Al-Badr Murabaha Fund – Saudi Riyals
Annual Report - 2020
CONTENT INVESTMENT FUND INFORMATION FUND PERFORMANCE FUND MANAGER CUSTODIAN AUDITOR FINANCIAL STATEMENTS
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A. INVESTMENT FUND INFORMATION
1. Al-Badr Murabaha Fund – Saudi Riyals
2. Investment objectives and polices Objectives of the Fund Al-Badr Murabaha Fund in Saudi Riyals is an open-end money market fund aimed at achieving returns by investing in financial instruments that are subject to the provisions of Islamic Shariah while preserving capital and providing liquidity.
Investment Policies The Fund Manager seeks, upon its own discretion, to achieve the Fund objectives through providing liquidity and maintenance of capital through the following strategies and controls: Invest in financing operations that comply with Islamic law, including but not limited to, Murabaha and Mudabarah deals. Invest with various financial institutions in global markets, including Banque Saudi Fransi. The Fund's investments may be in different currencies other than the currency of the fund, the Saudi riyal, in accordance with the investment strategies. The Fund Manager reserves the right to evaluate and purchase Sukuk, provided that it does not exceed 35% of the Fund’s net assets value at the purchase time. Invest in units of similar public investment funds that are compliant with Shariah standards and licensed by the Capital Market Authority or a similar supervisory Authority outside the Kingdom with similar risk levels up to 20% of the fund’s net assets value. Invest in repurchase and reverse repurchase agreements up to 5% of the Fund’s net assets value. The benchmark for the fund is 1-Week SAR deposit rate-20bps.
3. Distribution of income and gain policy The profits of the fund units will not be distributed to the investors, as the profits generated by the fund will be reinvested, and therefore the reinvestment will positively reflect on the value and price of the units.
B. FUND PERFORMANCE
1. Financial highlights for the last 3 years 2020 2019 2018 Net Asset Value (NAV) 1,512,911,726.00 1,188,418,263.00 1,299,191,777.00 NAV per Unit 15.69 15.53 15.20 Highest NAV per Unit 15.69 15.53 15.20 Lowest NAV per Unit 15.53 15.20 14.95 Number of Units 96,406,662.00 76,510,034.00 85,479,018.00 Income Distribution per Unit - - - Expense Ratio 0.48% 0.55% 0.55%
2. Performance record Total Annualized Return for 1 Year, 3 Years, 5 Years, and Since Inception 1 Year 3 Years 5 Years Since Inception Total Return 1.03% 1.65% 1.73% 2.13%
Total Annual Returns for Each of the Past 10 Years or Since Inception 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 Total Return 1.03% 2.20% 1.65% 1.49% 2.02% 0.82% 0.88% 0.90% 0.66% 0.42%
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Fund Fees and Expenses Amount (SAR) Tadawul Registration Fees 5,250 Regulatory Fees 7,500 Auditor Fee Expense 36,800 Remuneration of the Board of Directors 24,499 Benchmark Fees - Trading Expenses - Funding Fees - Other 7,354 Custody Fee 242,718 Management Fee 6,870,122 Shariah Audit Fee Expense - Total Expense Ratio % 0.48% * If there are any circumstances in which a fund manager may elect to waive or rebate any fees
3. Material Changes that occurred during the period and that affected the performance of the fund No material changes was done.
4. Exercise of Annual Voting Rights No voting rights were exercised during the year.
5. Fund's Board Annual Report The members of the Fund Board of Directors are as follows. Member Name Member Classification Mr. Ehab Talib Ahmed Farhan Chairman, Non-Independent Mr. Abdullah Sulaiman Abdulaziz Al-Oraini Vice-Chairman, Non-Independent Mr. Walid Saud Hamad Al-Khathlan Member, Non-Independent Mr. Muhammad Fathallah Abdul-Khaleq Al-Bukhari Member, Independent Mr. Hani Ibrahim Ahmed Obaid Member, Independent
The Fund Board held two meetings during 2020 The following is a summary of the key decisions approved and the matters discussed by the Fund Board: . Review of new market developments . Fund’s performance review . Fund’s compliance with all applicable rules and regulations . Acceptance of the independent board members
C. FUND MANAGER
1. Saudi Fransi Capital Head Office: PO Box 23454, Riyadh 11426, Saudi Arabia Phone +966 11 282 6666 - Fax +966 11 282 6725 Website: www.sfc.sa
2. Sub-Manager and Investment Adviser None
3. A Review of Investment Activities The year 2020 witnessed the approval of reducing interest rates by the SAMA which affected deposit rates, that came in line with the policy of the US Federal Reserve that reduced rates by a total of 150 basis points, this decision comes in order to preserve monetary stability in light of recent global developments, stimulate the economy and increase liquidity in the market, Year of 2019 also had three drops in interest rates. During December’s meeting of the Federal Reserve, it was decided that interest rates would not change during the short term (2021 and 2022), and it was also approved that the bank would continue to support the economy
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through the quantitative easing policy, which is based on increasing liquidity through the federal purchase of government and semi-government securities. The inflation target rate was decided to change from 2.00% to an average of 2.00%, allowing inflation to exceed 2.00% for a certain period. This affected the performance of local money market funds by being less than their performance in 2019.
4. Fund’s Performance 2020 Al-Badr Murabaha Fund - Saudi Riyals 1.03 Benchmark Performance 0.70
* The Fund outperformed the benchmark by 33 bps
5. Material Changes to Terms and Conditions - Modify the definition of (working day, dealing day, indicative indicator and minimum subscription). - Adding a definition of a number of terms related to the fund's activity (custodian, murabaha, speculation, sukuk, repurchase agreements, reverse repurchase agreements, value-added tax and its system, derivative contracts). - Expansion of the geographical scope of the Fund's investments. - Adding clarification to the following items: (Zakat and tax, investment strategies and controls for the fund, details of all payments from the fund's assets and method of calculate it , method of evaluation and pricing by type of asset, Sharia review mechanism) - Update the fund board members profile, fees and other funds oversea by the fund board based on the latest available date. - Entitlement of the fund manager with respect to the special commission arrangement, the fund to invest in other similar mutual funds and other consequential amendments. - Clarify some of the additional potential risks associated with and invest in the fund. - Update the example to the latest available data. - Update the item of financial reports submitted to unit holders. - Modify spelling changes in the Fund's documents.
6. Any other information that would enable unitholders to make an informed judgment about the Fund’s activities None
7. Investment in Other Investment Funds The Fund invests in Riyad Commodity Trading Fund.
8. Special Commission A 20% discount in Management Fee is received from Riyad Commodity Trading Fund.
9. Any other data and information required by the Regulations - Fund Manager's Subscriptions in Units in an Investment Fund None. - Conflicts of Interest None. - Breach of Investment Limitations . Non –Compliance with Article IFR-48 (D): The fund held 25.05% versus 25.00% of the fund NAV in Arab Banking Corporation, This breach has occurred due to changes in the market circumstance that is beyond the control of the fund manager. This breach was rectified on 13 May 2020. . Non –Compliance with Article IFR-48 (D): The fund held 25.49% versus 25.00% of the fund NAV in Arab Banking Corporation, This breach has occurred due to changes in the market circumstance that is beyond the control of the fund manager. This breach was rectified on 19 May 2020. . Non –Compliance with Article IFR-48 (D):
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The fund held 25.23% versus 25.00% of the fund NAV in Bank Almasraf, This breach has occurred due to changes in the market circumstance that is beyond the control of the fund manager. This breach was rectified on 17 Jun 2020. . Non –Compliance with Article IFR-48 (D): The fund held 25.25% versus 25.00% of the fund NAV in SAMBA, This breach has occurred due to changes in the market circumstance that is beyond the control of the fund manager. This breach was rectified on 17 Sep 2020. . Non –Compliance with Article IFR-48 (D): The fund held 25.86% versus 25.00% of the fund NAV in SAMBA, This breach has occurred due to changes in the market circumstance that is beyond the control of the fund manager. This breach was rectified on 10 Nov 2020. - Incorrect Valuation or Pricing None.
D. CUSTODIAN
1. HSBC Saudi Arabia Limited Head Office: Olaya - Al-Mrooj 7267 P.O. Box: 2255 Riyadh 12283, Saudi Arabia Phone +966 92000 5920 - Fax +966 11 299 2385 Website: www.hsbcsaudi.com Email: [email protected]
2. Duties and Responsibilities The Custodian is responsible for their obligations in accordance with the provisions of the Investment Funds Regulations, whether they fulfils their responsibilities directly or assigns it to a third party under the provisions of the Investment Funds Regulations or the list of authorized persons. The Custodian is liable towards the Fund Manager and unitholders for the losses of the Fund resulting from their fraud, shortcoming, misbehavior or deliberate negligence. The Custodian is responsible for preserving and protecting the Fund’s assets for the benefit of unitholders, and they also responsible for taking all necessary administrative measures in relation to preserving the Fund’s assets.
3. Custodian’s Opinion a. The Fund Manager issued, transferred and redeemed the units in accordance with the provisions of the Investment Funds Regulations and the Fund's Terms and Conditions. b. The Fund Manager valued and calculated the price of units in accordance with the provisions of the Investment Funds Regulations, the Fund's Terms and Conditions and the Information Memorandum. c. The Fund Manager did not breach some of the investment restrictions, limitations and borrowing powers applicable to the Investment Fund Regulations.
*The responsibilities of the custodian do not include the expression of these opinions.
E. AUDITOR
1. Al Azem, Al Sudairy, Al Shaikh and Partners Certified Public Accountants and Consultants Member of Crowe Global P.O Box 10504, Riyadh 11443 Phone number: +96611217 5000 - Fax: +96611217 6000 Website: www.crowe.com/sa
2. Auditor’s Opinion a. The financial statements have been prepared and audited in accordance with SOCPA standards, the Investment Funds Regulations, the Fund's Terms and Conditions and the Information Memorandum.
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b. The financial statements give a true and fair view of the net income and the net gains or losses of the Fund’s assets in that accounting period. c. The financial statements give a true and fair view of the financial position of the Fund at the end of the period.
The Fund's Reports are available upon request free of charge. These reports are also available on the fund manager’s website for free www.sfc.sa and on the Saudi Stock Exchange (Tadawul)
Saudi Fransi Capital (Closed Joint Stock Company owned by Banque Saudi Fransi) – Commercial Registration 1010231217 – Authorized and Regulated by the Capital Market authority (CMA) under license 11153-37
F. FINANCIAL STATEMENTS
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