Half Yearly Report

RNS Number : 4460T

The Family Shariah Fund Ltd

29 September 2010

 



THE FAMILY SHARI'AH FUND LIMITED

(the 'Company' or 'Fund')

29 September 2010, The Family Shari'ah Fund Limited, a multi-asset class fund providing investors with exposure to a variety of Shari'ah compliant investments predominantly outside of the GCC region, is pleased to announce its unaudited interim half year results for the six month period ended 30 June 2010.  

A full copy of the half year results which have been reviewed by the auditors, the financial timetable and the latest monthly investment manager's report are also available on the Fund's website

(www.familyshariahfund.com).

For further information, please contact: 

The Family Office (Investment Manager)	Tel: [phone]
Manoj Ranawat
Richard Joye - Projects Manager
Religare Capital Markets (Nominated Adviser and Broker)	Tel: [phone]
James Pinner  / Derek Crowhurst

INVESTMENT MANAGER'S REPORT

FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2010

The investment manager has the view that the markets in 2010 will experience more volatility than in 2009. This volatility will be experienced through ups and downs in the market. Global sovereign risks, elevated unemployment levels, lack of consumer spending, fears of fiscal tightening and corporate restructurings will also contribute to this volatility.

The investment manager has adopted a cautious approach to portfolio construction during the first half of the year. The NAV at the end of June 2010 was 0.8623 resulting in a loss of -2.97%. This loss is compared to the equity market loss of -9.62% during the same period.

In addition, the investment manager believes that the volatility expected in 2010 will create tactical trading opportunities in the market and will aim to benefit from these opportunities.

Cash holdings in the first six months decreased from 36.8% to 24.7%. This decrease in cash was as a result of investments in public equity, private equity and real estate.

In Islamic income, the investment manager took advantage of the Dubai World restructuring story and the large widening of the Dubai sovereign sukuks to build a position in the sovereign sukuks. This position was monetized early this year following the announcement of Dubai World restructuring. In addition, the investment manager sold its Bahrain sukuk exposure near the highs as the risk adjusted return diminished. The portfolio allocation to Islamic income decreased from 26.9% to 21.0% in the period.

In public equity, the investment manager shifted the portfolio more defensively by investing in a high-dividend fund. In addition, the investment manager traded the equity markets in the volatile month of May. The portfolio allocation to public equity increased from 22.1% to 26.7% in the half year.

In private equity, the investment manager participated in two direct transactions based in Asia. These transactions were in the industrials and healthcare sector. The portfolio allocation to private equity increased from 14.2% to 15.2% in the period.

The investment manager started its allocation to the real estate asset class in the half year. The investment manager believes that it is the right time to take advantage of the distress in US real estate market where the large number of foreclosures is forcing banks to unload good properties at attractive prices. The investment manager is targeting existing, tenant occupied, cash yielding properties mainly in the multifamily residential and medical facilities sectors. The investment manager participated in five real estate transactions and the portfolio allocation to real estate increased from 0% to 12.4% in the half year.

The investment manager will continue with the portfolio management approach adopted in the first half of the year, with a defensive positioning in cash and Islamic income, tactical trading in equities and the purchase of private companies and real estate companies at attractive prices.  

DIRECTORS' REPORT

FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2010

The Directors present their report and unaudited interim condensed financial statements for The Family Shari'ah Fund Limited (the "Fund") for the six month period ended 30 June 2010.

Principal Activities

The principal activity of the Fund is to carry on the business of an investment company with the investment objective to provide investors with a diversified pool of Shari'ah compliant assets and consistent risk-adjusted returns over a market cycle via an active and diversified asset allocation programme. The Fund aims at geographic diversification of investments, predominantly outside the Gulf Cooperation Council states and enhances liquidity through trading of the Fund's shares on the AIM Market of the London Stock Exchange ("AIM").

Quotation

The Fund was admitted to trading on AIM on 25 July 2008.

Substantial Shareholding

At 30 June 2010, the Fund had notification that the following shareholders had a beneficial interest of 3% or more of the Fund's issued share capital:

						No. of Shares    % of  Holding
Sumu Al Khaleej Trading Company						3,000,000		9.51%
Ibrahim Abdullah Al Munajem						3,000,000		9.51%
Ahmed Abdullah Al Munajem						3,000,000		9.51%
Abdulaziz Al Munajem						3,000,000		9.51%
Saleh Abdullah Al Munajem						3,000,000		9.51%
Ali Ibrahim Al Munajem						3,000,000		9.51%
Abdullah Abdullatif Al Fozan						3,000,000		9.51%
Heraymila Investments Limited						2,000,000		6.34%
Pershing Nominees Limited						1,000,000		3.17%
Goldman Sachs Securities (Nominees) Limited						1,000,000		3.17%
Asasat Investments Company						1,000,000		3.17%
Abdulwahab Said Al Sayed						1,000,000		3.17%
						27,000,000		85.59%

Results for the period and state of affairs as at 30 June 2010

The interim statement of financial position at 30 June 2010 and interim statement of comprehensive income for the six month period ended 30 June 2010 are set out below.

Dividend

No dividend was paid or proposed during the period.

Directors

The Directors, who served during the period and to the date of this report, are as follows:

Appointed on

William Morrison*

15 June 2010

Abdulmohsin Al-Omran

15 June 2009

Christopher Drew Dixon*

15 June 2010

Dr. Reinhard Leopold Klarmann

15 June 2009

Peter Robinson

15 June 2009

* Retired by rotation and re-elected on 15 June 2010

Directors' Interests

The Directors do not have any shareholdings in the Fund or any options over shares in the Fund as at 30 June 2010. None of the Directors were granted or exercised any share options during the period.

Directors' Fees

The total amounts incurred for Directors' fees during the period were as follows:

									US$
William Morrison											7,500
Abdulmohsin Al-Omran											7,500
Christopher Drew Dixon											7,500
Dr. Reinhard Leopold Klarmann											7,500
Peter Robinson											10,000
Total											40,000

Corporate Governance Statement

Whilst the Fund is not subject to the Combined Code, published by the Financial Reporting Council, which is applicable to companies listed on the Main Market of the London Stock Exchange (the "LSE"), the Directors recognise the importance of sound corporate governance.  The Fund complies with the Corporate Governance Guidelines for AIM Companies as published by the Quoted Companies Alliance (as far as such guidelines are appropriate to a fund of its size and nature).

The Fund has adopted a code of conduct for its Directors' and key employees' share dealings, which the Directors consider is appropriate for the Fund given its nature as an AIM quoted investment company and as the Fund has no executive Directors and has no share option or incentive schemes.  The Directors comply with Rule 21 of the AIM Rules for Companies as published by the LSE relating to Directors' dealings and, in addition, take all reasonable steps to ensure compliance by the Fund's applicable employees.

The Directors have established an Audit Committee and a Remuneration and Nomination Committee, each with formally delegated roles and responsibilities.  The Audit Committee is comprised of all three of the independent non-executive Directors; Peter Robinson, Christopher Dixon and Dr. Reinhard Klarmann.  The Remuneration and Nomination Committee comprises of Peter Robinson, Christopher Dixon and William Morrison.  The Committees meet as often as required but in any event at least once per year.

The Audit Committee is responsible for ensuring that the financial performance of the Fund is properly reported on and monitored and for meeting the auditors and reviewing the reports from the auditors relating to the financial statements and internal control systems.

The Remuneration and Nomination Committee, where appropriate given the size and nature of the Fund and the composition of the Board, reviews the performance of the executive (if any) and non-executive Directors and sets and reviews the scale and structure of their remuneration and the terms of their service agreements and/or letters of appointment with due regard to the interest of shareholders.  No Director is permitted to participate in discussions or decisions concerning his own remuneration.

Shari'ah Supervisory Board

The Shari'ah Supervisory Board is responsible for ensuring that the Fund's activities are in compliance with Shari'ah law.

Statement of Directors Responsibilities in respect of the Interim Condensed Financial Statements

The Directors are responsible for the preparation of financial statements for each financial period which present fairly the Fund's state of affairs as at the end of the period and the results of operations for the period then ended.

In preparing the interim condensed financial statements, the Directors are required to:

• ensure that the interim condensed financial statements comply with the Memorandum and Articles of Association and the preparation and presentation of these is in accordance with International Accounting Standards 34 "Interim Financial Reporting";

•  select suitable accounting policies and then apply them on a consistent basis;

•  make judgments and estimates that are reasonable and prudent; and

• prepare the interim condensed financial statements on the going concern basis unless it is inappropriate to presume that the Fund will continue in business.

The Directors are responsible for keeping proper accounting records, for safeguarding the assets of the Fund and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

On behalf of the Directors:

___________________                                                                      _____________________

Abdulmohsin Al-Omran                                                                        Peter Robinson

Date: 28 September 2010

REPORT ON REVIEW OF INTERIM CONDENSED FINANCIAL STATEMENTS TO THE BOARD OF DIRECTORS OF THE FAMILY SHARI'AH FUND LIMITED

Introduction

We have reviewed the accompanying interim statement of financial position of The Family Shari'ah Fund Limited (the 'Fund') as at 30 June 2010 and the related interim statements of comprehensive income, changes in equity and cash flows for the six month period then ended and explanatory notes. The Board of Directors is responsible for the preparation and presentation of these interim condensed financial statements in accordance with International Accounting Standard 34 "Interim Financial Reporting" ("IAS 34"). Our responsibility is to express a conclusion on the interim condensed financial statements based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed financial statements are not prepared, in all material respects, in accordance with IAS 34.

Ernst & Young

28 September 2010

Manama, Kingdom of Bahrain

INTERIM STATEMENT OF FINANCIAL POSITION

	Note	(Unaudited)			(Audited)
		30 June			31 December
		2010			2009
		US$			US$
ASSETS
Balance with bank		6,739,183			10,439,924
Investments at fair value through profit or loss	3	20,597,115			17,917,360
Other assets		111,278			153,150
TOTAL ASSETS		27,447,576			28,510,434
LIABILITIES AND EQUITY
LIABILITIES
Due to Investment Manager	5	194,482			185,991
Other payables and accruals		46,577			89,164
TOTAL LIABILITIES		241,059			275,155
EQUITY
Share capital		315,500			315,500
Share premium		31,234,500			31,234,500
Accumulated loss		(4,343,483)			(3,314,721)
TOTAL EQUITY		27,206,517			28,235,279
TOTAL LIABILITIES AND  EQUITY		27,447,576			28,510,434

INTERIM STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2010 (Unaudited)

		Six month period ended (Unaudited)
		30 June		30 June
	Note	2010		2009
		US$		US$
INCOME
Net (loss) gain from investments at fair value through
profit or loss		(357,343)		520,269
Murabaha income		-		46,017
TOTAL INCOME		(357,343)		566,286
EXPENSES
Management fee	5	205,891		205,781
General and administration expenses		465,528		572,030
TOTAL EXPENSES		671,419		777,811
NET LOSS FOR THE PERIOD		(1,028,762)		(211,525)
Other comprehensive income for the period		-		-
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD		(1,028,762)		(211,525)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING		31,550,000		31,550,000
LOSS PER SHARE (BASIC AND DILUTED)		(0.03)		(0.01)

INTERIM STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2010 (Unaudited)

	Share capital		Share premium		Accumulated loss		Total
	US$		US$		US$		US$
Balance at 1 January 2010	315,500		31,234,500		(3,314,721)		28,235,279
Total comprehensive loss
for the period	-		-		(1,028,762)		(1,028,762)
Balance at 30 June 2010	315,500		31,234,500		(4,343,483)		27,206,517

Balance at 1 January 2009	315,500		31,234,500		(3,788,138)		27,761,862
Total comprehensive loss
for the period	-		-		(211,525)		(211,525)
Balance at 30 June 2009	315,500		31,234,500		(3,999,663)		27,550,337

INTERIM STATEMENT OF CASH FLOWS

FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2010 (Unaudited)

	Six month period ended (Unaudited)
	30 June		30 June
	2010		2009
	US$		US$
OPERATING ACTIVITIES
Net loss for the period	(1,028,762)		(211,525)
Net changes in:
Investments at fair value through profit or loss	(2,679,755)		(2,840,265)
Murabaha receivables	-		(10,046,015)
Other assets	41,872		470,712
Due to Investment Manager	8,491		(66,437)
Other payables and accruals	(42,587)		(6,732)
Net cash used in operating activities	(3,700,741)		(12,700,262)
INVESTING ACTIVITIES	-		-
FINANCING ACTIVITIES	-		-
NET DECREASE IN BALANCE WITH BANK	(3,700,741)		(12,700,262)
BALANCE WITH BANK AT 1 JANUARY	10,439,924		16,805,698
BALANCE WITH BANK AT 30 JUNE	6,739,183		4,105,436
Supplemental information:
Dividends received	16,544		12,862

NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS

30 JUNE 2010 (Unaudited)

1    ACTIVITIES

The Family Shari'ah Fund Limited (the "Fund") is a Shari'ah-compliant multi-asset class investment company. The Fund is a Cayman Islands exempted company and is not registered with the Cayman Islands Monetary Authority ("CIMA"). The Fund invests in a range of Shari'ah-compliant assets, products and investments. The Fund's strategy is to focus on providing specialised Shari'ah-compliant financial products that appeal to a growing market of investors who desire Shari'ah-compliant economic equivalents to conventional assets and instruments.

The address of the registered office of the Fund is SH Corporate Services Ltd., P.O. Box 61, 4^th Floor, Harbour Centre, George Town, Grand Cayman, KY1, 1102, Cayman Islands.

The investment objective of the Fund is to achieve long-term capital appreciation from a Shari'ah-compliant, diversified, investment portfolio characterised by a moderate level of risk. The Fund operates under the overriding principle that all investments must be Shari'ah-compliant. The Fund's investment objectives are therefore devised so as to provide investors with a diversified pool of Shari'ah-compliant assets, consistent risk-adjusted returns over a market cycle via an active and diversified asset allocation programme, geographic diversification of investments and liquidity through trading of the Fund's shares on the AIM Market of the London Stock Exchange ("AIM").

The activities of the Fund are subject to Islamic Investment Guidelines, as defined from time to time by the Shari'ah Supervisory Board ("SSB"). The SSB consists of two members, as shown on the Company's website.

The SSB is responsible for:

-     reviewing and approving the Islamic Investment Guidelines of the Fund;

-     reviewing the Fund's investments to ensure that they are Shari'ah compliant;

-    receiving reports from the Investment Manager to ensure adherence to the Islamic Investment Guidelines; and

-    advising the Directors on revenue purification and selecting appropriate charities.

The Family Office Company B.S.C. (c), a company incorporated in the Kingdom of Bahrain, is the investment manager of the Fund ("Investment Manager").

The Fund has appointed Apex Fund Services (Ireland) Limited, an Irish limited liability company, as its administrator.

The interim condensed financial statements of the Fund for the six month period ended 30 June 2010 were approved by the Board of Directors on 28 September 2010.

2    BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The interim condensed financial statements of the Fund are prepared in accordance with International Accounting Standard 34, Interim Financial Reporting.

The interim condensed financial statements do not contain all information and disclosures required for full financial statements prepared in accordance with International Financial Reporting Standards and should be read in conjunction with the Fund's annual financial statements as at 31 December 2009. In addition, results for the six month period ended 30 June 2010 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2010.

      Significant accounting policies

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 2009.

The amendments to the following standards and interpretations below did not have any impact on the accounting policies, financial position or performance of the Fund:

Ø IFRS 2 Share-based Payment - Group Cash-settled Share-based Payment Transactions

Ø IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items

Ø IFRS 5 Non-current Assets Held for Sale and Discontinued Operations:

Ø IAS 17 Leases

Ø IAS 38 Intangible Assets

Ø IFRIC 9 Reassessment of Embedded Derivatives

Ø IFRIC 16 Hedge of a Net Investment in a Foreign Operation

Ø IFRIC 17 Distribution of Non-cash Assets to Owners

The Fund has not early adopted any other standard, interpretation or amendment that was issued but is not yet effective.

3    INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

These represent investments in instruments compliant with, or in compliance with, the principles and precepts of Shari'ah law as determined by the Shari'ah Supervisory Board. Investments are made in accordance with the investment policies as laid down in the revised Investment Policy of the Fund.    

The fair values of financial instruments are as follows:

		(Unaudited)		(Audited)
		30 June		31 December
		2010		2009
		US$		US$
Held-for-trading:
Quoted
- Equity securities		7,296,233		6,262,160
- Debt securities		5,740,329		7,628,451
		13,036,562		13,890,611
Designated at fair value through profit or loss: Unquoted
- Investments in unquoted funds		7,560,553		4,026,749
Total		20,597,115		17,917,360

4    COMMITMENTS

The Fund has a capital commitment to a related party unquoted fund. This capital commitment as at the statement of financial position date amounted to US$ 4 million (31 December 2009: US$ 0.05 million). The timing of the capital call depends upon investment opportunities identified by the related party fund.

5    RELATED PARTY TRANSACTIONS

Parties are considered to be related if one party has the ability to control the other party or exercises significant influence over the other party in making financial or operational decisions. All transactions with related parties were in the normal course of business. The Investment Manager and related companies are deemed to be related to the Fund. Fees incurred with related parties during the period and amounts payable to related parties at the period end are disclosed below.

Nature

Payable to

Basis

Management fee

The Family Office Company B.S.C. (c)

1.5% of the net asset value (NAV) of the Fund, calculated monthly as of the last day of each fiscal quarter using the month end net asset value and paid quarterly in arrears.

Performance fee

The Family Office Company B.S.C. (c)

is calculated in respect of each fiscal quarter if the hurdle rate (the Murabaha 3 month return) and a high water mark are met. The performance fee is equal to 10% of the excess NAV per share over the hurdle rate multiplied by the time weighted average of the number of shares in issue in the fiscal quarter.

Other fees

The Family Office Company B.S.C. (c)

This represents amounts reimbursed to the Investment Manager for certain expenses incurred on behalf of the Fund.

Balances and transactions with related parties included in these interim condensed financial statements are as follows:

(Unaudited)

(Audited)

30 June  2010

31 December 2009

US$

US$

Interim  statement of financial position

Assets:

Investments at fair value through profit or loss*

7,560,553

4,026,749

Other assets

18,924

Liabilities:

Due to Investment Manager

194,482

185,991

Directors' fees payable

20,000

20,872

Six month period ended (Unaudited)

30 June 2010

30 June 2009

US$

US$

Interim statement of comprehensive  income:

Net gain on investments at fair value through profit or loss*

123,480

97,284

Management fee

205,891

205,781

General and administration expenses:

-    Other fees to the Investment Manager

169,159

169,159

-    Directors' fees and expenses

53,318

71,850

* Investments made through investment vehicles that are managed by the Investment Manager.

6    SEGMENT REPORTING

For management purposes, the Fund is organised into six operating segments as mentioned below. Each segment engages in separate business activities and the operating results are regularly reviewed by the Investment Manager and Board of Directors, for performance assessment purposes and to make decisions about resources allocated to each segment. The Investment Manager is responsible for allocating resources available to the Fund in accordance with the overall business strategies as set out in the revised Investment Policy of the Fund. The segments are as follows:

·   Money market and cash (comprising of balance with bank)

·   Public equity (comprising of investments in equity funds, publicly quoted equities, ETF tracking Islamic indices, etc.)

·   Private equity (comprising of investments in private placements, investment in private equity funds, etc.) 

·   Islamic income and leasing (comprising of investments in Shari'ah compliant alternatives such as Sukuk, Musharakah, Ijarah etc.)

·  Alternative investments (comprising of investments in hedge funds, Shari'ah compliant wrapper instruments, etc.)

·   Real estate (comprising of investments in real estate, real estate funds, managed portfolio, etc.)

There have been no changes in reportable segments during the course of the period. There have been no transactions in the 'Alternative investments' to 30 June 2010. However, during the period the Fund committed US$ 4 million to the real estate segment.

Financial information about the remaining segments is as follows:

Six month period ended 30 June 2010 (Unaudited)

Money

Islamic

market and

Public

Private

income and

Real

cash

equity

equity

leasing

estate

Total

US$

US$

US$

US$

US$

US$

Net (loss) / gain from investments at fair value through profit or loss

-

(767,572)

112,021

286,749

11,459

(357,343)

At 30 June 2010

Other information:

Segment assets

6,739,183

7,296,233

4,160,553

5,740,329

3,400,000

27,336,298

				Six month period ended 30 June 2009 (Unaudited)
		Money								Islamic
		market and				Public		Private		income and		Real
		cash				equity		equity		leasing		estate		Total
		US$				US$		US$		US$		US$		US$
Net gain / (loss) from investments at fair value through profit or loss		-				594,301		(97,284)		23,252		-		520,269
Murabaha income		46,017				-		-		-		-		46,017
Total income		46,017				594,301		(97,284)		23,252		-		566,286
At 31 December 2009
Other information:
Segment assets		10,439,924				6,262,160		4,026,749		7,628,451		-		28,357,284

The following table analyses the segmental information of investments which form a majority of the total income:

Six month period ended 30 June 2010 (Unaudited)

Money

Islamic

market and

Public

Private

income and

Real

cash

equity

equity

leasing

estate

US$

US$

US$

US$

US$

Number of  investments

-

4

2

4

-

Total income of the segment

-

(767,572)

83,697

289,405

-

Six month period ended 30 June 2009 (Unaudited)

Money

Islamic

market and

Public

Private

income and

Real

cash

equity

equity

leasing

estate

US$

US$

US$

US$

US$

Number of  investments

-

4

1

-

-

Total income of the segment

-

626,028

(79,476)

-

-

The Fund's other assets, total liabilities, total equity and expenses are not considered part of the performance of an individual segment.

During the period there were no revenues from transactions within other operating segments.

The following table analyses the Fund's total income per geographical location:

		Six month period ended (Unaudited)
		30 June 2010		30 June 2009
		US$		US$
Ireland		(177,880)		331,081
Luxembourg		(589,693)		144,454
Bahrain		(2,656)		23,252
Jersey		82,314		-
Malaysia		94,447		-
Bermuda		53,893		-
United States		78,493		(82,481)
United Kingdom		25,573		(14,804)
South Korea		21,119		-
Singapore		-		(12,102)
Saudi Arabia		-		176,886
Cayman Islands		58,752		-
China		(1,705)		-
		(357,343)		566,286

The following table provides a reconciliation between total segment assets and total assets:

		(Unaudited)		(Audited)
		30 June 2010		31 December 2009
		US$		US$
Segment assets		27,336,298		28,357,284
Other assets		111,278		153,150
		27,447,576		28,510,434

Notes to Editors

The Family Shari'ah Fund Limited is the first multi-asset class fund to gain admission to AIM and provides investors with exposure to a variety of Shari'ah Compliant investments predominantly outside of the GCC region.

The Company's investing policy, as defined by the AIM Rules, is available on the Company's website at www.familyshariahfund.com/investing_policy.html.

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