as at 31 December 2012 and for the year then ended

Transcription

1 ANNUAL REPORT 2012

2 Union Commercial Bank Plc. Audited financial statements in accordance with Cambodian Accounting Standards and Regulations and Guidelines of the National Bank of Cambodia

3 CONTENTS Message from the Chairman and Chief UCB Company Report of the Board of Directors 08 AUDITED FINANCIAL STATEMENTS Independent Auditors Report 12 Statement of Changes in Equity 15 Balance Sheet 13 Statement of Cash Flows 16 Income Statement 14 Notes to The Financial Statements 17

4 Message from the Chairman and CEO Message from the Chairman and Chief Executive Officer turbulent. The year was marked by volatile swings in the world s stock markets caused by the possibility of Greece exiting from the Euro. The risks were highlighted when Moody s rating agency cut its assessment of Spanish the 17-nation European currency area had avoided plunging deeper into crisis was mitigated by concern about unresolved problems in Greece, the lack of a comprehensive plan for the euro zone as a whole, and weakness in the world economy. In the ASEAN Summit held on April 3 and 4, Cambodia took over the Chairmanship. The establishment of the ASEAN Economic Community by 2015 will increase demand and open new markets for Cambodian entrepreneurs in the ten member country group. The Regional Comprehensive Economic Partnership (RCEP) was launched in November and the leaders of the ASEAN member countries, along with the leaders of Japan, India, China, Korea, Australia and New Zealand, issued a joint declaration to begin RCEP negotiations in order to pave the way to boosting trade and investment under the Free Trade Agreements. This partnership has the potential to lead to traditional markets of the US and the EU. A new partnership looking to export Cambodian rice to world markets was formed in May The alliance of members had signed a memorandum of understanding with Chinese provincial authorities to build rice mills around Cambodia with the potential capacity of 400,000 tones. of 2012 as more foreign investors bought new condominiums and banks provided more housing loans. After A report released by the World Bank in October highlighted Cambodia as the most improved country in terms of 133 out of 185 in the World Bank s report, up from 141 in the previous year. On February 20, 2013, the government revised the economic growth for 2012 upwards from 7 to 7.3% at the 7th 2012; this was 0.1 % below the government revised projection and 0.5% higher than the ADB. 2 UCB Annual Report 2012

5 Message from the Chairman and CEO The Cambodian banking sector in 2012 saw many new developments, with new banks from Vietnam, Taiwan and Malaysia. However, banking penetration as measured by GDP to loans ratio in Cambodia is 30% compared to of 2011 to 613 as at June 25, The number of customers using ATMs in the provinces has also increased. Several banks have also launched RMB settlement services during The RMB is projected to become a major settlement service for inter-bank transfers. increase in retained earnings and reserves during the banking industry, which grew by 34.2%, the rate of loan growth was 23.2 %. However, growth in deposits in the Bank and a steady deposit base from our loyal customers. UCB continued to grow conservatively, with a in the coming years. During the year, the Board and all Board Committees met on a regular basis to approve and ratify all senior compliance, internal control, regulatory requirements and operations. The Board s composition is further strengthened by the appointment of additional directors. On behalf of the Board, I would like to express my sincere thanks and gratitude to our customers, shareholders, our dedicated and committed staff, the correspondent Banks and the guidance from the NBC and the Royal Government of Cambodia for the Bank s achievements during the year. Oknha Yum Sui Sang Chairman & CEO 31 st March 2013 UCB Annual Report

6 UCB Company Profile UCB COMPANY PROFILE Union Commercial Bank PLC is a full-service, customer-oriented commercial bank in Cambodia. As a full-service bank, UCB provides a comprehensive range of banking products and services tailored for individuals and businesses in Cambodia. The bank offers competitive financial solutions underpinned by its global experience and keen insight into the Cambodian market. UCB s professional strength lies in a solid combination of local expertise and commitment to clients, which is borne out by its high level of personalized customer service and its focus on strong business partnerships. History The history and growth of Union Commercial Bank is intertwined with the Kingdom of Cambodia s own path held general elections sponsored by the United Nations. Shortly afterwards, following the enactment of the Investment Law for Banking, Oknha Yum Sui Sang and several of his friends and associates traveled to Phnom long-standing businessman and visionary, observed that by establishing a commercial bank in Cambodia he could promote trade and economic activity that would enable under the Laws of the Kingdom of Cambodia and backed by the approval of the National Bank of Cambodia. 4 UCB Annual Report 2012

7 UCB Company Profile What UCB offers to issue the VISA Platinum credit card, and it now holds a major share of the VISA Platinum credit card market in the country. We also offer MasterCard services to our clients. Additionally, UCB has expanded the locations of its services, and currently operates branches at Olympic Market in Phnom Penh, and in Sihanoukville, Battambang, and Siem Reap. The UCB branch network allows customers to withdraw, deposit, and transfer in Phnom Penh), as well as numerous other local and international banks. UCB is currently acquiring China UnionPay services in order to deliver even greater convenience and a wider range of card usage to our clients and visitors from overseas. UCB is proud to serve the nation of Cambodia. It does so with a high level of professionalism and by adhering to superior standards of personal service. UCB is wholly dedicated to delivering value to its distinguished shareholders and investors, providing effective and competitive financial solutions to its customers, and developing the talent and performance of its staff. UCB Annual Report

8 UCB Company Profile OUR MISSION To promote the well-being and prosperity of our clients, shareholders and employees and services in an environment of integrity, openness, and client centricity. OUR VISION achieve sustained economic growth by continuing to exceed our customers expectations for top-tier service and 6 UCB Annual Report 2012

9 UCB Company Profile OUR VALUES At Union Commercial Bank we strongly believe in abiding by our core values: Commitment To remain loyal to our clients, to honor the promises that we make, and to respect our clients Integrity To uphold high moral principles, adhere to industry standards and ethics, and strive for uprightness in all of our interactions. Security To assure safe and reliable transactions for all our customers, and protect the bank and our clients from economic downturns through proper We strive for your betterment. UCB Annual Report

10 REPORT OF THE BOARD OF DIRECTORS REPORT OF THE BOARD OF DIRECTORS. THE BANK The Bank is a commercial bank operating under the Cambodian Law on Commercial Entreprises and the supervision of the National Bank of Cambodia ( NBC ), pursuant to the Law on Banking and Financial Institutions of Cambodia and in accordance with Banking License No. 08 issued by the NBC. The Bank s license was renewed on 28 November 2006 The Bank s main activities are mobilizing and receiving short, medium and long term deposit funds from various organizations and individuals; lending on a short, medium and long term basis to various organizations and individuals based on the nature and ability of the Bank s capital resources; conducting foreign currency transactions; providing branches. RESULTS OF OPERATIONS AND DIVIDENDS 5,107,474 (2011: 4,480,862). Dividends of 1,200,000 were declared and paid during the year. PAID-UP CAPITAL There were no movements in paid-up capital of the Bank during the year. 8 UCB Annual Report 2012

11 REPORT OF THE BOARD OF DIRECTORS RESERVES AND PROVISIONS BAD AND DOUBTFUL LOANS AND ADVANCES had been taken in relation to the writing off of bad loans and the making of provisions for bad and doubtful loans, and and doubtful loans. At the date of this report, the directors are not aware of any circumstances, which would render the amount written inadequate to any material extent. CURRENT ASSETS current assets, other than loans, which were unlikely to be realized in the ordinary course of business at their value as shown in the accounting records of the Bank, have been written down to an amount which they might be expected to realize. At the date of this report, the directors are not aware of any circumstances which would render the values attributed to VALUATION METHODS At the date of this report, the directors are not aware of any circumstances that have arisen which would render or inappropriate in any material respect. CONTINGENT AND OTHER LIABILITIES At the date of this report, there is: of any other person; and ordinary course of banking business. No contingent or other liability of the Bank has become enforceable, or is likely to become enforceable within the period effect on the ability of the Bank to meet its obligations as and when they become due. EVENTS AFTER THE BALANCE SHEET DATE UCB Annual Report

12 REPORT OF THE BOARD OF DIRECTORS THE BOARD OF DIRECTORS The members of the Board of Directors during the year and at the date of this report are: Oknha Yum Sui Sang Oknha Dr. Chear Ratana Mr. Li Wei Nan Mr Yum Ka Yee Ms. Juliana Lam Hiu Ying Ms. Tan Phally Mr. Raymond Kung Mr. Hun Sakhan Chairman Director Director Director Director Director Independent Director Independent Director AUDITORS The auditors, Ernst & Young (Cambodia) Ltd., expressed willingness to accept re-appointment as auditors. DIRECTORS INTERESTS follows: Number of shares of 1,000 each As at 1 January 2012 As at 31 December 2012 Oknha Yum Sui Sang 21,682 21,682 Oknha Dr. Chear Ratana 1,875 1,875 Mr. Li Wei Nan Ms. Tan Phally - DIRECTORS BENEFITS During and at the end of the year, no arrangement existed, to which the Bank was a party, whose object was to enable other corporate body. 10 UCB Annual Report 2012

13 REPORT OF THE BOARD OF DIRECTORS STATEMENT OF THE BOARD OF DIRECTORS RESPONSIBILITY IN RESPECT OF THE FINANCIAL STATEMENTS 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 NBC and Cambodian Accounting Standards or, if there has been any departure in the interests of fair presentation, ensure this has been appropriately disclosed, explained and maintain adequate accounting records and an effective system of internal controls; continue operations in the foreseeable future; and set overall policies for the Bank, ratify all decisions and actions that have a material effect on the operations and Management is responsible for ensuring that proper accounting records are kept which disclose, with reasonable accuracy accounting system. It is also responsible for safeguarding the assets of the Bank and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. APPROVAL OF THE FINANCIAL STATEMENTS with Cambodian Accounting Standards and relevant regulations and guidelines issued by the NBC. On behalf of the Board of Directors Oknha Yum Sui Sang Oknha Dr. Chear Ratana Director Phnom Penh, Kingdom of Cambodia 18 March 2013 UCB Annual Report

14 INDEPENDENT AUDITORS REPORT To: The Board of Directors of Union Commercial Bank Plc. the balance sheet as at 31 December 2012 and the income statement, statement of changes in equity and statement of Management s responsibility for the financial statements Cambodian Accounting Standards and relevant regulations and guidelines issued by the National Bank of Cambodia, that are free from material misstatement, whether due to fraud or error. Auditors responsibility accordance with Cambodian International Standards on Auditing. Those standards require that we comply with ethical free from material misstatement. statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank s internal control. An audit also includes evaluation the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall opinion. Opinion Standards and relevant regulations and guidelines issued by the National Bank of Cambodia. Ernst & Young (Cambodia) Ltd. Registered Auditors Phnom Penh, Kingdom of Cambodia 18 March UCB Annual Report 2012

15 Union Commercial Bank Plc. BALANCE SHEET as at 31 December 2012 ASSETS Notes Cash on hand 3 24,643, ,213,615 Balances with the National Bank of Cambodia 4 206,460,322 Balances with other banks 5 57,718,025 Checks discounted 6 30,588,203 21,844,385 Available-for-sale ( AFS ) investments 7 248, ,812 Loans and advances 8 176,074,608 Property and equipment 5,578,821 22,532,858 Software costs ,220 Other assets 11 1,864,116 TOTAL ASSETS 330,952,632 1,322,155, ,877,626 1,013,294,733 LIABILITIES AND SHAREHOLDERS EQUITY Liabilities Deposits by other banks 12 12,027,430 Deposits from customers ,000,604 1,038,702, ,427,848 Income tax payable 14.1 Deferred tax liabilities - net ,124 1,530, ,402 Other liabilities 15 38,608,886 4,201,245 Total liabilities 283,825,240 1,133,881, ,683, ,834,769 Shareholders equity Paid-up capital 16 37,500,000 37,500, ,462,500 Retained earnings 8,388,336 33,511,401 4,480,862 Non-distributable reserve 17 1,182,387 4,723,636 1,182,387 4,775,661 AFS reserve 7 30, ,601 Total shareholders equity 47,127, ,273,930 43,193, ,459,964 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 330,952,632 1,322,155, ,877,626 1,013,294,733 The attached notes 1 to 30 form part of these financial statements. UCB Annual Report

16 Union Commercial Bank Plc. INCOME STATEMENT for the year ended 31 December 2012 Operating income Notes Interest income 18 14,351,370 Interest expense Net interest income 8,669,565 34,634,912 7,682,378 31,029,124 Fees and commission income 20 4,757,177 4,074,270 Fees and commission expense 21 (3,333,346) Net fees and commission income 3,921,239 15,665,350 3,248,980 13,122,631 Other operating income 22 Total operating income 13,492,164 53,901,195 11,407,155 46,073,499 Other operating expenses 23 (4,248,852) (17,161,113) Provision for losses on loans and advances and checks discounted 7 (2,028,860) (1,470,062) 6,571,274 26,252,239 5,688,241 22,974,806 Income tax expense 14 (1,463,800) (5,847,881) (4,876,604) 5,107,474 20,404,358 4,480,862 18,098,202 The attached notes 1 to 30 form part of these financial statements. 14 UCB Annual Report 2012

17 Union Commercial Bank Plc. STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2012 Paid-up capital Retained earnings Nondistributable reserve AFS reserve Total Balance as at 1 January ,500,000 4,480,862 1,182,387 30,602-5,107, ,107,474 Dividends declared (1,200,000) - - (1,200,000) Unrealized gain on availablefor-sale investments ,067 26,067 Balance as at 31 December ,500,000 8,388,336 1,182,387 56,669 47,127,392 Equivalent in 149,812,500 33,511,401 4,723, , ,273,930 Balance as at 1 January ,500,000-1,182,387-4,480, ,480,862 Unrealized gain on availablefor-sale investments ,223 16,223 Balance as at 31 December ,500,000 4,480,862 1,182,387 30,602 43,193,851 Equivalent in 151,462,500 18,098,202 4,775, , ,459,964 The attached notes 1 to 30 form part of these financial statements. UCB Annual Report

18 Union Commercial Bank Plc. STATEMENT OF CASH FLOWS for the year ended 31 December 2012 Notes Net cash from (used in) operating activities 24 31,792, ,009,416 (3,823,107) (15,441,529) Cash flows from investing activities Dividends received from available-for-sale investments 1, Proceeds from disposals of property and equipment 47,500 Acquisitions of: Property and equipment (1,170,132) (4,674,677) (636,053) Software costs 10 (7,073) (28,257) (25,514) (103,052) Available-for-sale investments (154,056) (622,232) Net cash used in investing activities (1,152,817) (4,605,504) (767,878) (3,101,459) Cash flow from a financing activity Dividends paid 16 (1,200,000) (4,794,000) - - Net increase (decrease) in cash and cash s 29,439, ,609,912 (4,590,985) (18,542,988) Cash and cash s at beginning of year 53,757, ,125,957 58,348, ,485,821 Foreign exchange difference - (2,365,324) - (816,876) Cash and cash s at end of year 3 83,196, ,370,545 53,757, ,125,957 The attached notes 1 to 30 form part of these financial statements. 16 UCB Annual Report 2012

19 Union Commercial Bank Plc. NOTES TO THE FINANCIAL STATEMENTS 1. CORPORATE INFORMATION Union Commercial Bank Plc. ( the Bank ) is a commercial bank incorporated and registered in the Kingdom of Cambodia. Establishment and operations Prakas No. B dated 13 September The Bank s main activities are mobilizing and receiving short, medium and long term deposit funds from various organizations and individuals; lending on a short, medium and long term basis to various organizations and individuals based on the nature and ability of the Bank s capital resources; conducting foreign currency transactions; providing transaction services between customers; and other banking services as approved by the NBC. Paid-up capital The actual paid-up capital of the Bank as at 31 December 2012 is million (2011: million). Board of Directors The members of the Board of Directors ( BOD ) during the financial year and at the date of this report are: Oknha Yum Sui Sang Oknha Dr. Chear Ratana Mr. Li Wei Nan Mr. Yum Ka Yee Ms. Juliana Lam Hiu Ying Ms. Tan Phally Mr. Raymond Kung Mr. Hun Sakhan Chairman Director Director Director Director Director Independent director Independent director Location The head office of the Bank is located at No. 61, Street 130, Phnom Penh, Kingdom of Cambodia. The Bank has four branches located in Phnom Penh (Olympic Branch), Siem Reap, Sihanoukville and Battambang. Employees As at 31 December 2012, the Bank has a total of 181 employees (2011: 177 employees). UCB Annual Report

20 2. ACCOUNTING POLICIES 2.1 Basis of presentation investments that have been measured at fair value and land and building measured under revaluation model. The Bank NBC s Prakas No. B dated 13 December about the Kingdom of Cambodia s accounting principles, procedures and practices and furthermore are not intended practices generally accepted in countries other than the Kingdom of Cambodia. the Law on Corporate Accounts, their Audit and the Accounting Profession dated 8 July 2002 and relevant NBC Prakas, 1), as announced by the NBC. Such translation should not be construed as a representation that the amounts represent, or have been or could be, converted into Khmer Riel at that or any other rate. The accounting policies set out below have been consistently applied by the Bank during the year. Fiscal year 2.2 Significant accounting judgments and estimates In applying the Bank s accounting policies, management has used its judgment and made estimates in determining the Provision for losses on loans and advances to customers Provision for losses on checks discounted level of allowance for losses on checks discounted, as more fully disclosed in Note Operation lease determining whether or not there is an indication of operating lease treatment, the Bank considers the following factors: retention of ownership title to the leased property, and period of lease contract relative to the estimated useful economic life of the leased property, bearer of executory costs, among others. 18 UCB Annual Report 2012

21 2. ACCOUNTING POLICIES (continued) 2.3 Summary of significant accounting policies Change in accounting policies The accounting policies and methods of computation applied by the Bank are consistent with those adopted in the previous years Loans and advances Loans and advances are stated in the balance sheet at the amount of principal less any amounts written off and allowance for losses on loans and advances. Short term loans are those with repayment date within one year from the date the loan advanced. Loans and advances 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 allowance for losses on loans and advances in the income statement Allowance for losses on loans and advances The allowance is based on a percentage of total outstanding loans and advances. Number of days past due Allowance rate General allowance: Normal Nil to less than 30 days 1% Specific allowance: Special mention 3% Substandard 20% Doubtful 180 days or more but less than 360 days 50% Loss 360 days or more 100% value of the collateral, if any when in the judgment of the management, there is no prospect of recovery. UCB Annual Report

22 2. ACCOUNTING POLICIES (continued) 2.3 Summary of significant accounting policies (continued) Other credit-related commitments In the normal course of business, the Bank 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. Allowance is raised against other credit-related commitments when losses are considered probable Checks discounted Checks discounted are stated in the balance sheet at face value less unearned discount and any amounts written off and allowance for losses on checks discounted. Checks discounted are written off when there is no realistic prospect of recovery. Recoveries of checks discounted previously written off, or provided for, decrease the amount of the allowance for losses on loans and advances in the income statement Allowance for checks discounted as stated in Note The carrying amount of the asset is reduced through the use of an allowance account and the amount of loss is charged to the income statement. Checks discounted, together with the associated allowance account, are written off when there is no realistic prospect of future recovery and all collateral has been realized. If, in a subsequent year, the amount of the estimated impairment loss decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is reduced by adjusting the allowance account. If a future writeoff is later recovered, any amounts formerly charged are credited to reversal of losses on checks discounted Available-for-sale investments equity investments. After initial measurement which is at cost, AFS investments are subsequently measured at fair value. Unrealized gains or losses are recognized directly in equity in the AFS reserve. When the security is disposed of, the cumulative gain or loss previously recognized in equity is recognized in the income statement as other operating income or expense. Dividends earned while holding AFS investments are recognized in the income statement as other operating income when the right of the payment has been established. The losses arising from impairment of such investments are recognized in the income statement and removed from the AFS reserve Determination of fair value market price or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs. valuation techniques. 20 UCB Annual Report 2012

23 2. ACCOUNTING POLICIES (continued) 2.3 Summary of significant accounting policies (continued) Offsetting financial instruments is a currently 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 or expense can be reliably measured. Interest income from loans and advances to customers, checks discounted and balances with the NBC and other banks are recognized on a daily accrual basis, except for loans and advances to customers that have in suspense account. Interest expense on deposits of customers, settlement accounts of other banks and borrowings are recognized on a daily accrual basis. The following recognition criteria also apply to the Bank Fee and commission income The Bank earns fee and commission income from a diverse range of services it provides to its customers. Fee and commission income is recognized on a cash basis. Fee and commission income comprises income received from inward and outward remittances, loan processing, commitment fees, bank guarantees, letters of credit, and ATM/Visa and Master Card charges Dividend income Dividend income is recognized when the Bank s right to receive the payment is established Cash and cash s with an original maturity of less than ninety days that are readily convertible to known amounts of cash and accounts due from other banks Property and equipment and software costs Property and equipment, including software costs, are stated at cost excluding day-to-day servicing, less accumulated depreciation/amortization and provision for impairment in value (if any). Changes in the expected useful life are accounted for by changing the depreciation period or method, as appropriate and treated as a change in accounting estimate. Land and buildings are measured at fair value less accumulated depreciation on buildings and impairment losses recognized after the date of revaluation. Valuations will be performed frequently enough to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. Any revaluation, however, should be approved by the NBC. UCB Annual Report

24 2. ACCOUNTING POLICIES (continued) 2.3 Summary of significant accounting policies (continued) Property and equipment and software costs (continued) Any revaluation surplus is credited to the asset revaluation reserve included in the equity section of the balance sheet, except to the extent that it reverses a revaluation decrease of the same asset previously recognized in the income the income statement, except to the extent that it offsets an existing surplus on the same asset recognized in the asset revaluation reserve. Additionally, accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings. Any gain or loss on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognized in other operating income in the income statement in the year the asset is derecognized Depreciation and amortization Construction in progress is not depreciated and land is not amortized. Depreciation of property and equipment and amortization of software costs are calculated on a straight-line basis over the respective estimated useful lives of these assets, which are as follows: Buildings Building improvements Motor vehicles Information technology ( IT ) equipment and computers Software costs 20 years 10 years 4 years 4 years 4 years 4 years Foreclosed properties Foreclosed properties are carried at the lower of the outstanding balance of the related loan or advance and the estimated net realizable value of the property at the date of foreclosure. Gains or losses are recognized in the income statement at the date of disposal Corporate income tax Current income tax Current income 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. 22 UCB Annual Report 2012

25 2. ACCOUNTING POLICIES (continued) 2.3 Summary of significant accounting policies (continued) Corporate income tax (continued) Deferred income tax Deferred income tax is provided using the balance sheet liability method on temporary differences at the balance sheet Deferred income 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 Deferred income tax assets are recognized for all deductible temporary differences to the extent that it is probable that arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction affects The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that Unrecognized deferred income tax assets are re-assessed at each balance sheet date and are recognized to the extent Foreign currency transactions and translation The Bank maintains its accounting system and records all transactions in original currencies. Monetary assets and liabilities denominated in foreign currencies ( FC ) at year-end are re-translated to at the exchange rates ruling at the reporting date. For prevailing exchange rates of and applicable FCs against KHR as at 31 December, see Note 28. Income and expenses arising in FC are converted into at month-end using the applicable middle exchange rates rather than the exchange rates ruling at the transaction date Provisions Provisions are recognized when the Bank has a present obligation (legal or constructive) as a result of a past event, and reliable estimate can be made on the amount of the obligation Fiduciary assets the Bank Statutory deposits Statutory deposits are maintained with the NBC in compliance with the Cambodian Law on Banking and Financial by the NBC. UCB Annual Report

26 2. ACCOUNTING POLICIES (continued) 2.3 Summary of significant accounting policies (continued) Operating leases Payments made under operating leases are recognized in the income statement on a straight-line basis over the term of the lease Related parties Parties are considered to be related if the Bank has the ability, directly or indirectly, to control the other party or exercise entities and include close family members of any individual considered to be a related party. the following: (a) any person holding directly or indirectly at least ten percent (10%) of the capital or voting rights; (b) any company of which the Bank 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 Dividends on paid-up capital Dividends on paid-up capital are recognized as a liability and deducted from shareholders equity when approved by the BOD. Dividends declared during the year but approved by the BOD after the balance sheet date are dealt with as an event after the balance date Rounding of amounts KHR amounts, respectively. 24 UCB Annual Report 2012

27 3. CASH ON HAND Cash on hand in Cash on hand in KHR 334, ,811 Cash on hand in other currencies 86,250 8,883 35,878 24,643,868 98,452,253 26,544, ,213,615 Cash on hand 24,643, ,213,615 Balances with the NBC (Note 4) Current accounts Term deposits (less than 3 months maturity) 5, Balances with other banks (Note 5) 57,718,025 83,196, ,370,545 53,757, ,125,957 UCB Annual Report

28 4. BALANCES WITH THE NATIONAL BANK OF CAMBODIA Current account in 12,833,525 51,834,607 Current account in KHR 151, ,605 Term deposit in KHR 5, Reserve deposits 28,410, ,500,475 21,540,331 Capital guarantee deposit 3,750,000 3,750,000 15,146,250 51,679, ,460,322 38,212, ,341,964 Reserve deposits the NBC in the form of compulsory deposits, computed at 8.0% and 12.5% of customer deposits in KHR and in FC, respectively. Capital gurantee deposit Under NBC Prakas No. B dated 15 October 2001, banks are required to maintain a capital guarantee of 10.0% of registered capital. This deposit is not available for use in the Bank s day-to-day operations but it is refundable when the Bank voluntarily ceases to operate the business in Cambodia. Interest rates Annual interest rates on balances with the NBC are summarized as follows: Current account Nil Nil Reserve deposit 0.10% % 0.13% % Capital guarantee deposit 0.18% % 0.10% % Term deposit 1% Nil 26 UCB Annual Report 2012

29 5. BALANCES WITH OTHER BANKS Settlement accounts with overseas banks in 14,152,608 in other currencies 83, ,423 23,644 Settlement accounts with local banks in 728,761 10,727,373 in KHR 25, ,112 35, ,060 39,033, ,939,695 14,290,177 57,718,025 Settlement accounts maintained with local banks do not earn interest and those maintained with overseas banks earn interest at 0.01% per annum (2011: 0.01% per annum). 6. CHECKS DISCOUNTED Face value Allowance for losses on checks discounted (312,675) (223,125) Unearned income (366,641) (1,464,731) 30,588, ,199,871 21,844,385 88,229,471 UCB Annual Report

30 7. AVAILABLE-FOR-SALE INVESTMENTS Unquoted equity securities 150, , ,850 Quoted equity securities 248, , , ,812 Unquoted equity securities with Credit Bureau of Cambodia are carried at their acquisition cost. Quoted equity securities represent shares issued by a foreign company. The movements of AFS reserve of the Bank follow: As at 1 January ,602 Unrealized gain 32,583 Deferred income tax (6,516) As at 31 December ,669 As at 31 December ,602 Equivalent in As at 31 December ,393 As at 31 December , UCB Annual Report 2012

31 8. LOANS AND ADVANCES Commercial loans: Term loans 55,451,340 Overdraft loans 32,216, ,703,012 Trust receipts 1,745,025 7,048,156 Bills receivable 250,152 3,587,815 Consumer loans: Overdraft loans 65,302,626 54,483,485 Term loans 4,615,405 18,438,543 3,122,080 12,610,081 Credit card facilities 2,241,476 7,766,065 Other consumer loans Loans and advances - gross 179,501, ,109, ,746, ,671,960 Allowance for losses on loans and advances (3,427,217) (2,134,763) (8,622,308) Loans and advances - net 176,074, ,418, ,612, ,049,652 UCB Annual Report

32 8. LOANS AND ADVANCES (continued) Further analyses of loans and advances follow: (a) Movements of allowance for losses on loans and advances: Specific allowance: Balance at beginning of year Movements during the year: Provision during the year 1,664,115 1,040,232 Reversal during the year - - Amounts written off (646,856) (36,876) Foreign exchange difference - (28,245) - (1,374) Balance at end of year 1,659,216 6,628, ,957 2,592,864 General allowance: Balance at beginning of year Provision during the year 605,827 Foreign exchange difference - (65,684) - (12,416) Balance at end of year 1,768,001 7,063,164 1,492,806 6,029,444 Total allowance at end of year 3,427,217 13,691,732 2,134,763 8,622,308 Overall movements of allowance for losses on loans and advances and checks discounted follow: Loans and advances 2012 Checks discounted (Note 6) Total Balance at beginning of year 2,134, ,125 2,357,888 Provision during the year 2,028,860 Amounts written off (646,856) - (646,856) Balance at end of year 3,427, ,675 3,739,892 Equivalent in 13,691,732 1,249,137 14,940,869 Balance at end of year ,134, ,125 2,357,888 Equivalent in 8,622, ,201 9,523, UCB Annual Report 2012

33 8. LOANS AND ADVANCES (continued) (b) Grading of the loan portfolio and the related allowance for losses on loans and advances: Principal Allowance Principal Allowance Normal loans: Secured 128,533,533 1,322,322 Unsecured 21,328, ,282 16,571, ,484 Specially mention loans Substandard loans Doubtful loans: Secured 85,000 42, Loss loans: Secured 2,586,438 1,586, Unsecured 30,278 30,278 Total 179,501,825 3,427, ,746,957 2,134,763 Equivalent in 717,109,791 13,691, ,671,960 8,622,308 Refer to Note 27.1 on Credit risk for analysis of loans quality. UCB Annual Report

34 8. LOANS AND ADVANCES (continued) (c) Analysis of loan portfolio by industrial sector: Financial sector: Financial sector 12,603,626 50,351,484 6,146,268 24,824,778 Non-financial sector: Construction 62,263,654 Manufacturing 25,402, ,481,421 21,785,375 15,167,628 13,716,682 Wholesale 15,412,755 Hotel and restaurants 38,688,411 7,686,523 31,045,866 Retail trade 16,175,243 65,331,806 Utilities 6,673,766 Real estate activities 5,378,653 37,882,835 Transport and storage 2,886,472 11,531,456 11,144,126 Information media and telecommunication 735,443 6,086,478 Mining and quarrying - - Personal essentials: Personal lending 37,368,251 3,686,845 Credit cards 2,241,476 7,766,064 Mortgages ,664 47,111 Other lending 24,067 1,281,374 5,175,471 Total 179,501, ,109, ,746, ,671,960 (d) Analysis of loan portfolio by maturity: Refer to Note 28 on Liquidity analysis. 32 UCB Annual Report 2012

35 8. LOANS AND ADVANCES (continued) (e) Analyses of loan portfolio by residency, relationship, exposure, interest rates range and collateral are as follows: Residence status: Residents 179,501, ,109, ,746, ,671,960 Relationship: Related parties 316, ,814 Non-related parties 145,624, ,501, ,109, ,746, ,671,960 Exposure: Large 55,822, ,011, ,027,733 Non-large 87,557, ,644, ,501, ,109, ,746, ,671,960 Annual interest rates: Staff loans Loans to borrowers 7.50% % 7.50% % UCB Annual Report

36 9. PROPERTY AND EQUIPMENT Construction in progress Freehold land Buildings Building improvements equipment Motor vehicles IT equipment and computers Total Cost As at 1 January ,373, ,624 1,015,050 Additions 45, ,250-1, ,480 1,170,132 Transfer ,458 (27,273) - (185) - Disposals (1,821) (101,250) - (103,071) As at 31 December ,419,400 2,478,050 1,450, , ,921 1,348, ,652 9,060,682 Accumulated depreciation As at 1 January , ,517 2,414,800 Depreciation , ,341 53, ,103 Transfer ,124 - (55) - Disposals (1,400) (101,250) - (102,650) As at 31 December , , , , ,668 2,763,253 Net book value As at 31 December ,419,400 2,478,050 1,090, , , , ,984 6,297,429 As at 31 December ,373,600 1,896,800 1,162, , , ,952 98,409 5,578,821 Equivalent in Aa at 31 December ,670,503 9,899,810 4,355,413 2,025, ,644 2,361, ,400 25,158,229 As at 31 December ,547,970 7,661,175 4,697,208 2,412, ,808 1,332, ,474 22,532, UCB Annual Report 2012

37 10. SOFTWARE COSTS Cost As at 1 January ,180 Additions 7,073 As at 31 December ,253 Accumulated amortization As at 1 January ,265 Amortization As at 31 December ,459 Net book value As at 31 December ,794 As at 31 December ,915 Equivalent in KHR'000 As at 31 December ,942 As at 31 December , OTHER ASSETS Prepayments and deposits 562,565 Interest receivable 1,262, ,520 Others 1,413,136 5,645,476 74, ,818 2,339,656 9,346, ,529 1,864,116 Others include processing fee amounting to 1.40 million to acquire a real property. UCB Annual Report

38 12. DEPOSITS BY OTHER BANKS (a) Deposits by other banks are as follows: Current accounts 80,671 Savings accounts 487, ,267 2,234,645 Term deposits 12,527,391 50,046,927 12,027,430 48,578,790 (b) Interest rates: Annual interest rates on deposits by other banks follow: Current accounts Nil Nil Savings accounts 1% - 7.5% 1% Term deposits 2.50% % 1.50% % 36 UCB Annual Report 2012

39 13. DEPOSITS FROM CUSTOMERS Demand deposits In 140,744,484 In KHR 124, ,760 Savings accounts In 54,188,143 In KHR 45, ,747 85, ,205 Term deposits In 511,775, ,354,785 Margin and guarantee deposits In 840,512 1,635, ,000,604 1,038,702, ,004, ,427,848 (i) Interest rates of deposits of customers: Demand deposits denominated in KHR and in are non-interest bearing deposits. Savings deposits in KHR and bear interest at rates ranging from 1.00% to 4.50% per annum (2011: 1.00% to 4.00%). Term deposits include deposits with terms of between one to twelve months and more than twelve months. Customers can withdraw term deposits before the due date upon negotiation with the Bank. Term deposits denominated in KHR and bear interest at rates ranging from 2.50% to 6.20% per annum (2011: 2.50% to 6.20%). (ii) Deposits from related parties: Refer to Note 26 on Related party transactions and balances. (iii) Maturity analysis: Refer to Note 28 on Liquidity risk. UCB Annual Report

40 14. INCOME TAX Components of income tax expense for the year are as follows: Corporate income tax expense in accordance with statutory tax regulations: Current 1,268,538 5,123,625 Deferred 5,207 20,802 (247,021) Income tax expense 1,463,800 5,847,881 1,207,379 4,876, Current income tax 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. Details of estimated current income tax expense and payable are as follows: Accounting profit before income tax 6,571,274 5,688,241 Permanent differences 682,575 2,726,887 1,671,302 Temporary differences 156, ,658 Taxable profit 7,292,963 29,135,387 6,342,690 25,618,125 Current income tax, at the statutory rate of 20% 1,458,593 5,827,079 1,268,538 5,123,625 The Bank s tax returns are subject to periodic examination by the tax authorities. Because the application of tax laws 38 UCB Annual Report 2012

41 14. INCOME TAX (continued) 14.1 Current income tax (continued) Movements of income tax payable during the year follow: Balance at beginning of year 782,866 Current income tax expense 1,268,538 5,123,625 Payment of tax during the year (1,288,053) (5,145,772) (537,204) Over tax provision from prior year - - (1,756,646) Foreign exchange difference - (47,488) - Balance at end of year 1,249,819 4,993,027 1,079,279 4,359, Deferred tax liabilities - net Deferred tax liabilities Depreciation 118, Revaluation gain on land and building 1,885,442 Unrealized foreign exchange gain - net 67, Unrealized gain on AFS investment 14,167 7, ,439 2,107, ,460 1,916,344 Deferred tax assets Unearned income (73,328) Accruals (46,800) Unrealized foreign exchange loss - net - - (7,260) (144,315) (576,538) (103,058) (416,251) Deferred tax liabilities net 383,124 1,530, ,402 1,500,093 UCB Annual Report

42 15. OTHER LIABILITIES Accrued interest payable 2,718,185 Sundry creditors 856,447 3,421, ,412 3,047,070 Other liabilities 728,648 9,664,302 38,608,886 4,201,245 16,968, PAID-UP CAPITAL (a) Details of paid-up capital follow: Issued and fully paid: Balance at beginning and end of year 37,500,000 37,500, ,462,500 Balance at end of year 37,500, ,812,500 37,500, ,462,500 (b) Capital guarantee: The capital guarantee of 10% of registered capital amounting to 3,750,000 is maintained with the NBC, as disclosed in Note 4. (c) The Bank declared and paid dividends of 1.20 million on 10 May NON-DISTRIBUTABLE RESERVE The Bank transferred 1,182,387 from retained earnings to non-distributable reserve following NBC Prakas B dated 15 October There were no movements during the year. 40 UCB Annual Report 2012

43 18. INTEREST INCOME Interest income from lending Interest income from deposits 20,575 13,074 52,805 17,786,974 71,058,961 14,351,370 57,965, INTEREST EXPENSE Interest expense mainly arises from charges for deposits by other banks and from customers. 20. FEES AND COMMISSION INCOME Loan commitment fees Settlement services 1,586,335 6,337,408 1,508,276 Fees and commission from credit cards 1,868,178 1,610,212 Income from ATM/credit card 426,686 1,704, ,205 1,810,300 Guarantee activities 626, ,445 Telecommunication 574, , ,777 Other fees and commission 4,757,177 19,004,922 4,074,270 16,455,977 UCB Annual Report

44 21. FEES AND COMMISSION EXPENSE Expenses for ATM/credit card 673,503 Telecommunication 43, ,881 Commitment fees 21,567 86, ,535 Settlement services 42, , ,938 3,339, ,290 3,333, OTHER OPERATING INCOME Recovery of loans written off 180, ,338 88, ,452 Foreign exchange gain - net 335,432 28, ,477 Gain on disposal of property and equipment 23,576 47,500 Others 613, , ,360 3,600, ,797 1,921,744 the year ended 31 December 2010 amounting to 0.47 million. 42 UCB Annual Report 2012

45 23. OTHER OPERATING EXPENSES Staff and other related cost 2,115,884 1,848,614 7,466,552 Depreciation and amortization 2,110,547 2,177,324 Business and public relations 1,558, ,045 Professional and other related costs 276,887 1,106, ,006 Charity and donation 202, ,254 Security 165, , ,857 Utilities 153, , ,726 Building rentals 114, ,718 Other taxes 531, ,034 Travelling and transportation 125, , , ,420 Motor vehicle and running costs 403,151 Court fees 108,853 Stationeries and printing 375,282 77,047 License fees 75, ,015 Telecommunication 65, ,521 Publication, marketing and promotion 44, ,285 Repairs and maintenance 42,686 Others 616,811 60, ,047 4,892,030 19,543,660 4,248,852 17,161,113 UCB Annual Report

46 24. NET CASH FROM (USED IN) OPERATING ACTIVITIES Cash flows from operating activities 6,571,274 5,688,241 Adjustments for: Depreciation and amortization 2,110, ,855 2,176,435 Dividends from AFS investments (1,562) (245) Gain on disposals of property and equipment (23,576) (47,500) Income tax paid (1,288,053) (5,145,772) (537,204) Cash from operating activities before changes in operating assets and liabilities 5,787,551 23,121,266 5,642,147 22,788,631 Decrease (increase) in operating assets: Statutory deposits (6,870,301) (27,446,852) Checks discounted (8,743,818) 4,833,356 Loans and advances (32,462,414) (55,645,661) (224,752,825) Other assets (1,878,127) (7,503,117) 285,373 1,152,622 Increase (decrease) in operating liabilities: Deposits by other banks 7,156,578 Deposits from customers 38,882, ,045,626 Other liabilities 5,463,057 (7,177,743) Net cash from (used in) operating activities 31,792, ,009,416 (3,823,107) (15,441,529) 44 UCB Annual Report 2012

47 25. COMMITMENTS AND CONTINGENCIES (a) Lease commitments Details of the Bank s future minimum lease payments under non-cancellable operating lease arrangement are as follows: Not later than one year 63, ,082 63, , ,000 1,801, ,000 1,627, ,000 3,307, ,000 1,342,600 5,363,687 1,216,600 4,913,847 (b) Lending commitments Unused portion of overdraft 25,813, ,125,012 75,325,475 Documentary credit 151, ,417 Financing commitments 7,647,424 24,302,536 Unused portion of loans 26,681,383 Bank guarantees 4,364,230 7,205,351 Performance guarantees 2,708,285 13,002,455 Tender bonds 554,338 2,214,580 Warranty bonds 163, ,185 1,562,850 6,312,351 56,472, ,609,236 46,978, ,747,261 (c) Capital commitments Capital commitments 12,000,000 47,940, ,000 1,078,413 UCB Annual Report

48 26. RELATED PARTY TRANSACTIONS AND BALANCES follows: 31 December December 2011 Related party Nature of transaction Net transaction amount Net outstanding balance BoD, shareholders and key management personnel Customer deposits 221, , ,320 3,117,378 1,001,916 4,046,739 Key management personnel Loans 43, ,998 79, , , ,046 members and shareholders Remuneration and 6, , ,000 1,534, ,000 1,526, UCB Annual Report 2012

49 27. FINANCIAL RISK MANAGEMENT inevitable consequence of being in business. manage its risk exposure. recognizes that international best practices on risk management are yet to be implemented. The Board of Directors has established a Credit Committee to formulate broad parameters of acceptable risk for the Bank and monitor the activities against these parameters. Financial assets Cash on hand 24,643, ,213,615 Balances with the NBC 206,460,322 Balances with other banks 57,718,025 Checks discounted 30,588,203 21,844,385 Loans and advances 176,074,608 AFS investments 248, ,812 Other assets 322,246 1,301,552 Total financial assets 323,997,790 1,294,371, ,042, ,727,091 Financial liabilities Deposits by other banks 12,027,430 Deposits from customers 260,000,604 1,038,702, ,427,848 Other liabilities Total financial liabilities 276,056,891 1,102,847, ,236, ,951,471 UCB Annual Report

50 27. FINANCIAL RISK MANAGEMENT (continued) 27.1 Credit risk failing to discharge an obligation. Credit risk is the most important risk for the Bank s business. Credit exposure arises instruments, such as loan commitments. The credit risk management is carried out by the Bank s Credit Committee. (a) Credit risk measurement The Bank assesses the probability of default of individual counterparties in accordance with its credit policy, procedures and practices. Credit Committee is responsible for determining the risk rating policies. (b) Risk limit control and mitigation policies The Bank operates and provides loans and advances to individuals or enterprises within the Kingdom of Cambodia. The The Bank is required, under the conditions of NBC Prakas No. B , to maintain at all times a maximum ratio of large credit exposure must not exceed 300% of the Bank s net worth. The Bank 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 Bank implements 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; and Cash in the form of margin deposits. (c) Impairment and provisioning policies Prakas, as disclosed in Notes and UCB Annual Report 2012

51 27. FINANCIAL RISK MANAGEMENT (continued) 27.1 Credit risk (continued) (d) Maximum exposure to credit risk before collateral held or other credit enhancements Balances with the NBC 206,460,322 Balances with other banks 57,718,025 Checks discounted 30,588,203 21,844,385 Loans and advances 176,074,608 AFS investments 248, ,812 Other assets 322,246 1,301, ,353,922 1,195,918, ,498, ,513,476 The details of credit risk exposure relating to off-balance sheet items are disclosed in Note 25 on Commitments and contingencies. Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Bank s performance to developments affecting a particular industry or geographic location. UCB Annual Report

52 27. FINANCIAL RISK MANAGEMENT (continued) 27.1 Credit risk (continued) (e) Concentration of risks of financial assets with credit risk exposure (continued) The Bank monitors concentration of credit risk of counterparty by industry. An analysis of concentrations of the Bank s credit risk as at the balance sheet date is shown below: Balances with the NBC Balances with other banks Checks discounted 2012 Loans and advances Available-forsale investment Others Total Financial intermediaries - 12,603, , ,565,700 Manufacturing ,402, ,402,108 Retail trade ,661, ,661,828 Others - community, social and personal activities ,834, ,464,178 51,679,680 39,033,716 30,900, ,501, ,678 1,729, ,093,814 Less allowance for losses on loans and advances and checks discounted - - (312,675) (3,427,217) ,679,680 39,033,716 30,588, ,074, ,678 1,729, ,353,922 Equivalent in KHR' ,460, ,939, ,199, ,418, ,469 6,907,500 1,195,918, UCB Annual Report 2012

53 27. FINANCIAL RISK MANAGEMENT (continued) 27.1 Credit risk (continued) (e) Concentration of risks of financial assets with credit risk exposure (continued) Balances with the NBC Balances with other banks Checks discounted 2011 Loans and advances Available-forsale investment Others Total Financial intermediaries - 6,146,268-58,865,456 Manufacturing ,785, ,785,375 Retail trade ,803, ,803,328 Others - community, social and personal activities ,067, , ,401,742 38,212,915 14,290,177 22,067, ,746, , , ,855,901 Less allowance for losses on loans and advances and checks discounted - - (223,125) (2,134,763) - - (2,357,888) 38,212,915 14,290,177 21,844, ,612, , , ,498,013 Equivalent in KHR' ,341,964 57,718,025 88,229, ,049, ,812 1,301, ,513,476 UCB Annual Report

54 27. FINANCIAL RISK MANAGEMENT (continued) 27.1 Credit risk (continued) (f) Loans and advances Loans and advances are summarized as follows: Loans and advances neither past due nor impaired (i) 706,316, ,105,000 Loans and advances past due but not impaired (ii) Loans and advances individually impaired (iii) 2,701,716 Loans and advance - gross 179,501, ,109, ,746, ,671,960 Less: Allowance for losses on loans and advances (3,427,217) (2,134,763) (8,622,308) Loans and advances - net 176,074, ,418, ,612, ,049,652 (i) Loans and advances neither past due nor impaired Loans and advances that are not past due are not considered impaired, unless other information is available to indicate the contrary. (ii) Loans and advances past due but not impaired indicate the contrary. There were no loans and advances that were past due but not impaired as at 31 December UCB Annual Report 2012

55 27. FINANCIAL RISK MANAGEMENT (continued) 27.1 Credit risk (continued) (f) Loans and advances (continued) (iii) Loans and advances individually impaired indicate the contrary. Not past due Past due days 85,000 Past due more than 360 days 2,616,716 10,453, ,000 2,701,716 10,793, ,957 2,592,865 (g) Repossessed collateral During the year, the Bank did not obtain assets by taking possession of collateral held as security Market risk level of volatility of market rates or prices such as interest rates, credit spreads, foreign exchange rates and equity prices. hedge its risk exposure. (i) Foreign exchange risk The Bank operates in the Kingdom of Cambodia and transacts in many currencies, and is exposed to various currency risks, primarily with respect to Khmer Riel,, Euro, THB, and HKD. Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities denominated in a currency that is not the Bank s functional currency. UCB Annual Report

56 27. FINANCIAL RISK MANAGEMENT (continued) 27.2 Market risk (continued) (i) Foreign exchange risk (continued) As at 31 December 2012, balances in monetary assets and liabilities denominated in currencies other than are not (ii) Price risk investments. Quoted equity securities amounted to 0.10 million as at 31 December 2012 (2011: 0.07 million). the balance sheet at fair market value. (iii) Interest rate risk because of changes in market interest rates. Interest margins may increase as a result of changes and may reduce losses in the event that unexpected movements arise. The management of the Bank at this stage does not have a policy to set limits on the level of mismatch of interest rate re-pricing that may be undertaken; however, the management regularly monitors the mismatch. 54 UCB Annual Report 2012

57 27. FINANCIAL RISK MANAGEMENT (continued) 27.3 Liquidity risk when they fall due and to replace funds when they are withdrawn. The consequence of this may be the failure to meet Monitoring and reporting take the form of the daily cash position and projection for the next day, week and month respectively, as these are key periods for liquidity management. Management monitors the movements of the main depositors and projection of their withdrawals. The table in Note 26 is an analysis of the assets and liabilities of the Bank by relevant maturity based on the remaining period at the balance sheet date to the contractual or estimated maturity dates Fair value of financial assets and liabilities Fair value represents the amount at which an asset could be exchanged or a liability settled on an arms-length basis. liabilities included in the balance sheet are a reasonable estimation of their fair values. In making this assessment, the management assumes that loans and advances are mainly held to maturity with fair values equal to the book value of loans adjusted for allowance for loan losses, if any. UCB Annual Report

58 28. LIQUIDITY RISK 2012 Financial assets Up to 1 month >1-3 months >3-6 months >6-12 months >1 to 5 years Over 5 years maturity date Total Cash on hand 24,643, ,643,868 Balances with the NBC 5, ,160,632 - Balances with other banks Checks discounted 6,218, ,588,203 Loans and advances 30,831, ,074,608 AFS investments , ,678 Other assets Total financial assets 138,393,263 19,783,207 25,175,329 59,107,819 47,399,825 32,160,632 1,977, ,997,790 Financial liabilities Deposits by other banks 487, Deposits from customers 27,025,430 32,633,047 41,011, ,000,604 Other liabilities Total financial liabilities 159,817,956 27,025,430 32,633,047 41,011,433 12,019,936-3,549, ,056,891 Net liquidity surplus (gap) (21,424,693) (7,242,223) (7,457,718) 18,096,386 35,379,889 32,160,632 (1,571,374) 47,940,899 Equivalent in (85,591,649) (28,932,681) (29,793,583) 72,295, ,342, ,481,725 (6,277,642) 191,523, UCB Annual Report 2012

59 28. LIQUIDITY RISK (continued) 2011 Financial assets Up to 1 month >1-3 months >3-6 months >6-12 months >1 to 5 years Over 5 years maturity date Total Cash on hand Balances with the NBC Balances with other banks Checks discounted 4,618, ,844,385 Loans and advances 21,385, Available-for-sale investments Other assets , ,246 Total financial assets 79,760,739 38,136,711 29,111,124 42,378,292 29,827,068 25,290, , ,042,607 Financial liabilities Deposits by other banks 6,613, ,744 2,000,000 3,000,000 58,186-12,027,430 Deposits from customers 20,463,167 22,454,667 5,001 Other liabilities Total financial liabilities 80,642,338 20,769,911 24,454,667 36,932,182 4,207,424 5,001 38,225, ,236,809 Net liquidity (gap) surplus (881,599) 17,366,800 4,656,457 5,446,110 25,619,644 25,285,330 (37,686,944) 39,805,798 Equivalent in (3,560,778) 70,144,505 18,807,430 21,996, ,477, ,127,448 (152,217,567) 160,775,619 UCB Annual Report

60 29. SUBSEQUENT EVENTS December EXCHANGE RATES OF AND APPLICABLE FOREIGN CURRENCY AGAINST KHMER RIEL AT YEAR END KHR KHR EUR 5,386 5,231 HK$ THB UCB Annual Report 2012

61 LOCATIONS HEAD OFFICE UCB Bldg #61, 130 Rd, Phsa Chas Quarter, Khan Daun Penh, Phnom Penh, Cambodia Tel: +855 (0) Fax: +855 (0) (0) SWIFT: UCBPKHPP BRANCHES Olympic Branch #73-75, St. 286, Sangkat Olympic, Khan Chamkamon, Phnom Penh, Cambodia Tel: +855 (0) Fax: +855 (0) Preah Sihanouk #195, Vithei Ekreach, Sangkat No. 2, Preah Sihanouk Town, Preah Sihanouk Province, Cambodia Tel: +855 (0) (0) Fax: +855 (0) Siem Reap #Corner of St. Tepvong-OmChhay, Mondul 1 Village, Sangkat Svay Dongkum, Siem Reap Town, Siem Reap Province, Cambodia Tel: +855 (0) (0) Fax: +855 (0) ucbsrb@ucb.com.kh Battambang #100E0, Group 9, Prek Mohatep Village, Sangkat Svay Por, Battambang Town, Battambang Province, Cambodia Tel: +855 (0) (0) Fax: +855 (0) ucbbbb@ucb.com.kh

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64 Providing full professional banking services