Advanced Bank of Asia Ltd.

ADVANCED BANK OF ASIA LIMITEDANNUAL REPORT2010Let’s Move Forward

CONTENTSPagesCEO MESSAGE ....................................................................................................................................... 1ABA BANK ORGANISATION CHART ....................................................................................................... 2BRANCH NETWORKS ............................................................................................................................. 3ABA PRODUCTS LINE & SERVICES ......................................................................................................... 5COMPARATIVE OF FINANCIAL INDICATORS OF THE BANK ................................................................... 6REPORT OF THE BOARD OF DIRECTORS .................................................................................. 7REPORT OF INDEPENDENT AUDITORS .................................................................................... 11FINANCIAL STATEMENTSBALANCE SHEET ....................................................................................................................... 13INCOME STATEMENT .............................................................................................................. 14STATEMENT OF CHANGES IN EQUITY ..................................................................................... 15CASH FLOW STATEMENT ......................................................................................................... 16NOTES TO THE FINANCIAL STATEMENTS ................................................................................ 17

ABA BANK | ANNUAL REPORT 20101

ABA BANK | ANNUAL REPORT 2010ABA BANK ORGANISATION CHARTShareholdersBoard of DirectorsAudit CommitteeRisk Management CommitteeChief ExecutiveOfficerAsset & Liability Management CommitteeInternal AuditDepartmentDepartmentRisk ManagementDepartmentCredit CommitteeAdvisorLegal Advisory &Compliance DepartmentChief Financial OfficerAccount Maintenance DepartmentTreasury DepartmentChief Technology & InfrastructureDevelopment OfficerI T DepartmentHuman ResourcesDepartmentAdministrationDepartmentInternational Relationship &Remittance DepartmentTrade Finance DepartmentRemittance, Clearing & SWIFTDepartmentDeputy Chief Executive OfficerProduct CommitteeBusiness Development CommitteeChief Credit OfficerCredit AdministrationDepartmentCredit Monitoring & RecoveryDepartmentChief Marketing OfficerMarketing & Public Relationship DepartmentChief Operating OfficerCash Management & Operating Administration DepartmentCardCenterCustomerServicesDepartmentATM & POSTerminalDepartmentClearing &SettlementDepartmentIT SupportDepartmentChief Client Relationship OfficerSales Administration DepartmentCal CenterCentral BranchBoreiKeila BranchBatambang BranchSiem Reap BranchToulKork BranchStade Chas BranchMao TseToung BranchToekThla Branch2

ABA BANK | ANNUAL REPORT 2010Provinces:8-Siem Reap BranchNo. A1-A2, Sivutha Street, SvayDangkum Commune, Siem Reap District, Siem Reap Province,Cambodia (PhsarKandal)Tel: (855) 98 203 829, 63 965 434, 98 203 821..829Fax: (855) 63 965 435Email: siemreap@ababank.com9-Battambang BranchNo. 205-207, Street 3, Village Kamakor, Commune Svay Por, District Battambang,Battambang Province, CambodiaTel: (855) 98 203 839, 53 953 603, 98 203 831 839Fax: (855) 53 953 603Email: battambang@ababank.com10-Kompong Cham Branch ***No 31 Street Monivong, Village 7, Kompong Cham communeKompong Cham Town, Kompong Cham Province*** Under processing to open.4

ABA BANK | ANNUAL REPORT 2010ABA PRODUCTS LINE & SERVICES• Deposits• Current Account• Savings Account• Flexi-Savings• ABA Deposit• Fixed Deposit• Let’s Win Deposit• Special Remittance Account• Loans• Overdraft for SME and Corporate Clients• House mortgage Loan• Equipment Loan• Car Loan• Small Business Loan• Moto Loan• Credit Card Loan• Local and International I/W &O/W Fund TransferCorrespondent accounts with:• Standard Chartered Bank, New York• Standard Chartered Bank, Singapore• Standard Chartered Bank England, London• Korea Exchange Bank, Seoul• HSBC Bank USA, New York• HSBC Bank Thailand, Bangkok• DBS Bank Limited, Singapore• Mashreq Bank Psc, Hong Kong• Commerz Bank, AG Frankfort• HSBC Bank, Australia• Development Bank of the Philippines• Other Services• Letters of Credit, Guarantees• Document Collection• Local/International Cheque Clearing• ATM service• Master Debit Card• Visa Card• Cash Management• E-notification• ABA I-Banking Services• Centralized Banking System5

ABA BANK | ANNUAL REPORT 2010Comparative Financial Indicators of the BankThe comparative financial indicators of the fiscal years 2009 and 2010 are presented below:Fiscal YearParticulars F.Y.2010 F.Y.2009 Incre-/(Decre)%Net Interest Income 3,271,937 2,084,703 56.95Net Fees and Comm. Income 1,544,386 592,316 160.74Net Profit 38,563 (1,694,082) 102.27Total Deposit 122,401,589 40,622,167 201.32Total Gross Loan 74,032,883 26,486,301 179.51Share Capital 36,000,000 23,000,000 56.52Net Worth 29,851,915 17,492,663 70.65Total Assets 155,774,133 60,404,645 157.88Key Performance Indicators (KPI)ProfitabilityROAE(%) 0.15 (8.52) 101.76ROAA(%) 0.04 (3.3) 101.21Net Interest Margin (%) 5.21 7.58 (31.27)Cost/Income (%) 93.74 161.18 (41.84)Funding and LiquidityLiquidity Ratio (%) 52.92 93.13 (43.17)Credit/Deposit (%) 60.48 65.21 (7.25)CapitalizationSolvency Ratio (%) 24.35 62.42 (39.00)Equity/Total assets (%) 20.59 31.51 (34.66)Asset QualityNPL/ Total loan (%) 0.72 3.74 (80.74)Provision/Total Loan (%) 1.37 2.99 (54.18)General InformationHO& Branches 8 8 -Number of staffs 190 187 1.60Accumulated ATM Machines 30 17 76.47Accumulated POS Terminals 99 27 266.676

ABA BANK | ANNUAL REPORT 2010REPORT OF THE BOARD OF DIRECTORSThe Board of Directors (“the Directors”) is pleased to submit their report together with the auditedfinancial statements of Advanced Bank of Asia Limited ("the Bank") for the ended 31 December 2010.ADVANCED BANK OF ASIAThe Bank was incorporated on 25 October1996 and registered with the Ministry of Commerce as aprivate limited liability company under register number Co-322/97E dated 25 October 1996.PRINCIPAL ACTIVITIESThe Bank is principally engaged in all aspects of banking business and the provision of related financialservices in Cambodia.RESULTS OF OPERATIONS AND DIVIDENDThe results of operations for the year ended 31 December 2010 are set out in the income statement onpage 14.No dividends were declared or paid during the year ended 31 December 2010.STATUTORY CAPITALDuring the year, the Bank increased its paid-up statutory capital from US$23,000,000 to US$36,000,000by way of an issue of 13,000 shares of US$1,000 each for cash on 29 September 2010.This increase was made based on the mandatory requirement Prakas B7-08-193 dated 19 September2008 issued by the National Bank of Cambodia required to have a minimum paid up capital of at leastKHR150 billion (equivalent to USD36 million at the date of increase).RESERVES AND PROVISIONSThere were no material movements to or from reserves and provisions during the year under review.BAD AND DOUBTFUL LOANS AND ADVANCESBefore the financial statements of the Bank were drawn up, the Directors took reasonable steps toascertain that action had been taken in relation to the writing off of bad loans and advances or makingof provisions for doubtful loans and advances, and satisfied themselves that all known bad loans andadvances had been written off and that adequate provisions have been made.At the date of this report and based on the best of knowledge, the Directors are not aware of anycircumstances which would render the amount written off for bad loans and advances or the amount ofthe provision for bad and doubtful loans and advances in the financial statements of the Bankinadequate to any material extent.7

ABA BANK | ANNUAL REPORT 2010CURRENT ASSETSBefore the financial statements of the Bank were drawn up, the Directors took reasonable steps toensure that any current assets, other than debts which were unlikely to be realised in the ordinarycourse of business at their values as shown in the accounting records of the Bank, have been writtendown to an amount which they might be expected to realise.At the date of this report and based on the best of knowledge, the Directors are not aware of anycircumstances which would render the values attributed to the current assets in the financial statementsof the Bank misleading in any material respect.VALUATION METHODSAt the date of this report and based on the best of knowledge, the Directors are not aware of anycircumstances that have arisen which would render adherence to the existing method of valuation ofassets and liabilities in the financial statements of the Bank misleading or inappropriate in any materialrespect.CONTINGENT AND OTHER LIABILITIESAt the date of this report, there is:(a) no charge on the assets of the Bank which has arisen since the end of the financial period whichsecures the liabilities of any other person, and(b) no contingent liability in respect of the Bank that has arisen since the end of the financial periodother than in the ordinary course of banking business.No contingent or other liability of the Bank has become enforceable, or is likely to become enforceablewithin the period of twelve months after the end of the financial period which, in the opinion of thedirectors, will or may have a material effect on the ability of the Bank to meet its obligations as andwhen they become due.CHANGE OF CIRCUMSTANCESAt the date of this report, the Directors are not aware of any circumstances, not otherwise dealt with inthis report or the financial statements of the Bank, which would render any amount stated in thefinancial statements misleading in any material respect.ITEMS OF AN UNUSUAL NATUREThe results of the operations of the Bank for the year ended 31 December 2010 were not, in the opinionof 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, tosubstantially affect the results of the operations of the Bank for the current financial year in which thisreport is made.8

ABA BANK | ANNUAL REPORT 2010THE BOARD OF DIRECTORSThe members of the Board of Directors holding office during the year and as at the date of this reportare:Mr. Damir Karassayev, ChairmanMr. Nurlan Tokobayev, Independent DirectorMr. Madi Akmambet, Director/CEOMr. Yermek Mazhekenov, Independent DirectorDIRECTORS’ INTERESTSThe Directors are representing the interests of shareholders of the Bank during the year and at the dateof this report are as follows:Shareholder Holding Number ofshares% of USD1,000 eachDamir Karassayev 74.72% 26,90074.72% 26,900DIRECTORS' BENEFITSDuring and at the end of the year, no arrangements existed, to which the Bank was a party, with theobject of enabling Directors of the Bank to acquire benefits by means of the acquisition of shares in ordebentures of the Bank or any other body corporate.No Director of the Bank has received or become entitled to receive any benefit by reason of a contractmade by the Bank with the Director or with a firm of which the Director is a member, or with a companywhich the Director has a material financial interest other than as disclosed in the financial statements.9

ABA BANK | ANNUAL REPORT 2010RESPONSIBILITIES OF THE DIRECTORS IN RESPECT OF THE FINANCIAL STATEMENTSThe Directors are responsible to ensure that the financial statements are properly drawn up so as topresent fairly, in all material respects, the financial position of the Bank as at 31 December 2010 and ofits financial performance and cash flows for the year then ended. In preparing these financialstatements, the Directors are required to:i) adopt appropriate accounting policies which are supported by reasonable and prudentjudgements and estimates and then apply them consistently;ii)iii)iv)comply with the disclosure requirements and the National Bank of Cambodia’s guidelinesand Cambodian Accounting Standards or, if there have been any departures in the interestsof fair presentation, these have been appropriately disclosed, explained and quantified inthe financial statements;maintain adequate accounting records and an effective system of internal controls;prepare the financial statements on a going concern basis unless it is inappropriate toassume that the Bank will continue operations in the foreseeable future; andv) effectively control and direct the Bank in all material decisions and actions affecting theoperations and performance and ascertain that such have been properly reflected in thefinancial statements.The Directors confirm that the Bank has complied with the above requirements in preparing thefinancial statements.APPROVAL OF THE FINANCIAL STATEMENTSThe accompanying financial statements has been drawn up so as to present fairly, in all materialrespects, the financial position of the Bank as at 31 December 2010, and of its financial performance andcash flows for the year then ended in accordance with the National Bank of Cambodia’s guidelines andCambodian Accounting Standards, were approved by the Board of Directors.On behalf of the Board of Directors___________________________Madi AkmambetChief Executive OfficerDate: 29 March 201110

ABA BANK | ANNUAL REPORT 2010REPORT OF INDEPENDENT AUDITORSTO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF ADVANCED BANK OF ASIA LIMITEDWe have audited the accompanyingfinancial statements ofAdvanced Bank of Asia Limited (“the Bank”),which comprise the balance sheet as at 31 December 2010, and the related income statement,statement of changes in equity, and cash flow statement for the year then ended, and a summary ofsignificant accounting policies and other explanatory notes.Management’s responsibilityManagement is responsible for the preparation and fair presentation of these financial statements inaccordance with the National Bank of Cambodia’s guidelines and Cambodian Accounting Standards. Thisresponsibility includes: designing, implementing and maintaining internal control relevant to thepreparation and fair presentation of financial statements that are free from material misstatement,whether due to fraud or error; selecting and applying appropriate accounting policies; and makingaccounting estimates that are reasonable in the circumstances.Auditors’ responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with Cambodian Standards on Auditing and International Standardson Auditing and the requirements of the National Bank of Cambodia (“NBC”). Those principles requirethat we comply with ethical requirements and plan and perform the audit to obtain reasonableassurance as to whether the financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial statements. The procedures selected depend on the auditors’ judgment, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditors consider internal control relevant to the Bank’spreparation and fair presentation of the financial statements in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Bank’s internal control. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of accounting estimates made by Management, as wellas 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 forour audit opinion.11

ABA BANK | ANNUAL REPORT 2010OpinionIn our opinion, the accompanying financial statements give a true and fair view, in all materialrespects, of the financial position of the Bank as at 31 December 2010 and of it financialperformance and cash flows for the year then ended, in accordance with the National Bank ofCambodia’s guidelines andCambodian Accounting Standards.The accompanying financial statements are prepared for jurisdiction of Cambodia and theNational Bank of Cambodia’s guidelines. It is not intended to present the financial position andresults of operations and cash flows in accordance with accounting principles and practicesgenerally accepted in other countries and jurisdictions other than Cambodia.Morison Kak & AssociésCertified Public AccountantsRegistered AuditorsDate: 29March 201112

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDBALANCE SHEETAS AT 31 DECEMBER 20102010 2009Note USD KHR’000 USD(As restated)ASSETSCash in hand 4 9,345,698 37,878,114 7,646,125Deposits and placements with banks 5 24,571,756 99,589,327 16,232,658Statutory deposits with central bank 6 17,019,727 68,980,954 6,256,581Loans and advances to customers - net 7 73,019,511 295,948,078 25,693,834Investment securities 8 26,756,635 108,444,641 -Intangible assets - computer software 9 1,921,517 7,787,908 1,345,092Property and equipment 10 1,307,318 5,298,560 2,603,469Other assets 11 1,831,971 7,424,978 626,886TOTAL ASSETS 155,774,133 631,352,560 60,404,645LIABILITIES AND CAPITALLIABILITIESDeposits from customers and banks 12 122,401,589 496,093,640 40,622,167Provision for income tax 13 9,775 39,618 4,846Other liabilities 14 1,290,331 5,229,712 743,757TOTAL LIABILITIES 123,701,695 501,362,970 41,370,770CAPITAL AND RESERVESShare capital 15 36,000,000 145,908,000 23,000,000Accumulated losses (3,927,562) (15,918,410) (3,966,125)TOTAL CAPITAL AND RESERVES 32,072,438 129,989,590 19,033,875LIABILITIES AND CAPITAL 155,774,133 631,352,560 60,404,645Commitments and contingencies 26.1 6,542,151 26,515,338 4,241,488Signed and authorised for release on behalf of the Board of directors___________________________Madi AkmambetChief Executive OfficerDate: 29 March 2011The accompanying notes form an integral part of these financial statements.13

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDCASH FLOW STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2010Cash flows from operating activities2010 2009Note USD KHR’000 USD(As restated)Net cash (used in)/from operating activities 24 (2,736,457) (11,090,860) 15,686,192Cash flows from investing activitiesPurchase of intangible assets 9 (98,523) (399,314) (320,591)Purchase of property and equipment andsoftware 10 (126,349) (512,092) (924,665)Proceeds from disposal of property andequipment - - 7,732Net cash used in investing activities (224,872) (911,406) (1,237,524)Cash flows from financing activitiesIssued share capital 13,000,000 52,689,000 -Net cash used in financing activities 13,000,000 52,689,000 -Net changes in cash and cash equivalents 10,038,671 40,686,734 14,448,668Cash and cash equivalents, beginning of theyear 23,878,783 96,780,707 9,430,115Cash and cash equivalents, end of the year 33,917,454 137,467,441 23,878,783Represented by:Cash in hand 4 9,345,698 37,878,114 7,646,125Deposits and placements with banks 5 24,571,756 99,589,327 16,232,65833,917,454 137,467,441 23,878,783The accompanying notes form an integral part of these financial statements.16

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20101. GENERAL INFORMATIONAdvanced Bank of Asia Limited (“the Bank”) was incorporated in Cambodia on 25October1996 underRegistration No. Co.322/97E dated 25 October 1996 granted by the Ministry of Commerce andcommenced operations on 25 October 1996.The Bank is principally engaged in all aspects banking business and the provision of related financialservices in the Kingdom of Cambodia. On 28 November 2006, the Bank was granted a permanentbanking licence No.14 from the National Bank of Cambodia (“NBC”).The registered office of the Bank is located at No. 148, Preah Sihanouk Blvd., Sangkat Boeung Keng Kang I, KhanChamkarmon, Phnom Penh, Kingdom of Cambodia.As at 31 December 2010, the Bankemployed197 employees (2009: 188 employees).There have been no significant changes in the nature of these principal activities during the financialyear.The financial statements were authorised for issue by the Board of Directors on 29 March 2011.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe principal accounting policies applied in the preparation of these financial statements are set outbelow. These policies have been consistently applied to all the years presented, unless otherwise stated.2.1 Basis of preparationThe financial statements of the Bank are prepared under the historical cost convention in accordance withthe guidelines issued by the NBC and Cambodian Accounting Standards (“CAS”). In applying CAS, the Bankalso applies the Cambodian Financial Reporting Standard (“CFRS”) 7: Financial Instruments: Disclosures.This practice differs from the International Financial Reporting Standards which require that loans andreceivables be carried at amortised cost using the effective interest method of any difference between theinitial amount and the maturity amount, and minus any reduction for impairment or uncollectability.The financial statements are prepared using the historical cost convention.The preparation of financial statements in conformity with CAS as modified by NBC guidelines requiresthe use of estimates and assumptions that affect the amounts reported in the financial statements as atand for the year ended and accompanying notes. The estimates have been made based on existingavailable information and Management’s best knowledge of current event and actions; and thereforethe actual results ultimately may differ from those estimates.The accompanying financial statements are prepared for jurisdiction of Cambodia and are not intendedto present the financial position and its financial performance and cash flows in accordance withgenerally accepted accounting principles and practice in other countries and those who are notinformed about Cambodia’s procedures and practices.17

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20102. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.2 New accounting standards and interpretationsThere were no standards, amendments to existing standards and interpretations which becameeffective in the year ended 31 December 2010.On 28 August 2009, the National Accounting Council announced the adoption of CambodianInternational Financial Reporting Standards (“CIFRS”) which are based on full International FinancialReporting Standards. Public accountable entities shall prepare their financial statements in accordancewith CIFRS for accounting period beginning on or after 1 January 2012.The following Cambodian International Accounting Standards (“CIAS”) or CIFRS and amendments toexisting standards, which have been published are relevant and mandatory for the Bank’s accountingperiod beginning on or after 1 January 2012, but have not been early adopted by the Bank:CIAS 1 (Revised), 'Presentation of Financial Statements'The revised standard prohibits the presentation of items of income and expenses (i.e., 'non-ownerchanges in equity') in the statement of changes in equity. All non-owner changes in equity are tobe shown in a performance statement. Entities can opt to present one performance statement(i.e. statement of comprehensive income) or two statements (i.e. income statement andstatement of comprehensive income). Entities which restate or reclassify comparative informationare required to present a restated balance sheet as at the beginning comparative period. Therevised standard also clarifies that potential settlement of a liability by issue of equity is notrelevant in determining the classification of a liability as current or non-current liability. CIAS 16 (Amendment), 'Property, Plant and Equipment' (and consequential amendment to CIAS 7,'Statement of Cash Flows')The amended standard requires entities, whose ordinary activities comprise renting andsubsequently selling assets, to present proceeds from sale of those assets as revenue and totransfer the carrying amount of an asset to inventories when the asset becomes held for sale. Aconsequential amendment to CIAS 7 requires cash flows arising from purchase, rental and sale ofthose assets to be classified as cash flows from operating activities.CIAS 24 (Revised), ‘Related Party Disclosures’CIAS 24 was revised by (a) simplifying the definition of a related party, clarifying its intendedmeaning and eliminating inconsistencies from the definition; and (b) providing a partial exemptionfrom the disclosure requirements for government-related entities.CIAS 32, ‘Financial Instruments: Presentation’The objective of this standard is to establish the principles for presenting financial instruments asliabilities or equity and for offsetting financial assets and financial liabilities. It applies to theclassification of financial instruments, from the perspective of the issuer, into financial assets,financial liabilities and equity instruments as well as classification of related interest, dividends,losses and gains.18

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20102. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.2 New accounting standards and interpretations (continued)CIAS 36 (Amendment), 'Impairment of Assets'The amended standard states that where fair value less costs to sell is calculated on the basis ofdiscounted cash flows, disclosures equivalent to those for value-in-use calculation should bemade.CIAS 38 (Amendment), 'Intangible Assets'The revised standard provides clarifications in respect of fair value measurement of an intangibleasset acquired a business combination and it permits the grouping of intangible assets as a singleasset if each asset has similar useful economic lives.CIAS 39, “Financial Instruments: Recognition and Measurement’The standard establishes principles for recognising and measuring financial assets, financialliabilities and some contracts to buy or sell non-financial items. Adoption of CIAS 39 will result inthe following revisions to the accounting policies on financial instruments:Loans and advances to customersLoans and advances to customers are currently stated in the balance sheet at outstandingprincipal and interest, less any amounts written off and provision for loan losses. Under CIAS 39,loans and receivables are initially recognised at fair value - which is the cash consideration tooriginate or purchase the loan including any transaction costs - and subsequently measured atamortised cost using the effective interest rate method.Available for sale financial assetsThe bank currently states available for sale financial assets in the balance sheet at outstandingprincipal and interest, less any amounts written off and impairment. Under CIAS 39, available forsale financial assets are initially recognised at fair value, which is the cash consideration includingany transaction costs, and subsequently measured at fair value with gains and losses beingrecognised in the statement of comprehensive income, except for impairment losses and foreignexchange gains and losses, until the financial asset is derecognised. If available for sale financialasset is determined to be impaired, the cumulative gain or loss previously recognised in statementof comprehensive income is recognised in income statement. Interest is calculated using theeffective interest method.Held to maturity financial assetsThe bank currently states held to maturity financial assets in the balance sheet at outstandingprincipal and interest, less any amounts written off and impairment. Under CIAS 39, held tomaturity financial assets are initially recognised at fair value including direct and incrementaltransaction costs and subsequently measured at amortised cost, using affective interest method.Deposits from banks and customersThe Bank currently measures deposits from banks and customers at the deposit amount. CIAS 39requires that financial liabilities (which include deposits from banks and customers) to bemeasured at amortised cost.19

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20102. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.2 New accounting standards and interpretations (continued)Impairment of financial assetsThe Bank currently follows the mandatory credit classification and provisioning as required byPrakas No. B7-09-074 dated 25 February 2009 issued by the Central Bank, as disclosed in note 2.6to the financial statements. CIAS 39 requires the Bank to assess at each reporting date whetherthere is objective evidence that a financial asset or group of financial assets is impaired, eitheron an individual or collective assessment basis. Impairment loss is measured as the differencebetween an asset’s carrying amount and present value of estimated future cash flows (excludingfuture credit losses that have not been incurred) discounted at the asset’s original effectiveinterest rate. For the purposes of collective impairment assessment, assets are grouped on thebasis of similar credit risk characteristics.Interest income and interest expenseThe Bank currently recognises interest income and expense on an accrual basis at contractualrates, except where serious doubt exists as to the collectability; interest is suspended until it isrealized on a cash basis. CIAS 39 requires interest income and expense for all interest-bearingfinancial instruments to be recognised using the effective interest method. In respect of afinancial asset or a group of similar financial assets which are impaired, interest income is to berecognised at interest rate used in discounting future cash flows for purpose of measuring theimpairment loss.CIFRS 7 (Amendment), ‘Financial instruments - Disclosures’The revised standard requires enhanced disclosures in respect of fair value measurement andliquidity risk. In particular, the amendment requires disclosure of fair values by fair valuemeasurement hierarchy as follows:oooLevel 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;Level 2 - Inputs, other than quoted prices included within Level 1, that are observable for anasset or liability, either directly or indirectly; andLevel 3 - Inputs for an asset or liability that are not based on observable market data.CIFRS 9, ‘Financial instruments’The standard establishes principles for financial reporting of financial assets that will presentrelevant and useful information to users of financial statements for their assessment of theamounts, timing and uncertainty of the entity's future cash flows. CIFRS 9 specify the bases forclassification and measurement of financial assets, including some hybrid contracts. They requireall financial assets to be: (a) classified on the basis of an entity's business model for managing thefinancial assets and the contractual cash flow characteristics of a financial asset; (b) initiallymeasured at fair value, plus transaction costs in the case of a financial asset not at fair valuethrough profit or loss; and (c) subsequently measured at amortised cost or fair value based onasset classification.Other than the standards and amendments to existing standards as set out above, the other publishedstandards, amendments and interpretations to existing standards, which are applicable for accountingperiods beginning on or after 1 January 2010, are not relevant to the Bank’s operations.20

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20102. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.3 Foreign currencies translation(a)Functional and presentation currencyItems included in the financial statements of the Bank are measured using the currency of the primaryeconomic environment in which the Bank operates (‘the functional currency’).The national currency of Cambodia is the Khmer Riel (“KHR”). However, as the Bank transacts essentiallyin US Dollar (“USD”) and maintains its books of accounts primarily in USD, the financial statements arepresented in US$, which is the Bank’s functional and presentation currency as it reflects the economicsubstance of the underlying events and circumstances of the Bank.In compliance with the requirements of the NBC, all assets, liabilities, profit and loss statement items inforeign currencies at the end of the year are converted into thousand Khmer Riel (“KHR’000”) using theofficial exchange rate announced by the NBC at the balance sheet date, of 1 USD = 4,053 KHR (31December 2009: KHR 4,169). The purposes of such conversions are to comply with NBC’s financialstatements presentation guidelines only and should not be construed as representations that the KHRamounts have been, could be, or could in the future be, converted into USD at this or any other rate ofexchange.(b)Transactions and balanceAssets and liabilities expressed in currencies other than USD are translated into USD at the rate ofexchange quoted by the NBC at the date of the balance sheet. Income and expenses arising in foreigncurrencies are converted at the rate of exchange prevailing on the transaction dates. Exchangedifferences arising from conversion are reported on a net basis in the statement of income.2.4 Segment informationThe Bank operates within one business segment which is a commercial banking, and within onegeographical segment, the Kingdom of Cambodia2.5 Cash and cash equivalentsCash and cash equivalents comprise balances with original maturity of less than three months from thedate of acquisition, including cash on hand, non-restricted balance with the Central Bank and balanceswith other banks.2.6 Statutory deposits with central bankStatutory deposits represent mandatory reserve deposits and cash maintained with the NBC incompliance with the Law on Banking and Financial Institutions (“LBFI”) and are not available to financethe Bank’s day-to-day operations and hence are not considered as part of cash and cash equivalents forthe purpose of the statement of cash flows.21

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20102. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.7 Loans and advances to customersLoans originated by the Bank by providing money directly to the borrowers at draw down arecategorised as loans and advances to customers and are carried at outstanding balance andinterest, less allowances for loan loss and any amount written off. Interest in suspenserepresents interest accrued on loan receivables that are doubtful or bad.2.8 Allowances for loan lossesAllowances for loan losses are based on the latest mandatory credit classification and provisioningguidelines required by Prakas B7-09-074 dated 25 February 2009 issued by the NBC. Allowances aremade with regard to specific risks on loans individually reviewed and classified into five classes asnormal, special mention, substandard, doubtful and loss regardless of the assets (except cash) lodged ascollateral.NBC guidelines require the following loan classification and minimum level of allowances:Classification Overdue Type of provisionRate ofallowancesNormal/StandardPerforming in accordance withGeneral provisioncontractual terms1%Special mention Thirty days or more Specific provision 3%Substandard More than ninety days Specific provision 20%Doubtful More than six months Specific provision 50%Loss More than one year Specific provision 100%Exception on the above provision rate may be considered but this is conditional on the actual marketvalue of the collateral having been deemed acceptable by the NBC on a case-by-case basis.In accordance with NBC guidelines, overdue loans are defined as the total outstanding principalwhere the principal or interest is past due.2.9 Other credit related commitmentsIn the normal course of business, the Bank enters into other credit related commitments including loancommitments, letters of credit, and guarantees. The accounting policy and allowance methodology aresimilar to those for originated loans noted above. Specific allowances are raised against other creditrelated commitments when losses are considered probable.2.10 Investment securitiesInvestment securities are stated in the balance sheet at outstanding principal and interest, less anyamounts written off and impairment.22

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20102. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.11 Property and equipmentProperty and equipment are stated at historical cost less accumulated depreciation and impairmentlosses. Historical cost includes expenditure that is directly attributable to the acquisition of the items.Subsequent expenditures are included in the asset’s carrying amount or recognised as a separate asset,as appropriate, only when it is probable that future economic benefits associated with the item will flowto the Bank and the cost of the item can be measured reliably. All other repairs and maintenance arecharged to the statement of income during the financial year in which they are incurred.Depreciation of property and equipment is calculated on a straight-line basis over the estimated usefullives of assets at the following rates per annum:Leasehold improvements 10% - 33%Computer and IT equipment 33%Office equipment 33%Motor vehicle 20%An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carryingamount is greater than its estimated recoverable amount. The recoverable amount is the higher of theasset’s fair value less costs to sell and value in use.An item of property and equipment is derecognised upon disposal or when no future economic benefitsare expected from its use or disposal. Gains and losses on disposal are determined by comparingproceeds with carrying amount and are recognised in income statement.2.12 Intangible assetsIntangible assets, which comprise acquired computer software licenses and related costs, are stated atcost less accumulated amortisation and impairment loss. Acquired computer software licenses arecapitalised on the basis of the cost incurred to acquire the specific software and bring it to use. Thesecosts are amortised using the straight-line method at the rate of 10% per annum.Costs associated with maintaining computer software are recognised as an expense when incurred.2.13 Impairment of non-financial assetsAssets that have an indefinite useful life are not subject to amortisation and are tested annually forimpairment. Assets that are subject to amortisation or depreciation are reviewed for impairmentwhenever events or changes in circumstances indicate that the carrying amount may not berecoverable. Impairment loss is recognised for the amount by which the asset’s carrying amount exceedsits recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to selland value in use.23

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20102. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.13 Impairment of non-financial assets (continued)Any impairment loss is charged to income statement in the period in which it arises. Reversal ofimpairment loss is recognised in the income statement to the extent that the asset’s carrying amountdoes not exceed the carrying amount that would have been determined, net of depreciation andamortisation, had no impairment loss been recognised.2.14 Interest income and expenseInterest earned on loans and advances to customers, deposits with the Central Bank and other banks arerecognised on the accrual basis, except when loans and advances to customers become doubtful ofcollection, in which case, no interest is recognised as income.Where an account is classified as non-performing, recognition of interest income is suspended until it isrealised on a cash basis. Customer’s loan accounts are classified as non-performing where repaymentsare in arrears for ninety days and more.Interest expenses on the deposits and borrowings are recognized on an accrual basis.2.15 Fee and commission incomeLoan arrangement fee and commissions are generally recognized based on the occurrence when theservice has been provided and consideration received.Commitment fees and guarantee fees on a varietyof services and facilities extended to customers are recognised as income based on time apportionment.Service charges and processing fees are recognised as income when loan is disbursed.2.16 Operating leasesLeases in which a significant portion of the risks and rewards of ownership are retained by the Lessor areclassified as operating leases. Payments made under operating leases are charged to the incomestatement on a straight-line basis over the period of the lease.2.17 ProvisionsProvisions are recognised when the Bank has a present legal or constructive obligation as a result of pastevents; it is more likely than not that an outflow of resources will be required to settle the obligations;and a reliable estimate of the amount of the obligation can be made.When there are a number of similar obligations, the likelihood that an outflow will be required insettlement 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 theobligation using a pre-tax rate that reflects current market assessments of the time value of money andthe risks specific to the obligation. The increase in the provision due to passage of time is recognised asinterest expense.24

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20102. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.18 Current and deferred income taxesIncome tax expense for the period comprises current and deferred tax. Tax is recognised as expenses forthe period. Taxes other than on income are recorded within operating expenses.Current tax is calculated on the basis of taxable profit using tax rates that have been enacted orsubstantially enacted at the balance sheet date in accordance with Cambodian Law on Taxation.Deferred tax is provided in full, using the liability method, on temporary differences between tax basesof assets and liabilities and their carrying amounts in the financial statements. The amount of deferredtax provided is based on the expected manner of realisation or settlement of the carrying amount ofassets and liabilities, using tax rate enacted or substantially enacted at the balance sheet date.A deferred tax asset is recognised only to the extent that it is more likely than not that future taxableprofits will be available against which the asset can be utilised. Deferred tax assets are reduced to theextent that it is no longer probable that the related tax benefit will be realised.2.19 Related partiesParties are considered to be related if one party has the ability to control the other party or exercisesignificant influence over the other party in making financial and operating decisions.Under the LBFI, the definition of related parties includes parties who hold, directly or indirectly, at least10 percent of the capital or voting rights and includes any individual who participates in theadministration, direction, management or internal control of the Bank.3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTSEstimates and judgements are continually evaluated and based on historical experience and otherfactors, including expectations with regard to future events that are believed to be reasonable under thecircumstances. The Bank makes estimates and assumptions that affect the reported amounts of assetsand liabilities concerning the future. The resulting accounting estimates will, by definition, seldom equalthe related actual results. The estimates and assumptions that have a significant risk of causing amaterial adjustment to the carrying amounts of assets and liabilities within the next financial year arediscussed below.(a)Impairment losses on loans and advancesThe 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 the banking and financialinstitutions issued by the NBC. The NBC requires commercial banks to classify their loans, advances andsimilar assets into five classes and the minimum mandatory level of provisioning is provided, dependingon the classification concerned and regardless of the assets lodged as collateral. For the purpose of loanclassification, the Bank takes into account all risks and relevant factors which may affect thecounterparties’ repayment abilities.25

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20103. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)(b)Income taxTaxes are calculated on the basis of current interpretation of the tax regulations. However, theseregulations are subject to periodic variation and the ultimate determination of tax expenses will bemade following inspection by the Tax Authorities.Where the final tax outcome is different from the amounts that were initially recorded, such differenceswill have an impact on the income tax and deferred tax provisions in the financial period in which suchdetermination is made.4. Cash in hand2010 2010USD KHR’000 USD(As restated)Cash in hand 8,247,026 33,425,196 7,629,825Cash items in the process of collection 1,098,672 4,452,918 16,3005. Deposits and placement with banks9,345,698 37,878,114 7,646,1252010 2010USD KHR’000 USD(As restated)Inside CambodiaCurrent account:National Bank of Cambodia 2,969,875 12,036,902 4,404,400Acleda Bank 46,832 189,810 81,988Cambodia Public Bank 9,191 37,251 -Singapore Banking Corporation Limited 4,387 17,781 4,3883,030,285 12,281,744 4,490,776Saving deposits:Canadia Bank 17,098,945 69,302,023 202,001Acleda Bank 156,117 632,742 14,590Union Commercial Bank 11,269 45,673 21,54417,266,331 69,980,438 238,135Fixed deposits:Union Commercial Bank 56,491 228,958 53,546Canadia Bank - - 4,000,000Cambodia Public Bank - - 5,010,00056,491 228,958 9,063,54620,353,106 82,491,140 13,792,45726

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20105. Deposits and placement with banks (continued)2010 2010 2010USD KHR’000 USD(As restated)Outside CambodiaStandard Chartered Banks 1,714,900 6,950,490 291,487HSBC Bank 1,399,707 5,673,012 1,106,646Masheq Bank 419,984 1,702,195 520,359Korea Exchange Bank 316,462 1,282,620 244,635Commerz Bank 284,242 1,152,032 199,861Development Bank of Philippines 17,625 71,434 7,570DBS Bank 65,730 266,404 69,6434,218,650 17,098,187 2,440,20124,571,756 99,589,327 16,232,658(a)Further analysis of the above deposits and placements is as follows:(i) By maturity period2010 2009USD KHR’000 USDWithin one month 24,515,265 99,360,369 7,169,112From two month to three months - - 9,010,000From four months to six months - - -From seven months to twelve months 56,491 228,958 53,54624,571,756 99,589,327 16,232,658(ii) By currency2010 2009USD KHR’000 USDUS Dollar 23,872,571 96,755,530 15,716,153EURO 284,242 1,152,033 199,861Khmer Riels 213,078 863,605 151,880Pound 98,927 400,951 -Thai Bath 63,246 256,336 -Australia Dollar 23,898 96,859 155492Singapore Dollar 15,794 64,013 9,27224,571,756 99,589,327 16,232,65827

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20105. Deposits and placement with banks (continued)(b)The above deposits earn interest at the following rates per annum:2010 2009% %Bank inside Cambodia 0.75-5.50 0.02 - 7.50Bank outside Cambodia 0.00 - 0.70 0.00 - 4.506. Statutory deposits with central bank2010 2009USD KHR’000 USDStatutory capital deposit 3,600,000 14,590,800 2,300,000Reserve requirements on customer deposits 13,419,727 54,390,154 3,956,58117,019,727 68,980,954 6,256,581(a)Statutory capital deposit:Under NBC’s Prakas No. B 7-01-136 dated 15 October 2001, the Bank is required to maintain a statutorydeposit of ten per cent of its capital. This deposit is not available for use in the Bank’s day-to-dayoperations and is refundable should theBank voluntarily cease its operations in Cambodia.(b)Reserve requirements on customer deposits:The reserve deposit with the NBC is to comply with the NBC’s Prakas No. B 7-09-020 dated 26January2009. As per the Prakas, the Bank shall maintain reserve requirements against deposits andborrowings at a daily average balance equal to eight percent in Riel and twelve percent in foreigncurrencies with the NBC.(c)The above deposits earn interest at the following rates per annum:2010 2009Statutory capital deposits 0.11% to 0.18% 0.28% to 0.68%8% of reserve requirements in foreign currencies 0% 0%4% of reserve requirements in foreign currencies ½ SIBOR ½ SIBOR28

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20107. Loans and advances to customers2010 2009USD KHR’000 USD(As restated)Commercial loans:Long term loans 41,009,554 166,211,722 11,483,838Short term loans 13,331,657 54,033,206 6,760,074Overdrafts 18,677,806 75,701,148 7,840,933Consumer loans:Vehicle loan 659,725 2,673,865 205,336Staff loans 299,006 1,211,871 196,120Credit card loan 55,135 223,463 -74,032,883 300,055,275 26,486,301Allowances for impairment losses (*) (1,013,372) (4,107,197) (792,467)(*) Movements on allowances for impairment losses are as follows:73,019,511 295,948,078 25,693,8342010 2009USD KHR’000 USDAt beginning of year 792,467 3,211,869 2,024,455Addition during the year 613,694 2,487,302 583,963Recovery during the year (392,789) (1,591,974) (617,481)Write-off during the year - - (1,198,470)At end of year 1,013,372 4,107,197 792,467(a)By performance2010 2009USD KHR’000 USDNormal loans:- Secured 71,250,919 288,779,975 25,128,081- Unsecured 354,125 1,435,268 98,056Special mention loans:- Secured 1,893,694 7,675,142 270,000- Unsecured - - -Substandard loans:- Secured 215,455 873,239 47,533- Unsecured - - -29

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20107. Loans and advances to customers (continued)(a)By performance (continued)Doubtful loans:- Secured 242,540 983,015 840,065- Unsecured - - -Loss loans:- Secured - - 53,500- Unsecured 76,150 308,636 49,06674,032,883 300,055,275 26,486,301(b)By maturity period2010 2009USD KHR’000 USDUp to one month 1,319,383 5,347,459 286,402From one month to three months 4,959,622 20,101,348 7,091,716From four months to six months 9,509,767 38,543,086 2,093,253From seven months to one year 19,490,042 78,993,140 6,452,418From two years to three years 17,139,276 69,465,486 8,018,467From four years to five years 17,768,424 72,015,422 2,544,045Over five years 3,846,369 15,589,334 -74,032,883 300,055,275 26,486,301(c)By security2010 2009USD KHR’000 USDSecured 73,602,608 298,311,370 26,339,179Unsecured 430,275 1,743,905 147,12274,032,883 300,055,275 26,486,301(d)By currency denomination2010 2009USD KHR’000 USDUS Dollar 74,032,883 300,055,275 26,486,30130

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20107. Loans and advances to customers (continued)(e) By status of residence2010 2009USD KHR’000 USDResidents 74,032,883 300,055,275 26,486,301(f)By relationship=2010 2009USD KHR’000 USDRelated parties (staff loans) 299,006 1,211,871 196,120Non related parties 73,733,877 298,843,404 26,290,18174,032,883 300,055,275 26,486,301(g)By economic sectors2010 2009USD KHR’000 USDManufacturing 16,142,513 65,425,605 3,648,840Building and construction 15,979,149 64,763,491 10,456,948Services 14,610,316 59,215,611 6,629,725Wholesale and retail 11,160,314 45,232,753 3,084,132Import 6,057,176 24,549,734 1,087,495Staff loans 299,006 1,211,871 196,120Others 9,784,409 39,656,210 1,383,04174,032,883 300,055,275 26,486,301(h)By exposures2010 2009USD KHR’000 USDLarge exposures (*) 9,634,822 39,049,934 8,641,556Non large exposures 64,398,061 261,005,341 17,844,74574,032,883 300,055,275 26,486,301(*) The Bank has three single large exposure loans as at 31 December 2010. However, none of these loansexceeds the ceiling limit from 10% to 20% as per the provisions of NBC’s Prakas No. B7-06-226 dated 3November 2006.31

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20107. Loans and advances to customers (continued)A “large exposure” is defined under NBC Prakas as the overall gross exposure of the aggregate balance ofloans and advances with one single beneficiary, which exceeds 10% of the Bank’s net worth. The exposureis the higher of the outstanding loans or commitments and the authorised loans or commitments.(i)By interest rate (per annum)2010 2009% %Overdrafts 8% to 17% 8% to 18%Loans 7% to 21.6% 4% to 20%Trade finance 12% to 14% 7% to 13%Staff loans 7% to 12% 7% to 13%8. Investment securities2010 2009USD KHR’000 USDListedSecurities available-for-sale (a) 19,148,801 77,610,090 -Not listedSecurities held to maturity (b) 7,607,834 30,834,551 -26,756,635 108,444,641 -(a). Due to the excess of liquidity, the Bank decided to invest the excess portion in other company bondswhich are designated as available for sale securities. The Bank intend to hold these debt securities forthe purpose of liquidity management of the Bank which may be sold in response to needs for liquidity orchanges in interest rate or equity prices.(b). Securities held to maturity represents the Bank’s purchases of eight promissory notes issued by anoversea company. Each promissory note is issued at a discount to face value in USD 940,000 per unit ofUSD 1,000,000. These promissory notes have maturity dates ranging from October 2011 to November2011 and yields to maturity are US$ 392,166 as at 31 December 2010. The following is an analysis ofsecurities held to maturities:2010 2009USD KHR’000 USDNot ListedBuy price 7,520,000 30,478,560 -Appreciated 87,834 355,991 -As at 31 December 2010 7,607,834 30,834,551 -Yield to maturity 392,166 1,589,449 -Face value 8,000,000 32,424,000 -32

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20108. Intangible assets2010USDKHR’000CostAt 31 January 2010 1,569,522 6,361,273Additions 98,523 399,314Transfer 646,079 2,618,558At 31 December 2010 2,314,124 9,379,145Accumulated amortizationAt 31 January 2010 224,430 909,615Charge for the reporting period 168,177 681,621At 31 December 2010 392,607 1,591,236Net book valueAt 31 December 2010 1,921,517 7,787,909At 31 December 2009 1,345,09233

ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 20109. Property and equipmentLeaseholdimprovementsOffice equipment &furniture, fixturesMotorvehiclesComputer & ITequipmentCapital workin progress Total TotalUSD USD USD USD USD USD KHR’000CostAt 1 January 2010 737,266 618,116 141,329 1,576,420 646,079 3,719,210 15,073,957Additions 46,746 10,549 1,001 68,053 - 126,349 512,095Transfer to intangible assets - - - - (646,079) (646,079) (2,618,558)At 31 December 2010 784,012 628,665 142,330 1,644,473 - 3,199,480 12,967,494Accumulated depreciationAt 1 January 2010 278,199 164,106 54,334 619,102 - 1,115,741 4,522,099Charge for the year 94,264 125,337 28,465 528,355 - 776,421 3,146,835Write off - - - - - - -At 31 December 2010 372,463 289,443 82,799 1,147,457 - 1,892,162 7,668,934Net book valueAt 31 December 2010 411,549 339,222 59,531 497,016 - 1,307,318 5,298,560At 31 December 2009 459,067 454,010 86,995 957,318 646,079 2,603,469 10,853,858Depreciation charge for 2009 85,286 111,207 27,781 405,204 - 629,47834

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 201010. Other assets2010 2009USD KHR’000 USD(As restated)Interests receivable 981,397 3,977,603 239,813Interest in suspense (47,978) (194,454) (56,601)Advance payments 285,988 1,159,109 196,685Prepayments 201,628 817,198 137,657Foreclosed property (*) 156,401 633,893 -Others 254,535 1,031,630 109,3321,831,971 7,424,978 626,886(*) These represent bad loan collaterals foreclosed in the course of banking operations. These foreclosedassets are recorded at value equal to the corresponding loan principal outstanding plus interestreceivable. These assets will not be held for operational purposes and with the intention to be disposedof to recover the outstanding amount within the maximum allowable period of twelve months as perNBC’s guidelines. Assets realized in excess of outstanding amount plus disposal costs will be recognizedunder the gain on sale of foreclosed property under the other income after the settlement as per theagreement between borrower and the bank.11. Deposits from customers and banks2010 2009USD KHR’000 USD(As restated)CustomersDemand deposits 6,570,884 26,631,793 3,418,355Savings accounts 58,190,568 235,846,372 19,797,458Fixed deposits 51,906,172 210,375,715 13,740,098Margin deposits 139,523 565,487 128,974116,807,147 473,419,367 37,084,885BanksDemand deposits 36,480 147,853 319,786Savings accounts 2,487,962 10,083,710 39,167Fixed deposits 3,070,000 12,442,710 3,178,3295,594,442 22,674,273 3,537,282122,401,589 496,093,640 40,622,16735

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 201012. Deposits from customers and banks (continued)a) Further analysis is as follows:2010 2009USD KHR’000 USD(As restated)(i) By maturity periodWithin one month 83,391,704 337,986,576 28,797,286From two month to three months 9,226,989 37,396,986 3,243,584From four months to six months 7,455,986 30,219,111 3,756,593From seven months to one year 20,447,758 82,874,764 3,651,103Over one year 1,879,152 7,616,203 1,173,601122,401,589 496,093,640 40,622,167(ii) By type of customersIndividuals 86,655,195 351,213,505 26,894,447Business enterprises 30,151,953 122,205,866 10,190,438Banks 5,594,441 22,674,269 3,537,282122,401,589 496,093,640 40,622,167(iii) By status of residenceResidents 117,585,393 476,573,598 35,535,339Non Residents 4,816,196 19,520,042 5,086,828122,401,589 496,093,640 40,622,167(iv) By currency denominationUS Dollars 122,012,869 494,518,157 39,657,897Khmer Riels 357,576 1,449,256 944,558Others 31,144 126,227 19,712122,401,589 496,093,640 40,622,167(v) By relationshipRelated parties 927,139 3,757,694 710,403Non related parties 121,474,450 492,335,946 39,911,764b) The savings accounts and deposits bear interest as follows:122,401,589 496,093,640 40,622,1672010 2009% %Saving deposits 1.00 1.00Fixed deposits 1.00 to 9.00 4.70 to 8.5036

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 201013. Deposits from customers and banks (continued)c) The margin deposits are interest free and are encumbered for trade line and guarantee granted tocustomers.14. Provision for income tax2010 2009USD KHR’000 USDBalance at beginning of year 4,846 19,641 3,070Charge during the year 93,264 377,999 36,621Taxation paid during the year (88,335) (358,022) (34,845)15. Other liabilities9,775 39,618 4,8462010 2009USD KHR’000 USDInterests payable - customer deposits 1,037,219 4,203,849 192,125Accrued expense 69,184 280,403 371,743Other taxes payable 174,900 708,870 87,960Others 9,028 36,590 91,92916. Share capital1,290,331 5,229,712 743,7572010 2009USD KHR’000 USDBalance at beginning of year 23,000,000 93,219,000 23,000,000Proceed from share issued 13,000,000 52,689,000 -Balance at end of year 36,000,000 145,908,000 23,000,000The registered statutory capital of the Bank as at 31 December 2010 is 36,000 shares at a par value ofUSD1,000 per share. All shares are fully paid.Base on the mandatory requirement Prakas B7-08-193 dated 19 September 2008 issued by the NationalBank of Cambodia required to have a minimum paid up capital of at least KHR 150 billion, the Bankentered into a Memorandum of Understanding (MOU) with NBC on 9 August 2010 commits to increaseits paid up capital to KHR 150 billion by end of November 2010.As of 9 August 2010, the paid up capital of the Bank is KHR 97,198 million (equivalent to USD23 millionat exchange rate of KHR 4,223/USD) and will have to be supplemented in the amount of KHR 52,802million.37

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 201015. Share capital (continued)On 29 September 2010, the Bank supplemented its paid up capital of KHR 52,802 billion to meet theminimum requirement of KHR 150 billion which is equivalent to USD 36 million (KHR 4,223/USD) andtherefore amended its registered statutory capital from 23,000 shares to 36,000 shares at a par value ofUSD 1,000 per share.16. Interest income2010 2009USD KHR’000 USD(As restated)Loans and advances 5,961,352 24,161,360 2,888,754Deposits and placements with banks:Banks inside Cambodia 104,232 422,452 91,052National Bank of Cambodia 6,075 24,622 12,987Investment securities 839,379 3,402,003 -17. Interest expenseInterest expense is incurred on deposits from bank and non-bank customers.6,911,038 28,010,437 2,992,7932010 2009USD KHR’000 USDSavings accounts 1,541,133 6,246,212 135,746Fixed deposits 2,089,301 8,467,937 772,344Other interest expenses 8,667 35,127 -18. Fee and commission income3,639,101 14,749,276 908,0902010 2009USD KHR’000 USD(As restated)Fee and commissions:Loan commitment fees 742,812 3,010,617 201,553Inward and outward remittances 407,531 1,651,723 305,792Visa and credit card 344,387 1,395,801 27,287Telex, phone and fax 47,779 193,648 35,401Other fees 50,751 205,694 40,8931,593,260 6,457,483 610,926Fee and commission expenses (48,874) (198,087) (18,610)1,544,386 6,259,396 592,31638

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 201019. Other operating income2010 2009USD KHR’000 USD(As restated)Gain on sales of investment securities 637,250 2,582,774 -Foreign exchange gain, net 128,680 521,540 20,129Other miscellaneous income 43,758 177,351 66,94020. Personnel cost809,688 3,281,665 87,0692010 2009USD KHR’000 USD(As restated)Wages and salaries 1,741,975 7,060,225 1,511,763Others personnel cost 82,024 332,443 124,93821. Other operating expenses1,823,999 7,392,668 1,636,7012010 2009USD KHR’000 USD(As restated)Professional fees 54,061 219,109 96,801Utilities expenses 165,970 672,676 152,392Office rental 421,603 1,708,757 331,222Repair and maintenance 201,568 816,955 132,249Public relations, marketing and advertising 837,296 3,393,562 596,083Traveling and entertainment 36,743 148,919 32,025Communication 139,542 565,564 143,905License fees expense 113,990 462,001 101,587Motor vehicle operation expenses 76,895 311,655 71,466Insurance expenses 3,768 15,272 3,493Office supplies 122,476 496,395 106,172Card expenses 310,734 1,259,405 21,444Other expenses 20,036 81,206 239,4992,504,682 10,151,476 2,028,33839

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 201022. Depreciation and amortisation expenses2010 2009USD KHR’000 USD(As restated)Depreciation of property and equipment (note 10) 776,421 3,146,834 629,478Amortisation of intangible assets (note 9) 168,177 681,621 160,54923. Income tax expense944,598 3,828,455 790,027(a)Reconciliation of income taxIn accordance with Cambodian law, the Bank has an obligation to pay corporate income tax of the higherof 20% of taxable income or a minimum tax of 1% of revenues.The reconciliation of income tax expense computed at the statutory tax rate of 20% to the income taxexpense shown in the income statement is as follows:2010 2009USD KHR’000 USDProfit/(loss) before income tax 131,827 534,295 (1,657,461)Tax calculation at 20% 26,365 106,859 -Expenses not deductible for tax purposes 6,022 24,407 -32,387 131,266 -Minimum tax at 1% of turnover 93,264 377,999 36,621Income tax expense 93,264 377,999 36,621In 2010, the minimum tax on revenue exceeded the tax based on taxable profits and accordingly wasused to record corporate income tax expense for the year.Tax losses can be carried forward to offset against the taxable profits of subsequent years for up to fiveyears from the year in which they were incurred. As at 31 December 2010, the Bank had estimatedunutilised tax losses of US$2,595,627 and US$2,015,575 that will expire in 2013 and 2014 respectively.A deferred tax asset on tax loss is not recognised as it is not probable that future taxable profits will beavailable against which the losses can be utilised.(b)Other tax mattersThe Bank’s tax calculation is subject to periodic examination by the General Department of Taxation. Asthe application of tax laws and regulations to various types of transactions are susceptible to varyinginterpretations, amounts reported in the financial statements could be changed at a later date, uponfinal determination by the General Department of Taxation.40

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 201024. Cash flows from operating activities2010 2009USD KHR’000 USD(As restated)Cash flows from operating activitiesProfit before income tax 131,827 534,295 (1,657,461)Adjustments for:Depreciation and amortisation (note 22) 944,598 3,828,456 790,027Net impairment loss on loans and advances (note7) 220,905 895,328 (33,517)Loss/(gain) on disposal of property andequipment - - 401Uncollectible advances written off - - 12,500Foreclosed property written off - - 135,000Operating profit before changes in working capital 1,297,330 5,258,079 (753,050)Changes in operating assets and liabilities:Statutory deposits with central bank (10,763,146) (43,623,031) (6,581)Loans and advances to customers (47,546,582) (192,706,297) (3,556,952)Investment securities (note 8) (26,756,635) (108,444,641) -Other assets (1,205,085) (4,884,210) 92,689Deposits from customers and banks 81,779,422 331,451,997 19,945,643Other liabilities 546,574 2,215,265 (712)Cash (used in)/generated from operations (2,648,122) (10,732,838) 15,721,037Income tax paid (note 13) (88,335) (358,022) (34,845)Net cash (used in)/from operating activities (2,736,457) (11,090,860) 15,686,19225. Related party transactions and balances(a)Related party balances2010 2009USD KHR’000 USD(As restated)Due from:Loans and advances to staffs 299,007 1,211,875 196,620Interest receivable from loans and advances 1,248 5,058 964300,255 1,216,933 197,584Due to:Deposit and placement by key management 682,066 2,764,413 149,33941

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 201025. Related party transactions and balances (continued)(b)Related party transactions2010 2009USD KHR’000 USD(As restated)Income:Interest income from loans and advance to staff 23,095 93,604 17,647Expenses:Interest expenses to key management 10,189 41,296 4,014(c)Key management personnel remuneration2010 2009USD KHR’000 USD(As restated)Salaries and benefits 492,917 1,997,793 317,00026. Commitments and contingencies26.1 Credit related commitmentsIn the normal course of business, the Bank makes various commitments to extend credit facilities to orincurs certain contingent liabilities with legal recourse to its customers. No material losses areanticipated as a result of these transactions. At the year-end, the commitments of the Bank are asfollows:2010 2009USD KHR’000 USDFinancing commitments 5,000,194 20,265,786 3,269,395Documentary credits 1,312,177 5,318,253 464,441Bankers’ guarantees 27,390 111,012 168,068Others 202,390 820,287 339,58426.2 Operating lease commitments6,542,151 26,515,336 4,241,488The Bank has lease commitments in respect of the lease of Bank’s premises, branches and ATM outletsas follows:2010 2009USD KHR’000 USDNot later than one year 362,570 1,469,496 364,392Later than one year and not later than 5 years 1,886,169 7,644,643 1,896,561More than five years 2,702,836 10,954,594 3,067,2284,951,575 20,068,733 5,328,18142

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 201026.3 Tax interpretationThe Cambodian General Department of Taxation has two separate offices that are authorised to conducttax audits of entities undertaking activities and doing business in Cambodia. The application of tax laws andregulations on many types of transactions is susceptible to varying interpretations when reviewed by thesetwo tax offices. The Bank’s judgement of its business activities may not coincide with the interpretation ofthe same activities by those tax offices.If a particular treatment was to be challenged by those various tax authorities, the Bank may beassessed additional taxes, penalties and interest, which can be significant. Tax years remain open toreview by the tax authorities for three years with a possible extension of up to ten years.27. Financial risk managementThe bank’s business involves taking on risks in a targeted manner and managing them professionally.The bank’s risk management is to identify all key risks, measure these risks, manage the risk positionsand determine capital allocations. The risks arising from financial business to which the Bank’s activitiesare exposed are operational risk, financial risks: credit risk, market risk (including foreign exchange riskand interest rate risk), and liquidity risk. The following are policies and guidelines adopted by the Bank tomanage risks related to its business activities.27.1 Operational riskThe operational risk is the risk of losses arising from inadequate or failed internal processes, people orsystems or from external factors. This risk is managed through established operational risk managementprocesses, proper monitoring and reporting of the business activities by control and support units whichare independent of the business units and oversight provided by the senior management. This includeslegal, compliance, accounting and fraud risk.The operational risk management entails the establishment of policies and procedures to provideguidance to the key operating units on the risk governance structure and baseline internal controlsnecessary to identify, assess, monitor and control their operational risks. Internal control policies andmeasures that have been implemented including the establishment of signing authorities, definingsystem parameters controls, streamlining procedures and documentation ensuring compliance withregulatory and legal requirements. These are reviewed periodically, taking into account the businessobjectives and strategies of the Bank as well as regulatory requirements.27.2 Credit riskThe Bank assumes exposure to credit risk which is the risk that customers, clients or marketcounterparties fail to fulfil their contractual obligations to the Bank when due. Credit risk arises mainlyfrom loans and advances and loan commitments arising from such lending activities.43

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 201027.2 Credit risk (continued)(a) Credit risk measurementThe Bank has set up the Credit Risk Policy which is designed to govern the Bank’s risk undertakingactivities. Procedures of risk limit setting, monitoring, usage, and control are governed by creditprograms which set out the plan for a particular product or portfolio, including the target market, termsand conditions, documentation and procedures under which a credit product will be offered andmeasured.The Bank also ensures that there is a clear segregation of duties between loan originators, evaluatorsand approving authorities.(b) Risk limit control and mitigation policiesThe Bank manages, limits and controls concentration of credit risk whenever they are identified - inparticular, to individual counterparties and groups, and to industries.The Bank structures the levels of credit risk it undertakes by placing limits on the amount of riskaccepted in relation to one borrower, or groups of borrowers, and industry segments. Exposure to creditrisk is managed through regular analysis of the ability of the borrowers and potential borrowers to meetinterest 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 personalguarantees as well as by providing for loan losses. Limits on level of credit risk by product and industrysector are approved by Board of Directors.Commitments to extend credit represent unused portions of approved loans, guarantees or letters ofcredit. In general, all of the Bank’s guarantees and letters of credit are collateralised with cash deposits orcollateral pledged to the Bank, and accordingly the Bank normally assumes minimal risks.Large exposure is defined by the NBC as overall credit exposure to any single beneficiary which exceeds10% of the Bank’s net worth. The Bank is required, under the conditions of Prakas No. B7-06-226 of theNBC, to maintain at all times a maximum ratio of 20% between the Bank’s overall credit exposure to anysingle beneficiary and the Bank’s net worth. The aggregation of large credit exposure must not exceed300% of the Bank’s net worth.(c) Impairment and provisioning policiesThe Bank is required to follow the mandatory credit classification and provisioning in accordance withthe relevant Prakas issued by NBC, as stated in note 2.8 to the financial statements.Loans and advances less than 90 days past due are not considered impaired, unless other informationavailable indicates otherwise. A minimum level of specific provision for impairment is made dependingon the classification concerned. All loans and advances due from customers as at the balance sheet datewere granted by the Bank during the year ended 31 December 2010.44

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 201027.2 Credit risk (continued)(d) Maximum exposure to credit risk before collateral held or other credit enhancements2010 2009US$ KHR’000 US$(As restated)Credit risks exposures relating to on-balance sheetassets:Balances with other banks 24,571,756 99,589,327 16,232,658Loans and advances 73,019,511 295,948,078 25,693,834Investment securities 26,756,635 108,444,642 -Other assets 1,831,971 7,424,978 626,886126,179,873 511,407,025 42,553,378Credit risk exposures relating to off-balance sheetitems:Unused portion of approved credit facilities 5,000,194 20,265,786 3,269,395Letters of credit 1,312,177 5,318,253 464,441Bank guarantees 27,390 111,012 168,068Others 202,390 820,287 339,5846,542,151 26,515,338 4,241,488132,722,024 537,922,363 46,794,866The table above represents the maximum credit risk exposure to the Bank as at 31 December 2010,without taking into account any collateral held or other credit enhancements. For on-balance sheetassets, the exposures set out above are based on net carrying amounts. 58% of the total maximumcredit exposure is derived from loans and advances to customers in Cambodia.Management is confident of its ability to control and sustain minimal exposure to credit risk by the Bankresulting from its loans and advances based on the following:oooApproximately 99% of the loans and advances of the Bank are collaterized such as hard title deed,movable assets and cash. Loans and advances granted by the Bank are at approximately 50% to 60%of the collateral value.Most of all loans and advances portfolio are considered to be neither past due nor impaired, andThe Bank has a proper credit evaluation process in place for granting of loans and advances tocustomers.45

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 201027.2 Credit risk (continued)(e) Loans and advancesLoans and advances are summarised as follows:2010 2009US$ KHR’000 US$Loans and advances neither past due nor impaired 71,605,044 290,215,243 25,226,137Loans and advances past due but not impaired 1,893,694 7,675,142 270,000Loans and advances individually impaired 534,145 2,164,890 990,164Gross 74,032,883 300,055,275 26,486,301Less:Provision for loan loss (1,013,372) 4,107,197 (792,467)Net 73,019,511 295,948,078 25,693,834For the purpose of loan provisioning, expected recovery from collateral (except cash) is not taken intoconsideration in accordance with the Central Bank’s requirement. Total provision for loan loss is US$1,013,372 (2009: US$792,467) which represents specific provision for the individual loans and 1%general provision of total loans outstanding, net of specific provision.(i)Loans and advances neither past due or impairedLoans and advances not past due are not considered impaired, unless other information is available toindicate the contrary.(ii)Loans and advances past due but not impairedLoans and advances less than 90 days past due are not considered impaired, unless other information isavailable to indicate the contrary. In compliance with NBC guidelines, such loans are classified as specialmention with a specific provision of 3%.(iii)Loans and advances individually impairedLoans and advances individually impaired are loans and advances for which the Bank determines thatthere is objective evidence of impairment and it does not expect to collect all principal and interest dueaccording to the contractual terms of the loans and advances. In accordance with NBC guidelines, loansand advances past due more than 90 days are considered impaired and minimum level of specificprovision for impairment is made depending on the classification concerned, unless other information isavailable to indicate the contrary.(f) Repossessed collateralDuring the year ended 31 December 2010, the Bank obtained assets by taking possession of collateralheld as security amount to USD 156,401 (2009: Nil).Repossessed properties have to be sold within one year as required by the NBC. Repossessedproperty is classified in the balance sheet as foreclosed properties.46

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 201027.2 Credit risk (continued)(g) CollateralThe bank holds collateral against loans and advances in the form of mortgage interests property and/orguarantees. The estimates of value are based on the value of collateral assessed on an annual basis. Anestimate of the value of collateral held against loans and advances is shown below:2010 2009US$ KHR’000 US$Against individually impaired: Land and buildings 921,617 3,735,314 2,147,200Past due but not impaired 6,023,445 24,413,023 1,224,595(h) Concentration of financial assets with credit risk exposure6,945,062 28,148,337 3,371,795(i)By geographical distributionThe credit exposure of the Bank as at 31 December 2010 is wholly derived from Cambodia based on thecountry of domicile of the counterparties.(ii)By industry sectorBalanceswith otherbanksLoan andadvances tocustomersOtherassetsTotalTotalUS$ US$ US$ US$ KHR’ 000At 31 December 2010Manufacturing - 16,142,513 16,142,513 65,425,605Building and construction - 15,979,149 156,401 16,135,550 65,397,384Financial institutions 24,571,756 - 24,571,756 99,589,327Services - 14,610,316 14,610,316 59,215,611Wholesale and retail - 11,160,314 11,160,314 45,232,753Imports - 6,057,176 6,057,176 24,549,734Staff loans - 299,006 299,006 1,211,871Others - 9,784,409 1,675,570 11,459,979 46,447,29524,571,756 74,032,883 1,831,971 100,436,610 407,069,58047

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 201027.2 Credit risk (continued)(h) Concentration of financial assets with credit risk exposure (continued)Balanceswith otherbanksLoan andadvances tocustomersOtherassetsTotalTotalUS$ US$ US$ US$ KHR’ 000At 31 December 2009Manufacturing - 3,648,840 - 3,648,840 15,117,144Building and construction - 10,456,948 - 10,456,948 43,323,136Financial institutions 16,232,658 - - 16,232,658 67,251,902Services - 6,629,725 - 6,629,725 27,466,951Wholesale and retail - 3,084,132 - 3,084,132 12,777,559Imports - 1,087,495 - 1,087,495 4,505,492Staff loans - 196,120 - 196,120 812,525Others - 1,383,041 626,886 2,009,927 8,327,12827.3 Market risk16,232,658 26,486,301 626,886 43,345,845 179,581,836The Bank takes on exposure to market risk, which is the risk that the fair value or future cash flow of afinancial instrument will fluctuate because of changes in market prices. Market risk arises from openpositions in interest rates, currency and equity products, all of which are exposed to general and specificmarket movements and changes in the level of volatility of market rates or prices such as interest rates,credit spreads, foreign exchange rates and equity prices.(a) Foreign currency exchange riskCurrency risk is the risk that the value of financial instruments will fluctuate due to changes in foreignexchange rates.The Bank has no material exposures to currency risk as it transacts essentially in US Dollar. Significantpresence of US Dollar is a normal practice of banks operating in Cambodia as this is a currency widely inuse in Cambodia.(b) Price riskThe Bank is exposed to securities price risk, because it holds investment securities which are classifiedon the balance sheet as available for sale. The Bank currently does not have a policy to manage its pricerisk. Investment securities are disclosed in note 8.48

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 201027.3 Market risk (continued)(c) Interest rate riskInterest rate risk refers to the volatility in net interest income as a result of changes in the levels ofinterest rate and shifts in the composition of the assets and liabilities. Interest rate risk is managedthrough close monitoring of returns on investment, market pricing, cost of funds and through interestrate sensitivity gap analysis. The potential reduction in net interest income from an unfavourableinterest rate movement is monitored against the risk tolerance limits set.The Management is satisfied that the Bank’s position is such that exposure to movements in interestrates is minimised.The table below summarises the Bank’s exposure to interest rate risks. Included in the table are theBank’s assets and liabilities at carrying amounts, categorised by the earlier of contractual re-pricing ormaturity dates.(Continued)49

ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 201027.3 Interest rate risk (continued)As at 31 December 2010Financial AssetsUp to 1month 1-3 months 4-6 months7-12months 1 to 5 yearsOver 5yearsNon-interestbearing TotalInterestrateUSD USD USD USD USD USD USD USD %Cash in hand - - - - - - 9,345,698 9,345,698Deposits and placements with banks 17,266,330 - - 56,491 - - 7,248,935 24,571,757Statutory deposits with central bank - - - - - 3,600,000 13,419,727 17,019,727 0.11 – 0.18Loans and advances to customers:- Performing 1,319,383 4,744,167 9,267,227 19,413,892 34,907,700 3,846,369 - 73,498,738 7 – 21.6- Non-performing - 215,455 242,540 76,150 - - - 534,146- Specific provisions - - - - - - (297,411) (297,411)- General provisions - - - - - - (715,961) (715,961)Investment securities - - - - 26,756,635 - - 26,756,635 7.5 – 10.75Other assets - - - - - - 1,831,971 1,831,971Total financial assets 18,585,713 4,959,622 9,509,767 19,546,533 61,664,335 7,446,369 30,832,959 152,545,298Financial liabilitiesDeposits from customers and banks 76,784,340 9,226,989 7,455,986 20,447,758 1,879,152 - 6,607,364 122,401,589 1 – 9Other liabilities - - - - - - 1,290,331 1,290,331Provision for income tax - - - - - - 9,775 9,775Total financial liabilities 76,784,340 9,226,989 7,455,986 20,447,758 1,879,152 - 7,907,470 123,701,695Interest sensitivity gap 2010 (USD) (58,198,627) (4,267,367) 2,053,781 (901,225) 59,785,182 7,446,369 22,925,489 28,843,603Interest sensitivity gap 2010 (KHR’000 equivalent) (235,879,035) (17,295,638) 8,323,974 (3,652,665) 242,309,343 30,180,134 92,917,007 116,903,12050

ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 201027.3 Interest rate risk (continued)As at 31 December 2009Financial AssetsUp to 17-12Over 5 Non-interestInterestmonth 1-3 months 4-6 months months 1 to 5 years years bearing Total rateUSD USD USD USD USD USD USD USD %Cash in hand - - - - - - 7,646,125 7,646,125 -Deposits and placements with banks 9,248,135 - - 53,546 - - 6,930,977 16,232,658 0.97Statutory deposits with central bank - - - - - 2,300,000 3,956,581 6,256,581 0.28-0.68Loans and advances to customers:- Performing 286,402 7,044,183 1,253,188 6,349,852 10,562,512 - - 26,486,301 6 -24- Non-performing - 47,533 840,065 102,566 - - - 990,164 -- Specific provisions - - - - - - (537,506) (537,506) -- General provisions - - - - - - (254,961) (254,961) -Investment securities - - - - - - - - -Other assets - - - - - - 626,886 472,458 -Total financial assets 9,534,537 7,091,716 2,093,253 6,505,964 10,562,512 2,300,000 18,368,102 56,456,084Financial liabilitiesDeposits from customers and banks 28,797,286 3,243,584 3,756,593 3,651,103 1,173,601 - - 40,622,167 1-8.5Other liabilities - - - - - - 743,757 743,757 -Provision for income tax - - - - - - 4,846 4,846 -Total financial liabilities 28,797,286 3,243,584 3,756,593 3,651,103 1,173,601 - 748,603 41,370,770Interest sensitivity gap 2009 (USD) (19,262,749) 3,848,132 (1,663,340) 2,854,861 9,388,911 2,300,000 17,619,499 15,085,314Interest sensitivity gap 2009 (KHR’000 equivalent) (79,805,569) 15,942,811 (6,891,218) 11,827,689 38,898,258 9,528,900 72,997,584 62,498,45651

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 201027.4 Liquidity riskLiquidity risk is the risk that the Bank is unable to meet its obligation when they fall due as a result ofcustomer deposits being withdrawn, cash requirements from contractual commitments, or other cashoutflows.(a) Liquidity risk management processThe Bank’s management monitors balance sheet liquidity and manages the concentration and profile ofdebt maturities. Monitoring and reporting take the form of the daily cash position and project for thenext day, week and month respectively, as these are key periods for liquidity management. Themanagement monitors the movement of the main depositors and projection of their withdrawals.(b) Funding approachThe Bank’s main sources of liquidities arise from shareholder’s paid-up capital and customers’ deposits.The sources of liquidity are regularly reviewed daily through management’s review of maturity of termdeposits and key depositors.(c) Non-derivative cash flowsThe table below analyses non-derivative financial assets and liabilities of the Bank into relevant maturitygroupings based on the remaining period at the balance sheet date to the contractual or estimatedmaturity dates. 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.52

ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 201027.4 Liquidity risk (continued)As at 31 December 2010Financial Assets Up to 1 month 1-3 months 3-12 months 1 to 5 years Over 5 yearsNon-interestbearingTotalUSD USD USD USD USD USD USDCash in hand 9,345,698 - - - - - 9,345,698Deposits and placements with banks 24,571,756 - - - - - 24,571,756Statutory deposits with central bank - - - - - 17,019,727 17,019,727Loans and advances to customers:- Performing 1,319,383 4,744,167 28,681,119 34,907,700 3,846,369 - 73,498,738- Non-performing - 215,455 318,690 - - - 534,145- Specific provisions - - - - - (297,411) (297,411)- General provisions - - - - - (715,961) (715,961)Investment securities - - 7,607,834 19,148,801 - - 26,756,635Other assets 1,473,942 - 358,029 - - - 1,831,971Total financial assets 36,710,779 4,959,622 36,965,672 54,056,501 3,846,369 16,006,355 152,545,298Financial liabilitiesDeposits from customers and banks 83,391,704 9,226,989 27,903,744 1,879,152 - - 122,401,589Other liabilities 839,171 128,987 312,206 9,967 - - 1,290,331Provision for income tax - - - - - 9,775 9,775Total financial liabilities 84,230,875 9,355,976 28,215,950 1,889,119 - 9,775 123,701,695Net position 2010 (USD) (47,520,095) (4,396,354) 8,749,722 52,167,382 3,846,369 15,996,580 28,843,603As at 31 December 2009Total financial assets 24,654,414 7,091,716 8,683,328 10,562,512 - 5,464,114 56,456,084Total financial liabilities 28,797,286 3,243,584 7,407,696 1,173,601 - 748,603 41,370,770Net position 2009 (USD) (4,142,872) 3,848,132 1,275,632 9,388,911 - 4,715,511 15,085,31453

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 201027.5 Capital managementThe Bank considers the need to balance efficiency, flexibility and adequacy when determining sufficiencyof capital and when developing capital management plans. The Bank details these considerationsthrough an internal capital adequacy assessment process and the key features of which include (a)consideration of both economic and regulatory of minimum capital requirements set by the NationalBank of Cambodia, (b) safeguarding the Bank’s ability to continue as a going concern so that it cancontinue to provide returns for shareholders and benefits for other stakeholders, (c) maintaining astrong capital base to support the development of business.As of 31 December 2010, the Bank complies with minimum capital requirement on paid up capital ofKHR 150 billion, issued by the NBC, Prakas B7-08-193 dated 19 September 2008. The paid up capital wasdisclosed in note 15 to the financial statements.27.6 Fair value of financial assets and liabilitiesSince market prices for the major part of Bank’s financial assets and liabilities are not available, the fairvalue of these items is based on the estimates of the Management according to the type of assets andliabilities. According to the estimation of the Management, the market value is not materially differentfrom the carrying amount of all categories of assets and liabilities.The carrying amounts and fair value of financial assets and liabilities are not presented on the Bank’sbalance sheet at their fair value. The estimated fair values are based on the following methodologiesand assumptions:(a)Deposits and placements with other banksDeposits and placements with other banks include current accounts, saving deposits and fixed deposits.The fair values of deposits and placements with other banks approximates their carrying amounts.(b)Loans and advances to customersLoans and advances are stated at outstanding balance and interest, net of provision for loan losses. Theprovision of loan losses is made in accordance with the requirements of the relevant Prakas issued bythe NBC.(c)Investment securitiesInvestment securities are stated in the balance sheet at outstanding principal and interest, less anyamounts written off and impairment.(d)Deposits from customers and banksThe fair values of deposits payable on demand (current and savings accounts), or deposits withremaining maturity of less than one year are estimated to approximate their carrying amounts. The fairvalues of deposits with remaining maturity of more than one year are estimated based on discountedcash flows using the interest rates of such deposits from banks and customers.54

ABA BANK | ANNUAL REPORT 2010ADVANCED BANK OF ASIA LIMITEDNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 201027.6 Fair value of financial assets and liabilities (continued)(d)Other assets and liabilitiesThe carrying amounts of other financial assets and liabilities are assumed to approximate their fairvalues as these items are not materially sensitive to the shift in market interest rates.28. Comparative figuresWhere necessary, comparative figures have been reclassified or restated to conform with changes inpresentation in the current year. The amounts of reclassifications or restatements in the balance sheetand statement of income are not material.The following comparative figures have been restated to conform to the current year presentation.As previouslyAs reclassifiedpresentedUSDUSDBalance sheet:Cash in hand 7,646,125 7,629,825Other assets 626,886 643,1868,273,011 8,273,011Income statement:Net fee and commission income - 679,385Fee and commission income - Net 592,316 -Other operating income 87,069 -679,385 679,385General and administrative expenses - (4,455,066)Personnel cost (1,636,701) -Other operating expenses (2,028,338) -Depreciation and amortisation expenses (790,027) -(4,455,066) (4,455,066)55

ANNUAL REPORT 2010