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

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2 (A wholly-owned subsidiary of Global Bank Corporation) Independent Auditors Report and Financial Statements at June 30, 2017 Content s Page Independent Auditors Report 1-3 Statement of financial position 4 Statement of profit or loss 5 Statement of profit or loss and other comprehensive income 6 Statement of changes in equity 7 Statement of cash flows

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6 (A wholly-owned subsidiary of Global Bank Corporation) Statement of financial position June 30, 2017 Notes Assets Bank deposits 6,7,12 6,010,507 7,494,432 Securities available for sale 5,8,12 2,915, ,134 Other assets 9 308, ,143 Total assets 9,234,508 8,437,709 Liabilities and shareholder's equity Liabilities Other liabilities , ,101 Shareholder's equity Common shares 500, ,000 Capital reserve 323, ,230 Retained earnings 8,175,816 6,722,378 Total shareholder's equity 8,999,316 7,515,608 Total liabilities and shareholder's equity 9,234,508 8,437,709 The accompanying notes are an integral part of these financial statements

7 (A wholly-owned subsidiary of Global Bank Corporation) Statement of profit or loss Notes Commission income 1,459,828 1,216,403 Interest earned 6 252,280 84,510 Income from securities sold 8 394, ,695 2,106,728 1,733,608 Interest and commission expenses (65,628) (65,385) Net interest and commission income 2,041,100 1,668,223 Other income 67,421 23,457 2,108,521 1,691,680 Other expenses: Management services 6 (144,000) (144,000) Professional fees (61,366) (103,837) Other taxes (71,032) (68,549) Maintenance and repairs (36,674) (42,909) Regulatory supervision (50,475) (19,307) Transactional expenses - ext-pershing (81,963) (92,098) Others (36,914) (58,887) (482,424) (529,587) Profit before income tax 1,626,097 1,162,093 Income tax 13 (142,759) (117,048) Profit for the year 1,483,338 1,045,045 The accompanying notes are an integral part of these financial statements

8 (A wholly-owned subsidiary of Global Bank Corporation) Statement of profit or loss and other comprehensive income Note Profit for the year 1,483,338 1,045,045 Other comprehensive income: Items which can be subsequently reclassified to profit or loss: Net amount transferred to profit or loss Sale transferred to profit or loss 8 394, ,695 Net changes in securities available for sale 8 (364,350) (450,036) Other comprehensive income for the year 30,270 (17,341) TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,513,608 1,027,704 The accompanying notes are an integral part of these financial statements

9 (A wholly-owned subsidiary of Global Bank Corporation) Statement of changes in equity Total shareholders' Common Net changes in securities available Retained Note equity shares for sale earnings Balance at June 30, ,270, , ,571 5,709,438 Profit for the year 1,045, ,045,045 Net changes in securities available for sale 8 (17,341) - (17,341) - Total comprehensive income for the year 1,027,704 - (17,341) 1,045,045 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 Profit for the year 1,483, ,483,338 Net changes in securities available for sale 8 30,270-30,270 - Total comprehensive income for the year 1,513,608-30,270 1,483,338 Transacciones atribuibles a los accionistas: Increase in common shares Complementary tax (29,900) - - (29,900) Total transactions attributable to shareholders (29,900) - - (29,900) Balance at June 30, ,999, , ,500 8,175,816 The accompanying notes are an integral part of these financial statements

10 (A wholly-owned subsidiary of Global Bank Corporation) Statement of cash flows Cash flows from operating activities: Notes Profit for the year 1,483,338 1,045,045 Adjustments for: Income tax , ,048 Gain on sale of securities available for sale 8 (394,620) (432,695) Changes in: Time deposits with maturities greater than 90 days 7 (2,800,000) - Other assets (55,436) 31,307 Other liabilities (829,668) 626,193 Cash used in (provided by) operations (2,453,627) 1,386,898 Income tax paid (117,048) (13,424) Net cash flows from operating activities (2,570,675) 1,373,474 Cash flows from investment activities Purchase of securities available for sale 8 (187,402,044) (32,845,608) Sale of securities available for sale 8 185,718,694 32,903,303 Complementary tax (29,900) (32,105) Net cash flows (used in) provided by investment activities (1,713,250) 25,590 Cash flows from financing activities Proceeds from issuance of common shares - 250,000 Net cash flows provided by financing activities - 250,000 Net (decrease) increase in cash and cash equivalents (4,283,925) 1,649,064 Cash and cash equivalents at the beginning of the year 6,494,432 4,845,368 Cash and cash equivalents at year end 7 2,210,507 6,494,432 The accompanying notes are an integral part of these financial statements

11 (A wholly-owned subsidiary of Global Bank Corporation) 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 firm in Panama s Securities Exchange and manages investment funds under an investment management license granted by Resolution of Superintendency of Securities Market of Panama Resolution No. SMV of October 12, It is a wholly-owned subsidiary of Global Bank Corporation, an entity incorporated in June 1994 in accordance with the laws of the Republic of Panama. The Brokerage firm operations are regulated by the Superintendency of Securities Market of Panama in accordance with Decree Law No.1 of July 8, 1999, amended by Law No.67 of September 1, The Brokerage firm operations are in the process of adjusting to Agreement , which modifies certain provisions through Agreement , established by the Superintendency of Securities Market of Panama, which indicate that they are required to comply with standards of capital adequacy and its dispositions. The Company s main office is located in 50th Street, Global Bank Tower, Panama, Republic of Panama. Its parent company, Global Bank Corporation, provides administrative services to the Company. The Company holds 100% of the shares issued by Fondo Global de Inversiones, S.A., a Panamanian company incorporated on September 30, 2016 and whose operations were authorized by Resolution of the Superintendency of Securities Market of Panama No.SMV of February 14, 2017, amended by Resolution No.SMV of March 30, The main purpose of the Fund is to be an umbrella investment company that offers different types of participation quotas, aliquots in different investment portfolios or sub-fund through Participation Shares. 2. Application of International Financial Reporting Standards (IFRSs) 2.1 Amendments to IFRSs 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, 2016, 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, 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. A summary of the new and revised IFRSs or IFRIC interpretations issued but not yet adopted is provided below

12 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. 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. The impairment approach, an entity is required to always account for expected credit losses and changes in those expected credit losses. The amount of expected 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

13 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. 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. IAS 7 Disclosure Initiative The amendments require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. The amendments are effective for annual periods beginning on or after January 1,

14 Amendments to IAS 12 Recognition of deferred tax assets for unrealized losses The amendments clarify how an entity must assess if there is sufficient future taxable income to which it could apply the deductible temporary differences. Effective for annual periods beginning on or after January 1, Amendments to IFRIC 23 Uncertainty over Income tax treatments The interpretation establishes how to determine the accounting tax position when there is uncertainty about the treatment of income tax. The interpretation requires that the entity: a. Determine whether uncertain tax positions are valued separately or as a group; and b. Assess whether it is likely that the tax authority will accept the use of, or proposed use of, an uncertain tax treatment by an entity in its income tax returns: o If yes, the entity must determine their accounting tax position consistent with the tax treatment used or planned to be used in its income tax returns. o If not, the entity should reflect the effect of the uncertainty in determining its accounting tax position. Effective for annual periods beginning on or after January 1, 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) issued by the International Accounting Standards Board. 3.2 Basis of preparation The financial statements are prepared under the historical cost basis, except for securities available for sale which are measured at fair value. 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

15 3.3 Functional and presentation currency The accounting records are kept in balboas and the financial statements are expressed in this currency. 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. 3.4 Financial assets The financial assets held by the Company are classified in the following specific categories, securities available for sale. The classification depends on the nature and purpose of the financial asset and is determined at the initial recognition. All purchases or sales of financial assets are recognized on the settlement date. 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. After initial recognition, the available-for-sale securities are measured at fair value. For those cases where it is unreliable to estimate fair value, investments are maintained at cost or at 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 Financial liabilities Other financial liabilities Other financial liabilities, including debts, are initially measured at fair value, net of transaction costs and are subsequently measured at amortized cost using the effective interest method with interest expenses recognized on the effective rate base. Derecognition of financial liabilities The Bank derecognizes financial liabilities when, and only when, the Bank s obligations are liquidated, cancelled or expired

16 3.6 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. 3.7 Interest income and expenses Interest income and expenses 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. 3.8 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 over their terms. 3.9 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

17 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 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 prevailing rate 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 in other years and, furthermore, it also excludes items that will never be taxable or deductible 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. Risk management of financial instruments 4.1 Objectives of financial risk management The Company's activities are exposed to a variety of financial risks and these activities include the analysis, evaluation, acceptance, and administration of a certain degree of risk or a combination of risks. Taking risks is essential in the financing 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 Company s financial performance. 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 The Board of Directors of the Company is responsible for establishing and monitoring risk management policies of financial instruments. For this purpose, it has appointed committees responsible for the management and regular monitoring of the risks to which the Company is exposed

18 These committees are: Audit Committee Risk and Compliance Committee Additionally, the Company is subject to the regulation of the Superintendency of the Securities Market of Panama, regarding the 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 Market of Panama, as provided in Agreement , regarding liquidity risk measurement. The following is the liquidity ratios corresponding to the net margin of liquid assets over liquid liabilities at the date of the financial statements: 4.4 Market risk At the end of the year % % Period average % % Maximum for the year % % Minimum for the year 30.65% % Market risk is the risk that the value of a financial asset will decrease due to changes in interest rates, currency exchange rates, 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 risk return. Risk management policies provide for compliance with limits by financial instrument and the requirement that, except by approval of the Board of Directors, substantially all assets and liabilities are denominated in U.S. dollars or balboas

19 The Company manages the market risk of its financial instruments available-for-sale through regular reports to Asset and Liability Committee (ALCO) and Risk Committee in which the price changes of each instrument are analyzed in order to take action regarding the composition of portfolio. The Company's investment strategy, duly sanctioned by the Board of Directors, sets exposure limits for individual risks, which are established based on approvals by risk rating of the issuers of these instruments. Additionally, as part of market risk, the Company is mainly exposed to interest rate risk. Cash flows and fair value interest rate risk - The cash flow interest rate risk and the fair value 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 Company s exposure to interest rate risk. The Company s financial assets are included in the schedule at carrying value, categorized by the earlier of a new contractual rate or maturity dates, whichever occurs first. Up to 6 6 months 1 to Over 5 No interest 2017 months to 1 year 5 years years rate Total Financial assets: Bank deposits 1,500,000 2,300, ,210,507 6,010,507 Securities available for sale ,274 2,218, ,700 2,915,374 Total financial assets 1,500,000 2,300, ,274 2,218,400 2,699,207 8,925,881 Up to 6 6 months 1 to Over 5 No interest 2016 months to 1 year 5 years years rate Total Financial assets: Bank deposits - 1,000, ,494,432 7,494,432 Securities available for sale 100, , , , ,134 Total financial assets 100,000 1,000, , ,375 6,922,191 8,301, Capital management The Superintendency of Securities Market of Panama, by Agreement , requires the Company to maintain a total minimum equity of B/.350,000 free from encumbrances. Additionally, the Company as a brokerage firm manages its capital to insure compliance with the requirements established by Panama s Stock Exchange. Solvency ratio: Brokerage firms must maintain a minimum solvency ratio of 8% at all times

20 Capital funds: The capital funds of brokerage firms cannot be less than the highest of any of the following two (2) variables at any time: (i) two-thirds of the minimum paid-in capital required by Panama s Stock Exchange, and (ii) the amount resulting from the application of the required hedging standards for the level of activity supplemented according to plan. Liquidity ratio: Brokerage firms must maintain an active volume of investments in low-risk and high liquidity assets at all times, which must be, at least, ten percent (10%) of all of its liabilities with a residual maturity of less than one year. Concentration risk: The risks faced by a brokerage firm in Panama s Stock Exchange with respect to an issuer, individual client or group of issuers or clients related to each other, will be considered a concentration situation 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 brokerage firm contracts and keeps with the same issuer, customer or group of issuers or clients related with each other, may not exceed thirty percent (30%) of the total value of its capital resources. At closing date Maximum Minimum 2017 June 30 for the year for the year Solvency ratio % % 23.28% Date of occurrence June 30, 2017 December 2, 2016 July 22, 2016 Capital funds 7,934,489 7,971,470 4,819,606 Date of occurrence June 30, 2017 December 31, 2016 July 1, 2016 Liquidity ratio % % 30.65% Date of occurrence June 30, 2017 June 2, 2017 July 22, 2016 Concentration risk n/a n/a n/a 2016 At closing date Maximum Minimum June 30 for the year for the year Solvency ratio % % % Date of occurrence June 30, 2016 June 8, 2016 June 20, 2016 Capital funds 6,723,094 6,723,094 6,430,360 Date of occurrence June 30, 2016 June 30, 2016 May 2, 2016 Liquidity ratio % % % Date of occurrence June 30, 2016 May 6, 2016 May 27, 2016 Concentration risk n/a n/a n/a

21 5. 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) (b) Impairment of securities available for sale The Company determines that securities available for sale are impaired when there is a significant or permanent decrease in their fair value below its cost or if there are no technical and fundamental factors to explain and understand this decrease. The determination of what is significant or prolonged requires judgment. In making a judgment, the Company evaluates, among other factors, the normal volatility in the price of the investment and in other similar investments. Furthermore, impairment may be appropriate when there is evidence of decline in the issuer s financial health, decline in the industry and segment performance, changes in the technology and in financial and operating cash flows. Fair value of financial instruments and the valuation process - The Company determines the fair value using hierarchy levels that reflect the meaning of data inputs used in the measures. In order to determine the fair value, the Company has established a documented process and policy which defines the responsibilities and the segregation of duties among the different areas responsible that are involved in this process, which have been approved by the Assets and Liabilities Committee, Risk Committee, and the Board of Directors. When the Company uses or hires a third party as pricing agents to provide the service of obtaining prices for determining the fair value of the instruments, this control unit assesses and documents the evidence obtained from the third party pricing agents to support the conclusion that these valuations meet IFRS requirements. This assessment includes: Verifying the pricing agent has been approved by the Company; Obtain an understanding of how fair value is determined and whether it reflects current market transactions. IFRS 13 sets a hierarchy level of the valuation techniques based whether the data inputs used in the valuation techniques are observable or unobservable. The observable data inputs reflect market data from independent sources; the unobservable inputs reflect the Company s market assumptions. These two types of data inputs have created the following fair value hierarchy: Level 1: Data inputs that are quoted market prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2: Quoted prices in active markets for similar financial instruments or the use of a valuation technique where all variables are obtained from observable market data for assets and liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices). In some cases, the Company uses reference data from active markets for similar instruments and in others, uses discounted cash flow techniques where all model variables and inputs are obtained from observable market data. Level 3: When the inputs are unavailable and a valuation model is required to determine the fair value, the Company relies on entities dedicated to the valuation of quoted instruments or on the own managing entities for the asset or liability in question. Generally, the models used to determine fair value are discounted cash flows or valuations that use historical market observations

22 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 provides information about how the fair value of these financial assets and financial liabilities are determined (in particular, the valuation technique(s) and inputs used). Financial assets and liabilities Fair value Fair value hierarchy Valuation technique(s) and key inputs Significant nonobservable input(s) Relationship of nonobservable inputs to fair value Shares issued by companies - domestic 488, ,759 Level 2 Observable quoted prices in inactive markets N/A N/A Private debt securities - domestic 2,426, ,375 Level 2 Observable quoted prices in inactive markets N/A N/A Totals 2,915, ,134 Fair value of financial assets and liabilities that are not measured at fair value on a recurring basis (but require fair value disclosures) The carrying amount of the main financial assets and liabilities that are not measured at fair value in the Company s statement of financial position is summarized below: Carrying Fair Carrying Fair value value value value Financial assets: Demand deposits 2,210,507 2,210,507 6,494,432 6,494,432 Time deposits 3,800,000 3,800,000 1,000,000 1,000,000 Total financial assets 6,010,507 6,010,507 7,494,432 7,494,

23 Fair value hierarchy 2017 Total Level 1 Level 2 Level 3 Financial assets: Demand deposits 2,210, ,210,507 Time deposits 3,800, ,800,000 Total 6,010, ,010,507 Fair value hierarchy 2016 Total Level 1 Level 2 Level 3 Financial assets: Demand deposits 6,494,432-6,494,432 - Time deposits 1,000,000-1,000,000 - Total 7,494,432-7,494,432 - Due to their short-term nature, the fair value of financial assets included in Level 2 shown above is their carrying value

24 6. Balances and transactions with related parties The statement of financial position and statement of profit or loss included balances and transactions with its Parent Company detailed as follows: Transactions with related parties Statement of financial position Assets Bank deposits 2,001,406 5,291,858 Local time deposits 3,800,000 1,000,000 Statement of profit or loss Income and expenses Income earned on deposits 86,071 64,476 Administrative service expenses 144, ,000 The Company maintains an administrative services agreement with Global Bank Corporation Parent Company, which includes the use of part of the Bank s facilities, electricity, water, telephone, maintenance, stationary, management and accounting services provided by the Bank s personnel. 7. Bank deposits Demand deposits 2,210,507 6,494,432 Time deposits 3,800,000 1,000,000 Less: Time deposits with maturies greater than 90 days Cash in banks for the purpose of the statement 6,010,507 7,494,432 3,800,000 1,000,000 of cash flows 2,210,507 6,494,

25 8. Securities available for sale Listed securities: Shares issued by companies - domestic 488, ,759 Private debt securities - domestic 2,426, ,375 Totales 2,915, ,134 The movements of securities available for sale are summarized as follows: Balance at the beginning of the year 807, ,475 Acquisitions 187,402,044 32,845,608 Gain on securities available for sale transferred to profit or loss 394, ,695 Net changes in securities available for sale (364,350) (450,036) Sales (185,324,074) (32,470,608) Balance at the end of year 2,915, , Other assets Global investment fund 25,000 - Guarantee deposits 102, ,428 Prepaid expenses 8,355 - Other accounts receivable 172,844 33, Other liabilities 308, , ITBMS payable 1,443 12,465 Other accounts payable 233, , , ,

26 11. Managed funds client accounts The Company protected under the Securities Brokerage License granted by the Superintendency of Securities Market of Panama, provides brokerage services, securities management and custody services to third parties. As at June 30, 2017, the value of assets held in custody amounted to B/.1,133,278,605 (June 2016: B/.1,065,832,175) and these are registered outside of the Company s statement of financial position. Management believes there is no risk for the Company As at June 30, 2017, the Company does not hold managed assets on behalf of third parties. 12. Managed funds own accounts The value of proprietary and cash positions of the Company at June 30, 2017 amounted to B/.8,925,881 (June 2016: B/.8,301,566). 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, 2017, according to current fiscal regulations. According to current Panamanian tax regulations, companies are exempted from paying income tax on profits derived from foreign sources. Also exempted from income tax are interest earned on time deposits in local Banks and on Panamanian government securities and investments securities issued through the Bolsa de Valores de Panamá (Panama s Securities Exchange). As of January 1, 2010, with the entry into force of Law No.8 of March 15, 2010, Article 699 of the Tax Code indicates that legal entities whose annual taxable income exceed one million five hundred thousand balboas (B/.1,500,000) must pay income tax at a rate of 25% over the greater amount of: (1) net taxable income calculated using the standard method established in Title I of the Fourth Book of the Tax Code, or (2) net taxable income resulting from multiplying the total amount of taxable income by four point sixty-seven percent (4.67%). The current income tax expense is presented as follows: Profit for the year before income tax 1,626,097 1,162,093 Less: non-taxable income (1,403,058) (999,655) Plus: non-deductible expenses 347, ,754 Tax base 571, ,192 Income tax expense - calculated at 25%. 142, ,

27 14. Events after the reporting year The Company has assessed events after June 30, 2017 to determine the need for possible recognition or disclosure in the accompanying consolidated financial statements. These events were assessed through September 12, 2017, date in which these financial statements were made available for issuance. Based on this assessment, it was determined that there were no subsequent events that require recognition or disclosure in the financial statements. 15. Approval of financial statements These financial statements, were authorized by General Management and approved by the Board of Directors for issuance on September 12, * * * * * *