Bank of China (Thai) Public Company Limited 2015 Annual Report

Contents

Financial Highlights 2 Message from the Chairman 3 About BOC 4 Products and Services 6 Risk Factors and Risk Management 17 Performance Results and Financial Position Analysis 25 Corporate Governance 27 BOCT Activities 33 The Board of Directors and Top Executives 36 Report of the Audit Committee 37 Report of Board of Directors (Responsibility on a part of the Nomination Governance Compensation and Corporate) 38 Independent Auditor’s Report 39 Financial Statement 40 Notes to Financial Statement 47 Capital Structure 99 Organization Chart 100 General Information 101

Bank of China (Thai) Public Company Limited | Annual Report 2015 2 Financial Highlights

Financial Position (Million Baht)

2015 2014* Total Assets 58,239 55,784 Total to customers (Less deferred revenue) 41,892 30,893 Allowance for doubtful accounts 530 275 Total Liabilities 48,286 45,878 Deposit 24,990 8,802 Inter Bank and money market 22,342 35,697 Other liabilities 505 648 Share holder’s Equity 9,953 9,906

Performance results (Million Baht)

Net interest income 400 238 Net fee and service income 80 38 Other Operating Incomes 827 343 Other operating Expenses 580 201 Operating Profit 247 326 Provision of doubtful account 189 257 Net profit (Loss) 60 (114)

Financial ratio (%) Return on average asset (ROA) 0.72 (0.20) Return on average equity (ROE) 0.11 (1.15) Capital adequacy ratio 22.09 22.22 Basic earnings (Loss) per share (Baht) 0.06 (0.23) Book Value per share (Baht) 9.95 9.91

* Business operated on 26 August 2014, the performance of 2014 is from this date to December 31.

Bank of China (Thai) Public Company Limited | Annual Report 2015 Message from the Chairman 3

During year 2015, bank industry confronted many adverse factors that compromised their loan growth. Firstly, an unfavourable economic situation resulted in only slight loan growth as banks were more prudent in lending given lingering concerns over asset quality. Also, uncertainty about the global economy adversely and directly affected export – oriented SMEs, leading to even greater NPLs. Lastly, the delay in the government’s massive investment spending implied slower than expected loan growth for banks.

2015 is the first full fiscal year after Bank of China Limited, Bangkok Branch (“BOCBKK”) upgrading to a foreign bank’s subsidiary, i.e. Bank of China (Thai) Public Company Limited (“BOC(T)”). Opposite to the slow growth in banking industry and the economics of the country in 2015, the overall performance of BOC(T) was encouraging. As of the end of 2015, total deposit amounted to THB 24,990 million, rising 184% over the end of 2014. Loans to customer were THB 41,896 million, rising 36% against the end of 2014. In 2015, BOC(T) reported a net profit amounting to THB 60 million. Notably, the gains of foreign exchange amounted to THB 345 million. BOC(T)’s BIS ratio at end of 2015 stood at 22.09%, significantly higher than the 8.5% minimum ratio required by the Bank of Thailand. Moreover, in Oct 2015 Fitch Rating affirms BOC(T)’s national rating at “AAA”, which indicates the stable financial position of BOC(T)’s being a strategically important subsidiary of its parent company, i.e. Bank of China Limited. In the past year, BOC(T) grew and expanded rapidly in all major business activities and continued to enlarge the network in both outskirts of Bangkok (Bangna Branch and Talad Thai Branch) and throughout the upcountry regions (Khon Kaen Branch). In the coming years, BOC(T) plans to open more branches in order to provide more satisfactory services to our customers.

Looking forward to year 2016, under the vision of “A bank with excellent services and integrity” and mission of “the reliable and leading bank in Thailand, as well as the preferred bank for Chinese-Thai trade-related business”, BOC(T) will further improve the quality of operation and services provided to customers; continue to develop and innovate new products and services to meet customers’ need. BOC(T) is endeavouring to be “the main bank of Chinese or Thai "going out" enterprises, the leading bank in trade and finance, RMB denominated businesses, and also the professional service provider for high-end customers”.

And last but not the least, I, as Chairman of Bank of China (Thai) Public Company Limited, would like to take this opportunity to express my sincere appreciation to thank the shareholders and all supporters who have dedicated us their continuous trust and support. In return, the Board of Directors, the entire Bank’s staff and I will endeavour to keep working hard on the set tasks, so that Bank of China (Thai) Public Company Limited can continue to grow and prosper. Thank You.

(Mr. Cheng Jun) Chairman of the Board of Directors

Bank of China (Thai) Public Company Limited | Annual Report 2015 4 About BOC

Bank of China (Thai) Public Company Limited (abbreviated as BOCT) 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 BOCT 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, oversea 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.

“The BOCT is a part of BOC Group, As China’s most international and diversified bank”

BOC Introduction

Bank of China was formally established in February 1912. The BOC seized the historic opportunity presented by the government’s strategy of capitalizing on foreign funds and advanced technologies to boost economic development, and became the country’s key foreign financing channel by building up its competitive advantages in foreign exchange business. In 1994, the Bank was transformed into a wholly state-owned commercial bank.

Bank of China (Thai) Public Company Limited | Annual Report 2015 About BOC 5

In August 2004, Bank of China Limited was incorporated. The Bank was listed on the Hong Kong Stock Exchange and Shanghai Stock Exchange in June and July 2006 respectively, becoming the first Chinese commercial bank to launch an A- Share and H-Share initial public offering and achieve a dual listing in both markets. From 2011 to 2014, Bank of China was enrolled again as a Global Systemically Important Bank, becoming the sole financial institution from emerging economies to be enrolled for four consecutive years.

As China’s most international and diversified bank, the Bank provides a comprehensive range of financial services to customers across the Chinese mainland, Hong Kong, Macau, Taiwan and 37 countries. The Bank’s core business is commercial banking, including corporate banking, personal banking and financial markets services. BOC International Holdings Limited, a wholly owned subsidiary, is the Bank’s investment banking arm. Bank of China Group Insurance Company Limited and Bank of China Insurance Company Limited, both wholly owned subsidiaries, run the Bank’s insurance business. Bank of China Group Investment Limited, a wholly owned subsidiary, undertakes the Bank’s direct investment and investment management business. Bank of China Investment Management Co., Ltd., a controlled subsidiary, operates the Bank’s fund management business. BOC Aviation Pte. Ltd., a wholly owned subsidiary, is in charge of the Bank’s aircraft leasing business.

Bank of China has upheld the spirit of “pursuing excellence” throughout its hundred-year history.

With adoration of the nation in its soul, integrity as its backbone, reform and innovation as its path forward and “people first” as its guiding principle, the Bank has built up an excellent brand image that is widely recognized within the industry and by its customers. Faced with new historic opportunities, the Bank will meet its social responsibilities, strive for excellence, and make further contributions to achieving the China Dream and the great rejuvenation of the Chinese nation.

Bank of China (Thai) Public Company Limited | Annual Report 2015 6 Products and Services

Bank of China (Thai) Public Company Limited is ready 1.2 Term Deposit Account to serve the needs of both personal and corporate customers with a wide range of products and services. Term deposit is a fixed-term form of savings deposit. It Moreover, we have been given a kind support by Bank of cannot be transferred, remitted inward or outward. China Group which is regarded as the oldest bank in China; and the bank which provides a network covering Features: area outside china the most causing the security, rapidity 1) The available currencies include THB, USD, RMB and immensity of international payment system. and so on. 2) BOC (Thai) offers term deposit of 1 month, 3 months, 6 months 12 months and 24 months of maturities. 3) Customers can also choose automatic renewal upon 1. Deposit Accounts maturity date or withdraw the deposit in full amount. 4) The interest rate of the term deposit is higher than that 1.1 Saving Deposit account of the current deposit. 5) Free of account management fee.

Saving deposit account can be deposited or withdrawn in 1.3 Cheque Deposit Account cash and used for transfer, exchange, inward and outward remittance for personal purpose. . Cheque Deposit Account is a form of savings deposit. Customers can make either deposit or payment with the Features: Cheque, and apply for overdraft limit to facilitate the use of 1) The available currencies include THB, USD, RMB funds. and so on.

2) Saving deposit can be transferred and exchanged Features: between the customer's accounts or a third party's 1) The available currency is preliminarily THB accounts at Bank of China. 2) Cheque deposit can be transferred and exchanged 3) It can be used for remittance and account crediting between the customer's accounts or a third party's both domestic transfer and international transfer. accounts at Bank of China. 4) It generates current interest in accordance with the 3) It can be used for remittance and account crediting rate declared by the Bank of Thailand both domestic transfer and international transfer.

4) Cheque deposit account does not generate interest on

deposit, and customer will bear overdraft interest

when overdraft occurs.

Bank of China (Thai) Public Company Limited | Annual Report 2015 Products and Services 7

2. Remittance & Exchange 2.5 RMB Advance Settlement Remittance

2.1 Outward Remittance RMB advance settlement remittance is one of the special services of Bank of China in Thailand, when customers remit to China, Bank of China will lock the RMB exchange Bank of China owns an outlet network covering 29 rate upon remittance, enabling the receiver in China's countries and regions and 643 overseas branches, with its Mainland to receive in full amount of RMB at the international clearance centers in New York, London, exchange rate determined on the very day of remittance, Bangkok, Tokyo and other currency centers and eliminating the exchange risk between foreign currency correspondent bank relationship throughout all major and RMB caused by fluctuations in exchange rate. countries and regions, Bank of China can offer customers with the best remittance paths. In addition, based on years Features: of experience, Bank of China can provide customers with 1) The available currencies are USD and THB. global remittance service and professional consultation The service can help avoid exchange loss due to service, making the remittance unimpeded. fluctuations in exchange rate

Features: 1) Outward remittance refers to a remittance approach 3. Bank Cards provided by Bank of China by which customers can remit money to other banks. 2) Available currencies include: THB, USD, GBP, EUR, CHF, SGD, HKD, AUD, JPY and RMB.

2.2 Inward Remittance

Inward remittance refers to an approach provided by Bank of China to receive remitted money from other banks. 3.1 Dual-Currency Debit Card, Chinese

Features: Yuan and Thai Baht in one single card 1) Available currencies include: THB, USD, GBP, EUR, CHF, SGD, HKD, AUD, JPY and RMB. The debit card from the Bank of China with 2 currencies, 2) Funds from banks all over the world can be received Chinese Yuan and Thai Baht, together in one card - the without amount limit. first bank offered in Thailand market. Forget your worries about currency exchange rate risks when using your card in 2.3 Foreign Currency Exchange Services 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 . Foreign currency exchange service refers to an exchange Simply open a savings account with Bank of China, and service between foreign currency and THB provided by you will qualify for a debit card with no new application Bank of China. fees.

Features: Card Privileges: The service can meet the demand for foreign currency of 1) Enjoy convenience when getting cash or paying for the customers and tourists. goods or services both within the country and abroad.

It's easier than ever to withdraw cash or to pay for 2.4 Foreign Currency Cash Exchange goods or services in Chinese Yuan while in China. No Services more worry or hassle about exchange rates and currency exchange rate risks. 2) Enjoy convenience and accessibility to the widespread Foreign Currency cash exchange service refers to an network in China, whether you are withdrawing cash exchange service on 3 currencies only, there are THB, USD and CNY or paying for goods or services. There are over 400,000 ATMs and over 5,000,000 merchants that accept the card across China. Features: 3) Feel confident and secure with the personal PIN The service can meet the demand for foreign currency of number required before each debit card use, from the customers and tourists. withdrawing cash from the ATM to paying for goods or services.

Bank of China (Thai) Public Company Limited | Annual Report 2015 8 Products and Services

Product Features: internationally. The card helps you save time and 1) Withdrawing cash through ATM money when spending RMB in China. The list of a) ATM cash withdrawals of up to 50,000 yuan / transactions spent in Chinese Yuan is separated from day in China, or 250,000 baht / day in Thailand the list of transactions spent in Thai Baht. There is no or in other countries with an amount equivalent currency exchange rate risk, and it can allow you to to 250,000 baht / day save up to 2.5% of your entire setting payments in b) Withdraw cash at over 1.4 million ATMs Chinese yuan. worldwide bearing the logo 2) Paying for goods or services 2) Travel Insurance a) Payment of goods or services in an amount up to Get free insurance coverage when you’re on the go. 500,000 yuan / day in China, and 2.5 million baht / day in Thailand or in other countries with For a peace of mind while travelling, get travel an amount equivalent to 2.5 million baht / day insurance with coverage of up to 8 million baht, and b) Payment for goods or services at more than protection from flight and luggage delays, luggage 7,000,000 UnionPay merchants worldwide 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.

3.2 Great Wall International Union Pay Every 5 baht or 1 yuan spent earns 2 points when Credit Card using Platinum Card, and 1 point when using Gold or Classic Card. Points can be redeemed for desired gifts Dual-Currency Credit Card ... Chinese Yuan and Thai and rewards at your choices. Baht in a single card, giving you superior benefits every time you use the Great Wall International UnionPay credit Special with extra points! When applying the card in China, Hong Kong, and Macau. Save money when Installment, earn 1 additional point for every 5 baht using your card in China when making your payments in paid under the plan; applicable to every credit card Chinese Yuan, in order to avoiding currency exchange rate type risk. Let you enjoy the ease and convenience each time you make purchases via Great Wall International Union Pay 5) 52-Day Interest-Free Period credit card through leading retailers in the network in Enjoy up to 52 interest-free days. Thailand and over 100 countries worldwide. Use your credit card to pay for goods or services, and Card Privileges enjoy up to 52 interest-free days (depending on the date of card used transaction). 1) Dual Currency Credit Card It is the credit card that gives Chinese Yuan and Thai 6) Cash Advance Baht currencies in one card. No risk of foreign Get quick cash advance when needed. currency exchange fluctuations when paying in Add flexibility to your cash flow with cash advance Chinese Yuan in China. 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 This single credit card can be used to pay for goods or services in two currencies, Chinese Yuan and Thai or any ATM bearing the logo Baht. It gives you maximum convenience when paying for goods or services both domestically and 7) Free Joining Fee

Bank of China (Thai) Public Company Limited | Annual Report 2015 Products and Services 9

It’s free to join, and the annual fee is waived for the Special with extra points! When applying the first year on both primary and supplementary cards Installment, earn 1 additional point for every 5 baht for new cardholders. Also, no annual fee is charged in paid under the plan; applicable to every credit card subsequent years if you use your card at least 5 times type a year. 4) 52-Day Interest-Free Period Product Features: Enjoy up to 52 interest-free days. 1) Card can be used to pay for goods or services at any store worldwide that displays Use your credit card to pay for goods or services, and 2) Card can be used to withdraw cash at any Bank of enjoy up to 52 interest-free days (depending on the China ATM or any global ATM bearing the logo date of card used transaction). 3) Card grants more convenience and savings when used in China; there is no currency exchange rate risk when 5) Cash Advance paying for goods or services in RMB, allowing Get quick cash advance when needed. cardholders to save up to 2.5% of your entire setting Add flexibility to your cash flow with cash advance payments in Chinese yuan 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 bearing 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 3.3 Great Wall International MasterCard subsequent years if you use your card at least 5 times Credit Card a year.

7) MasterCard Global Service Center Card Privileges Get emergency assistance from the MasterCard Global Service Center 24-hours a day, regardless of 1) Travel Insurance where you are in the world. Get free insurance coverage when you’re on the go.

Product Features: For a peace of mind while travelling, get travel 1) Card can be used to pay for goods or services at any insurance with coverage of up to 8 million baht, and protection from flight and luggage delays, luggage store worldwide that displays mishaps and losses, by ACE INA Overseas Insurance, 2) Card can be used to withdraw cash at any Bank of the world's leading and trusted insurance provider. China ATM or any global ATM bearing the logo

2) Installment Plan Make easy payments on every purchase. 4. Mortgage Loans

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.

Year 2015 has been a successful year for the bank’s Every 5 baht spent earns 2 points when using a mortgage business given a double growth rate. BOC Platinum Card, and 1 point when using a Gold or Classic Card. Points can be redeemed for desired gifts mortgage loans are better known to medium to high and rewards at your choices. segment customers especially on its refinance mortgage loans which had high take up rate riding along with

Bank of China (Thai) Public Company Limited | Annual Report 2015 10 Products and Services 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. BOC 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, we have successfully developed relationship with local customers and developers projects. We are now partner 1) Issuing Domestic Letter of Guarantee with over 100 projects in Bangkok and vicinity. Expansion A letter of guarantee is a type of contract in which the bank of direct sales force and sales models enable the bank to unconditionally guarantees on behalf of an individual or reach to wider customers especially in high traffic business legal entity, residing within the country, that the work or area as well as department stores. delivery obligations of the individual or legal entity will be Facilitating with a cross-border BOC branch allows us to carried out within a specified period of time and under serve needs of Chinese customers living in Thailand to take certain conditions in terms of customs, tenders or the loan to buy property in Thailand. purchase or sale of goods. The bank guarantees to pay the recipient a specific amount under stipulated terms and 5. Wealth Management conditions in the event of default or failure to fulfill contractual obligations or responsibility.

Wealth Management presently acts as a selling agent for 2) Issuing of Letter of Guarantee under Counter Letter asset management companies to provide the new of Guarantee investment products for both existing and new customers.

After receiving the syndicated LG, Bank of China (Thai) Features: Public Company Limited would issue a letter of guarantee 1) For customers who seek higher returns than normal according to the principle of syndicated LG. savings or fixed deposit accounts with minimum risk aspect, BOC (T) offers an alternative investment in fixed Categories of Letter of Guarantee: income funds with Risk Level of not more than 4

2) Varieties of fixed income funds come from 6 Bid Bond medium to large reputable asset management companies, Bid Bond is a guarantee issued for submission together such as Asset Plus Fund Management, CIMB-Principal with tender documents for construction projects or for the Asset Management, Krungsri Asset Management, supply of goods, in which it guarantees that the price Land&House Fund Management, Manulife Asset quoted in the said tender documents would not be altered Management, and SCB Asset Management 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 6. Trade Finance 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 6.1 Letter of Guarantee 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 Product Overview; 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

Bank of China (Thai) Public Company Limited | Annual Report 2015 Products and Services 11 the performance bond. This would reduce breaking an 2. Provide warranty for the cargo. The commercial agreement and many other costs which may incur. credibility is replaced by the bank's credibility. The bank's

involvement can ensure a safer trade. The ownership of the Quality Assurance Guarantee cargo, shipping date and quality of cargos can be well A Quality Assurance Guarantee is issued to guarantee controlled by the documents and clauses. product performance during the warranty/maintenance period provided under an underlying contract. 3. Reduce the occupation of fund. For the importer who uses the L/C with credit limit, the fund occupation will be Payment Guarantee minimized during the period from the L/C issuance to the A written document issued by Bank of China at the request payment. of the buyer to the seller under the contract, guaranteeing the buyer will fulfill the payment obligations under the Target Customers: contract to purchase goods, technology, patent or labor. 1. Importers and exporters who want to promote the trade credit by making appointment on each other's business 6.2. Import activities. 2. The imported commodity is in a seller's market and the Product Overview; 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.

1) Letter of Credit (L/C) Procedure: 1. The importer submits the Application for Issuance of Nature of Products and Services: L/C. Bank of China (Thai) Public Company Limited will The Letter of Credit is a payment undertaking by issuing issue the L/C based on the margin or credit line after bank to the exporter as it is applied by the importer. The examination and approval. bank will fulfill its payment obligation when the terms and 2. The exporter prepares and ships the goods in accordance conditions under the L/C are satisfied. Bank of China with the relevant L/C clauses after having been advised of (Thai) Public Company Limited offers to issue irrevocable the L/C. L/C services. 3. The exporter presents the documents required by the L/C. The transmitting bank mails the documents to Bank of An irrevocable L/C is a type of L/C which cannot be China (Thai) Public Company Limited to ask for payment canceled or modified in any way without explicit consent or acceptance. by the affected parties involved. It can be divided into 2 4. Upon receipt of the documents, Bank of China (Thai) types as follow; Public Company Limited will make payment or acceptance to the exporters after examination and approval.  Sight L/C: Payment will be made once receive the 5. Bank of China (Thai) Public Company Limited makes documents the payment when the acceptance is due.  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.

Bank of China (Thai) Public Company Limited | Annual Report 2015 12 Products and Services

2) Inward Collection branch will notify the importer to pay (D/P) or accept (D/A) as instructed. Nature of Products and Services: 3. After the importer has made payment or acceptance to Entrusted by a foreign correspondent bank or an affiliated the exporter via Bank of China (Thai) Public Company bank, and according to their instructions, Bank of China Limited, it shall release the documents to the importer. (Thai) Public Company Limited collects import payments 4. When the acceptance under D/A is due, the importer and delivers the relevant commercial documents to the shall pay to the exporter via Bank of China (Thai) Public importer. Company Limited.

Functions: 3) Trust Receipt (T/R) It is used for international trade settlement in two forms: documents against payment (D/P) and documents against Nature of Products and Services: acceptance (D/A). T/R is a common financing provided by the bank to the importer. The customer was granted with a revolving T/R Features: facility after its credit standing, financial profile is assessed 1. Low cost - low banking fees can help the enterprises by the bank. reduce the financial expenses and control the costs. 2. Easy to use - The procedure is simple and it is easy to T/R limit has a fixed tenor and usually used together with use compared with L/C. Import L/C limit. 3. Reduce funds occupation - no advance payment is required when the exporter prepares and ships the goods. Bank provides financing by paying the supplier directly The goods documents can be obtained immediately, and and effectively owns title to the goods. The importer sells the goods become disposable upon payment or acceptance. the goods on the behalf of the bank, subsequently, the 4. Improve cash flow - with D/A, the importer can proceeds is used to pay off the loan. 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 6.3 Export no fund is occupied, so the company's financial position and solvency can be greatly improved. Product Overview;

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. 1) Export advising of L/C Application Qualifications: Speed and reliability are what makes L/C advising stand 1. The applicants hold business license legally approved, out, supported by our worldwide network. Bank of China is registered and annually checked as well as other valid ready to fulfill your needs with our excellence service, certificates sufficient to prove the legitimacy and scope of exporters can receive the authenticated L/C immediately as operation. Bank of China receive L/C from issuing bank. 2. The applicant shall have the qualification to engage in import and export trade. 2) Transferred Letter of Credit Transferred L/C is a beneficial service for exporters who Procedure: act as a middle man. As exporters receive transferrable L/C 1. The foreign exporter initiates collection by submitting from issuing bank, Bank of China will transfer the right the relevant documents to its bank after the preparation and and benefit upon your request to the second beneficiary shipment of goods. without establishing new transaction. 2. The exporter's bank mails the collection documents to Bank of China (Thai) Public Company Limited, and the 3) Export Bills Negotiation/Discount

Bank of China (Thai) Public Company Limited | Annual Report 2015 Products and Services 13

Export bill negotiation/discount is a service that will help Features: exporters to control the risk by presenting the export 1. A customer entrusts one bank with the purchasing of a documents that comply with conditions in L/C through certain currency and the selling of another currency at a Bank of China. Exporters can benefit from our extensive contractual foreign exchange rate on a specified settlement correspondent network in overseas to speed up the day to achieve the conversion between various foreign payment within the term period. currencies. 2. The forward price of a currency with a high interest rate 4) Export Bills for Collection is cheaper, so, the risk of the exchange rate is completely With our export bills for collection service, exporters can locked, and the foreign exchange rate of delivery day in the simply send export documents to Bank of China and we future is determined on the transaction day. will help exporters check and send export documents to buyer’s bank in a timely manner. Export documents will be Optional forward transaction of foreign exchange released to buyer upon payment or against acceptance. Optional forward transaction of foreign exchange refers to the foreign exchange forward deal that enables customers 5) Forfeiting to settle with prescribed foreign exchange rate on any working day within a certain contracted period in the Forfeiting is another service when exporters want to future. Customers can choose the settlement date by eliminate the risk of issuing bank running into financial themselves. difficulties, exchange control or political problems in importers’ country. Our forfeiting (without recourse) will Features: help exporters reduce these risk and provide you liquidity 1. Customers entrust Bank of China to settle with the as exporters send us the acceptance with payment term and contracted foreign exchange rate within a certain due date to Bank of China. designated period, and implement the conversion between

different foreign currencies by buying a kind of currency and selling another. 7. Treasury & Foreign Exchange Product 2. When the settlement date is uncertain, Bank of China can fix the foreign exchange rate of a certain period in the 7.1 Foreign Exchange Spot Deal future at a level on the settlement date to fully lock up the exchange rate risk, and to reduce the probability of breach Foreign exchange spot deal means that two parties enter of agreement caused by customers’ failure to normally into deals at the spot exchange rate of foreign exchange perform the trade contract. markets on the very day and complete corresponding foreign exchange deliveries on the second working day 7.3 Foreign Exchange Swap following the transaction date (T+2) Foreign exchange swap refers to currently buying one Features: currency and selling another currency while forward re- 1. Customers entrust the bank with buying one currency selling the bought currency and buying another one and selling another, to achieve the conversion between currency. different foreign currencies. 2. This product implements a direct quotation without Features: intermediate conversion through CNY, which is closer to 1. The combination of foreign exchange spot and forward market price levels and will reduce transaction costs for deals can lock up the exchange rate risk, which enable customers. customers match up, with no need to bear risk of foreign exchange rate changes, the cash flows of assets in two 7.2 Outright Forward foreign currencies to satisfy corporate demands. 2. Trading currency types: all kinds of freely convertible Forward Transaction of Foreign Exchange refers to the currencies mainly including USD and THB 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.

Bank of China (Thai) Public Company Limited | Annual Report 2015 14 Products and Services

8. Corporate Loans Features: 1) As an efficient and practical means of financing, working capital loan is one of the most popular credit 8.1 Global Credit Line products, characterized by the short loan term, simple procedures, stronger turnover, and lower financing Global credit line is an extension of the application scope costs. of traditional credit line products, and its major function is 2) In terms of the term, it can be divided into short-term to fulfill the financing needs of group companies' overseas working capital loan less than one year and one to affiliates. To be specific, answering to enterprises' strategy three-year medium-term working capital loan. of cross-border development, global credit line takes 3) In terms of the loan form, it can be divided into advantages of Bank of China's far-ranging overseas branch secured loan, which can be further divided into many networks to provide group companies' overseas affiliates forms such as guarantee, mortgage and pledge, and an overall financing package credit loan. 4) By the using method, it can be divided into the short Features: term working capital loan that is applied and reviewed 1) It provides customers with prompt, comprehensive case by case and the credit line of the working capital and standard bank services by easy and efficient loan within which can be easily borrowed, used and cooperation mode. repaid during the bank's preset time. 2) It can save the cooperation costs of the customer and the bank. By cooperation between enterprises and the 8.4 Credit Line bank, the operational procedures are simplified and financing efficiency is improved. Credit line refers to a flexible, convenient and recyclable 3) It can strengthen the customer's self-financing and product provided by Bank of China to the customers. Bank centralized management. With the bank's help, the of China may quickly extend the short-term credit to corporate headquarter can realize the centralized customers regardless of its accumulated amount and control over its overseas affiliates' financing and frequency, as long as the balance of credit extension is not enhance the management of overseas operational over the standard of corresponding service. risks. With flexible arrangement, total credit line can be further 8.2 Fixed Assets Loan divided into limits for different products such as loan, L/C, export bill purchase, letter of guarantee, bank acceptance Fixed assets loans are issued to address the financing draft, acceptance draft discounting and so on. Credit line is demand of the enterprises' fixed assets investment applicable in all credit extension services with a term activities. Enterprises' investment activities in fixed assets within one year (inclusive), which can be extended to over include: infrastructure construction, technology one year for letter of guarantee of tender, performance, transformation, new product development and advance payment, customs and marine under the item of manufacturing and related activities such as house letter of guarantee. purchase, engineering project construction, technology and equipment purchase and installation. Features: 1) Provide convenience to enterprises' short-term Features: financial arrangement. Since credit line can be 1) Generally the loan amount is relatively large. recycled, financial plan of enterprises may become 2) Generally the term is relatively long, most are long or more definite and systematic. Enterprises needn't medium term with installment schedule. arrange funds for current operations under the credit 3) On the way of the loan guarantees, except providing line. the necessary security, generally require taking the 2) Meet the enterprises’ demand for general financing. new added fixed assets of the project as mortgage. Credit line includes varieties of limits for different 4) Regarding the application process, the loans should be products such as loan, L/C, letter of guarantee and applied and approved on case by case basis. other credit extension services, which covers key financing demands of customers. With approval of Bank of China, such limit can complement and 8.3 Working Capital Loan overlap each other, increasing its utilization. 3) Simplify approval formalities of credit extension of Working capital loan is issued to meet customers' short enterprises. After acquiring credit line, the customers term financing demand during the process of production are entitled to decide how to use it and when to use it and operation, thus ensuring the normal running of at their own discretion and do not apply the credit production and operation activities. extension bank for approval item by item according to the provisions of the contract. Thus customers shall

Bank of China (Thai) Public Company Limited | Annual Report 2015 Products and Services 15

not go through the procedures of single credit be the one who manages all of the loan transactions extension approval, such as business information such as cash depositing, cash refunding, interest survey, guarantee conform and other formalities as paying, etc. required. 4) Diversified approaches for syndicated loans. The same loan syndications can include many forms of 8.5 Domestic Guarantee and Foreign loans, such as fixed-term loans, revolving loans, standby L/C line on requirements of the borrower. Loan Meanwhile, the borrower can also choose USD, HKD, CNY and other currencies or currency portfolio, if For Chinese "going out" enterprises' subsidiaries in needed. Thailand which are in need of production or operation fund 5) It can help the borrowers establish a good image in and credit support from banks, they may apply for the market. Successful establishment of the syndicate financing from Bank of China (Thai) Public Company comes from the participants' full recognition of the Limited under the following precondition: the foreign borrower's financial and operational performance, by subsidiary shall be secured by a SLC or L/G issued by a which the borrower can build up their reputation. domestic branch of Bank of China or other commercial 6) Bank of China Hong Kong Syndicated Loan Center bank in which Bank of China (Thai) Public Company can offer help with its advantages. Limited is appointed as the beneficiary. 8.7 Overdraft Account Features: 1) It can meet the financing needs for the "going out" enterprises to establish subsidiaries in Thailand: A It is one of the corporate loan accounts. With the overdraft strong domestic corporate customer may have a Thai account, customers can make cheque deposit and subsidiary with limited strength or not qualified for withdrawal, and apply for an overdraft limit to ease the use applying for financing credit independently from of fund. Bank of China (Thai) Public Company Limited. Therefore, the Thai subsidiary may solve its financing Features: needs through "domestic guarantee and foreign loan". 1) The main currency for this account is THB. 2) It is simple and convenient: The financing application 2) Interest will be accrued for overdraft. is handled through guarantee with rapid examination and approval of credit line, as well as easy procedures. 9. Online Banking

8.6 Syndicated Loan 9.1 Bank Account

Syndicated loan refers to financing method where two or more lenders provide funds for one or more companies Bank account service means that all accounts opened by with one loan agreement based on agreed term and customers with valid identity document in Bank of China conditions. The product mainly serves large group (Thai) Public Company Limited or at one of its outlets can customers and large construction projects. With syndicated have access to balance inquiry, transaction details and loan, the borrower can obtain large amount of long-term other account information via online banking (BOCNET). financing under uniform loan conditions. During the Functions: raising of syndicated loan, the borrower can boost its 1) Account overview: it displays all account information market influence and improve market image. linked to online banking by customers, including Features: account number, alias, type, currency, available 1) Large amount and long term. It can meet borrowers' balance and account balance; demand for funds of long term and large amount. 2) Transaction details: customers can make inquiry 2) Less time and effort for financing. It is usually the about and download the transaction details of linked responsibility of the arranger for doing the preparation accounts, including transaction date, transaction brief, work of establishing the syndicate after the borrower currency, cash/exchange, amount received, amount and the arranger has agreed on loan terms by paid, balance and so on; customers can also make negotiation. During implementation of the loans, the inquiry about transactions across various time span. borrower does not need to face all members of the 3) Term deposit account information: customers can syndicate, and relevant withdrawal, repayment of make inquiry about the current status, currency, principal with interest and other management work current balance and available balance of the term related to the loans shall be fulfilled by the agency deposit account; bank. 3) There is no need for the borrower to meet face to face with the members. The bank who is the agency would

Bank of China (Thai) Public Company Limited | Annual Report 2015 16 Products and Services

4) Account management: customers can change the alias 3) Self Management: Password and personal information of the account, cancel accounts linked to online setting up can be done as needed every time. banking, and link other account to online banking. 9.4 Service Application

9.2 Transfer and Remittance 1) Single Agency Transaction This refers to a businessperson empowers the operation Service Suggestion from one account to the other account by using the on-line Transfer & remittance indicates that customers can transfer banking service of Bank of China. The business person is funds among different accounts at Bank of China (Thai) required to select the recipient and the information related Public Company Limited, and transfer funds to accounts in the transfer. China or Global. The transfer and remittance services of online banking are only applicable to current accounts, or 2) Quantity Agency Transaction between the term deposit account and current account. This refers to a device for group empowering so that the money transfer and salary payment would be done Functions: conveniently and rapidly. The customer can download 1) Domestic transfer: customers can transfer the funds in documents and suggestion for this group transfer via current account to his/her or other people's account, internet. This would help to reduce the complication in including: transfer among customers' accounts of the historical transaction maintenance. same currency, transfer among customers' accounts of different currencies (currencies exchange), and 3) Business Edition transfer to other people's current account in Bank of For the business needed to make any editions such as error China (Thai) Public Company Limited. from operation or unauthorized empowering, the customer 2) Overseas remittance: customers can remit the funds in can use this function in order to reduce the complication of current account to an overseas account, including: duplicated data. general remittance (remittance directly from a current account of USD or another currency) and RMB 4) Business Empowering advance settlement of foreign exchange remittance. The businessperson can empower to the business. Each 3) Term deposit: customers can convert the funds in empowering transaction via the on-line banking service of current account into term deposit, or transfer mature Bank of China would be verified before formal exporting. funds to certain current account. 4) Payee management: customers can store the 5) Business Cancellation information of frequently used payees; therefore they The customer can cancel the business due to the error of can simply find certain payee's information for online operation or the necessity for cancellation. 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.

9.3 Services via BOCNET

1) Account Management: The customer can verify balance, movement of the transactions (latest and backward). 2) Money Transfer: The money transfer can be done anywhere and anytime by THB, USD, CNY including salary payment, group transfer and any other additional services for the convenience of money transfer. Moreover, the money of company can be verified causing the more of security.

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The Bank recognizes that effective risk management is fundamental to good banking practice. Accordingly, the Bank has established the guidelines for managing risk in each area of its business to ensure that it has effective risk management mechanisms in place. Over the past few years, the Bank has continuously analyzed major risk factors which could affect its financial operations and, where necessary, has adjusted its organizational structure and risk management processes accordingly. This is to ensure that its risk management system is effective and in line with international standards and in accordance with the principles of Basel requirements. The Basel III guidelines were introduced by the Basel Committee on Banking Supervision with an aim to strengthen the regulatory capital requirements, liquidity risk management standards, and supervisory measures over systemically important financial institutions. The Bank of Thailand has implemented the revised regulatory capital requirements under the principles of Basel III since January 1, 2013 and gradually increases the minimum capital requirement to reach the final 11% in 2019.

The Risk Management Committee, the Board of Executive Directors and the senior management all play significant roles in prescribing and reviewing the sufficiency of the risk management policy and system. They also define the risk management strategy, and monitor and control the Bank’s risk to be at an appropriate level, in compliance with the risk management policy approved by the Board of Directors.

The Bank’s risk management process comprises the identification of significant risks which may potentially impact the Bank’s business operations, the assessment of each type of risk, the monitoring and control of risks to an appropriate level, and the reporting of the status of each type of risk to the relevant parties so as to enable them to manage and/or handle the risks in a timely manner.

The operating environment and major risks that may affect the operations of the Bank, as well as the Bank’s management of these risks, are as follows.

1. Uncertainties in the Domestic, China and Global Economy

Thai government accelerated budget spending to help farmers and small businesses, in an effort to boost local demand amid falling exports. Bank of Thailand’s monetary policy remains accommodative to assist the recovery. However, due to the weaker export, the National Economic and Social Development Board cut its 2016 GDP growth estimate to a range of 2.8% to 3.8% from 3% to 4%.

As the most important export counterparty, China's economy grew by 6.9% in 2015, compared with 7.3% a year earlier, marking its slowest growth in a quarter of a century. China's growth, seen as a driver of the global economy, is a major concern for investors around the world including Thailand. In 2016 China's economy is expected to grow by only 6.3%.

2. Regulatory Changes

Principles of the Basel III Framework the Bank of Thailand has revised its regulatory capital requirements according to the Basel III framework issued by the Basel Committee on Banking Supervision (BCBS), which covers regulatory capital requirements and liquidity risk management standards. Since January 1, 2013, the Bank of Thailand’s regulatory capital framework has required banks to have more capital, in both quantitative and qualitative terms, to support losses that may occur in normal time and in stressed time, and to maintain the stability

Bank of China (Thai) Public Company Limited | Annual Report 2015 18 Risk Factors and Risk Management of the financial system. Significant revisions in capital requirements are: the new minimum capital ratio, an increase in the quality of capital, and an expansion of the coverage of risk weighted assets so that they are more comprehensive and reflect real risks. The revisions include the requirement to maintain the Capital Conservation Buffer, which will be phased in, starting in January 1, 2016 and due for completion by January 1, 2019. Apart from the regulatory capital requirements mentioned above, the Bank of Thailand has issued calculation guidelines for leverage ratio, aimed at restricting leverage, and it also requires commercial banks to report liquidity risk measurements in accordance with the Basel III framework to prepare for the adoption of appropriate liquidity standards for Thailand. The Bank has studied, prepared itself, and continually assessed the quantitative impact of compliance with these pending Basel III guidelines.

3. Credit Risk

Credit risk is the risk that a customer or a counterparty may be unable or unwilling to meet a repayment obligation. The extension of commercial credit by the Bank includes loans, advances, overdrafts, trade finance, treasury businesses and commitments, letter of guarantees, letters of credit, retail loan, housing loan, and credit card etc. the Bank’s credit risk management process includes: Independent due diligence investigation without any administrative intervention; Scientific and democratic risk review, taking both business developments and risk control into considerations; Approval based on strict decision making discipline; and Accountability system of examination and follow-up evaluation.

3.1 The structure and responsibilities allocation

Corporate Business Departments are responsible for Credit Rating, Credit Analysis and Credit Proposal case by case; Due Diligence Team of Risk Management is responsible for Due Diligence Investigation; Credit Review Committee is responsible for Credit Review; The CEO & Country Head is authorized by the Board of Directors of the Bank for credit approval no more than THB 2,000 million. Credit approval over THB 2,000 million shall be submitted to the Board of Director for approval. For the post-approval follow-up and monitoring, Corporate Business Departments are responsible for annually review and quarterly review; while Risk management Department shall be the counter-checker. Additionally, Risk Management Department is also responsible for the annual credit examination.

3.2 The scope and nature of risk measuring, monitoring, and reporting system

According to Risk Management and Internal Control Committee Minutes No. 2012/006, the Bank stipulated “Bank of China (Thai) Public Co., Ltd Credit Review & Approval Process Management Policy (Version 2015)” to perfect credit risk management. The Bank promoted specialized and differentiated credit risk management practices according to the nature and characteristics of different businesses, further improved credit risk limit-setting mechanism and adjusted limits according to market changes.

For new credit cases, Corporate Business Departments conduct insight credit analysis to know the customer and understand the market situation of the customer, and also conducts industry analysis as well as forward-looking analysis; Due Diligence Team, Credit Review Committee and the Approver strictly implement credit screening process. The consideration

Bank of China (Thai) Public Company Limited | Annual Report 2015 Risk Factors and Risk Management 19

covers customer information, credit facility information, borrower’s history record, risk analysis, conclusion, and suggestion or decision.

The Bank 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.

The Bank 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, the Bank performs standardized processes according to the “Administrative Measures for Credit Assets Risk Classification (Edition 2015)” in terms of classifying, checking, reviewing and approving.

The Bank 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. the Bank 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.

3.3 Policies for hedging or mitigating risks

The Bank hedges and mitigates credit risk majorly through the following 4 methods: (1) Cash collateral. The cash shall be pledged in the Bank, and the Bank will freeze such cash in bank’s system for the control of collateral; (2) Counter Guarantee from Other Financial Institutions; (3) Corporate Guarantee. The Bank reviews the overall status and guarantee capacity of such guarantors quarterly when implement quarterly review case by case and (4) Mortgage.

3.4 Guidelines for setting risk controlling limits

The Bank continued to strengthen management over credit approval and credit rating, adhering to the principles and criteria of credit limits approval in order to ensure the quality of new credit assets. The management policy of proactive withdrawal from high-risk customers was reinforced, and the Bank withdrew from customers who posed high risks in terms of finance, business management, and bank-enterprise cooperation.

4. Market Risk

Market risk is the risk that values of assets and liabilities or revenues will be adversely affected by changes in market conditions, such as interest rate movements, currency exchange rates and security prices. For the Bank, market risk arises from both trading and banking

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positions. Trading exposures represent positions taken in forward exchange contracts and cross currency swaps. The Bank utilizes the Standardized Approach for market risk calculation.

The Bank’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. Corporate Business Departments are responsible for specific limit control. According to the business development requirement, the Board of Directors will adjust the authorizations to Corporate Business Departments if necessary.

4.1 The structure and responsibilities allocation

The Board of Directors of the Bank takes the responsibility to approve market risk management policies and procedures and determines market risk limits. Corporate Business Departments are responsible for monitoring and reporting market risk related to businesses, and ensuring that the level of market risk is within the risk limits determined by the Board of Directors. Accounting & IT Department and Risk Management Department are responsible for implementing market risk management policies, and identifying, measuring, monitoring, controlling and reporting market risk.

4.2 The scope and nature of risk measuring, monitoring, and reporting system

The market risk management tools for different posts are as following: (1) Front office of Corporate Business Departments: position calculation software, all-in-one Table; (2) Mid-office of Risk Management Department: Kondor system; (3) Back office of Accounting & IT Department: accounting system.

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 the Bank also secures the overall procedure in collecting data to be independent from the Front Office in order to avoid interest conflicts or data manipulation.

The Bank conducts transactions in accordance with the head office’s approval of counterparty credit line strictly, doing forward transactions for customers under collateral or credit line.

4.3 Policies for managing and controlling risks

The size and scope of the Bank’s existing market risk are relatively limited, and the market risk management is strict, reasonable, and reliable, so the Bank’s market risk level is relatively low and the management is sufficient. Because of limited market risk exposure, the Bank maintains the current limits, improves the efficiency of position monitoring, controls the scope of derivative product, carries out new product prudently, adjusts interest rates if necessary, and improves the efficiency of utilization of funds.

4.4 Guidelines for setting risk controlling limits

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Currently, the Bank’s market risk comprises only foreign exchange rate risk. In order to manage market risk the Bank 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 Kordor 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 Head Office in the following business date.

5. Operational Risk

5.1 Risk management processes

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, and systems or from external events. The Bank stipulated operational risk management policy, guideline on identification and assessment of operational risk, and implementation measures on operational risk management, clarified classification of operational risks, principles of operational risk management, organization structure for operational risk management, and operational risk management system.

The Bank identifies and assesses specific operational risk points via the following process: to identify and understand the business areas to be assessed and the business process; to identify and assess the inherent risks; to identify and assess adequacy and effectiveness the control of inherent risks; to identify and assess residual risks; to determine whether to accept the residual risks; to determine the rectification plan for the unacceptable residual risks; to monitor and report the accepted residual risks.

5.2 The structure and responsibilities allocation

Each department and staff of the Bank is responsible for operational risk management when promoting business development, the Bank enhanced the effectiveness of operational risk management, and strengthened daily monitoring at departmental and staff level in order to improve self-control capability.

The Risk Management Department is responsible for the overall planning of operational risk management policies, directing, examining, monitoring and assessing the work of operational risk management.

5.3 The scope and nature of risk measuring, monitoring, and reporting system

The Bank stipulated handbook of operational risks and control which cover all major operational risk points within the Bank and each department shall monitor its operational risk management according to the handbook. The Bank also clarified the working process of operational risk accidents management, all operational risk accidents shall be reported and rectification measures shall be taken in time.

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The Bank applies operational risk management tools such as KRI and loss data collection to enhance the capacity to identify, assess and monitor operational risk, implements clearly defined operational risk management reporting framework and improves the communication and integration of operational risk management information throughout the Bank. The reports of loss data collection and key risk indicators shall be submitted quarterly and the key risk indicator’s threshold were set to appraise KRIs. The operational risk officer is responsible for independent check and review on such reports.

5.4 Policies for managing and controlling risks

The Bank continues dedicated efforts to establish a comprehensive, systemic, dynamic, proactive and verifiable framework of operational risk management. Specific measures included: (1) Further promoting the integrity and intensiveness of operational risk management by further improving the environment and organizational structure of operational risk management; (2) Further improving the efficiency of operational risk management by integrating measures, standardizing processes at departmental level; (3) Further enhancing the management of credit risk, market risk, operational risk, liquidity risk and other risks by improving ability to identify assess and monitor risk factors both internally and externally.

6. Capital Adequacy Risk

Capital is an important source of funding for any financial business. Therefore, effective capital management reflects the financial strength, and directly affects the reliability, of financial institutions.

In the past year, the capital structure, according to the Bank of Thailand’s Basel II guidelines, consists of Tier 1 capital and Tier 2 capital. Tier 1 capital comprises paid-up share capital; premiums on share capital, legal reserves, and reserves appropriated from net profit, and retained earnings after appropriations. Tier 2 capital consists of revaluation reserves for land and buildings in accordance with Bank of Thailand regulations, general provisions for normal assets, net unrealized gains on the revaluation of available-for-sale equity securities, and long-term subordinated debt instruments.

Since January 1, 2013 the Bank of Thailand has implemented the regulations on capital requirements under the principles of Basel III, by which the capital structure is revised into Common Equity Tier 1 capital, Additional Tier 1 capital and Tier 2 capital. Common Equity Tier 1 capital comprises paid-up share capital, premium on share capital, legal reserves, reserves appropriated from net profit, retained earnings after appropriations, and other reserves. Additional Tier 1 capital consists of Tier 1 capital instruments and non-controlling interest. Tier 2 capital consists of long-term subordinated debt instruments and general provisions for normal assets. Under the Bank of Thailand’s Basel III, other items of the other comprehensive income are allowed to be recognized as Common Equity Tier 1 capital, and deductible items from the capital are revised to be more than those prescribed under Basel II. With regards to additions to, or deductions from the capital, the Bank of Thailand requires the Bank to phase in and phase out at 20 percent per annum, starting in 2014.

In addition to the revision of the capital structure and its component, there are also changes in other main requirements, i.e. raising the quality of eligible capital instruments to be higher than that of the previous Basel II. The new guidelines prohibit offering incentives to redeem capital instruments. This is in order to ensure that the aforementioned instruments satisfy

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the feature of being long-term capital and capable of absorbing losses of the Bank on an ongoing basis, or at the point of non-viability. Instruments which do not meet the criteria or such qualifications of Basel III, will be phased out at 10 percent per annum, starting in 2013.

The Bank’s capital positions as at December 31, 2014 and December 31, 2015 were 9,901 million baht and 9,941 million baht respectively.

Capital adequacy risk factors cover the type, quantity and quality of the Bank’s risk assets as well as the Bank’s earnings’ capacity. In times of severe economic and financial difficulties, the quality of the Bank’s assets, including its investments, may deteriorate. The value of the Bank’s assets and/or investments and/or collateral may also decline, thereby increasing the Bank’s risk weighted assets. As a consequence, the Bank’s earnings may also be affected, resulting in a reduction of capital and leading to a corresponding decline in its capital adequacy ratio.

The objective of the Bank’s capital management policy is to maintain an adequate level of capital to support growth strategies within an acceptable risk framework, as well as to meet regulatory requirements and market expectations.

In compliance with the Bank of Thailand’s supervisory review process guidelines under Basel II-Pillar 2, the Bank’s capital management process assesses the overall risk and capital adequacy under the Internal Capital Adequacy Assessment Process (ICAAP). The process covers assessments of all substantial risks to the Bank’s operations under projected normal and stressed scenarios, so that the Bank can effectively manage its risks while ascertaining and ensuring that it has a sound capital base in line with its risk profile.

The Standardized Approach (SA) is currently used to measure credit risk, market risk and operational risk for computing regulatory capital requirements under Pillar I. The change from Basel II to Basel III, starting January 2013, has not significantly affected the calculation of capital adequacy.

As at December 31, 2014 and December 31, 2015, the Group’s Tier 1 capital adequacy ratio and its Total capital adequacy ratio were 22.22% and 22.09% respectively. Such ratios exceeded the Bank of Thailand’s minimum of 8.50%.

7. Credit Concentration Risk

Credit concentration risk is the risk from the Bank making lending, investment and other contractual commitments to any borrower or any sector at very high volumes. If losses occur, this will affect the status and operations of the Bank.

The Bank manages credit concentration risk by controlling its large borrower concentration and industry concentration. Large borrower concentration is controlled by limiting the lending, investment and other contractual commitments to any one borrower or any one project to no more than 25 percent of the Bank’s total capital. The Bank also sets a limit on the total sum of lending, investment and other contractual commitments to any group of borrowers that exceeds 10 percent of the Bank’s total capital to three times the total capital. These two limits are required by the Bank of Thailand.

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To control industry concentration, the Bank determines the lending limit to any industry sector at an acceptable level to limit damages to the Bank’s capital in the event of a serious incident with major implications on certain sectors.

As at December 31, 2015, groups of borrowers with exposure exceeding 10 percent of the Bank’s capital had a combined exposure lower than the regulations mentioned above. By sector, the Group’s lending to manufacturing and trading was the highest, at 40.87% and 15.59% of total lending respectively. The next highest was energy and real estate, at 10.14% and 8.46% respectively. Although the Bank’s lending to the manufacturing and commercial sectors is considered high as a proportion of total lending, it is well diversified among various subsectors. Moreover, the Bank regularly monitors its lending portfolio in order to maintain an appropriate level of diversification.

Liquidity Risk Management

Liquidity Risk is the risk caused by an inability to meet obligations when they come due because of an inability to obtain sufficient funds to meet funding needs at appropriate costs within a pre-specified time period, and/or to convert asset into cash, this may cause a malfunction.

Liquidity risk is continually analyzed and assessed to ensure adequate liquidity for business operations within an acceptable risk appetite and appropriate management cost. Our efforts include a liquidity gap analysis covering normal and crisis situations in which impact analyses are conducted at three scenario cases, i.e., a bank’s specific liquidity crisis, a market- wide liquidity crisis, and a combination liquidity crisis. The Bank has also adopted a Business Contingency Plan to mitigate the severity of the impacts that may occur. And have conducted to test the plan at least once a year. In addition, the bank has managed the risk on liquidity due to the Basel III i.e. Liquidity Coverage Ratio (LCR), Net Stable Funding Ratio (NSFR).

Bank of China (Thai) Public Company Limited | Annual Report 2015 Performance Results and Financial Position Analysis 25

Performance Results

The bank has received the Entire Business from Bank of China Limited Bangkok Branch and started operating the business on 26 August 2014. The performance of 2014 has been showed the operating from operating this date to 31 December 2014*. In 2015, the bank achieved a profit for the year of 60 million baht. Unit: Million Baht Profit & Loss Statements 2015 2014* Net Interest Income 400 238 Net Non-Interest Income 427 105 Total Income from Operation 827 343 Expenses from Operation 580 201 Operating Profit 247 142 Provision of doubtful account 189 257 Profit before tax 58 (115) Corporate Income Tax (2) (1) Net Profit after Tax 60 (114)

In 2015, the bank earned a net interest income of 400 million Baht, non-interest income amounted to 427 million Baht. Major factor of income was the gain on foreign exchange transaction. The Operating Profit amounted to 247 million Baht, and the bank recorded the expenses related to bad debt and doubtful account of loans in the amount of 189 million Baht.

In 2015, the corporate income tax expenses was -2 million Baht, This comprises of yearly income tax and deferred tax by 3 million Baht and -5 million Baht, respectively.

In 2015, net earnings per share for the Bank amounted to 0.06 Baht.

Financial Position

On 26 August 2014, the banking business was transferred to the bank at cost. This transaction was treated as Entire Business Transfer. Unit: Million Baht Key Balance sheet Items 2015 2014* % Change Balance Balance Total Assets 58,239 55,784 4 % Loan to customers (Less deferred revenue) 41,892 30,893 36 % Interbank and money market in asset (Less deferred revenue) 13,220 21,068 (37) % Total Liabilities 48,286 45,858 5 % Deposits 24,990 8,802 184 % Interbank and money market in liabilities 22,342 35,697 (37) % Shareholder’s Equity 9,953 9,906 5 %

Total assets as of 31 December 2015 were 58,239 million Baht which was increase of 4% from the prior year. Loan to customers net of deferred revenue were 41,892 million Baht or increased of 36% from the end of 2014. And interbank and money market were 13,220 million Baht or decrease of 37% from the end of 2014.

Bank of China (Thai) Public Company Limited | Annual Report 2015 26 Performance Results and Financial Position Analysis

Total liabilities as of 31 December 2015 were 48,286 million Baht which was increase of 5% from the prior year. Deposit items were 24,990 million Baht or increase of 184% from the end of 2014. And the interbank and money market were 22,342 million Baht or decrease of 37% from the end of 2014.

Shareholder’s Equity of the Bank as of 31 December 2015 was 9,953 million Baht which increase of 5% from the end of 2014.

Asset Quality

At the end of 2015, the Bank’s non-performing loans (NPLs) were 800 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 2015 2014 NPLs of total loans before allowance for doubtful account 1.75 1.23 NPLs of total loans after allowance for doubtful account 1.35 1.18

Capital Adequacy Ratio

At the end of 2015, the Bank had regulated capital fund of 9,941 million Baht, it totally was tier- 1 capital fund. The BIS ratio stood at 22.09% of regulated capital fund per total risk assets.

Percentage (%) Capital Adequacy Ratio 2015 2014 Ratio of tier 1 capital to risk asset 22.09 22.22 Ratio of total capital to risk asset 22.09 22.22 Total capital fund less capital add-on arising from Single Lending Limit to risk asset 21.90 22.06

Credit Rating

On 27 October 2015, 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)’.

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Bank of China (Thai) Public Company Limited | Annual Report 2015 Corporate Governance 27

The Bank recognizes 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 BOC Group. Thus, the Bank endeavors to establish and promotes the culture of good corporate governance in conducting business. The Bank sets 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 BOC Group’s reputation enhances 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 by 31st December, 2016 including Mr. Cheng Jun* Chairman Mr. Zhang Lei Executive Director Ms. Li Jun Executive Director Mr. Li Tao Executive Director Mr. Krish Follett Independent Director Mr. Chatchai Virameteekul Independent Director Mr. Chaiyuth Sudthitanakorn* Independent Director

* Mr. Wisudhi Srisuphan resigned from the position of independent director on 5th September, 2014 and replaced by Mr. Chaiyuth Sudthitanakorn effective on 12 June, 2015. Mr. Zhang Jianhua resigned from the Board of Director effective on 16th December, 2015 replaced by Mr. Cheng Jun effective on 31 December, 2015.

Bank of China (Thai) Public Company Limited | Annual Report 2015 28 Corporate Governance

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.

Bank of China (Thai) Public Company Limited | Annual Report 2015 Corporate Governance 29

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 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.

Duties and Responsibilities 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 is set up to assist the Board of Directors in its oversight responsibilities of the integrity of the Bank’s financial information, effectiveness of its system of internal control, compliance with legal, regulatory and code of conduct to promote the Bank’s corporate governance. The Audit Committee will also provide assessment in the adequacy and effectiveness of implementation of the Bank’s risk management.

Composition and Term of Office There shall be at least three members, and all of them must be independent directors. However, by 31st December, 2014, there are two members remain in the position. One member has resigned from his office. The Bank is in the process of appointing new member to join the Committee. The Audit Committee members are fully qualified in accordance with the qualifications prescribed by the Securities and Exchange Commission, and/or the Capital Market

Bank of China (Thai) Public Company Limited | Annual Report 2015 30 Corporate Governance

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 is equal to that of the member of the Board of Directors.

Duties and Responsibilities 1. To review the Bank’s financial reporting process to ensure accuracy and adequacy. 2. To review and assess the Bank has in place appropriate and effective internal control and internal audit systems. 3. To review the Bank’s compliance with laws governing the Bank’s businesses, such as the Bank of Thailand’s regulations, securities law, and other applicable laws. 4. To consider, select and propose the appointment of the Bank’s auditors, including their remunerations. 5. To consider the adequacy and accuracy of the Bank’s information disclosure, in particular on matters related to connected transaction or transaction that may lead to conflict of interest. 6. To prepare a report on monitoring activities of the Audit Committee and disclose it in the Bank’s annual report. 7. To formulate Audit Committee’s duties including changes in the composition and the changes that might materially affect the Audit Committee’s performance with the written papers as approved by the Board of Directors and inform the shareholders in its annual report. 8. To report the Board of Directors in order that remedial action is taken within the time that the Audit Committee deems appropriate in case the Audit Committee finds or suspects any misconduct as follows: a) Any transaction which causes conflict of interest. b) Any fraud or irregularity or material defect in the internal control system. 9. Infringement of laws governing the Bank businesses, laws governing securities, the Bank of Thailand regulations, other relevant laws related to the Bank businesses and securities, and other laws. If the Board of Directors or the executives do not take remedial action within the time that the Audit Committee proposes, the Audit Committee shall disclose such infringement in the annual report and report to the Bank of Thailand. 10. To perform any other tasks as assigned by the Board of Directors with approval of the Audit Committee. 11. In addition, the Audit Committee should review its roles, responsibilities and term of service in position of each director in the Audit Committee. It might seek professional advice from outside sources at the expense of the Bank.

Bank of China (Thai) Public Company Limited | Annual Report 2015 Corporate Governance 31

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 9 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.

Duties and Responsibilities 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 2015 Risk Board of Executive Meeting in 2015 Management Audit Committee Directors Committee Committee Nos. of Meetings 4 12 7 4 Mr. Cheng Jun 0 - - - Mr. Zhang Jianhua 2 - - - Mr. Zhang Lei 4 12 - - Ms. Li Jun 4 12 7 - Mr. Li Tao 4 11 - - Mr. Krish Follett 4 - - 4 Mr. Chatchai Virameteekul 4 - - 4 Mr. Chaiyuth Sudthitanakorn 2 - - 2

Bank of China (Thai) Public Company Limited | Annual Report 2015 32 Corporate Governance

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. Ms. Sakuna Yamsakul Certified Public Accountant (Thailand) No. 4906 2. Mrs. Unakorn Phruithithada Certified Public Accountant (Thailand) No. 3257 3. Mrs. Anothai Leekitwattana Certified Public Accountant (Thailand) No. 3442

Remuneration of Auditors

The audit fee of the Bank for the year ended 31 December 2015 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 2015 2,490,000 2). Certification of management’s statement accompanying The corporate income tax return 10,000

Bank of China (Thai) Public Company Limited | Annual Report 2015 BOCT Activities 33

To tightly focus on parent bank’s strategic objective of “Serving society, Delivering Excellence”, based in Thailand and serve both Thai and Chinese customers; 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.

July 25, 2015: The opening ceremony's picture exhibition and awarded ceremony of contest under the subject "Thailand in my eyes" held by Bank of China (Thai) Public Company Limited and China Cutural Centrein Bangkok.

September 15, 2015: Opening ceremony of picture exhibition "Thailand in my eyes" at Bank of China Head Office in Beijing.

Bank of China (Thai) Public Company Limited | Annual Report 2015 34 BOCT Activities

Mr. Teerakul Niyom, The Thai Amba ssador in China, was describing the picture of the 40th year relationship's anniversary between Thai - China to Mr. Xu Luode, The Vice President of Bank of China Head Office in Beijing

The event of awarding Mr. Wu Renping the decoration of bravery in the ceremony of 70th anniversary of China victory against the Fascism by Mr. Zhang Lei The CEO and Country Head of Bank of China (Thai) Public Company Limited.

Bank of China (Thai) Public Company Limited | Annual Report 2015 BOCT Activities 35

The MOU signing ceremony in The 12th China - Asean Expo SME Cross-Border investment and trade coorperation conference between Nongkhai Industrial Estate and Bank of China (Thai) Public Company Limited at Nanjing, China.

December 13, 2015: Bank of China (Thai Public Company Limited and Chinese-Thai Exterprise Association has hold the 2015 Badmintion Competition at Tito Court, Bangkok.

Bank of China (Thai) Public Company Limited | Annual Report 2015 36 The Board of Directors and Top Executives

1. Mr. Cheng Jun Bachelor Degree in International Finance from Wu Han Chairman of the Board of Director University.

Chairman of the Board of Director of Bank of China 5. Mr. Krish Follett (Thai) Public Company Limited since 2015 without Independent Director shareholding in the Bank and Chairman of the Board of Director of Bank of China (Canada). Currently, Mr. Independent Director of the Bank of China (Thai) Cheng Jun serves as the General Manager of Global Public Company Limited since 2014 without Trade Services Department overseeing the trade shareholding in the Bank. From 1971 to 2009, Mr. financial business line at Bank of China Company Krish held various positions in Bank of Thailand i.e. Limited, and also held various positions in Bank of Assistant Governor, Senior Director IAD, Senior China Company Limited i.e. General Manager of Director of On-site Examination 1 Division, Director of Corporate Banking Unit, Assistant General Manager & Modernization Program Office, Director of Product Director of International Settlement Northeastern Region Office, Assistant Director of Department and Head of Overseas Business Division. Payment System Department, Division Chief and Besides that Mr. Cheng also had ever held the position Special Investigation Team. Mr. Krish obtained of Manager of Credit and Risk Management Certificate in Advanced Management Program from Department in Bank of China Company Limited, Harvard University. Moreover, Mr. Krish graduated London Branch. Mr. Cheng graduated Master and Master Degree in Business Administration and Bachelor Bachelor Degrees in Economics from Renmin Degree in Economics, Major in Finance from University, and also graduated Bachelor Degree, Major Thammasat University. in Financial Services with Honours from University of Manchester Institute of Science and Technology.

2. Mr. Zhang Lei 6. Mr. Chatchai Virameteekul CEO & Country Head Independent Director

CEO & Country Head of Bank of China (Thai) Public Independent Director of the Bank of China (Thai) Company Limited since 2014 without shareholding in Public Company Limited since 2014 without the Bank. Prior upgrading to be a subsidiary, Mr. Zhang shareholding in the Bank. Currently, Mr. Chatchai served as General Manager of the Bank of China serves as Vice Chairman of the Siam Bangna Land Limited, Bangkok Branch in 2014. Furthermore, Mr. Co., Ltd and Vice Chairman of the Thai Institute of Zhang had served as the General Manager, Operation Directors (IOD). Mr. Chatchai served as Director, Service Unit of Bank of China Limited from 2001 to Chairman of Audit Committee, and Chairman of the 2014. Mr. Zhang graduated Master Degree in Business Risk Management Committee, Director and Acting Administration from Renmin University and Bachelor President, Chairman of the Nomination and Degree in Economic Management from Nankai Remuneration Committee and Vice Chairman of the University. Executive Board of Government Housing Bank. Mr. 3. Mrs. Li Jun Chatchai graduated Master Degree in Business Executive Vice President Administration from Thammasat University and Bachelor of Arts from University of Washington, Executive Vice President of Bank of China (Thai) USA. Public Company Limited since 2014 without shareholding in the Bank. Prior upgrading to be a 7. Mr. Chaiyuth Sudthitanakorn subsidiary, Mrs. Li had seated as Assistant General Independent Director Manager of Bank of China Limited, Bangkok Branch in 2014, and ever held the position of the Head of Risk Independent Director of the Bank of China (Thai) Management Department in Bank of China, Singapore Public Company Limited since 2015 without Branch, from 2007 to 2014. Mrs. Li graduated Master shareholding in the Bank. From 1977 to 2009, Mr. Degree in Industrial Economics from Shanxi University Chaiyuth held various positions in the Ministry of of Finance and Economics, and Bachelor Degree in Finance i.e. Director of Loan Policy Division, Director Economics from Fudan University. of Tax Policy Division, Director of Bureau of Tax Policy and Senior Expert on Fiscal and Tax, Senior 4. Mr. Li Tao Specialist on International Economic and Finance, Executive Vice President Director of Bureau of International & Macroeconomic Policy, Director of Bureau of Financial System Policy, Executive Vice President of Bank of China (Thai) and Director Bureau of International Economic Policy. Public Company Limited since 2014 without Mr. Chaiyuth obtained certificate in Financial shareholding in the Bank. Prior upgrading to be a Statements for Directors from Thai Institute of subsidiary, Mr. Li served as General Manager of the Directors (IOD). Also, Mr. Chaiyuth graduated Master Personal Loan Center and General Manager of Private Degree of Public Administration (Management Banking Department of Bank of China, Hubei Branch Program) from National Institute of Development from 2008 to 2014. Mr. Li graduated Doctoral Degree Administrative and Bachelor of Science in Agricultural in Economics, Master Degree in Economics and Economics from Kasetsart University.

Bank of China (Thai) Public Company Limited | Annual Report 2015 Report of the Audit Committee 37

Audit Committee Report for the year 2015

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 charter of the Audit Committee, 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 2015, The Audit Committee 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.

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 also review 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, and the Securities Act, and other requirements of supervisory authorities. The Audit Committee closely monitored the progress of audit on procurement process in order to ensure accurate compliance of all business units and comprehensive internal control system.

4. The potential conflict of interest The Audit Committee has independently performed its duties and freely expressed opinion for the highest benefit of the Bank. In addition, the Audit Committee has also assessed the Bank’s internal control, risk management, corporate governance and its performance in 2015 in order to ascertain that its Strategic Objectives were efficiently and effectively achieved as assigned by Board of Directors.

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

(Krish Follett) Chairman of the Committee

Bank of China (Thai) Public Company Limited | Annual Report 2015 38 Report of Board of Directors

Bank of China (Thai) Public Company Limited had held the meeting of the Board of Directors Meeting No. 1/2015 Date 26 March 2015 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 2015

Meeting Attendance Chairman of the Total remuneration No. Director's Name Committee Fee Position Fee (7 times)* Audit Committee /Person/Year

1 Mr. Zhang Jianhua Chairman

2 Mr. Zhang Lei Director - 3 Mrs. Li Jun Director

4 Mr. Li Tao Director

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

6 Mr. Chatchai Virameteekul Independent Director 240,000.00 960,000.00 - 1,200,000.00

7** Mr. Chaiyuth Sudthitanakorn Independent Director 140,000.00 530,666.73 - 670,666.73 7** Joined on June 12, 2015

Bank of China (Thai) Public Company Limited | Annual Report 2015 Independent Auditor’s Report 39

AUDITOR’S REPORT

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

I have audited the financial statements of Bank of China (Thai) Public Company Limited which comprise the statements of financial position as at 31 December 2015, and the related statements of comprehensive income, changes in shareholders’ equity and cash flows for the year then ended, and a summary of significant accounting policies and other notes.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Thai Financial Reporting Standards, 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.

Auditor’s responsibility

My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with Thai Standards on Auditing. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

Opinion

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bank of China (Thai) Public Company Limited as at 31 December 2015, and its results of operations and its cash flows for the year then ended in accordance with Thai Financial Reporting Standards.

Unakorn Phruithithada Certified Public Accountant (Thailand) No. 3257 PricewaterhouseCoopers ABAS Ltd.

Bangkok 18 March 2016

Bank of China (Thai) Public Company Limited | Annual Report 2015 40 Financial Statement

Statement of Financial Position As at 31 December 2015

Restated 2015 2014 Notes Baht Baht

Assets

Cash 107,799,075 70,284,846 Interbank and money market items, net 7 13,188,401,887 21,205,850,199 Financial derivatives assets 8 37,605,218 77,867,887 Investments, net 9 3,061,280,491 3,439,849,071

Net loans to customers and interest receivables 10 Loans to customers 41,895,750,615 30,899,394,027 Interest receivables 171,597,058 119,556,397

Total loans to customers and interest receivables 42,067,347,673 31,018,950,424 Less Deferred income (3,460,141) (6,247,734) Less Allowance for doubtful accounts 11 (530,041,736) (275,337,638)

Net loans to customers and interest receivables 41,533,845,796 30,737,365,052

Premises and equipment, net 13 169,525,495 114,793,213 Intangible assets, net 14 30,951,643 26,848,192 Leasehold, net 15 23,637,199 34,146,886 Deferred tax assets 16 26,004,096 17,714,086 Other assets 17 60,300,975 59,760,809

Total assets 58,239,351,875 55,784,480,241

Bank of China (Thai) Public Company Limited | Annual Report 2015 Financial Statement 41

Statement of Financial Position (Cont’d) As at 31 December 2015

Restated 2015 2014 Notes Baht Baht

Liabilities and shareholders’ equity

Liabilities

Deposits 18 24,989,928,635 8,802,064,493 Interbank and money market items, net 19 22,342,185,853 35,697,223,303 Demand liabilities 183,069,529 486,810,123 Financial derivatives liabilities 8 34,365,232 56,121,018 Accrued interest payable 209,304,300 169,565,603 Provisions 20 21,774,470 18,951,092 Other liabilities 21 505,330,471 647,550,418

Total liabilities 48,285,958,490 45,878,286,050

Shareholders’ 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 7,001,866 20,190,543 Deficits (53,608,481) (113,996,352)

Total shareholders’ equity 9,953,393,385 9,906,194,191

Total liabilities and shareholders’ equity 58,239,351,875 55,784,480,241

(Mr. Zhang Lei) Chief Executive Officer, Country Head

Bank of China (Thai) Public Company Limited | Annual Report 2015 42 Financial Statement

Statement of Profit or Loss and Other Comprehensive Income For the year ended 31 December 2015

Restated For the For the period from year ended 1 April 2014 to 31 December 2015 31 December 2014 Notes Baht Baht

Interest income 28 1,260,998,368 542,298,687 Interest expenses 29 (860,616,153) (303,817,306)

Net interest income 400,382,215 238,481,381

Fees and service income 94,619,823 43,935,729 Fees and service expenses (14,638,373) (5,795,302)

Net fees and service income 30 79,981,450 38,140,427

Net gains on trading and foreign exchange 31 345,048,793 65,853,175 Other operating income 1,095,274 688,310

Total income from operations 826,507,732 343,163,293

Expenses from operations Personnel expenses 293,559,646 93,700,066 Directors’ remuneration 26 49,701,981 11,430,517 Premises and equipment expenses 118,187,471 36,079,158 Taxes and duties 26,875,444 15,090,108 Others expenses 91,609,505 44,921,971 Total expenses from operations 579,934,047 201,221,820

Impairment loss of loans 12 188,865,897 257,191,221

Profit (loss) from operations before income tax 57,707,788 (115,249,748) Income tax 32 2,483,157 1,086,657

Net profit (loss) for the year/period 60,190,945 (114,163,091)

Bank of China (Thai) Public Company Limited | Annual Report 2015 Financial Statement 43

Statement of Profit or Loss and Other Comprehensive Income (Cont’d) For the year ended 31 December 2015

Restated For the For the period from year ended 1 April 2014 to 31 December 2015 31 December 2014 Notes Baht Baht Net profit (loss) for the year/period 60,190,945 (114,163,091) Other comprehensive income Items that will be reclassified subsequently to profit or loss Loss on remeasuring available-for-sale investments (16,485,846) (7,709,368) Income taxes relating to items that will be reclassified 16 3,297,169 (5,047,635) Items that will not be reclassified to profit or loss Actuarial gain (loss) on defined employee benefit plan 237,173 (477,887) Income taxes on items that will not be reclassified 16 (40,247) 79,931

Total other comprehensive expense (12,991,751) (13,154,959)

Total comprehensive income 47,199,194 (127,318,050)

Earnings (loss) per share for profit attributable 36 to the equity holders of the Bank

Basic earnings (loss) per share (Baht per share) 0.06 (0.23)

(Mr. Zhang Lei) Chief Executive Officer, Country Head

Bank of China (Thai) Public Company Limited | Annual Report 2015

Statement of Changes in Shareholders’ Equity For the year ended 31 December 2015

Issued and Other Retain paid-up component earnings share capital of equity (Deficits) Total Notes Baht Baht Baht Baht

Issue of shares and paid-up share capital 33 10,000,000,000 - - 10,000,000,000 Transfer in net assets from Bank of China, Bangkok Branch - 32,947,546 564,695 33,512,241 Loss on remeasuring available-for-sale investments - (7,709,368) - (7,709,368) Income taxes relating to items that will be reclassified - (5,047,635) - (5,047,635) Actuarial loss on defined employee benefit plan - - (477,887) (477,887) Income taxes on items that will not be reclassified - - 79,931 79,931 Net loss profit for the period (Restated) - - (114,163,091) (114,163,091) Closing balance 31 December 2014 (Restated) 10,000,000,000 20,190,543 (113,996,352) 9,906,194,191

Opening balance 1 January 2015 10,000,000,000 20,270,474 (145,976,353) 9,874,294,121 Adjustment for error 6 - (79,931) 31,980,001 31,900,070

Opening balance after adjustment 10,000,000,000 20,190,543 (113,996,352) 9,906,194,191 Loss on remeasuring available-for-sale investments - (16,485,846) - (16,485,846) Income taxes relating to items that will be reclassified - 3,297,169 - 3,297,169 Actuarial gain on defined employee benefit plan - - 237,173 237,173 Income taxes on items that will not be reclassified - - (40,247) (40,247) Net profit for the year - - 60,190,945 60,190,945 Closing balance 31 December 2015 10,000,000,000 7,001,866 (53,608,481) 9,953,393,385

(Mr. Zhang Lei) Financial Statement Financial Statement Chief Executive Officer, Country Head

44

Financial Statement 45

Statement of Cash Flows For the year ended 31 December 2015

Restated For the For the period from year ended 1 April 2014 to 31 December 31 December 2014 2015 Notes Baht Baht Cash flows from operating activities Profit (loss) from operating activities before income tax 57,707,788 (115,249,748) Adjustments to reconcile income from operating before income tax for the year to net cash received (paid) from operating activities: 13, 14, Depreciation and amortisation 48,900,271 15,570,634 15 Bad debt and doubtful accounts 12 188,865,897 257,191,221 Amortisation of discount and premium on debt instruments 4,779,493 224,374 Loss on impairment of other assets (reversal) 876,192 (29,443) Unrealised loss (gain) on change in fair value of financial derivative instruments 18,506,883 (18,281,399) Gain on disposal of equipment (53,498) (198,658) Provision for post-employment benefits 20 2,966,713 707,749 Net interest income (400,382,216) (238,481,381) Interest received 1,424,594,919 300,327,957 Interest paid (793,077,781) (164,529,093) Income tax paid (20,689,058) (32,859,493)

Profit from operating actives before changes in operating assets and liabilities 532,995,603 4,392,720 (Increase) decrease in operating assets Interbank and money market items 9,447,214,198 13,101,929,670 Loans (11,003,967,766) (17,244,717,442) Other assets (5,026,239) 264,372 Increase (decrease) in operating liabilities Deposits 16,187,864,142 (12,046,391,812) Interbank and money market items (13,316,130,153) 1,640,353,949 Demand liabilities (303,740,594) 190,566,175 Provisions (706,162) (48,664) Other liabilities 59,083,650 255,633,213

Net cash flows provided by (used in) operating activities 1,597,586,679 (14,098,017,819)

Bank of China (Thai) Public Company Limited | Annual Report 2015

46 Financial Statement

Statement of Cash Flows (Cont’d) For the year ended 31 December 2015

Restated For the period from For the year ended 1 April 2014 to 31 December 2015 31 December 2014 Notes Baht Baht Cash flows from investing activities Proceeds from redemption of investments 1,870,000,000 769,000,000 Purchase of investments (1,512,696,759) - Proceeds from disposal of equipment 13 53,500 200,000 Purchase of premises and equipment 13 (78,047,926) (2,845,303) Purchase of intangible assets 14 (2,742,500) -

Net cash flows provided by investing activities 276,566,315 766,354,697 Cash flows from financing activities Funds received from parent company 33 - 6,400,986,581 Profit remittance to head office (228,695,854) -

Net cash flows (used in) provided by financing activities (228,695,854) 6,400,986,581

Net increase (decrease) in cash and cash equivalents 1,645,457,140 (6,930,676,541) Cash and cash equivalents at the beginning of the year 7,725,625,872 14,656,302,413

Cash and cash equivalents at the end of the year 9,371,083,012 7,725,625,872

Cash 107,799,075 70,284,846 Interbank and money market items (assets) 9,421,215,325 7,852,179,711 Interbank and money market items (liabilities) (157,931,388) (196,838,685)

Total 9,371,083,012 7,725,625,872

Non-cash transaction Purchase of premises and equipment 10,189,917 - Purchase of intangible 5,445,976 - Provision for restoration and demolition cost 800,000 - Net assets received from entire business transfer - 228,695,854

(Mr. Zhang Lei) Chief Executive Officer, Country Head

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to the Financial Statements 47

Notes to the Financial Statements For the year ended 31 December 2015

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 18 March 2016.

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.

Bank of China (Thai) Public Company Limited | Annual Report 2015 48 Notes to the Financial Statements

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 2015. These standards are relevant to the Bank.

a) Financial reporting standards, which have a significant impact to the Bank:

TAS 1 (revised 2014) Presentation of financial statements TAS 16 (revised 2014) Property, plant and equipment TAS 19 (revised 2014) Employee benefits TAS 34 (revised 2014) Interim financial reporting TFRS 13 Fair value measurement

TAS 1 (revised 2014), the main change is that a requirement for entities to group items presented in ‘other comprehensive income’ (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI. The Bank has already grouped and presented items in statement of comprehensive income following the changes in this standard.

TAS 16 (revised 2014) indicates that spare part, stand-by equipment and servicing equipment are recognised as PPE when they meet the definition of PPE. Otherwise, such items are classified as inventory. The changes on this standard have no impact to the Bank.

TAS 19 (revised 2014), the key changes are (a) actuarial gains and losses are renamed ‘remeasurements’ and will be recognised immediately in ‘other comprehensive income’ (OCI). Actuarial gains and losses will no longer be deferred using the corridor approach or recognised in profit or loss; and (b) past-service costs will be recognised in the period of a plan amendment; unvested benefits will no longer be spread over a future-service period. This standard has no significant impact to the Bank since the Bank has already recognised actuarial gains and losses and past service costs in accordance with any amendment to this standard.

TAS 34 (revised 2014), the key change is the disclosure requirements for operating segment. An entity shall disclose information of a measure of total assets and liabilities for a particular reportable segment if such amounts are regularly provided to the chief operating decision maker and if there has been a material change from the amount disclosed in the last annual financial statements for that reportable segment. This standard has no impact to the Bank.

TFRS 13 aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across TFRSs. This standard has no impact to the Bank, except for disclosures which the Bank has disclosed in Note 23.4.

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to the Financial Statements 49

2 Accounting policies (Cont’d)

2.2 New financial reporting standards and revised financial reporting standards (Cont’d)

New financial reporting standards and revised accounting standards, revised financial reporting standards are effective on 1 January 2015. These standards are relevant to the Bank. (Cont’d)

b) Financial reporting standards with minor changes and do not have impact to the Bank are as follows:

TAS 2 (revised 2014) Inventories TAS 7 (revised 2014) Cash flow statements TAS 8 (revised 2014) Accounting policies, changes in accounting estimates and errors TAS 10 (revised 2014) Events after the reporting period TAS 11 (revised 2014) Construction contract TAS 12 (revised 2014) Income taxes TAS 17 (revised 2014) Leases TAS 18 (revised 2014) Revenue TAS 20 (revised 2014) Accounting for government grants & disclosure of government assistance TAS 21 (revised 2014) The effects of changes in foreign exchange rates TAS 23 (revised 2014) Borrowing costs TAS 24 (revised 2014) Related party disclosures TAS 26 (revised 2014) Accounting and reporting by retirement benefit plans TAS 27 (revised 2014) Separate financial statements TAS 28 (revised 2014) Investments in associates and joint ventures TAS 29 (revised 2014) Financial reporting in hyperinflationary economies TAS 33 (revised 2014) Earnings per share TAS 36 (revised 2014) Impairment of assets TAS 37 (revised 2014) Provisions, contingent liabilities and contingent assets TAS 38 (revised 2014) Intangible assets TAS 40 (revised 2014) Investment property TFRS 2 (revised 2014) Share-based payment TFRS 3 (revised 2014) Business combinations TFRS 6 (revised 2014) Exploration for and evaluation of mineral resources TFRS 8 (revised 2014) Operating segments TFRS 10 (revised 2014) Consolidated financial statements TFRS 11 (revised 2014) Joint arrangements TFRS 12 (revised 2014) Disclosure of interest in other entities TSIC 10 (revised 2014) Government assistance - No specific relation to operating activities TSIC 15 (revised 2014) Operating leases - Incentives TSIC 25 (revised 2014) Income taxes - changes in the tax status of an entity or its shareholders

Bank of China (Thai) Public Company Limited | Annual Report 2015 50 Notes to the Financial Statements

2 Accounting policies (Cont’d)

2.2 New financial reporting standards and revised financial reporting standards (Cont’d)

New financial reporting standards and revised accounting standards, revised financial reporting standards are effective on 1 January 2015. These standards are relevant to the Bank. (Cont’d)

b) Financial reporting standards with minor changes and do not have impact to the Bank are as follows: (Cont’d)

TSIC 27 (revised 2014) Evaluating the substance of transactions involving the legal form of a lease TSIC 29 (revised 2014) Service concession arrangements: Disclosures TSIC 31 (revised 2014) Revenue - barter transactions involving advertising services TSIC 32 (revised 2014) Intangible assets - Web site costs TFRIC 1 (revised 2014) Changes in existing decommissioning, restoration and similar liabilities TFRIC 4 (revised 2014) Determining whether an arrangement contains a lease TFRIC 5 (revised 2014) Rights to interests arising from decommissioning, Restoration and environmental rehabilitation funds TFRIC 7 (revised 2014) Applying the restatement approach under IAS 29 Financial reporting in hyperinflationary economies TFRIC 10 (revised 2014) Interim financial reporting and impairment TFRIC 12 (revised 2014) Service concession arrangements TFRIC 13 (revised 2014) Customer loyalty programmes TFRIC 14 (revised 2014) TAS 19 - The limit on a defined benefit asset, minimum Funding requirements and their interaction TFRIC 15 (revised 2014) Agreements for the construction of real estate TFRIC 18 (revised 2014) Transfers of assets from customers TFRIC 20 (revised 2014) Stripping costs in the production phase of a surface mine

The Bank’s management has determined that such revised accounting standards, revised financial reporting standards, and related interpretations have no significant impact to the Bank’s financial statements.

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to the Financial Statements 51

2 Accounting policies (Cont’d)

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 2016. 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 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).

Bank of China (Thai) Public Company Limited | Annual Report 2015 52 Notes to the Financial Statements

2 Accounting policies (Cont’d)

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 2016. These standards are relevant to the Bank and are not early adopted. (Cont’d)

b) Financial reporting standards with minor changes and do not have impact to the Bank are as follows:

TAS 1 (revised 2015) Presentation of financial statements TAS 2 (revised 2015) Inventories TAS 7 (revised 2015) Statement of cash flows TAS 8 (revised 2015) Accounting policies, changes in accounting estimates and errors TAS 10 (revised 2015) Events after the reporting period TAS 12 (revised 2015) Income taxes TAS 17 (revised 2015) Leases TAS 18 (revised 2015) Revenue TAS 20 (revised 2015) Accounting for government grants and disclosure of government assistance TAS 21 (revised 2015) The effects of changes in foreign exchange rates TAS 23 (revised 2015) Borrowing costs TAS 26 (revised 2015) Accounting and reporting by retirement benefit plans TAS 28 (revised 2015) Investments in associates and joint ventures TAS 29 (revised 2015) Financial reporting in hyperinflationary economies TAS 33 (revised 2015) Earnings per share TAS 34 (revised 2015) Interim financial reporting TAS 37 (revised 2015) Provisions, contingent liabilities and contingent assets TFRS 5 (revised 2015) Non-current assets held for sale and discontinued operations TFRS 6 (revised 2015) Exploration for and evaluation of mineral resources TFRS 11 (revised 2015) Joint arrangements TSIC 10 (revised 2015) Government assistance - No specific relation to operating activities TSIC 15 (revised 2015) Operating leases - Incentives TSIC 25 (revised 2015) Income taxes - changes in the tax status of an entity or its shareholders TSIC 27 (revised 2015) Evaluating the substance of transactions involving the legal form of a lease TSIC 29 (revised 2015) Service concession arrangements: Disclosures TSIC 31 (revised 2015) Revenue - barter transactions involving advertising services TSIC 32 (revised 2015) Intangible assets - Web site costs TFRIC 1 (revised 2015) Changes in existing decommissioning, restoration and similar liabilities TFRIC 4 (revised 2015) Determining whether an arrangement contains a lease TFRIC 5 (revised 2015) Rights to interests arising from decommissioning, restoration and environmental rehabilitation funds

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to the Financial Statements 53

2 Accounting policies (Cont’d)

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 2016. These standards are relevant to the Bank and are not early adopted. (Cont’d)

b) Financial reporting standards with minor changes and do not have impact to the Bank are as follows (Cont’d):

TFRIC 7 (revised 2015) Applying the restatement approach under TAS29 Financial reporting in hyperinflationary economies TFRIC 10 (revised 2015) Interim financial reporting and impairment TFRIC 12 (revised 2015) Service concession arrangements TFRIC 13 (revised 2015) Customer loyalty programmes TFRIC 14 (revised 2015) TAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction TFRIC 15 (revised 2015) Agreements for the construction of real estate TFRIC 17 (revised 2015) Distributions of non-cash assets to owners TFRIC 18 (revised 2015) Transfers of assets from customers TFRIC 20 (revised 2015) Stripping costs in the production phase of a surface mine

The Bank’s management has determined that such revised accounting standards, revised financial reporting standards, and the related interpretations will not significantly impact the financial statements being presented.

Bank of China (Thai) Public Company Limited | Annual Report 2015 54 Notes to the Financial Statements

2 Accounting policies (Cont’d)

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.

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to the Financial Statements 55

2 Accounting policies (Cont’d)

2.5 Investments (Cont’d)

Investments in debt securities (Cont’d)

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.

Bank of China (Thai) Public Company Limited | Annual Report 2015 56 Notes to the Financial Statements

2 Accounting policies (Cont’d)

2.7 Allowance for doubtful accounts (Cont’d)

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.

Legal fees and other direct costs incurred to effect the debt restructuring are expensed when incurred.

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to the Financial Statements 57

2 Accounting policies (Cont’d)

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.

Bank of China (Thai) Public Company Limited | Annual Report 2015 58 Notes to the Financial Statements

2 Accounting policies (Cont’d)

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.

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.

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to the Financial Statements 59

2 Accounting policies (Cont’d)

2.12 Impairment (Cont’d)

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.

Bank of China (Thai) Public Company Limited | Annual Report 2015 60 Notes to the Financial Statements

2 Accounting policies (Cont’d)

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 5% 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.

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to the Financial Statements 61

2 Accounting policies (Cont’d)

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.

Bank of China (Thai) Public Company Limited | Annual Report 2015 62 Notes to the Financial Statements

2 Accounting policies (Cont’d)

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.

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to the Financial Statements 63

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.

Bank of China (Thai) Public Company Limited | Annual Report 2015 64 Notes to the Financial Statements

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.

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to the Financial Statements 65

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 Adjustment of error

As at 31 December 2014, the management overstate liability of accrued bonus amounting to Baht 38,798,754 which effect to overstate deferred tax assets amounting to Baht 6,898,684. Income taxes on items that will not be reclassified was wrongly classified in other component of equity. This errors affects overstate deficits and other component of equity amounting to Baht 79,931.

The effects of adjustments from error are as follows:

Originally stated Adjustments Restated Baht Baht Baht

Statement of financial position as at 31 December 2014 Deferred tax assets 24,612,770 (6,898,684) 17,714,086 Other liabilities 686,349,172 (38,798,754) 647,550,418

Statement of comprehensive income for the period from 1 April 2014 to 31 December 2014 Personnel expenses 132,498,820 (38,798,754) 93,700,066 Income tax 7,985,341 (6,898,684) 1,086,657

Statement of changes in owners’ equity as at 31 December 2014 Other component of equity 20,270,474 (79,931) 20,190,543 Deficits (145,976,353) 31,980,001 (113,996,352)

The adjustment of error above does not have impact on statement of financial position as at 1 April 2014.

Bank of China (Thai) Public Company Limited | Annual Report 2015 66 Notes to the Financial Statements

7 Interbank and money market items (assets) 2015 At call Term Total Baht’000 Baht’000 Baht’000 Domestic The Bank of Thailand and Financial Institutions 505,446 7,900,000 8,405,446 Development Fund Commercial banks 46,662 - 46,662

Total 552,108 7,900,000 8,452,108 Add Accrued interest receivables - 440 440 Less Allowance for doubtful - - - account

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

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

Total 969,107 3,799,292 4,768,399 Add Accrued interest receivables - 5,448 5,448 Less Deferred income - - - Less 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

2014 At call Term Total Baht’000 Baht’000 Baht’000 Domestic The Bank of Thailand and Financial Institutions Development Fund 595,077 4,400,000 4,995,077 Commercial banks 46,237 3,300,000 3,346,237

Total 641,314 7,700,000 8,341,314 Add Accrued interest receivables - 3,540 3,540 Less Allowance for doubtful account - (33,000) (33,000)

Total domestic 641,314 7,670,540 8,311,854

Foreign US Dollar 454,948 208,845 663,793 Hongkong Dollar 7,576 - 7,576 Chinese Yuan 798,951 11,288,040 12,086,991 Euro 23,446 - 23,446 Other 4,902 - 4,902

Total 1,289,823 11,496,885 12,786,708 Add Accrued interest receivables 78 212,279 212,357 Less Deferred income - (29,414) (29,414) Less Allowance for doubtful account - (75,655) (75,655)

Total foreign 1,289,901 11,604,095 12,893,996

Total 1,931,215 19,274,635 21,205,850

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to the Financial Statements 67

8 Derivative financial instruments

Trading derivatives

Fair value and notional amount grouped by risk types

2015 Fair value Assets Liabilities Notional amount Risk types Baht’000 Baht’000 Baht’000

1. Exchange rate 37,605 34,365 16,898,863

2014 Fair value Assets Liabilities Notional amount Risk types Baht’000 Baht’000 Baht’000

1. Exchange rate 77,868 56,121 12,850,411

Portion of derivative contract balance grouped by types of counterparties

2015 2014 Counterparties Percentage Percentage

Financial institutions 80.57 26.65 Affiliated companies 16.73 72.77 Third parties 2.70 0.58

Total 100 100

9 Investment, net Fair value Fair value 2015 2014 Baht’000 Baht’000 Available-for-sale investments Government and state enterprise securities 3,061,275 3,439,849

Total available-for-sale investments 3,061,275 3,439,849

Cost Cost 2015 2014 Baht’000 Baht’000 General investments Equity securities 5 -

Total general investments 5 -

Total investments in securities, net 3,061,280 3,439,849

Bank of China (Thai) Public Company Limited | Annual Report 2015

68 Notes to the Financial Statements

10 Net loans to customers and interest receivables

Loans and accrued interest receivables as at 31 December 2015 and 2014 are as follows:

10.1 Classified by type of loans 2015 2014 Baht’000 Baht’000

Overdrafts 17,877 17,930 Loans 40,565,176 29,153,882 Bills 1,312,698 1,727,582 Less Deferred interest revenue (3,460) (6,248)

Total loans net of deferred income 41,892,291 30,893,146 Add Accrued interest receivables 171,597 119,557

Loans net of deferred income and accrued interest receivables 42,063,888 31,012,703 Less Allowance for doubtful accounts Minimum allowance followed BOT regulations by individual approach (443,518) (248,361) Additional allowance (86,524) (26,977)

Net loans to customers 41,533,846 30,737,365

10.2 Classified by currencies and residency of borrowers

2015 Domestic Foreign Total Baht’000 Baht’000 Baht’000

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

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

2014 Domestic Foreign Total Baht’000 Baht’000 Baht’000

Baht 2,930,170 - 2,930,170 US Dollar 4,564,275 16,518,834 21,083,109 Chinese Yuan 990 6,602,523 6,603,513 Other currencies - 276,354 276,354

Total 7,495,435 23,397,711 30,893,146

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to the Financial Statements 69

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

10.3 Classified by type of business and account status

2015 Special Doubtful Pass mention Substandard Doubtful of loss Total Baht’000 Baht’000 Baht’000 Baht’000 Baht’000 Baht’000

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

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

2014 Special Doubtful Pass mention Substandard Doubtful of loss Total Baht’000 Baht’000 Baht’000 Baht’000 Baht’000 Baht’000

Manufacturing and commerce 24,292,327 389,812 287,813 249,934 - 25,219,886 Property development and construction 1,170,244 - - - - 1,170,244 Infrastructure and services 4,223,642 - - - - 4,223,642 Housing loans 202,178 - - - - 202,178 Credit card 70,137 3,347 2,660 864 83 77,091 Other 105 - - - - 105

Total 29,958,633 393,159 290,473 250,798 83 30,893,146

Bank of China (Thai) Public Company Limited | Annual Report 2015

70 Notes to the Financial Statements

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

10.4 Classified by account status

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% 312,790 Special mention 173,888 3,417 2% 68 Substandard 548,499 126,049 100% 126,049 Doubtful 254,525 4,611 100% 4,611 Doubtful loss - - 100% - Additional allowance 86,524

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

2014 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 30,072,110 24,070,614 1% 240,706 Special mention 397,877 201,867 2% 4,037 Substandard 291,835 2,669 100% 2,669 Doubtful 250,798 866 100% 866 Doubtful loss 83 83 100% 83 Additional allowance 26,977

Total 31,012,703 24,276,099 275,338

As at 31 December 2015 there were defaulted loans amounting to Baht 803 million (31 December 2014: Baht 541 million) for which the bank has ceased accrual of interest income on accrual basis according to the Bank of Thailand’s notification.

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to the Financial Statements 71

11 Allowance for doubtful accounts

2015 Special Doubtful Pass mention Substandard Doubtful of loss Total Baht’000 Baht’000 Baht’000 Baht’000 Baht’000 Baht’000

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

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

2014 Special Doubtful Pass mention Substandard Doubtful of loss Total Baht’000 Baht’000 Baht’000 Baht’000 Baht’000 Baht’000

Transfer in from entire business transfer 90,926 13,093 3,659 11,756 593 120,027 Addition (decrease) during the period 156,728 (5,672) 8,881 (4,116) 8,350 164,171 Bad debt write-off - - - - (8,860) (8,860)

Balance at end of period 247,654 7,421 12,540 7,640 83 275,338

12 Bad debt and doubtful accounts

For the For the period from year ended 1 April 2014 to 31 December 31 December 2015 2014 Baht’000 Baht’000

Loans 259,527 164,171 Interbank and money market items (70,661) 93,020

Total 188,866 257,191

Bank of China (Thai) Public Company Limited | Annual Report 2015

72 Notes to the Financial Statements

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 period from 1 April 2014 to 31 December 2014 Transfer in from entire business transfer 74,171 13,412 18,815 16,267 - 122,665 Additions 473 895 1,477 - - 2,845 Disposals, net - - - (1) - (1) Depreciation charge (4,199) (2,110) (2,357) (2,050) - (10,716)

Closing net book amount 70,445 12,197 17,935 14,216 - 114,793

At 31 December 2014 Cost 169,120 34,467 53,543 37,860 - 294,990 Less Accumulated depreciation (98,675) (22,270) (35,608) (23,644) - (180,197)

Net book amount 70,445 12,197 17,935 14,216 - 114,793

For the year ended 31 December 2015 Opening net book amount 70,445 12,197 17,935 14,216 - 114,793 Additions 35,171 10,871 34,730 2,761 5,504 89,037 Disposal - - (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 5,504 383,730 Less Accumulated depreciation (111,682) (28,718) (43,983) (29,821) - (214,205)

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

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to Financial Statement 73

14 Intangible assets

Computer License fee software Total Baht’000 Baht’000 Baht’000 For the period from 1 April 2014 to 31 December 2014 Transfer in from entire business transfer 24,310 3,880 28,190 Amortisation charge (1,180) (162) (1,342)

Closing net book amount 23,130 3,718 26,848

At 31 December 2014 Cost 35,310 6,606 41,916 Less Accumulated amortisation (12,180) (2,888) (15,068)

Net book amount 23,130 3,718 26,848

For the year ended 31 December 2015 Opening net book amount 23,130 3,718 26,848 Additions 1,362 6,827 8,189 Amortisation charge (3,606) (479) (4,085)

Closing net book amount 20,886 10,066 30,952

At 31 December 2015 Cost 36,672 13,433 50,105 Less Accumulated amortisation (15,786) (3,367) (19,153)

Net book amount 20,886 10,066 30,952

Bank of China (Thai) Public Company Limited | Annual Report 2015

74 Notes to the Financial Statements

15 Leasehold

Baht’000

For the period from 1 April 2014 to 31 December 2014 Transfer in from entire business transfer 37,660 Amortisation charge (3,513)

Closing net book amount 34,147

At 31 December 2014 Cost 210,194 Less Accumulated amortisation (176,047)

Net book amount 34,147

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

Closing net book amount 23,637

At 31 December 2015 Cost 210,194 Less Accumulated amortisation (186,557)

Net book amount 23,637

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 2015 2014 Baht’000 Baht’000

Deferred tax asset to be recovered within 12 months 14,663 3,456 Deferred tax asset to be recovered after more than 12 months 13,091 19,306

Deferred tax assets 27,755 22,762

Deferred tax liabilities to be recovered within 12 months 1,459 1,567 Deferred tax liabilities to be recovered after more than 12 months 292 3,481

Deferred tax liabilities 1,751 5,048

Net of deferred tax asset (liabilities) 26,004 17,714

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to Financial Statement 75

16 Deferred tax assets (Cont’d)

The movement and the deferred income tax is as follows:

Restated 2015 2014 Baht’000 Baht’000

Beginning balance 17,714 - Charges to statements of comprehensive income (Note 32) 5,033 22,682 Tax charged directly to statement of changes in shareholders’ equity 3,257 (4,968)

Ending balance 26,004 17,714

The movements in deferred tax asset are as follows:

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

At 1 April 2014 - - - - Charged to the comprehensive income 3,973 18,322 387 22,682 Charged directly to statement of changes in shareholders’ equity 80 - - 80

At 31 December 2014 (Restated) 4,053 18,322 387 22,762

At 1 April 2015 4,053 18,322 387 22,762 Charged to the comprehensive income 12,083 (6,663) (387) 5,033 Charged directly to statement shareholders’ equity (40) - - (40)

At 31 December 2015 16,096 11,659 - 27,755

Investment Total Baht’000 Baht’000 Deferred tax liabilities

At 1 April 2014 - - Charged directly to statement of changes in shareholders’ equity 5,048 5,048

At 31 December 2014 5,048 5,048

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

At 31 December 2015 1,751 1,751

Bank of China (Thai) Public Company Limited | Annual Report 2015

76 Notes to Financial Statement

17 Other assets 2015 2014 Baht’000 Baht’000

Accrued interest income from investment 32,025 35,635 Deposit 10,075 6,805 Prepaid expense 7,442 8,831 Refundable withholding tax 1,838 - Others 8,921 8,490

Total 60,301 59,761

18 Deposits

18.1 Classified by type of deposits 2015 2014 Baht’000 Baht’000

Demand 183,586 91,106 Saving 8,356,778 5,660,794 Term - Less than 6 months 10,835,650 1,595,378 - 6 months but less than 1 year 5,606,330 1,453,595 - More than 1 year 7,585 1,192

Total 24,989,929 8,802,065

18.2 Classified by currencies and residencies of depositors

2015 Domestic Foreign Total Baht’000 Baht’000 Baht’000

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

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

2014 Domestic Foreign Total Baht’000 Baht’000 Baht’000

Baht 6,298,297 299,771 6,598,068 US Dollar 1,715,819 142,614 1,858,433 Chinese Yuan 336,050 2 336,052 Other currencies 9,512 - 9,512

Total 8,359,678 442,387 8,802,065

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to Financial Statement 77

19 Interbank and money market items (liabilities)

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

2014 At call Term Total Baht’000 Baht’000 Baht’000

Domestic items Commercial banks 5,313 - 5,313

Total domestics 5,313 - 5,313

Foreign items Baht 191,525 - 191,525 US Dollar - 18,093,869 18,093,869 Chinese Yuan - 17,130,162 17,130,162 Hong Kong Dollar - 276,354 276,354

Total foreign 191,525 35,500,385 35,691,910

Total domestic and foreign 196,838 35,500,385 35,697,223

Bank of China (Thai) Public Company Limited | Annual Report 2015

78 Notes to Financial Statement

20 Provisions

2015 2014 Baht’000 Baht’000

Provision for restoration and dismantling cost 9,381 8,581 Provision for post-employment benefit 10,437 7,708 Other provisions 1,956 2,662

Total provisions 21,774 18,951

Provision for employee benefits

As at 31 December 2015, the pension benefits only provided to 172 employees (As at 31 December 2014: 123 employees) of the Bank which are unfunded obligations. The pension benefit is a part of provision for pension fund as follows:

2015 2014 Baht’000 Baht’000

Present value of obligations 10,437 7,708 Less Deferred present value of obligations - -

Total provisions 10,437 7,708

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

2015 2014 Baht’000 Baht’000

Beginning balance 7,708 - Transfer from entire business transfer - 7,164 Current service costs 2,673 605 Interest costs 293 103 Benefits paid - (642) Remeasurements of post-employment benefit obligations (237) 478

Ending balance 10,437 7,708

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to Financial Statement 79

20 Provisions (Cont’d)

Expenses (income) for post-employment benefits were recognised in the statements of comprehensive income as follows: For the For the period from year ended 1 April 2014 to 31 December 31 December 2015 2014 Baht’000 Baht’000 Recognised in statement of comprehensive income Current service costs 2,673 605 Interest costs 293 103

Total 2,966 708

Recognised in statement of other comprehensive income Actuarial gain (loss) on defined employee benefit plan 237 (478)

The principal actuarial assumptions used are as follows:

2015 2014

Discount rate 3.45% 3.80% 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 2008 Disability rate 5% of Thai Mortality 5% of Thai Mortality Ordinary Table 2008 Ordinary Table 2008 Retirement age 55 years 55 years

Sensitivity analysis on key assumption changes are as follows:

2015 2014 Baht’000 Baht’000

Discount rate Increase of 1% (7,025) (7,156) decrease of 1% 8,460 8,336

Expected rate of salary increase Increase of 1% 8,440 8,353 decrease of 1% (7,029) (7,130)

Turnover rate Increase of 1% (7,004) (7,111) decrease of 1% 8,172 8,118

Bank of China (Thai) Public Company Limited | Annual Report 2015

80 Notes to Financial Statement

20 Provisions (Cont’d)

Maturity profile of defined benefit obligation.

2015 2014 Baht’000 Baht’000

Maturity analysis of benefits expected to be paid Benefits expected to be paid within 12 months 2,742 2,541 Benefits expected to be paid between 1 and 5 years 2,808 9,328 Benefits expected to be paid in more than 5 years 37,714 22,152

21 Other liabilities

Restated 2015 2014 Baht’000 Baht’000

Accrued expenses 190,062 122,076 Cash subscription payable to parent company 203,013 203,013 Deferred fees income 29,937 22,256 Income tax payable 2,550 20,639 Other liabilities on behalf of Bank of China Limited, Bangkok branch 6,277 228,696 Other 73,491 50,870

Total 505,330 647,550

22 Assets under commitment

As at 31 December 2015, Government bonds amounting to 803.85 million Baht (As at 31 December 2014: Baht 352.59 million) are used as collateral for borrowing from the Bank of Thailand and for securities sold under repurchase agreements.

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to Financial Statement 81

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 2015 and 2014 are as follows:

2015 Hong Chinese 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 - - 107,799 Interbank and money market items, net 8,452,548 794,724 2,871,121 1,075,007 32,995 13,226,395 (10,017,78 Derivatives assets 8,134,086 4) 1,921,303 - - 37,605 Investments, net 3,061,280 - - - - 3,061,280 Loans and accrued interest receivables, net 6,562,367 28,509,782 6,506,440 - 485,299 42,063,888 Accrued 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 24,989,929 Interbank and money market items, net 156,767 10,065,634 10,671,284 1,062,001 386,500 22,342,186 Liability payable on demand 30,923 124,622 19,713 4,229 3,583 183,070 Derivatives liabilities (4,697,685) 5,135,255 (403,205) - - 34,365 Accrued interest payables 83,277 6,698 118,894 366 69 209,304 Other 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, 9,869,828 369,796 238,480 8,411 13,212 10,499,727 net

Bank of China (Thai) Public Company Limited | Annual Report 2015

82 Notes to Financial Statement

23 Financial instruments

23.1 Foreign exchange risk (Cont’d)

The Bank’s foreign currency position as at 31 December 2015 and 2014 are as follows: (Cont’d)

2014 Hong Chinese Kong Baht US Dollar Yuan Dollar Others Total Baht’000 Baht’000 Baht’000 Baht’000 Baht’000 Baht’000

Assets Cash 43,610 5,018 21,657 - - 70,285 Interbank and money market items, net 8,344,854 663,978 12,269,749 7,576 28,348 21,314,505 Derivatives assets 1,771,894 5,264,162 (6,958,188) - - 77,868 Investments, net 3,439,849 - - - - 3,439,849 Loans and accrued interest receivables, net 2,945,765 21,154,057 6,635,838 277,042 - 31,012,702 Accrued income receivables 35,793 3,517 1 - - 39,311

Total assets 16,581,765 27,090,732 11,969,057 284,618 28,348 55,954,520

Liabilities Deposits 6,598,068 1,858,433 336,052 - 9,512 8,802,065 Interbank and money market items, net 191,525 18,093,869 17,135,475 276,354 - 35,697,223 Liability payable on demand 9,335 234,089 234,278 34 9,074 486,810 Derivatives liabilities (333,676) 5,190,874 (4,801,077) - - 56,121 Accrued interest payables 28,875 15,011 125,162 517 1 169,566 Other liabilities 612,762 41 25,471 1,901 - 640,175

Total liabilities 7,106,889 25,392,317 13,055,361 278,806 18,587 45,851,960

Foreign currency position on financial position items, 9,474,876 1,698,415 (1,086,304) 5,812 9,761 10,102,560 net

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to Financial Statement 83

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 2015 and 2014, as follows:

2015 2014 Baht’000 Baht’000

Floating interest rate 45,691,582 44,139,574

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 2015 and for the period from 1 April 2014 to 31 December 2014 are as follows:

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 1.67 Investments, net 2,426,681 70,354 2.90 Loans 39,800,858 991,856 2.49

Total 54,115,606 1,260,999

Interest-bearing Financial liabilities Deposits 16,610,264 241,959 1.46 Interbank and money market items 27,103,041 555,268 2.05

Total 43,713,305 797,227

2014 Average Average rate per balance Interest annum . Baht’000 Baht’000 % Interest-bearing Financial assets Cash and interbank and money market items 27,111,662 305,123 3.21 Investments, net 3,877,598 46,347 3.41 Loans 20,560,114 190,829 2.65

Total 51,549,374 542,299 3.00

Interest-bearing Financial liabilities Deposits 9,555,370 48,230 1.44 Interbank and money market items 31,485,097 242,225 2.19

Total 41,040,467 290,455 2.02

Bank of China (Thai) Public Company Limited | Annual Report 2015

84 Notes to Financial Statement

23 Financial instruments (Cont’d)

23.2 Interest rate risk (Cont’d)

Financial assets and liabilities, classified by maturity of interest repricing, as at 31 December 2015 and 2014, are as follows:

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’000 Financial assets Cash - - - - 107,799 107,799 Interbank and money market items 929,520 11,699,292 - - 597,583 13,226,395 Derivatives assets - - - - 37,605 37,605 Investments - 601,215 746,278 1,713,782 53,061,280 Loans 139,339 29,236,186 10,132,385 1,936,459 447,922 41,892,291 Accrued interest receivables - - - - 171,597 171,597 Accrued 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 24,989,929 Interbank and money market items 1,164 21,122,254 1,062,001 - 156,767 22,342,186 Liabilities payable on demand - - - - 183,070 183,070 Derivatives liabilities - - - - 34,365 34,365 Accrued interest payables - - - - 209,304 209,304 Other 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

2014 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’000 Financial assets Cash - - - - 70,285 70,285 Interbank and money market items 1,312,393 16,466,952 2,916,338 - 618,822 21,314,505 Derivatives assets - - - - 77,868 77,868 Investments - 2,552,953 886,896 - -3,439,849 Loans 176,541 22,283,574 8,183,097 - 249,934 30,893,146 Accrued interest receivables - - - - 119,556 119,556 Accrued income receivables - - - - 39,311 39,311

Total financial assets 1,488,934 41,303,479 11,986,331 - 1,175,776 55,954,520

Financial liabilities Deposits 5,360,914 2,170,957 879,168 40 390,986 8,802,065 Interbank and money market items 5,313 34,694,051 806,334 - 191,525 35,697,223 Liabilities payable on demand - - - - 486,810 486,810 Derivatives liabilities - - - - 56,121 56,121 Accrued interest payables - 127,788 12,427 - 29,351 169,566 Other liabilities - - - - 640,175 640,175

Total financial liabilities 5,366,227 36,992,796 1,697,929 40 1,794,968 45,851,960

Net position (3,877,293) 4,310,683 10,288,402 (40) (619,192) 10,102,560

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to Financial Statement 85

23 Financial instruments (Cont’d)

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 2015 and 2014 are as follows:

2015 Not over 3 months Over No At call 3 months - 1 year 1 - 5 years 5 years Maturity Total Baht’000 Baht’000 Baht’000 Baht’000 Baht’000 Baht’000 Baht’000 Financial assets Cash - - - - - 107,799107,799 Interbank and money market items 1,521,216 10,643,171 7 1,062,001 - - 13,226,395 Derivatives assets - 29,619 7,986 - - - 37,605 Investments, net 5 601,215 746,278 1,713,782 - - 3,061,280 Loans 679,075 14,432,500 13,904,371 11,372,625 1,503,720 - 41,892,291 Accrued interest Receivables - - - - - 171,597 171,597 Accrued income receivables 304 26,045 13,772 - - - 40,121

Total financial assets 2,200,600 25,732,550 14,672,414 14,148,408 1,503,720 279,396 58,537,088

Financial liabilities Deposits 8,540,364 9,385,788 7,056,232 7,545 - - 24,989,929 Interbank and money market items 157,931 18,671,314 2,433,368 1,079,573 - - 22,342,186 Liabilities payable on demand 183,070 - - - - - 183,070 Derivatives liabilities - 26,696 7,669 - - -34,365 Accrued interest payables - 165,212 44,026 66 - - 209,304 Other 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 (6,959,272) (2,516,460) 5,131,119 13,061,224 1,503,720 279,396 10,499,727

Bank of China (Thai) Public Company Limited | Annual Report 2015

86 Notes to Financial Statement

23 Financial instruments (Cont’d)

23.3 Liquidity risk (Cont’d)

A maturity analysis for financial assets and liabilities as at 31 December 2015 and 2014 are as follows: (Cont’d)

2014 Not over 3 months Over No 1 - 5 At call 3 months - 1 year years 5 years Maturity Total Baht’00 Baht’000 Baht’000 Baht’000 Baht’000 0 Baht’000 Baht’000 Financial assets Cash - - - - - 70,28570,285 Interbank and money market items 1,931,215 16,466,952 2,916,338 - - - 21,314,505 Derivatives assets - 25,418 52,450 - - - 77,868 Investments, net - 640,625 1,239,189 1,560,035 - - 3,439,849 Loans 426,475 16,401,888 9,495,576 4,367,029 202,178 - 30,893,146 Accrued interest receivables - 85,089 34,467 - - - 119,556 Accrued income receivables - 36,864 2,447 - - - 39,311

Total financial assets 2,357,690 33,656,836 13,740,467 5,927,064 202,178 70,285 55,954,520

Financial liabilities Deposits 5,751,900 2,170,957 879,168 40 - - 8,802,065 Interbank and money market items 196,838 33,984,333 529,980 986,072 - - 35,697,223 Liabilities payable on demand 486,810 - - - - - 486,810 Derivatives liabilities - 6,184 49,937 - - -56,121 Accrued interest payables - 141,809 24,171 3,586 - - 169,566 Other liabilities 640,175 - - - - - 640,175

Total financial liabilities 7,075,723 36,303,283 1,483,256 989,698 - - 45,851,960

Liquidity, net (4,718,033) (2,646,447) 12,257,211 4,937,366 202,178 70,285 10,102,560

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.

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to Financial Statement 87

23 Financial instruments (Cont’d)

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.

Bank of China (Thai) Public Company Limited | Annual Report 2015

88 Notes to Financial Statement

23 Financial instruments (Cont’d)

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 2015.

2015 Level 1 Level 2 Level 3 Total Baht’000 Baht’000 Baht’000 Baht’000

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

Total financial assets - 3,098,880 - 3,098,880

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 period.

2015 Level 1 Level 2 Level 3 Total Baht’000 Baht’000 Baht’000 Baht’000

Financial assets Interbank and money market items, net - 13,188,402 - 13,188,402 Net loans to customers and interest receivables - 41,533,846 - 41,533,846

Total financial assets - 54,722,248 - 54,722,248

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

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to Financial Statement 89

23 Financial instruments (Cont’d)

23.4 Fair values (Cont’d)

The estimated fair value of significant financial assets and liabilities as of 31 December 2015 and 2014 are as follows:

2015 2014 Book value Fair value Book value Fair value Baht’000 Baht’000 Baht’000 Baht’000

Financial assets Interbank and money market items 13,188,402 13,188,402 21,205,850 21,205,850 Derivatives assets 37,605 37,605 77,868 77,868 Investments 3,061,275 3,061,275 3,439,849 3,439,849 Loan and accrued interest receivable, net 41,533,846 41,533,846 30,737,365 30,737,365

Financial liabilities Deposits 16,449,564 16,469,981 8,802,064 8,802,064 Interbank and money market items 22,342,186 22,342,186 35,697,223 35,697,223 Liabilities payable on demand 183,070 183,070 486,810 486,810 Derivatives liabilities 34,365 34,365 56,121 56,121

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.

Bank of China (Thai) Public Company Limited | Annual Report 2015

90 Notes to Financial Statement

23 Financial instruments (Cont’d)

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.

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to Financial Statement 91

24 Contingencies and commitments

24.1 Contingencies and commitments as at 31 December 2015 and 2014 are classified as follows:

2015 2014 Foreign Foreign Baht currency Total Baht currency Total Baht’000 Baht’000 Baht’000 Baht’000 Baht’000 Baht’000

Letters of credit - 141,600 141,600 62,814 510,113 572,927

Other contingencies Other guarantees 4,231,089 7,280,823 11,511,912 7,778,136 3,871,786 11,649,922 Exchange rate agreements - Purchase contracts 13,226,628 3,661,473 16,888,101 2,302,363 10,551,977 12,854,340 - Sale contracts 385,151 16,488,194 16,873,345 189,203 12,655,955 12,845,158 Unused credit line of overdrafts 5,292,281 5,803,084 11,095,365 3,736,261 5,279,494 9,015,755

Total other contingencies 23,135,149 33,233,574 56,368,723 14,005,963 32,359,212 46,365,175

Total 23,135,149 33,375,174 56,510,323 14,068,777 32,869,325 46,938,102

24.2 The Bank has commitment to pay the future expenses relating to rental and service agreement at totalling Baht 50.28 million (2014: Baht 55.14 million), for which a maturity analysis are as follows:

2015 2014 Baht’000 Baht’000

Within 1 year 26,348 13,217 1 - 5 years 21,688 38,717 Over 5 years 2,248 3,205

50,284 55,139

Bank of China (Thai) Public Company Limited | Annual Report 2015

92 Notes to Financial Statement

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 2015 and for the period from 1 April 2014 to 31 December 2014 with related parties are summarised as follows:

For the For the period from year ended 1 April 2014 to 31 December 31 December 2015 2014 Baht’000 Baht’000

Interest income 82,039 197,384 Interest expenses 555,249 242,209 Premises and equipment expenses 11,921 387

Balances as at 31 December 2015 and 2014 with related parties are as follows:

2015 2014 Baht’000 Baht’000

Interbank and money market items Loans 4,768,399 10,280,437 Borrowings 22,341,022 35,691,910 Accrued interest receivables 5,448 212,279 Accrued interest payables 122,925 140,215

Other liabilities Cash subscription payable to parent company 203,013 203,013 Other liabilities on behalf of Bank of China Limited, Bangkok branch 6,277 228,696 Accrued expenses 9,178 1,457

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.

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to Financial Statement 93

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.

For the For the period from year ended 1 April 2014 to 31 December 31 December 2015 2014 Baht’000 Baht’000

Short-term employee benefits 49,702 11,431

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

27.1 Position grouped by type of transaction

2015 Domestic Foreign Total Baht’000 Baht’000 Baht’000

Assets

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

Liabilities

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

Bank of China (Thai) Public Company Limited | Annual Report 2015

94 Notes to Financial Statement

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

27.1 Position grouped by type of transaction (Cont’d)

2014 Domestic Foreign Total Baht’000 Baht’000 Baht’000

Assets

Interbank and money market item 13,561,465 7,644,385 21,205,850 Investments, net 3,439,849 - 3,439,849 Loans to customers and accrued interest receivables, net 8,066,443 22,670,922 30,737,365

Liabilities

Deposits 8,801,986 78 8,802,064 Interbank and money market item 5,442,422 30,254,801 35,697,223 Liabilities payable on demand 486,810 - 486,810

27.2 Performance grouped by types of transaction

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

Interest income 661,343 599,655 1,260,998 Interest 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 79,982 Other operating income 336,537 9,607 346,144 Other operating expenses (775,479) 6,679 (768,800)

Profit (loss) before income tax (128,774) 186,482 57,708

Restated For the period from 1 April 2014 to 31 December 2014 Domestic Foreign Total Baht’000 Baht’000 Baht’000

Interest income 263,170 279,129 542,299 Interest expenses (120,838) (182,979) (303,817)

Net interest income 142,332 96,150 238,482

Net fee and services income 35,117 3,023 38,140 Other operating income 65,593 948 66,541 Other operating expenses (154,183) (304,230) (458,413)

Profit (loss) before income tax 88,859 (204,109) (115,250)

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to Financial Statement 95

28 Interest income

For the For the period from year ended 1 April 2014 to 31 December 31 December 2015 2014 Baht’000 Baht’000

Interbank and money market items 198,788 304,737 Investment in debt securities 70,354 46,347 Loan to customers 991,856 191,215

Total 1,260,998 542,299

29 Interest expense For the For the period from year ended 1 April 2014 to 31 December 31 December 2015 2014 Baht’000 Baht’000

Deposits 241,969 48,230 Interbank and money market items 555,267 242,225 Contributions for deposit protection 63,380 13,362

Total 860,616 303,817

30 Fees and service income, net

For the For the period from year ended 1 April 2014 to 31 December 31 December 2015 2014 Baht’000 Baht’000

Fees and service income - Acceptances, avail and guarantees 58,837 23,555 - Others 35,782 20,381 Fees and service expenses (14,638) (5,795)

Fees and service income, net 79,981 38,141

Bank of China (Thai) Public Company Limited | Annual Report 2015

96 Notes to Financial Statement

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

For the For the period from year ended 1 April 2014 to 31 December 31 December 2015 2014 Baht’000 Baht’000

Gains on tradings and foreign exchange transactions - Foreign currencies and exchange derivatives 345,049 65,853

Total 345,049 65,853

32 Income tax

Restated For the For the period from year ended 1 April 2014 to 31 December 31 December 2015 2014 Baht’000 Baht’000

Current income tax: 2,550 21,595

2,550 21,595

Deferred income tax: Origination and reversal of temporary (5,033) (22,682)

Total deferred tax (Note 16) (5,033) (22,682)

Total income tax revenue (2,483) (1,087)

The calculation of income tax in the company income statements are as follows:

Restated For the For the period from year ended 1 April 2014 to 31 December 31 December 2015 2014 Baht’000 Baht’000

Profit (loss) before income tax 57,708 (115,250)

Tax calculated at a tax rate of 10% - 20% (7,107) (3,500) Tax effect of: Expenses not deductible for tax purpose 4,624 2,413

Tax revenue (2,483) (1,087)

Bank of China (Thai) Public Company Limited | Annual Report 2015 Notes to Financial Statement 97

33 Share capital

Number Amount shares Baht’000

Registered Issue of shares at 1 April 2014 10,000 100 Issue of shares at 5 June 2014 490,000 4,900 Issue of shares at 20 August 2014 999,500,000 9,995,000

At 31 December 2014 1,000,000,000 10,000,000

Issued and paid up Issue of shares at 1 April 2014 10,000 100 Issue of shares at 5 June 2014 490,000 4,900 Issue of shares at 20 August 2014 999,500,000 9,995,000

At 31 December 2014 1,000,000,000 10,000,000

At the meeting for the establishment of the Bank on 1 April 2014, the meeting passed a resolution to approve the issuance of authorised ordinary share capital of 10,000 shares with a par value of Baht 10 per share. The Bank registered the issuance of ordinary shares with the Ministry of Commerce on 1 April 2014.

On 27 May 2014, the shareholders at the Extraordinary Meeting passed a resolution to approve increase the authorised share capital 490,000 ordinary shares with a par value of Baht 10 per share. On 4 June 2014, the Bank received subscription of 490,000 additional shares which were priced at Baht 10 per share. The paid-up share capital totalling Baht 4,900,000. The Bank registered the increased share capital with the Ministry of Commerce on 5 June 2014.

On 6 August 2014, the shareholders at the Extraordinary Meeting passed a resolution to approve increase the authorised share capital 999,500,000 ordinary shares with a par value of Baht 10 per share. On 26 August 2014, the Bank received subscription of 999,500,000 additional shares which were priced at Baht 10 per share by transfer net assets from Bank of China, Bangkok Branch Baht 3,599,013,419 and cash received from shareholder Baht 6,395,986,581. The Bank registered the increased share capital with the Ministry of Commerce on 20 August 2014.

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.

Bank of China (Thai) Public Company Limited | Annual Report 2015

98 Notes to Financial Statement

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 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 (67,739)

Total Tier I capital fund 9,941,013 22.09

Total capital fund less capital add-on arising from Single Lending Limit 9,855,973 21.90

Restated Total capital 2014 to risk assets Baht’000 % Tier I Issued and paid up share capital 10,000,000 Other reserves 25,238 Deduction on Tier I capital fund (124,414)

Total Tier I capital fund 9,900,824 22.22

Total capital fund less capital add-on arising from Single Lending Limit 9,831,163 22.06

The Bank and its financial group will disclose capital maintenance information as at 31 December 2015 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 For the For the period from year ended 1 April 2014 to 31 December 31 December 2015 2014 Net gain (loss) attributable to ordinary shareholders (Baht) 60,190,945 (114,163,091) Weighted average number of ordinary shares issued and paid-up (Shares) 1,000,000,000 487,413,273 Basic earnings (losses) per share (Baht per share) 0.06 (0.23)

There are no potential dilutive ordinary shares for the year ended 31 December 2015 and for the period from 1 April 2014 to 31 December 2014.

Bank of China (Thai) Public Company Limited | Annual Report 2015 Capital Structure 99

As of the end 2015, 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 2015 as following

Ministry of Finance The People’s Republic of China (PRC)

China Investment Corporation Limited (CIC)

100%

Central Huijin Investment Limited Other Public Shareholders

65.52% 34.48%

Bank of China Limited

100% 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. 99.99%

Bank of China (Thai) 0.01% Public Company Limited

Bank of China (Thai) Public Company Limited | Annual Report 2015

The organization chart as at 31 December 2015 is as follows:

Board of Director

Risk Management Executive Audit Committee Committee Committee

Advisor Chief Executive Officer & Country Head Audit Section

Executive Vice President Executive Vice President For Business For Support

Risk Management Personal Business Corporate Business Group Group Group Branch Accounting & Information Technology Department Corporate Risk Management Banking -E-Banking Section Business 1 Department Department Department

Administrative Corporate Personal Credit Department Business 2 Department Department

Human Resources International Trade Banking Card Department Settlement Department Department

Wealth Treasury Management Department Department Organization Chart

100 General Information 101

Register Name BANK OF CHINA (THAI) PUBLIC COMPANY LIMITED

Register Address 1st- 4th Floor Bangkok City Tower, 179/4 Sourth Sathorn Rord, 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 2015)

Paid-up capital 10,000,000,000 Baht (As of 31 December 2015)

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 Rord, Tungmahamek, Sathorn, Bangkok 10120 Thailand Tel: (66)2-286-1010 Fax: (66)2-286-1020

Ratchada Branch 1st Floor Paking Building, 9 Ratchadaphisek Rord, 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

Bank of China (Thai) Public Company Limited | Annual Report 2015 102 General Information

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)43-246-710 Fax: (66)43-246-711

Bank of China (Thai) Public Company Limited | Annual Report 2015