MEFIC IPO Fund - June 30, 2017 - mefic.com.sa
MEFIC IPO Fund ‐ June 30, 2017 اﻟﺘﻘﺮﻳﺮ اﻟﻨﺼﻒ ﺳﻨﻮي ﻟﺼﻨﺪوق ﻣﻴﻔﻚ ﻟﻠﻄﺮوﺣﺎت اﻷوﻟﻴﺔ Article 71 A
Top Ten Holdings
B
Name of Stock
Fee Details
% Holding in the stock*
Name
% of Total NAV
i Saudi Ground Services Co
7.93%
i
Management Fees
1.75%
ii AL Tayyar Travel Group Co
7.48%
ii
Other Fees
0.50%
iii Dallah Healthcare Holding Company
7.24%
iii
Total Expenses Ratio
2.25%
iv Middle East Healthcare Co.
5.89%
v Saudi Company for Hardware
5.14%
vi Saudi Airline Catering Company
5.08%
C
Profit Distribution
vii Alandalus Property Company
4.86%
D
Dealing Expenses in the Fund
27,933,966.54
38.57%
Nil
0.00%
4.66%
E
ix Mouwasat Medical Services
3.94%
H
Fund Borrowing %
x Raydan Co. * Stock holdings as at June 30, 2017
3.63% G
Fund & Index Performance (2017)
,
0.00% 0.13%
viii Al Yamamah Steel Industries Co.
Standard Measure of Risk
%
Nil 99,317.27
Fund Manager Investment in the Fund
F
Amount
i Standard Deviation – Fund
16.97%
YTD
Benchmark
Alpha
ii Standard Deviation -Benchmark
26.17%
-6.18%
-9.90%
3.72%
** the information in based on the first half year 2017
Annex 5
A
Investment fund information i Name of the Fund
ii Investment Objective iii Policy & Procedure iv Distribution of Income & Gain Policy v Statement of Fund Report
MEFIC IPO FUND The objective of the Fund is to achieve absolute return through capital growth over medium to long term by investing mainly in the shares of listed companies during the first five years of listing and during their Initial Public Offering (IPO) in the Kingdom of Saudi Arabia. Terms & Conditions Available on Tadawul Website No Distribution of Dividend Fund Annual Financial Report as of 31 Dec 2016 is available on Tadawul website and available on request to investors at free of charge
B Fund Performance Table
Return
NAV Unit Price NAV High NAV Low Number of Units Annual Return Expense Ratio Income distribution
1 Year -0.26%
3 Year 24.1%
5 Year NA
Inception 27.25%
2014 176,936,937 122.49 138.56 98.84 1,444,536 22.49% 1.42% 0.00%
2015 86,222,864 117.69 147.81 113.46 732,601 -3.91% 2.28% 0.00%
2016 78,928,832 135.63 135.72 99.15 581,958 15.24% 2.29% 0.00%
1H 2017 72,424,217 127.25 136.82 123.04 569,168 -6.18% 2.26% 0.00%
2014 1,834,490 524,140 1.42%
2015 3,824,305 1,092,659 2.28%
2016 1,545,844 441,670 2.29%
1H 2017 655,549 187,300 2.25%
C Fund Fees and Expenses
Management Fee Other Expense Total Expense Ratio D Fund Manager Information
Name & Address
MEFIC Capital, 7758 King Fahed Road Olaya Riyadh 12333
Investment Activities
MEFIC Capital is an Authorized Person regulated by CMA with License # 37-060209. MEFIC Capital’s investment management business focuses on the management of public-listed funds, private placements, and real estate funds. MEFIC offers broad range of investment products to meet the varying investment needs and risk profiles of both institutional and retail investors. As at 31-Dec-2016, MEFIC had assets under management (AUM) of SAR 2.2bn, and MEFIC funds outperformed benchmarks during the period under review.
Investment Fund Performance
MEFIC IPO Fund yielded a YTD return of -6.18% as compared to benchmark S&P Index by -9.90%, Alpha of 3.72%.
Material Changes
None
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MEFIC IPO Fund ‐ June 30, 2017 اﻟﺘﻘﺮﻳﺮ اﻟﻨﺼﻒ ﺳﻨﻮي ﻟﺼﻨﺪوق ﻣﻴﻔﻚ ﻟﻠﻄﺮوﺣﺎت اﻷوﻟﻴﺔ E Custodian Information
Name & Address Custodian Responsibilites
MEFIC Capital, 7758 King Fahed Road Olaya Riyadh 12333 All necessary administrative measures regarding custody of assets; Taking custody & protecting fund assets
Custodian Opnion
MEFIC verifies that the below have been done in accordance with IFR & Funds’ Terms and Conditions 1. Issuance, transfer and redemption of the units 2. Valuation and calculated the NAV price of units 3. Not breached any of the investment restrictions, limitations and borrowing powers
F Auditor Information
Name & Address
BDO Dr. Mohamed Al-Amri & Co. P.O. Box 8736, Riyadh 11492, Kingdom of Saudi Arabia
Auditor Opinion
The financial statements have been prepared and audited in accordance with SOCPA standards, the Investment Funds Regulations, the fund's terms and conditions 1. Financial statements give a true and fair view of the net income and the net gains or losses of the investment fund’s assets in that accounting period; 2. True and fair view of the financial position of the investment fund at the end of the period.
mefic.com.sa
Page 2 of 2
MEFIC IPO FUND Managed by MIDDLE EAST FINANCIAL INVESTMENT COMPANY INTERIM FINANCIAL STATEMENTS (Unaudited) FOR THE SIX-MONTHS PERIOD ENDED 30 JUNE 2017 together with the INDEPENDENT AUDITOR’S REVIEW REPORT
MEFIC IPO FUND Managed by Middle East Financial Investment Company UNAUDITED INTERIM FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REVIEW REPORT For the six-months period ended 30 June 2017
INDEX
PAGE
Independent auditor’s review report
2
Interim balance sheet
3
Interim statement of income
4
Interim statement of cash flows
5
Interim statement of changes in net assets attributable to unitholders
6
Notes to the interim financial statements
7 - 11
-1-
MEFIC IPO FUND Managed by Middle East Financial Investment Company INTERIM BALANCE SHEET (Unaudited) As at 30 June 2017 (Saudi Riyals)
Note
30 Jun 2017
30 Jun 2016
ASSETS Cash and cash equivalents Investments held for trading Dividends receivable Total assets
7 8
1,165,086 71,263,114 130,342 72,558,542
43,552,319 60,094,151 160,438 103,806,908
9 9
104,475 29,850 134,325 72,424,217
151,105 43,173 194,278 103,612,630
569,167.56
812,176.09
127.25
127.57
LIABILITIES Management fee payable Other expenses payable Total liabilities Net assets attributable to the Unitholders Units in issue (Numbers) Net asset value-per unit (Saudi Riyals)
The accompanying notes 1 to 13 form an integral part of these interim financial statements. -3-
MEFIC IPO FUND Managed by Middle East Financial Investment Company INTERIM STATEMENT OF INCOME (Unaudited) For the six-months period ended 30 June 2017 (Saudi Riyals)
30 Jun 2017
30 Jun 2016
Dividend income Other income
(1,564,593) (3,697,191) 1,296,140 -
5,540,569 2,849,429 1,515,142 8,002
Total (loss) / income
(3,965,644)
9,913,142
(655,549) (187,887) (843,436)
(782,718) (223,704) (1,006,422)
(4,809,080)
8,906,720
Notes INCOME Realised (loss)/gain on disposal of investments held for trading Unrealised (loss)/gain on investments held for trading
EXPENSES Management fee Other expenses Total expenses NET (LOSS) / INCOME FOR THE PERIOD
6&9 6&9
The accompanying notes 1 to 13 form an integral part of these interim financial statements. -4-
MEFIC IPO FUND Managed by Middle East Financial Investment Company INTERIM STATEMENT OF CASH FLOWS (Unaudited) For the six-months period ended 30 June 2017 (Saudi Riyals) 30 Jun 2017
30 Jun 2016
CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) / income for the period Adjustments for: Realized loss / (gain) on investments held for trading Unrealized loss / (gain) on investments held for trading
(4,809,080)
8,906,720
1,564,593 3,697,191 452,704
(5,540,569) (2,849,429) 516,722
(22,946,192) (85,342) (14,921) (4,263) (22,598,014)
19,586,732 (160,438) 21,939 6,269 19,971,224
1,484,999 (3,180,534) (1,695,535)
74,490,600 (66,007,554) 8,483,046
(24,293,549)
28,454,270
25,458,635
15,098,049
1,165,086
43,552,319
Changes in operating assets and liabilities: Investments held for trading, net Dividends receivable Management fee payable Other expenses payable Net cash (used in) / generated from operating activities
CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from subscription of units Payments against redemption of units Net cash (used in) / generated from financing activities Net (decrease) / increase in cash and cash equivalent Cash and cash equivalent at 1 January Cash and cash equivalent at 30 June
The accompanying notes 1 to 13 form an integral part of these interim financial statements. -5-
MEFIC IPO FUND Managed by Middle East Financial Investment Company INTERIM STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS (Unaudited) For the six-months period end 30 June 2017 (Saudi Riyals)
30 Jun 2017
30 Jun 2016
Net Assets at 1 January Net (loss) / income for the period
78,928,832 (4,809,080)
86,222,864 8,906,720
Changes from unit transactions Proceeds from issuance of units Payments against redemption of units Net change from unit transactions
1,484,999 (3,180,534) (1,695,535)
74,490,600 (66,007,554) 8,483,046
Net assets value at 30 June
72,424,217
103,612,630
UNIT TRANSACTIONS Units at 1 January Units issued Units redeemed
Numbers 732,601.41 581,958.38 660,805.68 11,346.42 (581,231.00) (24,137.24)
Units at 30 June
569,167.56
812,176.09
The accompanying notes 1 to 13 form an integral part of these interim financial statements. -6-
MEFIC IPO FUND Managed by Middle East Financial Investment Company NOTES TO THE INTERIM FINANCIAL STATEMENTS (Unaudited) For the six months period ended 30 June 2017 1.
THE FUND AND ITS ACTIVITIES MEFIC IPO Fund (the “Fund”) is an open-ended investment fund established and managed through an agreement between Middle East Financial Investment Company (the “Fund Manager”) and the Fund Investors (the “Unitholders”). The objective of the Fund is to achieve absolute return through capital growth over medium to long term by investing mainly in the shares of public companies during the first five years of listing and during their Initial Public Offering (IPO) in the Kingdom of Saudi Arabia. In dealing with the Unitholders, the Fund Manager considers the Fund as an independent accounting unit. Accordingly, the Fund Manager prepares separate financial statements for the Fund. The Fund commenced its operations on 16 Rajab 1435H (corresponding to 15 May 2014G). The approval from Capital Market Authority (“CMA”) for the establishment of the Fund was granted in its letter number 2014/4486/5 dated 16 Rajab, 1435H (corresponding to 15 May 2014G). The interim results of the Fund may not be an indicator of its annual results of the operations.
2.
REGULATORY AUTHORITY The Fund is governed by the Investment Fund Regulations (“the Regulations”) issued by CMA as amended upto 16 Sha’ban 1437H (corresponding to 23 May 2016G).
3.
SUBSCRIPTION / REDEMPTION (DEALING DAY & VALUATION DAY) Subscription / redemption requests will be accepted on all days on which the Saudi Stock Market is open. The value of the Fund’s portfolio is determined twice a week on Monday and Thursday (each being a “Valuation Day”). The net asset value of the Fund for the purpose of purchase or sale of units is determined by dividing the net value of assets (fair value of the fund’s assets minus fund’s liabilities) by the total number of outstanding fund units on relevant valuation day.
4.
BASIS OF PREPARATION
a)
Statement of compliance These financial statements have been prepared in accordance with generally accepted accounting standards in the Kingdom of Saudi Arabia issued by the Saudi Organization of Certified Public Accountants (SOCPA), and in accordance with the requirements of the Investment Funds Regulations as published by CMA in Saudi Arabia and the Fund’s terms and conditions.
b)
Basis of measurement These interim financial statements have been prepared under the historical cost convention except for the investments held for trading which are carried at fair value, using the accrual basis of accounting and the going concern concept.
c)
Functional and presentation currency These interim financial statements have been presented in Saudi Riyals (SR), which is the functional currency of the Fund.
-7-
MEFIC IPO FUND Managed by Middle East Financial Investment Company NOTES TO THE INTERIM FINANCIAL STATEMENTS (Unaudited) For the six months period ended 30 June 2017 (Saudi Riyals) BASIS OF PREPARATION (Continued) d)
Use of estimates and judgment The preparation of these interim financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expense. 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 future years affected.
5.
SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies used in the preparation of these interim financial statements are consistent with those used and disclosed in the financial statements for the year ended 31 December 2016.
6.
MANAGEMENT FEE AND OTHER CHARGES The Fund Manager charges each investor a subscription fee of a percentage not exceeding 1.5% of the subscribed amount to cover administration costs and is netted off against proceeds from issuance of units. Under the terms and conditions of the Fund, the Fund is liable to pay the following expenses to the Fund Manager: Management fee: Management fee is accrued at the rate of 1.75% per annum of the net assets value of the Fund at each valuation day and is payable monthly. Other expenses: Other expenses are charged at the rate of 0.5% of the net asset value of the fund at each valuation day, payable monthly.
7.
CASH AND CASH EQUIVALENTS As at 30 June 2017, the cash and cash equivalents include an amount of SR 0.56 million (30 June 2016: SR 31.40 Million) which is held with the Fund Manager as custodian. The Fund Manager is authorized to utilize these funds for the purpose of trading in securities on behalf of the Fund. The remaining balance is held in the current account with local bank.
8.
INVESTMENTS HELD FOR TRADING
Listed equity investments
30 June 2017
30 June 2016
71,263,114
60,094,151
-8-
MEFIC IPO FUND Managed by Middle East Financial Investment Company NOTES TO THE INTERIM FINANCIAL STATEMENTS (Unaudited) For the six months period ended 30 June 2017 (Saudi Riyals) INVESTMENTS HELD FOR TRADING (Continued) The sector-wise composition of investments held for trading is summarized as follows: Fair value as at 30 June 2016* 30 June 2017 5,343,513 8,171,274 4,452,745 6,608,610 2,154,290 3,832,920 4,678,671 6,537,054 9,304,026 1,985,600 5,916,797 4,238,500 3,640,696 9,264,110 16,748,750 17,703,386 2,276,200 6,916,633 828,344 4,050,103 3,759,100 2,945,943 60,094,151 71,263,114
Sector: Transportation Retailing Energy Banks Insurance Materials Capital Goods Commercial & Professional Services Consumer Services Health Care Equipment & Services REITs Consumer Durables & Apparel Real Estate Management and development Food & Staples Retailing Food & beverages
* The Fund has rearranged comparatives to conform to latest sector wise composition of Saudi Stock Market. As at 30 June 2017, cost of the above-mentioned investments held for trading amounted to SR 71.46 million (30 June 2016: SR 57.2 million). The above investments are in equity shares quoted in the Saudi Stock Market. 9.
TRANSACTIONS AND BALANCES WITH RELATED PARTIES Related parties of the Fund include the Unitholders, the Fund Manager and other funds managed by the Fund manager. In the ordinary course of its activities, the Fund transacts business with related parties. Related party transactions are in accordance with the terms and conditions of the Fund. All transactions with related parties are carried out based on mutually agreed prices under formal agreement. Related party transactions for the period are described as under: For the six months period ended Related party
Nature of transactions
Middle East Financial Investment Company – The Fund Manager
Management fee Other expenses
30 June 2017
30 June 2016
655,549 187,300
782,718 223,704
-9-
MEFIC IPO FUND Managed by Middle East Financial Investment Company NOTES TO THE INTERIM FINANCIAL STATEMENTS (Unaudited) For the six months period ended 30 June 2017 (Saudi Riyals) TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Continued) The above transactions during the period resulted in the following balances due to related party:
Related party Middle East Financial Investment Company – The Fund Manager
Nature of balances Management accrued fee payable Other expenses
As at 30 June 2016 2017 104,475 29,850
151,105 43,173
10. FINANCIAL RISK MANAGEMENT Credit risk Credit risk is the risk that one party to a financial instrument fails to discharge an obligation and cause other party to incur a financial loss. The Fund is exposed to credit risk on its bank balance and dividend receivable. However, the bank balance is maintained with a reputed local bank in the Kingdom of Saudi Arabia and the receivable is against dividends from reputable companies listed in the Kingdom of Saudi Arabia. Therefore, the Fund Manager believes that the Fund does not have any significant credit risk. Equity price risk Equity price risk is the risk that the fair value of equity investments will decrease as a result of changes in the levels of equity indices and the value of individual stocks. The Fund is exposed to equity price risk arising from its investments in equity shares. The Fund Manager endeavors to minimize the risk through diversification across various sectors of the Saudi Stock Market. Further, the Fund Manager has established risk guidelines to manage its equity price risk. Liquidity risk Liquidity risk is the risk that the Fund may encounter difficulty in generating funds to meet commitments associated with financial liabilities which comprise of fund management and other expenses payable. The Fund Manager monitors the liquidity requirements on a regular basis and ensures that sufficient funds are available to meet any commitments as they arise. Currency risk Currency risk is the risk that the value of a financial instrument may fluctuate due to change in the foreign exchange rates. The financial instruments of the Fund i.e. cash and payables are denominated in Saudi Arabian Riyals. Accordingly, the Fund is not exposed to any currency risk.
- 10 -
MEFIC IPO FUND Managed by Middle East Financial Investment Company NOTES TO THE INTERIM FINANCIAL STATEMENTS (Unaudited) For the six months period ended 30 June 2017 (Saudi Riyals) 11. FAIR VALUE OF FINANCIAL INSTRUMENTS 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. Financial instruments comprise financial assets and financial liabilities. The Fund’s financial assets consist of investments held for trading and cash at bank; its financial liability is management fees payable. Investments held for trading are carried at fair value. The fair value of other financial instruments is not materially different from their carrying values. 12. LAST VALUATION DATE The last valuation date of the fund’s net asset value for the period was 30 June 2017 (2016: 30 June 2016). 13. APPROVAL OF INTERIM FINANCIAL STATEMENTS These interim financial statements were approved by the Fund’s Board on 11 Dhul Qa’ada 1438H corresponding to 3 August 2017G.
- 11 -
MEFIC IPO FUND Semi Annual Performance Report As of 30 June 2017 Fund Board of Directors FUND OBJECTIVE The fund aims to achieve absolute return on capital growth over the long term, by investing mainly in IPOs & Listed Stocks in the Saudi Arabian Stock Market. STOCK MARKET REVIEW The Saudi Stock Market Index (TASI) achieved positive returns of 8.07% to close by the end of June at 7,425.72. Average daily turnover rose to 3.38 billion riyals, up 25 percent from the previous month's average. The main sectors that achieved positive performance were Food and Beverages (16.2%), Banks (12.9%) and Utilities (11.2%). On the other hand, the real estate funds sector and the media declined by (6.18%) and (3.6%), respectively. On the corporate level: Most of the large cap companies in the market topped the list during June, in line with the decision to add the Saudi market to MSCI's watch list. FUND PERFORMANCE TABLE Performance
3M
1Y
Since Inception
Fund
-3.0%
-0.3%
27.3%
MEFIC S&P IPO index
-3.2%
-5.2%
-41.9%
TASI
6.1%
14.2%
-24.3%
Name
1 Year 13.2
3 Years 17.8
5 Years NA
0.71
0.82
NA
0.91
0.88
NA
-0.02
0.32
NA
0.83
0.78
NA
2.15
2.63
NA
Standard Deviation Beta Correlation Information Ratio R-Square Tracking Error FUND FINANCIAL STATEMENTS *Thomson Reuters
Page 1 of 2
FUND FINANCIAL STATEMENTS
The audited financial statements for the fund have been prepared & uploaded on Tadawul Website, within the specified time frame, in compliance with the IFR. BOARD MEETING DISCUSSION – KEY TAKEAWAYS o o
o o
o
o o
The fund board reviewed the fund performance and applauded the funds best in market performance for FY16 and its YTD fifth position. The fund performance has been reviewed by the Fund Board and it was applauded that our IPO equity fund has achieved the first ranking amongst peers in 2016 with a performance of 15% & YTD in the fifth position. The Chairman of the Fund Board has raised a comment regarding retail investment as described in the presentation and the reason for investing in that sector which is currently highly risky. There was a comment by Shahid that we are not investing in the retail sector as described, but in the health sector, which comes under the retail sector, this will be fixed based on the new divisions for the sectors. It was also mentioned to the Fund Board Members that we have notified clients about an addition to the T&C that we can trade in the NOMU Market and have got the approval from CMA to add this feature to the Fund's Terms and Conditions. Our fund performance has a positive rating since inception, due to implementing the fundamental strategy and we will work towards accomplishing the same in 2017. It was confirmed to the Fund Board, in accordance the Article 13 of IRF, that the Fund has no conflict of interest.
Page 2 of 2
Top Ten Holdings
B
Name of Stock
Fee Details
% Holding in the stock*
Name
% of Total NAV
i Saudi Ground Services Co
7.93%
i
Management Fees
1.75%
ii AL Tayyar Travel Group Co
7.48%
ii
Other Fees
0.50%
iii Dallah Healthcare Holding Company
7.24%
iii
Total Expenses Ratio
2.25%
iv Middle East Healthcare Co.
5.89%
v Saudi Company for Hardware
5.14%
vi Saudi Airline Catering Company
5.08%
C
Profit Distribution
vii Alandalus Property Company
4.86%
D
Dealing Expenses in the Fund
27,933,966.54
38.57%
Nil
0.00%
4.66%
E
ix Mouwasat Medical Services
3.94%
H
Fund Borrowing %
x Raydan Co. * Stock holdings as at June 30, 2017
3.63% G
Fund & Index Performance (2017)
,
0.00% 0.13%
viii Al Yamamah Steel Industries Co.
Standard Measure of Risk
%
Nil 99,317.27
Fund Manager Investment in the Fund
F
Amount
i Standard Deviation – Fund
16.97%
YTD
Benchmark
Alpha
ii Standard Deviation -Benchmark
26.17%
-6.18%
-9.90%
3.72%
** the information in based on the first half year 2017
Annex 5
A
Investment fund information i Name of the Fund
ii Investment Objective iii Policy & Procedure iv Distribution of Income & Gain Policy v Statement of Fund Report
MEFIC IPO FUND The objective of the Fund is to achieve absolute return through capital growth over medium to long term by investing mainly in the shares of listed companies during the first five years of listing and during their Initial Public Offering (IPO) in the Kingdom of Saudi Arabia. Terms & Conditions Available on Tadawul Website No Distribution of Dividend Fund Annual Financial Report as of 31 Dec 2016 is available on Tadawul website and available on request to investors at free of charge
B Fund Performance Table
Return
NAV Unit Price NAV High NAV Low Number of Units Annual Return Expense Ratio Income distribution
1 Year -0.26%
3 Year 24.1%
5 Year NA
Inception 27.25%
2014 176,936,937 122.49 138.56 98.84 1,444,536 22.49% 1.42% 0.00%
2015 86,222,864 117.69 147.81 113.46 732,601 -3.91% 2.28% 0.00%
2016 78,928,832 135.63 135.72 99.15 581,958 15.24% 2.29% 0.00%
1H 2017 72,424,217 127.25 136.82 123.04 569,168 -6.18% 2.26% 0.00%
2014 1,834,490 524,140 1.42%
2015 3,824,305 1,092,659 2.28%
2016 1,545,844 441,670 2.29%
1H 2017 655,549 187,300 2.25%
C Fund Fees and Expenses
Management Fee Other Expense Total Expense Ratio D Fund Manager Information
Name & Address
MEFIC Capital, 7758 King Fahed Road Olaya Riyadh 12333
Investment Activities
MEFIC Capital is an Authorized Person regulated by CMA with License # 37-060209. MEFIC Capital’s investment management business focuses on the management of public-listed funds, private placements, and real estate funds. MEFIC offers broad range of investment products to meet the varying investment needs and risk profiles of both institutional and retail investors. As at 31-Dec-2016, MEFIC had assets under management (AUM) of SAR 2.2bn, and MEFIC funds outperformed benchmarks during the period under review.
Investment Fund Performance
MEFIC IPO Fund yielded a YTD return of -6.18% as compared to benchmark S&P Index by -9.90%, Alpha of 3.72%.
Material Changes
None
Page 1 of 2
MEFIC IPO Fund ‐ June 30, 2017 اﻟﺘﻘﺮﻳﺮ اﻟﻨﺼﻒ ﺳﻨﻮي ﻟﺼﻨﺪوق ﻣﻴﻔﻚ ﻟﻠﻄﺮوﺣﺎت اﻷوﻟﻴﺔ E Custodian Information
Name & Address Custodian Responsibilites
MEFIC Capital, 7758 King Fahed Road Olaya Riyadh 12333 All necessary administrative measures regarding custody of assets; Taking custody & protecting fund assets
Custodian Opnion
MEFIC verifies that the below have been done in accordance with IFR & Funds’ Terms and Conditions 1. Issuance, transfer and redemption of the units 2. Valuation and calculated the NAV price of units 3. Not breached any of the investment restrictions, limitations and borrowing powers
F Auditor Information
Name & Address
BDO Dr. Mohamed Al-Amri & Co. P.O. Box 8736, Riyadh 11492, Kingdom of Saudi Arabia
Auditor Opinion
The financial statements have been prepared and audited in accordance with SOCPA standards, the Investment Funds Regulations, the fund's terms and conditions 1. Financial statements give a true and fair view of the net income and the net gains or losses of the investment fund’s assets in that accounting period; 2. True and fair view of the financial position of the investment fund at the end of the period.
mefic.com.sa
Page 2 of 2
MEFIC IPO FUND Managed by MIDDLE EAST FINANCIAL INVESTMENT COMPANY INTERIM FINANCIAL STATEMENTS (Unaudited) FOR THE SIX-MONTHS PERIOD ENDED 30 JUNE 2017 together with the INDEPENDENT AUDITOR’S REVIEW REPORT
MEFIC IPO FUND Managed by Middle East Financial Investment Company UNAUDITED INTERIM FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REVIEW REPORT For the six-months period ended 30 June 2017
INDEX
PAGE
Independent auditor’s review report
2
Interim balance sheet
3
Interim statement of income
4
Interim statement of cash flows
5
Interim statement of changes in net assets attributable to unitholders
6
Notes to the interim financial statements
7 - 11
-1-
MEFIC IPO FUND Managed by Middle East Financial Investment Company INTERIM BALANCE SHEET (Unaudited) As at 30 June 2017 (Saudi Riyals)
Note
30 Jun 2017
30 Jun 2016
ASSETS Cash and cash equivalents Investments held for trading Dividends receivable Total assets
7 8
1,165,086 71,263,114 130,342 72,558,542
43,552,319 60,094,151 160,438 103,806,908
9 9
104,475 29,850 134,325 72,424,217
151,105 43,173 194,278 103,612,630
569,167.56
812,176.09
127.25
127.57
LIABILITIES Management fee payable Other expenses payable Total liabilities Net assets attributable to the Unitholders Units in issue (Numbers) Net asset value-per unit (Saudi Riyals)
The accompanying notes 1 to 13 form an integral part of these interim financial statements. -3-
MEFIC IPO FUND Managed by Middle East Financial Investment Company INTERIM STATEMENT OF INCOME (Unaudited) For the six-months period ended 30 June 2017 (Saudi Riyals)
30 Jun 2017
30 Jun 2016
Dividend income Other income
(1,564,593) (3,697,191) 1,296,140 -
5,540,569 2,849,429 1,515,142 8,002
Total (loss) / income
(3,965,644)
9,913,142
(655,549) (187,887) (843,436)
(782,718) (223,704) (1,006,422)
(4,809,080)
8,906,720
Notes INCOME Realised (loss)/gain on disposal of investments held for trading Unrealised (loss)/gain on investments held for trading
EXPENSES Management fee Other expenses Total expenses NET (LOSS) / INCOME FOR THE PERIOD
6&9 6&9
The accompanying notes 1 to 13 form an integral part of these interim financial statements. -4-
MEFIC IPO FUND Managed by Middle East Financial Investment Company INTERIM STATEMENT OF CASH FLOWS (Unaudited) For the six-months period ended 30 June 2017 (Saudi Riyals) 30 Jun 2017
30 Jun 2016
CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) / income for the period Adjustments for: Realized loss / (gain) on investments held for trading Unrealized loss / (gain) on investments held for trading
(4,809,080)
8,906,720
1,564,593 3,697,191 452,704
(5,540,569) (2,849,429) 516,722
(22,946,192) (85,342) (14,921) (4,263) (22,598,014)
19,586,732 (160,438) 21,939 6,269 19,971,224
1,484,999 (3,180,534) (1,695,535)
74,490,600 (66,007,554) 8,483,046
(24,293,549)
28,454,270
25,458,635
15,098,049
1,165,086
43,552,319
Changes in operating assets and liabilities: Investments held for trading, net Dividends receivable Management fee payable Other expenses payable Net cash (used in) / generated from operating activities
CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from subscription of units Payments against redemption of units Net cash (used in) / generated from financing activities Net (decrease) / increase in cash and cash equivalent Cash and cash equivalent at 1 January Cash and cash equivalent at 30 June
The accompanying notes 1 to 13 form an integral part of these interim financial statements. -5-
MEFIC IPO FUND Managed by Middle East Financial Investment Company INTERIM STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS (Unaudited) For the six-months period end 30 June 2017 (Saudi Riyals)
30 Jun 2017
30 Jun 2016
Net Assets at 1 January Net (loss) / income for the period
78,928,832 (4,809,080)
86,222,864 8,906,720
Changes from unit transactions Proceeds from issuance of units Payments against redemption of units Net change from unit transactions
1,484,999 (3,180,534) (1,695,535)
74,490,600 (66,007,554) 8,483,046
Net assets value at 30 June
72,424,217
103,612,630
UNIT TRANSACTIONS Units at 1 January Units issued Units redeemed
Numbers 732,601.41 581,958.38 660,805.68 11,346.42 (581,231.00) (24,137.24)
Units at 30 June
569,167.56
812,176.09
The accompanying notes 1 to 13 form an integral part of these interim financial statements. -6-
MEFIC IPO FUND Managed by Middle East Financial Investment Company NOTES TO THE INTERIM FINANCIAL STATEMENTS (Unaudited) For the six months period ended 30 June 2017 1.
THE FUND AND ITS ACTIVITIES MEFIC IPO Fund (the “Fund”) is an open-ended investment fund established and managed through an agreement between Middle East Financial Investment Company (the “Fund Manager”) and the Fund Investors (the “Unitholders”). The objective of the Fund is to achieve absolute return through capital growth over medium to long term by investing mainly in the shares of public companies during the first five years of listing and during their Initial Public Offering (IPO) in the Kingdom of Saudi Arabia. In dealing with the Unitholders, the Fund Manager considers the Fund as an independent accounting unit. Accordingly, the Fund Manager prepares separate financial statements for the Fund. The Fund commenced its operations on 16 Rajab 1435H (corresponding to 15 May 2014G). The approval from Capital Market Authority (“CMA”) for the establishment of the Fund was granted in its letter number 2014/4486/5 dated 16 Rajab, 1435H (corresponding to 15 May 2014G). The interim results of the Fund may not be an indicator of its annual results of the operations.
2.
REGULATORY AUTHORITY The Fund is governed by the Investment Fund Regulations (“the Regulations”) issued by CMA as amended upto 16 Sha’ban 1437H (corresponding to 23 May 2016G).
3.
SUBSCRIPTION / REDEMPTION (DEALING DAY & VALUATION DAY) Subscription / redemption requests will be accepted on all days on which the Saudi Stock Market is open. The value of the Fund’s portfolio is determined twice a week on Monday and Thursday (each being a “Valuation Day”). The net asset value of the Fund for the purpose of purchase or sale of units is determined by dividing the net value of assets (fair value of the fund’s assets minus fund’s liabilities) by the total number of outstanding fund units on relevant valuation day.
4.
BASIS OF PREPARATION
a)
Statement of compliance These financial statements have been prepared in accordance with generally accepted accounting standards in the Kingdom of Saudi Arabia issued by the Saudi Organization of Certified Public Accountants (SOCPA), and in accordance with the requirements of the Investment Funds Regulations as published by CMA in Saudi Arabia and the Fund’s terms and conditions.
b)
Basis of measurement These interim financial statements have been prepared under the historical cost convention except for the investments held for trading which are carried at fair value, using the accrual basis of accounting and the going concern concept.
c)
Functional and presentation currency These interim financial statements have been presented in Saudi Riyals (SR), which is the functional currency of the Fund.
-7-
MEFIC IPO FUND Managed by Middle East Financial Investment Company NOTES TO THE INTERIM FINANCIAL STATEMENTS (Unaudited) For the six months period ended 30 June 2017 (Saudi Riyals) BASIS OF PREPARATION (Continued) d)
Use of estimates and judgment The preparation of these interim financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expense. 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 future years affected.
5.
SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies used in the preparation of these interim financial statements are consistent with those used and disclosed in the financial statements for the year ended 31 December 2016.
6.
MANAGEMENT FEE AND OTHER CHARGES The Fund Manager charges each investor a subscription fee of a percentage not exceeding 1.5% of the subscribed amount to cover administration costs and is netted off against proceeds from issuance of units. Under the terms and conditions of the Fund, the Fund is liable to pay the following expenses to the Fund Manager: Management fee: Management fee is accrued at the rate of 1.75% per annum of the net assets value of the Fund at each valuation day and is payable monthly. Other expenses: Other expenses are charged at the rate of 0.5% of the net asset value of the fund at each valuation day, payable monthly.
7.
CASH AND CASH EQUIVALENTS As at 30 June 2017, the cash and cash equivalents include an amount of SR 0.56 million (30 June 2016: SR 31.40 Million) which is held with the Fund Manager as custodian. The Fund Manager is authorized to utilize these funds for the purpose of trading in securities on behalf of the Fund. The remaining balance is held in the current account with local bank.
8.
INVESTMENTS HELD FOR TRADING
Listed equity investments
30 June 2017
30 June 2016
71,263,114
60,094,151
-8-
MEFIC IPO FUND Managed by Middle East Financial Investment Company NOTES TO THE INTERIM FINANCIAL STATEMENTS (Unaudited) For the six months period ended 30 June 2017 (Saudi Riyals) INVESTMENTS HELD FOR TRADING (Continued) The sector-wise composition of investments held for trading is summarized as follows: Fair value as at 30 June 2016* 30 June 2017 5,343,513 8,171,274 4,452,745 6,608,610 2,154,290 3,832,920 4,678,671 6,537,054 9,304,026 1,985,600 5,916,797 4,238,500 3,640,696 9,264,110 16,748,750 17,703,386 2,276,200 6,916,633 828,344 4,050,103 3,759,100 2,945,943 60,094,151 71,263,114
Sector: Transportation Retailing Energy Banks Insurance Materials Capital Goods Commercial & Professional Services Consumer Services Health Care Equipment & Services REITs Consumer Durables & Apparel Real Estate Management and development Food & Staples Retailing Food & beverages
* The Fund has rearranged comparatives to conform to latest sector wise composition of Saudi Stock Market. As at 30 June 2017, cost of the above-mentioned investments held for trading amounted to SR 71.46 million (30 June 2016: SR 57.2 million). The above investments are in equity shares quoted in the Saudi Stock Market. 9.
TRANSACTIONS AND BALANCES WITH RELATED PARTIES Related parties of the Fund include the Unitholders, the Fund Manager and other funds managed by the Fund manager. In the ordinary course of its activities, the Fund transacts business with related parties. Related party transactions are in accordance with the terms and conditions of the Fund. All transactions with related parties are carried out based on mutually agreed prices under formal agreement. Related party transactions for the period are described as under: For the six months period ended Related party
Nature of transactions
Middle East Financial Investment Company – The Fund Manager
Management fee Other expenses
30 June 2017
30 June 2016
655,549 187,300
782,718 223,704
-9-
MEFIC IPO FUND Managed by Middle East Financial Investment Company NOTES TO THE INTERIM FINANCIAL STATEMENTS (Unaudited) For the six months period ended 30 June 2017 (Saudi Riyals) TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Continued) The above transactions during the period resulted in the following balances due to related party:
Related party Middle East Financial Investment Company – The Fund Manager
Nature of balances Management accrued fee payable Other expenses
As at 30 June 2016 2017 104,475 29,850
151,105 43,173
10. FINANCIAL RISK MANAGEMENT Credit risk Credit risk is the risk that one party to a financial instrument fails to discharge an obligation and cause other party to incur a financial loss. The Fund is exposed to credit risk on its bank balance and dividend receivable. However, the bank balance is maintained with a reputed local bank in the Kingdom of Saudi Arabia and the receivable is against dividends from reputable companies listed in the Kingdom of Saudi Arabia. Therefore, the Fund Manager believes that the Fund does not have any significant credit risk. Equity price risk Equity price risk is the risk that the fair value of equity investments will decrease as a result of changes in the levels of equity indices and the value of individual stocks. The Fund is exposed to equity price risk arising from its investments in equity shares. The Fund Manager endeavors to minimize the risk through diversification across various sectors of the Saudi Stock Market. Further, the Fund Manager has established risk guidelines to manage its equity price risk. Liquidity risk Liquidity risk is the risk that the Fund may encounter difficulty in generating funds to meet commitments associated with financial liabilities which comprise of fund management and other expenses payable. The Fund Manager monitors the liquidity requirements on a regular basis and ensures that sufficient funds are available to meet any commitments as they arise. Currency risk Currency risk is the risk that the value of a financial instrument may fluctuate due to change in the foreign exchange rates. The financial instruments of the Fund i.e. cash and payables are denominated in Saudi Arabian Riyals. Accordingly, the Fund is not exposed to any currency risk.
- 10 -
MEFIC IPO FUND Managed by Middle East Financial Investment Company NOTES TO THE INTERIM FINANCIAL STATEMENTS (Unaudited) For the six months period ended 30 June 2017 (Saudi Riyals) 11. FAIR VALUE OF FINANCIAL INSTRUMENTS 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. Financial instruments comprise financial assets and financial liabilities. The Fund’s financial assets consist of investments held for trading and cash at bank; its financial liability is management fees payable. Investments held for trading are carried at fair value. The fair value of other financial instruments is not materially different from their carrying values. 12. LAST VALUATION DATE The last valuation date of the fund’s net asset value for the period was 30 June 2017 (2016: 30 June 2016). 13. APPROVAL OF INTERIM FINANCIAL STATEMENTS These interim financial statements were approved by the Fund’s Board on 11 Dhul Qa’ada 1438H corresponding to 3 August 2017G.
- 11 -
MEFIC IPO FUND Semi Annual Performance Report As of 30 June 2017 Fund Board of Directors FUND OBJECTIVE The fund aims to achieve absolute return on capital growth over the long term, by investing mainly in IPOs & Listed Stocks in the Saudi Arabian Stock Market. STOCK MARKET REVIEW The Saudi Stock Market Index (TASI) achieved positive returns of 8.07% to close by the end of June at 7,425.72. Average daily turnover rose to 3.38 billion riyals, up 25 percent from the previous month's average. The main sectors that achieved positive performance were Food and Beverages (16.2%), Banks (12.9%) and Utilities (11.2%). On the other hand, the real estate funds sector and the media declined by (6.18%) and (3.6%), respectively. On the corporate level: Most of the large cap companies in the market topped the list during June, in line with the decision to add the Saudi market to MSCI's watch list. FUND PERFORMANCE TABLE Performance
3M
1Y
Since Inception
Fund
-3.0%
-0.3%
27.3%
MEFIC S&P IPO index
-3.2%
-5.2%
-41.9%
TASI
6.1%
14.2%
-24.3%
Name
1 Year 13.2
3 Years 17.8
5 Years NA
0.71
0.82
NA
0.91
0.88
NA
-0.02
0.32
NA
0.83
0.78
NA
2.15
2.63
NA
Standard Deviation Beta Correlation Information Ratio R-Square Tracking Error FUND FINANCIAL STATEMENTS *Thomson Reuters
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FUND FINANCIAL STATEMENTS
The audited financial statements for the fund have been prepared & uploaded on Tadawul Website, within the specified time frame, in compliance with the IFR. BOARD MEETING DISCUSSION – KEY TAKEAWAYS o o
o o
o
o o
The fund board reviewed the fund performance and applauded the funds best in market performance for FY16 and its YTD fifth position. The fund performance has been reviewed by the Fund Board and it was applauded that our IPO equity fund has achieved the first ranking amongst peers in 2016 with a performance of 15% & YTD in the fifth position. The Chairman of the Fund Board has raised a comment regarding retail investment as described in the presentation and the reason for investing in that sector which is currently highly risky. There was a comment by Shahid that we are not investing in the retail sector as described, but in the health sector, which comes under the retail sector, this will be fixed based on the new divisions for the sectors. It was also mentioned to the Fund Board Members that we have notified clients about an addition to the T&C that we can trade in the NOMU Market and have got the approval from CMA to add this feature to the Fund's Terms and Conditions. Our fund performance has a positive rating since inception, due to implementing the fundamental strategy and we will work towards accomplishing the same in 2017. It was confirmed to the Fund Board, in accordance the Article 13 of IRF, that the Fund has no conflict of interest.
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