AlAhli Global Growth And Income Fund
AlAhli Global Growth And Income Fund
AlAhli Global Growth and Income 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 TCW Asset Management Company 865 South Figueroa Street, Suite 1800, Los Angeles, CA 90017 3. Investment activities During the first half of 2017,the fund strategy was mainly bottom-up and value oriented. The fund maintained a relatively stable sector exposure during the year with overweight in Energy, Material and Industrials and an underweight in Consumer Staples and Consumer Discretionary and Technology. The fund was mainly invested in developed markets with minor exposure to emerging markets 4. Fund’s performance The fund returned 5.98% (net of fees) vs. 12.60% of the benchmark with an underperformance of 662bps. The fund employed a value strategy and during the first half of the year growth stocks have outperformed value stocks. The overweight in Energy and the underweight in Technology are the main causes of the fund's underperformance. 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 GLOBAL GROWTH AND INCOME 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 GLOBAL GROWTH AND INCOME 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 31December 30 June 2017 2016 2016 (Unaudited) (Audited) (Unaudited)
ASSETS Cash and cash equivalents
6
268
315
351
Held for trading investments
8
7,267
12,233
13,042
Accounts receivable
9
117 343 108 ───────── ───────── ───────── 12,665 13,736 7,643
10
328 ───────── 7,315 ═════════ 7,068 ═════════ 1.0352 ═════════
Total assets LIABILITY Accounts payable Net assets attributable to Unitholders 11
Units in issue in thousands (number) Net asset value per unit (USD)
The accompanying notes 1 to 14 form integral part of these interim financial statements
2
292 ──────── 12,373 ════════ 12,395 ════════ 0.9982 ════════
584 ───────── 13,152 ═════════ 14,238 ═════════ 0.9237 ═════════
AL-AHLI GLOBAL GROWTH AND INCOME 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
Dividend income
165
252
Realised gain / (loss) on sale of held for trading investments
459
(264)
Unrealised gain on measurement of held for trading investments
242
215
-───────── 866 ─────────
(1) ───────── 202 ─────────
109
130
Custody fee
8
22
Audit fee
4
3
Shariah audit fee
4
4
Fund Board remuneration
3
2
CMA fee
1
1
6 ───────── 135 ───────── 731 ═════════
3 ───────── 165 ───────── 37 ═════════
Note INVESTMENT REVENUE
Unrealised loss on other financial assets Total revenue 7
EXPENSES Management fee
Administrative expenses Total expenses NET INCOME FOR THE PERIOD
The accompanying notes 1 to 14 form integral part of these interim financial statements
3
AL-AHLI GLOBAL GROWTH AND INCOME 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)
Note Cash flow from operating activities Net income 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 Increase / (decrease) in accounts payable Net cash provided by operating activities Cash flow from financing activities Proceeds from units sold Subscription fee deducted Income distribution Value of units redeemed Net cash used in financing activities Net (decrease) 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
30 June 2017
30 June 2016
731
37
-(242) ────── 489
165 (215) ────── (13)
5,208 9 36 ────── 5,742 ──────
1,569 (79) (209) ────── 1,268 ──────
1,316 -(162) (6,943) ────── (5,789) ────── (47)
532 (6) (232) (1,929) ────── (1,635) ────── (367)
315 ────── 268 ══════
718 ────── 351 ══════
The accompanying notes 1 to 14 form integral part of these interim financial statements
4
AL-AHLI GLOBAL GROWTH AND INCOME 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) 30 June 2017
30 June 2016
12,373
14,585
731
37
Gross proceeds from units sold
1,316
532
Subscription fees deducted
-1,316
(6)
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
11
Net proceeds from units sold
526
Value of units reinvested
7
Income distribution
-(162)
Value of units redeemed
Net assets attributable to Unitholders at the end of the period (unaudited)
(232)
(6,943) ─────── (5,789) ───────
(1,929) ─────── (1,470) ───────
7,315 ═══════
13,152 ═══════
The accompanying notes 1 to 15 form integral part of these interim financial statements
5
165
AL-AHLI GLOBAL GROWTH AND INCOME 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 Global Growth and Income Fund (the "Fund") is an open-end Shariah compliant 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 (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 CACEIS Bank Luxembourg, a custodian appointed by the Fund Manager. The Fund Manager has appointed an international investment house, TCW Asset Management Company, United States of America as sub-manager to the Fund. Their duties include opening separate independent investment accounts and managing the Fund assets in line with the investment strategies and Shariah guidelines. The Fund seeks to achieve long-term growth and income distribution by investing in dividend paying and other companies with growth and strong cash flow potential, listed on the developed and emerging markets in line with the Shariah guidelines. The un-invested cash balances may be held, in cash, Shariah compliant money market and Murabaha funds and/or be placed in Murabaha transactions. The terms and conditions of the Fund were approved by the CMA on 16 Shaaban 1434 H (corresponding to 15 June 2013). The Fund commenced its activities on 4 December 2013. 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 7-219-2006 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 valuation day (Monday and Wednesday). 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 total number of outstanding Fund units on the relevant Valuation day.
6
AL-AHLI GLOBAL GROWTH AND INCOME 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 13). 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, 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, 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 GLOBAL GROWTH AND INCOME 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)
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 which is the date on which Fund becomes a part to the contractual provisions of the instrument. 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 GLOBAL GROWTH AND INCOME 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 (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 GLOBAL GROWTH AND INCOME 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 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 primarily represents cash held in current accounts with a local bank. 7
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, which should not be 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, legal, 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 1.5% 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. 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 GLOBAL GROWTH AND INCOME 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 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 Japanese Yen Japan Pound Sterling United Kingdom Euro France Australian Dollar Australia Malaysian Ringgit Malaysia Hong Kong Dollar Hong Kong
Currency
Country
United States Dollar United States of America Euro Netherlands, Ireland, France and Finland
Pound Sterling Japanese Yen Swiss Franc
United Kingdom Japan Switzerland
Malaysian Ringgit Chinese Yuan Australian Dollar
Malaysia China Australia
Currency
Country
United States Dollar United States of America Pound Sterling United Kingdom Euro France Japanese Yen Japan Malaysian Ringgit Malaysia Australian Dollar Australia
30 June 2017 (Unaudited) % of Total Value Cost 74.29 7.72 7.44 6.12 1.83 1.64 0.95 ──────── 100 ════════
4,948 518 552 433 157 121 66 ──────── 6,795 ════════
31 December 2016 (Audited) % of Total Value Cost
Fair Value 5,399 561 541 445 133 119 69 ──────── 7,267 ════════
Fair Value
59.24
6,540
7,247
20.51 6.71 5.95 2.54 2.49 1.40 1.16 ──────── 100 ════════
2,482 1,046 622 292 387 156 170 ──────── 11,695 ════════
2,509 821 728 311 305 171 141 ──────── 12,233 ════════
30 June 2016 (Unaudited) % of Total Value Cost 78.85 6.15 6.04 3.77 2.61 2.58 ──────── 100 ════════
11
10,646 1,098 984 458 426 363 ──────── 13,975 ════════
Fair Value 10,284 802 788 492 341 335 ──────── 13,042 ════════
AL-AHLI GLOBAL GROWTH AND INCOME 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 FOR TRADING INVESTMENTS (continued)
The composition of the held for trading investments by industry sector is summarized below:
Industry Sector Consumer Goods Healthcare Energy Financial Services Telecommunication Information Technology Basic Materials Transportation Industrials Others
30 June 2017 (Unaudited) % of Total Value Cost 30.07 29.95 11.27 8.14 6.98 5.12 3.33 2.51 1.63 1.00 ──────── 100 ════════
1,824 2,201 931 586 403 244 270 119 121 95 ──────── 6,795 ════════
31 December 2016 (Audited) % of Total Value Cost
Fair Value 2,186 2,176 819 591 507 372 242 182 119 73 ──────── 7,267 ════════
Fair Value
Industry Sector Information Technology Health Care Industrials Consumer Goods Basic Materials Oil & Gas Consumer Services Telecommunication Services
Industry Sector Health care Information technology Industrial services and equipment Oil and gas Materials Consumer goods Consumer services Telecommunications
23.13 20.33 16.75 14.44 9.40 6.59 5.12 4.24 ──────── 100 ════════
2,563 2,278 2,039 1,594 1,130 959 754 378 ──────── 11,695 ════════
30 June 2016 (Unaudited) % of Total Value Cost 24.87 19.94 17.74 13.30 8.81 7.05 5.74 2.57 ──────── 100 ════════
12
3,548 2,668 2,497 2,025 1,318 817 739 363 ──────── 13,975 ════════
2,830 2,487 2,049 1,767 1,150 806 626 518 ──────── 12,233 ════════
Fair Value 3,243 2,600 2,314 1,734 1,149 919 748 335 ──────── 13,042 ════════
AL-AHLI GLOBAL GROWTH AND INCOME 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
ACCOUNTS RECEIVABLE
Receivable for investments sold Dividends receivable Other receivable
10
30 June 2017 (Unaudited)
31 December 2016 (Audited)
30 June 2016 (Unaudited)
108 --────── 108 ══════
-29 88 ────── 117 ══════
168 32 143 ────── 343 ══════
30 June 2017 (Unaudited)
31 December 2016 (Audited)
30 June 2016 (Unaudited)
52 50 ---226 ────── 328 ══════
-2 254 --36 ────── 292 ══════
-243 232 37 58 14 ────── 584 ══════
ACCOUNTS PAYABLE
Management fee payable Payable to Unitholders on account of redemption Payable for income distribution Payable for investments purchased Payable for purchase of foreign currency Other payables
13
AL-AHLI GLOBAL GROWTH AND INCOME 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
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
12,395
15,552
1,274
573
Units reinvested
--
179
Units redeemed
(6,601)
(2,066)
(5,327) ──────── 7,068 ════════
(1,314) ──────── 14,238 ════════
Units at the beginning of the period (audited) Units sold
Net decrease in units during the period Units at the end of the period (unaudited)
As at 30 June 2017, top five Unitholders represented of 60.78% (30 June 2016: 48.24%) of the Fund’s units. 12
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 2017 2016
Related party
Nature of transaction
NCBC
Management Fee
109
316
Expenses paid on behalf of the fund
27
35
14
Value of units held as at 30 June 2017 2016
--
--
AL-AHLI GLOBAL GROWTH AND INCOME 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) 13
LAST VALUATION DAY
The last valuation day for the period was 28 June 2017 (30 June 2016: 29 June 2016). 14
APPROVAL OF THE FINANCIAL STATEMENTS
These financial statements were approved by the Fund Manager on Dhul Qadah 23, 1438H, corresponding to August 15, 2017.
15
AlAhli Global Growth and Income 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 TCW Asset Management Company 865 South Figueroa Street, Suite 1800, Los Angeles, CA 90017 3. Investment activities During the first half of 2017,the fund strategy was mainly bottom-up and value oriented. The fund maintained a relatively stable sector exposure during the year with overweight in Energy, Material and Industrials and an underweight in Consumer Staples and Consumer Discretionary and Technology. The fund was mainly invested in developed markets with minor exposure to emerging markets 4. Fund’s performance The fund returned 5.98% (net of fees) vs. 12.60% of the benchmark with an underperformance of 662bps. The fund employed a value strategy and during the first half of the year growth stocks have outperformed value stocks. The overweight in Energy and the underweight in Technology are the main causes of the fund's underperformance. 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 GLOBAL GROWTH AND INCOME 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 GLOBAL GROWTH AND INCOME 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 31December 30 June 2017 2016 2016 (Unaudited) (Audited) (Unaudited)
ASSETS Cash and cash equivalents
6
268
315
351
Held for trading investments
8
7,267
12,233
13,042
Accounts receivable
9
117 343 108 ───────── ───────── ───────── 12,665 13,736 7,643
10
328 ───────── 7,315 ═════════ 7,068 ═════════ 1.0352 ═════════
Total assets LIABILITY Accounts payable Net assets attributable to Unitholders 11
Units in issue in thousands (number) Net asset value per unit (USD)
The accompanying notes 1 to 14 form integral part of these interim financial statements
2
292 ──────── 12,373 ════════ 12,395 ════════ 0.9982 ════════
584 ───────── 13,152 ═════════ 14,238 ═════════ 0.9237 ═════════
AL-AHLI GLOBAL GROWTH AND INCOME 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
Dividend income
165
252
Realised gain / (loss) on sale of held for trading investments
459
(264)
Unrealised gain on measurement of held for trading investments
242
215
-───────── 866 ─────────
(1) ───────── 202 ─────────
109
130
Custody fee
8
22
Audit fee
4
3
Shariah audit fee
4
4
Fund Board remuneration
3
2
CMA fee
1
1
6 ───────── 135 ───────── 731 ═════════
3 ───────── 165 ───────── 37 ═════════
Note INVESTMENT REVENUE
Unrealised loss on other financial assets Total revenue 7
EXPENSES Management fee
Administrative expenses Total expenses NET INCOME FOR THE PERIOD
The accompanying notes 1 to 14 form integral part of these interim financial statements
3
AL-AHLI GLOBAL GROWTH AND INCOME 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)
Note Cash flow from operating activities Net income 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 Increase / (decrease) in accounts payable Net cash provided by operating activities Cash flow from financing activities Proceeds from units sold Subscription fee deducted Income distribution Value of units redeemed Net cash used in financing activities Net (decrease) 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
30 June 2017
30 June 2016
731
37
-(242) ────── 489
165 (215) ────── (13)
5,208 9 36 ────── 5,742 ──────
1,569 (79) (209) ────── 1,268 ──────
1,316 -(162) (6,943) ────── (5,789) ────── (47)
532 (6) (232) (1,929) ────── (1,635) ────── (367)
315 ────── 268 ══════
718 ────── 351 ══════
The accompanying notes 1 to 14 form integral part of these interim financial statements
4
AL-AHLI GLOBAL GROWTH AND INCOME 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) 30 June 2017
30 June 2016
12,373
14,585
731
37
Gross proceeds from units sold
1,316
532
Subscription fees deducted
-1,316
(6)
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
11
Net proceeds from units sold
526
Value of units reinvested
7
Income distribution
-(162)
Value of units redeemed
Net assets attributable to Unitholders at the end of the period (unaudited)
(232)
(6,943) ─────── (5,789) ───────
(1,929) ─────── (1,470) ───────
7,315 ═══════
13,152 ═══════
The accompanying notes 1 to 15 form integral part of these interim financial statements
5
165
AL-AHLI GLOBAL GROWTH AND INCOME 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 Global Growth and Income Fund (the "Fund") is an open-end Shariah compliant 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 (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 CACEIS Bank Luxembourg, a custodian appointed by the Fund Manager. The Fund Manager has appointed an international investment house, TCW Asset Management Company, United States of America as sub-manager to the Fund. Their duties include opening separate independent investment accounts and managing the Fund assets in line with the investment strategies and Shariah guidelines. The Fund seeks to achieve long-term growth and income distribution by investing in dividend paying and other companies with growth and strong cash flow potential, listed on the developed and emerging markets in line with the Shariah guidelines. The un-invested cash balances may be held, in cash, Shariah compliant money market and Murabaha funds and/or be placed in Murabaha transactions. The terms and conditions of the Fund were approved by the CMA on 16 Shaaban 1434 H (corresponding to 15 June 2013). The Fund commenced its activities on 4 December 2013. 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 7-219-2006 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 valuation day (Monday and Wednesday). 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 total number of outstanding Fund units on the relevant Valuation day.
6
AL-AHLI GLOBAL GROWTH AND INCOME 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 13). 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, 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, 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 GLOBAL GROWTH AND INCOME 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)
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 which is the date on which Fund becomes a part to the contractual provisions of the instrument. 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 GLOBAL GROWTH AND INCOME 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 (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 GLOBAL GROWTH AND INCOME 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 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 primarily represents cash held in current accounts with a local bank. 7
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, which should not be 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, legal, 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 1.5% 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. 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 GLOBAL GROWTH AND INCOME 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 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 Japanese Yen Japan Pound Sterling United Kingdom Euro France Australian Dollar Australia Malaysian Ringgit Malaysia Hong Kong Dollar Hong Kong
Currency
Country
United States Dollar United States of America Euro Netherlands, Ireland, France and Finland
Pound Sterling Japanese Yen Swiss Franc
United Kingdom Japan Switzerland
Malaysian Ringgit Chinese Yuan Australian Dollar
Malaysia China Australia
Currency
Country
United States Dollar United States of America Pound Sterling United Kingdom Euro France Japanese Yen Japan Malaysian Ringgit Malaysia Australian Dollar Australia
30 June 2017 (Unaudited) % of Total Value Cost 74.29 7.72 7.44 6.12 1.83 1.64 0.95 ──────── 100 ════════
4,948 518 552 433 157 121 66 ──────── 6,795 ════════
31 December 2016 (Audited) % of Total Value Cost
Fair Value 5,399 561 541 445 133 119 69 ──────── 7,267 ════════
Fair Value
59.24
6,540
7,247
20.51 6.71 5.95 2.54 2.49 1.40 1.16 ──────── 100 ════════
2,482 1,046 622 292 387 156 170 ──────── 11,695 ════════
2,509 821 728 311 305 171 141 ──────── 12,233 ════════
30 June 2016 (Unaudited) % of Total Value Cost 78.85 6.15 6.04 3.77 2.61 2.58 ──────── 100 ════════
11
10,646 1,098 984 458 426 363 ──────── 13,975 ════════
Fair Value 10,284 802 788 492 341 335 ──────── 13,042 ════════
AL-AHLI GLOBAL GROWTH AND INCOME 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 FOR TRADING INVESTMENTS (continued)
The composition of the held for trading investments by industry sector is summarized below:
Industry Sector Consumer Goods Healthcare Energy Financial Services Telecommunication Information Technology Basic Materials Transportation Industrials Others
30 June 2017 (Unaudited) % of Total Value Cost 30.07 29.95 11.27 8.14 6.98 5.12 3.33 2.51 1.63 1.00 ──────── 100 ════════
1,824 2,201 931 586 403 244 270 119 121 95 ──────── 6,795 ════════
31 December 2016 (Audited) % of Total Value Cost
Fair Value 2,186 2,176 819 591 507 372 242 182 119 73 ──────── 7,267 ════════
Fair Value
Industry Sector Information Technology Health Care Industrials Consumer Goods Basic Materials Oil & Gas Consumer Services Telecommunication Services
Industry Sector Health care Information technology Industrial services and equipment Oil and gas Materials Consumer goods Consumer services Telecommunications
23.13 20.33 16.75 14.44 9.40 6.59 5.12 4.24 ──────── 100 ════════
2,563 2,278 2,039 1,594 1,130 959 754 378 ──────── 11,695 ════════
30 June 2016 (Unaudited) % of Total Value Cost 24.87 19.94 17.74 13.30 8.81 7.05 5.74 2.57 ──────── 100 ════════
12
3,548 2,668 2,497 2,025 1,318 817 739 363 ──────── 13,975 ════════
2,830 2,487 2,049 1,767 1,150 806 626 518 ──────── 12,233 ════════
Fair Value 3,243 2,600 2,314 1,734 1,149 919 748 335 ──────── 13,042 ════════
AL-AHLI GLOBAL GROWTH AND INCOME 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
ACCOUNTS RECEIVABLE
Receivable for investments sold Dividends receivable Other receivable
10
30 June 2017 (Unaudited)
31 December 2016 (Audited)
30 June 2016 (Unaudited)
108 --────── 108 ══════
-29 88 ────── 117 ══════
168 32 143 ────── 343 ══════
30 June 2017 (Unaudited)
31 December 2016 (Audited)
30 June 2016 (Unaudited)
52 50 ---226 ────── 328 ══════
-2 254 --36 ────── 292 ══════
-243 232 37 58 14 ────── 584 ══════
ACCOUNTS PAYABLE
Management fee payable Payable to Unitholders on account of redemption Payable for income distribution Payable for investments purchased Payable for purchase of foreign currency Other payables
13
AL-AHLI GLOBAL GROWTH AND INCOME 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
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
12,395
15,552
1,274
573
Units reinvested
--
179
Units redeemed
(6,601)
(2,066)
(5,327) ──────── 7,068 ════════
(1,314) ──────── 14,238 ════════
Units at the beginning of the period (audited) Units sold
Net decrease in units during the period Units at the end of the period (unaudited)
As at 30 June 2017, top five Unitholders represented of 60.78% (30 June 2016: 48.24%) of the Fund’s units. 12
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 2017 2016
Related party
Nature of transaction
NCBC
Management Fee
109
316
Expenses paid on behalf of the fund
27
35
14
Value of units held as at 30 June 2017 2016
--
--
AL-AHLI GLOBAL GROWTH AND INCOME 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) 13
LAST VALUATION DAY
The last valuation day for the period was 28 June 2017 (30 June 2016: 29 June 2016). 14
APPROVAL OF THE FINANCIAL STATEMENTS
These financial statements were approved by the Fund Manager on Dhul Qadah 23, 1438H, corresponding to August 15, 2017.
15
