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$: FINANCIAL STATEMENTS AND IIIDEPENDENT AUDITORS' …delta-plc.com/wp-content/uploads/2015/09/Audited... · 2015. 9. 15. · Registration No: Co.2227 Kill20l3 DELTA MICROF'INAi\CE PLC$
Registration No:Co.2227 zul/2013

DELTA MICROF'INANCE PLC.(TNCORPORATED rN CAMBODTA)

AT]DITED FINANCIAL STATEMENTS ANDIIIDEPENDENT AUDITORS' REPORT

31 DECEMBER 2014

Registration No:Co.2227 KLIl20l3

DT.' LTA MICROFINAI\CE PLC.(Incorporated in Cambodia)

C ORPORATE INf,'ORMATION

DIRECTORS: Sabo OjanoOuk RavinSoeun SambathSok Chan Lom AngTep Navuth

REGISTERED OFFICE: No.35-37, Street 582Sangkat Boeung Kak IIKhan TuolkokPhnom PenhKingdom of Cambodia

PRINCIPAL BANKERS: National Bank of CambodiaACLEDA Bank Plc.Advanced Bank of Asia Limited

AUDITORS: BDO (Cambodia) Limited

Registration No:Co.2227 KII/2013

DELTA MICROFINANCE PLC.(Incorporated in Cambodia)

CONTENTS

DIRECTORS' REPORT

INDEPENDENT AUDITORS' REPORT

BALANCE SHEET

INCOME STATEMENT

STATEMENT OF CHANGES IN EQUITY

CASH FLOWS STATEMENT

NOTES TO THE FINANCIAL STATEMENTS

PAGE

t-4

5-6

7

8

9

10

11 -32

Registration No:Co.2227 Kill20l3

DELTA MICROF'INAi\CE PLC.(Incorporated in Cambodia)

DIRECTORS' REPORT

The Directors have pleasure in submitting their report and the audited financial statements of DeltaMicrofinance Plc. ("the Company") for the financial period from 1 October 2013 (date ofincorporation) to 3l December 2014.

Principal activity

The principal activity of the Company is in microfinance operation. There have been no significantchanges in the nature of this activity during the financial period.

Results of operationsUS$ KIIR'OOO

Profit for the period

Dividends

4,224 17,213

The Directors do not recommend the payment of any dividends for the current financial period.

Reserves and provisions

There were no material transfers to or from reserves or provisions during the current financial period.

Bad and doubtful loans

Before the income statement and balance sheet were made out, the Directors took reasonable steps toascertain that action had been taken in relation to the writing off of bad loans and the making ofallowance for doubtful loans, and satisfied themselves that there are no known bad loans and thatadequate allowance have been made for doubtful loans.

At the date of this report, the Directors are not aware of any circumstances which would render itnecessary to write off any bad loans or the amount of allowance for doubtful loans in the financialstatements of the Company inadequate to any material extent.

Current assets

Before the income statement and balance sheet were made out, the Directors took reasonable steps toensure that for any current assets which were unlikely to be realised in the ordinary course of business,their values as shown in the accounting records of the Company have been written down to an amountexpected if realised.

At the date of this report, the Directors are not aware of any circumstances which would render thevalues attributed to the current assets in the financial statements of the Company misleading.

Valuation methods

At the date of this report, the Directors are not aware of any circumstances, which have arisen andwhich may render adherence to the existing method of valuation of assets or liabilities of the Companymislead ing or inappropriate.

Registration No:Co.2227 KIl/2013

DELTA MICROFINAIICE PLC.(Incorporated in Cambodia)

DIRECTORS' REPORT (continued)

Contingent and other liabilities

At the date of this report, there does not exist:

(i) any charge on the assets of the Company which has arisen since the end of the financial periodwhich secures the liabilities of any other person, or

(ii) any contingent liability of the Company which has arisen since the end of the financial period.

No contingent or other liability has become enforceable, or is likely to become enforceable, within theperiod of 12 months after the end of the financial period which, in the opinion of the Directors, will ormay substantially affect the ability of the Company to meet its obligations when they fall due.

Change of circumstances

At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with inthis report or in the financial statements of the Company, which would render any amount stated in thefinancial statements as misleading.

Items of an unusual nature

The results of the operations of the Company during the financial period were not, in the opinion of theDirectors, substantially affected by any item, transaction or event of a material and unusual nature.

There has not arisen in the interval between the end of the financial period and the date of this reportany item, transaction or event of a material and unusual nature likely, in the opinion of the Directors, toaffect substantially the results of the operations of the Company for the financial period for which thisreport is made.

Share capital

At the date of incorporation, the Company has an issued share capital of US$250,000 comprising 2,500ordinary shares of US$100 each.

No option to take up unissued shares in the Company was granted during the financial period and therewere no shares under options at the end of the financial period in respect of shares in the Company.

Registration No:Co.2227 KFV2013

DELTA MICROF'INANCB PLC.(Incorporated in Cambodia)


Directors

The Directors who have held for office since the date of incorporation are:

Sabo OjanoOuk RavinSoeun SambathSok Chan Lom AngTep Navuth

Directors' benefits

(appointed on(appointed on(appointed on(appointed on(appointed on

1 October 2013)1 October 2013)l2 December 2014)12 December 2014)l2 December 2014)

During and at the end of the financial period, no alrangements subsisted to which the Company is aparty, with the object or objects of enabling Directors of the Company to acquire benefits by means ofthe acquisition of shares in or debentures of the Company or any other corporate body.

The Directors have not received or become entitled to receive any benefit by reason of a contract madeby the Company or a related corporation with the Director or with a firm of which the Director is amember, or with a company in which the Director has a substantial financial interest.

Directors' responsibility in respect of the financial statements

The Directors are responsible to ascertain that the financial statements give a true and fair view of thefinancial position of the Company as at 31 December 2014, and of its financial performance and cashflows for the financial period then ended. In preparing these financial statements, the Directors arerequired to:

(i) adopt appropriate accounting policies which are supported by reasonable and prudentjudgements and estimates and then apply them consistently;

(ii) comply with the disclosure requirements of Cambodian Accounting Standards ("CASs") and theguidelines issued by the National Bank of Cambodia relating to the preparation and presentationof financial statements or, if there have been any departures in the interest of true and fairpresentation, ensure that these have been appropriately disclosed, explained and quantified in thefinancial statements;

(iiD maintain adequate accounting records and an effective system of internal controls;

(iv) prepare the financial statements on a going concern basis unless it is inappropriate to assume thatthe Company will continue its operations in the foreseeable future; and

(v) control and direct effectively the Company in all material decisions affecting its operations andperformance and ascertain that such decisions and/or instructions have been properly reflected inthe financial statements.

The Directors confirm that they have complied with the above requirements in preparing the financialstatements.

Registration No:Co"2227 KHl2013



Statement by the Directors

In the opinion of the Directors, the financial statements set out on pages 1 to 32 have been drawn up inaccordance with Cambodian Accounting Standards and the guidelines issued by the National Bank ofCambodia so as to give a true and fair view of the financial position of the Company as at 31

December 2014, and of its financial performance and cash flows for the financial period then ended.

Signed on behalf of the Board

Sabo OjanoChairman of Board

Phnon-r Penh. CambodiaDate: i.i ,, . ,,,

Thon

IBDOSuite 28 Hotel Cambodiana3'13 Sisowath QuayPhnom PenhKingdom of Cambodia

INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OFDELTA MICROFINANCE PLC.(lncorporated in Cambodia)(Registration No: Co. 2227 KH/2013)

Report on the Financial Statements

We have audited the accompanying financiat statements of Detta Microfinance Ptc. ("theCompany"), which comprise batance sheet as at 31 December 2014, and income statement,statement of changes in equity and cash flow statement for the period from 1 October 2013(date of incorporation) to 31 December 2014, and a summary of significant accountingpoticies and other explanatory information, as set out on pages 7 lo 32.

Directors' Responsibility for the Financial Statements

The Directors of the Company are responsibte for the preparation and fair presentation ofthese financial statements in accordance with Cambodian Accounting Standards and theguidetines issued by the National Bank of Cambodia, and for such internal control as theDirectors determine is necessary to enable the preparation of financial statements that arefree from materiat misstatement, whether due to fraud or error.

Auditors' Responsibi lity

Our responsibitity is to express an opinion on these financial statements based on our audit.We conducted our audit in accordance with Cambodian lnternational Standards on Auditing.Those standards require that we comply with ethica[ requirements and ptan and performthe audit to obtain reasonable assurance about whether the financia[ statements are freefrom materiaI misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures setected depend on the auditor'sjudgement, including the assessment of the risks of material misstatement of the financialstatements, whether due to fraud or error. ln making those risk assessments, the auditorconsiders internal control relevant to the entity's preparation and fair presentation of thefinancial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of theentity's internal controt. An audit also inctudes evaluating the appropriateness ofaccounting poticies used and the reasonabteness of accounting estimates made bymanagement, as wetl as evatuating the overatl presentation of the financia[ statements.

We betieve that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our quatified audit opinion.

Tel: +855 23218 128Fax:+855 23 993 225www.bdo.com.kh

ffiINDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OFDELTA MICROFINANCE PLC.(lncorporated in Cambodia)(Registration No: Co. 2227 KHl20 13) (conti nued)

Report on the Financial Statements (continued)

Basis for Qualified Opinion

As disctosed in Note 12 to the financial statements, the Company recorded property, plantand equipment ("PPE") of US5335,165 in the batance sheet as at 31 December 2014. As theCompany did not maintain a detailed tisting of the PPE, we were not abte to:

(i) audit the movements of PPE during the period effectively;(ii) carry out physical verification of the PPE;(iii) ascertain the appropriateness of the depreciation char:ge for the year;(iv) ascertain the appropriateness of the useful lives and residual vatues of the PPE; and(v) ascertain the effects of impairment on the PPE, if any.

Quolified Opinion

ln our opinion, except for the possibte effects of the matter described in the Basis forQuatified Opinion paragraph, the financial statements give a true and fair view of thefinanciat position of the Company as at 31 December 7014, and of its financial performanceand cash ftows for the period from 1 October 2013 (date of incorporation) to 31 December2014 in accordance with Cambodian Accounting Standards and the guidetines issued by theNational Bank of Cambodia retating to the preparation and presentation of financialstatements.

Date: 8 September 2015

6

/BDO



BALAI\CE SHEETAS AT 31 DECEMBER 2014

ASSETS

Cash on handBalances with National Bank of CambodiaBalances with other banksLoans to customersOther receivablesProperty, plant and equipmentIntangible asset

TOTAL ASSETS

LIABILITIES AND EQUITY

LIABILITIES

Trade and other payablesAmounts owing to shareholdersCurrent tax liabilities

TOTAL LIABILITIES

EQUITY

Share capitalRetained earnings

TOTAL EQUITY

TOTAL LIABILITIES AND EQUITY

Note 2014US$

46,49113,007

409,8582,644,647

76,310335,165

10,000

KTIR'OOO

189,45153,004

1,670,17170,776,937

310,9637,365,797

40,750

7

8

910

11

t2t3

14

15

535.478 14,407,013

34,468 140,4573,242,763 13,214,259

4,023 16,394

3,281,254 13,371,110

t6 250,000 1,018,7504,224 17,213

254,224 1,035,963

3,535,478 14,407,073

Registration No:Co.2227 KH/20I3


INCOME STATEMENTFOR THE PERIOD FROM 1 OCTOBER 2013 TO 31 DECEMBER 2014

Note

Interest incomeOther operating income

Total operating incomeOther operating expensesFinance costs

Profit before taxTax expense


1.10.2013to

31.12.2014US$ KTIR'OOO

306,578 1,249,30570,801 288,5t4

17

18

19

20

377,379 1,537,819(326,405) (1,330,100)

(39,s 10) (161,003)

2l11,464 46,716(7,240\ (29,503)

4.224 17.213

Registration No:Co.2227 Klll20l3

DELTA MICROF'INANCE PLC.(Incorporated in Cambodia)

STATEMENT OF'CHANGES IN EQUITYFOR TIIE PERIOD TROM 1 OCTOBER 2013 TO 31

Balance as at I October 2013(date of incorporation)


Balance as at 31 December 2014

(KHR'000 equivalent)

DECEMBER2Ol4

Share Retainedcapital earnings

US$ US$TotalUS$

250,000 - 250,000

4,224 4,224

250,000 4,224 254,224

1,018,750 17,213 1,035,963


DELTA MICROF'INANCE PLC.(Incorporated in Cambodia)

STATEMENT OF CASH FLOWSFOR THE PERIOD FROM 1 OCTOBER 2013 TO 31 DECEMBER 2014

NoteCash flows from operating activitiesProfit before taxAdjustments for:

Allowance for doubtful loansAmortisation of intangible assetDepreciation of property, plant and equipmentInterest expense

Operating profit before working capital changes

Changes in working capitalLoans to customersOther receivablesTrade and other payables

Cash used in operationsIncome tax paidInterest paidPlacement of statutory deposit

Net cash used in operating activities

Cash flows from investing activitiesPurchase of property, plant and equipmentPurchase of intangible assetAdvances from shareholders

Net cash from investing activities

Net increase in cash and cash equivalentsCash and cash equivalents at date of incorporation

Cash and cash equivalents at end of period

Cash and cash equivalents comprise the following:

Cash on handBalances with National Bank of Cambodia(excluding statutory deposit)

Balances with other banks - current account

Note

7

8

9

10

1013

t220

1.10.2013to

31.12.2014US$ KHR'OOO

11,464 46,716

31,088 126,6842,500 10,188

25,521 103,99839.s 10 161.003

110,083 448,589

(2,67 5,73 5) (10,903,621)(76,3t0) (310,963)34,468 740,457

(2,607,494) (10,625,538)(3,2t7) (13,109)

(39,510) (161,003)(12,s00) (50,938)

(2,662,721) (70,850,588)

(360,686) (1,469,795)(12,500) (50,938)

3,242,763 13,214,259

2.869.s77 tr.693.s26

206,856 842,938250,000 1,018,750

456.856 1.861.688

t2t3

2014US$

46,491

507

KHR'OOO

189,451

2,066409.85 8 r.610.111

4s6 856 861.688

Keglstratlon No:Co.2227 KIl/2013


NOTES TO THE F'INANCIAL STATEMENTS31 DECEMBER 2014

ll

C ORPORATE INF'ORMATION

The Company was registered on 1 October 2013 as a public limited company in the Kingdom ofCambodia.

The Company obtained its license from the National Bank of Cambodia ("NBC") to operate as amicrofinance institution on 12 Februry 2014. Under this license, the Company is authorised togrant credit to poor and low income households and small enterprises operating in the Kingdomof Cambodia.

The registered office and principal place of business of the Company is located at No. 35-37,Street 582, Sangkat Boeung Kak II, Khan Tuolkok, Phnom Penh.

The financial statements are presented in United States Dollar ("US$"), which is also theCompany's functional currency.

The financial statements were authorised for issue by the Board of the Directors on 8 September201s.

PRINCIPAL ACTTVITY

The principal activity of the Company is in microfinance operation. There have been nosignificant changes in the nature of this activity during the financial period.

BASIS OF PREPARATION

The financial statements of the Company have been prepared in accordance with CambodianAccounting Standards ("CASs") as issued by the National Accounting Council of the Ministryof Economy and Finance and the guidelines issued by NBC relating to the preparation andpresentation of financial statements.

SIGNIFICANT ACCOI]NTING POLICIES

Basis of accounting

The financial statements of the Company have been prepared under the historical costconvention except as otherwise stated in the financial statements

The preparation of financial statements in conformity with CASs requires the Directors to makeestimates and assumptions that affect the reported amounts of assets, liabilities, revenue andexpenses and disclosure of contingent assets and contingent liabilities. In addition, the Directorsare also required to exercise their judgement in the process of applying the accounting policies.The areas involving such judgements, estimates and assumptions are disclosed in Note 6 to thefinancial statements. Although these estimates and assumptions are based on the Directors' bestknowledge of events and actions, actual results could differ from those estimates.

Translation to Khmer Riel ("KHR") are presented in the balance sheet, income statement,statement of change in equity, cash flow statement and the notes to the financial statements as atand for the year ended 3 1 December 2014 of the Company using the official rate of exchangeregulated by National Bank of Cambodia as of reporting date, which was US$l: KHR4,075.Such translation amounts should not be construed as representations that the US$ amountrepresent, or have been or could be, converted into KHR at that or other rate.

1.

.,

3.

4.

4.1

4.

4.2

Registration No:Co.2221KHl20l3

l2

SIGNIFICANT ACCOIINTING POLICIES (continued)

Balances with National Bank of Cambodia

(a) Current account ,

Current account is carried at placement value.

(b) Statutorydeposit

Statutory deposits represent mandatory reserve deposits and cash maintained with theNational Bank of Cambodia in compliance with the Law on Banking and FinancialInstitutions ("LBFI") and are not available to finance the Company's day-to-dayoperations. Hence, it is not considered as part of cash and cash equivalents for thepurpose of the cash flow statement.

Balances with other banks

Balances with other banks are carried at placement value.

Loans to customers

All loans to customers are stated in the balance sheet as the amount of principal, less anyamounts written off and allowances for impairment.

Loans are written off when there is no realistic prospect of recovery. Recoveries of loanspreviously written off or provided for decrease the amount of the provision for impairment onloans in the income statement.

4.5 Allowance for bad and doubtful loans

The Company records the mandatory credit classification and provisioning as required byPrakas B7-02-186 Pro Kor dated 13 September 2002. The Prakas requires microfinanceinstitutions to classifu their loan portfolio into the following four classes and ensure that theminimum mandatory level of specific provisioning is provided:

4.3

4.4

Classification

Short-term loans (less than one year):StandardSub-standardDoubtfulLoss

Long-term loans (more than one year):StandardSub-standardDoubtfulLoss

Number of days past due

0 - 30 days31 - 60 days6l - 90 daysover 90 days

0 - 30 days31 - 180 days

181 - 360 daysOver 360 days

Allowance

lYo*t0%30%

t00%

lYo*t0%30%

100%

* 1%o of specific provision has been provided as compared to jyo as required in the PrakasB7-02-186 Pro Kor.

The specific provision is calculated as a percentage of the loans outstanding at the time the loanis classified and is charged as expense in the income statement.

Loans are written off when they are considered uncollectible. Loans written off are taken out ofthe outstanding loan portfolio and deducted from the allowance for loan loss.

Recoveries on loans previously written off and reversal of previous provisions are disclosed as

other operating income in the income statement.

Registration No:Co.2227 KHl2013

4.

4.6

t3

SIGNIFICANT ACCOLINTING POLICIES (continued)

Propertyo plant and equipment

All items of properfy, plant and equipment are initially measured at cost. Cost includesexpenditure that is directly attributable to the acquisition ofthe asset.

Each part of an item of property, plant and equipment with a cost that is significant in relation tothe total cost of the asset and which has different useful life, is depreciated separately.

After initial recognition, property, plant and equipment are stated at cost less accumulateddepreciation and any accumulated impairment losses.

Depreciation is calculated to write off the cost of the assets to their residual values on a straightline basis over their estimated useful lives. The principal depreciation periods are as follows:

4.7

ComputerOffice equipmentFurniture and fixturesMotor vehicles

2 years4 years4 years4 years

Freehold land has unlimited useful life and is not depreciated. Construction-in-progressrepresents renovation-in-progress and is stated at cost. Construction-in-progress is notdepreciated until such time when the asset is available for use.

At the end of each reporting period, the carrying amount of an item of property, plant andequipment is assessed for impairment when events or changes in circumstances indicate that itscarrying amount may not be recoverable. A write down is made if the carrying amount exceedsthe recoverable amount (see Note 4.9 on impairment of non-financial assets).

The residual values, useful lives and depreciation method are reviewed at each financial periodend to ensure that the amount, method and period of depreciation are consistent with previousestimates and the expected paffern of consumption of the future economic benefits embodied inthe items of property, plant and equipment. If expectations differ from previous estimates, thechanges are accounted for as a change in an accounting estimate.

The carrying amount of an item of property, plant and equipment is derecognised on disposal orwhen no future economic benefits are expected from its use or disposal. The difference betweenthe net disposal proceeds, if any, and the carrying amount is included in profit or loss.

Intangible assets

Intangible assets with finite useful lives that are acquired separately are carried at cost less

accumulated amortisation and any accumulated impairment losses. Amortisation is recognisedon a straight-line basis over their estimated useful lives. The estimated useful life andamortisation method are reviewed at the end of each reporting period, with the effect of anychanges in estimate being accounted for on a prospective basis.

Intangible assets with indefinite useful lives that are acquired separately are carried at cost less

any accumulated impairment losses.

Borrowing costs

Borrowing costs that are directly attributable to the acquisition or production of a qualified asset

is capitalised as part of the cost of the asset until when substantially all the activities necessaryto prepare the asset for its intended use or sale are complete, after which such expense is

charged to profit or loss. A qualifring asset is an asset that necessarily takes a substantial periodof time to get ready for its intended use or sale. Capitalisation of borowing cost is suspendedduring extended periods in which active development is interrupted.

4.8

Registration No:Co.2227 KIll2013

4.

4.8

t4

SIGNIFICANT ACCOUNTING POLICIES (continued)

Borrowing costs (continued)

The amount of borrowing costs eligible for capitalisation is the actual borrowing costs incurredon the borrowing during the period less any investment income on the temporary investment ofthe borrowing.

All other borrowing costs are recognised in profit or loss in the period in which they areincurred.

Impairment of assets

(a) Financialassets

A financial asset is assessed at each reporting date to determine whether there is anyobjective evidence that it is impaired. A financial asset is considered to be impaired ifobjective evidence indicates that one or more events have had a negative effect on theestimate future cash flows of that asset.

An impairment loss in respect of a financial asset is calculated as the difflerence betweenits carrying amount, and the present value of the estimated future cash flows discounted atthe original effective interest rate.

Individually significant financial assets are tested for impairment on an individual basis.The remaining financial assets are assessed collectively in groups that share similar creditrisk characteristics.

All impairment losses are recognised in profit or loss.

An impairment loss is reversed if the reversal can be related objectively to an eventoccurring after the impairment loss was recognised.

(b) Non-financialassets

The carrying amount of assets, except for financial assets, is reviewed at the end of eachreporting period to determine whether there is any indication of impairment. If any suchindication exists, the asset's recoverable amount is estimated.

Intangible assets that have an indefinite useful life are tested annually for impairment ormore frequently if events or changes in circumstances indicate that the intangible assetmight be impaired.

The recoverable amount of an asset is estimated for an individual asset. Where it is notpossible to estimate the recoverable amount of the individual asset, the impairment test iscarried out on the cash generating unit ("CGU") to which the asset belongs.

The recoverable amount of an asset or CGU is the higher of its fair value less cost to selland its value in use.

In estimating the value in use, the estimated future cash inflows and outflows to bederived from continuing use of the asset and from its ultimate disposal are discountedtotheir present value using a pre-tax discount rate that reflects current market assessmentsof the time value of money and the risks specific to the asset for which the future cashflow estimates have not been adjusted. An impairment loss is recognised in profit or losswhen the carrying amount of the asset or the CGU exceeds the recoverable amount of theasset or the CGU.

4.9


4. SIGNIFICANTACCOTINTINGPOLICIES (continued)

4.9 Impairment of assets (continued)

(b) Non-financialassets(continued)

The total impairment loss is allocated to reduce the carrying amount of the assets of theCGU on a pro-rata basis of the carrying amount of each asset in the CGU. Theimpairment loss is recognised in profit or loss immediately.

An impairment loss is reversed if and only if, there has been a change in the estimatesused to determine the assets' recoverable amount since the last impairment loss wasrecognised.

An impairment loss is reversed only to the extent that the asset's carrying amount doesnot exceed the carrying amount that would have been determined, net of depreciation oramortisation, if no impairment loss had been recognised. Such reversals are recognised as

income immediately in profit or loss.

4.10 Provisions

Provisions are recognised when there is a present obligation, legal or constructive, as a result ofa past event, when it is probable that an outflow of resources embodying economic benefits willbe required to settle the obligation and a reliable estimate can be made of the amount of theobligation.

Where the effect of the time value of money is material, the amount of a provision will bediscounted to its present value at a pre-tax rate that reflects current market assessments of thetime value of money and the risks specific to the liability.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the currentbest estimate. If it is no longer probable that an outflow of resources embodying economicbenefits will be required to settle the obligation, the provision will be reversed.

4.ll Income taxes

Income taxes include all taxes on taxable profit. Taxes in the income statement comprise currenttax and deferred tax.

Current tax

Current tax expenses are determined according to the tax laws and include all taxes basedupon the taxable profits.

(b) Deferred tax

A deferred tax asset or liability is recognised for tax recoverable or payable in futureperiods as a result of past transactions or events. Deferred tax arises from differences(known as temporary differences) between the carrying amounts of assets and liabilitiesin the consolidated balance sheet and their corresponding tax bases. The tax bases ofassets are determined by the consequences ofsale ofthe assets.

Deferred tax liabilities are recognised for all temporary differences that are expected toincrease taxable profit in the future, except those associated with goodwill. Deferred taxassets are recognised for all temporary differences that are expected to reduce taxableprofit in the future and any unused tax losses.

15

(a)

Registration No:Co.2227 KIll2013

4. SIGNIFICANTACCOUNTINGPOLICIES(continued)

4.ll Income taxes (continued)

(b) Deferred tax (continued)

Deferred tax assets are measured at the highest amount that is more likely than not to berecovered, based on current or estimated future taxable profit. The net carrying amount ofdeferred tax assets is reviewed at each reporting date and is adjusted to reflect the currentassessment of future taxable profits. Any adjustments are recognised in the incomestatement.

Deferred tax is calculated at the tax rates that are expected to apply to the taxable profit(tax loss) of the periods in which management expects the deferred tax asset to be realisedor the deferred tax liability to be settled, on the basis oftax rates that have been enactedor substantively enacted by the end of the reporting period.

4.12 Interest income recognition

Interest earned on loans to customers, deposits with National Bank of Cambodia and otherbanks are recognised on the accrual basis, except when loans become doubtful of collection, inwhich case, no interest is recognised as income.

Where an account is classified as non-performing, recognition of interest income is suspendeduntil it is realised on a cash basis. Customers' loan accounts are classified as non-performingwhere repayments are in arrears for 30 days and more.

4.13 Fee and commission income recognition

The Company earns fee and commission income mainly from loan processing and earlysettlements or late payments of loans. They are recognised in the income statement on anaccrual basis.

4.14 Related parties

Parties considered to be related if one party has the ability to control the other party or exercisesignificant influence over the other party in making financial and operating decisions.

Under the LBFI, the definition of related parties includes parties who hold, directly orindirectly, at least 10 percent of the capital or voting rights and includes any individual whoparticipates in the administration, direction, management or internal control of the Company.

4.15 Employee benefits

(a) Short term employee benefits

Wages, salaries, social security contributions, paid annual leave, paid sick leave, bonusesand non-monetary benefits are measured on an undiscounted basis and are expensedwhen employees rendered their services to the Company.

Short term accumulating compensated absences such as paid annual leave are recognisedas an expense when employees render services that increase their entitlement to futurecompensated absences. Short term non-accumulating compensated absences such as sickleave are recognised when the absences occur and they lapse if the current period'sentitlement is not used in full and do not entitle employees to a cash payment for unusedentitlement on leaving the Company.

16

Registration No:Co.2227 KIV20l3

4. SIGNIFICANTACCOTiI\TINGPOLICIES(continued)

4.15 Employee benefits (continued)

(a) Short term employee benefits (continued)

Bonuses are recognised as an expense when there is present, legal or constructiveobligation to make such payments, as a result of past events and when a reliable estimatecan be made of the amount of the obligation.

(b) Terminationbenefits

Termination benefits are payments due to employees as a result of the termination ofemployment before the normal retirement date or an employee's decision to acceptvoluntary redundancy in exchange for those benefits. They are recognised as a liabilityand an expense when the Company has a detailed formal plan for termination with norealistic possibility of withdrawal. In the case of voluntary redundancy, the benefits areaccounted for based on the number ofemployees expected to accept the offer.

Where termination benefits fall due more than 12 months after the end of reportingperiod, they are discounted to present value based on market yields at the end of reportingperiod.

4.16 Operating leases

A lease is classified as an operating lease if it does not transfer substantially all the risks andrewards incidental to ownership.

Lease payments under operatingover the lease term.

4.17 f,'oreigncurrencies

leases are recognised as an expense on a straight-line basis

(a) Functional and presentation currency

Items included in the financial statements of the Company are measured using theculrency of the primary economic environment in which the entity operates ('1hefunctional currency"). The national currency of Cambodia is Khmer Riel ("K[IR").However, as the Company transacts its business and maintains its accounting recordsprimarily in United States Dollar ("US$"), management have determined US$ to be theCompany's functional and presentation currency as it reflects the economic substance ofthe underlying events and circumstances of the Company.

(b) Foreign currency translations and balances

Transactions in foreign currencies are converted into functional currency at rates ofexchange ruling at the transaction dates. Monetary assets and liabilities in foreigncurrencies at the end ofthe reporting period are translated into functional currency at rateof exchange ruling at that date. All exchange differences arising from the settlement offoreign cuffency transactions and from the translation of foreign culrency monetary assetsand liabilities are included in the income statement in the period in which they arise. Non-monetary items initially denominated in foreign currencies, which are carried at historicalcost are translated using the historical rate as of the date of acquisition, and non-monetaryitems which are carried at fair value are translated using the exchange rate that existedwhen the values were determined for presentation currency purposes.

I7

5.1

Registration No:Co.2227 KI1l20l3

18

5. STATEMENT oF COMPLTANCE wrrH cASs AND ADOPTTON oF' NEw ANDAMENDED STANDARDS AND INTERPRETATIONS

Statement of compliance with CASs and basis of preparation

The financial statements of the Company have been prepared in accordance with CASs asissued by the National Accounting Council ("NAC") of the Ministry of Economy and Financeand the guidelines issued by the NBC relating to the preparation and presentation of financialstatements.

The accounting principles applied may differ in some material respects from InternationalFinancial Reporting Standards and the generally accepted accounting principles and standardsof the country of the reader. Accordingly, the financial statements are not intended to presentthe financial position and results of operations and cash flows in accordance with generallyaccepted accounting principles and practices in countries or jurisdictions other than theKingdom of Cambodia and furtherrnore their use is not designed for those who are not informedabout Cambodia's principles, procedures and practices.

Standards, amendments and interpretations to existing standards that are not yet effectiveand have not been early adopted by the Company

The NAC, as mandated by Prakas (Circular) No. 068 MoEF-Pr dated 8 January 2009 issued bythe Ministry of Economy and Finance ("MoEF") and following the announcement No. 097109MoEF-NAC dated 28 August 2009 by the NAC on the adoption of International FinancialReporting Standards ("IFRSs") issued by the International Accounting Standards Board("IASB") effective for financial statements with periods beginning on or after I Jantary 2012.The new standard is being referred to as "Cambodian International Financial ReportingStandards" ("CIFRSs").

In accordance with the Circular No. 086 MoEF-NAC dated 30 Jily 2012 issued by the NAC ofMoEF requires all banking and financial institutions to adopt CIFRSs effective from 1 January20t6.

CRITICAL AC COI]NTING E STIMATE S AND JI]D GEMENTS

Changes in estimates

Estimates are continually evaluated and are based on historical experience and other factors,including expectations of future events that are believed to be reasonable under thecircumstances.

The Directors are of the opinion that there are no significant changes in estimates during thereporting period end and as at the end ofthe reporting period.

CRITICAL ACCOUNTING ESTIMATES AND JIIDGEMENTS (continued)

Critical judgements made in applying accounting policies

There are no critical judgments made by the management in the process of applying theCompany's accounting policies that have the most significant effect on the amount recognisedin these financial statements apart from those involving estimates, which are dealt with below.

5.2

6.

6.1

6.

6.2

6.

6.3

L

Registration No:Co.2227 KFV2013

Cash on hand - KHRCash on hand - US$

8. BALANCES WITH NATIONAL BANK OF CAMBODIA

Statutory depositCurrent account

'.rlrl 'n

: i r,

l9

CRITICAL ACCOIINTING ESTIMATBS AI\D JUDGEMBNTS (continued)

Key sources of estimation uncertainty

The following are the key assumptions concerning the future and other key sources ofestimation uncertainty at the balance sheet that have a significant risk of causing a materialadjustment to the carrying amounts of assets and liabilities within the next financial year.

(a) Depreciation of p'roperty, plant and equipment

The cost of prdperty, plant and equipment is depreciated on a straight-line basis over theassets' useful lives. Management estimates the useful lives of these properfy, plant andequipment based on historical experience, the expected usage, wear and tear of the assetsand technical obsolescence arising from changes in market demands or service output ofthe assets. Changes in these factors could impact the economic useful lives and theresidual values ofthese assets, therefore future depreciation charges could be revised.

(b) Impairment on loans to customers

The Company records the mandatory credit classification and provisioning as required byPrakas B7-02-186 dated 13 September 2002. The Prakas requires microfinanceinstitutions to classifu their loan portfolio into four classes and ensure that the minimummandatory level of specific provisioning is provided depending on the classification andregardless of collateral (except for cash). For the purpose of loan classification, theCompany is iequired to take into account the borrowers' historical payment experienceand financial condition.

(c) Tax expense

Significant judgement is involved in determining the Companyts provision for taxes. TheCompany will recognise liabilities for expected tax expenses based on an estimate ofwhether the taxes are due through management's interpretation of the various taxlegislations. When the final tax outcome of these matters is different from the amountsthat were initially recognised, such differences will impact the tax provision in thefinancial year in which such determination is made.

CASH ON HANI)

2014US$ KIIR'OOO

7.

16,42430,067

66,928122,523

46,491 189,451

2014US$ KTIR'OOO

12,500507

50,9382.066

13,007 53,004

Statutory deposit

In compliance with Prakas 87-00-006 Pro Kor dated 11 January 2000 and B1-06-209 Pro Kordated 13 September 2006 on the Licensing of Microfinance Institutions, the Company isrequired.to maintain a statutory capital deposit with the NBC of 5o/o of registered capital. Thisdeposit is refundable should the Company voluntarily liquidate.

a

Registration No:Co.2227 KW2013

9. BALANCES WITH OTHER BANKS

ACLEDA Bank Plc.- KHRACLEDA Bank Plc.- US$Advanced Bark of Asia Ltd.

10. LOANS TO CUSTOMERS

Individual loansGroup loansAllowance for doubtful loans

(a) Allowance for doubtful loans

Allowance for the period

(b) By maturity

Within one yearFrom one to five years

(c) By currency

US Dollar

20

2014US$ KIIROOOO

9,9888,854

40,70136,080

391.016 1.593.390

409,858 7,670,771

2014US$ KIIR'OOO

2,327,164 9,483,196348,571 1,420,425(31,088) (t26,684\

2,644,647 10,776,937

2014US$ KTIR'OOO

31,088 126,684

2014US$ KTIR'OOO

1,679,689 6,844,733996,046 4,059,997

2,675,735 10,903,620

2014US$ I(HR'OOO

2,675,135 10,903,620

Registration No:Co.2227 K11/2013

10. LOANS TO CUSTOMBRS (continued)

(d) By economic sector

2t

AgricultureTrade and commerceServicesTransportationConstructionHousehold/FamilyOther categories

(e) By relationship

External customers

(f) Analysis by security on performing and non-performing loans

Standard loans:Secured

Sub-standard loans:Secured

Doubtful loans:Secured

Loss loans:Secured

11. OTHER RECEIVALBES

Interest receivablePrepaymentsAdvances to employeesDepositsOthers

2014us$

45,2021,937,033

230,357I 17,185139,685179,06227,211

KHR'OOO

184,1987,893,408

938,705477,529569,215729,678110,887

2,675,735 10,903,620

2014US$ I(HR'OOO

2,675,735 t0,903,620

2014US$ KTIR'OOO

2,660,689 10,842,308

ll,l2l

786

J,IJJ

45,343

3,203

12,'766

2,675,735 10,903,620

2014US$

55,52214,159

4394,2101,980

KTIR'OOO

226,25257,698

1,79917,156

8,069

76,310 310,963

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Registration No:Co.2227 K7112013

13. INTANGIBLE ASSET

CostBalance as at 1.10.2013Addition

Balance as at 31.12.2014


Accumulated depreciationBalance as at 1.10.2013Charge for the period

Balance as at 3 1.12.2014


Carrying amountBalance as at 31.12.2014


14. TRADE AND OTIIER PAYABLES

Trade payableThird parties

Other payablesAccrued payableWithholding tax payableAccrued expensesInterest-in-suspense

15. AMOUNTS OWING TO SHAREHOLDERS

Ouk RavinSok Chan Lom Ang

23

Computersoftware

us$

12,500

______12l!q

____t!21t

2,500

_______2;99_

I 0,188

______l!Jgq

40,750

2014US$

432

KHR'OOO

1,760

1,4963,732

25,5433,265

6,09615,208

104,08813,305

34,036 138.697

34,469 140,457

2014US$

3,042,763200,000

I(IIR'OOO

12,399,259815.000

3,242,763 13,274,259

Registration No:Co.2227 KW20l3

16. SHARB CAPITAL

Ordinary shares of US$100 eachAuthorised

Issued and fully paid:At date of incorporationl3l December

17. INTEREST INCOME

Loans to customersDeposits and placements with a bank

18. OTHER OPERATING INCOME

Commission incomePenalty feeOthers

24

2014Number

2,500

US$ KTIR'OOO

250,000 1,018.750

2,500 250,000 1,018,750

1.10.2013to

3t.12.2014US$ KIIR'OOO

306,567 1,249,26011 45

306,578 1,249,305

1.10.2013to

31.12.2014US$ KHR'OOO

36,587630

33,584

149,0922,567

136,855

70,801 288,514


19. OTHER OPERATING EXPENSES

AmortisationAllowance for doubtful loansCommunication expensesDepreciationInsurance feeLicense feeOther staff benefitsPersonal costsProfessional feesRental feesRepair and maintenanceStationary expensesSecurity feeTravellingutilitiesOthers

20. F'INANCE COSTS

Interest expense onamounts owing to shareholders

TAX EXPENSE

Income tax expense:Current period

25

1.10.2013to

31.12.2014US$ KIIR'OOO

2,50031,0994,695

25,5212,0106,2068,803

150,2866,711

22,0924,950

10,0253,365

12,3796,125

29,649

10,1 88126,68419,132

103,9988,191

25,28935,872

612,41527,34790,02520,17140,85313,71250,44524,959

l20,glg

326,405 1,330,100

1.10.2013to


39,510 161,003

2t.

1.10.2013to


7,240 29,503

Under the Cambodian Law on Taxation, the Company has an obligation to pay tax on profit at20o/o of the taxable profit or a minimum tax at l%o of total revenue, whichevei ii higher.


21. TAX E)GENSE (continued)

The numerical reconciliation between the tax expensemultiplied by the applicable tax rate of the Company is as

Profit before tax

Tax at Cambodian statutory tax rate of 20%o

Tax effects in respect of:Non-allowable expenses

Total tax expense

OPERATING LBASE COMMITMENTS

Not later than one yearLater than one year and not later than five yearsLater than five years

ShareholdersOuk RavinAdvances to the Company

Sok Cham Lom AngAdvances to the Company

Balances with related parties at thefinancial statements.

26

and thefollows:

product of accounting loss

1.10.2013to

31.12.2014US$ KHR'OOO

11,464 46,716

2,293 9,343

4.947 16020.

7.240 29 503

22.

The Company as lessee

The Company had entered into non-cancellable lease agreements for office space, resulting infuture rental commitments which can, subject to certain terms in the agreements, be revisedannually based on prevailing market rates. At period-end, the Company has outstandingcommitments under non-cancellable operating leases that fall due, as follows:

2014US$

52,3901 09,1 80

7,800

KTIR'OOO

213,489444,90931,785

169,370 690, I 83

23, RELATED PARTY DISCLOSURES

The Company had the following transactions with related parties during the financial period.

1.10.2013to


3,042,763 12,399,259

200.000 815"000

end of the reporting period are disclosed in Note l5 to the

Registration No:Co.2227 KHl20l3

27

23. RBLATED PARTY DISCLOSURES (continued)

(a) Compensation of key management personnel

1.10.2013to


Short term employee benefits 40.200 163,815

FINANCIAL RISK MANAGEMENT OBJECTTVES AND POLICIES

The Company's financial risk management objective is to optimise value creation for its

shareholders whilst minimising the potential adverse impact arising from volatility of thefinancial markets.

The Directors are responsible for setting the objectives and underlying principles of financialrisk management for the Company. The management then establishes the detailed policies such

as authority levels, oversight responsibilities, risk identification and measurement and exposure

limits in accordance with the objectives and underlying principles approved by the Directors.

Information on the management of the related exposures is detailed below.

(i) Credit risk

The Company assumes exposure to credit risk which is the risk that a counterparty will be

unable to pay the amounts in full when due. The Company structures the levels of creditrisk undertaken by placing limits on the amount of risk accepted in relation to one

borrower, or Company of borrowers, and the geographical and industry segments.

Procedures of risk limit setting, monitoring, usage, control are governed by internalregulations. Such risks are monitored on a regular basis.

Exposure to credit risk is managed through regular analysis of the ability of the borrowersand potential borrowers to meet the interest and capital repayment obligations and

reviewing these lending limits where appropriate. Exposure to credit risk is also managedin part by obtaining collateral and corporate or personal guarantees as well as byproviding for loan losses.

(a) Risk limit control and mitigation policies

The Company operates and provides loans to individuals or small-mediumenterprises within the Kingdom of Cambodia. The Company manages limits and

controls the concentration of credit risk whenever it is identified.

The Company employs a range of policies and practices to mitigate credit risk. Themost traditional of these is the taking of security in the form of collateral for loansto customers, which is common practice. The Company implements guidelines onthe acceptability of specific classes of collateral or credit risk mitigation. Theprincipal collateral types secured for loans to customers are:

- Collateral pledges over properties (land, building and other properties); and- Charges over business assets such as land and buildings.

24.

Registration No:Co.2227 KlV20l3

24. FINANCIAL RISK MANAGEMENT OBJECTMS AND POLICIES (continued)

(i) Credit risk (continued)

(b) Maximum exposure to credit riskenhancements

28

Credit exposure relating toassets on the balance sheet:

Balances with other banksLoans to customersOther receivables

before collateral held or other credit

Note 2014US$ KIIR'OOO

409,858 1,670,1712,675,735 10,903,620

76,31.0 310.963

3,161,903 12,884,754

The above table represents a worst case scenario for credit risk exposure to theCompany at 31 December 2014, without taking into account any collateral held orother credit enhancements. For assets in the balance sheet, the exposure set outabove is based on net carrying amounts.

Loans to customers are summarised as follows:

Loans to customers neither past due nor impairedLoans to customers past due but not impairedLoans to customers individually impaired

Gross loansAllowance for doubtful loans

Net loans to customers

2014US$ KTIR'OOO

2,634,082 10,733,88410,565 43,05231,088 726,684

2,644,647 70,776,936

For the purpose ofloan provisioning, the expected recovery from collateral (exceptcash) is not taken into consideration in accordance with the National Bank ofCambodia's requirements. The total allowance for doubtful loans is US$31,088,which represents the mandatory provision required by the National Bank ofCambodia and additional provision for the loan losses.

Loans to customers

(i) Loans to customers neither past due nor impaired

Loans to customers which are not past due are not considered impaired,unless other information is available to indicate the contrary.

(ii) Loans to customers past due but not impaired

Loans to customers which are past due are not considered impaired, unlessother information is available to indicate the contrary.

91011

2,675,735 10,903,620(31,088) (126,684)

(c)


24. FINAI\CIAL RISK MANAGEMENT OBJECTMS AND POLICIES (continued)

(i) Credit risk (continued)

(c) Loans to customers (continued)

(iii) Loans to customers individually impaired

29

(ii)

In accordance with Prakas B7-02-186 Pro Kor dated 13 September 2002 onloan classification and provisioning, loans past due more than 30 days areconsidered impaired and a minimum level of specific provision forimpairment is made depending on the classification concerned, unless otherinformation is available to indicate the contrary.

Past due 30 - 180 days

2014US$ KIIR'OOO

31,088 126,694

(iv) Loans to customers renegotiated

There were no renegotiated loans to customers as at 31 December 2014.

(d) Repossessedcollateral

During the financial period ended 31 December 2014, the Company did not obtainany assets by taking possession ofcollateral held as security.

Interest rate risk

Interest rate risk refers to the volatility in net interest income as a result of changes in thelevels of interest rate and shifts in the composition of the assets and liabilities. Interestrate risk is managed through close monitoring of returns on investment, market pricing,cost of funds and through interest rate sensitivity gap analysis. The potential reduction innet interest income from an unfavorable interest rate movement is monitored against therisk tolerance limits set. An analysis of the interest rate risk pertaining to the Company'sassets and liabilities is disclosed below.

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24. F'INAIICIAL RISK MANAGEMENT OBJECTMS Al[D POLICIES (continued)

(iii) Liquidity risk

Liquidity risk relates to the ability to maintain sufficient liquid assets to meet its financialcommitments an$ obligations when they fall due at a reasonable cost. In addition to fullcompliance of all liquidity requirements, the management of the Company closelymonitors all inflows and outflows and the maturity gaps through periodical reporting.Movements inr loans and customers' deposits are monitored and liquidity requirementsadjusted to ensure sufficierit liquid assets to meet its financial commitments andobligations as and when they fall due.

The following table provides an analysis of the financial liability of the Company intorelevant maturity groupings based on the remaining periods to repayment.

On demand orwithin one One to five

At3t.t2.2AM

Trade and other payablesAmounts owing to

shareholders

yearUS$

34,468

yearsUS$

3,242,763

Over fiveyears

US$TotalUS$

34,468

3,212-763

34,468 3 ,242,7 63 3 ,27 7 ,231

(KHR'000 equivalent) 140,457 I3,214,259 13,351,716

(iv) Foreign currency risk

Foreign culrency risk is the risk that the value of financial assets and liabilities willfluctuate due to changes in foreign exchange rates.

The Company has no material exposures to currency risk as it transacts essentially inLIS$. Significant presence of US$ is a normal practice of companies operating inCambodia as this is a currency widely in use in Cambodia.

(v) Capital management

The objectives of the Company on managing of capital are to meet the NBC'srequirement, continue as a going concern and support the development of the business bymaintain strong capital.

The table below summarises the composition of regulatory capital:

.aa 2014US$ KIIR'OOO

Share capitalRetained earnings

(vi) Fair value of financial assets and liabilities

The carrying amounts of financial assets andfair values.

250,000 1,018,7504,224 17,213

254 224 1,035,963

liabilities are reasonable approximation of

Registration No:Co. 1568 E,12012

25.

a^

TAXATION CONTINGENCIES

The taxation system in Cambodia is relatively new and is characterised by numerous taxes andfrequently changing legislation, which is often unclear, contradictory, and subject tointerpretation. Often, differing interpretations exist among numerous taxation authorities andjurisdictions. Taxes are subject to review and investigation by a number of authorities, who areenabled by law to impose severe fines, penalties and interest charges. These facts may create taxrisks in Cambodia substantially more significant than in other countries. Management believesthat it has adequately provided for tax liabilities based on its interpretation of tax legislation.However, the relevant authorities may have differing interpretations and the effects could besignificant.

COMPARATIVES FIGURES

There are no comparative figures as this is the first set of financial statements since the date ofincorporation.

26.

l-

financial statements and iiidependent auditors'...

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