Alizz Islamic Bank: Unaudited Interim Condensed Financial Statements - 30 June 2017

Transcription

1. Alizz Islamic Bank SAOG UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS 30 June 2017
2. 2 Alizz Islamic Bank SAOG INTERIM CONDENSED STATEMENT OF FINANCIAL POSITION As at 30 June 2017 Notes (Unaudited) 30 June 2017 RO (Unaudited) 30 June 2016 RO (Audited) 31 December 2016 RO ASSETS Cash and balances with the Central Bank of Oman Due from banks Wakala bil Istithmar Murabaha receivables Ijarah assets-Ijarah muntahia bittamleek Diminishing Musharaka Investments Property and equipment Intangibles Deferred tax asset Other assets 35,059,578 46,460,084 79,731,682 81,341,532 204,621,798 21,253,543 50,916,213 3,614,490 1,985,832 3,245,479 9,570,400 7,345,601 25,971,640 34,863,740 52,865,449 158,696,736 1,279,478 5,670,422 3,616,108 2,413,196 2,204,158 6,669,060 12,483,664 32,647,648 55,288,924 60,592,103 184,410,642 12,503,859 9,218,264 3,537,509 2,227,813 2,532,694 6,202,884 537,800,631 301,595,588 381,646,004 LIABILITIES Due to banks Customers’ current accounts Customers' wakala bil Istithmar Other liabilities 22,330,001 33,852,314 306,730,070 11,405,029 23,661,590 146,164,216 5,297,596 3,657,501 21,730,032 204,761,746 5,715,601 TOTAL LIABILITIES 374,317,414 175,123,402 235,864,880 84,797,930 42,533,785 64,536,879 100,000,000 289,969 (580,495) (21,024,187) 100,000,000 289,969 (5,047) (16,346,521) 100,000,000 289,969 (64,393) (18,981,331) 78,685,287 83,938,401 81,244,245 537,800,631 301,595,588 381,646,004 9 0.079 0.084 0.081 COMMITMENTS AND CONTINGENT LIABILITIES 10 65,053,616 70,018,110 72,039,289 3 4 5 6 7 12 TOTAL ASSETS LIABILITIES, EQUITY OF UNRESTRICTED INVESTMENT ACCOUNTHOLDERS AND OWNERS' EQUITY EQUITY OF UNRESTRICTED INVESTMENT ACCOUNTHOLDERS 8 OWNERS' EQUITY Share capital Legal reserve Fair value reserve Accumulated losses TOTAL OWNERS' EQUITY TOTAL LIABILITIES, EQUITY OF UNRESTRICTED INVESTMENT ACCOUNTHOLDERS AND OWNERS' EQUITY NET ASSETS PER SHARE The interim condensed financial statements were approved by the Board of Directors on 26 July 2017 and signed on their behalf by: __________________________ Chairman of the Board __________________________ Chief Executive Officer The attached notes from 1 to 19 form part of these interim Condensed Financial Statements
3. 3 Alizz Islamic Bank SAOG INTERIM CONDENSED STATEMENT OF INCOME For the six month period ended 30 June 2017 (Unaudited) Notes Income from financing and investing activities Return on equity of investment accountholders before bank's share as a Mudarib Bank's share as a Mudarib 1 April 2017 to 30 June 2017 RO 1 April 2016 to 30 June 2016 RO 1 January 2017 to 30 June 2017 RO 1 January 2016 to 30 June 2016 RO 5,051,466 2,853,097 9,394,272 5,394,672 (263,665) 37,828 (225,837) BANK'S SHARE IN INCOME AS MUDARIB AND RAB UL MAAL Bank's income from own investments Other income - net (97,391) 41,415 (55,976) (464,126) 67,826 (396,300) (150,975) 41,415 (109,560) 4,825,629 2,797,121 8,997,972 5,285,112 19,187 608,304 101,180 380,937 175,209 1,236,652 110,453 598,297 Profit on wakala bil Istithmar payable NET OPERATING INCOME 5,453,120 (2,901,565) 2,551,555 3,279,238 (861,702) 2,417,536 10,409,833 (5,147,393) 5,262,440 5,993,862 (1,586,128) 4,407,734 Staff expenses Depreciation Amortisation of intangibles Other general and adminstrative expenses (1,942,530) (191,947) (126,983) (1,206,531) (1,812,846) (196,738) (139,389) (990,817) (3,733,189) (374,017) (253,740) (2,420,676) (3,711,872) (332,478) (281,915) (1,804,175) TOTAL EXPENSES (3,467,991) (3,139,790) (6,781,622) (6,130,440) (916,436) (722,254) (1,519,182) (1,722,706) (382,489) (215,008) (1,236,459) (629,390) (1,298,925) (937,262) (2,755,641) (2,352,096) LOSS BEFORE PROVISION FOR IMPAIRMENT AND INCOME TAX Provision for impairment 11 LOSS BEFORE TAX Income tax 12 LOSS FOR THE PERIOD LOSS PER SHARE 13 - 142,000 712,785 262,000 (1,298,925) (795,262) (2,042,856) (2,090,096) (0.001) (0.001) (0.002) (0.002) The attached notes from 1 to 19 form part of these interim Condensed Financial Statements
4. 4 Alizz Islamic Bank SAOG INTERIM CONDENSED STATEMENT OF CHANGES IN OWNERS ' EQUITY 30 June 2017 (Unaudited) Legal Share capital RO reserve RO Fair value reserve RO Accumulated losses RO Total RO Balance at 1 January 2017 Loss for the period Investment fair value reserve 100,000,000 - 289,969 - (64,393) (516,102) (18,981,331) (2,042,856) - 81,244,245 (2,042,856) (516,102) Balance at 30 June 2017 (unaudited) 100,000,000 289,969 (580,495) (21,024,187) 78,685,287 Balance as at 1 January 2016 Loss for the period Investment fair value reserve 100,000,000 - 289,969 - (97,846) 92,799 (14,256,425) (2,090,096) - 85,935,698 (2,090,096) 92,799 Balance at 30 June 2016 (unaudited) 100,000,000 289,969 (5,047) (16,346,521) 83,938,401 Balance at 1 July 2016 (unaudited) Loss for the period Investment fair value reserve 100,000,000 100,000,000 289,969 289,969 (5,047) (59,346) (64,393) (16,346,521) (2,634,810) (18,981,331) 83,938,401 (2,634,810) (59,346) 81,244,245 Balance at 31 December 2016 (audited) The attached notes from 1 to 19 form part of these interim Condensed Financial Statements
5. 5 Alizz Islamic Bank SAOG INTERIM CONDENSED STATEMENT OF CASH FLOWS For the six month period ended 30 June 2017 (Unaudited) OPERATING ACTIVITIES Loss before tax Adjustments for: Depreciation Amortisation Provision for impairment Operating loss before changes in operating assets and liabilities Net changes in operating assets and liabilities: Capital deposit with Central Bank of Oman Wakala bil Istithmar Murabaha receivables Ijarah assets-Ijarah muntahia bittamleek Diminishing Musharaka Other assets Customers’ current accounts Customers' wakala bil Istithmar Other liabilities Equity of unrestricted investment account holders Net cash generated operating activities 1 January 2017 to 30 June 2017 RO 1 January 2016 to 30 June 2016 RO (2,755,641) (2,352,096) 332,478 281,915 629,390 374,017 253,740 1,236,459 (891,425) (1,108,313) (128,918) (24,741,554) (21,121,406) (20,647,570) (8,897,097) (3,384,516) 12,122,282 101,968,324 5,689,428 20,261,051 (133,109) (9,647,826) (10,078,862) (28,929,142) (231,385) (4,295,821) (2,023,992) 31,335,160 1,812,511 21,666,004 60,228,599 (1,634,775) INVESTING ACTIVITIES Financial assets at fair value through equity - net Purchase of property and equipment Additions to intangibles (42,178,910) (450,998) (11,759) (94,930) (349,142) (130,271) Net cash (used in) / generated from investing activities (42,641,667) (574,343) Net increase in cash and cash equivalents 17,586,932 (2,209,118) Cash and cash equivalents at the beginning of the period 41,196,083 35,248,631 Cash and cash equivalents at end of the period 58,783,015 33,039,513 2,998,783 2,788,487 31,654,149 3,740,083 4,279,386 2,426,638 42,720,001 23,545,002 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD COMPRISE: Cash in hand Balances with Central Bank of Oman (excluding capital deposit and Oman net deposit) Current accounts with local banks Due from banks and financial institutions with original maturity of less than 90 days Due to banks and financial institutions with original maturity of less than 90 days (22,330,001) 58,783,015 33,039,513 The attached notes from 1 to 19 form part of these interim Condensed Financial Statements
6. 6 Alizz Islamic Bank SAOG STATEMENT OF SOURCES AND USES OF CHARITY FUND For the six month period ended 30 June 2017 (Unaudited) 1 January 2017 to 30 June 2017 RO 1 January 2016 to 30 June 2016 RO Sources of charity funds Undistributed charity funds at beginning of the period 17,953 3,682 Donation from Customers due to late payment 8,929 7,197 Forfeit of non-shari’a compliant income 6,493 - 33,375 10,879 (28,574) (28,574) (3,682) (3,682) 4,801 7,197 Total sources of funds at end of the period Uses of charity funds Philanthropic societies Total uses of funds during the period Undistributed charity funds at end of the period The attached notes from 1 to 19 form part of these interim Condensed Financial Statements
7. Alizz Islamic Bank SAOG NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS 30 June 2017 (Unaudited) 1 INCORPORATION AND ACTIVITIES Alizz Islamic Bank SAOG (“the Bank”) is incorporated in the Sultanate of Oman (“Oman”), as a public joint stock company to carry out banking activities in accordance with the principles of Islamic Shari’a. The Central Bank of Oman (“CBO”) has issued an islamic banking license to the Bank on 5 September 2013 and the Bank commenced its operations on 30 September 2013. The Bank has eight branches as of 30 June 2017 (31 December 2016: seven branches). The Bank provides banking services which includes accepting customer deposits and providing financing through various Islamic instruments such as Murabaha, Mudaraba, Ijara and other products as defined in the Central Bank of Oman’s Islamic Banking Regulatory Framework. The Bank’s registered office is P.O.Box 753, PC 112 Ruwi, Muscat amd its share are listed on Muscat Securities Market. The Bank is regulated by the CBO and its Shari’a Supervisory Board is entrusted to ensure the Bank’s adherence to Shari’a in carrying out its activities. The Bank has commenced commercial operations on 30 September 2013 and as expected has reported loss during the initial years. As a result the Bank's minimum capital is below RO 100 million, which is a CBO requirement. The Bank has developed an appropriate strategy to comply with the minimum prescribed capital requirement and remains above the minimum capital adequacy ratio prescribed by CBO (refer note 18). 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis of preparation The Bank follows Financial Accounting Standards (“FAS”) issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (“AAOIFI”) for its accounting purposes. In line with the requirement of AAOIFI, for matters that are not covered by AAOIFI standards, the Bank uses guidance from the relevant International Financial Reporting Standards (“IFRS”). In the absence of separate FAS on interim financial reporting in AAOIFI, the interim condensed financial statements of the Bank for the six-month period ended 30 June 2017 have been prepared in accordance with the guidance given by the International Accounting Standard 34 - "Interim Financial Reporting", applicable regulations of CBO and the disclosure requirements set out in the Rules and Disclosure and Proformas issued by the Capital Market Authority (CMA). The interim condensed financial statements do not contain all information and disclosures required in the annual financial statements, and should be read in conjunction with the Bank's annual financial statements as at 31 December 2016. The condensed interim financial information is reviewed not audited. The comparatives for the condensed interim statement of financial position have been extracted from the audited financial statements for the year ended 31 December 2016 and for 30 June 2016, has been extracted from reviewed financial information for the six-month period ended 30 June 2016 and comparatives for the condensed statements of income, cash flows, changes in owners’ equity and sources and uses of charity fund have been extracted from the reviewed condensed interim financial information for the period ended 30 June 2016. 2.2 Basis of measurement The interim condensed financial statements have been prepared on a historical cost basis, except for financial assets which are classified as fair value through equity, which are measured at fair value. The interim condensed financial statements have been presented in Rial Omani (RO), which is the functional and presentation currency of the Bank. One RO is equivalent to one thousand Baizas. 2.3 Significant accounting policies The accounting policies adopted in the preparation of the interim condensed financial statements are consistent with those used in the preparation of the annual financial statements for the year ended 31 December 2016 except for the new and amended conceptual framework and financial accounting standards, which were prepared in accordance with the Financial Accounting Standards issued by Accounting and Auditing Organisation for Islamic Financial Institutions ("AAOIFI"). For matters which are not covered by AAOIFI standards, including "Interim Financial Reporting", the Bank uses the International Financial Reporting Standards (the "IFRSs"). 2.4 Accounting estimates The basis and the methods used for critical accounting estimates and judgments adopted in the preparation of this condensed interim financial information are the same as those applied in the preparation of the annual financial statements of the Bank for the year ended 31 December 2016. 2.5 Financial Risk Management The financial risk management objective and policies adopted by the Bank are consistent with those disclosed in the financial statements of the Bank for the year ended 31 December 2016. 7
8. 8 Alizz Islamic Bank SAOG NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS 30 June 2017 (Unaudited) 3 WAKALA BIL ISTITHMAR (Unaudited) (Unaudited) (Audited) 30 June 2016 30 June 2017 31 December 2016 Self financed RO Jointly financed RO Wakala bil Istithmar - 80,588,952 Less: Collective provision - (827,270) (827,270) - Less: Specific provision - (30,000) (30,000) - - - - - - - 34,863,740 34,863,740 - 55,288,924 55,288,924 4 79,731,682 Total RO Self financed RO Jointly financed RO 80,588,952 - 35,215,899 79,731,682 (352,159) Total RO Self financed RO Jointly financed RO Total RO 35,215,899 - 55,847,398 55,847,398 (352,159) - (558,474) (558,474) MURABAHA RECEIVABLES (Unaudited) (Unaudited) Self financed RO Jointly financed RO Murabaha receivables Less: Deferred profit Less: Collective provision Less: Specific provision Less: Reserve profit - 96,241,264 (13,433,673) (1,384,775) (79,928) Net murabaha receivables - 81,341,532 (1,356) (Audited) 30 June 2016 30 June 2017 31 December 2016 Total RO Self financed RO Jointly financed RO Total RO Self financed RO Jointly financed RO Total RO 96,241,264 (13,433,673) (1,384,775) (79,928) (1,356) - 62,245,428 (8,448,258) 62,245,428 (8,448,258) - - 72,034,931 (10,349,719) (1,063,720) (29,006) (383) 72,034,931 (10,349,719) (1,063,720) (29,006) (383) (931,721) - (931,721) 81,341,532 - 52,865,449 52,865,449 - 60,592,103 60,592,103 -
9. 9 Alizz Islamic Bank SAOG NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS 30 June 2017 (Unaudited) 5 IJARAH ASSETS-IJARAH MUNTAHIA BITTAMLEEK (Unaudited) (Unaudited) Self financed RO Jointly financed RO Total RO 207,803,456 34,681,992 (10,342,687) 232,142,761 207,803,456 34,681,992 (10,342,687) 232,142,761 - 30,340,096 12,230,672 (10,342,687) 32,228,081 Provision for impairment: At beginning of the period / year - Provided during the period / year At the end of the period / year - Net book value - 197,246,612 Building Cost: At beginning of the period / year Additions Disposal At the end of the period / year Depreciation: At beginning of the period / year Charge for the period / year Disposal At the end of the period / year - (Audited) 30 June 2016 30 June 2017 Self financed RO 31 December 2016 Jointly financed RO Total RO - 131,673,308 40,537,202 (3,338,486) 168,872,024 131,673,308 40,537,202 (3,338,486) 168,872,024 30,340,096 12,230,672 (10,342,687) 32,228,081 - 14,014,519 7,804,309 (3,338,486) 18,480,342 2,108,743 2,108,743 - 559,325 2,668,068 559,325 2,668,068 - 197,246,612 - Self financed RO Jointly financed RO Total RO - 131,673,308 83,068,340 (6,938,192) 207,803,456 131,673,308 83,068,340 (6,938,192) 207,803,456 14,014,519 7,804,309 (3,338,486) 18,480,342 - 14,014,519 23,263,769 (6,938,192) 30,340,096 14,014,519 23,263,769 (6,938,192) 30,340,096 1,361,709 1,361,709 - 1,361,709 1,361,709 282,118 1,643,827 282,118 1,643,827 - 747,034 2,108,743 747,034 2,108,743 148,747,855 148,747,855 - 175,354,617 175,354,617 k Plant and machinery Cost: At beginning of the period / year Additions Disposal At the end of the period / year - 12,263,333 12,263,333 12,263,333 12,263,333 - 14,430,000 (2,166,667) 12,263,333 14,430,000 (2,166,667) 12,263,333 - 14,430,000 (2,166,667) 12,263,333 14,430,000 (2,166,667) 12,263,333 Depreciation: At beginning of the period / year Charge for the period / year Disposal At the end of the period / year - 3,115,833 1,803,750 4,919,583 3,115,833 1,803,750 4,919,583 - 576,875 1,803,750 (166,667) 2,213,958 576,875 1,803,750 (166,667) 2,213,958 - 576,875 2,705,625 (166,667) 3,115,833 576,875 2,705,625 (166,667) 3,115,833 -
10. 10 Alizz Islamic Bank SAOG NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS 30 June 2017 (Unaudited) 5 IJARAH ASSETS-IJARAH MUNTAHIA BITTAMLEEK (continued) (Unaudited) (Unaudited) Self financed RO (Audited) 30 June 2016 30 June 2017 Jointly financed RO Total RO 91,475 Self financed RO 31 December 2016 Jointly financed RO Total RO - 60,198 60,198 40,296 100,494 9,948,881 40,296 100,494 9,948,881 Self financed RO Jointly financed RO Total RO - 60,198 60,198 - 31,277 91,475 9,056,025 31,277 91,475 9,056,025 Provision for impairment: At beginning of the period / year - 91,475 Provided/(released) during the period / year At the end of the period / year Net book value - (18,037) 73,438 7,270,312 (18,037) 73,438 7,270,312 - TOTAL Cost Less: Accumulated depreciation Less: Collective provision Less: Specific provision - 244,406,094 (37,147,664) (2,278,821) (357,811) 244,406,094 (37,147,664) (2,278,821) (357,811) - 181,135,357 (20,694,300) (1,744,321) - 181,135,357 (20,694,300) (1,744,321) - - 220,066,789 (33,455,929) (2,027,602) (172,616) 220,066,789 (33,455,929) (2,027,602) (172,616) Net book value - 204,621,798 204,621,798 - 158,696,736 158,696,736 - 184,410,642 184,410,642 6 DIMINISHING MUSHARAKA (Unaudited) (Unaudited) Diminishing Musharaka Less: Collective provision 7 Self financed RO - Jointly financed RO 21,527,257 (273,714) 21,253,543 (Audited) 30 June 2016 30 June 2017 Self financed RO - Jointly financed RO 1,292,402 (12,924) 1,279,478 Total RO Self financed RO (Unaudited) 30 June 2016 Jointly financed RO Total RO 21,527,257 (273,714) 21,253,543 31 December 2016 Total RO 1,292,402 (12,924) 1,279,478 Self financed RO - Jointly financed RO 12,630,160 (126,301) 12,503,859 Total RO 12,630,160 (126,301) 12,503,859 INVESTMENTS (Unaudited) 30 June 2017 Self Jointly financed financed RO RO Quoted investments classified as fair value through equity Regional listed Sukuks (Cost: RO 7,345,062, 31 March 2016: RO 4,033,927, 31 December 2016: RO 6,927,511) Regional listed equities (Cost: RO 2,735,768, 31 March 2016: RO 470,499,31 December 2016:RO 2,422,575) Less: Impairment Loss Total RO (Audited) 31 December 2016 Self Jointly financed financed RO RO Total RO 48,789,269 - 48,789,269 5,033,142 - 5,033,142 6,900,696 - 6,900,696 2,159,233 - 2,159,233 637,280 - 637,280 2,384,998 - 2,384,998 (32,289) 50,916,213 - (32,289) 50,916,213 5,670,422 - 5,670,422 (67,430) 9,218,264 - (67,430) 9,218,264
11. 11 Alizz Islamic Bank SAOG NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS 30 June 2017 (Unaudited) 8 EQUITY OF UNRESTRICTED INVESTMENT ACCOUNTHOLDERS Equity of unrestricted investment accountholders Profit equalisation reserve Investment risk reserve By type Saving deposits Term deposits (Unaudited) 30 June 2017 RO (Unaudited) 30 June 2016 RO (Audited) 31 December 2016 RO 84,797,930 - 42,533,785 - 64,519,497 17,382 - 84,797,930 42,533,785 64,536,879 82,747,184 2,050,746 84,797,930 40,881,682 1,652,103 42,533,785 62,981,133 1,555,746 64,536,879 As investment accountholder's funds are commingled with the Bank's funds for investment, no priority is granted to any party for the purpose of investments and distribution of profits. No appropriation for profit equalisation reserve and investment risk reserve has been made to maintain healthy pay out for unrestricted investment account holders. 9 NET ASSETS PER SHARE Net assets (RO) Number of shares at reporting date Net assets per share (RO) (Unaudited) 30 June 2017 RO (Unaudited) 30 June 2016 RO (Audited) 31 December 2016 RO 78,685,287 83,938,401 81,244,245 1,000,000,000 1,000,000,000 1,000,000,000 0.079 0.084 0.081 (Unaudited) 30 June 2017 RO (Unaudited) 30 June 2016 RO (Audited) 31 December 2016 RO 18,117,697 8,666,919 38,269,000 29,819,149 1,674,306 38,524,655 30,730,652 11,627,349 29,681,288 - 65,053,616 70,018,110 72,039,289 953 10 COMMITMENTS AND CONTINGENT LIABILITIES Letter of guarantees Letters of credit Irrevocable financing commitments
12. 12 Alizz Islamic Bank SAOG NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS 30 June 2017 (Unaudited) 11 MOVEMENT IN PROVISION FOR IMPAIRMENT Wakala bil Murabaha Istithmar receivables 30 June 2017 Provision at beginning of the period Charge for the period-Portfolio Charge for the year - specific Release for the period - specific Provision at end of the period Movement in reserve profit: Reserve profit at beginning of the period Trasnferred during the period Reserve profit as of reporting date Total provision and reserve profit at end of the period Movement in reserve profit: Reserve profit at beginning of the period Release to income Reserve profit as of reporting date Total provision and reserve profit at end of the period 12 TAXATION Current tax Deferred tax Deferred tax At beginning of the period / year Provided during the period / year At the end of the period / year Diminishing Musharaka Others Total RO RO RO RO RO RO 558,474 268,796 30,000 857,270 1,092,726 321,055 50,922 1,464,703 2,200,218 251,219 185,195 2,636,632 126,301 147,413 273,714 82,273 16,851 149 (35,141) 64,132 4,059,992 1,005,334 266,266 (35,141) 5,296,451 - 383 973 1,356 - - 15,463 18,446 33,909 15,846 19,419 35,265 857,270 1,466,059 2,636,632 273,714 98,041 5,331,716 Wakala bil Murabaha Istithmar receivables Diminishing Musharaka Others Total RO Ijarah muntahia bittamleek RO RO RO RO 255,681 96,478 352,159 728,696 194,927 7,895 931,518 1,421,907 273,635 48,779 1,744,321 10,610 2,314 12,924 7,827 2,727 2,635 13,189 2,424,721 570,081 59,309 3,054,111 - 203 203 - - - 203 203 352,159 931,721 1,744,321 12,924 13,189 3,054,314 (Unaudited) 30 June 2017 RO (Unaudited) 30 June 2016 RO (Audited) 31 December 2016 RO 712,785 712,785 262,000 262,000 590,536 590,536 2,532,694 712,785 3,245,479 1,942,158 262,000 2,204,158 1,942,158 590,536 2,532,694 30 June 2016 Provision at beginning of the period Charge for the period-Portfolio Release for the period-Specific Provision at end of the period Ijarah muntahia bittamleek The tax rate applicable to the Bank is 15% (2016 - 12%). For the purpose of determining the taxable result of the year, the accounting loss has been adjusted for tax purposes. Adjustment for tax purposes include items relating to both income and expense. The adjustments are based on the current understanding of the existing tax laws, regulations and practices. The Bank has reported a taxable loss. Therefore the applicable tax rate is nil. The average effective tax rate cannot be determined in view of the taxable loss.
13. 13 Alizz Islamic Bank SAOG NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS 30 June 2017 (Unaudited) 12 TAXATION (continued) The Bank has assessed that following taxable losses available for offset against future taxable profits will be utilised prior to their expiry: Available until 31 December 2018 (declared) Available until 31 December 2019 (declared) Available until 31 December 2020 (declared) Available until 31 December 2021 (declared) (Unaudited) 30 June 2017 RO (Unaudited) 30 June 2016 RO (Audited) 31 December 2016 RO 3,568,508 7,543,788 6,678,921 5,558,375 3,568,508 7,543,788 6,678,921 5,558,375 3,568,508 7,543,788 6,678,921 5,558,375 None of the assessments have been agreed by the tax authorities. The islamic finance regulations relating to tax treatment of various products are awaited. Thus based on on the current regulations governing taxation in Oman, deferred tax asset on taxable losses net of timing differences arising on property and equipment and intangibles has been recorded in these interim condensed financial statements. 13 LOSS PER SHARE Loss attributable to shareholders (RO) Weighted average number of shares outstanding Loss per share - basic and diluted (RO) (Unaudited) 30 June 2017 RO (Unaudited) 30 June 2016 RO (2,042,856) (2,090,096) 1,000,000,000 (0.002) 1,000,000,000 (0.002) For the purpose of calculating loss per share, the weighted average number of shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. As there are no dilutive potential shares, the diluted loss per share is identical to the loss per share.
14. 14 Alizz Islamic Bank SAOG NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS 30 June 2017 (Unaudited) 14 RELATED PARTY TRANSACTIONS Related parties comprise major shareholders, directors and key management personnel of the Bank, entities owned or controlled, jointly controlled or significantly influenced by them, companies affiliated by virtue of shareholding in common with that of the Bank and Shari'a supervisory board. The significant balances with related parties at reporting date were as follows: 30 June 2017 RO Total 30 June 2016 RO 31 December 2016 RO 6,139,247 350,801 557,065 70,956 3,800,000 81,899 6,139,247 350,801 508,054 45,433 483,454 33,368 623,535 67,256 508,054 54,092 483,454 39,688 1,309,783 4,435,387 7,006,870 1,318,812 4,444,046 7,013,190 37,182 - 5,601,364 125,000 894,226 25,000 1,089,628 25,000 6,210,624 125,000 946,265 25,000 1,126,810 25,000 52,039 37,182 5,726,364 919,226 1,114,628 6,335,624 971,265 1,151,810 - - - 246,611 827,497 778,422 246,611 827,497 778,422 - - - 1,610,615 - 1,386,615 1,610,615 - 1,386,615 30 June 2017 RO Directors 30 June 2016 RO 31 December 2016 RO - - - 557,065 70,956 3,800,000 81,899 9,029 8,659 6,320 623,535 58,227 9,029 8,659 6,320 609,260 - 52,039 - 609,260 Equity of unrestricted investment accountholders Contingent Liabilities and Commitments Assets: Wakala bil Istithmar Murabaha receivables Ijarah assets-Ijarah muntahia bittamleek Other assets Liabilities: Current account Customer wakala bil Istithmar Other related parties 30 June 30 June 31 December 2017 2016 2016 RO RO RO
15. 15 Alizz Islamic Bank SAOG NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS 30 June 2017 (Unaudited) 14 RELATED PARTY TRANSACTIONS (continued) The transactions with the related parties included in the statement of income are as follows: Income Income from financing and investing activities Other income Expenses Return on equity of IAH before Bank's share as a Mudarib Profit on Wakala bil Istithmar payable Board expenses Shari'a board expense Other expenses 1 January 2017 to 30 June 2017 RO 1 January 2016 to 30 June 2016 RO 180,870 33,820 91,727 5,262 214,690 96,989 1 January 2017 to 30 June 2017 RO 1 January 2016 to 30 June 2016 RO 432 1,550 33,529 24,940 464,486 524,937 189 275 33,158 26,126 502,357 562,105 1 January 2017 to 30 June 2017 RO 420,952 1 January 2016 to 30 June 2016 RO 435,078 12,645 9,890 433,597 444,967 Compensation of key management personnel is as follows: Salaries and allowances End of service benefits
16. 16 Alizz Islamic Bank SAOG NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS 30 June 2017 (Unaudited) 15 SEGMENTAL INFORMATION Segment information is presented in respect of the Bank’s operating segments. For performance management purposes, the Bank is organised into three operating segments based on products and services as follows: Retail banking includes customers’ deposits, unrestricted investment account consumer financing, credit card and general banking services. Corporate banking includes deposits and financing for corporate and institutional customers along with provision of trade finance services. Treasury includes placements with financial institutions and managing proprietary investment portfolio of the Bank. Performance of the bank is evaluated based on the profit after tax. 30 June 2017 Net operating income Provision for Impairment Net profit / (loss) Retail Corporate Treasury Others Total RO RO RO RO RO 2,409,594 2,600,656 252,190 - 5,262,440 - (1,236,459) (513,852) (735,646) 13,039 (2,547,821) (96,496) (111,324) 712,785 (2,042,856) Total assets 210,864,627 176,282,525 93,636,214 57,017,265 537,800,631 Total liabilities and equity of unrestricted accountholders 117,197,156 308,183,159 22,330,001 11,405,028 459,115,344 Retail Corporate Treasury Others Total RO RO RO RO RO 31 December 2016 Net operating income Provision for Impairment Net profit / (loss) Total assets Total liabilities and equity of unrestricted accountholders 30 June 2016 Net operating income 6,492,581 (919,585) (4,799,612) 1,860,054 618,427 (648,256) (67,430) 554,217 (463,570) - 8,971,062 (1,635,271) (15,941) (4,724,906) 169,323,525 143,838,015 41,865,911 26,618,553 381,646,004 85,129,735 205,881,540 3,657,501 5,732,983 300,401,759 Retail Corporate Treasury Others RO Total RO RO RO 2,813,397 1,299,720 4,407,734 - (629,390) (151,265) Net profit / (loss) 149,610 1,717,891 105,577 140,991,565 106,951,118 31,642,061 22,010,844 301,595,588 60,845,011 151,514,359 - 5,297,817 217,657,187 Total liabilities and equity of unrestricted accountholders - - Provision for Impairment Total assets (478,125) 294,617 RO (4,063,174) (2,090,096)
17. 17 Alizz Islamic Bank SAOG NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS 30 June 2017 (Unaudited) 16 FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of the financial assets and financial liabilities, other than those disclosed in the table below and in note 10, approximate their carrying values. The bank's primary medium and long-term financial liabilites are the borrowed funds. The fair values of these financial liabilities are not materially different from their carrying values, since these liabilities are repriced at intervals of three or six months, depending on the terms and conditions of the instrument and the resultant applicable margins approximate the current spreads that would apply for borrowings with similar maturities. Fair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable and willing parties in an arm’s length transaction. Fair values of quoted securities/sukuks are derived from quoted market prices in active markets, if available. For unquoted The Bank uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities; Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy at 30 June: Fair value through equity Level 1 RO 30 June 2017 (Unaudited) 2,126,944 48,789,269 - 50,916,213 637,280 5,033,142 - 5,670,422 2,317,568 6,900,696 - 9,218,264 30 June 2016 (Unaudited) 31 December 2016 (Audited) Level 2 RO Level 3 RO Total RO Transfers between Level 1, Level 2 and Level 3 There were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into or out of Level 3 fair value measurement.
18. 18 Alizz Islamic Bank SAOG NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS 30 June 2017 (Unaudited) 17 MATURITY PROFILE OF ASSETS AND LIABILITIES Liquidity risk is the risk that the Bank will be unable to meet its payment obligations when they fall due under normal and stress circumstances. To limit this risk, management has arranged diversified funding sources, manages assets with liquidity in mind, and monitors liquidity on a regular basis. The table below summarises the maturity profile of the Bank’s assets and liabilities as of 30 June 2017 based on expected periods to cash conversion from the reporting date: Up to 1 1 to 6 6 months 1 to 5 Over month months to 1 year years 5 years Total RO RO RO RO RO RO ASSETS Cash and balances with Central Bank 34,677,578 382,000 35,059,578 of Oman Due from banks 46,460,084 46,460,084 Wakala bil Istithmar 27,377,778 21,013,241 5,198,996 9,141,667 17,000,000 79,731,682 Murabaha receivables 3,724,487 18,744,979 10,825,973 38,748,443 9,297,650 81,341,532 Ijarah assets-Ijarah muntahia bittamleek 5,434,589 21,497,316 22,756,448 81,171,642 73,761,803 204,621,798 Diminishing Musharaka 74,426 1,579,514 1,853,939 11,566,827 6,178,837 21,253,543 Investments 47,622,302 2,125,086 1,168,825 50,916,213 Property and equipment 3,614,490 3,614,490 Intangibles 1,985,832 1,985,832 Deferred tax asset 3,245,479 3,245,479 Other assets 9,570,400 9,570,400 Total assets 117,748,942 110,457,352 52,330,842 145,042,883 LIABILITIES, EQUITY OF UNRESTRICTED INVESTMENT ACCOUNTHOLDERS AND OWNERS' EQUITY Due to banks 22,330,001 Customers’ current accounts 6,770,462 11,848,310 6,770,463 Customers' wakala bil Istithmar 19,177,113 119,752,425 76,959,914 48,015,500 Other liabilities 11,405,029 48,277,576 131,600,735 95,135,406 48,015,500 Total liabilities Equity of unrestricted investment 4,239,896 8,479,793 8,479,793 42,398,965 accountholders Total owners' equity - 112,220,612 537,800,631 8,463,079 42,825,118 51,288,197 22,330,001 33,852,314 306,730,070 11,405,029 374,317,414 21,199,483 78,685,287 84,797,930 78,685,287 537,800,631 Total liabilities, equity of investment accountholders and owners' equity 52,517,472 140,080,528 103,615,199 90,414,465 151,172,967 Net gap 65,231,470 (29,623,176) (51,284,357) 54,628,418 (38,952,355) Cumulative net gap 65,231,470 35,608,294 (15,676,063) 38,952,355 - - The table below summarises the maturity profile of the Bank’s assets and liabilities as of 31 December 2016 based on expected periods to cash conversion from the reporting date: Up to 1 1 to 6 6 months 1 to 5 Over month months to 1 year years 5 years Total RO RO RO RO RO RO ASSETS Cash and balances with Central Bank of Oman 12,205,936 277,728 12,483,664 32,647,648 32,647,648 Due from banks 12,038,184 19,402,244 5,243,899 13,979,597 4,625,000 55,288,924 Wakala bil Istithmar 1,433,593 10,533,357 9,816,413 31,416,093 7,392,647 60,592,103 Murabaha receivables 1,595,678 19,102,976 21,626,780 74,594,194 67,491,014 184,410,642 Ijarah assets-Ijarah muntahia bittamleek 99,664 621,974 1,203,448 10,578,773 12,503,859 Diminishing Musharaka 8,045,264 1,173,000 9,218,264 Investments 3,537,509 3,537,509 Property and equipment 2,227,813 2,227,813 Intangibles 2,532,694 2,532,694 Deferred tax asset 6,202,884 6,202,884 Other assets Total assets 60,020,703 49,660,551 52,138,688 134,274,351 LIABILITIES, EQUITY OF UNRESTRICTED INVESTMENT ACCOUNTHOLDERS AND OWNERS' EQUITY 3,657,501 Due to banks 4,959,294 7,337,198 4,192,685 Customers’ current accounts 4,808,442 57,931,236 107,880,939 28,518,078 Customers' wakala bil Istithmar Other liabilities 5,715,601 Total liabilities Equity of unrestricted investment account holders Total owners' equity 85,551,711 381,646,004 5,240,855 5,623,051 - 3,657,501 21,730,032 204,761,746 5,715,601 13,425,237 65,268,434 117,789,225 28,518,078 10,863,906 235,864,880 4,216,488 - 6,657,503 - 6,435,948 - 31,486,002 - 15,740,938 81,244,245 64,536,879 81,244,245 381,646,004 Total liabilities, equity of investment accountholders and owners' equity 17,641,725 71,925,937 124,225,173 60,004,080 107,849,089 Net gap 42,378,978 (22,265,386) (72,086,485) 74,270,271 (22,297,378) Cumulative net gap 42,378,978 20,113,592 (51,972,893) 22,297,378 - -
19. 19 Alizz Islamic Bank SAOG NOTES TO THE INTERIM CONDENSED 30 June 2017 (Unaudited) 18 CAPITAL ADEQUACY RATIO CBO sets and monitors capital requirements of the Banks operating in Oman. In implementing Basel III’s capital requirement, the CBO requires the Bank to maintain a minimum of 13.25% ratio of total capital to total risk-weighted assets. The Bank’s regulatory capital is analysed into two tiers: Tier I capital, which includes ordinary share capital, legal reserve and retained earning. Tier II capital which includes fair value reserves Asset liability committee devises capital utilisation strategy and monitors compliance with CBO's regulations in this regard. The risk asset ratio, calculated in accordance with the capital adequacy guidelines of the Basel Committee on Banking Supervision and CBO Circulars BM 1009 ‘Guidelines on Basel II’ and BM 1114 ‘Regulatory Capital and Composition of Capital Disclosure requirements under Basel III’ effective from 31 December 2013, minimum capital adequacy ratio requirement for the year is 13.25% inclusive of capital conservation buffer of 1.25% (2016: 12.625% inclusive of capital conservation buffer of 0.625%). The capital adequacy ratio working is as follows: (Unaudited) 30 June 2017 RO 73,337,036 73,337,036 4,815,510 78,152,546 (Unaudited) 30 June 2016 RO 79,294,000 79,294,000 2,900,238 82,194,238 (Audited) 31 December 2016 RO 76,421,410 76,421,410 3,799,423 80,220,833 379,843,498 7,150,000 15,732,678 402,726,176 231,047,030 8,762,500 25,014,105 264,823,635 301,710,023 11,150,000 14,421,238 327,281,261 Capital adequacy ratio CET1 capital (Tier I) as a percentage of total risk-weighted assets Tier II capital as a percentage of total risk weighted assets 18.21% 1.20% 29.94% 1.10% 23.35% 1.16% Total Regulatory Capital as a percentage of total risk-weighted assets 19.41% 31.04% 24.51% Common equity tier 1 (CET1) Additional Tier 1 Tier 1 Tier 2 Total regulatory capital Risk-weighted assets Credit risk Market risk Operational risk Total risk-weighted assets Minimum share capital requirement The Bank has commenced commercial operations on 30 September 2013 and as expected has reported loss during the initial years. As a result the Bank's owner's equity is below RO 100 million, which is a CBO requirement. The Bank is developing an appropriate strategy to comply with the minimum prescribed capital requirement. CBO has given dispensation till 31 December 2017 to meet the regulatory capital requirement. The shareholders of the Bank have approved to raise additional tier I capital by issuance of Mudaraba Sukuk through private placement. This remains subject to regulatory approvals from the Capital Market Authority and the Central Bank of Oman. 19 COMPARATIVE INFORMATION Certain of the corresponding figures have been reclassified in order to conform with the presentation for the current period. Such reclassification do not affect previously reported loss or owners' equity.