Investment involves risks. Please refer to the Explanatory Memorandum for details including the risk factors.

　　1. Investment risk 

　　The Sub-Fund’s investment portfolio may fall in value due to any of the key risk factors below and therefore your investment in the Sub-Fund may suffer losses. There is no guarantee of the repayment of principal. 　　

　　2. Risks associated with fixed income securities (including money market instruments) 

　　Short-term fixed income securities risk 

　　• The Sub-Fund invests primarily in fixed income securities with short maturities. This means the turnover rates of the Sub-Fund’s investments may be relatively high and the transaction costs incurred as a result of the purchase or sale of such securities may increase which in turn may have a negative impact on the NAV of the Sub-Fund. 

　　Credit risk 

　　• The Sub-Fund is exposed to the credit/default risk of the issuers of the fixed income securities that the Sub- 5 Fund may invest in. 

　　Interest rate risk 

　　• Investment in the Sub-Fund is subject to interest rate risk. In general,the prices of fixed income securities rise when interest rates fall, whilst their prices fall when interest rates rise. 

　　Volatility and liquidity risk 

　　• The fixed income securities in some of the markets in which the Sub-Fund invests may be subject to higher volatility and lower liquidity compared to more developed markets. The prices of securities traded in such markets may be subject to fluctuations. The bid and spreads of the price of such securities may be large and the Sub-Fund may incur significant trading costs. 

　　Credit rating and downgrading risk 

　　• Credit ratings assigned by rating agencies are subject to limitations and do not guarantee the creditworthiness of the security and/or their issuer at all times. 

　　• The credit rating of a fixed income security or its issuer may subsequently be downgraded. In the event of such downgrading, the value of the Sub-Fund may be adversely affected. The Manager may or may not be able to dispose of the fixed income securities that are being downgraded. 

　　Credit rating agency risk

　　• The credit appraisal system in the Mainland China and the rating methodologies employed in the Mainland China may be different from those employed in other markets. Credit ratings given by the Mainland China rating agencies may therefore not be directly comparable with those given by other international rating agencies. Sovereign debt risk 

　　• The Sub-Fund’s investment in securities issued or guaranteed by governments may be exposed to political, social and economic risks. In adverse situations, the sovereign issuers may not be able or willing to repay the principal and/or interest when due or may request the Sub-Fund to participate in restructuring such debts. The Sub-Fund may suffer significant losses when there is a default of sovereign debt issuers. 

　　Valuation risk 

　　• Valuation of the Sub-Fund’s investments may involve uncertainties and judgmental determinations. If such valuation turns out to be incorrect, this may affect the NAV calculation of the Sub-Fund.

　　3. Risks associated with bank deposits 

　　Bank deposits are subject to the credit risks of the relevant financial institutions. The Sub-Fund’s deposit may not be protected by any deposit protection schemes, or the value of the protection under the deposit protection schemes may not cover the full amount deposited by the Sub-Fund. Therefore, if the relevant financial institution defaults, the Sub-Fund may suffer losses as a result. 

　　4. Concentration risk 

　　The Sub-Fund will invest primarily in USD-denominated and settled instruments. The Sub-Fund is therefore likely to be more volatile than a broad-based fund that adopts a more diversified strategy.  

　　5. Emerging markets risks 

　　The Sub-Fund may invest in emerging markets which may involve increased risks and special considerations not typically associated with investment in more developed markets, such as liquidity risks, currency risks/control, political and economic uncertainties, legal and taxation risks, settlement risks, custody risk and the likelihood of a high degree of volatility. 

　　6. Risk associated with urban investment bonds 

　　Urban investment bonds are issued by LGFVs, such bonds are typically not guaranteed by local governments or the central government in Mainland China. In the event that the LGFVs default on payment of principal or interest of the urban investment bonds, the Sub-Fund could suffer substantial loss and the NAV of the Sub-Fund could be adversely affected. 

　　7. RMB class(es) related risk 

　　• RMB is currently not freely convertible and is subject to exchange controls and restrictions. 

　　• Although offshore RMB (CNH) and onshore RMB (CNY) are the same currency, they trade at different rates. The CNH rate may be at a premium or discount to the exchange rate for CNY and there may be significant bid and offer spreads. Any divergence between CNH and CNY may adversely impact the NAV of the Sub-Fund and thus the investors. 

　　• Non-RMB based (e.g. Hong Kong) investors may have to convert HKD or other currencies into RMB when investing in the RMB denominated class(es). Subsequently, investors may also have to convert the RMB redemption proceeds (received when selling the shares) back to HKD or other currencies. During these processes, investors will incur currency conversion costs and/or transaction costs and may suffer losses in the event that RMB depreciates against HKD or such other currencies upon receipt of the RMB redemption proceeds. Under exceptional circumstances, payment of redemptions may be delayed due to the exchange controls and restrictions applicable to RMB. 

　　8. Currency and foreign exchange risk 

　　• Underlying investments of the Sub-Fund may be denominated in currencies other than the base currency of the Sub-Fund. Also, a class of shares may be designated in a currency other than the base currency of the Sub-Fund or the currency of its underlying investment. The NAV of the Sub-Fund may be affected unfavorably by fluctuations in the exchange rates between these currencies and the base currency and by changes in exchange rate controls. 

　　9. Risk associated with instruments with loss-absorption features 

　　• Fixed income instruments with loss-absorption features are subject to greater risks when compared to traditional debt instruments as such instruments are typically subject to the risk of being written down or converted to ordinary shares upon the occurrence of a pre-defined trigger event (e.g. when the issuer is near or at the point of non-viability or when the issuer’s capital ratio falls to a specified level), which are likely to be outside of the issuer’s control. Such trigger events are complex and difficult to predict and may result in a significant or total reduction in the value of such instruments. 

　　• In the event of the activation of a trigger, there may be potential price contagion and volatility to the entire asset class. Debt instruments with loss-absorption features may also be exposed to liquidity, valuation and sector concentration risk. 

　　• The Sub-Fund may invest in contingent convertible debt securities, commonly known as CoCos, which are highly complex and are of high risk. Upon the occurrence of the trigger event, CoCos may be converted into 7 shares of the issuer (potentially at a discounted price), or may be subject to the permanent write-down to zero. Coupon payments on CoCos are discretionary and may be cancelled by the issuer at any point, for any reason, and for any length of time. 

　　• The Sub-Fund may invest in senior non-preferred debts. While these instruments are generally senior to subordinated debts, they may be subject to write-down upon the occurrence of a trigger event and will no longer fall under the creditor ranking hierarchy of the issuer. This may result in total loss of principal invested. 

　　10. Risks associated with distribution out of capital or effectively out of capital 

　　• Payment of distributions out of capital or effectively out of capital amounts to a return or withdrawal of part of an investor’s original investment or from any capital gains attributable to that original investments. Any such distributions may result in an immediate reduction of the NAV per share. 

　　• The distribution amount and NAV of the hedged share class may be adversely affected by differences in the interest rates of the reference currency of the hedged share class and the Sub-Fund’s base currency, resulting in an increase in the amount of distribution that is paid out of capital and hence a greater erosion of capital than other non-hedged share classes.