MORGAN STANLEY SAUDI EQUITY FUND ]
Annual Report | 31 DECEMBER 2020 ]
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MORGAN STANLEY SAUDI ARABIA
The Morgan Stanley Saudi Equity Fund Annual Report 2020
IFR, Article 71 (b)
MORGAN STANLEY SAUDI EQUITY FUND
Annual report | 31 DECEMBER 2020
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Table of Contents
Fund Directory ................................................................................................................................................. 3
A. Investment Fund Information .................................................................................................................. 4
1. Name of the investment fund ........................................................................................................... 4
2. Investment objectives and policies ................................................................................................... 4
3. Distribution of income and gain policy .............................................................................................. 4
B. Fund Performance .................................................................................................................................. 4
1. Fund summary .................................................................................................................................. 4
2. Fund performance record ................................................................................................................. 5
3. Actual fees and fund expenses paid by the investment fund ........................................................... 6
4. Material changes having affected the fund ...................................................................................... 6
5. Disclosure of annual voting rights .................................................................................................... 7
6. Fund Board Resolutions ................................................................................................................. 16
C. Fund Manager ...................................................................................................................................... 17
1. A review of the investment activities during the period. ................................................................. 17
2. A write-up of the investment fund’s performance during the period. .............................................. 17
3. Details of any material changes made during the period. .............................................................. 17
4. Any other information that would enable unitholders to make an informed judgment about the fund’s activities during the period. .................................................................................................. 17
5. A statement on any special commission received by the fund manager during the period. .......... 17
Custodian ...................................................................................................................................................... 18
Auditor ........................................................................................................................................................... 18
MORGAN STANLEY SAUDI EQUITY FUND
Annual report | 31 DECEMBER 2020
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Fund Directory
Name of the Fund Morgan Stanley Saudi Equity Fund
Fund Manager Morgan Stanley Saudi Arabia, a closed joint stock company established under the laws of Saudi
Arabia with Commercial Registration Number 1010224144 dated 18/9/1427H, issued in Riyadh, and
licensed by the Capital Market Authority.
The address of the Fund Manager is:
Al Rashid Tower, 10th Floor
King Saud Road, Riyadh
P. O. Box 66633, Riyadh 11586
Tel: +966 (11) 218 70 00
Fax:+966 (11) 218 71 44
www.MorganStanley.com
Custodian The Custodian is HSBC Saudi Arabia Limited
2nd floor – HSBC Building, Olaya Road
7267 Olaya – Al Murooj
Riyadh 12283-2255
Saudi Arabia
Tel: +966 (11) 299 23 13
Fax: +966 (11) 299 23 85
Administrator The Administrator is HSBC Saudi Arabia Limited
HSBC Building, Olaya Road
7267 Olaya – Al Murooj
Riyadh 12283-2255
Saudi Arabia
Registrar The Registrar is HSBC Saudi Arabia Limited
HSBC Building, Olaya Road
7267 Olaya – Al Murooj
Riyadh 12283-2255
Saudi Arabia
Auditor The Auditor is Ernst & Young
P.O. Box 2732
Riyadh 11461
Saudi Arabia
Tel: +966 (11) 273 4740
Fax: +966 (11) 273 4730
MORGAN STANLEY SAUDI EQUITY FUND ]
Annual Report | 31 DECEMBER 2020
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A. Investment Fund Information
1. Name of the investment fund
The Morgan Stanley Saudi Equity Fund
2. Investment objectives and policies
The Fund’s investment objective is to provide long-term capital appreciation and growth. It
intends to pursue these objectives by investing in shares listed and traded on the Saudi Stock
Exchange, Tadawul, and in shares offered in the course of an IPO. The Fund’s performance will
be measured against the Tadawul All Share Index (“TASI”) for the purposes of providing
investors with an indication of performance relative to an existing standard.
3. Distribution of income and gain policy
The Fund is an income accumulation Fund, whereby its net income will be reinvested in the Fund
and not distributed as dividends on the Units. Reinvestment of income will be reflected in the
value and price of the Units.
Reports are available upon request free of charge from the fund manager.
B. Fund Performance
1. Fund summary
2018 2019 2020
Net Assets 31.12 (SAR) 49,811,246.62 64,557,067.45 48,880,228.63
Net assets per unit 31.12 (SAR) 357.8715 412.4647 449.9475
Highest Net Assets Value per unit (SAR) 390.1710 436.4506 452.8824
Lowest Net Assets Value per unit (SAR) 303.7469 356.8052 302.2628
Units in Issue 31.12 139,187.53 156,515.38 108,635.41
Income Distribution Per Unit 0.00 0.00 0.00
Total Expense Ratio 2.58% 1.93% 2.14%
MORGAN STANLEY SAUDI EQUITY FUND ]
Annual Report | 31 DECEMBER 2020
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2. Fund performance record
The total return for 1 year, 3 years and 5 years (or since inception):
DESCRIPTION INCEPTION DATE
RETURN TYPE 1 YEAR CUM 3 YEAR CUM 5 YEAR CUM
SINCE INCEPTION
CUM
Saudi Equity Month-end NAV 6-Jan-09 Net 9.09 48.12 66.27 349.95
Tadawul All Share Index N/A N/A 3.58 20.25 25.72 64.27
The Annual total return for each of the last 10 financial years (or since Inception):
DESCRIPTION DATE ANNUALIZED RETURN
Saudi Equity Monthend NAV 31-Dec-09 19.551
Tadawul All Share Index 31-Dec-09 15.731
Saudi Equity Monthend NAV 31-Dec-10 17.23
Tadawul All Share Index 31-Dec-10 8.15
Saudi Equity Monthend NAV 31-Dec-11 0.09
Tadawul All Share Index 31-Dec-11 -3.07
Saudi Equity Monthend NAV 31-Dec-12 8.20
Tadawul All Share Index 31-Dec-12 5.98
Saudi Equity Monthend NAV 31-Dec-13 44.87
Tadawul All Share Index 31-Dec-13 25.50
Saudi Equity Monthend NAV 31-Dec-14 27.55
Tadawul All Share Index 31-Dec-14 -2.37
Saudi Equity Monthend NAV 31-Dec-15 -3.51
Tadawul All Share Index 31-Dec-15 -17.06
Saudi Equity Monthend NAV 31-Dec-16 9.91
Tadawul All Share Index 31-Dec-16 4.32
Saudi Equity Month end NAV 31-Dec-17 2.13
Tadawul All Share Index 31-Dec-17 0.22
Saudi Equity Month end NAV 31-Dec-18 17.81
Tadawul All Share Index 31-Dec-18 8.31
Saudi Equity Month end NAV 31-Dec-19 15.25
Tadawul All Share Index 31-Dec-19 7.19
Saudi Equity Month end NAV 31-Dec-20 9.09
Tadawul All Share Index 31-Dec-20 3.58
1 Fund inception date is 6 January 2009.
MORGAN STANLEY SAUDI EQUITY FUND ]
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3. Actual fees and fund expenses paid by the investment fund
The table below shows the actual fees and fund expenses paid by the investment fund during the
year.
DESCRIPTION PERIOD 2020
Management Fees 989,758
Management Fee rebate 282,788
Custody Fees 59,224
Fund Admin Fees 85,732
Audit Fees 55,000
Registration Fees 10,275
Board Fees 23,000
Transaction charges 50,288
VAT 99,089
Brokerage Fee 121,929
Other expenses 819
Total Expense 1,212,324
Average AUM 56,559,473
TER For 2020 2.14
4. Material changes having affected the fund
Performance was driven by normal business activities and portfolio positioning.
The Board of Directors approved to keep the investment management fee at 1.25% pa. up to 31
Dec 2021.
5. Disclosure of annual voting rights
COMPANY NAME
EVENT DATE AGENDAS VOTING DECISION
OF MSSEF
Bahri
Ordinary General
Assembly Meeting
12-Jan-20
1. Vote on the election of BoD members Agreed
2. Vote on the election of Audit Committee, approve tis Charter and the remuneration of its members Agreed
Ataa
Extraordinary General
Assembly Meeting
20-Jan-20
1. Vote on approving BoD report Agreed
2. Vote on approving the Company’s financials Agreed
3. Vote on approving the auditor’s report Agreed
4. Vote on discharging the BoD from liability Agreed
5. Vote on the recommendation of BoD to appoint external auditors Agreed
6. Vote on the distribution of cash dividends Agreed
7. Vote on the recommendation of the BoD to pay SAR 1.35 Mn as remuneration to BoD members Agreed
MORGAN STANLEY SAUDI EQUITY FUND ]
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8. Vote on approving three related party transactions Agreed
9. Vote on amending articles one and two of the Company’s bylaws Agreed
10. Vote on adding article nine to the Company’s bylaws Agreed
SABB
Ordinary General
Assembly Meeting
28-Jan-20
1. Vote on the election of Audit Committee for the new 3-year term starting from 28 Jan 2020 until 31 Dec 2022, and on its tasks, controls and remuneration of its members
Agreed
2. Vote on amending board membership Charter (polices and criteria of selection) Disagreed
3. Vote on amending remuneration and compensation policy for the board of directors, committees members and executive management
Agreed
Qassim Cement
Ordinary General
Assembly Meeting
4-Mar-20
1. Vote to approve board report for FY2019 Agreed
2. Vote to approve auditors report for FY2019 Agreed
3. Vote to approve 2019 FS. Agreed
4. Vote on the recommendation of BoD to appoint external auditors for 2020 and Q1 of 2021. Agreed
5. Vote to approve the distributed dividends of 2019. Agreed
6. Vote to approving a related party transaction between the Company and Al Watani Wealth Management Company
Disagreed
7. Vote on discharging BoD members from liability for 2019 Agreed
8. Vote on the recommendation to pay SAR 2.7 Mn as remuneration to BoD members for FY 2019 Agreed
9. Vote on delegating the BoD to distribute cash dividends for 2020 on a quarterly basis Agreed
10. Vote on the BoD recommendation to appointing Tariq Almarshoud (non-executive member) as a representative of GOSI in the board.
Agreed
Arabian Centres
Extraordinary General
Assembly Meeting
16-Mar-20 1. Vote on the issuance of up to USD 1 Bn of Shariah compliant sukuk, which may be issued from time to time either domestically and/or internationally in any currency and in a single or multiple issuances
Agreed
Samba
Ordinary General
Assembly Meeting
25-Mar-20
1. Vote to approve board report for FY2019 Agreed
2. Vote to approve auditors report for FY2019 Agreed
3. Vote to approve 2019 FS Agreed
4. Vote on the BoD recommendation to distribute SAR 0.70 as cash dividends for H2 2019 Agreed
5. Vote on the recommendation to pay SAR 4.7 Mn as remuneration to BoD members for FY 2019 Agreed
6. Vote on discharging BoD members from liability for 2019 Agreed
7. Vote on the recommendation of BoD to appoint external auditors for Q1 2020 Agreed
8. Vote on the recommendation of BoD to appoint external auditors for Q2 2020 – Q1 2021 Agreed
9. Vote on delegating the BoD to distribute cash dividends for 2020 on a bi-annual or quarterly basis Agreed
10. Vote on amending the nomination and remuneration committee charter Agreed
11. Vote on allowing Dr. Khalid Alsuwalim (BoD member) to be involved with other companies Agreed
12. Vote on allowing Mr. Fahad Almufarej (BoD member) to be involved with other companies Agreed
13. Vote on allowing Mr. Abdullah Alruweis (BoD member) to be involved with other companies Agreed
14. Vote to approve 8 related party transactions Agreed
Riyad Bank
Ordinary General
Assembly Meeting
25-Mar-20
1. Vote to approve board report for FY2019 Agreed
2. Vote to approve 2019 FS Agreed
3. Vote on discharging BoD members from liability for 2019 Agreed
4. Vote on the recommendation to pay SAR 5.5 Mn as remuneration to BoD members for FY 2019 Agreed
5. Vote on the BoD recommendation to distribute SAR 0.70 as cash dividends for H2 2019 Agreed
6. Vote on delegating the BoD to distribute cash dividends for 2020 on a bi-annual or quarterly basis Agreed
7. Vote on the BoD recommendation to appoint external auditors for 2020 Agreed
8. Vote on amending the Audit Committee Charter Agreed
9. Vote on amending the Nomination and Remuneration Committee Charter Agreed
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10. Vote on authorizing the BoD the power of license included in paragraph 1 of Article 71 of the Companies Law, for one year period - from the OGM date of approval or until the end of BoD term
Disagreed
11. Vote to approve 5 related party transactions Agreed
Al Rajhi Bank
Extraordinary General
Assembly Meeting
29-Mar-20
1. Vote to approve board report for FY2019 Agreed
2. Vote to approve 2019 FS Agreed
3. Vote to approve auditor report Agreed
4. Vote to discharge BoD members from liability for 2019 Agreed
5. Vote on the distributed cash dividends for H1 2019 Agreed
6. Vote on the BoD recommendation to distribute SAR 1.50 as cash dividends for H2 2019 Agreed
7. Vote on delegating the BoD to distribute cash dividends for 2020 on a bi-annual or quarterly basis Agreed
8. Vote on the BoD recommendation to appoint external auditors for 2020 Agreed
9. Vote on the recommendation to pay SAR 6.1 Mn as remuneration to BoD members for FY 2019 Agreed
10. Voting on the delegation of authorization powers stipulated in paragraph (1) of Article 71 of the Companies Law from general assembly to the BoD for one year
Disagreed
11. Vote to approve 17 related party transactions Agreed
SABIC Agri-Nutrients
Ordinary General
Assembly Meeting
29-Mar-20
1. Vote to approve auditor report Agreed
2. Vote to approve 2019 FS Agreed
3. Vote to approve board report for FY2019 Agreed
4. Vote on the BoD recommendation to appoint external auditors for 2020 and Q1 2021 Agreed
5. Vote to discharge BoD members from liability for 2019 Agreed
6. Vote on the recommendation to pay SAR 1.4 Mn as remuneration to BoD members for FY 2019 Agreed
7. Vote on the distributed cash dividends for H1 2019 Agreed
8. Vote on the BoD recommendation to distribute SAR 1.50 as cash dividends for H2 2019 Agreed
9. Vote to amend the Nomination and Remuneration Committee Charter Agreed
10. Vote to elect BoD members for the upcoming term Abstained
11. Vote to form the Audit Committee members, approve its Charter and remunerate its members Agreed
12. Vote on delegating the BoD to distribute cash dividends for 2020 on a bi-annual or quarterly basis Agreed
Arab National
Bank
Extraordinary General
Assembly Meeting
30-Mar-20
1. Vote to approve board report for FY2019 Agreed
2. Vote to approve 2019 FS Agreed
3. Vote to approve auditor report Agreed
4. Vote on the distributed cash dividends for H1 2019 Agreed
5. Vote on the BoD recommendation to distribute SAR 0.50 as cash dividends for H2 2019 Agreed
6. Vote on amending articles 3, 5, 8, 23, 33, 44 and 48 of the Company’s bylaws Agreed
7. Vote on removing article 16 from the Company’s bylaws Agreed
8. Vote on reorganizing and renumbering the articles of the bylaws to reflect the changes Agreed
9. Vote to discharge BoD members from liability for 2019 Agreed
10. Vote to elect BoD members for the upcoming term Abstained
11. Vote to form the Audit Committee members, approve its Charter and remunerate its members Agreed
12. Vote on the recommendation to pay SAR 5 Mn as remuneration to BoD members for FY 2019 Agreed
13. Vote on the BoD recommendation to appoint external auditors for 2020 and Q1 2021 Agreed
14. Voting on the delegation of authorization powers stipulated in paragraph (1) of Article 71 of the Companies Law from general assembly to the BoD for one year
Disagreed
15. Vote to approve 18 related party transactions Agreed
Advanced Ordinary General
31-Mar-20 1. Vote to approve board report for FY2019 Agreed
MORGAN STANLEY SAUDI EQUITY FUND ]
Annual Report | 31 DECEMBER 2020
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Assembly Meeting 2. Vote to approve 2019 FS Agreed
3. Vote to approve auditor report Agreed
4. Vote on the BoD recommendation to appoint external auditors for 2020 Agreed
5. Vote on the BoD recommendation to distribute SAR 0.65 as cash dividends for Q4 2019 Agreed
6. Vote on the distributed cash dividends for Q1, Q2 and Q3 2019 Agreed
7. Vote on delegating the BoD to distribute cash dividends for 2020 on a bi-annual or quarterly basis Agreed
8. Vote to discharge BoD members from liability for 2019 Agreed
9. Voting on the delegation of authorization powers stipulated in paragraph (1) of Article 71 of the Companies Law from general assembly to the BoD for one year
Disagreed
NCB
Extraordinary General
Assembly Meeting
31-Mar-20
1. Vote to approve board report for FY2019 Agreed
2. Vote to approve 2019 FS Agreed
3. Vote to approve auditor report Agreed
4. Vote on the BoD recommendation to distribute SAR 1.20 as cash dividends for H2 2019 Agreed
5. Vote on the distributed cash dividends for H1 2019 Agreed
6. Vote on delegating the BoD to distribute cash dividends for 2020 on a bi-annual or quarterly basis Agreed
7. Vote on the BoD recommendation to appoint external auditors for 2020 Agreed
8. Vote on the recommendation to pay SAR 4.8 Mn as remuneration to BoD members for FY 2019 Agreed
9. Vote to discharge BoD members from liability for 2019 Agreed
10. Vote on the share repurchase program of up to 3.98 Mn shares to be allocated to employee share scheme
Agreed
11. Vote on delegating to the Board of Directors the General Assembly’s powers included in paragraph (1) of Article (71) of the Companies Law, for one year
Disagreed
12. Vote to approve 12 related party transactions Agreed
Yamama Cement
Ordinary General
Assembly Meeting
6-Apr-20
1. Vote to approve board report for FY2019 Agreed
2. Vote to approve 2019 FS Agreed
3. Vote to approve auditor report for 2019 Agreed
4. Vote to discharge BoD members from liability for 2019 Agreed
5. Vote on the BoD recommendation to distribute SAR 0.50 as cash dividends for 2019 Agreed
6. Vote on the BoD recommendation to appoint external auditors for 2020 and Q1 2021 Agreed
7. Vote to approve 5 related party transactions Agreed
8. Vote to allow the general manager Mr. Jihad Alrasheed to be involved with other competitors Agreed
9. Vote on the recommendation to pay SAR 2.4 Mn as remuneration to BoD members for FY 2019 Agreed
10. Vote to amend the remuneration policy for BoD, executive management and their committees Agreed
Jarir
Ordinary General
Assembly Meeting
13-Apr-20
1. Vote to approve board report for FY2019 Agreed
2. Vote to approve auditor report for 2019 Agreed
3. Vote to approve 2019 FS Agreed
4. Vote on the BoD recommendation to appoint external auditors for 2020 and Q1 2021 Agreed
5. Vote on the distributed cash dividends for 2019 Agreed
6. Vote on the recommendation to pay SAR 2.65 Mn as remuneration to BoD members for FY 2019 Agreed
7. Vote to discharge BoD members from liability for 2019 Agreed
8. Vote to approve 12 related party transactions Agreed
9. Vote on delegating the BoD to distribute cash dividends for 2020 on bi-annual or quarterly basis Agreed
Bank Aljazira
Ordinary General
Assembly Meeting
15-Apr-20
1. Vote to approve board report for FY2019 Agreed
2. Vote to approve 2019 FS Agreed
MORGAN STANLEY SAUDI EQUITY FUND ]
Annual Report | 31 DECEMBER 2020
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3. Vote to approve external auditor’s report for 2019 Agreed
4. Vote to discharge BoD members from liability for 2019 Agreed
5. Vote on the BoD recommendation to appoint external auditors for 2020 Agreed
6. Vote on the BoD recommendation to distribute SAR 0.30 for H2 2019 Agreed
7. Vote to approve 2 related party transactions Agreed
Care
Ordinary General
Assembly Meeting
15-Apr-20
1. Vote to approve board report for FY2019 Agreed
2. Vote to approve auditor report for 2019 Agreed
3. Vote to approve 2019 FS Agreed
4. Vote to approve 2 related party transactions Agreed
5. Vote on the BoD recommendation to appoint external auditors for 2020 and Q1 2021 Agreed
6. Vote on the BoD recommendation to distribute SAR 2.00 as cash dividends for 2019 Agreed
7. Vote on the recommendation to pay SAR 1.9 Mn as remuneration to BoD members for FY 2019 Agreed
8. Vote to discharge BoD members from liability for 2019 Agreed
9. Vote on delegating the BoD for the authority of the OGM with authority mentioned in Paragraph (1) of Article 71 of the Companies Law
Disagreed
SIIG
Ordinary General
Assembly Meeting
15-Apr-20
1. Vote to approve 2019 FS Agreed
2. Vote to approve auditor report for 2019 Agreed
3. Vote to approve board report for FY2019 Agreed
4. Vote to discharge BoD members from liability for 2019 Agreed
5. Vote on the distributed cash dividends for 2019 Agreed
6. Vote to pay SAR 1.8 Mn as remuneration to BoD members for FY 2019 Agreed
7. Vote to appoint external auditors for 2020 and Q1 2021 Agreed
8. Vote on delegating the BoD to distribute cash dividends for 2020 on bi-annual or quarterly basis Agreed
9. Vote to update the Company’s corporate governance charter Agreed
Petrochem
Ordinary General
Assembly Meeting
16-Apr-20
1. Vote to approve 2019 FS Agreed
2. Vote to approve auditor report for 2019 Agreed
3. Vote to approve board report for 2019 Agreed
4. Vote on the BoD recommendation to appoint external auditors for 2020 and Q1 2021 Agreed
5. Vote to discharge BoD members from liability for 2019 Agreed
6. Vote on the BoD recommendation to distribute SAR 0.50 for 2019 Agreed
7. Vote to pay SAR 1.6 Mn as remuneration to BoD members for FY 2019 Agreed
8. Vote to approve a related party transaction Agreed
9. Vote on delegating the BoD to distribute cash dividends for 2020 on bi-annual or quarterly basis Agreed
10. Vote to update the nomination and remuneration committee charter Agreed
11. Vote to update the executive committee charter Agreed
Arriyadh Development
Co.
Ordinary General
Assembly Meeting
19-Apr-20
1. Vote to approve board report for 2019 Agreed
2. Vote to approve auditor report for 2019 Agreed
3. Vote to approve 2019 FS Agreed
4. Vote to appoint external auditors for 2020 and Q1 2021 Agreed
5. Vote on BoD recommendation to appoint Mr. Abdullah Al Bahouth as an independent BoD member Agreed
6. Vote on the BoD resolution to appoint Mr. Abdullah Al Bahouth as a member of the audit committee Agreed
7. Vote to discharge BoD members from liability for 2019 Agreed
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8. Vote to pay SAR 4 Mn as remuneration to BoD members for FY 2019 Agreed
9. Vote on the distributed cash dividend for H1 2019 Agreed
10. Vote on the BoD recommendation to distribute SAR 0.50 for H2 2019 Agreed
11. Vote on delegating the BoD to distribute cash dividends for 2020 on bi-annual or quarterly basis Agreed
Bahri
Ordinary General
Assembly Meeting
20-Apr-20
1. Vote to approve board report for 2019 Agreed
2. Vote to approve 2019 FS Agreed
3. Vote to approve auditor report for 2019 Agreed
4. Vote to appoint external auditors for 2020 and Q1 2021 Agreed
5. Vote to discharge BoD members from liability for 2019 Agreed
6. Vote on the BoD recommendation to distribute SAR 1.00 for H2 2019 Agreed
7. Vote on delegating the BoD to distribute cash dividends for 2020 on bi-annual or quarterly basis Agreed
8. Vote to increase the audit committee members from 3 members to 4 members, and appoint Mr. Yassir Al Qadhi to be an independent BoD member and a member of the audit committee
Agreed
Seera
Ordinary General
Assembly Meeting
20-Apr-20
1. Vote to approve board report for 2019 Agreed
2. Vote to approve external auditor report for 2019 Agreed
3. Vote to approve 2019 FS Agreed
4. Vote to appoint external auditors for 2020 and Q1 2021 Agreed
5. Vote to discharge BoD members from liability for 2019 Agreed
6. Vote to approve 4 related party transactions Agreed
7. Voting on the delegation of authorization powers stipulated in paragraph (1) of Article 71 of the Companies Law from general assembly to the BoD for one year
Disagreed
SABB
Ordinary General
Assembly Meeting
22-Apr-20
1. Vote to approve board report for 2019 Agreed
2. Vote to approve 2019 FS Agreed
3. Vote to approve auditor report for 2019 Agreed
4. Vote to discharge BoD members from liability for 2019 Agreed
5. Vote on the BoD recommendation to distribute SAR 0.60 for H2 2019 Agreed
6. Vote to appoint external auditors for 2020 Agreed
7. Vote to pay SAR 4.11 Mn as remuneration to BoD members for FY 2019 Agreed
8. Vote on delegating the BoD to distribute cash dividends for 2020 on bi-annual or quarterly basis Agreed
9. Vote to increase the audit committee members to five from three, and appoint Mr. Stuart Gulliver and Mr. Andrew Jackson (independent members) as audit committee members
Agreed
10. Vote to amend the nomination and remuneration committee charter Agreed
11. Vote to approve 6 related party transactions Agreed
12. Voting on the delegation of authorization powers stipulated in paragraph (1) of Article 71 of the Companies Law from general assembly to the BoD for one year
Disagreed
Mouwasat
Ordinary General
Assembly Meeting
22-Apr-20
1. Vote to approve board report for 2019 Agreed
2. Vote to approve external auditor report for 2019 Agreed
3. Vote to approve 2019 FS Agreed
4. Vote to appoint external auditors for 2020 and Q1 2021 Agreed
5. Vote on the BoD recommendation to distribute SAR 2.00 as cash dividends for 2019 Agreed
6. Vote to pay SAR 3.15 Mn as remuneration to BoD members for FY 2019 Agreed
7. Vote to approve 6 related party transactions Agreed
8. Vote to allow BoD member Mr. Sami Alabdulkarim to be involved with other competitors Agreed
9. Vote to allow BoD member Mr. Nasser Al Subaie to be involved with other competitors Agreed
10. Vote to allow BoD member Mr. Mohammed Al Salim to be involved with other competitors Agreed
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Annual Report | 31 DECEMBER 2020
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11. Vote to discharge BoD members from liability for 2019 Agreed
Alrajhi Takaful
Ordinary General
Assembly Meeting
26-Apr-20
1. Vote to approve board report for 2019 Agreed
2. Vote to approve auditor report for 2019 Agreed
3. Vote to approve 2019 FS Agreed
4. Vote to discharge BoD members from liability for 2019 Agreed
5. Vote to pay SAR 1.11 Mn as remuneration to BoD members for FY 2019 Agreed
6. Vote to appoint external auditors for 2020 and Q1 2021 Agreed
7. Vote on the BoD resolution to appoint Mr. Buleihid bin Buleihid – as an independent BoD member Agreed
8. Vote to approve 14 related party transactions Agreed
Savola Group
Extraordinary General
Assembly Meeting
29-Apr-20
1. Vote to approve auditor report for 2019 Agreed
2. Vote to approve 2019 FS Agreed
3. Vote to approve board report for 2019 Agreed
4. Vote to discharge BoD members from liability for 2019 Agreed
5. Vote to pay SAR 2.15 Mn as remuneration to BoD members for FY 2019 Agreed
6. Vote on the BoD recommendation to distribute SAR 0.30 as cash dividends for 2019 Agreed
7. Vote to approve 20 related party transactions Agreed
8. Vote to increase the audit committee members to five from three, and appoint Mr. Mohammed Alissa (non-executive board member) and Mr. Bader Al Rabiah (independent board member) as audit committee members
Agreed
9. Vote to amend the remuneration an nomination committee charter Agreed
10. Vote to authorize the share repurchase program of up to 700,000 shares to be allocated to the employee share scheme
Agreed
SACO
Ordinary General
Assembly Meeting
30-Apr-20
1. Vote to approve board report for 2019 Agreed
2. Vote to approve auditor report for 2019 Agreed
3. Vote to approve 2019 FS Agreed
4. Vote to discharge BoD members from liability for 2019 Agreed
5. Vote to appoint external auditors for 2020 and Q1 2021 Agreed
6. Vote on the distributed cash dividend for H1 2019 and vote to not distribute dividends for H2 2019 Agreed
7. Vote on delegating the BoD to distribute cash dividends for 2020 on bi-annual or quarterly basis Agreed
8. Vote to approve 2 related party transactions Agreed
9. Vote to pay SAR 1.8 Mn as remuneration to BoD members for FY 2019 Agreed
10. Vote on the board recommendation to appoint Mr. Sameer Baissa as an independent BoD member Agreed
Leejam Sports Co.
Extraordinary General
Assembly Meeting
30-Apr-20
1. Vote to approve board report for 2019 Agreed
2. Vote to approve auditor report for 2019 Agreed
3. Vote to approve 2019 FS Agreed
4. Vote to discharge BoD members from liability for 2019 Agreed
5. Vote to pay SAR 3.1 Mn as remuneration to BoD members for FY 2019 Agreed
6. Vote to appoint external auditors for 2020 and Q1 2021 Agreed
7. Vote on the distributed cash dividends for Q1, Q2 and Q3 2019 Agreed
8. Vote to approve 2 related party transactions Agreed
9. Vote on authorizing the BoD the power of license included in section (1) of article (71) of the companies law
Disagreed
10. Vote on delegating the BoD to distribute cash dividends for 2020 on bi-annual or quarterly basis Agreed
11. Vote to amend articles 3, 22 and 50 of the company’s bylaws Agreed
NADEC Extraordinary
General 5-May-20 1. Vote to approve auditor report for 2019 Agreed
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Annual Report | 31 DECEMBER 2020
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Assembly Meeting 2. Vote to approve 2019 FS Agreed
3. Vote to approve board report for 2019 Agreed
4. Vote to discharge BoD members from liability for 2019 Agreed
5. Vote to pay SAR 1.56 Mn as remuneration to BoD members for FY 2019 Agreed
6. Vote to approve audit committee report for 2019 Agreed
7. Vote to appoint external auditor for 2020 and Q1 2021 Agreed
8. Vote on the BoD recommendation to increase the company’s capital by 20%, through issuance of bonus shares (1:5)
Agreed
9. Vote on the BoD recommendation to appoint Abdullatif Alrajhi as a non-executive BoD member. Agreed
10. Vote to approve the standards of engagement of BoD members with other companies/competitors Agreed
11. Voting on the delegation of authorization powers stipulated in paragraph (1) of Article 71 of the Companies Law from general assembly to the BoD for one year
Disagreed
12. Vote to amend the audit committee charter Agreed
13. Vote to amend articles 22, 23, 24, 25, 36, 47, 48 and 51 of the Company’s bylaws Agreed
14. Vote to approve 4 related party transactions Agreed
15. Vote to allow BoD Eng. Ibrahim Abu Oubah to be involved with other competitor companies Agreed
Extra
Extraordinary General
Assembly Meeting
5-May-20
1. Vote to approve board report for 2019 Agreed
2. Vote to approve auditor report for 2019 Agreed
3. Vote to approve 2019 FS Agreed
4. Vote to discharge BoD members from liability for 2019 Agreed
5. Vote on the distributed cash dividends for H2 2018 Agreed
6. Vote on the distributed cash dividends for H1 and H2 2019 Agreed
7. Vote to appoint external auditor for 2020 and Q1 2021 Agreed
8. Vote on delegating the BoD to distribute cash dividends for 2020 on a bi-annual or quarterly basis Agreed
9. Vote on the BoD recommendation to increase the company’s capital by 20%, through issuance of bonus shares (1:5)
Agreed
10. Vote to amend articles 7, 8 and 17 of the Company’s bylaws Agreed
11. Voting on the delegation of authorization powers stipulated in paragraph (1) of Article 71 of the Companies Law from general assembly to the BoD for one year
Disagreed
12. Vote to approve 15 related party transactions Agreed
13. Vote on Extra to buy up to 100,000 shares to be allocated to the employee share scheme Disagreed
Maharah
Ordinary General
Assembly Meeting
6-May-20
1. Vote to approve board report for 2019 Agreed
2. Vote to approve auditor report for 2019 Agreed
3. Vote to approve 2019 FS Agreed
4. Vote to appoint external auditors for 2020 and Q1 2021 Agreed
5. Vote to discharge BoD members from liability for 2019 Agreed
6. Vote on delegating the BoD to distribute cash dividends for 2020 on bi-annual or quarterly basis Agreed
7. Vote to amend the remuneration policy for the BoD and committees Agreed
8. Vote to amend the audit committee charter Agreed
9. Vote on BoD resolution to appoint Dr. Abdulkarim Al Nujeedi as an executive member in the board Agreed
10. Vote on BoD resolution to appoint Mr. Haitham Al Milhim as an independent member in the board Agreed
11. Voting on the delegation of authorization powers stipulated in paragraph (1) of Article 71 of the Companies Law from general assembly to the BoD for one year
Disagreed
12. Vote to approve 3 related party transactions Agreed
13. Vote to pay SAR 3.91 Mn as remuneration to BoD members for FY 2019 Agreed
SULAIMAN ALHABIB
Extraordinary General
10-May-20 1. Vote to approve board report for 2019 Agreed
MORGAN STANLEY SAUDI EQUITY FUND ]
Annual Report | 31 DECEMBER 2020
14
Assembly Meeting 2. Vote to approve external auditor’s report for 2019 Agreed
3. Vote to approve 2019 FS Agreed
4. Vote to appoint external auditor for 2020 and Q1 2021 Agreed
5. Vote on the BoD recommendation to appoint Dr. Nabeel Alamudi as an independent BoD member Agreed
6. Vote to pay SAR 1.8 Mn as remuneration to BoD members for FY 2019 Agreed
7. Vote on delegating the BoD to distribute cash dividends for 2020 on a bi-annual or quarterly basis Agreed
8. Vote to discharge BoD members from liability for 2019 Agreed
9. Voting on the delegation of authorization powers stipulated in paragraph (1) of Article 71 of the Companies Law from general assembly to the BoD for one year
Disagreed
10. Vote on the competing business standards Agreed
11. Vote to amend articles 2, 13, 20, 21, 25, 35, 38, 39, 50, 51 and 57 of the Company’s bylaws Agreed
12. Vote to approve 10 related party transactions Agreed
13. Vote on the participation of the Chairman Dr. Sulaiman Al Habib in a competing business to the Company activities
Agreed
14. Vote on the participation of the BoD member Mr. Saleh Al Habib in a competing business to the Company activities
Agreed
Saudi Fransi Bank
Extraordinary General
Assembly Meeting
13-May-20
1. Vote to approve board report for 2019 Agreed
2. Vote to approve auditor report for 2019 Agreed
3. Vote to approve 2019 FS Agreed
4. Vote on the distributed cash dividends for H1 2019 Agreed
5. Vote on the BoD recommendation to distribute SAR 1.00 as cash dividends for 2019 Agreed
6. Vote on delegating the BoD to distribute cash dividends for 2020 on a bi-annual or quarterly basis Agreed
7. Vote to discharge BoD members from liability for 2019 Agreed
8. Vote to pay SAR 7.9 Mn as remuneration to BoD members for FY 2019 Agreed
9. Voting on the delegation of authorization powers stipulated in paragraph (1) of Article 71 of the Companies Law from general assembly to the BoD for one year
Disagreed
10. Vote to appoint external auditor for Q1 2021 Agreed
11. Vote to approve 7 related party transactions Agreed
12. Vote on BSFR to buy up to SAR 60 Mn shares to be allocated to the employee long-term incentive plan
Disagreed
SACO
Ordinary General
Assembly Meeting
20-May-20
1. Vote to elect BoD members Agreed
2. Vote on the formation of audit committee, approve its charter and the remuneration of its members Agreed
Yanbu Cement
Ordinary General
Assembly Meeting
3-Jun-20
1. Vote to approve board report for 2019 Abstained
2. Vote to approve 2019 FS Abstained
3. Vote on the BoD recommendation to distribute SAR 1.25 for H2 2019 Abstained
4. Vote to discharge BoD members from liability for 2019 Abstained
5. Vote to approve auditor report for 2019 Abstained
6. Vote to appoint external auditors for 2020 and Q1 2021 Abstained
7. Vote on delegating the BoD to distribute cash dividends for 2020 on bi-annual basis Abstained
Zain KSA
Ordinary General
Assembly Meeting
3-Jun-20
1. Vote to approve board report for 2019 Agreed
2. Vote to approve auditor report for 2019 Agreed
3. Vote to approve 2019 FS Agreed
4. Vote to appoint external auditors for 2020 and Q1 2021 Agreed
5. Vote to approve 4 related party transactions Agreed
6. Vote to discharge BoD members from liability for 2019 Agreed
7. Vote to pay SAR 3.68 Mn as remuneration to BoD members for FY 2019 Agreed
MORGAN STANLEY SAUDI EQUITY FUND ]
Annual Report | 31 DECEMBER 2020
15
SABIC
Extraordinary General
Assembly Meeting
10-Jun-20
1. Vote to amend articles 2- 4, 12- 14, 16-20, 23, 26, 28, 29, 33-35, 37, 38, 40, 41, 43 and 46 of SABIC’s bylaws
Agreed
2. Vote to amend articles 15 and 36 of SABIC’s bylaws Disagreed
2. Vote to delete articles 8, 22 and 24 of SABIC’s bylaws Agreed
4. Vote on rearranging and numbering the articles of SABIC’s bylaws Agreed
5. Vote to add articles 34-37 to SABIC’s bylaws Agreed
6. Vote to amend remuneration policy for board members, committee members, and executive committee
Disagreed
Ataa
Ordinary General
Assembly Meeting
15-Jun-20
1. Vote to appoint external auditors for 2020 and Q1 2021 Agreed
2. Vote on amending the remuneration and nomination Committee Charter Agreed
3. Vote to amend remuneration policy for board members, committee members, and executive committee
Agreed
Budget Saudi
Ordinary General
Assembly Meeting
15-Jun-20
1. Vote to approve board report for 2019 Agreed
2. Vote to approve auditor report for 2019 Agreed
3. Vote to approve 2019 FS Agreed
4 .Vote to appoint external auditors for 2020 Agreed
5..Vote to appoint external auditors for 2021 Agreed
6. Vote to pay SAR 2.53 Mn as remuneration to BoD members for FY 2019 Disagreed
7. Vote to approve 2 related party transactions Agreed
8. Vote to allow BoD member Mr. Alaa Sami to be involved with other competitors Agreed
9. Vote on delegating the BoD to distribute cash dividends for 2020 on bi-annual basis Agreed
10. Vote on the distributed cash dividends for H1 2019 Agreed
11. Vote on the BoD recommendation to distribute SAR 0.50 for H2 2019 Agreed
12. Vote to discharge BoD members from liability for 2019 Agreed
SADAFCO
Extraordinary General
Assembly Meeting
16-Jun-20
1. Vote to approve board report for year ended on 31 Mar 2020 Agreed
2. Vote to approve auditor report for year ended on 31 Mar 2020 Agreed
3. Vote to approve financial statement for year ended on 31 Mar 2020 Agreed
4. Vote on the BoD recommendation to distribute SAR 2.50 as cash dividends for H2 of the year ended on 31 Mar 2020
Agreed
5. Vote on the distributed cash dividends for H1 of the year ended on 31 Mar 2020 Agreed
6. Vote on delegating the BoD to distribute cash dividends for the year ended om 31 Mar 2021 on a bi-annual or quarterly basis
Agreed
7. Vote to appoint external auditor for Q2-Q4 2020 and Q1 2021 Agreed
8. Vote to discharge BoD members from liability for the year ended on 31 Mar 2020 Agreed
9. Vote to pay SAR 2.8 Mn as remuneration to BoD members for the year ended on 31 Mar 2020 Agreed
10. Vote to approve 4 related party transactions Agreed
11. Vote to amend article 20 of the Company’s bylaws Agreed
Aldrees
Ordinary General
Assembly Meeting
16-Nov-20
1. Vote to elect BoD members Abstained
2. Vote on the formation of audit committee, approve its charter and the remuneration of its members Agreed
SABIC Agri-Nutrients
Ordinary General
Assembly Meeting
18-Nov-20
1. Vote on the BoD recommendation to increase the company’s capital by 14.25%, through rights issue Agreed
2. Vote to change the company’s name to SABIC Agri Nutrients – subject to the approval of the first agenda
Agreed
3. Vote to amend articles 1, 5, 6, 16, 17, 19, 20, 24, 30 and 34 of the company’s bylaws Agreed
4. Vote to approve additional remuneration of auditors in relation to the acquisition and Q2, Q3 and Q4 of 2020 and Q1 of 2021
Agreed
5. Vote to approve remuneration and nomination committee charter Agreed
SADAFCO Extraordinary
General 18-Nov-20 1. Vote to purchase of up to 2,749,750 company shares to be used as treasury shares Agreed
MORGAN STANLEY SAUDI EQUITY FUND ]
Annual Report | 31 DECEMBER 2020
16
Assembly Meeting 2. Vote to hold the purchased treasury shares for a period up to 5 years Agreed
3. Vote to elect BoD members Abstained
Southern Province Cement
Ordinary General Assembly Meeting
24-Dec-20 1. Vote on the election of BoD members Abstained
Saudi Electricity
Extraordinary General
Assembly Meeting
27-Dec-20
1. Vote to elect BoD members Abstained
2. Vote to approve SAR 3.35 billion due to Saudi Aramco as a debt in favor to The Ministry of Finance and approve related resolutions
Agreed
3. Vote on establishing and allocating a consensual reserve to pay profit rate of Mudarabah instrument, in accordance with percentage and mechanism mentioned in that agreement
Agreed
4. Vote to authorize the BoD to transfer funds from the company’s retained earnings to form the reserve Agreed
5. Vote to authorize the BoD to use the consensual reserve in paying the Mudarabah instrument profit rate
Agreed
Bank Aljazira
Extraordinary General
Assembly Meeting
30-Dec-20
1. Vote to amend the Audit Committee Charter Agreed
2. Vote to amend the Nomination and Compensation Committee Charter. Agreed
3. Vote on the BoD resolution to appoint Khalifa Almulhem as an independent board of director Agreed
4. Vote to authorize the BoD to distribute interim dividends on semi-annual or quarterly basis for 2021 Agreed
5. Voting on the delegation of authorization powers stipulated in paragraph (1) of Article 71 of the Companies Law from general assembly to the BoD for one year
Agreed
6. Vote to amend the Bank’s Compensation Policy for members of the Board, Board Committees and senior executives
Agreed
7. Vote to transfer an amount of SAR 68 million existing as a general reserve to the retained earnings Agreed
8. Vote to amend articles 3, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 17, 18, 19, 20, 21, 22, 24, 28, 29, 31, 32, 33, 37, 38, 39, 46, 48, 49, and 51 of the Bank’s bylaws
Agreed
9. Vote to add articles 4 and 26 to the Bank’s bylaws Agreed
6. Fund Board Resolutions
In 2020, the Fund’s board held its meetings on 14 April and 17 of November and the following
resolutions were approved:
Board meeting held on 14 April 2020:
The minutes of the previous board meeting were ratified;
Review the Fund’s financial report for the period ended 31 Dec 2019;
Review the performance and risk metrics of the Fund;
Board meeting held on 17 November 2020:
The minutes of the previous board meeting were ratified;
Review the Fund’s financial report for the period ended 30 Jun 2020;
Review and approval of auditor engagement letter and new audit fee;
Review the performance and risk metrics of the Fund
MORGAN STANLEY SAUDI EQUITY FUND ]
Annual Report | 31 DECEMBER 2020
17
C. Fund Manager
1. A review of the investment activities during the period.
Portfolio Activity
In this section we discuss some of the portfolio activities. During 2020, we increased our
allocation to the construction material, which remains a play on the housing market on the back
of strong mortgage lending growth. We also increased exposure to the healthcare sector, which
offers growth opportunities as hospitals continue to expand. On the other hand, we reduced
allocation to the banking sector which is negatively impacted by the declining interest rate, which
is expected to drag the margins lower in short to medium term. The Fund carries an underweight
position on the largest two sectors by index weight namely Banks and Chemicals
2. A write-up of the investment fund’s performance during the period.
Performance Review
During the calendar year 2020, the Fund returned 9.09% (net of fees), while the benchmark
(TASI) rose by 3.58%. Both Stock selection and allocation contributed positively to returns. The
largest positive contributions were from the Healthcare sector, followed by the Food & Beverage
and Banking sectors. On the other hand, the Consumer Services and Consumer Durable sectors
contributed negatively.
3. Details of any material changes made during the period.
There were no material changes during the period.
4. Any other information that would enable unitholders to make an informed judgment about
the fund’s activities during the period.
The ongoing charges figure incorporates a fee reduction effective 1 June 2018 by way of a
waiver of 0.50% until 31 December 2021. This fee reduction will expire on 1 January 2022. The
reduced management fee is 1.25% per annum.
5. A statement on any special commission received by the fund manager during the period.
No special commission was received by the fund manager during the period.
6. Any other data and other information required by these Regulations to be included in this
report.
There is no other data or information required by the regulation to add to the report
MORGAN STANLEY SAUDI EQUITY FUND ]
Annual Report | 31 DECEMBER 2020
18
Custodian
Brief description of its duties and responsibilities,
The Custodian is a service provider to the Fund in line with articles 22 to 29 of the Investment Fund
Regulations issued by the Capital Market Authority. Please find below a brief summary of the
responsibilities of the custodian:
Opening of segregated accounts for the Fund in the name of the custodian for the benefit of the
specific Fund;
Safekeeping and periodic reconciliation of assets under custody;
Movement of Funds for Fund's investment and operational purposes based on Fund Manager
instructions;
Settlement of trades after execution and handling of corporate actions in the Fund portfolio based
on Fund Manager instructions;
Providing periodic statements to the Fund Manager and the Fund’s auditors; and
Complying with client money rules and Investment Account Instructions issued by the CMA.
The Custodian confirms that the above mentioned responsibilities have been duly complied.
The Custodian does not have any opinion on the below aspects:
- Issued, transferred and redeemed the units in accordance with the provisions of the
Investment Funds Regulations and the fund’s Terms and Conditions;
- Valued and calculated the price of units in accordance with the provisions of the Investment
Funds Regulations, the fund’s Terms and Conditions and the Information memorandum;
- Breached any of the investment restrictions, limitations and borrowing powers applicable to
the Investment Fund Regulations.
MORGAN STANLEY SAUDI EQUITY FUND ]
Annual Report | 31 DECEMBER 2020
19
Auditor
The Audited Financial Statements and Audit Opinion for the year ended in 31 December 2020 are as
follows:
Opinion
“We have audited the financial statements of Morgan Stanley Saudi Equity Fund (the “Fund”) managed by
Morgan Stanley Saudi Arabia Company (the “Fund Manager”), which comprise the statement of financial
position as at 31 December 2020, and the statement of comprehensive income, statement of cash flows
and statement of changes in equity for the year then ended, and notes to the financial statements,
including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial
position of the Fund as at 31 December 2020, and its financial performance and its cash flows for the year
then ended in accordance with International Financial Reporting Standards that are endorsed in the
Kingdom of Saudi Arabia and other standards and pronouncements that are endorsed by the Saudi
Organization for Certified Public Accountants.”
Morgan Stanley Saudi Equity Fund
(Managed By Morgan Stanley Saudi Arabia
Company)
FINANCIAL STATEMENTS AND INDEPENDENT
AUDITOR’S REPORT
31 DECEMBER 2020
Morgan Stanley Saudi Equity Fund
(Managed by Morgan Stanley Saudi Arabia Company)
The accompanying notes 1 to 16 form an integral part of these financial statements.
3
STATEMENT OF FINANCIAL POSITION
As at 31 December 2020
Notes
31 December 2020 SR
31 December 2019 SR
Assets
Bank balance 1,663,600 3,867,779
Financial assets at fair value through profit or loss (FVTPL) 7 47,608,640 60,619,360
Other assets 13,211 320,553
──────── ────────
Total assets 49,285,451 64,807,692
──────── ────────
Liabilities
Management fee payable 9 159,916 191,791 Accrued expenses 8 93,837 58,834
Other payables 151,469 -
──────── ────────
Total liabilities 405,222 250,625
──────── ────────
Equity
Net assets attributable to unitholders of redeemable units 48,880,229 64,557,067
════════ ════════
Redeemable units in issue 108,635 156,515
════════ ════════
Net asset value attributable to per unit 449.95 412.47
════════ ════════
Morgan Stanley Saudi Equity Fund
(Managed by Morgan Stanley Saudi Arabia Company)
The accompanying notes 1 to 16 form an integral part of these financial statements.
4
STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 December 2020
2020 2019 Notes SR SR Income
Net unrealised (loss) gain on financial assets at FVTPL (570,485) 3,261,716
Net realised gain on financial assets at FVTPL 4,972,665 3,224,740
Dividend income 1,497,519 2,577,491 ──────── ────────
5,899,699 9,063,947
──────── ────────
Expenses
Management fees 9 706,970 795,671
Other expenses 10 383,427 340,786
──────── ────────
1,090,397 1,136,457 ──────── ──────── Profit for the year 4,809,302 7,927,490
Other comprehensive income - - ──────── ──────── Total comprehensive income 4,809,302 7,927,490 ════════ ════════
Morgan Stanley Saudi Equity Fund
(Managed by Morgan Stanley Saudi Arabia Company)
The accompanying notes 1 to 16 form an integral part of these financial statements.
5
STATEMENT OF CASH FLOWS
Year ended 31 December 2020
2020 2019 SR SR Operating activities Profit for the year 4,809,302 7,927,490 Adjustments for: Net unrealised loss (gain) on financial assets at FVTPL 570,485 (3,261,716) ──────── ────────
5,379,787 4,665,774 Working capital adjustments: ──────── ────────
Decrease (increase) in financial assets at FVTPL 12,440,235 (8,258,228) Decrease (increase) in other assets 307,342 (320,553) (Decrease) increase in management fee payable (31,875) 69,015 Increase (decrease) in accrued expenses 35,003 (10,627) Increase in other liabilities 151,469 - ──────── ────────
12,902,174 (8,520,393) ──────── ────────
Net cash flows from (used in) operating activities 18,281,961 (3,854,619) ──────── ────────
Financing activities
Proceeds from issuances of units 1,200,000 13,280,500
Payments on redemption of units (21,686,140) (6,462,170) ──────── ────────
Net cash flows (used in) from financing activities (20,486,140) 6,818,330 ──────── ────────
Net (decrease) increase in bank balance during the year (2,204,179) 2,963,711
Bank balance at the beginning of the year 3,867,779 904,068 ──────── ────────
Bank balance at the end of the year 1,663,600 3,867,779 ════════ ════════
Morgan Stanley Saudi Equity Fund
(Managed by Morgan Stanley Saudi Arabia Company)
The accompanying notes 1 to 16 form an integral part of these financial statements.
6
STATEMENT OF CHANGES IN EQUITY Year ended 31 December 2020
2020 2019
SR SR
Net asset value (equity) at the beginning of the year 64,557,067 49,811,247
Profit for the year 4,809,302 7,927,490
Other comprehensive income for the year - - ──────── ────────
Total comprehensive income for the year 4,809,302 7,927,490
──────── ────────
Issue of units during the year 1,200,000 13,280,500
Redemption of units during the year (21,686,140) (6,462,170)
──────── ────────
Net change from unit transactions (20,486,140) 6,818,330
──────── ────────
Net asset value (equity) at the end of the year 48,880,229 64,557,067
════════ ════════
REDEEMABLE UNITS TRANSACTIONS
Transactions in redeemable units for the year ended 31 December are summarised as follows:
2020 2019 Units Units
Units at the beginning of the year 156,515 139,187
──────── ────────
Issue of units during the year 2,907 33,761
Redemption of units during the year (50,787) (16,433) ──────── ──────── Net change in units (47,880) 17,328 ──────── ──────── Units at the end of the year 108,635 156,515 ════════ ════════
Morgan Stanley Saudi Equity Fund
(Managed by Morgan Stanley Saudi Arabia Company)
NOTES TO THE FINANCIAL STATEMENTS At 31 December 2020
7
1 INCORPORATION AND ACTIVITES
Morgan Stanley Saudi Equity Fund (the “Fund”) is an open ended investment fund created by agreement between
Morgan Stanley Saudi Arabia Company (the “Fund Manager”) and investors (the “Unitholders”) in the Fund. The
objective of the Fund is to seek long-term capital appreciation and returns from investments in the Saudi equity market.
The Fund has appointed HSBC Saudi Arabia Limited (the “Administrator”) to act as its custodian, administrator and registrar. The fees for the custodian and administrator’s services are paid by the Fund.
The approval from the Capital Market Authority (the “CMA”) for the establishment of the Fund was obtained via
letter no. RH/639 dated 15 Sha’aban 1429H (corresponding to 16 August 2008). The Fund commenced operations
on 7 January 2009.
The books and records of the Fund are maintained in Saudi Riyals (“SR”).
The Fund’s Manager registered office is P.O. Box 66633, Riyadh 11586, Kingdom of Saudi Arabia.
2 REGULATING AUTHORITY
The Fund is governed by the Investment Fund Regulations (the “Regulations”) issued by the CMA on 3 Dhul Hijja
1427H (corresponding to 24 December 2006) and effective from 6 Safar 1438H (corresponding 6 November 2016)
by the New Investment Fund Regulations (the “Amended Regulations”) published by the Capital Market Authority
on 16 Sha’aban 1437H (corresponding to 23 May 2016), detailing requirements for all funds within the Kingdom of
Saudi Arabia.
3 BASIS OF PREPARATION
These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
that are endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements that are issued by the Saudi
Organization for Certified Public Accountants (“IFRS as endorsed in KSA”).
These financial statements have been prepared on a historical cost basis, except for financial assets held at fair value
through profit or loss that have been measured at fair value. The financial statements are presented in Saudi Riyal (“SR”)
which is the functional currency of the Fund.
4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial instruments
(i) Classification The Fund classifies its financial assets and financial liabilities at initial recognition into the categories of financial assets
and financial liabilities discussed below.
In applying that classification, a financial asset or financial liability is considered to be held for trading if:
(a) It is acquired or incurred principally for the purpose of selling or repurchasing it in the near term or
(b) On initial recognition, it is part of a portfolio of identified financial instruments that are managed together and for
which, there is evidence of a recent actual pattern of short-term profit-taking or
(c) It is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging
instrument)
Financial assets
The Fund classifies its financial assets as subsequently measured at amortised cost or measured at fair value through profit or loss on the basis of both:
► The entity’s business model for managing the financial assets ► The contractual cash flow characteristics of the financial asset
Morgan Stanley Saudi Equity Fund
(Managed by Morgan Stanley Saudi Arabia Company)
NOTES TO THE FINANCIAL STATEMENTS (continued) At 31 December 2020
8
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Financial instruments (continued) Financial assets (continued)
• Financial assets measured at amortised cost
A debt instrument is measured at amortised cost if it is held within a business model whose objective is to
hold financial assets in order to collect contractual cash flows and its contractual terms give rise on specified
dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
• Financial assets measured at fair value through profit or loss (FVTPL)
A financial asset is measured at fair value through profit or loss if:
i. Its contractual terms do not give rise to cash flows on specified dates that are solely payments of
principal and interest on the principal amount outstanding (SPPI); and
ii. It is not held within a business model whose objective is either to collect contractual cash flows,
or to both collect contractual cash flows and sell;
OR
iii. At initial recognition, it is irrevocably designated as measured at FVTPL when doing so eliminates
or significantly reduces a measurement or recognition inconsistency that would otherwise arise
from measuring assets or liabilities or recognising the gains and losses on them on different bases.
The Fund includes in this category:
• Instruments held for trading. This category includes equity instruments which are acquired
principally for the purpose of generating a profit from short-term fluctuations in price. Financial liabilities
• Financial liabilities measured at fair value through profit or loss (FVTPL)
A financial liability is measured at FVTPL if it meets the definition of held for trading. The Fund does not
hold any financial liabilities measured at FVTPL.
• Financial liabilities measured at amortised cost
This category includes all financial liabilities, other than those measured at FVTPL. (ii) Recognition
The Fund recognises a financial asset or a financial liability when it becomes a party to the contractual provisions of
the instrument.
Purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that
the Fund commits to purchase or sell the asset. (iii) Initial measurement
Financial assets and financial liabilities at FVTPL are recorded in the statement of financial position at fair value.
All transaction costs for such instruments are recognised directly in profit or loss.
Financial assets and liabilities (other than those classified as at FVTPL) are measured initially at their fair value including any directly attributable incremental costs of acquisition or issue.
(iv) Subsequent measurement
After initial measurement, the Fund measures financial instruments which are classified as at FVTPL, at fair value. Subsequent changes in the fair value of those financial instruments are recorded in net gain or loss on financial assets
and liabilities at FVTPL in the statement of comprehensive income. Interest and dividends earned or paid on these
instruments are recorded separately in interest income or expense and dividend income or expense in the statement
of comprehensive income.
Morgan Stanley Saudi Equity Fund
(Managed by Morgan Stanley Saudi Arabia Company)
NOTES TO THE FINANCIAL STATEMENTS (continued) At 31 December 2020
9
4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Financial instruments (continued)
(v) Derecognition
A financial asset (or, where applicable, a part of a financial asset or a part of a group of similar financial assets) is
derecognised where the rights to receive cash flows from the asset have expired, or the Fund has transferred its rights
to receive cash flows from the asset, or has assumed an obligation to pay the received cash flows in full without
material delay to a third party under a pass-through arrangement and the Fund has:
(a) Transferred substantially all of the risks and rewards of the asset or
(b) Neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred
control of the asset.
When the Fund has transferred its right to receive cash flows from an asset (or has entered into a pass-through
arrangement), and has neither transferred nor retained substantially all of the risks and rewards of the asset nor
transferred control of the asset, the asset is recognised to the extent of the Fund’s continuing involvement in the asset.
In that case, the Fund also recognises an associated liability. The transferred asset and the associated liability are
measured on a basis that reflects the rights and obligations that the Fund has retained.
The Fund derecognises a financial liability when the obligation under the liability is discharged, cancelled or expired.
(vi) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position
if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention
to settle on a net basis, or to realise the asset and settle the liability simultaneously. This is generally not the case
with master netting agreements unless one party to the agreement defaults and the related assets and liabilities are
presented gross in the statement of financial position. (vii) Impairment of financial assets
The Fund holds trade receivables with no financing component having maturities of less than 12 months at amortised
cost and, as such, has chosen to apply an approach similar to the simplified approach for expected credit losses (ECL)
to all its trade receivables. Therefore, the Fund does not track changes in credit risk, but instead recognises a loss
allowance based on lifetime ECLs at each reporting date.
The Fund’s approach to ECLs reflects a probability-weighted outcome, the time value of money and reasonable and
supportable information that is available without undue cost or effort at the reporting date about past events, current
conditions and forecasts of future economic conditions.
The Fund uses the provision matrix as a practical expedient to measuring ECLs on trade receivables, based on days
past due for groupings of receivables with similar loss patterns. Receivables are grouped based on their nature. The
provision matrix is based on historical observed loss rates over the expected life of the receivables and is adjusted
for forward-looking estimates.
Impaired debts, together with the associated allowance, are written off when there is no realistic prospect of future
recovery and all collateral has been realised or has been transferred to the Fund. If a previous write-off is later
recovered, the recovery is credited to the credit loss expense.
Commission revenue on impaired financial assets is recognised using the rate of commission used to discount the
future cash flows for the purpose of measuring the impairment loss. Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash on hand and short-term deposits in
banks that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes
in value, with original maturities of three months or less.
Short-term investments that are not held for the purpose of meeting short-term cash commitments and restricted
margin accounts are not considered as ‘cash and cash equivalents’.
Morgan Stanley Saudi Equity Fund
(Managed by Morgan Stanley Saudi Arabia Company)
NOTES TO THE FINANCIAL STATEMENTS (continued) At 31 December 2020
10
4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Cash and cash equivalents (continued)
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as
defined above, net of outstanding bank overdrafts when applicable. Redeemable Units
Redeemable units are classified as equity instruments when:
- The redeemable units entitle the holder to a pro rata share of the Fund’s net assets in the event of the Fund’s
liquidation
- The redeemable units are in the class of instruments that is subordinate to all other classes of instruments
- All redeemable units in the class of instruments that is subordinate to all other classes of instruments have
identical features
- The redeemable units do not include any contractual obligation to deliver cash or another financial asset other
than the holder’s rights to a pro rata share of the Fund’s net assets
- The total expected cash flows attributable to the redeemable units over the life of the instrument are based
substantially on the comprehensive income, the change in the recognised net assets or the change in the fair
value of the recognised and unrecognised net assets of the Fund over the life of the instrument
In addition to the redeemable shares having all of the above features, the Fund must have no other financial instrument
or contract that has:
- Total cash flows based substantially on the comprehensive income, the change in the recognised net assets or
the change in the fair value of the recognised and unrecognised net assets of the Fund
- The effect of substantially restricting or fixing the residual return to the redeemable unitholders
The Fund continuously assesses the classification of the redeemable shares. If the redeemable shares cease to have
all the features, or meet all the conditions set out, to be classified as equity, the Fund will reclassify them as financial
liabilities and measure them at fair value at the date of reclassification, with any differences from the previous
carrying amount recognised in equity. If the redeemable shares subsequently have all the features and meet the
conditions to be classified as equity, the Fund will reclassify them as equity instruments and measure them at the
carrying amount of the liabilities at the date of the reclassification.
The issuance, acquisition and cancellation of redeemable shares are accounted for as equity transactions.
No gain or loss is recognised in the statement of comprehensive income on the purchase, issuance or cancellation of
the Fund’s own equity instruments.
Dividend income
Dividend income is recognised in the statement of comprehensive income when the Fund’s right to receive payment
is established.
Net gain or loss on financial assets and liabilities at fair value through profit or loss (“FVTPL”)
Net gains or losses on financial assets and liabilities at FVTPL are changes in the fair value of financial assets and
liabilities held for trading or designated upon initial recognition as at FVTPL and exclude interest and dividend
income and expenses.
Unrealised gains and losses comprise changes in the fair value of financial instruments for the period and from
reversal of the prior period’s unrealised gains and losses for financial instruments which were realised in the reporting period. Realised gains and losses on disposals of financial instruments classified as at FVTPL are calculated using
the weighted average cost method. They represent the difference between an instrument’s initial carrying amount
and disposal amount, or cash payments or receipts made on derivative contracts (excluding payments or receipts on
collateral margin accounts for such instruments).
Morgan Stanley Saudi Equity Fund
(Managed by Morgan Stanley Saudi Arabia Company)
NOTES TO THE FINANCIAL STATEMENTS (continued) At 31 December 2020
11
4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fee and other expenses
Fee and other expenses are recognized on an accrual basis. Zakat and income tax
Zakat and income tax is the obligation of the unitholders and is therefore not provided in these financial statements. Foreign currency translation
Transactions in foreign currencies are translated into SR at the exchange rate at the dates of the transactions. Foreign
exchange gains and losses arising from translation are included in profit or loss.
Monetary assets and liabilities denominated in foreign currencies are retranslated into SR at the exchange rate at the
reporting date.
Foreign currency differences arising on retranslation are recognised in the statement of comprehensive income as net
foreign exchange gains/losses. 5 SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES The preparation of the Fund’s financial statements requires management to make judgments, estimates and
assumptions that affect the reported amounts recognised in the financial statements. However, uncertainty about these
assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount
of the asset or liability affected in the future periods. Significant areas where management has used estimates, assumptions or exercised judgement are as follows: 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, management is not
aware of any material uncertainties that may cast significant doubt upon the Fund's ability to continue as a going
concern. Therefore, the financial statements continue to be prepared on a going concern basis. Fair value measurement
The Fund measures its investments in financial instruments, such as equity instruments, at fair value at each reporting
date.
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. The fair value measurement is based on the presumption that
the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability
or, in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or
the most advantageous market must be accessible to the Fund. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market
participants act in their economic best interest.
The fair value for financial instruments traded in active markets at the reporting date is based on their quoted price
(bid price for long positions and ask price for short positions), without any deduction for transaction costs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized
within the fair value hierarchy. This is described, as follows, based on the lowest level input that is significant to the
fair value measurement as a whole:
• Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
• Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement
is directly or indirectly observable
• Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
The Fund has only financial assets at FVTPL or loss which is measured at fair values and are classified within level
1 of the fair value hierarchy. Management believes that the fair value of all other financial assets and liabilities at
the reporting date approximate their carrying values owing to their short-term tenure and the fact that these are readily liquid. These are all classified within level 2 of the fair value hierarchy. There were no transfers between
various levels of fair value hierarchy during the current period or prior year.
Morgan Stanley Saudi Equity Fund
(Managed by Morgan Stanley Saudi Arabia Company)
NOTES TO THE FINANCIAL STATEMENTS (continued) At 31 December 2020
12
6 NEW AND AMENDED STANDARDS AND INTERPRETATIONS a) Standards issued and effective during the year The standards and interpretations that were effective in 2020 do not have significant impact on the Fund’s financial
statements. Below is the list of the amended standards and interpretations:
• Amendments to IFRS 3: Definition of a Business
• Amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate Benchmark Reform
• Amendments to IAS 1 and IAS 8 Definition of Material
• Conceptual Framework for Financial Reporting issued on 29 March 2018
• Amendments to IFRS 16 Covid-19 Related Rent Concessions
b) Standards issued but not yet effective There are several standards and interpretations that are issued, but not yet effective, up to the date of issuance of the
Fund’s financial statements. In the opinion of the Board, these standards will have no significant impact on the
financial statements of the Fund. The Fund intends to adopt these standards, if applicable, when they become
effective. Below is the list of the amended standards and interpretations:
• IFRS 17 Insurance Contracts
• Amendments to IAS 1: Classification of Liabilities as Current or Non-current
• Reference to the Conceptual Framework – Amendments to IFRS 3
• Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16
• Onerous Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37
• IFRS 1 First-time Adoption of International Financial Reporting Standards – Subsidiary as a first-time
adopter
• IFRS 9 Financial Instruments – Fees in the ’10 per cent’ test for derecognition of financial liabilities
• IAS 41 Agriculture – Taxation in fair value measurements
7 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS The composition of the portfolio on the last valuation day is summarised below: 31 December 2020
% of market
Cost
Market value
Unrealised gain/(loss)
Description value SR SR SR Sectors
Banks 31.22% 13,040,221 14,861,537 1,821,316
Materials 21.77% 8,762,189 10,363,416 1,601,227
Health Care Equipment & Services 9.68% 3,643,889 4,609,520 965,631
Retailing 9.54% 3,505,509 4,540,444 1,034,935
Energy 5.21% 2,474,009 2,479,039 5,030
Capital Goods 4.12% 1,647,156 1,962,718 315,562
Food and beverages 3.19% 1,050,445 1,519,350 468,905
Consumer Services 2.81% 1,251,528 1,337,974 86,446
REITs 2.37% 981,402 1,125,611 144,209
Transportation 2.29% 1,015,873 1,089,536 73,663
Insurance 2.03% 876,676 968,053 91,377
Commercial & Professional Svc 2.01% 947,948 957,642 9,694
Food & Staples Retailing 1.97% 758,208 939,862 181,654
Utilities 1.79% 868,340 853,938 (14,402) ──────── ───────── ───────── ──────────
100.00% 40,823,393 47,608,640 6,785,247 ════════ ═════════ ═════════ ══════════
Morgan Stanley Saudi Equity Fund
(Managed by Morgan Stanley Saudi Arabia Company)
NOTES TO THE FINANCIAL STATEMENTS (continued) At 31 December 2020
13
7 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (continued)
31 December 2019
% of market
Cost
Market value
Unrealised gain/(loss)
Description value SR SR SR Sectors
Banks 43.60% 22,883,921 26,431,647 3,547,726
Energy 8.87% 4,183,096 5,376,367 1,193,271
Retailing 8.24% 4,691,214 4,994,337 303,123
Materials 7.84% 4,577,924 4,751,919 173,995 Consumer Services 7.54% 3,835,869 4,569,175 733,306
Food and beverages 5.49% 2,767,635 3,329,010 561,375
Health Care Equipment & Services 4.16% 2,486,467 2,519,243 32,776
Insurance 3.20% 1,879,326 1,941,386 62,060
REITs 2.95% 1,375,307 1,788,886 413,579
Real Estate 2.91% 1,725,437 1,765,790 40,353
Commercial & Professional Svc 1.85% 958,860 1,118,697 159,837
Consumer Durables & Apparel 1.70% 1,063,700 1,029,922 (33,778)
Transportation 1.65% 834,872 1,002,981 168,109 ──────── ───────── ───────── ──────────
100.00% 53,263,628 60,619,360 7,355,732 ════════ ═════════ ═════════ ══════════ Investments are listed on the Saudi stock exchange (“Tadawul”). The Fund Manager seeks to limit risk for the Fund by monitoring exposures in each investment sector and individual securities.
8 ACCRUED EXPENSES
31 December 2020 SR
31 December 2019 SR
Accrued audit fees 35,000 30,000
VAT payable 31,663 11,935
Accrued directors’ fees 11,000 -
Accrued fund administration fees 6,352 7,983 Accrued custodian fees 4,764 5,322
Others 5,058 3,594 ──────── ──────── 93,837 58,834 ════════ ════════
Morgan Stanley Saudi Equity Fund
(Managed by Morgan Stanley Saudi Arabia Company)
NOTES TO THE FINANCIAL STATEMENTS (continued) At 31 December 2020
14
9 TRANSACTIONS WITH RELATED PARTIES Management fee
Until 31 May 2018, the Fund manager was charging the management fee calculated at the rate of 1.75% per annum
on the net assets value of the Fund at each valuation date, however, effective from 1 June 2018, the Fund Manager
has waived 0.50% of this rate effectively reducing the rate to 1.25% per annum until the end of December 2021. The management fees amounting to SR 706,970 (31 December 2019: SR 795,671) reflected in the statement of
comprehensive income, represent the fees charged by the Fund Manager during the year as described above. As at 31
December 2020, management fees amounting to SR 159,916 (31 December 2019: SR 191,791) are payable to the
Fund Manager.
Board of directors
The independent directors are entitled to remuneration for their services at rates determined by the Fund’s terms and
conditions in respect of attending meetings of the board of directors or meetings of the Fund. Independent director’s
fees are currently SR 3,000 per meeting in addition to out of pocket expenses incurred for attending a meeting of the
Board subject to a cap of SR 5,000 per month per independent director. The maximum yearly remuneration for each
independent director is SR 50,000. Non-independent directors receive no remuneration from the Fund. The directors
received a total remuneration of SR 23,000 (inclusive of directors’ fees and ticketing) for year ended 31 December
2020 (for year ended 31 December 2019: SR 23,288). The Unitholders’ account at 31 December included units held as follows:
2020 Units
2019 Units
Held by the Fund Manager 10,447 10,447 ══════ ══════ 10 OTHER EXPENSES
31 December
2020 31 December
2019 SR SR VAT charges 99,089 52,930
Fund administration fees (note 1) 85,732 95,485
Custodian fees (note 1) 59,224 63,963
Audit fees 55,000 50,000
Transaction fees 50,288 42,975
Director fees (note 9) 23,000 23,288
Others 11,094 12,145 ──────── ──────── 383,427 340,786 ════════ ════════
Morgan Stanley Saudi Equity Fund
(Managed by Morgan Stanley Saudi Arabia Company)
NOTES TO THE FINANCIAL STATEMENTS (continued) At 31 December 2020
15
11 MATURITY ANALYSIS OF ASSETS AND LIABILITIES
The table below shows an analysis of assets and liabilities according to when they are expected to be recovered or settled
respectively:
As at 31 December 2020
Within
12 months
After
12 months Total
SR SR SR ASSETS
Bank balance 1,663,600 - 1,663,600
Financial assets at FVTPL 47,608,640 - 47,608,640
Other assets 13,211 - 13,211
───────── ───────── ─────────
TOTAL ASSETS 49,285,451 - 49,285,451
───────── ───────── ─────────
LIABILITIES
Management fee payable 159,916 - 159,916
Accrued expenses 93,837 - 93,837
Other liabilities 151,469 - 151,469 ──────── ───────── ────────
TOTAL LIABILITIES 405,222 - 405,222 ═════════ ═════════ ═════════
As at 31 December 2019
Within
12 months
After
12 months Total
SR SR SR ASSETS
Bank balance 3,867,779 - 3,867,779
Financial assets at FVTPL 60,619,360 - 60,619,360 Other assets 320,553 320,553
───────── ───────── ─────────
TOTAL ASSETS 64,807,692 - 64,807,692
───────── ───────── ─────────
LIABILITIES
Management fee payable 191,791 191,791
Accrued expenses 58,834 - 58,834 ──────── ───────── ────────
TOTAL LIABILITIES 250,625 - 250,625 ═════════ ═════════ ═════════
Morgan Stanley Saudi Equity Fund
(Managed by Morgan Stanley Saudi Arabia Company)
NOTES TO THE FINANCIAL STATEMENTS (continued) At 31 December 2020
16
12 FINANCIAL AND RISK MANAGEMENT OBJECTIVES AND POLICIES
Introduction
The Fund’s objective in managing risk is the creation and protection of unitholder's value. Risk is inherent in the Fund’s activities, but it is managed through a process of ongoing risk identification, measurement and monitoring,
subject to risk limits and other controls. The process of risk management is critical to the Fund’s continuing
profitability. The Fund is exposed to market risk (which includes foreign currency risk and equity price risk), credit
risk and liquidity risk arising from the financial instruments it holds.
Risk management
The Fund’s Investment Manager is responsible for identifying and controlling risks. The Board of Directors
supervises the Investment Manager and is ultimately responsible for the overall risk management of the Fund. Risk measurement and reporting system
Monitoring and controlling risks is primarily set up to be performed based on limits established by the Board of Directors. These limits reflect the business strategy, including the risk that the Fund is willing to accept and the market
environment of the Fund. In addition, the Fund monitors and measures the overall risk in relation to the aggregate
risk exposure across all risks type and activities. Risk mitigation
The Fund has investment guidelines that set out its overall business strategies, its tolerance for risk and its general risk
management philosophy.
Concentration risk
Concentration indicates the relative sensitivity of the Fund’s performance to developments affecting a particular
industry or geographical location. Concentrations of risk arise when a number of financial instruments or contracts
are entered into with the same counterparty, or where a number of counterparties are engaged in similar business
activities, or activities in the same geographical region, or have similar economic features that would cause their
ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions.
Concentrations of liquidity risk may arise from the repayment terms of financial liabilities, sources of borrowing facilities or reliance on a particular market in which to realise liquid assets. Concentrations of foreign exchange risk
may arise if the Fund has a significant net open position in a single foreign currency, or aggregate net open positions
in several currencies that tend to move together.
In order to avoid excessive concentrations of risk, the Fund’s policies and procedures include specific guidelines to
focus on maintaining a diversified portfolio. The investment manager is instructed to reduce exposure or to use
derivative instruments to manage excessive risk concentrations when they arise.
Note 7 to the financial statements analyse the Fund’s concentration of equity portfolio by industrial distribution.
Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party
to incur a financial loss. The Fund does not have a formal internal grading mechanism. Credit risk is managed and
controlled by monitoring credit exposures, limiting transactions with specific counterparties and continually assessing
the creditworthiness of counterparties. Credit risks are generally managed on the basis of external credit ratings of the
counterparties. The Fund Manager seeks to limit its credit risk by monitoring credit exposure and by dealing with reputed
counterparties.
The Fund is exposed to credit risk on its bank balances. Balances with bank is assessed to have low credit risk of default since the bank is highly regulated by the central bank. None of the balances with bank at the end of the reporting period
are past due, and taking into account the historical default experience and the current credit ratings of the bank, the
management of the Fund have assessed that there is no significant impairment, and hence have not recorded any loss
allowances on these balances.
Morgan Stanley Saudi Equity Fund
(Managed by Morgan Stanley Saudi Arabia Company)
NOTES TO THE FINANCIAL STATEMENTS (continued) At 31 December 2020
17
12 FINANCIAL AND RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
Credit risk (continued)
The table below shows the maximum exposure to credit risk for the component of the statement of financial position.
31 December 2020 SR
31 December 2019 SR
Bank balance 1,663,600 3,867,779 ───────── ───────── 1,663,600 3,867,779 ═════════ ═════════
Liquidity risk
Liquidity risk is the risk that the Fund will encounter difficulty in releasing funds to meet commitments associated with
financial liabilities that are settled by delivering cash or another financial assets.
The Fund’s terms and conditions provide for the terms of subscriptions and redemptions of units and it is, therefore,
exposed to the liquidity risk of meeting unitholder redemptions. The Fund’s securities are considered to be readily
realizable as they are all listed on stock markets. The Fund Manager monitors the liquidity requirements on a regular
basis and seeks to ensure that sufficient funds are available to meet any commitments as they arise.
The value of Fund’s undiscounted financial liabilities at the reporting date are equal to their carrying values and are all
repayable within one year from reporting date.
Market risk
Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity prices
will affect the Fund’s income or the fair value of its holdings in financial instruments.
The Fund’s strategy for the management of market risk is driven by the Fund’s investment objective as per Fund’s
terms and conditions. The Fund’s market risk is managed on a timely basis by the Investment Manager in accordance
with the policies and procedures in place. The Fund’s market positions are monitored on a timely basis by the Fund
Manager.
Equity price risk
Equity price risk is the risk that the value of financial instruments will fluctuate because of changes in market prices.
The Fund’s investments are susceptible to market price risk arising from uncertainties about future prices. The Fund
Manager manages this risk through diversification of its investment portfolio in terms of industry concentration.
Sensitivity analysis
The table below sets out the effect on net assets attributable to unitholders of a reasonably possible weakening /
strengthening in the individual equity market prices of 5% at reporting date. The estimates are made on an individual
investment basis. The analysis assumes that all other variables remain constant.
As at 31 December 2020
As at 31 December 2019
SR SR
Strengthening of 5% 2,541,772 3,131,018
Weakening of 5% (2,541,772) (3,131,018)
Currency risk
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange
rates. The Fund is not subject to fluctuations in foreign exchange rates as all significant monetary assets and labilities
and all significant transactions are denominated in Saudi Riyals.
Morgan Stanley Saudi Equity Fund
(Managed by Morgan Stanley Saudi Arabia Company)
NOTES TO THE FINANCIAL STATEMENTS (continued) At 31 December 2020
18
12 FINANCIAL AND RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
Interest rate risk
The Fund has no interest bearing financial assets and liabilities and therefore management believes that the Fund is
not exposed to any direct interest rate risk.
13 EVENTS SUBSEQUENT TO THE REPORTING PERIOD
In the opinion of Fund Manager, no events have occurred subsequent to the reporting date and before the issuance of
these financial statements which requires adjustment to, or disclosure, in these financial statements.
14 IMPACT OF COVID-19 ON OPERATIONS AND FINANCIAL STATEMENTS The global Coronavirus (COVID-19) pandemic continues to create unprecedented economic and social uncertainty throughout the world. During the period, global financial markets exhibited high levels of volatility which gave rise to steep and fast declines in global asset values (from 21st February 2020 through 23rd March 2020). Following unprecedented commitments to fiscal and monetary stimulus by governments and central banks globally we witnessed a strong recovery in asset values in the months following. The emergence of second and third waves as well as new variants of the virus added further to market volatility through the remainder of the year. News of the development and roll out of vaccines towards the end of the year gave rise to further volatility and a rotation towards those sectors which had been worst affected in the March sell off. Whilst the ultimate impact of the pandemic is difficult to predict, we have experienced increased market volatility and economic uncertainties, which may materially affect the valuation of portfolio investments and in turn, the net asset value of the Fund. The long-term impact of this is currently unpredictable.
15 LAST VALUATION DAY The last valuation day of the year was 31 December 2020 (For the year ended 31 December 2019: 31 December 2019).
16 APPROVAL OF FINANCIAL STATEMENTS
These financial statements are approved by the Fund’s Management on 16 Sha’aban 1442H (corresponding to 29
March 2021).