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Dar Al-Maal Al-Islami Trust
Annual Report 2013
Report on the consolidated financial statements
We have audited the accompanying consolidated financial statements of Dar Al-Maal Al Islami Trust and its subsidiaries (the “Group”),
which comprise the consolidated statement of financial position as at 31 December 2013, and the consolidated statement of income,
consolidated statement of comprehensive income, consolidated statement of change in equity and consolidated statement of cash flows
for the year then ended, and a summary of significant accounting policies and other explanatory notes.
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with
International Financial Reporting Standards (IFRS), and for such internal control as management determines is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. Except as discussed below,
we conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement
of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal
control relevant to the Group’s preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.
Basis for qualified opinion
As indicated in note 16 to the consolidated financial statements, on accounting for its acquisition of a controlling stake in Ithmaar Bank
B.S.C. (“Ithmaar”) during the year 2010, management determined the fair value of the Group’s previously held interest on the basis of
an independent valuation which used an average of a peer group market analysis of similar banks listed on the Bahrain stock exchange
and a discounted cash flow, adjusted for an estimated control premium. This methodology was accepted by management on the basis
that it does not consider that an active market existed for the shares of Ithmaar and therefore the quoted market price was ignored. In our
opinion, this valuation methodology was not in accordance with IFRS which stipulates that the most recent transaction prices should be
taken into consideration as an input in the valuation model, unless it can be demonstrated that these transactions related to distressed
sales. Had the quoted market price been used as an input into what we believe is an acceptable valuation methodology that market
participants would consider in valuing the Group’s previously held in interest in Ithmaar, this would have resulted in a valuation of US$
483.6 million rather than US$ 587.1 million, and led to a decrease in the consolidated retained earnings in the amount of US$ 103.5
million for the years ended 31 December 2013 and 2012 and a corresponding decrease in goodwill and non-controlling interests in the
amounts of US$ 111.6 million and US$ 8.1 million respectively for both years.
In addition, as indicated in note 3 to the consolidated financial statements, management determined the value in use of Islamic
Investment Company of the Gulf (Bahamas) Limited exceeded its carrying value as at 31 December 2013 and as such no impairment
has been recognised on the related goodwill and intangible balances of US$ 32.2 million and US$ 19.7 million, respectively. In
our opinion, the attached financial statements have not properly disclosed nor considered the significant uncertainty surrounding the
valuation of the entity as a result of the performance of the underlying funds under management. As such, there is a significant risk that
the goodwill and intangibles of a combined amount of US$ 51.9 million might be impaired.
Qualified opinion
In our opinion, except for the effects of the matters described in the Basis for qualified opinion paragraph above, the consolidated financial
statements present fairly, in all material aspects, the financial position of the Group as of 31 December 2013, and of its financial
performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.
PricewaterhouseCoopers Ltd
Alex Astolfi
Nicolas Colledge
Geneva, 15 May 2014
Report of the Auditor
To the Bearers and Owners of Equity Participations of Dar Al-Maal Al-Islami Trust
