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CSOP Hang Seng China Enterprises Index Daily (2X) Leveraged Product Summary

Core Information

• Product Name: CSOP Hang Seng China Enterprises Index Daily (2X) Leveraged Product
• Sub-fund of: CSOP Leveraged and Inverse Series (an umbrella unit trust established in Hong Kong)
• Stock Code: 7588 (changed from 7388 on 25 June 2019)
• Inception Date: 10 March 2017
• Index Benchmark: Hang Seng China Enterprises Index (H-shares Index)
• Strategy: Futures-based replication
• Leverage Factor: -2x (i.e., it seeks to deliver twice the inverse daily performance of the Index)
• Year-Ended: 31 December 2021
• Audited by: PricewaterhouseCoopers (PwC)
• Approved by: Manager (CSOP Asset Management Limited) and Trustee (HSBC Institutional Trust Services (Asia) Limited) on 28 April 2022

Performance Overview

• Dealing NAV per Unit (as of 31 December 2021): HKD 5.7598
• Units Outstanding: 6,400,000
• Total Assets Under Management: Approximately HKD 36.9 million
• Performance of the Sub-Fund (Year Ended 31 December 2021): +33.05%
• Performance of the Index (Year Ended 31 December 2021): -23.30%
• Price Return of HKD Counter (7588): +34.34%

Key Financial Highlights

Statement of Financial Position (as of 31 December 2021)

• Total Assets: HKD 246,776,123
• Total Liabilities: HKD 308,374
• Net Assets Attributable to Unitholders: HKD 246,467,749

Statement of Comprehensive Income (Year Ended 31 December 2021)

• Total Net Loss: HKD 72,570,826
• Total Comprehensive Loss: HKD 75,835,656
• Management Fee Paid: HKD 1,779,274
• Transaction Costs Paid: HKD 548,574
• Audit Fee: HKD 36,827
• Other Operating Expenses Paid: HKD 905,170

Statement of Changes in Net Assets Attributable to Unitholders (Year Ended 31 December 2021)

• Net Assets at Beginning of Year: HKD 226,242,474
• Net Increase from Unit Transactions: HKD 96,060,931
• Net Assets at End of Year: HKD 246,467,749

Statement of Cash Flows (Year Ended 31 December 2021)

• Net Cash Used in Operating Activities: HKD (4,315,086)
• Net Cash Generated from Financing Activities: HKD 96,060,931
• Net Increase in Cash and Cash Equivalents: HKD 91,745,845
• Cash and Cash Equivalents at End of Year: HKD 143,047,287

Manager and Trustee Responsibilities

Manager (CSOP Asset Management Limited)

• Prepares financial statements in accordance with IFRSs.
• Ensures the Sub-Fund is managed in line with the Trust Deed and SFC Code.
• Implements a monthly futures roll strategy on H-shares Index Futures.
• Maintains internal controls to prevent and detect fraud and irregularities.
• Assumes responsibility for the Sub-Fund's ongoing operations unless liquidation is required.

Trustee (HSBC Institutional Trust Services (Asia) Limited)

• Ensures the Sub-Fund is managed in accordance with the Trust Deed and SFC Code.
• Safeguards the Sub-Fund's assets and rights.
• Reports to unitholders if the Manager fails to comply with the Trust Deed.

Audit Report Highlights

• Auditor: PricewaterhouseCoopers
• Opinion: The financial statements give a true and fair view in accordance with IFRSs.
• Key Audit Matters:
  • Existence and valuation of investments and derivative financial instruments.
  • Occurrence and accuracy of investment loss.
  • The auditor performed procedures to verify the fair value of investments and derivatives.
  • Confirmed that no material exceptions were found during testing.
• Independence: The auditor is independent of the Sub-Fund in accordance with IESBA Code.
• Going Concern: The Management is responsible for assessing the Sub-Fund's ability to continue as a going concern.

Investment Portfolio and Derivatives

• Investments: Primarily in H-shares Index Futures.
• Derivative Financial Instruments: Used to replicate the Index performance.
• Investment Value (as of 31 December 2021): HKD 53,823,553
• Derivative Financial Instruments Value (as of 31 December 2021): HKD 4,500,961
• Net Realised Loss (Year 2021): HKD 62,936,861
• Net Unrealised Loss (Year 2021): HKD 9,674,927
• Total Investment Loss (Year 2021): HKD 72,611,788

Liquidity and Portfolio Rebalance

• Average Daily Turnover (December 2021): HKD 2.2 million
• Futures Rolls: 58 monthly futures rolls since inception
• Roll Strategy: Monthly roll on the SEHK shortly before expiration of the nearest month futures contract

Sub-fund Structure and Management

• Trust Structure: Umbrella unit trust with multiple sub-funds.

• Sub-funds as of 31 December 2021:

  • CSOP Hang Seng China Enterprises Index Daily (2X) Leveraged Product
  • CSOP Hang Seng Index Daily (2X) Leveraged Product
  • CSOP Hang Seng Index Daily (-1X) Inverse Product
  • CSOP Hang Seng China Enterprises Index Daily (-2X) Inverse Product
  • CSOP Hang Seng Index Daily (-2X) Inverse Product
  • CSOP NASDAQ-100 Index Daily (-2X) Inverse Product
  • CSOP Hang Seng Tech Index Daily (2X) Leveraged Product
  • CSOP Hang Seng Tech Index Daily (-2X) Inverse Product

• Units Issued and Redeemed:

  • 2021: Units issued 37,600,000; units redeemed (12,000,000)
  • 2020: Units issued 37,600,000; units redeemed (30,400,000)

Conclusion

The CSOP Hang Seng China Enterprises Index Daily (2X) Leveraged Product is a futures-based ETF designed to replicate the two times inverse daily performance of the Hang Seng China Enterprises Index. It is managed by CSOP Asset Management Limited and overseen by HSBC Institutional Trust Services (Asia) Limited. The financial statements for the year ended 31 December 2021 were audited by PricewaterhouseCoopers and found to give a true and fair view of the Sub-Fund's financial position and performance. The Sub-Fund had a net loss of HKD 72,570,826 for the year, with total assets of HKD 246,776,123 and liabilities of HKD 308,374. The product remained liquid with an average daily turnover of HKD 2.2 million in December 2021.