Aram Group — Interim / Quarterly Report 2017

May 2, 2017

Sharjah Group Company P.S.C. and its Subsidiary

Interim Condensed Consolidated Financial Information (Unaudited)

For the period ended March 31, 2017

Sharjah Group Company P.S.C. and its Subsidiary
Interim Condensed Consolidated Financial Information (Unaudited) For the period ended March 31, 2017

Table of contents

	Page
Report on review of the interim condensed consolidated financial information	1
Interim consolidated statement of financial position	2
Interim consolidated statement of profit or loss and other comprehensive income	3
Interim consolidated statement of changes in equity	$\overline{4}$
Interim consolidated statement of cash flows	5
Notes to the interim condensed consolidated financial information	$6 - 11$

Al Khan Sheikh Mohamed Building
Office M - 106 P.O. Box 1968 Sharjah, United Arab Emirates Tel: +971 (6) 5259691 Fax: +971 (6) 5259690 W: www.grantthornton.ae

Report on review of interim condensed consolidated financial information to the Shareholders of Sharjah Group Company P.S.C.

Introduction

We have reviewed the accompanying interim condensed consolidated financial statements of Sharjah Group Company P.S.C. ("the Company") and its Subsidiary ("the Group") as at March 31, 2017, comprising of the interim consolidated statement of financial position as at March 31, 2017 and the related interim consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and interim consolidated statement of cash flows for the three months period then ended, and explanatory notes. Management is responsible for the preparation and presentation of this interim condensed consolidated financial information in accordance with IAS 34 Interim Financial Reporting ("IAS 34"). Our responsibility is to express a conclusion on this interim condensed consolidated financial information based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial information are not prepared, in all material respects, in accordance with IAS 34.

GRANT THORNTON

Osama El Bakry Registration No. 935 Sharjah, United Arab Emirates

May 2, 2017

Grant Thomton UAE is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. Services are delivered by the member firms. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another's acts or omissions. Please see www.grantthornton.ae for further details.

Interim consolidated statement of financial position

As at March 31, 2017

ASSETS	Notes	March 31, 2017 (Unaudited) AED	December 31, 2016 (Audited) AED
Non-current assets
Property and equipment		113,860	129,075
Investment properties	3	235,781,230	235,755,320
Available for sale investments	4	3,492,493	3,543,976
Investments at fair value through other
comprehensive income	5	17,316,000	18,289,325
		256,703,583	257,717,696
Current assets			2,267,872
Investments at fair value through profit or loss	6	2,462,342 881,789	754,281
Trade and other receivables		5,000,135	3,626,148
Cash and cash equivalents		8,344,266	6,648,301
TOTAL ASSETS		265,047,849	264,365,997
EQUITY AND LIABILITIES Equity		78,901,086	78,901,086
Share capital Statutory reserve		29,777,838	29,777,838
Voluntary reserve		10,096,897	10,096,897
Fair value reserve		2,880,546	3,926,407
Foreign currency translation reserve		(648, 947)	(731, 814)
Retained earnings		47,158,366	49,208,609
Total equity		168, 165, 786	171,179,023
Non-current liabilities			784,784
Employees' end of service benefits		822,820
Current liabilities
Trade and other payables	7	62,599,903	62,032,117
Dividends payable		33,459,340	30,370,073
		96,059,243	92,402,190
Total liabilities		96,882,063	93,186,974
TOTAL EQUITY AND LIABILITIES		265,047,849	264,365,997

condensed consolidated financial information was approved and authorised for issue by the This interin Board of Directors on May 2, 2017 and were signed on their behalf by:

Mr. Mohammed Al Wazzan Managing Director

Mr. Ziyad Mahmoud Khairullah Al Haji Chairman

The accompanying notes from 1 to 12 form an integral part of this interim condensed consolidated financial information.

Interim consolidated statement of profit or loss and other comprehensive income For the period ended March 31, 2017 (Unaudited)

	Notes	Three months period ended March 31, 2017 March 31, 2016 AED	Three months period ended AED
Rental income		3,817,708	3,684,532
Dividend income			14,304
Unrealised gain / (loss) on investments at fair value through profit and loss		186,753	(83, 720)
General and administrative expenses	8	(1, 347, 180)	(1, 175, 985)
Repairs and maintenance expenses		(339, 177)	(271, 404)
Provision for claims and settlement	$\overline{7}$	(371, 076)	(371,076)
Impairment loss on available for sale investments		(53, 356)	(533, 302)
Other income		52,122	86,549
PROFIT FOR THE PERIOD		1,945,794	1,349,898
Other comprehensive income
Items that will never be reclassified to profit or loss in subsequent periods
Changes in fair value of investment at fair value through other comprehensive income		(1,035,245)	(692, 928)
Items that are or may be reclassified to profit or loss in subsequent periods
Changes in value of available for sale investments		(10, 616)	57,059
Foreign currency translation reserve		82,867	175,908
Other comprehensive income		(962, 994)	(459, 961)
TOTAL COMPRHENSIVE INCOME FOR THE PERIOD		982,800	889,937
Basic and diluted earnings per share	11	0.025	0.017

The accompanying notes from 1 to 12 form an integral part of this interim condensed consolidated financial information.

Interim Condensed Consolidated Financial Information Sharjah Group Company P.S.C. and its Subsidiary

Interim condensed consolidated statement of changes in equity For the period ended March 31, 2017 (Unaudited)

Total AED Retained earnings AED reserve Foreign AED	982,800 171,179,023 1,945,794 (3, 156, 037) 962,994 840,000 1.945.794 1,945,794 49,208,609 (3,156,037) 840,000) $\pmb{\mathfrak{f}}$ 82,867 82,867	168,165,786 47,158,366	$\Gamma$ otal AED Retained earnings QSY reserve Foreign AED	1,349,898 (459, 961) 157,872,361 44,061,558 1,349,898 175,908	889,937 (9,468,130) (000) 065 1,349,898 (9,468,130) 490,000 175,908	148,804,168 35,453,326
translation $c$ urren $C$ Fair value reserve AED	(731, 814) ı 3,926,407 (1,045,861) (1,045,861)	(648, 947) 2,880,546	translation currency reserve Fair value AED	(633, 629) 224,439 (635, 869)	(635, 869)	(457,721) (411, 430)
Reserve Voluntary AED	10,096,897 1	10,096,897	Reserve Voluntary AED	7,818,983	t	7,818,983
reserve Statutory AED Share capital AED	29,777,838 86	29,777,838	reserve Statutory AED Share capital AED	27,499,924		27,499,924
	78,901,0 Other comprehensive income for the period Board of Directors' remuneration (Note 10) Total comprehensive income for the period Balance at January 1, 2017 Profit for the period Dividends declared	78,901,086 Balance at March 31, 2017		78,901,086 Other comprehensive income for the period Balance at January 1, 2016 Profit for the period	Board of Directors' remuneration (Note 10) Total comprehensive income for the period Dividends declared	78,901,086 Balance at March 31, 2016

The accompanying notes from 1 to 12 form an integral part of this interim condensed consolidated financial information.

$\rightarrow$

Interim consolidated statement of cash flows For the period ended March 31, 2017 (Unaudited)

	Notes	Three months period ended March 31, 2017 AED	Three months period ended March 31, 2016 AED
OPERATING ACTIVITIES Profit for the period		1,945,794	1,349,898
Adjustments to reconcile profit to net cash flows: Unrealised (gain) / loss on investments classified
at fair value through profit or loss	6	(186, 753)	83,720
Impairment loss on available for sale investments		53,356	533,302
Provision for employees' end of service benefits		38,036	35,694
Depreciation on property and equipment		33,423	49,473
Provision for claims and settlement	$\overline{7}$	371,076	371,076
		2,254,932	2,423,163
Changes in working capital Trade and other receivables		(127, 508)	(28, 721)
Trade and other payables	$\overline{7}$	(643, 290)	265,255
Net cash from operating activities		1,484,134	2,659,697
INVESTING ACTIVITIES
Purchase of property and equipment		(18, 208)	(2, 855)
Purchase of investments at fair value
through profit of loss	6		(173, 716)
Addition of investment properties	$\overline{\mathbf{3}}$	(25, 910)	(2,470,826)
Net cash used in investing activities		(44, 118)	(2,647,397)
FINANCING ACTIVITY
Dividends paid		(66, 770)	(56, 787)
Net cash used in financing activity		(66, 770)	(56, 787)
Net change in cash and cash equivalents		1,373,246	(44, 487)
Exchange differences on translating foreign operations		741	3,945
Cash and cash equivalents, beginning of period		3,626,148	12,900,508
Cash and cash equivalents, end of period		5,000,135	12,859,966

The accompanying notes from 1 to 12 form an integral part of this interim condensed consolidated financial information.

Notes to the interim condensed consolidated financial information For the period ended March 31, 2017

Legal status and principal activities 1

Sharjah Group Company P.S.C. ("the Company") is a public share holding company, registered in the Emirate of Sharjah, United Arab Emirates under Emiri Decree number 133/76 dated 16 November 1976. The registered office of the Company is P O. Box 5440, Sharjah, United Arab Emirates. The shares of the Company are traded on the Abu Dhabi Securities Market.

The Company holds the following investment as at March 31, 2017. The entity has been consolidated in these interim condensed financial information:

	Ownership interest				Country of
Name of subsidiary	2017	2016	operation and incorporation	Principal activity
Tarfan General Trading and Contracting (Ebrahim Ahmed) Al-Mannaei and Partners) W.L.L.	100%	100%	State of Kuwait	General trading and Contracting - purchase and sale of shares and bonds for Subsidiary's sake.

The Subsidiary is a limited liability company incorporated in Kuwait. Two individuals own total 2% as beneficiaries for and on behalf of the Company, therefore no non-controlling interest has been disclosed.

The principal activities of the Company and its Subsidiary (the "Group") comprise investing in financial instruments, real estate, industrial projects and leasing of properties.

Summary of significant accounting policies $\mathbf{z}$

$a)$ Basis of preparation

The interim condensed consolidated financial information of the Group has been prepared in accordance with International Accounting Standards 34: Interim Financial Reporting, and does not include all of the information and disclosures required in the annual financial statements in accordance with International Financial Reporting Standard (IFRS), and should be read in conjunction with the consolidated financial statements of the Group for the year ended December 31, 2016.

The interim condensed consolidated financial information has been prepared under the historical cost convention except for investment properties, investments at fair value through profit or loss, investments at fair value through other comprehensive income which are stated at fair value.

Accounting policies, related adjustments, estimates and assumptions adopted for the preparation of this interim condensed consolidated financial information are the same as those applied in the preparation of the audited consolidated financial statements for the year ended December 31, 2016, except for new standards, interpretations and amendments mandatorily effective for the first time as of January 1, 2017 [refer note $2(d)$ ].

Functional and presentation currency $\mathbf{b}$

The interim condensed consolidated financial information has been prepared in Arab Emirates Dirham (AED), the functional currency of the Group.

The subsidiary determines its own financial currency and its assets and liabilities have been translated into AED at the closing rate at the reporting date. Income and expenses have been translated into the Group's presentation currency at the average rate over the reporting period. Exchange differences are charged/credited to the statement of other comprehensive income.

Notes to the interim condensed consolidated financial information (continued) For the period ended March 31, 2017

Summary of significant accounting policies (continued) $\overline{2}$

Basis of consolidation c)

The interim condensed consolidated financial information consolidates the un-audited financial information of the subsidiary referred to in Note 1, on a line-by-line basis, with un-audited financial information of the Company for the period. All significant inter-group investments, receivables, payables and other such transactions are eliminated on consolidation.

Standards, interpretations and amendments to existing standards that are $d)$ effective in 2017

Certain standards, interpretations and amendments to existing standards, issued by the IASB, that are effective for the accounting period beginning on or after January 1, 2017 are relevant to the Group and have been applied for the first time. The nature and impact of these standards, interpretations and amendments is described below:

Disclosure Initiative (Amendments to IAS 7)

The amendments in IAS 7 Statement of Cash Flows clarify that entities shall provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities.

Annual Improvements to IFRS 2014-2016 Cycle - Amendments to IFRS 12

The amendments clarify the scope of the standard by specifying that the disclosure requirements in the standard, except for those related to summarised financial information, also apply to an entity's interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities that are classified as held for sale, as held for distribution or as discontinued operations in accordance with IFRS 5 Noncurrent Assets Held for Sale and Discontinued Operations.

Standards, interpretations and amendments to existing standards that are not $e)$ vet effective and have not been adopted early by the Group

The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

Significant judgement and estimates f)

The preparation of interim condensed consolidated financial information requires management to make judgement, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these interim condensed consolidated financial information, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied in preparing to the Group's consolidated statements for the year ended December 31, 2016.

Notes to the interim condensed consolidated financial information (continued) For the period ended March 31, 2017

$\overline{\mathbf{r}}$ Investment properties

	March 31,	December 31,
	2017	2016
	AED	AED
	(Unaudited)	(Audited)
Balance at January 1,	235,755,320	216, 747, 723
Additions during the period / year	25,910	7,691,897
Unrealized gain on revaluation of
investment properties at fair value		11,315,700
	235,781,230	235,755,320

Investment properties consist of residential tower and buildings, offices and warehouses. It also includes undeveloped parcels of land.

Fair Value

Investment properties are stated at market value based on a valuation carried out by an independent external valuer as at December 31, 2016.

The fair values have been determined by taking into consideration the discounted estimated net cash flows and the current lease arrangements, which are entered into on an arm's length basis. Furthermore, fair values have also been determined, where relevant, with regard to recent market transactions for similar properties in the same locations as the Group's investment properties.

Available for sale investments $\overline{\mathbf{4}}$

	March 31, December 31,
2017	2016
(Unaudited)	(Audited)
AED	AED
3,492,493	3,543,976

The movement in available for sale investments is as follows:

	March 31,	December 31,
	2017	2016
	(Unaudited)	(Audited)
	AED	AED
Balance at January 1,	3,543,976	3,090,171
Changes in the fair value	(10, 616)	583,792
Impairment losses	(53, 356)	(115, 789)
Translation reserve	12,489	(14, 198)
	3,492,493	3,543,976

Investments at fair value through other comprehensive income 5

	March 31, December 31,
2017	2016
(Unaudited)	(Audited)
AED	AED
17,316,000	18,289,325

Notes to the interim condensed consolidated financial information (continued) For the period ended March 31, 2017

5 Investments at fair value through other comprehensive income (continued)

The movement in investments classified at fair value through other comprehensive income is as follows:

	March 31,	December 31,
	2017	2016
	(Unaudited)	(Audited)
	AED	AED
Balance at January 1,	18,289,325	15,244,416
Changes in fair value	(1,035,245)	3,118,176
Translation reserve	61,920	(73, 267)
	17,316,000	18,289,325

$\bf{6}$ Investments classified at fair value through profit or loss

	March 31,	December 31,
	2017	2016
	(Unaudited)	(Audited)
	AED	ΛED
Quoted investments	2,461,356	2,265,979
Unquoted investments	986	1,893
	2,462,342	2,267,872

The movement in investments classified at fair value through profit and loss is as follows:

	March 31,	December 31,
	2017	2016
	(Unaudited)	(Audited)
	AED	AED
Balance at January 1,	2,267,872	2,260,259
Purchased during the period / year		173,717
Change in fair value	186,753	(158,099)
Translation reserve	7,717	(8,005)
	2,462,342	2,267,872
7 Trade and other payables	BE 1 94	$T = 1.94$

	магсп эт.	December 51,
	2017	2016
	(Unaudited)	(Audited)
	AED	AED
Trade payables	861,095	1,351,911
Provision for claims and other legal expenses	57,940,875	57,569,799
Rental income received in advance	2,413,606	1,717,538
Refundable deposits	1,001,284	1,010,962
Accrued expenses	383,043	381,907
	62,599,903	62,032,117

Provision for claims and other legal expenses relate to a legal case filed against the Group in December 1999. The final verdict on this case dated November 2010 required the Group to pay an amount of USD 5.7 million or its equivalent in Kuwaiti Dinars using the exchange rate announced by the Central Bank of Kuwait in December 1999 and interest of 7% of the claimed amount for the period starting 22 June 1992 to the date of settlement.

During the period, the claimed amount has been fully provided as at March 31, 2017.

Notes to the interim condensed consolidated financial information (continued) For the period ended March 31, 2017

۰ Oeneral and administrative expenses
	Three months	Three months
	period ended	period ended
	March 31,	March 31,
	2017	2016
	AED	AED
Staff costs	484,876	474,466
Legal and professional fees	393,789	126,220
Salaries and other benefits to executive director	191,101	186,450
Rent	35,946	36,090
Depreciation	33,423	49,473
Directors' sitting fee		90,000
Others	208,045	213,286
	1,347,180	1,175,985

and and admisistration avanced

$\overline{9}$ Seasonality of results

The Group's income consists of rental and investment income. Rental income is not significantly affected by any seasonal impact as it depends on annual lease contracts which are recognised in the income statement on a straight line method and in accordance with different terms of these contracts. In addition, there is limited fluctuation on the rent rates where the Group's investment properties are located. Investment income depends on market conditions, investment activities of the Group and declaration of profit by investee companies, which are of a seasonal nature. Accordingly, results of investment income for the period ended March 31, 2017 are not comparable to those relating to the comparative period, and are not indicative of the results that might be expected for the year ending December 31, 2017.

10 Related parties

In the normal course of business, the Group carries on business with other entities which fall within the definition of a related party in accordance with IFRS.

For the purpose of the interim condensed consolidated financial information, entities are considered to be related to the Company or the Group if the Company or the Group has the ability, directly or indirectly, to exercise significant influence over the entities in making financial and operating decisions, or vice versa, or where the Company or the Group are subject to common control or significant influence.

Compensation of key management personnel

Details of related party transactions entered into during the period are set out below. These transactions have been carried out at the terms mutually agreed between the related parties. There was no outstanding balance receivable or payable to related parties as at March 31, 2017. (December 31, 2016: AED Nil).

Key management personnel of the Company include the Managing Director and Directors. Key management personnel compensation includes the following:

	Three months	Three months
	period ended	period ended
	March 31,	March 31,
	2017	2016
	AED	AED
Salaries and other short-term employee benefits	182,114	177,427
Directors' sitting fee		90,000
Board of Directors' remuneration	840,000	490,000
End of service benefits charged to profit and loss	8,987	9,023

Notes to the interim condensed consolidated financial information (continued) For the period ended March 31, 2017

10 Related parties (continued)

Board of Directors' remuneration

This represents professional fees paid to the Group's Directors for serving as the board, and devoting special time and attention to the business and affairs of the Group. In accordance with the interpretation of Article 169 of the UAE Federal Law no. 2 of 2015, the Group's policy is to recognise the Board of Directors' remuneration as an appropriation of retained earnings.

$11$ Basic and diluted earnings per share

	Three months	Three months
	period ended	period ended
	March 31,	March 31,
	2017	2016
	AED	AED
Profit for the period	1,945,794	1,349,898
Weighted average number of shares	78,901,086	78,901,086
Basic and diluted earnings per share	0.025	0.017
Basic and diluted earnings per share	$2.5$ fils	$1.7$ fils

$12$ Capital commitments

Capital commitments

At March 31, 2017, the Group had estimated capital commitments of construction of investment properties of AED 235,370 (December 31, 2016: AED 235,370).

Operating lease agreements - Company as lessor

The Group has entered into various operating lease agreements for investments properties. As at the period end, the future lease amounting to AED 7,633,543 (December 31, 2016: AED 7,470,813) are due within one year, future lease amounting to AED 1,137,500(December 31, 2016: AED 1,300,000) are due above one year to five years, from the statement of financial position date under these operating leases.