LHV Persian Gulf Fund

Transcription

1 LHV Persian Gulf Fund I half year interim report 2014 (Translation of the Estonian original)

2 LHV Persian Gulf Fund I half year report Fund name Fund type Fund Manager LHV Persian Gulf Fund Common fund Joel Kukemelk Main Activity Investment of fund assets, EMTAK Legal address Tartu mnt. 2, Tallinn Phone (372) Fax (372) Fund Management Company AS LHV Varahaldus Commercial Register no. of Fund Management Company Managers of Fund Management Company Mihkel Oja Kerli Lõhmus Auditor AS PricewaterhouseCoopers 2

3 Tabel of Contents Confirmation of the Fund Management Company s Management Board Members... 4 MANAGEMENT REPORT HALF YEAR INTERIM FINANCIAL STATEMENTS... 7 Balance Sheet... 7 Statement of income and expenses... 8 Statement of change in Fund s net assets... 9 Statement of cash flows Notes to financial statements Note 1 Accounting principles Note 2 Concentration of open currency positions Note 3 Assets by recalculation of interest rate Note 4 Assets by regions Note 5 Assets by sectors Note 6 Statement of comparison of the Fund s net assets value Note 7 Accrued income Note 8 Related parties STATEMENT OF TRANSACTION AND COMMISSION FEES STATEMENT OF THE FUND'S INVESTMENTS AS AT STATEMENT OF THE FUND'S INVESTMENTS AS AT

4 Confirmation of the Fund Management Company s Management Board Members LHV Persian Gulf Fund s 2014 first half year report comprises of a management report, financial report for the first half of 2014 and its notes, statement of investments and a statement of transaction and commission fees. Data and additional information presented in LHV Persian Gulf Fund 2014 first half year report is true and complete. Financial statements give a true and fair view of the financial position, performance and cash flows. Financial statements are prepared in compliance with IAS 34 "Interim financial reporting" and the requirements for information disclosure enforced by the Ministry of Finance. The financial statements are unaudited. Management Board of the Fund Management Company: Mihkel Oja Member of the Management Board Kerli Lõhmus Member of the Management Board Tallinn,

5 MANAGEMENT REPORT LHV Persian Gulf Fund is a public open-end common investment fund founded by AS LHV Varahaldus on 10 January The Fund is in compliance with the EU Council directive 85/611/EEC and the legislation of the Republic of Estonia regarding UCITS. The Fund was registered with the Financial Supervisory Authority on 23 January 2008 and the Fund commenced investment activities on 5 March The objective of the Fund's activities is long-term growth of the Fund's assets. The Fund invests in securities that are traded on regulated markets in countries located in the Arabian Peninsula and Persian Gulf region (mostly GCC (Gulf Cooperation Council) member states, including the United Arab Emirate, Qatar, Saudi Arabia, Oman, Kuwait and Bahrain). The rally in equities of the GCC countries of the first half year of 2014 was supported by growing profits of the region's companies and strong economic environment, growing government investments in the economy in GCC countries to diversify the economies, strong state of real estate market in the whole region and the decision made in June 2014 to add UAE and Qatar to the MSCI Emerging Markets Index. Qatar s decision in May to allow foreign investors to own 49% of company s shares, instead of 25% as it was up until May had a positive impact as well. Some anxious moments in the Middle East were caused by the conflict between Russia and Ukraine, ISIL rebels in Iraq, Syria s ongoing civil war, Israeli conflict in the Gaza area, Qatar s bribery accusations in relation to them winning the organization right for the 2022 FIFA World Cup and the change of management in Dubai s biggest construction firm Arabtec. Energy prices for the GCC countries remained at the suitably high level in the first half of The conflict between energy-rich Russia and Ukraine, which has led to mutual sanctions, has played a role in it. Whereas the GCC countries would require an average oil price of ca $80 per barrel to cover their budget expenditures, WTI oil price at the end of June 2014 was $105 a barrel vs $98 a barrel at the end of 2013 and Brent oil price at the end of June 2014 was $112 a barrel vs $111 a barrel at the end of Therefore, on an aggregate basis, despite the surge in investments made by the GCC countries governments, their aggregated budgets and current accounts continue to be in surplus. During the first six months of 2014 the Fund s investments in United Arab Emirate decreased from 36.9% to 33.1% and investments in Qatar decreased from 27.1% to 25.0%. Because of this the proportion of the Fund s investments in Saudi Arabia grew from 18.7% to 21.9% and investments in Kuwait grew from 3.8% to 7.6%. In the long term, the most interesting markets in the region are United Arab Emirate, Qatar and Saudi Arabia. Qatar and United Arab Emirate joined the MSCI Emerging Markets index in June This means more interest in the whole region by foreign investors hereinafter. The increase of the S&P Dow Jones rating with the same content will become effective by September The biggest stock Exchange in the region Saudi Arabia has taken big steps towards making direct investments to its stock exchange possible for foreign investors. It is highly likely that the Saudi Arabia stock market will open to foreign investors in the first half of 2015, which would increase the importance of GCC region on the financial markets. Western countries negotiations in regard to Iran s nuclear program and the established sanctions are ongoing, the probability of finding a final solution has increased. A negative impact on the GCC markets would be caused by rising geopolitical tension (e.g. worsening relationships between the Western countries, GCC countries and Iran, Syria, Israel, Egypt etc. ), an ongoing decline of oil prices, worsening relationships between the GCC countries (e.g. Saudi Arabia, the United Arab Emirates and Bahrain called back their ambassadors from Qatar due to Qatar s support to the Muslim Brotherhood in Egypt). As at the end on June 2014 LHV Persian Gulf Fund had been attributed a four star rating by Morningstar in the category of Middle East and Africa equity funds based on three and five year results, and the fund manager has been attributed a high AA rating by Citywire. In addition, the Fund has been attributed a maximum 5-star rating by the FE Crown. In June 2014 Zawya Thomson Reuters chose LHV Persian Gulf Fund the best equity fund in GCC it was a high recognition, which has been attributed to the Fund second year in a row. 5

6 As at the end of the first half of 2014 LHV Persian Gulf Fund assets under managements totalled EUR LHV Persian Gulf Fund s investment harmonic average expected P/E ratio as at the end of the first half of 2014 is 12.4x, the P/B ratio as at the end of 2013 was 1.4x, the weighted arithmetic average ROE as at the end of 2013 is 13.2% and current 12 month dividend rate is 3.8%. During the first half of 2014 the fund manager visited companies in the United Arab Emirate, Kuwait and Saudi Arabia. The difference of NAV in this report from the initially published NAV is mostly due to additional information considered for the valuation of investments which was received at the time of compiling the report. Comparison of Fund s return with MSCI indexes of different regions* NAV NAV Change in Period MSCI GCC countries index, excl. Saudi Arabia* 620, , ,51% LHV Persian Gulf Fund 12, , ,48% * net, in euros, according to the official daily price; source: 6

7 1 HALF YEAR INTERIM FINANCIAL STATEMENTS Balance Sheet (In euros) Assets Note Current assets Cash and cash equivalents Financial assets at fair value through statement of income and expenses: Shares Fund shares Derivatives Accrued Income Total assets Liabilities and net asset value Current liabilities Liabilities to unit holders Liabilities to Fund Management Company Liabilities to depositary Liability to purchase securities Total current liabilities Total liabilities Fund s net asset value Total liabilities and Fund s assets in net asset value

8 Statement of income and expenses (in euros) Note Income Interest income Dividend income Net profit/loss from financial assets at fair value through statement of income and expenses: Shares Fund shares Derivatives Net gain/loss on exchange rate change Total income Operating expenses Management fees Depositary fees Transaction fees Other operating expenses Total operating expenses Change in Fund s net asset value

9 Statement of change in Fund s net assets (in euros) Note Net assets of the Fund at the beginning of the period Cash received upon subscription of A units Cash received upon subscription of B units Cash paid upon redemption of A units Cash paid upon redemption of B units Change in Fund s net asset value Net assets of the Fund at the end of the period Number of A units outstanding at the end of the period Number of B units outstanding at the end of the period NAV of unit A at end of the reporting period NAV of unit B at end of the reporting period

10 Statement of cash flows (in euros) Cash flows from operating activities Interest received Dividends received Net of purchases and sales of financial investments Change in other receivables Operating expenses paid Net cash flows from operating activities Cash flows from financing activities Received from the issue of units Paid for redemption of units Net cash flows from financing activities Total cash flows Cash and cash equivalents at the beginning of the accounting period Change in cash and cash equivalents Effect of exchange rate changes Cash and cash equivalents at the end of the accounting period

11 Notes to financial statements Note 1 Accounting principles LHV Persian Gulf Fund is an open common investment fund which was formed on the 1st January in 2008 and started its investment activities in March of The Fund invests in securities traded in the regulated markets of countries on the peninsula of Arabian Peninsula and in the region of the Persian Gulf (mainly the GCC, the Gulf Cooperation Council member countries, incl. Bahrain, Oman, Qatar, Kuwait, United Arab Emirates and Saudi Arabia). The fund manager of the LHV Persian Gulf Fund is AS LHV Varahaldus located Tartu mnt. 2, Tallinn. The financial statements of LHV Persian Gulf Fund have been prepared in accordance with the International Financial Reporting Standards as they have been adopted by European Union (IFRS EU). The accounting principles of investment funds are stipulated in the Investment Funds Act, in the Accounting Act and in the regulation for Requirements for investment fund reports subject to disclosure as adopted by Ministry of Finance on The Fund s Net Asset Value is determined according to the rules set out by the Investment Funds Act 142 section 2 and 204 section 1. The report has been prepared using the same accounting principles as were used in the financial statements of the period ending The report has been prepared in euros. This report has been approved by the Management Board on Note 2 Concentration of open currency positions EUR USD AED BHD KWD OMR QAR SAR Assets exposed to currency risk Cash and cash equivalents Shares Fund shares Derivatives Accrued income Total assets exposed to currency risk Liabilities exposed to currency risk Derivatives Other liabilities Total liabilities exposed to currency risk Open currency position

12 EUR USD AED BHD KWD OMR QAR SAR Assets exposed to currency risk Cash and cash equivalents Shares Fund shares Derivatives Accrued income Total assets exposed to currency risk Liabilities exposed to currency risk Derivatives Other liabilities Total liabilities exposed to currency risk Open currency position Note 3 Assets by recalculation of interest rate Up to 3 months 3-12 months 1-5 years Assets More than 5 years Cash and cash equivalents Fair value of financial assets with change through the statement of income and expenses Total Up to 3 months 3-12 months 1-5 years Assets More than 5 years Cash and cash equivalents Fair value of financial assets with change through the statement of income and expenses Total Note 4 Assets by regions Estonia* 2.43% 4.71% Finland* 0.00% 0.06% Qatar 24.98% 27.08% United Arab Emirates 33.12% 36.87% Saudi Arabia 21.87% 18.72% Oman 7.22% 6.21% Kuwait 7.61% 3.78% Bahrain 2.78% 2.57% Total % % *In Estonia and Finland open exposure is only for cash and cash equivalents. 12

13 Note 5 Assets by sectors Cash and cash equivalents 2.43% 4.77% Services 21.54% 24.08% Financial sector 33.99% 28.18% Industrial sector 14.43% 13.92% Insurance 2.17% 1.51% Real estate 16.81% 19.04% Telecommunications 2.49% 3.23% Regional funds 6.14% 5.27% Total % % Note 6 Statement of comparison of the Fund s net assets value Beginning of activities: January 2008 Value of Fund s net assets NAV of unit A NAV of unit B The difference of NAV in this report from the initially published NAV is mostly due to additional information considered for the valuation of investments which was received at the time of compiling the report. Note 7 Accrued income As at accrued income includes cash receivables from sold securities in the amount of euros and dividend receivables in the amount of euros. By the time of preparation of these financial statements all the receivables have been collected. As at accrued income included cash receivable from subscribed shares in the amount of euros and dividend receivable in the amount of euros. Note 8 Related parties For the purposes of these financial statements, related parties include the Fund Management Company AS LHV Varahaldus and other investment and pension funds under the management of the Fund Management Company as well as other companies belonging to the same consolidation group with the Fund Management Company. LHV Persian Gulf Fund pays a monthly management fee to the Fund Management Company. In the first half of 2014 the fees totalled euros, in the first half of 2013 the fees totalled euros. As at the balance sheet date the payables to the Fund Management Company made up euros (as at the liability was euros). The Fund Management Company has not made any transactions with other funds under the management of the Fund Management Company. Transaction fees in the first half of 2014 and in the first half of 2013 to LHV Bank have been disclosed in Statement of transaction and commission fees. 13

14 Statement of transaction and commission fees Commissions for the I half year of 2014 Number of transactions Volume of transactions Transaction an commission fees paid % of total fees AS Swedbank % EFG-Hermes MENA Securities Ltd % Morgan Stanley % Total % Commissions for I half year of 2013 Number of transactions Volume of transactions Transaction an commission fees paid % of total fees AS Swedbank % EFG-Hermes MENA Securities Ltd % Morgan Stanley % Total % 14

15 LHVPersian Gulf Fund I half year interim report 2014 Statement of the Fund's investments as at (in euros) Issuer/Name of the Equity Country of location ISIN-code Nominal value Currency Quantity Average acquisition cost in currency Total acquisition cost in EUR Market price per unit as at in currency* Market value EUR Share in the net value of the Fund s assets 1. Securities % Shares ¹ % Securities of the United Arab Emirates UAE % Air Arabia AEA AED % ARAMEX AEA AED % Dubai Financial Market AED AED % Dubai Islamic Bank AED AED % Emaar Properties AEE AED % Emirates NBD AEE AED % First Gulf Bank AEF AED % Ras Al Khaimah Ceramics AER AED % Union National Bank AEU AED % Depa AEDFXA0NFP USD % Securities of Bahrain issuers Bahrain % Aluminium Bahrain BH BHD % Bahrain Telecommunications BH BHD % Securities of Kuwaiti issuers Kuwait % Agility Public Warehousing KW0EQ KWD % Burgan Bank KW0EQ KWD % National Bank of Kuwait KW0EQ KWD % Securities of Omani issuers Oman % Bank Muscat SAOG OM OMR % National Bank of Oman OM OMR % Oman Telecom OM OMR % ¹ Listed securities 15

16 LHVPersian Gulf Fund I half year interim report 2014 Issuer/Name of the Equity Country of location ISIN-code Nominal value Currency Quantity Average acquisition cost in currency Total acquisition cost in EUR Market price per unit as at in currency* Market value EUR Share in the net value of the Fund s assets Securities of Qatar issuers Qatar % Barwa Real Estate Co QA000A0KD6J QAR % Commercial Bank of Qatar QA QAR % Doha Bank QA QAR % Industries Qatar QSC QA000A0KD6K QAR % Qatar Insurance Company QA QAR % Qatar Electricity Water QA QAR % Qatar Fuel Company QA QAR % Qatar National Bank QA QAR % Qatar Navigation QA QAR % Ooredoo QA QAR % United Development Company QA000A0KD6M QAR % Fund shares % Equity funds % EFG-Hermes Saudi Arabia Equity Saudi Arabia XC000A1W4DX3 - SAR % Emitent Issuer Rating Rating Agency Quantity Underlying asset name Maturity date Market value EUR Share in the net value of the Fund s assets Derivatives % Forwards and futures (currency derivatives) % USD FX FUTURE EUR % Warrants (rights for securities) % Dar Al Arkan Real Estate Development CERTIFICATE Citigroup Dar Al Arkan Real Estate Development aktsia % Fawaz Abdulaziz Alhokair CERTIFICATE Citigroup Fawaz Abdulaziz Alhokair aktsia % United Electronics CERTIFICATE Morgan Stanley United Electronics aktsia % Saudi Basic Industries CERTIFICATE Morgan Stanley Saudi Basic Industries aktsia % Samba Financial Group CERTIFICATE Morgan Stanley Samba Financial Group aktsia % Savola CERTIFICATE Morgan Stanley Savola aktsia % 16

17 LHVPersian Gulf Fund I half year interim report 2014 Issuer Type of deposit Country of location Rating Rating Agency Underlying asset name Interest Start date Maturity date Sum deposited 2. Deposits % Swedbank Demand Deposits Estonia A1 Moody s Investor Service EUR % % Swedbank Demand Deposits Estonia A1 Moody s Investor Service USD % 3. Other Assets % Outstanding dividends % Accrued Income % TOTAL ASSETS % Liabilities % FUND S ASSETS NET ASSET VALUE % * Unit s market value in currency includes accrued interest as at

18 LHVPersian Gulf Fund I half year interim report 2014 Statement of the Fund's investments as at (in euros) Issuer/Name of the Equity Country of location ISIN-code Nominal value Currency Quantity Average acquisition cost in currency Total acquisition cost in EUR Market price per unit as at in currency Market value EUR Share in the net value of the Fund s assets 1. Securities % Equity ¹ % Securities of the United Arab Emirates UAE % Air Arabia AEA AED % Aldar Properties AEA AED % ARAMEX AEA AED % Dubai Financial Market AED AED % Emaar Properties Limited AEE AED % First Gulf Bank AEF AED % Ras Al Khaimah Ceramics AER AED % Union National Bank AEU AED % Depa AEDFXA0NFP81 0,40 USD % Securities of Bahraini issuers Bahrain % Aluminium Bahrain BH BHD % Bahrain Telecommunications BH BHD % Securities of Kuwaiti issuers Kuwait % Agility Public Warehousing KW0EQ KWD % Burgan Bank KW0EQ KWD % National Bank of Kuwait KW0EQ KWD % Securities of Omani issuers Oman % Bank Muscat SAOG OM OMR % National Bank of Oman OM OMR % Oman Telecom OM OMR % Securities of Qatari issuers Qatar % Barwa Real Estate Co QA000A0KD6J QAR % Commercial Bank of Qatar QA QAR % Doha Bank QA QAR % Industries Qatar QSC QA000A0KD6K QAR % Qatar Insurance Company QA QAR % ¹ Listed securities 18

19 LHVPersian Gulf Fund I half year interim report 2014 Issuer/Title of securities Country of location ISIN-code Nominal value Currency Quantity Average acquisition cost in currency Total acquisition cost in EUR Market price per unit as at in currency* Market value in EUR Share in the net value of the Fund s assets Qatar Electricity Water QA QAR % Qatar Fuel Company QA QAR % Qatar National Bank QA QAR % Qatar Navigation QA QAR % Ooredoo QA QAR % United Development Company QA000A0KD6M QAR % Issuer/Title of securities Country of location ISIN-code Nominal value Currency Quantity Average acquisition cost in currency Total acquisition cost in EUR Market price per unit as at in currency* Market value in EUR Share in the net value of the Fund s assets Fund shares % Equity funds % EFG-Hermes Saudi Arabia Equity Saudi Arabia XC000A1W4DX3 - SAR % Issuer/Title of securities Issuer Rating Rating Agency Quantity Underlying asset Maturity date Market value in EUR Share in the net value of the Fund s assets Derivatives % Forward and futures contracts (currency derivatives) % EURO FX FUTURE EUR % EURO FX FORWARD Nordea Pank Aa3 Moody s Investor Service EUR % Warrants (purchase rights for securities) % Dar Al Arkan Real Estate Development CERTIFICATE Citigroup Dar Al Arkan Real Estate Development aktsia % Aldrees Petroleum CERTIFICATE Citigroup Aldrees Petroleum aktsia % Fawaz Abdulaziz Alhokair CERTIFICATE Citigroup Fawaz Abdulaziz Alhokair aktsia % United Electronics CERTIFICATE Morgan Stanley United Electronics aktsia % Saudi Basic Industries CERTIFICATE Morgan Stanley Saudi Basic Industries aktsia % Samba Financial Group CERTIFICATE Morgan Stanley Samba Financial Group aktsia % 19

20 LHVPersian Gulf Fund I half year interim report 2014 Issuer/Title of securities Deposit type Country of location Rating Rating agency Underlying asset Deposited amount Interest Market value EUR Share in the net value of the Fund s assets 2. Deposits % Swedbank Demand deposit Estonia A1 Moody s Investor Service EUR % % Swedbank Demand deposit Estonia A1 Moody s Investor Service USD % 3. Other assets % Dividend receivables % Accrued income % Total assets % Liabilities % FUND S ASSETS NET VALUE % * Unit s market value in currency includes accrued interest as at