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ANNUAL REPORT
2015
Notes to The Consolidated Financial Statement
AL MAZAYA HOLDING COMPANY K.S.C.P. AND ITS SUBSIDIARIES
31 December 2015
30.3.2 Equity price risk
Equity price risk arises from changes in the fair values of equity investments. The Group manages this through diversification of
investments in terms of geographical distribution and industry concentration. All of the Group’s quoted investments are quoted
on the regional Stock Exchanges.
The effect on other comprehensive income (OCI) as a result of a change in the fair value of equity instruments held as available
for sale financial assets at 31 December 2015 due to 5% increase in the following market indices with all other variables held
constant is as follows:
The effect on the profit before directors’ remuneration and taxation represents increase in fair value of impaired available for sale
investments which will be recorded in the consolidated statement of income.
50 basis points increase
Effect in profit
2015
KD
2014
KD
Kuwaiti Dinars
401,832
323,793
30.3 Market risk
Market risk is the risk that the value of an asset will fluctuate as a result of changes in market variables such as interest rates,
foreign exchange rates and equity prices, whether those changes are caused by factors specific to the individual investment or
its issuer or factors affecting all investments traded in the market.
Market risk is managed on the basis of pre-determined asset allocations across various asset categories, diversification of assets
in terms of geographical distribution and industry concentration, a continuous appraisal of market conditions and trends and
management’s estimate of long and short term changes in fair value.
30.3.1 Interest/profit rate risk
Interest/profit rate risk arises from the possibility that changes in interest/profit rates will affect future profitability or the fair
values of financial instruments. Interest rate risk is managed by the finance department of the Parent Company. The Group
is exposed to interest/profit rate risk on its interest bearing assets and liabilities (bank deposits and facilities) as a result of
mismatches of interest rate repricing of assets and liabilities. It is the Group›s policy to manage its interest/profit cost using a mix
of fixed and variable rate debts. The Group
'
s policy is to keep a substantial portion of its borrowings at variable rates of interest.
The sensitivity of the consolidated statement of income is the effect of the assumed changes in interest/profit rates on the
Group’s profit before directors’ remuneration and taxation, based on floating rate financial assets and financial liabilities held at
31 December 2015. There is no impact on equity.
The following table demonstrates the sensitivity of the consolidated statement of income to a reasonable charge in interest /
profit rates of 50 basis points, with all other variables held constant.
Effect on OCI
2015
KD
2014
KD
KSE ( 5%)
Others
1,962
5,298
1,468
4,903
±
Market indices
89