Investment involves risks. Please refer to the Explanatory Memorandum for details including the risk factors.
1. Investment risk
· The Sub-Fund is an investment fund and is subject to market fluctuations and to the risks inherent in all investments. There is no guarantee of the repayment of principal.
· The Sub-Fund's investments may fall in value and therefore your investment in the Sub-Fund may suffer losses.

2. China market risk / single country investment risk
· China is considered as an emerging market. Investing in China may subject the Sub-Fund to higher economic, political, social, regulatory, legal, foreign exchange and liquidity risks than investing in more developed economies or markets. Investments in China may also be less liquid and more volatile.
· The Sub-Fund invests primarily in securities related to the China market and may be subject to additional concentration risk. The Sub-Fund may be more volatile than a broad-based fund as the Sub-Fund is more susceptible to fluctuations in value resulting from adverse conditions in the China market.
· The China fixed income securities market may be subject to higher volatility compared to more developed markets. The prices of securities traded in such market may be subject to fluctuations.

3. RQFII risk
· In the event of any default of either a PRC broker or the RQFII Custodian in the execution or settlement of any transaction or in the transfer of any funds or securities in the PRC, the Sub-Fund may encounter delays in recovering its assets which may in turn impact the Net Asset Value of the Sub-Fund.
· The Sub-Fund invests in securities through an RQFII which is subject to applicable regulations imposed by the PRC authorities. Although repatriations by the RQFII in respect of the Sub-Fund are currently not subject to any lock-up periods, prior approval or other repatriation restrictions, there is no assurance that PRC rules and regulations will not change or that repatriation restrictions will not be imposed in the future. Any restrictions on repatriation of the invested capital and net profits may impact on the Sub-Fund's ability to meet redemption requests from the unitholders.
· The RQFII rules are novel in nature – their application may depend on the interpretation of the Chinese authorities. Any changes to the relevant rules may have an adverse impact on investors’investment in the Sub-Fund.

4. RMB currency risk
· RMB is currently not freely convertible and is subject to exchange controls by the Chinese government and investors may be adversely affected by movements of the exchange rates between RMB and other currencies.
· There is no guarantee that RMB will not depreciate. If investors convert Hong Kong Dollar or any other currency into RMB so as to invest in the Sub-Fund and subsequently convert the RMB redemption proceeds back into Hong Kong Dollar or any other currency, they may suffer a loss if RMB depreciates against Hong Kong Dollar or such other currency.

5. PRC tax risk
· The Sub-Fund may be subject to the risks associated with changes in the PRC laws and regulations, including PRC tax laws and such changes may have retrospective effect and may adversely affect the Sub-Fund.
· The Manager will make 10% provisions for any PRC taxes payable by the Sub-Fund on dividend from China A-Shares, interest from RMB denominated fixed income securities and the gross capital gains, whether realised or unrealised, derived from China A-Shares and RMB fixed income securities and this will be debited from the Sub-Fund's assets.
· Such provisions may be excessive or inadequate to meet the actual tax liabilities. In case of any shortfall between the provisions and actual tax liabilities, which will be debited from the Sub-Fund's assets, the asset value of the Sub-Fund will therefore be adversely affected.

6. Risk relating to equity and equity-related securities
· The Sub-Fund may invest in China A-Shares and is therefore subject to market risks. The value of such investments may be volatile and may be affected by uncertainties such as international, political and economic developments, changes in government policies, investment sentiment, regional or global economic instabilities, currency and interest rate fluctuations, etc. In falling equity markets there may be increased volatility. Market prices in such circumstances may defy rational analysis or expectation for prolonged periods of time, and can be influenced by movements of large funds as a result of short-term factors, counter-speculative measures or other reasons. If the market value of equity securities in which the Sub-Fund invests goes down, its Net Asset Value may be adversely affected, and investors may suffer substantial losses.

7. Risk relating to small- and mid-capped companies
· The Sub-Fund may invest in the securities of small- and/or mid-capped companies. Investing in these securities may expose the Sub-Fund to risks such as greater market price volatility, less publicly available information, and greater vulnerability to fluctuations in the economic cycle.

8. Risks relating to RMB denominated fixed income securities
Credit risk
· The Sub-Fund invests in RMB denominated fixed income securities and these instruments may fall in value. Investors may suffer losses as a result. Investment in the Sub-Fund is subject to risks that apply to fixed income securities, including the credit risk of the issuers.
· The Sub-Fund is exposed to the credit/insolvency risk of issuers of the RMB denominated fixed income securities it invests in. In the event of a default or credit rating downgrading of the issuers, valuation of the Sub-Fund's portfolio may become more difficult, the Sub-Fund's value will be adversely affected and investors may suffer a substantial loss as a result.
· Such securities are typically unsecured debt obligations and are not supported by collateral. The Sub-Fund is therefore fully exposed to the credit/insolvency risk of its counterparties as an unsecured creditor. The Sub-Fund may also encounter difficulties or delays in enforcing its rights against such issuers as they may be incorporated outside Hong Kong and subject to foreign laws.
Risks of investing in PRC fixed income securities markets and of lower rated or unrated fixed income securities
· The financial market of the PRC is at an early stage of development, and some of the fixed income securities held by the Sub-Fund may be lower rated or may not be rated by any rating agency of an international standard.
· The Sub-Fund may invest up to 60% of its Net Asset Value in fixed income securities which are rated BB+ or below by major local credit rating agencies or unrated. Such securities are generally subject to a higher degree of credit risk and a lower degree of liquidity, which may result in greater fluctuations in value. The value of these securities may also be more difficult to ascertain and thus the Net Asset Value of the Sub-Fund may be more volatile.
Risks relating to credit rating
· The local PRC rating process may lack transparency and the rating criteria and methodology used by Chinese local rating agencies may be significantly different from those adopted by most of the established international credit rating agencies. Therefore, such rating system may not provide an equivalent standard for comparison with securities rated by international credit rating agencies.
· There is little assurance that credit ratings are independent, objective and of adequate quality. In selecting the Sub-Fund's fixed income portfolio, the Manager may refer to credit ratings given by PRC local credit rating agencies for reference but will primarily rely on its own internal analysis to evaluate each fixed income security independently. Investors should also exercise caution before relying on any local credit ratings.
Downgrading risk
· Securities of higher credit rating may be subject to the risk of being downgraded to a credit rating of BB+ or below by major local credit rating agencies, and credit rating of issuers of fixed income securities may also be downgraded; thus adversely affecting the value and performance of the Sub-Fund. The Manager may not be able to dispose of the securities that are being downgraded.
Risk of credit rating not the only selection criterion
· The credit rating of a fixed income security is not the only selection criterion for investment by the Sub-Fund. Investors should therefore note that even if all the fixed income securities the Sub-Fund currently invests in have a higher credit rating, there is no assurance that (a) such fixed income securities will continue to have a higher credit rating, (b) the Sub-Fund will not invest in fixed income securities that do not have a higher credit rating in future; (c) such fixed income securities will continue to be rated, and/or (d) the Sub-Fund will not invest in non-rated fixed income securities in future. Moreover, the Manager may or may not, in its sole discretion, dispose of fixed income securities of which the credit rating falls to BB+ or below by major local credit rating agencies. The Manager will take into account factors including liquidity and maturity date of the relevant fixed income securities and market sentiment towards the fixed income securities at the relevant time to determine whether (and when) disposing of a fixed income security of which the credit rating falls to BB+ or below by major local credit rating agencies is in the financial interest of the Sub-Fund.
Liquidity risk
· The RMB denominated fixed income securities market is at a developing stage and the trading volume may be lower than those of the more developed markets. The Sub-Fund may invest in fixed income securities which are not listed. Even if the fixed income securities are listed, the market for such instruments or securities may be inactive. The Sub-Fund is therefore subject to liquidity risks and may suffer losses in trading such instruments. The bid and offer spreads of the price of such securities may be large, so the Sub-Fund may incur significant trading and realisation costs and may suffer losses accordingly.
Valuation risk
· Valuation of the Sub-Fund's investments may involve uncertainties and judgmental determinations, and independent pricing information may not at all times be available. If such valuations should prove to be incorrect, the Net Asset Value of the Sub-Fund may be adversely affected. The value of fixed income securities may be affected by changing market conditions or other significant market events affecting valuation. In adverse market conditions or where an adverse event happens to the issuer (e.g. credit rating downgrading), the value of lower rated or unrated corporate bonds may decline in value due to investors’perception over credit quality.
Interest rate risk
· Investment in the Sub-Fund is subject to interest rate risk. Generally, the prices of fixed income securities rise when interest rates fall, whilst their prices fall when interest rates rise. The Chinese government's macro-economic policies and controls will have significant influence over the capital markets in China. Changes in fiscal policies, such as interest rates policies, may have an adverse impact on the pricing of fixed income securities, and thus the return of the Sub-Fund.

9. Risk of investing in urban investment bonds
· The Sub-Fund may invest up to 70% of its Net Asset Value in urban investment bonds. Urban investment bonds are issued by LGFVs. Although local governments may be seen to be closely connected to urban investment bonds, such bonds are typically not guaranteed by local governments or the central government of the PRC. As such, local governments or the central government of the PRC are not obliged to support any LGFVs in default. In the event that the LGFVs default on payment of principal or interest of the urban investment bonds, the Sub-Fund could suffer substantial losses and the Net Asset Value of the Sub-Fund could be adversely affected.

10. Dividends risk
· There is no assurance that the Sub-Fund will declare to pay dividends or distributions. Investors may not receive any distributions.