Aram Group — Regulatory Filings 2017

Nov 12, 2017

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

Interim Condensed Consolidated Financial Information (Unaudited)

For the period ended September 30, 2017

Sharjah Group Company P.S.C. and its Subsidiary Interim Condensed Consolidated Financial Information (Unaudited) For the period ended September 30, 2017

Table of contents

	Page
Report on review of the interim condensed consolidated financial information
Interim consolidated statement of financial position
Interim consolidated statement of profit or loss	3
and other comprehensive income
Interim consolidated statement of changes in equity
Interim consolidated statement of cash flows	5
Notes to the interim condensed consolidated financial information	$6 - 12$

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 statement of financial position of Sharjah Group Company P.S.C. (the "Company") and its Subsidiary (together the "Group") as at September 30, 2017, and the related interim consolidated statement of profit or loss and other comprehensive income for the three months and nine months periods then ended and the related interim consolidated statement of changes in equity and interim consolidated statement of cash flows for the nine 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.

Plan's HORNION

GRANT THORNTON

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

November 9, 2017

Grant Thomton UAE is a member firm of Grant Thomton 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 September 30, 2017

ASSETS Non-current assets Property and equipment Investment properties Available for sale investments Investments at fair value through other comprehensive income	Notes 3 4 5	September 30, 2017 (Unaudited) AED 169,701 235,990,420 2,555,701 17,481,600 256, 197, 422	December 31, 2016 (Audited) AED. 129,075 235,755,320 3,543,976 18,289,325 257,717,696
Current assets Investments at fair value through profit or loss Trade and other receivables Cash and cash equivalents TOTAL ASSETS EQUITY AND LIABILITIES Equity Share capital Statutory reserve	6	3,099,386 1,150,005 5,568,337 9,817,728 266,015,150 78,901,086 29,777,838	2,267,872 754,281 3,626,148 6,648,301 264,365,997 78,901,086 29,777,838
Voluntary reserve Fair value reserve Foreign currency translation reserve Retained earnings Total equity Non-current liabilities Employees' end of service benefits		10,096,897 2,028,218 (439, 190) 51,996,635 172,361,484 900,849	10,096,897 3,926,407 (731, 814) 49,208,609 171,179,023 784,784
Current liabilities Trade and other payables Dividends payable	7	62,725,130 30,027,687 92,752,817	62,032,117 30,370,073 92,402,190
Total liabilities TOTAL EQUITY AND LIABILITIES		93,653,666 266,015,150	93,186,974 264,365,997

This interim condensed consolidated financial information was approved and authorised for issue by the Board of Directors on November 9, 2017 and were signed on their behalf by:

Mr. Ziyad Mahmoud Khairullah Al Haji

Mr. Mohammed ALWazzan Managing Director

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 September 30, 2017 (Unaudited)

	Notes	Three months period ended September 30, 2017 AED	Three months 2016 AED	Nine months period ended period ended September 30, September 30, 2017 AED	Nine months period ended September 30, 2016 AED
Rental income		3,968,505	3,762,287	11,660,891	11,177,277
Dividend income Unrealised gain/(loss) on investments		345,082	6,015	412,492	78,442
at fair value through profit and loss	6	952,381	(176, 566)	802,736	(341, 688)
General and administrative expenses	8	(1,224,475)	(1,090,688)	(3,989,246)	(3,432,462)
Repairs and maintenance expenses		(261, 480)	(243, 386)	(957, 106)	(767, 960)
Provision for claims and settlement Impairment loss on available for sale	7	(371, 076)	(483, 442)	(1, 113, 228)	(1,225,594)
investments		(19, 734)		(158, 594)	(172, 290)
Reversal of impairment loss on available for sale investments	4		188,227		318,771
Other income		39,146	80,928	126,123	759,451
PROFIT FOR THE PERIOD		3,428,349	2,043,375	6,784,068	6,393,947
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	5		6,236,352	(1,035,245)	5,543,424
Items that are or may be reclassified to profit or loss in subsequent periods
Changes in value of available for sale investments	4	7,189	(80,028)	(862, 943)	107,724
Foreign currency translation reserve		93,207	186,593	292,625	300,538
Other comprehensive income		100,396	6,342,917	(1,605,565)	5,951,686
TOTAL COMPRHENSIVE INCOME FOR THE PERIOD		3,528,745	8,386,292	5,178,503	12,345,633
Basic and diluted earnings per share	11	0.043	0.026	0.086	0.081

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 September 30, 2017 (Unaudited)

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

160,259,864

40,497,375

$(333,091)$

5,875,587

7,818,983

27,499,924

78,901,086

Balance at September 30, 2016

Interim consolidated statement of cash flows For the period ended September 30, 2017 (Unaudited)

AED OPERATING ACTIVITIES
6,784,068 Profit for the period	6,393,947
Adjustments to reconcile profit to net cash flows: 1,113,228 Provision for claims and settlement Unrealised (gain)/loss on investments classified	1,225,594
(802, 736) at fair value through profit or loss	341,688
158,594 Impairment loss on available for sale investments	172,290
116,398 Provision for employee's end of service benefits	103,939
98,578 Depreciation on property and equipment	146,506
Reversal of impairment loss on available for sale investments	(318, 771)
7,468,130	8,065,193
Changes in working capital
Trade and other receivables (395, 724)	(210,966)
(1,260,215) Trade and other payables	444,317
5,812,191 Cash from operations	8,298,544
(333) Employee's end of service benefits paid	(300)
5,811,858 Net cash flow from operating activities	8,298,244
INVESTING ACTIVITIES
3 (235,100) Addition of investment properties	(5,903,797)
(139,205) Purchase of property and equipment	(17, 644)
Purchase of investments at fair value
6 through profit of loss	(173, 716)
(374, 305) Net cash flow used in investing activities	(6,095,157)
FINANCING ACTIVITY
(3, 498, 428) Dividends paid	(11, 410, 157)
(3, 498, 428) Net cash flow used in financing activity	(11, 410, 157)
1,939,125 Net change in cash and cash equivalents	(9,207,070)
3,064 Exchange differences on translating foreign operations	1,786
3,626,148 Cash and cash equivalents, beginning of period	12,900,508
5,568,337 Cash and cash equivalents, end of period	3,695,224

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 September 30, 2017

Legal status and principal activities $\overline{\mathbf{1}}$

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 September 30, 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 $\overline{2}$

Basis of preparation $a)$

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 that 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 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 September 30, 2017

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

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 $\mathbf{d}$ 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, 2016 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 $\bullet)$ yet 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.

$f$ Significant judgement and estimates

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 September 30, 2017

$\overline{\mathbf{3}}$ Investment properties

	September 30, December 31, 2017 AED (Unaudited)	2016 AED (Audited)
Balance at January 1, Additions during the period / year Gain on fair valuation of investment properties	235,755,320 235,100 235,990,420	216, 747, 723 7,691,897 11,315,700 235,755,320

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 $\overline{\mathbf{4}}$

	September 30, December 31,
	2017	2016
	(Unaudited)	(Audited)
	AED	AED
Unquoted investments	2,555,701	3,543,976

The movement in available for sale investments is as follows:

	September 30,	December 31,
	2017	2016
	(Unaudited)	(Audited)
	AED	AED
Balance at January 1,	3,543,976	3,090,171
Changes in the fair value	(862, 943)	583,792
Impairment losses	(158, 594)	(115,789)
Translation reserve	33,262	(14, 198)
	2,555,701	3,543,976

Notes to the interim condensed consolidated financial information (continued) For the period ended September 30, 2017

5 Investments at fair value through other comprehensive income

	September 30, December 31, 2017	2016
	(Unaudited) AED	(Audited) AED
Quoted investments	17,481,600	18,289,325

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

	September 30,	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	227,520	(73, 267)
	17,481,600	18,289,325

Investments classified at fair value through profit or loss $6\phantom{1}$

	September 30, December 31,
	2017	2016
	(Unaudited)	(Audited)
	AED	AED
Quoted investments	3,016,470	2,265,979
Unquoted investments	82,916	1,893
	3,099,386	2,267,872

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

	September 30,	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	802,736	(158,099)
Translation reserve	28,778	(8,005)
	3,099,386	2,267,872

Notes to the interim condensed consolidated financial information (continued) For the period ended September 30, 2017

7 Trade and other payables
	September 30,	December 31,
	2017	2016
	(Unaudited)	(Audited)
	AED	AED
Trade payables	614,291	1,351,911
Provision for claims and other legal expenses	58,683,027	57,569,799
Rental income received in advance	1,967,413	1,717,538
Refundable deposits	1,016,879	1,010,962
Accrued expenses	443,520	381,907
	62,725,130	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 June 22, 1992 to the date of settlement.

During the period, the claim amount has been fully provided as at September 30, 2017.

8 General and administrative expenses

	Three months period ended September 30, 2017 AED	Three months period ended 2016 AED	Nine months period ended September 30, September 30, 2017 AED	Nine months period ended September 30, 2016 AED
Staff costs Salaries and other benefits to	589,788	437,828	1,707,242	1,339,960
executive director	141,125	159,382	530,156	546,718
Legal and professional fees	88,254	182,833	737,607	473,077
Rent	35,946	36,090	107,838	108,270
Depreciation	29,654	48,377	98,578	146,506
Directors' sitting fee				146,500
Others	339,708	226,178	807,825	671,431
	1,224,475	1,090,688	3,989,246	3,432,462

$9$ 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 is 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 September 30, 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.

Notes to the interim condensed consolidated financial information (continued) For the period ended September 30, 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 September 30, 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 Nine months	Nine months
	period ended	period ended	period ended	period ended
	September 30,		September 30, September 30,	September 30,
	2017	2016	2017	2016
	AED	AED	AED	AED
Salaries and other short-term
employee benefits	126,747	150,359	497,805	519,650
Directors' sitting fee				146,500
Directors' other expenses	10,745		40,137
Board of Directors' remuneration			840,000	490,000
End of service benefits charged to
profit and loss	14,378	9,023	32,351	27,068

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 period ended	period ended	Three months Nine months period ended	Nine months period ended
	September 30,		September 30, September 30,	September 30,
	2017	2016	2017	2016
	AED	AED	AED	AED
Profit for the period	3,428,348	2,043,375	6,784,068	6,393,947
Weighted average number of shares	78,901,086	78,901,086	78,901,086	78,901,086
Basic and diluted earnings per share	0.043	0.026	0.086	0.081
Basic and diluted earnings per share	4.34 fills	$2.59$ fills	8.59 fills	8.10 fills

Notes to the interim condensed consolidated financial information (continued) For the period ended September 30, 2017

$12$ Capital commitments

Capital commitments

At September 30, 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 6,830,167 (December 31, 2016: AED 7,470,813) are due within one year, future lease amounting to AED 865,000 (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.