Annual Report 2016 English Version - 中国银行全球门户网站pic.bankofchina.com/bocappd/thailand/201704/P... · · 2017-04-25Bank of China (Thai) Public Company Limited |

Bank of China (Thai) Public Company Limited 2016 Annual Report

Bank of China (Thai) Public Company Limited | Annual Report 2016

Contents

Financial Highlights 2

Message from the Executive Director 3

About BOC 5

Products and Services 7

Risk Factors and Risk Management 24

Performance Results and Financial Position Analysis 30

Corporate Governance 32

BOCT Activities 38

The Board of Directors and Top Executives 42

Report of the Audit Committee 44

Report of Board of Directors (Responsibility on a part of the Nomination

Governance Compensation and Corporate) 45

Independent Auditor’s Report 46

Financial Statement 49

Notes to Financial Statement 56

Capital Structure 104

Organization Chart 105

General Information 106

2 Financial Highlights


Financial Position (Million Baht) 2016 2015 Total Assets 43,949 58,233 Total to customers (Less deferred revenue) 21,652 41,892 Allowance for doubtful accounts 488 530 Total Liabilities 33,947 48,250 Deposit 21,996 24,990 Inter Bank and money market 10,907 22,342 Other liabilities 514 469 Share holder’s Equity 10,002 9,983 Performance results (Million Baht) Net interest income 287 400 Net fee and service income 149 80 Other Operating Incomes 607 827 Other operating Expenses 624 544 Operating Profit (Loss) (17) 283 Provision of doubtful account (Reversal) (51) 189 Net profit (Loss) 26 90 Financial ratio (%) Return on average asset (ROA) 0.05 0.16 Return on average equity (ROE) 0.26 0.91 Capital adequacy ratio 37.78 22.16 Basic earnings (Loss) per share (Baht) 0.03 0.09 Book Value per share (Baht) 10.00 9.98

Message from the Executive Director 3


Year 2016 is a year showing the progressive improvement in executing the Bank’s development strategy and establishing Compliance and Internal Control. It is also a year that the Bank has experienced the downturn of international and domestic economic environment, reversion of RMB related business and great change in business focus and method, been facing the historical transition, and tramping through the difficulties. Led by the Executive Committee and the concerted efforts of senior management, the Bank resolutely implemented the development strategy of BOC Limited, performed earnestly on the management, internal control, and achieved the significant progress in the strategy execution, compliance management, business promotion and team building.

In consistence with the localization business development strategy of BOC group, the Bank studies and implements the strategy with great concentration. On the foundation of transforming from oversea branch to subsidiary, the Bank identified itself strongly in expanding both the physical branches in territory of Thailand and internet banking. The Bank established Khon Kaen and Nakhon Ratchasima branches in north-eastern Thailand, Chiangmai branch in northern Thailand, and Hatyai branch in southern Thailand. At the mean time, the Bank also concentrated in the business opportunities in Bangkok and other key area. As of the end of 2016, the Bank has completed the establishment of in total 9 physical branches and 1 electronic branch. The internet banking business has achieved significant accomplishment in engaging customers and experienced a rapid increase of the quantities and amount of various transactions. The internal management was steadily moved forward in consistence with the requirement of “Year of Internal Control and Compliance”. Internal Control management, regulation formulation, procedure optimization, inspection and rectification, Anti-Money Laundering and Risk Management have achieved a satisfactory performance.

In accordance with the group business strategy, on the basis of transformation to subsidiary, the Bank has conducted the preparation in all aspects for the integration to the BOC Hong Kong group. It laid a solid foundation for the realization of BOC group’s south-east Asia development strategy and the Bank’s mission of being a reliable and leading bank in Thailand.

Year 2017 is expected to be a “Year of Steady Growth”. The Bank shall based on the continuous optimization compliance and internal control, enhance the profitability and increase the profit level, simultaneously intensify the meticulous management to the key departments, the study and effective improvement in operation efficiency and trans-culture coordination. The Bank shall further strengthen the coordination between wholesale business and retail business, the coordination among the inter-bank lending, deposit, settlement and treasury business, the coordination among commercial bank’s traditional business, investment banking, insurance, and leasing business.

The upcoming 3 to 5 years are the period that Thailand faces with the great development opportunities. The Bank will be continuously upholding the strategic objectives of “Serving Society, Delivery Excellence” and “Being the Reliable and Leading Bank in Thailand”, and pay close attention to the compliance and internal control management. Coping with the strategy of

4 Message from the Executive Director


“One Belt One Road” advocated by Chinese government and the promotion policy of Thai government encouraged in EEC large projects construction, the Bank will comprehensively promote and increase the service and support to mutual investment and trading of Chinese and Thai entrepreneurs, and the sustainable and steady growth of economic and trade between China and Thailand.

Mr. Zhang Lei Executive Director

About BOC 5


Bank of China (Thai) Public Company Limited (abbreviated as “BOC (Thai)”) is a wholly-owned subsidiary of Bank of China limited (abbreviated as BOC). BOC, established for more than a century, has already been developed as the most internationalized and diversified bank in China and it is listed on the Hong Kong Stock Exchange and Shanghai Stock Exchange.

Thailand is considered as one of the most strategically valued regions. BOC, as the first Chinese bank in Thailand, established its off-shore office at February 21, 1994, and was formally upgraded to a branch bank providing full banking services at March 10, 1997. After transformed as BOC (Thai) at August 26, 2014, more opportunities and success have been obtained and achieved in this land of smiles.

The bank has wide-ranged customers, and it has promoted a distinguished and customized system which is based on Chinese enterprises in Thailand, RMB internationalization, overseas Chinese business, and Chinese background banking services. We will continually contribute to establish a more influential and renowned enterprise, and uphold BOC spirit to strive for the best bank in Thailand to fulfil more social responsibilities. Next Step of BOC (Thai) BOC group has chosen the ASEAN as their important strategy region for the international business. In recent years, with the rapid development of trade and investment between China and ASEAN countries, the implementation of the “Belt and Road” Initiative and the advance of the regional free trade agreements, ASEAN market carries greater strategic significance to Bank of China. Therefore, the Bank of China Limited (Head quarter Beijing) has determined to make the equity transactions of ASEAN subsidiaries to BOC Hong Kong.

BOC (Thai) is one pilot bank of ASEAN subsidiaries in this shareholder structure adjustment project. In the 2016, BOC (Thai) has prepared to accommodate the change of shareholder structure. The BOC HK and BOC completed the equity transaction of BOC Thailand, and BOC (Thai) will officially become a member of BOC Hong Kong Group in 9 January 2017.

6 About BOC


As the leading bank in Hong Kong for nearly a century, BOC Hong Kong has the largest branch network in Hong Kong and ranks at the top in all major businesses. It is one of the three note-issuing banks in Hong Kong as well as the largest overseas RMB clearing bank. With over 12,000 employees, it owns a diversified financial service platform. After the shareholder structure adjusted, the BOC Hong Kong and BOC (Thai) will realize mutual development.



Bank of China (Thai) Public Company Limited is ready to serve the needs of both personal and corporate customers with a wide range of products and services. Moreover, we have been given a kind support by Bank of China Group which is regarded as the oldest bank in China; and the bank which provides a network covering area outside china the most causing the security, rapidity and immensity of international payment system.

1. Deposit Accounts 1.1 Saving Deposit account

You will be served convenience for deposit, withdrawal in cash and used for transfer, exchange, inward and outward remittance for personal purpose. Features:

1) Just deposit money to THB or CNY account, you can withdraw via Bank of

China ATM across China with the cheapest cost. Suitable for one who attend to study in China.

2) A variety of financial tools designed to make provide convenience ultimate. It includes passbook, UnionPay debit card which can be used to make purchasing in leading stores and cash withdrawal at UnionPay-endorsed ATM machines worldwide.

3) Financial transaction such as fund transfer, auto direct debit through BOCT electric banking channels including ATM, Internet Banking and Mobile Banking.

4) It can be used for remittance and account crediting both domestic transfer and international transfer.

5) Daily interest calculation based on outstanding balance using the rate specified by the bank and payable twice a year (June and December) as per

8 Products and Services


savings interest rates applicable at the given time.

6) A minimum of 1,000.- Baht deposit required to open an account.

1.2 Term Deposit Account

Save with confidence of stable and long-term return with Term Deposit account which chosen by you to suit your desire and predictable compound interest. Features:

1) Fix your saving period 1, 3, 6, 12 and 24 months.

2) Flexible choice whether renews with principal and interest or renew only principal on maturity date.

3) Available for Local and foreign currency such as THB, USD, CNY and so on.

1.3 Cheque Deposit Account

Your business will become much easier and flexibility suitable for business owners. Deposit, withdrawal via cheque and overdraft credit (for credit applicant only) to smooth your business at all time.

Features:

1) Cheque operated account to facilitate business’ financial transactions which makes deposit and withdrawal simple.

2) Automatic money transfer from your saving account to cheque deposit account to facilitate cheque payment. (Auto pay service)

3) Available for every size of business; Individual business owners, Small and medium business entities.

4) Cheque deposit account does not generate interest on deposit, and customer will bear overdraft interest when overdraft occurs.

2. Fund Transfer

2.1 International Remittance

Bank of China owns an outlet network covering the region in 29 countries and 643 overseas branches, with its international clearance centers in New York, London, Bangkok, Tokyo and other across the world. Furthermore, there are correspondent banks relationship throughout all major countries and regions. Therefore, we can offer customers with the best remittance paths. And together with a long years of services, we can provide the global remittance service and professional consultation service those making the remittance transaction unimpeded.

Features:

1) Quick access to inward remittance from overseas banks and competitive exchange rates or simply bank it in your Foreign Currency Deposit Account (FCD).

2) You Can make the transfer to any destination bank around the world* with global partnership and designated banks overseas for the service

3) Available currencies include: THB, USD, GBP, EUR, CHF, SGD, HKD, AUD, JPY and RMB.

*Not applicable to bank accounts or countries for which financial transfers are banned.



2.2 Domestic Fund Transfer

Ready to deliver your money to recipients through various services. Therefore, you can trust in our fast, accurate, and safe system.

Features:

1) Transfer within BOCT Accounts; Free of charge fast and safely transfers your money to recipient, simply provide account number, account name

2) Inter-Bank Transfer; secure inter-banking transfer with cooperation of local banks

3. Foreign Currency Exchange Services

Make you purchase and sale of foreign currencies easy and convenient with our professional staff and provided customers with world-class Foreign Exchange service.

Features:

1.) Accept cash foreign bank notes or deposit to THB account with no charges.

2.) Exchange service available for currency of USD, CNY and THB.

4. RMB Advance Settlement Remittance

RMB advance settlement remittance is one of the special services of Bank of China in Thailand, available for outward remittance in currency RMB, We will fixed the RMB exchange rate upon remittance transaction. Therefore, the recipient in China's Mainland will receive RMB in exact amount. Avoiding the exchange risk between foreign currency and RMB caused by fluctuations in exchange rate.

Features:

1) Available for currencies of THB and USD, the recipient in China's Mainland will receive RMB in exact amount.

Avoiding the exchange risk between foreign currency and RMB caused by fluctuations in exchange rate.

5. Bank Cards 5.1 Dual-Currency Debit Card, Chinese Yuan and Thai Baht in one card

The debit card from the Bank of China is the first bank in Thailand market, offering 2 currencies, Chinese Yuan and Thai Baht, in one card. Forget your worries about currency exchange rate risks when using your card in China, and enjoy the convenience of withdrawing cash from ATMs and paying for goods or services from any city in China and anywhere in the world with the symbol . Simply open a savings account with Bank of China and you will qualify for a debit card with no new application fees.

Card Privileges:

1) Enjoy convenience when getting cash or paying for goods or services both within the country and abroad. It's easier than ever to withdraw cash or to pay for goods or services in Chinese Yuan while in China. No more worry or hassle about



exchange rates and currency exchange rate risks.

2) Enjoy convenience and accessibility to the widespread network in China, whether you are withdrawing cash or paying for goods or services. There are

over 400,000 ATMs and over 5,000,000 merchants that accept the card across China.

3) Feel confident and secure with the personal PIN number required before each debit card use, from withdrawing cash from the ATM to paying for goods or services.

Product Features:

1) Withdrawing cash through ATM

a) ATM cash withdrawals of up to 50,000 Yuan / day in China, or 100,000 baht / day in Thailand or in other countries with an amount equivalent to 100,000 baht / day

b) Withdraw cash at over 1.4 million ATMs worldwide with the logo

2) Paying for goods or services

Payment of goods or services in an amount up to 500,000 Yuan / day in China, and 2.5 million baht / day in Thailand or in other countries with an amount equivalent to 2.5 million baht / day

a) Payment for goods or services at more than 7,000,000 UnionPay merchants worldwide

5.2 Great Wall International Union Pay Credit Card

Dual-Currency Credit Card - Chinese Yuan and Thai Baht in a single card

Giving you superior benefits every time you use the Great Wall International UnionPay credit card in China, Hong Kong, and Macau. Save money when making your payments in Chinese Yuan while using in China, to avoid currency exchange rate risk. Let you enjoy the ease and convenience each time you make purchases via Great Wall International Union Pay credit card through leading retailers in the network in Thailand and over 100 countries worldwide.

Card Privileges

1) Dual Currency Credit Card

It is the credit card that gives Chinese Yuan and Thai Baht currencies in one card. No risk of foreign currency exchange fluctuations when paying in Chinese Yuan in China.

This single credit card can be used to pay for goods or services in two currencies, Chinese Yuan and Thai Baht. It gives you maximum convenience when paying for goods or services both domestically and internationally. The card helps you save time and money when spending RMB in China. The list of transactions spent in Chinese Yuan is separated from the list of transactions spent in Thai Baht. There is no currency exchange rate risk, and it can allow you to save up to 2.5% of your entire setting payments in Chinese Yuan.



2) Travel Insurance

Get free insurance coverage when you’re on the go.

For a peace of mind while travelling, get travel insurance with coverage of up to 8 million baht, and protection from flight and luggage delays, luggage mishaps and losses, by ACE INA Overseas Insurance, the world's leading and trusted insurance provider.

3) Installment Plan

Make easy payments on every purchase.

Ease your payment burden with the Installment Plan. When you use your credit card to pay for goods or services over the amount of 3,000 baht/ transaction or 5,000 baht/bill statement, you may apply the installment plan and choose to make payments in 3, 6 or 9 installments at fees of 2%, 4% and 6% respectively.

4) Rewards Points

Seamlessly earn points for redemption of great rewards.

Every 5 Baht or 1 Yuan spent earns 2 points when using Platinum Card, and 1 point when using Gold or Classic Card. Points can be redeemed for desired gifts and rewards at your choices.

Special with extra points! When applying the Installment Plan, earn 1 additional point for every 5 baht paid under the plan; applicable to every credit card type

5) 52-Day Interest-Free Period

Enjoy up to 52 interest-free days.

Use your credit card to pay for goods or services, and enjoy up to 52 interest-free days (depending on the date of card used transaction).

6) Cash Advance

Get quick cash advance when needed.

Add flexibility to your cash flow with cash advance through your credit card account. Withdraw cash over the counter at bank branches in the country and in China, or get cash through any Bank of China ATM or any ATM with the logo

7) Free Joining Fee

It’s free to join, and the annual fee is waived for the first year on both primary and supplementary cards for new cardholders. Also, no annual fee is charged in subsequent years if you use your card at least 5 times a year.

Product Features:

1) Card can be used to pay for goods or services at any store worldwide that displays

2) Card can be used to withdraw cash at any Bank of China ATM or any global ATM bearing the logo

3) Card grants more convenience and savings when used in China; there is no currency exchange rate risk when paying for goods or services in RMB, allowing cardholders to save up to 2.5% of your entire setting payments in Chinese Yuan



5.3 Great Wall International MasterCard Credit Card

Card Privileges

1) Travel Insurance

Get free insurance coverage when you’re on the go.

For a peace of mind while travelling, get travel insurance with coverage of up to 8 million baht, and protection from flight and luggage delays, luggage mishaps and losses, by ACE INA Overseas Insurance, the world's leading and trusted insurance provider.

2) Installment Plan

Make easy payments on every purchase.

Ease your payment burden with the Installment Plan. When you use your credit card to pay for goods or services over the amount of 3,000 baht/ transaction or 5,000 baht/bill statement, you may apply the installment plan and choose to make payments in 3, 6 or 9 installments at fees of 2%, 4% and 6% respectively.

3) Reward Points

Seamlessly earn points for redemption of great rewards.

Every 5 baht spent earns 2 points when using a Platinum Card, and 1 point when using a Gold or Classic Card. Points can

be redeemed for desired gifts and rewards at your choices.

Special with extra points! When applying the Installment, earn 1 additional point for every 5 baht paid under the plan; applicable to every credit card type

4) 52-Day Interest-Free Period

Enjoy up to 52 interest-free days.

Use your credit card to pay for goods or services, and enjoy up to 52 interest-free days (depending on the date of card used transaction).

5) Cash Advance

Get quick cash advance when needed.

Add flexibility to your cash flow with cash advance through your credit card account. Withdraw cash through any Bank of China ATM or any ATM with the logo

6) Free Joining Fee

It’s free to join, and the annual fee is waived for the first year on both primary and supplementary cards for new cardholders. Also, no annual fee is charged in subsequent years if you use your card at least 5 times a year.

7) MasterCard Global Service Center

Get emergency assistance from the MasterCard Global Service Center 24-hours a day, regardless of where you are in the world.

Product Features:



1) Card can be used to pay for goods or services at any store worldwide that displays

2) Card can be used to withdraw cash at any Bank of China ATM or any global ATM with the logo

6. Mortgage Loans

Product Features:

1) BOCT Mortgage Loan enables customers to get their new home through either buying a new one, purchasing a second-hand one for all projects.

2) BOCT Mortgage Loan Refinance is a loan for borrowers to refinance the loan from another bank (refinance), with the offer of additional loan for renovation, decoration, and furniture purchase with special offers.

3) BOCT Mortgage Loan for Foreigner is a loan facilitated with a cross-border BOC branch which allows us to serve the needs of Chinese customers living in Thailand to take loan for buying property in Thailand.

Year 2016 was a successful year for the bank’s mortgage business with a double growth rate from 2015 and a five-time growth from 2014. BOCT mortgage loans are better known to medium to high

segment customers especially on its refinance mortgage loans which had high take up rate riding along with increasing demand on customers who purchased the property in the last 3 years or more and are looking for refinance to lower their existing interest rate. BOCT refinance loans’ key attractions are long term saving on interest payment, lower monthly payment amount, and ease to obtain multipurpose loan on the rising property value.

With the expansion of branch network of Bank of China (Thai) PCL, we have successfully developed relationship with local customers and developers’ projects. Expansion of direct sales force and sales models including good and fast service quality enables the bank to reach to wider customers especially in high traffic business areas as well as department stores.

7. Wealth Management

Wealth Management presently acts as a selling agent for asset management companies to provide the new investment products for both existing and new customers.

Product Features:

1) For customers who seek higher returns than normal savings or fixed deposit accounts with minimum risk aspect, BOC (T) offers an alternative investment in fixed income funds with Risk Level of not more than 4

2) Varieties of fixed income funds come from 6 medium to large reputable asset management companies, such as Asset Plus Fund Management, CIMB-Principal Asset Management, Krungsri Asset Management, Land & House Fund Management, Manulife Asset



Management, and SCB Asset Management

8. Trade Finance

8.1 Letter of Guarantee

Product Overview;

1) Issuing Domestic Letter of Guarantee

A letter of guarantee is a type of contract in which the bank unconditionally guarantees on behalf of an individual or legal entity, residing within the country, that the work or delivery obligations of the individual or legal entity will be carried out within a specified period of time and under certain conditions in terms of customs, tenders or the purchase or sale of goods. The bank guarantees to pay the recipient a specific amount under stipulated terms and conditions in the event of default or failure to fulfill contractual obligations or responsibility.

2) Issuing of Letter of Guarantee under Counter Letter of Guarantee

After receiving the syndicated LG, Bank of China (Thai) Public Company Limited would issue a letter of guarantee according to the principle of syndicated LG.

Categories of Letter of Guarantee:

Bid Bond

Bid Bond is a guarantee issued for submission together with tender documents for construction projects or for the supply of goods, in which it guarantees that the price quoted in the said tender documents would not be altered of cancelled within the tender period and if the tender is successful, would undertake to sign the respective contract or furnish any required performance bonds, etc as required within the specified period of time.

Advance Payment Guarantee

Advanced payment guarantee is issued to guarantee the refund of Advance payment received by the Applicant under a contract due to the Applicant’s non-performance of contractual obligations.

Performance Guarantee

Performance guarantee is issued to guarantee the applicant’s due and proper performance of contractual obligations in an underlying contract. The conduction according to the agreement and the quality of goods according to the standard specified in the agreement would be guaranteed by the bank. This would solve the problem of untrustworthiness between the two parties. It also the way to reduce sunk cost which wouldn’t generate any usefulness to the customer. In case of default, a sufferer would be compensated meanwhile an agreement breaker would be punished according to the condition specified in the performance bond. This would reduce breaking an agreement and many other costs which may incur.



Quality Assurance Guarantee

A Quality Assurance Guarantee is issued to guarantee product performance during the warranty/maintenance period provided under an underlying contract.

Payment Guarantee

A written document issued by Bank of China at the request of the buyer to the seller under the contract, guaranteeing the buyer will fulfill the payment obligations under the contract to purchase goods, technology, patent or labor.

8.2. Import

Product Overview;

1) Letter of Credit (L/C)

Nature of Products and Services:

The Letter of Credit is a payment undertaking by issuing bank to the exporter as it is applied by the importer. The bank will fulfill its payment obligation when the terms and conditions under the L/C are satisfied. Bank of China (Thai) Public Company Limited offers to issue irrevocable L/C services.

An irrevocable L/C is a type of L/C which cannot be canceled or modified in any way without explicit consent by the affected parties involved. It can be divided into 2 types as follow;

Sight L/C: Payment will be made once receive the documents

Term L/C: Payment will be made once receive the documents and agree to pay at the maturity date

Features:

1. Improve your bargaining position in a negotiation. Opening L/C provides the exporter with a conditional payment commitment on top of the commercial credit, giving you a better credit by which you can win the favorable pricing terms for your goods.

2. Provide warranty for the cargo. The commercial credibility is replaced by the bank's credibility. The bank's involvement can ensure a safer trade. The ownership of the cargo, shipping date and quality of cargos can be well controlled by the documents and clauses.

3. Reduce the occupation of fund. For the importer who uses the L/C with credit limit, the fund occupation will be minimized during the period from the L/C issuance to the payment.

Target Customers:

1. Importers and exporters who want to promote the trade credit by making appointment on each other's business activities.

2. The imported commodity is in a seller's market and the exporter insists on a settlement with L/C.

3. Both the importers and exporters want to select trade finance due to the lack of working capital.

Application Qualifications:

1. The applicants hold the business license legally approved, registered and annually



checked as well as other valid certificates sufficient to prove the legitimacy and scope of operation.

2. The applicants shall have the qualification to engage in import and export trade.

Procedure:

1. The importer submits the Application for Issuance of L/C. Bank of China (Thai) Public Company Limited will issue the L/C based on the margin or credit line after examination and approval.

2. The exporter prepares and ships the goods in accordance with the relevant L/C clauses after having been advised of the L/C.

3. The exporter presents the documents required by the L/C. The transmitting bank mails the documents to Bank of China (Thai) Public Company Limited to ask for payment or acceptance.

4. Upon receipt of the documents, Bank of China (Thai) Public Company Limited will make payment or acceptance to the exporters after examination and approval.

5. Bank of China (Thai) Public Company Limited makes the payment when the acceptance is due.

2) Inward Collection


Entrusted by a foreign correspondent bank or an affiliated bank, and according to their

instructions, Bank of China (Thai) Public Company Limited collects import payments and delivers the relevant commercial documents to the importer.

Functions: It is used for international trade settlement in two forms: documents against payment (D/P) and documents against acceptance (D/A).

Features:

1. Low cost - low banking fees can help the enterprises reduce the financial expenses and control the costs.

2. Easy to use - The procedure is simple and it is easy to use compared with L/C.

3. Reduce funds occupation - no advance payment is required when the exporter prepares and ships the goods. The goods documents can be obtained immediately, and the goods become disposable upon payment or acceptance.

4. Improve cash flow - with D/A, the importer can immediately obtain the goods documents and dispose the goods after acceptance, and can make payments later when the cash inflow is generated by the sales of goods. Almost no fund is occupied, so the company's financial position and solvency can be greatly improved.

Target Customers:

1. Importers who want to pay to the exporters with lower cost and simpler procedure compared with L/C.

2. Importers with sufficient working capital can use D/P.

3. Importers with insufficient working capital who want the exporters to grant the financing facility of forward payment can choose D/A provided that they have a good business relationship with the exporters.



Application Qualifications:

1. The applicants hold business license legally approved, registered and annually checked as well as other valid certificates sufficient to prove the legitimacy and scope of operation. 2. The applicant shall have the qualification to engage in import and export trade.

Procedure:

1. The foreign exporter initiates collection by submitting the relevant documents to its bank after the preparation and shipment of goods.

2. The exporter's bank mails the collection documents to Bank of China (Thai) Public Company Limited, and the branch will notify the importer to pay (D/P) or accept (D/A) as instructed.

3. After the importer has made payment or acceptance to the exporter via Bank of China (Thai) Public Company Limited, it shall release the documents to the importer.

4. When the acceptance under D/A is due, the importer shall pay to the exporter via Bank of China (Thai) Public Company Limited.

3) Trust Receipt (T/R)


T/R is a common financing provided by the bank to the importer. The customer was granted with a revolving T/R facility after its credit standing, financial profile is assessed by the bank.

T/R limit has a fixed tenor and usually used together with Import L/C limit.

Bank provides financing by paying the supplier directly and effectively owns title to the goods. The importer sells the goods

on the behalf of the bank, subsequently, the proceeds is used to pay off the loan.

8.3 Export

Product Overview;

1) Export advising of L/C

Speed and reliability are what makes L/C advising stand out, supported by our worldwide network. Bank of China is ready to fulfill your needs with our excellence service; exporters can receive the authenticated L/C immediately as Bank of China receive L/C from issuing bank.

2) Transferred Letter of Credit

Transferred L/C is a beneficial service for exporters who act as a middle man. As exporters receive transferrable L/C from issuing bank, Bank of China will transfer the right and benefit upon your request to the second beneficiary without establishing new transaction.

3) Export Bills Negotiation/Discount

Export bill negotiation/discount is a service that will help exporters to control the risk by presenting the export documents that comply with conditions in L/C through Bank of China. Exporters can benefit from our extensive correspondent network in overseas to speed up the payment within the term period.

4) Export Bills for Collection



With our export bills for collection service, exporters can simply send export documents to Bank of China and we will help exporters check and send export documents to buyer’s bank in a timely manner. Export documents will be released to buyer upon payment or against acceptance.

5) Forfeiting

Forfeiting is another service when exporters want to eliminate the risk of issuing bank running into financial difficulties, exchange control or political problems in importers’ country. Our forfeiting (without recourse) will help exporters reduce these risk and provide you liquidity as exporters send us the acceptance with payment term and due date to Bank of China.

9. Treasury & Foreign Exchange Product

9.1 Foreign Exchange Spot Deal

Foreign exchange spot deal means that two parties enter into deals at the spot exchange rate of foreign exchange markets on the very day and complete corresponding foreign exchange deliveries on the second working day following the transaction date (T+2)

Features:

1. Customers entrust the bank with buying one currency and selling another, to achieve the conversion between different foreign currencies.

2. This product implements a direct quotation without intermediate conversion through CNY, which is closer to market price levels and will reduce transaction costs for customers.

9.2 Outright Forward

Forward Transaction of Foreign Exchange refers to the foreign exchange transaction on a foreign exchange rate agreed by the buyer and seller under a foreign exchange

contract, and for delivery on an agreed day, which is generally a certain day after the second working day after the transaction.

Features:

1. A customer entrusts one bank with the purchasing of a certain currency and the selling of another currency at a contractual foreign exchange rate on a specified settlement day to achieve the conversion between various foreign currencies.

2. The forward price of a currency with a high interest rate is cheaper, so, the risk of the exchange rate is completely locked, and the foreign exchange rate of delivery day in the future is determined on the transaction day.

Optional forward transaction of foreign exchange

Optional forward transaction of foreign exchange refers to the foreign exchange forward deal that enables customers to settle with prescribed foreign exchange rate on any working day within a certain contracted period in the future. Customers can choose the settlement date by themselves.

Features:

1. Customers entrust Bank of China to settle with the contracted foreign exchange rate within a certain designated period, and implement the conversion between different foreign currencies by buying a kind of currency and selling another.

2. When the settlement date is uncertain, Bank of China can fix the foreign exchange rate of a certain period in the future at a level on the settlement date to fully lock up the exchange rate risk, and to reduce the probability of breach of agreement caused by customers’ failure to normally perform the trade contract.

9.3 Foreign Exchange Swap



Foreign exchange swap refers to currently buying one currency and selling another currency while forward re-selling the bought currency and buying another one currency.

Features:

1. The combination of foreign exchange spot and forward deals can lock up the exchange rate risk, which enable customers match up, with no need to bear risk of foreign exchange rate changes, the cash flows of assets in two foreign currencies to satisfy corporate demands.

2. Trading currency types: all kinds of freely convertible currencies mainly including USD and THB

10. Corporate Loans 10.1 Global Credit Line

Global credit line is an extension of the application scope of traditional credit line products, and its major function is to fulfill the financing needs of group companies' overseas affiliates. To be specific, answering to enterprises' strategy of cross-border development, global credit line takes advantages of Bank of China's far-ranging overseas branch networks to provide group companies' overseas affiliates an overall financing package

Features:

1) It provides customers with prompt, comprehensive and standard bank services by easy and efficient cooperation mode.

2) It can save the cooperation costs of the customer and the bank. By cooperation between enterprises and the bank, the

operational procedures are simplified and financing efficiency is improved.

3) It can strengthen the customer's self-financing and centralized management. With the bank's help, the corporate headquarter can realize the centralized control over its overseas affiliates' financing and enhance the management of overseas operational risks.

10.2 Fixed Assets Loan

Fixed assets loans are issued to address the financing demand of the enterprises' fixed assets investment activities. Enterprises' investment activities in fixed assets include: infrastructure construction, technology transformation, new product development and manufacturing and related activities such as house purchase, engineering project construction, technology and equipment purchase and installation.

Features:

1) Generally the loan amount is relatively large.

2) Generally the term is relatively long, most are long or medium term with installment schedule.

3) On the way of the loan guarantees, except providing the necessary security, generally require taking the new added fixed assets of the project as mortgage.

4) Regarding the application process, the loans should be applied and approved on case by case basis.

10.3 Working Capital Loan



Working capital loan is issued to meet customers' short term financing demand during the process of production and operation, thus ensuring the normal running of production and operation activities.

Features:

1) As an efficient and practical means of financing, working capital loan is one of the most popular credit products, characterized by the short loan term, simple procedures, stronger turnover, and lower financing costs.

2) In terms of the term, it can be divided into short-term working capital loan less than one year and one to three-year medium-term working capital loan.

3) In terms of the loan form, it can be divided into secured loan, which can be further divided into many forms such as guarantee, mortgage and pledge, and credit loan.

4) By the using method, it can be divided into the short term working capital loan that is applied and reviewed case by case and the credit line of the working capital loan within which can be easily borrowed, used and repaid during the bank's preset time.

10.4 Credit Line

Credit line refers to a flexible, convenient and recyclable product provided by Bank of China to the customers. Bank of China may quickly extend the short-term credit to customers regardless of its accumulated amount and frequency, as long as the balance of credit extension is not over the standard of corresponding service.

With flexible arrangement, total credit line can be further divided into limits for different products such as loan, L/C, export bill purchase, letter of guarantee, bank acceptance draft, acceptance draft discounting and so on. Credit line is applicable in all credit extension services with a term within one year (inclusive), which can be extended to over one year for letter of guarantee of tender, performance, advance payment, customs and marine under the item of letter of guarantee.

Features:

1) Provide convenience to enterprises' short-term financial arrangement. Since credit line can be recycled, financial plan of enterprises may become more definite and systematic. Enterprises needn't arrange funds for current operations under the credit line.

2) Meet the enterprises’ demand for general financing. Credit line includes varieties of limits for different products such as loan, L/C, letter of guarantee and other credit extension services, which covers key financing demands of customers. With approval of Bank of China, such limit can complement and overlap each other, increasing its utilization.

3) Simplify approval formalities of credit extension of enterprises. After acquiring credit line, the customers are entitled to decide how to use it and when to use it at their own discretion and do not apply the credit extension bank for approval item by item according to the provisions of the contract. Thus customers shall not go through the procedures of single credit extension approval, such as business information survey, guarantee



conform and other formalities as required.

10.5 Domestic Guarantee and Foreign Loan

For Chinese "going out" enterprises' subsidiaries in Thailand which are in need of production or operation fund and credit support from banks, they may apply for financing from Bank of China (Thai) Public Company Limited under the following precondition: the foreign subsidiary shall be secured by a SLC or L/G issued by a domestic branch of Bank of China or other commercial bank in which Bank of China (Thai) Public Company Limited is appointed as the beneficiary.

Features:

1) It can meet the financing needs for the "going out" enterprises to establish subsidiaries in Thailand: A strong domestic corporate customer may have a Thai subsidiary with limited strength or not qualified for applying for financing credit independently from Bank of China (Thai) Public Company Limited. Therefore, the Thai subsidiary may solve its financing needs through "domestic guarantee and foreign loan".

2) It is simple and convenient: The financing application is handled through guarantee with rapid examination and approval of credit line, as well as easy procedures.

10.6 Syndicated Loan

Syndicated loan refers to financing method where two or more lenders provide funds for one or more companies with one loan agreement based on agreed term and

conditions. The product mainly serves large group customers and large construction projects. With syndicated loan, the borrower can obtain large amount of long-term financing under uniform loan conditions. During the raising of syndicated loan, the borrower can boost its market influence and improve market image.

Features:

1) Large amount and long term. It can meet borrowers' demand for funds of long term and large amount.

2) Less time and effort for financing. It is usually the responsibility of the arranger for doing the preparation work of establishing the syndicate after the borrower and the arranger has agreed on loan terms by negotiation. During implementation of the loans, the borrower does not need to face all members of the syndicate, and relevant withdrawal, repayment of principal with interest and other management work related to the loans shall be fulfilled by the agency bank.

3) There is no need for the borrower to meet face to face with the members. The bank who is the agency would be the one who manages all of the loan transactions such as cash depositing, cash refunding, interest paying, etc.

4) Diversified approaches for syndicated loans. The same loan syndications can include many forms of loans, such as fixed-term loans, revolving loans, standby L/C line on requirements of the borrower. Meanwhile, the borrower can also choose USD, HKD, CNY and other



currencies or currency portfolio, if needed.

5) It can help the borrowers establish a good image in the market. Successful establishment of the syndicate comes from the participants' full recognition of the borrower's financial and operational performance, by which the borrower can build up their reputation.

6) Bank of China Hong Kong Syndicated Loan Center can offer help with its advantages.

10.7 Overdraft Account

It is one of the corporate loan accounts. With the overdraft account, customers can make cheque deposit and withdrawal, and apply for an overdraft limit to ease the use of fund.

Features:

1) The main currency for this account is THB.

2) Interest will be accrued for overdraft.

11. Online Banking 11.1 Personal Online Banking

1. Bank Account

1) Account overview: it displays all account information linked to online banking by customers, including account number, alias, type, currency, available balance and account balance;

2) Transaction details: customers can make inquiry about and download the transaction details of linked accounts, including transaction date, transaction brief, currency, cash/exchange, amount received, amount paid, balance and so

on; customers can also make inquiry about transactions across various time span.

3) Term deposit account information: customers can make inquiry about the current status, currency, current balance and available balance of the term deposit account;

4) Account management: customers can change the alias of the account, cancel accounts linked to online banking, and link other account to online banking.

2. Transfer and Remittance

1) Domestic transfer: customers can transfer the funds in current account to his/her or other people's account, including: transfer among customers' accounts of the same currency, transfer among customers' accounts of different currencies (currencies exchange), and transfer to other people's current account in Bank of China (Thai) Public Company Limited.

2) Overseas remittance: customers can remit the funds in current account to an overseas account, including: general remittance (remittance directly from a current account of USD or another currency) and RMB advance settlement of foreign exchange remittance.

3) Term deposit: customers can convert the funds in current account into term deposit, or transfer mature funds to certain current account.

4) Payee management: customers can store the information of frequently used payees; therefore they can simply find certain payee's information for online remittance without inputting every time.

5) Scheduled transactions management: by using this function, customers can manage the scheduled transfer and remittance transactions and the system



handles the transactions according to customers' selection (only personal scheduled transfer in single currency is available at present).

6) Inquiry about online banking transactions: customers can make inquiry about whether the presented online banking transaction is accepted, and inquire about and print the historical transactions.

11.2 Corporate Online Banking

1. Bank Account

1) Account overview: it displays all account information linked to online banking by customers, including account number, alias, type, currency, available balance and account balance;

2) Transaction details: customers can make inquiry about and download the transaction details of linked accounts, including transaction date, transaction brief, currency, cash/exchange, amount received, amount paid, balance and so on; customers can also make inquiry about transactions across various time span.

3) Term deposit account information: customers can make inquiry about the current status, currency, current balance and available balance of the term deposit account;

4) Account management: customers can change the alias of the account, cancel accounts linked to online banking, and link other account to online banking.

2. Transfer and Remittance

1) Domestic transfer: customers can transfer the funds in current account to his/her or other people's account, including: transfer among customers' accounts of the same currency, transfer

among customers' accounts of different currencies (currencies exchange), and transfer to other people's current account in Bank of China (Thai) Public Company Limited.

2) Overseas remittance: customers can remit the funds in current account to an overseas account, including: general remittance (remittance directly from a current account of USD or another currency) and RMB advance settlement of foreign exchange remittance.

3) Term deposit: customers can convert the funds in current account into term deposit, or transfer mature funds to certain current account.

4) Payee management: customers can store the information of frequently used payees; therefore they can simply find certain payee's information for online remittance without inputting every time.

5) Scheduled transactions management: by using this function, customers can manage the scheduled transfer and remittance transactions and the system handles the transactions according to customers' selection (only Corporate scheduled transfer in single currency is available at present).

6) Inquiry about online banking transactions: customers can make inquiry about whether the presented online banking transaction is accepted, and inquire about and print the historical transactions.

24 Risk Factors and Risk Management


In 2016, as the third year for transfer to subsidiary, BOCT continuously improved its comprehensive risk management system, strengthened the coordinated management of all types of risks, constantly improved its risk management capabilities and held its risk bottom line. It continued to optimize its risk management policies and further improved its risk assessment mechanism. I Capital

1. Capital structure

BOCT is a subsidiary of Bank of China Limited. As of Dec 31, 2016, BOCT’s capital amounted to THB 9,965 million with details as follows:

Unit: Million Baht Description 2016 2015

Tier I Capital Fund Issued and paid up share capital 10,000 10,000Other reserves 1 9Deduction on Tier I capital fund (36) (38)Total Tier I capital fund 9,965 9,971 2. Capital adequacy

BOCT is required to calculate and report capital adequacy ratio to Bank of Thailand on monthly basis, and is required to maintain a minimum Capital Adequacy Ratio of 9.125% in year 2016 according to Basel III/Pillar I. BOCT actively monitors and ensures capital above the minimum requirement. As of Dec 31, 2016, BOCT’s Capital Adequacy Ratio (CAR) was 37.78%.

For the calculation approaches for each risk under pillar I of BOCT are as follows:

1) Standardized Approach (SA Method) is adopted to assess credit risk; 2) Standardized Approach (SA Method) is adopted to assess market risk; and 3) Basic Indicator Approach (BIA Method) is adopted to assess operational risk.

Unit: Million Baht Description 2016 2015

Tier I Capital Fund 9,965 9,971Tier 2 Capital Fund - -Total Capital Fund 9,965 9,971Minimum capital requirement for Credit Risk 24,540 43,217Minimum capital requirement for Market Risk 375 136Minimum capital requirement for Operational Risk 1,458 1,648Total Risk-weighted Asset 26,373 45,001Tier 1 capital to risk-weighted assets 37.78% 22.16%Total capital to risk-weighted assets 37.78% 22.16%



II. Credit Risk

Credit Risk Governance and Organization

RMC are the key oversight committees for credit risk and support the CEO and the

Board in managing BOCT’s overall credit risk exposures. The RMC serves as an executive

forum for discussions on all credit-related issues including the credit risk policies,

methodologies, systems and credit portfolios, processes.

Risk Management Department is responsible for the reporting, analysis and

management of all elements of credit risk. It develops credit policies and guidelines, and focuses

on facilitating business development within a prudent, consistent and efficient credit risk

management framework.

Corporate Business Departments are responsible for the initial the Credit proposal

based on the comprehensive survey and follow-up and monitoring the customers business after

credit granting.

Credit Risk Policies and Processes

BOCT improve the credit risk management policies in 2016. BOCT updated Bank of

China (Thai) Public Co., Ltd Credit Review & Approval Process Management Policy” to perfect

credit risk management and check and balance. For the Credit Concentration Risk, BOCT

stipulated “the Single Lending Limit Management Policy and Procedures” and “Single Lending

Limit Operating Manual”, to standard manage the credit concentration risk arose from a single

large exposure or from multiple exposures that are closely correlated.

BOCT utilizes the uniform internal rating system developed by Moody’s for overseas

institutions of Bank of China. The results from internal rating system are widely applied in

different areas, including credit approval; risk monitoring, limit setting, credit policy and risk

reporting.

BOCT generally measured and managed the quality of credit risk-bearing assets

based on the relevant rules and regulations of Bank of Thailand, which require to classify loans

into six categories, i.e. normal, special mentioned, substandard, doubtful, doubtful of loss and

loss, among which loans classified in the substandard, doubtful, doubtful of loss and loss

categories are regarded as non-performing loans. In classifying credit assets, consideration was



given to various factors that affect the quality of credit assets but always under the core criteria

of the probability of asset recovery and the extent of loss. To obtain a loan’s final risk

classification, BOCT performs standardized processes according to the “Administrative

Measures for Credit Assets Risk Classification” in terms of classifying, checking, reviewing and

approving.

BOCT strengthened risk monitoring and pre-warning systems, reinforced major risk

event reporting system, and made the rating and inspection of high-risk customers more

frequently. BOCT also conducted credit review and credit examination of credit business to

scrutinize potential risks and actively implemented rectification measures. Loan portfolio

reports are also made to monitor the structure and concentration of credit risk, including country

risk report, loan portfolio, outstanding of industry, outstanding by rating, etc.

Risk mitigation

BOCT hedges and mitigates credit risk majorly through the following 4 methods:

A. Cash collateral. The cash shall be pledged in BOCT, and BOCT will freeze such cash

in bank’s system for the control of collateral.

B. Counter Guarantee from Other Financial Institutions.

C. Corporate Guarantee. BOCT reviews the overall status and guarantee capacity of such

guarantors quarterly when implement quarterly review case by case.

D. Mortgage.

BOCT revised the collateral appraisal policy in 2016. Based on the new collateral

appraisal, BOCT strengthen the management of the work flow of collateral appraisal to ensure

the fairness of the collateral value.

Enhance the quality of Credit asset

BOCT strengthened its credit asset quality management. Pursuant to the principle of

substance over form, the Bank managed full-scope credit risks. It kept a close eye on changes in

the economic situation, intensified post-lending management and consolidated and improved its

risk monitoring and early warning mechanisms, including assessment of periodical inventory,

list management of overdue loans, management of material credit risk events, and management



of major customers, all with the aim of strengthening the proactive control of potential risks.

Overall, the Bank maintained relatively stable asset quality by enhancing the supervision of risk

analysis and asset quality control.

BOCT also stepped up the collection of NPAs and strived for reduce the special

mentioned credit assets. In 2016 BOCT succeed to collect special mentioned credit assets with

THB10 million and NPAs with USD500 thousands.

III. Market Risk

BOCT’s market risk management system is led and supervised by the Board of

Directors, Assets and Liability Committee, and Risk Management Committee to ensure market

risk taken to be within a rational scope in accordance with risk-taking ability, monitoring ability,

and management ability; to rationally arrange sources and usages of funds, cut down on passive

mismatches and structural exposures, and strictly manage the structural exposures.

Mark-to-Market is an important content in daily risk monitor and control. In normal case,

relevant data shall be directly quoted from the market and if the internal price is used for

evaluation data. And BOCT also secures the overall procedure in collecting data to be

independent from the Front Office in order to avoid interest conflicts or data manipulation.

BOCT conducts transactions in accordance with the Parent Company’s approval of

counterparty credit line strictly, doing forward transactions for customers under collateral or

credit line.

Currently, BOCT’s market risk comprises only foreign exchange rate risk. In order to

manage market risk BOCT strictly implements the limit control mechanism that is composed by

following indicators: (1) Credit limit with major counterparties, (2) FX exposure limit at end of

each business day, (3) Profit/loss (P/L) limit, and (5) PVBP. Besides, in order to minimize the

possible loss from adverse foreign exchange movement, for single transaction amount exceeding

limit, the treasury trader should square the position within half an hour and input the related

trading information into Murex System for risk management purposes.

For security investment (Bond), most bonds are purchased from BOT and MOF for

regulatory purposes. Risk indicators including VAR, PVBP and duration are used to monitor the

movement of bond prices. Those risk indicators are being monitored on daily basis and reported

to the Board of Directors and Parent Company in the following business date.



IV. Liquidity Risk

Liquidity risk management means risk that the bank is unable to meet obligations when

come due, mismatch gap between uses and sources of funds and unable to find sources of funds

on timely.

The bank sets liquidity risk plan to resolve as below:

The bank do estimate liquidity risk on daily, monthly basis for short term and long term

as Bank of Thailand notification including Liquidity coverage ratio (LCR) and Net stable

funding ratio (NSFR) and the bank is able to maintain these ratios.

The bank has liquidity risk control policy and review on annual basis and test for normal

and stress scenarios and evaluate liquidity risk 3 scenarios as well including (1) Bank’s

specific liquidity crisis (2) Market wide liquidity crisis and (3) Combination liquidity

crisis. All results are presented to Asset and Liabilities management committees

(ALCO) on at least quarterly basis

The bank do monitor liquidity risk closely and improve the liquidity risk ratios for both

normal and stress situations

The bank is able to find funds in time by funding from bank’s group and other

subsidiaries and deposit from customer. Treasury department is responsible for propose

strategies align with uses of fund

Treasury department uses over the counter derivative transactions including Foreign

Exchange contracts, Interest rate exchange contracts for operation and hedge the risk.

Operational Risk

BOCT stipulated the “Operational Risk Management Policy (Version 2016)” and

approved by the Boards. Based on the policy, BOCT continuously promoted the application of

its operational risk management system and deepened the use of operational risk management

instruments such as Risk and Control Assessment (RACA), Key Risk Indicators (KRI) and Loss

Data Collection (LDC) to identify, assess and monitor operational risk, thereby promoting

process streamlining. Supporting by parent company, BOCT enhanced its system supporting

capability by optimizing its operational risk management information system. It promoted



business continuity management, and carried out emergency drills covering key businesses to

enhance BOCT’s capacity for continuous business operation.

Compliance Management

BOCT continuously improved its compliance risk management system to better meet

compliance risk management requirements. It identified and assessed compliance risk in a

timely manner by tracking regulatory requirements and undertaking inspections and evaluations,

and released risk alerts in due time.

Follow the parent company’s anti-money laundering (AML) management, BOCT enhanced

AML management by implementing the three-year plan for AML. It enhanced the process and

system of customer identification and due diligence. It enhanced the sanction of compliance

management by improving the policies for sanction management and the functions of the

sanction list system. BOCT improved the functions of its large-amount and suspicious AML

transaction system, researched and developed new screening models for suspicious transactions,

and conducted real time control by applying customer risk ratings. It also conducted various

forms of AML trainings, and implemented AML training plans for all employees.

30 Performance Results and Financial Position Analysis


Performance Results

The bank has reported audited net profit of 26 million Baht, and 71% decrease of 64 million Baht from 90 million Baht recorded in 2015.

Unit: Million Baht Profit & Loss Statements 2016 2015 % Change

Net Interest Income 287 400 (28 %)Net Non-Interest Income 320 427 (25 %)Total Income from Operation 607 827 (27 %)Expenses from Operation 624 544 15 %Operating Profit (17) 283 (106 %)Provision of doubtful account (51) 189 (127 %)Profit before tax 34 94 (64 %)Corporate Income Tax 8 4 99 %Net Profit after Tax 26 90 (71 %) In 2016, the bank earned a net interest income of 287 million Baht, non-interest income amounted to 320 million Baht. Major factor of income was the gain on foreign exchange transaction. The Operating loss amounted to 17 million Baht, and the bank reversed the expenses related to bad debt and doubtful account of loans in the amount of 51 million Baht. In 2016, the corporate income tax expenses was 8 million Baht, This comprises of yearly income tax and deferred tax by 5 million Baht and 3 million Baht, respectively. In 2016, net earnings per share for the Bank amounted to 0.03 Baht. Financial Position

Key Balance sheet Items 2016 Balance

2015 Balance

% Change

Total Assets 43,949 58,233 (24%)Loan to customers (Less deferred revenue) 21,652 41,892 (48%)Interbank and money market in asset (Less deferred revenue) 18,465

13,221 40%

Total Liabilities 33,947 48,250 (30%)Deposits 21,996 24,990 (12%)Interbank and money market in liabilities 10,907 22,342 (51%)Shareholder’s Equity 10,002 9,983 0.19% Total assets as of 31 December 2016 were 43,949 million Baht which was decrease of 24% from the prior year. Loan to customers net of deferred revenue were 21,652 million Baht or decreased of 48% from the end of 2015. And interbank and money market were 18,465 million Baht or increase of 40% from the end of 2015. Total liabilities as of 31 December 2016 were 33,947 million Baht which was decrease of 40% from the prior year. Deposit items were 21,996 million Baht or decrease of 12% from the end of 2015. And the interbank and money market were 10,907 million Baht or decrease of 51% from the end of 2015.

Performance Results and Financial Position Analysis 31


Shareholder’s Equity of the Bank as of 31 December 2016 was 10,002 million Baht which increase of 0.19% from the end of 2015. Asset Quality At the end of 2016, the Bank’s non-performing loans (NPLs) were 828 million Baht, the NPLs to total loan before allowance for doubtful account of NPLs and after allowance for doubtful account of NPLs were as following: Percentage (%)

Key Asset Quality Ratio 2016 2015 NPLs of total loans before allowance for doubtful account 3.60 1.75 NPLs of total loans after allowance for doubtful account 2.39 1.35 Capital Adequacy Ratio At the end of 2016, the Bank had regulated capital fund of 9,964 million Baht, it totally was tier-1 capital fund. The BIS ratio stood at 37.78% of regulated capital fund per total risk assets. Percentage (%)

Capital Adequacy Ratio 2016 2015 Ratio of tier 1 capital to risk asset 37.78 22.16 Ratio of total capital to risk asset 37.78 Total capital fund less capital add-on arising from Single Lending Limit to risk asset 37.78

22.16

21.97 Credit Rating On 29 September 2016, Fitch Ratings (Thailand) has assigned Bank of China (Thai) Public Company Limited (BOC(T)) a National Long-Term Rating of ‘AAA(tha)’, with a Stable Outlook. The National Short-Term Rating is assigned at ‘F1+(tha)’.

32 Corporate Governance


The Bank recognize that good corporate governance is a crucial factor forming a basis of business sustainability and building trusts to its customers as well as remaining the reputation of BOCHK Group. Thus, the Bank endeavours to establish and promotes the culture of good corporate governance in conducting business. The Bank set up the organization structure, operational guidelines and responsibilities for good corporate governance and its operation strictly comply with the relevant laws and regulations.

In order to sustain BOCHK Group’s reputation enhance the Bank’s market position in Thailand banking industry, achieve our strategic objectives, the Bank is committed to conducting its business with integrity and ethics. At the mean time, the Board of Directors that oversees the Bank’s operation recognizes that risk management and internal control is critical to achieve a good corporate governance. Therefore, the Board of Directors has set up committees to monitor and oversee the Bank’s operation in different sectors by deploying professionals in each committee to screen matters and make proposals to the Board of Directors for efficient performance of the Board of Directors’. The committees include the Executive Committee, the Audit Committee, and the Risk Management Committee. These Committees must report their progress to the Board of Directors on a regular basis.

Board of Directors

Objective

The Board is responsible, by law, for governing the Bank’s business conduct, and responsible to all the Bank’s stakeholders: customers, shareholders, employees, service providers and the community.

The Management is responsible for the daily operations of the Bank. The role of the Board is to ensure that management operates in the best interests of the Bank and its stakeholders by working to elevate corporate economic value of the Bank.

Composition & Term of office

The Board of Directors has 7 members (6 members on office) by 31st December, 2016 including

Vacant* Chairman

Mr. Zhang Lei Executive Director

Ms. Li Jun Executive Director

Mr. Wu Lin* Executive Director

Mr. Krish Follett Independent Director

Mr. Chatchai Virameteekul Independent Director

Mr. Chaiyuth Sudthitanakorn Independent Director

*The previous Chairman Mr. Cheng Jun has resigned from the office with effective on 19th December 2016. Currently the position of Chairman of the Board is vacant, and will be elected and appointed by Shareholder’s Annual General Meeting in 2017. Mr. Li Tao has resigned from the position of Executive Director on 17th August, 2016 and replaced by Mr. Wu Lin effective on 26 September, 2016.



At every annual general meeting, 1/3 (one-third) of the number of Directors shall retire from office. If the number is not a multiple of 3 (three), then the number nearest to 1/3 (one-third) must retire from office.

The Directors to retire during the first and second years following the registration of the Bank shall be drawn by lots. In every subsequent year, the Director who has been in office for the longest term shall retire. A retiring Director is eligible for re-election.

Duties and Responsibilities

The Board, as the shareholders’ representative, has the role, duty, and responsibility to supervise and oversee the management and operation of the Bank to ensure that the business and affairs are conducted with honesty, with avoidance of conflict of interest, and to the best interests of the Bank. In general the Board has the duty to supervise the Bank in establishing policies, ensuring appropriate management process and overseeing that the system of monitoring and auditing complies with the stipulated policies with details as follows:

1. To define overall direction and strategic objectives of the Bank, to consider and approve policies and direction of the Bank’s operation proposed by management, and to ensure that they are implemented efficiently and effectively to protect the interests of the Bank and its shareholders.

2. To ensure the institution of internal business code and ethics, and code of conduct for Directors, persons with management authority, and employees.

3. To oversee that the Bank’s management establish policies, measures and control over the management of various risks, which at the minimum must include credit, market and investment, liquidity, operational, reputational, legal and strategic risks. In this regard, the Board has the approval authority over such policies. In addition, it must review the actual operational strategy and the policies of such matters on a regular basis.

4. To review the Bank’s operations continuously to ensure the executive Directors and management’s compliance with the laws and approved policies.

5. To ensure competent management of the Bank including ensuring appointment of qualified persons with management authority.

6. To ensure the institution of effective systems for internal control and audit. 7. To ensure the management refers significant financial issue to the Board and to ensure

that the Board receives sufficient information from the management to discharge its authorities and duties effectively.

8. To ensure that the Bank has in place the policies concerning granting credits and investment to persons relating to the Bank.

9. To review and approve all credit proposals over the limits delegated to the Chairman of Executive Committee.

10. To ensure that there exists appropriate check and balance in the management and/or major shareholders of the Bank, in particular the proportion or the number of independent Directors on the Board.

11. To consider appointing other subcommittees, such as the Executive Committee, Risk Management Committee, Audit Committee and others that as deemed appropriate and necessary to the Bank in order to ensure that the management system adheres to the approved policies.

12. To consider and approve duties and responsibilities of sub committees, changes in their composition as well as changes that materially affect the subcommittee works.

13. To ensure that there is a process for prompt submission of management letters from the external auditor and management to the Board. The Board should receive these letters

34 Corporate Governance


within 4 months after the end of an accounting period. If there is a long delay, the Board should seek reasons for the delay from the management.

14. To require Directors to attend at least half of the Board Meetings every year.

Executive Committee

Objective

The objective of the Executive Committee is to oversee the transaction & business of routine, administrative matters that occur between regularly scheduled meetings of the Board of Directors. The Executive Committee is responsible to the board of directors, and shall report to the Board of Directors at the next Board of Directors’ Meeting on the official actions it has taken on the substantial matters.

Composition & Term of office

There are three members of Executive Committee which are all executive directors of the Bank. The term of office of members of Executive Committee is equal to that of their directorship unless the Board of Directors determines otherwise.


The crucial duties and responsibilities of the Executive Committee are to ensure that the Bank's operations are in accordance with its strategies and policies and regulations. The Committee is empowered to administer and manage the Bank's business, and perform tasks assigned by the Board of Directors, with an aim to accomplish the Bank's vision and be in alignment with the Bank's mission, as well as to promote management practices that are in compliance with the Bank's core values.

Audit Committee

Objective

The Audit Committee (the “AC”) is a standing committee of the Board of Directors (the “Board”). The purpose of the AC is to assist the Board in fulfilling its oversight responsibility for Bank of China (Thai) Public Company Limited (the “Company”) relating to：

1. the integrity of financial statements and the financial reporting process; 2. the systems of internal control; 3. the performance of internal audit functions and internal auditors; 4. the appointment of external auditors and the evaluation of the external auditors’

qualifications, independence and performance; 5. the periodic review, where appropriate, and the annual audit of the Company’s financial

statements; 6. compliance with applicable accounting standards and legal and regulatory requirements on

financial disclosures; and 7. enhancing the corporate governance framework of the Company.



The function of the Audit Committee is oversight. The Management is responsible for the preparation, presentation and integrity of the financial statements. The external auditors are responsible for planning and carrying out a proper audit of the Group’s annual financial statements, for the review of half-yearly financial statements and (if appropriate) for performing agreed-upon procedures of quarterly financial results. Both the Management and the external auditors are ultimately accountable to the Board and the shareholders.

Composition and Term of Office

There shall be at least three members, and all of them must be independent directors. The Audit Committee members are fully qualified in accordance with the qualifications prescribed by the Securities and Exchange Commission, and/or the Capital Market Supervisory Board, and/or the Bank of Thailand, and have sufficient knowledge and experience in reviewing reliability of financial statements.

The term of office of each member of the Audit Committee shall be determined by the Board of Directors.


1. To review and monitor the effectiveness of the financial reporting processes.

2. To review and evaluate whether the Management is setting the internal control to make all employees understand their roles and responsibilities.

3. To review the reports submitted by internal audit and external audit, together with the Management’s response to any identified weaknesses on internal control.

4. To review significant accounting and financial reporting issues raised by internal and external auditors.

5. To conduct at least annually a review of the effectiveness of risk management and internal control system.

6. To review reports from regulators regarding legal and compliance matters that may have a significant impact on the financial standing and reputation, and ensure that the matters have been properly addressed and any significant impact of these issues is reflected in the financial statements.

7. To report conflict of interest transactions, fraud, corruption, internal control failure, and non-compliance with related laws that have material effects on the financial position or performance as required by the Bank of Thailand and other regulators to the Board for further corrective actions.

8. To report to the Board to update the Board about the AC’s activities and consider other topics as defined by the Board, ensure that the Board is aware of matters which may significantly impact the Company’s financial condition or business affairs of the business and make appropriate recommendations.

9. To review and assess the adequacy of the corporate governance framework (including the roles and responsibilities of other Board Committees, where appropriate) to ensure financial reporting, risk management and internal control meet governance standards.

10. To consider, select and propose the appointment of the Bank’s auditors, including their remunerations.

36 BOCT Activities


Risk Management Committee

Objective

The Committee has been established with the duty to assist the Board of Directors in its responsibility to oversee that the overall risk management process is at appropriate level and in line with the requirement of Parent Company. The Committee is to make sure that the Bank possesses efficient and effective risk management plan that covers all types of risks. In addition, the Committee is responsible for setting, assessing, reducing, monitoring and reporting risk levels for the attention of the Board of Directors.

Composition and Term of Office

The Committee comprises of 10 members consisting of one director and head of Risk Management Department, Banking Department, Treasury Department, International Settlement Department, and other relevant department which are appointed by the Board of Directors, being the combination that can ensure effective coverage of the overall risk management operation of the Bank.


1. To be responsible for operation of the branch’s internal control system, review and discuss basic rules and regulation of internal control, assess the effectiveness of internal control system, identify deficiencies of internal control system, and decide to take measures for improvement.

2. Formulate the risk management policy to present to the Board of Directors for the consideration of overall risk management. This must cover the various types of risk, i.e. strategy, liquidity, credit, market, operational or other significant risks to the Bank.

3. Formulate strategies in consistency with risk management policy, which can measure, monitor, and maintain acceptable risk levels of the Bank.

4. Control, monitor, measure risk exposure of the Bank and ensure that Bank including its branches strictly follow the Bank’s Risk Management Policy and BOT regulations.

5. Review the adequacy of the Bank’s risk policy and management, which includes the system’s effectiveness as well as the implementation of the prescribed policy.

6. Regularly report to Audit Committee regarding areas to be improved in accordance with the prescribed policy and strategies.

Summarizations of Meetings hold by Board of Directors and Committees in 2016

Meeting in 2016 Board of Directors

Executive Committee

Audit Committee

Risk Management Committee

Nos. of Meetings 4 14 5 5

Mr. Cheng Jun* 0 - - - Mr. Zhang Lei 4 14 - - Ms. Li Jun 4 14 5 - Mr. Wu Lin 1 1 - - Mr. Li Tao* 2 7 - - Mr. Krish Follett 4 - - 5 Mr. Chatchai Virameteekul 3 - - 4Mr. Chaiyuth Sudthitanakorn 4 - - 5



External Auditors Engaged Office PricewaterhouseCoopers ABAS Ltd. Address: 15th Floor Bangkok City Tower, 179/74-80 South Sathorn Road, Bangkok 10120, Thailand Name of statutory auditors

1. Mrs. Unakorn Phruithithada Certified Public Accountant (Thailand) No. 3257 2. Mrs. Anothai Leekitwattana Certified Public Accountant (Thailand) No. 3442 3. Mr. Paiboon Tunkoon Certified Public Accountant (Thailand) No. 4298

Remuneration of Auditors The audit fee of the Bank for the year ended 31 December 2016 was 2,500,000 plus out-of-pocket expenses. The fee includes professional services required to

Items Baht 1). Audit of the financial statement for the period ending

31 December 2016 2,490,0002). Certification of management’s statement accompanying

The corporate income tax return 10,000

38 BOCT Activities


To tightly focus on the strategic objective of “Serving society, Delivering Excellence” of the parent bank, based in Thailand and serve both Thai and Chinese customers; Bank of China (Thai) Public Co. Ltd. has worked with the determination to be the main bank of Chinese and Thai “Going-global” enterprises, the leading bank of trade finance, the dominant bank of RMB business, and the professional service provider for middle-to-high-end individual customers, the main bank of small and medium-sized enterprises; to be a Financial Bridge and link between Thailand and China, to actively promote the development of cultural of Thailand and China, to conduct all kinds of activities which are beneficial to the society and people.

16 January 2016: Bank of China (Thai) Public Co. Ltd. had celebrated the year of 2016 at Radisson Blue Hotel Bangkok on 16 January 2016, which our valued customers had also participated in the event.

23 April 2016: Bank of China (Thai) Public Co. Ltd. had launched “The BOCT Care and Share Day 2016” project as to give financial support on education to students at Ban Moo Si School, Nakhon Ratchasima.

BOCT Activities 39


23 – 24 April 2016: BOCT Team Building of 2016 had been held at Botanica Khao Yai Resort, Nakhon Ratchasima as to establish as strong bond between colleagues.

1 August 2016: Bank of China (Public) Co. Ltd., Hat Yai Branch Opening Ceremony

40 BOCT Activities


10 September 2016: Bank of China (Thai) Public Co. Ltd. had held the internal “Sport Day 2016” as to build a good relationship between colleagues and as to encourage employees to focus on good health.

18 December 2016: Bank of China (Thai) Public Co. Ltd., Nakhon Ratchasima Branch Opening Ceremony

BOCT Activities 41


22 December 2016: Bank of China (Thai) Public Co. Ltd., Chiang Mai Branch Opening Ceremony

42 The Board of Directors and Top Executives


1. Chairman of the Board of Director Vacant

2. Mr. Zhang Lei

CEO & Country Head CEO & Country Head of Bank of China (Thai) Public Company Limited since 2014 without shareholding in the Bank. Prior upgrading to be a subsidiary, Mr. Zhang served as General Manager of the Bank of China Limited, Bangkok Branch in 2014. Furthermore, Mr. Zhang had served as the General Manager, Operation Service Unit of Bank of China Limited from 2001 to 2014. Mr. Zhang graduated Master Degree in Business Administration from Renmin University and Bachelor Degree in Economic Management from Nankai University.

3. Mrs. Li Jun Executive Vice President Executive Vice President of Bank of China (Thai) Public Company Limited since 2014 without shareholding in the Bank. Prior upgrading to be a subsidiary, Mrs. Li had seated as Assistant General Manager of Bank of China Limited, Bangkok Branch in 2014, and ever held the position of the Head of Risk Management Department in Bank of China, Singapore Branch, from 2007 to 2014. Mrs. Li graduated Master Degree in Industrial Economics from Shanxi University of Finance and Economics, and Bachelor Degree in Economics from Fudan University.

4. Mr. Wu Lin

Executive Vice President Executive Vice President of Bank of China (Thai) Public Company Limited since 2016 without shareholding in the Bank. Mr. Wu Lin had been the Vice General Manager (Financial Institutions / Securities) of Financial Institute Department of Bank of China, Shandong Branch from 2005-2012. Furthermore, Mr. Wu Lin served as President and secretary of party committee of Bank of China, Shandong Branch from 2013 to 2016. Mr. Wu Lin graduated Bachelor Degree in Enterprise Management from Nanjing University.

The Board of Directors and Top Executives 43


5. Mr. Krish Follett Independent Director Independent Director of the Bank of China (Thai) Public Company Limited since 2014 without shareholding in the Bank. From 1971 to 2009, Mr. Krish held various positions in Bank of Thailand i.e. Assistant Governor, Senior Director IAD, Senior Director of On-site Examination 1 Division, Director of Modernization Program Office, Director of Northeastern Region Office, Assistant Director of Payment System Department, Division Chief and Special Investigation Team. Mr. Krish obtained Certificate in Advanced Management Program from Harvard University. Moreover, Mr. Krish graduated Master Degree in Business Administration and Bachelor Degree in Economics, Major in Finance from Thammasat University.

6. Mr. Chatchai Virameteekul Independent Director Independent Director of the Bank of China (Thai) Public Company Limited since 2014 without shareholding in the Bank. Currently, Mr. Chatchai serves as Vice Chairman of the Siam Bangna Land Co., Ltd and Chairman of Nomination and Corporate Governance Committee, Thai Institute of Directors (IOD) as well as serves as Director of Thai Institute of Directors (IOD), M.Thai Group Ltd. and M. Thai Expo City Co., Ltd. Mr. Chatchai served as Director, Chairman of Audit Committee, and Chairman of the Risk Management Committee, Director and Acting President, Chairman of the Nomination and Remuneration Committee and Vice Chairman of the Executive Board of Government Housing Bank. Mr. Chatchai graduated Master Degree in Business Administration from Thammasat University and Bachelor of Arts from University of Washington, USA.

7. Mr. Chaiyuth Sudthitanakorn Independent Director Independent Director of the Bank of China (Thai) Public Company Limited since 2015 without shareholding in the Bank. Currently, Mr. Chaiyuth serves as Senior Advisor of TEAM Consulting Engineering and Management Co., Ltd. From 1977 to 2010, Mr. Chaiyuth held various positions in the Ministry of Finance i.e. Director of Bureaus of Tax Policy, Financial System Policy, and International Economic Policy and Mr. Chaiyuth was also a former Board of Director of the Asian Development Bank from 2003 to 2006 and 2009 to 2012. Mr. Chaiyuth obtained certificates in Financial Statements for Directors and Director Certification Program from Thai Institute of Directors (IOD). Also, Mr. Chaiyuth graduated Master Degree of Public Administration (Management Program) from National Institute of Development Administrative and Bachelor of Science in Agricultural Economics from Kasetsart University.

44 Report of Audit Committee


Audit Committee Report for the year 2016

The Audit Committee of Bank of China (Thai) Public Company Limited comprises three members of the Board of Directors, all of them are independent directors, and they are knowledgeable in various fields, namely accounting and finance, law and organizational management.

Responsibilities

The Audit Committee’s charter, which was drafted under the scope of duties and responsibilities, was approved by the Board of Directors in accordance with the Securities and Exchange Commission Thailand (SEC) and the Bank of Thailand (BOT). According to The Audit Committee’s charter, The Audit Committee oversee the Bank’s operations in order to assure that transparency and fairness can be achieved for the confidence of shareholders, investors, and all stakeholders. In year 2016, the Audit Committee held five meetings and made the recommendations to Board of Directors as follows;

1. Financial Report The Audit Committee has reviewed and discussed with the external auditor the financial status, and the annually unaudited and audited financial statement. In collaboration with the Management and with quarterly analysis conducted on important issues of the financial status to ensure that the preparation of financial statements and disclosure of important information there of accurate, complete and reliable in accordance with generally accepted Thai Accounting Standards and Thai Financial Reporting Standards. Furthermore, the Audit Committee held two meetings with the external auditors without the participation of the Bank’s management to discuss the independence of the auditors and restrictions or limitations in performing their duties and expressing opinions and any points of concern arising from their audits.

2. Internal Control, good governance and risk management The Audit Committee has considered and approved the annual audit plan which has been developed and improved so that it is efficient, covers important operations and units exposed to high levels of risk. The Audit Committee has reviewed the audit reports done by the internal audit as well as reports done by external audit and the Bank’s supervisory authorities, and also reviewed the Internal Capital Adequacy Assessment (ICAAP) report done by risk management department. Otherwise, The Audit Committee proposed guidelines to ensure that comprehensive control system could reduce operational risk. The Audit Committee is opined that the Bank has closely supervised and examined operations to ascertain that all business units properly operated and complied with relevant requirements and regulations.

3. Regulatory Compliance The Audit Committee has reviewed the Bank’s operation to ascertain compliance with requirements and laws relevant to the banking business, such as the Public Limited Companies Act B.E.2535 (1992), the Securities and Exchange Act B.E.2535 (1992), and other requirements of supervisory authorities. The Audit Committee closely monitored the progress of audit on procurement process and the audit rectifications of the Bank of Thailand in order to ensure accurate compliance of all business units and comprehensive internal control system.

4. The potential conflict of interest The Audit Committee will consider connected transactions or potential conflicts of interests by adhering to principles of rationality, transparency, and sufficient information disclosure, which represents normal business practice and benefit maximization for the Bank.

The Audit Committee has performed its duties carefully and independently and has been forthcoming in expressing its opinions for the maximum benefit of the Bank. It has not encountered any difficulty in obtaining information, resources or cooperation from the Bank. The Audit Committee has assessed its performance in 2016 in order to ascertain that it has been efficient and effective and has achieved its objectives as assigned by the Board of Directors.

For and on behalf of the Audit Committee of Bank of China (Thai) Public Company Limited

(Mr. Krish Follett) Chairman of the Committee

Report of Board of Directors 45


Bank of China (Thai) Public Company Limited had held the meeting of the Board of Directors Meeting No. 1/2016 Date 26 March 2016 at No. 179/4 Bangkok City Tower, South Sathorn Road, Khwaeng Tungmahamek, Khet Sathorn, Bangkok to consider and approve the directors' remuneration as following;

The Chairman informed the Meeting that Article 22 of the Company's Articles of Association and Section 90 of the Public Company Limited Act B.E. 2535 (1992) require that the directors' remuneration be considered and approved by the shareholders meeting. Therefore, the Chairman proposed to the Meeting to consider the appropriateness of the following directors' remuneration scheme:

Independent Directors: each independent director shall receive committee fee THB 80,000 (Eighty Thousand) per month together with the annual payment of the meeting attendance fee at the end of each calendar year according to the following formula:

The chairman of the audit committee shall receive the extra payment of THB 100,000 (One Hundred Thousand) per year, to be paid at the end of each calendar pro rata

Directors' remuneration for year 2016

1 Mr. Cheng Jun Chairman

2 Mr. Zhang Lei Director

3 Mrs. Li Jun Director

4** Mr. Li Tao Director

5 Mr. Wu Lin Director

6 Mr. Krish Follett Independent Director 240,000.00 960,000.00 100,000.00 1,300,000.00

7 Mr. Chatchai Virameteekul Independent Director 186,666.67 960,000.00 - 1,146,666.67

8 Mr. Chaiyuth Sudthitanakorn Independent Director 240,000.00 960,000.00 - 1,200,000.00

4** Resigned on August 10, 2016

Directors' remuneration has been included in their compensation & benefit from BOC (T)

No. Director's Name Meeting

Attendance Total remuneration

/Person/YearCommittee FeePosition

Chairman of the Audit

46 Independent Auditor’s Report


Independent Auditor’s Report

To the Shareholders and the Board of Directors of Bank of China (Thai) Public Company Limited

My opinion

In my opinion, the financial statements of Bank of China (Thai) Public Company Limited (the Bank) present fairly, in all material respects, the financial position of the Bank as at 31 December 2016, and its financial performance and its cash flows for the year then ended in accordance with Thai Financial Reporting Standards (TFRS).

What I have audited

I have audited the accompanying financial statements of the Bank, which comprise the statement of financial position as at 31 December 2016, and the statement of comprehensive income and statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

Basis for opinion

I conducted my audit in accordance with Thai Standards on Auditing (TSAs). My responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of my report. I am independent of the Bank in accordance with the Federation of Accounting Professions under the Royal Patronage of his Majesty the King’s Code of Ethics for Professional Accountants together with the ethical requirements that are relevant to my audit of the financial statements, and I have fulfilled my other ethical responsibilities in accordance with these requirements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Responsibilities of management for the financial statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with TFRSs, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.

The audit committee assists management in discharging their responsibilities for overseeing the Bank’s financial reporting process.

Independent Auditor’s Report 47


Auditor’s responsibilities for the audit of the financial statements

My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with TSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with TSAs, I exercise professional judgment and maintain professional scepticism throughout the audit. I also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my auditor’s report. However, future events or conditions may cause the Bank to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

I communicate with the audit committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.

48 Independent Auditor’s Report


I also provide the audit committee with a statement that I have complied with relevant ethical requirements regarding independence , and to communicate with them all relationships and other matters that may reasonably be thought to bear on my independence , and where applicable , related safeguards.

PricewaterhouseCoopers ABAS Ltd.

Unakorn Phruithithada Certified Public Accountant (Thailand) No. 3257 Bangkok 24 March 2017



Bank of China (Thai) Public Company Limited

Statement of Financial Position

As at 31 December 2016

Restated

2016 2015

Notes Baht Baht

Assets

Cash 141,646,391 107,799,075

Interbank and money market items, net 7 18,453,771,331 13,188,401,887

Financial derivatives assets 8 76,610 37,605,218

Investments, net 9 3,706,038,450 3,061,280,491

Net loans to customers and interest receivables 10

Loans to customers 21,652,952,139 41,895,750,615

Interest receivables 102,905,215 171,597,058

Total loans to customers and interest receivables 21,755,857,354 42,067,347,673

Less Deferred income (1,105,800) (3,460,141)

Less Allowance for doubtful accounts 11 (487,504,521) (530,041,736)

Net loans to customers and interest receivables 21,267,247,033 41,533,845,796

Premises and equipment, net 13 254,479,317 169,525,495

Intangible assets, net 14 29,111,409 30,951,643

Leasehold, net 15 13,127,511 23,637,199

Deferred tax assets 16 18,858,137 19,552,530

Other assets 17 64,152,128 60,300,975

Total assets 43,948,508,317 58,232,900,309

50 Financial Statement



Statement of Financial Position (Cont’d)

As at 31 December 2016

Restated

2016 2015

Notes Baht Baht

Liabilities and equity

Liabilities

Deposits 18 21,995,917,904 24,989,928,635

Interbank and money market items, net 19 10,906,646,956 22,342,185,853

Demand liabilities 279,351,322 183,069,529

Financial derivatives liabilities 8 1,198,917 34,365,232

Accrued interest payable 223,910,562 209,304,300

Provisions 20 25,928,427 21,774,470

Other liabilities 6, 21 513,585,357 469,059,868

Total liabilities 33,946,539,445 48,249,687,887

Equity

Share capital

Registered, issued and fully paid-up

1,000,000,000 ordinary shares of Baht 10 each 10,000,000,000 10,000,000,000

Other components of equity (216,188) 7,001,866

Retain earnings (Deficits) 2,185,060 (23,789,444)

Total equity 10,001,968,872 9,983,212,422

Total liabilities and equity 43,948,508,317 58,232,900,309

______________________________

(Mr. Zhang Lei)

Chief Executive Officer, Country Head




Statement of Profit or Loss and Other Comprehensive Income

For the year ended 31 December 2016

Restated

2016

2015

Notes Baht

Baht

Interest income 28 1,153,999,487 1,260,998,368

Interest expenses 29 (867,016,551) (860,616,153)

Net interest income 286,982,936 400,382,215

Fees and service income 170,936,751 94,619,823

Fees and service expenses (22,141,975) (14,638,373)

Net fees and service income 30 148,794,776 79,981,450

Net gains on trading and foreign exchange 31 164,184,200 345,048,793

Other operating income 6,639,780 1,095,274

Total income from operations 606,601,692

826,507,732

Expenses from operations

Personnel expenses 6 344,741,566 304,380,357

Directors’ remuneration 6 3,620,000 2,610,667

Premises and equipment expenses 150,837,585 118,187,471

Taxes and duties 30,574,692 26,875,444

Others expenses 93,817,971 91,609,505

Total expenses from operations 623,591,814 543,663,444

Impairment loss of loans (Reversal) 12 (50,905,634) 188,865,897

Profit from operations before income tax 33,915,512 93,978,391

Income tax 6, 32 (7,904,167) (3,968,409)

Net profit for the year 26,011,345 90,009,982




Statement of Profit or Loss and Other Comprehensive Income (Cont’d)


Restated

2016

2015

Notes Baht

Baht

Net profit for the year 26,011,345 90,009,982

Other comprehensive income

Items that will be reclassified subsequently

to profit or loss

Loss on remeasuring available-for-sale

investments (9,022,568) (16,485,846)

Income taxes relating to items that

will be reclassified 16 1,804,514 3,297,169

Items that will not be reclassified

to profit or loss

Actuarial gain (loss) on defined

employee benefit plan (45,006) 237,173

Income taxes on items that will

not be reclassified 16 8,165 (40,247)

Total other comprehensive expense (7,254,895) (12,991,751)

Total comprehensive income 18,756,450 77,018,231

Earnings per share for profit attributable

to the equity holders of the Bank 36

Basic earnings per share (Baht per share) 0.03 0.09

______________________________

(Mr. Zhang Lei)


Ban

k o

f C

hin

a (T

hai

) P

ub

lic C

om

pan

y L

imit

ed

Sta

tem

ent

of

Ch

ang

es in

Eq

uit

y

Fo

r th

e ye

ar

en

ded

31

Dec

em

ber

20

16

Issu

ed a

nd

O

ther

R

etai

n

pai

d-u

p

co

mp

on

ent

earn

ing

s

shar

e c

apit

al

of

equ

ity

(D

efic

its)

T

ota

l

No

te

Bah

t B

aht

Bah

t B

aht

Op

enin

g b

alan

ce 1

Jan

uar

y 2

015

10

,00

0,00

0,00

0 20

,19

0,54

3

(113

,996

,352

) 9,

906,

194

,191

Loss

on

rem

easu

ring

avai

labl

e-fo

r-sa

le in

vest

men

ts

- (1

6,48

5,84

6)

- (1

6,48

5,84

6)

Inco

me

taxe

s re

latin

g to

item

s th

at w

ill b

e re

clas

sifie

d

- 3,

297,

169

-

3,29

7,1

69

Act

uaria

l gai

n on

def

ine

d em

plo

yee

ben

efit

pla

n

- -

237,

173

23

7,1

73

Inco

me

taxe

s on

item

s th

at w

ill n

ot b

e re

clas

sifie

d

- -

(40,

247)

(4

0,24

7)

Net

pro

fit fo

r th

e ye

ar

- -

60,1

90,

945

60

,19

0,94

5

Clo

sin

g b

alan

ce 3

1 D

ecem

ber

20

15

10,0

00,

000,

000

7,00

1,8

66

(53,

608,

481)

9,

953,

393

,385

Op

enin

g b

alan

ce 1

Jan

uar

y 2

016

10

,00

0,00

0,00

0 7,

001,

866

(5

3,60

8,48

1)

9,95

3,3

93,3

85

Adj

ustm

ent

for

erro

r 6

- -

29,8

19,

037

29

,81

9,03

7

Ope

ning

bal

an

ce a

fter

adju

stm

ent

10,0

00,

000,

000

7,00

1,8

66

(23,

789,

444)

9,

983,

212

,422

Loss

on

rem

easu

ring

avai

labl

e-fo

r-sa

le in

vest

men

ts

- (9

,022

,568

) -

(9,0

22,5

68)

Inco

me

taxe

s re

latin

g to

item

s th

at w

ill b

e re

clas

sifie

d

- 1,

804,

514

-

1,80

4,5

14

Act

uaria

l los

s o

n de

fined

em

plo

yee

ben

efit

plan

-

- (4

5,00

6)

(45,

006)

Inco

me

taxe

s o

n ite

ms

that

will

not

be

recl

assi

fied

-

- 8,

165

8,

165

Net

pro

fit fo

r th

e ye

ar

- -

26,0

11,

345

26

,01

1,34

5

Clo

sin

g b

alan

ce 3

1 D

ecem

ber

20

16

10,0

00,

000,

000

(216

,188

) 2,

185,

060

10

,00

1,96

8,87

2

___

____

___

____

___

___

____

___

___

(Mr.

Zha

ng

Lei)

Chi

ef E

xecu

tive

Offi

cer,

Cou

ntry

Hea

d

53Financial Statement




Statement of Cash Flows


Restated

2016 2015

Notes Baht Baht

Cash flows from operating activities

Profit from operating activities before income tax 33,915,512 93,978,391

Adjustments to reconcile income from operating

before income tax for the year to net cash

received (paid) from operating activities:

Depreciation and amortisation 13, 14,

15 63,422,568

48,900,271

(Reversal) Bad debt and doubtful accounts 12 (50,905,634) 188,865,897

Amortisation of premium on debt instruments 16,620,773 4,779,493

(Reversal) Loss on impairment of other assets (1,266,632) 876,192

Unrealised loss on change in fair value

of financial derivative instruments 4,362,292 18,506,883

Gain on disposal of equipment (862,832) (53,498)

Loss on write-off of equipment 13 64,013 -

Provision for post-employment benefits 20 2,373,840 2,966,713

Net interest income (286,982,936) (400,382,216)

Interest received 1,225,615,641 1,424,594,919

Interest paid (836,540,886) (793,077,781)

Income tax paid (2,558,316) (20,689,058)

Profit from operating actives before changes in

operating assets and liabilities 167,257,403 569,266,206

(Increase) decrease in operating assets

Interbank and money market items 2,464,117,018 9,447,214,198

Loans 20,224,171,385 (11,003,967,766)

Other assets (3,854,560) (5,026,239)

Increase (decrease) in operating liabilities

Deposits (2,994,010,731) 16,187,864,142

Interbank and money market items (11,587,416,390) (13,316,130,153)

Demand liabilities 96,281,793 (303,740,594)

Provisions 516,916 (706,162)

Other liabilities 8,897,266 22,813,047

Net cash flows provided by operating activities 8,375,960,100 1,597,586,679




Statement of Cash Flows (Cont’d)


2016 Restated 2015

Notes Baht Baht

Cash flows from investing activities

Proceeds from redemption of investments 1,340,000,000 1,870,000,000

Purchase of investments (2,010,401,300) (1,512,696,759)

Proceeds from disposal of equipment 13 870,000 53,500

Purchase of premises and equipment 13 (106,975,201) (78,047,926)

Purchase of intangible assets 14 (8,939,363) (2,742,500)

Net cash flows (used in) provided by investing activities (785,445,864) 276,566,315

Cash flows from financing activities

Fund remittance to head office - (228,695,854)

Net cash flows (used in) provided by financing activities - (228,695,854)

Net increase (decrease) in cash and cash equivalents 7,590,514,236 1,645,457,140

Cash and cash equivalents at the beginning of the year

9,371,083,012

7,725,625,872

Cash and cash equivalents at the end of the year

16,961,597,248

9,371,083,012

Cash 141,646,391 107,799,075

Interbank and money market items (assets) 17,129,759,738 9,421,215,325

Interbank and money market items (liabilities) (309,808,881) (157,931,388)

Total 16,961,597,248 9,371,083,012

Non-cash transaction

Increase in account payables from premises and equipment

purchased 24,410,866 10,189,917

(Decrease) increase in account payables from intangible

assets purchased (5,445,976) 5,445,976

Provision for restoration and demolition cost 1,218,195 800,000

______________________________

(Mr. Zhang Lei)


56 Notes to Financial Statement


Notes to the Financial Statements


1 General information

Bank of China (Thai) Public Company Limited (“the Bank”) is a public limited company incorporated and resident in Thailand. The address of the Bank’s registered office is as follows: 179/4 Bangkok City Tower, South Sathorn Road, Tungmahamek, Sathorn, Bangkok, Thailand. The main operations of the bank are providing financial products and financial services. These financial statements were authorised by the Board of Director on 24 March 2017.

2 Accounting policies The principal accounting policies adopted in the preparation of the Bank’s financial statements are set out below: 2.1 Basis of preparation

The financial statements have been prepared in accordance with the generally accepted accounting principles in Thailand under the Accounting Act B.E. 2543, being those Thai Financial Reporting Standard issued under the Accounting Profession Act B.E. 2547. The financial statements are prepared in the format as required by the Notification of the Bank of Thailand (“BOT”), No. SorNorSor 21/2558, “The Preparation and Format of the Financial Statements of Commercial Bank and Holding Parent Company of Financial Group” dated on 4 December 2015. The financial statements have been prepared under the historical cost convention except for some investments and derivative financial instruments as disclosed in the accounting policies below. The preparation of financial statements in conformity with Thai generally accepted accounting principles requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Bank’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4. An English version of the financial statements has been prepared from the statutory financial statements that are in the Thai language. In the event of a conflict or a difference in interpretation between the two languages, the Thai language statutory financial statements shall prevail.



2 Accounting policies (Cont’d)

2.2 New financial reporting standards and revised financial reporting standards New financial reporting standards and revised accounting standards, revised financial reporting standards are effective on 1 January 2016. These standards are relevant to the Bank. a) Financial reporting standards, which have a significant impact to the Bank:

TAS 16 (revised 2015) Property, plant and equipment TAS 19 (revised 2015) Employee benefits TAS 24 (revised 2015) Related party disclosures TAS 36 (revised 2015) Impairment of assets TAS 38 (revised 2015) Intangible assets TFRS 13 (revised 2015) Fair value measurement TAS 16 (revised 2015), ‘Property, plant and equipment’ clarifies how the gross carrying amount and the accumulated depreciation are treated where an entity uses the revaluation model. TAS 19 (revised 2015), ‘Employee benefits’ is amended to apply to contributions from employees or third parties to defined benefit plans and to clarify the accounting treatment of such contributions. The amendment distinguishes between contributions that are linked to service only in the period in which they arise and those linked to service in more than one period. TAS 24 (revised 2015), ‘Related party disclosures’ includes as a related party an entity that provides key management personnel services to the reporting entity or to the parent of the reporting entity (the ‘management entity’). Disclosure of the amounts charged to the reporting entity is required. TAS 36 (revised 2015), ‘Impairment of assets’ is amended to provide additional disclosure requirement when the recoverable amount of the assets is measured at fair value less costs of disposal. The disclosures include 1) the level of fair value hierarchy, 2) when fair value measurement categorised within level 2 and level 3, disclosures is required for valuation technique and key assumption. TAS 38 (revised 2015), ‘Intangible assets’ is amended to clarify how the gross carrying amount and the accumulated amortisation are treated where an entity uses the revaluation model. TFRS 13 (revised 2015), ‘Fair value measurement’ is amended to clarify that the portfolio exception in TFRS 13 applies to all contracts (including non-financial contracts) within the scope of TAS 39 (when announced) or IFRS 9 (when announced). Those accounting standards have no significant impact on the financial statements.

b) Financial reporting standards with minor changes There are 40 financial reporting standards with minor changes. Those accounting standards do not have an impact on the Bank.




2.2 New financial reporting standards and revised financial reporting standards (Cont’d) New financial reporting standard, revised accounting standards and revised financial reporting standards which are effective on 1 January 2017. These standards are relevant to the Bank and are not early adopted. a) Financial reporting standards, which have a significant impact to the Bank are as follows:

TAS 1 (revised 2016) Presentation of financial statements TAS 16 (revised 2016) Property, plant and equipment TAS 19 (revised 2016) Employee benefits TAS 34 (revised 2016) Interim financial reporting TAS 1 (revised 2016), the amendments provide clarifications on a number of issues, including: - Materiality - an entity should not aggregate or disaggregate information in a manner

that obscures useful information. Where items are material, sufficient information must be provided to explain the impact on the financial position or performance.

- Disaggregation and subtotals - line items specified in TAS 1 may need to be disaggregated where this is relevant to an understanding of the entity's financial position or performance. There is also new guidance on the use of subtotals.

- Notes - confirmation that the notes do not need to be presented in a particular order. - OCI arising from investments accounted for under the equity method - the share of

OCI arising from equity-accounted investments is grouped based on whether the items will or will not subsequently be reclassified to profit or loss. Each group should then be presented as a single line item in the statement of other comprehensive income.

TAS 16 (revised 2016), key amendments are 1) The amendments clarify that depreciation of an item of property, plant and equipment based on revenue generated by using the asset is not appropriate and 2) The amendments include bearer plants in scope of TAS 16. TAS 19 (revised 2016), the amendments clarify that when determining the discount rate for post-employment benefit obligations, it is the currency that the liabilities are denominated in that is important and not the country where they arise. TAS 34 (revised 2016), the amendments clarify that what is meant by the reference in the standard to 'information disclosed elsewhere in the interim financial report'; entities taking advantage of the relief must provide a cross-reference from the interim financial statements to the location of that information and make the information available to users on the same terms and at the same time as the interim financial statements. The management has already assessed that those accounting standards have no significant impact on the financial statements.

b) Financial reporting standards with minor changes There are 47 financial reporting standards with minor changes. The management assesses that they do not have an impact on its financial statement.




2.3 Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of the Bank are measured using the currency of the primary economic environment in which the entity operates which is Baht.

(b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss. When a gain or loss on a non-monetary item is recognised in other comprehensive income, any exchange component of that gain or loss is recognised in other comprehensive income. Conversely, when a gain or loss on a non-monetary item is recognised in profit and loss, any exchange component of that gain or loss is recognised in profit and loss.

2.4 Cash Cash represent cash on hand and cash items in process of the collection.

2.5 Investments Investments in debt securities Available-for-sale investment is marketable debt securities intended to be held for an indefinite period of time, which may be sold in response to liquidity needs or change in interest rates. Purchases and sales of investments are recognised on the settlement date. Cost of investment includes transaction costs. Available-for-sale investments are subsequently carried at fair value. Unrealised gain and losses arising from changes in the fair value of investments classified as available-for-sale are recognised in other comprehensive income. The Bank recognised interest income in the statement of comprehensive income using effective interest rate.

For Government securities and state enterprise securities which guaranteed by the Government, their fair value are calculated based on the Thai Bond Market Association Yield Curve as at financial position date except for debt securities of the Bank of Thailand that their fair value are calculated based on the Bank of Thailand Yield Curve as at financial position date. A test for impairment is carried out when there is a factor indicating that an investment might be impaired. If the carrying value of the investment is higher than its recoverable amount, impairment loss is charged to the statement of comprehensive income. Disposal of investments On disposal of an investment, the difference between the net disposal proceeds and the carrying amount is charged or credited to profit or loss. When disposing of part of the Bank’s holdings of a particular investment, the carrying amount of the disposed part is determined by the weighted average carrying amount of total holding of the investment.




2.6 Loans and accrued interest Loans and overdrafts are presented using the principal amount outstanding at end of year and accrued interest, net with deferred revenue (if any).

2.7 Allowance for doubtful accounts The Bank provides allowance for doubtful accounts based on the criteria determined by the Bank of Thailand. In addition, for non-performing loans the Bank provides specific allowance for doubtful accounts based on related factors such as financial ability to repay, historical collection experience, collateral value and expected loss rate. With reference to the Bank of Thailand’s notification, dated 3 August 2008 relating to the amended criteria for allowances for doubtful accounts, the Bank has classified its loan portfolios into six categories, primarily based on the days past due. For loans, classified as pass and special-mention, the calculation of allowances for doubtful accounts is based on the regulatory minimum percentage requirement, taking into consideration the collateral value, where the collateral type and date of the latest appraisal are qualifying factors. For loans classified as substandard, doubtful and doubtful of loss, the allowances on these accounts will be set at 100 percent for the difference between the outstanding book value of the debt and the present value of future cash flows expected to be received or the expected proceeds from the disposal of collateral in accordance with the Bank of Thailand’s criteria. Allowance for doubtful accounts is set in accordance with the Bank of Thailand’s guidelines. Allowance for doubtful accounts reversed or established during the year are charged as an income or expense in each accounting year. Bad debts written off are recorded as charges to the allowance for doubtful accounts.

2.8 Troubled debt restructuring The Bank records troubled debt restructuring transactions and related losses in accordance with the notifications of the Bank of Thailand. Foreclosed assets, transferred from troubled debt restructuring, are recorded at the fair value of the assets not exceeding the legal claim for the debt including interest receivable. The difference between the assets transferred and the outstanding balance of loans is recognised as loss in the statement of comprehensive income. Where restructuring a loan involves modification of its terms, the present value of the expected future cash collections is calculated by using discount rates equivalent to the market rates of interest at the time of restructuring. The difference between the present value of the future cash flows expected to be received and the outstanding balances of investment in loans is recorded in the revaluation allowance for debt restructuring. This revaluation allowance for debt restructuring is amortised to the statement of comprehensive income according to the amounts received over the remaining period of the debt-restructuring contracts. Restructured loans are classified as normal when the restructured loans agreement have been completed and when there is appropriate evidence that the restructured condition can be met. Loss on restructuring is recognised in the statement of comprehensive income when incurred.



2 Accounting policies (Cont’d) Legal fees and other direct costs incurred to affect the debt restructuring are expensed when incurred.

2.9 Premises and equipment Premises and equipment are stated at initial cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated on a straight-line basis to write off the cost of each asset, except for land which is considered to have an indefinite life, to its residual value over the estimated useful life as follows: Buildings and leasehold improvements 20 years Computer equipment 3 - 5 years Furniture and office equipment 5 years Vehicles 5 years Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Repairs and maintenance are charged to the income statement during the financial period in which they are incurred. The cost of major renovations is included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Bank. Major renovations are depreciated over the remaining useful life of the related asset. The Bank includes costs of dismantling and restoring the item and restoring the site on which it is located, when the Bank has obligation to do, with Building improvement. The Bank calculates the depreciation using straight line method, estimated useful life is equivalent to the residual life of rental contract. The Bank reviews useful life, residual value and depreciation method at least at each financial year-end. Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognised in statement of comprehensive income.

2.10 Intangible assets

(a) Computer software Acquired computer software licenses are capitalised on the basis of the cost incurred to acquire and bring to use the specific software. Their cost are amortised over their estimated useful lives not more than 3 - 10 years. Computer software is not revalued.

(b) Other intangible assets Expenditure on acquired licences is capitalised and amortised using the straight-line basis over their useful lives, generally over 10 years. Intangible assets are not revalued.

2.11 Leasehold Leasehold is capitalised and amortised using the straight line method over their useful lives, generally over 20 years.

62 Notes to the Financial Statements



2.12 Impairment The carrying amounts of the Bank’s non-financial assets are reviewed at each financial position date to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated. An impairment loss is recognised for the amount by which the carrying amount of an non-financial assets or its cash-generating unit exceeds its recoverable amount. The impairment loss is recognised in the statement of comprehensive income. Calculation of recoverable amount The recoverable amount of the non-financial assets is the higher of the non-financial assets’ net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the non-financial assets. For an non-financial asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the non-financial assets belongs. Reversals of impairment An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the non-financial asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

2.13 Liabilities - bearing interest Liabilities which bear interest are recognised initially at the fair value of proceeds received, net of transaction costs incurred and are subsequently stated at amortised cost using the effective yield method; any difference between proceeds (net of transaction costs) and the redemption value is recognised in the statement of comprehensive income over the period of the borrowings.

2.14 Demand liabilities The Bank records the demand liabilities as of the date of transaction equivalents to amount of cash received. When demand liabilities are recalled and repaid, the Bank reverses the outstanding.

2.15 Leases - where the Bank is a lessee Leases not transferring a significant portion of the risks and rewards of ownership to the lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of comprehensive income on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place.

Notes to the Financial Statements 63



2.16 Provident fund The Bank has established a contributory provident fund for its employees. Membership to the funds is on a voluntary basis. Contributions are made monthly by the employees at rate 3% of their basic salaries and by the Bank at rates ranging from 3% to 7% of the employees’ basic salaries. Contributions to the provident fund are charged to the statement of comprehensive income in the year to which they relate. The provident fund is registered with the Ministry of Finance as a juristic entity and is managed by a licensed Fund Manager.

2.17 Employee benefits Salary, wages, bonuses and contributions to the social security fund and provident fund are recognised as expenses when incurred. The assets of the fund are held in a separate trust fund. The Bank provides for post-employment retirement benefits, payable to employees under the labour laws applicable in Thailand. The liability in respect of employee benefits is measured, using the projected unit credit method which is calculated by an independent actuary in accordance with the actuarial technique. The present value of the defined benefit obligation is determined by discounting estimated future cash flows using the yield on government bonds which have terms to maturity approximating the terms of the related liability. The estimated future cash flows shall reflect employee salaries, turnover rate, mortality, length of service and other factors. Remeasurements of post-employment benefit obligations arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. In determining the appropriate discount rate, the Bank considers the interest rates in which the benefits will be paid to the staff.

2.18 Current and deferred income taxes Income tax for the period comprises of current and deferred tax. Tax is recognised in the statement of comprehensive income. The current income tax charge is calculated on the basis of the tax rate enacted or substantively enacted at the end of reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognised, using the liability method, on temporary differences arising from differences between the tax base of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.




2.19 Provisions Provisions except provision for post-employment benefit are recognised in the statements of financial position when the Bank has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. Where the Bank expects a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when it is virtually certain after provision has been settled.

2.20 Revenue recognition Interest income is recognised on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue except for interest on loans classified as overdue in excess of three months where regardless of whether the loans are covered by collateral, the cash basis is then adopted and interest accrued in arrears for three months is reversed against interest income to comply with the Bank of Thailand guideline. Discount received on purchase of bill of exchange are recognised on a straight-line basis over the period to maturity. Other income is recognised on an accrual basis.

2.21 Expense recognition Interest expense on deposits and borrowings is recognised on an accrual basis. Other expense is recognised on an accrual basis.

2.22 Financial derivative instruments Financial derivative instruments are recognised on trade date. Derivatives for trading purpose are recognised at fair values and net amount reported in the statement of financial position as assets or liabilities by the same counterparty and contracts have the same maturity date. Fair values are obtained from quoted market prices, or other widely used methods. Changes in fair values are posted to the statement of comprehensive income. Derivatives financial instruments for hedging purpose are recorded at the contract price. Premiums and discounts on contracts designated as a hedge are recognised on an accrual basis and posted to the statement of comprehensive income over the life of the hedged transactions.

2.23 Share Capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds.



3 Financial risk management

3.1 Foreign exchange risk management Foreign exchange risk is a risk that occurs from the change in exchange rates which may affect the value of the Bank’s financial instruments or may cause volatility in the Bank’s earnings or fluctuations in the value of the Bank’s assets and liabilities. The Bank engages in foreign exchange related transactions, which may create foreign exchange risk. However, the Bank believes that such risk is low, as most foreign currency transactions are completed with customers’ underlying transactions. The Bank’s policy is to minimise foreign exchange risk.

3.2 Interest rate risk management Interest rate risk refers to the risk that arises from the change in interest rates which may affect the value of the Bank’s financial instruments or may cause volatility in the Bank’s earnings or fluctuation in the value of the Bank’s financial assets and liabilities both in the current reporting period, and in future years. Interest rate risk also arises from the structure and characteristics of the Bank’s assets, liabilities and shareholder’s equity.

3.3 Liquidity risk management Liquidity risk is the risk that the Bank may not be able to meet its obligations as they fall due, become of inability to realise its assets or to cover funding requirements at an appropriate price which results in a loss to the Bank. The Bank manages its liquidity position under the Bank of Thailand’s liquidity reserve and other applicable regulations. The Treasury Department is accountable for managing liquidity position by providing short-term and long-term funding sources as well as investing in highly liquid assets in both Thai Baht and foreign currencies. The Bank also ensures that its liquidity position is suitable and sufficient for the current and foreseeable market conditions.

3.4 Credit risk management from investments and deposits Credit risk refers to the risk that a counterparty or a borrower may default on its contractual obligations and agreements. Such default may be caused by the counterparty’s inability to pay due to their financial position, or to their intention not to meet the contractual agreements, resulting in a loss to the Bank. The credit risk management system is characterised by centralised credit management, the separation of credit review from the origination of loans. The Credit Department are responsible for making a preliminary examination and preparing credit proposal report, the Due Diligence Investigation Group shall conduct analysis and investigation on such report, the Credit Risk Management Committee conduct credit evaluation by review the submitted reports and then make a collective recommendation to General Management to makes the final decisions. For non-performing loans, the Bank has closely and continuously monitored, resolved and restructured to retain maximum benefits to the Bank.



4 Critical accounting estimates, assumptions and judgements Estimates, assumptions and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Impairment of loans The Bank maintains an allowance for doubtful accounts to reflect impairment of loans relating to estimated losses resulting from the inability of customers to make required payments. The allowance for doubtful accounts is significantly impacted by the Bank’s assessments of future cash flows which based on historical collection experience, collateral value and known and identified instances default. Fair value of financial derivative instruments In determining the fair value of financial derivative instruments, the management has made judgment in valuing derivative instruments by using widely accepted valuation techniques and guidelines. The input parameter to the models used is taken from observable markets. Property, equipment and intangible assets Management determines and reviews the estimated useful lives and residual values for the Bank’s equipment and intangible assets and revises if they are different from previously estimated, or where write off or write down technically obsolete or assets that have been abandoned or sold. Provision for post-retirement benefits and pension fund The Bank has commitment on provision for post-retirement benefits and pension fund to employee on reaching retirement age. The present value of employee benefit liabilities recognised in the statement of financial position is determined on the present value of estimated future cash outflows for staff that is nearly reach retirement age. The assumptions used in determining the net year cost for employee benefits includes the salary and years of services of respective employees which are payable in the future and discount rate. Any changes in these assumptions will impact the net year cost recorded for employee benefits. Deferred tax assets Deferred tax liabilities are provided in full on all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences can be utilised. The Bank considers future taxable income and ongoing prudent and feasible tax planning strategies in assessing whether to recognise deferred tax assets. The Bank assumptions regarding the future profitability and the anticipated timing of utilisation of deductible temporary differences and significant changes in these assumptions from period to period may have a material impact on the Bank’s reported financial position and results of operations.



5 Capital risk management

The Bank’s objectives when managing capital are to safeguard the Bank’s ability to continue as a going concern in order to provide returns for head office and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. Moreover, the Bank is required to manage its capital funds in accordance with the Act on Undertaking of Banking business B.E. 2551. The Bank’s capital fund is presented in Note 35.

6 Change in presentation and adjustment of error Change in presentation The Bank made change in presentation of Directors’ remuneration in order to be consistent with the format as required by the Notification of the Bank of Thailand (“BOT”), No. SorNorSor 21/2558, “The Preparation and Format of the Financial Statements of Commercial Bank and Holding Parent Company of Financial Group” dated on 4 December 2015. Comparative figures have been reclassified to conform with the current year presentation. Adjustment of error As at 31 December 2015, the management overstate liability of accrued bonus amounting to Baht 36,270,603 which effect to overstate deferred tax assets amounting to Baht 6,451,566. The effects of change in presentation and adjustments of error are as follows:

Originally Change in Adjustments stated presentation of error Restated Baht Baht Baht Baht

Statement of financial position as at 31 December 2015 Deferred tax assets 26,004,096 - (6,451,566) 19,552,530Other liabilities 505,330,471 - (36,270,603) 469,059,868

Statement of comprehensive income for the year ended 31 December 2015 Personnel expenses 293,559,646 47,091,314 (36,270,603) 304,380,357Directors’ remuneration 49,701,981 (47,091,314) - 2,610,667Income tax 2,483,157 - (6,451,566) (3,968,409)

Statement of changes in equity as at 31 December 2015 Deficits (53,608,481) - 29,819,037 (23,789,444) The adjustment of error above does not have impact on statement of financial position as at 1 January 2015.



7 Interbank and money market items (assets)

2016 At call Term Total Baht’000 Baht’000 Baht’000Domestic

The Bank of Thailand and Financial Institutions Development Fund 345,201 15,100,000 15,445,201

Commercial banks 110,812 - 110,812

Total 456,013 15,100,000 15,556,013Add Accrued interest receivables - 838 838

Total domestic 456,013 15,100,838 15,556,851

Foreign US Dollar 659,987 960,263 1,620,250Hongkong Dollar 35,529 360,493 396,022Chinese Yuan 734,015 14,419 748,434Euro 138,381 - 138,381Other 5,835 - 5,835

Total 1,573,747 1,335,175 2,908,922Add Accrued interest receivables - 1,350 1,350Less Allowance for doubtful

account - (13,352) (13,352)

Total foreign 1,573,747 1,323,173 2,896,920

Total 2,029,760 16,424,011 18,453,771



7 Interbank and money market items (assets) (Cont’d)

2015 At call Term Total Baht’000 Baht’000 Baht’000Domestic

The Bank of Thailand and Financial Institutions 505,446 7,900,000 8,405,446Development Fund

Commercial banks 46,662 - 46,662

Total 552,108 7,900,000 8,452,108Add Accrued interest receivables - 440 440

Total domestic 552,108 7,900,440 8,452,548

Foreign US Dollar 288,312 505,983 794,295Hongkong Dollar 12,323 1,062,001 1,074,324Chinese Yuan 648,467 2,218,320 2,866,787Euro 15,441 12,988 28,429Other 4,564 - 4,564

Total 969,107 3,799,292 4,768,399Add Accrued interest receivables - 5,448 5,448Less Allowance for doubtful

account - (37,993) (37,993)

Total foreign 969,107 3,766,747 4,735,854

Total 1,521,215 11,667,187 13,188,402



8 Derivative financial instruments Trading derivatives Fair value and notional amount grouped by risk types

2016

Fair value Assets Liabilities Notional amountRisk types Baht’000 Baht’000 Baht’000

1. Exchange rate 77 1,199 1,307,204

2015

Fair value Assets Liabilities Notional amountRisk types Baht’000 Baht’000 Baht’000

1. Exchange rate 37,605 34,365 16,898,863 Portion of derivative contract balance grouped by types of counterparties

2016 2015Counterparties Percentage Percentage

Financial institutions 99.19 80.57Affiliated companies 0.81 16.73Third parties - 2.70

Total 100 100

9 Investment, net

Fair value Fair value 2016 2015 Baht’000 Baht’000Available-for-sale investments Government and state enterprise securities 3,706,033 3,061,275

Total available-for-sale investments 3,706,033 3,061,275 Cost Cost 2016 2015 Baht’000 Baht’000General investments Equity securities 5 5

Total general investments 5 5

Total investments in securities, net 3,706,038 3,061,280



10 Net loans to customers and interest receivables Loans and accrued interest receivables as at 31 December 2016 and 2015 are as follows: 10.1 Classified by type of loans

2016 2015 Baht’000 Baht’000

Overdrafts 43,564 17,877Loans 21,336,622 40,678,521Bills 272,766 1,199,353Less Deferred interest revenue (1,106) (3,460)

Total loans net of deferred income 21,651,846 41,892,291Add Accrued interest receivables 102,905 171,597

Loans net of deferred income and accrued

interest receivables 21,754,751 42,063,888Less Allowance for doubtful accounts Minimum allowance followed BOT

regulations by individual approach (385,845) (443,518)Additional allowance (101,659) (86,524)

Net loans to customers 21,267,247 41,533,846 10.2 Classified by currencies and residency of borrowers

2016 Domestic Foreign Total Baht’000 Baht’000 Baht’000

Baht 7,572,244 - 7,572,244US Dollar 6,147,602 2,686,382 8,833,984Chinese Yuan 8,088 3,851,020 3,859,108Other currencies - 1,386,510 1,386,510

Total 13,727,934 7,923,912 21,651,846


Baht 6,545,442 - 6,545,442US Dollar 11,368,703 17,047,907 28,416,610Chinese Yuan 46,508 6,398,744 6,445,252Other currencies 3,498 481,489 484,987

Total 17,964,151 23,928,140 41,892,291



10 Net loans to customers and interest receivables (Cont’d) 10.3 Classified by type of business and account status

2016 Special Doubtful Pass mention Substandard Doubtful of loss Total Baht’000 Baht’000 Baht’000 Baht’000 Baht’000 Baht’000

Manufacturing and commerce 9,831,641 159,288 353,574 249,934 197,988 10,792,425Property development and construction 4,049,572 - - - - 4,049,572Infrastructure and services 3,540,167 1,966,501 - - - 5,506,668Housing loans 1,153,639 - - 17,581 - 1,171,220Credit card 117,066 7,092 5,806 1,986 - 131,950Other 11 - - - - 11

Total 18,692,096 2,132,881 359,380 269,501 197,988 21,651,846


Manufacturing and commerce 24,110,664 169,000 542,291 249,934 - 25,071,889Property development and construction 2,107,907 - - - - 2,107,907Infrastructure and services 13,997,207 - - - - 13,997,207Housing loans 604,640 - - - - 604,640Credit card 99,226 3,366 3,422 4,590 - 110,604Other 44 - - - - 44

Total 40,919,688 172,366 545,713 254,524 - 41,892,291



10 Net loans to customers and interest receivables (Cont’d)

10.4 Classified by account status

2016

Allowance for doubtful accounts Outstanding debt to be computed Loans and for allowance Minimum Total accrued interest for doubtful required allowance receivables accounts according to recorded Baht’000 Baht’000 BOT guidelines Baht’000

Pass 18,764,246 14,382,184 1% 143,822Special mention 2,162,317 7,118 2% 142Substandard 360,538 39,675 100% 39,675Doubtful 269,662 4,218 100% 4,218Doubtful loss 197,988 197,988 100% 197,988Additional allowance 101,659

Total 21,754,751 14,631,183 487,504

2015

Allowance for doubtful accounts Outstanding debt to be computed Loans and for allowance Minimum Total accrued interest for doubtful required allowance receivables accounts according to recorded Baht’000 Baht’000 BOT guidelines Baht’000

Pass 41,086,976 31,279,016 1% 312,790Special mention 173,888 3,417 2% 68Substandard 548,499 126,049 100% 126,049Doubtful 254,525 4,611 100% 4,611Doubtful loss - - 100% -Additional allowance 86,524

Total 42,063,888 31,413,093 530,042

As at 31 December 2016 there were defaulted loans amounting to Baht 476 million (31 December 2015: Baht 500 million) for which the bank has ceased accrual of interest income on accrual basis according to the Bank of Thailand’s notification.



11 Allowance for doubtful accounts


Balance at beginning of period 342,449 3,448 170,636 13,509 - 530,042Addition during the period (181,499) 39,210 (98,315) 78 214,261 (26,265)Bad debt recovered - - - - 3,296 3,296Bad debt write-off - - - - (19,569) (19,569)

Balance at end of period 160,950 42,658 72,321 13,587 197,988 487,504


Balance at beginning of period 247,654 7,421 12,540 7,640 83 275,338Addition during the period 94,795 (3,973) 158,096 5,869 4,740 259,527Bad debt recovered - - - - 1,275 1,275Bad debt write-off - - - - (6,098) (6,098)

Balance at end of period 342,449 3,448 170,636 13,509 - 530,042

12 Bad debt and doubtful accounts

2016 2015 Baht’000 Baht’000

Loans (26,265) 259,527Interbank and money market items (24,641) (70,661)

Total (50,906) 188,866



13 Premises and equipment

Building Furniture and leasehold Computer and office Asset under improvements equipment equipment Vehicles construction Total Baht’000 Baht’000 Baht’000 Baht’000 Baht’000 Baht’000

For the year ended 31 December 2015 Opening net book amount 70,445 12,197 17,935 14,216 - 114,793Additions 35,171 10,871 34,730 2,761 5,504 89,037Disposal - - (1) - - (1)Depreciation charge (13,006) (6,448) (8,672) (6,178) - (34,304)

Closing net book amount 92,610 16,620 43,992 10,799 5,504 169,525

At 31 December 2015 Cost 204,292 45,338 87,975 40,621 5,504 383,730Less Accumulated

depreciation (111,682) (28,718) (43,983) (29,822) - (214,205)

Net book amount 92,610 16,620 43,992 10,799 5,504 169,525

For the year ended 31 December 2016 Opening net book amount 92,610 16,620 43,992 10,799 5,504 169,525 Additions 73,217 11,010 35,800 3,008 9,568 132,603 Disposal - - - (7) - (7)Write-off - (28) (35) - - (63)Transfer-in (out) 34 2,522 601 - (3,157) - Depreciation charge (15,284) (9,770) (16,775) (5,750) - (47,579)

Closing net book amount 150,577 20,354 63,583 8,050 11,915 254,479

At 31 December 2016 Cost 277,543 58,604 124,079 36,460 11,915 508,601 Less Accumulated

depreciation (126,966) (38,250) (60,496) (28,410) - (254,122)

Net book amount 150,577 20,354 63,583 8,050 11,915 254,479



14 Intangible assets

Computer software Computer under License fee software development Total Baht’000 Baht’000 Baht’000 Baht’000

For the year ended 31 December 2015 Opening net book amount 23,130 3,718 - 26,848Additions 562 5,446 2,181 8,189Amortisation charge (3,606) (479) - (4,085)

Closing net book amount 20,086 8,685 2,181 30,952 At 31 December 2015 Cost 35,872 12,052 2,181 50,105Less Accumulated amortisation (15,786) (3,367) - (19,153)

Net book amount 20,086 8,685 2,181 30,952

For the year ended 31 December 2016 Opening net book amount 20,086 8,685 2,181 30,952Additions 155 3,338 - 3,493Transfer-in (out) - 2,181 (2,181) -Amortisation charge (3,592) (1,742) - (5,334)

Closing net book amount 16,649 12,462 - 29,111 At 31 December 2016 Cost 36,027 17,571 - 53,598Less Accumulated amortisation (19,378) (5,109) - (24,487)

Net book amount 16,649 12,462 - 29,111



15 Leasehold

Baht’000

For the year ended 31 December 2015 Opening net book amount 34,147Amortisation charge (10,510)

Closing net book amount 23,637 At 31 December 2015 Cost 210,194Less Accumulated amortisation (186,557)

Net book amount 23,637

For the year ended 31 December 2016 Opening net book amount 23,637Amortisation charge (10,509)

Closing net book amount 13,128 At 31 December 2016 Cost 210,194Less Accumulated amortisation (197,066)

Net book amount 13,128

16 Deferred tax assets Deferred tax assets are calculated on certain temporary differences under the liability method using an enacted tax rate of 10% - 20%. The analysis of deferred tax assets is as follows:

Restated 2016 2015 Baht’000 Baht’000

Deferred tax asset to be recovered within 12 months 14,386 8,212Deferred tax asset to be recovered after more than 12 months 4,472 13,092

Deferred tax assets 18,858 21,304 Deferred tax liabilities to be recovered within 12 months - 1,459Deferred tax liabilities to be recovered after more than 12 months - 292

Deferred tax liabilities - 1,751

Net of deferred tax asset (liabilities) 18,858 19,553



16 Deferred tax assets (Cont’d)

The movement and the deferred income tax is as follows:


Beginning balance 19,553 17,714Charges to statements of comprehensive income (Note 32) (2,508) (1,418)Tax charged directly to statement of changes in equity 1,813 3,257

Ending balance 18,858 19,553 The movements in deferred tax asset are as follows:

Provisions Tax losses Bad debts Investment Others Total Baht’000 Baht’000 Baht’000 Baht’000 Baht’000 Baht’000Deferred tax assets

At 1 January 2015 4,053 18,322 387 - - 22,762Charged to the comprehensive income 5,632 (6,663) (387) - - (1,418)Charged directly to statement of changes in equity (40) - - - - (40)

At 31 December 2015 (Restated) 9,645 11,659 - -

- 21,304

At 1 January 2016 9,645 11,659 - - - 21,304Charged to the comprehensive income 7,167 (11,659) - - 1,984 (2,508)Charged directly to statement of changes in equity 8 - - 54 - 62

At 31 December 2016 16,820 - - 54 1,984 18,858

Investment Total Baht’000 Baht’000Deferred tax liabilities

At 1 January 2015 5,048 5,048Charged directly to statement of changes in equity (3,297) (3,297)

At 31 December 2015 1,751 1,751 At 1 January 2016 1,751 1,751Charged directly to statement of changes in equity (1,751) (1,751)

At 31 December 2016 - -



17 Other assets

2016 2015 Baht’000 Baht’000

Accrued interest income from investment 30,755 32,025Deposit 10,758 10,075Prepaid expense 10,348 7,442Refundable withholding tax - 1,838Others 12,291 8,921

Total 64,152 60,301

18 Deposits 18.1 Classified by type of deposits

2016 2015 Baht’000 Baht’000

Demand 146,710 183,586Saving 7,882,172 8,356,778Term - Less than 6 months 1,656,229 10,835,650 - 6 months but less than 1 year 11,991,921 5,606,330 - More than 1 year 318,886 7,585

Total 21,995,918 24,989,929

18.2 Classified by currencies and residencies of depositors


Baht 17,379,264 7,253 17,386,517US Dollar 3,520,903 319,025 3,839,928Chinese Yuan 651,093 2 651,095Other currencies 117,817 561 118,378

Total 21,669,077 326,841 21,995,918


Baht 20,635,475 18,990 20,654,465US Dollar 3,344,485 252,413 3,596,898Chinese Yuan 623,506 3 623,509Other currencies 115,057 - 115,057

Total 24,718,523 271,406 24,989,929



19 Interbank and money market items (liabilities)

2016 At call Term Total Baht’000 Baht’000 Baht’000

Domestic items Commercial banks 1,858 - 1,858

Total domestics 1,858 - 1,858

Foreign items Baht 307,951 - 307,951 US Dollar - 5,013,234 5,013,234 Chinese Yuan - 3,836,601 3,836,601 Hong Kong Dollar - 1,747,003 1,747,003 Other - - -

Total foreign 307,951 10,596,838 10,904,789

Total domestic and foreign 309,809 10,596,838 10,906,647

2015 At call Term Total Baht’000 Baht’000 Baht’000

Domestic items Commercial banks 1,164 - 1,164

Total domestics 1,164 - 1,164

Foreign items Baht 156,767 - 156,767 US Dollar - 10,065,634 10,065,634 Chinese Yuan - 10,670,120 10,670,120 Hong Kong Dollar - 1,062,001 1,062,001 Other - 386,500 386,500

Total foreign 156,767 22,184,255 22,341,022

Total domestic and foreign 157,931 22,184,255 22,342,186



20 Provisions 2016 2015 Baht’000 Baht’000

Provision for restoration and dismantling cost 10,599 9,381Provision for post-employment benefit 9,978 10,437Other provisions 5,351 1,956

Total provisions 25,928 21,774

Provision for employee benefits As at 31 December 2016, the pension benefits only provided to 220 employees (As at 31 December 2015: 172 employees) of the Bank which are unfunded obligations. The pension benefit is a part of provision for pension fund as follows:

2016 2015 Baht’000 Baht’000

Present value of obligations 9,978 10,437Less Deferred present value of obligations - -

Total provisions 9,978 10,437

The movements of provision for post-employment benefits are as follows:

2016 2015 Baht’000 Baht’000

Beginning balance 10,437 7,708Current service costs 2,108 2,673Interest costs 266 293Benefits paid (2,878) -Remeasurements of post-employment benefit obligations 45 (237)

Ending balance 9,978 10,437



20 Provisions (Cont’d) Expenses (income) for post-employment benefits were recognised in the statements of comprehensive income as follows:

2016 2015 Baht’000 Baht’000Recognised in statement of comprehensive income Current service costs 2,108 2,673Interest costs 266 293

Total 2,374 2,966 Recognised in statement of other comprehensive income Actuarial gain (loss) on defined employee benefit plan (45) 237

The principal actuarial assumptions used are as follows:

2016 2015

Discount rate 2.82% 3.45%Average salary increase rate 5.00% 5.00%Pre-retirement mortality rate 80% of Thai Mortality 80% of Thai Mortality Ordinary Table 2008 Ordinary Table 2008Disability rate 5% of Thai Mortality 5% of Thai Mortality Ordinary Table 2008 Ordinary Table 2008Retirement age 55 years 55 years

Sensitivity analysis on key assumption changes are as follows:

2016 2015

Discount rate Increase of 1% Decrease by 8.30% Decrease by 6.42% decrease of 1% Increase by 9.45% Increase by 7.32%

Expected rate of salary increase Increase of 1% Increase by 9.15% Increase by 7.14% decrease of 1% Decrease by 8.21% Decrease by 6.39%

Turnover rate Increase of 1% Decrease by 5.31% Decrease by 6.63% decrease of 1% Increase by 5.85% Increase by 4.57% The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the provision for post-employment benefit recognised within the statement of financial position.



20 Provisions (Cont’d) The weighted average duration of the defined benefit obligation is 13.74 years (2015: 13.15 years). Expected maturity analysis of undiscounted retirement benefits:

2016 2015

Baht’000 Baht’000

Benefits expected to be paid within 12 months 1,470 2,742Benefits expected to be paid between 1 and 5 years 2,942 2,808Benefits expected to be paid in more than 5 years 45,100 37,714

21 Other liabilities


Accrued expenses 205,288 153,792Cash subscription payable to parent company 203,013 203,013Deferred fees income 43,417 29,937Income tax payable 2,993 2,550Other liabilities on behalf of Bank of China Limited, Bangkok branch 10,789 6,277Other 48,085 73,491

Total 511,420 469,060

22 Assets under commitment As at 31 December 2016, Government bonds amounting to 2,202.73 million Baht (As at 31 December 2015: Baht 803.85 million) are used as collateral for borrowing from the Bank of Thailand and for securities sold under repurchase agreements.



23 Financial instruments

The Bank’s financial instruments comprise of cash, interbank and money market items, loans, investments, deposit, liability payable on demand and borrowings. The Bank is exposed to normal business risks from changes in market interest rates, currency exchange rates and from non-performance of contractual obligations by counterparties. 23.1 Foreign exchange risk

The Bank’s foreign currency position as at 31 December 2016 and 2015 are as follows:

2016 Chinese Hong Kong Baht US Dollar Yuan Dollar Others Total Baht’000 Baht’000 Baht’000 Baht’000 Baht’000 Baht’000

Assets Cash 107,983 6,366 27,297 - - 141,646Interbank and money market items, net 15,556,851 1,621,244 748,455 396,358 144,215 18,467,123Derivatives assets (5,908) 5,370 3,591 - (2,976) 77 Investments, net 3,706,038 - - - - 3,706,038Loans and accrued interest receivables, net 7,588,850 8,892,121 3,884,587 1,389,193 - 21,754,751 Accrued income receivables 32,533 6,891 1 - 109 39,534

Total assets 26,986,347 10,531,992 4,663,931 1,785,551 141,348 44,109,169 Liabilities Deposits 17,386,517 3,839,928 651,095 - 118,378 21,995,918 Interbank and money market items, net 309,026 5,013,234 3,837,384 1,747,003 - 10,906,647 Liability payable on demand 31,256 233,601 9,671 - 4,823 279,351 Derivatives liabilities (1,184,954) 1,191,534 (5,381) - - 1,199 Accrued interest payables 150,095 23,174 48,081 2,561 - 223,911 Other liabilities 251,933 258 2,607 - - 254,798

Total liabilities 16,943,873 10,301,729 4,543,457 1,749,564 123,201 33,661,824

Foreign currency position on

financial position items, net 10,042,474 230,263 120,474 35,987 18,147 10,447,345



23 Financial instruments (Cont’d)

23.1 Foreign exchange risk (Cont’d) The Bank’s foreign currency position as at 31 December 2016 and 2015 are as follows: (Cont’d)

2015 Chinese Hong Kong Baht US Dollar Yuan Dollar Others Total Baht’000 Baht’000 Baht’000 Baht’000 Baht’000 Baht’000

Assets Cash 79,247 8,861 19,691 - - 107,799Interbank and money market items, net 8,452,548 794,724 2,871,121 1,075,007 32,995 13,226,395Derivatives assets 8,134,086 (10,017,784) 1,921,303 - - 37,605Investments, net 3,061,280 - - - - 3,061,280Loans and accrued interest receivables, net 6,562,367 28,509,782 6,506,440 - 485,299 42,063,888Accrued income receivables 34,549 5,444 1 - 127 40,121

Total assets 26,324,077 19,301,027 11,318,556 1,075,007 518,421 58,537,088

Liabilities Deposits 20,654,465 3,596,899 623,508 - 115,057 24,989,929Interbank and money market items, net 156,767 10,065,634 10,671,284 1,062,001 386,500 22,342,186Liability payable on demand 30,923 124,622 19,713 4,229 3,583 183,070Derivatives liabilities (4,697,685) 5,135,255 (403,205) - - 34,365Accrued interest payables 83,277 6,698 118,894 366 69 209,304Other liabilities 226,502 2,123 49,882 - - 278,507

Total liabilities 16,454,249 18,931,231 11,080,076 1,066,596 505,209 48,037,361

Foreign currency position on

financial position items, net 9,869,828 369,796 238,480 8,411 13,212 10,499,727



23 Financial instruments (Cont’d) 23.2 Interest rate risk

Interest rate risk is the risk that changes in market interest rates which may lead to changes in the value of financial instruments. Most of the Bank’s financial assets and liabilities are based on the fluctuation in floating interest rates in the market. The Bank has loans (including to loans to financial institutions), as at 31 December 2016 and 2015, as follows:

2016 2015 Baht’000 Baht’000

Fixed interest rate 5,655,668 7,597,405Floating interest rate 17,331,353 38,094,177 The Bank has the following interest-bearing financial assets and liabilities. The average balances of which are calculated by using balances of the financial assets and liabilities of each month. The average interest and dividend rates per annum for the year ended 31 December 2016 and 2015 are as follows:

2016 Average Average rate per balance Interest annum. Baht’000 Baht’000 %Interest-bearing Financial assets Cash and interbank and money market items 20,387,341 211,848 1.04Investments, net 4,149,671 72,625 1.75Loans 28,227,795 869,526 3.08

Total 52,764,807 1,153,999 Interest-bearing Financial liabilities Deposits 28,539,462 445,933 1.56Interbank and money market items 13,260,943 306,955 2.31

Total 41,800,405 752,888



23 Financial instruments (Cont’d) 23.2 Interest rate risk (Cont’d)

The Bank has the following interest-bearing financial assets and liabilities. The average balances of which are calculated by using balances of the financial assets and liabilities of each month. The average interest and dividend rates per annum for the year ended 31 December 2016 and 2015 are as follows: (Cont’d)

2015 Average Average rate per balance Interest annum. Baht’000 Baht’000 %Interest-bearing Financial assets Cash and interbank and money market items 11,888,067 198,789 1.67Investments, net 2,426,681 70,354 2.90Loans 39,800,858 991,856 2.49

Total 54,115,606 1,260,999 Interest-bearing Financial liabilities Deposits 16,610,264 241,959 1.46Interbank and money market items 27,103,041 555,268 2.05

Total 43,713,305 797,227




23.2 Interest rate risk (Cont’d)

Financial assets and liabilities, classified by maturity of interest repricing, as at 31 December 2016 and 2015, are as follows:

2016 Immediate Not over 3 months Over Non-interest repricing 3 months - 1 year 1 year bearing Total Baht’000 Baht’000 Baht’000 Baht’000 Baht’000 Baht’000Financial assets Cash - - - - 141,646 141,646Interbank and money market items 1,469,846 16,435,175 - - 562,102 18,467,123 Derivatives assets - - - - 77 77 Investments - 3,706,033 - - 5 3,706,038Loans 198,996 12,459,606 5,404,970 3,113,572 474,702 21,651,846 Accrued interest receivables - - - - 102,905 102,905 Accrued income receivables - - - - 39,534 39,534 Total financial assets 1,668,842 32,600,814 5,404,970 3,113,572 1,320,971 44,109,169

Financial liabilities Deposits 7,756,605 8,093,795 5,561,900 311,342 272,276 21,995,918 Interbank and money market items 1,858 10,596,838 - - 307,951 10,906,647 Liabilities payable on demand - - - - 279,351 279,351Derivatives liabilities - - - - 1,199 1,199 Accrued interest payables - - - - 223,911 223,911 Other liabilities - - - - 254,798 254,798 Total financial liabilities 7,758,463 18,690,633 5,561,900 311,342 1,339,486 33,661,824 Net position (6,089,621) 13,910,181 (156,930) 2,802,230 (18,515) 10,447,345

2015 Immediate Not over 3 months Over Non-interest repricing 3 months - 1 year 1 year bearing Total Baht’000 Baht’000 Baht’000 Baht’000 Baht’000 Baht’000Financial assets Cash - - - - 107,799 107,799Interbank and money market items 929,520 11,699,292 - - 597,583 13,226,395Derivatives assets - - - - 37,605 37,605Investments - 601,215 746,278 1,713,782 5 3,061,280Loans 139,339 29,236,186 10,132,385 1,936,459 447,922 41,892,291Accrued interest receivables - - - - 171,597 171,597Accrued income receivables - - - - 40,121 40,121 Total financial assets 1,068,859 41,536,693 10,878,663 3,650,241 1,402,632 58,537,088

Financial liabilities Deposits 8,134,475 9,385,788 7,056,232 7,544 405,890 24,989,929Interbank and money market items 1,164 21,122,254 1,062,001 - 156,767 22,342,186Liabilities payable on demand - - - - 183,070 183,070Derivatives liabilities - - - - 34,365 34,365Accrued interest payables - - - - 209,304 209,304Other liabilities - - - - 278,507 278,507 Total financial liabilities 8,135,639 30,508,042 8,118,233 7,544 1,267,903 48,037,361 Net position (7,066,780) 11,028,651 2,760,430 3,642,697 134,729 10,499,727




23.3 Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facility, Major source of fund is from share capital. A maturity analysis for financial assets and liabilities as at 31 December 2016 and 2015 are as follows:

2016 Not over 3 months 1 - 5 Over No At call 3 months - 1 year years 5 years Maturity Total Baht’000 Baht’000 Baht’000 Baht’000 Baht’000 Baht’000 Baht’000Financial assets Cash - - - - - 141,646 141,646Interbank and money market items 2,029,760 16,437,352 11 - - - 18,467,123 Derivatives assets - 77 - - - - 77Investments, net 5 1,200,772 2,005,901 499,360 - - 3,706,038Loans 673,698 4,391,215 7,473,730 7,241,266 1,871,937 - 21,651,846 Accrued interest Receivables 6,418 68,612 22,310 5,565 - - 102,905 Accrued income receivables 207 37,697 790 840 - - 39,534 Total financial assets 2,710,088 22,135,725 9,502,742 7,747,031 1,871,937 141,646 44,109,169 Financial liabilities Deposits 8,028,881 8,093,795 5,561,900 311,342 - - 21,995,918 Interbank and money market items 309,809 10,596,838 - - - - 10,906,647 Liabilities payable on demand 279,351 - - - - - 279,351Derivatives liabilities - 1,199 - - - - 1,199Accrued interest payables - 159,778 57,230 6,903 - - 223,911 Other liabilities 254,798 - - - - - 254,798 Total financial Liabilities 8,872,839 18,851,610 5,619,130 318,245 - - 33,661,824

Liquidity, net (6,162,751) 3,284,115 3,883,612 7,428,786 1,871,937 141,646 10,447,345



23 Financial instruments (Cont’d) 23.3 Liquidity risk (Cont’d)

A maturity analysis for financial assets and liabilities as at 31 December 2016 and 2015 are as follows: (Cont’d)

2015 Not over 3 months 1 - 5 Over No At call 3 months - 1 year years 5 years Maturity Total Baht’000 Baht’000 Baht’000 Baht’000 Baht’000 Baht’000 Baht’000Financial assets Cash - - - - - 107,799 107,799Interbank and money market items 1,521,215 10,643,171 7 1,062,001 - - 13,226,394Derivatives assets - 29,619 7,986 - - - 37,605Investments, net 5 601,215 746,278 1,713,782 - - 3,061,280Loans 679,075 14,432,500 13,904,371 11,372,625 1,503,720 - 41,892,291Accrued interest Receivables 26,117 67,093 60,750 17,637 - - 171,597Accrued income receivables 304 26,045 13,772 - - - 40,121

Total financial assets 2,226,716 25,799,643 14,733,164 14,166,045 1,503,720 107,799 58,537,087 Financial liabilities Deposits 8,540,364 9,385,788 7,056,232 7,545 - - 24,989,929Interbank and money market items 157,931 18,671,314 2,433,368 1,079,573 - - 22,342,186Liabilities payable on demand 183,070 - - - - - 183,070Derivatives liabilities - 26,696 7,669 - - - 34,365Accrued interest payables - 165,212 44,026 66 - - 209,304Other liabilities 278,507 - - - - - 278,507 Total financial liabilities 9,159,872 28,249,010 9,541,295 1,087,184 - - 48,037,361

Liquidity, net (6,933,155) (2,449,367) 5,191,869 13,078,861 1,503,720 107,799 10,499,727

Derivatives The Bank enters into derivative transactions for the main reason to hedge of the Bank’s exposure to financial risks, which are activities to reduce or eliminate exchange rate and/or interest rate risk related to the Banks’ financial assets, liabilities, contingent accounts or expected transactions in the future and liquidity management. The derivatives which the Bank enters into are forward exchange contracts. The Bank controls credit risk by using procedures similar to those used when granting general loans.




23.4 Fair values When a financial instrument is traded in an active market, its quoted market price provides the best evidence of fair value. The appropriated quoted market price for financial asset held or liability to be issued is usually the current bid price and, for financial asset to be acquired or liability held, the current offer or asking price. When current bid and offer prices are unavailable, the price of the most recent transaction may provide evidence of the current fair value provided that there has not been a significant change in economic circumstances between the transaction date and the reporting date. When the Company has matching asset and liability positions, it is appropriate for the Company to use mid-market prices as a basis for establishing fair values. Where there is inactive activity in a market, the market is not well established or small volumes are traded relative to the number of trading units of a financial instrument to be valued, quoted market prices may not be indicative of the fair value of the instrument. In these circumstances, as well as when a quoted market price is not available, estimation techniques may be used to determine fair value with sufficient reliability. Techniques that are well established in financial markets include reference to the current market value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models. The Company uses a discount rate equal to the prevailing market rate of interest for financial instruments having substantially terms and characteristics, including the creditworthiness of the asset, the remaining term over which the contractual interest rate is fixed, the remaining term to repayment of the principal and the currency in which payments are to be made. The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: Level 1: Uses quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Uses inputs other than quoted prices included within level 1 that are observable

for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

Level 3: Uses data that is not observable in the market such as information regarding future cash flows that the Company estimates.




23.4 Fair values (Cont’d) The following table presents the Bank’s financial assets and liabilities that are measured at fair value at 31 December 2016 and 2015.

2016

Level 1 Level 2 Level 3 TotalBaht’000 Baht’000 Baht’000 Baht’000

Financials assets Derivatives assets - 77 - 77Available-for-sale securities Government and state enterprise securities - 3,706,033 - 3,706,033

Total financial assets - 3,706,110 - 3,706,110

Financial liabilities Derivatives liabilities - 1,199 - 1,199

Total financial liabilities - 1,199 - 1,199

2015 Level 1 Level 2 Level 3 Total

Baht’000 Baht’000 Baht’000 Baht’000

Financials assets Derivatives assets - 37,605 - 37,605Available-for-sale securities Government and state enterprise securities - 3,061,275 - 3,061,275


Financial liabilities Derivatives liabilities - 34,365 - 34,365

Total financial liabilities - 34,365 - 34,365 There was no transfers between Levels 1 and 2 during the year. There were no changes in valuation techniques during the year.




23.4 Fair values (Cont’d) The following table presents the Bank’s financial assets and liabilities that are measured at its cost but disclosed at its fair value as of 31 December 2016 and 2015.

2016


Financial assets Interbank and money market items, net - 18,453,771 - 18,453,771Net loans to customers and

interest receivables - 21,754,752 - 21,754,752


Financial liabilities Deposits - 13,979,570 - 13,979,570Interbank and money market items, net - 10,906,647 - 10,906,647Demand liabilities - 279,351 - 279,351

Accrued interest payable - 223,911 - 223,911

Total financial liabilities - 25,389,479 - 25,389,479

2015


Financial assets Interbank and money market items, net - 13,188,402 - 13,188,402Net loans to customers and

interest receivables - 41,533,846 - 41,533,846


Financial liabilities Deposits - 16,469,981 - 16,469,981Interbank and money market items, net - 22,342,186 - 22,342,186Demand liabilities - 183,070 - 183,070

Accrued interest payable - 209,304 - 209,304

Total financial liabilities - 39,204,541 - 39,204,541 There was no transfers between Levels 1 and 2 during the year.




23.4 Fair values (Cont’d) The estimated fair value of significant financial assets and liabilities as of 31 December 2016 and 2015 are as follows:

2016 2015 Book value Fair value Book value Fair value Baht’000 Baht’000 Baht’000 Baht’000

Financial assets Interbank and money market items 18,453,771 18,453,771 13,188,402 13,188,402Derivatives assets 77 77 37,605 37,605Investments 3,706,033 3,706,033 3,061,275 3,061,275Loan and accrued interest receivable, net 21,754,752 21,754,752 41,533,846 41,533,846

Financial liabilities Deposits 13,967,036 13,979,570 16,449,564 16,469,981Interbank and money market items 10,906,647 10,906,647 22,342,186 22,342,186Liabilities payable on demand 279,351 279,351 183,070 183,070Derivatives liabilities 1,199 1,199 34,365 34,365

Other financial instruments not carried at fair value are typically short-term in nature and reprice to current market rate frequently. Accordingly, their carrying amount is a reasonable approximation of fair value. This includes cash, saving deposits and current deposits presented as both interbank and money market assets and liabilities items, saving deposits and current deposits and liabilities payable on demand. Fair value of the following assets and liabilities are estimated for the purpose of disclosure as described below: Loans to customers and accrued interest receivable, net The fair value is the outstanding balance of loans and accrued interest less allowance for doubtful accounts. The majority of loans are float rate. Accordingly, their carrying amount is a reasonable approximation of fair value.




23.4 Fair values (Cont’d) Interbank and money market items The interbank and money market items (assets) are loans to financial institutions which are short-term or at call. Accordingly, their carrying amount is a reasonable approximation of fair value. The interbank and money market items (liabilities) are borrowing and fixed deposits which are short-term. Accordingly, their carrying amount is a reasonable approximation of fair value. Deposits The deposits are fixed deposits and certificate of deposit. The fair value are estimated using discounted cash flow, applying current rates offered for fixed deposits of similar remaining maturities. Accrued interest payable The carrying amount of accrued interest payable in the statement of financial positions approximates to fair value. Valuation techniques used to derive Level 2 fair values Level 2 trading derivatives comprise forward foreign exchange contracts and foreign exchange swaps which are fair valued based on forward rate of foreign currency against Thai Baht and discounted with interest rate in each currency which can be obtained from observable market. Level 2 debt investments of marketable securities are fair valued based on yield curve of the Thai Bond Market Association under discounted cash flow model.



24 Contingencies and commitments 24.1 Contingencies and commitments as at 31 December 2016 and 2015 are classified as

follows:

2016 2015 Foreign Foreign Baht currency Total Baht currency Total Baht’000 Baht’000 Baht’000 Baht’000 Baht’000 Baht’000

Letters of credit - 789,970 789,970 - 141,600 141,600

Other contingencies Other guarantees 6,623,882 8,421,340 15,045,222 4,231,089 7,280,823 11,511,912Exchange rate agreements - Purchase contracts 1,239,010 67,936 1,306,946 13,226,628 3,661,473 16,888,101 - Sale contracts 59,111 1,248,093 1,307,204 385,151 16,488,194 16,873,345Unused credit line of overdrafts 7,591,395 3,647,450 11,238,845 5,292,281 5,803,084 11,095,365

Total other contingencies 15,513,398 13,384,819 28,898,217 23,135,149 33,233,574 56,368,723

Total 15,513,398 14,174,789 29,688,187 23,135,149 33,375,174 56,510,323

24.2 The Bank has commitment to pay the future expenses relating to rental and service

agreement at totalling Baht 89.65 million (2015: Baht 50.28 million), for which a maturity analysis are as follows:

2016 2015 Baht’000 Baht’000

Within 1 year 24,572 26,3481 - 5 years 26,010 21,688Over 5 years 39,063 2,248

89,645 50,284



25 Related party transactions and balances Enterprises and individuals that directly, or indirectly through one or more intermediaries, control, or are controlled by, or are under common control with, the Bank, including parent company, subsidiaries and fellow subsidiaries are related parties of the Bank. Associates and individuals owning, directly or indirectly, an interest in the voting power of the Bank that gives them significant influence over the enterprise, key management personnel, including directors and officers of the Bank and close members of the family of these individuals and companies associated with these individuals also constitute related parties. In considering each possible related party relationship, attention is directed to the substance of the relationship, and not merely the legal form. Significant related party transactions were transacted with fellow branches, subsidiaries, associates and the Head office of Bank of China as follows: Transactions for the year ended 31 December 2016 and 2015 with related parties are summarised as follows:

2016 2015 Baht’000 Baht’000

Interest income 86,867 82,039Interest expenses 306,838 555,249Premises and equipment expenses 10,614 11,921 Balances as at 31 December 2016 and 2015 with related parties are as follows:

2016 2015 Baht’000 Baht’000

Interbank and money market items Loans 2,902,706 4,768,399Borrowings 10,904,789 22,341,022Accrued interest receivables 1,350 5,448Accrued interest payables 69,757 122,925

Other liabilities Cash subscription payable to parent company 203,013 203,013Other liabilities on behalf of Bank of China Limited, Bangkok branch 10,789 6,277Accrued expenses 10,372 9,178Other 15,685 51,978 Transactions between the Bank and related parties were priced at and contained similar conditions with the Bank’s general customers and conformed to normal banking practice.



26 Director and management benefits The Bank has not extended extraordinary monetary and/or non-monetary benefits to the Banks’ directors, executives at the level of executive vice president and higher, including financial controller, except for ordinary benefits to the directors and executives such as salary, bonus (if any) and allowance.

2016 2015 Baht’000 Baht’000

Short-term employee benefits 40,838 47,091

27 Important position and performance grouped by type of domestic or foreign transactions 27.1 Position grouped by type of transaction


Assets

Interbank and money market item 18,269,285 184,486 18,453,771Investments, net 3,706,038 - 3,706,038 Loans to customers and accrued interest receivables, net 13,265,601 8,001,646 21,267,247

Liabilities

Deposits 21,995,833 85 21,995,918 Interbank and money market item 2,820,144 8,086,503 10,906,647 Liabilities payable on demand 279,351 - 279,351


Assets

Interbank and money market item 10,992,340 2,196,062 13,188,402Investments, net 3,061,280 - 3,061,280Loans to customers and accrued interest receivables, net 30,329,160 11,204,686 41,533,846

Liabilities

Deposits 24,989,843 86 24,989,929Interbank and money market item 9,197,341 13,144,845 22,342,186Liabilities payable on demand 183,070 - 183,070



27 Important position and performance grouped by type of domestic or foreign transactions (Cont’d) 27.2 Performance grouped by types of transaction

31 December 2016 Domestic Foreign Total Baht’000 Baht’000 Baht’000

Interest income 781,284 372,715 1,153,999 Interest expenses (603,414) (263,603) (867,017)

Net interest income 177,870 109,112 286,982

Net fee and services income 131,973 16,822 148,795 Other operating income 182,848 (12,024) 170,824 Other operating expenses (484,065) (88,621) (572,686)

Profit before income tax 8,626 25,289 33,915

Restated

31 December 2015 Domestic Foreign Total Baht’000 Baht’000 Baht’000

Interest income 661,343 599,655 1,260,998Interest expenses (426,570) (434,046) (860,616)

Net interest income 234,773 165,609 400,382

Net fee and services income 75,395 4,587 79,982Other operating income 336,537 9,607 346,144Other operating expenses (739,209) 6,679 (732,530)

Profit (loss) before income tax (92,504) 186,482 93,978

28 Interest income 2016 2015 Baht’000 Baht’000

Interbank and money market items 211,848 198,788Investment in debt securities 72,625 70,354Loan to customers 869,526 991,856

Total 1,153,999 1,260,998

29 Interest expense

2016 2015 Baht’000 Baht’000

Deposits 445,933 241,969Interbank and money market items 306,955 555,267Contributions for deposit protection 114,129 63,380

Total 867,017 860,616



30 Fees and service income, net

2016 2015 Baht’000 Baht’000

Fees and service income - Acceptances, avail and guarantees 72,304 58,837 - Others 98,633 35,782Fees and service expenses (22,142) (14,638)

Fees and service income, net 148,795 79,981

31 Net gains (losses) on tradings and foreign exchange transactions

2016 2015 Baht’000 Baht’000

Gains on tradings and foreign exchange transactions - Foreign currencies and exchange derivatives 164,184 345,049

Total 164,184 345,049 32 Income tax


Current income tax: Current income tax for the period 5,389 2,550Adjustments in respect of prior year 7 -

Total current tax 5,396 2,550

Deferred income tax: Decrease in deferred tax assets (Note 16) 2,508 1,418

Total deferred tax 2,508 1,418

Income tax expense 7,904 3,968 The calculation of income tax in the company income statements are as follows:


Profit before tax 33,916 93,978

Tax calculated at a tax rate of 10% - 20% 4,254 (656)Tax effect of:

Expenses not deductible for tax purpose 3,643 4,624Adjustments in respect of prior year 7 -

Tax charge 7,904 3,968

The weighted average applicable tax rate was 23.30% (2015: 4.22%).



32 Income tax (Cont’d)

The tax (charge)/credit relating to component of other comprehensive income is as follows:

2016

Before tax

Tax (charge)

credit After tax Baht’000 Baht’000 Baht’000

Fair value gains (loss): Available-for-sale financial asset (9,023) 1,805 (7,218)Remeasurement on retirement benefit obligations (45) 8 (37)

Other comprehensive income (9,068) 1,813 (7,255)

2015

Before tax

Tax (charge)

credit After tax Baht’000 Baht’000 Baht’000

Fair value gains (loss): Available-for-sale financial asset (16,486) 3,297 (13,189)Remeasurement on retirement benefit obligations 237 (40) 197

Other comprehensive income (16,249) 3,257 (12,992) 33 Share capital

Number Amount shares Baht’000

At 1 January 2015 1,000,000,000 10,000,000Issue of shares - -

At 31 December 2015 1,000,000,000 10,000,000

At 1 January 2016 1,000,000,000 10,000,000Issue of shares - -

At 31 December 2016 1,000,000,000 10,000,000

The total number of authorised ordinary shares at 31 December 2016 and 2015 is 1,000,000,000 shares with a par value of Baht 10 per share. All issued shares are fully paid.

34 Legal reserve

Under the Public Limited Company Act., B.E. 2535, the Bank is required to set aside as a legal reserve at least 5 percent of its net profit after accumulated deficit brought forward (if any) until the reserve is not less than 10 percent of the registered capital. The legal reserve is non-distributable.



35 Capital funds

The primary objectives of the Bank’s capital management are to maintain the Bank’s ability to continue as a going concern and to maintain a capital adequacy ratio in accordance with the Act on Undertaking of Banking business B.E. 2551. The capital funds comprise:

Total capital 2016 to risk assets Baht’000 %Tier I Issued and paid up share capital 10,000,000 Other reserves (130) Deduction on Tier I capital fund (36,271)

Total Tier I capital fund 9,963,599 37.78

Total capital fund less capital add-on arising from

Single Lending Limit 9,963,599 37.78

Restated Total capital 2015 to risk assets Baht’000 %Tier I Issued and paid up share capital 10,000,000 Other reserves 8,752 Deduction on Tier I capital fund (37,920)

Total Tier I capital fund 9,970,832 22.16

Total capital fund less capital add-on arising from

Single Lending Limit 9,885,712 21.97 The Bank and its financial group will disclose capital maintenance information as at 31 December 2016 in accordance with the Notification of Bank of Thailand RE: Public Disclosure of Capital Maintenance Information for Commercial Banks and Consolidated Supervision on its website at www.bankofchina.com/th/th within four months after the statements of financial position date.

36 Basic earnings (losses) per share

Restated 2016 2015Net gain (loss) attributable to ordinary shareholders (Baht) 26,011,345 90,009,982Weighted average number of ordinary shares issued and paid-up (Shares) 1,000,000,000 1,000,000,000Basic earnings (losses) per share (Baht per share) 0.03 0.09 There are no potential dilutive ordinary shares for the year ended 31 December 2016 and 2015.



37 Other component of equity

Other component of equity for the year ended 31 December 2016 and 2015 are as follows:

Deferred tax Revaluation relating to surplus components (deficit) other available-for-sale comprehensive securities income Total Baht’000 Baht’000 Baht’000

Opening balance 1 January 2015 25,238 (5,047) 20,191Total comprehensive income (expenses) (16,486) 3,297 (13,189)

Closing balance 31 December 2015 8,752 (1,750) 7,002 Opening balance 1 January 2016 8,752 (1,750) 7,002Total comprehensive income (expenses) (9,022) 1,804 (7,218)

Closing balance 31 December 2016 (270) 54 (216)

38 Subsequent events On 9 January 2017, main shareholder has been officially changed from Bank of China Limited to Bank of China (Hong Kong) Limited upon the approval of Ministry of Finance.

104 Capital Structure


As of the end 2016, the Bank had a registered capital of 10,000,000,000 Baht, issued and fully paid-up capital 10,000,000,000 Baht. Totally were 1,000,000,000 ordinary shares, par value 10 Baht. Shareholder Structure The shareholder chart of the bank as at 31 December 2016 as following

0.01%

100%

99.99%

64.02% 35.98%

100%

Ministry of Finance The People’s Republic of China (PRC)

China Investment Corporation Limited (CIC)

Central Huijin Investment Limited Other Public Shareholders

Bank of China Limited


Bank of China Investment Limited Wise Key Enterprises Corp. Success Trend Development Ltd. Gold Tap Enterprises Inc. Express Talent Investment Ltd. Smart Linkage Holdings Inc. Billion Express Development Inc. Express Charm Holdings Corp. Maxi Success Holdings Inc. Elite Bond Investments Ltd. Billion Orient Holdings Ltd. Express Capital Enterprise Inc. Gold Medal Capital Inc. Smart Union Capital Investments Ltd. Express Shine Assets Holdings Corp.

The

org

aniz

atio

n ch

art a

s at

31

Dec

embe

r 20

16 is

as

foll

ows:

105Organizational Chart

106 General Information


BANK OF CHINA (THAI) PUBLIC COMPANY LIMITED Register Address 1st- 4th Floor Bangkok City Tower, 179/4 Sourth Sathorn Road, Tungmahamek, Sathorn, Bangkok 10120 Thailand Registration No. 0107557000098 Date of first registration 1 April 2014 Registered capital 10,000,000,000 Baht (As of 31 December 2016) Paid-up capital 10,000,000,000 Baht (As of 31 December 2016) Par value 10 Baht Website www.bankofchina.com/th Telephone (66)2-286-1010 Facsimile (66)2-286-1020 Customer Service Center (66)2-679-5566 (24 hours) Auditor PricewaterhouseCoopers ABAS Ltd. 179/74-80 South Sathorn Road, Bangkok 10120, Thailand Tel: (66)2-344-1000, (66)2-788-0000 Fax: (66)2-286-5050 Branch office Bangkok and Metropolitan Head office Branch 1st- 4th Floor Bangkok City Tower, 179/4 Sourth Sathorn Road, Tungmahamek, Sathorn, Bangkok 10120 Thailand Tel: (66)2-286-1010 Fax: (66)2-286-1020 Ratchada Branch 1st Floor Paking Building, 9 Ratchadaphisek Road, Dendaeng, Bangkok 10400 Thailand Tel: (66)2-203-7333 Fax: (66)2-203-7340 Talad Thai Branch 55/28-29 Moo 9 Tambol Klongsong, Amphoe Klongluang, Prathumthani 12120 Thailand Tel: (66)2-150-2459 Fax: (66)2-150-2460

General Information 107


Bangna Branch 1st Floor Mega Bangna Plaza, Bangna-Trad Road, Bangkaew, Bangphli, Samutprakarn 10540 Thailand Tel: (66)2-105-2102 Fax: (66)2-105-2101 Eastern Rayong Branch Amata City Industrial Estate, 9/21, Moo 4 Mabyangporn District, Pluakdaeng, Rayong 21140 Thailand Tel: (66)3-802-5837 Fax: (66)3-802-5830 North Eastern Khon Kaen Branch Jompol Market Unit A1-3, 555 Moo 13, Kasikorn Thungsang Road, Nai Muang, Muang Khon Kaen, Khon Kaen 40000 Thailand Tel: (66)4-324-6710 Fax: (66)4-324-6711 Nakhonratchasima Branch 440/9–11, Mittraparb-Nongkai Road, Tumbol Naimuang, Amphoe Muang Nakhon Ratchasima, Nakhon Ratchasima Province, 30000 Tel: (66)4-424-8909 Fax: (66)4-424-8901 North Chiangmai Branch 161, 161/1, Moo 4, Tumbol Nongpakrang,

Amphoe Muang Chiang Mai, Chiang Mai Province, 50000 Tel: (66)5-326-1880 Fax: (66)5-326-1875 South Hat Yai Branch Asean Plaza Hatyai, Unit 1468/7-8, 1st Floor,

Kanchanavanit Road, Hat Yai, Songkhla, 90110 Tel: (66)7-455-9579 Fax: (66)7-455-9580

Documents

Annual Report 2016 English Version - 中国银行全球门户网站pic.bankofchina.com/bocappd/thailand/201704/P... · · 2017-04-25Bank of China (Thai) Public Company Limited |