aljazira international equities fund

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ALJAZIRA INTERNATIONAL EQUITIES FUND (Formerly known as Al-Khair International Equities Fund)

An Open-Ended Mutual Fund (Managed by Aljazira Capital Company) Interim condensed financial statements (Unaudited)

For the six-month period ended 30 June 2019 together with the

Review Report to the Unitholders

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(Managed by Aljazira Capital Company)

INTERIM CONDENSED FINANCIAL STATEMENTS For the six-month period ended 30 June 2019

PAGES

REPORT ON REVIEW OF INTERIM CONDENSED FINANCIAL STATEMENTS 2

INTERIM STATEMENT OF FINANCIAL POSITION 3

INTERIM STATEMENT OF COMPREHENSIVE INCOME 4

INTERIM STATEMENT OF CHANGES IN NET ASSETS

ATTRIBUTABLE TO THE UNITHOLDERS 5

INTERIM STATEMENT OF CASH FLOWS 6

NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS 7- 12

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REPORT ON REVIEW OF INTERIM CONDENSED FINANCIAL STATEMENTS

TO THE UNITHOLDERS OF

ALJAZIRA INTERNATIONAL EQUITIES FUND

(FORMERLY KNOWN AS AL-KHAIR INTERNATIONAL EQUITIES FUND) RIYADH, KINGDOM OF SAUDI ARABIA

INTRODUCTION

We have reviewed the accompanying interim statement of financial position of Aljazira International Equities Fund (the

“Fund”) managed by Aljazira Capital Company (the “Fund Manager”) as at 30 June 2019 and the related interim statements of comprehensive income, changes in net assets attributable to the unitholders and cash flows for the six months period then ended, and a summary of significant accounting policies and other explanatory notes (the “interim condensed financial statements”). Management is responsible for the preparation and fair presentation of these interim condensed financial statements in accordance with International Accounting Standard 34 - “Interim Financial Reporting” ("IAS 34"), as endorsed in the Kingdom of Saudi Arabia. Our responsibility is to express a conclusion on these interim condensed financial statements based on our review.

SCOPE OF REVIEW

We conducted our review in accordance with International Standard on Review Engagement 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” as endorsed in the Kingdom of Saudi Arabia.

A review of these interim condensed financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing as endorsed in the Kingdom of Saudi Arabia, and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed financial statements are not prepared, in all material respects, in accordance with IAS 34, as endorsed in the Kingdom of Saudi Arabia.

For Al-Bassam & Co.

(Allied Accountants)

Ibrahim A. Al-Bassam Certified Public Accountant Registration No. 337

25 August 2019G 24 Dhul Hijjah 1440H

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(Managed by Aljazira Capital Company)

INTERIM STATEMENT OF FINANCIAL POSITION As at 30 June 2019

(Amounts in United States Dollars)

Notes 30 June 2019 (Unaudited)

31 December 2018 (Audited)

ASSETS

Cash and cash equivalents 4 1,520,772 1,639,767

Investments carried at FVTPL 5 60,069,527 53,599,164

Dividends receivable 89,101 38,068

Due from related party 7 24,458 24,458

Prepayments and other receivables 395,204 7,398

TOTAL ASSETS 62,009,062 55,308,855

LIABILITIES

Management fee payable 7 237,552 239,139

Accrued expenses and other liabilities 679,184 532,414

TOTAL LIABILITIES 916,736 771,553

NET ASSETS ATTRIBUTABLE TO THE

UNITHOLDERS 61,182,326 54,537,302

Units in issue (in numbers) 8 536,220 552,468

Net Asset Value per unit 114.10 98.72

The accompanying notes 1 to 12 form an integral part of these interim condensed financial statements.

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ALJAZIRA INTERNATIONAL EQUITIES FUND

(Formerly known as Al-Khair International Equities Fund) (Managed by Aljazira Capital Company)

(4) INTERIM STATEMENT OF COMPREHENSIVE INCOME

For the six-month period ended 30 June 2019 (Amounts in United States Dollars)

Notes

30 June 2019 (Unaudited)

30 June 2018 (Unaudited) Income

Net realized and unrealized gain on Investments carried

at FVTPL 6 8,304,792 675,141

Dividend income 722,749 789,947

Other income 8,947 952

9,036,488 1,466,040 Expenses

Management and custody fees 7 480,439 580,959

Other expenses 7 204,125 459,620

684,564 1,040,579

Net profit for the period 8,351,924 425,461

Other comprehensive income for the period - -

Total comprehensive income for the period 8,351,924 425,461

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(Managed by Aljazira Capital Company)

INTERIM STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO THE UNITHOLDERS For the six-month period ended 30 June 2019

30 June 2018 (Unaudited) Net assets attributable to the Unitholders at beginning of

the period 54,537,302 73,804,100

Total comprehensive income for the period 8,351,924 425,461 Changes from unit transactions

Issuance of units 2,989,488 4,616,589

Redemption of units (4,696,388) (16,420,518)

Net changes from unit transactions (1,706,900) (11,803,929)

Net assets attributable to the Unitholders at end of the

period 61,182,326 62,425,632

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ALJAZIRA INTERNATIONAL EQUITIES FUND

(Formerly known as Al-Khair International Equities Fund) (Managed by Aljazira Capital Company)

(6) INTERIM STATEMENT OF CASH FLOWS

For the six-month period ended 30 June 2019 (Amounts in United States Dollars)

Notes

Cash flow from operating activities:

Net profit for the period 8,351,924 425,461

Adjustments for:

- Net unrealized (gain) /loss on Investments carried

at FVTPL 6 (5,596,745) 6,482,793

2,755,179 6,908,254 Net changes in operating assets and liabilities:

Investments carried at FVTPL (873,618) 4,056,483

Dividends receivable (51,033) (46,426)

Prepayments and other receivables (387,806) (675,413)

Management fee payable (1,587) (12,668)

Payable to unitholder on account of redemption - 141,687

Accrued expenses and other liabilities 146,770 989,378

Net cash generated from operating activities 1,587,905 11,361,295

Cash flow from financing activities:

Proceeds from issuance of units 2,989,488 4,616,589

Redemption of units * (4,696,388) (16,420,518)

Net cash used in financing activities (1,706,900) (11,803,929) Net decrease in cash and cash equivalents: (118,995) (442,634) Cash and cash equivalents at beginning of the period 4 1,639,767 2,439,519 Cash and cash equivalents at end of the period 4 1,520,772 1,996,885

*Supplemental Information

Payable to unitholder on account of redemption - 141,687

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(Managed by Aljazira Capital Company)

NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS For the six-month period ended 30 June 2019

1 LEGAL STATUS AND PRINCIPAL ACTIVITIES

Aljazira International Equities Fund (Formerly known as Al-Khair International Equities Fund) (the “Fund”) is an open-ended, Saudi Investment fund established and managed through an agreement between Aljazira Capital Company – a Saudi Closed Joint Stock Company (the “Fund Manager”) and the investors (the “unitholders”).

The Fund Manager is a wholly owned subsidiary of Bank Aljazira (the “Bank”). The Capital Market Authority (“CMA”) approval to continue issuing units to public was granted vide its letter no 7720/5 dated 12 Muharram 1431H (corresponding to 29 December 2009). The Fund commenced its operations on 21 September 1998.

The Fund operates under the terms and conditions contained in its prospectus with the prime objective of providing the investors with the opportunities to invest in Shariah compliant investment securities listed in diversified global markets with the long-term capital growth. The Fund’s net income is re-invested in the Fund, which is reflected in the net assets attributable to each unit.

The Fund is administered by Maples Fund Services (the “Administrator”). The Fund’s assets are held in the custody of Northern Trust Securities (the “Custodian”). Lazard Asset Management Limited act as a Sub Fund Manager to the Fund. Fee paid to the Sub Fund Manager is borne by the Fund Manager.

The Fund is governed by the Investment Fund Regulations (the “Regulations”) published CMA on 3 Dhul Hijja 1427 H (corresponding to 24 December 2006) thereafter amended (the “amended regulation”) on 16 Sha’ban 1437 H (corresponding to 23 May 2016), detailing requirements for all funds within the Kingdom of Saudi Arabia. The amended regulation came into effect from 6 Safar 1438 H (corresponding to 6 November 2016).

2 BASIS OF PREPARATION 2.1 Statement of compliance

These interim condensed financial statements of the Fund have been prepared in accordance with International accounting standard (IAS) 34 interim financial reporting as endorsed in the Kingdom of Saudi Arabia and other standards and pronouncement issued by the Saudi Organization for Certified Public Accountants (SOCPA) should be read in conjunction with the Fund’s last annual financial statement for the year ended 31 December 2018.

The results for the six-month period ended 30 June 2019 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2019.

2.2 Basis of measurement

These interim condensed financial statements have been prepared on a historical cost convention, except for Investments that are measured at fair value.

The Fund does not have a clearly identifiable operating cycle and therefore does not present current and non- current assets and liabilities separately in the statement of financial position. Instead, assets and liabilities are presented in order of liquidity.

2.3 Functional and presentation currency

Items included in these interim condensed financial statements are measured using the currency of the primary economic environment in which the Fund operates (the “functional currency”). These interim condensed financial statements are presented in United States Dollars (USD) which is the Fund’s functional and presentation currency.

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ALJAZIRA INTERNATIONAL EQUITIES FUND

(Formerly known as Al-Khair International Equities Fund) (Managed by Aljazira Capital Company)

NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS For the six-month period ended 30 June 2019

(8) 2 BASIS OF PREPARATION (continued)

2.3 Functional and presentation currency (continued) Transactions and balances

Foreign currency transactions are translated into USD using the exchange rates prevailing at the date of transactions. Foreign currency assets and liabilities are translated into USD using the exchange rates prevailing at date of the statement of statement of financial position. Foreign exchange gains and losses arising from translation are included in the statement of comprehensive income.

3 CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

The preparation of these interim condensed financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income 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.

In the process of applying the Fund’s accounting policies, management has made the following estimates and judgments which are significant to these interim condensed financial statements:

3.1 Going concern

The Fund's management has made an assessment of the Fund’s ability to continue as a going concern and is satisfied that the Fund has the resources to continue in business for the foreseeable future. Furthermore, the management is not aware of any material uncertainties that may cast significant doubt on the Fund’s ability to continue as a going concern. Accordingly, these interim condensed financial statements have been prepared on a going concern basis.

4 CASH AND CASH EQUIVALENTS

Note

Cash at Bank 4.1 80,702 99,486

Cash with Custodian 1,440,070 1,040,281

1,520,772 1,639,767

4.1 Cash balances are held in current accounts with Bank Aljazira, a related party (Also see Note 1). The Fund does not earn profit on these current accounts.

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(Managed by Aljazira Capital Company)

NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS For the six-month period ended 30 June 2019

5 INVESTMENTS CARRIED AT FVTPL

Investments in equity instruments comprise of the following:

Industry sector 30 June 2019

(Unaudited)

Cost Fair value % of fair value

Telecommunication and technology 7,341,808 7,941,383 13.22%

Consumer products 4,386,808 5,928,467 9.87%

Pharmaceuticals 8,165,053 8,787,693 14.63%

Software Services 5,275,409 7,465,245 12.43%

Construction and engineering 2,085,571 2,233,354 3.72%

Oil and gas 3,113,336 2,919,987 4.86%

Automobile and parts 783,524 599,508 1.00%

Chemical 2,066,287 1,631,270 2.72%

Electronics 5,927,865 6,285,896 10.46%

Banks and financial institutions 908,131 1,519,286 2.53%

Aerospace 1,389,516 1,445,294 2.41%

Clothing 895,969 955,786 1.59%

Entertainment 3,786,632 4,159,781 6.92%

Other 7,448,784 8,196,577 13.64%

Total 53,574,693 60,069,527 100%

Industry sector 31 December 2018

(Audited)

Cost Fair value % of fair value

Telecommunication and technology 8,780,728 9,630,750 17.97%

Consumer products 5,096,785 5,271,832 9.84%

Pharmaceuticals 7,605,695 8,010,921 14.95%

Software Services 4,464,386 5,662,338 10.56%

Construction and engineering 2,836,051 2,483,600 4.63%

Oil and gas 3,501,811 3,138,572 5.86%

Automobile and parts 1,458,643 981,978 1.83%

Chemical 2,112,243 1,640,080 3.06%

Electronics 5,210,171 4,856,627 9.06%

Banks and financial institutions 1,748,794 2,174,590 4.06%

Aerospace 1,134,061 1,010,952 1.89%

Clothing 1,154,031 1,067,335 1.99%

Entertainment 1,667,827 1,313,432 2.45%

Other 5,929,849 6,356,157 11.85%

Total 52,701,075 53,599,164 100%

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ALJAZIRA INTERNATIONAL EQUITIES FUND

(Formerly known as Al-Khair International Equities Fund) (Managed by Aljazira Capital Company)

NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS For the six-month period ended 30 June 2019

(10) 6 NET REALIZED AND UNREALIZED GAIN OR LOSS FROM INVESTMENTS CARRIED

AT FVTPL

7 RELATED PARTIES TRANSACTIONS AND BALANCES

Management fee and other expenses

For management services, the Fund quarterly pays the management fees at an annual rate of 1.50% of the net assets of the Fund attributable to Unitholders at each valuation date, as set out in the Fund’s terms and conditions.

The Fund Manager recovers from the Fund any other expenses incurred on behalf of the Fund such as board compensation, Shariah supervisory board compensation and other similar charges. These expenses are not expected to exceed an annual rate of 0.25% of the value of Fund’s net assets calculated on daily basis.

Transactions with related parties

During the period, the Fund entered into the following significant transactions with related parties in the ordinary course of business. These transactions were carried out on the basis of approved terms and conditions of the Fund. All related party transactions are approved by the Fund Board.

Related parties Nature of relationship

Nature of transaction

Aljazira Capital Company Fund Manager Management fees 455,986 540,202

Other expenses 2,520 2,236

Fund's Board Key executive Board

remuneration 2,080 2,133

Unrealized gain / (loss) on revaluation of investments 5,596,745 (6,482,793)

Realized gain on disposal of investments 2,708,047 7,157,934

8,304,792 675,141

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(Managed by Aljazira Capital Company)

NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS For the six-month period ended 30 June 2019

7 RELATED PARTIES TRANSACTIONS AND BALANCES (continued)

Certain units of the Fund are subscribed by an affiliate of the Fund Manager and the funds managed and administered by the Fund Manager, the details of which are as follows:

Name of related parties 30 June 2019

(Unaudited)

31 December 2018 (Audited) (Unit in numbers)

Affiliate

Aljazira Takaful Taawuni Company 422,300 433,287

Funds managed by the Fund Manager

Aljazira Diversified Aggressive Fund 39,339 35,931

Aljazira Diversified Balanced Fund 6,713 11,351

Aljazira Diversified Conservative Fund 1,917 4,039

Balances with related parties Related parties

Nature of relationship

Nature of Balance

Aljazira Bank Affiliate Bank balance 80,702 99,486

Aljazira Capital Company

The Fund Manager

Management fee

payable 237,552 239,139

Other Receivable 24,458 24,458

Fund’s Board Key executive Remuneration

payable 2,080 4,267

8 UNIT TRANSACTIONS

Transactions in units for the period are summarized as follows:

Note

31 December 2018 (Audited) (Unit in numbers)

Units at beginning of the period / year 552,468 677,606

Units issued during the period / year 27,273 68,680

Units redeemed during the period / year 8.1 (43,521) (193,818)

Net change in units (16,248) (125,138)

Units at end of the period / year 536,220 552,468

8.1 As per Fund’s terms and conditions, any redemption of units is to be settled by the Fund to the unitholder within 4 working days from the date of redemption (“settlement period”).

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ALJAZIRA INTERNATIONAL EQUITIES FUND

(Formerly known as Al-Khair International Equities Fund) (Managed by Aljazira Capital Company)

NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS For the six-month period ended 30 June 2019

(12) 9 FAIR VALUE ESTIMATION

The fair value for financial instruments traded in active markets is based on quoted market prices at the close of trading on the financial reporting date. Instruments for which no sales were reported on the valuation day are valued at the most recent bid price.

An active market is a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The carrying value less impairment provision, if any, of financial instrument carried at amortized cost are assumed to approximate their fair values.

The fair value hierarchy has the following levels:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

• Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include active listed equity instruments. The Fund does not adjust the quoted price for these instruments.

Fund classifies all of its financial assets, except for those carried at amortized cost, at fair value as level 1.

10 EVENTS AFTER THE END OF THE REPORTING PERIOD

There has been no significant event after the statement of financial position date, which in the opinion of the management requires recognition or disclosure in the interim condensed financial statements.

11 LAST VALUATION DAY

The last valuation date for the purpose of preparation of these interim condensed financial statements was 27 June 2019 (2018: 31 December 2018). There is no material change in the net assets attributable to each unit of the Fund between last valuation day and its financial period end i.e. 30 June 2019.

12 APPROVAL OF THE INTERIM CONDENSED FINANCIAL STATEMENTS

These interim condensed financial statements were authorized for issue by the Fund’s Board August 25, 2019G corresponding Dhul Hijjah 24, 1440H.