SAIB Trade Finance Fund
SAIB Trade Finance Fund (Managed by Alistithmar for Financial Securities and Brokerage Company) FINANCIAL STATEMENTS 31 DECEMBER 2017
SAIB Trade Finance Fund BALANCE SHEET As at 31 December 2017 Notes ASSETS Cash and cash equivalents Money market placements Held to maturity investments Trading investments Accrued income Other receivable
2017 SR
2016 SR
4 5 6 7
143,660,357 692,546,840 5,000,000 285,875,291 7,858,945 111,383 ────────── 1,135,052,816 ──────────
20,798,690 396,819,578 29,266,509 55,916,111 5,298,346 104,980 ───────── 508,204,214 ─────────
9
6,078,955 110,441 ────────── 6,189,396 ──────────
5,118,164 300,751 ───────── 5,418,915 ─────────
NET ASSETS
1,128,863,420 ══════════
502,785,299 ═════════
Units in issue
83,967,726 ══════════
38,023,572 ═════════
Per unit value
SR 13.44 ══════════
SR 13.22 ═════════
LIABILITIES Risk allowance Accrued expenses
The accompanying notes 1 to 13 form part of these financial statements. 3
SAIB Trade Finance Fund STATEMENT OF OPERATIONS Year ended 31 December 2017
Notes INVESTMENT INCOME Special commission income Trading income
8
EXPENSES Management fees Risk allowance Service charges Other expenses
9 9 9 10
NET INCOME FROM OPERATIONS
The accompanying notes 1 to 13 form part of these financial statements. 4
2017 SR
2016 SR
17,251,111 4,856,599 ───────── 22,107,710 ─────────
14,653,073 153,651 ───────── 14,806,724 ─────────
(4,964,174) (960,791) (32,879) (71,921) ───────── (6,029,765) ─────────
(3,035,901) (1,147,872) (39,886) (305,731) ───────── (4,529,390) ─────────
16,077,945 ═════════
10,277,334 ═════════
SAIB Trade Finance Fund STATEMENT OF CASH FLOWS Year ended 31 December 2017 Note
2017 SR
2016 SR
OPERATING ACTIVITIES Net income from operations
16,077,945
Adjustment for: Movement in unrealised gains on trading investments
(3,829,710)
(880,007)
(295,727,262) 24,266,509 (226,129,470) (2,560,599) (6,403) 960,791 (190,310) ───────── (487,138,509) ─────────
251,671,733 172,511,831 (53,655,010) 272,797 102,354 1,147,872 (564,925) ───────── 380,883,979 ─────────
1,103,540,021 (493,539,845) ───────── 610,000,176 ─────────
222,648,800 (604,946,417) ───────── (382,297,617) ─────────
Changes in operating assets and liabilities: Money market placements Held to maturity investments Trading investments Accrued income Other receivable Risk allowance Accrued expenses Net cash (used in) from operating activities
10,277,334
FINANCING ACTIVITIES Proceeds from units sold Value of units redeemed Net cash from (used in) financing activities
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at the beginning of the year CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 4
Operational cash flows from special commission income Special commission income received
The accompanying notes 1 to 13 form part of these financial statements. 5
122,861,667
(1,413,638)
20,798,690 ───────── 143,660,357 ═════════
22,212,328 ───────── 20,798,690 ═════════
14,690,512 ═════════
14,925,870 ═════════
SAIB Trade Finance Fund STATEMENT OF CHANGES IN NET ASSETS Year ended 31 December 2017 2017 SR NET ASSET VALUE AT THE BEGINNING OF THE YEAR
CHANGES FROM OPERATIONS Net income from operations CHANGES FROM UNIT TRANSACTIONS Proceeds from units sold Value of units redeemed Net change from unit transactions
NET ASSET VALUE AT THE END OF THE YEAR
2016 SR
502,785,299 ─────────
874,805,582 ─────────
16,077,945 ─────────
10,277,334 ─────────
1,103,540,021 (493,539,845) ───────── 610,000,176 ─────────
222,648,800 (604,946,417) ───────── (382,297,617) ─────────
1,128,863,420 ═════════
502,785,299 ═════════
UNIT TRANSACTIONS Transactions in units for the year ended 31 December are summarised as follows: 2017 Units UNITS AT THE BEGINNING OF THE YEAR
Units sold Units redeemed Net increase (decrease) in units
UNITS AT THE END OF THE YEAR
The accompanying notes 1 to 13 form part of these financial statements. 6
2016 Units
38,023,572 ─────────
67,337,345 ─────────
82,918,363 (36,974,209) ───────── 45,944,154 ─────────
16,996,120 (46,309,893) ───────── (29,313,773) ─────────
83,967,726 ═════════
38,023,572 ═════════
SAIB Trade Finance Fund NOTES TO THE FINANCIAL STATEMENTS 31 December 2017 1
GENERAL
SAIB Trade Finance Fund (the Fund) is an open-ended investment fund created by an agreement between the Fund Manager and investors (the Unitholders) in the Fund. The Fund commenced operations on 30 June 2003. The Fund is designed for investors seeking capital preservation and high liquidity through exposure to Shariah compliant assets. All income is reinvested in the Fund and is reflected in the unit price. Alistithmar for Financial Securities and Brokerage Company (Alistithmar Capital), wholly owned subsidiary of the Saudi Investment Bank (The Bank) is the Fund Manager, Broker and Custodian of the Fund. The books and records of the Fund are maintained in Saudi Riyals (SR). 2
REGULATING AUTHORITY
The Fund is governed by the Investment Fund Regulations (the Regulations) published by 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 Regulation published by the Capital Market Authority on 16 Sha’aban 1437H (corresponding 23 May 2016), 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 modified to include the measurement at fair value of trading investments. Cash and cash equivalents For the purposes of cash flow statement, cash and cash equivalents consist of bank balances and money market placements with an original maturity of three months or less Investment valuation Money market placements are carried at cost. Equity investments which are purchased for trading purposes are valued at their market price as at the balance sheet date. Investments in mutual funds are valued on the basis of net asset values published by the Fund Manager. 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 Investment transactions are accounted for as of the trade date. Revenue recognition Special commission income is recognised on an effective yield basis. Trading income includes movement in unrealised gains (losses) from changes in fair value, realised gains (losses) from sale of trading investments and dividends from trading investments. Realised gains (losses) on trading investments sold are determined on a weighted average cost basis. Other income is recognized when earned. Zakat and income tax Zakat and income tax are the obligations of the Unitholders and are not provided for in the accompanying financial statements. Foreign currencies Transactions in foreign currencies are translated into Saudi Riyals at the rates of exchange prevailing at the dates of the transaction. Assets and liabilities in foreign currencies at the balance sheet date are retranslated at the rates of exchange ruling at that date. Resulting exchange gains and losses are taken to the statement of operations. 7
SAIB Trade Finance Fund NOTES TO THE FINANCIAL STATEMENTS (continued) 31 December 2017 4
CASH AND CASH EQUIVALENTS
Bank balances Money market placements with an original maturity of three months or less
5
2017 SR
2016 SR
8,660,357
20,798,690
135,000,000 ───────── 143,660,357 ═════════
───────── 20,798,690 ═════════
MONEY MARKET PLACEMENTS 2017 SR
Murabaha placements with other banks Murabaha car financing placements with the Bank
692,000,000 546,840 ───────── 692,546,840 ═════════
2016 SR 396,184,043 635,535 ───────── 396,819,578 ═════════
Money market placements comprise placements with commercial banks with minimum investment grade credit rating and have an original maturity of more than three months from date of placement. The average variable special commission rate on the placement as at 31 December 2017 is based on market rate. 6
HELD TO MATURITY INVESTMENTS 2017 SR
Sukuk: Spichem Saudi British Bank Awwal Bank (formerly known as Saudi Hollandi Bank)
7
2016 SR
5,000,000 ───────── 5,000,000 ═════════
5,000,000 12,152,699 12,113,810 ───────── 29,266,509 ═════════
2017 Market value SR
% of market value
TRADING INVESTMENTS Cost SR
Mutual funds Al Qawafeel Commodities Trading Fund Al-Sunbullah Riyal Fund Al Rajhi Commodities Fund Falcom Fund Al Awal Capital Murabaha SAR Fund
83,057,394 80,672,100 76,602,987 31,037,726 9,800,000 ───────── 281,170,207 ═════════ Cost SR
Mutual funds Falcom Fund Al-Sunbullah Riyal Fund Al Qawafeel Commodities Trading Fund Al Awal Capital Murabaha SAR Fund
20,037,726 15,203,011 10,000,000 9,800,000 ───────── 55,040,737 ═════════ 8
84,240,082 81,941,829 77,463,113 32,100,005 10,130,262 ───────── 285,875,291 ═════════ 2016 Market value SR 20,477,707 15,441,384 10,011,863 9,985,157 ───────── 55,916,111 ═════════
29.47 28.66 27.10 11.23 3.54 ────── 100.00 ══════ % of market value 36.62 27.61 17.91 17.86 ────── 100.00 ══════
SAIB Trade Finance Fund NOTES TO THE FINANCIAL STATEMENTS (continued) 31 December 2017 8
TRADING INCOME, NET 2017 SR
Movement in unrealised gains Realised gains (losses)
9
3,829,710 1,026,889 ───────── 4,856,599 ═════════
2016 SR 880,007 (726,356) ───────── 153,651 ═════════
TRANSACTIONS WITH RELATED PARTIES
The Fund pays a management fee calculated at an annual rate of 0.50% of the net asset value at each valuation date. The management fees reflected in the statement of operations represent the fees charged by the Fund Manager during the year. Additionally, administration expenses paid by the Fund Manager on behalf of the Fund are reimbursed from the Fund, subject to a maximum administration expense of 0.20% of net asset value per annum. At each valuation date, the Fund pays to the Bank service charges annually at 5.5% of the Fund’s car financing placements with the Bank. The Fund calculates a risk allowance at an annual rate of 10% of net income from operations at each valuation date. The risk allowance is in respect of the credit risk on Fund’s assets. The risk allowance reflected in the statement of operations represents the allowance charged during the year. The Bank acts as the Fund’s banker. The Unit holders’ account at 31 December, included units held as follows:
Held by the Bank Held by the Fund Manager Held by employees of the Fund Manager
10
2017 Units
2016 Units
7,700,126 4,515,907 ───────── 12,216,033 ═════════
7,700,126 616,219 12,425 ───────── 8,328,770 ═════════
2017 SR
2016 SR
30,000 18,500 8,121 7,500 5,000 2,800 ───────── 71,921 ═════════
30,000 20,765 239,666 7,500 5,000 2,800 ───────── 305,731 ═════════
OTHER EXPENSES
Audit fees Shariah board member fees Foreign exchange loss CMA fees Tadawul fees Fund board member fees
9
SAIB Trade Finance Fund NOTES TO THE FINANCIAL STATEMENTS (continued) 31 December 2017 11
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 2017. A hypothetical 10 basis points change in the weighted average special commission rates of the floating rate financial assets balances at 31 December 2017 would impact special commission income by approximately SR 5,000 (2016: SR 29,000) annually in aggregate. There are no floating rate special commissions 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 Cash and cash equivalents, money market placements, held to maturity investments, accrued income and other receivable. The Fund Manager seeks to limit its credit risk by monitoring credit exposures. The Fund does not have a formal internal grading mechanism. 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. 2017 SR Cash and cash equivalents Money market placements Held to maturity investments Accrued income Other receivable
143,660,357 692,546,840 5,000,000 7,858,945 111,383 ───────── 849,177,525 ═════════
Total exposure to credit risk
2016 SR 20,798,690 396,819,578 29,266,509 5,298,346 104,980 ───────── 452,288,103 ═════════
Liquidity risk Liquidity risk is the risk that the Fund will encounter difficulty in releasing funds to meet commitments associated with its financial liability. 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 the subscriptions and redemptions of units daily and it is, therefore, exposed to the liquidity risk of meeting Unitholders’ redemptions. The Fund’s securities are considered to be readily realisable and the units can easily be redeemed at any time. The Fund Manager monitors the liquidity requirements on a regular basis and seeks to ensure that sufficient funds are available to meet any 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 Fund views the Saudi Riyal as its functional currency. The Fund’s financial assets and liabilities are denominated in Saudi Riyals and US Dollars and as the Saudi Riyal is pegged to the US Dollar, the Fund is not exposed to significant currency risks.
10
SAIB Trade Finance Fund NOTES TO THE FINANCIAL STATEMENTS (continued) 31 December 2017 12
FAIR VALUES OF FINANCIAL INSTRUMENTS
Financial instruments comprise financial assets and financial liabilities. The Fund’s financial assets consist of bank balances, money market placements, held to maturity investments, trading investment and accrued 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. For investment in mutual fund, fair value is determined by reference to net asset value as published by the Fund Manager. The fair values of financial instruments, which are otherwise carried at cost, at 31 December, are set out below: SR 2017 Sukuk: Spichem Saudi British Bank Awwal Bank ( formerly known as Saudi Hollandi Bank)
13
5,000,000 ───────── 5,000,000 ═════════
LAST VALUATION DAY
The last valuation day of the year was 31 December 2017 (2016: 31 December 2016).
11
SR 2016 5,000,000 12,000,000 12,000,000 ───────── 29,000,000 ═════════
SAIB Trade Finance Fund BALANCE SHEET As at 31 December 2017 Notes ASSETS Cash and cash equivalents Money market placements Held to maturity investments Trading investments Accrued income Other receivable
2017 SR
2016 SR
4 5 6 7
143,660,357 692,546,840 5,000,000 285,875,291 7,858,945 111,383 ────────── 1,135,052,816 ──────────
20,798,690 396,819,578 29,266,509 55,916,111 5,298,346 104,980 ───────── 508,204,214 ─────────
9
6,078,955 110,441 ────────── 6,189,396 ──────────
5,118,164 300,751 ───────── 5,418,915 ─────────
NET ASSETS
1,128,863,420 ══════════
502,785,299 ═════════
Units in issue
83,967,726 ══════════
38,023,572 ═════════
Per unit value
SR 13.44 ══════════
SR 13.22 ═════════
LIABILITIES Risk allowance Accrued expenses
The accompanying notes 1 to 13 form part of these financial statements. 3
SAIB Trade Finance Fund STATEMENT OF OPERATIONS Year ended 31 December 2017
Notes INVESTMENT INCOME Special commission income Trading income
8
EXPENSES Management fees Risk allowance Service charges Other expenses
9 9 9 10
NET INCOME FROM OPERATIONS
The accompanying notes 1 to 13 form part of these financial statements. 4
2017 SR
2016 SR
17,251,111 4,856,599 ───────── 22,107,710 ─────────
14,653,073 153,651 ───────── 14,806,724 ─────────
(4,964,174) (960,791) (32,879) (71,921) ───────── (6,029,765) ─────────
(3,035,901) (1,147,872) (39,886) (305,731) ───────── (4,529,390) ─────────
16,077,945 ═════════
10,277,334 ═════════
SAIB Trade Finance Fund STATEMENT OF CASH FLOWS Year ended 31 December 2017 Note
2017 SR
2016 SR
OPERATING ACTIVITIES Net income from operations
16,077,945
Adjustment for: Movement in unrealised gains on trading investments
(3,829,710)
(880,007)
(295,727,262) 24,266,509 (226,129,470) (2,560,599) (6,403) 960,791 (190,310) ───────── (487,138,509) ─────────
251,671,733 172,511,831 (53,655,010) 272,797 102,354 1,147,872 (564,925) ───────── 380,883,979 ─────────
1,103,540,021 (493,539,845) ───────── 610,000,176 ─────────
222,648,800 (604,946,417) ───────── (382,297,617) ─────────
Changes in operating assets and liabilities: Money market placements Held to maturity investments Trading investments Accrued income Other receivable Risk allowance Accrued expenses Net cash (used in) from operating activities
10,277,334
FINANCING ACTIVITIES Proceeds from units sold Value of units redeemed Net cash from (used in) financing activities
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at the beginning of the year CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 4
Operational cash flows from special commission income Special commission income received
The accompanying notes 1 to 13 form part of these financial statements. 5
122,861,667
(1,413,638)
20,798,690 ───────── 143,660,357 ═════════
22,212,328 ───────── 20,798,690 ═════════
14,690,512 ═════════
14,925,870 ═════════
SAIB Trade Finance Fund STATEMENT OF CHANGES IN NET ASSETS Year ended 31 December 2017 2017 SR NET ASSET VALUE AT THE BEGINNING OF THE YEAR
CHANGES FROM OPERATIONS Net income from operations CHANGES FROM UNIT TRANSACTIONS Proceeds from units sold Value of units redeemed Net change from unit transactions
NET ASSET VALUE AT THE END OF THE YEAR
2016 SR
502,785,299 ─────────
874,805,582 ─────────
16,077,945 ─────────
10,277,334 ─────────
1,103,540,021 (493,539,845) ───────── 610,000,176 ─────────
222,648,800 (604,946,417) ───────── (382,297,617) ─────────
1,128,863,420 ═════════
502,785,299 ═════════
UNIT TRANSACTIONS Transactions in units for the year ended 31 December are summarised as follows: 2017 Units UNITS AT THE BEGINNING OF THE YEAR
Units sold Units redeemed Net increase (decrease) in units
UNITS AT THE END OF THE YEAR
The accompanying notes 1 to 13 form part of these financial statements. 6
2016 Units
38,023,572 ─────────
67,337,345 ─────────
82,918,363 (36,974,209) ───────── 45,944,154 ─────────
16,996,120 (46,309,893) ───────── (29,313,773) ─────────
83,967,726 ═════════
38,023,572 ═════════
SAIB Trade Finance Fund NOTES TO THE FINANCIAL STATEMENTS 31 December 2017 1
GENERAL
SAIB Trade Finance Fund (the Fund) is an open-ended investment fund created by an agreement between the Fund Manager and investors (the Unitholders) in the Fund. The Fund commenced operations on 30 June 2003. The Fund is designed for investors seeking capital preservation and high liquidity through exposure to Shariah compliant assets. All income is reinvested in the Fund and is reflected in the unit price. Alistithmar for Financial Securities and Brokerage Company (Alistithmar Capital), wholly owned subsidiary of the Saudi Investment Bank (The Bank) is the Fund Manager, Broker and Custodian of the Fund. The books and records of the Fund are maintained in Saudi Riyals (SR). 2
REGULATING AUTHORITY
The Fund is governed by the Investment Fund Regulations (the Regulations) published by 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 Regulation published by the Capital Market Authority on 16 Sha’aban 1437H (corresponding 23 May 2016), 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 modified to include the measurement at fair value of trading investments. Cash and cash equivalents For the purposes of cash flow statement, cash and cash equivalents consist of bank balances and money market placements with an original maturity of three months or less Investment valuation Money market placements are carried at cost. Equity investments which are purchased for trading purposes are valued at their market price as at the balance sheet date. Investments in mutual funds are valued on the basis of net asset values published by the Fund Manager. 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 Investment transactions are accounted for as of the trade date. Revenue recognition Special commission income is recognised on an effective yield basis. Trading income includes movement in unrealised gains (losses) from changes in fair value, realised gains (losses) from sale of trading investments and dividends from trading investments. Realised gains (losses) on trading investments sold are determined on a weighted average cost basis. Other income is recognized when earned. Zakat and income tax Zakat and income tax are the obligations of the Unitholders and are not provided for in the accompanying financial statements. Foreign currencies Transactions in foreign currencies are translated into Saudi Riyals at the rates of exchange prevailing at the dates of the transaction. Assets and liabilities in foreign currencies at the balance sheet date are retranslated at the rates of exchange ruling at that date. Resulting exchange gains and losses are taken to the statement of operations. 7
SAIB Trade Finance Fund NOTES TO THE FINANCIAL STATEMENTS (continued) 31 December 2017 4
CASH AND CASH EQUIVALENTS
Bank balances Money market placements with an original maturity of three months or less
5
2017 SR
2016 SR
8,660,357
20,798,690
135,000,000 ───────── 143,660,357 ═════════
───────── 20,798,690 ═════════
MONEY MARKET PLACEMENTS 2017 SR
Murabaha placements with other banks Murabaha car financing placements with the Bank
692,000,000 546,840 ───────── 692,546,840 ═════════
2016 SR 396,184,043 635,535 ───────── 396,819,578 ═════════
Money market placements comprise placements with commercial banks with minimum investment grade credit rating and have an original maturity of more than three months from date of placement. The average variable special commission rate on the placement as at 31 December 2017 is based on market rate. 6
HELD TO MATURITY INVESTMENTS 2017 SR
Sukuk: Spichem Saudi British Bank Awwal Bank (formerly known as Saudi Hollandi Bank)
7
2016 SR
5,000,000 ───────── 5,000,000 ═════════
5,000,000 12,152,699 12,113,810 ───────── 29,266,509 ═════════
2017 Market value SR
% of market value
TRADING INVESTMENTS Cost SR
Mutual funds Al Qawafeel Commodities Trading Fund Al-Sunbullah Riyal Fund Al Rajhi Commodities Fund Falcom Fund Al Awal Capital Murabaha SAR Fund
83,057,394 80,672,100 76,602,987 31,037,726 9,800,000 ───────── 281,170,207 ═════════ Cost SR
Mutual funds Falcom Fund Al-Sunbullah Riyal Fund Al Qawafeel Commodities Trading Fund Al Awal Capital Murabaha SAR Fund
20,037,726 15,203,011 10,000,000 9,800,000 ───────── 55,040,737 ═════════ 8
84,240,082 81,941,829 77,463,113 32,100,005 10,130,262 ───────── 285,875,291 ═════════ 2016 Market value SR 20,477,707 15,441,384 10,011,863 9,985,157 ───────── 55,916,111 ═════════
29.47 28.66 27.10 11.23 3.54 ────── 100.00 ══════ % of market value 36.62 27.61 17.91 17.86 ────── 100.00 ══════
SAIB Trade Finance Fund NOTES TO THE FINANCIAL STATEMENTS (continued) 31 December 2017 8
TRADING INCOME, NET 2017 SR
Movement in unrealised gains Realised gains (losses)
9
3,829,710 1,026,889 ───────── 4,856,599 ═════════
2016 SR 880,007 (726,356) ───────── 153,651 ═════════
TRANSACTIONS WITH RELATED PARTIES
The Fund pays a management fee calculated at an annual rate of 0.50% of the net asset value at each valuation date. The management fees reflected in the statement of operations represent the fees charged by the Fund Manager during the year. Additionally, administration expenses paid by the Fund Manager on behalf of the Fund are reimbursed from the Fund, subject to a maximum administration expense of 0.20% of net asset value per annum. At each valuation date, the Fund pays to the Bank service charges annually at 5.5% of the Fund’s car financing placements with the Bank. The Fund calculates a risk allowance at an annual rate of 10% of net income from operations at each valuation date. The risk allowance is in respect of the credit risk on Fund’s assets. The risk allowance reflected in the statement of operations represents the allowance charged during the year. The Bank acts as the Fund’s banker. The Unit holders’ account at 31 December, included units held as follows:
Held by the Bank Held by the Fund Manager Held by employees of the Fund Manager
10
2017 Units
2016 Units
7,700,126 4,515,907 ───────── 12,216,033 ═════════
7,700,126 616,219 12,425 ───────── 8,328,770 ═════════
2017 SR
2016 SR
30,000 18,500 8,121 7,500 5,000 2,800 ───────── 71,921 ═════════
30,000 20,765 239,666 7,500 5,000 2,800 ───────── 305,731 ═════════
OTHER EXPENSES
Audit fees Shariah board member fees Foreign exchange loss CMA fees Tadawul fees Fund board member fees
9
SAIB Trade Finance Fund NOTES TO THE FINANCIAL STATEMENTS (continued) 31 December 2017 11
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 2017. A hypothetical 10 basis points change in the weighted average special commission rates of the floating rate financial assets balances at 31 December 2017 would impact special commission income by approximately SR 5,000 (2016: SR 29,000) annually in aggregate. There are no floating rate special commissions 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 Cash and cash equivalents, money market placements, held to maturity investments, accrued income and other receivable. The Fund Manager seeks to limit its credit risk by monitoring credit exposures. The Fund does not have a formal internal grading mechanism. 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. 2017 SR Cash and cash equivalents Money market placements Held to maturity investments Accrued income Other receivable
143,660,357 692,546,840 5,000,000 7,858,945 111,383 ───────── 849,177,525 ═════════
Total exposure to credit risk
2016 SR 20,798,690 396,819,578 29,266,509 5,298,346 104,980 ───────── 452,288,103 ═════════
Liquidity risk Liquidity risk is the risk that the Fund will encounter difficulty in releasing funds to meet commitments associated with its financial liability. 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 the subscriptions and redemptions of units daily and it is, therefore, exposed to the liquidity risk of meeting Unitholders’ redemptions. The Fund’s securities are considered to be readily realisable and the units can easily be redeemed at any time. The Fund Manager monitors the liquidity requirements on a regular basis and seeks to ensure that sufficient funds are available to meet any 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 Fund views the Saudi Riyal as its functional currency. The Fund’s financial assets and liabilities are denominated in Saudi Riyals and US Dollars and as the Saudi Riyal is pegged to the US Dollar, the Fund is not exposed to significant currency risks.
10
SAIB Trade Finance Fund NOTES TO THE FINANCIAL STATEMENTS (continued) 31 December 2017 12
FAIR VALUES OF FINANCIAL INSTRUMENTS
Financial instruments comprise financial assets and financial liabilities. The Fund’s financial assets consist of bank balances, money market placements, held to maturity investments, trading investment and accrued 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. For investment in mutual fund, fair value is determined by reference to net asset value as published by the Fund Manager. The fair values of financial instruments, which are otherwise carried at cost, at 31 December, are set out below: SR 2017 Sukuk: Spichem Saudi British Bank Awwal Bank ( formerly known as Saudi Hollandi Bank)
13
5,000,000 ───────── 5,000,000 ═════════
LAST VALUATION DAY
The last valuation day of the year was 31 December 2017 (2016: 31 December 2016).
11
SR 2016 5,000,000 12,000,000 12,000,000 ───────── 29,000,000 ═════════
