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ANNUAL REPORT CHINA

2 0 1 2

Groupe PlaNet Finance


EDITORIAL Arnaud Ventura Chairman of the Board of Directors of MicroCred China, President of the Management Board and founder of MicroCred As Chairman of the Board of MicroCred China, it gives me great pleasure to share with you the results and to highlight the key developments of the company. In 2012, MicroCred China continued to operate successfully. MicroCred China finished the year with 11,625 active clients and an outstanding loan portfolio of EUR 45.1M, while maintening a PAR >30 days of 0.23%. MicroCred set an example by demonstrating that social and financial responsibility are not mutually exclusive, meaning that while pursuing its mission to provide financial services to micro and small entrepreneurs, it is possible to be profitable as well. The company generated a net profit of EUR 2.2M in 2012. In the name of all Board’s members of MicroCred China, I would like to wish all our colleagues continued success in 2013.

2


Table of contents

3

Presentation of MicroCred Group & its subsidiary in China

4

MicroCred Group in 2012 MicroCred China in figures Editorial, Shareholders & Governance MicroCred Nanchong MicroCred Sichuan

4 6 8 10 12

2012 Management Report Introduction Financial Expenses Social Performance

Financial Statements Report of the Directors Independent Auditors’ Report to the Shareholders Main notes of the Financial Statements

Notes & Contact Notes Branches & Outlets Credits

MicroCred China / Annual Report 2012

14 15 18 19

22 22 23 24

48 48 51 51

3


Presentation of MicroCred Group & its subsidiary in China

MicroCred Group as of Decembre 31st 2012

MicroCred Holding Shareholding structure

MicroCred’s mission is to provide qualitative financial services that are accessible and adapted to the needs of the individuals that are underserved and unserved by the financial sector, particularly the micro, small and medium entrepreneurs. Its objective is to improve the living conditions of clients and their families, and to contribute to the economic development of countries in wich it operates. MicroCred also committed to implementing a fair human resources policy while respecting the environment it operates in.

Axa Belgium

8%

Funds managed by DWM

8% MicroCred S.A.

51%

230,000,000 HKD

15%

18% KfW

IFC


MicroCred Group as of December 31st 2012 Operationnal Performance & Financial Results in full growth 178,581 clients a +40% EUR 122.8M of outstanding loan portfolio a +48% 1,4% PAR > 30 days 1 374 employees a +25% EUR 41M of outstanding savings portfolio a +46% 56 branches a +36% Since 2005, MicroCred has grown into a Group of 6 microfinance institutions around the world and provides about 180 000 clients an outstanding loan portfolio of more than EUR 122M.

a +37% MicroCred Holding Since 2005

MicroCred Madagascar Since 2006

MicroCred Sénégal Since 2007 EUR

EUR

■■

■■

Located in Hong Kong MicroCred Holding owns 51% of the capital

Net Result ■■

E

15 branches and outlets 348 employees MicroCred Holding owns 51% of the capital

lt

EUR

■■

■■ ■■

6 branches and outlets 209 employees MicroCred Holding owns 51% of the capital

2

■■ ■■ ■■

UR

217K

■■ ■■

4 branches 212 employees MicroCred Holding owns 51% of the capital

9 branches and outlets 122 employees MicroCred China owns 100 % of the capital

MicroCred Sichuan Since 2011 ■■ ■■ ■■

MicroCred China / Annual Report 2012

■■

MicroCred Nanchong Since 2007

M

lt

M 2.2

Net Res u

MicroCred China Since 2009

■■

Net Re su

Net Result ■■

■■

.5M -1

■■

16 branches and outlets 382 employees MicroCred Holding owns 51% of the capital

EU R

8K -28

■■

3K 87

Located in Paris 27 employees

M 1.3

■■

MicroCred Côte d’Ivoire Since 2010

EU R

EU R

■■

MicroCred MFB Nigéria Since 2010

R Net esult

total consolidated balance

Net Result

EUR 148M

6 branches and outlets 75 employees MicroCred China owns 100 % of the capital

5


MicroCred China’s evolution in figures 2012 Balance Sheet

12,268

active loans

EUR 45.5M

Gross Outstanding Loan Portfolio

EUR 2.3M Net Profit

6

2011

RMB

EUR

RMB

EUR

Total Assets

398,630,909

48,807,713

310,763,905

38,072,148

Gross Outstanding Loan Portfolio

378,881,297

45,551,573

256,390,998

31,410,842

Total Debts

175,632,995

21,115,741

104,476,621

12,799,586

Fixed Assets

1,279,244

153,799

1,126,061

137,955

Income Statement

RMB

EUR

RMB

EUR

Operating Income

67,437,110

8,107,728

42,261,574

5,070,557

Operating Expense

42,614,930

5,123,444

31,946,739

3,832,980

Operating Profit Before Tax

24,822,180

2,984,284

10,314,834

1,237,577

Net Profit

19,661,639

2,363,850

5,831,660

699,684

Key Ratios

2012

2011

Cost / Income

72.22%

79.54%

Yield on Portfolio

25.86%

24.43%

Operating Expenses/Portfolio

10.59%

15.02%

Financial Cost / Portfolio

2.28%

2.82%

Provision Expense / Portfolio

0.54%

-2.04%

Fixed Assets / Equity

0.57%

0.55%

Liquidity Ratio

20.86%

37.21%

Staff Cost to Total Operating Cost

51.70%

44.74%

Operational Statistics

2012

2011

Number of Active Loans

12,268

9,343

Number of Staff

197

182

Number of Loan Officers

98

90

Number of Branches and Outlets

15

13


MicroCred China’s evolution in figures Outstanding Loan Portfolio & Number of borrowers

PAR > 30 Days Evolution 10,000

35,000,000

0.05 0.045

30,000,000

8,000

25,000 000

0.04 0.035

6,000

20,000,000

0.03 0.025

15,000,000

4,000

0.02 0.015

10,000,000

2,000

5,000,000

0.01 0.005

0

2008

2009

2010

2011

Loan portfolio (Nanchong) Number of borrowers (Nanchong)

2012

0

0

2008

Loan portfolio (Sichuan) Number of borrowers (Sichuan)

7,000 6,000

4,000

5,000 4,000

3,000

3,000

2,000

2011

2012

PAR> 30 days (Sichuan)

Number of Loans Disbursement 8,000

5,000

2010

PAR> 30 days (Nanchong)

Average Loan per Client & Average Loan at Disbursement 6,000

2009

12,000 10,000 8,000 6,000 4,000

2,000 1,000 0

1,000 2008

2009

2010

2011

Average loan at disbursement (Ng) Average loan per client (Nanchong)

2012

2,000

0

0

Average loan at disbursement (S) Average loan per client (Sichuan)

2008

2010

Nb of loan disbursement (Nanchong)

Profitability Structure

2011

2012

Nb of loan disbursement (Sichuan)

Loan Officer Productivity

2,500,000

180

2,000,000

160 140

1,500,000

120

1,000,000

100

500,000

80 60

0

40

-500,000 -1,000,000

2009

20 2008

2009

2010

Profitability structure (Nanchong)

MicroCred China / Annual Report 2012

2011

2012

Profitability structure (Sichuan)

0

2008

2009

2010

Loan officer productivity (Nanchong)

2011

2012

Loan officer productivity (Sichuan)

7


Editorial & Shareholding Isabelle Levard Executive President of MicroCred China Deputy CEO of MicroCred Group

"MicroCred set an example by demonstrating that social and financial responsibility are not mutually exclusive" This year end of 2012 gives me time to reflect on what has been another year of outstanding achievement for MicroCred China. The organization continued to successully fulfill its corporate mission to provide financial services to entrepreneurs without access to the traditional financial sector. In 2012, MicroCred China finished the year with 11,628 active clients and an outstanding loan portfolio of EUR 45.1M, while maintening a PAR >30 days of 0.23%. MicroCred continued to gain in efficiency by large increase in productivity and reduction of operating expenses. It experienced dynamic growth as it rapidly and

Shareholding

successfully integrated itself into the local financial sector. MicroCred set an example by demonstrating that social and financial responsibility are not mutually exclusive, meaning that while pursuing its mission to provide financial services to micro and small entrepreneurs, it is possible to be profitable as well. The company generated a net profit of EUR 2.2M in 2012. In the name of all Board’s members of MicroCred China, I would like to wish all our colleagues continued success in 2013.

Governance At the end of December, 2012, MicroCred China had the following board members:

MicroCred China’s Shareholding Structure Axa Belgium

Arnaud Ventura Funds managed by DWM

8% 8%

President of the Management Board and founder of MicroCred Isabelle Levard Deputy CEO at MicroCred

MicroCred S.A.

51%

HKD 173,1603 EUR 20,996,500

15%

Jeff Ferry IFC

Advisor at MicroCred Dirk Steinwand Senior Project Manager at KfW Bankgruppe

18% KfW Bankengruppe

8

0M - EU R 10 M 12

MicroCred Nanchong 2007

RM B

0M - EUR 10 M 12

RM B

MicroCred China owns 100% of the capital

MicroCred Sichuan 2007

Joel Epstein Board Member Fernanda Lima Vice-President at DWM


Editorial & Governance

"I am fully confident that MicroCred will continue its existing good operations and outstanding development in southwestern China in the near future. "

Frank Li Acting Chief Executive Officer of MicroCred China 2012 was a break-through year for MicroCred China with both subsidiaries profitable and growing strongly. In this year, MicroCred China disbursed a total of 4,022 loans valued at EUR 75.2M (RMB 625.6M), presenting increases of 25% and 42% respectively compared to last year. The number of active loans reached 12,268 and gross outstanding loan portfolio (GLP) was EUR 45.2M (RMB 357.8M), which were 31% and 47% higher than those in 2011. Loan portfolio quality remained excellent, with PAR >0 day and PAR >30 days of 0.3% and 0.2% respectively.

■■

■■

■■

successfully obtained FDQ Approval of RMB 200MM by MicroCred Nanchong; 50% of leverage achieved by MicroCred Sichuan; launch of Agency Loan Model between MicroCred Sichuan and MicroCred Nanchong to solve the funding problem of the latter; ■■ adjustment of top operational management team in MicroCred Sichuan; Maturing of Commercial Officers teams in MicroCred Sichuan; geographic expansion of MicroCred Sichuan with distribution point increasing from 3 in 2011 to 6 in 2012; training and implementation of Social Performance Management (SPM) in the whole company.

EUR 2.2M of net result ■■

■■

■■

Besides the above mentioned operational achievements, MicroCred China outlined itself in the following aspects: ■■ proposal of registered capital increase from RMB 100MM to RMB 300MM in both subsidiaries was approved by board members;

MicroCred China / Annual Report 2012

With these great operational achievements and the good social impact, both MicroCred Nanchong and MicroCred Sichuan received many awards, including

2012 Top 100 MFI in China, Best Responsible MCCs in China and Best MCCs in Sichuan province, etc. In addition, local residents and government officials, as well as supervisory authorities spoke highly of the company’s development which was reported by local media in several reports. With the accumulated experience and spirit of innovation, I am fully confident that MicroCred will continue its existing good operations and outstanding development in southwestern China in the near future.

EUR 45.2M

Outstanding loan portfolio

a+47% of increase 9


MicroCred Nanchong

Lianggang He Chief Executive Officer MicroCred Nanchong 2012 was a very strong year for MicroCred Nanchong in spite of the funding constraints by the end of the year. Thanks in large part to the commitment of all the team and the strong support from MicroCred Holding, the subsidiary was able to meet all its key performance objectives, to pilot Agent Model with MicroCred Sichuan, to secure the approval of foreign debt quota and to receive a number of honorable awards at the national level. By the year end, MicroCred Nanchong disbursed a total of 11,209 loans with an amount of RMB 455 million or EUR 56MM, presenting an increases of 16% and 30% respectively than last year. The number of active loans reached 9,743 and the gross outstanding portfolio was RMB 269 million, which were 21% and 34% higher than those in 2011. Portfolio at risk over 30 days remained at 0.15%, which was the lowest so far. These figures demonstrate well that MicroCred Nanchong is very sustainable. Financially MicroCred Nanchong was also doing quite well in 2012. Total revenue was RMB 54 million or EUR 2.1 million and net result after taxes and donations was over RMB 17 million or EUR 2.1 million, respectively representing 99% and 95% of the budgeted figures in the financial business plan. At the same time, ROA and ROE

reached 7% and 14%, accounting for 93% and 91% of the forecast. Although MicroCred Nanchong could not 100% met its financial objectives, these figures are the best in the operational history of the company so far. 2012 was also a year for innovations and creativity. MicroCred Nanchong tested Loan Agent Model with MicroCred Sichuan with an amount of over RMB 20 million. This has greatly helped MicroCred Nanchong abate the impact of funding constraint by the end of the year. More importantly, through Agent model, MicroCred Nanchong has accumulated a lot of experiences regarding accounting, MIS and portfolio management, which will serve to work with other institutions to deal with the leverage issue. Another significant breakthrough was that MicroCred Nanchong secured the approval of Foreign Debt Quota after a series of intense negotiations with officials from Sichuan provincial government. This will well ease the funding issue in the years to come. As CEO, I am very proud of the achievements. I want to take this opportunity to extend my sincere gratitude to our shareholders, to our loyal clients and to all the committed staff in MicroCred Nanchong for their lasting support and dedication, I am very optimistic that MicroCred Nanchong will have even faster growth in the years to come.

11,209

disbursed loans

9,743 active loans

" 2012 results are the best in the operational history of the company so far." 10


MicroCred Nanchong Highlights 2012 PRODUCT MicroCred Nanchong has diversified product amortization method in respond to client demands collected in last client satisfaction survey. Balloon repayment approach was restarted while quarterly and grace period repayment approach were developed in order to meet clients’ different cash flows.

REPUTATION MicroCred Nanchong, for the second time, was awarded Top 100 MicroCredCs (out of 6,080 Microcredit Company’s (MCC)) in China at the 3rd MicroCredCs Annual Conference. MicroCred Nanchong won 2012 Sichuan Province Micro Credit Company Association Awards for Best Practice.

TEAM BUILDING Semi-annual Conference and the First Staff Sports MicroCred Nanchong held its half-year conference to summarize overall performances in the first half of 2012 and also, made strategic plan for the rest of the year. Following the conference, all the employees had taken part in the first staff sports with enthusiasm. ■■

The Fifth Anniversary A party was held to celebrate MicroCred Nanchong’s fifth anniversary on January 25, 2013. The management team took the opportunity to express their thanks to the staff for their efforts and contribution during the past five years. MicroCred Nanchong staff has prepared various wonderful performances for the party which nicely displaying the love, care, unite and happiness of MicroCred family. ■■

■■ The publication of MicroCred Credit Encouraged by the fact that MicroCred Nanchong newspaper had received good comments from all sides, the Company has put more focus on its own publication this year and designed a more professional magazine named MicroCred Credit to introduce MicroCred, microfinance and our clients.

MicroCred China / Annual Report 2012

Foreign Debt Quota MicroCred Nanchong was approved to increase its total investment up to RMB 300MM. In another word, the Company, with registered capital of RMB 100MM, is able to have oversea borrowing of RMB 200MM. It’s also the first Micro-credit Company in Sichuan Province to get such approval from local government.

Outlook 2013 PRODUCT DEVELOPMENT Two kinds of new products are planned for 2013. One is agriculture loan and the other one is environmental loan. The purpose of developing these new products is part of MicroCred’s mission – service farmers and protect environment.

GEOGRAPHIC EXPANSION In order to expand MicroCred Nanchong’s service outreach, 2-3 baby-outlets are planned to set up in densely populated township area. The Company will also pilot mobile branch in some less-developed villages in 2013.

INCREASING OF STAFF PRODUCTIVITY Fast speed is one of MicroCred Nanchong’s advantages in the market. The Company plans to strengthen this superiority by optimizing loan process in 2013.

BUILDING OF TALENTS POOL Another important task for MicroCred Nanchong, as the first and the most successful investment of MicroCred China, is to prepare talents for MicroCred China’s future expansion.

11


MicroCred Sichuan

Frank Li Chief Executive Officer MicroCred Sichuan For MicroCred Sichuan, 2012 was a year of challenge and adjustment. In the whole year, the company disbursed 2,813 loans valued at RMB 170MM (EUR 20MM). And at year end, it had 2,525 active loans with portfolio of RMB 107MM (EUR 12.9MM). Its loan quality was also quite good, with PAR >0 day and PAR >30 days being 0.54% and 0.44% respectively. The more exciting point was that it achieved profitability, with net result before tax and donation of RMB 1.9MM (EUR 228.7K).

a series of considerate adjustments and improvements, the company succeeded in building up a clear governance structure and thus lowered down the staff turnover rate and successfully obtained 50% leverage from China Development Bank. Furthermore, MicroCred Sichuan he lp e d M ic ro Cre d Nanchong to achieve portfolio growth through Agency Loan Model and achieved fast geographic expansion by the end of the year.

The more exciting point was that it achieved profitability, with net result before tax and donation of

RMB 1.9MM (EUR 228.7K)

At the beginning of the year, MicroCred Sichuan faced challenges of high staff turnover, low productivity and profitability. After

As Chief Executive Officer, I am proud of the achievements. I would like to thank all our shareholders and our staff for their support and their motivation.

"After a series of considerate adjustments and improvements, the company succeeded in building up a clear governance structure and thus lowered down the staff turnover rate."

12


MicroCred Sichuan Highlights 2012 MicroCred Sichuan experienced fast growth in 2012 in its second year of operation in Chengdu. In this year, it made achievements not only in operations, but also in geographic expansion, funding, team stability and Social Performance Management (SPM) implementation.

OPERATION RESULTS In 2012, a total of 2,813 loans amounting to RMB 170MM (EUR 20MM) were disbursed, representing an increase of 80% and 84% respectively compared to last year. Its portfolio increased by 95% over the previous year and reached RMB 107MM (EUR 12.9MM). I had 2,525 active loans at year end, being 92% higher than it was in 2011. Though its operational results were much higher than the previous year, its loan quality remained at the same excellent level as before, with PAR >0 day being 0.54%.

GEOGRAPHIC EXPANSION In 2012, MicroCred Sichuan set up 3 new outlets, adding its total number of distribution points to be 6, covering clients not only in the city center of Chengdu, but also in more rural areas. All of these three outlets continued the small team structure of « 1 Outlet Manager + 1 Client Advisor + 4/5 Commercial Officers » and as a result, though the outlet number increased, total number of commercial officers of the company did not increase significantly, being only 3 more than it in 2011.

FUNDING To maintain its stable portfolio growth, MicroCred Sichuan used up its paid-in capital of RMB 100MM (EUR 12MM) and borrowed RMB 46MM (EUR 5.5 MM ) from China Development Bank at the leverage rate of 50%. With sufficient cash on hand, MicroCred Sichuan conducted in cooperating with MicroCred Nanchong via the called as Agency Loan Model, with which MicroCred Nanchong disbursed an extra 562 loans amounting to RMB 26MM (3MM). The successful operation of this cooperation model provided a good example for both companies to break through the funding limitations, without violating existing legal regulations, especially by way of cooperating with institutions outside MicroCred Group.

MicroCred China / Annual Report 2012

CO PRODUCTIVITY The substantial improvement of Commercial Officers productivity is another highlight in 2012. At the beginning of the year, impacted by the unclear operational management structure and the lack of experience of the Commercial Officers team, MicroCred Sichuan suffered low Commercial Officers productivity, being only 4 loan disbursements per Commercial Officers in January. By restructuring the operational management team and implementation of intensive training for Commercial Officers team and « one-week on-the-field practice » for new Commercial Officers, productivity increased to 10 loans disbursement per Commercial Officers at the end of the year, being 150% higher than the level at the beginning of the year.

SOCIAL PERFORMANCE MANAGEMENT IMPLEMENTATION In 2012, with the support of Social Performance Management (SPM) team at MicroCred Holding, MicroCred Sichuan successfully launched SPM in the company, with the main steps being: 1. modification of social mission and approval from board members; 2. publication of Social Responsibility Charter; 3. SPM training for all staff; 4. establishment social SPM indictors. With the full implementation of SPM, the company found a good balance between operational targets and company social responsibilities.

Outlook 2013 The priorities of MicroCred Sichuan in 2013 will be to achieve its operational and financial objectives as described in the Business Plan. The following actions will be taken.

GEOGRAPHIC EXPANSION At the end of 2012, MicroCred Sichuan had 6 distribution points, covering 2 city center districts, 1 outskirt district, 1 outskirt town and 1 outskirt County, and provided micro-loan and SME loan services to 2,813 clients, including both small business owners and farmers. To further extend its service coverage and to provide strong financial support to more clients outside the existing distribution network, the company will continue its efforts

of setting up new outlets in the Chengdu Urban area. The targeted locations will not only be city downtown areas, but also in the surrounding counties/county-level cities of Chengdu. These outlets will continue the small structure, meaning « one Outlet Manager + one Client Advisor + 4/5 Commercial Officers ». According to plan, two or three new outlets will be opened in 2013 to cover the counties and districts in the north and west part of Chengdu.

BREAKING-THROUGH FUNDING LIMITATION With paid-in capital of RMB 100MM (EUR 12MM) and loan borrowed from China Development Bank valued at RMB 46MM (EUR 5.5MM), MicroCred Sichuan does not have a short term funding shortage in 2013. But for its make sustainable operational growth, it requires strong funding support. Based on the successful experience with MicroCred Nanchong on the Agency Loan Model, MicroCred Sichuan will initiate a similar cooperation with Huixin Microcredit Company’s (MCC), a local MCC with registered capital of RMB 300MM (EUR 36MM). From this cooperation, it will get funding support valued at RMB 30MM (EUR 3.6MM) to support its loan disbursement, and then share profit with Huixin MCC. This action will break the funding constraints set by supervisory authorities and can provide sufficient support to the sustainable growth of the subsidiary.

PRODUCTIVITY IMPROVEMENT As last year, Commercial Officers will be requested to work within a limited area assigned by the company, so as to reduce the time spent on transportation. The structure of small and simple teams will be continued so as to improve the management efficiency of branch/outlet manager. Medium level Commercial Officers will be authorized to conduct loan evaluation, replacing the role of the previous coordinator and sharing the working load of branch/outlet managers. Remote working tool - laptop will be widely applied among medium level operational management team in order to offer flexible working place and time for them. Extra SME officers will be recruited to facilitate the development of SME loan disbursement in the company. The HR team will continue to carry out the strict policy of improving the general working capability of Commercial Officers.

13


2012 Management Report

2012 Management Report

Mr. Li Ping, Fruit Shop Owner Nanchong Mr. Li is running a small fruit shop with his wife since 2010. There are some other fruit shops nearby but only Mr. Li’s shop is busy with businesses. In 2011, Mr. Li planned to buy a mini-van for transporting fruits. He consulted the bank and was informed he could get a loan from bank but need his house as collateral. A few days later, Mr. Li discovered MicroCred Nanchong through advertisement and went to one branch for more details. “I told them I need a loan, but my time is limited. Two days after my visit to MicroCred Nanchong, I got a loan of RMB 50,000 from them!

14

It was very simple and fast. I didn’t even leave my shop during those two days!” Mr. Li bought a mini-van with the loan which improved his working efficiency to a great extent. In 2012, again with MicroCred Nanchong’s financial support, Mr. Li rent an ice storage to store more inventories. He plans to open the first branch in 2013. “I believe with the help of MicroCred, my plan will be realized soon.”

"I believe with the help of MicroCred, my plan will be realized soon"


2012 Management Report Both MicroCred Nanchong and MicroCred Sichuan recorded good performances in 2012: increase of +34% of loan portfolio for Nanchong and increase of +95% for Sichuan. GROSS LOAN PORTFOLIO

Introduction MicroCred China’s mission is to help both micro entrepreneurs and small and medium enterprises that are not fully served by the traditional banking sector boost their business, in an efficient and transparent way, creating a positive and measureable impact in their lives. Our business strategy remains the same; we are different from commercial banks and other MFIs in the sense that we very much care about social commitment. We achieve that through simple processes, comfortable and high quality service as well as a strong focus on long term partnerships with our clients.

HIGHLIGHTS 2012 MicroCred China’s subsidiary, MicroCred Sichuan, located in Chengdu, recorded its first annual profit for the year 2012 (in only its second full-year of operations). MicroCred Sichuan launched a client referral program to attract more clients MicroCred Sichuan received its first borrowing from CDB to further grow its portfolio Facing some funding constraints during the year, MicroCred Nanchong received the approval for foreign debt quota of RMB 200M at the end of the year that will enable it to access overseas funding in early 2013. The two subsidiaries disbursed a record of 1.434 loans in the month of December and ended the year with 12.268 active clients. MicroCred Sichuan increased the number of branches/outlets from 3 to 6. Both subsidiaries successfully cooperated in an agency model, whereby Nanchong disbursed and managed loans funded by Sichuan. This helped MicroCred Nanchong to further serve clients despite some funding constraints.

MicroCred China / Annual Report 2012

■■

■■

Socio-economic environment : GDP growth in China for 2012 was 7.8% and inflation (CPI) dropped to an annual rate of 2.6%, lowest in three years, both pointing to a deceleration of growth. The number of MicroCredCs in China increased rapidly to more than 6000, though still only focus on serving micro-entrepreneurs.

14,000

50,000,000 45,000,000

12,000

40,000,000 35,000,000

10,000

30,000,000

8,000

25,000,000 20,000,000

6,000

15,000,000

4,000

10,000,000

2,000

5,000,000

Asset and Liability Management Compared with 2011, total assets increased by HKD 100M to HKD 489M. As cash was further converted into portfolio (especially in MicroCred Sichuan), the combined Gross Loan Portfolio (GLP)/assets further increased to 94% as of December 2012, marking the highest level in MicroCred China’s history. Gross Loan Portfolio (GLP) in Nanchong reached RMB 269M, an increase of 34%. This was a slower growth rate than in the previous year, partly due to funding constraints. MicroCred Sichuan recorded strong Gross Loan Portfolio (GLP) growth of 95% during 2012, reaching RMB 106.8M by the end of the year.

0

1st 2nd 3rd 4th Quarter Quarter Quarter Quarter

0

Gross Outstanding Portfolio Actual Active Loans Actual

MicroCred Sichuan disbursed a total of 2.813 loans, with a total volume of RMB 170M in 2012. At the end of the year, the number of active loans stood at 2.525 active loans valued at RMB 106.8M. The average disbursed loan size remained close to RMB 60K as in the previous year. Average outstanding amount for microloans was RMB 28K, while the figure was RMB 149K for SME loans as of year-end. MicroCred Nanchong disbursed a total of 11.209 loans valued RMB 455.5M, an increase of 16% in number and 30% in volume over the previous year. MicroCred Nanchong ended the year with 9.743 active loans valued at RMB 269M. The average loan size (at disbursement) increased by 10% to RMB 40K, still considerably lower than in MicroCred Sichuan. At the end of the year, the average outstanding amount of microloans was RMB 19K, while the figure was RMB 128K for SME loans. There has again been significant growth compared to last year especially in MicroCred Sichuan and despite funding constraints in MicroCred Nanchong.

15


2012 Management Report PORTFOLIO QUALITY

LOAN DISTRIBUTION

Consolidated Risk coverage ratio (Loan Loss provisions/PAR > 30) was 107%, sufficient to cover potential losses. MicroCred Sichuan demonstrated continued sound credit risk control with the year-end PAR > 0 and PAR > 30 as low as 0.54% and 0.44%, respectively. Especially during the second half of the year PAR continuously decreased in all branches/outlets to similar low levels.

Construction Agriculture

1% 2%

Production

5%

Services

42%

41%

36 loans valued at RMB 983K were written off during the year and equaling a write-off ratio of 1.2% higher than forecasted. This was mainly attributed to the lack of stability and experience of the operational staff. After exhibiting low levels of PAR during 2011, MicroCred Nanchong was able to further lower PAR > 0 and PAR > 30 to 0.23% and 0.15%, respectively at the end of the year.

1%

Agriculture Others

4%

6% 12%

Trade

Production

55% 22%

Services

OTHER ASSETS

0.9% 0.8% 0.7% 0.6% 0.5% 0.4% 0.3% 1st Quarter

2nd Quarter

PAR > 0

3rd Quarter

4th Quarter

PAR > 30

The table above shows the combined data for Nanchong and Sichuan in terms of Portfolio quality. PAR > 0 shows a downward trend from already low levels during the course of the year, leading followed by PAR >30 days. The consolidated average reached its lowest levels at the end of the year, at 0.3% for PAR > 0 day and 0.2% for PAR > 30 day.

16

Trade

Construction

For Nanchong 136 loans valued at RMB 1.8M were written off during the year, a writoff ratio of 0.78%. Furthermore, MicroCred Nanchong was successful at recovering about a third of written-off loans.

0.2%

Others

8%

- Interest receivable for portfolio was RMB 2.7M in Nanchong and RMB 1.4M in Sichuan. - Deferred taxes of RMB 510K were recognized according to IFRS adjustment on commissions in Nanchong, while deferred tax of RMB 2M was recognized as operations loss according to IFRS in Sichuan. - Accounts receivable and other assets are composed of rent and insurance paid in advance, loans to commercial officer to buy motorcycle, deposit for office rent etc. It is the same in both locations. - Net fixed assets: Net fixed assets (computer, office equipment, minibus, etc.) slightly decreased to RMB 558K (net after depreciation) in Nanchong and increased to RMB 721K (net after depreciation) in Sichuan. - Intangible assets: including accounting software, back-up software required for disaster recovery, and T24 implementation cost. - Other long term assets (office renovation after amortization etc.,) were RMB 1.4M in Sichuan and RMB 287K in Nanchong.


2012 Management Report EQUITY AND LIABILITIES In Sichuan, total equity is RMB 94M (with RMB 100M of paid-in capital minus RMB 6M as accumulated loss) and total liability is RMB 52MM (including RMB 46M from CDB and RMB 6M of accounts payable). Accounts payable is composed of TA payable to MicroCred Holding, tax payable, accrued salary and bonus payable to staff, accrued audit fee and received commission which will be amortized in loan term. In Nanchong, total equity is RMB 128M (with RMB 100M of paid-in capital and RMB 28M of retained earnings) and total liability is RMB 123M (including RMB 113M from CDB and BNPP, and RMB 9.9M of accounts payable). Accounts payable is composed of payables to tax authority, MicroCred S.A., accrued personnel cost and Amortization of fee and commission in the period of loan granted, etc.

FUNDING STRUCTURE

The consolidated average reached its lowest levels at the end of the year, at 0.3% for PAR > 0 day and 0.2% for PAR > 30 day.

Overall, leverage limitations for Microcredit Company’s remain very conservative in China, as exemplified by the 50% leverage rule. After receiving the approval from Sichuan Provincial FMP in 2011 to pilot 100% leverage, MicroCred Nanchong increased its debt funding from China Development Bank. Yet, during the course of 2012, MicroCred Nanchong was asked by China Development Bank to repay the outstanding loans to again abide by the 50% leverage rule, following related announcement by CBRC. Facing a substantial funding constraint, MicroCred Nanchong applied for a Foreign Debt Quota that was approved in December 2012 and enables the company to draw funding from overseas sources of up to RMB 200M. For MicroCred Nanchong, debt funding at the end of the year stood at RMB 113,5M, which comes from CDB (RMB 98.5M) and BMPP (RMB 15M). For MicroCred Sichuan debt funding at the end of the year amounted to RMB 46M, all from CDB.

MicroCred China / Annual Report 2012

Below graphs show the funding structure of Nanchong and Sichuan: 100% 80% 60%

Equity

40% 20% 0%

100% 80% 60%

Equity

40% 20% 0%

MicroCred Sichuan has also applied for the Foreign Debt Quota (approved in early 2013) to expand its funding options and leverage beyond the limit of 50% of equity.Efficiency and Profitability

INSTITUTION MAIN P&L ITEMS MicroCred Nanchong generated total financial revenue of RMB 53.8M, which composed of income of RMB 53.5M from loan portfolio and income of RMB 188K from cash deposited in bank, MicroCred Nanchong generated fees and commissions on agency model of RMB 163K in December. MicroCred Sichuan generated total financial revenue of RMB 21M, in which 98% comes from portfolio and 2% comes from cash deposit in bank. For both institutions, income from loan portfolio includes interest, commission fee from borrowers and penalty.

17


2012 Management Report Below split for Nanchong and Sichuan: Penalty

2%

Commission

7%

91% Interest

Penalty

1%

Commission

19%

FINANCIAL EXPENSES:

NET RESULTS

In 2012, financial expenses of MicroCred Nanchong are caused by Interest paid on borrowings, bank fees and exchange gain/ loss. Interest paid on borrowings was RMB 8MM. Bank fees amounted to RMB 86K Exchange gain/loss: exchange gain of RMB 13K was recorded.

MicroCred Nanchong ended the year with operational gains of RMB 17.4M, which is 59% more than last year.

In 2012, MicroCred Sichuan received borrowing of RMB 46M from CDB starting from October. Interest rate is 7.38% p.a. (monthly accrued and quarterly paid). Total financial expense is RMB 685K: 1. RMB 298K is paid to MicroCred Nanchong as management fee for agent loan (all revenue from agent loans booked in MicroCred Sichuan accounts after deducting funding costs was transferred to MicroCred Nanchong). 1. RMB 388K is finance cost paid to CDB for borrowing. In which, RMB 235K is paid by Nanchong as above mentioned (reverse to the other revenue).

OPERATIONAL EXPENSES 80% Interest

The biggest part of portfolio revenue comes from interest in both cases. For both cases, interest was booked under EIR basis. As per commissions, 7% and 19% of portfolio revenue respectively came from those and penalty income (charged on arrear days) was 2% and 1% respectively.

18

MicroCred Nanchong Personnel expenses accounted for 52% of total operational expenses while general expenses were 45%. MicroCred Sichuan Personnel expenses accounted for 51% of total operational expenses while general expenses is accounted for 46% of total operation expenses.

Without any subsidy from shareholders (as was the case with MicroCred Nanchong), MicroCred Sichuan earned a profit of RMB 1.82M in its second year of operation.

MicroCred Nanchong ended the year with operational gains of RMB 17.4M, which is 59% more than last year. Branch network and branch profitability At the end of year MicroCred China has a total of 15 outlets, 9 in MicroCred Nanchong and 6 in MicroCred Sichuan. MicroCred Nanchong All the service points in Nanchong were profitable. Details are as follows:

Operational Selfsufficiency (Direct Cost)

Operational Selfsufficiency (Direct Cost + Indirect Cost)

Jialing

256%

126%

Yingshan

350%

145%

Nanbu

377%

156%

Langzhong

353%

146%

Pengan

257%

114%

Xichong

325%

132%

Gaoping

319%

138%

Shunqing

325%

149%

Yilong

281%

117%

YTD OSS


2012 Management Report Except for the newly opened branch/outlet of Longquan (opened at the end of Nov.), the first 5 branches/outlets are fully cover their direct cost. Except for Huayang, 4 established branches/outlets can cover the indirect cost distributed from HQ.

Human Resources

Outlook 2013

SICHUAN MicroCred Sichuan ended the year with 75 staff, of which 47% were Commercial Officers. MicroCred Sichuan experienced a relatively high turn-over rate during the second and third quarter of the year, bringing the cumulative turnover rate to 46% for the year. The Commercial Officer team increased in quality and quantity during the year, with the number of intermediate Commercial Officers (CO’s managing more than 100 clients) rising from 0 to 14, accounting for 40% of the total number. This development has considerably elevated the capabilities of the team. 9% 8% 7% 6% 5% 4% 3% 2% 1% 0%

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Monthly Turn-over rate Cumulated Turn-over rate

NANCHONG 50% 45% 40% 35%

--

--

--

--

Both MicroCred Nanchong and Sichuan will seek new off-shore funding via the Foreign Debt Quota to fund the continued expansion of the business; Introduction of a Credit Line product in MicroCred Sichuan; Client referral program will be launched in MicroCred Sichuan; Further integration of Social Performance Management indicators in the operations of MicroCred Nanchong.

Social Performance MicroCred China is one of a few microfinance institutions in China working on actual micro finance. Being awarded Best Social Responsible MicroCred Company’s in China for two consecutive years, MicroCred China is always thinking how to do better and do more to our clients. During the year of 2012, social performance management (SPM) is one of the key words for MicroCred China.

MODIFICATION OF SOCIAL MISSION MicroCred China’s initial social mission was set in 2007 when its first affiliate – MicroCred Nanchong opened. During the past five years, finance sector in China is having significant changes. In 2012, with the guideline of MicroCred Holding, MicroCred China modified its social mission to make it more accurate, practical, and completed. Initial mission: « To provide financial services to farmers, private business owners, or micro and small entrepreneurs unserved or underserved by the traditional financial sector in an attempt to make contribution to local economic development and improve living condition of clients. »

30% 25% 20% 15% 10% 5% 0%

MicroCred Nanchong ended the year with a total of 122 staff, of which 63 were Commercial Officers (CO). Of the 63 Commercial Officers (CO), 63% of them reached intermediate or senior levels, further improving the overall skills and experiences of the team.

1st Quarter

2nd Quarter

3rd Quarter

Modified mission: “To provide qualitative financial services that are accessible and adapted to the needs of the individuals that are underserved and unserved by the financial sector, particularly the micro, small and medium entrepreneurs. Its objective is to improve the living conditions of clients and their families, and to contribute to the development of local economy. MicroCred China is also committed to implementing a fair human resources policy while respecting the environment it operates in.”

PUBLISHING OF SOCIAL RESPONSIBILITY CHARTER Social Responsibility Charter, created by MicroCred Group, is the general standards for all MicroCred affiliates to comply with. The Charter includes MicroCred Social Responsibility Policy, Annex 1 – Anti Harassment Policy Principles and Procedures, Annex 2 – Recovery Code of Conduct, Annex 3 – Microfinance Client Protection Principles (Smart Campaign), Annex 4 – MicroCred: Social Performance Management Policy Objectives and Content, Annex 5 – IFC Exclusion List, Annex 6 – Code of Ethics of PlaNet Finance Group. It was translated into Chinese and printed into brochures. Every employee of MicroCred China has a copy and signs after careful reading and full understanding.

STAFF TRAINING ON SPM Most of the clients get their first impressions on MicroCred through our staff. Thus, to make all the employees understand correctly the concept of Social Performance Management (SPM) and actions is crucial. MicroCred China has spent three months to design and revise its training materials. By the end of September, all staff has received trainings on Social Performance Management (SPM), Client Protection Principles (CPPs), Code of Conduct and MicroCred Social Responsibility Charter. We believe that Social Performance Management (SPM) is not on the side of operations, it is a new logic to insert into operations.

4th Quarter

Monthly Turn-over rate Cumulated Turn-over rate

MicroCred China / Annual Report 2012

19


2012 Management Report ESTABLISHMENT OF SOCIAL INDICATORS As described in its new mission, MicroCred China is serving five groups of people – shareholder, client, staff, community of environment. And social indicator is a method to assess its performance on social responsibility. During June’s Board, Board Directors of MicroCred China approved the proposed social indicators unanimously. These indicators have covered many aspects, such as client retention, client business growth, contribution to local community, staff turnover, training, service, etc. The final implementation of social indicators into MIS will take place at the beginning of 2013, which means MicroCred China is able to publish its social performance in figures next year.

Social Indicators of MicroCred China Speed

90% of loans were disbursed in less than 3 days in the last 3 months

Client retention

In the last 12 months, 60 % of borrowers are granted a new loan less than 6 months after the repayment of their previous loan 30% of the new borrowers never had a relationship with a financial institution before MicroCred in the last 12 months

Outreach Client business growth

40% of the borrowers financed increase the turnover of their activity(ies) by 10% every year.

Employment rate

15% of clients increase the number of their employees by 20% after 2 years

Environment

0% of the clients classified A, Maximum 30% of the clients classified B; Minimum 70% of the clients classified C

Staff training

90% of the employees are trained each year

Staff turnover

Maximum 30% of staff rotation rate per year

KEY FIGURES:

20

56

100%

16

job positions created

employees received trainings

service points

12K

300

low income persons received financial service from MicroCred

towns and villages in Chengdu and Nanchong


2012 Management Report

MicroCred China / Annual Report 2012

21


Report of the Directors The directors have pleasure in submitting their annual report together with the audited financial statements for the year ended 31 December 2012.

There being no provision in the Company’s articles of association in connection with the retirement of directors, all existing directors continue in office for the following year.

PRINCIPAL PLACE OF BUSINESS

At no time during the year was the Company, or any of its holding company or fellow subsidiaries a party to any arrangement to enable the 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.

MicroCred China Limited (the “Company”) is a limited liability company incorporated and domiciled in Hong Kong and has its registered office and principal place of business at 9th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong.

PRINCIPAL ACTIVITIES The principal activity of the Company is investment holding. The principal activities and other particulars of its subsidiaries are set out in Note 8 to the financial statements.

Financial Statements

FINANCIAL STATEMENTS The profit of the Company and its subsidiaries (the Group) for the year ended 31 December 2012 and the state of the Company’s and the Group’s affairs as at that date are set out in the financial statements on pages 5 to 53.

TRANSFER TO REVERSES Profits attributable to shareholders, before dividends, of HKD 22,794,797 (2011: HKD 6,987,594) have been transferred to reserves. Other movements in reserves are set out in the consolidated statement of changes in equity. No dividend was declared and paid during the year (2011: Nil).

FIXED ASSETS Details of the movements in fixed assets are set out in Note 6 to the financial statements.

SHARE CAPITAL Details of the movements in share capital of the Company during the year are set out in Note 14 to the financial statements.

DIRECTORS The directors during the year and up to the date of this report were: -- Arnaud Ventura -- Isabelle Dominique Marie Levard -- Dirk Karl Johannes Steinwand -- Fernanda Lima -- Joel Epstein (appointed on 26 September 2012) -- Jeff Duane Ferry (resigned on 26 September 2012) -- Alain, Patrick Soulard (resigned on 26 September 2012)

22

No contract of significance to which the Company, or any of its holding company or fellow subsidiaries was a party, and in which a director of the Company had a material interest, subsisted at the end of the year or at any time during the year.

AUDITORS KPMG retire and, being eligible, offer themselves for re-appointment. A resolution for the re-appointment of KPMG as auditors of the Company is to be proposed at the forthcoming Annual General Meeting.

By order of the Board Hong Kong Bruno DAUPHINE


Independent auditor’s report to the shareholders of MicroCred China Limited We have audited the consolidated financial statements of MicroCred China Limited (the “Company”) and its subsidiaries (together the “Group”) set out on pages 5 to 53 which comprise the consolidated and Company statements of financial position as at 31 December 2012, and the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended and a summary of significant accounting policies and other explanatory information.

DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board and the Hong Kong Companies Ordinance and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

AUDITOR’S RESPONSIBILITY Our responsibility is to express an opinion on these consolidated financial statements based on our audit. This report is made solely to you, as a body, in accordance with section 141 of the Hong Kong Companies Ordinance, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

MicroCred Madagascar China / Annual/ Report Rapport 2012 annuel 2012

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2012 and of the Group’s profit and cash flows for the year then ended in accordance with International Financial Reporting Standards and have been properly prepared in accordance with the Hong Kong Companies Ordinance.

Certified Public Accountants 8th Floor, Prince’s Building 10 Chater Road Central, Hong Kong

23


Financial Statements MicroCred China Limited Consolidated statement of financial position (Expressed in Hong Kong dollar)

Assets Assets

Note

2012

2011

Cash at bank hand on hand

4

9,890,838

58,236,605

Loans and advances - to customers

 5

464,963,128

311,746,708

Interest receivable

 

5,002,136

3,353,179

Fixed assets

1,569,888

1,374,471

Intangible assets

1,169,331

1,550,572

Deferred tax assets

9(b)

3,035,362

3,651,325

Other assets

10 

3,569,169

3,913,555

Total assets

 

489,199,852

383,826,415

Note

2012

2011

Loans and borrowings

11

195,738,400

119,074,949

Employee benefits payable

12

3,159,995

2,220,835

Interest payable

 

936,801

582,559

4,127,478

3,250,938

Liabilities Liabilities

Taxes payable

9(a) 

Other liabilities

13 

11,574,137

9,162,856

Total Liabilities

 

215,536,811

134,292,137

Note

2012

2011

14

230,000,000

230,000,000

18,050,350

14,584,530

25,612,691

4,949,748

273,663,041

249,534,278

489,199,852

383,826,415

Equity Share capital Reserves Retained earnings

 

Equity attributable to owners of the Company Total liabilities and equity

24

 


Financial Statements MicroCred China Limited Statement of financial position (Expressed in Hong Kong dollar)

Assets Assets Cash at bank and on hand

Note

2012

2011

4

392,050

1,049,869

Investment in subsidiaries

 8

229,106,062

226,107,458

Other assets

10 

100,800

1,220,642

Total assets

 

229,598,912

228,377,969

Note

2012

2011

11

-

3,117,949

9,685

-

 

230,246

340,373

-

61,072

Liabilities Liabilities Loans and borrowings Employee benefits payable Interest payable Taxes payable

9(a) 

Other liabilities

13 

76,655

858,215

Total Liabilities

 

316,586

4,377,609

Note

2012

2011

Share capital

14

230,000,000

230,000,000

Accumulated losses

14

(717,674)

(5,999,640)

Equity attributable to owners of the Company

 

229,282,326

224,000,360

Total liabilities and equity

 

229,598,912

228,377,969

Equity

MicroCred China / Annual Report 2012

25


Financial Statements MicroCred China Limited Consolidated statement of comprehensive income (Expressed in Hong Kong dollar)

Interest income Interest income

Note

Interest income Interest expenses Net interest income Fees and commission income

Operating income

52,942,027

(10,507,044)

(5,081,788) 47,860,239

 

9,279,904

3,182,518

(162,292)

(880,999)

9,117,612

2,301,519

28,299

(2,996,370)

 

846,917

9,189

18 

 

82,758,821

47,174,577

Business tax and surcharges

 19

(4,947,596)

(3,285,097)

General and administrative expenses

20

(44,731,123)

(35,332,914)

(Provision)/reversal of impairment losses

21

(2,618,323)

91,891

Operating expenses

 

(52,297,042)

(38,526,120)

30,461,779

8,648,457

Profit before taxation Less: Income tax expense

22 

(7,666,982)

(1,660,863)

22,794,797

6,987,594

 23

1,333,966

8,386,272

 

24,128,763

15,373,866

Net profit for the year Other comprehensive income Total comprehensive income for the year

26

83,273,037 72,765,993

Exchange gains/(losses) Other operating income

2011

 17

Fees and commission expenses Net fees and commission income

2012


Financial Statements MicroCred China Limited Consolidated statement of changes in equity (Expressed in Hong Kong dollar)

Assets Note

Share Capital

Surplus reserve

Translation reserve

Retained earnings/ (accumulated losses)

Total

Balance at 1 January 2011

 

230,000,000

458,130

4,424,734

(722,452)

234,160,412

Changes in equity for 2011

  -

-

-

6,987,594

6,987,594

Profit for the year Other comprehensive income

23 

-

-

8,386,272

-

8,386,272

Total comprehensive income

 

-

-

8,386,272

6,987,594

15,373,866

15

-

1,315,394

-

(1,315,394)

-

Balance at 31 December 2011 / 1 January 2012

 

230,000,000

1,773,524

12,811,006

4,949,748

249,534,278

Changes in equity for 2012

 

Profit for the year

 

-

-

-

22,794,797

22,794,797

Other comprehensive income

23

-

-

1,333,966

-

1,333,966

-

-

1,333,966

22,794,797

24,128,763

Appropriations to statutory surplus reserve

Total comprehensive income Appropriations to statutory surplus reserve

15

-

2,131,854

-

(2,131,854)

-

Balance at 31 December 2012

 

230,000,000

3,905,378

14,144,972

25,612,691

273,663,041

The notes on pages 12 to 53 are an integral part of these financial statements.

MicroCred China / Annual Report 2012

27


Financial Statements MicroCred China Limited Consolidated statement of cash flows (Expressed in Hong Kong dollar) 2012

2011

 22,794,797

6,987,594

Provision/(reversal) of impairment losses

2,618,323

(91,891 )

Depreciation of fixed as sets

 550,608

405,047

Amortisation of intangible assets

389,689

288,394

Amortisation of long-term deferred expenses

477,068

353,409

 7,866

9,357

Net interest income

 (72,765,993)

(47,860,239)

Income tax expense

7,666,982

1,660,863

Cash flows from operating activities Profit for the year Adjustments for:

Losses on disposaI of fixed assets and intangible assets

Gain on changes in foreign exchange rate Change in loans and advances to customers Change in loans and borrowings Change in employee benefits payable Change in other operating assets Change in other operating liabilities Interest received Interest paid

(133,374)

(717,723)

 (38,394,034)

(38,965,189)

(153,155,558)

(153,762,886)

 76,663,451

67,176,949

939,160

1,746,493

(1,764,091)

(529,153)

3,745,247 

11,041,327

 (111,965,825)

(113,292,459)

81,624,080

51,414,143

 (10,152,802)

(4,591,128)

(6,154,631)

(3,703,481)

(46,649,178) 

(70,172,925)

12,519

-

Acquisition of fixed assets, intangible assets and long-term deferred expenses

 (1,842,482)

(4,008,249)

Net cash used in investing activities

(1,829,963)

(4,008,249)

Net decrease in cash and cash equivalents

(48,479,141)

(74,181,174)

Cash and cash equivalents at 1 January

58,236,605

131,700,056

Effect of foreign exchange rate changes on cash and cash equivalents

133,374

717,723

9,890,838

58,236,605

Income tax paid Net cash used in operating activities Cash flows from investing activities DisposaI of fixed assets, intangible assets and long-term deferred expenses

Cash and cash equivalents at 31 December

The notes on pages 12 to 53 are an integral part of these financial statements.

28


Financial Statements MicroCred China Limited Notes to the financial statements (Expressed in Hong Kong dollar) 1. REPORTING ENTITY MicroCred China Limited (the «Company») is a limited liability company domiciled and incorporated in Hong Kong. The address of its registered office is 9th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong. The ultimate holding company is MicroCred S.A. which is incorporated in France and has produced financial statements available for public use. The consolidated financial statements of the Company as at and for the year ended 31 December 2012 comprise the Company and its subsidiaries (together referred to as the «Group» and individually as «Group entities»). The principal activity of the Company is investment holding. The principal activities of its subsidiaries are granting loans and providing loan related consulting services.

2. BASIS OF PREPARATION 1. Statement of compliance These financial statements have been prepared in accordance with all applicable International Financial Reporting Standards («IFRSs») issued by the International Accounting Standards Board («IASB»), which collective term includes all applicable individual International Financial Reporting Standards, International Accounting Standards («IASs») and Interpretations issued by the IASB. These financial statements also comply with the requirements of the Hong Kong Companies Ordinance. A summary of the significant accounting policies adopted by the Group is set out in Note 3 below. 2. Accounting year The accounting year of the Group is from 1 January to 31 December. 3. Basis of measurement The financial statements have been prepared on the historical cost basis. 4. Functional and presentation currency These financial statements are presented in Hong Kong dollar, which is the Company’s functional currency, except when otherwise indicated.

MicroCred China / Annual Report 2012

3. SIGNIFICANT ACCOUNTING POLIDES 1. Basis of consolidation i. Business combinations Business combinations are accounted for using the acquisition method as at the acquisition date - i.e. when control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In accessing control, the Group takes into consideration potential voting rights that are currently exercisable. The Group measures goodwill at the acquisition date as: -- the fair value of the consideration transferred; plus -- the recognised amount of any non-controlling interests in the acquiree; plus -- if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less -- the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gam is recognised immediately in profit or loss. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss. If share-based payment awards (replacement awards) are required to be exchanged for awards held by acquiree’s employees (acquiree’s awards) and relate to past services, then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based value of the replacement awards compared with the market-based value of the acquiree’s awards and the extent to which the replacement awards relate to past and/or future service.

29


Financial Statements ii. Subsidiaries Subsidiaries are entities control!ed by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. In the Company’s statement of financial position, investment in subsidiaries is stated at cost less impairment losses (see Note 3(8)(b)). iii. Loss of control On the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently that retained interest is accounted for as an equity-accounted investee or as an availablefor-sale financial asset depending on the level of influence retained. iv. Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. 2. Foreign currency i. Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year. Non-monetary assets and liabilities that are measured at fair value in a foreign currency

30

are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Foreign cunency differences arising on retranslation are generally recognised in profit or loss. However, foreign currency differences arising from the retranslation of the following items are recognised in other comprehensive income: -- available-for-sale equity investments (except on impairment in which case foreign currency differences that have been recognised in other comprehensive income are reclassified to profit or loss); -- a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or -- qualifying cash flow hedges to the extent the hedge is effective. ii. Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to Hong Kong dollar at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Hong Kong dollar at exchange rates at the dates of the transactions. Foreign currency differences are recognised in other comprehensive income, and presented in the foreign currency translation reserve (translation reserve) in equity. However, if the foreign operation is a non-wholly owned subsidiary, then the relevant proportion of the translation difference is allocated to non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposa!. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor Iikely in the foreseeable future, foreign currency gains and losses arising from such item are considered to form part of the net investment in the foreign operation and are recognised in

other comprehensive income, and presented in the translation reserve in equity. 3. Cash and cash equivalents Cash and cash equivalents comprise cash on hand, demand deposits, and short-term, highly liquid investments, which are readily convertible into known amounts of cash and are subject to an insignificant risk of change in value. 4. Fixed assets Fixed assets represent the tangible assets held by the Group for administrative purposes with useful lives over one year. Fixed assets are stated at cost less accumulated depreciation and impairment losses (see Note 3(8)(b)). The cost of a purchased fixed asset comprises the purchase price, related taxes, and any directly attributable expenditure for bringing the asset to working condition for its intended use. The cost of self-constructed assets includes the cost of materials, direct labour, capitalised borrowing costs, and any other costs directly attributable to bringing the asset to working condition for its intended use. Where the parts of an item of fixed assets have different useful lives or provide benefits to the Group in a different pattern, thus necessitating use of different depreciation rates or methods, each part is recognised as a separate fixed asset. The subsequent costs including the cost of replacing part of an item of fixed assets are recognised in the carrying amount of the item if the criteria to recognise fixed assets are satisfied, and the carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of fixed assets are recognised in profit or loss as incurred. Gains or losses arising from the retirement or disposaI of an item of fixed asset are determined as the difference between the net disposai proceeds and the carrying amount of the item and are recognised in profit or loss on the date of retirement or disposaI. The cost of fixed assets, less its estimated residual value and accumulated impairment losses, is depreciated using the straight-line method over its estimated usefullife, unless the fixed asset is classified as held for sale.


Financial Statements The estimated useful lives, residual value rates and depreciation rates of each class of fixed assets are as follows: Estimated usefullife

Residual value rate

Depreciation rate

Motor vehicles

4 years

10%

22.5%

Office & other equipment

3-5 years

10%

18% ~30%

Useful lives, residual values and depreciation methods are reviewed at least at each year-end. 5. Operating lease charges RentaI payments under operating leases are recognised as costs or expenses on a straightline basis over the lease term. 6. Intangible assets Intangible assets are stated at cost less accumulated amortisation (where the estimated useful life is finite) and impairment losses (see Note 3(8)(b)). For an intangible asset with finite useful life, its cost less estimated residual value and accumulated impairment losses is amortised on the straight-line method over its estimated useful life, unless the intangible asset is classified as held for sale. The respective amortisation periods for such intangible assets are as follows: Amortisation period Computer software

3-5 years

7. Financial instruments Financial instruments include cash at bank and on hand, interest receivable, loans and advances to customers, loans and borrowings and share capital. a. Recognition and measurement of financial assets and financial liabilities A financial asset or financial liability is recognised when the Group becomes a party to the contractual provisions of a financial instrument. The Group classifies financial assets and liabilities into different categories at initial recognition based on the purpose of acquiring assets or assuming liabilities: loans and receivables, and other financial liabilities. Financial assets and financial liabilities are

MicroCred China / Annual Report 2012

measured initially at fair value. For financial assets and financial liabilities at fair value through profit or loss, any related directly attributable transaction costs are charged to profit or loss; for other categories of financial assets and financial liabilities, any related directly attributable transaction costs are included in their initial costs. Subsequent to initial recognition, financial assets and financial liabilities are measured as follows: -- Loans and receivables : -- Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. -- Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. -- Other financial liabilities -- Financial liabilities, other than the financial liabilities at fair value through profit or loss, are classified as other financial liabilities. -- Subsequent to initial recognition, other financial liabilities are measured at amortised cost using the effective interest method. b. Derecognition of financial assets and financial liabilities A financial asset is derecognised if the Group’s contractual rights to the cash flows from the financial asset expire or if the Group transfers substantially all the risks and rewards of ownership of the financial asset to another party. Where a transfer of a financial asset in its entirety meets the criteria for derecognition, the difference between the two amounts below is recognised in profit or loss: -- the carrying amount of the financial asset transferred -- the sum of the consideration received from the transfer and any cumulative gain or loss that has been recognised directly in equity. -- The Group derecognises a financial liability (or part of it) only when the underlying present obligation (or part of it) is discharged, cancelled or expires. c. Equity instrument An equity instrument is a contract that proves the ownership interest of the assets after deducting allliabilities in the Group. The consideration received from the issuance of equity instruments net of transaction costs is recognised in owners’ equity.

8. Impairment of assets a. Impairment of financial assets The carrying amounts of financial assets (other than those at fair value through profit or loss) are reviewed at each reporting date to determine whether there is objective evidence of impairment. If any such evidence exists, an impairment loss is recognised. -- Loans and receivables Loans and receivables are assessed for impairment both on an individual basis and on a collective group basis.

Where impairment is assessed on an individual basis, an impairment loss in respect of a receivable is calculated as the excess of its carrying amount over the present value of the estimated future cash flows (exclusive of future credit losses that have not been incurred) discounted at the original effective interest rate. All impairment losses are recognised in profit or loss. The assessment is made collectively where loans and receivables share similar credit risk characteristics (including those having not been individually assessed as impaired), based on their historical loss experiences, and adjusted by the observable factors reflecting present economic conditions. If, after an impairment loss has been recognised on loans and receivables, there is objective evidence of a recovery in value of the financial asset which can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss. A reversaI of an impairment loss will not result in the asset’s carrying amount exceeding what the amortised cost would have been had no impairment loss been recognised in prior years. b. Impairment of other assets The carrying amounts of the following assets are reviewed at each reporting date based on the internaI and external sources of information to determine whether there is any indication of impairment: -- fixed assets -- intangible assets -- other assets -- investment in subsidiaries If any indication exists that an asset may be impaired, the recoverable amount of the asset

31


Financial Statements is estimated. In addition, the Group estimates the recoverable amount of intangible assets not ready for use at least once during each year. An asset group is the smal!est identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or asset groups. An asset group is composed of assets directly relating to cash-generation. Identification of an asset group is based on whether major cash inflows generated by the asset group are largely independent of the cash inflows from other assets or asset groups. In identifying an asset group, the Group also considers how management monitors the Group’s operations and how management makes decisions about continuing or disposing ofthe Group’s assets. The recoverable amount of an asset, asset group or set of asset groups is the higher of its fair value less costs to sel! and ils present value of expected future cash flows. An asset’s fair value less costs to sell is the amount determined by the price of a sale agreement in an arm’s length transaction, less the costs that are directly attributable to the disposaI of the asset. The present value of expected future cash flows of an asset is determined by discounting the future cash flows, estimated to be derived from continuing use of the asset and from its ultimate disposaI, to their present value using an appropriate pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the result of the recoverable amount calculation indicates the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is recognised as an impairment loss and charged to profit or loss for the current period. A provision for impairment of the asset is recognised accordingly. 9. Employee benefits Salaries, annual bonuses, paid annual leave and contributions to defined contribution retirement plans are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

32

10. Income tax Current tax and deferred tax are recognised in profit or loss except to the extent that they relate to a business combination or items recognised directly in equity (including other comprehensive income). Current tax is the expected tax payable calculated at the applicable tax rate on taxable income for the year, plus any adjustment to tax payable in respect of previous years. At the reporting date, current tax assets and liabilities are offset if the Group has a legally enforceable right to set them off and also intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases, which include the deductible losses and tax credits carried forward to subsequent periods. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which deductible temporary differences can be utilised. At the reporting date, the amount of deferred tax recognised is measured based on the expected manner of recovery or settlement of the carrying amount of the assets and liabilities, using tax rates that are expected to be applied in the period when the asset is recovered or the Iiability is settled in accordance with tax laws. The carrying amount of a deferred tax asset is reviewed at each reporting date. The carrying amount of a deferred tax asset is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the benefit of the deferred tax asset to be utilised. Such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available. At the reporting date, deferred tax assets and liabilities are offset if all the following conditions are met: -- the taxable entity has a legally enforceable right to offset current tax liabilities and assets, and -- they relate to income taxes levied by the same tax authority on either:

---

the same taxable entity; or different taxable entities which intend either to settle the current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

11. Provisions and contingent liabilities A provision is recognised for an obligation related to a contingency if the Group has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to setlle the obligation. Where the effect of time value of money is material, provisions are determined by discounting the expected future cash flows. In terms of a possible obligation resulting from a past transaction or event, whose existence will only be confirmed by the occurrence or non-occurrence of uncertain future events or a present obligation resulting from a past transaction or event, where it is not probable that the settlement of the above obligation will cause an outflow of economic benefits, or the amount of the outflow cannot be estimated reliably, the possible or present obligation is disclosed as a contingent liability. 12. Revenue recognition Revenue is the gross inflow of economic benefit arrising in the course of the Group’s ordinary activities when those inflows result in increases in equity, other than increases relating to contributions from owners. Revenue is recognised in profit or loss when it is probable that the economic benefits will flow to the Group, the revenue and costs can be measured reliably and the following respective conditions are met: a. Interest income Interest income arising from the use by others of entity assets is recognised in profit or loss based on the duration and the effective interest rate. Interest income includes the amortisation of any discount or premium or differences between the initial carrying amount of an interest-bearing instrument and its amount at maturity calculated on an effective interest rate basis. The effective interest method is a method of calculating the amortised cost of financial assets and liabilities and of allocating the interest income and interest expenses over


Financial Statements the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument, or, when appropriate, a shorter period, to the net carrying amount of the financial instrument. When calculating the effective interest rate, the Group estimates cash flows considering all the contractual terms of the financial instrument (for example, prepayment, calI and similar options) but does not consider future credit losses. The calculation includes ail fees and points paid or received between parties to the contract that are an integral pmi of the effective interest rate, transaction costs and all other premiums or discounts. Interest on the impaired financial assets is recognised using the rate of interest used to discount future cash flows for the purpose of measuring the related impairment loss. b. Fees and commission income Fees and commission income is recognised in profit or loss when the corresponding service is provided. 13. Government grants Government grants are transfers of monetary assets or non-monetary assets from the government to the Group at no consideration. A government grant is recognised when there is reasonable assurance that the grant will be received and that the Group will comply with the conditions attaching to the grant. If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount that is received or receivable. If a government grant is in the form of a transfer of a non-monetary asset, it is measured at its fair value. A government grant related to an asset is recognised initially as deferred income and amortised to profit or loss on a straight-line basis over the useful life of the asset. A grant that compensates the Group for expenses to be incuned in the subsequent periods is recognised initially as deferred income and recognised in profit or loss in the same periods in which the expenses are recognised. A grant that compensates the Group for expenses incurred is recognised in profit or loss immediately.

MicroCred China / Annual Report 2012

14. Borrowing costs Borrowing costs incurred directly attributable to the acquisition or construction of a qualifying asset are capitalised as part of the cost of the asset. Except for the above, other borrowing costs are recognised as financial expenses when incurred. The effective interest rate is determined as the rate that exactly discounts estimated future cash flow through the expected life of the borrowing or, when appropriate, a shorter period to the initially recognised amount of the borrowings. Borrowing costs are recognised as financial expenses when incurred. 15. Related parties a. A person, or a close member of that person’s family, is related to the Group if that person: -- (i) has control or joint control over the Group; -- (ii) has significant influence over the Group; or -- (iii) is a member of the key management personnel of the Group or the Group’s parent.

--

--

--

--

--

--

--

b. An entity is related to the Group ifany ofthe following conditions applies: (i) The entity and the Group are members of the same Group (which means that each parent, subsidiary and fellow subsidiary is related to the others); (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a Group of which the other entity is a member); (iii) Both entities are joint ventures of the same third party; (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third party; (v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group; (vi) The entity is controlled or jointly controlled by a person indentified in 1.; (vii) A person identified in 1.a has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

16. Significant accounting estimates and judgments The preparation of financial statements requires management to make estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. a. Impairment of loans and advances The Group reviews the portfolios of loans and advances periodically to assess whether impairment losses exist and if they exist, the amounts of impairment losses. When loans and advances are collectively assessed for impairment, the estimate is based on historical loss experience for assets with credit risk characteristics similar to the loans and advances. Historical loss experience is adjusted on the basis of the relevant observable data that reflect current economic conditions. Management reviews the methodology and assumptions used in estimating future cash flows regularly to reduce any difference between estimated and actual losses. b. Impairment of assets such as fixed assets and intangible assets: As described in Note 3(8)(b), assets such as fixed assets and intangible assets are reviewed at each reporting date to determine whether the carrying amount exceeds the recoverable amount of the assets. If any such indication exists, an impairment loss is recognised. The recoverable amount of an asset (asset group) is the greater of its fair value less costs to sell and its present value of expected future cash flows. Since a market price of the asset (the asset group) cannot be obtained reliably, the fair value of the asset cannot be estimated reliably. In assessing value in use, significant judgments are exercised over the asset’s production, selling price, related operating expenses and discount rate to calculate the present value. All relevant materials which can be obtained are used for estimation of the recoverable amount, including the estimation of the production, selling price and related operating expenses based on reasonable and supportable assumptions.

33


Financial Statements c. Depreciation and amortisation of assets such as fixed assets and intangible assets As described in Note 3(4) and 3(6), fixed assets and intangible assets are depreciated and amortised over their useful lives after taking into account residual value. The useful lives of the assets are regularly reviewed to determine the depreciation and amortisation costs charged in each reporting period. The usefuI lives of the assets are determined based on historical experience of similar assets and the estimated technical changes. If there have been significant changes in the factors used to determine the depreciation or amortisation, the rate of depreciation or amortisation is revised prospectively.

4. CASH AT BANK AND ON HAND Note

d. Analysis by security type Note Unsecured loans

Demand deposits Total

26(2)

351,825,759

231,461,976

74,918,860

47,563,368

Secured loans

39,361,791

33,925,508

466,106,410

312,950,852

Total Less: Allowance for impairment losses

(f)

(1,143,282)

(1,204,144)

Total

 

464,963,128

311,746,708

e. Overdue loans analysed by overdue period

2012

2011

276,030

176,596

9,614,808

58,060,009

9,890,838

58,236,605

Overdue between Overdue 1 within 1 month month to 3 months

Overdue between 3 months to 6 months

Total

31 December 2012

The Company Demand deposits

392,050

1,049,869

5. LOANS AND ADVANCES TO CUSTOMERS Note

2012

2011

The Group Personal loans

291,844,005

220,980,446

Unsecured loans Guaranteed loans

 394,960

386,474

648,874

1,430,308

9,250

30,680

1,508

41,438

-

-

-

-

417,154

650,382

1,471,746

Secured loans Total

Small-and-medium sized enterprise loans

174,262,405

91,970,406

Total

466,106,410

312,950,852

Unsecured loans Guaranteed loans

 404,210

31 December 2011  271,772

464,846

699,616

1,436,234

8,053

12,246

268,552

288,851

-

-

52,409

52,409

279,825

477,092

1,020,577

1,777,494

Less: Allowance for impairment losses

(f)

(1,143,282)

(1,204,144)

Total

 

464,963,128

311,746,708

2012

2011

Commercial

200,200,535

220,980,446

Services

193,465,485

220,980,446

Manufacturing

36,063,321

91,970,406

Agriculture

36,377,069

91,970,406

Collective assessment:

Total

466,106,410

312,950,852

b. Analysis by industry sectors Note

Secured loans Total

Less: Allowance for impairment losses

(f)

(1,143,282)

(1,204,144)

Total

 

464,963,128

311,746,708

Overdue loans refer to loans, of which the whole or part of the principals or interest were overdue for more than one day. f. Movement of allowance for impairment losses 2012

2011

Opening balance

1,204,144

2,096,494

Provision/(reversal) for the year

2,618,323

(91,891)

720,483

354,902

(3,406,190)

(1,214,098)

Recoveries for the year Write-off for the year Effect of movements in exchange rates

c. Analysis by geographical sectors All loans and advances to customers were provided in Sichuan Province of the PRC.

34

2011

Guaranteed loans

The Group Cash on hand

2012

Ending balance

6,522

58,737

1,143,282

1,204,144


Financial Statements g. Rescheduled loans and advances to customers

Rescheduled loans and advances to customers Overdue rescheduled loans and advances to customers

2012

2011

904,690

280,836

87,986

52,436

h. As at 31 December 2012, loans and advances to customers amounting to HKD 219,649,281 (31 December 2011: HKD 163,045,401) were pledged as securities for the loans and borrowings of HKD 177,330,400 (31 December 2011: HKD 111,074,600) (Note 11).

6. FIXED ASSETS Motor vehicles

Office and other equipement

Total

At 1 January 2011

540,779

885,258

1,426,037

Additions

 257,353

591,717

849,070

DisposaIs

 -

(27,203)

(27,203)

22,717

39,344

62,061

820,849

1,489,116

2,309,965

Additions

 419,450

339,559

759,009

DisposaIs

 (48,835)

(19,638)

(68,473)

4,378

8,000

12,378

1,195,842

1,817,037

3,012,879

Cost 

Effect of movements in exchange rates At 31 December 2011

Effect of movements in exchange rates At 31 December 2012

Less: Accumulated depreciation At 1 January 2011

(107,189)

(417,011)

(524,200)

Charge for the year

 (126,098)

(278,949)

(405,047)

 -

17,846

17,846

(5,632)

(18,461)

(24,093)

At 31 December 2011

(238,919)

(696,575)

(935,494)

Charge for the year

(213,478)

(337,130)

(550,608)

Written back on disposaIs

34,795

13,293

48,088

Effect of movements in exchange rates

(1,263)

(3,714)

(4,977)

(418,865)

(1,024,126)

(1,442,991)

At 31 December 2011

 581,930

792,541

1,374,471

At 31 December 2012

 776,977

792,911

1,569,888

Written back on disposaIs Effect of movements in exchange rates

At 31 December 2012 Carrying amounts 

MicroCred China / Annual Report 2012

35


Financial Statements 7. INTANGIBLE ASSETS Computer software

The Group

9. INCOME TAX IN THE STATEMENT OF FINANCIAL POSITION a. Current taxation in the statement of financial position represents: 2012

Cost  At 1 January 2011

132,871

Additions

1,704,960

Effect of movements in exchange rates

30,293

At 31 December 2011

1,868,124

Effect of movements in exchange rates

10,101

At 31 December 2012

1,878,225

Less: Accumulated depreciation At 1 January 2011

(23,982)

Charge for the year

(288,394)

Effect of movements in exchange rates

(5,176)

At 31 December 2011

(317,552)

Charge for the year

(389,689)

Effect of movements in exchange rates

(1,653)

At 31 December 2012

(708,894)

Carrying amounts  At 31 December 2011

1,550,572

At 31 December 2012

1,169,331

The Group Withholding tax payable

-

61,072

Overseas profits tax payable

4,127,478

3,189,866

Total

4,127,478

3,250,938

-

61,072

The Company Withholding tax payable

The provision for Hong Kong profits tax for 31 December 2012 is calculated at 16,5% (31 December 2011: 16,5%) of the estimated assessable profits for the year. Taxation for overseas subsidiaries is charged at the appropriate current rates of taxation ruling in the relevant countries. b. Deferred tax assets and liabilities recognised: The components of deferred tax assets/(liabilities) recognised in the consolidated statement of financial position and the movements during the year are as follows: The Group

Opening balance

2012

2011

Unlisted shares, at cost

231,039,716

231,039,716

Allowance for impairment losses

(1,933,654)

(4,932,258)

Total

229,106,062 226,107,458 MicroCred Nanchong

Place of incorporation and operation Particulars of issued and paid up capital

Effect of Opening balance

Ending balance

MicroCred Sichuan

China 100,000,000 shares of RMB 1 each

Deferred income

902,741

(281,395)

4,927

626,273

Interest income

(192,404)

193,476

(1,072)

-

Tax losses

2,940,988

(394,160)

15,968

2,562,796

-

(153,732)

25

(153,707)

3,651,325

(635,811)

19,848

3,035,362

Government grant Total

31 December 2011 Deferred income

-

889,355

13,386

902,741

Interest income

-

(189,551)

(2,853)

(192,404)

Group’s effective Interest

100%

Tax losses

-

2,897,377

43,611

2,940,988

Held by the Company

100%

Government grant

-

-

-

-

Total

-

3,597,181

54,144

3,651,325

Principal activity

36

Charged to profit or loss

31 December 2012

8. INVESTMENT IN SUBSIDIARIES The Company

2011

Granting loans


Financial Statements 10. O  THER ASSETS 2012

2011

2,084,343

1,478,046

Prepaid rentaIs

749,904

716,362

The Group Leasehold improvements Deposits for operating leases

204,500

152,013

Prepaid insurance charges

184,990

102,005

Due from employees

183,024

509,055

Prepaid leasehold improvements

10,648

19,273

Others

151,760

936,801

3,569,169

3,913,555

100,800

1,220,642

Total The Company Withholding tax payable

11. LOANS AND BORROWINGS 2012

2011

Principal

Secured/ Unsecured/ Guaranteed

Principal

Secured/ Unsecured/ Guaranteed

China Development Bank

177,330,400

Secured

111,074,600

Secured

BNP Paribas

18,408,000

Unsecured

The Group

MicroCred S.A. Total

4,882,400

Unsecured

-

3,117,949

Unsecured

195,738,400

119,074,949

-

3.117.949

The Company MicroCred S.A.

Unsecured

Loans and borrowings from China Development Bank was secured by the Group’s loans and advances to customers (Note 5(h)).

12. EMPLOYEE BENEFITS PAYABLE The Group

Opening balance

Accrued during the year

Paid during the year

Effect of movements in exchange rates

Ending balance

31 December 2012 Salaries, bonuses and allowances Staff welfare and benefits Total

2,019,025

18,653,758

(17,905,182)

10,795

2,778,396

201,810

3,415,774

(3,237,049)

1,064

381,599

2,220,835

22,069,532

(21,142,231)

11,859

3,159,995

31 December 2011 Salaries, bonuses and allowances Staff welfare and benefits Total

423,368

12,536,501

(10,979,039)

38,195

2,019,025

50,974

2,411,363

(2,264,514)

3,987

201,810

474,342

14,947,864

(13,243,553)

42,182

2,220,835

MicroCred China / Annual Report 2012

37


Financial Statements 13. O  THER LIABILITIES 2012

2011

The Group Deferred income

5,236,126

3,610,965

Due to a related party

3,018,636

2,711,076

Business tax and surcharges payable

1,766,351

1,252,902

Others

1,553,024

1,587,913

Total

11,574,137

9,162,856

The Company Accountancy fee payable

74,500

73,784

2,155

735,767

-

48,664

76,655

858,215

Other professional fees payable Due to a related party Total

14. SHARE~ CAPITAL a. Share capital Authorised and fully paid: 2012

2011

Number of shares

Amount

Number of shares

Amount

Ordinary shures with nominal value of HKD 1 On issue at 1 January and 31 December - fully paid

230,000,000

230,000,000

230,000,000

230,000,000

Authorised - par value

230,000,000

230,000,000

230,000,000

230,000,000

The Group

Authorised and fully paid share capital included: 2012 Amount

%

Amount

%

MicroCred S.A.

117,300,000

51

117,300,000

51

KfW

41,400,000

18

41,400,000

18

International Finance Corporation

34,500,000

15

34,500,000

15

AXA Belgium S.A.

18,400,000

8

18,400,000

8

Pettelaar Effectenbewaarbedrijf N.V.

10,672,000

4.6

10,672,000

4.6

DWM Funds S.C.A. -SICAV SIF

6,808,000

3

6,808,000

3

920,000

0.4

920,000

0.4

230,000,000

100

 230,000,000

100

DWM Income Funds S.C.A. -SICAV SIF Total

38

2011


Financial Statements b. The Company

Balance at 1 January 2011

Share capital

Accumulated lasses

Total

230,000,000

(4,872,614)

225,127,386

-

(1,127,026)

(1,127,026)

230,000,000

(5,999,640)

224,000,360

-

5,281,966

5,281,966

230,000,000

(717,674)

229,282,326

Losses for the year Balance at 31 December 2011/ 1 January 2012 Profit for the year Balance at 31 December 2012

15. S  TATUTORY SUR-PLUS RESERVE Statutory surplus reserve of the subsidiaries is calculated according to the relevant PRC rules and regulations. 2012

2011

Opening balance

1,773,524

458,130

Profit appropriations

2,131,854

1,315,394

3,905,378

1,773,524

Ending balance

16. CAPITAL MANAGEMENT The Group’s primary objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, by pricing products and services commensurately with the level of risk and by securing access to finance at a reasonable cost. The Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher shareholder returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions. The Group defines «capital» as including al! components of equity less unaccrued proposed dividends. On this basis the amount of capital employed at 31 December 2012 was HKD 273,663,041 (31 December 2011: HKD 249,534,278). During the year, the Group’s strategy was to maintain the financial ratios in compliance with the financial covenants under the bank facility agreement and it was not subject to any external regulatory requirements.

17. NET INTEREST INCOME 2012

2011

82,504,057

52,500,859

768,980

441,168

83,273,037

52,942,027

Loans and borrowings

(10,507,044)

(5,081,788)

Sub-total

(10,507,044)

(5,081,788)

Net interest income

72,765,993

47,860,239

Interest income Loans and advances to customers Cash at bank Sub-total Interest expenses

MicroCred China / Annual Report 2012

39


Financial Statements 18. NET FEES AND COMMISSION INCOME 2012

2011

Loans and advances to customers

9,279,904

3,182,518

Sub-total

9,279,904

3,182,518

(162,292)

(122,949)

-

(601,250)

Fees and commission income

Fees and commission expenses Bank settlement fees Guarantee fees

-

(156,800)

Sub-total

Financial consultation fees

(162,292)

(880,999)

Net fees and commission income

9,117,612

2,301,519

2012

2011

4,396,118

2,924,305

19. BUSINESS TAX AND SURCHARGES Business tax Urban construction tax

307,728

204,701

Education surcharges

219,806

146,105

Others

23,944

9,986

Total

4,947,596

3,285,097

20. GENERAL AND ADMINISTRATIVE EXPENSES 2012

2011

18,653,758

12,536,501

3,415,774

2,411,363

Staff cost Salaries, bonuses and allowances Staff welfare and benefits Sub-total

22,069,532

14,947,864

Technical service charges

11,129,599

10,264,068

Office expenses

2,850,894

2,818,569

Operating lease charges

2,441,925

1,965,705

Depreciation and amortisation

1,417,365

1,046,850

Marketing expenses

1,047,880

814,342

Consulting fees

429,905

822,038

Auditors’ remuneration

404,320

301,398

2,939,703

2,352,080

44,731,123

35,332,914

Others Net fees and commission income

21. IMPAIRMENT LOSSES (Provision)/reversal of impairment losses on loans and advances to customers

40

Note

2012

2011

5(1)

(2,618,323)

91,891


Financial Statements 22. INCOME TAX IN THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME a. Taxation charged to profit or loss 2012

2011

-

-

Current tax - Provision for Hong Kong Profits Tax Provision for the year

-

-

Sub-total

-

-

Provision for the year

7,291,040

5,020,651

(Over)/under provision in respect of prior year

(259,869)

237,393

Sub-total

7,031,171

5,258,044

620,735

(3,597,181)

15,076

-

Current tax - Overseas Profits Tax

Deferred taxation Origination and reversaI of temporary differences Under provision in respect of prior year Sub-total Total

635,811

(3,597,181)

7,666,982

1,660,863

b. Reconciliation between tax expense charged to profit or loss and accounting profit at applicable tax rates: Profit before taxation

2012

2011

30,461,779

8,648,457

Tax using the Company’s domestic tax rate

5,026,194

1,426,996

Effect of tax rates in foreign jurisdictions

2,639,293

751,542

Non-deductible expenses

136,042

101,029

Non-taxable income

(40,927)

(61,858)

(244,793)

237,393

-

(855,311)

Increase/(decrease) of tax effect:

(Over)/under provision for income tax in respect of prior year Recognition of previously unrecognised tax losses Others Actual tax expense

151,173

61,072

7,666,982

1,660,863

2012

2011

1,333,966

8,386,272

23. OTHER COMPREHENSIVE INCOME Foreign currency translation differences

24. DIRECTORS’ REMUNERATION There is no directors’ remuneration during 2012 pursuant to section 161 of the Hong Kong Companies Ordinance (2011: Nil).

25 LOANS TO OFFICERS There are no loans to officers during 2012 pursuant to section 161B o f the Hong Kong Companies Ordinance (2011: Nil).

MicroCred China / Annual Report 2012

41


Financial Statements 26. SUPPLEMENT TO THE CONSOLIDATED STATEMENT OF CASH FLOWS 1. Change in cash and cash equivalents:

Ending balance

2012

2011

9,890,838

58,236,605

Less: opening balance

(58,236,605) (131,700,056)

Sub-total

(48,345,767)

(73,463,451)

Effect of foreign exchange rate changes on cash and cash equivalents

(133,374)

(717,723)

Net decrease in cash and cash equivalents

(48,479,141)

(74,181,174)

2. Details of cash and cash equivalents are shown in Note 4.

27. R  ISK ANALYSIS, SENSITIVITY ANALYSIS, AND FAIR VALUE FOR FINANCIAL INSTRUMENTS The Group has exposure to the following risks from its use of financial instruments: -- Credit risk -- Liquidity risk -- Interest rate risk -- Foreign currency risk This note presents information about the Group’s exposure to each of the above risks and their sources, the Group’s objectives, policies and processes for measuring and managing risks and etc. The Group aims to seek the appropriate balance between the risks and benefits from its use of financial instruments and to mitigate the adverse effects that the risks of financial instruments have on the Group’s financial performance. Based on such objectives, the Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The internaI audit department of the Group undertakes both regular and ad hoc reviews of risk management controls and procedures. 1. Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Group’s credit risk is primarily attributable to cash at bank, loans and advances to customers and other receivables. Exposure to these credit risks are monitored by management on an ongoing basis. The cash at bank of the Group is mainly heId with reputable financial institutions. Management does not foresee any significant credit risks from these deposits and does not expect that these financial institutions may default and cause losses to the Group. In respect of identifying, assessing and managing credit risks of loans and advances to customers and other receivables, the Group has established a system structure, credit policy and procedures to control credit risk positions. Individual credit evaluations are performed to set related credit facility and period, based on the customers’ financial position, possibility of guarantee from a third party, external credit records and other factors such as current market information. The

42

Group monitors customer credit risk on an ongoing basis in order to ensure credit risk as a whole is under control. The overdue period of loans and advances that are past due but not impaired based on individual or collective assessement is set out as follows: Overdue within 30 days (including 30 days)

2012

2011

404,210

279,825

Past due but not impaired loans and advances are those for which contractual interest or principal payements are past due, but the Group believes that impairment is not appropriate on the basis of the stage of collection of amunts owed to the Group. Loans and advances of the Group that are neither past due nor impaired mainly relate to a wide range of customers for whom there was no recent history of default. As the Group operates primarily in Sichuan Province of the PRC, there exists a celiain level of geographical concentration risk for its loan and advances to customers in that it might be affected by changes in the local economic conditions.


Financial Statements In addition to the geographical concentration risk, the Group’s exposure to credit risk is influenced mainly by the Indlvidual characteristics of each customer rather than the industry in which the customers operate and therefore significant concentrations of credit risk arise primarily when the Group has significant exposure to individual customers. The Group did not have any significant exposure to individual customers. As at 31 December 2012,0.82% (31 December 2011: 0.77%) ofloans and advances were to the Group’s five largest customers.

The Group

Carrying amount

The maximum exposure to credit risk is represented by the carrying amount of each financial asset. The Group does not provide any other guarantees which would expose the Group to credit risk.

cover expected cash demands. The Group’s policy is to regularly monitor its liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term.

2. Liquidity risk Liquidity risk is the risk that an enterprise may encounter deficiency of funds in meeting obligations associated with financial liabilities.

The following are the Group’s and the Company’s contractual maturities of financial assets and financial liabilities, which are based on contractual cash flows (including estimated interest payments) and the earliest date the Group or the Company can be required to pay:

The Group is responsible for its own cash management, including short term investment of cash surpluses and the raising of loans to

Estimated cash flow

No contractual on demand

3 months or less

3·12 months

1-5 years

31 December 2012 Financial assets Cash at bank hand on hand

201,810

3,415,774

(3,237,049)

1,064

381,599

381,599

Loans and advances to customers

201,810

3,415,774

(3,237,049)

1,064

381,599

381,599

Other assets

201,810

3,415,774

(3,237,049)

1,064

381,599

381,599

Sub-total

474,342

14,947,864

(13,243,553)

42,182

2,220,835

2,220,835

Loans and borrowings

201,810

3,415,774

(3,237,049)

1,064

381,599

381,599

Employee benefits payable

201,810

3,415,774

(3,237,049)

1,064

381,599

381,599

Other liabilities

201,810

3,415,774

(3,237,049)

1,064

381,599

381,599

474,342

14,947,864

(13,243,553)

42,182

2,220,835

2,220,835

7,666,982

1,660,863

1,660,863

1,660,863

1,660,863

1,660,863

Financial liabilities

Sub-total Net amount

31 December 2011 Financial assets Cash at bank hand on hand

58,236,605

58,236,605

58,236,605

-

-

-

Loans and advances to customers

315,099,887

349,111,460

1,777,494

126,110,876

214,396,516

6,836,574

Other assets Sub-total

1,597,869

1,597,869

1,597,869

-

-

-

374,934,361

408,955,934

61,611,968

126,110,876

214,396,516

6,836,574

(119,657,508)

(130,020,077)

-

(1,943,012)

(55,973,416)

(72,103,649)

(2,220,835)

(2,220,835)

-

(2,220,835)

-

-

Financial liabilities Loans and borrowings Employee benefits payable Other liabilities

(4,298,989)

(4,298,989)

(4,298,989)

-

-

-

Sub-total

(126,177,332)

(136,539,901)

(4,298,989)

(4,163,847)

2,220,835

(72,103,649)

Net amount

248,757,029

272,416,033

57,312,979

121,947,029

158,423,100

(65,267,075)

MicroCred China / Annual Report 2012

43


Financial Statements The Company

Carrying amount

Estimated cash flow

No contractual on demand

3 months or less

3路12 months

1-5 years

31 December 2012 Financial assets Cash at bank hand on hand

392,050

392,050

392,050

-

-

-

Investment in subsidiaries

229,106,062

229,106,062

229,106,062

-

-

-

Other assets

100,800

100,800

-

100,800

-

-

229,598,912

229,598,912

229,598,912

100,800

-

-

(230,246)

(230,246)

(230,246)

-

-

-

(9,685)

(9,685)

-

(9,685)

-

-

Other liabilities

(76,655)

(76,655)

(76,655)

-

-

-

Sub-total

(316,586)

(316,586)

(306,901)

(9,685)

-

-

229,282,326

229,282,326

229,191,211

91,115

-

-

Sub-total Financial liabilities Loans and borrowings Employee benefits payable

Net amount

31 December 2011 Financial assets Cash at bank hand on hand

1,049,869

1,049,869

1,049,869

-

-

-

Investment in subsidiaries

226,107,458

226,107,458

226,107,458

-

-

-

1,220,642

1,220,642

-

1,220,642

-

-

228,377,969

228,377,969

227,157,327

1,220,642

-

-

(3,458,322)

(3,458,322)

-

-

(3,458,322)

-

-

-

-

-

-

-

(858,215)

(858,215)

(858,215)

-

-

-

Other assets Sub-total Financial liabilities Loans and borrowings Employee benefits payable Other liabilities Sub-total Net amount

44

(4,316,537)

(4,496,413)

(858,215)

-

(3,638,198)

-

224,061,432

223,881,556

226,299,112

1,220,042

(3,638,198)

-


Financial Statements 3. Interest rate risk Interest-bearing financial instruments at variable rates and at fixed rates expose the Group to cash flow interest rate risk and fair value interest risk, respectively. a. At the reporting date, the interest rate profile of the Group’s and the Company’s interest-bearing financial instruments was as follows:

2012 Effective interest rate

2011 HKD

Effective interest rate

23.05%

466,106,410

21.40%

312,950,852

7.64%

(99,403,200)

7.22%

(114,192,549)

HKD

The Group Fixed rate instruments Loans and advances to customers Loans and borrowings Total

366,703,211

198,758,303

Variable rate instruments Cash at bank

0.34%

9,614,808

0.49%

58,060,009

Loans and borrowings

7.25%

(96,335,200)

7.63%

(4,882,400)

Total

(86,720,392)

53,177,609

The Company Fixed rate instruments Loans and borrowings

-

-

15%

(3,117,949)

0.01%

392,050

0.01%

1,049,869

Variable rate instruments Cash at bank

b. Sensitivity analysis Fair value sensitivity analysis for fixed rate instruments The Group does not account for any fixed rate financial assets and liabilities at fair value. Therefore a change in interest rates at the repoliing date would not affect profit or loss or net equity. ■■

Cash flow sensitivity analysis for variable rate instruments An increase or decrease of 100 basis points in interest rates at the reporting date would have decreased or increased profit or loss by HKD 372,235 or HKD 428,086, respectively (2011: increased or decreased by HKD 489,716 or HKD 231,202, respectively). This analysis assumes that aIl other variables, in particular foreign currency rates, remain constant. ln respect of the exposure to cash flow interest rate risk arising from floating rate non-derivative instruments held by the Group at the reporting date, the impact on the net profit and equity is estimated as an annualised impact on interest expense or income of such a change in interest rates. This analysis is performed on the same basis for the previous year. ■■

4. Foreign currency risk In respect of assets and liabilities denominated in foreign currencies other than the functional currency, the Group ensures that

MicroCred China / Annual Report 2012

its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances, a. As at 31 December, the Group’s and the Company’s exposure to currency risk arising from recognised assets or liabilities denominated in a cunency other than the functional currency of the entity to which they relate is presented in the following tables. For presentation purposes, the amounts of the exposure are shown in Hong Kong dollar, translated using the spot rate at the reporting date. Differences resulting from the translation of the financial statements of foreign operations into the Group’s presentation currency are excluded. 2012 EUR

2011 HKD

EUR

HKD

The Group Cash at bank and on hand

-

-

30,158

-

Loans and borrowings

-

-

(3,117,949)

-

(230,246)

-

(340,373)

-

Interest payable Taxes payable

-

-

-

(61,072)

Other Iiabilities

(3,019,133)

(67,272)

(2,662,412)

(64,684)

Total exposure

(3,249,379)

(67,272)

(6,090,576)

(125,756)

Cash at bank and on hand

-

-

30,158

-

Other assets

-

100,800

-

1,220,642

The Company

Loans and borrowings

-

-

(3,117,949)

-

Interest payable

(230,246)

-

(340,373)

-

Taxes payable

-

-

-

(61,072)

Other Iiabilities

-

(67,272)

-

(64,684)

Total exposure

(230,246)

33,528

(3,428,164)

1,094,886

45


Financial Statements b. The following are the significant exchange rates applied: 2012

2011

EUR

RMB

EUR

RMB

Average rate

9.9678

1.2274

10.8342

1.2025

Reporting date mid-spot rate

10.2513

1.2272 10.0604 1.2206

c. Sensitivity analysis Assuming ail other risk variables remained constant, a 1% strengthening of the Hong Kong dollar against the EUR and RMB at 31 December would have increased the Group’s net profit by the amount shown below, whose effect is in Hong Kong dollar and translated using the spot rate at the year-end date: 2012

2011

EUR

(32,494)

(60,906)

RMB

(673)

(1,258)

Total

(33,167)

(62,164)

A 1% weakening of the Hong Kong dollar against the EUR and RMB at 31 December would have had the equal but opposite effect on them to the amounts shown above, on the basis that ail other variables remained constant. The sensitivity analysis above assumes that the change in foreign exchange rates had been applied to re-measure those financial instruments held by the Group which expose the Group to foreign currency risk at the reporting date. 5. Fair values The Group’s and the Company’s financial assets and liabilities are ail carried at cost or amortised cost. The carrying amounts of financial assets and financial liabilities are not materially different from their fair values as at the end of the year.

28. O  PERATING LEASE COMMITMENTS As at 31 December, the total future minimum lease payments under non-cancellable operating leases of properties were payable as follows: 2012

2011

Within 1 year (inclusive)

2,549,737

1,884,403

After 1 year but within 2 years (inclusive)

2,485,302

1,723,045

After 2 years but within 3 years (inclusive)

1,942,798

1,664,416

After 3 years

1,818,643

2,683,289

8,796,480

7,955,153

Total

46

29. RELATED PARTY RELATIONSHIPS AND TRANSACTIONS 1. Information on the parent and ultimate holding company of the Group is listed as follows

Company name

Registered place

Business nature

Registered capital EUR

Shareholding percentage

Proportion of voting rights

51%

51%

MicroCred Investment France 28,973,964 Holding S.A.

2. Transactions with its key management personnel Remuneration of key management personnel

2012

2011

8,374,051

4,625,643

3. Transactions with related parties other than its key management personnel a. Significant transactions with ultimate holding company during the year: Technical service charges Interest expenses

2012

2011

10,779,565

10,264,068

214,142

364,113

The above transactions with related parties were conducted under normal commercial terms or relevant agreements. b. The balances of transactions with related parties as at 31 December: The Group The balances of transactions with ultimate holding company as at 31 December are set out as follows: 2012

2011

-

3,117,949

Interest payable

230,246

340,373

Other liabilities

-

48,664

Loans and borrowings

The balances of transactions with subsidiaries as at 31 December are set out as follows: Other assets

2012

2011

100,800

1,220,642

c. Relationships with the related parties under the transactions stated in Note 29(3)(a) and (b) above Name of the entitiy

Relationship with the Company

MicroCred S.A.

Ultimate holding company

MicroCred Nanchong

Subsidiary

MicroCred Sichuan

Subsidiary


Financial Statements 30. POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE YEAR ENDED 31 DECEMBER 2012

Effective for accounting period beginning on or after IFRS 10 Consolidated financial statements

1 January 2013

lFRS 11 Joint arrangements

1 January 2013

IFRS 12 Disclosure of interests in other entities

1 January 2013

Up to the date of issue of the financial statements, the IASB has issued a number of amendments, new standards and interpretations which are not yet effective for the accounting year ended 31 December 2012.

Amendments to lFRS 10, lFRS 11 and lFRS 12 Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance

1 January 2013

lFRS 13 Fair value measurement

1 January 2013

lAS 27 Separate financial statements (2011)

1 January 2013

The Group has not adopted the above amendments, new standards and interpretations. The Group’s management is in the process of assessing what the impact of these amendments, new standards and Interpretations is expected ta be in the period of initial application and has sa far concluded that the adoption of these amendments, new standards and interpretations is unlikely ta have a significant impact on the Group’s results of operations and financial position.

lAS 28 Investments in associates and joint ventures (2011)

1 January 2013

Revised lAS 19 Employee benefits

1 January 2013

IFRlC 20 Stripping costs in the production phase of a surface mine

1 January 2013

Amendments to lFRS 7 Financial instruments: Disclosures - Offsetting

1 January 2013

Amendments to lFRS 1 First-time Adoption of International Financial Reporting Standards - Government loans

1 January 2013

Amendments to lAS 32 Financial instruments: Presentation - Offsetting financial assets and financial liabilities

1 January 2014

Recoverable Amount Disclosures for Non-Financial Assets (Proposed amendments ta lAS 36)

1 January 2014

lFRS 21 Levies

1 January 2014

lFRS 9 (2010) Financial instruments

1 January 2015

Amendments to lFRS 9 Financial instruments and IFRS 7 Financial instruments: Disclosures - Mandatory effective date and transition disclosures

1 January 2015

MicroCred China / Annual Report 2012

47


Notes

48


MicroCred China / Annual Report 2012

49


Contact

50


Contact MicroCred Holding

MicroCred Nanchong

MicroCred Sichuan

44 rue de prony 75017 Paris FRANCE

Build. 3 2-11 North Glory Market Jialing District, Nanchong PRC CHINA 637000

Tel: 00 (33) 1 49 21 26 47 Fax: 00 (33) 1 49 21 26 27 www.microcredgroup.com

Tel : 00 (86) 817 6019288 Fax: 00 (86) 817 6019298 www. microcredchina.com

No.2-4 F10, Xi’nian square Lower Dongda Road Jinjiang District, Chengdu PRC CHINA 610017 Tel : 00 (86) 28 865 860 85 Fax: 00 (86) 28 865 860 95 www. microcredchina.com

Branches & Outlets SHUNQING

JIALING

No.3 Yudai Road first section, Shunqing District, Nanchong

Build. 3 2-11 North Glory Market Jialing District, Nanchong

YINGSHAN

NANBU

210 Waixi Street Build. 3 2-11 Yingshan County, Nanchong

No.2 Yunjing Yuan, Tiyu Road Nanbu County, Nanchong

PENG’AN

LANGZHONG

Dongfeng Road Zhoukou Town Peng’an County, Nanchong

No.33 Zhangfei Road Langzhon County, Nanchong

XICHONG

CAOPING

No.320 Jianshe Road Xichong County, Nanchong PRC CHINA 637000

No.59 Kangle Xiang Road Gaoping District, Nanchong

DONGDAJIE

No. 76, 1st Section of Liu Li Street Jinjiang District, Chengdu City

No. 688, Jindong Road Jinjiang District, Chengdu City

HUAYANG Fuhe Building, Huaxin Street, Huayang Town Shuangliu County, Chengdu City

JINHUA

JINNIU No. 18, Hengde Road Jinniu District, Chengdu City

SHUANGLIU No. 6, Guangdu Road, Dongsheng Town Shuangliu County, Chengdu City

Credits Design & Production : Marion Ivars, Nadjat Ferradji Photos : Antoine Dehamel

MicroCred China / Annual Report 2012

PEFC/10-31-1238

PEFC/10-31-1238

Imprimé sur papier provenant de forêts gérées durablement.

Imprimé sur papier provenant de forêts gérées durablement.

51


Groupe PlaNet Finance

ANNUAL REPORT 2012 MicroCred China

MicroCred Nanchong

MicroCred Sichuan

Build. 3 2-11 North Glory Market Jialing District, Nanchong PRC CHINA 637000

No.2-4 F10, Xi’nian square Lower Dongda Road Jinjiang District, Chengdu PRC CHINA 610017

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Tel : 00 (86) 28 865 860 85 Fax: 00 (86) 28 865 860 95

www.microcredchina.com www.microcredgroup.com


Ra microcred china 2012