Jadwa Saudi IPO Fund - Jadwa Investment
Jadwa Saudi IPO Fund 2017 Semi Annual Report
A Saudi Closed Joint Stock Company (registration no. 1010228782, Licensed by the Capital Market Authority under the license number 37-6034 Head Office: Phone +966 11 279-1111 Fax +966 11 279-1571 P.O.Box 60677, Riyadh 11555, Saudi Arabia
) مرخصة من قبل هيئة السوق المالية بموجب7878110101 شركة مساهمة سعودية مقفلة (رقم السجل التجاري 83870-71 ترخيص رقم 77777 الرياض38311 ب. ص+233 77 112-7717 فاكس+233 77 112-7777 اإلدارة العامة هاتف المملكة العربية السعودية
Jadwa Saudi IPO Fund Annual Report is available upon request free of charge and on www.jadwa.com
1
Contents Investment Fund Information ........................................................................................................................................... 3
Fund Manager’s Commentary ......................................................................................................................................... 6
Fund Performance ............................................................................................................................................................ 8
Fund Expenses .................................................................................................................................................................. 9
Disclosures ....................................................................................................................................................................... 10
Annex A: Auditor Statement and Financial Statements ............................................................................................ 11
Jadwa Saudi IPO Fund Annual Report is available upon request free of charge and on www.jadwa.com
2
Investment Fund Information
Fund Name Jadwa Saudi IPO Fund
Benchmark IdealRatings Saudi IPO Islamic Index (TR)
Inception Date August 7, 2016G
Investment Objective and Policies The Fund aims to provide long term capital growth through investing mainly in IPOs of Saudi company shares, shares of Saudi Companies that are listed on Tadawul for less than two years, and in the priority rights of Saudi companies in accordance with the Sharia guidelines. (1) The Fund aims to invest its assets in the following:
IPOs that are compliant with the Fund Manager’s Sharia Criteria; The shares of Saudi Companies that were listed on Tadawul during the last two years; The rights issue of Saudi companies and any related financial instruments such as tradable rights; In periods in which there are no IPOs, right issues, or any other investment opportunities that fit the Fund's objectives (i.e. complaint with the Fund's Sharia Criteria, licensed by the CMA, publicly offered in the Kingdom of Saudi Arabia by the Fund Manager or any other manager or both) are available, the Fund Manager may reduce the minimum limit for exposure to the above mentioned instruments from 30% to 0%. Further, the Fund Manager may allocate Fund’s assets to: o Cash; o Short-term Murabaha agreements denominated in Saudi Riyal; o Saudi or GCC Sukuk.
(2) The following Table summarizes the concentration policies and asset allocation among various investment categories, noting that o Investment territory shall be the Kingdom of Saudi Arabia and GCC Countries; o The investment universe shall be updated on a quarterly basis, and upon the start of the new year; o Investment concentration will not be in a certain sector or industry.
Minimum Fund Assets
Maximum Fund Assets
Only Saudi Stock Exchange
30%
100%
Cash
0%
30%
Type of Investment IPOs, right issues and shares listed in the last two years Cash
Description
Jadwa Saudi IPO Fund Annual Report is available upon request free of charge and on www.jadwa.com
3
Short-term Murabaha agreements in Saudi Riyal or Murabaha funds
Saudi or GCC Sukuk or Sukuk Funds
IPO funds with objectives similar to the Fund
Investment will be made in money market instruments directly in Murabaha agreements through Saudi banks licensed by (SAMA), or investment will be indirectly made in Murabaha agreements, provided that they shall be complaint with the Fund's Sharia Criteria, licensed by the CMA, and publicly offered in the Kingdom of Saudi Arabia by the Fund Manager, any other manager or both. No more than 15% of the Fund's Net Asset Value can be allocated to investment in securities of a single entity or issuer. Investment will be directly made in corporate Sukuk (either through IPOs or private placements) with a minimum investment grade credit rating by at least one of the international credit rating agencies (Standard & Poor's – BBB / Moody's - Baa3 / Fitch – BBB). In case of lack of credit rating, the Fund Manager shall internally define a credit rating to them based on the stability and integrity of the financial position of the counterparty or the issuer. Further, the Fund may invest in Sukuk funds provided that they are compliant with the Fund's Sharia Criteria, licensed by the CMA, and publicly offered in the Kingdom of Saudi Arabia by the Fund Manager, any other manager or both. No more than 15% of the Fund's Net Asset Value can be allocated to investment in securities of a single entity or issuer. Compliant with the Fund's Sharia Criteria, licensed by the CMA, and publicly offered in the Kingdom of Saudi Arabia by the Fund Manager, any other manager or both. No more than 15% of the Fund's Net Asset Value can be allocated to investment in securities of a single entity or issuer.
0%
50%
0%
50%
0%
50%
It is worth mentioning that the Fund Manager shall select, after fulfilling the said requirements and criteria, the investment instrument and the entity in which it plans to invest based on its sole discretion and the stability of the financial position of the counterparty or the issuer. (3) Jadwa Investment uses active investment strategy to determine securities and funds expected to generate longterm returns through analyzing their financial statements, periodical reports and disclosures. The team further assesses the management of these companies and their plans, along with market situations in which they operate to effectively manage Fund’s investments. (4) The Fund Manager will invest in securities only set forth in Paragraphs (1) and (2). (5) The Fund will only invest in Sharia-complaint securities, and the Fund shall comply with the investment restrictions set forth Investment Funds Regulations.
Jadwa Saudi IPO Fund Annual Report is available upon request free of charge and on www.jadwa.com
4
(6) The Fund may obtain loans compliant with the investment's Sharia Criteria, provided that the Fund's leverage shall not exceed 10% of its Net Asset Value for a maturity period of no later than one year, and shall be used for investing in the same assets of the Fund, except the loans from the Fund Manager or any of its subsidiaries to cover Redemption Requests allowed under Investment Funds Regulations, subject to the approval of the Fund Board. (7) The Fund aims to invest mainly in the Saudi and GCC markets. (8) The Fund may invest as high as 50% of its assets in other mutual funds, provided that they are compliant with the Sharia Criteria of the Fund, in Saudi Riyal, licensed by the CMA and publicly offered in the Kingdom of Saudi Arabia by the Fund Manager, any other manager or both. No more than 10% of the Fund's Net Asset Value can be allocated to investment in securities of another fund, or a maximum 10% of another fund may be owned for the benefit of the Fund. (9) The Fund will invest no more than 10% of the Fund's Net Asset Value in the financial derivatives related to the issuances of rights shares; namely, the tradable rights that are compliant with the Investment Sharia Criteria.
Distribution of Income and Gain Policy Dividends and/or income are reinvested in the Fund and not paid out or distributed to investors.
Fund Manager Jadwa Investment A Saudi Closed Joint Stock Company (registration no. 1010228782, Licensed by Capital Market Authority under license number 37-6034 Head Office: P.O. Box 60677, Riyadh 11555, Saudi Arabia. Phone +966 11 279-1111 Fax +966 11 279-1571
Fund Custodian Jadwa Investment A Saudi Closed Joint Stock Company (registration no. 1010228782, Licensed by Capital Market Authority under license number 37-6034 Head Office: P.O. Box 60677, Riyadh 11555, Saudi Arabia. Phone +966 11 279-1111 Fax +966 11 279-1571 The custodian is responsible for taking custody and protecting fund assets on behalf of all unitholders and for taking all required administrative measures in regards to the custody of the fund’s assets.
Fund Auditor KPMG Al Fozan PO BOX 92876 Al Riyadh 11663 Kingdom of Saudi Arabia
Jadwa Saudi IPO Fund Annual Report is available upon request free of charge and on www.jadwa.com
5
Fund Manager’s Commentary At Jadwa Investment, we are committed to our research-driven, high conviction approach to investing, which we believe can generate above-average risk-adjusted returns for our clients. Our investment strategy is based on long term views founded upon economic, industry and company level fundamentals. 2016 was a challenging year in capital markets globally, characterized by high levels of uncertainty. Oil prices collapsed at the start of the year and then more than doubled as global economic activity stabilized, US oil production levels declined and major oil producing nations stepped up efforts to reach supply cut agreements. Given oil is a major source of revenue for Saudi Arabia, low and volatile oil price along with uncertainty related to government spending affected investors’ risk appetite. Moreover, delay in government payments and periodic issuance of local government debt squeezed money supply from the system. As a result, the first three quarters of the year were marked by rising interbank rates and declining valuations of local risk assets. Towards year end, however, the local bourse remained buoyed driven by substantial improvement in money supply (due to successful debut international government bond issuance and measures taken by SAMA to ease system liquidity), stabilization of oil prices at relatively higher levels, as well as positive steps taken by CMA and Tadawul to enable inclusion of Saudi Arabia into emerging market equity indices. Market outlook further strengthened with announcements of 2017 Budget, NTP 2020 and Balanced Budget 2020 which highlighted key government measures to reform the economy, and brought clarity regarding future direction of government policies. Jadwa Saudi IPO Fund had a -3.12% cumulative return since inception (on 07 August 2016). In comparison, the Fund’s benchmark achieved a total return of 6.53% during the same period. Moreover, since the fund’s inception till year end, there were no initial public offerings in Saudi market that the fund could participate in. For more details on performance please refer to the Fund Performance section. Turnover
1H 2017 Fund
10.33%
Jadwa Saudi IPO Fund Annual Report is available upon request free of charge and on www.jadwa.com
6
Allocation
% of Net Assets 31-Dec-2016
% of Net Assets 30-Jun-2017
Equity
46.56%
Equity
62.18%
Cash
53.44%
Cash
37.82%
Total
100.00%
Total
100.00%
Sector
% of Net Assets 31-Dec-2016
Sector
% of Net Assets 30-Jun-2017
Transportation
25.52%
Transportation
19.29%
Health Care Equipment & Svc
8.48%
Health Care Equipment & Svc
18.30%
Materials
5.94%
Retailing
6.77%
Top 3 Sector Allocations
Jadwa Saudi IPO Fund Annual Report is available upon request free of charge and on www.jadwa.com
7
Fund Performance
1-Year
3-Year
5-Year
Since Inception*
Fund
-
-
-
-3.12%
Benchmark
-
-
-
6.53%
th
st
*From August 7 2016 till December 31 2016
Fund
Benchmark
2016*
8.15%
18.73%
1H 2017
-10.42%
-10.27%
th
st
*From August 7 2016 till December 31 2016
Jadwa Saudi IPO Fund Annual Report is available upon request free of charge and on www.jadwa.com
8
Fund Expenses
Expenses for 1H 2017 (SAR) Management Fees
95,397.99
Fund Board
9,917.81
Auditing Fees
9,917.81
Custodian's Fees
15,620.55
Fund Administration Fees
79,342.47
Tadawul Fees
2,479.45
CMA Fees
3,719.18
Legal Expenses
-
Cost of Sharia-compliant finance (when required)
-
Registration / Fees of Unit Processing
-
Other expenses
12,111.83
Total
228,507.09
Cost/Average Assets Ratio
1.35%
Jadwa Saudi IPO Fund Annual Report is available upon request free of charge and on www.jadwa.com
9
Disclosures Material Changes No Material Changes during 1H 2017.
For additional information please refer to the Terms & Conditions available on www.jadwa.com
Kindly refer to Annex A for auditor statements regarding the Fund.
Jadwa Saudi IPO Fund Annual Report is available upon request free of charge and on www.jadwa.com
10
Annex A: Auditor Statement and Financial Statements
Jadwa Saudi IPO Fund Annual Report is available upon request free of charge and on www.jadwa.com
11
Disclaimer: Jadwa Investment or its directors, staff, or affiliates makes no warranty, representation or undertaking whether expressed or implied, nor does it assume any legal liability, whether direct or indirect, or responsibility for the accuracy, completeness, or usefulness of any information that is contained in this material. It is not the intention of this material to be used or deemed as an advice, option or for any action that may take place in future. Unless otherwise stated, all information contained in this material shall not be reproduced, in whole or in part, without the specific written permission of Jadwa Investment. The content of this document is for information purposes only. Jadwa Investment does not hold itself out as providing legal, financial or other advice via this document. Investments in Jadwa's products are governed by their Terms and Conditions. Some products are exposed to foreign currencies and changes in currency exchange rates may have an adverse effect on the value and price. The product's value is subject to fluctuations and the investor may not receive the full amount that is originally invested. The information provided in this document may be changed at any time without prior notice. Past performance is not indicative of future returns. Jadwa Investment is authorized and regulated by the Capital Market Authority of Saudi Arabia.
A Saudi Closed Joint Stock Company (registration no. 1010228782, Licensed by the Capital Market Authority under the license number 37-6034 Head Office: Phone +966 11 279-1111 Fax +966 11 279-1571 P.O.Box 60677, Riyadh 11555, Saudi Arabia
) مرخصة من قبل هيئة السوق المالية بموجب7878110101 شركة مساهمة سعودية مقفلة (رقم السجل التجاري 83870-71 ترخيص رقم 77777 الرياض38311 ب. ص+233 77 112-7717 فاكس+233 77 112-7777 اإلدارة العامة هاتف المملكة العربية السعودية
Jadwa Saudi IPO Fund Annual Report is available upon request free of charge and on www.jadwa.com
1
Contents Investment Fund Information ........................................................................................................................................... 3
Fund Manager’s Commentary ......................................................................................................................................... 6
Fund Performance ............................................................................................................................................................ 8
Fund Expenses .................................................................................................................................................................. 9
Disclosures ....................................................................................................................................................................... 10
Annex A: Auditor Statement and Financial Statements ............................................................................................ 11
Jadwa Saudi IPO Fund Annual Report is available upon request free of charge and on www.jadwa.com
2
Investment Fund Information
Fund Name Jadwa Saudi IPO Fund
Benchmark IdealRatings Saudi IPO Islamic Index (TR)
Inception Date August 7, 2016G
Investment Objective and Policies The Fund aims to provide long term capital growth through investing mainly in IPOs of Saudi company shares, shares of Saudi Companies that are listed on Tadawul for less than two years, and in the priority rights of Saudi companies in accordance with the Sharia guidelines. (1) The Fund aims to invest its assets in the following:
IPOs that are compliant with the Fund Manager’s Sharia Criteria; The shares of Saudi Companies that were listed on Tadawul during the last two years; The rights issue of Saudi companies and any related financial instruments such as tradable rights; In periods in which there are no IPOs, right issues, or any other investment opportunities that fit the Fund's objectives (i.e. complaint with the Fund's Sharia Criteria, licensed by the CMA, publicly offered in the Kingdom of Saudi Arabia by the Fund Manager or any other manager or both) are available, the Fund Manager may reduce the minimum limit for exposure to the above mentioned instruments from 30% to 0%. Further, the Fund Manager may allocate Fund’s assets to: o Cash; o Short-term Murabaha agreements denominated in Saudi Riyal; o Saudi or GCC Sukuk.
(2) The following Table summarizes the concentration policies and asset allocation among various investment categories, noting that o Investment territory shall be the Kingdom of Saudi Arabia and GCC Countries; o The investment universe shall be updated on a quarterly basis, and upon the start of the new year; o Investment concentration will not be in a certain sector or industry.
Minimum Fund Assets
Maximum Fund Assets
Only Saudi Stock Exchange
30%
100%
Cash
0%
30%
Type of Investment IPOs, right issues and shares listed in the last two years Cash
Description
Jadwa Saudi IPO Fund Annual Report is available upon request free of charge and on www.jadwa.com
3
Short-term Murabaha agreements in Saudi Riyal or Murabaha funds
Saudi or GCC Sukuk or Sukuk Funds
IPO funds with objectives similar to the Fund
Investment will be made in money market instruments directly in Murabaha agreements through Saudi banks licensed by (SAMA), or investment will be indirectly made in Murabaha agreements, provided that they shall be complaint with the Fund's Sharia Criteria, licensed by the CMA, and publicly offered in the Kingdom of Saudi Arabia by the Fund Manager, any other manager or both. No more than 15% of the Fund's Net Asset Value can be allocated to investment in securities of a single entity or issuer. Investment will be directly made in corporate Sukuk (either through IPOs or private placements) with a minimum investment grade credit rating by at least one of the international credit rating agencies (Standard & Poor's – BBB / Moody's - Baa3 / Fitch – BBB). In case of lack of credit rating, the Fund Manager shall internally define a credit rating to them based on the stability and integrity of the financial position of the counterparty or the issuer. Further, the Fund may invest in Sukuk funds provided that they are compliant with the Fund's Sharia Criteria, licensed by the CMA, and publicly offered in the Kingdom of Saudi Arabia by the Fund Manager, any other manager or both. No more than 15% of the Fund's Net Asset Value can be allocated to investment in securities of a single entity or issuer. Compliant with the Fund's Sharia Criteria, licensed by the CMA, and publicly offered in the Kingdom of Saudi Arabia by the Fund Manager, any other manager or both. No more than 15% of the Fund's Net Asset Value can be allocated to investment in securities of a single entity or issuer.
0%
50%
0%
50%
0%
50%
It is worth mentioning that the Fund Manager shall select, after fulfilling the said requirements and criteria, the investment instrument and the entity in which it plans to invest based on its sole discretion and the stability of the financial position of the counterparty or the issuer. (3) Jadwa Investment uses active investment strategy to determine securities and funds expected to generate longterm returns through analyzing their financial statements, periodical reports and disclosures. The team further assesses the management of these companies and their plans, along with market situations in which they operate to effectively manage Fund’s investments. (4) The Fund Manager will invest in securities only set forth in Paragraphs (1) and (2). (5) The Fund will only invest in Sharia-complaint securities, and the Fund shall comply with the investment restrictions set forth Investment Funds Regulations.
Jadwa Saudi IPO Fund Annual Report is available upon request free of charge and on www.jadwa.com
4
(6) The Fund may obtain loans compliant with the investment's Sharia Criteria, provided that the Fund's leverage shall not exceed 10% of its Net Asset Value for a maturity period of no later than one year, and shall be used for investing in the same assets of the Fund, except the loans from the Fund Manager or any of its subsidiaries to cover Redemption Requests allowed under Investment Funds Regulations, subject to the approval of the Fund Board. (7) The Fund aims to invest mainly in the Saudi and GCC markets. (8) The Fund may invest as high as 50% of its assets in other mutual funds, provided that they are compliant with the Sharia Criteria of the Fund, in Saudi Riyal, licensed by the CMA and publicly offered in the Kingdom of Saudi Arabia by the Fund Manager, any other manager or both. No more than 10% of the Fund's Net Asset Value can be allocated to investment in securities of another fund, or a maximum 10% of another fund may be owned for the benefit of the Fund. (9) The Fund will invest no more than 10% of the Fund's Net Asset Value in the financial derivatives related to the issuances of rights shares; namely, the tradable rights that are compliant with the Investment Sharia Criteria.
Distribution of Income and Gain Policy Dividends and/or income are reinvested in the Fund and not paid out or distributed to investors.
Fund Manager Jadwa Investment A Saudi Closed Joint Stock Company (registration no. 1010228782, Licensed by Capital Market Authority under license number 37-6034 Head Office: P.O. Box 60677, Riyadh 11555, Saudi Arabia. Phone +966 11 279-1111 Fax +966 11 279-1571
Fund Custodian Jadwa Investment A Saudi Closed Joint Stock Company (registration no. 1010228782, Licensed by Capital Market Authority under license number 37-6034 Head Office: P.O. Box 60677, Riyadh 11555, Saudi Arabia. Phone +966 11 279-1111 Fax +966 11 279-1571 The custodian is responsible for taking custody and protecting fund assets on behalf of all unitholders and for taking all required administrative measures in regards to the custody of the fund’s assets.
Fund Auditor KPMG Al Fozan PO BOX 92876 Al Riyadh 11663 Kingdom of Saudi Arabia
Jadwa Saudi IPO Fund Annual Report is available upon request free of charge and on www.jadwa.com
5
Fund Manager’s Commentary At Jadwa Investment, we are committed to our research-driven, high conviction approach to investing, which we believe can generate above-average risk-adjusted returns for our clients. Our investment strategy is based on long term views founded upon economic, industry and company level fundamentals. 2016 was a challenging year in capital markets globally, characterized by high levels of uncertainty. Oil prices collapsed at the start of the year and then more than doubled as global economic activity stabilized, US oil production levels declined and major oil producing nations stepped up efforts to reach supply cut agreements. Given oil is a major source of revenue for Saudi Arabia, low and volatile oil price along with uncertainty related to government spending affected investors’ risk appetite. Moreover, delay in government payments and periodic issuance of local government debt squeezed money supply from the system. As a result, the first three quarters of the year were marked by rising interbank rates and declining valuations of local risk assets. Towards year end, however, the local bourse remained buoyed driven by substantial improvement in money supply (due to successful debut international government bond issuance and measures taken by SAMA to ease system liquidity), stabilization of oil prices at relatively higher levels, as well as positive steps taken by CMA and Tadawul to enable inclusion of Saudi Arabia into emerging market equity indices. Market outlook further strengthened with announcements of 2017 Budget, NTP 2020 and Balanced Budget 2020 which highlighted key government measures to reform the economy, and brought clarity regarding future direction of government policies. Jadwa Saudi IPO Fund had a -3.12% cumulative return since inception (on 07 August 2016). In comparison, the Fund’s benchmark achieved a total return of 6.53% during the same period. Moreover, since the fund’s inception till year end, there were no initial public offerings in Saudi market that the fund could participate in. For more details on performance please refer to the Fund Performance section. Turnover
1H 2017 Fund
10.33%
Jadwa Saudi IPO Fund Annual Report is available upon request free of charge and on www.jadwa.com
6
Allocation
% of Net Assets 31-Dec-2016
% of Net Assets 30-Jun-2017
Equity
46.56%
Equity
62.18%
Cash
53.44%
Cash
37.82%
Total
100.00%
Total
100.00%
Sector
% of Net Assets 31-Dec-2016
Sector
% of Net Assets 30-Jun-2017
Transportation
25.52%
Transportation
19.29%
Health Care Equipment & Svc
8.48%
Health Care Equipment & Svc
18.30%
Materials
5.94%
Retailing
6.77%
Top 3 Sector Allocations
Jadwa Saudi IPO Fund Annual Report is available upon request free of charge and on www.jadwa.com
7
Fund Performance
1-Year
3-Year
5-Year
Since Inception*
Fund
-
-
-
-3.12%
Benchmark
-
-
-
6.53%
th
st
*From August 7 2016 till December 31 2016
Fund
Benchmark
2016*
8.15%
18.73%
1H 2017
-10.42%
-10.27%
th
st
*From August 7 2016 till December 31 2016
Jadwa Saudi IPO Fund Annual Report is available upon request free of charge and on www.jadwa.com
8
Fund Expenses
Expenses for 1H 2017 (SAR) Management Fees
95,397.99
Fund Board
9,917.81
Auditing Fees
9,917.81
Custodian's Fees
15,620.55
Fund Administration Fees
79,342.47
Tadawul Fees
2,479.45
CMA Fees
3,719.18
Legal Expenses
-
Cost of Sharia-compliant finance (when required)
-
Registration / Fees of Unit Processing
-
Other expenses
12,111.83
Total
228,507.09
Cost/Average Assets Ratio
1.35%
Jadwa Saudi IPO Fund Annual Report is available upon request free of charge and on www.jadwa.com
9
Disclosures Material Changes No Material Changes during 1H 2017.
For additional information please refer to the Terms & Conditions available on www.jadwa.com
Kindly refer to Annex A for auditor statements regarding the Fund.
Jadwa Saudi IPO Fund Annual Report is available upon request free of charge and on www.jadwa.com
10
Annex A: Auditor Statement and Financial Statements
Jadwa Saudi IPO Fund Annual Report is available upon request free of charge and on www.jadwa.com
11
Disclaimer: Jadwa Investment or its directors, staff, or affiliates makes no warranty, representation or undertaking whether expressed or implied, nor does it assume any legal liability, whether direct or indirect, or responsibility for the accuracy, completeness, or usefulness of any information that is contained in this material. It is not the intention of this material to be used or deemed as an advice, option or for any action that may take place in future. Unless otherwise stated, all information contained in this material shall not be reproduced, in whole or in part, without the specific written permission of Jadwa Investment. The content of this document is for information purposes only. Jadwa Investment does not hold itself out as providing legal, financial or other advice via this document. Investments in Jadwa's products are governed by their Terms and Conditions. Some products are exposed to foreign currencies and changes in currency exchange rates may have an adverse effect on the value and price. The product's value is subject to fluctuations and the investor may not receive the full amount that is originally invested. The information provided in this document may be changed at any time without prior notice. Past performance is not indicative of future returns. Jadwa Investment is authorized and regulated by the Capital Market Authority of Saudi Arabia.
