ABDULLAH AL-OTHAIM MARKETS COMPANY (SAUDI JOINT STOCK COMPANY)

Transcription

1 CONSOLIDATED FINANCIAL STATEMENTS AND AUDITORS REPORT

2 CONSOLIDATED FINANCIAL STATEMENTS AND AUDITORS' REPORT INDEX PAGE Auditors' report 1 Consolidated balance sheet 2 Consolidated statement of income 3 Consolidated statement of cash flows 4 Consolidated statement of changes in shareholders equity 5 Notes to the consolidated financial statements 6 18

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4 CONSOLIDATED BALANCE SHEET AS AT DECEMBER 31, Notes ASSETS Current assets Cash on hand and at banks 63,478,659 43,619,168 Inventories, net 3 321,789, ,353,260 Prepayments and other receivables 4 79,885, ,464,896 Total current assets 465,153, ,437,324 Non-current assets Investments in associated companies and others 6 174,018, ,945,249 Property and equipment, net 7 1,075,859,844 1,024,756,613 Projects in progress 8 36,517,123 58,260,734 Intangible assets, net 11,876,824 13,215,328 Total non-current assets 1,298,271,823 1,215,177,924 TOTAL ASSETS 1,763,425,682 1,675,615,248 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Short-term loans and Murabahas 9 (a) 78,193,602 61,432,944 Current portion of long-term loans and Murabahas 9 (b) 105,399, ,346,089 Trade payables 656,122, ,779,387 Other payables and accrued expenses ,337,415 83,062,487 Total current liabilities 941,052, ,620,907 Non-current liabilities Provision for End-of-service benefits 41,068,395 35,461,372 Long-term loans and Murabahas 9 (b) 100,858, ,230,587 Total non-current liabilities 141,927, ,691,959 Total liabilities 1,082,979,890 1,144,312,866 Shareholders' equity Share capital 1 225,000, ,000,000 Statutory reserve 12 74,159,034 56,982,411 Voluntary reserve 13 12,453,336 12,453,336 Retained earnings 368,757, ,667,477 Unrealized gains from investments in available-forsale securities 76, ,158 Total shareholders' equity 680,445, ,302,382 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,763,425,682 1,675,615,248 The accompanying notes form an integral part of these consolidated financial statements -2-

5 CONSOLIDATED STATEMENT OF INCOME Notes Revenues Sales 4,105,198,404 3,942,797,390 Rent 5 160,978, ,115,441 Total revenues 4,266,176,672 4,090,912,831 Cost of revenues (3,940,929,175) (3,767,767,726) Gross profit 325,247, ,145,105 Selling and distribution expenses 17 (113,878,296) (115,020,839) General and administrative expenses 18 (55,244,940) (50,502,628) Income from continuous main operations 156,124, ,621,638 Company s share in net profits of the associate companies 6 30,151,720 12,655,583 Impairment of an investment 6 (929,491) - Finance expenses (10,910,445) (12,516,125) Other income (expenses), net 1,080,185 (4,177,922) Income before zakat 175,516, ,583,174 Zakat (3,750,000) (3,500,000) NET INCOME 171,766, ,083,174 Earnings per share 14 From continuous main operations From net income The accompanying notes form an integral part of these consolidated financial statements -3-

6 CONSOLIDATED STATEMENT OF CASH FLOWS OPERATING ACTIVITIES Income before zakat 175,516, ,583,174 Adjustments for: Depreciation 82,753,690 73,976,900 Amortization of intangible assets 1,338,504 1,338,504 Losses (Gains) on sale of property and equipment 613,766 (749,181) Impairment of an investment 929,491 - Company s share in net profits of the associate companies (30,151,720) (12,655,583) Provision for end-of-service benefits 5,607,023 6,577,853 Changes in working capital: Inventories (10,436,545) (26,077,528) Prepayments and other receivables 25,579,501 (16,720,398) Trade payables, other payables and accrued expenses (20,362,202) 119,574,359 Zakat paid (3,770,048) (3,712,420) Net cash from operating activities 227,617, ,135,680 INVESTING ACTIVITIES Investments in associated companies and others (45,098,374) (900,000) Additions to property, equipment and projects in progress (114,795,803) (209,666,747) Dividends received from an associated company 19,125,000 - Proceeds on sale of property and equipment 2,068,727 1,151,760 Net cash used in investing activities (138,700,450) (209,414,987) FINANCING ACTIVITIES Loans and Murabahas (46,557,749) (19,837,431) Cash dividends (22,500,000) (67,500,000) Net cash used in financing activities (69,057,749) (87,337,431) Net change in cash on hand and at banks 19,859,491 (1,616,738) Cash on hand and at banks at January 1 43,619,168 45,235,906 CASH ON HAND AND AT BANKS AT DECEMBER 31 63,478,659 43,619,168 Non cash transactions: Unrealized (losses) gains on investment in available-for-sale securities (122,820) 199,158 The accompanying notes form an integral part of these consolidated financial statements -4-

7 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY Notes Share capital Statutory reserve Voluntary reserve Retained earnings Unrealized gains from investments in available-forsale securities Balance at January 1, 225,000,000 41,974,094 12,453, ,092, ,520,050 Net income for year ,083, ,083,174 Transfer to statutory reserve 12-15,008,317 - (15,008,317) - - Unrealized gains on investment in available-for-sale securities , ,158 Cash dividends (67,500,000) - (67,500,000) Balance at December 31, 225,000,000 56,982,411 12,453, ,667, , ,302,382 Net income for year ,766, ,766,230 Transfer to statutory reserve 12-17,176,623 - (17,176,623) - - Unrealized losses on investment in available-for-sale securities (122,820) (122,820) Cash dividends (22,500,000) - (22,500,000) Balance at December 31, 225,000,000 74,159,034 12,453, ,757,084 76, ,445,792 Total The accompanying notes form an integral part of these consolidated financial statements -5-

8 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND ACTIVITY Abdullah Al-Othaim Markets Company is a Saudi Joint Stock company registered in Riyadh on Rajab 7, 1400 (May 21, 1980) under Commercial Registration Number The Company was converted from a limited liability into a joint stock Company according to the ministerial decree No. 227/G on Ramadan 3, 1428 (corresponding to September 15, 2007). The share capital of the Company amounting to 225 million is divided into 22.5 million shares of 10 each. The Company s main activity is to undertake wholesale trading in food supplies, fish, meat, cars and its spare parts, agricultural crops and livestock, household equipment, constructing, managing, operating and maintaining of super markets and malls, cooked and non-cooked catering services, computer services, operating and maintaining electrical and mechanical equipment, constructing, operating and maintaining of storage and cooling warehouses. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying consolidated financial statements have been prepared in accordance with the accounting standards generally accepted in the Kingdom of Saudi Arabia issued by the Saudi Organization for Certified Public Accountants. The following is a summary of significant accounting policies applied by the Company. Basis of consolidation During, the Company established limited liability companies in the Kingdom of Saudi Arabia which are fully owned, directly and indirectly, by the Company. The investment in these companies in year was stated at cost since the financial statements for these companies have not been prepared and the companies did not engage in any commercial activities during year. Therefore, they were not consolidated in. The consolidated financial statements include the financial statements of Abdullah AlOthaim Markets Company (the "Company") and the financial statements of the following subsidiaries: Capital Ownership % Direct Indirect Haley Holding Co. 100,000 99% 1% Universal Marketing Center Co. 100,000 99% 1% Seven Services Co. 100,000 99% 1% Bayt Alwatan Co. 100,000 99% 1% Marafeq Tashgheel Co. 500, % -6-

9 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Use of estimates The preparation of consolidated financial statements in conformity with generally accepted accounting standards requires the use of estimates and assumptions that could affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements in addition to the reported amounts of revenues and expenses during the year. Although these estimates are based on management s best knowledge of current events and activities available with the management, actual results may ultimately differ from those estimates. Accounting convention The consolidated financial statements are prepared under the historical cost and accrual basis conventions, except for the Investment in available-for-sale securities which is accounted for using fair value and investment in associated companies which are accounted for using equity method. Revenue recognition Sales are recognized upon delivery of goods to customers. Income from rent is recognized on accrual basis over the period of lease contracts. Expenses Selling and distribution expenses principally comprise of costs incurred in the distribution and sale of the Company s products. All other expenses are classified as general and administrative expenses. General and administrative expenses include direct and indirect costs not specifically part of cost of revenues as required under generally accepted accounting standards. Allocations between general and administrative expenses and cost of revenues, when required, are made on consistent basis. Cost of sales Cost of sales includes the cost of purchases and expenses related to the outlets. Accounting for lease agreements All leases entered into by the Company are classified as operating leases. Rental payments are charged to the statement of income using the straight-line method over the term of the operating lease contract. The lease amounts received by the Company as a lessor in operating lease contracts are recognized in the statement of income using the straight-line method over the period of the related leases. -7-

10 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Investments in Associated companies and others Investment in an associated company which is 13.65% owned and in which the Company exercises significant influence through its participation in its financial and operational policies is accounted for using equity method, under which the investment is initially stated at cost and adjusted thereafter for the change in the Company's share in net assets of the investee. Company's share of the net profit or loss of the investee is reported in the consolidated statement of income. Investments in companies which are less than 20% owned and where the fair value is no readily determinable are stated at cost. Appropriate provision is made for any other than temporary impairment in the value of these investments. Income is reported upon declaration. Investments in securities are classified in the balance sheet as investments available for sale at fair value. Unrealized gains or losses are reported in the equity. Realized gains or losses on disposal of investments in securities available for sale are reported in the income statement. Dividends from investments available for sale are reported in the income statement. If the fair value is not available, these investments are stated at cost. Cost is adjusted to reflect any other than temporary impairment in the value. Inventories Inventories are stated at the lower of cost or market value. Cost is determined using the weighted average costing method. Property and equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided over the estimated useful lives of the applicable assets using the straight line method. Leasehold improvements and buildings constructed on leased lands are amortized over the shorter of the estimated useful life of these assets or the remaining term of the lease. The estimated lives of the principal classes of assets are as follows: Years Machinery and equipment 10 Buildings 5 25 Vehicles 5 7 Computers 5 7 Furniture and fixtures 7 Leasehold improvements 10-8-

11 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Impairment of long-term assets The Company reviews on regular basis the carrying amount of its tangible assets to determine whether there is any indication that those assets have suffered impairment in value. In case such indication exists, the recoverable amount of the assets is estimated in order to determine the extent of the impairment, if any. Where it is not possible to estimate the recoverable amount of individual assets, the Company estimates the recoverable amount of the cash generating unit to which the asset belongs. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. Impairment loss is recognized as an expense in the consolidated statement of income immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized as income in the consolidated statement of income immediately. Borrowing cost Borrowing costs directly attributable to acquisitions or constructions of qualifying assets, which are the assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until the assets are substantially ready for their intended use or sale. All other borrowing costs are charged to the consolidated statement of income in the period in which they are incurred. Intangible assets Intangible assets represent costs incurred for the purpose of using rented stores (key money). These assets are amortized over the term of the related contract lease. Foreign currency translation Foreign currency transactions are translated into Saudi Riyals at the rates of exchange prevailing at the time of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the exchange rates prevailing at that date. Gains and losses from settlement and translation of foreign currency transactions are included in the consolidated statement of income. Provision for End-of-service Benefits End-of-service benefits are provided in accordance with the Saudi Arabian Labor Law and are reduced by the payments to employees. Differences in indemnities, if any, are computed and paid to employees upon termination. Zakat The Company is subject to the regulations of the Department of Zakat and Income Tax ( DZIT ) in the Kingdom of Saudi Arabia. Zakat is provided on an accrual basis. The zakat charge is computed on the zakat base. Any difference in the estimate is recorded when the final assessment is approved, at which time the provision is cleared. -9-

12 3. INVENTORIES, NET Main warehouses goods 98,093,529 96,285,893 Branches goods 223,696, ,067, ,789, ,353, PREPAYMENTS AND OTHER RECEIVABLES Prepaid expenses 60,119,025 67,844,079 Advance payments to suppliers 6,837,666 16,407,151 Stores rent receivables 3,261,995 4,066,828 Employees receivables 1,797,558 1,798,121 Margin on letters of credit and letters of guarantees 3,982,168 8,869,905 Others 3,886,983 6,478,812 79,885, ,464,896 Prepayments include an amount of 16.4 million (: 21.4 million) which represents rents paid to a related party in advance against early payment discount. 5. RELATED PARTY TRANSACTIONS During the period, the Company transacted with the following related parties. The terms of these transactions and expenses were executed in accordance with the Company s management approval: Company s name Al Othaim Holding Company Abdullah Al Othaim Real Estate Investment and Development Co. Relationship Founding Shareholder Associated Company The significant transactions and related amounts are as follows: Transactions Rent expenses 11,442,528 9,923,481 Rent income 37,560,575 37,445,

13 6. INVESTMENTS IN ASSOCIATED COMPANIES AND OTHERS Investments consist of the following: Notes Investment in an associated company a 122,458, ,446,091 Investment in an associated company of a subsidiary b 48,512,566 - Investment in National Laboratories Co, Net c 2,470,509 3,400,000 Investments in available-for-sale securities 576, ,158 Investments in non-consolidated subsidiaries - 400,000 a- Investment in an associated company 174,018, ,945,249 Balance, January 1 114,446, ,790,508 Company's share in net profits 27,137,528 12,655,583 Cash dividends received (19,125,000) - Balance, December ,458, ,446,091 The investment in associated company represents 13.65% of the share capital of Abdullah Al-Othaim Real Estate Investment and Development Company. The remaining percentage is owned by Al-Othaim Holding Company, Mr. Abdullah Saleh Al-Othaim and his family members. b- This item represents investments in companies associated to the subsidiaries of Abdullah Al Othaim Markets Company. These companies are engaged in Food business. c- The Company invested in 6% of the share capital of National Laboratories Company, a limited liability company registered in Dammam city. Through periodic review of the value of the investment, it has been determined that the company is incurring continuous losses, which resulted in an impairment of the investment by 929,491 reported in the consolidated statement of income. -11-

14 7. PROPERTY AND EQUIPMENT, NET Lands Machinery and equipment Buildings Vehicles Computers Furniture and fixtures Leasehold improvements Cost January 1, 318,838, ,067, ,368,323 52,312,989 80,754, ,059, ,936,778 1,345,338,460 Additions 19,195,125 18,205,693 53,070,268 10,376,155 10,074,234 11,494,432 14,123, ,539,414 Disposals - (4,430,324) - (618,900) (5,667,642 ) (3,925,437) (108,229 ) (14,750,532) December 31, 338,033, ,842, ,438,591 62,070,244 85,161, ,628, ,952,056 1,467,127,342 Accumulated depreciation January 1, - 81,600,863 58,960,507 35,464,849 36,313,580 66,278,619 41,963, ,581,847 Charge for the period - 18,711,596 28,711,833 7,469,309 6,264,275 10,800,139 10,796,538 82,753,690 Disposals - (2,706,064) - (537,275) (4,942,173) (3,881,267) (1,260) (12,068,039) December 31, - 97,606,395 87,672,340 42,396,883 37,635,682 73,197,491 52,758, ,267,498 Net book value December 31, 338,033, ,236, ,766,251 19,673,361 47,525,720 46,431,070 70,193,349 1,075,859,844 December 31, 318,838, ,466, ,407,816 16,848,140 44,441,230 45,780,947 66,973,349 1,024,756,613 On March 29, 2010, the Company purchased investment lands in Madinah from a related party (Abdullah Al Othaim Real Estate Investment and Development Co.), for an amount of 98 million for the purpose of constructing a shopping mall project and the investment in residential and office buildings. The approval for the purchase of lands was granted in the second shareholders' ordinary general assembly meeting held on April 7, Some title deeds of the land were transferred to the name of the Company while other title deeds amounting to 37 million are still under progress. Land mentioned above amounting to 166 million (: 165 million) are mortgaged to some local banks as collateral against banks facilities (Note 9b). No capital commitments associated with these projects exist as at the consolidated balance sheet date. Additions include an amount of 68,268,504 (: 18,231,505) transferred from projects in progress. Total -12-

15 8. PROJECTS IN PROGRESS Projects in progress mainly represent costs incurred for developing new stores and constructing logistic facilities. The contractual commitments relating to projects in progress as at December 31, amounted to 10.2 million (December 31, : 17.3 million). During the year, an amount of 68,268,504 (: 18,231,505) was transferred to property and equipment (Note 7). 9. LOANS AND MURABAHAS a) Short-term murabahas The Company has facilities from local commercial banks in the form of short-term murabahas to finance its working capital. Unutilized balance of these murabahas loans as at December 31, amounted to million (December 31, : million). b) Long-term loans and murabahas: December 31, Current portion Non-current portion Total Bank Al-Bilad Loan 56,217,694 22,676,939 78,894,633 Saudi Hollandi Bank Loans 31,000,000 60,000,000 91,000,000 SAMBA Financial Group Loan 18,181,818 18,181,818 36,363, ,399, ,858, ,258,269 December 31, Non-current Current portion portion Total Saudi Industrial Development Fund Loan 400, , ,500 Bank Al Bilad Loan 53,001,644 74,987, ,988,731 Saudi Hollandi Bank Loans 34,666,667 91,000, ,666,667 Saudi British Bank Loan 15,277,778-15,277, ,346, ,230, ,576,676 These facilities are secured by personal guarantees of one of the shareholders and mortgage of lands title deeds owned by the Company with a book value of 166 million as at December 31, (December 31, : 165 million). -13-

16 10. OTHER PAYABLES AND ACCRUED EXPENSES Due to employees 33,639,195 33,531,219 Othaim cards (received in advance) 17,241,279 11,923,456 Deferred revenues Iktissab credit 20,499,117 11,524,339 Advanced payments of shops rent 3,952,278 5,202,911 Accrued utilities expenses 5,059,463 5,056,021 Zakat provision (Note 11) 4,281,225 4,301,273 Refundable deposits 6,311,341 4,024,569 Others 10,353,517 7,498, ZAKAT The principal elements of the zakat base are as follows: 101,337,415 83,062,487 Calculation of zakat base Shareholders equity beginning of year 508,603, ,020,050 Income before zakat 175,516, ,583,174 Long term liabilities 247,326, ,038,048 Non-current assets (1,298,271,823) (1,215,177,924) Some figures were adjusted to arrive to the Zakat base. Due to negative zakat base, Zakat provision is computed based on adjusted net income. The movement in provision for zakat is as follows: Balance at January 1 4,301,273 4,513,693 Payments during the year (3,770,048) (3,712,420) Provision for the year 3,750,000 3,500,000 Balance at December 31 4,281,225 4,301,273 The Company received the final assessments until The Company has also filed its zakat returns for the years 2008, 2009, 2010 and which are still under review by DZIT. -14-

17 12. STATUTORY RESERVE In accordance with Regulations for Companies in Saudi Arabia, the Company has established a statutory reserve by the appropriation of 10% of net income until the reserve reaches 50% of the share capital. This reserve is not available for dividend distribution. 13. VOLUNTARY RESERVE The extraordinary general assembly in its meeting held on Jumad Al-Awal 2, 1430 (corresponding to April 27, 2009) approved a voluntary reserve of 20% from year 2008 net income and appropriated it for the expansion of the Company s operations. 14. EARNINGS PER SHARE Earnings per share are calculated based on the net income and the income from continuous main operations for the year divided by the weighted average number of shares for the year ended December 31, and amounting to 22.5 million shares. 15. DIVIDENDS In its meeting held on October 3,, the shareholders General Assembly approved the distribution of cash dividends of 22.5 million, which represents 1 per share for the year ended December 31,. In its meeting held on March 28,, the shareholders General Assembly approved the distribution of cash dividends of 67.5 million, which represents 3 per share for the year ended December 31, SUBSEQUENT EVENTS The board of directors proposed in its meeting held on February 4, 2013 cash dividends of 67.5 million for the year ended December 31, which represents 3 per share. 17. SELLING AND DISTRIBUTION EXPENSES -15- Salaries and benefits 63,175,189 61,833,554 Advertisements, media and marketing support 14,806,489 20,066,404 Depreciation and amortization 11,458,985 10,756,633 Rent 5,598,350 4,953,983 Branches freight expenses 5,046,748 4,506,352 Maintenance and repairs 3,157,756 4,111,727 Fuel, oils and supplies 3,545,251 3,040,920 Utilities 3,001,760 2,758,404 Insurance expenses 1,007,591 1,009,457 Others 3,080,177 1,983, ,878, ,020,839

18 18. GENERAL AND ADMINISTRATIVE EXPENSES Salaries and benefits 37,493,504 36,726,206 Rent 2,304,116 2,248,640 Depreciation and amortization 3,622,507 2,976,663 Professional fees 653, ,375 Utilities 1,963,406 1,365,537 Subscription fees 1,872,767 1,335,970 Maintenance and repairs 1,270,249 1,245,725 Hospitality 608, ,741 Others 2,059, ,836 Fuel, oils and supplies 863, ,155 Donations to approved charities 2,378,114 1,354,692 Insurance 155, ,088 55,244,940 50,502, SEGMENTAL INFORMATION The Company s activities are focused on retail and wholesale of food stuff and carries out its operations in the Kingdom of Saudi Arabia, in addition to constructing commercial malls and investing in their sales or leases. Some selected information was summarized for each business segment as at December 31: For the year ended December 31, Retail and wholesale Real estate and leasing (Rent) Total Sales 4,105,198,404-4,105,198,404 Rents income 93,769,817 67,208, ,978,268 Property and equipment, net 547,270, ,589,339 1,075,859,844 Gross Profit 297,520,762 27,726, ,247,497 For the year ended December 31, Retail and wholesale Real estate and leasing (Rent) Total Sales 3,942,797,390-3,942,797,390 Rents income 84,978,990 63,136, ,115,441 Property and equipment, net 496,515, ,241,512 1,024,756,613 Gross Profit 294,840,132 28,304, ,145,

19 20. COMMITMENTS AND CONTINGENCIES a) As at December 31 the Company had the following commitments and contingent liabilities: Letters of credit 7,850,789 47,474,987 Letters of guarantee 13,930,450 20,668,300 Capital commitments on projects in progress 10,168,222 17,349,963 b) Commitments against operating lease agreements The outstanding lease commitments of the Company related to non-cancelable long-term operating leases for the Company s branches and malls as at December 31 are as follows: Less than one year 47,294,579 46,153,869 More than one year, but less than 5 years 170,600, ,425,990 More than 5 years, but less than 20 years 215,974, ,568, FINANCIAL INSTRUMENTS AND RISK MANAGEMENT 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. As the Company s financial instruments are compiled under the historical cost convention, differences can arise between the book values and 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. Financial instruments reported in the balance sheet principally include cash on hand and at banks, prepayments and other receivables, payables, trade payables and accrued expenses, short-term and long-term loans and Murabahas. Credit risk is the risk that one party will fail to discharge an obligation and cause the other party to incur a financial loss. The Company has no significant concentration of credit risk. Cash is substantially placed with local banks with sound credit ratings. Prepayments and other receivables are carried net of provision for doubtful debts, if any. -17-

20 Commission rate risk is the exposure to various risks associated with the effect of fluctuations in the prevailing commission rates on the Company s financial position and cash flows. The Company monitors the fluctuations in commission rates and believes that the effect of the commission rate risk is not material. Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. The Company s transactions are principally in Saudi riyals and U.S. dollars. Management monitors the fluctuations in currency exchange rates and believes that the currency risk is not material. Liquidity risk is the risk that Company will be unable to meet its funding requirements primarily for loan commitments. The Company maintains adequate funding to meet such obligations when they become due. 22. APPROVAL OF THE FINANCIAL STATEMENTS Financial statements had been approved by the Board of Directors on February 4, COMPARATIVE FIGURES Certain figures for have been reclassified to conform with the presentation in the current year. -18-