UCB. Union Commercial Bank Plc. FINANCIAL STATEMENTS For the year ended 31 December 2016

Transcription

1 Annual 2016 REPORT

2 UCB Union Commercial Bank Plc. FINANCIAL STATEMENTS

3 List of Contents Message from Management Team 1 Company Profile 4 Operational Highlights 6 Corporate Governance 12 Director s Report 15 Independent Auditor s Report 21 Financial Statement 26 Services & Financial Products 101 Contact Information 102

4 Message from Management Team 2016 年是 UCB 克服許多挑戰的一年, 因為要保持長期穩健經營及符合相關法規的因素, 該年我們認列了較多的不良放款提存, 而造成當年度的財務虧損, 我們已經進行組織改造強化風險管理與員工訓練, 在母公司玉山銀行的充分支持下,UCB 股東會 董事會也通過現金增資計畫, 預計將實收資本額提高為 8,000 萬美元, 厚植 UCB 未來發展基礎 2016 is a year that UCB has overcome numerous challenges. For the reason of maintaining a sound long-term operation and being in compliance with related laws and regulations, we have recognized more provision on our non-performing loans that resulted in a financial losses situation in For this, UCB has undertaken a series of organizational structuring which strengthen our risk management capacity and relevant personnel training. Beside, owing to the full support from our parent company, E.SUN Bank, the shareholders meeting and Board of Directors of UCB have approved a capital increase plan which expects to raise UCB s paid-up capital via cash replenishment to the level of USD 80,000,000. We believe this will be an important foundation for UCB s further development 年 UCB 在許多領域仍有優秀表現, 我們的信用卡業務經過 2015 年以來持續精進的過程, 已重新聚焦於高端客群, 無論是服務品質亦或是市場聲量, 都有顯著地提升 在通路營運上,2016 年我們落成了兩家新分行 Stueng Mean Chey 與 Old Stadium 分行 讓我們在金邊地區的服務網絡更加綿密完整, 進一步提升 UCB 的品牌價值 ; 在行舍硬體上, 我們也為現有的西哈努克分行購置新的行舍, 並重新整修暹粒分行 另一方面, 新總行大樓的興建工程進度亦如期推展, 預期在不久的將來 UCB 將以更好 更新的面貌, 帶給顧客更優質的服務體驗 而在 IT 系統方面, 過去一年 UCB 也持續優化自身的銀行核心系統, 在業務數據掌握 作業效率與顧客服務等方面均有長足的進展, 亦為我們的網路銀行及其他資訊服務, 提供更堅強的競爭力基礎 In 2016, UCB still had outstanding performance in many areas. Our credit card business, having experiencing an enhancement process since 2015, has re-focused on the high-end customers. Meanwhile, the service quality and brand reputation of our card business has - 1 -

5 risen significantly as well. As for branch management, in 2016 we have established two new branches Stueng Mean Chey Branch and Old Stadium Branch which make our service network more complete in Phnom Penh area and further escalate UCB s brand value. With regards to our branch buildings, we found a better building for our Sihanouk Branch and renovated our Siem Reap Branch building; on the other hand, our New Head Office Building Project was in progress as we scheduled. We believe, in the near future, UCB will have a much better and newer appearance to provide our valued customers a premium service experience. As for our IT system, UCB has also continued to optimize our core banking system over the past year, with considerable improvement in our database management, operational efficiency, and customer services capacity, and provide a strongly competitive environment for our internet banking business and other information services 年, 在全球經濟展望風險上升 環境複雜度提高的情況下,UCB 將提高風險管理力度, 在組織架構上, 我們將成立風險管理部與授信管理部兩個部門, 並擴增授信審查部的職能, 配合內部控制三道防線機制 ( 業務部門負責管理風險 ; 總行執行控管功能的部門, 包括法遵及風管部門, 負責監控風險 ; 內部稽核完全獨立於業務及監控功能之外 ), 強化 UCB 的風險控管能力與授信資產品質 在放款業務發展與管理上,2017 年我們將進行一連串的組織改造, 將放款產品線以商業貸款與個人消費貸款進行區分, 透過產品線分工的經營模式, 加強我們在金融服務的專業深度與經營能力, 從而優化我們的人才招募與訓練 風險管理與顧客服務流程 In 2017, under the higher risky situation of global economic outlook and a more complicated business environment, UCB will reinforce our risk management intensity. In our organizational structure, we will build up two new departments Risk Management Department and Loan Management Department and expand the duties of existing Credit Assessment Department to strengthen UCB s risk management capacity and asset quality in the framework of Three Lines of Defense of effective internal control, namely, business management departments are in charge of managing risks; departments which are responsible for exercising controlling function in Head Office, including Compliance Department and Risk Management Department, monitor risks; the Internal Audit Department shall be fully independent from day-to-day business and controlling function. For the development and management of lending business, in 2017, we will start a series of organization reformation and re-classify our customers into commercial loans and personal - 2 -

6 loans by their purpose of loan usage. With this management model of product specialization, we can strengthen our professional depth in financial services and business capacity to optimize our personnel recruitment and training, risk management, and customer service processes. 展望未來,UCB 仍秉持打造一家柬埔寨最具特色外資銀行的理念, 積極培育在地人才以 加強自身經營能力 同時, 讓過去的各種當地經驗, 轉化為寶貴的經營智慧 我們期望經過一 連串的改革與努力,2017 年 UCB 的營運將回復穩健,2018 年以後可以享受我們努力的成果 Looking forward to the future, UCB still uphold the idea of establishing a most distinctive foreign bank in Cambodia, and actively cultivate local talents to strengthen our own management capacity. In the same time, we will refine the experiences learnt locally into the precious wisdom in business. We expect, after a series of reforms and efforts, the operation of UCB will return stable in 2017, and then we can enjoy the results of such efforts in

7 UCB Company Profile E.SUN Bank 1992 年, 創辦人黃永仁先生結合志同道合的專業團隊, 在台灣創立以 玉山 為名的銀行, 建立專家領航的制度與優質的企業文化, 齊心打造一家銀行家的銀行 In 1992, E.SUN Bank was founded by Mr. Huang Yung Jen along with several financial elites sharing the same ideals. By naming the Bank after Taiwan s highest peak, with exceptional business culture and profession management, Mr. Huang has made clear their resolve and mission to create a bankers bank. 玉山自創立之初, 就以 建立制度 培育人才 發展資訊 為三大發展支柱, 用心實踐 專業 (Expertise) 服務(Service) 責任(Business) 的經營理念 未來玉山銀行將秉持 誠信正直 清新專業 的核心價值, 除了深耕商業銀行的基礎工程, 亦將持續拓展策略聯盟及審慎 M&A 近年來, 玉山銀行在海外積極佈局, 在東南亞區域如柬埔寨 緬甸 新加坡 越南均設立據點, 希望提供顧客更完整的服務, 成為亞洲有特色的標竿銀行 Under the core values of honesty, integrity, purity, and profession and the vision of expertise, service and business, E.SUN Bank gives priority to establishing systems, cultivating talents, and developing information as the three pillars of sustainable development for E.SUN. In the future, E.SUN will keep strengthening banking business, expanding by strategic alliance and prudent M&A. Through these years, E.SUN Bank actively established subsidiaries or branches in Southeast Asia countries such as Cambodia, Myanmar, Singapore and Vietnam, hoping to provide complete services and become a characteristic benchmark bank in Asia

8 Union Commercial Bank PLC. 聯合商業銀行 (UCB) 由任瑞生勛爵與其他投資人於 1994 年 3 月 31 日創立, 經過 20 年的努力耕耘,UCB 於柬埔寨成為一家知名銀行 2013 年 9 月玉山銀行收購 UCB 70% 股權, 並於 2015 年再次購買 5% 股權 Union Commercial Bank PLC was founded by Oknha Yum Sui Sang and several investors on 31 March After 20 years of efforts, UCB has established itself as a well-known financial institution in Cambodia. In September 2013, E.SUN Bank invested 70% shares of UCB, and acquired additional 5% in 身為玉山銀行的子公司,UCB 秉持母行的核心價值與經營理念, 以 專業 服務 責任 的精神, 提供顧客最優質的服務體驗, 貢獻柬埔寨社會與經濟發展 展望未來,UCB 將持續精進產品 服務與金融創新, 同時發展以人為本的精神, 培育在地人才, 促進各國菁英的交流與合作, 以創造多元價值, 讓 UCB 成為柬埔寨最具特色的外資銀行 As a subsidiary of E.SUN Bank, UCB insists on E.SUN s core values and vision, providing an extraordinary service experience and contributing to Cambodia society. In the future, UCB will keep enhancing financial products, services and innovation and accelerating education and cooperation between multicultural elites for becoming a distinctive foreign bank in Cambodia

9 Operational Highlights 1. EXPANSION PROJECT OUR NEW HEAD OFFICE BUILDING Our new head office building, UCB Tower, is now under construction. The building site is alone with Monivong Blvd. and located at the central area of Phnom Penh City. The Building is designed and contracted by the famous construction company, LBL INTERNATIONAL, and will be completed by the end of UCB Tower will serve as the logistics center for UCB s operation and act as the paragon to provide UCB s premium services for our valued customers. OUR NEW BRACNCHES In 2016, we have opened two new branches Stueng Mean Chey Branch and Old Stadium Branch which expanded our services network in Phnom Penh areas more completely. This will help us provide our valued customers a more convenience and accessible service experiences

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11 THE PROGRESS OF OUR NEW HEAD OFFICE BUILDING Aug-2015 Mobilization Sep-2015 Foundation Dec-2016 Basement Completed Feb th Floor Completed Sep-2017 Façade Installment Dec-2017 Roof Top Completed Mar-2018 Main-Building Completed Q Interior Decoration Q Completion - 8 -

12 OUR IT INFRASTRUCTURE Since it was founded, our Parent Company, E.SUN Bank, has made Establishment of Institutional Systems, Cultivation of Human Resources, and Development of Information Technology the three pillars of its quest for long-term sustainability. Among these, the information system plays the most important role for maintaining a bank s daily business processes and operational efficiency. For this, in the past three years, UCB has renewed the equipment of data center, established the Disaster Recovery (DR Site), and introduced a better core banking system to assist our business development, raise our operational efficiency and further strengthen the risk management

13 2. TRANSNATIONAL PROFESSIONAL TEAM In the past three years, UCB kept actively recruiting numerous potential local talents and professionals. Combining the abundant experiences from Taiwan and Cambodian local wisdom, UCB has built up a transnational professional team that aims to make it the most distinctive foreign bank in Cambodia. Even so, UCB continues strengthening its educational trainings for its staff, from services etiquette to professional knowledge, for providing our valued customers a better service quality and experience. 3. LEADING SERVICES UCB continues to provide premium and leading financial services for our valued customers and create its unique market reputation. In credit card area, currently UCB has ranked the second place on card circulation in Cambodian market and acquires several international awards from VISA and MasterCard. UCB will keep developing our credit card as the most beloved brand for Cambodian affluence. UCB also emphasizes SME and housing loan services that accompany the economic growth of Cambodia

14 4. SOCIAL CONTRIBUTION UCB upholds the idea of sustainable development from our parent company, E.SUN Bank, and enthusiastically concerns the interests of our stakeholders. We make our best effort to make the society better and reveal our love to this mother land by various charity activities. For example, in 2016, we cooperated with E.SUN Bank holding a volunteer service team to help constructing houses for people living in the remote area of Siem Reap, and cooperated with Taiwan s Mackay Memorial Hospital raising a volunteer medical team to perform charity medical services for people living in Phnom Penh remote area

15 Corporate Governance UCB Organizational Structure The chart below details the organizational structure of Union Commercial Bank, PLC. Shareholders Meeting Board of Directors Risk Management Committee Audit Committee Internal Audit Department Compliance Department Accounting Department Branch Management Department Chief Executive Officer (CEO) Card Center Asset Liability Committee Executive Committee Credit Committee CEO Office Corporate Lending Department Credit Assessment Department General Affairs Department Human Resource Department Personal Lending Department IT Department

16 UCB Board of Directors The below table provides details of the members of the UCB Board of Directors: Nº Name Position Date of Appointment Current Share Holding Share Ratio Education 1 Oknha Yum Sui Sang Chairman 30-Aug ,500 20% 2 Mr. Yum Ka Yee Simon Director 30-Aug ,875 5% Bachelor of Management University of Lethbridge 3 Representative from E.SUN Bank Mr. Chen Mao Chin Director 30-Aug-2013 Master of Economics National Taiwan University 4 Representative from E.SUN Bank Ms. Kuo I Yen Director 30-Aug-2013 Master of Economics National Taiwan University 5 Representative from E.SUN Bank Mr. Chen Chia Heng Director 30-Aug-2013 Master of Laws New York University 6 Representative from E.SUN Bank Mr. Chung Chi Kan Director and CEO 30-Aug Ms. Hun Phalin Director 19-Nov Mr. Hou Yang Hsiung Independent Director 30-Aug-2013 Bachelor of Economic Fu Ren University Bachelor of Art Option Chinese Language Beijing Language and Culture University Bachelor of Business Administration, National Taiwan University 9 Mr. Huang Chuan Hsing Independent Director 30-Aug-2013 Doctor Degree of Philosophy Tamkang University UCB s Chairman, CEO, Managers or person responsible for financial and accounting matters, within the past year worked in the CPA firm or its affiliates: No From last fiscal year to the date of this report, the Directors have different opinions and written statement on the resolutions passed by the board: All resolutions are passed and approved by all directors present, no disagreement

17 UCB Audit Committee The below table contains the details of the members of the UCB Audit Committee: Nº Position Name Date of Appointment Education 1 Committee Chairman Mr. Hou Yang Hsiung 16-Dec-2016 Bachelor of Business Administration National Taiwan University 2 Member Oknha Yum Sui Sang 16-Dec Member Mr. Huang Chuan Hsing 16-Dec Member Ms. Kuo I Yen 16-Dec-2016 Doctor Degree of Philosophy Tamkang University Master of Economics National Taiwan University UCB Risk Committee The below table contains the details of the members of the UCB Risk committee: Nº Position Name Date of Appointment Education 1 Committee Chairman Mr. Huang Chuan Hsing 16-Dec-2016 Doctor Degree of Philosophy Tamkang University 2 Member Oknha Yum Sui Sang 16-Dec Member Mr. Chen Mao Chin 16-Dec Member Mr. Chung Chi Kan 16-Dec-2016 Master of Economics National Taiwan University Bachelor of Economic Fu Ren University

18 Directors Report The Board of Directors ( the Directors ) is pleased to submit its report together with the consolidated financial statements of Union Commercial Bank Plc. ("the Bank") and its subsidiary collectively referred to as ( the Group ) and the separate financial statements of the Bank for the year ended 31 December THE BANK The Bank is a commercial bank operating under the supervision of the National Bank of Cambodia ( NBC or the Central Bank ) in accordance with Banking License No. 08 issued by the NBC. The Bank s license was renewed on 28 November 2006 for an indefinite period following Prakas No. B dated 13 September The Bank s main activities are mobilising and receiving short, medium and long term deposits from various organisations and individuals; lending on a short, medium and long term loans and advances to various organisations and individuals; conducting foreign currency

19 transactions; providing international trade finance services; discounting of commercial notes, providing transaction services between customers; and other banking services as approved by the NBC, through its head office and branches in Cambodia. THE SUBSIDIARY URE Land Holding Co., Ltd. ( the Subsidiary ) was incorporated on 25 July The principal activity of the Subsidiary is to hold parcels of land for the Bank s use. FINANCIAL PERFORMANCE The financial performance of the Group and Bank for the year ended 31 December 2016 is set out in the consolidated income statement and the separate income statement on pages 26 and 30 respectively. STATUTORY CAPITAL As at 31 December 2016, the paid-up statutory capital of the Bank is US$37,500,000 (US$1,000 par value per share). There was no change in shares during the year. BAD AND DOUBTFUL LOANS AND ADVANCES Before the financial statements of the Group and of the Bank were drawn up, the Directors took reasonable steps to ascertain that action had been taken in relation to the writing off of bad loans and advances or making of provisions for doubtful loans and advances, and satisfied themselves that all known bad loans and advances had been written off and that adequate provision has been made for bad and doubtful loans and advances\ At the date of this report and based on the best of knowledge, the Directors are not aware of any circumstances which would render the amount written off for bad loans and advances or the amount of the provision for bad and doubtful loans and advances in the financial statements of the Group and of the Bank inadequate to any material extent

20 ASSETS Before the financial statements of the Group and of the Bank were drawn up, the Directors took reasonable steps to ensure that all assets, other than debts which were unlikely to be realised in the ordinary course of business at their values as shown in the accounting records of the Group and of the Bank, have been written down to an amount which they might be expected to realise. At the date of this report and based on the best of knowledge, the Directors are not aware of any circumstances which would render the values attributed to the assets in the financial statements of the Group and of the Bank misleading in any material respect. CONTINGENT AND OTHER LIABILITIES At the date of this report, there is: (a) no charge on the assets of the Group and of the Bank which has arisen since the end of the year which secures the liabilities of any other person, and (b) no contingent liability in respect of the Group and of the Bank that has arisen since the end of the year other than in the ordinary course of the banking business. No contingent or other liability of the Group and of the Bank has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the year which, in the opinion of the Directors, will or may have a material effect on the ability of the Bank and its Subsidiary to meet its obligations as and when they become due. CHANGE OF CIRCUMSTANCES At the date of this report, the Directors are not aware of any circumstances, not otherwise dealt with in this report or the financial statements of the Group and of the Bank, which would render any amount stated in the financial statements misleading in any material respect

21 ITEMS OF AN UNUSUAL NATURE The results of the performance of the Group and of the Bank for the year were not, in the opinion of the Directors, materially affected by any item, transaction or event of a material and unusual nature. There has not arisen in the interval between the end of the year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors, to substantially affect the results of the operations of the Group and of the Bank for the current financial year in which this report is made. THE BOARD OF DIRECTORS The members of the Board of Directors holding office during the year and at the date of this report are: Oknha Yum Sui Sang Mr. Chi-Kan Chung Mr. Yum Ka Yee Simon Mr. Mao-Chin Chen Ms. I-Yen Kuo Mr. Chia-Heng Chen Mr. Yang-Hsiung Hou Mr. Chuan-Hsing Huang Chairman Member Member Member Member Member Member Member Ms. Hun Phalin Member (approved on 5 February 2016)

22 THE DIRECTORS RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS The Directors are responsible for ensuring that the financial statements are properly drawn up so as to present fairly, in all material respects, the financial position of the Group and of the Bank as at 31 December 2016 and the financial performance and cash flows of the Group and of the Bank for the year then ended. In preparing these financial statements, the Directors are required to: i) adopt appropriate accounting policies which are supported by reasonable and prudent judgements and estimates and then apply them consistently; ii) comply with the disclosure requirements of Cambodian Accounting Standards and guidelines of National Bank of Cambodia or, if there have been any departures in the interests of no fair presentation, these have been appropriately disclosed, explained and quantified in the financial statements; iii) maintain adequate accounting records and an effective system of internal controls; iv) prepare the financial statements on a going concern basis unless it is inappropriate to assume that the Group and Bank will continue operations in the foreseeable future; and v) effectively control and direct the Group and the Bank in all material decisions affecting the operations and performance and ascertain that such have been properly reflected in the financial statements. The Directors confirm that the Group and the Bank have complied with the above requirements in preparing the financial statements

23 APPROVAL OF THE FINANCIAL STATEMENTS The accompanying financial statements, together with the notes thereto, which present fairly, in all material respects, the financial position of the Group and of the Bank as at 31 December 2016, and the financial performance and its cash flows of the Group and Bank for the year then ended in accordance with Cambodian Accounting Standards and the guidelines of National Bank of Cambodia, were approved by the Board of Directors. Signed in accordance with a resolution of the Board of Directors

24 Independent Auditor s Report To the shareholders of Union Commercial Bank Plc. Our opinion In our opinion, the consolidated financial statements of Union Commercial Bank Plc. ( the Bank ) and its subsidiary (collectively referred to the Group ) and the separate financial statements of the Bank present fairly, in all material respects, the consolidated and separate financial position of the Group and of the Bank as at 31 December 2016, and its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with Cambodian Accounting Standards and the guidelines of the National Bank of Cambodia. What we have audited The financial statements comprise: Group s consolidated financial statements Consolidated balance sheet as at 31 December 2016; Consolidated income statement for the year then ended; Consolidated statement of changes in equity for the year then ended; Consolidated statement of cash flows for the year then ended; and The notes to the financial statements, which include a summary of significant accounting policies Bank s separate financial statements Separate balance sheet as at 31 December 2016; Separate income statement for the year then ended; Separate statement of changes in equity for the year then ended;

25 Separate statement of cash flows for the year then ended; and The notes to the financial statements, which include a summary of significant accounting policies Basis for opinion We conducted our audit in accordance with Cambodian International Standards on Auditing (CISAs). Our responsibilities under those standards are further described in the Auditor s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group and the Bank in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants ( IESBA Code ) and the requirements of Kampuchea Institute of Certified Public Accountant and Auditors Code of Ethics for Certified Public Accountants and Auditors ( KICPAA Code ). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code and ethical requirements of KICPAA Code. Other information Management is responsible for the other information. The other information comprises appendix notes on requirement of the Central Bank s Prakas but does not include the financial statements and our auditor s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is

26 materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of management and those charged with governance for the financial statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with Cambodian Accounting Standards and the guidelines of the National Bank of Cambodia and, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Group and the Bank s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group and the Bank or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group and the Bank s financial reporting process. Auditor s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with CISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements

27 As part of an audit in accordance with CISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group and the Bank s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group and the Bank s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report. However, future events or conditions may cause the Group and the Bank to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation

28 We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit

29 CONSOLIDATED BALANCE SHEET As at 31 December 2016 Financial Statement CONSOLIDATED BALANCE SHEET Note US$ KHR 000 US$ KHR 000 ASSETS Cash on hand 25,727, ,860,771 37,913, ,548,565 Balances with the Central Bank 4 104,346, ,246, ,338, ,069,694 Balances with banks and other financial institutions 5 40,722, ,398,404 23,747,075 96,175,654 Available-for-sale ("AFS") investments 203, , , ,365 Loans and advances to customers 6 394,054,497 1,590,798, ,119,906 1,741,985,619 Property and equipment 7 25,294, ,112,661 21,281,233 86,188,994 Deferred tax asset ,092,674 16,522, Intangible assets 8 1,324,641 5,347,576 1,484,623 6,012,723 Other assets 9 7,195,197 29,047,009 5,804,902 23,509,853 TOTAL ASSETS 602,961,676 2,434,156, ,895,424 2,733,326,467 LIABILITIES AND EQUITY LIABILITIES Deposits from banks and other financial institutions 10 3,308,630 13,356,939 43,505, ,197,911 Deposits from customers ,671,677 1,548,882, ,206,555 1,750,436,548 Borrowings ,246, ,546, ,629, ,797,450 Subordinated debts 14 29,000, ,073,000 13,000,000 52,650,000 Employee benefit obligations ,476 1,225,133 80, ,000 Current income tax liabilities ,360 1,317,515 2,298,895 9,310,525 Deferred tax liabilities , ,628 Other liabilities 16 13,159,711 53,125,753 9,509,802 38,514,696 TOTAL LIABILITIES 553,016,502 2,232,527, ,387,101 2,455,867,758 SHAREHOLDERS EQUITY Share capital 17 37,500, ,387,500 37,500, ,875,000 Retained earnings (13,319,179) (53,769,526) 5,241,710 21,228,926 Non-distributable reserve 25,622, ,439,131 25,622, ,772,227 AFS reserve 141, , , ,556 TOTAL SHAREHOLDERS EQUITY 49,945, ,628,667 68,508, ,458,709 TOTAL LIABILITIES AND EQUITY 602,961,676 2,434,156, ,895,424 2,733,326,467 The accompanying notes on pages 35 to 100 form an integral part of these financial statements

30 CONSOLIDATED INCOME STATEMENT Note US$ KHR 000 US$ KHR 000 Interest income 18 37,680, ,117,168 35,014, ,808,433 Interest expense 19 (19,909,903) (80,376,278) (17,053,232) (69,065,590) Net interest income 17,770,842 71,740,890 17,961,196 72,742,843 Fee and commission income 20 4,707,404 19,003,790 6,752,959 27,349,484 Fee and commission expense 21 (1,831,973) (7,395,675) (1,373,157) (5,561,286) Net fee and commission income 2,875,431 11,608,115 5,379,802 21,788,198 Other operating income ,043 1,037, ,009 1,741,536 Total operating income 20,903,316 84,386,688 23,771,007 96,272,577 Personnel expenses 23 (5,372,044) (21,686,942) (4,729,897) (19,156,083) Depreciation and amortisation charges 24 (2,180,382) (8,802,202) (1,425,300) (5,772,465) General expenses 25 (4,486,418) (18,111,669) (4,311,748) (17,462,580) Provision for loan losses 6(a) (31,152,053) (125,760,838) (2,601,388) (10,535,621) (Loss)/profit before income tax (22,287,581) (89,974,963) 10,702,674 43,345,828 Income tax expense 12 3,781,153 15,264,515 (2,415,118) (9,781,228) (Loss)/profit for the year (18,506,428) (74,710,448) 8,287,556 33,564,600 Attributable to: Equity holder of the Bank (18,560,889) (74,930,309) 8,176,961 33,116,690 Minority interest 54, , , ,910 (18,506,428) (74,710,448) 8,287,556 33,564,600 The accompanying notes on pages 35 to 100 form an integral part of these financial statements

31 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2015 Share Retained Nondistributable AFS capital earnings reserve reserve Total US$ US$ US$ US$ US$ Balance as at 1 January ,500,000 9,779,969 12,907, ,639 60,304,160 Transfer to reserve - (12,715,220) 12,715, Profit for the year - 8,176, ,176,961 Unrealised gain on AFS investment ,202 27,202 Balance as at 31 December ,500,000 5,241,710 25,622, ,841 68,508,323 In KHR '000 equivalent 151,875,000 21,228, ,772, , ,458,709 Balance as at 1 January ,500,000 5,241,710 25,622, ,841 68,508,323 Loss for the year - (18,560,889) - - (18,560,889) Unrealised loss on AFS investment (2,260) (2,260) Balance as at 31 December ,500,000 (13,319,179) 25,622, ,581 49,945,174 In KHR '000 equivalent 151,387,500 (53,769,526) 103,439, , ,628,667 The accompanying notes on pages 35 to 100 form an integral part of these financial statements

32 CONSOLIDATED CASH FLOW STATEMENT Note US$ KHR'000 US$ KHR'000 Cash flows from operating activities (Loss)/profit before income tax (22,287,581) (89,974,963) 10,702,674 43,345,828 Adjustments for: Depreciation and amortisation charges 24 2,180,382 8,802,202 1,425,300 5,772,465 Net interest income (17,770,842) (71,740,890) (17,961,196) (72,742,843) Provision for loan losses 6(a) 31,152, ,760,838 2,601,388 10,535,621 Employee benefit obligations 267,581 1,080,224 80, ,000 Dividends from AFS investments (1,037) (4,186) (871) (3,528) Loss/(gain) on disposals of property and equipment 618 2,495 (5,134) (20,793) (6,458,826) (26,074,280) (3,157,839) (12,789,250) Changes in working capital Statutory and term deposits with the Central Bank 2,846,674 12,359,360 (26,628,167) (107,844,076) Negotiable certificate of deposits with the Central Bank 8,197,372 33,226,001 (10,246,914) (41,500,002) Loans and advances to customers 4,913,356 25,426,777 (128,717,009) (521,303,886) Other assets (3,296,003) (13,277,504) (259,085) (1,049,294) Deposits from banks and other financial institution (40,197,027) (162,840,972) (2,007,972) (8,132,287) Deposits from customers (48,534,878) (201,553,988) 91,837, ,940,275 Other liabilities 3,022,045 12,199,996 (2,100,983) (8,508,981) Cash (used in)/generated from operations (79,507,287) (320,534,610) (81,280,864) (329,187,501) Employee benefit obligation paid (44,105) (178,052) - - Interest income received 39,586, ,810,511 32,751, ,641,720 Interest expense paid (19,336,468) (78,061,321) (15,116,936) (61,223,591) Income tax paid 12.2 (2,441,248) (9,855,318) (2,123,165) (8,598,818) Cash used in operating activities (61,742,655) (248,818,790) (65,769,923) (266,368,190) Cash flows from investing activities Dividends from AFS investments 1,037 4, ,528 Balances with banks and other financial institutions 11,000,000 44,407,000 9,887,909 40,046,031 Proceeds from disposals of property and equipment , ,057 Purchases of property and equipment 7 (5,752,728) (23,223,763) (8,025,359) (32,502,704) Purchases of intangible assets 8 (281,251) (1,135,410) (1,001,194) (4,054,836) Cash generated from investing activities 4,967,058 20,052, ,241 3,654,076 Cash flows from financing activities Proceeds from borrowings and subordinated debts 33,617, ,172, ,629, ,847,450 Cash generated from financing activities 33,617, ,172, ,629, ,847,450 Net (decrease)/increase in cash and cash equivalents (23,157,949) (94,594,509) 41,761, ,133,336 Cash and cash equivalents at beginning of the year 120,283, ,147,470 78,522, ,977,183 Exchange differences - (457,814) - (1,963,049) Cash and cash equivalents at end of the year 26 97,125, ,095, ,283, ,147,470 The accompanying notes on pages 35 to 100 form an integral part of these financial statements

33 SEPARATE BALANCE SHEET As at 31 December 2016 Note US$ KHR 000 US$ KHR 000 ASSETS Cash on hand 25,727, ,860,771 37,913, ,548,565 Balances with the Central Bank 4 104,346, ,246, ,338, ,069,694 Balances with banks and other financial institutions 5 40,721, ,394,149 23,634,420 95,719,401 Available-for-sale ("AFS") investments 203, , , ,365 Loans and advances to customers 6 394,054,497 1,590,798, ,119,906 1,741,985,619 Investment in subsidiary 490 1, ,985 Property and equipment 7 16,292,745 65,773,812 12,242,773 49,583,231 Deferred tax asset ,084,708 16,489, Intangible assets 8 1,324,641 5,347,576 1,484,623 6,012,723 Other assets 9 6,195,197 25,010,010 5,804,902 23,509,853 TOTAL ASSETS 592,951,697 2,393,746, ,744,799 2,696,266,436 LIABILITIES AND EQUITY LIABILITIES Deposits from banks and other financial institutions 10 3,308,630 13,356,939 43,505, ,197,911 Deposits from customers ,965,059 1,554,103, ,244,396 1,758,689,804 Borrowings ,246, ,102,718 93,629, ,197,450 Subordinated debts 14 29,000, ,073,000 13,000,000 52,650,000 Finance lease liabilities 1,032,187 4,166,939 1,033,495 4,185,654 Employee benefit obligations ,476 1,225,133 80, ,000 Current income tax liabilities ,862 1,149,988 2,242,093 9,080,477 Deferred tax liabilities , ,072 Other liabilities 16 13,172,869 53,178,872 9,600,404 38,881,636 TOTAL LIABILITIES 543,313,731 2,193,357, ,491,359 2,419,840,004 EQUITY Share capital 17 37,500, ,387,500 37,500, ,875,000 Retained earnings (13,626,387) (55,009,724) 4,986,827 20,196,649 Non-distributable reserve 25,622, ,439,131 25,622, ,772,227 AFS reserve 141, , , ,556 TOTAL EQUITY 49,637, ,388,469 68,253, ,426,432 TOTAL LIABILITIES AND EQUITY 592,951,697 2,393,746, ,744,799 2,696,266,436 The accompanying notes on pages 35 to 100 form an integral part of these financial statements

34 SEPARATE INCOME STATEMENT Note US$ KHR 000 US$ KHR 000 Interest income 18 37,591, ,756,506 35,014, ,808,231 Interest expense 19 (19,547,295) (78,912,430) (16,841,011) (68,206,095) Net interest income 18,044,111 72,844,076 18,173,367 73,602,136 Fee and commission income 20 4,707,404 19,003,790 6,752,959 27,349,484 Fee and commission expense 21 (1,831,973) (7,395,675) (1,373,157) (5,561,286) Net fee and commission income 2,875,431 11,608,115 5,379,802 21,788,198 Other operating income ,737 1,294, ,942 1,336,265 Total operating income 21,240,279 85,747,006 23,883,111 96,726,599 Personnel expenses 23 (5,372,044) (21,686,942) (4,729,897) (19,156,083) Depreciation and amortisation charges 24 (2,143,371) (8,652,789) (1,393,118) (5,642,128) General expenses 25 (5,000,852) (20,188,440) (4,739,737) (19,195,935) Provision for doubtful debts 6(a) (31,152,053) (125,760,838) (2,601,388) (10,535,621) (Loss)/profit before income tax (22,428,041) (90,542,003) 10,418,971 42,196,832 Income tax expense 12 3,814,827 15,400,457 (2,357,120) (9,546,336) (Loss)/profit for the year (18,613,214) (75,141,546) 8,061,851 32,650,496 The accompanying notes on pages 35 to 100 form an integral part of these financial statements

35 SEPARATE STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2015 Share capital Retained earnings Nondistributable reserve AFS reserve Total US$ US$ US$ US$ US$ Balance as at 1 January ,500,000 9,640,196 12,907, ,639 60,164,387 Transfer to reserve - (12,715,220) 12,715, Profit for the year - 8,061, ,061,851 Unrealised gain on AFS investment ,202 27,202 Balance as at 31 December ,500,000 4,986,827 25,622, ,841 68,253,440 In KHR '000 equivalent 151,875,000 20,196, ,772, , ,426,432 Balance as at 1 January ,500,000 4,986,827 25,622, ,841 68,253,440 Loss for the year - (18,613,214) - - (18,613,214) Unrealised loss on AFS investment (2,260) (2,260) Balance as at 31 December ,500,000 (13,626,387) 25,622, ,581 49,637,966 In KHR '000 equivalent 151,387,500 (55,009,724) 103,439, , ,388,469 The accompanying notes on pages 35 to 100 form an integral part of these financial statements

36 SEPARATE CASH FLOW STATEMENT Note US$ KHR 000 US$ KHR 000 Cash flows from operating activities Profit before income tax (22,428,041) (90,542,003) 10,418,971 42,196,833 Adjustments for: Depreciation and amortisation charges 24 2,143,371 8,652,789 1,393,118 5,642,128 Net interest income (18,044,111) (72,844,076) (18,173,367) (73,602,136) Provision for loan losses 6(a) 31,152, ,760,838 2,601,388 10,535,621 Employee benefit obligation 267,581 1,080,224 80, ,000 Dividends from AFS investments (1,037) (4,186) (871) (3,528) (Gain)/Loss on disposals of property and equipment 618 2,495 (5,134) (20,793) (6,909,566) (27,893,919) (3,685,895) (14,927,875) Changes in working capital Statutory and term deposits with the Central Bank 2,846,674 12,359,360 (26,628,167) (107,844,076) Negotiable certificate of deposits with the Central 8,197,372 33,226,001 (10,246,914) (41,500,002) Bank Loans and advances to customers 4,913,356 25,426,777 (128,717,009) (521,303,886) Other assets (2,296,003) (9,240,505) (248,934) (1,008,183) Deposits from banks and other financial institutions (40,197,027) (162,840,972) (2,007,972) (8,132,287) Deposits from customers (49,279,337) (204,585,861) 91,195, ,343,488 Other liabilities 2,969,448 11,950,516 (2,027,558) (8,211,610) Cash (used in)/generated from operating activities (79,755,083) (321,598,603) (82,366,526) (333,584,431) Employee benefit obligations paid (44,105) (178,052) - - Interest income received 39,497, ,449,849 32,740, ,600,406 Interest expense paid (18,944,246) (76,477,921) (14,949,083) (60,543,786) Income tax paid 12.2 (2,383,426) (9,621,891) (2,085,993) (8,448,272) Cash used in operating activities (61,629,746) (248,426,618) (66,660,761) (269,976,083)

37 SEPARATE CASH FLOW STATEMENT Note US$ KHR 000 US$ KHR 000 Cash flows from investing activities Dividends from AFS investments 1,037 4, ,528 Balance with banks and other financial institutions 11,000,000 44,602,000 10,000,000 40,500,000 Proceeds from disposals of property and equipment , ,057 Purchases of property and equipment 7 (5,752,728) (23,223,763) (7,185,359) (29,100,704) Purchases of intangible assets 8 (281,251) (1,135,410) (1,001,194) (4,054,836) Cash generated from investing activities 4,967,058 20,247,013 1,854,332 7,510,045 Cash flows from financing activities Proceeds from borrowings 33,617, ,714, ,629, ,847,450 Payments on finance lease liability (1,308) (18,715) (1,195) (4,840) Cash generated from financing activities 33,616, ,695, ,627, ,842,610 Net increase in cash and cash equivalents (23,046,348) (92,483,875) 41,821, ,376,572 Cash and cash equivalents at beginning of the year 120,170, ,691,217 78,349, ,273,377 Exchange differences (2,116,450) - (1,958,732) Cash and cash equivalents at end of the year 26 97,124, ,090, ,170, ,691,217 The accompanying notes on pages 35 to 100 form an integral part of these financial statements

38 1. BACKGROUND INFORMATION Union Commercial Bank Plc. ( the Bank ), established on 31 March 1994, is duly registered with the Ministry of Commerce and was granted a renewal of banking license by the National Bank of Cambodia ( NBC ) on 28 November 2006 for an indefinite period following Prakas No. B , dated 13 September The Bank is a subsidiary of E.SUN Commercial Bank Ltd., incorporated in Taiwan, Republic of China. The ultimate parent is E.SUN Financial Holding Company Ltd., an entity incorporated in Taiwan, Republic of China and listed on Taiwan Stock Exchange. The Bank s main activities are mobilising and receiving short, medium and long term deposits from various organisations and individuals; lending on a short, medium and long term basis to various organisations and individuals based on the nature and ability of the Bank's capital resources; conducting foreign currency transactions; providing international trade finance services, discounting of commercial notes, bonds and valued documents; providing transaction services between customers; and other banking services as approved by the NBC, through the Bank s head office at Phnom Penh and its provincial branchesin Cambodia. URE Land Holding Co., Ltd., the Subsidiary, was incorporated on 25 July 2013 by the Bank and Cambodian individual. The principal activity of the subsidiary is to hold parcels of land for the Bank s use. The Subsidiary has different class of shares. The individuals own Class A shares and the Bank owns Class B shares, representing 51% and 49% interest in the Subsidiary, respectively. Furthermore, the right to appoint members of the Board of Directors ( BOD ) was granted only to holders of Class B shares. The Bank has assessed that they maintain a control over the Subsidiary and therefore prepared these consolidated financial statements. The head office of the Bank is located at No. 61, Street 130, Phnom Penh, the Kingdom of Cambodia. The Bank also has twelves branches located in various cities and provinces. The financial statements were authorised for issue by the Board of Directors on 17 February

39 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies adopted in the preparation of the financial statements are set out below. 2.1 Basis of preparation The financial statements of the Group and of the Bank have been prepared using the historical cost convention as modified by valuation of available for sales investments and in accordance with Cambodian Accounting Standards ( CAS ) and the guidelines of Central Bank. In applying CAS, the Group and the Bank also apply the Cambodian International Financial Reporting Standard ( CIFRS ) 7: Financial Instruments: Disclosures. The accounting principles applied may differ from generally accepted accounting principles adopted in other countries and jurisdictions. The accompanying financial statements are therefore not intended to present the financial position and results of operations and cash flows in accordance with jurisdictions other than Cambodia. Consequently, these financial statements are addressed to only those who are informed about Cambodian accounting principles, procedures and practices. The preparation of financial statements in accordance with the Cambodian Accounting Standards ( CAS ) and the guidelines of Central Bank requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management s best knowledge of current events and actions, actual results ultimately may differ from those estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 3 to the financial statements. 2.2 New financial reporting framework On 28 August 2009, the National Accounting Council of the Ministry of Economy and Finance (NAC) announced the adoption of Cambodian International Financial Reporting Standards ( CIFRS ) which are based on all standards published by the International Accounting Standard Board ( IASB ), including the related interpretations and amendments. Public accountable entities are required to prepare their financial statements in accordance with CIFRS for accounting period beginning on or after 1 January Circular 058 MoEF.NAC dated 24 March 2016 issued by the National Accounting Council of the Ministry of Economy and Finance allowed banks and financial institutions to delay adoption of CIFRS until periods beginning on or after 1 January CAS, the current accounting standard used, is different to CIFRS in many areas. Hence, the adoption of CIFRS will have some impacts on the separate financial statements of the Bank

40 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.3 Basis of consolidation The consolidated financial statements include the financial statements of the Bank and its subsidiary made up to the end of the financial year. A subsidiary is a company in which the Group has power to exercise control over the financial and operating policies of an enterprise so as to obtain benefits from its activities. Subsidiary is consolidated using the acquisition method of accounting. Under the acquisition method of accounting, the results of the subsidiary during the period are included from the date of acquisition or up to the date of disposal. At the date of acquisition, the fair values of the subsidiary s net assets are determined and these values are reflected in the consolidated financial statements. Inter-company transactions, balances and unrealised gain or loss arising from intercompany transactions are eliminated and the consolidated financial statements reflect external transactions only. Losses resulting from intra-group transactions, which indicate an impairment loss, will be recognised in the consolidated financial statements. Consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances. The gain or loss on disposal of a subsidiary, which is the difference between net disposal proceeds and the Group s share of its net assets as of the date of disposal is recognised in the consolidated income statement. Minority interest represents the portion of profit or loss and the net assets of the subsidiary not owned, directly or indirectly, by the Bank. Minority interests are presented separately in the consolidated income statement, and within equity in the consolidated balance sheet, separately from equity attributable to equity holders of the Bank. Where the minority interest is assessed to be that of a liability it is presented under the Liability section in the consolidated balance sheet. Any losses applicable to the minority interests are allocated against the interests of the minority interest even if this results in the minority interest having a deficit balance. 2.4 Investment in subsidiary Investment in subsidiary, which is eliminated on consolidation, is stated at cost. On disposal of such investment, the difference between the net disposal proceeds and its carrying amounts is recognised as the gain or loss on disposal in the income statement of the Bank

41 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.5 Foreign currencies (i) Functional and presentation currency Items included in the financial statements of the Group and Bank are measured using the currency of the primary economic environment in which the Bank operates ( the functional currency ). The financial statements are presented in US$, which is the Bank s functional and presentation currency. (ii) Transactions and balances Transactions in currencies other than US$, the functional and presentation currency, are translated into US$ at the exchange rates prevailing at the dates of transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary and liabilities denominated in currencies other than US$, are recognised in the income statement. (iii) Presentation in Khmer Riel For the sole regulatory purpose of complying with the Prakas No. B dated 13 December 2007 of the Central Bank, a translation to Khmer Riel ( KHR ) is provided for the balance sheet, the income statement, the statement of changes in shareholders equity, the cash flow statement and notes to the financial statements as of and for the year ended 31 December 2015 using the official rate of exchange published by the Central Bank as at the reporting date. US Dollars ( US$ ) 4,037 4,050 Such translation amounts are unaudited and should not be construed as representations that the US$ amounts represent, or have been or could be, converted into KHR at that or any other rate. 2.6 Cash and cash equivalents For the purpose of the cash flow statement, cash and cash equivalents comprise balances with original maturity of three months or less from the date of acquisition, including cash on hand, the non-restricted balance with the Central Bank and balances with banks and other financial institutions

42 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.7 Loans and advances to customers All loans and advances to customers are stated on the balance sheet at outstanding principal, less any amounts written off, interest-in-suspense and provision for loan losses. Loans and advances are written off when there are no realistic prospects of recovery. Recoveries of loans and advances previously written off or provided for are recognised in the income statement. 2.8 Provision for loan losses The Bank follows the mandatory credit classification and provisioning as required by Prakas B , dated 25 February 2009 issued by the Central Bank. The Prakas requires commercial banks to classify their loans, advances and similar assets into five classes and the minimum mandatory level of specific provisioning is provided, depending on the classification concerned and regardless of the assets pledged as collateral as follows: Classification General provision Specific provision 2.9 Other credit related commitments Rate of provision Normal 1% Special mention 3% Substandard 20% Doubtful 50% Loss 100% In the normal course of business, the Bank enters into other credit related commitments including loan commitments, letters of credit and guarantees. Specific provisions are raised against other credit related commitments when losses are considered probable

43 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.10 Property and equipment Property and equipment are stated at cost less accumulated depreciation and impairment loss. Historical cost includes expenditure that is directly attributable to the acquisition of the assets. Subsequent expenditure relating to an item of property and equipment are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that the future economic benefits associated with the item will flow to the Group and the Bank and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the period in which they are incurred. Depreciation of property and equipment is charged to the income statement on a straight-line basis over the estimated useful lives of the individual assets at the following annual rates: Years Buildings 20 Leasehold improvements 10 Office equipment 4 Furniture, fixtures and fittings 4 Computer equipment 4 Motor vehicles Property and equipment An asset s carrying amount is written down immediately to its recoverable amount if the asset s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the income statement. Work-in-progress is stated at cost less impairment losses if any, and represents the infrastructure and improvements under construction. The cost of completed construction work will be transferred to the appropriate category of property and equipment. Depreciation commences when the relevant assets are available for use Intangible assets Intangible assets, which comprise acquired computer software licenses and related costs, are stated at cost less accumulated amortisation and impairment loss. Acquired computer software licenses are capitalised on the basis of the cost incurred to acquire the specific software and bring it to use. These costs are amortised over four years using the straight-line method. Costs associated with maintaining computer software are recognised as expenses when incurred

44 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.12 Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and its value in use. Any impairment loss is charged to the income statement in the year in which it arises. Reversal of an impairment loss is recognised in the income statement to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation and amortisation, had no impairment loss been recognised Available-for-sale ( AFS ) investments This classification includes investment securities which the Bank intends to hold for an indefinite period of time and which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity price. After initial measurement which is at cost, AFS investments are subsequently measured at fair value. Unrealised gains or losses are recognised directly in equity in the AFS reserve. When the security is disposed of, the cumulative gain or loss previously recognised in equity is recognised in the income statement as other operating income or expense. Dividends earned while holding AFS investments are recognised 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 recognised in the income statement and removed from the AFS reserve. The fair value of AFS traded in the active markets at the balance sheet date is based on their quoted market price or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs Related party transactions Parties are considered to be related if one party 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 where the Bank and the other 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. In accordance with the Law on Banking and Financial Institutions, related parties are defined as parties who hold, directly or indirectly, at least 10% of the capital of the Bank or voting rights and include any individual who participates in the administration, direction, management or internal control of the Bank

45 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.15 Interest income and expense Interest earned on loans and advances to customers, balances with the Central Bank and balances with other banks and financial institutions is recognised on an accrual basis, except where serious doubt exists as to the collectability, in which case, interest is suspended until it is realised on a cash basis. Interest expense on deposits from other banks and financial institutions and customers is recognised on an accrual basis Fee and commission income Fees and commissions are generally recognised on an accrual basis when the service is provided. Loan processing fees are recognised as income when loan is disbursed Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. Leases of property and equipment where the Group or the Bank has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in other long term payables. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term

46 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.18 Provisions Provisions are recognised when the Group and the Bank has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. When there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as interest expense Employee benefits i) Retirement benefits The Bank provides its employees with retirement benefit at 6% of each employee s aggregated salary from the date of their employment with the Bank upon early/voluntary retirement of 55 years or retirement age of 60 years or when he or she is unable to perform their duties due to mental disorder or physical disability. No separate fund is maintained for the retirement benefits. ii) Short-term employee benefits Short term employee benefits are accrued in the period in which the associated services are rendered by the employees of the Group and the Bank Subordinated debts Subordinated debts are treated as financial liabilities when there are contractual obligations to deliver cash or financial assets to the other entity or to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the Bank, if otherwise, it is treated as equity. The subordinated debts which are approved by the Central Bank are included as a Tier II line item in the calculation of the Bank s net worth in accordance with the guidelines of the Central Bank

47 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.21 Deferred and income taxes The current income tax charge is calculated on the basis of the tax law enacted or substantively enacted at the reporting date in country where the Bank operates and generates taxable income. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates expected to be applied to temporary differences when they reverse, based on laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to income taxes levied by the same tax authority on the same taxable entity. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised

48 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The Group and the Bank make estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. (a) Impairment losses on loans and advances The Bank follows the mandatory credit classification and provisioning as required by Prakas No. B dated 25 February 2009 on asset classification and provisioning in banking and financial institutions issued by the Central Bank. The Central Bank requires commercial banks to classify their loans, advances and similar assets into five classes and the minimum mandatory level of provisioning is provided, depending on the classification concerned and regardless of the assets pledged as collateral. For the purpose of loan classification, the Bank takes into account all relevant factors which may affect the counterparties repayment abilities. (b) Taxes Taxes are calculated on the basis of the current interpretation of the tax regulations. However, these regulations are subject to periodic variation and the ultimate determination of tax expenses will be made following inspection by the General Department of Taxation. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will have an impact on the provision for income tax and deferred tax in the period in which such determination is made. (c) Employee benefit obligation The Bank provides its employees with retirement benefit at 6% of each employee s aggregated salary from the date of their employment with the Bank upon early/voluntary retirement of 55 years or retirement age of 60 years or when he or she is unable to perform their duties due to mental disorder or physical disability. The present value of the employee benefit obligation depends on a number of factors that are determined by management using a number of assumptions such as salary growth rates and turnover rates, discount rate. Any changes in these assumptions will impact the value of employee benefit obligation. The management believes that the amount is reasonable and represents its obligation at 31 December

49 4. BALANCES WITH THE CENTRAL BANK Group and Bank US$ KHR 000 US$ KHR 000 Current account 34,675, ,983,972 73,623, ,173,251 Reserve deposit 63,871, ,849,581 66,718, ,208,941 Statutory deposit 3,750,000 15,138,750 3,750,000 15,187,500 Negotiable certificate of deposit 2,049,542 8,274,001 10,246,914 41,500, ,346, ,246, ,338, ,069,694 (a) Reserve deposit The reserve deposit represents the minimum reserve which is calculated at 8% (2015: 8%) and 12.5% (2015: 12.5%) of customers deposits in Khmer Riel ( KHR ) and other currencies respectively. The 4.5% (2015: 4.5%) reserve deposit on customers deposits in currencies other than KHR is interest bearing while the remaining 8% and the reserve deposit in KHR bear no interest. (b) Statutory deposit Pursuant to Prakas No. B on Bank s Capital Guarantee dated 15 October 2001 issued by the Central Bank, banking and financial institutions are required to maintain 10% of its paid-up capital as a statutory deposit with the Central Bank. The deposit, which is not available for use in the Bank s day-to-day operations, is refundable should the Bank voluntarily cease its operations in Cambodia. (c) Negotiable certificate of deposit The Bank pledged negotiable certificate of deposit (NCD) amounting to US$2,049,542 with the Central Bank as collateral for settlement clearing facility. The term of the NCD is for a period of three months. As at 31 December 2016, the Bank has yet utilised the overdraft facility. (d) Interest rates The current accounts are non-interest bearing. The statutory and reserve requirement deposits earn interest at the following annual rates as at the balance sheet date: Reserve deposit 0.21% % 0.08% % Statutory deposit N/A 0.11% % Term deposit 0.20% % 0.11% - 1% Negotiable certificate of deposit 0.49% % 0.62%

50 5. BALANCES WITH BANKS AND OTHER FINANCIAL INSTITUTIONS Group US$ KHR 000 US$ KHR 000 Local banks Current accounts 239, , , ,245 Savings accounts 1,067 4, , ,510 Term deposits 4,000,000 16,148,000 15,000,000 60,749,999 Overseas banks Current accounts 30,290, ,284,090 6,718,826 27,211,245 Savings accounts 6,191,326 24,994,383 1,695,470 6,866,655 40,722, ,398,404 23,747,075 96,175,654 Bank US$ KHR 000 US$ KHR 000 Local banks Current accounts 239, , , ,245 Savings accounts ,545 6,257 Term deposits 4,000,000 16,148,000 15,000,000 60,750,000 Overseas banks Current accounts 30,290, ,284,090 6,718,826 27,211,245 Savings accounts 6,191,326 24,994,383 1,695,470 6,866,654 40,721, ,394,149 23,634,420 95,719,

51 6. LOANS AND ADVANCES TO CUSTOMERS a) Analysis by type of loans Commercial Loans US$ KHR 000 US$ KHR 000 Term loans 71,842, ,027,183 88,272, ,505,350 Overdraft loans 26,117, ,435,068 32,160, ,249,397 Trust receipts 2,135,573 8,621,308 2,475,040 10,023,912 Bill receivable ,457 3,812,901 Other commercial loans 9,495,473 38,333,225 21,288,819 86,219,717 Consumer Loans - Term loans 39,578, ,780,225 30,400, ,120,126 Overdraft loans 61,201, ,070,871 76,022, ,891,380 Credit card facilities 4,091,446 16,517,168 5,027,008 20,359,382 Other consumer loans 218,475, ,986, ,327, ,376, ,938,278 1,747,771, ,915,796 1,773,558,974 Allowance for bad and doubtful loans Specific provision (35,281,582) (142,431,747) (3,924,577) (15,894,537) General provision (3,602,199) (14,542,077) (3,853,679) (15,607,400) (38,883,781) (156,973,824) (7,778,256) (31,501,937) Unamortised loan fees - - (17,634) (71,418) 394,054,497 1,590,798, ,119,906 1,741,985,619 Movement of allowance for bad and doubtful loans is analysed as follows: US$ KHR 000 US$ KHR 000 Balance at beginning of year 7,778,256 31,501,937 5,233,183 21,325,220 Provision during the year 31,152, ,760,838 2,601,388 10,535,621 Amounts written off (46,528) (187,833) (56,315) (228,076) Currency translation differences - (101,118) - (130,828) Balance at end of the year 38,883, ,973,824 7,778,256 31,501,

52 6. LOANS AND ADVANCES TO CUSTOMERS (continued) b) Analysis by security on performing and non-performing loans US$ KHR 000 US$ KHR 000 Normal loans Secured 329,953,511 1,332,022, ,835,570 1,449,234,058 Unsecured 30,270, ,200,543 25,913, ,948,606 Special mention loans - Secured 8,464,055 34,169,390 51,133, ,092,587 Unsecured 307,914 1,243, , ,691 Substandard loans - Secured 18,977,495 76,612, ,423 2,820,513 Unsecured 39, ,793 6,225 25,211 Doubtful loans - Secured 27,197, ,794, ,911 1,846,440 Unsecured 115, ,999 91, ,020 Loss loans - Secured loans 13,859,770 55,951,891 1,655,765 6,705,848 Unsecured loans 3,753,354 15,152, ,938,278 1,747,771, ,915,796 1,773,558,974 c) By exposure US$ KHR 000 US$ KHR 000 Large exposure 64,612, ,839,464 61,281, ,190,484 Non-large exposure 368,326,075 1,486,932, ,634,195 1,525,368, ,938,278 1,747,771, ,915,796 1,773,558,974 Large exposure is defined by the Central Bank as overall credit exposure to any single beneficiary that exceeds 10% of the Bank s net worth. The exposure is the higher of the outstanding loans or commitments and the authorised loans or commitments

53 6. LOANS AND ADVANCES TO CUSTOMERS (continued) d) Relationship analysis US$ KHR 000 US$ KHR 000 Related parties 297,998 1,203, ,898 1,271,287 Non-related parties 432,640,280 1,746,568, ,601,898 1,772,287, ,938,278 1,747,771, ,915,796 1,773,558,974 e) Interest rates These loans and advance earn interest at annual rate ranging from: Staff loans 2.75% % 4.98% % Loans to external customers 6.77% % 6.77% %

54 7. PROPERTY AND EQUIPMENT Group As at 31 December 2015 Cost Work in progress Freehold land Buildings Building improvements Office equipment Motor vehicles IT equipment and computers US$ US$ US$ US$ US$ US$ US$ US$ As at 1 January ,028,571 7,830,050 2,377, , ,410 1,551,122 1,506,286 18,201,655 Additions 5,631, , , , , , ,602 8,025,359 Transfers (2,649,346) - - 1,989, , ,799 - Disposals (5,746) (159,140) - (164,886) As at 31 December ,010,506 8,468,570 2,579,351 3,395,135 1,643,186 1,589,693 2,375,687 26,062,128 Accumulated depreciation As at 1 January , , , , ,271 3,695,794 Depreciation charge , , , , ,070 1,209,403 Disposals (5,212) (119,090) - (124,302) As at 31 December ,064, , ,225 1,091,764 1,025,341 4,780,895 Total Net book value As at 31 December ,010,506 8,468,570 1,515,129 2,621, , ,929 1,350,346 21,281,233 In KHR 000 equivalent 24,342,549 34,297,709 6,136,273 10,618,258 3,308,692 2,016,612 5,468,901 86,188,994

55 7. PROPERTY AND EQUIPMENT (continued) Group As at 31 December 2016 Work in progress Freehold land Buildings Building improvements Office equipment Motor vehicles IT equipment and computers US$ US$ US$ US$ US$ US$ US$ US$ Cost As at 1 January ,010,506 8,468,570 2,579,351 3,395,135 1,643,186 1,589,693 2,375,687 26,062,128 Additions 5,248, , , ,419 55,041 5,752,728 Disposals (26,934) - (1,935) (28,869) Transfers (1,691,133) - - 1,340, ,133-48,505 - As at 31 December ,568,059 8,468,570 2,579,351 4,747,767 2,202,830 1,742,112 2,477,298 31,785,987 Accumulated depreciation As at 1 January ,064, , ,225 1,091,764 1,025,341 4,780,895 Depreciation charge , , , , ,847 1,739,149 Disposals (26,577) - (1,674) (28,251) As at 31 December ,376,084 1,167,130 1,143,516 1,317,549 1,487,514 6,491,793 Total Net book value As at 31 December ,568,059 8,468,570 1,203,267 3,580,637 1,059, , ,784 25,294,194 In KHR 000 equivalent 38,626,254 34,187,617 4,857,589 14,455,032 4,276,450 1,713,961 3,995, ,112,661

56 7. PROPERTY AND EQUIPMENT (continued) Cost Bank Work in progress Freehold land Buildings Building improvements Office equipment Motor vehicles IT equipment and computers US$ US$ US$ US$ US$ US$ US$ US$ As at 1 January ,028,571-1,517, , ,410 1,551,122 1,506,286 9,510,824 Additions 5,631, , , , ,602 7,185,359 Transfers (2,649,346) - - 1,989, , ,799 - Disposals (5,746) (159,140) - (164,886) As at 31 December ,010,506-1,517,090 3,395,135 1,643,186 1,589,693 2,375,687 16,531,297 Total Accumulated depreciation As at 1 January , , , , ,271 3,235,605 Depreciation charge , , , , ,070 1,177,221 Disposals (5,212) (119,090) - (124,302) As at 31 December , , ,225 1,091,766 1,025,341 4,288,524 Net book value As at 31 December ,010, ,241 2,621, , ,927 1,350,346 12,242,773 In KHR 000 equivalent 24,342,549-3,828,226 10,618,258 3,308,692 2,016,604 5,468,902 49,583,231

57 7. PROPERTY AND EQUIPMENT (continued) Cost Bank Work in Progress Freehold land Buildings Building improvements Office equipment Motor vehicles IT equipment and computers US$ US$ US$ US$ US$ US$ US$ US$ As at 1 January ,010,506-1,517,090 3,395,135 1,643,186 1,589,693 2,375,687 16,531,297 Additions 5,248, , , ,419 55,041 5,752,728 Transfers (26,934) - (1,935) (28,869) Disposals (1,691,133) - - 1,340, ,133-48,505 - As at 31 December ,568,059-1,517,090 4,747,767 2,202,830 1,742,112 2,477,298 22,255,156 Total Accumulated depreciation As at 1 January , , ,225 1,091,766 1,025,341 4,288,524 Depreciation charge , , , , ,847 1,702,138 Disposals (26,577) (1,674) (28,251) As at 31 December ,700 1,167,130 1,143,516 1,317,551 1,487,514 5,962,411 Net book value As at 31 December ,568, ,390 3,580,637 1,059, , ,784 16,292,745 In KHR 000 equivalent 38,626,254-2,706,364 14,455,032 4,276,451 1,713,953 3,995,758 65,773,812

58 8. INTANGIBLE ASSETS Cost Group and Bank Computer software Work in progress- Core banking system Total US$ US$ US$ As at 1 January ,042, ,560 1,555,084 Additions 1,001,194-1,001,194 Transfers 512,560 (512,560) - As at 31 December ,556,278-2,556,278 Accumulated amortisation As at 1 January , ,758 Amortisation charge 215, ,897 As at 31 December ,071,655-1,071,655 Net book value As at 31 December ,484,623-1,484,623 In KHR 000 equivalent 6,012,723-6,012,723 Cost As at 1 January ,556,278-2,556,278 Additions 281, ,251 Transfers As at 31 December ,837,529-2,837,529 Accumulated amortisation As at 1 January ,071,655-1,071,655 Amortisation charge 441, ,233 As at 31 December ,512,888-1,512,888 Net book value As at 31 December ,324,641-1,324,641 In KHR 000 equivalent 5,347,576-5,347,

59 9. OTHER ASSETS Group US$ KHR 000 US$ KHR 000 Accrued interest receivable 6,748,190 27,242,443 3,783,843 15,324,564 Allowance for interest receivable (5,038,259) (20,339,452) (168,204) (681,226) Net interest receivable 1,709,931 6,902,991 3,615,639 14,643,338 Prepayments and deposits 4,072,757 16,441,720 1,592,269 6,448,689 Other investments 150, , , ,500 Other assets 1,262,509 5,096, ,994 1,810,326 5,485,266 22,144,018 2,189,263 8,866,515 7,195,197 29,047,009 5,804,902 23,509,853 Bank US$ KHR 000 US$ KHR 000 Accrued interest receivable 6,748,190 27,242,443 3,783,843 15,324,564 Allowance for interest receivable (5,038,259) (20,339,452) (168,204) (681,226) Net interest receivable 1,709,931 6,902,991 3,615,639 14,643,338 Prepayments and deposits 4,072,757 16,441,720 1,592,269 6,448,689 Other investments 150, , , ,500 Other assets 262,509 1,059, ,994 1,810,326 4,485,266 18,107,019 2,189,263 8,866,515 6,195,197 25,010,010 5,804,902 23,509,

60 10. DEPOSITS FROM BANKS AND OTHER FINANCIAL INSTITUTIONS Group and Bank US$ KHR 000 US$ KHR 000 Current accounts 964,206 3,892, ,581 1,225,454 Savings accounts 1,639,240 6,617, ,587 2,124,577 Term deposits 705,184 2,846,827 42,678, ,847,880 3,308,630 13,356,939 43,505, ,197,911 As at the balance sheet date, deposits from banks and other financial institutions bear interest at the following rates per annum: Current accounts Nil Nil Savings accounts 1.00% 1.00% Term deposits 1.50% % 2.58% % 11. DEPOSITS FROM CUSTOMERS Group US$ KHR 000 US$ KHR 000 Current accounts 30,476, ,032,226 36,041, ,969,865 Savings accounts 94,982, ,442,790 70,190, ,270,978 Term deposits 253,113,412 1,021,818, ,167,980 1,304,780,320 Margin and guarantee deposits 5,100,000 20,588,700 3,806,268 15,415, ,671,677 1,548,882, ,206,555 1,750,436,548 Bank Current accounts 31,769, ,253,609 36,270, ,896,344 Savings accounts 94,982, ,442,790 70,190, ,270,978 Term deposits 253,113,412 1,021,818, ,977,061 1,312,107,097 Margin and guarantee deposits 5,100,000 20,588,700 3,806,268 15,415, ,965,059 1,554,103, ,244,396 1,758,689,804 As at the balance sheet date, deposits from customers bear interest at the following rates per annum: Current accounts Nil Nil Savings deposits 1.00% 1.00% Term deposits 1.50% % 2.58% %

61 12. INCOME TAX EXPENSE 12.1 Income tax expense Group Current tax US$ KHR 000 US$ KHR 000 Current tax on profit for the period 473,972 1,913,426 2,294,432 9,292,449 Adjustment in respect of prior year (5,259) (21,231) - - Total current tax 468,713 1,892,195 2,294,432 9,292,449 Deferred tax (4,249,866) (17,156,709) 120, ,779 Income tax expense (3,781,153) (15,264,514) 2,415,118 9,781,228 Bank US$ KHR 000 US$ KHR 000 Current tax Current tax on profit for the year 426,195 1,720,549 2,236,434 9,057,557 Total current tax 426,195 1,720,549 2,236,434 9,057,557 Deferred tax (4,241,022) (17,121,006) 120, ,779 Income tax expense (3,814,827) (15,400,457) 2,357,120 9,546,336 In accordance with the Cambodian tax laws, the Bank has an obligation to pay corporate income tax of either tax on profit at a rate of 20% on taxable profit or 1% minimum tax, whichever is higher. The reconciliation of income tax computed at the statutory tax rate of 20% to taxation as disclosed in the income statement is as follows:

62 12. INCOME TAX EXPENSE(continued) 12.1 Income tax expense(continued) Group US$ KHR 000 US$ KHR 000 Accounting (loss)/profit before income tax (22,287,581) (89,974,963) 10,702,674 43,345,830 Tax calculated at 20% (4,457,517) (17,994,996) 2,140,535 8,669,167 Expenses not deductible for tax purposes 255,428 1,031, ,583 1,112,061 Tax on Profit at 20% (4,202,089) (16,963,833) 2,415,118 9,781,228 Adjustment in the respect of prior year (5,259) (21,231) - - Minimum tax for the year 426,195 1,720, Income tax expense (3,781,153) (15,264,515) 2,415,118 9,781,228 Bank US$ KHR 000 US$ KHR 000 Accounting (loss)/profit before income tax (22,428,041) (90,542,003) 10,418,971 42,196,833 Tax calculated at 20% (4,485,609) (18,108,404) 2,083,794 8,439,366 Tax effects in respect of: Expenses not deductible for tax purposes 244, , ,326 1,106,970 Tax on Profit at 20% (4,241,022) (17,121,006) 2,357,120 9,546,336 Minimum tax for the year 426,195 1,720, Income tax expense (3,814,827) (15,400,457) 2,357,120 9,546,

63 12. INCOME TAX EXPENSE(continued) 12.2 Income tax payable Group US$ KHR 000 US$ KHR 000 Balance at the beginning of year 2,298,895 9,310,525 2,127,628 8,670,084 Current income tax expense 468,713 1,892,194 2,294,432 9,292,450 Payments for income tax during the year (2,441,248) (9,855,318) (2,123,165) (8,598,818) Currency translation difference - (29,886) - (53,191) Balance at the end of year 326,360 1,317,515 2,298,895 9,310,525 Bank US$ KHR 000 US$ KHR 000 Balance at the beginning of year 2,242,093 9,080,477 2,091,652 8,523,482 Current income tax expense 426,195 1,720,549 2,236,434 9,057,557 Payments for income tax during the year (2,383,426) (9,621,891) (2,085,993) (8,448,272) Currency translation difference - (29,147) - (52,290) Balance at the end of year 284,862 1,149,988 2,242,093 9,080, Deferred tax asset/(liabilities) Group The movement of the net deferred tax assets/(liabilities) is as follow: US$ KHR 000 US$ KHR 000 Balance at the beginning of year (157,192) (636,628) (36,506) (148,762) Charge to the income statement 4,249,866 17,156,709 (120,686) (488,779) Currency translation difference - 2, Balance at the end of year 4,092,674 16,522,125 (157,192) (636,628)

64 12. INCOME TAX EXPENSE (continued) 12.3 Deferred tax asset/(liabilities) (continued) Group The movement in deferred income tax assets/(liabilities) during the period is as follows: Accelerated depreciation and amortization Unrealised gain on availablefor-sale investment Provision for employee benefit Unrealised foreign exchange gain - net Unearned income Revaluation gain on land and building Provision for tax loss Nondeductible interest expense Provision for loan (1% and 3%) Total US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ At 01 January 2015 (8,818) (28,876) - (9,681) 10, (36,506) Charged to income statement (128,592) (6,906) 16,000 9,681 (10,779) (90) (120,686) At 31 December 2015 (137,410) (35,782) 16, (157,192) Equivalent in KHR 000 (556,511) (144,917) 64, (636,628) At 01 January 2016 (137,410) (35,782) 16, (157,192) Charged to income statement 14, , ,409,502 6, ,441 4,249,866 At 31 December 2016 (122,615) (35,226) 60, ,409,502 6, ,441 4,092,674 Equivalent in KHR 000 (496,591) (142,665) 245, ,808,483 27,852 3,132,436 16,575,330

65 12. INCOME TAX EXPENSE (continued) 12.3 Deferred tax asset/(liabilities) Bank The movement of the net deferred tax assets is as follow: US$ KHR 000 US$ KHR 000 Balance at the beginning of year (156,314) (633,072) (35,628) (145,184) Charge to the separate income statement 4,241,022 17,121,006 (120,686) (488,779) Currency translation difference - 2, Balance at the end of year 4,084,708 16,489,966 (156,314) (633,072)

66 12. INCOME TAX EXPENSE (continued) 12.3 Deferred tax asset/(liabilities) (continued) Bank The movement in deferred income tax assets/(liabilities) during the period is as follows: Accelerated depreciation and amortization Unrealised gain on available-forsale investment Provision for employee benefit Unrealised foreign exchange gain - net Unearned income Revaluation gain on land and building Provision for tax loss Provision for loan (1% and 3%) Total US$ US$ US$ US$ US$ US$ US$ US$ US$ At 01 January 2015 (7,940) (28,876) - (9,681) 10, (35,628) Charged to income statement (128,592) (6,906) 16,000 9,681 (10,779) (90) - - (120,686) At 31 December 2015 (136,532) (35,782) 16, (156,314) Equivalent in KHR 000 (552,955) (144,917) 64, (633,072) At 01 January 2016 (136,532) (35,782) 16, (156,314) Charged to income statement 12, , ,441 3,409,502 4,241,022 At 31 December 2016 (123,704) (35,226) 60, ,441 3,409,502 4,084,708 Equivalent in KHR 000 (501,001) (142,665) 245, ,132,436 13,808,483 16,543,068

67 13. BORROWINGS Group US$ KHR 000 US$ KHR 000 Immediate parent company 16,246,648 65,587,718 72,129, ,122,450 Other banks Local ,500,000 46,575,000 Overseas 107,000, ,959,000 22,000,000 89,100, ,246, ,546, ,629, ,797,450 Bank US$ KHR 000 US$ KHR 000 Immediate parent company 16,246,648 65,587,718 72,129, ,122,450 Other banks Local ,500,000 46,575,000 Overseas 95,000, ,515,000 10,000,000 40,500, ,246, ,102,718 93,629, ,197, SUBORDINATED DEBTS Group and Bank US$ KHR 000 US$ KHR 000 Immediate parent company 29,000, ,073,000 13,000,000 52,650,000 29,000, ,073,000 13,000,000 52,650,

68 15. EMPLOYEE BENEFITS OBLIGATIONS Group and Bank US$ KHR 000 US$ KHR 000 At the beginning of the year 80, , Addition during the year 267,581 1,080,224 80, ,000 Payment during the year (44,105) (178,052) - - Currency Translation differences (1,039) 303,476 1,225,133 80, , OTHER LIABILITIES Group US$ KHR 000 US$ KHR 000 Funds held under escrow* 900,000 3,633, ,000 1,498,500 Accrued interest payable 7,368,302 29,745,835 6,794,867 27,519,211 Cheques under clearing accounts 882,744 3,563,638 31, ,667 Sundry creditors 599,722 2,421,078 1,530,027 6,196,609 Other tax payable 174, , , ,152 Order cheques 290,070 1,171,013 12,087 48,952 Account payable 196, , ,845 1,408,772 Other liabilities 2,748,063 11,093, , ,833 13,159,711 53,125,753 9,509,802 38,514,696 Bank US$ KHR 000 US$ KHR 000 Funds held under escrow* 900,000 3,633, ,000 1,498,500 Accrued interest payable 7,353,548 29,686,273 6,750,499 27,339,521 Cheques under clearing accounts 882,744 3,563,638 31, ,667 Sundry creditors 599,722 2,421,078 1,530,027 6,196,609 Other tax liability 162, , , ,447 Order cheques 290,070 1,171,013 12,087 48,952 Account payable 196, , ,845 1,408,772 Other liabilities 2,788,194 11,255, ,424 1,496,168 13,172,869 53,178,872 9,600,404 38,881,636 * Funds held under escrow represent the selling price of a sale purchase agreement where the Bank acts as the escrow agent

69 17. SHARE CAPITAL US$ KHR 000 US$ KHR 000 Share capital paid-up 37,500, ,387,500 37,500, ,875,000 Number of shares at par value of US$1,000 each Ownership% E. Sun Commercial Bank Ltd. 75% 28,125 28,125 Mr. Oknha Yum Sui Sang 20% 7,500 7,500 Mr. Yum Ka Yee Simon 5% 1,875 1, % 37,500 37,500 All authorised shares were issued and fully paid. 18. INTEREST INCOME Group US$ KHR 000 US$ KHR 000 Interest income from: Loans and advances to customers 36,214, ,197,650 33,267, ,732,354 Balances with the Central Bank and other financial institutions 1,466,316 5,919,518 1,747,180 7,076,079 37,680, ,117,168 35,014, ,808,433 Bank Loans and advances to Customers Balances with the Central Bank and other financial institutions US$ KHR 000 US$ KHR ,125, ,836,988 33,267, ,732,354 1,466,316 5,919,518 1,747,130 7,075,877 37,591, ,756,506 35,014, ,808,

70 19. INTEREST EXPENSE Group US$ KHR 000 US$ KHR 000 Interest expense on: Deposits from banks and other financial institution 1,355,929 5,473,885 1,380,462 5,590,871 Deposits from customers 16,296,453 65,788,781 14,283,623 57,848,673 Borrowings and subordinated debts 2,257,521 9,113,612 1,389,147 5,626,046 19,909,903 80,376,278 17,053,232 69,065,590 Bank US$ KHR 000 US$ KHR 000 Interest expense on: Deposits from banks and other financial institution 1,355,929 5,473,885 1,380,462 5,590,871 Deposits from customers 16,296,453 65,788,781 14,283,623 57,848,673 Borrowings and subordinated debts 1,894,913 7,649,764 1,176,926 4,766,551 19,547,295 78,912,430 16,841,011 68,206, FEE AND COMMISSION INCOME Group and Bank US$ KHR 000 US$ KHR 000 Loan processing fees 1,446,132 5,838,035 2,760,776 11,181,143 Settlement services 1,441,077 5,817,628 1,871,801 7,580,794 Income from ATM/credit card 442,062 1,784, ,246 3,066,846 Fees and commission from credit card 527,070 2,127, ,120 1,891,836 Telecommunication 109, , , ,587 Guarantee activities 168, , , ,737 Other fees and commission 572,706 2,312, ,010 2,470,541 4,707,404 19,003,790 6,752,959 27,349,

71 21. FEE AND COMMISSION EXPENSE Group and Bank US$ KHR 000 US$ KHR 000 Expenses for ATM/credit card 929,082 3,750,703 1,242,192 5,030,878 Commitment fees 815,882 3,293,716 31, ,295 Telecommunication 52, ,928 70, ,853 Settlement services 34, ,328 29, ,260 1,831,973 7,395,675 1,373,157 5,561, OTHER OPERATING INCOME Group US$ KHR 000 US$ KHR 000 Foreign exchange gain-net 137, , , ,424 Gain/(loss) on disposals of property and equipment 8,020 32,377 5,134 20,793 Recovery of loans written off 25, ,092 2,980 12,069 Other gains-net 86, , ,568 1,213, ,043 1,037, ,009 1,741,536 Bank US$ KHR 000 US$ KHR 000 Foreign exchange gain-net 137, , , ,315 Gain/(loss) on disposals of property and equipment 8,020 32,377 5,134 20,793 Recovery of loans written off 25, ,092 2,980 12,069 Other gains-net 149, , , , ,737 1,294, ,942 1,336,

72 23. PERSONNEL EXPENSES Group and Bank US$ KHR 000 US$ KHR 000 Salaries and wages 4,378,188 17,674,746 4,108,256 16,638,437 Bonuses, incentives and other related costs 726,275 2,931, ,641 2,193,646 Employees benefit obligations 267,581 1,080,224 80, ,000 5,372,044 21,686,942 4,729,897 19,156, DEPRECIATION AND AMORTISATION CHARGES Group US$ KHR 000 US$ KHR 000 Depreciation charge 1,739,149 7,020,945 1,209,403 4,898,082 Amortisation charge 441,233 1,781, , ,383 2,180,382 8,802,202 1,425,300 5,772,465 Bank US$ KHR 000 US$ KHR 000 Depreciation charge 1,702,138 6,871,531 1,177,221 4,767,745 Amortisation charge 441,233 1,781, , ,383 2,143,371 8,652,789 1,393,118 5,642,

73 25. GENERAL AND ADMINISTRATIVE EXPENSES Group US$ KHR 000 US$ KHR 000 Building rentals 508,735 2,053, ,213 3,147,713 Business and public relations 232, , ,592 1,602,148 Professional and other related costs 455,716 1,839, ,605 1,448,300 Travelling and transportation 134, , , ,049 Utilities 275,426 1,111, ,965 1,000,208 Stationery and printing 188, , , ,143 Security 267,660 1,080, , ,904 License fees 256,321 1,034, , ,297 Charity and donation 35, ,744 81, ,156 Motor vehicle and running costs 113, , , ,035 Telecommunication 153, , , ,271 Repairs and maintenance 443,856 1,791, ,368 1,536,440 Promotion 42, ,826 56, ,469 Court fees 429,488 1,733,843 23,730 96,107 Other taxes 628,933 2,539, ,232 3,099,190 Others 319,360 1,289, , ,150 4,486,418 18,111,669 4,311,748 17,462,580 Bank US$ KHR 000 US$ KHR 000 Building rentals 1,098,508 4,434,677 1,253,465 5,076,533 Business and public relations 232, , ,592 1,602,148 Professional and other related costs 450,916 1,820, ,664 1,403,989 Travelling and transportation 134, , , ,049 Utilities 275,426 1,111, ,965 1,000,208 Stationery and printing 188, , , ,143 Security 267,660 1,080, , ,904 License fees 256,321 1,034, , ,297 Charity and donation 35, ,744 81, ,156 Motor vehicle and running costs 113, , , ,035 Telecommunication 153, , , ,271 Repairs and maintenance 443,856 1,791, ,368 1,536,440 Promotion 42, ,826 56, ,469 Court fees 429,488 1,733,843 23,730 96,107 Other taxes 562,313 2,270, ,429 2,958,237 Others 315,474 1,273,568 99, ,949 5,000,852 20,188,440 4,739,737 19,195,

74 26. CASH AND CASH EQUIVALENTS For the purpose of the cash flow statements, the cash and cash equivalents comprise: Group US$ KHR 000 US$ KHR 000 Cash on hand 25,727, ,860,771 37,913, ,548,565 Balances with the Central Bank: Current accounts 34,675, ,983,972 73,623, ,173,251 Balances with other banks and financial institutions: Term deposits (with maturity of three months or less) 36,722, ,250,404 8,747,075 35,425,654 97,125, ,095, ,283, ,147,470 Bank US$ KHR 000 US$ KHR 000 Cash on hand 25,727, ,860,771 37,913, ,548,565 Balances with the Central Bank: Current accounts 34,675, ,983,972 73,623, ,173,251 Term deposits (with maturity of three months or less) Deposits with other banks and financial institutions 36,721, ,246,149 8,634,420 34,969,401 97,124, ,090, ,170, ,691, COMMITMENTS AND CONTINGENCIES (a) Commitments to extend credit Group and Bank US$ KHR 000 US$ KHR 000 Unused portion of loan, overdraft and credit card 37,536, ,533,066 50,087, ,855,240 Payment guarantee 18,853,460 76,111,418 1,742,037 7,055,250 Bid, performance and warrantee bonds 3,927,179 15,854,022 3,052,339 12,361,973 Letter of credit 4,271,026 17,242,132 2,697,175 10,923,561 Other commitment and guarantee 6,529,929 26,361,323 5,610,176 22,721,211 71,117, ,101,961 63,189, ,917,

75 27. COMMITMENTS AND CONTINGENCIES (continued) (b) Non-cancellable operating lease commitments As at 31 December 2016, the Group and the Bank have non-cancellable lease commitments in respect of its leases of premises. The future aggregate minimum lease payments under non-cancellable operating leases of the Group and the Bank are as follows: Group US$ KHR 000 US$ KHR 000 No later than one year 699,788 2,834, ,172 2,151,247 Later than one year and not later than five years 1,555,382 6,299,297 1,647,573 6,672,671 Later than one years 1,042,254 4,221,129 1,184,025 4,795,301 3,297,424 13,354,567 3,362,770 13,619,219 Bank US$ KHR 000 US$ KHR 000 No later than one year 1,363,388 5,503,997 1,176,772 4,765,927 Later than one year and not later than five years 4,209,782 16,994,890 4,229,973 17,131,391 Later than five years 28,873, ,563,749 27,043, ,524,251 34,447, ,062,636 32,449, ,421,569 (C) Capital Commitment The Bank is currently constructing a new head office. The construction has started since August 2015 and has estimated amount of US$ 23,182,500. As at 31 December 2016, US$ 8,703,480 was paid and recorded as construction in progress. The remaining US$ 14,479,020 will be paid in various stages until completion in

76 28. RELATED PARTY TRANSACTIONS AND BALANCES (a) Related parties and relationship The related parties of, and their relationship with the Group and the Bank are as follows: Relationship Ultimate parent entity Immediate parent entity Subsidiary Key management personnel Related party E.SUN Financial Holding Company Ltd. E.SUN Commercial Bank Ltd. URE Land Holding Co., Ltd. All directors of the Bank who make critical decisions in relation to the strategic direction of the Bank and senior management staff (including their close family members) (b) Bank balance with related parties Group and bank US$ KHR 000 US$ KHR 000 Immediate parent entity 17,289,874 69,799,221 3,470,009 14,220,097 (c) Loans and advances to related parties Group and bank US$ KHR 000 US$ KHR 000 Loans outstanding 297,998 1,203, ,898 1,286,354 Accrued interest receivable Interest income 15,804 63,801 16,228 66,

77 28. RELATED PARTY TRANSACTIONS AND BALANCES (continued) (d) Deposit balances/transactions from related parties Group US$ KHR 000 US$ KHR 000 Deposits Key management 1,905,522 7,692, ,137 1,311,921 1,905,522 7,692, ,137 1,311,921 Accrued interest payable - Key management - - 5,857 24, ,857 24,002 Interest expense - Immediate parent entity 4,033 16,281 1,407,382 5,767,451 - Subsidiary Key management 7,671 30,968 36, ,716 11,704 47,249 1,443,672 5,916,167 Deposits carry interest at rates ranging from 1.00% to 6.48% (2015: 1.00% to 7.25%) per annum

78 28. RELATED PARTY TRANSACTIONS AND BALANCES (continued) (d) Deposit balance/transactions from related parties (continued) Bank Deposits US$ KHR 000 US$ KHR Subsidiary 1,293,391 5,221,419 2,038,012 8,351,072 - Key management 1,905,522 7,692, ,137 1,311,921 3,198,913 12,914,011 2,358,149 9,662,993 Accrued interest payable - Subsidiary ,347 91,578 - Key management - - 5,857 24, , ,580 Interest expense - Immediate parent entity 4,033 16,281 1,407,382 5,767,451 - Subsidiary 28, ,350 85, ,670 - Key management 7,671 30,968 36, ,716 40, ,599 1,529,243 6,266,837 Deposits carry interest at rates ranging from 1.00% to 6.48% (2015: 1.00% to 7.25%) per annum. (e) Borrowings and subordinated debts from related parties Group and Bank US$ KHR 000 US$ KHR 000 Immediate parent entity Borrowing and subordinated debts 45,246, ,660,718 85,129, ,858,642 Accrued interest payable 109, ,481 36, ,507 Interest expense 1,056,752 4,266,108 1,112,955 4,560,

79 28. RELATED PARTY TRANSACTIONS AND BALANCES (continued) (f) Key management remuneration Group and Bank US$ KHR 000 US$ KHR 000 Salaries and short-term benefits 1,242,637 5,016,526 1,275,863 5,228,487 (g) Board of Directors fee Group and Bank US$ KHR 000 US$ KHR 000 Board of Directors fees 84, ,108 84, ,232 (h) Other transactions with related parties Group US$ KHR 000 US$ KHR 000 Immediate parent entity 397,352 1,604, ,297 2,046,119 Bank US$ KHR 000 US$ KHR 000 Immediate parent entity 397,352 1,604, ,297 2,046,119 - Subsidiary 589,773 2,380, ,852 1,963, ,125 3,985, ,149 4,009,

80 29. FINANCIAL RISK MANAGEMENT The Bank s activities expose it to a variety of financial risks, including credit risk, market risk (including foreign exchange risk and interest rate risk) and liquidity risk as well as operational risk. Taking risk is core to the financial business, and operational risk is an inevitable consequence of being in business. The Bank does not use derivative financial instruments to manage its risk exposures. The financial assets and liabilities held by the Group and the Bank are as follows: Group As at 31 December 2016 Assets US$ KHR 000 US$ KHR 000 Cash on hand 25,727, ,195,225 37,913, ,548,565 Balances with the Central Bank 36,724, ,735,395 83,869, ,673,253 Balances with other banks 40,722, ,927,802 23,747,075 96,175,654 Loans and advances to customers (*) 432,938,278 1,753,400, ,915,796 1,773,558,974 Available-for sales ( AFS ) investments 203, , , ,365 Other assets 3,401,650 13,776,683 4,477,043 18,132,024 Total financial assets 539,718,818 2,185,861, ,129,342 2,381,923,835 Liabilities Deposits from other banks 3,308,630 13,399,952 43,505, ,197,911 Deposits from customers 383,671,677 1,553,870, ,206,555 1,750,436,548 Borrowings 123,246, ,148, ,629, ,797,450 Subordinated debts 29,000, ,450,000 13,000,000 52,650,000 Other liabilities 12,911,285 52,290,704 8,723,668 35,330,855 Total financial liabilities 552,138,240 2,236,159, ,064,880 2,442,412,764 Net financial assets (12,419,422) (50,298,658) (14,935,538) (60,488,929)

81 29. FINANCIAL RISK MANAGEMENT (continued) Bank As at 31 December 2016 US$ KHR 000 US$ KHR 000 Assets Cash on hand 25,727, ,860,771 37,913, ,548,565 Balances with the Central Bank 36,724, ,257,973 83,869, ,673,253 Balances with other banks 40,721, ,394,149 23,634,420 95,719,401 Loans and advances to customers 432,938,278 1,747,771, ,915,796 1,773,558,974 Available-for sales ( AFS ) investments 203, , , ,365 Other assets 2,401,650 9,695,461 4,062,633 16,453,664 Total financial assets 538,717,764 2,174,803, ,602,277 2,379,789,222 Liabilities Deposits from other banks 3,308,630 13,356,939 43,505, ,197,911 Deposits from customers 384,965,059 1,554,103, ,244,396 1,758,689,804 Borrowings 111,246, ,102,718 93,629, ,197,450 Subordinated debts 29,000, ,073,000 13,000,000 52,650,000 Other liabilities 12,620,019 50,947,017 9,044,787 36,631,387 Total financial liabilities 541,140,356 2,184,583, ,423,840 2,403,366,552 Net financial assets (2,422,592) (9,780,004) (5,821,563) (23,577,330) 29.1 Credit risk (*) This is gross loan amount. Credit risk is the risk of suffering financial loss should any of the Bank s customers, clients or market counterparties fail to fulfil their contractual obligations to the Bank. Credit risk arises mainly from loans and advances and loan commitments arising from such lending activities. Credit risk is the single largest risk for the Bank s business; management therefore carefully manages its exposure to credit risk. (a) Credit risk measurement The Bank has established the Core Credit Risk Policy, which is designed to govern the Bank s risk undertaking activities. Extension of credit is governed by credit programs which set out the plan for a particular product or portfolio, including the target market, terms and conditions, documentation and procedures under which a credit product will be offered and measured. The Bank also ensures that there is a clear segregation of duties between loan originators, evaluators and approving authorities

82 29. FINANCIAL RISK MANAGEMENT (continued) 29.1 Credit risk (continued) (b) Risk limit control and mitigation policies The Bank manages, limits and controls concentration of credit risk whenever they are identified, in particular, to individual counterparties and groups, and to industries. The Bank structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower or group of borrowers, and industry segments. Such risks are monitored on a revolving basis and subject to an annual or more frequent review, when considered necessary. Limits on the level of credit risk by product and industry sector are approved by the Board of Directors. Large exposure is defined by the Central Bank as overall credit exposure to any single beneficiary which exceeds 10% of the Bank s net worth. The Bank is required, under the conditions of Prakas No. B of the Central Bank, to maintain at all times a maximum ratio of 20% between the Bank s overall credit exposure to any single beneficiary and the Bank s net worth. The aggregate 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, including requiring borrowers to pledge collateral against loans and advances granted by the Bank. (c) Impairment and provisioning policies The Bank is required to follow the mandatory credit classification and provisioning in accordance with the relevant Prakas, as stated in note 2.8 to the financial statements. Loan classification and loan loss provisioning are determined taking into account past due period of loans and advances to customers and other relevant qualitative factors

83 29. FINANCIAL RISK MANAGEMENT (continued) 29.1 Credit risk (continued) (d) Maximum exposure to credit risk before collateral held or other credit enhancements The table below presents the maximum credit risk exposure of the Group and of the Bank, without taking into account any collateral held or other credit enhancements. For on-balance sheet assets, the exposures are based on net carrying amounts. For credit related commitments, the maximum exposure to credit risk represents the full amount of irrevocable committed facilities. Group and Bank On-balance sheet assets US$ KHR 000 US$ KHR 000 Balances with other banks 40,721, ,394,149 23,634,420 95,719,401 Loans and advances to customers 432,938,278 1,747,771, ,119,906 1,741,985,619 Other assets 2,401,650 9,695,461 4,062,633 16,453, ,061,788 1,921,861, ,816,959 1,854,158,684 Off-balance sheet items Commitments 71,117, ,101,961 63,189, ,917, ,179,440 2,208,963, ,006,400 2,110,075,920 To the extent possible, pledges of collateral are negotiated with the counterparties for the purposes of reducing credit risk. The Group and the Bank take into consideration the marketability of the collateral as well as the adequacy of debt coverage in assessing the acceptability of collateral. The main types of collateral and other credit enhancements obtained by the Group and the Bank in respect of loans and advances to customers are properties and guarantees. Properties are valued periodically based on valuation by independent professional valuers. Management is confident of its ability to control and sustain minimal exposure to credit risk by the Group and the Bank resulting from loans and advances based on the following: Loans and advances of the Group and of the Bank are collaterised; and The Bank has a proper credit evaluation process in place for granting of loans and advances to customers

84 29. FINANCIAL RISK MANAGEMENT (continued) 29.1 Credit risk (continued) (e) Credit quality of financial assets Loans and advances to customers As at the balance sheet date, exposures of the Group and of the Bank to credit risk arising from loans and advances to customers (without taking into account of any collateral held or other credit enhancements and provision for loan losses) are as follows: Loans and advances US$ KHR 000 US$ KHR 000 Neither past due nor impaired 360,223,648 1,454,222, ,748,806 1,554,182,664 Past due but not impaired 8,771,969 35,412,439 51,261, ,608,278 Individually impaired 63,942, ,136,522 2,905,687 11,768, ,938,278 1,747,771, ,915,796 1,773,558,974 Loans and advances that are past due for less than 90 days are generally not considered impaired unless other information available indicates otherwise. All other financial assets held by the Group and the Bank as at the balance sheet date are neither past due nor individually impaired. Balances with banks and other financial institutions Analysis of the balances with banks and other financial institutions of the Group and Bank as at the balance sheet date by counterparty is as follows: Group In Cambodia US$ KHR 000 US$ KHR 000 Commercial banks 4,240, ,366,235 15,332,779 62,097,754 Outside Cambodia Commercial banks 36,482, ,278,473 8,414,296 34,077,900 40,722, ,644,708 23,747,075 96,175,

85 29. FINANCIAL RISK MANAGEMENT (continued) 29.1 Credit risk (continued) (e) Credit quality of financial assets (continued) Bank In Cambodia US$ KHR 000 US$ KHR 000 Commercial banks 4,239,702 17,115,677 15,220,124 61,641,502 Outside Cambodia Commercial banks 36,482, ,278,472 8,414,296 34,077,899 40,721, ,394,149 23,634,420 95,719,401 Other financial assets Other financial assets of the Group and of the Bank mainly comprise interest receivable on placements with banks and other financial institutions and deposits placed by the Bank in respect of rental of premises. (f) Credit quality of loans and advances to customers i. Loans and advances that are past due but not impaired The aging analysis of loans and advances that are past due but not impaired as at the balance sheet date (without taking into account of any collateral held or other credit enhancements) is as follows: US$ KHR 000 US$ KHR 000 Past due period - 30 to < 60 days 8,771,969 35,412,439 51,261, ,608,278 Less: Specific provision (263,159) (1,062,373) (1,537,839) (6,228,248) 8,508,810 34,350,066 49,723, ,380,030 Loans that are past due for 30 days or more but less than 90 days are classified as special mention and subject to specific provision of 3%

86 29. FINANCIAL RISK MANAGEMENT (continued) 29.1 Credit risk (continued) (f) Credit quality of loans and advances to customers (continued) ii. Loans and advances that are individually impaired The aging analysis of loans and advances that are past due for 90 days or more, which are considered impaired (without taking into account of any collateral held or other credit enhancements) is as follows: Past due period US$ KHR 000 US$ KHR to <180 days 19,017,077 76,771, ,648 2,845, to < 360 days 27,312, ,260, ,274 2,216, days or more 17,613,124 71,104,182 1,655,765 6,705,848 63,942, ,136,523 2,905,687 11,768,032 Less: Specific provision (35,018,423) (141,369,374) (2,386,738) (9,666,289) 28,924, ,767, ,949 2,101,743 (g) Repossessed collateral The Central Bank requires banking institutions to classify repossessed property, if any as foreclosed property in the balance sheet and to dispose of the property within one year. During the period, the Bank did not obtain any asset by taking possession of collateral held as security

87 29. FINANCIAL RISK MANAGEMENT (continued) 29.1 Credit risk (continued) (h) Credit risk concentration of financial assets i. By geographical distribution As at the balance sheet date, the credit exposures of the Group and of the Bank are derived mainly from Cambodia based on the country of domicile of the counterparties as follows: Group Cambodia Other countries Total US$ US$ US$ As at 31 December 2016 Balances with other banks 4,240,756 36,482,158 40,722,914 Loans and advances to customers 432,938, ,938,278 Other assets 3,401,650-3,401, ,580,684 36,482, ,062,842 In KHR 000 equivalent 1,778,624, ,278,472 1,925,902,693 As at 31 December 2015 Balances with other banks 15,332,779 8,414,296 23,747,075 Loans and advances to customers 437,915, ,915,796 Other assets 4,477,043-4,477, ,725,618 8,414, ,139,914 In KHR 000 equivalent 1,853,788,753 34,077,899 1,887,866,

88 29. FINANCIAL RISK MANAGEMENT (continued) 29.1 Credit risk (continued) (h) Credit risk concentration of financial assets i. By geographical distribution (continue) Bank 31 December 2016 Cambodia Other countries Total US$ US$ US$ Balances with other banks 4,239,702 36,482,158 40,721,860 Loans and advances to customers 432,938, ,938,278 Other assets 2,401,650-2,401, ,579,630 36,482, ,061,788 In KHR 000 equivalent 1,774,582, ,278,472 1,921,861, December 2015 Balances with other banks 15,220,124 8,414,296 23,634,420 Loans and advances to customers 437,915, ,915,796 Other assets 4,062,633-4,062, ,198,553 8,414, ,612,849 In KHR 000 equivalent 1,851,654,140 34,077,899 1,885,732,

89 29. FINANCIAL RISK MANAGEMENT (continued) 29.1 Credit risk (continued) (h) Credit risk concentration of financial assets (continued) ii. By industry sector The following table summarises the credit exposures of the Group and of the Bank at their net carrying amounts by industry sector of the counterparties. Group and bank US$ KHR 000 US$ KHR 000 Financial Institutions Other financial institutions 7,000,000 28,259,000 13,420,877 54,354,552 Non-financial institutions Agriculture, forestry and fishing 37,850, ,801,746 32,098, ,998,079 Mining and quarrying 932,723 3,765,403 1,468,444 5,947,198 Manufacturing 33,770, ,331,198 34,534, ,863,259 Utilities 13,257,347 53,519,910 11,843,544 47,966,353 Construction 106,090, ,289, ,869, ,871,256 Wholesale and retail trade 39,696, ,254,653 38,836, ,289,396 Retail trade 29,954, ,928,178 36,853, ,255,339 Hotel and restaurants 20,783,890 83,904,564 17,302,407 70,074,748 Transport and storage 2,816,131 11,368,721 3,625,902 14,684,903 Information media and telecommunication 631,593 2,549, ,381 2,091,343 Rentals and operational leasing activities (excluded real estate leasing and rental) 1,488,358 6,008,501 1,087,477 4,404,282 Real estate activities 22,432,299 90,559,191 37,549, ,075,961 Non-financial services 62,578, ,631,334 65,171, ,945,045 Personal essentials Personal lending 34,896, ,876,370 20,604,207 83,447,038 Credit cards 4,091,446 16,517,168 5,027,008 20,359,382 Mortgages, owner-occupied housing only 14,260,845 57,571,031 8,380,308 33,940,247 Other lending 405,256 1,636,018 1,726,072 6,990, ,938,278 1,747,771, ,915,796 1,773,558,

90 29. FINANCIAL RISK MANAGEMENT (continued) 29.2 Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk arises from open positions in interest rates, currency and equity products, all of which are exposed to general and specific market movements and changes in the level of volatility of market rates or prices such as interest rates, credit spreads, foreign exchange rates and equity prices. (a) Price risk The Bank managed its risk of unfavourable changes of prices of its investment by reviewing the monthly fund performance report. (b) Foreign exchange risk The Group and the Bank mainly transact in US$, which is the functional currency of the Group and of the Bank. The Group and the Bank do not have significant exposure to foreign exchange risk. (c) Interest rate risk Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Interest margins may increase or decrease due to unexpected movements in rates. Management regularly monitors any mismatch of interest rate repricing undertaken. The table below summarises the exposures of the Group and of the Bank to interest rate risk. The assets and liabilities at carrying amount are categorised by the earlier of contractual repricing or maturity dates

91 29. FINANCIAL RISK MANAGEMENT (continued) 29.2 Market risk (continued) (c) Interest rate risk (continued) Group As at 31 December 2016 Assets Over Non-interest 1 month 1-3 months 3-12 month 1 to 5 years 5 years bearing Total US$ US$ US$ US$ US$ US$ US$ Cash on hand ,727,216 25,727,216 Balances with the Central Bank - 2,049, ,675,247 36,724,789 Balances with other banks 6,192,393-4,000, ,530,521 40,722,914 Loans and advances to customers 84,277,065 20,785,209 66,728, ,408, ,739, ,938,278 Available-for-sale ("AFS") investments , ,971 Other assets ,401,650 3,401,650 Total financial assets 90,469,458 22,834,751 70,728, ,408, ,739,055 94,538, ,718,818 Liabilities Deposits from other banks 1,858,408 60, , ,206 3,308,630 Deposits from customers 162,473,054 75,315, ,720,339 8,293,602-36,869, ,671,677 Borrowing 3,000,000-5,000, ,246,648 2,000, ,246,648 Subordinated debts ,000,000-29,000,000 Other liabilities ,911,285 12,911,285 Total financial liabilities 167,331,462 75,375, ,146, ,540,250 31,000,000 50,745, ,138,240 Total interest repricing gap (76,862,004) (52,540,397) (35,417,928) 5,868, ,739,055 43,793,580 (12,419,422) In KHR '000 equivalent (310,291,910) (212,105,583) (142,982,175) 23,690, ,757, ,794,682 (50,137,207)

92 29. FINANCIAL RISK MANAGEMENT (continued) 29.2 Market risk (continued) (c) Interest rate risk (continued) Group As at 31 December 2015 Over Non- interest 1 month 1-3 months 3-12 month 1 to 5 years 5 years bearing Total US$ US$ US$ US$ US$ US$ US$ Assets Cash on hand ,913,226 37,913,226 Balances with the Central Bank 3,246,914-7,000, ,623,025 83,869,939 Balances with other banks 1,809,670-15,000, ,937,405 23,747,075 Loans and advances to customers 57,018,790 24,472, ,988, ,219, ,216, ,915,796 Available-for-sale ("AFS") investments , ,263 Other assets ,477,043 4,477,043 Total financial assets 62,075,374 24,472, ,988, ,219, ,216, ,156, ,129,342 Liabilities Deposits from other banks 524,587 11,269,368 5,009,121 26,400, ,581 43,505,657 Deposits from customers 113,103,449 58,656, ,369, ,076, ,206,555 Borrowing ,500,000 15,129, ,629,000 Subordinated debts ,000,000 5,000,000-13,000,000 Other liabilities ,723,668 8,723,668 Total financial liabilities 113,628,036 69,925, ,879,063 49,529,000 5,000,000 49,103, ,064,880 Total interest repricing gap (51,552,662) (45,452,758) (183,890,824) 62,690, ,216,643 74,053,743 (14,935,538) In KHR '000 equivalent (208,272,754) (183,629,142) (742,918,929) 253,268, ,035, ,177,122 (60,339,572)

93 29. FINANCIAL RISK MANAGEMENT (continued) 29.2 Market risk (continued) (c) Interest rate risk (continued) Bank As at 31 December 2016 Assets Over Non-interest 1 month 1-3 months 3-12 month 1 to 5 years 5 years bearing Total US$ US$ US$ US$ US$ US$ US$ Cash on hand ,727,216 25,727,216 Balances with the Central Bank - 2,049, ,675,247 36,724,789 Balances with other banks 6,191,339-4,000, ,530,521 40,721,860 Loans and advances to customers 84,277,065 20,785,209 66,728, ,408, ,739, ,938,278 Available-for-sale ("AFS") investments , ,971 Other assets ,401,650 2,401,650 Total financial assets 90,468,404 22,834,751 70,728, ,408, ,739,055 93,538, ,717,764 Liabilities Deposits from other banks 1,858,408 60, , ,206 3,308,630 Deposits from customers 162,473,054 75,315, ,013,721 8,293,602-36,869, ,965,059 Borrowings - - 5,000, ,246, ,246,648 Subordinated debts ,000,000-29,000,000 Other liabilities ,620,019 12,620,019 Total financial liabilities 164,331,462 75,375, ,439, ,540,250 29,000,000 50,453, ,140,356 Total interest repricing gap (73,863,058) (52,540,397) (36,711,310) 12,868, ,739,055 43,084,846 (2,422,592) In KHR '000 equivalent (298,185,165) (212,105,583) (148,203,558) 51,949, ,831, ,933,523 (9,780,004)

94 29. FINANCIAL RISK MANAGEMENT (continued) 29.2 Market risk (continued) (c) Interest rate risk (continued) Bank As at 31 December 2015 Assets Over Non-interest 1 month 1-3 months 3-12 month 1 to 5 years 5 years bearing Total US$ US$ US$ US$ US$ US$ US$ Cash on hand ,913,226 37,913,226 Balances with the Central Bank 3,246,914-7,000, ,623,025 83,869,939 Balances with other banks 1,697,015-15,000, ,937,405 23,634,420 Loans and advances to customers 57,018,790 24,472, ,988, ,219, ,216, ,915,796 Available-for-sale ("AFS") investments , ,263 Other assets ,062,633 4,062,633 Total financial assets 61,962,719 24,472, ,988, ,219, ,216, ,742, ,602,277 Liabilities Deposits from other banks 524,587 11,269,368 5,009,121 26,400, ,581 43,505,657 Deposits from customers 113,103,449 58,656, ,407, ,076, ,244,396 Borrowings ,500,000 12,129, ,629,000 Subordinated debts ,000,000 5,000,000-13,000,000 Other liabilities ,044,787 9,044,787 Total financial liabilities 113,628,036 69,925, ,916,904 46,529,000 5,000,000 49,424, ,423,840 Total interest repricing gap (51,665,317) (45,452,758) (176,928,665) 65,690, ,216,643 73,318,214 (5,821,563) In KHR '000 equivalent (208,727,881) (183,629,142) (714,791,807) 265,388, ,035, ,205,585 (23,519,114)

95 29. FINANCIAL RISK MANAGEMENT (continued) 29.3 Liquidity risk Liquidity risk is the risk that the Group and the Bank are unable to meet their obligations when they fall due as a result of customer deposits being withdrawn, cash requirements from contractual commitments, or other cash outflows. (a) Liquidity risk management process The management monitors balance sheet liquidity and manages the concentration and maturity profile of deposits as well as the movements of main depositors and projection of their withdrawals. (b) Funding approach The main sources of funding of the Group and of the Bank are from shareholder s paidup capital and deposits from banks, other financial institutions and customers. The sources of funding are reviewed daily through management s review of maturity profile of term deposits. (c) Non-derivative cash flows The table below presents the undiscounted cash flows arising from financial assets and liabilities and commitments of the Group and of the Bank based on the remaining contractual maturities as at the balance sheet date

96 29. FINANCIAL RISK MANAGEMENT (continued) 29.3 Liquidity risk (continued) (c) Non-derivative cash flows (continued) Group Up to 1 month 1-3 months 3-12 months 1 to 5 years Over 5 years No fixed maturity date Total US$ US$ US$ US$ US$ US$ US$ As at 31 December 2016 Assets Cash on hand ,727,216 25,727,216 Balances with the Central Bank - 2,049, ,675,247 36,724,789 Balances with other banks - - 4,000, ,721,860 40,721,860 Loans and advances to customers 84,277,065 20,785,209 66,728, ,408, ,739, ,938,278 Available-for-sale ("AFS") investments , ,971 Other assets 46, ,466 3,485,645 34,925,168 93,541,196 3,401, ,752,749 Total Assets 84,323,689 23,187,217 74,214, ,333, ,280, ,729, ,068,863 Liabilities Deposits from other banks 219,168 60, , ,603,446 3,308,630 Deposits from customers 67,490,941 75,315, ,720,339 8,293, ,851, ,671,677 Borrowing 3,000,000-5,000, ,246,648 2,000, ,246,648 Subordinated debts ,000,000-29,000,000 Other liabilities 1,214,359 1,914,891 5,611,947 11,097,807 2,343,790 12,911,285 35,094,079 Total Liabilities 71,924,468 77,290, ,758, ,638,057 33,343, ,366, ,321,034 Net liquidity surplus (gap) (US$) 12,399,221 (54,102,822) (37,544,230) 29,695, ,936,461 (46,636,434) 97,747,829 Net liquidity surplus (gap) (KHR 000) 50,055,655 (218,413,092) (151,566,057) 119,881, ,921,493 (188,271,284) 394,607,985

97 29. FINANCIAL RISK MANAGEMENT (continued) 29.3 Liquidity risk (continued) (c) Non-derivative cash flows (continued) Group As at 31 December 2015 Up to 1 month 1-3 months 3-12 months 1 to 5 years Over 5 years No fixed maturity date US$ US$ US$ US$ US$ US$ US$ Assets Cash on hand ,913,226 37,913,226 Balances with the Central Bank 3,246,914-7,000, ,623,025 83,869,939 Balances with other banks 1,809,670-15,000, ,937,405 23,747,075 Loans and advances to customers 63,344,269 26,819, ,983, ,745, ,773, ,666,997 Available-for-sale ("AFS") investments , ,263 Other assets 786 1,553 3, ,477,043 4,483,158 Total Assets 68,401,639 26,820, ,987, ,745, ,773, ,156, ,886,658 Total Liabilities Deposits from other banks 11,269,368 5,009,121 26,400, ,168 43,505,657 Deposits from customers 42,913,084 58,656, ,369, ,267, ,206,555 Borrowing 261, ,461 92,113,561 15,754, ,653,002 Subordinated debts 54, , ,372 10,609,986 5,396,047-16,658,529 Other liabilities 1,394,227 2,413,234 5,267, ,723,668 17,798,671 Total Liabilities 55,892,783 66,710, ,640,417 26,364,236 5,396, ,818, ,822,414 Net liquidity surplus (gap) (US$) 12,508,856 (39,889,849) (203,652,781) 109,381, ,377,822 3,338,791 16,064,244 Net liquidity surplus (gap) (KHR 000) 50,535,778 (161,154,990) (822,757,235) 441,900, ,886,401 13,488,716 64,899,546

98 29. FINANCIAL RISK MANAGEMENT (continued) 29.3 Liquidity risk (continued) (c) Non-derivative cash flows (continued) Bank As at 31 December 2016 Up to 1 month 1-3 months 3-12 months 1 to 5 years Over 5 years No fixed maturity date Total US$ US$ US$ US$ US$ US$ US$ Assets Cash on hand ,727,216 25,727,216 Balances with the Central Bank - 2,049, ,675,247 36,724,789 Balances with other banks - - 4,000, ,721,860 40,721,860 Loans and advances to customers 84,277,065 20,785,209 66,728, ,408, ,739, ,938,278 Available-for-sale ("AFS") investments , ,971 Other assets 46, ,466 3,485,645 34,925,168 93,541,196 2,401, ,752,749 Total Assets 84,323,689 23,187,217 74,214, ,333, ,280,251 99,729, ,068,863 Liabilities Deposits from other banks 219,168 60, , ,603,446 3,308,630 Deposits from customers 67,490,941 75,315, ,013,721 8,293, ,851, ,965,059 Borrowings - - 5,000, ,246, ,246,648 Subordinated debts ,000,000-29,000,000 Other liabilities 1,181,449 1,865,106 5,386,503 10,379,270 1,871,008 12,620,019 33,303,355 Total Liabilities 68,891,558 77,240, ,826, ,919,520 30,871, ,075, ,823,692 Net liquidity surplus (gap) (US$) 15,432,131 (54,053,037) (38,612,168) 37,414, ,409,243 (47,345,168) 109,245,171 Net liquidity surplus (gap) (KHR 000) 62,299,513 (218,212,110) (155,877,322) 151,041, ,904,114 (191,132,443) 441,022,756

99 29. FINANCIAL RISK MANAGEMENT (continued) 29.3 Liquidity risk (continued) (c) Non-derivative cash flows (continued) Bank As at 31 December 2015 Up to 1 month 1-3 months 3-12 months 1 to 5 years Over 5 years No fixed maturity date Total US$ US$ US$ US$ US$ US$ US$ Assets Cash on hand ,913,226 37,913,226 Balances with the Central Bank 3,246,914-7,000, ,623,025 83,869,939 Balances with other banks ,000,000 8,634,420 23,634,420 Loans and advances to customers 63,344,269 26,819, ,983, ,745, ,773, ,666,997 Available-for-sale ("AFS") investments , ,263 Other assets 786 1,553 3, ,062,633 4,068,748 Total Assets 66,591,969 26,820, ,987, ,745, ,773, ,439, ,359,593 Liabilities Deposits from other banks 11,269,368 5,009,121 26,400, ,168 43,505,657 Deposits from customers 42,913,084 58,656, ,407, ,267, ,244,396 Borrowings 236, ,360 82,903,327 12,748, ,360,287 Subordinated debts 54, , ,372 10,609,986 5,396,047-16,658,529 Other liabilities 1,394,227 2,413,234 5,267, ,044,787 18,119,790 Total Liabilities 55,867,231 66,659, ,468,024 23,358,408 5,396, ,139, ,888,659 Net liquidity surplus (gap) US$ 10,724,738 (39,838,748) (196,480,388) 112,387, ,377,822 4,300,277 25,470,934 Net liquidity surplus (gap) (KHR 000) 43,327,942 (160,948,542) (793,780,768) 454,044, ,886,401 17,373, ,902,573

100 29. FINANCIAL RISK MANAGEMENT (continued) 29.4 Operational risk Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems, or from external events. This includes legal, compliance, accounting and fraud risk. The Bank has established policies and procedures to provide guidance to the key operating units on the risk governance structure and baseline internal controls necessary to identify, assess, monitor and control their operational risks. Internal control policies and measures that have been implemented including the establishment of signing authorities, defining system parameter controls, streamlining procedures and documentation ensuring compliance with regulatory and legal requirements. The policies and procedures are reviewed periodically, taking into account the business objectives and strategies of the Bank as well as regulatory requirements. The internal audit function provides independent assessment of the adequacy of the internal control policies and procedures of the Bank to mitigate risk associated with operational activities. Any findings arising from the audit and review will be escalated to the senior management of the Bank and the Audit Committees of the Bank and of the parent company Fair value of financial assets and liabilities As at the balance sheet date, the fair values of financial instruments of the Group and of the Bank approximate their carrying amounts. The estimated fair values are based on the following methodologies and assumptions: (i) Balances with other banks and financial institutions The fair values of balances with other banks and financial institutions with maturity of less than one year approximate their carrying amounts. (ii) Loans and advances to customers For fixed rate loans with remaining period to maturity of less than one year, the carrying amounts are generally reasonable estimates of their fair values. For fixed rate loans with remaining period to maturity of one year and above, fair values are estimated by discounting the estimated future cash flows using the prevailing market rates of loans with similar credit risks and maturities

101 29. FINANCIAL RISK MANAGEMENT (continued) 29.5 Fair value of financial assets and liabilities (continued) (iii) Deposits from banks and customers The fair values of deposits payable on demand (current and savings accounts), or deposits with remaining maturity of less than one year are estimated to approximate their carrying amounts. The fair values of deposits with remaining maturity of more than one year are estimated based on discounted cash flows using prevailing market rates for similar deposits from banks and customers. (iv) Other financial assets and liabilities The carrying amounts of other financial assets and liabilities are assumed to approximate their fair values as these items are not materially sensitive to the shift in market interest rates

102 29. FINANCIAL RISK MANAGEMENT (continued) 29.6 Capital management The Bank s objectives when managing capital, which is a broader concept than the equity on the face of the balance sheet, are: To comply with the capital requirement set by the Central Bank; To safeguard the ability of the Group and of the Bank to continue as a going concern so that it can provide returns to its shareholder and benefits for other stakeholders; and To maintain a strong capital base to support the development of business. The Central Bank requires all commercial banks to i) hold a minimum capital requirement, ii) maintain the Bank s net worth equal at least to the minimum capital and iii) comply with solvency and liquidity ratios. The table below summarises the composition of the Group and the Bank s regulatory capital: Group US$ KHR 000 US$ KHR 000 Tier 1 capital Share capital 37,500, ,387,500 37,500, ,875,000 Retained earnings (13,319,179) (53,769,526) 5,241,710 21,228,926 Non-distributable reserve 25,622, ,439,131 25,622, ,772,227 Less: Loan to related parties (297,998) (1,203,018) (313,898) (1,271,287) Less: Intangible assets (1,324,641) (5,347,576) (1,484,623) (6,012,723) 48,180, ,506,511 66,565, ,592,143 Tier 2 complementary capital Add: Subordinated debts approved by the Central Bank 22,000,000 88,814,000 13,000,000 52,650,000 Add: General provision for loan losses 3,602,199 14,542,077 3,853,679 15,607,400 Less: Equity participation in banking or financial institution (150,000) (605,550) (150,000) (607,500) 73,633, ,257,038 83,269, ,242,

103 29. FINANCIAL RISK MANAGEMENT (continued) 29.6 Capital management (continued) Bank Tier 1 capital US$ KHR 000 US$ KHR 000 Share capital 37,500, ,387,500 37,500, ,875,000 Retained earnings (13,626,387) (55,009,724) 4,986,827 20,196,649 Non-distributable reserve 25,622, ,439,131 25,622, ,772,227 Less: Loan to related parties (297,998) (1,203,018) (313,898) (1,271,287) Less: Intangible assets (1,324,641) (5,347,576) (1,484,623) (6,012,723) 47,873, ,266,313 66,311, ,559,866 Tier 2 complementary capital Add: Subordinated debts approved by the Central Bank 22,000,000 88,814,000 13,000,000 52,650,000 Add: General provision for loan losses 3,602,199 (14,542,077) 3,853,679 15,607,400 Less: Equity participation in banking or financial institution (150,000) 605,550 (150,000) (607,500) 73,325, ,143,786 83,014, ,209,766 (*) On 30 December 2016, the Central Bank allowed the Bank to add the subordinated debt of US$9 million (totalling US$22 million) into the computation of net worth for the end of December The remaining subordinated debt of US$7 million (totally US$29 million) is allowed to be further added from January 2018 onwards. The National Bank of Cambodia issued a Prakas No. B , dated 22 March 2016, on "new minimum registered capital requirement for banks and financial institutions". It requires that commercial banks being a local entity or a subsidiary of foreign bank must have a minimum registered capital of at least KHR 300 billion (equivalent to US$75 million). The Prakas allows commercial banks to increase its capital to meet the new minimum registered capital requirement within 2 years from the date this Prakas. On 16 June 2016, NBC issued an Instruction on the implementation of its Prakas No. B , dated 22 March 2016, on "new minimum registered capital requirement for banks and financial institutions". The Instruction requires the banks to increase the additional capital at least 50% of the amount to fulfil the minimum registered capital by end of March 2017 and the remaining amount by end of March As at 31 December 2016, the Bank had paid-up capital of US$37.5 million. To meet the new minimum capital requirement, the Bank got the board approval in January 2017 on its plan to inject capital in cash from its parent entity, E-Sun Commercial Bank Ltd., to increase the Bank's registered capital to US$80 million

104 Services and Financial Products COMMERCIAL BANKING Term Loan Working Capital Loan Business Cheque Account Escrow Account Payroll Service Acquiring Service CONSUMER BANKING Saving Deposit Demand Deposit Time Deposit Housing Loan Credit Card Online Banking ATM Service INTERNATIONAL BANKING Money Transfer Trade Finance Import & Export L/C D/P & D/A Guarantee & Standby L/C Check Discounted Trade Finance Loan

105 Contact Information HEAD OFFICE UCB Bldg #61, 130 Rd Phsa Chas Quarter, Khan Daun Penh Phnom Penh Cambodia Tel: Fax: SWIFT: UCBPKHPP BRANCHES Olympic Branch #73-75, St. 286, Sangkat Olympic Khan Chamkamon, Phnom Penh Tel: Fax: Old Stadium Branch #B41 & B43, St. 70, Sangkat Srah Chak Khan Doun Penh, Phnom Penh Tel: Fax: Kbal Tnol Branch #518ABC, Preah Monivong Blvd, Phum 12 Sangkat Tonle Basak Khan Chamkar Mon, Phnom Penh Tel: Fax: Intercontinental Branch # , Mao Tse Tung Blvd (245), Phum 04 Sangkat TomnobTuek Khan Chamkar Mon, Phnom Penh Tel: Fax: Tuol Kork Branch #115, St. 289, Phum 14, Sangkat Boeng Kok II Khan Tuol Kork, Phnom Penh Tel: Fax: Stueng Mean Chey Branch #16B & 17B, Samdach Preah Monireth Blvd. Sangkat Stueng Mean Chey Khan Mean Chey, Phnom Penh Tel: Fax: Siem Reap Branch #Corner of St. Tepvong-Omchhay, Mondul1 Village Sangkat Svay Dongkum Siem Reap Province Tel: Fax: Sihanouk Ville Branch #195, Vithei Ekreach, Sangkat No.2 Khan Mittapheap, Preah Sihanouk Province Tel: Fax: Tuek L ak Branch #342E0-3 and 342F0-3, St. 182, Phum 10 Sangkat Tuek L ak3, Khan Tuol Kork, Phnom Penh Tel: Fax: Tuek Thla Branch #A123 and A125, Russian Federation Blvd Phum Tuek Thla, Sangkat Tuek Thla Khan Saen Sokh, Phnom Penh Tel: Fax: Battambang Branch # , St. 01, Phum Prek Mohatep Sangkat Svay Por, Battambang Province Tel: Fax: Khsach Kandal District Branch Vihear Suork Commune Vihear Suork Cheung Village Vihear Suork Commune Khsach Kandal District, Kandal Province Tel: Fax:

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