CAMBODIA POST BANK PLC. FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

CAMBODIA POST BANK PLC. FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

CONTENTS Pages Directors‟ report

1-4

Independent auditor‟s report on financial statements

5-6

FINANCIAL STATEMENTS Balance sheet

7

Income statement

8

Statement of changes in equity

9

Statement of cash flows

10

Notes to the financial statements

11 - 52

Appendix: Notes on compliance with the Central Bank‟s Prakas*

53 - 64

* The Appendix does not form part of the audited financial statements.

DIRECTORS' REPORT The Board of Directors (“the Directors”) hereby submit their report together with financial statements (“the financial statements”) of Cambodia Post Bank Plc. (“the Bank”) for the year ended 31 December 2014. CAMBODIA POST BANK PLC. The Bank is a commercial bank operating in accordance with the Cambodian Law on Commercial Enterprises and under the supervision of the National Bank of Cambodia (“NBC” or “the Central Bank”), pursuant to the Law on Banking and Financial Institutions of Cambodia and in accordance with the Banking Licence No. 38, dated 20 September 2013, issued by the NBC. PRINCIPAL ACTIVITIES The principal activities of the Bank consist of operations of core banking business and provisions of related financial services through the Bank‟s head office and various branches in Phnom Penh and in provinces. FINANCIAL PERFORMANCE The financial performance of the Bank for the year ended 31 December 2014 is set out in the income statement on page 8. SHARE CAPITAL The Bank‟s share capital was US$38,000,000 at 31 December 2014 (2013: US$38,000,000) as disclosed in Note 14 to the financial statements. RESERVES AND PROVISIONS There was no material movement to or from reserves and provisions during the year other than those disclosed in the financial statements. BAD AND DOUBTFUL LOANS AND ADVANCES Before the Bank‟s financial statements were drawn up, the Directors took reasonable steps to ascertain that action had been taken in relation to the writing-off of bad loans or the making of provisions for bad and doubtful loans and advances, and have satisfied themselves that all known bad loans and advances had been written-off and that adequate provisions had been made for bad and doubtful loans and advances. At the date of this report, the Directors are not aware of any circumstances that would render the amount written-off for bad loans and advances or the amount of the provision for bad and doubtful loans and advances in the Bank‟s financial statements inadequate to any material extent. 1

ASSETS Before the Bank‟s financial statements were drawn up, the Directors took reasonable steps to ensure that any assets that were unlikely to be realised in the ordinary course of business at their value as shown in the Bank‟s accounting records, have been written down to an amount that they might be expected to realise. At the date of this report, the Directors are not aware of any circumstances that would render the values attributed to the assets in the financial statements of the Bank misleading in any material respect. VALUATION METHODS At the date of this report, the Directors are not aware of any circumstances that have arisen that would render adherence to the existing method of valuation of assets and liabilities in the financial statements of the Bank misleading or inappropriate in any material respect. CONTINGENT AND OTHER LIABILITIES At the date of this report, there is: (a)

no charge on the assets of the Bank that has arisen since the end of the year that secures the liabilities of any other person, and

(b)

no contingent liability in respect of the Bank that has arisen since the end of the year other than in the ordinary course of banking business.

No contingent or other liability of the Bank has become enforceable, or is likely to become enforceable within the period of 12 months after the end of the year which, in the opinion of the Directors, will or might have a material effect on the ability of the Bank to meet its obligations as and when they become due. CHANGE OF CIRCUMSTANCES At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements of the Bank that would render any amount stated in the financial statements misleading in any material respect. ITEMS OF AN UNUSUAL NATURE The results of the operations of the Bank for the year were not, in the opinion of the Directors, materially affected by any item, transaction or event of a material and unusual nature. There has not arisen in the interval between the end of the year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors, to affect substantially the results of the operations of the Bank for year in which this report is made.

2

THE BOARD OF DIRECTORS The members of the Board of Directors of the Bank during the year and at the date of this report are:       

Mr. Mr. Mr. Ms. Mr. Mr. Mr.

Pung Kheav Se Gan Chee Yen Ros Phirun Pung Carolyne Quah Boon Leng Giang Sovann Neo PohKiat

Chairman Vice Chairman Board of Director Board of Director Board of Director Independent, Non-Executive Independent, Non-Executive

DIRECTORS’ INTERESTS Mr. Pung Kheav Se is the Bank‟s director who holds shares in CIHP, a shareholder. STATEMENT OF THE BOARD OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS The Board of Directors is responsible for ensuring that the financial statements are properly drawn up so as to present fairly, in all material respects, the financial position of the Bank as at 31 December 2014, and its financial performance and cash flows for the year then ended. The Board of Directors oversees preparation of these financial statements by management, which is required to: i)

adopt appropriate accounting policies that are supported by reasonable and prudent judgements and estimates and then apply them consistently;

ii)

comply with the disclosure requirements and the guidelines issued by the National Bank of Cambodia and Cambodian Accounting Standards. Or, if there has been any departure in the interests of fair presentation, ensure that these have been appropriately disclosed, explained and quantified in the financial statements;

iii)

maintain adequate accounting records and an effective system of internal controls;

iv)

prepare the financial statements on a going-concern basis, unless it is inappropriate to assume that the Bank will continue operations in the foreseeable future, and

v)

effectively control and direct the Bank in all material decisions affecting its operations and performance and ascertain that these have been properly reflected in the financial statements.

The Board of Directors confirms that the Bank have complied with the above requirements in preparing the financial statements.

3

APPROVAL OF THE FINANCIAL STATEMENTS The accompanying financial statements, together with the notes thereto, which present fairly, in all material respects, the financial position of the Bank as at 31 December 2014, and its financial performance and cash flows of the Bank for the year then ended in accordance with the guidelines issued by the National Bank of Cambodia and Cambodian Accounting Standards, were approved by the Board of Directors.

Signed in accordance with a resolution of the Board of Directors.

_______________________ Mr. Pung Kheav Se Chairman of Board of Director

_______________________ Mr. Toch Chaochek Chief Executive Officer

Phnom Penh, Kingdom of Cambodia Date: 30 March 2015

Phnom Penh, Kingdom of Cambodia Date: 30 March 2015

4

Independent auditor’s report To the Shareholders of Cambodia Post Bank Plc. We have audited the accompanying financial statements of Cambodia Post Bank Plc. (“the Bank”), which comprise the balance sheet as at 31 December 2014 of the Bank and the income statement, the statement of changes in equity and statement of cash flows for the year ended 31 December 2014, and notes, comprising a summary of significant accounting policies and other explanatory information. Management’s responsibility for the financial statements The management is responsible for the preparation and fair presentation of the financial statements in accordance with the guidelines issued by the National Bank of Cambodia and Cambodian Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with Cambodian International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the financial statements 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 entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating 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 audit opinion.

5

Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Bank as at 31 December 2014, and its financial performance and cash flows for the year 31 December 2014 in accordance with the guidelines issued by the National Bank of Cambodia and Cambodian Accounting Standards. For PricewaterhouseCoopers (Cambodia) Ltd.

By Kuy Lim Partner Phnom Penh, Kingdom of Cambodia Date: 30 March 2015

6

CAMBODIA POST BANK PLC. BALANCE SHEET AS AT 31 DECEMBER 2014

Note ASSETS Cash on hand Balances with the NBC Balances with other banks Loans and advances Property and equipment Intangible assets Deferred tax assets Other assets

4 5 6 7 8 9 10

Total assets

31 December 2014 US$ KHR’000

1,048,721 4,273,538 10,518,445 42,862,663 21,845,618 89,020,893 92,536,333 377,085,557 1,088,704 4,436,469 485,511 1,978,457 140,969 574,449 1,206,374 4,915,974 128,870,675 525,148,000

31 December 2013 US$ KHR’000

378,736 4,352,145 19,644,770 20,676,455 660,044 223,128 291,849

1,513,050 17,386,819 78,480,856 82,602,438 2,636,876 891,396 1,165,937

46,227,127 184,677,372

LIABILITIES AND EQUITY LIABILITIES Deposits from banks Deposits from customers Income tax payable Other liabilities

11 12 22 13

Total liabilities EQUITY Share capital Retained earnings Total equity Total liabilities and equity

14

52,112,331 212,357,749 35,543,993 144,841,771 148,671 605,834 2,896,821 11,804,546

5,300,010 3,640,894 9,402 524,794

21,173,540 14,545,372 37,561 2,096,551

90,701,816 369,609,900

9,475,100

37,853,024

38,000,000 154,850,000 168,859 688,100

38,000,000 151,810,000 (1,247,973) (4,985,652)

38,168,859 155,538,100

36,752,027 146,824,348

128,870,675 525,148,000

46,227,127 184,677,372

The accompanying notes on pages 11 to 52 form an integral part of these financial statements.

7

CAMBODIA POST BANK PLC. INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2014

For the year ended From 26 September to 31 31 December 2014 December 2013 US$ KHR’000 US$ KHR’000

Note

Interest income Interest expense

15 15

9,074,220 (2,377,131)

36,977,447 (9,686,809)

1,389,368 (344,068)

5,550,525 (1,374,552)

Net interest income

15

6,697,089

27,290,638

1,045,300

4,175,973

Fee and commission income Fee and commission expense

16 16

276,910 (6,725)

1,128,408 (27,404)

34,654 (2,476)

138,443 (9,892)

Net fee and commission income

16

270,185

1,101,004

32,178

128,551

Other operating income

17

50,191

204,528

1,117

4,462

7,017,465

28,596,170

1,078,595

4,308,986

(2,405,709) (411,299) (1,968,691) (733,751)

(9,803,264) (1,676,043) (8,022,416) (2,990,035)

(847,409) (55,789) (589,572) (608,625) (208,853)

(3,385,399) (222,877) (2,355,340) (2,431,457) (834,368)

1,498,015

6,104,412

(1,231,653)

(4,920,455)

(81,183)

(330,821)

(16,320)

(65,198)

1,416,832

5,773,591

(1,247,973)

(4,985,653)

Total operating income Personnel expenses Depreciation and amortisation charges General and administrative expenses Pre-operating costs Provision for loan losses

18 19 20 21

Profit/(loss) before income tax Income tax expense

22

Profit/(loss) for the year/period

The accompanying notes on pages 11 to 52 form an integral part of these financial statements.

8

CAMBODIA POST BANK PLC. STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2014

Share capital US$

Retained earnings US$

Total US$

At 1 January 2014 Profit for the year

38,000,000 -

(1,247,973) 1,416,832

36,752,027 1,416,832

At 31 December 2014

38,000,000

168,859

38,168,859

154,850,000

688,100

155,538,100

38,000,000 -

(1,247,973)

38,000,000 (1,247,973)

38,000,000

(1,247,973)

36,752,027

151,810,000

(4,985,652)

146,824,348

Notes

KHR’000 equivalent

At 26 September 2013 (date of incorporation) Issue of share capital Loss for the period

14

At 31 December 2013 KHR’000 equivalent

The accompanying notes on pages 11 to 52 form an integral part of these financial statements.

9

CAMBODIA POST BANK PLC. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2014 For the year ended 31 December 2014 US$ KHR’000

Note Cash flows from operating activities Profit/(loss) before income tax Adjustments for: Depreciation and amortisation charges Provision for loan losses Net interest income Changes in working capital: Loans and advances Other assets Deposits from banks Deposits from customers Other liabilities Cash from/(used in) operations Interest received Interest paid Income tax paid

19 6 15 6

Cash flows from investing activities Capital guarantee and reserve deposits with NBC Purchases of property and equipment Purchases of intangible assets Proceeds from sales of property and equipment

6,104,412

(1,231,653)

(4,920,455)

411,299 731,169 (6,697,089)

1,676,043 2,979,514 (27,290,638)

55,789 208,853 (1,045,300)

222,877 834,368 (4,175,973)

(72,591,047) (295,808,517) (20,885,308) (216,688) (883,004) (101,473) 46,812,321 190,760,208 5,300,010 31,903,099 130,005,128 3,640,894 684,826 2,790,666 470,351 2,535,905 10,333,812 (13,587,837)

(83,436,806) (405,384) 21,173,540 14,545,372 1,879,051 (54,283,410)

8,376,383 (689,930) (82,883)

10,139,475

7 8

Net cash used in investing activities Cash flows from financing activities Proceeds from issuance of share capital

1,498,015

22

Net cash from/(used in) operating activities

1,198,992 (289,625) (6,918)

4,789,973 (1,157,052) (27,637)

41,318,360 (12,685,388)

(50,678,126)

(18,334,676) (3,075,953) (1,540,998)

(4,302,503) (715,765) (223,196)

(17,188,499) (2,859,481) (891,668)

30,652

124,907

-

-

(5,601,649)

(22,826,720)

(5,241,464)

(20,939,648)

-

-

38,000,000

151,810,000

-

-

38,000,000

151,810,000

4,537,826

18,491,640

20,073,148

80,192,226

20,073,148 -

80,192,226 1,605,853

-

-

24,610,974

100,289,719

20,073,148

80,192,226

14

23

34,133,761 (2,811,465) (337,748)

(4,499,307) (754,835) (378,159)

Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of year/period Currency translation differences Cash and cash equivalents at the end of year/period

From 26 September to 31 December 2013 US$ KHR’000

The accompanying notes on pages 11 to 52 form an integral part of these financial statements.

10

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

1.

BACKGROUND INFORMATION The Bank is a commercial bank operating in accordance with the Cambodian Law on Commercial Enterprises and under the supervision of the National Bank of Cambodia (“NBC” or “the Central Bank”), pursuant to the Law on Banking and Financial Institutions of Cambodia and in accordance with the Banking Licence No. 38, dated 20 September 2013, issued by the NBC. The main shareholders of the Bank are Canadia Investment Holding Plc. ("CIHP"), a public limited company incorporated in the Kingdom of Cambodia and Fullerton Financial Capital Pte. Ltd. ("Fullerton"), incorporated in Singapore as illustrated in Note 14. The principal activities of the Bank consist of the operation of core banking business and the provision of related financial services through the Bank‟s head office and various branches in Phnom Penh and in the provinces. The Bank‟s registered office is currently located at No. 265-269, Ang Duong Street, Sangkat Wat Phnom, Khan Doun Penh, Phnom Penh, the Kingdom of Cambodia. The Bank has a total of 26 branches located in Phnom Penh and major provinces in Cambodia. As at 31 December 2014, the Bank had a total of 753 employees (2013: 240 employees). The financial statements were authorised and approved for issue by the Board of Directors on 30 March 2015.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1

Basis of preparation The financial statements have been prepared in accordance with the guidelines issued by the National Bank of Cambodia and Cambodian Accounting Standards (“CAS”). In applying CAS, the Bank also applies the Cambodian International Financial Reporting Standard (“CIFRS”) 7: Financial Instruments: Disclosures. The accounting principles applied may differ from generally accepted accounting principles adopted in other countries and jurisdictions. The accompanying financial statements are therefore not intended to present the financial position and results of operations and cash flows in accordance with jurisdictions other than Cambodia. Consequently, these financial statements are addressed only to those who are informed about Cambodia‟s accounting principles, procedures and practices. The financial statements are prepared based on the historical cost convention.

11

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.1

Basis of preparation (continued) The preparation of financial statements in accordance with the guidelines issued by the National Bank of Cambodia and CAS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. Although these estimates are based on management‟s best knowledge of current events and actions, actual results may ultimately differ from those estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3 to the financial statements.

2.2

Financial reporting framework On 28 August 2009, the National Accounting Council of the Ministry of Economy and Finance announced the adoption of Cambodian International Financial Reporting Standards (“CIFRS”) which are based on all standards published by International Accounting Standard Board (“IASB”) including other interpretations and amendments to each standard that might arise in certain circumstances, by adding the word “Cambodian”. Publicly accountable entities shall prepare their financial statements in accordance with CIFRS for accounting years beginning on or after 1 January 2012. The National Accounting Council of the Ministry of Economy and Finance, through Circular No. 086 MoEF.NAC, dated 30 July 2012, approved banks and financial institutions‟ delaying the adoption of CIFRS until years beginning on or after 1 January 2016. The first financial statement of the Bank that will be prepared under CIFRS is for the year ending 31 December 2016. CAS, the current accounting standard used, is different from CIFRS in many areas. Hence, the adoption of CIFRS will have significant impact on the financial statements of the Bank.

2.3

Foreign currencies (i)

Functional and presentation currency

Items included in the financial statements of the Bank are measured using the currency of the primary economic environment in which the Bank operates („the functional currency‟). The financial statements are presented in United States dollars (“US$”), which is the Bank‟s functional and presentation currency. (ii)

Transactions and balances

Transactions in currencies other than US$ are translated into US$ at the exchange rates prevailing at the transaction dates. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in currencies other than US$ at the reporting date exchange rates, are recognised in the income statement.

12

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.3

Foreign currencies (continued) (iii)

Presentation in KHR

For the sole regulatory purpose of complying with Prakas No. B7-07-164 dated 13 December 2007 of the NBC, a translation into Khmer Riel is provided for the balance sheets, income statements, statements of changes in equity, cash flow statements and notes to the financial statements as at and for the year ended 31 December 2014 using the average exchange rate published by the NBC as at the reporting date, which was US$1 equal to Khmer Riel (“KHR”) 4,075 (2013: US$1 equal to KHR 3,995). Such translated amounts are unaudited and should not be construed as representations that the US$ amounts represent, or have been or could be, converted into Khmer Riel at that or any other rate. 2.4

Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise balances with original maturity of three months or less from the date of acquisition, including cash on hand, the non-restricted balance with the NBC and balances with other banks.

2.5

Loans and advances All loans and advances are stated in the balance sheet at outstanding principal, net of unamortised loan commitment fees less any amounts written off and allowance for losses on loans and advances. Loans are written-off when there is no realistic prospect of recovery. Recoveries of loans and advances previously written-off, or provided for, decrease the amount of the provision for loan losses in the income statement. Loans and advances classified as substandard, doubtful or loss are considered to be nonperforming loans.

2.6

Allowance for losses on loans and advances The Bank follows the mandatory credit classification and provisioning as required by Prakas B7-09-074, dated 25 February 2009, issued by the NBC. The Prakas requires commercial banks to classify their loans, advances and similar assets into five classes and the minimum mandatory level of specific provisioning is provided, depending on the classification concerned and regardless of the assets pledged as collateral as follows: Classification

Rate of provision (%)

General provision: Normal Specific provision: Special mention Sub-standard Doubtful Loss

1 3 20 50 100 13

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.7

Other credit-related commitments In the normal course of business, the Bank enters into other credit-related commitments including loan commitments, letters of credit and guarantees. Specific provisions are raised against other credit-related commitments when losses are considered probable similar to loans and advances to customers above.

2.8

Property and equipment Property and equipment are stated at cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the asset items. Subsequent costs are included in the asset‟s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that the future economic benefits associated with the item will flow to the Bank and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the year in which they are incurred. Capital work-in-progress is not depreciated. Depreciation of property and equipment assets is calculated using the straight-line methods and the following rates: Buildings Vehicles Leasehold Improvement Office equipment Furniture and fixtures Computers and IT equipment Other assets

5% 25% 25% 25% 25% 25% 25%

An asset‟s carrying amount is written-down immediately to its recoverable amount if the asset‟s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals recognised in the income statement are determined by comparing the proceeds and the carrying amount of the disposed property and equipment. 2.9

Intangible assets Intangible assets, which comprise acquired computer software licences and related cost, are stated at cost less accumulated amortisation and impairment loss. Acquired computer software is capitalised on the basis of the costs incurred to acquire the specific software and bring it to use. These costs are amortised at the rate of 25% using the straight-line method. Costs associated with maintaining computer software programs are recognised as expense when incurred.

14

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.10 Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment loss is recognised for the amount by which the asset‟s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset‟s fair value less costs to sell and its value in use. Any impairment loss is charged to the income statement in the year in which it arises. Reversal of an impairment loss is recognised in the income statement to the extent that the asset‟s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation and amortisation, had no impairment loss been recognised. 2.11 Interest income and expense Interest earned on loans and advances, balances with the NBC and other banks are recognised on an accrual basis, except where serious doubt exists as to the collectability of loans and advances, in which case no interest income is recognised. The policy on the suspension of interest is in conformity with the NBC‟s guidelines on the suspension of interest on non-performing loans and provision for loan losses. Interest expense on deposits from banks, customers and borrowings are recognised on an accrual basis. 2.12 Fee and commission income Fee and commission income is recognised on an accrual basis when the service has been provided. Fee and commission income comprises income received from inward and outward bank transfers, loan processing, bank guarantees, letters of credit, debit and credit card (ATM/Visa and MasterCard) charges. Loan commitment fees are deferred and recognised to other income in the income statement over the loan term period. 2.13 Operating leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.

15

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.14 Provisions Provisions are recognised when the Bank has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. When there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as interest expense. 2.15 Current and deferred income tax Current income tax Current income tax assets and liabilities for the current and prior years are measured at the amounts expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted at the balance sheet date. Deferred income tax Deferred income tax is provided using the balance sheet liability method on temporary differences at the balance sheet date between the tax base of assets and liabilities and their carrying amount for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences, except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that at the time of the transaction affects neither the accounting profit nor taxable profit or loss. Deferred income tax assets are recognised for all deductible temporary differences to the extent that it is probable that future taxable profits will be available against which these differences can be utilised, except where the deferred tax arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction affects neither the accounting profit nor taxable profit or loss. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered. Unrecognised deferred income tax assets are re-assessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be recovered.

16

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

3.

CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGEMENTS The Bank makes estimates, assumptions and judgements that affect the reported amounts of assets and liabilities. Estimates, assumptions and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. (a)

Impairment losses on loans and advances

The Bank follows the mandatory credit classification and provisioning as required by Prakas No. B7-09-074, dated 25 February 2009, on asset classification and provisioning in banking and financial institutions, issued by the NBC. The NBC requires commercial banks to classify their loans, advances and similar assets into five classes and the minimum mandatory level of provisioning is provided, depending on the classification concerned and regardless of the assets pledged as collateral. For the purposes of loan classification, the Bank takes into account all relevant factors that may affect the counterparties‟ repayment abilities. (b)

Taxes

Taxes are calculated on the basis of the current interpretation of the tax regulations. However, these regulations are subject to periodic variation and the ultimate determination of tax expenses will be made following inspection by the General Department of Taxation. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will have an impact on the provision for income tax and deferred tax in the year in which such determination is made. 4.

BALANCES WITH THE NBC 31 December 2014 US$ KHR’000 Current accounts Short-term deposits (i) Capital guarantee deposits (ii) Reserve deposits (iii)

(i)

31 December 2013 US$ KHR’000

1,516,635 200,000 3,800,000 5,001,810

6,180,288 815,000 15,485,000 20,382,375

49,642 3,800,000 502,503

198,320 15,181,000 2,007,499

10,518,445

42,862,663

4,352,145

17,386,819

Short-term deposits

Short-term deposits with NBC of US$200,000 have three-month term and bear interest rate of 0.12% per annum. The deposits are placed to secure the NBC‟s overdraft facility for liquidity contingency in accordance with Prakas B5-014-230 on Facility Provision to Member of Clearing House of the National Bank of Cambodia. As at 31 December 2014, the Bank has yet utilised the overdraft facility.

17

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

4.

BALANCES WITH THE NBC (continued) (ii)

Capital guarantee deposits

Under the NBC Prakas No. B7-01-136, dated 15 October 2001, banks are required to maintain a capital guarantee deposit of 10% of share capital. These deposits are refundable should the Bank voluntarily cease its operations in Cambodia and they are not available for use in the Bank‟s day-to-day operations. (iii) Reserve deposits Reserve deposits represent the minimum reserve requirement calculated at 8% for Riel and 12.5% for other currencies of the total amount of deposits from customers. (iv) Interest rates Current accounts and reserve deposits do not earn interest. Annual interest rates on other balances with the NBC are as follows:

Short-term deposits Capital guarantee deposits

5.

31 December 2014

31 December 2013

0.12% 0.08% to 0.11%

0.08% to 0.11%

BALANCES WITH OTHER BANKS 31 December 2014 US$ KHR’000 Local banks: Current accounts Savings accounts Term deposits

(i)

31 December 2013 US$ KHR’000

15,435,793 3,409,825 3,000,000

62,900,856 19,221,069 13,895,037 423,701 12,225,000 -

76,788,171 1,692,685 -

21,845,618

89,020,893 19,644,770

78,480,856

Annual interest rates: 31 December 2014 31 December 2013

Current accounts Savings accounts Term deposits

0% to 2% 0.25% to 2.50% 2% to 4.80%

18

0% to 2% 0.75% to 2% N/A

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

6.

LOANS AND ADVANCES 31 December 2014 US$ KHR’000 Commercial loans: Short-term loans Long-term loans Total gross loans Allowance for losses on loans and advances

(a)

31 December 2013 US$ KHR’000

900,164 3,668,168 147,451 92,576,191 377,247,979 20,737,857 93,476,355 380,916,147 20,885,308

(940,022)

(3,830,590)

589,067 82,847,739 83,436,806

(208,853)

(834,368)

92,536,333 377,085,557 20,676,455

82,602,438

Allowance for losses on loans advances

Movements in the allowance for losses on loans and advances follow: Specific provision US$

General provision US$

Total US$

Balance at 1 January 2014 Charges for the year Recoveries during the year Exchange difference

6,121 -

208,853 727,720 (90) (2,582)

208,853 733,841 (90) (2,582)

Balance at 31 December 2014

6,121

933,901

940,022

24,943

3,805,647

3,830,590

Balance at 26 September 2013 Charges for the period

-

208,853

208,853

Balance at 31 December 2014

-

208,853

208,853

KHR’000 equivalent

-

834,368

834,368

KHR’000 equivalent

(b)

By industry 31 December 2014 US$ KHR’000

Wholesale and retail Service Agriculture Building and construction Others

31 December 2013 US$ KHR’000

47,690,272 20,814,224 13,922,884 4,397,854 6,651,121

194,337,858 84,817,963 56,735,752 17,921,255 27,103,319

9,421,040 8,249,159 1,649,103 1,276,392 289,614

37,637,055 32,955,390 6,588,166 5,099,186 1,157,009

93,476,355

380,916,147 20,885,308

83,436,806

19

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

6.

LOANS AND ADVANCES (continued) (c)

By loan classification 31 December 2014 US$ KHR’000

Normal: Secured Unsecured Special mention: Secured Unsecured Sub-standard: Secured Unsecured Doubtful: Secured Unsecured Loss: Secured Unsecured

(d)

93,254,537 380,012,238 20,885,308 135,562 552,415 -

83,436,806 -

70,102 -

285,666 -

-

-

13,529 -

55,131 -

-

-

2,625 -

10,697 -

-

-

-

-

-

-

93,476,355 380,916,147 20,885,308

83,436,806

By maturity 31 December 2014 US$ KHR’000

Not later than 1 year Later than 1 year and no later than 3 years Later than 3 years and no later than 5 years Later than 5 years

(e)

31 December 2013 US$ KHR’000

31 December 2013 US$ KHR’000

1,338,034

5,452,489

205,364

820,429

21,242,048

86,561,346

4,063,749

16,234,677

65,416,554 266,572,458 14,697,379 5,479,719 22,329,854 1,918,816

58,716,029 7,665,671

93,476,355 380,916,147 20,885,308

83,436,806

By large exposure 31 December 2014 US$ KHR’000

Large exposure Non-large exposure

31 December 2013 US$ KHR’000

93,476,355

380,916,147 20,885,308

83,436,806

93,476,355

380,916,147 20,885,308

83,436,806

The large exposure is defined by the NBC as the overall credit exposure to any individual beneficiary that exceeds 10% of the Bank‟s net worth.

20

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

6.

LOANS AND ADVANCES (continued) (f)

By related parties 31 December 2014 US$ KHR’000

Related parties Non-related parties

(g)

31 December 2013 US$ KHR’000

93,476,355

380,916,147 20,885,308

83,436,806

93,476,355

380,916,147 20,885,308

83,436,806

Interest rates

Annual interest rates during the year/period are as follows:

Long-term loans Short-term loans

31 December 2014

31 December 2013

9.00% to 33.60% 9.00% to 36.00%

13.80% to 33.60% 14.40% to 31.20%

21

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

7.

PROPERTY AND EQUIPMENT

Under Leasehold construction improvement US$ US$ Cost At 1 January 2014 Additions Transfers Disposals

Furniture and fixtures US$

Office equipment US$

Computer and IT equipment US$

Vehicles US$

Total US$

78,210 30,598 (78,210) -

259,325 110,566 -

78,993 95,059 -

53,830 100,887 -

96,258 290,319 78,210 -

149,149 127,406 (31,952)

715,765 754,835 (31,952)

30,598

369,891

174,052

154,717

464,787

244,603

1,438,648

Accumulated depreciation At 1 January 2014 Depreciation charge Disposals

-

(16,068) (79,651) -

(8,378) (36,808) -

(4,968) (23,878) -

(15,588) (109,198) -

(10,719) (45,988) 1,300

(55,721) (295,523) 1,300

At 31 December 2014

-

(95,719)

(45,186)

(28,846)

(124,786)

(55,407)

(349,944)

30,598

274,172

128,866

125,871

340,001

189,196

1,088,704

124,687

1,117,251

525,129

512,924

1,385,504

770,974

4,436,469

At 31 December 2014

Net book value KHR’000 equivalent

22

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

7.

PROPERTY AND EQUIPMENT (continued)

Under Leasehold construction improvement US$ US$

Furniture and fixtures US$

Office equipment US$

Computer and IT equipment US$

Vehicles US$

Total US$

Cost At 26 September 2013 Additions

78,210

259,325

78,993

53,830

96,258

149,149

715,765

At 31 December 2013

78,210

259,325

78,993

53,830

96,258

149,149

715,765

Accumulated depreciation At 26 September 2013 Depreciation charge

-

(16,068)

(8,378)

(4,968)

(15,588)

(10,719)

(55,721)

At 31 December 2013

-

(16,068)

(8,378)

(4,968)

(15,588)

(10,719)

(55,721)

78,210

243,257

70,615

48,862

80,670

138,430

660,044

312,449

971,812

282,107

195,204

322,277

553,027

2,636,876

Net book value KHR’000 equivalent

23

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

8.

INTANGIBLE ASSETS Software-inprogress US$

Software US$

Total US$

221,196 (221,196)

2,000 378,159 221,196

223,196 378,159 -

At 31 December 2014

-

601,355

601,355

Accumulated amortisation At 1 January 2014 Amortisation charge

-

(68) (115,776)

(68) (115,776)

At 31 December 2014

-

(115,844)

(115,844)

Net book value

-

485,511

485,511

KHR’000 equivalent

-

1,978,457

1,978,457

Cost At 26 September 2013 Additions

221,196

2,000

223,196

At 31 December 2013

221,196

2,000

223,196

Accumulated amortisation At 26 September 2013 Amortisation charge

-

(68)

(68)

At 31 December 2013

-

(68)

(68)

Net book value

221,196

1,932

223,128

KHR’000 equivalent

883,678

7,718

891,396

Cost At 1 January 2014 Additions Transfers

24

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

9.

DEFERRED TAX ASSETS Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when deferred income taxes relate to the same fiscal authority. The offset amounts are as follows: 31 December 2014 US$ KHR’000

31 December 2013 US$ Riel' 000

Deferred tax assets Deferred tax liabilities

162,598 (21,629)

662,587 (88,138)

-

-

Deferred tax assets - net

140,969

574,449

-

-

The gross movement of the deferred tax accounts is as follows: 31 December 2014 US$ KHR’000

31 December 2013 US$ Riel' 000

At 1 January Recognised in the income statement

140,969

574,449

-

-

At 31 December

140,969

574,449

-

-

The movements of deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same jurisdiction, are as follows:

Deferred tax assets

Unearned loan Provision for commitment fees accrued bonus US$ US$

Total US$

At 1 January 2014 Recognised in the income statement

155,470

7,128

162,598

At 31 December 2014

155,470

7,128

162,598

Accelerated depreciation US$

Unrealised exchange gain/(loss) US$

Total US$

At 1 January 2014 Recognised in the income statement

(18,204)

(3,425)

(21,629)

At 31 December 2014

(18,204)

(3,425)

(21,629)

Deferred tax liabilities

25

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

10.

OTHER ASSETS 31 December 2014 US$ KHR’000 Accrued interest receivable Office rental deposits Prepayments Office supplies Others

11.

31 December 2013 US$ KHR’000

888,213 219,122 55,663 24,104 19,272

3,619,468 892,922 226,827 98,224 78,533

190,376 80,477 1,520 9,190 10,286

760,552 321,506 6,072 36,714 41,093

1,206,374

4,915,974

291,849

1,165,937

DEPOSITS FROM BANKS 31 December 2014 US$ KHR’000 Savings accounts Term deposits

31 December 2013 US$ KHR’000

3,370 13,733 52,108,961 212,344,016

10 5,300,000

40 21,173,500

52,112,331 212,357,749

5,300,010

21,173,540

Annual interest rates during the year/period are as follows: 31 December 2014 31 December 2013 Savings accounts Term deposits 12.

1.25% 5.30%

1.25% 5.50%

DEPOSITS FROM CUSTOMERS 31 December 2014 US$ KHR’000 Current accounts Savings accounts Term deposits

31 December 2013 US$ KHR’000

39,800 162,185 6,113,040 24,910,638 29,391,153 119,768,948

401,782 3,239,112

1,605,120 12,940,252

35,543,993 144,841,771

3,640,894

14,545,372

Annual interest rates follow: 31 December 2014 31 December 2013 Savings accounts Term deposits

1.27% 6.82%

26

1.25% 7.50%

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

13.

OTHER LIABILITIES 31 December 2014 US$ KHR’000 Accrued interest payable Unearned loan commitment fees Accrued staff bonuses Accrued expenses Other taxes payable Payable to related party for settingup cost Others-liabilities

14.

31 December 2013 US$ KHR’000

1,741,644 777,349 198,225 109,864 29,514

7,097,199 3,167,697 807,767 447,696 120,270

54,443 206,830 7,500 6,874 131,242

217,500 826,285 29,963 27,462 524,311

40,225

163,917

113,625 4,280

453,932 17,098

2,896,821

11,804,546

524,794

2,096,551

US$

KHR’000

SHARE CAPITAL Description Issued and fully paid: At 26 September 2013

38,000,000 151,810,000

At 31 December 2013

38,000,000 151,810,000

At 1 January 2014 Currency translation differences

38,000,000 151,810,000 3,040,000

At 31 December 2014

38,000,000 154,850,000

Ownership and number of shares are presented as below: 31 December 2014 31 December 2013 Ownership Shares Ownership Shares CIHP Fullerton Cambodia Post

50% 45% 5%

19,000,000 17,100,000 1,900,000

50% 45% 5%

19,000,000 17,100,000 1,900,000

100%

38,000,000

100%

38,000,000

27

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

15.

NET INTEREST INCOME For the year ended 31 December 2014 US$ KHR’000 Interest income from: Loans and advances Balances with other banks Balances with the NBC

8,625,376 448,655 189

35,148,408 1,828,269 770

1,303,220 84,956 1,192

5,206,364 339,399 4,762

Total interest income

9,074,220

36,977,447

1,389,368

5,550,525

Interest expense on: Deposits from customers (1,027,951) Deposits from banks (1,349,180) Interest expense on short-term loans -

(4,188,900) (5,497,909) -

(18,231) (38,681) (287,156)

(72,833) (154,531) (1,147,188)

Total interest expense

(2,377,131)

(9,686,809)

(344,068)

(1,374,552)

6,697,089

27,290,638

1,045,300

4,175,973

Net interest income

16.

FEE AND COMMISSION INCOME For the year ended 31 December 2014 US$ KHR’000

From 26 September to 31 December 2013 US$ KHR’000

Loan commitment fees Other fee and commission income

275,731 1,179

1,123,604 4,804

34,649 5

138,423 20

Total fee and commission income

276,910

1,128,408

34,654

138,443

6,725

27,404

2,476

9,892

270,185

1,101,004

32,178

128,551

Fee and commission expense Net fee and commission income

17.

From 26 September to 31 December 2013 US$ KHR’000

OTHER OPERATING INCOME For the year ended 31 December 2014 US$ KHR’000 Foreign exchange gains Other income

From 26 September to 31 December 2013 US$ KHR’000

40,554 9,637

165,258 39,270

91 1,026

364 4,098

50,191

204,528

1,117

4,462

28

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

18.

PERSONNEL EXPENSES For the year ended 31 December 2014 US$ KHR’000 Salaries and wages Other short term benefits Staff insurance

19.

2,294,804 90,732 20,173

9,351,326 369,733 82,205

823,664 15,475 8,270

3,290,538 61,822 33,039

2,405,709

9,803,264

847,409

3,385,399

DEPRECIATION AND AMORTISATION CHARGES For the year ended 31 December 2014 US$ KHR’000 Depreciation of property and equipment Amortisation of intangible assets

20.

From 26 September to 31 December 2013 US$ KHR’000

From 26 September to 31 December 2013 US$ KHR’000

295,523 115,776

1,204,256 471,787

55,721 68

222,605 272

411,299

1,676,043

55,789

222,877

GENERAL AND ADMINISTRATIVE EXPENSES For the year ended 31 December 2014 US$ KHR’000 Office rental Taxes and duties Motor vehicles Rental Communication Non-capitalised equipment and furniture Utilities Stationery and supplies Repairs and maintenance Advertising and public relations Legal and professional fees Travel, accommodation and foods Unrealised foreign exchange losses Printing and forms Others-expenses Grand opening expense for the Bank Board of director's expenses Fines and penalties

From 26 September to 31 December 2013 US$ KHR’000

428,751 327,413 229,506 155,908 128,204

1,747,160 1,334,208 935,237 635,325 522,431

111,489 144,772 24,431 28,601 17,663

445,399 578,364 97,602 114,261 70,564

108,104 107,830 77,261 76,342 50,811 49,503 43,805 18,688 17,566 148,999 -

440,524 439,407 314,839 311,094 207,055 201,725 178,505 76,154 71,581 607,171 -

55,632 37,230 35,405 5,619 6,757 35,512 12,240 1,319 14,539 13,436 32,190 9,266 3,471

222,250 148,734 141,443 22,448 26,994 141,870 48,899 5,269 58,083 53,676 128,599 37,018 13,867

1,968,691

8,022,416

589,572

2,355,340

29

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

21.

PROVISION FOR LOAN LOSSES For the year ended 31 December 2014 US$ KHR’000 Provision for losses on loans (Note 6a) Recovery of losses on loans (Note 6a)

22.

From 26 September to 31 December 2013 US$ KHR’000

733,841

2,990,402

208,853

834,368

(90)

(367)

-

-

733,751

2,990,035

208,853

834,368

INCOME TAX a)

Current tax liabilities

The movements of the Bank‟s income tax payable are as follows: 31 December 2014 US$ KHR’000

31 December 2013 US$ KHR’000

At the beginning of the year/period Income tax expense Income tax paid Currency translation differences

9,402 222,152 (82,883) -

37,561 905,270 (337,748) 751

16,320 (6,918) -

65,198 (27,637) -

At the end of the year/period

148,671

605,834

9,402

37,561

b)

Income tax expense For the year ended 31 December 2014 US$ KHR’000

Current income tax Deferred tax

From 26 September to 31 December 2013 US$ KHR’000

222,152 (140,969)

905,270 (574,449)

16,320 -

65,198 -

81,183

330,821

16,320

65,198

30

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

22.

INCOME TAX (continued) c)

Reconciliation between accounting loss and income tax expense of the Bank are as follows: For the year ended 31 December 2014 US$ KHR’000

Profit/(loss) before income tax Tax calculation at 20% Tax effects in respect of: Expenses not deductible for tax purposes Temporary differences Utilisation of previously unrecognised tax losses Tax on profit 1% minimum tax Current income tax

1,498,015

From 26 September to 31 December 2013 US$ KHR’000

6,104,412 (1,231,653)

(4,920,454)

299,603

1,220,882

(246,331)

(984,092)

14,792 52,451

60,277 213,738

60,615 48,801

242,157 194,960

(144,694)

(589,628)

-

-

222,152

905,269

(136,915)

(546,975)

95,083

387,463

16,320

65,198

222,152

905,269

16,320

65,198

In accordance with the Cambodian tax laws, the Bank has an obligation to pay corporate income tax of either tax on profit at a rate of 20% on taxable profit or 1% minimum tax, whichever is higher. The Bank‟s tax returns are subject to periodic examination by the General Department of Taxation. As the application of tax laws and regulations to various types of transactions is susceptible to varying interpretations, amounts reported in the Bank‟s financial statements could be changed at a later date, upon final determination by the General Department of Taxation.

31

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

23. CASH AND CASH EQUIVALENTS 31 December 2014 US$ KHR’000 Cash on hand Balances with the NBC: Current accounts Term deposits (maturity of three months or less) Balances with other banks: Current accounts Savings accounts Term deposits (maturity of three months or less)

24.

31 December 2013 US$ KHR’000

1,048,721

4,273,538

378,736

1,513,050

1,516,635

6,180,288

49,642

198,320

200,000

815,000

-

-

15,435,793 3,409,825

62,900,856 13,895,037

19,221,069 423,701

76,788,171 1,692,685

3,000,000

12,225,000

-

-

24,610,974 100,289,719

20,073,148

80,192,226

COMMITMENTS AND CONTINGENCIES a)

Loan commitments, guarantees and other financial liabilities

Contractual amounts arising from off-balance sheet financial instruments that the Bank committed to extend credit to customers, guarantees and other facilities are as follows: 31 December 2014 US$ KHR’000 Unused portion of approved credit facilities

31 December 2013 US$ KHR’000

-

-

21,000

83,895

-

-

21,000

83,895

No material losses are anticipated as a result of these transactions. b)

Operating lease commitments

Where the Bank is the lessee, the future minimum lease payments of the Bank‟s offices in Phnom Penh and provinces under a non-cancellable operating lease arrangement are as follows: 31 December 2014 US$ KHR’000 Not later than one year Later than one year and not later than five years

31 December 2013 US$ KHR’000

529,055

2,155,899

280,925

1,122,295

1,386,760

5,651,047

856,922

3,423,403

1,915,815

7,806,946

1,137,847

4,545,698

32

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

25.

RELATED PARTY TRANSACTIONS AND BALANCES a)

Related parties and relationship

Related parties and their relationship with the Bank are as follows: Relationship

Related party

Shareholder Shareholder Shareholder Affiliate Directors and key management

Canadia Investment Holding Plc. (“CIHP”) Fullerton Financial Capital Pte. Ltd. (“Fullerton”) Cambodia Post Canadia Bank Plc., Cana Securities Ltd. All directors of the Bank who make critical decisions in relation to the strategic direction of the Bank and senior management staff (including their close family members)

b)

Deposits from related parties 31 December 2014 US$ KHR’000

31 December 2013 US$ KHR’000

Shareholders Affiliates Directors and key management

117,898 1,900,135 1,665,911

480,434 7,743,050 6,788,588

170,399

680,744

At the end of the year/period

3,683,944

15,012,072

170,399

680,744

159,648

650,566

2,445

9,768

Interest expense

The deposits from shareholders, affiliates, directors and key management bear interest at rates ranging from 1.25% and 7.5% per annum. c)

Other balances with related parties 31 December 2014 US$ KHR’000

31 December 2013 US$ KHR’000

With affiliates: Deposit balances Refundable rental deposits

18,799,137 28,857

76,606,483 19,644,770 117,592 26,667

78,480,856 106,535

At the end of the year/period

18,827,994

76,724,075 19,671,437

78,587,391

Interest income

346,263

1,411,022

84,956

339,399

Refundable rental deposits bear no interest, other deposits with affiliates bear interest at rates ranging from 0.25% and 2% per annum.

33

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

25.

RELATED PARTY TRANSACTIONS AND BALANCES (continued) d)

Other transactions with related parties For the year ended From 26 September to 31 December 2014 31 December 2013 US$ KHR’000 US$ KHR’000

With affiliate: Office rental expense Interest expense on short-term loans (*)

140,295 -

571,702 -

46,524 287,156

185,863 1,147,188

140,295

571,702

333,680

1,333,051

-

-

113,625

453,932

Management fee charged: By shareholders

(*) This was the interest expense on short-term loans which had been paid off during the period. e)

Directors and key management compensation For the year ended From 26 September to 31 December 2014 31 December 2013 US$ KHR’000 US$ KHR’000

Salaries and short-term benefits

420,900

34

1,715,168

288,199

1,151,355

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26.

FINANCIAL RISK MANAGEMENT The Bank‟s activities expose it to a variety of financial risks: credit risk, market risk (including currency risk, interest rate risk and price risk), and liquidity risk. Taking risk is core to the financial business, and the operational risks are the inevitable consequence of being in business. The Bank does not use derivative financial instruments such as foreign exchange contract and interest rate swaps to manage its risk exposure. The financial assets and liabilities held by the Bank are as follows: 31 December 2014 US$ KHR’000 Financial assets Cash on hand Balances with the NBC (*) Balances with other banks Loans and advances (**) Other assets Total financial assets

1,048,721 1,716,635 21,845,618 93,476,355 961,433 119,048,762

4,273,538 6,995,288 89,020,893 380,916,147 3,917,839 485,123,705

Financial liabilities Deposits from banks Deposits from customers Other liabilities Total financial liabilities

52,112,331 35,543,993 2,049,733 89,706,057

212,357,749 144,841,771 8,352,662 365,552,182

Net financial assets

29,342,705

119,571,523

(*) (**)

31 December 2013 US$ KHR’000

378,736 1,513,050 49,642 198,320 19,644,770 78,480,856 20,885,308 83,436,805 281,139 1,123,150 41,239,595 164,752,181

5,300,010 3,640,894 317,964 9,258,868

31,980,727 127,763,003

Exclude capital guarantee and reserve deposits with the Central Bank Exclude allowance for losses on loans and advances

35

21,173,540 14,545,372 1,270,266 36,989,178

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26.

FINANCIAL RISK MANAGEMENT (continued)

26.1 Credit risk The Bank takes exposure to credit risk, which is the risk that counterparty will cause a financial loss to the Bank by failing to discharge an obligation. Credit risk is the most important risk for the business of the Bank. Credit exposure arises principally in lending activities. The credit risk management of the Bank is carried out by its credit committee. a)

Credit risk measurement

The Bank assesses the probability of default of individual counterparties using an internal rating tool. The credit committee is responsible for determining the risk rating for each borrower. Risk ratings are reviewed and updated at least annually, and in the event of a change in loan terms and conditions including extension; repayment irregularities or delinquencies; and adverse information relating to the borrower or transaction. b)

Risk limit control and mitigation policies

The Bank operates and provides loans and advances to individuals or enterprises within the Kingdom of Cambodia. The Bank manages limits and controls the concentration of credit risk whenever it is identified. Large exposure is defined by the NBC as overall credit exposure to any individual beneficiary which exceeds 10% of the Bank‟s net worth. The Bank is required, under the conditions of Prakas No. B7-06-226, to maintain at all times a maximum ratio of 20% between the Bank‟s overall credit exposure to any individual beneficiary and the Bank‟s net worth. The aggregation of large credit exposure must not exceed 300% of the Bank‟s net worth. The Bank employs a range of policies and practices to mitigate credit risk. The most traditional of these is the taking of security in the form of collateral for loans and advances. The Bank implements guidelines on the acceptability of specific classes of collateral or credit risk mitigation. The principal collateral types as security for loans and advances are:  mortgages over residential properties (land, building and other properties);  charges over business assets such as land and buildings; and  cash in the form of deposits.

c)

Impairment and provisioning policies

The Bank is required to follow the mandatory credit classification and provisioning in accordance with the relevant Prakas, as stated in Note 2.6 to the financial statements. Loan classification and loan loss provisioning are determined taking into account past due period of loans and advances to customers and other relevant qualitative factors.

36

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26.

FINANCIAL RISK MANAGEMENT (continued)

26.1 Credit risk (continued) d)

Maximum exposures to credit risk before collateral held or other credit enhancements of the Bank are as follows: 31 December 2014 US$ KHR’000

Credit risk exposures relating to on-balance sheet assets: Balances with other banks Loans and advances Other assets Credit risk exposures relating to off-balance sheet items: Unused portion of approved credit facilities

21,845,618 93,476,355 961,433 116,283,406

89,020,893 380,916,147 3,917,839 473,854,879

-

-

116,283,406

473,854,879

31 December 2013 US$ KHR’000

19,644,770 78,480,856 20,885,308 83,436,805 281,139 1,123,150 40,811,217 163,040,811

21,000 21,000

83,895 83,895

40,832,217 163,124,706

The above table represents a worst case scenario of credit risk exposure to the Bank, since collateral held and/or other credit enhancement attached were not taken into account. For on-balance sheet assets, the exposures set out above are based on net carrying amounts. At 31 December 2014, 80% (2013: 51%) of total maximum exposure is derived from loans and advances. Management is confident of its ability to continue to control and sustain minimal exposure on credit risk resulting from the Bank‟s loans and advances due to the following:  

All loans and advances are collateralised and loan to collateral value range from 60% to 80%. 99% of loan portfolio is considered neither past due nor impaired.

Allowance for losses on loans and advances had been provided for those individually impaired loans in accordance with the NBC‟s requirement.

37

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26.

FINANCIAL RISK MANAGEMENT (continued)

26.1 Credit risk (continued) e)

Credit quality of financial assets

Loans and advances of the Bank are as follows: 31 December 2014 US$ KHR’000 Loans and advances neither past due nor impaired Loans and advances past due but not impaired Loans and advances individually impaired

31 December 2013 US$ KHR’000

93,390,099 380,564,653 20,885,308

83,436,806

70,102

285,666

-

-

16,154

65,828

-

-

93,476,355 380,916,147 20,885,308

83,436,806

For loan provisioning purposes, expected recovery from collateral (except cash) is not taken into consideration in accordance with the NBC‟s requirements. i.

Loans and advances neither past due nor impaired

Loans and advances not past due are not considered impaired, unless other information is available to indicate the contrary. ii.

Loans and advances past due but not impaired

Loans and advances less than 90 days past due are not considered impaired, unless other information is available to indicate the contrary. Gross amount of loans and advances that were past due but not impaired are as follows: 31 December 2014 US$ KHR’000 Past due up to 90 days

70,102

38

285,666

31 December 2013 US$ KHR’000 -

-

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26.

FINANCIAL RISK MANAGEMENT (continued)

26.1 Credit risk (continued) iii.

Loans and advances individually impaired

In accordance with Prakas B7-09-074 dated 25 February 2009 on the classification and provisioning for bad and doubtful debts, loans and advances that are past due for more than 90 days are considered impaired and a minimum level of specific provision for impairment is made depending on the classification concerned, unless other information is available to indicate the contrary. 31 December 2014 US$ KHR’000 Past due 91 to 180 days Past due 181 to 360 days Past due for more than 360 days

iv.

31 December 2013 US$ KHR’000

13,529 2,625 -

55,131 10,697 -

-

-

16,154

65,828

-

-

Loans and advances renegotiated

Restructuring activities include extended payment arrangements, modification and deferral of payments. Following restructuring, the loan is still kept in its current classification unless there is strong evidence of improvement in the customer‟s financial condition. There were no restructured loans and advances during the year (2013: Nil). f)

Repossessed properties

Repossessed properties are classified in the balance sheet as foreclosed properties. There were no repossessed properties during the year (2013: Nil).

39

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26.

FINANCIAL RISK MANAGEMENT (continued)

26.1 Credit risk (continued) g)

Concentration of financial assets with credit risk exposure

i.

Geographical sector

The following table provides a breakdown of the Bank‟s main credit exposure at their carrying amount, as categorised by geographical region. The Bank allocated exposure to regions based on the country of domicile of the counterparties. Cambodia US$ KHR’000 At 31 December 2014 Balances with other banks Loans and advances Other assets

21,845,618 93,476,355 961,433

89,020,893 377,085,557 8,352,662

116,283,406

474,459,112

At 31 December 2013 Balances with other banks Loans and advances Other assets

19,644,770 20,885,308 281,139

78,480,856 83,436,805 1,123,150

Total credit exposure

40,811,217

163,040,811

Total credit exposure

40

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26.

FINANCIAL RISK MANAGEMENT (continued)

26.1 Credit risk (continued) g)

Concentration of financial assets with credit risk exposure (continued)

ii.

Industry sector

The following table provides a breakdown of the Bank‟s main credit exposure at their carrying amounts, as categorised by industry sector. Financial institutions US$

Building and Service construction US$ US$

Wholesale and retail US$

Agriculture US$

Others US$

Total US$

21,845,618 93,476,355 961,433

At 31 December 2014 Balances with other banks Loans and advances Other assets

21,845,618 21,752

20,814,224 189,156

4,397,854 40,323

47,690,272 437,129

13,922,884 143,026

6,651,121 130,047

Total credit exposure

21,867,370

21,003,380

4,438,177

48,127,401

14,065,910

6,781,168 116,283,406

KHR’000 equivalent

89,109,533

85,588,774

18,085,571 196,119,159

57,318,583

27,633,260 473,854,880

At 31 December 2013 Balances with other banks Loans and advances Other assets Total credit exposure

19,644,770 19,644,770

8,249,159 8,249,159

1,276,392 1,276,392

9,421,040 9,421,040

1,649,103 1,649,103

KHR’000 equivalent

78,480,856

32,955,390

5,099,186

37,637,055

6,588,166

41

289,614 281,139 570,753

19,644,770 20,885,308 281,139 40,811,217

2,280,158 163,040,811

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26.

FINANCIAL RISK MANAGEMENT (continued)

26.2 Market risk The Bank takes exposure to market risk, which is the risk that the fair value or future cash flow of a financial instrument will fluctuate because of changes in market prices. Market risk arises from open positions in interest rates, currency and equity products, all of which are exposed to general and specific market movements and changes in the level of volatility of market rates or prices such as interest rates, credit spreads, foreign exchange rates and equity prices. The Bank does not use derivative financial instruments such as foreign exchange contract and interest rate swaps to hedge its risk exposure. a)

Foreign exchange risk

The Bank operates in Cambodia and transacts in many currencies, and is exposed to various currency risks, primarily with respect to Riel, euro and Thai Baht. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Bank‟s functional currency. Management monitors foreign exchange risk against the Bank‟s functional currency. However, the Bank does not hedge its foreign exchange risk exposure arising from future commercial transactions and recognised assets and liabilities using forward contracts. The Bank‟s policy is to maintain foreign currency exposure within acceptable limits and within existing regulatory guidelines. The Bank did not present a sensitivity analysis on the impact of reasonably possible change in foreign currency on profit and loss before tax and equity since the exposure to foreign currency risk is minimal. The table below summarises the Bank‟s exposure to foreign currency exchange rate risk. Included in the table are the Bank‟s financial instruments at their carrying amounts by currency in US$ equivalent.

42

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26.

FINANCIAL RISK MANAGEMENT (continued)

26.2 Market risk (continued) a)

Foreign exchange risk (continued) US$

Riel

THB

Total

942,388 1,711,749 21,314,107 91,835,086 937,499 116,740,829

97,987 4,886 475,613 1,202,141 18,336 1,798,963

8,346 55,898 439,128 5,598 508,970

1,048,721 1,716,635 21,845,618 93,476,355 961,433 119,048,762

Financial liabilities Deposits from banks Deposits from customers Other liabilities Total financial liabilities

50,212,196 35,053,353 1,916,903 87,182,452

1,472,393 451,556 120,947 2,044,896

427,742 39,084 11,883 478,709

52,112,331 35,543,993 2,049,733 89,706,057

Net position

29,558,377

(245,933)

30,261

29,342,705

KHR’000 equivalent

120,450,386

(1,002,177)

123,314

119,571,523

Credit commitments

-

-

-

-

KHR’000 equivalent

-

-

-

-

At 31 December 2014 Financial assets Cash on hand Balances with the NBC (*) Balances with other banks Loans and advances (**) Other assets Total financial assets

(*) (**)

Exclude capital guarantee and reserve deposits with the Central Bank Exclude allowance for losses on loans and advances

43

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26.

FINANCIAL RISK MANAGEMENT (continued)

26.2 Market risk (continued) a)

Foreign exchange risk (continued) US$

Riel

THB

Total

347,036 49,392 19,614,502 20,835,045 280,576 41,126,551

7,415 250 30,268 50,263 563 88,759

24,285 24,285

378,736 49,642 19,644,770 20,885,308 281,139 41,239,595

5,300,010 3,606,102 315,292 9,221,404

10,507 2,640 13,147

24,285 32 24,317

5,300,010 3,640,894 317,964 9,258,868

31,905,147

75,612

(32)

31,980,727

KHR’000 equivalent

127,461,062

302,070

(128)

127,763,004

Credit commitments

21,000

-

-

21,000

KHR’000 equivalent

83,895

-

-

83,895

At 31 December 2013 Financial assets Cash on hand Balances with the NBC (*) Balances with other banks Loans and advances (**) Other assets Total financial assets Financial liabilities Deposits from banks Deposits from customers Other liabilities Total financial liabilities Net position

(*) (**)

Exclude capital guarantee and reserve deposits with the Central Bank Exclude allowance for losses on loans and advances

b)

Interest rate risk

Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate because of changes in market interest rates. Interest margins may increase as a result of changes but may reduce losses in the event that unexpected movements arise. At this stage, the management of the Bank do not have a policy to set limits on the level of mismatch of interest rate repricing. The table below summarises the exposures of the Bank to interest rate risk. The assets and liabilities at carrying amount are categorised by the earlier of contractual repricing or maturity dates.

44

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26.

FINANCIAL RISK MANAGEMENT (continued)

26.2 Market risk (continued) b)

Interest rate risk (continued) Up to 1 month US$

At 31 December 2014 Financial assets Cash on hand Balances with the NBC (*) Balances with other banks Loans and advances (**) Other assets

1 to 3 months 4 to 12 months US$ US$

1 to 5 years US$

Over 5 years US$

Non-interest bearing US$

Total US$

200,000 20,844,447 3,136 888,213 21,935,796

1,000,000 22,983 1,022,983

1,311,915 1,311,915

86,658,602 73,220 86,731,822

5,479,719 5,479,719

1,048,721 1,516,635 1,171 2,566,527

1,048,721 1,716,635 21,845,618 93,476,355 961,433 119,048,762

984,965 8,867,330 9,852,295

10,800,485 3,327,467 14,127,952

22,326,881 22,262,605 44,589,486

18,000,000 1,086,591 19,086,591

-

2,049,733 2,049,733

52,112,331 35,543,993 2,049,733 89,706,057

Total interest rate repricing gap

12,083,501

(13,104,969)

(43,277,571)

67,645,231

5,479,719

516,794

29,342,705

KHR’000 equivalent

49,240,267

(53,402,749)

(176,356,102)

275,654,316

22,329,855

2,105,936

119,571,523

Financial liabilities Deposits from banks Deposits from customers Other liabilities

(*) (**)

Exclude capital guarantee and reserve deposits with the Central Bank Exclude allowance for losses on loans and advances

45

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26.

FINANCIAL RISK MANAGEMENT (continued)

26.2 Market risk (continued) b)

Interest rate risk (continued)

Up to 1 month US$ At 31 December 2013 Financial assets Cash on hand Balances with the NBC (*) Balances with other banks Loans and advances (**) Other assets

Financial liabilities Deposits from banks Deposits from customers Other liabilities

Total interest rate repricing gap KHR’000 equivalent (*) (**)

1 to 3 months 4 to 12 months US$ US$

1 to 5 years US$

Over 5 years US$

Non-interest bearing US$

Total US$

2,500 2,500

423,701 3,950 427,651

198,914 198,914

18,761,128 18,761,128

1,918,816 1,918,816

378,736 49,642 19,221,069 281,139 19,930,586

378,736 49,642 19,644,770 20,885,308 281,139 41,239,595

10 407,782 407,792

300,000 38,636 338,636

5,000,000 3,077,476 8,077,476

117,000 117,000

-

317,964 317,964

5,300,010 3,640,894 317,964 9,258,868

(405,292)

89,015

(7,878,562)

18,644,128

1,918,816

19,612,622

31,980,727

(1,619,142)

355,615

(31,474,855)

74,483,291

7,665,670

78,352,425

127,763,004

Exclude capital guarantee and reserve deposits with the Central Bank Exclude allowance for losses on loans and advances.

46

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26.

FINANCIAL RISK MANAGEMENT (continued)

26.3 Liquidity risk Liquidity risk is the risk that the Bank is unable to meet its payment obligations associated with its financial liabilities when they fall due and to replace funds when they are withdrawn. The consequence of this may be the failure to meet obligations to repay depositors and fulfil commitments to lend. a)

Liquidity risk management process

Management monitors balance sheet liquidity and manages the concentration and profile of debt maturities. Monitoring and reporting, taking the form of daily cash position and projection for the next day, week and month respectively, are key periods for liquidity management. In addition, management monitors the movement of main depositors and projection of their withdrawals. b)

Funding approach

The Bank‟s main sources of liquidity arise from shareholder‟s share capital, customers‟ deposits and borrowings. The sources of liquidity are regularly reviewed by management through review of maturity of term deposits and the key depositors. c)

Non-derivative cash flows

The table below presents the cash flows of the financial instruments by the Bank by remaining contractual maturities at the balance sheet date. The amounts disclosed in the table are the contractual undiscounted cash flows, whereas the Bank manages the inherent liquidity risk based on expected undiscounted cash flows.

47

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26.

FINANCIAL RISK MANAGEMENT (continued)

26.3 Liquidity risk (continued) c)

Non-derivative cash flows (continued) Up to 1 month US$

1 to 3 months US$

At 31 December 2014 Financial assets Cash on hand Balances with the NBC (*) Balances with other banks Loans and advances (**) Other assets Total financial assets by remaining contractual maturities

1,048,721 1,716,635 20,847,205 3,171 888,213 24,503,945

1,006,568 23,928 1,030,496

Financial liabilities Deposits from banks Deposits from customers Other liabilities Total financial liabilities by remaining contractual maturities

989,860 8,871,950 1,851,508 11,713,318

10,870,567 3,367,046 14,237,613

Net liquidity surplus/(gap)

12,790,627 (13,207,117)

KHR’000 equivalent

52,121,805 (53,819,002) (183,754,696) 482,551,740

(*) (**)

Exclude capital guarantee and reserve deposits with the Central Bank Exclude allowance for losses on loans and advances

48

4 to 12 months 1 to 5 years Over 5 years US$ US$ US$

1,527,136 139,428,280 73,220 1,527,136 139,501,500

23,058,848 23,363,240 198,225 46,620,313

Total US$

1,048,721 1,716,635 21,853,773 9,771,717 150,754,232 961,433 9,771,717 176,334,794

19,868,523 1,215,372 21,083,895

-

54,787,798 36,817,608 2,049,733 93,655,139

(45,093,177) 118,417,605

9,771,717

82,679,655

39,819,747 336,919,594

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26.

FINANCIAL RISK MANAGEMENT (continued)

26.3 Liquidity risk (continued) c)

Non-derivative cash flows (continued) Up to 1 month US$

1 to 3 months US$

4 to 12 months 1 to 5 years Over 5 years US$ US$ US$

378,736 49,642 19,221,069 2,500 281,139 19,933,086

423,701 3,950 427,651

198,914 198,914

18,761,128 18,761,128

1,918,816 1,918,816

378,736 49,642 19,644,770 20,885,308 281,139 41,239,595

10 407,782 317,964 725,756

300,000 38,636 338,636

5,000,000 3,077,476 8,077,476

117,000 117,000

-

5,300,010 3,640,894 317,964 9,258,868

Net liquidity surplus/(gap)

19,207,330

89,015

(7,878,562)

18,644,128

1,918,816

31,980,727

KHR’000 equivalent

76,733,283

355,615 (31,474,855)

74,483,291

7,665,670 127,763,004

At 31 December 2013 Financial assets Cash on hand Balances with the NBC (*) Balances with other banks Loans and advances (**) Other assets Total financial assets by remaining contractual maturities Financial liabilities Deposits from banks Deposits from customers Other liabilities Total financial liabilities by remaining contractual maturities

(*) (**)

Exclude capital guarantee and reserve deposits with the Central Bank Exclude allowance for losses on loans and advances

49

Total US$

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26.

FINANCIAL RISK MANAGEMENT (continued)

26.3 Liquidity risk (continued) d)

Off-balance sheet items

i.

Loan commitments

The contractual maturity dates of the Bank‟s off-balance sheet financial instruments with commitment to extend credit to customers and other facilities are summarised in the table below. ii.

Other financial facilities

Other financial facilities are also included below based on the earliest contractual date. iii.

Operating lease commitments

Where the Bank is the lessee, the future minimum lease payments under non-cancellable operating leases are summarised in the table below. All commitments of the Bank, as disclosed in Note 24, are summarised in the table below.

At 31 December 2014 Unused portion of approved credit facilities Operating lease commitments

KHR’000 equivalent At 31 December 2013 Unused portion of approved credit facilities Operating lease commitments

KHR’000 equivalent

No later than 1 year

1 to 5 year

Over 5 years

Total

529,055

1,386,760

-

1,915,815

529,055

1,386,760

-

1,915,815

2,155,899

5,651,047

-

7,806,946

21,000 280,925

856,922

-

21,000 1,137,847

301,925

856,922

-

1,158,847

1,206,190

3,423,403

-

4,629,593

50

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26.

FINANCIAL RISK MANAGEMENT (continued)

26.4 Fair value of financial assets and liabilities As at the balance sheet date, the fair values of financial instruments of the Bank approximate their carrying amounts. The estimated fair values are based on the following methodologies and assumptions: (i)

Balances with the NBC and other banks

The carrying amounts of balances with the NBC and other banks approximate their fair values, since these accounts consist mostly of current, savings and short-term deposits. (ii)

Loans and advances

Loans and advances are stated, net of unamortised loan commitment fees less any amounts written off and allowance for losses on loans and advances as determined based on the requirements of the relevant NBC‟s Prakas. (iii)

Deposits from banks and customers

The fair values of deposits from customers and deposits from banks approximate their carrying amounts. The estimated fair value of deposits with no stated maturities, which include non-interest earning deposits, is the amount repayable on demand. Deposits with fixed interest are not quoted in the active market and are short-term. Their fair value approximates the carrying amount. (iv)

Other financial assets and liabilities

The carrying amounts of other financial assets and liabilities are assumed to approximate their fair values as these items are not materially sensitive to the shift in market interest rates.

51

CAMBODIA POST BANK PLC. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014

26.

FINANCIAL RISK MANAGEMENT (continued)

26.5 Capital management The Bank‟s objectives when managing capital, which is a broader concept than the „equity‟ on the face of balance sheet, are:   

to comply with the capital requirement set by the NBC to safeguard the Bank‟s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders, and to maintain a strong capital base to support the development of business.

The NBC requires all commercial banks to i) hold a minimum capital requirement, ii) maintain the Bank‟s net worth at least equal to the minimum capital, and iii) comply with solvency, liquidity and other prudential ratios. The table below summarises the composition of the Bank‟s regulatory capital: 31 December 2014 US$ KHR’000 Share capital Reserves Retained earnings

Less: Intangible assets Loans to related parties Investments in financial institutions Add: General provision Subordinated debt

31 December 2013 US$ KHR’000

38,000,000 168,859

154,850,000 688,100

38,000,000 (1,247,973)

151,810,000 (4,985,652)

38,168,859

155,538,100

36,752,027

146,824,348

(485,511) -

(1,978,457) -

(223,128) -

(891,396) -

933,901 -

3,805,647 -

208,853 -

834,368 -

38,617,249

157,365,290

36,737,752

146,767,320

52

_______________________________________________________ APPENDIX: NOTES ON COMPLIANCE WITH THE CENTRAL BANK’S PRAKAS _______________________________________________________

53

CAMBODIA POST BANK PLC.

UNAUDITED

APPENDIX: NOTES ON COMPLIANCE WITH THE CENTRAL BANK’S PRAKAS FOR THE YEAR ENDED 31 DECEMBER 2014

1.

LIQUIDITY RATIO, Prakas No. B7-04-207 The Bank was in compliance with this Prakas which requires a Liquidity Ratio of at least 50%. As at 31 December 2014, the Bank‟s Liquidity Ratio was 59.42%. The Liquidity Ratio calculation is detailed in Schedule 1.

2.

MINIMUM CAPITAL REQUIREMENT, Prakas No. B7-08-193 The NBC‟s Prakas No. B7-08-193 on new capital requirement and criteria for licensing approval of banks requires that commercial banks locally incorporated as companies which have at least one influential shareholder as a bank or financial institution with a rating of “investment grade”, extended by a reputable rating agency must have minimum capital equal to at least Riel 50 billion (or US$13 million) and commercial banks having shareholders as individuals or companies must have minimum capital of at least Riel 150 billion (or US$37.5 million). As at 31 December 2014, the Bank‟s share statutory capital was US$38,000,000.

3.

NET WORTH, Prakas No. B7-010-182 The Bank‟s net worth as at 31 December 2014 amounted to US$38,617,249 as computed in Schedule 2. Banks must maintain their net worth at least equal to the minimum capital. As at 31 December 2014, the Bank‟s net worth of US$38,617,249 is higher than the minimum capital of US$37,500,000 by US$1,117,249.

4.

SOLVENCY RATIO, Prakas No. B7-04-206 As at 31 December 2014, the Bank maintained a Solvency Ratio of 33.06%, representing the Bank‟s net worth as a percentage of its risk-weighted assets and off-balance sheet items. The Bank was in compliance with this Prakas which requires a Solvency Ratio of at least 15%. The Solvency Ratio calculation is detailed in Schedule 3.

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CAMBODIA POST BANK PLC.

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APPENDIX: NOTES ON COMPLIANCE WITH THE CENTRAL BANK’S PRAKAS FOR THE YEAR ENDED 31 DECEMBER 2014

5.

FOREIGN CURRENCY TRANSACTIONS, Prakas No. B7-00-50 The Bank transacts its business primarily in United States Dollars (US$) and maintains its books of accounts in US$. Accordingly, all currencies other than US$ are considered as foreign currencies. Balance sheet items As at 31 December 2014, in accordance with Prakas No. B7-00-50, all assets and liabilities of the Bank that were denominated in foreign currencies were translated using the year end exchange rate. Off-balance sheet items The Bank is required to record off-balance sheet items from the commitments arising from the purchase and sale of foreign currencies relating to spot transactions (with a completion period of two days) and forward foreign exchange transactions. As at 31 December 2014, the Bank had no commitments of this nature.

6.

NET OPEN POSITION IN FOREIGN CURRENCY, Prakas No. B7-07-134 Net open position in foreign currencies in either any foreign currency or overall net open position in all foreign currencies, whether long or short, shall not exceed 20% of Bank‟s regulatory net worth. As at 31 December 2014, the Bank was in compliance with the Prakas of net open position in foreign currency.

7.

CLASSIFICATION OF AND PROVISIONING FOR LOSSES ON LOANS AND ADVANCES, Prakas No. B7-09-074 The Bank is in compliance with the NBC‟s requirement, with respect to the minimum level of specific provisioning to be applied on the respective classification of loans and advances, as defined by this Prakas. The details of the computation of the required loan loss provision to comply with the NBC‟s requirements are provided in Schedule 4.

8.

LARGE CREDIT EXPOSURES, Prakas No. B7-06-226 Banks are required, under the conditions of the above Prakas, to maintain at all times a maximum ratio of 20% between their overall exposure resulting from their operations with each individual beneficiary and their net worth and the aggregate individual large credit exposure must not be more than 300% of the Bank‟s regulatory net worth. As at 31 December 2014, the Bank had no exposure with a single beneficiary where such exposure exceeded 20% and 300% as aggregate of individual large credit exposure of the regulatory net worth as computed in Schedule 2.

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CAMBODIA POST BANK PLC.

UNAUDITED

APPENDIX: NOTES ON COMPLIANCE WITH THE CENTRAL BANK’S PRAKAS FOR THE YEAR ENDED 31 DECEMBER 2014

9.

LOANS TO RELATED PARTIES, Prakas No. B7-02-146 The Bank was in compliance with this Prakas which requires the total of the weighted outstanding balances of loans to related parties to be not more than 10% of the Bank‟s regulatory net worth. As at 31 December 2014, the Bank was in compliance with this Prakas.

10.

FIXED ASSETS, Prakas No. B7-01-186 Fixed assets acquired by banks for operational purposes shall be less than 30% of the Bank‟s total net worth as defined in Prakas B7-010-182. Fixed assets with no direct link to operating the Bank shall be sold not later than one year after the date they became property of the Bank. As at 31 December 2014, the Bank‟s fixed assets amounting to US$1,088,704 were equivalent to 2.82% of the Bank‟s regulatory net worth and this is therefore comply with the fixed asset ratio required by this Prakas.

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CAMBODIA POST BANK PLC.

UNAUDITED

SCHEDULE 1 LIQUIDITY RATIO AS AT 31 DECEMBER 2014

LIQUIDITY RATIO

US$

NUMERATOR - Debit items - Cash on hand - Balances with the NBC (excluding statutory deposit and reserve requirement) - Balances with other banks and financial institutions - Portion of lending to banks and FI with not more than one month to run

Less: - Credit items - Sight accounts maintained by the NBC, banks or financial institutions - Borrowings from the NBC with not more than one month to run

Net balance - Lender position

1,048,721 1,716,635 21,845,618 24,610,974

24,610,974

1. Lending with not more than one month to run (exclude loans with no maturity) 2. Treasury bills with not more than one month to run (double) TOTAL NUMERATOR (A)

2,092,111 26,703,085

DENOMINATOR 1. 80% of FD & CD having not more than one month to run 2. 50% of FD & CD having more than one month to run

2,956,869 38,902,014

3. 50% of savings deposits

3,058,205

4. 60% of demand deposits

23,880

TOTAL DENOMINATOR (B)

44,940,968

LIQUIDITY RATIO (A/B)

59.42%

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CAMBODIA POST BANK PLC.

UNAUDITED

SCHEDULE 2 NET WORTH AS AT 31 DECEMBER 2014

NET WORTH

US$

Tier: (Core Capital) I. Subtotal - A Share capital Reserves (other than revaluation reserves: translation reserve, general reserve and capital reserve) Audited net profit for the year Retained earnings brought forward Other Items (approved by the NBC) Premiums related to capital Other items approved by the NBC Total (A) Limit check on retained earnings: Max 20% of Total A II. Subtotal - B Own shares held (at book value) Accumulated losses Intangible assets to be deducted Shareholders, Directors, Related Parties (deduct) 1. Unpaid portion(s) of capital 2. Loans, overdrafts and other advances 3. Debt instruments held bearing signature of Shareholders, Directors, Related Parties Other losses Total (B) Total Tier 1 (Core Capital) (A) - (B)

38,000,000 1,416,832 (1,247,973) 38,168,859 0.44%

485,511 485,511 37,683,348

Tier: (Complementary Capital) III. Sub-Total C Revaluation reserves (approved by the NBC) Provisions for general banking risks (approved by the NBC) 1% General provision (Prakas on Asset Classification) Subordinated debt instruments (approved by the NBC) Other items (approved by the NBC) Total (C) Limit check on Subordinated Debt (max. 50 % of Tier 1 Capital) IV. Sub-Total D (Tier 2, Deductions) Equity participations in banking and financial institutions Other items to be deducted (deferred charge) Total (D) Total Tier 2 (Complementary Capital) (C) - (D) Limit check on Tier 2 capital (Tier 2 = max. 100 % of Tier 1) Regulatory Net Worth (A)- (B) + (C) - (D)

933,901 933,901 0.0%

933,901 2.48% 38,617,249

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CAMBODIA POST BANK PLC.

UNAUDITED

SCHEDULE 3 SOLVENCY RATIO AS AT 31 DECEMBER 2014

SOLVENCY RATIO US$ Numerator Net Worth as computed in Schedule 2 (N)

38,617,249 Assets Weighting US$

Denominator Total gross assets - Cash, gold and claims on the NBC - Assets collaterised by deposits - Claims on sovereign rated AAA to AA- Claims on sovereign rated A+ to A- Claims on banks rated AAA to AA- Claims on sovereign rated BBB+ to BBB- Claims on banks rated A+ to A- Other assets Total assets (*) Off-balance sheet items - Full risk - Medium risk - Moderate risk - Low risk

Denominator (D1)

11,567,166 116,817,998 128,385,164

0% 0% 0% 20% 20% 50% 50% 100%

116,817,998 116,817,998

-

100% 50% 20% 0%

116,817,998

SOLVENCY RATIO:(S = N / D1)

33.06%

59

CAMBODIA POST BANK PLC.

UNAUDITED

SCHEDULE 4 CLASSIFICATION AND PROVISONING FOR BAD AND DOUBTFUL DEBTS AS AT 31 DECEMBER 2014 (*) Excluding items which are deducted in calculating the net worth as stated in the NBC‟s Prakas B7-07-135 dated 27 August 2007The details of the NBC‟s required provision following its mandatory provisioning requirements based on the prescribed credit classification of loans and advances to customers are provided in the following table. Loan The Central Amount Bank’s 31 December Required 2014 Classification US$

Estimated Collateral Value US$

The Central Bank’s Provision Rate

Loan and advances Loan and advances Loan and advances Loan and advances Loan and advances

93,390,099 Standard 70,102 Special mention 13,529 Substandard 2,625 Doubtful Loss

206,536,513 155,034 29,921 5,805 -

1% 3% 20% 50% 100%

Total

93,476,355

206,727,273

60

The Central Bank’s Provision Difference Required Recorded by in Provision Provision the Bank Amount US$ US$ US$ 933,901 2,103 2,706 1,312 -

933,901 2,103.00 2,706.00 1,312.00 -

-

940,022

940,022

-

CAMBODIA POST BANK PLC.

UNAUDITED

COMPUTATION OF OTHER RATIOS AS AT 31 DECEMBER 2014

(Amounts in US$)

31 December 2014

31 December 2013

CAPITAL 1

Equity to total assets (A/B) A - Equity B - Total assets

29.62% 38,168,859 128,870,675

79.50% 36,752,027 46,227,127

2

Capital Tier I to total assets (A/B) A - Capital Tier 1 B - Total assets

29.24% 37,683,348 128,870,675

79.02% 36,528,899 46,227,127

3

Capital Tier I to risk-weighted assets (A/B) A - Capital Tier 1 B - Risk-weighted assets

32.26% 37,683,348 116,817,998

88.51% 36,528,899 41,273,118

4

Capital Tier I + Tier II to risk-weighted assets (A/B) A - Capital Tier I + Tier II B - Risk-weighted assets

33.06% 38,617,249 116,817,998

89.01% 36,737,752 41,273,118

5

Net worth to assets (A/B) A - Net worth B - Total assets

29.97% 38,617,249 128,870,675

79.47% 36,737,752 46,227,127

6

Solvency ratio (A/B) A - Net worth B - Risk-weighted assets

33.06% 38,617,249 116,817,998

89.01% 36,737,752 41,273,118

7

Debt to total assets (A/B) A - Total liabilities B - Total assets

70.38% 90,701,816 128,870,675

20.50% 9,475,100 46,227,127

8

Debt-equity ratio (A/B) A - Total liabilities B - Equity

237.63% 90,701,816 38,168,859

25.78% 9,475,100 36,752,027

9

Dividend to net profit (A/B) A - Dividend B - Net profit/(loss)

0.00% 1,416,832

0.00% (1,247,973)

10 Banking reserves to total loans (A/B) A - Banking reserves B - Total loans (gross)

0.00% 93,476,355

0.00% 20,885,308

11 Banking reserves to total assets (A/B) A - Banking reserves B - Total assets

0.00% 128,870,675

0.00% 46,227,127

ASSETS QUALITY

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CAMBODIA POST BANK PLC.

UNAUDITED

COMPUTATION OF OTHER RATIOS AS AT 31 DECEMBER 2014

31 December 2014

31 December 2013

12 Non-performing loans to total loans (A/B) A - Non-performing loans B - Total loans (gross)

0.02% 16,154 93,476,355

0.00% 20,885,308

13 Non-performing loans to total assets (A/B) A - Non-performing loans B - Total assets

0.01% 16,154 128,870,675

0.00% 46,227,127

14 Classified assets to total loans (A/B) A - Classified assets B - Total loans (gross)

0.02% 16,154 93,476,355

0.00% 20,885,308

15 Classified assets to total assets (A/B) A - Classified assets B - Total assets

0.01% 16,154 128,870,675

0.00% 46,227,127

16 Classified assets to total equity (A/B) A - Classified assets B - Total equity

0.04% 16,154 38,168,859

0.00% 36,752,027

17 Loans to related parties to total loans (A/B) A - Loans to related parties B - Total loans (gross)

0.00% 93,476,355

0.00% 20,885,308

18 Large exposure to total loans (A/B) A - Large exposure B - Total loans (gross)

0.00% 93,476,355

0.00% 20,885,308

19 Loans to related parties to net worth (A/B) A - Loans to related parties B - Net worth

0.00% 38,617,249

0.00% 36,737,752

20 Large exposure to net worth (A/B) A - Large exposure B - Net worth

0.00% 38,617,249

0.00% 36,737,752

21 General provision to net worth A - General provision B - Total loans (gross)

1.00% 933,901 93,476,355

1.00% 208,853 20,885,308

22 Specific provision to total loans (A/B) A - Specific provision B - Total loans (gross)

0.01% 6,121 93,476,355

0.00% 20,885,308

37.89% 6,121 16,154

NA -

(Amounts in US$)

23 Specific provision to non-performing loans (A/B) A - Specific provision B - Non-performing loans

62

CAMBODIA POST BANK PLC.

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COMPUTATION OF OTHER RATIOS AS AT 31 DECEMBER 2014

31 December 2014

31 December 2013

0.73% 940,022 128,870,675

0.45% 208,853 46,227,127

106.64% 93,476,355 87,656,324

233.59% 20,885,308 8,940,904

26 Return on assets (A/B) A - Net profit B - Total assets

1.10% 1,416,832 128,870,675

-2.70% (1,247,973) 46,227,127

27 Return on equity (A/B) A - Net profit B - Equity

3.71% 1,416,832 38,168,859

-3.40% (1,247,973) 36,752,027

28 Gross yield (A/B) A - Interest income B - Total assets

7.04% 9,074,220 128,870,675

3.01% 1,389,368 46,227,127

29 Net interest margin (NIM) to total assets ((A-B)/C) A - Interest income B - Interest expense C - Total assets

5.20% 9,074,220 2,377,131 128,870,675

2.26% 1,389,368 344,068 46,227,127

30 Other income (OTNC) = (A/B) A - Other income B - Total assets

0.25% 327,101 128,870,675

0.08% 35,771 46,227,127

31 Provision to total assets (A/B) A - Provision B - Total assets

0.73% 940,022 128,870,675

0.45% 208,853 46,227,127

32 Overhead (OHEAD) = (A/B) A - Non-interest expense B - Total assets

3.72% 4,792,424 128,870,675

3.23% 1,495,246 46,227,127

33 Net income before tax (NIBT) = (A/B) A - Net income before tax B - Total assets

1.16% 1,498,015 128,870,675

-2.66% (1,231,653) 46,227,127

34 Tax to total assets (A/B) A - Tax B - Total assets

0.06% 81,183 128,870,675

0.04% 16,320 46,227,127

(Amounts in US$) 24 All allowances to total assets (A/B) A - Total all allowances B - Total assets 25 Loans to deposits (A/B) A - Total loans to non-bank customers (gross) B - Customer‟s deposits EARNINGS

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CAMBODIA POST BANK PLC.

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COMPUTATION OF OTHER RATIOS AS AT 31 DECEMBER 2014

31 December 2014

31 December 2013

35 Interest margin to gross income ((A-B)/C) A - Interest income B - Interest expense C - Gross income

71.24% 9,074,220 2,377,131 9,401,321

73.35% 1,389,368 344,068 1,425,139

36 Non-interest income to gross income (A/B) A - Non-interest income B - Gross income

3.48% 327,101 9,401,321

2.51% 35,771 1,425,139

37 Non-interest expense to gross income (A/B) A - Non-interest expense B - Gross income

50.98% 4,792,424 9,401,321

104.92% 1,495,246 1,425,139

38 Times interest earned ((A+B)/C) A - Income before tax B - Interest expense C - Interest expense

1.6 1,498,015 2,377,131 2,377,131

-2.6 (1,231,653) 344,068 344,068

39 Liquid assets (A/B) A - Liquid assets B - Total assets

19.10% 24,610,974 128,870,675

43.42% 20,073,148 46,227,127

40 Short-term liabilities (A/B) A - Short-term liabilities (less than one year) B - Total assets

53.32% 68,718,404 128,870,675

19.11% 8,833,306 46,227,127

41 Net liquid assets ((A-B)/C) A - Liquid assets B - Short-term liabilities (less than one year) C - Total liabilities

-48.63% 24,610,974 68,718,404 90,701,816

118.63% 20,073,148 8,833,306 9,475,100

42 Quick ratio (A/B) A - Quick assets B - Current liabilities

35.81% 24,610,974 68,718,404

227.24% 20,073,148 8,833,306

43 Deposit to total loans (A/B) A - Total customers‟ deposits B - Total loans to non-bank customers (gross)

93.77% 87,656,324 93,476,355

42.81% 8,940,904 20,885,308

(Amounts in US$)

LIQUIDITY

64