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Jordan Mortgage Refinance Company,
A public shareholding company with limited
liability, established in pursuance to the
Temporary Companies Law No. (1) for the year
1989, registered in the public shareholding
Companies Register on 5/6/1996 under No.
(314) with a capital of Jordanian Dinars (5)
million, and licensed to operate as of 22/7/1996.
Head Office : Amman,The Hashemite Kingdom of Jordan .
Address : I5 Al - Mahdi Bin Baraka Street/
Western Shmeisani
P.O.Box 940743 Amman 11194 Jordan,
Tel: 5601417
Fax: 5601542
E-mail: jmrc@go.com.jo
Web site: www.jmrc.com.jo
1
Contents
Letter from the Chairman of the Board of Directors 12
Economic activity indicators and housing finance market in Jordan during 2005 14
JMRC's incorporation, objectives, sources of funds, and operations mechanism. 16
Benefits of borrowing from JMRC. 18
Benefits of investing in JMRC bonds 19
JMRC's activities and achievements during 2005. 20-25
- In the area of refinancing of housing loans.
- In the area of borrowing.
- In the area of marketing.
- In the area of training.
Financial analysis of JMRC’s financial statements for the year 2005 26
JMRC's organizational chart and its human resources. 28
Introductory Background about Executive Management Staff 30
Projected action plan. 32
Other information about JMRC. 33
Agenda of the annual ordinary meeting of the general assembly. 37
Recommendations of the Board of Directors concerning distribution of profits. 38
Financial statements as of 31 December 2005 together with auditor's report. 39-54
11
HIS MAJESTY
KING ABDULLAH II
BIN AL HUSSEIN
3
The Board of Directors
The Chairman
H.E. Dr. Omayah Toukan: Representative, Central Bank of Jordan.
Vice Chairman
Engineer Shehadeh Abu Representative, Housing & Urban Development Cor-
Hdaib : poration
Members
Mr. Ibrahim Daher Representative, Central Bank of Jordan
Miss Malak Ghanim Representative, Central Bank of Jordan
Mr. Jamal Ashoor Representative, Social Security Corporation
Mr. Mohammed Mousa Representative, Arab Bank
Mr. "Mohammed Mazen" AL- Khalha Representative, Housing Bank for Trade & Finance
Mr. Zahie Fakhourri Representative, Jordan National Bank.
Mrs. Simona Sabilla Representative, Cairo- Amman Bank
Miss Ghada AL- Farhan Representative, Jordan Commercial Bank
Mr. Tawfiq Mukahal Representative, Jordan Kuwait Bank
Managing Director
Mr. Ibrahim Daher
Auditors
Messrs./ Arab Professionals
Member of Grant Thornton International
Legal Consultant
Advocate Mousa AL-Aaraj
5
* Dr. Umayya Salah Toukan:
Introductory
Chairman of the Board
• Academic Qualification: Background
- B.Sc. in in Busniess Administration/ American Univerisyt - Beirut. about
- Diploma in Economic Development/ Oxford University - London.
- PHD in Monetary Economics (Money & Financial Markets)/ Members of
Columbia University - N. Y. USA.
the Board of
• Present Position:
Governor of the Central Bank of Jordan from 1/1/2001 Directors
• Previous Experience:
- Head of the Economic Research Department at the Centeral
Bank of Jordan.
- Economic advisor for the prime minister or Jordan.
- Director General of the Stock Exchange in Jordan.
- Senior Economist at the Arab monetary fund-Abu Dhabi.
- Representative of Jordan in the United Nations - N. Y
(Economic & Financial Committee).
- Ambassador of Jordan in the Kingdom of Netherlands, the
Kindgdom of Belgium, the grand Duch of Luxembourg.
- Representative of Jordan in the European Union.
* Engineer Shehadeh Abu Hdaib:
Representative, Housing & Urban Development Corporation
• Academic Qualification:
- B.Sc. in Civil Engineering/ Texas University/USA -1981
• Present Position:
Director General, Housing & Urban Development Corporation
since 5/12/2004
• Previous Experience:
- Chairman of the Board of Petra Region Authority
1/1/2000-5/12/2004.
- Director General, Petra Region Authority 1/9/1999-5/12/2004.
- Consultant to Greater Amman Mayor and Director of Central
Amman Development Project 1982-1999
- Member of Government Tenders Committee
- Representative of the Social Security Corporation in the Board
of the National Company for the Toursim Development.
- Member of the Higher Organization Council.
7
* Mr. Ibrahim Daher
Representative: Central Bank of Jordan
• Academic Qualification:
- BA in Business Administration/ University of Jordan,1974
- Higher Diploma in Education/ University of Jordan,1977
• Present Position:
- Managing Director -JMRC
• Previous Experience:
- Worked in the Housing Bank for Trade & Finance
1/10/1974-8/3/2004
During his tenure, he held several administrative, financial and
banking positions, including: Branch manager for (7) years,
director of low-cost housing loans department, executive
director of housing loans and due installments, executive
director of credit risks management department, and executive
director of property and administrative departments.
- Member of the Board of Directors/ Housing & Urban
Development Corporation.
* Miss Malak Ghanim
Representative, Central Bank of Jordan
• Academic Qualification:
- MBA in Banking & Finance Development-Finfrica Foundation
Milan/ Italy 1987.
- B.Sc. in Accounting/ University of Jordan 1976
• Present Position:
- Executive Director- Banks Control Department/ Central Bank
of Jordan
• Previous Experience:
- Holding several leading positions, Central Bank of Jordan
since 1976.
* Mr. Jamal Ashoor
Representative, Social Security Corporation
• Academic Qualification:
- B.Sc. in Accounting-Arab Republic of Egypt- 1981
• Present Position:
- Head of Internal Audit & Control Department - Social Security
Corporation
• Previous Experience:
- Held several leading positions - Social Security Corporation
since 1981.
8
* Mr. Mohammed Mousa
Representative, Arab Bank
• Academic Qualification:
- B.Sc. in Mathematics/ Business Administration/ University of
Jordan-1978
• Present Position:
Corporate Credit Manager/ Corporate Sector Management/
Jordan and Palestine Branches-Arab Bank
• Previous Experience:
- Head of Guarantees Department-Arab National Bank/Jeddah-
Saudi Arabia, Aug 1982 - Oct 1983.
- Credit Facilities Departments/ General Management-Arab
Bank Jordan since November 1978.
* Mr. "Mohammad Mazen" AL- Khalha
Representative, Housing Bank for Trade & Finance
• Academic Qualification :
B.Sc. in Economics & Commerce/ University of Jordan-1975
• Present Position:
Risks Management Manager/Housing Bank for Trade & Finance
• Previous Experience:
- Worked at the Housing Bank for Trade & Finance 1975-1976
- Financial Controller with a contracting establishment
1976/1985.
- Housing Bank for Trade & Finance since 1985-present. He
gradually held several financial and banking positions
including: controller, branch manager and facilities manager,
authorized credit manager (ASCO), commercial credit center
manager, regional manager.
* Mr. Zahie Fakhourri
Representative, Jordan National Bank.
• Academic Qualification:
- B.Sc. in Accounting
• Present Position:
- Assistant General Manager for Trade Facilities - Jordan
National Bank
• Previous Experience:
- Since 1973 worked at Arab Bank, International Credit &
Commerce Bank, Business Bank and Jordan National Bank.
9
* Mrs. Simona Sabilla
Representative, Cairo-Amman Bank
• Academic Qualification:
- BA in Arts/ Major: English Language, Minor: Education
University of Jordan-1977.
• Present Position:
- Assistant General Manager, Risks Management and
Compliance Control- Cairo-Amman Bank
• Previous Experience:
- Chase Manhattan Bank/Amman September 1977- March 1986
- Bank of Jordan/Amman, April 1986-August 1995.
- Cairo-Amman Bank, August 1995- Present.
* Miss Ghada AL- Farhan
Representative, Jordan Commercial Bank
• Academic Qualification:
- Financial Investments & Capital Management / Hubert Hum-
phrey Fellow Boston University, Boston M.A 1999-2000.
- MBA in International Management/ East London University,
United Kingdom 1995.
- BA in Economics/ American University of Beirut 1983.
• Present Position:
- Deputy General Manager - Jordan Commercial Bank snice 1/9/2004.
• Previous Experience:
- Held various positions at the Social Security Corporation, the
last of which was Assistant Manager of Projects & Shares
Investment Department 1984-2004
* Mr. Tawfiq Mukahal
Representative, Jordan Kuwait Bank
• Academic Qualification:
- BA in Business Administration/ University of Jordan-1974
• Present Position:
- Assistant General Manager and Supervisor of Facilities
Department/ General Management - Jordan Kuwait Bank.
• Previous Experience:
- Local Credit & Marketing Department The National Bank of
Kuwait from 1974-1990.
- Jordan Kuwait Bank, since 1991.
- Member of the Board of Directors/ Trust Investment Company,
representing Jordan Kuwait Bank.
10
Dear Shareholders,
Letter It is my pleasure to present to you the ninth annual report of
the Company, which reflects JMRC's major achievements during
From the
2005, its financial position as at the end of 2005 through its
Chairman balance sheet and final accounts and briefly sheds light on its
Of the action plan for the future.
JMRC's establishment, with joint efforts of the public and
Board of private sectors, represents one of the important aspects for
Directors restructuring the housing sector in the Kingdom, considered one
of the main sectors of the national economy. JMRC also
constitutes a new and important link between money market and
capital market through its provision of medium and long term
finance to local banks and financial institutions, which grant
housing loans from its different financial resources, most
important of which is the proceeds of JMRC corporate bonds
issues in the local capital market.
JMRC's work mechanism, through refinancing housing loans,
provides banks and financial institutions with the opportunity to
increase their participation in granting housing loans and
subsequently expand housing loans base in the Kingdom. This
mechanism helps to overcome the lack of medium and short- term
financial resources for the housing sector in the banking sector
institutions. Moreover, JMRC's loans enable banks and financial
institutions to manage their assets and liabilities more efficiently
through matching the terms of their resources and uses of funds.
Dear Shareholders
During 2005, JMRC continued to focus its efforts to deepen
and develop the housing finance market in the Kingdom, through
developing the primary market by increasing the volume of
housing finance offered by local banks and developing housing
loans programs introduced by these financial institutions offering
such type of loans. JMRC also persist its effort to develop the
secondary mortgage market by increasing the volume of
refinance loans offered by JMRC to banks and developing the
capital market by increasing JMRC issues of corporate bonds
with the aim to provide the funds necessary for its refinance loans
12
activities in addition to increasing the number of financial
institutions that invest in corporate bonds issued by the Company.
In spite of the events which the region has witnessed and the high
liquidity available in most local banks, yet the Company's efforts -
during the year 2005 - resulted in granting refinance loans to banks
in the amount of JD (48) million, from which 6 financial institutions
benefited so that the loans granted by the Company since its
establishment reached approximately JD (153) million at the end of
2005. Moreover, the balance of refinance loans at the end of 2005
reached about JD (100) million covered about (6500) housing loans.
During 2005 the Company issued corporate bonds in the amount of
JD (48) million. The Company's efforts resulted also in promoting
some banks to grant housing loans at constant interest rates.
It is to be noted that JMRC's action plan for the future includes,
introduction of new lending programs to cope with the
developments in housing refinance market in consistent with the
requirements of different banks, borrowers and investors in terms of
investment in low risk financial instruments, in addition to
increasing the volume of its operations in refinance loans and
issuance of corporate bonds for different terms. JMRC is also
considering the possibility of expanding purchasing mortagage
loans portfolios and issuing mortgage-backed securities.
Dear Shareholders,
Before concluding this letter, let me express, on behalf of my
colleague members of the Board, our most sincere gratitude and
appreciation to our government and CBJ for their trenuous efforts to
support the Company's march. We would also like to express our
thanks to the Company's Managing Director and its entire staff for
their sincere efforts. I hope that Almighty Allah will help us all in
shouldering the responsibility, fulfilling the duties entrusted to us
and serving our country under the leadership of his majesty our
great King Abdullah the II Bin Al Hussein,
Allah is the bestower of success
Dr. Umayah Tuqan
Chairman of the Board of Directors
13
During 2005, the Jordanian economy continued to realize
Economic
positive achievements and improvement in performance at the
activity macro level. which exceeded 7% in constant prices, compared with
indicators economic growth rates 7.5% in 2004, 3.4% in 2003 and 5.1% in
2002.
and housing On the monetary policy level, the Central Bank of Jordan
finance continued its policy in 2005 to maintain monetary stability,
reinforce the immunity of the banking system and provide a
market in suitable interest rates structure that copes with local and
Jordan during international economic developments. The Central Bank of Jordan
was able to maintain a convenient level of foreign reserves, which
2005 reached its highest level at the end of December 2005, about $
(4.8) billion.
On the capital market level, Amman Stock Exchange witnessed
an outstanding activity in 2005 where the trading volume until the
end of December 2005 amounted to JD (16.9) billion, the highest
since its establishment in 1978, compared to about JD 3.79 billion
at the end of 2004. The capital market witnessed also a remarkable
activity in the volume of bonds and bills issued or guaranteed by
the Jordanian Government, in addition to private sector issues.
Despite of the activity which the bonds market witnessed during
2005, yet the role of this market is still in need for reinforcing and
enhancing its role in mobilizing national long term savings and
finance resources including promoting trading therein.
In this respect, it is worth mentioning that development of
capital market is vital for JMRC's activity. It is also considered one
of the most objectives for which the Company was founded.
In the domain of real estate market, the construction sector
continued to realize high growth rates during 2005 in view of the
rise in infrastructure projects and the areas licensed for
construction inside the Kingdom, However, Jordan, like other
countries, is still facing the problem of providing housing units for
low - income citizens.
The housing sector is one of the important sectors in the
national economy since it is related to providing the local
community with suitable housing units and its link with other
several economic activities. Therefore, activating this sector will
14
necessarily lead to activating the national economy and
subsequently contribute to increasing the actual growth rates in the
national economy.
Regarding developments in the primary market for housing
loans, a remarkable growth was noticed in the volume of housing
loans and improvement of its conditions, and a decline in interest
rates on housing loans more than the decline in the interest rates in
the market on banking facilities for other purposes. Some local
banks started to grant housing loans at constant interest rates,
during interest periods, reaching (10) years from the life of a
housing loan. In this respect, JMRC has played an outstanding
role.
15
JMRC's Incorporation:
incorporation, Historic Background:
objectives, JMRC is a public shareholding company. It was established in
sources of mid 1996 on direction of the Government, with the cooperation of
the International Bank for Reconstruction and Development and the
funds and support of the Central Bank of Jordan for the purpose of providing
work medium and long-term financing for the Jordanian housing sector.
mechanism Objectives:
The following are the most important objectives, which JMRC is
seeking to achieve:
- Develop and improve housing finance market in the Kingdom by
enabling banks and other financial institutions increase their
participation in housing loans lending.
- Promote and develop capital market in the Kingdom through
issuing corporate bonds in the local capital market and thus
contribute to increasing investment instruments in the market.
- Provide middle and long- term finance for Islamic banks and
financial institutions.
JMRC sources of funds
- Paid-up capital amounting JD (5) million
- Subordinated loan in the amount of about JD (13.5) million, ob-
tained from the Government for 20 years, originally a loan which
the Government received from the International Bank for Recon-
struction and Development in US$. The loan balance as at 31/12/
2005 was JD (10.9) million.
- Proceeds of JMRC's bonds.
16
JMRC's operation mechanism
JMRC provides middle and long-term finance for banks
operating in the Kingdom through refinancing housing loans
granted by these institutions to citizens at a percentage not
exceeding (83%) of the outstanding balances of housing loans.
JMRC's policy has specified the principles and criteria that ought
to be available in the borrowing financial institution and in the
housing refinance loan.
To guarantee the loan obtained by the bank from the Company,
the bank transfers first preferred property mortgages pertaining to
the housing loans granted by it in favor of the Company at a
percentage of not less than (120%) of the value of JMRC's loan
granted to the bank, provided that the housing loans granted by the
bank shall not be under any installments due and that the bank
undertakes to transfer alternative mortgage deeds throughout the
life of JMRC's loan to the bank.
Under JMRC's credit policy the bank was also permitted to
provide temporary guarantees until it can provide the Company
with necessary property mortgages. The most important of such
temporary guarantees are the Jordanian Government bonds or
bonds guaranteed by it, treasury bills, JMRC's Bonds. It is worth
mentioning that JMRC grants its loans on the strength that the loan
principal shall be repaid on its maturity date and payment of
interest at the end of every (6) months until the expiry of its term.
In special cases, JMRC grants housing refinance loans on the basis
of settlement of the principal loan and loan interests periodically.
Loans granted by JMRC to banks for refinancing housing loans
enable these banks to increase its participation in the housing
finance market and minimize the risks of mismatching between the
sources and uses of its funds and encourage competition among
these banks, which would eventually be in the interest of citizens.
Benefits of borrowing from JMRC
17
Benefits of Refinance by JMRC provides banks and financial institutions
with the following benefits:
borrowing -Sources of funds at a cost relatively lower than other banks'
from JMRC sources.
- Improve the capital adequacy ratio as JMRC's loans are risk
weighted at 20% on housing loans granted by the bank, not
exceeding the refinance loans amounts borrowed from JMRC.
- The bank is exempted to allocate provision for the good housing
loans refinanced by JMRC.
- Help the bank to improve assets and liabilities management,
through better matching of sources and uses of its funds (ALM).
- Enable the bank to avoid interest rates risks (IRR) on mortgage
loans, by fixing interest rates on these loans through using
JMRC's work mechanism.
- Exclude the loans refinanced by JMRC from the loans granted for
construction and purchase of real estates upon calculating the
percentage determined under the Banks Law, which provides that
the loans granted for construction and purchase of real estates
purposes shall not exceed 20% from the total bank's deposits in
Jordanian dinar.
18
Benefits of investing in JMRC bonds Benefits of
- JMRC's bonds are risk-weighted at (20%) for the purpose of
investing
calculating the capital adequacy ratios of banks.
- JMRC's bonds have priority in repayment over the Company's
JMRC bonds
obligations resulting from the loan granted to it by the
Government.
- JMRC's bonds are eligible to serve as liquidity reserve holding of
banks for the purpose of calculating the legal liquidity ratios as
required by the Central Bank of Jordan .
- Interests derived from JMRC's bonds and profits generated from
investment in these bonds are exempted from taxation in
accordance with the Income Tax Law.
- JMRC's bonds provide investors with stable periodical cash flow.
- JMRC's bonds are easy to subscribe to, and they are tradable in
the local capital market.
19
The following are the most important JMRC's activities during
JMRC's
2005:
activities &
achievements In the area of refinancing of housing loans
JMRC continued its lending activity during 2005 and signed (8)
during 2005 refinance housing loan agreements for terms ranging between
(1-10) in an amount of JD (48) million Therefore, the number of
refinance loans agreements signed since JMRC inception until 31
December 2005 has been (70) agreements with a total amount of
JD (153) million approximately. The balance of rifinance loans on
31/12/2005 was JD (100) million covering about 6500 housing
laons, the appraisal value of collateral amounts to JD (246) million.
The following table shows the current amounts of mortgage
loans refinanced, as of 31/12/2005:
Million (J.D)
No. of Balances of Balance of Refinancing Appraised
Borrowing Bank No of
Housing housing refinancing loans value of
Agreements
loans loans loans collateralized collateral
Housing Bank for 5 811 9.5 4.5 9.5 19.3
Trade & Finance
Egyptian Arab Land 10 722 10.7 13.2 17.6 23.2
Bank
Jordan Kuwait Bank 2 1437 17.1 11.3 19.0 40.8
Jordan National Bank 4 598 11.4 8.4 11.4 26.2
Arab Banking 4 998 12.9 9.5 12.9 27.9
Corporation
Cairo Amman Bank 1 735 18.1 15.0 18.1 31.5
Export & Finance 7 535 25.9 25.1 30.9 44.5
Bank
Societe General Bank 2 187 4.1 3.0 4.1 8.6
Union Bank for Saving 3 502 11.1 10.0 15.9 24.6
& Investment
Total 38 6525 120.8 100 139.4 246.6
20
It is clear that there has been an improvement in the distribution
of refinance loans granted by JMRC, in terms of the number of
institutions benefiting from refinance loans and volume of lending
for each institution.
The following chart shows the distribution of JMRC's refinance
loan outstanding balances by bank as at the end of 2005:
Distribution of refinance loan balances
The following chart shows the growth in the outstanding
balances of the refinancing loans granted by JMRC during the
period from 1/1/1999 to 31/12/2005:
Development of refinance loan balances
million JD
21.66 23.75 48.71 58.29 63.94 73.84 100.02
21
In the area of borrowing
During 2005 JMRC issued corporate bonds with a nominal
value of JD (48) million. This brings the total amount of corporate
bonds issued by JMRC since its establishment and until December
31, 2005 to JD (203.75) million, with (1) and (3) and (5) year
terms.
The volume of JMRC corporate bonds outstanding as at
31/12/2005 stood about (80.98) million JD. It is worth mentioning
that JMRC has issued its corporate bonds through private and
public subscription to investors. The interest rates on JMRC
financial papers reflected the low risks associated with JMRC
issues of these papers.
It is also worth mentioning that the financial papers issued by
JMRC are collateralized by the Company's assets, which include
the refinance loan portfolio, which in turn is collateralized by
mortgage deeds duly transferred to the order of JMRC whose value
exceeds (120%) of the outstanding balance of the Company's loans
at the end of each quarter through the life of these loans.
- The data available with the Company indicate that the mortgage
deeds value is equivalent to 176% of the refinance loan
balances.
- The total appraised value of mortgaged properties to the
outstanding balances of the refinancing loans stood at 243%.
- The outstanding balances of the refinanced mortgage loans to
the outstanding balances of the refinancing loans stood at
137%.
22
The following table shows the outstanding JMRC's
bonds as at 31/12/2005:
Issue Nominal value Interest Issue Maturity Interests payment dates Bond value
No Million JD Rate % Date Date amortization option Market value
4 5.00 6.800 31/5/2001 31/5/2006 Four equal installments every (3) 10000
months, on (31/8), (30/11), (28/2)
and (31/5) throughout the issue life
7 3.00 5.750 19/9/2001 19/9/2006 Four equal installments every (3) 10000
months on (19/12), (19/3), (19/6)
and (19/9) throughout the issue life.
12 5.00 3.75 3/3/2003 3/3/2006 Two equal installments every (6) 10000
months on (3/9) and (3/3)
throughout the issue life.
13 5.00 4.60 11/5/2004 11/5/2009 Two equal installments every (6) 1000
months on (11/11), (11/05) 970
throughout the issue life
15 2.480 3.25 3/6/2004 3/6/2007 Four equal installments every (3) 10000
months on (3/9), (3/12),(3/3) and
(3/6) throughout the issue life
Bonds shall be amortized every (3)
months on interests payment dates
14 3.00 3.75 14/6/2004 14/6/2007 Two equal installments every (6) 10000
months on (14/12) and (14/6)
throughout the issue life
17 2.00 4.35 20/7/2004 20/7/2007 Two equal installments every (6) 10000
months on (20/1) and (20/7)
throughout the issue life
Bonds shall be amortized every (6)
months on interests payment dates
at (6) installment
16 3.00 5.413 28/7/2004 28/7/2007 Two equal installments every (6) 10000
months on (28/1) and (28/7)
throughout the issue life
19 4.00 4.75 5/12/2004 5/12/2007 Two installments every (6) months 10000
on (5/6) and (5/12) throughout the
issue life
25 4.00 4.00 13/3/2005 13/3/2006 Interest and nominal value will be 10000
paid on maturity date
26 3.00 4.185 15/3/2005 15/3/2006 Interest and nominal value will be 10000
paid on maturity date
18 5.00 5.4 5/4/2005 5/4/2010 Two equal installments every (6) 1000
months on (5/10) and (5/4)
throughout the issue life
27 5.00 4.50 24/4/2005 24/4/2006 Interest and nominal value will be 1000
paid on maturity date
28 5.00 4.822 22/5/2005 22/5/2006 Interest and nominal value will be 10000
paid on maturity date
29 5.00 4.93 5/6/2005 5/6/2006 Interest and nominal value will be 10000
paid on maturity date
30 1.500 4.93 3/7/2005 3/7/2006 Interest and nominal value will be 10000
paid on maturity date
31 5.00 5.58 25/9/2005 25/3/2006 Interest and nominal value will be 10000
paid on maturity date
32 15 9.07 10/11/2005 10/11/2010 Two equal installments every (6) 1000
months on (10/5) and (10/11)
throughout the issue life
JMRC may amortize the bonds
partially and totally one year after
issue on the interest rates payment
dates.
Total 80.98
23
The following chart shows the growth in JMRC's
bonds issues during the period 1998 - 2005:
Growth of JMRC issue of bonds
NB: No trading transactions were carried out on JMRC
outstanding corporate bonds during 2005 other than the thirteenth
issue where two trading transactions were carried out at sale price
of 970 JD per each bond.
In the area of marketing
During 2005 JMRC continued its efforts to market its different
products in the lending side as well as in the borrowing side, through
field visits for various management levels of concerned parties as well
as through conducting several workshops for banks to explain the
Company's objectives, the mechanism of its work, and the advantages
to borrowers and to investors in its corporate bonds. The
above-mentioned marketing activities contributed remarkably to
increasing the volume of housing loans extended by banks and to
improving in the terms of such loans.
24
The following table summarizes the components of the housing
loan programs available in the market by local banks:
Purposes of the Loan Financing residential house and/or purchasing house and/or residential
apartment and/or completion of construction and/or maintenance of house
and/or expanding an existing estate and/or purchasing land for the purpose of
constructing a residential house.
Interest rate Varies between 6% - 9%.
Commission Varies between 0% - 1% annually.
Loan duration Up to (20) years.
Percentage of loan/ guarantee Up to 100% of the estimated value of property but often less than 80%.
In the area of training
Since its incorporation, JMRC continued its efforts to provide
necessary training to its staff, through joining courses or through
inviting experts to train employees and offer consultations.
A number of staff members have participated, during 2005 in
the following training courses:
Training course No. of No. of
courses participants
Administrative 1 2
Computer 2 2
Languages 7 5
Total 10 9
The managing director participated in the Islamic Financial
Markets Conference held in Manama/Bahrain during May 2005.
25
Financial analysis of JMRC financial statements for
the year 2005:
When comparing the JMRC's financial statements as at the end
of 2005 with 2004 the following can be noticed:
1- The outstanding balance of refinance loans with banks has
increased by JD (26.2) million at 35.4% to reach JD (100)
million from JD (73.8) million at the end of the previous year. It
is worth mentioning that the total amount of refinance loans
granted during 2005 stood at JD (48) million, of which JD (43)
million are new loans and JD (5) million renewed loans. The
total amount of repaid loans and installments during the year
was JD (16.8) million.
2- The total amount of assets has increased by JD (17.2) million at
18.6% to reach JD (109.6) million from JD (92.4) million at the
end of the preceding year.
3- The outstanding balance of corporate bonds issued by JMRC has
increased by JD (7.4) million at 10% to reach JD (81) million
compared to JD (73.6) million at the end of 2004. It is worth
noting that the corporate bonds issued during the year amounted
JD (48.5) million while the corporate bonds and financial
papers repaid were JD (41.1) million.
4- Shareholders' equity has increased by JD (367.2) thousand
compared to the previous year to reach JD (6.6) million, an
increase of 5.9%.
5- The gross profits of the Company's operations have increased by
JD (137.1) thousand compared to the previous year i.e. an
increase of 13.6% to reach JD (1.15) million.
6- The net profits before taxes and provisions have increased by JD
(123.4) thousand compared to the previous year at 21.3% to
reach JD (702.2) thousand.
26
The following chart shows the growth of the
Growth of years 1999-
Company's assets during the JMRC Assets 2005.
million JD
Growth of JMRC Assets
28.39 37.67 73.21 67.27 71.65 92.43 109.63
The following are the most important financial ratios
for the year 2005 as compared with 2004:
Description 2005 2004
% %
Shares allocation of net profit 8.8 8.9
Cash in banks to total assets 5.3 17.8
Refinance loans to total assets 91.2 79.9
Returns on shareholders equity 6.7 7.23
Borrowed money to shareholders equity/ once 15.7 13.9
Percentages of collaterals related to JMRC's activities for 2005
as compared with 2004 were as follows:
Description 2005 2004
% %
Value of mortgage deeds to the balances of 177.8 194
refinance loans
Estimated value of mortgaged real estates to 253.4 273
the balances of refinance loans
Balances of refinanced housing loans to the 140.9 148
balances to refinance loans
Balances of refinance loans to the total nominal 123.6 126
value of the outstanding JMRC corporate bonds
Value of real estate mortgage deeds transferred 219.8 195
to the Company to the total nominal value of
the outstanding balance of JMRC corporate
bonds.
27
JMRC
Organizational
Chart and
Company's
Structure and
Human
Resources
28
Human Resources of the Company:
The number of JMRC staff members, including the managing
director, reached (24) at the end of 2005 and two staff members
were appointed during 2005. Staff members are appointed
according to the Company's need.
Grades and salaries of staff members are fixed in accordance
with their qualifications and practical experience.
The following is a list showing the Company's staff members
and their academic qualification:
Academic Qualification Number
MA 2
Higher Diploma 1
BA 14
General Secondary Education 4
Below General Secondary Education 2
Unclassified 1
Total 24
The following is a list of the names of the higher management
Ibrahim Daher
who have executive power with their functional ranks and
Managing Director
academic qualifications:
Representative Cen-
tral Bank of Jordan
Name Title Educational qualifications
Mr. Saad AL- Bishtawi Head of Bond (BA) Business Administration 1972
Issuance Dept.
Mr. Bassam Head of Mortage Master MBA/Finance 2003
Abu Sahab Refinance Dept. (BA) Business Administration
Sciences 1991;
Mr. Moh'd Head of Finance (BA) Accounting 1972
Rasoul Bayazidi Division
Mr. Zuhair Head of Administration (BA) Business Administration 1990
AL - Qudah Division
29
1- Mr ÆSaad AL- Bishtawi
Introductory
• Academic Qualification:
Background - B.Sc. Business Administration/ University of Jordan-1972
about • Present Position:
Head of Bonds Issuance Department JMRC since April 11, 1998.
Executive
• Previous Experience:
Management - The First National Bank of Chicago - Abu Dhabi,1975-1976
Staff - Central Bank of the United Arab Emirates- Abu Dhabi
1976-1995: Leding Positions (i.e. General Accounting,
Finance, Investment and Foreign Relations).
- Arab Bank -Regional Management/ Ramallah
Head of Treasury & Investments Department, 1995-1998.
Member of the Bank's Assets & Liabilities Management
Committee.
2- Mr. Bassam Abu Sahab
• Academic Qualification:
- MBA in Finance/ University of Jordan -2003
- BA in Administrative Science/ Muta' University 1991
• Present Position:
- Head of Refinance Dep./ Jordan Mortage R. Co. since
27/6/2004-Present.
• Previous Experience ∫
- Head of Loan Division - JMRC 16/8/1997-7/2/2004.
- Assistant Manager/Bank of Jordan 8/2-24/6/2004.
- Chief Accountant at the Supply Company 1991-1997.
30
2- Mr. Mohammad Rasoul Bayazidi∫
• Academic Qualification:
- B.Sc. Accounting: Arab University of Beirut -1972
• Present Position:
- Head of Finance Division JMRC since 3/1/1998.
• Previous Experience∫
- Accountant at the Natural Resources Authority- 1965-1974
- Auditor at Badi & Abdel Jawad Office-Libya- 1974-1975.
- Financial Manager at the Industrial Casting & Sanitary
Materials Company- Saudi Arabia- 1975-1976.
- Executive Manager then General Manager of Modern
Company for Construction Materials Industry in Jordan
1976-1979.
- Chief Accountant and Acting Financial Manager at the Arab
Co. for Drug Industries & Medical Appliances (ACDIMA) in
Jordan 1979-1995.
- Financial and Administrative Manager at the United Glass
Industries Company in Jordan, 1995-1997.
4- Mr. Zuhair AL - Qudah
• Academic Qualification:
- BA in Business Administration/ Yarmouk University,1990
• Present Position:
- Head of Administration Division JMRC since 11/6/1997.
• Previous Experience:
- Different administrative and technical positions in the Royal
Jordanian Air Force 1969-1989
- Director of Navigation & Air Traffic Control RJAF 1989-1992
- Director of RJAF Archives & Corespondence Department
1992-1995.
31
The Company has set up a general framework for its work plan
Projected
for the next years. This plan aims at achieving the following:
action plan 1- Increase the volume of the Company's refinancing housing loans
in the secondary market by introducing new refinance programs
commensurate with the developments which the housing
refinance market is witnessing and encourage banks to increase
their participation in granting housing loans at constant interest
rates.
2- Increase the Company's issues of bonds to provide funds
required for refinancing loans and be proportionate to the
volume of the Company's refinance activities and widen the
base of investors in the Company's issues to include individuals
by issuing bonds through public subscription.
3- Adopt a suitable mechanism to deal with financial institutions,
which grant mortgage loans in accordance with Islamic Sharia
law.
4- Purchasing mortagage loans portfolios and issuing
mortgage-backed securities.
The company expects to grant housing loans in the amount of
(55) million JD during 2006. The funds necessary for sucth
transaction shall be provided by issuing corporate bonds in the
capital market.
it is expected also that the growth rates in the Comapany’s
activities and turnover shall be within the range of the rates
realized during the year 2005.
32
The following information about the Company is disclosed in
accordance with the requirements of the law: Other
a. The Company enjoys the following privileges:
1- In mid November 1997, The Company was exempted from the information
fees of transferring mortgage deeds in favor of the Company
or in favor of the borrowing banks, on a case by case basis. about
2- The Central Bank of Jordan has agreed to risk weigh-housing
loans at 20% for the purpose of computing the capital
JMRC
adequacy ratio only to the total of borrowed amounts from
the Company.
3- The Central Bank of Jordan has agreed to exempt the
borrowing banks from JMRC from the required general
provisions on the refinanced housing loans to the total of the
outstanding balance of the refinance loans.
4- The Central Bank of Jordan has agreed to consider the
holding of JMRC bonds and short-term financial papers (less
than one year) as part of the liquid assets in the balance sheet
of banks and financial institutions for the purpose of
computing the applicable legal liquidity ratio.
5- The Central Bank of Jordan has agreed to risk weigh JMRC's
bonds and short-term financial papers (less than one year) at
20% for the purpose of computing the capital adequacy ratio.
6- Interests and profits realized from investing in JMRC's bonds
and short-term financial papers (less than one year) shall be
exempted from taxes in accordance with the applicable
Income Tax Law.
7- The Central Bank of Jordan has permitted banks to deduct
the amounts of loans refinanced by the Company from the
total loans granted by financial institutions from the ratio
determined in the Banks Law, which prevents that the value
of loans for construction or purchase of real estates from
exceeding 20% from total bank's deposit in Jordan dinar.
b. Others:
1- The Company shares have been listed in Amman Stock
Exchange/Securities Market (Second Market) since August
20, 2002 and the book value for each share is one JD but no
trading transactions were carried out on the Company's
shares since its establishment.
2- JMRC's corporate bonds are listed in Amman Stock
Exchange/Securities Market as per the conditions indicated
in each issue's prospectus.
3- Company's contribution to the environment and society: The
Company grants refinance loans with the aim to expand the
housing refinance base and improve the opportunities for
citizens with different incomes to obtain housing loans.
Therefore the Company's role in this respect is indirect. In
33
2005 JMRC contributed by JD (1848) in the Institute of
Banking Studies expenses (scientific research allocation).
4- Amounts paid in 2005 to the Chairman and members of the
Board of Directors totaled JD (39600), as transportation
allowances, JD (33000) as an annual remuneration, JD
(1863) as travel expenses for the Managing Director and JD
(148631) as salaries, allowances, transportation allowances
and remuneration for the executive department staff.
5- The fees of the external auditors (The Arab Professionals) in
2005 amounted to JD (4988), including the sales tax.
6- The fees of the legal advisor, Mr. Nabel Law Office for the
period 1/1/2005 to 31/3/2005 amounted to JD (1015),
including sales tax.
7- The fees of the Company's legal advisor, advocate Musa Al
Araj for the period from 1/4/2005 to 31/12/2005 amounted to
JD (2250). including sales tax.
8- The Company does not depend on specified suppliers and/or
major local or foreign clients.
9- In 2005, no operations were recorded of repetitious nature,
which are not part of the Company's main activities.
10- The Company's previous managing director Dr. Zuhair
Khalifeh, has filed a legal action against the Company
claiming it to pay JD (390746) as compensations up to the
date of terminating his service on 9/3/2004. The Company
calculated his entitlements up to the end of his service in the
amount of JD (87253). These entitlements were calculated in
accordance with the employment agreement concluded
between the Company and him and pursuant to the Jordan
Labor Law. Such entitlements were documented in the
Company's records and the above amount was paid as per a
certified cheque drawn on the Company's account with the
Housing Bank for Trade & Finance to the order of the
execution officer at Amman Court of First Instance on
10/8/2004. The legal action is still being considered by the
court. Moreover, there are no other legal action or cases filed
before courts or pending against the Company.
11- JMRC's has no subsidiaries or branches.
12- The Company has not concluded any contracts, projects or
commitments with the Chairman of Board of directors or
members of the Board or with any Company employee or
their relatives.
13- The Company has not paid any donations or grants in 2005.
14- JMRC does not enjoy any government protection and has
no patent or concession rights.
15- There are no decisions issued by the government or
34
international and other organizations, which have any
material effect on JMRC's operations or products or on its
competitiveness. JMRC also, applies the international
accounting standards.
16- There are no competitors to JMRC in its sector or major markets.
17- Non of JMRC's Board members, executive managers
and their relatives owns any financial papers issued by
JMRC. Members of the Board of Directors represent the
institutions members in the Board.
18- The following table shows JMRC's profits before taxes and
provisions, distributed profits, and net equity for the year
1998 through 2005.
Amount in Million JDs
Year Shareholder’s net Net profits before Distributed
equity taxes and provision profits
1998 5.49 0.05 -
1999 5.43 0.21 0.25
2000 5.59 0.18 -
2001 5.89 0.25 0.35
2002 5.96 0.57 0.35
2003 6.05 0.58 0.30
2004 6.19 0.58 0.25
2005 6.6 0.70 0.25
19- Risks to which the Company might be exposed:
- Exchange rates fluctuation risks
All Company's assets and liabilities are in Jordan dinar and the
Company does not bear exchange rates fluctuation risks as a result
of the loan which the Government received from the International
Bank for Reconstruction and Development in United States Dollars
and refinanced by the Government to the Company in Jordan dinar
in accordance with the loan agreement concluded between the
Government and the Company.
- Interest Rates Risks
Financial instruments are subject to interest rates fluctuation
risks and nonconformity in assets and liabilities terms. The
Company's assets and liabilities department manages these risks
through harmonizing assets and liabilities maturity terms and
continuous revision of interest rates on assets and liabilities.
- Credit Risks
The Company keeps balances and deposits with banking
institutions of good solvency.
35
Shareholders owning 5% and more of the Company's shares:
Shareholder’s List Value/ No. Percentage
of Shares %
1- Central Bank of Jordan 900.000 18
2- General Social Security Corporation 500.000 10
3- Housing & Urban Development Corporation 500.000 10
4- Housing Bank of Trade & Finance 500.000 10
5- Arab Bank 500.000 10
6- Jordan Loans Guarantee Company 300.000 6
7- Jordan National Bank 250.000 5
8- Cairo - Amman Bank 250.000 5
9- Jordan Commercial Bank 250.000 5
No trading transactions were carried out since JMRC inception
In accordance with the provisions of Paragraph (E) of Article
(4) of the Instructions of the Disclosure and Accounting Standards,
issued by The Board of Commissioners of Jordan Securities
Commission, the Board of Directors of the Jordan Mortgage
Refinance Company declares, according to its knowledge and
belief, that there are no substantial issues that could affect the
continuity of the Company's activities during the fiscal year 2006.
The Board also admits its responsibility for the preparation of
the financial statements, and that the Company operates an
efficient Control system.
It further admits that the information and data indicated in the
Company's annual report for the year 2005 are accurate and
complete.
Moh'd Rasoul Bayazidi Ibrahim Daher Dr. Omayah Toukan
Head of Finance Division Managing Director Chairman
36
In accordance with the provisions of the applicable Companies Agenda of
Law No. 22 of 1997 and the Company's Articles of Association,
the Company's Board of Directors is pleased to invite you to attend the annual
the Ninth Ordinary Meeting of the General Assembly decided to be ordinary
held at 12:00 noon of Sunday on 5/3/2006 at the Conference Hall
of the Central Bank of Jordan to discuss the following items on the meeting of
agenda: the general
1- To read and approve the minutes of the last meeting of the
General Assembly.
assembly
2- To discuss and approve the Ninth Annual Report of the Board of
Directors for the fiscal year 2005 and the Company's plan of
action for the year 2006 for approval.
3- To read the report prepared by the Company's auditors for the
fiscal year ending on December 31st 2005.
4- To review the Company's balance sheet, the profit and loss
account, and the changes that have been introduced to the
shareholders equity as well as the cash flows as at 31st of
December 2005 and to discuss and approve it and release the
Board of Directors from any responsibility pertaining to these
matters.
5- To elect the Company's auditors for the fiscal year 2006 and to
determine their fees.
6- To discuss and approve any other matters in accordance with the
provisions of the Law.
The Board of Directors
37
Whereas the distributable profits amounted to (707138), Jordan
Recommend
dinar, the Board recommends to the Ordinary General Assembly to
ations of distribute this amount as follows:
the Board Allocation Amount (JDs)
of Directors Statutory Reserve 70,222
concerning Voluntary Reserve 67,879
Provision for income tax 167,820
distribution Provision for supporting scientific research & 7.022
of profits vocational training
Provision for supporting vocational education 4,171
and technical training fund
Provision for Jordanian universities fees 7,022
Remuneration for Board Members 33,000
7% of the Capital to the Shareholders 350,000
The Board of Directors
38
JORDAN MORTGAGE REFINANCE COMPANY
PUBLIC SHAREHOLDING COMPANY
AMMAN - JORDAN
FINANCIAL STATEMENTS AS OF
DECEMBER 31, 2005 AND 2004
TOGETHER WITH AUDITORS' REPORT
ARAB PROFESSIONALS
(Member of Grant Thornton)
39
JORDAN MORTGAGE REFINANCE COMPANY
PUBLIC SHAREHOLDING COMPANY
AMMAN - JORDAN
CONTENTS
Page
- Auditors' Report 41
- Balance Sheets as of December 31, 2005 42
- Statement of Income for the years ended 43
December 31, 2005
- Statement of Changes in Shareholders' Equity 44
for the years ended December 31, 2005
- Statement of Cash Flows for the years ended 45
December 31, 2005
- Notes to the Financial Statements 46-54
40
Auditors'
To The Shareholders of Report
Jordan Mortgage Refinance Company
Public Shareholding Company
We have audited the accompanying balance sheets of Jordan
Mortgage Refinance Company Ltd. (a public shareholding
company) as of December 31, 2005 and the related statements of
income, changes in shareholders' equity and cash flows for the year
then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with International
Standards on Auditing. Those Standards require that we plan and
perform our audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall
financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
Jordan Mortgage Refinance Company as of December 31, 2005
and the results of its operations and its cash flows for the year then
ended in accordance with the Law and International Financial
Reporting Standards and we recommend its approval by the
General Assembly.
The Company maintains proper books of account and the
accompanying financial statements and financial information
presented by the Board of Directors' report are in agreement
therewith.
Amman - Jordan
January 19, 2006
Arab Professionals
Amin Samara
(License No. 481)
41
Balance JORDAN MORTGAGE REFINANCE COMPANY
Sheet as of PUBLIC SHAREHOLDING COMPANY
December
ASSETS Note 2005 2004
31, 2005
Current Assets
( In Jordanian Dinars)
Cash at banks 3 5,758,560 16,485,919
Interest receivable 1,614,419 1,261,278
Current portion of long-term refinance loans 26,513,449 21,810,971
Other current assets 4 88,767 51,160
Total Current Assets 33,975,195 39,609,328
Available for sale investments 1,398,754 125,000
Employees' housing loans 209,853 96,090
Long-term refinance loans 5 73,490,209 52,024,844
Fixed assets, net 6 552,010 578,814
Total Assets 109,626,021 92,434,076
Liabilities and Shareholders' Equity
Current Liabilities
Short-term bonds 7 44,180,000 26,130,000
Short-term debt securities - 15,000,000
Accrued interest 1,845,901 827,684
Current portion of Government's loan 9 736,391 695,992
Other current liabilities 8 343,951 211,402
Total Current Liabilities 47,106,243 42,865,078
Long-term bonds 7 36,800,000 32,480,000
Government's loan 9 10,159,568 10,895,959
Central Bank of Jordan loan 10 9,000,000 -
Total Liabilities 103,065,811 86,241,037
Shareholders' Equity
Common Stock, par value JD1, authorized
and issued 5,000,000 5,000,000 5,000,000
Statutory Reserve 14 369,674 299,452
Voluntary Reserve 15 666,782 598,903
Proposed Dividends 350,000 250,000
Accumulated fair market adjustment 173,754 -
Retained earnings - 44,684
Total Shareholders' Equity 6,560,210 6,193,039
Total Liabilities and Shareholders' Equity 109,626,021 92,434,076
"The accompanying notes are an integral part of this financial statements"
42
JORDAN MORTGAGE REFINANCE COMPANY Statements
PUBLIC SHAREHOLDING COMPANY of Income
For The
Note 2005 2004
Year Ended
Interest income 11 5,535,766 4,736,414
Interest expense 12 (4,387,317) (3,725,041) December
Gross operating Income 1,148,449 1,011,373
General and administrative expenses 13 ( 416,058) ( 418,839) 31, 2005
Depreciation and amortization ( 39,504) ( 42,020)
Other revenues 9,335 28,323
(In Jordanian Dinars)
Net income before income tax and provisions 702,222 578,837
Provision for income tax ( 167,820) ( 80,998)
Prior year's income tax ( 39,770) -
Provision for professional & technical training fund ( 4,171) ( 5,788)
Provision for scientific research and vocational training ( 7,022) ( 5,788)
Provision for Jordanian Universities' fees ( 7,022) ( 5,788)
Board of Directors' remuneration ( 33,000) ( 33,000)
Net income for the year 443,417 447,475
Earnings per share 0.088 0.089
Average number of shares outstanding 5,000,000 5,000,000
"The accompanying notes are an integral part of this financial statements"
43
Statements of JORDAN MORTGAGE REFINANCE COMPANY
PUBLIC SHAREHOLDING COMPANY
Changes In
Shareholders'
Paid-in Statutory Voluntary Proposed Revaluation Retained
Equity capital reserve reserve Dividends reserves earnings
Total
For The Year Dalance as of December 31, 2003 5,000,000 241,568 483,136 300,000 - 20,860 6,045,564
Ended Net income for the year - - - - - 447,475 447,475
Paid dividends - - - (300,000) - - (300,000)
December 31, Proposed dividends - - - 250,000 - (250,000) -
Reserves - 57,884 115,767 - - (173,651) -
2005 Balance as of December 31, 2004 5,000,000 299,452 598,903 250,000 - 44,684 6,193,039
( In Jordanian Dinars ) Net income for the year - - - - - 443,417 443,417
Paid dividends - - - (250,000) - - (250,000)
Proposed dividends - - - (350,000) - - -
Revaluation Reserves - - - - 173,754 - 173,754
Reserves - 70,222 67,879 - - (70,222) -
Balance as of December 31, 2005 5,000,000 369,674 666,782 (350,000) 173,754 417,879 6,560,210
"The accompanying notes are an integral part of this financial statements"
44
JORDAN MORTGAGE REFINANCE COMPANY Statements
PUBLIC SHAREHOLDING COMPANY
of Cash
Flows
2005 2004 For The Year
Cash Flows From Operating Activities
Ended
Net income for the year 443,417 447,475
Depreciation and amortization 39,505 42,020 December
(Increase) decrease in operating assets
31, 2005
Interests receivable and other current assets ( 390,748) 63,590 (In Jordanian Dinars)
Refinance loans (26,167,843) ( 9,897,391)
Employees' housing loans ( 113,763) 3,318
Increase (decrease) in operating liabilities
Accrued interests and other current liabilities 1,150,766 ( 218,883)
Short-term debt securities (15,000,000) 14,500,000
Bonds 22,370,000 7,020,000
Government's loan (695,992) ( 655,609)
Central Bank of Jordan loan 9,000,000 -
Cash flows from operating activities ( 9,364,658) 11,304,520
Cash Flows From Investing Activities
Available for sale investments ( 1,100,000) -
Fixed assets (12,701) ( 55,714)
Cash flows from investing activities ( 1,112,701) ( 55,714)
Cash Flows From Financing Activities
Dividends paid (250,000) ( 300,000)
Change in cash (10,727,359) 10,948,806
Cash at beginning of year 16,485,919 5,537,113
Cash at end of year 5,758,560 16,485,919
"The accompanying notes are an integral part of this financial statements"
45
Notes to the
JORDAN MORTGAGE REFINANCE COMPANY
Financial PUBLIC SHAREHOLDING COMPANY
Statements 1 - General
December 31,
Jordan Mortgage Refinance Company was established on June 5, 1996 as
2005 a public shareholding company and was granted the operating license on
July 22, 1996. The Company's main objectives are:
( In Jordanian Dinars) - Development and improvement of the housing finance market in Jordan by
enabling licensed banks and other financial institutions to increase their
participation in granting housing loans.
- Enhancement and development of the capital market in Jordan by issuing
medium and long-term bonds.
The financial statements were authorized for issue by the Company's
Board of Directors in their meeting held on February 7, 2006 and it is
subject to the General Assembly approval.
2- Basis of Presentation and Significant Accounting
Policies
Basis of preparation
The financial statements have been prepared in accordance with
International Financial Reporting Standards as published by International
Accounting Standards Board. The financial statements have been
prepared under the historical cost convention except as disclosed in the
accounting policies below.
Cash and cash equivalents
Cash and cash equivalents are carried in the balance sheet at cost. For the
purposes of the cash flow statement, cash and cash equivalents comprise
cash on hand, deposits held at call with banks, other short- term highly
liquid investments.
Loans and bonds
Interest on long-term loans and bonds are recorded using the accrual basis
of accounting.
Property, plant and equipment
Property plant and equipment are stated at cost less accumulated
depreciation and accumulated impairment loss. When assets are sold or
retired, their cost and accumulated depreciation are eliminated from the
accounts and any gain or loss resulting from their disposal is included in
46
the Income Statement.
The initial cost of property, plant and equipment comprises its purchase
price, including import duties and non-refundable purchase taxes and any
directly attributable costs of bringing the asset to its working condition
and location for its intended use. Expenditures incurred after the fixed
assets have been put into operation, such as repairs and maintenance and
overhaul costs, are normally charged to income in the period the costs are
incurred. In situations where it can be clearly demonstrated that the
expenditures have resulted in an increase in the future economic benefits
expected to be obtained from the use of an item of property, plant and
equipment beyond its originally assessed standard of performance, the
expenditures are capitalized as an additional cost of property, plant and
equipment.
Depreciation is computed on a straight- line basis over the following
estimated useful lives:
Buildings 2%
Vehicles 20%
Furniture & fixtures 15%
Air conditions 25%
Equipment 20%
Computers 30%
Land is not depreciated as it is deemed to have an indefinite life.
The useful life and depreciation method are reviewed periodically to
ensure that the method and period of deprecation are consistent with the
expected pattern of economic benefits from items of property plant and
equipment.
Available for sale investments
Available for sale investments are initially measured at cost, which is the
fair value of the consideration given for them, including transaction costs.
Available for sale investments are subsequently carried at fair value
without any deduction for transaction costs by reference to their quoted
market price at the balance sheet date. Investments for which fair value
can not be reliably determined are stated at cost. Impairment loss is
recognized in net profit or loss for the period.
Gains or losses on measurement to fair value of available for sale
investments are recognized directly in the fair value reserve in
shareholders equity, until the investment is sold or otherwise disposed of,
or until it is determined to be impaired, at which time the cumulative gain
47
or loss previously recognized in equity is included in net profit or loss for
the period.
Available-for-sale investments are classified as current assets if
management intends to realize them within twelve months of the balance
sheet date.
End of service indemnity
End of service indemnities are calculated and provided for in accordance
with the Internal Company's regulations. The provision is based on the
accumulated period of service for each employee at the balance sheet
date.
Provisions
Provisions are recognized when the Company has a present legal or
constructive obligation as a result of past events, it is probable that an
outflow of resources will be required to settle the obligation, and a
reliable estimate of the amount can be made.
Income taxes
The Company provides for income taxes in accordance with IAS 12.
Deferred taxation is brought to account under the liability method in
accordance with IAS 12, for the difference between the book and the tax
bases for assets and liabilities. Under IAS 12 timing differences on
provisions, give rise to a deferred tax asset, which due to its
immateriality, has not been recognized in the financial statements.
Revenues
Revenue is recognized when it is probable that the economic benefits
associated with the transaction will flow to the company and the amount
of revenue can be measured reliably.
Interest is recognized on a time proportion basis that reflects the effective
yield on the assets.
Dividends are recognized when the shareholders ßright to receive
payment is established.
Other revenues are recognized on the accrual basis.
Foreign currency
Assets and liabilities denominated in foreign currencies are translated to
Jordanian Dinars using the prevailing exchange rates at year end. Foreign
currency transactions during the year are recorded using exchange rates
that were in effect at the dates of the transactions. Foreign exchange gains
or losses are reflected in the statement of income.
48
3 - Cash at banks
2005 2004
Time deposits and current accounts 5,758,560 7,215,919
Certificates of deposit maturing within a year - 9,270,000
Total 5,758,560 16,485,919
4 - Other current assets
2005 2004
Prepaid expenses 64,972 39,718
Refundable deposits 1,473 1,398
Others 22,322 10,044
Total 88,767 51,160
5 - Refinance loans
This item represents loans granted to local banks for the purpose of
financing housing loans.
The aggregate amounts of annual principal maturities of refinance loans
are as follows:
Year JD
2006 26,513,449
2007 20,238,448
2008 12,994,876
2009-2023 40,256,885
100,003,658
49
6 - Fixed assets
Cost
31/12/2004 Additions 31/12/2005
Lands 176,400 - 176,400
Buildings 389,758 - 389,758
Vehicles 73,817 - 73,817
Furniture and Fixtures 74,733 - 74,733
Air-conditioning units 20,632 - 20,632
Equipment 17,475 - 17,475
Computers 56,104 12,701 68,805
Total 808,919 12,701 821,620
Accumulated Depreciation
31/12/2004 Additions 31/12/2005
Buildings 61,852 8,088 69,940
Vehicles 27,449 10,700 38,149
Furniture and Fixtures 59,822 11,210 71,032
Air-conditioning units 20,631 - 20,631
Equipment 14,556 2,277 16,833
Computers 45,795 7,230 53,025
Total 230,105 39,505 269,610
Net Book Value 578,814 552,010
50
7 - Bonds
Issuance No. Value Rate % Issuance Date Maturity Date Period
4 5,000,000 6.800 31/05/2001 31/05/2006 5 years
7 3,000,000 5.750 19/09/2001 19/09/2006 5 years
12 5,000,000 3.750 03/03/2003 03/03/2006 3 years
13 5,000,000 4.600 11/05/2004 11/05/2009 5 years
14 3,000,000 3.750 14/06/2004 14/06/2007 3 years
15 2,480,000 3.250 03/06/2004 03/06/2007 3 years
16 3,000,000 5.413 28/07/2004 28/07/2007 3 years
17 2,000,000 4.350 20/07/2004 20/07/2007 3 years
18 5,000,000 5.400 05/04/2005 05/04/2010 5 years
19 4,000,000 4.750 05/12/2004 05/12/2007 3 years
25 4,000,000 4.000 13/03/2005 13/03/2006 1 year
26 3,000,000 4.185 15/03/2005 16/03/2006 1 year
27 5,000,000 4.500 24/04/2005 24/04/2006 1 year
28 5,000,000 4.822 22/05/2005 22/05/2006 1 year
29 5,000,000 4.930 05/06/2005 05/06/2006 1 year
30 1,500,000 4.930 03/07/2005 03/07/2006 1 year
31 5,000,000 5.580 25/09/2005 25/03/2006 1 year
32 15,000,000 9.070 10/11/2005 10/11/2010 5 years
Total 80,980,000
8 - Other current liabilities
2005 2004
Accrued expenses 18,682 5,677
Provision for income tax 167,820 81,447
Provision for professional and technical training fund 8,124 5,788
Employees medication 2,323 36
Provision for employees' vacations 14,767 10,579
Provision for end of services indemnity 82,555 63,168
Provisions for scientific research and training 9,379 5,788
Provision for Jordanian Universities' fees 7,022 5,788
Board of Directors' remuneration 33,000 33,000
Others 279 131
Total 343,951 211,402
51
9 - Government's loan
This item represents the $19,600,000 loan granted to the Company by the
Jordanian Government and financed by the World Bank. The original loan
amount reduced during 2002 to $19,000,000.
The carrying amount of the loan is payable as follows:-
Year JOD
2006 736,391
2007 776,775
2008 823,800
2009-2016 8,558,994
10,895,960
10- Central Bank of Jordan loan
This item represents the present value of the debt instrument issued to the
favor of Central Bank of Jordan. The instrument mature on 7/6/2035 and
carry a fixed interest rate of 5.12% per annum payable on the instrument's
maturity date.
11- Interest income
2005 2004
Time deposits 453,093 224,964
Interest on refinance loans 5,073,562 4,504,868
Interest on reinvestment 9,111 6,582
Total 5,535,766 4,736,414
12- Interest expense
2005 2004
Interest on bonds 3,393,018 3,007,619
Interest on Government's loan 549,614 513,089
Short-term debt securities 146,715 184,429
Central Bank’s loan 262,691 -
Others 35,279 19,904
Total 4,387,317 3,725,041
52
13- General and administrative expenses
2005 2004
Salaries and benefits 216,811 236,544
Employees' provident fund 23,690 15,835
Social security 17,235 22,095
End of service indemnity and paid vacations 23,574 17,661
Employees bonus 14,686 9,608
Health, life and accidents insurance 21,034 10,896
Board of Directors' transportation 39,600 39,242
Professional fees 8,353 18,060
Fees and subscriptions 5,716 5,744
Stationery and publications 4,623 4,509
Entertainment 1,318 1,948
Vehicles expenses 4,227 4,108
Post and telephone 4,593 4,444
Utilities 3,237 3,419
Building expenses 5,743 4,493
Advertisement 3,305 4,580
Employees' training, studies & research 12,760 1,518
Maintenance 3,163 3,634
Traveling 1,818 10,102
Miscellaneous 572 399
Total 416,058 418,839
14- Statutory reserve
As required by the Jordanian Companies' Law, 10% of the annual net income for
the year before taxation is to be transferred to statutory reserve until it equals the
paid in capital. However, the Company has the option to stop such transfer when the
statutory reserve balance reaches 25% of the paid in capital. This reserve is not
available for distribution to shareholders.
15- Voluntary reserve
The accumulated amounts in this account represent cumulative appropriations not
exceeding 20% of the income before taxation. This reserve is available for
distribution to shareholders.
53
16- Income tax status
- The company settled its tax liabilities with the Income Tax Department up
to December 31, 2003.
- The income tax return for year 2004 has been filed with the Income Tax
Department but the department has not reviewed the Company's records till
the date of this report.
- The income tax liability for 2005 was computed in accordance with the
Jordanian Income Tax Law.
17- Litigations
The Company appears as a defendant in a law suit amounting to JD 390,746
of which JD 79,793 has been settled by the Company before December 31,
2004. The Company's legal advisor is of the opinion that the final outcome of
this law suit should not exceed the settled amount.
18- Financial instruments
Fair Value:
The Company's financial instruments consist of cash, available for sale
securities, refinancing loans, short-term debt securities, government loan and Bonds.
The fair value of these financial instruments approximates their carrying values.
Currency Risk:
All of the Company's transactions are denominated in Jordanian Dinars and
the Company is not exposed to any exchange risk relating to the Government's
loan as per the loan agreement between the Government and the Company.
Interest Rate Risk:
Interest rate risk is the uncertainty of future earning from fluctuations in
interest rates. The risk arises when there is mismatch in the assets, liabilities
positions which are subject to interest rate adjustment within a specific period.
The Company manages this risk by closely following the maturities and reprising
opportunities of both assets and liabilities to reduce gaps in interest spreads.
Credit Risk:
The Company maintains its bank accounts and deposits in leading financial
institutions.
19- Financial instruments
Some of the 2004 balances were reclassified to correspond to the 2005
presentation.
54
PRINTED BY: AD-DUSTOUR COMMERCIAL PRINTING PRESS
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