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MEFIC LOCAL EQUITY FUND Managed by MIDDLE EAST FINANCIAL INVESTMENT COMPANY INTERIM CONDENSED FINANCIAL STATEMENTS (Unaudited) For the six-months period ended June 30, 2016 together with the Independent Auditors’ Review Report to the Unitholders
MEFIC LOCAL EQUITY FUND MANAGED BY MIDDLE EAST FINANCIAL INVESTMENT COMPANY UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REVIEW REPORT For the six-months period ended 30 June 2016
INDEX
PAGE
Independent auditor’s review report
2
Interim balance sheet
3
Interim statement of income
4
Interim statement of cash flows
5
Interim statement of changes in net assets attributable to unitholders
6
Notes to the interim condensed financial statements
7 - 11
MEFIC LOCAL EQUITY FUND MANAGED BY MIDDLE EAST FINANCIAL INVESTMENT COMPANY INTERIM BALANCE SHEET As at 30 June 2016 (Saudi Riyals)
Notes
30 June 2016
30 June 2015
ASSETS Cash and cash equivalents Investments held for trading Dividends receivable Total assets
7 8
1,299,431 7,340,035 8,200 8,647,666
626,521 10,041,787 10,668,308
9 9
10,800 32,340 43,140
13,660 13,661 27,321
8,604,526
10,640,987
109,632.78
109,842.08
78.48
96.88
LIABILITIES Management fee payable Other expenses payable Total liabilities Net assets attributable to the Unitholders Units in issue (Numbers) Net assets value – per unit (Saudi Riyals)
The accompanying notes 1 to 13 form an integral part of these financial statements. -3-
MEFIC LOCAL EQUITY FUND MANAGED BY MIDDLE EAST FINANCIAL INVESTMENT COMPANY INTERIM STATEMENT OF INCOME (Unaudited) For the six-months period ended June 30, 2016 (Saudi Riyals)
Notes 30 June 2016
For the period from 03 May 2015 to 30 June 2015
(209,985) 370,598 160,613 180,991 52 341,656
(4,874) (305,541) (310,415) 4,010 (306,405)
(61,819) (61,819) (123,638)
(26,304) (26,304) (52,608)
218,018
(359,013)
INCOME - Realised loss on disposal of investments held for trading - Unrealised gain / (loss) on investments held for trading Net gain / (loss) from investments held for trading Dividend income Other income Total income EXPENSES Management fee Other expenses Total expenses NET INCOME / (LOSS) FOR THE PERIOD
6 6
The accompanying notes 1 to 13 form an integral part of these financial statements. - 4-
MEFIC LOCAL EQUITY FUND MANAGED BY MIDDLE EAST FINANCIAL INVESTMENT COMPANY INTERIM STATEMENT OF CASH FLOWS (Unaudited) For the six-months period ended June 30, 2016 (Saudi Riyals) For the period from 03 May 2015 to 30 June 2015
30 June 2016 CASH FLOWS FROM OPERATING ACTIVITIES Net income / (loss) for the period Adjustments for: Realized loss on investments held for trading Unrealized (gain)/loss on investments held for trading
218,018
(359,013)
209,985 (370,598) 57,405
4,874 305,541 (48,598)
(8,200) (104) 10,870 (1,084,708) (1,024,737)
13,660 13,661 (10,352,202) (10,373,479)
-
11,000,000 11,000,000
(1,024,737) 2,324,168 1,299,431
626,521 626,521
Changes in operating assets and liabilities: Dividends receivable Management fees payable Other expenses payable Investments held for trading - net Net cash used in operating activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from subscription of units Net cash (used in)/generated from financing activities Net (decrease)/increase in cash and cash equivalent Cash and cash equivalent at the beginning of the period Cash and cash equivalent at the end of the period
The accompanying notes 1 to 13 form an integral part of these financial statements. - 5-
MEFIC LOCAL EQUITY FUND MANAGED BY MIDDLE EAST FINANCIAL INVESTMENT COMPANY INTERIM STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS (Unaudited) For the six-months period ended 30 June 30, 2016 (Saudi Riyals)
30 June 2016
For the period from 03 May 2015 to 30 June 2015
Net assets at January 1 Proceeds from issuance of units Net income / (loss) for the period Net change from unit transactions
8,386,508 218,018 -
11,000,000 (359,013) 11,000,000
Net assets value at June 30
8,604,526
10,640,987
UNITS TRANSACTIONS Units at the beginning of the period Units issued
Numbers 109,632.78 -
109,842.08
Units at the end of the period
109,632.78
109,842.08
The accompanying notes 1 to 13 form an integral part of these financial statements. - 6-
MEFIC LOCAL EQUITY FUND MANAGED BY MIDDLE EAST FINANCIAL INVESTMENT COMPANY NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (Unaudited) For the six months period ended 30 June 2016 (Saudi Riyals) 1.
THE FUND AND ITS ACTIVITIES MEFIC Local Equity Fund (the “Fund”) is an open-ended investment fund established and managed through an agreement between Middle East Financial Investment Company (the “Fund Manager”) and the Fund Investors (the “Unitholders”). The Fund aims to provide long-term capital growth by investing in Saudi equity market, IPO funds, Murabaha funds, Money market and equity funds in accordance with Shariah investment guidelines of the Fund manager’s Shariah Committee. The Fund commenced its operations on 15 Rajab 1436H (corresponding to 03 May 2015). In dealing with the Unitholders, the Fund Manager considers the Fund as an independent accounting unit. Accordingly, the Fund Manager prepares separate financial statements for the Fund. The interim results of the Fund may not be an indicator of its annual results of the operations.
2.
REGULATORY AUTHORITY The Fund is governed by the Investment Fund Regulations (“the Regulations”) issued by Capital Market Authority (“CMA”) pursuant to its resolution number 1–219–2006 dated 3 Dhul Hajj 1427 H (corresponding to 24 December 2006) based on the Capital Market Law issued by the Royal Decree No. M/30 dated 2 Jumada Al Akhir 1424 H (corresponding to 31 July 2003).
3.
SUBSCRIPTION / REDEMPTION (DEALING DAY & VALUATION DAY) Subscription / redemption requests will be accepted on all days on which the Tadawul is open. The value of the Fund’s portfolio is determined twice weekly on Monday and Thursday (each being a “Valuation Day”). The net asset 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 the Fund’s assets minus fund liabilities) by the total number of outstanding fund units on the relevant valuation day.
4.
BASIS OF PREPARATION
a)
Statement of compliance These interim condensed financial statements have been prepared in accordance with generally accepted accounting standards in the Kingdom of Saudi Arabia issued by the Saudi Organization of Certified Public Accountants (SOCPA).
b)
Basis of measurement These interim condensed financial statements have been prepared under the historical cost convention except for held for trading investments which are carried at fair value, using the accrual basis of accounting and the going concern concept.
c)
Functional and presentation currency These financial statements have been presented in Saudi Riyals (SR), which is the functional currency of the Fund. - 7-
MEFIC LOCAL EQUITY FUND MANAGED BY MIDDLE EAST FINANCIAL INVESTMENT COMPANY NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (Unaudited) For the six months period ended 30 June 2016 (Saudi Riyals) 3.
BASIS OF PREPARATION (Continued)
d)
Use of estimates and judgment The preparation of these 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 future years affected.
5.
SIGNIFICANT ACCOUNTING POLICIES The significant accounting and risk management policies used in the preparation of these interim condensed financial statements are consistent with those used and disclosed in the financial statements for the period ended 03 May 2015 to 31 December 2015.
6.
MANAGEMENT FEE, ADMINISTRATION AND OTHER CHARGES The Fund Manager charges each investor a subscription fee of a percentage not exceeding 1.5% of the subscribed amount to cover administration costs and is netted off against proceeds from issuance of units. Under the terms and conditions of the Fund, the Fund is liable to pay the following expenses to the Fund Manager: - Management fee at the rate of 1.50% per annum of the net assets value of the Fund at each valuation day, payable monthly. - Other expenses are charged at the rate of 1.50% of the net asset value of the fund at each valuation day, payable monthly.
7.
CASH AND CASH EQUIVALENTS As at 30 June 2016, the cash and cash equivalent include an amount of SR 1.28 million (30 June 2015: 0.63 million) which is held with the Fund Manager as custodian. The Fund Manager is authorized to utilize these funds for the purpose of trading in securities on behalf of the Fund. The remaining balance is held in the current account in a local bank.
8.
INVESTMENTS HELD FOR TRADING Note Equity investments Investment in mutual fund units
8.1 & 8.2 8.3 & 8.4
30 June 2016
30 June 2015
6,424,230 915,805
8,994,990 1,046,797
7,340,035
10,041,787
- 8-
MEFIC LOCAL EQUITY FUND MANAGED BY MIDDLE EAST FINANCIAL INVESTMENT COMPANY NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (Unaudited) For the six-months period ended 30 June 2016 (Saudi Riyals) 8.
INVESTMENTS HELD FOR TRADING (Continued)
8.1 The sector-wise composition of investments held for trading is summarized as follows: Fair value as at Retail Agriculture and food Insurance Cement Transport Industrial investment Petrochemical industries Hotel & Tourism Banks Telecommunication & Information Technology
30 June 2016 1,514,230 939,532 609,316 591,960 509,913 183,500 508,723 1,160,289 406,767
30 June 2015 1,162,489 1,502,133 287,955 462,908 540,002 449,960 1,901,319 517,450 1,623,754 547,020
6,424,230
8,994,990
8.2 As at 30 June 2016, cost of the above-mentioned investments held for trading amounted to SR 6.12 million (June 30 2015 SR 9.35 million). The above investments are in the equity shares quoted on Tadawul. 8.3 Detail of investment in units of mutual fund comprises the following: Fair value as at 30 June 2015 30 June 2016
Quoted MEFIC IPO Fund
915,805
1,046,797
8.4 As at 30 June 2016, cost of the above mentioned investment in the units of mutual fund amounted to SR 844,880 (30 June 2015: SR 1,000,000). The units of the above mutual fund are quoted on Tadawul. 9.
TRANSACTIONS AND BALANCES WITH RELATED PARTIES Related parties of the Fund include the Unitholders, the Fund Manager and other funds managed by the Fund manager. In the ordinary course of its activities, the Fund transacts business with related parties. Related party transactions are in accordance with the terms and conditions of the Fund. All transactions with related parties are carried out based on mutually agreed prices under formal agreement. Related party transactions for the period are described as under: Related party Middle East Financial Investment Company (“the Fund Manager”)
Nature of transaction
For the period 30 June 2016
For the period from 03 May 2015 to 30 June 2015
Management fees
61,819
26,304
Other expenses
61,819
26,304 - 9-
MEFIC LOCAL EQUITY FUND MANAGED BY MIDDLE EAST FINANCIAL INVESTMENT COMPANY NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (Unaudited) For the six-months period ended 30 June 2016 (Saudi Riyals) 9.
TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Continued) The above transactions during the period resulted in the following balances due to related party: Related party Middle East Financial Investment Company (“the Fund Manager”)
Nature of balance
Management fees payable Other expenses payable
30 June 2016
30 June 2015
10,800
13,660
32,340
13,661
As at 30 June 2016 the Fund has investment of SR 915,805 (30 June 2015: SR 1,046,797) in MEFIC IPO Fund, a fund managed by the Fund Manager. 10. FINANCIAL RISK MANAGEMENT Credit risk Credit risk is the risk that one party to a financial instrument fails to discharge an obligation and cause other party to incur a financial loss. The Fund is exposed to credit risk on its bank balance and dividend receivables. However, the bank balance is maintained with reputed local bank in the Kingdom of Saudi Arabia and the receivable is against dividend from reputable companies listed in the Kingdom of Saudi Arabia. Therefore, the Fund Manager believes that the Fund does not have any significant credit risk. Equity price risk Equity price risk is the risk that the fair value of equity investments will decrease as a result of changes in the levels of equity indices and the value of individual stocks. The Fund is exposed to equity price risk arising from its investments in equity shares. The Fund Manager endeavors to minimize the risk through diversification across various sectors of the Saudi stock market and in the Gulf markets. Further, the Fund Manager has established risk guidelines to manage its equity price risk. Liquidity risk Liquidity risk is the risk that the Fund may encounter difficulty in generating funds to meet commitments associated with financial liabilities which comprise of fund management and other expenses payable. The Fund Manager monitors the liquidity requirements on a regular basis and ensures that sufficient funds are available to meet any commitments as they arise. Currency risk Currency risk is the risk that the value of a financial instrument may fluctuate due to change in the foreign exchange rates. The financial instruments of the Fund i.e. cash and payables are denominated in Saudi Arabian Riyals. Accordingly, the Fund is not exposed to any currency risk.
- 10-
MEFIC LOCAL EQUITY FUND MANAGED BY MIDDLE EAST FINANCIAL INVESTMENT COMPANY NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (Unaudited) For the six-months period ended 30 June 2016 (Saudi Riyals) 11. FAIR VALUE OF FINANCIAL INSTRUMENTS 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. Financial instruments comprise financial assets and financial liabilities. The Fund’s financial assets consist of investments held for trading and cash at bank; its financial liabilities are fees payable. Investments held for trading are carried at fair value. The fair value of other financial instruments is not materially different from their carrying values. 12. LAST VALUATION DATE The last valuation date of net asset value of the fund for the period was 30 June 2016 (2015: 30 June 2015). 13. APPROVAL OF INTERIM CONDENSED FINANCIAL STATEMENTS These interim condensed financial statements were approved by the Fund’s Board on 5 Dhul Qa’ada 1437H corresponding to 8 August 2016G.
- 11-
MEFIC LOCAL EQUITY FUND MANAGED BY MIDDLE EAST FINANCIAL INVESTMENT COMPANY UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REVIEW REPORT For the six-months period ended 30 June 2016
INDEX
PAGE
Independent auditor’s review report
2
Interim balance sheet
3
Interim statement of income
4
Interim statement of cash flows
5
Interim statement of changes in net assets attributable to unitholders
6
Notes to the interim condensed financial statements
7 - 11
MEFIC LOCAL EQUITY FUND MANAGED BY MIDDLE EAST FINANCIAL INVESTMENT COMPANY INTERIM BALANCE SHEET As at 30 June 2016 (Saudi Riyals)
Notes
30 June 2016
30 June 2015
ASSETS Cash and cash equivalents Investments held for trading Dividends receivable Total assets
7 8
1,299,431 7,340,035 8,200 8,647,666
626,521 10,041,787 10,668,308
9 9
10,800 32,340 43,140
13,660 13,661 27,321
8,604,526
10,640,987
109,632.78
109,842.08
78.48
96.88
LIABILITIES Management fee payable Other expenses payable Total liabilities Net assets attributable to the Unitholders Units in issue (Numbers) Net assets value – per unit (Saudi Riyals)
The accompanying notes 1 to 13 form an integral part of these financial statements. -3-
MEFIC LOCAL EQUITY FUND MANAGED BY MIDDLE EAST FINANCIAL INVESTMENT COMPANY INTERIM STATEMENT OF INCOME (Unaudited) For the six-months period ended June 30, 2016 (Saudi Riyals)
Notes 30 June 2016
For the period from 03 May 2015 to 30 June 2015
(209,985) 370,598 160,613 180,991 52 341,656
(4,874) (305,541) (310,415) 4,010 (306,405)
(61,819) (61,819) (123,638)
(26,304) (26,304) (52,608)
218,018
(359,013)
INCOME - Realised loss on disposal of investments held for trading - Unrealised gain / (loss) on investments held for trading Net gain / (loss) from investments held for trading Dividend income Other income Total income EXPENSES Management fee Other expenses Total expenses NET INCOME / (LOSS) FOR THE PERIOD
6 6
The accompanying notes 1 to 13 form an integral part of these financial statements. - 4-
MEFIC LOCAL EQUITY FUND MANAGED BY MIDDLE EAST FINANCIAL INVESTMENT COMPANY INTERIM STATEMENT OF CASH FLOWS (Unaudited) For the six-months period ended June 30, 2016 (Saudi Riyals) For the period from 03 May 2015 to 30 June 2015
30 June 2016 CASH FLOWS FROM OPERATING ACTIVITIES Net income / (loss) for the period Adjustments for: Realized loss on investments held for trading Unrealized (gain)/loss on investments held for trading
218,018
(359,013)
209,985 (370,598) 57,405
4,874 305,541 (48,598)
(8,200) (104) 10,870 (1,084,708) (1,024,737)
13,660 13,661 (10,352,202) (10,373,479)
-
11,000,000 11,000,000
(1,024,737) 2,324,168 1,299,431
626,521 626,521
Changes in operating assets and liabilities: Dividends receivable Management fees payable Other expenses payable Investments held for trading - net Net cash used in operating activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from subscription of units Net cash (used in)/generated from financing activities Net (decrease)/increase in cash and cash equivalent Cash and cash equivalent at the beginning of the period Cash and cash equivalent at the end of the period
The accompanying notes 1 to 13 form an integral part of these financial statements. - 5-
MEFIC LOCAL EQUITY FUND MANAGED BY MIDDLE EAST FINANCIAL INVESTMENT COMPANY INTERIM STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS (Unaudited) For the six-months period ended 30 June 30, 2016 (Saudi Riyals)
30 June 2016
For the period from 03 May 2015 to 30 June 2015
Net assets at January 1 Proceeds from issuance of units Net income / (loss) for the period Net change from unit transactions
8,386,508 218,018 -
11,000,000 (359,013) 11,000,000
Net assets value at June 30
8,604,526
10,640,987
UNITS TRANSACTIONS Units at the beginning of the period Units issued
Numbers 109,632.78 -
109,842.08
Units at the end of the period
109,632.78
109,842.08
The accompanying notes 1 to 13 form an integral part of these financial statements. - 6-
MEFIC LOCAL EQUITY FUND MANAGED BY MIDDLE EAST FINANCIAL INVESTMENT COMPANY NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (Unaudited) For the six months period ended 30 June 2016 (Saudi Riyals) 1.
THE FUND AND ITS ACTIVITIES MEFIC Local Equity Fund (the “Fund”) is an open-ended investment fund established and managed through an agreement between Middle East Financial Investment Company (the “Fund Manager”) and the Fund Investors (the “Unitholders”). The Fund aims to provide long-term capital growth by investing in Saudi equity market, IPO funds, Murabaha funds, Money market and equity funds in accordance with Shariah investment guidelines of the Fund manager’s Shariah Committee. The Fund commenced its operations on 15 Rajab 1436H (corresponding to 03 May 2015). In dealing with the Unitholders, the Fund Manager considers the Fund as an independent accounting unit. Accordingly, the Fund Manager prepares separate financial statements for the Fund. The interim results of the Fund may not be an indicator of its annual results of the operations.
2.
REGULATORY AUTHORITY The Fund is governed by the Investment Fund Regulations (“the Regulations”) issued by Capital Market Authority (“CMA”) pursuant to its resolution number 1–219–2006 dated 3 Dhul Hajj 1427 H (corresponding to 24 December 2006) based on the Capital Market Law issued by the Royal Decree No. M/30 dated 2 Jumada Al Akhir 1424 H (corresponding to 31 July 2003).
3.
SUBSCRIPTION / REDEMPTION (DEALING DAY & VALUATION DAY) Subscription / redemption requests will be accepted on all days on which the Tadawul is open. The value of the Fund’s portfolio is determined twice weekly on Monday and Thursday (each being a “Valuation Day”). The net asset 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 the Fund’s assets minus fund liabilities) by the total number of outstanding fund units on the relevant valuation day.
4.
BASIS OF PREPARATION
a)
Statement of compliance These interim condensed financial statements have been prepared in accordance with generally accepted accounting standards in the Kingdom of Saudi Arabia issued by the Saudi Organization of Certified Public Accountants (SOCPA).
b)
Basis of measurement These interim condensed financial statements have been prepared under the historical cost convention except for held for trading investments which are carried at fair value, using the accrual basis of accounting and the going concern concept.
c)
Functional and presentation currency These financial statements have been presented in Saudi Riyals (SR), which is the functional currency of the Fund. - 7-
MEFIC LOCAL EQUITY FUND MANAGED BY MIDDLE EAST FINANCIAL INVESTMENT COMPANY NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (Unaudited) For the six months period ended 30 June 2016 (Saudi Riyals) 3.
BASIS OF PREPARATION (Continued)
d)
Use of estimates and judgment The preparation of these 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 future years affected.
5.
SIGNIFICANT ACCOUNTING POLICIES The significant accounting and risk management policies used in the preparation of these interim condensed financial statements are consistent with those used and disclosed in the financial statements for the period ended 03 May 2015 to 31 December 2015.
6.
MANAGEMENT FEE, ADMINISTRATION AND OTHER CHARGES The Fund Manager charges each investor a subscription fee of a percentage not exceeding 1.5% of the subscribed amount to cover administration costs and is netted off against proceeds from issuance of units. Under the terms and conditions of the Fund, the Fund is liable to pay the following expenses to the Fund Manager: - Management fee at the rate of 1.50% per annum of the net assets value of the Fund at each valuation day, payable monthly. - Other expenses are charged at the rate of 1.50% of the net asset value of the fund at each valuation day, payable monthly.
7.
CASH AND CASH EQUIVALENTS As at 30 June 2016, the cash and cash equivalent include an amount of SR 1.28 million (30 June 2015: 0.63 million) which is held with the Fund Manager as custodian. The Fund Manager is authorized to utilize these funds for the purpose of trading in securities on behalf of the Fund. The remaining balance is held in the current account in a local bank.
8.
INVESTMENTS HELD FOR TRADING Note Equity investments Investment in mutual fund units
8.1 & 8.2 8.3 & 8.4
30 June 2016
30 June 2015
6,424,230 915,805
8,994,990 1,046,797
7,340,035
10,041,787
- 8-
MEFIC LOCAL EQUITY FUND MANAGED BY MIDDLE EAST FINANCIAL INVESTMENT COMPANY NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (Unaudited) For the six-months period ended 30 June 2016 (Saudi Riyals) 8.
INVESTMENTS HELD FOR TRADING (Continued)
8.1 The sector-wise composition of investments held for trading is summarized as follows: Fair value as at Retail Agriculture and food Insurance Cement Transport Industrial investment Petrochemical industries Hotel & Tourism Banks Telecommunication & Information Technology
30 June 2016 1,514,230 939,532 609,316 591,960 509,913 183,500 508,723 1,160,289 406,767
30 June 2015 1,162,489 1,502,133 287,955 462,908 540,002 449,960 1,901,319 517,450 1,623,754 547,020
6,424,230
8,994,990
8.2 As at 30 June 2016, cost of the above-mentioned investments held for trading amounted to SR 6.12 million (June 30 2015 SR 9.35 million). The above investments are in the equity shares quoted on Tadawul. 8.3 Detail of investment in units of mutual fund comprises the following: Fair value as at 30 June 2015 30 June 2016
Quoted MEFIC IPO Fund
915,805
1,046,797
8.4 As at 30 June 2016, cost of the above mentioned investment in the units of mutual fund amounted to SR 844,880 (30 June 2015: SR 1,000,000). The units of the above mutual fund are quoted on Tadawul. 9.
TRANSACTIONS AND BALANCES WITH RELATED PARTIES Related parties of the Fund include the Unitholders, the Fund Manager and other funds managed by the Fund manager. In the ordinary course of its activities, the Fund transacts business with related parties. Related party transactions are in accordance with the terms and conditions of the Fund. All transactions with related parties are carried out based on mutually agreed prices under formal agreement. Related party transactions for the period are described as under: Related party Middle East Financial Investment Company (“the Fund Manager”)
Nature of transaction
For the period 30 June 2016
For the period from 03 May 2015 to 30 June 2015
Management fees
61,819
26,304
Other expenses
61,819
26,304 - 9-
MEFIC LOCAL EQUITY FUND MANAGED BY MIDDLE EAST FINANCIAL INVESTMENT COMPANY NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (Unaudited) For the six-months period ended 30 June 2016 (Saudi Riyals) 9.
TRANSACTIONS AND BALANCES WITH RELATED PARTIES (Continued) The above transactions during the period resulted in the following balances due to related party: Related party Middle East Financial Investment Company (“the Fund Manager”)
Nature of balance
Management fees payable Other expenses payable
30 June 2016
30 June 2015
10,800
13,660
32,340
13,661
As at 30 June 2016 the Fund has investment of SR 915,805 (30 June 2015: SR 1,046,797) in MEFIC IPO Fund, a fund managed by the Fund Manager. 10. FINANCIAL RISK MANAGEMENT Credit risk Credit risk is the risk that one party to a financial instrument fails to discharge an obligation and cause other party to incur a financial loss. The Fund is exposed to credit risk on its bank balance and dividend receivables. However, the bank balance is maintained with reputed local bank in the Kingdom of Saudi Arabia and the receivable is against dividend from reputable companies listed in the Kingdom of Saudi Arabia. Therefore, the Fund Manager believes that the Fund does not have any significant credit risk. Equity price risk Equity price risk is the risk that the fair value of equity investments will decrease as a result of changes in the levels of equity indices and the value of individual stocks. The Fund is exposed to equity price risk arising from its investments in equity shares. The Fund Manager endeavors to minimize the risk through diversification across various sectors of the Saudi stock market and in the Gulf markets. Further, the Fund Manager has established risk guidelines to manage its equity price risk. Liquidity risk Liquidity risk is the risk that the Fund may encounter difficulty in generating funds to meet commitments associated with financial liabilities which comprise of fund management and other expenses payable. The Fund Manager monitors the liquidity requirements on a regular basis and ensures that sufficient funds are available to meet any commitments as they arise. Currency risk Currency risk is the risk that the value of a financial instrument may fluctuate due to change in the foreign exchange rates. The financial instruments of the Fund i.e. cash and payables are denominated in Saudi Arabian Riyals. Accordingly, the Fund is not exposed to any currency risk.
- 10-
MEFIC LOCAL EQUITY FUND MANAGED BY MIDDLE EAST FINANCIAL INVESTMENT COMPANY NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (Unaudited) For the six-months period ended 30 June 2016 (Saudi Riyals) 11. FAIR VALUE OF FINANCIAL INSTRUMENTS 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. Financial instruments comprise financial assets and financial liabilities. The Fund’s financial assets consist of investments held for trading and cash at bank; its financial liabilities are fees payable. Investments held for trading are carried at fair value. The fair value of other financial instruments is not materially different from their carrying values. 12. LAST VALUATION DATE The last valuation date of net asset value of the fund for the period was 30 June 2016 (2015: 30 June 2015). 13. APPROVAL OF INTERIM CONDENSED FINANCIAL STATEMENTS These interim condensed financial statements were approved by the Fund’s Board on 5 Dhul Qa’ada 1437H corresponding to 8 August 2016G.
- 11-
