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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, 2017

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, 2017

Table of Contents

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

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

Audit report ............................................................................................................................................................ 6

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 ........................................................................................................................ 21

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

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

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

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


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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. Ka Yan Wong CSOP Asset Management Limited Suite 2802 Two Exchange Square 8 Connaught Place, Central Hong Kong S.A.R.

Directors Mr. Dimitri Brunwasser Lemanik Asset Management S.A. 106, route d’Arlon L-8210 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. Alexandre Dumont Ms. Sandrine Puccilli (since October 23, 2017)

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

Investment Manager 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 Europe plc, 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 Elvinger Hoss Prussen, Société anonyme 2, Place Winston Churchill L-1340 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 – 2017

The Fund return was 40.13% in 2017 compared with the MSCI China Index returned 54.42%. The main contribution of the Fund's performance comes from the IT, Financials and Consumer sector allocations. In 2017, the Hang Seng Index which is representing the Hong Kong stock market rise without significant adjustment during the whole year. The Hang Seng Index rose eight consecutive months, which is the first time since 2007. Only in December, due to overseas holidays (Thanksgiving Day, Christmas Day and New Year's Day) and the traditional end-of-year assessment period of the asset management industry, the year-end profit taking activities leads to an adjustment at the end of 2017. In 2017, the mainland flowed through the Stock Connect Program with a net inflow of 339.9 billion Hong Kong dollars, which is a year-on-year increase of 36%. We expect the net inflow through Stock Connect in 2018 should be more than 500 billion yuan and the daily turnover of more than 100 billion Hong Kong stocks should have become the new norm in the Hong Kong stock market. In 2017, for the Hong Kong stock market, it is only the first year of the great era and the first year of the revaluation of the Hong Kong stock market. The revaluation is only structural and partial. Hong Kong stock market will be brilliant in the next three years. Due to the gradual emergence of the wealth effect in the Hong Kong stock market in 2017, all industrial leaders have undergone different degrees of revaluation. There is a common agreement among sell-side, buy-side or listed companies, they all believe that the 2017 tier one company revaluation will be the benchmark and the revaluation will be spread to second-tier, third-tier companies, as expected.

For 2018, we are still very optimistic about the trend of the overall Hong Kong stock market. First, the world's major economies, including the United States, China and the EU, have entered a period of steady economic recovery accompanied by mild inflation. Although there is a risk of oil price surge in a short period, it still has not yet reached the stage where there is a vicious inflation. The probability of the rate hiking and monetary policy should remain mild. This is the best macro environment for equity assets. In particular, driven by the supply-side structural reforms in China's macro-economy, the profitability of the traditional cyclical industries continued to improve, and the growth of the new economy continued to accelerate. Therefore, under the background of global macroeconomic recovery, investors' preference for risky assets will gradually increase. More importantly for the Hong Kong stock market, we think the capital markets in the Mainland and Hong Kong are intertwined and interoperability is the driving force for investment in the Hong Kong stock market in the next three to five years. Interaction between the two market investors and valuation difference convergence will be expected. This is a great era for the development of China's financial market. We think the Hong Kong stock market may have completed only half of this historic change over the past year or two. The revaluation of first-tier blue chip stocks in Hong Kong stock market has reached a certain stage. The revaluation of second-tier stocks has just begun. The revaluation of third-line stocks Revaluation has not started yet. We believe the revaluation of the Hong Kong stock market bull market is still on its way, which is a historic investment opportunity for the Hong Kong stock market over the next three to five years. At present, the Hong Kong Stock Exchange has officially announced the listing and restructuring of the industry and regulators to fully communicate and discuss the advice of the reform of the listing structure, with particular reference to allowing non-profitable biotechnology companies to be listed in Hong Kong, allowing different voting rights of the "new economy” representors. The listing rule reform should be a remarkable institutional rule change since Hong Kong allowed H-share listing in 1993. With the implementation of this reform, we expect that more and more companies from the "new economy" sectors in the Mainland, biotechnology companies, financial technology companies, etc. to raise finance in Hong Kong in the future and the structure of listed companies in Hong Kong stock market will be more preferred and more attractive.


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Investment Manager’s report (continued) CSOP RMB High Yield Bond Fund (the “Fund”) Manager Report - 2017 2017 Market Review In 2017, RMB offshore bond yield curve market moved upwards with fluctuations. Due to shrinking issuance, the total size of the market slumped by 31% to 252 billion in 2017 compared with 2016. The shrinking trend of Dim Sum market continued as the liquidity dry-up in the market dragged the performance of offshore RMB bonds market. Later on, However, market’s growing expectation for ECB to bring forward its moderation of QE triggered USD’s weakness in a broader market, and meanwhile, along with CNY’s liquidity tightening-up following deleveraging measures within domestic China, CNY’s depreciation trend halted and reversed to gain throughout the last half of 2017. Currency appreciation eventually helped to stabilize RMB offshore bonds market. Fund Performance and Strategy The Fund returned 7.32% and 0.34% in USD and RMB share classes respectively in 2017, while the Citi Dim Sum (Offshore CNY) Bond Index High-Yield & Not-Rated LCL was up 7.54% during the same period. Even under challenging environment of hiking rate and RMB depreciation, the Fund still generated an outstanding performance in 2017. 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. 2018 Market Outlook The pressure of capital outflow remains and the volatility of RMB FX rate will rise, driven by the USD’s relative outperformance and the underlying evolvements of China’s economic growth due to its ongoing structural reform agenda. Taking into account Trump’s policy and recovery signal of global economy, FED’s pace of hiking rate and its withdrawing from QE is expected to be gradual, which will put a cap on US government bond yield. Meanwhile, China’s central bank PBOC will continue to strike a delicate balance between stabilization of RMB FX and RMB globalization, which will then in turn, encourage the recovery of offshore RMB bond market. Based on our call for both FX and bond market’s volatility to pick up in a range bound fashion, we are to be more flexible with regard to the allocation ratio between RMB and USD, while gradually extending RMB bond durations and maintaining majority of our allocation of USD securities to those with higher yields, e.g. callable real estate bond, high quality financial names and refined credit quality names.

PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 LuxembourgT : +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

Audit report

To the Shareholders ofChina Southern Dragon Dynamic Fund

Our opinion

In our opinion, the accompanying financial statements give a true and fair view of the financialposition of China Southern Dragon Dynamic Fund and of each of its sub-funds (the “Fund”) as at31 December 2017, and of the results of their operations and changes in their net assets for the year thenended in accordance with Luxembourg legal and regulatory requirements relating to the preparationand presentation of the financial statements.

What we have audited

The Fund’s financial statements comprise:

· the statement of net assets as at 31 December 2017;· the schedule of investments as at 31 December 2017;· the statement of operations and changes in net assets for the year then ended; and· the notes to the financial statements, which include a summary of significant accounting policies.

Basis for opinion

We conducted our audit in accordance with the Law of 23 July 2016 on the audit profession (Law of23 July 2016) and with International Standards on Auditing (ISAs) as adopted for Luxembourg by the“Commission de Surveillance du Secteur Financier” (CSSF). Our responsibilities under those Law andstandards are further described in the “Responsibilities of the “Réviseur d’entreprises agréé” for theaudit of the financial statements” section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour opinion.

We are independent of the Fund in accordance with the International Ethics Standards Board forAccountants’ Code of Ethics for Professional Accountants (IESBA Code) as adopted for Luxembourg bythe CSSF together with the ethical requirements that are relevant to our audit of the financial statements.We have fulfilled our other ethical responsibilities under those ethical requirements.

Other information

The Board of Directors of the Fund is responsible for the other information. The other informationcomprises the information stated in the annual report but does not include the financial statements andour audit report thereon.

Our opinion on the financial statements does not cover the other information and we do not express anyform of assurance conclusion thereon.

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In connection with our audit of the financial statements, our responsibility is to read the otherinformation identified above and, in doing so, consider whether the other information is materiallyinconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appearsto be materially misstated. If, based on the work we have performed, we conclude that there is a materialmisstatement of this other information, we are required to report that fact. We have nothing to reportin this regard.

Responsibilities of the Board of Directors of the Fund and those charged with governance for thefinancial statements

The Board of Directors of the Fund is responsible for the preparation and fair presentation of the financialstatements in accordance with Luxembourg legal and regulatory requirements relating to the preparationand presentation of the financial statements, and for such internal control as the Board of Directors of theFund determines is necessary to enable the preparation of financial statements that are free from materialmisstatement, whether due to fraud or error.

In preparing the financial statements, the Board of Directors of the Fund is responsible for assessing theFund’s ability to continue as a going concern, disclosing, as applicable, matters related to going concernand using the going concern basis of accounting unless the Board of Directors of the Fund either intendsto liquidate the Fund or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Fund’s financial reporting process.

Responsibilities of the “Réviseur d’entreprises agréé” for the audit of the financial statements

The objectives of our audit are to obtain reasonable assurance about whether the financial statementsas a whole are free from material misstatement, whether due to fraud or error, and to issue an auditreport that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guaranteethat an audit conducted in accordance with the Law of 23 July 2016 and with ISAs as adopted forLuxembourg by the CSSF will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if, individually or in the aggregate, they couldreasonably be expected to influence the economic decisions of users taken on the basis of these financialstatements.

As part of an audit in accordance with the Law of 23 July 2016 and with ISAs as adopted for Luxembourgby the CSSF, we exercise professional judgment and maintain professional scepticism throughout the audit.

We also:

· identify and assess the risks of material misstatement of the financial statements, whether due tofraud or error, design and perform audit procedures responsive to those risks, and obtain auditevidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detectinga material misstatement resulting from fraud is higher than for one resulting from error, as fraudmay involve collusion, forgery, intentional omissions, misrepresentations, or the override of internalcontrol;

· obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Fund’s internal control;

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evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by the Board of Directors ofthe Fund;

conclude on the appropriateness of the Board ofDirectors ofthe Fund’s use of the going concern basisof accounting and, based on the audit evidence obtained, whether a material uncertainty existsrelated to events or conditions that may cast significant doubt on the Fund’s ability to continue as agoing concern. Ifwe conclude that a material uncertainty exists, we are required to draw attention inour audit report to the related disclosures in the financial statements or, if such disclosures areinadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up tothe date of our audit report. However, future events or conditions may cause the Fund to cease tocontinue as a going concern;

evaluate the overall presentation, structure and content of the financial statements, including thedisclosures, and whether the financial statements represent the underlying transactions and eventsin a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the plannedscope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.

Pricewaterhousecoopers, Société coopérativeRepresented by

Luxembourg, 25 April 2018

China Southern Dragon Dynamic Fund Statement of Net Assets as at December 31, 2017 (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 176,862,970 9,976,246 186,839,216 Net unrealised appreciation 20,153,969 80,473 20,234,442 Investment portfolio at market value (note 2a) 197,016,939 10,056,719 207,073,658 Cash at bank and at broker 7,264,639 1,134,106 8,398,745 Interest and dividend receivables, net (notes 2d,2e) – 138,149 138,149 Receivable on shares purchased 34,800 – 34,800 Unrealised appreciation on forward foreign exchange contracts (notes 2h,13) 5,273 15,554 20,827 Total Assets 204,321,651 11,344,528 215,666,179 Liabilities Payable on securities purchased – 307,167 307,167 Payable for shares redeemed 145,853 – 145,853 Management fees payable (note 3) 570,840 14,780 585,620 Performance fees payable (note 5) 4,720,839 – 4,720,839 Other payables 151,499 19,659 171,158 Total Liabilities 5,589,031 341,606 5,930,637 Net Assets 198,732,620 11,002,922 209,735,542

China Southern Dragon Dynamic Fund Statement of Net Assets (continued) as at December 31, 2017 (Expressed in United States dollars)


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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 218.63 – Class A (USD) Dis 163.98 132.81 Class A (EUR) Dis – 147.49 Class A (HKD) Acc 228.42 – Class A (HKD) Dis 178.96 – Class I (USD) Acc 260.39 – Class I (USD) Dis 78.39 128.72 Class I (EUR) Dis – 149.18 Class I (HKD) Acc 223.11 – Class I (HKD) Dis 166.52 – Class I (RMB) Dis – 127.87 Class R (EUR) Hedge Dis – 116.30 Class V (EUR) Hedge Acc 157.43 107.28 Number of outstanding shares Class A (USD) Acc 334,916.022 – Class A (USD) Dis 427.634 592.000 Class A (EUR) Dis – 10.000 Class A (HKD) Acc 1,247,269.263 – Class A (HKD) Dis 1,414,978.856 – Class I (USD) Acc 116,527.340 – Class I (USD) Dis 257,069.409 64,064.950 Class I (EUR) Dis – 7,500.000 Class I (HKD) Acc 146,665.498 – Class I (HKD) Dis 80,000.000 – Class I (RMB) Dis – 7,293.281 Class R (EUR) Hedge Dis – 1,960.285 Class V (EUR) Hedge Acc 1,070.000 7,138.752

China Southern Dragon Dynamic Fund Statement of Operations and Changes in Net Assets as at December 31, 2017 (Expressed in United States dollars)


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China New Balance

Opportunity Fund

CSOP RMB High

Yield Bond Fund Combined

Net Assets at the beginning of the year 165,571,647 10,817,582 176,389,229 Income Dividends (net of withholding tax) (note 2e) 4,575,712 306 4,576,018 Interest Income (note 2d) 9,456 607,446 616,902 Other income – 135 135 Total income 4,585,168 607,887 5,193,055 Expenses Management fees (note 3) 3,008,499 87,556 3,096,055 Depositary fees (note 7) 121,139 53,630 174,769 Audit and Legal fees 68,422 13,698 82,120 Administration and Accounting fees (note 7) 140,165 80,335 220,500 Registrar and Transfer Agent fees (note 7) 57,602 23,971 81,573 Management Company fees (note 4) 91,572 8,673 100,245 Taxe d'Abonnement (note 6) 66,833 1,283 68,116 Publication / Printing fees 30,176 6,821 36,997 Compliance fees 17,057 17,057 34,114 Performance fees (note 5) 4,900,396 – 4,900,396 Directors fees (note 8) 14,130 979 15,109 Transaction fees (note 12) 4,029,730 – 4,029,730 Other expenses 98,696 4,310 103,006 Total expenses 12,644,417 298,313 12,942,730 Net gain / (loss) from investments (8,059,249) 309,574 (7,749,675) Net realised gain / (loss) - on investments (note 2f) 61,607,431 (32,686) 61,574,745 - on foreign exchange (notes 2b, 2f) 14,630 1,778 16,408 - on forward foreign exchange contracts (note 2h) 19,036 6,875 25,911 - on futures contracts (267,458) – (267,458) Net change in unrealised appreciation - on investments 13,059,900 485,906 13,545,806 - on forward foreign exchange contracts (note 2h) 57,295 124,946 182,241 Net change in net assets for the year as a result of operations 66,431,585 896,393 67,327,978 Proceeds from subscriptions 95,320,873 176,340 95,497,213 Payments for redemptions (121,817,706) (887,393) (122,705,099) Net proceeds from shares transactions (26,496,833) (711,053) (27,207,886) Dividends paid during the year (note 14) (6,773,779) – (6,773,779) Net Assets at the end of the year 198,732,620 11,002,922 209,735,542

China Southern Dragon Dynamic Fund Net Asset Information as at December 31, 2017


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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, 2017 198,732,620 11,002,922 December 31, 2016 165,571,647 10,817,582 December 31, 2015 200,497,307 23,130,502 Net Asset Value per Share (expressed in share class currency) Class A (USD) Acc December 31, 2017 218.63 – December 31, 2016 148.18 – December 31, 2015 148.89 – Class A (USD) Dis December 31, 2017 163.98 132.81 December 31, 2016 111.14 124.10 December 31, 2015 111.67 121.11 Class A (EUR) Dis December 31, 2017 – 147.49 December 31, 2016 – 156.42 December 31, 2015 – 147.97 Class A (EUR) Hedge Dis December 31, 2017 – –* December 31, 2016 – 117.12 December 31, 2015 – 115.11 Class A (HKD) Acc December 31, 2017 228.42 – December 31, 2016 153.61 – December 31, 2015 154.28 – Class A (HKD) Dis December 31, 2017 178.96 – December 31, 2016 120.35 – December 31, 2015 120.87 – Class A (RMB) Dis December 31, 2017 – –** December 31, 2016 – 129.97 December 31, 2015 – 119.51 * The share class was closed on May 19, 2017 ** The share class was closed on May 11, 2017

China Southern Dragon Dynamic Fund Net Asset Information as at December 31, 2017 (continued)


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China New Balance

Opportunity Fund

CSOP RMB High

Yield Bond Fund

Class I (USD) Acc December 31, 2017 260.39 – December 31, 2016 185.82 – December 31, 2015 184.77 – Class I (USD) Dis December 31, 2017 78.39 128.72 December 31, 2016 74.79 119.94 December 31, 2015 86.10 116.73 Class I (EUR) Dis December 31, 2017 – 149.18 December 31, 2016 – 157.80 December 31, 2015 – 148.89 Class I (HKD) Acc December 31, 2017 223.11 – December 31, 2016 158.27 – December 31, 2015 157.69 – Class I (HKD) Dis December 31, 2017 166.52 – December 31, 2016 118.13 – Class I (RMB) Dis December 31, 2017 – 127.87 December 31, 2016 – 127.44 December 31, 2015 – 116.87 Class R (USD) Acc December 31, 2017 –*** – December 31, 2016 114.14 – December 31, 2015 114.62 – Class R (EUR) Dis December 31, 2017 – –**** December 31, 2016 – 150.00 December 31, 2015 – 142.97 Class R (EUR) Hedge Dis December 31, 2017 – 116.30 December 31, 2016 – 111.79 December 31, 2015 – 111.54 *** The share class was put into dormancy on December 5, 2017 **** The share class was closed on May 19, 2017

China Southern Dragon Dynamic Fund Net Asset Information as at December 31, 2017 (continued)


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China New Balance

Opportunity Fund

CSOP RMB High

Yield Bond Fund

Class V (USD) Acc December 31, 2017 –***** – December 31, 2016 105.21 – December 31, 2015 104.66 – Class V (EUR) Hedge Acc December 31, 2017 157.43 107.28 December 31, 2016 113.85 102.08 December 31, 2015 113.82 100.50 ***** The share class was put into dormancy on June 9, 2017

China Southern Dragon Dynamic Fund Notes to the Financial Statements as at December 31, 2017

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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, 2017, 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.

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.

China Southern Dragon Dynamic Fund Notes to the Financial Statements as at December 31, 2017 (continued)

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2. Significant Accounting policies (continued)

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, 2017 are:

1 USD = 6.516908 CNH* 1 USD = 0.834133 EUR 1 USD = 7.815492 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) Dividend 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, 2017. 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”.

i) Futures contracts

The futures contracts are valued at the last available settlement price or the last available market price of the instruments. The change in unrealised gain or loss on futures contracts is disclosed in the Statement of Operations and Changes in Net Assets under “net change in unrealised appreciation /(depreciation) on futures contracts”. The realised gain / (loss) on futures contracts is disclosed in the Statement of Operations and Changes in Net Assets under “net realised gain/(loss) on futures 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 maximum of 0.05 % per year, subject to an annual minimum fee of EUR 20,000 for the SICAV. 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.


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

Company Total Commission Paid Bloomberg Tradebook Hong Kong Limited HKD 432,587 USD 6,720 China International Capital Corporation Hong Kong Securities Limited HKD 999,417 USD 16,155 UBS Securities Asia Limited HKD 54,692

12. Transaction costs

For the year ended December 31, 2017, the SICAV incurred transaction costs related to purchase or sale of financial instruments (securities and derivatives) as follows:

China New Balance Opportunity Fund: USD: 4,029,730 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, 2017, 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

USD 9,448* EUR 7,900.00 February 14, 2018 Citibank London (50) USD 11,607* EUR 9,800.00 February 14, 2018 Citibank London (175) EUR 176,500* USD 206,809.99 February 14, 2018 Citibank London 5,385 EUR 6,200* USD 7,340.62 February 14, 2018 Citibank London 113 5,273

* 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 year-end before netting and hedging arrangements amounts to USD 240,084.


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13. Outstanding forward foreign exchange contracts (continued) As at December 31, 2017, 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

USD 12,494* EUR 10,500.00 January 18, 2018 Citibank London (109) EUR 249,851* USD 295,739.27 January 18, 2018 Citibank London 4,170 USD 15,146* EUR 13,000.00 January 18, 2018 Citibank London (458) EUR 789,717* USD 934,733.05 January 19, 2018 Citibank London 13,266 USD 46,700* EUR 40,000.00 January 19, 2018 Citibank London (1,315) 15,554

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

Total commitment on open forward foreign exchange contracts at year-end before netting and hedging arrangements amounts to USD 1,320,626.

As at December 31, 2017, 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, 2017.

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

currency Class I (USD) Dis 21/12/2017 USD 26.3500 6,773,779

15. Other important information

On April 13, 2016, the shares of the company Sound Global Limited had been suspended on the Stock Exchange, due to discrepancies in balances of bank accounts of its subsidiaries. On February 1, 2018, Sound Global Limited announced that the shares would remain suspended until further notice, as the reviewer, engaged on January 19, 2017 to perform investigation services in respect of these discrepancies, was unable to identify the reason for and particulars of the discrepancies.

On February 13, 2018, the Board of Directors of the SICAV has approved the application of a discount of 100% on the valuation of the security Sound Global Limited held by the China New Balance Opportunity Fund, representing 0.25% of the NAV as at December 31, 2017, for the NAV valuation date from February 9 onwards. This discount represents a further 50% write down since the security was last written off as of November 23, 2016.

China Southern Dragon Dynamic Fund Schedule of Investments (expressed in United States dollars) As at December 31, 2017

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China New Balance Opportunity Fund Quantity Description Market Value % NAV Transferable securities and money market instruments admitted to an official exchange listing HKD Equities

735,000 AAC Acoustic Technologies Holdings Inc. 13,109,731 6.60 2,600,000 Agile Property Holdings Limited 3,945,497 1.99

11,400,000 Aluminum Corp. of China Limited 8,153,805 4.10 3,935,000 Byd Electronic Company Limited 8,569,352 4.32 3,000,000 China Animal Healthcare Limited * – – 2,400,000 China Molybdenum Company Limited 1,541,554 0.78

11,600,000 China Oriental Group Company Limited 8,653,070 4.35 2,300,000 China Taiping Insurance Holdings Company Limited 8,622,618 4.34 4,600,000 China Yongda Automobiles 5,291,286 2.66

10,000,000 China ZhengTong Auto Services Holdings Limited 10,120,924 5.10 7,000,000 Cifi Holdings Group Company Limited 4,218,544 2.12 3,700,000 Country Garden Holdings Company Limited 7,053,939 3.54

49,600,000 GCL Poly Energy Holdings Limited 8,884,917 4.47 1,900,000 Guangzhou R&f Properties Company Limited 4,283,544 2.16

495,000 Hong Kong Exchanges and Clearing Limited 15,187,912 7.64 830,000 Mgm China Holdings Limited 2,511,614 1.26

8,000,000 MMG Limited 3,971,599 2.00 1,200,000 New China Life Insurance Company - H 8,199,100 4.13 1,320,000 Ping An Insurance Group Company of China Limited 13,739,633 6.90 1,300,000 Sands China Limited 6,711,670 3.38 4,200,000 Semiconductor Manufacturing International Corp. 7,265,570 3.66 4,800,000 Shougang Fushan Resources Group Limited 1,031,797 0.52 4,600,000 SJM Holdings Limited 4,120,022 2.07 2,600,000 Sound Global Limited ** 495,682 0.25

625,000 Sunny Optical Technology Group Company Limited 7,988,941 4.02 337,000 Tencent Holdings Limited 17,506,512 8.81

2,200,000 Truly International Holdings 951,444 0.48 4,000,000 Value Partners Group Limited 4,247,973 2.14 1,600,000 ZTE Corp. - H 6,008,579 3.02

Total HKD Equities 192,386,829 96.81 USD Equities

20,000 Belgene Limited - ADR 1,957,000 0.98 19,000 China Lodging Group Limited 2,673,110 1.35

Total USD Equities 4,630,110 2.33 Total Transferable securities and money market instruments admitted to an official exchange listing 197,016,939 99.14 Total Investments in Securities 197,016,939 99.14 Other Net Assets 1,715,681 0.86 Total Net Assets 198,732,620 100.00 * Illiquid security ** Please see note 15 The accompanying notes form an integral part of these financial statements.

China Southern Dragon Dynamic Fund Schedule of Investments (expressed in United States dollars) (continued) As at December 31, 2017


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CSOP RMB High Yield Bond Fund Nominal Value Description Market Value % NAV Transferable securities and money market instruments admitted to an official exchange listing CNY Bonds

2,000,000 Air Liquide Finance 3.950% 19/Sep/2018 306,569 2.79 3,000,000 Australia & New Zealand 4.100% 8/Jun/2018 460,122 4.18

2,000,000 Australia & New Zealand Banking Group Limited FRN 30/Jan/2025 307,631 2.80

2,000,000 BP Capital Markets 3.950% 8/Oct/2018 306,255 2.78 3,000,000 BSH Hausgerate GmbH 4.000% 28/Sep/2018 * 459,766 4.18 3,000,000 Caterpillar Financial Services Corp. 3.550% 23/Jun/2018 459,018 4.17 2,000,000 CNI Capital Limited 4.300% 11/Nov/2019 304,129 2.76 3,000,000 Fonterra Cooperative Group Limited 3.600% 29/Jan/2019 457,809 4.16 2,600,000 Icbcil Finance Company Limited 3.900% 18/Jun/2018 398,038 3.62

5,000,000 Industrial & Commercial Bank of China Limited FRN 29/Dec/2049 784,087 7.13

3,000,000 Sinostrong International 4.000% 28/May/2018 459,334 4.17 1,000,000 TMB Bank 5.500% 9/Mar/2018 * 155,034 1.41

Total CNY Bonds 4,857,792 44.15 USD Bonds

200,000 Central China Real Estate Limited 8.000% 28/Jan/2020 204,317 1.86 800,000 China Fortune Land Development 6.500% 21/Dec/2020 802,205 7.29 200,000 Country Garden Holdings Company Limited 7.250% 4/Apr/2021 207,270 1.88 400,000 Guanghui Investment 7.875% 30/Mar/2020 398,200 3.62 400,000 Hilong Holding Limited 7.250% 22/Jun/2020 396,667 3.61 200,000 Huachen Energy 6.625% 18/May/2020 194,802 1.77 400,000 Kwg Property Holding Limited 8.975% 14/Jan/2019 410,423 3.73 400,000 Maoye International Holdings Limited 7.000% 23/Oct/2018 403,811 3.67 400,000 Times Property Holdings Limited 11.450% 5/Mar/2020 428,542 3.89 500,000 Panda Green Energy 8.250% 25/Jan/2020 505,625 4.60

Total USD Bonds 3,951,862 35.92 CNY Supranationals, Governments and Local Public Authorities, Debt Instruments

1,000,000 Export Development Canada 3.530% 18/Feb/2018 153,315 1.39 2,000,000 Export-Import Bank of Korea 4.400% 3/Mar/2018 307,968 2.80 2,000,000 Export-Import Bank of Korea 4.100% 6/Aug/2018 306,463 2.78 1,000,000 Kreditanstalt fuer Wiederaufbau 4.250% 20/Mar/2018 153,578 1.40

Total CNY Supranationals, Governments and Local Public Authorities, Debt Instruments 921,324 8.37 Total Transferable securities and money market instruments admitted to an official exchange listing 9,730,978 88.44 * Illiquid security

China Southern Dragon Dynamic Fund Schedule of Investments (expressed in United States dollars) (continued) As at December 31, 2017


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CSOP RMB High Yield Bond Fund (continued) Nominal Value Description Market Value % NAV

Other transferable securities and money market instruments CNY Bonds

2,000,000 Cooperatieve Rabobank 5.780% 28/Dec/2018 311,671 2.83

Total CNY Bonds 311,671 2.83 Total Other transferable securities and money market instruments 311,671 2.83 Other undertakings for collective investments

CNY Funds

8,808 CSOP Shen Zhou RMB I 14,070 0.13

Total CNY Funds 14,070 0.13 Total Other undertakings for collective investments 14,070 0.13 Total Investments in Securities 10,056,719 91.40 Other Net Assets 946,203 8.60 Total Net Assets 11,002,922 100.00

China Southern Dragon Dynamic Fund Economic and Geographical Classification As at December 31, 2017

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China New Balance Opportunity Fund Economic Classification as at December 31, 2017 Sector % NAV Insurance 15.37 Real estate 9.81 Financial services 9.78 Internet software and services 8.81 Leisure and entertainment 8.06 Retail 7.76 Mining (non precious) 7.40 Telecommunication equipment 7.34 Electronic equipment 7.08 Energy - alternate sources 4.47 Iron and steel 4.35 Miscellaneous machinery 4.02 Semiconductors 3.66 Pharmaceuticals 0.98 Environment control and services 0.25 Total Investments in Securities 99.14 Other Net Assets 0.86 Total Net Assets 100.00

Geographical Classification as at December 31, 2017

Country % NAV Cayman Islands 49.94 China 25.41 Hong Kong 23.54 Singapore 0.25 Total Investments in Securities 99.14 Other Net Assets 0.86 Total Net Assets 100.00

China Southern Dragon Dynamic Fund Economic and Geographical Classification As at December 31, 2017

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CSOP RMB High Yield Bond Fund

Economic Classification as at December 31, 2017

Sector % NAV Banks 21.15 Real estate 18.65 Energy - alternate sources 6.37 Home furnishings 4.18 Governments 4.18 Auto manufacturers 4.17 Machinery 4.17 Food 4.16 Stores 3.67 Retail 3.62 Financial services 3.62 Oil and gas producers 3.61 Chemicals 2.79 Oil and gas services 2.78 Industrials 2.76 Government guaranteed bonds 1.39 Open-ended Funds 0.13 Total Investments in Securities 91.40 Other Net Assets 8.60 Total Net Assets 100.00

Geographical Classification as at December 31, 2017

Country % NAV Cayman Islands 32.86 China 12.52 Australia 6.98 Republic of Korea (South) 5.58 Germany 5.58 Bermuda 4.60 United States 4.17 New Zealand 4.16 Hong Kong 3.75 Netherlands 2.83 France 2.79 United Kingdom 2.78 Thailand 1.41 Canada 1.39 Total Investments in Securities 91.40 Other Net Assets 8.60 Total Net Assets 100.00

China Southern Dragon Dynamic Fund Unaudited Supplementary Information

25

Global Exposure 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 2017, the SICAV did not enter into securities financing transactions and total return swaps. Remuneration policies and practices 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, the 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. Within the Management Company, these categories of staff represents 22 persons. 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. The following table shows the fixed and variable remuneration in 2017 for the Identified Staff (22 persons), who is fully or partly involved in the activities of all the funds managed by the Management Company.

China Southern Dragon Dynamic Fund Unaudited Supplementary Information (continued)

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Staff expenses split into fixed and variable remuneration Wages and salaries

a. Fixed b. Variable

S = Senior Management R = Risk takers, which includes staff members whose professional activities can exert material influence on UCITS or AIFs managed by LAM C = Staff engaged in control functions (other than senior management) responsible for risk management, compliance, internal audit and similar functions O = Any other staff member receiving total remuneration that takes them into the same remuneration bracket as senior management and risk-takers, whose professional activities have a material impact on LAM’s risk profile. 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.

Staff expenses broken down by categories of staff subject to UCITS V pay rules (in EUR): Staff code

Fixed remuneration Variable Remuneration Total

S 1,597,571.31 735,266.46 2,332,837.77 R 440,736.59 25,245.37 465,981.96 C 561,874.25 7,000.00 568,874.25 O 0 0 0

China Southern Dragon Dynamic Fund Global Exposure

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

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

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