AlAhli GCC Trading Equity Fund
AlAhli GCC Trading Equity 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 have seen investment activities related to benefit from the announcement of the Kingdom being added to the MSCI watch list for inclusion in the global BM by mid-2018. 4. Fund’s performance AlAhli GCC Trading Equity Fund appreciated by 1.17% underperforming the Benchmark by 2.35% during 1H17. 5. T&C’s Material changes 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 GCC TRADING EQUITY FUND (Managed by NCB Capital Company) INTERIM FINANCIAL STATEMENTS (unaudited) For the six months period ended 30 June 2017 with REVIEW REPORT TO THE UNITHOLDERS
AL-AHLI GCC TRADING EQUITY FUND (Managed by NCB Capital Company) INTERIM BALANCE SHEET As at 30 June 2017 Expressed in Saudi Arabian Riyals ‘000 (unless otherwise stated) 30 June 31 December 30 June 2017 2016 2016 Notes (Unaudited) (Audited) (Unaudited) ASSETS Cash and cash equivalents
6
7,335
9,267
27,479
Held for trading investments
8
217,210
219,443
195,098
Accounts receivable
9
-──────── 224,545
-───────── 228,710
277 ──────── 222,854
498
54
93
331 ──────── 829 ──────── 223,716 ════════ 247,124 ════════ 0.9053 ════════
13 ───────── 67 ──────── 228,643 ═══════ 254,799 ═══════ 0.8973 ═════════
-──────── 93 ──────── 222,761 ════════ 258,663 ════════ 0.8612 ════════
Total assets LIABILITIY Payable to Unitholders on account of redemptions Management fee payable Total liabilities Net assets attributable to Unitholders Units in issue in thousands (number)
10
Net asset value per unit (SR)
The accompanying notes 1 to 13 form integral part of these interim financial statements 2
AL-AHLI GCC TRADING EQUITY FUND (Managed by NCB Capital Company) INTERIM STATEMENT OF INCOME (unaudited) For the six months period ended 30 June 2017 Expressed in Saudi Arabian Riyals ‘000 (unless otherwise stated) 30 June 2017
30 June 2016
Dividend income
6,029
4,293
Realised gain / (loss) on sale of held for trading investments
9,894
(34,380)
(12,282)
30,137
(2) ───────── 3,639 ─────────
8 ───────── 58 ─────────
1,983
1,954
1
98
Shariah audit fee
14
13
Audit fee
12
11
Fund Board remuneration
9
8
CMA fee
4
4
88 ───────── 2,111 ───────── 1,528 ═════════
122 ───────── 2,210 ───────── (2,152) ═════════
Note INVESTMENT REVENUE
Unrealised (loss) / gain on measurement of held for trading investments Exchange (loss) / gain Total revenue 7
EXPENSES Management fee Custody fee
Administrative expenses Total expenses NET INCOME / (LOSS) FOR THE PERIOD
The accompanying notes 1 to 13 form integral part of these interim financial statements 3
AL-AHLI GCC TRADING EQUITY FUND (Managed by NCB Capital Company) INTERIM STATEMENT OF CASH FLOWS (unaudited) For the six months period ended 30 June 2017 Expressed in Saudi Arabian Riyals ‘000 (unless otherwise stated)
Note Cash flow from operating activities Net income / (loss) for the period Adjustment for: Value of units reinvested Unrealised loss / (gain) on held for trading investments
30 June 2016
1,528
(2,152)
-2,210 12,282 (30,137) ─────── ─────── 13,810 (30,079)
Changes in operating assets and liabilities: (Increase) / decrease in held for trading investments Decrease in account receivable Decrease in IPO deposit Increase in payable to unit holders on account of redemptions Increase in management fee payable
(10,049) ---
43,722 114 960
80 444 -318 ─────── ─────── 4,523 14,797 ─────── ───────
Net cash provided by operating activities Cash flow from financing activities Proceeds from units sold Subscription fees deducted Value of units redeemed
20,931 13,562 -(9) (27,386) (13,763) ─────── ─────── (6,455) (210) ─────── ──── ─── (1,932) 14,587
Net cash used in financing activities (Decrease) / increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period
6
Cash and cash equivalents at the end of the period
6
The accompanying notes 1 to 13 form integral part of these interim financial statements 4
30 June 2017
12,892 9,267 ─────── ──── ─── 7,335 27,479 ═══════ ═══════
AL-AHLI GCC 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 2017 Expressed in Saudi Arabian Riyals ‘000 (unless otherwise stated)
Notes Net assets attributable to Unitholders at the beginning of the period (audited)
30 June 2017
30 June 2016
228,643
222,913
1,528
(2,152)
20,931
13,562
--
(9)
20,931
13,553
--
2,210
(27,386) ───────── (6,455) ─────────
(13,763) ───────── 2,000 ─────────
223,716 ═════════
222,761 ═════════
Net (loss) / income for the period Increase / (decrease) in net assets from unit transactions during the period
10
Gross proceeds from units sold Subscription fee deducted Net 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 13 form integral part of these interim financial statement 5
AL-AHLI GCC TRADING EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in Saudi Arabian Riyals ‘000 (unless otherwise stated) 1
THE FUND AND ITS ACTIVITIES
Al-Ahli GCC 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 30 of the Investment Fund Regulations (the Regulation) 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 in GCC companies, other than those listed on the stock exchange of the Kingdom of Saudi Arabia, are held by Citibank N.A., a sub-custodian appointed by the Fund Manager. The Fund is established with the objective to provide investors with long term capital growth through investments in GCC equity markets companies in accordance with the Shariah guidelines issued by the Fund Shariah Board. The Fund will not make any distributions to Unitholders. Instead, capital gains and dividends will be reinvested. The terms and conditions of the Fund were originally approved by the Saudi Arabian Monetary Agency (SAMA) and subsequently endorsed by CMA through their letter dated 18 Dhul Hijja 1429H (corresponding to 16 December 2008). The Fund commenced its activities on 6 October 2005. 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
REGULATORY AUTHORITY
The Fund is governed by the Regulations issued by the CMA pursuant to resolution number 7-219-2006 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
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 Saudi Business day. 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.
6
AL-AHLI GCC TRADING EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in Saudi Arabian Riyals ‘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 12). 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 Saudi Arabian Riyals (SR), which is the Fund’s functional currency. All financial information presented in Saudi Arabian Riyals 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 period in which the estimates are revised and in any future periods 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, 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.
7
AL-AHLI GCC TRADING EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in Saudi Arabian Riyals ‘000 (unless otherwise stated) 4
BASIS OF PREPARATION (continued)
Use of estimates and judgments (continued) Valuation of financial assets (continued) 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. 5
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. 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)
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; (ii) 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; (iii) 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 GCC TRADING EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in Saudi Arabian Riyals ‘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 (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 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
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 liabilit ies 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 consists 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.
9
AL-AHLI GCC TRADING EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in Saudi Arabian Riyals ‘000 (unless otherwise stated) 5 j)
SIGNIFICANT ACCOUNTING POLICIES (continued) 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. 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, on each valuation day, 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. 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. 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 fees/charges are paid in cash.
10
AL-AHLI GCC TRADING EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in Saudi Arabian Riyals ‘000 (unless otherwise stated) 8
HELD FOR TRADING INVESTMENTS
The composition of the held for trading investments by currency is summarized below: 30 June 2017 (Unaudited) Currency
Country
Saudi Riyal
Kingdom of Saudi Arabia United Arab Emirates Kuwait
UAE Dirham Kuwaiti Dinar
Currency
Country
Saudi Riyal
Kingdom of Saudi Arabia United Arab Emirates Qatar Kuwait
UAE Dirham Qatari Riyal Kuwaiti Dinar
% of Total Value
Cost
Fair Value
78.94 20.80 0.26 ──────── 100 ════════
160,296 44,700 -──────── 204,996 ════════
171,461 45,179 570 ──────── 217,210 ════════
31 December 2016 (Audited) % of Total Cost Fair Value Value
77.74 13.84 8.16 0.26 ──────── 100 ════════
147,011 30,493 17,517 -──────── 195,021 ════════
170,596 30,378 17,904 565 ──────── 219,443 ════════
30 June 2016 (Unaudited) Currency
Country
Saudi Riyal
Kingdom of Saudi Arabia Qatar United Arab Emirates Kuwait
Qatari Riyal UAE Dirham Kuwaiti Dinar
% of Total Value
Cost
Fair Value
89.06 5.00 3.44 2.50 ──────── 100 ════════
168,653 11,186 6,775 4,447 ──────── 191,061 ════════
173,748 9,746 6,711 4,893 ──────── 195,098 ════════
11
AL-AHLI GCC TRADING EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in Saudi Arabian Riyals ‘000 (unless otherwise stated) 8
HELD FOR TRADING INVESTMENTS (continued)
The composition of the held for trading investments by industry sector is summarized below:
Industry Sector Banking and Financial Services Petrochemical Industries Real Estate Development Transportation Industrial Investment Insurance Energy and Utilities Agriculture and Food Industries Telecommunication and Information Technology Retail Cement
Industry Sector Petrochemical Industries Real Estate Development Banks and Financial Services Transportation Retail Telecommunication and Information Technology Industrial Investment Energy utilities Insurance
30 June 2017 (Unaudited) % of Total Value Cost 23.45 17.28 17.09 9.87 6.29 5.86 5.11 4.66 3.88 3.59 2.90 ──────── 100 ════════
45,989 36,278 37,100 21,831 11,296 11,886 9,943 8,231 9,380 5,975 7,087 ──────── 204,996 ════════
Fair Value 50,973 37,524 37,121 21,435 13,657 12,734 11,092 10,124
8,418 7,791 6,341 ──────── 217,210 ════════
31 December 2016 (Audited) % of Total Value Cost Fair Value 31.84 15.79 14.76 11.42 10.00
61,358 31,912 29,097 21,536 17,745
69,871 34,660 32,392 25,069 21,940
5.29 4.69 3.30 2.91 ──────── 100 ════════
10,353 10,512 7,037 5,471 ──────── 195,021 ════════
11,608 10,282 7,249 6,372 ──────── 219,443 ════════
12
AL-AHLI GCC TRADING EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in Saudi Arabian Riyals ‘000 (unless otherwise stated) 8
HELD FOR TRADING INVESTMENTS (continued)
Industry Sector Petrochemical Industries Retail Real Estate Development Industrial Investment Transportation Banking and Financial Services Telecommunication and Information Technology Energy and Utilities Cement Agriculture and Food Industries Insurance Building and Construction
9
30 June 2016 (Unaudited) % of Total Value Cost
Fair Value
18.29 16.78 11.36 9.70 8.39 8.04
35,269 31,729 21,359 20,293 17,031 13,595
35,692 32,739 22,166 18,915 16,368 15,679
7.63 6.43 5.95 2.98 2.91 1.54 ──────── 100 ════════
15,860 10,817 11,698 5,854 4,413 3,143 ──────── 191,061 ════════
14,887 12,537 11,612 5,809 5,668 3,026 ──────── 195,098 ════════
ACCOUNT RECEIVABLE
Dividends receivable Other receivables
13
30 June 2017 SR’ 000 (Unaudited)
31 December 2016 SR’ 000 (Audited)
30 June 2016 SR’ 000 (Unaudited)
--────── -══════
--────── -══════
88 189 ────── 277 ══════
AL-AHLI GCC TRADING EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in Saudi Arabian Riyals ‘000 (unless otherwise stated) 10
UNIT TRANSACTIONS
Transactions in units are summarized as follows: For the six months period ended 30 June 2017 Units’ 000
For the six months period ended 30 June 2016 Units’ 000
254,799
256,138
23,701
16,515
Units reinvested
--
2,701
Units redeemed
(31,376)
(16,691)
(7,675) ─────── 247,124 ═══════
2,525 ─────── 258,663 ═══════
Units at the beginning of the period (audited) Units sold
Net (decrease) / increase in units during the period Units at the end of the period (unaudited)
As at 30 June 2017, top five Unitholders represented 30.55% (30 June 2016: 30.46%) of the Fund’s units. 11
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 and Banker to the Fund Unitholder
Al-Ahli IPO Fund
14
AL-AHLI GCC TRADING EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2017 (unaudited) Expressed in Saudi Arabian Riyals ‘000 (unless otherwise stated) 11
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
Amount of transactions 2017 2016
Related party
Nature of transaction
NCBC
Management Fee
1,983
1,954
Expenses paid on behalf of the fund
128
256
Subscription of units
2,815
--
Redemption of units
--
--
Al-Ahli IPO Fund
12
--
11,561
2,845
--
LAST VALUATION DAY
The last valuation day for the period was 22 June 2017 (30 June 2016: 29 June 2016). There is no significant change in the net asset value per unit of the Fund between last valuation and 30 June 2017. 13
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.
15