JADWA SAUDI RIYAL MURABAHA FUND FINANCIAL STATEMENTS AND AUDITORS REPORT FOR THE YEAR ENDED DECEMBER 31, 2011

Transcription

1 FINANCIAL STATEMENTS AND AUDITORS REPORT MT: Saudi Riyal Murabaha Fund (fs.dec.31, )

2 FINANCIAL STATEMENTS AND AUDITORS REPORT INDEX PAGE Auditors report 1 Statement of assets and liabilities 2 Statement of income 3 Statement of changes in net assets 4 Statement of cash flows 5 Notes to the financial statements 6 9

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4 STATEMENT OF ASSETS AND LIABILITIES AS AT DECEMBER 31, Notes Assets Cash at bank 3 1,931, ,302 Investments 3, 4 2,088,314 6,011,717 Accrued special commission income 830 2,168 Total assets 4,020,872 6,130,187 Liabilities Accrued expenses 17,089 3,963 Total liabilities 17,089 3,963 Net assets 4,003,783 6,126,224 Units in issue 37, , Per unit value The accompanying notes 1 to 8 form an integral part of these financial statements - 2 -

5 STATEMENT OF INCOME Investment income Note Special commission income 168,915 37,061 Expenses General expenses 1 (b) (16,989) (3,963) Total expenses (16,989) (3,963) Net income 151,926 33,098 The accompanying notes 1 to 8 form an integral part of these financial statements - 3 -

6 STATEMENT OF CHANGES IN NET ASSETS Net assets at the beginning of the year 6,126,224 6,328,014 Net income 151,926 33,098 Proceeds from units issued 71,205, ,608 Value of units redeemed (73,479,367) (1,014,496) Net assets at the end of the year 4,003,783 6,126,224 Units Transactions Units Units Outstanding units at the beginning of the year 57, , Units issued 668, , Units redeemed (688,776.35) (9,535.63) Outstanding units at the end of the year 37, , The accompanying notes 1 to 8 form an integral part of these financial statements - 4 -

7 STATEMENT OF CASH FLOWS Operating activities Note Net income 151,926 33,098 Changes in operating assets and liabilities: Accrued special commission income 1,338 1,128 Accrued expenses 13,126 3,963 Net cash from operating activities 166,390 38,189 Financing activities Proceeds from units issued 71,205, ,608 Value of units redeemed (73,479,367) (1,014,496) Net cash used in financing activities (2,274,367) (234,888) Net decrease in cash and cash equivalents (2,107,977) (196,699) Cash and cash equivalents, beginning of the year 6,128,019 6,324,718 Cash and cash equivalents, end of the year 3 4,020,042 6,128,019 The accompanying notes 1 to 8 form an integral part of these financial statements - 5 -

8 NOTES TO THE FINANCIAL STATEMENTS 1. GENERAL (a) The Jadwa Saudi Riyal Murabaha Fund (the Fund ) is a trade transactions fund established and managed through an agreement between the Jadwa Investment (the Fund Manager ) and the Fund Investors (the Unit-Holders ). The Fund aims to generate market returns from short-term Murabaha based trade transactions that are compliant with Shariah principles. In dealing with the Unit-Holders, the Fund Manager considers the Fund as an independent accounting unit. Accordingly, the Fund Manager prepares separate financial statements for the Fund. Furthermore, Unit-Holders are owners of the assets of the Fund and any income distribution is made in relation to their respective unit holdings to the total number of units. The Capital Market Authority s (CMA) approval for the establishment of the Fund was granted in its letter number 443 dated Jumad Awal 9, 1428 H (corresponding to May 26, 2007). The Fund commenced its operations on June 30, The Fund is governed by the Investment Fund Regulations (the regulations) published by CMA on Dhul Hijja 22, 1427 H (corresponding to January 12, 2007) detailing requirements for all funds within the Kingdom of Saudi Arabia. The books and records of the Fund are maintained in Saudi Riyals. (b) The management of the Fund is the responsibility of the Fund Manager. However, in accordance with the Fund s Agreement, the Fund Manager can delegate or assign its duties to one or more of the financial institutions in the Kingdom of Saudi Arabia and overseas. The Fund Manager charges the Fund a management fee of 0.5% per annum of the net asset value of the Fund at each valuation day. In addition, the Fund Manager has the right to collectively charge the Fund all other expenses related to the management of the Fund, including but not limited to audit fee, legal charges for a percentage not to exceed 1% per annum of the net assets value of the Fund at each valuation day

9 NOTES TO THE FINANCIAL STATEMENTS (Continued) 2. SIGNIFICANT ACCOUNTING POLICIES The financial statements are prepared in accordance with accounting standards generally accepted in the Kingdom of Saudi Arabia issued by the Saudi Organization for Certified Public Accountants, as considered appropriate to the circumstances of the Fund. The significant accounting policies adopted in the preparation of these financial statements are set out below: Accounting convention The financial statements are prepared under the historical cost convention. Cash and cash equivalents Cash and cash equivalents as referred to in the statement of cash flows comprises cash at bank and Murabaha deposits with an original maturity of three months or less. Investments Investments are stated at amortized cost as at the date of the statement of assets and liabilities. Revenue recognition Special commission income is recognized on an effective yield basis. Investment transactions Investment transactions are accounted for as of the trade date. Zakat and income tax Zakat and income tax are the obligations of the Unit-Holders and are not provided for in the accompanying financial statements. 3. CASH AND CASH EQUIVALENTS Cash at bank 1,931, ,302 Murabaha (time deposits) Note 4 2,088,314 6,011,717 4,020,042 6,128,

10 NOTES TO THE FINANCIAL STATEMENTS (Continued) 4. INVESTMENTS The investments portfolio is summarized as follows: Description Original maturity Murabaha (time deposits) Less than 1 month 2,088,314 1,155,655 Murabaha (time deposits) 1 3 months - 4,856, RELATED PARTY TRANSACTIONS 2,088,314 6,011,717 In the ordinary course of its activities, the Fund transacts business with the following related parties: Jadwa Balanced Allocation Fund Jadwa Conservative Allocation Fund Relationship Fund managed by Jadwa Investment Fund managed by Jadwa Investment The unit holders accounts with the related parties as at December 31 include the following; Units Units - Jadwa Balanced Allocation Fund 7, ,917 16,003 1,703,839 - Jadwa Conservative Allocation Fund 5, ,536 9, , RISK MANAGEMENT Special commission rate risk Special commission rate risk arises from the possibility that changes in market commission rates will affect future profitability or the fair value of the financial instruments. The Fund is subject to special commission rate risk on its commission bearing assets, including Murabaha deposits. The sensitivity of the income is the effect of the assumed changes in commission rates, with all other variables held constant, on the Fund s profit for one year, based on the floating rate financial assets held at December 31,

11 NOTES TO THE FINANCIAL STATEMENTS (Continued) 6. RISK MANAGEMENT (Continued) 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 investment portfolio. The Fund Manager seeks to limit its credit risk by monitoring credit exposures and setting limits for individual investments. Liquidity risk Liquidity risk is the risk that the Fund will encounter difficulty in releasing funds to meet commitments associated with financial liabilities. The Fund s terms and conditions provide for the subscriptions and redemptions of units on all business days and it is, therefore, exposed to the liquidity risk of meeting unit-holders redemptions. The Fund s investments are considered to be readily realizable as they are investments in short-term Murabaha placements which can be easily redeemed at any time. The Fund Manager monitors the liquidity requirements on a regular basis and ensures that sufficient funds are available to meet any commitments as they arise. 7. FAIR VALUES OF FINANCIAL INSTRUMENTS Financial instruments comprise financial assets. The Fund s financial assets consist of cash at bank, investments and accrued special commission income. 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. Investments are carried at amortized cost. 8. VALUATION DAYS The Fund s units are valued daily and announced on the following business day