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A N N U A L R E P O R T 1 9 9 9 T a b l e o f C o n t e n t s FINANCIAL HIGHLIGHTS 2 MESSAGE FROM THE CHAIRMAN 3 MESSAGE FROM THE PRESIDENT 5 REVIEW OF OPERATIONS 8 BUSINESS DEVELOPMENT 14 SOCIAL CONTRIBUTIONS 18 BOARD OF DIRECTORS AND EXECUTIVE COMMITTEE 21 ORGANIZATION CHART 22 SENIOR MANAGEMENT 24 REPORT OF THE AUDIT COMMITTEE 42 REPORT OF THE AUDITORS 43 OTHER INFORMATION 119 BRANCH NETWORK 132 FINANCIAL HIGHLIGHTS (Million Baht) Consolidated Bank of Asia 1999 1998 1999 1998 Income Statement Net interest and dividend income 1,434 330 1,415 242 Non - interest income 1,869 1,623 1,535 1,625 Total income 9,911 18,894 9,553 18,562 Profit before provision and income tax (840) (2,309) (1,044) (2,120) Provision for possible loan losses 10,370 5,817 10,528 5,582 Net profit (loss) (11,218) (8,000) (11,583) (7,702) Earnings (loss) per share (Baht) Basic (5.59) (8.82) (5.77) (8.49) Diluted (5.49) (8.41) (5.66) (8.09) Balance Sheet Total assets 156,951 149,497 156,839 148,936 Total loans 125,878 124,268 125,808 125,541 Allowance for doubtful accounts 17,924 9,151 17,622 8,859 Total deposits 125,255 116,544 124,742 115,629 Total liabilities 145,260 140,384 144,546 139,263 Total shareholders' equity 11,647 9,065 12,293 9,674 Ratios Return on average assets (7.32) (5.20) (7.58) (5.04) Return on average equity (108.33) (87.40) (105.46) (78.76) Net interest and dividend income to average assets 0.94 0.21 0.93 0.16 Net profit to gross revenue (339.65) (409.66) (392.73) (412.58) Dividend per share (Baht) - - - - Book value per share (Baht) 5.80 9.99 6.12 10.65 Capital fund to risk assets - Total 12.64 9.42 - Tier 1 10.00 8.29 No. of employees 2,480 2,202 No. of branches - Bangkok 68 66 - Provinces 53 48 No. of ATMs 215 188 2 BANK OF ASIA PUBLIC COMPANY LIMITED MESSAGE FROM THE CHAIRMAN CHAVALIT THANACHANAN Dear Shareholders, The last year of the century brought welcome relief to the Thai economy. Thanks primarily to a pick-up in exports, our GDP numbers returned to positive territory. However, while the news was good on the macroeconomic front, several outstanding issues remain to be addressed. The crisis created a situation where numerous companies remain burdened with debt thus affecting their creditors, the Thai commercial banks. While progress on debt restructuring has been made, the pace has been slow. The bankruptcy and foreclosure laws adopted have not gone far enough yet to remove a significant portion of non-performing loans from the system. Separately, while the economy has shown signs of recovery, overcapacity remains and has limited the demand for fresh credit. 3 BANK OF ASIA PUBLIC COMPANY LIMITED 1999 will also be remembered as a year when the structure of Thai banking underwent massive change. New competitors entered the market through the purchase of local Thai institutions. With the sale of two nationalized banks yet to be conducted, we expect further foreign entrants into the Thai banking sector in 2000. It is clear that the nature of banking has been permanently altered and that institutions will need to focus on increasing the range and quality of products going forward to ensure a commensurate return on equity to their shareholders. At the Bank of Asia, we are focused on doing just that. In many respects, 1999 was a year of consolidation for us. We consolidated our position as the premier retail bank in Thailand while simultaneously cementing our operating relationship with our largest shareholder, ABN AMRO Bank of the Netherlands in several areas. Co-operation was increased on several fronts ranging from risk management and loan work-outs to trade finance and treasury. It is apparent that there is much to leverage from ABN AMRO and it is essential for Bank of Asia to be able to do so given the changing nature of the banking sector in the country. Importantly, ABN AMRO signaled its support for our Bank by subscribing to the Tier I and Tier II capital issues leaving us well-provisioned and immune from the capital-raising distractions faced by a number of our competitors. We realize that our shareholders have impressive goals for the Bank of Asia in the years ahead. We believe we are building the resource and management base to achieve those goals. We accept that we are somewhat dependent on the economic situation. However, assuming progressive public policy from the government and reasonably robust external growth, there is no reason why the banking sector will not show signs of a strong recovery in the next two or three years. 4 BANK OF ASIA PUBLIC COMPANY LIMITED MESSAGE FROM THE PRESIDENT CHULAKORN SINGHAKOWIN Dear Shareholders, In my message last year, I indicated our ambition to be The International Thai Bank - an institution that would offer the range and quality of services of an international bank while maintaining a strong Thai identity. I am pleased to report that in the year past we built the foundation to achieve that ambition. This occurred despite the distractions of a weak economy. The year 1999 confirmed what we had been expecting about the market and our competition. New foreign competitors entered the market through the purchase of ailing financial institutions while the existing players principally focused on repairing their balance sheets. Loan growth was insignificant, a symptom of problems that remain in the economy. While the overcapacity situation eased somewhat, demand was inadequate to support credit expansion. 5 BANK OF ASIA PUBLIC COMPANY LIMITED While the financial markets were in disarray and the economy was struggling to right itself, the Bank of Asia, prepared for future growth as The International Thai Bank. We undertook two successful capital raisings in 1999, raising two billion Baht of Tier II capital in the first half of the year and thirteen billion Baht in the form of Tier I equity in November. We acknowledge the confidence placed in the Bank by our shareholders. With these issues completed, we can now safely claim to have the strongest balance sheet in the country. Fitch IBCA, the bank rating agency, acknowledged this by assigning an investment grade of BBB- for long term foreign currency and F3 for short term foreign currency. These investment grade for debt ratings are the highest Fitch IBCA has assigned to a Thai bank and are equal to the sovereign ceiling. On the operating front, we can now claim to be the premier retail bank in Thailand in terms of product and service innovations. While our competitors have publicly stated their ambition to focus on retail banking long term, I am pleased to say that we have actually been doing just that, building on the foundation laid by our Retail Transformation in 1996-1997. Services like Saturday banking and supermarket branches have been extremely well-received. The public perception of our brand is now clearly identified with the most innovative and consumer-friendly approach to banking in Thailand, as reflected in the increase of our customer base by nearly twofold from the previous year. We believe that a strong brand identity is crucial given our ambition to be The International Thai Bank. A strong brand will also be critical as technology and new international entrants make the next few years the most competitive period in the history of financial services in this country. Our Treasury division remained a source of strength in 1999. We are now the second most active dealer in the Thai bond market. In cooperation with our principal shareholder, ABN AMRO, we have been improving our processes and systems in this area. We expect our Treasury operations to expand substantially going forward. In the area of loan work-outs, the Bank's energies were focused on the problem through the Special Credits area. While we are pleased with the quality of restructurings in 1999, the actual amount restructured fell short of expectation due to the severity of the economic situation and the recalcitrance of "strategic NPLs". The year ended with the Bank of Asia declaring a net loss of Baht 11,583 million. The item of greatest impact to our bottom line was provisions for bad and doubful debts which increased to Baht 10,528 million in 1999. 6 BANK OF ASIA PUBLIC COMPANY LIMITED Looking ahead to 2000, we can only hope that the economic environment is more amenable to growth in the banking sector. Recent GDP growth numbers have been promising, but with the spectre of higher rates in the U.S. and lingering uncertainties about the sustainability of the Japanese recovery, we would prefer not to be overly optimistic. Whatever the economic situation, 2000 is likely to be a dynamic year for our institution. It is crucial that we maintain the momentum that we have established in the last twelve months. On the retail banking side, we will continue our innovative approach. Now that we have built the distribution network, 2000 will see us increasingly focus on providing products to push through this pipeline. Among new retail products are small - business loans, asset management products and insurance products. We expect the Corporate Bank to show significant growth in 2000. A major push to recruit relationship bankers towards the end of 1999 should begin to show results. Capturing accounts from competitors will be one prong of this strategy.

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