Deloitte. Global Valores, S. A. (A wholly-owned subsidiary of Global Bank Corporation)

Transcription

1 Deloitte. Financial statement and Independent Auditors' Report dated September 9, 2016 "This document has been prepared with the knowledge that its contents will be available to investors and the general public" Deloitte LATCO Firma miembro de Deloitte Touche Tohmatsu Limited

2 Independent Auditors Report and 2016 Financial Statements Content s Page Independent Auditors Report 1 Statement of financial position 2 Statement of profit or loss 3 Statement of profit or loss and other comprehensive income 4 Statement of changes in equity 5 Statement of cash flows

3 Deloitte. Deloitte, Inc. Contadores Publicos Autorizados RUC D.V. 65 Panama, Rep. de Panama INDEPENDENT AUDITORS' REPORT Telefono: (507) To the Shareholder and Board of Directors of Global Valores, S.A. Panama, Republic of Panama We have audited the accompanying financial statements of Global Valores, S.A., which comprise the statement of financial position as at June 30, 2016 and the statement of profit or loss, statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies applied and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as Management determines is necessary to enable the preparation of the 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 financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements 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 Management, as well as evaluating a the overall presentation of the 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 financial statements present fairly, in all important respects, the financial position of Global Valores, S.A. as of June 30, 2016, and its results of operations and its cash flows for the year then ended, in accordance with International Financial Reporting Standards. Deloitte signed September 9, 2016 Panama, Republic of Panama Deloitte LATCO Firma miembro de Deloitte Touche Tohmatsu Limited

4 Statement of financial position June 30, 2016 Notes Assets Deposits in banks: Demand - domestic 7 5,291,858 1,646,639 Demand - foreign 1,202,574 2,998,729 Time - domestic 7 1,000,000 1,200,000 Total deposits in banks 6,12 7,494,432 5,845,368 Securities available for sale 5,8,12 807, ,475 Other assets 9 136, ,450 Total assets 8,437,709 6,462,293 Liabilities and equity Liabilities: Other liabilities 7,10 922, ,284 Equity: Common shares at par value of B/.100 each, 5,000 authorized, issued and outstanding shares 500, ,000 Net changes on securities available for sale 293, ,571 Ratained earnings 6,722,378 5,709,438 Total equity 7,515,608 6,270,009 Total liabilities and equity 8,437,709 6,462,293 The accompanying notes are an integral part of these financial statements

5 Statement of profit or loss Notes Operating income: Brokerage fees 1,216,403 1,045,692 Interest earned on deposits 7 84,510 63,798 Income on sold securities 8 432, ,105 Other incomes 23,457 32,227 Total income 1,757,065 1,764,822 Interest and commission expenses 65,385 40,388 Total operating income, net 1,691,680 1,724,434 Other expenses: Administrative expenses 7 144, ,000 Professional fees 103,837 25,779 Other taxes 68,549 87,641 Repair and maintenance 42,909 74,481 Others 170, ,145 Total other expenses 529, ,046 Income before income tax 1,162,093 1,288,388 Income tax 13 (117,048) (102,367) Net income 1,045,045 1,186,021 The accompanying notes are an integral part of these financial statements

6 Statement of profit or loss and other comprehensive income Note Net income 1,045,045 1,186,021 Other comprehensive income (loss): Items that may be reclassified subsequently to statement of profit or loss: Net realized gain on securities available for sale transferred to profit or loss 8 432, ,105 Net changes in securities available for sale 8 (450,036) (614,012) Total other comprehensive income, net (17,341) 9,093 Total comprehensive income 1,027,704 1,195,114 The accompanying notes are an integral part of these financial statements

7 Statement of changes in equity Net changes on Total Common securities available Retained Note equity shares for sale earnings Balance at June 30, ,101, , ,478 4,550,281 Net income 1,186, ,186,021 Other comprehensive income: Net changes in securities available for sale 8 9,093-9,093 - Total comprehensive income of the year 1,195,114-9,093 1,186,021 Transactions attributable to shareholders: Complementary tax (26,864) - - (26,864) Balance at June 30, ,270, , ,571 5,709,438 Net income 1,045, ,045,045 Other comprehensive income: Net changes in securities available for sale 8 (17,341) - (17,341) - Comprehensive income of the year 1,027,704 - (17,341) 1,045,045 Transactions attributable to shareholders: Increase in common shares 250, , Complementary tax (32,105) - - (32,105) Total transactions attributable to shareholders: 217, ,000 - (32,105) Balance at June 30, ,515, , ,230 6,722,378 The accompanying notes are an integral part of these financial statements

8 Statement of cash flows Cash flows from operating activities: Notes Net income 1,045,045 1,186,021 Income tax , ,367 Income on securities available for sale 8 (432,695) (623,105) Net changes in operating assets and liabilities: Decrease in deposits greater than 90 days - 200,000 Decrease (increase) in other assets 31,307 (16,073) Increase (decrease) in other liabilities 626,193 (43,895) Income tax paid (13,424) (83,324) Net cash provided by operating activities 1,373, ,991 Cash flows from investing activities Purchase of securities available for sale 8 (32,845,608) (48,029,506) Sales of securities available for sale 8 32,903,303 48,613,538 Complementary tax (32,105) (26,864) Net cash provided by investment activities 25, ,168 Cash flows from financing activities Proceeds from issuance of common shares 250,000 - Net cash from financing activities 250,000 - Net increase in cash and cash equivalents 1,649,064 1,279,159 Net cash and cash equivalents at beginning of year 4,845,368 3,566,209 Net cash and cash equivalents at end of year 6 6,494,432 4,845,368 The accompanying notes are an integral part of these financial statements

9 1. General Information (the Company ) is incorporated under the laws of the Republic of Panama through Public Deed No of August 27, 2002 and started operations on February The company operates a brokerage house in the Stocks Exchange of Panama and manages investment funds. The Company is a whollyowned subsidiary of Global Bank Corporation incorporated on June, 1994, in accordance with laws of the Republic of Panama. The operations of the brokerage seat are regulated by the Securities and Exchange Commission in accordance with Law Decree No. 1 of July 8, Additionally, the operations of the brokerage houses are regulated by the Agreement of the Superintendency of Panama Securities Exchange, which indicates that they are required to comply with capital adequacy and its modalities. The main office of the Company is located at 50th Street, Global Bank Tower, Panama, Republic of Panama. Its Parent Bank, Global Bank Corporation, provides administrative services to the Company. 2. Application of International Financial Reporting Standards (IFRS) 2.1 Amendments to IFRS s and the new Interpretation that are mandatorily effective for the current year There were no IFRS or IFRIC interpretations, effective for the year beginning on or after January 1, 2015, which had a significant effect on the consolidated financial statements. 2.2 New and revised IFRSs issued but not yet adopted A series of new standards and amendments and interpretations to the standards are effective for annual periods beginning after January 1, 2016 and have not been applied in the preparation of these financial statements. With the exception of IFRS 9 - Financial Instruments: Classification and Measurement, IFRS 15 - Revenue from Contracts with Customers and IFRS 16 - Leases, it is not expected that none of these will have a significant effect on the financial statements. However, it is not practical to provide a reasonable estimate of its effect until a detailed review has not been completed. IFRS 9 Financial Instruments: Classification and Measurement IFRS 9 issued in November 2009, introduced new requirements for the classification and measurement of financial assets. IFRS 9 was further amended in October 2010 to include requirements for classification and measurement of financial liabilities and derecognition, and in November 2013, included new requirements for general hedge accounting. In July 2014, another revised version of IFRS 9 was issued mainly to include: a) impairment requirements for financial assets and b) limited amendments to the classification and measurement requirements by introducing a measurement category at fair value with changes in other comprehensive income (FVTOCI) for certain simple debtor instruments

10 Key requirements of IFRS 9 IFRS 9 requires that all recognized financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement are to be subsequently measured at either amortized cost or fair value. a debt instrument that is held within a business model whose objective is to collect the contractual cash flows and has contractual cash flows that are solely payments of principal and interest on the principal amount outstanding must be measured at amortized cost (at the end of subsequent accounting periods. They are also measured with changes in other comprehensive income Additionally, a debt instrument that is held within a business model whose objective is to collect the contractual cash flows and has contractual cash flows and sell financial assets that have contractual terms of the financial asset they produce, on specific dates to cash flows that are solely payments of principal and interest on the principal amount all other debt instruments must be measured at FVTPL at the end of subsequent accounting periods. In addition, under IFRS 9, entities can make an irrevocable election to present subsequent changes at fair value of an equity investment (not held for trade) in another comprehensive income only with dividend income generally recognized in profit or loss. IFRS 9 also contains requirements for the classification and measurement of financial liabilities and derecognition requirements. One major change from IAS 39 relates to the presentation of changes in the fair value of a financial liability designated as at FVTPL attributable to changes in the credit risk of that liability. Under IFRS 9, such changes are presented in other comprehensive income, unless the presentation of the effect of the change in the liability s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability s credit risk are not subsequently reclassified to profit or loss. Under IAS 39, the entire amount of the change in the fair value of the financial liability designated as FVTPL is presented in profit or loss. The impairment model under IFRS 9 reflects expected credit losses, as opposed to incurred credit losses under IAS 39. Under the impairment approach in IFRS 9, it is no longer necessary for a credit event to have occurred before credit losses are recognized. Instead, an entity always accounts for expected credit losses and changes in those expected credit losses. The amount of expected credit losses should be updated at each reporting date to reflect changes in credit risk since initial recognition. In other words it is not necessary for a credit event to happen before the credit losses are recognized. The general hedge accounting requirements of IFRS 9 retain the three types of hedge accounting mechanisms in IAS 39. However, greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify as hedging instruments and the types of risk components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been overhauled and replaced with the principle of an economic relationship. Retrospective assessment of hedge effectiveness is no longer required. Far more disclosure requirements about an entity s risk management activities have been introduced. The effective date for the application of IFRS 9 is for annual periods beginning on or after January 1, However, this standard may be adopted early. IFRS 15 - Revenue from Contracts with Customers In May 2014, IFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction Contracts and the related Interpretations when it becomes effective

11 The core principle of IFRS 15 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces a 5-step approach to revenue recognition: Step 1: Identify the contract(s) with a customer. Step 2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction price to the performance obligations in the contract. Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. Under IFRS 15, an entity recognizes revenue when (or as) a performance obligation is satisfied, i.e. when control of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in IFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by IFRS 15. IFRS 15 is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. IFRS 16 Leases IFRS 16 - Leases replaces IAS 17. This standard eliminates the classification of leases and states that it must be recognized in a similar way to financial leases and measured at the present value of future lease payments. IFRS 16 is effective for annual periods beginning on or after January 1, Early adoption is permitted for entities that also adopt IFRS 15 - Revenue from Contracts with Customers. 3. Most significant accounting policies 3.1 Statement of compliance The Company s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). 3.2 Basis of preparation The financial statements are prepared under the historical cost basis, except for securities available for sale that are measured at their fair values. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the characteristics of the asset or liability are taken into account if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. 3.3 Functional currency and presentation The accounting records are recorded in balboas and the financial statements are expressed in such currency which is the functional currency of the Company. The balboa, monetary unit of the Republic of Panama, is at par value and freely exchangeable with the U.S. dollar. The Republic of Panama does not issue paper currency and instead uses the U.S. dollars as legal tender

12 3.4 Financial assets available for sale They consist of securities acquired with the intention of holding them for a period of indefinite duration, which can be sold in response to needs for liquidity or changes in interest rates or prices of equity instruments. After initial recognition, securities available for sale are measured at fair value. For those cases which are not reliable estimates of fair value, investments are held at cost or amortized cost less any identified impairment loss. Gains or losses arising from changes in the fair value of financial assets available for sale are recognized directly in equity until they are discharged from financial assets or impairment is determined. At this time, the cumulative gain or loss, previously recognized in equity is recognized in profit. Dividends on equity instruments available for sale are recognized in the income statement when the entity's right to receive payment is established. The fair value of an investment in securities is generally determined based on quoted market price at the date of the statement of financial position. If the quoted market price is not available, the fair value of the instrument is estimated using pricing models or technical calculations of discounted cash flows. 3.5 Equity instruments issued by the Company Classification as equity The equity instruments are classified as equity in accordance to the contractual agreement. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deduction of all its liabilities. Equity instruments issued by the Company are recorded at the amount received, net of direct cost of issuance. 3.6 Income and interest expense Interest income and expense are recognized in the statement of profit or loss under the effective interest method for all financial instruments that earn interest. The method of effective interest rate is the method used to calculate the amortized cost of a financial asset or liability and to distribute income or interest expense over a period of time. The effective interest rate is the rate that exactly discounts estimated future cash flows through the expected life of a financial instrument, or where a shorter period is appropriate, to its net carrying amount. When calculating the effective interest rate, we estimate cash flows considering all contractual terms of the financial instrument but does not consider future losses on loans. 3.7 Commission income Generally, commissions on financial services are recognized as income when they are collected due to their short-term maturity. The income recognized at collection is not significantly different from the income under the accrual method. The commissions on medium and long-term loans and other transactions, net of some direct costs of granting them, are deferred and amortized during their terms

13 3.8 Impairment of financial assets Assets classified as available for sale securities At the date of each statement of financial position, the Company assesses whether there is objective evidence that a financial asset or group of financial assets are deteriorated. In the case of equity instruments classified as available for sale, a significant or prolonged decline in fair value of financial asset is below its cost is taken into account in determining whether assets are impaired. If such evidence exists for financial assets available for sale, the cumulative loss, measured as the difference between the acquisition cost and current fair value, less any impairment loss on financial assets previously recognized in profit or loss, removed from equity and recognized in the statement of profit or loss. Impairment losses recognized in the income statement on equity instruments are not reversed. If in a subsequent period, the fair value of a debt instrument classified as available for sale increases and this increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, loss impairment is reversed through the statement of profit or loss. 3.9 Income tax The current income tax expense is based on taxable income for the year. The income tax year includes both current tax and deferred tax. Income tax is recognized in results of operations for the current year. The current income tax refers to the estimated tax payable on taxable income of the year, using the rate prevailing at the date of the statement of financial position. Taxable income differs from net profit as reported in the profit or loss because it excludes income or expenses that are taxable or deductible. The company s liability for current tax when taxable income is calculated using the tax rate that is in effect on the date of the statement of financial position Complementary Tax The complementary tax corresponds to a portion of the tax on dividends paid in advance by the shareholders, which is deducted when dividends are paid to shareholders. 4. Financial risk management 4.1 Objectives of financial risk management The Company's activities are exposed to a variety of financial risks and these activities include analysis, evaluation, acceptance, and administration of a certain degree of risk or a combination of risks. Taking risks is essential in the financial business and operational risks are inevitable consequences of being in the business. Therefore, the Company's objective is to achieve an appropriate balance between risk and return to minimize potential adverse effects on the financial realization of the Company. The Company s activities are mainly related to the use of financial instruments and, as such, the statement of financial position consists mainly of financial instruments. It is exposed to the following risks when using them: Credit Risk Liquidity Risk Market Risk Operational Risk

14 The Board of Directors of the Company is responsible for establishing and monitoring risk the management policies of financial instruments. For this purpose, it has appointed committees responsible for the management and regular monitoring of risk on which the Company is exposed. These committees are: Audit Committee Risk and compliance committee Additionally, the Company is subject to the regulation of the Superintendency of the Panama Securities and Exchange, regarding to concentration of risk, liquidity and capitalization, among others. 4.2 Credit risk Credit risk is the risk of a financial loss for the Company that may take place if a client or a counterparty of a financial instrument fails to meet their contractual obligations arising mainly on deposits in bank and investment securities. Management believes that this risk is minimized as these are financial assets mainly with related parties. 4.3 Liquidity risk The liquidity risk is defined as the risk that the Company may encounter difficulties in obtaining funds to meet its commitments and obligations on time. The key measure used by the Company for managing liquidity risk is the ratio of liquid assets to liquid liabilities. Liquid assets are cash and cash equivalents and debt securities, for which there is an active and liquid market. Liquid liabilities are commitments with short-term maturities. A similar calculation, but not identical, is used for measuring liquidity limits set by the Company in compliance with that indicated by the Superintendency of Securities Exchange, as provided in the Agreement , regarding liquidity risk measurement. Following is the liquidity index corresponding to the margin of net liquid assets on deposits received at the date of the financial statements: Market risk At end of the period % % Period average % % Maximum of the period % % Minimum of the period % % Is the risk that the value of a financial asset is reduced due to changes in interest rates in currency exchange rates, in stock prices, and other financial variables, as well as feedback from participants of markets to economic and political events, whether it is due to latent losses or potential gains. The objective of market risk management is to manage and monitor risk exposures, and that they remain within the acceptable parameters maximizing the return of risk. The risk management policies have price limits compliance by financial instrument and which require, except by approval of the Board of Directors, that substantially all assets and liabilities be denominated in U.S. Dollars or Balboas

15 The Company manages its market risk of financial instruments available-for-sale and held to maturity through regular reports to Asset and Liability Committee (ALCO) and Risk Committee which analyzes changes in the prices of each instrument and thus takes action regarding the composition of portfolio. Within the company's investment strategy, duly endorsed by the Board of Directors, sets limits exposure to individual risks, which are approved, based on risk rating of the issuers of these instruments. Additionally, as part of the market risk, the Company is exposed mainly to the interest rate risk. Interest rate risk of the cash flow and fair value - The interest rate risk of cash flows and fair value of interest rate risk are the risks that will cause future cash flows and the value of financial instruments to fluctuate due to changes in market interest rates. The Assets and Liabilities Committee periodically reviews the exposure to interest rate risk. The following schedule summarizes the Bank exposure to interest rate risk. The assets and liabilities of the Bank are included in the schedule at carrying value, categorized by the earlier of contractual repricing or maturity dates, whichever occurs first Up to 6 months 6 months to 1 year 1 to 5 years More than 5 years No interest rate Total Financial assets: Cash and deposits - 1,000, ,494,432 7,494,432 Securities available for sale 100, , , , ,134 Total of financial assets 100,000 1,000, , ,375 6,922,191 8,301, Up to 6 months 6 months to 1 year 1 to 5 years More than 5 years No interest rate Total Financial assets: Cash and deposits 200,000 1,000, ,645,368 5,845,368 Securities available for sale , ,475 Total of financial assets 200,000 1,000, ,094,843 6,294, Capital management The Superintendency of Securities Exchange of Panama by Agreement requires the Company to maintain a minimum total and free from encumbrances equity of B/.350,000. In addition the Company as brokerage seat manages its capital to insure compliance with the requirements established by the Stocks Exchange of Panama. Solvency ratio: Broker s seats must maintain a minimum solvency ratio of 8% at all times. Capital Funds: The capital funds the brokerage will not be at any time less than the highest of any of the following two (2) variables: (i) two-thirds of the minimum required paid-in capital by the Stocks Exchange of Panama, and (ii) the amount resulting from the application of the rules of coverage requirements for the level of activity supplemented according to plan. Liquidity index: Brokerage must maintain at all times an active volume of investments in low-risk and high liquidity assets which will be at least ten percent (10%) of all of its liabilities with a residual maturity less than one year

16 Concentration risk: The risks held by a brokerage member on the Panama Stock Exchange with respect to an issuer, individual client or group of issuers or clients related among them is considered a situation of concentration when the aggregate value of these risks exceeds ten percent (10%) of the total value of its capital resources. Additionally, the value of all the risks that a Broker s seat deals and keeps with the same issuer, customer or group of issuers or related clients among each other may not exceed thirty percent (30%) of the total value of its capital resources. At the closing date Maximum of Minimum of 2016 June 30 year year Solvency ratio % % % Date ocurred June 30, 2016 June 8, 2016 June 20, 2016 Capital funds 6,723,094 6,723,094 6,430,360 Date ocurred June 30, 2016 June 30, 2016 May 2, 2016 Liquidity index % % % Date ocurred June 30, 2016 May 6, 2016 May 27, 2016 Risk concentration N/A N/A N/A 2015 At the closing date Maximum of Minimum of June 30 year year Solvency ratio % % % Date ocurred June 30, de mayo 2015 March 30, 2015 Capital funds 5,820,474 5,820,474 4,778,579 Date ocurred June 30, 2015 June 30, 2015 July 31, 2014 Liquidity index % % % Date ocurred June 30, 2015 June 30, 2015 November 30, Critical accounting estimates and judgments The Company makes estimates and judgments that affect the reported amounts of assets and liabilities within the next fiscal year. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. (a) Impairment of available-for-sale investments - The Company determines which capital securities available for sale are impaired when there has been a significant or prolonged decline in fair value below its cost. This determination which is significant or prolonged requires trial. When conducting a trial, the Company evaluates among other factors, the normal volatility in share price. Additionally, the deterioration may be appropriate when there is evidence of deterioration in the issuer's financial health, industry performance and the industry, changes in technology and financial and operating cash flows

17 (b) Fair value of financial instruments and the valuation process - The Company measures the fair value using hierarchy levels that reflect the meaning of data input used in the measures. In order to determine the fair value, the Company has constituted a documented process and policies which has set the responsibilities and the segregation of duties among the different responsible areas that are involved in this process which has been approved by the Assets and Liabilities Committee, Risk Committee, and the Board of Directors. When the Company contracts third parties as price vendors to determine the fair value of the instruments, this control unit assesses and obtains from the price vendors the documentation that supports their conclusion that such valuations meet the IFRS requirements. This assessment includes: Verifying that the price vendors have been approved by the Company; Obtain an understanding of how the fair value was determined and if it reflects current market transactions; When the fair value was determined using similar instruments, the features used to adjust these prices. IFRS 13 set a hierarchy level of the valuation techniques based on the information included in the valuation techniques is observable or unobservable. The observable information reflects market data from independent sources; the unobservable input reflects Company s market assumptions. These two types of information have set the following fair value hierarchy: Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical instruments. Level 2: Inputs other tan quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices of identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly observable from market data. Level 3: Inputs that are unobservable. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument s valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumption are required to reflect differences between the instruments. Fair value of financial assets and financial liabilities that are measured at fair value on a recurring basis Some of the Company s financial assets and financial liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair value of these financial assets and financial liabilities are determined (in particular, the valuation technique(s) and inputs used)

18 Financial assets / liabilities Fair value as of Fair value hierachy Valuations technique(s) and key inputs Significant unobservable input(s) Relationship of unobservable imputs to fair value Private equity securities - local 427, ,475 Level 2 Private debt securities - local 379,375 - Level 2 Observable prices in market not active Observable prices in market not active N/A N/A N/A N/A Totales 807, ,475 Fair value of financial assets and liabilities that are not measured at fair value on a recurring basis (but fair value disclosures are required) The carrying amount of the principal assets and liabilities that are not measured at fair value in the Company s consolidated statement of financial position is summarized below: Carrying Fair Carrying Fair value value value value Financial assets: Cash and due from banks 6,494,432 6,494,432 4,645,368 4,645,368 Time deposits 1,000,000 1,000,000 1,200,000 1,200,000 Total financial assets 7,494,432 7,494,432 5,845,368 5,845,

19 Fair value hierachy 2016 Total Level 1 Level 2 Level 3 Financial assets: Cash and due from banks 6,494,432-6,494,432 - Time deposits 1,000,000-1,000,000 - Total 7,494,432-7,494,432 - Fair value hierachy 2015 Total Level 1 Level 2 Level 3 Financial assets: Cash and due from banks 4,645,368-4,645,368 - Time deposits 1,200,000-1,200,000 - Total 5,845,368-5,845,368 - Due to their short term nature, the fair value of financial assets included in Level 2, shown below in the carrying amount. 6. Bank deposits Banks deposits are detailed below: Demand deposits 6,494,432 4,645,368 Time deposits 1,000,000 1,200,000 Less: 7,494,432 5,845,368 Term deposits with maturities over 90 days 1,000,000 1,000,000 Cash equivalents for cash flows purpose flow statement 6,494,432 4,845,368 June 30, 2016, there were time deposits with maturities greater than 90 days for B/.1,000,000 (2015: B/.1,000,000)

20 7. Balances and transactions with related parties The statement of financial position and statement of profit or loss included balances and transactions with its Parent Bank, as follows: Balances with related parties Statement of financial position Assets Bank deposits 5,291,858 1,646,639 Time deposits local 1,000,000 1,000,000 Liabilities Other liabilities Statement of profit or loss Income and expense Interest earned on deposits 64,476 51,302 Administrative expenses 144, ,000 The Company maintains an administrative services agreement with its Parent Bank, which includes the use of part of its facilities, electricity, water, telephone, maintenance, stationary, management and accounting services provided by Global Bank Corporation personnel. 8. Securities available for sale The securities available for sale are comprised by the following type of investment: Listed securities: Shares issued by companies - domestic 807, , , ,

21 The movements of securities available for sale are summarized below: Balance at beginning of the year 449, ,309 Adiciones 32,845,608 48,029,506 Gain on securities available for sale transferred to income 432, ,105 Net changes in securities available for sale (450,036) (614,012) Sales (32,470,608) (47,990,433) Balance at end of year 807, , Other assets Other assets are detailed below: Guarantee deposits 102, ,428 Accounts receivable - other 33,715 65, , , Other liabilities Other liabilities are detailed below: ITBMS payable 12,465 3,121 Other accounts payable 909, , , , Amount administered of client accounts The Company covered under the Securities Broker License granted by the Superintendency of Securities of Panama, provides brokerage services, administration and custody of securities to third parties. At June 30, 2016, the value of assets held in custody amounted to B/.1,065,832,175 (2015: B/.874,566,580) and the same are registered outside the statement of financial position of the Company. Management believes that there are no risks for the Company As at June 30, 2016, the Company does not maintain assets under management on behalf of third parties

22 12. Amount administered from own accounts The value of proprietary and cash positions of the Company at June 30, 2016 amounted to B/.8,301,566 (2015: B/.6,294,843). 13. Income tax Income tax returns of the companies incorporated in the Republic of Panama are subject to revision by the local tax authorities for the last three years, including the year ended June 30, 2015, according to current fiscal regulations. According to current Panamanian tax regulations, companies are exempted from paying income tax on profits derived from foreign source. Also exempted from income tax are interest earned on time deposits of local Banks, interest earned on Panamanian government securities and investments on securities issued through the Bolsa de Valores de Panamá (Panama Stock Exchange). In Official Gazette No A, Law No.8 of March 15, 2010 was enacted amending the general rates of income tax (ISR). For financial institutions, the current rate is 27.5% since January 1, 2012, and subsequently, reduced to 25% since January 1, Also, Law No.8 of March 15, 2010 eliminates the calculation method called Alternate Calculation of Income Tax (CAIR) and replaces it with presumptive taxation of Income Tax, forcing all individuals who earn income in excess of one million five hundred thousand dollars (B/.1,500,000) in determining as taxable amount of the tax, the amount greater of: (a) the net taxable income calculated by the standard method established in the Tax Code and (b) the net taxable income resulting from the application of four point sixty-seven percent (4.67%). Current income tax reconciliation is presented as follows: Net income before income tax 1,162,093 1,288,388 Less: non taxable income (999,655) (1,149,014) Plus: non deductible expense 305, ,094 Tax base 468, ,468 Income tax expense - computation at 25% 117, , Approval of financial statements This financial statements for the year ending June 30, 2016 were authorized by de General Management and approved by the Board of Directors for issuance on September 9, * * * * * *