CREDIT SUISSE SAUDI ARABIA
(A Saudi Closed Joint Stock Company)
ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR
ENDED 31 DECEMBER 2016
together with the
INDEPENDENT AUDITOR’S REPORT
CREDIT SUISSE SAUDI ARABIA
(A Saudi Closed Joint Stock Company)
Index
For the year ended 31 December 2016
INDEX
PAGE
Independent auditors’ report
1-2
Balance sheet
3
Statement of income
4
Statement of cash flows
5
Statement of changes in shareholders’ equity
6
Notes to the financial statements
7 – 20
CREDIT SUISSE SAUDI ARABIA
(A Saudi Closed Joint Stock Company)
BALANCE SHEET
As at 31 December 2016
Expressed in Saudi Arabian Riyals
Note
2016
2015
ASSETS
Current assets
Cash and cash equivalents
Due from related parties
Prepayments and current assets
Total current assets
4
6b
5
79,781,623
269,268
1,035,603
81,086,494
96,026,326
2,843,646
1,030,033
99,900,005
Non-current assets
Property and equipment, net
Total non-current assets
7
1,327,351
1,327,351
144,816
144,816
82,413,845
100,044,821
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accrued expenses and other liabilities
Total current liabilities
8
1,131,550
1,131,550
1,408,948
1,408,948
Non-current liabilities
Group employee share plan
Employees’ end of service benefit
Total non-current liabilities
18
19
44,935
3,976,001
4,020,936
135,319
3,294,458
3,429,777
5,152,486
4,838,725
300,000,000
(222,738,641)
77,261,359
82,413,845
300,000,000
(204,793,904)
95,206,096
100,044,821
Total liabilities
SHAREHOLDERS’ EQUITY
Share capital
Accumulated losses
Total shareholders’ equity
Total liabilities and shareholders’ equity
9
The accompanying notes 1 through 26 form an integral part of these financial statements.
These financial statements as shown on pages 1 to 20 were authorized for issue by the Board of Directors
on 13 Jumada I 1438H (corresponding to 27 March 2017).
3 CREDIT SUISSE SAUDI ARABIA
(A Saudi Closed Joint Stock Company)
STATEMENT OF INCOME
For the year ended 31 December 2016
Expressed in Saudi Arabian Riyals
2016
2015
11
6a
12
4,207,966
670,702
(234,640)
4,644,028
9,374,644
3,626,249
(1,952)
12,998,941
13
13,099,211
2,512,697
2,449,008
1,267,160
871,936
154,019
27,172
2,234,411
22,615,614
13,832,450
2,514,789
2,597,968
1,021,043
912,247
190,369
19,080
2,143,696
23,231,642
16
(17,971,586)
26,849
(17,944,737)
(10,232,701)
48,020
(10,184,681)
23
23
(0.60)
(0.60)
(0.34)
(0.34)
Note
Revenues
Brokerage services, net
Arranging and advisory services, net
Trading loss, net
Total revenues
Operating expenses
Salaries and employees related expenses
Rent and premises related expenses
Telecommunication and data service charges
Consultancy and legal charges
Expenses paid by principal shareholder
Depreciation
Marketing expenses
Other general and administrative expenses
Total operating expenses
15
6a
7
14
Operating loss for the year
Other income
Net loss for the year
Operating and net loss per share
Operating loss per share
Net loss per share
The accompanying notes 1 through 26 form an integral part of these financial statements.
4 CREDIT SUISSE SAUDI ARABIA
(A Saudi Closed Joint Stock Company)
STATEMENT OF CASH FLOWS
For the year ended 31 December 2016
Expressed in Saudi Arabian Riyals
Note
2016
2015
(17,944,737)
(10,184,681)
154,019
(90,384)
(17,881,102)
190,369
(358,868)
(10,353,180)
(5,570)
(277,398)
2,574,378
681,543
(14,908,149)
(19,466)
(213,598)
(749,333)
919,457
(10,416,120)
(1,336,554)
(1,336,554)
(37,681)
(37,681)
(16,244,703)
96,026,326
79,781,623
(10,453,801)
106,480,127
96,026,326
Cash flow from operating activities:
Net loss for the year
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation
Group employee share plan
Changes in operating assets and liabilities:
7
Prepayments and other current assets
Accrued expenses and other current liabilities
Due from / to related parties
Employees’ end of service benefits, net
Net cash used in operating activities
Investing activities:
Purchase of property and equipment
Net cash used in investing activities
7
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
4
The accompanying notes 1 through 26 form an integral part of these financial statements.
5 CREDIT SUISSE SAUDI ARABIA
(A Saudi Closed Joint Stock Company)
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
For the year ended 31 December 2016
Expressed in Saudi Arabian Riyals
Note
As at 1 January 2016
Net loss for the year
Provision for zakat and
income tax
As at 31 December 2016
As at 1 January 2015
Net loss for the year
Provision for zakat and
income tax
As at 31 December 2015
17
17
Share capital
Accumulated losses
300,000,000
(204,793,904)
(17,944,737)
95,206,096
(17,944,737)
-300,000,000
-(222,738,641)
-77,261,359
300,000,000
--
(194,609,223)
(10,184,681)
105,390,777
(10,184,681)
-300,000,000
-(204,793,904)
-95,206,096
The accompanying notes 1 through 26 form an integral part of these financial statements
6 Total
CREDIT SUISSE SAUDI ARABIA
(A Saudi Closed Joint Stock Company)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2016
Expressed in Saudi Arabian Riyals
1.
ORGANIZATION AND ACTIVITIES
Credit Suisse Saudi Arabia (the “Company”) is a Closed Joint Stock Company registered in the
Kingdom of Saudi Arabia. The Company operates under commercial registration number
1010228645 dated 1 Safar 1428H (corresponding to 19 February 2007).
The Company’s registered office is located at:
Al Jumaiah Center, 2nd Floor
King Fahad Road – Hay El Mhamadiyah
P.O. Box 5000
Riyadh 12361-6858
Kingdom of Saudi Arabia
At 31 December 2016, the share capital of the Company was held by the following shareholders:
Credit Suisse AG Percentage
100%
No. of shares
30,000,000
At 31 December 2015, the share capital of the Company was held by the following shareholders:
Credit Suisse AG Others Percentage
70.51%
29.49%
100%
No. of shares
21,152,400
8,847,600
30,000,000
The principal business activities of the Company are to provide brokerage, arranging, dealing and
advisory services.
On 26 October 2016, Credit Suisse AG executed a buyout of all minority shareholders. Credit
Suisse acquired 8,847,600 shares (29.49% of total share capital as at 31 December 2015) from
six minority shareholders and received all regulatory approvals. As a result, Credit Suisse AG
owned 100% of the Company’s share capital as at 31 December 2016.
2.
BASIS OF PREPARATION
2.1 Statement of Compliance
The accompanying financial statements have been prepared in accordance with the generally
accepted accounting standards in Saudi Arabia issued by the Saudi Organization for Certified
Public Accountants (SOCPA).
The new Regulation for Companies issued through Royal Decree M/3 on 11 November 2015
(hereinafter referred as “The Law”) came into force on 25/07/1437H (corresponding to 2 May
2016). The Company has to amend its by-laws for any changes to align the by-laws to the provisions
of The Law. Consequently, the Company shall present the amended by-laws to the shareholders in
their Extraordinary General Assembly meeting for their ratification. The full compliance with The
Law is expected no later than 24/07/1438H (corresponding to 21 April 2017).
2.2
Basis of Measurement
These financial statements have been prepared under the historical cost basis except for
investments in trading securities and cash settled share based payment liabilities which are stated
at their fair values.
7 CREDIT SUISSE SAUDI ARABIA
(A Saudi Closed Joint Stock Company)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2016
Expressed in Saudi Arabian Riyals
2.
BASIS OF PREPARATION (Continued)
2.3
Functional and presentation currency
These financial statements are presented in Saudi Arabian Riyal (SAR) which is the functional and
presentation currency of the company.
2.4
Use of estimates and judgments
In the ordinary course of business, the preparation of financial statements requires the use of certain
critical accounting estimates and assumptions that affect the reported amounts of assets, liabilities,
income and expenses. It also requires management to exercise its judgment in the process of applying
the Company’s accounting policies. Such estimates, assumptions and judgments are continually
evaluated and are based on historical experience and other factors, including obtaining professional
advices and expectations of future events that are believed to be reasonable under the circumstances.
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.
2.5
Going concern
As at 31 December 2016, the accumulated losses of the company amounts to SR 222,738,641 (31
December 2015: SAR 204,793,904) which represent 74% (2015: 69%) of the company’s share capital.
While approving these financial statements, the board of directors has considered the financial position
and future profitability of the company and it believes that the going concern basis used for the
preparation of the financial statement is appropriate.
During the year, the company resolved to increase its share capital by SR 200,000,000 which was
approved by the board of directors on 8 December 2016. Subsequent to the year-end, the company has
received in an escrow account SR 200,000,000 in lieu of increase in share capital from its shareholders.
The Company held an extraordinary general meeting on 12 March 2017 and approved the increase in
the share capital. On 27 March 2017, the Company received the CMA approval for the increase in share
capital. The additional share capital will bring the accumulated losses below 50% threshold as a
percentage of issued capital.
3.
SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in the financial
statements.
The significant accounting policies are as follows:
a)
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and cash with banks which are available to the company
without any restrictions.
b)
Property and equipment
Property and equipment are stated at cost and presented net of accumulated depreciation and
amortization. Cost includes expenditure that is directly attributable to the acquisition of the assets.
Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in
the item of property and equipment. All other expenditure is recognized in the income statement when
incurred.
8 CREDIT SUISSE SAUDI ARABIA
(A Saudi Closed Joint Stock Company)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2016
Expressed in Saudi Arabian Riyals
3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
The cost less estimated residual value is depreciated on straight-line basis over the following
estimated useful lives of the assets:
Leasehold improvements Furniture and fixture
Computer software and hardware
Motor vehicle
Shorter of the lease terms or 5 years
5 years
3-5 years
4 years
Gains and losses on disposals are determined by comparing proceeds with carrying amount.
These are included in the Statement of Income.
The assets’ residual values and useful lives are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. Any carrying
amount is written down immediately to its recoverable amount if the asset’s carrying amount is
greater than its estimated recoverable amount.
c)
Work in progress
Work in progress includes assets under construction for which it is probable that future economic
benefits will flow to the Company and the cost can be measured reliably. Typically these are
items that have not yet been brought to the location and/or condition necessary for it to be capable
of operating in the manner intended by management.
In the event of partially completed construction work that has necessitated advance or progress
payments, or work-in-progress, depreciation will only commence when the work is complete (i.e.
the asset is in the location and condition necessary for its intended use).
d)
Impairment of finacial assets
Financial assets, property and equipment and other non-current assets are reviewed for
impairment losses whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss, if any, is recognized for the amount by which the
carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the
higher of an asset's fair value less costs to sell and value in use. For the purpose of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows.
e)
Employees’ end of service benefits
Employees’ end of service benefits, calculated in accordance with Saudi Arabian labour
regulations, are accrued and charged to the Statement of Income. The liability is calculated at the
current value of the vested benefits to which the employee is entitled, should his services are
terminated at the balance sheet date.
f)
Share based incentive plans
The share based arrangements between the employees of the Company and its parent company
(Credit Suisse AG) are classified as cash settled share based transactions.
The fair value of the amounts payable to employees in respect of the shares granted is recognized
as an expense with a corresponding increase in liability over the period that the employees
unconditionally become entitled to receiving the shares. The liability is re-measured at each
9 CREDIT SUISSE SAUDI ARABIA
(A Saudi Closed Joint Stock Company)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2016
Expressed in Saudi Arabian Riyals
3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
reporting date and at settlement date. Any change in the fair value of liability is recognized in the
Statement of Income.
Share awards and share unit awards that contain market conditions are marked-to-market based
on the latest share price information reflecting the terms of the award.
Share unit awards that contain earnings performance conditions are marked-to-market based on
the parent company's actual earnings performance to date and the parent company's internal
earnings projections over the remaining vesting period of the award. In determining the final
liability, the parent company also estimates the number of forfeitures over the life of the plan
based on management’s expectations for future periods, which also considers past experience.
g)
Assets held in trust or in a fiduciary capacity
Assets held in trust or in a fiduciary capacity by the Company are not treated as assets of the
Company and accordingly are not included in the financial statements; these are treated as offbalance sheet items.
h)
Revenue recognition
•
•
•
•
i)
Income from brokerage services is recognized on an accrual basis;
Income from arranging and advisory services is recognized when the services are rendered;
Income from trading activities is recognized on accrual basis.
Dividend income is recognized when the right to receive payment is established.
Payable and accruals
Liabilities are recognized for amounts to be paid in the future for goods or services received,
whether billed by the supplier or not.
j)
Provisions
Provisions are recognized when the Company has an obligation (legal or constructive) arising
from a past event, and the costs to settle the obligation are both probable and can be measured
reliably. Provisions are not recognized for future operating losses.
k)
Expenses
Expenses are measured and recognized as a period cost at the time when they are incurred.
Expenses related to more than one financial periods are allocated over such periods
proportionately.
l)
Offsetting
Financial assets and liabilities are offset and reported net in the balance sheet when there is a
legally enforceable right to set off the recognised amounts and when the Company intends to
settle on a net basis, or to realise the asset and settle the liability simultaneously.
10 CREDIT SUISSE SAUDI ARABIA
(A Saudi Closed Joint Stock Company)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2016
Expressed in Saudi Arabian Riyals
3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
m)
Zakat and income tax
The Company is subject to Zakat and income tax in accordance with the regulations of General
Authority of Zakat and Tax (“GAZT”). Zakat and income tax provision for the period is deducted
from retained earnings and any differences between the provision and the final assessment are
recorded in the period during which the GAZT has issued the final assessment.
n)
Foreign currencies
Transactions in foreign currencies are translated into Saudi Arabian Riyals at the exchange rates
prevailing at transaction dates. Monetary assets and liabilities at year-end, denominated in foreign
currencies, are translated into Saudi Riyals at the exchange rates prevailing at the balance sheet
date. Foreign exchange gains or losses on translation of monetary assets and liabilities
denominated in foreign currencies are recognised in the consolidated statement of income.
4.
CASH AND CASH EQUIVALENTS
Cash in hand
Cash at bank - current account
2016
2015
5,000
79,776,623
79,781,623
2,717
96,023,609
96,026,326
Cash at bank is placed with counterparties who have investment grade credit ratings.
5.
PREPAYMENTS AND OTHER ASSETS
Prepaid rent
Prepaid Professional Indemnity
Security deposit against rental property
Medical Insurance
Regulatory fee
Others
6.
2016
2015
342,340
226,271
147,014
110,514
100,000
109,464
1,035,603
342,607
238,181
147,014
100,726
100,001
101,504
1,030,033
RELATED PARTY TRANSACTIONS AND BALANCES
The Company’s shareholders and all their affiliate and subsidiary companies are considered as
related parties of the Company. Credit Suisse AG is the ultimate parent company incorporated in
Switzerland. In the ordinary course of business, the Company enters into transactions with related
parties, which are based on prices and contract terms approved by the Company’s management.
The Company entered into a Service Level Agreement (SLA) with Credit Suisse AG (“principal
shareholder”), which provides the basis for sharing revenues on jointly executed projects and
allocation of common expenses incurred by or on behalf of the principal shareholder. For 2016,
allocation of common expenses between Credit Suisse Saudi Arabia and Credit Suisse AG
(principle shareholder) was approved by Credit Suisse Saudi Arabia board on 16 May 2016.
Further the principal shareholder also provides administrative and infrastructural support to the
Company as and when required.
11 CREDIT SUISSE SAUDI ARABIA
(A Saudi Closed Joint Stock Company)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2016
Expressed in Saudi Arabian Riyals
6.
RELATED PARTY TRANSACTIONS AND BALANCES (Continued)
(a)
The significant transactions during the year were as follows:
Nature of transactions
Expenses reimbursable from principal shareholder
Expenses of the Company incurred by principal shareholder
Revenue from jointly executed projects agreed share of the
Company as per SLA:
• Brokerage from swap arrangements (Note 11)
• Arranging and advisory services
2016
(543,750)
1,415,686
871,936
3,398,719
670,702
2015
(506,250)
1,418,497
912,247
7,327,480
3,626,249
(b) Following balances pertain to related parties in the Balance Sheet:
Due from related parties
Credit Suisse and its subsidiaries & affiliates
Due to related parties
Credit Suisse and its subsidiaries & affiliates
2016
2015
269,268
2,843,646
--
--
In addition to above, the principal shareholder has offered share based incentive plans to certain
employees of the Company (see note 18).
12 CREDIT SUISSE SAUDI ARABIA
(A Saudi Closed Joint Stock Company)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2016
Expressed in Saudi Arabian Riyals
7.
PROPERTY AND EQUIPMENT, NET
2015
2016
Leasehold
improvements
Furniture &
fixture and
office equipment
Computer
software and
hardware
12,424,486
2,937,862
3,559,933
290,050
--
12,424,486
18,934
2,956,796
166,284
3,726,217
-290,050
1,151,336
1,151,336
20,548,885
37,681
19,212,331
Balance at 1 January
Depreciation during the year
12,424,486
2,834,523
3,518,456
290,050
--
19,067,515
18,877,146
Balance at 31 December
12,424,486
71,732
2,906,255
82,287
3,600,743
290,050
---
154,019
19,221,534
190,369
19,067,515
Net book value at 31
December 2016
--
50,541
125,474
--
1,151,336
1,327,351
Net book value at 31
December 2015
--
103,339
41,477
--
--
--
Motor
vehicles
Work in
progress*
Total
Total
Cost:
Balance at 1 January
Additions during the year
Balance at 31 December
--
19,212,331
19,174,650
1,336,554
Accumulated depreciation
* Work in progress includes installation of an IT server which is still in progress at the balance sheet date. It is expected to be completed during 2017.
13 144,816
CREDIT SUISSE SAUDI ARABIA
(A Saudi Closed Joint Stock Company)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2016
Expressed in Saudi Arabian Riyals
8.
ACCRUED EXPENSES AND OTHER LIABILITIES
9.
2015
441,239
653,665
292,244
21,800
1,408,948
2016
392,007
390,283
330,250
19,010
1,131,550
Accrual for performance bonus
Due to vendors
Professional fee
Withholding tax payable
SHARE CAPITAL
The Company’s issued and fully paid share capital is SAR 300,000,000 comprising 30,000,000
shares of SAR 10 each (31 December 2015: SAR 300,000,000).
10.
STATUTORY RESERVE
The Company’s Articles of Association and the Regulations for Companies in the Kingdom of Saudi
Arabia require the Company to allocate 10% of its net income to form a statutory reserve until such
reserve equals one-half of its share capital. The Company has not transferred any amount for the
current year as statutory reserve on account of losses incurred. The statutory reserve is not available
for distribution.
11.
BROKERAGE SERVICES, NET
Income from brokerage services for dealing in
• Shares and custodian fee
• Equity swap arrangements
Note
2016
11.1
809,247
3,398,719
4,207,966
2015
2,047,164
7,327,480
9,374,644
11.1 This includes an amount of SAR 1,512,799 (2015: SAR 3,607,474) representing commission
charged to Credit Suisse Securities (Europe) Limited (a related party) for providing market
information and other services relating to the execution of Swap transactions.
12.
TRADING LOSS, NET
Realized loss on the investments held for trading
2016
(234,640)
(234,640)
2015
(1,952)
(1,952)
The trading income relates to the proprietary trading done by the Company during the year.
14 CREDIT SUISSE SAUDI ARABIA
(A Saudi Closed Joint Stock Company)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2016
Expressed in Saudi Arabian Riyals
13.
SALARIES AND EMPLOYEE RELATED EXPENSES
Basic salaries
Allowances and other benefits
Incentive based performance bonus
Deferred compensation expense
14.
2016
613,897
537,618
338,211
129,132
615,553
2,234,411
2015
627,580
670,122
226,034
107,299
512,661
2,143,696
TELECOMMUNICATION AND DATA SERVICE CHARGES
2016
427,383
2,021,625
2,449,008
Data service charges
Telecommunication charges
16.
2015
7,386,427
5,902,039
441,361
102,623
13,832,450
OTHER GENERAL AND ADMINISTRATIVE EXPENSES
Insurance
Repair and maintenance
Business travel
Office supplies
Others
15.
2016
7,040,892
5,662,789
392,036
3,494
13,099,211
2015
440,283
2,157,685
2,597,968
OTHER INCOME
Other income represents commission income earned on bank deposits and placements from a
commercial bank during the year.
17.
ZAKAT AND INCOME TAX
a)
Zakat and income tax
Charge for the year
Zakat charge for the year is Nil (2015: NIL) as the zakat base is negative. The details are as
follows:
15 CREDIT SUISSE SAUDI ARABIA
(A Saudi Closed Joint Stock Company)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2016
Expressed in Saudi Arabian Riyals
17.
ZAKAT AND INCOME TAX (Continued)
The movement in accrued zakat during the year ended 31 December 2016 is as follows:
Balance at 1 January Add: Charge for the year Less: Payments during the year
Balance at 31 December 2016 -- -- -- -- 2015
-----
The provision for zakat charge relating to Saudi shareholders is based on the following:
Equity Opening allowances and other adjustments
Adjusted loss for the year Zakat base Saudi Shareholders’ zakat base
2016 65,460,000
(79,831,433) (3,219,543) (17,590,976) ‐‐ 2015
65,476,000
(75,501,855)
(2,393,196)
(12,419,051)
--
The Company has become 100% foreign-owned entity starting from 1 November 2016. Although
the Company no longer has Saudi shareholders as of 31 December 2016, the Company has still
calculated zakat on the above items as per the current practice of General Authority of Zakat and
Tax (GAZT).
b)
Income tax
No provision for income tax has been made in these financial statements as the Company has
incurred a loss in the current year.
c)
Status of assessments
Zakat and income tax declarations have been submitted with the General Authority of Zakat and
Tax (GAZT) for the years up to 31 December 2015, however no assessment has been finalized.
18.
GROUP EMPLOYEE SHARE PLAN
Share based incentive plans - cash awards
2016
2015
44,935 44,935 135,319
135,319
The total stock award liability recorded as at 31 December 2016 was nil (2015: SAR nil). The fair
value used to calculate the stock award liability was the closing Credit Suisse Group share price
as at 31 December 2016 SAR 54.50 (2015: SAR 83.02). The average weighted fair value of awards
granted in 2016 was nil (2015: nil). The intrinsic value of vested share based awards outstanding
as at year end was nil (2015: SAR nil).
16 CREDIT SUISSE SAUDI ARABIA
(A Saudi Closed Joint Stock Company)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2016
18.
GROUP EMPLOYEE SHARE PLAN (Continued)
A brief description of the Credit Suisse Group employee share award is summarized as follows:
Phantom Share Awards
Phantom Share awards were granted to certain employees as part of their variable compensation.
These share awards replace other plans introduced in prior years, including SISUs, ISUs and PIP
in an effort to make the design of the company’s compensation instruments simpler, more
transparent and less leveraged and to better align the interests of the employees with those of the
shareholders. Each share award granted entitles the holder of the award to receive one CSG share.
Phantom share awards vest equally over a period ranging from 3 years to 4 years. The value that
is delivered is equal to the CSG share price at the time of delivery, as the share awards do not
contain any leverage component or multiplier effect as contained in earlier awards.
The share awards also include other awards such as special awards, which may be granted to new
employees.
19.
EMPLOYEES’ END OF SERVICE BENEFITS
2016
3,294,458
681,543
3,976,001
Balance at beginning of the year
Additions
Balance at end of the year
20.
2015
2,375,001
919,457
3,294,458
OPERATING LEASE COMMITMENTS
The Company is renting its office premises through operating lease contract. The lease duration
was initially for five years; the lease contract was subsequently extended for three years up to end
of February 2020.
The future minimum lease payments under the operating lease is as follows:
2016
Less than one year
Between one and five years
1,938,000 5,814,000 7,752,000 17 2015
2,120,000
6,360,000
8,480,000
CREDIT SUISSE SAUDI ARABIA
(A Saudi Closed Joint Stock Company)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2016
Expressed in Saudi Arabian Riyals
21.
CAPITAL COMMITMENTS
As at 31 December 2016 and 31 December 2015 the Company had no capital commitments.
22.
ASSETS HELD IN FIDUCIARY CAPACITY
22.1 As at 31 December 2016 assets held under fiduciary capacity amounted to SAR 58.6 million
(2015: SAR 39.9 million). These are kept with a local commercial bank. These amounts were kept
in custody by the Company for its customers for the purpose of investment in the local equity
market.
22.2 As at 31 December 2016, the Company held equity securities with a market value of SAR 1,291
million (2015: SAR 1,593 million) in its name under a Swap Agreement with Credit Suisse
Securities (Europe) Limited (a related party). These securities were held pursuant to Capital
Market Authority (CMA) circular dated 21 August 2009. Through this circular, CMA allowed the
Authorized Persons (AP) to enter into Swap Agreements with non-resident foreign investors to
transfer the economic benefits of the listed securities on Tadawul while the Company retains the
legal ownership of shares.
23.
OPERATING AND NET LOSS PER SHARE
Operating and net loss per share for the year ended 31 December 2016 have been calculated by
dividing the operating and net loss for the year by weighted average number of shares outstanding
during the year.
24.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Financial instruments carried on the balance sheet include cash and cash equivalents, due to/ from
related parties, investments and other liabilities.
Fair value and cash flow interest rate risks are the exposures to various risks associated with
the effect of fluctuations in the prevailing interest rates on the Company's financial position and
cash flows. Management monitors the changes in interest rates and believes that the fair value and
cash flow interest rate risks to the Company are not significant.
Liquidity risk is the risk that an enterprise may encounter difficulty in raising funds to meet
commitments associated with financial instruments. Liquidity risk may result from the inability to
sell a financial asset quickly at an amount close to its fair value.
Liquidity risk is managed by monitoring on a regular basis that sufficient funds are available to
meet the Company's future commitments.
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in
foreign exchange rates.
Management believes that there is minimal risk of significant losses due to exchange rate
fluctuation as the majority of monetary assets and liabilities are in currencies linked to the Saudi
Riyal. In addition, as the Company’s foreign currency transactions are primarily in US dollars
which is pegged with the Saudi Riyal, foreign exchange gains and losses are not significant and
have not been disclosed separately.
18 CREDIT SUISSE SAUDI ARABIA
(Closed Joint Stock Company)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2016
Expressed in Saudi Arabian Riyals
24.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Continued)
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 in the principal, or in
absence, the most advantageous market to which the Company has access at that date. As the
accompanying financial statements are prepared under the historical cost method, except for
investments in trading securities and cash settled share based payment liability which are stated at
their fair values, differences may arise between the book values and the fair value estimates.
Management believes that the fair values of the Company's financial assets and liabilities are not
materially different from their carrying values.
25. CAPITAL MANAGEMENT
The Capital Market Authority (the “CMA”) has issued Prudential Rules (the “Rules”) dated 30
December 2012 (corresponding to 17 Safar 1434H). According to the Rules, the CMA has
prescribed the framework and guidance regarding the minimum regulatory capital requirement
and its calculation methodology as prescribed under these Rules. In accordance with this
methodology, the Company has calculated its minimum capital required and capital adequacy
ratios as follows:
19 CREDIT SUISSE SAUDI ARABIA
(A Saudi Closed Joint Stock Company)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2016
Expressed in Saudi Arabian Riyals
25. CAPITAL MANAGEMENT (Continued)
2016
2015
SAR 000’
Capital Base
Tier I Capital
Tier II Capital
Total Capital Base
Minimum capital requirement
Market risk
Credit risk
Operational risk
Total Minimum Capital Required
Surplus in Capital
Total capital ratio
77,261
-77,261
95,206
-95,206
4
3,234
5,654
8,892
68
3,262
6,393
9,722
68,369
8.69
85,484
9.79
The capital that the Company are required to hold is determined by on - balance sheet, off - balance
sheet, counterparty and other risk exposures. Suitable processes and controls are in place to
monitor and manage capital adequacy and ensure compliance with local regulatory ratios. These
processes are designed to ensure that the company have sufficient capital available to meet local
regulatory capital requirements at all times.
a) Capital Base of the Company comprise of:
-
Tier-1 capital: consists of paid-up share capital and retained earnings.
-
Tier-2 capital: consists of subordinated loans with certain restrictions. The Company does
not have any subordinated loans as a result the company does not have tier-2 capital.
b) The minimum capital requirements for market, credit and operational risk are calculated as per
the requirements specified in the Rules.
c) The Company’s business objectives when managing capital adequacy is to comply with the
capital requirements set forth by the CMA to safeguard the Company’s ability to continue as
a going concern, and to maintain a strong capital base.
26. SUBSEQUENT EVENTS
On 31 January 2017, the company has received SR 200,000,000 from its shareholders relating to the
increase in share capital in an escrow account. The Company held an extra ordinary general meeting
on 12 March 2017 and approved the application to be submitted to CMA for their final approval. On
27 March 2017, the Company received the CMA approval for the increase in share capital. As at the
date of approval of these financial statements, the company is awaiting final approval from Ministry
of Commerce and Industry “MOCI” to provide the final confirmation based on which the amount
will be transferred from escrow to the Company’s capital account hence; the financial impact of
increase in share capital has not been incorporated in these financial statements.
20