al-ahli freestyle saudi equity fund unaudited interim financial ...
AL-AHLI FREESTYLE SAUDI EQUITY FUND UNAUDITED INTERIM FINANCIAL STATEMENTS FOR THE PERIOD FROM 12 JANUARY 2015 TO 30 JUNE 2015
Al-Ahli Freestyle Saudi Equity Fund BALANCE SHEET As at 30 June 2015 30 June 2015 SR’ 000 Notes
(Unaudited)
ASSETS Cash and cash equivalents Held for trading investments
2,035 5
89,488 ───── 91,523
LIABILITY Payable to unit holders on account of redemptions Net assets attributable to unitholders Units at issue in thousands Per unit value in Saudi Riyals
The attached notes 1 to 8 form part of these unaudited interim financial statements. 2
6
318 ───── 91,205 ═════ 78,874 ═════ 1.156 ═════
Al-Ahli Freestyle Saudi Equity Fund STATEMENT OF OPERATIONS For the period from 12 January 2015 to 30 June 2015
Note
For the period from 12 January 2015 to 30 June 2015 SR’ 000 (Unaudited)
INVESTMENT REVENUES Realised gain on held for trading investments
3,592
Changes in fair value of held for trading investments
1,407 296 ────── 5,295
Dividend income
EXPENSES
4
Management fee
479
Shariah audit fee
4
Fund Board remuneration
3
CMA fees
1
Audit fees
4
Fund administration expenses
INCREASE IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS
The attached notes 1 to 8 form part of these unaudited interim financial statements. 3
14 ────── 505 ────── 4,790 ══════
Al-Ahli Freestyle Saudi Equity Fund STATEMENT OF CASH FLOWS For the period from 12 January 2015 to 30 June 2015 For the period from 12 January 2015 to 30 June 2015 SR’ 000 (Unaudited) OPERATING ACTIVITIES Increase in net assets attributable to unitholders Adjustment for: Value of units reinvested
Changes in operating assets and liabilities: Held for trading investments Payable to unit holders on account of redemptions Net cash used in operating activities FINANCING ACTIVITIES Gross proceeds from units sold Value of units redeemed Subscription fee deducted Net cash from financing activities CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD
The attached notes 1 to 8 form part of these unaudited interim financial statements. 4
4,790 505 ────── 5,295 (89,488) 318 ────── (83,875) ────── 104,457 (16,895) (1,652) ────── 85,910 ────── 2,035 ══════
Al-Ahli Freestyle Saudi Equity Fund STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS For the period from 12 January 2015 to 30 June 2015
Note
4,790 ───────
INCREASE IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS INCREASE IN NET ASSETS FROM UNIT TRANSACTIONS
6
Gross proceeds from units sold
104,457
Subscription fees deducted
(1,652) ─────── 102,805
Net proceeds from units sold Value of units reinvested Value of units redeemed
NET ASSETS ATTRIBUTABLE TO UNITHOLDERS AT THE END OF THE PERIOD
The attached notes 1 to 8 form part of these unaudited interim financial statements. 5
For the period from 12 January 2015 to 30 June 2015 SR’ 000 (Unaudited)
4
505 (16,895) ─────── 86,415 ─────── 91,205 ═══════
Al-Ahli Freestyle Saudi Equity Fund NOTES TO THE INTERIM FINANCIAL STATEMENTS At 30 June 2015 (unaudited) 1
NATURE OF THE FUND
Al-Ahli Freestyle Saudi Equity Fund (the "Fund") is an 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 ultimately supervised by the Fund Board. NCB Capital Company acts as the custodian of the Fund. The Fund's objective is to achieve long term capital growth through investing primarily in Shariah complaint Saudi listed companies and Exchange Traded Funds, listed in the Saudi stock market. In addition, the Fund may invest in local Initial Public Offerings whenever possible. 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 books and records of the Fund are maintained in Saudi Riyals (“SR”) which represents the functional and presentation currency of the Fund. All financial information presented in Saudi Riyals has been rounded to the nearest thousand. The results for the period from 12 January 2015 to 30 June 2015 are not necessarily indicative of the results that may be expected for the period from 12 January 2015 to 31 December 2015. As these are the first set of interim financial statements of the Fund, therefore, no comparative information has been presented. 2
REGULATING AUTHORITY
The Fund is governed by the Investment Funds Regulations (the “Regulations”), issued by the Capital Market Authority (“CMA”) 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
SIGNIFICANT ACCOUNTING POLICIES
The interim financial statements have been prepared in accordance with accounting standards generally accepted in the Kingdom of Saudi Arabia and they are in conformity with the guidelines of CMA, in so far as they affect the preparation and presentation of the interim financial statements. The significant accounting policies adopted are as follows: Accounting convention The interim financial statements are prepared under the historical cost convention modified to include the revaluation of investments. Held for trading investments All the investments are classified as held for trading. Securities listed or traded on a stock exchange and units of mutual funds are initially recognised at cost, being the fair value of the consideration given and are subsequently carried at fair value. Changes in fair values of held for trading investments (“investments”), comprising realized and unrealized gains and losses are included in the statement of operations. Realized gains and losses on investments sold are determined on an average cost basis. Investments in mutual funds are initially recognized at cost, being the fair value of considerations given. After initial recognition investments in mutual funds are valued at unit price prevailing on the last valuation day of the period. Unrealized gains and losses are included in the statement of operations for the period. Investment transactions Investment transactions are accounted for as of the trade date. Fair value measurement Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.
6
Al-Ahli Freestyle Saudi Equity Fund NOTES TO THE INTERIM FINANCIAL STATEMENTS (continued) At 30 June 2015 (unaudited)
3
SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair value measurement (continued) The fair value for financial instruments traded in active markets at the valuation date is based on their quoted price. Instruments for which no sale was reported on the valuation day are valued at the most recent bid price. Investments in mutual funds are valued at the unit price prevailing on the last valuation day of the period. Impairment of financial assets An assessment is made at 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 operations. If a financial asset is impaired, impairment is determined as follows: a) b) c)
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 operations; 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.
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: a) The rights to receive cash flows from the asset have expired; or b) 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; c) 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. Revenue recognition Realized gains and losses on investments sold are determined on an average cost basis. Dividends are recognized when the Fund’s right to receive is established. Increases or decreases in the difference between the cost and market value of the Fund’s portfolio of investments are classified as change in fair value of investments in the statement of operations. Foreign currency transactions Transactions during the period 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 liabilities 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 operations. Taxation / zakat Taxation / zakat is the obligation of the unitholders and therefore, no provision for such liability is made in the accompanying interim financial statements. Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents consist of bank balances and cash in transit, if any. 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.
7
Al-Ahli Freestyle Saudi Equity Fund NOTES TO THE INTERIM FINANCIAL STATEMENTS (continued) At 30 June 2015 (unaudited)
3
SIGNIFICANT ACCOUNTING POLICIES (continued)
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 realize the asset and settle the liability simultaneously. Revenue 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. 4
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. 5
HELD FOR TRADING INVESTMENTS
The composition of held for trading investments by industry sector is summarized below:
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 30 June 2015 (Unaudited)
8
% of Value
Cost SR’ 000
Value SR’ 000
16.96 16.28 14.65 12.95 12.85 8.29 6.83 6.08 5.11 ──── 100 ════
15,970 14,150 12,979 9,218 11,537 7,452 6,390 5,863 4,522 ───── 88,081 ═════
15,177 14,572 13,108 11,592 11,503 7,418 6,113 5,440 4,565 ───── 89,488 ═════
Al-Ahli Freestyle Saudi Equity Fund NOTES TO THE INTERIM FINANCIAL STATEMENTS (continued) At 30 June 2015 (unaudited) 6
UNIT TRANSACTIONS
Transactions in units are summarized as follows: For the period from 12 January 2015 to 30 June 2015 Units’ 000 (Unaudited) Units sold
94,411
Units reinvested
442
Units redeemed
(15,979) ────── 78,874 ══════
UNITS AT END OF THE PERIOD As at 30 June 2015, top five unitholders represented 21.37% of the Fund’s units. 7
RELATED PARTY TRANSACTIONS AND BALANCES
The Fund Manager’s investment in the Fund at 30 June 2015 was SR 4,754,000 : 4,111,300 units. The National Commercial Bank acts as the Fund’s banker. 8
LAST VALUATION DAY
The last valuation day for the period was 29 June 2015.
9
Al-Ahli Freestyle Saudi Equity Fund BALANCE SHEET As at 30 June 2015 30 June 2015 SR’ 000 Notes
(Unaudited)
ASSETS Cash and cash equivalents Held for trading investments
2,035 5
89,488 ───── 91,523
LIABILITY Payable to unit holders on account of redemptions Net assets attributable to unitholders Units at issue in thousands Per unit value in Saudi Riyals
The attached notes 1 to 8 form part of these unaudited interim financial statements. 2
6
318 ───── 91,205 ═════ 78,874 ═════ 1.156 ═════
Al-Ahli Freestyle Saudi Equity Fund STATEMENT OF OPERATIONS For the period from 12 January 2015 to 30 June 2015
Note
For the period from 12 January 2015 to 30 June 2015 SR’ 000 (Unaudited)
INVESTMENT REVENUES Realised gain on held for trading investments
3,592
Changes in fair value of held for trading investments
1,407 296 ────── 5,295
Dividend income
EXPENSES
4
Management fee
479
Shariah audit fee
4
Fund Board remuneration
3
CMA fees
1
Audit fees
4
Fund administration expenses
INCREASE IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS
The attached notes 1 to 8 form part of these unaudited interim financial statements. 3
14 ────── 505 ────── 4,790 ══════
Al-Ahli Freestyle Saudi Equity Fund STATEMENT OF CASH FLOWS For the period from 12 January 2015 to 30 June 2015 For the period from 12 January 2015 to 30 June 2015 SR’ 000 (Unaudited) OPERATING ACTIVITIES Increase in net assets attributable to unitholders Adjustment for: Value of units reinvested
Changes in operating assets and liabilities: Held for trading investments Payable to unit holders on account of redemptions Net cash used in operating activities FINANCING ACTIVITIES Gross proceeds from units sold Value of units redeemed Subscription fee deducted Net cash from financing activities CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD
The attached notes 1 to 8 form part of these unaudited interim financial statements. 4
4,790 505 ────── 5,295 (89,488) 318 ────── (83,875) ────── 104,457 (16,895) (1,652) ────── 85,910 ────── 2,035 ══════
Al-Ahli Freestyle Saudi Equity Fund STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS For the period from 12 January 2015 to 30 June 2015
Note
4,790 ───────
INCREASE IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS INCREASE IN NET ASSETS FROM UNIT TRANSACTIONS
6
Gross proceeds from units sold
104,457
Subscription fees deducted
(1,652) ─────── 102,805
Net proceeds from units sold Value of units reinvested Value of units redeemed
NET ASSETS ATTRIBUTABLE TO UNITHOLDERS AT THE END OF THE PERIOD
The attached notes 1 to 8 form part of these unaudited interim financial statements. 5
For the period from 12 January 2015 to 30 June 2015 SR’ 000 (Unaudited)
4
505 (16,895) ─────── 86,415 ─────── 91,205 ═══════
Al-Ahli Freestyle Saudi Equity Fund NOTES TO THE INTERIM FINANCIAL STATEMENTS At 30 June 2015 (unaudited) 1
NATURE OF THE FUND
Al-Ahli Freestyle Saudi Equity Fund (the "Fund") is an 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 ultimately supervised by the Fund Board. NCB Capital Company acts as the custodian of the Fund. The Fund's objective is to achieve long term capital growth through investing primarily in Shariah complaint Saudi listed companies and Exchange Traded Funds, listed in the Saudi stock market. In addition, the Fund may invest in local Initial Public Offerings whenever possible. 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 books and records of the Fund are maintained in Saudi Riyals (“SR”) which represents the functional and presentation currency of the Fund. All financial information presented in Saudi Riyals has been rounded to the nearest thousand. The results for the period from 12 January 2015 to 30 June 2015 are not necessarily indicative of the results that may be expected for the period from 12 January 2015 to 31 December 2015. As these are the first set of interim financial statements of the Fund, therefore, no comparative information has been presented. 2
REGULATING AUTHORITY
The Fund is governed by the Investment Funds Regulations (the “Regulations”), issued by the Capital Market Authority (“CMA”) 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
SIGNIFICANT ACCOUNTING POLICIES
The interim financial statements have been prepared in accordance with accounting standards generally accepted in the Kingdom of Saudi Arabia and they are in conformity with the guidelines of CMA, in so far as they affect the preparation and presentation of the interim financial statements. The significant accounting policies adopted are as follows: Accounting convention The interim financial statements are prepared under the historical cost convention modified to include the revaluation of investments. Held for trading investments All the investments are classified as held for trading. Securities listed or traded on a stock exchange and units of mutual funds are initially recognised at cost, being the fair value of the consideration given and are subsequently carried at fair value. Changes in fair values of held for trading investments (“investments”), comprising realized and unrealized gains and losses are included in the statement of operations. Realized gains and losses on investments sold are determined on an average cost basis. Investments in mutual funds are initially recognized at cost, being the fair value of considerations given. After initial recognition investments in mutual funds are valued at unit price prevailing on the last valuation day of the period. Unrealized gains and losses are included in the statement of operations for the period. Investment transactions Investment transactions are accounted for as of the trade date. Fair value measurement Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.
6
Al-Ahli Freestyle Saudi Equity Fund NOTES TO THE INTERIM FINANCIAL STATEMENTS (continued) At 30 June 2015 (unaudited)
3
SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair value measurement (continued) The fair value for financial instruments traded in active markets at the valuation date is based on their quoted price. Instruments for which no sale was reported on the valuation day are valued at the most recent bid price. Investments in mutual funds are valued at the unit price prevailing on the last valuation day of the period. Impairment of financial assets An assessment is made at 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 operations. If a financial asset is impaired, impairment is determined as follows: a) b) c)
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 operations; 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.
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: a) The rights to receive cash flows from the asset have expired; or b) 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; c) 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. Revenue recognition Realized gains and losses on investments sold are determined on an average cost basis. Dividends are recognized when the Fund’s right to receive is established. Increases or decreases in the difference between the cost and market value of the Fund’s portfolio of investments are classified as change in fair value of investments in the statement of operations. Foreign currency transactions Transactions during the period 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 liabilities 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 operations. Taxation / zakat Taxation / zakat is the obligation of the unitholders and therefore, no provision for such liability is made in the accompanying interim financial statements. Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents consist of bank balances and cash in transit, if any. 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.
7
Al-Ahli Freestyle Saudi Equity Fund NOTES TO THE INTERIM FINANCIAL STATEMENTS (continued) At 30 June 2015 (unaudited)
3
SIGNIFICANT ACCOUNTING POLICIES (continued)
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 realize the asset and settle the liability simultaneously. Revenue 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. 4
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. 5
HELD FOR TRADING INVESTMENTS
The composition of held for trading investments by industry sector is summarized below:
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 30 June 2015 (Unaudited)
8
% of Value
Cost SR’ 000
Value SR’ 000
16.96 16.28 14.65 12.95 12.85 8.29 6.83 6.08 5.11 ──── 100 ════
15,970 14,150 12,979 9,218 11,537 7,452 6,390 5,863 4,522 ───── 88,081 ═════
15,177 14,572 13,108 11,592 11,503 7,418 6,113 5,440 4,565 ───── 89,488 ═════
Al-Ahli Freestyle Saudi Equity Fund NOTES TO THE INTERIM FINANCIAL STATEMENTS (continued) At 30 June 2015 (unaudited) 6
UNIT TRANSACTIONS
Transactions in units are summarized as follows: For the period from 12 January 2015 to 30 June 2015 Units’ 000 (Unaudited) Units sold
94,411
Units reinvested
442
Units redeemed
(15,979) ────── 78,874 ══════
UNITS AT END OF THE PERIOD As at 30 June 2015, top five unitholders represented 21.37% of the Fund’s units. 7
RELATED PARTY TRANSACTIONS AND BALANCES
The Fund Manager’s investment in the Fund at 30 June 2015 was SR 4,754,000 : 4,111,300 units. The National Commercial Bank acts as the Fund’s banker. 8
LAST VALUATION DAY
The last valuation day for the period was 29 June 2015.
9
