EasyCred 2011 Financial statement 2011

7/29/2019 EasyCred 2011 Financial statement 2011

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Microfinance Organization

Easycred Georgia LLC

Consolidated Financial Statements

for the year ended 31 December 2011


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Microfinance Organization Easycred Georgia LLC

Contents

Independent Auditors Report ....................................................................................................... 3Consolidated statement of comprehensive income ........................................................................ 4

Consolidated statement of financial position ................................................................................. 5

Consolidated statement of cash flows ............................................................................................ 6

Consolidated statement of changes in equity ................................................................................. 7

Notes to the consolidated financial statements .............................................................................. 8


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Consolidated Statement of Financial Position as at 31 December 2011

The consolidated statement of financial position is to be read in conjunction with the notes to, and forming part of, the

financial statements.

5

Notes

2011

GEL000

2010

GEL000

ASSETS

Cash and cash equivalents 10 140 165

Loans to customers 11 6,119 4,676

Property, equipment and intangible assets 12 564 527

Deferred tax asset 9 17 17

Other assets 13 306 145

Total assets 7,146 5,530

LIABILITIES

Loans and borrowings 14 2,912 1,932

Income tax payable 3 144

Other liabilities 15 78 43

Total liabilities 2,993 2,119

EQUITY 16

Charter capital 3,213 2,313

Retained earnings 940 1,098

Total equity 4,153 3,411

Total liabilities and equity 7,146 5,530


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Consolidated Statement of Cash Flows for the year ended 31 December 2011

The consolidated statement of cash flows is to be read in conjunction with the notes to, and forming part of, the


6

Notes

2011

GEL000

2010

GEL000

CASH FLOWS FROM OPERATING ACTIVITIES

Profit for the year 941 899

Adjustments for:

Impairment (recovery)/losses (30) 141

Net foreign exchange loss/(gain) 128 (103)

Depreciation and amortization 56 47

Loss on disposal of property and equipment 8

Gain on disposal of repossessed assets (13) -

Interest income (2,024) (1,664)

Interest expense 329 207

Fee and commission income (319) (178)

Fee and commission expense 8 10

Income tax expense 180 159

(Increase)/decrease in operating assets

Loans to customers (1,680) (1,799)

Other assets (202) (136)

Increase/(decrease) in operating liabilities

Other liabilities 33 10

Interest and fees and commissions received 2,309 1,737

Interest and fees and commissions paid (332) (217)

Income tax paid (321) (72)

Cash flows used in operations (929) (959)

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of property and equipment (95) (26)

Proceeds from sale of property and equipment 14 -

Proceeds from sale of repossessed assets 33

Cash flows used in investing activities (48) (26)

CASH FLOWS FROM FINANCING ACTIVITIES

Payment of dividends (199) -

Proceeds from borrowings 1,376 1,003

Repayment of borrowings (215) -

Cash flows from financing activities 962 1,003

Net (decrease)/increase in cash and cash equivalents (15) 18

Effect of changes in exchange rates on cash and cash equivalents (10) -

Cash and cash equivalents as at the beginning of the year 165 147

Cash and cash equivalents as at the end of the year 35 140 165


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Consolidated Statement of Changes in Equity for the year ended 31 December 2011

The consolidated statement of changes in equity is to be read in conjunction with the notes to, and forming part of, the


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Charter capital

Retained

earnings Total equity

GEL000 GEL000 GEL000

Balance as at 1 January 2010 2,313 199 2,512

Total comprehensive income

Profit for the year - 899 899

Total comprehensive income for the year - 899 899

Balance as at 31 December 2010 2,313 1,098 3,411

Balance as at 1 January 2011 2,313 1,098 3,411

Total comprehensive income

Profit for the year - 941 941

Total comprehensive income for the year - 941 941

Transactions with owners, recorded directly in equity

Increase in charter capital 900 (900) -

Dividends paid - (199) (199)

Total transactions with owners 900 (1,099) (199)

Balance as at 31 December 2011 3,213 940 4,153


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1 Background(a) Organisation and operations

Microfinance Organization Easycred Georgia LLC (the Company) and its subsidiaries (the

Group) was established on 21 November 2008 to provide sustainable lending services to those

individual entrepreneurs who are not able to access credit facilities through the conventional

banking system. The Group helps in the development of the economy of Georgia by providing

credit to very small entrepreneurs to grow their businesses and improve their economic situation.

The Group was registered by the National Bank of Georgia on 20 February 2009. The legal

address of the Group is 64 Mitskevich Street, Tbilisi, Georgia.

On 29 November 2011 the Group established a subsidiary, Easycred Capital LLC, an asset

management company with 100% ownership. As at 31 December 2011, Easycred Capital LLC

had no transactions or balances.

The principal subsidiaries of the Group are as follows:

Ownership %

Name Country of incorporation Principal activities 2011 2010

Easycred Capital LLC Georgia Asset management 100% -

Shareholders

The Groups immediate and ultimate parent company is Laponeto Commmercial LLC and the

ultimate controlling party is Elena Papachristodoulou Psintrou.

As at 31 December 2011 and 2010 the Groups shareholders were as follows:

2011

Ownership interest, %

2010

Ownership interest, %

Laponeto Commmercial LLC 51.0% 51.0%

Laerti Zubadalashvili 25.0% 25.0%

Kakhaber Kakhiani 15.0% 15.0%

Nodar Daushvili 9.0% 9.0%

100% 100%

Related party transactions are detailed in note 20.

(b) Business environmentGeorgian business environment

The Groups operations are primarily located in Georgia. Consequently, the Group is exposed to

the economic and financial markets of Georgia which display characteristics of an emerging

market. The conflict between Georgia and the Russian Federation has created additional

uncertainty in the environment. The legal, tax and regulatory frameworks continue development,

but are subject to varying interpretations and frequent changes which together with other legal and

fiscal impediments contribute to the challenges faced by entities operating in the Georgia. The

consolidated financial statements reflect managements assessment of the impact of the Georgianbusiness environment on the operations and the financial position of the Group. The future

business environment may differ from managements assessment.


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2 Basis of preparation(a)

Statement of compliance

The accompanying consolidated financial statements are prepared in accordance with

International Financial Reporting Standards (IFRS).

(b) Basis of measurementThe consolidated financial statements are prepared on the historical cost basis.

(c) Functional and presentation currencyThe national currency of Georgia is the Georgian Lari (GEL), which is the Groups functional

currency and the currency in which these consolidated financial statements are presented.

Financial information presented in GEL is rounded to the nearest thousand.

(d) Use of estimates and judgmentsThe preparation of consolidated financial statements in conformity with IFRSs requires

management to make judgments, estimates and assumptions that affect the application of

accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual

results could differ from those estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accountingestimates are recognised in the period in which the estimates are revised and in any future periods

affected.

Information about significant areas of estimation uncertainty and critical judgments in applying

accounting policies is described in note 11, loan impairment estimates.

(e) Changes in accounting policies and presentationWith effect from 1 January 2011, the Group changed its accounting policies in the following

areas:

With effect from 1 January 2011, the Group retrospectively applied a revised version of IAS24 (issued in 2009) Related Party Disclosures. This change has not had a significant impact

on the related party disclosures;

With effect from 1 January 2011, the Group retrospectively applied limited amendments toIFRS 7 Financial Instruments: Disclosures issued as part ofImprovements to IFRSs 2010.

These amendments mainly relate to disclosures on collateral and other credit enhancements,

as well as to renegotiated assets that would otherwise be past due or impaired.


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3 Significant accounting policiesThe accounting policies set out below are applied consistently to all periods presented in these

consolidated financial statements, and are applied consistently by the Group, except as explained

in note 2(e), which addresses changes in accounting policies.

(a) Basis of consolidation(i) Subsidiaries

Subsidiaries are entities controlled by the Company. Control exists when the Company has the

power, directly or indirectly, to govern the financial and operating policies of an entity so as to

obtain benefits from its activities. The financial statements of subsidiaries are included in the

consolidated financial statements from the date that control effectively commences until the date

that control effectively ceases.

(ii) Transactions eliminated on consolidationIntra-group balances and transactions, and any unrealised gains arising from intra-group

transactions, are eliminated in preparing the consolidated financial statements.

(b) Foreign currencyTransactions in foreign currencies are translated to GEL at exchange rates at the dates of the

transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting

date are retranslated to GEL 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 period, adjusted for effective interest and payments during the period, and the

amortised cost in foreign currency translated at the exchange rate at the end of the reporting

period. Non-monetary items that are measured in terms of historical cost in a foreign currency are

translated using the exchange rate at the date of the transaction. Foreign currency differences

arising on retranslation are recognised in profit or loss.

(c) Cash and cash equivalentsCash and cash equivalents comprise cash balances, call deposits and higly liquid investments with

maturities at initial recognition of three months or less.

(d) Financial instruments(i) Classification

Loans and receivables are non-derivative financial assets with fixed or determinable payments

that are not quoted in an active market, other than those that the Group:

intends to sell immediately or in the near term upon initial recognition designates as at fair value through profit or loss upon initial recognition designates as available-for-sale or, may not recover substantially all of its initial investment, other than because of credit

deterioration.


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Loans and borrowings are non-derivative financial liabilities with fixed or determinable payments

that are not quoted in an active market.

(ii) RecognitionFinancial assets and liabilities are recognized in the consolidated statement of financial position

when the Group becomes a party to the contractual provisions of the instrument. All regular way

purchases of financial assets are accounted for at the settlement date.

(iii) MeasurementA financial asset or liability is initially measured at its fair value plus transaction costs that are

directly attributable to the acquisition or issue of the financial asset or liability.

Subsequent to initial recognition, financial assets, comprising loans and receivables, are measured

at amortized cost, using the effective interest method.

All financial liabilities are measured at amortized cost.

(iv) Amortised costThe amortised cost of a financial asset or liability is the amount at which the financial asset or

liability is measured at initial recognition, minus principal repayments, plus or minus the

cumulative amortisation using the effective interest method of any difference between the initial

amount recognised and the maturity amount, minus any reduction for impairment. Premiums and

discounts, including initial transaction costs, are included in the carrying amount of the related

instrument and amortized based on the effective interest rate of the instrument.

(v) Fair value measurement principlesFair value is the amount for which an asset could be exchanged, or a liability settled, between

knowledgeable, willing parties in an armss length transaction on the measurement date.

When available, the Group measures the fair value of an instrument using quoted prices in an

active market for that instrument. A market is regarded as active if quoted prices are readily and

regularly available and represent actual and regularly occurring market transactions on an arms

length basis.

If a market for a financial instrument is not active, the Group establishes fair value using avaluation technique. Valuation techniques include using recent arms length transactions between

knowledgeable, willing parties (if available), reference to the current fair value of other

instruments that are substantially the same, discounted cash flow analyses and option pricing

models. The chosen valuation technique makes maximum use of market inputs, relies as little as

possible on estimates specific to the Group, incorporates all factors that market participants would

consider in setting a price, and is consistent with accepted economic methodologies for pricing

financial instruments. Inputs to valuation techniques reasonably represent market expectations and

measures of the risk-return factors inherent in the financial instrument.

The best evidence of the fair value of a financial instrument at initial recognition is the transaction

price, i.e., the fair value of the consideration given or received, unless the fair value of thatinstrument is evidenced by comparison with other observable current market transactions in the

same instrument (i.e., without modification or repackaging) or based on a valuation technique


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whose variables include only data from observable markets. When transaction price provides the

best evidence of fair value at initial recognition, the financial instrument is initially measured at

the transaction price and any difference between this price and the value initially obtained from a

valuation model is subsequently recognised in profit or loss on an appropriate basis over the lifeof the instrument but not later than when the valuation is supported wholly by observable market

data or the transaction is closed out.

(vi) Gains and losses on subsequent measurementFor financial assets and liabilities carried at amortized cost, a gain or loss is recognized in profit or

loss when the financial asset or liability is derecognized or impaired, and through the amortization

process.

(vii)DerecognitionThe Group derecognises a financial asset when the contractual rights to the cash flows from the

financial asset expire, or when it transfers the financial asset in a transaction in which

substantially all the risks and rewards of ownership of the financial asset are transferred or in

which the Group neither transfers nor retains substantially all the risks and rewards of ownership

and it does not retain control of the financial asset. Any interest in transferred financial assets that

qualify for derecognition that is created or retained by the Group is recognised as a separate asset

or liability in the consolidated statement of financial position. The Group derecognises a financial

liability when its contractual obligations are discharged or cancelled or expire.

The Group writes off assets deemed to be uncollectible.

(viii)OffsettingFinancial assets and liabilities are offset and the net amount reported in the consolidated statement

of financial position when there is a legally enforceable right to set off the recognised amounts

and there is an intention to settle on a net basis, or realise the asset and settle the liability

simultaneously.

(e) Property, equipment and intangible assets(i) Owned assets

Items of property and equipment are stated at cost less accumulated depreciation and impairment

losses.

Where an item of property and equipment comprises major components having different useful

lives, they are accounted for as separate items of property and equipment.

(ii) Leased assetsAll leases are operating leases and the leased assets are not recognized in the consolidated

statement of financial position.


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(iii) DepreciationDepreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of

the individual assets. Depreciation commences on the date of acquisition. Land is not depreciated.The estimated useful lives are as follows:

- buildings 20 years- intangible assets 5 years- other 3 years

(f) Repossessed assetsThe Group recognises repossessed assets in the statement of financial position when it has the full

and final settlement rights to the collateral, and when it is entitled to retain any excess proceeds

from the realisation of the collateral. Repossessed assets are measured at the lower of the carrying

amount and the fair value less costs to sell. At initial recognition repossessed assets are measuredbased on the value of the defaulted loan, including expenditure incurred in the process of

collateral foreclosure. Fair value less costs to sell is the estimated selling price of the collateral in

the ordinary course of business, less the related selling costs. Subsequent to initial recognition,

repossessed assets are reviewed for held for sale classification criteria and are reclassified

accordingly when the criteria are met.

Repossessed assets are included in other assets.

(g) Impairment(i) Financial assets carried at amortized cost

Financial assets carried at amortized cost consist principally of loans and other receivables (loans

and receivables). The Group reviews its loans and receivables to assess impairment on a regular

basis. A loan or receivable is impaired and impairment losses are incurred if, and only if, there is

objective evidence of impairment as a result of one or more events that occurred after the initial

recognition of the loan or receivable and that event (or events) has had an impact on the estimated

future cash flows of the loan that can be reliably estimated.

Objective evidence that financial assets are impaired can include default or delinquency by a

borrower, breach of loan covenants or conditions, restructuring of a loan or advance on terms that

the Group would not otherwise consider, indications that a borrower or issuer will enter

bankruptcy, the disappearance of an active market for a security, deterioration in the value ofcollateral, or other observable data relating to a group of assets such as adverse changes in the

payment status of borrowers in the group, or economic conditions that correlate with defaults in

the group.

The Group first assesses whether objective evidence of impairment exists individually for loans

and receivables that are individually significant, and individually or collectively for loans and

receivables that are not individually significant. If the Group determines that no objective

evidence of impairment exists for an individually assessed loan or receivable, whether significant

or not, it includes the loan in a group of loans and receivables with similar credit risk

characteristics and collectively assesses them for impairment. Loans and receivables that are

individually assessed for impairment and for which an impairment loss is or continues to be

recognised are not included in a collective assessment of impairment.


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If there is objective evidence that an impairment loss on a loan or receivable has been incurred,

the amount of the loss is measured as the difference between the carrying amount of the loan or

receivable and the present value of estimated future cash flows including amounts recoverable

from guarantees and collateral discounted at the loan or receivables original effective interestrate. Contractual cash flows and historical loss experience adjusted on the basis of relevant

observable data that reflect current economic conditions provide the basis for estimating expected

cash flows.

In some cases the observable data required to estimate the amount of an impairment loss on a loan

or receivable may be limited or no longer fully relevant to current circumstances. This may be the

case when a borrower is in financial difficulties and there is little available historical data relating

to similar borrowers. In such cases, the Group uses its experience and judgement to estimate the

amount of any impairment loss.

All impairment losses in respect of loans and receivables are recognized in profit or loss and are

only reversed if a subsequent increase in recoverable amount can be related objectively to anevent occurring after the impairment loss was recognised.

When a loan is uncollectable, it is written off against the related allowance for loan impairment.

The Group writes off a loan balance (and any related allowances for loan losses) when

management determines that the loans are uncollectible and when all necessary steps to collect the

loan are completed.

(ii) Non financial assetsOther non financial assets, other than deferred taxes, are assessed at each reporting date for any

indications of impairment. The recoverable amount of non financial assets is the greater of theirfair value less costs to sell and value in use. In assessing value in use, the estimated future cash

flows are discounted to their present value using a pre-tax discount rate that reflects current

market assessments of the time value of money and the risks specific to the asset. For an asset that

does not generate cash inflows largely independent of those from other assets, the recoverable

amount is determined for the cash-generating unit to which the asset belongs. An impairment loss

is recognised when the carrying amount of an asset or its cash-generating unit exceeds its

recoverable amount.

All impairment losses in respect of non financial assets are recognized in profit or loss and

reversed only if there has been a change in the estimates used to determine the recoverable

amount. Any impairment loss reversed is only reversed to the extent that the assets carrying

amount does not exceed the carrying amount that would have been determined, net ofdepreciation or amortisation, if no impairment loss had been recognised.

(h) Charter capitalCharter capital is classified as equity.

Dividends are reflected as an appropriation of retained earnings in the period when they are

declared.


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(i) TaxationIncome tax comprises current and deferred tax. Current tax expense is the expected tax payable on

the taxable income for the year, using tax rates enacted or substantially enacted at the reportingdate, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of

assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

Deferred tax is not recognised for the temporary differences on the initial recognition of assets or

liabilities in a transaction that is not a business combination and that affect neither accounting nor

taxable profit. Deferred tax is measured at the tax rates that are expected to be applied to the

temporary differences when they reverse, based on the laws that have been enacted or

substantively enacted by the reporting date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits

will be available against which the temporary differences, unused tax losses and credits can beutilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related

tax benefit will be realised.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current

tax assets and liabilities, and they relate to income taxes levied by the same tax authority on the

same taxable entity, or on different tax entities, but they intend to settle curent tax laibilities and

assets on a net basis or their tax assets and liabilities will be realised simultaneously.

(j) Income and expense recognitionInterest income and expense are recognised in profit or loss using the effective interest method.

Loan origination fees, loan servicing fees and other fees that are considered to be integral to the

overall profitability of a loan, together with the related transaction costs, are deferred and

amortized to interest income over the estimated life of the financial instrument using the effective

interest method.

Other fees, commissions and other income and expense items are recognised in profit or loss

when the corresponding service is provided.

Payments made under operating leases are recognised in profit or loss on a straight-line basis over

the term of the lease.

(k) New standards and interpretations not yet adoptedA number of new standards, amendments to standards and interpretations are not yet effective as

at 31 December 2011, and are not applied in preparing these consolidated financial statements. Of

these pronouncements, potentially the following will have an impact on the financial position and

performance. The Group plans to adopt these pronouncements when they become effective.

IFRS 9 Financial Instruments will be effective for annual periods beginning on or after 1January 2015. The new standard is to be issued in phases and is intended ultimately to replace

International Financial Reporting Standard IAS 39 Financial Instruments:Recognition and

Measurement. The first phase of IFRS 9 was issued in November 2009 and relates to the

classification and measurement of financial assets. The second phase regarding classification

and measurement of financial liabilities was published in October 2010. The remaining parts


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of the standard are expected to be issued during 2012. The Group recognises that the new

standard introduces many changes to the accounting for financial instruments and is likely to

have a significant impact on Groups consolidated financial statements. The impact of these

changes will be analysed during the course of the project as further phases of the standard areissued. The Group does not intend to adopt this standard early.

IFRS 13 Fair Value Measurementwill be effective for annual periods beginning on or after1 January 2013. The new standard replaces the fair value measurement guidance contained in

individual IFRSs with a single source of fair value measurement guidance. It provides a

revised definition of fair value, establishes a framework for measuring fair value and sets out

disclosure requirements for fair value measurements. IFRS 13 does not introduce new

requirements to measure assets or liabilities at fair value, nor does it eliminate the

practicability exceptions to fair value measurement that currently exist in certain standards.

The standard is applied prospectively with early adoption permitted. Comparative disclosure

information is not required for periods before the date of initial application.

Various Improvements to IFRSs have been dealt with on a standard-by-standard basis. Allamendments, which result in accounting changes for presentation, recognition or measurement

purposes, will come into effect not earlier than 1 January 2012. The Group has not yet

analysed the likely impact of the improvements on its financial position or performance.

4 Net interest income2011

GEL000

2010

GEL000

Interest income

Loans to customers 2,024 1,660

Placements with banks - 4

Total interest income 2,024 1,664

Interest expense loans and borrowings (329) (207)

Net interest income 1,695 1,457

5 Fee and commission income2011

GEL0002010

GEL000

Settlement fees 316 177

Other 3 1

319 178


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6 Impairment (recovery)/losses2011

GEL000

2010

GEL000

Loans to customers (30) 141

(30) 141

7 Personnel expenses2011

GEL000

2010

GEL000

Employee compensation 512 351

8 Other general administrative expenses2011

GEL000

2010

GEL000

Professional services 82 51

Depreciation and amortization 56 47

Rent 27 2

Communications and information services 23 15

Security 7 13

Advertising and marketing 6 5

Taxes other than income tax 5 -

Office supplies 3 4

Other 71 41

280 178


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9 Income tax expense2011

GEL000

2010

GEL000

Current year expense

Current year 180 181

181

Deferred tax expense

Origination and reversal of temporary differences - (22)

Total income tax expense 180 159

In 2011, the applicable tax rate for current and deferred tax is 15% (2010: 15%).

Reconciliation of effective tax rate:

2011

GEL000 %

2010

GEL000 %

Profit before income tax 1,121 100% 1,058 100%

Income tax at the applicable tax rate 168 15% 159 15%

Non-deductible expenses 12 1% - -

180 16% 159 15%

(a) Deferred tax asset and liabilityTemporary differences between the carrying amounts of assets and liabilities for financial

reporting purposes and the amounts used for taxation purposes give rise to net deferred tax assets

and liabilitiesas at 31 December 2011 and 2010.

Movements in temporary differences during the years ended 31 December 2011 and 31 December

2010 are presented as follows:

GEL000

Balance

1 January 2011

Recognized

in profit or loss

Balance

31 December 2011

Loans to customers 21 (4) 17

Property, equipment and intangible assets (4) 3 (1)

Other liabilities - 1 1

17 - 17

GEL000

Balance

1 January 2010

Recognized

in profit or loss

Balance

31 December 2010

Loans to customers - 21 21

Property, equipment and intangible assets (5) 1 (4)

(5) 22 17


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10 Cash and cash equivalentsCash and cash equivalents as at 31 December as shown in the statement of cash flows are

composed of the following items:

2011

GEL000

2010

GEL000

Petty cash 128 148

Bank balances

- rated B+ 3 15

- rated BB- 7 -

- not rated 2 2

Total cash and cash equivalents 140 165

The above ratings are per Fitch ratings.

None of cash and cash equivalents are impaired or past due.

The Groups exposure to interest rate risk and a sensitivity analysis for financial assets and

liabilities are disclosed in note 17.

11 Loans to customers2011

GEL000

2010

GEL000

Commercial loans loans to small businesses 353 600

Loans to individuals

Loans collateralized by real estate 4,433 3,725

Consumer loans 1,388 303

Auto loans 56 189

Total loans to individuals 5,877 4,217

Gross loans to customers 6,230 4,817

Impairment allowance (111) (141)

Net loans to customers 6,119 4,676

Movements in the loan impairment allowance by classes of loans to customers for the year ended

31 December 2011 are as follows:

Commercial loans

GEL000


GEL000

Total

GEL000

Balance at the beginning of the year 20 121 141

Net charge (recovery) 6 (36) (30)

Balance at the end of the year 26 85 111


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Movements in the loan impairment allowance by classes of loans to customers for the year ended

31 December 2010 are as follows:

Commercial loansGEL000

Loans to individualsGEL000

TotalGEL000

Balance at the beginning of the year - - -

Net charge 20 121 141

Balance at the end of the year 20 121 141

(a) Credit quality of loans to customersThe following table provides information on the credit quality of loans to customers as at

31 December 2011:

Gross loans

Impairment

allowance Net loans

Impairmentallowance togross loans,

GEL000 GEL000 GEL000 %

Commercial loans

Loans without individual signs of impairment 255 - 255 -

Impaired loans:

-overdue less than 90 days 32 - 32 -

- overdue more than 90 days and less than 1

year 54 (22) 32

40.7%

- overdue more than 1 year 12 (4) 8 33.3%

Total impaired loans 98 (26) 72 26.5%Total commercial loans 353 (26) 327 7.4%


Loans collateralized by real estate

- not overdue 4,076 - 4,076 -

- overdue less than 30 days 48 (2) 46 4.2%

- overdue 30-89 days 42 (2) 40 4.8%

- overdue 90-179 days 85 (6) 79 7.1%

- overdue 180-360 days 182 (50) 132 27.5%

Total loans collateralized by real estate 4,433 (60) 4,373 1.4%

Consumer loans

- not overdue 1,236 - 1,236 -

- overdue less than 30 days 38 - 38 -

- overdue 30-89 days 31 (1) 30 3.2%

- overdue 90-179 days 9 - 9 -

- overdue 180-360 days 65 (17) 48 26.2%

- overdue more than 360 days 9 - 9 -

Total consumer loans 1,388 (18) 1,370 1.3%


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Gross loans

Impairment

allowance Net loans

Impairment

allowance to

gross loans,

GEL000 GEL000 GEL000 %Auto loans

- not overdue 24 - 24 -

- overdue 30-89 days 4 - 4 -

- overdue 90-179 days 7 - 7 -

- overdue 180-360 days 18 (6) 12 33.3%

- overdue more than 360 days 3 (1) 2 33.3%

Total auto loans 56 (7) 49 12.5%

Total loans to individuals 5,877 (85) 5,792 1.4%

Total loans to customers 6,230 (111) 6,119 1.8%

The following table provides information on the credit quality of the loans to customers as at

31 December 2010:

Gross loans

Impairment

allowance Net loans

Impairment

allowance to

gross loans,

GEL000 GEL000 GEL000 %

Commercial loans

Loans without individual signs of impairment 432 - 432 -

Impaired loans:


- overdue more than 90 days and less than 1

year 67 (20) 47

29.9%

Total impaired loans 168 (20) 148 11.9%

Total commercial loans 600 (20) 580 3.3%



- not overdue 3,128 - 3,128 -


- overdue 30-89 days 176 (3) 173 1.7%

- overdue 90-179 days 68 (7) 61 10.3%

- overdue 180-360 days 257 (108) 149 42.0%

Total loans collateralized by real estate 3,725 (118) 3,607 3.2%

Consumer loans



- overdue 30-89 days 37 (1) 36 2.7%

Total consumer loans 303 (1) 302 0.3%


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Gross loans

Impairment

allowance Net loans

Impairment

allowance to

gross loans,

GEL000 GEL000 GEL000 %Auto loans



- overdue 30-89 days 18 - 18 -

- overdue 180-360 days 4 (2) 2 50.0%

Total auto loans 189 (2) 187 1.1%

Total loans to individuals 4,217 (121) 4,096 2.9%

Total loans to customers 4,817 (141) 4,676 2.9%

(b)

Key assumptions and judgments for estimating the loan impairment

(i) Commercial loansLoan impairment results from one or more events that occurred after the initial recognition of the

loan and that have an impact on the estimated future cash flows associated with the loan, and that

can be reliably estimated. Loans without individual signs of impairment do not have objective

evidence of impairment that can be directly attributed to them.

The objective indicators of loan impairment include the following:

overdue payments under the loan agreement significant difficulties in the financial conditions of the borrowerThe Group estimates loan impairment for commercial loans based on an analysis of the future

cash flows for impaired loans and based on its past loss experience for portfolios of loans for

which no indications of impairment has been identified.

In determining the impairment allowance for commercial loans, management makes the following

key assumptions:

no historical loss rate for loans without individual signs of impairment based on the Groupspast loss experience;

a delay of 6 to 12 months in obtaining proceeds from the foreclosure of collateral for loanswith individual signs of impairment.

Changes in these estimates could effect the loan impairment provision. For example, to the extent

that the net present value of the estimated cash flows differs by minus one percent, the impairment

allowance on loans to corporate customers as at 31 December 2011 would be GEL 3 thousand

higher (2010: GEL 6 thousand).


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23

(ii) Loans to individualsThe Group estimates loan impairment for loans to individuals based on its past historical loss

experience on each type of loan. The significant assumptions used by management in determiningthe impairment losses for loans to individuals include:

loss migration rates are constant and can be estimated based on the historic loss migrationpattern for the past 24 months for loans collateralized by real estate, auto loans and other

consumer loans

loans to individuals overdue for more than 180 days are allocated 25%-50% probability ofloss.

The significant assumptions used in determining the impairment losses for loans to individuals

include the following loan loss rates:

- Loans collateralized by real estate 1.4%- Consumer loans 1.3%- Auto loans 12.5%

Changes in these estimates could effect the loan impairment provision. For example, to the extent

that the net present value of the estimated cash flows differs by plus minus three percent, the

impairment allowance on loans to individuals as at 31 December 2011 would be GEL 174

thousand lower/higher (2010: GEL 123 thousand).

(c) Analysis of collateralThe following table provides information on collateral securing loans to corporate customers, netof impairment, by types of collateral as at 31 December 2011:

2011 2010

Loans to customers, net

GEL000 % of portfolio

Loans to customers,

net

GEL000 % of portfolio

Real estate 4,534 74% 4,117 88%

Gold and jewelry 1,205 20% 203 4%

Motor vehicles 50 1% 219 5%

No collateral 330 5% 137 3%

6,119 100% 4,676 100%

Commercial loans that are past due or impaired

Impaired or overdue commercial loans are secured by collateral with a fair value of GEL 72

thousand (2010: GEL 148 thousand), excluding the effect of overcollateralisation.

Commercial loans that are neither past due nor impaired

For the remaining loans to corporate customers with a net carrying amount of GEL 255 thousand

(2010: GEL 432 thousand), which are neither past due nor impaired, the fair value of collateral

was estimated at the inception of the loans and was not adjusted for subsequent changes to the

reporting date. The recoverability of these loans is primarily dependent on the creditworthiness of

the borrowers rather than the value of collateral, and the current value of the collateral does not

impact the impairment assessment.


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24

Collateral obtained

During the year ended 31 December 2011, the Group obtained assets with the carrying amount of

GEL 84 thousand by taking control of collateral securing commercial loans (2010: GEL 84thousand). The Groups policy is to dispose these assets as soon as it is practicable.

(i) Loans to individualsMortgage loans are secured by the underlying housing real estate. Auto loans are secured by the

underlying cars. Other consumer loans are secured by different types of collateral.


For loans collateralized by real estate with a net carrying amount of GEL 4,373 thousand

(2010: GEL 3,607 thousand) management believes that the fair value of collateral is at least equal

to the carrying amount of individual loans at the reporting date.

The Group updates the appraised values of collateral at inception of the loans to the current

values considering the approximate changes in property values. The Group obtains specific

individual valuation of collateral in case there are indications of impairment.

Auto loans

For auto loans with a net carrying amount of GEL 49 thousand (2010: GEL 187 thousand)

management believes that the fair value of collateral is at least equal to the carrying amount of

individual loans at the reporting date.

Consumer loans

Included in consumer loans are loans with a net carrying amount of GEL 930 thousand (2010:

GEL 133 thousand), which are secured by collateral with a fair value of less than the net carrying

amount of the individual loans. The fair value of collateral for these loans amounts to GEL 910

thousand (2010: GEL 128 thousand).

For consumer loans with a net carrying amount of GEL 111 thousand (2010: GEL 40 thousand)

management believes that the fair value of collateral is at least equal to the carrying amount of

individual loans at the reporting date.

For the remaining consumer loans with a net carrying amount of GEL 329 thousand (2010: GEL

129 thousand), which are neither past due nor impaired, there is no collateral or it is impracticableto determine the fair value of the collateral.

Collateral obtained

During the year ended 31 December 2011, the Group obtained assets with the carrying amount of

GEL 170 thousand by taking control of collateral securing commercial loans (2010: nil). The

Groups policy is to dispose these assets as soon as it is practicable.


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25

(d) Industry and geographical analysis of the loan portfolioLoans to customers were issued primarily to customers located within Georgia who operate in the

following economic sectors:2011

GEL000

2010

GEL000

Loans to individuals 5,792 4,096

Trade 100 417

Service 220 125

Agriculture 7 7

Manufacturing - 13

Other - 18

6,119 4,676

(e) Significant credit exposuresAs at 31 December 2011 and 2010 no individual loan balances exceed 10% of equity.

(f) Loan maturitiesThe maturity of the loan portfolio is presented in note 17(d), which shows the remaining period

from the reporting date to the contractual maturity of the loans.

12 Property, equipment and intangible assetsGEL000 Land and buildings Other Total

Cost

Balance at 1 January 2011 460 140 600

Additions 58 57 115

Disposals - (29) (29)

Balance at 31 December 2011 518 168 686

Depreciation


Depreciation for the year 12 44 56

Disposals - (7) (7)


Carrying amount

At 31 December 2011 485 79 564

Land and buildings with the carrying amount of GEL 427 thousand are pledged under loans and

borrowings (see note 14).


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26

GEL000 Land and buildings Other Total

Cost


Additions - 26 26

At 31 December 2010 460 140 600

Depreciation


Depreciation for the year 12 35 47


Carrying amounts

At 31 December 2010 439 88 527

At 1 January 2010 451 97 548

13 Other assets2011

GEL000

2010

GEL000

Accounts receivable 37 9

Total other financial assets 37 9

Repossessed assets 233 84

Prepayments 26 46

Prepaid other taxes 189 4Materials and supplies 2 2

Total other non-financial assets 450 136

Total other assets 487 145

14 Loans and borrowingsThis note provides information about the contractual terms of interest-bearing loans and

borrowings, which are measured at amortized cost. For more information about exposure to

interest rate, foreign currency and liquidity risk, see note 17.

2011

GEL000

2010

GEL000

Non-current liabilities

Secured bank loans 608 -Unsecured loans from individuals 16 35

624 35

Current liabilities

Secured bank loans 1,910 1,818

Unsecured loans from individuals 378 79

2,288 1,897

2,912 1,932


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27

(a) Terms and debt repayment scheduleTerms and conditions of outstanding loans were as follows:

31 December 2011 31 December 2010

GEL000 Currency

Nominal

interest

rate

Year of

maturity

Face

value

Carrying

amount

Face

value

Carrying

amount

Secured bank loan USD 12% 2012 988 988 1,048 1,048

Secured bank loan USD 11% 2012 104 104 - -




Secured bank loan EUR 12% 2012 562 562 770 770

Secured bank loan EUR 10% 2012 132 132 - -

Secured bank loan EUR 12% 2013 239 239 - -

Unsecured loans from

individuals USD 12%-24% 2012 303 303 35 35


individuals USD 18% 2014 16 16 - -


individuals EUR 14%-18% 2012 75 75 - -


individuals USD 8% 2011 - - 71 71


individuals GEL 8% 2011 - - 8 8

2,912 2,912 1,932 1,932

Bank loans are secured by the following:

Land and buildings with the carrying amount of GEL 427 thousand, located on 64 Mitskevichstreet, Tbilisi, Georgia, the Groups head office;

repossessed assets with the carrying amount of GEL 52 thousand located in Tbilisi, Georgia; term deposit of the shareholder of the Group.

15 Other liabilities2011

GEL000

2010

GEL000

Accounts payable 5 2

Total other financial liabilities 5 2

Prepayments received 63 41

Other taxes payable 10 -

Total other non-financial liabilities 73 41

Total other liabilities 78 43


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28

16 Equity(a)

Charter capital

Charter capital represents the nominal amount of capital in the founding documentation of the

Group.

(b) DividendsIn accordance with Georgian legislation the Groups distributable reserves are limited to the

balance of retained earnings as recorded in the Groups statutory consolidated financial statements

prepared in accordance with IFRSs. As at 31 December 2011 the Group had retained earnings of

GEL 940 thousand (2010: GEL 1,098 thousand).

On 23 February 2011, the Group declared dividends of GEL 199 thousand. The dividends werepaid to the shareholders during 2011.

17 Risk managementManagement of risk is fundamental to the microfinance business and is an essential element of the

Groups operations. The major risks faced by the Group are those related to market risk, credit

risk and liquidity risk.

(a) Risk management policies and proceduresThe risk management policies aim to identify, analyse and manage the risks faced by the Group,

to set appropriate risk limits and controls, and to continuously monitor risk levels and adherence

to limits. Risk management policies and procedures are reviewed regularly to reflect changes in

market conditions, products and services offered and emerging best practice.

The Supervisory Board has overall responsibility for the oversight of the risk management

framework, overseeing the management of key risks and reviewing its risk management policies

and procedures as well as approving significantly large exposures.

Management is responsible for monitoring and implementation of risk mitigation measures and

making sure that the Group operates within the established risk parameters. The Chief Executive

Officer (CEO) is responsible for the overall risk management and compliance functions, ensuringthe implementation of common principles and methods for identifying, measuring, managing and

reporting both financial and non-financial risks. The CEO reports directly to the Supervisory

Board.

(b) Market riskMarket risk is the risk that the fair value or future cash flows of a financial instrument will

fluctuate because of changes in market prices. Market risk comprises currency risk, interest rate

risk and other price risks. Market risk arises from open positions in interest rate, currency and

equity financial instruments, which are exposed to general and specific market movements and

changes in the level of volatility of market prices.


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29

The objective of market risk management is to manage and control market risk exposures within

acceptable parameters, whilst optimizing the return on risk.

Overall authority for market risk is vested with management. Market risks are approved bymanagement.

(i) Interest rate riskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument will

fluctuate because of changes in market interest rates. The Group is exposed to the effects of

fluctuations in the prevailing levels of market interest rates on its financial position and cash

flows. Interest margins may increase as a result of such changes but may also reduce or create

losses in the event that unexpected movements occur.

Interest rate risk arises when the actual or forecasted assets of a given maturity period are either

greater or less than the actual or forecasted liabilities in that maturity period.

Management does not have a formal policy of determining how much of the Groups exposure

should be to fixed or variable rates. However, at the time of raising new loans or borrowings

management uses its judgment to decide whether it believes that a fixed or variable rate would be

more favorable to the Group over the expected period until maturity.

Profile

At the reporting date the interest rate profile of interest-bearing financial instruments was:

2011

GEL000

2010

GEL000Fixed rate instruments

Financial assets 6,131 4,676

Financial liabilities (2,912) (1,932)

3,219 2,744

Average interest rates

The table below displays average effective interest rates for interest bearing assets and liabilities

as at 31 December 2011 and 2010. These interest rates are an approximation of the yields to

maturity of these assets and liabilities.

2011Average effective interest rate, %

2010Average effective interest rate, %

GEL USD EUR GEL USD EUR

Interest bearing assets

Loans to customers 31% 34% 34% 30% 34% 31%

Interest bearing liabilities

Loans and borrowings - 13% 12% 8% 12% 13%

The sensitivity of the Groups interest-bearing assets and liabilities to changes in interest rate

repricing risk was not significant as at 31 December 2011 and 31 December 2010.


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30

Fair value sensitivity analysis for fixed rate instruments

The Group does not account for any fixed rate financial assets and liabilities at fair value through

profit or loss. Therefore a change in interest rates at the reporting date would not affect profit andloss.

(ii) Currency riskThe Group has assets and liabilities denominated in several foreign currencies.

Currency risk is the risk that the fair value or future cash flows of a financial instrument will

fluctuate because of changes in foreign currency exchange rates. Foreign currency risk arises

when the actual or forecasted assets in a foreign currency are either greater or less than the

liabilities in that currency. The Group does not hedge its exposure to currency risk.

The following table shows the foreign currency exposure structure of financial assets andliabilities as at 31 December 2011:

GEL USD EUR Total

GEL000 GEL000 GEL000 GEL000

ASSETS

Cash and cash equivalents 13 108 19 140

Loans to customers 34 5,649 436 6,119

Other financial assets 10 20 7 37

Total assets 57 5,777 462 6,296

LIABILITIES

Loans and borrowings 3 1,657 1,252 2,912

Other financial liabilities 5 - - 5

Total liabilities 8 1,657 1,252 2,917

Net position 49 4,120 (790) 3,379

The following table shows the currency structure of financial assets and liabilities as at

31 December 2010:

GEL USD EUR Total

GEL000 GEL000 GEL000 GEL000

ASSETS

Cash and cash equivalents 16 87 62 165

Loans to customers 8 4,331 337 4,676

Other financial assets 2 7 - 9

Total assets 26 4,425 399 4,850

LIABILITIES

Loans and borrowings 8 1,154 770 1,932

Other financial liabilities 2 - - 2

Total liabilities 10 1,154 770 1,934

Net position 16 3,271 (371) 2,916


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31

A strengthening of the GEL, as indicated below, against the following currencies at 31 December

2011 and 2010 would have increased (decreased) equity and profit or loss by the amounts shown

below. This analysis is on net of tax basis and is based on foreign currency exchange rate

variances that the Group considered to be reasonably possible at the end of the reporting period.The analysis assumes that all other variables, in particular interest rates, remain constant.

2011 2010

Profit or loss

GEL000

Profit or loss

GEL000

10% appreciation of USD against GEL 350 278

10% appreciation of EUR against GEL (67) (32)

A weakening of the GEL against the above currencies at 31 December 2011 and 2010 would have

had the equal but opposite effect on the above currencies to the amounts shown above, on the

basis that all other variables remain constant.

(c) Credit riskCredit risk is the risk of financial loss to the Group if a customer or counterparty to a financial

instrument fails to meet its contractual obligations. The Group has policies and procedures for the

management of credit exposures including guidelines to limit portfolio concentration and the

establishment of a Credit Committee, which actively monitors credit risk. The credit policy is

reviewed and approved by the Supervisory Board.

The credit policy establishes:

procedures for review and approval of loan credit applications methodology for the credit assessment of borrowers methodology for the evaluation of collateralIndividual loan credit applications are originated by the relevant loan officers. Analysis reports are

based on a structured analysis focusing on the customers business and financial performance. The

Credit Committee reviews the loan credit application on the basis of submission by the loan

officers. The loan credit application and the report are then independently reviewed by the CEO.

The Group continuously monitors the performance of individual credit exposures and regularly

reassesses the creditworthiness of its customers. The review is based on the customers most

recent financial information and other information submitted by the borrower, or otherwise

obtained by the Group.

The maximum exposure to credit risk is generally reflected in the carrying amounts of financial

assets on the consolidated statement of financial position. The impact of possible netting of assets

and liabilities to reduce potential credit exposure is not significant.

The maximum exposure to credit risk from financial assets at the reporting date is as follows:

2011

GEL000

2010

GEL000

ASSETS

Loans to customers 6,119 4,676

Bank balances 12 17

Other financial assets 37 9

Total maximum exposure 6,168 4,702


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32

For the analysis of concentration of credit risk in respect of loans to customers refer to note 11.

(d) Liquidity riskLiquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated

with its financial liabilities that are settled by delivering cash or another financial asset. Liquidity

risk exists when the maturities of assets and liabilities do not match. The matching and or

controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental

to liquidity management. It is unusual for financial institutions ever to be completely matched

since business transacted is often of an uncertain term and of different types. An unmatched

position potentially enhances profitability, but can also increase the risk of losses.

The Group maintains liquidity management with the objective of ensuring that funds will be

available at all times to honor all cash flow obligations as they become due. The liquidity policy is

reviewed and approved by management.

The Group seeks to actively support a diversified and stable funding base comprising long-term

and short-term loans from banks and other financial institutions, accompanied by diversified

portfolios of highly liquid assets, in order to be able to respond quickly and smoothly to

unforeseen liquidity requirements.

The liquidity management practice includes the following:

projecting cash flows by major currencies and considering the level of liquid assets necessaryin relation thereto

maintaining a diverse range of funding sources managing the concentration and profile of debts maintaining debt financing plans maintaining liquidity and funding contingency plansThe following tables show the undiscounted cash flows on liabilities on the basis of their earliest

possible contractual maturity. The total gross outflow disclosed in the tables is the contractual,

undiscounted cash flow on the financial liability.

The liquidity analysis for financial liabilities as at 31 December 2011 is as follows:

GEL000

Demand

and less

than1 month

From

1 to 3months

From

3 to 6months

From

6 to 12months

More

than1 year

Total

gross

amountoutflow

Carrying

amount

Non-derivative liabilities

Loans and borrowings 843 74 1,093 455 697 3,162 2,912

Other financial liabilities 5 - - - - 5 5

Total liabilities 848 74 1,093 455 697 3,167 2,917


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33

The liquidity analysis for financial liabilities as at 31 December 2010 is as follows:

GEL000

Demand

and less

than1 month

From

1 to 3months

From

3 to 6months

From

6 to 12months

More

than1 year

Total

gross

amountoutflow

Carrying

amount


Loans and borrowings 71 57 58 1,898 39 2,123 1,932

Other financial liabilities 2 - - - - 2 2

Total liabilities 73 57 58 1,898 39 2,125 1,934

The table below shows an analysis, by expected maturities, of the amounts recognised in the

consolidated statement of financial position as at 31 December 2011:

GEL000

Demandand less

than1 month

From

1 to 3months

From 3 to

6 months

From

6 to 12months

More than

1 year

No

maturity Total

Non-derivative assets

Cash and cash equivalents 140 - - - - - 140

Loans to customers 526 534 834 2,142 2,083 - 6,119

Property, equipment and

intangible assets - - - - - 564 564

Deferred tax asset - - - - - 17 17

Other assets 65 8 - 233 - - 306

Total assets 731 542 834 2,375 2,083 581 7,146


Loans and borrowings 818 27 1,050 393 624 - 2,912

Income tax payable 3 - - - - 3

Other liabilities 72 6 - - - - 78

Total liabilities 893 33 1,050 393 624 - 2,993

Net position (162) 509 (216) 1,982 1,459 581 4,153

The table below shows an analysis, by expected maturities, of the amounts recognised in the

consolidated statement of financial position as at 31 December 2010:

GEL000

Demandand less

than1 month

From

1 to 3months

From

3 to 6months

From

6 to 12months

More than

1 year

No

maturity Total

Non-derivative assets

Cash and cash equivalents 165 - - - - - 165

Loans to customers 378 509 771 1,543 1,475 - 4,676

Property, equipment and

intangible assets - - - - - 527 527

Deferred tax asset - - - - - 17 17

Other assets 61 - - - - 84 145

Total assets 604 509 771 1,543 1,475 628 5,530


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34

GEL000

Demand

and less

than1 month

From

1 to 3

months

From

3 to 6

months

From

6 to 12

months

More than

1 year

No

maturity Total


Loans and borrowings 71 - - 1,826 35 - 1,932

Income tax payable - 144 - - - - 144

Other liabilities 43 - - - - - 43

Total liabilities 114 144 - 1,826 35 - 2,119

Net position 490 365 771 (283) 1,440 628 3,411

(e) Fair values versus carrying amountsManagement believes that the fair value of financial assets and liabilities approximates theircarrying amounts. The basis for determining fair values is disclosed in note 3(d).

18 Capital managementThe Groups policy is to maintain a strong capital base so as to maintain investor, creditor and

market confidence and to sustain future development of the business. Capital consists of charter

capital and retained earnings.

The debt to capital ratio at the end of the reporting period is as follows:

2011

GEL000

2010

GEL000

Total liabilities 2,993 2,119

Less cash and cash equivalents (140) (165)

Net debt 2,853 1,954

Total equity 4,153 3,411

Debt to capital ratio 69% 57%

There were no changes in the Groups approach to capital management during the year.

19 Contingencies(a) Insurance

The Group does not have full coverage for its premises and equipment, business interruption, or

third party liability in respect of property or environmental damage arising from accidents on its

property or relating to operations. Until the Group obtains adequate insurance coverage, there is a

risk that the loss or destruction of certain assets could have a material adverse effect on operations

and financial position.


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35

(b) Taxation contingenciesThe taxation system in Georgia continues to evolve and is characterised by frequent changes in

legislation, official pronouncements and court decisions, which are sometimes contradictory andsubject to varying interpretation by different tax authorities. In the event of a breach of tax

legislation, no liabilities for additional taxes, fines or penalties may be imposed by the tax

authorities after six years have passed since the end of the year in which the breach occurred.

These circumstances may create tax risks in Georgia that are substantially more significant than in

other countries. Management believes that it has provided adequately for tax liabilities based on

its interpretations of applicable Georgian tax legislation, official pronouncements and court

decisions. However, the interpretations of the relevant authorities could differ and the effect on

the financial position, if the authorities were successful in enforcing their interpretations, could be

significant.

20 Related party transactions(a) Control relationships

The Groups immediate and ultimate parent company is Laponeto Commercial LLC. The party

with ultimate control over the Group is Elena Papachristodoulou Psintrou.

No publicly available financial statements are produced by the Groups parent company.

(b) Transactions with the Management BoardTotal remuneration included in personnel expenses for the years ended 31 December 2011 and

2010 is as follows:

2011

GEL000

2010

GEL000

Employee compensation 250 191

These amounts include non-cash benefits in respect of the members of the Board of Directors and

the Management Board.

The outstanding balances and average interest rates as at 31 December 2011 and 2010 fortransactions with the members of the Management Board are as follows:

2011

GEL000

Average

interest rate,%

2010

GEL000

Average

interest rate,%

Consolidated statement of financial

position

Loans to customers 6 18% 4 20%

Loans and borrowings 3 17% - -

Amounts included in profit or loss in relation to transactions with the members of the Board of

Directors and the Management Board for the year ended 31 December are as follows:


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2011

GEL000

2010

GEL000

rofit or loss

Interest income 1 1

(c) Transactions with other related partiesThe outstanding balances and average interest rates as at 31 December 2011 and 2010 for

transactions with other related parties are as follows:

2011

GEL000

Average

interest rate,

%

2010

GEL000

Averageinterest

rate, %

Consolidated statement of financial

position

Loans and borrowings 23 18% - -

21 Events after the reporting periodOn 25 January 2012 the following decisions were made by the owners of the Group regarding

distribution of retained earnings:

pay dividends of GEL 400 thousand from the profit for the period ended 31 December 2011; after payment of dividends transfer the remaining profit for the year ended 31 December 2011

to the charter capital of the Group with a corresponding increase in the ownership percentageof owners in proportion to their holdings as at the date of decision.

In 2012, up to the issue date of these financial statements, dividends of GEL 184 thousand were

paid to owners of the Group.

Documents

EasyCred 2011 Financial statement 2011