AL-AHLI EMERGING MARKETS TRADING EQUITY FUND (Managed by NCB Capital Company) INTERIM FINANCIAL STATEMENTS (unaudited) For the six months period ended 30 June 2016 with REVIEW REPORT TO THE UNITHOLDERS
AL-AHLI EMERGING MARKETS TRADING EQUITY FUND (Managed by NCB Capital Company) INTERIM BALANCE SHEET As at 30 June 2016 Expressed in US Dollars ‘000
Notes
30 June 2016 (Unaudited)
31 December 2015 (Audited)
30 June 2015 (Unaudited)
ASSETS Cash and cash equivalents
7
421
338
109
Held for trading investments
9
13,804
13,840
15,133
Accounts receivable
10
64 ────── 14,289
112 ────── 14,290
109 ────── 15,351
11
62 ────── 14,227 ══════ 12,201 ══════ 1.1660 ══════
345 ────── 13,945 ══════ 12,533 ══════ 1.1127 ══════
120 ────── 15,231 ══════ 12,389 ══════ 1.2294 ══════
Total assets LIABILITY Accounts payable Net assets attributable to Unitholders Units in issue in thousands (number)
12
Net asset value per unit (USD)
The accompanying notes 1 to 15 form integral part of these interim financial statements 2
AL-AHLI EMERGING MARKETS TRADING EQUITY FUND (Managed by NCB Capital Company) INTERIM STATEMENT OF INCOME (unaudited) For the six months period ended 30 June 2016 Expressed in US Dollars ‘000
30 June 2016
30 June 2015
129
168
Realised (loss) / gain on sale of held for trading investments
(320)
1,245
Unrealised gain / (loss) on measurement of held for trading investments
1,009
(1,228)
-────── 818 ──────
1 ────── 186 ──────
128
160
18
47
Audit fee
3
3
Fund Board remuneration
2
2
Shariah audit fee
4
4
CMA fee
1
1
5 ────── 161 ────── 657 ══════
7 ────── 224 ────── (38) ══════
Note INVESTMENT REVENUE Dividend income
Change in fair value of other financial instruments Total revenues 8
EXPENSES Management fee Custody fee
Administrative expenses Total expenses NET INCOME / (LOSS) FOR THE PERIOD
The accompanying notes 1 to 15 form integral part of these interim financial statements 3
AL-AHLI EMERGING MARKETS TRADING EQUITY FUND (Managed by NCB Capital Company) INTERIM STATEMENT OF CASH FLOWS (unaudited) For the six months period ended 30 June 2016 Expressed in US Dollars ‘000
Note Cash flow from operating activities Net income / (loss) for the period Adjustment for: Value of units reinvested Unrealised (gain) / loss on held for trading investments Changes in operating assets and liabilities: Decrease in held for trading investments Decrease / (increase) in accounts receivable (Decrease) / increase in accounts payable Net cash provided by operating activities Cash flow from financing activities Proceeds from units sold Subscription fees deducted Value of units redeemed Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period
7
Cash and cash equivalents at the end of the period
7
The accompanying notes 1 to 15 form integral part of these interim financial statements
4
30 June 2016
30 June 2015
657
(38)
161 (1,009) ────── (191)
224 1,228 ────── 1,414
1,045 48 (283) ────── 619 ──────
6,497 (49) 90 ────── 7,952 ──────
518 (7) (1,047) ────── (536) ────── 83
358 (2) (8,291) ────── (7,935) ────── 17
338 ────── 421 ══════
92 ────── 109 ══════
AL-AHLI EMERGING MARKETS TRADING EQUITY FUND (Managed by NCB Capital Company) INTERIM STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS For the six months period ended 30 June 2016 Expressed in US Dollars ‘000 30 June 2016
30 June 2015
13,945
22,980
657
(38)
518
358
Subscription fees deducted
(7)
(2)
Net proceeds from units sold
511
356
161
224
(1,047) ─────── (375) ───────
(8,291) ─────── (7,711) ───────
14,227 ═══════
15,231 ═══════
Notes Net assets attributable to Unitholders at the beginning of the period (audited) Net income for the period Decrease in net assets from unit transactions during the period
12
Gross proceeds from units sold
Value of units reinvested
8
Value of units redeemed
Net assets attributable to Unitholders at the end of the period (unaudited)
The accompanying notes 1 to 15 form integral part of these interim financial statements 5
AL-AHLI EMERGING MARKETS TRADING EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in US Dollars ‘000 1
THE FUND AND ITS ACTIVITIES
Al-Ahli Emerging Markets Trading Equity Fund (the "Fund") is a Shariah compliant, open-end investment fund, managed by NCB Capital Company ("the Fund Manager"), a subsidiary of The National Commercial Bank (“the Bank”), for the benefit of the Fund's Unitholders. The Fund is established under article 5 (b) of the Investment Fund Regulations (the Regulations) issued by the Capital Market Authority (CMA). NCB Capital Company also acts as the custodian of the Fund. As defined in Capital Market Authority's (CMA) Regulation No. 2-83-2005 dated 21 Jumada Awal 1426H (28 June, 2005) the Fund Manager conducts following securities’ activities: a) b) c) d) e)
Dealing; Arranging; Managing; Advising; Custody;
The Fund’s investments are held by State Street Bank and Trust Company, a custodian appointed by the Fund Manager. The Fund Manager has appointed an international investment house, Amundi - France, as sub-manager to the Fund. Their duties include opening separate independent investment accounts and managing the Fund’s assets in line with the investment strategies and Shariah guidelines. The Fund invests in equities expected to benefit from growth in Emerging Markets (primarily securities originated in China, India, Russia and Brazil but not limited to these countries). Un-invested cash balances may be held in Shariah compliant money market and Murabaha funds and/or be placed in Murabaha transactions. The terms and conditions of the Fund were originally approved by the Saudi Arabian Monetary Agency (SAMA) and subsequently endorsed by CMA through its letter dated 18 Dhul Hijja 1429H (corresponding to 16 December 2008). The Fund commenced its activities on 9 October 2006. The results for the six months period ended 30 June 2016 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2016. 2
REGULATING AUTHORITY
The Fund is governed by the Regulations pursuant to resolution number 1-219-2006 dated 3 Dhul Hijja 1427H (corresponding to 24 December 2006), detailing requirements for all funds within the Kingdom of Saudi Arabia. 3
CHANGES IN FUND’S TERMS AND CONDITIONS
During the period ended 30 June 2016, the Fund Manager has made certain revisions to the terms and conditions of the Fund. The main change in the terms and conditions relate to change in the strategy, valuation and statutory auditors of the Fund. The changes in the term and conditions do not have any impact on these interim financial statements.
6
AL-AHLI EMERGING MARKETS TRADING EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in US Dollars ‘000 3
CHANGES IN FUND’S TERMS AND CONDITIONS (continued)
The changes in the strategy and valuation were approved by CMA through its letter dated 24 January 2016 and the change in the auditors of the Fund was approved by CMA through its letter dated 11 April 2016. These changes were notified by the Fund manager to the Unitholders through a letter dated 24 April 2016. 4
SUBSCRIPTION AND REDEMPTION
The Fund is open for subscriptions / redemptions of units on every Saudi Business day. The net asset value of the fund is determined on each Valuation day (Monday and Wednesday). For the purpose of purchase / sale of units, the net assets of the Fund attributable to each unit is determined by dividing the value of net assets of the Fund by the total number of outstanding Fund units on the relevant Valuation day. 5
BASIS OF PREPARATION
Statement of compliance These interim financial statements are prepared in accordance with generally accepted accounting standards in the Kingdom of Saudi Arabia promulgated by Saudi Organization for Certified Public Accountants ("SOCPA"). The Fund prepares its interim financial statements as at and for the period ended on its last valuation date (note 14). The Fund presents comparative numbers of December in Balance Sheet and its related notes as additional information for benefit of Unitholders. Basis of measurement These interim financial statements have been prepared under the historical cost convention using the accrual basis of accounting and the going concern concept, except for held for trading investments which are carried at fair value. Functional and presentational currency These interim financial statements are presented in United States Dollar (USD), which is the Fund’s functional currency. All financial information presented in United States Dollar has been rounded to the nearest thousand. Use of estimates and judgments The preparation of the financial statements in conformity with the generally accepted accounting standards as applicable in the Kingdom of Saudi Arabia requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilit ies, revenues and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
7
AL-AHLI EMERGING MARKETS TRADING EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in US Dollars ‘000 5
BASIS OF PREPARATION (continued)
Use of estimates and judgments (continued) Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognized in the interim financial statements have been consistent with those used in the preparation of annual financial statements of the Fund for the year ended 31 December 2015. Valuation of financial assets 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. As the Fund's financial instruments are accounted for under the historical cost convention, except for held for trading investments, differences may arise between the carrying values and fair values. The Fund Manager believes that at the reporting date, the fair values of the Fund's financial assets and liabilities are not materially different from their carrying values. The Fund measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:
Level 1: Fair value measurements using quoted price (unadjusted) in an active market for identical assets or liabilities. Level 2: Fair value measurements using inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: Fair value measurement using inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs).
All financial assets of the fund, carried at fair value at the reporting date, are classified under hierarchy level 1. 6
SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in these financial statements. a)
Held for trading investments
Securities listed or traded on a stock exchange are classified as Held for Trading and are initially recognised at cost, being the fair value of the consideration given and are subsequently measured at fair value. Changes in fair values of held for trading investments (“investments”), comprising unrealised gains and losses are included in the statement of income. Realised gains and losses on investments sold are determined on weighted average basis. b)
Investment transaction
Investment transactions are accounted for as of the trade date.
8
AL-AHLI EMERGING MARKETS TRADING EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in US Dollars ‘000 6 c)
SIGNIFICANT ACCOUNTING POLICIES (continued) Impairment of financial assets
An assessment is made at the balance sheet date to determine whether there is objective evidence that a specific financial asset may be impaired. If such evidence exists, any impairment loss is recognised in the statement of income. If a financial asset is impaired, impairment is determined as follows: (i) (ii) (iii)
d)
For assets carried at fair value, impairment is the difference between cost and fair value, less any impairment loss previously recognised in the statement of income; For assets carried at cost, impairment is the difference between carrying value and the present value of future cash flows discounted at the current market rate of return for a similar financial asset; For assets carried at amortised cost, impairment is the difference between carrying amount and the present value of future cash flows discounted at the original effective commission rate. Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised where: (i) (ii) (iii)
The rights to receive cash flows from the asset have expired; or The Fund has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party; and Either (a) the Fund has transferred substantially all the risks and rewards of the asset, or (b) the Fund has neither transferred nor retained substantially all the risks and rewards of the asset, but ha s transferred control of the asset.
When the Fund has transferred its rights to receive cash flows from an asset, and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Fund’s continuing involvement in the asset. e)
Revenue recognition
Realised gains and losses on investments sold are determined on an average cost basis. Dividends are recognised when the Fund’s right to receive the payment is established. Increases or decreases in the difference between the cost and market value of the Fund’s portfolio of investments are receognised as change in fair value of investments in the statement of income. f)
Foreign currency translation
Transactions during the year in currencies other than the functional currency are translated into the functional currency at the rates of exchange at the dates of the transactions. Monetary assets and liabilities that are denominated in a foreign currency are retranslated at the rate of exchange ruling at the balance sheet date. Exchange gains or losses are reflected in the statement of income. g)
Taxation / zakat
Taxation / zakat is the obligation of the Unitholders and therefore, no provision for such liability is made in these financial statements. 9
AL-AHLI EMERGING MARKETS TRADING EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in US Dollars ‘000 6 h)
SIGNIFICANT ACCOUNTING POLICIES (continued) Cash and cash equivalents
For the purposes of the statement of cashflows, cash and cash equivalents consists of bank balances. i)
Net asset value per unit
The Fund is open for subscription and redemption of units on every Saudi business day. The net asset value per unit is calculated by dividing the net assets attributable to Unitholders included in the balance sheet by the number of units outstanding at the period end. j)
Provision and accruals
Provisions and accruals are recognized when the Fund has an obligation (legal or constructive) arising from a past event, and the costs to settle the obligation are both probable and can be measured reliably. k)
Offsetting
Financial assets and liabilities are offset and reported net in the balance sheet when there is a legally enforceable right to set off the recognized amounts and when the Fund intends to settle on a net basis, or to realise the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted under accounting standards generally accepted in the Kingdom of Saudi Arabia, or for gains and losses arising from a group of similar transactions. 7
CASH AND CASH EQUIVALENTS
Cash and cash equivalents primarily represent cash held in current accounts with banks. 8
MANAGEMENT FEE AND OTHER EXPENSES
The Fund is managed and administered by the Fund Manager. For these services, the Fund accrues, twice a week, a management fee, as determined by the Fund Manager, but which is no more than the maximum annual rate of 1.85% p.a., as set out in the Fund’s terms and conditions. The Fund Manager is also entitled to recover expenses incurred on behalf of the Fund relating to audit, custody, advisory, data processing and other similar charges. The maximum amount of such expenses that can be recovered from the Fund by the Fund Manager is restricted to 1% per annum of the Fund's net assets at the respective valuation days. These expenses have been recovered by the Fund Manager on an actual basis. The Fund Manager is allocated units in settlement of the management fee and other expenses on every valuation day, which are reinvested in the Fund. Furthermore, the Fund Manager is entitled to a subscription fee of 2% at the time of the investment in the Fund by a Unitholder. This fee may be waived at the discretion of the Fund Manager.
10
AL-AHLI EMERGING MARKETS TRADING EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in US Dollars ‘000 9
HELD FOR TRADING INVESTMENTS
The composition of the held for trading investments by currency is summarized below:
Currency
Country
United States Dollar
United States of America Hong Kong Taiwan Thailand Indonesia South Africa Brazil Philippines Malaysia Mexico Hungary Turkey Poland
Hong Kong Dollar New Taiwan Dollar Thailand Baht Indonesian Rupiah South African Rand Brazilian Real Philippine Peso Malaysian Ringgit Mexican Peso Hungarian Forint Turkish Lira Polish Zloty
Currency
Country
United States Dollar
United States of America, India, China and Peru Hong Kong Taiwan Thailand South Africa Malaysia Indonesia Brazil Mexico Philippines Hungry Turkey Poland Singapore
Hong Kong Dollar New Taiwan Dollar Thailand Baht South African Rand Malaysian Ringgit Indonesian Rupiah Brazilian Real Mexican Peso Philippine Peso Hungarian Forint Turkish Lira Polish Zloty Singapore Dollar
30 June 2016 (Unaudited) % of Total Value Cost 32.16 21.09 19.29 5.13 4.51 4.21 4.17 2.79 2.52 2.47 0.91 0.38 0.37 ──────── 100 ════════
4,334 2,460 2,246 752 508 961 704 350 334 289 109 54 57 ──────── 13,158 ════════
31 December 2015 (Audited) % of Total Value Cost
36.08 22.53 17.52 4.03 3.75 3.58 3.42 2.99 2.89 1.37 0.89 0.42 0.33 0.20 ──────── 100 ════════
11
4,871 2,905 2,153 642 961 503 518 778 403 200 109 72 57 29 ──────── 14,201 ════════
Fair Value 4,439 2,911 2,663 708 622 581 576 385 348 341 125 53 52 ──────── 13,804 ════════
Fair Value
4,994 3,118 2,424 557 519 496 474 414 400 190 123 58 46 27 ──────── 13,840 ════════
AL-AHLI EMERGING MARKETS TRADING EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in US Dollars ‘000 9
HELD FOR TRADING INVESTMENTS (continued)
Currency
Country
United States Dollar
United States of America Hong Kong Taiwan South Africa Mexico Brazil Thailand Philippines Malaysia Indonesia Turkey Hungary Poland
Hong Kong Dollar New Taiwan Dollar South African Rand Mexican Peso Brazilian Real Thailand Baht Philippine Peso Malaysian Ringgit Indonesian Rupiah Turkish Lira Hungarian Forint Polish Zloty
30 June 2015 (Unaudited) % of Total Value Cost
Fair Value
27.59 25.77 16.70 7.28 4.51 3.95 3.87 3.21 2.95 2.63 0.70 0.44 0.40
4,014 3,407 2,038 1,284 698 854 581 470 477 418 131 73 57
4,175 3,900 2,527 1,101 682 598 585 486 446 398 107 67 61
────────
────────
────────
100
14,502
15,133
════════
════════
════════
The composition of the held for trading investments by industry sector is summarized below:
Industry Sector
30 June 2016 (Unaudited) % of Total Value Cost
Information Technology Consumer Services Telecommunications Consumer Goods Industrials Financials Basic Materials Health Care Oil & Gas Utilities Others
28.21 14.10 12.19 8.66 8.64 8.11 7.91 5.48 1.62 0.58 4.50
2,431 1,974 2,016 1,287 1,109 1,218 1,253 789 303 91 687
────────
────────
100
13,158
════════
12
════════
Fair Value
3,894 1,947 1,683 1,196 1,192 1,119 1,092 756 223 81 621
────────
13,804
════════
AL-AHLI EMERGING MARKETS TRADING EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in US Dollars ‘000 9
HELD FOR TRADING INVESTMENTS (continued)
Industry Sector
Information Technology Consumer Services Telecommunications Consumer Goods Health Care Industrial services and equipment Basic materials Financial services Energy Utilities Others
31 December 2015 (Audited) % of Total Value Cost
27.85 13.32 10.24 9.03 8.58 7.82 7.31 7.17 2.28 0.40 6.00
3,854 1,843 1,417 1,250 1,187 1,083 1,011 993 315 56 831
────────
────────
────────
════════
════════
════════
100
Industry Sector
2,650 1,851 1,947 1,347 1,141 1,131 1,511 1,151 514 91 867
Fair Value
14,201
30 June 2015 (Unaudited) % of Total Value Cost
Information Technology Telecommunications Consumer Goods Industrials Basic Materials Consumer Services Financials Health Care Oil & Gas Utilities Others
13,840
Fair Value
25.03 12.15 10.86 10.64 9.70 8.11 6.86 5.76 4.78 1.32 4.79
2,548 2,052 1,600 1,593 1,707 1,299 1,080 834 832 200 757
3,788 1,839 1,643 1,610 1,468 1,227 1,038 872 724 199 725
────────
────────
────────
100 ════════
13
14,502 ════════
15,133 ════════
AL-AHLI EMERGING MARKETS TRADING EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in US Dollars ‘000 10
ACCOUNTS RECEIVABLE
Dividends receivable Receivable for investments sold Other receivables
11
30 June 2016 (Unaudited)
31 December 2015 (Audited)
30 June 2015 (Unaudited)
61
7
109
--
103
--
3 ────── 64 ══════
2 ────── 112 ══════
-────── 109 ══════
30 June 2016 (Unaudited)
31 December 2015 (Audited)
30 June 2015 (Unaudited)
5
334
90
21
8
16
36 ────── 62 ══════
3 ────── 345 ══════
14 ────── 120 ══════
ACCOUNTS PAYABLE
Payable for investments purchased Payable to Unitholders on account of redemptions Other payables
14
AL-AHLI EMERGING MARKETS TRADING EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in US Dollars ‘000 12
UNIT TRANSACTIONS
Transactions in units are summarized as follows: For the six months period ended 30 June 2016 Units’ 000
For the six months period ended 30 June 2015 Units’ 000
12,533
18,410
Units sold
467
280
Units reinvested
146
176
Units redeemed
(945)
(6,477)
(332) ─────── 12,201 ═══════
(6,021) ─────── 12,389 ═══════
Units at the beginning of the period (audited)
Net decrease in units during the period Units at the end of the period (unaudited)
As at 30 June 2016, top five Unitholders represented of 47.42% (30 June 2015: 41.32%) of the Fund’s units. 13
RELATED PARTY TRANSACTIONS
In the ordinary course of its activities, the Fund transacts business with related parties on the basis of approved terms and conditions of the Fund. All related party transactions are approved by the Fund Board. Name of entity
Relationship
NCB Capital Company National Commercial Bank (NCB)
Fund Manager Shareholder of Fund Manager
The significant related party transactions entered into by the Fund during the period and balances resulting from such transactions are as follows: Amount of transactions 2016 2015
Related party
Nature of transaction
NCBC
Management Fee
128
160
Expenses paid on behalf of the fund
33
164
15
Value of units held as at 30 June 2016 2015
--
--
AL-AHLI EMERGING MARKETS TRADING EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in US Dollars ‘000 14
LAST VALUATION DAY
The last valuation day for the period was 29 June 2016 (30 June 2015: 29 June 2015). 15
APPROVAL OF THE FINANCIAL STATEMENTS
These interim financial statements were approved by the Fund Manager on 7 Dhul Qadah 1437H, corresponding to 10 August 2016.
16