Annual report 2009-OK.qxp - Canadia Bank Plc.

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Canadia Bank Plc.Annual Report 20094

Canadia Bank Plc.5Annual Report 2009

Canadia Bank Plc.MESSAGE FROM THE PRESIDENT /CHIEF EXECUTIVE OFFICERDear valued clients, shareholders and friends of Canadia Bank Plc.The Cambodian economy in 2009 encountered problems as result of the global financial crisis after astrong growth in the past five years with significant poverty reduction. However, the overall economicperformance was considered as satisfactory. Recent preliminary estimates suggested GDP growth in 2009would remain positive, supported by good performance in agriculture and service sectors at 5.4% and2.3% respectively, offsetting the decline in other sectors such as garment and real estate.The growth in thetourism sector slowed down to plus 1.8%. Overall, the economy was influenced less by the financial sectorthan by trade and domestic and foreign direct investment.The banking and finance sector remains healthyand stable.The National Bank of Cambodia in its capacity as regulatory authority took prompt actions andmeasures to assure that liquidity, capital adequacy and other key ratios in the finance industry weresecured. The second half of 2009 has shown clear signs of recovery and in this context the RoyalGovernment of Cambodia forecasts that the economy will manage to grow around 5% in 2010.AchievementsAnnual Report 20096Canadia Bank reported a net profit attributable to shareholders of US$ 20.4 million in 2009, whichrepresented 7.8% decline from the previous year, which we see as a good result considering the difficultglobal economy. Total lending fell by 6.5% to US$ 385.2 million from the end of 2008 reflecting the overallnegative growth world wide and in the region respectively. Total assets increased however by 24.9% toUS$729 million and total deposits rose to US$ 588.4 million. The trust of our clients in our bank andresulting high liquidity will allow us to provide more funding into the Cambodian economy by followingincreased loan demand in recent months.The bank's solvency ratio stood at 24.9%, comfortably above theminimum required level of the National Bank of Cambodia, with Tier 1 Capital of US$ 115.6 million and"Tier2" Capital of US$ 122.7 million.The Bank's financial strength and capital adequacy reflected the Bank'sstrong fundamentals and commitment to operate close to its customer-base, maintaining asset quality,and retaining a healthy level of liquidity in order to support the future financial needs of its clients,existing and future alike.The operational network expanded from 25 to 28 branches and the number of employees increased from803 to 887.The bank continues to develop its Human Resource Capital. Intensive skills training on management andstaff level has been developed in 2009 and will continue to be a priority during 2010. Our ATM network hasincreased to 51 ATM machines at the end of 2009.

Canadia Bank Plc.VISIONTo be a premier and a well-rounded local financial services group, dedicated to creating the highest levelsof value for our clients, shareholders and employees, and at the same time producing long-term levels ofindustry-leading profitability and growth.MISSIONWe work as a unified team to understand our client's ever-changing requirements and exceeding theirexpectations by providing tailor-made solutions to their business needs in this dynamic environment.CORE VALUEDoing the right thing - We have the responsibility of being ethical ambassadors for our customers,shareholders, communities and one another.Trusting and teamwork - We succeed together, taking collective responsibility for our customers'satisfaction.Inclusive meritocracy - We care about one another, value one another's differences, focus on results andstrive to help all associates reach their full potential and get reward as well as recognition.Annual Report 20098Winning - We have a passion for achieving results and winning, for all our stakeholders and for oneanother.Leadership - We will be decisive and accountable leaders, taking action to help build a better future.

Canadia Bank Plc.FINANCIAL HIGHLIGHTSYear ended 31 December 2005 2006 2007 2008 2009(US$ milloin)Gross Revenue 23.48 30.93 43.63 62.62 59.78Net income 6.03 12.52 20.11 22.07 20.35Total assets 293.78 368.09 552.51 583.57 729.42Shareholder's equity 43.67 60.14 73.17 95.25 115.60Loans (net) 157.73 205.41 332.40 390.60 360.59Deposits 237.68 293.33 458.31 462.14 588.35Return on Shareholder's equity (RoE) 13.75% 20.80% 25.17% 23.17% 17.60%Return on assets (RoA) 2.04% 3.40% 3.64% 3.78% 2.79%Interest margin to gross income 76.62% 61.59% 61.99% 62.83% 45.96%Expense to income ratio 67.89% 49.29% 42.37% 55.94% 58.98%Gross loan and advances to customers 167,588 217,441 346,738 412,125 385,105Loan to deposits 71.36% 74.13% 76.79% 94.45% 69.38%Solvency ratio 15.94% 18.81% 16.71% 20.26% 24.88%Liquidity ratio 71.60% 72.95% 61.05% 54.62% 76.84%Net worth (USD million) 33.07 49.56 68.50 90.44 118.26Capital adequacy ratio 21.05% 22.83% 19.52% 22.93% 25.81%Earnings per share 0.23 0.30 0.50 0.55 0.509Annual Report 2009

Canadia Bank Plc.Annual Report 200910

Canadia Bank Plc.CORPORATE SOCIAL RESPONSIBILITYAs one of the leading banks in Cambodia, Canadia Bank has been welded together with the CambodianSociety since it was established in 1991.The Bank has played a key role in contributing to the developmentof Cambodia's economy. One of its core values is the awareness of its social responsibilities to theCambodian society. In addition to the Bank's day-to-day business responsibilities, the Bank providessupport and help for many different community services, with the aim of strengthening the Cambodiansociety and supporting sustainable development. Major charitable and social activities supported by theBank in 2009 include:EDUCATIONThe Bank initiated to offer scholarships to 50 Cambodian students who have high-level academic trackrecord, come from a financial challenged family, and currently studying in the field of finance and banking,IT and management at recognized universities in Cambodia in the aim of contributing to the developmentof human resources in Cambodia. Under the Bank's scholarships programme, the students are awardedwith the tuition fee, monthly allowance, internship programme and the opportunity to apply for a job withthe Bank after their graduation.11Annual Report 2009Canadia Bank has also supported 60 university students from third and fourth year under the studentinternship program in 2009.SUPPORTING CHARITY ORGANIZATIONSCanadia Bank has continually supported various charity organization and communities. In 2009, the Bankdonated approximately US$350,000 to communities and charitable institutions, such as the CambodianRed Cross, Provincial Schools and Health Centers in Kandal and Pursat Provinces, The Assistance in relatedorganization for Preah Vihear Province, The National Authority of Anti-Drug, and Non-Profit Organizations etc.

Canadia Bank Plc.EMPLOYEEApart from being an equal opportunity employer and commitment in developing the quality ofemployees, Canadia Bank continues to provide training for employees to improve their skills. In 2009, theBank has given financial support to:• 50 staff who are undertaking the CAT and ACCA training programme;• 60 staff and 24 staff who are studying for their master and bachelor's degreelevel respectively;• 115 staff for their training in General English and Chinese language skills andtechnical improvements related to Banking & Finance.The Bank has set up a training center which organizes training courses, both tailor-made to meet specificneeds of various departments and also courses with general and soft skill for staff from all departmentsacross the Bank. The quality of training has further improved in order to meet the requirements andchallenges of best business practices as well as development, modernization and integration steps in linewith the overall Bank's business plan and strategies.CORPORATE GOVERNANCEAnnual Report 200912Canadia Bank is fully committed to conduct its business in a prudent manner and maintain high standardof good corporate governance by setting up sufficient and appropriate internal control and riskmanagement system in line with the principles of good corporate governance with the ultimate goal toachieve ongoing positive performance results and to sustain its good reputation.INFORMATION DISCLOSURE AND TRANSPARENCYCanadia Bank has always recognized the importance of disclosing information necessary for stakeholdersand regulators. The Board of Directors is responsible for the preparation of the financial statement of theBank and it has assigned the Audit Committee to review the Bank's financial statements to ensure thatthey are accurate, reliable and in compliance with the National Bank of Cambodia's guidelines and theCambodian Accounting Standards. The annual report includes the audited financial statements and otherrelevant information and this annual report is published and disseminated to all concerned stakeholders.In addition, the Bank published the information on its website at www.canadiabank.com.kh and annualfinancial results posted in some key local newspapers.CODE OF CONDUCTAll staff and management are required to perform their work diligently and honestly, placing first theinterests of the Bank. In addition, all staff is deemed to understand, accept and follow their duty to strictlyabide by the Bank's Code of Conduct which is stipulated as follows:• Not to solicit or to receive on an unsolicited basis gifts, commissions, kickbacks orvaluables of any kind from customers;• Not to use their position to conduct private business;• Not to conduct in any illegal or immoral activities acting in the capacity of the Bank'sstaff; and• Not to engage in any acts, behaviors or arrangements causing damages to the Bank'sreputation and/or financial interest.

Canadia Bank Plc.INTERNAL CONTROL AND AUDITThe Bank has progressively implemented various initiatives in order to establish an internal control systemwhich is in line with generally accepted standards and the National Bank of Cambodia's regulations andguidelines. The Bank's structures of internal control contain the following:• The Audit Committee is charged with the duty and responsibility of reviewing the Bank'sfinancial reports to ensure that they are accurate and are adequately disclosed. It is responsible forensuring that the Bank's internal control and audit systems are adequate, appropriate and effective byreviewing those systems with external auditors as well as internal auditors.• The Internal Audit Department is responsible for auditing the head office, including the keyoperational departments, and branch operations under the direct supervision of the Audit Committee.TheInternal Audit reports directly to the Audit Committee.• The Compliance Officers are responsible for providing clarification on the rules and regulationsissued by relevant authorities as well as ensuring that the Bank complies with existing relevant laws andregulations.COMPOSITION OF THE BOARD OF DIRECTORSThe composition of the Board has been realigned to strengthen its capacity, strategy and overall businesspolicy and to provide leadership for the management and staff. As at 31 December 2009, the Boardcomprised 8 members, two of whom were independent non-executive directors: Mr Jimmy Leow Min Fongand Mr. Gerald Yeo.The independent non-executive directors of the Bank are directors who have met the qualification andrequirement specified by the National Bank of Cambodia's regulation.13Annual Report 2009COMMITTEESThe Bank has set up committees at the Board and management level to closely monitor and oversee theBank's day-to-day operations, and report the actual progress to the Board of Directors on a regular basis.These committees include: the Audit Committee, the Risk Management Committee, the Credit Committee,the Assets and Liabilities Management Committee (ALCO), the Human Resource Committee and The Antimoneylaundering and Combating Financing Terrorism (AML-CFT) Oversight Committee.(1) THE AUDIT COMMITTEEPurposeThe primary objective of the Audit Committee (as a standing committee of the Board) is to assist the boardin the effective discharge of its fiduciary responsibilities for corporate governance, financial reporting andinternal control.CompositionAt the end of 2009, the Audit Committee comprised three (03) members from the Board and led by oneindependent director with expertise in accounting, finance and auditing.

Canadia Bank Plc.1- Mr Jimmy Leow Min Fong, Chairman of the Audit Committee2- Mr Charles Vann, Member3- Mrs Pung Carolyne, MemberAuthority and Main Responsibility(1) The Audit Committee is authorized by the board to investigate any activity within its terms of reference.The Committee shall have unrestricted access to both the internal and external auditors and to allemployees of the Bank. The Committee may with the approval of the Board, consult legal or otherprofessionals where they consider necessary to discharge their duties.(2) The Audit Committee shall consider the appointment of the external auditors, the audit fee and anyquestions of resignation or dismissal.(3) The Committee shall review the financial reports and report to the Board.(4) The Committee shall review the report of internal auditors and monitor the performance of theinternal audit department on regular basis.(5) The Committee shall perform any other tasks as directed by the Board.Annual Report 200914MeetingsThe Audit Committee schedules meetings at least once every three months. The Audit Committee held 4meetings in 2009.(2) THE RISK MANAGEMENT COMMITTEEPurposeThe Risk Management is the process of actively managing the risk inherent in the Bank. In order tomanage risks, the Board of Directors defines and forms RMC Committee to oversight the risk profile andapprove the risk management framework.In addition, the Committee shall take responsibilities by the Board's discretionary power to set riskappetites, approve frameworks, policies and procedures for the management of risks.CompositionAt the end of 2009, the Risk Management Committee comprised seven (07) members from the Board andmanagement:1. Mr Gerald Yeo, Chairman of the Risk Management Committee2. Mr Charles Vann, Vice-Chair3. Mr Chen Lee Yiaw Hui4. Mr Dieter Billmeier, Member5. Mr Leng Seng Lan, Member (Risk Manager)6. Mrs. Song Khenglay, Member7. Mr Ou Sophanarith, Member

Canadia Bank Plc.Authority and Main ResponsibilityThe Committee will recommend to the Board the parameters of the Bank's risk framework, monitoring thealignment of risk profile with risk appetite as defined following:a). Credit Risk• Review and approve the framework for the management of credit risk in according tothe Credit Policies and Procedure manual;• Review the monitoring of the risk profile, performance and management of thecred it portfolio.• Review the Bank's bad debt performance and provision for loan loss (general andspecific provision in compliance with National Bank of Cambodia's guidelines)b). Market Risk• Review and monitor the framework for the management of market risk.• Review and approve market risk limits including but not limited to Value at Risk Limitsc). Liquidity Risk• Review and monitor the framework for the management of liquidity risk;• Review the monitoring of the Bank's liquidity position and requirements inconsultation with the ALCO on liquidity risk policies.• Review the monitoring of the Bank's funding plan and funding requirements.15Annual Report 2009d). Operational Risk• Review and approve the framework for the management of operational risk;• Review the monitoring of the performance of operational risk management andinternal controls and appropriate operational risk policiesMeetingsThe Risk Management Committee schedules meetings at least once every three months. The RiskManagement Committee held 3 meetings in 2009.(3) THE ASSETS AND LIABILITIES MANAGEMENT COMMITTEE (ALCO)PurposeAsset and Liability Management is the process of actively managing the risk inherent in the Bank's balancesheet, primarily the Bank's interest-earning assets (loans and advances) and interest-bearing liabilities(deposits and other borrowings) in a manner consistent with the Bank's goals for long-term growth andprofitability. The ALCO's management of risk shall provide guidance to Bank management such thatsufficient risk is taken to achieve growth and profitability objectives; to prevent Bank management fromengaging in levels of risk considered unacceptable and to establish treasury strategy to secure the bank'smanagement goal efficiently and monitor the proper implementation of the strategy.

Canadia Bank Plc.CompositionAt the end of 2009, the ALCO comprised nine (9) members from the board and management led byPresident/CEO:1. Mr Pung Kheav Se, Chairman of the ALCO2. Mr Charles Vann, Vice-Chair3. Mrs Pung Carolyne, Member4. Mr Moon, Byung Soo, Member4- Mr Dieter Billmeier, Member5- Mrs Chan Muy, Member6- Ms Taing Sokun, Member7- Mr Ou Sophanarith, Member8- Mr Bou Ros, Member9- Mr Sok Chantha, MemberAuthority and Main ResponsibilityAnnual Report 200916The primary responsibility of the Committee shall be to manage the financial risk (interest rate, credit, andliquidity risk) associated with the interest-earning assets and interest-bearing liabilities contained on theBank's balance sheet and related off-balance sheet accounts. The Committee's process for managingfinancial risk shall be based upon the following:• Identification of the Bank's risk profile; i.e., its tolerance for risk• Establishment of appropriate risk parameters• Monitoring risks on an ongoing basisThe Committee, in carrying out its responsibilities believes its policies and procedures should remainflexible, in order to best react to changing conditions and circumstances. The Committee may form anddelegate authority to subcommittees consisting of one or more members when appropriate. On aquarterly basis, the Committee shall:• Review the Bank's adherence to established ALM risk parameters and exceptions to policies,if any;• Review the Bank's performance against its Strategic Business Plan and determine ifadjustments in the mix, volume, credit rating, pricing, and/or maturity of interest-earningassets and interest-bearing liabilities are needed to enable the Bank to achieve its Planobjectives; and• Review an updated financial forecast of the Bank prepared using updated economic andinterest rate scenarios, unless major forecast assumptions have not substantially from priorforecastsMeetingsThe ALCO schedules meetings at least twice every month.

Canadia Bank Plc.The Governor of National Bank of Cambodia visits Canadia Tower, Head Office of Canadia Bank Plc.17Annual Report 2009Managers of both National Bank of Cambodia and Canadia Bank Plc. on top of Canadia Tower

Canadia Bank Plc.REPORT OF THE BOARD OF DIRECTORSThe Board of Directors of Canadia Bank Plc. ("the Bank") presents its report together with the audited financialstatements of the Bank as at 31 December 2009 and for the year then ended.THE BANKThe Bank was incorporated in 1991 under a joint venture between the National Bank of Cambodia ("NBC")and certain overseas Cambodians. On 4 February 1998, the NBC disposed all its shares to private investors.In 2001, the Overseas Cambodian Investment Corporation ("OCIC"), a public limited companyincorporated in the Kingdom of Cambodia, acquired 100% of the shares of the Bank and consequentlybecame the holding company of the Bank.In 2007, OCIC conducted a corporate restructuring whereby it transferred its investment in the Bank toCanadia Investment Holding Plc. ("CIHP"), a public limited company incorporated in the Kingdom ofCambodia.The restructuring was approved by the NBC and the Ministry of Commerce. Consequently, CIHPis now the new holding company of the Bank.PRINCIPAL ACTIVITIESAnnual Report 200918The principal activities of the Bank consist of the operation of core banking business and the provision ofrelated financial services through the Bank's head office and various branches in Phnom Penh and in theprovinces.There were no significant changes in the nature of these principal activities during the year.RESULTS OF OPERATIONS AND DIVIDENDSThe financial results of the Bank for the years ended 31 December 2009 and 2008 were asfollows:2009 2008US$US$Profit before tax 24,523,500 27,592,062Income tax expense (4,172,434) (5,518,412)Net profit for the year 20,351,066 22,073,650Million Riel equivalent 84,844 90,082There were no dividends declared or paid during the year then ended.RESERVES AND PROVISIONSThere were no material movements to or from reserves and provisions during the financial year other thanthose disclosed in the financial statements.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 or the making of provisionsfor bad and doubtful loans and advances, and satisfied themselves that all known bad loans and advanceshad been written off and that adequate provisions had been made for bad and doubtful loans andadvances.

Canadia Bank Plc.At the date of this report, the Directors are not aware of any circumstances which would render theamount written off for bad loans and advances or the amount of the provision for bad and doubtful loansand advances in the financial statements of the Bank inadequate to any material extent.ASSETSBefore the financial statements of the Bank were drawn up, the Directors took reasonable steps to ensurethat any assets which were unlikely to be realised in the ordinary course of business at their value as shownin the accounting records of the Bank, have been written down to an amount which they might beexpected to realise.At the date of this report, the Directors are not aware of any circumstances which would render the valuesattributed to the assets in the financial statements of the Bank misleading in any material respect.VALUATION METHODSAt the date of this report, the Directors are not aware of any circumstances that have arisen which wouldrender adherence to the existing method of valuation of assets and liabilities in the financial statements ofthe Bank misleading or inappropriate in any material respect.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 year which securesthe liabilities of any other person, and(b) no contingent liability in respect of the Bank that has arisen since the end of the financial year otherthan in the ordinary course of banking business.19Annual Report 2009No 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 year which, in the opinion of the Directors,will or may have a material effect on the ability of the Bank to meet its obligations as and when theybecome due.CHANGE OF CIRCUMSTANCESAt the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in thisreport or the financial statements of the Bank which would render any amount stated in the financialstatements misleading in any material respect.ITEMS OF AN UNUSUAL NATUREThe results of the operations of the Bank for the financial year were not, in the opinion of the Directors,materially affected by any items, transaction or event of a material and unusual nature. There has notarisen in the interval between the end of the financial year and the date of this report any item,transaction or event of a material and unusual nature likely, in the opinion of the Directors, to affectsubstantially the results of the operations of the Bank for year in which this report is made.

Canadia Bank Plc.THE BOARD OF DIRECTORSThe members of the Board of Directors holding office during the year and as at the date of this report are:NameMrs Lim SophanyMr Pung Kheav SeMr Pung WayMr Charles VannMrs Pung CarolyneMr Chen Lee Yiaw HuiMr Gerald YeoMr Jimmy Leow Min FongPositionChairwomanDirector/President/Chief Executive OfficerDirectorDirector/Executive Vice PresidentDirector/Assistant to President & Chief Executive OfficerDirector/Vice PresidentNon-executive DirectorNon-executive Director/Chairman of Audit CommitteeDIRECTORS' INTERESTSThe Bank's directors who hold shares in CIHP, the ultimate parent company of the Bank are: Mr Pung KheavSe, Mr Pung Way and Mrs Lim Sophany.Annual Report 200920AUDITORSThe auditors, Ernst & Young Indochina Ltd., expressed their willingness to accept re-appointment asauditors.DIRECTORS' BENEFITSDuring and at the end of the financial year, no arrangements existed to which the Bank was a party withthe object 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 directors of the Bank have received or become entitled to receive any benefit by reason of a contractmade by the Bank with the directors or with a firm of which the director is a member, or with a companyin which the director has a substantial financial interest other than those disclosed in the financialstatements.STATEMENT OF THE BOARD OF DIRECTORS' RESPONSIBILITIES INRESPECT OF THE FINANCIAL STATEMENTSThe Board of Directors is responsible for ensuring that the financial statements are properly drawn up soas to give a true and fair view of the financial position of the Bank as at 31 December 2009, and of itsfinancial performance and its cash flows for the year then ended. The Board of Directors is responsible forensuring that proper accounting records are kept which disclose, with reasonable accuracy at any time, thefinancial position of the Bank and to ensure that the accounting records comply with the registeredaccounting system. It is also responsible for safeguarding the assets of the Bank and hence for takingreasonable steps for the prevention and detection of fraud and other irregularities. In preparing thesefinancial statements, the Board of Directors is required to:

Canadia Bank Plc.i) adopt appropriate accounting policies which are supported by reasonable and prudentjudgments and estimates and then apply them consistently;ii) comply with the disclosure requirements and guidelines issued by the NBC andCambodian Accounting Standards or, if there have been any departures in the interestsof fair presentation, these have been appropriately disclosed, explained andquantified in the financial statements;iii) maintain adequate accounting records and an effective system of internal controls;iv) prepare the financial statements on a going concern basis unless it is inappropriateto assume that the Bank will continue operations in the foreseeable future; andv) effectively control and direct the Bank in all material decisions affecting the operationsand performance and ascertain that these have been properly reflected in thefinancial statements.The Board of Directors confirms that the Bank has complied with the above requirements in preparing thefinancial statements.APPROVAL OF THE FINANCIAL STATEMENTSWe hereby approve the accompanying financial statements which give a true and fair view of the financialposition of the Bank as at 31 December 2009, and of its financial performance and its cash flows for theyear then ended in accordance with Cambodian Accounting Standards and relevant regulations andguidelines issued by the NBC.Signed in accordance with a resolution of the Board of Directors.21Annual Report 2009Mr Pung Kheav SePresident and Chief Executive OfficerDate: 29 March 2010Mr Charles VannExecutive Vice PresidentDate: 29 March 2010

Canadia Bank Plc.INDEPENDENT AUDITORS' REPORTTo :The Board of Directors of Canadia Bank Plc.We have audited the accompanying financial statements of Canadia Bank Plc. ("the Bank"), which comprisethe balance sheet as at 31 December 2009, and the income statement, statement of changes in equity andstatement of cash flows for the year then ended, and a summary of significant accounting policies andother explanatory notes. The financial statements of the Bank as at and for the year ended 31 December2008 were audited by other auditors whose report dated 31 March 2009 expressed an unqualified opinionon those financial statements.Management's responsibility for the financial statementsThe management of the Bank is responsible for the preparation and fair presentation of these financialstatements in accordance with Cambodian Accounting Standards and relevant regulations and guidelinesissued by the National Bank of Cambodia. This responsibility includes: designing, implementing andmaintaining internal control relevant to the preparation and fair presentation of financial statements thatare free from material misstatement, whether due to fraud or error; selecting and applying appropriateaccounting policies; and making accounting estimates that are reasonable in the circumstances.Auditors' responsibilityAnnual Report 200922Our responsibility is to express an opinion on these financial statements. We conducted our audit inaccordance with International Standards on Auditing and Cambodian Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance 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 risk of material misstatement of the financial statements, whether due to fraud or error.In making those risk assessments, the auditors consider internal control relevant to the Bank's preparationand fair presentation of the financial statements in order to design audit procedures that are appropriatein the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank'sinternal control. An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by the directors, as well as evaluating the overallpresentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.OpinionIn our opinion, the financial statements give a true and fair view of the financial position of the Bank as at31 December 2009, and of its financial performance and its cash flows for the year then ended, inaccordance with Cambodian Accounting Standards and relevant regulations and guidelines issued by theNational Bank of Cambodia.

Canadia Bank Plc.taragtulükarnaéfTI31 ExFñÚ qñaM2009kMNt; 2009 2009 2008 2008bgðaj duløaGaemrik smmUl lanerol duløaGaemrik smmUl lanerol¬kMNt;bgðaj¬kMNt;bgðajelx 2>1¦ elx 2>1¦RTBüskmμsac;R)ak;kñúgéd 4 35>945>109 149>855 42>825>814 174>772smtulüCamYyFnaKarCati 5 198>667>290 828>244 72>046>256 294>021smtulüCamYyFnaKarepSg² 6 81>939>255 341>605 28>785>020 117>472\NTannigR)ak;buerRbTaneTAGtifiCn-suT§ 7 360>587>399 1>503>289 390>602>198 1>594>047vinieyaKTun 8 3>500>000 14>592 10>580>000 43>177GclnRTBü 9 32>759>299 136>573 31>221>264 127>414kmμviFIkuMBüÚT½r 10 714>828 2>980 1>130>351 4>613RTBüsm,tiþrwbGUs 11 - - 2>100>000 8>570RTBüskmμepSg² 12 15>303>442 63>800 4>280>898 17>470RTBüskmμsrub 729>416>622 3>040>938 583>571>801 2>381>556RTBüGkmμ nigmUlniFim©as;PaKh‘unRTBüGkmμR)ak;beBaØI nigsmtulürbs;FnaKarepSg² 13 33>307>122 138>857 25>777>981 105>200R)ak;beBaØIrbs;GtifiCn 14 555>042>999 2>313>974 436>362>009 1>780>793bMNulBn§elIR)ak;cMeNj 15 3>624>299 15>110 4>834>595 19>730R)ak;km©I;epSg² 16 3>234>615 13>485 7>057>279 28>801bMNulbnÞab;bnSM 17 7>080>000 29>517 7>080>000 28>894sMviFanFnsMrab;kardwgKuNbuKÁlik 18 1>095>550 4>567 810>350 3>307RTBüGkmμepSg² 19 10>430>836 43>487 6>399>452 26>116srubRTBüGkmμ 613>815>421 2>558>997 488>321>666 1>992>84123Annual Report 2009mUlniFim©as;PaKh‘unedImTun 20 40>545>000 169>032 40>545>000 165>464R)ak;cMeNjrkSaTuk 75>056>201 312>909 54>705>135 223>251srubmUlniFim©as;PaKh‘un 115>601>201 481>941 95>250>135 388>715srubRTBüGkmμ nigmUlniFim©as;PaKh‘un 729>416>622 3>040>938 583>571>801 2>381>556kMNt;sMKal;EdlP¢ab;mkCamYyBITMB½rTI 1 dl; 35 KWCaEpñkmYyénr)aykarN_hirBaØvtßúTaMgenH .

Canadia Bank Plc.Annual Report 200924

Canadia Bank Plc.BALANCE SHEETAS AT 31 DECEMBER 2009Notes 2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)ASSETSCash on hand 4 35,945,109 149,855 42,825,814 174,772Balances with the NBC 5 198,667,290 828,244 72,046,256 294,021Balances with other banks 6 81,939,255 341,605 28,785,020 117,472Loans and advances tocustomers - net 7 360,587,399 1,503,289 390,602,198 1,594,047Investment 8 3,500,000 14,592 10,580,000 43,177Property and equipment 9 32,759,299 136,573 31,221,264 127,414Computer software 10 714,828 2,980 1,130,351 4,613Property foreclosed 11 - - 2,100,000 8,570Other assets 12 15,303,442 63,800 4,280,898 17,470TOTAL ASSETS 729,416,622 3,040,938 583,571,801 2,381,556LIABILITIES ANDSHAREHOLDER'S EQUITYLIABILITIESDeposits from banks 13 33,307,122 138,857 25,777,981 105,200Due to customers 14 555,042,999 2,313,974 436,362,009 1,780,793Income tax liabilities 15 3,624,299 15,110 4,834,595 19,730Borrowings 16 3,234,615 13,485 7,057,279 28,801Subordinated debt 17 7,080,000 29,517 7,080,000 28,894Provision for staff gratitude 18 1,095,550 4,567 810,350 3,307Other liabilities 19 10,430,836 43,487 6,399,452 26,11625Annual Report 2009Total liabilities 613,815,421 2,558,997 488,321,666 1,992,841SHAREHOLDER'S EQUITYShare capital 20 40,545,000 169,032 40,545,000 165,464Retained earnings 75,056,201 312,909 54,705,135 223,251Total shareholder's equity 115,601,201 481,941 95,250,135 388,715TOTAL LIABILITIES ANDSHAREHOLDER'S EQUITY 729,416,622 3,040,938 583,571,801 2,381,556The attached notes 1 to 35 form part of these financial statements.

Canadia Bank Plc.r)aykarN_lT§plsMrab;dMNac;qñaMéfTI31 ExFñÚ qñaM2009kMNt; 2009 2009 2008 2008bgðaj duløaGaemrik smmUl lanerol duløaGaemrik smmUl lanerol¬kMNt;bgðaj¬kMNt;bgðajelx 2>1¦ elx 2>1¦cMNUlBIkarR)ak; 47>453>068 197>832 52>709>241 215>107cMNayelIkarR)ak; ¬19>981>707¦ ¬83>304¦ ¬13>364>028¦ ¬54>539¦cMNUlBIkarR)ak;suTæ 21 27>471>361 114>528 39>345>213 160>568cMNUlkéRmQñÜl nigkéRmeCIgsar 7>122>804 29>695 8>830>950 36>039cMNaykéRmQñÜl nigkéRmeCIgsar ¬1>133>801¦ ¬4>727¦ ¬1>087>439¦ ¬4>438¦cMNUlkéRmQñÜl nigkéRmeCIgsarsuT§ 22 5>989>003 24>968 7>743>511 31>601Annual Report 200926cMNUlBIRbtibtiþkarepSg² 23 5>201>726 21>686 1>079>862 4>407srubcMNUlRbtibtiþkar 38>662>090 161>182 48>168>586 196>576cMNayTUeTA nigrdæ)al 24 ¬11>715>089¦ ¬48>839¦ ¬11>408>141¦ ¬46>557¦sMviFanFnelI\NTan )at;bg; ¬2>423>501¦ ¬10>104¦ ¬9>168>383¦ ¬37>416¦R)ak;cMeNjmunbg;Bn§ 24>523>500 102>239 27>592>062 112>603Bn§elIR)ak;cMeNj 13 ¬4>172>434¦ ¬17>395¦ ¬5>518>412¦ ¬22>521¦R)ak;cMeNjsuTæsMrab;kariybriecäT 20>351>066 84>844 22>073>650 90>082kMNt;sMKal;EdlP¢ab;mkCamYyBITMB½rTI 1 dl; 35 KWCaEpñkmYyénr)aykarN_hirBaØvtßúTaMgenH .

Canadia Bank Plc.27Annual Report 2009

Canadia Bank Plc.INCOME STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2009Notes 2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Interest income 47,453,068 197,832 52,709,241 215,107Interest expense (19,981,707) (83,304) (13,364,028) (54,539)Net interest income 21 27,471,361 114,528 39,345,213 160,568Fee and commission income 7,122,804 29,695 8,830,950 36,039Fee and commission expense (1,133,801) (4,727) (1,087,439) (4,438)Net fee and commission income 22 5,989,003 24,968 7,743,511 31,601Other operating income 23 5,201,726 21,686 1,079,862 4,407Annual Report 200928Total operating income 38,662,090 161,182 48,168,586 196,576General and administrative expenses 24 (11,715,089) (48,839) (11,408,141) (46,557)Provision for loan losses - net 26 (2,423,501) (10,104) (9,168,383) (37,416)Profit before income tax 24,523,500 102,239 27,592,062 112,603Income tax expense 27 (4,172,434) (17,395) (5,518,412) (22,521)Net profit for the year 20,351,066 84,844 22,073,650 90,082The attached notes 1 to 35 form part of these financial statements.

Canadia Bank Plc.r)aykarN_sþIBIkarERbRbYlmUlniFiPaKTuniksMrab;dMNac;qñaMéfTI31 ExFñÚ qñaM2009edImTun R)ak;cMeNjrkSaTuk srubduløarGaemrik duløarGaemrik duløarGaemriksmtulünaéfTI01 Exmkra qñaM2009 40>545>000 54>705>135 95>250>135R)ak;cMeNjsuT§sMrab;kariybriecäT - 20>351>066 20>351>066smtulüna éfTI31 ExFñÚÚ qñaM2009 40>545>000 75>056>201 115>601>201smtulünaéfTI31 ExFñÚÚ qñaM2009-lanerol¬kMNt;bgðaj elx 2>1¦ 169>032 312>909 481>941smtulünaéfTI 1 Ex mkra qñaM 2008 40>545>000 32>631>485 73>176>485R)ak;cMeNjsuT§sMrab;kariybriecäT - 22>073>650 22>073>650smtulünaéfTI31 ExFñÚÚ qñaM2008 40>545>000 54>705>135 95>250>135smtulünaéfTI31 ExFñÚÚ qñaM2008-lanerol¬kMNt;bgðaj elx 2>1¦ 165>464 223>251 388>715kMNt;sMKal;EdlP¢ab;mkCamYyBITMB½rTI 1 dl; 35 KWCaEpñkmYyénr)aykarN_hirBaØvtßúTaMgenH .29Annual Report 2009

Canadia Bank Plc.Annual Report 200930

Canadia Bank Plc.STATEMENT OF CHANGE IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2009Share capital Retained earnings TotalUS$ US$ US$Balance as at 1 January 2009 40,545,000 54,705,135 95,250,135Net profit for the year - 20,351,066 20,351,066Balance as at 31 December 2009 40,545,000 75,056,201 115,601,201Balance as at 31 December 2009- Million Riel equivalent (Note 2.1) 169,032 312,909 481,941Balance as at 1 January 2008 40,545,000 32,631,485 73,176,485Net profit for the year - 22,073,650 22,073,650Balance as at 31 December 2008 40,545,000 54,705,135 95,250,135Balance as at 31 December 2008- Million Riel equivalent (Note 2.1) 165,464 223,251 388,715The attached notes 1 to 35 form part of these financial statements.31Annual Report 2009

Canadia Bank Plc.Annual Report 200932r)aykarN_lMhUrsac;R)ak;sMrab;dMNac;qñaMéfTI31 ExFñÚ qñaM2009kMNt; 2009 2009 2008 2008bgðaj duløaGaemrik smmUl lanerol duløaGaemrik smmUl lanerol¬kMNt;bgðaj¬kMNt;bgðajelx 2>1¦ elx 2>1¦lMhUrsac;R)ak;BIskmμPaBRbtibtþikarsac;R)ak;)anBI¬eRbIkñúg¦skmμPaBRbtibtþikar 28 158>790>602 661>999 ¬43>939>677¦ ¬179>318¦BnæelIR)ak;cMeNj)anbg; 15 ¬5>382>730¦ ¬22>441¦ ¬5>104>960¦ ¬20>834¦sac;R)ak;suT§)anBI¬eRbIkñúg¦skmμPaBRbtibtþikar 153>407>872 639>558 ¬49>044>637¦ ¬200>152¦lMhUrsac;R)ak;BIskmμPaBvinieyaKsac;R)ak;)anBIkarlk;vinieyaKTun 11>000>000 45>859 - -sac;R)ak;)anBIkarlk;GclnRTBü 14>388>283 59>985 122>178 499karTijGclnRTBü ¬17>362>129¦ ¬72>383¦ ¬12>831>762¦ ¬52>366¦karTijkmμviFIkuMBüÚT½r ¬222>300¦ ¬927¦ ¬74>693¦ ¬305¦sac;R)ak;suT§)anBI¬eRbIkñúg¦skmμPaBvinieyaK 7>803>854 32>534 ¬12>784>277¦ ¬52>172¦lMhUrsac;R)ak;BIskmμPaBhirBaØb,TanTUTat;sgkm©IeTA KfW ¬717>197¦ ¬2>990¦ ¬427>429¦ ¬1>744¦TUTat;sgkMm©IeTAFnaKarCati énkm105>467¦ ¬12>947¦ - -sac;R)ak;suTæeRbIkñúgskmμPaBhirBaØb,Tan ¬3>822>664¦ ¬15>937¦ ¬427>429¦ ¬1>744¦karERbRbYlsuT§énsac;R)ak;nigsac;R)ak;smmUl 157>389>062 656>155 ¬62>256>343¦ ¬254>068¦sac;R)ak; nig sac;R)ak;smmUlnaedImkariybriecäT 77>631>480 316>815 139>887>823 559>971lMeGogbNþalmkBIGRtabþÚrR)ak; - 6>831 - 10>912sac;R)ak; nig sac;R)ak;smmUlnacugkariybriecäT 4 235>020>542 979>801 77>631>480 316>815kMNt;sMKal;EdlP¢ab;mkCamYyBITMB½rTI 1 dl; 35 KWCaEpñkmYyénr)aykarN_hirBaØvtßúTaMgenH .

Canadia Bank Plc.33Annual Report 2009

Canadia Bank Plc.STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2009Notes 2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Cash Flows from operating activitiesCash generated from (used in)operations 28 158,790,602 661,999 (43,939,677) (179,318)Income tax paid 15 (5,382,730) (22,441) (5,104,960) (20,834)Net cash generated from(used in) operating activities 153,407,872 639,558 (49,044,637) (200,152)Annual Report 200934Cash Flows from investing activitiesProceeds from sale of investment 11,000,000 45,859 - -Proceeds from sale of propertyand equipment 14,388,283 59,985 122,178 499Purchases of property and equipment (17,362,129) (72,383) (12,831,762) (52,366)Purchases of computer software (222,300) (927) (74,693) (305)Net cash generated from(used in) investing activities 7,803,854 32,534 (12,784,277) (52,172)Cash Flows from financing activitiesRepayment of borrowing from KfW (717,197) (2,990) (427,429) (1,744)Repayment of borrowing from the NBC (3,105,467) (12,947) - -Net cash used in financing activities (3,822,664) (15,937) (427,429) (1,744)Net change in cash and cash equivalents 157,389,062 656,155 (62,256,343) (254,068)Cash and cash equivalentsat beginning of the year 77,631,480 316,815 139,887,823 559,971Currency translation difference - 6,831 - 10,912CASH AND CASH EQUIVALENTSAT END OF THE YEAR 4 235,020,542 979,801 77,631,480 316,815The attached notes 1 to 35 form part of these financial statements.

Canadia Bank Plc.NOTES TO THE FINANCIAL STATEMENTS1. CORPORATE INFORMATIONEstablishment and operationsCanadia Bank Plc. ("the Bank') was incorporated in 1991 under a joint venture between the National Bankof Cambodia ("NBC") and certain overseas Cambodians. On 4 February 1998, the NBC disposed all its sharesto private investors.In 2001, the Overseas Cambodian Investment Corporation ("OCIC"), a public limited companyincorporated in the Kingdom of Cambodia, acquired 100% of the shares of the Bank and consequentlybecame the holding company of the Bank.In 2007, OCIC conducted a corporate restructuring whereby it transferred its investment in the Bank toCanadia Investment Holding Plc ("CIHP"), a public limited company incorporated in the Kingdom ofCambodia.The restructuring was approved by the NBC and the Ministry of Commerce. Consequently, CIHPis now the new holding company of the Bank.The principal activities of the Bank consist of the operation of core banking business and the provision ofrelated financial services through the Bank's head office and various branches in Phnom Penh and in theprovinces.The Bank holds a commercial banking license which was renewed for an indefinite period on 18October 2006.There were no significant changes in the nature of these principal activities during the year.Share capitalThe share capital of the Bank as at 31 December 2009 is US$40.55 million.Board of Directors35Annual Report 2009The members of the Board of Directors during the financial year and at the date of this report are:NameMrs Lim SophanyMr Pung Kheav SeMr Pung WayMr Charles VannMrs Pung CarolyneMr Chen Lee Yiaw HuiMr Gerald YeoMr Jimmy Leow Min FongPositionChairwomanDirector/President/Chief Executive OfficerDirectorDirector/Executive Vice PresidentDirector/Assistant to President & Chief Executive OfficerDirector/Vice PresidentNon-executive DirectorNon-executive Director/Chairman of Audit CommitteeLocationThe registered office of the Bank is currently located at No. 265 - 269 Ang Duong Street, Phnom Penh,Kingdom of Cambodia. The Bank has total of 27 branches located in Phnom Penh and major provinces inCambodia.EmployeesAs at 31 December 2009 and 2008, the Bank has a total of 887 and 803 employees, respectively.Approval of the financial statementsThe financial statements cover only the individual entity of the Bank.The financial statements were authorised and approved for issue by the Board of Directors on29 March 2010. The Board of Directors has the power to amend and reissue the financial statements.

Canadia Bank Plc.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe significant accounting policies adopted 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 have been prepared in accordance with the guidelines issued by the NBC andCambodian Accounting Standards ("CAS"). The accounting principles applied may differ from generallyaccepted accounting principles adopted in other countries and jurisdictions. The accompanying financialstatements are therefore not intended to present the financial position and results of operations and cashflows in accordance with jurisdictions other than Cambodia. Consequently, these financial statements areaddressed only to those who are informed about Cambodia's accounting principles, procedures andpractices.The financial statements are prepared based on the historical cost convention.Significant inter-account transactions and balances between the Bank and its branches in Cambodia havebeen eliminated.Annual Report 200936The preparation of financial statements in accordance with CAS requires the use of estimates andassumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assetsand liabilities at the date of financial statements and the reported amounts of revenues and expensesduring the reporting period. Although these estimates are based on management's best knowledge ofcurrent event and actions, actual results ultimately may differ from those estimates. The areas involving ahigher degree of judgment or complexity, or areas where assumptions and estimates are significant to thefinancial statements are disclosed in Note 3.The translation of the United States dollar ("US$") amounts in the financial statements into Khmer Riel("Riel") is provided for the sole purpose of complying with Prakas No. B7-07-164 dated 13 December 2007using the official rate of exchange regulated by the NBC as at the reporting date, which was US$1 to Riel4,169 as at 31 December 2009 (2008: US$1 to Riel 4,081). Such translation should not be construed as arepresentation that the US$ amounts represent, or have been or could be, converted into Riel at that or anyother rate.Fiscal yearThe Bank's financial year starts on 1 January and ends on 31 December.2.2 Changes in accounting policies arising from adoption of new and revised regulations of the NBCThe accounting policies and methods of computation applied by the Bank are consistent with thoseadopted in the previous years except for the prospective adoption by the Bank of Prakas B7-09-074 dated25 February 2009, on Asset Classification and Provisioning in Banking and Financial Institutions, effectivefrom the financial periods beginning 1 January 2009.2.3 Foreign currency transactions2.3.1 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 financial statementsare presented in US$ which is the Bank's functional and presentation currency.

Canadia Bank Plc.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.4 Foreign currency transactions (continued)2.4.1 Transactions and balancesTransactions in currencies other than US$ are translated into US$ at the exchange rate prevailing at thedate of transaction. Foreign exchange gains and losses resulting from the settlement of such transactionsand from the translation at the year end exchange rate of monetary assets and liabilities denominated incurrencies other than US$ are recognised in the income statement.For prevailing exchange rates of applicable foreign currencies and US$ against Riel as at 31 December, seeNote 35.2.5 Cash and cash equivalentsFor the purpose of the cash flow statement, cash and cash equivalents comprise balances with less thanthree months' maturity from the date of acquisition, including cash on hand, non-restricted balance withthe NBC, and balances with other banks.2.5 Loans and advances to customersAll loans and advances to customers are stated in the balance sheet at principal amount, net ofunamortised loan commitment fees and less any amounts written off and allowance for loan losses. Shortterm loans are those with repayment date within one year from the date the loan was advanced. Long termloans are those with a final repayment date of more than one year from the date the loan was advanced.Loans are written off when there is no realistic prospect of recovery. Recoveries of loans and advancespreviously written off, or provided for, decrease the amount of the provision for loan losses in the incomestatement.Loan and advances to customers classified as substandard, doubtful or loss are considered asnon-performing loans.37Annual Report 20092.6 Allowance for losses on loans and advancesAllowance for losses on loans and advances to customers is made with regard to specific risks and relateto those loans and advances to customers that have been individually reviewed and specifically identifiedas special mention, substandard, doubtful or loss. In addition, a general allowance is also maintained forloans classified as normal.The allowance is based on a percentage of total outstanding loans and advances, net of interest-in-suspense.The Bank follows the mandatory credit classification and provisioning required by Prakas No. B7-09-074dated 25 February 2009. The Prakas requires commercial banks to classify their loan portfolio into fiveclasses. The mandatory level of general and specific allowances is provided depending on the loanclassification as follows:Classification Number of days past due Allowance ratesGeneral provisionNormal Nil to less than 30 days 1%Specific provisionSpecial mention 30 days or more but less than 90 days 3%Substandard 90 days or more but less than 180 days 20%Doubtful 180 days or more but less than 360 days 50%Loss 360 days or more 100%

Canadia Bank Plc.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)An uncollectible loan or portion of a loan classified as bad is written off after taking into consideration therealisable value of the collateral, if any, when in the judgment of the management, there is no prospect ofrecovery.2.7 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 provision methodology aresimilar to those for originated loans as noted above. Specific provisions are raised against other credit relatedcommitments when losses are considered probable.2.8 Investment in shares of another bankInvestment is carried at cost. Dividend is recognised as income when received.2.9 Property and equipmentProperty and equipment are stated at cost less accumulated depreciation, except freehold land which isnot depreciated. Historical cost includes expenditure that is directly attributable to the acquisition of theasset items.Annual Report 200938Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, asappropriate, only when it is probable that the future economic benefits associated with the item will flowto the Bank and cost of the item can be measured reliably. All other repairs and maintenance are chargedto the income statement during the financial year in which they are incurred.Land is not depreciated. Depreciation on other assets is calculated using the following methods and rates:Buildings - straight-line 5%Vehicles - declining 25%Office equipment - declining 25%Furniture and fixtures - declining 25%Computers and IT equipment - declining 50%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.Gains and losses on disposals recognised in the income statement are determined by comparing theproceeds and the carrying amount of the disposed property and equipment.2.10 Computer softwareAcquired computer software licenses are capitalised on the basis of the cost incurred to acquire thespecific software and bring it to use. These costs are amortised over a two-year period using the decliningbalance method.Costs associated with developing or maintaining computer software programs are recognised as expensewhen incurred.2.11 Impairment of non-financial assetsAssets that have indefinite useful lives 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 be recoverable.An impairment loss is recognised for the amount by which the asset's carrying amount exceeds itsrecoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell andvalue in use.

Canadia Bank Plc.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.12 Statutory depositsFor purposes of assessing impairment, assets are grouped at the lowest levels for which there areseparately identified cash flows (cash-generating units). Non-financial assets other than goodwill that havesuffered impairment are reviewed for possible reversal of the impairment at each reporting date. Statutorydeposits for banking-related activities are maintained with the NBC in compliance with the Law onBanking and Financial Institutions and are determined by defined percentages of minimum sharecapital and customers' deposits as required by the NBC.2.13 Subordinated debtSubordinated debt with no fixed repayment term and which is interest-free is recognised initially at costand subsequently stated at the outstanding principal.2.14 Provisions for liabilitiesProvisions for liabilities are recognised when the Bank has a present legal or constructive obligation as aresult of past events, it is probable that an outflow of resources will be required to settle the obligation, andthe amount has been reliably estimated.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. A provision is recognised evenif the likelihood of an outflow with respect to any one item included in the same class of obligations maybe small.Provisions for liabilities are measured at the present value of the expenditure expected to be required tosettle the obligation using a pre-tax rate that reflects current market assessments of the time value ofmoney and the risks specific to the obligation. The increase in the provision due to the passage of time isrecognised as interest expense.39Annual Report 20092.15 Provision for staff gratitudeThe Bank provides its employees with retirement and resignation benefits. At the age of retirement, theretired employee will be given a compensation based on the number of full-year service renderedmultiplied by the final month salary. An employee who has worked for the Bank for two years or more isentitled upon resignation for a lump sum payment representing an employee's final month salarymultiplied by the number of full-year service rendered. The payment of employment benefit is subject tothe discretion of the Bank's management.The Bank recognises the provision for the employment benefits in the financial statements which iscalculated for employees who are entitled to receive this benefit.2.16 Current and deferred income taxCurrent taxCurrent tax assets and liabilities for the current and prior periods are measured at the amounts expectedto be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute theamount are those that are enacted at the balance sheet date.Deferred taxDeferred tax is provided using the balance sheet liability method on temporary differences at the balancesheet date between the tax base of assets and liabilities and their carrying amount for financial reportingpurposes.

Canadia Bank Plc.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.16 Current and deferred income tax (continued)Deferred tax liabilities are recognized for all taxable temporary differences, except where the deferred taxliability arises from the initial recognition of an asset or liability in a transaction which at the time of thetransaction affects neither the accounting profit nor taxable profit or loss.Deferred tax assets are recognized for all deductible temporary differences to the extent that it isprobable that future taxable profits will be available against which these differences can be utilized, exceptwhere the deferred tax arises from the initial recognition of an asset or liability in a transaction which atthe time of the transaction affects neither the accounting profit nor taxable profit or loss.The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to theextent that it is no longer probable that sufficient taxable profits will be available to allow all or part of theassets to be recovered. Unrecognized deferred income tax assets are re-assessed at each balance sheetdate and are recognized to the extent that it has become probable that future taxable profit will allow thedeferred tax assets to be recovered.2.17 Interest income and expensesInterest earned on loans and advances to customers, deposits with the NBC and other banks arerecognised on an accrual basis, except where serious doubt exists as to the collectability of loans andadvances to customers, in which case no interest income is recognised. The policy on the suspension ofinterest is in conformity with the NBC's guidelines on the suspension of interest on non-performing loansand provision for bad and doubtful debts.Annual Report 200940Interest expense on deposits of customer and settlement accounts of other banks and borrowings arerecognised on accrual basis.2.18 Fee and commission incomeFee and commission income is recognised on an accrual basis when the service has been provided. Feeand commission income comprises income received from inward and outward bank transfers, loanprocessing, bank guarantees, letters of credit, ATM/Visa and Mastercard charges. Loan commitment fees aredeferred and recognised as other income in the income statement over the term of the loan. Unamortisedloan commitment fees are presented as a deduction from loans.2.19 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.2.20 Related party transactionsParties are considered to be related if the Bank has the ability, directly or indirectly, to control the otherparty or exercise significant influence over the other party in making financial and operating decisions, orvice-versa, or where the Bank and the party are subject to common control or significant influence. Relatedparties may be individuals or corporate entities and include close family members of any individualconsidered to be a related party.Related parties, as defined in Article 49 and 50 of the Cambodian Law on Banking and FinancialInstitutions, include the following:(i) any person holding directly or indirectly at least ten percent (10%) of the capital orvoting rights;(ii) any company of which the Bank directly or indirectly holds at least 10% of the capitalor voting rights;(iii) any individual who participates in the administration, direction, management orinternal control; and(iv) the external auditors.Transactions with related parties and related account balances are disclosed in Note 30.

Canadia Bank Plc.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)2.21 Fiduciary assetsAssets held in trust or in a fiduciary capacity are not reported in the financial statements since they are notthe assets of the Bank.2.22 Rounding of amountsAmounts in the financial statements have been rounded off to the nearest dollar and nearest million Rielfor US$ and Riel amounts, respectively.2.23 Corresponding figuresCertain corresponding figures have been reclassified to conform with current year's presentation.3. CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGEMENTSThe Bank makes estimates, assumptions and judgments that affect the reported amounts of assets andliabilities. Estimates, assumptions and judgments are continually evaluated and are based on historicalexperience and other factors, including expectations of future events that are believed to be reasonableunder the circumstances.a) Impairment losses on loans and advancesThe Bank follows the mandatory credit classification and provisioning as required by Prakas No. B7-09-074dated 25 February 2009 of the NBC.The NBC requires commercial banks to classify their loan portfolio intofive classes and the minimum mandatory level of specific provision is made depending on theclassification concerned and regardless of the assets (except for cash) pledged as collateral. For purposesof loan classification, the Bank takes into account historical payment experience and the borrower'sfinancial condition.41Annual Report 2009b) Investment in shares of another bankThe Bank now owns 15.22% of the share capital of Foreign Trade Bank, a local bank, after divesting its30.78% ownership of this bank during the year. This remaining investment is carried at cost. The Directorsbelieve it is appropriate to carry this investment at cost since fair value cannot be reliably estimated.Current CAS in force has also not adopted the equity method of accounting for investments of this nature.c) Income taxTaxes are calculated on the basis of current interpretation of the tax regulations. However, theseregulations are subject to periodic variation and the ultimate deter mination of tax expenses will be madefollowing inspection by the Tax Department.Where the final tax outcome of these matters is different from the amounts that were initially recorded,such differences will have an impact on the income tax and deferred tax provisions in the year in whichsuch determination is made.

Canadia Bank Plc.4. CASH ON HAND2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)USD 32,100,778 133,828 38,510,425 157,161Riel 2,398,890 10,001 2,952,340 12,048Other foreign currencies 1,445,441 6,026 1,363,049 5,56335,945,109 149,855 42,825,814 174,772For the purpose of the statement of cash flows, cash and cash equivalents comprise:2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Annual Report 200942Cash on hand 35,945,109 149,855 42,825,814 174,772Balances with NBC:Current accounts 86,032,807 358,671 5,090,531 20,775Term deposits (maturity lessthan 3 months) 44,000,000 183,436 5,500,000 22,446Overdraft - - (3,105,467) (12,673)Balances with other banks - currentaccounts 69,042,626 287,839 27,320,602 111,495235,020,542 979,801 77,631,480 316,8155. BALANCES WITH THE NBC2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Current accounts 86,032,807 358,671 5,090,531 20,775Term deposits 44,000,000 183,436 5,500,000 22,446Statutory deposits 4,054,500 16,903 4,054,500 16,546Reserve deposits 64,579,983 269,234 57,401,225 234,254198,667,290 828,244 72,046,256 294,021Reserve deposit represents the minimum reserve requirement which is calculated at 8% for Riel (2008: 8%)and 12% for other currencies (2008: 16%) of the total amount due to customers and other banks andborrowings.Under Prakas No. B7-01-136 dated 15 October 2001, banks are required to maintain a statutory deposit of 10%of paid-up capital.This deposit is refundable should the Bank voluntarily cease its operations in Cambodia andit is not available for use in the Bank's day-to-day operations.

Canadia Bank Plc.5. BALANCES WITH THE NBC (continued)Current accounts and reserve deposits do not earn interest. Annual interest rates on other balances with theNBC are summarised as follows:2009 2008Term deposits 1.44% - 3.72% 1.05% - 3.07%Statutory deposits 0.68% - 0.28% 1.18% - 1.77%6. BALANCES WITH OTHER BANKS2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Local banks:Current accounts 2,437,080 10,160 610,388 2,491Fixed deposits 14,000,000 58,366 - -Overseas banks:Current accounts 65,502,175 273,079 27,674,632 112,940Fixed deposits - - 500,000 2,04181,939,255 341,605 28,785,020 117,47243Annual Report 2009Included in the balances with other banks are trust deposits from Visa Card and Master Card operationsamounting to US$431,308 (2008: US$430,996) and US$534,481 (2008: US$533,422), respectively. Thesedeposits are not available for the Bank's day-to-day operations.Current accounts with other local banks do not earn interest. Current accounts with overseas banks earnannual interest at rates ranging from 0.10% to 5.10% (2008: 0% to 4.52%). Fixed deposits with other localbanks earn annual interest at rates ranging from 2.00% to 6.50% (2008: Nil).

Canadia Bank Plc.7.LOANS AND ADVANCES TO CUSTOMERS - NET2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Commercial loans:Short-term loans 172,399,141 718,732 140,652,557 574,003Overdrafts 84,358,566 351,691 98,594,541 402,364Long-term loans 37,412,480 155,972 82,876,071 338,217Micro-finance loans 141,493 590 116,364 476294,311,680 1,226,985 322,239,533 1,315,060Consumer loans:Mortgage loans 87,506,796 364,816 88,108,882 359,572Credit cards 1,062,496 4,430 1,089,667 4,447Leasing 2,224,256 9,273 683,447 2,78990,793,548 378,519 89,881,996 366,808Total gross loans 385,105,228 1,605,504 412,121,529 1,681,868Annual Report 200944Allowance for loan losses (23,101,677) (96,311) (20,708,846) (84,513)Unamortised loan commitment fees (1,416,152) (5,904) (810,485) (3,308)360,587,399 1,503,289 390,602,198 1,594,047(a) Allowance for loan lossesMovements in the allowance for loan losses are as follows:Specific Generalprovision provision TotalUS$ US$ US$Balance at 1 January 2009 20,708,846 - 20,708,846Charges for the year 5,194,114 3,259,167 8,453,281Recovery during the year (5,953,839) (75,941) (6,029,780)Amount written off (27,619) - (27,619)Exchange difference (3,051) - (3,051)Balance at 31 December 2009 19,918,451 3,183,226 23,101,677Million Riel equivalent (Note 2.1) 83,040 13,271 96,311Balance at 1 January 2008 13,176,166 - 13,176,166Charges for the year 13,593,843 - 13,593,843Recovery during the year (4,425,460) - (4,425,460)Amount written off (1,632,740) - (1,632,740)Exchange differences (2,963) - (2,963)Balance at 31 December 2008 20,708,846 - 20,708,846Million Riel equivalent (Note 2.1) 84,513 - 84,513

Canadia Bank Plc.7.LOANS AND ADVANCES TO CUSTOMERS - NET (continued)The Bank wrote off loans and advances of US$27,619 (2008: US$1,632,740) which had been previously fullyprovisioned and therefore had no effect on income statement.(b) Loan classification2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Normal:Secured 316,111,714 1,317,870 353,932,220 1,444,397Unsecured 368,914 1,538 311,987 1,273Special mention:Secured 36,984,364 154,188 - -Substandard:Secured 15,585,687 64,977 35,981,324 146,840Unsecured 80,000 333 - -Doubtful:Secured 558,000 2,326 6,836,133 27,898Unsecured 39,535 165 - -Loss:Secured 15,167,335 63,233 14,819,551 60,479Unsecured 209,679 874 240,314 981Total gross loans 385,105,228 1,605,504 412,121,529 1,681,86845Annual Report 2009(c) Analysis by industry2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Service 116,211,280 484,485 108,510,765 442,832Mortgage 87,506,797 364,816 88,109,243 359,574Wholesale and retail 61,587,464 256,758 79,815,604 325,727Building and construction 42,461,916 177,024 42,173,418 172,110Agriculture 19,369,538 80,752 31,141,740 127,089Import and export 17,702,533 73,802 19,621,998 80,077Manufacturing 17,461,695 72,798 22,451,512 91,625Transportation, storage and communication 2,493,636 10,396 7,960,014 32,485Individual 1,062,496 4,429 1,089,667 4,447Others 19,247,873 80,244 11,247,568 45,902Total gross loans 385,105,228 1,605,504 412,121,529 1,681,868

Canadia Bank Plc.7.LOANS AND ADVANCES TO CUSTOMERS-NET (continued)(d) Maturity analysis2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Not later than 1 year 255,004,476 1,063,114 285,498,785 1,165,121Later than 1 year and nolater than 3 years 36,480,228 152,086 33,622,945 137,215Later than 3 year and no later than 5 years 8,913,122 37,159 14,815,272 60,461Later than 5 years 84,707,402 353,145 78,184,527 319,071Total gross loans 385,105,228 1,605,504 412,121,529 1,681,868(e) Interest ratesThe annual interest rates that applied during the year are as follows:2009 2008Annual Report 200946Credit cards 18.00% - 21.00% 18.00% - 21.00%Micro-finance loans 12.00% - 21.60% 12.00% - 21.60%Long-term loans 8.00% - 19.20% 7.20% - 18.00%Leasing 8.00% - 14.40% 8.00% - 14.40%Short-term loans 6.00% - 21.60% 7.20% - 21.60%Overdrafts 6.00% - 18.00% 6.00% - 18.00%Mortgage loans 4.80% - 15.60% 7.20% - 13.20%8.INVESTMENTOn 28 October 2005, the Bank entered into a sale and purchase agreement with the Privatisation Committee(acting on behalf of the Royal Government of Cambodia) to acquire 46% of the share capital of FTB for aconsideration of US$10,580,000. The investment is carried at cost. The Bank was previously required by theNBC to reduce its shareholding to less than 20% by 31 December 2008. The NBC, on 6 February 2009,extended the deadline to 31 March 2009.On 26 March and 3 July 2009, the Bank entered into agreements to sell its 30.78% share ownership in FTBcosting US$7.08 million to two individual buyers for a total consideration of US$11.00 million.The gain on saleof shares in FTB recognised under "Other operating income" in the income statement amounted to US$3.92million (see Note 23).After the sale, the Bank has remaining 15.22% shares in FTB with carrying cost of US$3.50 million.

Canadia Bank Plc.9. PROPERTY AND EQUIPMENTAssets Furniture ComputerFreehold under and Office and ITland Buildings construction fixtures equipment equipment Vehicles TotalUS$ US$ US$ US$ US$ US$ US$ US$Year ended 31 December 2009CostAt beginning of year 4,378,140 5,303,984 20,010,407 445,842 1,242,913 2,572,851 1,867,981 35,822,118Additions - 68,523 16,621,382 64,242 94,359 387,718 125,905 17,362,129Disposals - - (13,847,563) (1,415) (380) (313,489) (12,000) (14,174,847)Transfers - 15,515,924 (22,653,875) 87,633 6,867,939 182,379 - -At end of year 4,378,140 20,888,431 130,351 596,302 8,204,831 2,829,459 1,981,886 39,009,400Accumulated depreciationAt beginning of year - 1,484,698 - 192,523 594,381 1,454,717 874,535 4,600,854Depreciation - 393,349 - 69,212 453,468 490,599 257,395 1,664,023Disposals - - - (716) (80) (1,981) (11,999) (14,776)At end of year - 1,878,047 - 261,019 1,047,769 1,943,335 1,119,931 6,250,101Net book value 4,378,140 19,010,384 130,351 335,283 7,157,062 886,124 861,955 32,759,299Million Riel equivalent (Note 2.1) 18,252 79,254 543 1,398 29,838 3,694 3,594 136,573In September 2009, the Bank sold several building floors to third parties with an aggregate cost ofUS$13.96 million for US$14.02 million. Of the total sale price, US$5.51 million was received by the Bank asdeposit payment and the remaining US$8.41 million will be paid by the buyers in 12 monthly installmentsstarting January 2010. The portion to be collected in installments from buyers is recognised as "Salescontract receivable" under "Other assets" in the balance sheet. The gain on sale amounting to US$0.06million was recognised as "Other income" under "Other operating income" in the income statement(see Note 23).47Annual Report 2009Assets Furniture ComputerFreehold under and Office and ITland Buildings construction fixtures equipment equipment Vehicles TotalUS$ US$ US$ US$ US$ US$ US$ US$Year ended 31 December 2008CostAt beginning of year 3,844,790 3,263,400 11,681,014 413,330 1,008,039 1,733,515 1,314,813 23,258,901Additions 563,350 2,042,730 8,329,393 113,033 312,901 900,886 569,469 12,831,762Disposals (30,000) (2,146) - (80,521) (78,027) (61,550) (16,301) (268,545)At end of year 4,378,140 5,303,984 20,010,407 445,842 1,242,913 2,572,851 1,867,981 35,822,118Accumulated depreciationAt beginning of year - 1,285,228 - 183,250 495,726 986,485 664,318 3,615,007Depreciation - 199,470 - 67,232 157,193 515,766 226,516 1,166,177Disposals - - - (57,959) (58,538) (47,534) (16,299) (180,330)At end of year - 1,484,698 - 192,523 594,381 1,454,717 874,535 4,600,854Net book value 4,378,140 3,819,286 20,010,407 253,319 648,532 1,118,134 993,446 31,221,264Million Riel equivalent (Note 2.1) 17,867 15,587 81,662 1,034 2,647 4,563 4,054 127,414

Canadia Bank Plc.10. COMPUTER SOFTWARESoftware Work in progress TotalUS$ US$ US$Year ended 31 December 2009CostAt beginning of year 1,722,196 - 1,722,196Addition 222,300 - 222,300At end of year 1,944,496 - 1,944,496Accumulated amortisationAt beginning of year 591,845 - 591,845Amortisation 637,823 - 637,823At end of year 1,229,668 - 1,229,668Net book value 714,828 - 714,828Million Riel equivalent (Note 2.1) 2,980 - 2,980Annual Report 200948Year ended 31 December 2008CostAt beginning of year 591,878 1,055,625 1,647,503Additions 73,443 1,250 74,693Transfer from Work-in-progress 1,056,875 (1,056,875) -At end of year 1,722,196 - 1,722,196Accumulated amortisationAt beginning of year 475,228 - 475,228Amortisation 116,617 - 116,617At end of year 591,845 - 591,845Net book value 1,130,351 - 1,130,351Million Riel equivalent (Note 2.1) 4,613 - 4,61311. PROPERTY FORECLOSEDProperties foreclosed are assets obtained by taking possession of collateral held as security for loans whichare in default.These assets are not held for operational purposes and will be disposed of to recover the outstandingamount within the maximum allowable period of twelve months based on the guidelines issuedby the NBC.On 22 December 2008, the Bank foreclosed a piece of land with fair value of US$2.10 million.On 19 December 2009, the Bank entered into an agreement to sell the foreclosed property for US$2.09million payable in two installments, 20% upon sale and 80% after nine months from the date of sale. On 21December 2009, the Bank received the 20% payment amounting to US$0.42 million while theremaining 80% was recognised as "Sales contract receivable" under "Other assets" in the balance sheet.The loss on sale amounting to US$0.01 million was included in "Others" under "General and administrativeexpenses" in the income statement (see Note 24).

Canadia Bank Plc.12. OTHER ASSETS2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Sales contract receivable (Notes 9 and 11) 10,081,740 42,031 - -Accrued interest receivable 2,448,914 10,209 2,242,535 9,152Other advances 749,062 3,123 435,788 1,778Prepaid expenses 709,682 2,959 127,198 519Deposits with companies outside Cambodia 215,833 900 259,896 1,061Travelers cheques purchased 20,006 83 93,214 380Others 1,078,205 4,495 1,122,267 4,58015,303,442 63,800 4,280,898 17,47013. DEPOSITS FROM BANKS2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Current accounts 122,338 510 78,327 320Saving accounts 2,345,390 9,778 2,392,425 9,763Fixed deposits 30,821,394 128,494 23,307,229 95,117Margin deposits 18,000 75 - -33,307,122 138,857 25,777,981 105,20049Annual Report 2009Current accounts and margin deposits are non-interest bearing whereas savings and fixed deposits bear thefollowing interest rates per annum:2009 2008Current accounts 0.50% - 1.00% 0%Saving accounts 0.75% 0.75%Fixed deposits 2.00% - 7.00% 4.25% - 5.30%

Canadia Bank Plc.14. DUE TO CUSTOMERS2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Current accounts 27,743,840 115,664 34,315,531 140,042Saving accounts 198,279,043 826,625 201,861,505 823,797Fixed deposits 328,358,352 1,368,926 199,729,928 815,098Margin deposits 661,764 2,759 455,045 1,856555,042,999 2,313,974 436,362,009 1,780,793Current, savings and fixed deposits bear annual interest rates as follows:2009 2008Current accounts 0.50% - 1.00% 0%Saving accounts 0.75% 0.75% - 4.75%Fixed deposits 3.00% - 7.50% 3.00% - 9.70%Annual Report 200950Margin deposits, which are non-interest bearing, represent the aggregate balance of required non-interestbearing cash deposits from customers for letters of credit and guarantees outstanding at year end (see Note 29).15. CURRENT TAX LIABILITIES2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Balance at beginning of year 4,834,595 20,156 4,421,143 18,043Charge for the year (Note 27) 4,172,434 17,395 5,518,412 22,521Income tax paid during year (5,382,730) (22,441) (5,104,960) (20,834)3,624,299 15,110 4,834,595 19,730Income tax is calculated by applying the corporate tax rate to taxable income.The Bank has obtained tax clearance up to the fiscal year 2008. The current year's tax is subject to the TaxDepartment's assessment, the outcome of which cannot be determined as at the date of these financialstatements.

Canadia Bank Plc.16. BORROWINGS2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Short-term overdraft with NBC - - 3,105,467 12,674Term borrowing 3,234,615 13,485 3,951,812 16,1273,234,615 13,485 7,057,279 28,801Term borrowing represents loan from KfW through the Ministry of Economy and Finance ("MoEF") that resultedfrom loan and finance agreements between the Bank, KfW and MoEF dated 23 April 2003 for Small and MediumEnterprise ("SME") term-lending I and dated 18 October 2005 for SME term- lending II.The agreements stipulatethat the funds borrowed from KfW through MoEF shall be sub-lent to Small and Medium Enterprises to buildSME capacity in Cambodia. The sub-loans are classified as an asset of the Bank under loans and advances tocustomers. KfW borrowing is unsecured and bears annual interest at an average rate of 6.98% (2008: 5.81%).17. SUBORDINATED DEBTOn 28 October 2005, the Bank entered into an agreement with Mr Pung Kheav Se, a main shareholder of theBank through CIHP, to provide the Bank with a subordinated loan of US$7.08 million for the purpose ofacquiring shares in FTB. This subordinated debt is unsecured, non-interest bearing and has no fixed terms ofrepayment. This subordinated debt was approved by the NBC on 28 December 2005.The subordinated debt is treated as a liability for financial reporting purposes and included as capital Tier II inthe Bank's net worth calculation in accordance with the guidelines of the NBC (see Note 33).51Annual Report 200918. PROVISION FOR STAFF GRATITUDE2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Provision for staff benefits 1,095,550 4,567 810,350 3,307The Bank has provided its employees with retirement and resignation benefit plan since August 2006. Movementsin the provision for staff benefits are as follows:2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)At beginning of year 810,350 3,378 - -Provision 356,938 1,488 837,790 3,419Payments (71,738) (299) (27,440) (112)At end of year 1,095,550 4,567 810,350 3,307

Canadia Bank Plc.19. OTHER LIABILITIES2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Accrued interest payable 7,460,874 31,104 4,989,586 20,363Staff bonus payable 361,075 1,505 288,497 1,177Accounts payable 242,598 1,012 298,845 1,220Other taxes payable 186,991 780 166,921 681Accrued expenses 148,543 619 162,807 664Others 2,030,755 8,467 492,796 2,01110,430,836 43,487 6,399,452 26,11620. SHARE CAPITALAnnual Report 200952The Bank's total authorised share capital is 40,545,000 shares with a par value of US$ 1 per share. All shares arefully paid and owned by CIHP.21. NET INTEREST INCOME2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Interest income:Loans and advances to customers 47,069,716 196,234 50,824,983 207,417Other banks 274,633 1,145 1,099,034 4,485NBC 108,719 453 785,224 3,205Total interest income 47,453,068 197,832 52,709,241 215,107Interest expense:Non-bank customers' deposits 18,434,025 76,851 12,419,340 50,683Other banks 1,256,323 5,238 704,617 2,876Borrowings 291,359 1,215 240,071 980Total interest expense 19,981,707 83,304 13,364,028 54,539Net interest income 27,471,361 114,528 39,345,213 160,568

Canadia Bank Plc.22. NET FEE AND COMMISSION INCOME2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Loan commitment fees 2,097,084 8,743 2,882,884 11,765Commission from remittances 1,680,612 7,006 2,284,365 9,322Other fees and commission 1,583,155 6,600 1,539,708 6,284Miscellaneous loan fees and charges 920,709 3,838 1,123,807 4,586Income from letters of credit 346,062 1,443 430,822 1,758Fees for telex, fax and phone 217,238 906 294,744 1,203Fees for credit card advancesand late payments 151,582 632 146,575 598ATM/Credit card annual fees 126,362 527 128,045 523Total fee and commission income 7,122,804 29,695 8,830,950 36,039Fee and commission expense (1,133,801) (4,727) (1,087,439) (4,438)Net fee and commission income 5,989,003 24,968 7,743,511 31,60123. OTHER OPERATING INCOME53Annual Report 20092009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Gain on sale of shares in FTB (Note 8) 3,920,000 16,342 - -Gain on foreign exchange currency 865,464 3,608 572,116 2,335Rental income 142,176 593 64,450 263Other income 274,086 1,143 443,296 1,8095,201,726 21,686 1,079,862 4,407

Canadia Bank Plc.24. GENERAL AND ADMINISTRATIVE EXPENSES2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Annual Report 200954Employee benefit expense (Note 25) 5,517,644 23,003 5,597,598 22,845Depreciation and amortisation 2,301,846 9,596 1,282,794 5,235Utilities 589,052 2,456 427,646 1,745Communication 505,152 2,106 452,729 1,848Advertising and public relations 405,039 1,689 397,254 1,621Building rental 393,919 1,642 299,544 1,222Charitable donations and gifts 349,901 1,459 968,163 3,951Travel, accommodation and foods 316,122 1,318 439,340 1,793Taxes and duties 273,356 1,140 327,251 1,336Repair and maintenance 256,190 1,068 254,426 1,038Legal and professional fees 153,332 639 219,530 896Stationery and supplies 126,007 525 53,692 219Printing and forms 104,816 437 117,352 479Motor vehicles 62,952 262 124,787 509Furniture, fixtures and equipment expenses 42,569 177 42,335 173Insurance 21,822 91 14,449 59Others 295,370 1,231 389,251 1,58811,715,089 48,839 11,408,141 46,55725. EMPLOYEE BENEFIT EXPENSE2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Salaries 4,816,874 20,082 4,263,003 17,398Staff gratitude benefits 356,938 1,488 837,790 3,419Other short term benefits 343,832 1,433 496,805 2,0285,517,644 23,003 5,597,598 22,845

Canadia Bank Plc.26. PROVISION FOR LOAN LOSSES - NET2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Provision for loan losses (Note 7a) 8,453,281 35,242 13,593,843 55,476Recovery of loan losses (Note 7a) (6,029,780) (25,138) (4,425,460) (18,060)2,423,501 10,104 9,168,383 37,41627. INCOME TAX EXPENSEThe Bank's tax returns are subject to periodic examination by the Tax Department. As the application of tax lawsand regulations to many types of transactions is susceptible to varying interpretations, amounts reported in thefinancial statements could be changed at a later date, upon final determination by the Tax Departmenta) Current income tax expense2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Current income tax expense 4,172,434 17,395 5,518,412 22,521Reconciliation between accounting and taxable profit is as follows:55Annual Report 20092009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Accounting profit before income tax 24,523,500 102,239 27,592,062 112,603Non-taxable income (4,148,212) (17,294) - -Non-deductible expenses 486,885 2,030 - -Taxable profit subject to 20% tax rate 20,862,173 86,975 27,592,062 112,603Current income tax expense 4,172,434 17,395 5,518,412 22,521In accordance with Cambodian tax laws, the Bank has an obligation to pay corporate income tax of either tax onprofit at the rate of 20% on taxable profit or minimum tax at 1% of turnover, whichever is higher.b) Deferred taxNo deferred tax has been recognised in the financial statements as there are no material temporary differences.

Canadia Bank Plc.28. CASH GENERATED FROM (USED IN) OPERATIONS2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Annual Report 200956Profit before income tax 24,523,500 102,239 27,592,062 112,603Adjustments for:Depreciation and amortisation 2,301,846 9,596 1,282,794 5,235Provision for loan losses (Note 7a) 8,453,281 35,242 13,593,843 55,476Recovery of loan losses (Note 7a) (6,029,780) (25,138) (4,425,460) (18,060)Provision for staff gratitude 285,200 1,189 810,350 3,307Gain on disposal of property and equipment (228,212) (952) (33,963) (139)Gain on disposal of FTB shares (3,920,000) (16,342) - -Changes in working capital:Balances with other banks (8,326,744) (34,714) 475,701 1,941Reserve requirement with the NBC (7,178,758) (29,928) (23,999,976) (97,944)Loans and advances to customers 27,591,298 115,028 (67,366,591) (274,923)Other assets (11,022,544) (45,953) 632,513 2,581Property foreclosed 2,100,000 8,755 2,412,741 9,846Deposits from banks 7,529,141 31,389 19,038,577 77,697Due to customers 118,680,990 494,781 (15,208,054) (62,064)Other liabilities 4,031,384 16,807 1,255,786 5,126Cash generated from(used in) operations 158,790,602 661,999 (43,939,677) (179,318)29.COMMITMENTS AND CONTINGENT LIABILITIESa) Loan commitments, guarantees and other financial liabilitiesContractual amounts arising from off-balance sheet financial instruments that the Bank committed to extendcredit to customers, guarantees and other facilities are as follows:2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Unused portion of approved credit facilities 39,828,331 166,044 28,459,913 116,145Bankers' acceptance 3,707,247 15,455 362,426 1,479Documentary credit 3,309,806 13,799 3,500,945 14,287Performance and bankers' guarantees 1,407,072 5,866 644,632 2,631Others 66,197 276 105,406 43048,318,653 201,440 33,073,322 134,972No material losses are anticipated as a result of these transactions.

Canadia Bank Plc.29. COMMITMENTS AND CONTINGENT LIABILITIES (continued)b) Lease commitmentsWhere the Bank is the lessee, the future minimum lease payments under non-cancellable operating leases of itsbranches in Phnom Penh and provinces are as follows:2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Not later than one year 477,785 1,992 307,385 1,254Later than one year and not later thanfive years 1,374,815 5,732 770,315 3,144Over five years 2,205,518 9,195 2,111,368 8,6164,058,118 16,919 3,189,068 13,014c) Capital expenditure and other service commitmentsCapital commitments authorised and contracted for new office buildings, new core bankingsoftware and other related services as at balance sheet date are as follows:2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)57Annual Report 2009Not later than one year 1,158,801 4,831 5,656,910 23,086Later than one year and not later thanfive years - - 622,188 2,5391,158,801 4,831 6,279,098 25,62530. RELATED PARTY TRANSACTIONSA number of banking transactions are entered into with related parties in the normal course ofbusiness which include loans, deposits and foreign currency transactions.Related party transactions, outstanding balances at year-end, and related expense and income forthe year are as follows:

Canadia Bank Plc.30.RELATED PARTY TRANSACTIONS (continued)a) Loans and advances to directors and key management2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)At beginning of year 180,805 754 235,264 960Loans advanced during the year 64,436 268 137,554 561Loan repayments received (39,364) (164) (192,013) (784)At end of year 205,877 858 180,805 737Interest received 17,867 74 31,859 130Loans to directors and key management earn annual interest at rates ranging from 10% to 12%.b) Deposits from related partyAnnual Report 2009582009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Non-interest bearing deposits in a current account 161,159 672 225,941 922c) Deposits from related parties2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Savings deposits from:Parent company 142,509 594 76,230 311Directors and key management 492,460 2,053 644,967 2,632Other related companies 147,228 614 146,680 599Term deposits from an affiliate company 4,200,000 17,509 4,200,000 17,140Total deposits 4,982,197 20,770 5,067,877 20,682Interest paid 281,019 1,172 2,783 11

Canadia Bank Plc.30.RELATED PARTY TRANSACTIONS (continued)The saving deposits from parent entity, directors and key management bear annual interest at0.75%. Term deposits from an associate company bear annual interest at 5.5%.d) Subordinated debt2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Subordinated debt from Mr. Pung Kheav Se 7,080,000 29,517 7,080,000 28,894The subordinated debt is non-interest bearing and with no fixed term of repayment.This subordinate debt was used to finance the acquisition of FTB shares.e) Key management compensation2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)59Annual Report 2009Salary and short term benefits 501,975 2,093 431,975 1,763f) Other transactions with related parties2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Management fee charged by parent entity 33,000 138 30,250 123

Canadia Bank Plc.31. FINANCIAL RISK MANAGEMENTThe Bank's activities expose it to a variety of financial risks: credit risk, market risk (including currency risk,interest rate risk and price risk), and liquidity risk.Taking risk is core to the financial business, and the operationalrisks are the inevitable consequence of being in business.The Bank does not use derivative financial instruments such as foreign exchange contract and interest rateswaps to manage its risk exposure.The Bank holds the following financial assets and liabilities:2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Annual Report 200960Financial assetsCash on hand 35,945,109 149,855 42,825,814 174,772Balances with the NBC 198,667,290 828,244 72,046,256 294,021Balances with other banks 81,939,255 341,605 28,785,020 117,472Loans and advances tocustomers - net 360,587,399 1,503,289 390,602,198 1,594,047Other assets 12,766,493 53,223 2,595,645 10,593Total financial assets 689,905,546 2,876,216 536,854,933 2,190,905Financial liabilitiesDeposits from banks 33,307,122 138,857 25,777,981 105,200Due to customers 555,042,999 2,313,974 436,362,009 1,780,793Borrowings 3,234,615 13,485 7,057,279 28,801Subordinated debt 7,080,000 29,517 7,080,000 28,894Other liabilities 8,213,090 34,240 5,739,735 23,424Total financial liabilities 606,877,826 2,530,073 482,017,004 1,967,112Net financial assets 83,027,720 346,143 54,837,929 223,79331.1 Credit riskThe Bank takes exposure to credit risk, which is the risk that counterparty will cause a financial loss to the Bank byfailing to discharge an obligation. Credit risk is the most important risk for the Bank's business. Credit exposurearises principally in lending activities.There is also credit risk in off-balance sheet financial instruments, such as loancommitments.The credit risk management is carried out by the Bank's credit committee.

Canadia Bank Plc.31. FINANCIAL RISK MANAGEMENT (continued)31.1 Credit risk (continued)a) Credit risk measurementThe Bank assesses the probability of default of individual counterparties using internal rating tool. Creditcommittee is responsible for determining the risk rating for each borrower.In measuring credit risk of loans and advances to customers at a counterparty level, the Bank reflects the ninerisk rating grades which are: (i) minimal risk, (ii) below average risk, (iii) average risk, (iv) above average risk, (v)higher than above average risk but still acceptable, (vi) watch, (vii) substandard, (viii) doubtful and (ix) loss.Risk ratings are reviewed and updated at least annually, and in event of change of loan terms and conditionsincluding extension; repayment irregularities or delinquencies; and adverse information relating to theborrower or transaction.b) Risk limit control and mitigation policiesThe Bank operates and provides loans and advances to individuals or enterprises within the Kingdom ofCambodia.The Bank manages, limits and controls the concentration of credit risk whenever it is identified. Largeexposure is defined by the NBC as overall credit exposure to any individual beneficiary which exceeds 10% ofthe Bank's net worth.The Bank is required, under the conditions of Prakas No. B7-06-226, to maintain at all times a maximum ratio of20% between the Bank's overall credit exposure to any individual beneficiary and the Bank's net worth. Theaggregation of large credit exposure must not exceed 300% of the Bank's net worth.The Bank employs a range of policies and practices to mitigate credit risk.The most traditional of these is the takingof security in the form of collateral for loans and advances to customers.The Bank implements guidelines onthe acceptability of specific classes of collateral or credit risk mitigation. The principal collateral types assecurity for loans and advances to customers are:• Mortgages over residential properties (land, building and other properties);• Charges over business assets such as land and buildings; and• Cash in the form of margin deposits.61Annual Report 2009c) Impairment and provisioning policiesThe Bank is required to follow the mandatory credit classification and provisioning in accordance with PrakasB7-09-074 dated 25 February 2009. The NBC requires commercial banks to classify their loan portfolio into fiveclasses and the minimum mandatory level of specific provision is made depending on the classificationconcerned and regardless of the assets (except for cash) pledged as collateral, as follows:

Canadia Bank Plc.31. FINANCIAL RISK MANAGEMENT (continued)31.1 Credit risk (continued)c) Impairment and provisioning policies (continued)2009 2008Normal 1% 0%Special mention 3% NASubstandard 20% 10%Doubtful 50% 30%Loss 100% 100%d) Maximum exposure to credit risk before collateral held or other credit enhancements:2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Annual Report 200962Credit risk exposures relating toon-balance sheet assets:Balances with other banks 81,939,255 341,605 28,785,020 117,472Loans and advances to customers 360,587,399 1,503,289 390,602,198 1,594,047Other assets 12,766,493 53,223 2,595,645 10,593Credit risk exposures relatingto off-balance sheet items:Unused portion of approved credit facilities 39,828,331 166,044 28,459,913 116,145Guarantees, acceptances and other financialfacilities 8,490,322 35,396 4,613,409 18,827The above table represents a worse case scenario of credit risk exposure to the Bank, since collateral held and/orother credit enhancement attached were not taken into account. For on-balance sheet assets, the exposures set outabove are based on net carrying amounts. About 72% of total maximum exposure is derived from loans andadvances to customers (2008: 86%).Management is confident in its ability to continue to control and sustain minimal exposure on credit risk resultingfrom its loans and advances to customers due to the following:• Almost all loans and advances to customers are collateralised and loan to collateral value rangefrom 60% to 70%.• 90% of loan portfolio are considered neither past due nor impaired (2008: 78%).• Allowance for loan losses had been provided for those individually impaired loans in accordancewith the NBC's requirement.

Canadia Bank Plc.31. FINANCIAL RISK MANAGEMENT (continued)31.1 Credit risk (continued)e) Loans and advances to customersLoans and advances to customers are summarised as follows:2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Loans and advances neither past due norimpaired 347,174,420 1,447,370 322,845,455 1,317,533Loans and advances past due but notimpaired 21,427,759 89,333 31,398,753 128,138Loans and advances individually impaired 16,503,049 68,801 57,877,321 236,197TOTAL GROSS LOANS 385,105,228 1,605,504 412,121,529 1,681,868Less:Allowance for loan losses (23,101,677) (96,311) (20,708,846) (84,514)Unamortised loan commitment fees (1,416,152) (5,904) (810,485) (3,307)360,587,399 1,503,289 390,602,198 1,594,047For loan provisioning purposes, expected recovery from collateral (except cash) is not taken intoconsideration in accordance with the NBC's requirement.63Annual Report 2009i. Loans and advances neither past due nor impairedLoans and advances not past due are not considered impaired, unless other information is availableto indicate 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 informationis available to indicate the contrary. Gross amount of loans and advances to customers that were pastdue but not impaired are as follows:2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Past due up to 30 days 15,105,274 62,974 14,037,571 57,288Past due 31 to 60 days 2,037,660 8,495 5,396,795 22,024Past due 61 to 90 days 4,284,825 17,864 11,964,387 48,826TOTAL 21,427,759 89,333 31,398,753 128,138Value of collateral 79,496,011 331,419 62,565,025 255,328

Canadia Bank Plc.31. FINANCIAL RISK MANAGEMENT (continued)31.1 Credit risk (continued)e) Loans and advances (continued)iii.Loans and advances individually impairedIn accordance with Prakas B7-09-074 dated 25 February 2009 on the classification and provisioningfor bad and doubtful debts, loans and advances that are past due for more than 90 daysare considered impaired and a minimum level of specific provision for impairment is made dependingon the classification concerned, unless other information is available to indicate the contrary.2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Annual Report 200964Past due up to 90 days - - 7,855,986 32,060Past due 91 to180 days 603,868 2,518 28,125,338 114,780Past due 181 to 360 days 977,535 4,075 6,836,133 27,898Past due for more than360 days 14,921,646 62,208 15,059,864 61,459TOTAL 16,503,049 68,801 57,877,321 236,197Value of collateral 29,622,390 123,496 86,391,842 352,565The value of collateral is based on the valuation assessed by property valuation agents or performed internallyby the Bank during the loan approval process or upon loan renewal. As the current property price is volatile, thefair value of collateral assessed when the loan was approved might be different from current value. Under theNBC's regulation, the value of collateral is not taken into account when determining the impairment of loans andadvances to customers.iv.Loans and advances renegotiatedRestructuring activities include extended payment arrangements, modification and deferral ofpayments. Following restructuring, the loan is still kept in its current classification unless there is strongevidence of improvement in the customer's financial condition.The Bank restructured loans and advances amounting to US$15.14 million during the year and theseloans were classified as non-performing loans as at 31 December 2009 (2008: US$27.30 million).f) Repossessed propertiesRepossessed properties are classified in the balance sheet as foreclosed properties.In December 2008, the Bank foreclosed land held as security for loan with fair value of US$2.10 million. Suchproperty was subsequently sold by the Bank in 2009 following the requirement of the NBC to disposerepossessed properties within one year from date of foreclosure.

Canadia Bank Plc.31.FINANCIAL RISK MANAGEMENT (continued)31.1 Credit risk (continued)g) Concentration of financial assets with credit risk exposurei. Geographical sectorThe following table provides a breakdown the Bank's main credit exposure at theircarrying amount, as categorised by geographical region. The Bank has allocatedexposure to regions based on the country of domicile of the counterparties.Canada China and Other AseanCambodia And USA Hongkong Coutries Other Coutries TotalUS$ US$ US$ US$ US$ US$As at 31 December 2009Balances with other banks 16,437,081 11,304,963 33,648,709 18,435,613 2,112,889 81,939,255Loans and advances to customers 360,587,399 - - - - 360,587,399Other assets 12,550,660 215,833 - - - 12,766,493Total main credit exposure 389,575,140 11,520,796 33,648,709 18,435,613 2,112,889 455,293,147Million Riel equivalent (Note 2.1) 1,624,139 48,030 140,281 76,858 8,809 1,898,117As at 31 December 2008Balances with other banks 610,387 16,008,970 4,733,328 6,709,515 722,820 28,785,02065Annual Report 2009Loans and advances to customers 390,602,198 - - - - 390,602,198Other assets 2,242,535 353,110 - - - 2,595,645Total main credit exposure 393,455,120 16,362,080 4,733,328 6,709,515 722,820 421,982,863Million Riel equivalent (Note 2.1) 1,605,690 66,774 19,317 27,382 2,949 1,722,112

Canadia Bank Plc.31.FINANCIAL RISK MANAGEMENT (CONTINUED)31.1 CREDIT RISK (CONTINUED)g) Concentration of financial assets with credit risk exposure (continued)ii.Industry sectorThe following table provides a breakdown of the Bank's main credit exposure at their carrying amounts, ascategorised by industry sector.Financial Building and WholesaleImport andinstitution Service Mortgage construction and retail export Agriculture Others TotalUS$ US$ US$ US$ US$ US$ US$ US$ US$As at 31 December 2009Balances withother banks 81,939,255 - - - - - - - 81,939,255Loans and advancesto customers - 101,882,044 87,503,657 38,823,931 61,300,064 17,642,533 18,778,911 34,656,259 360,587,399Other assets 235,839 6,094,801 58,796 5,088,199 487,620 46,731 353,361 401,146 12,766,493Total main credit exposure 82,175,094 107,976,845 87,562,453 43,912,130 61,787,684 17,689,264 19,132,272 35,057,405 455,293,147Million Riel equivalent(Note 2.1) 342,588 450,155 365,048 183,070 257,593 73,747 79,762 146,154 1,898,117Annual Report 200966As at 31 December 2008Balances withother banks 28,785,020 - - - - - - - 28,785,020Loans and advancesto customers - 91,379,426 87,932,966 40,349,434 79,593,639 19,488,409 30,356,664 41,501,660 390,602,198Other assets 317,087 855,328 572,417 77,044 365,989 116,927 61,302 229,551 2,595,645Total main credit exposure 29,102,107 92,234,754 88,505,383 40,426,478 79,959,628 19,605,336 30,417,966 41,731,211 421,982,863Million Riel equivalent(Note 2.1) 118,766 376,410 361,190 164,980 326,315 80,009 124,136 170,306 1,722,11231.2 Market riskThe Bank takes 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.The Bank does not use derivative financial instruments such as foreign exchange contract and interest rateswaps to hedge its risk exposure.

Canadia Bank Plc.31.FINANCIAL RISK MANAGEMENT (CONTINUED)31.2 Market risk (continued)a) Foreign exchange riskThe Bank operates in Cambodia and transacts in many currencies, and is exposed to various currency risks,primarily with respect to Khmer Riel, Euro and Thai Baht.Foreign exchange risk arises from future commercial transactions and recognised assets and liabilitiesdenominated in a currency that is not the Bank's functional currency.The management monitors their foreign exchange risk against functional currencies. However, the Bankdoes not hedge their foreign exchange risk exposure arising from future commercial transactions andrecognised assets and liabilities using forward contracts.The table below summarises the Bank's exposure to foreign currency exchange rate risk. Included in thetable are the Bank's financial instruments at their carrying amounts by currency in US$ equivalent.US$ Riel EUR THB Gold Other TotalAs at 31 December 2009Financial assetsCash on hand 32,100,778 2,398,890 101,146 1,273,039 - 71,256 35,945,109Balances with the NBC 196,405,205 2,262,085 - - - - 198,667,290Balances with other banks 78,891,116 22,699 1,069,560 17,709 - 1,938,171 81,939,255Loans and advances to customers 359,349,391 - - 1,238,008 - - 360,587,39967Annual Report 2009Other assets 12,574,692 183,760 - 8,041 - - 12,766,493Total financial assets 679,321,182 4,867,434 1,170,706 2,536,797 - 2,009,427 689,905,546Financial liabilitiesDeposits from banks 33,304,342 2,780 - - - - 33,307,122Due to customers 545,413,074 7,506,711 37,464 2,085,750 - - 555,042,999Borrowings 3,234,615 - - - - - 3,234,615Subordinated debt 7,080,000 - - - - - 7,080,000Other liabilities 8,120,794 52,679 20,605 19,012 - - 8,213,090Total financial liabilities 597,152,825 7,562,170 58,069 2,104,762 - - 606,877,826Net position 82,168,357 (2,694,736) 1,112,637 432,035 - 2,009,427 83,027,720Million Riel equivalent(Note 2.1) 342,560 (11,234) 4,639 1,801 - 8,377 346,143Credit commitments 47,972,126 25,280 114,882 206,365 - - 48,318,653

Canadia Bank Plc.31.FINANCIAL RISK MANAGEMENT (CONTINUED)31.2 Market risk (continued)a) Foreign exchange risk (continued)US$ Riel EUR THB Gold Other TotalAs at 31 December 2008Financial assetsCash on hand 38,451,843 3,010,754 37,248 1,272,133 9,500 44,336 42,825,814Balances with the NBC 69,570,268 2,475,988 - - - - 72,046,256Balances with other banks 26,845,316 6,031 802,514 - - 1,131,159 28,785,020Loans and advances tocustomers 389,074,202 188,650 - 1,339,346 - - 390,602,198Other assets 2,567,673 - 10,709 - - 17,263 2,595,645Total financial assets 526,509,302 5,681,423 850,471 2,611,479 9,500 1,192,758 536,854,933Annual Report 200968Financial liabilitiesDeposits from banks 25,776,303 1,678 - - - - 25,777,981Due to customers 428,871,178 5,986,901 - 1,487,233 16,697 - 436,362,009Borrowings 7,057,279 - - - - - 7,057,279Subordinated debt 7,080,000 - - - - - 7,080,000Other liabilities 5,654,792 66,526 - 18,417 - - 5,739,735Total financial liabilities 474,439,552 6,055,105 - 1,505,650 16,697 - 482,017,004Net position 52,069,750 (373,682) 850,471 1,105,829 (7,197) 1,192,758 54,837,929Million Riel equivalent(Note 2.1) 212,496 (1,525) 3,471 4,513 (29) 4,867 223,793Credit commitments 32,710,537 55,813 83,534 223,438 - - 33,073,322b) Price riskThe Bank is not exposed to security price risk because it does not hold any investment classified as eitheravailable-for-sale financial asset or financial asset at fair value through profit or loss. The Bank currentlydoes not have a policy to manage its price risk.

Canadia Bank Plc.31.FINANCIAL RISK MANAGEMENT (CONTINUED)31.2 Market risk (continued)c) Interest rate riskCash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuatebecause of changes in market interest rates. Fair value interest rate risk is the risk that the value of afinancial instrument will fluctuate because of changes in market interest rates. Interest margins mayincrease as a result of changes but may reduce losses in the event that unexpected movements arise. Atthis stage, the management of the Bank does not have a policy to set limits on the level of mismatch ofinterest rate repricing.The table below summarises the Bank's exposure to interest rate risks. It includes the Bank's financialinstruments at carrying amounts, categorised by the earlier of contractual repricing or maturity dates.Up to 1 1 to 3 1 to 12 1 to 5 Over 5 Non-interestmonth month months years years earning/bearing TotalUS$ US$ US$ US$ US$ US$ US$As at 31 December 2009Financial assetsCash on hand - - - - - 35,945,109 35,945,109Balances with the NBC 44,000,000 - - - 4,054,500 150,612,790 198,667,290Balances with other banks 35,780,110 2,000,000 2,000,000 - - 42,159,145 81,939,255Loan and advances to customers 117,798,652 20,436,772 118,666,064 36,322,839 67,363,072 - 360,587,39969Annual Report 2009Other assets - - - - - 12,766,493 12,766,493Total financial assets 197,578,762 22,436,772 120,666,064 36,322,839 71,417,572 241,483,537 689,905,546Financial liabilitiesDeposits from banks 24,793,095 5,514,027 3,000,000 - - - 33,307,122Due to customers 363,324,428 49,503,092 126,901,408 15,314,071 - - 555,042,999Borrowings - 213,714 213,714 2,807,187 - - 3,234,615Subordinated debt - - - - - 7,080,000 7,080,000Other liabilities - - - - - 8,213,090 8,213,090Total financial liabilities 388,117,523 55,230,833 130,115,122 18,121,258 - 15,293,090 606,877,826Total interest rate repricing gap (190,538,761) (32,794,061) (9,449,058) 18,201,581 71,417,572 226,190,447 83,027,720Million Riel equivalent(Note 2.1) (794,356) (136,718) (39,393) 75,882 297,740 942,988 346,143

Canadia Bank Plc.31.FINANCIAL RISK MANAGEMENT (CONTINUED)31.2 Market risk (continued)c) Interest rate risk (continued)Up to 1 1 to 3 1 to 12 1 to 5 Over 5 Non-interestmonth month months years years earning/bearing TotalUS$ US$ US$ US$ US$ US$ US$As at 31 December 2008Financial assetsCash on hand - - - - - 42,825,814 42,825,814Balances with the NBC - 5,500,000 - - 4,054,500 62,491,756 72,046,256Balances with other banks 27,320,602 500,000 - - 964,418 - 28,785,020Loan and advances to customers 47,919,959 35,566,358 174,425,149 54,509,065 78,181,667 - 390,602,198Other assets - - - - - 2,595,645 2,595,645Total financial assets 75,240,561 41,566,358 174,425,149 54,509,065 83,200,585 107,913,215 536,854,933Financial liabilitiesDeposits from banks 20,200,259 5,499,395 - - - 78,327 25,777,981Annual Report 200970Due to customers 265,946,946 31,316,174 96,827,502 7,500,811 - 34,770,576 436,362,009Borrowings 3,105,467 213,714 213,714 1,709,712 1,814,672 - 7,057,279Subordinated debt - - - - - 7,080,000 7,080,000Other liabilities - - - - - 5,739,735 5,739,735Total financial liabilities 289,252,672 37,029,283 97,041,216 9,210,523 1,814,672 47,668,638 482,017,004Total interest rate repricing gap (214,012,111) 4,537,075 77,383,933 45,298,542 81,385,913 60,244,577 54,837,929Million Riel equivalent(Note 2.1) (873,383) 18,516 315,804 184,863 332,136 245,857 223,79331.3 Liquidity riskLiquidity risk is the risk that the Bank is unable to meet its payment obligations associated with itsfinancial liabilities when they fall due and to replace funds when they are withdrawn. The consequence ofthis may be the failure to meet obligations to repay depositors and fulfill commitments to lend.a) Liquidity risk management processManagement monitors balance sheet liquidity and manage the concentration and profile of debtmaturities. Monitoring and reporting, taking the form of daily cash position and projection for the next day,week and month respectively, are key periods for liquidity management. In addition, management monitorsthe movement of main depositors and projection of their withdrawals.

Canadia Bank Plc.31.FINANCIAL RISK MANAGEMENT (continued)31.3 Liquidity risk (continued)b) Funding approachThe Bank's main sources of liquidity arise from shareholder's paid-up capital and customers' deposits. Thesources of liquidity are regularly reviewed by management through review of maturity of term depositsand the key depositors.c) Non-derivative cash flowsThe table below presents the cash flows payable by the Bank under non-derivative financial liabilities byremaining contractual maturities at the balance sheet date.The amounts disclosed in the table are the contractualundiscounted cash flows, whereas the Bank manages the inherent liquidity risk based on expectedundiscounted cash flows.Up to 1 month 1 to 3 months 1 to 12 months 1 to 5 years Over 5 years TotalUS$ US$ US$ US$ US$ US$As at 31 December 2009Financial liabilitiesDeposits from banks 18,950,563 15,399,122 3,102,500 - - 37,452,185Due to customers 320,107,480 70,729,508 151,948,694 15,306,536 - 558,092,218Borrowings - 398,040 447,344 2,560,138 303,204 3,708,726Subordinated debt - - - 7,080,000 - 7,080,000Other liabilities 7,852,015 361,075 - - - 8,213,09071Annual Report 2009Total financial liabilities by remainingcontractual maturities 346,910,058 86,887,745 155,498,538 24,946,674 303,204 614,546,219Million Riel equivalent (Note 2.1) 1,446,268 362,235 648,273 104,003 1,264 2,562,043As at 31 December 2008Financial liabilitiesDeposits from banks 20,454,500 5,600,377 - - - 26,054,877Due to customers 301,951,710 32,379,729 103,283,426 8,590,706 - 446,205,571Borrowings 3,105,467 332,268 325,857 2,376,044 2,073,822 8,213,458Subordinated debt - - - 7,080,000 - 7,080,000Other liabilities 4,995,078 744,657 - - - 5,739,735Total financial liabilities by remainingcontractual maturities 330,506,755 39,057,031 103,609,283 18,046,750 2,073,822 493,293,641Million Riel equivalent (Note 2.1) 1,348,798 159,392 422,829 73,649 8,463 2,013,131

Canadia Bank Plc.31. FINANCIAL RISK MANAGEMENT (continued)31.3 Liquidity risk (continued)d) Off-balance sheet itemsi. Loan commitmentsThe contractual maturity dates of the Bank's off-balance sheet financial instruments with commitmentto extend credit to customers and other facilities, as disclosed in Note 29,, are summarised in the tablebelow.ii. Other financial facilitiesOther financial facilities, as disclosed in Note 29, are also included below based on the earliestcontractual date.iii. Operating lease commitmentsWhere the Bank is the lessee, the future minimum lease payments under non-cancellable operatingleases, as disclosed in Note 29, are summarised in the table below.iv. Capital commitmentsCapital commitments for the construction of head office buildings and acquisitions of property andequipment, as disclosed in Note 29, are summarised in the table below.Annual Report 200972No later Over 5than 1 year 1 to 5 years years TotalAs at 31 December 2009Unused portion of approved credit facility 39,828,331 - - 39,828,331Acceptances and other financial facilities 7,759,869 729,103 1,350 8,490,322Operating lease commitments 477,785 1,374,815 2,205,518 4,058,118Capital commitments 1,158,801 - - 1,158,801TOTAL 49,224,786 2,103,918 2,206,868 53,535,572Million Riel equivalent (Note 2.1) 205,218 8,771 9,201 223,190As at 31 December 2008Unused portion of approvedcredit facility 28,459,913 - - 28,459,913Acceptances and other financial facilities 4,613,409 - - 4,613,409Operating lease commitments 307,385 770,315 2,111,368 3,189,068Capital commitments 5,656,910 622,188 - 6,279,098TOTAL 39,037,617 1,392,503 2,111,368 42,541,488Million Riel equivalent (Note 2.1) 159,313 5,683 8,616 173,612

Canadia Bank Plc.32. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIESa) Financial instruments measured at fair valueThe Bank does not have financial instruments measured at fair value.b) Financial instruments not measured at fair valueThe table below summarises the carrying amounts and fair values of those financial assets and liabilities not presented on the Bank's balance sheet at their fair values.Carrying valueFair value2009 2008 2009 2008US$ US$ US$ US$Financial assetsBalances with the NBC 198,667,290 72,046,256 198,667,290 72,046,256Balances with other banks 81,939,255 28,785,020 81,939,255 28,785,020Loans and advances to customers 360,587,399 390,602,198 360,587,399 390,602,198Financial liabilitiesDeposits from banks 33,307,122 25,777,981 33,307,122 25,777,981Due to customers 555,042,999 436,362,009 555,042,999 436,362,009Borrowings 3,234,615 7,057,279 3,234,615 7,057,279Subordinated debt 7,080,000 7,080,000 7,080,000 7,080,000i. Balances with the NBC and other banksThe carrying amounts of balances with the NBC and other banks approximate their fair values, since theseaccounts consist mostly of current, savings and short-term deposits.73Annual Report 2009ii.Loans and advances to customersLoans and advances are stated net of allowance for loan losses as determined based on the requirementsof the relevant NBC Prakas.iii.Due to customers and deposits from banksThe fair values of due to customers and deposits from banks approximate their carrying amounts.The estimated fair value of deposits with no stated maturities, which includes non-interest earningdeposits, is the amount repayable on demand.Deposits with fixed interest are not quoted in active market and are short-term. Theirfair valueapproximates the carrying amount.iv.BorrowingsBorrowings are not quoted in active market and their fair value approximates their carrying amount.v. Subordinated debtThe estimated fair value of subordinated debt with no stated maturities is the amount repayable ondemand.

Canadia Bank Plc.33. CAPITAL MANAGEMENTThe Bank's objectives when managing capital, which is a broader concept than the 'equity' on the face of balancesheet, are:• To comply with the capital requirement set by the NBC;• To safeguard the Bank's ability to continue as a going concern so that it can continue toprovide return for shareholder and benefits for other stakeholders; and• To maintain a strong capital base to support the development of business.The NBC requires all commercial banks to hold minimum capital requirement, maintain the Bank's net worth at leastequal to minimum capital, and comply with solvency, liquidity and other prudential ratios.The table below summarises the composition of regulatory capital:2009 2009 2008 2008US$ Million Riel US$ Million Rielequivalentequivalent(Note 2.1) (Note 2.1)Annual Report 200974Tier I capitalStatutory capital 40,545,000 169,032 40,545,000 165,464Retained earnings 75,056,201 312,909 54,705,135 223,251115,601,201 481,941 95,250,135 388,715Tier II capitalSubordinated debt 7,080,000 29,517 7,080,000 28,894Less:Investment in another bank (3,500,000) (14,592) (10,580,000) (43,177)Intangible assets (714,828) (2,980) (1,130,351) (4,613)Loans and advances torelated parties (205,877) (858) (180,805) (737)(4,420,705) (18,430) (11,891,156) (48,527)Total regulatory capital(net worth) 118,260,496 493,028 90,438,979 369,082Subordinated debt is treated as a financial liability for financial reporting purposes and considered as a Tier IIcapital in the calculation of the Bank's net worth in accordance with the guidelines of the NBC.

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