ANNUAL REPORT 2012

ANNUAL REPORT 2012

PAPUA NEW GUINEA: Credit Corporation Finance Limited 

Port Moresby - Lae - Kokopo 

FIJI: Credit Corporation (Fiji) Limited 

Suva - Nadi - Lautoka - Nakasi 

SOLOMON ISLANDS: Credit Corporation (SI) Limited 

Honiara 

VANUATU: Credit Corporation (Vanuatu) Limited 

Port Vila

CONTENTS 

COMPANY INFORMATION 2 

CHAIRMAN'S REVIEW 4 

GROUP’S FIVE YEAR FINANCIAL SUMMARY 5 

34 YEAR HIGHLIGHTS 6 

CHIEF EXECUTIVE OFFICER’S REPORT 8 

BOARD OF DIRECTORS 13 

DIRECTORS’ MEETINGS 13 

CORPORATE GOVERNANCE STATEMENT 14 

CONSOLIDATED FINANCIAL STATEMENTS 

Directors' Report 15 

Independent Auditor’s Report 16 

Consolidated Statements of Financial Position 17 

Consolidated Income Statements 

Consolidated Statements of 

18 

Comprehensive Income 19 

Consolidated Statements of Changes in Equity 20 

Consolidated Statements of Cash Flows 

Notes to and Forming Part of the 

22 

Financial Statements 23 

SHAREHOLDER INFORMATION 69 

CREDIT CORPORATION (FIJI) LIMITED 70 

Consolidated Statements Fiji 71 

CREDIT CORPORATION (SI) LIMITED 72 

Consolidated Statements Solomon Islands 73 

CREDIT CORPORATION (VANUATU) LIMITED 74 

Consolidated Statements Vanuatu 75 

CREDIT CORPORATION FINANCE LIMITED 76 


CREDIT CORPORATION PROPERTY DIVISION 78 


CORPORATE DIRECTORY IBC 

CREDIT CORPORATION ANNUAL REPORT 2012 1

2 

C O M P A N Y I N F O R M A T I O N 

Credit Corporation (PNG) Limited commenced business in 

1978 as a general finance company. It has grown successfully 

to become recognised as one of Papua New Guinea and the 

South Pacific’s most progressive financial institutions. 

The Company specialises in providing the following range of 

financial products and services: 

• Chattel Mortgage and Lease Finance for customers to acquire 

a wide variety of motor vehicles, heavy machinery and plant 

and equipment for commercial and business use. 

• Variable Rate Contracts for business or property purchases. 

• Specially tailored financial packages. 

• Attractive investment facilities. 

In addition, through its subsidiary companies, the Credit 

Corporation Group owns and manages a portfolio of prime real 

estate assets. 

Shareholders have received a dividend each year since the 

incorporation of the Company in 1978. 

The Credit Corporation Group presently owns assets valued at 

K1.009 billion and operates offices in Port Moresby, Kokopo and 

Lae in Papua New Guinea, in Suva, Nadi, Lautoka and Nakasi in Fiji, 

in Honiara in the Solomon Islands and in Port Vila in Vanuatu. 

Credit Corporation (PNG) Limited is a registered company under 

the Papua New Guinea Companies Act 1997 and is incorporated 

and domiciled in Papua New Guinea. 

CREDIT CORPORATION ANNUAL REPORT 2012

CREDIT CORPORATION ANNUAL REPORT 2012 

3

4 

Garth McIlwain CBE - Chairman 

A further year of pleasing growth in total Group assets – total 

Group assets now exceed one billion kina – and increased 

profitability is recorded for 2012: 

• Group core business cash operating profit for 2012 was 

K80.79 million, a steady increase from the 2011 result of 

K74.16 million; 

• Group total assets reached K1,008.94 million, a significant 

increase when compared to the 2011 figure of K890.56 

million; 

• Shareholders’ equity reached K711.02 million up from 

K633.86 million; and 

• A dividend payment totalling K31.74 million was 

distributed to shareholders during August 2012, this 

representing an increase of 25% when compared to the 

sum of K25.31 million distributed during 2011. 

Strong volumes of new finance contracts were settled in Papua 

New Guinea during 2012, a significant number being related to 

the construction of the PNGLNG project. As the LNG Project 

construction stage is trending towards completion, the volumes 

of new LNG related financing opportunity may well disappear as 

2013 progresses. In Fiji new finance contract levels showed a 

slightly reduced volume when compared to recent years. This is 

not surprising as the Fiji economy remains subdued. Reduced 

volumes also featured in Vanuatu. This was expected as the 

growth achieved since establishment has matured to what 

seems to be a sustainable level. Solomon Islands continued its 

recent strong growth trend. The Solomon Islands subsidiary too 

has now reached a level of assets that seems appropriate for the 

Solomon Islands economy. In all, the overall indicators are that 

all finance company activities have reached a sustainable level 

with future growth opportunity that will be directly related to 

large projects that appear from time to time that stimulate 

demand for financing facilities. 

The Port Moresby executive office and residential properties 

continue to perform well with no vacancies. This trend is 

expected to continue during 2013. The new 20 executive 

apartments at Era Dorina will be completed later this year and it 

is anticipated these will be occupied by year end. 

A recovery in share trading price levels on the Port Moresby 

Stock Exchange has now arrested the negative adjustment to 


C H A I R M A N ’ S R E V I E W 

annual profitability for the past three years. At year end, Bank of 

South Pacific Limited (BSP) shares were trading at K8.06, up from 

K7.53 at end 2011. This is the major reason for the positive 

adjustment of K21.94 million in the investments revaluation 

figure. 

The property portfolio was subject to formal valuation during 

the latter part of 2012 in accord with the three yearly revaluation 

requirement. This too resulted in a positive adjustment to the 

value of Credit House and the Era Dorina executive apartment 

development. The sum of K47.75 million has been booked in 

this regard. 

The after tax profit outcome for 2012, following the revaluation 

adjustments is K106.93 million, a significant increase from the 

2011 result of K42.10 million. 

During November 2012 the On Market Share Buy Back Scheme 

that allowed shareholders to dispose of up to 5,000 shares via 

this scheme expired. 

Your Board has now extended the On Market Share Buy Back 

Scheme under a reviewed level. Shareholders can now dispose 

of up to 20,000 shares under the revised 2012 scheme. The sum 

of K5.00 million has been reserved to facilitate the scheme. 

During late December 2012 an unsolicited, non-binding offer 

was received from BSP for the purchase of the Group’s subsidiary 

finance companies in Papua New Guinea, Fiji, Vanuatu and the 

Solomon Islands. The prospective offer is subject to due 

diligence and various regulatory approvals in each of the four 

nations. Should a firm offer eventuate, Board consideration and 

shareholder consideration will proceed. Shareholders will be 

kept informed with market releases through the Port Moresby 

Stock Exchange. 

The pleasing results during 2012 indicate the continued 

dedication and commitment by the Group’s executive and 

support staff. My fellow Board members also play a crucial role 

in formulating the future strategic directions of the Group. 

Continued shareholder support is also important for ongoing 

stability. To you all my sincere appreciation for facilitating yet 

another successful year. 

Garth McIlwain 

CHAIRMAN

G R O U P ’ S F I V E Y E A R F I N A N C I A L S U M M A R Y 

2008 2009 2010 2011 2012 

Profit and Loss (K'000) 

Core Operating Profit 42,017 45,033 68,244 74,158 80,786 

Property Revaluations - 46,004 - - 47,752 

Investment Revaluations 114,411 (58,672) (24,682) (15,721) 21,937 

Operating Profit before Tax & after Revaluations 156,428 32,365 43,562 58,437 150,475 

Income Tax 12,395 10,713 14,067 16,332 43,548 

Operating Profit after Tax attributable to the Group 144,033 21,652 29,495 42,105 106,927 

Retained Earnings 159,483 176,677 208,006 242,169 257,736 

Dividends (K'000) 

Dividend Paid 15,349 15,486 21,790 25,306 31,737 

Balance Sheet (K'000) 

Finance Receivables 197,750 198,500 271,906 270,414 332,583 

Total Assets 779,743 810,828 849,552 890,555 1,008,939 

Deposits 119,458 152,853 177,149 211,743 229,411 

Shareholders' Funds 614,736 617,626 629,168 633,858 711,021 

Performance Ratios 

Return on Assets 5.4% 5.6% 8.0% 8.3% 8.0% 

Return on Equity 6.8% 7.3% 10.8% 11.7% 11.4% 

Expense/Income 38.0% 37.4% 38.8% 31.6% 34.4% 

Key Prudential Ratios 

Capital Adequacy 52.1% 53.7% 46.4% 48.0% 39.2% 

Liquid Asset Ratio 232% 179% 179% 160% 157% 

Leverage Ratio 40.7% 35.5% 35.6% 30.8% 29.7% 

Net Asset Backing Per Share 1.98 1.98 2.01 2.00 2.23 

Exchange Rates (One (1) PNG Kina buys): 

Fiji Dollar 0.6948 0.7494 0.7074 0.8921 0.8866 

Solomon Islands Dollar 3.0285 3.1395 2.9187 3.6400 3.7102 

Vanuatu Vatu 41.1200 35.0200 34.8200 42.8500 44.1900 

(Sources - BSP & ANZ) 


6 

1978 

Company incorporated on 25 April. Business commenced in 

June at Four-Mile, Port Moresby. By year end shareholders' equity 

had reached K501,016 and a trading profit of K38,201 was 

achieved. 

1979 

Operations relocated to Badili. Public share issue resulted in 

339,105 additional shares being issued. Total assets had reached 

nearly K5 million. Rabaul Branch established. 

1980 

Company awarded land at Gordons 5 and plans commenced to 

build nine townhouses at this location. Shareholders' equity 

passed the K1.5 million mark. 

1981 

Total assets exceed K6.4 million. Operating profit of K293,950 

achieved. A recession hits PNG. 

1982 

Construction of nine townhouses completed at Gordons 5 in the 

National Capital District. 

1983 

Shareholders' equity passed the K2 million mark. 

1984 

An additional six townhouses completed at Gordons 5. 

Company operations relocated to ADF House. 

1985 

Assets reached K16.3 million and an operating profit of K626,302 

was achieved. 

1986 

A further 537,000 shares were issued. Negotiations completed 

for the purchase of land in Cuthbertson Street, downtown Port 

Moresby. Shareholders' equity approached K4 million. 

1987 

A residential town subdivision lease was secured over land at Ela 

Makana in Port Moresby. Assets pass the K20 million mark. A 

public share issue raises a further 1,777,727 shares. 


3 4 Y E A R H I G H L I G H T S 

1988 

A tender of K7.6 million was accepted for construction of a highrise 

office building in downtown Port Moresby. Nine 

townhouses constructed at "Era Dorina" Stage 1. Company 

assets exceed K30 million. 

1989 

Construction of a further 12 townhouses commissioned at "Era 

Dorina" in Port Moresby. 

1990 

"Credit House" opened in September. The 12 townhouses 

completed at "Era Dorina". Revaluation of assets increased 

shareholders' equity to K12 million. 

1991 

24 new apartments commenced at "Era Dorina" Stage 2. First 

profit of over K1 million achieved. 

1992 

Credit Corporation (Fiji) established and returns an inaugural 

profit of FJD66,638 while total assets exceeded FJD5 million. The 

24 apartments at "Era Dorina" completed and tenanted. 

1993 

Founding Chairman, Sir Albert Maori Kiki KBE passed away. Sir 

Henry ToRobert KBE appointed as Chairman. Decision taken to 

build a further 12 apartments at "Era Dorina". Equity acquired in 

the Bank of South Pacific Limited as a long term strategic 

investment. Group profit exceeded K3 million. 

1994 

Construction of 12 additional apartments at "Era Dorina" Stage 2 

completed bringing the total at the "Era Dorina" estate to 57 fully 

tenanted townhouses/apartments. Serious volcanic damage in 

Rabaul necessitates a special provision of K450,000 to cover 

possible losses. Credit Corporation (Fiji) Limited is issued with a 

credit institution licence by the Reserve Bank of Fiji. 

1995 

Revaluation of property increases shareholders' equity to K25.6 

million and assets to K118.17 million. Five additional townhouses 

purchased at Gordons 5. Focus Finance established in Australia.

1996 

Shareholders' equity reaches K27.5 million and Group operating 

profit exceeds K4 million. Focus Finance affected by interest rate 

war in Australia. This investment written off. 

1997 

Office established in Nadi, Fiji. Group records trading profit of 

K8.07 million while Group assets exceed K155 million. The Fiji 

subsidiary achieves a record profit of FJD2.09 million. 

1998 

Economic recession develops in both Papua New Guinea and 

Fiji. Group trading profit of K9,176,973 recorded. 

1999 

Subdued economic conditions continue, however Group 

trading profit of K6,852,266 achieved. Application for listing of 

the Company shares on POMSoX lodged. 

2000 

Company listed on POMSoX. Coup takes place in Fiji. Subdued 

economic conditions and high interest rates continue. Group 

assets exceed K200 million and shareholders' equity reaches 

over K55 million. 

2001 

Group records trading profit of K11,068,073. Interest rates start to 

ease. Political stability returns to Fiji following general elections. 

2002 

Violence mars Papua New Guinea general elections. Recession 

grips Papua New Guinea. Group assets exceed K243 million and 

shareholders' equity reaches K85 million. 

2003 

Group posts record trading profit K25,579,248. Treasury Bills 

reach year high of 19.69%. Fiji operations show significant 

increase in profitability to FJD2,704,228. 

2004 

Total assets reach K306,531,010. Lae Branch established. 

3 4 Y E A R H I G H L I G H T S 

2005 

Group records trading profit K114,125,633 for 2005. 

Total assets reach K408,483,313. Credit Corporation (SI) Limited 

established in Honiara, Solomon Islands. Construction begins on 

Stage 3 at Era Dorina. 

2006 

Riots in Honiara affect Solomon Islands result. Fiji experiences 

military coup. 

2007 

Group records trading profit of K187,036,567. Total assets reach 

K681,383,423. Credit Corporation (Vanuatu) Limited established 

in Port Vila, Vanuatu. Office established in Lautoka, Fiji. Credit 

House, 10 Gorrie St, Suva opened. Stage 3 of Era Dorina, 18 

townhouses completed and fully tenanted. Dividend 

Reinvestment Scheme introduced. 

2008 

Global financial crisis pushes most of the world towards 

recession. 

2009 

Total assets reach record K811,356,679. Stage 4 Era Dorina, 18 

executive apartments completed and fully tenanted. 

2010 

Construction of the US$19 billion PNG LNG Project begins. K2 

million On Market Share Buy Back launched. Property purchased 

in Lae for new branch office. 

2011 

Construction of 20 executive one bedroom units commissioned 

at Era Dorina. 

2012 

Total assets reach record K1.009 billion. Ela Makana 

Developments Limited purchased. 


8 

Our business performed exceptionally well in 2012, achieving a 

record core underlying profit in line with the guidance we 

provided. The growth of the Papua New Guinea economy, 

arising largely as a result of the ongoing US$19 billion Exxon 

Mobil led PNGLNG project has continued during 2012. This 

growth has laid the foundation for another highly successful 

year with our core business of finance and property enjoying 

continued demand and earnings growth. Whilst this demand is 

expected to level out during 2013 the Company is well 

positioned with a growing business and a very strong balance 

sheet. 

Credit Corporation (PNG) Limited and its subsidiaries recorded a 

record core operating profit of K80.79 million for the year ended 

31 December 2012, 9% above the 2011 result. The Group 

recorded a net profit after tax of K106.93 million for the same 

period, 154% above the 2011 result. 

We are at last seeing an improvement in the value of our Bank of 

South Pacific Limited (BSP) shares on the Port Moresby Stock 

Exchange. After three years of heavy losses it is pleasing to see 

that the sum of K21.94 million was booked to the profit and loss 

account due to the increased value of our BSP shares. Hopefully 

the Bank’s long running “Transformation and Modernisation” 

exercise will soon be at an end and shareholders will see some 

real value from their BSP shareholding. 

Shareholders’ equity has continued the growth of the last few 

years, and has now reached K711.02 million while total assets 

have grown to a record K1,008.94 million. Net asset backing per 

share is K2.23 as at 31 December 2012 and our expense to 

income ratio has increased slightly to 34.4%. All in all, an 

excellent year. 

During 2012, the Company’s On Market Share Buy Back Scheme 

that was introduced during 2010 was extended to the end of 

2013. The Buy Back has proven to be popular with shareholders 

and besides stabilising the fluctuations in the Company’s share 

price on the Port Moresby Stock Exchange, it has enabled 

shareholders to sell their shareholding at a fair and reasonable 

price. Over 80% of our shareholders hold under 20,000 shares 

and the Buy Back has enabled them to sell their shares into the 

scheme with no brokerage or other fees. 


C H I E F E X E C U T I V E O F F I C E R ’ S R E P O R T 

Robert Allport - Chief Executive Officer 

Kina (K’000) 

Kina (K’000) 

42,017 

Core Operating Profit 

45,033 

2008 2009 2010 

15,349 15,486 

68,244 

Dividends Paid 

21,790 

74,158 

2011 

25,306 

2008 2009 2010 2011 

80,786 


31,737 

2012

Kina (K’000) 

Kina (K’000) 

779,743 


2008 2009 2010 2011 

614,736 

810,828 

Total Assets 

849,552 

890,555 

Total Shareholders’ Equity 

617,626 

629,168 

2008 2009 2010 

633,858 

2011 

1,008,939 


711,021 


409,643 413,781 

352,023 

414,144 

2008 2009 2010 2011 2012 

Credit House Limited 

BSP Investment 

328,014 

415,207 

310,715 

Fair Value (K’000) No. of Shares 

321,178 

41,264 39,848 

Credit House produced its most successful result in 2012 posting 

a net profit before tax of K7.6 million. The revaluation of the 

building in October 2012 set the value of the building at K61.87 

million which more than justifies the capital expenditure of the 

major refurbishment of the building. 

We expect rental rates to remain static with the new commercial 

space in the market, but we believe Credit House remains an 

attractive commercial address and will be able to maintain good 

occupancy rates into the future. Older buildings in the CBD that 

have not invested in renewing their systems and services will 

find it increasingly difficult to compete in the market and we 

expect market activity will largely be based on existing tenants 

moving to newer space. 

2011 


10 



Stage 5, Era Dorina, Port Moresby under construction


Artists Impression - Future Ela Makana Residential Development 

Era Dorina Limited 

Era Dorina Estate enjoyed another successful year in 2012 

posting a net profit before tax (after property revaluation) 

of K18.94 million. This was an increase of 8.5% on the 

previous year’s performance and continues a trend of strong 

performances in an increasingly competitive market. 

The revaluation of the property in October 2012 produced an 

increase of 37% on the book value and demonstrates strong 

asset appreciation. 

Despite rental rates peaking in 2012, we believe Era Dorina 

Estate provides a unique and attractive product in the executive 

residential accommodation market, and we believe the Estate 

will continue to maintain high occupancy levels. 

The construction of the Stage 5, twenty one-bedroom studio 

apartments is progressing well and we expect the project will be 

completed in October 2013. 

Ela Makana Developments Limited 

We concluded the purchase of Ela Makana Developments 

Limited in November 2012, acquiring a large block of land in 

close proximity to Era Dorina Estate. 

A master site plan has been drafted and we expect to be able to 

construct a new executive residential estate on the site 

consisting of between 50 and 60 executive residential 

apartments, a swimming pool, gymnasium and entertainment 

area. Detailed plans and costings are being developed and a 

final decision will be made at the completion of this process. 

Land in the city is scarce and this is a long term strategic 

investment that will allow us to expand the property portfolio in 

the future. 

2011 


12 


Credit Corporation Finance Limited 

Credit Corporation Finance Limited has had a record year and 

has again made a substantial contribution to the profit of the 

Group. Net operating profit before tax for the period was a 

record K21.11 million. The PNGLNG project has had a large 

influence on the PNG economy and Credit Corporation Finance 

Limited has benefited immensely from this huge project. 

However with the construction phase of the project drawing to 

an end, the growth that we have experienced over the last few 

years will slow considerably. 

Credit Corporation (Fiji) Limited 

The Fiji operation enjoyed another profitable year in 2012 

despite challenging local conditions. Net profit after tax of 

FJD5.20 million (K5.86 million) saw improvement over the prior 

year’s result of FJD4.74 million (K5.34 million), due to a reduction 

in the rate of company taxation. Whilst trading performance was 

solid, increased provisioning for bad and doubtful debts was 

necessary resulting in an abnormally high charge against 

profitability. 

Natural disasters in Fiji caused a degree of disruption to the 

operations of the Company and its borrowers and this coupled 

with a very competitive asset finance market resulted in a 

reduction in business volumes from the previous year. 

There are signs of an improving Fiji economy, with increases in 

household and business spending and in capital investment, 

with Government initiatives in terms of increased funding for 

rehabilitation of roads and bridges expected to be positive for 

the growth of our Fiji operation. 

Our profit in the Fiji market will be boosted through the opening 

of our new Nadi branch in mid 2013. 

Credit Corporation (SI) Limited 

Credit Corporation (SI) Limited recorded an operating profit 

before tax of SBD12.09 million (K3.23 million), which translates to 

an 83.18% increase over the 2011 result. 

Total dividend payment of SBD6.4 million (K1.72 million) was 

paid out in 2012. 

We maintained a strong and growing balance sheet and the 

quality of our loan portfolio is very good. The default level was 

maintained below 3% throughout the year and cost to income 

ratio has been maintained at 20% throughout the year. 


Credit Corporation (Vanuatu) Limited 

Credit Corporation Vanuatu recorded a profit of Vatu 19.94 

million (K0.44 million), compared to the 2011 profit of Vatu 37.50 

million (K0.84 million). The lower profit is due to the sluggish 

economic conditions that prevailed during the year. 

Growth in the transport sector, our core area of business saw a 

significant decline due largely to low commodity prices and 

slowing down of activities in the construction industry. The 

tourism sector continued to expand with increased numbers of 

visitor arrivals. Trading conditions were often difficult during the 

year with a slow moving economy and high liquidity in the 

financial markets saw a downward trend in interest rates. The 

commencement of major donor funded projects in and around 

Port Vila is expected to generate economic growth. Tourism 

activities will continue to ensure future growth is sustained, 

however we expect current subdued trading conditions to 

continue into 2013. 

Outlook 

Credit Corporation (PNG) Limited is committed to long term 

sustainable growth and the pursuit of strategic opportunities 

will enhance this growth. 2013 has started on a positive note 

but with the PNGLNG project construction phase nearing 

completion, the Company will face challenges due to decreased 

demand for both our rental accommodation and financial 

products. 2012 has been an excellent year for the Company, and 

with the help of all at Credit Corporation during 2013, I am 

confident that we can meet the challenges that lie ahead. 

Robert Allport 

Chief Executive Officer

B O A R D O F D I R E C T O R S 

Board of Directors: Standing from left to right - Rennie Wekina (Company Secretary), Robert Allport, Ian Tarutia and John Dunlop. 

Seated from left - Garth McIlwain and Michael Koisen. 

Directors’ Meetings 

D I R E C T O R S ’ M E E T I N G S 

There were four meetings of the Board of Directors during 2012 and these were attended as follows: 

Garth McIlwain 4/4 

Ian Tarutia 3/4 

Michael Koisen 4/4 

John Dunlop 4/4 

Robert Alllport 4/4 


14 

C O R P O R A T E G O V E R N A N C E S T A T E M E N T 

The Board is committed to achieving the highest standards of 

corporate governance and ethics and expects similar standards 

from all employees. 

The Board sets the strategic direction for the Group and meets 

quarterly or as required. All matters pertinent to the Group are 

discussed by the full Board, including, but not limited to, the 

operations and financial performance of the Group and 

achievement of objectives. 

Board Composition 

The Board consists of five members, all non-executive Directors 

except for the Chief Executive Officer, Robert Allport. 

The members of the Board seek to ensure that it contains a 

blend of experience and skills appropriate to the Group. 

Directors retire by rotation each three years and are eligible for 

re-election. 

Committees 

The Board meets as a committee to consider issues pertaining to 

the appointment of new Directors. 

An audit committee of three non-executive Directors meets halfyearly 

in order to confirm that any matters raised by the Group's 

external auditors are addressed and to confirm that the Group's 

financial affairs are conducted in accordance with prudent 

commercial practice, the requirements of the Group Procedures 

Manual and the prudential standards issued by the Bank of 

Papua New Guinea. 

Independent Advice 

Directors are entitled to seek independent legal advice on their 

duties at the Group's expense, provided that they seek the prior 

approval of the Chairman. 


Risk Management 

The Board is committed to identifying significant business risks 

and has put in place a number of measures to manage such 

risks. 

Shareholder Information 

The Board communicates with shareholders at least once a year 

by means of a comprehensive annual report. In addition, the 

Board provides shareholders with continuous disclosure of 

information considered to be price sensitive to the Group's 

shares. At all times the Board ensures that statutory 

requirements regarding disclosure are met. 

Staff Matters 

The Group is an equal opportunity employer and does not 

tolerate sexual harassment amongst employees. 

Policy and Procedures 

The Group has in place both Staff and Procedures Manuals, 

which set out duties for each staff member and systems for all 

procedures. 

All routine legal documents are standard and used in all 

instances.

DIRECTORS’ REPORT 

C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S 

Your Directors present their annual report on the affairs of the Group and the Company including the financial statements for the year 

ended 31 December 2012. 

Activities 

The principal activities of the Group during the course of the financial year remain that of providing general finance, leasing and hire 

purchase financing, property and equity investments. 

There were no significant changes in the nature of the activities of the Group during the year. 

Results 

The net profit after taxation for the Group attributable to the members of the Group for the year was K106,926,901 (2011: K42,104,685) 

and for the Company was K63,599,732 ( 2011: K21,663,593). 

Dividends 

The Company paid a final dividend of K31,736,719 (K0.10 per share in August 2012) (2011: K25,305,934 (K0.08 per share)). 

Directors 

The Directors at the date of the report of the Company are listed on page 13. Directors’ interests and shareholdings are disclosed in 

Note 26. No Director had any material interest in any contract or arrangement with the Company or any related entity during the year. 

Remuneration of Directors and Employees 

The Directors and employees remuneration information is disclosed in Note 26. 

Interests Register 

The details of information recorded in the Interests register is disclosed in Note 26. 

For and on behalf of the Board of Directors 

Garth McIlwain Robert Allport 

Director Director 

22 March 2013 22 March 2013 


16 


INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF CREDIT CORPORATION (PNG) 

LIMITED FOR THE YEAR ENDED 31 DECEMBER 2012 

Scope 

We have audited the accompanying consolidated financial statements of Credit Corporation (PNG) Limited (“Company”) and its subsidiaries 

(“the Group”), which comprise the consolidated statements of financial position as at 31 December 2012, and the consolidated income 

statements, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of 

cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes as set out on pages 23 to 68. 

This report is made solely to the Company's members, as a body, in accordance with section 199 of the Companies Act 1997. Our audit work 

has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report 

and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company 

and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed. 

Directors’ responsibility for the financial statements 

The Directors of Credit Corporation (PNG) Limited are responsible for the preparation and fair presentation of these financial statements in 

accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal 

control relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud 

or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. 

Auditor’s responsibility 

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with 

International Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit 

to obtain reasonable assurance whether the financial statements are free of 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 the auditor’s judgement, including the assessment of the risks of material misstatement of the financial 

statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s 

preparation of the financial statements that gives a true and fair view 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 reasonableness of accounting estimates made by the Directors, as well as 

evaluating the overall presentation of the financial statements. 

We performed procedures to assess whether in all material respects the consolidated financial statements presents fairly in accordance with 

Companies Act 1997 and International Financial Reporting Standards, a true and fair view which is consistent with our understanding of the 

Company’s and the Group’s financial position and their performance. 

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

Audit opinion 

In our opinion: 

(a) the financial statements of Credit Corporation (PNG) Limited is in accordance with Companies Act 1997 including: 

i) giving a true and fair view of the Company’s and the Group’s financial position as at 31 December 2012 and of their performance for 

the year ended on that date; and 

ii) complying with International Financial Reporting Standards, and 

(b) proper accounting records have been kept by the Company as far as appears from our examination of those records. 

DATED at Port Moresby this 8th day of April 2013. 

Chartered Accountants 

Richard Kuna 

Partner 

Registered under the Accountants Act 1996 



CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 

Consolidated Company 

2012 2011 2012 2011 

Note K K K K 

ASSETS 

Cash and cash equivalents 13 22,107,914 24,169,870 944,049 628,746 

Finance and other receivables 14 346,849,006 283,410,380 13,931,521 12,423,454 

Held-to-maturity investments 15 (i) 25,063,559 56,410,120 16,637,347 11,479,852 

Available-for-sale investments 15 (ii) 75,896 75,636 33,600 33,600 

Investment in associate 15 (iii) 5,512,724 4,937,839 5,512,724 4,937,839 

Other investments 15 (iv) 327,175,541 313,246,423 670,884,477 609,039,173 

Inventories 295,823 250,509 - - 

Property, plant and equipment 16 18,623,384 17,694,881 4,242,897 4,519,170 

Investment property 17 258,961,232 187,988,861 - - 

Deferred tax assets 21 4,274,051 2,370,577 21,368 49,865 

Total assets 1,008,939,130 890,555,096 712,207,983 643,111,699 

EQUITY 

Share capital 22 32,357,794 30,171,862 32,357,794 30,171,862 

Reserves 23 394,835,683 361,516,862 540,822,855 485,836,294 

Retained earnings 283,827,993 242,168,937 137,840,821 117,849,505 

Total equity 711,021,470 633,857,661 711,021,470 633,857,661 

LIABILITIES 

Trade and other payables 18 8,114,717 6,664,806 475,370 3,117,025 

Loans and borrowings 19 250,543,897 235,803,219 - 6,137,013 

Employee benefits 20 1,685,560 921,726 - - 

Income taxes payable 12 6,202,401 8,349,014 711,143 - 

Deferred tax liabilities 21 31,371,085 4,958,670 - - 

Total liabilities 297,917,660 256,697,435 1,186,513 9,254,038 

Total equity and liabilities 1,008,939,130 890,555,096 712,207,983 643,111,699 

For and on behalf of the Board of Directors 

Garth McIlwain Robert Allport 

22 March 2013 22 March 2013 

The consolidated statements of financial position are to be read in conjunction with the notes to and forming part of the financial 

statements set out on pages 23 to 68. 


18 


CONSOLIDATED INCOME STATEMENTS 




Note K K K K 

Finance income 57,485,026 53,831,407 821,614 761,440 

Finance costs 6 (14,766,922) (12,838,565) (153,829) (959,991) 

Net finance income 42,718,104 40,992,842 667,785 (198,551) 

Other revenue 7 64,373,460 57,615,838 43,222,434 38,266,277 

Fair value gain/(loss) - Investment in shares 15(d) 21,937,312 (15,721,361) 21,937,312 (15,721,361) 

Fair value of investment properties 17 47,751,810 - - - 

Net operating income 176,780,686 82,887,319 65,827,531 23,346,365 

Personnel expenses 10 (10,933,491) (10,975,510) - - 

Depreciation expenses 16 (1,842,223) (1,415,835) (294,715) (261,961) 

Other operating expenses (14,350,757) (12,639,295) (1,161,739) (826,805) 

Results from operating activities 8 149,654,215 57,856,679 64,371,077 21,257,599 

Share of profit of equity accounted 

investee (net of tax) 15(c) 574,817 405,994 574,817 405,994 

Profit before tax 150,229,032 58,262,673 64,945,894 21,663,593 

Income tax (expense)/benefit 12 (43,302,131) (16,157,988) (1,346,162) - 

Profit for the year 106,926,901 42,104,685 63,599,732 21,663,593 

The consolidated income statements are to be read in conjunction with the notes to and forming part of the consolidated financial 

statements set out on pages 23 to 68.


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 



Note K K K K 

Profit for the year 106,926,901 42,104,685 63,599,732 21,663,593 

Other comprehensive income 

Foreign currency translation differences 

for foreign operations attributable to: 

Owners of the Company 23(c) (212,305) (14,283,972) - - 

Non-controlling interests - 1,596 - 1,596 

Revaluation of subsidiaries 

Other comprehensive income 

23(a) - - 43,114,864 6,157,121 

for the year (net of income tax) (212,305) (14,282,376) 43,114,864 6,158,717 

Total comprehensive income for 

the year 106,714,596 27,822,309 106,714,596 27,822,309 

Earnings per share based on 

profit for the year 

Basic and Diluted 0.34 0.13 0.20 0.07 

The consolidated statements of comprehensive income are to be read in conjunction with the notes to and forming part of the 

consolidated financial statements set out on pages 23 to 68. 


20 


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 

Consolidated 


Share Reserves Retained Non- Total 

Capital Earnings controlling 

interests 

Note K K K K K 

Balance at 1 January 2011 21,381,699 393,163,388 208,006,036 6,616,580 629,167,703 

Total comprehensive income for the year - (14,283,972) 42,106,281 - 27,822,309 

Transfer to reserves - (17,362,554) 17,362,554 - - 

Transactions with owners 

- (31,646,526) 59,468,835 - 27,822,309 

Dividends to equity holders 11 - - (25,305,934) - (25,305,934) 

Dividend reinvestment 22 2,353,697 - - - 2,353,697 

Share buy back transactions 22 (928,842) - - - (928,842) 

Total contributions by and 

distributions to owners 1,424,855 - (25,305,934) - (23,881,079) 

Acquisition of non-controlling interests 15(e)(ii) 7,365,308 - - (6,616,580) 748,728 

Total transactions with owners 8,790,163 - (25,305,934) (6,616,580) (23,132,351) 

Balance at 31 December 2011 30,171,862 361,516,862 242,168,937 - 633,857,661 

Total comprehensive income for the year - (212,305) 106,926,901 - 106,714,596 

Transfer to reserves - 33,531,126 (33,531,126) - - 


- 33,318,821 73,395,775 - 106,714,596 

Dividends to equity holders 11 - - (31,736,719) - (31,736,719) 

Dividend reinvestment 22 2,890,972 - - - 2,890,972 

Share buy back transactions 22 (705,040) - - - (705,040) 

Total transactions with owners 2,185,932 - (31,736,719) - (29,550,787) 

Balance at 31 December 2012 32,357,794 394,835,683 283,827,993 - 711,021,470 

The consolidated statements of changes in equity are to be read in conjunction with the notes to and forming part of the financial 



CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (continued) 

Company 

Share Reserves Retained Total 

Capital Earnings 

Note K K K K 

Balance at 1 January 2011 21,381,699 497,041,727 104,127,697 622,551,123 

Total comprehensive income for the year - 6,157,121 21,665,188 27,822,309 

Transfer to reserves - (17,362,554) 17,362,554 - 


- (11,205,433) 39,027,742 27,822,309 

Dividends to equity holders 11 - - (25,305,934) (25,305,934) 

Dividend reinvestment 22 2,353,697 - - 2,353,697 

Share buy back transactions 22 (928,842) - - (928,842) 

Total contributions by and 

distributions to owners 

1,424,855 - (25,305,934) (23,881,079) 

Acquisition of non-controlling interests 15(e)(ii) 7,365,308 - - 7,365,308 

Total transactions with owners 8,790,163 - (25,305,934) (16,515,771) 

Balance at 31 December 2011 30,171,862 485,836,294 117,849,505 633,857,661 

Total comprehensive income for the year - 43,114,864 63,599,732 106,714,596 

Transfer to reserves - 11,871,697 (11,871,697) - 


- 54,986,561 51,728,035 106,714,596 

Dividends to equity holders 11 - - (31,736,719) (31,736,719) 

Dividend reinvestment 22 2,890,972 - - 2,890,972 

Share buy back transactions 22 (705,040) - - (705,040) 

Total transactions with owners 2,185,932 - (31,736,719) (29,550,787) 

Balance at 31 December 2012 32,357,794 540,822,855 137,840,821 711,021,470 

The consolidated statements of changes in equity are to be read in conjunction with the notes to and forming part of the financial 

statements set out on pages 23 to 68. 


22 


CONSOLIDATED STATEMENTS OF CASH FLOWS 




Note K K K K 

OPERATING ACTIVITIES 

Charges earned on leases & loans 57,485,026 53,511,825 - - 

Commission, fees and rents 40,313,310 37,681,345 - 1,751,273 

Dividends received - - 39,637,572 29,445,991 

Interest from funds deposited 665,548 720,215 777,934 720,215 

Interest payments (8,001,439) (8,865,218) (151,847) (939) 

Payments to suppliers and employees (21,904,376) (29,859,714) (1,005,271) (4,884,533) 

Operating cash flows before changes in 

operating assets 68,558,069 53,188,453 39,258,388 27,032,007 

Net cash received/(advanced) in respect of leases (64,795,917) 1,931,347 (6,137,013) (6,991,116) 

Net cash received/(repaid) in respect of deposits 11,645,021 34,169,693 (5,175,578) 119,099 

Net cash from subsidiaries - - (2,117,884) 2,166,660 

Net cash from operating activities 

before income tax 15,407,173 89,289,493 25,827,913 22,326,650 

Income taxes (paid)/refund (20,933,765) (10,658,866) - 9,556 

Cash flows from/(used in) operating activities (5,526,592) 78,630,627 25,827,913 22,336,206 

INVESTING ACTIVITIES 

Purchase of property, plant & equipment (2,795,381) (4,382,869) (18,442) (446,485) 

Acquisition of investment property (17,198,399) (2,872,072) - - 

Proceeds from sale of property 57,911 571,975 - 40,518 

Acquisition of shares (619,694) (164,840) (619,694) (164,840) 

Proceeds from sale of shares 2,801,670 1,966,125 2,801,670 1,966,125 

Dividends received 16,999,493 11,866,933 - - 

Interest from funds deposited 691,646 998,241 - - 

Net cash flow from short term investments 31,328,218 (41,723,022) - - 

Cash flows from/(used in) investing activities 31,265,464 (33,739,529) 2,163,534 1,395,318 

FINANCING ACTIVITIES 

Share buy back 22 (705,040) (928,842) (705,040) (928,842) 

Repayment of borrowings - (1,357,176) - - 

Dividends paid (net) (26,971,104) (21,420,731) (26,971,104) (22,746,168) 

Cash flows from financing activities (27,676,144) (23,706,749) (27,676,144) (23,675,010) 

Effect of exchange rate changes on 

cash and cash equivalents (124,684) (10,765,390) - - 

Net increase/(decrease) in cash 

and cash equivalents (2,061,956) 10,418,959 315,303 56,514 

Cash and cash equivalents at 1 January 13 24,169,870 13,750,911 628,746 572,232 

Cash and cash equivalents 

at 31 December 13 22,107,914 24,169,870 944,049 628,746 

The consolidated statements of cash flows are to be read in conjunction with the notes to and forming part of the financial 



NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 

1. Reporting entity 

Credit Corporation (PNG) Limited (the “Company”) is a company domiciled in Papua New Guinea. The address of the Company’s 

registered office is Credit House, Cuthbertson Street, Port Moresby, Papua New Guinea. The consolidated financial statements 

of the Company as at and for the year ended 31 December 2012 comprise the Company and its subsidiaries (together referred 

to as the “Group” and individually as “Group entities”) and the Group’s interest in associates and jointly controlled entities. The 

Group primarily is involved in providing general finance, leasing and hire purchase financing and property investment. 

2. Basis of preparation 

(a) Statement of compliance 

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting 

Standards (IFRSs) as adopted by the Accounting Standards Board of Papua New Guinea (ASB) and the requirements of the Papua 

New Guinea Companies Act 1997. 

The consolidated financial statements have been authorised for issue by the Board of Directors on 22 March 2013. 

(b) Basis of measurement 

The consolidated financial statements have been prepared primarily on the historical cost basis except for financial instruments 

designated at fair value through profit and loss and investment property which are measured at fair value through profit or loss. 

(c) Functional currency 

The financial statements are presented in the Papua New Guinea currency, the Kina which is the Company’s functional currency. 

(d) Use of estimates and judgements 

The preparation of a financial report in conformity with IFRSs requires management to make judgements, estimates and 

assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual 

results may differ from these estimates. 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are 

recognised in the period in which the estimate is revised and in future periods if affected. 

(e) Changes in accounting policies 

(i) Accounting for finance income 

The Group has adopted in August 2010 the Effective Interest Rate Method to compute for finance charges earned. For 

finance contracts existing prior to the adoption of Effective Interest Rate Method, finance income is determined using 

the “Rule of 78” Method. The change in the method of accounting for interest has an immaterial effect in the current 

period. The effect in subsequent periods is not disclosed because estimating it is impracticable due to the form in which 

the Group’s records are kept. 

3. Significant accounting policies 

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial 

statements, and have been applied consistently by Group entities, except as explained in note 2(e), which addresses changes 

in accounting policies. 


24 



3. Significant accounting policies (continued) 

Certain comparative amounts have been reclassified to conform with the current year’s presentation. 

(a) Basis of consolidation 

(i) Subsidiaries 

Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the 

consolidated financial statements from the date that control commences until the date that control ceases. The 

accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the 

Group. The Parent Company Investments in Subsidiaries are fair valued. 

(ii) Investments in associates and jointly controlled entities 

Associates are those entities in which the Group has significant influence, but not control, over the financial and 

operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the 

voting power of another entity. Joint ventures are those entities over whose activities the Group has joint control, 

established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. 

Investments in associates and jointly controlled entities are accounted for using the equity method (equity accounted 

investees) and are recognised initially at cost. The Group’s investment includes goodwill identified on acquisition, net of 

any accumulated impairment losses. The consolidated financial statements include the Group’s share of the income and 

expenses and equity movements of equity accounted investees, after adjustments to align the accounting policies with 

those of the Group, from the date that significant influence or joint control commences until the date that significant 

influence or joint control ceases. 

When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that 

interest, including any long-term investments, is reduced to nil, and the recognition of further losses is discontinued 

except to the extent that the Group has an obligation or has made payments on behalf of the investee. 

(iii) Transactions eliminated on consolidation 

(b) Foreign currency 

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, 

are eliminated in preparing the consolidated financial statements. 

Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the 

extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but 

only to the extent that there is no evidence of impairment. 

(i) Foreign currency transactions 

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange 

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

date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on 

monetary items is the difference between amortised cost in the functional currency at the beginning of the period, 

adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at 

the exchange rate at the end of the reporting period. Non-monetary assets and liabilities denominated in foreign 

currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date 

that the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign 

currency are translated using the exchange rate at the date of the transaction. 





(b) Foreign currency (continued) 

(ii) Foreign operations 

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are 

translated to PNG Kina at exchange rates at the reporting date. The income and expenses of foreign operations, 

excluding foreign operations in hyperinflationary economies, are translated to PNG Kina at exchange rates at the dates 

of the transactions. 

Foreign currency differences are recognised in other comprehensive income. Foreign exchange differences have been 

recognised in the exchange fluctuation reserve or EFR. When a foreign operation is disposed of, in part or in full, the 

relevant amount in the EFR is transferred to profit or loss as part of the profit or loss on disposal. 

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely 

in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form 

part of a net investment in a foreign operation and are recognised in other comprehensive income, and are presented 

within equity in the EFR. 

(c) Financial instruments 

(i) Non-derivative financial assets 

The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial 

assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which 

the Group becomes a party to the contractual provisions of the instrument. 

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it 

transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all 

the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that 

is created or retained by the Group is recognised as a separate asset or liability. 

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and 

only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the 

asset and settle the liability simultaneously. 

The Group has the following non-derivative financial assets: financial assets at fair value through profit or loss, held-tomaturity 

financial assets, loans and receivables and available-for-sale financial assets. 

Financial assets at fair value through profit or loss 

A financial asset is classified at fair value through profit or loss if it is classified as held for trading or is designated as such 

upon initial recognition. Financial assets are designated at fair value through profit or loss if the Group manages such 

investments and makes purchase and sale decisions based on their fair value in accordance with the Group’s 

documented risk management or investment strategy. Upon initial recognition attributable transaction costs are 

recognised in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value, and 

changes therein are recognised in profit or loss. 

Held-to-maturity financial assets 

If the Group has the positive intent and ability to hold debt securities to maturity, then such financial assets are classified 

as held-to-maturity. Held-to-maturity financial assets are recognised initially at fair value plus any directly attributable 

transaction costs. Subsequent to initial recognition held-to-maturity financial assets are measured at amortised cost 

using the effective interest method, less any impairment losses. Any sale or reclassification of a more than insignificant 

amount of held-to-maturity investments not close to their maturity would result in the reclassification of all held-tomaturity 

investments as available-for-sale, and prevent the Group from classifying investment securities as held-tomaturity 

for the current and the following two financial years. 


26 




(c) Financial instruments (continued) 

(i) Non-derivative financial assets (continued) 

Finance and other receivables 

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. 

Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial 

recognition loans and receivables are measured at amortised cost using the effective interest method, less any 

impairment losses. 

Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. 

Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included 

as a component of cash and cash equivalents for the purpose of the statement of cash flows. 

Available-for-sale financial assets 

Available-for-sale financial assets are non-derivative financial assets that are designated as available- for-sale and that are 

not classified in any of the previous categories. The Group’s investments in equity securities and certain debt securities 

are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and 

changes therein, other than impairment losses and foreign currency differences on available-for-sale equity 

instruments, are recognised in other comprehensive income and presented within equity in the fair value reserve. When 

an investment is derecognised, the cumulative gain or loss in other comprehensive income is transferred to profit or 

loss. 

(ii) Non-derivative financial liabilities 

The Group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All 

other financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the 

trade date at which the Group becomes a party to the contractual provisions of the instrument. 

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. 

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and 

only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the 

asset and settle the liability simultaneously. 

The Group has the following non-derivative financial liabilities: loans and borrowings, bank overdrafts, and trade and 

other payables. Such financial liabilities are recognised initially at fair value plus any directly attributable transaction 

costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective 

interest method. 

(iii) Share capital 

Ordinary shares 

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share 

options are recognised as a deduction from equity, net of any tax effects. 

(d) Property, plant and equipment 

(i) Recognition and measurement 

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated 

impairment losses. 





(d) Property plant and equipment (continued) 

(i) Recognition and measurement (continued) 

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets 

includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working 

condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they 

are located, and capitalised borrowing costs. Cost also may include transfers from other comprehensive income of any 

gain or loss on qualifying cash low hedges of foreign currency purchases of property, plant and equipment. Purchased 

software that is integral to the functionality of the related equipment is capitalised as part of that equipment. 

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate 

items (major components) of property, plant and equipment. 

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds 

from disposal with the carrying amount of property, plant and equipment, and are recognised net within other income 

in profit or loss. When revalued assets are sold, the amounts included in the revaluation reserve are transferred to 

retained earnings. 

(ii) Reclassification into investment property 

When the use of a property changes from owner-occupied to investment property, the property is remeasured to fair 

value and reclassified as investment property. Property that is being constructed for future use as investment property 

is accounted for at fair value. Any gain arising on remeasurement is recognised in profit or loss to the extent the gain 

reverses a previous impairment loss on the specific property, with any remaining gain recognised in other 

comprehensive income and presented in the revaluation reserve in equity. Any loss is recognised in other 

comprehensive income and presented in the revaluation reserve in equity to the extent that an amount had previously 

been included in the revaluation reserve relating to the specific property, with any remaining loss recognised 

immediately in profit or loss. 

(iii) Subsequent costs 

The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the 

item if it is probable that the future economic benefits embodied within the part will flow to the Group, and its cost can 

be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing 

of property, plant and equipment are recognised in profit or loss as incurred. 

(iv) Depreciation 

Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for 

cost, less its residual value. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful 

lives of each part of an item of property, plant and equipment, since this most closely reflects the expected pattern of 

consumption of the future economic benefits embodied in the asset. Leased assets are depreciated over the shorter of 

the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of 

the lease term. Land is not depreciated. 

Depreciation is calculated on a straight line basis over the following periods: 

buildings 50 years 

plant and equipment 5-12 years 

fixtures and fittings 5-12 years 

motor vehicle 5 years 

major components 3-5 years. 


28 




(d) Property plant and equipment (continued) 

(iv) Depreciation (continued) 

Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if 

appropriate. 

(e) Investment property 

Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the 

ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment 

property is measured at cost on initial recognition and subsequently at fair value with any change therein recognised in profit 

or loss. 

Cost includes expenditure that is attributable to the acquisition of the investment property. The cost of self-constructed 

investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the 

investment property to a working condition for their intended use and capitalised borrowing costs. 

When the use of a property changes such that it is reclassified as property, plant and equipment, its fair value at the date of 

reclassification becomes its cost for subsequent accounting. 

(f) Inventories 

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in first-out 

principle, and includes expenditure incurred in acquiring the inventories. Cost also may include transfers from other 

comprehensive income of any gain or loss on qualifying cash flow hedges of foreign currency purchases of inventories. 

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and 

selling expenses. 

(g) Impairment 

(i) Non-derivative financial assets (including receivables) 

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether 

there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss 

event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the 

estimated future cash flows of that asset that can be estimated reliably. 

Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by 

a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, 

indications that a debtor or issuer will enter bankruptcy, the disappearance of an active market for a security. In addition, 

for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective 

evidence of impairment. 

Loans and receivables and held-to-maturity investments securities 

The Group considers evidence of impairment for receivables and held-to-maturity investment securities at both a 

specific asset and collective level. All individually significant receivables and held-to-maturity investment securities are 

assessed for specific impairment. All individually significant receivables and held-to-maturity investment securities 

found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not 

yet identified. Receivables and held-to-maturity investment securities that are not individually significant are collectively 

assessed for impairment by grouping together receivables and held-to-maturity investment securities with similar risk 

characteristics. 





(g) Impairment (continued) 

(i) Non-derivative financial assets (including receivables) (continued) 

In assessing collective impairment the Group uses historical trends of the probability of default, timing of recoveries and 

the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit 

conditions are such that the actual losses are likely to be greater or less than suggested by historical trends. 

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between 

its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective 

interest rate. Losses are recognised in profit or loss and reflected in an allowance account against receivables. Interest 

on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event 

causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss. 

Available for sale financial assets 

Impairment losses on available-for-sale investment securities are recognised by transferring the cumulative loss that has 

been recognised in other comprehensive income, and presented in the fair value reserve in equity, to profit or loss. The 

cumulative loss that is removed from other comprehensive income and recognised in profit or loss is the difference 

between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any 

impairment loss previously recognised in profit or loss. Changes in impairment provisions attributable to time value are 

reflected as a component of interest income. 

If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be 

related objectively to an event occurring after the impairment loss was recognised in profit or loss, then the impairment 

loss is reversed, with the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the 

fair value of an impaired available-for-sale equity security is recognised in other comprehensive income. 

(ii) Non-financial assets 

The carrying amounts of the Group’s non-financial assets, investment property, inventories and deferred tax assets, are 

reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication 

exists, then the asset’s recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful 

lives or that are not yet available for use, the recoverable amount is estimated each year at the same time. 

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs 

to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax 

discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For 

the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest 

group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of 

other assets or groups of assets (the “cash-generating unit, or CGU”). Subject to an operating segment ceiling test, for 

the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the 

level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting 

purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from 

the synergies of the combination. 

The Group’s corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may 

be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs. 

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to 

reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying 

amounts of the other assets in the CGU (group of CGUs) on a pro rata basis. 

An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable 

amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are 

allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying 

amounts of the other assets in the unit (group of units) on a pro rata basis. 


30 




(g) Impairment (continued) 

(ii) Non-financial assets (continued) 

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in 

prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An 

impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An 

impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount 

that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. 

Goodwill that forms part of the carrying amount of an investment in an associate is not recognised separately, and 

therefore is not tested for impairment separately. Instead, the entire amount of the investment in an associate is tested 

for impairment as a single asset when there is objective evidence that the investment in an associate may be impaired. 

(h) Non-current assets held for sale 

Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale 

rather than through continuing use, are classified as held for sale. Immediately before classification as held for sale, the assets, 

or components of a disposal group, are remeasured in accordance with the Group’s accounting policies. Thereafter generally 

the assets, or disposal group, are measured at the lower of their carrying amount and fair value less cost to sell. Any impairment 

loss on a disposal group first is allocated to goodwill, and then to remaining assets and liabilities on pro rata basis, except that 

no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets, investment property and 

biological assets, which continue to be measured in accordance with the Group’s accounting policies. Impairment losses on 

initial classification as held for sale and subsequent gains or losses on remeasurement are recognised in profit or loss. Gains are 

not recognised in excess of any cumulative impairment loss. 

(i) Employee benefit plans 

(i) Defined contribution plans 

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a 

separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions 

to defined contribution pension plans are recognised as an employee benefit expense in profit or loss in the periods 

during which services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that 

a cash refund or a reduction in future payments is available. Contributions to a defined contribution plan that are due 

more than 12 months after the end of the period in which the employees render the service are discounted to their 

present value. 

(ii) Other long-term employee benefits 

A liability is recognised for the amount to be paid as at 31 December 2012 in respect of long-term benefits (long service 

leave) other than pension plans if the Group has a present legal or constructive obligation to pay this amount as a result 

of past service provided by the employee. 

(iii) Short-term employment benefits 

A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the 

Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the 

employee. 

(j) Provisions 

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be 

estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. 





(k) Revenue 

(i) Finance income and finance costs 

Finance income comprises finance charges earned from the provision of lease finance and is recognised over the 

finance contract using the ‘Rule of 78’ for finance contracts existing before August 2010. The Effective Interest Rate 

Method is adopted for finance contracts settled from August 2010 and onwards. 

Finance costs comprise interest expense on interest bearing deposits and other costs associated with financing income. 

(ii) Commissions 

When the Group acts in the capacity of an agent rather than as the principal in a transaction, the revenue recognised is 

the net amount of commission made by the Group. 

(iii) Rental income 

Rental income from investment property is recognised in profit or loss on a straight-line basis over the term of the lease. 

Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease. Rental 

income from subleased property is recognised as other income. 

(l) Lease payments 

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease 

incentives received are recognised as an integral part of the total lease expense, over the term of the lease. 

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the 

outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic 

rate of interest on the remaining balance of the liability. 

Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease 

when the lease adjustment is confirmed. 

Lease income 

Finance income on finance leases is recognised on a basis that reflects a constant periodic return on the net investment in the 

finance lease. 

Determining whether an arrangement contains a lease 

At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. A specific asset is 

the subject of a lease if fulfillment of the arrangement is dependent on the use of that specified asset. An arrangement conveys 

the right to use the asset if the arrangement conveys to the Group the right to control the use of the underlying asset. 

At inception or upon reassessment of the arrangement, the Group separates payments and other consideration required by 

such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group 

concludes for a finance lease that it is impracticable to separate the payments reliably, an asset and a liability are recognised at 

an amount equal to the fair value of the underlying asset. Subsequently the liability is reduced as payments are made and an 

imputed finance charge on the liability is recognised using the Group’s incremental borrowing rate. 

(m) Other income 

Other income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, 

establishment fees on finance contracts, gains on the disposal of available-for-sale financial assets, fair value gains and losses on 

financial assets at fair value through profit or loss and investment properties. Interest income on funds deposited is recognised 

as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that 

the Group’s right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date. The 

establishment fee on finance contract is recognised in the year of receipt on the basis that it is a documentation processing 

charge and not refundable. 


32 




(n) Income tax 

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to 

the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income. 

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or 

substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. 

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial 

reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary 

differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects 

neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and jointly controlled 

entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not 

recognised for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax 

rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted 

or substantively enacted by the reporting date. 

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

they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they 

intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. 

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it 

is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at 

each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. 

(o) Earnings per share 

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the 

profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares 

outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss 

attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own 

shares held, for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted 

to employees. 

(p) Segment reporting 

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and 

incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All 

operating segments’ operating results are reviewed regularly by the Group’s CEO to make decisions about resources to be 

allocated to the segment and assess its performance, and for which discrete financial information is available. 

Segment results that are reported to the CEO includes items directly attributable to a segment as well as those that can be 

allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company’s headquarters), 

head office expenses, and income tax assets and liabilities. 

Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment. 

(q) Acquisition of non-controlling interest 

Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore 

no goodwill is recognised as a result. Adjustments to non controlling interests arising from transactions that do not involve the 

loss of control are based on a proportionate amount of the net assets of the subsidiary. 





(r) New standards and interpretations not adopted 

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 

1 January 2012, and have not been applied in preparing these financial statements. None of these is expected to have a 

significant effect on the financial statements of the Group, except the following set out below: 

(a) IFRS 9 Financial Instruments 

IFRS 9 (2009) introduces new requirements for the classification and measurement of financial assets. Under IFRS 9 

(2009), financial assets are classified and measured based on the business model in which they are held and the 

characteristics of their contractual cash flows. IFRS 9 (2010) introduces additions relating to financial liabilities. The IASB 

currently has an active project to make limited amendments to the classification and measurement requirements of 

IFRS 9 and add new requirements to address the impairment of financial assets and hedge accounting. 

IFRS 9 (2010 and 2009) are effective for annual periods beginning on or after 1 January 2015 with early adoption 

permitted. The adoption of IFRS 9 (2010) is expected to have an impact on the Group and Company's financial assets 

and financial liabilities. 

(b) IFRS 13 Fair Value Measurement (2011) 

IFRS 13 provides a single source of guidance on how fair value is measured, and replaces the fair value measurement 

guidance that is currently dispersed throughout IFRS. Subject to limited exceptions, IFRS 13 is applied when fair value 

measurements or disclosures are required or permitted by other IFRSs. The Company is currently reviewing its 

methodologies in determining fair values. IFRS 13 is effective for annual periods beginning on or after 1 January 2013 

with early adoption permitted. 

(c) IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests 

in Other Entities (2011) 

IFRS 10 introduces a single control model to determine whether an investee should be consolidated. As a result, the 

Group may need to change its consolidation conclusion in respect of its investees, which may lead to changes in the 

current accounting for these investees. 

Under IFRS 11, the structure of the joint arrangement, although still an important consideration, is no longer the main 

factor in determining the type of joint arrangement and therefore the subsequent accounting. 

The Group’s interest in a joint operation, which is an arrangement in which the parties have rights to the assets and 

obligations for the liabilities, will be accounted for on the basis of the Group’s interest in those assets and liabilities. 

The Group’s interest in a joint venture, which is an arrangement in which the parties have rights to the net assets, will 

be equity-accounted. The Group may need to reclassify its joint arrangements, which may lead to changes in current 

accounting for these interests. 

IFRS 12 brings together into a single standard all the disclosure requirements about an entity’s interests in subsidiaries, 

joint arrangements, associates and unconsolidated structured entities. The Group is currently assessing the disclosure 

requirements for interests in subsidiaries, interests in joint arrangements and associates and unconsolidated structured 

entities in comparison with the existing disclosures. IFRS 12 requires the disclosure of information about the nature, risks 

and financial effects of these interests. 

These standards are effective for annual periods beginning on or after 1 January 2013 with early adoption permitted. 


34 



4. Determination of fair values 

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and nonfinancial 

assets and liabilities. Fair values have been determined for measurement and / or disclosure purposes based on the 

following methods. When applicable, further information about the assumptions made in determining fair values is disclosed 

in the notes specific to that asset or liability. 

(a) Property, plant and equipment 

The market value of property is the estimated amount for which a property could be exchanged on the date of valuation 

between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each 

acted knowledgeably and willingly. The fair value of items of plant, equipment, fixtures and fittings is based on the market 

approach and cost approaches using quoted market prices for similar items when available and replacement cost when 

appropriate. 

(b) Investment property 

An external, independent valuation company, having appropriate recognised professional qualifications and recent experience 

in the location and category of property being valued, values the Group’s investment property portfolio as required. The fair 

values are based on market values, being the estimated amount for which a property could be exchanged on the date of the 

valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties 

had each acted knowledgeably and willingly. 

In the absence of current prices in an active market, the valuations are prepared by considering the estimated rental value of 

the property. A market yield is applied to the estimated rental value to arrive at the gross property valuation. When actual rents 

differ materially from the estimated rental value, adjustments are made to reflect actual rents. 

Valuations reflect, when appropriate, the type of tenants actually in occupation or responsible for meeting lease commitments 

or likely to be in occupation after letting vacant accommodation, the allocation of maintenance and insurance responsibilities 

between the Group and the lessee, and the remaining economic life of the property. When rent reviews or lease renewals are 

pending with anticipated reversionary increases, it is assumed that all notices, and when appropriate counter-notices, have 

been served validly and within the appropriate time. Investment property under construction is valued by estimating the fair 

value of the completed investment property and then deducting from that amount the estimated costs to complete 

construction, financing costs and a reasonable profit margin. 

(c) Equity and debt securities 

The fair value of financial assets at fair value through profit or loss, held-to-maturity investments and available-for-sale financial 

assets is determined by reference to their quoted closing bid price at the reporting date. The fair value of held-to-maturity 

investments is determined for disclosure purposes. 

(d) Finance and other receivables 

The fair value of finance and other receivables, excluding construction work in progress, is estimated as the present value of 

future cash flows. This fair value is determined for disclosure purposes. 

(e) Non-derivative financial liabilities 

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest 

cash flows. For finance leases the market rate of interest is determined by reference to similar lease agreements. 




5. Financial risk management 

The Group has exposure to the following risks from its use of financial instruments: 

Credit risk 

Liquidity risk 

Market risk 

Operational risk 

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and 

processes for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are 

included throughout these consolidated financial statements. 

Risk management framework 

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s audit and risk management 

framework. The Board has established the Audit and Risk Management Committee, which is responsible for developing and 

monitoring the Group’s risk management policies. The committee reports regularly to the Board of Directors on its activities. 

The Group’s audit and risk management policies are established to identify and analyse the risks faced by the Group, to set 

appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are 

reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and 

management standards and procedures, aims to develop a disciplined and constructive control environment in which all 

employees understand their roles and obligations. 

The Group Audit Committee oversees how management monitors compliance with the Group’s risk management policies and 

procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. 

(i) Credit risk 

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet 

its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities. 

Finance and other receivables 

The Group’s exposure to credit risk is influenced mainly by the industry and sector in which clients operate. 

Management also considers the default risk of the industry and country in which these operate, as these factors may 

have an influence on credit risk, particularly in the currently deteriorating economic circumstances. 

Approximately 2 percent (2011: 0.05 percent) of the Group’s revenue is attributable to sales transactions with a single 

customer contract. 

The Audit and Risk Management Committee has established a credit policy under which each new customer is analysed 

individually for creditworthiness before the Group’s standard payment and delivery terms and conditions are offered. 

The Group’s review includes external ratings, when available, and in some cases bank references. Lending limits are 

established for each customer, which represents the maximum open amount without requiring approval from the Risk 

Management Committee; these limits are reviewed quarterly. 

More than seventy percent (70%) of the Group’s customers have been transacting with the Group for over five (5) years, 

and losses have occurred infrequently. In monitoring customer credit risk, customers are grouped according to their 

credit characteristics, including whether they are an individual or legal entity, whether they are a wholesale, retail or 

end-user customer, geographic location, industry, aging profile, maturity and existence of previous financial difficulties. 

Trade and other receivables relate mainly to the Group’s wholesale customers. 


36 



5. Financial risk management (continued) 

(i) Credit risk (continued) 

The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of finance 

and other receivables and investments. The main components of this allowance are a specific loss component that 

relates to individually significant exposures, and a collective loss component established for groups of similar assets in 

respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on 

historical data of payment statistics for similar financial assets. 

Investments 

The Group limits its exposure to credit risk by investing only in liquid securities (government securities and interest 

bearing deposits with banks). 

Guarantees 

The Group’s policy is to provide financial guarantees only to wholly-owned subsidiaries. At 31 December 2012 K52.57 

million (2011:K62.65 million) was guaranteed to wholly owned subsidiaries. 

(ii) Liquidity risk 

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial 

liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to 

ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal 

and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. 

Typically the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a period 

of 60 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances 

that cannot reasonably be predicted, such as natural disasters. In addition, the Group maintains various lines of credit 

facilities with banks (see note 19). 

(iii) Market risk 

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will 

affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management 

is to manage and control market risk exposures within acceptable parameters, while optimising the return. 

(iv) Operational risk 

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Group’s 

processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity 

risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate 

behaviour. Operational risks arise from all of the Group’s operations. The Group’s objective is to manage operational risk 

so as to balance the avoidance of financial losses and damage to the Group’s reputation with overall cost effectiveness 

and to avoid control procedures that restrict initiative and creativity. 

The primary responsibility for the development and implementation of controls to address operational risk is assigned 

to senior management within each business unit. This responsibility is supported by the development of overall Group 

standards for the management of operational risk in the following areas: 

• requirements for appropriate segregation of duties, including the independent authorisation of transactions 

• requirements for the reconciliation and monitoring of transactions 

• compliance with regulatory and other legal requirements 




5. Financial risk management (continued) 

(iv) Operational risk (continued) 

• documentation of controls and procedures 

• requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures 

to address the risks identified 

• requirements for the reporting of operational losses and proposed remedial action 

• development of contingency plans 

• training and professional development 

• ethical and business standards 

• risk mitigation, including insurance where this is effective. 

Compliance with Group standards is supported by a programme of periodic reviews undertaken by the members of 

Audit and Risk Management Committee. The results of the reviews are discussed with the management of the business 

unit to which they relate, with summaries submitted to the Board of Directors and senior management of the Group. 

Capital management 

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to 

sustain future development of the business. The Board of Directors monitors the return on capital, which the Group 

defines as result from operating activities divided by total shareholders’ equity excluding non-controlling interests. The 

Board of Directors also monitors the level of dividends to ordinary shareholders. 

The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of 

borrowings and the advantages and security afforded by a sound capital position. The Company’s target in 2012 was to 

achieve a return on capital of between 3 and 10 percent; in 2012 the actual return was 15.04 percent (2011: 6.64 

percent). In comparison the weighted average interest expense on interest-bearing borrowings (excluding liabilities 

with imputed interest) was 4.11 percent (2011: 3.12 percent). 

The Group’s debt to adjusted capital ratio at the end of the reporting period was as follows: 

In thousands of Kina 2012 2011 

Total liabilities 297,918 256,697 

Less: cash and cash equivalents (22,108) (24,170) 

Net debt 275,810 232,527 

Adjusted capital 711,021 633,858 

Debt to adjusted capital ratio at 31 December 0.39 0.37 

There were no changes in the Group’s approach to capital management during the year. 

Various finance subsidiaries are subject to respective Central Banks restrictions imposed on capital requirements. 


38 



6. Finance costs 




K K K K 

Interest on customer deposits (7,560,500) (8,455,973) (151,682) (959,052) 

Other costs associated with finance income (7,206,422) (4,382,592) (2,147) (939) 

Total finance costs (14,766,922) (12,838,565) (153,829) (959,991) 

7. Other revenue 

Profit on sale of financial assets 184,315 137,500 184,315 137,500 

Dividend income 21,660,424 19,455,213 41,902,835 36,908,115 

Rental income from property 

Interest on term deposits, treasury bills and 

32,866,720 29,477,762 324,000 291,244 

semi-government bonds 1,948,854 1,670,384 - - 

Other operating income 7,713,147 6,874,979 811,284 929,418 

Total other revenue 64,373,460 57,615,838 43,222,434 38,266,277 

8. Profit/(Loss) before taxation 

The operating profit for the year is stated after (crediting)/ charging the following items: 

Auditor’s remuneration 

- audit 395,449 394,502 110,000 127,845 

- other services 289,406 215,456 150,638 67,155 

(Profit)/ Loss on sale of fixed assets (25,318) 111,155 - 12,881 

Provision for bad debts 7,125,293 3,908,635 - - 

Bad debts recovered 

Direct operating expenses 

(32,778) (60,941) - - 

– Investment properties 2,832,637 3,758,486 - - 

9. Employees 

The number of employees as at 31 December 2012 employed in the Group was 150 (2011: 152). 

10. Personnel expenses 

Wages and salaries 7,706,909 7,708,983 - - 

Contributions to defined contribution plans 501,357 746,818 - - 

Long service leave expense 143,105 14,748 - - 

Other staff costs 2,582,120 2,504,961 - - 

10,933,491 10,975,510 - -



11. Dividends 



K K K K 

Final dividend of K0.10 per share 

(2011: K0.08 per share) 31,736,719 25,305,934 31,736,719 25,305,934 

Final dividend was declared on 10 August 2012 and paid on 24 August 2012. 

12. Income tax 

31,736,719 25,305,934 31,736,719 25,305,934 

(i) Income tax expense 

Current tax 18,793,090 13,945,198 1,374,659 37,706 

Change in deferred taxes 24,509,041 2,212,790 (28,497) (37,706) 

Irrecoverable withholding taxes on 

43,302,131 16,157,988 1,346,162 - 

Fiji & Solomon Islands - - - - 

43,302,131 16,157,988 1,346,162 - 

The Group’s applicable tax rate represents the statutory corporate income tax rate of 30% (2011: 30%). The following 

is a reconciliation of income taxes calculated at the applicable tax rate with income tax expense: 

Profit / (loss) before tax 150,229,030 58,262,673 69,495,896 21,663,593 

Computed tax using the applicable 

corporate income tax rate 45,068,779 17,478,802 19,483,769 6,499,078 

Non-deductible costs - 4,716,408 - 4,716,408 

Non-taxable income (1,484,998) (5,836,564) (19,324,489) (11,177,780) 

43,583,781 16,358,646 159,280 37,706 

Under/(over) provision in prior years (281,650) (200,658) 1,186,882 (37,706) 

43,302,131 16,157,988 1,346,162 - 

(ii) Income taxes payable 

At 1 January 8,349,014 5,103,910 - - 

Income tax expense for the year 17,485,364 11,891,838 1,374,659 37,706 

Movement in deferred taxes 1,583,438 2,212,790 (28,497) (37,706) 

Under/(over) provision in prior years (281,650) (200,658) (635,019) - 

Income taxes paid during the year (20,933,765) (10,658,866) - - 

At 31 December 6,202,401 8,349,014 711,143 - 


40 



13. Notes to the statement of cash flows 

Reconciliation of cash 

For the purpose of the Statement of Cash Flows, cash includes cash on hand and at bank and short-term deposits at call, net 

of outstanding bank overdrafts. Cash as at the end of the financial year as shown in the Statement of Cash Flows is reconciled 

to the related items in the balance sheet as follows: 




K K K K 

Bank and cash balances 22,107,914 24,169,870 944,049 628,746 

14. Finance and other receivables 

22,107,914 24,169,870 944,049 628,746 



K K K K 

Gross finance receivables 411,777,441 346,401,573 - - 

Less : Unearned charges (64,253,072) (65,435,228) - - 

Less : Provision for doubtful debts (14,941,340) (10,551,965) - - 

Net finance receivables 332,583,029 270,414,380 - - 

Amounts owed by related corporations - - 1,319,038 - 

Dividend withholding tax receivable 10,055,657 8,086,581 10,055,657 8,086,581 

Other debtors and prepayments 4,210,320 4,909,419 2,556,826 4,336,873 

346,849,006 283,410,380 13,931,521 12,423,454 

The amount owed from related corporation relate to intercompany receivable from Ela Makana Developments Limited. The 

amount was interest free and repayable on demand. 

Current 42,259,692 116,430,424 11,510,659 12,423,454 

Non-Current 304,589,314 166,979,956 - - 

Total 346,849,006 283,410,380 11,510,659 12,423,454 

Finance Receivables 

Non – Current 

Finance receivables 365,859,031 191,319,134 - - 

Unearned charges (61,269,717) (24,339,177) - - 

304,589,314 166,979,956 - - 

Current 

Finance receivables 45,918,410 155,082,440 - - 

Unearned charges (2,983,355) (41,096,051) - - 

Provision for doubtful debts (14,941,340) (10,551,965) - - 

27,993,715 103,434,424 - -



14. Finance and other receivables (continued) 

Finance leases included in finance receivables analysed as follows: 



K K K K 

Not later than one year 593,169 1,046,205 - - 

Later than one year and not later than five years 21,564,761 3,550,690 - - 

Later than five years - - - - 

22,157,930 4,596,895 - - 

Less: Unearned charges (4,617,412) (521,465) - - 

Net investment in Finance leases 17,540,518 4,075,430 - - 

Analysis of provisions 

Specific provisions (a) 2,975,046 3,302,626 - - 

General provisions (b) 11,966,294 7,249,339 - - 

14,941,340 10,551,965 - - 

(a) Specific Provision 

Opening balance 3,302,626 4,086,557 - - 

Net increase in provisions 1,707,605 1,120,951 - - 

Transfer from / (to) general provision - 1,865,286 - - 

Bad debts written off (2,035,185) (3,770,168) - - 

Closing balance 2,975,046 3,302,626 - - 

(b) General Provision 

Opening balance 7,249,339 9,180,345 - - 

Net increase in provisions 5,417,688 2,787,684 - - 

Transfer from / (to) specific provision - (1,865,286) - - 

Bad debts written off (700,733) (2,853,404) - - 

Closing balance 11,966,294 7,249,339 - - 


42 



14. Finance and other receivables (continued) 

Analysis of finance receivables by industry 

Consolidated - 2012 Consolidated - 2011 


% K’000 % K’000 

Agriculture 2% 10,292 3% 9,216 

Mining 4% 16,058 3% 11,248 

Manufacturing 2% 9,668 3% 9,249 

Forestry and saw-milling 1% 1,656 0% 113 

Civil contracting 8% 34,459 13% 43,003 

Building and construction 7% 28,331 7% 24,770 

Real Estate 1% 5,147 2% 7,783 

Wholesale / Retail 7% 26,857 4% 15,218 

Transport and storage 55% 224,595 49% 169,600 

Professional and business services 9% 38,140 10% 34,093 

Private and self employed 3% 11,947 4% 12,916 

Financial Institutions - - 1% 3,733 

Government & statutory bodies 0% 157 0% 673 

Other 1% 4,470 1% 4,787 

100% 411,777 100% 346,402 

15. Investments 



K K K K 

(i) Held-to-maturity investments (a) 

Non-Current 8,430,425 7,867,171 5,046,712 5,064,795 

Current 16,633,134 48,542,949 11,590,635 6,415,057 

25,063,559 56,410,120 16,637,347 11,479,852 

(ii) Available-for-sale financial assets(b) 

Non-Current 75,896 75,636 33,600 33,600 

Current - - - - 

75,896 75,636 33,600 33,600 

(iii) Investment in associate (c) 

Non-Current 5,512,724 4,937,839 5,512,724 4,937,839 


5,512,724 4,937,839 5,512,724 4,937,839 

(iv) Other investments 

Non-Current 

Financial assets designated at fair 

value through profit and loss (d) 327,175,541 313,246,423 327,175,541 313,246,423 

Subsidiaries (e) - - 343,708,936 295,792,750 

327,175,541 313,246,423 670,884,477 609,039,173 


327,175,541 313,246,423 670,884,477 609,039,173



15. Investments (continued) 

(a) Held-to-maturity investments 

(1) The government and semi-government securities consist of stocks and bonds of Fiji semi-government institutions held by 

Credit Corporation (Fiji) Limited which earn interest rates of between 3.50% and 8.00% per annum (2011: between 3.45% and 

8.00% per annum). Interest is paid on a quarterly basis. The balance including accrued interest as at 31 December 2012 is 

K3,383,713 (2011:K2,802,376). Credit Corporation (Fiji) Limited also holds short term deposits with Bank of South Pacific Limited. 

The balance including accrued interest as at 31 December 2012 is K9,030,090 (2011:K4,690,396). 

(2) In June 2009, Credit Corporation (PNG) Limited subscribed for a 10-year, fixed rate (11%), unsecured, subordinated 

K5 million Bank of South Pacific Limited (BSP) notes. The interest is payable half yearly on 29 May and 29 November. The balance 

including accrued interest as at 31 December 2012 is K5,046,712 (2011:K5,046,795). 

(3) Treasury bills consist of Central Bank Bills issued by the Bank of Papua New Guinea to Credit Corporation Finance Limited. The 

balance including accrued interest as at 31 December 2012 is K4,599,246 (2011:K38,917,710). 

(4) Credit Corporation (Vanuatu) Limited holds short term deposits with the National Bank of Vanuatu. The balance including 

accrued interest as at 31 December 2012 is K3,003,749 (2011:K1,888,293). 

(b) Available-for-sale financial assets 

The Company purchased shares in Fiji's Credit & Data Bureau (K33,600) in 2008. As of 31 December 2012, the unlisted shares 

acquired by Credit Corporation (Fiji) Limited amounted to FJD37,500 (K42,036). 

(c) Equity-accounted Investee 

Credit Corporation (PNG) Limited owns 31% (2011: 31%) of the issued shares of Capital Insurance Group. At 31 December 2012, 

the investment was valued at K5,512,724 (2011: K4,937,839). 

The Group and Company’s share of profit in Capital Insurance Group for the year was K574,817 (2011: K405,994). 

Non- Non- Group Group 

Current Current Total Current Current Total Net Profit/ share of share of 

Year Assets Assets Assets Liabilities Liabilities Liabilities Assets Income Expenses (Loss) net assets profit/(loss) 

2012 11,283,776 13,265,003 24,908,779 7,120,706 5,413 7,126,119 17,782,660 8,884,522 7,779,752 1,104,770 5,512,724 574,817 

2011 8,756,298 12,845,365 21,601,663 4,179,917 1,493,214 5,673,131 15,928,532 7,275,881 5,333,787 1,942,094 4,937,839 405,994 

(d) Financial assets designated at fair value through profit and loss 

Credit Corporation (PNG) Limited owns over 8.69% (2011: over 8.69%) of the issued shares in Bank of South Pacific Limited (BSP). 

At 31 December 2012, the investment was valued at market value amounting to K321,177,548. 

The increase/(decline) in market value of K21,937,312 (2011:(K15,721,361)) resulting from the revaluation of listed shares 

investments is recorded in the profit and loss account. 


44 




(d) Financial assets designated at fair value through profit and loss (continued) 

2012 2011 

% No. of Cost Fair value No. of Cost Fair value 

Held Shares K gain/(loss) Shares K gain/(loss) 

Listed shares 

Bank of South Pacific Limited 8.69% 39,848,331 321,177,548 21,485,287 41,263,600 310,714,908 (15,606,882) 

Airlines PNG Limited 0.90% 2,000,000 720,000 (80,000) 2,000,000 800,000 (300,000) 

City Pharmacy Limited 1.25% 1,953,544 3,027,993 682,025 1,546,002 1,731,515 185,521 

Kina Asset Management Limited 5.48% 2,500,000 2,250,000 (150,000) - - - 

Total 327,175,541 21,937,312 313,246,423 (15,721,361) 



Country Ownership K K 

(e) Subsidiaries 

Credit Corporation Finance Limited PNG 100% 91,934,520 83,605,220 

Credit House Limited PNG 100% 49,409,165 55,357,955 

Era Dorina Limited PNG 100% 143,320,912 105,654,132 

Ela Makana Development Limited PNG 100% 4,761,395 - 

Credit Corporation (Fiji) Limited Fiji 100% 36,484,733 33,699,081 

Credit Corporation (Vanuatu) Limited Vanuatu 100% 9,462,193 9,992,747 

Credit Corporation (SI) Limited Solomon Islands 100% 8,336,018 7,483,615 

343,708,936 295,792,750 

(i) Acquisition of fully owned subsidiary - Ela Makana Developments Limited 

In November 2012 the Group acquired 100% of the shares of Ela Makana Developments Limited (EMDL) a real estate and 

property company. The Group acquired EMDL to expand its residential property portfolio. The Group has elected to measure 

the acquired company at the net fair value of the identifiable assets and liabilities. 

Other payables were settled as part of the consideration by the Parent entity resulting in an investment in the subsidiary by the 

Company of K4,801,321 and an intercompany loan of K1,198,681 between the Company and the subsidiary at the date of 

acquisition. The intercompany loan is eliminated on consolidation. 

The fair value of the identifiable assets and liabilities of EMDL at the date of acquisition were: 

Book value Fair value 

at the date recognised 

of acquisition of acquisition 

Assets 

Property, plant and equipment 5,998,757 5,998,757 

Other receivables 1,245 1,245 

6,000,002 6,000,002 

Liabilities 

Other payables 1,198,681 - 

Net Assets 4,801,321 6,000,002 

Net outflow from acquisition of subsidiary 6,000,002 6,000,002 

The acquisition consideration was in the form of Bank of South Pacific Limited 

shares held by Credit Corporation (PNG) Limited. 746,269 shares at K8.04.




(e) Subsidiaries (continued) 

From the date of acquisition, EMDL have incurred expenses of K39,927. If the acquisition had taken place at the beginning of 

2012, revenue from continuing operations and the loss from continuing operations for the Group would not have been 

materially different. 

(ii) Acquisition of non-controlling interest 

In August 2011 the Group acquired the entire portion (15.5%) of non-controlling interest in the Credit Corporation (Fiji) Limited 

from BSP Life (Fiji) Limited and increased its ownership from 84.5% to 100%. The total consideration of K7,365,308 paid through 

issue of 4,091,838 fully paid ordinary shares of Credit Corporation (PNG) Limited to BSP Life (Fiji) Limited. The carrying amount 

of Credit Corporation (Fiji) Limited net assets in the Group's financial statements on the date of acquisition was FJD30,187,482. 

The Group recognised a decrease in minority interest of K6,616,580 and a decrease in reserves of K748,728. 

16. Property, plant and equipment 

Consolidated Buildings & Furniture Motor Office Total 

Capital WIP & Fittings Vehicles Equipment 

K K K K K 

Cost 

At 1 January 2011 10,208,861 7,564,446 2,952,084 2,477,873 23,203,264 

Additions 1,950,448 472,278 522,403 1,437,740 4,382,869 

Disposals/ Transfers (719,151) - (327,259) 314,423 (731,987) 

Effect of exchange variances (1,416,458) (110,562) (347,658) (244,983) (2,119,661) 

At 31 December 2011 10,023,700 7,926,162 2,799,570 3,985,053 24,734,485 

At 1 January 2012 10,023,700 7,926,162 2,799,570 3,985,053 24,734,485 

Additions 923,729 1,065,642 523,436 228,796 2,741,603 

Disposals/ Transfers - (1,063,391) (254,303) - (1,317,694) 

Effect of exchange variances 24,019 (2,992) 873 4,464 26,364 

At 31 December 2012 10,971,448 7,925,421 3,069,576 4,218,313 26,184,758 

Depreciation 

At 1 January 2011 227,617 3,341,707 1,317,370 1,425,221 6,311,915 

Charge for the year 56,182 574,161 530,717 254,775 1,415,835 

Disposals/ Transfers - - (263,330) (8,071) (271,401) 

Effect of exchange variances (50,009) (56,101) (143,678) (166,957) (416,745) 

At 31 December 2011 233,790 3,859,767 1,441,079 1,504,968 7,039,604 

At 1 January 2012 233,790 3,859,767 1,441,079 1,504,968 7,039,604 

Charge for the year 179,198 647,840 492,873 522,312 1,842,223 

Disposals/ Transfers - - (1,063,391) (263,347) (1,326,738) 

Effect of exchange variances 1,141 1,444 (948) 4,648 6,285 

At 31 December 2012 414,129 4,509,051 869,613 1,768,581 7,561,374 

Carrying amounts 

At 1 January 2011 9,981,244 4,222,739 1,634,714 1,052,652 16,891,349 

At 31 December 2011 9,789,910 4,066,395 1,358,491 2,480,085 17,694,881 

At 31 December 2012 10,557,319 3,416,370 2,199,963 2,449,732 18,623,384 


46 



16. Property, plant and equipment (continued) 

Company Buildings & Motor Office Total 

Capital WIP Vehicles Equipment 

K K K K 

Cost 

At 1 January 2011 3,410,742 1,041,865 1,155,978 5,608,585 

Additions 307,700 130,000 8,784 446,484 

Disposals - (139,500) - (139,500) 

At 31 December 2011 3,718,442 1,032,365 1,164,762 5,915,569 

At 1 January 2012 3,718,442 1,032,365 1,164,762 5,915,569 

Additions 18,443 - - 18,443 

Disposals - - - - 

At 31 December 2012 3,736,885 1,032,365 1,164,762 5,934,012 

Depreciation 

At 1 January 2011 11,202 673,839 561,261 1,246,302 

Charge for the year 2,448 158,709 100,804 261,961 

Disposals - (111,863) - (111,863) 

At 31 December 2011 13,650 720,685 662,065 1,396,400 

At 1 January 2012 13,650 720,685 662,065 1,396,400 

Charge for the year 62,888 138,256 93,571 294,715 

Disposals - - - - 

At 31 December 2012 76,538 858,941 755,636 1,691,115 

Carrying amounts 

At 1 January 2011 3,399,540 368,026 594,717 4,362,283 

At 31 December 2011 3,704,792 311,680 502,697 4,519,170 

At 31 December 2012 3,660,347 173,424 409,126 4,242,897 




17. Investment property 



K K K K 

Balance as at 1 January 187,988,861 185,116,789 - - 

Revaluation 47,751,810 - - - 

Transfer to property, plant and equipment (313,611) - - - 

Acquisition (including Stage 5 - WIP) 23,534,172 2,872,072 - - 

Balance as at 31 December 258,961,232 187,988,861 - - 

Investment properties are land and buildings held for long-term investments. 

The carrying amount of the following investment properties is the fair value of the properties as determined by the registered 

independent appraiser having an appropriate recognised professional qualification and recent experience in the location and 

category of the property being valued. 

Investment Valuation Valuer Valuation Value 

property basis Date As at 31 

December 2012 

Era Dorina Capitalisation The Professional Valuers 26 October 2012 173,546,000 

of PNG Ltd – Kaluwin Potuan 

Credit House Capitalisation The Professional Valuers 26 October 2012 61,873,000 

of PNG Ltd – Kaluwin Potuan 

Fair values were determined having regard to recent market transactions for similar properties located in Papua New Guinea. In 

the current year. The Directors have reviewed the independent valuation using current rental rates and expected current market 

yields of similar properties and assessed that the carrying value of the investment properties are fairly stated. 

18. Trade and other payables 



K K K K 

Interest accrued on deposits 455,401 533,182 - - 

Other creditors and accrued expenses 7,659,316 6,131,624 475,370 3,117,025 

8,114,717 6,664,806 475,370 3,117,025 


48 



19. Loans and borrowings 




K K K K 

Non-current 

Secured bank loan - note 19, 

(c), (iv) (a) 19,240,285 22,167,086 - - 

Interest bearing deposits (b) 71,140,608 24,610,366 - - 

Current 

Current-portion of secured 

90,380,893 46,777,452 - - 

bank loan - note 19, (c), (iv) (a) 1,892,792 1,892,792 - - 

Interest bearing deposits (b) 158,270,212 187,132,975 - - 

Intercompany loan - - - 6,137,013 

160,163,004 189,025,767 - 6,137,013 

Total Loans and Borrowings 250,543,897 235,803,219 - 6,137,013 

(a) Principal repayments for non-current secured bank loans are scheduled as follows: 

More than one year, less than two years 2,037,675 1,892,792 - - 

More than two years, less than three years 2,195,116 2,037,675 - - 

More than three years, less than four years 2,366,203 2,195,116 - - 

More than four years, less than five years 2,552,118 2,366,203 - - 

More than five years 10,089,173 13,675,300 - - 

19,240,285 22,167,086 - - 

(b) Interest bearing deposits are subject to fixed interest rates and payable on maturity. Non-current portion of K71,140,608 is 

repayable within 2 years.



19. Loans and borrowings (continued) 

(c) Bank Facilities and Security 

Interest bearing loans and borrowings include: 

i. Credit Corporation (Fiji) Limited has a bank overdraft facility of K6.8 million with Bank of South Pacific Limited. Interest 

is charged at 6% per annum. The facilities are secured by a first registered fixed and floating charge over all the assets 

and undertakings of Credit Corporation (Fiji) Limited including uncalled and unpaid capital and first registered 

mortgage over CT 6618 being freehold property at Gorrie Street, Suva. 

ii. Credit Corporation (Vanuatu) Limited has a bank overdraft facility of K2.3 million with National Bank of Vanuatu at 9.25% 

interest per annum. The facilities are secured by first registered mortgage over all assets and undertakings of Credit 

Corporation (Vanuatu) Limited including uncalled and unpaid capital and with limited guarantee and indemnity from 

Credit Corporation (PNG) Limited for K2.3 million. 

iii. Credit Corporation Finance Limited has a bank overdraft facility with Bank of South Pacific Limited of K10 million at 31 

December 2012. The interest rate on the facility is the bank’s indicator lending rate of 11.20% minus a margin of 1.75% 

per annum. These facilities are secured by a K10 million guarantee (joint and several) by Credit House Limited and Credit 

Corporation (PNG) Limited. As at 31 December 2012 this facility has not been used 

iv. Era Dorina Limited has an advance facility from Bank of South Pacific Limited of approximately K21 million at a variable 

interest rate of 11.20% minus a margin of 1.75% p.a. The loan is secured by a registered equitable mortgage over the 

fixed and floating assets of Era Dorina Limited, first registered mortgage over Allotment 33 Section 34, Granville, Port 

Moresby, first registered mortgage over Portion 2259, being Allotment 27 Section 34, Granville, Port Moresby, first 

registered Mortgage over Lots 2,3 and 8 Section 45, Granville, Port Moresby known as “Credit House”, deed of guarantee 

and indemnity for K49.5 million by Credit House Limited and a first registered equitable mortgage over the fixed and 

floating assets of Credit House Limited. 

v. Credit Corporation (SI) Limited has a bank overdraft facility with Bank of South Pacific Limited of K0.8 million. Interest 

rate on the overdraft facility is the bank’s indicator lending rate of 14.5% p.a. minus 5.75%. These facilities are secured by 

an unlimited amount of guarantee by Credit Corporation (PNG) Limited, registered equitable mortgage over the whole 

of Credit Corporation (SI) Limited company assets and undertaking including uncalled capital and first registered 

charged over residential property under purchase as described in parcel number 191-009-16 situated at Tavioa. This 

facility has not been drawn down at 31 December 2012. 

20. Employee benefits 



K K K K 

Long service leave 928,099 784,994 - - 

Annual leave 617,122 136,732 - - 

Others 140,339 - - - 

1,685,560 921,726 - - 


50 



21. Deferred tax assets and liabilities 

Deferred tax assets and deferred tax liabilities at 31 December 2012 and 2011 are attributable to the items detailed in the 

tables below: 


Asset Liability Net Asset Liability Net 

K K K K K K 

(a) Consolidated 

Property, plant and 

equipment - (31,250,487) (31,250,487) 29,489 (4,853,939) (4,824,450) 

Employee benefits 472,420 - 472,420 334,370 - 334,370 

Provisions 3,755,215 - 3,755,215 1,972,229 - 1,972,229 

Other Items 46,416 (120,598) (74,182) 34,489 (104,731) (70,242) 

Net tax assets/ liabilities 4,274,051 (31,371,085) (27,097,034) 2,370,577 (4,958,670) (2,588,093) 

(b) Company 

Property, plant and 

equipment - - - 15,375 - 15,375 

22. Share capital 

Other items 21,368 - 21,368 34,490 - 34,490 

Net tax assets / liabilities 21,368 - 21,368 49,865 - 49,865 


Consolidated & Company 


K K 

Issued ordinary share capital 

317,463,745 shares in issue at 1 January 2012 30,171,862 21,381,699 

1,521,616 shares issued arising from Dividend Reinvestment Plan 2,890,972 2,353,697 

4,091,838 share swap (15.5% share of BSP Life in CC Fiji Ltd.) - 7,365,308 

(335,003) shares repurchased during the year (705,040) (928,842) 

318,650,358 shares in issue at 31 December 2012 32,357,794 30,171,862 

In accordance with the provisions of the Companies Act 1997 the shares do not have a par value. All issued shares are fully 

paid. 

In accordance with the provisions of the Constitution, the Board of Directors of the Company may issue shares as it thinks fit 

so long as it does not create a controlling interest in the Company and subject to complying with the requirements of Port 

Moresby Stock Exchange Listing Rules.



23. Reserves 



K K K K 

Asset revaluation reserve (a) 116,223,220 94,563,791 246,747,046 203,632,182 

Asset realisation reserve (b) 1,328,824 1,328,824 149,294 149,294 

Exchange fluctuation reserve (c) (16,642,876) (16,430,571) - - 

General reserve (d) 293,926,515 282,054,818 293,926,515 282,054,818 

394,835,683 361,516,862 540,822,855 485,836,294 

(a) Asset revaluation reserve 

Balance at 1 January 94,563,791 94,563,791 203,632,182 197,475,061 

Surplus/(deficit) on revaluation of properties 47,751,810 - - - 

Surplus/(deficit) on revaluation of investments - - 43,114,864 6,157,121 

Tax effect on revaluation of properties (26,092,381) - - - 

Balance at 31 December 116,223,220 94,563,791 246,747,046 203,632,182 

(b) Asset realisation reserve 

Balance at 1 January 1,328,824 1,328,824 149,294 149,294 

Transfer from retained earnings - - - - 

Balance at 31 December 1,328,824 1,328,824 149,294 149,294 

(c) Exchange fluctuation reserve 

Balance at 1 January (16,430,571) (2,146,599) - - 

Translation adjustment (212,305) (14,283,972) - - 

Balance at 31 December (16,642,876) (16,430,571) - - 

(d) General reserve 

Balance at 1 January 282,054,818 299,417,372 282,054,818 299,417,372 

Transfer (to)/from retained earnings 11,871,697 (17,362,554) 11,871,697 (17,362,554) 

Balance at 31 December 293,926,515 282,054,818 293,926,515 282,054,818 

Asset revaluation reserve 

The asset revaluation reserve relates to the revaluation of property, plant and equipment prior to its reclassification as 

investment property and revaluation of investments in subsidiaries. 

Asset realisation reserve 

The asset realisation reserve represents profits on sale of fixed assets over the cost. 

Exchange fluctuation reserve 

The exchange fluctuation reserve comprises all foreign exchange differences arising from the translation of the financial 

statements of foreign operations that are not integral to the operations of the Company. 

General reserve 

The general reserve represents amounts of net gains on long-term investments transferred from the profit and loss account. 


52 



24. Employee benefit plans 

The Group contributed to superannuation funds which are defined contribution plans, whereby employees contribute certain 

legislated percentage of their salary to the fund and the Group contributes a certain percentage of each member’s salary as 

allowed by law. During 2012 the Group expensed K501,357 (2011:K746,818) in contributions payable. 

25. Commitments and contingencies 

Commitments 

The Group expects a capital outlay of K13 million for the completion of Era Dorina Stage 5. The total project cost is K28m. A 

further K6 million is expected for acquisition of various plant and equipment for its Properties Division. There are no other 

capital commitments as at 31 December 2012. 

Contingencies 

The Company and its subsidiaries have provided various assets as security to the bank facilities provided to the Group (refer Note 

19(c)). Other than the above, there are no contingencies as at 31 December 2012. 

26. Related party transactions 

(a) Interests Register 

The following are interests recorded in the Register for the year. 

Name Nature of Interest Company 

Garth McIlwain Director Credit Corporation Finance Limited, Credit Corporation (Fiji) Limited, Credit 

Corporation (SI) Limited, Credit Corporation (Vanuatu) Limited, Era Dorina 

Limited, Credit House Limited, Ela Makana Developments Limited, Air 

Niugini, Tower Insurance Limited, East New Britain Properties Limited. 

John Dunlop Director Credit Corporation Finance Limited, Credit Corporation (Fiji) Limited, Era 

Dorina Limited, Credit House Limited, Ela Makana Developments Limited, 

Steamships Trading Company Limited, CPL Group Limited, Hardware Haus 

Ltd., John Swire & Sons (PNG) Ltd., John Swire & Sons Pty. Ltd. and Mainland 

Holdings Limited. 

Robert Allport Director Credit Corporation Finance Limited, Credit Corporation (Fiji) Limited, Credit 

Corporation (SI) Limited, Credit Corporation (Vanuatu) Limited, Era Dorina 

Limited, Credit House Limited, Ela Makana Developments Limited, Capital 

Insurance Group, Credit & Data Bureau Limited. 

Michael Koisen Director Credit Corporation Finance Limited, Era Dorina Limited, Credit House 

Limited, Ela Makana Developments Limited, Federation of Savings & Loan 

Societies Limited, Capital Life Insurance Limited, Airlines of Papua New 

Guinea Limited and Independent Public Business Corporation. 

Chief Executive Officer Teachers Savings & Loan Society Ltd. 

Ian Tarutia Director Credit Corporation Finance Limited, Era Dorina Limited, Credit House 

Limited, Ela Makana Developments Limited, Nasfund Contributors Savings 

& Loan Society, East New Britain Properties Limited and Federation of 

Savings and Loan Societies Limited. 

Joint Chief Executive Officer National Superannuation Fund Limited (Nasfund) 




26. Related party transactions (continued) 

(b) Transactions with Directors and key management personnel 

(i) Shareholdings of Directors and interested parties in Credit Corporation (PNG) Limited 


Michael Koisen, a Director of the Company and is also a Director of Federation 

of Savings and Loans Societies Limited that holds shares as follows: 

Michael Koisen, a Director of the Company, is the Chief Executive Officer of 

16,621,878 16,621,878 

Teachers Savings and Loan Society Limited that holds shares as follows: 

Ian Tarutia, a Director of the Company, is the Joint Chief Executive Officer of 

48,613,500 48,613,500 

National Superannuation Fund Limited that holds shares as follows: 58,315,745 58,315,745 

Garth McIlwain, a Director of the Company holds shares as follows: 8,779,066 8,779,066 

(ii) Remuneration of Directors 

Directors’ remuneration, including the value of benefits, 

received during the year, is as follows: 2012 2011 

K K 

Garth McIlwain 100,000 55,640 

Michael Koisen 40,000 21,935 

Ian Tarutia 40,000 21,935 

John Dunlop 100,000 90,000 

Robert Allport* - - 

Total 280,000 189,510 

*Managing Director/Chief Executive Officer received no fees for his services as Director during the year. The 

remuneration as Managing Director/Chief Executive Officer has been included in the remuneration of key 

management personnel and remuneration of employees. 

Director Fees in respect of the following Director are paid directly to the Company he represents. 

Ian Tarutia National Superannuation Fund Limited (2012 & 2011) 

(iii) Directors Retirement Benefit Scheme 

Shareholders, at the June 2005 annual general meeting, have approved a retirement benefit scheme for Directors of 

the Company, in respect of which a sum of K Nil (2011:K Nil) has been charged to the profit and loss account during 

the year. 

(iv) Remuneration of Employees 

The number of management staff whose remuneration, including salaries and benefits (superannuation, 

accommodation, leave fares, insurance, school fees, club subscriptions and related entitlements), was within the 

specified bands as follows: 


K400,000 - K599,999 3 3 

K600,000 - K799,999 1 1 

K800,000 - K999,999 1 1 

K1,000,000 - K1,199,999 - - 

K1,200,000 - K1,399,999 - - 

K1,400,000 - K1,599,999 - 1 

K1,600,000 - K1,799,999 1 - 


54 




(b) Transactions with Directors and key management personnel (continued) 

(v) Key management personnel compensation 

Key management personnel compensation are as follows: 


Transaction value for the Balance outstanding 

year ended 31 December as at 31 December 

Note 2012 2011 2012 2011 

K K K K 

Short term benefits (i) 5,043,863 4,751,594 - - 

Long term benefits (ii) 152,015 36,223 778,823 626,808 

5,195,878 4,787,817 778,823 626,808 

(i) Short-term employee benefits includes wages, salaries, paid annual leave, superannuation, bonuses (if payable 

within twelve months of the end of the period) and non-monetary benefits (such as medical care, housing, cars 

and free or subsidised goods or services) for current employees; 

(ii) Long-term employee benefits includes only long-service leave. 

(vi) Other transactions with Directors and key management personnel 

The aggregate value of transactions and outstanding balances related to Directors and key management personnel 

were as follows: 



Related Party Transaction Note 2012 2011 2012 2011 

K K K K 

Management Personal 

personnel Loan (i) 27,142 (24,478) 200,322 173,180 

Director Deposit (ii) (49,134) (5,721) (125,366) (76,232) 

Total (21,992) (30,199) 74,956 96,948 

(i) Staff are entitled to personal loans from Credit Corporation Finance Limited up to a maximum of 25% of the gross 

annual salary at an interest rate of 10% per annum. 

(ii) A non-interest bearing deposit with Credit Corporation Finance Limited.




(c) Transaction with subsidiaries 

All the transactions are in the normal course of business and on normal commercial terms and conditions and repayable on 

demand. Except for the finance loans from Credit Corporation Finance Limited, all the other transactions are unsecured. 



Transaction Note 2012 2011 2012 2011 

K K K K 

Management fee (i) 854,220 851,533 65,865 795,991 

Guarantee fee (ii) 24,035 40,617 24,257 13,736 

Finance loans (iii) 6,137,013 6,991,116 - (6,137,013) 

Interest bearing deposit (iv) 5,174,611 (118,133) 11,590,635 6,416,024 

Dividends (v) 20,256,069 18,153,019 - 3,502,493 

Other (vi) 1,263,914 (3,448) 1,267,828 (3,914) 

(i) Management fees paid by Credit Corporation (Fiji) Limited (FJD60,000); Credit Corporation (SI) Limited (SBD90,000) and 

Credit Corporation Finance Limited (K750,000) to Credit Corporation (PNG) Limited annually. 

(ii) Guarantee fees paid by Credit Corporation (SI) Limited (SBD100,000) per annum. Credit Corporation (PNG) Limited did not 

receive management fees from Credit Corporation (Vanuatu) Limited. 

(iii) As at 31 December 2012, Credit Corporation (PNG) Limited had existing loans (interest incurred in 2012 was K151,682 

(2011: K956,283) from Credit Corporation Finance Limited as follows: 

Contract Amount No. of Interest Balance 

Purpose of Loan Date Financed Months Rate 2012 2011 

K K 

BSP unsecured fixed rate notes 17/07/09 5,000,000 60 9.0% - 2,868,782 

Lae property 22/10/10 3,360,551 60 9.0% - 3,268,230 

Total - 6,137,012 

(iv) Credit Corporation (PNG) Limited invested the excess funds from dividends, management & guarantee fees, in a 1-year 

deposit with Credit Corporation Finance Limited at 2.815% interest per annum. The Interest earned during 2012 was 

K291,203 (2011: K211,127). 

(v) Dividends received from all the subsidiary companies except Ela Makana Developments Limited. 

(vi) Stationery expenses paid by Credit Corporation (PNG) Limited for Credit Corporation (SI) Limited. Also includes amount 

owing by subsidiary Company Ela Makana Developments Limited. 


56 




(d) Other related party transactions 

(i) The associate company of Credit Corporation (PNG) Limited, Capital General Insurance, has interest bearing deposit 

accounts amounting to K3,726,945 as at 31 December 2012 (2011: K3,211,825) at (3.00% to 3.75%) per annum with 

Credit Corporation Finance Limited. The net interest earned was K65,085 (2011:K17,503). 

(ii) Directors and entities in which Directors have an interest have interest bearing deposits with the Group at commercial 

rates prevailing at the time of the deposit. 

27. Financial instruments 

(a) Credit risk 

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the 

reporting date was: 




K K K K 

Held-to-maturity investments 

Financial assets designated at fair value 

25,063,559 56,410,120 16,637,347 11,479,852 

through profit or loss 237,175,541 313,246,423 327,175,541 313,246,423 

Available-for-sale financial assets 75,896 75,636 33,600 33,600 

Finance and other receivables (net) 345,147,186 283,410,380 12,447,087 12,423,454 

Cash and cash equivalents 22,107,914 24,169,870 944,049 628,746 

Total 629,570,096 677,312,429 357,237,624 337,812,075 

The maximum exposure to credit risk for finance and other receivables (net) at the reporting date by geographic region was: 

Papua New Guinea 227,802,988 168,368,755 9,695,647 12,423,454 

Fiji 87,107,863 91,361,832 - - 

Solomon Islands 21,251,257 12,872,565 - - 

Vanuatu 8,985,078 10,807,228 - - 

Total 345,147,186 283,410,380 9,695,647 12,423,454 

The maximum exposure to credit risk for finance and other receivables at the reporting date by type of counterparty was (in 

K’000s): 

Transport & storage 

Civil contracting, Building & construction 

224,595 169,600 - - 

and Real Estate 67,937 75,556 - - 

Wholesale/ Retail 26,857 15,218 - - 

Others 104,952 99,023 9,695 12,423 

424,341 359,397 9,695 12,423 

Unearned charges (64,253) (65,435) - - 

Doubtful debts (14,941) (10,552) - - 

Total 345,147 283,410 9,695 12,423



27. Financial instruments (continued) 

(a) Credit risk (continued) 

Impairment losses 

The aging of finance receivables (net of unearned charges) at the reporting date was: 



K K K K 

Not past due 203,622,540 247,852,104 - - 

Past due 1-30 days 80,742,628 1,500,915 - - 

Past due 31-180 days 52,066,555 31,421,258 - - 

Past due 181-360 days 6,495,221 192,067 - - 

Past due more than 1 year 4,597,425 - - - 

Total 347,524,369 280,966,344 - - 

The movement in the allowance for impairment in respect of loans and receivables was as follows: 

Balance as at 1 January 10,551,965 13,266,902 - - 

Impairment recognised during the year 7,125,293 3,908,635 - - 

Impairment reversed during the year (2,735,918) (6,623,572) - - 

Balance as at 31 December 14,941,340 10,551,965 - - 


58 




(b) Liquidity risk 

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the 

impact of netting agreements: 

(i) Consolidated 

Non-derivative Carrying Contracted Less than 1 - 2 2 - 5 More than 

financial liabilities amount cash flows one year years years 5 years 

Amounts at 31 December 2012: 

Secured loans 

Interest bearing 

21,133,077 34,143,600 3,691,200 3,691,200 11,073,600 15,687,600 

deposits 

Trade and other 

229,410,820 233,478,169 209,974,059 17,480,716 6,023,394 - 

Payables 8,114,717 8,114,717 8,114,717 - - - 

Total 258,658,614 275,736,486 221,779,976 21,171,916 17,096,994 15,687,600 

Amounts at 31 December 2011: 

Secured loans 

Interest bearing 

24,059,878 37,834,800 3,691,200 3,691,200 11,073,600 19,378,800 

deposits 

Trade and other 

211,743,341 218,349,733 192,147,765 26,201,968 - - 

Payables 6,664,806 6,664,806 6,664,806 - - - 

Total 242,468,025 262,849,339 202,503,771 29,893,168 11,073,600 19,378,800 

(ii) Company 

At 31 December 2012, non-derivative financial liabilities, all of which are due within the year were 

K475,370 (2011: K9,254,038). 





(c) Currency risk 

(i) The Group’s exposure to foreign currency risk was as follows based on notional amounts: 


FJD SBD VATU 

Interest bearing deposits (65,398,020) (50,445,199) (113,900,214) 

Trade and other payables (571,323) (956,259) (15,853,283) 

Trade receivables 76,171,417 78,744,389 395,691,283 

Held-to-maturity investments 3,000,000 - 132,737,850 

Cash and cash equivalents 10,909,352 2,263,692 13,788,627 

Gross balance sheet exposure 24,111,426 29,606,623 412,464,263 

Estimated charges from finance receivables - - - 

Budgeted forecast purchases - - - 

Net exposure 24,111,426 29,606,623 412,464,263 


FJD SBD VATU 

Interest bearing deposits (65,937,144) (40,682,482) (185,953,330) 

Trade and other payables (3,789,266) (857,287) (16,364,989) 

Trade receivables 81,201,376 46,755,752 461,822,727 

Held-to-maturity investments 2,500,000 - 80,913,359 

Cash and cash equivalents 9,618,218 9,109,758 84,381,208 




Net exposure 23,593,184 14,325,741 424,798,975 


60 




(c) Currency risk (continued) 

(ii) The Company’s exposure to foreign currency risk was as follows based on notional amounts: 



FJD SBD VATU 

Total assets 98,352,793 84,315,473 550,973,854 

Total liabilities (66,005,438) (53,387,165) (132,966,500) 




Net exposure 32,347,355 30,928,308 418,007,354 


FJD SBD VATU 

Total assets 100,299,349 69,190,375 630,507,536 

Total liabilities (70,236,399) (41,950,013) (202,318,319) 




Net exposure 30,062,951 27,240,362 428,189,217




(c) Currency risk (continued) 

(iii) Currency sensitivity analysis 

The significant exchange rates applied during the year were as follows: 

Average rate Reporting date spot rate 


FJD 0.8930 0.7962 0.8866 0.8921 

SBD 3.7445 3.4425 3.7102 3.6400 

VATU 44.8963 37.7013 44.1900 42.8500 

A 10 percent strengthening of the PNG Kina against the following currencies at 31 December would have increased 

(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in 

particular interest rates, remain constant. The analysis is performed on the same basis for 2011. 

Consolidated Strengthening Weakening 

Profit or Equity Profit or Equity 

loss loss 

As at 31 December 2012 

FJD 4,053,858 - (3,316,793) - 

SBD 926,225 - (757,820) - 

VATU 1,051,036 - (859,938) - 

As at 31 December 2011 

FJD 3,744,342 - (3,063,553) - 

SBD 831,513 - (680,329) - 

VATU 1,110,305 - (908,432) - 

Company Strengthening Weakening 


loss loss 

As at 31 December 2012 

FJD - 4,053,858 - (3,316,793) 

SBD - 926,225 - (757,820) 

VATU - 1,051,036 - (859,938) 

As at 31 December 2011 

FJD - 3,744,342 - (3,063,553) 

SBD - 831,513 - (680,329) 

VATU - 1,110,305 - (908,432) 


62 




(d) Interest rate risk 

Profile 

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




K K K K 

Fixed rate instruments 

Financial assets (Held-to-maturity investments) 25,063,559 56,410,120 - 11,479,852 

Finance receivables (net) 347,524,369 280,966,344 - - 

Financial liabilities (250,543,897) (235,803,220) - - 

Total 122,044,031 101,573,244 - 11,479,852 

Variable rate instruments 

Financial liabilities 21,133,077 24,059,878 - (6,137,013) 

Fair value sensitivity analysis for fixed rate instruments 

The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore a 

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

Cash flow sensitivity analysis for variable rate instruments 

A change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss 

by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain 

constant. The analysis is performed on the same basis for 2011. 

Consolidated 100bp increase 100bp decrease 


loss loss 


As at 31 December 2012 (211,331) - (211,331) - 

As at 31 December 2011 (21,654) - (21,654) - 

Company 100bp increase 100bp decrease 


loss loss 


As at 31 December 2012 - - - - 

As at 31 December 2011 5,523 - (5,523) -




(e) Fair value versus carrying values 

The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows: 

Consolidated Fair values Carrying amounts 


K K K K 



25,063,559 56,410,120 25,063,559 56,410,120 



Finance and other receivables 332,583,029 270,414,379 332,583,029 270,414,379 

Cash and cash equivalents 22,107,914 24,169,870 22,107,914 24,169,870 

Secured bank loans (21,133,077) (24,059,878) (21,133,077) (24,059,878) 

Interest bearing deposits (229,410,820) (211,743,341) (229,410,820) (211,743,341) 

Trade and other payables (8,114,717) (6,664,806) (8,114,717) (6,664,806) 

Bank overdraft - - - - 

Total 448,347,325 421,848,403 448,347,325 421,848,403 

Company 



16,637,347 11,479,852 16,637,347 11,479,852 



Cash and cash equivalents 944,049 628,746 944,049 628,746 

Trade and other payables (475,370) (9,254,038) (475,370) (9,254,038) 

Total 344,315,167 316,134,583 344,315,167 316,134,583 

There are no debt markets in the segments the Group operates. Based on history, secondary market transactions for fixed rate 

instruments have been very minimal and have been at the interest rate implicit in the instrument. As a result, there is no 

difference in fair value and carrying value of fixed rate instruments. 


64 




(f) Fair value hierarchy 

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been 

defined as follows. 

• Level 1: quoted prices in active markets for identical assets or liabilities 

• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either 

directly (ie. as prices) or indirectly (derived from prices) 

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs) 

Consolidated Level 1 Level 2 Level 3 Total 

K K K K 

31 December 2012 


value through profit & loss 237,175,541 - - 237,175,541 

Financial assets classified as held for trading - - 75,896 75,896 

Total Assets 237,175,541 - 75,896 237,251,437 

31 December 2011 




Total Assets 313,246,423 - 75,636 313,322,059 

Company 

31 December 2012 




Total Assets 237,175,541 - 33,600 237,209,141 

31 December 2011 




Total Assets 313,246,423 - 33,600 313,280,023 




28. Operating segments 

The Group has eight (8) reportable segments, as described below, which operate under the Group’s three (3) strategic business 

units. The strategic business units offer different products and services, and are managed separately. For each of the reportable 

segment, the Group’s CEO reviews internal management reports on at least a monthly basis. The following summary describes 

the operations in each of the Group’s reportable segment: 

General finance, leasing and hire purchase financing - 

• Credit Corporation Finance Limited (CC Finance) 

• Credit Corporation (SI) Limited (CCSI) 

• Credit Corporation (Fiji) Limited (CCFJ) 

• Credit Corporation (Vanuatu) Limited (CCVT) 

Property investment - 

• Era Dorina Limited - residential 

• Credit House Limited - commercial (office space) 

• Ela Makana Developments Limited - vacant land 

Investment company - 

• Credit Corporation (PNG) Limited (CCPNG) 

Information regarding the results of each reportable segment is included below. Performance is measured based on segment 

profit before tax, as included in the internal management reports that are reviewed by the Group's CEO. Segment profit is used 

to measure performance as management believes that such information is the most relevant in evaluating the results of certain 

segments relative to other entities that operate within these industries. 

Information about reportable segments 

2012 (K’000) 

Credit Ela Era CC 

CCPNG House Makana Dorina Finance CCSI CCFJ CCVT Total 

External revenue - - - - 34,981 4,270 17,121 2,383 58,755 

Other revenue 44,044 12,018 - 26,334 1,928 612 1,272 434 86,642 

Inter-segment revenue 21,228 650 - 390 980 - - - 23,248 

Finance costs (2) (64) - (4) (6,565) (859) (6,517) (1,183) (15,057) 

Fair value loss 21,937 740 - 47,012 - - - - 69,689 

Depreciation (295) (121) - (617) (307) (51) (405) (46) (1,842) 

Reportable segment profit 

before income tax 64,371 7,559 (40) 65,951 21,113 3,230 7,283 444 169,911 

Share of profit of equitymethod 

investee 575 - - - - - - - 575 

Reportable segment assets 707,143 63,598 6,023 189,683 255,165 22,725 111,691 12,468 1,368,496 

Investment in associate 5,065 - - - - - - - 5,065 

Reportable segment liabilities 1,187 14,188 1,262 46,362 163,230 14,389 75,207 3,006 318,831 


66 



28. Operating segments (continued) 

Information about reportable segments (continued) 

2011 (K’000) 


Credit Era CC 

CCPNG House Dorina Finance CCSI CCFJ CCVT Total 

External revenue - - - 28,876 3,069 19,800 3,603 55,348 

Other revenue 39,028 10,408 24,271 1,656 355 1,234 331 77,283 

Inter-segment revenue 18,600 557 510 1,517 - - - 21,184 

Finance costs - 58 191 (3,887) (761) (6,871) (1,569) (12,839) 

Fair value loss (15,721) - - - - - - (15,721) 

Depreciation (262) (78) (558) (10) (28) (430) (50) (1,416) 

Reportable segment profit 

before income tax 21,257 5,877 17,451 18,676 1,917 9,136 995 75,309 

Share of profit of equitymethod 

investee 406 - - - - - - 406 

Reportable segment assets 622,278 56,689 131,614 227,057 19,008 112,431 14,714 1,183,791 

Investment in associate 4,938 - - - - - - 4,938 

Reportable segment liabilities (6,641) 1,331 25,960 143,451 11,524 78,732 4,722 259,079




Reconciliation of reportable segment revenues, profits or loss, assets and liabilities. 

(K’000) 2012 2011 

Revenues 

Total revenue for reportable segments 58,755 55,348 

Other revenue 86,642 77,283 

Fair value gain/(loss) 69,689 (15,721) 

Finance costs (15,057) (12,839) 

Elimination of inter-segment revenue (23,248) (21,184) 

Net operating income 176,781 82,887 

Profit or loss 

Total profit or loss for reportable segments 169,911 75,309 

Elimination of inter-segment profit (20,257) (17,453) 

Share of profit of equity-accounted investee 575 406 

Consolidated profit before tax 150,229 58,262 

Assets 

Total assets for reportable segments 1,368,496 1,183,791 

Investment in equity-accounted investee 5,065 4,938 

Elimination of intercompany transaction (20,913) (2,382) 

Elimination of investment in subsidiaries (343,709) (295,792) 

Consolidated total assets 1,008,939 890,555 

Liabilities 

Total liabilities for reportable segments 313,831 259,079 

Elimination of intercompany transaction (20,913) (2,382) 

Consolidated total liabilities 297,918 256,697 


68 




Geographical segments 

Consolidated 

Revenue Non-current Assets* 

(K’000) 2012 2011 2012 2011 

Papua New Guinea 159,248 63,696 805,747 609,355 

Fiji 11,876 14,163 94,241 78,350 

Solomon Islands 4,023 2,663 20,656 7,924 

Vanuatu 1,634 2,365 7,114 5,532 

Total 176,781 82,887 927,758 701,161 

*Non-current assets presented consist of property and equipment, finance and other receivables, investment property, other 

investments and deferred tax assets. 

29. Earnings per share 

The calculation of basic earnings per share (consolidated) at 31 December 2012 was based on profit attributable to ordinary 

shareholders of K106,926,901 (2011: K42,104,685), and a weighted average number of ordinary shares outstanding of 

318,057,052 (2011: 317,518,748). There is no difference between basic and diluted earnings per share. 

30. Events occurring after balance sheet date 

In January 2013 the Group received a non-binding offer from Bank of South Pacific Limited to acquire the Group’s finance and 

leasing businesses. The non-binding offer is at a price of K250,000,000. The Group has decided to invite Bank of South Pacific 

Limited to undertake a due diligence. The acquisition is conditional upon completion of a successful due diligence, various 

regulatory approvals in Papua New Guinea, Fiji, Solomon Islands and Vanuatu, shareholder approval and the parties agreeing 

on the terms of, and entering into, agreed transaction documents. 


S H A R E H O L D E R I N F O R M A T I O N 

TOP 20 SHAREHOLDERS AS AT 31 DECEMBER 2012 

Number % 

National Superannuation Fund Limited 58,315,745 18.30 

Nambawan Super Limited 48,776,170 15.31 

Teachers Savings and Loan Society Limited 48,613,500 15.26 

Lamin Trust Fund 19,158,710 6.01 

Motor Vehicles Insurance Limited 17,100,000 5.37 

Federation of Savings & Loan Societies Limited 16,621,878 5.22 

Garth McIlwain 8,779,066 2.76 

NGIP Agmark Limited 8,006,946 2.51 

Mineral Resources Star Mountains Limited 4,374,011 1.37 

BSP Nominees Limited 4,241,086 1.33 

BSP Life (Fiji) Limited 4,091,838 1.28 

Mineral Resources Ok Tedi No. 2 Limited 4,064,848 1.28 

Sios Workers Ritaia Fund Trustee Services Limited 3,783,622 1.19 

Finance Corporation Limited 3,190,647 1.00 

Columbus Investments Limited 3,123,580 0.98 

Tropicana Limited 2,942,101 0.92 

Kina Asset Management No. 1 Limited 2,806,440 0.88 

Comrade Trustee Services Limited 2,694,629 0.85 

Melanesian Trustee Services Limited 2,500,000 0.78 

Capuchin Friars Minor of PNG 2,452,214 0.77 

Total 265,637,031 83.37 

SHAREHOLDING BANDS AS AT 31 DECEMBER 2012 

Shareholding No. of Shareholders No. of Shares 

1 - 1,000 674 363,455 

1,001 - 5,000 439 1,027,677 

5,001 - 10,000 358 3,028,752 

10,001 - 100,000 268 8,360,878 

100,001 and above 99 305,869,596 

Total 1,838 318,650,358 

SHARE TRADES 

Year No. Volume 

2003 89 797,725 

2004 156 879,359 

2005 171 228,528 

2006 333 486,440 

2007 637 6,312,012 

2008 795 5,641,868 

2009 263 10,560,264 

2010 363 11,625,353 

2011 500 13,740,727 

2012 528 7,226,532 


70 

Peter Dixon - Managing Director 

Credit Corporation (Fiji) Limited enjoyed another profitable year 

in 2012 despite extremely challenging local conditions. Net 

profit before tax of FJD6.50 million (K7.33 million) was returned 

for the year, a 10.6% decrease on the 2011 figure of FJD7.27 

million (K8.20 million). However, net profit after tax of FJD5.20 

million (K5.86 million) was a 9.7% improvement over the prior 

year’s result of FJD4.74 million (K5.34 million) due to a reduction 

in the corporate tax rate to 20% in 2012 from 28% the previous 

year. 

Fiji was severely impacted by natural disasters during the year. 

The damage from two major floods early in the year coupled 

with damage caused by the impact of Cyclone Evan in late 2012, 

was disruptive to the operations of the Company and to many of 

our business borrowers particularly in the west of Fiji. 

The asset finance market was subject to a heightened level of 

competition in 2012, with all major commercial banks actively 

promoting asset finance products. As a result of this market 

aggression, new business volumes were down 16% from the 

previous year and the number of new vehicles financed also 

declined significantly from the previous year. Falling levels of 

new business volumes coupled with loss of existing business 

due to refinancing, resulted in a runoff in the level of the finance 

book. Net finance receivables as at the end of 2012 stood at 

FJD76.2 million (K85.94 million) as compared to FJD80.4 million 

(K90.68 million) as at the end of the previous year. 

Additional provisioning for bad and doubtful debts was made 

against the Company’s finance book in 2012, resulting in a 

higher than normal provisioning charge against profit. We are 

comfortable that the finance book is adequately provisioned, 

providing a satisfactory buffer against any deterioration in the 

credit quality of the book. 

Economic growth in Fiji in 2012 was tempered by the impact of 

natural disasters, however there are positive signs that the 

economy is gaining momentum, with increasing household and 

business spending and capital investment. Sectorial 

performance remains mixed, with cane and sugar production 

declining in 2012, however a buoyant tourism industry 

continues to provide a solid backbone for the economy. Interest 

rates continued to fall during 2012 with strong levels of liquidity 

available in the Fiji market. 


C R E D I T C O R P O R A T I O N 

( F I J I ) L I M I T E D 

The Government has committed to fund a major program over 

the coming years to rejuvenate roads and bridges across Fiji and 

this should present Credit Corporation with good financing 

opportunities as local contractors gear up for the work. 

The Company has commissioned construction of a two storey 

commercial building in Namaka near Nadi. We will see a shift in 

the Company’s Nadi branch to that site by mid 2013, allowing for 

more efficient operations and a significant lift in the Company’s 

profile in the west. 

In 2013 the focus will remain on maintaining a high level of 

customer service to the Company’s valued clients, improving 

operational efficiency and maximising financial performance. 

Strong competition is expected to continue in the local asset 

finance market, however it is to be hoped that business levels 

will rise on the back of improving economic conditions. 

Peter Dixon 

Fiji 

Grand Pacific Hotel Suva under construction

C O N S O L I D A T E D S T A T E M E N T S 

C R E D I T C O R P O R A T I O N ( F I J I ) L I M I T E D 

(EXTRACTED FROM AUDITED FINANCIAL STATEMENTS) 

BALANCE SHEET 


Fiji Dollar Fiji Dollar 

Assets 

Cash at bank 10,909,352 9,618,218 

Finance receivables 76,171,417 80,390,686 

Held to maturity investments 3,000,000 2,500,000 

Available for sale investments 37,500 37,500 


Current tax asset 79,474 - 

Deferred tax asset 2,076,675 1,215,755 

Other assets 102,526 97,503 

Other receivables 292,578 295,352 

Total assets 98,352,793 99,488,660 

Liabilities 

Accounts payable 311,057 595,527 

Borrowings 65,398,020 65,937,144 

Employee entitlements 294,766 258,049 

Current tax liability - 509,989 

Deferred income 1,595 - 

Proposed dividends - 2,125,000 

Total liabilities 66,005,438 69,425,709 

Net assets 32,347,355 30,062,951 

Shareholders' equity 

Share capital 2,150,000 2,150,000 

Share premium reserve 1,300,000 1,300,000 

Capital profits reserve 633,814 633,814 

Retained profits 28,263,541 25,979,137 

Shareholders' equity 32,347,355 30,062,951 

PROFIT AND LOSS ACCOUNT 

Operating profit 6,503,419 7,274,250 

Income tax expenses (1,300,684) (2,533,781) 

Operating profit after tax 5,202,735 4,740,469 

Accumulated profits at the beginning of the year 25,979,137 26,103,668 

Transfer from general reserve - - 

Dividends (2,918,331) (4,865,000) 

Accumulated profits at the end of the year 28,263,541 25,979,137 

Board of Directors 

Garth McIlwain (Chairman) 

John Dunlop 


Peter Dixon 

Lionel Yee 


72 

I am pleased to report that Credit Corporation (SI) Limited 

recorded an operating profit of SBD12.09 million (K3.23 million), 

which translates to an 83.18% increase over 2011 result. 

The exceptional result was driven by increase business volumes 

gained from activities in the transport, agricultural, construction, 

mining, fishing and distribution sectors and this has contributed 

to the overall revenue growth by 55% to SBD16 million (K4.31 

million) in 2012. 

Total dividend payment of SBD6.4 million (K1.72 million) was 

paid out in 2012. This is a well rewarding return for our 

shareholders in PNG. 

Notwithstanding a slight increase in our expenditure by 8%, the 

overall Cost to Income Ratio was maintained around 20% 

throughout the year and we forecast similar trend in 2013. No 

major CAPEX is committed in 2012 and 2013 respectively. 

We maintained a strong and growing balance sheet and the 

quality of our loan portfolio is very good. The default level was 

maintained below 3% throughout the year. 

The Central Bank of Solomon Islands conducted a review on our 

operations in October and we have yet to receive their report. 

Whilst we forecast for continued growth in 2013 as indicated in 

our budget, this will be lower compared to 2012 as we believe 

Solomon Islands staff 

Tony Langston - Managing Director 



( S I ) L I M I T E D 

we have reached the level our business can comfortably absorb, 

taking into consideration our size and the country’s projected 

economic growth of 4% in 2013. 

Solomon Islands Government had passed a donor subsidised 

budget of USD400 million (SBD3 billion or K0.81 billion) for 2013 

to cater for its recurrent costs and development programs. 

Total credit to private sector continues to hold above 

SBD1billion (K270 million). The bank’s lending rate in the market 

has gradually reduced from 14% to as low as 7% to selective 

commercial businesses. This is to counter the excess liquidity in 

the system which continues to hold above SBD2 billion (K539 

million) compared to 12 months ago. Our market share in credit 

to private sector is 9%, which is considered a very good standing 

given our size. Our product pricing remains competitive and well 

aligned with our risk exposure. 

Credit Corporation is committed to continue to delivering 

attractive and competitive financial services to individuals and 

businesses in Solomon Islands in the future, as we have proven 

since our inception in Solomon Islands in 2005. 

Tony Langston 

Solomon Islands


C R E D I T C O R P O R A T I O N ( S I ) L I M I T E D 


BALANCE SHEET 


SBD SBD 

Assets 

Cash at bank 2,263,692 9,109,758 

Receivables, net 78,744,389 46,755,751 


Other debtors 102,025 10,100,385 

Total assets 84,315,474 69,285,375 

Liabilities 

Creditors and other payables 2,941,968 1,362,531 

Deposits 50,445,199 40,682,482 


Net assets 30,928,307 27,240,362 

Issued Capital (20,000,000 at SBD1.00) 20,000,000 20,000,000 

Accumulated profit (losses) 10,928,307 7,240,362 




Income tax expense (1,965,532) (1,302,711) 


Dividends (6,440,000) (3,115,000) 

Accumulated profit brought forward 7,240,362 5,058,570 

Accumulated profit at the end of the year 10,928,307 7,240,362 




Tony Langston 


74 

Credit Corporation Vanuatu Limited recorded an operating profit 

of VT19.94 million (K0.44 million), compared to the 2011 result of 

VT37.50 million (K0.84 million). The lower profits are due to the 

sluggish economic conditions that prevailed during the year. 

New business volumes recorded a slight increase of 9.2% from 

previous year. Total gross receivables stood at VT614.06 million 

(K13.90 million) compared to VT654.31 million (K14.81 million) 

in 2011. 

A large number of delinquent accounts were addressed as more 

emphasis has been placed towards consolidation and 

strengthening of our loan book. 

The economy in general saw slow growth in most sectors, owing 

to an ailing agriculture sector with low commodity prices and 

slowing down of activities in the construction sector. 

Tourism on the other hand, continued to expand with increased 

numbers of visitor arrivals. As expected both air and cruise-ship 

arrivals increased significantly as with the total non-resident 

visitor arrivals for the same period last year. 

Vanuatu staff 

Orai Gairo - Managing Director 



( V A N U A T U ) L I M I T E D 

In 2012, forecast for growth was revised downwards which was 

brought about by the weaker-than-expected performance in 

the agriculture sector owing to lower commodity prices. 

Manufacturing sector forecasts were also revised downwards. 

Economic growth for 2013 is expected to be around 3.7 percent. 

With this, trading conditions were often difficult during the year 

with a subdued economy. A slowing in banking activity and 

domestic credit saw high liquidity levels which resulted in a drop 

in both deposit rates and lending rates. 

The outlook for growth is expected to be supported by 

increased tourism arrivals and services activities and various 

ongoing projects. 

After this consolidation phase, we will continue to focus on 

improving the performance of the Company to maximise 

profitability and continue to maintain our strong presence in 

Vanuatu. 

Orai Gairo 

Port Vila


C R E D I T C O R P O R A T I O N ( V A N U A T U ) L I M I T E D 


BALANCE SHEET 


VATU VATU 

Assets 

Cash at bank 146,526,477 165,294,567 

Finance receivables 395,691,283 461,822,727 


Other assets 1,359,293 1,267,003 

Total assets 550,973,854 632,317,091 

Liabilities 

Accounts payable 10,051,926 11,111,139 

Borrowings 113,900,214 185,953,330 

Deferred fee income 8,887,460 7,063,405 


Net assets 418,134,254 428,189,217 


Share capital 50,000,000 50,000,000 

Share premium reserve 318,188,000 318,188,000 

Accumulated profits 49,946,254 60,001,217 



Operating profit/(loss) 19,945,037 37,501,069 

Accumulated profit at the beginning of the year 60,001,217 52,500,148 

Dividends (30,000,000) (30,000,000) 

Accumulated profit at the end of the year 49,946,254 60,001,217 




Orai Gairo 


76 

Credit Corporation Finance Limited has again produced an 

excellent result for PNG in 2012. An operating profit at K21.11 

million (2011: K18.68 million) was returned for the year and net 

profit after tax for the year was K14.83 million (2011: K13.07 

million). New business written for the period totalled K223.37 

million split between Lae K113.51 million (50.82%), Port Moresby 

K91.66 million (41.03%) and Kokopo K18.20 million (8.15%). In 

addition to obtaining some large and desirable clients in both 

Lae and Port Moresby, the PNGLNG project has again played a 

large part in the overall result. This will slow down over the next 

12 months as Tari & Hides projects have already commenced 

demobilising. 

Delinquent accounts have also been held to a very acceptable 

level, 2.72% of the total book. This is a very pleasing result in light 

of the ongoing tough market, especially in the trucking sector. 

Losses for the year were K51,543 in total which is only 0.02% of 

the closing book balance. This indicates excellent work by all 

Port Moresby Head Office staff 



David Weston - General Manager Finance 

F I N A N C E L I M I T E D 

staff approving new business over the past years and highlights 

the solid training and expertise of our lending and collection 

staff. 

In the coming year, it will be difficult to maintain the results for 

the past 12 months due to the downturn in the transport 

industry bought upon by the Hides & Tari demobilisations. We 

continue to actively seek new clients as well as retaining existing 

clients. We will be promoting our business more in outer laying 

areas and trying to establish sound client bases in these regions 

for the future. With this in mind, Credit Corporation Finance 

Limited will still be a major contributor to the 2013 results. 

David Weston 

General Manager Finance

F I N A N C I A L S T A T E M E N T S 

C R E D I T C O R P O R A T I O N F I N A N C E L I M I T E D 


BALANCE SHEET 


K K 

Assets 

Cash and cash equivalents 13,516,160 12,414,601 

Finance and other receivables 232,911,931 169,724,803 

Other investments 4,599,247 41,964,261 

Fixed assets 2,302,000 2,056,674 

Deferred tax asset 1,835,319 896,280 

Total assets 255,164,657 227,056,619 

Liabilities 

Trade and other payables 625,765 1,445,189 

Employee benefits 1,102,845 716,286 

Deposits 158,968,778 138,637,402 

Income taxes payable 2,532,749 2,652,522 


Net assets 91,934,520 83,605,220 


Share capital 38,347,813 38,347,813 

Retained profits 53,586,707 45,257,407 




Income tax expenses (6,283,849) (5,602,724) 


Accumulated profits at the beginning of the year 45,257,407 37,648,173 

Dividends (6,500,000) (5,463,791) 

Accumulated profits at the end of the year 53,586,707 45,257,407 



Michael Koisen 

Ian Tarutia 

John Dunlop 



78 

CREDIT HOUSE LIMITED 

Credit House Limited produced a record performance in 2012 

posting a net profit before tax of K7.6 million an increase of 

28.6% over the 2011 result. This was primarily as a result of all 

tenant leases being renewed in the preceding two years and the 

building being fully tenanted throughout the year. 

A revaluation of the property was carried out in October 2012 

and there was a nominal increase of 2% on the book value of the 

building. When the capital expenditure on the major 

refurbishment of the building is taken into consideration, this 

demonstrates that the project was well worth undertaking and 

the costs were appropriately within the normal market 

appreciation of the property. 

We note that with all the new commercial office stock in the 

market, rental rates will not see any significant increases in the 

medium term, although outgoings costs continue to remain 

high. This is largely as a result of the businesses that provide 

these services passing on the high core input costs. 

We expect there will be some tenant movement in 2013/2014 

and this will impact on the building’s performance. We are 

confident that having completed the major refurbishment of the 

building and with the high standard of service and security we 

provide, space in Credit House will remain an attractive option to 

new and existing corporate tenants wishing to be 

accommodated in a modern, functional and well serviced 

building. 

ERA DORINA LIMITED 

Although rental rates in the executive residential market peaked 

in 2012, Era Dorina Estate has maintained full occupancy 

throughout the year and we have been able to maintain rental 

levels. Consequently, the property produced another record 

result, posting a net profit before tax (after property revaluation) 

of K18.94 million. This represents an increase of 8.5% on the 2011 

result. 

We also carried out the revaluation of Era Dorina Estate in 

October 2012 and the property was valued at K173.09 million 

which is an increase of 37% on the book value. This is a very 

good result and demonstrates strong asset appreciation since 

the last valuation in 2009. 



Rennie Wekina - General Manager Properties 

P R O P E R T Y D I V I S I O N 

Supply of executive residential accommodation in the market 

has been satisfied and we do not expect any movement in rental 

rates in the short to medium term. Despite that, the reputation 

Era Dorina Estate enjoys as a well serviced, family friendly, secure 

compound will ensure that we will continue to maintain high 

occupancy rates. 

The construction of the Stage 5, twenty one-bedroom studio 

apartments is progressing well and we expect the apartment 

leases to start from November 2013. Although we have not yet 

commenced marketing, we have received encouraging 

feedback from various sectors of the market and we believe this 

will be another successful addition to the Era Dorina brand. 

ELA MAKANA DEVELOPMENTS LIMITED 

We have purchased 0.7975 hectares of land at the crest of Ela 

Makana not far from Era Dorina Estate and with fantastic views 

towards both Ela Beach and Fairfax Harbour. 

An overall master plan has been drafted for the site and 

development will be completed in stages, based on market 

demand. Concept designs and costings are currently underway 

to build an executive residential development on the site, which 

will compliment Era Dorina Estate. 

We believe this is a good, strategic purchase and it will allow us 

to expand the portfolio in a controlled and responsive manner. 

Rennie Wekina 

General Manager Properties

F I N A N C I A L S T A T E M E N T S 

ERA DORINA LIMITED AND CREDIT HOUSE LIMITED 


BALANCE SHEET 

ERA DORINA CREDIT HOUSE 


K K K K 

Assets 

Cash and cash equivalents 1,261,191 295,815 974,712 267,654 

Trade and other receivables 3,102,816 2,328,534 1,018,189 725,693 

Inventories 104,153 68,468 191,670 182,041 

Property, plant and equipment 4,209,634 3,880,570 427,344 255,989 

Investment property 191,066,069 127,246,995 61,873,000 60,741,866 

Other investment 3,003,032 8,105,666 3,063,230 1,801,757 

Deferred tax asset 13,452 13,452 61,621 48,179 

Total assets 202,760,347 141,939,500 67,609,766 64,023,179 

Liabilities 

Trade and other payables 3,969,024 2,403,838 1,509,502 202,131 

Loans and borrowings 34,210,072 26,279,271 4,012,203 5,532,463 

Income taxes payable 1,832,989 4,987,441 736,963 587,515 

Deferred tax liabilities 19,427,354 2,614,820 11,941,932 2,343,850 

Total liabilities 59,439,439 36,285,370 18,200,600 8,665,959 

Net assets 143,320,908 105,654,130 49,409,166 55,357,220 


Share capital 17,500,004 17,500,004 3,600,002 3,600,002 

Reserves 106,551,688 59,539,332 35,763,912 35,024,458 

Retained profits 19,269,216 28,614,794 10,045,252 16,732,760 

Shareholders' equity 143,320,908 105,654,130 49,409,166 55,357,220 


Operating profit 

Income tax expenses (including deferred tax 

65,950,694 17,451,065 7,558,705 5,877,058 

on property revaluation) (22,183,916) (5,235,321) (11,506,759) (1,759,362) 

Operating profit after tax 43,766,778 12,215,744 (3,948,054) 4,117,696 

Accumulated profits at the beginning of the year 28,614,794 20,311,644 16,732,760 14,015,394 

Property revaluation transferred to reserves (47,012,356) - (739,454) - 

Dividends (6,100,000) (3,912,594) (2,000,000) (1,400,330) 

Accumulated profits at the end of the year 19,269,216 28,614,794 10,045,252 16,732,760 




Ian Tarutia 

John Dunlop 



This page has been left intentionally blank.

Registered Office 

Credit House, Cuthbertson Street 

Port Moresby, Papua New Guinea 

Principal Place of Business 



Directors 



Ian Tarutia 

John Dunlop 


Chief Executive Officer 


Company Secretary 

Rennie Wekina 

Auditors 

KPMG Chartered Accountants 

PO Box 507 

Port Moresby 

Papua New Guinea 

Fiji - KPMG 

Solomon Islands - Morris & Sojnocki 

Vanuatu - Law Partners 

Share Registry 

PNG Registries Limited 

Level 2, AON Haus 

PO Box 1265 

Port Moresby 


Telephone: (675) 321 6377 

Facsimile: (675) 321 6379 

Email: ssimon@online.net.pg 

Bankers 

Australia and New Zealand Banking 

Group (PNG) Limited 

Australia and New Zealand Banking 

Group (Fiji) Limited 

Bank of South Pacific Limited 

National Bank of Vanuatu 

C O R P O R A T E D I R E C T O R Y 

PAPUA NEW GUINEA 

Credit Corporation (PNG) Limited 



PO Box 1787, Port Moresby 


Telephone: (675) 321 7066 

Facsimile: (675) 321 7767 

Email: 

finance@creditcorporation.com.pg 

Branch Offices 

NGIP Haus, Talina, Kokopo 

East New Britain Province 


Telephone: (675) 982 8555 

Facsimile: (675) 982 8658 

Credit Corp Building 

Butibum Road, Voco Point, 

Lae, Morobe Province 


Telephone: (675) 472 5855 

Facsimile: (675) 472 6877 

FIJI 

Credit Corporation (Fiji) Limited 

Credit House 

10 Gorrie Street, Suva, Fiji Islands 

PO Box 14070, Suva, Fiji Islands 

Telephone: (679) 3305 744 

Facsimile: (679) 3305 747 

Email: creditcorp@connect.com.fj 

Branch Offices 

Colonial Plaza, Namaka 

Nadi, Fiji Islands 

Telephone: (679) 6724 766 

Facsimile: (679) 6724 911 

3 Vidilo Street 

Lautoka, Fiji Islands 

Telephone: (679) 6652 025 

Facsimile: (679) 6652 085 

Shop 14 Tebara Meat Complex 

Nakasi, Fiji Islands 

Telephone: (679) 3410 029 

Facsimile: (679) 3410 028 

SOLOMON ISLANDS 

Credit Corporation (SI) Limited 

Centrepoint Building 

Mendana Avenue, 

Honiara, Solomon Islands 

PO Box 1235, Honiara 

Solomon Islands 

Telephone: (677) 22114 

Facsimile: (677) 22118 

Email: 

creditcorporation@solomon.com.sb 

VANUATU 

Credit Corporation (Vanuatu) 

Limited 

Anchor House 

Rue Lilini Highway 

PO Box 3494 

Port Vila 

Vanuatu 

Telephone: (678) 23822 

Facsimile: (678) 23823 

Email: gm@creditcorp.com.vu 

www.creditcorporation.com.pg

ANNUAL REPORT 2012

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