business carried on in Hong Kong.
Under current Cayman Islands law no tax will be charged in the Cayman Islands on profits or gains of the Fund and distributions of the Fund will be payable to unitholders resident in or outside the Cayman Islands without deduction of tax. No stamp duty is levied in the Cayman Islands on the transfer or redemption of units.
Mutual Funds Law
The Fund falls within the definition of a "regulated mutual fund" in terms of the Mutual Funds Law (2013 Revision) of the Cayman Islands (the “Mutual Funds Law”).
The Trustee (being a licensed mutual fund administrator in the Cayman Islands) has agreed to provide the principal office of the Fund in the Cayman Islands and, accordingly, the Fund is regulated under Section 4(1)(b) of the Mutual Funds Law.
As a regulated mutual fund, the Fund is subject to the supervision of the Cayman Islands Monetary Authority (the “Authority”) and the Authority may at any time instruct the Fund to have its accounts audited and to submit them to the Authority within such time as the Authority specifies. In addition, the Authority may ask the Trustee to give the Authority such information or such explanation in respect of the Fund as the Authority may reasonably require to enable it to carry out its duty under the Mutual Funds Law.
The Trustee must give the Authority access to or provide at any reasonable time all records relating to the Fund and the Authority may copy or take an extract of a record it is given access to. Failure to comply with these requests by the Authority may result in substantial fines on the part of the Trustee and may result in the Authority applying to the court to have the Fund wound up.
The Authority may take certain actions if it is satisfied that a regulated mutual fund is or is likely to become unable to meet its obligations as they fall due or is carrying on or is attempting to carry on business or is winding up its business voluntarily in a manner that is prejudicial to its investors or creditors. The powers of the Authority include, inter alia, the power to require the substitution of the Trustee, to appoint a person to advise the Fund on the proper conduct of its affairs or to appoint a person to assume control of the affairs of the Fund. There are other remedies available to the
Authority, including the ability to apply to court for approval of other actions.
Foreign Account Tax Compliance Act (FATCA) and similar measures
Sections 1471 through 1474 of the U.S. Internal Revenue Code ("FATCA") impose a 30% withholding tax on certain payments to a foreign financial institution (“FFI”) if that FFI is not compliant with FATCA.
Beginning 1 July 2014, this withholding tax applies to payments that constitute interest, dividends and other types of income from U.S. sources (such as dividends paid by a U.S. corporation) and beginning on 1 January 2017, this withholding tax is extended to the proceeds received from the sale or disposition of assets that give rise to U.S. source dividend or interest payments.
The Cayman Islands has signed a Model 1(b) (non-reciprocal) inter-governmental agreement with the United States (the “US IGA”) to give effect to the US Foreign Account Tax Compliance Act. Although the US IGA has been signed and came into force on 14 April 2014. Cayman Islands legislation and regulations are still necessary to provide guidance on the application of the US IGA and to clarify, inter alia, the powers and responsibilities of the Cayman Islands Tax Information Authority (the "Cayman TIA"). Cayman Islands financial institutions ("FIs") that comply with the US IGA and the enabling legislation will be treated as satisfying the due diligence and reporting requirements of FATCA and accordingly will be "deemed compliant" with the requirements of FATCA, will not be subject to withholding tax, and will not be required to close recalcitrant accounts.
The US IGA categorises FIs as either "Reporting FIs" or "Non-Reporting FIs". By default, all Cayman FIs will be Reporting FIs, unless they qualify as Non-Reporting FIs. The categories of Non-Reporting FIs are specified in Annex II to the US IGA. A Reporting FI is (i) not required to enter an "FFI agreement" with the US Internal Revenue Service ("IRS"), (ii) required to register with the IRS to obtain a Global Intermediary Identification Number, (iii) required to conduct due diligence on its investors to identify whether accounts are held directly or indirectly by "Specified US Persons", and (iv) required to report information on such Specified US Persons to the Cayman TIA. The Cayman TIA will exchange the information reported to it with the IRS annually on an automatic basis. While a Non-Reporting FI will not be subject to these requirements, it will need to provide self-certification, on US tax forms, to withholding agents to avoid the imposition of the 30% withholding tax.
Under the terms of the US IGA and the relevant regulations, FATCA withholding tax will not be imposed on payments made to the Fund and the Sub-Funds except to the extent the Fund, the relevant Sub-Fund, its investors or any other account holder fails to comply with its obligations under FATCA or the US IGA, or otherwise fails to comply with any other obligations it may have to the Fund or the relevant Sub-Fund with respect to the Fund's or the relevant Sub-Fund’s obligations under FATCA and/or the US IGA, as applicable. If the Fund or the relevant Sub-Fund is subject to such withholding tax, this will generally be at the rate of 30% of the relevant payment. Under the terms of the US IGA (as currently drafted), the Fund and the Sub-Funds will not be required to withhold tax on payments made by the Fund and the Sub-Funds to an account holder. The Fund and the Sub-Funds intend to comply with the US IGA in good time to ensure that none of its income is subject to FATCA withholding.
In order to comply with its FATCA obligations, the Fund and the Sub-Funds will be required to obtain certain information from its investors so as to ascertain their U.S. tax status. If the investor is a specified U.S. person, U.S. owned non-U.S. entity, non-participating FFI (“NPFFI”) or does not provide the requisite documentation, the Fund and the Sub-Funds may need to report information on these investors to the Cayman Islands Tax Information Authority.
If an investor or an intermediary through which it holds its interest in the Fund and the Sub-Funds fails to provide the Fund and/or the Sub-Funds, its agents or authorised representatives with any correct, complete and accurate information that may be required for the Fund and the Sub-Funds to comply with FATCA, the investor may be subject to withholding on amounts otherwise distributable to the investor, may be compelled to sell its interest in the Fund and the Sub-Funds or, in certain situations, the investor’s interest in the Fund and the Sub-Funds may be sold involuntarily (provided that the Manager shall observe relevant legal requirements and shall act in good faith and on reasonable grounds). The Fund and the Sub-Funds may at its discretion enter into any supplemental agreement without the consent of investors to provide for any measures that the Fund and the Sub-Funds deem appropriate or necessary to comply with FATCA.
Investors should consult their own tax advisors regarding the FATCA requirements with respect to their own situation. In particular, investors who hold their units through intermediaries should confirm the FATCA compliance status of those intermediaries to ensure that they do not suffer FATCA withholding tax on their investment returns.
Although the Fund and the Sub-Funds will attempt to satisfy any obligations imposed on it to avoid the imposition of the FATCA withholding tax, no assurance can be given that the Fund and the Sub- Funds will be able to satisfy these obligations. If the Fund and the Sub-Funds become subject to a withholding tax as a result of the FATCA regime, the value of the units held by unitholders may suffer material losses.
The Cayman Islands has also signed with the UK a separate inter-governmental agreement (the "UK IGA") in broadly similar form to the US IGA. The UK IGA imposes similar requirements to the US IGA, so that the Fund and the Sub-Funds will be required to identify accounts held directly or indirectly by "Specified United Kingdom Persons" and report information on such Specified United Kingdom Persons to the Cayman TIA, which will exchange such information annually with HM Revenue & Customs ("HMRC"), the United Kingdom tax authority. It is possible that further inter-governmental agreements ("future IGAs") similar to the US IGA and the UK IGA may be entered into with other third countries by the Cayman Islands Government to introduce similar regimes for reporting to such third countries fiscal authorities ("foreign fiscal authorities").
By investing (or continuing to invest) in the Fund and the Sub-Funds, investors shall be deemed to acknowledge that:
(i) the Fund or the Sub-Funds (or their agent) may be required to disclose to the Cayman TIA certain confidential information in relation to the investor, including but not limited to the investor's name, address, tax identification number (if any), social security number (if any) and certain information relating to the investor's investment;
(ii) the Cayman TIA may be required to automatically exchange information as outlined above with the IRS, HMRC and other foreign fiscal authorities;
(iii) the Fund or the Sub-Funds (or their agent) may be required to disclose to the IRS, HMRC and other foreign fiscal authorities certain confidential information when registering with such authorities and if such authorities contact the Fund or the Sub- Funds (or their agent directly) with further enquiries;
(iv) the Fund or the Sub-Funds may require the investor to provide additional information and/or documentation which the Fund or the Sub-Funds may be required to disclose to the Cayman TIA;
(v) in the event an investor does not provide the requested information and/or documentation, whether or not that actually leads to compliance failures by the Fund or
the Sub-Funds, or a risk of the Fund or the Sub-Funds or their investors being subject to withholding tax under the relevant legislative or inter-governmental regime, the Fund and the Sub-Funds reserve the right to take any action and/or pursue all remedies at its disposal including, without limitation, compulsory redemption or withdrawal of the investor concerned, to the extent permitted by applicable laws and the Fund’s and the Sub-Funds’ constitutional documents and the Manager shall observe relevant legal requirements and shall act in good faith and on reasonable grounds; and
(vi) no investor affected by any such action or remedy shall have any claim against the Fund or the Sub-Funds (or their agent) for any form of damages or liability as a result of actions taken or remedies pursued by or on behalf of the Fund or the Sub-Funds in order to comply with any of the US IGA, the UK IGA or any future IGAs, or any of the relevant underlying legislation.
Other countries are in the process of adopting tax legislation concerning the reporting of information. The Fund and the Sub-Funds also intend to comply with such other similar tax legislation that may apply to the Fund and the Sub-Funds, although the exact parameters of such requirements are not yet fully known. As a result, the Fund and the Sub-Funds may need to seek information about the tax status of investors under such other country’s laws and each investor for disclosure to the relevant governmental authority.
Prevention of Money Laundering
The Fund, its service providers and other members of the HSBC Group (including but not limited to the Manager, the Trustee and their respective delegates) are required to act in accordance with the laws, regulations and requests of public and regulatory authorities operating in various jurisdictions which relate to, amongst other things, the prevention of money laundering, terrorist financing and the provision of financial and other services to any persons or entities which may be subject to sanctions. The Fund, any of its service providers or any member of the HSBC Group may take any action which in their sole and absolute discretion consider appropriate to take in accordance with all such laws, regulations and requests.
Such action may include but is not limited to: the interception and investigation of any payment messages and other information or communications sent to or by an investor or on behalf of such investor via the systems of the Fund, any service provider of the Fund or any member of the HSBC Group; and making further enquiries as to whether a name which might refer to a sanctioned person or entity actually refers to that person or entity.
The Fund, its service providers and other members of the HSBC Group shall not be liable for loss (whether direct or consequential and including, without limitation, loss of profit or interest) or damage suffered by any party arising out of:
(a) any delay or failure of the Fund, any of its service providers or any member of the HSBC Group in processing any such payment messages or other information or communications, or in performing any of their duties or other obligations in connection with any accounts or the provision of any services to an investor, caused in whole or in part by any steps which the Fund, any of its service providers or any member of the HSBC Group, in their sole and absolute discretion, consider appropriate to take in accordance with all such laws, regulations and requests; or
(b) the exercise of any of the rights of the Fund, its service providers and other members of the HSBC Group under this section.
of the HSBC Group may take may prevent or cause a delay in the processing of certain information. Therefore, the Fund, its service providers and other members of the HSBC Group do not warrant that any information on their systems relating to any payment messages or other information and communications which are the subject of any action taken pursuant to this section is accurate, current or up-to-date at the time it is accessed, whilst such action is being taken.
In order to comply with regulations aimed at the prevention of money laundering in any applicable jurisdictions, the Manager, the Trustee and their respective delegates may require prospective investors to provide evidence to verify their identity and the source of payment of subscription monies. Accordingly, each of the Manager, the Trustee and their respective delegates reserves the right to request such information as it considers necessary to verify the identity of a prospective investor and the source of payment of subscription monies. The Manager, the Trustee and/or their respective delegates may refuse to accept any subscription application if a prospective investor delays in producing or fails to produce any information required by the Manager, the Trustee and/or their respective delegates, for the purpose of verification and, in that event, any funds received will be returned without interest to the account from which the monies were originally debited. Each of the Manager, the Trustee and their respective delegates may also refuse to process any redemption request or delay payment of redemption proceeds if a unitholder requesting for redemption delays in producing or fails to produce any information required by the Manager, the Trustee and/or their respective delegates. Neither the Manager, the Trustee, nor their respective delegates shall be liable to any prospective investor or unitholder (as the case may be) for any loss suffered by the prospective investor or unitholder (as the case may be) as a result of the rejection of any subscription or redemption request or delay of subscription or payment of redemption proceeds.
If any person resident in the Cayman Islands knows or suspects or has reasonable grounds for knowing or suspecting that another person is engaged in criminal conduct or is involved with terrorism or terrorist property and the information for that knowledge or suspicion came to their attention in the course of business in the regulated sector (as such term is defined in the Proceeds of Crime Law, 2008 of the Cayman Islands and the Terrorism Law (2011 Revision) of the Cayman Islands), the person will be required to report such knowledge or suspicion to (i) the Financial Reporting Authority of the Cayman Islands, pursuant to the Proceeds of Crime Law, 2008 if the disclosure relates to criminal conduct or money laundering, or (ii) a police officer of the rank of constable or higher pursuant to the Terrorism Law (2011 Revision) if the disclosure relates to involvement with terrorism or terrorist financing and property. Such a report shall not be treated as a breach of confidence or of any restriction upon the disclosure of information imposed by any enactment or otherwise.