AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB ...
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) INTERIM FINANCIAL STATEMENTS (unaudited) For the six months period ended 30 June 2016 with REVIEW REPORT TO THE UNITHOLDERS
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) INTERIM BALANCE SHEET As at 30 June 2016 Expressed in Saudi Arabian Riyals ‘000
Notes
30 June 31December 30 June 2016 2015 2015 (Unaudited) (Audited) (Unaudited)
ASSETS Cash and cash equivalents
7
IPO deposit Held for trading investments
9
Dividends receivable
8,223
10,147
2,035
--
960
--
135,961
112,592
89,488
--170 ───────── ───────── ───────── 123,699 144,354 91,523
Total assets LIABILITY Payable to unit holders on account of redemptions Net assets attributable to Unitholders 10
Units in issue in thousands (number) Net asset value per unit (SR)
5 ───────── 144,349 ═════════ 156,630 ═════════ 0.9216 ═════════
7 ───────── 123,692 ═════════ 137,334 ═════════ 0.9007 ═════════
The accompanying notes 1 to 13 form integral part of these interim financial statements
2
318 ───────── 91,205 ═════════ 78,874 ═════════ 1.1563 ═════════
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) INTERIM STATEMENT OF INCOME (unaudited) For the six months period ended 30 June 2016 Expressed in Saudi Arabian Riyals ‘000
30 June 2016
For the period from 12 January 2015 to 30 June 2015
3,333
296
(10,692)
3,592
14,651 ────── 7,292 ──────
1,407 ────── 5,295 ──────
Management fee
1,166
479
Shariah audit fee
13
4
Fund Board remuneration
9
3
CMA fees
4
1
Audit fees
11
4
75 ────── 1,278 ────── 6,014 ══════
14 ────── 505 ────── 4,790 ══════
Note INVESTMENT REVENUE Dividend income Realised gain / (loss) on sale of held for trading investments Unrealised gain on measurement of held for trading investments Total revenue 8
EXPENSES
Fund administration expenses Total expenses NET INCOME FOR THE PERIOD
The accompanying notes 1 to 13 form integral part of these interim financial statements
3
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) INTERIM STATEMENT OF CASH FLOWS (unaudited) For the six months period ended 30 June 2016 Expressed in Saudi Arabian Riyals ‘000
30 June 2016
For the period from 12 January 2015 to 30 June 2015
6,014
4,790
1,278 (14,651) ────── (7,359)
505 (1,407) ────── 3,888
(8,718) (170) 960
(88,081) ---
(2) ────── (15,289) ──────
318 ────── (83,875) ──────
32,258 (18,774) (119) ────── 13,365 ────── (1,924)
104,457 (16,895) (1,652) ────── 85,910 ────── 2,035
10,147 ───────── 8,223 ═════════
-───────── 2,035 ═════════
Note Cash flow from operating activities Net income for the period Adjustment for: Non-cash expenses Unrealised gain on held for trading investments
Changes in operating assets and liabilities: Increase in held for trading investments Increase in dividend receivable Decrease in IPO deposit (Decrease) / increase in payable to unit holders on account of redemptions Net cash used in operating activities Cash flow from financing activities Proceeds from units sold Value of units redeemed Subscription fee deducted Net cash provided by financing activities Net (decrease) / increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period
7
Cash and cash equivalents at the end of the period
7
The accompanying notes 1 to 13 form integral part of these interim financial statements
4
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) INTERIM STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS For the six months period ended 30 June 2016 Expressed in Saudi Arabian Riyals ‘000
Notes Net assets attributable to Unitholders at the beginning of the period (audited) Net income for the period Increase / (decrease) in net assets from unit transactions during the period
30 June 2016
For the period from 12 January 2015 to 30 June 2015
123,692
--
6,014
4,790
32,258
104,457
(119)
(1,652)
10
Gross proceeds from units sold Subscription fees deducted Net proceeds from units sold Value of units reinvested
8
Value of units redeemed
Net assets attributable to Unitholders at the end of the period (unaudited)
32,139
102,805
1,278
505
(18,774) ─────── 14,643 ───────
(16,895) ─────── 86,415 ───────
144,349 ═══════
91,205 ═══════
The accompanying notes 1 to 13 form integral part of these interim financial statements
5
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in Saudi Arabian Riyals ‘000 1
THE FUND AND ITS ACTIVITIES
Al-Ahli Freestyle Saudi Equity Fund (the "Fund") is a Shariah compliant, open-end Shariah compliant fund, managed by NCB Capital Company ("the Fund Manager"), a subsidiary of The National Commercial Bank (“the Bank”), for the benefit of the Fund's Unitholders. The Fund is established under Article 5 (b) of the Investment Fund Regulations (the Regulations) issued by the Capital Market Authority (CMA). NCB Capital Company also acts as the custodian of the Fund. As defined in CMA’s Regulation No. 2-832005 dated 21 Jumada Awal 1426H (28 June, 2005) the Fund Manager conducts following securities’ activities: a) b) c) d) e)
Dealing; Arranging; Managing; Advising; Custody;
The Fund's objective is to achieve long term capital growth by actively managing a concentrated portfolio of Shariah complaint companies in the Saudi equity market. The Fund will not make any distributions to Unitholders. Instead, capital gains and dividends will be reinvested. Surplus cash may be invested in Shariah compliant Murabaha funds. The terms and conditions of the Fund were approved by the Capital Markets Authority (“CMA”) on 29 December 2014 (corresponding to 7 Rabi Al-Awwal 1436 H). The Fund commenced its activities on 12 January 2015. The results for the six months period ended 30 June 2016 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2016. 2
REGULATING AUTHORITY
The Fund is governed by the Regulations pursuant to resolution number 1-219-2006 dated 3 Dhul Hijja 1427H (corresponding to 24 December 2006), detailing requirements for all funds within the Kingdom of Saudi Arabia. 3
CHANGES IN FUND’S TERMS AND CONDITIONS
During the period ended 30 June 2016, the Fund Manager has made certain revisions to the terms and conditions of the Fund. The main change in the terms and conditions relate to change in the statutory auditors of the Fund, borrowing right and rebate language. The changes in the terms and conditions do not have any impact on these financial statements. These changes were approved by CMA through its letter dated 24 April 2016 and was notified by the Fund manager to the Unitholders through a letter dated 2 May 2016. The revised terms and conditions became effective from 2 July 2016.
6
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in Saudi Arabian Riyals ‘000 4
SUBSCRIPTION AND REDEMPTION
The Fund is open for subscriptions / redemptions of units on every Saudi Business day. The net asset value of the fund is determined on each Saudi Business day. For the purpose of purchase / sale of units, the net assets of the Fund attributable to each unit is determined by dividing the value of net assets of the Fund by the total number of outstanding Fund units on the relevant Valuation day. 5
BASIS OF PREPARATION
Statement of compliance These interim financial statements are prepared in accordance with generally accepted accounting standards in the Kingdom of Saudi Arabia promulgated by Saudi Organization for Certified Public Accountants ("SOCPA"). The Fund prepares its interim financial statements as at and for the period ended on its last valuation date (note 12). The Fund presents comparative numbers of December in Balance Sheet and its related notes as additional information for benefit of Unitholders. Basis of measurement These interim financial statements have been prepared under the historical cost convention using the accrual basis of accounting and the going concern concept, except for held for trading investments which are carried at fair value. Functional and presentational currency These interim financial statements are presented in Saudi Arabian Riyals (SR), which is the Fund’s functional currency. All financial information presented in Saudi Arabian Riyals has been rounded to the nearest thousand. Use of estimates and judgments The preparation of the financial statements in conformity with the generally accepted accounting standards as applicable in the Kingdom of Saudi Arabia requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognized in the interim financial statements interim financial statements have been consistent with those used in the preparation of annual financial statements of the Funds for the year ended December 31, 2015. Valuation of financial assets 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. As the Fund's financial instruments are accounted for under the historical cost convention, except for held for trading investments, differences may arise between the carrying values and fair values. The Fund Manager believes that at the reporting date, the fair values of the Fund's financial assets and liabilities are not materially different from their carrying values.
7
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in Saudi Arabian Riyals ‘000 5
BASIS OF PREPARATION (continued)
Use of estimates and judgments (continued) Valuation of financial assets (continued) The Fund measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:
Level 1: Fair value measurements using quoted price (unadjusted) in an active market for identical assets or liabilities. Level 2: Fair value measurements using inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: Fair value measurement using inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs).
All financial assets of the fund, carried at fair value at the reporting date, are classified under hierarchy level 1. 6
SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in these financial statements. a)
Held for trading investments
Securities listed or traded on a stock exchange are classified as Held for Trading and are initially recognised at cost, being the fair value of the consideration given and are subsequently measured at fair value. Changes in fair values of held for trading investments (“investments”), comprising unrealised gains and losses are included in the statement of income. Realised gains and losses on investments sold are determined on weighted average basis. b)
Investment transaction
Investment transactions are accounted for as of the trade date. c)
Impairment of financial assets
An assessment is made at the balance sheet date to determine whether there is objective evidence that a specific financial asset may be impaired. If such evidence exists, any impairment loss is recognised in the statement of income. If a financial asset is impaired, impairment is determined as follows: (i) (ii)
(iii)
For assets carried at fair value, impairment is the difference between cost and fair value, less any impairment loss previously recognised in the statement of income; For assets carried at cost, impairment is the difference between carrying value and the present value of future cash flows discounted at the current market rate of return for a similar financial asset; For assets carried at amortised cost, impairment is the difference between carrying amount and the present value of future cash flows discounted at the original effective commission rate.
8
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in Saudi Arabian Riyals ‘000 6 d)
SIGNIFICANT ACCOUNTING POLICIES (continued) Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised where: (i) (ii) (iii)
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; and Either (a) the Fund has transferred substantially all the risks and rewards of the asset, or (b) the Fund has 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 rights to receive cash flows from an asset, 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. e)
Revenue recognition
Realised gains and losses on investments sold are determined on an average cost basis. Dividends are recognised when the Fund’s right to receive the payment is established. Increases or decreases in the difference between the cost and market value of the Fund’s portfolio of investments are receognised as change in fair value of investments in the statement of income. f)
Foreign currency translation
Transactions during the year in currencies other than the functional currency are translated into the functional currency at the rates of exchange at the dates of the transactions. Monetary assets and liabilit ies that are denominated in a foreign currency are retranslated at the rate of exchange ruling at the balance sheet date. Exchange gains or losses are reflected in the statement of income. g)
Taxation / zakat
Taxation / zakat is the obligation of the Unitholders such liability is made in these financial statements. h)
and therefore, no provision for
Cash and cash equivalents
For the purposes of the statement of cashflows, cash and cash equivalents consists of bank balances. i)
Net asset value per unit
The Fund is open for subscription and redemption of units on every Saudi business day. The net asset value per unit is calculated by dividing the net assets attributable to Unitholders included in the balance sheet by the number of units outstanding at the period end.
9
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in Saudi Arabian Riyals ‘000 6
SIGNIFICANT ACCOUNTING POLICIES (continued)
j)
Provision and accruals
Provisions and accruals are recognized when the Fund has an obligation (legal or constructive) arising from a past event, and the costs to settle the obligation are both probable and can be measured reliably. k)
Offsetting
Financial assets and liabilities are offset and reported net in the balance sheet when there is a legally enforceable right to set off the recognized amounts and when the Fund intends to settle on a net basis, or to realise the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted under accounting standards generally accepted in the Kingdom of Saudi Arabia, or for gains and losses arising from a group of similar transactions. 7
CASH AND CASH EQUIVALENTS
Cash and cash equivalents primarily represent cash held in current accounts with a local bank. 8
MANAGEMENT FEE AND OTHER EXPENSES
The Fund is managed and administered by the Fund Manager. For these services, the Fund accrues, twice a week, a management fee, as determined by the Fund Manager, but which is no more than the maximum annual rate of 1.75%, as set out in the Fund’s terms and conditions, of the Fund's net assets on those dates. The Fund Manager is also entitled to recover expenses incurred on behalf of the Fund relating to audit, legal, custody, data processing and other similar charges, etc. The maximum amount of such expenses that can be recovered from the Fund by the Fund Manager are restricted to 1% per annum of the Fund's net assets at the respective valuation days. These expenses have been recovered by the Fund Manager on actual basis. The Fund Manager is allocated units in settlement of the management fee and other expenses on every valuation day, which are reinvested in the Fund. Furthermore, the Fund Manager is entitled to a subscription fee of 2% at the time of the investment in the Fund by a Unitholder. This fee may be waived at the discretion of the Fund manager.
10
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in Saudi Arabian Riyals ‘000 9
HELD FOR TRADING INVESTMENTS
The composition of held for trading investments by industry sector is summarized below: 30 June 2016 (Unaudited) % of Total Value Cost Fair Value
Industry Sector Petrochemical Industries Retail Real Estate Transport Banks and Financial Services Industrial Investment Telecommunication and Information Technology Energy and Utilities Cement Insurance Building & Construction Sector
23.37 13.14 12.82 9.95 9.16 8.80 6.77 6.70 3.78 3.27 2.24
────────
100
════════
30,903 16,329 16,846 13,571 11,563 11,878 9,384 7,835 5,298 3,362 3,143
────────
130,112
════════
31,778 17,871 17,429 13,534 12,449 11,971 9,208 9,109 5,142 4,442 3,028
────────
135,961
════════
31 December 2015 (Audited) % of Total Value Cost Fair Value
Industry Sector Banks and Financial Services Real Estate Transport Telecommunication and Information Technology Agriculture and Food Industries Industrial Investment Insurance Cement Hotel and Tourism Retail
11
20.88 20.15 11.52 10.18 9.95 8.63 5.34 5.09 4.32 3.94
23,564 26,953 13,048 10,991 12,943 11,089 5,383 6,720 6,449 4,253
23,504 22,683 12,966 11,462 11,199 9,722 6,018 5,732 4,866 4,440
────────
────────
────────
100
121,393
112,592
════════
════════
════════
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in Saudi Arabian Riyals ‘000 9
HELD FOR TRADING INVESTMENTS (continued) 30 June 2015 (Unaudited) % of Total Value Cost Fair Value
Industry Sector Banks and Financial Services Real Estate Petrochemical Industries Transport Sector Agriculture and Food Industries Telecommunication and Information Technology Hotel and Tourism Industrial Investment Multi investment
16.96 16.28 14.65 12.95 12.85 8.29 6.83 6.08 5.11
15,970 14,150 12,979 9,218 11,537 7,452 6,390 5,863 4,522
15,177 14,572 13,108 11,592 11,503 7,418 6,113 5,440 4,565
────────
────────
────────
100
88,081
89,488
════════
════════
════════
10 UNIT TRANSACTIONS Transactions in units during the period are summarized as follows: For the six months period ended 30 June 2016 Units 000
For the period from 12 January 2015 to 30 June 2015 Units 000
137,334
--
40,008
94,411
Units reinvested
1,475
442
Units redeemed
(22,187)
(15,979)
19,296 ────────── 156,630 ══════════
78,874 ────────── 78,874 ══════════
Units at the beginning of the period (audited)
Units sold
Net increase in units during the period Units at the end of the period (unaudited)
As at 30 June 2016, top five Unitholders represented 57.96% (June 2015: 21.37%) of the Fund’s units.
12
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in Saudi Arabian Riyals ‘000 11
RELATED PARTY TRANSACTIONS
In the ordinary course of its activities, the Fund transacts business with related parties on the basis of approved terms and conditions of the Fund. All related party transactions are approved by the Fund Board. Name of entity
Relationship
NCB Capital Company National Commercial Bank (NCB) Al-Ahli Al-Ahli Al-Ahli Al-Ahli
Fund Manager Shareholder of Fund Manager and Banker to the Fund Associate of NCB Unit-holder Unit-holder Unit-holder
Takaful Company Multi Asset Conservative Fund Multi Asset Moderate Fund Multi Asset Growth Fund
The significant related party transactions entered into by the Fund during the period and balances resulting from such transactions are as follows: Value of units held as at 30 June
Amount of transactions Related party
Nature of transaction
2016
2015
2016
NCBC
Management Fee
1,166
479
Expenses paid on behalf of the fund
112
26
Al-Alhli Multi Asset Conservative Fund
Subscription of units
8,700
--
Redemption of units
--
--
Al-Alhli Multi Asset Moderate Fund
Subscription of units
6,700
--
Redemption of units
--
--
Al-Alhli Multi Asset Growth Fund
Subscription of units
8,200
--
Redemption of units
--
--
Al Ahli Takaful Company
Subscription of units
1,500
--
Redemption of units
--
--
13
2015
3,796
4,754
10,227
--
7,876
--
9,639
--
1,763
--
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in Saudi Arabian Riyals ‘000 12 LAST VALUATION DAY The last valuation day for the period was 30 June 2016 (30 June 2015: 29 June 2015). 13
APPROVAL OF THE FINANCIAL STATEMENTS
These interim financial statements were approved by the Fund Manager on 7 Dhul Qadah 1437H, corresponding to 10 August 2016.
14
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) INTERIM BALANCE SHEET As at 30 June 2016 Expressed in Saudi Arabian Riyals ‘000
Notes
30 June 31December 30 June 2016 2015 2015 (Unaudited) (Audited) (Unaudited)
ASSETS Cash and cash equivalents
7
IPO deposit Held for trading investments
9
Dividends receivable
8,223
10,147
2,035
--
960
--
135,961
112,592
89,488
--170 ───────── ───────── ───────── 123,699 144,354 91,523
Total assets LIABILITY Payable to unit holders on account of redemptions Net assets attributable to Unitholders 10
Units in issue in thousands (number) Net asset value per unit (SR)
5 ───────── 144,349 ═════════ 156,630 ═════════ 0.9216 ═════════
7 ───────── 123,692 ═════════ 137,334 ═════════ 0.9007 ═════════
The accompanying notes 1 to 13 form integral part of these interim financial statements
2
318 ───────── 91,205 ═════════ 78,874 ═════════ 1.1563 ═════════
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) INTERIM STATEMENT OF INCOME (unaudited) For the six months period ended 30 June 2016 Expressed in Saudi Arabian Riyals ‘000
30 June 2016
For the period from 12 January 2015 to 30 June 2015
3,333
296
(10,692)
3,592
14,651 ────── 7,292 ──────
1,407 ────── 5,295 ──────
Management fee
1,166
479
Shariah audit fee
13
4
Fund Board remuneration
9
3
CMA fees
4
1
Audit fees
11
4
75 ────── 1,278 ────── 6,014 ══════
14 ────── 505 ────── 4,790 ══════
Note INVESTMENT REVENUE Dividend income Realised gain / (loss) on sale of held for trading investments Unrealised gain on measurement of held for trading investments Total revenue 8
EXPENSES
Fund administration expenses Total expenses NET INCOME FOR THE PERIOD
The accompanying notes 1 to 13 form integral part of these interim financial statements
3
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) INTERIM STATEMENT OF CASH FLOWS (unaudited) For the six months period ended 30 June 2016 Expressed in Saudi Arabian Riyals ‘000
30 June 2016
For the period from 12 January 2015 to 30 June 2015
6,014
4,790
1,278 (14,651) ────── (7,359)
505 (1,407) ────── 3,888
(8,718) (170) 960
(88,081) ---
(2) ────── (15,289) ──────
318 ────── (83,875) ──────
32,258 (18,774) (119) ────── 13,365 ────── (1,924)
104,457 (16,895) (1,652) ────── 85,910 ────── 2,035
10,147 ───────── 8,223 ═════════
-───────── 2,035 ═════════
Note Cash flow from operating activities Net income for the period Adjustment for: Non-cash expenses Unrealised gain on held for trading investments
Changes in operating assets and liabilities: Increase in held for trading investments Increase in dividend receivable Decrease in IPO deposit (Decrease) / increase in payable to unit holders on account of redemptions Net cash used in operating activities Cash flow from financing activities Proceeds from units sold Value of units redeemed Subscription fee deducted Net cash provided by financing activities Net (decrease) / increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period
7
Cash and cash equivalents at the end of the period
7
The accompanying notes 1 to 13 form integral part of these interim financial statements
4
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) INTERIM STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS For the six months period ended 30 June 2016 Expressed in Saudi Arabian Riyals ‘000
Notes Net assets attributable to Unitholders at the beginning of the period (audited) Net income for the period Increase / (decrease) in net assets from unit transactions during the period
30 June 2016
For the period from 12 January 2015 to 30 June 2015
123,692
--
6,014
4,790
32,258
104,457
(119)
(1,652)
10
Gross proceeds from units sold Subscription fees deducted Net proceeds from units sold Value of units reinvested
8
Value of units redeemed
Net assets attributable to Unitholders at the end of the period (unaudited)
32,139
102,805
1,278
505
(18,774) ─────── 14,643 ───────
(16,895) ─────── 86,415 ───────
144,349 ═══════
91,205 ═══════
The accompanying notes 1 to 13 form integral part of these interim financial statements
5
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in Saudi Arabian Riyals ‘000 1
THE FUND AND ITS ACTIVITIES
Al-Ahli Freestyle Saudi Equity Fund (the "Fund") is a Shariah compliant, open-end Shariah compliant fund, managed by NCB Capital Company ("the Fund Manager"), a subsidiary of The National Commercial Bank (“the Bank”), for the benefit of the Fund's Unitholders. The Fund is established under Article 5 (b) of the Investment Fund Regulations (the Regulations) issued by the Capital Market Authority (CMA). NCB Capital Company also acts as the custodian of the Fund. As defined in CMA’s Regulation No. 2-832005 dated 21 Jumada Awal 1426H (28 June, 2005) the Fund Manager conducts following securities’ activities: a) b) c) d) e)
Dealing; Arranging; Managing; Advising; Custody;
The Fund's objective is to achieve long term capital growth by actively managing a concentrated portfolio of Shariah complaint companies in the Saudi equity market. The Fund will not make any distributions to Unitholders. Instead, capital gains and dividends will be reinvested. Surplus cash may be invested in Shariah compliant Murabaha funds. The terms and conditions of the Fund were approved by the Capital Markets Authority (“CMA”) on 29 December 2014 (corresponding to 7 Rabi Al-Awwal 1436 H). The Fund commenced its activities on 12 January 2015. The results for the six months period ended 30 June 2016 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2016. 2
REGULATING AUTHORITY
The Fund is governed by the Regulations pursuant to resolution number 1-219-2006 dated 3 Dhul Hijja 1427H (corresponding to 24 December 2006), detailing requirements for all funds within the Kingdom of Saudi Arabia. 3
CHANGES IN FUND’S TERMS AND CONDITIONS
During the period ended 30 June 2016, the Fund Manager has made certain revisions to the terms and conditions of the Fund. The main change in the terms and conditions relate to change in the statutory auditors of the Fund, borrowing right and rebate language. The changes in the terms and conditions do not have any impact on these financial statements. These changes were approved by CMA through its letter dated 24 April 2016 and was notified by the Fund manager to the Unitholders through a letter dated 2 May 2016. The revised terms and conditions became effective from 2 July 2016.
6
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in Saudi Arabian Riyals ‘000 4
SUBSCRIPTION AND REDEMPTION
The Fund is open for subscriptions / redemptions of units on every Saudi Business day. The net asset value of the fund is determined on each Saudi Business day. For the purpose of purchase / sale of units, the net assets of the Fund attributable to each unit is determined by dividing the value of net assets of the Fund by the total number of outstanding Fund units on the relevant Valuation day. 5
BASIS OF PREPARATION
Statement of compliance These interim financial statements are prepared in accordance with generally accepted accounting standards in the Kingdom of Saudi Arabia promulgated by Saudi Organization for Certified Public Accountants ("SOCPA"). The Fund prepares its interim financial statements as at and for the period ended on its last valuation date (note 12). The Fund presents comparative numbers of December in Balance Sheet and its related notes as additional information for benefit of Unitholders. Basis of measurement These interim financial statements have been prepared under the historical cost convention using the accrual basis of accounting and the going concern concept, except for held for trading investments which are carried at fair value. Functional and presentational currency These interim financial statements are presented in Saudi Arabian Riyals (SR), which is the Fund’s functional currency. All financial information presented in Saudi Arabian Riyals has been rounded to the nearest thousand. Use of estimates and judgments The preparation of the financial statements in conformity with the generally accepted accounting standards as applicable in the Kingdom of Saudi Arabia requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognized in the interim financial statements interim financial statements have been consistent with those used in the preparation of annual financial statements of the Funds for the year ended December 31, 2015. Valuation of financial assets 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. As the Fund's financial instruments are accounted for under the historical cost convention, except for held for trading investments, differences may arise between the carrying values and fair values. The Fund Manager believes that at the reporting date, the fair values of the Fund's financial assets and liabilities are not materially different from their carrying values.
7
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in Saudi Arabian Riyals ‘000 5
BASIS OF PREPARATION (continued)
Use of estimates and judgments (continued) Valuation of financial assets (continued) The Fund measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:
Level 1: Fair value measurements using quoted price (unadjusted) in an active market for identical assets or liabilities. Level 2: Fair value measurements using inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: Fair value measurement using inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs).
All financial assets of the fund, carried at fair value at the reporting date, are classified under hierarchy level 1. 6
SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in these financial statements. a)
Held for trading investments
Securities listed or traded on a stock exchange are classified as Held for Trading and are initially recognised at cost, being the fair value of the consideration given and are subsequently measured at fair value. Changes in fair values of held for trading investments (“investments”), comprising unrealised gains and losses are included in the statement of income. Realised gains and losses on investments sold are determined on weighted average basis. b)
Investment transaction
Investment transactions are accounted for as of the trade date. c)
Impairment of financial assets
An assessment is made at the balance sheet date to determine whether there is objective evidence that a specific financial asset may be impaired. If such evidence exists, any impairment loss is recognised in the statement of income. If a financial asset is impaired, impairment is determined as follows: (i) (ii)
(iii)
For assets carried at fair value, impairment is the difference between cost and fair value, less any impairment loss previously recognised in the statement of income; For assets carried at cost, impairment is the difference between carrying value and the present value of future cash flows discounted at the current market rate of return for a similar financial asset; For assets carried at amortised cost, impairment is the difference between carrying amount and the present value of future cash flows discounted at the original effective commission rate.
8
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in Saudi Arabian Riyals ‘000 6 d)
SIGNIFICANT ACCOUNTING POLICIES (continued) Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised where: (i) (ii) (iii)
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; and Either (a) the Fund has transferred substantially all the risks and rewards of the asset, or (b) the Fund has 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 rights to receive cash flows from an asset, 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. e)
Revenue recognition
Realised gains and losses on investments sold are determined on an average cost basis. Dividends are recognised when the Fund’s right to receive the payment is established. Increases or decreases in the difference between the cost and market value of the Fund’s portfolio of investments are receognised as change in fair value of investments in the statement of income. f)
Foreign currency translation
Transactions during the year in currencies other than the functional currency are translated into the functional currency at the rates of exchange at the dates of the transactions. Monetary assets and liabilit ies that are denominated in a foreign currency are retranslated at the rate of exchange ruling at the balance sheet date. Exchange gains or losses are reflected in the statement of income. g)
Taxation / zakat
Taxation / zakat is the obligation of the Unitholders such liability is made in these financial statements. h)
and therefore, no provision for
Cash and cash equivalents
For the purposes of the statement of cashflows, cash and cash equivalents consists of bank balances. i)
Net asset value per unit
The Fund is open for subscription and redemption of units on every Saudi business day. The net asset value per unit is calculated by dividing the net assets attributable to Unitholders included in the balance sheet by the number of units outstanding at the period end.
9
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in Saudi Arabian Riyals ‘000 6
SIGNIFICANT ACCOUNTING POLICIES (continued)
j)
Provision and accruals
Provisions and accruals are recognized when the Fund has an obligation (legal or constructive) arising from a past event, and the costs to settle the obligation are both probable and can be measured reliably. k)
Offsetting
Financial assets and liabilities are offset and reported net in the balance sheet when there is a legally enforceable right to set off the recognized amounts and when the Fund intends to settle on a net basis, or to realise the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted under accounting standards generally accepted in the Kingdom of Saudi Arabia, or for gains and losses arising from a group of similar transactions. 7
CASH AND CASH EQUIVALENTS
Cash and cash equivalents primarily represent cash held in current accounts with a local bank. 8
MANAGEMENT FEE AND OTHER EXPENSES
The Fund is managed and administered by the Fund Manager. For these services, the Fund accrues, twice a week, a management fee, as determined by the Fund Manager, but which is no more than the maximum annual rate of 1.75%, as set out in the Fund’s terms and conditions, of the Fund's net assets on those dates. The Fund Manager is also entitled to recover expenses incurred on behalf of the Fund relating to audit, legal, custody, data processing and other similar charges, etc. The maximum amount of such expenses that can be recovered from the Fund by the Fund Manager are restricted to 1% per annum of the Fund's net assets at the respective valuation days. These expenses have been recovered by the Fund Manager on actual basis. The Fund Manager is allocated units in settlement of the management fee and other expenses on every valuation day, which are reinvested in the Fund. Furthermore, the Fund Manager is entitled to a subscription fee of 2% at the time of the investment in the Fund by a Unitholder. This fee may be waived at the discretion of the Fund manager.
10
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in Saudi Arabian Riyals ‘000 9
HELD FOR TRADING INVESTMENTS
The composition of held for trading investments by industry sector is summarized below: 30 June 2016 (Unaudited) % of Total Value Cost Fair Value
Industry Sector Petrochemical Industries Retail Real Estate Transport Banks and Financial Services Industrial Investment Telecommunication and Information Technology Energy and Utilities Cement Insurance Building & Construction Sector
23.37 13.14 12.82 9.95 9.16 8.80 6.77 6.70 3.78 3.27 2.24
────────
100
════════
30,903 16,329 16,846 13,571 11,563 11,878 9,384 7,835 5,298 3,362 3,143
────────
130,112
════════
31,778 17,871 17,429 13,534 12,449 11,971 9,208 9,109 5,142 4,442 3,028
────────
135,961
════════
31 December 2015 (Audited) % of Total Value Cost Fair Value
Industry Sector Banks and Financial Services Real Estate Transport Telecommunication and Information Technology Agriculture and Food Industries Industrial Investment Insurance Cement Hotel and Tourism Retail
11
20.88 20.15 11.52 10.18 9.95 8.63 5.34 5.09 4.32 3.94
23,564 26,953 13,048 10,991 12,943 11,089 5,383 6,720 6,449 4,253
23,504 22,683 12,966 11,462 11,199 9,722 6,018 5,732 4,866 4,440
────────
────────
────────
100
121,393
112,592
════════
════════
════════
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in Saudi Arabian Riyals ‘000 9
HELD FOR TRADING INVESTMENTS (continued) 30 June 2015 (Unaudited) % of Total Value Cost Fair Value
Industry Sector Banks and Financial Services Real Estate Petrochemical Industries Transport Sector Agriculture and Food Industries Telecommunication and Information Technology Hotel and Tourism Industrial Investment Multi investment
16.96 16.28 14.65 12.95 12.85 8.29 6.83 6.08 5.11
15,970 14,150 12,979 9,218 11,537 7,452 6,390 5,863 4,522
15,177 14,572 13,108 11,592 11,503 7,418 6,113 5,440 4,565
────────
────────
────────
100
88,081
89,488
════════
════════
════════
10 UNIT TRANSACTIONS Transactions in units during the period are summarized as follows: For the six months period ended 30 June 2016 Units 000
For the period from 12 January 2015 to 30 June 2015 Units 000
137,334
--
40,008
94,411
Units reinvested
1,475
442
Units redeemed
(22,187)
(15,979)
19,296 ────────── 156,630 ══════════
78,874 ────────── 78,874 ══════════
Units at the beginning of the period (audited)
Units sold
Net increase in units during the period Units at the end of the period (unaudited)
As at 30 June 2016, top five Unitholders represented 57.96% (June 2015: 21.37%) of the Fund’s units.
12
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in Saudi Arabian Riyals ‘000 11
RELATED PARTY TRANSACTIONS
In the ordinary course of its activities, the Fund transacts business with related parties on the basis of approved terms and conditions of the Fund. All related party transactions are approved by the Fund Board. Name of entity
Relationship
NCB Capital Company National Commercial Bank (NCB) Al-Ahli Al-Ahli Al-Ahli Al-Ahli
Fund Manager Shareholder of Fund Manager and Banker to the Fund Associate of NCB Unit-holder Unit-holder Unit-holder
Takaful Company Multi Asset Conservative Fund Multi Asset Moderate Fund Multi Asset Growth Fund
The significant related party transactions entered into by the Fund during the period and balances resulting from such transactions are as follows: Value of units held as at 30 June
Amount of transactions Related party
Nature of transaction
2016
2015
2016
NCBC
Management Fee
1,166
479
Expenses paid on behalf of the fund
112
26
Al-Alhli Multi Asset Conservative Fund
Subscription of units
8,700
--
Redemption of units
--
--
Al-Alhli Multi Asset Moderate Fund
Subscription of units
6,700
--
Redemption of units
--
--
Al-Alhli Multi Asset Growth Fund
Subscription of units
8,200
--
Redemption of units
--
--
Al Ahli Takaful Company
Subscription of units
1,500
--
Redemption of units
--
--
13
2015
3,796
4,754
10,227
--
7,876
--
9,639
--
1,763
--
AL-AHLI FREESTYLE SAUDI EQUITY FUND (Managed by NCB Capital Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS For the six months period ended 30 June 2016 (unaudited) Expressed in Saudi Arabian Riyals ‘000 12 LAST VALUATION DAY The last valuation day for the period was 30 June 2016 (30 June 2015: 29 June 2015). 13
APPROVAL OF THE FINANCIAL STATEMENTS
These interim financial statements were approved by the Fund Manager on 7 Dhul Qadah 1437H, corresponding to 10 August 2016.
14
