Shawn Andre Scott, Vice Chairman Jody Raymond Jordahl, Director Patirck Mckinlay, Independent Director Irene Tantiado Nepomuceno, Independent Director

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2 Contents CORPORATE INFORMATION... 1 VISION... 2 BOARD OF DIRECTORS... 3 FINANCIAL HIGHLIGHTS... 5 ORGANIZATION STRUCTURE... 7 DIRECTOR S REPORT... 8 INDEPENDENT AUDITOR S REPORT CONSOLIDATED BALANCE SHEET BALANCE SHEET CONSOLIDATED INCOME STATEMENT INCOME STATEMENT CONSOLIDATED STATEMENT OF CHANGE IN EQUITY STATEMENT OF CHANGE IN EQUITY COSOLIDATED CASH FLOW STATEMENT CASH FLOWS STATEMENT NOTED TO THE FINANCIAL STATEMENTS... 22

3 CORPORATE INFORMATION BOARD OF DIRECTORS: John Kevin Baldwin, Chairman Shawn Andre Scott, Vice Chairman Jody Raymond Jordahl, Director Patirck Mckinlay, Independent Director Irene Tantiado Nepomuceno, Independent Director REGISTERED OFFICE: No. 202, Norodom Blvd, Sangkat Tonle Bassac Khan Chamkarmon, Phnom Penh Kingdom of Cambodia PRINCIPAL BANKERS: National Bank of Cambodia ACLEDA Bank Cambodia Asia Bank Phnom Penh Commercial Bank AUDITORS: Grand Thornton (Cambodia) Limited 1

4 VISION To be a top ranking local and regional bank with international standards, committed to augmenting Stakeholder value through due diligence, care, and competence while at the same time continuing to offer a high level of personalized, competent, and friendly service to our customers. 2

5 BOARD OF DIRECTORS H.E. John Kevin Baldwin is the Principal of Bridge Capital LLC and the head of the company investment committee. He has been involved in major financial transactions since 1981, working as an executive or Principal in firms involved in high yield debt, high yield loans, and has served as a Shareholder and Director of several commercial banks, as well as coordinated the acquisition of debts. Mr. Baldwin manages the day to day investment activities of Bridge Capital LLC. H.E. Oknha Shawn Andre Scott is the Principal of Bridge Capital LLC and has a background in finance, real estate development and construction. Mr. Scott has been a shareholder of several commercial banks. He is in-charge of reviewing loan requests that comes into Bridge Capital and guides the Company s investment policy for emerging markets. Mr. Jody Jordahl has been focusing primarily, since 2007, on the emerging markets of Laos, Cambodia, Vietnam, and Thailand and has developed extensive knowledge and experience in international finance and project development, real estate acquisitions, multinational tax planning, and secured transactions. Prior to joining Bridge Capital, Mr. Jordahl spent more than 14 years as an executive in the restaurant industry where he served as Regional Director of Operations in Washington, Oregon, Idaho, and Arizona. He holds both a B.A. and Juris Doctorate from the University of Arizona. 3

6 Mr. Patrick Mckinlay, holding Master Degree of Philosophy from Cambridge University and Master in Law of Edinburgh University in the UK, has several years of experiences with National Health Service education as Director of Training Development Support Unit. He has also joined Senior Management team of Cambodia Children s Fund for over 6 years. He has also given lectures in Political Science at CamEd Business School. Ms. Irene Tantiado Nepomuceno, has got extensive experience in Financial Investment Controller for international investment company where she involved many big international investment projects. She has also experienced in both operations and management in hotel and entertainment resort business in Lao PDR. She holds Bachelor of Science in Commerce major in Accounting from University of the Visayas. 4

7 FINANCIAL HIGHLIGHTS Change INCOME STATEMENT Interest Income 1,174, ,066 1,025,636 34% Interest Expenses 30,656 1, % Net Interest Income 1,143, ,924 1,025,636 34% Non Interest Income 133,841 1,071, ,408 75% Operating Expenses 591, , ,031 27% Net Operating Income 685,352 1,123, ,013 31% Provision for loan loss (1,037,105) 666, ,777 77% Income tax 13,391 72, ,667 99% Net Income/Loss 1,735, , ,569 24% STATEMENT OF FINANCIAL POSITION Net Loans and advances to customers 3,743,246 4,707,286 4,986,237 6% Other assets 4,205,424 4,070,768 4,090,344 0% Total Equity 9,571,745 9,955,390 10,431,959 5% Borrowing 750, Syndicated loan 115, Other liabilities 346, , ,514 22% KEY RATIO Return on Equity 18% 5% 6% 36% Return on Asset 16% 4% 6% 29% Debt/Equity Ratio 8% 0% 0% NPL Ratio 34% 3% 3% 8% 5

8 Net Income USD 476,569 24% 1,308 INCOME CAMPARISON Gross Income Net Operating Income Net Income 1,709 1,835 1,123 1,292 Gross Income has decreased by 30% in 2016 comparing to 2015, while Net Operating Income has decreased by 31%. However, Net Income of 2016 has increased by 24% Interest Income USD 1,025, % Gross Income USD 1,292, % 2,000 1,800 1,600 1,400 1,200 1, INCOME COMPONENTS Interest Income Non Interest Income Overdraft LOI & Dividend 3% Others 0% 5% 134 1,174 1, , Loan Processing Fee 16% Short Term Deposit 0% Fixed Loan 0% Interest only 76% In 2016, total income comprises of non interest income 21%, which is lower 37% and higher 11% than of 2015 and In 2016, total gross Income is $1.2M, 76% of which comes from interest income only, 16% from Loan processing fee, and 5% from other fee income and 3% from overdraft loan interest. 6

9 ORGANIZATION STRUCTURE 7

10 DIRECTOR S REPORT The Board of Directors submits this report together with the audited consolidated financial statements of Angkor Capital Specialized Bank ( the Bank ) and its subsidiary, Angkor Capital Bank Properties Co., Ltd, together hereinafter referred to as the Group, and the financial statements of the Bank for the year ended 31 December 2016 ( the year ). The Group Angkor Capital Specialized Bank was incorporated in Cambodia on 12 May 2008 under registration number Co. 4853/08E. On 28 December 2010, the Bank has been granted a specialized bank s license No. SE-8 by the National Bank of Cambodia ( NBC ) and thereafter changed its name to Angkor Capital Specialized Bank. The registered office of the Bank is located at No. 202, Norodom Boulevard, Sangkat Tonle Bassac, Khan Chamkarmorn, Phnom Penh, Kingdom of Cambodia. Angkor Capital Bank Properties Co., Ltd ( the Subsidiary ) was incorporated in Cambodia. The registered office of the subsidiary is located at No. 202, Norodom Boulevard, Sangkat Tonle Bassac, Khan Chamkarmorn, Phnom Penh, Kingdom of Cambodia. Principal activities The principal activity of the Bank is the provision of comprehensive specialized banking loans in the Kingdom of Cambodia. The Subsidiary s principal activity is property investment. There have been no significant changes in the nature of these principal activities during the financial year. Results of operations The results of the Group and of the Bank s operations for the year ended 31 December 2016 and the state of their affairs as at that date are set out in the accompanying financial statements on pages 8 to 45. Dividends The directors do not recommend the payment of any dividends for the current financial year. Reserves and provisions There were no material transfers to or from reserve or provision during the current financial year. Bad and doubtful debts Before the income statements and balance sheets of the Group and of the Bank were made out, the directors took reasonable steps to ascertain that action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts, and satisfied themselves that all known bad debts had been written off and adequate allowance had been made for doubtful debts. At the date of this report, the directors are not aware of any circumstances which would render it necessary to write off any bad debts nor make the amount of allowance for doubtful debts in the financial statements of the Group and of the Bank inadequate to any material extent. 8

11 Current assets Before the financial statements of the Group and of the Bank were made out, the directors took reasonable steps to ensure that for any current assets which were unlikely to be realized in the ordinary course of business, their value as shown in the accounting records of the Group and of the Bank have been written down to an amount that would be expected if realized. At the date of this report, the directors are not aware of any circumstances which would render the values attributed to the current assets in the financial statements of the Group and of the Bank misleading. Value methods At the date of this report, the directors are not aware of any circumstances which have arisen and which may render adherence to the existing method of valuation of assets or liabilities in the financial statements of the Group and of the Bank misleading or inappropriate. Contingent and other liabilities At the date of this report, there does not exist: (i) Any charge on the assets of the Group and of the Bank which has arisen since the end of the current financial year which secure the liabilities of any other person, or (ii) Any contingent liability of the Group and of the Bank which has arisen since the end of the current financial year. No contingent or other liability has become enforceable, or is likely to become enforceable, within the year after the end of the current financial year which, in the opinion of the directors, will or may substantially affect the ability of the Group and the Bank to meet its obligations when they fall due. Change of circumstances At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or in the financial statements of the Group and of the Bank which would render any amount stated in the financial statements as misleading. Items of an unusual nature The result of the operations of the Group and of the Bank during the financial year were not, in the opinion of the directors, substantially affected by any item, transaction or event of a material and unusual nature. There has not arisen in the interval between the end of the current financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors, to affect substantially the results of the operations of the Group and of the Bank for the current financial year for which this report is made. Share capital The Bank did not issue any shares during the current financial year. No option to take up unissued shares in the Bank was granted during the financial year and there were no shares under options at the end of the current year in respect of shares in the Bank. 9

12 Board of Directors The members of the Board of Directors of the Group and of the Bank holding office during the year and as at the date of this report are: Name John Kevin Baldwin Shawn Andre Scott Jody Raymond Jordahl Patrick Mckinlay Irene Tantiado Nepomuceno Position Chairperson Vice Chairperson Director Independent Director Independent Director Auditors The financial statements for the year ended 31 December 2016 have been audited by Grant Thornton (Cambodia) Limited. Directors interest in the Group and Bank According to the Memorandum of Articles and Association of the Bank, the interests and deemed interest in the shares of the Bank of directors at year end are as follows: Number of shares at USD1 par value per share Directors interests At 1 January 2016 Bought Sold At 31 December 2016 John Kevin Baldwin 2,500, ,500,000 Shawn Andre Scott 2,500, ,500,000 Directors responsibility in respect of the financial statements The directors are responsible for ensuring that the financial statements are properly drawn up so as to give as true and fair view of the financial position of the Group and the Bank as at 31 December 2016, and of their financial performance and their cash flows for the year then ended. When preparing these financial statements, the directors are required to: i. adopt appropriate accounting policies which are supported by reasonable and prudent judgments and estimates and then apply them consistently; ii. comply with the disclosure requirements of the Cambodian Accounting Standards and guidelines issued by the National Bank of Cambodia or, if there have been any departures from such requirements in the interest of true and fair presentation, ensure that these have been appropriately disclosed, explained and quantified in the financial statements; iii. maintain adequate accounting records and an effective system of internal controls; iv. prepare the financial statements on a going-concern basis unless it is inappropriate to assume that the Group will continue its operations in the foreseeable future; and, v. control and direct effectively the Group and the Bank and be involved in all material decisions affecting its operations and performance, and ascertain that such have been properly reflected in the financial statements. The directors are also responsible for safeguarding the assets of the Group and of the Bank and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors confirm that the Group and the Bank have complied with the above requirements in preparing the financial statements. 10

13 Statement by the Board of Directors In the opinion of the directors, the accompanying financial statements set out on pages 8 to 45 have been properly drawn up and give a true and fair view of the financial position of the Group and of the Bank as at 31 December 2016, and of their financial performance and cash flows for the year then ended in accordance with Cambodian Accounting Standards and guidelines issued by the NBC. 11

14 INDEPENDENT AUDITOR S REPORT To the shareholders of Angkor Capital Specialized Bank and its subsidiary Opinion We have audited the accompanying financial statements of Angkor Capital Specialized Bank ( the Bank ) and its subsidiary ( the Group ), which comprise the balance sheets of the Group and the Bank as at 31 December 2016, income statements, statements of changes in equity and statements of cash flows of the Group and of the Bank for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Group and of the Bank as at 31 December 2016, and of their financial performance and cash flows for the year then ended, in accordance with Cambodian Accounting Standards ( CASs ) and guidelines issued by the National Bank of Cambodia. Basis for opinion We conducted our audit in accordance with International Standards on Auditing ( ISAs ). Our responsibilities under those standards are further described in the auditor s responsibilities for the audit of the financial statements section of our report. We are independent of the Group and the Bank in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants ( IESBA Code ) together with the ethical requirements that are relevant to our audit of financial statements in the Kingdom of Cambodia, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other matter The financial statements of the Group and of the Bank for the year ended 31 December 2015 were audited by another auditor who expressed an unmodified opinion on those financial statements on 29 March Responsibilities of the directors for the financial statements The directors are responsible for the preparation and fair presentation of the financial statements in accordance with CASs and NBC s guidelines, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the Group and the Bank s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Bank or to cease operations, or has no realistic alternative but to do so. Auditor s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 12

15 Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group s and the Bank s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group s and the Bank s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report. However, future events or conditions may cause the Group or the Bank to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. 13

16 CONSOLIDATED BALANCE SHEET Notes 31 December December 2015 (As restated) USD KHR 000 USD KHR 000 (Note 3) (Note 3) Assets Cash on hand 7 50, ,248 95, ,901 Statutory deposits with Central Bank 8 725,495 2,928, ,498 2,938,267 Deposits and placements with banks 9 1,599,298 6,456,366 1,322,526 5,356,230 Loans and advances to customers-net 10 4,986,237 20,129,439 4,707,287 19,064,512 Other investment 12 12,794 51,650 12,794 51,816 Other assets 13 67, ,665 70, ,748 Intangible asset 14 4,807 19,406 9,614 38,937 Property and equipment 15 2,832,202 11,433,599 2,860,307 11,584,243 Total assets 10,278,473 41,494,196 9,804,359 39,707,654 Liabilities and equity Liabilities Deposits from customers 16 34, ,457 89, ,458 Other payables , ,846 89, ,723 Income tax payable , ,841 63, , ,809 1,190, , ,907 Equity Share capital 19 10,000,000 40,370,000 10,000,000 40,500,000 Accumulated losses (16,336) (65,948) (438,581) (1,776,253) 9,983,664 40,304,052 9,561,419 38,723,747 Total liabilities and equity 10,278,473 41,494,196 9,804,359 39,707,654 14

17 BALANCE SHEET Notes 31 December December 2015 (As restated) USD KHR 000 USD KHR 000 (Note 3) (Note 3) Assets Cash on hand 7 50, ,248 95, ,901 Statutory deposits with Central Bank 8 725,495 2,928, ,498 2,938,267 Deposits and placements with banks 9 1,599,298 6,456,366 1,322,526 5,356,230 Loans and advances to customers-net 10 4,986,237 20,129,439 4,707,287 19,064,512 Investment in a subsidiary 11 2,800,000 11,303,600 2,800,000 11,340,000 Other investment 12 12,794 51,650 12,794 51,816 Other assets 13 67, ,665 70, ,748 Intangible asset 14 4,807 19,406 9,614 38,937 Property and equipment ,202 1,938, ,307 1,831,843 Total assets 10,726,473 43,302,772 10,196,359 41,295,254 Equity and liabilities Liabilities Deposits from customers 16 34, ,457 89, ,458 Other payables , ,656 87, ,740 Income tax payable , ,841 63, , ,514 1,188, , ,924 Equity Share capital 19 10,000,000 40,370,000 10,000,000 40,500,000 Retained earnings/(accumulated losses) 431,959 1,743,818 (44,610) (180,670) 10,431,959 42,113,818 9,955,390 40,319,330 Total liabilities and equity 10,726,473 43,302,772 10,196,359 41,295,254 15

18 CONSOLIDATED INCOME STATEMENT Notes 31 December December 2015 USD KHR 000 USD KHR 000 (Note 3) (Note 3) Interest income 20 1,025,636 4,140, ,066 3,094,467 Interest expense (1,142) (4,625) Net interest income 1,025,636 4,140, ,924 3,089,842 Other operating income ,408 1,075,489 1,071,046 4,337,736 General and administrative expenses 23 (572,355) (2,310,597) (771,812) (3,125,838) Allowance for bad and doubtful loans and advances 10 (152,777) (616,761) (666,795) (2,700,520) Profit before income tax 566,912 2,288, ,363 1,601,220 Income tax expense 24 (144,667) (584,021) (72,670) (294,314) Profit for the year 422,245 1,704, ,693 1,306,906 16

19 INCOME STATEMENT Notes 31 December December 2015 USD KHR 000 USD KHR 000 (Note 3) (Note 3) Interest income 20 1,025,636 4,140, ,066 3,094,467 Interest expense (1,142) (4,625) Net interest income 1,025,636 4,140, ,924 3,089,842 Other operating income ,408 1,075,489 1,071,046 4,337,736 General and administrative expenses 23 (518,031) (2,091,291) (710,860) (2,878,983) Allowance for bad and doubtful loans and advances 10 (152,777) (616,761) (666,795) (2,700,520) Profit before income tax 621,236 2,507, ,315 1,848,075 Income tax expense 24 (144,667) (584,021) (72,670) (294,314) Profit for the year 476,569 1,923, ,645 1,553,761 17

20 CONSOLIDATED STATEMENT OF CHANGE IN EQUITY Notes Share capital Accumulated losses Total equity USD KHR 000 USD KHR 000 USD KHR 000 (Note 3) (Note 3) (Note 3) Balance as at 1 January ,000,000 40,500,000 (761,274) (3,083,159) 9,238,726 37,416,841 Profit for the year ,693 1,306, ,693 1,306,906 Balance as at 31 December ,000,000 40,500,000 (438,581) (1,776,253) 9,561,419 38,723,747 Balance as at 1 January ,000,000 40,500,000 (438,581) (1,776,253) 9,561,419 38,723,747 Profit for the year ,245 1,704, ,245 1,704,603 Translation differences - (130,000) - 5,702 - (124,298) Balance as at 31 December ,000,000 40,370,000 (16,336) (65,948) 9,983,664 40,304,052 18

21 STATEMENT OF CHANGE IN EQUITY Notes Share capital Accumulated (losses)/retained earnings Total equity USD KHR 000 USD KHR 000 USD KHR 000 (Note 3) (Note 3) (Note 3) Balance as at 1 January ,000,000 40,500,000 (428,255) (1,734,431) 9,571,745 38,765,569 Profit for the year ,645 1,553, ,645 1,553,761 Balance as at 31 December ,000,000 40,500,000 (44,610) (180,670) 9,955,390 40,319,330 Balance as at 1 January ,000,000 40,500,000 (44,610) (180,670) 9,955,390 40,319,330 Profit for the year ,569 1,923, ,569 1,923,909 Translation differences - (130,000) (129,421) Balance as at 31 December ,000,000 40,370, ,959 1,743,818 10,431,959 42,113,818 19

22 CONSOLIDATED CASH FLOW STATEMENT 31 December December 2015 Notes USD KHR 000 USD KHR 000 (Note 3) (Note 3) Operating activities Profit before tax 566,912 2,288, ,363 1,601,220 Adjustment for: 14 and , , , ,856 Depreciation and amortization Allowance for bad and doubtful loans and advances , , ,795 2,700,520 Operating profit before working capital changes 828,332 3,343,977 1,246,320 5,047,596 Change in working capital: Change in deposit from customers (54,952) (221,841) (202,795) (821,319) Change in loan and advances (431,725) (1,742,874) (1,663,810) (6,738,429) Change in other assets 3,509 14,165 84, ,553 Change in other payable 44, ,287 97, ,248 Net cash from/(used in) operating activities 389,575 1,572,714 (438,852) (1,777,351) Income tax paid (82,256) (332,067) (72,670) (294,314) Net cash from/(used in) operating activities 307,319 1,240,647 (511,522) (2,071,665) Investing activities Change in advance to shareholders - - (28,008) (113,432) Acquisitions of property and equipment 15 (75,731) (305,726) (12,194) (49,386) Net cash used in investing activities (75,731) (305,726) (40,202) (162,818) Financing activities Repayments of syndicated loans - - (115,641) (468,346) Repayments of borrowing - - (750,289) (3,038,670) Net cash used in financing activities - - (865,930) (3,507,016) Net change in cash and cash equivalents 231, ,921 (1,417,654) (5,741,499) Cash and cash equivalents, at beginning of year 7 and 9 1,418,304 5,744,131 2,835,958 11,485,630 Translation differences - (18,438) - - Cash and cash equivalents, at end of year 7 and 9 1,649,892 6,660,614 1,418,304 5,744,131 20

23 CASH FLOW STATEMENT 31 December December 2015 Notes USD KHR 000 USD KHR 000 (Note 3) (Note 3) Operating activities Profit before tax 621,236 2,507, ,315 1,848,075 Adjustment for: Depreciation and amortization 14 and 15 52, , , ,155 Allowance for bad and doubtful loans and advances , , ,795 2,700,520 Operating profit before working capital changes 826,656 3,337,211 1,246,605 5,048,750 Change in working capital: Change in deposit from customers (54,952) (221,841) (202,795) (821,320) Change in loan and advances (431,725) (1,742,874) (1,663,810) (6,738,430) Change in other assets 3,509 14,165 84, ,553 Change in other payable 46, ,053 96, ,096 Net cash from/(used in) operating activities 389,575 1,572,714 (438,852) (1,777,351) Income tax paid (82,256) (332,067) (72,670) (294,314) Net cash from/(used in) operating activities 307,319 1,240,647 (511,522) (2,071,665) Investing activities Change in advance to shareholders - - (28,008) (113,432) Acquisitions of property and equipment 15 (75,731) (305,726) (12,194) (49,386) Net cash used in investing activities (75,731) (305,726) (40,202) (162,818) Financing activities Repayments of syndicated loans - - (115,641) (468,346) Repayments of borrowing - - (750,289) (3,038,670) Net cash used in financing activities - - (865,930) (3,507,016) Net change in cash and cash equivalents 231, ,921 (1,417,654) (5,741,499) Cash and cash equivalents, at beginning of year 7 and 9 1,418,304 5,744,131 2,835,958 11,485,630 Translation differences - (18,438) - - Cash and cash equivalents, at end of year 7 and 9 1,649,892 6,660,614 1,418,304 5,744,131 21

24 NOTE TO THE FINANCIAL STATEMENT 1. General information Angkor Capital Specialized Bank ( the Bank ) was incorporated in Cambodia on 12 May 2008 under registration number Co. 4853/08E. On, the Bank has been granted a specialized bank s license no.sb-8 by the National Bank of Cambodia ( NBC or Central Bank ) and thereafter changed its name to Angkor Capital Specialized Bank. The registered office of the bank is location at No. 202, Norodom Blvd, Sangkat Tonle Bassac, Phnom Penh, Kingdom of Cambodia. Angkor Capital Bank Properties Co., Ltd ( the Subsidiary ) was incorporated in Cambodia. The registered office of the subsidiary is located at No. 202, Norodom Boulevard, Sangkat Tonle Bassac, Khan Chamkarmorn, Phnom Penh, Kingdom of Cambodia. 2. Principal activities The principal activity of the Bank is the provision of comprehensive specialized banking business in the Kingdom of Cambodia. The Subsidiary s principal activity is property investment. There have been no significant changes in the nature of these principal activities during the financial year. 3. Basis of preparation The financial statements of the Group and of the Bank have been prepared in accordance with Cambodia Accounting Standards ( CASs ) as issued by the National Accounting Council of the Ministry of Economy and Finance and guidelines issued by the NBC. For the sole regulatory purpose of complying with Prakas No. B dated 13 December 2007 of the NBC, translations to Khmer Riel ( KHR ) are presented in the balance sheets, income statements, statements of changes in equity, cash flow statements and the notes to the financial statements as of and for the year ended 31 December 2016 of the Group and of the Bank using the official rate of exchange regulated by the Central Bank as at the reporting date, which was United States Dollar ( USD )1 = KHR4,037 (2015: USD1=KHR 4,050). Such translated amounts should not be construed as representations that the USD amounts represent, or have been or could be, converted into KHR at that or any other rate. 4. Summary of significant accounting policies 4.1 Basis of accounting The financial statements of the Group and of the Bank have been prepared under the historical cost convention except as otherwise stated in the financial statements. The preparation of the financial statements requires the directors to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent assets and contingent liabilities. In addition, the directors are also required to exercise their judgement in the process of applying accounting policies. The areas involving such judgements, estimates and assumptions are disclosed in note 6 to the financial statements. Although these estimates and assumptions are based on the director s best knowledge of events and actions, actual results could differ from those estimates. 22

25 4.2 Basis of consolidation The consolidated financial statements incorporate the financial statements of the Bank and its Subsidiary made up to the end of the financial year using the purchase method of accounting. Under the purchase method of accounting, the cost of business combination is measured at the aggregate of fair values at the date of exchange, of assets given, liabilities incurred or assumed, and equity instrument issued plus any cost directly attributable to the business combination. At the acquisition date, the cost of business combination is allocated to identifiable assets, liabilities and contingent liabilities in the business combination which are measured initially at their fair values at the acquisition date. The excess of the cost of business combination over the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities is recognised as goodwill. If the cost of business combination is less than the interest in the net fair values of identifiable assets, liabilities and contingent liabilities, the Group will: reassess the identifiable and measurement of the acquirer s identifiable assets, liabilities and contingent liabilities and the measurement of the cost of the combination; and, recognize immediately in profit or loss any excess remaining after that reassessment. When a business combination includes more than one exchange transaction, any adjustment to the fair values of subsidiary s identifiable assets, liabilities and contingent liabilities relating to previously held interest of the Group is accounted for as a revaluation. A subsidiary is consolidated from the acquisition date, which is the date on which the Group effectively obtain any control, until the date on which the Group cease to control the subsidiary. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefit from its activities. In assessing control, potential voting rights that are exercisable are taken into account. Intragroup balance, transaction and unrealized gain and losses on intragroup transactions are eliminated in full. Intragroup losses may indicate are impairment that requires recognition in the consolidate financial statements. If a subsidiary use accounting policies other than those adopted in the consolidated financial statements for likes transactions and event in similar circumstances, appropriate adjustments are made to its financial statements is preparing the consolidated financial statements. The gain or loss on disposal of a subsidiary, which is the difference between the net disposal proceed and the Group s share of its net assets as of the date of disposal including the carrying amount of the goodwill and cumulative amount of any exchange differences that relate to the subsidiary, is recognised in the consolidated income statement. 4.3 Foreign currencies Functional and presentation currency Item included in the financial statements of the Group are measured using the currency of the primary economic environment in which the entity operates ( the function currency ). The national currency of Cambodia is KHR. However, as the Group and the Bank transact their business and maintain their accounting records primarily in USD, Management has determined USD to be the Group s and the Bank s functional and presentation currency as it reflects the economic substance of the underlying events and circumstances of the Group and the Bank. Foreign currency translations and balances Transactions in currencies other than the functional currency of the Group and the Bank ( foreign currencies ) are converted into USD at rates of exchange ruling at the transaction dates. Monetary asset and liabilities in foreign currencies at the end of reporting period are translated into USD at rate of exchange ruling at that date. All exchange differences arising from the settlement of foreign currency monetary assets and liabilities are included in profit or loss in the period in which they arise. Non-monetary items initially denominated in foreign currencies, which are carried at historical cost are translated using the historical rate as of the date of acquisition, and non-monetary items which are carried at fair value are translated using the exchange rate as of the date of acquisition, and non-monetary items which are carried at fair value are 23

26 translated using the exchange rate which existed when those value were determined for presentation currency purposes. 4.4 Property and equipment All items of property and equipment are initially measured at cost. Cost includes expenditure that is directly attributable to the acquisition of the assets. Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate, only when the cost in incurred and it is probable that the future economic benefit associates with the asset with flow to the Group and the cost of the asset can be measured reliably. The carrying amount of parts that are replaced is derecognized in profit or loss as incurred. Cost also comprise the initial estimates of dismantling and removing of the asset and restoring the site on which it is located for which the Group is obligated to incur when the asset is acquired, if applicable. Each part of an item of property and equipment with a cost that significant in relation to the total cost of the asset and which has different useful life, is depreciated separately. After initial recognition, property and equipment are state at cost less accumulated depreciation and any accumulated impairment losses. Freehold land has an unlimited useful life and therefore not depreciated. Depreciation of other property and equipment is calculated to write off the cost of the assets to their residual values over their estimates useful lives. The depreciation method and principal depreciation rate are as follows: Category Method Percentage Building Straight line method 5% Leasehold improvement Declining method 20% Office equipment Declining method 25% Furniture and fixtures Declining method 25% Computer equipment Declining method 50% At the end of each reporting period, the carrying amount of an item of property and equipment is asset for impairment when events or changes in circumstance indicate that is carrying amount may not be recoverable. A write down is made if the carrying amount exceed the recoverable amount. The residual values, useful lives and depreciation method are reviewed at each financial year end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefit embodied in the item of property and equipment. If expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate. The carrying amount of an item of property and equipment is derecognized on deposal or when on future economic benefit are expected from its use or disposal. The difference between the net disposal proceeds, if any, and the carrying amount is included in profit or loss. 4.5 Intangible assets Intangible assets comprise of computer software license including cost incurred in acquiring and building software, which is not integral part to the operation of hardware, and is carried at cost less accumulated amortization and impairment losses, if any. Amortization is recognized in the income statement on a declining balance method at rate 25% per annum. 24

27 4.6 Impairment of assets Financial assets A financial asset is assessed at each reporting date to determine whether there is any objective evidence that is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimates future cash flow of that asset. This does not apply to loan and advances to customers, which have a separate accounting policy as disclosed in Note 4.14 and An impairment loss in respect of a financial asset is calculated as the difference between its carrying amount, and the present value of the estimates future cash flow discounted at the original effective interest rate. Individual significant financial assets are test for impairment on an individual basis. The remaining financial assets are assessed collectively in group that share similar credit risk characteristics. All impairment losses are recognized in profit or loss. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. Non-financial assets The carrying amount of non-financial assets are reviewed at the end of each reporting period to determine whether there is any indicator of impairment. If any such indication exists, the asset s recoverable amount is estimated. Intangible assets that have an indefinite useful life are tested annually for impairment or more frequently if event or changes in circumstances indicate that the intangible asset might be impaired. The recoverable amount of an asset is estimated for an individual asset. Where it is not possible to estimates the recoverable amount of the individual asset, the impairment test is carried out on the cash generating unit ( CGU ) to which the asset belongs. The recoverable amount of an asset or CGU is the higher of its fair value less cost to sell and its value is use. In estimates the value is use, the estimates future cash inflows and outflows to be derived from continuing use of the asset and from its ultimate disposal 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 risk specific to the asset for which the future cash flow estimates have not been adjusted. An impairment loss is recognized in profit or loss when the carrying amount of the asset or the CGU exceed the recoverable amount of the asset or the CGU. The total impairment loss is allocated to reduce the carrying amount of each asset in the CGU. The impairment loss is recognized in profit or loss immediately. An impairment loss is reversed if, and only if, there has been a change in the estimates used to determine the assets recoverable amount since the last impairment loss was recognized. 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 amortization, if no impairment loss had been recognized. Such reversals are recognized as income immediately in profit or loss. 4.7 Investment in a subsidiary A subsidiary is an entity in which the Group and the Bank have power to control the financial and operating policies so as to obtain benefit from its activities. The existence and effect of potential voting right that are currently exercisable or convertible are considered when assessing whether the Group has such power over another entity. An investment in subsidiary, which is eliminated on consolidation, is stated in the Bank s separate financial statements at cost less impairment loss, if any. On disposal of such an investment, the difference between the net disposal proceeds and its carrying amount is included in profit or loss. 4.8 Investment in Credit Bureau of Cambodia ( CBC ) Investment in CBC is stated at cost less any impairment allowance to recognized non-temporary declines in the value of the investment. 25

28 4.9 Income taxes Income taxes include all taxes on taxable profit. Tax in the income statement comprise current tax and deferred tax. Current tax Current tax expenses are determined according to the tax laws and include all tax based upon the taxable profits. Deferred tax Deferred tax is recognized in full using the liability method on temporary differences arising between the carrying amount of an asset or liability in the balance sheets and its tax base. Deferred tax is recognized for all temporary differences, unless the deferred tax arises from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of transaction, affects neither accounting profit nor taxable profit. A deferred tax asset is recognized only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilized. The carry amount of a deferred tax asset is reviewed at the end of each reporting period. If it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of the deferred tax asset to be utilized, the carrying amount of the deferred tax asset will be reduced accordingly. When it becomes probable that sufficient taxable profit will be available, such reductions will be reversed to the extent of the taxable profit. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred income taxes related to the same taxation authority on either: (i) (ii) The same taxable entity; or Different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amount of deferred liabilities or assets are expected to be settled or recovered. Deferred tax will be recognized as income or expense and included in profit or loss for the period unless the tax relates to items that are credited or charged, in the same or different period, directly to equity, in which case the deferred tax will be charged or credited directly to equity. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply for the year when the asset is realized or the liability is settled, based on the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period Cash and cash equivalents Cash and cash equivalents consist of cash and bank balances, unrestricted cash balances with NBC, demand deposit with other financial instruments, and short-term highly liquid investment with original maturities of three months or less when purchase, and that are readily convertible to know amounts of cash and subject to an insignificant risk of changes in value Short-term employee benefits Wages, salaries, social security contributions, paid annual leave, paid sick leave, bonuses and non-monetary benefits are recognized as an expense in the financial year when employees have rendered their services to the Group. Short term accumulating compensated absences such as paid annual leave are recognized as an expense when employees render services that increase their entitlement to future compensated absences. Short term nonaccumulating compensated absences such as sick leave are recognized when the absences occur. Bonuses are recognized as an expense when there is present, legal or constructive obligation to make such payments, as a result of past events and when a reliable estimate can be made of the amount of the obligation. 26

29 4.12 Provisions, contingent assets and contingent liabilities Provisions are recognized when there is a present obligation, legal or constructive, as a result of a past event, when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the effect of the time value of money is material, the amount of a provision will be discounted to its present value at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Provisions are reviewed at the end of reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will required to settle the obligation, the provision will be reversed. Provisions are not recognized for future operating losses. If the Group has a contract that is onerous, the present obligation under the contract shall be recognized and measured as a provision Statutory deposit with Central Bank Statutory deposit represent mandatory reserve deposit and cash maintained with the Central Bank in compliance with the Law on Banking and Financial ( LBFI ) and are not available to financial the Bank s day-to-day operations and hence are not considered as part of cash and cash equivalents for the purpose of preparing the cash flows statement Loans and advances All loans and advances to customers are state in the balance sheets as the amount of principal, less any amount written off and allowance for bad and doubtful loans and advances. Loans are written off when there is no realistic prospect of recovery. Recoveries of loans and advances previously written off or provided for decrease the amount of the provision for impairment on loans and advances in the income statements Allowances for bad and doubtful loans and advances Allowances for bad and doubtful loans and advances are based on the latest Central Bank guidelines and are made with regard to specific risks on loans individually reviewed and classified as normal, special mention, substandard, doubtful and loss regardless of the assets (except cash) lodged as collateral. Central Bank guidelines require the following loan classification and minimum level of allowances: Classification Overdue Type of provision Allowances Normal/Standard 0-29 days General provision 1% Special mention days Specific provision 3% Substandard days Specific provision 20% Doubtful days Specific provision 50% Loss Over 360 days Specific provision 100% Exception on the above provision rate may be considered but this is condition on the actual market value of the collateral having been deemed acceptable by the Central Bank on a case-by-case basis. The minimum percentage of allowance for doubtful loans and advance are to be maintained according to the assigned classification. Where reliable information suggest that losses are likely to be more than these minimum requirements, larger allowance is made. In determining the above allowance, any collateral value other than cash deposit which has been pledged is disregarded Interest income Interest earned on loans and advances to customers, deposit with Central Bank and other banks are recognized on the accrual basis, except when loans become doubtful of collection, on which case, no interest is recognized as income. 27

30 Where an account is classified as non-performing, recognition of interest income is suspended until it is realized on a cash basis. Customers loans accounts are classified as non-performing where repayment are in arrears for 90 days and more Interest expenses Interest expenses on the deposit and borrowing ate recognized on an accrual basis Loan processing fees Loan processing fees are recognized in the income statements when all the condition precedents are fulfilled Related parties Parties considered to be related if one party has the ability to control the other party or exercise significant influence over the party in making financial and operating decisions. Under the Cambodia Law on Banking and Financial Institution ( LBFI ), the definition of relates includes parties who hold, directly or indirectly, at least 10 percent of capital or voting right and includes any individual who participates in the administration, direction, management or internal control of the Bank. 5. Statement of compliance with CAS and adoption of new and amended standards and interpretations 5.1 Statement of compliance with CAS The financial statements of the Group and of the Bank have been prepared in accordance with CAS as issue by the National Accounting Council ( NAC ) and the guidelines issued by the NBC relating to the preparation and presentation of the financial statements. Accordingly, the financial statements are not intended to present the financial position and result of operation and cash flow in accordance with generally accepted accounting principles and practices in countries or jurisdiction other than the Kingdom of Cambodia and furthermore their use is not designed for those who are not informed about Cambodia s accounting principles, procedures and practices. 5.2 Standard, amendments and interpretations to existing standard that are not yet effective and have not been early adopted by the Group At the date of authorization of these financial statements, certain new standard, amendments and interpretations to existing standard have been published but are not yet effective, and have not been early adopted by the Group. The NAC, as mandated by Prakas (Circular) No. 068-MoEF-Pr dated 8 January 2009 issued by the Ministry of Economy and Financial ( MoEF ) and following the announcement No. 097/09-MEF-NAC dated 28 August 2009 by the NAC, has decided to adopt International Financial Reporting Standard ( IFRSs ) issued by the International Accounting Standard Board ( IASB ) effective for financial statements with period beginning on or after 1 January The new standard is being referred to as Cambodia International Financial Reporting Standards ( CIFRS ). In accordance with the Notification No. 058 MoEF NA dated 24 March 2016 issued by the NAC of MoEF, all banking and financial institutions are required to adopt CIFRSs effective from 1 January 2019, as amended. 6. Critical accounting estimates and judgements 6.1 Changes in estimates Estimates are continually evaluated and are based on historical experience and other factors, including expectation of future event that are believed to be reasonable under the circumstances. The director are of the opinion that there are no significant change in estimates during the reporting period end and as at the end of the reporting 28