Download annual report - Anfaal Capital

ANNUAL REPORT
Financial Year Ended 31 December 2015
Company Registration No.: 4030200832
CMA License No. 14180-37
CONTENTS
Page
BOARD OF DIRECTORS
1
DIRECTORS’ REPORT
2
CORPORATE GOVERNANCE STATEMENT
5
Directors
Responsibilities of the Board of Directors and its Committees
Remuneration & Compensation
Declaration on Penalty Imposed by CMA
Code of Conduct
Results of Audit Review on Internal Control Procedures
Directors’ Responsibility Statement
Shariah governance
SHARIAH SUPERVISORY ANNUAL STATEMENT
14
AUDITED FINANCIAL STATEMENTS
15
Independent Auditors’ Report
Balance Sheet
Income Statement
Cash Flow Statement
Statement of Changes in Shareholders’ Equity
Notes to the Financial Statements
PILLAR 3 DISCLOSURES
ANFAAL CAPITAL
ANNUAL REPORT 2015
34
BOARD OF DIRECTORS
As at 31 December 2015
Name
Classification
1.
Saud Al Sabhan
Chairman, Independent
2.
Muzaffar Bin Hisham
Member, Non-Executive
3.
Alyas Al Meftah
Member, Non-Executive
4.
Abdulwahhab Al Dahlawi
Member, Non-Executive
5.
Farid Arshad Masood
Member, Non-Executive
6.
Mohamad Yasin Abdullah
Member, Non-Executive
7.
Dr. Abubaker Ali Bagabir
Member, Independent
8.
Abdul Hamid Sh Mohamed
Member, Independent
9.
[Vacant]*
* Ms Nida Raza has been nominated to the vacant position. Management is in the process of compiling the necessary documents for
submission to CMA for approval.
ANFAAL CAPITAL
ANNUAL REPORT 2015
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DIRECTORS’ REPORT
In the name of Allah, the Beneficent, the Merciful
Dear Esteemed Shareholders,
On behalf of the Board of Directors, I hereby share with you the Annual Report and Audited Financial
Statement of Anfaal Capital (“Anfaal” or “the Company”) for the year ended 31 December 2015.
The year 2015 witnessed the fall of the crude oil price from around 100 USD/bbl in 2014 to as low as 30
USD/bbl at the start of 2016. This price plunge had a negative effect on many countries that depended on oil as
their major source of revenue. Many oil producing countries have announced measures such as budget
calibration, prudent spending and subsidy cuts in trying to weather this oil price crash. 2015 also saw a
significant appreciation of the US Dollars against most currencies around the world. Major stock markets
around the world fell as investors became nervous with facing the current bearish market conditions. China
market conditions is facing uncertainty and may even lead to a full blown crisis.
Anfaal was not immune to the ongoing uncertainties in the global market in 2015. Our second investment
banking department deal from China had to be aborted when China stock market nose-dived sometime in mid2015. Even certain investment banking deals around the Gulf was postponed or was dropped.
At Anfaal, we recognized the market challenges that we have to face in the coming year. However, we feel that
the Saudi market conditions are still the strongest in the region and among the Gulf countries. We are in the
opinion that Saudi Arabia is the right place to be and it is just a matter of producing the right products that
appeal and gives appropriate returns to investors with the current risk appetite. Furthermore, Anfaal
recognizes that opportunities for new deals are still in abundance and we are diligently reaching out to the
market locally and globally in sourcing these deals.
During the year, Anfaal successfully obtained the Dealing as Principal license from Saudi Capital Markets
Authority (CMA). This has added to Anfaal current licenses of Managing, Custody, Advising and Arranging of
securities. Towards the end of 2015, Anfaal has also successfully launched a new unique Shariah Compliant
liquidity management product called Maysarah Money Market Fund (Maysarah). Through Maysarah, Anfaal
aims to offer to its investors stable growth, diversification, minimised risk exposure with the objective of
outperforming USD fixed deposit products. Currently, Anfaal is aggressively promoting Maysarah to investors
and we hope that by end of 2016, we would be able to attract approximately USD 100 million into Maysarah.
In December 2015, Anfaal has completed the process to increase its share capital from SAR 50,000,000 to SAR
61,499,950 by converting our subordinated debt and shareholder funding account to ordinary shares. Total
revenue for 2015 was SAR 11.4 million (2014: SAR 12.9 million), mainly from AlFareeda Residential Fund (ARF).
ARF’s 4 year term is expiring in November 2016. We acknowledged this and have been developing new funds
that will replace ARF which could give stable and consistent fees. Maysarah is an example of the new fund that
we have developed and more projects are in the pipeline. Net loss for the year before zakat was SAR 4.5
million (2014: SAR 0.7 million). This is mainly due to higher costs of doing business, bad debt provisioning and
lower than anticipated revenues amid challenging environment.
As a continuation to last year, we are pleased to publish the ‘Pillar 3 Disclosure’ report at the last section of this
Annual Report. The ‘Pillar 3 Disclosure’ is for the market participants to assess the key pieces of information on
the scope of application, capital, risk exposures, risk assessment processes and capital adequacy of the
Company. The Pillar 3 Disclosure comprises both qualitative and quantitative information.
ANFAAL CAPITAL
ANNUAL REPORT 2015
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Key Business Activities
Investment Banking (IB)
IB, through our Corporate Finance Department, is focused on arranging and advising innovative funding
solutions to its clients within the spheres of both Islamic equity and debt markets. The range of services offered
include: general financial advisory, merger and acquisition, arranging sukuk and arranging debt and equity
syndications locally and internationally.
Asset Management (AM)
Our Asset Management Department offers fund type solutions to institutions and individuals seeking sharia
compliant products based on their investment goals and objectives. Currently, apart from having extensive
expertise in real estate development, Money Market Fund is a newly launched product by AM that offers stable
returns to investors who are seeking investment opportunities in the money market.
AM also offers customized Discretionary Portfolio Management (DPM) services for institutional and high networth investors seeking discretionary portfolio management services.
Operating Results
Financial year ending 31 December
2013
2014
2015
(SAR, unless stated otherwise)
Change
Y-o-Y
Total Revenues
13,769,831
12,725,000
11,066,466
-13%
Total Expenses
10,881,251
13,563,476
15,993,021
18%
Profit/(Loss) from Operations
2,888,580
-838,476
-4,926,555
488%
Net Profit/(Loss) for the year
4,069,386
-657,415
-4,481,700
582%
0.81
-0.13
-0.89
575%
Earnings/(Loss) per Share
Investment Return & Productivity Measures
Both return on investment yardstick – Return on Equity and Return on Capital Employed – are in the negative in
2015 as compared to the previous year due the reasons mentioned in the previous section. The higher
employee remuneration and coupled with lower revenue in 2015 have caused productivity measurements to
deteriorate as compared to the previous year.
Financial year ending 31 December
2013
2014
2015
(SAR, unless otherwise stated)
Net Profit/(Loss) after Zakat & Tax
Change
Y-o-Y
3,260,427
-1,289,180
-4,731,590
267%
Share Capital
50,000,000
50,000,000
61,499,950
23%
Sub Debt SAR 10 mil
10,000,000
10,000,000
0
-100%
1,499,950
1,499,950
0
-100%
Total Capital Employed
61,499,950
61,499,950
61,499,950
0%
Total Shareholders’ Equity
35,171,206
33,882,026
39,186,557
16%
Return on Equity (ROE)
9.7%
-3.7%
-13%
247%
Return on Capital Employed (ROCE)
5.1%
-2.1%
-7.7%
283%
Shareholders Funding Account
ANFAAL CAPITAL
ANNUAL REPORT 2015
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CORPORATE GOVERNANCE STATEMENT
The Board of Anfaal fully appreciates the importance of adopting high standards of corporate governance
within the Company in order to safeguard stakeholders’ interests as well as enhancing shareholders’ value. The
Board views corporate governance to be synonymous with four key concepts namely; transparency,
accountability, integrity as well as corporate performance.
The Board of Anfaal believes in inculcating a culture that seeks to balance conformance requirements with the
need to deliver long-term strategic success through performance, predicated on entrepreneurship, control and
ownership, without compromising personal or corporate ethics and integrity.
As such, the Board strives to adopt the substance behind corporate governance prescriptions and not merely
the form. The Board is pleased to provide a narrative statement on the application with corporate governance
principles and best practices.
Corporate Governance Requirements
Resolution No. 3-4-2011 dated 23 Jan 2011
1.
Restructure the Board of Directors of the Authorized Person to
include independent members not fewer than two, or, onethird of the members of the Board, whichever is greater
2.
Issuing an Annual Report that includes:
Compliance Commitment Level
Non
Committed
Semi
Committed
Fully
Committed

(a)
Description of key business activities, plans and key decisions
such as restructuring, expansion or suspension of operations;

(b)
Financial results of the Authorized Person and comments
from the external auditors, if any;

(c)
Names of companies which the Board Member is a director,
formation and composition of the Board of Directors and the
classification of its members;

(d)
Brief description of the terms of reference of the Board
Committees, its functions with the names of the chairman
and members, and the number of meetings held;

(e)
Details of remuneration and compensation paid by the
Authorized Person to the Board Members and 5 senior
executives in the Company who received the highest total
remuneration in addition to the CEO and the CFO;

(f)
Any penalty, sanction or reserve restriction imposed on the
Company by the CMA or any other supervisory, judiciary or
regulatory authorities or in other jurisdictions; and

(g)
The results of the annual audit review of the effectiveness of
internal control procedures of the company.

3.
Authorized Person to send a copy of Annual Report to CMA
during the first quarter of the year following the fiscal year
4.
Authorized Persons should establish the governance structure
necessary to develop a code of conduct of corporate
governance to include the following:

(a)
Define procedures and restrictions for the membership of the
Board of Directors of the Authorized Person and the
responsibilities and basic functions;

(b)
Define the authorities of the Board of Directors and the
executive management;

ANFAAL CAPITAL
ANNUAL REPORT 2015
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(c)
Develop the code of conduct for the employees of the
Authorized Person; and

(d)
The formation of oversight committees.

A. DIRECTORS
THE BOARD
The Board plays a pivotal role in the stewardship of the Company’s direction and operations, including
enhancing long-term shareholders’ value. In order to fulfil this role, the Board is explicitly responsible for
reviewing and adopting a strategic plan for business performance; overseeing the proper conduct of the
Company’s business; identifying principal risks and ensuring the implementation of systems to manage risks
and succession planning.
Whilst the Board is responsible for creating the framework and policies within which the Company should be
operating, Management is responsible for instituting compliance with laws, regulations, rules, directives and
guidelines, including the achievement of the Company’s corporate objectives. This demarcation of roles both
complements and reinforces the supervisory role of the Board.
The Board has a formal schedule of matters specifically reserved to it for decision. Such matters include the
overall Company strategy and direction, investment policy, approval for major capital expenditure,
consideration of significant financial matters and monitoring the financial and operating performance of the
Company. This arrangement enables the direction and control of the Company to be firmly in the Board’s hand.
FORMATION OF THE CURRENT BOARD
The Board currently has nine (9) members, comprising three (3) Independent Non-Executive Directors and six
(6) Non-Independent Non-Executive Directors including one (1) vacant position.
The new term of the Board of Directors started on 24 March 2015 for a 3 years period to 23 March 2018. The
new term replaces the Founding Director of Anfaal five years term which expired on 23 March 2015. Out of the
nine (9) incumbent Directors, only one (1) Director had stated the intention not to renew his term as a Board
Member. Ms Nida Raza has been nominated to take up the vacant seat and management is currently compiling
all the required documents for submission to CMA for the approval of her appointment.
The Board ordinarily meets at least four (4) times a year with additional meetings convened when urgent and
important decisions need to be taken between the scheduled meetings. Due notice is given of scheduled
meetings and matters to be dealt with. The agenda for each Board meeting and papers relating to the agenda
items are disseminated to all Directors at least seven (7) days before the meeting, in order to provide sufficient
time for the Directors to review the Board papers and seek clarification, if any.
All proceedings from the Board meetings are minuted and signed by the Chairman of the meeting and all
Directors.
ANFAAL CAPITAL
ANNUAL REPORT 2015
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MEMBERSHIP OF THE BOARD, NUMBER OF MEETINGS HELD IN 2015 AND ATTENDANCE RECORD
Name of Director
Position
Membership
Classification
Attendance
Record
16.02.2015
Meeting
18.05.2015
Meeting
15.09.2015
Meeting
08.12.2015
Meeting
Chairman,
Independent
4/4




Current Members
(1)
1
Saud Al Sabhan
2
Muzaffar Bin Hisham
Non-Executive
3/4



--
3
Alyas Al Meftah
Non-Executive
3/4

--


4
Abdulwahhab Al Dahlawi
Non-Executive
2/4


--
--
5
Farid Arshad Masood
Non-Executive
4/4




6
Mohamad Yasin Abdullah
Non-Executive
4/4




7
Dr. Abubaker Ali Bagabir
Independent
4/4




8
Abdul Hamid Sh Mohamed
Independent
4/4




9
[Vacant]
Non-Executive
1/1

na
na
na
(2)
(3)
Resigned
1
Khalid Al Aboodi
(4)
Note:
(1)
Appointment as Chairman accepted by CMA via Circular dated 31.12.2015
(2)
Resigned subsequent to financial year end. Resignation approved by CMA via Circular dated 1.2.2016
(3)
Ms Nida Raza has been nominated to replace Mr Khalid Al Aboodi during 15.09.2015 BODM. Management is in the
process of compiling the necessary documents for submission to CMA for approval.
(4)
Decline to renew term upon expiry on 23.3.2015.
None of the members of the Board hold an executive position in the Company. None of the members of the
Board have any interest (whether directly or indirectly) in the Company’s business and contracts. None of the
members of the Board participated in any activity which may likely compete with the activities of the Company,
or trade in any branch of the activities carried out by the Company. Anfaal does not grant cash loan whatsoever
to any of its Board members or render guarantee in respect of any loan entered into by a Board member with
third parties, excluding banks and other fiduciary companies.
Non-executive members of the Board are persons of calibre, credibility and have the necessary skill and
experience to bring an independent judgement to bear on the issues of strategy, performance and resources;
including key appointments and standards of conduct. The Chairman of the Board is an independent nonexecutive director and does not hold any position, executive or otherwise, within the controlling shareholders
of the Company.
The next table highlights the directorships held by members of the Board in other Joint Stock Companies, Public
Companies and Financial Institutions.
ANFAAL CAPITAL
ANNUAL REPORT 2015
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BOARD OF DIRECTORS’ MEMBERSHIP IN OTHER JOINT STOCK AND PUBLIC COMPANIES
No
Name of Company
Country of
Incorporation
Classification of Directorship
Executive
Non-Executive
Name : Saud Al Sabhan (Chairman)

1
Future Ceramics Company
Saudi Arabia
2
Umm Al Qura Cement Company
Saudi Arabia


Independent




Name : Abdul Hamid Sh Mohamed

1
Symphony House Berhad
Malaysia
2
SILK Holdings Berhad
Malaysia
3
MMC Corporation Berhad
Malaysia
4
SCOMI Group Berhad
Malaysia

5
POS Malaysia Berhad
Malaysia









BOARD COMMITTEES
The Board has delegated certain responsibilities to the following Board Committees:
Board Committees
Key Functions
Audit, Risk and Compliance Committee
Audit Committee
Compliance Committee
Risk Committee
Executive Committee
Executive Committee
Nomination and Remuneration Committee
Investment Committee
The Committees are required to report to the Board on all their deliberations and recommendations and such
reports are incorporated in the minutes of the Board meeting.
SUPPLY OF INFORMATION
The Chairman undertakes primary responsibility for organising information necessary for the Board to deal
with the agenda and in ensuring that all Directors have full and timely access to the information relevant to
matters that will be deliberated at the Board meeting. The Board is supplied with a comprehensive balance of
financial and non-financial information covering strategic, operational, financial, regulatory and marketing and
human resources issues for informed decision making and effective discharge of its responsibilities.
The Board Committees play a pivotal role in channelling pertinent operational and assurance related issues to
the Board. The Committees partly function as a filter to ensure that only pertinent matters are tabled at the
Board level.
All Directors have full and immediate access to information relating to the Company’s business and affairs in
the discharge of their duties. If the Board is required to take professional advice, in furtherance of their duties,
it would be at the Company’s expense.
ANFAAL CAPITAL
ANNUAL REPORT 2015
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B. RESPONSIBILITIES OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
BOARD OF DIRECTORS
The Board of Directors of the Company is ultimately responsible for the stewardship of the Company. It does
not actively manage but rather oversees the day-to-day management delegated to the CEO and the other
officers of the Company. The principal responsibilities and functions of the Board, among others, is the
following:
1.
2.
3.
4.
5.
6.
Reviewing, approving and supervising the adoption of the strategic plans of the Company;
Reviewing the adequacy and integrity of the Company’s internal control systems including systems for
compliance with applicable laws and regulations and the supervision of it;
Drafting a Corporate Governance Code for the Company, supervising and monitoring in general the
effectiveness of the code and amending it whenever necessary;
Laying down specific and explicit policies, standards and procedures, for the membership of the Board
of Directors and implementing them after they have been approved by the General Assembly;
Outlining a written policy that regulates the relationship with stakeholders with a view to protecting
their respective rights; and
Deciding policies and procedures to ensure the Company’s compliance with the laws and regulations
and the Company’s obligation to disclose material information to shareholders, creditors and other
stakeholders.
Without prejudice to the competences of the General Assembly, the company’s Board of Directors shall
assume all the necessary powers for the Company’s management. The Board may set up Board Committees or
delegate some of its powers to a third party; however, the ultimate responsibility for the Company will still rest
with the Board of Directors.
EXECUTIVE COMMITTEE (EXCOM)
The Executive Committee (EXCOM) is a combination of three committees; i.e. Executive Committee,
Investment Committee and Nomination & Remuneration Committee. It is constituted as a permanent
committee of the Board of Anfaal Capital.
The EXCOM oversees that the Business, Investment & Financial, and the Operational performances of the
Company are in accordance with the approved strategic business plan and budget, and recommends changes
to the Board as appropriate.
The EXCOM periodically reviews and provides views on the overall strategic business direction of the company;
the financial and business performance of the company; and provides necessary advice thereto and where
necessary; and advises the management on the day-to-day management activities of the company to ensure
that the business of the Company is operating effectively for the long term creation of value for shareholders
through financial and non-financial means.
Also, the EXCOM reviews and appraises performance of the investment portfolios and the investment
managers and other investment professionals regularly, to ensure adherence to policy guidelines and to
monitor progress towards achieving investment objectives. Where and when applicable, the committee also
reviews and approves management’s suggested investment strategy for the Company’s own account and any
underwriting exposure, including asset allocation, risk profile, exit strategy, investment horizon and other
relevant considerations.
ANFAAL CAPITAL
ANNUAL REPORT 2015
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The scope of the EXCOM also covers that of a nomination and remuneration committee. EXCOM is responsible
to develop the strategies and policies related to staff recruitment, reward, retention, motivation and career
development.
The EXCOM is chaired by a non-executive member of the Board and all of the members of the committee are
solely responsible to the Board of Directors.
The EXCOM consists of at least three (3) members appointed by the Board, two (2) of which are members of
the Board, or, representatives of the members of the Board. The Board appoints one (1) of the Board members
of the EXCOM to serve as its chairman and the chairman shall generally lead the direction of the EXCOM. The
Board shall have the authority at any time to change the composition of the committee and to fill EXCOM
vacancies. The EXCOM’s recommendations and actions shall be reported to the Board.
The EXCOM held three (3) meetings throughout the financial year ended 31 December 2015.
The EXCOM Chairman may request any other member of management or other outside party to attend
meetings and provide relevant information on the issues to be deliberated at the committee meetings.
MEMBERSHIP OF EXCOM, NUMBER OF MEETINGS HELD IN 2015 AND ATTENDANCE RECORD
Name of Member
Position
Membership
Status
16.02.2015
18.05.2015
10.09.2015
Farid Masood
Chairman
Board Member
3/3



Abdulwahhab Dahlawi
Member
Board Member
2/3




--
Mohamad Yasin Abdullah
Member
Board Member
3/3






Saud Al Sabhan
Member
Board Member
3/3



Attendance
Record
AUDIT, RISK & COMPLIANCE COMMITTEE (ARCO)
Audit, Risk and Compliance Committee or ARCO is a combination of the three committees; ie. Audit
Committee, Risk Committee and Compliance Committee. It is constituted as a permanent committee of the
Board of Anfaal Capital.
The ARCO scope of responsibility covers the following: reviewing the Company’s financial reporting process to
ensure accuracy and sufficient disclosure; developing and maintaining programs that protect from
unanticipated loss by providing systematic risk analysis and developing techniques to reduce potential
exposure to loss; minimizing legal or regulatory risks and to demonstrate the Company’s commitment to follow
all laws and regulations and to maintain the highest ethical standards.
The ARCO consists of at least three (3) members. The members are appointed by the Board.
Members of the ARCO must have at least a Director who has significant financial and business experience.
The majority of the members of the ARCO shall be independent from the management and shall meet the
requirements of the applicable law, rules and regulations.
The Board appoints a member of the committee who is not from the management to serve as its chairman,
who shall generally lead the direction of the ARCO. The Board shall have the authority at any time to change
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 10 -
the membership of the ARCO and to fill vacancies on the Committee. The Committee’s recommendations
and actions shall be reported to the Board.
The ARCO shall meet at least four times in a calendar year to carry out its responsibilities. The Committee
held four (4) meetings throughout the financial year ended 31 December 2015. Meetings may be called by
the Chairman of the ARCO and the Chairman may request any other member of management or other
outside party to attend meetings and provide relevant information on the issues to be deliberated at the
meeting.
MEMBERSHIP OF ARCO, NUMBER OF MEETINGS HELD IN 2015 AND ATTENDANCE RECORD
Abubaker Bagabir
Member
Board Member
Abdul Hamid Sh Mohamad
Member
Board Member
Ayman Bitar
Member
Board
Representative
07.12.2015
Board Member
14.09.2015
Alyas Al Meftah
Chairman
Attendance
Record
12.05.2015
Membership
Status
11.02.2015
Name of Member
Position
4/4














--

4/4
4/4
3/4
C. REMUNERATION & COMPENSATION
BOARD OF DIRECTORS
With effect from the second half of 2015, a fixed sum of SAR 50,000 per year for each Director spread over the
number of meetings in a calendar year. The allowance is payable to a Director that attends the meeting either
physically or via telephone conference call.
However, for Non-Independent Directors an affirmative approval during a properly convened shareholders’
General Assembly with sufficient quorum is required before any payment shall be made.
No remunerations have been paid to Board Members for the financial year 2015, save the meeting allowance
and reimbursed expenses as disclosed in the following table.
TOTAL ANNUAL COMPENSATION PAID FOR FIVE TOP EXECUTIVES INCLUDING CEO AND HEAD OF FINANCE
DURING THE FINANCIAL YEAR
The total annual compensation paid for the five top executives including the CEO and the Head of Finance
during the financial year are also disclosed the following table:
Description
Salaries and compensation
Allowances **
Discretionary Bonus *
Motivational plans
Any compensation and other benefits
in kind paid on a monthly or yearly
basis
Total Payment
Five senior executives including the
CEO and CFO
Non-Executive and Independent
Directors
SAR 3,812,280
-SAR 234,300
--
-SAR 264,135
---
--
--
SAR 4,046,580
SAR 264,135
Note: * Bonus paid in 2015 is in relation to the 2014 financial year; ** including reimbursed expenses claims
ANFAAL CAPITAL
ANNUAL REPORT 2015
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D. PUNISHMENT OR PENALTY IMPOSED BY THE CMA OR ANY OTHER SUPERVISORY, JUDICIAL
OR REGULATORY AUTHORITY IN SAUDI ARABIA OR IN OTHER JURISDICTIONS
The Company has not been imposed any penalty or any punishment by the Capital Market Authority or any
other supervisory, judicial or regulatory authority in Saudi Arabia or in other jurisdictions.
E. CODE OF CONDUCT
Anfaal’s present Code of Conduct (the “Code”) is a statement of Anfaal’s values and ethical standards and
provides the framework for maintaining the highest possible standards of professional conduct. It embodies
not only legal and regulatory requirements, but also the values and ethical standards and Sharia rules to which
Anfaal requires all staff and Directors to adhere.
The foundation of the Code consist of the following basic standards of business and personal conduct:




Honesty and candor in all activities, including observance of the spirit as well the letter of the law;
Avoidance of conflict of interest or even the appearance of conflict of interest between personal interest
and the interests of the Company;
Respect and maintain confidential information obtained in the course of the business;
Maintain reputation and avoid activities which may reflect adversely on Anfaal.
All staff and Directors shall:




Act with integrity, competence, dignity and in an ethical manner when dealing with the public, clients,
prospects, employers, employees and fellow members of the profession;
Practice and encourage others to practice in a professional and ethical manner that will reflect credit on
colleagues and their profession;
Strive to maintain and improve their competence and competence of others in the profession;
Use reasonable care and exercise independent professional judgement.
The Code is accessible by all of Anfaal’s staff. The Code will be distributed to each employee and Director in
booklet form. The Code will be reviewed annually and if required, updates will be made to the Code.
F. THE RESULTS OF THE ANNUAL AUDIT REVIEW OF THE ADEQUACY AND EFFECTIVENESS OF
INTERNAL CONTROL PROCEDURES OF THE COMPANY
The Board is responsible for internal control in Anfaal Capital and for reviewing the adequacy and integrity of
the control system, and its effectiveness. The Board ensures that the Company has appropriate policies and
procedures, financial authority limits, a risk management system, as well as internal audit generally designed
for safeguarding the shareholders’ investment and the Company’s assets against unauthorized use; for
maintaining proper accounting records; and for the reliability and usefulness of financial information used
within the business or for publication. The Board reviews the adequacy and effectiveness of the system of
internal controls through the Audit Committee which oversees the work of the internal auditors and comments
made by the external auditors in their management letter and internal audit reports.
During 2015, a follow up review on the findings from the internal audit work performed by KPMG in 2014 was
done internally to check on the progress whether the internal audit issues found by the internal auditor have
been properly resolved. The findings have been presented to ARCO over the course of 2015 and subsequently
reported to the Board.
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 12 -
G. DIRECTORS’ RESPONSIBILITY STATEMENT
The Board of Directors of the Company confirms:




That in the preparation of the annual accounts, the applicable accounting standards have been followed
and there has been no material departure;
That the financial statement has been prepared correctly in accordance with recognized accounting
standards and in accordance with the Company’s circumstances in conformity with the Company’s
regulations and the Company’s Articles of Association. Also the internal control system has been prepared
on sound principles which were effectively implemented and there is no reasonable doubt regarding the
Company’s capability to carry out its activities;
That the external auditor has given an unqualified opinion on the financial statements; and
That the annual accounts have been prepared on a going concern basis.
The audited financial statements for the year ended 31 December 2015 begins from page 15 and the
independent auditors’ report are on page 16.
H. SHARIAH GOVERNANCE
The Board is aware of the importance of giving comfort to the shareholders and the public that all the business
practices and activities of Anfaal are in compliance with the Sharia at all times. The existence of non-Sharia
compliant element would not just affect the confidence of the shareholders and the public towards Anfaal, but
would also ruin the reputation of Anfaal in the market. The Board is of the opinion that appropriate mechanism
must be in place to ensure the compliance with the Sharia principles. Therefore, the Board has decided to have
a supervisory body to ensure that Anfaal adhere to the Sharia principles and remain at all times Sharia
compliant in all its business deals and activities.
Anfaal has engaged Shariyah Review Bureau W.L.L. (“SRB”), incorporated under the laws of the Kingdom of
Bahrain with Commercial Registration No. 56329 and licensed by the Central Bank of Bahrain under License No
ANC/008, to perform the role of Sharia Advisor. SRB scope of engagement was to provide Sharia consultation,
advisory and Sharia audit services to Anfaal.
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 13 -
SHARIAH SUPERVISORY ANNUAL STATEMENT
This annual statement reflects the compliance of Anfaal Capital with the Shariah principles and guidelines.
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 14 -
ANFAAL CAPITAL
(A Closed Joint Stock Company)
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2015
AND INDEPENDENT AUDITORS' REPORT
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 15 -
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 16 -
ANFAAL CAPITAL
(A Closed Joint Stock Company)
Balance sheet
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 17 -
(All amounts in Saudi Riyals unless otherwise stated)
Note
Assets
Current assets
Cash and cash equivalents
Accounts receivable
Short-term investments (murabaha investments)
Investment - held for trading
Prepayments and other receivables
Non-current assets
Available-for-sale investment
Property and equipment
Intangible assets (software)
4
5
15
6
7
8
9
Total assets
Liabilities
Current liabilities
Subordinated loans
Accounts payable
Accrued and other liabilities
Zakat and income tax payable
Non-current liabilities
Employee termination benefits
15
10
11
12
Total liabilities
Shareholders’ equity
Share capital
Shareholders’ funding account
Fair value reserve
Accumulated losses
Total shareholders’ equity
13
15
7
Total liabilities and shareholders’ equity
Commitments
As at December 31,
2015
2014
15,660,269
5,545,206
445,725
38,196
885,868
22,575,264
27,800,617
16,590,067
1,351,299
45,741,983
19,127,300
963,494
50,934
20,141,728
1,159,347
4,093
1,163,440
42,716,992
46,905,423
52,228
1,925,986
487,104
2,465,318
10,000,000
94,271
1,250,881
868,979
12,214,131
1,065,117
809,266
3,530,435
13,023,397
61,499,950
36,121
(22,349,514)
39,186,557
50,000,000
1,499,950
(17,617,924)
33,882,026
42,716,992
46,905,423
21
The notes on pages 21 to 32 form an integral part of these financial statements.
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 18 -
ANFAAL CAPITAL
(A Closed Joint Stock Company)
Income statement
(All amounts in Saudi Riyals unless otherwise stated)
Year ended December 31,
2015
2014
Note
Revenues
Management and other related fees
Arrangement fee and advisory services
Total revenues
Expenses
Salaries and other benefits
Rent
Professional and consultant fees
Travel
Depreciation and amortization
Provision for doubtful debts
Other expenses
Total expenses
15
21
15
8, 9
5, 6
16
10,364,305
567,730
2,740,647
682,348
321,541
534,109
782,341
15,993,021
9,514,462
476,667
1,725,363
700,593
275,240
871,151
13,563,476
319,719
53,822
71,314
15
Net loss for the year
Loss per share:
From operating loss
From net loss
11,000,000
1,725,000
12,725,000
(4,926,555)
Loss from operations
Other income
Investment income
Financial income
Other
11,006,466
60,000
11,066,466
(4,481,700)
(838,476)
181,061
(657,415)
18
(0.80)
(0.73)
(0.14)
(0.11)
The notes on pages 21 to 32 form an integral part of these financial statements.
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 19 -
ANFAAL CAPITAL
(A Closed Joint Stock Company)
Cash flow statement
(All amounts in Saudi Riyals unless otherwise stated)
Year ended December 31,
2015
2014
Note
Cash flow from operating activities
Net loss for the year
Adjustments for non-cash items
Provision for doubtful debts
Depreciation and amortization
Employee termination benefits provision
Accrued income on short-term investment
Management fee earned in form of units of a fund
Changes in working capital
Accounts receivable
Prepayments and other receivables
Accounts payable
Accrued and other liabilities
Employee termination benefits paid
Net cash generated from / (utilized in) operating activities
Cash flow from investing activities
Available-for-sale investment
Short-term investment
Accrued income on short-term investment
Investment - held for trading
Purchase of property and equipment
Additions to intangible assets
Net cash (utilized in) / generated from investing activities
Cash flow from financing activity
Zakat and income tax paid
Cash utilized in financing activity
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
Supplementary information for non-cash transactions
Subordinated loan converted to share capital
Shareholders’ funding account converted to share capital
Unrealized gain on available-for-sale investment
Zakat and income tax charged to shareholders’ equity
accounts
(4,481,700)
534,109
321,541
368,554
(26,598)
(6,460)
5, 6
8, 9
12
7
12
7
8
9
13, 15
13, 15
7
275,240
362,410
-
10,982,361
20,420
(42,043)
675,105
(112,703)
8,232,586
(11,417,371)
(507,970)
(18,701)
448,975
(50,000)
(11,564,832)
(19,084,719)
(445,725)
(38,196)
(105,729)
(66,800)
(19,741,169)
30,000,000
1,099,268
(128,732)
(4,210)
30,966,326
(631,765)
(631,765)
(808,294)
(808,294)
11
4
(657,415)
(12,140,348)
27,800,617
15,660,269
18,593,200
9,207,417
27,800,617
10,000,000
1,499,950
36,121
-
249,890
631,765
11
The notes on pages 21 to 32 form an integral part of these financial statements.
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 20 -
ANFAAL CAPITAL
(A Closed Joint Stock Company)
Statement of changes in shareholders’ equity
(All amounts in Saudi Riyals unless otherwise stated)
Saudi
shareholders
Foreign
shareholder
Total
32,415,010
17,584,990
50,000,000
6,400,000
3,600,000
10,000,000
959,950
39,774,960
540,000
21,724,990
1,499,950
61,499,950
959,950
540,000
1,499,950
15
(959,950)
-
(540,000)
-
(1,499,950)
-
7
23,361
23,361
12,760
12,760
Note
Share capital
January 1, 2014 and December 31, 2014
Conversion of subordinated loans to share
capital
Conversion of shareholders' funding account
to share capital
December 31, 2015
Shareholders’ funding account
January 1, 2014 and December 31, 2014
Conversion of shareholders' funding account
to share capital
December 31, 2015
Fair value reserve
January 1, 2014 and December 31, 2014
Unrealized gain during the year
December 31, 2015
Accumulated losses
January 1, 2014
Net loss for the year
Zakat
December 31, 2014
Net loss for the year
Zakat
13
36,121
36,121
(14,098,134)
(426,202)
(631,765)
(15,156,101)
(2,903,514)
(249,890)
(18,309,505)
(2,230,610)
(231,213)
(2,461,823)
(1,578,186)
(4,040,009)
(16,328,744)
(657,415)
(631,765)
(17,617,924)
(4,481,700)
(249,890)
(22,349,514)
Total shareholders’ equity
December 31, 2015
21,488,816
17,697,741
39,186,557
December 31, 2014
18,218,859
15,663,167
33,882,026
December 31, 2015
11.2
11.2
The notes on pages 21 to 32 form an integral part of these financial statements.
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 21 -
1
General information
Anfaal Capital (the "Company") is a Closed Joint Stock Company incorporated on February 24, 2010 through
ministerial resolution and commenced its business from the date of ministerial resolution No.122 dated March 23,
2010 announcing the incorporation of the Company. The Company is involved in the business of Managing,
Custody, Advising and Arranging of securities. The Company is an Authorized Person by Capital Market Authority
(“CMA”) of Saudi Arabia (License No. 09140-36) and the Saudi Arabian General Investment Authority (License
No. 112031016038-01). During the year 2014, the Company obtained a conditional approval from CMA to add
Dealing as Principal as part of its licensed activities. The Company was in the process of completing all the
conditions to get the final license from CMA. During the year 2015, the Company obtained the final license from
st
CMA. The registered address of the Company is P.O. Box 126575, 1 floor Aster Center, Al Khaldiyah District,
Prince Mohammed bin Abdulaziz Road, Jeddah 21352, Kingdom of Saudi Arabia.
As explained in Note 3.6 to the financial statements, the Company is a fund manager of Alfareeda Residential
Fund (the “Fund”) and majority of the Company's revenue for the years ended December 31, 2015 and 2014 by
way of management and other related fees are from the Fund. Accordingly, the Company’s operations currently
are largely dependent on the Fund.
2
Summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below.
2.1
Basis of preparation
The financial statements have been prepared under the historical cost convention on the accrual basis of
accounting, as modified by the revaluation of available-for-sale investment and held for trading investment to fair
value and in compliance with accounting standards promulgated by Saudi Organization for Certified Public
Accountants.
2.2
Critical accounting estimates and judgments
The preparation of financial statements in conformity with generally accepted accounting principles requires the
use of certain critical estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the reporting date and the reported amounts of revenues and
expenses during the reporting period. Estimates and judgments are continually evaluated and are based on
historical experience and other factors, including expectations of future events that are believed to be reasonable
under the circumstances. The Company makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual results.
2.3
Foreign currency translations
(a)
Reporting currency
The financial statements of the Company are presented in Saudi Riyals which is the reporting currency of the
Company.
(b)
Transactions and balances
Foreign currency transactions are translated into Saudi Riyals using the exchange rates prevailing at the dates of
the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from
the translation at the year-end exchange rates of monetary assets and liabilities denominated in foreign currencies
are recognized in the income statement. Such exchange adjustments were not significant for the years presented.
2.4
Cash and cash equivalents
Cash and cash equivalents include cash in hand and with banks and other short-term highly liquid investments
with maturities of three months or less from the purchase date.
2.5
Short-term investment
Short-term investment represents placements (murabaha investments) with original maturities of more than three
months but not more than one year from the purchase date.
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 22 -
2
Summary of significant accounting policies (continued)
2.6
Accounts receivable
Accounts receivable are carried at original invoice amount less provision for doubtful accounts. A provision
against doubtful accounts is established when there is objective evidence that the Company will not be able to
collect all amounts due according to the original terms of the receivables. Such provisions are charged to income
statement. When an account receivable is uncollectible, it is written-off against the provision for doubtful accounts.
Any subsequent recoveries of amounts previously written-off are credited in the income statement.
2.7
Investments
(a)
Available-for-sale investment
Available-for-sale investments principally consist of equity investments in certain quoted/unquoted investments.
The investments are classified in available-for-sale category when the Company does not have control or
significant influence over the investee and the investments are not held for regular sale and purchase. These
investments are included in non-current assets unless management intends to sell such investments within twelve
months from the balance sheet date. These investments are initially recognized at cost and are subsequently remeasured at fair value at each reporting date as follows:
(i)
(ii)
(iii)
Fair values of quoted securities are based on available market prices at the reporting date adjusted for any
restriction on the transfer or sale of such investments; and
Fair values of unquoted securities are based on a reasonable estimate determined by reference to the
current market value of other similar quoted investment securities or is based on the expected discounted
cash flows. In the absence of such information and indication of impairment, cost is deemed to be the fair
value.
Fair value of investment in mutual funds is based on net assets value determined by the Fund Manager.
Cumulative adjustments arising from revaluation of these investments are reported as separate component of
equity as fair value reserve until the investment is disposed.
(b)
Held for trading
Held for trading investments are initially measured at fair value, with transaction costs directly recognized in the
income statement. They are subsequently measured at fair value with changes in fair value directly recognized in
the income statement.
2.8
Property and equipment
Property and equipment are carried at cost less accumulated depreciation. Depreciation is charged to the income
statement, using the straight-line method, to allocate the costs of the related assets to their residual values over
the following estimated useful lives:
Number of years




Furniture and fixtures
Leasehold improvements
Computers and accessories
Office equipment
5
7
3
5
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in
the income statement.
Maintenance and normal repairs which do not materially extend the estimated useful life of an asset are charged
to the income statement as and when incurred. Major renewals and improvements, if any, are capitalized and the
assets so replaced are retired.
2.9
Intangible assets
Intangible assets are carried at cost less accumulated amortization. Expenditure to acquire intangible assets
having future benefits is capitalized and amortized using the straight-line method over their useful lives. The
Company’s intangible assets comprise of computer software that is amortised over 3 years.
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 23 -
2
Summary of significant accounting policies (continued)
2.10
Impairment
(a)
Financial assets
An assessment is made at each balance sheet date to determine whether there is objective evidence that a
specific financial asset may be impaired. If such evidence exists, any impairment loss is recognized in the income
statement. Impairment is determined as follows:
(i)
(ii)
b)
For available-for-sale financial assets carried at fair value, other than temporary decline in the fair value
below cost less any impairment loss on that financial asset previously recognised in profit or loss is
removed from equity and recognised in the income statement.
For assets carried at cost or amortized cost, impairment is the difference between carrying value and the
present value of future cash flows (excluding future credit losses that have not been incurred) discounted
at the financial asset's original effective interest rate.
Non-financial assets
Non-financial assets (other than goodwill) are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. Goodwill, if any, is tested for impairment
annually. An impairment loss is recognized for the amount by which the carrying amount of the asset exceeds its
recoverable amount which is the higher of an asset’s fair value less cost to sell and value in use. For the purpose
of assessing impairment, assets are grouped at lowest levels for which there are separately identifiable cash
flows (cash-generating units). Non-financial assets other than intangible assets (goodwill) that suffered
impairment are reviewed for possible reversal of impairment at each reporting date. Where an impairment loss
subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised
estimate of its recoverable amount, but the increased carrying amount should not exceed the carrying amount
that would have been determined, had no impairment loss been recognized for the assets or cash-generating unit
in prior years. A reversal of an impairment loss is recognized as income immediately in the income statement.
Impairment losses recognized on intangible assets (goodwill) are not reversible.
2.11
Accounts payable and accruals
Liabilities are recognized for amounts to be paid for goods and services received, whether or not billed to the
Company.
2.12
Provisions
Provisions are recognized when; the Company has a present legal or constructive obligation as a result of a past
event; it is probable that an outflow of resources will be required to settle the obligation; and the amount can be
reliably estimated.
2.13
Zakat and taxes
In accordance with the regulations of the Department of Zakat and Income Tax (“DZIT”), the Company is subject
to zakat attributable to the Saudi shareholders and to income taxes attributable to the foreign shareholder.
Provisions for zakat and income taxes are charged to the equity accounts of the Saudi and the foreign
shareholders, respectively. Additional amounts payable, if any, at the finalization of final assessments are
accounted for when such amounts are determined.
Deferred income taxes are recognized on all major temporary differences between financial income and taxable
income during the period in which such differences arise, and are adjusted when related temporary differences
are reversed. Deferred income tax assets on carry forward losses are recognized to the extent that it is probable
that future taxable income will be available against which such carry-forward tax losses can be utilized. Deferred
income taxes are determined using tax rates which have been enacted by the balance sheet date and are
expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is
settled. Deferred income tax asset arising out of such temporary differences and on carry forward tax losses were
not recorded as of December 31, 2015 and 2014 as the recovery of such asset is not probable in the near future.
The Company withholds taxes on certain transactions with non-resident parties in the Kingdom of Saudi Arabia as
required under Saudi Arabian Income Tax Law.
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 24 -
2
Summary of significant accounting policies (continued)
2.14
Employee termination benefits
Employee termination benefits required by Saudi Labor and Workman Law are accrued by the Company and
charged to the income statement. The liability is calculated at the current value of the vested benefits to which the
employee is entitled, should the employee leave at the balance sheet date. Termination payments are based on
employees’ final salaries and allowances and their cumulative years of service, as stated in the laws of Saudi Arabia.
2.15
Borrowings
Borrowings are recognized at the proceeds received, net of transaction costs incurred, if any. Borrowing costs
are charged to the income statement.
2.16
Revenues
Revenues are recognized on the performance of the service based on the contractual terms. Arrangement and
management fee is recognized based on contractual terms and conditions as agreed with counter parties.
2.17
General and administrative expenses
General and administrative expenses include direct and indirect costs not specifically part of costs of revenues as
required under generally accepted accounting principles.
2.18
Operating leases
Rental expenses under operating leases are charged to income statement over the period of the respective lease.
2.19
Segment reporting
The Company does not have any business or other geographical segments. Accordingly, the disclosures related
to segment reporting are not required.
3
Financial instruments and risk management
The Company’s activities expose it to a variety of financial risks: market risk (including currency risk and cash flow
interest rate risks and price risk), credit risk and liquidity risk. The Company’s overall risk management program
focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the
Company’s financial performance.
Risk management is carried out by senior management under policies approved by the board of directors. The
most important types of risk is credit risk.
Financial instruments carried on the balance sheet include cash and cash equivalents, short-term investment,
accounts receivable, investment - held for trading, accrued income, other receivable, available-for-sale
investment, accounts payable, accrued and other liabilities and subordinated loans from shareholders. The
particular recognition methods adopted are disclosed in the individual policy statements associated with each
item.
Financial asset and liability are offset and net amounts reported in the financial statements, when the Company
has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis, or to
realize the asset and liability simultaneously.
3.1
Currency risk
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange
rates. The Company’s transactions are principally in Saudi Riyals and US Dollars. Since Saudi Riyal is pegged
with US Dollar, there is no significant currency exchange exposure to the Company.
3.2
Cash flow interest rate risks
Cash flow interest rate risk is the exposure to various risks associated with the effect of fluctuations in the
prevailing interest rates on the Company’s financial positions and cash flows. The Company’s management
monitors such exposures and believes the exposure is not significant to the Company. As of December 31, 2015
the Company is not exposed to cash flow interest rate risk.
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 25 -
3
Financial instruments and risk management (continued)
3.3
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. Cash is placed with banks with sound credit ratings. Accounts receivable, principally
due from related parties are carried net of provision for doubtful accounts.
3.4
Liquidity risk
Liquidity risk is the risk that an enterprise will encounter difficulty in raising funds to meet commitments associated
with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at an amount
close to its fair value. Liquidity risk is managed by monitoring on a regular basis that sufficient funds are available
to meet any future commitments.
3.5
Price risk
The risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether
those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all
instruments traded in the market. The Company is not exposed to any significant equity securities price risk.
3.6
Client risk
The Company is a fund manager of Alfareeda Residential Fund (the “Fund”) and majority of the Company's
revenue for the years ended December 31, 2015 and 2014 by way of management and other related fees and
receivable balances at December 31, 2015 and 2014, are from the Fund. Accordingly, the Company’s operations
currently are largely dependent on the Fund.
3.7
Fair value
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. Management believes that the fair values of the Company’s financial
assets and liabilities are not materially different from their carrying values.
4
Cash and cash equivalents
2015
2014
5,660,269
10,000,000
27,800,617
-
15,660,269
27,800,617
Note
2015
2014
15.2
5,607,706
-
16,360,067
230,000
5,607,706
(62,500)
16,590,067
-
5,545,206
16,590,067
2015
2014
62,500
62,500
-
Cash at bank
Short-term investment (Time deposit)
Short-term investment earn profit at prevailing market rates.
5
Accounts receivable
Related parties
Others
Less: provision for doubtful debts
Movement in provision for doubtful debts is as follows:
January 1
Addition
December 31
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 26 -
6
Prepayments and other receivables
Note
Security deposits
Prepaid insurance
Cost recoverable from funds under incorporation
Other prepayments
Advances to employees
Prepaid rent
Accrued income
Other receivable
15.2
Less: Provision against cost recoverable from funds under
incorporation
7
2015
2014
239,930
110,761
481,609
174,012
199,359
80,667
26,598
44,541
1,357,477
246,180
105,729
481,609
138,746
298,369
80,666
1,351,299
(471,609)
885,868
1,351,299
Available-for-sale investment
During October 2015, the Company launched Maysarah Money Market Fund (Fund). The Company is the
manager and custodian of the Fund. See also Note 17. The Fund is a Shariah compliant open-ended money
market fund. As at December 31, 2015, it represents 100% (2014: Nil) ownership interest in the Fund. The target
capitalization of the Fund is US Dollars 100 million (equivalent to Saudi Riyals 375 million). The above capital will
be raised by the Company in its capacity as the Fund Manager by issuing units to the new investors.
The movement in available-for-sale investment for the year ended December 31 is as follows:
2015
January 1
Addition
Unrealised gain recognized
Fee earned in form of units
December 31
8
19,084,719
36,121
6,460
19,127,300
Property and equipment
Cost
Furniture and fixtures
Leasehold improvements
Computers and accessories
Office equipment
Accumulated depreciation
Furniture and fixtures
Leasehold improvements
Computers and accessories
Office equipment
January 1,
2015
Additions
December 31,
2015
416,242
955,165
1,032,236
45,366
2,449,009
4,500
8,700
82,529
10,000
105,729
420,742
963,865
1,114,765
55,366
2,554,738
(130,803)
(216,050)
(905,429)
(37,380)
(1,289,662)
1,159,347
(83,847)
(137,281)
(74,987)
(5,467)
(301,582)
(214,650)
(353,331)
(980,416)
(42,847)
(1,591,244)
963,494
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 27 -
8
Property and equipment (continued)
Cost
Furniture and fixtures
Leasehold improvements
Computers and accessories
Office equipment
Accumulated depreciation
Furniture and fixtures
Leasehold improvements
Computers and accessories
Office equipment
9
January 1,
2014
Additions
416,242
955,165
903,504
45,366
2,320,277
128,732
128,732
416,242
955,165
1,032,236
45,366
2,449,009
(47,554)
(79,598)
(861,481)
(28,307)
(1,016,940)
1,303,337
(83,249)
(136,452)
(43,948)
(9,073)
(272,722)
(130,803)
(216,050)
(905,429)
(37,380)
(1,289,662)
1,159,347
Intangible assets (software)
Cost
January 1
Additions
December 31
Accumulated amortization
January 1
Additions
December 31
Net book value at December 31
10
2015
2014
410,939
66,800
477,739
406,729
4,210
410,939
(406,846)
(19,959)
(426,805)
50,934
(404,328)
(2,518)
(406,846)
4,093
Accrued and other liabilities
Note
Employee payables
Service level agreements
Accrued expenses
Commission
11
December 31,
2014
15.2
2015
2014
643,423
876,000
406,563
1,925,986
593,946
296,935
360,000
1,250,881
Zakat and income tax matters
11.1
Components of zakat base
The significant components of the zakat base of the Company attributable to the Saudi shareholders, which are
subject to adjustment under zakat and income tax regulations, are as follows:
2015
2014
Share capital at beginning of the year
Increase in share capital
Available-for-sale investment
Fair value reserve
Provisions at beginning of the year less paid
Property and equipment, as adjusted
Zakat base of the Company
Saudi shareholders share of zakat base at 64.67478%
Adjusted net loss for the year attributable to Saudi shareholders
Subordinated loans from Saudi shareholders
Saudi shareholders' funding account
Saudi shareholders share in beginning accumulated loss
Zakat provision
Adjusted zakat base attributable to Saudi shareholders
50,000,000
11,499,950
(19,127,300)
36,121
696,563
(1,112,346)
41,992,988
27,158,873
(2,243,521)
(15,156,101)
236,332
9,995,583
50,000,000
496,856
(1,148,394)
49,348,462
31,992,618
(220,176)
6,400,000
959,950
(14,098,134)
236,332
25,270,590
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 28 -
11
Zakat and income tax matters (continued)
Zakat is payable at 2.5 percent of the zakat base attributable to the Saudi shareholders. Certain adjustments
under income tax and zakat regulations are made to arrive at the adjusted net loss for the year.
11.2
Provision for zakat and income taxes
Zakat
January 1, 2015
Provision
Payments
December 31, 2015
868,097
249,890
(631,765)
486,222
January 1, 2014
Provision
Payments
December 31, 2014
891,961
631,765
(655,629)
868,097
Income
taxes
Total
882
882
868,979
249,890
(631,765)
487,104
153,547
(152,665)
882
1,045,508
631,765
(808,294)
868,979
Income tax is calculated at 20% of the adjusted net income attributable to the foreign shareholder adjusted for
carry forward losses to the extent of 25% of adjusted net income attributable to the foreign shareholder. No
provision for income tax is made as the Company has adjusted net loss for the year.
11.3
Status of final assessments
The Company filed the zakat and tax return for the long period ended December 31, 2011 and for each of the
years ended December 31, 2012 to 2015, and obtained the unrestricted zakat and tax certificates. The Company
has not received any assessment from DZIT for such period / years.
11.4
Temporary and permanent differences
2015
Net loss for the year
Temporary differences:
- Provision for doubtful debts
- Depreciation
- Employee termination benefits
Permanent differences:
- Repairs and maintenance
- Other
Adjusted net loss for the year
12
(4,481,700)
534,109
38,001
368,554
59,916
20,000
(3,461,120)
2014
(657,415)
(28,105)
312,410
13,060
20,429
(339,621)
Employee termination benefits
2015
2014
January 1
809,266
496,856
Provision
368,554
362,410
Payments
December 31
(112,703)
1,065,117
(50,000)
809,266
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 29 -
13
Share capital
The share capital of the Company as of December 31, 2015 was comprised of 6,149,995 (2014: 5,000,000)
shares stated at Saudi Riyals 10 per share owned as follows:
Shareholder
Nationality
2015
2014
Islamic Corporation for the Development of Private
Sector (ICD)
Maybank Investment Bank Berhad (MIB)
Saudi Arabia
Malaysia
37.67481%
35.32522%
37.82998%
35.16998%
Alnumu Real Estate Company Limited (AREC)
Saudi Arabia
0.00003%
0.00004%
Mr. Abed Abdulrasool Abdulnabi AlZeera
Bahrain
17.99993%
18.00000%
Mr. Khalid Mohamed Nasser Al-Aboodi
Saudi Arabia
9.00001%
9.00000%
100%
100%
During 2015, subordinated loans and shareholders’ funding account totaling to Saudi Riyals 11,499,950 were
converted into share capital (see Note 15.2). Legal formalities for such transfers were completed during 2015.
14
Statutory reserve
In accordance with the Regulations for Companies in the Kingdom of Saudi Arabia, the Company transfer 10% of
the net income for the year to a statutory reserve, after absorbing the accumulated losses, until such reserve
equals 50% of its share capital. No transfer has been made to the statutory reserve due to accumulated losses.
15
Related party matters
15.1
Related party transactions
Significant transactions with related parties in the ordinary course of business included in the financial statements
are summarized below:
2015
2014
Management and other related fees
Professional and consultant fees
Arrangement fee and advisory services
Financial income
Investment income
15.2
11,006,466
876,000
319,719
11,000,000
1,062,500
56,436
-
Related party balances
Significant year end balances arising from transactions with related parties are as follows:
(i)
Receivable from related parties
ICD (for services rendered)
Alfareeda Residential Fund
Ewaan Global Residential Company (“Ewaan Global”)
(ii)
2015
2014
5,545,206
62,500
5,607,706
2,400,000
13,772,567
187,500
16,360,067
2015
2014
287,634
183,975
471,609
287,634
183,975
471,609
Prepayments and other receivables
Costs recoverable from funds under incorporation include:
Sawari Real Estate Company
Ewaan Global
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 30 -
15
Related party matters (continued)
(iii)
Subordinated loans from shareholders
ICD
MIB
Mr. Abed Abdulrasool Abdulnabi AlZeera
Mr. Khalid Mohamed Nasser Al-Aboodi
(iv)
2014
-
3,700,000
3,600,000
1,800,000
900,000
10,000,000
2015
2014
-
555,000
540,000
269,950
135,000
1,499,950
2015
2014
444,000
432,000
876,000
-
Shareholders’ funding account
ICD
MIB
Mr. Abed Abdulrasool Abdulnabi AlZeera
Mr. Khalid Mohamed Nasser Al-Aboodi
(v)
2015
Accrued and other liabilities
ICD
MIB
These are payable for various consultancy services obtained from the shareholders or their affiliated entities
during the year. These are included in professional expenses.
16
Other expenses
Note
Subscription and registration fees
Information technology
Insurance
Utilities
Printing and publication
Cleaning and refreshments
Repairs and maintenance
Equipment rent
Marketing
Miscellaneous
17
2015
2014
288,545
200,932
63,520
63,127
32,683
28,750
13,984
13,197
77,603
782,341
324,035
103,027
60,671
27,842
28,450
9,974
13,374
131,280
172,498
871,151
Assets under management
Assets held in trust or in a fiduciary capacity are not treated as assets of the Company and, accordingly, are not
included in the Company’s financial statements.
a)
Alfareeda Residential Fund
The assets under management outstanding at the end of the year for a real estate mutual fund amounted to
Saudi Riyals 462.7 million (2014: Saudi Riyals 496.4 million) and market value at December 31, 2015 amounted
to Saudi Riyals 612.7 million (2014: Saudi Riyals 668.83 million).
b)
Maysarah Money Market Fund
The assets under management outstanding at the end of the year for a money market fund amounted to Saudi
Riyals 19.1 million (2014: Nil).
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 31 -
18
Loss per share
Loss per share for the year ended December 31, 2015 have been computed by dividing the operating and net
loss by weighted average number of shares outstanding during the year.
Loss per share for the year ended December 31, 2014 have been computed by dividing the operating and net
loss by 6,149,995 shares to give a retrospective effect of the change in the number of shares which increased as
a result of increase in share capital as described in Note 13.
19
Capital base, minimum capital and capital adequacy
The Capital Base, Minimum Capital and Capital Adequacy of the Company as per Pillar I of the Prudential Rules
are as follows:
As at December 31,
2015
2014
Capital Base:
39,099,502
Tier 1 Capital
33,877,933
Tier 2 Capital
Total Capital Base
39,099,502
33,877,933
Minimum Capital Requirement:
Market Risk
Credit Risk
Operational Risk
Total Minimum Capital Required
Capital Adequacy Ratio:
7,000
15,326,000
3,998,255
19,331,255
18,042,000
3,390,869
21,432,869
Total Capital Ratio (time)
2.02
1.6
Tier 1 Capital Ratio (time)
2.02
1.6
19,768,247
12,445,064
Surplus in Capital
20
i)
The Capital Base consists of Tier 1 Capital (which includes share capital, Shareholders’ funding account
and accumulated losses) as per Article 4 and 5 of the Prudential Rules. The minimum capital requirements
for market, credit and operational risk are calculated as per the requirements specified in Part 3 of the
Prudential Rules.
ii)
The Company manages the capital base in the light of Pillar I of the Prudential Rules - the capital base
should not be less than minimum capital requirement and company internal capital adequacy assessment
process.
iii)
The Company’s business objectives when managing capital adequacy is to comply with the capital
requirements set forth by the CMA to safeguard the Company’s ability to continue as a going concern, and
to maintain a strong capital base.
Application of authorized persons regulations
At December 31, 2015, the Company was not holding any of the clients’ cash accounts. Accordingly, Part Seven
"Client Money and Assets", Chapter Two "Client Money Rules" of the Authorized Persons Regulations issued by
the Capital Market Authority is not applicable to the Company.
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 32 -
21
Operating leases
The Company has its office space under an operating lease. Rental expense for the year ended December 31,
2015 amounted to Saudi Riyals 567,730 (2014: Saudi Riyals 476,667). Future rental commitments at December
31 are as follows:
Years ending December 31:
2015
2016
2017
2018
2019
2020
2021
22
2015
2014
564,667
580,800
580,800
580,800
580,800
96,800
2,984,667
403,333
80,667
484,000
Approval of financial statements
The financial statements were authorized for issue by the Company’s Board of Directors on _________, 2016.
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 33 -
PILLAR-3 DISCLOSURE
As at 31 December 2015
CONTENTS
Page
OVERVIEW
34
SPECIFIC DISCLOSURE REQUIREMENT
35
1.
SCOPE OF APPLICATION
35
2.
CAPITAL STRUCTURE
35
3.
2.1
Overview of Capital Structure
2.2
Disclosure of Capital Base
CAPITAL ADEQUACY
36
3.1 Capital Management Strategy
3.2 Overview of ICAAP
4.
3.2.1
Governance and Oversight
3.2.2
Sound Capital Management
3.2.3
Comprehensive Assessment of Risk
3.2.4
Monitoring and Reporting
3.2.5
Internal Control Review
RISK MANAGEMENT
40
4.1 Risk Management Framework
4.2 Credit Risk Disclosure
4.2.1
Credit Risk Mitigation
4.2.2
Credit Risk Disclosure and Credit Risk Concentration
4.3 Counterparty Credit Risk (“CCR”) and Off Balance Sheet Disclosure
4.4 Market Risk Disclosure
4.5 Operational Risk Disclosure
4.6 Liquidity Risk Disclosure
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 34 -
OVERVIEW
1
The Pillar-3 Disclosure is the annual market disclosure of information as referred to by the Article 68 of
the Prudential Rules (“PR”) to be published by all the Authorised Persons (“AP”) licensed for the
Dealing, Managing and or Custody activities.
2
The purpose of Pillar-3 Disclosure is for the market participants to assess the key pieces of information
on the scope of application, capital, risk exposures, risk assessment processes, and hence the capital
adequacy of the AP.
3
Pillar-3 Disclosure comprises both qualitative and quantitative disclosures.
4
The Pillar-3 Disclosures contained herein relate to the Audited Financial Statement of Anfaal Capital
for the year ended 31 December 2015.
5
The information provided herein has been reviewed by the Audit, Risk & Compliance Committee
(“ARCO”) of Anfaal Capital, hereafter referred to “Anfaal” or “the Company”, and approved for public
disclosure by the Board of Directors (“BOD”) of the Company.
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 35 -
SPECIFIC DISCLOSURE REQUIREMENTS
1.
SCOPE OF APPLICATION
The Pillar-3 Disclosure is prepared for Anfaal, a Closed Joint Stock Company incorporated on 24 February
2010. Anfaal is an Authorised Person licensed by the Capital Market Authority of Saudi Arabia (License No.
14180-37) and the Saudi Arabian General Investment Authority (License No. 112031016038-01). General
information about Anfaal is available in Note 1 to the Audited Financial Statement.
Anfaal is not part of a financial group as defined in the Prudential Rules. Hence, the requirement to
disclose if there were any current or foreseen material, or, legal impediments to the prompt transfer of
capital or repayment of liabilities for AP that is part of a financial group is not applicable.
2.
CAPITAL STRUCTURE
2.1 OVERVIEW OF CAPITAL STRUCTURE
The capital items and component of Anfaal are disclosed in the Balance Sheet and the accompanying
notes to the Audited Financial Statements.
2.2 DISCLOSURE ON CAPITAL BASE
The following Table 1 presents the Capital Base of the Company as at 31 December 2015.
Table 1: Capital Base
SAR '000
Tier-1 Capital
Paid-Up Capital
Audited Retained Earnings
61,500
(17,618)
Share Premium
-
Reserves (Other Than Revaluation Reserves)
-
Tier-1 Capital Contribution
-
Deductions From Tier-1 Capital
(4,782)
Total Tier-1 Capital
39,100
Tier-2 Capital
Subordinated Loans
-
Cumulative Preference Shares
-
Revaluation Reserves
-
Other Deductions From Tier-2 (-)
-
Deduction To Meet Tier-2 Capital Limit (-)
-
Total Tier-2 Capital
-
TOTAL CAPITAL BASE
39,100
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 36 -
3.
CAPITAL ADEQUACY
3.1 Capital Management Strategy
Capital management is an integral part of the decision making processes, in which capital adequacy
among others is being considered.
Capital management entails evaluation of options and strategies to implement the capital adequacy
plan. This would involve evaluating options and proposing initiatives, methodologies, tools and
instruments that will achieve the following objectives:
a) optimize capital levels
b) reduce capital wastages
c) minimize cost of capital
The Management has put in place a capital management strategy that has been defined by the BOD
and planned at the business sectors, taking into account the planned strategies, regulatory capital
requirements, internal capital requirements, management actions on capital raising or capital
optimization (if applicable), dividend payout strategy (if applicable), Internal Capital Adequacy
Assessment Process (“ICAAP”), and stress testing.
3.2 Overview of ICAAP
ICAAP describes the process for assessing overall capital adequacy in relation to the Company’s risk
profile and business environment, and a strategy for maintaining its internal capital targets.
The 5 elements of ICAAP and the processes under each elements are summarized below:
Internal Capital Adequacy Assessment
Process
Governance
and Oversight
3.2.1
Sound Capital
Assessment
Comprehensive
Assessment of
Risk
Monitoring and
Reporting
Internal Control
Review
Governance and Oversight
a)
Board of Directors
The Board of Directors of Anfaal is responsible in ensuring that the Company maintains
an appropriate level of quality capital for its risk profile and operating environment.
b) Audit, Risk and Compliance Committee (“ARCO”)
ARCO shall review Anfaal’s ICAAP implementation and reporting, as delegated from the
BOD.
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 37 -
c)
3.2.2
The Management of Anfaal
The Management is responsible for the development, documentation and effective
implementation of ICAAP as approved by the BOD.
Sound Capital Assessment
In order to do the assessment, Anfaal needs to have a comprehensive Capital Management
Strategy which has been briefly described in the previous section. A Capital Management Plan
shall be formulated and shall consist of the information below:
a)
b)
c)
d)
e)
f)
g)
h)
i)
3.2.3
Objectives of capital management and planning;
Key capital drivers;
Regulatory updates on capital related matters;
Business plan/capital projection for at least 3 years horizon
Projected capital requirement for at least 3 years horizon;
Stress testing;
Internal capital targets and basis;
Results of the latest ICAAP report; and
Results of the latest Stress Test report.
Comprehensive Assessment of Risk
Anfaal’s scope of risk covers the quantifiable risks captured under Pillar 1 (specifically credit
risks, market risks and operational risks) and non-quantifiable risks captured under Pillar 2
(such as concentration risks, liquidity risks, reputation risks and business/strategic risks.
Furthermore, the risk assessment also covers risk factors external to Anfaal i.e. the risks that
may arise from regulatory, economic or business environment and incorporated under
business/strategic risks.
3.2.4
Anfaal is only concerned with material risk. Material risk is defined as “risk that would
materially impact the financial performance of Anfaal should the risk occur”. The material
risks faced by Anfaal are identified through discussion between the Management, Executive
Committee (“EXCOM”) and the BOD and compliance reporting to ARCO.
Monitoring and Reporting
Key assessment results of ICAAP are reported to the EXCOM, ARCO and eventually to the BOD
for final approval.
The Management of Anfaal shall include the following:
a) Communicate the ICAAP effectively throughout the organization;
b) All elements of ICAAP are established and functioning effectively, supported by sufficient
authorities and resources;
c) Capital planning and management policies are integrated into the overall risk
management framework;
d) Comprehensive assessment of capital adequacy through annual capital planning process
with a view to ascertain the appropriate internal capital target;
e) Establish method for monitoring ICAAP compliance through regular ICAAP reporting; and
f) Strategies, policies and procedures of the ICAAP and internal capital targets are reviewed
annually.
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 38 -
3.2.5
Internal Control Review
An independent review on the ICAAP shall be performed annually to ensure the continued
effectiveness of the ICAAP. Where required, an external third party maybe engaged to
provide an independent review of the ICAAP.
The ICAAP shall be revised to incorporate the appropriate adjustment should there be
changes on the following:
a)
Whether the ICAAP is proportionate to the size, nature of business, operating
environment and complexity of business;
b) Any factors that materially affect the reasonableness and validity of methodologies and
assumptions; and
c) Robustness of the ICAAP-related risk monitoring.
Any new risks that occur in the business of Anfaal should be identified and incorporated into
the ICAAP.
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 39 -
Table 2: Minimum Regulatory Capital Requirements for Credit Risk and Market Risks
Table below shows Anfaal has met the minimum regulatory capital requirement for the year under review.
Exposure
before CRM
SAR '000
Net
Exposures
after CRM
SAR '000
Risk
Weighted
Assets
SR '000
Capital
Requirement
SAR '000
-
-
-
-
16,106
16,106
3801
532
Corporates
-
-
-
-
Retail
-
-
-
-
Exposure Class
1. CREDIT RISK
On-Balance Sheet Exposures
Governments and Central Banks
Authorised Persons and Banks
Investments
24,673
24,673
45,327
6,346
Securitisation
-
-
-
-
Margin Financing
-
-
-
-
Other Assets
1,849
1,846
7,594
1,063
42,628
42,628
56,722
8,041
OTC/Credit Derivatives
-
-
-
-
Repurchase agreements
-
-
-
-
Securities borrowing/lending
-
-
-
-
Commitments
-
-
-
-
Other off-balance sheet exposures
-
-
-
-
Total On-Balance sheet Exposures
Off-Balance Sheet Exposures
Total Off-Balance sheet Exposures
-
-
-
-
Total On and Off-Balance sheet Exposures
42,628
42,628
56,722
8,041
Prohibited Exposure Risk Requirement
19,127
19,127
55,748
7,385
Total Credit Risk Exposures
61,755
61,755
109,468
15,326
Interest rate risks
Long
Position
-
Short
Position
-
-
Equity price risks
2. MARKET RISK
38
-
7
Risks related to investment funds
-
-
-
Securitisation/resecuritisation positions
-
-
-
Excess exposure risks
-
-
-
Settlement risks and counterparty risks
-
-
-
Foreign exchange rate risks
-
-
-
Commodities risks.
-
-
-
-
-
7
Total Market Risk Exposures
3. OPERATIONAL RISK
3,998
Minimum Capital Requirements
19,331
Surplus/(Deficit) in Capital
19,769
TOTAL CAPITAL RATIO (TIME)
2.02
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 40 -
4.
RISK MANAGEMENT
4.1 Risk Management Framework
The key elements of Anfaal’s Risk Management Framework are as follows:
a)
Risk Governance
Anfaal’s BOD is ultimately responsible for the adequacy and effectiveness of risk management and
system of internal control. The BOD, through ARCO maintains overall responsibility for risk
oversight in Anfaal. ARCO assists the BOD in overseeing the effectiveness of Anfaal’s ICAAP and
approving risk policies and framework relating to ICAAP. ARCO also provides an independent
assessment on the adequacy and reliability of the risk management processes and system of
internal control, and compliance with approved risk policies and regulatory requirements.
b) Risk Appetite
Risk appetite is a guidepost in strategy setting. It is the type of risk that it is willing to accept in
pursuit of its strategic and business objectives. It is the acceptable balance of growth, risk and
return, or as risk-adjusted shareholder value added measures. Management allocates resources
across the Company based on the risk appetite. Risk appetite can be expressed in qualitative or
quantitative terms.
c)
Risk Management Processes
Risk management seeks to monitor the business risks and to keep risks within acceptable limits.
Risk management helps ensure that risk exposures do not become excessive relative to Anfaal’s
capital position and its financial position.
In all circumstances, all activities giving rise to risk must be identified, measured, managed and
monitored.
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 41 -
d) Risk Culture
Risk awareness culture is a key aspect of an effective enterprise wide risk management framework and
the following are key factors of risk cultures:
-
Strong corporate governance;
Organization structure with clearly defined roles and responsibilities;
Effective communication and training;
Commitment to compliance with laws, regulations and internal controls;
Integrity in fiduciary responsibilities;
Clear policies, procedures and guidelines.
4.2 Credit Risk Disclosure
Credit risk is the potential loss of revenue as a result of failure by the customers or counterparties to
meet their contractual financial obligations. Anfaal’s exposure to credit risk is primarily from its Trade
Receivables. The credit term given to all customers of Anfaal including related parties is 30 days.
Currently, 100% of Anfaal’s Trade Receivables as disclosed in the financial statement are amount due
from related parties. The aging analysis of Trade Receivables is as follows:
SR’000
Amount due
Current
< 180 days
181-365 days
> 365 days
5,545
5,545
0
0
0
0
0
0
0
0
Total
5,545
5,545
0
0
0
%
100%
100%
0
0
0
Related Parties
Non-Related Parties
Management does not considered the receivable balances to be impaired since the amounts are owed
by Anfaal’s related parties and are less than 180 days.
Management will only impair an amount that is past due when Management feels that it is highly
likely that the amount would not be recoverable upon which a specific provision for doubtful debt
shall be provided in the financial statements.
4.2.1
Credit Risk Mitigation
Credit Risk Mitigation (“CRM”) is the employment of various methods to reduce the risks to
organization or lenders which offer credit. The methods can include risk based pricing, or
adjusting the cost of credit according to the credit strength of the borrower; credit tightening,
or reducing the amount of credit available to higher risk applicants; diversification, or
increasing the portfolio mix of borrowers and purchasing credit insurance. Examples are
collateral and netting.
Anfaal does not grant credit facilities to its customers. The credit term stated on invoices to
customers including related parties is 30 days. Outstanding balances are monitored via ageing
report at the end of month. Reminders are sent for all outstanding invoices.
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 42 -
4.2.2
Credit Risk Disclosure and Credit Risk Concentration
Table 3 presents Anfaal’s total gross credit risk exposures, plus average gross exposure over
the year under review, broken down by major types of credit exposure, according credit risk
concentration. A concentration of credit risk exists when a number of counterparties are
engaged in similar activities and have similar economic characteristics that would cause their
ability to meet contractual obligations to be similarly affected by changes in economic and
other conditions.
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 43 -
Table 3: Illustrative Disclosure on Credit Risk's Risk Weight
Exposures after Netting and Credit Risk Mitigation
Risk
Weights
Governments
and Central
Banks
Administrative
Bodies and NPO
Authorised
Persons
and Banks
Margin
Financing
Corporates
Retail
Past
Due
Items
Investments
Securitisation
Other
Assets
0%
15,660
20%
Off-Balance
Sheet
Commitments
Total Exposure
after netting and
Credit Risk
Mitigation
Total Risk
Weighted
Assets
0
0
15,660
3,132
50%
0
100%
0
150%
446
19,127
19,573
0
200%
300%
5,545
1,355
9,600
400%
0
500%
0
714%
(include
prohibited
exposure)
29,356
9,353
494
10,154
20,700
56,275
Average
Risk Weight
Deduction
from
Capital Base
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 44 -
Table 4: Illustrative Disclosure on Credit Risk's Rated Exposure
Long Term Ratings of Counterparties
Exposure Class
Credit Quality Step
1
2
3
4
5
6
Unrated
S&P
AAA to AA-
A+ to A-
BBB+ to BBB-
BB+ to BB-
B+ to B-
CCC+ and below
Unrated
Fitch
AAA to AA-
A+ to A-
BBB+ to BBB-
BB+ to BB-
B+ to B-
CCC+ and below
Unrated
Moody's
Aaa to Aa3
A1 to A3
Baa1 to Baa3
Ba1 to Ba3
B1 to B3
Caa1 and below
Unrated
Capital Intelligence
AAA
AA to A
BBB
BB
B
C and below
Unrated
On and Off-Balance-Sheet Exposures
Governments and Central Banks
Authorised Persons and Banks
15,660
446
Corporates
Retail
Investments
19,127
Securitisation
Margin Financing
Other Assets
Total
1,849
15,660
21,422
ANFAAL CAPITAL
ANNUAL REPORT 2015
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Table 5: Illustrative Disclosure on Credit Risk Mitigation (CRM)
Exposure Class
Exposures
before CRM
Exposures covered
by Guarantees/
Credit Derivatives
Exposures covered
by Financial
Collateral
Exposures covered
by Netting
Agreement
Exposures covered
by other eligible
collaterals
Exposures after
CRM
-
-
-
-
-
-
16,107
-
-
-
-
16,107
0
-
-
-
-
0
Credit Risk
On-Balance Sheet Exposures
Governments and Central Banks
Authorised Persons and Banks
Corporates
Retail
-
-
-
-
-
-
24,672
-
-
-
-
24,672
Securitisation
-
-
-
-
-
-
Margin Financing
-
-
-
-
-
-
1,849
-
-
-
-
1,849
42,628
-
-
-
-
42,628
OTC/Credit Derivatives
-
-
-
-
-
-
Exposure in the form of repurchase agreements
-
-
-
-
-
-
Exposure in the form of securities lending
-
-
-
-
-
-
Exposure in the form of commitments
-
-
-
-
-
-
*Other Off-Balance sheet Exposures
-
-
-
-
-
-
-
-
-
-
-
-
42,628
-
-
-
-
42,628
Investments
Other Assets
Total On-Balance sheet Exposures
Off-Balance Sheet Exposures
Total Off-Balance sheet Exposures
Total On and Off-Balance sheet Exposures
*Refer to Table 2 of Section 3.
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 46 -
4.3 Counterparty Credit Risk (“CCR”) and Off Balance Sheet Disclosure
CCR is the risk that the counterparties and clients defaulting on their obligation towards Anfaal. Know
Your Client (“KYC”) is a process that Anfaal has put in place to obtain as much as information about
the background of potential clients (i.e. their business, management, shareholders etc.) at the
beginning of every deal. KYC process enables Anfaal to select quality clients which should minimize
any counterparty credit risk.
As at balance sheet date, Anfaal’s credit risks are mainly from deposit in local banks and receivables
from the our managed Alfareeda Fund.
Anfaal does not have any off balance sheet exposures for year under review.
4.4 Market Risk Disclosure
Market risk is the risk of loss arising from movements in market variables, such as interest rates, credit
spreads, commodity prices, equity prices, risks related to investment funds and foreign exchange
rates. Market risk can be segregated into traded market risk and non-traded market risk. Anfaal has
already in place the risk management processes over both type of market risk within Anfaal’s Risk
Management Framework, in order to mitigate these types of risks.
As at balance sheet date, Anfaal’s market risk is minimum.
4.5 Operational Risk Disclosure
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and
systems or from external events. Operational risk is unavoidable as it is inherent in all investment
banking businesses. The objective of the operational risk management of Anfaal is to manage its
operational risk within an acceptable level.
Table 2 presents the minimum regulatory capital requirements for the risks describe from 4.2 to 4.6 of
Anfaal.
4.6 Liquidity Risk Disclosure
Liquidity risk is the risk that Anfaal is unable to maintain sufficient liquid assets to meet its financial
commitments and obligations when they fall due or securing the funding requirements at excessive
rate.
ANFAAL CAPITAL
ANNUAL REPORT 2015
- 47 -