# 7. TRANSACTIONS WITH THE TRUSTEE, MANAGER AND CONNECTED PERSONS (Continued)

# (b) Trustee fee and Registrar’s fee

The Trustee is entitled to receive a trustee fee of up to 1% per annum of the net asset value of the Sub-Fund, which accrued daily and calculated as at each dealing day and payable monthly in arrears. For the year ended December 2016 and 2015, the trustee fee is calculated as a percentage per annum of the net asset value of the Sub-Fund at the rate as follows, subject to a monthly minimum of RMB40,000:

<table><tr><td></td><td>Trustee fee percentage 
per annum</td></tr><tr><td>For first RMB200 million</td><td>0.16%</td></tr><tr><td>For next RMB1,000 million</td><td>0.14%</td></tr><tr><td>For next RMB1,000 million</td><td>0.12%</td></tr><tr><td>For next RMB1,000 million</td><td>0.10%</td></tr><tr><td>Thereafter</td><td>0.08%</td></tr></table>

The Trustee’s fee is inclusive of fees payable to The Hongkong and Shanghai Banking Corporation Limited (the “Custodian”) and HSBC Bank (China) Company Limited (the “PRC Custodian”).

The Trustee, acting as the Registrar, is also entitled to a fee of RMB120 (2015: RMB120) per participating dealer per transaction.

# (c) Financial assets

The investments and bank balances of the Sub-Fund held with related parties of the Trustee are:

<table><tr><td rowspan="2"></td><td>2016</td><td>2015</td></tr><tr><td>RMB</td><td>RMB</td></tr><tr><td>Investments</td><td></td><td></td></tr><tr><td>HSBC Bank (China) Company Limited</td><td>17,177,372,883</td><td>18,232,458,944</td></tr><tr><td>Bank balances</td><td></td><td></td></tr><tr><td>The HonkShgondkig an anhigai BannCg oridporaton Limte</td><td>27,455,761</td><td>110,734,726</td></tr><tr><td>HSBC Bank (China) Company Limited</td><td>12,822,162</td><td>100,388,864</td></tr><tr><td></td><td>40,277,923</td><td>211,123,590</td></tr></table>

Interest income amounted to RMB439,200 (2015: RMB1,266,203) was earned on these bank balances for the year ended 31 December 2016 and 2015.

# (d) License fee

According to the Trust Deed dated 25 July 2012, as amended, the license fees and expenses payable to the owner of an index for the use of such index shall be payable out of the Sub-Fund. Prior to 1 January 2015, the FTSE index license fees were paid by the Manager of the Sub-Fund. Pursuant to the letter dated 16 November 2015 between the Trustee and the Manager of the Sub-Fund, the Manager has decided that the license fee shall be paid out of the Sub-Fund commencing from 1 January 2015 and the Manager was reimbursed by the Sub-Fund for the license fee of RMB19,918,378 which was paid out by the Manager from 1 January 2015 to 16 November 2015. For the year ended 31 December 2016 and 2015, the amount of RMB19,481,156 represents the license fee (2015: the amount of RMB22,984,953 represents the license fee of the Sub-Fund of which RMB19,918,378 was the reimbursement to the Manager for their payment of the license fee for the Sub-Fund for 1 January 2015 to 16 November 2015).

# 8. FINANCIAL RISK MANAGEMENT

The objective of the Sub-Fund is to provide investment results that, before deduction of fees and expenses, closely correspond to the performance of the FTSE China A50 Index. The Sub-Fund’s activities may expose it to a variety of risks including but not limited to: market risk (including market price risk, interest rate risk and currency risk), credit and counterparty risk and liquidity risk which are associated with the markets in which the Sub-Fund invests.

The following is a summary of the main risks and risk management policies.

# (a) Market risk

# (i) Market price risk

Market price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual instrument or factors affecting all instruments in the market.

The Sub-Fund is designated to track the performance of the FTSE China A50 Index, therefore the exposures to market risk in the Sub-Fund will be substantially the same as the tracked index. The Manager manages the Sub-Fund’s exposures to market risk by ensuring that the key characteristics of the portfolio, such as security weight and industry weight, are closely aligned with the characteristics of the tracked index.

As at 31 December, the Sub-Fund’s investments were concentrated in the following industries:

<table><tr><td rowspan="3"></td><td colspan="2">2016</td><td colspan="2">2015</td></tr><tr><td>Fair value</td><td>% of net 
asset value</td><td>Fair value</td><td>% of net
asset value</td></tr><tr><td>RMB</td><td></td><td>RMB</td><td></td></tr><tr><td>Listed equities in PRC – by 
industry</td><td></td><td></td><td></td><td></td></tr><tr><td>Basic materials</td><td>153,662,997</td><td>0.89</td><td>293,798,572</td><td>1.60</td></tr><tr><td>Consumer goods</td><td>2,045,331,472</td><td>11.90</td><td>1,353,533,151</td><td>7.38</td></tr><tr><td>Consumer Services</td><td>-</td><td>-</td><td>252,164,110</td><td>1.38</td></tr><tr><td>Financials</td><td>11,903,756,589</td><td>69.24</td><td>12,585,400,577</td><td>68.64</td></tr><tr><td>Health Care</td><td>88,029,586</td><td>0.51</td><td>86,329,057</td><td>0.47</td></tr><tr><td>Industrials</td><td>2,175,816,158</td><td>12.65</td><td>2,630,961,791</td><td>14.36</td></tr><tr><td>Oil & gas</td><td>402,492,070</td><td>2.34</td><td>404,247,010</td><td>2.21</td></tr><tr><td>Technology</td><td>35,907,130</td><td>0.21</td><td>-</td><td>-</td></tr><tr><td>Telecommunications</td><td>-</td><td>-</td><td>260,833,401</td><td>1.42</td></tr><tr><td>Utilities</td><td>372,376,881</td><td>2.17</td><td>365,191,275</td><td>2.00</td></tr><tr><td></td><td>17,177,372,883</td><td>99.91</td><td>18,232,458,944</td><td>99.46</td></tr></table>

The Sub-Fund held 50 out of 50 (2015: 50 out of 50) constituent securities comprising the FTSE China A50 Index. The Sub-Fund is therefore exposed to substantially the same market price risk as the FTSE China A50 Index.