Al-Mubarak SAR Trade Fund (Managed by Arab National Investment Company)

Transcription

1 FINANCIAL STATEMENTS 31 DECEMBER

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4 BALANCE SHEET As at 31 December Notes ASSETS Bank balance 4 835, ,110 Murabaha placements 5 2,315,000,000 2,064,000,000 Held to maturity investments 6 280,000, ,000,000 Accrued special commission income 13,522,199 9,874,164 2,609,357,746 2,354,794,274 LIABILITY Accrued expenses 1,694, ,423 UNITHOLDERS FUNDS Net assets 2,607,663,624 2,353,842,851 Units in issue 127,939, ,687,678 Per unit value The accompanying notes 1 to 11 form part of these financial statements. 3

5 STATEMENT OF OPERATIONS For the year ended 31 December Notes INCOME Special commission income 66,200,387 54,429,160 EXPENSES Management fees 7 6,487,252 3,903,483 Other fees 7 86,106 68,187 6,573,358 3,971,670 NET INCOME FROM OPERATIONS 59,627,029 50,457,490 The accompanying notes 1 to 11 form part of these financial statements. 4

6 STATEMENT OF CASH FLOWS For the year ended 31 December Note OPERATING ACTIVITIES Net income from operations 59,627,029 50,457,490 Changes in operating assets and liabilities: Murabaha placements, net (325,000,000) (540,000,000) Accrued special commission income (3,648,035) (5,375,208) Accrued expenses 742, ,842 Net cash used in operating activities (268,278,307) (494,285,876) FINANCING ACTIVITIES Proceeds from units sold 2,812,750,831 2,003,031,834 Value of units redeemed (2,618,557,087) (1,256,503,110) Net cash from financing activities 194,193, ,528,724 (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (74,084,563) 252,242,848 Cash and cash equivalents at the beginning of the year 360,920, ,677,262 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 4 286,835, ,920,110 Operational cash flows from special commission income Special commission income received 62,552,352 49,053,952 The accompanying notes 1 to 11 form part of these financial statements. 5

7 STATEMENT OF CHANGES IN NET ASSETS For the year ended 31 December NET ASSET VALUE AT THE BEGINNING OF THE YEAR 2,353,842,851 1,556,856,637 NET INCOME FROM OPERATIONS 59,627,029 50,457,490 CHANGES FROM UNIT TRANSACTIONS Proceeds from units sold 2,812,750,831 2,003,031,834 Value of units redeemed (2,618,557,087) (1,256,503,110) Net change from unit transactions 194,193, ,528,724 NET ASSET VALUE AT THE END OF THE YEAR 2,607,663,624 2,353,842,851 UNIT TRANSACTIONS Transactions in units for the year ended 31 December are summarised as follows: Units Units UNITS AT THE BEGINNING OF THE YEAR 117,687,678 79,879,705 Units sold 139,605, ,472,121 Units redeemed (129,354,120) (63,664,148) Net increase in units 10,251,343 37,807,973 UNITS AT THE END OF THE YEAR 127,939, ,687,678 The accompanying notes 1 to 11 form part of these financial statements. 6

8 NOTES TO THE FINANCIAL STATEMENTS As 31 December 1 GENERAL (the Fund ) is an open-ended fund. The investment objective of the fund is to provide capital preservation and short term capital growth, through investing in Shariah-compliant conservative transactions. The Fund was established on 4 Jumada Thani 1413H (corresponding to 4 May 1999) by Arab National Bank (the Bank ). In accordance with the Capital Market Authority s (CMA) decision No dated 21 Jumada Awal 1426H (corresponding to 28 June 2005) issued by the CMA Board in connection with the regulations relating to Authorised Persons, the Bank has transferred its asset management operations to the Arab National Investment Company (the Fund Manager ), a wholly owned subsidiary of the Bank, effective 1 January The books and records of the Fund are maintained in Saudi Riyals. 2 REGULATING AUTHORITY The Fund is governed by the Investment Fund Regulations (the Regulations ) issued by the CMA on 3 Dhul Hijja 1427H (corresponding to 24 December 2006) and effective from 6 Safar 1438H (corresponding 6 November ) by the New Investment Fund Regulations ( Amended Regulations ) published by the Capital Market Authority on 16 Sha aban 1437H (corresponding to 23 May ), detailing requirements for all funds within the Kingdom of Saudi Arabia. 3 SIGNIFICANT ACCOUNTING POLICIES The financial statements have been prepared in accordance with accounting standards generally accepted in the Kingdom of Saudi Arabia. The significant accounting policies adopted are as follows: Accounting convention The financial statements are prepared under the historical cost convention. Revenue recognition Special commission income is recognised on an effective yield basis. Murabaha placements Murabaha placements are carried at cost less provision for any uncollectible amounts and any accrued special commission income as at the year-end is disclosed separately. Investment valuation Investments that are bought with the intention of being held to maturity are carried at cost (adjusted for any premium or discount on an effective yield basis), less permanent decline in value. Investment transactions Investments transactions are accounted for as of the trade date. Zakat and income tax Zakat and income tax are the obligations of the Unitholders and are not provided for in the accompanying financial statements. Cash and cash equivalents Cash and cash equivalents as referred to in the statement of cash flows comprise of bank balance and murabaha placements with an original maturity of three months or less. 7

9 NOTES TO THE FINANCIAL STATEMENTS (continued) At 31 December 4 CASH AND CASH EQUIVALENTS Bank balance 835, ,110 Murabaha placements with an original maturity of three months or less 286,000, ,000, ,835, ,920,110 5 MURABAHA PLACEMENTS, NET Murabaha placements are with counterparties in Saudi Arabia and the rest of the Middle East. 6 HELD TO MATURITY INVESTMENTS Held to maturity investments comprises the following as at 31 December: Maturity Date ANB Sukuk 7 October ,000,000 80,000,000 SABB Sukkuk-III 28 May ,000,000 75,000,000 Riyadh Bank-Sukuk 28 May ,000,000 75,000,000 Advanced Petrochemical Sukuk 17 November ,000,000 50,000, ,000, ,000,000 7 TRANSACTIONS WITH RELATED PARTIES As per agreement, the Fund is required to pay a management fee at the maximum rate of 0.20% per annum calculated on the total net assets at each valuation date. In addition, the Fund Manager also charges other fee at a maximum rate of 0.50% per annum calculated on the total net assets at each valuation date to meet other expenses of the Fund. During the year, the Fund Manager has charged management fees amounting to 6,487,252 (: 3,903,483) and other fees amounting to 86,106 (: 68,187). The Bank (parent of the Fund Manager) acts as the Fund s banker. During the year, the Fund has earned special commission amounting to 14,455,820 (: 13,223,562) on murabaha placements and Sukuk made with the Bank. The Unitholders account at 31 December included units held as follows: Units Units Held by the Fund Manager 970, ,852 Held by other funds under same management 25, ,579 Held by employees of the Bank 256,063 92,289 Total 1,252,421 1,428,720 8

10 NOTES TO THE FINANCIAL STATEMENTS (continued) At 31 December 8 RISK MANAGEMENT Special commission rate risk Special commission rate risk is the risk that the value of financial instruments will fluctuate due to changes in the market rates. The sensitivity of the income is the effect of the assumed changes in special commission rates on the special commission income for one year, based on the floating rate financial assets and financial liabilities held as at 31 December. A hypothetical 10 basis points change in the weighted average special commission rates of the floating rate financial assets balances at 31 December would impact special commission income by approximately 280,000 (: 280,000) annually in aggregate. There are no floating rate special commission bearing financial liabilities. Credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Fund is exposed to credit risk for its bank balance, murabaha placements, held to maturity investments and accrued special commission income. The Fund Manager seeks to limit its credit risk by monitoring credit exposures and setting limits for individual counterparties. The table below shows the maximum exposure to credit risk for the components of the balance sheet. Bank balance 835, ,110 Murabaha placements 2,315,000,000 2,064,000,000 Held to maturity investment 280,000, ,000,000 Accrued special commission income 13,522,199 9,874,164 Total exposure to credit risk 2,609,357,746 2,354,794,274 Murabaha placements and held to maturity investments are with counterparties who have at a minimum investment grade credit rating. Liquidity risk Liquidity risk is the risk that the Fund will encounter difficulty in releasing funds to meet commitments associated with financial liabilities. Liquidity risk may result from an inability to sell a financial asset quickly at an amount close to its fair value. The Fund s terms and conditions provide for redemptions of units throughout the week and it is, therefore, exposed to the liquidity risk of meeting Unitholders redemptions. The Murabaha placements are considered to be readily realizable. The Fund Manager monitors liquidity requirements on a regular basis and seeks to ensure that sufficient funds are available including bank facilities to meet commitments as they arise. All liabilities are contractually payable on a current basis. Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to a change in foreign exchange rates. The Fund s functional currency is the Saudi Riyal. As the Fund s financial assets and liabilities are denominated in its functional currency, the Fund is not subject to currency risk. 9

11 NOTES TO THE FINANCIAL STATEMENTS (continued) At 31 December 9 FAIR VALUES OF FINANCIAL INSTRUMENTS Financial instruments comprise financial assets and financial liabilities. The Fund s financial assets consist of murabaha placements, held to maturity investments and accrued special commission income. Financial liabilities comprise of bank overdrafts and accrued expenses. 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. The fair values of financial instruments are not expected to be materially different from their carrying values. 10 LAST VALUATION DAY The last valuation day of the year was 31 December (: 29 December ). 11 FUND BOARD APPROVAL The financial statement of the fund for the year was approved by the Board of Directors of the fund on 29 March