CANADIA BANK Plc. FINANCIAL STATEMENTS FOR THE YEAR ...

CANADIA BANK Plc. 

FINANCIAL STATEMENTS 

FOR THE YEAR ENDED 31 DECEMBER 2006



FOR THE YEAR ENDED 31 DECEMBER 2006 

CONTENTS 

Page 

REPORT OF THE BOARD OF DIRECTORS 1 – 4 

INDEPENDENT AUDITORS’ REPORT 5 – 6 


Balance sheet 7 

Income statement 8 

Statement of changes in equity 9 

Cash flow statement 10 

Notes to the financial statements 11 – 39 

APPENDIX : NOTES ON COMPLIANCE WITH CENTRAL BANK PRAKAS* 40 – 50 

* This Appendix does not form part of the audited financial statements


NOTES TO THE FINANCIAL STATEMENTS 


1. BACKGROUND INFORMATION 

1.1 GENERAL 

Canadia Bank Plc. was incorporated in 1991 under a joint venture between the National 

Bank of Cambodia ("the Central Bank") and certain overseas Cambodians. On 4 February 

1998, the Central Bank disposed of all its shares to private investors. On 16 December 

2003, the Central Bank issued a licence for the Bank to become a commercial bank for a 

period of three years commencing 22 December 2003. The Bank’s licence was renewed for 

an indefinite period on 18 October 2006. 

In 2001, the Overseas Cambodian Investment Corporation ("OCIC"), a public limited 

company incorporated in the Kingdom of Cambodia, acquired 100% of the shares of the 

Bank and consequently became the holding company of the Bank. 

The principal activities of the Bank comprise the operations of core banking business and the 

provision of related financial services through its head office and various branches in Phnom 

Penh and the provinces. There have been no significant changes in the nature of these 

principal activities during the year under audit. 

The registered office of the Bank is currently located at No. 265-269 Ang Duong Street, 

Phnom Penh, Kingdom of Cambodia. 

As at 31 December 2006, the Bank had 460 employees (2005: 394). 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

The significant accounting policies adopted in the preparation of these financial statements 

are set out below. These policies have been applied to all the years presented, unless 

otherwise stated. 

2.1 Basis of preparation 

The financial statements have been prepared under the historical cost convention in 

accordance with the guidelines issued by the Central Bank and Cambodian Accounting 

Standards. The accompanying financial statements are prepared for the jurisdiction of 

Cambodia and are not intended to present the financial position, financial performance and 

cash flows in accordance with generally accepted accounting principles and practice in other 

countries. 

For the sole purpose of complying with Announcement No. B795-139-AN dated 5 December 

1995 of the Central Bank, a translation to Khmer Riel is provided for the balance sheet, the 

income statement, the statement of changes in equity, the cash flow statement and the notes 

to the financial statements as of and for the year ended 31 December 2006 using the official 

rate if exchange regulated by the Central Bank as at the reporting date, which was US$1 to 

Riel 4,057 (2005: US$1 to Riel 4,112). Such translation amounts are unaudited and should 

not be construed as representations that the US$ amounts represent, or have been or could 

be, converted into Khmer Riel at that or any other rate. 

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 

2.2 Foreign currency transactions 

a) 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 US$, which is the Bank’s functional and 

presentation currency. 

b) Transaction and balances 

Transactions in currencies other than US$, the functional and presentation currency, are 

translated into US$ at the exchange rate prevailing at the date of the transaction. Foreign 

exchange gains and losses resulted from the settlement of such transactions and from the 

translation at the period end exchange rate from monetary assets and liabilities denominated 

in currencies other than US$, are recognised in the income statement. 

The principal rates used to translate monetary assets and liabilities at the balance sheet date 

are: 

31 December 2006 31 December 2005 

KHR 4,057 4,112 

EUR 1.31 1.18 

CAD 0.86 0.86 

SGD 0.65 0.60 

GBP 1.96 1.72 

HKD 0.13 0.13 

JPY 0.008 0.008 

NZD 0.70 0.68 

THB 0.025 0.025 

CNY 0.13 0.13 

CHF 0.81 0.76 

AUD 0.79 0.73 

2.3 Cash and cash equivalents 

Cash and cash equivalents includes balances with less than 90 days maturity from the date 

of acquisition including: cash on hand, deposits and placements with the Central Bank and 

deposits and placements with banks and other financial institutions. 

2.4 Statutory deposits with the Central Bank 

Statutory deposits represent mandatory reserve deposits and cash maintained with the 

Central Bank in compliance with the Law on Banking and Financial Institutions and are not 

available to finance the Bank’s day-to-day operations. These statutory deposits are not 

considered as part of cash and cash equivalents for the purpose of the cash flow statement. 

12





2.5 Loans and advances to customers 

All loans and advances to customers are stated in the balance sheet as the amount of 

principal, less any amounts written off and the provision for loan losses. Short term loans are 

those with a repayment date within one year of the date the loan was advanced. Long term 

loans are those with a final repayment date of more than one year of the date the loan was 

advanced. 

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 

losses on loans and advances in the income statement. 

2.6 Provision for loan losses 

The Bank is required to follow the mandatory credit classification and provisioning as 

required by Prakas B7-02-145 dated 7 June 2002 issued by the Central Bank. The Prakas 

requires commercial banks to classify their loan portfolio into four classes and the mandatory 

level of specific provisioning is provided, depending on the classification concerned and 

regardless of the assets (except cash) pledged as collateral as follows: 

Overdue 

Rate of provision 

Standard 0% 

Substandard from 91 days to 180 days 10% 

Doubtful from 181 days to 360 days 30% 

Loss more than 360 days 100% 

2.7 Investment in Foreign Trade Bank of Cambodia 

The Bank entered into a sale and purchase agreement 28 October 2005 with the 

Privatisation Committee (acting on behalf of the Royal Government of Cambodia), to acquire 

46% of the share capital of Foreign Trade Bank of Cambodia (“FTB”). This investment was 

initially recognised at cost and accounted for using the accounting for investments in 

accordance with the Cambodia Accounting Standards (“CAS”) 25. The dividend income 

received from the investment in FTB is credited to the income statement. 

2.8 Other credit related commitments 

In the normal course of business, the Bank enters into other credit related commitments 

including loan commitments, letters of credit and guarantees. The accounting policy and 

provision methodology are similar to those for originated loans as noted above. Specific 

provisions are raised against other credit related commitments when losses are considered 

probable. 

13





2.9 Interest income and expenses 

Interest earned on loans and advances to customers, deposits with the Central Bank and 

other banks are recognised on a daily accruals basis, except where serious doubt exists as 

to the collectibility of loans and advances to customers, in which case, no interest income is 

recognised. The policy on the suspension of interest is in conformity with the Central Bank’s 

guidelines on the suspension of interest on non-performing loans and provision for bad and 

doubtful debts. 

Interest expense on the deposits of customers, settlement accounts of other banks and loans 

from other financial institutions are recognised on a daily accruals basis. 

2.10 Fee and commission income 

Fee and commission income is generally recognised on an accruals 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, ATM/Visa 

and Mastercard charges. 

2.11 Property and equipment 

Property and equipment is stated at cost less accumulated depreciation, except freehold land 

which is not depreciated. Repairs and maintenance costs are charged to the income 

statement during the financial period in which they are incurred. 

The Bank adopted the provisions of the new Article 13 of the Law on Taxation which allows 

the following rates and methods of depreciation: 

Buildings – straight-line 5% 

Renovations – straight-line 5% 

Motor vehicles – declining 25% 

Office equipment and furniture – declining 25% 

Computers and IT equipment – declining 50% 

2.12 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. 

14





2.13 Income tax 

Income tax is calculated on the basis of taxable profit, which is calculated by adjusting the 

financial result for certain expense items (such as costs of representation, over/under 

depreciation, etc.) in accordance with Cambodian taxation regulations. Taxes other than tax 

on income are recorded as operating expenses. 

Deferred income tax is provided in full, using the liability method, on temporary differences 

arising between tax bases of assets and liabilities and their carrying amounts in the financial 

statements. Deferred tax assets are recognised to the extent that it is probable that future 

taxable profit will be available against which the temporary differences can be utilised. 

2.14 Subordinated debts 

Subordinated debts of the Bank are in the form of subordinated loan capital. In accordance 

with the guidelines of the Central Bank, sub ordinated debts are included as a Tier II line item 

in the calculation of the Bank’s net worth. Subordinated debts are interest-free with no fixed 

terms of repayment. 

2.15 Related party transactions 

Parties are considered to be related if one party has the ability to control the other party or 

can exercise significant influence over the other party in making financial and operating 

decisions. 

In accordance with the Law on Banking and Financial Institutions, related parties are defined 

as parties who hold, directly or indirectly, at least 10% of the capital or voting rights and 

includes any individual who participates in the administration, direction, management or 

internal control of the Bank. 

Transactions with related parties and related account balances are disclosed in note 28 to 

the financial statements. 

3. BALANCES WITH THE CENTRAL BANK 

2006 2005 2006 2005 

US$ US$ Riel Million Riel Million 

(Unaudited) (Unaudited) 

Current accounts 7,735,124 5,708,322 31,381 23,473 

Deposits and placements 19,000,000 8,000,000 77,083 32,896 

Statutory deposit 4,054,500 2,600,000 16,449 10,691 

Reserve account 21,901,233 16,001,216 88,854 65,797 

52,690,857 32,309,538 213,767 132,857 

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3. BALANCES WITH THE CENTRAL BANK (continued) 

Deposits and placements with the Central Bank will mature within one month and earn 

interest at the following rates per annum: 


Fixed deposits within one month 3.79% - 4.06% 1.80% - 3.29% 

Under Prakas No. B7-01-136 dated 15 October 2001; the Bank is required to maintain a 

statutory deposit of 10% of its registered capital. This statutory deposit is interest bearing at 

1/2 of the six-month period refinancing rate set by the Central Bank for statutory deposits 

maintained in Riel and 3/8 of the six-month SIBOR rate for statutory deposits maintained in 

US$. 

Reserve accounts represent the minimum reserve requirement, which is calculated at 8% of 

the total deposits from customers and settlement accounts of other banks. 

4. BALANCES WITH OTHER BANKS AND FINANCIAL INSTITUTIONS 

2006 2005 2006 2005 



Deposits with banks: 

- In Cambodia 427,210 340,625 1,733 1,401 

- Outside Cambodia: 

Fixed deposits 4,656,072 22,500,000 18,890 92,520 

Demand deposits 50,915,586 28,779,946 206,564 118,343 

Analysis by maturity period: 

55,998,868 51,620,571 227,187 212,264 

Within one month 51,342,796 49,120,571 208,297 201,984 

One to three months 4,656,072 - 18,890 - 

Four to five months - - - - 

Six to twelve months - 2,500,000 - 10,280 

55,998,868 51,620,571 227,187 212,264 

Short-term placements with others banks earned interest at rates ranging from 2.27% to 

5.21% in 2006 (2005: 3.09% to 4.00%). 

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5. LOANS AND ADVANCES TO CUSTOMERS 

Commercial loans: 

2006 2005 2006 2005 



Overdrafts 57,814,259 38,073,003 234,552 156,556 

Short term loans 82,428,900 57,058,006 334,414 234,623 

Long term loans 51,307,270 58,348,997 208,153 239,931 

Micro-financing loans 145,399 124,222 592 510 

Consumer loans: 

Mortgage loans 25,215,490 13,462,933 102,299 55,360 

Credit card facilities 530,042 520,565 2,150 2,141 

217,441,360 167,587,726 882,160 689,121 

Provisions for loan losses (12,033,815) (9,856,220) (48,822) (40,529) 

205,407,545 157,731,506 833,338 648,592 

Movements in the provision for loan losses during the year are as follows: 

2006 2005 2006 2005 



At 1 January 9,856,220 8,117,670 39,987 33,380 

Unrealised foreign exchange 1,962 (3,082) 7 (13) 

Addition during the year 8,719,679 5,351,572 35,377 22,006 

Amount written off (78,902) (99,803) (320) (410) 

Recovery during the year (6,465,144) (3,510,137) (26,229) (14,434) 

At 31 December 12,033,815 9,856,220 48,822 40,529 

17




5. LOANS AND ADVANCES TO CUSTOMERS (continued) 

Further classification of loans and advances to customers is as follows: 

2006 2005 2006 2005 



Standard loans: 

- Secured 178,366,178 153,033,879 723,632 629,275 

- Unsecured 557,837 1,395,164 2,263 5,737 

Substandard loans: 

- Secured 15,054,774 1,272,000 61,077 5,230 

- Unsecured - 5,465 - 22 

Doubtful loans: 

- Secured 

- Unsecured 

18,471,762 

- 

3,067,552 

7,798 

74,939 

- 

12,614 

32 

Loss loans: 

- Secured 4,990,809 8,684,058 20,249 35,709 

- Unsecured - 121,810 - 502 

217,441,360 167,587,726 882,160 689,121 

Further analysis of the loans and advances to customers is provided below: 

(a) Analysis by maturity 

2006 2005 2006 2005 



1 – 3 months 2,851,888 5,517,154 11,570 22,687 

4 – 6 months 

7 – 12 months 

1,728,232 

126,829,723 

12,158,833 

116,187,316 

7,011 

514,548 

49,997 

477,762 

Over 1 year but within 3 years 55,640,688 11,134,614 225,735 45,786 

Over 3 years but within 5 years 9,533,679 7,894,863 38,678 32,464 

Over 5 years 20,857,150 14,694,946 84,618 60,425 

217,441,360 167,587,726 882,160 689,121 

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(b) Analysis by currency 

2006 2005 2006 2005 



US Dollar 215,609,730 166,118,363 874,729 683,079 

Khmer Riel 247,590 230,620 1,004 948 

Thai Baht 1,584,040 1,238,743 6,427 5,094 

(c) Analysis by industry 

217,441,360 167,587,726 882,160 689,121 

2006 2005 2006 2005 



Services 

Building and construction 

66,310,152 

56,645,481 

68,869,048 

31,070,497 

269,020 

229,811 

283,190 

127,762 

Wholesale and retail 33,971,257 26,993,306 137,821 110,996 

Mortgage 25,215,490 13,462,933 102,299 55,360 

Manufacturing 17,392,828 13,045,038 70,563 53,641 

Import and export 6,391,476 7,540,767 25,930 31,008 

Transportation, storage and 

communication 5,307,483 1,283,845 21,532 5,279 

Agriculture 2,192,796 2,227,766 8,896 9,161 

Individuals 553,237 520,565 2,245 2,141 

Others 3,461,160 2,573,961 14,043 10,583 

(d) Analysis by residence 

217,441,360 167,587,726 882,160 689,121 

2006 2005 2006 2005 



Residents 217,441,360 167,587,726 882,160 689,121 

Non-residents - - - - 

217,441,360 167,587,726 882,160 689,121 

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(e) Analysis by relationship 

2006 2005 2006 2005 



Non-related parties 217,441,360 128,881,828 882,160 529,962 

Related parties - 38,705,898 - 159,159 

217,441,360 167,587,726 882,160 689,121 

On 22 November 2004, the Bank recorded the loans given to the subsidiaries of Capital 

Investment Holding ("CIH"), a related party of the Bank, in the Bank's equity investment as 

per conditional approval from the Central Bank. On 2 February 2006, the Central Bank 

issued a letter to the Bank instructing the Bank to reverse all investments in CIH subsidiaries 

back to loan assets for further consideration and study. In September 2006, the Bank’s 

loans to these five companies have been restructured to reflect the change in shareholders 

of each of the CIH subsidiary companies resulting from CIH’s disposal of its investments in 

the five companies to individual investors. 

As at 31 December 2006, included in long term loans are loans to the five companies 

totalling US$29,970,000 (2005: US$38,705,898). These loans are subject to interest rates 

ranging from 5% to 6% per annum (2005: 4% per annum). 

(f) Interest rates 

The annual interest rates that were in operation during the year were as follows: 


Commercial loans 5% - 21.6% 4% - 21.6% 

Consumer loans 3.6% - 21.6% 4.44% - 21.96% 

6. INVESTMENT SECURITIES 

This represents a fixed-maturity debt security investment in Omnia Life (Bermuda) Ltd. – 

Trust which was intended to be held to maturity and was recognised at amortised cost. On 

16 January 2006, the Bank requested an early termination of the investment in Omnia Life 

due to unfavourable interest yields. A refund of US$2,135,534 (net of earlier termination cost 

and unearned interest) was transferred to the Bank on 20 January 2006. 

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7. OTHER ASSETS 

2006 

US$ 

2005 

US$ 

2006 

Riel Million 

2005 

Riel Million 


Deposits with companies 

outside Cambodia 259,066 301,318 1,051 1,239 

Accrued interest receivable 729,654 592,797 2,960 2,438 

Prepaid expenses 46,095 34,795 187 143 

Advances to contractors 728,226 - 2,954 - 

Other advances 564,005 177,050 2,288 728 

Travelers cheques purchased 135,028 138,196 548 568 

Guarantee deposits for 

MasterCard and Visa 

Others 

900,878 

246,682 

872,821 

818,110 

3,655 

1,001 

3,589 

3,364 

3,609,634 2,935,087 14,644 12,069 

8. INVESTMENT IN THE FOREIGN TRADE BANK OF CAMBODIA 

On 28 October 2005, the Bank entered into a sale and purchase agreement with the 

Privatisation Committee (acting on behalf of the Royal Government of Cambodia), to acquire 

46% of the share capital of Foreign Trade Bank of Cambodia (“FTB”) for a consideration of 

US$10,580,000. 

21




10. PROPERTIES FORECLOSED 

These represent the collaterals held for loans which are in default and have been foreclosed 

in the ordinary course of banking operations. These foreclosed assets are recorded at the 

value equal to the corresponding loan principal outstanding plus interest receivable. These 

assets are not held for operational purposes and will be disposed of in order to recover the 

outstanding amount within the maximum allowable period of twelve months as per the 

guidelines issued by the Central Bank. Assets realised in excess of the outstanding amount 

plus disposal costs will be returned to the borrower after settlement. 

11. MASTERCARD FRANCHISE/LICENCES 

2006 2005 2006 2005 

US$ US$ Riel Million 

(Unaudited) 

Riel Million 

(Unaudited) 

Cost of acquiring MasterCard 

franchise/ licence 125,250 125,250 508 515 

Accumulated amortisation (112,725) (87,675) (457) (360) 

Amortisation during the year (12,525) (25,050) (51) (103) 

Net balance at end of year - 12,525 - 52 

The initial cost of acquiring the MasterCard franchise and licence was recognised as an 

intangible asset and amortised on a straight-line basis over a five year period. 

12. DEPOSITS AND BALANCES OF OTHER BANKS 

2006 2005 2006 2005 

US$ US$ Riel Million 

(Unaudited) 

Riel Million 

(Unaudited) 


Savings accounts 1,511,317 311,754 6,131 1,282 

3,872,609 2,833,654 15,711 11,652 

24




13. DEPOSITS FROM NON-BANK CUSTOMERS 

(a) Analysis by category 

2006 2005 2006 2005 




Savings accounts 142,029,873 121,538,332 576,215 499,766 

Fixed deposits 128,033,027 98,300,697 519,430 404,212 

Margin deposits 1,500,504 1,374,065 6,088 5,650 

(b) Analysis by maturity 

289,458,459 234,846,816 1,174,333 965,690 

2006 2005 2006 2005 



Within 1 month 162,227805 136,546,118 658,158 561,478 

1 to 3 months 47,392,359 16,082,517 192,271 66,131 

4 to 6 months 20,830,920 22,878,024 84,511 94,074 

7 to 12 months 46,057,776 55,202,824 186,856 226,994 

Over 1 year but within 3 years 12,949,599 4,137,333 52,537 17,013 

(c) Analysis by resident status 

289,458,459 234,846,816 1,174,333 965,690 

2006 2005 2006 2005 



Residents 286,172,351 232,781,720 1,161,001 957,198 

Non-residents 3,286,108 2,065,096 13,332 8,492 

289,458,459 234,846,816 1,174,333 965,690 

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13. DEPOSITS FROM NON-BANK CUSTOMERS (Continued) 

(d) Analysis by relationship 

2006 

US$ 

2005 

US$ 

2006 

Riel Million 

2005 

Riel Million 


Related parties 492,573 985,146 1,998 4,051 

External customers 288,965,886 233, 861,670 1,172,335 961,639 

(e) Analysis by currency 

289,458,459 234,846,816 1,174,333 965,690 

2006 2005 2006 2005 



US Dollar 282,857,960 228,299,356 1,147,554 938,767 

Khmer Riel 4,766,953 3,879,985 19,340 15,954 

Thai Baht 1,614,990 2,417,406 6,552 9,940 

Gold 218,556 250,069 887 1,029 

(f) Analysis by customer 

289,458,459 234,846,816 1,174,333 965,690 

2006 2005 2006 2005 



Individuals 173,682,961 147,708,869 704,632 607,379 

Business enterprises 90,118,252 70,234,212 365,610 288,803 

Government enterprises & 

state enterprises 18,672,525 8,754,621 75,754 35,999 

Other finance institutions - 428,502 - 1,762 

Not-for-profit organisations 2,730,421 4,032,498 11,077 16,582 

Other 4,254,300 3,688,114 17,260 15,165 

289,458,459 234,846,816 1,174,333 965,690 

The savings accounts and fixed deposits bear the following interest rates per annum: 

2006 2005 

% % 

Saving deposits 0.75 - 2.00 0.75 - 2.00 

Fixed deposits 3.00 - 6.50 3.00 - 5.50 

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14. PROVISION FOR INCOME TAX 

2006 2005 2006 2005 



Balance at 1 January 1,258,013 779,897 5,104 3,207 

Charge during the year 3,164,356 1,507,798 12,838 6,200 

Income tax paid during the year (1,635,851) (1,026,713) (6,637) (4,222) 

Over provision from prior year - (2,969) - (12) 

Balance as at 31 December 2,786,518 1,258,013 11,305 5,173 

The Bank has obtained tax clearance up to the fiscal year 2001. The remaining tax years 

have yet to be reassessed by the Tax Department and, accordingly, its tax for these years is 

not considered final. 

15. OTHER LIABILITIES 

2006 

US$ 

2005 

US$ 

2006 

Riel Million 

2005 

Riel Million 


Accrued interest payable 2,523,841 1,975,710 10,239 8,124 

Provision for L/C claim (see note 23) 862,360 1,702,969 3,499 7,003 

Amount due to merchants 333,059 80,692 1,351 332 

Suspense account remittance 192,767 1,730,213 782 7,115 

Staff bonus payable 185,324 61,620 752 253 

Tax payables 67,731 61,428 275 253 

Accounts payable 5,079 15,488 21 64 

Accrued expenses 107,516 26,576 436 109 

Other liabilities 246,755 26,894 1,001 110 

4,524,432 5,681,590 18,356 23,363 

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16. OTHER BORROWINGS 

2006 

US$ 

2005 

US$ 

2006 

Riel Million 

2005 

Riel Million 


Borrowed funds from IFC 2,500,000 2,500,000 10,143 10,280 

Borrowed funds from KfW through 

MoEF 4,806,669 2,992,001 19,500 12,303 

7,306,669 5,492,001 29,643 22,583 

The US$2,500,000 borrowed from the International Finance Corporation ("IFC") is the result 

of a Loan Agreement between the Bank and the IFC dated 20 September 2004 whereby IFC 

agreed to lend the Bank US$2,500,000 to be loaned out to eligible sub-borrowers to finance 

acquisition of residential property in Cambodia. On 22 January 2007, this loan was fully 

repaid to IFC. 

The US$4,806,669 borrowed from KfW through the Ministry of Economy and Finance 

(“MoEF”) is the result of loan and finance agreements between the Bank, KfW and MoEF 

dated 23 April 2003 for SME term-lending I and dated 18 October 2005 for SME term-lending 

II. The agreements stipulate that the funds borrowed from KfW, through MoEF shall be sublent 

to Small and Medium Enterprises (“SME”) to build SME capacity in Cambodia. The subloans 

are classified as an asset of the Bank. 

The interest rates during the year were as follows: 


IFC 8.67% - 9.42% 7.14% - 7.62% 

KfW 4.34% - 5.60% 4.45% - 4.89% 

17. SHARE CAPITAL 

2006 2005 2006 2005 



As at 1 January 26,000,000 23,000,000 105,482 94,576 

Increase during the year 4,000,000 3,000,000 16,228 12,336 

Dividends paid and reinvested into 

share capital 10,545,000 - 42,781 - 

As at 31 December 40,545,000 26,000,000 164,491 106,912 

In 2005, the Bank increased its paid up capital from US$23 million to US$26 million by 

issuing 3 million ordinary shares at a par value of US$1 per share. A US$2 million capital 

increase was approved by the Central Bank Banking Supervision Department on 16 

December 2005, with a further US$1 million increase approved on 23 December 2005. 

28




17. SHARE CAPITAL (continued) 

On both 29 April 2006 and 26 June 2006, the Board of Director’s approved a US$2 million 

increase in paid up capital through the issuance of 2 million ordinary shares at a par value of 

US$1 per share, resulting in an overall increase in paid up capital of US$4 million. 

A directors’ resolution was passed on 12 June 2006 which specified that the US$10,545,000 

declared as a dividend was to be reinvested in the share capital of the Bank. 

The capital increase in aggregate of US$14,545,000 was approved by the Central Bank on 

21 July 2006. 

The total authorised amount of share capital as at 31 December 2006 was 40,545,000 

shares, with a par value of US$1 per share. 

18. SUBORDINATED DEBT 

On 28 October 2005, the Bank entered into an agreement with Mr. Pung Kheav Se (a main 

shareholder of the Bank through OCIC) to provide the Bank with a subordinated loan of 

US$7,080,000 for the purpose of acquiring shares in the Foreign Trade Bank of Cambodia. 

This subordinated debt is interest free with no fixed terms of repayment. This subordinated 

debt was approved in principle by the Central Bank on 28 December 2005. 

19. INTEREST INCOME 

2006 2005 2006 2005 



Loans, overdraft and advances 

to customers 21,697,042 17,996,164 88,025 74,000 

Placements with banks 2,843,760 968,513 11,537 3,983 

Placements with the Central Bank 809,688 208,431 3,285 857 

Investment securities - 27,090 - 111 

25,350,490 19,200,198 102,847 78,951 

20. INTEREST EXPENSE 

2006 2005 2006 2005 



Deposits from customers 5,890,144 4,918,210 23,896 20,224 

Borrowed funds from KfW and IFC 414,674 256,999 1,683 1,056 

6,304,818 5,175,209 25,579 21,280 

29




21. FEE AND COMMISSION INCOME 

2006 

US$ 

2005 

US$ 

2006 

Riel Million 

2005 

Riel Million 


Commissions from remittance services 1,366,507 1,136,721 5,544 4,674 

Loan commitment fees 745,001 497,519 3,022 2,046 

Fees for telex, fax and phone 592,003 541,844 2,402 2,228 

Other fees and commissions 528,296 604,957 2,143 2,488 

Income from letters of credit 221,086 174,939 897 719 

Miscellaneous loan fees and service 

charges 537,135 413,888 2,179 1,702 

Fees for wire transfers 104,884 193,970 426 798 

Fees for credit card advances and 

late charges 76,859 65,249 312 268 

ATM/Credit card annual fees and 

MoneyGram 231,752 67,731 940 278 

4,403,523 3,696,818 17,865 15,201 

22. GENERAL ADMINISTRATIVE EXPENSES 

2006 2005 2006 2005 



Payroll and other staff costs 2,720,967 1,708,566 11,039 7,026 

Depreciation and amortisation expenses 654,358 614,474 2,655 2,527 

Loss on foreign exchange currency 504,547 838,790 2,047 3,449 

Charitable donations and gifts 

Travel, accommodation and food 

304,276 

274,478 

113,473 

178,130 

1,234 

1,114 

467 

732 

Advertising and public relations 217,578 256,241 883 1,054 

Utilities 200,568 156,597 814 644 

Legal and professional fees 177,933 254,198 722 1,045 

Taxes and duties 164,344 137,339 667 565 

Communication 152,791 147,429 620 606 

Building rental 135,440 117,730 549 484 

Repairs and maintenance 86,333 77,766 350 320 

Motor vehicles 

Furniture, fixture and equipment 

79,454 58,046 322 239 

expenses 5,251 47,923 21 197 

Stationery and supplies 71,162 106,320 289 437 

Printing and forms 31,758 58,026 129 239 

Insurance 17,808 39,780 72 164 

Loss on disposal of foreclosed properties 21,431 271,580 87 1,117 

Fraud losses by staff written off - 1,444,156 - 5,938 

Other operational costs 493,474 32,520 2,002 132 

6,313,951 6,659,084 25,616 27,382 

30




23. PROVISION FOR LOSSES IN RELATION TO L/C 

In November 2004, the Bank became subject to a financial claim from the Foreign Trade 

Bank of Vietnam for non-payment of four irrevocable letters of credit issued by the Bank 

amounting to US$1,702,969. On 7 March 2006, the Bank entered into a settlement 

agreement with Foreign Trade Bank of Vietnam whereby the Bank agreed to pay 

US$1,702,969 to the Foreign Trade Bank of Vietnam in four installments. The first installment 

amounting to US$416,237 was paid on 9 March 2006 and the second installment amounting 

to US$424,372 was paid by the Bank on 28 June 2006. The final installments are to be paid 

on or before 31 December 2008. 

24. INCOME TAX EXPENSE 

The Bank is subject to a prepayment of Tax on Profit at the rate of 1% of turnover inclusive of 

all taxes, to be paid on a monthly basis by the 15th day of the succeeding month. The 

prepayment of Tax on Profit can be offset against the annual Tax on Profit liability. 

Where the Bank has made a prepayment of Tax on Profit that is greater than the Tax on 

Profit liability, the excess can be carried forward to be offset against future prepayment of 

Tax on Profit and Tax on Profit liabilities. 

Income tax expense is 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 the income tax expense will be made following inspection by the tax 

authorities. 

Reconciliation between income tax expense and accounting profit: 

2006 2005 2006 2005 



Profit before income tax 15,681,051 7,538,994 63,618 31,000 

Expenses not deductible for tax 

purposes 140,730 - 571 - 

Taxable income 15,821,781 7,538,994 64,189 31,000 

Tax charge at a rate of 20% 3,164,356 1,507,798 12,838 6,200 

31




25. CASH USED IN OPERATIONS 

2006 

US$ 

2005 

US$ 

2006 

Riel Million 

2005 

Riel Million 


Cash flows from operating activities 

Profit before income tax 15,681,051 7,538,994 63,618 31,000 

Adjustments for: 

Provision for loan losses – net 2,254,535 1,842,599 9,146 7,577 

Provision for losses in relation to L/C - 1,702,969 - 7,003 

Depreciation and amortisation 654,358 614,474 2,655 2,527 

Gain on disposals of property and 

equipment 21,481 (23,289) 87 (96) 

Reclassification of property and 

equipment - 12,475 - 51 

Operating profit before changes in 

working capital 18,611,425 11,688,222 75,506 48,062 

Increase/(decrease) in cash 

attributable to the change 

in operating assets and liabilities: 

Payment to the Board of Directors (40,000) - (161) - 

Deposits and placements with 

banks (2,156,072) 7,535,583 (8,747) 30,986 

Loans and advances to customers (49,930,573) (30,585,683) (202,568) (125,768) 

Other assets (674,547) 1,645,533 (2,737) 6,766 

Investment assets - 159,004 - 654 

Foreclosed properties (1,391,486) 5,224 (5,645) 21 

Deposits and balances from banks 

Deposits from non-bank customers 

1,038,955 

54,611,643 

(2,642,386) 

27,821,469 

4,215 

221,559 

(10,865) 

114,402 

Provision for income tax 1,528,505 - 6,201 - 

Other liabilities (1,157,158) (610,786) (4,695) (2,512) 

Cash generated from operations 20,440,692 15,016,180 82,928 61,746 

26. CASH AND CASH EQUIVALENTS 

2006 2005 2006 2005 



Cash on hand 25,141,461 25,349,958 101,999 104,239 

Deposits and placements with Central 

Bank 

Deposits and placements with banks 

26,735,124 

51,342,797 

13,708,322 

49,120,571 

108,464 

208,298 

56,369 

201,984 

103,219,382 88,178,851 418,761 362,592 

32




27. COMMITMENTS AND CONTINGENCIES 

(i) 

Credit related commitments 

In the normal course of business, the Bank makes various commitments or incurs certain 

contingent liabilities with legal recourse to its customers. No material losses are anticipated 

as a result of these transactions. At the balance sheet date, the commitments of the Bank are 

as follows: 

2006 

US$ 

2005 

US$ 

2006 

Riel Million 

2005 

Riel Million 


Documentary letter of credits 4,657,767 7,336,644 18,897 30,168 

Performance and bankers’ 

guarantees 

Tender bonds 

855,779 

51,901 

495,942 

192,994 

3,472 

211 

2,039 

794 

Retention guarantees - 17,217 - 71 

Other 102,007 89,983 414 370 

5,667,454 8,132,780 22,994 33,442 

Unused portion of approved 

credit facilities 25,502,232 13,558,636 103,463 55,753 

31,169,686 21,691,416 126,457 89,195 

(ii) 

Lease Commitments 

The Bank has lease commitments for the lease of its branches in Phnom Penh and provincial 

offices as follows: 

2006 

US$ 

2005 

US$ 

2006 

Riel Million 

2005 

Riel Million 


Not later than one year 129,600 107,622 526 443 

Later than one year and not 

later than three years 

Over three years 

326,380 

2,574,372 

270,440 

2,575,750 

1,324 

10,444 

1,112 

10,591 

3,030,352 2,953,812 12,294 12,146 

(iii) 

Capital expenditure and other service commitments 

The following are the capital commitments of new office buildings, new core banking software 

and other related services as at 31 December 2006: 

31 December 2006 

US$ Riel Million 

(Unaudited) 

Not later than one year 1,777,650 7,212 

Later than one year and not later than three years 2,281,185 9,254 

4,058,835 16,466 

33




28. RELATED PARTY BALANCES AND TRANSACTIONS 

Significant related party balances and transactions entered into by the Bank during the period 

on terms negotiated and agreed between the parties were as follows: 

2006 2005 2006 2005 



-Loans, overdrafts and advances: 

Long term loans - 38,705,898 - 159,159 

-Deposits by customers: 

Other related party deposits - 536,306 - 2,205 

Directors’ deposit accounts 23,603 34,939 96 144 

Subordinated debt received 7,080,000 7,080,000 28,724 29,113 

-Interest income: 

Interest income on long term loans - 1,517,380 - 6,239 

-Interest expenses: 

Interest paid on related party deposits 1,841 20,444 7 84 

-Operating expenses: 

Salaries for directors and management 232,985 275,752 945 1,134 

- Rental income 1,200 1,200 5 5 

- Amount due to Director 165,000 - 669 - 

In 2006, interest paid on the long term loans is at a lower than market interest rate of 6% per 

annum (2005: 4% per annum). 

29. FINANCIAL RISK MANAGEMENT 

(a) 

Credit risk 

The Bank assumes exposure to credit risk which is the risk that a counterparty will be unable 

to pay amounts in full when due. The Bank structures the levels of credit risk it undertakes by 

placing limits on the amount of risk accepted in relation to one borrower, or group of 

borrowers, and the geographical and industry segments. Procedures of risk limit setting, 

monitoring, usage, and control are governed by internal regulations. Such risks are 

monitored on a regular basis. 

Exposure to credit risk is managed through regular analysis of the ability of the borrowers 

and potential borrowers to meet interest and capital repayment obligations and reviewing 

these lending limits where appropriate. Exposure to credit risk is also managed in part by 

obtaining collateral and corporate or personal guarantees as well as by providing for loan 

losses. 

Commitments to extend credit represent unused portions of approved loans, guarantees or 

letters of credit. In general, all of the Bank's guarantees and letters of credit are collateralised 

with cash deposits or collateral pledged to the Bank, and accordingly the Bank normally 

assumes minimal risks. 

34




29. FINANCIAL RISK MANAGEMENT (continued) 

(b) 

(i) 

Market risk 

Interest rate risk 

Cash flow interest rate risk is the risk that future cash flows of a financial instrument will 

fluctuate because of changes in market interest rates. Interest margins may increase as a 

result of such changes but may reduce or create losses in the event that unexpected 

movements arise. 

The Bank’s interest rates are generally fixed on a short term basis. Interest rates that are 

contractually fixed on both assets and liabilities are often renegotiated to reflect current 

market conditions. The management is satisfied that the Bank's position is such that 

exposure to movements in interest rates is minimised. 

The table in note 30 summarises the Bank's exposure to interest rate risks. Included in the 

table are the Bank's assets and liabilities at carrying amounts, categorised by the earlier of 

contractual re-pricing or maturity dates. 

(ii) 

Foreign currency exchange risk 

Foreign currency exchange risk refers to the adverse exchange rate movements on foreign 

currency exchange positions taken from time to time. 

The Bank has no material exposure to currency risk as it transacts essentially in US$. 

Significant presence of US$ is the normal practice of banks operating in Cambodia. 

(c) 

Liquidity risk 

Liquidity risk is defined as the risk when the maturity of assets and liabilities do not match. 

Liquidity risk management at the Bank is performed on the basis of measuring liquidity 

surplus/deficit and liquidity ratios that are calculated using scenario analysis. 

The matching and/or controlled mismatching of the maturities and interest rates of assets 

and liabilities is fundamental to the management of the Bank. It is unusual for banks ever to 

be completely matched since business transactions are often of an uncertain term and of 

different types. An unmatched position potentially enhances profitability, but can also 

increase the risk of losses. 

The table in note 31 analyses the assets and liabilities of the Bank into relevant maturity 

based on the remaining period at the balance sheet date to the contractual or estimated 

maturity dates. 

35

CANADIA BANK Plc. FINANCIAL STATEMENTS FOR THE YEAR ...

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