AlAhli International Trade Fund
AlAhli International Trade Fund
AlAhli International Trade Fund – Interim Report A. Fund Manager 1. The Fund Manager is NCB Capital Company. Address: King Saud Road, P.O. Box 22216, Riyadh 11495, Kingdom of Saudi Arabia, Tel: +966 920000232
Fax +966 114060049
Website: www.alahlicapital.com
2. Sub-manager / investment adviser None 3. Investment activities During the first half of 2017, the fund focused on short term Murabaha investments with local and GCC banks. This was driven by mainly:
The liquidity needs of banks in the GCC.
The expectation of redemptions. The fund strategy was conservative given the circumstances, the strategy helped the fund manager over perform the benchmark.
4. Fund’s performance During the first half of 2017, the fund over-performed the benchmark by 0.24%. The Assets Under Management (AUM) have decreased by -2.7% and closed the period at USD 122.7 MM. 5. T&C’s Material changes made The fund manager has not made any changes to the terms and conditions of the fund. 6. The fund does not invest substantially in other investment funds. 7. No special commissions were received by the fund manager during the period.
B. Financial Statements
NCB Capital is authorized by the Capital Market Authority of the Kingdom of Saudi Arabia under license number 37-06046. The registered office is at King Saud Road, NCB Regional Building P.O. Box 22216, 11495 Riyadh, Kingdom of Saudi Arabia T: +966 11 874 7106 F: +966 11 406 0049 www.alahlicapital.com
06046-37 شركة األهلي المالية (األهلي كابيتال) هي شركة مرخصــة من قبــل هيئة السـوق الماليــــة ترخيـص رقم ، 22216 ص ب، المبنى اإلقليمي للبنك األهلي التجاري، طريق الملك سعود:وعنوان مركزها الرئيسي المسجل. المملكة العربية السعودية، 11495 الرياض www.alahlicapital.com +966 11 406 0049 : ف+966 11 874 7106 :هـ
AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) INTERIM FINANCIAL STATEMENTS (unaudited) For the six months period ended 30 June 2017 with REVIEW REPORT TO THE UNITHOLDER
AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) INTERIM BALANCE SHEET As at 30 June 2017 Expressed in US Dollars ‘000 (unless otherwise stated)
Notes
30 June 2017 (Unaudited)
31 December 2016 (Audited)
30 June 2016 (Unaudited)
ASSETS Cash and cash equivalents
6
5,859
59
97
Held to maturity investments
8
116,905
126,017
169,302
122,764
126,076
169,399
--
2
1
Management fee payable
47
--
--
Total liabilities
47
2
1
122,717
126,074
169,398
48,044
49,673
67,161
2.5543
2.5381
2.5222
Total assets LIABILITY Payable to Unitholders on account of redemptions
Net assets attributable to Unitholders Units in issue in thousands (number)
9
Net assets value per unit (USD)
The accompanying notes 1 to 12 form an integral part of these interim financial statements. 2
AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) INTERIM STATEMENT OF INCOME (unaudited) For the six months period ended 30 June 2017 Expressed in US Dollars ‘000 (unless otherwise stated) 30 June 2017
30 June 2016
1,141
1,431
279
419
Audit fee
3
4
Shariah audit fee
3
4
Fund Board remuneration
2
2
CMA fee
1
1
16
22
Total expenses
304
452
NET INCOME FOR THE PERIOD
837
979
Note INVESTMENT REVENUE Profit on Murabaha contracts EXPENSES
7
Management fee
Administrative expenses
The accompanying notes 1 to 12 form an integral part of these interim financial statements. 3
AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) INTERIM STATEMENT OF CASH FLOWS (unaudited) For the six months period ended 30 June 2017 Expressed in US Dollars ‘000 (unless otherwise stated) 30 June 2017
30 June 2016
837
979
-837
452 1,431
9,112
24,459
-45
(1) --
9,994
25,889
Cash flow from financing activities Proceeds from units sold Value of units redeemed
45,462 (49,656)
46,491 (72,341)
Net cash used in financing activities
(4,194)
(25,850)
5,800
39
Note Cash flow from operating activities Net income for the period Adjustment for: Value of units reinvested Changes in operating assets and liabilities: Decrease in held to maturity investments (Increase) / decrease in payable to Unitholders on account of redemptions Increase in management fee payable Net cash provided by operating activities
Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period
6
59
58
Cash and cash equivalents at the end of the period
6
5,859
97
The accompanying notes 1 to 12 form an integral part of these interim financial statements. 4
AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) INTERIM STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS For the six months period ended 30 June 2017 Expressed in US Dollars ‘000 (unless otherwise stated)
Notes Net assets attributable to Unitholders at the beginning of the period (audited)
30 June 2017
30 June 2016
126,074
193,817
837
979
45,462
46,491
--
452
(49,656)
(72,341)
(4,194)
(25,398)
122,717
169,398
Net income for the period Decrease in net assets from unit transactions during the period
9
Proceeds from units sold Value of units reinvested
7
Value of units redeemed
Net assets attributable to Unitholders at the end of the period (unaudited)
The accompanying notes 1 to 12 form an integral part of these interim financial statements. 5
AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in US Dollars ‘000 (unless otherwise stated) 1.
THE FUND AND ITS ACTIVITIES
Al-Ahli International Trade Fund ("the Fund") is a Shariah compliant open-ended 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 30 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 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 assets of the Fund principally comprise trading contracts and the Fund offers investors the opportunity to participate in trade transactions which conform to Shariah principles. The Fund purchases goods, and then contracts to sell them at a mark-up on deferred payment terms. The murabaha trading contracts are for terms of less than a year, and usually less than 6 months, and are with large, well-established multi-national corporations. The terms and conditions of the Fund were originally approved by the Saudi Arabian Monetary Agency (SAMA) and subsequently endorsed by the CMA through a letter dated 18 Dhul Hijja 1429H (corresponding to 16 December 2008). The Fund commenced its activities on 6 March 1987. The results for the six months period ended 30 June 2017 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2017. 2.
REGULATING AUTHORITY
The Fund is governed by the Regulations issued by the CMA pursuant to resolution number 7-2192006 dated 3 Dhul Hijja 1427H (corresponding to 24 December 2006) as amended by the Resolution No 1/61/2016 of Board of the CMA dated 16 Sha’ban 1437H (corresponding to 23 May 2016), which provided detailed requirements for all funds within the Kingdom of Saudi Arabia. 3.
SUBSCRIPTIONS / REDEMPTIONS
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 Saudi Business Day. All transactions for purchase / sale of units are entered on the net assets value of the Fund, determined by dividing the value of net assets of the Fund by the number of outstanding units prior to such transaction.
6
AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in US Dollars ‘000 (unless otherwise stated) 4.
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 11). 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. Functional and presentation currency These interim financial statements are presented in U.S. Dollars (US$), which is the Fund’s functional currency. All financial information presented in U.S. Dollars 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, liabilities, 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 year in which the estimates are revised and in any future years affected. 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 Funds for the year ended December 31, 2016. 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.
7
AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in US Dollars ‘000 (unless otherwise stated) 4.
BASIS OF PREPARATION (continued)
Use of estimates and judgments (continued) Valuation of financial assets 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 2.
5.
SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently in respect of all periods presented in these financial statements. a)
Investments
Investments in Murabaha contracts are classified as Held to Maturity Investments and are measured at cost (being the fair value of consideration given) at initial recognition. Subsequent to initial measurement these are measured at amortised cost. b)
Investment transaction
Investment transactions in Murabaha contracts are accounted for as of the settlement date. c)
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)
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.
8
AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in US Dollars ‘000 (unless otherwise stated) 5.
SIGNIFICANT ACCOUNTING POLICIES (continued)
d)
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; and Either (i) the Fund has transferred substantially all the risks and rewards of the asset, or (ii) the Fund has neither transferred nor retained substantially all the risks and rewards of the asset, but has 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
Revenue on Murabaha contracts recognised on a time-apportioned basis over the period of the contract based on the principal amounts outstanding. f)
Foreign currency transactions
Transactions during the year in currencies other than the functional currency are translated into the functional currency at the rates of exchange ruling 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. h)
Cash and cash equivalents
For the purposes of the statement of cashflows, cash and cash equivalents consist of bank balances. i)
Net asset value per unit
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)
Provisions 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.
9
AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in US Dollars ‘000 (unless otherwise stated) 5.
SIGNIFICANT ACCOUNTING POLICIES (continued)
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 realize 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. 6.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents represent cash held in current accounts with National Commercial Bank (a related party). 7.
MANAGEMENT FEE AND OTHER EXPENSES
The Fund is managed and administered by the Fund Manager. For these services, the Fund accrues, daily a management fee, as determined by the Fund Manager, which should not be more than the maximum annual rate of 0.45% p.a. of the Fund's daily net assets 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 0.5% 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 except for custody fess, which is borne by the Fund Manager. Until 23 July 2016, the Fund Manager was allocated units against settlement of the management fee and other expenses on every valuation day, which were reinvested in the Fund. Subsequent to this date these expenses are settled in cash.
10
AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in US Dollars ‘000 (unless otherwise stated) 8.
HELD TO MATURITY INVESTMENTS
Held to maturity investments comprises of the following: % of total Value Investment in Murabaha contracts National Bank of Fujairah, UAE Khaleeji Commercial Bank National Bank of Kuwait National Commercial Bank (a related party) Masraf Al Rayan Commercial Bank International Saudi Investment Bank Bank Al Jazira Qatar Islamic Bank Saudi American Bank
Cost
Carrying value
19.37 17.73 13.70 13.46 11.43 8.20 5.99 5.41 3.77 0.94
22,500 20,600 16,000 15,600 13,300 9,550 7,000 6,300 4,400 1,100
22,650 20,728 16,013 15,737 13,353 9,585 7,005 6,325 4,409 1,100
30 June 2017 (Unaudited)
100
116,350
116,905
31 December 2016 (Audited)
100
125,300
126,017
30 June 2016 (Unaudited)
100
168,600
169,302
Murabaha contracts as at 30 June 2017 carry profit ranging from 1% to 2.6% (June 2016: 0.75% to 2.5%) and have maturities ranging from 1 to 9 months (June 2016: 1 to 9 months) from period end. The expected maturity profile of the above held to maturity investments is as follows:
Up to 1 month
1 – 6 months
6 months – 1 year
Total
22,209
80,600
14,096
116,905
22,209
80,600
14,096
116,905
31 December 2016 (Audited)
39,830
86,187
--
126,017
30 June 2016 (Unaudited)
44,679
99,549
25,074
169,302
Investment in Murabaha contracts 30 June 2017 (Unaudited)
11
AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in US Dollars ‘000 (unless otherwise stated) 9.
UNIT TRANSACTIONS
Transactions in units during the period are summarised as follows: For the sixmonths period ended 30 June 2017 Units’ 000
For the sixmonths period ended 30 June 2016 Units’ 000
Units at the beginning of the period (audited)
49,674
77,247
Units sold
17,857
18,474
Units reinvested
--
180
Units redeemed
(19,487)
(28,740)
Net decrease in units
(1,630)
(10,086)
Units at the end of the period (unaudited)
48,044
67,161
As at 30 June 2017, top five Unitholders represented 27.32% (30 June 2016: 39.17%) of the Fund’s units. 10. 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) Al Ahli Takaful Company Al-Ahli Multi-Asset Conservative Fund Al-Ahli Multi-Asset Moderate Fund Al-Ahli Multi-Asset Growth Fund Al-Ahli Diversified USD Trade Fund Al-Ahli Multi-Asset Income Plus Fund Al-Ahli US Dollar Sukuk Fund Al-Ahli Global Equity Fund
Fund Manager Shareholder of Fund Manager Unithodler Unitholder Unitholder Unitholder Unitholder Unitholder Unitholder Unitholder
In addition to the below disclosure, balances with related parties are also disclosed in note 6 and 8.
12
AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in US Dollars ‘000 (unless otherwise stated) 10.
RELATED PARTY TRANSACTIONS (continued)
The significant related party transactions entered into by the Fund during the period and balances resulting from such transactions are as follows: Value of units held as at 30 June 2017 2016
Related party
Nature of transaction
NCBC
Management fee
279
419
Expenses paid on behalf of the fund
25
33
Subscription of units
6,000
1,500
Redemption of units
9,700
13,400
Subscription of units Al Ahli MultiAsset Moderate Fund Redemption of units
2,800
3,400
5,100
10,400
Al Ahli MultiAsset Growth Fund
Subscription of units
4,300
1,800
Redemption of units
4,698
3,500
Al Ahli Diversified USD Trade Fund
Subscription of units
700
16,565
Redemption of units
--
12,000
Al Ahli Takaful Subscription of units Company Redemption of units
--
17
3,320
--
Al-Ahli MultiAsset Income Plus Fund
Subscription of units
4,465
3,466
Redemption of units
70
--
Al-Ahli US Dollar Sukuk Fund
Subscription of units
4,880
1,330
Redemption of units
5,058
5,320
Al-Ahli Global Equity Fund
Subscription of units
--
1,330
Redemption of units
60
5,320
Al Ahli MultiAsset Conservative Fund
Amount of transactions 2017 2016
13
20
28,944
25
11,237
869
3,041
1
2,536
7,812
15,567
--
1,345
4,403
3,466
1,639
--
--
--
AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in US Dollars ‘000 (unless otherwise stated) 11. LAST VALUATION DAY The last valuation day of the period was 22 June 2017 (30 June 2016: 30 June 2016). There is no significant change in the net asset value per unit of the Fund between last valuation and 30 June 2017. 12. APPROVAL OF THE FINANCIAL STATEMENTS These interim financial statements were approved by the Fund Manager on Dhul Qadah 23, 1438H, corresponding to August 15, 2017.
14
AlAhli International Trade Fund – Interim Report A. Fund Manager 1. The Fund Manager is NCB Capital Company. Address: King Saud Road, P.O. Box 22216, Riyadh 11495, Kingdom of Saudi Arabia, Tel: +966 920000232
Fax +966 114060049
Website: www.alahlicapital.com
2. Sub-manager / investment adviser None 3. Investment activities During the first half of 2017, the fund focused on short term Murabaha investments with local and GCC banks. This was driven by mainly:
The liquidity needs of banks in the GCC.
The expectation of redemptions. The fund strategy was conservative given the circumstances, the strategy helped the fund manager over perform the benchmark.
4. Fund’s performance During the first half of 2017, the fund over-performed the benchmark by 0.24%. The Assets Under Management (AUM) have decreased by -2.7% and closed the period at USD 122.7 MM. 5. T&C’s Material changes made The fund manager has not made any changes to the terms and conditions of the fund. 6. The fund does not invest substantially in other investment funds. 7. No special commissions were received by the fund manager during the period.
B. Financial Statements
NCB Capital is authorized by the Capital Market Authority of the Kingdom of Saudi Arabia under license number 37-06046. The registered office is at King Saud Road, NCB Regional Building P.O. Box 22216, 11495 Riyadh, Kingdom of Saudi Arabia T: +966 11 874 7106 F: +966 11 406 0049 www.alahlicapital.com
06046-37 شركة األهلي المالية (األهلي كابيتال) هي شركة مرخصــة من قبــل هيئة السـوق الماليــــة ترخيـص رقم ، 22216 ص ب، المبنى اإلقليمي للبنك األهلي التجاري، طريق الملك سعود:وعنوان مركزها الرئيسي المسجل. المملكة العربية السعودية، 11495 الرياض www.alahlicapital.com +966 11 406 0049 : ف+966 11 874 7106 :هـ
AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) INTERIM FINANCIAL STATEMENTS (unaudited) For the six months period ended 30 June 2017 with REVIEW REPORT TO THE UNITHOLDER
AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) INTERIM BALANCE SHEET As at 30 June 2017 Expressed in US Dollars ‘000 (unless otherwise stated)
Notes
30 June 2017 (Unaudited)
31 December 2016 (Audited)
30 June 2016 (Unaudited)
ASSETS Cash and cash equivalents
6
5,859
59
97
Held to maturity investments
8
116,905
126,017
169,302
122,764
126,076
169,399
--
2
1
Management fee payable
47
--
--
Total liabilities
47
2
1
122,717
126,074
169,398
48,044
49,673
67,161
2.5543
2.5381
2.5222
Total assets LIABILITY Payable to Unitholders on account of redemptions
Net assets attributable to Unitholders Units in issue in thousands (number)
9
Net assets value per unit (USD)
The accompanying notes 1 to 12 form an integral part of these interim financial statements. 2
AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) INTERIM STATEMENT OF INCOME (unaudited) For the six months period ended 30 June 2017 Expressed in US Dollars ‘000 (unless otherwise stated) 30 June 2017
30 June 2016
1,141
1,431
279
419
Audit fee
3
4
Shariah audit fee
3
4
Fund Board remuneration
2
2
CMA fee
1
1
16
22
Total expenses
304
452
NET INCOME FOR THE PERIOD
837
979
Note INVESTMENT REVENUE Profit on Murabaha contracts EXPENSES
7
Management fee
Administrative expenses
The accompanying notes 1 to 12 form an integral part of these interim financial statements. 3
AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) INTERIM STATEMENT OF CASH FLOWS (unaudited) For the six months period ended 30 June 2017 Expressed in US Dollars ‘000 (unless otherwise stated) 30 June 2017
30 June 2016
837
979
-837
452 1,431
9,112
24,459
-45
(1) --
9,994
25,889
Cash flow from financing activities Proceeds from units sold Value of units redeemed
45,462 (49,656)
46,491 (72,341)
Net cash used in financing activities
(4,194)
(25,850)
5,800
39
Note Cash flow from operating activities Net income for the period Adjustment for: Value of units reinvested Changes in operating assets and liabilities: Decrease in held to maturity investments (Increase) / decrease in payable to Unitholders on account of redemptions Increase in management fee payable Net cash provided by operating activities
Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period
6
59
58
Cash and cash equivalents at the end of the period
6
5,859
97
The accompanying notes 1 to 12 form an integral part of these interim financial statements. 4
AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) INTERIM STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS For the six months period ended 30 June 2017 Expressed in US Dollars ‘000 (unless otherwise stated)
Notes Net assets attributable to Unitholders at the beginning of the period (audited)
30 June 2017
30 June 2016
126,074
193,817
837
979
45,462
46,491
--
452
(49,656)
(72,341)
(4,194)
(25,398)
122,717
169,398
Net income for the period Decrease in net assets from unit transactions during the period
9
Proceeds from units sold Value of units reinvested
7
Value of units redeemed
Net assets attributable to Unitholders at the end of the period (unaudited)
The accompanying notes 1 to 12 form an integral part of these interim financial statements. 5
AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in US Dollars ‘000 (unless otherwise stated) 1.
THE FUND AND ITS ACTIVITIES
Al-Ahli International Trade Fund ("the Fund") is a Shariah compliant open-ended 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 30 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 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 assets of the Fund principally comprise trading contracts and the Fund offers investors the opportunity to participate in trade transactions which conform to Shariah principles. The Fund purchases goods, and then contracts to sell them at a mark-up on deferred payment terms. The murabaha trading contracts are for terms of less than a year, and usually less than 6 months, and are with large, well-established multi-national corporations. The terms and conditions of the Fund were originally approved by the Saudi Arabian Monetary Agency (SAMA) and subsequently endorsed by the CMA through a letter dated 18 Dhul Hijja 1429H (corresponding to 16 December 2008). The Fund commenced its activities on 6 March 1987. The results for the six months period ended 30 June 2017 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2017. 2.
REGULATING AUTHORITY
The Fund is governed by the Regulations issued by the CMA pursuant to resolution number 7-2192006 dated 3 Dhul Hijja 1427H (corresponding to 24 December 2006) as amended by the Resolution No 1/61/2016 of Board of the CMA dated 16 Sha’ban 1437H (corresponding to 23 May 2016), which provided detailed requirements for all funds within the Kingdom of Saudi Arabia. 3.
SUBSCRIPTIONS / REDEMPTIONS
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 Saudi Business Day. All transactions for purchase / sale of units are entered on the net assets value of the Fund, determined by dividing the value of net assets of the Fund by the number of outstanding units prior to such transaction.
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AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in US Dollars ‘000 (unless otherwise stated) 4.
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 11). 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. Functional and presentation currency These interim financial statements are presented in U.S. Dollars (US$), which is the Fund’s functional currency. All financial information presented in U.S. Dollars 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, liabilities, 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 year in which the estimates are revised and in any future years affected. 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 Funds for the year ended December 31, 2016. 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.
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AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in US Dollars ‘000 (unless otherwise stated) 4.
BASIS OF PREPARATION (continued)
Use of estimates and judgments (continued) Valuation of financial assets 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 2.
5.
SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently in respect of all periods presented in these financial statements. a)
Investments
Investments in Murabaha contracts are classified as Held to Maturity Investments and are measured at cost (being the fair value of consideration given) at initial recognition. Subsequent to initial measurement these are measured at amortised cost. b)
Investment transaction
Investment transactions in Murabaha contracts are accounted for as of the settlement date. c)
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)
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.
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AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in US Dollars ‘000 (unless otherwise stated) 5.
SIGNIFICANT ACCOUNTING POLICIES (continued)
d)
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; and Either (i) the Fund has transferred substantially all the risks and rewards of the asset, or (ii) the Fund has neither transferred nor retained substantially all the risks and rewards of the asset, but has 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
Revenue on Murabaha contracts recognised on a time-apportioned basis over the period of the contract based on the principal amounts outstanding. f)
Foreign currency transactions
Transactions during the year in currencies other than the functional currency are translated into the functional currency at the rates of exchange ruling 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. h)
Cash and cash equivalents
For the purposes of the statement of cashflows, cash and cash equivalents consist of bank balances. i)
Net asset value per unit
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)
Provisions 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.
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AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in US Dollars ‘000 (unless otherwise stated) 5.
SIGNIFICANT ACCOUNTING POLICIES (continued)
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 realize 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. 6.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents represent cash held in current accounts with National Commercial Bank (a related party). 7.
MANAGEMENT FEE AND OTHER EXPENSES
The Fund is managed and administered by the Fund Manager. For these services, the Fund accrues, daily a management fee, as determined by the Fund Manager, which should not be more than the maximum annual rate of 0.45% p.a. of the Fund's daily net assets 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 0.5% 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 except for custody fess, which is borne by the Fund Manager. Until 23 July 2016, the Fund Manager was allocated units against settlement of the management fee and other expenses on every valuation day, which were reinvested in the Fund. Subsequent to this date these expenses are settled in cash.
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AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in US Dollars ‘000 (unless otherwise stated) 8.
HELD TO MATURITY INVESTMENTS
Held to maturity investments comprises of the following: % of total Value Investment in Murabaha contracts National Bank of Fujairah, UAE Khaleeji Commercial Bank National Bank of Kuwait National Commercial Bank (a related party) Masraf Al Rayan Commercial Bank International Saudi Investment Bank Bank Al Jazira Qatar Islamic Bank Saudi American Bank
Cost
Carrying value
19.37 17.73 13.70 13.46 11.43 8.20 5.99 5.41 3.77 0.94
22,500 20,600 16,000 15,600 13,300 9,550 7,000 6,300 4,400 1,100
22,650 20,728 16,013 15,737 13,353 9,585 7,005 6,325 4,409 1,100
30 June 2017 (Unaudited)
100
116,350
116,905
31 December 2016 (Audited)
100
125,300
126,017
30 June 2016 (Unaudited)
100
168,600
169,302
Murabaha contracts as at 30 June 2017 carry profit ranging from 1% to 2.6% (June 2016: 0.75% to 2.5%) and have maturities ranging from 1 to 9 months (June 2016: 1 to 9 months) from period end. The expected maturity profile of the above held to maturity investments is as follows:
Up to 1 month
1 – 6 months
6 months – 1 year
Total
22,209
80,600
14,096
116,905
22,209
80,600
14,096
116,905
31 December 2016 (Audited)
39,830
86,187
--
126,017
30 June 2016 (Unaudited)
44,679
99,549
25,074
169,302
Investment in Murabaha contracts 30 June 2017 (Unaudited)
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AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in US Dollars ‘000 (unless otherwise stated) 9.
UNIT TRANSACTIONS
Transactions in units during the period are summarised as follows: For the sixmonths period ended 30 June 2017 Units’ 000
For the sixmonths period ended 30 June 2016 Units’ 000
Units at the beginning of the period (audited)
49,674
77,247
Units sold
17,857
18,474
Units reinvested
--
180
Units redeemed
(19,487)
(28,740)
Net decrease in units
(1,630)
(10,086)
Units at the end of the period (unaudited)
48,044
67,161
As at 30 June 2017, top five Unitholders represented 27.32% (30 June 2016: 39.17%) of the Fund’s units. 10. 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) Al Ahli Takaful Company Al-Ahli Multi-Asset Conservative Fund Al-Ahli Multi-Asset Moderate Fund Al-Ahli Multi-Asset Growth Fund Al-Ahli Diversified USD Trade Fund Al-Ahli Multi-Asset Income Plus Fund Al-Ahli US Dollar Sukuk Fund Al-Ahli Global Equity Fund
Fund Manager Shareholder of Fund Manager Unithodler Unitholder Unitholder Unitholder Unitholder Unitholder Unitholder Unitholder
In addition to the below disclosure, balances with related parties are also disclosed in note 6 and 8.
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AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in US Dollars ‘000 (unless otherwise stated) 10.
RELATED PARTY TRANSACTIONS (continued)
The significant related party transactions entered into by the Fund during the period and balances resulting from such transactions are as follows: Value of units held as at 30 June 2017 2016
Related party
Nature of transaction
NCBC
Management fee
279
419
Expenses paid on behalf of the fund
25
33
Subscription of units
6,000
1,500
Redemption of units
9,700
13,400
Subscription of units Al Ahli MultiAsset Moderate Fund Redemption of units
2,800
3,400
5,100
10,400
Al Ahli MultiAsset Growth Fund
Subscription of units
4,300
1,800
Redemption of units
4,698
3,500
Al Ahli Diversified USD Trade Fund
Subscription of units
700
16,565
Redemption of units
--
12,000
Al Ahli Takaful Subscription of units Company Redemption of units
--
17
3,320
--
Al-Ahli MultiAsset Income Plus Fund
Subscription of units
4,465
3,466
Redemption of units
70
--
Al-Ahli US Dollar Sukuk Fund
Subscription of units
4,880
1,330
Redemption of units
5,058
5,320
Al-Ahli Global Equity Fund
Subscription of units
--
1,330
Redemption of units
60
5,320
Al Ahli MultiAsset Conservative Fund
Amount of transactions 2017 2016
13
20
28,944
25
11,237
869
3,041
1
2,536
7,812
15,567
--
1,345
4,403
3,466
1,639
--
--
--
AL-AHLI INTERNATIONAL TRADE FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in US Dollars ‘000 (unless otherwise stated) 11. LAST VALUATION DAY The last valuation day of the period was 22 June 2017 (30 June 2016: 30 June 2016). There is no significant change in the net asset value per unit of the Fund between last valuation and 30 June 2017. 12. APPROVAL OF THE FINANCIAL STATEMENTS These interim financial statements were approved by the Fund Manager on Dhul Qadah 23, 1438H, corresponding to August 15, 2017.
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