Fondi Slloveno Kosovar i Pensioneve. Fund 1 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 WITH INDEPENDENT AUDITORS REPORT THEREON

Transcription

1 Fondi Slloveno Kosovar i Pensioneve Fund 1 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 WITH INDEPENDENT AUDITORS REPORT THEREON

2 Contents Page Independent Auditor s Report Statement of Fund 1 s net assets 1 Statement of income and expenditures 2 Statement of changes in Fund 1 s net assets 3 Accounting unit s financial indicators 4 Statement of accounting unit 5 Notes to the financial statements 6-19

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5 STATEMENT OF INCOME AND EXPENDITURES for the year ended 31 December 2015 (amounts in Eur, unless otherwise stated) Notes 31 December December 2014 Income Interest income 9 163, ,033 Realized gains of sold/matured investments 10 25,807 28,473 Dividend income 35,443 15,170 Foreign exchange gains of monetary items 18,300 4,836 Other income 3,603 1, , ,956 Expenses Management fee (84,998) (79,061) Expenses for profit sharing 8 (7,356) (38,519) Provision and transaction fees (21,099) (8,901) Realized losses of investments (11,684) (6,822) Foreign exchange loss of monetary items (25,782) (2,722) (150,919) (136,025) Net profit from investments 96, ,931 Unrealized gains Unrealized (loss)\gain from investments held for trading, net (159,330) 91,138 Foreign exchange rate differences of investments in investments 71,070 32,852 (88,260) 123,990 Net surplus of the Fund 1 for the year 7, ,921 The statement of income and expenditures is to be read in conjunction with the notes set on pages 6 to 19 forming an integral part of the financial statements. 2

6 STATEMENT OF CHANGES IN FUND 1 s NET ASSETS for the year ended 31 December 2015 (amounts in Eur, unless otherwise stated) Notes 31 December December 2014 Net profit from investments 96, ,931 Unrealized gains (88,260) 123,990 Net surplus of the Fund 1 for the year 7, ,921 Participant's contributions received 447, ,830 Pension paid out (257,893) (237,390) Increase from billing control units 189, ,440 Total increase of net assets 197, ,361 Net assets as of 01 January 5,439,956 5,001,595 Net assets as of 31 December 5,637,624 5,439,956 Number of billing control units 1, , The Statement of Changes in Fund 1 Net assets is to be read in conjunction with the notes set on pages 6 to 19, forming an integral part of the financial statements. 3

7 ACCOUNTING UNIT S FINANCIAL INDICATORS for the year ended 31 December 2015 (amounts in Eur, unless otherwise stated) 31 December December 2014 Accounting units at the beginning of year 37, , Value of accounting units at the beginning of year Net assets of pension fund at the end of the year 5,637,623 5,439,956 Number of accounting units at the end of the year 38, , Value of accounting unit at the end of the year

8 STATEMENT OF ACCOUNTING UNIT for the year ended 31 December 2015 (amounts in Eur, unless otherwise stated) Description Number of accounting units Value of net assets Accounting units at the beginning of the year 37, ,439,956 Issued accounting units during the year-contributions 3, ,748 Issued accounting units during the year-transfers to other funds - - Reduction of accounting units due to transfers to Fund 2 (7.3742) - Reduction of accounting units due to payment of benefits (1, ) (257,894) Reduction of accounting units due to payment of fee from net assets of the Fund Net increase from operations 7,813 Total number of accounting units at end of the year 38, ,637,623 Value of accounting unit At the beginning of the year At the end of year

9 1. BACKGROUND INFORMATION Fondi Slloveno Kosovar i Pensioneve sh.a. (hereinafter the Company or FSKP ) was constituted as a joint-stock company as of 29 August 2006 with business registration number The Company started its operations as of 04 September The Company is located at Rr.UCK, nr.50/2, Prishtina, Republic of Kosovo. The Laws no. 2012/04-L-168; 2011/04-L-101; 03/L-084; UNMIK regulation 2005/20 on pensions in Kosovo under which the Fondi Slloveno Kosovar i Pensioneve - Fund 1 was established, provides for a supplementary pension savings program, funded by pensions contributions of both employees and their employers. Each voluntary participant has an Individual Account with the Fund 1, to which contributions are credited. The Fund 1 is administered and managed by the Company FSKP. The principal shareholders of the Company are Prva Group PLC, Slovenia and Corporation Dukagjini, Republic of Kosovo. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies that were adopted in the preparation of these financial statements are set out bellow. These policies have been consistently applied to all the years presented, unless otherwise stated. 2.1 Statement of compliance These financial statements have been prepared in accordance with the rules and regulations of the Central Bank of the Republic of Kosovo applicable to pension companies ( CBK Rules ), which are based on the recognition and measurement criteria of International Financial Reporting Standards ( IFRS ). 2.2 Basis of preparation These financial statements have been prepared using the significant accounting policies and measurement basis summarized below that are in accordance with CBK Rules. These policies have been consistently applied to all the years presented, unless otherwise stated. These financial statements should be read as prepared in accordance with the accounting standards and regulations prevailing in Kosovo, with a reference to the accounting policies as below, and should not be read or considered as financial statements prepared in accordance with IFRS These financial statements are presented in Euro, the European Union currency. 2.3 Cash and cash equivalents Cash and cash equivalents, comprising balances with banks for pension contributions payments and for investments purposes, are carried at cost. 6

10 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.4 Financial assets Valuation and classification policies The Fund has established its accounting policies in accordance with CBK regulations. Rule N. 6 On Pension Asset and Valuation of Pension Assets establish general classification and valuation guidelines of assets held by pension companies. Regarding financial instruments, article 4.2 of Rule No. 6 establishes the following principles and guidelines. Investment in equity investments are measured at fair value. Short term investments at net realizable value while medium or long term debt at amortized cost. Government investments are measured at amortized cost Investments purchased in active markets are valued based valued based on respective realizable values on the valuation date. CBK may allow other bases of valuation which are consistent with international best practices for pension assets that are established by OECD or EU Countries or acceptable by IFRS. Management of Fund 1 has determined that measurement at fair value is the widely used methodology for valuation of pension assets, when the fair value can be measured reliably, as is the case of quoted equity and debt investments. Consequently in the current year, Fund 1 has reclassified its quoted debt investments from an amortized cost valuation to market value valuation, the difference of the fair value to the carrying amount on the reclassification date, has been recognised in income of the year. Classification and reclassification of financial instruments Upon Initial recognition, the Fund 1 classifies it s financial assets in the following categories: at fair value through profit or loss that includes held for trading investments, loans and receivables, held to maturity and available for sale. The classification depends on the purpose for which the financial assets were acquired. The regulations of CBK do not have any reclassification rules; however, management follows widely accepted principles that the classification should be generally consistent over time, and reclassifications are made with the purpose of improving the reliability of the financial statements. For example the reclassification of debt investments to available for trading has eliminated impairment uncertainties of the held to maturity portfolio. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading and those designated at fair value through profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term or if so designated by management. Assets in this category are classified as current assets. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. The Fund 1 s loans and receivables comprise trade and other receivables, placements with banks and cash and cash equivalents in the balance sheet. Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. The Fund 1 has no assets classified in this category. Held to - maturity financial assets Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Fund 1 s management has the positive intention and ability to hold to maturity. Were the Fund 1 to sell other than an insignificant amount of held-to-maturity assets, the entire category would be tainted and reclassified as held for trading. 7

11 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.4 Financial assets (continued) Initial recognition, measurement and de-recognition Regular purchases and sales of financial assets are recognized on the trade date the date on which the Fund 1 commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss, are initially recognized at fair value and transaction costs are expensed in the statement of income and expenditures. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Fund 1 has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets (if held) and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and Held-to-Maturity investments are carried at amortized cost using the effective interest method. Unrealized interest income and amortization of the discount/ (premium) are recognized as income and expenses for the period. Dividend income and gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category are recognized as income in the statement of income and expenditures in the period in which they arise. Changes in the fair value of monetary and non-monetary investments classified as available-for-sale (if held) are recognized in equity. When investments classified as available for sale are sold or impaired, the accumulated fair value adjustments recognized in equity are included in the statement of income and expenditures as gains and losses from investment investments. Interest on available-for-sale investments calculated using the effective interest method is recognized in the statement of income and expenditures as part of other income. Dividends on available-for-sale equity instruments are recognized in the statement of income and expenditures as part of other income when the Fund 1 s right to receive payments is established. The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted investments), the Fund 1 establishes fair value by using valuation techniques. Impairment of financial assets The Fund 1 assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the investments are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss is removed from equity and recognized in the statement of income and expenditures. Impairment losses recognized in the statement of income and expenditures on equity instruments are not reversed through the statement of income and expenditures. Impairment testing of trade receivables is described further in this note. 2.5 Receivables and payables related with investment securities Receivables and payables arise from the acquisition and sale of investments and are recognized as assets and/or liabilities at the date of the transaction made. 8

12 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.6 Net assets of the Fund 1 The Fund s net asset value equals total assets minus total liabilities of the Fund Value of accounting unit The value of the accounting unit equals the value of Fund s net assets divided by the total number of accounting units as of the date of calculation. This formula does not apply as of the first day of operations when the value of the accounting unit equals Euro 100 in accordance with Fund s policy. 2.8 Interest income Interest income includes income from bond s coupon rates and interest on term deposits. The interest income is recorded on an accrual basis. 2.9 Management fee The Fund 1 is obliged to pay management fee to the Company on daily basis. The annual management fee is 1.5% of the total Fund s assets Expenses for transaction fee These expenses relate to the fees paid to financial intermediaries (banks and brokerage houses) who are acquiring investments for the Fund Realized gains/losses Realized gains/losses arise from the sale of investments, levelling of prices when investments are acquired and matured principals and interest on investments acquired at premium or discount. These gains/losses are recorded as revenues or expenses at the moment when they occur. Gains or losses arising when investments are sold or matured are presented as Realized in the statement of income, whereas gains or losses arising on valuation of investments still held are presented separately as Unrealized in the statement of income Amortization of discount/premium of the security Amortization of the discount/premium of the security is recorded through deferred revenues/expenses and accrued expenses/revenues. At the moment when the security matures or is sold, the amount of amortization is transferred as realized capital gain or loss Foreign exchange gains/losses Transactions in foreign currencies are recorded in accordance with the valid exchange rate as of the date of the transaction. The differences are recorded in the statement of income and expenditures as gains/losses. Foreign exchange differences arising from reporting date valuation of cash and equivalents and difference arising upon the sale of investments are reported separately in the statement of income as Realized. Foreign exchange differences arising from reporting date translation of investments held are reported separately in the statement of income as Unrealized 2.14 Transaction with related parties Related parties are defined as those parties which have control over each other or have an influence on the financial and operational decisions of each other. The Fund related parties are Prva Group PLC from Ljubljana, Slovenia and Corporation Dukagjini from Peja, Republic of Kosovo, which are managing and administering the Fund 1 and Company. 9

13 3. FUND 1 ASSETS AND INVESTMENT STRATEGY The Fund 1 is obliged to follow CBK rules with regard to investments in different types of financial assets and the amount of investments in those assets. As prescribed by Rule 9 on Investment of Pension Assets, pursuant to the provisions of the Law no. 03/L-084 amending UNMIK regulation no. 2005/20, the Fund 1 must comply with the following common conditions: a. The Fund must invest their assets only in the classes of permitted (eligible) investments prescribed under this Rule or in cash in the course of deposit to the custodian or for cash and bank deposits representing amounts as are reasonably necessary to conduct its pension operations. b. The eligibility of investment is determined at the time of its making or acquisition. If the determination of eligibility is based on amount, the limitation is based on the amount of total investment assets as of the last asset valuation date, as reported to the CBK. c. Investment of pension assets must be in accordance with the statement of investment principles and in conformity with investment directives adopted and issued by the pension entity consistent with the requirements of the Pensions Regulation and these Rules. d. Investments made in breach or violation of the investment principles and directives must be corrected and rectified immediately. Breaches and deviations, of previously conforming investments, arising from cause or causes beyond the control of the board of directors or asset manager of the pension entity may be rectified or corrected within such time and manner that is least detrimental to the interests of the participants which period of time is not greater than 6 months from the date of such breach or deviation. e. The governing bodies of pension entities providing pensions shall submit to the CBK, together with quarterly and yearly reports, a statement certified by a duly authorized officer, attesting that all investment assets of the entity are in compliance with the conditions, restrictions and limitations prescribed in the Pensions Regulation and this Rule and in conformity with the statement of investment principles and investment directives adopted by the entity; provided that, if otherwise, the certified statement must clearly indicate the nature of the violation, breach or deviation, identifying the particular non-complying investment asset and describing the manner and the time frame for rectification and/or correction. As prescribed by Rule 9, the Fund 1 should comply with the following specific conditions: a. At any one time, investment of pension assets is subject to the following specific conditions: Stocks or equity shares shall not be greater than 5% of the total shares issued by one issuer. Bonds shall not be greater than 30% of any single bond issue. Total investments in any one entity, including its affiliate entities, shall not be greater than 5% of the total pension assets. b. For the further protection of the quality of pension assets, the CBK may, from time to time, prescribe minimum investment grades or ratings of investments in the determination of eligibility of the investment. Investment grade or rating conditions shall form part and parcel of this Rule on the date set by written directive of the BPK prescribing such requirement(s). The investments securities which are eligible (permitted) are as follows: a Investments Issued and/or Located Outside of Kosovo Pension assets may be invested only in the following international types and classes: Monetary funds, including bank accounts and deposits with banks that are licensed by a bank regulatory authority of a member state of the OECD, and whose license remains in force and in good standing. Investments issued by any member state of the OECD. Investments issued by local governments in member states of the OECD to the extent guaranteed by the respective state. 10

14 3. FUND 1 ASSETS AND INVESTMENT STRATEGY (CONTINUED) Investments registered with the capital markets regulator of any member state of the OECD and placed for public offering and actively listed or traded in the Stock Exchange that is appropriately regulated and supervised in such state(s). Mutual funds and other investment funds (open-end entities) subject to the approval in the OECD member state of their establishment and for which compliance requirements are prescribed by the appropriate regulatory or supervisory authority within such member state relating to the conduct of business activities of such open-end entities. All other types of international investments as may be authorized, from time to time, by effective laws, statutes, regulations and rules issued by competent authorities in Republic of Kosovo. b Investments Issued and/or Located within Republic of Kosovo Monetary funds, including bank accounts and deposits with banks that are licensed by the CBK and conducting banking business in Republic of Kosovo in good standing with the regulatory requirements of the CBK. Investments issued by competent authority in Republic of Kosovo, to the extent guaranteed by such authority. Investments issued by public and/or private enterprises that are registered with the capital markets regulator in Republic of Kosovo provided that such investments are listed and traded in investments exchange(s) licensed in Republic of Kosovo or in a member state of the OECD and subject to regulation and supervision of the applicable capital market authority in such state. Mutual funds and other investment funds (open-end entities) subject to the approval in Republic of Kosovo and for which compliance requirements are prescribed by the appropriate regulatory or supervisory authority in Republic of Kosovo relating to the conduct of business activities of such open-end entities. All other types and classes of do0mestic investments as may be authorized, from time to time, by effective laws, statutes, regulations and rules issued by competent authorities in Republic of Kosovo. The Fund 1 should also comply with the rule on prohibited investments which are defined as follows: Pension assets cannot be invested in the following types of classes: Investments that is either unlisted or not publicly traded. Assets that cannot be legally conveyed, sold, disposed of or otherwise alienated. Derivatives investments, options, futures, forward and other agreements with respect to investments and other financial assets. Real or physical assets not listed on organized markets and for which valuation is uncertain such as, precious objects, works of arts, antiques, coins, collections, and motor vehicles. Investments issued by proscribed parties as defined under this Rule. Investments that are not of the types or classes permitted under the Pensions Regulation, and/or investments acquired not in accordance with the investment principles and directives of the pension entity at the time of their acquisition. Pension Funds and Pension Providers shall be deemed to have complied with the rules on diversification of investments if the following conditions are fulfilled: The investments made are in accordance with the terms and stipulations contained in their Statements of Investment Principles approved by the CBK. The assets of the Pension Fund, or when applicable the Pension Provider, are kept and safeguarded by an independent Custodian in accordance an asset custodial agreement. The amount of the assets does not exceed Five Hundred Thousand (500,000) Euro. The Pension Fund or Pension Provider has submitted to the CBK an acceptable plan for increasing the diversification of its investments. 11

15 4. FINANCIAL INSTRUMENTS BY CATEGORY The carrying amounts of the Fund s financial assets and liabilities as recognized at the date of the statement of financial position under review may also be categorized as follows: At fair value through profit or loss Loans and receivables Held - to - maturity Total 31 December 2015 Assets Cash and cash equivalents - 172, ,560 Investments held for trading 5,146, ,146,924 Investments held-to-maturity , ,306 Other receivable - 5,020-5,020 5,146, , ,306 5,654,810 Other financial liabilities at amortized cost Liabilities Liabilities for management fee - - Total 9,384 9,384 Liabilities for profit sharing - - 7,356 7,356 Liabilities to Fund Other liabilities ,187 17,187 At fair value through profit and loss Loans and receivables Held - to - maturity Total 31 December 2014 Assets Cash and cash equivalents - 116, ,418 Investments held for trading 4,628, ,628,744 Investments held-to-maturity , ,788 Other receivable ,628, , ,788 5,487,130 Other financial liabilities at amortized cost Total Liabilities Liabilities for management fee - - 8,412 8,412 Liabilities for profit sharing ,519 38,519 Other liabilities ,174 47,174 12

16 5. CASH AND CASH EQUIVALENTS 31 December December 2014 ABANKA - Current account - EUR 77,240 - BKT current account 26,681 3,322 Saving account - Raiffeisen Bank 22,853 33,048 Contribution account NLB Kasabank 16,512 14,374 TEB cash account 16,462 5,315 Contribution account Pro Credit Bank 7,468 10,486 ABANKA - Current account - USD 3,252 - Contribution account Banka Ekonomike 2,090 3,284 Banka Ekonomike 2 36 Custodian account-nova Ljubljanska Banka d.d, NLB - 46,530 Cash account Raiffeisen bank , , INVESTMENT HELD FOR TRADING Investments held for trading in the statements of financial positions are as follows: 31 December December 2014 Corporate bonds 1,773,790 2,253,757 Government bonds 1,686,302 1,479,577 Equity investments 1,595, ,171 Commercial bills 90, ,239 5,146,924 4,628,744 The following table provides for the movement of investments held for trading during 2015 and 2014: Corporate bonds Government bonds Commercial bills Equity investments Total At 01 January ,253,757 1,479, , ,171 4,628,744 Additions 436, , , ,328 2,366,133 Disposal/matured (775,101) (736,163) (248,429) - (1,759,693) Net exchange rate ,070 71,070 Unrealized gain/(loss) (141,025) 4,421 1,001 (23,727) (159,330) At 31 December ,773,790 1,686,302 90,990 1,595,842 5,146,924 At 01 January ,471, ,409 99, ,163 3,769,613 Additions 921, , , ,025 2,446,736 Disposal (1,133,641) (285,287) (248,501) (44,165) (1,711,594) Net exchange rate ,852 32,852 Unrealized gain/(loss) (5,974) 60,275 3,538 33,298 91,137 At 31 December ,253,757 1,479, , ,173 4,628,744 13

17 7. INVESTMENTS HELD TO MATURITY Investments held-to-maturity consists entirely of bonds and other debt investments issued by foreign companies and banks 31 December December 2014 Placement with banks 307, ,501 Accrued interest 22, ,287 Placement with banks and Accrued interest is as follows: 330, , December December 2014 Banka Kombetare Tregtare BKT 161, ,986 TEB Turkish Enterprise Bank 115, ,862 Raiffeisen Bank 53,279 87,737 Pro Credit Bank PCB - 198,773 Banka Ekonomike e Kosovës - 98,402 NLB Kasabank - 79, , ,788 The placements in banks earn interest from 3% to 6.6% on annual basis. Their maturity period ranges from 1 till 5 years. 8. LIABILITIES FOR PROFIT SHARING Company has reward asset manager based on pension plan In the event that fund is performing better than benchmark set out in internal act then Asset manager is entitled to reward of up to 20% of yield above that benchmark. Return of the Fund is established annually on 30 November, accounting period is of one year. The pension plan of the Company for the return of funds is approved by the Central Bank. 9. INTEREST INCOME 31 December December 2014 Interest income from investments 141, ,399 Interest income from deposits 21,830 52,567 Interest income from bank accounts , , REALIZED GAINS OF SOLD/MATURED INVESTMENTS IN INVESTMENTS 31 December December 2014 Government bonds 21,930 15,566 Corporate bonds 306 3,971 Commercial Bills 3,571 3,791 Equity shares - 5,145 25,807 28,473 14

18 11. TRANSACTION WITH RELATED PARTIES Related parties are considered to include major shareholders, affiliates and entities under common ownership, control and management with the Fund, or whose activities the Fund has an ability to control. All Funds transactions with related parties arise in the normal course of business and their value is not materially different from the terms and conditions that would prevail in arms-length transactions. All related party transactions and balances refer to the Company FSKP and asset manager as follows: 31 December 2015 Prva Group Company Fund 2 Total Receivables Receivables from Company - 1,100-1,100 Total Receivables - 1,100-1,100 Liabilities Liabilities for profit sharing 7, ,356 Liabilities for management fee - 9,384-9,384 Liabilities Total Liabilities 7,356 9, ,964 Net Receivables/(Liabilities) (7,356) (8,284) (224) (15,864) Expenses Expenses for profit sharing 7,356-7,356 Expenses for management fee - 103, ,521 Total Expenses 7, , ,877 Net Income/(Expense) (7,356) (103,521) (110,877) 31 December 2014 Prva Group Company Total Liabilities Liabilities for profit sharing 38,519-38,519 Liabilities for management fee - 8,412 8,412 Total Liabilities 38,519 8,412 46,931 Net Receivables/(Liabilities) (38,519) (8,412) (46,931) Expenses Expenses for profit sharing 38,519-38,519 Expenses for management fee - 96,754 96,754 Total Expenses 38,519 96, ,273 Net Income/(Expense) (38,519) (96,754) (135,273) 15

19 12. FINANCIAL RISK MANAGEMENT The Fund s activities expose it to a variety of financial risks and those activities involve the analysis, evaluation, acceptance and management of risks. The Fund s aim is to achieve an appropriate balance between risk and return and minimize potential adverse effects on the Fund s financial performance. The Fund s risk management policies are designed to identify and analyse these risks, to set appropriate risk limits and controls, and to monitor the risks and adherence to limits by means of reliable and up-to-date information systems. The Fund s Management regularly reviews its risk management policies and systems to reflect changes in markets, products and emerging best practice. Risk management is carried out by Risk Management Department under policies approved by the Company. This department identifies and evaluates financial risks in close co-operation with the Fund s operating units. The Fund provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk and credit risk Credit risk The Fund takes on exposure to credit risk, which is the risk that a counter party will cause a financial loss for the Fund by failing to discharge an obligation. Credit risk is the most important risk for the Fund s business activities. Therefore, the Fund s management carefully manages its exposure to credit risk. Fund must be in accordance with CBK rules with regard of types, amounts of investment on financial assets Maximum exposure to credit risk Investments held for trading Corporate bonds 1,773,790 2,253,757 Government bonds 1,686,302 1,479,577 Equity investments 1,595, ,171 Commercial bills 90, ,239 5,146,924 4,628,744 Investments held to maturity Placement on banks 307, ,501 Accrued interest 22, , , ,788 Other receivables 5, ,482,250 5,370,712 16

20 12. FINANCIAL RISK MANAGEMENT (CONTINUED) Interest rate risk The table below analyses assets and liabilities of the Fund into relevant maturity groupings based on the remaining period at balance sheet date to the contractual maturity date as of 31 December 2015 and 2014 (in Euro). 31 December 2015 Interest-bearing Less than 1 month From 1 to 3 months From 3 to 12 months From 1 to 5 years Over 5 years Noninterest bearing Total Assets Cash and cash equivalents 172, ,560 Investments held for trading - 109, ,560 1,777,064 1,114,520 1,686,831 5,146,924 Investments held-tomaturity - 115, , ,306 Other receivable ,020 5, , , ,560 1,991,618 1,114,520 1,691,851 5,654,810 Liabilities Liabilities for management fee ,384 9,384 Liabilities for profit sharing ,356 7,356 Liabilities to Fund Other liabilities ,187 17,187 Net interest risk gap 172, , ,560 1,991,618 1,114,520 1,674,664 5,637, December 2014 Assets 116, , ,111 2,477,834 1,182, ,351 5,487,130 Liabilities ,174 47,174 Net interest risk gap 116, , ,111 2,477,834 1,182, ,177 5,439,956 Foreign currency risk At 31 December 2015 and 2014, the Fund 1 is exposed to risk considering the effects from the flows of the exchange rate level. The following tables summarize the foreign currency position of the monetary assets and liabilities of the Fund on 31 December 2015 and 2014 (in Euro): 31 December 2015 In EUR In USD Other Total Assets Cash and cash equivalents 169,308 3, ,560 Investments held for trading 3,959,471 1,187,453 5,146,924 Investments held-to-maturity 330, ,306 Other receivables 5, ,020 Total assets 4,464,105 1,190,705-5,654,810 Liabilities Liabilities for management fee 9, ,384 Liabilities for profit sharing 7, ,356 Liabilities to Fund Other liabilities Total liabilities 17, ,187 Net foreign currency risk 4,446,918 1,190,705-5,637, December 2014 Total assets 5,065, ,884-5,487,130 Total liabilities 47, ,174 Net foreign currency risk 5,018, ,884-5,439,956 17

21 12. FINANCIAL RISK MANAGEMENT (CONTINUED) Liquidity risk The Fund 1 policy is to invest the assets in highly liquid financial instruments on different capital markets in compliance with the prescribed limits by the Law and regulations. In the process of creating the Fund s portfolio, aiming to provide a higher liquidity, the Fund s assets were invested in investments characterized with possibility of quick conversion into cash and cash equivalents. The tables below analyse assets and liabilities of the Fund into relevant maturity based on the remaining period at balance sheet date to the contractual maturity date (in Euro). 31 December 2015 Less than 1 month From 1 to 3 months From 3 to 12 months From 1 to 5 years Over 5 years Total Cash and cash equivalents 172, ,560 Investments held-for-trading - 127, ,617 1,777,064 2,710,362 5,146,924 Investments held-to-maturity - 115, , ,306 Other receivable 5, , , , ,617 1,991,618 2,710,362 5,654,810 Liabilities Liabilities for management fee 9, ,384 Liabilities for profit sharing 7, ,356 Liabilities to Fund Other liabilities , ,187 Net liquidity gap 160, , ,617 1,991,618 2,710,362 5,637, December 2014 Total assets 116, , ,111 2,477,834 1,932,269 5,487,130 Total liabilities 47, ,174 Net liquidity gap 69, , ,111 2,477,834 1,932,269 5,439, FAIR VALUE Fair value represents the amount at which an asset could be replaced or a liability settled on an arm s length basis. Fair values have been based on management assumptions according to the profile of the asset and liability base. Financial instruments presented at fair value The financial assets measured according to the fair value in the statement of financial position in accordance with the hierarchy of the fair value are shown in the next table. This hierarchy groups the financial assets and liabilities into three levels that are based on the significance of the incoming data used during the measurement of the fair value of the financial assets: Level 1: quoted prices (not adjusted) on the active markets for identical assets or liabilities; Level 2: other incoming data, aside from the quoted prices, included in Level 1 which are available for asset or liability observing, directly (i.e. prices), or indirectly (i.e. made of prices) Level 3: incoming data on the asset or liability that are not based on data available for market observing. The financial assets that are registered according to their fair values in The Statement of Fund 1 s Net Assets are grouped according to the hierarchy level of the fair value, as follows (in Euro). 31 December 2015 Level 1 Level 2 Level 3 Total Assets Investments held for trading 5,146, ,146,924 Investments held to maturity - 330, ,306 18

22 13. FAIR VALUE (CONTINUED) Financial instruments that are not presented at fair value 31 December 2014 Level 1 Level 2 Level 3 Total Assets Investments held for trading 4,628, ,628,744 Investments held to maturity 741, ,788 The following table summarizes the carrying amounts and fair values to those financial assets and liabilities that are not presented on balance sheet at their fair value. Carrying amount Fair value Assets Cash and cash equivalents 172, , , ,418 Investments held-to-maturity 330, , , ,788 Other receivables 5, , Total assets 507, , , ,386 Liabilities Liabilities for management fee and other liabilities 17,187 47,174 17,187 47,174 Total liabilities 17,187 47,174 17,187 47,174 The fair value of financial instruments traded in active markets (such as trading and available-for-sale investments) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Fund is the current bid price. The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The carrying value less impairment provision of trade receivables and the carrying value of payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Fund for similar financial instruments. However, for short term bank placements were interest rates are comparable to the market, the carrying amount is considered to be the best approximate of the fair value. 14. EVENTS AFTER THE REPORTING DATE After 31 December 2015 the reporting date until the approval of these financial reports, there are no adjusting events reflected in the financial statements or events that are materially significant for disclosure in these financial statements. 19