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CAMMA MICROFINANCE LIMITEDFinancial Statementsfor the year ended 31 December 2015andReport of the Independent Auditors

Corporate InformationCompanyCAMMA Microfinance LimitedRegistration No.Co. 0700 KH/2010Registered officeNo.101A, Street 289Sangkat Boeng Kak I, Khan Toul KokPhnom Penh, Kingdom of CambodiaShareholdersMadam Ou SanMadam Dith NitaBoard of DirectorsMr. Thun Vathana, Chairman(appointed on 26 December 2015)Mr. Benson Samay, Chairman(resigned on 2 January 2016)Ms. Khat Sokean, Vice-chairpersonMr. Khov Soviet, MemberManagement teamMadam Dith Nita, Chief Executive OfficerMr. Tith Vannarith, Head of finance and accounting departmentMr. Ly Chheang, Head of loan departmentMr. Yang Haiy, Head of internal audit departmentPrincipal bankersAdvanced Bank of Asia LimitedANZ Royal Bank (Cambodia) LtdRHB Indochina Bank LimitedACLEDA Bank Plc.Vattanac Bank LimitedAuditorsKPMG Cambodia Ltd

CAMMA Microfinance LimitedContentsPage1.Report of the Board of Directors12.Report of the independent auditors63.Balance sheet84.Income statement95.Statement of changes in equity106.Statement of cash flows117.Notes to the financial statements13

CAMMA Microfinance LimitedBalance sheetAs at 31 December 20152015Note2014US KHR’000(Note 4)US KHR’000(Note 031,053,000232,7844,290,975948,595Total equity2,451,6189,929,0531,285,7845,239,570Total liabilities and Cash on handBalances with banksBalances with National Bankof CambodiaLoans to customers, netOther assetsProperty and equipmentIntangible assetsTotal assetsLiabilities and equityLiabilitiesOther liabilitiesCurrent income tax liabilitiesBorrowings121314Total liabilitiesEquityShare capitalRetained earnings15The accompanying notes form an integral part of these financial statements.8

CAMMA Microfinance LimitedIncome statementfor the year ended 31 December 20152015NoteInterest income16Interest expense17Net interest incomeProvision for bad anddoubtful loans8Net interest income after provisionfor bad and doubtful loansUS 2014KHR’000(Note 4)US 66(28,612)(115,879)KHR’000(Note ,591230,625Other operating income1876,760310,87856,595Personnel reciation and amortisationexpensesGeneral and administrativeexpenses20Profit before income taxIncome tax expenseNet profit for the 9,128232,046945,587The accompanying notes form an integral part of these financial statements.9

CAMMA Microfinance LimitedStatement of changes in equityfor the year ended 31 December 2015SharecapitalUS Balance as at 1 January 2014Net profit for the yearTransfer from retained earnings to share capitalRetainedearningsUS TotalUS 000)-Balance as at 31 December 20141,053,000232,7841,285,784(KHR’000 equivalents - Note 4)4,290,975948,5955,239,570Balance as at 1 January 20151,053,000232,7841,285,784-315,834315,834Net profit for the yearTransfer from retained earnings to share capital200,000(200,000)-Issuance of share capital850,000-850,000Balance as at 31 December 20152,103,000348,6182,451,618(KHR’000 equivalents - Note 4)8,517,1501,411,9039,929,053The accompanying notes form an integral part of these financial statements.10

CAMMA Microfinance LimitedStatement of cash flowsfor the year ended 31 December 20152015US 2014KHR’000(Note 4)US KHR’000(Note 4)Cash flows from operating activitiesNet profit for the year315,834Adjustments for:Depreciation and amortisation expenses 24,662Allowance for bad and doubtful loans28,612Net interest income(748,399)Income tax 89)(1,049,675)Changes in:Loans to customersOther assetsOther 442Cash used in operationsIncome tax paidInterest receivedInterest 8,946)Net cash used in operating Cash flows from investing activitiesStatutory capital depositTerm depositsPurchased of property and equipmentPurchased of intangible 000(27,718)(6,826)Net cash (used in)/ generated frominvesting 800(5,559,887)23,780,790(22,517,542)Cash flows from financing activitiesProceeds from borrowingsRepayments of borrowingsProceeds from issuance ofshare capitalNet cash generated fromfinancing ,66011

CAMMA Microfinance LimitedStatement of cash flows (continued)for the year ended 31 December 20152015US 2014KHR’000(Note 4)US KHR’000(Note 4)Net increase/(decrease) in cashand cash equivalents47,074190,650(217,249)(885,288)Cash and cash equivalents atbeginning of the yearCurrency translation 9,513Cash and cash equivalentsat end of the 98,734804,873151,660618,015Cash and cash equivalents represented by:Cash on handBalances with banksDeposits with NBC567The accompanying notes form an integral part of these financial statements.12

CAMMA Microfinance LimitedNotes to the financial statementsfor the year ended 31 December 20151.Reporting entityCAMMA Microfinance Limited (“the Company”) was incorporated as a limited liability companyin the Kingdom of Cambodia under the Registration No. Co. 0700 KH/2010 issued by the Ministryof Commerce on 6 April 2010. On 29 July 2010, the Company obtained a permanent license fromthe National Bank of Cambodia to provide micro-finance services.The Company’s principal activity is to efficiently and sustainably provide a wide variety ofmicro-finance services to entrepreneurs of small and medium enterprises who are farmers,artisans and business persons.The Company’s registered office is located at No.101A, Street 289, Sangkat Boeng Kak I, KhanToul Kok, Phnom Penh, Kingdom of Cambodia.As at 31 December 2015, the Company had 54 employees (31 December 2014:38 employees).2.Basis of preparation(a)Statement of complianceThe financial statements have been prepared in accordance with Cambodian AccountingStandards and the guidelines of the National Bank of Cambodia (“NBC”) relating to thepreparation and presentation of financial statements.The financial statements were authorised for issue by the Board of Directors on 28 April 2016.(b)Basis of measurementThe financial statements of the Company have been prepared on the historical cost basis.(c)Functional and presentation currencyThe Company transacts its business and maintains its accounting records in two currencies,Khmer Riel (“KHR”) and United States Dollars (“US ”). Management has determined the US to be the Company’s functional and presentation currency as it reflects the economic substanceof the underlying events and circumstances of the Company.13

CAMMA Microfinance LimitedNotes to the financial statements (continued)for the year ended 31 December 20152.Basis of preparation (continued)(c)Functional and presentation currency (continued)Transactions in currencies other than US are translated into US at the exchange rates ruling atthe dates of the transactions. Monetary assets and liabilities denominated in currencies other thanUS at the balance sheet date are translated into US at the exchange rates ruling at that date.Exchange differences arising on translation are recognised in the income statement.(d)Use of estimates and judgementsThe preparation of financial statements requires management to make judgements, estimates andassumptions 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 ongoing basis. Revisions toaccounting estimates are recognised in the year in which the estimates are revised and in anyfuture periods affected.Key accounting estimates and judgements applied in the preparation of the financial statementsinclude estimates of recoverable amount for loans which have a separate accounting policy statedin Notes 3(f).3.Significant accounting policiesThe following significant accounting policies have been adopted by the Company in thepreparation of these financial statements. These policies have been consistently applied to all theyears presented, unless otherwise stated.(a)Financial instrumentsThe Company’s financial assets and liabilities include cash and cash equivalents, originatedloans, deposits, other receivables, borrowings and payables. The accounting policies for therecognition and measurement of these items are disclosed in the respective accounting policies.14

CAMMA Microfinance LimitedNotes to the financial statements (continued)for the year ended 31 December 20153.Significant accounting policies (continued)(b)Cash and cash equivalentsCash and cash equivalents consist of cash and bank balances, demand deposits and short-termhighly liquid investments with original maturities of three months or less when purchased thatare readily convertible to known amounts of cash and are subject to an insignificant risk ofchanges in value.(c)Deposits with bankDeposits with bank are stated at cost less allowance for any uncollectible amounts.(d)Statutory depositsStatutory deposits are maintained with the NBC in compliance with the Cambodian Law onBanking and Financial Institutions and are determined by defined percentages of minimum sharecapital and customers’ deposits as required by NBC.(e)Loans to customersLoans to customers are stated in the balance sheet at the amount of principal outstanding less anyamounts written off and specific and general allowance.Loan are written off automatically when a client dies and in other case where the loans remainunpaid based on the assessment of the management and upon the approval of the Board ofDirectors as they are uncollectible. Loans written off are removed from the outstanding loanportfolio and from the allowance for bad and doubtful loans.(f)Allowance for bad and doubtful loansIn compliance with the NBC guidelines, a specific provision for bad and doubtful loans that areidentified as non-performing is made as follows:ClassificationNumber of days past dueAllowanceShort term loans (less than one year):Sub-standardDoubtfulLoss30- 59 days60- 89 days90 days or more10%30%100%15

CAMMA Microfinance LimitedNotes to the financial statements (continued)for the year ended 31 December 20153.Significant accounting policies (continued)(f)Allowance for bad and doubtful loans (continued)ClassificationNumber of days past dueAllowanceLong term loans (more than one year):Sub-standardDoubtfulLoss30-179 days180- 359 days360 days or more10%30%100%The specific allowance is calculated as a percentage of the loan outstanding at the time the loanis classified, excluding accrued interest. The allowance is recorded in the Company’s accountsand charged to the income statement for the month during which the corresponding loan has beenclassified below standard.The adequacy of the allowance for bad and doubtful loans is evaluated monthly by management.Factors considered in evaluating the adequacy of the allowance include the size of the portfolio,previous loss experience, current economic conditions and their effect on clients, the financialsituation of clients and the performance of loans in relation to contract terms.Recoveries on loans previously written off and reversal of previous allowance are disclosed asother operating income in the income statement.(g)Interest in suspenseInterest in suspense represents interest on non-performing loans to customers, that is recorded asan allowance rather than income until it is realised on a cash basis.Interest in suspense is disclosed as a deduction from interest receivables.(h)Other assetsOther assets are carried at cost. An estimate is made for doubtful receivables based on a reviewof outstanding amounts at the end of the reporting date.(i)Property and equipment(i)Items of property and equipment are measured at cost less accumulated depreciation andaccumulated impairment losses, if any. When parts of an item of property and equipment havedifferent useful lives, they are accounted for as separate items (major components) of propertyand equipment.16

CAMMA Microfinance LimitedNotes to the financial statements (continued)for the year ended 31 December 20153.Significant accounting policies (continued)(i)Property and equipment (continued)(ii)Depreciation of property and equipment is charged to income statement on a straight line basisover the estimated useful lives of the individual assets as follows:Leasehold improvementsOffice furniture and equipmentComputer and IT equipment25%25%25%(iii)Subsequent expenditure relating to an item of property and equipment that has already beenrecognised is added to the carrying amount of the asset when it is probable that future economicbenefits, in excess of the originally assessed standard of performance of the existing asset, willflow to the Company. All other subsequent expenditure is recognised as an expense in the periodin which it is incurred.(iv)Gains or losses on disposal of an item of property and equipment are determined as the differencebetween the estimate net disposal proceeds and the carrying amount of property and equipmentand are recognised in the income statement on the date of retirement or disposal.(v)Fully depreciated items of property and equipment are retained in the financial statements untildisposed of or written off.(j)Intangible assetsIntangible assets consist of computer software and are stated at cost less accumulatedamortisation and accumulated impairment losses, if any. Acquired computer software iscapitalised on the basis of the cost incurred to acquire the specific software and bring it into use.Intangible assets are amortised based on declining balance method over the annual rate of 50%.(k)Impairment(i)Financial assetsA financial asset is assessed at each reporting date to determine whether there is any objectiveevidence that it is impaired. A financial asset is considered to be impaired if objective evidenceindicates that one or more events have had a negative effect on the estimate future cash flows ofthat asset. This does not apply to loans to customers which has a separate accounting policystated in Note 3(f).Individually significant financial assets are tested for impairment on an individual basis. Theremaining financial assets are assessed collectively in groups that share similar credit riskcharacteristics.All impairment losses are recognised in the income statement.An impairment loss is reversed if the reversal can be related objectively to an event occurringafter the impairment loss was recognised.17

CAMMA Microfinance LimitedNotes to the financial statements (continued)for the year ended 31 December 20153.Significant accounting policies (continued)(k)Impairment (continued)(ii)Non-financial assetsThe carrying amounts of the Company’s non-financial assets are reviewed at each reporting dateto determine whether there is any indication of impairment. If any such indication exists, theasset’s recoverable amount is estimated.The recoverable amount of an asset or cash-generating unit is the greater of its value in use andits fair value less cost to sell. In assessing value in use, the estimated future cash flows arediscounted to their present value using a pre-tax discount rate that reflects current marketassessments of the time value of money and the risks specific to the asset. For the purpose ofimpairment testing, assets are grouped together into the smallest group of assets that generatescash inflows from continuing use that are largely independent of the cash inflows of other assetsor groups of assets (the “cash-generating unit”).An impairment loss is recognised if the carrying amount of an asset or its cash-generating unitexceeds its estimated recoverable amount. Impairment losses are recognised in the incomestatement.(l)BorrowingsBorrowings are stated at the amount of the principal outstanding.(m) ProvisionsProvisions are recognised in the balance sheet when the Company has a legal or constructiveobligation as a result of a past event, and it is probable that an outflow of economic benefits will berequired to settle the obligation. If the effect is material, provisions are determined by discountingthe expected future cash flows at a pre-tax rate that reflects current market assessments of the timevalue of money and, where appropriate, the risks specific to the liability.(n)Income and expense recognitionInterest income on loans is recognised on an accrual basis. Where a loan becomes nonperforming, the recording of interest as income is suspended until it is realised on a cash basis.Interest on loans is calculated using the declining balance method on monthly balances of theprincipal amount outstanding.Loan fee income is calculated using the principal and the applicable fee rate and is recognised asincome when the loan is disbursed to customers.Expenses are recognised on an accruals basis.18

CAMMA Microfinance LimitedNotes to the financial statements (continued)for the year ended 31 December 20153.Significant accounting policies (continued)(o)Operating leasesPayments made under operating leases are recognised in the income statement on a straight-linebasis over the term of the lease. Lease commitments are not recognised as liabilities until theobligation to pay become due.(p)Income taxIncome tax expense comprises current and deferred tax. Income tax is recognised in the incomestatement except to the extent that it relates to items recognised as a component of shareholders’equity, in which case it is recognised in equity.Current tax is the expected tax payable on the taxable income for the year using tax rates enactedor substantially enacted at the balance sheet date, and any adjustment to tax payable in respect ofprevious years.Deferred tax is provided using the balance sheet method, providing for temporary differencesbetween the carrying amounts of assets and liabilities for financial reporting purposes and theamounts used for taxation purposes. The amount of deferred tax provided is based on theexpected manner of the realisation or settlement of the carrying amount of assets and liabilities,using tax rates enacted at the reporting date.A deferred tax asset is recognised only to the extent that it is probable that future taxable profitswill be available to permit the realisation of the asset. Deferred tax assets are reduced to the extentthat it is no longer probable that the related tax benefit will be realised.(q)Related partiesParties are considered to be related to the Company if one party has the ability, directly orindirectly, to control the other party or exercise significant influence over the other party inmaking financial and