al murabih sar murabaha fund

(1)

AL MURABIH SAR MURABAHA FUND

(MANAGED BY ALBILAD INVESTMENT COMPANY)

INTERM CONDENSED FINANCIAL STATEMENTS (UN-AUDITED) FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2019

AND INDEPENDENT AUDITOR’S REVIEW REPORT TO THE UNITHOLDERS

(2)

INTERM CONDENSED FINANCIAL STATEMENTS (UN-AUDITED) FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2019

Index Page

Independent auditor’s review report 1

Interim statement of financial position 2

Interim statement of income and other comprehensive income 3

Interim statement of changes in equity attributable to the unitholders 4

Interim statement of cash flows 5

Notes to the interim condensed financial statements 6 - 9

(3)

(4)

2 AL MURABIH SAR MURABAHA FUND

INTERIM STATEMENT OF FINANCIAL POSITION (All amounts in Saudi Riyals ‘000’ unless otherwise stated)

As at 30 June 2019 (Un-audited)

As at 31 December

2018 (Audited) Assets

Cash and cash equivalents 7,653 6,544

Investments held at amortised cost 885,743 475,205

Total assets 893,396 481,749

Liabilities

Accrued management fee 929 -

Accrual and other liabilities 44 37

Total liabilities 973 37

Equity attributable to the unitholders 892,423 481,712

Units in issue in thousands 698,593 382,686

Equity per unit in Saudi Riyals 1.2775 1.2588

The accompanying notes from 1 to 9 form an integral part of these interim condensed financial statements.

(5)

INTERIM STATEMENT OF INCOME AND OTHER COMPREHENSIVE INCOME (UN-AUDITED) (All amounts in Saudi Riyals ‘000’ unless otherwise stated)

For the six-month period ended 30 June

2019 2018

Income

Profit / income on investments held at amortised cost:

- Commodity murabaha 10,420 4,083

- Sukuk 1,225 556

Gain on sale of investments held at fair value through statement of

income (FVSI) - mutual fund units - 120

Total income 11,645 4,759

Expenses

Management fee (936) (546)

Other expenses (147) (50)

Impairment charge on investments held at amortised cost (418) (303)

Total expenses (1,501) (899)

Net income for the period 10,144 3,860

Other comprehensive income for the period - -

Total comprehensive income for the period 10,144 3,860

(6)

INTERIM STATEMENT OF CHANGES IN EQUITY ATTRIBUTABLE TO THE UNITHOLDERS (UN-AUDITED) (All amounts in Saudi Riyals ‘000’ unless otherwise stated)

2019 2018

Equity attributable to the unitholders at the beginning of the period 481,712 379,647

Changes on initial application of IFRS - 9 - (352)

Restated balance as at 1 January 481,712 379,295

Changes from operations

Total comprehensive income for the period 10,144 3,860

Changes from unit transactions

Proceeds from issuance of units 577,573 354,162

Payment against units redeemed (177,006) (206,203)

Net change from unit transactions 400,567 147,959

Equity attributable to the unitholders at the end of the period 892,423 531,114 Transactions in units (‘000’) for the periods ended 30 June are summarized as follows:

2019 2018

Units at the beginning of the period 382,685 308,211

Units issued 455,238 285,836

Units redeemed (139,330) (166,582)

Net change in units 315,908 119,254

Units at the end of the period 698,593 427,465

(7)

INTERIM STATEMENT OF CASH FLOWS (UN-AUDITED) (All amounts in Saudi Riyals ‘000’ unless otherwise stated)

2019 2018

Cash flows from operating activities

Net income for the period 10,144 3,860

Adjustments for:

Profit on investments held at amortised cost:

- Commodity murabaha (10,420) (4,083)

- Sukuk (1,225) (556)

Gain on sale of investment in mutual funds - (120)

Impairment charge on investments held at amortised cost 418 303

(1,083) (596) Net changes in operating assets and liabilities

Investments held at amortised cost (408,111) (155,149)

Accrued management fee 929 291

Accruals and other liabilities 7 37

Cash used in operating activities (408,258) (155,417)

Profit received on commodity murabaha 7,584 3,231

Profit received on investment in sukuk 1,216 544

Net cash used in operating activities (399,458) (151,642)

Cash flows from investing activities

Purchase of investment held at FVSI - mutual fund units - (37,000)

Proceeds from sale of investment held at FVSI - mutual fund units - 37,120

Cash flows generated from investing activities - 120

Cash flows from financing activities

Proceeds from issuance of units 577,573 354,162

Payment against units redeemed (177,006) (206,203)

Net cash generated from financing activities 400,567 147,959

Net change in cash and cash equivalents 1,109 (3,563)

Cash and cash equivalents at the beginning of the period 6,544 7,008

Cash and cash equivalents at the end of the period 7,653 3,445 The accompanying notes from 1 to 9 form an integral part of these interim condensed financial statements.

(8)

NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UN-AUDITED) FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2019

(All amounts in Saudi Riyals ‘000’ unless otherwise stated)

6 1 LEGAL STATUS AND PRINCIPAL ACTIVITIES

Al Murabih SAR Murabaha Fund (the “Fund”) is an open-ended investment fund, managed by AlBilad Investment Company (the “Fund Manager”), a subsidiary of Bank AlBilad (the “Bank”) for the benefit of the Fund’s unit holders (the “Unitholders”). The objective of the Fund is to protect investor’s principle investment and to achieve reasonable return by way of Murabaha based transactions that do not conflict with Shari’ah rules.

In dealing with the Unitholders, the Fund Manager considers the Fund as an independent accounting unit.

Accordingly, the Fund Manager prepares separate interim condensed financial statements for the Fund.

Furthermore, the Unitholders are considered to be the beneficial owners of the assets of the Fund.

The Fund is governed by the Investment Fund Regulations (“the Regulations”) published by the Capital Market Authority (CMA) on 3 Dhul Hijja 1427H (corresponding to 24 December 2006) as amended by the resolution of the CMA Board on 16 Sha’aban 1437H (corresponding to 23 May 2016).

2 BASIS OF PREPARATION

These interim condensed financial statements of the Fund have been prepared in accordance with International Accounting Standard 34 – “Interim Financial Reporting” (IAS 34) as endorsed in the Kingdom of Saudi Arabia.

These interim condensed financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2018.

These interim condensed financial statements have been prepared on a historical cost convention, except for the re-measurement of investments held at fair value through statement of income (FVSI).

The principal accounting policies, estimates and assumptions used in the preparation of these interim condensed financial statements are consistent with those of the previous financial year except as described in note 3 below.

The Fund does not have a clearly identifiable operating cycle and therefore does not present current and non- current assets and liabilities separately in the statement of financial position. Instead, assets and liabilities are presented in order of liquidity. However, all balances would generally be classified as current except for

“Investments measured at amortised cost.

The preparation of these interim condensed financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimates are revised and in any future years affected. There are no areas of significant judgment or critical assumption used in the preparation of these interim condensed financial statements.

The Fund can recover or settle all its assets and liabilities within 12 months from the reporting date.

3 NEW AND AMENDED STANDARDS ADOPTED BY THE FUND

IFRS-16 leases is effective from 1 January 2019. However, the Fund does not have any impact in the current or future reporting years and on foreseeable future transactions.

There are other amendments to standards that are effective in current and future periods but have not been detailed in these interim condensed financial statements and are not expected to have any impact on the Fund's financial statements.

4 FUNCTIONAL AND PRESENTATION CURRENCY

Items included in the interim condensed financial statements are measured using the currency of the primary economic environment in which the Fund operates (the “functional currency”). These interim condensed financial statements are presented in Saudi Arabian Riyal (“SAR”) which is the Fund’s functional and presentation currency. All financial information presented in SAR has been rounded to the nearest thousand.

The Fund did not have any foreign currency transaction during the period ended 30 June 2019 (31 December 2018: Nil).

(9)

7 5 RELATED PARTY TRANSACTIONS AND BALANCES

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions.

Management fee and other expenses

For management services, the Fund pays a management fee at an annual rate of 0.25% (2018: 0.25%) of the equity value at each Valuation Day of the Fund’s equity value.

The Fund Manager also recovers certain expenses incurred on behalf of the Fund within limits mentioned in the Terms and Conditions of the Fund.

Transactions with related parties

In the ordinary course of its activities, the Fund transacts business with related parties. Related party transactions are in accordance with the terms and conditions of the Fund. All the related party transactions are approved by the Fund Board.

Following table summarises the details of transactions with related parties:

For the six-month period ended 30 June Related party Nature of relationship Nature of transaction 2019 2018 AlBilad Investment

Company

Fund Manager Management fee 936 546

AlBilad Pure Saudi Equity Fund

Affiliate Units issued 10,000 8,000

Units Redeemed - 8,002

USD Murabaha Fund Affiliate Units issued 5,203 -

Riyad Capital Custodian of the Fund Custody fee 128 30

Fund Board Members of the Fund board Fund board fee 2 3

Following table summarises the details of balances with related parties:

Nature of balance Related Party

As at 30 June 2019

2018

Current account Bank AlBilad 493 806

Accrued management fee AlBilad Investment Company 929 -

Investment account Riyad Capital - Custodian of Fund 7,160 5,738

Custody fee payable Riyad Capital - Custodian of Fund 25 15

AlBilad Pure Saudi Equity Fund Affiliate 10,057 -

USD Murabaha Fund Affiliate 5,206 -

Fund Board fee payable Members of the Fund board 2 5

(10)

8

6 EFFECT ON EQUITY ATTRIBUTABLE TO UNITHOLDERS IF EXPECTED CREDIT LOSSES ARE NOT RECOGNIZED

i) Expected credit losses on financial assets as at 30 June 2019 is as set out below:

As at 30 June 2019

2018

Expected credit losses on financial assets 952 534

Units in issue in thousands 698,593 382,686

Per unit share in expected credit losses 0.0014 0.0014

ii) The equity attributable to the unit holders, after incorporating expected credit losses as at 30 June 2019 is set out below

As at 30 June 2019

2018 Equity value per unit after considering expected credit losses as per these

interim condensed financial statements 1.2775 1.2588

Per unit share in expected credit losses 0.0014 0.0014

Equity per unit before expected credit losses 1.2789 1.2602

7 FAIR VALUES OF FINANCIAL INSTRUMENTS

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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

- In the principal market for the asset or liability, or

- In the absence of a principal market, in the most advantageous accessible market for the asset or liability Determination of fair value and fair value hierarchy

The Fund uses the following hierarchy for determining and disclosing the fair value of financial instruments:

Level 1: quoted prices in active markets for the same or identical instrument that an entity can access at the measurement date;

Level 2: quoted prices in active markets for similar assets and liabilities or other valuation techniques for which all significant inputs are based on observable market data; and

Level 3: valuation techniques for which any significant input is not based on observable market data.

All the financial instruments of the Fund are measured at amortised cost. The fair values of financial instruments which are not measured at fair value in these interim condensed financial statements are not significantly different from the carrying values included in the interim condensed financial statements.

(11)

9 At 30 June 2019

Fair value

Level 1 Level 2 Level 3 Total Financial assets not measured at fair value

Cash and cash equivalents - - 7,653 7,653

Investments held at amortised cost - - 885,743 885,743

- - 893,396 893,396

Financial liabilities not measured at fair value

Accrued management fee - - 929 929

Accrual and other liabilities - - 44 44

- - 973 973

At 31 December 2018

Fair value

Level 1 Level 2 Level 3 Total Financial assets not measured at fair value

Cash and cash equivalents - - 6,544 6,544

Investments held at amortised cost - - 475,205 475,205

- 481,749 481,749

Financial liabilities not measured at fair value

Accruals and other liabilities - - 37 37

- - 37 37

8 LAST VALUATION DAY

In accordance with the terms and conditions of the Fund, the last valuation day for the period was 30 June 2019.

9 APPROVAL OF THE INTERIM CONDENSED FINANCIAL STATEMENTS

These interim condensed financial statements were approved by the Fund Board on 31 July 2019.