KREDAQRO NON-BANKING CREDIT ORGANIZATION LIMITED LIABILITY COMPANY The International Financial Reporting Standards Financial Statements and Independent Auditor s Report For the Year Ended December 31, 2017
INDEPENDENT AUDITOR S REPORT To the Shareholder and Board of Directors of Kredaqro Non-Banking Credit Organization Limited Liability Company: Our opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Kredaqro Non-Banking Credit Organization Limited Liability Company (hereinafter referred to as the Organization ) as of 31 December 2017 and its financial performance and its cash flows for the period then ended in accordance with International Financial Reporting Standards (IFRS). What we have audited The Organization s financial statements comprise: the statements of financial position as at 31 December 2017 the statement of comprehensive income for the period then ended the statement of changes in equity for the period ended the statement of cash flows for the period then ended; and the notes to the financial statements, which include significant accounting policies and other explanatory information. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence We are independent of the Organization in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code). Responsibilities of management and those charged with governance for the financial statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. 4
In preparing the financial statements, management is responsible for assessing the Organization s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Organization or to cease operations, or have no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Organization s financial reporting process. Auditor s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; Obtain an understanding of internal control relevant to the audit 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 Organization s internal control; Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management; Conclude on the appropriateness of management s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Organization s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Organization to cease to continue as a going concern; Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings including any significant deficiencies in internal control that we identify during our audit. 01 May 2018 Republic 5
STATEMENT OF FINANCIAL POSITION As at 31 DECEMBER 2017 (In Azerbaijani Manats) In Azerbaijani Manats Note 31 December 2017 31 December 2016 ASSETS Cash and Cash Equivalents 6 128,641 653,157 Loans to customers 7 4,731,700 10,774,174 Property and Equipments 8 1,408,007 1,653,725 Intangible assets 9 101,635 67,642 Deferred tax asset 24 36,966 - Other assets 10 305,025 530,523 Non-current assets held for sale 11 1,253,483 1,347,644 TOTAL ASSETS 7,965,457 15,026,865 LIABILITIES Deferred Income 12 5,185,100 - Borrowings 12 1,293,084 14,535,174 Other liabilities 13 255,978 167,693 Deferred tax liability 24-16,658 TOTAL LIABILITIES 6,734,162 14,719,525 EQUITY Charter Capital 14 452,300 452,300 Capital reserves 15 1,593,963 1,593,963 Accumulated loss (814,968) (1,738,923) TOTAL EQUITY 1,231,295 307,340 TOTAL EQUITY AND LIABILITIES 7,965,457 15,026,865 6
STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2017 (in Azerbaijani Manats) In Azerbaijani Manats Note 31 December 2017 31 December 2016 Interest Income 16 1,338,036 3,813,899 Interest Expense 16 (99,333) (1,262,049) Net interest income before recovery of provision /(provision) for impairment loses on interest bearing assets 1,238,703 2,551,850 Provision expense on interest bearing assets 17 (1,301,284) (3,639,957) Net interest expense (62,581) (1,088,107) Salaries and Benefits (1,671,238) (2,300,537) Impairment loss non interest bearing assets 10-18 (387,013) (191,961) Net loss on foreign exchange operations 19 (1,029,737) (1,202,561) Fee and commission expense 20 (98,898) (438,919) Depreciation and amortization 8,9 (199,438) (314,708) Administrative and other operating expenses 21 (1,889,200) (2,610,528) Other income 22 6,352,157 4,525,174 Other expenses 23 (135,407) (271,496) Gain from derivative financial instruments - 260,788 Net non-interest income/(expense) 941,226 (2,544,748) Income/(Loss) before income tax 878,645 (3,632,855) Deferred tax gain/(loss) 24 45,310 (96,673) NET PROFIT/(LOSS) FOR THE YEAR 923,955 (3,729,528) OTHER COMPREHENSIVE INCOME - - TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR 923,955 (3,729,528) 7
STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2017 (in Azerbaijani Manats) In Azerbaijani Manats Charter Capital Capital Reserves Retained Earnings/ (Accumulated loss) Total Equity Total Equity as on 31 December 2015 452,300 1,593,963 1,990,605 4,036,868 Total comprehensive loss for the year - - (3,729,528) (3,729,528) Total Equity as on 31 December 2016 452,300 1,593,963 (1,738,923) 307,340 Total comprehensive income for the year - - 923,955 923,955 Total Equity as on 31 December 2017 452,300 1,593,963 (814,968) 1,231,295 8
STATEMENT OF CASH FLOWS For the year ended 31 December 2017 (in Azerbaijani Manats) In Azerbaijani Manats Note 31 December 2017 31 December 2016 CASH FLOWS FROM OPERATING ACTIVITIES: Profit/(Loss) before income tax 878,645 (3,632,855) Adjustments for non-cash items: Amortization and depreciation expense 8-9 199,438 314,708 Provision for impairment losses on interest bearing assets 17 1,301,284 3,639,957 Charge of Impairment on other than interest bearing assets 10-11 387,013 191,961 Gain from derivative financial instruments - (260,788) Loss on sale of property and equipment 23 135,407 4,727 (Gain)/Loss on sale of assets held for sale - (2,147) Foreign exchange translation loss 19 1,029,737 1,202,561 Forgiven amount of borrowings 22 (6,048,764) (4,127,906) Net interest income 16 (1,238,703) (2,551,850) Operating profit before changes in operating assets (3,355,943) (5,221,632) Changes in operating assets and liabilities Loans to customers 7 5,917,665 17,818,948 Other assets 10 (130,997) 192,609 Income tax receivable - 425,653 Non-current assets held for sale 11 19,753 15,233 Other liabilities 13 (3,471) (70,780) Changes in operating assets and liabilities 5,802,950 18,381,663 Net Cash flow from operating activities before income tax and interest 2,447,007 13,160,031 Income tax paid (8,314) - Derivative financial instruments received - 994,839 Interest paid (82,787) (2,762,397) Net cash inflow/(outflow) from operating activities 2,355,906 11,392,473 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property equipment and intangible assets 8-9 (238,393) (325,884) Proceeds from the sale of property and equipment 115,273 30,677 Net cash (outflow)/ inflow from investing activities: (123,120) (295,207) CASH FLOWS FROM FINANCING ACTIVITIES Decrease in borrowings 12 (2,705,690) (11,165,989) Net cash outflow from financing activities (2,705,690) (11,165,989) Effect of changes in foreign exch. rate on cash and cash equivalents (51,612) (24,826) NET DECREASE IN CASH AND CASH EQUIVALENTS (524,516) (93,549) CASH AND CASH EQUIVALENTS, beginning of the year 6 653,157 746,706 CASH AND CASH EQUIVALENTS, end of the year 6 128.641 653,157 9