[PDF] Financial Statements for the year ended 31 December 2015 and

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PRASAC MICROFINANCE

INSTITUTION LIMITED

Financial Statements

for the year ended 31 December 2015 and

Report of the Independent Auditors

Corporate Information

Company PRASAC Microfinance Institution Limited

Registration No. Co. 6931/04P (with MoC), MF10 (with NBC) Registered office Building 212, Street 271, Sangkat Tuol Tumpung 2,

Khan Chamkarmon, Phnom Penh, Kingdom of Cambodia

Shareholders Dragon Capital Group Limited (DCG)

Belgian Investment Company for Developing Countries SA (BIO)

The Nederlandse Financierings-Maatschappij voor

Ontwikkelingslanden N.V. (FMO)

Lanka ORIX LEASING Company Ltd (LOLC)

PRASAC Staff Company Ltd. (PSCo)

Board of Directors Mr. Ranjit Fernando, Chairman

Mr. Joseph Hoess, Director

Mr. Hanco Halbertsma, Director

Mr. Ishara C. Nanayakkara, Director

Mr. Oum Sam Oeun, Director

Mr. Phai Touch, Independent Director

Mr. Antonius Theodorus Maria (Antoin) Bruijninckx, Director Executive Management team Mr. Sim Senacheert, President & Chief Executive Officer

Mr. Oum Sophan, EVP & Chief Financial Officer

Mr. Oum Sam Oeun, EVP & Chief Operations Officer

Mr. Neang Sokhim, SVP & Chief Business Management

Mr. Sou Vanthan, SVP & Chief Human Resource Management

Mr. Say Sony, SVP & Chief Marketing Management

Auditors KPMG Cambodia Ltd

PRASAC Microfinance Institution Limited

Contents

Page

1. Report of the Board of Directors 1

2. Report of the independent auditors 5

3. Balance sheet 7

4. Income statement 8

5. Statement of changes in equity 9

6. Statement of cash flows 10

7. Notes to the financial statements 11

PRASAC Microfinance Institution Limited

2

Bad and doubtful loans (continued)

At the date of this report, the Board of Directors is not aware of any circumstances, which would render the

amount written off for bad loans, or the amount of allowance for doubtful loans in the financial statements of the

Company, inadequate to any material extent.

Assets

Before the financial statements of the Company were prepared, the Board of Directors took reasonable steps to

ensure that any assets, other than debts, which were unlikely to be realised in the ordinary course of business at

their value as shown in the accounting records of the Company had been written down to an amount which they

might be expected to realise.

At the date of this report, the Board of Directors is not aware of any circumstances, which would render the values

attributed to the assets in the financial statements of the Company misleading.

Valuation methods

At the date of this report, the Board of Directors is not aware of any circumstances which have arisen which

render adherence to the existing method of valuation of assets and liabilities in the financial statements of the

Company as misleading or inappropriate.

Contingent and other liabilities

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

(a) any charge on the assets of the Company which has arisen since the end of the financial year which secures

the liabilities of any other person; and

(b) any contingent liability in respect of the Company that has arisen since the end of the financial year other

than in the ordinary course of its business operations.

No contingent or other liability of the Company has become enforceable, or is likely to become enforceable within

the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may

substantially affect the ability of the Company to meet its obligations as and when they fall due.

Change of circumstances

At the date of this report, the Board of Directors is not aware of any circumstances, not otherwise dealt with in

this report or the financial statements of the Company, which would render any amount stated in the financial

statements misleading.

PRASAC Microfinance Institution Limited

3

Items of unusual nature

The results of the operations of the Company for the financial year were not, in the opinion of the Board of

Directors, 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 year and the date of this report any item,

transaction or event of a material and unusual nature likely, in the opinion of the Board of Directors, to affect

substantially the results of the operations of the Company for the current financial year in which this report is

made.

Share capital

On 27 March 2015, the Board of Directors approved to use part of the retained earnings to increase the paid up

share capital of the Company from USD 47,000,000 to USD 72,000,000. The revised Memorandum and Articles

of Association was acknowledged by the NBC and the Ministry of Commerce on 3 July 2015 and 13 July 2015

respectively.

The Board of Directors

The members of the Board of Directors during the year and at the date of this report are:

1) Mr. Ranjit Fernando, Chairman

2) Mr. Joseph Hoess, Director

3) Mr. Hanco Halbertsma, Director

4) Mr. Ishara C. Nanayakkara, Director

5) Mr. Oum Sam Oeun, Director

6) Mr. Phai Touch, Independent Director

7) Mr. Antonius Theodorus Maria (Antoin) Bruijninckx, Director.

Directors' benefits

During and at the end of the financial year, no arrangements existed to which the Company is a party with the

object of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or

debentures of the Company or any other body corporate.

Since the end of the previous financial year, no Director of the Company has received or become entitled to

receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and

receivable by the Directors as disclosed in the financial statements) by reason of a contract made by the Company

or a related corporation with a firm of which the Director is a member, or with a company in which the Director

has a substantial financial interest other than as disclosed in the financial statements.

PRASAC Microfinance Institution Limited

Balance sheet

As at 31 December 2015

7

2015 2014

Note USD KHR'000 USD KHR'000

(Note 4) (Note 4)

ASSETS

Cash on hand 5 38,657,774 156,563,985 32,621,225 132,931,492

Deposits and placements with the

National Bank of Cambodia 6 73,698,178 298,477,621 59,148,975 241,032,073 Deposits and placements with banks 7 63,527,275 257,285,464 19,698,918 80,273,091 Loans to customers 8 847,173,235 3,431,051,602 571,187,994 2,327,591,076 Other assets 9 15,204,236 61,577,156 11,179,052 45,554,637 Property and equipment 10 5,537,336 22,426,211 5,459,877 22,248,999 Intangible assets 11 1,598,781 6,475,063 1,654,490 6,742,047 Deferred tax assets, net 12 1,409,630 5,709,002 624,458 2,544,666 TOTAL ASSETS 1,046,806,445 4,239,566,104 701,574,989 2,858,918,081

LIABILITIES AND EQUITY

Liabilities

Deposits from banks and other

financial institutions 13 23,901,222 96,799,949 16,763,602 68,311,678 Deposits from customers 14 443,532,243 1,796,305,584 288,400,205 1,175,230,835

Overdraft 11,390,511 46,131,570 - -

Borrowings 15 362,620,831 1,468,614,366 260,902,091 1,063,176,021 Subordinated debts 16 49,335,158 199,807,390 21,000,000 85,575,000 Other liabilities 17 19,951,950 80,805,398 12,169,992 49,592,716 Current income tax liabilities 12 10,691,091 43,298,919 6,738,740 27,460,366 Severance pay obligations 18 3,633,432 14,715,400 2,534,965 10,329,982 Total liabilities 925,056,438 3,746,478,576 608,509,595 2,479,676,598

Equity

Share capital 19 72,000,000 291,600,000 47,000,000 191,525,000 Subordinated debts 16 - - 11,204,313 45,657,577 Reserves 2,272,647 9,204,220 5,482,607 22,341,624 Retained earnings 47,477,360 192,283,308 29,378,474 119,717,282 Total equity 121,750,007 493,087,528 93,065,394 379,241,483 TOTAL LIABILITIES AND EQUITY 1,046,806,445 4,239,566,104 701,574,989 2,858,918,081 The accompanying notes form an integral part of these financial statements.

PRASAC Microfinance Institution Limited

Income statement

for the year ended 31 December 2015 8

2015 2014

Note USD KHR'000 USD KHR'000

(Note 4) (Note 4) Interest income 20 155,865,652 631,255,891 107,575,555 438,370,387 Interest expenses 21 (53,370,045) (216,148,682) (34,609,507) (141,033,741) Net interest income 102,495,607 415,107,209 72,966,048 297,336,646

Allowance for bad and

doubtful loans 8 (688,812) (2,789,689) (3,441,488) (14,024,064)

Net interest income after allowance

for bad and doubtful loans 101,806,795 412,317,520 69,524,560 283,312,582 Fee and commission expenses 22 (1,449,667) (5,871,151) (1,061,976) (4,327,552) Other income 23 4,010,951 16,244,352 1,930,955 7,868,642 Personnel expenses 24 (31,050,183) (125,753,241) (21,877,355) (89,150,222) Depreciation and amortisation 25 (2,236,549) (9,058,023) (1,916,739) (7,810,711)

General and

administrative expenses 26 (12,637,379) (51,181,385) (9,333,094) (38,032,358) Operating profit 58,443,968 236,698,072 37,266,351 151,860,381 Net foreign exchange (loss)/gain (262,813) (1,064,393) 178,483 727,318

Grant 29,600 119,880 219,808 895,718

Profit before income tax 58,210,755 235,753,559 37,664,642 153,483,417 Income tax expense 12 (11,754,666) (47,606,397) (7,609,837) (31,010,086) Net profit for the year 46,456,089 188,147,162 30,054,805 122,473,331 The accompanying notes form an integral part of these financial statements.

PRASAC Microfinance Institution Limited Statement of changes in equity for the year ended 31 December 2015

9

Share Subordinated Retained capital debts Reserves earnings Total USD USD USD USD USD At 1 January 2014 19,685,067 11,428,679 4,698,399 27,422,810 63,234,955 Net profit for the year - - - 30,054,805 30,054,805 Transfer to share capital 27,314,933 - - (27,314,933) - Transfer to reserves - - 784,208 (784,208) - Currency translation differences - (224,366) - - (224,366)

As at 31 December 2014 47,000,000 11,204,

313 5,482,607 29,378,474 93,065,394

(KHR'000 equivalents - Note 4)

191,525,000 45,657,577 22,341,624 119,717,282 379,241,483

At 1 January 2015 47,000,000 11,204,313 5,482,607 29,378,474 93,065,394 Net profit for the year - - - 46,456,089 46,456,089 Transfer to share capital

25,000,000 - - (25,000,000) -

Transfer to subordinated debts (Note 16)

- (11,204,313) (3,561,682) - (14,765,995)

Transfer to reserves - - 351,722 (351,722) - Dividend paid - - - (3,005,481) (3,005,481)

As at 31 December 2015 72,000,000 - 2,272,647

47,477,360

121,750,007

(KHR'000 equivalents - Note 4)

291,600,000 - 9,204,220 192,283,308 493,087,528

The accompanying notes form an integral

part of these financial statements.

PRASAC Microfinance Institution Limited

Statement of cash flows

for the year ended 31 December 2015 10

2015 2014

Note USD KHR'000 USD KHR'000

(Note 4) (Note 4)

Cash flows from operating activities

Net cash used in operations 27 (169,829,882) (687,811,022) (82,104,016) (334,573,863) Interest received 153,088,200 620,007,210 105,254,419 428,911,757 Interest paid (46,565,957) (188,592,126) (30,319,153) (123,550,548) Income tax paid (8,587,487) (34,779,322) (4,859,215) (19,801,301) Severance pay paid (227,158) (919,990) (200,540) (817,201) Net cash used in operating activities (72,122,284) (292,095,250) (12,228,505) (49,831,156)

Cash flows from investing activities

Purchase/transfer of property and equipment (2,074,330) (8,401,037) (3,357,916) (13,683,508) Purchase of intangible assets (216,642) (877,400) (771,147) (3,142,424)

Proceeds from disposals of

property and equipment 74,669 302,409 27,446 111,842 Net cash used in investing activities (2,216,303) (8,976,028) (4,101,617) (16,714,090)

Cash flows from financing activities

Proceeds from borrowings 192,952,040 781,455,762 126,081,765 513,783,192 Repayments of borrowings (77,733,300) (314,819,865) (79,457,988) (323,791,301) Dividend payment (3,005,481) (12,172,198) - - Net cash generated from financing activities 112,213,259 454,463,699 46,623,777 189,991,891 Net increase in cash and cash equivalents 37,874,672 153,392,421 30,293,655 123,446,645

Cash and cash equivalents

at beginning of the year 83,211,657 339,087,502 52,918,002 211,407,418 Currency translation differences - (2,080,291) - 4,233,440

Cash and cash equivalents

at the end of the year 28 121,086,329 490,399,632 83,211,657 339,087,503 The accompanying notes form an integral part of these financial statements.

PRASAC Microfinance Institution Limited

Notes to the financial statements

for the year ended 31 December 2015 11

1. Reporting entity

PRASAC Microfinance Institution Limited ("the Company" or "PRASAC"), is engaged in providing financial services to rural communities and micro-enterprises of Cambodia through its head office in Phnom Penh and various branches in Phnom Penh and provinces in Cambodia. The Company was incorporated in Cambodia and registered with the Ministry of Commerce as a private limited liability company under the registration number Co-6931/04P, dated 12 August 2004 and latest renewed on 29 July 2014. Renewal is required every three years. The net assets of PCA (PRASAC Credit Association) were transferred to PRASAC as subordinated debt,

as discussed in Note 19 to these financial statements, in accordance with the asset transfer document

effective from 31 December 2004. The National Bank of Cambodia ("NBC") granted a microfinance license to the Company effective from

14 December 2007.

On 8 February 2011, the Company received a license from the NBC to conduct a deposit-taking business.

On 1 December 2011, the Company received a permission from the NBC to conduct the Automatic Teller

Machine ("ATM") and POS services.

On 10 April 2014, the NBC approved for the increase of share capital to KHR 188,000 million (equivalent

to USD 47 million) and the changes in par value to KHR 4,000 (equivalent to USD 1) per share. Such changes were amended in Memorandum and Articles of Association which acknowledged by the Ministry of Commerce on 29 July 2014.

On 27 March 2015, the Board of Directors approved to use part of the retained earnings to increase the

paid up share capital of the Company from USD 47,000,000 to USD 72,000,000. The revised Memorandum and Articles of Association was acknowledged by the NBC and the Ministry of Commerce on 3 July 2015 and 13 July 2015 respectively. The Company's head office is at Building 212, Street 271, Sangkat Tuol Tumpung 2, Khan Chamkarmon,

Phnom Penh, Kingdom of Cambodia.

As at 31 December 2015, the Company had 5,285 employees (31 December 2014: 4,100).

PRASAC Microfinance Institution Limited

Notes to the financial statements (continued)

for the year ended 31 December 2015 12

2. Basis of preparation

(a) Statement of compliance The financial statements have been prepared in accordance with Cambodian Accounting Standards and the guidelines of the National Bank of Cambodia ("NBC") relating to the preparation and presentation of financial statements. The financial statements were approved and authorised for issue by the Board of Directors on

29 February 2016.

(b) Basis of measurement The financial statements of the Company have been prepared on the historical cost basis. (c) Functional and presentation currency

The Company transacts its business and maintains its accounting records in three currencies, Khmer Riel

("KHR"), United States Dollars ("USD") and Thai Baht ("THB"). Management have determined the

USD to be the Company's functional and presentation currency as it reflects the economic substance of

the underlying events and circumstances of the Company.

Transactions in currencies other than USD are translated into USD at the exchange rate ruling at the dates

of the transactions. Monetary assets and liabilities denominated in currencies other than USD at the

balance sheet date are translated into USD at the rates of exchange ruling at that date. Exchange differences

arising on translation are recognised in the income statement. (d) Use of estimates and judgments The preparation of these financial statements requires management to make judgements, estimates and

assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities,

and income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting

estimates are recognised in the year in which the estimates are revised and in any future periods affected.

Key accounting estimates and judgements applied in the preparation of financial statements include estimates of recoverable amounts for loans and advances which have a separate accounting policy stated in Note 3 (g).

PRASAC Microfinance Institution Limited

Notes to the financial statements (continued)

for the year ended 31 December 2015 13

3. Significant accounting policies

The significant accounting policies adopted in the preparation of these financial statements are set out

below. These policies have been consistently applied to all the years presented, except in the Notes 3(g)

and 3(j). (a) Financial instruments

The Company's financial assets and liabilities include cash and cash equivalents, loans and receivables,

deposits, other receivables, borrowings and payables. The accounting policies for the recognition and

measurement of these items are disclosed in the respective accounting policies. (b) Basis of aggregationquotesdbs_dbs9.pdfusesText_15

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