Al Rajhi Saudi Equity Income Fund (Managed by Al Rajhi Capital)
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REVIEW REPORT
FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2019
AL RAJHI SAUDI EQUITY INCOME FUND
Interim condensed statement of financial position (unaudited)
As at 30 June 2019
The accompanying notes 1 to 10 form an integral part of these interim condensed financial statements.
2
Note
30 June 2019 (Unaudited)
SR
31 December 2018 (Audited)
SR
ASSETS
Cash and cash equivalents 12,969,796 2,351,313
Financial assets at fair value through profit or loss 4 129,182,229 143,922,388
Dividends receivable 92,133 70,778
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TOTAL ASSETS 142,244,158 146,344,479
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LIABILITIES
Management fee payable 5 206,022 227,274
Accrued expenses 104,907 124,556
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TOTAL LIABILITIES 310,929 351,830
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EQUITY
Net assets attributable to unitholders of redeemable units 141,933,229 145,992,649
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TOTAL LIABILITIES AND EQUITY 142,244,158 146,344,479
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Redeemable units in issue 9,713,260 10,876,406
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Net asset value attributable to each per unit 14.61 13.42
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Interim condensed statement of comprehensive income (unaudited)
For the six-month period ended 30 June 2019
The accompanying notes 1 to 10 form an integral part of these interim condensed financial statements.
3
Note 2019
SR 2018
SR
INCOME
Net unrealized gain on financial assets at fair value through profit or loss 2,824,133 9,646,783 Net realized gain on financial assets at fair value through profit or loss 10,535,077 429,051
Dividend income 3,342,529 1,817,347
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TOTAL INCOME 16,701,739 11,893,181
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EXPENSES
Management fees 5 (1,323,071) (722,527)
Purification charges 6 (41,042) (16,337)
Others (141,039) (63,505)
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TOTAL EXPENSES (1,505,152) (802,369)
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NET INCOME FOR THE PERIOD 15,196,587 11,090,812
OTHER COMPREHENSIVE INCOME FOR THE PERIOD - -
──────── ────────
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 15,196,587 11,090,812
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AL RAJHI SAUDI EQUITY INCOME FUND
Interim condensed statement of changes in equity (unaudited)
For the six-month period ended 30 June 2019
The accompanying notes 1 to 10 form an integral part of these interim condensed financial statements.
4
2019
SR 2018
SR EQUITY AT THE BEGINNING OF THE PERIOD 145,992,649 47,624,035
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Net income for the period 15,196,587 11,090,812
Other comprehensive income for the period - -
────────── ──────────
Total comprehensive income for the period 15,196,587 11,090,812
Issue of units during the period 65,998,732 89,873,530
Redemption of units during the period (82,419,904) (25,112,079)
Payment of dividends to unitholders (2,834,835) (1,478,448)
────────── ──────────
EQUITY AT THE END OF THE PERIOD 141,933,229 121,997,850
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Units Units
REDEEMABLE UNIT TRANSACTIONS
Transactions in redeemable units during the period are summarised as follows:
UNITS AT THE BEGINNING OF THE PERIOD 10,876,406 3,830,545
───────── ─────────
Issue of units during the period 4,414,754 6,570,861
Redemption of units during the period (5,577,900) (1,799,034)
───────── ─────────
Net (decrease) increase in units (1,163,146) 4,771,827
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UNITS AT THE END OF THE PERIOD 9,713,260 8,602,372
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Interim condensed statement of cash flows (unaudited)
For the six-month period ended 30 June 2019
The accompanying notes 1 to 10 form an integral part of these interim condensed financial statements.
5
2019
SR 2018
SR
Operating activities
Net income for the period 15,196,587 11,090,812
Adjustments to reconcile net income to net cash flows from (used in) operating activities:
Movement in unrealised gains on financial assets at
fair value through profit or loss (2,824,133) (9,646,783)
Working capital adjustments:
Decrease (increase) in financial assets at fair value through profit
or loss 17,564,292 (69,699,181)
Increase in redemptions payable - 4,584,002
Increase in dividends receivable (21,355) -
(Decrease) increase in management fee payable (10,951) 109,401
Decrease in accrued expenses (29,950) (33,979)
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Net cash flows from (used in) operating activities 29,874,490 (63,595,728)
───────── ─────────
Financing activities
Proceeds from issuance of units 65,998,732 89,873,530
Payment on redemption of units (82,419,904) (25,112,079)
Payment of dividends to unitholders (2,834,835) (1,478,448)
───────── ─────────
Net cash flows (used in) from financing activities (19,256,007) 63,283,003
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Net increase (decrease) in cash and cash equivalents 10,618,483 (312,725) Cash and cash equivalents at the beginning of the period 2,351,313 312,725
───────── ─────────
Cash and cash equivalents at the end of the period 12,969,796 -
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Operational cash flows from dividends:
Dividends received 3,321,174 1,817,347
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AL RAJHI SAUDI EQUITY INCOME FUND
Notes to interim condensed financial statements (unaudited)
At 30 June 2019
6 1. INCORPORATION AND ACTIVITIES
Al Rajhi Saudi Equity Income Fund (the “Fund”) is an open-ended investment fund created by an agreement between Al Rajhi Capital (the “Fund Manager”), a wholly owned subsidiary of the Al Rajhi Banking and Investment Corporation (the
“Bank”), and investors (the “Unitholders”) in the Fund. The address of the Fund Manager is as follows:
Al Rajhi Capital P.O. Box 5561 Riyadh 11432
Kingdom of Saudi Arabia
The Fund aims to achieve capital gains over the long term by investing in Shariah compliant stocks listed on Tadawul in accordance with the guidelines set out by the Fund’s Shariah Board. The fund also aims to distribute income to the Unitholders. The Fund was established on 4 May 2015.
The Fund has appointed AlBilad Investment Company (the “Custodian”) to act as its custodian and registrar. The fees of the custodian and registrar’s services are paid by the Fund.
The Fund Manager is responsible for the overall management of the Fund's activities. The Fund Manager can also enter into arrangements with other institutions for the provision of investment, custody or other administrative services on behalf of the Fund.
2. REGULATING AUTHORITY
The Fund is governed by the Investment Fund Regulations (the “Regulations”) issued by the Capital Market Authority (“CMA”) on 3 Dhul Hijja 1427H (corresponding to 24 December 2006) and effective from 6 Safar 1438H (corresponding 6 November 2016) by the New Investment Fund Regulations (“Amended Regulations”) published by the CMA on 16 Sha’aban 1437H (corresponding to 23 May 2016) detailing requirements for all funds within the Kingdom of Saudi Arabia.
3. BASIS OF PREPARATION AND CHANGES TO ACCOUNTING POLICIES 3.1. Basis of preparation
These interim condensed financial statements for the six-month period ended 30 June 2019 have been prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” (“IAS 34”).
The interim condensed financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Fund’s annual financial statements as at 31 December 2018.
The interim condensed financial statements have been prepared on a historical cost basis, using the accrual basis of accounting except for investments held at fair value through profit or loss that are measured at fair value. These interim condensed financial statements are presented in Saudi Arabian Riyals (“SR”), which is the Fund’s functional currency. All financial information presented has been rounded to the nearest SR.
3.2 New standards, interpretations and amendments
The accounting policies adopted in the preparation of the interim condensed financial statements are consistent with those followed in the preparation of the Fund’s annual financial statements for the year ended 31 December 2018. There are new standards, amendments and interpretations apply for the first time in 2019, but do not have an impact on the interim condensed financial statements of the Fund.
There are other several amendments and interpretations that are issued, but not yet effective, up to the date of issuance of the Fund’s interim condensed financial statements. In the opinion of the Board, these will have no significant impact on the interim condensed financial statements of the Fund. The Fund intends to adopt those amendments and interpretations, if applicable.
Notes to interim condensed financial statements (unaudited) (continued)
At 30 June 2019
7
4. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
The composition of the investments portfolio on the last valuation day of the period/year end is summarised below:
30 June 2019 (Unaudited)
% of Market
Value Cost
SR Market value SR
Unrealised gain/(loss)
SR Investments (by sectors)
Financials 35.17 38,215,712 45,435,871 7,220,159
Materials 33.08 41,484,920 42,730,711 1,245,791
Telecommunication Services 11.99 13,439,708 15,484,988 2,045,280
Consumer Discretionary 9.11 10,545,396 11,765,158 1,219,762
Food and Staples Retailing 4.49 5,731,782 5,799,637 67,855
Industrials 2.95 3,769,477 3,806,801 37,324
Health Care 1.83 1,992,348 2,369,700 377,352
Real Estate 1.38 1,799,746 1,789,363 (10,383)
──────── ──────── ──────── ────────
Total 100.00 116,979,089 129,182,229 12,203,140
═════════ ═════════ ═════════ ═════════
31 December 2018 (Audited)
% of Market
Value Cost
SR Market value SR
Unrealised gain/(loss)
SR Investments (by sectors)
Materials 36.91 53,462,894 53,119,278 (343,616)
Financials 39.81 50,441,308 57,293,786 6,852,478
Consumer Discretionary 5.61 6,931,541 8,080,328 1,148,787
Food and Staples Retailing 2.70 3,825,247 3,881,716 56,469
Health Care 4.00 5,720,536 5,759,661 39,125
Telecommunication Services 7.74 9,647,962 11,145,989 1,498,027
Energy 3.23 4,513,893 4,641,630 127,737
──────── ─────── ──────── ────────
Total 100.00 134,543,381 143,922,388 9,379,007
═════════ ═════════ ═════════ ═════════
The above equity investments are listed on the Saudi Stock Exchange (“Tadawul”). The Fund Manager seeks to limit risk for the Fund by monitoring exposures in each investment sector and individual securities.
5. TRANSACTIONS WITH RELATED PARTIES
In the ordinary course of its activities, the Fund transacts business with related parties.
The Fund pays the Fund Manager a management fee calculated at an annual rate of 1.75% per annum calculated on the total net assets value at each valuation date. The fee is intended to compensate the Fund Manager for administration of the Fund.
The management fees amounting to SR 1,323,071 (30 June 2018: SR 722,527) reflected in the interim condensed statement of comprehensive income represent the fees charged by the Fund Manager during the period as described above.
As at 30 June 2019, management fees amounting to SR 206,022 (31 December 2018: SR 227,274) are payable to the Fund Manager.
Board of Directors’ fees amounting to SR Nil (30 June 2018: SR Nil) was charged during the period. As at 30 June 2019, Board of Directors’ fees amounting to SR Nil (31 December 2018: SR Nil) is payable to the Fund’s Board of Directors.
AL RAJHI SAUDI EQUITY INCOME FUND
Notes to interim condensed financial statements (unaudited) (continued)
At 30 June 2019
8
5. TRANSACTIONS WITH RELATED PARTIES (continued)
The units in issue at 30 June 2019 include 10,846 units held by the employees of the Fund Manager (31 December 2018: 7,693 units).
The units in issue at 30 June 2019 include Nil units held by the Fund Manager (31 December 2018: Nil units).
At the end of the period, the cash balance with the Bank is SR 148,938 (31 December 2018: SR 1,467,932).
6. PURIFICATION CHARGES
The purification charges amounting to SR 41,042 (30 June 2018: SR 16,337), represent charges incurred in respect of purification of the income generated from the investee companies in order to achieve a Sharia compliant return.
These charges are calculated based on the Fund’s Sharia Board approved formula and paid to charities recommended by the Fund’s Sharia Board through the Fund Manager.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Fund measures its investments in financial instruments, such as equity instruments, at fair value at each reporting date.
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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Fund. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
The fair value for financial instruments traded in active markets at the reporting date is based on their quoted price (bid price for long positions and ask price for short positions), without any deduction for transaction costs.
The Fund measures financial instruments at fair value at each interim condensed statement of financial position date.
The Fund has only investments at fair value through profit or loss which is measured at fair values and are classified within level 1 of the fair value hierarchy. Management believes that the fair value of all other financial assets and liabilities at the reporting date approximate their carrying values owing to their short-term tenure and the fact that these are readily liquid. These are all classified within level 2 of the fair value hierarchy. There were no transfers between various levels of fair value hierarchy during the current period or prior year.
Notes to interim condensed financial statements (unaudited) (continued)
At 30 June 2019
9
8. MATURITY ANALYSIS OF ASSETS AND LIABILITIES
The table below shows an analysis of assets and liabilities according to when they are expected to be recovered or settled respectively:
As at 30 June 2019 (Unaudited)
Within 12 months
After
12 months Total
SR SR SR
ASSETS
Cash and cash equivalents 12,969,796 - 12,969,796
Financial assets at fair value through profit or loss 129,182,229 - 129,182,229
Dividends Receivable 92,133 - 92,133
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TOTAL ASSETS 142,244,158 - 142,244,158
═════════ ═════════ ═════════
LIABILITIES
Management fee payable 206,022 - 206,022
Accrued expenses 104,907 - 104,907
───────── ───────── ─────────
TOTAL LIABILITIES 310,929 - 310,929
═════════ ═════════ ═════════
As at 31 December 2018 (Audited)
Within 12 months
After
12 months Total
SR SR SR
ASSETS
Cash and cash equivalents 2,351,313 - 2,351,313
Financial assets at fair value through profit or loss 143,922,388 - 143,922,388
Dividends receivable 70,778 - 70,778
───────── ───────── ─────────
TOTAL ASSETS 146,344,479 - 146,344,479
═════════ ═════════ ═════════
LIABILITIES
Management fee payable 227,274 - 227,274
Accrued expenses 124,556 - 124,556
───────── ───────── ─────────
TOTAL LIABILITIES 351,830 - 351,830
═════════ ═════════ ═════════
9. LAST VALUATION DAY
The last valuation day of the period/year was 30 June 2019 (year ended 31 December 2018: 31 December 2018).
10. APPROVAL OF THE INTERIM CONDENSED FINANCIAL STATEMENTS
These interim condensed financial statements were approved by the Fund’s management on 28 Dhul-Qadah 1440H (corresponding to 31 July 2019).
