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CSOP CSI 500 ETF Summary

Core Content

The CSOP CSI 500 ETF is a sub-fund of the CSOP ETF Series, an umbrella unit trust established in Hong Kong under the Securities and Futures Ordinance (Cap. 571). It was launched on 19 March 2020 and is listed on the Stock Exchange of Hong Kong Limited (SEHK) with stock codes 83005 (RMB counter) and 3005 (HKD counter). The ETF seeks to replicate the performance of the CSI 500 Index using a combination of physical and synthetic representative sampling strategies.

The fund is managed by CSOP Asset Management Limited (the Manager) and held by HSBC Institutional Trust Services (Asia) Limited (the Trustee). The Manager has obtained QFI status in the PRC mainland, enabling direct investment in A-Shares through QFI and the Stock Connect program. The fund may use up to 50% of its NAV in financial derivative instruments (FDIs), specifically unlisted funded total return swaps, to replicate the index performance.

Main Points

Investment Strategy

• Physical representative sampling strategy: The fund invests 50% to 100% of its NAV in a representative portfolio of securities that closely correlate with the CSI 500 Index.
• Synthetic representative sampling strategy: Up to 50% of the fund's NAV may be invested in FDIs, particularly funded total return swaps, to achieve exposure to the index's performance.

Fund Performance

• As of 30 June 2022:
  • Dealing NAV per unit (RMB): 17.5522
  • Units outstanding: 2,000,000
  • Total assets under management: Approximately RMB 35.1 million
  • Performance of RMB counter: -12.74% compared to the index's -11.36%
  • Price return of RMB counter: -13.00%
• The fund's performance differences are primarily due to fees and expenses.

Exchange Liquidity

• RMB counter (83005): Average daily turnover of RMB 47.8 thousand in June 2022.
• HKD counter (03005): Average daily turnover of HKD 51.2 thousand in June 2022.

Unit Transactions

• Units in issue at the beginning of the period (30 June 2022): 2,800,000
• Units redeemed: (800,000)
• Units in issue at the end of the period: 2,000,000
• Net assets attributable to unitholders per unit (30 June 2022): 17.2183
• Net assets attributable to unitholders per unit (31 December 2021): 19.8323

Financial Statements

• Condensed Statement of Financial Position (30 June 2022):
  • Total assets: RMB 35,876,839
  • Total liabilities: RMB 1,440,337
  • Net assets attributable to unitholders: RMB 34,436,502
• Condensed Statement of Comprehensive Income (30 June 2022):
  • Total comprehensive (loss)/income: RMB -6,555,834
• Condensed Statement of Changes in Net Assets:
  • Net assets at the beginning of the period: RMB 55,530,536
  • Net assets at the end of the period: RMB 34,436,502
• Condensed Statement of Cash Flows:
  • Net increase in cash and cash equivalents: RMB 284,129
  • Cash and cash equivalents at the end of the period: RMB 793,892

Key Information

Accounting Policies

• The fund's financial statements are prepared in accordance with HKAS 34 "Interim Financial Reporting" for the six months ended 30 June 2022, and HKFRS for the year ended 31 December 2021.
• The fund applies the amortization method for establishment costs, which results in a decrease in net assets compared to the prospectus methodology.
• Establishment cost adjustments:
  • 30 June 2022: RMB 667,943
  • 31 December 2021: RMB 789,693

Taxation

• Hong Kong profits tax: Exempt due to its status as a collective investment scheme under the SFC Code.
• PRC withholding tax:
  • Dividend income: 10% applied on A-Shares.
  • Taxation for 30 June 2022: RMB 20,259
  • Taxation for 31 December 2021: RMB 31,430

Risk Management

• The fund is exposed to market risk, interest rate risk, currency risk, credit risk, and liquidity risk.
• Market price risk: The fund holds 477 out of 500 constituent securities of the CSI 500 Index as of 30 June 2022, with 50.11% of its assets invested in a funded total return swap based on the CSI 500 Net Total Return Index.
• Sensitivity analysis:
  • If the CSI 500 Index increases by 10%, the fund's operating profit would increase by approximately RMB 3,506,143.
  • If the index decreases by 10%, the fund's operating profit would decrease by the same amount.

Related Party Transactions

• Management fee: 0.99% per annum of the fund's NAV, accrued daily and paid monthly in arrears.
• Trustee and Registrar's fees: Included in the management fee, with the Trustee also being reimbursed for out-of-pocket expenses.
• Investments held with related parties:
  • HSBC Hongkong and Shanghai Banking Corporation Limited: RMB 15,376,812 (30 June 2022)
  • HSBC Bank (China) Company Limited: RMB 2,427,438 (30 June 2022)
• Interest income from these bank balances: RMB 1,052 (for the period ended 30 June 2022)

Portfolio Rebalancing

• The fund has undergone five semi-annual index rebalances since inception.
• As of 30 June 2022, the fund's investments were concentrated in the following industries:
  • Basic materials: 10.52% of net asset value
  • Consumer Discretionary: 5.79%
  • Consumer Staples: 3.03%
  • Energy: 2.64%
  • Financials: 4.12%
  • Health care: 5.03%
  • Industrials: 8.86%
  • Real Estate: 1.72%
  • Technology: 6.22%
  • Telecommunications: 2.04%
  • Utilities: 1.73%

Conclusion

The CSOP CSI 500 ETF is a well-structured ETF that tracks the CSI 500 Index using a combination of physical and synthetic strategies. Despite a decline in performance, the fund maintains steady liquidity and adheres to standard accounting and tax policies. The fund's risk profile is aligned with the index, and its related party transactions are transparent and conducted on commercial terms.