English - Foreign Trade Bank of Cambodia

3Foreign Trade Bank of Cambodia Annual Report 2009

Page

General information 1

Mission statement / Our vision 1

Corporate profile 2

Organisation chart 2

Four years’ financial highlights 3

Business performance 4

Chairman’s message 5

General Manager’s message 6

1Businessoverview

The Board of Directors 7

The board members 8

The executive management 7

Board of Directors’ report 9

Report of the directors 11

Report of the independent auditors 13

Balance sheet 14

Income statement 15

Statement of changes in equity 16

Statement of cash flows 17

Notes to the financial statements 18

Contents

2Corporate governance

Annual auditfinancial statements3

Foreign Trade Bank of Cambodia Annual Report 20091

Corporate profileGeneral information

Foreign Trade Bank of Cambodia Annual Report 2009 2

Our visionTo be the ‘bank of choice’ in Cambodiaand be recognised as: n providing shareholders with a healthy

return on investment (ROI)n an employer of choice, based on

remuneration, working conditions anddevelopment opportunities

n providing best value, choice ofproducts, security and levels of servicefor our customers

n contributing to Cambodia’s economicdevelopment through theimplementation of the RoyalGovernment’s financial sector strategy.

The Foreign Trade Bank of Cambodia (FTB)was established on 10 October 1979 undersub-decree no.1213 of the RevolutionPeople’s Council of Cambodia to:n perform banking and business functionsn manage foreign currenciesn conduct international settlementsn make foreign trade loansn contribute to the protection of the

national currency and State assetsn strengthen economic and cultural

communications with other countriesn operate as a separate legal entity from

the Government.

From liberation on 7 January 1979 until 1999,FTB operated as a department within theNational Bank of Cambodia (NBC).Appropriate business systems andprocedures were established and FTBdeveloped active roles in local and overseasmarkets which, in turn, contributed to therestoration of Cambodia’s economy. Over aperiod of time FTB won the trust of its

customers and built the necessary technicalcapacity required to run a profitable business.

In 1999, in order to allow the NBC to focuson its role as a central bank and monetaryauthority and to allow FTB to conductautonomous business operations with equalstatus to other commercial banks,privatisation was identified as a key reformand was implemented using the frameworkof the Royal Government’s Program onPoverty Reduction.

On 1 August 2000, FTB’s status changed tothat of a state-owned commercial bank. On1 August 2002, an 80% share of ownershipin FTB was transferred to the Ministry ofEconomy and Finance, with NBC retainingthe remaining 20% share.

FTB changed from a state owned bank to acommercial bank operating as a joint venturebetween the State and private enterprise on28 October 2005. Under the new structure,

the shareholders were Canadia Bank PLCwith a 46% share, ING Holding Co., Ltd with44% and the Ministry of Economy andFinance holding the remaining 10% of thetotal capital.

In April 2009 Lokchumteav Ouk Malystepped down from her position of GeneralManager after 30 successful years.

In accordance with recommendations fromCambodia’s Central Bank, Canadia Bankreduced its share in the Bank to 15.22% inJuly 2009. Of the shares sold by CanadiaBank, 15.39% were purchased by Mrs. KimTiek and 15.39% by Mrs. Chhay Kimbouy.The National Bank of Cambodia recognisedthese new shareholders in letter No. B-7-09-154, dated 26 August 2009. Independentboard members Mrs. Sok Chan Sona and Mr.Kang Y joined the board in 2007 and 2008respectively and Mr. Nuon Sam Ean wasnominated to the board as a thirdindependent member in July 2009.

Mission statementTo be the ‘bank of choice’ in Cambodia, in terms of customerconfidence, service levels and product range. We will achieve this byproviding first class services and innovative and appropriate financialproducts which not only create, but maximise, value for our customersand shareholders.

As an organisation, we strive for success, excellence and only the higheststandards in everything we do. By recruiting top quality staff, creating aproductive workplace, providing a healthy learning environment andrecognising and rewarding our people, we will build a team that is readyto lead the Bank into a successful new era.

“The ‘bank ofchoice’ in Cambodia,in terms of customerconfidence, servicelevels and product

range.”

“...we strive forsuccess, excellence

and only thehighest standardsin everything we

do...”

“...employer ofchoice, based on

remuneration,working conditionsand development

opportunities.”

Status: Commercial bank which is a joint venture between the State and private enterprise

Head office: No.3, Street Kramuon Sar, Sangkat Phsar Tmey 1, Khan Daun Penh, Phnom Penh, Kingdom of Cambodia. Phone: +855 (0)23 724 466 / 722 466 / 725 266 Fax: +855 (0)23 426 108 / 426 410 Email: [email protected] www.ftbbank.com

Registered capital: USD 13,000,000.00. Increased to USD 33,000,000.00 on 18 February 2010

First bank license: License no. 16, dated 4 January 2001

Registered amendments: An amendment to the Memorandum of the Articles of Association was registered at NBC on 12 June 2006

Commercial registration: No. Co 5280/00, dated 16 August 2000 No. Co 8835/06M, dated 21 June 2006. Re-registered 19 June 2007.

Organisation chart

Deputy GeneralManager

Samdech PanBranch

HR

Secretary &Assistants

ALCOCommittee

Board ofDirectors

Credit


CreditCommittee

ComplianceOfficer

CustomerService

International

Audit

Committee

IT/EDP


AccountingMarketing Admin.

GeneralManager

Internal

Audit


Four years’ financial highlights


Summary of the balance sheet (US Dollars)2009 2008 2007 2006

Total assets 271,759,672 262,691,555 219,994,181 218,848,353

Net loans and advances to customers 95,765,360 93,967,174 65,475,143 42,411,102

Other assets 175,994,312 168,724,381 154,519,038 176,437,251

Total liabilities 230,491,256 226,706,365 191,330,644 197,867,506

Deposits 226,229,038 222,906,600 188,087,859 196,158,405

Other liabilities 4,262,218 3,799,765 3,242,785 1,709,101

Capital 13,000,000 13,000,000 13,000,000 12,159,533

Reserves and retained earnings 28,268,416 22,985,190 15,663,537 8,821,314

A summary of the income statement (US Dollars)2009 2008 2007 2006

Net interest (income) 8,112,037 8,612,015 8,932,451 6,162,053

Operating income before extensions of credit 10,852,969 8,486,931 9,215,739 6,546,492

Profit (before income tax) 6,409,880 9,146,333 9,608,363 2,787,840

Net profit for the year 5,322,826 7,321,651 7,682,690 2,256,909

Key ratios 2009 2008 2007 2006Return on capital 40.94% 56.32% 59.10% 18.56%

Return on assets 1.96% 2.79% 3.49% 1.03%

Return on shareholders’ equity 12.90% 20.35% 26.80% 10.76%

Solvency ratio 32.02% 28.28% 31.46% 27.73%

Liquidity ratio 111.46% 111.81% 147.45% 165.86%

Interest income to total assets 4.83% 4.80% 5.61% 4.18%

Total loans (gross) to total deposits 46.48% 44.06% 37.11% 25.31%

Growth in interest income 4.01% 2.17% 35.02% 43.09%

Growth in total deposits 1.49% 18.51% -4.11% 36.57%

Growth in total loans (gross) 7.06% 40.71% 40.58% 47.16%

Growth in shareholders’ equity 14.68% 25.54% 36.62% 11.79%

Growth in total assets 3.45% 19.41% 0.52% 33.85%

Business performance


FTB has been proudly serving customers for30 years and 2009 was certainly one of themost challenging in recent times!Fortunately, in 2007, our board membersmade a decision not to rely on the realestate and construction sectors for businessdevelopment and actively pursuedopportunities in other sectors. As a result,whilst FTB has not been immune to theeconomic downturn, we have managed toperform ahead of shareholders’expectations and remain solid in terms ofprofitability, liquidity and capital base. Ourreputation as Cambodia's most experiencedand established bank remains intact and wehave been able to continue delivering a safeand secure banking environment for ourcustomers.

From the shareholders’ point of view wehave outperformed expectations financiallyand, whilst net profits were slightly lowerthan recent years, we are satisfied with ourfinancial accomplishments in 2009:n Profit after tax amounted to more than

USD 5 million.n Shareholders' equity increased to USD

41.3 million, exceeding new minimumcapital requirements set by NBC.

n Gross loans and advances to customersclimbed to more than USD 105 million.

n Total assets rose by almost 4% to USD272 million, when compared to 2008.

n Asset quality improved; non-performingloans were reduced to 5.6%.

Our solid financial performance can largelybe attributed to stringent cost controlpolicies, which we plan to maintain duringthese uncertain times.

Other notable achievements include:n The opening of our Samdech Pan branch

to serve customers in central andsouthern Phnom Penh.

n The successful installation of state-of-the-art ATMs.

n The launch of an internet bankingservice featuring an EDC bill payingfunction.

At the time of writing, there are encouragingsigns that the national economy is startingto regain confidence. We recognise thatsmall and medium sized businesses arecrucial to the continued development ofCambodia’s economy and, whilst we willcontinue to provide our products, services,

5 Foreign Trade Bank of Cambodia Annual Report 2009

Dear customers, shareholders and otherstakeholders,

On behalf of the Board of Directors of FTB,it is my privilege to present to you FTB'sAnnual Report for the financial year endedDecember 31, 2009.

Since commencing operations as astate/private joint venture commercial bankin 2005 our board members have been busymanaging many changes; leading the waywith a new commercial corporate culture,ensuring compliance with new Prakasguidelines issued by the National Bank ofCambodia and guiding the bank safelythrough the fall out of the internationaleconomic crisis.

One of the most significant changes duringthe review period was the departure ofLokchumteav Ouk Maly from the bank afteralmost 30 years of success as our generalmanager. On behalf of myself, the Board ofDirectors, shareholders, employees andcustomers, I wish to take this opportunityto pass on our heartfelt thanks toLokchumteav Ouk Maly for her outstandingand valuable contributions to the bank and

wish her every success for the future. Mr.Gui Anvanith has succeeded LokchumteavOuk Maly in the role of General Managerand we wish him every success.

2009 has been a challenging year foreveryone but hard work, commitment,attention to cost control and a prudentattitude to lending during these uncertaintimes has positioned us well for the future.Of course the economy was not the onlyissue of note during the review period,corporate governance was also on theagenda. The Board of Directors madesubstantial changes in this area in order toensure ongoing compliance with the latestguidelines from NBC. Specifically we have:n Reduced the holdings of Canadia Bank,

from 46% to 15.22%.n Appointed a third independent board

member with significant central bankexperience.

n Established a new audit committee andnominated a new compliance officer.

n Adjusted the focus of our CreditCommittee to include increased riskassessment capability.

Our after-tax profits for the review period

amounted to more than USD 5 millionwhich is an achievement we are proud of,bearing in mind the challenges of theperiod! Whilst this figure is lower than profitsposted in previous years, it exceedsshareholders’ expectations and takes intoaccount increased expenditure necessary torespond to new guidelines from NBC.

Our 2009 results prove that we aredelivering what our customers want and,despite the challenges of recent times, weare optimistic and confident about thefuture.

As usual, I wish to take this opportunity toexpress my warmest thanks to all our staffand their managers for their contributionand commitment and to thank our valuedcustomers for the support and confidenceyou continue to show in us. I wish you allevery success for the future.

Sincerely yours,

Oknha Pung Kheav Se, Chairman

General manager’s messageChairman’s message

“... we havemanaged to

exceedshareholders’

expectations andremain solid in

terms ofprofitability,liquidity and

capital base. ...”

facilities and expertise to large corporate andinstitutional business, we will also expand tosupply the needs of smaller enterprises. Withthese aims in mind, we will:n Open new branches in strategic

locations that deliver maximumconvenience to core customers, such asthe Autonomous Port of Sihanoukvilleand Siem Reap Province.

n Set up a strategic marketing team todevelop promotional activities anddistribution channels.

n Review pricing policies to ensure they arecompetitive.

n Continue to develop our understandingof our customers’ needs and maintainour focus on building long termcustomer relationships.

n Expand services to offer the best andwidest possible choice to our customers.

n Broaden the way we use our capital toincrease and maximise profitability.

n Implement a staff developmentprogramme to enhance individualtalents, encourage professionalism andensure the right human resources are inplace to meet the challenges andopportunities of the future.

n Contribute to the sustainabledevelopment of the country throughresponsible lending policies.

It has been an exciting and challenging yearand I would like to express my gratitude toour shareholders, Chairman and Board ofDirectors for skillfully navigating FTB safelyand successfully through 2009. I also wishto thank the whole FTB team for theircontribution towards our solid performanceduring this year; it is the professionalism anddedication of this team that has made FTBas successful as it is today.

As always, we want to express our warmestappreciation for the continuing support andconfidence our valued customers show inus. We hope to have the honour andpleasure of serving you for another 30years… and beyond!

Yours sincerely,

Gui Anvanith, General Manager


The Board of Directors The board members


The Foreign Trade Bank of Cambodia is led by the Board of Directors. This is the supreme body, and it represents the general assembly ininitiating ordinary and extraordinary meetings of the shareholders.

The Board of Directors consists of eight members. The current members are listed below:

Oknha Pung Kheav Se Chairman of the Board of Directors Joined the Board in 2005

Oknha Lim Bun Sour Member of the Board of Directors Joined the Board in 2005

H.E. Mey Vann Member of the Board of Directors & representative of MEF Joined the Board in 2002

Mr. Gui Anvanith Member of the Board of Directors Joined the Board in 2005

Mrs. Ung Polyna Member of the Board of Directors Joined the Board in 2005

Mrs. Sok Chan Sona Member of the Board of Directors - Independent Joined the Board in 2007

Mr. Kang Y Member of the Board of Directors - Independent Joined the Board in 2008

Mr. Nuon Sam Ean Member of the Board of Directors - Independent Joined the Board in 2009

The executive managementThe Executive Board is responsible for running the Bank’s day-to-day business.

The Board of Management (the Executive Board) consists of five members:

Lokchumteav Ouk Maly General Manager (Resigned in April 2009)

Mr. Gui Anvanith General Manager

Mrs. Ung Polyna Deputy General Manager

Mr. Tim Bophal Deputy General Manager

Ms. Nuon Borany Deputy General Manager

Assets & Liabilities Committee (ALCO) Audit CommitteeALCO is comprised of eight members, as follows: The Audit Committee is comprised of three

members, as follow:

Mr. Gui Anvanith Board Member Chairman Mr. Nuon Sam Ean Independent Director, Chairman

Mrs. Ung Polyna Deputy General Manager Member Mrs. Sok Chan Sona Independent Director, Member

Mr. Tim Bophal Deputy General Manager Member Mr. Try Chanthy Head of Internal Audit, Secretary

Ms. Nuon Borany Deputy General Manager Member

Head of International Dept. Member

Head of Customer Service Dept. Member

Head of Accounting Dept. Member

Head of Credit Dept. Member

Credit & Risk CommitteeThe Credit Committee comprises of the following members:

Oknha Lim Bun Sour Board Member Chairman

Mr. Gui Anvanith General Manager Member

Mrs. Ung Polyna Deputy General Manager Member

Mr. Tim Bophal Deputy General Manager Member

Oknha Lim Bun SourBoard member

H.E. Mey VannBoard member

Oknha Pung Kheav SeChairman

Mrs. Ung PolynaDeputy General Manager

Mrs. Sok Chan SonaBoard member

Mr. Gui AnvanithGeneral Manager

Mr. Nuon Sam EanBoard member

Mr. Kang YBoard member


Cambodia, which is the supervisoryauthority for all commercial banks. Besidesthese permanent regulatory controls, theBank is also subject to an annual audit byan independent external auditor. Thisauditor inspects all financial aspects of ouroperation, delivers a report outlining theirfindings and certifies our accounts as beingcompliant with all regulatory requirements.

CustomersThe Foreign Trade Bank of Cambodiamakes every effort to provide reliable andefficient services to our customers at alltimes. Despite this, we recognise that thereis always room for improvement and wetherefore welcome comments from ourcustomers on suggested improvements.We are committed to evaluating and actingon these customer suggestions wheneverpossible.

StaffIn order to be the premier bank inCambodia, the Board of Directors andshareholders understand that recruitingand retaining top quality employees, interms of knowledge, skills, expertise andmotivation is a top priority.

Staff remuneration, reward anddevelopment obviously play a key role inour ability to do this. All our staff havebenefited from either in-house or overseastraining during the review period, which ishelping to deliver a multi-skilled workforcecapable of responding effectively to thechanges facing the banking industry inCambodia today.

Social and community contributionsAs usual the Bank has continued itscontributions to community and socialcauses during 2009. Our main focus, asusual, has been on the Cambodian RedCross but we have also contributed tomany smaller charitable organisations andfunded some traditional events such assponsoring a boat team during the WaterFestival.

Compliance with the laws andregulations of the National Bank ofCambodiaThe Foreign Trade Bank of Cambodia fullycomplies with all the laws and regulations

of the National Bank of Cambodia,including:n The implementation of the new 'Chart

of Account' of National Bank ofCambodia.

n Liquidity Ratio, Prakas No. B7-04-207.n Minimum Capital Requirement, Prakas

No. B7-00-39.n Net Worth, Prakas No. B7-00-47.n Solvency Ratio, Prakas , B7-00-46, No.

B7-04-206, and B7-07-135.

n Asset Classification and Provisioning B7-09-074.

n Fixed Assets, Prakas No. B7-01-186.n Foreign Currency Net Open Position,

Prakas B7-07-134.n Large Exposures, Prakas B7-06-226.n Loans to Related Parties, Prakas B7-02-

149.

9

Board of Directors’ report


Internal auditThe Foreign Trade Bank has an internalaudit department whose main function isto assist the Board of Directors inmonitoring the internal controls of alldepartments at the Bank. Through the useof regular evaluations and controls, thedepartment assures that procedures andprocesses are followed in respect oftransparency, good governance andprofessionalism. The department alsomakes recommendations for operationalimprovements where necessary.

Risk managementFTB's Assets and Liabilities Committee(ALCO) is responsible for managing theBank's risks, reporting on risk exposure andensuring that the Bank's risks comply withboth internal regulations and therequirements of the National Bank ofCambodia, especially in regard to solvencyand liquidity. It is also their responsibility toensure that the business environment isconstantly monitored and analysed so thatnecessary amendments to the Bank's riskpolicies or procedures can be reviewedaccordingly and any changes implementedin a timely and well planned manner.

Following the roll out of the newlyreviewed risk management proceduresduring 2007, senior managers haveconcentrated on the implementation andevaluation of the newly instatedprocedures that were introduced, whichincluded:n A daily review of the liquidity report to

ensure tighter controls.n A robust contingency plan for use in

the event of liquidity shortfalls.n Ongoing maintenance of a healthy

liquidity flow and compliance withPrakas No. B07-00-38 issued by theNational Bank of Cambodia.

n Where necessary, continuousassessment of, and adjustment to,policies and procedures for themanagement of interest rate risk usinggap analysis.

n Limiting foreign exchange activities andthe implementation of a procedure toprevent the mismatch of currencyassets and liabilities.

n Transparent reporting lines to and fromall departments, including from the

Internal Audit team to the Board ofDirectors.

n Following the new internal auditpolicies and procedures which adhereto the Bank's internal control systems.

n Distribution of an internal manual forthe Bank's staff members to use as aguide to routine operating practicesand procedures.

n Implementing an extensive trainingprogram to enable staff to develop theirrisk management competencies.

Significant changes during the year2009 was the Bank's most challenging yearsince its change in operating status but westill managed to outperform shareholderexpectations during the review period.Financial milestones included: n A healthy after tax profit of more than

USD 5 million.n The growth of shareholders' equity to

USD 41.3 million, exceeding newminimum capital requirements set byNBC.

n An increase in gross loans andadvances to USD 105 million.

n An increase in total assets to USD 272million.

n Total deposits stood at over USD 226million from almost 13,000 accounts atthe end of the review period.

n Asset quality improved; non-performing loans were reduced to5.6%.

n Capital increased to USD 33 million.

Other significant achievements during2009 included the opening of the SamdechPan Branch, the installation of state-of-the-art ATMs and the introduction of internetbanking complete with an EDC bill payingfunction.

Board focus and commitmentAs well as steering the Bank throughturbulent financial waters our Board ofDirectors has paid particularly attention tounderstanding, supporting and ensuringcompliance with all new Prakas guidelinesissued by NBC in 2009. As a result CanadiaBank has reduced its share in FTB from46% to 15.22% and two newshareholders; Mrs. Kim Tiek and Mrs.Chhay Kimbouy, each took a 15.39% stakein FTB. A third independent board memberwith significant central bank experience hasalso been appointed. A new AuditCommittee has been established, acompliance officer nominated and thefocus of the Credit Committee has beenbroadened to incorporate greater riskassessment capability.

Code of ethicsThe Foreign Trade Bank of Cambodia is avery well respected organisation. To ensurewe retain our good reputation, FTB willdemonstrate the highest level of ethical,social and moral values at all times. In orderto assist staff members in their day to dayadherence to these values, FTB hasdeveloped a series of written best practicepolicies and procedures for staff to follow.These procedures outline correct workpractices, company regulations and ethicalpositioning. These booklets are beingsupplemented with ongoing staff training.

Independence and transparencyThe Foreign Trade Bank of Cambodia is afully independent institution. The ForeignTrade Bank of Cambodia operates as acommercial bank and, as such, its businessactivities are subject to periodic, on-site oroff-site inspections by the National Bank ofCambodia.

To ensure operational transparency, theForeign Trade Bank of Cambodia'soperations are monitored by its InternalAudit team. In addition, we are under theregulatory control of the National Bank of


n H.E. Mey Vann, Member (executive)n Mr. Gui Anvanith, General Manager n Mrs. Ung Polyna, Deputy General

Manager n Mrs Sok Chan Sona, Member (non-

executive)n Mr. Kang Y, Member (non-executive)n Mr. Nuon Sam Ean, Member (non-

executive).

Directors’ benefitsDuring and at the end of the financial year,no arrangements existed to which theBank is a party with the object of enablingDirectors of the Bank to acquire benefits bymeans of the acquisition of shares in ordebentures of the Bank or any other bodycorporate.

Since the end of the previous financial year,no Director of the Bank has received orbecome entitled to receive any benefit(other than a benefit included in theaggregate amount of emolumentsreceivable by the Directors as disclosed inthe financial statements) by reason of acontract made by the Bank or a relatedcorporation with a firm of which theDirector is a member, or with a company inwhich the Director has a substantialfinancial interest other than as disclosed inthe financial statements.

Directors’ responsibility in respect ofthe financial statementsThe Board of Directors is responsible forascertaining that the financial statementsare properly drawn up so as to give a trueand fair view of the financial position of theBank as at 31 December 2009, and of theresults of its operations, change in equityand its cash flows for the year then ended.In preparing these financial statements, theBoard of Directors is required to:i) adopt appropriate accounting policies

which are supported by reasonable andprudent judgments and estimates andthen apply them consistently;

ii) comply with Cambodian AccountingStandards and the guidelines of theNational Bank of Cambodia relating tothe preparation and presentation offinancial statements or, if there havebeen any departures in the interest oftrue and fair presentation, ensure that

these have been appropriatelydisclosed, explained and quantified inthe financial statements;

iii) maintain adequate accounting recordsand an effective system of internalcontrols;

iv) prepare the financial statements on thegoing concern basis unless it isinappropriate to assume that the Bankwill continue operations in theforeseeable future; and

v) control and direct effectively the Bank inall material decisions affecting theoperations and performance andascertain that such have been properlyreflected in the financial statements.

The Board of Directors confirms they havecomplied with the above requirements inpreparing the financial statements

Signed in accordance with a resolution ofthe Board of Directors,

Mr. Gui AnvanithGeneral Manager

Ms. Nuon BoranyDeputy General Manager

Date: 29 March 2010

11

Report of directors


The Directors have pleasure in submittingtheir report together with the auditedfinancial statements of Foreign Trade Bankof Cambodia (“the Bank”) for the yearended 31 December 2009.

Principal activityThe Bank operates under regulation of theNational Bank of Cambodia with specialfocus on lending and providing otherfinancial services to the citizenry and smalland medium size enterprises, and toengage in all other activities which theBoard of Directors believes support thisobjective.

There were no significant changes to theseprincipal activities during the financial year.

Financial resultsThe financial results of the Bank for the yearended 31 December 2009 were as follows:

US$Profit before taxation 6,409,880Income tax expense (1,087,054)

Net profit 5,322,826

DividendsNo dividend was declared or paid and theDirectors do not recommend any dividendto be paid for the year under review.

Share capitalOn 15 December 2009, the shareholdersapproved the increase in the Bank’sregistered share capital to US$33,000,000.The increase will be done throughconversion of retained earnings, capitalreserve and reserve for banking risk as at 31December 2008 amounting toUS$18,708,768, US$247,529 andUS$1,043,703 respectively. The approvalfor the proposed increase in share capitalto US$33,000,000 was obtained from theNational Bank of Cambodia (“the NBC”) on18 February 2010.

Based on the capital injection plan dated30 January 2009, the Bank plans toincrease the paid-up share capital to thenew minimum registered capital of KHR150billion (equivalent to US$37.5 million) by theend of 2010 to comply with the PrakasNo.B7-08-193 issued by the NBC on 19

September 2008 through a furtherconversion of profit generated in 2009. TheBank is confident that the additionalconversion will be approved by the NBC.

Reserves and provisionsThere were no material movements to orfrom reserves and provisions during thefinancial year other than as disclosed in thefinancial statements.

Bad and doubtful loans andadvances Before the financial statements of the Bankwere prepared, the Directors tookreasonable steps to ascertain that actionshad been taken in relation to the writing offof bad loans and advances and the makingof allowances for doubtful loans andadvances, and satisfied themselves that allknown bad loans and advances had beenwritten off and adequate allowance hadbeen made for bad and doubtful loans andadvances.

At the date of this report, the Directors arenot aware of any circumstances, whichwould render the amount written off forbad loans and advances, or the amount ofallowance for doubtful loans and advancesin the financial statements of the Bank,inadequate to any substantial extent.

Current assetsBefore the financial statements of the Bankwere prepared, the Directors tookreasonable steps to ensure that any currentassets, other than debts, which wereunlikely to be realised in the ordinary courseof business at their value as shown in theaccounting records of the Bank have beenwritten down to an amount which theymight be expected to realise.

At the date of this report, the Directors arenot aware of any circumstances, whichwould render the values attributed to thecurrent assets in the financial statements ofthe Bank misleading.

Valuation methodsAt the date of this report, the Directors arenot aware of any circumstances which hasarisen which render adherence to theexisting method of valuation of assets and

liabilities in the financial statements of theBank misleading or inappropriate.

Contingent and other liabilitiesAt the date of this report, there does notexist: (a) any charge on the assets of the Bank

which has arisen since the end of thefinancial year which secures theliabilities of any other person, or

(b) any contingent liability in respect of theBank that has arisen since the end ofthe financial year other than in theordinary courses of banking business.

No contingent or other liability of the Bankhas become enforceable, or is likely tobecome enforceable within the period oftwelve months after the end of the financialyear which, in the opinion of the Directors,will or may substantially affect the ability ofthe Bank to meet its obligations as andwhen they fall due.

Change of circumstancesAt the date of this report, the Directors arenot aware of any circumstances, nototherwise dealt with in this report or thefinancial statements of the Bank, whichwould render any amount stated in thefinancial statements misleading.

Items of unusual natureThe results of the operations of the Bankfor the financial year were not, in theopinion of the Directors, substantiallyaffected by any item, transaction or eventof a material and unusual nature.

There has not arisen in the intervalbetween the end of the financial year andthe date of this report any item, transactionor event of a material and unusual naturelikely, in the opinion of the Directors, toaffect substantially the results of theoperations of the Bank for the currentfinancial year in which this report is made.

DirectorsThe Directors who served since the date ofthe last report are:n Oknha Pung Kheav Se, Chairman

(Executive)n Oknha Lim Bun Sour, Member

(executive)


As at 31 December 20092009 2008

Note US$ KHR’000 US$

AssetsCash on hand 5 8,202,157 34,194,793 4,670,555Deposits and placements with banks 6 132,948,727 554,263,243 130,989,108Loans and advances 7 95,765,360 399,245,785 94,221,817Other assets 8 531,909 2,217,529 313,687Foreclosed properties 9 4,371,997 18,226,855 -Statutory deposits 10 27,618,254 115,140,501 30,561,823Deferred tax assets 15 153,830 641,317 -Intangible assets 11 439,394 1,831,834 385,062Property and equipment 12 1,728,044 7,204,215 1,549,502

Total Assets 271,759,672 1,132,966,072 262,691,554

Liabilities and shareholders’ fundsLiabilitiesDeposits from customers and banks 13 226,229,038 943,148,859 218,345,031Other liabilities 14 2,463,667 10,271,028 5,912,080Provision for income tax 15 1,066,757 4,447,310 1,660,451Provision for provident fund and post employment benefits 16 731,794 3,050,849 750,722Deferred tax liabilities 15 - - 38,082

Total liabilities 230,491,256 960,918,046 226,706,366

Shareholders’ fundsShare capital 17 13,000,000 54,197,000 13,000,000Reserves 4,236,822 17,663,311 4,276,420Retained earnings 24,031,594 100,187,715 18,708,768

Total shareholders’ funds 41,268,416 172,048,026 35,985,188

Total liabilities and shareholders’ funds 271,759,672 1,132,966,072 262,691,554

The accompanying notes form part of these financial statements.

13

Report of the independent auditors


To the shareholdersForeign Trade Bank of CambodiaWe have audited the accompanying financial statements of Foreign Trade Bank of Cambodia (“the Bank”), which comprise the balancesheet as at 31 December 2009, and the income statement, statement of changes in equity and statement of cash flows for the yearthen ended, and notes, comprising a summary of significant accounting policies and other explanatory information as set out on pages14 to 39. The corresponding figures presented are based on the financial statements of the Bank as at and for the year ended 31December 2008, which were audited by another firm of auditors whose report dated 30 March 2009 expressed an unqualified opinionon those financial statements.

Management’s Responsibility for the Financial StatementsThe Bank’s management is responsible for the preparation and fair presentation of these financial statements in accordance withCambodian Accounting Standards and the guidelines of the National Bank of Cambodia relating to the preparation and presentationof financial statements. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparationand fair presentation of financial statements that are free from material misstatements, whether due to fraud or error; selecting andapplying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordancewith International Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan andperform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. Theprocedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements,whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation andfair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not forthe purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating theappropriateness of accounting principles used and the reasonableness of accounting estimates made by management, as well asevaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

OpinionIn our opinion, the financial statements give a true and fair view of the financial position of Foreign Trade Bank of Cambodia as at 31December 2009 and of its financial performance and its cash flows for the year then ended, in accordance with Cambodian AccountingStandards and the guidelines of the National Bank of Cambodia relating to the preparation and presentation of financial statements.The accompanying financial statements as at 31 December 2009 and for the year then ended have been translated into Khmer Rielsolely for compliance with the guidelines issued by the National Bank of Cambodia regarding the preparation and presentation offinancial statements. We have audited the translation and, in our opinion, the financial statements expressed in United States Dollarshave been translated into Khmer Riel on the basis as set forth in Note 4 to the financial statements.

For KPMG Cambodia Ltd

Balance sheet


Income statement


For the year ended 31 December 20092009 2008


Interest income 18 13,120,651 54,699,994 12,615,266

Interest expense 19 (5,008,614) (20,880,912) (4,003,251)

Net interest income 8,112,037 33,819,082 8,612,015

Net fee and commission income 20 1,703,405 7,101,496 1,747,563

Other operating income 21 5,437,812 22,670,238 1,552,496

General and administrative expenses 22 (4,400,285) (18,344,788) (3,425,143)

10,852,969 45,246,028 8,486,931

(Allowance for)/reversal of allowance for bad and doubtful loans

and advances 7 (4,443,089) (18,523,238) 659,402

Profit before income tax 6,409,880 26,722,790 9,146,333

Income tax expense 15 (1,087,054) (4,531,928) (1,824,682)

Net profit for the year 5,322,826 22,190,862 7,321,651


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Statement of changes in equity


For the year ended 31 December 20091. Background and principal activitiesForeign Trade Bank of Cambodia ("the Bank") was created following Sub-decree No. 1213 dated 10 October 1979 under the formerregime of the State of Cambodia. In 2000, the Bank was separated from the direct management of the National Bank of Cambodia(“NBC”) in order to transform its permanent identity into a state-owned commercial bank with the features of a Public Economic Enterprisewith an aim to conduct autonomous business operations.

In January 2001, the Bank obtained a banking license from the NBC to operate as a commercial bank in the Kingdom of Cambodia fora period of three years starting from 4 January 2001. This was the first license granted to the Bank to operate as a separate legal entityindependent from the NBC’s direct management.

On 31 December 2002, the Ministry of Economy and Finance (“MEF”) announced, through a Statement of Intent Privatisation of theBank as part of the reform of the financial sector of the Royal Government of Cambodia.

On 8 January 2004, the Bank obtained its second banking license for a period of three years starting from that date. The Bank holds acommercial banking license which was renewed for an indefinite period on 21 December 2006.

On 28 October 2005, the shareholders of the Bank represented by the Privatisation Committee entered into a sale agreement withCanadia Bank and ING Holding Company. The NBC sold its 20% shareholding in the Bank and MEF reduced its 80% shareholding to10%. The Bank’s Memorandum and Articles of Association were revised twice to reflect the change in shareholders and Board ofDirectors, first on 23 May 2006 and later on 30 May 2007.

The Bank is principally engaged in all aspects of banking business and the provision of related financial services.

The Bank had 116 (31 December 2008: 96) employees as at 31 December 2009.

2. Basis of preparation (a) Statement of compliance The financial statements have been prepared in accordance with Cambodian Accounting Standards and the guidelines of the NationalBank of Cambodia (“NBC”) relating to the preparation and presentation of financial statements.

The financial statements of the Bank were authorised for issued by the Board of Directors on 29 March 2010.

(b) Basis of measurement The financial statements of the Bank have been prepared on the historical cost basis.

(c) Functional and presentation currencyThe national currency of Cambodia is the Khmer Riel (“KHR”). However as the Bank transacts and maintains its accounting recordsprimarily in United States Dollars (“US$”) management has determined the US$ to be the Bank’s measurement and presentation currencyas it reflects the economic substance of the underlying events and circumstances of the Bank.

Transactions in foreign currencies are translated into US$ at the exchange rate ruling at the date of the transaction. Monetary assetsand liabilities denominated in currencies other than US$ at the balance sheet date are translated into US$ at the rates of exchangeruling at that date. Exchange differences arising on translation are recognised in the income statement.

(d) Use of estimates and judgementsThe preparation of financial statements requires management to make judgements, estimates and assumptions that affect the applicationof accounting policies and the reported amounts of assets, liabilities, and income and expenses. Actual results may differ from theseestimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the yearin which the estimates are revised and in any future periods affected.

Key accounting estimates and judgements applied in the preparation of the financial statements include estimates of recoverable amountfor loans and advances which have a separate accounting policy stated in Note 3(e).

3. Significant accounting policiesThe following significant accounting policies have been adopted by the Bank in the preparation of these financial statements.

17

Statement of cash flows


For the year ended 31 December 20092009 2008


Cash flows from operating activitiesNet cash generated from/(used in) operating activities 23 29,375,124 122,464,892 (8,884,734)

Cash flows from investing activitiesPurchase of property and equipment (514,196) (2,143,683) (705,518)Purchase of intangible assets (146,833) (612,147) (148,975)Proceeds from disposal of property and equipment 30,050 125,279 -Guarantee deposits with the NBC - - (50,937) Reserve deposit with the NBC - - (14,772,690)

Net cash used in investing activities (630,979) (2,630,551) (15,678,120)

Cash flows from financing activities

Provident fund paid (39,598) (165,084) -

Net cash used in financing activities (39,598) (165,084) -

Net increase/(decrease) in cash and cash equivalents 28,704,547 119,669,257 (24,562,854)

Cash and cash equivalents at beginning of year 112,446,337 468,788,779 137,009,191

Cash and cash equivalents at end of year 24 141,150,884 588,458,036 112,446,337


Notes to the financial statements

20Foreign Trade Bank of Cambodia Annual Report 200919 Foreign Trade Bank of Cambodia Annual Report 2009

(a) Financial instrumentsThe Bank’s financial assets and liabilities include cash and cash equivalents, originated loans and receivables, deposits, and otherreceivables and payables. The accounting policies for the recognition and measurement of these items are disclosed in the respectiveaccounting policies.

(b) Segment informationThe Bank operates within one business segment, commercial banking, and within one geographical segment, the Kingdom of Cambodia.

(c) Cash and cash equivalentsCash and cash equivalents consist of cash and bank balances, demand deposits and short-term highly liquid investments with maturitiesof three months or less when purchased, and that are readily convertible to known amounts of cash and subject to an insignificant riskof changes in value.

(d) Loans and advancesAll loans and advances to customers are stated in the balance sheet at the amount of principal, less any amounts written off, andallowance for bad and doubtful loans and advances.

(e) Allowance for bad and doubtful loans and advancesIn compliance with NBC Guidelines, all loans and advances are classified according to the repayment capacity of the counterparty. Thisrepayment capacity is assessed through past payment experience, financial condition of the borrower, business prospective and cashflow projections, borrowers’ ability and willingness to repay, financial environment, and quality of documentation.

In addition to the above qualitative information, number of days past due is taken into account as follows:

Number of days past dueClassification 2009 2008

Normal/standard <30 days <90 daysSpecial mention > 30 days – 90 days N/ASubstandard > 90 days – 180 days > 90 days – 180 daysDoubtful > 180 days – 360 days > 180 days – 360 daysLoss More than 360 days More than 360 days

The minimum percentage of allowance for doubtful loans and advances are to be maintained according to the assigned classifications.Where reliable information suggests that losses are likely to be more than these minimum requirements, larger allowance is made.

Classification Minimum provision 2009 2008

Normal/standard 1% -Special mention 3% -Substandard 20% 10%Doubtful 50% 30%Loss 100% 100%

The change in the minimum percentage is applied prospectively and resulted in an increase in the allowance for doubtful loans andadvances for the year of US$2,155,258.

Recoveries on loans previously written off and reversals of previous allowances are disclosed separately together with the net movementin the allowance for bad and doubtful loans and advances in the income statement.

An uncollectible loan or portion of a loan classified as bad is written off after taking into consideration the realisable value of the collateral,if any, when in the judgement of the management there is no prospect of recovery.

(f) Interest in suspenseInterest in suspense represents interest on non-performing loans and advances, that is recorded as a provision rather than income untilit is realised on a cash basis.

(g) Deposits and placements with banksDeposits and placements with banks are stated at cost.

(h) Other assetsOther assets are stated at estimated realisable value.

(i) Foreclosed propertiesForeclosed properties consist of immoveable properties which are carried at the lower of the outstanding balance of the related loan oradvance and the estimated fair value of the property at the date of the foreclosure.

Gains or losses on the disposal of foreclosed properties are recognised in the income statement on the date of the disposal.

(j) Intangible assets Intangible assets are stated at cost less accumulated amortisation. Intangible assets are amortised over their estimated useful lives offive years using the straight-line method.

(k) Property and equipment(i) Items of property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any.

Where an item of property and equipment comprises major components having different useful lives, they are accounted for asseparate items of property and equipment.

(ii) Land is not depreciated.

Depreciation of property and equipment is charged to the income statement using the straight-line method over the estimateduseful lives as follows:

YearBuildings 20Furniture and equipment 3-5Motor vehicles 5

(iii) Subsequent expenditure relating to an item of property and equipment that has already been recognised is added to the carryingamount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard ofperformance of the existing asset, will flow to the Bank. All other subsequent expenditure is recognised as an expense in theyear in which it is incurred.

(iv) Capital work in progress is stated at cost. This includes the cost of Automatic Teller Machines (“ATMs”) and software, IT equipmentand cost of building renovation for the Sihanouk ville Branch. Capital work in progress is not depreciated until such time as theitems are completed and put into operational use.

(v) Gains or losses arising from the retirement or disposal of an item of property and equipment are determined as the differencebetween the estimated net disposal proceeds and the carrying amount of the assets and are recognised in the income statementon the date of retirement or disposal.

(vi) Fully depreciated property and equipment are retained in the financial statements until disposed of or written off.

(vii) The carrying amounts of property and equipment are reviewed for impairment when there is an indication that the assets mightbe impaired. Impairment is measured by comparing the carrying values of the assets with their recoverable amounts. Animpairment loss is charged to the income statement immediately.

Reversal of impairment losses recognised in prior years is recorded where there is an indication that the impairment lossesrecognised for the asset no longer exist or have decreased. The reversal is recognised to the extent of the carrying amount ofthe asset that would have been determined (net of amortisation and depreciation) had no impairment loss been recognised.The reversal is recognised in the income statement immediately.

(l) Deposits from customers and banksDeposits from customers and banks are stated at placement value.

Notes to the financial statements (continued) For the year ended 31 December 2009

22Foreign Trade Bank of Cambodia 21 Foreign Trade Bank of Cambodia Annual Report 2009

(t) Related partiesParties are considered to be related to the Bank if one party has the ability, directly or indirectly, to control the other party or exercise significantinfluence over the other party in making financial and operating decisions or where the Bank and the other parties are subject to commoncontrol or significant influence. Related parties may be individuals or corporate entities and include close family members of any individualconsidered to be a related party.

Under the Law on Banking and Financial Institutions, related parties includes parties who hold, directly or indirectly, a minimum of tenpercent of the capital of the Bank or voting rights therefore, or who participates in the administration, direction, management, or the designand implementation of the internal controls of the Bank.

(u) Future adoption of new standards and interpretationsThe National Accounting Council of Cambodia, as mandated by Prakas (Circular) No. 068-MEF-Pr dated 8 January 2009 issued by theMinistry of Economy and Finance of Cambodia on the adoption of Cambodian Financial Reporting Standards, has decided to adoptInternational Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) effective for financialstatements with periods beginning on or after 1 January 2012. The new standards will be referred to as “Cambodian International FinancialReporting Standards” (CIFRS). The adoption of CIFRS is expected to have a significant impact on the financial statements of the Bank.

4. Translation of United States Dollars into Khmer RielThe financial statements are stated in United States Dollars. The translations of United States Dollars amounts into Khmer Riel are includedsolely for compliance with the guidelines issued by the NBC relating to the preparation and presentation of financial statements and havebeen made using the prescribed official exchange rate of US$1 to KHR4,169 published by the NBC on 31 December 2009. These translationsshould not be construed as representations that the United States Dollars amounts have been, could have been, or could in the future be,converted into Khmer Riel at this or any other rate of exchange.

5. Cash on hand 2009 2008 US$ KHR’000 US$

US Dollars 6,556,700 27,334,883 2,988,737Khmer Riel 1,645,457 6,859,910 1,681,818

8,202,157 34,194,793 4,670,555

6. Deposits and placements with banks 2009 2008 US$ KHR’000 US$

In Cambodia: National Bank of Cambodia 117,823,963 491,208,102 100,449,777 Acleda Bank Plc. - - 1,960,304 Canadia Bank Plc. 4,200,000 17,509,800 4,200,000

122,023,963 508,717,902 106,610,081

Outside Cambodia: 10,924,764 45,545,341 24,379,027

Total 132,948,727 554,263,243 130,989,108 The above bank balances represent settlement accounts with other banks and are analysed as follows:

(a) By currency: 2009 2008 US$ KHR’000 US$

US Dollars 125,822,783 524,555,182 123,022,584 Khmer Riel 5,199,141 21,675,219 7,022,472 Euro 1,738,313 7,247,027 736,877 Australian Dollars 166,912 695,856 65,530 Great Britain Pound 20,679 86,211 101,353 Japanese Yen 746 3,110 40,116 Thai Baht 153 638 176

132,948,727 554,263,243 130,989,108

(m) Other liabilitiesOther liabilities are stated at their cost.

(n) ProvisionsA provision is recognised in the balance sheet when the Bank has a legal or constructive obligation as a result of a past event, and it isprobable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determinedby discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of moneyand, where appropriate, the risks specific to the liability.

(o) Provident fund and post employment benefits(i) Provident fund

The Bank provides its employees with benefits under the provident fund (defined contribution plan). The fund is sourced fromthe following:

a) A monthly contribution which is based on the monthly salary of an employee and contributed by the Bank and its employeesat a rate of 5% and 5%, respectively. This contribution is charged to the income statement.

b) The Bank contributes interest on the cumulative balance of the provident fund computed at 6% per annum. This contributionis charged to the income statement.

The provident fund will be fully paid to an employee, who contributed to the fund, upon termination of employment with the Bank.

(ii) Other post employment benefitsIn addition to the provident fund, an employee is also entitled to receive the benefits of a lump sum payment representing anemployee’s end gross monthly salary multiplied by the lower of number of years of service or 12 years upon termination ofemployment with the Bank.

(p) Income recognition Interest income on performing loans and advances and deposits and placements with banks are recognised on a daily accrual basis. Income from the various activities of the Bank is accrued using the following bases:

(i) Fee and commission income is recognised when transaction occurs. Fee and commission income comprises the income receivedfrom inward and outward bank transfers, trading with letter of credit and bills of collection.

(ii) Loan processing fees and commitment fees on a variety of services and facilities extended to customers likely to be drawn downare deferred and recognised as income over the period of the loans.

(q) Interest expenseInterest expense on deposits from customers is recognised on an accruals basis.

(r) Operating leasesPayments made under operating leases are recognised in the income statement on a straight-line basis over the period of the lease.

(s) Income tax(i) Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement

except to the extent that it relates to items recognised as a component of shareholders’ equity, in which case it is also disclosedas a component of shareholders’ equity.

Current tax is the expected tax payable on the taxable income for the year using tax rates enacted or substantially enacted atthe balance sheet date, and any adjustment to tax payable in respect of previous years.

(ii) Deferred tax is provided using the balance sheet method, providing for temporary differences between the carrying amounts ofassets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred taxprovided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using taxrates enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available to permit therealisation of the asset. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit willbe realised.


Annual Report 2009


(b) By performance: Normal/standard loans Secured 82,347,325 343,305,998 67,602,896 Unsecured 2,091,292 8,718,596 2,843,084

Special mention loans Secured 14,777,322 61,606,655 - Unsecured - - -

Sub-standard loans Secured 150,000 625,350 23,603,548 Unsecured - - -

Doubtful loans Secured - - 4,160,248 Unsecured - - -

Losses Secured 5,788,057 24,130,410 13,500 Unsecured - - -

105,153,996 438,387,009 98,223,276

The loans and advances are analysed as follows: 2009 2008 US$ KHR’000 US$

(c) By industry: Services 50,394,163 210,093,266 40,175,813 Construction 17,527,097 73,070,467 18,454,506 Wholesale and retail 10,970,851 45,737,478 13,227,838 Banking and financial businesses 11,694,106 48,752,728 12,170,301 Import/export 4,990,233 20,804,281 6,298,875 Agriculture 4,545,743 18,951,203 3,879,283 Chemical and medical supplies 1,675,019 6,983,154 1,468,845 Consumer items 882,633 3,679,697 - Other categories 2,474,151 10,314,735 2,547,815

105,153,996 438,387,009 98,223,276 (d) By currency: US Dollars 91,860,678 382,967,166 85,584,589 Khmer Riel 13,293,318 55,419,843 12,638,687

105,153,996 438,387,009 98,223,276

(e) By residency status: Residents 105,153,996 438,387,009 98,223,276 (f) By relationship: Staff loans 364,712 1,520,484 405,232 Non-related parties 104,789,284 436,866,525 97,818,044

105,153,996 438,387,009 98,223,276

(g) By exposure: Large exposures 37,621,961 156,845,955 51,814,000 Non-large exposures 67,532,035 281,541,054 46,409,276

105,153,996 438,387,009 98,223,276

(b) By Maturity: 2009 2008 US$ KHR’000 US$

Within one month 119,948,727 500,066,243 99,775,782 2 to 3 months 13,000,000 54,197,000 8,000,000 4 to 6 months - - 23,213,326

132,948,727 554,263,243 130,989,108

(c) By interest rate (per annum): 2009 2008 Banks inside Cambodia 6.5%-10% 6.5%-10% Banks outside Cambodia 0.05%-0.773% 0.11%-3.96%

7. Loans and advances 2009 2008 US$ KHR’000 US$

Commercial loans Overdrafts 47,882,579 199,622,472 47,170,036 Long-term loans 41,439,028 172,759,308 36,788,669 Short-term loans 3,806,127 15,867,743 1,689,038

Loans to other banks and micro-finance institutions 11,661,550 48,617,002 12,170,301

Consumer loans Staff loans 364,712 1,520,484 405,232

105,153,996 438,387,009 98,223,276

Interest receivable 999,927 4,168,696 908,790Interest in suspense (1,575,199) (6,567,005) (654,147)

(575,272) (2,398,309) 254,643Allowance for doubtful loans and advances - specific (6,212,833) (25,901,301) (3,617,412) - general (1,847,668) (7,702,928) -

(8,060,501) (33,604,229) (3,617,412)

96,518,223 402,384,471 94,860,507

Unamortised commitment fees (752,863) (3,138,686) (638,690)

95,765,360 399,245,785 94,221,817

The movements in allowance for bad and doubtful loans and advances were as follows: 2009 2008 US$ KHR’000 US$

At beginning of year 3,617,412 15,080,991 4,330,942Allowance for/(reversal of allowance for) bad and doubtful loans and advances 4,443,089 18,523,238 (659,402)Written off during the year - - (54,128)

At end of year 8,060,501 33,604,229 3,617,412 The loans and advances are analysed as follows: 2009 2008 US$ KHR’000 US$

(a) By maturity: Within 1 month 1,327,680 5,535,098 4,307,575 2 to 3 months 8,832,598 36,823,101 7,829,631 4 to 6 months 17,210,233 71,749,461 7,708,145 7 to 12 months 34,884,313 145,432,701 25,838,295 1 to 5 years 34,971,115 145,794,578 22,762,333 Over 5 years 7,928,057 33,052,070 29,777,297

105,153,996 438,387,009 98,223,276


Annual Report 2009


11. Intangible assetsComputer Capital work Total

software in progressUS$ US$ US$ KHR’000

CostAt 1 January 2009 317,273 174,454 491,727 2,050,010Additions 63,747 83,086 146,833 612,147Transfers 259,193 (259,193) - -Reclassification - 3,798 3,798 15,834

At 31 December 2009 640,213 2,145 642,358 2,677,991

Less: Accumulated amortisationAt 1 January 2009 106,665 - 106,665 444,686Charge for the year 96,299 - 96,299 401,471

At 31 December 2009 202,964 - 202,964 846,157 Net book value

At 31 December 2009 437,249 2,145 439,394 1,831,834

At 31 December 2008 210,608 174,454 385,062

The loans and advances are analysed as follows: A “large exposure” is defined under NBC Prakas as the overall gross exposure of the aggregate balance of loans and advances with

one single beneficiary, which exceeds 10% of the Bank’s net worth. The exposure is the higher of the outstanding loans orcommitments and the authorised loans or commitments.

(h) By interest rate (per annum): 2009 2008 Overdrafts 10% - 14.4% 10% - 15% Loans 10% - 14.4% 10% - 15% Staff loans 7% 7%

8. Other assets 2009 2008 US$ KHR’000 US$

Interest receivable - others 189,066 788,216 62,096Prepayments and deposits 263,870 1,100,074 221,462Travellers cheques, foreign cheques and credit card balances for collection in transit 18,842 78,553 7,481 on hand 60,131 250,686 22,648

531,909 2,217,529 313,687

9. Foreclosed properties Foreclosed properties relate to properties taken over from customers who are unable to repay their loans. NBC Guidelines require

that the foreclosed assets be disposed of within 12 months of foreclosure.

10. Statutory deposits 2009 2008 US$ KHR’000 US$

Statutory deposits on: Minimum capital 1,300,000 5,419,700 1,300,000 Customers’ deposits 26,318,254 109,720,801 29,261,823

27,618,254 115,140,501 30,561,823 (a) Statutory deposit on minimum capital This is a capital guarantee deposit of 10% of the registered capital under the Article 1 of the Prakas No. B7-01-136 on bank’s capital

guarantee dated 15 October 2001. This capital guarantee which is placed with the National Bank of Cambodia in US$, is refundableonly when the Bank ceases its operations in Cambodia. During the year, the interest earned at 1/4 SIBOR (six months) ranging from0.28% to 0.68% per annum (2008: 1.18% to 1.77% per annum).

(b) Statutory deposit on customers’ deposits This is a reserve requirement which fluctuates depending on the level of the Bank’s customers’ deposits. It is maintained in compliance

with the National Bank of Cambodia’s Prakas No. B7-09-020 dated 26 January 2009 at the rates of 8% of customers’ deposits inKHR and 12% in currency other than KHR. 4% of statutory deposit on customers’ deposits in currency other than KHR earns interestat 1/2 SIBOR (one month) while the remaining 8% and the statutory deposit on customers’ deposits in KHR do not earn interest.

Prior to 26 January 2009, the reserve requirement was maintained according to the National Bank of Cambodia’s Prakas No. B7-08-063 dated 25 April 2008, in which the reserve requirement on customers’ deposits in currencies other than KHR was increased from8% to 16% effective from the date of the base period starting from 27 June 2008. The 8% increment earned interest at 3/4 SIBOR(one month).


Annual Report 2009


13.Deposits from customers and banks 2009 2008 US$ KHR’000 US$

Current accounts 56,223,945 234,397,627 67,541,217Savings accounts 75,438,250 314,502,064 69,893,045Fixed deposits 92,754,531 386,693,640 79,392,946Margin deposits * 1,475,036 6,149,425 1,178,377Other deposit accounts 337,276 1,406,103 339,446

226,229,038 943,148,859 218,345,031

* Marginal deposits represent the aggregated balance of required non-interest bearing cash deposits from customers for letter of creditand guarantees outstanding at year end.

The above amounts are analysed as follows: 2009 2008 US$ KHR’000 US$

(a) By maturity: Within 1 month 157,511,484 656,665,377 154,466,393 2 to 3 months 19,419,915 80,961,626 19,022,593 4 to 6 months 22,211,374 92,599,218 19,501,448 6 to 12 months 26,748,990 111,516,539 25,015,151 More than 12 months 337,275 1,406,099 339,446

226,229,038 943,148,859 218,345,031

(b) By type of customer: Domestic corporations 129,831,608 541,267,974 120,752,022 Individuals 95,916,136 399,874,371 97,349,593 Foreign corporations 481,294 2,006,514 243,416

226,229,038 943,148,859 218,345,031

(c) By currency: US Dollars 196,138,422 817,701,081 180,256,793 Khmer Riel 29,952,274 124,871,030 37,976,784 Australian Dollars 109,793 457,727 84,746 Great Britain Pound 2,755 11,486 2,476 Euro 305 1,271 300 Others 25,489 106,264 23,932

226,229,038 943,148,859 218,345,031

(d) By residency status: Residents 225,747,744 941,142,345 218,101,615 Non-residents 481,294 2,006,514 243,416

226,229,038 943,148,859 218,345,031

(e) By relationship: Non-related party 226,229,038 943,148,859 218,345,031 (f) By interest rate (per annum): Savings accounts

US Dollars 0.75% 0.75%Khmer Riel 1.5% 1.5%

Fixed depositsUS Dollars 1%-5% 1%-5%Khmer Riel 4.5%-6.5% 4.5%-6.5%1

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Annual Report 2009


Deferred tax assets/(liabilities) are attributable to the following: 2009 2008 US$ KHR’000 US$

Provisions 146,359 610,171 -Unrealised exchange gain 92,458 385,457 -Depreciation and amortisation (84,987) (354,311) (38,082)

Balance at end of year 153,830 641,317 (38,082)

16. Provision for provident fund and post employment benefits 2009 2008 US$ KHR’000 US$

Provident fund obligations 474,891 1,979,820 410,744Provision for post employment benefits 256,903 1,071,029 339,978

731,794 3,050,849 750,722

The details of movements of the provident fund obligations are as follows: 2009 2008 US$ KHR’000 US$

Balance at beginning of year 410,744 1,712,392 315,757Additions during year Staff contribution 5% 40,210 167,635 41,270 Bank’s contribution 5% 40,210 167,635 41,570 Interest 26,116 108,878 21,762Payments (42,389) (176,720) (9,615)

Balance at end of the year 474,891 1,979,820 410,744

The details of movements of the post employment benefits are as follows: 2009 2008 US$ KHR’000 US$

Balance at beginning of year 339,978 1,417,368 98,957Addition - - 241,021Payments (83,075) (346,339) -

Balance at end of the year 256,903 1,071,029 339,978

17. Share capitalThe details of shareholding are as follows: 2009 2008 Number of Amount Number of Amount shares US$ shares US$

ING Holding Company Ltd. 2,200 5,720,000 2,200 5,720,000Mrs. Kim Tiek 769.5 2,000,700 - -Mrs. Chhay Kimbouy 769.5 2,000,700 - -Canadia Bank Plc 761 1,978,600 2,300 5,980,000Ministry of Economy and Finance 500 1,300,000 500 1,300,000

5,000 13,000,000 5,000 13,000,000

(KHR’000 equivalents) 54,197,000 53,053,000

The total authorised numbers of shares is 5,000 shares (2008: 5,000 shares) with a par value of US$2,600 per share (2008: US$2,600).All issued and registered shares are fully paid.

On 15 December 2009, the shareholders approved the increase in the Bank’s registered share capital to US$33,000,000. The increasewill be done through conversion of retained earnings, capital reserve and reserve for banking risk as at 31 December 2008 amountingto US$18,708,768, US$247,529 and US$1,043,703 respectively. The approval for the proposed increase in share capital to US$33,000,000was obtained from the National Bank of Cambodia (“the NBC”) on 18 February 2010.


14. Other liabilities 2009 2008 US$ KHR’000 US$

Interest payable 1,444,397 6,021,691 1,050,013Non-withdrawn deposits 436,590 1,820,144 868,120Certified cheque 224,545 936,128 220,159Unearned income 159,768 666,073 159,768Other tax payable 40,266 167,869 42,001Banker cheque 14,514 60,509 3,473,290Others 143,587 598,614 98,729

2,463,667 10,271,028 5,912,080

15. Income taxa) Provision for income tax 2009 2008 US$ KHR’000 US$

Balance at beginning of year 1,660,451 6,922,420 1,678,367Current income tax 1,278,966 5,332,009 1,824,682Income tax paid (1,872,660) (7,807,119) (1,842,598)

Balance at end of year 1,066,757 4,447,310 1,660,451

In accordance with Cambodian law, the Bank has an obligation to pay corporate income tax of either the profit tax at the rate of 20%of taxable profits or the minimum tax at 1% of gross revenues, whichever is higher.

b) Income tax expense 2009 2008 US$ KHR’000 US$

Current income tax 1,278,966 5,332,009 1,824,682Deferred tax assets (191,912) (800,081) -

1,087,054 4,531,928 1,824,682

The reconciliation of current income tax computed at the statutory tax rate of 20% to the income tax expense shown in the incomestatement is as follows: 2009 2008 US$ KHR’000 US$

Profit before income tax 6,409,880 26,722,790 9,146,333

Income tax using statutory rate 1,281,976 5,344,558 1,829,267Non-deductible expenses 107,782 449,343 157Effect of unrecognised deferred tax assets in prior year (305,067) (1,271,824) -Others 2,363 9,851 (4,742)

1,087,054 4,531,928 1,824,682

The calculation of taxable income is subject to the review and approval of the tax authorities.

c) Deferred tax assets/(liabilities) 2009 2008 US$ KHR’000 US$

Deferred tax assets 238,817 995,628 -Deferred tax liabilities (84,987) (354,311) (38,082)

Balance at end of year 153,830 641,317 (38,082)

The movement in the net deferred tax assets is as follows:

Balance at beginning of year (38,082) (158,764) (38,082)Credited to income statement 191,912 800,081 -

Balance at end of the year 153,830 641,317 (38,082)



Travel 50,519 210,614 35,190 Loss on disposal of property and equipment 39,132 163,141 - Other expenses 461,270 1,923,035 116,545

4,400,285 18,344,788 3,425,143

23. Cash flows from operating activities 2009 2008 US$ KHR’000 US$

Profit before income tax 6,409,880 26,722,790 9,146,333Adjustments for: Depreciation and amortisation 358,973 1,496,558 125,635 Allowance for/(reversal of) bad and doubtful loans and advances 4,443,089 18,523,238 (659,402) Provision for post employment benefits 80,420 335,270 241,022 Loss on disposal of property and equipment 39,132 163,141 -

11,331,494 47,240,997 8,853,588

Decrease/(increase) in: Loans and advances (10,358,629) (43,185,124) (27,832,629) Other assets (218,222) (909,767) (2,386) Statutory deposits 2,943,569 12,271,739 - Deposits and placements with banks 23,213,326 96,776,356 (23,213,326)

Increase/(decrease) in: Deposits from customers and banks 7,884,007 32,868,425 34,818,741 Other liabilities (3,547,761) (14,790,615) 238,889 Provision for provident fund and post employment benefits - - 94,987

Cash generated from/(used in) operations 31,247,784 130,272,011 (7,042,136)Income tax paid (1,872,660) (7,807,119) (1,842,598)

Net cash generated from/(used in) operating activities 29,375,124 122,464,892 (8,884,734)

24. Cash and cash equivalents 2009 2008 US$ KHR’000 US$

Cash on hand 8,202,157 34,194,793 4,670,555Deposits and placements with banks (within three month maturity) 132,948,727 554,263,243 107,775,782

141,150,884 588,458,036 112,446,337

25. Related party balances and transactions(a) Balances with related parties as at 31 December are as follows: 2009 2008 US$ KHR’000 US$

With shareholders/directors: Deposits from customers * 1,105,303 4,608,008 592,743 Placement with Bank ** 4,200,000 17,509,800 4,200,000

* The interest rate earned by a Director is 0.75% per annum (31 December 2008: 0.75% per annum). ** This represents the term deposit with Canadia Bank Plc.; the interest earned is 6.5% per annum (2008: 6.5% per annum).

(b) Significant transactions with related parties are as follows: 2009 2008 US$ KHR’000 US$

With shareholders/directors:Directors’ fees and remuneration 810,158 3,377,549 699,291Interest income 134,630 561,272 273,000Payment on post employment benefit expense 118,798 495,269 -Interest expense 3,124 13,024 1,255


Based on the capital injection plan dated 30 January 2009, the Bank plans to increase the paid-up share capital to the new minimum registered capital of KHR150 billion (equivalent to US$37.5 million) by the end of 2010 to comply with the Prakas No.B7-08-193 issuedby the NBC on 19 September 2008 through a further conversion of profit generated in 2009. The Bank is confident that the additionalconversion will be approved by the NBC.

18. Interest income 2009 2008 US$ KHR’000 US$

Loans and advances 12,568,692 52,398,877 10,131,662Deposits and placements with: National Bank of Cambodia 219,325 914,366 1,270,796 Other banks 332,634 1,386,751 1,212,808

13,120,651 54,699,994 12,615,266

19. Interest expense 2009 2008 US$ KHR’000 US$

Fixed deposits 4,324,401 18,028,428 3,300,280Savings accounts 658,097 2,743,606 681,209Provident fund 26,116 108,878 21,762

5,008,614 20,880,912 4,003,251

20. Net fee and commission income 2009 2008 US$ KHR’000 US$

Loan processing fees 712,203 2,969,174 524,262Fund remittance fees 608,966 2,538,779 700,632Guarantee fees 244,597 1,019,725 275,866SWIFT fees 108,930 454,129 129,395Loan commitment fees 57,009 237,671 39,555Other service charges 116,719 486,602 136,090

1,848,424 7,706,080 1,805,800Fee and commission expenses (145,019) (604,584) (58,237)

1,703,405 7,101,496 1,747,563

21. Other operating income 2009 2008 US$ KHR’000 US$

Loan loss recovered 4,911,818 20,477,369 1,216,512Foreign exchange gain-unrealised 462,289 1,927,283 283,160Other income 63,705 265,586 52,824

5,437,812 22,670,238 1,552,496

22. General and administrative expenses 2009 2008 US$ KHR’000 US$

Salaries and wages 1,892,383 7,889,345 1,959,191Marketing 368,717 1,537,181 284,515Professional and legal fees 670,491 2,795,277 509,117Depreciation and amortisation 358,973 1,496,558 125,635Utilities and office expenses 150,984 629,452 110,528Board of Directors’ meeting fees 23,520 98,055 17,500Communication 97,324 405,744 86,281Rental 85,550 356,658 82,800Other tax expenses 73,476 306,321 20,276Repairs and maintenance 69,738 290,738 29,273Insurance 58,208 242,669 48,292



The operational risk losses is managed through established operational risk management processes, proper monitoring and reportingof the business activities by control and support units which are independent of the business units and oversight provided by thesenior management of the Bank.

The Bank’s operational risk management entails the establishment of clear organisational structures, roles and control policies. Variousinternal control policies and measures have been implemented including the establishment of signing authorities, defining systemparameters controls, streamlining procedures and documentation and compliance with regulatory and other legal requirements.

(c) Credit risk Credit risk is the financial loss to the Bank if a borrower or counterparty fails to meet its contractual obligations, and arises principallyfrom the loans and advances.

(i) Management of credit riskThe lending activities are guided by the Bank’s credit policy to ensure that the overall objectives in the area of lending are achieved;i.e., that the loan portfolio is strong and healthy and credit risks are well diversified. The credit policy documents the lendingpolicy, collateral policy and credit approval processes, including the Bank’s own internal grading system, and proceduresimplemented to ensure compliance with NBC Guidelines.The Bank holds collateral against loans and advances to customers in the form of mortgage interests over property andguarantees.

(ii) Exposure to credit risk 2009 2008 US$ KHR’000 US$

Loans and advances Individually impaired 5,938,057 24,755,760 27,777,296 Past due but not impaired 14,777,322 61,606,655 - Neither past due nor impaired 84,438,617 352,024,594 70,445,980

105,153,996 438,387,009 98,223,276

Interest receivable 999,927 4,168,696 908,790 Interest in suspense (1,575,199) (6,567,005) (654,147)

(575,272) (2,398,309) 254,643 Allowance for doubtful loans and advances - specific (6,212,833) (25,901,301) (3,617,412) - general (1,847,668) (7,702,928) -

(8,060,501) (33,604,229) (3,617,412)

96,518,223 402,384,471 94,860,507

Unamortised commitment fees (752,863) (3,138,686) (638,690)

95,765,360 399,245,785 94,221,817

Impaired loans and advancesIndividually impaired loans and advances are loans and advances for which the Bank determines that there is objective evidenceof impairment and it does not expect to collect all principal and interest due according to the contractual terms of the loans andadvances. In compliance with NBC Guidelines, an allowance for doubtful loans and advances is made for loan and advancewith payment overdue more than 90 days. A minimum level of specific provision for impairment is made depending on theclassification concerned, unless other information is available to substantiate the repayment capacity of the counterparty. Referto separate accounting policy stated in Note 3(e).

Past due but not impaired loans and advancesPast due but not impaired loans and advances are those for which contractual interest or principal payments are past due morethan 30 days but less than 90 days, unless other information is available to indicate otherwise. In compliance with NBC Guidelinessuch loans are classified as special mention with a specific provision of 3% (2008: Nil).


26. Commitments and contingencies(a) Operations

In the normal course of business, the Bank makes various commitments and incurs certain contingent liabilities with legal recourseto its customers. No material losses are anticipated from these transactions which consist of:

2009 2008 US$ KHR’000 US$

Unutilised portion of approved facilities 15,216,113 63,435,975 17,730,199 Letters of credit 6,177,838 25,755,406 3,197,707 Bank guarantees 5,230,946 21,807,814 1,431,574 Others 109,306 455,697 -

26,734,203 111,454,892 22,359,480

(b) Lease commitments The Bank has operating lease commitments in respect of the lease of offices as follows: 2009 2008 US$ KHR’000 US$

Within one year 68,000 283,492 69,600 Between two to five years 7,200 30,017 71,300

75,200 313,509 140,900

(c) Capital commitments The Bank has commitments in respect of software license and building renovation at Sihanoukville branch as follows: 2009 2008 US$ KHR’000 US$

Within one year 76,646 319,537 - Between two to five years - - 245,318

76,646 319,537 245,318

(d) Taxation contingenciesThe taxation system in Cambodia is relatively new and is characterised by numerous taxes and frequently changing legislation, whichis often unclear, contradictory, and subject to interpretation among numerous taxation authorities and jurisdictions. Taxes are subjectto review and investigation by a number of authorities, who are enabled by law to impose severe fines, penalties and interest charges.

These facts create risks of additional taxes through reassessment, fines, penalties and interest charges, which are substantially moresignificant in Cambodia than in other countries. Management believes that it has adequately provided for tax liabilities based on itsinterpretation of current tax legislation.

27. Financial risk management(a) Introduction and overview The Bank has exposure to the following risks from financial instruments: n operational risk n credit risk n market risk n liquidity risk

This note presents information about the Bank’s exposure to each of the above risks, the Bank’s objectives, policies and processesfor measuring and managing risk, and the Bank’s management of capital.

(b) Operational riskOperational risk is the risk of direct or indirect loss arising from inadequate or failed internal processes, personnel, technology andinfrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatoryrequirements and generally accepted standards of corporate behaviour.



pricing, cost of funds and through interest rate sensitivity gap analysis. The potential reduction in net interest income from anunfavourable interest rate movement is monitored against the risk tolerance limits set.

An analysis of the interest rate risk pertaining to the Bank’s assets and liabilities is disclosed below.

The table indicates the effective interest rates at the balance sheet date and the periods, in which the financial instruments re-price or mature, whichever is earlier.

Non- WeightedUp to > 1-3 > 3-6 > 6-12 > 1-5 Over 5 interest average1 mth mths mths mths yrs yrs sensitive Total interest

2009 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 %

AssetsCash on hand - - - - - - 8,202 8,202Deposits & placements with banks 112,425 13,000 - - - - 7,524 132,949 1.26%Loans and advances- Performing 1,328 8,833 17,210 34,884 34,971 1,990 - 99,216 12%- Non performing - - - - - 5,938 - 5,938- Specific allowance - - - - - - (6,213) (6,213)- General allowance - - - - - - (1,848) (1,848)- Interest receivable - - - - - 1,000 - 1,000- Interest in suspense - - - - - (1,575) - (1,575)- Unamortised commitment fees - - - - - - (753) (753)Other assets - - - - - - 532 532Statutory deposits - - - - - 24,500 3,118 27,618Deferred tax assets 154 154

Total assets 113,753 21,833 17,210 34,884 34,971 31,853 10,716 265,220

LiabilitiesDeposits from customers

and banks 106,150 18,901 22,145 26,749 - - 52,284 226,229 3%Other liabilities - - - - - - 2,463 2,463Provision for income tax - - - - - - 1,067 1,067Provision for provident fund and

post employee benefits - - - - - 732 - 732 4%

Total liabilities 106,150 18,901 22,145 26,749 - 732 55,814 230,491

Maturity gap 7,603 2,932 (4,935) 8,135 34,971 31,121 (45,098) 34,729

2008

AssetsCash on hand - - - - - - 4,671 4,671Deposits & placements with banks 86,526 8,000 23,213 - - - 13,250 130,989 1.81%Loans and advances- Performing 4,308 7,830 7,708 25,838 22,762 2,000 - 70,446 10%- Non performing - - - - - 27,777 - 27,777- Specific allowance - - - - - - (3,617) (3,617)- General allowance - - - - - - - -- Interest receivable - - - - - 909 - 909- Interest in suspense - - - - - (654) - (654)- Unamortised commitment fees - - - - - - (639) (639)Other assets - - - - - - 314 314Statutory deposits - - - - 18,800 11,762 30,562

Total assets 90,834 15,830 30,921 25,838 22,762 48,832 25,741 260,758

LiabilitiesDeposits from customers & banks 86,134 18,711 19,426 25,015 - - 69,059 218,345 2%Other liabilities - - - - - - 5,912 5,912Provision for income tax - - - - - - 1,660 1,660Provision for provident fund and

post employee benefits - - - - - 751 - 751 3%Deferred tax liabilities - - - - - - 38 38

Total liabilities 86,134 18,711 19,426 25,015 - 751 76,669 226,706

Maturity gap 4,700 (2,881) 11,495 823 22,762 48,081 (50,928) 34,052


Loans with renegotiated terms/restructured loansLoans with renegotiated terms are loans that have been rescheduled or refinanced in accordance with an agreement setting fortha new repayment schedule on a periodic basis occasioned by weaknesses in the borrower’s financial condition and/or inability torepay the loan as originally agreed. Loans to be restructured are analysed on the basis of the business prospects and repaymentcapacity of the borrower according to new cash flow projections supported by updated business perspectives and overall marketconditions being based on realistic and prudent assumptions.

Once the loan is restructured it remains in the same category independent of satisfactory performance after restructuring. Theclassification is not improved unless there are no arrears in repayment of principal and interest within 3 installment periods andwithin a period of not less than 3 months.

Write-off policyIn compliance with NBC Guidelines, the Bank shall remove a loan/advance or a portion of a loan from its balance sheet when theBank loses control of the contractual rights over the loan or when all or part of a loan is deemed uncollectible; or there is no realisticprospect of recovery.

CollateralThe Bank holds collateral against loans and advances in the form of mortgage interests over property and/or guarantees. The valueof collateral is assessed on an annual basis.

An estimate of value of collateral held against loans and advances is shown below: 2009 2008 US$ KHR’000 US$

Against individually impaired: Land and buildings 15,669,870 65,327,688 65,413,064 Past due but not impaired: Land and buildings 47,296,244 197,178,041 -

62,966,114 262,505,729 65,413,064

There were non-financial assets obtained by the Bank during the year by taking possession of collateral held as security againstloans and advances.

The repossessed properties have to be sold within one year as required by the NBC Guidelines and are classified in the balancesheet as foreclosed property.

Concentration of credit riskThe analysis of concentrations of credit risk from loans and advances at the balance date are shown in Note 7 to the financialstatements.

(d) Market riskMarket risk is the risk of loss arising from adverse movement in the level of market prices or rates, the two key components being foreigncurrency exchange risk and interest rate risk.

Market risk arising from the trading activities is controlled by marking to market the trading positions against their predetermined marketrisk limits.

(i) Foreign currency exchange risk Foreign currency exchange risk refers to the adverse exchange rate movements on foreign currency exchange positions taken fromtime to time. The Bank maintains a policy of not exposing itself to large foreign exchange positions. Any foreign currency exchangeopen positions are monitored against the operating requirements, predetermined position limits and cut-loss limits.

As of 31 December 2009, balances in monetary assets and liabilities denominated in currencies other than US$ are not significant.Therefore, no sensitivity analysis for foreign currency exchange risk was presented.

(ii) Interest rate riskInterest rate risk refers to the volatility in net interest income as a result of changes in the levels of interest rate and shifts in thecomposition of the assets and liabilities. Interest rate risk is managed through close monitoring of returns on investment, market



The Bank and its individually regulated operations have complied with all externally imposed capital requirement throughout theyear.

On 15 December 2009, the shareholders approved the increase in the Bank’s registered share capital to US$33,000,000. Theincrease will be done through conversion of retained earnings, capital reserve and reserve for banking risk as at 31 December2008 amounting to US$18,708,768, US$247,529 and US$1,043,703 respectively. The approval for the proposed increase in sharecapital to US$33,000,000 was obtained from the National Bank of Cambodia (“the NBC”) on 18 February 2010.

Based on the capital injection plan dated 30 January 2009, the Bank plans to increase the paid-up share capital to the newminimum registered capital of KHR150 billion (equivalent to US$37.5 million) by the end of 2010 to comply with the Prakas No.B7-08-193 issued by the NBC on 19 September 2008 through a further conversion of profit generated in 2009. The Bank is confidentthat the additional conversion will be approved by the NBC.

(ii) Capital allocation The allocation of capital between specific operations and activities is, to a large extent, driven by optimisation of the returnachieved on the capital allocated. The amount of capital allocated to each operation or activity is based primarily upon theregulatory capital

28. Fair values of financial assets and liabilitiesThe aggregate fair values of financial assets and liabilities carried on the balance sheet are approximately equal to their carrying valuesas at 31 December 2009 except for loans and advances which have a separate accounting policy stated in Note 3(d).

29. Comparative figuresThe following comparative figures have been reclassified to conform with the current year presentation. As previously As reclassified presented US$ US$

Assets Statutory deposits 30,561,823 -

Current account with NBC - 131,011,600 Statutory deposits - (30,561,823) Deposits and placements with banks 130,989,108 7,249,577 Placements with other banks - 23,289,754

130,989,108 130,989,108

Loans and advances 94,221,817 93,967,174 Interest receivable - 908,790 Interest in suspense - (654,147)

94,221,817 94,221,817

Other assets 313,687 568,330 Interest receivable - (908,790) Interest in suspense - 654,147

313,687 313,687 Liabilities Deposits from customers and banks 218,345,031 222,906,600 Deposits from non-bank customers - (4,561,569)

218,345,031 218,345,031

Other liabilities 5,912,080 1,402,778 Accrued taxation - (52,267) Deposits from non-bank customers - 4,561,569

5,912,080 5,912,080


Fair value sensitivity analysis for fixed rate instrumentsThe Bank does not account for any fixed rate liabilities at fair value through profit or loss, and the Bank does not have derivativesas at year end. Therefore, a change in interest rates at the reporting date would not affect profit or loss.

Cash flow sensitivity analysis for variable-rate instrumentsThe Bank does not have significant variable-rate instruments. Therefore, no cash flow sensitivity analysis for variable-rateinstruments was presented.

(e) Liquidity riskLiquidity risk relates to the ability to maintain sufficient liquid assets to meet its financial commitments and obligations when they falldue at a reasonable cost.

In addition to full compliance of all liquidity requirements, the management of the Bank closely monitors all inflows and outflowsand the maturity gaps through periodical reporting. Movements in loans and customers’ deposits are monitored and liquidityrequirements adjusted to ensure sufficient liquid assets to meet its financial commitments and obligations as and when they falldue.

The following table provides an analysis of the financial liabilities of the Bank into relevant maturity groupings based on the remainingperiods to repayment.

2009 >1-3 >3 – 12 > 1 – 5 over 5 No fixed 1 month months months years years term Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Financial liabilities Deposits from customers and banks 157,512 19,420 48,960 337 - - 226,229 Other liabilities 972 292 555 160 - 484 2,463 Provision for provident fund and post employment benefits - - - - - 732 732 Provision for income tax 45 1,022 - - - - 1,067

158,529 20,734 49,515 497 - 1,216 230,491

2008 >1-3 >3 – 12 > 1 – 5 over 5 No fixed 1 month months months years years term Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Financial liabilities Deposits from customers and banks 154,466 19,023 44,517 339 - - 218,345 Other liabilities 4,076 311 926 160 - 439 5,912 Provision for provident fund and post employment benefits - - - - - 751 751 Provision for income tax 52 1,608 - - - - 1,660 Deferred tax liabilities - - - - - 38 38

158,594 20,942 45,443 499 - 1,228 226,706

f) Capital management (i) Regulatory capital

The Bank’s lead regulator, the National Bank of Cambodia (“NBC”), sets and monitors capital requirements for the Bank as a whole.

The Bank’s policy is to maintain a strong capital base so as to maintain market confidence and to sustain further development ofthe business. The impact of the level of capital on shareholders’ return is also recognised and the Bank recognised the need tomaintain a balance between the higher returns that might be possible with greater gearing and advantages and security affordedby a sound capital position.


Foreign Trade Bank of Cambodia 39 Foreign Trade Bank of Cambodia Annual Report 2009

As previously As reclassified presented US$ US$

Provision for income tax 1,660,451 1,608,184 Accrued taxation - 52,267

1,660,451 1,660,451

Income statement Other operating income 1,552,496 335,984 Loan loss recovered - 1,216,512

1,552,496 1,552,496 Provision for bad and doubtful loans and advances (659,402) 3,481,734 Reversal of allowance for bad and doubtful loan and advances - (4,141,136)

(659,402) (659,402)

Notes to the financial statements (continued)For the year ended 31 December 2009

Annual Report 2009

Documents

English - Foreign Trade Bank of Cambodia