AL-AHLI SAUDI TRADING EQUITY FUND
AL-AHLI SAUDI TRADING 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 SAUDI TRADING EQUITY FUND (Managed by NCB Capital Company) INTERIM BALANCE SHEET As at 30 June 2016 Expressed in Saudi Arabian Riyals ‘000
Notes
30 June 2016 (Unaudited)
31December 2015 (Audited)
30 June 2015 (Unaudited)
ASSETS Cash and cash equivalents
7
114,237
132,294
47,583
Held for trading investments
9
850,333
840,953
1,246,771
827
2,344
2,344
-───────── 965,397
960 ──────── 976,551
-──────── 1,296,698
7 ───────── 965,390 ═════════ 124,190 ═════════ 7.7735 ═════════
47 ──────── 976,504 ════════ 125,014 ════════ 7.8111 ════════
46,108 ──────── 1,250,590 ════════ 123,212 ════════ 10.1499 ════════
Dividends receivable IPO deposit 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)
The accompanying notes 1 to 13 form integral part of these interim financial statements
2
AL-AHLI SAUDI TRADING 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
30 June 2015
19,959
18,670
Realised (loss) on sale of held for trading investments
(177,082)
(14,996)
Unrealised gain on measurement of held for trading investments
161,753
178,463
───────── 4,630 ─────────
───────── 182,137 ─────────
8,033
11,984
Audit fee
13
17
Shariah audit fee
13
14
Fund Board remuneration
8
9
CMA fee
4
4
297 ───────── 8,368 ───────── (3,738) ═════════
372 ───────── 12,400 ───────── 169,737 ═════════
Note INVESTMENT REVENUE Dividend income
Total revenue 8
EXPENSES Management fee
Administrative expenses Total expenses NET (LOSS) / INCOME FOR THE PERIOD
The accompanying notes 1 to 13 form integral part of these interim financial statements
3
AL-AHLI SAUDI TRADING 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
30 June 2015
(3,738)
169,737
8,368 (161,753) ───────── (157,123)
12,400 (178,463) ───────── 3,674
152,373 1,517 960
302,370 ---
(40) ───────── (2,313) ─────────
42,679 ───────── 348,723 ─────────
46,360 (62,104) ───────── (15,744) ───────── (18,057)
180,246 (491,658) ───────── (311,412) ───────── 37,311
132,294 ───────── 114,237 ═════════
10,272 ───────── 47,583 ═════════
Note Cash flow from operating activities Net (loss) / income for the period Adjustment for: Non-cash expenses Unrealised gain on held for trading investments
Changes in operating assets and liabilities: Decrease in held for trading investments Decrease in dividends receivable Decrease in IPO deposit (Decrease) / increase in payable to unit holders on account of redemptions Net cash (used in) / provided by operating activities Cash flow from financing activities Proceeds from units sold Value of units redeemed Net cash used in financing activities (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 SAUDI TRADING 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 (loss) / income for the period Decrease in net assets from unit transactions during the period
30 June 2016
30 June 2015
976,504
1,379,865
(3,738)
169,737
46,360
180,246
8,368
12,400
(62,104)
(491,658)
(7,376) ─────────
(299,012) ─────────
965,390 ═════════
1,250,590 ═════════
10
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)
The accompanying notes 1 to 13 form integral part of these interim financial statements
5
AL-AHLI SAUDI TRADING 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 Saudi Trading Equity Fund (the “Fund”) is a Shariah compliant, open-ended investment 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 Capital Market Authority's (CMA) Regulation No. 2-83-2005 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 through investing in listed companies in the Saudi equity market that comply with Shariah guidelines. The terms and conditions of the Fund were initially approved by the Saudi Arabian Monetary Agency (SAMA) and subsequently endorsed by the Capital Markets Authority (CMA) through their letter dated 18 Dhul Hijja 1429H (corresponding to 16 December 2008). The Fund commenced its activities on 1 October 2003. 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 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 and rebate language. The changes in the terms and conditions do not have any impact on these interim 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 becomes effective from 2 July 2016.
6
AL-AHLI SAUDI TRADING 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 Dealing 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 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 SAUDI TRADING 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 SAUDI TRADING 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 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 income. g)
Taxation / zakat
Taxation / zakat is the obligation of the Unitholders and therefore, no provision for such liability is made in these financial statements. h)
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 SAUDI TRADING 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% p.a., as set out in the Fund’s terms and conditions. The Fund Manager is also entitled to recover expenses incurred on behalf of the Fund relating to audit, custody, advisory, data processing and other similar charges. The maximum amount of such expenses that can be recovered from the Fund by the Fund Manager is restricted to 0.5% per annum of the Fund's net assets at the respective valuation days. These expenses have been recovered by the Fund Manager on an 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.
10
AL-AHLI SAUDI TRADING 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:
Industry Sector
Building & Construction Banking and Financial Services Cement Retail Telecommunication and Information Technology Agricultural and Food Industries Industrial Investment Transportation Energy and Utilities Insurance Real Estate Development Petrochemical Industries
Industry Sector
Banking and Financial Services Real Estate Development Transportation Telecommunication and Information Technology Agricultural and Food Industries Cement Industrial Investment Petrochemical Industries Hotel and Tourism Insurance Retail
30 June 2016 (Unaudited) % of Total Value Cost
Fair Value
15.14 14.60 12.19 10.87
128,139 140,933 93,240 81,674
128,774 124,138 103,651 92,467
9.74 8.54 8.49 8.20 3.95 3.43 2.89 1.96 ──────── 100 ════════
84,989 78,423 72,385 73,955 29,473 21,516 31,990 15,892 ──────── 852,609 ════════
82,801 72,623 72,208 69,702 33,629 29,143 24,583 16,614 ──────── 850,333 ════════
31 December 2015 (Audited) % of Total Value Cost
Fair Value
20.93 17.66 11.99
235,204 170,113 96,081
176,031 148,547 100,797
11.80 9.85 8.23 6.99 4.57 4.15 2.57 1.26 ──────── 100 ════════
99,096 93,608 111,042 69,295 52,319 46,267 21,116 10,842 ──────── 1,004,983 ════════
99,258 82,829 69,206 58,757 38,394 34,881 21,635 10,618 ──────── 840,953 ════════
11
AL-AHLI SAUDI TRADING 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)
Industry Sector
Banking and Financial Services Petrochemical Industries Transportation Real Estate Development Agricultural and Food Industries Cement Telecommunication and Information Technology Hotel and Tourism Industrial Investment Multi Investment Sector Retail
10
30 June 2015 (Unaudited) % of Total Value Cost
Fair Value
22.24 17.57 14.29 10.62 8.93 7.25
287,177 216,065 134,820 113,645 102,698 98,857
277,340 219,019 178,165 132,429 111,321 90,362
6.65 6.02 3.76 1.99 0.68 ──────── 100 ════════
85,125 72,572 50,403 25,248 8,357 ──────── 1,194,967 ════════
82,966 74,942 46,884 24,862 8,481 ──────── 1,246,771 ════════
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 six months period 30 June 2015 Units 000
125,014
154,012
Units sold
6,536
17,269
Units reinvested
1,135
1,245
Units redeemed
(8,495)
(49,314)
(824) ───────── 124,190 ═════════
(30,800) ───────── 123,212 ═════════
Units at the beginning of the period (audited)
Net increase in units during the period Units at the end of the period (unaudited)
As at 30 June 2016, top five Unitholders represented 15.94% (30 June 2015: 14.30%) of the Fund’s units.
12
AL-AHLI SAUDI TRADING 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)
Fund Manager Shareholder of Fund Manager and Banker to the Fund Unitholder Unitholder Unitholder
Al-Ahli Multi Asset Conservative Fund Al-Ahli Multi Asset Moderate Fund Al-Ahli 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 2016 2015
Amount of transactions 2016 2015
Related party
Nature of transaction
NCBC
Management Fee
8,033
11,984
Expenses paid on behalf of the fund
335
416
Al-Alhli Multi Asset Conservative Fund
Subscription of units
6,800
--
Redemption of units
--
7,855
Al-Ahli Multi Asset Moderate Fund
Subscription of units
6,500
--
Redemption of units
--
8,545
Al-Ahli Multi Asset Growth Fund
Subscription of units
3,800
--
Redemption of units
--
7,685
12
46
--
7,929
--
7,579
--
4,431
--
LAST VALUATION DAY
The last valuation day for the period was 30 June 2016 (30 June 2015: 30 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.
13
AL-AHLI SAUDI TRADING EQUITY FUND (Managed by NCB Capital Company) INTERIM BALANCE SHEET As at 30 June 2016 Expressed in Saudi Arabian Riyals ‘000
Notes
30 June 2016 (Unaudited)
31December 2015 (Audited)
30 June 2015 (Unaudited)
ASSETS Cash and cash equivalents
7
114,237
132,294
47,583
Held for trading investments
9
850,333
840,953
1,246,771
827
2,344
2,344
-───────── 965,397
960 ──────── 976,551
-──────── 1,296,698
7 ───────── 965,390 ═════════ 124,190 ═════════ 7.7735 ═════════
47 ──────── 976,504 ════════ 125,014 ════════ 7.8111 ════════
46,108 ──────── 1,250,590 ════════ 123,212 ════════ 10.1499 ════════
Dividends receivable IPO deposit 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)
The accompanying notes 1 to 13 form integral part of these interim financial statements
2
AL-AHLI SAUDI TRADING 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
30 June 2015
19,959
18,670
Realised (loss) on sale of held for trading investments
(177,082)
(14,996)
Unrealised gain on measurement of held for trading investments
161,753
178,463
───────── 4,630 ─────────
───────── 182,137 ─────────
8,033
11,984
Audit fee
13
17
Shariah audit fee
13
14
Fund Board remuneration
8
9
CMA fee
4
4
297 ───────── 8,368 ───────── (3,738) ═════════
372 ───────── 12,400 ───────── 169,737 ═════════
Note INVESTMENT REVENUE Dividend income
Total revenue 8
EXPENSES Management fee
Administrative expenses Total expenses NET (LOSS) / INCOME FOR THE PERIOD
The accompanying notes 1 to 13 form integral part of these interim financial statements
3
AL-AHLI SAUDI TRADING 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
30 June 2015
(3,738)
169,737
8,368 (161,753) ───────── (157,123)
12,400 (178,463) ───────── 3,674
152,373 1,517 960
302,370 ---
(40) ───────── (2,313) ─────────
42,679 ───────── 348,723 ─────────
46,360 (62,104) ───────── (15,744) ───────── (18,057)
180,246 (491,658) ───────── (311,412) ───────── 37,311
132,294 ───────── 114,237 ═════════
10,272 ───────── 47,583 ═════════
Note Cash flow from operating activities Net (loss) / income for the period Adjustment for: Non-cash expenses Unrealised gain on held for trading investments
Changes in operating assets and liabilities: Decrease in held for trading investments Decrease in dividends receivable Decrease in IPO deposit (Decrease) / increase in payable to unit holders on account of redemptions Net cash (used in) / provided by operating activities Cash flow from financing activities Proceeds from units sold Value of units redeemed Net cash used in financing activities (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 SAUDI TRADING 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 (loss) / income for the period Decrease in net assets from unit transactions during the period
30 June 2016
30 June 2015
976,504
1,379,865
(3,738)
169,737
46,360
180,246
8,368
12,400
(62,104)
(491,658)
(7,376) ─────────
(299,012) ─────────
965,390 ═════════
1,250,590 ═════════
10
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)
The accompanying notes 1 to 13 form integral part of these interim financial statements
5
AL-AHLI SAUDI TRADING 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 Saudi Trading Equity Fund (the “Fund”) is a Shariah compliant, open-ended investment 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 Capital Market Authority's (CMA) Regulation No. 2-83-2005 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 through investing in listed companies in the Saudi equity market that comply with Shariah guidelines. The terms and conditions of the Fund were initially approved by the Saudi Arabian Monetary Agency (SAMA) and subsequently endorsed by the Capital Markets Authority (CMA) through their letter dated 18 Dhul Hijja 1429H (corresponding to 16 December 2008). The Fund commenced its activities on 1 October 2003. 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 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 and rebate language. The changes in the terms and conditions do not have any impact on these interim 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 becomes effective from 2 July 2016.
6
AL-AHLI SAUDI TRADING 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 Dealing 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 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 SAUDI TRADING 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 SAUDI TRADING 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 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 income. g)
Taxation / zakat
Taxation / zakat is the obligation of the Unitholders and therefore, no provision for such liability is made in these financial statements. h)
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 SAUDI TRADING 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% p.a., as set out in the Fund’s terms and conditions. The Fund Manager is also entitled to recover expenses incurred on behalf of the Fund relating to audit, custody, advisory, data processing and other similar charges. The maximum amount of such expenses that can be recovered from the Fund by the Fund Manager is restricted to 0.5% per annum of the Fund's net assets at the respective valuation days. These expenses have been recovered by the Fund Manager on an 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.
10
AL-AHLI SAUDI TRADING 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:
Industry Sector
Building & Construction Banking and Financial Services Cement Retail Telecommunication and Information Technology Agricultural and Food Industries Industrial Investment Transportation Energy and Utilities Insurance Real Estate Development Petrochemical Industries
Industry Sector
Banking and Financial Services Real Estate Development Transportation Telecommunication and Information Technology Agricultural and Food Industries Cement Industrial Investment Petrochemical Industries Hotel and Tourism Insurance Retail
30 June 2016 (Unaudited) % of Total Value Cost
Fair Value
15.14 14.60 12.19 10.87
128,139 140,933 93,240 81,674
128,774 124,138 103,651 92,467
9.74 8.54 8.49 8.20 3.95 3.43 2.89 1.96 ──────── 100 ════════
84,989 78,423 72,385 73,955 29,473 21,516 31,990 15,892 ──────── 852,609 ════════
82,801 72,623 72,208 69,702 33,629 29,143 24,583 16,614 ──────── 850,333 ════════
31 December 2015 (Audited) % of Total Value Cost
Fair Value
20.93 17.66 11.99
235,204 170,113 96,081
176,031 148,547 100,797
11.80 9.85 8.23 6.99 4.57 4.15 2.57 1.26 ──────── 100 ════════
99,096 93,608 111,042 69,295 52,319 46,267 21,116 10,842 ──────── 1,004,983 ════════
99,258 82,829 69,206 58,757 38,394 34,881 21,635 10,618 ──────── 840,953 ════════
11
AL-AHLI SAUDI TRADING 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)
Industry Sector
Banking and Financial Services Petrochemical Industries Transportation Real Estate Development Agricultural and Food Industries Cement Telecommunication and Information Technology Hotel and Tourism Industrial Investment Multi Investment Sector Retail
10
30 June 2015 (Unaudited) % of Total Value Cost
Fair Value
22.24 17.57 14.29 10.62 8.93 7.25
287,177 216,065 134,820 113,645 102,698 98,857
277,340 219,019 178,165 132,429 111,321 90,362
6.65 6.02 3.76 1.99 0.68 ──────── 100 ════════
85,125 72,572 50,403 25,248 8,357 ──────── 1,194,967 ════════
82,966 74,942 46,884 24,862 8,481 ──────── 1,246,771 ════════
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 six months period 30 June 2015 Units 000
125,014
154,012
Units sold
6,536
17,269
Units reinvested
1,135
1,245
Units redeemed
(8,495)
(49,314)
(824) ───────── 124,190 ═════════
(30,800) ───────── 123,212 ═════════
Units at the beginning of the period (audited)
Net increase in units during the period Units at the end of the period (unaudited)
As at 30 June 2016, top five Unitholders represented 15.94% (30 June 2015: 14.30%) of the Fund’s units.
12
AL-AHLI SAUDI TRADING 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)
Fund Manager Shareholder of Fund Manager and Banker to the Fund Unitholder Unitholder Unitholder
Al-Ahli Multi Asset Conservative Fund Al-Ahli Multi Asset Moderate Fund Al-Ahli 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 2016 2015
Amount of transactions 2016 2015
Related party
Nature of transaction
NCBC
Management Fee
8,033
11,984
Expenses paid on behalf of the fund
335
416
Al-Alhli Multi Asset Conservative Fund
Subscription of units
6,800
--
Redemption of units
--
7,855
Al-Ahli Multi Asset Moderate Fund
Subscription of units
6,500
--
Redemption of units
--
8,545
Al-Ahli Multi Asset Growth Fund
Subscription of units
3,800
--
Redemption of units
--
7,685
12
46
--
7,929
--
7,579
--
4,431
--
LAST VALUATION DAY
The last valuation day for the period was 30 June 2016 (30 June 2015: 30 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.
13
