(Managed by Arab National Investment Company) FINANCIAL STATEMENTS 31 DECEMBER
BALANCE SHEET As at 31 December Notes ASSETS Bank balance 4 404,235 72,335 Money market placements 5 81,800,000 53,100,000 Held to maturity investments 6 26,000,000 26,000,000 Accrued special commission income 323,795 284,607 108,528,030 79,456,942 LIABILITY Payables 73,377 54,270 UNITHOLDERS FUNDS Net assets 108,454,653 79,402,672 Units in issue 7,116,559 5,315,308 Per unit value 15.24 14.94 The accompanying notes 1 to 11 form part of these financial statements. 3
STATEMENT OF OPERATIONS For the year ended 31 December Note INCOME Special commission income 2,209,540 2,394,064 EXPENSES Management fees 7 196,198 178,667 Other fees 7 75,556 54,226 271,754 232,893 NET INCOME FROM OPERATIONS 1,937,786 2,161,171 The accompanying notes 1 to 11 form part of these financial statements. 4
STATEMENT OF CASH FLOWS For the year ended 31 December Note OPERATING ACTIVITIES Net income from operations 1,937,786 2,161,171 Changes in operating assets and liabilities: Money market placements, net (25,500,000) 60,700,000 Held to maturity investments - 6,000,000 Accrued special commission income (39,188) 126,278 Payables 19,107 14,011 Net cash (used in) from operating activities (23,582,295) 69,001,460 FINANCING ACTIVITIES Proceeds from units sold 86,970,893 17,777,260 Value of units redeemed (59,856,698) (88,583,928) Net cash from (used in) financing activities 27,114,195 (70,806,668) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,531,900 (1,805,208) Cash and cash equivalents at the beginning of the year 23,372,335 25,177,543 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 4 26,904,235 23,372,335 Operational cash flows from special commission income Special commission income received 2,170,352 2,520,342 The accompanying notes 1 to 11 form part of these financial statements. 5
STATEMENT OF CHANGES IN NET ASSETS For the year ended 31 December NET ASSET VALUE AT THE BEGINNING OF THE YEAR 79,402,672 148,048,169 NET INCOME FROM OPERATIONS 1,937,786 2,161,171 CHANGES FROM UNIT TRANSACTIONS Proceeds from units sold 86,970,893 17,777,260 Value of units redeemed (59,856,698) (88,583,928) Net change from unit transactions 27,114,195 (70,806,668) NET ASSET VALUE AT THE END OF THE YEAR 108,454,653 79,402,672 UNIT TRANSACTIONS Transactions in units for the year ended 31 December are summarised as follows: Units Units UNITS AT THE BEGINNING OF THE YEAR 5,315,308 10,158,252 Units sold 5,765,228 1,211,169 Units redeemed (3,963,977) (6,054,113) Net increase (decrease) in units 1,801,251 (4,842,944) UNITS AT THE END OF THE YEAR 7,116,559 5,315,308 The accompanying notes 1 to 11 form part of these financial statements. 6
NOTES TO THE FINANCIAL STATEMENTS At 31 December 1 GENERAL Al-Arabi SAR Money Market Fund (the Fund ) is an open-ended fund. The investment objective of the fund is to provide capital preservation, liquidity and short term capital growth through investing in high-grade money market instruments. The Fund was established on 27 Safar 1421H (corresponding to 31 May 2000) by Arab National Bank (the Bank ). In accordance with the Capital Market Authority s (CMA) decision No. 1-83-2005 dated 21 Jumada Awal 1426H (corresponding to 28 June 2005) issued by the CMA Board in connection with 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 2008. 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. Money market placements Money market placements are carried at cost 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 provision for any permanent decline in value. Revenue recognition Special commission income is recognised on an effective yield basis. 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 For the purpose of the statement of cash flows, cash and cash equivalents comprise bank balances and money market placements with an original maturity of three months or less. 7
NOTES TO THE FINANCIAL STATEMENTS (continued) At 31 December 4 CASH AND CASH EQUIVALENTS Bank balance 404,235 72,335 Money market placements with an original maturity of three months or less 26,500,000 23,300,000 26,904,235 23,372,335 5 MONEY MARKET PLACEMENTS Money market placements comprise placements with counterparties in Saudi Arabia and the rest of the Middle East. 6 HELD TO MATURITY INVESTMENTS The composition of investments which are held to maturity is summarised below: Maturity date Advanced Petrochemical Sukuk 17 November 2019 7,000,000 7,000,000 SABB Sukkuk-III 28 November 2025 7,000,000 7,000,000 Riyadh Bank-Sukuk 28 November 2025 7,000,000 7,000,000 ANB Sukuk 7 October 2025 5,000,000 5,000,000 26,000,000 26,000,000 7 TRANSACTIONS WITH RELATED PARTIES The Fund pays a management fee at a maximum rate of 0.20% per annum calculated on the total net assets at each valuation date. In addition, the Fund Manager is also entitled to charge other fees 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. Management fees amounting to 196,198 (: 178,667) and other fees amounting to 75,556 (: 54,226) reflected in the statement of operations, represent fees charged by the Fund Manager during the year as described above. The Bank (parent of the Fund Manager) acts as the Fund s banker. During the year, the Fund has earned special commission amounting to 387,613 (: 521,699) on money market placements and sukuk made with the Bank. As per the term and conditions, the Fund Manager is allowed to arrange finance for the Fund that should not exceed 10% of the net assets. The Unitholders account at 31 December included units held as follows: Units Units Held by other funds under same management 33,443 689,931 Held by the employees of the Bank 9,820-43,263 689,931 8
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 Fund is subject to special commission rate risk on its floating special commission rate bearing financial assets and liabilities. The sensitivity of the income is the effect of the assumed changes in special commission rates, with all other variables held constant, on the Fund s income for one year, based on the floating rate financial assets and financial liabilities held 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 26,000 (: 26,000) annually in aggregate. There are no floating special commission rates 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 on its bank balance, money market placements, held to maturity investments and accrued special commission income. Credit risk is managed and controlled by monitoring credit exposures, limiting transactions with specific counter-parties, and continually assessing the creditworthiness of counter-parties. Credit risks are generally managed on the basis of external credit grading of the counterparty. The table below shows the maximum exposure to credit risk for the components of the balance sheet. Bank balance 404,235 72,335 Money market placements 81,800,000 53,100,000 Held to maturity investments 26,000,000 26,000,000 Accrued special commission income 323,795 284,607 Total exposure to credit risk 108,528,030 79,456,942 Counterparties as at the year-end either have an investment grade credit rating or represent quasi-government exposure. 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 Fund s bank balance and money market placements are considered to be readily realisable. 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. 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 functional currency of the Fund is the Saudi Riyal. As the Fund s financial assets and financial liabilities are denominated in its functional currency, the Fund is not subject to currency risk. 9
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 bank balance, money market placements, held to maturity investments and accrued special commission income. The Fund s financial liabilities consist of payables. 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 2018. 10