Review report to the Unitholders
RIYAD EQUITY FUND 1 Open-Ended Fund (Managed By Riyad Capital) Interim Condensed Financial Statements (Un-Audited) For the six month period ended 30 June 2016 Together with the
Review report to the Unitholders
RIYAD EQUITY FUND 1 Open-Ended Fund (Managed By Riyad Capital) INTERIM CONDENSED BALANCE SHEET (UN-AUDITED) As at 30 June 2016 (Amounts in SAR)
Notes
2016
2015
10,428,838 159,198,287 172,767
12,937,668 237,851,906 663,511
169,799,892
251,453,085
779,439 -
1,153,651 10,000
779,439
1,163,651
169,020,453
250,289,434
13,316,543.75
13,818,449.89
12.69
18.11
ASSETS Cash at bank Held for trading investments Dividend receivable
7
Total assets LIABILITIES Accrued expenses Redemptions payable
10
Total liabilities Net asset attributable to the Unitholders Units in issue (numbers)
8
Net asset attributable to each unit
The accompanying notes 1 to 12 form an integral part of these interim condensed financial statements
2
RIYAD EQUITY FUND 1 Open-Ended Fund (Managed By Riyad Capital) INTERIM CONDENSED STATEMENT OF INCOME (UN-AUDITED) For the six month period ended 30 June 2016 (Amounts in SAR) 2016
2015
9
(16,489,003) 4,120,361 10,854 (12,357,788)
28,350,695 4,529,628 3,380 32,883,703
10 10
(1,506,493) (9,904) (1,516,397)
(2,272,169) (9,453) (2,281,622)
(13,874,185)
30,602,081
Notes Income/Loss Net (loss)/gain from held for trading investments Dividend income Special commission income Expenses Fund management fee Other expenses
Net (loss)/income for the period
The accompanying notes 1 to 12 form an integral part of these interim condensed financial statements
3
RIYAD EQUITY FUND 1 Open-Ended Fund (Managed By Riyad Capital) INTERIM CONDENSED STATEMENT OF CASH FLOWS (UN-AUDITED) For the six month period ended 30 June 2016 (Amounts in SAR) 2016
2015
(13,874,185)
30,602,081
12,582,653 (1,291,532)
(13,474,981) 17,127,100
(30,417) (136,533) (122,375) (1,580,857)
16,264,713 (648,459) (76,599) 32,666,755
Proceeds from issuance of units Payments for redemption of units Net cash used in financing activities
4,951 (2,190,205) (2,185,255)
3,271,650 (23,431,149) (20,159,499)
Net (decrease)/increase in cash at bank
(3,766,112)
12,507,256
Cash at bank at beginning of the period
14,194,950
430,412
Cash at bank at end of the period
10,428,838
12,937,668
CASH FLOWS FROM OPERATING ACTIVITIES Net (loss)/income for the period Adjustments to reconcile net income to net cash used in / generated from operating activities: Unrealized loss/gain on revaluation of held for trading investments Changes in operating assets and liabilities Held for trading investments Dividend receivable Accrued expenses Net cash used in/generated from operating activities CASH FLOWS FROM FINANCING ACTIVITIES
The accompanying notes 1 to 12 form an integral part of these interim condensed financial statements
4
RIYAD EQUITY FUND 1 Open-Ended Fund (Managed By Riyad Capital) INTERIM CONDENSED STATEMENT OF CHANGES IN NET ASSET ATTRIBUTABLE TO THE UNITHOLDERS (UN-AUDITED) FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2016 (AMOUNTS IN SAR) 2016
2015
Net assets attributable to the Unitholders at beginning of the period
185,079,893
239,856,852
Net (loss)/income for the period
(13,874,185)
30,602,081
4,951 (2,190,205) (2,185,255)
3,271,650 (23,441,149) (20,169,499)
169,020,453
250,289,434
Changes from unit transactions: Issuance of units Redemption of units Net changes from unit transactions Net assets attributable to the Unitholders at end of the period
The accompanying notes 1 to 12 form an integral part of these interim condensed financial statements
5
RIYAD EQUITY FUND 1 Open-Ended Fund (Managed By Riyad Capital) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UN-AUDITED) FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2016 1.
THE FUND AND ITS ACTIVITIES The Riyad Equity Fund 1 (the “Fund”) is an equity fund managed through an agreement between Riyad Capital (the “Fund Manager”) and the Fund investors (the “Unitholders”). The objective of the Fund is to achieve long term capital growth through an investment pool of equity securities of listed Saudi companies. In dealing with the Unitholders, the Fund Manager considers the Fund as an independent accounting unit. Accordingly, the Fund Management prepares a separate financial statement for the Fund. The management of the Fund is the responsibility of the Fund Manager. However, in accordance with the Fund’s Agreement, the Fund Manager can delegate or assign its duties to one or more of the financial institutions in the Kingdom of Saudi Arabia and overseas. Saudi Arabian Monetary Agency’s approval for the establishment of the Fund was granted in its letter number 531/MA/161 dated 15 Muharram 1412H (corresponding to 26 July 1991). The Fund commenced its operations on 3 December 1992.
2.
REGULATING AUTHORITY The Fund is governed by the Investment Fund Regulations (the “Regulations”) issued by Capital Market Authority (CMA) 3 Dhul Hijja 1427H (corresponding to 24 December 2006) detailing requirements for all investment funds within the Kingdom of Saudi Arabia.
3.
SUBSCRIPTION/ REDEMPTION The Fund is open for subscriptions/ redemptions of units on every Monday and Wednesday. The net assets value of the Fund is determined every Monday and Wednesday (each “Dealing Day”). The net assets value of the Fund for the purpose of purchase or sale of units is determined by dividing the net value of assets (fair value of Fund assets minus Fund liabilities) by the total number of outstanding fund units on the relevant Dealing Day.
4.
BASIS OF PRESENTATION
4.1
Statement of compliance These interim condensed financial statements have been prepared in accordance with generally accepted accounting standards applicable in the Kingdom of Saudi Arabia issued by the Saudi Organization of Certified Public Accountants. These interim financial statements have been presented in condensed form and do not include all the information presented in annual financial statements of the Fund; therefore, these interim condensed financial statements should be read in conjunction with the annual financial statements of the Fund for the year ended 31 December 2015. These interim condensed financial statements do not necessarily constitute an indication of the yearend financial statements. These interim condensed financial statements were approved by the Fund’s Board of Directors on 11 Dhual Qa’dah 1437H corresponding to 14 August 2016.
5
RIYAD EQUITY FUND 1 Open-Ended Fund (Managed By Riyad Capital) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UN-AUDITED) FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2016 4.
BASIS OF PRESENTATION (Continued)
4.2
Basis of measurement These interim condensed financial statements have been prepared under the historical cost convention, except for the measurement of investments held for trading at fair value, using accrual basis of accounting and the going concern concept.
4.3
Functional and presentation currency These interim condensed financial statements are presented in Saudi Arabian Riyals (SAR) which is the functional currency of the Fund. All financial information presented has been rounded to the nearest SAR.
4.4
Use of estimates and judgments In the ordinary course of business, the preparation of these interim condensed financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expense. 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 future periods affected.
5.
SIGNIFICANT ACCOUNTING AND RISK MANAGEMENT POLICIES The significant accounting policies used in the preparation of these interim condensed financial statements are consistent with those used and disclosed the annual financial statements of the Fund for the year ended 31 December 2015. Risk management policies are consistent with those used and disclosed in the annual financial statements of the Fund for the year ended 31 December 2015.
6.
MANAGEMENT FEE, ADMINISTRATION AND OTHER CHARGES On daily basis, the Fund Manager charges the Fund, a management fee at the rate of 1.5 percent per annum of the Fund's net asset value. The Fund Manager also recovers from the Fund any other expenses incurred on behalf of the Fund such as audit and legal fees, board compensation and other similar charges. These charges are not expected to exceed in total 0.2 percent per annum of the Fund’s net asset value. In addition, on daily basis the Fund Manager charges the Fund, custody and administration fees at the rate of 0.1 percent per annum and 0.2 percent per annum respectively of the Fund’s net asset value.
6
RIYAD EQUITY FUND 1 Open-Ended Fund (Managed By Riyad Capital) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UN-AUDITED) FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2016 (Amounts in SAR) 7.
HELD FOR TRADING INVESTMENTS
7.1
The Fund invests primarily in equity securities of listed Saudi companies. The market value of trading investment portfolio by industry sector is summarized as follows: Equities: Banking and Financial Services Retail Agriculture and Food Industries Petrochemical Industries Real Estate Development Cement Industrial Investment Energy and utilities Hotel and Tourism Building and construction Telecom and Information Technology Transportation Insurance Multi Investments
7.1 8.
2016
2015
51,916,615 14,410,497 18,761,926 18,657,693 14,237,343 8,607,330 7,251,624 2,758,770 5,759,470 7,007,757 5,697,713 3,801,069 330,480
73,528,665 39,488,257 26,669,392 17,875,668 17,658,156 16,212,929 13,123,044 11,153,086 8,449,978 6,874,686 6,818,045 -
159,198,287
237,851,906
The cost of above held for trading investments amounted to SAR 171.78 million (30 June 2015: SAR 224.37 million). UNIT TRANSACTIONS Transactions in units for the period are summarized as follows: (Units in numbers) 13,500,710.28
15,003,390.58
Units issued Units redeemed
378.46 (184,544.99)
186,984.61 (1,371,925.29)
Net change in units
(184,166.52)
(1,184,940.69)
13,316,543.75
13,818,449.89
Units at the beginning of the period
Units at the end of the period
7
RIYAD EQUITY FUND 1 Open-Ended Fund (Managed By Riyad Capital) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UN-AUDITED) FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2016 (Amounts in SAR) 9.
NET LOSS/GAIN FROM HELD FOR TRADING INVESTMENTS Realised loss/gain on sale of held for trading investments Unrealised loss/gain on revaluation of held for trading investments
10.
(3,906,350) (12,582,653)
14,875,714 13,474,981
(16,489,003)
28,350,695
TRANSACTIONS WITH RELATED PARTIES Related parties of the Fund include “Riyad Capital” being the Fund Manager, Riyad Bank (being the shareholder of Riyad Capital) and other funds managed by the Fund manager. In the ordinary course of its activities, the Fund transacts business with related parties. The related parties’ transactions are governed by limits set by the regulations issued by the CMA. All related party transactions are approved by the Fund Board of directors. Riyad Bank acts as a banker of the Fund and as at 30 June 2016 SAR 10,428,838 (30 June 2015: SAR 12,937,668) were held in current account of the Fund maintained with Riyad Bank. The significant related party transactions entered into by the Fund during the period and the balances resulting from such transactions are as follows: Related party
Riyad Capital
11.
Nature of transactions
Amount of transactions
Closing balance payable
2016
2015
2016
2015
Fund management fee
(1,506,493)
(2,272,169)
(774,487)
(1,148,898)
Expenses incurred on behalf of the Fund
(9,904)
(9,453)
(4,952)
(4,753)
FAIR VALUES OF FINANCIAL INSTRUMENTS 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. Financial instruments comprise financial assets and financial liabilities. The Fund’s financial assets consist of bank balance, held for trading investments and dividend receivable and financial liabilities consist of accrued expenses and redemption payable. For investments traded in an active market, fair value is determined by reference to quoted market bid prices. The fair values of other financial assets and liabilities are not materially different from their carrying values.
12.
LAST VALUATION DAY The last Valuation Day of the period was 29 June 2016 (30 June 2015: 29 June 2015).
8
Review report to the Unitholders
RIYAD EQUITY FUND 1 Open-Ended Fund (Managed By Riyad Capital) INTERIM CONDENSED BALANCE SHEET (UN-AUDITED) As at 30 June 2016 (Amounts in SAR)
Notes
2016
2015
10,428,838 159,198,287 172,767
12,937,668 237,851,906 663,511
169,799,892
251,453,085
779,439 -
1,153,651 10,000
779,439
1,163,651
169,020,453
250,289,434
13,316,543.75
13,818,449.89
12.69
18.11
ASSETS Cash at bank Held for trading investments Dividend receivable
7
Total assets LIABILITIES Accrued expenses Redemptions payable
10
Total liabilities Net asset attributable to the Unitholders Units in issue (numbers)
8
Net asset attributable to each unit
The accompanying notes 1 to 12 form an integral part of these interim condensed financial statements
2
RIYAD EQUITY FUND 1 Open-Ended Fund (Managed By Riyad Capital) INTERIM CONDENSED STATEMENT OF INCOME (UN-AUDITED) For the six month period ended 30 June 2016 (Amounts in SAR) 2016
2015
9
(16,489,003) 4,120,361 10,854 (12,357,788)
28,350,695 4,529,628 3,380 32,883,703
10 10
(1,506,493) (9,904) (1,516,397)
(2,272,169) (9,453) (2,281,622)
(13,874,185)
30,602,081
Notes Income/Loss Net (loss)/gain from held for trading investments Dividend income Special commission income Expenses Fund management fee Other expenses
Net (loss)/income for the period
The accompanying notes 1 to 12 form an integral part of these interim condensed financial statements
3
RIYAD EQUITY FUND 1 Open-Ended Fund (Managed By Riyad Capital) INTERIM CONDENSED STATEMENT OF CASH FLOWS (UN-AUDITED) For the six month period ended 30 June 2016 (Amounts in SAR) 2016
2015
(13,874,185)
30,602,081
12,582,653 (1,291,532)
(13,474,981) 17,127,100
(30,417) (136,533) (122,375) (1,580,857)
16,264,713 (648,459) (76,599) 32,666,755
Proceeds from issuance of units Payments for redemption of units Net cash used in financing activities
4,951 (2,190,205) (2,185,255)
3,271,650 (23,431,149) (20,159,499)
Net (decrease)/increase in cash at bank
(3,766,112)
12,507,256
Cash at bank at beginning of the period
14,194,950
430,412
Cash at bank at end of the period
10,428,838
12,937,668
CASH FLOWS FROM OPERATING ACTIVITIES Net (loss)/income for the period Adjustments to reconcile net income to net cash used in / generated from operating activities: Unrealized loss/gain on revaluation of held for trading investments Changes in operating assets and liabilities Held for trading investments Dividend receivable Accrued expenses Net cash used in/generated from operating activities CASH FLOWS FROM FINANCING ACTIVITIES
The accompanying notes 1 to 12 form an integral part of these interim condensed financial statements
4
RIYAD EQUITY FUND 1 Open-Ended Fund (Managed By Riyad Capital) INTERIM CONDENSED STATEMENT OF CHANGES IN NET ASSET ATTRIBUTABLE TO THE UNITHOLDERS (UN-AUDITED) FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2016 (AMOUNTS IN SAR) 2016
2015
Net assets attributable to the Unitholders at beginning of the period
185,079,893
239,856,852
Net (loss)/income for the period
(13,874,185)
30,602,081
4,951 (2,190,205) (2,185,255)
3,271,650 (23,441,149) (20,169,499)
169,020,453
250,289,434
Changes from unit transactions: Issuance of units Redemption of units Net changes from unit transactions Net assets attributable to the Unitholders at end of the period
The accompanying notes 1 to 12 form an integral part of these interim condensed financial statements
5
RIYAD EQUITY FUND 1 Open-Ended Fund (Managed By Riyad Capital) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UN-AUDITED) FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2016 1.
THE FUND AND ITS ACTIVITIES The Riyad Equity Fund 1 (the “Fund”) is an equity fund managed through an agreement between Riyad Capital (the “Fund Manager”) and the Fund investors (the “Unitholders”). The objective of the Fund is to achieve long term capital growth through an investment pool of equity securities of listed Saudi companies. In dealing with the Unitholders, the Fund Manager considers the Fund as an independent accounting unit. Accordingly, the Fund Management prepares a separate financial statement for the Fund. The management of the Fund is the responsibility of the Fund Manager. However, in accordance with the Fund’s Agreement, the Fund Manager can delegate or assign its duties to one or more of the financial institutions in the Kingdom of Saudi Arabia and overseas. Saudi Arabian Monetary Agency’s approval for the establishment of the Fund was granted in its letter number 531/MA/161 dated 15 Muharram 1412H (corresponding to 26 July 1991). The Fund commenced its operations on 3 December 1992.
2.
REGULATING AUTHORITY The Fund is governed by the Investment Fund Regulations (the “Regulations”) issued by Capital Market Authority (CMA) 3 Dhul Hijja 1427H (corresponding to 24 December 2006) detailing requirements for all investment funds within the Kingdom of Saudi Arabia.
3.
SUBSCRIPTION/ REDEMPTION The Fund is open for subscriptions/ redemptions of units on every Monday and Wednesday. The net assets value of the Fund is determined every Monday and Wednesday (each “Dealing Day”). The net assets value of the Fund for the purpose of purchase or sale of units is determined by dividing the net value of assets (fair value of Fund assets minus Fund liabilities) by the total number of outstanding fund units on the relevant Dealing Day.
4.
BASIS OF PRESENTATION
4.1
Statement of compliance These interim condensed financial statements have been prepared in accordance with generally accepted accounting standards applicable in the Kingdom of Saudi Arabia issued by the Saudi Organization of Certified Public Accountants. These interim financial statements have been presented in condensed form and do not include all the information presented in annual financial statements of the Fund; therefore, these interim condensed financial statements should be read in conjunction with the annual financial statements of the Fund for the year ended 31 December 2015. These interim condensed financial statements do not necessarily constitute an indication of the yearend financial statements. These interim condensed financial statements were approved by the Fund’s Board of Directors on 11 Dhual Qa’dah 1437H corresponding to 14 August 2016.
5
RIYAD EQUITY FUND 1 Open-Ended Fund (Managed By Riyad Capital) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UN-AUDITED) FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2016 4.
BASIS OF PRESENTATION (Continued)
4.2
Basis of measurement These interim condensed financial statements have been prepared under the historical cost convention, except for the measurement of investments held for trading at fair value, using accrual basis of accounting and the going concern concept.
4.3
Functional and presentation currency These interim condensed financial statements are presented in Saudi Arabian Riyals (SAR) which is the functional currency of the Fund. All financial information presented has been rounded to the nearest SAR.
4.4
Use of estimates and judgments In the ordinary course of business, the preparation of these interim condensed financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expense. 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 future periods affected.
5.
SIGNIFICANT ACCOUNTING AND RISK MANAGEMENT POLICIES The significant accounting policies used in the preparation of these interim condensed financial statements are consistent with those used and disclosed the annual financial statements of the Fund for the year ended 31 December 2015. Risk management policies are consistent with those used and disclosed in the annual financial statements of the Fund for the year ended 31 December 2015.
6.
MANAGEMENT FEE, ADMINISTRATION AND OTHER CHARGES On daily basis, the Fund Manager charges the Fund, a management fee at the rate of 1.5 percent per annum of the Fund's net asset value. The Fund Manager also recovers from the Fund any other expenses incurred on behalf of the Fund such as audit and legal fees, board compensation and other similar charges. These charges are not expected to exceed in total 0.2 percent per annum of the Fund’s net asset value. In addition, on daily basis the Fund Manager charges the Fund, custody and administration fees at the rate of 0.1 percent per annum and 0.2 percent per annum respectively of the Fund’s net asset value.
6
RIYAD EQUITY FUND 1 Open-Ended Fund (Managed By Riyad Capital) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UN-AUDITED) FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2016 (Amounts in SAR) 7.
HELD FOR TRADING INVESTMENTS
7.1
The Fund invests primarily in equity securities of listed Saudi companies. The market value of trading investment portfolio by industry sector is summarized as follows: Equities: Banking and Financial Services Retail Agriculture and Food Industries Petrochemical Industries Real Estate Development Cement Industrial Investment Energy and utilities Hotel and Tourism Building and construction Telecom and Information Technology Transportation Insurance Multi Investments
7.1 8.
2016
2015
51,916,615 14,410,497 18,761,926 18,657,693 14,237,343 8,607,330 7,251,624 2,758,770 5,759,470 7,007,757 5,697,713 3,801,069 330,480
73,528,665 39,488,257 26,669,392 17,875,668 17,658,156 16,212,929 13,123,044 11,153,086 8,449,978 6,874,686 6,818,045 -
159,198,287
237,851,906
The cost of above held for trading investments amounted to SAR 171.78 million (30 June 2015: SAR 224.37 million). UNIT TRANSACTIONS Transactions in units for the period are summarized as follows: (Units in numbers) 13,500,710.28
15,003,390.58
Units issued Units redeemed
378.46 (184,544.99)
186,984.61 (1,371,925.29)
Net change in units
(184,166.52)
(1,184,940.69)
13,316,543.75
13,818,449.89
Units at the beginning of the period
Units at the end of the period
7
RIYAD EQUITY FUND 1 Open-Ended Fund (Managed By Riyad Capital) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UN-AUDITED) FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2016 (Amounts in SAR) 9.
NET LOSS/GAIN FROM HELD FOR TRADING INVESTMENTS Realised loss/gain on sale of held for trading investments Unrealised loss/gain on revaluation of held for trading investments
10.
(3,906,350) (12,582,653)
14,875,714 13,474,981
(16,489,003)
28,350,695
TRANSACTIONS WITH RELATED PARTIES Related parties of the Fund include “Riyad Capital” being the Fund Manager, Riyad Bank (being the shareholder of Riyad Capital) and other funds managed by the Fund manager. In the ordinary course of its activities, the Fund transacts business with related parties. The related parties’ transactions are governed by limits set by the regulations issued by the CMA. All related party transactions are approved by the Fund Board of directors. Riyad Bank acts as a banker of the Fund and as at 30 June 2016 SAR 10,428,838 (30 June 2015: SAR 12,937,668) were held in current account of the Fund maintained with Riyad Bank. The significant related party transactions entered into by the Fund during the period and the balances resulting from such transactions are as follows: Related party
Riyad Capital
11.
Nature of transactions
Amount of transactions
Closing balance payable
2016
2015
2016
2015
Fund management fee
(1,506,493)
(2,272,169)
(774,487)
(1,148,898)
Expenses incurred on behalf of the Fund
(9,904)
(9,453)
(4,952)
(4,753)
FAIR VALUES OF FINANCIAL INSTRUMENTS 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. Financial instruments comprise financial assets and financial liabilities. The Fund’s financial assets consist of bank balance, held for trading investments and dividend receivable and financial liabilities consist of accrued expenses and redemption payable. For investments traded in an active market, fair value is determined by reference to quoted market bid prices. The fair values of other financial assets and liabilities are not materially different from their carrying values.
12.
LAST VALUATION DAY The last Valuation Day of the period was 29 June 2016 (30 June 2015: 29 June 2015).
8
