China Southern Dragon Dynamic Fund · Mr. Alexandre Dumont (until 14/09/2016) Management Company...

China Southern Dragon Dynamic Fund

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China Southern Dragon Dynamic Fund Société d’Investissement à Capital Variable Audited Annual Report for the year ended December 31, 2016

R.C.S Luxembourg B 157.189

No subscription can be received on the basis of financial reports. Subscriptions are only valid if made on the basis of the current prospectus, accompanied by the Key Investor Information Document, the latest annual report and semi-annual report if published thereafter.


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Société d'Investissement à Capital Variable

Audited Annual Report for the year ended December 31, 2016

Table of Contents

General Information ............................................................................................................................................... 3

Investment Manager’s report ................................................................................................................................ 4

Audit report ............................................................................................................................................................ 7

Financial Statements ............................................................................................................................................. 9

Statement of Net Assets .......................................................................................................................................... 9

Statement of Operations and Changes in Net Assets ........................................................................................... 11

Net Asset Information ............................................................................................................................................ 12

Notes to the Financial Statements ..................................................................................................................... 15

Schedule of Investments ..................................................................................................................................... 20

China New Balance Opportunity Fund ................................................................................................................... 20

CSOP RMB High Yield Bond Fund ........................................................................................................................ 22

Economic and Geographical Classification ...................................................................................................... 23

China New Balance Opportunity Fund ................................................................................................................... 23

CSOP RMB High Yield Bond Fund ........................................................................................................................ 24

Unaudited Supplementary Information .............................................................................................................. 25


* Effective 1 January 2016, Citibank International Limited, Luxembourg Branch changed its name to Citibank Europe plc, Luxembourg Branch.

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General Information

Registered Office Atrium Business Park 31, Z.A. Bourmicht L-8070 Bertrange Grand Duchy of Luxembourg

Board of Directors

Chairman Ms. Lingli Zhou (until 15/01/2016) CSOP Asset Management Limited Ms. Ka Yan Wong (since 16/01/2016) CSOP Asset Management Limited

Directors Mr. Dimitri Brunwasser Lemanik Asset Management S.A. 106, route d’Arlon L-8217 Mamer Grand Duchy of Luxembourg Mr. Jin Wang Independent Director EJF Capital 2107 Wilson Blvd, Suite 410 Arlington, VA 22201 United States

Conducting Persons of the Management Company Mr. Philippe Meloni Mr. Marco Sagramoso Mr. Jean Philippe Claessens Mr. Pascal Dufour (until 30/04/2016) Mr. Alexandre Dumont (until 14/09/2016)

Management Company and Global Distributor Lemanik Asset Management S.A. 106, route d’Arlon L-8210 Mamer Grand Duchy of Luxembourg

Investment Manager and Global Distributor CSOP Asset Management Limited Suite 2802 Two Exchange Square 8 Connaught Place, Central Hong Kong S.A.R.

Depositary, Paying and Domiciliary Agent, Fund Administrator and, Transfer and Registrar Agent Citibank International Limited, Luxembourg Branch* Atrium Business Park 31, Z.A. Bourmicht L-8070 Bertrange Grand Duchy of Luxembourg

Auditor PricewaterhouseCoopers, Société coopérative 2, rue Gerhard Mercator, B.P. 1443 L-1014 Luxembourg Grand Duchy of Luxembourg

Legal Adviser Arendt & Medernach, S.A. 41A, avenue J.F. Kennedy L-2082 Luxembourg Grand Duchy of Luxembourg

Information to Shareholders Copies of the prospectus and any information relating thereto may be obtained from the registered office of the SICAV at 31, Z.A. Bourmicht, L-8070 Bertrange, Grand Duchy of Luxembourg.


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Investment Manager’s report

China New Balance Opportunity Fund (the “Fund”) Manager Report – 2016

Fund Performance

The Fund’s NAV increased by 0.57% for the 2016 financial year, while the MSCI China Index (in USD) returned 1.10% during the same period.

Investment Review

The global capital markets have experienced significant adjustments in 2016 due to frequent occurrence of “black swan events”. The Hong Kong stock market and U.S. listed Chinese companies were quite volatile during the year, especially in January, June, November and December when the “black swan events” arose. However, the valuation in the offshore market was deemed generally reasonable and hence, when market sentiment stabilized, the Hong Kong stock market saw inflows in March, July and September due to perceived low valuations and high dividend yields. The Hong Kong and Chinese stock markets suffered due a reduction in confidence of local and international investors. Firstly, the core reason for “black swan events” in 2016 was due to investors’ worries about the economic outlook of emerging market sector represented by China. Secondly, reduction in confidence by international investors in China’s financial policies and financial market stability was felt due to the two circuit breakers in the A-share market. The depreciation of the CNH had also made global investors hold bearish view on short-term Renminbi exchange rate. The HKD was traded close to weak-side against USD which saw global sentiment become concerned about the sustainability of the pegged USDHKD exchange rate. The decreased oil price shook the fundamentals of those countries’ economy and the currencies that rely on commodity exports. Additionally, Brexit and the stability of the European Union is of major concern internationally. Due to these factors, the weakness’ exhibited in 2016 was driven by a general confidence crisis. Although short China is a hot topic and it is true that China’s economic growth is facing lots of difficulties such as the high debt GDP ratio and overcapacity in particular industries, we still see huge growth potential in the long-run. One of the reasons for this view is that China has the largest population base, especially those born in the 1980s and 1990s which total approximately 400 million, which is larger than the total population of the U.S. This part of population will become the majority of China’s labor force and their wealth and consumption behavior will decide the future of Chinese economy to a large extent. Obviously, people born in the 1980s and 1990s tend to consume much more than the older generations, and the behavior gap might be the largest worldwide. From this perspective, we believe that most difficulties in the Chinese economy are temporary and can be resolved through extensive reform, although the process may be painful. In the medium-to-long run, we see further investment opportunity in Hong Kong stock market. Given the

background of Chinese capital account control, Shanghai-Hong Kong stock connect and Shenzhen-Hong

Kong stock connect allowed both domestic and foreign investors to directly invest into onshore and offshore

markets, which was a historic moment for the capital market of mainland and Hong Kong, and is particularly

meaningful for Hong Kong stock market. In nearly 40 years since the implementation of the 1978 Reform

and Opening-up Policy, Hong Kong has been playing three roles in offshore market. Firstly, from 1980s to

early 1990s, Hong Kong acted as the hub for international trade, connecting resources in China with global

market. Secondly, from early 1990s until now, ever since Tsing Tao Beer listed as the first H-share in 1993,

Hong Kong has become the most important capital market for Chinese enterprises to expand into and raise

foreign capital. For this purpose, Hong Kong has been critical in connecting the Chinese market with foreign

capital, and international markets generally. The third and final stage starts from now and is expected to last

for 5-10 years, during which period Hong Kong will be the first stop for global asset allocation for mainland

residents, connecting capitals in China with global assets. This is from the macro perspective, which is

highly significant. More importantly, from micro perspective of Hong Kong stock market, the composition of

investors may change significantly in the coming 3-5 years, which will be the very first time in modern

history and is likely to bring momentous new investment opportunities.


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Investment Manager’s report (continued)

China New Balance Opportunity Fund (the “Fund”) Manager Report – 2016 (continued)

Market Outlook

Looking into 2017, foreign investors have high expectations for economic recovery and stimulating fiscal policies in the U.S. after Donald Trump becomes the president. Therefore, following his official inauguration on January 20th, to what extent Trump’s polices will be in line with market expectation has become a key factor for 2017 market trend. There we see trading opportunities for expectation gap, and there might be an entry point when global capitals pay more attention to emerging markets again. In addition, our studies of the U.S. dollar index for the past 45 years since 1971, conclude that a full cycle usually takes 15-16 years with 7-8 years’ of decreasing and another 7-8 years for rebound. The most recent U.S. dollar rebound started in 2008; given it has been 8 years ever since, this round of rebound may get to an end, although there is still some distance from the last dollar index high of 120. If the U.S. rate hikes were to be slowed down and Trump’s policies and execution power turned out much lower than expected, this round of U.S. dollar rebound may come to an end, which will create opportunities for emerging markets such as China. Overall, we are more optimistic about Hong Kong stock market in 2017, especially given the comparatively cheap valuation after adjustments in November and December of 2016.


Note: The information in this report is provided on an historical basis and provides no indication for future

results.

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Investment Manager’s report (continued) CSOP RMB High Yield Bond Fund (the “Fund”) Manager Report - 2016 2016 Market Review In 2016, RMB offshore bond market moves upwards with fluctuations. Due to shrinking issuance, the total size of the market slumped by 33.9% to 1.0021 trillion in 2016 compared with 2015. Early this year, under the intervention of central bank the over-night rate touched a historical high 60% and the liquidity dry-up in the market which dragged the performance of offshore RMB bonds market. After that, RMB FX stabilized and market rebounded mainly benefited from shortage in issuance and asset allocation requirement from offshore RMB capital. The USD is under pressure as the market saw a calmer Fed and potential delay in hiking rate which helped RMB to stabilize. Fund Performance and Strategy The Fund returned 3.09% and 9.39% in USD and RMB share classes respectively in 2016, while the Citi Dim Sum (Offshore CNY) Bond Index High-Yield & Not-Rated LCL was up 5.01% during the same period. Even under challenging environment of hiking rate and RMB depreciation, the Fund still generated an outstanding performance in 2016. The main operations are shortening the duration of the portfolio to reduce the interest rate risk and increase the portfolio USD holding to upper limit of the Fund. From security level, high quality LGFV bonds and shorter duration callable real estate debt are over-weighted. During 2016, the Fund’s RMB class outperformed the referencing benchmark index by 4.38% which brings the investors considerable amount of return in market turmoil. 2017 Market Outlook The pressure of capital outflow remains and the volatility of RMB FX rate will surge driven by the USD performance and the fundamental factors of China’s economy. Taking into account Trump’s policy and recovery signal of global economy, Fed’s pace of hiking rate will not be too aggressive then there is a limit for US government bond yield to rise further. To support RMB FX rate, Chinese government may take more control on capital flow which will further shrink the offshore bond market. The globalization of RMB will be under the shadow. As less issuance, the offshore market is performing well and enjoying a higher yield than onshore market. From valuation and credit quality perspective, investment opportunities are in those names with shorter duration but higher yield e.g. callable short term real estate bond, high quality LGFV bonds and refined credit quality names. By the meantime, the portfolio will keep a relative higher allocation in USD securities to reduce RMB depreciation risk. Overall, the RMB offshore bond market yield is appealing to take asset allocation actions. April 18, 2017

PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P 1443, L-1014 Luxembourg T: +352 494848 1, F:+352 494848 2900, www.pwc.lu

Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n°10028256)

R.C.S. Luxembourg B 65 477 - TVA LU25482518

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Audit report

To the Shareholders of


We have audited the accompanying financial statements of China Southern Dragon Dynamic Fund

and of each of its sub-funds, which comprise the statement of net assets and the schedule of

investments as at December 31, 2016 and the statement of operations and changes in net assets for

the year then ended, and a summary of significant accounting policies and other explanatory notes to

the financial statements.

Responsibility of the Board of Directors of the SICAV for the financial statements

The Board of Directors of the SICAV is responsible for the preparation and fair presentation of these

financial statements in accordance with Luxembourg legal and regulatory requirements relating to the

preparation of the financial statements and for such internal control as the Board of Directors of the

SICAV determines is necessary to enable the preparation of financial statements that are free from

material misstatement, whether due to fraud or error.

Responsibility of the “Réviseur d’entreprises agréé”

Our responsibility is to express an opinion on these financial statements based on our audit. We

conducted our audit in accordance with International Standards on Auditing as adopted for

Luxembourg by the “Commission de Surveillance du Secteur Financier”. Those standards require that

we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance

about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures

in the financial statements. The procedures selected depend on the judgment of the

“Réviseur d’entreprises agréé”, including the assessment of the risks of material misstatement of the

financial statements, whether due to fraud or error. In making those risk assessments, the

“Réviseur d’entreprises agréé” considers internal control relevant to the entity’s preparation and fair

presentation of the financial statements in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s

internal control. An audit also includes evaluating the appropriateness of accounting policies used and

the reasonableness of accounting estimates made by the Board of Directors of the SICAV, as well as

evaluating the overall presentation of the financial statements.

pwc

We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of ChinaSouthern Dragon Dynamic Fund and of each of its sub-funds as of December 31, 2016, and ofthe results of their operations and changes in their net assets for the year then ended inaccordance with Luxembourg legal and regulatory requirements relating to the preparation of thefinancial statements.

Other information

The Board of Directors of the SICAV is responsible for the other information. The otherinformation comprises the information included in the annual report but does not include thefinancial statements and our audit report thereon.

Our opinion on the financial statements does not cover the other information and we do notexpress any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the otherinformation and, in doing so, consider whether the other information is materially inconsistent withthe financial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated. If, based on the work we have performed, we conclude that there is amaterial misstatement of this other information; we are required to report this fact. We havenothing to report in this regard.

PricewaterhouseCoopers, Société cooperative Luxembourg, April 18, 2017

Represented by

Valérie Arnold


Statement of Net Assets

as at December 31, 2016

(Expressed in United States dollars)

The accompanying notes form an integral part of these financial statements.

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China New Balance

Opportunity Fund

CSOP RMB High

Yield Bond Fund Combined

Assets Investment portfolio at cost 158,053,567 10,374,498 168,428,065 Net unrealised appreciation / (depreciation) 7,094,069 (405,433) 6,688,636

Investment portfolio at market value (note 2a) 165,147,636 9,969,065 175,116,701 Cash at bank 1,443,098 840,565 2,283,663 Interest and dividend receivables, net (notes 2d,2e) 46,427 163,409 209,836 Receivable on securities sold 1,158,748 – 1,158,748 Receivable on shares purchased 331,373 – 331,373

Total Assets 168,127,282 10,973,039 179,100,321

Liabilities Payable on securities purchased 1,473,912 – 1,473,912 Payable for shares redeemed 92,336 3,726 96,062 Management fees payable (note 3) 550,884 21,807 572,691 Performance fees payable (note 5) 231,910 – 231,910 Unrealised loss on forward foreign exchange contracts (note 2h,13) 52,022 109,392 161,414 Other payables 154,571 20,532 175,103

Total Liabilities 2,555,635 155,457 2,711,092

Net Assets 165,571,647 10,817,582 176,389,229


Statement of Net Assets (continued)



*The share class was launched on January 26, 2016 The accompanying notes form an integral part of these financial statements.

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China New Balance

Opportunity Fund

CSOP RMB High

Yield Bond Fund

Net Asset Value per share (expressed in share class currency) Class A (USD) Acc 148.18 – Class A (USD) Dis 111.14 124.10 Class A (EUR) Dis – 156.42 Class A (EUR) Hedge Dis – 117.12 Class A (HKD) Acc 153.61 – Class A (HKD) Dis 120.35 – Class A (RMB) Dis – 129.97 Class I (USD) Acc 185.82 – Class I (USD) Dis 74.79 119.94 Class I (EUR) Dis – 157.80 Class I (HKD) Acc 158.27 – Class I (HKD) Dis 118.13* – Class I (RMB) Dis – 127.44 Class R (USD) Acc 114.14 – Class R (EUR) Dis – 150.00 Class R (EUR) Hedge Dis – 111.79 Class V (USD) Acc 105.21 – Class V (EUR) Hedge Acc 113.85 102.08 Number of outstanding shares Class A (USD) Acc 133,645.567 – Class A (USD) Dis 10,382.957 2,020.942 Class A (EUR) Dis – 575.000 Class A (EUR) Hedge Dis – 348.024 Class A (HKD) Acc 1,388,704.038 – Class A (HKD) Dis 1,885,482.735 – Class A (RMB) Dis – 5,195.589 Class I (USD) Acc 301,764.127 – Class I (USD) Dis 257,069.409 64,064.950 Class I (EUR) Dis – 7,500.000 Class I (HKD) Acc 147,694.485 – Class I (HKD) Dis 80,000.000* – Class I (RMB) Dis – 7,293.281 Class R (USD) Acc 368.890 – Class R (EUR) Dis – 99.514 Class R (EUR) Hedge Dis – 2,661.862 Class V (USD) Acc 70,386.340 – Class V (EUR) Hedge Acc 7,182.475 8,672.809


Statement of Operations and Changes in Net Assets




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China New Balance

Opportunity Fund

CSOP RMB High

Yield Bond Fund Combined

Net Assets at the beginning of the year 200,497,307 23,130,502 223,627,809 Income Dividends (net of withholding tax) (note 2e) 1,993,057 13,866 2,006,923 Interest Income (note 2d) 11,918 806,185 818,103 Other income 160,000 74,286 234,286

Total income 2,164,975 894,337 3,059,312

Expenses Management fees (note 3) 2,572,373 119,563 2,691,936 Depositary fees (note 7) 97,647 47,572 145,219 Audit and Legal fees 210,501 17,267 227,768 Administration and Accounting fees (note 7) 120,758 98,716 219,474 Registrar and Transfer Agent fees (note 7) 46,476 25,195 71,671 Management Company fees (note 4) 100,000 33,405 133,405 Taxe d'Abonnement (note 6) 49,661 2,300 51,961 Publication / Printing fees 16,244 7,297 23,541 Compliance fees 16,103 16,103 32,206 Performances fees (note 5) 231,910 – 231,910 Directors fees (note 8) 13,244 1,715 14,959 Transaction fees (note 12) 2,118,909 – 2,118,909 Bank fees 16 – 16 Other expenses 65,016 9,617 74,633

Total expenses 5,658,858 378,750 6,037,608

Net gain / (loss) from investments (3,493,883) 515,587 (2,978,296)

Net realised gain / (loss) - on investments (note 2f) 8,574,335 (454,804) 8,119,531 - on foreign exchange (note 2b, 2f) (35,321) 37,084 1,763 - on forward foreign exchange contracts (note 2h) 118,223 (274,180) (155,957) - on futures contracts 542,506 – 542,506 Net change in unrealised appreciation / (depreciation) - on investments (4,144,244) 266,495 (3,877,749) - on forward foreign exchange contracts (note 2h) 350,628 166,031 516,659

Net change in net assets for the year as a result of operations 1,912,244 256,213 2,168,457

Proceeds from subscriptions 138,601,923 1,566,067 140,167,990 Payments for redemptions (170,438,643) (14,135,200) (184,573,843)

Net proceeds from shares transactions (31,836,720) (12,569,133) (44,405,853)

Dividends paid during the year (note 14) (5,001,184) – (5,001,184)

Net Assets at the end of the year 165,571,647 10,817,582 176,389,229


Net Asset Information as at December 31, 2016


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China New Balance

Opportunity Fund

CSOP RMB High

Yield Bond Fund

Total Net Assets (expressed in United States dollars) December 31, 2016 165,571,647 10,817,582 December 31, 2015 200,497,307 23,130,502 December 31, 2014 142,068,100 50,736,027 Net Asset Value per Share (expressed in share class currency) Class A (USD) Acc December 31, 2016 148.18 – December 31, 2015 148.89 – December 31, 2014 132.09 – Class A (USD) Dis December 31, 2016 111.14 124.10 December 31, 2015 111.67 121.11 December 31, 2014 99.08 119.79 Class A (EUR) Dis December 31, 2016 – 156.42 December 31, 2015 – 147.97 December 31, 2014 – 131.13 Class A (EUR) Hedge Dis December 31, 2016 – 117.12 December 31, 2015 – 115.11 December 31, 2014 – 114.96 Class A (HKD) Acc December 31, 2016 153.61 – December 31, 2015 154.28 – December 31, 2014 136.95 – Class A (HKD) Dis December 31, 2016 120.35 – December 31, 2015 120.87 – December 31, 2014 109.50 – Class A (RMB) Dis December 31, 2016 – 129.97 December 31, 2015 – 119.51 December 31, 2014 – 112.00


Net Asset Information as at December 31, 2016 (continued)

* The share class was closed on December 2, 2016.

**The share class was launched on January 26, 2016

*** The share class was closed on August 17, 2016 The accompanying notes form an integral part of these financial statements.

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China New Balance

Opportunity Fund

CSOP RMB High

Yield Bond Fund

Class I (USD) Acc December 31, 2016 185.82 – December 31, 2015 184.77 – December 31, 2014 165.12 – Class I (USD) Dis December 31, 2016 74.79 119.94 December 31, 2015 86.10 116.73 December 31, 2014 – 115.13 Class I (EUR) Dis December 31, 2016 – 157.80 December 31, 2015 – 148.89 December 31, 2014 – 131.60 Class I (EUR) Hedge Dis December 31, 2016 – –* December 31, 2015 – 119.73 December 31, 2014 – 119.01 Class I (HKD) Acc December 31, 2016 158.27 – December 31, 2015 157.69 – December 31, 2014 139.25 – Class I (HKD) Dis December 31, 2016 118.13** – Class I (RMB) Dis December 31, 2016 – 127.44 December 31, 2015 – 116.87 December 31, 2014 – 109.24 Class R (USD) Acc December 31, 2016 114.14 – December 31, 2015 114.62 – December 31, 2014 101.69 – Class R (EUR) Dis December 31, 2016 – 150.00 December 31, 2015 – 142.97 December 31, 2014 – 127.68 Class R (EUR) Hedge Acc December 31, 2016 –*** – December 31, 2015 115.50 – December 31, 2014 101.59 –


Net Asset Information as at December 31, 2016 (continued)


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China New Balance

Opportunity Fund

CSOP RMB High

Yield Bond Fund

Class R (EUR) Hedge Dis December 31, 2016 – 111.79 December 31, 2015 – 111.54 December 31, 2014 – 114.69 Class V (USD) Acc December 31, 2016 105.21 – December 31, 2015 104.66 – December 31, 2014 98.83 – Class V (EUR) Hedge Acc December 31, 2016 113.85 102.08 December 31, 2015 113.82 100.50 December 31, 2014 99.47 98.12


Notes to the Financial Statements as at December 31, 2016

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1) Description of the SICAV

China Southern Dragon Dynamic Fund (the "SICAV") was originally incorporated on December 3, 2010 as a Luxembourg investment company with variable capital – specialised investment fund (société d’investissement à capital variable – fonds d’investissement spécialisé or SICAV-FIS) with multiple sub-funds governed by the provisions of the amended law dated February 13, 2007 on specialised investment funds.

The SICAV has been converted from a specialised investment fund to a UCITS on November 4, 2011 and is governed by the Part I of the Law of December 17, 2010, as amended by the Directive 2014/91 (UCITS V).

The Articles of Incorporation of the SICAV were published in the Mémorial, Recueil des Sociétés et Associations (the " Mémorial") on December 22, 2010. The SICAV is registered at the Luxembourg Register of Commerce under the number B 157.189. The revised articles were published on November 25, 2011.

As at December 31, 2016, the SICAV is comprised of the following two sub-funds:

China New Balance Opportunity Fund, CSOP RMB High Yield Bond Fund.

The SICAV may in the future create new sub-funds and new share classes.

2) Significant Accounting policies

The financial statements have been prepared in accordance with Luxembourg regulations relative to undertakings for collective investment, including the following significant policies:

a) Investment Securities

Listed securities and securities dealt in on another regulated market are valued on the basis of their last available market price at the date of these financial statements.

Transferable securities and money market instruments which are quoted, listed or traded on a regulated market or on another regulated market will be valued at last traded market prices, which may be, the closing market price, the mid-market price or the latest market price, as appropriate. Where a security is listed or dealt in on more than one regulated market or on another regulated market, the relevant exchange or market shall be the principal stock exchange or market on which the security is listed or dealt in on. Investments listed or traded on a regulated market or on another regulated market, but acquired or traded at a premium or at a discount outside or off the relevant exchange or market, may be valued taking into account the level of premium or discount as of the valuation day.

The value of any transferable security which is not quoted, listed or dealt in on a regulated market or on another regulated market or which is so quoted, listed or dealt in on but for which no such quotation or value is available or the available quotation or value is not representative, shall be the probable realisation value as estimated with care and good faith by the Directors and approved for the purpose by the Depositary.

Where reliable market quotations are not available for fixed income securities, the value of such securities may be determined using matrix methodology compiled by the Directors.


Notes to the Financial Statements as at December 31, 2016 (continued)

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2. Significant Accounting policies (continued)

b) Foreign currency translation

The financial statements and accounting records of each sub-fund are expressed in USD.

Amounts included in the Statement of Operations and Changes in Net Assets in foreign currency are translated into USD at the rate of exchange prevailing on the date of the transaction.

Assets and liabilities denominated in other currencies are converted into USD at the exchange rate prevailing at the closing date of the financial statements.

Any resulting gains or losses are recognised in the Statements of Operations and Changes in Net Assets under the heading “Net realised gain/ (loss) on foreign exchange”.

Main exchange rates used as of December 31, 2016 are:

1 USD = 6.970487 CNH* 1 USD = 0.946970 EUR

1 USD = 7.754523 HKD * The valuation of Renminbi (“RMB”) assets, denominated in Chinese Renminbi (“CNY”) and traded through Hong Kong or Singapore, is done at the Hong Kong delivered Chinese Renminbi (“CNH”) foreign exchange rate.

c) Formation Expenses

The formation expenses represent the cost of establishing the SICAV and its sub-funds. The formation costs are amortised on a straight line basis over 5 years from the date on which sub-funds commenced business.

d) Interest Income

Interest income includes interest applied to bonds and interest applied to bank accounts. It is accrued on a daily basis.

e) Dividends Income

Dividends are accounted for on an “ex-dividend” basis net of any irrecoverable withholding tax.

f) Realised Gains or Losses on Sales of Investments and on foreign exchange

Realised gains or losses comprise the profit or loss arising from disposal of securities during the year and differences arising on the revaluation of other assets and liabilities denominated in foreign currencies.

Realised gains or losses are determined on the basis of the weighted average cost of the securities sold.

g) Combined Figures

The combined Statement of Net Assets and the combined Statement of Operations and Changes in Net Assets are expressed in USD and are presented for information purposes only.

h) Forward foreign exchange contracts

The forward foreign exchange contracts are valued on the basis of forward foreign exchange rates prevailing on December 31, 2016. The change in unrealised gain or loss is disclosed in the Statement of Operations and Changes in Net Assets under “net change in unrealised appreciation /(depreciation) on forward foreign exchange contracts”. The realised gain / (loss) on forward foreign exchange contracts is disclosed in the Statement of Operations and Changes in Net Assets under “net realised gain/(loss) on forward foreign exchange contracts”.



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3. Management Fees

The Investment Manager, CSOP Asset Management Limited, will receive from each sub-fund, payable out of the assets attributable to the relevant class of shares, the following management fees calculated and accrued on each valuation day on the basis of the Net Asset Value of the assets attributable to the relevant class of shares and paid out monthly in arrears on the relevant valuation day:

4. Management Company Fees

The Management Company is entitled to receive a management company fee of 0.05% per year, subject to an annual minimum fee of EUR 20,000 by sub-fund. This fee is payable monthly and based on the average net assets of the Sub-Fund during the relevant month.

5. Performance Fees

The Investment Manager, CSOP Asset Management Limited, will receive from Class V and I Shares of China New Balance Opportunity Fund a performance fee calculated and accrued on each valuation day on the basis of the increase in the Net Asset Value per Share outstanding. The performance fees are equal to 20% of the increase in the Net Asset Value per Share, with the Hurdle rate of 8 % for each performance period. The performance fees are also subject to a High Water Mark (“The High Water Mark” is the greater of: (a) the highest Net Asset Value per Share on the last day of the previous Performance Period; or (b) USD 100 per Share (being the price at which Shares were issued during the Initial Offer Period)).

The performance fee in respect of each performance period is calculated by reference to the Net Asset Value per Share before the deduction of any accrued Performance Fees.

The performance fee is calculated and accrued in a daily basis and payable annually.

The Investment Manager is entitled to be paid a Performance Fee on the Shares outstanding as at the last Valuation Day of each Performance Period and a Performance Fee on the Shares being redeemed or exchanged during a Performance Period.

6. Taxation

The SICAV is subject to Luxembourg tax laws. Under current laws and regulations, the SICAV is subject in Luxembourg to the subscription tax (« taxe d’abonnement ») at an annual rate of 0.05% (0.01% for institutional share classes) such tax being payable quarterly and calculated on the basis of the net assets at the end of the relevant quarter. The SICAV is not subject to Corporate Income Tax in Luxembourg. Income received from the SICAV may be subject to withholding taxes in the country of origin of the issuer of the security, in respect of which such income is paid.

7. Depositary, Paying and Domiciliary Agent, Fund Administrator, and Transfer and Registrar Agent

The SICAV pays the fees of the Depositary, Paying and Domiciliary Agent, Fund Administrator, and Transfer and Registrar Agent at commercial rates agreed between these parties and the SICAV, in addition to reasonable out-of-pocket expenses properly incurred in the course of carrying out their duties. The maximum fee paid for these services by the sub-fund is 0.5% p.a. of its Net Asset Value (excluding reasonable out-of-pocket expenses).

8. Directors fees

The SICAV shall pay to the Directors out of the assets of the SICAV an annual fee, which shall not exceed USD 15,000 per Director, per annum.

Sub-Funds Class A Class I Class R Class V

China New Balance Opportunity Fund 2.00% p.a. 1.00% p.a. 2.00% p.a. 1.00% p.a.

CSOP RMB High Yield Bond Fund 1.00% p.a. 0.75% p.a. 1.75% p.a. 1.00% p.a.



18

9. Changes in the Investment Portfolio

The details of the changes in investment portfolio composition are held at the disposal of the shareholders at the registered office of the SICAV and are available upon request free of charge.

10. Related Party Transactions

All transactions with related parties were entered into the ordinary course of business and under normal commercial terms. The main related party to the SICAV is the Investment Manager and Global Distributor, CSOP Asset Management Limited. For the basis of the fees charged by the Investment Manager please refer to note 3 and note 4 above.

11. Soft Commission

During the period covered by this financial report, the Investment Manager entered into soft-dollar commissions/arrangements with the following entities:

Company Total Commission Paid

China International Capital Corporation Hong Kong Securities Limited HKD 434,787

UBS Securities Asia Limited HKD 198,043

12. Transaction costs

For the year ended December 31, 2016, the SICAV incurred transaction costs related to purchase or sale of financial instruments (securities and derivatives) as follows:

China New Balance Opportunity Fund: USD: 2,118,909. CSOP RMB High Yield Bond Fund: USD: 0

The amount of transaction costs supported by the Fund is included in the Statement of Operations and Changes in Net Assets under the heading ‘‘Transaction fees’’.

The transaction costs mainly relate to brokerage fees.

13. Outstanding forward foreign exchange contracts

As at December 31, 2016, the China New Balance Opportunity Fund had the following outstanding forward foreign exchange contracts:

CCY purchased

Amount bought

CCY sold

Amount sold Maturity Date Counterparty

Unrealised gain / (loss) in USD

EUR 900,000* USD 1,004,139.00 January 13, 2017 Citibank London (52,819)

USD 31,425* EUR 30,000.00 January 13, 2017 Citibank London (285)

USD 37,898* EUR 35,000.00 January 13, 2017 Citibank London 901

USD 29,778* EUR 28,000.00 January 13, 2017 Citibank London 181

(52,022)

* The purpose of these forward foreign exchange contracts is to hedge the currency exposure of the Class V (EUR) Hedge Acc.

Total commitment on open forward foreign exchange contracts at period end amounts to 1,049,501 USD.



19

13. Outstanding forward foreign exchange contracts (continued)

As at December 31, 2016, the CSOP RMB High Yield Bond Fund had the following outstanding forward foreign exchange contracts:

CCY purchased

Amount bought

CCY sold

Amount sold Maturity Date Counterparty

Unrealised gain / (loss) in USD

EUR 187,065* USD 206,987.42 January 17, 2017 Citibank London (9,217) USD 1,305* EUR 1,250.00 January 17, 2017 Citibank London (16) USD 151,061* EUR 145,000.00 January 17, 2017 Citibank London (2,235) EUR 930,000 USD 1,029,231.00 January 18, 2017 Citibank London (45,960) USD 988,125 EUR 930,000.00 January 18, 2017 Citibank London 4,848 EUR 278,493* USD 308,180.69 January 19, 2017 Citibank London (13,721) EUR 20,000* USD 21,296.00 January 19, 2017 Citibank London (149) EUR 870,750* USD 963,659.03 January 20, 2017 Citibank London (42,942)

(109,392)

* The purpose of these forward foreign exchange contracts is to hedge the currency exposure of the Class A (EUR) Hedge Dis, Class R (EUR) Hedge Dis and Class V (EUR) Hedge Acc.

Total commitment on open forward foreign exchange contracts at period end amounts to 3,554,832 USD.

As at December 31, 2016, there is no collateral related to the forward foreign exchange contracts.

14. Dividend paid

China New Balance Opportunity Fund paid the following dividends during the year ended December 31, 2016.

Share Class Ex-Date Currency Amount per Share Amount paid in Fund

currency

Class I (USD) Dis 17/03/2016 USD 10.6200 5,001,184.00


Schedule of Investments (expressed in United States dollars)

As at December 31, 2016


20

China New Balance Opportunity Fund

Quantity Description Market Value % NAV

Transferable securities and money market instruments admitted to an official exchange listing HKD Equities

620,000 Aac Acoustic Technologies Holdings Inc. 5,632,713 3.40 3,000,000 AviChina Industry & Technology Company - H 2,065,891 1.25 1,400,000 Baic Motor Corp. Limited 1,245,725 0.75 7,000,000 Beijing Enterprises Water Group Limited 4,657,927 2.81 2,700,000 Byd Electronic Company Limited 2,123,922 1.28 3,000,000 China Animal Healthcare Limited – – 1,300,000 China International Marine Containers Group Company Limited - H 1,877,614 1.13 1,900,000 China Life Insurance Company Limited - H 4,949,369 2.99 5,000,000 China Molybdenum Company Limited 1,218,644 0.74

800,000 China Taiping Insurance Holdings Company Limited 1,650,650 1.00 4,200,000 China Unicom Hong Kong Limited 4,890,823 2.95 3,320,000 Dongjiang Environmental Company Limited - H 5,779,853 3.49 1,900,000 Galaxy Entertainment Group Limited 8,281,619 5.00 7,500,000 Geely Automobile Holdings Limited 7,166,785 4.33 5,100,000 Guangzhou Automobile Group Company Limited 6,169,045 3.73 1,000,000 Guangzhou Shipyard International Company Limited 1,606,804 0.97 4,392,476 Haitong International Securities Group Limited 2,520,660 1.52 2,300,000 Luoyang Glass Company Limited 1,512,666 0.91

900,000 Mgm China Holdings Limited 1,866,266 1.13 3,100,000 Nanjing Panda Electronics - H 2,882,318 1.74

350,000 New China Life Insurance Company - H 1,606,804 0.97 4,000,000 Petrochina Company Limited 2,981,486 1.80

500,000 Prada SpA 1,695,785 1.02 1,950,000 Sands China Limited 8,474,408 5.12 2,300,000 Semiconductor Manufacturing International Corp. 3,612,601 2.18

255,000 Shanghai Fudan-Zhangjiang - H 213,089 0.13 2,600,000 Sound Global Limited 499,579 0.30

800,000 Sunny Optical Technology Group Company Limited 3,502,472 2.12 670,000 Tencent Holdings Limited 16,390,305 9.90

2,000,000 WH Group Limited 1,617,121 0.98 2,200,000 Wynn Macau Limited 3,500,925 2.11 3,218,800 Yichang Changjiang Pharmaceutical Company 6,433,845 3.89

Total HKD Equities 118,627,714 71.64 USD Equities

171,000 Alibaba Group Holding 14,933,430 9.02 70,000 Ctrip.com International Limited - ADR 2,799,300 1.69 65,000 Momo Inc. 1,193,400 0.72 54,700 Netease.com - ADR 12,198,100 7.37 80,000 New Oriental Education & Technology Group - ADR 3,402,400 2.05


Schedule of Investments (expressed in United States dollars) (continued)



21

Quantity Description Market Value % NAV

USD Equities (continued)

60,000 Tal Education Group - ADR 4,267,200 2.58 187,800 Weibo Corp. - ADR 7,726,092 4.67

Total USD Equities 46,519,922 28.10

Total Transferable securities and money market instruments admitted to an official exchange listing 165,147,636 99.74

Total Investments in Securities 165,147,636 99.74

Other Net Assets 424,011 0.26

Total Net Assets 165,571,647 100.00


Schedule of Investments (expressed in United States dollars) (continued)



22

CSOP RMB High Yield Bond Fund

Nominal Value Description Market Value % NAV

Transferable securities and money market instruments admitted to an official exchange listing CNH Bonds

3,000,000 Avic International Finance & Investment Limited 4.800% 10/Apr/2017

428,159 3.96

3,000,000 China Electronics Corp. Holdings Company Limited 4.700% 16/Jan/2017

428,159 3.96

3,000,000 International PTE Limited 8.000% 17/Jul/2017 425,615 3.93 6,000,000 Jinchuan Group 4.750% 17/Jul/2017 820,944 7.59 3,000,000 Kunzhi Limited 5.875% 15/Jan/2017 428,253 3.96 3,000,000 Ocean Wealth Limited 5.200% 24/Mar/2017 430,386 3.98 3,000,000 Sinochem Offshore Capital Company Limited 3.550%

13/May/2017 427,175 3.95

3,000,000 Universal Number One Company 5.700% 30/Jan/2017 428,229 3.96 3,000,000 Vast Expand Limited 5.200% 11/Sep/2017 423,371 3.91 3,000,000 Yieldking Investment Limited 5.150% 31/Jul/2017 428,234 3.96 5,000,000 Yufu Eternity Limited 5.625% 26/Nov/2017 711,930 6.58 3,000,000 Yunnan Investment 5.500% 21/Oct/2017 423,396 3.91

Total CNH Bonds 5,803,851 53.65 .

USD Bonds 300,000 Baoxin Auto Finance I Ltd 8.750% 29/Dec/2049 301,722 2.79 300,000 Chalieco Hong Kong Corp. Limited FRN 29/Dec/2049 305,018 2.82 300,000 China Aoyuan Property Group Limited 11.250% 17/Jan/2019 318,756 2.95 400,000 Fantasia Holdings 10.625% 23/Jan/2019 423,432 3.91 300,000 Hanrui Overseas Investment Company Limited 4.900%

28/Jun/2019 292,005 2.70

500,000 Huai An Traffic Holding Company Limited 4.950% 25/Oct/2019 496,075 4.59 600,000 Maoye International Holdings Limited 7.750% 19/May/2017 602,982 5.57 500,000 Oriental Capital Company Limited 5.150% 22/Nov/2019 496,275 4.59 500,000 Zhiyuan Group BVI Company Limited 6.200% 11/Jan/2019 512,462 4.74 400,000 Zoomlion HK Company Limited 6.875% 5/Apr/2017 403,444 3.73

Total USD Bonds 4,152,171 38.39

Total Transferable securities and money market instruments admitted to an official exchange listing 9,956,022 92.04 Other undertakings for collective investments CNH Funds

8,609 CSOP Shen Zhou RMB I 13,043 0.12

Total CNH Funds 13,043 0.12

Total Other undertakings for collective investments 13,043 0.12

Total Investments in Securities 9,969,065 92.16

Other Net Assets 848,517 7.84

Total Net Assets 10,817,582 100.00


Economic and Geographical Classification


23

China New Balance Opportunity Fund

Economic Classification as at December 31, 2016

Sector % NAV Internet software and services 26.00 Leisure and entertainment 13.36 Auto manufacturers 8.81 Software 7.37 Insurance 4.96 Commercial services 4.63 Pharmaceuticals 3.89 Environment control and services 3.79 Electronic equipment 3.40 Miscellaneous machinery 3.25 Telecommunication equipment 3.02 Telecommunication services 2.95 Water utilities 2.81 Semiconductors 2.18 Oil and gas producers 1.80 Financial services 1.52 Aerospace and defence 1.25 Apparel 1.02 Food 0.98 Machinery 0.97 Building materials 0.91 Mining (non precious) 0.74 Biotechnology 0.13

Total Investments in Securities 99.74

Other Net Assets 0.26

Total Net Assets 100.00

Geographical Classification as at December 31, 2016

Country % NAV Cayman Islands 51.24 China 27.46 Hong Kong 13.28 Bermuda 4.33 Macau 2.11 Italy 1.02 Singapore 0.30





Economic and Geographical Classification


24

CSOP RMB High Yield Bond Fund

Economic Classification as at December 31, 2016

Sector % NAV Financial services 29.50 Industrials 12.15 Retail 8.36 Transportation 7.89 Mining (non precious) 7.59 Real estate 6.86 IT Consulting and services 3.96 Telecommunication equipment 3.96 Chemicals 3.95 Energy - alternate sources 3.91 Investment companies 3.91 Open-ended Funds 0.12




Geographical Classification as at December 31, 2016

Country % NAV Virgin Islands (British) 34.51 Hong Kong 17.21 Cayman Islands 16.39 China 16.16 Bermuda 3.96 Singapore 3.93





Unaudited Supplementary Information

Global Exposure

25

The SICAV uses a risk-management process that enables to monitor and measure at any time the risk of the Sub-Funds’ portfolio positions and their contribution to the overall risk profile of the SICAV. The Commitment Approach is used for both Sub-Funds. Global Exposure is measured with the Commitment Approach calculated along the guidelines of ESMA 10-788.

European Regulation (EU) 2015/2365 on the transparency of financial transactions in securities and reuse of collateral (Securities Financing Transactions or SFTR)

During the year ended 31 December 2016, the SICAV did not enter into securities financing transactions and total return swaps.

Information on Remuneration The Management Company has established and applies a remuneration policy and practices that are consistent with, and promote, sound and effective risk management and that neither encourage risk taking which is inconsistent with the risk profiles, rules, this Prospectus or the Articles nor impair compliance with the Management Company’s obligation to act in the best interest of the SICAV (the “Remuneration Policy”). The Remuneration Policy includes fixed and variable components of salaries and applies to those categories of staff, including senior management, risk takers, control functions and any employee receiving total remuneration that falls within the remuneration bracket of senior management and risk takers whose professional activities have a material impact on the risk profiles of the Management Company, the SICAV or the Sub-Funds. The Remuneration Policy is in line with the business strategy, objectives, values and interests of the Management Company, the SICAV and the Shareholders and includes measures to avoid conflicts of interest. In particular, the Remuneration Policy will ensure that: a) the staff engaged in control functions are compensated in accordance with the achievement of the objectives linked to their functions, independently of the performance of the business areas that they control; b) the fixed and variable components of total remuneration are appropriately balanced and the fixed component represents a sufficiently high proportion of the total remuneration to allow the operation of a fully flexible policy on variable remuneration components, including the possibility to pay no variable remuneration component; c) the measurement of performance used to calculate variable remuneration components or pools of variable remuneration components includes a comprehensive adjustment mechanism to integrate all relevant types of current and future risks; Details of the Remuneration Policy, including the persons in charge of determining the fixed and variable remunerations of staffs, a description of the key remuneration elements and an overview of how remuneration is determined, is available on the website http://www.lemanikgroup.com/management-company-service_substance_governance.cfm. A paper copy of the summarised Remuneration Policy is available free of charge to the Shareholders upon request. No material changes have been made to the remuneration policy.

http://www.lemanikgroup.com/management-company-service_substance_governance.cfm

http://www.lemanikgroup.com/management-company-service_substance_governance.cfm


Global Exposure

www.csopasset.com Telephone: (852) 3406 5688

2801-2803, Two Exchange Square, 8 Connaught Place, Central, Hong Kong

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