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SIA TWINO
Annual report for the periodfrom August 5, 2015 to December 31,
2016
SIA TWINO financial statements/or the period/rom August 5,2015 to December 31,201641 Mukusalas street, Riga, L 1'-1004Registration No 40103919184
Table of contents
Page
Information on the Company
Report of the Management
Financial statements
3
4
Statement of profit or loss
Balance sheet
Statement of cash flows
Statement of changes in equity
Notes to the financial statements
7
8
10
11
12
33Independent auditor's report
2
SIA TWINO financial statements/or the period/rom August 5,2015 to December 31,201641 Mukusalas street, Riga, LV-1004Registration No 40103919184
General information
Name of the Company
Legal status of the Company
SIA TWINO
Limited liability company
Registration number, place and date 40103919184, Riga, August 5,2015
Registered office and mailing address 41 Mukusalas street, Riga, Latvia, L V-1004
Other credit granting (NACE 64.92)Business activity
Managing Director Armands Broks
Armands Broks, chairman of the Boardfrom 12.10.2016JevgeIJijs KazalJins, member of the Boardfrom 02.11.2015 to30.11.2016Etina Pu!lfe, member of the Boardfrom 04.04.2016 to11.10.2016L/ga Trupa, member of the Boardfrom 05.08.2015 to02.11.2015
05.08.2015 - 31.12.2016
Members of the board
Reporting period
Shareholder to 12.10.2016*S1A Finabay41 Mukusalas ie/a, Riga, LV-1004Equity share: 100%
from 12.10.2016
Armands BroksEquity share: 100%
*on 12.10.2016, as a result of reorganization, S1A TWINOtook over its parent company SIA Finabay
Auditor BDO Audit SIAStirnu street 6, GarkalneAdazu county, Latvia, LV-2164License No J 65
3
SIA TWINO financial statements/or the period/rom August 5,2015 to December 31,201641 Mukusalas street, Riga, LV-1004Registration No 40103919184
Management report
Business profile
SIA TWINO (hereinafter - the Company) was founded on 5 August 2015. The Company management hasprepared the financial statements for the extended period stat1ing from its foundation date, i.e. from 5 August2015 to 31 December 2016.
The primary objective of the Company's activities is to develop and maintain the peer-to-peer lending platformtwino.eu (hereinafter - twino.eu platform). Through the twino.eu platform, the Company offers investors anopportunity to earn premium returns on investments made in the EUR or GBP currencies.
In 2016, for the Company's regional development purposes, the TWINO Group (hereinafter - the Group) wasestablished. The Company acquired and established several consumer lending companies in the WesternEuropean and Eastern European regions and become the Group's holding company and competence centre.As a result, the Company provides funding for the Group's business growth, i.e. it operates as a fundraisingcentre through selling unsecured consumer loan claims to investors via the twino.eu platform. At the end of2016, the Company management executed reorganisation of the Group through merger. As a result theCompany acquired its parent company Finabay SIA. The reorganisation (merger) was completed in October2016 and the Company became the parent of several entities in Latvia, Poland, Mexico, and Georgia.
The Company's operations and financial performance in the reporting period
Since the beginning of its operations up to the end of 20 16, the Company has taken vital steps in developingthe twino.eu platform. The Company has signed seven long-term cooperation agreements for unsecuredconsumer loan assignment with the Group companies in Latvia, Georgia, Poland, Denmark, and Russia, raisedfunds for the Group companies and, in the global environment of moderate returns on investment, hasguaranteed safe investments (secured by a buyback guarantee) with high returns (I 1% on average per year).In the reporting period, the Company's the twino.eu platfonTI showed high growth rates, i.e., 5,841 customersregistered andwere successfully identified. These customerspurchased the claims for the total amount ofEUR 90,853,459.
At the end of the reporting period, the major part of the Company's assets consisted of loans to privateindividuals amounting to EUR 26,454,949, of which EUR 22,643,217 were current loans and EUR 3,811,732- non-current loans. The quality of these assets can be regarded as very high - 93% of these loans were notpast due while the others were less than 30 days overdue. Significant assets of the Company also includedloans to related companies of EUR 12,114,028 and investments into related companies of EUR 8,680,158.
The Company closed the repOl1ing period with a loss of EUR 1,738,920. Notwithstanding the Company'spositive performance regarding the operation of the twino.eu platform, at the beginning the Companymade investments for its further development (advet1ising and marketing, staff, software lease andmaintenance) which resulted in losses. It is expected that as soon as the investment value is realized, theCompany's operational model will result in profits.
In the repOl1ing period, the Company's net turnover was EUR 33,497,729, of which 69% represented the netturnover in Georgia, 26% - in Poland, 2% - in Latvia and 3% - in other countries. In the reporting period, theCompany's operating expenses amounted to EUR 35,373,739, of which financial expenses were EUR1,756,305, selling expenses - EUR 1,439,886 and administrative expenses - EUR 5,249,526 as well asoperating expenses (net) - EUR 26,928,022, which mainly consisted of portfolio assignment transactions. TheCompany's share capital was EUR 7,707,800. At the end of the reporting period, the Company's equity totalledEUR 6,117,187.In the repOl1ing period, the Company employed 43 employees on average.
4
SIA TWINO financial statements/or the periodfrom August 5,2015 to December 31,201641 Mukusalas street, Riga. LV-l004Registration No 40103919184
Management Report
Non-profit projects and activities
The Company supported several public benefit initiatives aimed at enhancing the quality of education in Latviaand suppOliing new talents and entrepreneurs, including the Mission Possible, association KIM?, foundationTechHub Riga, SSE Riga Alumni Association, etc.
In the repOliing period, the Company provided a financial support to several industry events both in Latvia andabroad, including TechChill 2016, Lendit Europe 2016, REB Forum 2016, etc. The Company played an activerole in improving the reputation of Latvian stafi-up ecosystem and participated in non-governmentalorganisations - Startin.lv and the Alternative Financial Services Association of Latvia - both by suppoliingnew entrepreneurs and organising study tours to various international events, e.g. Latitude59 in Estonia andSlush 2016 in Finland.
Financial risk management
Due to the operational specifics, the Company is exposed to various financial risks, including credit risk,liquidity risk, and foreign currency risk. The Company has introduced procedures and processes for therespective risk assessment and mitigation. A detailed description of the financial risk management is providedin the section "Financial instruments and financial risks" ofthe notes to the financial statements.
Subsequent events
Subsequent to the end of the repOlting period, the twino.eu platform continued to demonstrate high growthrates, i.e. 6,051 new customers registered and were identified accordingly by the end of February 2018. Fromthe last day of the reporting period until the date of approving these financial statements, claims for EUR160,051,427 were purchased by investors, thus the total amount of the claims purchased exceeded than EUR250 million.
In the spring of2017, the Company's the twino.eu platform introduced an additional guarantee for investors-Payment Guarantee, so allowing improvement of cash flow for non-current loans with a maturity of more thantwo months placed on the twino.eu platform. This type of guarantee offers investors a stable and foreseeablereturn on investments, as even if a borrower delays the loan repayment, the Company acts as a guarantor andmakes the monthly payments to investors on behalf of the borrower.
In 2017, the Company sold celtain investments in the subsidiaries in Romania and Spain to release and transfercapital to markets with potentially higher yields (Kazakhstan, Russia) which provide better growth and profitopportunities both for the Company and its investors. With a goal of maximising the investments of theCompany's resources in the markets with potentially higher yields and diversifying the Company's risks, in2017 granting of loans by the subsidiary in Mexico was suspended due to the high default rate. [n the summerof20 17, lending was frozen in Denmark due to the legislative changes having an adverse impact on the industryand affecting the profitability of the service.
The Company's the twino.eu platform was the first to provide investors with an opportunity to make highyield investments in the markets of Kazakhstan and Russia. In 2017, unsecured consumer loans issued by theCompany's subsidiaries Zing Kazakhstan LLP (Kazakhstan) and Ezaem 000 (Russia) were listed on theCompany's twino.eu platform.
Future prospects
The Company's management believes 2017 to be a very good year for the Company's operations. In 2017,several measures aimed at efficiency and risk diversification were carried out to to make investments in theCompany's twino.eu platform more appealing to investors (listing of the loans issued by Kazakhstan and
5
SIA TWINO financial statements/or the period/rom August 5,2015 to December 31,201641 Mukusalas street, Riga, LV-1004Registration No 40103919184
Management Report
Future prospects (continued)
Russian entities), as well as minimise the impact of operations with low profitability (suspension oflending inMexico, sale of operations in Spain).
In the future, the Company plans to offer its investors a wider range of services and yield opportunities.
ArmanChairman of the Board
2 March 2018
6
SIA TWINO financial statements/or the period/rom August 5,2015 to December 31,201641 Mukusalas street, Riga, LV-I004Registration No 40/03919184
Statement o.fpro/it or lossfrom 05.08.2015 to 31.12.2016
Notes
05.08.2015 -31.12.2016
EUR
Cost of sales
Gross profit
Selling expenses
Administrative expenses
Other operating income
Other operating expenses
Loss before corporate income tax
Corporate income tax
Loss after corporate income tax
Income from changes in deferred tax assets or liabilities
Loss for the reporting period
2
3
8
33,497,729
(1,756,305)
31,741,424
(1,439,886)
(5,249,526)
3,718,583
(30,646,605)
(1,876,010)
(5,001)
(1,881,011)
142,091
Net turnover
4
5
6
7
8
(1,738,920)
The accompanyin notes on pages 12 to 32 are an integral part of these financial statements.
Chairman of the Board
2 March 2018
7
SIA rWINO financial statements for the periodfrom August 5, 2015 to December 31, 201641 Mukusalas street, Riga, LV-}OO-lRegistration No 40103919184
Balance sheet as at 31 December 2016
Assets
Non-current assetsIntangible assets
Concessions, patents, licences, trademarks and similar rightsOther intangible assetsAdvances for intangible assets
Total intangible assetsProperty, plant and equipment
Other fixtures and fittings, tools and equipment
Total property, plant and equipmentNon-current financial assets
Investments in subsidiariesLoans to related companiesConsumer loansOther loans and non-current receivablesDeferred income tax assets
Total non-current financial assets
Total non-current assetsReceivables
Consumer loansReceivables from related companiesOther receivablesLoans to shareholders and managementPrepaid expensesAccrued income
Total receivablesCash and cash equivalents
Total current assets
Total assets
Notes31.12.2016
EUR
999
2,410928,637102,977
1,034,024
10 264,645
264,645
11 8,680,1581,067,1493,811,732
8,797142,091
1312148
13,709,927
15,008,596
121314
22,643,21711,046,879
878,3133,544
267,011336,466
1535,175,430
164,320
35,339,750
50,348,346
The accompanying notes on pages 12 to 32 are an integral part of these financial statements.
8
SIA TWINO financial statements/or the period/rom August 5,2015 to December 31,201641 Mukusalas street, Riga, LV-1004Registration No 40103919184
Balance sheet as at 31 December 2016
Equity and liabilities
EquityShare capitalOther reservesAccumulated loss:
retained earnings taken over as a result of reorganisationloss for the reporting period
Total equity 17
LiabilitiesNon-current liabilities
Issued debt securitiesPayables for assignment rightsOther borrowingsPayables to related companies
Total non-current labilitiesCurrent liabilities
Payables for assignment rightsTrade payablesPayables to related companiesTaxes and the state compulsory social insurancecontributions payableOther liabilitiesAccrued liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
Notes
16
18192021
19
21
222324
31.12.2016EUR
7,707,800
148,306(1,738,920)
6,117,187
201,3504,256,1911,751,2413,329,046
9,537,828
18,178,011637,384
15,238,978
201,753104,326332,879
34,693,331
44,231,159
50,348,346
The accompanying notes on pages 12 to 32 are an integral part of these financial statements.
Chairman of the Board
2 March 2018
9
SIA TWINO financial statements/or the period/rom August 5,2015 to December 31,201641 Mukusalas street, Riga, LV-1004Registration No 40103919184
Cash flow statement/or the period/rom 05.08.2015 to 31.12.2016
Cash flows from operating activities
I. (Loss) before corporate income taxAdjustments for:
depreciation and amortisationIntrest (income)Interest expenses
2. (Loss) before adjustments for the effect of changes in current assetsand current liabilities
Adjustments for:(increase) in receivablesincrease in trade and other payables
3. Gross cash flows from operating activities4. Interest paid
Net cash flows from operatillg activities
Cash flows from investing activitiesInvestments in subsidiaries
Acquisition of property, plant and equipment and intangible assetsLoans issuedLoans repaidInterest received
Net cash flows from illvestillg activities
Cash flows from financing activitiesProceeds from investments in share capitalProceeds from borrowingsRepayment of borrowings
Net cash flows from financing activities
Net increase of cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
Notes05.08.2015 - 31.12.2016
EUR
(1,876,0 10)
9,1023
81 114(977,588)
263,737
(2,508,747)
(32,222,679)43,909,067
9,177,641(150,647)
9,026,994
9,10(975,158)
(1,379,783)(10,389,607)
2,458,6481,216,426
(9,069,474)
16 2,800638,000
(434,000)
206,800
164,320
15 164,320
otes on pages 12 to 32 are an integral part of these financial statements.
ArmandsChairman a
2 March 2018
10
SIA TWINO financial statements/or the periodfrom August 5,2015 to December 31,201641 Mukusalas street, Riga, LV-I004Registration No 40103919184
Statement ojckunges in equityjor the period from 05.08.2015 to 31.12.2016
Notes Share Other Accumulated Total equitycapital reserves loss for the
reportingperiod
EUR EUR EUR EUR
05.08.2015 2,800 2,800
Increase in share capital 7,705,000 7,705,000
Other reserves* I
Retained earnings taken over as a result ofreorganisation * 148,306 148,306
Loss for the reporting year (1,738,920) (1,738,920)
31.12.2016 7,707,800 1 (1,590,914) 6,117,187
* Balance sheet items taken over as a result of the Company's reorganisation are described in Note Ito the financialstatements in the section on Company reorganisation.
The accompanying notes on pages 12 to 32 are an integral part of these financial statements.
Chairman a/the Board
2 March 2018
11
Sf A TWfNO financial statements for the period from August 5, 2015 to December 31, 201641 Mukusalas street, Riga, L/'-1004Registration No 40103919184
Notes to the financial statements
(1) Information on the Company's operation and significant accounting policies - generalprinciples
Corporate information
The Company was registered in the Republic of Latvia on 5 August 2015, as limited liability company TWINOwith unified registration number 40 I03919184. The registered office of the Company is at 41 Mukusalas street,Riga, LY-1004, Latvia. The Company's Chairman of the Board is Armands Broks.The Company together with related companies make up a Group. Companies within the Group are engaged inissuing unsecured consumer loans in different countries. The Company does not issue unsecured consumerloans, its primary function is to ensure continuous sufficiency of funds required for business development byselling the claims arising from unsecured consumer loans using twino.eu platform.In summer 2016 the Company's reorganization project had stalted, and it was finalised on 30 September 20 16.Through reorganization project the Company's parent company Finabay SIA was merged into the Companystarting from 12 October 2016. The Company became the parent company of OC Finance SIA (Latvia), NETCREDIT Sp. z 0.0. (Poland), FINABAY MEXICO S.A. de C.Y (Mexico) and TWINO LLC (Georgia),effectively developing into the parent company ofthe Group.The Company's auditor is Commercial Firm of Certified Auditors BOO Audit SIA with Gunta Darkevica asthe auditor in charge.
Basis of preparation
The Financial statements have been prepared in accordance with the Law of the Republic of Latvia On AnnualReports and Consolidated Annual Reports and the Law on Accounting, Cabinet Regulations No 488 OnApplication of Law on Annual Reports and Cabinet Regulations No 481 On Contents and Procedure for thePreparation of the Statement of Cash Flows and Statement of Changes in Equity. Using the deviation pennittedby law, the Company has recognised deferred tax.
The statement of profit or loss has been prepared according to the function of expense method. The statementof cash flows has been prepared under the indirect method. The financial statements are prepared on a historicalcost basis.
Significant accounting policies
The financial statements have been prepared in accordance with the following principles:a) going concern principle;b) prudence principle:
• the financial statements comprise only the profit generated to the balance sheet date;• all expected risk amounts and losses incurred during the reporting year or in the previous years have
been taken into consideration, even if identified during the period from the last day of the repoltingyear until the date of signing these financial statements;
• all impairments and depreciation have been calculated and considered irrespective of whether thefinancial result was loss or profit;
c) income and expenses incurred during the reporting year have been taken into consideration irrespective ofthe payment date or the invoice issuance date. Expenses have been matched with the respective income;
d) assets and liabilities items have been valued separately;e) all items having a material impact on the evaluation or decision making by the users of the financial
statements are presented, immaterial items are added together and their disclosure is provided in theaccompanying notes;
f) business transactions are recorded according to their substance and economic reality and not merely theirlegal form.
12
SIA TWINO financial statements/or the periodfrom August 5,2015 to December 31, 201641 Mu""usalas street, Riga, LV-I004Registration No 40103919184
Notes to the financial statements
Related parties
Related parties are individuals and legal entities which are related to the Company in accordance with therules set out below.a) A person or a close member ofthat person's family is related to a reporting entity if that person:
I. has control or joint control over the reporting entity;II. has significant influence over the reporting entity; or
Ill. is a member of the key management personnel of the reporting entity or of a parent of the reportingentity.
b) An entity is related to a reporting entity ifany of the following conditions applies:
I. the entity and the reporting entity are members of the same group (which means that each parent,subsidiary and fellow subsidiary is related to the others);
II. one entity is an associate or joint venture of the other entity (or an associate or joint venture of amember of a group of which the other entity is a member);
Ill. both entities are joint ventures of the same third party;IV. one entity is a joint venture of a third entity and the other entity is an associate ofthe third entity;v. the entity is controlled or jointly controlled by a person identified in (a);
VI. a person identified in (a)(i) has significant influence over the entity or IS a member of the keymanagement personnel of the entity (or of a parent of the entity);
VII. the entity, or any member of a group of which it is a part, provides key management personnel servicesto the repOlting entity or to the parent of the reporting entity.
A related palty transaction is a transfer of resources, services, or obi igations between related paIties, regardlessof whether a price is charged.
Financial instruments and financial risks
A financial instrument is a contract that simultaneously gives rise to a financial asset of one entity and afinancial liability or equity instrument of another entity.
The most significant financial instruments of the Company are financial assets -unsecured consumer loans toindividuals obtained as a result of assignment transaction, loans to affiliated and non-related companies andother receivables and financial liabilities - payables for assignment rights to investors of twino.eu platform,borrowings from affiliated and non-related companies, issued debt securities and trade payables stemmingdirectly from its business activity.
Financial risks related to the Company'sjinancial instruments,jinancial risk management
The key financial risks related to the Company's financial instruments include:
• Credit risk - a risk that the Company will incur financial losses if a palty to the transaction is unableto meet its contractual obligations; credit risk is mainly related to the borrowers - private individuals;
• Interest rate risk - a risk that movements in interest rates will affect the Company's income or thevalue of its pOltfolios of financial instruments;
• Country risk - a risk related to changes in legislation, which adversely can impact the Company or itstransactions with other Group companies, which is influenced by respective changes of countrylegislation;
• Currency risk - a risk that the Company will incur unexpected losses due to foreign exchange ratefluctuations;
• Liquidity risk - a risk that the Company will be unable to settle its current and future cash flow andcollateral funds for borrowing needs in order not to jeopardize the Company's daily operations or theCompany's overall financial position.
13
SIA TW1NO financial statements/or the period/rom August 5,2015 to December 31,20164 I Mukusalas street, Riga, LV-1004Registration No 4010391918-1
Notes to thefinancial statements
Financial instruments and financial risks (continued)
Credit riskCredit risk is a risk that the Company will incur financial losses if the borrower for whose loan the Companyhas purchased the underlying claim is unable to comply with the obligations that are set in the agreement.Credit risk is reduced in the following ways:
• There are established lending procedures to ensure high-quality loan portfolio in the Group's lendingcompanies. The procedures are continually improved and they include behavioural indicators as wellas credit bureau data in order to reduce the loan principal if a potential customer has doubtfulcreditworth iness.
• The Company acquires the right of claim, using individual parameters of the selection criteria for eachindividual company of the Group. Ifthe borrower, on whose debt the Company has acquired the rightto claim, delayed the repayment term of the loan for more than 30 days, the Company repossessed thisright to the Group company that issued the loan. Thereby the Company takes the credit risk only forthe period from the moment of the claim purchase until the 30th day of delay.
• The Company makes allowances for doubtful loans that are 1-30 days overdue to account for theimpact of expected losses in the statement of profit or loss. Allowances for doubtful loans are basedon experience of the Group lending companies and aggregated statistics on the history of borrowers'repayment delays.
The table below shows the gross and net client loan pOltfolio of the Company obtained as result of assignmentby the maturity of the debt. Repayment date of loans is assumed to be the final maturity date.
As of31 December 2016Not delayed and not impairedOverdue with impairmentGross client portfolioAllowances for the impairment of loansNet loan portfolio
Days overdue<=01-30
Loans, EUR25,901,5002,651,232
28,552,732(2,097,783)26,454,949
Interest rate riskIn order to minimize any interest rate risk, the Company and the Group lending entities enter into loanagreements with fixed interest rates. Given the fixed interest rates of the Company's borrowings and issuedloans, as of 31 December 2016 the Company is not exposed to significant interest rate risk.
Country riskCountry risk is being decreased by means of the control performed by Group's company management in eachseparate country following changes in legislation and regular assessment of the situation within each individualcountry.The table below shows thesplit of client loan portfolio by the country of operation.
As of31.12.2016EUR 0/0
Georgia 14,947,335 57%Poland 9,652,316 36%Latvia 792,962 3%Russia 773,434 3%Denmark 288,902 1%Total 26,454,949 100%
14
SIA TWINO financial statements/or the period/rom August 5,2015 to December 31,201641 Mukusalas street, Riga, LV-1004Registration No 4010391918-1
Notes to the financial statements
Financial instruments un financial risks (continued)
Currently Latvian peer-to-peer lending platform regulations and legislations are at development stage. Thecurrent draft legislation stipulates that the Latvian market for this type of commercial activity will require alicense in the future. The Company as the member of Alternative Financial Services Association of Latvia isinvolved in the development of regulating law and the content of the regulating law and suggestions are beingcommunicated with the Latvian Ministry of Finance. Therefore, it is not expected that the new licensing rulesmay not be feasible for the Company or threaten the Company's commercial operations and going concern inany other way.
Currency riskCurrency risk is a risk of the fluctuation in value of financial instruments, since the risk of fluctuations inforeign exchange rate affect the Company's value of assets and liabilities. The management of the Companyhas assumed that the exchange rate in countries in which economics in their legislation is tied to EUR(Denmark) could fluctuate between 0-8%, while the other currencies by the difference between the historicalminimum and maximum rate of the previous year.
The table below lists the currencies the Company has used in the reporting period, the minimum and maximumcurrency exchange rates, according to the maximum difference that each specific rate had in the reportingperiod.
In the reporting period(currency/EUR) PLN DKK GEL RUB GBPForeign exchange rates 4.4103 7.4344 2.794 64.3 0.853Maximum difference in therepOlting period 7.5% 0.4% 17.7% 31.4% 22.8%Minimum value 4.1626 7.4338 2.3886 62.9938 0.6983Maximum value 4.5005 7.4645 2.8999 91.766 0.90485
Foreign exchange rate fluctuations affect the value of the Company's assets and liabilities, as well as the profitand loss result. During the reporting period in connection with assignment transactions, the Company hadrevenues, assets, and liabilities in EUR, PLN, GEL, RUB, and DKK currencies. Operating expenses andliabilities towards twino.eu platform users were mainly in EUR and insignificant part in GBP. Revenuerecognised in GEL currency accounted for 69% of the repOlting period total turnover, revenue recognised inPLN currency accounted for 26% of the repOlting period total turnover. During the reporting period theCompany has suffered a loss from exchange rate fluctuations amounting to EUR 1 032 888, the largest palt ofthis amount relates to revaluation of balance sheet positions to GEL currency. PLN / EUR and DKK / EURexchange rates are considered as stable, because during the reporting period fluctuation range was 8%. Otherforeign currencies (GBP, USD, RUB) during the reporting period accounted for a non- essential part of thetotal turnover (1 %). Overall, the Company manages the currency risk by trying to keep balance betweenrevenues and costs in the same currency; foreign currency risk management (hedging) instruments availablein financial markets are not used.
The table below summarizes receivables and liabilities that are exposed to exchange rate fluctuations.
Currency GEL, PLN, DKK, GBP, RUB, Total,EUR EUR EUR EUR EUR EUR EUR
Financial assetsConsumer loans 792,962 14,947,335 9,652,316 288,902 773,434 26,454,949Receivables from and loans torelated parties 12,114,028 12,114,028Other lenders and receivables 890,654 890,654Cash and cash equivalents 159,346 4,974 164,320
13,956,990 14,947,335 9,652,316 288,902 4,974 773,434 39,623,951
15
SlA TW1NO financial statements for the period pom August 5, 2015 to December 31, 201641 Mukusalas street, Riga, LV-1004Registration No 40103919184
Notes to the financial statements
Financial instruments andfinancial risks (continued)
CurrencyGEL, PLN, DKK, GBP, RUB, Total,
EUR EUR EUR EUR EUR EUR EURFinancial liabilitiesOther borrowings 22,325,408 2,061,385 24,386,793Payables to related companies 4,580,580 1,500,930 11,712,888 6,468 767,158 18,568,024Other liabilities 943,463 943,463
27,849,451 1,500,930 11,712,888 6,468 2,061,385 767,158 43,898,280
Liquidity riskOne of the cornerstones of the Company's activities is to maintain sufficient level of liquidity. Liquidity riskis, on the one hand, means maintaining sufficient liquidity at lending company level to ensure that loans canbe provided to borrowers on a continuous basis, and, on the other hand, the ability of the Company to settlepayments at request of investors related the rights of claim acquired by participants in the twino.eu platform.
In order to manage the liquidity risk, the Company's management closely follows the maturity structure of itsassets and liabilities. It is important for the Company to monitor the liquidity position to third patties, inpatticular to the investors of the twino. eu platform, as debtors and creditors of related companies are settled byassessing the overall liquidity demands in the Group as a whole and at individual Group companies, based ontheir operational needs.
Liquidity risk is assessed and controlled by the Company's Finance Department. Liquidity managementensures continuous availability of funds to perform any obligations falling due. The Company's liquiditymanagement procedures include:
a) producing intra-Group and outward cash flow forecasts;
b) managing loan structure and concentration;
c) linking maturity of investments made by twino. eu platform investors to maturity of the loan portfolio;daily monitoring of cash balances in the bank accounts as well as the amount of claims of theassignment transaction partners in order to withdraw funds from the accounts of the twino.eu platform;
d) estimating the necessary cash reserve and maintaining the requisite funds as cash balances in bankaccounts.
The Finance Department produces the following forecasts:
a) loan pOltfolio cash flows, taking into account the estimated sales volumes and loan repaymentschedules as well as the possibility of early or overdue settlement or extending the maturity ofloans based on historical data;
b) refunds and repurchases due to the twino.eu platform investors;
c) operational cash flows between the Group's related companies and external suppliers and creditorson a daily basis. Based on these forecasts and plans, the Finance Department is managing daily aswell as long-term liquidity position.
The Finance Department manages daily and long term liquidity based on forecasts and plans. The Company'smanagement is continuously monitoring bank account balances and daily cash withdrawal requests by thetwino.eu platform investors from the twino.eu platform accounts. The cash reserve required to ensurecontinuous liquidity is estimated and maintained by the Company based on cash withdrawal requests by thetwino.eu platform investors and taking into account the amount that is raised from the assignment transactionpatties each day.
16
SIA 'lWINOlilluncial statements/vr the period/rulIl August 5, 2015 tu Decelllber 31, 201641 Mukusalas street, Riga, LV-1004Registration No 40 I03919184
Notes to thefinancial statements
Financial instruments and financial risks (continued)
The table below shows information about the Company's liquidity - asset and liability maturity structure basedon their contractual maturity.
As of 31 DecemberAssetsFixed and intangibleassetsInvestments in relatedcompaniesDeferred income taxassetConsumer loansReceivables from andloans to related partiesOther assetsCash and cashequivalents
up to 1 yearEUR
over 1 yearEUR
No maturityEUR
TotalEUR
11,046,8791,485,334
1,067,1498,797
1,298,669 1,298,669
8,680,158 8,680,158
142,091 142,09126,454,949
12,114,0281,494,131
164,32010,120,918 50,348,346
22,643,217 3,811,732
164,32035,339,750 4,887,678
Equity and liabilitiesShare capital 7,707,800 7,707,800Other reserves I 1Accumulated losses (1,590,614) (1,590,614)Payables for assignmentrights 18,178,011 4,256,191 22,434,202Payables to relatedcompanies 15,238,978 3,329,046 18,568,024Other liabilities 1,276,342 1,865,607 86,984 3,228,933
34,693,331 9,450,844 6,204,171 50,348,346
As at the end of the reporting period, the Company's liquidity position can be considered stable. The balanceof the Company's cash and cash equivalents at the end of reporting period was EUR 164,320. Current assets(up to I year) exceeded current liabilities by EUR 646,419. Net volume of the loan portfolio (includingexpected bad credit amount) was EUR 26,454,949, which was sufficient to cover payments due for theassignment rights (settling with investors of twino.eu platform) at amount of E R 22,434,202, when theybecome due. At the end of reporting period non-current liabilities above 1 year exceeded non-current assetvalue. The plan is to settle difference in the future through the realization of long-term investments(Investments in related companies) and from the payments of dividends from subsidiaries of the Company.
Use of derivative financial instrumentsTo date, no derivative financial instruments have been used for hedging financial risk.
Fair value offinanciai assets and liabilitiesFair value of assets and liabilities corresponds to the sum for which it is possible to exchange an asset or toextinguish debt in operation between the informed, interested and financially independent parties.Upon recognition, the Company measures financial assets and liabilities at cost, which, according to theCompany's management, corresponds to their fair value at the time of acquisition, adding any relevantadditional expenses.
17
SIA TWINO financial statements Jar the period from August 5, 2015 to December 31, 201641 Mukusalas street, Riga, LV-I004Registration No 40103919184
Notes to thefinancial statements
Reporting period
The financial statements cover 17 months from 5 August 20 IS through 31 December 2016.
Monetary unit andforeign currency translation
The functional and presentation currency of these financial statements is the euro (EUR). Transactions inforeign currencies are translated into the euro at the euro foreign exchange reference rate published by theEuropean Central Bank at the date of the transaction. Assets and liabilities denominated in foreign currenciesare translated into the euro applying the euro foreign exchange reference rate published by the EuropeanCentral Bank at the balance sheet date. Transactions as well as monetary assets and liabilities in foreigncurrencies for which the European Central Bank does not publish the euro (EUR) foreign exchange referencerate are translated using the euro exchange rate determined by the central bank of the respective country on thetransaction date. Gains or losses resulting from foreign exchange rate fluctuations are netted in the statementof profit or loss for the reporting period.
Estimates and assumptions
In preparing the financial statements, the Company makes estimates and assumptions that affect the repOltedamounts of assets and liabilities and the disclosure of off-balance sheet assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expenses for the repOlting period. TheCompany's management makes the estimates and assumptions concerning the Company's future. Actualresults could differ from those estimates.Estimates and assumptions are being constantly reviewed. Changes in accounting estimates are recognised inthe period in which estimates are reviewed if these changes only affect that period or in the period in whichestimate are reviewed and subsequent periods, if changes affect current and subsequent periods.
Loans and receivables
Acquired client consumer loans are recognised in the balance sheet at amortised cost. Amortised cost of theloan is the cost that is determined when the loan is issued, less repayments of the loan principal, plus or minusthe estimated amortisation of the difference between the initial value and the value after moment of maturity(using the effective interest rate method) minus partial write-off due to impairment.
Impairment of financial assets
At the end of repolting period, the Company performs an analysis of accounts receivable in order to assesswhether it is necessary and to what extent an allowance for the impairment of assets needs to be establishedand ind icated in the statement of profit or loss.
The core business purpose of the Company is to offer the investors of the twino.eu platform to purchase claimson loans that have been issued to solvent borrowers. The Company believes that if a borrower delays repaymentof the loan for more than 30 days, the risk that the borrower will not repay the loan in full or at all significantlyincreases. For this reason, the Company sells back the claims on loans with payments that are more than 30days overdue to its counterpalties, thus fully compensating the risk of loss to the investors of the twino.euplatform. Since more than 30 days overdue and redeemed loans with an increased risk of insolvency are notconsidered attractive business objects for fUlther trade on the twino.eu platform, the Company in the interimreporting period has sold these claims on loans back to the related lending companies for the pricecorresponding to their market value.
Based on the market value estimates, loans that are more than 30 days overdue are sold by applying discountto the remaining principal amount. These types of transactions respectively cause loss to the Company. Takinginto consideration the available historical and current loan portfolio data in related lending companies, theCompany estimates the share of claims that are expected to be overdue by more than 30 days.
In addition, the above mentioned discount is taken into consideration in the calculation, resulting in the amountof allowances for the specific asset impairment.
18
SIA TWINO financial statements/or the period/rom August 5,2015 to December 31,201641 Mukusalas street, Riga, LV-1004Registration No 40103919184
Notes to thefinancial statements
Intangible assets and property, plant and equipment
The Company recognises the cost of an item of propelty, plant and equipment as an asset if it is probable thatfuture economic benefits associated with the item will flow to the Company, and the cost of the item can bemeasured reliably. The cost of an item of property, plant and equipment comprises the purchase price,transp0l1ation costs, installation, and other directly attributable expenses related to the acquisition orimplementation.
Intangible assets are disclosed at cost less any subsequent accumulated amol1isation and accumulatedimpairment losses. Amortisation is calculated using straight-line method in order to write-off assets historicalcost during the useful life of an asset. Intangible assets are amortised over 4 to 5 years.
Property, plant and equipment are stated at acquisition cost, less accumulated depreciation and accumulatedimpairment losses.
Intangible assets:Estimated useful
life
Licences
Software
Property, plant and equipment:FurnitureComputers and office equipment
Other
5 years
4 years
5 years
4 years4 years
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and balances in bank accounts.
Disposal of financial assets and liabilities
Financial asset is disposed, when:
a) the rights to receive cash from the asset have expired; or
b) the Company has transferred its rights to receive cash from the asset or has undertaken an obligationto make immediate transfer of the all cash received to a third party as per assignment agreement; and
c) either (a) the Company has transferred all significant risks and rewards of the assets to a third palty,or (b) the Company has neither transferred nor retained all the risks and rewards of the assets, but hastransferred control over the assets to a third party.
The Company excludes financial liabilities when the contractual obligations are settled, cancelled or expired.
Revenue and expense recognition
Interest income and expense are recognised on an accrual basis applying the effective interest rate.
Accrued interest income is recognised in the statement of profit or loss if the Company does not have objectiveevidence that these payments will not be received on due date.
Commissions received from customers are recognised in the statement of profit or loss on an accrual basis atthe time when the service is provided or on the basis of certain important events.
Revenue from penalties is recognised on cash basis.
Revenue and expenses relating to the reporting period are reflected in the statement of profit or loss, regardlessof receipt or payment date.
19
SIA TWINOjinancial statements/or Iheperiodfrom Augusl5. 2015 to December 31,201641 Mukusalas streel, Riga. LV-l004Regislralion No 40 I039 I 9184
Notes to thefinancial statements
Corporate income tax
Corporate income tax of the reporting period comprises the tax assessed for the repOlting period and thedeferred tax. Corporate income tax is recognised in the statement of profit or loss unless it relates to the itemswhich are recognised in equity directly.
Tax payableThe tax payable for the reporting period is assessed in accordance with the requirements set forth in theCorporate Income Tax Law, by determining the taxable income and applying the 15% tax rate prescribed inthe law.
Deferred income taxDeferred income tax is calculated for temporary differences caused by time deviations that arise fromdifferences between assets and liabilities in the financial statements (accounts) and the amounts used fortaxation purposes. The said differences are mainly due to different propelty, plant and equipment depreciationrates used in tax and financial accounting as well as allowances, including allowances for doubtful debts.Deferred tax is assessed using the tax rates which are expected to be applicable to temporary differences whenthey will arise, based on laws and regulations in effect or expected to be in effect on the last day of the repOltingperiod. The deferred tax has been calculated using the currently effective statutory tax rate of 15%.
Deferred tax assets and liabilities are only offset if there is legal right to do so and these assets and liabilitiesare related to income, which is being taxed by the same taxing authority.
The carrying amount of deferred tax asset is reviewed at the end of each reporting period and reduced to theextent that it is no longer probable that the tax relief related thereto will be utilised.
Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of apast event and it is probable that the Company will be required to settle the obligation and a reliable estimatecan be made of the amount of the obligation.
The recognised amount of provisions is based on the best possible assessment of the likelihood that the currentobligation will be settled, taking into account the risks and unceltainties relating to this obligation. In caseswhere the amount of provisions is determined on the basis of the cash flows necessary to cover liability, netbook value for provisions is determined on the basis of expected cash flow present value.
Company reorganisation
[n summer 2016, the Company's reorganisation process was commenced, which was completed on30 September 2016. As a result, with effect from 12 October 2016 the Company took over its parent company,SIA Finabay. Assets and liabilities of both companies were merged using the consolidation method.
20
SIA TWINO financial statements/or the period/rom August 5,2015 to December 31,201641 Mukusalas street, Riga, LV-I004Registration No 401039 J 9J 84
Notes to the financial statements
Company reorganisation (continued)
The following balance sheet items were added to the Company's balance sheet:
Assets
SIAFinabay
closingbalance
EUR492,051
8,500,4383,2941,2503,500
360
Consolidationadjustment
Consolidated balance
Investments in related companiesLong-term loans to related companiesRelated company receivablesOther receivablesShort-term loans to shareholders or managementCash and cash equivalents
EUR(2,800)
(5,346,708)(3,197)
EUR489,251
3,153,73097
1,2503,500
3609,000,893 (5,352,705) 3,648,188
SIA Consolidation Consolidated balanceFinabay adjustment
closingEquity and liabilities balance
EUR EUR EURShare capital 2,845 (2,800) 45Other reservesRetained earnings taken over as a result ofreorganisation 148,262 44 148,306Issued debt securities 202,250 202,250Long-term borrowings from related parties 8,380,0 II (5,346,709) 3,033,302Other borrowings 86,984 86,984Trade payables 3,71 I (3,196) 515Payables to related companies 2,617 2,617Taxes and the state compulsory social insurancecontributions payable 88,999 (45) 88,954Other liabilities 78,568 78,568Accrued liabilities 6,646 6,646
9,000,893 {5,352,705} 3,648,188
21
SIA TWINO financial statements for the period from August 5,2015 to December 31,201641 Mukusalas street, Riga, LV-1004Registration No 40103919184
Notes to the financial statements
(2) Net turnover
Net turnover includes interest, commission and contractual penalty income generated during the reportingperiod under the consumer loan agreements (with natural persons) acquired through assignments, as well asfrom loans issued under agreements with related and unrelated companies.
Interest and commission income under loan agreementsCollected fines and contractual penaltiesInterest income under loan agreements with related partiesInterest income under other loan agreements
05.08.2015 -31.12.2016
EUR31,129,498
1,390,643825,564152,024
Type of activity
33,497,729
Net turnover by geographical regions:
GeorgiaPolandLatviaDenmarkCyprusMexicoRussiaSpainKazakhstan
05.08.2015 -31.12.2016
EUR23,194,575
8,778,936746,130423,885241,54546,94531,12927,131
7,45333,497,729
(3) Cost of sales
Salaries
05.08.2015 -31.12.2016
EUR1,407,681
170,95392,78447,42837,459
Premium to the twino.eu platform investors*Interest on received loansInterest on loans received from related parties
Amortisation of intangible assets1,756,305
* Premium to the investors ofthe twino.eu platform results from the difference between the price at which theinvestors of the twino. eu platform acquire the loan claim rights and the value of the expected cash flow fromthe acquired claim rights. It is recognised in the statement of profit or loss on accrual basis.
22
SIA TWINO financial statements/or the periodfrom August 5,2015 to December 31,201641 Mukusalas street, Riga, LV-I004Registration No 40/03919184
Notes to the financial statements
(4) Selling expenses
Marketing and adve11isingMarket researchTelecommunicationsOther distribution costs
05.08.2015 -31.12.2016
EUR1,251,909
183,720488
3,7691,439,886
(5) Administrative expenses
Business tripsDepreciation
05.08.2015 -31.12.2016
EUR2,876,220
851,438396,225333,050225,418148,064130,235118,92988,07243,65516,11422,106
Management staffSoftware maintenance and leaseDonations and sponsorshipLegal and professional feesOffice lease and maintenanceTeam building events and self-consumptionAudit feeOffice maintenance
Representation expensesOther expenses
5,249,526During the reporting period, no remuneration was assessed to the Board Members for their work at the Board.
(6) Other operating income
Income from profit sharing agreementIncome from compensation of expenses and provision of services
05.08.2015 -31.12.2016
EUR2,845,038
873,5453,718,583
(7) Other operating expenses
05.08.2015 -31.12.2016
EUR
Losses from sale of customer debtsAllowances for doubtful debtsCurrency exchange lossPenalties and fines paid
27,514,5672,097,7831,032,888
1,36730,646,605
23
SIA TWINO financial statements/or the periodfrom August 5,2015 to December 31,201641 Mukusalas street, Riga, LV-I004Registration No 40103919184
Notes to the .finan cial statements
(8) Corporate income tax of the reporting year and the deferred income tax asset
a) Corporate income tax recognised in the statement of profit or loss
Tax assessed in the tax return(Income) from changes in deferred income tax asset balances
05.08.2015 -31.12.2016
EUR5,001
(142,091)(137090)
b) Comparison of the effective corporate income tax rate
The amount of the repOlted corporate income tax expenses for the period ending on 3 I December 2016 differsfrom the amount calculated by applying the statutory tax rate to the Company's profit before tax, asdemonstrated in the table below:
(Losses) before corporate income taxTheoretically calculated corporate income tax, 15%Impact of non-deductible expensesImpact of non-taxable incomeTax deductions for donationsCorporate income tax of the reporting period
05.08.2015 -31.12.2016
EUR(1,876,010)
(281,402)471,793
(184,140)(1,250)5,001
c) Recognised deferred income tax is attributable to the following temporary d?fferences:
DepreciationAllowances for doubtful debtsNet temporary differenceNet defened income tax asset
05.08.2015 -31.12.2016
EURAssets Liabilities
1,150,508(2,097,783) -----
(947,275)-----
(142,091)
05.08.2015 -31.12.2016
EURDeferred income tax liability at the beginning of the periodDeferred income tax changes recognised in the statement of profitor lossDeferred income tax asset at the end of the period
(142,091)(142,091)
24
Sf A TW1NO financial statements/or the period/rom August 5,2015 to December 31,201641 Mukusalas street. Riga, LV-I004Registration No 40103919184
Notes to thefinancial statements
(9) Intangible assets
Acquisition cost05.08.2015Additions31.12.2016
Accumulated amortisation05.08.2015AmOltisation31.12.2016
Net book value as of31.12.2016
Concessions,patents,licences,
trademarksand similar Other intangible
righh righhEUR EUR
2,5542,554
965,952965,952
144144
2,410====~=~
(10) Property, plant and equipment
Acquisition cost05.08.2015Additions31.12.2016
Accumulated depreciation05.08.2015Depreciation charge31.12.2016
Net book value as of 31.12.2016
Advances forintangible
assetsEUR
TotalEUR
102,977102,977
1,071,4831,071,483
37,45937,459
1,034,024
Other items ofproperty, plant and
equipmentEUR
308,300308,300
43,65543,655
264,645
25
SIA TWINO financial statements for the periodfrom August 5, 2015 to December 31, 2016-II Mukusalas street, Riga, LV-I004Registration No 40103919184
Notes to thefinancial statements
(11) Investments in subsidiaries
As of 31 December 2016, the Company had the following investments in subsidiaries and related companies:
Subsidiary Country Book value of Equity of Subsidiary's The reporting Company'sthe subsidiary value of period net share in the
Company's as of balance sheet result for the shareinvestment in 31.12.2016 as of subsidiary as of capital ofsubsidiary as 31.12.2016 31.12.2016 the
of subsidiary31.12.2016 as of
31.12.2016EUR EUR EUR EUR 0/0
OC Finance SIA Latvia 426,861 53,879 2,583,214 492,386 100%
TWINO LLC Georgia 101,357 (752,413) 6,481,112 (2,302,603 ) 100%
NetCredit Aps Denmark6,721 (315,201) 328,568 (92,627) 100%
Incredit Sp. z 0.0. Poland46,588 46,515 5,771,200 1,181 100%
AD Credit Sp. z 0.0. Poland46,588 41,919 48,292 (3,470) 100%
Net Credit Sp. z 0.0. Poland 45,986 (1,626,470) 14, I00,216 (29,954) 100%
CzechMoneza Financial S.LO. Republic
100,000 292,643 782,810 57,109 100%
NetCredit IFN SA Romania195,211 167,543 175,295 (35,524) 95%
E-Zajom 000 MFK Russia 7,705,000 7,821,257 9,254,708 4,230,756 50%
Moneza 000 MKK(1167746297762) Russia 636 (139,454) 1,601,526 (121,613) 99%
Moneza 000(1167746181790) Russia
1,677 (6,879) 4,520 (7,740) 99%
Finabay Mexico S.A.(1,038,169) 359,154 (1,031,966) 99%deC.Y., Mexico
Rapido Finance S.L. Spain 3,000 (706,103) 386,742 (708,982) 100%
Zing Kazakhstan LLP Kazakhstan 533 (198,678) 160,079 (194,038) 100%
8,680,158 (3,640,389) 42,037,436 252,915
26
SIA TWINO financial statements for the period ji-om August 5, 2015 to December 31, 2016-11Mukusalas street, Riga, LV-I004Registration No 4(}103919184
Notes to thefinancial statements
(12) Consumer loans
Loan principleAccrued interestAccrued commissionsDeferred interest incomeDeferred commission incomeGross receivables from customersAllowances for impairment of receivablesfrom customersNet receivables from customers
31.12.2016EUR
27,470,1093,053,920
216,855(1,752,657)
(435,495)28,552,732
(2,097,783)26,454,949
Changes in allowances for impairment of receivables from customers:Allowances at the beginning of the reporting periodIncrease in allowancesDecrease in allowances as a result of sale of receivables from customersTotal change for the reporting periodAllowances at the end of the reporting period
14,828,620(12,730,837)
2,097,7832,097,783
As the result of the Group's assignment transactions, portfolio assets and related credit risks are transferred tothe Company, The weighted average effective interest rate on issued customer loans in the repOl1ing periodwas 152%, As at the end of the reporting period, the remaining balance of the investors of the twino,eu platformthat consisted of customer loans purchased by assignment transaction pat1ies amounted to EUR 22,434,202.
Age structure of customer debts and allowances for doubtful customer debts:Book value Allowances31.12.2016 31.12.2016
EUR EUR
Not overdue 25,901,500 (1,295,036)1-30 days overdue 2,651,232 (802,747)
28,552,732 (2,097,783)
Net book value31.12.2016
EUR
24,606,4641,848,485
26,454,949
(13) Related party receivables
Principal amounts of loans due from related companiesAccrued loan interest due from related companiesOther related palty receivables
31.12.2016EUR
11,266,242548,829
298,95712,114,028
27
SIA TWINO financial statements/or the period/rom August 5,2015 to December 31,201641 Mukusalas street, Riga, LV-1004Registration No 40103919184
Notes to the financial statements
(14) Other receivables
Principal amounts of loans due from other companiesAccrued loan interest due from other companiesOther receivables
31.12.2016EUR
664,5758,947
213,588887,110
(15) Cash and cash equivalents
Current accounts
31.12.2016EUR
164,320164,320
All the cash funds are held in the EUR currency in the current accounts with credit institutions registered inthe Republic of Latvia without any limitations being imposed on their use.
(16) Share capital
As of31 December 20 16, the fully paid and registered share capital of the Company amounts to EUR 7,707,800and consists of 7,707,800 shares with a nominal value ofEUR l.00 per share.
(17) Equity
Over the reporting period, the Company's business generated losses of EUR 1,738,920, its equity is positiveand amounts to EUR 6,117,187. The Company's Board believes that there are no circumstances which couldcast doubts on the Company's ability to continue as a going concern.
(18) Issued debt securities
As a result of the reorganization, on 12 October 2016, the Company took over private placement bondsamounting to EUR 10,000,000 EUR with the maturity on 10 September 2018 (ISIN: LV0000801884) with afixed interest (coupon) rate of 12.00 % per annum. As of the end of the repOlting period, the total nominalvalue of bonds issued by the Company was EUR 2,890,000, of which the Company itself owned bonds withthe total nominal value of EUR 2,690,000 and bonds with the total nominal value of EUR 200,000 have beensold to investors on a secondary market. At the end of repOlting period issued debt securities consist of nominalvalue of sold bonds in amount of EUR 200,000 and calculated bonds coupon of EUR 1,350.
(19) Payables for assignment rights
Short-term liabilitiesLong-term liabilities
31.12.2016EUR
18,178,0114,256,191
22,434,202
This posItion reflects the settlements with the Latvian and foreign individuals for assignment rights onconsumer loans. As of 31 December 2016, the weighted average effective interest rate for balances of theserights was 11,8%.
28
SIA TWINO financial statements/or the period/rom August 5,2015 to December 31,201641 Mukusalas street. Riga, LV-1004Registration No 40103919184
Notes to the financial statements
(20) Other borrowings
Principal amounts of loans payable to other companiesAccrued loan interest payable to other companies
31.12.2016EUR
1,730,68420,557
1,751,241
(21) Payables to related companies
Payables for acquisition of consumer loan claimsPrincipal amounts of loans payable to related companiesAccrued loan interest payable to related companiesOther payabJes to related parties
31.12.2016EUR
15,025,4122,897,583
431,463213,566
18,568,024
(22) Taxes and the state compulsory social insurance contributions payable
Taken overfrom SIA
Assessed Paid Penalty Finabay05.08.2015 05.08.2015 05.08.2015 05.08.2015
Balance BalanceTax 05.08.2015 31.12.2016 31.12.2016 3l.l2.2016 3l.l2.2016 31.12.2016
EUR EUR EUR EUR EUR EUR
Corporate income tax 5,001 278 3,510 8,789
Value added tax 374,131 (296,165) 881 78,847State social insurancecontributions 698,706 (610,325) 47 88,428
Personal income tax 401,449 (375,949) 159 25,659
Unemployment risk duty 264 (234) 30
1,479,551 (1,282,673) 1,365 3,510 201,753
(23) Other liabilities
Amounts overpaid by customersSalary
31.12.2016EUR
101,8212,505
104,326
29
SIA TWINO financial statemenlsJor Ihe periodfrom Augusl 5,2015 to December 31,201641 Mukusalas sireel. Riga, LV-1004Registration No 40/03919184
Notes to the financial statements
(24) Accrued liabilities
Accrued liabilities for received servicesAccrued liabilities for unused vacation pay
31.12.2016EUR
234,35598,524
332,879
(25) Related parties, related party transactions
During the repOiting period, in the course of its business activity the Company has entered into transactioswith related parties. As of the end of the reporting period, the list of the Company's related parties includesthe following entities:
Subsidiaries and relatedparties Status Address CountryZing Kazakhstan LLP, reg. No.
78 Masanchi Str., 050012, Almaty Kazakhstan1167746297762 SubsidiaryNetCredit ApS, reg. No. Subsidiary 18 Kronprinsessgade Str., DK-1306
Denmark36421509 Copenhagen, DenmarkRapido Finance S.L., reg. No. Subsidiary 91 Paseo de la Castellana Str., 4a,
SpainB93366862 28046 Madrid, SpainTWINO LLC, reg. No. Subsidiary 118 Tsereteli ave, Pavil ion 10, 0119
Georgia401993606 Tbilisi, GeorgiaOC Finance SIA, reg. No. Subsidiary 41 Mukusalas street, Riga LV-1004,
Latvia40103203191 LatviaIncredit Sp. z 0.0., reg. No. Subsidiary
27 aleja lana Pawla ll, 00-876, Warsaw Poland0000604092
AD Credit Sp. z 0.0., reg. No. Subsidiary87 Grzybowska Str., 00-844, Warsaw Poland0000604185
Net Credit Sp. z 0.0., reg. No. Subsidiaryul. Prosta 68, 00-838 Warsaw, Poland Poland0000401570
Moneza 000 MKK, reg. No. Subsidiary 12 Presnenskaya nab. Str., apt. 4,Russia1167746297762 Moscow, 123100
Moneza 000, reg. No. Subsidiary 12 Presnenskaya nab. Str., apt. 4,Russia1167746181790 Moscow, 123100
Moneza Financial s.r.o., reg. Subsidiary 1349/2 Yysehradska Str., Nove Mesto, CzechNo. 24286028 Prague Republic
Finabay Mexico S.A. de C.Y., Subsidiary Calle Montecito Nr.38, piso 8, oficina
reg. No. FMEI51012AWZ 28, colonia Napoles, C.P.0381 0, MexicoMexico City
NetCredit IFN SA, 69-71 Bucuresti- Ploiesti Str.,Romaniareg.No.J40/1 0 149/20 16 Subsidiary Bucharest
Finabay, SIA, reg. No. Parent company until41 Mukusalas street, Riga LY-1004 Latvia40103254681 12.10.2016
Payday Loans Sp. z 0.0. SKA,ul. Prosta 68, 00-838, Warsaw, Poland Polandreg. No. 0000424914 Related company
The Business Group Sp. z 0.0. 27 aleja lana Pawl a II, 00-876,PolandSKA, reg. No. 0000424914 Related company Warsaw, Poland
E-Zaem 000 MFK, reg. No. 12 Presnenskaya nab. Str., apt. 4,Russia1127746672130 Related company Moscow, 123 100, Russian Federation
30
SIA TWINO financial statements/or the period/rom August 5.2015 to December 31,201641 Mukusalas street, Riga, LV-1004Registration No 4010391918-1
Notes to thefinancial statements
(25) Related parties, related party transactions (continued)Subsidiaries and relatedparties Status Address Country
Affiliate Solutions SIA, reg,No. 40103744480 Related company
41 Mukusalas street, Riga LV-I004,Latvia Latvia
Company's related pal1y transactions:
Income
Income from profit sharing agreementIncome from expense compensationInterest income from loans issued to related companies
05.08.2015 -31.12.2016
EUR2,845,038
873,403825,564
4,544,005
Expenses05.08.2015 -
31.12.2016EUR
14,580,601160,619109,48292,78473,7146,3035,7071,195
Losses from sale of customer debtsRent and maintenance of premisesSoftware maintenance and leaseInterest on related party loansManagement expensesOffice maintenanceLegal and professional feesTravel expenses
15,030,405
Assets
Investments in related companiesPrincipal amounts of loans due from related companiesAccrued interest due from related companiesAccrued incomeReceivables from related companiesShort-term loans to shareholders and management
31.12.2016EUR
8,680,15811,266,242
548,829336,466298,957
3,54421,134,196
Liabilities31.12.2016
EUR15,238,9782,897,583
431,46370,012
Payables to related partiesPrincipal amount of loans payable to related partiesAccrued interest payable to related partiesAccrued liabilities
18,638,036
In the reporting period, the balance of loan portfolio issued to related parties was EUR 3,329,046, its weightedaverage annual effective interest rate was 12%.
31
SIA TWINO financial statements for the periodfrom August 5, 2015 to December 31, 201641 Mukusalas street, Riga, LV-I004Registration No 40103919184
Notes to thefinancial statements
(26) Average number of employees
Average number of employees
Average number of employees, by category
Board membersOther
(27) Labor expenses
Type of expenses
SalariesStatutory social insurance contributionsOther social security contributions
(28) Off-balance sheet liabilities and pledged assets
As of 31.12.2016, the Company had no off-balance sheet liabilities or pledged assets.
05.08.2015 -31.12.2016
4343
05.08.2015 -31.12.2016
4243
05.08.2015 -31.12.2016
EUR
2,148,117483,499
19,667
2,651,283
(29) Significant events after reporting date
In June 2017, the Company sold its subsidiary NetCredit IFN SA in Romania.Based on 9 months results in year 2017 the Company established allowances in September 2017 for theCompany's subsidiary in Spain, Rapido Finance S.L. expected losses amounting to EUR 700,000. In October2017, the Company sold its subsidiary in Spain, Rapido Finance S.L.Due to the higher than expected bad rate on loans issued by the Company's subsidiary in Mexico, FinabayMexico S.A. de C.V., its operations were suspended in spring 2017 and in September 2017 the Companyestablished allowances for expected losses ofEUR 1,316,297.Due to changes in the industry's regulatory environment and the resulting fall of the issued loan volumes, issueof loans by the Company's subsidiary NetCredit ApS in Denmark was suspended in summer 2017, Theoperations have been profitable, as a result no loss provisions needed to be made.In 2017, the Company added to the twino.eu platform's investment opportunity range consumer loans issuedby the Company's subsidi ries Zing Kazakhstan LLP (Kazakhstan) and Ezaem 000 (Russia).In 2017, the Compa aunched a new service, Payment guaranty, available to the investors of the twino.euplatform.
Chairm
2 March 2018
32
BDO BOOAudit SIAReg. Nr.40103888857Stirnu Street 6, GarkalneAdazu county, LV-2164, Latvia
INDEPENDENT AUDITORS' REPORT
To the Shareholder of TWINO SIA
Our Opinion on the Financial Statements
We have audited the accompanying financial statements of TWINO SIA (the Company), set out onpages 7 to 32 of the accompanying annual report for the period from 5 August 2015 to 31 December2016, which comprise the balance sheet as at 31 December 2016, and the statement of profit orloss, statement of cash flows and statement of changes in equity for the period from 5 August 2015to 31 December 2016, and notes to the financial statements, including a summary of significantaccounting policies.
In our opinion, the accompanying financial statements give a true and fair view of the financialposition of TWINO SIA as of 31 December 2016, and of its financial performance and cash flows forthe period from 5 August 2015 to 31 December 2016 in accordance with the 'Law on Annual Reports'of the Republic of Latvia.
Basis for Opinion
In accordance with the Law on Audit Services of the Republic of Latvia we conducted our audit inaccordance with International Standards on Auditing adopted in the Republic of Latvia (ISAs). Ourresponsibilities under those standards are further described in the Auditor's Responsibilities for theAudit of the Financial Statements section of our report_
We are independent of the Company in accordance with the International Ethics Standards Board forAccountants' Code of Ethics for Professional Accountants (IESBA Code) and independencerequirements included in the Law on Audit Services of the Republic of Latvia that are relevant toour audit of the financial statements in the Republic of Latvia. We have also fulfilled our otherprofessional ethics responsibilities and objectivity requirements in accordance with the IESBACodeand Law on Audit Services of the Republic of Latvia_
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.
Reporting on Other Information
The Company management is responsible for the other information. The other information is theManagement Report, as set out on pages 4 to 6 of the accompanying Annual Report, and Informationof the Company as set out page 3 of the accompanying Annual Report.
Our opinion on the financial statements does not cover the other information included in the AnnualReport, and we do not express any form of assurance conclusion thereon, except as described in theOther reporting responsibilities in accordance with the legislation of the Republic of Latvia sectionof our report.
In connection with our audit of the financial statements, our responsibility is to read the otherinformation and, in doing so, consider whether the other information is materially inconsistent withthe financial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.
If, based on the work we have performed and in light of the knowledge and understanding of theentity and its environment obtained in the course of our audit, we conclude that there is a material
BOO Audit SIA is a member of BOO International Limited, a UK company limited by guarantee, and forms part of the international BOO network of independent memberfirms, BOO is the brand name for the BDO network and for each of the BOO Member Firms,
BDO BDOAudit SIAReg. Nr .40103888857Stirnu Street 6, GarkalneAdazu county, LV-2164, Latvia
misstatement of this other information, we are required to report that fact. We have nothing toreport in this regard.
Other reporting responsibilities in accordance with the legislation of the Republic of Latvia
In addition, in accordance with the Law on Audit Services of the Republic of Latvia with respect tothe Management Report, our responsibility is to consider whether the Management Report isprepared in accordance with the requirements of the 'Law On the Annual Reports' of the Republicof Latvia.
Based solely on the work required to be undertaken in the course of our audit, in our opinion:
• the information given in the Management Report for the financial year for which the financialstatements are prepared is consistent with the financial statements; and
• the Management Report has been prepared in accordance with the requirements of the 'LawOn the Annual Reports' of the Republic of Latvia.
Responsibilities of Management and Those Charged with Governance for the Financial statements
Management is responsible for the preparation of the financial statements that give a true and fairview in accordance with the 'Law On the Annual Reports' of the Republic of Latvia and for suchinternal control as management determines is necessary to enable the preparation of financialstatements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company'sability to continue as a going concern, disclosing, as applicable, matters related to going concernand using the going concern basis of accounting unless management either intends to liquidate theCompany or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reportingprocess.
Auditor's Responsibility for the Audit of the Financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as awhole are free from material misstatement, whether due to fraud or error, and to issue an auditor'sreport that includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with ISAs will always detect a materialmisstatement when it exists. Misstatements can arise from fraud or error and are consideredmaterial if, individually or in the aggregate, they could reasonably be expected to influence theeconomic 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 maintainprofessional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether dueto fraud or error, design and perform audit procedures responsive to those risks, and obtainaudit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk ofnot detecting a material misstatement resulting from fraud is higher than for one resulting fromerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company's internal control.
BOO Audit SIA is a member of BOO International Limited, a UK company limited by guarantee, and forms part of the international BOO network of independent memberfirms. BOO is the brand name for the BOO network and for each of the BOO Member Firms.
IBOO BDOAudit SIAReg. Nr.40103888857Stirnu Street 6, GarkalneAdazu county, LV-2164, Latvia
• Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accountingand, based on the audit evidence obtained, whether a material uncertainty exists related toevents or conditions that may cast significant doubt on the Company's ability to continue as agoing concern. If we conclude that a material uncertainty exists, we are required to drawattention in our auditor's report to the related disclosures in the financial statements or, if suchdisclosures are inadequate, to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditor's report. However, future events or conditionsmay cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, includingthe disclosures, and whether the financial statements represent the underlying transactions andevents in a manner that achieves a fair presentation.
We communicate with those charged with governance regarding, among other matters, the plannedscope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.
BDOAudit SIACompany of Certified AuditorsLicence No 176.,
d~'Gunta DarkevicaMember of the BoardCertified auditor of LatviaCertificate No. 165
2 March 2018Riga, Latvia
BOO Audit SIA is a member of BOO International Limited, a UK company limited by guarantee, and forms part of the international BOO network of independent memberfirms. BOO is the brand name for the BOO networl~ and for each of the BOO Member Firms.