HSBC Multi Assets Defensive Fund Interim Report - H1 2020

Transcription

1. INTERIM REPORT – H1 2020 - HSBC Multi-Assets Defensive Fund - *FUND REPORTS ARE AVAILABLE UPON REQUEST FREE OF CHARGE
2. Table of Contents A . Management Information ........................................................................................................ 3 B. Detailed Fundamental, Material, Notifiable, or Significant Changes Made on the Fund’s Terms and Conditions During the Year................................................................................................. 4 C. Investment Activities of the Period ........................................................................................... 4 D. Commentary on Investment Fund’s Performance During the Period ......................................... 4 E. Valuation or Pricing Errors during the Year ............................................................................... 4 F. Any Additional Information that Might Enable Unit Holders to Make Informed Decisions ....... 4 G. Distribution of Management Fees ............................................................................................ 4 H. Special Commission Received by Fund Manager ....................................................................... 5 2
3. A . Management Information HSBC Multi-Assets Defensive Fund 1. Fund Name 2. Fund Manager Name Address 3. Fund Sub-Manager (if any) Name Address 4. Advisor (if any) Name Address 3 HSBC Saudi Arabia 7267 Olaya, AlMurooj Riyadh 12283-2255 Kingdom of Saudi Arabia Phone: 920022688 Fax: +966112992385 Website: www.hsbcsaudi.com None None
4. B . Detailed Fundamental, Material, Notifiable, or Significant Changes Made on the Fund’s Terms and Conditions During the Period Date Change 11-Mar-20 Appointment of Ms. Areej Almokbel as a new independent fund board member and updating the financial information of the fund and HSBC SA 21-May-20 Resignation of Ms. Areej Almokbel as independent fund board member C. Investment Activities of the Period During the 1st half of 2020, in the Murabaha Funds, Sukuk Fund and Sukuk space, the HSBC MultiAssets Defensive Fund (‘Fund’) primarily had exposure to HSBC SAR Murabaha Fund, HSBC US Dollar Murabaha Fund, HSBC Sukuk Fund and Bank Albilad Sukuk; whereas, in Equity Mutual Funds space the Fund primarily had exposure to HSBC Global Equity Index Fund, HSBC Saudi Companies Equities Fund (investment exited during the period), HSBC Global Emerging Market Equity Fund and HSBC GCC Equity Fund. D. Commentary on Investment Fund’s Performance During the Period During the 1st half of 2020, the underlying Mutual funds held by the Fund posted mixed performances. During the period, Covid-19 introduced a lot of volatility in the markets; however, both developed and emerging markets posted surprisingly swift recoveries after the initial correction in the markets. In the 1st half 2020, the HSBC Multi-Assets Defensive Fund recorded a decline of 1.90%, as opposed to benchmark’s decline of 0.21%. For the underlying Mutual Funds held in the Fund as of end of 1st half of 2020, the top two Mutual funds (in terms of their respective positive performances) were HSBC Global Equity Index Fund and HSBC SAR Murabaha Fund. During the period, the HSBC Global Equity Index Fund posted a return of 3.98%; whereas HSBC SAR Murabaha Fund posted an annualized return of 1.74%. E. Valuation or Pricing Errors during the period None. F. Any Additional Information that Might Enable Unit Holders to Make Informed Decisions that are Based on Sufficient Information about the Fund During the Year There is no additional information to be disclosed; however, investors need to read and understand the Fund’s Terms and Conditions and all related documents and/or obtain advice from their own legal, regulatory, tax, and/or investment advisors. G. Distribution of Management Fees (only if the fund is substantially investing in other funds) Fund International Equity Funds 4 Fees
5. Global Equity Index Fund 1 .55% Global Emerging Markets Equity Fund 2.30% GCC Equity Fund 2.30% Local Equity Funds HSBC Saudi Companies Equity Fund 1.70% HSBC Saudi Freestyle Equity Fund 1.70% Murabaha Funds Saudi Riyal Murabaha Fund 0.45% US Dollar Murabaha Fund 0.35% Other International Funds Sukuk Fund 1.00% H. Special Commission Received by Fund Manager (if any, including what they are and the manner in which they were utilized) None. 5
6. HSBC MULTI-ASSETS DEFENSIVE FUND (An open-ended mutual fund) Managed by HSBC Saudi Arabia Interim condensed financial statements For the six-month period ended 30 June 2020 together with the Independent auditor’s review report
7. HSBC MULTI-ASSETS DEFENSIVE FUND (An open-ended mutual fund) Managed by HSBC Saudi Arabia Interim condensed financial statements INDEX PAGE Independent auditor’s review report 1 Interim condensed statement of financial position 2 Interim condensed statement of comprehensive income 3 Interim condensed statement of changes in net assets (equity) attributable to the unitholders 4 Interim condensed statement of cash flows 5 Notes to the interim condensed financial statements 6-12
9. HSBC MULTI-ASSETS DEFENSIVE FUND (An open-ended mutual fund) Managed by HSBC Saudi Arabia Interim condensed statement of financial position As at 30 June 2020 (Amounts in Saudi Arabian Riyal) As at 30 June Note 2020 (Unaudited) ASSETS Cash at bank Investments at fair value through profit or loss (FVTPL) Investments at fair value through other comprehensive income (FVOCI) Receivables and advances TOTAL ASSETS LIABILITIES Accrued expenses As at 31 December 2019 (Audited) 10 11 1,488,131 97,870,860 4,034,180 107,344,609 14 6,015,975 547,517 105,922,483 6,802,482 244,428 118,425,699 13 1,136,122 240,282 1,136,122 240,282 104,786,361 118,185,417 6,821,070 7,547,435 TOTAL LIABILITIES NET ASSETS (EQUITY) ATTRIBUTABLE TO THE UNITHOLDERS Units in issue (numbers) Net assets value (equity) per unit – Dealing 18 15.36 15.66 Net assets value (equity) per unit – IFRS 18 15.36 15.66 The accompanying notes 1 to 21 form an integral part of these interim condensed financial statements.
10. HSBC MULTI-ASSETS DEFENSIVE FUND (An open-ended mutual fund) Managed by HSBC Saudi Arabia Interim condensed statement of comprehensive income (Unaudited) For the six-month period ended 30 June 2020 (Amounts in Saudi Arabian Riyal) Note INVESTMENT INCOME Net (loss) / gain on investments at FVTPL Net realised gain on sale of investment at FVOCI Exchange gain / (loss), net Dividend income Special commission income from investments measured at FVOCI TOTAL INVESTMENT (LOSS) / INCOME For the six-month period ended 30 June 2020 2019 12 (2,691,092) 33,660 2,888 270,899 126,614 (2,257,031) 5,436,528 -(799) 537,966 147,028 6,120,723 15 256,418 (3,404) 253,014 287,104 37,121 324,225 (2,510,045) 5,796,498 -- 6,504 Transfer of fair value reserves on investment at FVOCI to income statement – debt instruments (1,639) -- Movement in fair value / allowance for expected credit losses on investments at FVOCI – debt instruments (3,404) 37,121 (2,515,088) 5,840,123 EXPENSES Management fees (Reversal) / provision for expected credit losses TOTAL EXPENSES NET (LOSS) / INCOME FOR THE PERIOD OTHER COMPREHENSIVE INCOME Net unrealized gain on investments at FVOCI – debt instruments TOTAL COMPREHENSIVE (LOSS) / INCOME FOR THE PERIOD The accompanying notes 1 to 21 form an integral part of these interim condensed financial statements.
11. HSBC MULTI-ASSETS DEFENSIVE FUND (An open-ended mutual fund) Managed by HSBC Saudi Arabia Interim condensed statement of changes in net assets (equity) attributable to the unitholders (Unaudited) For the six-month period ended 30 June 2020 (Amounts in Saudi Arabian Riyal) For the six-month period ended 30 June 2019 2020 Net assets (equity) attributable to the unitholders as at the beginning of the period 118,185,417 122,183,025 (2,510,045) 5,796,498 -- 6,504 Transfer of fair value reserves on investment at FVOCI to income statement – debt instruments (25,963) -- Movement in fair value / allowance for expected credit losses on investments at FVOCI – debt instruments (3,404) 37,121 Contributions and redemptions by the unitholders: Proceeds from issuance of units Payments for redemption of units Net change from unit transactions 5,548,796 (16,408,440) (10,859,644) 13,683,664 (14,394,962) (711,298) Net assets (equity) attributable to the unitholders as at 30 June 104,786,361 127,311,850 Net (loss) / income for the period Net unrealized gain on investments at FVOCI – debt instruments UNIT TRANSACTIONS Transactions in units for the period ended 30 June are summarised as follows: For the six-month period ended 30 June 2020 2019 (In numbers) Units at the beginning of the period Units issued during the period Units redeemed during the period Net decrease in units Units as at end of the period 7,547,435 8,427,155 361,961 (1,088,326) (726,365) 901,131 (955,806) (54,675) 6,821,070 8,372,480 The accompanying notes 1 to 21 form an integral part of these interim condensed financial statements.
12. HSBC MULTI-ASSETS DEFENSIVE FUND (An open-ended mutual fund) Managed by HSBC Saudi Arabia Interim condensed statement of cash flows (Unaudited) For the six-month period ended 30 June 2020 (Amounts in Saudi Arabian Riyal) For the six-month period ended 30 June 2020 2019 Cash flow from operating activities Net income for the period (2,510,045) 5,796,498 Adjustment for: Unrealised loss / (gain) on investments at FVTPL (Reversal) / provision for expected credit losses 4,716,247 (3,404) (2,070,077) 37,121 Net changes in operating assets and liability Decrease / (increase) in investments at FVTPL Decrease / (increase) in investments at FVOCI Increase in receivables and advances Increase / (decrease) in accrued expenses Net cash generated from operating activities 4,757,501 760,544 (303,089) 895,841 8,313,595 (701,444) (1,832,346) (35,071) (342,164) 852,517 5,548,796 (16,408,440) (10,859,644) 13,683,664 (14,394,962) (711,298) (2,546,049) 141,219 Cash and cash equivalent at the beginning of the period 4,034,180 817,026 Cash and cash equivalent as at the end of the period 1,488,131 958,245 126,614 147,028 Cash flow from financing activities Proceeds from issuance of units Payments against redemption of units Net cash used in financing activities Net (decrease) / increase in cash and cash equivalents Operational cash flows from special commission income Special commission income received The accompanying notes 1 to 21 form an integral part of these interim condensed financial statements.
13. HSBC MULTI-ASSETS DEFENSIVE FUND (An open-ended mutual fund) Managed by HSBC Saudi Arabia Notes to the interim condensed financial statements (Unaudited) For the six-month period ended 30 June 2020 (Amounts in Saudi Arabian Riyal) 1 GENERAL HSBC Multi-Assets Defensive Fund (“the Fund”) is an investment fund created through the agreement between HSBC Saudi Arabia (“the Fund Manager”) and the investors (“the unitholders”). The objective of the Fund is to seek medium to long term capital appreciation with the emphasis on capital preservation and limited exposure to equity markets. The Fund Manager allocates the funds across Shariah compliant securities such as Murabaha transactions, Sukuks and shares either directly, through mutual funds or through discretionary managed accounts in order to achieve the portfolio objective. The Fund is managed by the Fund Manager who also acts as the administrator of the Fund. Albilad Capital is the custodian of the Fund. All income is reinvested in the Fund and is reflected in the unit price. 2 REGULATING AUTHORITY The Fund is governed by the Investment Fund Regulations (“the Regulations”) published by the Capital Market Authority (“the CMA”). 3 SUBSCRIPTION / REDEMPTION (DEALING DAY AND VALUATION DAY) The Fund is open for subscriptions / redemptions of units twice weekly on Sunday and Tuesday (each being a “Dealing Day”). The value of the Fund’s portfolio is determined twice weekly on Monday and Wednesday (each being a “Valuation Day”). The net asset value of the Fund for the purpose of purchase or sale of units is determined by dividing the net value of assets (fair value of fund assets minus fund liabilities) by the total number of outstanding fund units on the relevant Valuation Day. 4 BASIS OF PREPARATION These interim condensed financial statements have been prepared in accordance with the International Accounting Standard 34 Interim Financial Reporting (“IAS 34”) as endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements issued by Saudi Organization for Certified Public Accountants (“SOCPA”) and to comply with the applicable provisions of the Investment Fund Regulations issued by the Capital Market Authority, the Fund’s Terms and Conditions and the Information Memorandum. These interim condensed financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Fund’s annual financial statements as at 31 December 2019. 5 FUNCTIONAL AND PRESENTATION CURRENCY These interim condensed financial statements are presented in Saudi Arabian Riyal (“SAR”), which is the Fund’s functional currency. 6 BASIS OF MEASUREMENT These interim condensed financial statements have been prepared on a historical cost basis, [except for investments at fair value through profit or loss (“FVTPL”) and investments at fair value through other comprehensive income (“FVOCI”) which are stated at their fair value] using the accrual basis of accounting. The Fund Manager has made an assessment of the Fund’s ability to continue as a going concern and is satisfied that the Fund has resources to continue its business for the foreseeable future. Furthermore, the Fund Manager is not aware of any material uncertainties that may cast significant doubt upon the Fund’s ability to continue as a going concern. Therefore, the interim condensed financial statements continue to be prepared on the going concern basis.
14. HSBC MULTI-ASSETS DEFENSIVE FUND (An open-ended mutual fund) Managed by HSBC Saudi Arabia Notes to the interim condensed financial statements (Unaudited) For the six-month period ended 30 June 2020 (Amounts in Saudi Arabian Riyal) 6 BASIS OF MEASUREMENT (CONTINUED) The financial statement accounts in the statement of financial position have been presented in the order of liquidity. 7 USE OF CRITICAL JUDGEMENTS AND ESTIMATES The preparation of these interim condensed financial statements in conformity with IFRS requires the use of certain critical accounting judgements, estimates and assumptions that affect the reported amounts of assets and liabilities. It also requires management to exercise its judgement in the process of applying the Fund’s accounting policies. Such judgements, estimates and assumptions are continually evaluated and are based on historical experience and other factors, including obtaining professional advices and expectations of future events that are believed to be reasonable under the circumstances. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively. Significant area where management has used estimates, assumptions or exercised judgement are as follow: Allowance for expected credit losses The Fund recognises allowance for expected credit loss (ECL) on itsSukuk instruments.. The Fund measures loss allowances at an amount equal to lifetime ECL, except for the following, for which they are measured at 12-month ECL: - Financial assets that are determined to have low credit risk at the reporting date; and - Financial assets on which credit risk has not increased significantly since their initial recognition The Fund considers a debt security to have low credit risk when their credit risk rating is equivalent to the globally understood definition of 'investment grade’ or certain unrated investment with no default in past. 12-month ECL are the portion of ECL that result from default events on a financial instrument that are possible within the 12 months after the reporting date. 8 SIGNIFICANT ACCOUNTING POLICIES The significant accounting and risk management policies used in the preparation of these interim condensed financial statements are consistent with those used and disclosed in the financial statements for the year ended 31 December 2019. A number of standards are effective from 1 January 2020 but they do not have a material impact on these interim condensed financial statements. 9 STANDARDS ISSUED BUT NOT YET EFFECTIVE A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2020 and earlier application is permitted; however, the Fund has not early adopted any of the forthcoming new or amended standards in preparing these interim financial statements. 10 CASH AT BANK Cash at bank comprise of balances with banks who have investment grade credit ratings, as rated by the international rating agencies.
15. HSBC MULTI-ASSETS DEFENSIVE FUND (An open-ended mutual fund) Managed by HSBC Saudi Arabia Notes to the interim condensed financial statements (Unaudited) For the six-month period ended 30 June 2020 (Amounts in Saudi Arabian Riyal) 11 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS Investments comprise of the following as at 30 June 2020: Description 30 June 2020 (Unaudited) % of Cost Fair value value SR SR 31 December 2019 (Audited) % of Cost Fair value value SR SR Mutual Funds HSBC Sukuk Fund HSBC Saudi Riyal Murabaha Fund HSBC US Dollar Murabaha Fund HSBC Global Equity Index Fund HSBC Global Emerging Market Equity Fund HSBC GCC Equity Fund HSBC Saudi Free Style Equity Fund HSBC Saudi Companies Equity Fund Taleem REIT Fund Jadwa Saudi Fund 38.9 24.1 16.9 6.4 39,659,631 22,433,024 14,998,952 4,396,513 38,034,999 23,609,219 16,537,893 6,263,511 31.7 28.5 15.3 7.8 33,750,797 28,666,981 14,998,952 6,088,955 33,989,383 30,555,019 16,422,476 8,358,377 6.1 3.4 5,491,372 3,183,009 5,949,329 3,424,683 5.5 3.4 4,937,533 3,183,009 5,900,145 3,707,720 2.1 2,090,000 2,034,255 ---- ---- ---- 3.7 2.1 1.3 3,697,007 1,865,229 1,265,841 4,019,694 2,238,475 1,425,222 Sub Total 97.9 92,252,501 95,853,889 99.3 98,454,304 106,616,511 Equities Energy Health Care Equipment & Services Banks Sub Total 1.1 1.0 -2.1 960,654 955,443 -1,916,097 1,059,723 957,248 -2,016,971 --0.7 0.7 --471,796 471,796 --728,098 728,098 Grand Total 100 94,168,598 97,870,860 100 98,926,100 107,344,609 12 NET (LOSS) / GAIN FROM INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS For the six-month period ended 30 June 2020 2019 Realised gains for the period Unrealised (losses) / gains for the period Total 2,025,155 (4,716,247) (2,691,092) 3,366,451 2,070,077 5,436,528 Realized (loss) / gain on investments at FVTPL is calculated based on weighted average cost of securities. 13 ACCRUED EXPENSES Accrued expenses include management fee payable (inclusive of VAT) to the Fund Manager. 14 INVESTMENTS MEASURED AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME Debt security – sukuk Accrued special commission income Total 30 June 31 December 2020 2019 (Unaudited) (Audited) 6,001,005 6,775,370 14,970 27,112 6,015,975 6,802,482
16. HSBC MULTI-ASSETS DEFENSIVE FUND (An open-ended mutual fund) Managed by HSBC Saudi Arabia Notes to the interim condensed financial statements (Unaudited) For the six-month period ended 30 June 2020 (Amounts in Saudi Arabian Riyal) 14 INVESTMENTS MEASURED AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (CONTINUED) The average effective special commission rate on investments for the six-months period ended 30 June 2020 is 4.8% (31 December 2019: 4.80%). The above debt securities are redeemable at par Sukuk investments. The movement in the allowance for expected credit losses for debt securities (sukuk) is summarized as follows: For the six-month period ended 30 June 2020 2019 Balance at the beginning of the period 6,349 1,472 Reversal on sale of investment (1,639) -Net (reversal) / charge for the period (3,404) 37,121 Balance at the end of the period 1,306 38,593 The methodology and assumptions applied by the Fund in estimating the ECL on the sukuk investment is based on using the Moody’s rating scales which are then adjusted for country specific data based on where the sukuk’s underlying assets / projects are, forward looking estimates and macroeconomic variables such as expected GDP growth, to determine the ECL as at the end of the reporting year. 15 TRANSACTIONS WITH RELATED PARTIES Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form. Related parties of the Fund comprise of HSBC Saudi Arabia (being the Fund Manager, the Fund Board and administrator of the Fund), mutual funds managed by the Fund Manager and The Saudi British Bank (“SABB”) (being the significant shareholder of the Fund Manager). In the ordinary course of its activities, the Fund transacts business with related parties. Related party transactions are governed by limits set by the regulations issued by CMA. All the related party transactions are undertaken at mutually agreed prices and approved by the Fund Manager. These transactions are carried out on the basis of approved Terms and Conditions of the Fund. The Fund Manager charges to -the Fund on each Valuation Day, management fees at a rate of 0.45% of Net assets value (2019: 0.45% of Net assets value). All Fees and expenses related to the management of the Fund including but not limited to custody, administration, audit, regulatory and index fees, etc., are included in the management fee. Subscription fee up to 2% is not considered in the financial statement of the Fund, as investment in the Fund are always net of subscription fees.
17. HSBC MULTI-ASSETS DEFENSIVE FUND (An open-ended mutual fund) Managed by HSBC Saudi Arabia NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (Unaudited) For the six-month period ended 30 June 2020 (Amounts in Saudi Arabian Riyal) 15 TRANSACTIONS WITH RELATED PARTIES (CONTINUED) During the period, the Fund entered into the following transactions with related parties in the ordinary course of business. Related party Nature of transactions Amount of transaction for the six-month period ended Closing balance 30 June HSBC Saudi Arabia (Fund Manager) SABB 30 June 30 June 2020 31 December 2020 2019 (Unaudited) 2019 (Audited) Fund management fee 256,418 287,104 6,764 9,185 Cash at bank (under omnibus account with SABB) -- -- 1,474,298 -- Cash at bank -- -- -- 37,459 As at 30 June 2020, the investment portfolio of the Fund includes investments with a market value of SAR 95.85 million (31 December 2019: SAR 102.95) in the units of mutual funds managed and administered by the Fund Manager (refer note 11). Board member compensation and other fees such as custodian fee and administration fee during the year has been borne and paid by HSBC Saudi Arabia (“the Fund Manager”). Cash and cash equivalents are deposited in a current account maintained with SABB under the name of the Fund Manager. No special commission is accrued on this balance. 16 FAIR VALUES OF FINANCIAL INSTRUMENTS Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: • • In the principal market for the asset or liability, or In the absence of a principal market, in the most advantageous market for the asset or liability When available, the Fund measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an on-going basis. The Fund measures instruments quoted in an active market at a market price, because this price is reasonable approximation of the exit price. If there is no quoted price in an active market, then the Fund uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction. The Fund recognizes transfer between levels of fair value at the end of the reporting period during which the change has occurred. The fair value hierarchy has the following levels: • • • Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs for the asset or liability.
18. HSBC MULTI-ASSETS DEFENSIVE FUND (An open-ended mutual fund) Managed by HSBC Saudi Arabia NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (Unaudited) For the six-month period ended 30 June 2020 (Amounts in Saudi Arabian Riyal) 16 FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED) The table below presents the financial instruments measured at their fair values as of reporting date based on the fair value hierarchy: 30 June 2020 (Unaudited) Carrying value Investments at FVTPL Investments at FVOCI Total 97,870,860 6,015,975 103,866,835 Level 1 Level 2 97,870,860 -97,870,860 Level 3 ---- -6,015,975 6,001,005 Total 97,870,860 6,015,975 103,866,835 31 December 2019 (Audited) Carrying value Investments at FVTPL Investments at FVOCI Total 107,344,609 6,802,482 114,147,091 Level 1 Level 2 107,344,609 -107,344,609 Level 3 ---- -6,802,482 6,802,482 Total 107,344,609 6,802,482 114,147,091 During the period, no transfer within the levels have taken place. Level 3 investments measured at FVOCI (sukuks) have been valued based on management’s assessment of risks associated with the instrument’s underlying assets, the Terms and Conditions of the investment and the expected market prevailing economics. Other financial instruments such as cash at bank, receivables and advances and accrued expenses are financial assets and financial liabilities respectively whose carrying amounts approximate fair value, being short-term in nature and the high credit quality of counterparties. 17 FINANCIAL RISK MANAGEMENT The Fund has exposure to the following risks from financial instruments: - credit risk; liquidity risk; and market risks. Risk management framework The risk management framework and policies of the Fund are consistent with those used and disclosed in the annual financial statements of the Fund for the year ended 31 December 2019. Credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Fund is exposed to credit risk for its cash at bank, investments measured at FVTPL, investments measured at FVOCI and receivables and advances. The Fund Manager seeks to limit its credit risk by monitoring credit exposures and by dealing with only reputable counterparties. Liquidity risk Liquidity risk is the risk that the Fund will encounter difficulty in releasing funds to meet commitments associated with financial liabilities.
19. HSBC MULTI-ASSETS DEFENSIVE FUND (An open-ended mutual fund) Managed by HSBC Saudi Arabia NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (Unaudited) For the six-month period ended 30 June 2020 (Amounts in Saudi Arabian Riyal) 17 FINANCIAL RISK MANAGEMENT (CONTINUED) Liquidity risk (continued) The Fund’s Terms and Conditions provide for the subscriptions and redemptions of units on Dealing Day and it is, therefore, exposed to the liquidity risk of meeting unitholders redemptions at any time. However, the Fund is allowed to borrow in order to satisfy redemptions. Substantially all of the Fund’s cash at bank, investments measured at FVTPL, investments measured at FVOCI and receivables and advances are either short-term or considered to be readily realisable. The Fund Manager monitors liquidity requirements on a regular basis and seeks to ensure that funds are available to meet commitments as they arise. Market risk Market risk is the risk that changes in market prices – such as commission rates, foreign exchange rates, and credit spreads – will affect the Fund’s income or the fair value of its holdings in financial instruments. The Fund’s strategy for the management of market risk is driven by the Fund’s investment objective as per Funds’ Terms and Conditions. The Fund’s market risk is managed on a timely basis by the investment manager in accordance with the policies and procedures in place. The Fund’s market positions are monitored on a regular basis by the Fund Manager. 18 LAST VALUATION DAY The last valuation day of the year was 29 June 2020 (2019: 31 December 2019) and the dealing net assets value on this day was SR 15.36 per unit (2019: SR 15.66). The IFRS net assets value per unit on 29 June 2020 was SR 15.36 (31 December 2019: SR 15.66). 19 IMPACT OF COVID 19 OUTBREAK During March 2020, the World Health Organisation (“WHO”) declared the Coronavirus (“COVID-19”) outbreak as a pandemic in recognition of its rapid spread across the globe. This outbreak has also affected the GCC region including the Kingdom of Saudi Arabia. Governments all over the world took steps to contain the spread of the virus. Saudi Arabia in particular implemented closure of borders, released social distancing guidelines and enforced country wide lockdowns and curfews. Oil prices witnessed significant volatility during the first half of 2020, owing not just to demand issues arising from COVID-19 as the world economies went into lockdown, but also supply issues driven by volume which had predated the pandemic. The oil prices have shown some recovery in late Q2 2020 as oil producing countries cut back production coupled with increasing of demand as countries emerged from lockdowns. These events have significantly impacted the stock market and created volatility in net asset value of investment funds which impacted the Fund’s earnings and cash flows. The Fund Manager continues to evaluate the current situation through reviewing its investment strategy and other risk management practices to manage the impact COVID-19 outbreak has had on its normal operations and financial performance. 20 SUBSEQUENT EVENTS There were no events subsequent to the statement of financial position date which require adjustments of or disclosure in the interim condensed financial statements or notes thereto. 21 APPROVAL OF FINANCIAL STATEMENTS These interim condensed financial statements were approved by the Fund Board on 4 Muharram 1442H (corresponding to 23 August 2020).