fondi slloveno kosovar i pensioneve fund 1fondipensional.com/english/files/fund1 yearly report...

Fondi Slloveno Kosovar i Pensioneve

Fund 1

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2014

WITH INDEPENDENT AUDITORS’ REPORT THEREON

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

Ernst & Young Certified AuditorsLtd KosovoPashko Vasa 16/7 Pejton

Tel: (+381 38) 220 155Fax: (+381 38) 220 151www.ey.com

A member firm of Ernst & Young Global Limited

INDEPENDENT AUDITOR’S REPORT

To the Management and members of Fondi Slloveno Kosovar i Pensioneve - Fund 1

We have audited the accompanying financial statements of Fondi Slloveno Kosovar i Pensioneve –Fund 1 (“the Fund 1”) as of and for the year ended 31 December 2014 which comprise theStatement of Fund’s Net Assets, Statement of Income and Expenditure, Statement of Changes inFund 1’s Net Assets, Accounting Unit’s Financial Indicators and Statement of Accounting Units, anda summary of significant accounting policies and other explanatory information

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statementsin accordance with the rules and regulations of the Central Bank of Kosovo applicable to pensionfunds (“CBK Rules”) in Kosovo as set out in note 2, and for such internal control as managementdetermines is necessary to enable the preparation of financial statements that are free frommaterial misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with International Standards on Auditing. Those standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditors’ judgment,including the assessment of the risks of material misstatement of the financial statements, whetherdue to fraud or error. In making those risk assessments, the auditor considers internal controlrelevant to the entity’s preparation and fair presentation of the financial statements in order todesign audit procedures that are appropriate for the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the entity’s internal control. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of accountingestimates made by the management, as well as evaluating the overall presentation of the financialstatements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion.

Opinion

In our opinion, the financial statements of the Fund 1 as at and for the year ended December 31,2014 are prepared, in all material respects, in accordance with CBK Rules as set out in note 2 tothe financial statements.

Ernst & Young Certified Auditors ltd Kosovo shpk

30 April 2015

FONDI SLLOVENO KOSOVAR I PENSIONEVE - FUND 1

1

STATEMENT OF FUND 1’s NET ASSETSas at December 31, 2014(Amounts in Euro, unless otherwise stated)

Notes At 31 December2014 2013

Assets

Cash and cash equivalents 5 116,418 116,286Investments held for trading 6 4,628,744 3,769,613Investments held-to-maturity 7 741,788 1,184,293Other receivables 180 245Total assets 5,487,130 5,070,437

Liabilities and Participants’ fundsLiabilitiesLiabilities for management fee 8,412 7,386Liabilities for profit sharing 8 38,519 59,884Other liabilities 243 1,572

47,174 68,842

Participants’ funds and technicalreserveNet assets of the Fund 1 5,204,035 4,697,541Surplus for the year 235,921 304,054

5,439,956 5,001,595Total liabilities and Participants’ funds 5,487,130 5,070,437

Issued accounting units 37,499.1535 36,096.8139Value of an accounting unit 145.0688 138.5606

These financial statements have been approved by the Management of Fondi Slloveno Kosovar iPensioneve Sh.a – Fund 1 on March 31, 2015 and signed on its behalf by,

Mr. Bajram Bajrami,Managing Director

The statement of 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.


2

STATEMENT OF INCOME AND EXPENDITURESfor the year ended December 31, 2014(amounts in Euro, unless otherwise stated)

Notes 31 December2014

31 December2013

Income

Interest income 9 198,033 157,963Realized gains of sold/matured investments 10 28,473 10,706Dividend income 15,170 8,146Foreign exchange gains of monetary items 4,836 -Other income 1,444 -Income from portfolio converting - 199,484

247,956 376,298

ExpensesManagement fee (79,061) (71,163)Expenses for profit sharing 8 (38,519) (59,884)Provision and transaction fees (8,901) (6,171)Realized losses of investments (6,822) -Foreign exchange loss of monetary items (2,722) -

(136,025) (137,218)Net profit from investments 111,931 239,080

Unrealized gains

Unrealized gains from investments held fortrading, net 91,138 70,951Foreign exchange rate differences ofinvestments in investments 32,852 (5,977)

123,990 64,974Net surplus of the Fund 1 for the year 235,921 304,054

The statement of income and expenditures is to be read in conjunction with the notes set on pages 6to 19 forming an integral part of the financial statements.


3

STATEMENT OF CHANGES IN FUND 1’s NET ASSETSfor the year ended December 31, 2014(amounts in Euro, unless otherwise stated)

Notes 31 December2014

31 December2013

Net profit from investments 111,931 239,080Unrealized gains 123,990 64,974Net surplus of the Fund 1 for the year 235,921 304,054

Participant's contributions received 439,830 375,188Pension paid out (237,390) (128,447)Increase from billing control units 202,440 246,741

Total increase of net assets 438,361 550,795

Net assets as of 01 January 5,001,595 4,450,800

Net assets as of 31 December 5,439,956 5,001,595

Number of billing control units 1,402.3396 1,852.8365

The Statement of Changes in Fund 1 Net assets is to be read in conjunction with the notes set onpages 6 to 19, forming an integral part of the financial statements.


4

Accounting Unit’s Financial Indicatorsfor the year ended December 31, 2014(amounts in Euro, unless otherwise stated)

31 December 2014 31 December 2013

Accounting units at the beginning of year 36,096.8139 34,343.9774Value of accounting units at the beginning of year 138.5606 129.9732

Net assets of pension fund at the end of the year 5,439,956 5,001,595

Number of accounting units at the end of the year 37,499.1535 36,096.8139

Value of accounting unit at the end of the year 145.0688 138.5606


5

Statement of accounting unitfor the year ended December 31, 2014(amounts in Euro, unless otherwise stated)

Description

Number ofaccounting

unitsValue of net

assets

Accounting units at the beginning of the year 36,096.8139 5,001,595

Issued accounting units during the year-contributions 3,073.5070 439,830

Issued accounting units during the year-transfers to other funds - -

Reduction of accounting units due to transfers to Fund 2 - -

Reduction of accounting units due to payment of benefits (1,671.1674) (237,390)

Reduction of accounting units due to payment of fee from netassets of the Fund 1 - -

Net increase from operations 235,921Total number of accounting units at end of the year 37,499.1535 5,439,956

Value of accounting unitAt the beginning of the year 138.5606At the end of year 145.0688


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1. Background information

Fondi Slloveno Kosovar i Pensioneve sh.a. (hereinafter “the Company” or “FSKP”) was constituted asa joint-stock company as of 29 August 2006 with business registration number 70378739. TheCompany started its operations as of 04 September 2006. The Company is located at Rr.UCK,nr.50/2, 10000 Prishtina, Republic of Kosovo.

The Law no. 03/L-084 amending UNMIK regulation 2005/20 on pensions in Kosovo under which theFondi Slloveno Kosovar i Pensioneve - Fund 1 was established, provides for a supplementarypension 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 arecredited.

The Fund 1 is administered and managed by the Company – FSKP. The principal shareholders of theCompany 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 statementsare set out bellow. These policies have been consistently applied to all the years presented, unlessotherwise stated.

2.1 Statement of compliance

These financial statements have been prepared in accordance with the rules and regulations of theCentral Bank of the Republic of Kosovo applicable to pension companies (“CBK Rules”), which arebased 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 andmeasurement basis summarized below that are in accordance with CBK Rules. These policies havebeen consistently applied to all the years presented, unless otherwise stated.

These financial statements should be read as prepared in accordance with the accounting standardsand regulations prevailing in Kosovo, with a reference to the accounting policies as below, and shouldnot 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 andfor investments purposes, are carried at cost.

FONDI SLLOVENO KOSOVAR I PENSIONEVE - FUND 1Notes to the financial statements (continued)

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2. Summary of Significant Accounting Policies (continued)

2.4 Financial assets

Valuation and classification policiesThe Fund has established its accounting policies in accordance with CBK regulations. Rule N. 6 “OnPension Asset and Valuation of Pension Assets establish general classification and valuationguidelines of assets held by pension companies. Regarding financial instruments, article 4.2 of RuleNo. 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 realizablevalues on the valuation date.

CBK may allow other bases of valuation which are consistent with international best practices forpension assets that are established by OECD or EU Countries or acceptable by IFRS. Managementof Fund 1 has determined that measurement at fair value is the widely used methodology for valuationof pension assets, when the fair value can be measured reliably, as is the case of quoted equity anddebt investments.

Consequently in the current year, Fund 1 has reclassified its quoted debt investments from anamortized cost valuation to market value valuation, the difference of the fair value to the carryingamount 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 its financial assets in the following categories: at fairvalue through profit or loss that includes held for trading investments, loans and receivables, held tomaturity and available for sale. The classification depends on the purpose for which the financialassets were acquired.The regulations of CBK do not have any reclassification rules; however, management follows widelyaccepted principles that the classification should be generally consistent over time, andreclassifications are made with the purpose of improving the reliability of the financial statements. Forexample the reclassification of debt investments to available for trading has eliminated impairmentuncertainties of the held to maturity portfolio.

Financial assets at fair value through profit or lossFinancial assets at fair value through profit or loss are financial assets held for trading and thosedesignated at fair value through profit or loss at inception. A financial asset is classified in thiscategory if acquired principally for the purpose of selling in the short-term or if so designated bymanagement. Assets in this category are classified as current assets.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments thatare not quoted in an active market. They are included in current assets, except for maturities greaterthan 12 months after the balance sheet date. These are classified as non-current assets. The Fund1’s loans and receivables comprise ‘trade and other receivables’, placements with banks and cashand cash equivalents in the balance sheet.

Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivatives that are either designated in this category or notclassified in any of the other categories. They are included in non-current assets unless managementintends to dispose of the investment within 12 months of the balance sheet date. The Fund 1 has noassets classified in this category.

Held – to - maturity financial assetsHeld-to-maturity investments are non-derivative financial assets with fixed or determinable paymentsand fixed maturities that the Fund 1’s management has the positive intention and ability to hold tomaturity. Were the Fund 1 to sell other than an insignificant amount of held-to-maturity assets, theentire category would be tainted and reclassified as held for trading.


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2.4 Financial assets (continued)

Initial recognition, measurement and de-recognitionRegular purchases and sales of financial assets are recognized on the trade date – the date on whichthe Fund 1 commits to purchase or sell the asset. Investments are initially recognized at fair valueplus 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 andtransaction costs are expensed in the statement of income and expenditures.

Financial assets are derecognized when the rights to receive cash flows from the investments haveexpired or have been transferred and the Fund 1 has transferred substantially all risks and rewards ofownership.

Available-for-sale financial assets (if held) and financial assets at fair value through profit or loss aresubsequently carried at fair value. Loans and receivables and Held-to-Maturity investments arecarried at amortized cost using the effective interest method.

Unrealized interest income and amortization of the discount/ (premium) are recognized as income andexpenses for the period.

Dividend income and gains or losses arising from changes in the fair value of the ‘financial assets atfair value through profit or loss’ category are recognized as income in the statement of income andexpenditures 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 orimpaired, the accumulated fair value adjustments recognized in equity are included in the statement ofincome and expenditures as ‘gains and losses from investment investments’.

Interest on available-for-sale investments calculated using the effective interest method is recognizedin the statement of income and expenditures as part of other income. Dividends on available-for-saleequity instruments are recognized in the statement of income and expenditures as part of otherincome 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 financialasset is not active (and for unlisted investments), the Fund 1 establishes fair value by using valuationtechniques.

Impairment of financial assetsThe Fund 1 assesses at each balance sheet date whether there is objective evidence that a financialasset or a group of financial assets is impaired. In the case of equity investments classified asavailable for sale, a significant or prolonged decline in the fair value of the security below its cost isconsidered as an indicator that the investments are impaired. If any such evidence exists foravailable-for-sale financial assets, the cumulative loss – measured as the difference between theacquisition cost and the current fair value, less any impairment loss on that financial asset previouslyrecognized in profit or loss – is removed from equity and recognized in the statement of income andexpenditures. Impairment losses recognized in the statement of income and expenditures on equityinstruments are not reversed through the statement of income and expenditures. Impairment testingof trade receivables is described further in this note.

2.5 Receivables and payables related with investment securitiesReceivables and payables arise from the acquisition and sale of investments and are recognized asassets and/or liabilities at the date of the transaction made.


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2.6 Net assets of the Fund 1

The Fund’s net asset value equals total assets minus total liabilities of the Fund 1.

2.7 Value of accounting unit

The value of the accounting unit equals the value of Fund’s net assets divided by the total number ofaccounting units as of the date of calculation. This formula does not apply as of the first day ofoperations 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 interestincome 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 annualmanagement fee is 1.5% of the total Fund’s assets.

2.10 Expenses for transaction fee

These expenses relate to the fees paid to financial intermediaries (banks and brokerage houses) whoare acquiring investments for the Fund 1.

2.11 Realized gains/lossesRealized gains/losses arise from the sale of investments, levelling of prices when investments areacquired and matured principals and interest on investments acquired at premium or discount. Thesegains/losses are recorded as revenues or expenses at the moment when they occur.

2.12 Amortization of discount/premium of the security

Amortization of the discount/premium of the security is recorded through deferred revenues/expensesand accrued expenses/revenues. At the moment when the security matures or is sold, the amount ofamortization is transferred as realized capital gain or loss.

2.13 Foreign exchange gains/losses

Transactions in foreign currencies are recorded in accordance with the valid exchange rate as of thedate of the transaction. The differences are recorded in the statement of income and expenditures asgains/losses.

2.14 Transaction with related parties

Related parties are defined as those parties which have control over each other or have an influenceon the financial and operational decisions of each other.

The Fund related parties are Prva Group PLC from Ljubljana, Slovenia and Corporation Dukagjinifrom Peja, Republic of Kosovo, which are managing and administering the Fund 1 and Company.


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3. Fund 1 assets and investment strategy

The Fund 1 is obliged to follow CBK rules with regard to investments in different types of financialassets 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 followingcommon conditions:

a. The Fund must invest their assets only in the classes of permitted (eligible) investments prescribedunder this Rule or in cash in the course of deposit to the custodian or for cash and bank depositsrepresenting 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 thedetermination of eligibility is based on amount, the limitation is based on the amount of totalinvestment 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 principlesand in conformity with investment directives adopted and issued by the pension entity consistentwith the requirements of the Pensions Regulation and these Rules.

d. Investments made in breach or violation of the investment principles and directives must becorrected and rectified immediately. Breaches and deviations, of previously conforminginvestments, arising from cause or causes beyond the control of the board of directors or assetmanager of the pension entity may be rectified or corrected within such time and manner that isleast detrimental to the interests of the participants which period of time is not greater than 6months from the date of such breach or deviation.

e. The governing bodies of pension entities providing pensions shall submit to the CBK, together withquarterly and yearly reports, a statement certified by a duly authorized officer, attesting that allinvestment assets of the entity are in compliance with the conditions, restrictions and limitationsprescribed in the Pensions Regulation and this Rule and in conformity with the statement ofinvestment 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 timeframe 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 ofthe investment. Investment grade or rating conditions shall form part and parcel of this Rule on thedate 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 KosovoPension 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 bankregulatory authority of a member state of the OECD, and whose license remains in force and ingood 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.


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3. Fund 1 assets and investment strategy (continued)

� Investments registered with the capital markets regulator of any member state of the OECD andplaced for public offering and actively listed or traded in the Stock Exchange that is appropriatelyregulated and supervised in such state(s).

� Mutual funds and other investment funds (open-end entities) subject to the approval in theOECD member state of their establishment and for which compliance requirements areprescribed by the appropriate regulatory or supervisory authority within such member staterelating 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 effectivelaws, 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 CBKand conducting banking business in Republic of Kosovo in good standing with the regulatoryrequirements of the CBK.

Investments issued by competent authority in Republic of Kosovo, to the extent guaranteed by suchauthority.

� Investments issued by public and/or private enterprises that are registered with the capitalmarkets regulator in Republic of Kosovo provided that such investments are listed and traded ininvestments exchange(s) licensed in Republic of Kosovo or in a member state of the OECD andsubject 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 Republicof Kosovo and for which compliance requirements are prescribed by the appropriate regulatoryor supervisory authority in Republic of Kosovo relating to the conduct of business activities ofsuch 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 ofKosovo.

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 thepension entity at the time of their acquisition.

Pension Funds and Pension Providers shall be deemed to have complied with the rules ondiversification of investments if the following conditions are fulfilled:

� The investments made are in accordance with the terms and stipulations contained in theirStatements of Investment Principles approved by the CBK.

� The assets of the Pension Fund, or when applicable the Pension Provider, are kept andsafeguarded 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.


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4. Financial instruments by category

The carrying amounts of the Fund’s financial assets and liabilities as recognized at the date of thestatement of financial position under review may also be categorized as follows:

At fair value throughprofit or loss

Loans andreceivables

Held - to -maturity Total

31 December 2014AssetsCash and cash equivalents - 116,418 - 116,418Investments held for trading 4,628,744 - - 4,628,744Investments held-to-maturity - 741,788 - 741,788Other receivable - 180 - 180

4,628,744 858,386 - 5,487,130

Other financial liabilitiesat amortized cost Total

LiabilitiesLiabilities for managementfee - - 8,412 8,412Liabilities for profit sharing - - 38,519 38,519Other liabilities - - 243 243

- - 47,174 47,174

At fair value throughprofit and loss

Loans andreceivables

Held - to -maturity Total

31 December 2013AssetsCash and cash equivalents - 116,286 - 116,286Investments held for trading 3,769,613 - - 3,769,613Investments held-to-maturity - 1,184,293 - 1,184,293Other receivable - 245 - 245

3,769,613 1,300,824 - 5,070,437

Other financial liabilitiesat amortized cost Total

LiabilitiesLiabilities for managementfee - - 7,386 7,386Liabilities for profit sharing - - 59,884 59,884Other liabilities - - 1,572 1,572

- - 68,842 68,842

5. Cash and cash equivalents31 December 2014 31 December 2013

Custodian account-Nova Ljubljanska Banka d.d, NLB 46,530 103,126Saving account - Raiffeisen Bank 33,048 1,910Contribution account – NLB Kasabank 14,374 778Contribution account – Pro Credit Bank 10,486 5,280TEB cash account 5,315 799BKT current account 3,322 805Contribution account – Banka Ekonomike 3,284 2,355Banka Ekonomike 36 380Cash account Raiffeisen bank 23 515Pension Payment account – Banka Ekonomike - 338

116,418 116,286


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6. Investment held for trading

Investments held for trading in the statements of financial positions are as follows:


Corporate bonds 2,253,757 2,471,528Government bonds 1,479,577 819,409Equity investments 750,171 379,163Commercial bills 145,239 99,513

4,628,744 3,769,613

The following table provides for the movement of investments held for trading during 2014 and 2013:

Corporatebonds

Governmentbonds

Commercialbills

Equityinvestments Total

At 31 December 2014 2,471,528 819,409 99,513 379,163 3,769,613Additions 921,844 885,179 290,688 349,024 2,446,736Disposal/matured (1,133,641) (285,287) (248,501) (44,165) (1,711,594)Net exchange rate 32,852 32,852Unrealized gain/(loss) (5,974) 60,275 3,538 33,298 91,137At 31 December 2014 2,253,757 1,479,577 145,239 750,171 4,628,744

At 31 December 2013 - 20,485 - 176,283 196,768Additions - - 185,237 149,585 334,822Reclassified 2,476,919 795,544 - - 3,272,463Disposal - (10,054) (89,360) - (99,414)Net exchange rate - - - (5,977) (5,977)Unrealized gain/(loss) (5,391) 13,434 3,636 59,272 70,951At 31 December 2013 2,471,528 819,409 99,513 379,163 3,769,613

On 11 November 2013 management has made decision to convert its portfolio of corporate bondsand Commercial bills quoted in active markets from Held to maturity carried at amortised cost toAvailable for Trading measured at fair value, as also described in Note 2.4. The difference betweenthe carrying amount and the fair value on reclassification date amounting to 199,484 Euro wasrecognised in income of the year.


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7. Investments held to maturity

Investments held-to-maturity consists entirely of bonds and other debt investments issued by foreigncompanies and banks

31 December 2014 31 December 2013Placement with banks 634,501 1,077,501Accrued interest 107,287 106,792

741,788 1,184,293

Placement with banks and Accrued interest is as follows:

31 December 2014 31 December 2013Pro Credit Bank PCB 198,773 189,997TEB –Turkish Enterprise Bank 155,862 183,873Banka Kombetare Tregtare BKT 121,986 210,794Banka Ekonomike e Kosovës 98,402 187,541Raiffeisen Bank 87,737 193,244NLB Kasabank 79,028 218,844

741,788 1,184,293

The placements in banks earn interest from 3.60% to 6.65% on annual basis. Their maturity periodranges from 1 till 3 years.

Following table provides for the movement of investments held-to-maturity during 2014 and 2013:

2014 2013

1 January - 3,122,642Additions - 219,244Matured - (268,907)Amortization of the discount of investments with fixed maturity - -Reclassified to available for trade (see note 6) - (3,072,979)At 31 December - -

Realized gain from portfolio conversion - 199,484

8. Liabilities for profit sharing

Company has reward asset manager based on pension plan ”In the event that fund is performingbetter 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. Thepension plan of the Company for the return of funds is approved by the Central Bank.


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9. Interest income


Interest income from investments 145,399 107,844Interest income from deposits 52,567 60,312Interest income from bank accounts 67 513

198,033 168,668

10. Realized gains of sold/matured investments in investments

31 December 2014 31 December 2013Government bonds 15,566 -Corporate bonds 3,971 8,064Commercial Bills 3,791 2,642Equity shares 5,144 -

28,473 10,706

11. Transaction with related parties

Related parties are considered to include major shareholders, affiliates and entities under commonownership, control and management with the Fund, or whose activities the Fund has an ability tocontrol.

All Funds transactions with related parties arise in the normal course of business and their value is notmaterially different from the terms and conditions that would prevail in arms-length transactions. Allrelated party transactions and balances refer to the Company FSKP and asset manager as follows:

31 December 2014 Prva Group Company Total

Liabilities

Liabilities for profit sharing 38,519 - 38,519Liabilities for management fee - 8,412 8,412Total Liabilities 38,519 8,412 46,931

Net Receivables/(Liabilities) (38,519) (8,412) (46,931)

Expenses

Expenses for profit sharing 38,519 - 38,519Expenses for management fee - 79,061 79,061Total Expenses 38,519 79,061 117,580

Net income/(expense) (38,519) (79,061) (117,580)


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11. Transaction with related parties (continued)

31 December 2013 Prva Group Company TotalLiabilities

Liabilities for profit sharing 59,884 - 59,884Liabilities for management fee - 7,386 7,386Total Liabilities 59,884 7,386 67,270

Net Receivables/(Liabilities) (59,884) (7,386) (67,270)Expenses

Expenses for profit sharing 59,884 - 59,884Expenses for management fee - 71,163 71,163Total Expenses 59,884 71,163 131,047

Net income/(expense) (59,884) (71,163) (131,047)

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 appropriatebalance between risk and return and minimize potential adverse effects on the Fund’s financialperformance.

The Fund’s risk management policies are designed to identify and analyse these risks, to setappropriate risk limits and controls, and to monitor the risks and adherence to limits by means ofreliable and up-to-date information systems. The Fund’s Management regularly reviews its riskmanagement policies and systems to reflect changes in markets, products and emerging bestpractice.

Risk management is carried out by Risk Management Department under policies approved by theCompany. This department identifies and evaluates financial risks in close co-operation with theFund’s operating units. The Fund provides written principles for overall risk management, as well aswritten policies covering specific areas, such as foreign exchange risk, interest rate risk and credit risk

Credit riskThe Fund takes on exposure to credit risk, which is the risk that a counter party will cause a financialloss for the Fund by failing to discharge an obligation. Credit risk is the most important risk for theFund’s business activities. Therefore, the Fund’s management carefully manages its exposure tocredit risk. Fund must be in accordance with CBK rules with regard of types, amounts of investmenton financial assets.

2014 2013Maximum exposure to credit riskInvestments held for tradingCorporate bonds 2,253,757 2,471,528Government bonds 1,479,577 819,409Equity investments 750,171 379,163Commercial bills 145,239 99,513

4,628,744 3,769,613Investments held to maturityPlacement on banks 634,501 1,077,501Accrued interest 107,287 106,792

741,788 1,184,293Other receivables 180 245

5,370,712 4,954,151


17

12. Financial risk management (continued)

Interest rate riskThe table below analyses assets and liabilities of the Fund into relevant maturity groupings based onthe remaining period at balance sheet date to the contractual maturity date as of 31 December 2014and 2013 (in Euro).

31 December 2014 Interest-bearingNon-

interestbearing Total

Less than1 month

From 1to 3

months

From 3to 12

monthsFrom 1 to

5 yearsOver 5years

AssetsCash and cashequivalents 116,418 - - - - - 116,418Investments held fortrading - 130,816 248,692 2,316,967 1,182,098 750,171 4,628,744Investments held-to-maturity - 269,502 311,419 160,867 741,788Other receivable - - - - - 180 180

116,418 400,318 560,111 2,477,834 1,182,098 750,351 5,487,130LiabilitiesLiabilities formanagement fee - - - - - 8,412 8,412Liabilities for profitsharing - - - - - 38,519 38,519Other liabilities - - - - - 243 243

- - - - - 47,174 47,174Net interest riskgap 116,418 400,318 560,111 2,477,834 1,182,098 703,177 5,439,956

31 December 2013Assets 116,286 214,754 446,099 3,574,824 237,114 481,360 5,070,437Liabilities - - - - - 68,842 68,842Net interest riskgap 116,286 214,754 446,099 3,574,824 237,114 412,518 5,001,595

Foreign currency risk

At 31 December 2014 and 2013, the Fund 1 is exposed to risk considering the effects from the flowsof the exchange rate level. The following tables summarize the foreign currency position of themonetary assets and liabilities of the Fund on 31 December 2014 and 2012 (in Euro):

31 December 2014 In EUR in USD Other TotalAssetsCash and cash equivalents 115,180 1,238 - 116,418Investments held for trading 4,208,098 420,646 - 4,628,744Investments held-to-maturity 741,788 - - 741,788Other receivables 180 - - 180Total assets 5,065,246 421,884 - 5,487,130

LiabilitiesLiabilities for management fee 8,412 - - 8,412Liabilities for profit sharing 38,519 - - 38,519Other liabilities 243 - - 243Total liabilities 47,174 - - 47,174Net foreign currency risk 5,018,072 421,884 - 5,439,956

31 December 2013Total assets 4,893,403 177,034 - 5,070,437Total liabilities 68,842 - - 68,842Net foreign currency risk 4,824,561 177,034 - 5,001,595


18

12. Financial risk management (continued)

Liquidity risk

The Fund 1 policy is to invest the assets in highly liquid financial instruments on different capitalmarkets in compliance with the prescribed limits by the Law and regulations. In the process ofcreating the Fund’s portfolio, aiming to provide a higher liquidity, the Fund’s assets were invested ininvestments 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 theremaining period at balance sheet date to the contractual maturity date (in Euro).

31 December 2014

Lessthan 1month

From 1to 3

months

From 3 to12

months

From 1to 5

years Over 5 years Total

Cash and cash equivalents 116,418 - - - - 116,418Investments held-for-trading - 130,816 248,692 2,316,967 1,932,269 4,628,744Investments held-to-maturity - 269,502 311,419 160,867 - 741,788Other receivable 180 - - - - 180

116,598 400,318 560,111 2,477,834 1,932,269 5,487,130LiabilitiesLiabilities for management fee 8,412 - - - - 8,412Liabilities for profit sharing 38,519 - - - - 38,519Other liabilities 243 - - - - 243

47,174 - - - - 47,174Net liquidity gap 69,424 400,318 560,111 2,477,834 1,932,269 5,439,956

31 December 2013Total assets 116,531 214,754 446,099 3,574,824 718,229 5,070,437Total liabilities 68,842 - - - - 68,842Net liquidity gap 47,689 214,754 446,099 3,574,824 718,229 5,001,595

13. Fair Value

Fair value represents the amount at which an asset could be replaced or a liability settled on an arm’slength basis. Fair values have been based on management assumptions according to the profile ofthe 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 inaccordance with the hierarchy of the fair value are shown in the next table. This hierarchy groups thefinancial assets and liabilities into three levels that are based on the significance of the incoming dataused 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 areavailable 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 marketobserving.

The financial assets that are registered according to their fair values in The Statement of Fund 1’s NetAssets are grouped according to the hierarchy level of the fair value, as follows (in Euro).

31 December 2014

Level 1 Level 2 Level 3 TotalAssetsInvestments held for trading 4,628,744 - - 4,628,744Investments held to maturity 741,788 - 741,788


19

13. Fair Value (continued)

Financial instruments that are not presented at fair value

31 December 2013Level 1 Level 2 Level 3 Total

AssetsInvestments held for trading 3,769,613 - - 3,769,613Investments held to maturity - 1,184,293 - 1,184,293

The following table summarizes the carrying amounts and fair values to those financial assets andliabilities that are not presented on balance sheet at their fair value.

Carrying amount Fair value2014 2013 2014 2013

AssetsCash and cash equivalents 116,418 116,286 116,418 116,286Investments held-to-maturity 741,788 1,184,293 741,788 1,184,293Other receivables 180 245 180 245Total assets 858,386 1,300,824 858,386 1,300,824

LiabilitiesLiabilities for management fee and otherliabilities 47,174 68,842 47,174 68,842Total liabilities 47,174 68,842 47,174 68,842

The fair value of financial instruments traded in active markets (such as trading and available-for-saleinvestments) is based on quoted market prices at the balance sheet date. The quoted market priceused 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 usingvaluation techniques.

The carrying value less impairment provision of trade receivables and the carrying value of payablesare assumed to approximate their fair values. The fair value of financial liabilities for disclosurepurposes is estimated by discounting the future contractual cash flows at the current market interestrate that is available to the Fund for similar financial instruments. However, for short term bankplacements were interest rates are comparable to the market, the carrying amount is considered to bethe best approximate of the fair value.

14. Events after the reporting date

After 31 December 2014 the reporting date until the approval of these financial reports, there are noadjusting events reflected in the financial statements or events that are materially significant fordisclosure in these financial statements.

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