OVERSEA-CHINESE BANKING CORPORATION LIMITED (YANGON BRANCH) (REGISTERED IN THE REPUBLIC OF THE UNION OF MYANMAR) FINANCIAL STATEMENTS

Transcription

1 () FINANCIAL STATEMENTS Khin Su Htay & Associates Limited Certified Public Accountants

2 () FINANCIAL STATEMENTS Contents Page Statement by the Country Manager 1 Auditor s Report to the Management of OCBC Bank Yangon Branch 2-4 Statement of Financial Position 5 Statement of Comprehensive Income 6 Statement of Cash Flows 7 Notes to the Financial Statements 8-19

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4 KHIN SU HTAY & ASSOCIATES LIMITED Certified Public Accountants (Company Registration Number: 268 of YGN) #C1/005, Ground Floor, Hninnsi Street,Yuzana Highway Complex, Narnat Taw Road, Kamayut Township, Yangon, Myanmar thantint@ytp.com.mm Tel: (95-1) , (95-09) AUDITOR S REPORT TO THE MANAGEMENT OF OVERSEA-CHINESE BANKING CORPORATION LIMITED () Opinion We have audited the financial statements of OVERSEA-CHINESE BANKING CORPORATION LIMITED (YANGON BRANCH ( the Branch Office ), which comprise the statement of financial position of the Branch Office as at 31 March 2018, the statement of comprehensive income, and the statement of cash flows of the Branch Office for the year then ended and a summary of significant accounting policies and other explanatory notes, as set out on pages 5 to 19. In our opinion, the financial statements of the Branch Office are properly drawn up in accordance with Myanmar Financial Reporting Standards (MFRS) and the provisions of Myanmar Companies Act ( the Act ) so as to give a true and fair view of the state of affairs of the Branch Office as at 31 March 2018 and of the results and cash flows of the Branch Office for the year then ended. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Branch Office in accordance with the ethical requirements that are relevant to our audit of the financial statements in Myanmar, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of Myanmar Companies Act ("the Act") and Myanmar Financial Reporting Standards (MFRS) 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 Branch Office 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 Branch Office or to cease operations, or has no realistic alternative but to do so. 2

5 KHIN SU HTAY & ASSOCIATES LIMITED Certified Public Accountants (Company Registration Number: 268 of YGN) #C1/005, Ground Floor, Hninnsi Street,Yuzana Highway Complex, Narnat Taw Road, Kamayut Township, Yangon, Myanmar thantint@ytp.com.mm Tel: (95-1) , (95-09) Those charged with governance are responsible for overseeing the Branch Office s financial reporting process. Auditor s responsibility for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can raise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement 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, of the override of internal control. Obtain an understanding of internal controls 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 Branch Office s internal controls. 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 evidences obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Branch Office s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to attention in our auditor s report to the related disclosures in the financial statements or, if such disclosures are inadequate, 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 Branch Office to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 3

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10 These notes form an integral part of and should be read in conjunction with the accompanying financial statements. 1. General Information OVERSEA-CHINESE BANKING CORPORATION LIMITED (Yangon Branch) is domiciled and registered in the Republic of the Union of Myanmar with its registered office at Union Financial Centre, Suite 02-10, Corner of Mahabandoola Road and Thein Phyu Road, 45 th Street, Botataung Township, Yangon, Myanmar. The Yangon Branch Office was incorporated under Permit No FC of dated 22 January 2015 and Registration Certificate No.1054 FC of dated 22 January Oversea-Chinese Banking Corporation Limited which is incorporated in Singapore is the Head Office of the Yangon Branch Office with its registered office at 63 Chulia Street, #10-00, OCBC Centre East, Singapore Banking license No. CBM/FBBL (R) 02/ dated 29 July 2016 was issued by the Central Bank of Myanmar. The principal activities of the Yangon Branch are to undertake banking business in Myanmar including the provision of banking services in Myanmar in accordance with terms and conditions of the Foreign Bank License issued by the Central Bank of Myanmar. 2. Basis of Preparation (a) (b) (c) Statement of Compliance The financial statements have been prepared in compliance with the applicable standards of Myanmar Financial Reporting Standards (MFRS) and the provisions of Myanmar Companies Act. Basis of Measurement The financial statements have been prepared on the historical cost basis. Use of estimates and judgements The preparation of financial statements in conformity with MFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected. There are no accounting estimates and judgement made by the management that has a significant effect on the financial statements. 8

11 3. Significant Accounting Policies The accounting policies set out below have been applied consistently to all periods presented in these financial statements. 3.1 Functional and Reporting Currency The financial statements are presented in Myanmar Kyats which is the reporting currency of the statutory accounts. Management has determined to treat USD as the functional currency of the Yangon Branch and books of accounts are recorded in USD. All the transactions denominated in USD during the year were translated into Myanmar Kyats at the Central Bank of Myanmar exchange rates as of the transaction date. All assets and liabilities denominated in US Dollars outstanding at balance sheet date were translated into Myanmar Kyats at the Central Bank of Myanmar exchange rate ruling at balance sheet date at US$ 1 = Ks 1,335 for 31 March 2018 and at US$ 1=Ks 1,362 for 31 March Financial Assets and Liabilities Recognition The Bank recognizes loans and advances, deposits and debts issued on the date of origination. All regular purchases and sales of financial assets with delivery of assets within the time period established by regulation or market convention are recognized on the settlement date. De-recognition Financial assets are de-recognised when the Bank s contractual rights to the cash flows from the financial assets expire or when the Bank transfers the financial asset to another party without retaining control or transfers substantially all the risks and rewards of the assets. Financial Liabilities are de-recognised when the Bank s obligations specified in the contract expire or are discharged or cancelled. Offsetting Financial assets and liabilities are set off and the net amount presented in the balance sheet when, and only when, there is a legally enforceable right to set off the amounts and an intention to settle on a net basis or realize the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted by the accounting standards, or for gains and losses arising from a group of similar transactions such as in the Bank s trading activity. 9

12 3.3 Loans Loans and receivables are non-derivative financial assets with fixed and determinable payments that are not quoted in an active market. They arise primarily from the Bank s banking business of providing lending directly to its customers, participation in loans with other lenders that are not quoted in an active market. They are recognized when cash is advanced to borrowers, and are subsequently re-measured at amortised cost using effective interest method less impairment allowance for loans. 3.4 Cash and Cash Equivalents Cash and cash equivalents comprise cash on hand, balances, money market placements and reserve repo transactions with central banks which are generally short-term financial instruments or repayable on demand. 3.5 Fixed Assets and Depreciation Leasehold building Improvements and Equipment Leasehold building Improvement and Equipment are stated at cost less accumulated depreciation. Depreciation is provided on a straight line basis starting from the month of purchase so as to write off the cost of Leasehold building Improvement and Equipment following the estimated useful life of each component. The estimated useful lives of the Leasehold building Improvement and Equipment are as follows: Computers Office Equipment Fixtures & Fittings Renovation Leasehold Premises 3 years 5 years 5 years 3 years 3.6 Operating Lease Payments Payments made under operating leases (net of any incentives received from the lessor) are taken to the income statement on a straight-line basis over the term of the lease. When a lease is terminated before its expiry, any payment required to be made to the lessor by way of penalty is recognized as an expense in the period when the termination takes place. 10

13 3.7 Deposits of non-bank customers Deposits of non-bank customers include current and checking account, saving deposits, foreign currency call deposits, term deposits and structured deposits. These are recorded at the amount received and are subsequently measured at amortised cost using the effective interest method. Interest on demand deposits are computed daily by the system and credited to the customers accounts at month end. Interest on term deposits is accrued daily as interest payable and credited to the customers accounts on maturity dates. 3.8 Other Liabilities and Provisions Provisions are recognized when there is a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. 3.9 Interest Income and Expense Interest income and expense are recognized in the income statement using the effective interest method. The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected life of the financial instruments or, when appropriate, a shorter period to the net carrying amount. When calculating the effective interest rate, significant fees and transaction costs integral to the effective interest rate, as well as premiums or discounts, are considered Fee and Commission Fees and service incomes are recognized as and when services are provided Taxation Tax expense is determined on accounting profit for the year. Current tax is the expected tax payable on the taxable income or loss for the year, using tax rate enacted or substantively enacted at the reporting date. 4. Leasehold Building Improvements and Equipment Leasehold Building Improvements and Equipment are stated at cost less accumulated depreciation. Details are shown in below schedule. 11

14 Computers Office Equipment Furniture and Fixture Renovation Leasehold Premises Total Cost Balance as at 01 April ,671, ,315, ,780, ,877,659 1,539,645,512 Additions 14,227,762 5,245,696 19,473,458 FX translation adjustment (6,476,187) (2,385,233) (2,513,388) (19,148,275) (30,523,083) Balance as at 31 March ,423, ,176, ,266, ,729,384 1,528,595,887 Accumulated Depreciation Balance as at 01 April ,194,529 43,216,760 49,253, ,158, ,823,235 Additions 109,215,592 24,005,722 22,637, ,802, ,660,902 Disposals FX translation adjustment (4,845,016) (744,037) 1,239,653 (18,659,077) (23,008,477) Balance as at 31 March ,565,105 66,478,445 73,129, ,302,123 1,360,475,660 Carrying Amount Balance as at 31 March ,477,109 77,099,102 77,527, ,718, ,822,277 Balance as at 31 March ,858,108 56,697,880 51,136,978 16,427, ,120, Loan to Customers and Interest receivable Details are as follow: 31-March March Short -term Loan 77,316,942, ,118,603, Term Loan Corp 5,712,868, ,400, Syndication Loan 40,992,615, ,486,680, Invoice Financing 2,140,742, ,781,923, Trust Receipt 4,556,292,

15 Due from FI-Term Loan (COF) 9,100,000, Interest receivable-short-term Loan 306,262, ,540, Interest receivable-term Loan Corp 27,926, ,034, Interest receivable-syndication Loan 498,821, ,243, Interest receivable-invoice Financing 23,316, ,941, Int Rec -Trusts receipts 25,993, Int Rec-Term Loan Fin Institution 167,610, Total 140,869,393, ,833,368, Interbank and Money Market Items Details are as follow: Central Bank of Myanmar 70,724,054, ,302,595, Co-Operative Bank Limited 2,818,044, ,318,872, Kanbawza Bank 664,309, ,273,087, Myanma Apex Bank Limited 143, , Myanma Investment and Commercial 69,382, Bank 11,677,783, AYA Bank Limited 1,893,269, ,358, Myanma Oriental Bank 1,216, ,663, Bangkok Bank 13,349,994, Mizuho Bank 3,782,000, May Bank 13,300,000, ANZ Bank 6,550,000, UOB Bank 1,000,000, Due from OCBC Bangkok Branch 356, ,383, Due from HO Deposit 536,102,389, ,159,591, HO Nostro (OCBC Singapore) 1,261,782, ,823,512, Interest Receivable 324,304, ,665, Total 651,841,248, ,013,660,

16 7. Other Assets Details are as follow: Prepaid Expense-General 275,850, ,322, Rental Deposit 199,956, ,330, Sundry Deposit 16,142, ,566, Sundry Debtor - 150, Derivative receivables 4,520, ,200, Spot Trade (44.50) Total 496,469, ,569, Cash & Cash Equivalents Details are as follow: Cash in hand () 1,000, ,000, Cash in hand (USD) 1,334, ,362, Total 2,334, ,362, Deposit Details are as follow: Current Accounts-LCY 20,182,961, ,524,568, Current Accounts-FCY 70,709,215, ,795,200, Other Deposit - 102,053, Margin Deposit Trade Facility 7,742,779, ,809,126, Fixed Deposits 79,479,045, ,492,279, Call Deposits-FCY 376,100,777, ,827,727, Total 554,214,779, ,550,955,

17 10. Inter Bank and Money Market Items Details are as follow: Due to Banks-Vostro 3,173,766, ,988,268, Due to Local Banks-Term Deposit 42,082,000, ,000,000, Total 45,255,766, ,988,268, Other Liabilities Details are as follow: Employee benefit obligation 49,984, ,581, HO-ESPP Payable 3,593, ,823, Audit Fees 11,998, ,025, Sundry accruals 620,070, ,926, Variable Bonus 122,715, ,295, Provident Fund 4,129, ,920, Interest payable-fixed Deposit 117,096, ,255, Interest payable-call Deposit - 1,384, Interest payable-local Banks Term Deposit 358,508, Provision for annual bonus 35,224, Withholding Tax-customer - 4, Sundry Creditors 1,755, Due to HO-Advance payment - 20,854, Derivative payables - 2,499, Provision for tax consultation 19,365, Total 1,344,443, ,572,

18 12. Regulatory capital Details are as follow: Details are as follow Regulatory Capital (USD rate 1,075) Regulatory Capital 181,875,000, ,875,000, Total 181,875,000, ,875,000, General Reserve for Loan Loss 2,796,389, It represents general loan loss reserve of 2% on total outstanding loan balances as at 31 March The reserve amount is set up in compliance with Section 39 (a) of Myanmar Financial Institutions Law. 14. Statutory Reserves It represents the reserve fund amount 1,008,948, was maintained by the Branch Office in accordance with Section 35 (a) of Myanmar Financial Institutions Law. (i.e 25% of net profit for the financial year ). 15. Employee Expenses Salaries 1,970,177, ,693,913, New Horizon Awards - 916, Exec Bonus Others - 14,135, Overtime 3,499, ,093, Staff Bonus-Variable 651,384, ,556, Outstation Allowance 222,966, ,988, Other Allowance 2,031, ,646, Provident Fund 38,589, ,556, Payroll Tax 257,483, ,242, Staff Child Education Allowance 28,796, ,903, Allowance Transportation 111,304, ,761, Allowance Housing 263,588, ,586, Medical Expense 36,765, ,356,

19 Staff Fidelity Insurance - 2,402, Other Staff Insurance 11,106, ,515, Staff Welfare-Dinner & Dance 1,805, ,927, ESPP Expenses 1,398, ,026, Staff Refreshments 3,540, ,644, Staff Welfare Expense 240, , Staff Welfare -Long Services Award 252, , Staff Welfare -Recreation Club 1,360, ,310, Staff Welfare Dental 1,246, , Staff Training 1,707, ,273, Health Screening 1,240, , Staff Welfare-Worklife Balance 306, ,346, Staff Relocation Expense 27,390, ,332, Annual Wages Supplement 227,846, ,735, Provident Fund for Variable Bonus 17,099, ,561, Staff Meeting Expense 169, ,074, Staff Social Security 3,977, ,364, Levies-Skill Development 560, , Total 3,887,838, ,848,657, Premises and Equipment Expenses IT Operations Charge in (BAU) 56,968, ,184, IT Development Charge-in (21,704,290.28) 202,462, IT Charge Development Project 28,917, ,447, IT Shared Services Charge in 38,102, ,757, IT Development Charge in - Projects 769, ,675, Application Software Licence Fee 217, ,099, IT Operations Completed Projects Charge in (Software) 65,808, ,665, IT Charge in - Project -Hardware 2,686, ,656, IT Charge in - Project - Software 1,511, ,712, IT Charge in Margin 9,631, ,261, Internet Related 303,750, ,974, Depreciation-Office Equipment 24,005, ,458,

20 Depreciation Furniture & Other Equipment 22,637, ,926, MAINT Bank Premises 3,598, ,319, Water, Light, Gag 22,127, ,182, Amortisation of Rent Cost 321,802, ,357, Flowers & Plant - 186, Security Expense-Premises 5,123, ,968, CAP Item Expense-Office Equipment 315, ,088, MAINT- Office Equipment 7,684, ,744, Rent & Rates (EQUIP) 2,304, ,623, Rent & Rates 968,456, ,531, Depreciation -Computers 109,215, ,678, MAINT- Computer Hardware 2,231, ,856, Telephone 2,363, ,414, Motor Vehicle -Rent/Lease Expense 39,540, ,059, Software Maintenance charges 536, , Total 2,018,603, ,564,967, Tax and Duties Stamp Duty 2,460, ,044, Withholding Tax for Outsourcing Services 24,655, ,591, Total 27,115, ,635, Other Expenses Tax Consultation Fees 25,472, ,921, Printing & Stationery 19,272, ,253, Postage & Courier 17,222, ,519, Running Expense - Motor Vehicle 8,978, ,143, Air Fares 5,713, ,102, Hotel & Meals 5,501, , Local Transport Expense 1,560, ,858, Advertisement 49,243, ,466, Business Promotion 34,674, (559,504.68) 18

21 Entertainment 5,262, ,799, Sales Promotion -Gifts 2,075, ,114, News, Periodical & Book 1,559, ,485, Subscription to Trade Assoc 1,728, ,832, Insurances 17,457, ,788, W/Off - Operational Losses 9, Misc Expense Service Charge 182, , Legal Fees 28,301, ,498, Donation 1,401, , Sponsorship & Biz Events 69,109, ,296, Handphone charges 3,343, ,823, Banking License Fees 101,993, ,150, Total 400,061, ,661, General Provision for bad debts Details are as follows: Reverse previous year s loan loss provision (593,192,472.00) Provision made during the year 2,840,395, Total 2,247,203, General loan loss provision made during the financial year was recorded on the historical cost basis. 20. Financial Risk Management Risk management is integral to the whole business of the company. The main risk arising from the Company s financial instruments are credit risk, market risk and liquidity risk. The management shall review and agree policies for managing each of these risks to ensure that an appropriate balance between risk and control is achieved. 21. Comparative Figures Figures of the year ended 31 March 2017 were restated and shown in the financial statements to facilitate comparison. 19