1. IPR Cover-2011 › images › publication › Annual2010.pdf · Annual Report 2010 3 MESSAGE FROM CHAIRMAN 2009 had already been a difficult year for IPR. The year 2010 has turned

Micro Finance Institution

Makes Your Live Better!

Annual Report 2010

InteanPoalroathRongroeurng Ltd.

Annual Report 2010 1

CONTENTS

• Vision and Mission ............................................................ 02

• Message from Chairman .................................................... 03

• Message from General Manager ........................................ 04

• 2010 in Numbers ................................................................ 06

• Branch Network ................................................................. 07

• History ................................................................................ 08

• Cambodia Key Economic Indicators 2010 ........................ 09

• Organisational Structure .................................................... 10

• Shareholders ....................................................................... 11

• Board of Directors .............................................................. 12

• Senior Management ........................................................... 15

• Financial Highlights ........................................................... 17

• Operational Highlights ....................................................... 19

• Staff and Capacity Building ............................................... 22

• Internal Audit and Control ................................................. 24

• Extracts from the 2010 Audited Financial Statement ........ 25

Report of the Board of Directors .................................. 26

Report of the Independent Auditors ............................ 31

Balance Sheet ............................................................... 33

Income Statement ......................................................... 34

Statement of Changes in Equity ................................... 35

Statement of Cash Flows .............................................. 36

• Branch Network and Addresses ......................................... 37


VISION & MISSION Vision “To be the leading Cambodian MFI serving the agricultural sector.”

Mission “To provide convenient financial services adapted to farmer-specific needs in order to improve their living conditions while sustaining the institution’s profitable growth.” InteanPoalroathRongroeurng Ltd. (IPR) strives to serve the farming community, which is its traditional client base.With its services, IPR wants to improve the life of its clients and at the same time generate profits for its own growth.


MESSAGE FROM CHAIRMAN

2009 had already been a difficult year for IPR. The year 2010 has turned out to be even more challenging. Although the external economic environment stabilized, the consequences of the global financial crisis continued to have a negative impact on IPR’s loan portfolio. In addition, poor management practices at one branch office and its late discovery also had a significant impact on IPR’s loan portfolio. These two factors combined had a serious impact on the quality of IPR’s loans and caused the Company to constitute large provisions against loan loss. Both the number of clients and the size of loan portfolio declined over the year, as the Company gave priority to solving its portfolio problems. Though faced with unprecedented challenge, I am very pleased to note that IPR’s Management and staff have risen to the occasion with courage and tackled the problems with great energy and commitment. Among other measures, the Company has strengthened its internal controls, tightened its credit policy and procedures, and designated dedicated staff for bad debt recovery. These efforts have already started to bear fruit and I am confident that 2011 will be a better year for IPR. Indeed, I believe that the Company, as a microfinance institution entirely devoted to the agricultural sector, is uniquely placed to benefit from the bright prospects of the agricultural markets and the policy of the Cambodian government to promote agricultural production and export. Besides granting credit to farmers as IPR has done so far, possibilities for cooperation with rice mills and other downstream stakeholders in the agricultural value chain exist that could significantly expand IPR’s clientele and business volume, while at the same time reduce risks both for the Company and for its clients. I am not the only one holding this optimistic view. As a matter of fact, Leopard Capital Fund, Cambodia’s first private equity fund, has decided to invest in IPR and become a significant minority shareholder despite IPR’s current challenges, precisely because it believes in IPR’s future. Leopard Capital Fund, which is operated by an international team of experienced financiers, will bring welcome financial and business expertise to IPR. It is IPR’s first opening up of ownership since its inception. The year 2010 may, with hindsight, turn out to be a turning point for IPR. It has not only been a year of challenges, but also a year of opportunity. I wish to thank the other Board members for the valuable guidance they have provided. On behalf of the Board of Directors, I wish to thank IPR’s Management and staff who have shown great devotion and put in hard work in 2010. I encourage them to continue to do so and am confident that the team can realize IPR’s good potential and bring its development to a higher level. The pride and honor of such an achievement will belong to them all.

OknhaPhouPuy Chairman


MESSAGE FROM GENERAL MANAGER The global economic downturn, only slowly recovering, had continued to impact Cambodian business in 2010. It has turned the year 2010, together with the previous year of 2009, into the most challenging period for IPR since its creation. Within the unfavorable external environment, an internal factor additionally compounded IPR’s woes during 2010. Poor management of one branch office and its late discovery affected the quality of loan portfolio. In accordance with prudential regulations, appropriate provisions were made. Were it not for the provisions, IPR’s revenues would have been comfortably higher than in 2009, despite a smaller portfolio size. Gross loan portfolio declined during 2010 due to tighter disbursement rules and concentration of effort on the recovery of bad loans. The year 2010 has thus been a year of challenge and struggle for us. We have learned from this experience and we hope to bring about future development and growth in a careful manner. With a clear strategic market positioning in the agricultural sector, IPR is, I believe,heading in a favourabledirection and it can achieve its vision and mission in the long run. We have always considered agriculture as a key driver for the Cambodian economic development. Our belief was vindicated by the launch of “The Policy Paper on the Promotion of Paddy Production and Rice Export” by the government in August 2010,which encourages us to continue to devote ourselves to this sector. Credit access by farmers remains a key constraint to be addressed in the development of agriculture. IPR concentratesits resources on the alleviation of this constraint and continues to strive to become the leading player in the financing of small farmers. We believe our growth will accelerate in future as some other lenders reduce their focus on agriculture and turn their attention to other sectors. The participation in IPR’s ownership by a new foreign investor in late 2010, IPR (HK), an investment company under the umbrella of Leopard Capital Fund, a private equity fund, will significantly enhance IPR’s capacity to gain a future leadership position in agricultural lending. Besides additional capital, IPR also counts on receiving technical expertise from the new shareholder to improve the Company’s policies and processes. In the context of 2010’s circumstances, IPR identified and worked on four main areas for improvement, to adapt to new circumstances and to prepare the Company for future growth: 1) Credit policy and procedures, 2) Staff capacity building and restructuring, 3) Rigorous day-to-day operational control, and 4) Upgrade of reporting system. IPR’s credit policy and procedures have been improved by the addition of extra features and methodologies. Loan disbursement and collection is to be reinforced by an additional geographical network under the supervision of IPR’s branches. Staff capacity has continuously been enhanced by the provision of capacity building programs, while some key positions will be restructured and reassigned based on the skills required and the efficiency of work of their current holders. The control of loan operations has been strengthened by a daily monitoring of transactions. And the Company has searched for a more effective MIS that allows for faster development, the implementation of which is planned for 2011. It will replace the existing MFISYS and Sage Accpac systems. All the four areas will witness continued effort in 2011.

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2010IN NUMBERS

INDICATORS 2009 2010 Variation Assets and Portfolio (10-09) %Total Assets (USD) 4,381,252 5,143,819 762,567 17.4%

Gross Loan Portfolio (USD) 3,998,599 3,497,035 (501,564) (12.5%)Number of Borrowers 4,219 3,578 (641) (15.2%)Average Loan Size (USD) 948 977 29 3.1%PAR> 30 days 14.5% 14.3% (0.2%) (1.4%)Loan Write off (USD) 39,632 245,372 205,740 519.1% Productivity (10-09) %Number of Loans per Credit Officer 156 132 (24) (15.4%)Loan Portfolio per Credit Officer (USD) 148,096 129,520 (18,576) (12.5%)Number of Loans per Staff 69 48 (21) (30.4%)Loan Portfolio per Staff (USD) 65,551 46,627 (18,924) (28.9%) Efficiency (10-09) %Gross Yield on Portfolio 30.9% 28.2% (2.7%) (8.7%)Operating Cost Ratio 14.5% 17.5% (3%) (20.7%)ROA 0.5% 0.3% (0.2%) (40%)ROE 1.1% 0.4% (0.7%) (63.6%)OSS 100.8% 91.8% (9%) (8.9%) Branch Network and Employees (10-09) %Number of Branches 6 6 0 0% Number of Operational Districts 20 22 2 10%Number of Operational Communes 77 83 6 7.8%Number of Operational Villages 312 335 23 7.4%Number of Employees 61 75 14 23%Number of Office Staff 29 42 13 44.8%Number of Field Staff 27 27 0 0%Number of Workers 5 6 1 20%Staff Recruited 16 27 11 68.8%Staff Turn Over 10 4 (6) (60%)


BRANCH NETWORK

As of December 2010, IPR operatessix branchoffices in five provinces: Kandal, Takeo,Pursat, Bat Dambang, and BanteayMeanchey. Some parts of Kampong Chhnang province are serviced by Kandal branch.


HISTORY

The company InteanPoalroathRongroeurng Ltd. (meaning Credit, Population, Prosperity in Khmer) was founded by two private Cambodian individuals, Mr. OknhaPhouPuy and Ms. HaoSimorn, in 2003. It was founded as a credit unit of the Federation of Cambodian Rice Millers Associations, to alleviate the capital constraint of rice mill entrepreneurs who lacked access to credit to expand their production. In January 2005, the Unit registered with the National Bank of Cambodia as a rural credit operator. In July in the same year, the Unit transformed into a private limited liability company and officially registered with the Ministry of Commerce under the name “InteanPoalroathRongroeurng Ltd”, IPR, with a registration number Co. 7896/05 P. The Company furthermore received a microfinance institution license, MF 014, from the National Bank of Cambodia in August 2005. As the funding situation of rice mills had gradually improved over time, IPR turned its focus to small farmers after its registration and MFI license. On June 24th2008, IPR’s MFI license was renewed by the NBC as a permanent one. On April 03rd2009, IPR re-registered following a capital injection from its existing shareholders. A new permanent MFI license that took the capital increase into account was granted by the NBC on June 19th2009. In 2010, the Company’s ownership underwent a significant change. Ms. HaoSimorn transferred the entirety of her shares in IPR with full rights to Mr. OknhaPhouPuy in July 2010. On December 31st 2010, Leopard Cambodia Fund, Cambodia’s first private equity fund operated by the international financial group Leopard Capital L.P., took a minority stake in IPR through the Hong Kong based company IPR (HK) Limited. IPR is today a member of the Cambodian Microfinance Association.


CAMBODIA KEY ECONOMIC INDICATORS 2010(1)

2007 2008 2009 2010e 2011f1. GDP

GDP % Change 10.2 6.7 -2.0 6.7 6.5

Per capita GDP ( Current Prices, US Dollars) 626.0 805.0 768.0 795.0 896.0

2. Inflation

Inflation (end year in %) 14.0 12.5 5.3 3.1 5.0

3. Public Sector

Government revenues (% GDP) 11.9 12.0 11.5 12.9 13.2

Government expenses (% GDP) 14.8 14.8 19.6 18.6 18.9

Government balance (% GDP) -2.9 -2.8 -8.1 -5.7 -5.7

4. Money and Credit (12 months percentage change)

M2 62.9 4.8 21.1 - -

Total Deposits in the Banking & MFIs system 75.0 3.7 32.7 - -

Total Loans in the Banking & MFIs system 78.0 57.0 3.4 - -

Credit Private Sector 76.0 55.0 6.5 17.0 -

5. Balance of Payments

Exports (millions US Dollars) 4,089.0 4,708.0 4,302.0 5,200.0 5,876.0

Imports (millions US Dollars) -5,432.0 -6,509.0 -5,876.0 -6,800.0 -7,616.0

Trade Balance (millions US Dollars) -1,343.0 -1,801.0 -1,574.0 -1,600.0 -1,740.0

Exchange Rate (Riel per Dollar end period) 3,999.0 4,077.0 4,169.0 4,053.0 -

1 Source: National Bank of Cambodia, IMF, World Bank and EconomyWatche: estimate ; f: forecast

Annual Report 201010

ORGANISATIONAL STRUCTURE

Unit: Internal Audit Unit: Operation

Sec: Accounting & Finance

Sec: Administration

Sec: Credit

Sec: Debt Recovery

Sec: Personnel

Sec: MIS

Sec: Training

Unit: Human Resources Unit: Finance

General Manager

Board of Directors

Audit Committee

Branch: 001 Branch: 002 Branch: 003 Branch: 004 Branch: 005 Branch: 006

GM Assistant

Risk Committee


SHAREHOLDERS

The total registered capital of the Company as at December 2010 is represented by twenty five thousand nine hundred and fifty five (25,955) shares. It isdistributed among two shareholders, Mr. OknhaPhouPuy, who holds 17,220 shares, equivalent to 66.35% of IPR’s total registered capital,and IPR (HK) Limited, which holds 8,735 shares, equal to 33.65% of IPR’s capital.

Shareholders Percentage of Shareholding Mr. OkhnaPhouPuy 66.35% IPR (HK) Limited. 33.65%

Mr. OknhaPhouPuyis a private Cambodian individual shareholder and the founder of InteanPoalroathRongroeurng Ltd. He is generally considered as one of Cambodia’s leading rural entrepreneurs. He owns a limited sole proprietorship company named “PhouPuy Investment Co., Ltd” which is active in consumer goods distribution and real estate development in the Northwest of Cambodia.Heis also a main shareholder of another private limited liability company named “Baitang (Kampuchea) Plc” which is in the rice milling and trading business. IPR (HK) Limited is a Hong Kong company owned by Leopard Cambodia Fund,Cambodia’s first private equity fundand launched in April 2008. IPR (HK) is duly represented by Mr. Scott Lewis.


BOARD OF DIRECTORS

MR. OKHNA PHOU PUY, Director, Chairman of the Board OknhaPhouPuy isthe Chairman of the Board of Directors of IPR from the initial stage of inceptionin 2005. He is the founder of the Company. OknhaPhouPuyis a successful entrepreneur starting from a rural rice miller during 1990 in BanteayMeanchey province to a reputed businessman and a well-known person in agriculture sector and rice milling industry. He diversified his business through foundinga limited sole proprietorship company, PhouPuy Investment, in 2007 and a private limited liability company, Baitang (Kampuchea) Plc, in 2008 through partnership with other owners. With his prestige in businesses, he was elected and has been serving in the position of President of Chamber of Commerce of Bat Dambang province.

MR. SCOTT LEWIS, Director, Member of the Board, Representative of IPR (HK) Limited Mr. Scott Lewis is currently a Director of the Board of Directors of IPR. His directorship ison behalf of IPR (HK) shareholder representative. Scott is Managing Partner at Leopard Capital.He has 16 years’ experience in investment banking and private equity. He was a Director of Merrill Lynch’s Global Energy & Power investment banking group in London, Houston and Calgary. Earlier he was a member of the investment teams of First Reserve Corp, an energy-focused private equity group and Sterling Group, a private equity firm investing in the US petrochemical, agribusiness and manufacturing sectors. Scott received a MPA and a BBA (Accounting) with High Honors from the University of Texas at Austin.

MR. HORT BUN SONG, Director, Member of the Board & General Manager Mr. Hort Bun Song servesas General Manager of IPR from the inception. He joined the Company since the foundation stage helping in building the initial infrastructure prior to registration of the organizationas a private limited liability company in 2005. He was invited for directorship of the Company from the start. His prior experiences include general management, public relation, and education. Prior to joining IPR, Bun Song was the Coordinator of the national rice mill network, Federation of Cambodian Rice Millers Associations. Bun Song was as an instructor of a university during 2000. Prior to this job, from 1998, he had worked in publicsector. Bun Song earned MBA and BBA in management. He also attained Senior Financial Management from Mekong Institute, Thailand, and Economic Development Policy from Kyung Hee University, Republic of Korea.


MR. CHAN SOPHAL, Director, Independent Member of the Board Mr. Chan Sophal is currently an Independent Director of the Board of Directors of IPR. He is currently serving as Advisor at the Leopard Cambodia Fund, the first multi-sector private equity fund in Cambodia. He joined the fund in January 2009. He is also President of the Cambodian Economic Association (CEA), which he took part in founding in 2002. He taught at government-owned Prek Leap Agricultural College for four years from 1992 to 1995. After that he worked for 12 years at the Cambodia Development Resource Institute (CDRI), Cambodia’s leading independent development policy research institute, conducting and publishing a considerable amount of research in the field of socio-economic development, covering poverty, food security, rural livelihood, agricultural production and trade, labor migration, and land issues. He had one-year employment with the World Food Program as a Vulnerability Analysis and Mapping Officer in 2004/05, and two years at the World Bank as Poverty Specialist in the Cambodia Country Office in 2005-2006. Mr. Chan Sophal received MSc in Agricultural Economics from the University of London, Imperial College at Wye, United Kingdom, in 2000.

MR. NARATH VEASNA, Director, Member of the Board Born in PreahVihear province, Cambodia, Mr. Narath Veasna is currently a Director of the Board of Directors of “InteanPoalroathRongroeurng Ltd”. Veasna is currently a Senior Consultant at Emerging Markets Consulting (EMC). He joined the firm in April 2010. His prior professional and business experiences include business general management, project management, human resources management, advisory services, strategies development, and education. Prior to joining EMC, Veasna was the Chief Operating Officer of First Groups Holding from 2008 to 2010.He was the second in charge in the company, reporting directly to the owner/President and CEO. From 2004 to 2007, Veasna was with the British American Tobacco (BAT). He holds a Professional Certificate of Asia Personnel Management in 2003, majoring in Human Capital Management, a Bachelor of Education in 2002, and achieved the University Diploma of Technology in 1998, majoring in Civil Engineering


MR. MAO SAVIN, Director, Member of the Board Born in Prey Veng province, Cambodia, Mr. Mao Savin is currently a Director of the Board of Directors of “InteanPoalroathRongroeurng Ltd”. He currently serves as a consultant within EMC Cambodia’s business consulting and private sector development advisory firm; Savin plays a key analytical and work-stream management role in EMC Cambodia’s projects. He has extensive project experience on EMC Cambodia’s work in the agriculture and agri-business sectors, as well as in the financial sector. Prior to joining EMC, Savin had worked for British American Tobacco for about 4 years, where he rose vertically in Finance Function from Assistant Management Accounting Manager, Budget Controller, and his last position was the Manager responsible for Risk Management, Treasury and Taxation, overseeing risk management, internal controls, treasury operations, and tax planning and compliance. Mr. Savin holds a BBA (Accounting) from Maharishi Vedic University in Cambodia. He is currently undertaking a Masters of Business (Finance) at Charles Sturt University (Australia) and the Economic and Finance Institute of Cambodia’s Ministry of Economy and Finance.He is a former Professional Level ACCA (Association of Chartered Certified Accountants)qualification student.

MR SIM HOY CHHONG, Director, Member of the Board Mr. Sim Hoy Chhoung is currently a Director of the Board of Directors of IPR. Hoy Chhoung spent 3 years as deputy chief accountant at Canadia Bank in Cambodia. Previously he taught business for 5 years in universities such as National University of Management and Pannasastra University of Cambodia. Mr. Chhoung earned a MBA from Brandeis Universityunder a Fulbright Scholarship, and won the South East Asia Supplemental Grant Award for Outstanding Fulbright Grantees. He has a Master of Economics, Royal Academy of Cambodia, and is a member of the Association of Chartered Certified Accountants (ACCA).


SENIOR MANAGEMENT

MR. HORT BUN SONG, General Manager Mr. Hort Bun Song servesas General Manager of IPR from the inception. He joined the Company since the foundation stage helping in building the initial infrastructure prior to registration of the organizationas a private limited liability company in 2005. He was invited for directorship of the Company from the start. His prior experiences include general management, public relation, and education. Prior to joining IPR, Bun Song was the Coordinator of the national rice mill network, Federation of Cambodian Rice Millers Associations. Bun Song was as an instructor of a university during 2000. Prior to this job, from 1998, he had worked in publicsector. Bun Song earned MBA and BBA in management. He also attained Senior Financial Management from Mekong Institute, Thailand, and Economic Development Policy from Kyung Hee University, Republic of Korea.

MR. HAY KIMKHORN, Finance Manager Born in 1981 in BatDambangProvince, Mr. Hay Kimkhorn obtained Bachelor Degree in Business Administration, major in Accounting, from the University of Management and Economics in 2004.He obtained a Masters Degree in Business Management in 2008 from the same university. He started his employment with InteanPoalroathRongroeurng Ltd in January 2006 in the position of Branch Assistant. In September of the same year, he was promoted to become Operation Manager.He served for a short period as temporary Branch Manager in 2008at a newly established branch in Bat Dambang Province. He has been serving as Finance Manager since January 2009. Before moving to InteanPoalroathRongroeurng Ltd, he used to work for another micro-finance institution from 2004 to 2006 in the position of bookkeeper.


MR OUK CHAN SOPHEA, Operation Manager Born in Phnom Penh, Mr. Ouk Chan Sophea has held the position of Operation Manager since January 2011. Mr. Sophea has been proposed by Leopard Capital, for which he has worked since 2009, to join IPR’s Management.He has four years of prior commercial banking experience at ANZ Royal Bank and Vattanac Bank. Under a French government scholarship, Mr. Sophea completed a Masters in International Business atUniversité Paris Sorbonne (Paris IV) in France. He also holds MM and BBA degrees from the Royal University of Law and Economics in Cambodia, and is fluent in Khmer, English and French.

MR SAM SODANEL, Internal Audit Manager Born in Phnom Penh, Mr. Sam SodaneljoinedInteanPoalroathRongroeurng Ltd in 2003 at its inception as a Credit Officer.Hewas promoted to become MIS officer in 2005, then the head of internal audit unit in early 2008. Prior to joining IPR, he started his employment as IT officer with an NGO in 2002. He obtained a Bachelor Degree in Information Technology from the Royal University of Phnom Penh in 2002 and a Masters Degree in Auditing from Vanda Institute of Accounting in 2007. He has also obtained several certificates in relation to audit and microfinance.


FINANCIAL HIGHLIGHTS

The Finance Unit is in charge of Accounting and Finance functions for the Company. It manages funds and prepares thefinancial reports in compliance with regulations of the National Bank of Cambodia, the Cambodian Taxation Laws, and the Cambodian and International Accounting Standards. Capital As of December 2010, the total capital of InteanPoalroathRongreoung, Ltd. was increased to $3,088,645 as after having a new fund injection from Leopard Cambodia Fund which through IPR (HK) Limited owns a minority stake in the company. This has proven an additional financial strength for the company’s future growths. Debt As of December 2010, InteanPoalroathRongroeurng Ltd. had outstandingborrowingstotaling $1,075,000 that was loaned bya local bank and an international microfinance investor. The finance unit has the important duty of managing and allocating these funds efficiently for the company and of foreseeing sufficient liquidity for their timely repayment.

Institution Amount in USD

Interest Rate Per Year

Rural Development Bank 875,000 9% Luxembourg Microfinance and Development Fund

200,000 8.5%

Total 1,075,000


Balance Sheet (in USD)

Description 2007 2008 2009 2010Total Assets 2,956,789 4,066,051 4,381,252 5,143,819Net Loan Portfolio

1,743,980 3,221,855 3,616,414 2,979,532

Other Assets 1,212,809 844,196 764,838 2,164,287Total Liabilities

2,009,139 2,778,405 1,850375 1,231,907

Borrowed Funds

1,900,000 2,672,000 1,700,000 1,075,000

Other Liabilities

109,139 106,405 150,375 156,907

Total Equity 947,650 1,287,646 2,530,877 3,911,912Share Capital 500,000 500,000 1,722,000 3,088,645Retained Earnings

447,650 787,646 808,877 823,267

Income Statement (in USD) Description 2007 2008 2009 2010Interest Income 625,248 1,124,229 1,121,919 1,056,131Profit Before Tax 285,370 422,796 34,561 26,659Net Profit After Tax 225,884 399,996 21,231 14,390

Expenditure (in USD) Description 2007 2008 2009 2010Interest expense 146,625 216,335 169,024 134,958Payroll and Other staff costs 135,949 179,436 301,262 296,471Depreciation expense 12,113 16,762 33,195 41,978Other operating expenses 107,491 289,791 202,818 318,709Provision for impairment loss 3,827 4,509 414,341 374,069Tax on Income & Profit 59,486 82,800 13,330 12,269Total 465,491 789,633 1,133,970 1,178,454


OPERATIONAL HIGHLIGHTS

Gross Loan Portfolio After two years of strong growth (+84% in 2008, +24% in 2009), IPR’s loan portfolio encountered a significant challenge in 2010. As of December 2010, the gross loan portfolio had decreased by 12.5% in size against end 2009. This decrease is mainly linked to a portfolio quality problem which is described in the next section.

Portfolio at Risk As of December 2010, the Company’s portfolio at risk (PAR) decreased slightly to 14.33% from 14.50% in 2009. This remain high rate of PAR was mainly caused by two factors, one external and one internal.Firstly, the global financial crisis and border problems between Cambodia and Thailand caused some difficulties for the businesses of IPR’s clients, who for example could not sell their agricultural products to traders and subsequently struggled torepay theirIPR loan as per schedule.Secondly, an internal fraud was discovered at a branch office. The branch office has subsequently been reorganized, the involved staff members have been dismissed and are being pursued in court. The company has provisioned for its bad loans and has written them off as appropriate. At the same time, it has pursued a vigorous effort to recover the loans (two dedicated bad debt recovery officers have been assigned) and it has strengthened the procedures for the disbursement of new loans. Thanks to these measures, the Company’s portfolio at risk has been on a declining trend since end 2010.

3,200,000

3,300,000

3,400,000

3,500,000

3,600,000

3,700,000

3,800,000

3,900,000

4,000,000

3,90

6,82

6

3,85

2,92

4

3,74

9,87

5

3,59

7,68

6

3,56

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Gross Loan Outstanding

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10

15

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2006 2007 2008 2009 2010

Portfolio at Risk (%)


Disbursement and Reimbursement Review As IPR’s loans are mainly destined for the agricultural sector, disbursements and reimbursementsusally follow a seasonal pattern, with disbursement highest during sowingseason and reimbursement highest after harvest.As evidenced by the chart below, Disbursements peak in the second quarter and in December, while reimbursements mainly occur after the rainy season harvest from December to May. Loan activity is low during the rainy season from August to October.

Products and Services IPR offers individual loans only, in particular to farmers living in rural areas for their agricultural productions: rice, cassava, maize, sesame and to small business owners or traders. Its loan productsare categorized into two types, working capitalloan and investment loan:

• Working Capital Loanruns from 1 month to 12 months. It finances the purchase of seeds, fertilizer and other running inputs.

• Investment Loan is set by its term from more than 12 months to 36months.It finances the purchase of equipments, machinery and other capital goods.

A number of repayment options are designed to meet clients’ needs, notably the option for balloon repayment at the end of the loan term. The repayment options are tailored to meet the client’s conditions and agreed upon bilateral discussion and negotiation with the client. This flexibility of repaymentconfers a significant competitive advantage to IPR against its competitors in the industry. IPR offers its loan products in three currencies: Khmer Riel, Thai Baht and US Dollar. Apart from an analysis of the client’s business, collateral is required to accessa loan from IPR. All loan sizes disbursed to the clients are based on an evaluation of the client’s qualifications, business prospects and capability to repay by the field staff.

0

100

200

300

400

500

600

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

324

390

383

278

545

470

410

280

301

238

270

454

526

510 56

0

494 52

8

327

193

285

225

168

385 42

5

Number of Disbursed and Reimbursed

Nbr. of loans disbursed during period Nbr. of loans reimbursed during period


Target Clients IPR’s clients arelargely farmers in rural areas. It targetsareas where there is ample potential for agricultural production and wheregood irrigation systems are available. Small business owners are also targetedby IPR, but theymake up a limited number in the portfolio. In terms of portfolio value, agricultural loans constitute 91% of IPR’s outstanding portfolio value at end 2010, while small business loans account for 9%.

As with portfolio size, the number of IPR’s clients fell in 2010, from 4219 at the end of December 2009 to 3578 a year later, a decrease of 15%.

3,200

3,300

3,400

3,500

3,600

3,700

3,800

3,900

4,000

4,100

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

4,017

3,897

3,720

3,504 3,521

3,664

3,833 3,828

3,721

3,791

3,676

3,578

Number of Borrowers 2010

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PACITY

mployees, comwereoffice s

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Staff Training Capacity buildingis very important for all levels of staff. A large number of internal and external trainingsand workshops were provided in 2010 to IPR staff in order to strengthen their competence and skillsand to improve their performance for the Company.

Trainings and workshops in 2010

Internal Trainings and Orientations External Trainings and Workshops 1. Counterfeit Detection 1. Credit Risk Management 2. Risk Management 2. Practical on Cambodian Taxation 3. Effective Communication 3. Training Techniques for Trainer 4. Sage Accpac (Acc.program),

Fixed Assets, Counterfeit Detection 4. Loan Assessment

5. Practical of Financial Record 5. HR implementation and Management 6. Job Description 6. ADA workshop on governance and human

resources 7. Practical Management and Leadership 8. Trend Micro Security Software 9. Project Proposal Preparation and Resource

Generation for IPR 10. Financing Rural Energy Enterprises 11. IAS 39 and IFRS 7


INTERNAL AUDIT AND CONTROL

The Internal Audit Unit has the mission to audit financial and operational transactions for fairness and transparency and to monitor employees’behaviourfor compliance with stated policies and procedures, all within the overall aim of achieving the Company’s objectives. The Unit operates independently under the supervision of the Audit Committee of the Board and the General Manager. In 2010, the Unit followed its set work plan, reviewed audit policy and procedures, reformulated audit approach and reporting forms, defined each individual audit staff’s duties and responsibilities, and prepared and compiled audit reports. Over the course of the year, the Unit identified mistakes, both intentional (fraud case) and unintentional,affecting branches as well as the whole company, and provided swift recommendations for remedial action. In the year 2011, theInternal Audit Unit will increase its commitment and effort and contribute to the improvement of staff performance and the accomplishment of the company’s business plan.


InteanPoalroathRongroeurng Ltd

(Extracts from the 2010 audited financial statements)

Contents Page

1. Report of the Board of Directors 26

2. Report of the independent auditors 31

3. Balance sheet 33

4. Income statement 35

5. Statement of changes in equity 35

6. Statement of cash flows 36


Report of the Board of Directors

The Board of Directors presents its report together with the audited financial statements of InteanPoalroathRongroeurng Ltd (“the Company”) for the year ended 31 December 2010.

Principal activities

The Company is principally engaged in the provisions of micro-finance services to the rural population of Cambodia. Those services comprise granting credit for poor and low-income households and small enterprises operating in the Kingdom of Cambodia.

Financial results The financial results of the Company for the year ended 31 December 2010 were as follows:

US$ Profit before income tax 26,659

Income tax expense (12,269)

Net profit for the year 14,390

Dividends No dividend was declared or paid and the Directors do not recommend any dividend to be paid for the year under review.

Share capital During the year the Company increased its registered and paid up share capital from US$1,722,000 to US$3,088,645. The Company has completed the process of amending its Memorandum and Articles of Association with the Ministry of Commerce. However, it is still pending approval from the National Bank of Cambodia.

Reserves and provisions There were no material movements to or from reserves and provisions during the financial year other than as disclosed in the financial statements.


Report of the Board of Directors (continued)

Bad and doubtful loans Before the financial statements of the Company were prepared, the Board of Directors took reasonable steps to ascertain that action had been taken in relation to the writing off of bad loans and the making of provision for doubtful loans, and satisfied themselves that all known bad loans had been written off and adequate provision had been made for bad and doubtful loans.

At the date of this report, the Board of Directors is not aware of any circumstances which would render the amount written off for bad loans or the amount of allowance for doubtful loans in the financial statements of the Company inadequate to any substantial extent.

Current assets Before the financial statements of the Company were prepared, the Board of Directors took reasonable steps to ensure that any current assets, other than loans, which were unlikely to be realised in the ordinary course of business at their values as shown in the accounting records of the Company had been written down to amounts which they might be expected to realise.

At the date of this report, the Board of Directors is not aware of any circumstances which would render the values attributed to the current assets in the financial statements of the Company misleading.

Valuation methods At the date of this report, the Board of Directors is not aware of any circumstances that have arisen which render adherence to the existing method of valuation of assets and liabilities in the financial statements of the Company misleading or inappropriate.

Contingent and other liabilities At the date of this report, there does not exist:

(a) any charge on the assets of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; and

(b) any contingent liability in respect of the Company that has arisen since the end of the financial year other than in the ordinary course of its business operations.



Contingent and other liabilities (continued) No contingent or other liability of the Company has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Board of Directors, will or may have a material effect on the ability of the Company to meet its obligations as and when they fall due.

Change of circumstances At the date of this report, the Board of Directors is not aware of any circumstances, not otherwise dealt with in this report or the financial statements of the Company, which would render any amount stated in the financial statements misleading.

Items of an unusual nature The results of the operations of the Company for the year ended 31 December 2010 were not, in the opinion of the Board of Directors, substantially affected by any item, transaction or event of a material and unusual nature.

There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Board of Directors, which affect substantially the results of the operations of the Company for the current financial year in which this report is made.

The Board of Directors The members of the Board of Directors during the period and at the date of this report are:

• OknhaPhouPuy, Chairman • Mr. Scott Alexander Lewis, Member (appointed on 30 December 2010) • Mrs. HaoSimorn, Member (resigned on 15 July 2010) • Mr. Hort Bunsong, Member • Mr. SimHuyChhong, Member • Mr. Chan Sophal, Member • Mr. Mao Savin, Member • Mr. Narath Veasna, Member

All members are non-executive board members, except Mr. Hort Bunsong, who holds the position of the General Manager.



Directors’ interests The Directors who held office at the end of the financial year and their interests in the shares of the Company are as follows:

Holding Number of % shares US$ 119 each

OkhnaPhouPuy 66.35% 17,220 IPR (HK) Limited 33.65% 8,735

100.00% 25,955

Directors’ benefits

During and at the end of the financial year, no arrangements existed to which the Company is a party with the object of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Since the end of the previous financial year, no Director of the Company has received or become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by the Directors as disclosed in the financial statements) by reason of a contract made by the Company or a related corporation with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest other than as disclosed in the financial statements.

Events since the balance sheet date At the date of this report, there have been no significant events occurring after the balance sheet date which would require adjustments or disclosures to be made in the financial statements.

Responsibilities of the Board of Directors in respect of the financial statements The Board of Directors is responsible for ascertaining that the financial statements present fairly, in all material respects, the financial position of the Company as at 31 December 2010, and its financial performance and its cash flows for the year then ended. In preparing these financial statements, the Board of Directors is required to:

adopt appropriate accounting policies which are supported by reasonable and prudent judgments and estimates and then apply them consistently;

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Report of the independent auditors To the shareholders InteanPoalroathRongroeurng Ltd

We have audited the accompanying financial statements of InteanPoalroathRongroeurng Ltd (“the Company”), which comprise the balance sheet as at 31 December 2010, and the income statement, the statement of changes in equity and the statement of cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information as set out on pages 8 to 46.

Management's responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Cambodian Accounting Standards and the guidelines of the National Bank of Cambodia relating to the preparation and presentation of financial statements, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Cambodian International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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____

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11

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1,6 2,9 2

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3,9

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uthorised fo

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44,519

605,964979,532 142,158

86,10011,343

216,95757,246

143,819

075,000114,215

42,692-

231,907

088,645 823,267

911,912

143,819

or release on

0KHR’000

180,436

6,508,97212,076,043

576,166348,963

45,973879,327232,018

20,847,898

4,356,975462,913173,031

-

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15,854,979

20,847,898

n behalf of t

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218,353,616,41

161,0986,10

8,82240,31

4,381,25

1,700,00112,53

34,233,61

1,850,37

1,722,00808,87

2,530,87

4,381,25

the Board

________

Mr.Hay KFinance M

Date: 29 A

2009 KHR’00

d) (Restated

54 209

57 91014 15,07690 67100 35823 3614 1,001

-

52 18,265

00 7,08731 46934 14210 15

75 7,714

00 7,17977 3,372

77 10,551

52 18,265

__________

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April 2011

00

d)

9,092

0,330 6,830 1,584 8,951 6,783 1,869

-

5,439

7,300 9,142 2,721 5,050

4,213

9,018 2,208

1,226

5,439

Incofor th Interes Interes

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2010US$

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134,958)

921,173

136,713

057,886

374,069)

657,158)

26,659

(12,269)

14,390

or release on

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4,280,499

(546,985)

3,733,514

554,097

4,287,611

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108,049

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58,323

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the Board

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Date: 29 A

2009 KHR’00

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82 138

77 4,111

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April 2011

00

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7,280

4,661)

2,619

8,752

1,371

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9,899)

4,085

5,573)

8,512


Statement of changes in equity for the year ended 31 December 2010 Retained Share capital earnings Total US$ US$ US$ Balance at 1 January 2009 (as previously reported) 500,000 787,646 1,287,646 Increase in share capital 1,222,000 - 1,222,000 Net profit for the year (Restated) - 21,231 21,231

Balance as at 31 December 2009 (Restated) 1,722,000 808,877 2,530,877 Increase in share capital 1,366,645 - 1,366,645 Net profit for the year - 14,390 14,390

Balance as at 31 December 2010 3,088,645 823,267 3,911,912

(KHR’000 equivalents) 12,518,278 3,336,701 15,854,979


Statement of cash flows for the year ended 31 December 2010 2010 2009 US$ KHR’000 US$ KHR’000 (Restated) (Restated) Cash flows from operating activities

Net cash generated from/(used in) operating activities 661,253 2,680,058 (317,257) (1,322,644)

Cash flows from investing activities

Purchase of property and equipment (15,379) (62,331) (112,933) (470,818) Purchase of intangible assets (5,847) (23,698) (4,252) (17,727) Proceeds from disposals of property and equipment 300 1,216 4,525 18,865

Net cash used in investing activities (20,926) (84,813) (112,660) (469,680)

Cash flows from financing activities

Proceeds from borrowings - - 950,000 3,960,550 Repayments of borrowings (625,000) (2,533,125) (1,922,000) (8,012,818) Proceeds from issue of shares 1,366,645 5,539,012 1,222,000 5,094,518

Net cash generated from financing activities 741,645 3,005,887 250,000 1,042,250

Net increase/(decrease) in cash and cash equivalents 1,381,972 5,601,132 (179,917) (750,074)

Cash and cash equivalents at the beginning of the year 268,511 1,119,422 448,428 1,830,035

Translation difference - (31,146) - 39,461

Cash and cash equivalents at the end of the year 1,650,483 6,689,408 268,511 1,119,422


BRANCH NETWORK AND ADDRESSES

Head Office

# 54, Russian Confederation Blvd, SangkatPhsarDepo 3, Khan ToulKork, Phnom Penh, Cambodia. Tel: 023 990 237 and 023 63 64 125 E-mail: [email protected] Website: www.iprmfi.com

Branch Offices

Branch 001 “Kandal”

Prek Run Village, PrekKoy Commune, S’ang District, Kandal Province Tel: 024 63 64 126 Email: [email protected]

Branch 002

“Traing”

KbalPor Village, Sambuor Commune, Triang District, Takeo Province Tel: 032 63 64 127 Email: [email protected]

Branch 003

“Phnom Proek”

Phnom Toch Village, Pichenda Commune, Phnom Preok District, Bat Dambang Province Tel: 053 63 63 734 Email: [email protected]

Branch 004

“MongkulBorey”

OuSgnout Village, BanteayNeang Commune, MongkulBorei District, BanteayMeanchey Province Tel: 054 63 85 855 Email: [email protected]

Branch 005

“Bakan”

BoengKnarVillage, Boeng Knar Commune, Bakan District, PursatProvince Tel: 052 63 90 340 Email: [email protected]

Branch 006

“Bat Dambang”

AnhchanhVillage, O’Char Commune, Bat Dambang District, BatDambangProvince Tel: 053 63 44 428 Email: [email protected]

Address # 54, Russian Confederation Blvd,

SangkatPhsarDepo 3, Khan ToulKork, Phnom Penh, Cambodia

Tel: 023 990 237 and 023 63 64 125 E-mail:[email protected]

Website:www.iprmfi.com

Documents

1. IPR Cover-2011 › images › publication › Annual2010.pdf · Annual Report 2010 3 MESSAGE FROM CHAIRMAN 2009 had already been a difficult year for IPR. The year 2010 has turned