Al Rajhi Commodities Mudaraba Fund – United States Dollar
(Managed by Al Rajhi Capital)
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REVIEW REPORT
FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2019
Interim condensed statement of financial position (unaudited)
As at 30 June 2019
The accompanying notes 1 to 12 form an integral part of these interim condensed financial statements.
30 June 2019 (Unaudited)
31 December 2018 (Audited)
Note USD USD
ASSETS
Cash and cash equivalents 4 53,606,159 43,391,142
Financial assets at fair value through profit or loss 5 13,579,498 10,977,518
Murabaha placements measured at amortised cost 6 77,120,000 91,590,000
Financial assets measured at amortised cost 7 3,229,128 2,532,245
Accrued special commission 602,491 591,431
TOTAL ASSETS 148,137,276 149,082,336
LIABILITIES
Management fee payable 8 52,851 60,698
Accrued expenses 9,811 12,555
TOTAL LIABILITIES 62,662 73,253
EQUITY
Net assets attributable to the unitholders of redeemable units 148,074,614 149,009,083
TOTAL LIABILITIES AND EQUITY 148,137,276 149,082,336
Redeemable units in issue 65,244 66,521
Net asset value attributable to each per unit 2,269.55 2,240.03
AL RAJHI COMMODITIES MUDARABA FUND – UNITED STATES DOLLAR Interim condensed statement of comprehensive income (unaudited)
For the six-month period ended 30 June 2019
The accompanying notes 1 to 12 form an integral part of these interim condensed financial statements.
3
2019 2018
Note USD USD
INCOME
Special commission income 2,236,631 1,656,558
Net unrealized (loss) gain on financial assets at fair value through
profit or loss (58,886) 75,412
Net realized gain on financial assets at fair value through profit or loss 200,084 42,819
2,377,829 1,774,789 EXPENSES
Management fees 8 (374,800) (277,443)
Other expenses (8,842) (7,949)
(383,642) (285,392)
NET INCOME FOR THE PERIOD 1,994,187 1,489,397
OTHER COMPREHENSIVE INCOME FOR THE PERIOD - -
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 1,994,187 1,489,397
Interim condensed statement of changes equity (unaudited)
For the six-month period ended 30 June 2019
The accompanying notes 1 to 12 form an integral part of these interim condensed financial statements.
2019 2018
USD USD
EQUITY AT THE BEGINNING OF THE PERIOD 149,009,083 184,658,892
Net income for the period 1,994,187 1,489,397
Other comprehensive income for the period - -
────────── ──────────
Total comprehensive income for the period 1,994,187 1,489,397
Issue of units during the period 31,160,364 23,099,577
Redemption of units during the period (34,089,020) (49,157,870)
───────── ─────────
EQUITY AT THE END OF THE PERIOD 148,074,614 160,089,996
═════════ ═════════
Units Units
REDEEMABLE UNIT TRANSACTIONS
Transactions in redeemable units during the period are summarised as follows:
UNITS AT THE BEGINNING OF THE PERIOD 66,521 84,172
───────── ─────────
Issue of units during the period 13,866 10,494
Redemption of units during the period (15,143) (22,350)
───────── ─────────
Net decrease in units (1,277) (11,856)
───────── ─────────
UNITS AT THE END OF THE PERIOD 65,244 72,316
═════════ ═════════
AL RAJHI COMMODITIES MUDARABA FUND – UNITED STATES DOLLAR Interim condensed statement of cash flows (unaudited)
For the six-month period ended 30 June 2019
The accompanying notes 1 to 12 form an integral part of these interim condensed financial statements.
5
2019 2018
USD USD
Operating activities
Net income for the period 1,994,187 1,489,397
Adjustments to reconcile net income to net cash flows (used in) from operating activities:
Movement in unrealised losses (gains) on financial assets at fair
value through profit or loss 58,886 (75,412)
Working capital adjustments:
(Increase) decrease in financial assets at fair value through profit or loss (2,660,866) 2,415,172
Decrease in accrued special commission (11,060) (1,848)
(Decrease) increase in management fee payable (7,847) 7,101
Decrease in accrued expenses (2,744) (5,709)
Net cash flows (used in) from operating activities (629,444) 3,828,701 Investing activities
Decrease in murabaha placements measured at amortised cost 14,470,000 137,400,000 (Increase) decrease in financial assets measured at amortised cost (696,883) 9,891 Net cash flows from investing activities 13,773,117 137,409,891 Financing activities
Proceeds from issuance of units 31,160,364 23,099,577
Payment on redemption of units (34,089,020) (49,157,870)
Net cash flows used in financing activities (2,928,656) (26,058,293) Net increase in cash and cash equivalents 10,215,017 115,180,299
Cash and cash equivalents at the beginning of the period 43,391,142 3,834,218 Cash and cash equivalents at the end of the period 53,606,159 119,014,517
Operational cash flows from special commission income:
Special commission income received 2,225,571 1,654,710
Notes to interim condensed financial statements (unaudited)
At 30 June 2019
1. INCORPORATION AND ACTIVITIES
Al Rajhi Commodities Mudaraba Fund – United States Dollar (the “Fund”) is an open-ended investment fund created by an agreement between Al Rajhi Capital (the “Fund Manager”), a wholly owned subsidiary of the Al Rajhi Banking and Investment Corporation (the “Bank”), and investors (the “Unitholders”) in the Fund. The address of the Fund Manager is as follows:
Al Rajhi Capital P.O. Box 5561 Riyadh 11432
Kingdom of Saudi Arabia
The Fund is designed for investors seeking current income consistent with the preservation of capital and liquidity. The assets of the Fund are invested in Murabaha funds and in Murabaha transactions executed in accordance with Sharia principles. Murabaha comprises purchases of goods and commodities from approved suppliers against immediate payment and selling them to reputed organisations on deferred payment terms, thereby generating a profit. All the trading profits are reinvested in the Fund. The Fund was established on 14 December 1990.
The Fund has appointed AlBilad Investment Company (the “Custodian”) to act as its custodian and registrar. The fees of the custodian and registrar’s services are paid by the Fund.
The Fund Manager is responsible for the overall management of the Fund's activities. The Fund Manager can also enter into arrangements with other institutions for the provision of investment, custody or other administrative services on behalf of the Fund.
2. REGULATING AUTHORITY
The Fund is governed by the Investment Fund Regulations (the “Regulations”) issued by the Capital Market Authority (“CMA”) on 3 Dhul Hijja 1427H (corresponding to 24 December 2006) and effective from 6 Safar 1438H (corresponding 6 November 2016) by the New Investment Fund Regulations (“Amended Regulations”) published by the CMA on 16 Sha’aban 1437H (corresponding to 23 May 2016) detailing requirements for all funds within the Kingdom of Saudi Arabia.
3. BASIS OF PREPARATION AND CHANGES TO ACCOUNTING POLICIES 3.1. Basis of preparation
These interim condensed financial statements for the six-month period ended 30 June 2019 have been prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” (“IAS 34”).
The interim condensed financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Fund’s annual financial statements as at 31 December 2018.
The interim condensed financial statements have been prepared on a historical cost basis, using the accrual basis of accounting except for financial assets held at fair value through profit or loss that are measured at fair value. These interim condensed financial statements are presented in United States Dollar (“USD”), which is the Fund’s functional currency.
All financial information presented has been rounded to the nearest USD.
3.2 New standards, interpretations and amendments
The accounting policies adopted in the preparation of the interim condensed financial statements are consistent with those followed in the preparation of the Fund’s annual financial statements for the year ended 31 December 2018. There are new standards, amendments and interpretations apply for the first time in 2019, but do not have an impact on the interim condensed financial statements of the Fund.
There are other several amendments and interpretations that are issued, but not yet effective, up to the date of issuance of the Fund’s interim condensed financial statements. In the opinion of the Board, these will have no significant impact on the interim condensed financial statements of the Fund. The Fund intends to adopt those amendments and interpretations, if applicable.
AL RAJHI COMMODITIES MUDARABA FUND – UNITED STATES DOLLAR Notes to interim condensed financial statements (unaudited) (continued)
At 30 June 2019
7 4. CASH AND CASH EQUIVALENTS
30 June 2019 (Unaudited)
USD
31 December 2018 (Audited)
USD
Bank balances – current account 81,193 1,841,142
Short term murabaha placements with other banks with original maturity of
three months or less 53,524,966 41,550,000
───────── ─────────
53,606,159 43,391,142
5. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
The composition of the financial assets at fair value through profit or loss in investment mutual fund on the last valuation day of the period/ year is summarized below:
Market value USD
Cost USD
Unrealised gain USD As at 30 June 2019 (Unaudited)
Al Rajhi Commodity Murabaha Fund – Saudi Riyal 13,579,498 13,489,665 89,833
──────── ──────── ────────
As at 31 December 2018 (Audited)
Al Rajhi Commodity Murabaha Fund – Saudi Riyal 10,977,518 10,828,799 148,719
──────── ──────── ────────
Investments in mutual funds are unrated. The Fund also does not have an internal grading mechanism. However, the Fund Manager seeks to limit its risk by monitoring each investment exposure and setting limits for individual investment.
6. MURABAHA PLACEMENTS MEASURED AT AMORTISED COST
30 June 2019 (Unaudited)
31 December 2018 (Audited)
USD USD
Murabaha placements with the other banks 77,120,000 91,590,000
───────── ────────
Murabaha placements with the other banks are composed of the following:
30 June 2019
% of Cost
Remaining maturity Value USD
Up to 1 month 14.26 11,000,000
1-3 months 63.50 48,975,000
3-6 months 12.80 9,875,000
6-9 months 9.44 7,270,000
───────── ─────────
100.00 77,120,000
═════════ ═════════
Notes to interim condensed financial statements (unaudited) (continued)
At 30 June 2019
6. MURABAHA PLACEMENTS MEASURED AT AMORTISED COST (continued) 31 December 2018
% of Cost
Remaining maturity Value USD
Up to 1 month 23.69 21,700,000
1-3 months 68.46 62,700,000
3-6 months 7.85 7,190,000
───────── ─────────
100.00 91,590,000
═════════ ═════════
The management has conducted an impairment assessment based on the expected credit loss (“ECL”) as required under IFRS 9, which included taking into account numerous variables. Based on the assessment, the management has assessed that the impairment loss under ECL is not significant against the carrying value of investment held at amortised cost at the reporting date.
7. FINANCIAL ASSETS MEASURED AT AMORTISED COST
The composition of financial assets measured at amortised cost are summarised below:
As at 30 June 2019 (Unaudited) Maturity date USD
State of Qatar Sukuk 18 January 2023 1,513,784
Almarai Sukuk USD 5 March 2024 700,000
First Gulf Bank Sukuk 17 September 2024 1,015,344
─────────
3,229,128
═════════
As at 31 December 2018 (Audited) Maturity date USD
State of Qatar Sukuk 18 January 2023 1,515,520
First Gulf Bank Sukuk 17 September 2024 1,016,725
─────────
2,532,245
═════════
The management has conducted an impairment assessment based on the expected credit loss (“ECL”) as required under IFRS 9, which included taking into account numerous variables. Based on the assessment, the management has assessed that the impairment loss under ECL is not significant against the carrying value of investment held at amortised cost at the reporting date.
8. TRANSACTIONS WITH RELATED PARTIES
In the ordinary course of its activities, the Fund transacts business with related parties.
The Fund pays a management fee at a maximum rate of 16% per annum (30 June 2018: 16%) calculated on the Fund’s special commission. The fee is intended to compensate the Fund Manager for administration of the Fund.
The management fees amounting to USD 374,800 (30 June 2018: USD 277,443) reflected in the interim condensed statement of comprehensive income represent the fees charged by the Fund Manager during the period as described above.
As at 30 June 2019, management fees amounting to USD 52,851 (31 December 2018: USD 60,698) are payable to the Fund Manager.
In the normal course of business, the Fund places Murabaha investments with the Bank at prevailing market rates.
Murabaha investments involve typically the purchase of a commodity by the Fund for the purpose of its re-sale. The re- sale and the related mark up over cost is agreed with a counterparty at the inception of the Murabaha transaction deals.
Board of Directors’ fees amounting to USD 198 (30 June 2018: USD 195) was charged during the period. As at 30 June 2019, Board of Directors’ fees amounting to USD 198 (31 December 2018: USD 394) is payable to the Fund’s Board of Directors.
AL RAJHI COMMODITIES MUDARABA FUND – UNITED STATES DOLLAR Notes to interim condensed financial statements (unaudited) (continued)
At 30 June 2019
9
8. TRANSACTIONS WITH RELATED PARTIES (continued)
The units in issue at 30 June 2019 include 82 units held by the employees of the Fund Manager (31 December 2018: 82 units).
The units in issue at 30 June 2019 include Nil units held by the Fund Manager (31 December 2018: Nil units).
At the end of the period, the cash balance with the Bank is USD 81,193 (31 December 2018: USD 1,841,142).
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Fund measures its investments in financial instruments, such as investment in Fund, at fair value at each reporting date.
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 market for the asset or liability. The principal or the most advantageous market must be accessible by the Fund. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
The fair value for financial instruments traded in active markets at the reporting date is based on their quoted price (bid price for long positions and ask price for short positions), without any deduction for transaction costs.
The Fund measures financial instruments at fair value at each interim condensed statement of financial position date.
The Fund has investments at fair value through profit or loss which is measured at fair values and are classified within level 1 of the fair value hierarchy. Management believes that the fair value of all other financial assets and liabilities at the reporting date approximate their carrying values owing to their short-term tenure and the fact that these are readily liquid. These are all classified within level 2 of the fair value hierarchy. There were no transfers between various levels of fair value hierarchy during the current period or prior year.
10. MATURITY ANALYSIS OF ASSETS AND LIABILITIES
The table below shows an analysis of assets and liabilities according to when they are expected to be recovered or settled respectively:
As at 30 June 2019 (Unaudited)
Within 12 months
After
12 months Total
USD USD USD
ASSETS
Cash and cash equivalents 53,606,159 - 53,606,159
Financial assets at fair value through profit or loss 13,579,498 - 13,579,498 Murabaha placements measured at amortised cost 77,120,000 - 77,120,000
Financial assets measured at amortised cost - 3,229,128 3,229,128
Accrued special commission 602,491 - 602,491
───────── ───────── ─────────
TOTAL ASSETS 144,908,148 3,229,128 148,137,276
═════════ ═════════ ═════════
LIABILITIES
Accrued expenses 52,851 - 52,851
Management fee payable 9,811 - 9,811
───────── ───────── ─────────
TOTAL LIABILITIES 62,662 - 62,662
═════════ ═════════ ═════════
Notes to interim condensed financial statements (unaudited) (continued)
At 30 June 2019
10. MATURITY ANALYSIS OF ASSETS AND LIABILITIES (continued) As at 31 December 2018 (Audited)
Within 12 months
After
12 months Total
USD USD USD
ASSETS
Cash and cash equivalents 43,391,142 - 43,391,142
Financial assets at fair value through profit or loss 10,977,518 - 10,977,518 Murabaha placements measured at amortised cost 91,590,000 - 91,590,000
Financial assets measured at amortised cost - 2,532,245 2,532,245
Accrued special commission 591,431 - 591,431
───────── ───────── ─────────
TOTAL ASSETS 146,550,091 2,532,245 149,082,336
═════════ ═════════ ═════════
LIABILITIES
Accrued expenses 12,555 - 12,555
Management fee payable 60,698 - 60,698
───────── ───────── ─────────
TOTAL LIABILITIES 73,253 - 73,253
═════════ ═════════ ═════════
11. LAST VALUATION DAY
The last valuation day of the period/year was 30 June 2019 (year ended 31 December 2018: 31 December 2018).
12. APPROVAL OF THE INTERIM CONDENSED FINANCIAL STATEMENTS
These interim condensed financial statements were approved by the Fund’s management on 28 Dhul-Qadah 1440H (corresponding to 31 July 2019).
