ANNUAL REPORT 2016 BRINGS PROSPERITY TO CUSTOMERS

Transcription

1 ANNUAL REPORT 2016 BRINGS PROSPERITY TO CUSTOMERS 0

2 TABLE OF CONTENTS 1. ABOUT US CORE VALUES MESSAGE OVERVIEW ORGANIZATIONAL CHART FINANCIAL STATEMENT AND AUDIT REPORT 1

3 ABOUT US Agribank Cambodia was established in 2010 and is the only branch of Vietnam Bank for Agriculture and Rural Development, one of the largest banks in Vietnam was established abroad. Business objectives of Agribank Cambodia is developing stable, efficient, preserve capital, manpower and assets. This important event marks the expansion and increase of the outreach of Agribank network abroad, thus bridging the financial and banking markets between the two countries. As a foreign investor in Cambodia, Agribank Cambodia committes to fully following the provisions of law, the NBC and always aim to provide to its customers with products of advanced banking services, the most convenient, and low cost, wish to contribute to the economic development of Cambodia and promoting the better and more sustainable traditional friendship and comprehensive cooperation between Vietnam and Cambodia Our Mission Agribank is the state-owned commercial bank in Vietnam which plays a key role in the investment of agricultural and rural development and contributes to economic and social development. Our Vision Developing a modern banking system with the philosophy "growth-safe- sustainable-effective", Agribank is definitely leading role in the investment for agricultural, rural areas and farmers, full capacity of competition and international economic integration. Our Values Honesty; Discipline; Quality; Efficiency; Creativity 2

4 CORE VALUES CREATIVITY HONESTY EFFICIENCY DISCIPLINE QUALITY 3

5 DIRECTOR S MESSAGE Dear Valued Customers, On behalf of the Management Board of Cambodia, I have great pleasure in presenting the Bank s Annual Report and Financial Statements for the financial year ended 31st December Cambodia s economy continues to be a hot prospect for future business investment, particularly for Vietnamese investors. It brings opportunities for Vietnamese banks which want to outreach globally. Agribank Cambodia which is a unique branch of Vietnam Bank for Agriculture and Rural Development, one of the biggest banks in Vietnam was established abroad. We deeply acknowledge our important role in internationally Agribank branch development. 4 The year 2016 remarked Agribank Cambodia s significant success after six year establishment. The past 12 months have been expressed our great efforts and creativity in overcoming challenges to reach earnings growth well. Agribank Cambodia has achieved good results with the high recorded profit before tax for 2016 more than USD 831,025. Total customer deposit has reached a number of USD 2.1million and near USD 23.7 million of Loans outstanding. Our main development strategy for 2017 is enhancement in services quality, technology level, diversification in products, creativity, and constant self-improvement in operation, management and supervision capability. These will bring us closer to our aim which is to be one of the best banking choices for the Cambodian people. On behalf of the Management Board of Cambodia and myself, I would like to place on record our gratitude for all the guidance and cooperation received from the National Bank of Cambodia, other government and regulatory agencies, as well as the support from our Head Office in Vietnam. I am grateful to the Bank s customers and bankers for their continued support. I would also like to take this opportunity to express my appreciation to the dedicated and committed team of employees for their contribution to the Bank and rendering high quality services to the customers. On behalf of the Board of Management Mr. NGUYEN THANH DUNG Director Phnom Penh, Kingdom of Cambodia 26 June, 2017

6 HIGHLIGHTS OF 2016 Total assets reach USD 42million Loans grew 13.54% to USD 23.7 million Bad loan have only 0.1% total out standing loan Net Profit Before Tax reached USD831,025 Ratio Profit per Outstanding loan reached 3.49% 5

7 OVERVIEW 2016 BUSINESS ENVIROMENT In 2016, the recovery of Cambodian economy continues to move forward and also has positive signs of growth. Cambodia's GDP growth in 2016 reached about 7%, due to the significant recovery of the key economic sectors which include textile, garment, tourism, agriculture and construction. With populations is 15.8 Millions, GDP per Capital is 1,300 USD. The inflation rate remained at level of 2.8% which pointed out the success of Cambodian Government in controlling the rate at a reasonable level, lower than many countries in the ASEAN region. Cambodian Banking sector in 2016 operated with profitability and efficiency which contributed significantly to GDP growth in The total assets banking sectors increased 20.9%, deposit increased 21.82%, lending also increased 20.52% compare to 2015, while the non - performing loan is 2.4%. Total lending /GDP = %, deposit/gdp = 68.44% 6

8 OVERVIEW 2016(cont.) BUSINESS PERFORMANCE 1. Main Business Activities (USD thousands) Fund Mobilization Loan Local Remittance Oversea Remittance Trade Finance 1.1. Fund mobilization As of 31 December 2016, Agribank Cambodia total fund resources reached USD 2.1 million, decreased by USD 1.3 million compared with the previous year Loan As at 31 December 2016, the total outstanding loan was estimated USD 23.7million, an increase of 13.54% over 2015, including: Short term loans achieved USD 9.4million, accounted for 39.66% of the total loan outstanding. Medium term loans reached USD 7.7 million, accounted for 32.49% of the total loan outstanding. Long term loans amounted USD 6.6 million, accounted for 27.85% of the total loan outstanding Local Remittance In 2016, Agribank conducted internally payment orders worth USD 7.17 million Oversea Remittance With correspondent relationship with 858 banks in 88 countries and territories, Agribank customers can benefit from fast, safe and convenient money transfer services. Especially, for remittances to Vietnam, Agribank Cambodia can connect online with all Agribank branches (over 2,242 branches and transaction offices) in Vietnam so that customers can transfer money from Cam- 6

9 bodia to all areas across the S shape Vietnam in the fastest way, and cheapest fee through Agribank system. As of 31 December 2016, the total amount of remittances conducted by Agribank Cambodia was worth about USD 28.5 million Trade Finance In 2016, the total volume of Agribank in Trade Finance services such as Letter of Credit, was about USD 557,524, decreased 54.22% compare with previous years. 6

10 ORGANIZATIONAL CHART DIRECTOR Mr. NGUYEN THANH DUNG DEPUTY DIRECTOR Ms. TRAN VU THU HANG DEPUTY DIRECTOR Mr. LE THANH NANG ADMINISTRATION DIVISION Mrs. THONG SODAPHEARA ACCOUNTING & CASHIER DIVISION Mrs. LONG KIMPHEAK AUDIT DIVISION Mr.NGUYEN VAN PHONG BUSINESS & PLANNING DIVISION Mr. NGUYEN DINH TANG ACCOUNTING CASHIER INTERNATIONAL PAYMENT LOAN PLANNING 8

11 REPORT OF THE BOARD OF MANAGEMENT MANAGEMENT The members of the Board of Management during the year 2016 are: Name Position Date of appointment Appointed on 16 September Mr. Nguyen Thanh Dung Director 2015 Mr. Le Thanh Nang Deputy Director Appointed on 15 April 2010 AUDITOR Ernst & Young (Cambodia) Ltd. is the auditor of the. MANAGEMENT S BENEFITS During and at the end of the year, no arrangement existed, to which the was a party, whose object was to enable the Board of Management to acquire benefits by means of the acquisition of shares in or debentures of the or any other corporate body. No management of the has received or become entitled to receive a benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by the Board of Management, or the fixed salary of a full time employee of the as disclosed in the financial statements) by reason of a contract made by the or with a firm of which he is a member, or with a company in which he has a material financial interest other than those disclosed in the financial statements. MANAGEMENT S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS The Board of Management is responsible for ensuring that the financial statements give a true and fair view of the financial position of the as at 31 December 2016, and its financial performance and its cash flows for the year then ended. In preparing these financial statements, the Board of Management is required to: adopt appropriate accounting policies which are supported by reasonable and prudent judgments and estimates and then apply them consistently; comply with regulations and guidelines issued by the National Bank of Cambodia and Cambodian Accounting Standards or, if there has been any departure in the interest of fair presentation, ensure this has been appropriately disclosed, explained and quantified in the financial statements; maintain adequate accounting records and an effective system of internal control; 9

12 REPORT OF THE BOARD OF MANAGEMENT (continued) prepare the financial statements on a going concern basis unless it is inappropriate to assume that the will continue operation in the foreseeable future; and set overall policies for the, ratify all decisions and actions by the management that have a material effect on the operations and performance of the, and ensure they have been properly reflected in the financial statements. The Board of Management is responsible for ensuring that proper accounting records are kept which disclose, with reasonable accuracy at any time, the financial position of the and to ensure that the accounting records comply with the registered accounting system. It is also responsible for safeguarding the assets of the and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Board of Management confirms that the has complied with these requirements in preparing the financial statements. APPROVAL OF THE FINANCIAL STATEMENTS We hereby approve the accompanying financial statements which give a true and fair view of the financial position of the as at 31 December 2016, and its financial performance and its cash flows for the year ended in accordance with Cambodian Accounting Standards and relevant regulations and guidelines issued by the National Bank of Cambodia. On behalf of Management: Mr. Nguyen Thanh Dung Director Phnom Penh, Kingdom of Cambodia 26 June

13 FINANCIAL STATEMENT AND AUDIT REPORT 11

14 STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2016 ASSETS Notes Cash on hand 3 361,235 1,458, ,058 1,385,335 Balances with the National Bank of Cambodia 4 7,020,443 28,341,526 5,949,820 24,096,771 Due from other financial institutions 5 10,702,203 43,204,794 15,836,915 64,139,506 Loans and advances to customers 6 23,528,804 94,985,782 20,297,322 82,204,154 Property and equipment 7 245, , ,290 1,313,375 Deferred tax asset 11 38, ,963 31, ,681 Other assets 8 146, , , ,946 TOTAL ASSETS 42,043, ,729,342 42,920, ,829,768 LIABILITIES Due to other financial institutions 9 1,039 4,194 1,036 4,196 Due to customers 10 2,106,302 8,503,141 3,415,650 13,833,383 Income tax payable , ,051 80, ,919 Other liabilities 12 45, ,449 81, ,626 Total liabilities 2,328,421 9,399,835 3,578,055 14,491,124 OWNER S EQUITY capital 13 39,000, ,443,000 39,000, ,950,000 Retained earnings 715,013 2,886, ,875 1,388,644 Total owner s equity 39,715, ,329,507 39,342, ,338,644 TOTAL LIABILITIES AND OWNER S EQUITY 42,043, ,729,342 42,920, ,829,768 The accompanying notes 1 to 22 form an integral part of these financial statements 12

15 STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2016 Notes Interest income 1,695,805 6,845,965 1,362,483 5,518,056 Interest expense (16,227) (65,508) (11,074) (44,850) Net interest income 14 1,679,578 6,780,457 1,351,409 5,473,206 Fee and commission income , , , ,902 Fee and commission expense 16 (55,936) (225,814) (74,909) (303,381) Net fee and commission income 56, ,840 44, ,521 Other operating (expense) income (201) (811) 1,113 4,508 TOTAL OPERATING INCOME 1,735,815 7,007,486 1,397,342 5,659,235 General and administrative expenses 17 (872,825) (3,523,595) (919,046) (3,722,136) Charge of provision for credit losses 6 (31,965) (129,043) (73,664) (298,339) PROFIT BEFORE TAX 831,025 3,354, ,632 1,638,760 Current income tax expense 11 (199,662) (806,035) (111,686) (452,328) Deferred income tax income 11 7,108 28,695 7,072 28,642 Total income tax expense (192,554) (777,340) (104,614) (423,686) NET PROFIT FOR THE YEAR 638,471 2,577, ,018 1,215,074 The accompanying notes 1 to 22 form an integral part of these financial statements 13

16 STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2016 Paid-up capital US$ Retained earnings US$ Total US$ Balance as at 1 January ,000, ,522 39,245,522 Net profit for the year - 300, ,018 Profit transferred to Head Office - (202,665) (202,665) Balance as at 31 December ,000, ,875 39,342,875 KHR'000 equivalent (Note 2.1.5) 157,950,000 1,388, ,338,644 Balance as at 1 January ,000, ,875 39,342,875 Net profit for the year - 638, ,471 12% salary refund salary for ,174 37,174 Profit transferred to Head Office - (303,507) (303,507) Balance as at 31 December ,000, ,013 39,715,013 KHR'000 equivalent (Note 2.1.5) 157,443,000 2,886, ,329,507 The accompanying notes 1 to 22 form an integral part of these financial statements 14

17 NOTES TO THE FINANCIAL STATEMENTS Notes Net cash used in operating activities 18 (3,741,408) (15,104,064) (5,510,838) (22,318,895) Cash flow from financing activity Profit transferred to Head Office (303,507) (1,225,258) (202,665) (820,793) Net decrease in cash and cash equivalents (4,044,915) (16,329,322) (5,713,503) (23,139,688) Cash and cash equivalents at the beginning of the year 17,564,340 71,135,577 23,277,843 94,857,211 Foreign exchange difference - (228,338) - (581,946) Cash and cash equivalents at the end of the year 3 13,519,425 54,577,917 17,564,340 71,135,577 The accompanying notes 1 to 22 form an integral part of these financial statements 15

18 NOTES TO THE FINANCIAL STATEMENTS 1. CORPORATE INFORMATION Vietnam Bank for Agriculture and Rural Development - Cambodia ( the ) was incorporated and registered in the Kingdom of Cambodia. Establishment and operations The is set up as a branch of Vietnam Bank for Agriculture and Rural Development, incorporated in Vietnam. The operates in the Kingdom of Cambodia under Banking License No. 29 issued by the National Bank of Cambodia ( NBC ) dated 23 June The officially started operations on 1 July The is a credit institution operating pursuant to the laws and regulations of the NBC. The s operations are directly supported by Vietnam Bank for Agriculture and Rural Development ( VBARD ). The support of VBARD to the extends to development and improvement of technology system, systems and processes and provision of advanced banking products and quality services. The is principally engaged in all aspects of banking business and the provision of related financial services. There were no significant changes to these principal activities during the year. capital The capital of the as at 31 December 2016 is US$39,000,000 or KHR billion (2015: US$39,000,000 or KHR billion). Location The s registered office is located at No. 364, Preah Monivong Blvd., Sangkat Boeung Keng Kang 1, Khan Chamkarmon, Phnom Penh, Cambodia. Employees As at 31 December 2016, the had 25 employees (2015: 26 employees). 2. SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis of preparation Statement of compliance The financial statements have been prepared in accordance with Cambodian Accounting Standards ( CAS ) and the guidelines of the NBC on the preparation and presentation of financial statements. The accompanying financial statements, including their utilization, are not designed for those who are not informed about the Kingdom of Cambodia's accounting principles, procedures and practices and furthermore are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries other than the Kingdom of Cambodia. The accounting policies set out below have been consistently applied by the Basis of measurement The financial statements have been prepared based on the historical cost convention Fiscal year The s fiscal year starts on 1 January and ends on 31 December. 16

19 2. SIGNIFICANT ACCOUNTING POLICIES (continued) 2.1 Basis of preparation (continued) Functional and presentation currency The national currency of Cambodia is the Khmer Riel ( KHR ). However, the transacts its business and maintains its accounting records primarily in United States dollar ( US$ ). Management has determined the US$ to be the s measurement and presentation currency as it reflects the economic substance of the underlying events and circumstances of the. This is in accordance with NBC Prakas No. B dated 13 December Transactions in foreign currencies ( FC ) are translated into US$ at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in currencies other than US$ at the balance sheet date are translated into US$ at the rates of exchange ruling at that date. Exchange differences arising on translation are recognized in the income statement Translation of US$ into KHR The translation of the US$ amounts into KHR is presented in the financial statements to comply with the Cambodian Law on Corporate Accounts, their Audit and the Accounting Profession dated 8 July 2002 and relevant Prakas of NBC, using the closing exchange rate of KHR4,037: US$1 ruling at the reporting date (2015: KHR4,050: US$1), as announced by NBC. Such translation should not be construed as a representation that the US$ amounts represent, or have been or could be converted into KHR at that or any other rate. 2.2 Significant accounting judgments and estimates In applying accounting policies, management has used its judgment and made estimates in determining the amounts recognized in the financial statements, as follows: Operating lease The has entered into lease of premises used for its operations. The has determined, based on the evaluation of the terms and conditions of the lease agreements (i.e., the lease does not transfer ownership of the asset to the lessee by the end of the lease term and lease term is not for the major part of the asset s economic life), the lessor retains all the significant risks and rewards of ownership of these properties Functional currency CAS 21 requires management to use its judgment to determine the entity s functional currency such that it most faithfully represents the economic effects of the underlying transactions, events and conditions that are relevant to the entity. In making this judgment, the considers the following: a) the currency that mainly influences prices for financial instruments and services (this will often be the currency in which prices for its financial instruments and services are denominated and settled); b) the currency in which funds from financing activities are generated; and c) the currency in which receipts from operating activities are usually retained Allowance for loan losses When preparing the financial statements, the quality of loans and advances is reviewed and assessed to determine their classification and level of allowance for loan losses, as more fully disclosed in Note

20 2. ACCOUNTING POLICIES (continued) 2.2 Significant accounting judgments and estimates (continued) Recognition of deferred tax assets Deferred tax assets are recognized for all unused tax losses and temporary differences to the extent that it is probable that future taxable profit will be available against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable income together with future tax planning strategies Estimated useful lives of property and equipment The estimates the useful lives of its property and equipment. This estimate is reviewed periodically to ensure that the period of depreciation and amortization are consistent with the expected pattern of economic benefits from the items of property and equipment. 2.3 Summary of significant accounting policies Change in accounting policies The accounting policies and methods of computation applied by the are consistent with those adopted in prior periods Cash and cash equivalents For cash flow statement purposes, cash and cash equivalents consist of cash, demand deposits, short-term deposits and highly liquid investments with original maturities of three months or less when purchased, and that are readily convertible to known amounts of cash and subject to an insignificant risk of changes in value Balances with the National Bank of Cambodia Statutory deposits for banking activities are maintained with the NBC in compliance with the Cambodian Law on Banking and Financial Institutions and are determined by defined percentages of minimum share capital and customers deposits as required by the NBC Due from other financial institutions Due from other financial institutions are carried at cost Loans and advances All loans and advances are stated in the balance sheet at principal amount, less any amounts written off and allowance for losses on loans and advances. Short-term loans are those with a repayment date within one year from the date the loan was advanced. Longterm loans are those with a final repayment date of more than one year from the date the loan was advanced. 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 allowance for losses on loans and advances in the income statement. Loans and advances classified as substandard, doubtful or loss are considered as nonperforming loans Allowance for losses on loans and advances Allowance for losses on loans and advances is made with regard to specific risks and relate to those loans and advances that have been individually reviewed and specifically identified as special mention, substandard, doubtful or loss. In addition, a general allowance is also maintained for loans classified as normal. 18

21 The follows the mandatory credit classification and provisioning as required by NBC Prakas No. B dated 25 February 2009, which is to classify their loan portfolio into five classes. The Prakas also requires that minimum general and specific allowances be provided depending on loan classification. 19

22 2. ACCOUNTING POLICIES (continued) 2.3 Summary of significant accounting policies (continued) The allowance is based on a percentage of total outstanding loans and advances as follows: Classification Number of days past due Allowance percentage General allowance Normal Less than 30 days 1% Specific allowance Special mention 30 days or more but less than 90 days 3% Substandard 90 days or more but less than 180 days 20% Doubtful 180 days or more but less than 360 days 50% Loss 360 days or more 100% An uncollectible loan or portion of a loan classified as bad is written off after taking into consideration the realisable value of the collateral, if any, when in the judgment of the management, there is no prospect of recovery Other credit-related commitments In the normal course of business, the enters into other credit-related commitments including loan commitments, letters of credit and guarantees. The accounting policy and provision methodology are similar to originated loans as disclosed above. An allowance is raised against other credit-related commitments when losses are considered probable Other assets Other assets are carried at anticipated realisable values. An estimate is made for doubtful debts based on a review of all outstanding amounts as at the balance sheet date Property and equipment Items of property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Where an item of property and equipment comprises major components having different useful lives, the components are accounted for as separate items of property and equipment. Depreciation of property and equipment is charged to statement of income. Buildings and leasehold improvements are depreciated on straight-line basis over the lease term of 10 years. Depreciation charge of other property and equipment items is calculated using reducing balance method at the following rates: 5% Leasehold buildings Furniture, fixtures and equipment 25% Information technology ( IT ) equipment 50% Motor vehicles 25% Subsequent expenditure relating to an item of property and equipment that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the. All other subsequent expenditure is recognised as an expense in the year in which it is incurred. Gains or losses arising from the retirement or disposal of an item of property and equipment are determined as the difference between the estimated net disposal proceeds and the carrying amount of the assets and are recognised in the income statement at the date of retirement or disposal. Fully depreciated property and equipment are retained in the financial statements until disposed of or written off. 20

23 2. ACCOUNTING POLICIES (continued) 2.3 Summary of significant accounting policies (continued) Property and equipment (continued) The carrying amounts of property and equipment are reviewed for impairment when there is an indication that the assets might be impaired. Impairment is measured by comparing the carrying values of the assets with their recoverable amounts. An impairment loss is charged to the income statement immediately. Reversal of impairment losses recognised in prior years is recorded where there is an indication that the impairment losses recognised for the asset no longer exist or have decreased. The reversal is recognised to the extent of the carrying amount of the asset that would have been determined (net of amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in the income statement immediately Due to other financial institutions and due to customers Due to other financial institutions and due to customers are stated at their placement values Other liabilities Other liabilities recognized for amounts to be paid in the future for goods and services received, whether or not billed to the Provisions Provisions are recognised when the has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, the amount of the provision is the present value of the expenditure expected to be required to settle the obligation Corporate income tax Current tax Current tax assets and liabilities for the current and prior periods are measured at the amounts expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted at the balance sheet date. Deferred tax Deferred tax is provided using the balance sheet liability method on temporary differences at the balance sheet date between the tax base of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognized for all taxable temporary differences, except where the deferred tax liability arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction affects neither the accounting profit nor taxable profit or loss. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that future taxable profits will be available against which these differences can be utilized, except where the deferred tax arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction affects neither the accounting profit nor taxable profit or loss. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be 21

24 available to allow all or part of the assets to be recovered. Unrecognized deferred income tax assets are re-assessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be recovered. 2. ACCOUNTING POLICIES (continued) 2.3 Summary of significant accounting policies (continued) Offsetting financial instruments Financial assets and financial liabilities are offset and the net amount reported in the balance sheet if, and only if, there is a current enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. This is not generally the case with master netting agreements, and the related assets and liabilities are presented gross in the balance sheet Recognition of income and expense a) Interest income Revenue is recognized to the extent that it is probable that the economic benefits will flow to the and the revenue can be reliably measured. Interest income on overdraft, term loans and other loans is recognized on a daily accrual basis. Where a loan becomes non-performing, the recording of interest is suspended until it is realized on a cash basis. Loans are deemed to be non-performing where repayments are in arrears for ninety days or more. b) Fee and commission income Fee and commission income includes the following: Loan arrangement fees and commissions on services and facilities extended to customers are recognized on the occurrence of such transactions; Service charges and processing fees are recognized when the service is provided. c) Interest expense Interest expense on deposits of customers, settlement accounts of other banks and borrowings are recognized on an accrual basis. d) Fee and commission expense Operating leases Fee and commission expense is recognized as incurred. Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease Related parties Under CAS 24 on Related Party Disclosures, parties are considered to be related if the has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions, or vice-versa, or where the and the party are subject to common control or significant influence. Related parties may be individuals or corporate entities and include close family members of any individual considered to be a related party. Related parties, as defined in Article 49 and 50 of the Cambodian Law on Banking and Financial Institutions, include the following: (a) any person holding directly or indirectly at least ten percent (10%) of the capital or voting rights; 22

25 (b) any company of which the directly or indirectly holds at least 10% of the capital or voting rights; (c) any individual who participates in the administration, direction, management or internal control; and (d) the external auditors. 2. ACCOUNTING POLICIES (continued) 2.3 Summary of significant accounting policies (continued) Fiduciary assets Assets held in trust or in a fiduciary capacity are not reported in the financial statements since they are not the assets of the Rounding of amounts Amounts in the financial statements have been rounded off to the nearest dollar and nearest thousand KHR ( KHR 000 ) for US$ and KHR amounts, respectively. 3. CASH ON HAND US$ 358,680 1,447, ,574 1,371,225 KHR 2,555 10,315 3,484 14, ,235 1,458, ,058 1,385,335 For the purpose of the statement of cash flows, cash and cash equivalents comprise: Cash on hand 361,235 1,458, ,058 1,385,335 Balances with the NBC 2,455,987 9,914,817 1,385,367 5,610,736 Balances with other banks 10,702,203 43,204,794 15,836,915 64,139,506 13,519,425 54,577,917 17,564,340 71,135, BALANCES WITH THE NATIONAL BANK OF CAMBODIA Current and settlement accounts Settlement account - US$ 861,559 3,478, Current account - US$ 1,069,665 4,318, , ,235 Current account - KHR 24,763 99,965 15,052 60,961 Term deposits (i) US$ 500,000 2,018,500 1,261,615 5,109,540 23

26 Statutory deposits Capital guarantee deposit - US$ (ii) 3,900,000 15,744,306 3,900,000 15,795,000 Reserve deposit - US$ (iii) 664,083 2,680, ,083 2,689,536 Reserve deposit - KHR (iii) 373 1, ,499 7,020,443 28,341,526 5,949,820 24,096, BALANCES WITH THE NATIONAL BANK OF CAMBODIA (continued) (i) Term deposits The balance represents deposits with the NBC for clearing cheques with original maturities of three months. (ii) Capital guarantee deposit Under NBC Prakas No. B dated 15 October 2001, banks are required to maintain a statutory deposit of 10.00% of registered capital with the NBC. This deposit is not available for use in the s day-to-day operations but it is refundable when the voluntarily ceases to operate the business in Cambodia. (iii) Reserve deposits Under NBC Prakas No. B dated 13 September 2012, banks are required to maintain certain cash reserves with the NBC in the form of compulsory deposits, computed at 8.00% and 12.50% of deposits from customers in KHR and in foreign currencies, respectively. Annual interest rates of deposits and placements with the NBC were summarised as follows: Capital guarantee deposit - US$ 0.20% % 0.08% % Reserve deposit - US$ 0.20% % 0.07% % Reserve deposit - KHR 0.00% 0.00% Term deposit 0.30% % 0.17% % Current accounts 0.00% 0.00% Settlement accounts 0.00% 0.00% 5. DUE FROM OTHER FINANCIAL INSTITUTIONS Local financial institution (i) 6,714,721 27,107,329 7,040,980 28,515,969 Overseas financial institution (ii) 3,987,482 16,097,465 8,795,935 35,623,537 10,702,203 43,204,794 15,836,915 64,139,506 (i) This current account earns interest at rates ranging from 0.00% to 0.50% per annum (2015: 0.00% %) (ii) This current account with Vietnam Bank for Agriculture and Rural Development - Transaction Office, earns interest at 0.10% per annum (2015: 0.10%) (Note 20). 24

27 6. LOANS AND ADVANCES TO CUSTOMERS Loans Term loans - gross 23,792,277 96,049,422 20,954,685 84,866,474 Allowance for losses on loans and advances (263,473) (1,063,640) (657,363) (2,662,320) Loans and advances to customers - net 23,528,804 94,985,782 20,297,322 82,204,154 Changes in the allowance for losses on loans and advances were summarised below: Balance as at 1 January 657,363 2,662, ,699 2,378,573 Provision during the year 32, ,148 82, ,015 Reversal during the year (1,017) (4,105) (8,562) (34,676) Write-off of bad loans and advances (425,855) (1,719,177) - - Exchange differences - (8,546) - (14,592) Balance as at 31 December 263,473 1,063, ,363 2,662,320 (a) The loan portfolio was graded as follows: Normal loans Secured 23,725,553 95,780,057 20,493,843 83,000,064 Unsecured 5,000 20,185 8,501 34,430 Special mention loans Secured 36, , Loss loans Secured 25, , ,341 1,831,980 Total 23,792,277 96,049,422 20,954,685 84,866,474 (b) For an analysis of loans and advances by maturity, refer to Note 21.2 on Financial risk management. (c) For an analysis of loans and advances by currency, refer to Note 21.3 on Financial risk management. 25

28 6. LOANS AND ADVANCES TO CUSTOMERS (continued) (d) Analysis of loans and advances by type of loans was as follows: Consumer loans 8,967,633 36,202,334 11,525,874 46,679,790 Commercial loans 14,824,644 59,847,088 9,428,811 38,186,684 Total gross loans 23,792,277 96,049,422 20,954,685 84,866,474 (e) Analysis of loan portfolio by industrial sector was as follows: Consumer items 14,824,644 59,847,087 16,243,631 65,786,705 Agriculture and forestry 3,739,000 15,094, ,000 3,037,500 Construction 2,626,133 10,601,699 2,340,840 9,480,402 Manufacturing and petroleum 2,602,500 10,506,293 1,620,214 6,561,867 Total gross loans 23,792,277 96,049,422 20,954,685 84,866,474 (f) Further analyses of loans and advances by residency, relationship, exposure and annual interest rates were as follows: Residence status Residents 23,787,277 96,029,237 20,952,185 84,856,349 Non-residents 5,000 20,185 2,500 10,125 Relationship 23,792,277 96,049,422 20,954,685 84,866,474 Third parties 23,792,277 96,049,422 20,954,685 84,866,474 Exposure Non-large 23,792,277 96,049,422 20,954,685 84,866,474 Short-term loans 6.50% % 6.50% % Medium-term loans 6.50% % 6.50% % Long-term loans 6.50% % 6.50% % 26

29 7. PROPERTY AND EQUIPMENT Movements of property and equipment during the year were as follows: Leasehold building US$ Furniture, fixtures and equipment US$ IT equipment US$ Motor vehicles US$ Total US$ Cost As at 1 January and 31 December ,230 82,817 43, , ,812 Less: Accumulated depreciation As at 1 January ,938 61,400 42, , ,522 Depreciation for the year 66,551 5, ,586 79,108 As at 31 December ,489 66,754 42, , ,630 Net book value As at 1 January ,292 21,417 1,233 26, ,290 As at 31 December ,741 16, , ,182 KHR'000 equivalent (Note 2.1.5) As at 1 January ,114,933 86,739 4, ,709 1,313,375 As at 31 December ,688 64,846 2,487 79, ,800 27

30 8. OTHER ASSETS Office rental deposit 84, ,108 84, ,200 Interest receivable 56, ,521 52, ,394 Deferred charges 5,617 22,676 1,599 6,476 Others 710 2, ,876 Total 146, , , , DUE TO OTHER FINANCIAL INSTITUTIONS This account pertains to demand deposit accounts maintained by other financial institutions which bear interest at 0.20% per annum (2015: 0.20%). 10. DUE TO CUSTOMERS Fixed deposits 341,991 1,380, ,042 1,417,669 Current accounts 1,163,780 4,698,180 2,486,859 10,071,780 Savings deposits 600,531 2,424, ,749 2,343,934 Total 2,106,302 8,503,141 3,415,650 13,833,383 Further analyses of deposits from customers were as follows: (a) Type of customers Domestic corporations 768,036 3,100, ,071 3,697,939 Resident individuals 651,790 2,631,276 1,938,716 7,851,798 Non-residents individuals 686,476 2,771, ,863 2,283,646 Total 2,106,302 8,503,141 3,415,650 13,833,383 (b) (c) For maturity analysis, refer to Note 21.2 on Financial risk management. Relationship Third parties 2,040,877 8,239,021 3,281,116 13,288,520 Staffs 65, , , ,863 Total 2,106,302 8,503,141 3,415,650 13,833,383 28

31 10. DUE TO CUSTOMERS (continued) (d) Annual interest rates Fixed deposits 1.50% - 4.5% 1.00% % Saving deposits 0.5% 0.50% % Current accounts 0.5% 0.20% 11. TAXATION Major components of income tax expense for the year were as follows: Current income tax 199, , , ,328 Deferred income tax (7,108) (28,695) (7,072) (28,642) Income tax expense 192, , , ,686 Current income tax The s tax returns are subject to examination by the tax authorities. Because the application of tax laws and regulations to many types of transactions is susceptible to varying interpretations, amounts reported in the financial statements could be changed at a later date upon final determination by the tax authorities. In accordance with Cambodian tax regulations, current income tax is calculated at the higher of the taxable income for the year multiplied by the tax rate of 20% at the reporting date and 1% of turnover. Reconciliation between the income tax expense and the accounting profit multiplied by 20% tax rate is as follows: 29

32 11. TAXATION (continued) Accounting profit before tax 831,025 3,354, ,632 1,638,760 Statutory income tax rate at 20% 166, ,970 80, ,752 Income tax applicable to nondeductible expenses 18,491 74,647 12,584 50,965 Current income tax expense 184, ,617 93, ,717 Additional tax payments for prior year 14,966 60,418 18,176 73,611 Income tax expense 199, , , ,328 Balance at the beginning of the year 80, ,919 54, ,594 Income tax expense for the year 199, , , ,328 Payments during the year (86,286) (348,336) (72,555) (293,848) Tax prepayments (17,965) (72,524) (13,283) (53,796) Foreign exchange difference - (1,043) - (1,359) Income tax payable 175, ,051 80, ,919 Deferred income tax Details of deferred tax asset and its movements are as follows: Balance sheet Credited to the income statement US$ US$ US$ US$ Accelerated tax depreciation 38,881 31,773 7,108 7,072 KHR'000 equivalent (Note 2.1.5) 156, ,681 Deferred income tax benefit 7,108 7,072 KHR'000 equivalent (Note 2.1.5) 28,695 28, OTHER LIABILITIES Withholding tax 42, ,820 28, ,146 Interest payable 1,653 6,673 1,796 7,274 Bonus and welfare fund 873 3,524 1,013 4,103 Payable to employees , ,555 Others ,234 49,548 Total 45, ,449 81, ,626 30

33 13. BRANCH CAPITAL The paid-up capital as at 31 December 2016 was US$39,000,000 or KHR ,443,000 which was fully contributed by Vietnam Bank for Agriculture and Rural Development. On 22 March 2016, the NBC issued Prakas B on Minimum Registered Capital of Banking and Financial Institutions ( the Prakas ). The Prakas requires branches whose head office is rated investment grade by a reputable and international rating agency to have a minimum registered capital of KHR billion (approximately US$50.00 million). To implement the above Prakas, the NBC issued Circular B on 16 June 2016 requiring banks and financial institutions to inject half of the additional required capital by 31 March 2017 and to fully comply by 22 March On 7 December 2016, the Head Office sent an official letter to the NBC requesting an extension for the deadline to increase the s capital subject to the Head office s completion of necessary documentation related to regulatory requirements in Vietnam, which the NBC approved based on its letter dated 7 February NET INTEREST INCOME Interest income Lending 1,608,297 6,492,695 1,276,761 5,170,882 Deposits 87, ,270 85, ,174 1,695,805 6,845,965 1,362,483 5,518,056 Interest expense Other banks (3) (12) (311) (1,259) Customers (16,224) (65,496) (10,763) (43,591) (16,227) (65,508) (11,074) (44,850) Net interest income 1,679,578 6,780,457 1,351,409 5,473, FEE AND COMMISSION INCOME Loan commitment fees 70, ,149 64, ,670 Commission received on remittances 34, ,063 38, ,168 Other commissions and fees 7,293 29,442 16,312 66,064 Total 112, , , ,902 31

34 16. FEE AND COMMISSION EXPENSE Settlement services 20,309 81,987 29, ,831 Expense for money transportation 24,328 98,213 26, ,637 Telecommunication fee 11,022 44,496 17,632 71,410 Others 277 1,118 1,112 4,503 55, ,814 74, , GENERAL AND ADMINISTRATIVE EXPENSES Personnel 339,611 1,371, ,713 1,509,488 Rental 84, ,108 84, ,200 Depreciation 79, ,359 83, ,373 Other taxes 67, ,751 80, ,361 Other allowance for employees 52, ,330 55, ,540 Business trip expense 33, ,895 51, ,121 Utilities 34, ,500 31, ,000 Supplies 11,521 46,510 25, ,907 Marketing expenses 24, ,356 25, ,559 Conference 16,387 66,154 13,160 53,298 Repairs and maintenance 11,890 48,000 11,961 48,442 Business meals and entertainment 13,988 56,470 6,373 25,811 Others 103, ,151 77, , ,825 3,523, ,046 3,722,136 32

35 18. NET CASH USED IN OPERATING ACTIVITIES Cash flows from operating activities Profit before income tax 831,025 3,354, ,632 1,638,760 Adjustments for: Depreciation expense 79, ,359 83, ,373 Provision for losses on loans and advances 31, ,043 73, ,339 Property and written-off Income tax paid during the year (104,251) (420,861) (85,838) (347,644) Operating profit before changes in working capital 837,847 3,382, ,084 1,928,140 Increase in operating assets: Balances with the NBC (3) (12) (2) (8) Loans and advances to customers (3,263,447) (13,174,536) (4,366,372) (17,683,807) Other assets (7,934) (32,030) (16,193) (65,582) Increase (decrease) in operating liabilities: Due to other financial institutions 3 12 (1,599,710) (6,478,826) Due to customers (1,309,348) (5,285,838) 15,395 62,350 Other liabilities 1,474 5,951 (20,040) (81,162) Net cash used in operating activities (3,741,408) (15,104,064) (5,510,838) (22,318,895) 19. COMMITMENTS (i) Credit-related commitments Undrawn credit facilities 1,229,134 4,962,014 5,099,815 20,654,252 Letters of credit 17,612 71,100 80, ,592 Others , ,214 1,246,746 5,033,114 5,214,335 21,118,058 (ii) Lease commitments Up to 1 year 84, ,108 84, ,200 From 1-5 years 196, , ,000 1,020, ,000 1,130, ,000 1,360,800 33

36 20. RELATED PARTY TRANSACTIONS AND BALANCES a) Significant transaction with a related party follows: Interest income from VBARD - Transaction Office 5,287 21,344 9,768 39,559 b) Outstanding amount due from a related party follows: Current account with VBARD - Transaction Office 3,987,482 16,097,465 8,795,935 35,623,537 c) Key management personnel compensation is as follows: Gross remuneration 77, , , , FINANCIAL RISK MANAGEMENT The s activities are exposed to a variety of financial risks: credit risk, market risk (including currency risk and interest rate risk) and liquidity risk. Taking risk is core to the financial business, and operational risks are an inevitable consequence of being in business. A primary objective of the in risk management is to comply with the NBC s regulations. On the other hand, the has recognised the importance of achieving international best practices on risk management. The holds the following financial assets and liabilities: Financial assets Cash on hand 361,235 1,458, ,058 1,385,335 Balances with the NBC 7,020,443 28,341,526 5,949,820 24,096,771 Due from other financial institutions 10,702,203 43,204,794 15,836,915 64,139,506 Loans and advances to customers 23,792,277 96,049,422 20,954,685 84,866,474 Other financial assets 140, , , ,128 Total financial assets 42,016, ,621,210 43,220, ,041,214 Financial liabilities Due to other financial institutions 1,039 4,194 1,036 4,196 Due to customers 2,106,302 8,503,141 3,415,650 13,833,383 Other financial liabilities 1,760 7,105 13,796 55,874 Total financial liabilities 2,109,101 8,514,440 3,430,482 13,893,453 Net financial assets 39,907, ,106,770 39,789, ,147,761 34

37 21. FINANCIAL RISK MANAGEMENT (continued) 21.1 Credit risk The takes on exposure to credit risk, which is the risk that a counterparty will cause a financial loss to the by failing to discharge an obligation. Credit risk is the most important risk for the s business. Credit exposure arises principally in lending activities that lead to loans and advances. There is also credit risk in off-balance-sheet financial instruments, such as loan commitments. The credit risk management is carried out in compliance with the risk management policy of Head office and the regulations of NBC. (a) Credit risk measurement The assesses the probability of default of individual counterparties in accordance with its credit policy, procedures and practices. (b) Risk limit control and mitigation policies The operates and provides loans and advances to individuals or enterprises within the Kingdom of Cambodia. The manages, limits and controls the concentration of credit risk whenever it is identified. Large exposure is defined by the NBC as overall credit exposure to any single beneficiary which exceeds 10% of the s net worth. The is required, under the conditions of NBC Prakas No. B , to maintain at all times a maximum ratio of 20% between the s overall credit exposure to any single beneficiary and the s net worth. The aggregation of large credit exposure must not exceed 300% of the s net worth. As at 31 December 2016, the has no large exposure exceeding 10% of its net worth and has no large exposure exceeding the maximum ceiling limit of 20% for individual large exposure. The employs a range of policies and practices to mitigate credit risk. The most traditional of these is the taking of security in the form of collateral for loans and advances to customers, which is a common practice. The implements guidelines on the acceptability of specific classes of collateral or credit risk mitigation. The principal collateral types to secure for loans and advances to customers are: Mortgages over residential properties (land, building and other properties); Charges over business assets such as land and buildings; Customers fixed deposits placed with the ; and Cash in the form of margin deposits. (c) Impairment and provisioning policy The is required to follow the mandatory credit classification and provisioning in accordance with the relevant Prakas, as disclosed in Note (d) Maximum exposure to credit risk before collateral held or other credit enhancements US$ KHR 000 US$ KHR 000 Balances with the NBC 7,020,443 28,341,526 5,949,820 24,096,771 Due from other financial institutions 10,702,203 43,204,794 15,836,915 64,139,506 Loans and advances to customers 23,792,277 96,049,422 20,954,685 84,866,474 Other financial assets 140, , , ,128 41,655, ,162,904 42,877, ,655,879 35