RIYAD INCOME FUND Open-Ended Fund (Managed by Riyad Capital ...
RIYAD INCOME FUND 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 INCOME FUND Open-Ended Fund (Managed by Riyad Capital) INTERIM CONDENSED BALANCE SHEET (UN-AUDITED) As at 30 June 2016 (Amounts in SAR)
Notes
2016
2015
5,761,868 77,233,691 183,553 83,179,112
9,071,580 110,851,380 446,428 120,369,388
312,374 312,374
443,566 6,000 449,566
82,866,738
119,919,822
11,576,479.34
12,115,626.61
7.16
9.89
ASSETS Cash at bank Held for trading investments Dividend receivable Total assets
7
LIABILITIES Accrued expenses Redemption payable Total liabilities
10
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 INCOME FUND 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) Notes
2016
2015
9
(4,558,856) 3,140,515 (1,418,341)
7,538,897 2,518,909 10,057,806
10 10
(595,398) (7,912) (603,310)
(730,841) (8,241) (739,082)
(2,021,651)
9,318,724
Income/Loss Net (loss)/gain from held for trading investments Dividend 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 INCOME FUND Open-Ended Fund (Managed By Riyad Capital) INTERIM CONDENSED STATEMENT OF CASH FLOWS For the six month period ended 30 June 2016 (Amounts in SAR) 2016
2015
CASH FLOWS FROM OPERATING ACTIVITIES Net (loss)/Income for the period
(2,021,651)
9,318,724
950,018 (1,071,632)
(4,355,577) 4,963,147
Held for trading investments Dividend receivable Accrued expenses
(5,805,011) (163,774) (30,402)
(36,000,281) (436,630) 144,909
Net cash used in operating activities
(7,070,819)
(31,328,855)
2,700,131
45,666,057
Payments for redemption of units Net cash used in/ generated from activities
(2,708,676) (8,545)
(5,362,894) 40,303,163
Net increase in cash and cash equivalents
(7,079,364)
8,974,308
Cash and cash equivalents at beginning of the period
12,841,232
97,272
5,761,868
9,071,580
Adjustments to reconcile net (loss)/income to net cash used in operating activities:
Unrealized (loss)/gain on held for trading investments Changes in operating assets and liabilities
CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of units
Cash and cash equivalents at end of the period
The accompanying notes 1 to 12 form an integral part of these interim condensed financial statements
4
RIYAD INCOME FUND 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 asset attributable to the Unitholders at beginning of the period
84,896,934
70,303,935
Net (loss)/income for the period
(2,021,651)
9,318,725
2,700,131 (2,708,676)
45,666,057 (5,368,894)
(8,545)
40,297,163
82,866,738
119,919,823
Changes from unit transactions: Issuance of units Redemption of units Net changes from unit transactions Net asset 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 INCOME FUND 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 Income Fund (“the Fund”) is an open-ended sharia compliant equity fund managed through an agreement between Riyad Capital (the “Fund Manager”) and the Fund investors (the “Unitholders”). The Fund aims to achieve income growth by investing primarily in the Saudi listed companies stocks, with consistent distributions of cash dividends within the criteria set by Shariah Committee of Riyad Capital. In dealing with the Unitholders, the Fund Manager considers the Fund as an independent accounting unit. Accordingly, the Fund Manager 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. CMA’s approval for the establishment of the Fund was granted in its letter number 09/3 dated 4 Rajab 1434 H (corresponding to 14 May 2013). The Fund commenced its operations on 10 April 2014.
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 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 on Monday and Wednesday (each a “Dealing 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 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 condensed financial statements do not include all of the information required for a full set of financial statements and 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 does not necessarily constitute an indication of the year-end 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).
6
RIYAD INCOME FUND 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 Riyal (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 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 in 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 AND OTHER EXPENSES On daily basis the Fund Manager charges the Fund, 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 assets value. In addition, on daily basis the Fund Manager charges the Fund, custody and administration fees at the rate of 0.3 percent respectively of the Fund’s net assets value.
7
RIYAD INCOME FUND Open-Ended Fund (Managed by Riyad Capital) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UN-AUDITED) For the six month period ended 30 June 2015 (Amount 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 by sector wise is summarized as follows:
Retail Cement Petrochemical Industries Banking & Financial Services Agriculture and Food Industries Hotel & Tourism Telecom & Information Technology Industrial investments Transportation Building & Construction Real Estate Development Energy and Utilities
2016
2015
8,242,198 16,071,353 25,408,453 10,769,612 564,394 8,188,863 1,315,360 1,309,896 2,036,915 3,326,648 77,233,691
18,381,081 17,418,333 16,420,687 15,281,889 9,889,737 7,904,889 7,166,983 7,109,384 6,599,157 2,828,642 1,850,598 110,851,380
7.2 The cost of the above held for trading investments portfolio as at 30 June 2016 amounted to SAR 78.18 million (30 June 2015: 106.5million) 8.
UNIT TRANSACTIONS Transactions in units for the period are summarized as follows: (Units in numbers) Units at the beginning of the period Units issued Units redeemed Net change in units Units at the end of the period
9.
11,585,052.75
7,862,740.69
392,096.70 (400,670.11)
4,809,384.30 (556,498.38)
(8,573.41)
4,252,885.92
11,576,479.34
12,115,626.61
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
8
(3,608,837) (950,018) (4,558,856)
3,183,321 4,355,577 7,538,898
RIYAD INCOME FUND 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 (Amount in SAR) 10. TRANSACTION 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 5,761,868 (2015: SAR 9,071,580) 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
Nature of transactions
Amount of transactions during the period
Closing balance payable
2016
2015
2016
2015
Fund management fee
(595,398)
(730,841)
308,418
439,446
Expenses incurred on behalf of the Fund
(7,912)
(8,241)
3,955
4,120
11. 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 of financial asset and financial liability. The Fund’s financial asset consists of cash at bank, held for trading investments and dividend receivable and financial liability consists of accrued expense and redemptions 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 30 June 2016. (30 June 2015: 29 June 2015).
9
RIYAD INCOME FUND Open-Ended Fund (Managed by Riyad Capital) INTERIM CONDENSED BALANCE SHEET (UN-AUDITED) As at 30 June 2016 (Amounts in SAR)
Notes
2016
2015
5,761,868 77,233,691 183,553 83,179,112
9,071,580 110,851,380 446,428 120,369,388
312,374 312,374
443,566 6,000 449,566
82,866,738
119,919,822
11,576,479.34
12,115,626.61
7.16
9.89
ASSETS Cash at bank Held for trading investments Dividend receivable Total assets
7
LIABILITIES Accrued expenses Redemption payable Total liabilities
10
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 INCOME FUND 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) Notes
2016
2015
9
(4,558,856) 3,140,515 (1,418,341)
7,538,897 2,518,909 10,057,806
10 10
(595,398) (7,912) (603,310)
(730,841) (8,241) (739,082)
(2,021,651)
9,318,724
Income/Loss Net (loss)/gain from held for trading investments Dividend 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 INCOME FUND Open-Ended Fund (Managed By Riyad Capital) INTERIM CONDENSED STATEMENT OF CASH FLOWS For the six month period ended 30 June 2016 (Amounts in SAR) 2016
2015
CASH FLOWS FROM OPERATING ACTIVITIES Net (loss)/Income for the period
(2,021,651)
9,318,724
950,018 (1,071,632)
(4,355,577) 4,963,147
Held for trading investments Dividend receivable Accrued expenses
(5,805,011) (163,774) (30,402)
(36,000,281) (436,630) 144,909
Net cash used in operating activities
(7,070,819)
(31,328,855)
2,700,131
45,666,057
Payments for redemption of units Net cash used in/ generated from activities
(2,708,676) (8,545)
(5,362,894) 40,303,163
Net increase in cash and cash equivalents
(7,079,364)
8,974,308
Cash and cash equivalents at beginning of the period
12,841,232
97,272
5,761,868
9,071,580
Adjustments to reconcile net (loss)/income to net cash used in operating activities:
Unrealized (loss)/gain on held for trading investments Changes in operating assets and liabilities
CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of units
Cash and cash equivalents at end of the period
The accompanying notes 1 to 12 form an integral part of these interim condensed financial statements
4
RIYAD INCOME FUND 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 asset attributable to the Unitholders at beginning of the period
84,896,934
70,303,935
Net (loss)/income for the period
(2,021,651)
9,318,725
2,700,131 (2,708,676)
45,666,057 (5,368,894)
(8,545)
40,297,163
82,866,738
119,919,823
Changes from unit transactions: Issuance of units Redemption of units Net changes from unit transactions Net asset 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 INCOME FUND 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 Income Fund (“the Fund”) is an open-ended sharia compliant equity fund managed through an agreement between Riyad Capital (the “Fund Manager”) and the Fund investors (the “Unitholders”). The Fund aims to achieve income growth by investing primarily in the Saudi listed companies stocks, with consistent distributions of cash dividends within the criteria set by Shariah Committee of Riyad Capital. In dealing with the Unitholders, the Fund Manager considers the Fund as an independent accounting unit. Accordingly, the Fund Manager 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. CMA’s approval for the establishment of the Fund was granted in its letter number 09/3 dated 4 Rajab 1434 H (corresponding to 14 May 2013). The Fund commenced its operations on 10 April 2014.
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 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 on Monday and Wednesday (each a “Dealing 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 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 condensed financial statements do not include all of the information required for a full set of financial statements and 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 does not necessarily constitute an indication of the year-end 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).
6
RIYAD INCOME FUND 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 Riyal (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 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 in 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 AND OTHER EXPENSES On daily basis the Fund Manager charges the Fund, 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 assets value. In addition, on daily basis the Fund Manager charges the Fund, custody and administration fees at the rate of 0.3 percent respectively of the Fund’s net assets value.
7
RIYAD INCOME FUND Open-Ended Fund (Managed by Riyad Capital) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UN-AUDITED) For the six month period ended 30 June 2015 (Amount 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 by sector wise is summarized as follows:
Retail Cement Petrochemical Industries Banking & Financial Services Agriculture and Food Industries Hotel & Tourism Telecom & Information Technology Industrial investments Transportation Building & Construction Real Estate Development Energy and Utilities
2016
2015
8,242,198 16,071,353 25,408,453 10,769,612 564,394 8,188,863 1,315,360 1,309,896 2,036,915 3,326,648 77,233,691
18,381,081 17,418,333 16,420,687 15,281,889 9,889,737 7,904,889 7,166,983 7,109,384 6,599,157 2,828,642 1,850,598 110,851,380
7.2 The cost of the above held for trading investments portfolio as at 30 June 2016 amounted to SAR 78.18 million (30 June 2015: 106.5million) 8.
UNIT TRANSACTIONS Transactions in units for the period are summarized as follows: (Units in numbers) Units at the beginning of the period Units issued Units redeemed Net change in units Units at the end of the period
9.
11,585,052.75
7,862,740.69
392,096.70 (400,670.11)
4,809,384.30 (556,498.38)
(8,573.41)
4,252,885.92
11,576,479.34
12,115,626.61
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
8
(3,608,837) (950,018) (4,558,856)
3,183,321 4,355,577 7,538,898
RIYAD INCOME FUND 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 (Amount in SAR) 10. TRANSACTION 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 5,761,868 (2015: SAR 9,071,580) 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
Nature of transactions
Amount of transactions during the period
Closing balance payable
2016
2015
2016
2015
Fund management fee
(595,398)
(730,841)
308,418
439,446
Expenses incurred on behalf of the Fund
(7,912)
(8,241)
3,955
4,120
11. 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 of financial asset and financial liability. The Fund’s financial asset consists of cash at bank, held for trading investments and dividend receivable and financial liability consists of accrued expense and redemptions 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 30 June 2016. (30 June 2015: 29 June 2015).
9
